Release Date: May 08, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- R1 RCM Inc (RCM, Financial) reported strong first quarter 2024 revenue of $604 million and adjusted EBITDA of $152 million, reflecting positive underlying business trends.
- The company successfully integrated Acclara, contributing positively to the quarter's revenue from its closing date in January.
- R1 RCM Inc (RCM) demonstrated robust operational execution, with significant interest in physician advisory solutions, DRG validation, charge capture, and underpayments.
- The company made substantial progress in its technology transformation, investing in AI and automation to enhance platform capabilities and drive innovation.
- R1 RCM Inc (RCM) effectively managed the Change Healthcare cyberattack impact by quickly transitioning affected customers to alternative claim clearinghouses, demonstrating strong crisis management and operational resilience.
Negative Points
- The Change Healthcare cyberattack impacted the company's near-term operating performance, affecting revenue and adjusted EBITDA by an estimated $9.5 million in the first quarter.
- A significant customer of R1 RCM Inc (RCM)'s modular services filed for bankruptcy, leading to financial adjustments and reservations for outstanding AR balances.
- The company faces ongoing challenges from the Change Healthcare cyberattack, including potential elevated denials and the need to rebuild automation with new clearinghouses.
- R1 RCM Inc (RCM) incurred additional costs related to the Change Healthcare incident, with an expected ongoing expense of approximately $2 million per quarter for the rest of 2024 to manage the backlog of claims and manual efforts required.
- Despite strong revenue growth, the company experienced client attrition and facility divestitures, which partially offset the revenue gains from Acclara and other business expansions.
Q & A Highlights
Q: Can you discuss the full impact of the Change Healthcare outage on the financial outlook for 2024? Is there a possibility that some of this impact could extend into the next year?
A: (Lee Rivas, CEO & Director) The core business remains strong with no long-term strategic impact expected from the Change Healthcare outage. The team responded quickly to transition affected customers to alternative clearinghouses. While there is a near-term impact, it is primarily within 2024, with some residual effects possibly affecting KPIs like denials into the first half of 2025.
Q: How is the Providence contract progressing in terms of investments and visibility into the ramp-up into 2025?
A: (Lee Rivas, CEO & Director) The onboarding of Providence is on track, following a proven playbook for large customer integrations. The relationship is strong, and the execution aligns with the guidance provided for the Providence contract.
Q: Could you provide more details on the harmonization efforts with Acclara and how this positions you for 2025?
A: (Lee Rivas, CEO & Director) The integration with Acclara is proceeding well, with a focus on aligning business lines and customer contracts. This process will help streamline operations and improve profitability, setting a strong foundation for 2025.
Q: Has the Change Healthcare disruption affected your pipeline or RFP flow?
A: (Lee Rivas, CEO & Director) The disruption led to a temporary 3-4 week delay in the pipeline, but overall, the modular bookings are on track. The incident has potentially increased demand for AR and denials management solutions.
Q: How are the recent strategic and operational challenges influencing client perceptions and sales funnel dynamics?
A: (Lee Rivas, CEO & Director) There has been no long-term impact on the sales pipeline or client perceptions. The challenges have underscored the need for robust technology partners, and R1 RCM is well-positioned to meet these needs.
Q: Can you elaborate on the financial impact of a client bankruptcy mentioned in the earnings call?
A: (Jennifer Williams, Executive VP, CFO & Treasurer) The client bankruptcy has led to a cautious approach, with $45 million in modular revenue included in the annual forecast, reflecting ongoing work as the client has designated R1 RCM as a critical vendor. All revenue recognized in Q1 was collected, and any outstanding AR has been fully reserved.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
