Q4 2023 NeueHealth Inc Earnings Call

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Operator: Good morning, my name is Drew, and I'll be your conference operator today. At this time, I would like to welcome everyone to the New Health Q4 2023 earnings conference call. All lines have been placed on mute to prevent any background noise.

Good morning, My name is drew and I will be your conference operator today at this time I would like to welcome everyone to the New House Q4 at 2023 earnings Conference call.

All lines have been placed on mute to prevent any background noise.

Operator: After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, please press the star followed by one on your telephone keypad. If you change your mind, please press the star followed by two.

The speaker's remarks, there will be a question and answer session if you'd like to ask a question. During this time. Please press star followed by one on your telephone keypad. If you change your mind. Please press star followed by two.

Emily Lombardi: I'll now turn the call over to our host, Emily Lombardi. You may now begin your question. Good morning, and welcome to New Health's fourth quarter 2023 earnings conference call. As a reminder, this call is being recorded. Leading the call today are New Health President and CEO Mike Mikan and CFO Jay Matushak. Before we begin, we want to remind you that this call may contain forward-looking statements under U.S. federal securities laws. These statements are subject to risks and uncertainties that could cause actual results to differ materially from historical experience or present expectations. A description of some of the risks and uncertainties can be found in the reports that we file with the Securities and Exchange Commission, including the risk factors in our current and periodic reports that we file with the SEC. Unless required by law, we undertake no obligation to revise or update any forward-looking statements or information.

I'll now turn the call over to our highest Emily Lombardi you May now begin your conference.

Good morning, and welcome to New House fourth quarter 2023 earnings Conference call. As a reminder, this call is being recorded.

Leading the call today, our new President and CEO, Mike My gun and CFO, Jay Madhu Shack.

Before we begin we want to remind you that this call may contain forward looking statements under U S Federal Securities laws.

These statements are subject to risks and uncertainties that could cause actual results to differ materially from historical experience or present expectations.

A description of some of the risks and uncertainties can be found in our reports that we file with the securities and Exchange Commission, including the risk factors in our current and periodic reports, we file with that E C.

Except as required by law, we undertake no obligation to revise or update any forward looking statements or information.

Mike Mikan: This call will also reference non-GAAP amounts and measurements. A reconciliation of the non-GAAP to GAAP measures is available in the company's fourth-quarter press release, available on the company's investor relations page at investors.newhealth.com. Information presented on this call is contained in the earnings release we issued this morning on our form 8k dated March 6, 2024 and in the related presentation, each of which may be accessed from the investor relations page of the company's website. With that, I will now turn the conference over to NewHealth Chief Executive Officer Mike Mike.

This call will also reference non-GAAP amounts and measurement.

Reconciliation of the non-GAAP to GAAP measures is available in the Companys fourth quarter press release.

Available on the company's Investor Relations page at investors Dot New health Dot com.

Information presented on this call is contained in the earnings release, we issued this morning, and our form 8-K dated March.

1024, and then the related presentation.

Each of which may be accessed from the Investor Relations page of the company's website.

With that I will now turn the conference over to New Health, Chief Executive Officer, Mike <unk>.

Mike Mikan: Good morning, everyone, and thank you for joining New Health's fourth quarter 2023 earnings call. As previously announced in January, Bright Health Grp adopted New Health as our corporate brand name to reflect our ongoing focus on a core and successful part of our care delivery and provider. Today, we are pleased to announce strong fourth-quarter and full-year results for 2023 for New Health, laying a solid foundation for continued success in 2024. We believe New Health is a business with much greater predictability and significantly less volatility, as we expect to achieve adjusted EBITDA profitability in both our new care and new solution segments and at the enterprise level in 2024. Before we get into more detail on our 2023 financial performance, I would like to recognize the significant milestones we reached as a company to start the year. On January 1, 2024, we closed the sale of our California Medicare Advantage business, which consisted of Brand New Day and Central Health Plan to Molina. Concurrent with the close of the sale, we also announced that we had made the final repayment on our amended credit facility with J.P. Morgan.

Good morning, everyone and thank you for joining new helps fourth quarter 2023 earnings call.

As previously announced in January right help group adopted new health as our corporate brand name to reflect our ongoing focus on our core and successful part of our company.

Our delivery and provider enablement business.

Today, we are pleased to announce strong fourth quarter and full year results in 2023 for newco.

Laying a solid foundation for continued success in 2024.

We believe new health is a business with much greater predictability and significantly less volatility as we expect to achieve adjusted EBITDA profitability in both our nuclear and new solutions segments and at the enterprise level in 2024.

Before we get into more detail on our 2023 financial performance I would like to recognize the significant milestones we reached as a company to start the year.

On January one 2024, we closed the sale of our California, Medicare advantage business, which consisted of a brand new day in Central Health plan to Molina.

Concurrent with the close of the sale. We also announced that we made the final repayment on our amended credit facility with Jpmorgan.

Mike Mikan: This eliminated the company's secured debt. This was a significant step as it allows us to further focus on where we have proven to have the greatest impact through our value-driven care delivery and provider enablement business. Although our business has evolved over the last few years, our core beliefs have not changed. We are committed to uniquely aligning the interests of payers, providers, and consumers to deliver a better, healthier experience for all. The healthcare industry continues to evolve and shift towards value-based care. We believe our differentiated care model and ability to serve all populations in performance-based arrangements puts us in a strong position to capture this growing opportunity in 2024 and beyond. On the call today, I'll start with a discussion of our two forward-looking business segments, new care and new solutions, and talk about why we are confident in the future of our differentiated value-driven care model. Then I'll turn it over to Jay to provide additional details on our financial performance.

This eliminated the company secured debt.

This was a significant step as it allows us to further focus on where we are proven to have the greatest impact through our value driven care delivery and provider enablement business.

Although our business has evolved over the last few years, our core beliefs have not changed.

Since our founding we have been committed to uniquely aligning the interest of payers providers and consumers to deliver a better healthcare experience for all.

The healthcare industry continues to evolve and shift towards value based care.

We believe our differentiated care model and ability to serve all populations in performance based arrangements puts us in a strong position to capture this growing opportunity in 2024 and beyond.

On the call today, I will start with a discussion of our two go forward business segment, New care and new solutions and talk about why we are confident in the future of our differentiated value driven care model.

Then I'll turn it over to Jay to provide additional details on our financial performance.

Mike Mikan: Our new care segment is focused on delivering value-driven, consumer-centric care through our own clinics and partnerships with affiliated providers. Our model is unique, and we believe that when we tightly align the interests of stakeholders clinically, financially, and through data and technology, we can drive differentiated value and deliver a truly personalized care experience that's tailored to meet the needs of each consumer. New Care's positive momentum continued in the fourth quarter, leading to strong full-year results. New Care Segment Adjusted EBITDA was $42.9 million in 2023. Excluding the impact of the Goodwill Impairment we discussed in the third quarter, New Care delivered operating income of $32 million for the full year and realized $169.7 million of gross profit for the full year.

Our new care segment is focused on delivering value driven consumer centric care through our own clinics and partnerships with affiliated providers.

Our model is unique and we believe that when we tightly align the interests of stakeholders clinically financially and through data and technology, we can drive differentiated value and deliver a truly personalized care experience that's tailored to meet the needs of each consumer.

New <unk> positive momentum continued in the fourth quarter, leading to strong full year results.

Nuclear segment, adjusted EBITDA was $42 $9 million for 2023.

Excluding the impact of the goodwill impairment, we discussed in the third quarter, New care delivered operating income of $32 million for the full year and realized a $169 $7 million of gross profit for the full year.

Mike Mikan: In 2024, we expect to continue to drive growth in our new care sector by strengthening relationships with our existing payer partners, engaging in new payer partnerships, and continuing to attract and retain consumers through our value-driven model. We see our ability to effectively manage a diverse population mix, agnostic and product category, as a key differentiator that will fuel future growth.

In 2024, we expect to continue to drive growth in our new care segment strengthening relationships with our existing payer partners engaging a new payer partnerships and continuing to attract and retain consumers through our value driven model.

We see our ability to effectively manage a diverse population mix agnostic of product category is a key differentiator that will fuel future growth.

Mike Mikan: In 2024, we expect to serve between 330,000 and 345,000 value-based consumers through our own and affiliated clinics, an increase of approximately 17% over 2023. Turning now to our new solution segment, this is our provider enablement, focused on partnering with independent providers and medical societies to enable them to succeed in performance-based arrangements.

In 2024, we expect to serve between 330000 and 345000 value based consumers through our owned and affiliated clinics and increase of approximately 17% over 2023.

Turning now to our new solutions segment. This is our provider enablement business focused on partnering with independent providers and medical groups to enable them to succeed and performance based arrangements.

Mike Mikan: New Solutions also supports our new care business with care management, referral management, and other population health tools and capabilities. This business reflects our core and overarching focus on aligning interests to maximize value for all and represents a significant growth opportunity as more providers look to enter risk-bearing arrangements. We believe new solutions provide a strong platform for our company to continue to grow, enter new provider partnerships, and manage a diverse population base. Specifically, we see growth opportunities to serve additional Medicaid consumers in partnership with federally qualified health plans and other providers, as well as our APO reach. We encountered some headwinds that impacted our results in 2023, including Babylon's bankruptcy file and the impacts of CMS adjustments to financial benchmarks, notably the coding intensity factor, which Jay will discuss more in a moment. Excluding these factors, REACH ACOs delivered strong performance in line with our expectations. For 2024, we re-evaluated the participating providers in our accountable care organization and did not renew the contracts of certain underperforming

New solutions also supports our new care business with care management referral management, and other population health tools and capabilities.

This business reflects our core an overarching focus on aligning interests to maximize value for all and represents a significant growth opportunity as more providers look to enter risk bearing arrangements.

We believe new solutions provides a strong platform for our company to continue to grow enter new provider partnerships and manage a diverse population base.

Specifically, we see growth opportunities to serve additional Medicaid consumers in partnership with federally qualified health centers and other provider groups.

And our ACO reach business, we encountered some headwinds that impacted our results in 2023.

Including Babylon bankruptcy filings.

And the impact of CMS adjustments, chief financial benchmarks, notably the coding intensity factor, which Jay will discuss more in a moment.

Excluding these factors our reach Acos delivered strong performance in line with our expectations.

For 2024, we reevaluated the participating providers in our Acos and did not renew the contract of certain underperforming groups.

Jay Stephen Matushak: We also added new strategic provider partners more closely aligned with our goal. As a result, we expect overall margins to improve with greater insight into the returning population of Medicare beneficiaries we are managing and a more optimal partner. We are seeing strong growth opportunities on the provider enablement side of new solutions. During the fourth quarter, we secured new partnerships with providers, increasing the lives we are serving to over 106,000. This growth is significant and shows the value providers see in our partnership and Deep Experience in Managing Diverse Populations in Performance-Based Arrangements. We see our provider enablement in ACO REACH businesses as complementary, with each driving future growth opportunities for the other. I'll now hand it over to Jay to provide additional details on our fourth quarter and full year performance and our 2024 outlook. Thank you, Mike. And good morning, everyone.

We also added new strategic provider partners more closely aligned with our goals.

As a result, we expect overall margins to improve with greater insight into the returning population of Medicare beneficiaries, we are managing and a more optimal partner mix.

We are seeing strong growth opportunities on the provider enablement side of new solutions during the fourth quarter, we secured new partnerships with provider groups.

Increasing the lives we are serving to over 106000.

This growth is significant and shows the value providers CNR partnership and deep experience in managing diverse populations and performance based arrangements.

We see our provider enablement and ACO reach businesses as complementary with each driving future growth opportunities for the other.

I'll now hand, it over to Jay to provide additional details on our fourth quarter and full year performance and our 2020 for outlook.

Thank you, Mike and good morning, everyone I'll start with a discussion of our fourth quarter performance and full year results for our consolidated new health business as well as each of our new care and new solutions segments.

Jay Stephen Matushak: I'll start with a discussion of our fourth quarter performance and full results for our consolidated new health business, as well as each of our new care and new solution segments. And I'll provide an update on the winding down of our ACA insurance business and go over our balance. Finally, I'll provide an overview of our 2024 outlook.

Then I'll provide an update on our wind down of our ICA insurance business and go over our balance sheet.

Finally, I will provide an overview of our 2024 outlook.

Jay Stephen Matushak: Before I begin, I would like to note that I will be focusing on the 2023 financial results of our continuing new health business in each of our new care and new solutions segments. Yes, financials are included in our press release in the 10k that will be filed in the coming month and contain results that include our discontinued, New Health Consolidated Revenue for the fourth quarter was $292.9 million. Full Year Consolidated Revenue was $1.2 billion, representing 55% growth year-over-year on a comparable basis. The fourth quarter gross margin was $28 million and $164.2 million for the full year. New Health's Adjusted EBITDA loss for the 4th quarter was $10.4 million, and its Fully Adjusted EBITDA loss was $8.5 million.

Before I begin I would like to note that I will be focusing on the 2023 financial results of our continuing new health business in each of our new care and new solutions segments.

That financials are included in our press release and 10-K that will be filed in the coming months Canadian results that include our discontinued operations.

Consolidated revenue for the fourth quarter was $292 9 million.

Full year consolidated revenue was $1 2 billion, representing 55% growth year over year on a comparable basis.

Our fourth quarter gross margin was $28 million and $164 2 million for the full year.

Adjusted EBITDA loss for the fourth quarter was $10 4 million in full year adjusted EBITDA loss was $8 5 million.

Jay Stephen Matushak: When excluding the impact of non-recurring bad debt write-offs in our new care segment, as well as the impacts of the CMS benchmark adjustments in our ECO REACH business, New Health adjusted EDTA was approximately break-even for the full year. In 2023, we drew the number of consumers we serve across our new care and new solutions segments considerably to 461,000, which represents growth of 294% over the prior year, excluding the consumers served in partnership with the former Bright Healthcare commercial segment. In the new care segment, revenue was $71.3 million in the fourth quarter and $267.2 million for the full year, in line with expectations and resulting from increased attributed members to our clinic. We continue to be prudent on the level of risk we are taking in our contracts.

When excluding the impact of nonrecurring bad debt write off and our new care segment as well as the impacts of the CMS benchmark adjustments in our ACO reached business.

Adjusted EBITDA was approximately breakeven for the full year.

In 2023, we grew the number of consumers, we serve across our new care and new solution segments considerably to 461.

Which represents growth of 294% over the prior year, excluding the consumer serve in partnership with the former bright health care commercial segment.

And the nuclear segment revenue was $71 3 million in the fourth quarter and $267 2 million for the full year in line with expectations and resulting from increased attributed members to our clinics.

We continue to be prudent level of risk we are taking in our contracts.

Jay Stephen Matushak: We recognize that there is opportunity for greater revenue and margin expansion as we look to take on greater risk sharing and participate in more fully capitated models in the future. Operating costs were favorable for the full year, with medical costs moderately higher. Fourth quarter operating income was $3.7 million, with full year operating income of $32 million, including the goodwill impairment recognized in the third quarter.

I recognize there is opportunity for greater revenue and margin expansion as we look to take on greater risk sharing and participate in more fully captured models in the future.

Operating costs were favorable for the full year with medical costs moderately higher.

Fourth quarter operating income was $3 $7 million with full year operating income of $32 million.

<unk> the goodwill impairment recognized in the third quarter. Additionally.

Jay Stephen Matushak: Additionally, the new care segment adjusted EBITDA with a positive 42.9 million for the full year. Through our clinics in 2023, we serve consumers across the ACA marketplace, Medicare, and Medicaid, totaling approximately $293,000 in value. In 2024, we expect our new care segment to continue to drive growth and deliver differentiated value to providers, payers, and consumers. This year, we will continue to focus on enhancing our value-driven, consumer-centric care model, build upon long-standing relationships with existing payer partners, and prioritize engagement and growth with new payers. Turning now to our new solutions segment, in 2023, performance and new solutions will be largely driven by our ACO REACH business. We are now entering our third year participating in ACO REACH and continue to see strong alignment between the goals of the program and our commitment to aligning interests to make high quality health care more accessible and affordable.

Additionally, <unk> segment adjusted EBITDA was positive $42 9 million for the full year.

Through our clinics in 2023, we serve consumers across the ACI marketplace, Medicare and Medicaid totaling approximately 293000 value based consumers.

In 2020 forward, we'd expect our new care segment to continue to drive growth and deliver differentiated value to providers payers and consumers. This.

This year, we will continue to focus on enhancing our value driven consumer centric care model built upon long standing relationships with existing carrier partners.

I think engagement and growth with new payers.

Turning now to our new solutions segment of 2023 performance of New solutions was largely driven by our ACO reach business.

Were now entering our third year participating in ACO reach and continuing to see strong alignment between the goals of the program and our commitment to aligning interests.

Health care more accessible and affordable.

Jay Stephen Matushak: Through ACO REACH, we contract with CMS to assume the full performance risk of the Medicare fee-for-service beneficiaries aligned with our provider partners and contract separately with provider partners to share in the performance risk of their aligned beneficiaries. We have grown significantly over the years we have participated in the program. In 2023, we partnered with 11 provider groups and over 3000 affiliated providers to serve 62,000 Medicare beneficiaries across the country. New Solutions revenue was $220.9 million in the fourth quarter and $899.4 million for the full year, in line with expectations. Operating costs were in line with expectations, with medical costs higher for the full year. The new solution segment operating loss was $14.6 million for the fourth quarter, with an operating loss of $42.5 million for the full year. As we mentioned in our third quarter earnings call, our new solutions results have been significantly impacted by our relationship with Babylon Medical Group within ACL Reach. Due to Babylon's bankruptcy, we established a reserve against Everett Siebel in the third quarter, creating a bad debt charge of $22.4 million for the quarter.

The ratio reached we contract with CMS to assume a full performance risk of the Medicare fee for service beneficiaries align with our provider partners and contracts separately with provider partners to share in the performance risk of airlines beneficiaries.

It's grown significantly over the years, we participated in the program.

2023, we partner with 11 provider groups and over 3000 affiliated providers.

62000, Medicare beneficiaries across the country.

New solutions revenue was $220 9 million in the fourth quarter and $899 4 million for the full year inline with expectations.

Operating costs were in line with expectations with medical cost higher for the full year.

The new solution segment operating loss was $14 6 million for the fourth quarter with operating loss of $42 5 million for the full year.

As we mentioned in our third quarter earnings call, our new solutions results have been significantly impacted by our relationship with Avalon Medical group within ACL reach.

You had a Babylon bankruptcy, we established a reserve against the receivable in the third quarter, creating a bad debt charge of $22 4 million for the quarter.

Jay Stephen Matushak: We also retain full responsibility for the deficits of their attributed members for the balance of 2023. This negatively impacted gross margin by $14 million in 2020. In addition to Babylon, our ACO performance was also negatively impacted by CMS benchmark revenue adjustments, most notably the coding intensity factor.

We also retain full responsibility for the deficits of their attributed members for the balance of 2023.

This negatively impacted gross margin by $14 million in 2023.

In addition to Babylon, our ACO reach performance was also negatively impacted by CMS benchmark revenue adjustments, most notably the coding intensity factor.

Jay Stephen Matushak: New solutions adjusted EBITDA for the full year was a loss of $6 million, which excludes the bad debt expense and the additional Babylon deficits, as these are one-time items that don't reflect the ongoing expectations for the business. Aside from Babylon, our REACH ACOs perform well and continue to be a source of stable top-line growth. When excluding the Babylon Impact, our new solution segment revenue for the full year was $591.7 million, which represents a 49% increase over 2022, and the full year operating loss was $6 million, excluding battle. In 2023, we served over 42,000 Medicare beneficiaries, a 50% growth over 2022, not including Babel.

New solutions adjusted EBITDA for the full year was a loss of $6 million, which excludes the bad debt expense and the additional Babylon deficits.

These are one time items that don't reflect the ongoing expectations for the business.

Aside from Babylon, a reach ACO has performed well and continued to be a source of stable top line growth.

When excluding the Babylon impact our new solutions segment revenue for the full year was $591 7 million.

It represents a 49% increase over 2022 and full year operating loss was $6 million excluding that alone.

In 2023, if we served over 42000, Medicare beneficiaries, 50% growth over 2022, not including Babylon.

Jay Stephen Matushak: In 2024, we have diligently vetted providers we will partner with as part of the ACO REACH program based on historical performance relative to regional benchmarks, and a carefully selected group of high performing providers. We believe we are well positioned to drive strong performance in ATO reach in 2024. This year, we expect to serve 45,000 Medicare beneficiaries slightly above 2023 when excluding Babylon and expect revenue of between $690 million and $700 million for the full year.

In 2024, we have diligently embedded providers, we will partner with as part of the ACO reach program based on historical performance relative to regional benchmarks.

That's a carefully selected group of high performing providers. We believe we are well positioned to drive strong performance in ACO reach in 2024.

This year, we expect to serve 45000, Medicare beneficiaries slightly above 2023, when excluding Babylon and expect revenue of between $690 million and $700 million for the full year.

Jay Stephen Matushak: As Mike mentioned, in addition to ACO REACH, our new solutions segment offers enablement services to both our own clinics and to independent providers and medical groups. We are starting 2024 with new provider partnerships in this part of our business, serving over 106,000 consumers. We share our enablement business as a strong platform to expand our relationships with provider groups and leverage our expertise in managing all populations in performance-based arrangements, turning to the ACA insurance business wind down to continue to make significant progress and wind down in the fourth quarter. As of today, we believe we are more than 99% complete on medical claims in the ACA insurance business. At the end of the fourth quarter, our A.C. insurance business had approximately $150 million in excess cash surplus after reserving for expected medical costs and other anticipated wind-down expenses, not including risk adjustment obligations under our repayment agreements with CMS. Additionally, subject to adjustments in the conditions in the M.A.

As Mike mentioned in addition to ACO reach our new solution segment offers enablement services to both our own clinics and to independent providers and medical groups.

Starting 2024 with new provider partnerships and as part of our business serving over 106000 consumers. We sure enablement business has a strong platform to expand our relationships with provider groups and leverage our expertise in managing all populations and performance based arrangements.

Turning to the ACA insurance business wind down.

We continue to make significant progress in the wind down in the fourth quarter.

As of today, we believe we are more than 99% complete on medical claims in the insurance business.

The end of the fourth quarter, our insurance business had approximately $150 million in excess cash surplus after reserving for our expected medical cost and other anticipated wind down expenses.

Including risk adjustment obligations due under our repayment agreements with CMS.

Additionally, subject to adjustments in the conditions and the MAA sale agreement, we expect to receive an additional $110 million from escrow.

Jay Stephen Matushak: In the sale agreement, we expect to receive an additional $110 million from escrow. We intend to use these funds, if and when received, to offset liabilities in our discontinued APA insurance business, such as the obligations under the CMS repayment agreement that come due on or before March 14, 2025. Overall, we believe the remaining liability related to this business is substantially less and more certain heading into 2020. Now looking at our balance, as of December 31, 2023, we have $411 million in total cash and investments, including amounts in our regulated entity. Our non-regulated cash and short-term investments were $94 million at the end of Q4.

We intend to use these funds if and when received.

Liabilities in our discontinued FDA insurance business, such as the obligations are the CMS repayment agreements, which come due on or before March 14th 2025.

Overall, we believe the remaining liability related to this business substantially less and more certain heading into 2024.

Now looking at our balance sheet.

As of December 31, 2023, we had $411 million in total cash and investments including amounts in our regulated entities.

Our nonregulated cash and short term investments were $94 million as of the end of Q4.

Jay Stephen Matushak: As Mike mentioned earlier, we made the final repayment on our amended credit facility at the beginning of 2024, which eliminated our secured debt. Starting off the year, we are in a significantly stronger capital position, and we believe we are well positioned for the future. In 2024, we expect consolidated revenue of approximately $1 billion. Specifically, we expect between $310 million and $320 million from our new care segment and between $690 million and $700 million from our new solution segment. We expect Enterprise Adjusted EBITDA to be between $15 million and $25 million.

Mike mentioned earlier, we made the final repayment on our amended credit facility at the beginning of 2024, which eliminated our secured debt.

Start off the year, we're in a significantly stronger capital position and we believe we are well positioned for the future.

In 2024, we expect consolidated revenue of approximately $1 billion.

Specifically, we expect between $310 million and $320 million from our new care segment and between $690 million and $700 million from our new solutions segment.

We expect enterprise adjusted EBITDA to be between $15 million and $25 million.

Jay Stephen Matushak: In 2024, we expect to serve between 475,000 and 500,000 consumers across both our new care and new solution segments, serving between 330,000 and 345,000 value-based consumers in our clinics and between 145,000 and 155,000 consumers in new solutions, including approximately 45,000 through ACO REIT. Finally, we expect our adjusted operating cost ratio to be between 15 and 16%. As I mentioned earlier, it is important to note that there is substantial opportunity for revenue growth as we look to take on greater levels of risk sharing in our contract. Considering the total number of lives we serve in 2023, our total revenue opportunity is over $2.5 billion. In the future, we will look for opportunities to take on greater risk sharing as appropriate. In 2024, we believe a few key factors will drive improved profitability. First, growth and consumer service, specifically through our clinics, as well as through the enablement side of our new solution segment.

In 2024, we expect to serve between 475000.

And 500000 consumers across both our new care and new solutions segment.

Between 330000, 345000 value based consumers in our clinics and between 145100 <unk>.

55000 consumers in new solutions, including approximately 45000 through ACO reach.

Finally.

We expect our adjusted operating cost ratio to be between 15 and 16%.

As I mentioned earlier it is important to note that there is substantial opportunity for revenue growth as we look to take on greater levels of risk sharing in our contracts.

Considering the total number of lives we serve in 2023, our total revenue opportunity is over $2 5 billion.

In future, we will look for opportunities to take on greater risk sharing as appropriate.

2024, we believe a few key factors will drive improved profitability.

<unk> broken consumer served specifically through our clinics as well as through the enablement side of our new solutions segment.

Mike Mikan: Our differentiated, value-driven model has proven to deliver strong consumer satisfaction scores, and we expect to continue to attract and retain consumers in our clinics and through provider partnerships. Second, we expect to continue to build on longstanding relationships with our payer partners, while also prioritizing growth with new payers, as we continue to demonstrate differentiated performance in managing populations across the ACA marketplace, Medicare, and Medicaid. Third, we expect to drive improved performance in ACO reach by optimizing our partner portfolio and leveraging our past experience in the program to effectively manage the Medicare population. And finally, we are continuing to take steps to reduce operating expenses and right-size our business for long-term sustainable growth. We are confident in our going forward business and the value we will drive for stakeholders across the healthcare ecosystem. I'll now turn it back over to Mike for some closing remarks. Thank you, Jay.

Our differentiated value driven model has proven to deliver strong consumer satisfaction scores and we expect to continue to attract and retain consumers in our clinics and through provider partnerships.

Second we expect to continue to build on long standing relationships with our payer partners. While also prioritizing growth within payers as we continue to demonstrate differentiated performance and managing populations across the ACA marketplace Medicare and Medicaid.

Third we expect to drive improved performance in ACO reach by optimizing our partner portfolio and leveraging our past experience in the program to effectively manage the Medicare population.

And finally, we are continuing to take steps to reduce operating expenses and right size our business for long term sustainable growth.

We are confident in our go forward business and the value, we will drive for stakeholders across the health care ecosystem.

I'll now turn it back over to Mike for some closing remarks.

Thank you Jay.

Operator: This is an exciting time for our community, as we focus on our care delivery and provider-enabled models, where we have proven to drive the greatest value for payers, providers, and consumers. Our value-driven, consumer-centric care model is unique, and in combination with our ability to align the interests of key stakeholders clinically, financially, and through data and technology. We believe we can transform healthcare and create a better experience for all. As the industry continues to shift towards value-based care, we are well positioned to take the lead, and we see significant future growth opportunities in both our new care and new solutions segments. I would like to thank the entire New Health team for their continued hard work and dedication over the past year. I have great confidence in our people and the differentiated, value-driven care model we have built. Thank you for joining the call and for your interest in New Health. We will now take the first question. Thank you.

This is an exciting time for our company as we focus on our care delivery and provider enablement business, where we have proven to drive the greatest value for payers providers and consumers.

Our value driven consumer centric care model is unique and in combination with our ability to align the interests of key stakeholders clinically financially and through data and technology.

We believe we can transform health care and create a better experience for all.

As the industry continues to shift towards value based care, we are well positioned to take the lead and we see significant future growth opportunities in both our new care and new solutions segments.

I would like to thank the entire new health team for their continued hard work and dedication over the past year.

I have great confidence in our people and the differentiated value driven care model, we have built.

Thank you for joining the call and for your interest in New health.

I'll now take the first question.

Thank you we will now start today's Q&A session I would just like to remind everyone that if you would like to ask a question. Please press star followed by one on your telephone keypad.

Operator: We will now start today's Q&A session. I would just like to remind everyone that if you would like to ask a question, please press the star followed by one on your telephone keypad. If you change your mind, please press the star followed by two.

Change your mind, Please press star followed by <unk>.

Joshua Raskin: Our first question today comes from Joshua Raskin from Nephron Research. Your line is now open, please go ahead. Hi, thanks. Good morning.

Our first question today comes from Joshua Raskin from Nephron Research. Your line is now open. Please go ahead.

Hi, Thanks, good morning.

Joshua Raskin: I wanted to start, I guess, just a balance sheet question. So first, could you just confirm what the total actual proceeds from Molina were in early January? And then how much is pending in escrow? And what are the variables that that escrow depends on? So the proceeds received from the Molina transaction in January were $390 million. What was the second question, Josh?

I wanted to start I guess just balance sheet questions. So first is could you just confirm what the total actual proceeds from Molina. We're in early January and then how much is pending in escrow and what are the variables that escrow depends on.

So.

The proceeds.

<unk> received from the Molina transaction in January were $390 million, what was the second question Josh.

Jay Stephen Matushak: How much is pending in escrow, and what's the timing and what are the milestones for that to come in? Is that just claims and adjustments? Yeah, it's $110 million. 100 of it is tied to CMS pending approval of the consolidation of brand new day and central health plans, the age contract, or if we achieve a three star rating in the Part D, B, and D business. So either way, either of those being achieved would be the return of the hundred million.

How much is pending in escrow and what are the what's the timing and what are the milestones for that to come in is that just.

Claims and adjustments there.

Yes, it's $110 million.

It.

Is tied to.

CMS pending approval of the.

Consolidation of brand, New day, and Central health plans, each contract or if we achieve.

<unk> three star in the part D BMD business, so either way.

Neither of those being achieved would be the return of the $100 million. The other $10 million is related to an indemnity and we expect the $100 million to come in later this year, probably Q4 of 'twenty, four and $10 million related to other indemnity items likely in early 'twenty five sometime.

Jay Stephen Matushak: And the other $10 million is related to indemnity. And we expect the $100 million to come in later this year, probably Q4 of 24, and the $10 million related to other indemnity items, you know, likely in early 25 sometime. Okay, gotcha. So at the end of the year, you had $87 million. You got to $390. You paid off the 390, you paid off the 304, and then you've got another 110 coming.

Okay got you all right. So you had $87 million at the end of the year you got the 390 <unk>.

Paid off of the $3 90, you paid off the 304.

And then you've got another 110 coming in so I guess the last piece of the puzzle is what's cash flow from operations. If youre going to do is take 20 million of EBITDA, what does that translate into cash flow from ops. This year.

Mike Mikan: And so I guess the last piece of the puzzle is what's cash flow from operations? If you're going to do, say, 20 million in EBITDA, what does that translate into cash flow from operations this year? It's about half.

It's about half.

Mike Mikan: So we're free cash flow positive. But the way I kind of think about the capital position, Josh is, we've got, Jay mentioned, we've got about $90 million at the end of the year of non-regulated cash. After you netted out the gross proceeds and netted out the payments for the bank repayment transaction costs, we put $30 plus million on the balance sheet. So we started the year with about $120 million of, you know, non-regulated cash.

Our free cash flow positive.

But the way the way I kind of love the capital position, Josh as we've got as Jay mentioned, we've got about $90 million at the end of the year.

Nonregulated cash.

After you netted out.

From the gross proceeds are netted out the payments to the bank repayment transaction costs, we put 30 plus million dollars on the balance sheet. So we started the year with about $120 million of nonregulated cash.

Mike Mikan: As Jay mentioned, we've got about $150 million of cash and surplus that we expect to get back from entities that were in the surplus position. And then we've got the $110 million that we expect, you know, assuming CMS approves the consolidation from the Molina transaction. And so those are kind of the cash and capital that we are relying on today. And then offsetting that is the CMS repayment agreement, which is $290 million, which will be accruing interest, depending on when we pay it down based on, you know, the surplus return, which we're working on right now. You know that that's the obligation that remains out there. So we're in a meaningfully stronger cash capital position today. And, you know, feel good about the future. Yeah, that's what I was getting at 380 of total cash to 90 of total CMS repayment and free cash flow. Let's call it $10 million. That's kind of the math that I was going with.

As Jay mentioned, we've got about $150 million of cash.

Cash in surplus.

We expect to get back.

Entities that were in the surplus position.

And then we've got the $110 million that we expect assuming.

MFS approves the consolidation from the Molina transaction and so those are kind of the cash and capital that we are relying on today and then offsetting that is the <unk>.

CMS repayment agreement, which is $290 million, which will be accruing interest depending on when we pay it down based on the surplus return, which we're working on right now.

That's the obligation that remains out there so we're at a meaningfully stronger cash capital position today.

And.

I feel good about the future.

Yes, that's what I was getting at $3 80, a total cash $2 90 of total CMS repayment and.

Free cash flow, let's call it $10 million Thats kind of the math that I was kind of it. So that's super helpful. And then I guess just more importantly can you talk about.

Mike Mikan: So that's super helpful. And then, I guess, just more importantly, can you talk about ACL reach and sort of, you know, the reevaluation of partners and sort of what gives you comfort that the existing partners are strong partners and that, you know, these are going to be, you know, positive income generators in 2024. Yeah, I'll start, and maybe I'll ask Thomas Orozco, who is our Executive Vice President and runs our day-to-day operations, to maybe add in if he has something to add. But, you know, we've taken a detailed look at all of our provider partners.

ACL reach in sort of the <unk>.

Reevaluation of partners and sort of what gives you comfort that the existing partners are strong partners in that these are going to be positive income generators in 2024.

Yes, I'll start and maybe I'll ask Thomas Roscoe, who is our executive Vice President and runs our day to day operations to maybe add in if he has something to add but we have taken a detailed look at all of our provider partners and let's start with a core set of our provider.

Mike Mikan: And let's start with a core set of our provider partners are our own and employed providers within our organization, and they perform very well. So we feel very confident that within our organization or our provider base, we've got strong performers that understand how to manage population risk, use our tools, and provider enablement capabilities. And so we've got a strong foundation of those. Obviously, in 22 and 23, we had partnerships with the likes of Babylon, which, unfortunately, while we weren't taking significant downside risk as a contractual matter, unfortunately, from a, you know, with them going bankrupt, we, it came back to us in terms of their losses. And so that had a big impact. We don't have anywhere near that level of concentration.

Our partners or our own owned and employed providers within our organization and they performed very well. So we feel very confident that within our organization and our provider base that we've got.

Strong performance that understand how to manage population risk use our tools and provider enablement capabilities and so we've got a strong foundation of those obviously.

Obviously in 'twenty, two and 'twenty three we had partnerships with.

The likes of Babylon, which.

Unfortunately, while.

We werent, taking significant downside risk as a contractual matter.

Fortunately for me.

With them going bankrupt.

It came back to us in terms of their losses, and so that was the big impact we don't have anywhere near that level of concentration that was a big part of our ACO book of business.

Mike Mikan: That was a big part of our ACO book of business. We're not, we will no longer take any that type of concentration risk going forward. So as we look to the future, we look to providers, as Jay said, where, you know, we can see historical performance that is strong against the benchmarks. And I don't know, Thomas, do you have anything to add to that?

Will no longer take any that type of concentration risk going forward. So as we look to the future. We look to providers as Jay said, where we can see historical performance strong against the benchmark.

I don't know Thomas side.

Do you have anything to add to that.

Yes, Thanks, Mike again, Josh Great question, I think Mike's point is the right one in terms of how we selected our partners going into 2024.

Thomas Orozco: Yeah, thanks, Mike. And Josh, a great question. I think, you know, Mike's point is the right one in terms of how we selected our partners going into 2024, their performance in 2023, which was favorable, and new partners that we've added. I think we feel great in terms of network composition. But I think the piece that I'd highlight is how we're deploying our capabilities and supporting these providers and their performance in the ACO REACH program. I think this being our third year, you know, just how we're coordinating those capabilities, how we're partnering with the providers just gives us a tremendous amount of confidence in terms of our performance and us being able to support their underlying performance. So, you know, I think the third-year models evolved, network composition is far more favorable, and just the connectivity between us and our affiliate partners and how we're deploying key capabilities, i.e., care management, chronic care management, patient engagement capabilities, I think is going to make all the difference. And Josh, I would just add that, you know, one last, just, one more add-on to that.

<unk> performance in 2023, which was favorable.

New partners that we've added I think we feel great in terms of network composition, but I think the piece that I would highlight is how we're deploying our capabilities in supporting these providers and their performance on the ACO reach program I think this being our third year.

Just how we're coordinating those capabilities, how we're partnering with the providers just gives us.

A tremendous amount of confidence in terms of our performance and also being able to support their underlying performance.

The third year of models evolved network composition far more favorable and just the connectivity between us and our affiliate partners and how we're deploying key capabilities I E care management current chronic care management.

Patient engagement capabilities, I think is going to make all the difference.

And Josh I would just add one last.

Josh just one more add on to that and just to be clear, while we believe in the ACO reach program.

Mike Mikan: And just, you know, to be clear, while we believe in the ACL Reach program, we really view it as very much aligned with our provider enablement business. We are partnering with providers who are, you know, moving to manage care, population risk, taking downside risk. And so it very much aligns with our business. And so we're excited about the long-term prospects. But the critical element is to make sure you're partnering with providers who are committed to managing population risk. And so that's something that we've been very focused on; we're not focused on growth just for growth; we're focused on growth where we know we can not only provide high-quality care but provide it on a profitable basis. Yeah, that makes sense.

We really view it as very much aligned with our provider enablement business, we are partnering with providers who are moving.

Moving to managed care population risk, taking downside risk and so it very much aligns with with our business and so we're excited about the long term prospects, but the critical element is to make sure youre partnering with providers, who are committed to managing population risk and so that's something that we've been very focused.

We're not focused on growth just for growth we're focused on growth, where we know we can.

Not only provide high quality care, but provided on a profitable basis.

Yes.

Yes that makes sense and if I could just sneak in one more just on the exchanges and the individual exchanges I'm curious about utilization trends into the fourth quarter and.

Joshua Raskin: And if I could just sneak in one more on the exchanges on the individual exchanges, I'm curious about utilization trends into the fourth quarter. And, you know, whether you saw any, you know, increases in utilization towards the end of the year, if you're seeing anything in January or February in the run-out of claims that would suggest that, you know, there's been some pickup in utilization. No, we really haven't, Josh. You know, we've seen stable trends, and we haven't seen anything. In the Medicare business, it's been noted that, you know, we've seen some elevated trends, especially with elective procedures and outpatient care in the later part of the year, but that's stuff that we've seen, you know, typically in the fourth quarter. So we don't have any noteworthy utilization changes in the fourth quarter and on the ACA exchanges.

Whether you saw any.

Increases in utilization towards the end of the year, if youre seeing anything in January or February and the run out of claims that would suggest that there's been some pickup in utilization.

No we really haven't Josh.

Ed.

We've seen stable trends and we haven't seen anything in the Medicare business. It's been noted that we saw some elevated trends, especially with electric procedures in our patient care in the later part of the year, but that's stuff that we've seen.

Typically in the fourth quarter. So we don't have any noteworthy utilization changes in the fourth quarter on the ACA exchanges.

Jay Stephen Matushak: Perfect. Thanks again. Thanks, Josh. Just a reminder that if you would like to ask a question, please press star followed by one on your telephone keypad. Now, if you change your mind, please press star followed by. We have no further questions at this time. I'll now hand the call back over to Mike Mikan for any closing remarks. All right, great. Thanks for your interest in New Health, and we look forward to updating you again shortly. Thanks, and that concludes today's New Health Earnings Call. You may now disconnect your line: www.globalonenessproject.org

Perfect. Thanks again.

Thanks, Josh.

Just a reminder, that if you would like to ask a question. Please press star followed by one on your telephone keypad now if you change your mind. Please press star followed by <unk>.

Yes.

We have no further questions at this time I'll now hand, the call back over to Mike Mike <unk> for any closing remarks.

Well great. Thanks for your interest in new health and we look forward to updating you again shortly.

That concludes today's new House earnings call you May now disconnect your line.

Yeah.

[music].

Okay.