Signify Health Q3 2021 Earnings Call Transcript

Quartr
Provided by Quartr
November 9, 2021

There are 10 speakers on the call.

Operator

Hello, everyone, and welcome to the SignifAI Health Third Quarter 2021 Earnings Conference Call. My name is Seb, and I'll be the operator for your call today. There will be an opportunity to ask questions. I will now hand the floor over to Jennifer DiBerandino, Head of Investor Relations and Treasurer. Please go ahead.

Speaker 1

Good morning, and welcome to Signify Health's Q3 2021 earnings conference call. This call is being webcast live, and a recording will be available on the Events page of our investor website at signifyhealth.com through January 10, 2022. Throughout the call this morning, we will be referencing the financial tables It appeared in our press release dated November 9, 2021. And in addition, the Q3 earnings call summary slide presentation we have posted to the Events page of the IR This morning, we will discuss Cigna by Health's business outlook, and we will also make certain statements about our future performance, including projections about our future financial performance, our anticipated growth strategies, anticipated trends in our business And our outlook, including estimates for total GAAP revenue, total adjusted EBITDA, in home evaluations, program size and weighted average savings rate. These statements are only predictions based on our current expectations and projections about future events and constitute forward looking statements Within the meaning of the federal securities laws.

Speaker 1

There are important factors that could cause our actual results, level of activity, performance or achievements To differ materially from the results, level of activity, performance or achievements expressed or implied by the forward looking statements. Please note the cautionary language about our forward looking statements as presented in our earnings press release and in our quarterly report on Form 10 Q, which will be filed later today. That same cautionary language applies to the statements made in this conference call. We will also discuss certain non GAAP financial measures, including Reconciliations to the relevant GAAP numbers for these non GAAP measures are included in the earnings release Filed on Form 8 ks yesterday and also in our Form 10 Q, which will be filed later today. As a reminder, we intend to participate in industry or sell side In lieu of issuing a press release to announce each conference, we will be posting our conference attendance on the Events page calendar of our Investor Relations site@signifyhealth.com.

Speaker 1

I encourage you to register for alerts on the investor site so that you'll receive an e mail notification each Joining me on the call today are Kyle Armbruster, Chief Executive Officer and Steve Stenoff, President and Chief Financial Officer. Kyle will provide a business overview followed by Steve with a financial overview. We will have an operator facilitated question and answer session after our prepared remarks. Now, I will turn the call over to Kyle.

Speaker 2

Thank you, Jennifer. Good morning and thank you for joining us. Our Q3 year to date performance reflects progress towards our mission of activating the home For care and enabling the shift to value based care, our current strategic focus is expanding to as many unique homes as possible. We also build diversified service Offerings that help to identify and close care gaps and drive better patient outcomes. Yesterday evening, we announced strong financial results for the 3rd quarter And 1st 9 months of 2021.

Speaker 2

Through September, revenue grew by 42% to $592,000,000 and adjusted EBITDA Increased 52 percent to $131,000,000 from the 9 month period a year ago, largely driven by in home evaluation For IHE volume growth in our Home and Community Services segment. In the 1st 9 months of the year, we performed over 1,400,000 IHEs exceeding the number performed for the full year 2020. Our 2021 results to date Driving positive momentum into 2022. With continued in home demand expected to fuel HCS growth, diversification of our Services in the home and our episode weighted average program size moving from approximately $5,000,000,000 to $6,000,000,000 next year. Given this performance, we are projecting 20% plus top line growth in 2022 and corresponding adjusted EBITDA growth, which is expected to benefit from improving operating leverage.

Speaker 2

Clients are increasingly asking us for expansion of our transition to home and analytics services for Other value based programs, which we view as another positive trend. A testament to our value of our in home evaluations, We've received new customer commitments for IHE volume that will continue to drive substantial growth momentum into 2022. We've seen several notable clients move and expand volume to SignifAI and away from legacy or in sourced programs, Realizing the value that we bring to their members, we remain confident in our belief that the risk of in sourcing our space is low given our unique data and analytics platform, Nationwide clinical network, member density and our strong customer relationships. As we look ahead to future years, we are very bullish about our HCS business. The value of our in home evaluations for both our customers and Medicare Advantage members who receive IHEs at no cost has increased tremendously.

Speaker 2

We're doing more in the home than ever for our clients by helping to connect their members back into the health system each and every day. We also have made substantial progress on the social determinants of health front, connecting members more than 390,000 times With social services and their community, we are working to connect members, many of whom have not been under the regular care of a provider Back to a primary care physician in their community and even scheduling appointments when possible. We provide the PCP a comprehensive summary of their patient's Clinical and social evaluation highlighting issues that require attention. In fact, approximately 72% of members who receive an IHE from SignifAI Health Return to an outpatient care setting within a year after their IHE. While our doctors and nurse practitioners are in the home, they perform various screenings to help close care gaps.

Speaker 2

We are proud to have earned the National Committee For Quality Assurance or NCQA Healthcare Effectiveness Data and Information Or HEDIS certification for several of our in home screening services such as diabetic eye exam, diabetic kidney disease monitoring, colorectal cancer screening and osteoporosis management in women. Test results are also shared with the member, The plan and the respective primary care physician to provide another data point for any identified health issues and appropriate treatment plans. We continue to successfully expand our clinician network to support our growing IHE volume despite recent concerns in other part of the industry Around the difficulty of hiring healthcare workers, while we have seen some capacity challenges in certain geographic areas, A significant benefit of our flexible network is that we credential our providers in multiple states, allowing us to deploy them wherever evaluation demand requires, including rural communities. Our model and technology make it easy for providers to do what they value most, spend quality time with patients instead of dealing with administrative issues in a facility setting. As a result, we believe we have not experienced the same clinician staffing issues as reported by some others in the industry.

Speaker 2

Using the home of the key venue to activate the care journey, we believe coordination of care will be one of our strategic pillars going forward. Our future service expansion includes medication management, chronic condition management, remote patient monitoring And follow on services to improve the health and well-being of beneficiaries. Almost all of our customers are asking for This expansion of our work, realizing the value of our engagement in their members' lives while in their homes. This represents a tremendous opportunity For us to expand our in home market share and continue to diversify into new services to drive better outcomes for the millions of lives we touch annually. Healthcare in the United States generally and the Medicare Advantage Program specifically.

Speaker 2

Medicare Advantage is an important program providing about 27,000,000 individuals High quality care with better benefits at a lower beneficiary costs when compared to Medicare fee for service. We believe that the risk adjustment process with all the appropriate checks and balances is critical to the functioning of value based care and Medicare Advantage. Appropriate risk adjustment, including in home evaluations, levels the playing fields provide broad and equitable access to care for the most vulnerable MA members. As I've outlined this morning, the value of our IHEs to our customers and Medicare Advantage members is tremendous And it's an essential service that provides insights, coordination and critical member touch points and we have a roadmap to expand our capabilities in the home as we focus on opportunities to support our clients and their efforts to address health disparities to ensure health equity moving forward. We believe there will be further adoption of value based payment programs in Medicare, Medicaid and across the entire health system.

Speaker 2

Currently approximately 40% of Medicare fee for service payments, 30% of commercial payments and 25% of Medicaid payments are made through some sort of value based arrangement. As we advance value based payment models through our excellent work in both our home and community services In episodes of Care Services, we expect SignifAI Health to be a significant part of this movement. In episodes of Care, We are the largest convener in the CMS bundled payment program today. And as such, meet regularly with CMMI to provide feedback Through thought leadership on the current BPCIA program and its future state, we look forward to the next iteration of the BPCIA program and believe Liz Fowler, the Head of CMMI, recently spoke publicly at a briefing hosted by the Alliance For Health Policy An indicated that CMMI is actively engaged in exploring bundled payments that go beyond post acute care to move upstream to engage specialists in managing patients to avoid and or reduce acute events. This focus nicely dovetails with our non PPCI episodes of care, We can support not only procedure based bundles, but also conditions such as maternity, diabetes and substance abuse.

Speaker 2

We are continuing our focus on diversification of revenue through continued discussions related to ACO programs and other targeted models like radiation oncology. We continue to make successful inroads in our non DPCIA business. In October, we jointly announced with our customer, the State of Connecticut, That their program was approved by CMS as an all payer advanced alternative payment model. This is an important designation for the Episodes of Care payment model administered by SignifAI through our networks of payment model administered by SignifAI through our networks of distinction. Eligible services included in these programs Could span as much as 60% of the average health plan spend and include episodes such as knee replacement, colonoscopy, cataract surgery, Care related to pregnancy and more.

Speaker 2

CMS' ongoing efforts and commitment to affordability, quality and outcomes has been of significant benefit to Patients, providers and taxpayers alike, we are excited that the best practice from federal value based programs will be extended to commercial health plans And we are proud to be a part of this catalyst for continued adoption of value based care by innovative provider organizations. In closing, we are pleased with our 3rd quarter and year to date results. Our long term vision is to drive positive outcomes for our partners and their members as their platform for We simplified participation in highly complex payment programs and enabled health plans and health systems to successfully transition to value based payments. Over time, we may supplement our strong capabilities with acquisitions or partnerships with other companies to add further functionality And innovation to our platform to drive increased value for our customers and for patients. I will now turn the call over to Steve to walk you through the Q3 year to date financial results.

Speaker 3

Thanks, Kyle. Good morning, everyone. Strength in our Home and Community Service Segment is driving our strong performance in the Q3 year to date. In episodes of Care Services, we continue to deliver strong savings to our Partners across the BPCI program, while ensuring individuals receive excellent care within their episodes. Results for ECS in the The 3rd quarter were in line with our expectations as we await the next BVCI program reconciliation in the Q4.

Speaker 3

During my commentary, I will be referring to the tables that As you can see in Table 1, we had total revenue in the quarter of $199,200,000 an increase of 29% when compared to the same period last year. Revenue strength in the quarter was Regions, which we attribute to local COVID spikes. HCS segment services also include diagnostic and preventative testing services, and we continue to see As a reminder, we expect 4th quarter IHG volume to be in line with historical patterns as the lowest quarter of the year And to be lower year over year comparison from the 20 24th quarter due to last year having the COVID related catch up as we have previously discussed. Still on Table 1, Q3 2021 ECS revenue was $30,100,000 a 25% decline compared to the same period last year. The decline was related to the adverse impact of COVID-nineteen on program size and our savings rate.

Speaker 3

Additionally, we recognized 9 $200,000 of revenue in the Q3 of 2020 related to new information received ahead of the reconciliation due in the Q4 2020. The new information received reflected the impact of COVID-nineteen on BPCI program size and the subsequent CMS imposed changes Offered to providers that had an overall beneficial impact on savings rates. As I mentioned, we will receive the next PPCI reconciliation in the Q4, which will reflect Final performance primarily from the first half of twenty twenty one. As we discussed last quarter, we continue to monitor patient case mix adjustments and the next set of care issues with skilled And we'll have more information when we receive the next reconciliation and report on it with our year end results. Our data indicates that utilization continued to improve in the Q3 despite the prevalence of the COVID delta variant.

Speaker 3

We remain on track to end the year At a $6,000,000,000 run rate for program size, setting our episodes business up for a strong 2022. Moving to table 4, total company adjusted EBITDA for the Q3 increased 46% to $42,000,000 compared to 28,700,000 For the Q3 of 2020, driven primarily by the strong growth in Home and Community Services. Back to Table 1, 3rd quarter total net income was $2,000,000 in the Q3 of 2021 or $0.12 per share on a fully diluted weighted average share basis. There is no meaningful year ago comparison due to the IPO and subsequent reorganization in February 2021. Our strong operating performance In addition to the $27,300,000 quarterly reevaluation of our equity appreciation rights or EARS drove net income this quarter, We mark the ears to market each quarter and the credit in the quarter reflects the current lower value of our stock price.

Speaker 3

Even excluding the impact of the ears, we achieved Positive net income in the 3rd quarter, an encouraging sign of the trajectory we are on. Year to date results through September 30, 2021 largely reflect the continued overall strength in our Home and Community Services segment with Strong IHE volume for the 1st 9 months of 2021 of over 1,400,000. As I mentioned, we did see a slight uptick in virtual IHEs Since September, but we still expect virtual evaluations as a percentage of total IHE volume to continue to be lower than 2020 pandemic levels. Episodes of Care Services results for the 1st 9 months of 2021 continue to reflect the COVID-nineteen impact on healthcare utilization, Savings rate and discharge patterns reported in connection with the reconciliation received in June. Moving on, As you can see in Table 2, we ended the quarter with $678,800,000 in non restricted cash, an increase from the Q2 primarily related to cash receipts from the Q2 BVCIA reconciliation.

Speaker 3

We ended the quarter with debt outstanding of $350,000,000 And $173,000,000 in capacity under our new revolving credit facility. Given our strong cash position At September 30, 2021, which exceeds our debt levels, we ended the period with negative net leverage. Given our strong results for the 9 months ended September 30, 2021, we are raising total revenue and adjusted EBITDA guidance ranges for 2021 as follows: Total GAAP revenue in the range of $755,000,000 to $770,000,000 and total adjusted EBITDA in the range of $160,000,000 to $170,000,000 We are providing updated estimates for our key performance indicators for the full year 2021. Reflecting continued strength in Home and Community Services, we now expect IHEs in the range of approximately 1.81 $5,000,000 to $1,855,000 reflecting the ongoing impact of COVID-nineteen on episodes of care services, we are maintaining our estimates of ECS segment weighted average program size of approximately $4,900,000,000 to $5,100,000,000 And ECS segment weighted average savings rate of approximately 6.1% to 6.4%. Referring to Slide 6 in our Q3 earnings presentation.

Speaker 3

I would like to point out that when we gave guidance for 2021 in March of this year, we are projecting about 20% revenue growth. And with our updated 2021 guidance, it could now be as high as 25%. As Kyle mentioned, we are looking at strong top line I'm heading into 2022 with expectations for overall 20% plus revenue growth and corresponding adjusted EBITDA growth, which is expected to benefit from improving operating Taken altogether, this is a testament to the incredible work done across the company. We plan to provide detailed 2022 guidance on our Q4 2020 Now I'd like to turn the call back to Kyle for closing remarks.

Speaker 2

Thanks, Steve. I would like to take this opportunity to Thank our team at SignifAI for their positive and compassionate focus on the individuals we serve. SignifAI is considered the whole person in helping health plans And providers close gaps in care so that people can remain in their homes and enjoy more healthy, happy days. As I've mentioned, our current strategic focus is expanding to as many unique homes as possible, while we also build diversified service offerings that help to identify and close care gaps and drive better patient outcomes. I would also like to thank all of our stakeholders who are on this journey with us for the value we expect to generate over the long term.

Speaker 2

Now, I'll turn the call over to the operator to take your questions. Operator?

Operator

Thank you. Our first question comes from Anne Samuel at JPMorgan. Please go ahead.

Speaker 4

Hi, guys. Congrats on the great quarter, and thanks for taking the question. Really appreciated the color on 2022 growth expectations. I was hoping maybe you could provide a little bit more color about what headwinds and tailwinds are included within those assumptions?

Speaker 3

Yes, it's Steve. Yes, we typically, I wouldn't guide to 2022 this early, but we just see Tremendous momentum. So I'd say that the 2 big things are we're seeing a lot of momentum on IHE volume. So as we look into next year, we have a lot of visibility. We're doing all Planning today with our plan members, the plan payers.

Speaker 3

And then also the $6,000,000,000 the confidence We have in having the $6,000,000,000 plus exit run rate for ECS. So when you combine those 2, we felt confident that we could Lean in and give a little bit of a signal that we feel like we're going to have another great year in 2022.

Speaker 4

That's great. And then maybe just a follow-up to that, How should we be thinking about some of the labor inflation impact on your savings rate as we think about next year?

Speaker 3

The labor rates, are you talking about just labor rate inflation that other companies are facing because That's not really a savings rate.

Speaker 4

Yes, I guess maybe more impact on margins, yes.

Speaker 3

Yes. So look, one of the things we have, Dan, as you hear a lot of companies saying that they're having a lot of pressure on that. I think the uniqueness of our network today Allows us to avoid some of those same challenges that our companies are having. So we've continued to maintain a very strong network. Our biggest challenge is just the growth.

Speaker 3

The growth is so significant, making sure that we keep up with that. So there's a few markets We have had to make sure that we can deliver in those markets. But the flexibility has always been we've got Physicians and nurse practitioners are credentialed across different markets that allow us the flexibility to move people around. And so that's a big advantage that we have.

Speaker 4

Great. Thank you.

Operator

Our next Question comes from Michael Cherny from Bank of America. Please go ahead.

Speaker 5

Good morning. Thanks for taking the question. Maybe just a follow-up again on the 'twenty two numbers. And I know, Steve, as you mentioned, this typically isn't when you give a lot of color. But I just want to make sure I understood Kyle's comments correctly regarding EBITDA.

Speaker 5

I couldn't really tell, are you expecting EBITDA margins to expand next year? Is EBITDA, at least at the

Speaker 3

Yes, Michael, Fair question. Like I said, we're not going to save all the details for the next quarter. But yes, what we're signaling is 20% plus top line growth And our model, as we continue to grow, we do have room for EBITDA expansion as well as investing back in the business. So It's a nice part of our business model as we can do both.

Speaker 5

Got it. I just want to make sure I heard the comments correctly, and that's helpful. And then I guess Intra quarter, obviously, the OAG report came out that had some questions about the market as a whole. And I know that the company has been very vocal in Putting forward their explanation, I think in this venue

Speaker 2

as well,

Speaker 5

I would just love to hear a little bit more about your reaction, Kyle, Steve, to the OIG And why SignifAI is differentiated versus some of the commentary that was made in some of the approaches that were taken relative to the view of the Medicare Advantage Carriers that were noted in the report.

Speaker 2

Yes, absolutely, Michael. Happy to take it. The most recent report that came out Really wasn't anything new, and it was focused on 2016 data, and it was largely the same as the report that they put out in 2020. So they were pretty consistent. And what they were really focused on more than anything was MA plan oversight.

Speaker 2

And I would just share they were obviously focused on a Single plan and what that plan was doing back in 2016 was groundbreaking and innovative, and it's become commonplace throughout the industry now, Great. And so, this whole notion that, you know, there's any gamesmanship or anything, I think it's totally unfounded, number 1. Number 2, the big recommendation from the report, which we've been doing for a long time, it's just when you're touching MA members, You're going in and identifying conditions or closing care gaps is to make sure that you're reconnecting them to care, both social and clinical. And we Spending a lot of time sending medical records to primary care doctors, getting appointments booked so folks can get back to see a specialist or a primary care doctor. As We mentioned in the script, we've closed over 390,000 social condition issues.

Speaker 2

There's going to be food shortage issues, transportation. So I think it's actually the fact that in homes exist for the Medicare Advantage population is remarkable, Right. They're provided for free to the beneficiaries. And we go in and do, as I just mentioned, a battery of different work. And the other thing I would say is our model is really absent moral hazard, right.

Speaker 2

Our clinicians go in and get paid the same amount of money regardless The work that they do inside the home and our whole focus is on activating and getting those folks reengage in their care. So many of them haven't seen a primary care doctor In a long time, have a lot of chronic conditions that are going unmanaged and typical fee for service ignores them, right? Typical fee for service waits until they show up in the emergency room or If you run into a negative health outcome, what's the beauty of Medicare Advantage and the model that we've So many of our planned clients are deeply engaged in as it's genuine preventative medicine, right? We're moving away from just sick care in this country And instead taking care of folks and making sure that their conditions and diseases are being managed more appropriately. And the last point I would make, While the report focused on risk adjustment, that is a very small percentage of the total work that we do inside the home, right?

Speaker 2

As I mentioned, we're doing chronic condition management, A battery of gaps in care closure, closing out social determinants of health issues, and we're super proud And we've done that. The other beauty of Medicare Advantage, it extends to rural markets and really helps solve a bunch of health equity issues Where folks aren't able to get care easily and affordably. And so it's a great model that we need to continue to expand on. But if anything, I view some of the commentary in the report as a tailwind for us. The report is pushing for more services to be done in the home and each and every one of our And our health plan clients is looking to do the same, right?

Speaker 2

More condition management, more engagement to help make sure that we're driving better health outcomes through the members' lives that they serve.

Speaker 3

Yes, I think people misunderstood how this report would actually impact us. We view this actually as an opportunity, as Kyle mentioned. So Just to reiterate, getting them rescheduled back to their BCP, connecting them to community resources, making the referrals to the healthcare management group, These are all things we're doing today and plan to do more of in the future.

Speaker 2

Thanks, Michael.

Operator

Our next question is from George Hill at Deutsche Bank Securities. Please go ahead.

Speaker 6

Yes. Good morning, guys, and thanks for taking the question. And Kyle, I actually want to follow-up on Michael's line of questioning, which is really, I guess, is there anything more that you guys can do To highlight the I love your quote, the absent moral hazard line about the services that you're providing in the HCS segment. I'd say both kind of is a way to differentiate like show that There's a real arm's length transaction between you guys and the MCOs and the carriers, and that there's a real value to using a third party provider just because I think it'd be very helpful both for the business growth And for the stock price. And then I guess just I'll throw a quick follow-up in there for Steve.

Speaker 6

As we read a lot about the great resignation, I guess, can you talk about How you're thinking about kind of labor inflation and employment and kind of just like the number of people that you have in the field as we're seeing kind of a very tumultuous Employment environment and how that kind of impacts margins as we think about 2022?

Speaker 2

Yes. I'll take it first and then Steve can touch on your second question. Yes, the Mohr Hizer piece is important. So I mean, let's start from the top. 1st and foremost, these visits, so folks are selecting into Medicare Advantage seniors on their own, right?

Speaker 2

Like they're choosing to go into the program And then they choose to receive these visits, which is free healthcare in their home. It's a pretty amazing value proposition. And what we've been excited about is that We have been focused on providing those all of our services as a flat fee to the health plans regardless of the work that we do inside. And you're It's an arm's length transaction that gives the health plan and the member peace of mind that we're going into do genuine high quality diagnostic work And then ensuring that we're connecting them back to care. It's why we're not using home health workers to do this work.

Speaker 2

We're using medical doctors And top of the license, nurse practitioners as we're going into these homes. And so it's a real opportunity to see healthcare where it really happens, Which is inside the home, right? We're spending 20 minutes going through their medications that they often can't afford and helping them to figure out better ways to Make those meds more affordable for them by connecting them back to benefit services that the plans offer. We're contacting their primary care doctor I'm sending their medical information to the primary care doctors so they can see that they're not taking their meds or that they have a transportation issue or that their chronic condition has gone Completely unmanaged and their A1C levels through the roof, right. And so all of that being done as a free benefit These members in MA is really something that's special and something that we need to be leaning more in as a country, I think, across other populations, which is why we're excited to see Our service model pretty dramatically expand into Medicaid and into commercial populations as well.

Speaker 2

And so the plans that we need in And almost all of them as a strategic pillar have home access and expansion of home services is a core differentiator for the current and future state of their business. And we're a key partner driving that success for them. Secondarily and something that's really important, Our year over year rebooking rate is very high and members see extreme value and that's coming in and helping again to solve problems Where again healthcare really happens inside their homes, right? We're able to lay eyes on their broader social, clinical and behavioral environment and then provide all that information back in a safe secure way to the plan and to their primary care doctors. And then finally just on the Moral hazard piece, our doctors and nurses do not code, right.

Speaker 2

They go in and do a totally focused Clinical evaluation of the individuals' lives that they touch. We have a totally separate team that goes through and does the coding and any documentation work Related to the visit and I'm super proud to say that that team has consistently quarter over quarter year after year had a 98% 99% plus Positive audit rate on all of the work that we do. So we are delivering a highly compliant super valuable touch point It's having a very positive impact on millions of seniors, many of who are in dramatic need lives throughout the country. And so I appreciate the question George. And I think that to answer your second point about the stock price and everything else, I mean we're focused On consistent delivery and execution and we are more bullish than ever on the value that we deliver to seniors and to folks in Medicaid and commercial and the Deep connectivity we have with our plans, who are asking us each and every one of them to expand our services in the home and to better connect these members' lives.

Speaker 2

And Steve, why don't you take those again?

Speaker 3

Yes. And then back to the employment situation, our network, as I mentioned earlier, continues to be strong, 9,000 plus. And as we look across the company, we are spending a lot of time as a management team focusing on engagement, making sure this is a great place to work, Both virtually and safely back in the office when appropriate. We spent a lot of time talking about the mission of the company and when you start off our meetings with A lot of mission moments. So a lot of that stuff goes a long way of really being excited to work for the company that you have Where we're at?

Speaker 3

So like everyone, we have challenges. But as I mentioned in my previous comment, we still expect next year Even with a lot of the noise around labor and pressure to continue to expand our margins. And so it's again back to Our model is as we continue to scale, we will see margin expansion.

Speaker 2

Thanks, guys. Yes. Thanks, George.

Operator

Our next question comes from Sarah James at Barclays.

Speaker 7

Please go ahead. Thank you. I was hoping that you could kind of level set us on how you think about Seasonality of earnings. So what were some of the unusual items that impacted this year and how do you see typical seasonality laying out?

Speaker 3

Well, the typical seasonality is for the HCS business, You're typically going to have a stronger first half and in the back half of the year, it's going to be a little bit softer because as you go through the list, The member list and get the in home engagements, that starts to trickle down in the back half of the year, Q4. As we've said since we had the IPO and the roadshow is always our softest quarter. And there's a variety of reasons for that. We're winding down the list. Holidays, the weather typically, and then we start again for the following year.

Speaker 3

So that's the biggest thing. In the ECS business, The only things that are a little bit different there is typically when we get the recons in Q2 and Q4, There could be some true ups there that would give it a bump and then you've also we've got the 13th month Extra month that gets booked there the way the revenue recognition works. So other than that, that's probably the quickest way to explain our seasonality.

Speaker 7

And thinking through the headwinds and tailwinds that you mentioned for 2022 so far, it seems like there might be A little bit more headwinds in the beginning of the year, tailwinds in the end of the year. So is that the right way to think about the shift in

Speaker 3

Look, I think there's nothing in 'twenty two that I would Any different that we would start off strong again on the IHE front. We're going to have all our new lifts, and We'll go at it. We'll have the higher program size to start the year with the exit run rate of $6,000,000,000 So 2020 2 should we should be off to a strong start, should be a typical seasonality year where first half is a little stronger than Back half in Q4 is would be the softest quarter.

Speaker 7

Great. Thank you.

Operator

Our next question is from Sean Weiland at Piper. Please go ahead.

Speaker 8

Thank you. Good morning. You've touched briefly on the possibility of mandatory bundled payments. Wanted to get your perspective on for your business. Is that a good thing or a bad thing considering CMS might play a greater role as the convener?

Speaker 2

Hey, Sean, good to hear from you. Yes, ironically, we had a great call yesterday with almost All of our very large PPTIA participants talking just about the subject and just future of the program, etcetera. So I've got some good perspective from the field. I would say 2 things. 1, we've had, as I kind of mentioned on the script, great consistent engagement with CMS.

Speaker 2

They are focused, I would say, 3 fold on the future of the program. 1, they want to get more into specialty care. And so that's Upstream from where we are today, whereas we operate predominantly in the post acute. And so that's helping to We make side of care decisions on where you're going to get your knee surgery done or get your heart valve replaced, etcetera, versus Just the discharge moment. So that's a great opportunity for us.

Speaker 2

That's everything that we've been doing out in the non VPCIA bundled space. So that's number 1. Number 2, they are looking at and we're having frequent meetings with them about the expansion into chronic condition Inclusion into the bundles as well, which obviously increases potential program size dramatically because a lot of spend is associated with chronic condition management. And then finally, on the future of mandatory and I would also lump in there the overlap at ACO is another big focus point for them. I would say that they've been consistent that they want better engagement between ACO and bundled payments in the future.

Speaker 2

So more understanding of Attribution and largely that's because they're focused on a mandatory and then I believe this is my speculation probably a voluntary component as well. I would say almost all of the big health systems we had on and hospitalist PGP groups yesterday on our client advisory board all agree with what I just said. We play the role as convener sometimes and often don't play the role as convener with others. We're an analytics and data and then service company that helps Managed the post acute today. And so the status of being a convener or not is not critical to our future in the program.

Speaker 2

That would be the direct answer to your question. And our model is flexible to work with folks regardless who is convening. I think we had a lot of value convening today and have helped, I deeply believe push forward all the great success that we've seen in BPTIA across the country. But we don't view that as A headwind to us if that was to shift in direction longer term. Does that answer your question?

Speaker 8

Yes, that does. Thank you. And then you also mentioned in your prepared remarks the NCQA HEDIS certification. Is that new? Is that an expansion of the addressable market?

Speaker 3

What are your thoughts there?

Speaker 2

Yes, absolutely. Yes, great question and thanks for picking up on it. My clinical quality team will be thrilled. We have a great team there. Jennifer Cobbs, our leader who's really leaned in and taken that bull by the horns.

Speaker 2

I would say one of the big Group trends inside the health plans and this goes to my earlier comments. The risk and quality in clinical groups have all started to merge together And many of our clients are like, hey guys, you're in 100 of 1000 of if not approaching a 1,000,000 of our members' homes. We need you to be doing more. And so the quality teams have really leaned in and we've worked in concert with them To start to bring in more quality centric gaps in care device work into the home. And so just to be clear, all a lot of that work has nothing, As I mentioned before, to do with risk adjustment, but it's more focused on gaps in care closure, etcetera.

Speaker 2

And so we want to do that at the Highest possible standard in CQA obviously is the platinum standard in the industry. So it's helping us get GEDA certification and other work, and we're doing this in concert By opening up this totally new avenue of doing more of this gaps in care closure inside the home, some plans are even pushing us towards just GAPS and Care visits into the future with different populations. So it is an expansion opportunity Sean and one that we're very excited about.

Speaker 3

Awesome. Thanks, Kyle.

Speaker 2

Yes. Good to hear from you.

Operator

Our next question is from Matt Larew at William Blair. Please go ahead.

Speaker 9

Yes. Hi. Good morning. I wanted to follow-up on your comments around service line extensions, Jen, things like management. How much of that you see as capabilities that you feel you have today, but maybe just need to figure out payment Sure.

Speaker 9

Versus capabilities that you could expand to either through in house technology development or M and A?

Speaker 2

Yes, great question, Matt. I would say it's on med management, chronic condition management, we have great capabilities today. So I'll touch on those 2 first. So on the med side, the largest percentage of time we spend in the home is helping seniors understand their medications and it is It's frankly frequently a mess, right? They don't understand the pills they're taking, MetaMed interaction.

Speaker 2

This pill makes me nauseous and I don't have enough money to Afford food necessarily to eat with this type of pill like the doctor recommended. So working through all of that is such a big part of what we do. The plans also have comprehensive vendor Use MTM services and connection back to their PBM workflow. We're in talks of expanding into all of that, given that great rich, Really golden medalist that we're producing outside of the home with all of the surrounding social, financial, whatever they may be issues. So we are in the cat I think to make a real positive impact for seniors, to get their meds cleaned up once and for all.

Speaker 2

And this is a plague Across the senior population today, and I think SignifAI is in a great position to make a positive impact there. So that's well underway. We've been doing a lot of work there, and it's been It will be a great expansion opportunity for us next year. On the chronic condition management side, it's a big synergy between the two businesses. And so what we've been building out For years now on the episode of care division is the ability to manage chronic conditions for a period of time to get them back in check, right, with clinicians, social workers, All of the patient identification work we do, we are now wanting to bring that capability set more into the home.

Speaker 2

And so we already do all the identification work obviously on the chronic condition. What we want to push forward into and we're in talks with numerous plans on how to pilot best pilot this is to go in and pick Diabetes, chronic heart failure, some of these conditions that really are plaguing seniors and making a positive impact, connecting them back to caregivers, taking on some risk ourselves as a part of that. I would say that's more in the pricing, figuring out how to do the met economics and the actuarial analysis. On the remote patient monitoring front, we're doing a lot of that today telephonically. And so we as a part of our transition to home services, We're spending a lot of time engaging and making sure that we're monitoring folks remotely.

Speaker 2

I think there's an opportunity to expand our device hub and tie more Passive remote patient monitoring, excuse me, work inside the home as well. CMS recently approved a pretty dramatic expansion of fee for service Billing on the RPM side, remote patient monitoring side, that's an opportunity for us, obviously, as DPTIA is a big fee for service population. But I think that the Medicare Advantage plans are leaning in here too and we're again we're in a great position to activate and to monitor and provide follow on services as a result of that reach in the home. So we're pretty excited about that roadmap. And I think that You know as I characterized earlier, what are the plans asking us to do more of?

Speaker 2

It falls into that bucket of work I would say more than anything. The final thing that you'll see continued innovation from us, we're spinning up a team that's focused just on deeper connection back to primary Air and to specialists out of the home as well. And so we've been doing that for years, but we're now wanting to dig in more, using our core data platform and assets to Push information via our FHIR APIs, push digital scheduling, and we view ourselves as a big activation hub to really get folks more engaged in their care. And the plans are super excited about that innovation from us as well. I mean, getting folks back They're care providers.

Speaker 2

It lowers readmissions. It allows them to have more happy, healthy days at home, which is our mission. And it's something that we're laser focused on next year as well. Thanks for the question, Matt.

Speaker 9

Yes. Thanks a lot, Kyle. That's really helpful. One thing I want to follow-up on from your comments. You mentioned that The IAG strength this year, next year is related to not to share taking, but more movement from in house volume.

Speaker 9

And I'm curious, The OIG report perhaps wasn't applicable to you and the services you provide, but we're wondering if you think it's changed the thought process or kind of the risk Calculate that payers are going through as they consider in house versus 3rd party IHs?

Speaker 2

Yes, I think that it really plays into this arm's length moral hazard thing. You want to Have a completely independent, highly compliant, 99% plus audited partner to help you deliver The super critical services and number 1. Number 2, I mean there we have the best data asset And the best logistics and routing platform to be able to pull this off at nationwide scale and they're consistently seeing this. And we saw Several of our large and medium and small clients expand their programs, number 1. So move this to more members because they're seeing all of the Benefit of positive outcomes to those members, number 1.

Speaker 2

And number 2, we saw the sun setting And move away from several in source programs. And so I deeply believe we have no real risk of In sourced, which is always something that folks say inside payer services businesses, why wouldn't they just in source themselves? I think our payer clients, we have extremely strong relationships with them, and It would be nearly impossible I believe for them to stand up nationwide scale like we have. And so it's been fantastic. Instead conversations focused on, hey guys, We need you to do more in the home.

Speaker 2

Like we want to drive more of an impact and as I've kind of mentioned extensively in the call, We want deeper and deeper engagement from you all because you've got a really trusted relationship with these folks. Like what's more trust than allowing a clinician to come inside your home, Right. And spend an hour with you trying to solve some really complex health problems. And there's more work we could be doing on benefit explanation and connecting them Other programs that the plans are running and pushing forward on the supplemental benefit side too is something we've talked a lot about. And so I do think We're going to continue to see an expanded TAM by the moving into, as I mentioned, Medicaid and commercial and touching more and more Medicare Advantage lives, number 1.

Speaker 2

Number 2, we see no risk in the foreseeable future of in sourcing and quite the contrary folks are leaning in more than ever And asking SignifAI to do more than ever to make a positive impact on these individuals' lives that we're touching.

Operator

As we have no further questions on the call, I will hand back to Kyle to conclude.

Speaker 2

Great. Thank you all very For a wonderful quarter, and thanks to the whole team for leaning in. It's been amazing to see us To dive into more homes, as I mentioned, expand our services, we're very bullish on the expanded program size and seeing episodes continue to drive positive Outcomes both for the BPTIA population, as well as the episodes of care, the non BPTIA population. Thank you all very much and I will talk to you guys all soon. Take care.

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Earnings Conference Call
Signify Health Q3 2021
00:00 / 00:00