Q1 2024 InnovAge Holding Corp Earnings Call
Speaker 1: years.
Speaker 2: Regarding our De Novo Center in Downey, California, a large market southeast of Los Angeles, we continue to work with the Department of Health Care Services in California toward a mid-year calendar 2024 opening.
Speaker 2: We're excited to get these new centers up and running and serving the communities.
Speaker 2: In addition to same center organic growth, we believe these new locations create visibility into multi-year, double-digit, top-line growth and embedded future earnings.
Speaker 2: Operationally, we continue to make meaningful progress in proving how we're managing our sitters according to what we call the one N of H way.
Speaker 2: We're reducing variation in business processes, policies, and procedures among our centers, which is leading to improvements in operational compliance, productivity, clinical quality, and unit economics across our platform.
Speaker 2: Clinically, we continue to strengthen our payer capabilities through our clinical value initiatives.
Speaker 2: This quarter we achieved meaningful improvements in patient utilization, which was 5.3%, relative to 5.8% in the fourth quarter of fiscal year 23.
Speaker 2: We've kept our short stay skilled nursing utilization rate below 2% this quarter.
Speaker 2: What you'll recall was down approximately 23% in FY23 relative to FY22.
Speaker 2: And we've begun transitioning our assisted living facility and nursing home providers into high performing networks, which include providers who consistently deliver more compliant and higher quality care, lower costs, and are more collaborative with our care teams.
Speaker 2: We're excited about the impact this will have on the quality of care we can offer our participants.
Speaker 2: Further, we continue to work with our vendors to identify improvements in risk-court capture accuracy.
Speaker 2: Counter-balancing the improvements in utilization that we're seeing, we have observed some modest increase in inpatient unit cost in higher outpatient services utilization in the first quarter, which isn't unexpected as we continue to work through the lingering risk pool impacts of the Colorado Sanction on participant acuity.
Speaker 2: We continue to work through the multiple levers to get to targeted levels and ensure a financially attractive margin overall.
Speaker 2: Regarding technology, we have 14 of our 17 centers live on EMPIC.
Speaker 2: with the remainder scheduled for the second fiscal quarter.
Speaker 2: Though it takes time to realize the full extent of anticipated benefits of our new system, we're encouraged by the operational efficiencies that are emerging and the positive feedback our administrative and clinical teams are sharing.
Speaker 2: For example, since going live in Pennsylvania, Virginia, and Colorado, we've exchanged over 200,000 participant health records with specialists and hospital partners.
Speaker 2: Using EPIC's interoperability capability within their provider equal system.
Speaker 2: Previously, this level of health information exchange consumed significant labor and time and was prone to inefficiency and rework.
Speaker 2: Now, we have a single record source which is shared in available real-time with many of our external partners. We expect that in time, the network effect will grow and it will enable better service, access, quality, cost, and labor efficiency.
Speaker 2: Further, Epic ranks its users against the overall Epic community as our clinicians go live and features are implemented.
Speaker 2: As a testament to our early progress, Epic has shared with us that we're in the top quartile a feature adoption in the areas of physician productivity, nurse productivity, and population health management.
Speaker 2: As I've mentioned, these are all dials and not switches, but we're pleased to see these activities starting to have an impact and ultimately value on our business.
Speaker 2: In summary, we're just beginning to unlock the full potential of the organization. I greatly appreciate the continued commitment from our more than 2,100 colleagues nationally and the ongoing support of our valued government partners.
Speaker 2: We remain focused on demonstrating incremental improvement quarter to quarter in each of our focus areas. I believe there is momentum building from our team's work. And in time, this will translate to improve financial performance and enable us to return to normalized margins.
Speaker 2: We are humbled by the responsibility to serve the many underserved pace health in our communities and are thrilled to be returning to responsible growth.
Speaker 2: With that, I'll turn it over to Ben to review the financials in detail.
Speaker 3: Thank you, Patrick. Today I will provide some highlights from our first quarter of fiscal year 2024 financial performance.
Speaker 3: compared to the fourth quarter, as well as provide insight into some of the trends we are seeing as we head into the winter months of the year.
Speaker 3: While it's still early in the fiscal year, we continue to track and make progress on the guidance targets we provided on our fourth quarter earnings call.
Speaker 3: Starting with Census, we ended the first quarter of fiscal year 2024 with 17 Centers.
Speaker 3: and approximately 6,580 participants as of September 30, 2023.
Speaker 3: This represents an ending census increase of 2.8% compared to last quarter.
Speaker 3: We reported approximately 19,540 member months in the first quarter of fiscal year 2024, a 2.3% increase compared to the fourth quarter.
Speaker 3: Total revenue increased by 3.2% to $182.5 million in the first quarter compared to the fourth quarter.
Speaker 3: Primarily, to an increase in member months, coupled with an increase in capitation rates associated with annual Medicaid rate increases effective July 1st.
Speaker 3: partially offset by favorable Medicare risk score true-ups recorded in the fourth quarter.
Speaker 3: We incurred $99.4 million of external provider costs during the first quarter of fiscal 2024, a 4.6% increase compared to the fourth quarter.
Speaker 3: The sequential increase was driven by an increase in member months as we continue to grow census.
Speaker 3: Coupled with an increase in cost per participant.
Speaker 3: The cost per participant increase was driven by higher assisted living and nursing facility unit costs as a result of annual provider increases.
Speaker 3: Higher cost per admission due to acuity.
Speaker 3: and an increase in pharmacy expense.
Speaker 3: These costs were partially offset by reductions in permanent and short-stay nursing facility utilization.
Speaker 3: and a reduction in inpatient utilization. countries with Shawn morning high cancer therapy.
Speaker 3: Cost of care, excluding depreciation amortization of $55.3 million, was 3.5% higher compared to the fourth quarter.
Speaker 3: Primary cost drivers include salaries, wages, and benefits.