CareCloud, Inc. (CCLD) Earnings Call Transcript & Summary

Good afternoon and good morning, everybody. My name is Kevin Dede. I am Research Analyst at H.C. Wainwright. And it's my great pleasure and honor to introduce Hadi Chaudhry, the CEO of CareCloud; and Bill Korn as well, the CFO of CareCloud. We're here to talk about the transition that the company is currently undergoing from more of an M&A type of history to the great emergence of more organic growth, which we think is more or less gone overlooked by Wall Street. And that's really the driver of the agenda here. So Bill, I'll turn it over to you. If you wouldn't mind just catching people up on CareCloud's history and a little bit about where you and Hadi see things.

Thanks, Kevin, and we appreciate you taking the time to chat with us today. For those who don't know, Kevin Dede has known us since before we were at CareCloud. We went -- we were -- the company was founded about 20 years ago. We went public in 2014. At the time, we were called Medical Transcription Billing Corporation. And at that time, probably 75% of our revenue was medical billing and other service-related offerings. Well, we've done 17 acquisitions since then. Some of them are small, but some of them some pretty big game changers. Today, 85% of our revenue comes from cloud-based services. And in fact, we, a year ago, took the name of one of the companies that we bought in 2020, CareCloud. And recently, the company has continued this evolution. We introduced telehealth to the marketplace in 2019. And for everybody who's used telehealth in 2020, in 2019, nobody was really thinking about it, but we added it to our platform, which was fortuitous. A few months ago, we introduced CareCloud Wellness, which we're really going to talk about today. And we think that this new sort of hybrid initiative that we're introducing is really going to usher in a whole new era of healthcare. We think it's going to be as much of a game changer to the world as telehealth was when people started using it in 2020 and 2021. So with that, let's -- Kevin, ask us a few more questions and tell people what do we mean by this.

Right, right. Hadi, maybe you could give us a little insight on the evolution of telemedicine. And how you see the Wellness service offering differentiated from that?

Great. First of all, thank you, Kevin, and thank you, everyone, for joining. We do appreciate everyone's time. So as, Kevin, you said and as Bill has mentioned, so the evolution of the company since its inception and now more and more focused, whether it's us or the overall healthcare industry, towards the telemedicine or in a broader speaking, the digital health or virtual care, value-based care, preventative medicine, this is where the whole U.S. healthcare industry is evolving and transitioning and going towards. And we believe the way we are looking at the market, I think it's at the cusp of transitioning towards the next generation of healthcare. And by that, what I mean is, if I just give one simple analogy or an example, today, if you think about it, most of the appointments are being driven -- the doctor visits are being driven by the patients. It's the patient who feel sick and picks up the phone and call the doctor for an appointment. The times are not far away where most of the appointments will be driven by the healthcare providers instead of the patients. And we're going to talk about some of those things today, why we believe that to be the case and where the opportunity is for us as a company and similar other companies in this space and the overall healthcare market. Talking about the telehealth, just to put the things in perspective and if I can share some of the numbers, if we think about when we launched our telehealth services in 2019 before COVID, if you look at our overall appointments, hardly 1% of 1/10 of the appointments were telehealth visits compared to the overall. COVID hit. During the COVID, the world realized, everyone realized there is a more and more need of virtual visits instead of the in-person visits. That number went up to 27%, 28%. Post COVID, it's -- it currently is settled down somewhere around 6% to 7%. So that pushes already that adaptability. Acceptability has already started to take place, already have started to happen. Now if you just zoom out and look at some of the industry numbers, some of the industry analysts with the different reports what they have been talking about. So based on some of the credible industry reports that we look at, the U.S. telemedicine industry in 2022 was about $31 billion. And it is anticipated to grow to about $90 billion by 2031 at about a 17.5% CAGR. That's what's anticipated. If you now think about and look at it further because, as I mentioned, the telemedicine initially was considered to be just a video call between the doctor and the patient, it has gone a lot beyond that, the solutions such as chronic care management or the remote patient monitoring-based solutions, which is not purely a telemedicine, but it's a part of it because it does involve telephonically or over the video talking to the patients by the caregiver, based on the certain data, and helping them improve their health condition. So if we just dive a little more into the numbers, based on, let's say, a live market research report presented, chronic care management is estimated to be at about $5 billion -- was estimated to be at about $5 billion in 2021 and is expected to grow to about $15 billion by 2031. Same way, there was -- if you look at the Fortune business insights, they share the Internet of Medical Things, which is the, you can say, the further refinement of the remote patient monitoring because that is dependent on many of these devices, which are -- which can be connected to the Internet and finally can feed the data, this market will reach about $188 billion by 2028 at a CAGR of around 30%. So this is how we -- when we look at it from the market opportunity perspective, this is how we are -- this is where the opportunity lies.

So Bill, just taking a page from the comment you made earlier, can you dive in a little deeper, peel the onion back on CareCloud's Wellness service offering? And give us a little more insight on that transition from pure telemedicine, as Hadi pointed out.

Yes. So Hadi mentioned the 2 core elements that we've launched so far in CareCloud Wellness. The first is chronic care management. And the way to think about chronic care management is you've got a patient with a chronic condition, so diabetes, asthma. And now let's give them the opportunity for a regular, say, monthly remote check-in with a trained medical professional, not necessarily a doctor. It could be a nurse maybe. Maybe it's somebody who's got training and is actually not even a nurse, but they know what to do in that situation. . So they could have the conversation, see how the person is doing, check up on what's going on. And then they could identify -- in your situation, I think you should go see the specialist next month. So let me go set you up for the in-patient -- in-person visit. So again, for a lot of people who've got these chronic conditions, they don't think about it. They don't know there's a problem. But if somebody is talking to them, maybe it gets identified. So the chronic care management is really a -- an interpersonal offering. Remote patient monitoring, as Hadi mentioned, think about this Internet of Medical Things. And now you've gotten a blood pressure cuff or you've got something to measure your blood sugar or whatever is specific for you, and it's sending in the results automatically every day. Well, if the doctor got results on 300 patients every day and had to try to see whether their blood pressure was in line with history, forget it, they never do that. And if they did, that would be their whole job. On the other hand, we've got software that can look at this, can look at your trends and can say, "Based on what I see, you didn't know this, but you need to come in. You need to be seen." And I think that's really the beauty here, is the same way that your car can say, "Now it's time for oil change." Yes. Now all of a sudden, the doctor's office will have information that we provided and say, "Now it's time for you to come in essentially for your oil to be changed and for you to get seen by the specialist." So it's really changing the whole paradigm of how healthcare is delivered.

So Bill, just to help clarify for me the initiation of the process, right, it still seems that it's incumbent on the patient to reach out to the physician. Just help me understand the mechanics from that perspective and then the delivery of the physical devices and their capability in order to make -- to complete the package.

Yes. So clearly, the patient is key to this. But instead of making the patients do all the outreach, and certainly, instead of making the doctors or their staffs do the outreach, we take that on for them. So we say to the doctors, and we started doing this with our existing customers, share with us the list of patients who have the conditions that would make them eligible for this, and we'll take care of the outreach. We'll contact them on your behalf. We'll get them signed up. If it's chronic care management, then they don't really need a device. I mean then they can use their telephone. They can use their computer for a Zoom call just like this. If it's remote patient monitoring, they're going to need a device, and then we'll position those devices at the doctor's practice, so that the doctor's staff could give it to the patient, can give them kind of the "Here's how you put this thing on your wrist. And if you have more questions, here's who you call." And again, we'll take the burden on of do-it-all that. Because at the end of the day, the benefit for our practices is we'll do a lot of this work. They don't need to add the staff to do it. They don't need to take the time to do it. But on the other hand, when Medicare reimburses, when insurance reimburses, we'll share a piece of the fee with them. So they'll get the -- some of the economic benefit as well.

So does your software comb through the patient list that your physicians -- your client physicians have?

And maybe add -- a good question, Kevin. To summarize what Bill has said. So the pieces that we offer, just to summarize everything, so one is the technology aspect, and that relates to the part of your question because if it's an existing client, we already have the patient data. We already know about their conditions because of the clinical -- access to the clinical data. They have been using our platform or they were part of our services. . So we run the eligibility electronically, eligibility checks with the CMS and other insurances to find out and based on the chronic conditions that which patients are eligible and can participate in this chronic care management program. So we obtain the data. And then the second set comes in, which is our caregivers. And those caregivers are the ones, which do the outreach to the patient out of that eligible list of patients, and then they help them, first of all, understand why it is important, how this will improve your overall health, your well-being and this is how we believe your -- the certain -- this x percent, which the CMS numbers are about, 7% to 8% reduction in the hospitalization rates for the patients who have been participating in the chronic care program as an example. And then they look at their existing charge. They create the care plans. They update the charts in the system. So they can take care of everything in terms of providing and guiding the patients. Then the third step comes in -- the major step comes in, which is the RCM part or the financial part because all those services have now been performed. Now the reimbursement has to come in from the insurance company. This is where our revenue cycle platform comes in and our team members over 2 decades of experience in RCM space comes in, our rules of scrubbing -- the claim-scrubbing engines come in. We make sure that the claims get submitted to the right insurance companies. They get reimbursed at the right levels. So these are the 3 pieces. One is the technology platform to monitor, to identify the patient. This is the verification of their eligibility. Second part is the caregivers or the doctors and the staff doesn't have to worry about hiring additional staff member to conduct those services. Third piece is making sure, now whatever you have completed, you get the financial benefit and to get it reimbursed at the right level from the insurance company. In the case of remote patient monitoring, the one additional piece gets added, which is, as Bill mentioned, the devices as an example, the blood pressure monitor. The good -- one of the advantages to the patient is the FDA-approved devices are reimbursed by the insurance company. So CMS pays even for the cost of that device. So all the patient has to do is to agree to keep doing the monitoring as defined or worked out by the caregiver, and it will be paid by the insurance company for the cost of the device, and then there is a reimbursement based on the time the practice has spent with the patient or our caregivers have spent with the patient.

Okay, Hadi. Now understand that these are fairly newly introduced, but give us some insight on how you see their adoption and the opportunity set within the group of clients that you have.

Great. Great question, Kevin. And I'll talk about, first of all, the -- what we have seen in our existing client base. So first of all, just still for us, it's a newly launched program. We just hardly have been -- it's been 2 quarters we have been in chronic care. In less than a quarter, we have been in this remote patient monitoring. So based on the limited data that we have so far, what we have seen, when we do an outreach to the practices to tell them the benefit of this program, one is the financials, the other one is the patient satisfaction, the improvement of the well-being, the overall -- the health condition of the patients. For the eligible practices who can do chronic care management, we have seen an acceptability rate of over 70%, except for if they already have been taking the services from somewhere else or doing it in-house. And this is in our push towards the first phase that we are trying to reach out to handpicked clients -- of our existing handpicked clients. And then we are entering -- going to enter and in the process of as per a defined plan for the second phase and the third phase, which is even not only existing, the external clients using -- making this as part of an overall program, let's say, if we are doing an offering of full RCM that we call Concierge, we'll communicate and talk about this further and later in the fourth quarter, like how the whole end-to-end program with an inclusion of chronic care and remote patient monitoring can benefit one practice. On the patient side of it -- and again, so we don't have too much data, but we believe what we have seen so far. Out of the eligible patients, the adoption is going to be somewhere between 40% to 50%, and this might even improve further. And we don't have enough data or virtually no data at all from the remote patient monitoring perspective for the patients. That adoption rate probably could even be higher. Let's take an example of blood pressure. If a patient is a high blood pressure patient, you still have a blood pressure monitor at home, the old conventional -- the blood pressure monitor. You may still check your BP level once every week. So now if you're getting a [ freak ] device, which is a more digitized, state-of-the-art blood pressure monitor and can check the -- check your blood pressure monitor level just on the once and on the daily basis as an example, and it automatically feeds the data to the central system. And then the doctor or the caregiver or the nurse gives you the call and tell you by looking at your last 1 week of blood pressure reading, this is our guidance for you. This is how you should change your exercise habits or your -- how you're taking your food or your medicine. So those changes can be suggested. In terms of adoption, we have seen like -- to summarize, as we are trying to go and sell these services, about 70% of who we have reached out to and on the patient side, we believe, based on how much we know today, it's going to be somewhere between 40% to 50% for chronic care and may be higher for remote patient monitoring.

So you touched on sort of my next line of thinking, Hadi. You still have a huge opportunity set within your own client base. But how are you presenting these services, both to patients and your client physicians?

Okay. Kevin, if you -- just on the last earning call, we mentioned we disclosed the numbers for our annualized recurring revenue, booking numbers in the second quarter. So we hit our record-high booking quarter -- the revenue booking quarter for the sales -- the actual revenue that needs to be recognized, but we have booked our -- the contracts have been signed, about $5.2 million in the second quarter. . 1/3 of those we mentioned that were coming for over these new initiatives such as Wellness, which is at that time, it was only chronic care management, and the visibility that we had at that time, we believed that the third quarter is going to be similar or higher than the second quarter, though we will talk about this further in our upcoming earning call for the -- when we will share our performance for the third quarter. But just to give you -- and we mentioned in one of our press releases, we already have increases surpass those numbers. So the numbers for the third quarter are going to be better than the second quarter booking numbers. So that's the kind of the -- so it's the proof of what we think it can happen, and now the numbers are proving that this is happening. And our approach, how we are doing the outreach at this point to share a little more details -- since we have all the data -- so when we go and talk to the client, it's just not hypothetically telling them this is how much we can do. We share with them, this is -- these are your total number of patients who are eligible. This is what our average adoption rate has been in this -- whether age group or in this geographical location and so on and so on. And this is how much your revenue will be increased with zero increase in your operational cost. And then the benefit on the patient satisfaction is the next thing that will come, and the patient will have more stickiness for them as a -- from the business standpoint. And this has been very successful. That's why we have been able to get a lot of quick -- the signing of the contract from the existing clients. For the patients, it's a different approach because that's being driven primarily by the caregivers when they are calling them and sharing with them their current health conditions and then saying these are the industry statistics. This is how we're going to make sure that we will take care of you. We will keep on updating your medication plans whenever it's needed instead of you scheduling another visit after 3 months when you start feeling a need of it. It will be -- once every month, we'll get on the phone with you for 20 minutes or 40 minutes, and we will guide you based on the data what you should be doing. So this is whatever our strategy has been so far, and it seems to have been working pretty well.

So from your client-physician perspective, it's very attractive, right? They'll see revenues go up without much marginal cost, implying a margin expansion, right? And the patient sees more complete service, right, that they're being recognized for any abnormalities that might be detected through chronic care, the wellness and modern solution.

Absolutely.

So the -- how has your marketing and your business development effort evolved as you've accumulated better data, more measures of success? Are you trying to lead with this type of solution to address maybe new clients?

Yes. Good question, Kevin. And then actually, I think there's another number statistic that I should share. We have seen whoever has -- the practices providers and the practices perspective who sign up for this service, they can increase their revenue with no increase in their expense by over 30% in their annualized revenue just by adopting to chronic care and the remote patient monitoring services. And this is 30%. It's going to be at an average 30% or above it, but it's a typical practice. It's between 30% to 40% improvement in the revenue, which is a very attractive number, and there is no reason for them to say no because it's not just this one 30% increase in the revenue. This is also -- they need to get themselves ready for the next challenges of the healthcare industry, the requirements and the compliance and the -- because as more and more -- there will be dependency on the value-based care models, this will help them get themselves prepared to handle those, to face those the next-level challenges. And then to your second part of the question, which is the strategy-wise -- so one, as I said, in the phased approach, we reached out, first of all, to a handpicked existing clients, where we know we can add good value for them. And then the second phase is also part in the -- expanding the first phase to the existing client base. And then the third phase coming up with more creative, packaged solutions, and we may come up and we will communicate. Let's say, today, if we have a CareCloud Concierge, maybe we have another separate group of service offering, which would include these 2 services as part of the overall offering we have because we still believe the real value can come if someone signed and opt for end-to-end service, which is our one of the differentiator. Think about it. Starting from -- you don't need to worry about the EHR. You don't need to worry about the practice management system. You don't need to worry about your RCM. We're going to take care of those. Now you don't need to worry about your digital health-related initiative, whether it's telemedicine, the regular telehealth phone call, chronic care management. So it's all tied, integrated back end in the same database. This will eliminate redundancies, inefficiencies, duplication of data. They sign up for us end-to-end, we make sure we can improve the overall patient satisfaction levels, the healthcare of -- the overall well-being of their patients and improvement in their revenues.

So Bill, I appreciate you mentioning that I go -- we go back a long time. I think we started talking in 2016. And back then in those days, it was all M&A. And I'm curious now if you can talk about how maybe those M&A objectives may have altered, given the success that you've seen with CareCloud Wellness.