LifeStance Health Group Q2 2023 Earnings Call Transcript

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Provided by Quartr
August 9, 2023

There are 11 speakers on the call.

Operator

Ladies and gentlemen, thank you for standing by. My name is Desiree, and I will be your conference operator today. At this time, I would like to welcome everyone to the LifeStance Health Second Quarter 2023 Earnings Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session.

Operator

Followed by the number 1 on your telephone keypad. I would now like to turn the conference over to Monica Perkotsky, Vice President of Investor Relations. Please go ahead.

Speaker 1

Good morning, everyone, and welcome to LifeStance Health's Second Quarter 2023 Earnings Conference Call. I'm Monica Vorkovsky, Vice President of Investor Relations. Joining me today are Ken Burdick, Chief Executive Officer Dave Borden, Chief Financial Officer and Manish Qureshi, Chief Operating Officer. We issued the earnings release and presentation before the market opened this morning. And Investor Relations section of our website, investor.

Speaker 1

Lifestance.com. In addition, a replay of this conference call will be available disclaimers about forward looking statements included in the earnings press release and SEC filings. Today's remarks contain forward looking statements, including statements about our financial performance outlook, business model and strategy. Those statements involve risks, uncertainties and other factors as noted in our periodic filings with the SEC that could cause actual results to differ materially. In addition, please note that we report results using non GAAP financial measures, which we believe provide additional information for investors to help facilitate comparison of current and past performance.

Speaker 1

A reconciliation to the most directly comparable GAAP measures

Speaker 2

and

Speaker 1

Careful Period in the Prior Year. At this time, I'll turn the call over to Ken Burdick, CEO of LifeStance. Ken?

Speaker 3

Thanks, Monica, and thank you all for joining us today. Halfway through the year, We are continuing to steadily strengthen our operational performance. In addition, we continue to see strong visit volume and Growth. Importantly, this is the Q1 where 100% of our growth was organic. Nearly 90% of the U.

Speaker 3

S. Population has access to our multidisciplinary team of clinicians to a hybrid model of virtual and in person care covered by commercial insurance. These dedicated clinicians deliver every day on LifeStance's mission to provide access to trusted, Affordable and Personalized Mental Health Care. Our team is passionate about optimizing patient outcomes. I want to begin by highlighting recent advances on this front.

Speaker 3

To better support our clinicians in measuring How their patients care is progressing. We launched a new outcomes informed care program. As part of this program, outcomes assessments will be sent to all new patients and after follow-up appointments as deemed clinically appropriate. Over time, this new capability will allow us to develop an unprecedented level of clinical efficacy data. This data will be invaluable for improving patient care at LifeStance and will highlight our differentiated ability to deliver quality outcomes.

Speaker 3

It will also support our continued advancement toward value based care arrangements with our payer partners. We are uniquely positioned to leverage LifeStance's size and scale to measure quality and outcomes in a disciplined way that we believe can help drive improvements in mental healthcare across the country. We are excited about this step on our path to using data and analytics to better inform care and enhance Mental Health Treatment. While we are still early in rolling out our new outcomes initiatives, We are very pleased with the results of other patient experience data that we have been tracking over time. We currently earn a patient net promoter score of over 80 and our average reviews for LifeStance Centers across Google searches and Care that our patients receive from LifeStance clinicians.

Speaker 3

We are proud of the compassionate and customized care that we deliver every day, but recognize that we have opportunities to enhance the patient experience. As we constantly strive for continuous improvement, we're proud of the team's progress and commitment as we move closer to serving nearly 1,000,000 patients annually. Regarding operational execution, We continue to make progress on initiatives to streamline the business and improve our performance. We announced on our last earnings call that we were in the process of sending termination notifications for approximately 30% of our payer contracts, which we completed as of July 1. These will have little to no impact on visit value, but will allow our internal teams to operate more efficiently.

Speaker 3

While this initial phase is complete, we will continue to evaluate our payer contracts and focus on aligning with payer partners commensurate with the value that LifeStance clinicians provide. Additionally, as of July 1st, We now have all of our centers aligned on 1 single EHR system, 1 phone system and One email system. This is a truly significant step forward towards simplifying the complexity created from nearly 100 acquisitions during the past 6 years, as the administrative burden of multiple systems will be significantly reduced. Streamlining our processes and systems will also enable us to swiftly and Effectively Implement New Company Wide Initiatives. Turning to our financial results in the second quarter, We delivered revenue of $260,000,000 center margin of $73,000,000 and adjusted EBITDA of $14,000,000 All of which met or exceeded our expectations.

Speaker 3

This is the 3rd consecutive quarter that our team has met or exceeded expectations and with continued disciplined execution, we feel well positioned to achieve our full year commitments. With that, I will turn it over to Dave to provide additional commentary on our financial performance and outlook. Dave?

Speaker 4

Thank you, Ken. I would like to echo Ken's comments regarding the team's solid performance through the first half of this year, both operationally and in our financial results. In the Q2, we produced strong top line results with revenue of $260,000,000 representing growth of 24% year over year. This outperformance was primarily driven by increased visit volumes that were the result of higher than expected productivity. Visit volumes of 1,705,000 increased 21% year over year, primarily driven by higher clinician count and higher productivity.

Speaker 4

Total revenue per visit increased 3% year over year to $152 primarily driven by modest payer rate increases. The outperformance on revenue flowed through to center margin. Center margin of $73,000,000 in the quarter increased by 22% year over year. Adjusted EBITDA of $14,000,000 was consistent with our expectations. Turning to liquidity.

Speaker 4

In the second quarter, free cash flow was negative $12,000,000 $6,000,000 improvement year over year, which was in line with our expectations. As we stated previously, we expected to improve cash flow from the Q1, which was impacted by compensation costs such as bonus payments and higher payroll taxes. In the Q2, DSO increased sequentially from 42 days to 43 days. This was above our prior expectations as we made the decision to hold claims for a large payer due to a retroactive rate increase. We expect a similar dynamic in the Q3 as we hold claims for several other payers due to updates from rate negotiations.

Speaker 4

DSO should meaningfully improve during the Q4. We exited the quarter with cash of $80,000,000 and net long term debt of $249,000,000 As of the end of Q2, we had additional debt capacity from a delayed draw term loan of $41,000,000 as well as a $50,000,000 revolving debt facility, providing us with sufficient financial flexibility to run the business as we head towards positive free cash flow for the full year 2025. In terms of our outlook for 2023, we are raising our full year revenue range by $20,000,000 to $1,010,000,000 to $1,040,000,000 and raising our full year center margin range to $280,000,000 to $300,000,000 We are reiterating the adjusted EBITDA guidance range of $50,000,000 to $62,000,000 to maintain flexibility for further investing in the business. We expect the higher productivity that we experienced in Q1 and Q2 to continue into the second half of the year, which is driving the increase in our revenue guidance. For the Q3, We expect revenue of $250,000,000 to $260,000,000 center margin of $69,000,000 to $76,000,000 and adjusted EBITDA of $11,000,000 to $17,000,000 As a reminder, there is seasonality Before I transition to Danish, I'd like to make it clear that as we drive revenue favorability, We are continuing to accelerate investments in 2023.

Speaker 4

As stated previously, we expect to exit 2025 with double digit margins. However, our progression from 2023 to 2025 will not be linear. We fully expect to see margin expansion in 2024, but anticipate greater margin expansion in 2025 as we will have the benefit of a full year of returns on our foundational investments. With that, I'll turn it over to Donish for additional color with respect to operations.

Speaker 2

Thank you, Dave. We continue to align our teams around 2 growth priorities, net clinician adds and clinician productivity. In terms of net clinician adds, we grew by 171 in the 2nd quarter, Bringing our total to 6,132 clinicians, an increase of 17% year over year. Importantly and consistent with our prior messaging, this quarter's growth was 100% organic. Turning to clinician productivity, capacity or the time clinicians make available to see patients trended in line with our expectations.

Speaker 2

In terms of utilization or our ability to appropriately fill our clinician schedules, We continue to deliver improvement, which has been sustained for 3 quarters. We believe it is now appropriate to increase our go forward productivity assumptions to reflect the performance in the first half of the year, which is factored into our higher revenue expectations for the second half of the year. We are driving these improvements in utilization through operational discipline at the top, middle and bottom of the patient funnel. At the top of the funnel, we continue to attract new patients in line with the overall growth of our clinicians and their related capacity. Our boots on the ground primary care referral team is doing a tremendous job expanding and solidifying local relationships and delivering growth in referrals, which is a key contributor to ramping new clinicians.

Speaker 2

Additionally, Our marketing team's ability to drive continued growth in online organic patient traffic in combination with increasing levels of brand awareness continue to have a positive effect at the top of the funnel. 2nd, at the middle of the funnel, We are improving our scheduling of patients. Our intake teams are focused on enhancing the overall conversion and matching experience for patients who prefer to schedule their appointments over the phone. We also continue to leverage our digital capabilities To optimize patient matching via our online booking and intake experience, Obi. We are excited to announce that Obi has been fully implemented nationwide as of the Q2, completing an 18 month project.

Speaker 2

These online and offline efforts have led to further progress at the middle of the funnel. Finally, at the bottom of the funnel, in terms of scheduled appointments converting to completed visits, 4 point improvement since the end of 2022 and has had a significant impact on utilization and the ability of our clinicians to use their patient facing time productively. Our strong execution at the top, middle and bottom funnel Contributed to better than expected productivity in the Q2.

Speaker 4

Turning to Real Estate.

Speaker 2

We are making good progress on the real estate optimization project that we initially announced on our Q4 earnings call. As a reminder, we were planning to consolidate 30 to 40 centers this year. By the end of the second quarter, We consolidated 36 centers with little to no disruption to our patients and clinicians. As we work through this review of our real estate, we identified additional centers that we are targeting for consolidation late in 2023 and we will provide an update by next quarter's earnings call. Additionally, we are continuing to intentionally moderate our case of de novo openings.

Speaker 2

We are now expecting to open no more than 36 in 2023, down from our original guidance of 40 to 45. Going forward, we will continue to regularly evaluate Our real estate footprint ensures it meets the needs of our hybrid model while supporting our goals of efficiency and operating leverage. And we expect fewer de novo openings in 2024 as we continue to optimize use of our existing space. In closing, I'm proud of the team's continued dedication to driving operational improvements across the foundation of our business. We have dramatically reduced complexity and streamlined many areas of the company.

Speaker 2

We've gone from 100 phone systems to 1, dozens of EHRs to 1 and rolled out a national online booking system. We've also aligned the teams around a single set of KPIs that move us forward in a common direction. While we still have a lot of work to do and are just 2 quarters into a 2 year transformation process, The energy and enthusiasm of the team are palpable and inspiring. With that, I'll turn it back over to Ken for his closing remarks.

Speaker 3

Thank you, Ganesh. I would like to thank all of our dedicated clinicians and team members for their continued outstanding work in the first half of twenty twenty three. It's been nearly 1 year since I joined LifeStance And at that time, we have focused on standardizing and simplifying our processes, systems, payer contracts, Real Estate and Other Areas of the Business as referenced by Danish. As leaders in the outpatient mental healthcare space, We are also beginning to leverage our unique scale to use data and analytics to better inform care and Enhanced Mental Health Treatment. While I recognize that there is a great deal of work ahead of us, I am more confident than ever that as we continue to focus on our top priorities, Execute with discipline and make the necessary investments to strengthen our foundation,

Operator

Your first question comes from Craig Hettenbach with Morgan Stanley. Your line is

Speaker 5

open. Thanks. Ken, based on the clinician growth and productivity gains, it seems you're firmly On track for kind of the mid teens revenue growth over the next couple of years. Can you just talk about what do you think about some puts and takes around some things that could drive revenue growth higher or any potential risks to that mid teens as you see it?

Speaker 3

Sure. Thanks for the question, Craig. I'll give you my $0.02 and then let Danish weigh in and add and Human Resources. The first thing that occurs to me is that, as we've mentioned in the script, the Growth that we've had most recently is 100% organic. So one of the Upsides is that at a point where we can fund acquisitions from our free cash, We will be back into more of an acquisitive mode.

Speaker 3

So that represents sort of pure upside. And in terms of the downside, we have to stay vigilant and focusing on the things that Danish talks about in each earnings call and frankly that he focuses on every day, Which is around productivity and utilization, conversion rates, cancellation rates, etcetera. So, I'm overall optimistic, but we've got to stay on top of it.

Speaker 2

Yes, I concur with that answer. And as we really look out to the future with this being a organic focused approach now. Our ability to continue to deliver on neck clinician adds through our recruiting engine, which we continue to view as Best in class, and we continue to be able to scale in conjunction with Our improvement that we've already delivered on the utilization front as it affects productivity with the new lever being how do we start to turn our attention to the other side of the productivity equation, which is capacity. Historically, that has been an area that we have very purposely Not put our attention to with our primary focus being driving the improvements on utilization and delivering on our commitments to our clinicians that when they make time available to us, we are going to fill that appropriately. Now that we have made so many strides on that front, we will start to turn our attention again to the other side of the equation, which is capacity and see how we effect that going forward.

Speaker 5

Got it. And then I have a follow-up for Dave. It's nice to have revenue upside that you can Reinvest more into the business. On those investments, is it just things that you were already doing and you're able to spend a little bit more? Are there any other initiatives like

Speaker 3

How

Speaker 5

would you frame some of the investments you're making this year?

Speaker 4

Yes. Good morning. As far as the investments themselves, I would say more of the same. I would not point to any new particular Initiatives. We continue to invest in areas across many aspects of the business that allow us to Drive performance as well as scale effectively so that we can drive margin improvement in 2024 and exit 20 25 with double digit margins.

Speaker 5

Got it. Thank you.

Operator

Our next question comes from Lisa Gill with JPMorgan. Your line is open.

Speaker 6

Great. Thanks very much and thanks for taking my question. I just want to start with the current environment around managed care contracting and I noted, Dave, you made the comment that your DSOs were

Speaker 1

up because you're holding claims due

Speaker 6

to rate increases. 1, is it an annual negotiation with Managed Care when we think about rate. 2, can you give us any color around what you're seeing in the rate environment With Managed Care. And then thirdly, around that, is Managed Care looking to do any type of contracting around either value based care initiatives or, capitation, etcetera. Like, is there any changes when we think about those contracts that you have with managed care.

Speaker 4

Hey, Elyse, it's Dave. I'll take that one. So there was a few pieces So first of all, as far as negotiations that go with the payers, we are doing them we are having regular Interaction with our payers from an engagement perspective. Some of them are annual contracts, some of them are an annual plus 1 from an escalator perspective. So it depends on the situation, but more than anything else, we want to have frequent interactions with our payers and be engaging with them.

Speaker 4

As far as the value based care, We do have some value based care arrangements already. I would point you to more of them being around access and quality rather than capitation or risk bearing things like that. And I would also say it's early stages in mental health Around value based care. That is not prevalent across our entire book.

Speaker 6

Okay, great. And then just a quick follow-up on virtual versus in person. Can you maybe just give us

Speaker 1

what the percentage is this quarter and your expectation for the rest of the year?

Speaker 2

Sure. This is Donish. I can answer that. So from a virtual perspective, Virtual visits represented about 73% of our total visits in Q2 as compared with 75% in Q1. So we continue to see an increased trends in patient demand for in person visits and a slow return to in that direction.

Speaker 2

That being said, because of our hybrid model and the way that we deliver care, we remain agnostic as to where it trends, How fast it trends and ultimately where it sells out, which is a key differentiator for us. What it affects more than anything is how we continue to think about our optimization strategy around real estate and the footprint that we want to maintain.

Speaker 6

Great. Thanks for the comments.

Operator

Next question comes from Ryan Daniels with William Blair. Your line is open.

Speaker 7

Yes. Hey, guys. This is Jack Fembth on for Ryan Daniels. Congrats on the quarter. Thanks for So I appreciate the comments on the launch of the new outcomes informed care program for clinicians.

Speaker 7

But can you dive just a little deeper into this program on Clinician front, specifically maybe like what measures are included or how it differs from the older process for clinicians? And then, the second part with this too, is this rolled out nationwide Already or is this only rolled out to a select group? Thanks.

Speaker 3

Thanks for the question, Jack. Actually, it is rolled out nationwide and that's the power of this program. It's not as if we haven't been doing assessments, but as we transition from lots of acquisitions Doing things the way they had always done them to a single approach at LifeStance that's nationally consistent. It's going to allow us to harness that data more effectively. And to date, we have already done 180,000 of these patient assessments, and we're still in the very early stages.

Speaker 3

But it's just a more structured disciplined way of making sure that we are analyzing the clinical efficacy of the work and then helping to inform Our clinicians and hopefully helping to inform the industry about best practices and protocols.

Speaker 7

Understood. Thanks. And as a quick follow-up too, on the center consolidation front, you noted the additional centers that are good consolidation candidates. I'm curious if those are within the same markets or

Speaker 2

are others that are sorry,

Speaker 7

as others that are solid oh my god, sorry. Curious if those are within the same markets as others that you're consolidating, or if those are new markets that you identified? Thanks.

Speaker 2

So this is Danish. I'll take that. So some of them are within the same states or markets that the initial 36 We may have had closures in, others are in new markets. The way that we looked at this was with the initial 36, that was sort of what I'd characterize as the obvious closures. They were all acquired locations that were suboptimal in either the footprint, the layout, the quality of the build and most importantly, the in person utilization of the space.

Speaker 2

With this next go around, it's looking more broadly to say these centers may not check every single box, But there's a compelling reason, the largest one being in person utilization and proximity to other centers where We can consolidate some of that visit volume and both patient traffic and clinician workspace. So, it's a mixed bag to answer your specific question, which is In some cases, they may be brand new markets that were not part of the initial 36. In other cases, they may occur in the same market.

Speaker 7

Great. Thanks, guys.

Operator

Next question comes from Kevin Caliendo with UBS. Your line is open.

Speaker 8

Thanks. Thanks for taking my question. You mentioned you're sort of 2 quarters into a 2 year plan here in terms of updating, improving operations. I know a lot of the heavy lifting is done, but maybe can you talk about some of the initiatives you have going forward? And are those again to be margin enhancements, operational enhancements, revenue enhancements, all of the above.

Speaker 8

Just love to hear a little bit more detail and what you could share at least with sort of the next 18 months of this plan.

Speaker 3

Sure, Kevin. This is Ken. I want to be really clear. While we are pleased with the progress, we literally are only a quarter of the way through this 2 year Investment Phase, where we have every intention of fortifying the foundation so that we can continue to build and grow A strong company. So none of us at LifeStance would declare that the heavy lifting is done.

Speaker 3

We are there's plenty of heavy lifting that remains over the next 18 months. Having said that, I view the progress as solid and steady, but we are far from declaring victory. To the second part of your question, it really is all of the above. The work that we're doing is going to Improve our operational performance that will drive improved administrative costs, operating leverage, if you will. But we're also doing things that will improve revenue.

Speaker 3

So it's across the board And that's why we talk about it as transformational because we're taking an incredibly high growth business and we're taking just a bit of a pause to invest for 2 years, so that we have a rock solid foundation upon which to grow going forward.

Speaker 8

Appreciate that. A quick follow-up if I might. Are you in terms of demand for services or patient traffic or the like, are you finding that just being in network Is enough to fill your schedules or is there any additional outreach that needs to be done advertising and the like? Just sort of trying to understand the dynamics of where demand is currently and where you think it's heading.

Speaker 2

Yes. Hey, Kevin, this is Damish. I can take that. So in general, as a starting point From an industry perspective, patient demand outstrips supply. So, irregardless of LifeStance, In general, we are all positioned well, just based on the overwhelming demand for mental health services across the country.

Speaker 2

Now that being said, Making sure that that enough of that demand is appropriately coming our direction to fill the top of the funnel. And then obviously, all the operational execution that takes place to convert that to a completed visit through the middle and the bottom of the funnel. That's where we're really focused, but right now with our marketing and business development efforts, which include our local relationships with Primary Care Offices as well as our increasing levels of organic online presence and brand awareness. We feel that our top of the funnel or the overall patient demand as compared to the clinicians' capacity we have Phil is appropriately right sized.

Speaker 8

I know you guys don't ever talk about your CAC. It's a number that others in the industry talk about a lot. But when you think about it, where do you expect the trends on that to go for you Going forward, meaning where we are now, I understand the demand supply setup is favorable. Do you think it remains that way? Do you think it It's easier as your brand awareness gets better, as your market penetration gets better.

Speaker 8

I'd just love to think about how you guys Think about allocating resources in that direction going forward.

Speaker 2

Yes. So, we have always been from The beginning of the company, very organic focus as it pertains to patient acquisition. CAC or CPA is not something that we regularly discuss only because it is such a minimal amount of our total spend. So if you look at it in aggregate, like we've discussed on kind of previous in previous public statements, In totality, we spend less than 2% of revenue on everything related to marketing. And so that is not just paid, which is a fraction of that 2%.

Speaker 2

That is, the actual teams, the headcount, the related activities that they have. So we have an extremely efficient model as it pertains to patient acquisition because of the demand And that continues to move in a favorable direction as we focus on both organic and increasing levels of brand awareness as the primary drivers of filling our top of the funnel.

Speaker 8

Super helpful. Thanks guys.

Operator

Next question comes from Jamie Furst with Goldman Sachs. Your line is open.

Speaker 9

Hey, thank you. Good morning. Donna, sticking with you here to start, just on the productivity front and your ability To fill capacity, that's obviously been a key driver of the outperformance in the first half. How much more room is there to improve That first piece, the ability to fill time through conversions and lower cancellations. Then you mentioned the other piece, which is Maybe incentivizing clinicians to give you more of their time.

Speaker 9

What levers do you have to pull to accomplish that? And Any thoughts on just the wage environment or compensation packages, changes you're making for clinicians?

Speaker 2

Yes. So thanks for the question. You're right in when I started as COO, The very first focus for us was making sure that we're delivering on our commitments to our clinicians by filling the time that they were giving us appropriately with a full caseload of patients. And so that cuts to the heart of everything we've talked about on the utilization side of the productivity equation. We've made very significant strides in that front with the specific example that we have given being cutting our cancellation rates down by about a third, since we put a concerted effort against it.

Speaker 2

So though we continue to have Further areas for improvement on the utilization front, we feel like we're in a spot where now is the right time to Start to turn our attention to the other side of the equation, which is capacity. There are a number of levers and incentives that we can pull there that we are starting to discuss with our leadership teams and the clinicians themselves to understand What we could do, but it's early enough in that in our kind of thought process there That will come back later once we've made more of a developed more of a conservative strategy around it. Things like our LTIP program was an initial path that starting to create long term incentives around Those clinicians that want to give us more in their capacity and more of their time and want to focus on Filling that productively. And so we'll continue to evaluate other similar opportunities as we go forward and we'll come back to you all when we have clarity there.

Speaker 9

Okay. Thanks for that. And then maybe just a financial philosophy question. You're increasing revenue guidance, EBITDA is being maintained. It sounds like there's not specific investments you're contemplating that are incremental.

Speaker 9

You mentioned just maintaining flexibility. So is the philosophy just that when you have stronger top line, You'll reallocate that or invest incrementally in accelerating the operations or just or is there potential to kind of let that flow Group. Just any thoughts on how you think about that would be great? Thank you.

Speaker 4

Yes, Jimmy, it's Dave. I'll take that one. Basically, it's what you just described, which is for 2023, as we generate flexibility, We are investing. We have an investment list that we're working through. There's not any new big initiatives there.

Speaker 4

It's more smaller investments in multiple areas and I expect that to continue through 2023 if and when We generate financial flexibility. As we move into 2024, we will see operating leverage and Margin Improvement, but we still will be also making investments in 2024 as Ken has stated 2023 2024 are foundational and investment years.

Operator

And we do have our last question comes from Brian Tanquilut with Jefferies. Your line is open.

Speaker 10

Hey, good morning. Ken, maybe just a question on how you're thinking about the Biden administration's push to Force more in network coverage for behavioral health. I mean, how do you think that affects LifeStance, whether it's an opportunity or does that open the door for Increased

Speaker 3

competition. Well, I'm entirely supportive. I think what President Biden He's doing is highlighting what we've all observed. It existed before the pandemic, but the pandemic sort of elevated it and exacerbated the disconnect between the demand for mental health treatment and the supply. So, Whether we're talking about fully realizing parity or we're talking about responding to the changing condition, frankly, of the American Society.

Speaker 3

I think it will Be positive as we sort of try to translate and navigate through a period where we're seeing unprecedented demand and there's no indication That demand is going to subside. So if it brings on more competition and people continue to find and Better ways to expand access to mental health. That's a positive. We don't think we are a good company because We lack competition. We think we're a good company because of the model that we've built and the way that we execute.

Speaker 10

I appreciate that. And then maybe as we think about the fact that you're calling contracting, I think you called out 30% Have been eliminated. Are you seeing any flow through to the other side of the remaining clients or contracts With payers who are willing to give you the rate increases that you need to justify keeping them on the panel.

Speaker 3

Yes, that's an ongoing discussion and ongoing initiative. As we said in our prepared remarks, Increasing our level of engagement with payers is really important. It's certainly the rates are important, but it's also the terms and it's the way in which we partner for mutual benefit. So we want to be a good partner. We want to be able to minimize The stress and strain for our patients and their members as they access mental health treatment, which is a courageous decision in and of itself.

Speaker 3

So removing barriers and everything from the credentialing process to the payment process, including reimbursement. It's just going to be an ongoing dialogue with our payer partners. The reduction in payer contracts was done for many reasons. The first reason is because we were looking to simplify or Administrative Burden. And so this first tranche, as Danish said in his remarks, literally had de minimis impact on patient visits and revenue because these were contracts where we're seeing very, very little visit activity.

Speaker 3

As we go further, we'll continue to review this and make sure that the payer relationships that we have going forward fit our sort of our best interests and the best interests of our patients. So we'll be looking at rates, we'll be looking at volume, we'll be looking at the terms of the relationship.

Speaker 10

Understand. Maybe Dave, just one quick follow-up. You drew 25 of the credit facility. Is that just a timing thing? How should we be thinking about that?

Speaker 4

Yes, that was a timing thing. That was related to funding our acquisitions that Early in the year, we accessed our DDTL, the delayed draw term loan facility. And that was again just to maximize flexibility, so we put more cash on the balance sheet.

Speaker 9

Understand. Thank you.

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LifeStance Health Group Q2 2023
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