Assure Holdings Corp.

Good morning, everyone, and welcome to the Assure Holdings fourth quarter and full year 2022 earnings call. At this time, all participants are in a listen-only mode. There will be an opportunity to ask questions after the presentation. If you would like to ask a question, please press star one on your telephone keypad. Please note this call may be recorded. It is now my pleasure to turn today's program over to Brett Mass, Investor Relations Manager. Please go ahead.

Hello, everyone. Thank you for participating in today's conference call to discuss Assured Holdings financial results for the fourth quarter and full year 2022. On the call today are Executive Chairman and CEO John Farlinger and CFO John Price. Pre-market this morning, the company issued a press release announcing its results. The release is available in the extra section of our website. Before we begin the prepared remarks, I'd like to remind you that some of the statements made will be forward-looking and are made under the Private Securities and Allegation 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 findings with the SEC, including our annual report on Form 10-K for the full year for a more detailed discussion of the risk that could impact the company's future operating results and financial conditions. Also on today's call, management will reference certain non-GAAP financial measures, which we believe provide useful information to investors. For reconciliation of these non-GAAP measures, please consult the most recently filed 8-K associated with the filing of the earnings release for the year ended December 31st, 2022, which is available on SEC's website. Finally, I would like to remind everyone who dialed into the call by telephone, you may want to join our webcast, and this call will be recorded and made available for replay via link and on the company's website. Now I'd like to turn the call over to the Executive Chairman and CEO of Assure Holdings, John Parlinger. John?

Thank you, Brett. Hello, everyone, and thanks for joining us today. We're obviously disappointed by your results, However, a lot more elaboration is needed to get clarity on the position of our business at the current time. We finished 2022 with a managed case volume of 21,557, well within our guidance and expectations for between 21 and 22,000 managed procedures. This represents an increase of 24% in managed case volume over last year, a compelling metric to the underlying strength of our business. During 2022, we provide oversight to over 14,000 surgeries. There continues to be strong demand for our services. Interoperative neuromonitoring is essential for invasive surgeries that place the nervous system at risk. It is a standard of care, and surgeons agree it is a vital resource in the operating room. Importantly, our business remains highly scalable with compelling unit economics. Despite what have been significant reimbursement challenges that are plaguing not only the interoperative neuromonitoring industry, but the larger healthcare industry in general. We're taking the actions necessary to counterbalance a challenging reimbursement landscape by exiting the shared revenue MSA model utilizing our internal RCM function, and greatly expanding our cash collections and commercial areas, facilities, and patients. And further, we are continuing to reduce our cost of delivery by leveraging our teleneurology services. On the revenue side, we made the prudent decision to implement a new accounts receivable, accrual, and reserve strategy during 2022. our new accounting estimation practice reserves and writes down claims earlier in the accounts receivable aging process. This led to a much higher accounts receivable reserve in 2022, which negatively impacted our net revenue. Recorded gross revenue of approximately $28.9 million. A bad debt charge of $17.9 million resulted in net revenues of $11 million for the year ending December 31st, 2022. A number of factors led to this reserve. During 2022, we experienced a more than 60% decrease in the Texas state arbitration rate beginning in October, which not only negatively impacted our accrual rate, but also increased our accounts receivable reserve. Additionally, collections on the COVID period during 2020, these claims were negligible, also increasing our bad debt expense, all the while the company continued to experience accelerated cash receipts. Collecting $21 million in 2022 compared to $13 million in 2021 and reducing our days to collect to 105 in 2022 compared to 209 in 2021. We're taking a pragmatic approach to accounts receivable reserves given the challenges associated with collecting certain receivables and persistent industry headwinds. Using this approach, we've increased visibility and substantially reduced our risk of future write downs for uncollectible accounts going forward. The reimbursement environment was challenging in 2022, to say the least, and served as a significant negative factor for our financial results. It impacted our top-line revenue, our profitability per case, and our margins. For federal reimbursements, time from submission to resolution continues to be extremely long. The federal no-surprises legislation, which went into effect in January of 2022, was passed with the best of intentions to protect consumers and provide healthcare providers with the ability to arbitrate claims where service was performed but a fair rate was not paid. However, implementation of the legislation has been an utter failure on the part of the federal government's as the federal agencies have faced numerous operational challenges, including a significantly higher number of claims than anticipated, which has led to lengthy times to resolve outstanding claims, and this is rampant across the entire healthcare industry. To date, we have filed nearly 400 claims under this legislation. Just last month, we had our first case adjudicated. While the results were positive, is anecdotal until we process more cases through the federal bottleneck. While the time from submission to resolution is consistently longer than the 90 days prescribed by the legislation, seven months is what it took for our first case. We are encouraged by this first win. We expect to file an increasing number of federal arbitration cases in 2023. The resolution of these claims in a timely manner will have an impact on future profitability and cash flow. For state reimbursements, there was a significant reduction in benchmark reimbursement rates that went into effect in October. And there have been a number of challenging technical issues surrounding the inbound filing of claims. We believe the commercial insurance companies are lobbying in certain states to secure reduced reimbursement rates, causing downward pressure on our accrual rates. The gamesmanship that surrounds provider reimbursement is a cloud over the entire industry. Just recently, one of our private equity backed competitors was forced to shut its doors. This was a competitor that had been in business for much longer than a share. Reimbursement environment further supports our decision to develop internal revenue cycle management resources, which continue to be critical to our business. Smaller competitors that rely on third-party billing companies are vulnerable to the current turmoil surrounding federal and state reimbursements, primarily because they don't have a framework or the tools to analyze the data or arbitrate like we do. We have developed a more data-driven, analytical approach to understanding and managing our revenue cycle and reimbursement per case. We believe that this remains a key differentiator in our business. Consistent success in arbitration is essential, and you need the data and analytics to win cases and be successful. We believe the arbitration process will ultimately lead to in-network contractual agreements with commercial insurance payers, which in turn will speed up cash flow and improve participation rates. There is a strengthening case for industry consolidation in the near term, and we expect to selectively pursue M&A opportunities that will help us to expand our managed case volume in 2023. 2022, We extended our geographical reach to include the state of New Jersey, which historically has had a strong reimbursement profile, being among the top five in the United States. In 2023, we are looking to add business in this new market, as well as expand in high-performing markets like Texas and Colorado, where we already have a significant footprint. On the cost side, in February this year, we initiated an incremental cost reduction plan that targets a further $2 million reduction in annualized operating costs. The elements of this plan include a reduction in salaries for current staff and a reduction in headcount. We expect the impact of this plan will become more evident in our financial results beginning in the second quarter of fiscal 2023. This plan is an addition to the more than $4 million in salary and workforce reductions, as well as other costs that was introduced earlier in 2022. While the industry is facing a number of challenges, we are optimistic we will overcome all of these hurdles in 2023. We have a robust infrastructure of professionals, capital equipment, and processes that serve the interoperative air monitoring space well. and data analytics on the back end to help us manage and improve our revenue cycle management process. Through cost cutting and the use of analytics, we are positioned to withstand the industry challenges around reimbursement and achieve sustained profitability and cash flow from operations during the second half of 2023. We are right-sizing our business to be self-sustaining operation. Again, Interoperative neuromodernity is essential for invasive surgeries to place the nervous system at risk and is a vital resource in the operating room. The demand is still there. I want to point out that notwithstanding the issues around the reserve, our total cash collected has steadily increased over the trailing six, 12, and 24-month period basis. we continue to experience strong cash collections and collected $21 million in 2022 compared to 13.4 million in 2021. Total cash collections, including MSA collections, were 27.5 million in 2022 compared to 22.7 million in 2021. We would further benefit from in-network agreements, which we anticipate to achieve during 2023. Additionally, we are no longer supporting managed service agreements requiring revenue shares with our surgeon partners, and we have exited the majority of these business agreements and expect to fully exit by the second quarter of 2023. As a result, we anticipate Achieving and collecting an additional $200,000 or more of incremental cash receipts per month as a result of controlling all of that cash flow that was currently shared under MSAs. Importantly, we are driving higher participation rates, shortening our cash cycle, and achieving better collections. we have built a sophisticated data-driven revenue cycle management function that is continuing to improve collections and improve our visibility into the market. We're off to an encouraging start in 2023 with first quarter revenue collections better than our internal forecast and headed toward what we believe will be measurable improvement. The percentage of first pass payment rates has been increasing Days to pay have been reduced, and commercial payers are paying at a higher rate versus last year. While still early in the year, reimbursement rates appear to be stabilizing and possibly rebounding from 2022. And we are moving closer toward receiving a fair rate for the services we provide. Looking ahead, we are focused on aligning our costs with updated management case revenue expectations and adding scale in favorable markets and fixing, controlling, and reducing the cost of delivering our services. Next, John Price will walk us through the full year financials. John.