Q3 2024 Nutex Health Inc Earnings Call
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Speaker Change: Good morning and welcome to NewTek's helping third quarter earnings call for the period ended September 30th, 2024. My name is Vivian Sanders and I will be your moderator for today's call. We appreciate your participation and interest in our company. Today's call is being recorded.
Speaker Change: With me this morning is our Chairman and CEO, Dr. Tom Vo.
CFO Jon Bates
President, Dr. Warren Housinian, and COO, Josh DeTillio.
Speaker Change: Our team will provide some prepared remarks and then we'll take questions. Before I turn the call over to Dr. Vo, let me remind everyone that today's call can 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.
Speaker Change: More information on forward-looking statements and these factors are listed in Thursday's press release and in our various SEC filings.
Speaker Change: On this morning's call, we will reference measures such as Adjusted EBITDA, which is a non-GAAP financial measure.
Speaker Change: A table providing supplemental information on adjusted EBITDA and reconciling net loss attributable to New Tax Health Inc. is included in the press release and Form 10-Q filed earlier this week.
Speaker Change: This morning's call is being recorded and a replay of the calls will be available later today. With that, I'll now turn the call over to Dr. Vo, our Founder and Chief Executive Officer.
i
Thank you, Vivian.
And thank you all for joining us today.
Speaker Change: We are pleased to report another excellent quarter for NUTEX Health.
Speaker Change: In the third quarter of 2024, we achieved substantial revenue growth as well as volume growth and continue to show our commitment to enhancing profitability and operational efficiency.
Speaker Change: I would like to start with some highlights from this quarter.
Speaker Change: For the three-month ended September 30, 2024, we reported total revenue of $78.8 million, which is a significant increase compared to $62.7 million for the same period last year.
This equates to a growth of 26%.
Speaker Change: Some of this growth was due to the four new hospitals that we opened in 2023.
Speaker Change: The rest were from mature hospitals, which are those opened prior to December 31, 2021, which had revenue increase of 20.7% during this same period.
Speaker Change: On the net income side, we incurred a loss, a net loss attributable to NewTek's health of $8.8 million as compared to a net loss of $5.5 million in the third quarter of 2023.
Speaker Change: This $8.8 million amount does include a $6.7 million non-cash loss on warrant liability, as well as a $2 million non-cash stock-based compensation expense.
Speaker Change: Our adjusted EBITDA, on the other hand, was $13.5 million positive for this quarter, compared to just $1.3 million from one year ago, an increase of 938%.
Speaker Change: In terms of cash flow, as of September 30, 2024, we reported net cash from operating activities of $23.1 million as compared to cash from the same time last year of $3 million, an increase of 670%.
Speaker Change: Our finance lease liabilities, which we are required to report due to GAAP accounting policies, did increase slightly from $213 million to $241 million. This is mainly due to new leases that were signed for facilities opening within the past nine months.
Speaker Change: From a patient perspective, our hospital division reported 41,668 visits in the third quarter, reflecting an 11.3% increase over the same quarter last year.
Thanks for watching. See you next time.
Speaker Change: I would like to take a moment to share some insights regarding our operational performance that is responsible for these positive results.
Speaker Change: First, I want to emphasize that the achievements we reported today are not just numbers. They reflect the dedication and hard work of our team across all levels of the organization.
Speaker Change: The growth we have experienced in both revenue and patient volume is a testament to our commitment to delivering exceptional healthcare throughout our micro hospitals as well as population health divisions.
Speaker Change: Second, our recent opening of four de novo hospitals in 2023 have all ramped up nicely and contributed to this positive trend.
Speaker Change: Our ability to adapt to the needs of our patients is key to our ongoing success.
Speaker Change: Third, our internal coding, billing, and collections departments, operationally, are getting more experience in working the No Surprises Act, or NSA, claims.
Speaker Change: Adapting to specific nuances and solving complex problems in dealing with insurers post-NSA.
As a result, we are seeing better reimbursement per patient.
Speaker Change: Looking forward, we are focused on a few strategic initiatives that we believe will drive continued growth.
First, continue de novo expansions of new hospitals.
Speaker Change: We are still on track to open between two to four hospitals per year.
Speaker Change: For 2024, we have already opened hospitals in Green Bay, Wisconsin, as well as Post Falls, Idaho.
Speaker Change: We are on track to open two more facilities later this year.
Speaker Change: As it takes about 18 to 24 months to open a hospital, we are already working on the 2025, 2026, and 2027 hospital pipeline.
Speaker Change: We still get requests from all over the country to open these hospitals on a regular basis.
Speaker Change: Our challenge is to keep up with the demands in areas of the country that have the most immediate need for our brand of medicine and focus on those opportunities for our future pipelines.
Second, continue expansion of services for our mature hospitals.
Speaker Change: We will continue to explore opportunities to expand both our inpatient side as well as outpatient services to meet the evolving needs of our patient population.
Speaker Change: This may include adding new specialties or enhancing our current offerings, all aimed at providing concierge-level care closer to home.
Speaker Change: By having a licensed hospital consisting of a 24-7 emergency room as well as inpatient services, we have all the tools necessary to pivot to service lines that are lacking or underserved in the communities that we serve.
Speaker Change: and actively try to fill that void to provide the maximum value to the community.
Third, continue to work with insurers for better reimbursement.
Speaker Change: As we continue to learn more and more about the No Surprises Act, we are slowly getting better.
Reimbursements, as evident in our improved financials.
We continually strive to obtain fair in-network contracts with insurers.
Speaker Change: If this is not possible, we make serious attempts to get a fair, qualified payment amount, or QPA, from the insurers.
Speaker Change: If we do not get a fair QPA as described in the NSA bylaws the first time, we proceed with the Independent Dispute Resolution, or IDR, which includes both the open negotiation as well as arbitration process options.
Speaker Change: The IDR is a formal process that is available to all providers under the guidelines of the NSA.
Speaker Change: As we proceed with putting more charge through the IDR process, we will continue to report our findings in future reports.
Fourth, operational efficiency.
Speaker Change: Improving operational efficiency remains a priority as it allows us to manage costs effectively while enhancing patient experience. We are implementing best practices across our facilities to streamline processes, reduce waste, and improve turnaround times for our patients.
Speaker Change: Josh DeTillio, our COO, will address this in further details later.
Fifth, innovation and technology.
Speaker Change: We remain committed to embracing advanced technologies that can improve patient care and operational efficiencies.
Speaker Change: Whether it's through electronic medical records, telemedicine capabilities, artificial intelligence to automate our coding, billing, collection services, or other digital tools, we aim to leverage innovation and provide enhanced services to our patients.
Speaker Change: As more technology becomes available, we are able to treat more and more patients at our micro-hospitals, providing patients an attractive alternative to the often overcrowded hospital systems.
And lastly, driving awareness and community engagement.
Speaker Change: We will continue to engage with our local communities to raise awareness of the services that we provide.
Speaker Change: By focusing on targeted business development, marketing, brand awareness, and community events, we hope to build trust and maintain a strong presence within our regions.
Speaker Change: Overall, we're optimistic about our trajectory and believe that our focused approach will lead to sustainable growth and value creation.
Speaker Change: The healthcare landscape is constantly changing, and we are committed to staying ahead of these changes.
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In closing, I would like to acknowledge and thank you.
to all our NUTEX physicians, nurses,
Technologists, Technicians, Front Desk Personnel,
Speaker Change: administrators, and the entire NewTek Corpus team from over 13 states are working as one unit to achieve these great results.
Speaker Change: We all share and believe in the same vision and mission of NewTek's health and are all aligned to continue to strive to create a long-term and profitable company.
Speaker Change: Anyone that has been involved in healthcare for a long time will recognize that what Nutex Health is doing is very unique and very special and fills a definite void in many aspects of medicine.
Speaker Change: We believe our momentum will continue and we are excited about what the future holds for Nutex Health.
John Bates, John Bates, Joshua DeTillio, Thomas Vo, Warren Hosseinion,
Speaker Change: Now, I would like to turn it over to Jon Bates, our Chief Financial Officer, to discuss our financial results in greater detail.
Jon Bates: Thank you, Tom, and good morning, everyone. It's great to see how our financial results reflect the effectiveness of our strategic initiatives and operational improvements.
Jon Bates: Our third quarter 2024 results showed yet another great operational quarter continuing the great quarter improvement in each of the last three quarters this year.
Jon Bates: We have seen continued growth with increased success in both top-line growth as well as in our cost controls company-wide.
Jon Bates: So let's start with the third quarter ended September 30th, 2024 first and compare those results to the third quarter ended September 30th of 2023.
Jon Bates: For the third quarter of 2024, total revenue grew 26%, or $16.1 million, to $78.8 million, versus $62.7 million for the same period in 2023.
Jon Bates: Of the total revenue increase, mature hospitals, which are hospitals that were opened prior to December 31st of 2021, and therefore provided two full years of comparative results, increased their revenue by 20.7% for the third quarter of 24 versus third quarter of 23.
Jon Bates: in the third quarter of 2024 versus 37,443 visits in the same period of 2023, with mature hospitals growing at 3.8% in the third quarter of 2024 over the third quarter of 2023.
Jon Bates: Additionally, the Population Health Division had a revenue reduction of $1,000,000 to $7.1 million in the third quarter of 2024 from $8.1 million in the similar period of 2023 due to the divestiture of two small entities within the division in the second and third quarters of this year.
Jon Bates: Now, we discussed the growth in the hospital revenue and visits we have seen in the third quarter of 2024. Now, let's discuss the overall facility and corporate cost structure and the improvements in that area.
Jon Bates: Total facility level operating costs and expenses represented only 72.2% or $56.9 million dollars of total revenue.
Jon Bates: for the third quarter of 24 versus 88.7 percent or 55.7 million for the same period in 23.
Jon Bates: As a result of the revenue and facility cost improvement, our 2024 third quarter gross profit was $21.9 million, or 27.8% of total revenue.
Jon Bates: As compared to 7.1 million or 11.3% of total revenue in 2023, a 210% improvement in the third quarter of 24 over 23.
Jon Bates: From a corporate and other cost perspective, the general and administrative expenses as a percentage of total revenue for the third quarter of 2024 remain consistent at 12.5% compared to 12.4% for the same period in 2023.
Jon Bates: Additionally, on our third quarter income statement, you'll see a line item for stock-based compensation with the amount for the third quarter of 2024 being $2 million.
Jon Bates: Most of that expense is explained in a third quarter 10-Q filing, which is within Note 11 for your reference.
Jon Bates: But within that note, we explain that under the terms of four separate contribution agreements for hospitals that were deemed to be underdevelopment hospitals when NewTex went public in April of 2022, when each of the hospitals
Based upon the earnings
Jon Bates: of the hospital in the second year of their operations, which we denote as the burnout period.
Jon Bates: With four of these hospitals now entering that earn-out period, we began to accrue for the potential earn-out for each, and in the third quarter of 2024, that amounted to $2.5 million.
and reported as a non-cash stock compensation expense.
Jon Bates: That had very little impact on the operational side of the population health business as we move forward, but did impact population health revenue by around a million dollars in the third quarter, as we discussed.
Jon Bates: For the third quarter of 2024 was $9.7 million compared to an operating loss of $821,000 in Q3 of 2023, representing a $10.5 million improvement quarter over quarter.
Jon Bates: Now net loss attributable to NewTek Inc. was $8.8 million for the third quarter of 2024 as Tom mentioned.
Thank you. Bye. Bye.
Speaker Change: Non-cash items noted above for the $6.7 million non-cash loss on warrant liability and the $2 million non-cash stock-based compensation expense.
The comparative net loss attributable to NewTek
was $5.5 million for the third quarter of 2023.
Speaker Change: So we're moving the effect of the $8.7 million of non-cash items in the third quarter of 2024 would show a $5.6 million improvement quarter over quarter from 2023 all the way to 2024.
Speaker Change: did remove the effect of those two non-cash impairments noted above.
Speaker Change: increased $12.2 million, or 938%, from $1.3 million in the third quarter of 2023 to $13.5 million in the second quarter, excuse me, third quarter of 2024.
Speaker Change: So now on to the nine months into September 30 to 24 compared to the nine months into 23.
Speaker Change: Total revenue for the first nine months of 24 grew by 25%, or $44.3 million, to $222.3 million, versus $178 million for the first nine months of 23.
Speaker Change: Of the total revenue increase, mature hospitals increased their revenue by 13.5% for the first nine months of 2024 versus the same period in 2023.
Speaker Change: or 20,146 visits to 122,944 visits in the first nine months of 24 versus 102,798 visits in the same period in 23.
Speaker Change: With mature hospital visits growing at 7.7% in the nine months into September 24 versus that same period in 23.
Speaker Change: Additionally, the Population Health Division had a revenue growth of 2.1% to $23 million in the first nine months of 2024 from $22.5 million in that same period in 2023, despite the divestiture of the two small entities within the division during the second and third quarters as mentioned previously.
Speaker Change: In addition to the revenue visit growth noted above, facility and corporate level costs also showed improvement for the first 9 months of 24 compared to the first 9 months of 23.
Speaker Change: Total facility level operating costs and expenses represented 75.4% or $167.7 million of total revenue for the nine months ended September.
Speaker Change: which represented a 153% increase for the nine months into September 24 compared to the same period in 23.
9% or $24.7 million for the same period in 2023.
Speaker Change: And operating income for the nine months ended September 30, 2024 was a positive $16.4 million compared to an operating loss of $5.6 million for the nine months ended September of 2023.
Speaker Change: Net loss attributable to Nutex, Inc. improved by $4.7 million from a loss of $4.2 million in the first nine months of 2023.
Speaker Change: to a loss of $9.5 million in the first nine months of 2024, even with four non-cash expense items.
Speaker Change: related to stock account expense, the impairment of assets, impairment of goodwill, and the loss on warrant liability, as you'll see in our income statement. And those negatively impacting this loss by $10.2 million.
Speaker Change: So removing these four non-cash items, the company would show net income attributable to Nutex Health, Inc. for the nine-month period of a slight positive number of just over $600,000.
Speaker Change: Adjusted EBITDA attributable to NewTex, which removed the effect of the four non-cash impairment items noted above, increased 22.4 million, or 290%, from 7.7 million in the first nine months of 2023 to 30.1 million in the first nine months of 2024.
from $22 million as of December 31st, 2023.
Speaker Change: With regard to cash flow, net cash from operating activities increased by $20.1 million for the nine months ended September 30-24 to $23.1 million as compared to only $3 million for the same period in 2023.
Speaker Change: to $41.9 million at September 30th of 2024, down from $42.4 million at December 31st.
Speaker Change: of 2023, with the majority of this debt related to equipment loans at our hospitals for such items as MRIs, X-rays, ultrasounds, CT machines.
Speaker Change: And this is a slight decrease from year-end, but the overall balance is a relatively small amount of true operating debt for a company of our size. And so outside of this normal $40-plus million of bank equipment
Speaker Change: The only other items of materiality that look like debt on the balance sheet are the liabilities related to financing and operating lease liabilities, which are just the future lease payments to our landlords on our hospitals.
Speaker Change: Now, these are reflected on the balance sheet because the accounting rules require us to aggregate all lease payments that we pay to a landlord for the entirety of each lease, which in our case could be anywhere between 15 to 20 years, and then present value of the total lease payments for each.
Speaker Change: of those leases back to the inception of the lease and record both the right-of-use asset and Correspondingly a right-of-use liability on the balance sheet for that result
Speaker Change: As a result, on our balance sheet at September 30, 2024, the net asset balance for the Operating and Financing Right-of-Use Assets amounted to $209.9 million, which is roughly 48% of the total assets.
Speaker Change: And the net liability balance for the Operating and Financing and Right-of-Use liabilities amounted to $262.5 million, which is 73.2% of total liabilities.
Speaker Change: So now most investors and analysts don't view these right-of-use assets and right-of-use liabilities as real operating debt, so I wanted to clarify that to you since we seem to get that question a lot.
Speaker Change: With that, now I'll turn it over to Warren to discuss more about the population health business.
Warren: Thank you, Jon, and good morning everyone. I'd like to take this opportunity to discuss our Population Health Management Division and the results we've seen in the third quarter of 2024 as outlined in our quarterly report.
Warren: Our Population Health Management Division is important in our overall strategy at NewTexHealth.
Warren: As many of you are aware, this division focuses on providing integrated care solutions aimed at improving the health outcomes of our patients.
Warren: We operate primarily through our networks of Independent Physician Associations, or IPAs, which are central to our model.
Warren: For the three months ended September 30, 2024, the Population Health Management Division reported total revenue of approximately $7.1 million.
Speaker Change: As Jon mentioned earlier, the decline in revenue is primarily attributed to the sale of two smaller subsidiaries earlier this year.
Both of these subsidiaries were unprofitable.
Speaker Change: They have enhanced our bottom line and will allow us to concentrate more closely on our core competencies and strategic objectives within the population health space.
Speaker Change: Adjusting for these divestitures, our core population health management efforts have continued to demonstrate growth.
Speaker Change: We now manage just over 40,000 patients under value-based care arrangements with multiple payers.
Speaker Change: The division is focused on enhancing the quality of care provided to our patients while managing risks and costs.
Speaker Change: This is particularly critical as we navigate an environment that increasingly emphasizes value-based care and population health strategies.
Speaker Change: One of the key drivers behind our positive trajectory is our emphasis on building relationships with local physicians and health care providers.
Speaker Change: coordinating care and improving treatment outcomes. This collaborative approach not only adds value to our services but it enhances patient engagement and continuity of care.
Speaker Change: Furthermore, we are enhancing the capabilities of our management services organization, which enables us to better support our IPAs and physician groups.
Speaker Change: In line with our focus growth strategy, we are actively working to launch new IPAs and expand our existing ones, thereby increasing the number of patients we serve under our population health framework.
Speaker Change: This expansion is integral to achieving economies of scale that can translate into improved financial performance over time.
Speaker Change: As we move forward, we hope that our population health management initiatives will become an even more significant contributor to NewTek's health revenue mix.
Speaker Change: The growing focus on preventative care and holistic patient management aligns well with today's health care landscape, which increasingly seeks to address not just individual health events, but the overall well-being of population.
Speaker Change: In conclusion, while the revenue results for the Population Health Management Division reflects a temporary decline due to strategic divestitures, the underlying initiatives demonstrate a solid foundation for growth and improvement in our overall business model.
Speaker Change: I remain optimistic about our ability to drive both patient engagement and financial performance in this key segment.
With that, I will turn it over to Josh now.
Josh DeTillio: Thank you, Warren. I appreciate the opportunity to speak with you today about NewTek's health operational efficiency, cost strategies, and growth endeavors during the third quarter of 2024.
Josh DeTillio: As many of you know, operational efficiency is critical in our industry, as costs have increased significantly for hospitals, especially in labor and supplies. I'm pleased to report that our efforts to control costs while driving volume have yielded significant results so far this year.
Josh DeTillio: By closely monitoring labor hours and scheduling efficiently, we have successfully optimized staffing without compromising patient care.
Josh DeTillio: We are incorporating more software programs to help us become more efficient with labor, including...
Josh DeTillio: An HR and procurement software that went live in the first quarter of this year, a scheduling software which is projected to go live in the first quarter of 2025, and a software solution for labor analytics in the second quarter of 2025.
Josh DeTillio: For active management of our supply chain has resulted in notable savings and has helped us mitigate inflationary pressures.
Josh DeTillio: But new hospitals will also be on the reduced GPO rates and pricing going forward.
Josh DeTillio: In contract services, we continue to standardize where appropriate for discounted and bulk pricing. We are looking at areas like facility maintenance, shredding services, office supplies, DME, waste management, and pharmaceuticals.
Josh DeTillio: We've executed on a number of initiatives but have more to go. The local hospital teams have continued to renegotiate local contracts as the whole company has been very focused on cost in 2024.
Josh DeTillio: In addition to these cost controls, we're seeing increased volume due in part to strategic growth initiatives.
Josh DeTillio: As previously mentioned, for the first 9 months of 2024, the hospital division total visits increased to 122,944, which was up 19.6% from 2023, while mature hospitals were up 7.7% in visits.
Josh DeTillio: This growth is a direct reflection of both our business development and marketing strategy and the local engagement of our leadership teams across our facilities.
Josh DeTillio: Our business development team has been actively pursuing relationships with various local health care providers and groups, and working to enhance and grow our mix of services offered.
Josh DeTillio: One of the strategies we've developed is utilizing a new customer relationship management software. This program enables us to manage relationships more effectively, track engagement with both prospective and existing patients, and analyze data to refine our outreach strategies.
We've also placed a strong emphasis on community engagement.
Josh DeTillio: By participating in local health fairs and offering educational seminars on various health topics, we have been able to build strong relationships within the communities we serve.
Josh DeTillio: This initiative not only helps in raising awareness about our services, but also positions NewTek Health as a trusted health provider, engaging directly with our community fosters goodwill and helps drive patient volume through referrals and repeat visits for the whole family.
Josh DeTillio: Our leadership teams across the facilities have been pivotal in our success, empowering our local leaders to make decisions tailored to their community's needs has been an important aspect of our strategy. Their on-the-ground insights allow us to adapt quickly to demand fluctuations and service needs.
Josh DeTillio: This decentralized approach enhances our responsiveness and supports our commitment to delivering quality care. Looking forward, we are committed to maintaining this trajectory of growth and operational efficiency.
Josh DeTillio: As we expand our footprint by opening new facilities and transitioning existing operations, we will continue to prioritize cost management while ensuring that we meet the health needs of our communities.
Josh DeTillio: In summary, our focused strategies in managing costs and driving volume growth, combined with strong leadership and community engagement, are shaping a promising future for NewTek's health. Our commitment to operational excellence remains a top priority as we strive to enhance shareholder value while keeping patient care at the forefront of our efforts.
Speaker Change: I will now turn it back over to our moderator, Vivian, to open the line for questions. Thank you.
Thomas DeTillio, Thomas Vo, Jon Bates
[inaudible]
Speaker Change: Thank you, Josh. On the call, we have Bill Sutherland from the Benchmark Company, as well as Thomas McGovern from Maxim, who will now ask our team their questions.
I guess I'll start off. It's Bill. How's everybody doing?
Speaker Change: particularly interested in kind of how you're seeing patient visits in the fourth quarter, I think you get
Some positive seasonality, as I recall.
Speaker Change: This is Tom. Bill, yes, I could answer this. No, definitely our business does have seasonality to it.
Speaker Change: Fourth quarter, with being colder flu season, typically have higher volume.
And that continues through the first quarter.
Speaker Change: And then second and third quarter it dips a little bit. So for sure we are expecting better numbers in the fourth quarter in terms of volume. But as you know this year it's been a little bit warmer.
Speaker Change: Okay and your hospitals are going to be I guess near the end of the quarter then the two new ones.
Speaker Change: Yes, the two new ones are projected to open in November and December.
Okay.
Thank you. Bye.
Speaker Change: On the CapEx line, Jon, notice it's been a lot lower this year, year-to-date, than last year. What's the outlook for CapEx, I guess, going forward, given your plans?
Speaker Change: Yeah, I mean, I think that you'll see that as we certainly reopen up the facilities.
Speaker Change: We will definitely be adding more, right? Each one of those as we go. We've had two this year, and then potentially, as Tom indicated, two more later in this year. And I think we talked about, on average, every year, somewhere being in the two to four range. But I would anticipate that going up a little bit as we go through this process of adding that equipment as we open each of those facilities.
Speaker Change: But right now everything's pretty much in line and we have a, you know, real solid opportunity for getting those in place. And as you probably know, we've talked about this before, where you have to put some of the equipment in months before something would open. So there's some that you can wait until right around opening.
Speaker Change: But there's, you know, MRIs and some of those machines you have to do several months ahead of time, so we have to plan for that. And so we'll continue to watch it, but I think it should be, you know, consistent with a little bit of an uptick I would anticipate over the next couple quarters in that line. Okay.
Speaker Change: on your progress with the NSA arbitrations, or not just the arbitration, but negotiation, and I guess the degree to which you're taking on more arbitrations. Talk about the impacts that that has near-term on revenue and then longer-term.
Speaker Change: So we're still working on that and we still have some data that we're still trying to sort out but so far the trend is going well.
Speaker Change: And so far our results are consistent with published data out there regarding arbitration.
Speaker Change: but we will know a lot more hopefully in the fourth quarter when we report and definitely the first and second quarter of next year regarding our success and our experience with arbitration from New Texas.
If you'd remind us what the...
Speaker Change: What the data has been in terms of industry-wide, I think it's been a pretty high success rate, right?
Speaker Change: Yeah, so industry, the data that's publicly available essentially shows a win rate of roughly 70 to 80 percent.
Speaker Change: for the provider, and the return that they get is, according to published data, almost doubles that of what they get initially.
and so that's what the data shows.
Speaker Change: And so far, once again, our trend is pointing toward similar data, but once again, we're still very early because June was only maybe five months ago, and it does take roughly six months or so to get money in the bank.
Speaker Change: and we get a favorable result as to, you know, what the insurance company actually does with that information.
Speaker Change: So, and we'll know a lot more, hopefully, this quarter and next quarter.
Speaker Change: If I could sneak one more on this. What percentage of your claims are you putting into arbitration?
From our standpoint, between 60% to 80%.
Speaker Change: Yeah, what we find is that the insurance companies are paying relatively low the first time.
Speaker Change: and we initiate the process through the IDR process and then from there we go to open negotiation first and if we can't negotiate then we go to arbitration so there's definitely a stepwise approach to that process so you just can't straight to arbitration you have to go through open negotiation.
Speaker Change: So the 60 to 70 percent relates to just going through that entire process, not just arbitration? Entire process. Yeah, okay. That's right. Okay. Thanks, Tom. Thanks, everybody.
Speaker Change: Hey guys, it's Tom McGovern with Maxim Groups. So yeah, so first question, going to touch on, and congrats on the quarters guys. Great performance there.
Speaker Change: So first question, going to piggyback on one of the earlier questions asked on the hospital opening. So it sounds like you guys have pretty clear visibility on the two that will open by the end of 2024. Just curious though, I mean one of the great things about your business model is that you have a lot of levers to pull that you know can...
Speaker Change: Augment the timeline for these openings so just curious is there anything you see now that might push that December opening into 25 or are you fairly confident that it'll occur by the end of the year?
Speaker Change: Yeah, Thomas, thank you for the question and welcome to the team, so to speak. Thank you for joining us.
Speaker Change: So, to answer the question, so our first opening in November is pretty certain. We already have licensing.
This month November
Speaker Change: The second opening, I think, to your question, is slightly not as certain and the reason is that it is located in Florida where we had a hurricane.
Speaker Change: And that pushed everything back a few weeks with dealing with the hurricane and everything else.
Speaker Change: And so, in essence, we're still on track to hopefully open by December.
Speaker Change: But there are a few levers, to your point, that we have to push in order to make that happen. But we're still very optimistic that we're going to be able to open that.
Speaker Change: And by the way, the hurricane really did not do any damage to our hospitals, and just a side note, I mean, we've been in about probably ten different hurricanes in the past.
Speaker Change: with our operation in Texas, Louisiana, and now Florida. And for the most part, our hospitals have fared very, very well. And there's a reason for that. The reason is that, for the most part, these hospitals are built
Speaker Change: to withstand, you know, pretty much anything that nature could throw at us. And typically, the state wants these hospitals to be the last structure standing, so that if everything is wiped out, at least the hospital is still open and we can see patients afterwards.
Gotcha, glad to hear that from you guys.
Speaker Change: Yeah, no, absolutely. I'm glad you guys managed to get through the hurricane relatively unscathed.
Speaker Change: Okay, so then as we look at 2025, you know, you guys have been saying around four hospital openings we could expect, two to four per year, but it's looking more like four in 25. Again, you know, considering that you guys have a good deal of influence on the timing of these openings, what should we expect in terms of cadence? Should we expect, you know, maybe a hospital a quarter, or do you think that these openings might be weighted to one half of the year, maybe one in the first, three in the second? Any kind of visibility on that would be very helpful.
Speaker Change: Yeah, no, we have we have four hospitals planned for 25 also just like in 24 We I think from the in terms of the cadence one will open I would say in the either first or second quarter of 25 and then we should have three at the end of 25
[inaudible]
Speaker Change: And so all four of them are essentially under construction as we speak. And so really it just depends on construction time.
Gotcha.
Speaker Change: Okay, so then, you know, something that was mentioned earlier on the call is driving patient volume, which you guys have seen to have done very successfully, particularly, it's great to see that mature hospitals are seeing higher patient volume.
Speaker Change: So, you know, one of the things you guys called out was the introduction of new services and capabilities across your portfolio of hospitals So I'm just curious now, you know you guys in the past year just
Speaker Change: You know, correct me if there's anything else I'm missing here, but you guys introduced some behavioral health specialties. You guys, you know, did substance abuse or, you know,
Speaker Change: Thanks for joining us. We appreciate it. Have a great weekend. Bye. Thank you. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye.
Speaker Change: I'm curious if across your facilities and maybe with some of these new openings you're seeing different trends in these communities, but have you identified any new services that you're looking to introduce in Q4 or in 25 or any kind of visibility or colors you could add on that would be helpful for our outlook. Thank you.
[inaudible]
Speaker Change: Yeah, and Chas could probably chime in also, but no, we're always trying to innovate. We're always looking for solutions to problems and And the great thing about being in a lot of different localities and different states and different Communities is that we see the needs of each of these communities and we try to solve it and so behavioral health or treating substance abuse depression alcohol detox opiate Detox those are all as a result of the community reaching out to us and say hey, can you help us with this?
Speaker Change: to pivot to those service lines and try to resolve them as best as we can.
Speaker Change: And so that was sort of like the genesis of behavioral health and some of the other service lines.
Speaker Change: Going forward, once again, we're always innovating, always looking for ways to solve the problems of the community.
Speaker Change: We're looking at doing more procedures at our hospital. In a few states, in a few hospitals, we're starting to do procedures.
Thank you.
Speaker Change: And I appreciate that response Next question is on some of the cost savings that you guys have achieved and then Looking forward at how you guys are going to kind of continue this trend as you expand your network So you guys Josh called out specifically the labor cost supply chain in the contract services. So so first
Thomas DeTillio, Thomas Vo, Jon Bates
William Sutherland, Jon Bates, Thomas Vo.
Josh DeTillio: Sure. Yeah, this is Josh. A couple things. So we really view...
Josh DeTillio: All three buckets as big opportunities. There's not really one that's more than the others.
Josh DeTillio: We've already executed on a number of the items. In terms of the labor...
software, we are creating an entire labor suite.
Josh DeTillio: where we had, as I mentioned, the HR and procurement software, as well as the next one coming is a scheduling software, so the teams will be able to schedule their teams more efficiently, communicate better, and then really optimize staffing to the volume.
And then the last one is a labor analytics metric.
Josh DeTillio: tool software that we will implement, which will give us a little bit more insight into daily trends and really be able to staff the volumes better. We already operate our hospitals very lean from a labor standpoint.
Josh DeTillio: So we're already pretty much there, but there are always opportunities to improve there, and as you heard on the supply chain, we're looking at about a 15% reduction, and that's really reduced pricing across the board.
Josh DeTillio: And then the contract services, really leveraging our size and scope to get some of those ones that I mentioned really at national type contracts with significant discounts across the board. So we're continuing to focus on cost.
Speaker Change: Gotcha. I know that's very helpful. And then my last question will just be on the variable interest entities. So, you guys discussed and explained on the call, you know, why you have to carry some of those on your balance sheet.
Speaker Change: You guys were successful in removing 18 variable interest entities from your balance sheet through discussions with lenders. And I know that there were two, last time we spoke, there were two still on your balance sheet, and you guys were in active conversations with the lender to remove them. So just curious if there's been any progress on that, if you guys have had any discussion or any indication as to when we could expect those to be removed from the balance sheet.
Speaker Change: Yeah, no, we've made a lot of progress in trying to remove those two facilities, and both of these are in Albuquerque, the two hospitals in Albuquerque, and in essence, the bank has already told us that they plan to remove that by the end of the year. So that's where we're at. Once again, it's up to the bank, but they have confirmed that their intention is to remove those by the end of the year. So we'll see what happens, hopefully.
[inaudible]
Speaker Change: Alright, that's all great to hear. I appreciate you guys taking the time to answer all of my questions and again congrats on the quarter.
Thanks, Thomas.
Thank you, Thomas, and thank you, Bill.
You're welcome.
Speaker Change: All right, there are no additional questions for us. On behalf of the NewTex Health Management Team, we appreciate everyone for dialing in and listening to our third quarter earnings report. A recording of this call will be available on our website for a limited time. If there are any additional questions, please send an email to investors at newtexhealth.com and we will do our best to answer in a timely manner. Take care, everyone.
Thank you, everyone.
Thank you. This does conclude today's teleconference.
Speaker Change: We thank you for your participation. You may disconnect your lines at this time.
Thank you. Bye. Bye.
Speaker Change: Thomas DeTillio, Thomas Vo, Jon Bates Thomas DeTillio, Thomas Vo, Jon Bates
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