InnovAge Q1 2025 Earnings Call Transcript

Quartr
Provided by Quartr
November 5, 2024

There are 8 speakers on the call.

Operator

Good day and thank you for standing by. Welcome to the Enovitch First Quarter 2025 Earnings Conference Call. At this time, all participants are in a listen only mode. After the speakers' presentation, there will be a question and answer session. Please be advised that today's conference is being recorded.

Operator

I would now like to turn the conference over to your speaker for today, Ryan Kubota, Director of Investor Relations. Please go ahead.

Speaker 1

Good afternoon, and thank you all for joining the Innovage 2025 fiscal Q1 earnings call. With me today is Patrick Blair, CEO and Ben Adams, CFO. Doctor. Rich Pfeiffer, Chief Medical Officer will also be joining the Q and A portion of the call. Today, after the market closed, we issued an earnings press release containing detailed information on our fiscal Q1 results.

Speaker 1

You may access the release on the Investor Relations section of our company website, innovage.com. For those listening to the rebroadcast of this call, we remind you that the remarks made herein are as of today, Tuesday, November 5, 2024, and have not been updated subsequent to this call. During our call, we will refer to certain non GAAP measures. A reconciliation of these measures to the most directly comparable GAAP measures can be found in our earnings press release posted on our website. We will also be making forward looking statements, including statements related to our 2025 fiscal year projections, future growth prospects and growth strategy, our clinical and operational initiatives, Medicare rate increases, executive leadership transition, the status of current and future regulatory actions and other expectations.

Speaker 1

Listeners are cautioned that all of our forward looking statements involve certain assumptions that are inherently subject to risks and uncertainties that could cause our actual results to differ materially from our current expectations. We advise listeners to review the risk factors discussed in our Form 10 ks Annual Report for fiscal year 2024 and any subsequent reports filed with the SEC, including our most recent quarterly report on Form 10 Q. After the completion of our prepared remarks, we will open the call for questions. I will now turn the call over to our CEO, Patrick Blair. Patrick?

Speaker 2

Thank you, Ryan, and good afternoon, everyone. I want to begin by expressing my continued appreciation to our colleagues, participants, government partners and the investor community who support Innovage. Today, I will discuss several topics: financial results for our 1st fiscal quarter an update on our organic growth and drivers a California regulatory compliance update recent progress in our clinical and operational value initiatives and affirmation of our annual targets. Let me start with our Q1 performance. Earlier today, we reported total revenues of $205,100,000 center level contribution margin of $34,500,000 and adjusted EBITDA of $6,500,000 for the 1st fiscal quarter.

Speaker 2

When compared to the Q1 of fiscal 2024, revenues have increased by approximately 12% from $182,500,000 and adjusted EBITDA has increased by approximately 500% from adjusted EBITDA of $1,300,000 When compared to the Q4 of fiscal 2024, revenues increased by approximately 3% and adjusted EBITDA increased by approximately 25%. Since this increased to approximately 7,210, which represents a quarter over quarter improvement of approximately 3%. Building on our strong fiscal year 2024 performance, our Q1 reflects continued momentum and execution of our strategy to deliver high quality care with strong stewardship of internal and external costs, while continuing to enhance our margins. On the leadership front, we welcome Michael Scarborough this week as our new President and Chief Operating Officer. Michael comes with 3 decades of experience building, scaling and managing government healthcare programs.

Speaker 2

Most recently, he served as the CEO of Optum at Home following the acquisition of Prospero, a physician led home based medical care model that Michael co founded and sold to UnitedHealthcare in 2022. In approximately 3 years, Prospero grew to serve 50,000 members in 28 states. Prior to that, Michael served as a Senior Vice President at both Anthem and Amerigroup. Given the uniqueness of PACE as both a provider and payer, we're thrilled to have a leader with Michael's experience and track record join the company at this pivotal inflection point. At the same time, Chris Vint will be leaving the organization.

Speaker 2

I want to personally thank Chris as a partner and friend for her leadership. She will be missed. Staying a moment longer on the people who deliver on Innovage's mission every day, I'm excited to share that our recent employee satisfaction and engagement survey demonstrated strong quarter over quarter performance with an employee engagement score of 79%. And our recently completed Net Promoter Score survey, which measures participant satisfaction, loyalty and enthusiasm, reached a new high of 56, well above the comparable survey score of 50 in the Q1 of fiscal 2024. Fostering a highly engaged workforce is a key priority for our company.

Speaker 2

When employees are engaged and invested in the company's success, they are more motivated to deliver exceptional service and go the extra mile for our participants. This translates to higher participant loyalty and stronger word-of-mouth referrals that drives incremental growth. Before turning to growth, I do want to take a moment to recognize the tremendous efforts of our teams in Tampa and Orlando, who went above and beyond to support our employees, participants and local communities during the recent hurricanes. Despite facing significant personal and professional disruptions, our teams demonstrated remarkable resilience, teamwork and a steadfast commitment to our mission. They worked tirelessly to ensure our facilities remained open, participant care was uninterrupted and critical resources were provided to those in need.

Speaker 2

What makes this response even more remarkable is that the teams are simultaneously navigating the complexities of newly opened centers. To demonstrate such resilience, managing both a natural disaster and the day to day challenges of scaling operations speaks volumes about their commitment and capabilities. Their actions embodied our core values and I'm incredibly proud of how they represented our company during this difficult time. On the organic front, we're off to a solid start in fiscal 2025 since this increased to approximately 7,210, which represents approximately 10% year over year growth compared to the Q1 of fiscal 2024. Our sales and marketing teams have made significant strides in their ability to identify and engage new prospective participants.

Speaker 2

By leveraging advanced market data and analytics, they have developed a more nuanced understanding of our target customer segments and their evolving pain points and preferences. This intelligence has allowed our teams to craft highly personalized channel specific messaging that resonates more effectively with potential leads. For example, our digital marketing campaigns now leverage sophisticated audience targeting and dynamic creative to serve prospective customers with ads tailored to their specific needs and behaviors. Similarly, our enrollment representatives are armed with deeper insights that enable them to have more meaningful consultative conversations with prospects. The results of these data driven strategies are evident in our Q1 performance, We saw a 7% improvement in qualified lead volume compared to the same period last year.

Speaker 2

Additionally, our inside sales team is now contributing over 20% of our enrollments, which is more than double where it was a year ago. This increased pipeline provides us with greater visibility into future revenue potential and strengthens our ability to efficiently convert prospects into loyal long term participants. Lastly, you recall previous discussions regarding state processing delays in some of our key markets. I'm pleased to report that we're now beginning to see small but steady signs of improvement in application processing times. Thanks to our continued collaboration with state agencies to reduce bottlenecks that have contributed to delayed enrollment and access to pay services.

Speaker 2

As we enter the Medicare annual enrollment period in the Q2, we typically experience some seasonal variations in enrollment patterns. However, we are more optimistic about our competitive position this year, particularly given the broader financial pressures affecting the Medicare Advantage sector. These factors position us for stronger comparative performance relative to this period last year. Regarding regulatory compliance, as disclosed in our 10 Q, CMS has closed its audit process for Sacramento, while the state audit processes remain open in Sacramento and San Bernardino. We intend to provide updates as they become available.

Speaker 2

As such, we have no updates regarding the timeline to open the Bakersfield and Downey locations. On the operational front, we continue to systematically address medical costs, labor efficiency, administrative expenses and risk score accuracy through our dual track approach of clinical value initiatives, CVIs, and operational value initiatives, OVIs. Through the Q1, we're pleased with our progress. Importantly, we look at these as a portfolio as some initiatives produce more value than we expect and some produce less value or delayed value. Ultimately, we depend on these initiatives to counteract the natural inflation in medical expenses and to aid in rebuilding profitability.

Speaker 2

With our first group of CDIs now in place for over a year, we believe they are contributing to improvement in our center level margins. And like our CVI's, we expect OVIs to contribute incremental margin lift over time. External provider cost PMPM increased 1.6% on a sequential quarter over quarter basis, which is a commendable result given the prevailing environment of higher medical service utilization we're observing more broadly in other programs serving frail seniors. Our inpatient admissions rate decreased to 5.1%, below where we ended fiscal year 2024 at 5.5%. And we're pleased that our short stay nursing utilization of 1.8% continues to remain in our target.

Speaker 2

And while we are encouraged by these results, managing utilization requires constant vigilance and is subject to some volatility on a quarterly basis. Our clinical and operational teams are driving more consistency across our centers in the areas of utilization management, high acuity care management, re contracting high cost external providers, ancillary services network management, claims payment integrity and chronic condition documentation. We are also looking at pharmacy costs. Last fiscal year, we spent $88,000,000 on net pharmacy costs, and it is growing proportionately with our census. We conducted a routine market pricing check last year, or taking a close look at the options available in the market, as well as how we're organized to efficiently and effectively deliver these critical services to our participants.

Speaker 2

We continue to pursue opportunities to improve the participant experience, while also reducing costs in this area. We also continue to invest in tools and technologies to enable our clinicians to remain focused on participant care and practice at the top of their license. Last fiscal year, we piloted a new e consults initiative that enables our primary care physicians to get a specialist review within 24 hours and can often prevent the need for an in person specialist visit, which can sometimes take months to schedule and complete. After a successful pilot, we're scaling this solution nationally. We believe this is essential for further empowering our physicians because of their extensive geriatric training, manages significant amount of routine specialty care that would otherwise be referred to specialists by other primary care providers.

Speaker 2

Lastly, we remain committed to strong administrative cost controls in our centers and in corporate services. We continue to push ourselves to find new ways to be more efficient and productive and are beginning to see fixed cost leveraging translate into margin. As we conclude the Q1, our strategic initiatives are delivering measurable results across key metrics. Based on our performance and leading indicators, we are reaffirming our annual guidance. Our disciplined approach to enrollment growth combined with robust cost management and enhanced quality and compliance programs has yielded tangible improvements in organizational effectiveness, participant satisfaction scores and financial performance.

Speaker 2

At our core, we remain focused on operational excellence in our centers, the foundation of our business, where continuous incremental improvements drive sustainable long term value for our participants and stakeholders. With that, I'll turn it over to Ben to walk through our quarterly financial performance.

Speaker 3

Thank you, Patrick. Today, I will provide some highlights from our Q1 fiscal year 2025 financial performance and insight into some of the trends we are seeing in the current quarter. Starting with Census. We served approximately 7,210 participants across 20 centers as of September 30, 2024, which represents annual growth of 9.4% and sequential quarter growth of 2.7%. We reported 21,000 380 member months in the Q1, an increase of approximately 9.4% compared to the Q1 of fiscal year 2024 and 2.8% over the 4th quarter, representing a strong start to fiscal year 2025.

Speaker 3

Total revenues of $205,100,000 increased 12.4% compared to $182,500,000 in the Q1 of fiscal year 2024, primarily driven by an increase in member months and capitation rates. The increase in capitation rates was primarily driven by higher Medicaid rates in connection with our annual state contract increases and higher Medicare rates as a result of increased risk score in county rates. Compared to the Q4, total revenues increased 2.9%, primarily due to the sequential increase in member months as rates were flat. Rate activity included an annual increase in Medicaid capitation rates effective July 1. This was offset by a Medicare Part C risk or true up recorded in the 4th quarter, coupled with a change to our reporting methodology addressed on the last call, where effective July 1, a portion of what was recorded as bad debt in previous years is now recorded as a revenue reserve or contra revenue.

Speaker 3

We incurred $107,200,000 of external provider costs during the Q1 of fiscal 2025, an increase of approximately 7.9% compared to the Q1 of fiscal year 2024. The increase was primarily driven by an increase in member months, partially offset by a decrease in cost per participant. The decrease in cost per participant was primarily driven by a decrease in permanent nursing facility utilization and a decrease in external hospice care associated with the transition of this function to internal clinical resources. This was partially offset by an increase in pharmacy cost and an annual increase in assisted living and permanent nursing facility unit cost. Compared to the Q4, external provider costs increased 4.4%.

Speaker 3

The sequential increase was primarily driven by the increase in member months and an increase in cost per participant. The increase in cost per participant was due to pharmacy expense timing, coupled with an increase in assisted living and nursing facility unit costs, partially offset by lower inpatient utilization and cost per admit. Cost of care, excluding depreciation and amortization, was $63,400,000 an increase of 14.7% compared to the Q1 of fiscal year 2024. The increase was primarily due to an increase in member months, coupled with an increase in cost per participant. The increase in cost per participant was primarily driven by higher salaries, wages and benefits associated with increased headcount and higher wages, increased software license fees, an increase in contract provider expense in California associated with growth, contract provider recruiting and de novo occupancy and administrative expense associated with opening centers in Florida and the Concerto acquisition.

Speaker 3

These costs were partially offset by a reduction in contract transportation costs associated with the transition of services to internal transportation resources. Cost of care, excluding depreciation and amortization, increased 5.4% compared to the 4th quarter. The increase was due to higher salary, wages and benefits costs associated with an increase in member months as well as recruiting costs in California for primary care physicians. Center level contribution margin, which we define as total revenues less external provider costs and cost of care, excluding depreciation and amortization, which includes all medical and pharmacy costs, was $34,500,000 for the quarter compared to $27,900,000 for the Q1 of fiscal year 2024. As a percentage of revenue, center level contribution margin of 16.8 percent increased by approximately 1.5% compared to 15.3% in the Q1 of fiscal year 2024.

Speaker 3

Sales and marketing expenses of approximately $6,500,000 increased 20.7% compared to the Q1 of fiscal year 2024, primarily due to increased headcount to support growth. Sales and marketing expenses decreased slightly by approximately 70 basis points compared to the 4th quarter. Corporate, general and administrative expenses of $27,500,000 decreased 4.9% compared to the Q1 of fiscal year 2024. The decrease was primarily due to a reduction in insurance expense, lower consulting expense associated with improving organizational capabilities, including the transition to a new electronic medical record system and a reduction in consulting costs associated with SOX compliance and internal audit. These costs were partially offset by an increase in employee compensation and benefits as a result of greater headcount to support compliance and bolster organizational capabilities.

Speaker 3

Corporate, general and administrative expenses decreased by approximately 6.9% compared to the 4th quarter. The decrease was primarily due to the change to our reporting methodology we announced last quarter, coupled with lower third party legal expense. Effective July 1, a portion of what was previously recorded as bad debt expense is now recorded as a revenue reserve or contra revenue. This decrease was partially offset by higher salaries, wages and benefits associated with higher wage rates and an increase in contract services. Net loss was $5,700,000 compared to net loss of $11,000,000 in the Q1 of fiscal year 2024.

Speaker 3

We reported a net loss per share of $0.04 on both the basic and diluted basis, and our weighted average share count was approximately 136,000,000 shares for the quarter on both the basic and fully diluted basis. Adjusted EBITDA calculated per our revised methodology previously described was $6,500,000 for the quarter compared to $1,300,000 in the Q1 of fiscal 2024. Our adjusted EBITDA margin was 3.2 percent for the quarter compared to 0.7% in the Q1 of fiscal year 2024. We do not add back any losses incurred in connection with our de novo centers in the calculation of adjusted EBITDA. De novo center losses are defined as net losses related to pre opening and start up ramp through the 1st 24 months of de novo operations.

Speaker 3

For the Q1, de novo losses were $4,100,000 and primarily related to our Bakersfield and Crenshaw centers that we acquired in fiscal 2024 and our Tampa and Orlando Centers in Florida. This compares to $1,600,000 of de novo losses in the Q1 of fiscal 2024 and $4,200,000 of de novo losses in the 4th quarter. Turning to our balance sheet. We ended the quarter with $39,000,000 in cash and cash equivalents, plus $46,700,000 in short term investments. We had $81,300,000 in total debt on the balance sheet, representing debt under our senior secured term loan, convertible term loan and finance leases.

Speaker 3

For the Q1, we recorded negative cash flow from operations of $7,500,000 and had $2,200,000 of capital expenditures. We repurchased approximately 801,300 shares of our common stock for an aggregate of approximately $4,800,000 under the company's share repurchase plan during the quarter. In September, our Board increased the size of our share repurchase program by an additional $2,500,000 Our first quarter performance was in line with our expectations, and thus, we are reaffirming our fiscal 2025 guidance, which we laid out last quarter. Based on the information as of today, we expect our ending census for fiscal year 2025 to be between 7,307,750 participants and member months to be in the range of 86,000 to 89,000. We are projecting total revenue in the range of $815,000,000 to $865,000,000 and adjusted EBITDA in the range of $24,000,000 to $31,000,000 Finally, we anticipate that de novo losses for fiscal 2025 will be in the $18,000,000 to $20,000,000 range.

Speaker 3

In closing, we are off to a solid start to the year, and we believe we are continuing to improve and strengthen the business every quarter. We remain focused on day to day operational execution and are mindful that our participants are at the core of our work. We believe that the comprehensive and personalized model of care PACE requires positions us to provide a level of service that is unmatched in traditional Medicare Advantage and enables us to have greater visibility and consistency in medical cost trends despite the level of frailty in the population we serve. Operator, that concludes our prepared remarks. Please open the call for questions.

Operator

Thank you. Our first question comes from Jamie Purce of Goldman Sachs. Your line is open.

Speaker 4

Hey, thank you. Good afternoon. Patrick, maybe you can start just giving us a little bit of color on what you're seeing in some of the different states with respect to enrollment. Colorado and Sacramento in particular would be interested to hear what the enrollment trends look like in those markets? How much you're still being held back by some of the enrollment delays that you discussed?

Speaker 4

And then more broadly in the rest of your markets and new states, how are the Florida markets contributing to that? Just some color on enrollment trends by state would be great.

Speaker 2

Sure, sure. Great. Thank you, Jamie. I would start with we're pleased with the momentum we're seeing in every market. When it comes to the demand for our services, we're feeling very good about the demand.

Speaker 2

As you mentioned, we have had a handful of situations in our states where we're encountering some bottlenecks as it relates to enrollment processing. Oftentimes, that's related to getting a level of care assessment complete before the enrollment can kind of move through the process. That's typically the primary issue that we deal with. As I said in the remarks, I think where we are starting to see some progress. We're working with the states and the state third party partners very closely, and we're starting to see small signs of reduced backlog and faster throughput.

Speaker 2

That's true in each of the states. So you mentioned Colorado and that is a market we've been working closely with the state and we started to see some signs of improvement. California, same situation, slightly different underlying issues, but similar impact. And then in Florida, the same and some of the maybe the channels in Florida are more linked to some of the disaster activities we've been facing down there. But I think overall, we're seeing signs of improvement.

Speaker 2

I don't think we have seen the consistency that we want to see before we can claim to have this in our rearview mirror. So there's still work to do. I think we've got to string together a couple of quarters of consistent progress in each state, and then we'll feel more like we're kind of back to a run rate. But even with the setbacks, the demand is strong, and we are still pleased with the progress that we're making from an enrollment perspective. I think that's the key message is that we're staying vigilant.

Speaker 2

And despite the delays, we're still turning around net enrollment numbers that I think meet our expectations.

Speaker 4

Okay, great. And then maybe 2 for Ben on the P and L. I'll sneak them in together here. First, just what's your assessment on where we are in the rebalancing of the risk pool across the patients that you serve? And as that progresses, how should we think about that impacting margins?

Speaker 4

And then secondly, just on the de novo losses in the 2 Florida facilities, But what's your latest perspective on just timing to profitability? How those should progress over the course of the year? And then obviously, the California ones are a little bit behind. And I'd love any color on the breakdown between the California, which I think are going to take a little bit more time given the audit situation versus the Florida ones that can probably ramp some this year? Thank you.

Speaker 3

Sure. On the first question about sort of the mix in the portfolio, I would say that's something that's going to change gradually over time. And so while we are seeing some mix shift in the right direction, You probably won't see that really begin to ripple through the income statement for a bit longer, but we are making progress on that. The changes are sort of subtle period to period. When we think about the de novo centers, I guess what I would probably say just in general is when you think about Florida, they're new, they've been up and running for a relatively short period of time.

Speaker 3

They're tracking kind of as we thought they were going to track, maybe a little bit slower than we'd originally hoped, but certainly in line with what we thought when we put together our internal budgets. So I think we feel pretty good about what's going on in Florida. I think it was a little bit encouraging that we didn't see a big disruption to our business when the hurricane rolled through Tampa. And so even though the center was relatively young, we see we've made it through there okay. So I think we're feeling pretty good about how those businesses are progressing.

Speaker 2

Yes. Jimmy, I might just punctuate. I think he said it accurately that we're probably in the gradual stages of impact on risk mix because we enrolled maybe 200 net in Q1 and on a 7,000 member book of business, plus maybe what we grew net last year. It's still early for net new growth to have a material impact on mix. I think the progress we're seeing from a medical cost perspective, I think is very much expected and a testament to the good work our clinical operation teams are doing to manage medical cost trends, to make sure our CVI are beginning to kind of take shape and have the impact that we anticipated.

Speaker 2

And the team is just doing a much better job at, I think, managing controllable utilization. And we've got a lot of different initiatives focused on that. And we're feeling really good about the impact we're having, especially in this inflationary environment that I think others are feeling.

Speaker 4

Okay, really helpful. Thank you.

Operator

Thank you. One moment for the next question. And our next question will be coming from Jared Hsieh of William Blair. Your line is open.

Speaker 5

Hey, good afternoon and thanks for taking the questions. Maybe just another one on the guidance here. Appreciate you affirm the outlook. So I'm going to give some additional color just on how we should be thinking about the assumptions for the balance of the year. And I'm thinking specifically about the low end of the census guidance, which I think would reflect very little sequential growth from Q1 over the rest of the year.

Speaker 5

And obviously, I think you typically run maybe 2% to 3% would be more normalized. So how should we think about that? Is that sort of more conservatism or anything else you call out relative to the assumptions there?

Speaker 3

I would say, look, I think we're happy with the guidance where it stands right now. When you think about the top line progression for our business, the way I tend to think about it is, the 1st and second quarters have pretty good growth. The Q3 is sort of seasonally slow growth because of some of the competitive factors we've talked about before. And the Q4 is pretty good. We expect essentially sort of linear progression over the course of the year with albeit slightly slower growth in the Q3.

Speaker 3

But I think the progression that we have this year will be hopefully more indicative of what a normal progression looks like for the business and a little bit more consistent than what we had in the prior year.

Speaker 2

Yes. And just obviously, the financial impact of those compounding member months, we'll see that pull through in the back half of the year. So the financial impact is weighted towards the end of the year.

Speaker 5

Yes. Okay. I appreciate that. And then maybe just a follow-up from the prepared remarks. Nice to hear the improvement both in employee and member engagement surveys and the satisfaction there.

Speaker 5

I was just hoping to hear a little bit more about what factors you think has been, I guess, the most impactful in driving that, whether that's on the employee side or on the member side. Obviously, there's been a lot of investments in workflows and operations and different technology tools and things like that. But just curious if there's anything that you call out specifically in terms of the improvement there?

Speaker 2

Well, I think it starts with ensuring every employee in the company has a clear view of what we're trying to accomplish and what's most important to the organization. Think I've talked about the notion of our 5 pillar performance model before where we start with people, service, quality, growth and financials. And it's in that order for a reason. We're a big believer that especially in this healthcare business, if you can attract and engage really caring people, they're going to deliver great service and great quality. And if you do those three things right, the company is going to grow heavily by word-of-mouth.

Speaker 2

And we're a big believer in just core unit economics of PACE. And so financially, you should do well also. So I think we put a lot of effort into making sure all of our employees feel heard, they feel engaged, They understand what the company's objectives are at a local level as well as enterprise level. And we do our very best to recognize employees that are going above and beyond. I think some of my remarks around the Florida centers, just the miraculous job they've done to keep the business open, serving patients, while at the same time serving their community.

Speaker 2

We have that happening every day in every center. And they just I think all of our employees just have a deep passion for the work that they do and for the impact that we can have. And so we're quick to highlight these heroic efforts. We're quick to recognize and share that across the company. And I think the organization really wants to grow and serve more people.

Speaker 2

And I think that's a big driver to keeping people engaged. And then from a participant satisfaction perspective, we use NPS as our primary sort of proxy to get at that loyalty and enthusiasm. And we just are seeing it go up every quarter. We're seeing caregiver satisfaction go up every quarter. So I think we've just got a fantastic employee base who really cares about our patients and participants and feel recognized and rewarded for their work.

Speaker 2

And it's really showing in those. But I really appreciate you asking that question because it sometimes gets lost on an earnings call, but it's at the heart of what we believe will impact our financials is a great workforce.

Speaker 5

Absolutely. That's great to hear and congrats on all the momentum.

Operator

Thank you. One moment for the next question. Our next question will be coming from Matt Gilmore of KeyBanc. Your line is open.

Speaker 6

Hey, thanks for the question. Patrick had mentioned the portfolio of clinical value initiatives and operational value initiatives with some progressing faster, some progressing slower, but it sounds like good overall progress. Can you just give us the flavors for the things that are progressing faster and having an impact versus the things that will have an impact in future periods?

Speaker 2

Yes. I think that's maybe a great one for Doctor. Pfeiffer to take. He spends his every waking moment on providing leadership to the teams that are executing on the CDIs. And maybe I'll have Ben say a little bit about the ODIs.

Speaker 7

Well, yes, thanks Patrick. And many of us spend our waking hours on this. The CDIs that are progressing faster are the ones that you would expect because they're reflected directly in some of the utilization results that Ben reviewed earlier during the prepared remarks. These are the CDIs that focus on inpatient reduction and that focus on short stay skilled nursing facility utilization, finding other better ways to provide care for people, safer ways to provide care in many cases at a lower cost. So we have a lot of work around that.

Speaker 7

They've been remarkably successful this year, in some cases surpassing expectations. Areas where we're challenged on the other side are getting all of our participants to call us for care before seeking care in an emergency room when they don't need to be in emergency room and they don't need to be admitted. So we continue to work on that, but the portfolio itself is right now very successful and we continue to look for opportunities to add to our CDIs during the year. For example, right now we're considering one around dental care, which is not something that's often in the spotlight, but every opportunity is worth considering and adding to the portfolio.

Speaker 3

Sure. And on the OBIs, I guess I would say, this is a new initiative that we undertook this year to sort of mimic the success that we had on the CVI side. And a lot of these are things that are really focused on just improving the core operations of the business. So these are things that are focused on things like improving our fleet because we actually have a large fleet of vehicles. That's an important part of our business, making sure we're optimized from a fleet perspective, focusing on food service contracts and things like that that basically cater the needs of our participants in our centers to make sure we're getting them the best quality nourishment at the most reasonable cost.

Speaker 3

And then other things around contact centers and scheduling. So there's a whole portfolio of them. They're relatively new initiatives. I think we're sort of 1 quarter into it. I think we feel like they're tracking pretty well.

Speaker 3

A lot of these things tend to be back end loaded in the back of the year as the impact becomes more significant as you flow through the back of the year. So something we're encouraged about, we're watching carefully and we think it's going to have a meaningful impact on the business.

Speaker 2

Yes. I might just add on to what Vince said. It just mentioned that Michael Scarborough, as you know, has joined the company as the President and Chief Operating Officer. And I know Michael firsthand from working both at Amerigroup and then Anthem. And there's no doubt he's a leader that's got a proven track record of scaling large cost containment initiatives as whether they relate to medical cost or they relate to operating cost.

Speaker 2

And so he's going to bring, I think, a fresh perspective and to both the CVI and the OVIs. And I think really position us well to scale very efficiently and effectively as we go forward and make sure that we've got the right mix of services at the right unit cost and delivering the right value. And so really excited about the impact that he's going to have in that regard.

Speaker 6

Great. Thanks for that. And then as a follow-up, on the EMR implementation and the opportunity to improve documentation and accurately capture risk scoring. Can you just update us where you are on that journey? And then with your business, is there an offset in terms of the activity you're doing now impacts future periods like it does in MA and just sort of what that cadence looks like?

Speaker 2

Yes. I'll let Rich start and then Ben or I will punctuate his points.

Speaker 7

Yes, absolutely. Well, we are well on our way in leveraging EPIC, leveraging our electronic health record to optimize and improve our chronic condition recapture rate. And that's the chronic conditions that year over year need to be they need to be recoded in order to ensure an appropriate risk score for Medicare. And we've seen chronic condition recapture rates improve period over period and that's in a large part because we have alerts that are being triggered within the electronic health record at the point of care for our providers asking them whether or not a condition is still accurate if it hadn't been coded in the prior year to ensure that they consider coding it again if it's appropriate. We have a number of other initiatives also to address risk adjustment appropriately.

Speaker 7

But I think is being leveraged in a very meaningful way in that regard. And there still are future opportunities for data mining, for example, for uncoated information, free text. But right now, we're already seeing a lot of the value coming out of that. And then I'll pass along to Jeff.

Speaker 2

Well, I might just add to what Rich said by saying, in addition that the importance of the chronic condition capture is not only important for revenue accuracy, it also becomes a really important input to our quality programs, to our care management programs, to our high risk kind of cost management programs. In some ways, it allows us to better segment our population and tailor our interventions to meet this. So it's Epic's really, I think, giving us a multifaceted kind of positive impact in this regard because, yes, it helps to make sure we're paid appropriately for the risk that we bear, but it's also, I think, feeding our clinical programs and helping us target populations and individuals and conditions where we can have the greatest impact on their lives. And I think that this is just one area where EPIC has the potential to bring a lot of value to the company. And again, I'll just refer back one of Michael's key objectives as he joins the company is to really look at EPYC at sort of this sort of phase that we're in and ensure we're getting the most from our investment and helping our employees operate more efficiently, help make their jobs easier from a documentation perspective, make sure that everything is being documented appropriately for our compliance audits.

Speaker 2

It really is a multifaceted system that's going to help us in a number of ways, and we're excited about the potential.

Speaker 5

Dave, anything you want to add? No, I think you guys covered it, okay? Yes.

Speaker 6

All right. Thank you.

Operator

Thank you. This does conclude today's Q and A session. And thank you for all of your questions. You may all now disconnect. Thank you for participating in today's conference call.

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Earnings Conference Call
InnovAge Q1 2025
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