InnovAge Holding Corp. Q3 2023 Earnings Call
Good day, and thank you for standing by and welcome to innovate third quarter 2023 earnings conference call. At this time all participants are in a listen only mode. After the speaker's presentation there'll be a question and answer session to ask a question. During the session you will need to press star one.
One on your telephone you will then hear an automated message buys in your hand is raised to withdraw your question. Please press star one one again please be advised that today's conference is being recorded I would now like to hand, the conference over to your speaker today, Brian Caboodle director of Investor Relations. Please go ahead.
Thank you operator.
Afternoon, and thank you all for joining the <unk> fiscal 2023 third quarter earnings call.
With me today is Patrick Blair.
It Didnt CEO .
Embark gutierrez CFO .
Dr. Richard Schaefer, Chief Medical Officer will also be joined in the Q&A portion of the call.
Today after the market close we issued a press release containing detailed information on our quarterly results.
You may access the release on our company website.
<unk> Dot com.
For those listening to the rebroadcast of this call. We remind you that the remarks made herein are as of today Tuesday may nine 2023.
I have not been updated subsequent to this call.
During our call we will refer to certain non-GAAP measures.
A reconciliation of these measures to the most directly comparable GAAP measures can be found in our fiscal third quarter 2023 earnings press release, which is posted on the Investor Relations section of our website.
We will also be making forward looking statements.
<unk> statements related to our remediation measures, including scaling our capabilities as a provider <unk>.
Expanding our payer capabilities and strengthening our enterprise functions.
Future growth prospects.
With current and future regulatory actions.
De novo centers and other expectations.
Listeners are cautioned that all of our forward looking statements involve certain assumptions and are inherently subject to risks and uncertainties that could cause our actual results to differ materially from our current expectations.
We advise listeners to review the risk factors discussed in our Form 10-K annual report for fiscal year 2022.
So your down payment when it showed the central payer capabilities that we believe will better position us to manage medical costs going forward.
And we reverse the negative trends of financial performance and are now in the phase of growth and margin recapture.
These accomplishments were made possible by the efforts of literally thousands of innovative employees.
Thank you all for what you have done to make this happen.
As many of you know one week ago, we reached an important milestone in our transformation by being released from enrollments sanctions in Sacramento, California by the Department of Health care services, which was the last remaining sanction.
With the support of CMS and the state of California, and our unwavering commitment to sustainable improvement, we're now able to enroll new participants across all 17 innovate centers as well as responsibly pursue opportunities in new markets.
This moment can be viewed as the end of one chapter and the beginning of the new one are sinners have been focused on closing compliance gaps in building the infrastructure business processes talent and culture to consistently achieve operational excellence the.
Chapter in front of us will build on the shoulders of the last and will concentrate on aspiring to deliver best in class quality and participant satisfaction, which we believe will result in consistent responsible profitable growth.
The hard work of performance improvement begins now on.
On the leadership front.
We continue to augment the organization with additional high impact talent, most notably in recently. The addition of our Chief operating Officer, Chris meant.
Chris has decades of Multisite care delivery operations experience or experience will be essential to not only building on the teams great work over the last 19 months, but also to creating a more scalable infrastructure to support the significant opportunities ahead.
We also saw a few encouraging operational milestones this quarter, perhaps most notably synthesis now increasingly sequential basis, albeit modestly for the first time since November 2021.
Also our financial trends are improving as reported adjusted EBITDA, a 3.8 million this quarter.
Barbel spend some time dimensionalizing, both the results and the underlying trends, which are expected to impact future quarters. Additionally, as I noted briefly where midway through implementing our industry, leading pay specific version of epic and all of our centers.
That all said I don't believe our progress will be a straight line up into the right there.
There will be inevitable surprises ahead gearing up the organization for growth will take some time.
We also need to acknowledge that our risk mix has been negatively impacted primarily by the inability to roll new participants in our largest market until recently this.
This dynamic and understandably take significant time to rebalance itself.
Our focus in progress trajectory remain consistent with what we shared last quarter and so my comments today will encompass a regulatory update.
Progress in our focus areas and perspectives on the quarterly financial performance.
Let me begin the regulatory update my expressing my sincere appreciation to our government partners for their confidence in us and for their ongoing partnership as I mentioned last quarter. We are committed to remaining fully vigilant to ensure that a rigorous compliance focus is bedrock to innovate just way of doing business.
As I just noted and discussed in our May 1st press release, we have been released from enrollment sanctions in Sacramento by the California Department of Health care services and it can begin enrolling again.
To be sure. This is good news for our ability to pursue our broader desired footprint in California. While sacramental currently has only a small census of about 130 participants today, we believe it's an attractive market and has the potential to drive meaningful organic growth.
Especially with our JV partners Adventist health and eschatology.
And the state of Florida. We're also excited this year that we resumed the administrative process to open centers in Tampa and Orlando, where.
Recall, we began construction on these facilities in mid 2021, and intentionally hit pause to focus on Remediating, the Colorado, and California audit findings in 2022.
We aspire for these two centers to meet our high expectations for participant experience.
Each centers approximately 35000 square feet has a potential mature census of 1300 participants and incorporates numerous historical best practices to optimize care delivery.
The opening of these two centers is expected to expand our total since this capacity by over 20%.
As I've noted in the past the administrative process will likely take months, we're holding ourselves accountable to execute everything within our control to get them operation as quickly as possible, which we anticipate will be later this calendar year.
And you can be sure that our commitments to CMS related to quality compliance and operational excellence extend to our four to centers as well.
I also wanted to touch on the ongoing corrective action plan in Colorado, Our partners at CMS and the state have continued to hold us to a very high standard postings should Ah.
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And while we're a line I want to acknowledge that the overall time effort and scope of the postings monitoring continues to be significant as a result of these efforts are expected to create a modest but ongoing headwind into our local staffing costs and the rate of staffing ratio improvement for the remainder of the calendar year.
Consistent with my comments over the past few quarters are near term priorities remained straightforward.
We need to ensure highly compliant and operationally effective business, while executing responsible growth strategy.
R. T objectives have also not changed.
What the increase our same center and dinovo enrollment growth rate.
Increase our revenue per participant through more effective state rate setting discussions to ensure rates are fair and Actuarially sound.
Strengthen our payer capabilities to better manage unnecessary utilization provider costs.
Run our center operations more efficiently and effectively which enables our staff to focus on what matters, most the health and wellbeing of our participants.
And enhance discipline at the corporate level to better leverage our fixed cost base.
On the growth front, we've been focusing on adding the right talent ensuring the team has the right tools for the job expanding a referral channels and improving forecasting effectiveness and.
The last few months, we've seen morley volume than any other time across both field and digital channels.
We're focused now on qualifying these leads in an enrollment conversion.
This is a team effort between us in our state partners, who ultimately process. The enrollments, we continue to challenge ourselves to improve each dimension of the enrollment funnel to be more productive consistent and predictive each month.
In Colorado, specifically I wanted to spend a minute detail in the shape of the anticipated enrollment over the coming months.
Recall, we were released from sanctions at the end of January we enrolled our first group of new participants on the first available date of March 1st consistent with required pace enrollment processing time lines at.
At the same time, we are actively developing a pipeline as potential pace participants who have expressed an interest in enrolling.
We are facilitating the necessary third party approvals to satisfy Medicare and Medicaid requirements to join pace, which can take on average between 60 and 90 days.
And critically we have been intentional within our centers to gradually reintroduce new enrollments as it's a muscle and mindset, we have not flex in over a year.
It's been a deliberate ramp up in Colorado over the last few months and we anticipate it will take at least alert quarter to have confidence in our enrollment run right.
In addition to the organic focus we're pleased with the level of activity in the market for tucking in acquisitions and new partnership opportunities.
That said were resolved nothing distract us from our compliance focus and filling an existing center capacity we.
We will continue to be opportunistic and will focus on organizations that share our commitment to quality and participants center care.
Last quarter I mentioned, the importance of using the rate setting process, both on and off cycle as an opportunity to work closely with states to ensure we received <unk>.
Surely sound right adjustments that properly consider the acuity and underlying risk of our participants as well as the inflationary factors inherent in our business.
Primarily as a byproduct of sanctions or risk mix now comprises a disproportionate share participants with greater healthcare and supportive housing needs like assisted living.
And as we have discussed before our population was also disproportionately impacted by Covid.
Now more than ever it is incumbent on us to empirically prove out our medical cost experience to our state partners, which we believe to be higher today than is reflected in the historical data that can be used to set future rates.
To support our work here, we recently hired Randy Brock as senior Vice President of Medical Economics, Randy brings decades of experience from anthem and Amerigroup working to ensure rates for Medicaid managed longterm care and dual eligible programs reflect the true cost of serving these high needs populations.
Barb will provide an update on the current rate setting activity and timing when new rates will go into effect.
Our portfolio of clinical initiatives Cvi's continues to progress we now have a strong perimeter around the near term opportunities and accountable leaders to drive these initiatives forward. However, as I've mentioned in the past these will be dials not switches and we do not expect the financial impact of these initiatives to materially contribute to our financial.
Results until next fiscal year.
I would also note that the current portfolio of initiatives is primarily prophylactic and that we're looking for improvement to offset currently elevated cost until we have added enough new participant grow to balance the risk pool.
As an example are focused on resource management led to the identification of short stays skilled nursing facility or stiff utilization is a top priority, we launched an initiative to determine where and when the services critically needed for participants and to find alternative care settings for times when it is not necessary.
As a result of these efforts we have achieved a meaningful reduction in monthly short stay sniff utilization over the last 12 months.
Furthermore, for those participants meeting Smith for short stay medical care or average monthly short stay sniff days has dropped approximately 25% over the fiscal year to date.
This is great progress on an important cost driver, but we have other cost categories like inpatient admissions that are stubbornly higher than our current expectations.
In addition to our initiatives discussed last quarter, we're kicking off a new effort focused on lowering external provider unit cost when out of line with benchmarks.
We'll also be streamlining our assisted living facility network to match, our capacity to provide compliance oversight and to better meet the needs of our census.
We believe this initiative will help lower external provider cost and improve the participant experience.
Turning to center operations as I mentioned earlier, we have nine of our 17 centers live on epic with the remainder scheduled for the first half of fiscal year 2004, we've made the decision to pull forward the Colorado market go lie to early fiscal year 24.
Pulling for the six senators in Colorado earlier than originally anticipated will likely create modest G&A headwinds in fiscal year 2004, but we believe the expected benefit will more than offset the incremental investment.
Though it takes many months to achieve full adoption and the expected benefits of the new system. We're encouraged by the operational efficiencies that are emerging and the positive feedback or administrative and clinical teams or sherry.
We expect the epic investment to be a powerful enabler to drive better compliance productivity and clinical staff satisfaction.
We also continue to make meaningful progress implementing our new triad operating model, which focuses on the partnership among the center directors nursing directors and medical directors epicentre regional and national levels.
Triad model is predicated on driving better participant care, making faster operating decisions and improving center level contribution margin.
We're starting to see the impact of forming this tightened it team with a mind incentives and accountability.
Regarding corporate cost, we continue to maintain discipline to hold corporate staffing costs constant as we grow back into our fixed cost base.
The hiring controls we put in place six months ago have helped us better match or hiring pace and volume to our financial targets. We continue to focus on actions to ensure our G&A relative to revenue as a line while using savings as a funding mechanism for tools and technology that will improve efficiency and effectiveness. We believe there is a virtuous cycle.
Behind these efforts in which our employees can be more productive satisfied and scalable.
Additionally, we've also look beyond the P&L and found opportunities to optimize our working capital, which we believe will drive approximately $10 million a benefit was fully implemented by the start of fiscal year 2004.
Turning to financial performance, we reported revenue of $172.5 million, a sequential improvement of approximately 3% compared to last quarter.
We ended the quarter, serving approximately 6310 participants.
For the corner, we reported central level contribution margin of $28.8 million and a corresponding center level contribution margin ratio of 16.7% <unk>.
Compared to second quarter of fiscal year, 2003, central level contribution margin of $22.6 million.
An increase of $6 $2 million and margin improvement a 320 basis points.
The quarter overall demonstrated incremental progress in our core focus areas. However, as I mentioned at the outset. It remains too early to take the results of the quarter and extrapolate them into the future.
The benefit of a few one time, tailwinds, which barbel discuss and we continue to face medical cost pressures from our decondition participant risk mix, which will take some time to normalize.
To help contextualize that point are consolidated RAF score as of March 31 was 253, which is up approximately 5% relative to our year to date average.
To accelerate rebalancing of our risk pool, we will continue to focus on unemployment is slack capacity in our existing centers.
Particularly in the Colorado market resilient enrollment growth will drive better labor utilization in our centers and help rebalance our mix of new and tenured participants, which had improved participant expense Pnp ups.
In closing the team's collective dedication to our participants and hard work through this last chapter along with numerous investments and new processes is beginning to unlock the full potential of the organization.
I greatly appreciate their tireless efforts and continued commitment and the ongoing support of our valued government partners. We've.
We look forward to continuing to demonstrate incremental improvement quarter over quarter each of our focus areas and are seeking additional catalyst to deliver breakthrough impact and value to the organization over time.
I know I speak for the entire organization that we're thrilled to be returning to our core mission of expanding pays to the many deserving underserved seniors across the country.
Now I will turn it over to Barbara.
Thank you Patrick and good afternoon, everyone.
Today I will provide some highlights from our third quarter of fiscal year 2023 performance and some insight into the transfer thing through the end of the fiscal year.
As with our previous earnings call I will refer to sequential comparisons relative to the second quarter in order to provide a more meaningful picture of our performance.
At the end of the quarter served approximately 6310 contests.
Compared to the prior year this represents an ending.
Line at 7.1% in a 2.2% decline compared to the second quarter of fiscal year 2023.
We reported approximately 19016 number of lines or the third quarter of 7.6 per cent decrease over the prior year and a decrease of 2.1% over the second quarter of fiscal 2023.
Enrollment freeze in Colorado had the greatest impact on member months, and it's F S compared to the third quarter of fiscal 2022 and sequentially.
However, we are pleased that we are now ramping up the enrollment at new participants following our release from sanctions in Colorado in late January and have begun to wrap up the enrollment process in Sacramento as well following our release from sanctions on may 1st.
The timing of our Colorado sanction release in late January coupled with a typical enrollment processing timeline of 30 to 60 days.
As well as the enrollment cycle for new participants starting at the beginning of each month translate into limited enrollment during the quarter. However, we are steadily gaining momentum as the process continues to mature and we anticipate returning to a more normalized growth run right in the next few quarters.
We also expect Sacramento to follow a similar timeline with respect to the ramp up a new participant enrollment as we re engage with the local community and connect with potential participants.
Additionally, during the quarter, we consolidated our German town centre in Pennsylvania, and moved existing participants a task to our Allegheny and Henry Avenue centers.
Move which included prior approval from C. N F L. The state as well as participants and then play and put transitioned approximately 170 participants to newer larger centres with additional amenities less than five miles away.
As a result total center count has decreased from 18 to 17.
Total revenue decreased by 2.7% to $172.5 million compared to the third quarter of fiscal year 2022, principally due to the sanctions they'll slightly upset by the ramp up a new enrollment in Colorado.
The decrease was also partially offset by the annual increase in Medicaid and Medicare rates, which are neck of the full reinstatement of sequestration in July of 2022.
Additionally, a risk or has increased quarter over quarter by nine 5%, reflecting the overall increased acuity of our participants and our risk pool.
Compared to the second quarter revenue increased 3%, primarily as a result of an increase in Medicare rates.
This increase was partially offset by lower remember months associated with sanctions. Despite the ramp up of new enrollment in Colorado.
We incurred $89.8 million of external provider costs during the quarter of 13% decrease compared to the prior year the.
The decrease was driven by lower remember months Cup.
Coupled with a 5.9% decrease in cost per participant.
The cost per participant decrease was primarily due to lower impatient cost per admit as a result of the omicron spike in the prior year and lower sharp safe skilled nursing utilization is Patrick reference in his prepared remarks.
The decrease is partially offset by an increase in assisted living in permanent nursing facility utilization as well as a unit costs.
Sequentially external provider costs decreased by 4%, primarily as a result of lower and lower per member per month pharmacy expense due to.
Higher than anticipated rebates.
Partially offset by an increase in in patient utilization and cost per admit which are typically elevated during the winter months as a result of seasonality.
Cost of cure, excluding depreciation and amortization of $53.9 million was 17% higher compared to the prior year.
Similar to our experienced last quarter. The primary cost drivers include the following items.
One <unk>.
Salaries wages and benefits, which accounts for approximately 80% of the total variance.
Increase due to higher head count as a result of filling key vacancies.
Higher wage rate and increased labor costs associated with ongoing audit remediation and compliance effort.
Two third party audit and compliance support as we work through the audits and proactively performed cellphone and are not thanks and market.
Three fleet and contract transportation, driven by higher average daily attendance and our senators and.
An increase in external appointments and higher fuel costs.
And for increased building maintenance and security costs associated with growth and average daily attendance.
Cost of care increased 5% over the second quarter of fiscal 2023, primarily due to increased <unk> and head count coupled with an increase in building maintenance.
Senator level contribution Martin, which redefine as total revenue less external provider cost and cost of care, excluding depreciation and amortization with $28.8 million for the third quarter compared to $28 million in the prior year and $22.6 million in the second quarter of fiscal two.
23.
As a percentage of revenue center level of contribution margin for the quarter was 16.7% representing a 90 basis point improvement over the prior year and a 320 basis point improvement over the prior quarter.
Sales and marketing expense with $5.3 million and 800000 dollar decrease compared to the prior year.
A decrease was mainly due to lower sales head count as a result of the sanctions partially offset by one time costs related to organizational realignment completed in the third quarter of 2022.
Compared to the second quarter of fiscal year, 2023 sales and marketing expense increased by $1.5 million, primarily due to increased marketing spend in sales head count following the Colorado sanction left and the addition of traditional media and all non sanctioned market.
Corporate general and administrative expense with $27.6 million, a 3 million dollar increase compared to the prior year.
This was primarily due to an increase in headcount to support compliance and bolster organizational capabilities and.
An increase in third party legal spend and an increase of software license and maintenance expenses, including ethic.
These costs were partially offset by a reduction in Baghdad expense and lower consulting expense associated with laying the groundwork for strengthening organizational capabilities.
Sequentially corporate general and administrative expense decreased $1.2 million due to lower third party legal expense reduction and contract services associated with epic implementation and our centers in the East region continued tapering a certain third party consultant expenses associated.
With improving organizational capabilities and a reduction in bad debt expense.
These decreases were partially offset by an increase in headcount an employee related costs.
And an increase in software license and maintenance expenses.
Net loss was $7.3 million compared to net loss of $3.2 million in the third quarter of fiscal 2022.
We reported a net loss per share for the fiscal third quarter of five cents on both the basic and diluted basis.
Or a weighted average share count was 135 million 601327 shares for the third quarter on both the basic and fully diluted basis.
Adjusted EBITDA, which we calculate by adding interest taxes, depreciation and amortization, one time adjustments for transaction and offering related costs and other non-recurring are exceptional cost to net income with $3.8 million compared to $1.9 million in there.
Third quarter of fiscal year, 2022, and negative $2 million in the second quarter of fiscal year 2023.
Our adjusted EBITDA margin with 2.2% for the third quarter compared to 1.1% for the third quarter of fiscal year, 2022, and negative 1.2% for the second quarter of fiscal year 2023.
The sequential quarter over quarter improvement and adjusted EBITDA and adjusted EBITDA margin is primarily a function of increase Medicare capitation rate improvement and external provider cost per member per month, resulting from pharmacy rebates and lower G&A.
Partially offset by increased cost of care and increased sales and marketing.
We do not add back any losses incurred in connection with our dinovo centers in the calculation of adjusted EBITDA.
Novo center losses, which redefine as net losses related to pre opening and start up ramp through the first 24 months of dinovo operations, where approximately $880000 for the third quarter, primarily related to centers in Florida.
Turning to our balance sheet, we ended the quarter with $121.7 million in cash and cash equivalents plus $45.8 million in short term investments.
We had $89 $1 million in total death on the balance sheet, representing that under our senior secured term loan plus financed lease obligations and other commitments.
For the third quarter, we recorded cash flow from operations of $29 $1 million inclusive of $26 million of deferred revenue.
And we had $4.7 million of capital expenditures.
As Patrick indicated in this quarter, we benefited from certain one time or timing related tailwinds, which cannot be extrapolated for the remainder of fiscal 2023 or into fiscal 2024.
Over the remainder of the fiscal year and into the next fiscal year trends will we evolve related to enrollment growth <unk>.
<unk> sanction cost structure and the impact of C V is.
With that said I will provide some additional visibility around the following trends when you're saying.
Regarding census.
While our focus remains on ramping up our enrollment efforts in Colorado in Sacramento.
Briefly provide some additional detail on the impact of Medicaid Redetermination as a result of the end of the public health emergency.
The nature of our population and the complexity of the Medicaid services. Our participants receive result in a comprehensive financial qualification as compared to the more traditional Medicaid only population.
Additionally, we completed annual Medicaid redetermination throughout the public health emergency with a dedicated team to support these efforts.
Our process enables us to provide a high degree of service to participants to monitor eligibility.
Assist with an eerie determination process.
Address potential issues with eligibility in real time and track future renewal date, which we believe will result in minimal pre COVID-19 levels of financial Disenrollment.
Regarding revenue as we said last quarter effective January 1st we experienced a low double digit Medicare rate increase associated with an annual increase in counting rates, coupled with an increase in risk scores.
This positive outcome was tempered by a low single digit Medicaid rate decrease from the state of California, resulting in a net mid single digit rate increase in the aggregate.
Two appropriately optimize our opportunity to be accurately compensated for the full risk profile of our participants we are building out our internal competencies around revenue participant and around the rate setting process to more actively engaged with our regulators.
Most of our states, including Colorado are on a July 1st fiscal year, and we plan to utilize these augmented capabilities during the rate setting cycle currently in progress.
Finally, some thoughts on cost of care external provider costs and overall center at a level margins.
And the midterm, we continue to believe that we can obtain margin similar to what we experienced before the sanctions.
Although the composition of our central level cost may look slightly different.
The investments that we have made particularly in staff related costs have elevated our cost of care expense compared to historical levels.
But we are driving values to other revenue and cost focus areas such as our pair initiatives and see the eyes to bend, the curve and deliver margin overtime.
So it will take multiple quarters to return to more robust margins our focus remains on the key drivers specifically.
Accelerating census growth, which also serves to rebalance the participant risk pool as well as to unlock staffing capacity.
Optimizing revenue per participant through diligence on the accuracy of risk scores.
And executing on clinical value initiatives to improve participant care and reduce unnecessary costs.
All of which we expect will drive a meaningful improvement in our margin profile.
In closing we are excited to be turning a page as we begin to focus on growth and expansion once again.
We remain extremely proud of the hard work and accomplishments that have brought us to this point and we look forward to expanding access to paste in the future to the many seniors who could benefit from the program.
Operator that concludes our prepared remarks, please open the call for questions.
<unk>. Thank you.
And one moment as a reminder to ask a question. Please press star one one on your telephone and wait for your name to be announced to withdraw. Your question. Please press star one one again, please stand by while we compile the Q&A roster.
And one moment my first question.
And our first question comes from Lisa Gil from J P. Morgan.
It is now open.
Alright, thanks, very much and thanks for taking the question Uhm congratulations on getting everything back up online, but let me just first start with giving US a lot of information, but really not quantifying anything I'm just curious as to when you think you have to be in a position to maybe give us.
Incremental number again and when will bring back guidance would be my my first kind of overarching question and then secondly, maybe if you could also help us to think about the speed at which will be able to backfill your capacity and your center like how how quickly can we start to ramp back up again.
At least this Patrick let me just go jump in on the guidance question and the amount paid it off to barb to Philly or anything I Miss <unk>.
Clearly, it's our attention to provide guidance on a on a go forward basis birthday too.
<unk>, we're not ready today to say exactly.
When that will be we do believe it's appropriate.
It would take a bit of a conservative posture on the timing for that sort of a few reasons that.
I think we hit the script, but just sort of come to mind for all one it's still a pre dynamic business as we just exit the sanctions and begin to grow again in our largest market, which is really had a pretty significant impact on the company and then there are still a number of drivers that we just like Ah.
A bit more clarity on before providing guidance I think one which we touched on as we're making great progress in Florida, but it's still a question is exactly wins, Florida going to start generating revenue and I think that's something we whenever a better read on borrowed mentioned.
Participant mix and there's still a question just how quickly is that risk pool going to rebalance and normalize as a result of the growth and so we're trying to get as much of a read on that as quickly as we can.
And.
We talked about the staffing ratios in Colorado, It's a big market, there's a lot of people and so the growth rate in Colorado file following a year.
Not growing can have real impact on those ratios we have to we have to understand that and we also I also mentioned I think my prepared remarks, just this notion of the post monitoring oversight.
By the regulators continues to be pretty resource intensive and so.
We're gonna work hard over the next few months to dial all these things in but I don't think we're ready to say today exactly what date guidance will be reinstituted, but we're very committed to getting there as quickly as possible Barbie. Thank you dad and maybe a second course, yeah, yeah glad to answer any other specific questions Lisa.
That was helpful and that's it.
The second one was just suddenly around the <unk> now that you know Sacramento back online how how quickly can you start to get new.
Uhm patient and enter your facility.
Yeah. Good good question. So we we the sanctions were lifted in Colorado. It was January 23rd it took us a bit of time to wrap up the enrollment process. So.
<unk> enrollment was I'll say good given the time that we had but it was limited as you if you compare that to serve or historical run rates, but.
In April and May we've had nice momentum. So I think we're tracking well with our internal targets and we've got a a solid pipeline of prospects who were interested in joining pace I think we're probably seen a few more that need to get their Medicaid coverage, which can take 60 90 days, but that's not everyone in the <unk>.
Lines. So we still have so we definitely have some folks that are ready to enroll now I expect that we're gonna get back to.
Our historical run rate in Colorado in the first quarter of the of the new fiscal year. You know, we are certainly challenging ourselves to to pull that forward and improved productivity at every market, but I think that's sort of zoom out and think about the full business.
I would say.
Excluding to novo's, we expect to be back at historical net monthly enrollment levels in the first quarter of 2024 of our fiscal year.
Re challenging ourselves to do it faster, but right now that feels like the right trajectory to get back to those historical levels.
Okay, great. Thanks for the comments.
And thank you.
And if you would like to ask a question that is star one one again, if you would like to ask a question that is star one one and one moment for our next question.
And our next question comes from <unk> from William Blair.
Hi, This is actually Madeline <unk> I was just wondering obviously small sample size right now, but have you seen anything you can say about <unk> and the population that you're enrolling in Colorado, so far or at like <unk> there.
I think it's it's a bit too early for that you were just a couple of months. It here and it takes a little time for the participant profiled in the claims history to build.
So he's just a little early to answer that.
Got it and just thinking about the <unk> Ullman process in General I think you mentioned that you know you instead of learning to exercise that muscle again anything that you've learned from the Colorado process that you think would make sacramento more smooth or make it easier to start adding new patients in Sacramento.
You know I I think one of the things that we focused on a lot is really spending time to build our referral engagement channels. So we have a variety of community based organizations that we work with.
You know everything from sort of benefits counseling to faith based organization to food Pantries Foster care.
Housing alternatives I mean, the list goes on.
I think we did a really nice job of building a game plan in Colorado for each of those channels and we've gotten a jump start on that in Sacramento. So I think you know just getting a great view of the landscape.
He is really important and I also think that Sacramento is just one center. So it's a lot less complex to sort of ramp up then the whole our largest market has been in Colorado. So.
We got our first enrollment already in Sacramento. So I think we're feeling good about the ramp up there and we think it is kind of followed the shape of Colorado in terms of build out.
Okay. Thank you and then just one last thing me thinking about the Florida Center I think you mentioned last quarter that you were waiting on some licensure like adult daycare license and things like that is that still sort of what's holding up the process or can you talk a little bit about what more there is to do in Florida from a regulatory standpoint.
Sure sure well first thing that I would say is we're very pleased with the progress we've had great engagement with the state I think we are you have a sort.
Sort of blessed to have them.
To have the state so interested in us entering the market as a as a pace provider.
He resumed as soon as the sanctions were lifted.
In Colorado, we resumed the application process, we're pleased with the adult daycare application it's.
What we're executing on right now is the adult daycare application and then there's a state readiness review and a CMS Reeves.
Review and then there's the three way agreement. So overall I think we're tracking nicely to get this done before the end of the calendar year and we're going to do everything we Canada. That's in our control to pull that forward even earlier in the year if possible so couldn't be more excited about Florida.
Great. Thank you so much. Thank you for taking my question.
You bet and thank you.
And bear with me one moment please.
And one moment of our next question.
And our next question comes from Jamie purse from Goldman Sachs or <unk>.
Hi, This is the G ban for Jamie purse. Thanks. Thanks for taking my question. So I was just wondering about external provider cost I mean, they're they're down this quarter and I was just wondering if where where do you expect it to trend going going forward.
The past quarter.
In terms of as far as furniture.
Yeah sure so highest Barbara I'll take that question. So the you're right that the trend is down this quarter. We didn't we didn't mention that in large part that was due to a pharmacy rebate that we received during the quarter. So about two thirds of that decrease relate to that but there is definitely we are seeing some improve.
<unk> as it relates to some of our clinical value initiatives and other things, we're focusing on I think both Patrick and I and our prepared remarks. For example mentioned some some efforts related to the short stay skilled nursing facility that we're seeing some nice trend. So the embedded in that decrease or some some nice trends related to the medical.
Costs, but for this quarter in particular that was.
The bulk of it two thirds of that was related to the pharmacy rebate.
And thank you.
And I am showing no further questions I would now like to turn the call back over to Patrick Blair, President and CEO for closing remarks.
Well. Thank you very much I appreciate everyone, who joined the call we.
We continue to believe that the company is on.
The right track and we're excited about our future and excited about closing one chapter and beginning a new chapter and we look forward to the discussion on our incremental progress in another few months. So thank you for your time today.
This concludes today's conference call. Thank you for participating you may now disconnect. Thank you.
Mmm.
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