R1 RCM Inc.

Good day and thank you for standing by. Welcome to the R1RCM second quarter 2021 earnings call. At this time, all participants are in a 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. If you require any further assistance, please press star 0. I would now like to hand the conference over to your speaker today, Atif Rahim of Investor Relations. Please go ahead.

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, 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. I'm pleased to report strong results for the second quarter, with revenue of $353.4 million and adjusted EBITDA of $78.8 million, driven by continued operational execution by our team. as well as contribution from our technology investments. Over the past five quarters, our team's remarkable commitment and engagement has helped our customers navigate unprecedented challenges and delivered outstanding results along the way. We've been able to demonstrate the strength of our value proposition and expanded recognition of R1's brand with providers. I'd like to extend a big thank you to everyone on the team for their continued dedication in driving this performance. Our investments in automation and digitization are also starting to yield meaningful, sustainable results. We are exceeding our financial targets, driven in large part by a contribution from cost savings generated by automation, as well as higher incentive fees due to improvement in customer performance metrics, such as denials and AR days. These technology investments are also resonating well with prospective customers, evidenced by continued growth in our sales pipeline. Given the strong ongoing performance, along with a steady recovery in patient volumes, we are raising our 2021 guidance. We now expect revenue for the year to range from $1.46 to $1.48 billion, up from our prior expectation of $1.41 to $1.46 billion. And we expect adjusted EBITDA of $330 to $340 million, up from our prior range of $315 to $330 million. Technology is increasingly becoming a significant differentiator when it comes to our value proposition. I'd like to devote some time on today's call to discuss automation and patient experience. We have been consistently focused on these two areas as we feel strongly they present an opportunity to fundamentally transform our industry by substantially reducing the process breakage that causes latency and inefficiency across revenue cycle operations today. From our vantage point, there are over 100 breakpoints at the process interfaces between the patient, provider, payer, and host system when interacting with the revenue cycle. For example, referring providers usually have no visibility into a rendering provider schedule. Patients are provided with inaccurate estimates of out-of-pocket costs or none at all. Billing statements are not delivered in a timely manner. The list goes on and on. The friction at these breakpoints leads to patient frustration, higher administrative costs, and yield loss for providers. The complexity of this problem is routinely underestimated by point solutions and technology vendors with siloed views into a subprocess of the revenue cycle. And even when technology is deployed into subprocesses, it often never reaches its full potential because the accompanying operational change management is typically under-resourced. Much of this friction is pervasive across both fee-for-service and value-based models. The only way to rectify these breakpoints at scale is by engineering an end-to-end process from the ground up with linkages into the various revenue cycle sub-processes. This is what we did in the period leading up to 2018. We systematically standardized processes at every point along the way. We integrated our core technology across workflows and care settings. We understood we could not afford to compartmentalize anything in order to drive transformational change. The result of our approach is a scaled technology platform complemented by deep revenue cycle domain expertise. Our track record is unparalleled in the industry. Over the last five years, we have onboarded more than $35 billion in NPR, implemented our technology at over 170 hospitals and 1,100 practice locations and clinics, rationalized over 600 third-party vendors, deployed 200-plus standard methods, and a standardized tech-driven measurement system across a global footprint, developed, acquired, and integrated technology to digitize virtually every patient touchpoint with the revenue cycle processes. With technology integrated across workflows and processes standardized, in 2018, we launched an effort to systematically automate manual processes in our operations. Our automation center of excellence is dedicated to uncovering opportunities for automation and developing innovative solutions that improve revenue cycle performance for our customers. In less than three years, we have developed routines to automate more than 50 million manual tasks. We are very encouraged with the accelerated pace of developing new automations equating to roughly 10 million new tasks per quarter in 2021. At the same time, our backlog of tasks, process map for future automation, has grown to approximately 60 million from 45 million last quarter as we've uncovered new opportunities. We are accomplishing this growth through the continued scaling of existing automations across new customers and delivering innovative new solutions. Our initial efforts centered around robotic process automation, or RPA. However, to digitize the wide range of complex processes found in provider organizations we realized we needed more than just RPA. We therefore started complementing our RPA effort with additional capabilities to expand the universe of automatable processes. These additional capabilities include optical character recognition, natural language processing, expert rules and machine learning, workflow integration, and analytics that can be leveraged independently or collectively to solve automation challenges and manage a digital workforce. Collectively, I would characterize this capability set as intelligent automation, which is significantly more advanced than RPA alone. The improved value proposition we can convey to customers and the margin benefit we retain from automation is profound. We've started to see it flow through to our numbers, and we plan to continue to invest heavily in this area. The combination of our deep revenue cycle expertise, scaled footprint, control over the processes, and cutting-edge technology are all critical in enabling the success we've had with automation. With workflow standardized and our automation foundation in place, the next step of our journey has been focused on empowering the patient experience by enabling self-service. Revenue cycle is typically the first and last step of a healthcare episode, and patients can experience significant dissatisfaction in their revenue cycle touchpoints. To give you a sense of these manual and redundant activities, At a typical $1 billion revenue health system, before contracting with R1, there are approximately 750,000 phone calls and 700,000 paper statements sent out annually, and more than 300 employees in local patient access functions. Even after adjusting for varying degrees of deployment maturity and rationalization across our customer base, we estimate the manual and redundant activities are as follows. 15 million annual phone calls, including an average of 3.5 calls per patient pre-service, 5,000 on-site patient access employees, and 25 million annual paper statements. The magnitude of this inefficiency and administrative burden placed on the patient is massive and represents a significant opportunity for value creation going forward. We fundamentally believe there are two primary reasons for the significant amount of redundant administrative tasks. First is the fragmentation of technology solutions currently deployed within the industry. Second are the organizational silos that exist across key revenue cycle functions that result in duplicative activities and poor execution. R1 is at a distinct advantage to be positioned to deliver our current and future customers an exceptional patient experience due to our deep domain expertise, commitment to process and technology integration, and an aligned contracting model. These unique attributes have fueled our conviction to invest and build the most comprehensive patient experience platform in the market. Our platform is designed to empower consumers to access and afford care quickly and simply via digital self-service. For example, we can take an inbound order, the first signal of demand for a patient in need, and in real time automate authorization rules, clearance, price quoting, scheduling, and onboarding. This can take days out of the cycle time, stressful phone calls out of the experience, and wasted dollars out of the expense ledger. And at our scale, the potential impact to all stakeholders is enormous. Just to provide one example, in our work with Memorial Hermann, we are working to deliver the first phase of a digital front door capability, spanning their hospital-based, own physician, affiliated, and retail ambulatory care sites, with the focus of system-wide scheduling. Our commitment is to enable a seamless care journey for consumers as a big step forward for the organization. Our recent acquisition of Visipay is a further proof point of our commitment to developing the most comprehensive patient-centric platform for the industry. Let me recap some of the value drivers underpinning the acquisition. Integrating Visipay establishes us as a leader in consumer payments. Healthcare consumer debt is arguably the largest and most inefficiently managed liability in our services economy. As we seek to solve high-value problems to create a competitive advantage for providers, we can't think of a better space for disruptive innovation and believe we will be rewarded well for our investments on consumer payments. VisitPay also advances our technology platform with a robust AI-ready data set for digitizing and personalizing the patient experience. which will enable us to further reduce administrative expense and improve affordability of healthcare. In addition to Visipay's impressive standalone growth trajectory, we are also already in detailed planning phases of a broader, more robust deployment and adoption of Visipay technology across a broad share of our installed base, for all the reasons stated previously. While it's only been a few weeks since we completed the acquisition, we are very encouraged with the increased interest from our core target market IDNs who are looking to create a best-in-class digital patient experience to fit the needs of the communities they serve. We expect to formally launch our comprehensive solution at HIMSS next week and plan to hold an investor event later this year to allow the investment community to get a firsthand look at the deep capabilities we have developed. To round out our technology discussion, I'd like to highlight our announcement yesterday appointing Jay Sridharan as our new Chief Technology and Digital Officer. Jay brings a wealth of expertise in creating digital solutions that drive higher value experiences. He joins us from MGM Resorts where he was Senior Vice President and Chief Technology Officer, responsible for setting the overall technology vision and executing upon all technology investments and M&A activity. Previously, he developed the next generation of applications and cloud services that ultimately powered Starbucks mobile order and pay offering. We're very excited to have Jay join our One team, and his contributions will be instrumental in shaping our vision. Now I'd like to turn to our activity on the commercial front, where we continue to see strong demand for our solutions. Our messaging and value proposition are resonating well, and prospective customers are increasingly recognizing the superior outcomes we can deliver via our experience and technology. Our end-to-end pipeline remains very active and has grown over Q1, with a healthy progression of activities leading up to contracting. The type of health systems we're engaged with in active discussions run the spectrum of large for-profit and non-for-profit health systems, as well as academic medical centers and hospital-based physician groups. The tone of our ongoing discussions is very encouraging and gives us a high degree of confidence in signing $4 billion in new end-to-end NPR under management in 2021. In the second quarter, we made progress towards this goal with the addition of Mednax as an operating partner customer. Mednax is a national network of prenatal, neonatal, and pediatric providers equating to approximately $1.5 billion in net patient revenue. We are honored to have been selected by Mednax after a competitive evaluation process and look forward to delivering value to their providers and customers. We believe the driving factors behind Mednax's decision were similar to factors we have discussed in the past. Comprehensive technology and integration with the host EHR, a dedicated deployment function, captively owned global shared services, and a track record of results and value we have delivered for other customers. Onboarding activities at Mednax commenced immediately after contract announcement, and we are well underway with our major onboarding work streams. In addition to Mednax, onboarding activities are also progressing well at LifePoint. In July, we commenced onboarding of Phase 3 of the LifePoint business we contracted last year, and to date we have welcomed over 800 employees from LifePoint to R1. Phase 1, which we started onboarding in January, is nearing completion, and we are more than 60% along the way for Phase 2. which commenced in April. We remain on track to complete all onboarding activities by mid-2022 and are pleased with the pace of progress and value we are delivering for LifePoint. In closing, we are very optimistic about the prospects of our business and are on a strong footing to execute on the opportunity ahead of us. We strongly believe that our end-to-end offering, which brings together expert process knowledge, experience, and technological differentiation, is a winning model for providers and difficult to replicate. With the investments we've made, we believe we have the highest quality, lowest cost platform to manage provider revenue, and we continue to build on this strong foundation. Now I'd like to turn the call over to Rachel.