Option Care Health, Inc. (OPCH) Earnings Call Transcript & Summary

It's my pleasure to be introducing Option Care. Option Care Health is -- a forward-looking statements during today's conversation. And results obviously may differ, and I would encourage you to refer to our safe harbor disclosures and our SEC disclosures. So with that, John?

Yes. Great. Thanks, Kevin. Really excited to be able to present today. A couple of things to start -- also a balanced view of how we're looking at the back half of the year and some of the challenges that I think exist around some of the inflationary pressures and the team is dedicated to get evolved and we look for opportunities to partner more deeply as we emerge out of the Omicron variant into the back half of the year. There are certainly pressures acquisition and really moving that forward. The unique platform that we have for a nursing network, we think, is one that will allow us to continue to focus around our growth, certainly support the marketplace broadly. But it's really unique in that aspect. And when we look at the areas of growth and hover from a net debt leverage ratio, we're at 3.0. We're certainly going to continue to focus on drifting beneath that, but that just gives us a lot of flexibility as we're looking at the business ahead. And we talked a little bit about our appetite to look at other opportunities to continue to grow the business, both organically and inorganically, and we think that we've got strength not only in the cash flow, but also the strength of the balance sheet to really support that sort of inflection point yet where we're seeing the inflationary tide subside. I think our going-in proposition is [statisticians]. Those are highly sought after disciplines. We think the inflationary pressures in those areas are going to continue and sure these are sedentary cost pressures.

The company has always been talking about pretty attractive organic growth profile, but it's almost -- it's each specifically around there. And some of them, look, we'll push to try to get some rate increase on the podiums or the nursing rate, but it has to be balanced because in some of those you don't want to be reopening negotiations across the whole spectrum. So we've got to take a look at all those components. Our -- the main levers we have certainly is continuing to focus around productivity and efficiency, leveraging the infrastructure, leveraging the technology that we've invested in to the fullest and then [indiscernible] (00:02:35).

Owing of our structure still remains the drug reimbursement. But labor is obviously not insignificant. And as we've said this year we've seen a couple of [Audio Gap].

And is that starting point -- I mean, again, no inflection point there either, I guess, should we be thinking about this being the right -- is going to be the same type of inflationary environment for labor [Audio Gap].

Again, I think it's a little too early to tell we're trying to manage through the balance of 2022, but allusion to what you're saying is [Audio Gap]. One thing I'm saying definitely with John mentioned. So we were talking to both of these organizations before, I'd say some of the labor dynamics of late last year. Again, we employed over 1,000 nurses on the legacy Option Care side. Part of our strategy was to collaborate with leading staffing enterprises across the country. So we already had long-standing relationships with both Infinity and SPIN and dating back to last summer, we were already [Audio Gap].

Long ago that Nursing is a critical part that last mile and at the point of care. That transition was something we were always monitoring. And so to support that patient population as we move ahead.

And I think that the long-term kind of outlook for the company has always been that you have this kind of 6% to 9% in the medium term as we see this as -- on a conservative basis, a high single-digit top line translating into a low to mid-teens earnings proposition. And really, you hit the high end, but we're still pointing to double-digit EBITDA growth despite us absorbing and digesting [Audio Gap].

Hopefully, was great. And so I guess that means kind of the 8.6% margin kind of that's a good base to be thinking of there's no at this point.

We think so. I mean look, if you take the high[Audio Gap].

Your 2 biggest competitors are also payers, how are those relationships, I guess, in specific going, but [Audio Gap].

Relationships. We continue to support their members broadly in the marketplace. We like the balance of our portfolio between the acute and chronic, and that allows us to be a meaningful participant in serving the needs of their members as that moves forward. I think when we [ Audio Gap ]. Access is extremely important as they're building out their network, just having a narrow network that doesn't meet the needs of their members or doesn't have access isn't going to achieve their goals of satisfaction. So when we focus on those areas regardless of who the payer is, we think we've got a winning combination, and we're part of that network care. And we're still on the right side of that equation regardless of captive capabilities or not.

Okay. That's helpful. And you mentioned like the balanced portfolio of chronic and acute [Audio Gap].

So like those are the high-priced drugs. I mean, the specialty drugs have the area of focus. And so from a [Cytocare] initiative and when they're looking at where they can help to influence the -- our infusion suite capabilities and expanding that network, it all plays well in their initiatives around how to rightsize that care.

[Audio Gap] rate that the company feels appropriate, the Medicare not. Usually, it's almost the opposite. So any progress on getting [Audio Gap].

The challenge we have is twofold. Number one is this is a rider along a bigger bill, right? It's not going to be a stand-alone action, and so we need to [fire away] when you look broadly at the limited access of Medicare fee-for-service, especially when you look at what happened with COVID, right, the most vulnerable [Audio Gap] and where that sits and limits access for Medicare beneficiaries. And so look, we think we're right on the right side of that conversation. I mean, in many instances, going to the government to say, look, we can help reduce cost. We can help improve quality. We can do it in a setting in which patients want to receive the care, you would think it's got to be within the trust. And so it's a little bit frustrating because we think we can serve the American public. We think we can reduce the overall cost [Audio Gap].

As a percentage so more and more of the markets opening up to you for that. What about value-based care? We see capitation physicians or direct contracting or [Audio Gap].

Can help play an important role on that. I think as we've disclosed before, they kind of start with a phase of maybe performance guarantees that we'll be well positioned to participate and continue to provide service as they're looking holistically around the capitation model and how to deliver care [Audio Gap].

Is that the way things are going, having home health capability or having capability would help service the population better?

Look, I mean I think those conversations will continue. We've got a very productive relationship with Humana. And really, they've been one of the early adopters of some of the performance guarantees and other aspects. And so we think that's an [evolve vision] business. We love being infusion suite capabilities that we have, and we think that the core of what we do, there's certainly a lot of runway for us to continue to grow. Looking at around augmentation of services. If we're in the home or there are additional things that we can do. Is there additional data we can capture? Are there ways that we can look [seran] and ambulatory statics.

Okay. Great. And then I guess one of the concerns that I can get with you is like drug price reform. If we get this question a lot, that [Audio Gap].

The 3 legs of the reimbursement tool that we have, give us some flexibility around that. And we're either ASP or AWP mark towards that affairs. A reduction needless to say, the percentage that we'd be getting on that would be adjusted on that. We think that the mechanism we have to get after per [DMs] and/or nursing costs and rightsize those through that conversation so that we're being focused around the total value that we're delivering -- reimbursed for the value that we're delivering through that process.

Yes. And then I guess like from an opportunity perspective, you get biosimilars coming -- how do you think about that?

So we cultivate those relationships as we move forward. There's opportunities as payers are looking at formulary administration and formulary management for us to make certain that we're looking at the acquisition cost and how to manage that effectively through that process. So I think our scale gives us an opportunity to manage that effectively and look for opportunities as they present themselves.

Okay. That's helpful. And then you mentioned a few times your home infusion [Audio Gap].

Development would actually probably be a downward pressure when you think about from a reported revenue perspective because presumably with a more competitive category that's going to drive ASPs down, yes we've seen within the chronic inflammatory and within the IG space over a year. So the way we try to handicap this is like 6 to 9 to [Audio Gap].

As we continue to increase the chronic portfolio of products, a lot of those patients are out doing activities of daily living. They're working, they're going out and doing things, having convenient places for them to receive their infusions that's close to work or close to hinted that chronic portfolio. A lot more of those patients are ambulatory. They're out doing activities of daily living, and that's fantastic for that side.[indiscernible] (00:10:06), enter the marketplace that puts additional demands on that nursing community, we're well positioned because we can offer infusion services [Audio Gap].

At least 20 we have over 140 infusion suite locations over 500 [chairs] nationally. There's an upfront cost when you open these new facilities. But once we get these up to "cruising altitude", it's typically about a 10% productivity uplift. And when we think about additional nurse capacity.

Is there any way to think about how much of your business is doing the infusion suites today and like where that could go to [Audio Gap].

Yes. So today of our nursing [Audio Gap].

Perfect. I think actually, I'm trying to squeeze one more in. So you mentioned before the balance sheet is getting better. Cash flow is getting stronger. So like how do we think about capital deployment for you guys? Is there enough M&A? Or should we think about share repurchase or anything else?

Yes. I mean we're thrilled. Again, when we started this journey, the capital structure when we merged into BioScrip, we inherited it.

I think it's all we have time for. Thank you very much.

Thank you.