R1 RCM Inc.

Ladies and gentlemen, thank you for standing by and welcome to the R1 RCM Q1 2021 earnings conference call. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 on your telephone keypad. If you require further assistance, please press star 0. I would now like to turn the conference over to your speaker today, Mr. Rahim, Head of Investor Relations. Please go ahead, sir.

Good morning, everyone, and welcome to the call. Certain statements made during this call may be considered forward-looking statements pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. In particular, any statements about our future growth, plans, and performance, including statements about our strategic and cost-saving initiatives, our liquidity position, our growth opportunities, and our future financial performance are forward-looking statements. These statements are often identified by the use of words such as anticipate, believe, estimate, expect, intend, design, may, plan, project, would, and similar expressions or variations. Investors are cautioned not to place undue reliance on such forward-looking statements. All forward-looking statements made on today's call involve risks and uncertainties. While we may elect to update these forward-looking statements at some point in the future, we have no current intention of doing so except to the extent required by applicable law. Our actual results and outcomes could differ materially from those included in these forward-looking statements as a result of various factors, including but not limited to the potential impacts of the COVID-19 pandemic and the factors discussed under the heading risk factors in our annual report on our latest Form 10-K and our latest report on Form 10-Q. We will also be referencing non-GAAP metrics on this call. For a reconciliation of the non-GAAP amounts mentioned to their equivalent GAAP amounts, please refer to our press release. Now, I'd like to turn the call over to Joe.

Thanks, Atif. Good morning, everyone, and thank you for joining us. We issued three announcements this morning, which will be the basis for a substantial portion of the agenda on today's call. In addition to Q1 earnings, we announced an agreement to acquire visit pay. a leader in healthcare consumer payment solutions that simplify and modernize the payment experience for patients while driving improved financial outcomes for providers. The transaction provides a tax benefit valued at approximately $40 million, equating to an effective purchase price of approximately $260 million. We also announced the strategic expansion of our agreement with Ascension along three broad categories – deployment of our PX solution architecture across ambulatory and acute settings of care, expansion of services performed out of the global shared service centers, and expansion of automation use cases across key functions. The new agreement also extends our master services agreement to 2031, effectively a 10-year term. Let me start with a brief recap of Q1 earnings. I'm pleased to report that 2021 is off to a strong start. Our team continues to execute exceptionally well And we are seeing this manifest itself in the results we are delivering for our customers. First quarter revenue of $342.6 million and adjusted EBITDA of $80.4 million were both ahead of the expectations we communicated on our last earnings call. The upside was driven by higher incentive fees and lower operating costs. While patient volumes in aggregate remain below pre-COVID levels, we have successfully navigated the environment over the past year and believe we are very well positioned to serve our customers and the broader end market in the post-COVID environment. The tone and quality of discussions with prospective customers in our pipeline is very encouraging and gives us a high degree of confidence in our goal of signing $4 billion in new end-to-end NPR in 2021. Technology is increasingly becoming the differentiating factor in many decision-making processes. Our patient experience or PX platform is gaining prominence as providers are increasingly inclined to make revenue cycle sourcing decisions based on what's best for their patients over and above other criteria. Additionally, automation presents an opportunity to fundamentally transform the nature of our industry and reduce the heavy reliance on labor that exists today. Our operational control across the entire revenue cycle process provides a unique lens and significant competitive advantage to drive this disruption. These two factors are the driving force behind our continued heavy investment in technology and the strategic rationale for the VisitPay acquisition. Before I discuss VisitPay in detail, let me provide some background on our PX platform. When we embarked on our PX journey in 2016, we had two important ideas in mind. ease the burden on patients when they access health care, and two, provide a seamless, intuitive journey across all care settings. At the time, the strategic potential of a solution such as this was clear. Patients are generally highly dissatisfied with their scheduling, billing, and payment experience, and any transformation of the patient experience could potentially be a meaningful competitive differentiator for us as well as for our customers. Fast forward to today. I'm pleased to say we believe we have the most advanced, comprehensive technology solution to transform the patient experience. Our PX platform is integrated across care settings, ranging from primary care to outpatient settings such as imaging, labs, same-day surgery, all the way through to inpatient surgery. With the acquisitions of SCI Solutions and Tonic last year, we significantly enhanced our in-house ability to digitize order intake, scheduling, registration, and the authorization process, thereby delivering a robust, cost-effective digital front door capability to our customers. As we've deployed our PX solution to customers, we've seen several transformative results. More than 60% of patient registration counters are performed on a self-service basis. NPS scores are above 75, and we have cut time spent on administrative tasks in that. We've also seen an improvement in collection rates and a decline in the percentage of patient accounts that progress to late-stage collection activities that are a well-publicized dissatisfier for patients. These results have fueled our conviction to continue to invest heavily in PMS. The next logical capability to bring in in-house is the technology to modernize the consumer payments ecosystem in health care. Visipay is the leading consumer payments platform with a proven track record of driving improved payment experience and improved financial outcomes for providers. Visipay makes the healthcare financial experience simple and efficient for both patients and providers in several ways. Let me provide a few examples. First, patients can digitally view simple, modern, and unified statements at the guarantor or family level across care centers. This is a critically unmet need in the market today. Second, patients receive coordinated, tailored communications throughout their healthcare journey. These communications, which are driven by machine learning and adapted for patient preference, keep the patient informed and in control of the financial experience. Third, deep integrations with both health plans and HSA administrators offer a uniquely clear and aligned 360-degree view for patients. Fourth, patients receive financing options and anticipate their need for payment flexibility. Advanced machine learning creates personalized payment recommendations that work for each patient's unique needs while improving provider revenue. And finally, with 10 years of curated data from 300 million visits, we believe VisitPay has the most AI-ready data set for patient payment behavior. a vital differentiator as we think about our broader investments in digitization. The patient satisfaction, loyalty, and retention driven by Visipate's platform are significant. Two of the most important outcomes are a 40-point improvement in net promoter score and a 35% improvement in patient yield, which is increasingly important given the increase in patient payment mix over the past several years. By combining visit-based capabilities with R1, we expect to have the richest payment-related functionality healthcare providers can offer their patients, from pre-service through final bill resolution. We're excited about these capabilities, which will round out our PX offering to cover all patient access components, including integrated order and referral management and real-time scheduling with booking and appointment, comprehensive pre-registration, preauthorization, and price estimation before patients arrive for the appointment, contactless check-in and digital pre-service forms when they arrive for the appointment, and seamless digitized bill visibility and payment options pre-visit, at the point of care, and post-visit, with visibility across care settings and intuitive payment choices. We expect to formally launch this comprehensive solution mid-year, and we'll showcase it at the HIMSS conference in August, where we will also hold an investor event to highlight this and other technology initiatives underway at R1. In addition to rounding out our PX platform, VisitPay allows us to establish a leading position in the consumer payments area. Healthcare consumer debt is arguably the largest and most inefficiently managed liability in our services economy. As we seek to solve high value problems, create a competitive advantage for providers, we can't think of a better space for disruptive innovation, and we believe we will be rewarded well for our investments in this area. VisitPay will also advance our technology platform with both access to a robust data set to enhance our AI-based automation roadmap and patient contact capabilities, which will enable us to reduce friction in the patient access and denials management domains. R1 will also gain substantial technical engineering talent as part of this acquisition, which accelerates our technology roadmap. In addition to Visipay's impressive standalone growth trajectory, we are also expecting meaningful cost synergies from the acquisition by deploying Visipay's deep functionality across the $40 billion of NPR we have under management. Over time, we also see significant revenue synergies. Of note, our sales team is excited to communicate our enhanced end-to-end value proposition, since much of VisitPay's installed base lies with large health systems similar to our target base of end-to-end customers. In summary, the rationale for bringing together R1 and VisitPay's capabilities was clearly compelling. Further fueling our conviction were the results at some of our common customers, where we've been able to generate value beyond what either company on a standalone basis would have been able to do. We believe these proof points are replicable across our customer base and a broad set of healthcare providers. Next, let me provide a customer update with a focus on the Ascension agreement and ongoing deployment activities at LifePoint. I'm pleased to announce the strategic expansion of our revenue cycle services agreement with Ascension. This expansion can be broadly categorized into the following three areas. One, comprehensive deployment of our PX technology solutions. across the acute and ambulatory environments. Two, expansion of our scheduling scope and certain patient-facing services through our global delivery centers. And third, approval around a broader application of technology and use cases for automating key functions within our operations. As noted in my first point, Ascension will be standardizing its technology footprint for digital engagement and will now utilize R1's complete PX technology solution for both the acute and ambulatory settings of care. Important to note, this technology expansion also includes the full suite of patient payment capabilities. In addition to the strategic expansion, we have extended our master services agreement with Ascension through April of 2031. We expect this extension to be net favorable over the term of the agreement relative to our prior contract. In addition, the weighted average contract life for our end-to-end contracts is now nine years. This gives us a high degree of visibility as we think about making long-term investments to support future growth. Turning now to LifePoint, onboarding continues to progress on schedule. We initiated Phase 1 onboarding in January and commence Phase 2 in April. To date, we have welcomed over 700 employees from LifePoint to R1, and technology integration for Phase 1 hospitals is currently underway. We expect to commence phase three in July with the goal of completing all deployment activities in mid-2022. On a related note, we are pleased to have welcomed David Dill, LightPoint's CEO and President, to R1's board, deepening our strategic partnership. His depth of healthcare expertise and broad vantage point will be invaluable to the company. Next, I'd like to turn to our automation effort. We are highly committed to this effort as it presents an opportunity to fundamentally transform the industry by reducing the latency and inefficiency that exists in the revenue cycle management infrastructure today. The 15 million tasks we automated by early 2020 delivered approximately $20 million in EBITDA benefit last year. We now have 40 million tasks in production, up from 30 million as we exit in 2020. These 10 million incremental tasks cover eight new routines, and demonstrate an accelerated development pace. The modular nature of our development approach allows us to develop new routines at a faster pace by reusing and adding to existing automation code. Additionally, the investments we have made in additional core capabilities beyond just RPA, including optical character recognition, natural language processing, expert rules of machine learning, workflow integration, and analytics have expanded our automation coverage of any given workflow. In closing, we remain very excited about our business prospects going forward. To recap the key messages from today's call, our team continues to perform exceptionally well, and this is translating directly to our financial performance. With our Q1 results, we are off to a strong start for the year, and look forward to continued strong execution going forward. End-market dynamics remain very favorable, and we have a high degree of confidence in adding $4 billion in NPR from new end-to-end deals in 2021. VisitPay rounds out our PX platform via a market-leading consumer payment platform and establishes a leading position in the broader consumer payments ecosystem. Our expansion of the Ascension Agreement is a meaningful validation of our PX technology solution, and the expansion is net favorable to our prior agreement. We continue to invest heavily in automation, and the modular nature of our development approach allows us to develop new routines at a faster pace. Now I'd like to turn the call over to Rachel.