Signify Health, Inc. (SGFY) on Q2 2021 Results - Earnings Call Transcript
Operator: Ladies and gentlemen, welcome to the Signify Health’s Second Quarter 2021 Earnings Call. My name is Louisa and I will be operating your call today. I will now hand over to your host Jennifer DiBerardino, Head of Investor Relations. Jennifer, please go ahead.
Jennifer W. DiBerardino: Good morning and welcome to Signify Health’s second quarter 2021 earnings conference call. This call is being webcast live and a recording will be available on the events page of our investor website, at signifyhealth.com, through August 11, 2021. Throughout the call this morning, we will be referencing the financial tables that appeared in our press release dated August 10, 2021. On today’s call, we will discuss Signify Health’s business outlook and we will make certain forward-looking statements within the meaning of the Federal Securities Laws. Please note that the cautionary language about our forward-looking statements as presented in our earnings press release and in our quarterly report on Form 10-Q which will be filed later today. That same cautionary language applies to this conference call. We will also discuss certain non-GAAP financial measures, including adjusted EBITDA and adjusted EBITDA margin. Reconciliations to the relevant GAAP numbers for these non-GAAP measures are included in the earnings release filed on Form 8-K yesterday and also on our Form 10-Q which will be filed later today. We intend to participate in industry or sell-side sponsored conferences and we will be issuing a press release to announce each conference, we will be posting our conference attendance on the Events Page Calendar of our Investor Relations site at signifyhealth.com. I encourage you to register for alerts on the Investor site so that you receive an email notification each time we add a conference, any events, or any other updates in the Investor Relations Calendar. Joining me on the call today are Kyle Armbrester, Chief Executive Officer; and Steve Senneff, President and Chief Financial Officer. Kyle will provide a business overview followed by Steve with a financial overview. We will have an operator-facilitated question-and-answer session after our prepared remarks. Now I will turn the call over to Kyle.
Kyle Armbrester: Thank you, Jennifer. Good morning and thank you for joining us. Team Signify continues to drive significantly better outcomes for individuals across the continuous care while supporting customers with our value based payment platform. Our second quarter and year-to-date performance reflects the hard work we’ve put it and investments we have made to deliver value for individuals, customers and shareholders. Yesterday evening, we announced record financial results for the second quarter and first six months of 202. In the first half of 2021, revenue grew by 50% to $392.8 million and adjusted EBITDA increased 56% to $89 million from the six month period a year ago. Results are driven by continued positive momentum in our home and community services segment. As we reported for Episodes of Care Services, we experienced COVID-19 related impacts, and the recently received BPCI-A reconciliation. Although we delivered strong sales customers. We remain confident that the program size run rate will recover to pre-pandemic levels of $6 billion as we exit 2021 and that savings rates will resume the previous growth trajectory. Steve will go into further details on the reconciliation during his remarks. Our HCS and Episodes businesses are highly complementary as we sit between payer and providers to help our customers’ measure, understand and manage risk. Both segments serve health plans and risk bearing entities, which enables cross-selling for existing customers. Our Episodes segment also serves large health systems and physician groups. We're increasingly assuming risk and value based payment programs and therefore need the capabilities of our home and community services segment. Our home and community services segment drives the majority of its revenue from Medicare Advantage and Managed Medicaid health plans, who our customers and who rely on our nationwide network of over 9,000 clinicians to reach their enrolled members in their homes. These clinicians are supported by our membership engagement teams, and our logistical software to conduct comprehensive and home evaluations, which we refer to as IHEs. Our health plan clients value these evaluations because they see the full picture of the health status and acuity of health plan members and allow our appropriate triage and care coordination. Through the six months ended June 30, 2021, we performed approximately 959,000 IHEs, an increase of nearly 60% from the same period in 2020. Virtual evaluations in the first half of this year continue to trend downward from 2020 pandemic levels and only represented about 17% of total IHEs completed. We believe virtual evaluations will continue to play a role in the second half. But we have found that health plan members prefer our in home evaluations, which can go much deeper in their assessment, including determining social and behavioral needs, and performing diagnostic tests and other preventive services. We also provide access to social services to address those needs through a network of about 200 community based organizations and delegated social workers. Continued demand for diagnostic and preventative tests in home also contributed to our HCS results. We offer multiple diagnostic and preventative tests through our connected device hub. And we have a strong pipeline of additional tests and devices. Signify receives an additional fee per test perform our customers benefit from enhanced information and lower costs. We also coordinate with the members’ primary care physician and provide them with additional data on their patients. Most importantly, the individual member benefits because he or she to need to leave their home to visit an office or facility to obtain the same tests. Our Episodes of Care Services again provides a comprehensive platform that serves government programs, health plans, employers and health care providers. We deliver software analytics in clinical and operational services, as well as develop contracted provider networks to help these organizations and evaluate payment programs. Our Episodes Services are critically important to the financial and operational success of the customers we serve, and important significantly improved patient outcomes. With the BPCI-A program as the anchor for Episodes segment, we continue to build up deep provider networks in three geographic regions represented by our current non BPCI-A payer clients to establish this business as a future growth driver. At this is stages, we are gaining traction in building provider networks and having productive conversations with plans, employers and providers be under three current payer contracts. As an example, along with regions yesterday, we announced the Washington State Health Care Authority, the state's largest purchaser with 303,000 members during the region's Episodes of Care Program effective January 1, 2022. Through these Episodes, we can support not only procedure based bundled, but also condition such as maternity, oncology and substance abuse. From an employer perspective conditions like these drugs a significant amount of healthcare costs for self insured organization, and we can facilitate substantial savings through Episodes management. Our consumer engagement and assessment capabilities and our HCS segments are being leveraged to improve the performance of our Episodes of Care Program through higher shared savings and better patient outcomes. Our transition to home solution demonstrates our extensive capabilities in engaging patients in and around the home for provider partners who are participating in Episodes and other value based programs. The solution is designed to reduce the clinical and financial impacts of avoidable in-patient readmissions and unnecessary emergency department visits. Hospital readmissions costs Medicare approximately $17 billion per year, an analysis of readmission results were 800,000 Episodes of Care managed by Signify under Medicare's value based bundled payment program BPCI-A shows that nearly 44% of all readmissions occur more than 30 days following discharge from the hospital. To address the risk of readmission, during this critical phase, our transition to home solution provides evidence based clinical and social care coordination services to patients. These services are provided not just during the initial 30 days from discharge, which is the market standard, but rather for a full 90 days following discharge. Early results showed this solution has statistically significant effect on reducing re-hospitalization rates. We've activated a transition to home solution in 50 plus hospitals within the industry's most visionary health systems and health care providers, including Ardent Health Services, Beaumont Health, Cape Fear Valley Health, and Premier Health. We're experiencing strong consumer interest in virtual post discharge care coordination support, with upwards of 60% of patients contacted engaging with the Signify’s care team. Facilitating the time to transition to the home, and extending our partner's reach beyond the hospital setting, enhances patient care experience, achieved better outcome and improves financial performance through the elimination of costs associated with avoidable readmissions. We are excited to see the key synergy between our divisions driving such a positive impact and we’re also removing barriers to recovery in home. Our long-term vision at Signify is to drive positive outcomes for our partner as a platform for value based care. We simplify highly complex payment programs and enable health plans and health systems to successfully transition to value based payments. We may supplement our strong capabilities of acquisition or partnerships with other companies to add further functionality and innovation to our platform to drive increased value for our customers. I will now turn the call over to Steve to walk you through our second quarter and year-to-date financial results.
Steven Senneff: Thank you, Kyle. Good morning, everyone. We reported record second quarter and year-to-date financial results yesterday afternoon, and I'm happy to be able to walk you through the details. Strength in our home and community services segment is driving our results. As Kyle mentioned, Episodes of Care results are being impacted in the short -term by the effects of COVID-19 on the BPCI-A program, which I will discuss in detail momentarily. During my commentary, I will be referring to the tables that appeared in the earnings press release issued yesterday. As you can see in table one, we had record total revenue in the quarter up $212.8 million, an increase of 63% when compared to the same period last year. Revenue strength in the quarter was primarily driven by HCS growth of 109% to a quarterly record of $175.4 million as we had record in home evaluation volume. Total evaluation volume for the second quarter was approximately 497,000 including virtual evaluations compared to 298,000 in the second quarter of 2020. Virtual evaluations as a percentage of total valuations continued to decline, reflecting customer preference to perform the evaluations in the home.HCS segments services also include diagnostic and preventative testing services and we are seeing attachment rates increase, which is additive to HCS revenue. As I mentioned our first quarter call in May, our expectations are that HCS revenue growth will continue to be strong in 2021. After a COVID impacted 2020, we expect revenue to follow a more typical seasonality pattern in 2021, where our cost and utilization are better spread out across the year. We still expect higher first half IHE volume compared to the second half of the year, with the fourth quarter projected to be our lowest quarter of the year, which will be a decline year-over-year from the 2020 fourth quarter. Still on table one, second quarter 2021 ECS revenue was $37.4 million, a 20% decline compared to the same period last year. Despite the headwinds from COVID-19 on savings rates and program size, we still delivered strong savings to our partners across the program. While ensuring individuals received excellent care within their Episodes. There were two distinct areas that the savings rate was negatively impacted in a latest reconciliation. The first area relates to patient case mix adjustments and missing comorbidity diagnosis codes. There's a 90-day period prior to an acute episode being triggered that CMS incorporates diagnosis coding, which ultimately adjust an Episodes target pricing. During that pandemic, Medicare patients were avoiding routine health care visits. And as a result, comorbidities were not being diagnosed and coded. As individuals entered episodes, the coding for associated comorbidities did not fully reflect the acuity of the patient and therefore was not reflected in the target price for that Episodes. This in turn contributed to the lower savings rate and lower shared savings for the second quarter. The second area relates to the next side of care transfers during the pandemic when skilled nursing facilities were facing reduced bed availability due to COVID-19 outbreaks and staffing shortages. Patients were being discharged from acute care facilities to inpatient rehabilitation facilities, and other post-acute facilities with significantly higher cost and skilled nursing facilities. In total, we believe that COVID impact on these two areas impacted the weighted average savings rate for 2021 by at least 1 percentage point. We believe that patient case makes adjustments will normalize as individuals resumed routine visits to receive outpatient care. Our data sales is utilization proving and supports our assumption for more normalized healthcare utilization for the balance of 2021 and lots of COVID resurgence set down occurs. Regarding the next side of care transfers skilled nursing facilities are recovering from the pandemic making them once again a viable next side of care choice for those who need. More importantly, we believe that the traction Kyle described in our transition to home solution will more frequently make homeless services the best next side of care for appropriate individuals leaving acute care facilities and reduce costs and readmissions, all of which we believe should increase shared savings. Assuming that the worst of the pandemic is behind us and the country will not go into another COVID variant like we expect to in the year at a $6 billion run rate for program size. Setting our Episodes business operates strong 2022. We also believe the savings rate will rebound in 2022 once the country becomes more fully vaccinated and the impacts of the COVID-19 state in the rearview mirror. Moving to Table 4, total company adjusted EBITDA for the second quarter increased 55% to $54.6 million, compared to $35.4 million for the second quarter of 2020 driven primarily by the strong revenue growth in home and community services. Back to Table 1, second quarter total net loss was nearly breakeven at a loss of $100,000 compared to net income of $7 million for the same period a year ago. Operating income for the quarter was offset by the quarterly revaluation of the equity appreciation right agreement or EARs of $14.5 million and a loss extinguishment of debt of $5 million due to the June debt refinancing. As disclosed last quarter the incremental expense reflects the increase in value of the EARs largely related to the change in fair value of the company upon our IPO, as these instruments are directly linked to the value. Year-to-date results through June 30, 2021 largely reflect the continued overall strength in our home and community services segment with strong IHE volume for the first six months of 2021 of approximately 959,000, 17% of which was virtual. For comparison for the full year 2020, approximately 38% of total IHE volume was virtual. We expect virtual evaluations as a percentage of total IHE volume will continue to decline from pandemic levels. Episodes of Care services results for the first half of 2021 continue to reflect the COVID-19 impact on healthcare utilization, but we expect utilization to improve as the year progresses. Moving on, as you can see, in Table 2, we ended the quarter with $631.9 million in unrestricted cash a decline from the first quarter primarily related to our debt refinancing and deleveraging that we successfully closed at the end of June. As a result of the refinancing, we have reduced our annualized interest expense on the term-loan by approximately $10 million, reflecting a $61 million reduction in debt and more favorable pricing. We ended the quarter with debt outstanding of $350 million and $173 million in capacity under our new revolving credit facility. Given our strong cash position at June 30, 2021, which exceeds our debt levels, we ended the period with negative net leverage. We are in a strong and flexible financial position to continue to invest directly back into the business and evaluate potential partnerships or acquisitions. Given our record results for the first half of 2021, we are raising total revenue and adjusted EBITDA a guidance ranges for 2021 as follows. Total GAAP revenue in the range of $745 million to $765 million and total adjusted EBITDA in the range of $155 million to $165 million. The revised financial guidance assumes that the COVID-19 situation will not worsen and negatively impact IHE volume, the weighted average savings rate or program size for the balance of 2021. We are also updating estimates for the following key performance indicators for the full year 2021 reflecting continued strength in HCS and the ongoing impact of COVID-19 on the Episodes segment. HCS segment IHEs are approximately $1.785 million to $1.81 5 million, ECS segment weighted average program size are approximately $4.9 billion to $5.1 billion and ECS segment weighted average savings rates of approximately 6.1% to 6.4%.I look forward to being able to update you on our financial results next quarter. Now I'd like to turn the call back over to Kyle for closing remarks.
Kyle Armbrester: Thanks, Steve. I'd like to take this opportunity to thank our team Signify for continuing to putting the hard work to grow our business and drive positive results. Signify’s passion and energy to work every day to guide our mission to transform how healthcare is paid for and delivered that people can enjoy more healthy, happy days at home. Now I'll turn the call over to the operator to take your questions. Operator?
Operator: Thank you, Kyle. Our first question comes from Andrea Alfonso from UBS. Andrea, please go ahead. Your line is open.
Unidentified Analyst: Hi. It's Kevin Caliendo with Andrea. First question is really about the HCS revenue per eVal, it was up 10% sequentially. Can you maybe discuss what's driving that other additional services? Is this the kind of trend I guess as we think about modeling going forward and like is it expected that the baseline that you have on a per member eVal would increase as the year goes on? Or is there a new baseline that's established that would carry over to the next year?
Steven Senneff: Kevin, it’s Steve. So the reason the average price is going up is a couple things. One, it's going to be the virtual versus in home. So as that virtual number comes down as reminder, it's about a 20% pricing differential that's going to give us some left. And so last year, we were closed to just under 40%. As we said, here to the first half, we're about half of that. So that that's going to be a driver. The other thing that's also driving it is, we continue to have our preventative and diagnostic testing that continues to be a big driver. And the attachment rates there have gone up nicely, and we continue to drive nice revenue there. So those are really two the big drivers that we're seeing.
Unidentified Analyst: A quick follow up topic amongst all sorts of providers nowadays is labor and wage costs. Are you seeing any pressure either in terms of filling seats or cost per seat in terms of the people that are doing your assessments or any other labor related issues?
Steven Senneff: The one beauty of our model is the flexibility that we have to get over 9,000 providers in our network where we're able to move them around. So we're seeing not a lot of wage pressure per se but more of like can you clear the volume to get us more in home visits. And so at their total compensation, the more they can work, the more visits that they can perform, the more money they're going to make. And so we continue to try and drive and become more efficient and allowing them to have more visits per day. And that's really been our focus. We have a couple areas that we continue to focus on. But there's real hotspots and getting the providers in there. But we've not seen any major wage pressure across our network that put any pressure on any of our margins.
Operator: Thank you. Our next question comes from Michael Cherney from Bank of America. Michael, please go ahead.
Michael Cherney: Good morning. Thanks for taking the question. I want to stay on the topic of HCS in home evaluations clearly had a very strong health performance in the quarter, you talked about the return of more normalized seasonality and obviously a ridiculously hard 14 comp, as you think about the performance in the quarter. What was the main drivers of the outperformance that was the activity on the part of your clinicians? Was it something with regards to the patient population? Was it something regarding the availability of individuals just curious, more about the business to get an understanding of what drove that meaningful level of performance?
Kyle Armbrester: I'd say it's a few things. This is one demand for the services or even all time highs. So we have our conversion rates continue to train very nicely. So we're getting better with our data better with our engagement tactics. So we've investing heavily, as I mentioned, on the last call, with SMS email in a really multifaceted platform so bringing in services more easily to folks..So that'd be number one. Number two, Steve alluded to it, we are getting more and more efficient with our technology, automating away a lot of the manual work for the providers. So when they go when they're able to have a more seamless experience, and then more face-to-face time with the individuals which in turn, and we've been doing that for years, leads to better year-over-year conversion to. And then finally, I would say it there's been a radical shift in a lot of our health plan clients’ strategies where the risk and quality and clinical groups have all come together. And these visits have really taken on a genuinely multi-faceted nature where we're going in and doing everything to properly assess and evaluate somebody, but we're doing in front of follow up care, bringing them to devices helping to get back with either specialists or PTP. So it's really broaden the service line is really broadened substantially, which again, drives more value into the individuals lives once we get inside the home. The final thing I'd say is, we've had really great adoption across the client base of our social care coordination service as well. And so we've been able to go in and help with several national payers now too, as we've scaled out our social workers and community organizations, bringing not just a clinical perspective but also a more holistic behavioral and social perspective. And that is driven substantially higher conversion in the markets we've launched that and we've got a really great pipeline to continue to expand that throughout the year as well.
Steven Senneff: That conversion increase and the demand from our existing clients it's been great to see obviously, it's led to our third consecutive record revenue quarter and HCS gives us a ton of momentum and that's why we raised guidance in that area.
Michael Cherney: Understood and just a follow up to that relative to the guidance and as you think about the back half of the year, and what's implied relative to where your expectations were prior to this quarter. How does that back half guidance on IHEs on imply HCS revenue shakeout? Is there anything that you think was pulled forward into the second quarter? And relative to that implied growth rate, obviously, normalizing for the 4Q comp? Is this in line with where you would expect your typical trends to be? And where you would have expected the prior to this quarter?
Steven Senneff: No, we're excited, obviously we've been mentioning all along that the seasonality would be returned back to normal versus last year where we did tremendous amount of the back half, particularly in the fourth quarter, really, due to the impacts of COVID. This year, what we're excited about is, at the end of Q1, we said, hey, we're not going to raise guidance until we see this more than just a pull forward event that's going on. And as we just said, like the conversion rates, the demand from clients, that's really allowed us to over perform in HCS. And as we look to the back half the assets, it will be less than the first half as it is in a normal year with seasonality. But we're excited, we're still even with the over performance. And what we've done, I think we're, we're right on expectations for the back half of the year and able to deliver that as well.
Operator: Thank you. Our next question comes from Anne Samuel at JPMorgan. Anne please, go ahead.
Anne Samuel: Hi, thanks for taking my question. I was hoping maybe talk a little bit about margins, we think about lower ECS revenue in the back half of the year. Are there any margin offsets for that? Or how we how should we be thinking about margins? Thanks.
Steven Senneff: So again, if we look at margins in total, we're really happy, right, we continue to expand our margins in total, HCS has done a nice job. ECS is impacted, there's very little variable costs in that side. So there's going to be some impact there as we have the pressure on year-over-year, so that side of the business have lower margins projected for the year. But when we look at it in total, we're still able to manage the business and expand our overall margin base for the year.
Anne Samuel: That's really helpful. And then maybe just on the rebound on the savings rate, how should we think about the cadence of that, looking into next year? Is it something that kind of come back early on in the year? Or is it something that'll be more gradual?
Steven Senneff: That's one of the things it'll be interesting to see. And as we said in the call like, it really came down to the reason that the savings rate is where it is, is the case mix adjustment where we're missing comorbidity diagnosis codes that is people return into the healthcare system, and they have their annual checkups and are returning a patient facilities that should naturally just come back? Is it going to happen tomorrow or in a big bang, no. But we're already seeing that happen in our transits today. If we think that the there's skilled nursing facilities at the back half of last year, even into the first quarter this year, there was a lot of them that were shut down. And so it was just natural people who were putting them into higher cost centers, like inpatient rehab facilities, that trend is going away too, as the skilled nursing facilities are back up and running. So we're expecting the way that we're thinking about it, it’s going to be a gradual rebound in the savings rate, that will primarily we'll start to see in 2022, we've taken a pretty conservative approach for the rest of this year of keeping it around, that’s 6164 is kind of where we're guiding to keep it at around there. But as we said in the call, we think that the impact from those COVID related were at least 1 percentage point. So, if that hadn't happened, we wouldn't be talking much about the ECS business and it'd be much better story.
Anne Samuel: That's great to hear and really helpful color. Thanks so much.
Operator: Thank you. Our next question comes from Matt Larew from William Blair. Matt, please go ahead.
Matt Larew: On the Q1 call I think you mentioned program size was kind of what we thought would be and electives were coming back online. Just curious, from sort of mid-May to June, you have that and any changes you're seeing in terms of program size rebuild here from the backup here?
Steven Senneff: So that's where we're still really encouraged and optimistic. And that's why we kind of view this 2021 is the impact of COVID is really a short-term. If we look to the long-term piece of this Matt, we're seeing that the program size is coming back even today. So every month, we continue to look at the claims that program size is increasing. We've said all along that our expectation was that we could end the year back to the $6 billion mark, all our trends are showing that that is underway and happening. We're seeing the electives have come back even though the electives are actually a fairly small percentage of our total. But our volume continues to trend. And we feel very, very optimistic about returning back to that $6 billion mark, it's a big number for us, because with a weighted average of around $5 billion this year, that sets us up for a strong 2022. It's almost like, as I've said on previous calls, it's almost like we want a billion dollar client to start the year. And so that's going to be a really strong momentum as we head to ‘22. And then back to the previous questions around the rebound in the savings rate. As the utilization comes back the case missed adjustments issue, subsides, we're already seeing issues subsiding, that savings can set us up for a nice run in ’22.
Kyle Armbrester: Sort of to complement that. Just a compliment really quickly to a lot of metrics there, when we got patient ID, which is obviously critical to finding somebody in an Episodes to perform services and to help do the work alongside them, we've been integrating more deeply into charge capture fees, we've been overhauling our AVP infrastructure. So we've really delve into and the team's done a nice job of building better digital connectivity across the base and with some of our largest clients. I'm very happy about that. And then, as I mentioned, kind of in the prepared remarks, our transition to home services really shining and we're live in over 50 hospitals. Our clients are asking us to do that beyond just the Episode BPCI patients but we're working with, we're looking at expanding it to ACOs and to others. But that also is giving folks the opportunity to transition to home as the service name indicates and to recover there versus a much more cost and unnecessary stay inside of a particular facility. So we're excited about those elements as well.
Matt Larew: Another question about sort of what's built into your expectations for bed. And, Steve, I think you said part of getting back to normal vaccination in terms of its 2022. And that there wouldn't be a sort of another COVID surging impact HCS and ECS, we have seen a couple of dates, and health systems discuss the potential for delaying elective procedures in the back half of the year. I guess just curious from your discussions with your clients or your observation of what's built into your expectations for the back half of the year?
Steven Senneff: I think the good news is that the way we're seeing this is we're not seeing anything significant. As I mentioned, it's only 10% to 15% of our volume is really driven by electives. And so if there's a few facilities, it's not really going to have any impact for us. And we're also seeing that the healthcare systems are much more likely to be able to deal with the situation this go around. So while there may be pockets, we're obviously not forecasting that there's going to be any type of national shutdown, like there was last time. So we feel like that we've baked in kind of what the new normal is for now into our numbers, bearing any national shutdown. We feel good about the rest of the year, and then setting this up for ‘22. Hopefully, getting a lot of this behind us. Having seeing the vaccination rates go up is obviously a big piece of solving part of this problem as well. And so, I think that's another factor as we look at the numbers, we see the utilization, returning back to the health systems. They're all numbers and trends in our favor.
Operator: Thank you. Our next question is from George Hill at Deutsche Bank. George, please go ahead.
George Hill: Thanks for taking the question. I think, Steve, you might have just kind of preempted my question was your answer to the last question, but I was kind of a little surprised on the ECS weakness year-over-year in the guidance given that, I would have thought this would have been an easier utilization copper and easier medical costs, or I'm thinking of as it is growing medical costs, year-over-year in Q2 versus what should have been the bottoming Q2 of last year, but you talked about kind of the discretionary use versus the non-discretionary use of the healthcare system? So I guess just a little more color on what you're seeing, as it relates to medical utilization. And I think a lot of us are seeing well, a lot of the MCOs are starting on increased utilization, so just kind of how that rolls into your thinking when you see us and expectations there?
Steven Senneff: So George, one of the things here, you have to remember too, is like the reconciliation that we just received from CMS is, is for the second half of last year. And so the next reconciliation will be good for the first half of this year. So there's significant COVID impact going on in the second half, and even the first quarter of this year. Now, we're seeing an environment was more in certain pockets and areas versus nationwide. But that that lag is kind of what part of the impact is, why we've said that ‘21 was always going to be a tough year for us. And so, as again, as that that case mix adjustment starts to rebound as people go back, and we are seeing those utilization rates. And it's just simple if someone's having in an Episode, and there's no comorbidities that are not part of their history, what happens is they're -- that we're going against is artificially low. And so that's what's happened across the program, over the last, call it six to nine months. And as people return, go back into their house, they'll get those diagnosis is that will be part of their history, and that target price, will that go back up. And, obviously the savings rates that were driving will be based off that target price. I think the thing that we're also seeing in the trends is just as people go back, we feel that the whole utilization process will just naturally drive that up. So we're excited about the future. We know we have to get through the next six months of this year, there's going to be some ebbs and flows there. But as far as our guidance, we're good. And the last thing I would say, George, I know, we keep saying about the savings rate going back backwards. It's still, like I say that, we believe it's leading the industry. And so if we look at all the participants 6% savings rate is certainly nothing to be ashamed about, like our clients are thrilled but we were able to manage that well, of a savings rate during this really tough time. So we know it's going to bounce back. It's just a matter of the timing. And when we get that adjusted.
George Hill: Thanks. That's great color. Maybe just a quick follow up for Kyle, just as we think about the guidance, and the strength that was delivered in Q2, basically, the guidance that was raised for the year reflects the strength of 2Q I guess I would ask the question as it relates to HCS. Do you guys feel like you've seen anything kind of in the last six weeks as it relates to the Delta variant and the slowdown, this kind of tempered expectations in the back half? Or I guess, kind of looking for some real time commentary?
Kyle Armbrester: Nothing, nothing at all, actually, I mean, if anything, we've continued to maintain protective equipment on providers, we monitor daily and a weekly, more room on any COVID, in particular markets. We have zero documented transmission from a clinician to a member, we take into safety extremely high throughout this entire process. I would say even in the last peak of the pandemic, we were operating in homes, and a lot of folks are scared, they don't want to go into facilities still. And so we're giving them a great alternative to bring health care to them. And it's resonating, right, it's like having a doctor coming check on you. And make sure that you're getting clinical social and behavioral your needs are met and homes for free is a really strong value proposition. And so we've seen conversion continue. So no softness on that front. And our providers are retention and provider satisfaction scores are very high. They realize that they're going in and helping to provide the care and services to folks that are off the grid sometimes and don't have easy access to healthcare or for what aren't able to get in and manage your healthcare proactively as they would like to potentially. And so we're, we really haven't seen any degradation in any of our core metrics. And in fact, we've got several clients that we're working with in earnest on a multitude of ways to expand and do more in the home, I'd say that's the most consistent. I've been leaving a ton of clients in the last few months. And most consistent thing they're asking us to do is you're in there with the doctor, with the nurse practitioner, performing all of this work with these connected devices, etcetera. We want to expand clinical pathways and help you guys with us manage disease and risk and think more creatively about the lives that we're touching in. And I think we've got a really amazing opportunity to expand into that given all of the tech investment analytics and how broad our network is as well. And so the answer your questions no, softness and demand is as high as ever, which is why the HCS numbers continue to pick up.
George Hill: I appreciate the color. Thank you.
Operator: Thank you. . Our next question comes from Jessica Tassan from Piper Sandler. Please go ahead.
Unidentified Analyst: Sean Wieland is for Jessica Tassan. Thanks for taking my question. So what's your latest thinking on the outlook for the bundled payment program longer term? Specifically, with respect to mandatory bundled payment? How does the role of the convener change in that? And how does program size change?
Kyle Armbrester: Good question. We've been at a bunch of great dialogues and we talk to them by weekly and have bigger monthly calls with them too. They should be coming out with guidance on model year five, which is the next model year, any day now. You spend your assets have to go through all the various levels of approval. I mean, they've been pretty steadfast and all conversations with it. They're insane anticipate an expansion and more energy and effort behind this program going forward. They also fundamentally believe that it is led to dramatic changes for the positive across the healthcare landscape in value based care centric work, and also helping to helping individuals to navigate and manage their care, beyond, just the procedure or the work that they're getting done in the hospital. And so looking at folks more holistically down into the home. The other thing, we've talked to them a lot about our non-BPCI-A works on, we are with the commercial folks, the ACOs, self-insured employers, we're working on prospective payments, right. So we're things are paid in real time, not the retrospective way that the BPCI-A program has been run. And we spent a lot of time talking to team on that front. And that's been well received. We've also shown them how we've moved beyond just the procedural work inside the BPCI-A to the broader chronic condition where diabetes, substance abuse maternities, inside of the non-BPCI-A Episodes, and that's sort of needed as well. We've had a bunch of thought leadership sessions with them. So we continue to see great engagement with them and I anticipating new soon from them just on model year five, and the path forward here for folks. And there's a ton of conviction across our client base and I've said this before, there's still demand. The last time to have the health systems we were able to add bundles during the pandemic, right where there was a really to most of the time. We know there's a ton of additional service lines and a ton of additional volume again that would give the Medicare trust guaranteed savings that our health systems are advocating for us. We’re hopeful to that human I made, the ability to add bundles through model year five, we don't have that forecasted. That's my aspiration. But we've been a good dialogue with them on that as well.
Unidentified Analyst: Thanks and remind me when does model year five hit your P&L?
Steven Senneff: So model year five will be next year right, so that the first half of next year will not hit until October of next year. Now that said Sean, remember we are estimating along every month on what that actual number is going to be. But we develop a range usually take the low end of the range unless we see like significant uptick. We wouldn't get that until the second half of next year.
Unidentified Analyst: Got it. Thanks very much.
Steven Senneff: Thanks, Sean.
Operator: Thank you. It appears we have no further questions from the audience. So I'll hand back over to Kyle for any final remarks.
Kyle Armbrester: Great. Thank you, everybody, and just wanted to give a big thank you to our team members and appreciate all the work that they've put into this past quarter and throughout this whole year, it's been a big transition year for all of us as a country and COVID has been fluid and they've remained resilient, those helping to make sure visits and appointments to book but also, with all the work that they've done, making sure that we get into the homes to help take care and manage the lives that were responsible for which we take very, very seriously. So thank you guys. And we'll talk to you all soon.
Operator: Thank you all for joining today's call. Have a lovely rest of your day. You may now disconnect your lines.
