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    RCM   US7493971052

R1 RCM INC.

(RCM)
  Report
Delayed Quote. Delayed Nasdaq - 10/15 04:00:00 pm
22.51 USD   -0.88%
10/14INSIDER SELL : R1 Rcm
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10/14R1 RCM : JPMorgan Starts R1 RCM at Overweight with $27 Price Target
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10/12R1 RCM : to Release Third Quarter 2021 Results on November 2
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R1 RCM : Management's Discussion and Analysis of Financial Condition and Results of Operations (form 10-Q)

08/03/2021 | 09:13am EDT
Unless the context indicates otherwise, references in this Quarterly Report on
Form 10-Q to "R1," "the Company," "we," "our," and "us" mean R1 RCM Inc., and
its subsidiaries.
The following discussion and analysis is an integral part of understanding our
financial results and is provided as an addition to, and should be read in
connection with, our consolidated financial statements and the accompanying
notes.

This Quarterly Report on Form 10-Q contains "forward-looking statements" within
the meaning of the federal securities laws, that involve substantial risks and
uncertainties. 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.
These forward-looking statements include, among other things, statements about
the potential impacts of the COVID-19 pandemic, our strategic initiatives, our
capital plans, our costs, 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, our future financial performance, and
our liquidity. Such forward-looking statements are subject to risks,
uncertainties, and other factors that could cause actual results and the timing
of certain events to differ materially from future results expressed or implied
by such forward-looking statements. Factors that could cause or contribute to
such differences include, but are not limited to, the severity, magnitude, and
duration of the COVID-19 pandemic; responses to the pandemic by the government
and healthcare providers and the direct and indirect impacts of the pandemic on
our customers and personnel; the disruption of national, state, and local
economies as a result of the pandemic; the impact of the pandemic on our
financial results, including possible lost revenue and increased expenses; as
well as those discussed elsewhere in this Report, and those set forth in Part I,
Item 1A of the 2020 Form 10-K and our other filings with the SEC. The
forward-looking statements in this Quarterly Report on Form 10-Q represent our
views as of the date of this Quarterly Report on Form 10-Q. Subsequent events
and developments 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. You
should, therefore, not rely on these forward-looking statements as representing
our views as of any date subsequent to the date of this Quarterly Report on
Form 10-Q.
Overview
Our Business
We are a leading provider of technology-driven solutions that transform the
patient experience and financial performance of healthcare providers. Our
services help healthcare providers generate sustainable improvements in their
operating margins and cash flows while also enhancing patient, physician, and
staff satisfaction for our customers.
We achieve these results for our customers by managing healthcare providers'
revenue cycle operations, which encompass processes including patient
registration, insurance and benefit verification, medical treatment
documentation and coding, bill preparation, and collections from patients and
payers. We do so by deploying a unique operating model that leverages our
extensive healthcare site experience, innovative technology, and process
excellence. We assist our revenue cycle management ("RCM") customers in managing
their revenue cycle operating costs while simultaneously increasing the portion
of the maximum potential services revenue they receive. Together, these benefits
can generate significant and sustainable improvements in operating margins and
cash flows for our customers.
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Our primary service offering consists of end-to-end RCM services for health
systems, hospitals, and physician groups, which we deploy through an operating
partner relationship or a co-managed relationship. Under an operating partner
relationship, we provide comprehensive revenue cycle infrastructure to
providers, including all revenue cycle personnel, technology solutions, and
process workflow. Under a co-managed relationship, we leverage our customers'
existing RCM staff and processes, and supplement them with our infused
management, subject matter specialists, proprietary technology solutions, and
other resources. Under the operating partner model, we record higher revenue and
expenses due to the fact that almost all of the revenue cycle personnel are our
employees and more third-party vendor contracts are controlled by us. Under the
co-managed model, the majority of the revenue cycle personnel and more
third-party vendor contracts remain with the customer and those costs are netted
against our co-managed revenue. For the six months ended June 30, 2021 and 2020,
substantially all of our net operating and incentive fees from end-to-end RCM
services were generated under the operating partner model.

We also offer modular services, allowing customers to engage us for only
specific components of our end-to-end RCM service offering, such as physician
advisory services ("PAS"), practice management ("PM"), revenue integrity
solutions ("RIS"), patient experience ("PX"), coding management, and business
office services. Our PAS offering assists healthcare organizations in complying
with payer requirements regarding whether to classify a hospital visit as an
in-patient or an out-patient observation case for billing purposes. Our PM
services offer administrative and operational support to allow healthcare
providers to focus on delivering high quality patient care and outsource
non-core functions to us. Our RIS offering includes charge capture, charge
description master ("CDM") maintenance, and pricing services that help providers
ensure they are capturing the maximum net compliant revenue for services
delivered. Our PX offering helps patients manage their data in one easy-to-use
environment, enabling eligibility validation and insurance plan attribution,
demographic accuracy, meeting authorization and referral requirements, medical
necessity validation, and patient out-of-pocket cost estimation. Our coding
management offering drives performance, quality, and consistent results via
business intelligence and analysis, human capital management, an accountability
framework, and a quality management program. Our business office services can
help providers with the entire billing function or to specifically recoup
revenue that may otherwise be lost by focusing skilled resources in lower
priority areas with significant revenue potential.

Once implemented, our technology solutions, processes, and services are deeply
embedded in our customers' day-to-day revenue cycle operations. We believe our
service offerings are adaptable to meet an evolving healthcare regulatory
environment, technology standards, and market trends.
We operate our business as a single segment configured with our significant
operations and offerings organized around the business of providing revenue
cycle operations for healthcare providers.
SCI Solutions, Inc. Acquisition

On April 1, 2020, we completed the acquisition of scheduling.com, Inc. d/b/a SCI
Solutions, Inc. ("SCI") pursuant to a stock purchase agreement dated as of
January 9, 2020 (the "Stock Purchase Agreement"), by and among the Company,
Clearsight Intermediate Holdings, Inc. ("Clearsight Holdings") and Clearsight
Group Holdings, LLC (the "Seller") (the "SCI Acquisition"). At the closing of
the transaction, we purchased from the Seller all of the issued and outstanding
equity interests of Clearsight Holdings, which owns all of the issued and
outstanding equity interests of SCI. SCI is a leading provider of
software-as-a-service ("SaaS")-based scheduling and patient access solutions.
SCI's platform streamlines the patient and provider experience, creating
efficient care networks where health systems' capacity is digitally and
conveniently accessible to all market constituents. The combination of R1 and
SCI is expected to deliver enhanced value for healthcare providers by enabling
them to expand digital front door strategies for their patients, improve
operating efficiency, and increase capacity utilization, among other benefits.
The aggregate purchase price consisted of $190.0 million in cash, adjusted
pursuant to the Stock Purchase Agreement for cash and working capital. The
agreement also contained an earn-out of $10.0 million for meeting certain
financial and operational targets. The earn-out was paid out in full in the
second quarter of 2021.

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RevWorks Acquisition


On August 3, 2020, we completed the acquisition of the RevWorks services
business pursuant to an asset purchase agreement dated as of June 2, 2020 (the
"RevWorks Purchase Agreement") by and among the Company and Cerner Corporation
(the "RevWorks Acquisition"). At the closing of the transaction, we purchased
certain assets relating to the RevWorks services business, as specified in the
RevWorks Purchase Agreement. The combination of R1 and RevWorks is expected to
provide enhanced revenue cycle capabilities and expertise to RevWorks clients,
helping drive sustainable financial improvements for providers while improving
their patients' overall experience.

Emergency Medical Services Disposition


On October 30, 2020, we disposed of the emergency medical services ("EMS")
business, including EMS Revenue Cycle Management and Electronic Patient Care
Reporting, for $140.0 million, inclusive of a $5.0 million hold-back amount
subject to the completion of certain transition services, to be paid
approximately one year from the date of the disposition. We recognized a gain on
the sale of $55.7 million, which was subject to customary working capital
adjustments.

VisitPay Acquisition


On July 1, 2021, we completed the acquisition of iVinci Partners, LLC d/b/a
VisitPay ("VisitPay") pursuant to an Agreement and Plan of Merger dated as of
May 3, 2021 by and among the Company, iVinci Partners, LLC, Vine Merger Sub,
LLC, Flare Capital Partners I, L.P., Flare Capital Partners Investment Company,
and Vine Sellers' Representative, LLC (the "VisitPay Acquisition"). We acquired
VisitPay for approximately $298.0 million in cash, subject to customary
adjustments for working capital, cash, and debt. The Company funded the VisitPay
Acquisition and related fees and expenses with the proceeds from additional
borrowings and cash on hand.

In conjunction with the closing, we entered into an amended and restated senior
credit agreement (the "A&R Credit Agreement") with Bank of America, N.A., as
administrative agent, and the lenders named therein, governing the Company's
amended and restated senior secured credit facilities, consisting of a
$700.0 million senior secured term loan and a $450.0 million senior secured
revolving credit facility. Upon closing, the aggregate borrowings incurred under
the senior secured revolving credit facility were $120.0 million.The proceeds
from the A&R Credit Agreement were used, in addition to cash on hand, (1) to
refinance, in full, all existing indebtedness under the Credit Agreement, and
amend and restate all commitments thereunder (the "Refinancing"), (2) to pay
certain fees and expenses incurred in connection with the entry into the A&R
Credit Agreement and the Refinancing, and (3) to fund the VisitPay Acquisition,
and to pay the fees, premiums, expenses and other transaction costs incurred in
connection therewith; and in the future, will be used to finance working capital
needs of the Company and its subsidiaries for general corporate purposes.

Coronavirus Pandemic


On January 31, 2020, the Secretary of Health and Human Services ("HHS")
announced a determination that a Public Health Emergency existed in the U.S. as
a result of the 2019 Novel Coronavirus (hereafter, "COVID-19"). Since that time,
HHS has repeatedly renewed its determination of the Public Health Emergency,
most recently as of July 19, 2021. Further, in March 2020, the World Health
Organization characterized COVID-19 as a pandemic and that characterization
remains in place. In turn, and based on continuously updated international,
federal, state, and local guidelines, certain restrictions on businesses and
travel remain in place, varying by locality, and cannot be reasonably predicted.

                                       29
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Given the ongoing challenges associated with efforts to contain the spread of
COVID-19 and related business impact for our customers, we initiated a number of
actions in 2020 that have continued in 2021 to ensure (1) the health, safety,
and well-being of our workforce; (2) uninterrupted and, in many respects,
expanded support for our customers and the patients and communities they serve;
and (3) business and operational continuity. Among our specific actions to
support our workforce, we have maintained our work-from-home model for more than
15,000 global employees, offered zero out-of-pocket cost for COVID-19 testing
and telemedicine visits, offered mental wellness programming, and recently
launched the R1 Cares vaccination support program for our India workforce. In
addition, we have continued to deliver customer support that includes: our PX
mobile patient registration technology which reduces risk of patient and R1
staff exposure and preserves the use of critical personal protective equipment
for clinical staff; reporting to allow for detailed COVID-19 order tracking,
scheduling, and follow-up; in-depth regulatory resource guidance and content to
aid our customers in navigating a rapidly developing and changing series of
healthcare regulations during the public health emergency; and providing
operational best practices for implementation and revenue cycle management of
telehealth services. We continue to track new COVID-19 variants and monitor and
assess the current situation and guidance both locally and globally, and may
adjust the above efforts as needed based on our ongoing assessment.

Due to the impact of the pandemic, there continues to be decreased patient
volumes for our customers. Corresponding to the decreased volume, we anticipate
that our second half 2021 revenues on average will be modestly below pre-COVID
amounts. Given the continued uncertainty of the pandemic, we cannot reasonably
predict when volumes will return to their pre-COVID levels. The impact of the
COVID-19 pandemic is fluid and continues to evolve. We cannot predict the extent
to which our business, results of operations, financial condition or liquidity
will ultimately be impacted. However, we continue to assess its impact on our
business and continue to actively manage our response. For further details on
the potential impact of COVID-19 on our business, refer to "Risk Factors," in
Part II, Item 1A of our Annual Report on Form 10-K for the fiscal year ended
December 31, 2020.
CONSOLIDATED RESULTS OF OPERATIONS
The following table provides consolidated operating results and other operating
data for the periods indicated:
                                                                                 2021 vs. 2020                                                                 2021 vs. 2020
                                     Three Months Ended June 30,                    Change                        Six Months Ended June 30,                       Change
                                        2021              2020              Amount                %                 2021                2020              Amount                %
                                                                                             (In millions except percentages)

© Edgar Online, source Glimpses

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