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spk06: on your telephone keypad. To withdraw your question, please press start followed by two. And with that, I'll hand over to Emily Lombardi. Please go ahead when you are ready.
spk07: Good morning and welcome to New Health's first quarter 2024 earnings conference call. As a reminder, this call is being recorded. Leading the call today are New Health's president and CEO, Mike Miken and CFO, Jay Matushek. Before we begin, we want to remind you that this call may contain forward-looking statements under US federal securities laws. These statements are subject to risks and uncertainties that could cause actual results to differ materially from historical experience or present expectations. A description of some of the risks and uncertainties can be found in the reports that we file with the Securities and Exchange Commission, including the risk factors in our current and periodic reports we file with the SEC. Except as required by law, we undertake no obligation to revise or update any forward-looking statements or information. This call will also reference non-GAAP amounts and measures. A reconciliation of the non-GAAP to GAAP measures is available in the company's first quarter earnings release available on the company's investor relations page at .newhealth.com. Information presented on this call is contained in such earnings release that we issued this morning in our form 8K dated May 8th, 2024, and in the related presentation, each of which may be accessed from the investor relations page of the company's website. With that, I will now turn the conference over to New Health Chief Executive Officer, Mike Miken.
spk02: Good morning, everyone, and thank you for joining the New Health's first quarter 2024 earnings call. We are pleased to report strong first quarter results for New Health, driven by continued momentum in both our new care and new solutions business segments. In 2024, we are focused on driving long-term, sustainable growth of our value-driven, consumer-centric care model, as we align interests to create a better healthcare experience for all. We believe our model is built for the future of healthcare. It represents a strong alternative to traditional approaches, which rely on broad provider networks with limited care coordination and lack of focus on the consumer. Our model is grounded in the power of longstanding, trusted relationships in local communities, not one-time episodic encounters. This means we are focused on deeply understanding the consumers we serve, proactively managing care on an ongoing basis, and fostering strong partnerships with providers and payers to create a seamless, more coordinated care experience. Our relationship-based approach gives us confidence in our ability to take on greater risk-sharing in the future as we continue to build upon our knowledge of the populations we manage and the local communities we serve. Through our differentiated model, we are serving a diverse population base, including consumers across the ACA marketplace, Medicare, and Medicaid, which is a large and growing addressable market. Our ability to drive differentiated results across product categories allows us to capture opportunities with payers and providers throughout the industry, while limiting concentration risk. Our model continues to resonate with our partners and the broader marketplace, leading to strong consumer engagement and satisfaction. For example, this past year, there were approximately 745,000 ACA marketplace consumers in the Miami-Dade market, and we have served approximately 40% of them. This is significant and allows us to understand the unique needs of each consumer, deliver better health outcomes, and effectively manage the total cost of care. In addition, we continue to receive high consumer satisfaction scores. For instance, in our Florida market, we have an NPS score of 84, as well as a .8-star Google rating. Overall, our value-driven consumer-centric care model is attracting and retaining consumers and leading to long-standing partnerships with providers and payers across the industry. In the first quarter, we delivered enterprise-adjusted EBITDA of $2.5 million. This puts us in a strong position to continue to advance our care model and value-based capabilities this year. This morning, I'll provide a brief update on our new care and new solution segments. Then I'll turn it over to Jay to review our financial performance in more detail. New care delivered strong results to start the year, driving segment-adjusted EBITDA of $13.6 million for the first quarter. Starting in 2024, we expanded our operations in central Florida to serve approximately 41,000 additional ACA marketplace consumers. We completed this expansion in a capital-efficient manner, leveraging existing relationships to expand our footprint and the consumers we serve across our own and affiliated clinics. This expansion demonstrates the value we are driving for our payer partners and the trusted relationships we have built, especially in managing the ACA marketplace population in performance-based arrangements. We have had a strong presence in Florida for more than 20 years through our Central Health, Associates MD, and Premier Medical Associates clinics. And we look forward to continuing to grow our presence across the state as we bring a better healthcare experience to more local communities. We continually evaluate strategic opportunities to expand our value-based footprint, not only in Florida, but throughout the country. And we believe we have a strong pipeline in place for the remainder of 2024, 2025, and beyond. In our clinics, we are taking a holistic and comprehensive approach to care that starts with engagement. This helps us to guide our consumers to the right point of care, provide personalized and tailored treatment plans, follow up on progress, and maintain ongoing trusted relationships throughout the entire healthcare journey. With a strong focus on proactive engagement, we seek to drive improved results for all consumers, no matter their need or circumstance, and deliver a healthcare experience that is affordable, convenient, and coordinated. In our new solution segment, we continue to advance our provider enablement business, including our suite of population health tools and capabilities, as well as our ACO reach business in the first quarter. As you may recall, on our fourth quarter earnings call, we announced that we secured new partnerships with provider groups that increase the lives we are serving in our provider enablement business. In the first quarter, we served approximately 109,000 consumers, starting the year off on a strong note. We continue to see this business as a key driver of future growth opportunities, specifically in our new care segment, leading to new provider and payer partnerships and opportunities to serve additional consumers in diverse product categories through our own and affiliated clinics. Looking at our first quarter 2024 ACO reach results, we are performing in line with our expectations. This year, we have a carefully selected group of high performing provider partners, and we are confident in our ability to deliver strong performance and improved margins in the program. We are working closely with our provider partners on care management and patient engagement initiatives, focused on delivering consumer-centric care, preventing avoidable readmissions, optimizing site of service, and proactively identifying high risk and rising risk beneficiaries. We will maintain tight collaboration with our provider partners as we continue to deliver high quality personalized care to the Medicare beneficiaries we manage. I'll now hand it over to Jay to provide additional details on our first quarter financial results.
spk01: Thank you, Mike, and good morning, everyone. I'll start by reviewing our first quarter financial performance for consolidated new health business, as well as each of our new care and new solution segments. Then I'll provide a brief update on the wind down of our ACA insurance business and go over our balance sheet. Finally, I'll talk through our 2024 outlook. As a reminder, I will be focusing on the 2024 financial results of our continuing new health business in each of our new care and new solution segments. Gap financials are included in our earnings release and contain results that include our discontinued operations. New health consolidated revenue for the first quarter was 245.1 million, which is slightly below expectations due to the impact of prior year development in our ACO reach business, as well as moderately lower volume in our new care segment. Our first quarter gross margin was 48.2 million. New health adjusted EBITDA for the first quarter was 2.5 million. Due to the seasonality of our business, we expect to drive increased growth in the second half of the year, as we have in previous years, and we maintain our expectation for full year new health adjusted EBITDA of between 15 million and 25 million. In the first quarter, we served approximately 469,000 consumers across our new care and new solution segments. In our new care segment, revenue was 73.6 million in the first quarter, slightly below our expectations, resulting from lower volume in our clinics. Over the course of the year, we expect to grow the number of consumers we serve through existing and new payer partnerships. And we maintain our expectation of serving between 330,000 and 345,000 value-based consumers in our clinics in 2024. New care operating costs were approximately in line with expectations with medical costs favorable for the first quarter. New care operating income was 9.8 million for the quarter, including incremental surplus we realized in certain payer contracts from strong 2023 performance. We expect to continue to build on this positive momentum this year. As Mike mentioned, the start of the year, we expanded in central Florida, serving approximately 41,000 additional consumers, and we continue to see our ability to deliver high quality affordable care to all populations, agnostic of product category as a strong competitive advantage. Through our experience and knowledge of the local markets we serve, we have developed a deep understanding of our consumer base. We continue to leverage our consumer-centric approach to engage consumers in a proactive and timely manner so we can deliver a personalized care experience and ensure each consumer is receiving the right care in the right setting. Turning now to our new solutions segment. New solutions revenue was 173.9 million in the first quarter, slightly below expectations, resulting from the one-time impact of the 2023 retrospective trend adjustment in our ACO REACH business. First quarter operating costs were in line with expectations with medical costs moderately lower. New solutions segment operating loss was 2.9 million for the first quarter. Excluding the prior peer development in our ACO REACH business, new solutions revenue and operating income were both in line with expectations for the quarter. Looking at our 2024 results in our ACO REACH business, we are performing well, consistent with our expectations. We have an optimized partner portfolio and we are confident in our ability to execute against key care management and patient engagement initiatives to support the Medicare beneficiaries we are managing and drive improved results this year. In 2024, we continue to expect to serve approximately 45,000 Medicare beneficiaries through our ACO REACH business. On the provider enablement side of our new solutions segment, we served approximately 109,000 consumers in the first quarter, which generated service revenue slightly above our expectations for the quarter. We continue to partner with providers across the country, deploying our population health tools and capabilities, in addition to serving our own and affiliated clinics. We see our provider enablement business as a reliable source of future growth opportunities and both our new care and new solutions segments as we deepen relationships with long-standing provider partners, build relationships with new provider groups, and enable our own clinics to thrive in value-based arrangements. Next, I'll turn to the wind down of our ACA insurance business, which continues to progress as planned in the first quarter. As a reminder, to satisfy our 2022 risk adjustment obligation, we paid 1.5 billion to CMS in September of 2023. This represented approximately 80% of our final ACA insurance business risk adjustment obligation. At that time, we entered into a repayment agreement with CMS to fulfill the remaining obligation, which comes due on March 15th, 2025. We expect to offset the remaining risk adjustment obligation with 110 million held in escrow in connection with the sale of our Medicare Advantage business to Molina. At the end of the first quarter, our ACA insurance business had approximately $150 million in excess cash after reserving for expected medical costs and other anticipated wind down expenses, not including risk adjustment obligations due under our repayment agreements with CMS. We have had some early success in retrieving capital from our discontinued entities, which was infused into states with repayment agreements, and we have made several prepayments with CMS already. Overall, remaining liabilities associated with our ACA insurance business continues to steadily decline, placing our business in a much more stable and predictable position this year. Now looking at our balance sheet. As of March 31st, 2024, we had 256.4 million in total cash and investments, including amounts in our regulated entities. Our non-regulated cash and short-term investments were 62 million at the end of the first quarter. On April 9th, we announced that we entered into an incremental amendment to our credit facility with NEA that increases our unsecured term loan commitment by up to 30 million. We are pleased to have the continued support of our largest investor, which demonstrates ongoing confidence in the future of our business. We intend to use the proceeds of this incremental commitment for general corporate purposes, including to support our 2024 strategic priorities. I'll now provide a brief review of our 2024 outlook. In 2024, we continue to expect consolidated revenue of approximately one billion. Specifically, we expect between 310 million and 320 million from our new care segment, and between 690 million and 700 million from our new solution segment. In addition, we are confirming our expectations for enterprise-adjusted EVTA to be between 15 million and 25 million. At the end of 2024, we expect to serve between 475,000 and 500,000 consumers across both our new care and new solution segments, serving between 330,000 and 345,000 value-based consumers in our clinics, and between 145,000 and 155,000 consumers in new solutions, including approximately 45,000 through ACO reach. Finally, we expect our adjusted operating cost ratio to be between 15 and 16%, excluding corporate costs. When you include corporate costs, this is 19 to 20%. We are pleased with the performance of both our new care and new solution segments in the first quarter and remain confident in our ability to continue to drive strong results through the remainder of the year. I'll now turn it back over to Mike for some closing remarks. Thank
spk02: you, Jay. As you've heard this morning, we are off to a strong start this year with our new care and new solution segments well-positioned for continued success. We have built a differentiated model that aligns with the industry's shift towards value-based care. Grounded in the power of strong ongoing relationships and proactive consumer engagement, our model allows us to deliver a more coordinated, personalized care experience for all populations across the ACA marketplace, Medicare, and Medicaid. New Health is a more mature and focused business this year, and we continue to see our value proposition resonating with the broader market as evidenced by the long-standing relationships we have formed with key payer and provider partners, the capital-efficient growth we have driven to start the year, and the high consumer satisfaction scores we are receiving. We are confident in our ability to continue to drive strong performance this year as we maintain our focus on creating a better healthcare experience for all. To conclude, I'd like to extend my sincere gratitude to the entire New Health team for their continued commitment to transforming healthcare. I look forward to continuing to work together as we drive value for stakeholders across the healthcare ecosystem. Thank you for joining the call and for your interest in New Health. We'll now open it up for questions.
spk06: Thank you. We will now start today's Q&A session. If you would like to ask a question, please press start, followed by one on your telephone keypad. To withdraw your question, please press start, followed by two. Our first question today comes from Joshua Raskin from Nefron Research LLC. Your line is now open. Please go ahead.
spk04: Hey, good morning. This is actually Marco on for Josh. Appreciate
spk05: you taking the question. Looking at the balance sheet, it looks like cash was only up 25 million in the quarter, despite the Molina proceeds, and total liabilities don't seem to have come down that much either. With that, can you just speak to changes in net debt in the first quarter, and then also help us bridge liquidity against cash uses for the balance of 2024? Thank you.
spk02: Yeah, Marco, I'm a little bit confused by your cash reconciliation. But if you just go back to what we talked about in the last call, after closing the Molina transaction, we continue to have about $305 million of what we consider to be cash or potential cash proceeds coming back from the escrow and what have you to offset future liabilities. If you recall, at the end of the first quarter, that number was closer to $380 million. So we've seen a reduction in that estimate, and that is really based on, we had to fund our financial guarantees for 2024, and we had other restructuring costs, severance and things like that that offset that. And as you will note as well, we did increase our credit facility with NEA after the quarter, but in early April by about $30 million. So that's the way we look at our capital position. Obviously there's contingency to that, but we feel we're obviously in a much stronger capital position
spk03: than we were a year ago.
spk04: Great, that's helpful. And then if I could squeeze one
spk05: other question in, it looks like guidance for the adjusted operating cost ratio was up about 400 basis points versus the prior outlook, but you are reaffirming EBITDA guidance. Is there any offset coming on the medical cost line for that? And if so, what specific segment are you seeing that flow through?
spk02: Yeah, I know that was a miss on our part in the previous guidance from the, we were referring to 15 to 16% excluding the corporate costs, but that was always in the model. So we just added that when you include corporate costs of about $40 million, that remains the bottom line. So nothing's
spk03: changed in terms of the guidance.
spk04: Okay, makes a lot of sense. Thank you.
spk03: Thank
spk06: you. As a reminder, to ask a question on today's call, please press start followed by one on your telephone keypad. And to withdraw your question, please press start followed by two. We have no further questions on the line at this time. So I'll hand back over to the management team for closing remarks.
spk03: Thanks for your interest in new health. We look forward to further updates in the future.
spk06: That concludes today's call. You may now disconnect your line.
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