EX-99.2 4 jpmorganpresentation1152.htm EXHIBIT 99.2 jpmorganpresentation1152
Exhibit 99.2 38th Annual J.P. Morgan Healthcare Conference January 15, 2020


 
Forward-Looking Statements and Non-GAAP Financial Measures This presentation includes statements that may constitute “forward-looking statements” made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. In particular, statements about future events and relationships, plans, future growth future performance, including statements about the proposed acquisition of SCI, the anticipated benefits of the proposed acquisition of SCI, and the expected timing of the proposed acquisition of SCI, are forward-looking statements. These statements are often identified by the use of words such as “anticipate,” “believe,” “estimate,” “expect,” “intend,” “designed,” “may,” “plan,” “predict,” “project,” “would” and similar expressions or variations, although not all forward-looking statements contain these identifying words. We have based these forward-looking statements on our current expectations and projections about future events as of the date hereof and any forward-looking statements contained herein should not be relied upon as representing our views as of any subsequent date. Subsequent events and developments, including actual results or changes in our assumptions, may cause our views to change. While we may elect to update these forward-looking statements at some point in the future, we have no current intention of doing so except to the extent required by applicable law. Although we believe that the expectations reflected in such forward-looking statements are based on reasonable assumptions, such statements are subject to risks and uncertainties that could cause actual results to differ materially from those projected. Should one or more of these risks and uncertainties materialize, or should underlying assumptions, projections, or expectations prove incorrect, actual results, performance, financial condition, or events may vary materially and adversely from those anticipated, estimated, or expected. Our actual results and outcomes could differ materially from those included in these forward-looking statements as a result of various factors, including, but not limited to risks related to the satisfaction of the conditions to closing the acquisition of SCI and the related financing in the anticipated timeframe or at all, risks that the expected benefits from the proposed acquisition of SCI will not be realized or will not be realized within the expected time period, the risk that the businesses will not be integrated successfully, and significant transaction costs, unknown or understated liabilities, our ability to integrate the Intermedix business as planned and to realize the expected benefits of the Intermedix acquisition, our ability to successfully deliver on our commitments to our customers, our ability to deploy new business as planned, our ability to successfully implement new technologies, fluctuations in our results of operations and cash flows, and the factors discussed under the heading “Risk Factors” in our annual report on Form 10-K for the year ended December 31, 2018, our quarterly reports on Form 10-Q and any other periodic reports we file with the Securities and Exchange Commission. This presentation includes the following non-GAAP financial measure: Adjusted EBITDA. Please refer to the Appendix located at the end of this presentation for a reconciliation of the non-GAAP financial measure to the most directly comparable GAAP financial measure. 2


 
R1 Investment Highlights Strong Profit Unique Large Multiple Growth Trajectory Value Market Drivers with High Underpinned by Proposition Opportunity Recurring Revenue Tech Investment Operating Model $100B 14% $320 – $340M Robust & Proven Acute & Physician RCM Average Quarterly 2021 Adjusted Scale Leverage Market Revenue Growth EBITDA Outlook Proprietary Technology Since 2016 From $165-170M in 2019 Leading, end-to-end revenue cycle platform with a compelling financial model 3


 
Significant Improvements for Integrated Health Systems NEED VALUE ADD RESULTS Growing • Lower costs pressure to run revenue cycle We plug into • Faster collections more efficiently health providers’ • Higher revenue existing • Higher patient satisfaction IT systems OPERATING MODEL Proprietary Experienced Analytics Global Shared Proven Technology Talent and Alerts Services Results 4


 
Comprehensive Revenue Cycle Capabilities for Providers Care Settings Emergency Physician Acute Post-Acute Revenue Cycle Phases Order to Intake Care to Claim Claim to Payment Solutions address the full spectrum of needs and Payment Models operations Fee-for-service Patient Self-pay Value-based Transforming revenue cycle performance across all care settings and payment models 5


 
SCI Transaction Rationale . Delivers most comprehensive solution to drive patient engagement for health systems Enhances Growth . Expands R1 addressable market and supports commercialization of PX modular offering Trajectory . Further differentiates R1’s value proposition in end-to-end opportunities Accelerates . Advances R1’s capability set and provides greater control of technology architecture Technology . Comprehensive automation of patient intake including pre-auth process increases DTO use case Roadmap . Adds innovative culture and high-performing team . Estimated $30M in synergies, with ~$20M from margin expansion on contracted base (expect $10M Unlocks Significant in synergies to phase-in in 2021, with remainder in 2022 and 2023) Synergies . Adds high margin SaaS Offering to revenue mix that fuels R1 margin upside . Potential for meaningful growth upside above synergy assumption via PX commercialization Accretive to . Accretive to earnings within first year Earnings . Supports 2021 adjusted EBITDA guidance of $320M to $340M Strategic technology that meaningfully increases R1’s value proposition and unlocks significant synergies 6


 
Industry’s Only Integrated Pre-Service SaaS Workflow Automated Choreography Across Any Provider Care Setting SCI Core Product Offerings 1 2 3 4 Provider Network Schedule Digital Patient Intake Experience (PNX) Maximizer Experience (DPX) Analytics Capture Confirm Schedule Obtain Maintain Outpatient Financial Viability Order Optimally Pre-Service Case Arrival, Update and Demand of Case Utilize Capacity Preparations Follow Up 40M 95K 1,100 86% 2,200 ~20% $225B Potential Consumers Providers Hospitals Order-Appt. Health Plan Productivity Annual NPR Conversion Automations Improvement Conveyed 7


 
Industry’s Only Integrated Pre-Service SaaS Workflow Automated Choreography Across Any Provider Care Setting Capture Confirm Schedule Obtain Maintain Outpatient Financial Viability Order Optimally Pre-Service Case Arrival, Update and Demand of Case Utilize Capacity Preparations Follow Up Search and find in- Validate health plan Schedule patient from Obtain prior- Patient check-in, arrival network providers, ingest network participation, consumer mobile device, authorization from payer; notifications; bi- clinically appropriate member eligibility and referring provider office give patient option to directional EMR update; referrals, orders and benefits; verify patient or call center; calculate make online payment; closed-loop consult transfers from any source identity and propensity estimate of patient send appointment report back to referring (EMR, web, fax); validate to pay; determine need co-pay, deductible and reminders, directions, provider; post-visit payer medical necessity for health plan prior co-insurance collect pre-reg. instructions and patient in real time authorization information, PROMs and surveys social determinants 40M 95K 1,100 86% 2,200 ~20% $225B Potential Consumers Providers Hospitals Order-Appt. Health Plan Productivity Annual NPR Conversion Automations Improvement Conveyed 8


 
R1 Strategic Priorities with SCI Acquisition 1 2 3 Solidify and Extend Our Integrate R1 and SCI Lead as the Most Enable High-Performing Technology to Transform Comprehensive Digital Marketplace for Scheduling and Pre- Patient Experience Healthcare Services Registration Process Solution in the Market . Drives margin expansion . Unlocks growth via PX . Significantly increases our . Increases returns for Offering customers’ revenue stream customers . Establishes high margin SaaS via efficient online access to patient and referring . Further differentiates end- revenue stream provider demand to-end offering . Solves high-value customer pain points 9


 
Integrate R1 and SCI Technology to Transform Scheduling and 1 Pre-Registration Process Illustrative Order Scheduling & Referral Workflow How We Will Leverage This Technology in Our Operations Auth & Order/ Estimate Schedule Financial Pre-Reg Referral and Pay 1 Transformative Operational Benefits Clearance . Provide patients and providers with a superior, efficient experience Primary Care . Drives significant cost reduction through waste elimination . Drives yield via up-front defect resolution, price transparency & payment Specialist Referral 2 Comprehensive Authorization Automation Diagnostic . All data elements from order fully codified and digitized & Ancillary Care Settings Care . Standardized, structured data fundamentally enables automation Acute 3 Strategic Analytics Offering for Clients Out-Patient . Enable forecasting and visibility into demand Technology SCI SCI R1 R1/SCI R1 . Visually monitor and holistically drive utilization of capacity Significant value created by comprehensive solution architecture 10


 
Solidify and Extend Our Lead as the Most Comprehensive Digital 2 Patient Experience Solution in the Market Technology Requirements The Complete Digital Experience Four Critical Technology Components Required to Deliver Digital Patient Engagement in all Care Settings Referral, Order, & Digital Patient Interface 1 2 Scheduling DIGITAL PATIENT SCHEDULE MAXIMIZER EXPERIENCE PROVIDER NETWORK EXP Financial Clearance and Contract Model-Based 3 Authorization Engine 4 Price Calculation Engine R1 ACCESS R1 INSIGHT The most complete digital patient engagement platform across all care settings 11


 
3 Enable High-Performing Marketplace for Healthcare Services Multi-Sided Marketplace Overview Why R1/SCI are in unique position Match Supply and Demand . Digitizing Scheduling & Order Referral enables efficient matching of qualified demand to supply Referring Health Patients Providers Plans . Scale & Market Presence as a result of R1 ~$35B Captive NPR Provider Consumer- Optimize Demand Online Directed member-to- . Exceptional User Experience, Drives Retention, Expanded Ordering & Online provider Scheduling Scheduling matching Use/Uptake, and Marketplace Preference . By Covering Constituents’ Entire End to End Journey, We are in position to amplify Network Effects Rendering Provider Organizations . Nature of R1 Operating Partner Commercial Engagement we Supply are in position to support Customers Growth Strategy Service Delivery Resources Codified & Digitized Already launched in pilot markets and driving results... structural combination accelerates scaling and technology roadmap 12


 
Financial Outlook Prior 2020 Guidance Long-Term 1 Objectives $M Contracted Growth 2020 Updated 2021 New End-to-End NPR Annual Revenue 1,250 – 1,300 1,300 – 1,400 1,300 – 1,400 1,400 – 1,500 Growth: 10-12% Annual adjusted EBITDA Operating Income - 145 – 165 205 – 225 Growth: 12-15% Adjusted EBITDA 245 – 260 235 – 245 260 – 275 320 – 340 Adjusted EBITDA Margin: ~25% Cash flow from operations expected to grow ~$100M in 2020 Note: Adjusted EBITDA is a non-GAAP measure, please refer to the Appendix for a reconciliation of non-GAAP financial measures. 13 Note1: Long-term is defined as 3-5 years post-2020. 2020 guidance continues to assume addition of $3B in new end-to-end NPR under management.


 
R1 Investment Highlights 1. Large, Underpenetrated Market 2. Differentiated Value Proposition 3. Multiple Growth & Profit Drivers 4. Strong Financial Trajectory 14


 
Market Dynamics Play to Our Strengths Hospital Implications Need for Market Dynamics for Hospitals Sustainable Solutions . Sub-optimal collections rate . Financial pressures . Weakening margins . Increasing complexity . Infrastructure not delivering . Industry consolidation scale advantages . Capital constraints . Falling behind in technology Best value . Consumer demands . Transform from a wholesale proposition to retail mindset 15


 
Large, Growing and Underpenetrated Market $100B RCM Market1 External RCM Spend R1 Revenue Expected Growing Steadily2 to Grow Faster $60B Acute-Care $40B Physician $100B Total TAM External TARGET Spend MARKET ~$30B Internal 19% Spend 12% CAGR ~$70B CAGR Projected through 2022 Projected from 2018 through 2021 Market dynamics support strong incremental growth 1 Note : CMS NHE Projections and R1 estimates. 16 Note2: Research and Markets Global Forecast to 2022, published January 2018.


 
R1 Investment Highlights 1. Large, Underpenetrated Market 2. Differentiated Value Proposition 3. Multiple Growth & Profit Drivers 4. Strong Financial Trajectory 17


 
Comprehensive Transformation WORKFLOW PATIENT ACCESS UTILIZATION, CHARGE & CODE CLAIMS & REIMBURSEMENT 1 2 3 4 5 6 7 8 9 10 11 12 13 Phys. Pre-Reg. / Financial Check-in Level of Case Mgmt. Charge Coding & Billing & Denials Customer Patient Pay / Under- Order & Financial Counseling /Arrival Care / Utilization Compliance Acuity Follow-up Mgmt. Service Pre-Collect payments Scheduling Clearance Review Capture ANALYTICS VISIBILITY + ACTIONABLE INTELLIGENCE + PERFORMANCE MANAGEMENT DELIVERY DEPLOYMENT + CENTRALIZED OPERATIONS + TALENT + GLOBAL NETWORK TECHNOLOGY EXTENSIVE & FLEXIBLE PLATFORM + AUTOMATION SOLUTIONS + SECURITY OPERATING SYSTEM PROVEN METHODS + STANDARDIZATION + OPERATING RHYTHM + QUALITY + COMPLIANCE UP TO 5% 20% 30% Improved healthcare provider economics Increase in Reduction in Reduction in net revenue A/R days cost to collect 18


 
Broad Portfolio of Technology Tools PATIENT ACCESS & EXPERIENCE YIELD & DENIAL MITIGATION ANALYTICS AUTOMATION Clinical and Scoring and Predictive Technical Personalization Analytics Appeals Actionable Order Integrated Yield-Based Web Service Performance Management Bill Pay Follow-Up Integration Monitoring Simple and Documentation Digital Scheduling Complex Management Self-Service Coding Natural Digital Financial Claim Status Alerts and Language Check-In Counseling Triage Messaging Processing Revenue Price Dimensional Omni-Channel Capture and Estimation Visualization Communications Integrity Robotic Denial Financial Process Cognitive Detection Clearance Automation Automation and Triage (RPA) Patient Access & Experience Yield & Denial Mitigation Analytics Automation PATIENT EXPERIENCE CONTACT DECISION ANALYTICS AUTOMATE LINK INSIGHT ePARS PROVIDER AWARENESS ACCESS CONTRACT Foundational 19


 
Scalable Infrastructure, Broadest RCM Capabilities High Major end-to-end Scalability Competitors Niche Competitors Low Single-focus Revenue Cycle Capabilities End-to-End 20


 
R1 Investment Highlights 1. Large, Underpenetrated Market 2. Differentiated Value Proposition 3. Multiple Growth & Profit Drivers 4. Strong Financial Trajectory 21


 
Multi-faceted Approach to Growth Contracted Provides EBITDA growth visibility beyond 2021 Business Rollout Digital Margin expansion through automation and digitizing patient experience Transformation Expansion of Selectively pursue acquisitions and fund internal initiatives Capabilities End-to-end co-managed or operating partner deals New Commercial Modular services wins Wins Cross-sell into physician advisory services installed base 22


 
Contracted Business Drives Margin Expansion End-to-End Customers Deployment Schedule and Margin Progression Quorum Health, Physician Group1, and RUSH2 ($4.1B NPR) AMITA and Ascension Medical Group ($6B NPR) Intermountain ($5B NPR) Ascension Phase-2 and Wisconsin ($5B NPR) Ascension Phase-1 ($3B NPR) 2016 2017 2018 2019 2020 2021 Year 1: Onboarding phase Year 2: Margin-ramp phase Year 3+: Steady-state phase $15B of NPR still in margin-ramp phase exiting 2020 Note1: $700M NPR End-to-End Operating Partner Physician Group signed in Q3 2019 23 Note2: $1.8B Co-managed customer announced in Form 8-K filed on 12/27/19


 
Digital Transformation Set to Deliver Margin Expansion 3 Key Levers Year One Results Future Roadmap Automation Center of Excellence developed and Continue to rapidly deploy automations Robotic Process implemented automations resulting in digitizing the equivalent of ~1000 workers representing across both new client and new use cases Automation one of the largest in Revenue Cycle Management with the goal of doubling our digital workforce within the next 12-18 months Improved patient experience through digital self Expand R1’s digital front door strategy Digital Self Service & service registration across 260+ Host System through the scaling of our digital Scheduling Patient Experience Integrations addressing a previously difficult to solution and continued scaling of self-service improve operational footprint registration to additional patient types Cognitive and Leveraged R1’s built-for-purpose machine Expand machine learning across multiple Machine Learning learning approach to across several pilot domains to expand automation use case projects in the Accounts Receivable domain potential and enhance manual workflow Overall impact: $15-20M contribution to adjusted EBITDA in 2020 24


 
R1’s Physician Group RCM Capabilities & Scale Significant $7B+ 30M Scale Net Patient Revenue Patient Encounters Under Management Annually Employed Deep Specialty 27,000+ 80+ and Independent Expertise Providers Specialties Physician Groups Hospital-Based and Office-Based Broad Host System Practice Capabilities End-to-End Coverage Agnostic Technology Management Large, diversified physician revenue cycle footprint 25


 
Well-Positioned to Support Evolution to Value-Based Payments Capability Phase 3 RCM Infrastructure Phase 2 of Choice for VBR Expand RCM Further extend Phase 1 Functionality capabilities to enable partners to take risk and succeed financially Commercialize Value Build or acquire: Proposition to IDNs • Acuity capture • Patient intake Establish scale in core • Patient engagement RCM functionality across care settings Complete In-Progress Tomorrow 26


 
R1 Investment Highlights 1. Large, Underpenetrated Market 2. Differentiated Value Proposition 3. Multiple Growth & Profit Drivers 4. Strong Financial Trajectory 27


 
Demonstrated Recurring Revenue Momentum Quarterly Revenue – $Millions $295 $301M $276 $263 $250 $208 $140 $147 $123 $87 $99 Q1'17 Q2'17 Q3'17 Q4'17 Q1'18 Q2'18 Q3'18 Q4'18 Q1'19 Q2'19 Q3'19 28


 
Margin Expansion from Contracted Business & Technology Investment Expected Adjusted EBITDA1 % ~25% ~23% Revenue . Only 70% lift from Contracted Book performance at Steady State Return on improvement Technology Margins Investment Rationalize . vendor spend 30% of total SCI ~14% Synergies Move work to Captured shared service centers 2019 2021 Long Term EBITDA % Objective Clear line of sight to long term EBITDA target with upside driven by modular growth & technology commitment Note1: Based on midpoints of guidance ranges. 29


 
Financial Outlook Cash flow from operations expected to grow ~$100M in 2020 Note: Adjusted EBITDA is a non-GAAP measure, please refer to the Appendix for a reconciliation of non-GAAP financial measures. 30 Note1: Long-term is defined as 3-5 years post-2020. 2020 guidance continues to assume addition of $3B in new end-to-end NPR under management.


 
Appendix 31


 
Contract Economics by Engagement Model Illustrative Revenue and EBITDA contribution based on typical $3B NPR Operating Partner Co-Managed Modular $M $M $M 120-150 70-80 30-50 35-45 15-20 10-20 5-15 10-20 3-12 3-12 ~(12) ~(2.0) Year 1 Year 4 Year 1 Year 4 Year 1 Year 4 Revenue contribution EBITDA contribution 32


 
Financial Model for Operating Partner Model Illustrative Contribution from $3B NPR Customer Launch Growth Steady State 0 – 12 Months 12 – 36 Months 36+ Months . Deploy transition resources . Finalize employee transitions . Continuous optimization: . Perform financial . Transfers to Shared Services − KPI metric improvement assessment . Complete standardization − Technology advancement . Invest in infrastructure . Steady state org structure − Productivity improvement . Implement technology Mid-Point Mid-Point Mid-Point Financial Impact – $M of Range Financial Impact – $M of Range Financial Impact – $M of Range Revenue 75 Revenue 120 Revenue 135 Adj. EBITDA contribution (12) Adj. EBITDA contribution 20 Adj. EBITDA contribution 40 Adj. EBITDA contribution % (16%) Adj. EBITDA contribution % 17% Adj. EBITDA contribution % 30% 33


 
Financial Model for Co-Managed Partner Model Illustrative Contribution from $3B NPR Customer Launch Growth Steady State 0 – 12 Months 12 – 36 Months 36+ Months . Deploy transition resources . Complete standardization . Continuous optimization: . Perform financial . Workflow optimization − KPI metric improvement assessment . Rationalize third-party − Technology advancement . Invest in infrastructure vendors − Productivity improvement . Implement technology Mid-Point Mid-Point Mid-Point Financial Impact – $M of Range Financial Impact – $M of Range Financial Impact – $M of Range Revenue 10 Revenue 25 Revenue 40 Adj. EBITDA contribution (2) Adj. EBITDA contribution 7 Adj. EBITDA contribution 18 Adj. EBITDA contribution % (20%) Adj. EBITDA contribution % 28% Adj. EBITDA contribution % 45% 34


 
Capital Structure Data as of latest Form 10-Q Cash $56 million in cash and cash equivalents $321 million Term Loan A1 Debt $50 million Revolver 165.6 million diluted common shares consisting of: . 112.2 million basic common shares, plus Diluted Common . Dilutive effect of: Shares − Employee stock options − Ascension/TowerBrook warrant to purchase 60 million common shares at $3.50 per share − Intermountain Healthcare warrant to purchase 1.5 million common shares at $6.00 per share Convertible Equivalent to 106.6 million common shares in Q4’19 . 200,000 shares issued in Feb. 2016 (equivalent to 80 million common shares at issuance) Preferred . 8% annual dividend payable in kind on a quarterly basis for 7 years, and cash or kind Stock thereafter Note1: The Company expects to enter into a $150 million incremental Term Loan to fund the acquisition of SCI. 35


 
Use of Non-GAAP Financial Measures . In order to provide a more comprehensive understanding of the information used by R1’s management team in financial and operational decision making, the Company supplements its GAAP consolidated financial statements with certain non-GAAP financial performance measures, including adjusted EBITDA. Adjusted EBITDA is defined as GAAP net income before net interest income/expense, income tax provision, depreciation and amortization expense, share-based compensation expense, expense arising from debt extinguishment, strategic initiatives costs, transitioned employee restructuring expense, digital transformation office expenses, facility exit costs, and certain other items. . Our board of directors and management team use adjusted EBITDA as (i) one of the primary methods for planning and forecasting overall expectations and for evaluating actual results against such expectations and (ii) a performance evaluation metric in determining achievement of certain executive incentive compensation programs, as well as for incentive compensation programs for employees. . A reconciliation of GAAP operating income guidance to non-GAAP adjusted EBITDA guidance is provided below. Adjusted EBITDA should be considered in addition to, but not as a substitute for, the information presented in accordance with GAAP. Reconciliation of GAAP Operating Income Guidance to Adjusted EBITDA Guidance $ in millions 2019 2020 2021 GAAP Operating Income $55-60 $145-165 $205-225 Plus: Depreciation and amortization expense $50-60 $65-75 $75-85 Share-based compensation expense $15-20 $20-25 $20-25 Strategic initiatives, severance and other costs $30-35 $25-30 $20-25 Adjusted EBITDA $165-170 $260-275 $320-340 36