Three of the BofA Healthcare Conference. I'm Allen Lutz, the Healthcare Tech and Distribution Analyst here at BofA. We are very excited to have R1 RCM here. We have CEO Lee Rivas and CFO Jen Williams. Thank you both for coming out. Lee, you've been CEO now for 18 months, and obviously the business has evolved. I guess, for a couple minutes, can you just take us through where the business has been, where you are today, and, and where you're going? Sure, mic working okay? Good. You know, when I first took on the role, I had laid out some priorities, and I'd say upfront, we feel very good about accomplishing what we set out to accomplish in spite of, you know, some noise around our business, if you will. But those priorities back then were, number one, prioritize operational performance for our customers. Two, continue to build a technology, data, automation, and AI platform. The third was to complete the integration of the Cloudmed business and then continue to build our team out, 'cause I was bringing two teams and two cultures together. There's more, but those were the basics. A year and a half into our tenure, you know, the macro environment has changed a bit. You know, payer timelines have evolved and gotten better over time. Not back completely to pre-COVID, but much better than when we started. So that's one difference, if you will. The team has come together and are operating very well on the customer operations side, so a lot more stability on the end-to-end side, with a lot of good progression on the metric side, you know, given a challenging environment. We've hit or exceeded our modular bookings targets in the first year and feeling very positive about where we are year to date this year. And then on the technology platform, you know, this is a long journey, but you know, there's an acceleration of innovation when you have a captive set of structured and unstructured data across all 50 states, all payers, all care settings. So we feel like that's an accelerant to the technology roadmap, along with a base case I had laid out, which is build a data platform, continue with the automation journey started by my predecessor. I sit here today, having won, the team has won the largest deal in the company's history, $14 billion of NPR. We, Jennifer, Evan, and I are thinking about the business differently, getting away from some of the, you know, metrics you're used to on NPR and cost to collect, and wanting to deliver a steady progression of EBITDA cash to our shareholders. You know, feeling really positive about the modular pipeline, the end-to-end pipeline, and the innovation opportunities on behalf of our customers. Really appreciate that background. You talked a lot about the modular solutions, and obviously, given your background, that's been a big focus for you. As you think about the growth algorithm of RCM over the next few years, how do you think about, and kind of looking at what the growth algo has been over the past few years, how do you think about the growth rates of the modular solutions business versus the end-to-end? Is it possible for, that the modular business could become a much larger piece of the overall story over the next few years? Or do you think that the end-to-end, while lumpy, is still gonna remain, front and center? Just trying to get a sense of, of your priorities and, and what you think about the business longer term. So let me start, and then if you have any color commentary, Jennifer. What I'd say upfront is, you know, we have a much more diversified business today than we did two years ago with the acquisition of Cloudmed and the size of our modular business now, when you combine Acclara. So just start with, you know, our largest customer years ago was 70% of revenue. Today, it's, you know, under 40%. In three years, it'll be in the kinda, call it, high 20s. So a lot more diversification, especially when you add in Providence to the mix, and that's a huge advantage for us as we think about, you know, the different business lines across our different areas of the business. Market growth rates across revenue cycle, depending on who you ask, are somewhere between, you know, call it six to seven on the low end, up to, you know, double digits. We are out of the business of predicting when we get new end-to-end deals, but if you look at the history of end-to-end, not just for us, but across our competition set, you see kind of a steady, every 18-24 months, a win that is in the kind of $4 billion or $5 billion of NPR range, and I would expect us to win our more than our fair share of that. So, 100% not a de-emphasis on the end-to-end business. In fact, we're. I push and talk about that as much as anything. So I want to kind of clarify but emphasize we are not, you know, out of that business. It's a huge part of our business. The other end of the spectrum, modular, it's a sub-segment of the $115 billion total addressable market, but still a very large market. We have a lot more room to grow with, call it on average today, 2.5 to three solutions sold per customer, when, depending on how you count it, I could say 20, but just let's just say, you know, 12, 13 total solutions in the modular space, so a lot more runway. So I, you know, my, my intuition is that will grow faster, continue to grow double digits, you know, not just this year, but, you know, going forward. We'll need to continue to innovate, continue to build out technology, continue to execute on our commercial plan. You know, it's hard for me to guess which one grows faster over time. You know, when you win a deal like Providence, you have embedded EBITDA in the business that drives a, you know, significant growth rate. That, that's the only reason I'm pausing on, on which one grows faster, but I feel good about both sides of the business. Yeah. The only thing that I would add to that is even if the businesses are growing about the same rate from a revenue perspective and bringing on new business, you still have a margin differential. So the modular business is a higher margin, so that will continue to contribute a larger percentage of EBITDA over time. As we think about the modular business, on your most recent earnings call, you talked a lot about how Cloudmed's denials and accounts receivable business could see an uptick in interest around some of the cybersecurity issues that the market's observed. Can you unpack that a little bit and maybe walk through an example of what's going on in the environment today, and how your modular solutions can help solve a pain point for your customers? Yeah. So I'll maybe dive deeper into one of, you know, the three major product areas in the legacy Cloudmed business. The way we think about it, just in that subsegment of modular that's not, you know, comprehensive, is, you know, we have a significant market position in coding accuracy. DRG validation, if you look at our website, is the premier product. A strong position in underpayments optimization, so a claim is filed optimizing whether a provider was paid accurately for that claim, retrospectively. And the third area is, and, you know, Jennifer and I helped start this business back in 2020, through the acquisition of the two best-in-class denials management and AR companies, East Coast and West Coast. A very strong and strong growing business, helping providers deal with denials and accounts receivable. The need is today there are, you know, if you look at the research, somewhere between 9% and 12% of claims are denied, oftentimes for high-dollar items. It's very difficult for providers to understand how to respond to the claims. And, you know, I live in Atlanta, so I'm very, very close to all the systems there. There's, you know, labor shortages, so these providers are all in all those hospital systems are struggling to staff up in those areas of denials and AR. So without, you know, the kind of macro backdrop of 2022 post-COVID, without the Change outage, you have a healthy demand environment. It's not that there isn't competition, there is, but we feel very good because when you're already talking to 90+ of the top 100 by NPR, anytime there's a denials opportunity, we're probably going to see it. With you know, the last two years, we've seen healthy growth in that business, and it's, you know, grown faster than our own expectation because of some of the issues with payer timelines, MA or otherwise, there's just a big need for it. When you add in the potential latency effect of, you know, call it a two-month outage for the largest claims clearinghouse in the U.S., we would expect that in the third and fourth quarter and into the first, second quarter next year, that there would be a need for a continued need for our services, our solutions around, you know, potentially an increase in denials. So we're starting to see the pipeline build in that area, but we're feeling very positive about it. Got it. That's great. And then, Jen, can you provide an update on the Change cyberattack and just remind us how that impacted your business, the timing of cash flow, and what's embedded in your 2024 guidance? Sure. As we mentioned on our earnings call last week, we expect the Change impact to be about $20 million of revenue impact in 2024, and about $25 million of EBITDA impact for the year. And that's really driven by a couple of things. One, our incentive fees. So we expect. You know, every customer has different metrics that we measure for incentive fees, but almost every customer, in particular, those that were most significantly impacted by Change, have metrics like AR, cash metrics, and denials metrics that we think will be impacted by the outage. We do expect that AR is going to be elevated for the next couple of quarters. Cash coming in is going to be lower because there was a period of time where claims weren't flowing. Therefore, the provider's cash is impacted on the cash receipts piece. And then from a denials perspective, as Lee just indicated, while it helps our modular business, on our end-to-end business, we actually will be impacted by those denials because in the early days of the Change outage, while patient care was still continuing, we weren't able to get authorizations. And so we expect that that will come in the form of denials down the road. Now, there's pressure on the payers to relax some of those authorization requirements because of the outage, but that's yet to be seen. So we do expect some kind of impact in the back half of the year on our denials metrics. So revenue will be impacted through the incentives. We do expect that we'll have some increased cost, about $2 million a quarter, for the rest of 2024, and that's really driven by this backlog of claims that we have to now work through, work through the cash posting on those as the cash comes in and maage the denials and additional documentation requests that comes through, because there's just this backlog of volume that normally would be more steady through the year. So that's it from an overall impact. We also expect that our base fees, which our base fees are based on cash collections with about a four-month lag on cash collections to the base fee revenue, and we do expect that our base fees will be impacted. Think about that as more of a timing or a delay in revenue. And so the second half of the year, we expect some fluctuations between our Q3 base fee revenue and our Q4 base fee revenue, just based on the timing of when those cash collections will now come in, because there was about a two-month period of cash delay. So that will push a lot of that revenue from Q3 to Q4. We still expect, and the assumption in our guidance is that the clearinghouses are mostly caught up, or the payers are mostly caught up with this backlog by August of this year. And August is an important month because August is the last month of our base fee revenue impact for Q4. So any cash that comes in or is delayed past August would have an impact to 2024 and then would catch up in 2025. So that's the way we're thinking about the Change impact. Great. Your largest customer had a cybersecurity breach a few days ago. Can you talk directly about that customer, or can you talk more at a high level about RCM's policy or internal framework, about what exactly goes on after one of your customers has an issue? What's the policy? What does RCM do? Is there anything you can say about that? Sure. So, first and foremost, when a cyberattack happens with one of our customers. And just stepping back, reflecting on the Change outage, the Change cyberattack, now Ascension, and if you just do even a bit of research, you'll see, you know, many of the top U.S. hospital systems have had something similar happen in the last several years. It's an attack on the industry. It is something we will all have to deal with and have to put protection in place from an information security, and we feel very good about our posture on that front. So what I'd say, first and foremost, our, our posture with any customer, in particular our largest customer, is to help them navigate and ensure patient safety. What that means is making sure patients can get into the ED, get into their facilities, and this is where we come in to be able to help and prove to our customers that, you know, with or without the technology tools they've or any other customer would have at their disposal, we can help them schedule patients, register patients, administer transcription, and eventually process a claim. What we believe will happen industry-wide whenever there's a cyberattack is any system or physician will have to shut down their access to their systems, and most, if not all, technology vendors that are connected to that system are gonna have to shut down for some period of time to ensure they're not affected by malware. There's a lot of publicly available information on this customer that is very consistent with what we're seeing. So, above all else, patient safety, finding manual workarounds. Think about the pre, you know, EMR days of paper transcription, finding ways to digitize that. We are committed to helping them through this and hope, but, you know, there's no indications from them that this is, you know, a matter of weeks, not more. But first and foremost, in our mind, our team is mobilized, and I'm in daily contact with their senior leaders. The team is in daily contact on the situation there. I know it's obviously very, very early, and it's, you know, there's not a lot of clarity on, on how this progresses. Is there any way, how should investors think about the guidance as it relates to, the potential impact from this customer being offline for an extended period of time? Is there anything you can comment, about that? It's too early at this point to be able to size any impact, but the way we're thinking about the potential impacts are in a couple of areas. As Lee mentioned, patient safety and being able to process patients through the facilities is the first priority. This is one of our largest clients, one of our most mature clients, so we have downtime protocols that we're able to implement very quickly. Now, what that means is it's more manual effort, so more manual work, which will result in some increase in cost for some period of time to be able to continue to process it. It's a little bit different than the Change outage, because with the Change outage, we could not process anything. There was a backlog that was just continuing to build to be able to process claims. In this case, to continue patient flow, we're doing manual workarounds. So it will just result in incremental cost. From a revenue perspective, it will depend on the duration of the downtime and what ends up happening with procedures. Are they diverted, meaning they don't happen and it's lost revenue for some period of time, or are they delayed and it comes back? So in some cases, if it's an elective procedure, they may say, "Hey, come back in two weeks. We'll reschedule you." And so it's just a matter of that being a delayed revenue or a delayed claim versus, hey, I don't, you know, it's a procedure, and I just decide I'm gonna cancel it, and I'll just come back next year on my normal schedule and have it done. So that's what we're trying to size, is what that looks like. Obviously, the longer that it takes, the more likely that there would be more diverted or lost revenue versus just delayed revenue. Got it. Appreciate all that color. Let's take a step back on the cybersecurity issue. It seems like this is an industry issue that is becoming obviously a bigger problem for the industry as a whole. As you think about cybersecurity, and you're having conversations with your stakeholders and others in the industry, what can be done from an industry perspective, or is there any type of regulation or government intervention that can help? I'm just trying to get a sense of what steps can be taken from the industry's perspective to minimize the risk from these types of attacks that seem to be becoming more prevalent. You know, I can only speak for, I've, you know, been reading what's happening with, you know, some of the pending regulation and, you know, thoughts, about our industry, but in theory, should apply to any industry. I can tell you how we think about it is, you know, there's you can never spend or invest enough in cybersecurity tools, people and processes. Thankfully, you know, before I well, before I got here, we had hired an amazing CISO, a CTO who's very experienced in patient data in the provider space, and have built out a team that is a best-in-class team, and there's no shortage of resources and technology tools we use in every threat area. So that's the first thing, is just from an investment standpoint, we've already invested in, tools that are, you know, oriented towards the major risk areas. And, you know, there's I don't want to educate this audience of things you already know, but individual risk around, you know, email and access points, risk in, servers if you're still, you know, not on cloud, risk with third-party vendors, physical security risk, and then constantly doing threat assessments by the best-in-class consulting firms that can evaluate your posture any given day. So what I can say is, you know, if every provider, physician group adopted a, you know, standard framework on investment, on tools, on processes, governance frameworks, we would all be better off. And then the last thing I'd say is just from a governance standpoint, we have a very robust process with our board and committees evaluating this from an outside-in point of view, you know, regularly. Got it. Switching gears to utilization, RCM is a pretty unique position. Obviously, the end-to-end business is relatively concentrated, but the modular market may give you a broader opportunity to look at utilization trends in the market. What have you observed broadly when it comes to utilization within the inpatient environment? Have trends improved over the past three months, and what are your expectations for the rest of the year on utilization? So we've assumed, and we're seeing utilization in the low single digit. And I know that there are some reports out there of, you know, more broadly speaking, utilization has been stronger. When you look at our customer base, what settings, care settings that they're in and what they're seeing across their patient base, we assumed in our guidance that we would see low single digit, and that's really what we're seeing across our customer base. You know, there may be some months where it's a little bit higher, some months where it's a little bit low, lower based on just kind of normalized seasonality, but overall, it's still in that low single digit and in line with our guidance. Great. Can you provide an update on the Providence onboarding and how that's going versus your expectations? Sure. On track, applying the same structure and process we applied to previous, you know, large-scale onboarding. Very supportive executive team, very strong operational team on the ground, paired with our operational team. You know, I don't wanna oversimplify it because there are a lot of moving parts when you're transitioning thousands of employees, but the relative advantage we have in this situation is, you know, support from an executive team, one main EMR, which is a big positive, and a lot of good momentum that, you know, gives me confidence we're well on track. From a financial perspective, we are in line with what we guided to at the beginning of the year, so we're very much on track for that. These things take a long time to plan. We have over 2,000 people that will be transitioned as part of this onboarding, so we're very much in the planning stage right now to prepare for those transitions the second half of the year. One of the things that the legacy RCM business focused a lot on was robotic process automation or RPA, and that was a big component of the story a few years ago. And then more recently, you started talking about AI and all the different opportunities around AI. How should investors think about the investments that were made in RPA and future and current investments in AI? Are those synergistic? Can they work together? Would you expect to downplay RPA, or would you leverage the RPA that you've already invested in to grow or to spend more through AI? Just trying to get a sense of when you're investing in RPA, do you expect that to go up or down? And then how to think about how that they work together. I'd say synergistic is the short answer. Think about, just as an example, of RPA, any process where someone is pointing and clicking and takes them some amount of time, whether it's retrieving a medical record, validating insurance, you know, searching a payer website for some information, should be done with some level of automation. It's less exciting these days because it's, you know, in theory, a band-aid on what should otherwise be an optimized piece of software, but very valuable when you have inefficient systems working with each other at the provider level or customer level, we can absolutely help them and build automation. So continued investment there. Continued investment in data. You didn't ask about that, but it's a big initiative across our business, leveraging the Cloudmed footprint to build predictive models around a DRG code that you don't just see in the code. You might see it in an underpaid claim, and having a model that says, when you see this trigger, a bunch of if-then statements, there's probably an under optimized medical claim in the underpayment space, right? So that's an example. AI is an accelerant, is what it is, of innovation, over time, needing less labor to accomplish the same tasks. So I used on the last earnings call, the denial automated appeal example, automating account summarization to speed up the time of account reviews, automating customer SOPs to ensure that the operator is following the customer SOPs, automating contracts with contract modeling, or even automating or evaluating the customer contact center on any individual answering the phone and how they resolve issues. So there's just so many, I should say, easy but straightforward use cases that will, over time, allow us to be a lot more tech-centric versus labor-centric as we add more customers and grow the business. Got it. With the last couple of minutes here, as we think about the competitive landscape, both for the end-to-end and the modular businesses, has there been any type of shift in pricing, market activity, anything notable that you've seen over the past couple of years? Nothing. No major changes on the end-to-end side. We respect our competition. We believe we have a very strong position, a unique position with a combination of technology investment and global scale, but more specifically, our own facilities in India and the Philippines. But we expect there to be continued pressure in the market from competition, but no major changes on pricing or what we're seeing across the market. Modular, same thing. We feel there's a lot more activity there just by nature of pick a product area. There's going to be some probably private, you know, company that's trying to accomplish the same task and take share from us. We're very aware of that, where this is where the competitive advantage of knowing literally every head of revenue cycle in the top 100 systems and more becomes a real advantage when you're already using our product. And I'll give you an example, but you know, life is not always this easy, but I'll come back to the DRG example. You know, we deploy DRG validation, we see inaccuracies in coding. Let's say they don't use our underpayments product, we can literally do the math for them and show them in real time what they're losing in the underpaid claim because we're already collecting the data. And then it's, you know, we've already integrated the billing system, the data, gotten the data from the customer. It's not this easy, but turning on that solution is a lot faster than if you didn't have traction already. So that's the advantage we have, but no, no major changes in the market that we've seen. Is there anything that you can say or comment on publicly about the bid for the business? Is there any update that you can talk about, about the May 6th waiver? Just any comments on that. No. I mean, look, I can tell you what I tell my team, which is focus on customers, focus on building our business, on your people. Don't let this distract you. What is publicly available is what I can say. There's a special committee, and they're very independent on doing their work, and we, you know, obviously, Jennifer and I are engaged in that process, but very focused on running the business. And then with the last minute or so, you know, as it relates to your opportunity in the market, what are you most excited about for the next year as you go to work both on the end-to-end and the modular side, what's the most exciting? I think technology, number one. Two is continue to expand our customer base, getting to know our largest new customer, expanding with our current customers. And three, which could easily be one, is I'm really excited about the people, the talent we have in the organization. High retention rates on people, people that know the industry and are growing up in the organization and will lead the next generation. Great! We'll leave it there. Thank you, everyone, for joining, and thank you, Lee and Jennifer. Thanks. Great. Thank you. Thank you.