Participants

Ryan Kubota; Director of Investor Relations; InnovAge Holding Corp

Patrick Blair; President, Chief Executive Officer; InnovAge Holding Corp

Benjamin Adams; Chief Financial Officer; InnovAge Holding Corp

Jamie Perse; Analyst; Goldman Sachs

Jared Haase; Analyst; William Blair

Matt Gilmore

Presentation

Operator

Good day. And thank you for standing by. Welcome to the end of first quarter, 2025 earnings conference call at this time, all participants under the snowy mode after the speakers' presentation, there'll be a question and answer session to ask a question during the session.
(Operator instructions).
I would now like to turn the conference over to your speaker for today, Ryan Kubota Director of Investor Relations. Please go ahead.

Ryan Kubota

Good afternoon and thank you all for joining the Innovage 2025 fiscal first quarter earnings call with me today is Patrick Blair CEO and Ben Adams CFO, Dr Rich Pfeiffer, Chief Medical Officer will also be joining the Q&A portion of the call today. After the market closed, we issued an earnings press release containing detailed information on our fiscal first quarter results.
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 5th 2024 and have not been updated subsequent to this call during our call, we will refer to certain non-GAAP measures.
The reconciliation of these measures to the most directly comparable GAAP measures can be found in our earnings press release posted on our website.
We'll 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.
Listeners are cautioned that all of our forward-looking statements involve certain assumptions that are inherently subject to risk 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-K 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'll open the call for questions. I will now turn the call over to our CEO Patrick Blair. Patrick.

Patrick Blair

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's support Innovage Today I will discuss several topics, financial results for our first 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 first quarter performance. Earlier today, we reported total revenues of USD205.1 million. Center level contribution margin of USD34.5 million and adjusted EBITDA of USD6.5 million for the first fiscal quarter.
When compared to the first quarter of fiscal 2024 revenues have increased by approximately 12% from USD182.5 million and adjusted EBTIDA has increased by approximately 500% from adjusted EBTIDA of USD1.3 million.
When you compare to the fourth quarter of fiscal 2024, revenues increased by approximately 3% and adjusted EBITDA increased by approximately 25%.
Census increased to approximately 7,210 which represents a quarter over quarter improvement of approximately 3%.
Building on our strong fiscal year 2024 performance, our first quarter 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 three decades of experience building scaling and managing government health care programs. Most recently, he served as the CEO of Optimate home following the acquisition of Prospero, a physician led home based medical care model that Michael cofounded and sold to United Healthcare in 2022.
In approximately three 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 is both the 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 Bent will be leaving the organization. I want to personally thank Chris as a partner and friend for her leadership. She will be missed.
Stay in a moment longer on the people who deliver on Innovage 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 first quarter of fiscal 2024 fostering a highly engaged workforce is a key priority for a company.
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 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. 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. Census increased to approximately 7,210 which represents approximately 10% year over year growth compared to the first quarter of fiscal 2024.
Our sales and marketing teams have made significant strides in their ability to identify and engage new prospective participants.
By leveraging advanced market data and analytics, they have developed a more nuanced understanding of our target customer segments and the revolving 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 the specific needs and behaviors.
Similarly, our enrollment representatives are armed with deeper insights to enable them to have more meaningful consultative conversations with prospects.
The results of these data driven strategies are evident in our Q1 performance which saw a 7% improvement in qualified lead volume compared to the same period last year. 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.
As we enter the Medicare annual enrollment period in the second quarter, 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 QC, MS 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 as such we have no updates regarding the timeline to open the Bakersfield and Downy 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 first quarter, 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 and medical expenses and to aid rebuilding profitability. With our first group of CVIS is now in place for over a year. We believe they're contributing to improvement in our center level margins. And like our CVIS is we expect OVIS to contribute incremental margin lift over time.
External provider costs PM PM 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 for seniors.
Our inpatient admissions rate decreased to 5.1% below where we ended fiscal year '24 at 5.5%. And we're pleased that our short stay nursing utilization of 1.8% continues to remain in our target.
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, recontacting 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 USD88 million on net pharmacy cost and it is growing proportionally with our census, we conducted a routine market pricing check. Last year, we're 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. 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 who because of their extensive geriatric training, manage a significant amount of routine specialty care that would otherwise be referred to specialists by other primary care providers.
Lastly, we remain committed to strong administrative cost controls that are centers and in corporate services. We continue to push ourselves to find new ways to be more efficient and productive, and we're beginning to see fixed cost leveraging translate into margin.
As we conclude the first quarter, 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.
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.

Benjamin Adams

Thank you, Patrick. Today, I will provide some highlights from our first quarter, 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 21,380 member months in the first quarter, an increase of approximately 9.4% compared to the first quarter of fiscal year, 2024 and 2.8% over the fourth quarter. Representing a strong start to fiscal year 2025 total revenues of USD205.1 million increased 12.4% compared to USD182.5 million. In the first quarter 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 fourth quarter, 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 score true up recorded in the fourth quarter. Coupled with a change to our reporting methodology addressed on the last call where effective July 1st, a portion of what was recorded as bad debt in previous years is now recorded as a revenue reserve or contra revenue.
We incurred USD107.2 million of external provider costs during the first quarter of fiscal 2025. An increase of approximately 7.9% compared to the first quarter 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 fourth quarter, external provider costs increased 4.4% 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 in patient utilization and cost per admit. Cost of care excluding depreciation and amortization was USD63.4 million. An increase of 14.7% compared to the first quarter 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.
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 amortization increased 5.4% compared to the fourth 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 USD34.5 million for the quarter compared to USD27.9 million for the first quarter of fiscal year 2024.
As a percentage of revenue center level contribution margin of 16.8% increased by approximately 1.5% compared to 15.3% in the first quarter of fiscal year, 2024.
Sales and marketing expenses of approximately USD6.5 million increased 20.7% compared to the first quarter of fiscal year 2024. Primarily due to increased head count to support growth. Sales and marketing expenses decreased slightly by approximately 70 basis points compared to the fourth quarter.
Corporate general and administrative expenses of USD27.5 million decreased 4.9% compared to the first quarter 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 head count to support compliance and bolster organizational capabilities, corporate general and administrative expenses decreased by approximately 6.9% compared to the fourth 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 1st, 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 USD5.7 million compared to net loss of USD11 million, in the first quarter of fiscal year 2024. We reported a net loss per share of USD0.04 on both a basic and diluted basis and our weighted average share count was approximately 136 million shares for the quarter on both a basic and fully diluted basis adjusted EBITDA. Calculated per hour revised methodology previously described with USD6.5 million for the quarter compared to USD1.3 million in the first quarter of fiscal 2024.
Our adjusted EBITDA margin was 3.2% for the quarter compared to 0.7% in the first quarter of fiscal year 2024.
We do not add back any losses incurred in connection with our de Novo centers and the calculation of adjusted EBITDA de Novo Center losses are defined as net losses related to preopening and start up ramp through the 1st 24 months of de Novo operations. For the first quarter, deNovo losses were USD4.1 million 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 USD1.6 million of deNovo losses in the first quarter of fiscal 2024 and USD4.2 million of deNovo losses in the fourth quarter.
Turning to our balance sheet, we ended the quarter with USD39 million in cash and cash equivalents plus USD46.7 million in short term investments.
We had USD81.3 million in total debt on the balance sheet, representing debt under our senior secured term loan, convertible term loan and finance leases for the first quarter. We recorded negative cash flow from operations of USD7.5 million and had USD2.2 million of capital expenditures.
We repurchased approximately 801,300 shares of our common stock for an aggregate of approximately USD4.8 million 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 USD2.5 million.
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 7,300 and 7,750 participants and member months to be in the range of 86,000 to 89,000.
We are projecting total revenue in the range of USD815 million to USD865 million and adjusted EBITDA in the range of USD24 million to USD31 million. Finally, we anticipate that de novo losses for fiscal 2025 will be in the 18 to USD20 million range.
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 and 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.
(Operator instructions)
Our first question comes from Jamie Perse of Goldman Sachs. Your line is open.

Question and Answer Session

Jamie Perse

Hey, thank you. Good afternoon. Patrick, maybe you can start just giving us a little bit of color on what you're seeing in, in some of the different states with respect to enrollment.
You know, Colorado and, and Sacramento in particular would be interested to hear what the enrollment trends look like in those markets.
You know, how much you're still being held back by, by some of the, the the enrollment delays that, that you discussed? And then, and then more broadly in, in the, the rest of your markets and, and new states. How, how, how are the, you know, Florida markets, you know, contributing to that, just some color on enrollment trends by state would be great.

Patrick Blair

Sure. Sure, great. Thank you, Jamie. You know, I would start with you know, we're pleased with the momentum we're seeing in every market. You know, when it comes to the to the demand for our services, we're feeling very good about the demand.
As you, as you mentioned, we have had a handful of situations in our states where we're encountering, you know, some bottlenecks as it relates to enrollment process and often times 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, 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, you know, third party partners very closely and we're starting to see, you know, small signs of reduced backlog and faster throughput.
That's true in, in each of the States. So you mentioned Colorado and you know, that 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, but, but similar impact.
And then in Florida, the, the same and some of the maybe the channels in Florida are more linked to some of the you know, disaster activities that we've been facing down there.
But I think overall we're seeing signs of improvement. I don't think we have seen the consistency that, that we want to see before we can claim to have this in our rearview mirrors.
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, the setbacks, the demand is strong and we're still pleased with the progress that, that we're making from an enrollment perspective. I think that's the key message is that we're staying vigilant and despite the delays, we're still turning around net enrollment numbers that I think meet our expectations.

Jamie Perse

Okay, great. And, and then maybe, two for Ben on the P&L I'll sneak them in together here. You first, just what's your assessment on where we are in the rebalancing of the, of the risk pool across the patients that you serve? And, and as that progresses, how, how should we think about that impacting margins?
And then secondly, just on the, the de novo losses in, in the two Florida facilities. But what's your latest perspective on just, you know, timing to profitability? You know, how, how those should, you know, pro progress over the course of the year.
And then, you know, obviously the, the California ones are a little bit behind and I'd love, you know, any color on the breakdown between, you know, the California, which, you know, I think are, are going to take a little bit more more time given the, the audit situation versus the Florida ones that can probably ramp some this year. Thank you.

Benjamin Adams

Sure. On the first question about sort of the mix in the portfolio, I would say, you know, that's something that's going to change gradually over time.
And so we are seeing some, you know, mixed shift in the right direction, you know, you probably won't see that really begin to ripple through the income statement for a bit longer.
But, you know, we are making progress on that. The changes are sort of subtle period to period. When we think about the deNovo Centers, I, I guess what I would probably say just in general is when you think about Florida, you know, they're new, they've been up and running for a relatively short period of time. 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, you know, 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 and he seemed to have made it through there, okay. So I think we're feeling pretty good about how those businesses are progressing.

Patrick Blair

You know, Jimmy, I might just punctuate now. I think he said it accurately that we, we're probably at the, in the gradual stages of impact on risk mix because you know what we, we enroll maybe 200 net in Q1 and you know, 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 the progress we're seeing from a medical cost perspective, I think it is very much perspective expected and a testament to the good work our clinical operation teams are are doing to manage medical cost trends.
You know, to, to make sure our CVIS are beginning to kind of take shape and have the impact that we anticipated.
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, we're feeling really good about the impact we're having, especially in this, this inflationary environment that I think others are feeling.

Jamie Perse

Okay, really helpful. Thank you.

Operator

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

Jared Haase

Hey, good afternoon and thanks for taking the questions. Maybe just another one on the, the guidance here. Appreciate you affirm the outlook, was hoping to get some additional color just on, you know, 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 guide and which I think would reflect very little sequential growth from Q1 over the rest of the year. And obviously, I think you typically run maybe 2 to 3% would be more normalized.
So, you know, how should we think about that? Is that sort of more conservatism or anything else you call out relative to the assumptions there?

Benjamin Adams

You know I would, 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, you know, the 1st and 2nd quarters have pretty good growth.
The third quarter is sort of seasonally slow growth because of some of the competitive factors we've talked about before and the fourth quarter is pretty good.
We expect, you know, essentially sort of a linear progression over the course of the year with albeit slightly slower growth in the third quarter.
But, you know, 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.

Patrick Blair

Yeah, I just, you know, obviously the financial impact of those compounding member months, you know, we'll, we'll see that pull through in the back half of the year. So the financial impact is a little weighted towards the end of the year.

Jared Haase

Okay. I appreciate that. And then maybe just a follow up from the prepared remarks. Nice to hear the improvement both in employee and, employee and member engagement surveys and the satisfaction there.
I was just hoping to hear a little bit more about what factors you think is in, I guess the most impactful in driving that, you know, whether that's on the employee side or on the member side.
Obviously, there's been a lot of investments and, you know, work flows and operations and different technology tools and things like that. But just curious, you know, if there's anything that you call out specifically in terms of the improvement there.

Patrick Blair

Well, you know, I think it starts with ensuring, you know, every employee in the company has a clear view of what we're trying to accomplish and, you know, what's most important to the organization. I think I've talked about the notion of our five pillar performance model before where we start with people service quality growth and financials.
And, you know, it's in that order for a reason, you know, we're, we're a big believer that especially in this health care business. If you can, you know, attract and engage really caring people, they're going to deliver great service and great quality.
And if you do those three, those three things, right? You know, the company is going to grow heavily by word of mouth.
And, you know, we were a big believer in just the core unit, economics of pace. And so financially you should, you know, you should, you should do well also. So I think we put a lot of effort into making sure all of our employees, you know, feel heard.
You know, they feel engaged, they, they understand what the company's objectives are at a local level as well as the enterprise level.
And, you know, we do our very best to recognize employees that are, 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.
You know, we have that happening every day in every center and they, they just, I think all of our employees just have a deep passion for for the work that they do and for the impact that we can have. And so we're quick to highlight, you know, these heroic efforts, we're quick to, to recognize and share that across the company.
And you know, I think that the organization really wants to grow and serve more people. And I think that's a, that's a big driver. It's keeping people engaged. And then from a participant satisfaction perspective, you know, we use NPS is 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 just got a fantastic employee base who really cares about our, our patients and participants and, you know, feel recognized and rewarded for their work and it's it's really showing in those. But I I really appreciate you asking that question because it sometimes gets lost, you know, on an earnings call. But it's at the heart of what we believe will impact our financials is a great workforce.

Jared Haase

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

Operator

Thank you one moment for the next question.
(Operator instructions)
Our next question will be coming from Matt Gilmore of KeyBank. Your line is open.

Matt Gilmore

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, can you just give us the flavors for, for the things that are progressing faster and having an impact versus the things that will have an impact in future periods?

Patrick Blair

You know, I think that's maybe a great one for Doctor Piff to, to take, he's spends his, you know, every waking moment on providing leadership to the teams that are executing them. The CVIS and maybe I'll have Ben say a little bit about the OVIS.

Well, well, yeah, thanks Patrick. And many of us spend our waking hours on this. The, the CVIS that are progressing faster are the ones that you would expect because they're reflected directly in some of the utilization results that have been reviewed earlier during the prepared remarks.
These are the CVIS that focus on inpatient reduction and that focus on on a 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, a lot of work around that. They've been remarkably successful this year in some cases, surpassing expectations of areas where we're challenged on the other side are getting all of our participants to call us for care before care in an emergency room when they don't need to be an 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 CVIS 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, but every opportunity is worth considering and adding to the portfolio.

Benjamin Adams

Sure. And on the on the OVIS I guess I would say, you know, this is a new initiative that we undertook this year to sort of mimic the success that we had on the CVIS 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 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 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 one quarter into it. I think we feel like they're tracking pretty well.
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.

Patrick Blair

Yeah, I I might just add on to what been said, it just mentioned that Michael Scarborough as you know, has joined the company as the President and Chief Operating Officer.
And you know, I know Michael firsthand from working both at Ama Group and then anthem.
And you know, there's no doubt he's a leader that's got a proven track record of, of scaling large cost containment initiatives as whether they relate to medical cost or they relate to operating cost. And so he's going to bring, I think a fresh perspective and to the to both the CVIS is and the OVIS.
And I think really position us well to, to scale very efficiently and effectively as we go forward and make sure that, you know, 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.

Matt Gilmore

Great. Thanks. 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 impact future periods like it does in ma and just sort of what that cadence looks like.

Patrick Blair

You know, I'm a rich start and then either be or I'll punctuate his, his points.

Yeah, absolutely. Well, we are well on our way in leveraging epic leveraging our electronic health record. To optimize and improve our chronic condition recapturing. That's the chronic conditions that year over year need to be, they need to be recoated in order to ensure an appropriate risk score for Medicare.
And we've seen chronic condition recapture improved period over period and, 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.
But epic is being leveraged in a very meaningful way in that regard. And there still are future opportunities for data mining, for example, for uncoded 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 that.

Patrick Blair

Well, I might just add to what rich said by saying, you know, 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, it's, you know, Epic is 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 you know, populations and individuals and conditions where we can have the greatest impact, you know, on their lives.
And you know, I think that this is just one area where Epic has the potential to bring a lot of value to the company. And, you know, again, I'll just refer back, you know, one of Michael's key objectives is as he joins, the company is to really look at Epic at sort of this sort of phase that we're in and ensure we're getting the most from our investment and, you know, 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. It really is a multi faceted system that's going to help us in a number of ways and we're excited about the potential anything you want to add. No, I think you guys covered.

Benjamin Adams

Okay.
All right. Thank you.

Operator

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