Q1 2024 Nutex Health Inc Earnings Call
Greetings and welcome to the new tax help first quarter 'twenty 'twenty four financial results, earning call at.
At this time all participants are in a listen only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance. During the conference. Please press star zero on your telephone keypad.
As a reminder, this conference is being recorded it is now my pleasure to introduce your host Jennifer Rodriguez.
You may begin.
Hello, and good morning, welcome to the New text Health first quarter 2020 for four earnings Conference call. Today's call is being recorded with me. This morning is our chairman and CEO, Dr. Tom, Though CFO, Jon Bates President Dr worn Houstonian and C O O Josh to Twilio.
Our team will provide some prepared remarks, and then we'll take questions before I turn the call over to Dr. <unk>, Let me remind everyone that today's call may contain forward looking statements that are based on management's current expectations numerous risks uncertainties and other factors that may cause actual results to differ materially from those that might be expressed today.
More information on forward looking statements and these factors are listed on Wednesdays press release and in our various SEC filings on this morning's call. We may reference measures such as adjusted EBITDA, which is a non G. A a P financial measure.
Providing supplemental information on adjusted EBITDA and reconciling net loss attributable to new textile ink is included in the press release and Form 10-Q filed earlier this week.
Dr. Tom: This mornings call is being recorded and a replay of the call will be available later today with that I'll now turn the call over to Dr. Tom, Though our founder and Chief Executive Officer.
Okay.
Jennifer Thank you and good morning, everybody and thank you for joining the call.
The past two years have been very challenging both from a health care industry standpoint, as well as from a macroeconomic standpoint.
However, we remain committed to our core mission of providing improved accessibility as well as exceptional concierge level patient care.
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All of our hospitals are open 24, seven and we are the medical safety net for those communities that we serve.
While we have faced many hurdles I'm happy to report that our team have been very diligent and overcoming many of these hurdles.
We believe our effort over the past 12 months are beginning to pay off.
This momentum has generated improved financial results driven by volume growth year over year.
Improved collections per visit and solid operating at solid operating margins.
In 2023, we implemented several initiatives to increase our volume.
Increase in patient volume and increased outpatient volume.
In addition, we opened four new hospitals in 2023.
All of which have ramped up either faster than expectations well within expectations.
System wide quarter over quarter from 'twenty to 'twenty three 'twenty 'twenty four.
E our volumes increased by 21%.
Of this 21% increase five three per such are from mature hospital growth defined as hospitals being opened by December 31st 2022.
To provide one full year or more of comparable results.
Most of the remaining increases are from our ramping hospitals.
Fine S being open for less than one year.
Dr. Tom: From a revenue per patient perspective, we have also made some gains.
Collection percentages have consistently increased monthly since January 1st 2022 when they know surprises act was implemented.
And we are making great strides in understanding as well as navigating through all the nuances of the no surprises Act.
On the population health side of the business. We are also seeing growth.
In addition to our I P. A in Los Angeles, which has been consistently profitable.
We have recently added an IPA in south, Florida, as well as an IPA in Houston.
As a result, the number F M. A lives for our Medicare advantage lives have increased by 78% quarter over quarter.
From a cost perspective.
Operating costs across most categories have started to come down.
You may lead to our cost cutting measures, which we have announced earlier this year.
As we move through the remainder of the year, we will maintain our disciplined approach of managing our cost.
Continuing to invest appropriately in our strategic growth areas, which we believe should position the company favorably to meet our long term objectives of being a long term sustainable and profitable company.
With that I will turn the call over to Jon Bates.
Our C F O our chief financial Officer for more financial information for the first quarter John.
Thanks, Tom and good morning, everyone.
So we believe our first quarter performance represents a strong start to the year and we continue to combine solid operational performance with a disciplined and balanced allocation of capital to increase shareholder value over time.
We had very strong topline growth in and tuck in total revenue and visits for the first quarter of 2024 compared to the first quarter of 2023.
Regarding total revenue, we had an increase of 20% or $11.2 million to $67 5 million for the first quarter of 2024 versus $56 3 million for the first quarter of 2023.
Of the total revenue increase mature hospitals, which are hospitals that were opened prior to December 31, 2021, and therefore provided one full year of comparative results increased its revenue by 6.7% for the first quarter 2024 versus the first quarter 2023.
Additionally, the population Health Division.
Revenue grew by.
Two 5.4% in the first quarter of 2024 from 7 million in the first quarter of 2023 to $7 4 million in the first quarter of 2024.
With regard to this hospital Division visits. We also grew as Tom mentioned earlier had a solid increase of 21% quarter over quarter with those mature facility is growing at five 3% for the first quarter 2020 for the first quarter 2023.
So what do you listen to that revenue improvement, we have seen year over year. The company's focused operating cost control efforts that were started toward the end of 2023 continued to be a focus in the first quarter of 2024 and began to see a positive impact from these initiatives during the quarter.
Dr. Tom: One of those areas, where we see this is in the 2024 first quarter gross profit as it grew to 10.2 million or 15, 1% of total revenue as compared to $4 8 million or eight 6% of total revenue in the first quarter of 2023.
Which is a 113% increase quarter over quarter.
Additionally, first quarter 2024 operating income was a positive 1.4 million compared to an operating loss of a negative $4 4 million in the same quarter of 2023.
So net loss attributable to new tax income improved by $4 8 million from a loss of negative point.
Negative $5 1 million in the first quarter of 2023 to only a very small loss or a negative 364000 in the first quarter of 2024.
Adjusted EBITDA increased 2.2 million or 92% from two to 4 million in the first quarter of 2023 to $4 6 million in the first quarter of 2024.
With regard to cash flow, you'll see that the net cash from operating activities was $3 1 million in the first quarter of 2024 cause an increase of $2 1 million from the first quarter of 2023.
Finally on our balance sheet cash and cash equivalents at March 31 of 2024 was $30 million up 8 million from 22 million at December 31, 2023, and on the liability side, we have long term debt of $26 3 million, which is a relatively reasonable amount of for a company.
There's 21 separate hospital locations and the majority of this debt is related to as you would imagine equipment loans related at our hospitals for such things as MRI is X rays ultrasound and C T machines.
So with that I'll turn the call over to Jennifer to open it up for Q&A as we look forward to your questions.
Thank you John.
We will now open the call to take questions.
In the Q, we have bill Sutherland from the benchmark company.
No.
Hey, Thank you and good morning, everybody a nice nice work in the first quarter or just and appreciate you taking the questions.
So Tom you up to date I think you added one hospital on April one.
How are you thinking about and additional growth in terms of hospital facilities.
Tom: Oh no. Thank you bill for the question.
No we we believe in future growth.
And for 'twenty 'twenty four we do have a pipeline of four hospitals that we can open anytime after the third quarter of this year.
Oh, I'm, sorry during the third quarter or after the third quarter of this year. However.
However, as previously disclosed we have placed a delay in the opening up any further new hospitals in 'twenty 'twenty four and to a certain financial metrics have been achieved so in particular, we're slowing down openings until we get fun, new hospitals, either through internal cash collections or through alternative financing that.
Theres not prohibitively expensive nor dilutive.
So on a weekly basis, we continue to evaluate our cash and potential timing for opening new hospitals. This year.
Yeah as far as.
Oh God you Bill.
No no no you finish sorry.
And I was just going to say that beyond 24 are looking forward to 25 and beyond that we do get a fair number of request from all over the country weekly to open these micro hospitals in their community and so we'll continue to evaluate these opportunities and balance the.
The high cost of developing these hospitals versus the big need and demand for its festival health care. The good news, though is that there is no lack of demand for our services are these micro hospitals are very popular around the country.
Bill: Sorry, Bill go ahead.
Oh, no I was just going to say a two follow ons. It you've also done some pruning of some underperforming hospitals is that process largely complete or is there more to go.
So there's more to go and so.
We're a portfolio company as you know.
And we are constantly reviewing every single hospital in our portfolio on a monthly basis to make sure that they are performing.
Currently there are a few hospitals that are not performing as expected and saw what happened with the no surprises act was that with the decrease in reimbursement.
The hospitals that were performing well three years ago may not be performing asphalt this year.
And so we are always looking to improve the performance of these hospitals and so our plans for these hospitals are to initiate all of the revenue growth protocol, which I could I could go into later as well as all the cost cutting measures are that I could go into later also.
And give them a period of time to turn around and so if that still doesn't work then the next step would be to do an analysis to either sell that facility to another operator or shut the facility down. So this one so once again this is a continuing process not just for the underperforming hospitals, but for all of that our hospitals are in our portfolio.
Just a continual process of optimization it sounds like it doesn't sound like you've got like a list that you're concerned about you know two to not continue with it.
For the placebo.
Seeable future.
Bill: That's right Oh, 21 hospitals I would say that there's there are a few that were that were trying to turn around but for the most part most of the hospitals are doing well.
Got it.
Warren maybe over to you in terms of the population health side.
How do you see the growth outlook there.
For the remainder of the year and into next year.
Yeah. Thank you for the question Bill we are continued growth in that business. We currently have three IEP AIDS that are operational one.
Warren: One in Houston, and one in South Florida, All three of these had a strong annual enrollment peaked at the end of 2023, resulting in new Tech health almost doubling our Medicare advantage lives under management.
Looking forward, we are launching our I T in Phoenix, Arizona. This year and then we plan to launch one to two more new I P. Each year going forward around our other <expletive> abilities.
Got it.
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The.
So you provided a same store number this quarter, which is helpful.
Warren: But.
How are you kind of focusing on.
On expanding that.
Same store number going forward, because I think there's some.
Some servicing and enhancements that you guys have started to put in place.
Yeah.
Speaker Change: Absolutely. So we definitely believe in and growth both internally as well as externally with new location. So internally over the past 12 months, we have put several initiatives that we think will be very beneficial to the company. So we have protocols in place for all of the hospitals in our network to number one increase ear volume's.
And that's through marketing and patient referral physician referral so on so forth.
Number two is once a patient goes into our yeah, we want to keep them at our hospital.
So we want to increase the observation status of those patients.
And then from there increase of inpatient as well because we want to maximize the use of our inpatient service lines and then we also have outpatient service lines such as imaging. So C. T X Ray MRI ultrasound lapse. So we want to increase those service lines also.
For about six of our hospitals, we actually have a pretty robust initiative for a medical treatment of behavioral health conditions, so conditions, such as alcohol alcohol intoxication alcohol detoxification or benzodiazepine addiction. As an example of these treatments and.
Speaker Change: For about four hospital, we're starting to do some outpatient procedures, such as interventional pain procedures or interventional radiology procedures and so far we're seeing some positive results from a lot of the initiatives and so hence that's why you see the the 5% to 6% quarter over quarter growth from both a volume.
As far as a as a revenue side.
So that's on the revenue side on the expense side. We've also implemented a few cost cutting initiatives and with that I'd like to ask our chief operating officer, Josh to describe some of the things that he's working at and we're working on both from a hospital level as well as the corporate level.
Josh are you on.
Yes, good morning, everyone. Yeah, So as Tom said on the cost side, we've been working very hard in the last number of months both at the hospitals and at corporate are our three biggest costs are our labor costs, our contract services and our supplies for labor, we worked very hard with our teams to maximize productivity at the hospitals as well as corporate and we've leaned down.
In certain areas, we put in some new tools like staffing matrices and we're looking at implementing some new scheduling and productivity software and it's always a balance and we you know with the significant volume growth that we've had over the last several months to ensure that we're staffing appropriately I would also add that we've not experienced the staffing shortages or turnover or increased labor costs like other health system.
As our teams are highly engaged and loved their loved above our model and love their jobs.
Contract services has also been a big improvement for us in cost and Theres a lot more to come we're really working hard to leverage our size and scope with vendors.
Historically, we've had 21 different contracts for certain vendors where.
Where we're shifting to larger corporate contracts to take advantage of bulk purchasing and discounts on the corporate side. We've had a number of consultants that we've eliminated insurances that we've renegotiated and quint when we've continued to whittle down spending on temporary employee staffing agencies and our legal spend on the supply side, we've been working very closely with our distributors and G. P. S.
To ensure we've got the right contracts with the most advantageous pricing for medical supplies and pharmaceuticals, and again and supplies for leveraging our size versus 21 individual hospitals the supply savings have begun but theres a lot more to come and it will continue to be material. We're working closely with our corporate team and hospital teams and they are very familiar with our operational planning and cost savings.
This shows that we put in place and we're very fortunate to have some of the best leaders in the industry in our hospitals and they're doing a great job executing on the cost side.
Thank you.
Sure.
Thanks, Josh Thanks, Tom.
If you don't mind I'll sneak in one or two more questions.
Speaker Change: And because I'm curious about revenue per visit patient revenue per visit bounce back dramatically last year pretty steady right now is that kind of a kind of a steady state number.
Going forward yeah.
Yeah, no not where we're continuing to make progress with the NSA and as you know and this is industry wide is that a when the NSA was implemented back in 'twenty. Two we saw roughly a 30 to 35 decrease in revenue and that's just not us.
Your body else and so we had to make some serious adjustment very very fast and so over the past two years, we have learned a great deal about the process and have put together a very competent team to work. These these claims.
And what we're finding is that unfortunately, we have to resubmit about two third of our claims back to the NSA portal in order to get a better payment. So in other words insurers are paying us below market.
Two thirds of those claims.
Speaker Change: So as you can imagine that's a lot of claims that we have to reprocess, which requires a lot more work, but however, we're doing it.
And so when we resubmit. These claims there are two ways to do it through the what's called the idea or the independent dispute resolution.
Either negotiate with insurers directly through what's called an open negotiation or you could go through a little bit more of a formal process called arbitration.
So historically, we've been doing mainly open negotiation and we're getting good results as you can tell from our from our previous financials.
However, at the end of 'twenty to 'twenty three the arbitration Porto was actually upgrade it.
Thanks to the current administration.
To make it a lot more streamlined as well as cost effective.
And so we are basically ramping up to start to process more claims through the arbitration process of the MSA in 2024.
And so really our goal is to get the insurance company to pay us fairly that's it that's our goal we don't eat you know any more than that however.
We don't we don't have any data yet on the arbitration process, because we're just starting that process. However, based on public data.
That we see out there are we see that the providers when about 70 or 80% of the time when they go through the opposite.
When they go through the arbitration process. So we're hopeful for a good outcome. So in addition to the arbitration you may know this already but in 'twenty 'twenty four the insurers are through the N. S. A are mandated to increase their payment by about 5% to adjust for cost of living increase.
So in summary, we're close we're closely monitoring our collections, but but we remain very optimistic about both the fiber side cost of living increase as well as the arbitration process.
Process to help increase our our collections so more to come as we as we get more results over the next few quarters.
So just a follow up Tom on that I had I think that in may or this month I should say the payers are.
Now, we're using a higher that's called qualifying payment amounts.
Is that the 5% increase you're talking about or is that separate.
No that that's separate that's separate the Q P. A basically staffs for qualified payment amounts.
And its essentially tied to what's called the median in networks.
And so the median and that work is based on the median in network rates of the hospitals around our hospital and so this is there's a fair amount of controversy remaining about this this so called Q P. A R median in network.
And so.
Unfortunately, there has been a lack of clarity on what the insurance company to use as a median in network and.
And so there's been several court cases, you know that's been challenging. This is a median in network, but ER, but so far it looks like you know the court has sided with the providers on this calculation of the median and at work and you can definitely read about it you know have you do a search but going back to the Q P. A that you referenced yes.
Q P. A is separate.
To this 5% cost of living increase and in fact because of that the NSA also mandates that if the insurance company had not done a cost of living increase since 2019, the actual cost of living increase since 2019 should be closer to 21%.
So that 5% is the only going from 23 to 24.
And so where it works where a monitoring our collection to see that if that has been done.
Okay. So that is basically the law of the land Oh, they mandate that alright or use.
Are the payers now forced to get rid of course, but.
I've talked to that whole P. P. A thing that's going to improve because they were going to start out with a higher Q P. A.
Is that going to work so I can't remember if that's okay.
Yeah, no no basically the whole premise of the Q P. A is that they have to use the median in network calculation and.
And using the median and network calculation they have to exclude any hospitals or providers that do not provide a similar level of service and so for example.
And let's just say it in a in a region. If there are say 10 hospitals and only three hospital provides emergency services, which is similar to our model then they could only use the median in network rate of those three hospitals that provide emergency services mhm the other.
Hospitals may not provide emergency services and so there are there rep or there are payment maybe a lot less and so the court back in 2020 three rule that in calculation of the of the Q P. A R. The median network the insurers cannot use what they called the <unk>.
Rates, which are the inclusion of the rates for the seven hospitals that do not have emergency services. They could only use the three hospitals that provide emergency services and so that's where I think there was a lack of clarity and I and I think that's where the insurance company.
Just to sort of like you know caused the reduction in revenue. So I think it's sort of a school that I'm sorry go ahead.
Yeah, So theyre now.
So theyre now abiding by that.
At structure, you just talked about with.
Like you know like for like to create the median.
Right.
Okay. That's good that's a long time, whether or not the insurers follow that you know hard to say.
Okay.
I think that's all I got I appreciate all the color guys.
Take care.
Yeah. Thank you Bill for the excellent question. Thanks Bill.
Okay are there any additional questions for the new tax team.
Okay on behalf of the new tax management team. We appreciate everyone for dialing in and listening to our first quarter earnings appoint.
A recording of this call will be available on our website for a limited time.
Is there any additional questions. Please send an email to investors at your Pet's health Dot Com and we will do our best to answer it in a timely manner.
<unk> you for joining and take care.
Speaker Change: This concludes today's conference you may disconnect your lines at this time. Thank you for your participation.
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