CareMax (CMAXQ) 9 Nov 232023 Q3 Earnings call transcript

Good morning, and welcome to the CareMax, Inc.

Third Quarter 2023 Financial Results and Conference Call. [Operator Instructions] I would now like to turn today's call over to Roger Ou, Senior Vice President of Investor Relations.

Good morning, and welcome to CareMax's Third Quarter 2023 Earnings Call. I'm Roger Ou, Senior Vice President of Investor Relations, and I'm joined today by Carlos de Solo, our Chief Executive Officer; and Kevin Wirges, our Chief Financial Officer.

will certain we information. call, the be forward-looking discussing During historical and based by their These to expected be of they are other assumptions developments experience current assessments and future assessment appropriate. of forward-looking statements believe light on made factors conditions, in CareMax's and trends, management otherwise. as future a to Any revise update forward-looking made such statements events result CareMax and statements this during today, made as of or information, new undertakes or are whether call of no duty that actual the decisions statements company's cause factors Factors. to differ including are the business Important developments and Risk SEC, could results, in section the materially forward-looking filings entitled the from with described be today's certain metrics. non-GAAP by financial we In remarks will discussing management, GAAP release. be earnings A this morning's measures in reconciliation these most can financial of found press non-GAAP metrics to comparable the

I'd turn to Carlos. call to over like Now the

that thank Thank for reflect focus a everyone, few you key want years are ahead. in joining the our value delivering you, morning, that to Roger. Today, I poised to on we're Good themes deliver today and and call. the

an I'll quarter our and performance our XXXX of outlook. First, financial updated third overview provide

cash I'll review. including steps outline planning free are take a accelerate Second, our positive to comprehensive we to business path to the flow,

Third, gives our taking national increasing promising Medicare business. metrics risk Advantage MSO I'll share us in our in performance that confidence in book of

of toward end REACH XXXX, supporting in the and our performance see meaningful we ACO favorable for cash of Additionally, generation MSSP indications expectation XXXX.

pre-opening $X de period XXXX. developments the opening Adjusted $X of quarter million. us $XX for million, by full in XXX,XXX. revenue quarter related million $XXX Total begin of novo million, impacted was EBITDA third prior with results. million to by on quarter our and Let's the in was the to half unfavorable and third losses membership track to quarterly first post in guidance for Advantage keeping X,XXX our year in costs million Medicare the grew $XXX $XXX

year-to-date million excluding variability believe EBITDA profitability and adjusted we by rapid financial of near-term $XX full in we of and the our amount year guidance to in Although the updating growth underlying a $XX prior think payer experienced range resulted PPD, year impacts encouraged remain our membership, warrants developments our our greater relationships of quarter results. million. geographies in to has We prior

developments perspective, we're to our this optimistic trended helping If processes in surgical in across we admissions working beyond consecutive downward and believe inpatient you throughout volumes another to XXXX, outpatient County, operate From observed the costs quarter. and to phase prior conducted workflows. a and keep as a and growth. significant period and continuously we in normalize improve performance we our are Today, magnitude patterns quarter of for and recall, are along medical stable also initial remained QX risk integration that management XXXX a and result, added to the are related efforts Medicare reduce lines of our Broward activities membership clinics set has our of Tampa controlled. subsided efforts clinical technology throughout well XXXX. future, single designed will this increase last The Orlando These

at our is ago, over our of pleased now specialty X% and We REACH our business, perspective, eligible care approximately MSSP XX% aged less network, volume XX savings We top MSSP we rate handled higher believe than XX our largest things an generated are patients savings specialist in seniors and million government of a among entities portion of is gross CareMax, of ]. we with members. members. $XX a the preventative prior and control the care results the outcomes greater put gross which percentage ACO have has above contributing participation highest to this [ quality largest MSSP from achieved ACO since since under we believe our initial and This earned in To costs, in members dual of percentage VBC XXXX team the leverage savings, performance is strong our caliber XXX,XXX validates the our our for the onboarded better ownership. of year In rate. driving highest percentage representing external continue provider year to up XX% high-quality of network dual and infrastructure savings to provider ACOs. to Combined, a that Over with for ACO's being record our organization. in-house in to the beneficiaries close heavy

further are which greater Kevin even will in shared suggesting year-to-date XXXX, by later. We savings encouraged discuss data points

second Next, light operational flow. the our while reimbursement, markets and to maintaining of positive We conducted of our cash comprehensive accelerating steps review and the shifting flexibility the including quarter sustainable free medical critical our of portfolio path have to resources covered taken theme rates our reprioritization towards bolster proactive our we excellence. of clinical of a management medical patterns capital in cost upcoming pipeline of refinement record utilization and changes In environment, track existing business our our assessment structure, that areas, several during centers. an of of

cost in center operations. a including First, both our optimizing detailed structure, levels examination of our conducted corporate we and staffing have

of these from by fully savings XXXX. actions to net QX materialize more expect We

members we've successful platform. with more most and With pivoting nimble populations the our team. reallocated become evolving to clinic increased patients our Second, bolster from targeting complex leadership org needs expansion and This our clinical MSO oversight includes agile care of also structure, programs a at physician most resources team our across conditions. to management we've the more care

control the untreated higher group. an program, overseeing inpatient and most their compared over successfully expanded utilizer participation. a of In their program care match patients, coordinators throughout during achieved our we that to dedicated quarter, utilization needs acute example, pilot XX% For of we the XX% ER with to lower

chronic few the Another patients to utilization. outcomes A disease-specific conditions, enhancing Part for drive lower on focuses example, have program, helping that specific a

evaluating consolidate and de existing are opportunities portfolio pace medical including centers we for the of Third, novo of sites. moderate development efficiencies, our to our

of end of York, As Coast the the nearby, ones New X synergies higher in along X opened the older year, this per new from clinics Bronx, utilization and seventh including X larger, marks which of location time, location. absorbed October, have newer in Florida same Space at into the our we sites smaller, generating capacity

pipeline year under into remainder the we sites continue maintain of towards this to development. a Looking and of XXXX,

timing sites priorities. MSO, Fourth, on Advantage we with our are area Medicare current our allocation plan and these However, evaluate carefully aim in balance other performance clinical our we in turning towards data optimizing to this each to capital of the and case-by-case basis focus of contracts. a in our

becoming strategic we contract ahead, to that While we in don't believe degree alignment we financial be to terms encumber to EBITDA: accretive high position. believe more growth membership toward the our and a partial near-term continue of payers immediately opportunities are with

year-end For to MA from guidance which these of are now still XXX,XXX we reasons, us in XXX,XXX our targeting positions for believe we MA the MSO our membership XXXX. of growth end contracts range previous low EBITDA

MSO Since of team positive believe of the acquisition the momentum our this year, new Moving footprint leadership national the markets. time into across our we building are we embedded closing theme last we've third the on our heading of XXXX. day, to

X-way our We to network. the strive with technology implemented relationships are have PCPs gaps. To aligned affiliate providing assisting quality across has promptly coverage expanded care for we XX% long-term encouraged and addressing with practices real-time data by within team insights. the network, and practices, of our have feeds these providers now Furthermore, the XXX% receptivity to our date, of CareOptimize positions our of

care our MSO extensive patients positions equips serves in a our excel of various to with believe care support we advantage, differentiated As comprehensive mentioned care and as management the to resources our earlier, value-based our robust type program models. This coordination both support PCPs. needed offering

designed As Advantage our we A allows first for have while to increasing glide the Medicare no to us toward assume time. discussed path we holistic the are process. risk XX past, risk XX our negotiated care over arrangement a limited to months typical have downside implement in to contracts

EBITDA. cases, many full ability have may pull so we forward we to the if believe As reminder, accretive to a doing would be in risk

platform business of organization. anticipate year coming the as and us year-over-year the EBITDA. risk. value years encouraged we our have second within As This, initial margin are we focused medical in cohort position of in turn, areas the MA move to in enter within direction MSO the full drive improvements year to In performance of investments by unlock our this and the further members, made XX,XXX to we closing, we potential the multiple our of our will

the improve of have we operations. our We and center corporate organization efficiency realigned to seek the as

solid a our With performance the now we ACOs over to across are in network, achieving to partnerships are foundation growth providing more position things financial government and Our quarter. that, our building for on details third results, MSO provide XXXX. strong turn I'll Kevin in continued robust

and Carlos, good Thanks, morning.

our of book As integrated early business created we results executing Rapid the Advantage care in quarter our has are near-term stages Medicare value-based third of in some still growth fluctuations. our show, strategy.

financial closely plan are cash. translate operations reducing developments these more by focusing being completeness net of and comments, over streamlining efforts responsive time, factors reiterate outcomes. to expect use ensure health our timeliness to we these on working predictable and are with We to into of and we and market partners data To to Carlos' our our

$XX an change goodwill Now quarter. third charge, the the million to our primarily results, include impairment price which in let me stock related during the discuss quarter

to and quarter. as half first year immaterial prior bringing earnings first developments Medicaid million. revenues progress $XX developments for nearly $XXX also impact a of Total of metrics million, unfavorable quarters, this like risk puts were prior quarter $XXX million made development. million the on prior will government I GAAP refer will performance the note, to third Medicare to meet go period to discuss PPD business, and our adjusted our risk of VBC to our revenues believe raised in You and recognized followed by relates to previously our guidance to approximately in of Medicare $XXX all were year EBITDA. million. Of we over year-to-date revenue of related the period us substantially revenues may this $XXX we Like of by We the have non-GAAP XXXX the presentation full of prior release accruals. track business. in reconciliation million I $XXX impacted lines experienced

shortly combination and acquisitions announced over Medicare drove members XXXX, As X IMC after in business growth in ] XX% several that the [ Florida months. of CareMax just we June Carlos in noted, in

over We largely complete. have past reconciliations. our years consolidating health integrate these Those and plan contract are reporting members terms, X worked now by fund the claims partners activities with to integration

magnitude the clinic our documentation reduce robust future. EMR into a of consolidated processes in more single the have PPDs which standardized, We operations designed are established and to

$X Finally, our patients Medicare already it's introducing growing were these to in to including from development important full prior contracted a In We patients Medicaid, $XX million over of million, were Advantage million members note different risk X,XXX ecosystem historical by revenues retroactive June, contracts. QX, risk QX them the declined MSO of into compared approach in removals about that to Medicaid unfavorable risk acquired by XX,XXX favorable to a in periods. our full time. down projections. with $XX Membership from glide from slightly path period take newly

in to ratio of further couple earlier contributing external ratios $X PPD claims levels. developments to fee-for-service PPD, lower drove related provider IBNR medical through cost the X,XXX Medicaid expense in primarily expenses million external by attrition larger normalization by to year-end reported from of claims estimate a reinsurance XX% We expect approximately than accruals expense of higher half continue believe Reported of also of this year, the Among expense the a and are recoveries and point driven the revenue basis XX% increase year-to-date. and accrued. was combination in unfavorable roughly previously which or We include pre-Covid PPD XXXX. QX. increased reported risk medical costs first QX We toward to provider were medical

member developments for the excluding card that that uptick since only prior in disclosed the utilization the perform QX. XXXX see in increase mix we you developments, saw numbers. within ranges. XX, XXXX historical MER continued third card year-over-year to benefit MSO in year mind underlying on can quarters to consider the year centers Flex Page believe and year-to-date this in recognized As prior utilization, Keep the we past of prior are view, QX period slight developments quarter a the reflected couple the in compared in

a Based expect partners plans programs. external traditional case supporting plan with benefits our on have to benefits of our others benefits not increased at utilization management between when quarter remaining discussed XXXX competitive benefit we centers been a As or historically in a compared and maintaining prior combination balance health our analysis service managed offering some result primarily in continue management through we XXXX of on to a level our that work supplemental members plans, call, strike with to at provider reduced costs our at and to XXXX. consistent at

revenues to million, X QX on government were revenues to government VBC. $XX Now month $XX bringing million.

Carlos for strong MSSP and optimism increased noted, XXXX trends ACO drove savings our As REACH. projected in expenditure favorable performance in and XXXX year-to-date shared

against far benchmarks. downwards, metrics, post-acute rates data including and Utilization readmission the days are expenditures in beneficiary XXXX, in performance. So suggests overall for believe we turning improvement are favorably continued and tracking facility

care are plan, the back incremental year. patients enrollments of half this our confidence management of In us in addition, giving in in greater programs of generating nearly of all ahead savings year-to-date high-risk

reasons, to expectation PPD this of our Medicare the quarter Medicaid summary these table. now range single-digit Page accruals offsetting reflect we related million. gross $XX first Please booked of government from partially and the see favorable increase, revenue half million previously. savings XXXX the in of percentage a to $X assumed government of mid- risk XX for For VBC high this slides our Related mid-single to XXXX, an digit in

profitable believe on but numbering full margin In at Advantage arrangements, contractually members, me in year-to-date. performing our about X/X XX,XXX. to regularly share MSO approximately plans. contracts a the an from including risk. currently lives generally, information and upside-only amount Based a take upside XX representing MSO slightly Let More provide medical individual some begin XXXX. partial Medicare we accretive to those risk far receiving from those of are is update we EBITDA risk financial total, expect the population with been higher along be adjusted most and plans, on in of health margin downside reports to contracts we risk XXXX, health have of medical in thus reconciliation will

our path forward. and losses. risk the $X going PPD in million more believe Reported into novo $XX guidance XXXX now million we and visibility the gave characteristics of first net de we pre-opening towards greater MSO for inclusive costs adjusted was have quarter to giving of of and are We members' predictable when compared $X guidance million, right post-opening unfavorable EBITDA

$XX in the we performance of population. savings believe adjusted further result prior risk third lower our in improved the comprehensive review medical including million our approximately In year MSO PPDs, to mentioned, Carlos headwinds, to management light the and resources the particular, we've suggests Absent $XX our expect EBITDA guidance the full As clinical operations XXXX recent de we reprioritizing higher have in conducted measures, million. cost and a of of we environment of cost novo among investments potential of material PPD reach integration that the and quarter delaying strategy. end the into full implemented towards to our cash

Additionally, tailwinds the limits stop-loss be patients deductibles margin in to fourth hitting medical still we seasonal quarter. to expect and D Part would

considerate risk around development and of unfavorable are uptick medical early COVID uncertainty expenses, flu, sweeps, final we in year-end of and the another However, utilization Medicare potential flex card benefits. or further

pre-opening novo reasons, expected $XX to from we those to in million million, equivalents operating year $XX at to Cash adjusted $XX in activities and losses of end million, including QX. lower our Cash million post-opening $XX million costs QX. de it appropriate range million. For narrowing $XX was used the $XX is EBITDA of full were feel and

proceeds facility MSSP from we repaid Following $XX.X payment. XXXX our the million quarter, end AR with the of the

DDTL Our of remains $XX undrawn. million

through QX expect after to MSSP positive. operations XXXX, fund free our we be in which next up payment We expect to cash to flow sustainably draw

about Before going with would comments into some Q&A, leave on I like thinking how you to are we XXXX.

developments with risk Medicare going and our normalization our completion period we unfavorable forward. risk revenue recalibration factors, lower prior First, of of expect in a accruals

growth XXXX, year-over-year suggests already see we XXXX. data savings government the in shared opportunity to VBC enhance further believe we Second, which in in

a and Third, the standards care data this rightsizing benefit margin our improve, our our positive while in clinically medical we for continue ability as for to cost high XXXX, so population. and believe capabilities to MA environment, EBITDA Fourth, will proactively we our MSO our Operator, manage business contracts contribute now patients. new of running are questions. structure more and adjustment maintaining take efficient we risk our will does

[Operator Truist Instructions] from comes Our first question with Jailendra Singh Securities.

is on Jailendra. This for Eduardo

plans or the just around comment the is of Just 'XX. regular Can out that cards, external analysis your go benefit a and XXXX made provider just you're seeing? helpful. being you be costs back is That utilization that that would you to bit, benefit comparable 'XX to flesh in about that versus

in a Eduardo, patients. is plan benefit of packages Yes, were a some it's retracting on majority those so. the improving Kevin. seeing have look are were on historical cards. in little $XXX $XX, in them, of other the of What room at we in concentration copayments co-pays let's -- actually under benefits, benefit those have have do ones But some or them ambulance which for benefit $XX, certain the obviously, benefits plans saw card, were more now we investing all the those take the or X benefit like cards actually the that emergency we are plans say, is of that our focused we're the what were, actually of

through similar would we're assessment, potentially list XXXX cost our in with seeing in standpoint. overall we're understand for where gone that's -- to to what how from total on totality we've Based that an look So the XXXX. benefits up coming

versus the truing QX up half benefit had frame in looks QX? in that It just, you impact card first cards in like the the just make Maybe some half. in Was quarter the benefit and of guess, experience? the expectation first what impact maybe I worsened the guys

Yes, call it's a good out.

in So as certain looking were in health that dive that are explicitly little benefit and charges, a plans at card being included card there we expenses. deeper benefits and what's OTC including

So to had was. We for year the current to the the analysis. understand do to that and go year we OTC PBPs to certain back OTC what specifically of impact had in include prior

the that year-over-year did is year-over-year. changed relatively include to haven't would too I underlying -- impact much. this consistent say was probably comparison. we The when needed We component just So OTC assumptions the

'XX one million, last XQ the just you're the end? from $XXX revenues, X still range, and end on to than right, that takes low less months quarter. given end a from the wide for you million $XXX me. of the The All the pretty away high it's revenue to What

talked throughout so we a as of the on couple bringing more down this tend expire Yes, your and patients there's the you're before, One, to on things. acute obviously, trend Medicare PMPMs book newer about of business patients. year

the PMPMs So to go tend down.

down do on the what we remarks, Medicaid the due expect a from run of we mentioned some to the have further Additionally, we're the Medicare rate Then, in but cognizant little trend sweep. this X our the quarters first components. to potential we in also premiums of just prepared in redetermination year final

we So will, we our in sure that to if want numbers. that cushion, make you have guidance

with question Our Piper comes from Jessica next Tassan Sandler.

final raising XXXX? XXXX revision and just I ACO guess million what comfortable downward in to REACH, MSSP I for just related XXXX all the start wanted So to you the settlement given with the accrual makes $X.X

Yes.

Kevin. it's Jessica, So

happens We of QX historically, costs an happened in actuaries, obviously There's that actually from as looking years, in opposite to external of QX we a looked past couple year QX. for couple at data those this we're beneficiary been and at that the of our seeing So uptick trends from of the we're points. currently to data. One, on our QX. kind with there's saw we historical work trends somewhat

first anticipate In programs there enrollment we are half seeing an year. fruition half over talked closely second opportunities about of utilizers. year those in to addition of standpoint experienced of the the our to in very going for being management what to that the the high come tracking care that ahead the that that, to exist from schedule we we've We're and

multitude a of that that in So things it's a combination give number. confidence us of

can year visibility So progression to year? X the the us you kind to program? year to or just the from of of color year on give versus in the performance CMS subsequent each you that So X some the level year then in in of savings get maybe X, and maturity year rate

if I the tell have year would improvement. year, that year-over-year-over-year XXXX that don't under seen prior the the of since we we've I you has the know this What started payment is one ACO ownership. was best

say your I'm at incremental from X% improvement and ahead have X% or now was I sorry, this over few We that question? want years, the kind what going so of to Jessica, point. to seen of returning second

over in that year. the the Just visibility the interested the subsequent to then of from and in course in level of year get you year, the MSSP CMS performance specifically

how XXXX, your So are what XXXX? the visibility does example, in the over during for learning course then of kind you and trend of performance year,

it. Got

question. good Another

the So data CMS plan lagged. data, similar our we get, is health to

from that information, us it obviously, beneficiaries. patients, fluctuations. who the get accurate So our is relatively some those we eye of What into can cohort is an really keeping visibility say changes that have we're benchmarks I with we into Obviously, and that actuary standpoint. visibility really that is it's assists really third-party our the on. as It's -- there

with You're of that you're always we have in. data the dealing to when coming magnitude going have fluctuations

membership, my in of some kind Got of expansion. Advantage is -- given and total about terms comments question about being last it, being of just about or more XXXX just Medicare disciplined think then your -- as we

So just risk? should roughly as me, year-over-year thanks. total flattish we Advantage being the about it and lives partial with think migration That's from between full Medicare

a think I good Yes, it's Yes, this is Carlos. point.

are for the we flow. focus efficiency to given XXXX what operations, on is cash environment, and think going I

that what and XXXX we to something quality and the about membership I focused So guidance our sure in we're else, and and you we're more profitable was it's expected, can now we're than on incremental the giving that tell anything think more it's going definitely have be I growth think integrating when else going that for lot probably that's into making We're to -- is that take we currently over that business prioritized going a be everything to that business. account.

Our Jefferies. with question Tanquilut comes next Instructions] from [Operator Brian

Slevin I'm correctly. I to make back just touch it Brian. sure on It's for understanding to on Jack the MER, on wanted commentary XXXX

So that operationally PYD when good how understanding guess, we minimize guess, change I reserving guidance giving PYD about to made we that thinking with there roughly on in one PYD both help next year back should in commentary here then pretty done thought that's and to is are thing maybe Is going to baked the Just that's half the But front side year? be thoughts, it? keep gave. QX for benefit in you'd you're flat more cards some assumptions on just 'XX, commentary. this are your versus be going and MER that I to that's detail changes that the you the can being -- and what the you the there. that

Yes.

right. already through ingesting that's think of all data claims the board. on XX% members we've MSO I We're brought that of our

year. of the been that accruals helps more lot be. this experienced accurately that, minimize on platform PYD done has going to the and assess We PPD the that are a determine us we will significantly work that and what So believe CareOptimize

the in the of remember, couple you it talked lot MSO, the region years. lot but ingested I about over If bit also earlier, last in of a not little Florida we just of a and membership, a

anticipate. that. reasons, whole PPD over integrating was Kevin that most process PYD all mitigated led that I think bringing that add more to he a would several of and think degree little just of I'll confidence bit it to But a we I and we there than what So have something. to different much turn -- we've saying higher for

that's Yes, right.

the benefit As at soon, performance our historical the look way think an slide the probably from underlying like. medical So I sense MER comparative we is really reason versus it benefits to an performance get don't we on cards of going what current we of expenses, best the right? the anytime from look provide standpoint, the that more a look away at to anticipate apples-to-apples is

consideration. into the we have as in However, that look take future, to we

So working are best excluding potentially I development. sure with making point, at have, say MERs we're quarter, sound. actuarily our obviously, prior our actuaries would available looking at we consistent, year that be type we're always and data relatively -- going assumptions this that the When closed probably are the assuming we to

So we never the PYD anticipate we or as because PPD are adequately believe quarter, we close reserved. we

helpful. correctly. for want it, commentary on that's sure to back understanding make Got just I'm Then the your maybe I thoughts XXXX. touching

a some payment of on focus closure side on novo like the sounds bit think ramp to it? little the flipping perhaps sounded you've it a built on talked or So for to that the Then perhaps? approach only on selective MA in full already, is to way more openings help going contracts more approach as but the previously, the out about upside not much it about centers be-- you've really the or measured right Is de the as as like maybe risk profitability. to GAAP relates it MSO,

or acqui-hires, members -- going very either of add we're we think on focused about very about have Yes, thoughtful a the to in the on we that novos much We're we're full capital-light structure, de be be only to right? risk sure of pretty focused membership, making -- ingestion exactly think we that's going meaning Then that I that on have [indiscernible] as XXXX. right. these risk, partial the

membership producing on et changes about thinking that and cost organization that the want environment, the just sure to the platform. make capital, focus the really flow making cash we to given the sure we of think I that in and cetera, to really we're we're adding pivot

going the be to that's the organization. XXXX think I of for theme So

last for one Then me.

like quarter, benefit fourth the it I card impact trying the seems [indiscernible] impact relatively be pull [indiscernible] the X should the to on same. pieces Just or guess, the apart,

in On you but in terms implied if track kicking any should commentary there trend it the It year-to-date what does on with other guidance, your to in, of side of things, the we seems would helpful. of in performance be fourth quarter? seen be expect sort just you've historical -- the and stop-loss

There's right. past, make for business. expect We in Look, that's of in part the the that some had the little fact thinking way. of Yes, tailwinds about we sure We want cushion But bit quarter. we allow the a it you're this a obviously had limitations components. we've and deal stop-loss specifically right around to QX. the potentially I seasonality it think do ourselves in PPD we're think there, just mindful I that PPD

take annualize, if think There is maybe little even midpoint, it you more will close try little that favorable. there higher. probably you it make to a seasonality a components you gets that, the I to around pretty

So guiding taking prudent the just to I we're rest of think the for approach year. a

There further de to closing this at to now time. are Carlos for questions remarks. like the I call would back turn over no Solo any

our just everyone. to Have everybody I'd forward great you. team and today, like a on of progress. behalf thank our day, updating joining on the call Thank look for you CareMax we to

today's call. conference concludes This

now may disconnect. You