All right, guys. Welcome, everyone, I know it's early. My name is Michael Ha, the Managed Care and Healthcare Services Analyst at Morgan Stanley. Our first session today is with CareMax, one of the largest providers of physician services through its capitated physician clinic model. I'm pleased to have with us today, Chief Executive Officer, Carlos de Solo, Chief Financial Officer, Kevin Wirges. And with that said, I'll pass it over to you guys for some introductory remarks. Great. T hanks for having me. For those of you who don't know the CareMax story, we founded the company in 2011, primarily because we saw a disjointed system that was very fragmented, specifically for the senior population, through some of the experiences that we had with our family members. And we set out to fix that by creating what we call our, you know, our fully integrated center model. And what we use, we use something called the Whole Person Healthcare Model, which, we use it frequently today. And what that means is that we were able to offer everything in one location to our seniors and focus on things that traditionally hadn't been really important, like social determinants of health, making sure that patients weren't suffering from social isolation, which had a direct impact. Bringing all the specialists under one roof to create this, effectively, a team approach, and make sure that we were able to identify what patients had early and put them into a cohesive plan with all the physicians acting as, as a team. We had tremendous success in bringing down, you know, hospital days per thousand, just total admissions. As we had more and more success, we opened up more and more centers and also applied it to our MSO, our IPA affiliate network, and effectively created the same model, for those IPAs, creating those preferred specialist networks, giving them access to our centers, and we're able to have similar results that we achieved at our, at our medical centers. So we perfected that model in Florida, and over the last several years, or in the last several years, decided that we really wanted to scale that nationally. And so we decided to take the company public, and since then, we've done a lot of exciting things to expand the CareMax footprint. Now we're in 10 different states. We recently closed an acquisition with Steward that added about 1,500 physicians that are really gonna help us expand in a capital-efficient way through all these markets, and bring this kind of great innovation that we've been able to develop, both using our model and a technology called CareOptimize, which we developed to assist us in doing this throughout the country. So really excited to be here today and to have a little bit more discussion around all the things that we're doing. Great. Great. Thank you. So maybe to kick it off, utilization. Curious how it's trending so far through third quarter versus your expectations. I understand inpatient trends have outperformed year to date, and last quarter, you did see a brief increase in MA outpatient surgical, but it appeared to normalize back to expectations. I think you also mentioned flex card utilization, if you could comment on that as well. Yes, overall, I'm curious to hear how things are developing now that summer's over. Yeah. So utilization, we did see that little bit of an uptick in the outpatient side. During Q2, it did normalize. You know, we continue to monitor our inpatient utilization. We're really happy with the results for the first half of the year. It was, you know, favorable to our expectations. I think it's a little too early to tell right now from a Q3 standpoint. Early indicators tell us that our utilization is in line with our expectations. So we're pleased with that. Flex cards continue to be a hot topic, especially in South Florida, with those benefits. We continue to manage those costs. It impacted our first half results by about 190 basis points. We do anticipate that utilization to continue. I think it's also important to note that as we look out for the second half of the year, we did expect MERs to be relatively consistent, first half versus second half. However, as you look back historically, 5 of the last 7 years, the second half has been markedly favorable to the first half. The two exceptions were COVID in 2020 and last year, when we had the flu season happen just a few weeks earlier than anticipated. So, you know, we're, we're excited about the second half of the year. Utilization is, is, is within, you know, we're our expectations, and so we're continuing to manage the, the flex cards as well. You know, and I would say those flex cards, they have been an issue for us, so we have begun having conversations for the, for the next several years with those health plans, right? You know, the way we see it, you know, we're managing the risk, we're managing the acuity, you know, the revenue effectively after admin fee really comes to CareMax. So in a lot of ways, a lot of those dollars, you know, it's effectively our dollars, and we get the pressure the health plans are under to grow, and they use these flex cards. But these flex cards are ultimately coming out of our pockets. So effectively, a lot of the growth is being subsidized by the, the provider groups. So these are conversations that we're having on how we can work with the health plans to, you know, better adjust those benefits as we think through them, in the future. Additionally, I would say that we're also taking matters into our own hands and finding different ways to be more effective in how we can mitigate that. And that may mean that certain things that were available at those centers, at no charge for members, that now are potentially covered by those flex cards, we're exploring ways on how we can use that flex card at our centers to acquire those services, so that there's less of a net impact to CareMax, or potentially no impact to CareMax. So a lot of that is underway right now. Just a quick follow-up. Do you have enough execution time to get that set up in place for 2024, beginning of the new benefit season? I think it's still too early to tell if we'll be able to have some of those things in place. I think there's probably some low-hanging fruit, and ideas we'll have this in, in kind of different schedules. So I think there is an opportunity for some favorability or some benefit from that in 2024, but I think it's gonna take, it's gonna take some time to really realize the full benefit of being able to implement these things, work with the health plans, to negotiate, to make sure that we can use those flex cards. They're all very different. That's the other thing, right? Every single health plan is different. Some are more flexible than others. Some we could theoretically use today, you know, and others we probably have to have some setup with the health plan to be able to use it at the center. So it's going to really be, you know, be plan by plan. Right. That's helpful. So maybe to jump right into the hot topic as of late, V28 risk model revisions, especially with all the ChenMed news and rumors circulating around that. I just wanted to dive deeper into this with a few questions. My first question, I understand Steward, it gives you more geographic diversification in your model with lower-risk score lives, which presumably should help. But curious, have you run an internal analysis on quantifying that impact to CareMax over the next three years? Yeah, we actually used external third-party actuarial firm to assist us with that. As a matter of fact, when the news came out earlier in the year, we engaged with them pretty quickly to understand what the impact was gonna be. Look, over the next three years, it's, you know, it's probably gonna be a 3%-4% impact, headwind, just taking the pure methodology change. From our standpoint, there's, you know, activities that we engage with throughout the year, from a coding quality standpoint. And so, as we looked at 2024, initially, our initial budget or assessment was about a 5% improvement, in overall PMPM revenue. Now, with the V28 coming out, we're expecting that basically a 2%-3% increase. Yeah, there's no doubt that there's going to be an impact, specifically in the Florida, South Florida membership because of its maturity. But I think you mentioned it because we have expanded our business so much and now have so many members outside of Florida, more members now than before that have very low to, in many cases, you know, zero risk scoring. We think there's gonna be huge upside for us versus other groups that have higher concentrations. I'm not, you know, too familiar with, you know, ChenMed's business, but I know that they had a significant exposure in that South Florida market, and I think there may be some impact there. But ultimately, in our case, I think while we will feel some impact, as Kevin mentioned, in our analysis, I think the big upside here and the big focus is on the transaction that we completed and the upside we have there, both with MSSP and the Medicare Advantage membership, really not having been accurately captured from an acuity perspective. Great, that makes sense. Just quick clarification, 3%-4%, that's per year? That's per year. Okay. And then as you think about that, one of the major payers recently mentioned they are planning to offset about a third of the impact of Value-based care providers through the plan design. Taking that into context and thinking about a potential mitigation plan, is that something you can discuss in terms of, you know, pace and timing, specific offsets, you know, if you could expand on that? Yeah. I think we're always looking at ways to continue to bring down our cost and improve our ability to capture the right acuity. So, you know, we think that impact that Kevin spoke to you about is without anything being done, right? And I think some health plans, again, this is gonna be plan to plan specific, just like the flex cards. Some plans may be able to, you know, make an impact that can, you know, save one third and some maybe two thirds. So I think it's going to vary plan by plan. So I think it's important for us, regardless of what the health plans do, and we're still working closely with them, to continue to invest in developed programs to manage our high acuity patients. We've already been able to implement programs like that that have been very impactful in the amount of savings that we're able to generate. In our top 10% of our spend, we continue to invest in bringing more specialists, both to our MSO network as well as our fully integrated medical centers. All of those things allow us to bring down costs in a way that will allow us to help impact or mitigate that potential effect from that RAF score. Great. Great. So pivoting here to MSSP, CMS announced the final 2022 savings. I was wondering if you could talk about how that panned out for CareMax relative to your expectations. And then a quick one on, you know, as we look to next year, the final 2023 MSSP, it'll include the full year of Steward's shared savings. So could you discuss, I guess, the view year to year on expected shared savings progression, the broader opportunity, and could that be an upside cash flow lever to the CareMax story next year? I think the majority of that upside or that savings for this year went to Steward. I think CareMax was 1/6 of that payment. I think Steward did, you know, they did a good job of where they got MSSP too. But what we have seen as we begin, you know, to really understand that business, is that there's a lot of upside left behind in just the way that we manage member the capturing of acuity. You know, when we think about capturing acuity, we really think about managing chronic comorbidities early, right? And capturing things early. And I think that's something that really wasn't done. So our ability to actually be able to manage these members, identify these conditions early, put them into a cohesive protocol, and it's not going to be managed any differently than we manage the MA population, has the potential upside of both bringing down utilization as well as capturing acuity for those members, because, you know, we really see those as one and the same. So we do see significant upside in that savings rate. I think you want to add something. Yeah, that's right. I think we definitely are expecting the 2023 savings rate to be higher than the 2022 savings rate, based on all the everything that Carlos just mentioned. The $50 million that came in or is expected to come in for 2022 was a little better than we had anticipated, which was good. But we do expect to unlock some additional savings from the 2023 efforts. Great. Great. So a topic as of late, one of your large competitors in your geographic footprint is going up for sale. Wanted to jump a bit ahead and discuss capital priorities, specifically appetite for M&A, and how you view the competitive landscape if these assets were sold to another competing payer or provider, you know, your ability or your ability to take market share during that period of disruption, and if that were to happen, do you, do your centers even have the capacity to take that market share within that footprint? Yeah, I'll start with the end. We definitely have capacity in all of our centers. There's significant overlap in a lot of specific geographic regions. So I think whenever you have that type of disruption, I think there is a net benefit to, you know, to the providers that are effectively left behind. So I think we'll have a lot of upside there. As we think through our business right now, though, I think we're thinking about it in two ways: you know, it's liquidity and capital efficiency. So those are kind of first and foremost what's important to us. So I don't know that we have an appetite for any serious M&A for the foreseeable future as we kind of think about this next year and the MSSP payment coming in and getting cash flow positive by the end of 2024. So I think there's gonna be a lot of opportunity to potentially you know during that period of confusion or disruption or what you called it there will be opportunities there. That doesn't mean that we won't explore an opportunity. If there is an M&A opportunity that does make sense, it's completely synergistic, and it is accretive from the beginning, we'll always take a look at those you know those specific examples. But again, a nd you'll hear us talk about that a lot today. I think liquidity and capital efficiency as we think about growth, de novos, acquisitions, is first and foremost, you know, between now and cash flow positive next year. Great. W anna spend a little bit of time talking about capital position and then pivot to three or four questions on Steward. I believe you currently have about $55 million in cash, $60 million of undrawn debt capacity, that you believe is enough to bridge you to end of next year when you're targeting breakeven free cash flow. Could you walk us through your thinking on balance sheet cash flow next year? What gives you confidence that it's enough to get you there? Y ou're right, $55 million of cash on hand, $60 million in DDTL, which we anticipate pulling down over the next nine months or so. T his business has a little bit of a working capital drag. There's always ebbs and flows, but typically the first half of the year, there's a working capital drag. We're waiting for the midyear and the final to come in. Once those comes in, there, you know, there's a little bit of an improvement with MSSP on the horizon. Obviously, you know, we only get one-sixth of the $50 million that's coming in now, but that comes in kind of in Q3, end of Q3, early Q4. So typically in the business, there's ebbs and flows. You tend to have a working capital drag early on. You know, our core business is producing cash. We have de novos that we've, you know, invested in, starting last year, that are a little bit of a drag on cash. So yeah, we feel confident in our position and where we are right now, to kind of bridge that gap until, you know, 2024, 2023 payment that comes in at the end of 2024, at that point, we'll be, cash flow positive. Great. And you receive that in October? It's September, October. Yeah. October. Okay, great. All right, Steward. So I think a common misunderstanding or feeling I get from investors is that the Steward deal is, you know, too good to be true. So many lives that are projected to be brought on board at full risk. I was hoping you could discuss this at a deeper level. Like, one, the eagerness of payers to align themselves with CareMax. And two, are most of these Steward lives already attached to payer contracts with sort of trigger points over the next couple of years? So if that's the case, how does that give you greater certainty that these lives will flip to full risk over time and can convert? Yeah. Yeah, I think that's right. All of our agreements that we negotiate are full risk agreements, but what we're able to negotiate within those full risk agreements are these glide path to risk concept, meaning all of these members that we are ingesting, it isn't about going back to the payer at some point in time in the future to negotiate a risk contract. That risk contract has already been negotiated, and it is a matter of two things: either timing, or we do have the ability to elect to trigger risk prior to that 18- to 24-month period of time. So I would say that all the members that you see today are already on a full risk platform. We have just been very efficient at being able to negotiate something where, as we professionalize the business c apture the acuity, we've been able to leave those losses on the side of the health plans for that period of time. And I think that's something that has served us well in these markets, where others have experienced some challenges and maybe having gone, you know, with that full risk too early. I think having taken that prudent approach has really set us up, you know, to succeed over the next, over the next couple of years. Great. And I definitely want to get into the thinking about how you elect early and make that decision. But first, in terms of, like, pace and timing, you know, since completing the acquisition, you've more than doubled your contracts, right? 40 MSO risk contracts. You're expecting to make more contracts active over the next year. How should we think about the pace of timing, you know, over the next few years? How much visibility do you have ahead of time into potential members that allows you to reasonably project over 2024, 2025, 2026? So a lot of that is attribution, right? There's a lot of Medicare Advantage membership today that sits in the Steward ecosystem, and the way the health plans determine if that's your member or not your member is by their attribution methodology. One of the things that we do when we practice managed care, and we train the providers, is to make sure that they're seeing those patients, you know, either twice a year, once a quarter, depending on acuity. So as we train that behavioral change for these doctors, and they start bringing in those members more frequently, that attribution number begins to increase, and that is how we end up getting those members. We don't have to enroll them in a plan. They're already enrolled. It's a matter of just getting that attribution and getting credit for that member that we're already servicing today, but potentially under the Steward system, they may have been seen once in that year or maybe even once over the last two years. So we're just getting into that cadence of seeing that member more frequently, and it's how we really motivate the providers, you know, to practice managed care, right? We teach and train them to change their behaviors, and we create a payment according to that, so that we can get both attribution, but also the right performance rates based on, did you see 95% of your patients? Are you hitting your quality measures to make sure that they're practicing well? And inevitably, in doing those things, we'll get the attribution that we need. So when we think about long term, I think when we think about, you know, the numbers that we had discussed in Investor Day presentation in 2026, you know, there's a high degree of confidence we get there now. The years in between, you know, it's a lot more choppy, and that's why we never gave guidance in, you know, 2024, 2025, because as we get that attribution, you know, the cadence of that is a little bit more difficult to predict with accuracy. Yeah, the long-term thesis holds. Yeah, I would, I would just add to that, in, in addition to that, as we're maturing that book of business, the implied EBITDA that's coming from those patients or the medical margin coming from those patients early on is relatively small, right? So as you think about s taking a, you may have a full risk contract, there is 12-18 months before we get there, sometimes 24, there's an admin fee that gets paid up front, right? And call it $10 PMPM, right? So if you sign up or we activate a contract with 100,000 patients, it's not a significantly over material amount of revenue dollars that are coming in. But as we mature that book of business over time, which, again, to Carlos' point, is why we're really focused on 2026, at that point, all of the contracts that we have, that we are currently negotiating, will be full risk. And so that's at the point when the full revenue recognition starts happening, medical margin starts being unlocked, and that improvement on the medical margin PMPM is actually recognized. Got it. So actually, I think you touched on both of my next questions already. But, it sounds like, just to recap, your ability to, or your comfortability to attribute members depends on the physician readiness and, you know, seeing members, like, once or twice a year to filling goalposts and quality measures. And that's, to confirm, that's the real, I guess, hurdle in attributing members, getting the physicians ready. Is that right? There's going to be a tranche of patients that are already attributed, right? So there's a tranche of patients that as soon as that contract goes live, 5,000, 10,000 patients automatically are assigned to CareMax. Then there's going to be another tranche of patients that we need that attribution logic to kick in. So that's where the lumpiness comes in. We may execute a contract today, it may be effective right now, and maybe only 50% of the membership that the provider has seen over the past year or two gets attributed, and we have to work on that other 50% over a period of time, right? Yeah. That attribution happens, deploying what we call our CareMax University, right, which is our provider relations team, educating the providers on all the things that we just touched on, that we just discussed. Also, deploying the CareOptimize software that's already been deployed in most of these practices to make sure that we're ingesting the claims and, allowing or providing the ability for physicians to, you know, practice better on the quality side, as well as on the acuity and the risk scoring so. Got it. Got it. That's helpful. And then, Kevin, you mentioned profitability of these lives, and just to quickly touch on this again: So the lives that you're triggering are electing to take full risk on earlier, they're actually coming in accretive and lower MLRs, like low, low nineties. And is that true? And does that mean if they're already profitable year one, how many of these year-one profitable Steward lives are around in that population base? W e're still, obviously, still evaluating that. As data flows through, we're taking a look at it. We need to have substantial data points as we look at that before we pull the trigger. We did actually do two contracts in Q1. Those contracts had an admin fee of roughly $10-$15 PMPM. We noticed that despite the high 90%, call it 93%-94% MER, they were significantly accretive, earning $60-$70 PMPM. A lthough we pulled the trigger early, and it does deteriorate our overall blended MER, it's accretive from an EBITDA standpoint, so we'll obviously, we'll do that every single day. Great, great. And, I guess my next question was about MRA, but it sounds like they run at an overall lower risk score than their geographic averages. So that, that does present an opportunity over time to just even appropriately code them, not just for like MSSP as well. W e've talked about this, right? I think Steward did a good job at beginning the process of what we call value-based care light, but not a, not a whole lot of focus on acuity and making sure they had the right coders in place. So that's something that we feel that we're gonna be able to implement and take advantage of. And again, I'll just reiterate what I said earlier, taking advantage of not just capturing the right acuity for a member, which is critical, but the early identification process that happens through capturing acuity is just as critical, because that is what allows us to bring down our overall cost of utilization, right? If I'm able to identify potential conditions that patients have whether cardiovascular or diabetic or whatever that may be, and we can put them in programs to monitor their health earlier and get them on the right medications, then the likelihood that they fall into some a facility is far lower because we're creating a higher touch model with these patients, and we're able to be on top of them. So there's a net-net benefit actually on both sides by being able to take advantage of this. Got it. So wanna spend a couple minutes here talking about your, clinic centers and what I see as the CareMax one of the very distinct points of differentiation are your in-center specialists. And I think last quarter you mentioned successfully reducing external specialty leakage by 10% versus last year. Could you speak more about the initiative here with your specialists? How are you going about reducing leakage? What percent total specialty leakage are you at now? I f there's a way to quantify, like, the cost benefit to that, and if you could expand on that, that'd be great. I'll start. I mean, we're always trying to add more and more services to our patients to create a better experience. Specialists is one of those that ultimately always create a better experience and better outcomes. So to the extent that it makes financial sense to bring in those specialists to manage the patients, we're always trying to do that. And just over the last year, we've been able to add the amount of specialists that we currently have at our facilities and bring that number up. We've also added the number of specialists that are within that preferred network, and the more that we can do that, and the more that we can educate our patients to use those specialists that we have, either in our preferred network or in-house, the more team approach we get with those physicians to be able to manage that patient's or chronic illnesses more efficiently because everybody's on the same page. So it's something that we're continuously trying to do, not just in the wholly owned centers, but we do that in our MSO. We do it with the Steward book of business as well, in fact. where we go out and we meet with these doctors, we identify those specialists in those areas that we can deploy CareMax University to actually train those physicians, and then try to limit those facilities so that they're using one or two specialists, one or two cardiologists, one or two gastroenterologists, rather than either letting the patient decide or having 10, 15 different specialists that really don't have any communication with that practice. So I think bringing down that leakage serves a lot of different benefits, both from the patient outcome as well as financial. Yeah, the other thing I would add to that is just, you know, patient satisfaction, right? You're at your PCP's office, they're saying that you need a referral or to go see a cardiologist. It reduces the level of anxiety when, at that same appointment, we can go ahead and schedule their specialty visit right there, hand them the card, they know exactly when they're coming, versus, "We're gonna call you back, 'cause now we have to call another office to try to get you scheduled. We gotta work on a referral." So having that in-house really helps from just, you know, patients' compliance, as well as just member satisfaction and lowering the anxiety. If you hear you need to go see a cardiologist, then you start thinking, "Oh, is there something wrong with my heart?" If a week goes by, you may end up in the ER, right? And so that's the piece where we wanna make sure that it's seamless to the patient, and lowers that level of anxiety, which ultimately is a better outcome for the patient. Great. Great. Maybe in the last 10 seconds, what do you think investors are missing about the CareMax story today that they'll come to appreciate 12-18 months from now? I think the biggest thing is, you know, we've built an incredible platform to manage acuity. I think the numbers speak and talk for themselves. I think what folks are missing potentially is, the hardest thing in this business is to capture market share, to have growth, and I think we solved for that, and now it's a matter of deploying our systems, our technology, our platform to execute on that membership that we now have, right? We're managing over 200,000 Medicare members on our platform today. You know, we've grown significantly from where we were over two years ago. So just executing on that and what this business looks like once we turn cash flow positive in 2024 and then the years beyond, it's a completely different business. I mean, we're extremely excited at CareMax, just to be able to execute on this and look forward to the future. Terrific. Thank you, Carlos. Kevin, thank you, everyone. Appreciate the time. Thank you so much. Thank you for having us here.