Assure Holdings Corp.

Q3 2021 Earnings Conference Call

11/15/2021

spk01: Good day and welcome to the Assure Holdings Third Quarter 2021 Earnings Conference Call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your touchtone phone. To withdraw your question, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to Scott Kozak. Please go ahead.
spk00: Hello, everyone. Thank you for participating in today's conference call to discuss Assure Holdings Financial Results for the third quarter ended September 30th, 2021. On the call today are Executive Chairman and CEO John Follinger and CFO John Price. After the market closed this afternoon, the company issued a press release announcing its results for the third quarter of 2021. The release and investor presentation are available in the investor section of our website. Before we begin to prepare remarks, I would like to remind you that some of the statements made will be forward-looking and are made under the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those projected or implied due to a variety of factors. We refer you to Assure's recent filings with the SEC, including our quarterly report on Form 10-Q for the third quarter, for a more detailed discussion of the risks that could impact the company's future operating results and financial condition. Also in today's call, management will reference certain non-GAAP financial measures, which we believe provide useful information for investors. For reconciliation of these non-GAAP measures, please consult the most recently filed 8K associated with the filing of the earnings release for the three months ended September 30th, 2021, which is available on the SEC website. In addition, please note that our share reports in U.S. dollars and all amounts to be expressed today are in U.S. currency. Finally, I would like to remind everyone that this call will be recorded and made available for replay via link on the company's website. Now, I would like to turn the call over to the Executive Chairman and CEO of Assure Holdings, John Porringer. John?
spk04: Thank you, Scott, and hello, everyone. For anyone who dialed in with a call by telephone, you may want to join our webcast or download our third quarter 2021 earnings presentation on Assure's investor relations site. found at ir.assureneuromonitoring.com. Again, that is ir.assureneuromonitoring.com. This will allow you to see the slides that I'm referencing. Today, we'll provide an update on our drivers for success and discuss our vision for sustained rapid growth over the next several years. I'll start with with an update on our third quarter results. This was a very active quarter for sure. We secured an agreement with Premier, the country's second largest group purchasing organization. And through that, we became the sole contracted provider of interoperative neuromodeling services for its network of 4,400 hospitals. Additionally, We ramped our high-margin remote neurology services platform. We organically expanded into two new states, and we completed our uplisting onto NASDAQ. In terms of financial flexibility, Assure completed a small surgical private placement transaction, which we announced today, raising just enough funds from institutional investors as well as support from our board and management team to fuel our most promising growth initiatives in 2022 while at the same time minimizing dilution. Key financial metrics in the third quarter were sharply positive, including a notable increase in revenue to $8.5 million. We showed a net profit of $100,000. And adjusted EBITDA rose to $1.2 million. Our adjusted EBITDA improvement really stands out as it occurred during a quarter in which we had a heavy focus on century integration and building out infrastructure. Going forward, we will continue to focus on minimizing cash burn and generating positive EBITDA while striving to deliver rapid growth. Assure reiterates our guidance to perform 17,000 managed procedures in 2021. In fact, we expect to exceed 17,000 and deliver a record fourth quarter in terms of managed procedures. All of this happening despite the lingering impact of COVID-19. I also want to outline that we are guiding toward 25,000 managed procedures in 2022. And I want to be clear. but this target of 25,000 managed procedures excludes any growth generated from the premier relationship.
spk11: It also excludes any growth coming out of further M&A.
spk04: Managed procedure growth from premier or M&A activity would add to this target of 25,000 managed procedures that we are forecasting for 2022. We will talk much more about why Assure is growing so rapidly, while a significant majority of our industry peers are either stagnant or, in many cases, shrinking. Next, I'm going to jump onto slide four, and I'll talk about how Assure is pivoting away from our historical model. Assure's bread and butter has long been providing a highly trained, board-certified technologist in the operating room and pairing that technologist with a contractor providing remote neurology services. The one-to-one pairing and this one-to-one model we've established matched an Assure technologist with a surgeon in the operating room, which is illustrated in blue in the diagram on the left. Assure technologists typically perform approximately 200 surgeries per year. This repeatable revenue structure has served as the basis for our success today. Remote neurology services, which is featured in orange on the right side of the slide, is a one-to-many model, and as a result, has a different financial profile. Physicians provide remote neurology services from an off-site location, each one having the ability to handle 2,500 patients or more procedures annually. Early this year, Assure began transitioning surgeries from remote neurology contractors to Assure utilized physicians. To summarize this pivot in a nutshell, Assure technologists have created a baseline for our business. Assure neurologists are simply consuming the volume created by this relationship. At this point, It's simply a matter of scheduling and delivering because the patient volume is already established. Our focus in Q4 in 2022 is on controlling the quality of our neurology service and driving that cost of delivery lower. As we move on to slide five, you see one remote neurology professional working from an offsite location. and you see them reviewing multiple screens and managing multiple surgeries simultaneously. While we continue to outsource this function to trusted partners in certain geographies as we ramp, Assure has begun delivering this service ourselves in our largest markets, including Texas and Colorado. This accomplishes a number of key positives and objectives for the company. Firstly, we'll be able to oversee quality of service for providing remote neurology services. This commitment to quality supports our efforts to sign newly network agreements and facility-wide agreements with hospitals. Secondly, by bringing the neurologist function in-house, we will be able to significantly reduce cost of delivery, allowing the company to improve our profitability on every case we perform going forward. Our objective is to cut the cost of delivery for remote neurology services by over 50% going forward. Additional scale will serve as a catalyst for margin improvement in the future. Thirdly, regarding top-line benefits, for most of the cases we perform, remote neurology services represents the creation of a new revenue stream. Fourthly, Our integrated offering will add significant value for each new market and every new M&A opportunity we pursue going forward. Fifthly and finally, providing remote neurology services for IOM opens the door for new opportunities in adjacent markets where similar remote neurology services are utilized. I want to be clear that our shift to providing remote neurology is simple and straightforward. We've already built that platform. We already have the patient volume. We are simply replacing contractors with a sure, controlled physicians to absorb the volume. The result will be higher margins, a new revenue stream, and turning cash over much more quickly. On slide six, we take a closer look at the trajectory of our remote neurology business. I want to emphasize, this is not something we are planning. This is something we are doing. In September, the two Assure readers working on our team recorded a record 330 remote neurology procedures, with a third physician reader joining the organization in mid-November, and a fourth starting at the end of November the number of cases we are performing will only continue to accelerate. We are guiding to a range of 1,000 to 1,200 remote neurology procedures in the fourth quarter of 2021. I want to again amplify that we consider Assure's telehealth neurology offering to be one of the company's most important growth opportunities. On slide seven, Focused my comments on the platform we have spent the last two years building and what it means for future growth and development. Assure's platform is summarized in the center of the circle in blue and includes the following. Firstly, maintaining exceptional clinical operations. Automating our revenue cycle management function and collecting cash faster. Boosting managed care. which refers to signing more in-network agreements, minimizing the bottlenecks in business operations, particularly around onboarding and credentialing. We instituted an ongoing training and development program for clinical staff, and we've successfully executed on an M&A strategy in a highly fragmented market that has led to three accretive transactions over the last two years. This platform was built with the intent of having these functional areas support interoperative neuromonitoring. And you see those verticals on the left, spine, neurosurgery, vascular, ENT, and orthopedic. And indeed, it was done, and I believe we've done a good job in supporting those verticals. As we transition to becoming a provider of remote neurology services, We expect that our expertise in Neurooperative Neuromonitoring will assist us to enter adjacent markets in which Assure Neurologists can also provide patient services. We are planning and hoping to be able to provide services in such new verticals as EEG, epilepsy, sleep study and stroke by leveraging our existing key competencies which we have focused on building over the past 24 months. Next, we'll jump on to slide eight and look at our geographic footprint. The 12 states in green represent our current operations. CERN has expanded into four new states in 2021 alone. Missouri and Kansas via the acquisition of Century Neuromonitoring, Nebraska, and most recently, Nevada through organic growth. We just bought one in Nevada for a second. We signed an agreement to provide interoperative neuromodeling services for eight hospitals in the state. And we are currently ramping those procedures up and hope to be able to get to a run rate of almost 2,000 procedures annually. In addition, we see further expansion to add at least one more state by the end of 2021. Our expansion has been supported by the build-out of our distributor channel. Partnerships with medical device distributors have helped Assure open new markets in Nevada and Nebraska and extended our reach in Texas just within the last few months. The other catalyst for Assure's expansion is the winning of a system-wide hospital facility contract. I'm pleased to report a very big win on that front, which we believe would be a game changer for Assure. Specifically on slide nine, I am referring to the system-wide contract we secured with Premier, the second largest group purchasing organization, or GPO, in the United States. Over the life of the three-year agreement, Assure will serve as the sole contracted supplier of interoperable neuromonitoring services to Premier's alliance of approximately 4,400 U.S. hospitals and 225,000 other providers. We were honored to be chosen by Premier following an RFP process that included our largest competitors in the industry. Our selection provides Assure with a hunting license to pursue other opportunities within this network. It also underscores Premier's recognition that Assure has established a reputation for delivering high quality service at a competitive price and has the capacity to scale and support coverage for the second largest GPO in the US. This agreement is consistent with our strategy to build a platform that enables hospitals and medical facilities to outsource interoperative neuromodeling services for thousands of cases annually. We'll be devoting resources and significant resources to make sure that Assure fully harnesses this substantial premier opportunity. Next on slide 10, I'm gonna note another key milestone. Assure began trading on NASDAQ in September. Assure is the first interoperative neuromonitoring focused company trading on a major US exchange. We believe that Assure has reached the level of maturity necessary to take advantage of the accelerating benefits and opportunities that a NASDAQ listing can provide, including enhancing Assure's visibility, industry profile, and market liquidity. Before handing off the call, I want to highlight a few additional updates on our 2021 corporate objectives listed in front of you on slide 11. We've already talked quite a bit about how Assure is expanding scale, so I will just quickly add that we anticipate a buyer's market for high-quality, interoperative, and monitoring assets in 2022. as many of our competitors continue to struggle with network billing, weak collections, the continued impact of COVID-19, and the general inability to raise the capital sufficient to capitalize their businesses. To those points, we now have approximately 30% of our total commercial insurance volume in contractual rates, either directly with payers or indirectly through third-party administrators. and anticipate expanding this to more than 50% by the end of 2022. We recently signed an agreement with Multiplan that we believe has significant potential for Assure. The Multiplan agreement will provide network access to health plan members who access Multiplan's national primary and complementary networks. More than one million healthcare providers participate in Multiplan's network and 60 million health plan members have access to the company's services. Sher believes the Multiplan agreement will improve network utilization for the company's interoperative neuromodern claims and attract a substantially higher proportion of eligible claims to our contracted rates. Another catalyst on the horizon that could significantly change our landscape for in-network agreements is the No Surprises Act federal legislation. This bill allows for the first time companies like ours to arbitrate at a batch level cases where we are not being paid. To date, our only remedies for nonpayment have been litigation or going to state regulators. Going forward, we believe that the speed resolution process will help us get paid on as many claims as possible, and also force many insurance companies to strike fair in-network agreements with companies like ourselves. Before turning the call over to John Price, I want to reiterate that I believe this is the best position that Assure has been in. From a capitalization perspective, from a platform perspective, and a business catalyst perspective, the opportunities ahead of us with Premier remote neurology services, organic growth in the new states, and M&A will be keeping us very busy over the next six to 12 months and beyond. Now I'll turn the meeting over to Assure's CFO, John Price, to go through the company's financials. John.
spk03: Thank you, John. Hello, everyone, and thank you for joining us today. I will start by calling out highlights from Assure's third quarter 2021 financial results. Ensure experience, strong revenue, and improved profitability in the quarter as illustrated on slide 12. Managed case volumes increased as we anticipated related to the acquisition of Century, which we completed on April 30th, transitioning cases from remote neurology contractor to Assure's readers, seasonality, which typically improves over the course of the year as patients schedule surgical procedures to align with meeting their health insurance deductibles. Our revenue accrual rate was stable overall. Digging a bit deeper, that stability reflects some revenue per case compression on a technical bill balanced to get some improvement on a remote neurology professional rate. We continue to see improvement in collections. As a greater proportion of our commercial insurance volume becomes set by contracted in-network rates with payors, we expect to add more stability in revenue. From Q2 to Q3, our managed case volume increased 17%. On a year-over-year basis, our Q3 2021 managed cases increased by 86% from 2,685 during the third quarter of 2020. Adjusted EBITDA was a profit of approximately $1.2 million compared to a loss of $0.7 million in the second quarter of 2021. The positive EBITDA result and transition to profitability we achieved in the third quarter reflected faster improvement driven primarily by delivering on remote neurology services. On a sequential basis, our operating expenses decreased to 3.7 million compared to 4.5 million. The company's second quarter operating expenses included several one-time costs, such as legal expenses to support our NASDAQ application, startup costs associated with our remote neurology business, IT investments to support data analytics initiatives, infrastructure costs to support anticipated growth, and one-time stock-based compensation. On slide 13, we'll review Assure's balance sheet and cash flow. Our cash collections in the third quarter were impacted by an uncharacteristically slow July that we believe was an industry-wide issue. Since July, our monthly collections have returned to normalized levels. Looking forward, we anticipate collections to improve in the fourth quarter and into 2022, driven by our investments in automation and the benefit of in-network contracting and our remote neurology billing. We ended the quarter with $0.9 million in cash compared to $4.4 million at the end of 2020. However, our cash position is substantially different today. The company strengthened its balance sheet with the closing of an institutional investor-led private placement of approximately $5 million, providing additional financial flexibility, liquidity, and capital to execute our 2022 initiatives. The company's accounts receivable increased to $22.7 million during the third quarter. This was primarily due to the 86% increase in year-over-year managed case volume, including additional volume from acquisitions and several million dollars of accounts receivable from our remote neurology business. Further, there was no meaningful adjustment to our provision for bad debt. From a financial strength and liquidity perspective, I think it is useful to highlight our nearly 10 to 1 current ratio as of September 30th, which has been further strengthened with a closing of approximately $5 million of additional financing. Next, I want to highlight our financial goals of tightly managing expenses while continuing to improve cash collections. During Q3, we reduced our cost profile by reducing operating expenses 18% sequentially, which we anticipate will continue during the fourth quarter of 2021. Taking a step back assures overall financial strength has greatly improved. and our current capitalization is the best we've ever had at Assure. Before concluding, I want to note that John Farlinger and I have spoken with many of our investors in recent months. During these discussions, we have heard a desire to better streamline how Assure presents to business investors to help facilitate a better understanding of our volume, mix, and business catalysts. We are working to realign how we present the business model to make it more digestible. We anticipate presenting the business performance for fiscal 21 and the outlook for 22 in a more streamlined fashion during our fourth quarter call.
spk11: And with that, I'll turn the call back over to our operator for Q&A.
spk01: Thank you. We will now begin the question and answer session. To ask a question, you may press star then one on your touch-tone phone. If you're using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star then 2. At this time, we will pause momentarily to assemble our roster. Our first question comes from Jim Sidoti with Sidoti and Company. Please go ahead.
spk09: Good afternoon. Thanks for taking the questions. I cover a couple of different companies that are involved in spinal procedures. Almost all the other ones have had to lower guidance in 2021 because of the recent surge in the Delta variant. To what extent is the Delta variant impacting your business?
spk11: Hey, Jim. Listen, great question.
spk04: We're still seeing lingering effects of COVID. This morning we did a quick assessment. As you probably know, Colorado has went through another surge. We're seeing a slowdown in some cases in parts of western Colorado. There's still a lingering impact in Texas and to a lesser degree in Louisiana. But for the most part, it's kind of just a lingering gnawing at the business rather than a complete, you know, slowing down of the business like we experienced in early 2020. And, you know, we've given guidance earlier that we felt we would be at 17,000 procedures. You know, we would have been higher than that, save and except for the impact of COVID. But, you know, we are expecting a record fourth quarter in procedures, and obviously we're halfway through the quarter, so we have some perspective on how we think it's going to end up. The other thing is, you know, surgeons are very creative. They went through this exercise in April, May, and June of 2020 where their business models got shut down. They've been very adaptable and are moving, you know, in certain markets, more and more business to ASCs or ambulatory surgery centers in the event that hospitals are slowed down by COVID. And that's really not forced us to be at the mercy of what could have been probably having a larger impact on our business in Q3 and Q4.
spk09: Yeah, I think that answered it. As you look into the fourth quarter, typically the fourth quarter is a higher quarter in terms of procedure volumes. What does that mean for you, though, in terms of revenue mix? Do you think you'll have more of a commercial business in the fourth quarter or more of a government-insured business, and what is the impact on margins?
spk04: Great question. It's funny. We just went through – we're going through our planning exercise right now for 2022 – And we just went through this analysis. I'm gonna let our CFO, John Price, respond to you with the assessment of mix and the seasonality impact on our business.
spk03: And Jim, based on some of our prior discussions we've had with you, one, we really see the mix change over the course of the year. The first part of the year, it's really focused more from a government perspective. And as we get further into Q3, and we've seen this in September, the mix really starts to accelerate and change, basically moving to the high 50s as we wrap up the year from a commercial payer perspective, with the residual piece being government-oriented. And the other part of the two, we also start to see that hockey stick in just pure case volume as well in Q4.
spk04: So, Jim, just to summarize, we kind of go through a reset every year. We go into Q1, the next shifts, higher propensity of government cases, probably in the high 50s, hence lower margins. And then we kind of sequentially progress, higher volume, higher margins as it shifts to Q4, where it's the complete opposite. You're almost at 60% in terms of commercial cases. Dominance because of the race to get elective procedures done in Q4. And we've seen that pretty much every year over the last couple of years.
spk09: And when you look at the business today, what do you think the primary growth drivers are? Because you can expand geographically. You can add more technicians. You can add more neurologists. You know, there's M&A opportunities. You know, which one gets the highest priority, which initiative?
spk04: Well, short-term, you know, we're very focused on really two or three initiatives. Number one is ramping up our remote neurology services, and we're demonstrating what we're doing in Q3. That will have a significant impact on our business, both our existing business, new states, and M&A opportunities, and it will drive more margin. And the focus there is really to deliver higher quality of service with a lower cost of delivery, hence making all parts of our business more valuable. And, you know, we've been pretty transparent. Our plans were to have four full-time neurologists on board by the end of this fiscal year. They're hired. We're ramping. And then as we go into next year, we'll continue that progression and cadence of moving more business onto our platform. Secondly, we've got to be able to ramp up on the corporate development side to support the premier opportunity. It's a significant milestone for us in winning this contract, and we don't want to misstep here. So we're ramping, we're planning now. and that is all happening real time. The third thing is really just execution, opening up probably at least one more state before the end of the year, and then just delivering on the business we've got in front of us. To your point about M&A, we'll turn our attention to M&A probably in Q1. We're looking, we're always active, we're always looking for opportunities. There are buying opportunities out there, but right now for the balance of the year, it's simply execution of remote neurology delivering on the premier contract, ramping up our corp dev function, and opening up at least one more state.
spk09: And when you do turn to M&A, do you think there'll be more deals like Century out there, or is there possibly another type of target that you'd be looking at? Great question.
spk04: We're active now. Our plan is to always be active, and... We believe there will be buying opportunities. They're buying opportunities now. It's just with a small team, we're taxed delivering on the business in front of us. But going into Q1, you know, we're in a unique position. We can offer people a NASDAQ currency. And that currency was critical to getting the century deal done and offering stock back to the founders where they didn't get the price they wanted up front. but they probably will get it over the medium term with the appreciation of the value of our currency. I think going into key one, as you look at our trajectory next year, we laid out kind of a cadence of getting to 25,000 managed procedures. We'd like to augment that as we did this year with additional M&A. But like this past year, we want to be patient and look for buying opportunities.
spk09: Now, this morning you announced you raised some money to a private placement. Why now?
spk04: Well, we needed capital to expand our remote neurology service. The premier opportunity needs bodies. We need a corp dev team. We want to be able to get access to data. There are a host of things that we need now to integrate with Premier. And then we're hiring more bodies. We've announced Nevada. We need to hire more people there, and we're hoping to have another state. And I think we just wanted to make sure that we were capitalized to take advantage of the growth opportunities in front of us right now. And we were conscious of dilution, the price of our stock, And we didn't want to raise a lot of money. We wanted to raise just enough money to deliver and execute the business in front of us.
spk09: All right, a couple more. You mentioned the No Surprises Act in your script. What do you think the impact of that act will be on your business and your ability to sign more in-network agreements? I think it's going to be a...
spk04: significant catalyst for driving behavior. We see it. I know Paul Webster's listening on the call. I believe he's on it. Paul's working pretty much extensively on positioning us to be able to arbitrate cases starting in the first quarter of 22. But no surprise that kicks in on January 1. Why this is important for companies like ours is that today, if we're not paid by a major insurer, the only option we've got available is to litigate or to go to the state regulators. Neither of those usually work out. In the new order with the No Surprises Act, in states where there is no state legislation, we can now arbitrate and batch claims in arbitration. We just went through our first exercise. of batching, not batching, but arbitrating. The results have worked out positively for us. Where this goes is if you're able to successfully arbitrate against the insurance companies, and we believe we can, that then forces a discussion around an in-network contracting rate. And we believe, ultimately, this will be a catalyst for driving more of our business into in-network rates. Right now, we've kind of held off wanting to go in-network and taking rates that were probably lower than we thought we had to take in the short term because we're kind of doubling down on our ability to arbitrate and to get successful results in Q1 and then push for in-network rates as we start to win some of these arbitration cases. And the arbitration numbers are predicated based upon a formula which is typically an average of average collections by payors on a state level and federally.
spk09: All right. And then last one for me on the balance sheet. Your accounts are up, I think, about $4 million in the quarter. Is that just related to the the rapid increase in procedures, or is there anything else that's driving that, and are you confident you'll be able to collect that revenue?
spk04: John, do you want to answer that? You just went through a fairly detailed analysis of all the AR.
spk03: Yeah, we talked to this a bit on the script as well. So, one, it's really driven by the increase in volume, and the balance was really in line with our expectations. When you take a look at the volume on a year-over-year basis, we've grown volume 86%, so we were expecting some growth in accounts receivable. The other aspect of this, just on a quarter-to-quarter sequential basis, a good portion of the accounts receivable, I'd say in excess of $2 million, is really related to our remote neurology services and some of the additional volume that we had this quarter in comparison to Q2. And just the last thing, Jim, to note is that, again, we did a deep dive on our allowance for doubtful accounts, and during the quarter we had no additional meaningful write-offs, which is critical for us. And really I think it's showing the benefit of us being in-network.
spk09: And do you expect accounts to pick up again in the fourth quarter and then maybe start to work itself down in Q1?
spk03: Yeah, I would expect Q4 to be up again. Again, we're expecting volumes to increase quite significantly in Q4. We're going to continue to move more volume onto our remote neurology platform. And that obviously is going to continue to drive higher billing because it's at a higher rate on a professional basis.
spk04: But then we'll see kind of a drop in the AR numbers going into Q1 and Q2 as volumes taper off. The other thing is we are speeding up the rate at which cash is collected and the files which were being paid. It's just we've had an 86% lift in volume. You have to expect an increase in the size of the AR.
spk09: And do you think with the money you raised through the private placement, you'll be able to fund this rapid rise in procedure growth? And are there any steps you can do now to manage your cash so you don't have to go back right away to raise more?
spk11: Well, as the numbers are kind of highlighting, we've
spk04: We've been pretty focused on running leader. And during Q3, we reduced our workforce by over 8% with the intent of understanding that our business model shifted. We're moving from an interoperative neuromodern-focused business into remote neurology. So you're going to see a migration of spending from the traditional core business into remote neurology. Our focus has really been, we've been saying it every quarter, it's all about automation. It's all about data. It's all about analytics. And our planning now is around being at 75,000 procedures and building a platform that allows us to scale without a linear increase in staff. And right now, the biggest need for spending is really around bodies, technologies to deliver more interoperative neuromonitoring business, So additional neurologists that we expect to probably hire in 2022 and then additional staff to support growth. But I think right now we're with this infusion of capital work. And as you can see, we were even a positive in the quarter. So the spending right now will be investment spending around, again, getting to a higher level of volume, which has been our goal all the way along in 2021.
spk10: Jim, any other questions? Sorry. I think that's it for me. Thank you. All right.
spk01: Our next question comes from Bill Sutherland with the Benchmark Company. Please go ahead.
spk12: Thank you. Congrats on all the progress. I wanted to talk a little bit about the premier relationship. Are the member health systems that you're going to be going to, currently using another third party for their monitoring?
spk11: Yeah, a number of them are.
spk04: That third party, their contract ended on October 31st. So, Bill, we'll be going through, we're really going through a process now of learning, gathering data, starting discussions with some hospitals who've already reached out. And then we're getting, we've spent the last two weeks getting contractual data on the pricing that that competitor has been using. And now we're going to start an outreach program, starting with various hospitals.
spk12: Did you, so this was, I didn't realize this was a sole contract prior to you winning yours. So did they, to what degree did they have that entire contract? you know, universe of members, of premier members.
spk04: Well, we don't have data yet on the penetration numbers they had, but they had an exclusive relationship, we believe, as well, over a three-year period.
spk12: So is it your guess that the rest of it would be more or less Greenfield, or is it, I mean, or is it safe to assume that even if they didn't use that vendor, they've got some relationship in place?
spk11: Yeah, I think it's safe to assume that. Yeah.
spk12: So you're going to bring remote neurology to these deals as well, aren't you?
spk04: We'll be augmenting the interoperative neuromodular expansion with remote neurology. You know, going back to the slide in the presentation, it's now supporting all of our interoperative neuromodular growth, and we have plans to expand that. that vertical in 2022.
spk12: Is the limitation neurologists or just the pace of being able to, you know, the contracting process?
spk04: As it relates to Premier, limitation right now is just, you know, we need people. We're building a corp dev team to support this opportunity. which we believe is significant. We know the prior competitor had meaningful success in delivering on the contract with Previer. There's five territories. We're now ramping up and trying to gather data. We're into our first month in the deal. It started November 1. So we're still low on the learning curve here, but we're moving quickly. Part of the funding that we just brought in was really to help ramp that up.
spk12: Because you're going to need to geographically expand, aren't you?
spk04: We are. And they have capabilities across the entire United States. Now, obviously, we're in 12 states now. There will be some overlap. And we've already started some of the outreach in states where we currently operate in. But, again, we need the capital to really start to aggressively to go after this business.
spk12: And is your push with remote neurology changing your M&A focus in terms of what you want to emphasize?
spk11: Good question.
spk04: I think as it relates to core business and core interoperative neuromonitoring, does it change our valuation? Well, it potentially makes those acquisitions more valuable to us. Right. And because hopefully it doesn't change to a pricing decision on our part. But, well, for example, the Sentry transaction, if we were providing remote neurology at that point in time we acquired Sentry, it would have affected our valuation of the business, no doubt. So it's only made that acquisition more valuable in hindsight because they were using third parties, they were paying a premium, and now by bringing it in-house, in our own proprietary model, where we are able to preserve and keep margin, it just makes that book of business more valuable to us.
spk12: Sure. Makes sense. And you'd be looking, I suppose, at M&A as a way to speed up the pace of it getting into adjacent? Yeah.
spk04: Yeah. I don't want to really go down that path yet. I think from our standpoint, in the medium term, we're focused on ramping up. And we have a couple of tactical directions we're taking, both focused on improving quality of service and lowering cost of delivery. And frankly, as we bring it in-house, we're looking at a 35% to 40% reduction out of the gate through our own delivery team and through negotiating contracts with existing vendors. So again, we expect margins to improve as we scale that business and as we continue to drive our interoperative neuromondering business. Because interoperative neuromondering is driving the remote neurology platform and generating more margin.
spk12: Right. And then last, I did also, as the prior analyst noticed, your very impressive ability to do your case, your managed procedure target given the surge. I was thinking, what portion of your cases are in ASCs or short-stay surgical facilities?
spk11: Well, it varies a little bit based upon the level of COVID.
spk04: Ballpark, probably 30% are in ASCs right now. However, last year it shifted as the hospitals were faced with issues the surgeons migrated more of their business to ASCs.
spk12: But obviously, that's a pretty good portion of your business in the ASC. It is. Yeah, so that helped. Okay. Exciting times. Thanks, guys. Appreciate it. Thanks, Bill.
spk10: Thank you, Bill.
spk01: Our next question comes from David. with Perspective Capital Management. Please go ahead.
spk02: Hi, John. Hi, Scott and John again. Congratulations on all the great stuff that's going on there. As you look at a year from now and, you know, assuming things go as you hope they will, breaking IONM cases away from neurology cases, What kind of profit per case? And again, I understand there's different states and there's different types of surgeries. Is there any way for an outsider to model what kind of profit on a per case basis? We or you think you should have perhaps a year from now or two years from now, whatever you think is the right time frame.
spk03: John, do you want to respond to that? Yeah, David. It's been really a primary focus since I joined the company, and as we discussed on the script there, we've met with a number of investors, and we're trying to streamline the way that we're presenting the business. I would say for Q4 and taking a look out for 2022, We'll be in a better position to give you a bit of an outlook. Historically, we really haven't discussed our margins or rates on a per-case basis. Historically, and as we kind of roll out this new model in the way we're presenting the business, I'm hoping to give a little more transparency to help you with your own independent models.
spk02: Thanks, John. Yeah, it would be very helpful because you do forecast a total case number next year, albeit without premier or acquisitions of 25,000 cases. But that's hard to translate into some kind of potential profit number or even a revenue number without at least some guidance towards the modeling.
spk03: Yeah, David, I completely understand. And it's, like I said, I'm anticipating that we'll have disclosure on those various elements that's going to allow you to go ahead and kind of put your arm around it. Yeah, for year-end.
spk02: All right, sir. Thank you very much to all of you.
spk04: Yeah. David, just give us – we'll have something back in the next quarter. It's kind of a moving target. You know, you can probably take our existing numbers – extrapolate that over 25,000 procedures. But frankly, the upside here, the significant upside in the remote neurology side and getting additional margin off of that business going forward, even an extra $250 a procedure has a significant impact on profitability next year. Separately, we're going to do an assessment probably as early as January, February around other M&A targets and Again, it's not in that $25,000, but I'm of the belief it will have an impact on growth next year, as it did this year. We think there are going to be buying opportunities again, and we want to be selective, and we want to be active in the early part of next year.
spk02: I look forward to that. One last quick question. In the financing that just closed in the – press release, you mentioned that management and the board would be buying up to another $700,000 of the securities. When would you expect that deal, that additional might even consider it a kind of a green shoe for the management and board? When do you expect that to close?
spk04: Over the next couple of days. Management and the board wanted the market to be able to react to the funding and the earnings before pricing all around per our corporate guidelines around insiders. And we felt the right thing to do was to allow the market to react, see the results, and then we would participate after that in the public domain.
spk02: I appreciate that. Thank you very much. Thanks, David.
spk01: Our next question comes from Nate Naherny with Think Equity. Please go ahead.
spk07: Yes, thank you for taking my question. Congratulations on the quarter, guys. Can you maybe expand upon the multi-plan agreement and how that impacts the acceleration of your in-network revenue stream?
spk04: Yeah, happy to. You know, Paul, are you on the line right now? Paul Webster?
spk08: Yes, can you hear me?
spk04: Yeah, why don't you just walk Nate through the opportunity that's developed through Multiplan and the effect and the impact it's having on our business?
spk08: Sure. So, Nate, we had an agreement with Multiplan previously, which was a different kind of structured plan. It was a discount arrangement. This is a true network, PPO network agreement. And we've included all of our provider entities across all of our states in this new agreement. And a couple of things. We focused on pricing this agreement so that it would be more attractive to payers and participation. The initial structure was based on a percent of billed charges. This one is various multiples of the Medicare fee schedule. And so with that pricing arrangement, it was Multiplan's belief and it is our belief that there will be a higher participation in processing claims through those discount arrangements, thereby increasing our in-network participation.
spk04: And we're seeing a, Paul, you can share, we're seeing a material impact of that plan already. by bringing it onto our platform.
spk08: Right. And yeah, to provide some context for the effectiveness of this contract so far, the effective date of the agreement was August 15th. That is the effective date of dates of service. So obviously there's some timing where the claim has to go through adjudication and payment and so forth. So we start seeing the impact of the agreement in late September, early October. Now that we're into mid-November, we can see a fairly material impact. I would hesitate to give you any numbers at this point only because it's early in the process and the communication of Multiplan out to their partners and clients is still underway. And so we have, you know, what we've seen so far is encouraging. but it's by no means where we expect we'll be. We think it will improve over time.
spk06: Got it. That makes sense. Yes.
spk01: This concludes our question and answer session. I would like to turn the conference back over to John Farlinger for any closing remarks.
spk04: Thank you. On behalf of the Assure team, we'd like to thank everyone for listening to today's call. Before concluding, I'd like to add a few last comments. I want to summarize what we believe are Assure's greatest opportunities and areas of focus in the near term. They're as follows. Again, just reiterating, number one, expanding our remote neurology services platform. Two, taking full advantage of our position as the sole contracted provider of interoperative neuromonitoring services for the Premier Network. Three, organic growth that extends our reach within existing states and helps us expand into new states. Four, opportunistic M&A that leverages our public company NASDAQ currency and advantage that none of our interoperative neuromonitoring-focused competitors can duplicate. Fifthly, will continue to focus on using data, analytics, and automation to strengthen revenue cycle management and to facilitate the signing of new in-network agreements. With that, revenue cycle management and managed care, or essentially the contracting with in-network providers, will continue to be a focus for us going into early 2022. With that, I'm going to conclude. We thank all of you for your participation today. We look forward to speaking to you again on our fourth quarter earnings call for 2022. Thank you.
spk01: The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.
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