Hanger, Inc.
Q4 2017 Earnings Call Transcript

Published: 15 May 2018

[Operator:]

Greetings, and welcome to the Hanger 2017 Earnings and Business Update Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Seth Frank, Vice President of Treasury and Investor Relations for Hanger. Thank you. You may begin.

[Seth Frank:]

Thank you, Michelle. Welcome to Hanger's 2017 earnings conference call. With us today are Vinit Asar, Hanger's Chief Executive Officer; and Thomas Kiraly, Hanger's Chief Financial Officer. Some of the information discussed today will include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are subject to risks and uncertainties that could cause Hanger's actual results to materially different than as discussed today. Those risks include among others, matters we have identified in the forward-looking statement portion of our latest earnings release and in our filings with the SEC. Hanger disclaims any obligation to update forward-looking information discussed on this call. And now, I would like to introduce Hanger's President and Chief Executive Officer, Vinit Asar.

[Vinit Asar:]

Thank you, Seth. Good morning, everyone, and thank you for joining our call. I'm pleased to be speaking with you again and we'll start with an update of our progress since our last call on January 21. I will also comment on our 2017 results along with a brief view of what to expect going forward. Tom will then provide a detailed review of the financials, following which we will take your questions. We are at an important inflection point for Hanger. After three years of significant corporate infrastructure investment, we are winding down what I would characterize as one of the most challenging periods in our company's history. As you know, much of our effort has been focused on rebuilding and strengthening Hanger's infrastructure, including people, systems and processes to ensure the absolute integrity of Hanger's financial reporting. We have made great strides here. The pace of our financial reporting has accelerated since May of 2017. At that time, we filed our 2014 annual report, which included financial restatements for prior year periods. The most recent restatement period is now almost four years behind us. Our challenge in the ensuing months has been to literally catch up with ourselves from an external reporting perspective. We are now approaching the point, where we are in a position to resume a normal reporting and communications cadence as a public company. It is notable that we have accomplished a lot with regards to becoming a current filer and I attribute that to the hard work and dedication of our finance and accounting teams. With the 2017 10-K filing complete, we are now current with our annual filing. The next step will be filing our first quarter 10-Q, which we plan to file as expeditiously as possible. We then anticipate a return to filing financial reports in a timely fashion and will begin our outreach to the financial community. We are also targeting a relisting on a national securities exchange, by the fall timeframe this year. While there remains work to do in remediating our material weaknesses, we are very happy to return to the public company arena and share the potential of our company with you. After this period of stabilization, I believe Hanger is better positioned than it has ever been, to thrive, grow and fully leverage its leadership position in O&P. I say this, because we have been deeply focused, not just on improving financial reporting, but also on tackling a myriad of opportunities from an operational standpoint. Reimbursement challenges in healthcare and our industry increased significantly during the past several years. We saw this coming and made the necessary investments to ensure we successfully navigate healthcare's evolution to a value-based economic system. In order to do that, we initially focused on revenue cycle management and patient outcomes. As we discussed in January, we elected to sacrifice growth and short-term profitability during 2016 in order to make the necessary changes in our patient-level workflow to sustain us going forward. Our results for 2017 are consistent with what we laid out in January. Growth resumed in Patient Care as the investments we made in these areas during the last two years began to demonstrate results. In our Patient Care segment, revenues increased by almost $12 million or 1.4% after declining in 2016. Adjusted EBITDA in the segment increased by $26 million and adjusted EBITDA margins increased to 17.4%, a 290 basis point improvement in the segment year over year. Driving the top line was the resumption of growth in same clinic revenue per day. Growth in adjusted EBITDA within the Patient Care segment was driven by the improvement in disallowed revenue, a resumption of same clinic revenue growth, as well as lower operating expenses on a net basis, which Tom will discuss in more detail. Within our Products & Services segment, the difficult trends in the skilled nursing facilities industry we saw in 2016 and discussed in our last call continue to be challenging in 2017. [Nets of] [ph] the primary end market for our therapeutic solutions offering, which represent about 6% of our total company revenue. Reimbursement and utilization challenges have resulted in client facility consolidation, pressuring some of our clients to either take our service offerings in-house or in some cases close facilities. As a result, we saw a net loss of clients in this business in 2017 that were the primary driver of lower revenues in the Products & Services segment of about $13 million, with an adjusted EBITDA decline of approximately $10 million. This is in line with the headwinds we communicated for 2017 back in January. We are in the process of evaluating options to stabilize and maximize value from our therapeutic solutions offering. It is important to bear in mind that the other 94% of our business is growing. We believe that with the incremental growth in Patient Care and eventual stability in therapeutic solutions, our consolidated revenue growth will improve. I'll now provide an operational update and discuss some of the levers we are focusing on to meet our objectives going forward. Our most pressing focus has been to drive higher revenue and profitability through lower revenue disallowances from payers via improved documentation, claims management and lower bad debt. These actions have had, as you see in the 2017 results, a positive impact on revenue and profitability. We implemented a rigorous centralized revenue cycle management or RCM function across our patient care network, moving away from a decentralized model. We then instituted a clean claims initiative at the clinic and provider level to maximize timely reimbursement. 2017 was the third year in a row we achieved an improvement in disallowed revenue, which resulted in a reduction of $12 million compared to 2016. The percentage of our gross billings that have been disallowed as a percentage of adjusted gross revenue for the Patient Care segment decreased to 4.2% in 2017 from a high of 9% in 2014. Bad debt expenses also declined in 2017. This considerable improvement in our revenue quality and yield is a signature achievement of our team, and is directly attributable to our RCM and clean claims initiatives. The other major area of focus has been our efforts to measure and improve patient outcomes, anchored by the continued rollout of our electronic health record system across the Hanger patient care network nationally. Currently, 80% of our patient care clinics are live on our EHR, compared to two-thirds of the network at the end of 2017. We are on schedule for our implementation targets in 2018 and continue to anticipate completing the rollout by mid-2019. Our ability to measure outcomes and communicate this information to our payers, referral sources and also our patients is coming increasingly important in today's healthcare environment. Our focus and investment in our EHR as well as our clinical outcomes initiative has positioned us very well for the future. Enthusiasm of our Hanger's momentum is strong among our 1,500 clinicians, technicians, clinic staff and other care providers. In February, we hosted the annual Hanger Education Fair and National Business Meeting this year. We gathered over 1,100 of our employees, mainly clinicians, plus 370 exhibitor representatives as well members of the limb loss and limb difference community. In addition to continuing education, peer networking and evaluating the latest technologies, we focused our 2018 meeting on the values that define who we are, specifically putting patients first. As an organization, we are operationalizing a model that will continue to improve our patient experience, as a primary focus and differentiator for Hanger. We utilize Net Promoter Score as a key indicator of our success in patient and customer focus. Through the first quarter of 2018, Hanger reported a composite Net Promoter Score of 81, which is a strong performance compared to the healthcare industry benchmark in the mid-70s. Our goal is to improve outliers in our network through more active patient engagement feedback and generating a consistent patient care experience. Another example of innovation and patient engagement we are levering unique to Hanger is utilizing virtual reality technology applications for our patients. In late April, we announced the launch of MiGO, a first-of-its-kind immersive 360-degree video experience for people at any stage of their limb loss or limb difference journey, showing them that with the right care, support and technology, it is possible to lead a life without limitations. Initiatives such as these are a key part of our strategy to differentiate Hanger as providing the most advanced and connected healthcare experience nationally. We expect these efforts to be increasingly helpful as we build up our referral network to drive same clinic growth over time. On the regulatory front, many of you may be aware of O&P related legislation passed by Congress and signed by the President in the Bipartisan Budget Act. This legislation will now allow certified O&P clinicians' notes to be accepted as part of a patient's medical record for documenting and establishing medical necessity for payment of Medicare claims. Overall the legislation is encouraging and then move in the right direction of elevating O&P clinician documentation. We have reason to believe that CMS has just begun the process of implementing this policy, and we anticipate it will take time to see how this all comes together in terms of real world reimbursement policy. In the meantime, we continue bolstering our clinical documentation instituting best practices and constantly improving our workflow to enable great care and ensure we are appropriately compensated for our services. I will wrap up with brief synopsis of our strategy for the remainder of 2018, as I stated earlier, and as you can see in our financials. Hanger is moving forward on a solid and much improved footing in 2018. Our financial position is strong. We refinanced our debt with new senior credit facility in early March. We also had a good 2017 with respect to cash flow generation and have been successful through the initiatives we have discussed in improving cash conversions, lower DSO and ultimately generating solid free cash flow. With more financial flexibility improved operations in a scalable platform, we continue to evaluate our growth opportunities. Organically, the multiple initiatives we have built to strengthen our referral networks and increase the quality and value of our patient experience will we believe lead to increased market share over time and improved same clinic revenue growth. As we continue to implement technology and automated processes across our network, we anticipate the ability to improve provider level productivity over time, which will benefit revenue and margins. We continue to pursue multiple initiatives through our integrated supply chain management organization to maximize our economies of scale, be efficient with working capital and lower our material costs, while also delivering a robust and superior patient experience. We intend to continue to invest in technologies that will improve our efficiency as a corporation, while carefully minding discretionary G&A expenditures. All of these items, combined with a lower cost of borrowing would help growth and the predictability and stability of our earning streams. With our better financial position, we are evaluating the merits of highly selective inorganic growth via potential acquisitions of O&P providers as an additional lever potentially later this year. On that front, we will pursue a disciplined approach to valuation and integration to help round out our broader growth strategy. So as I said earlier, we stand at an important inflection point and look forward to resuming a normal cadence of communication with all of these soon. Thanks for your attention to my comments. And now, I will hand the call to Tom Kiraly, so he can dive deeper into the numbers.

[Thomas Kiraly:]

Thanks, Vinit. I'll be breaking my comments this morning into two primary sections. First, I'll provide you with some more information regarding our financial trends in 2017, and then during the second portion of my comments, I'll spend a few minutes sharing our general sense of Hanger's current financial trends through the first quarter of 2018. First with respect to 2017, as we discussed with you in January, our revenues during the year were consistent with the prior year at just over $1.04 billion. Within those results, the revenue growth of $12 million in our primary segment Patient Care was offset by a decline in the revenue of our Products & Services segment. Revenue growth in the Patient Care segment directly benefited from $12 million reduction in disallowed revenue. Payer disallowances relates solely to our Patient Care segment and they declined from $49 million or 5.6% of segment revenue in 2016 to $37 million or 4.2% in 2017. This reduction was a direct benefit of our investments in revenue cycle management and the claims documentation improvement initiatives we undertook in 2015 and 2016. Excluding the favorable effects of these disallowance trends, our underlying same clinic revenue reflected a progressive resumption of growth during the course of the year, culminating in a 2.1% rate in the fourth quarter. For the full year, Patient Care reflected a same clinic growth rate of 0.8%. As Vinit shared during his remarks, the favorable growth we achieved in the Patient Care segment was offset by the headwinds we experienced in the Products & Services segment, particularly within our therapeutic solutions service line. After considering these offsetting revenue trends, our consolidated revenue in 2017 was essentially the same as the prior year. Despite this through favorable expense reductions resulting from a number of internal initiatives, Hanger achieved significant growth in its underlying earnings during the course of 2017. This earnings growth was driven by the Patient Care segment, which achieved $30 million increase in this income from operations. In addition to favorable flow-through from the $12 million reduction in disallowed revenue, our Patient Care business benefited from $11 million decrease in non-personnel expenses during the course of the year. These expense reductions related primarily to our cost of materials, which declined from 30.5% of net revenue in 2016 to 29.6% of net revenue in 2017; to our lease expenses, which declined due to our pruning of underperforming clinics in 2017, and from telecommunications' expenses and reductions in bad debt expense. We additionally benefited from a net reduction of $3 million in personnel expenses, as a result of the reduction in force we undertook in December of 2016 and from the process of closing underperforming patient care clinics on a gross basis to personnel cost of the Patient Care segment were reduced by $12 million during 2017. This decrease was partially offset by an increase in segment bonus expense of $9 million. Finally, the Patient Care segment also benefited from a $4 million reduction in depreciation and amortization expense during 2017, which brings the aggregate total of these improvements to income from operations to $30 million. Excluding the favorable depreciation and amortization expense improvement on an adjusted EBITDA basis, Patient Care earnings grew by $26 million from $122 million in 2016 to $148 million in 2017, and reflected a growth in margin from 14.5% to 17.4%. This earnings growth in the Patient Care segment was offset by $10 million decline in the adjusted EBITDA of our Products & Services segment resulting from the revenue decline in our therapeutic solutions as well as other adverse business mix and expense trends we experienced in our distribution services. You should be noted that due to the trends in these services, we incurred a non-cash charge of $55 million for the impairment of the segments remaining goodwill in a significant portions of its intangible assets. As a final component to our changes in adjusted EBITDA during 2017, we incurred a net increase of $5 million in expenses in our corporate, general and administrative costs related to increased bonus expenses. The net total of $26 million in adjusted EBITDA growth for Patient Care reduced by the $10 million decline in Products & Services and $5 million of increase in corporate, general and administrative expense was in a $11 million overall increase in Hanger's adjusted EBITDA, which grew from $109 million in 2016 to $120 million in 2017. Separately from these results, it should be noted the during 2017 we incurred $32 million in professional third-party expenses related to accounting and legal costs associated with restatement of our prior financials, our efforts to address internal control weaknesses, and our activities to catch-up on our delayed filings. We currently estimate that we will expand approximately $13 million of these activities in 2018, and that our results in 2019 will reflect only a minimal amount of this spend, with our future expenditures primarily relating to our focus on remediation of our internal control weaknesses. As a final consideration regarding our operating expenses, please note that we expensed approximately $4 million in training and related implementation expenses associated with rollout of our new electronic health record and patient management system in 2017. And we anticipate that we will spend further $5 million in 2018, those amounts are included as burdens to the operating expenses of our Patient Care segment. When reviewing Hanger's non-operating expenses for 2017, there are two key areas of focus, interest expenses and provision for taxes. With respect to interest expenses due to our delayed financial filing status, we found it necessary to refinance the company during the third quarter of 2016 using alternative sources of debt financing. This refinancing brought the average rate of interest on our indebtedness to approximately 10% and set the stage for interest expenses in 2017 to increase to $58 million as compared to the $45 million we expensed in 2016. Promptly upon the filing of our 2016 financial statements in January of 2018, we undertook the four refinancing of the company's term indebtedness and completed that refinancing in early March. Refinancing was comprised of a new seven-year $505 million term loan and $100 million five-year revolving credit facility. Given the raising interest rate environment, we simultaneously entered a six-year interest rate hedge agreement, which has the effect of fixing the interest rates on $325 million or 64% of the term loan. The average rate of interest we now there is approximately 6%, and we accordingly estimate that the company will report interest expense of approximately $40 million in 2018, which reflects a significant reduction from the $58 million we incurred last year. In reviewing our income statement, you will also notice that we incurred $27 million provision for income taxes, despite a net loss from continuing operations. Due to the perspective decrease in corporate tax rates enacted through the new federal tax law passed late last year like other companies Hanger was required to reassess the future value of its deferred tax assets and incurred in associated underlying charge of $35 million to its provision for taxes in 2017. Before we turn to the company's trends in 2018, I'll spend a brief walking you through our 2017 cash flows. During 2017, we reported operating cash flows of $30 million, which reflected a decrease from 2016, and analyzing those flows it's important to note that the company made $45 million in cash payments associated with third-party professional expenses we incurred in connection with restatement. And incurred $48 million in cash interest expense associated with higher cost bridge debt it raised in 2016. Both of those amounts will decrease substantially in 2018. Additionally for comparison purposes in 2016, the company benefited from $35 million tax refund and from favorable collections to prior accounts receivable accumulated in previous years. From a capital expenditure perspective during 2017, Hanger incurred $23 million for property, plant, and equipment, which was approximately consistent with prior year total. In 2018, we do intend to increase our expenditures primarily with respect to investment in therapy equipment for using our Products & Services segment to an amount in the low-to-mid $30 million range. Now I'll turn to our trends in 2018. In the first quarter, our preliminary results indicate that we produced net revenue in the range of $234 million, which was consistent with a level we reported for the first quarter of 2017. This reflected modest Patient Care revenue growth with same clinic revenue increasing 1.1%. This growth was driven primarily by an increases in revenue associated with prosthetic patients. In a manner similar to the dynamic experienced in 2017, we experienced revenue declines in our Products and Services segment that offset growth in our Patient Care segment. During the quarter, we also experienced to expense improvement, primarily related to our benefits expenses, which have led to a preliminary level of adjusted EBITDA that reflects modest growth over the prior year quarter. At the conclusion of the quarter, we had $127 million of liquidity, which was comprised of $33 million in cash and $94 million in undrawn revolver borrowing capacity. Our accounts receivable level was consistent with prior year quarter at DSO level of 49 days. Inventory balances reflected a modest decrease over the prior year period. For the full year of 2018, we currently anticipate that the trends for the year will remain consistent with what we have been experiencing in 2017, and in the first quarter of 2018. We believe, we will continue to achieve earnings growth in our Patient Care segment, driven by positive same clinic revenue growth, which will be offset by declines in our Products & Services segment. Overall, this positions us to currently view 2018 is being a year that we'll produce consolidated revenue and adjusted EBITDA at levels generally consistent where those we achieved in 2017. While, we do not currently have the effect of any acquisitions incorporated in our expectations, as Vinit indicated, we may commence the use of a portion of our free cash flow to undertake the targeted acquisition of orthotics and prosthetic clinics that will assist us in expanding the access of our patients to medical care. With the filing of our 2017 Form 10-K, we are now working expeditiously to file our first quarter 2018 Form 10-Q, and believe we are positioned to resume a timely filing cadence commencing with our second quarter 2018 Form 10-Q. Unless something significant arises in connection with our finalization of the first quarter 10-Q, we currently do not plan to hold an additional investor conference call regarding our first quarter results. During the past 12 months, we found ourselves in the unique position to have filed three jumbo Form 10-Ks, covering a cumulative total of eight years and 30 interim quarterly and year-to-date periods. This has been a tremendous accomplishment by the company's accounting team and we've all benefited significantly from the exceptional efforts by all of our Hanger colleagues, who have remained focused on and made great strides in executing on our operating plans and in achieving our patient-focused mission. With that, I'll turn the call back over to Michelle, to open up the line for any questions you may have.

[Operator:]

Thank you. We will now be conducting a question-and-answer session. [Operator Instructions] Our first question comes from the line of Brian Tanquilut with Jefferies. Please proceed with your question.

[Jason Plagman:]

Hey, guys. This is Jason Plagman on for Brian. Congrats on getting reported and making progress. And first question, can you just talk about what are the drivers that you're seeing of the improved same clinic growth? Is that ex the disallowances? Is that volume or - patient volumes, is it pricing, is it higher acuity, just what are the dynamics that are helping improve the same clinic revenue growth?

[Vinit Asar:]

Yeah, Jason, thanks for your question. I appreciate you being on the call. Look, for us, our Patient Care segment, we're pleased with all the initiatives that we talked about. We're seeing good progress in terms of getting market share. The way we see the market in 2018, we see the market growing by about between 1.5% and 2.2% in 2018, half because of the rate and half by volume. So that's how we're thinking about it. A lot of it is being driven by our initiatives. And we're just - we're focusing on patient care and we believe that word is getting out, even to our referral sources, is that the initiatives we put in place such as our Net Promoter Score and also our clinical outcomes is getting traction.

[Thomas Kiraly:]

And Brian or Jason, I mean, I'll just add to that. I think there is also a positive effect of the lapping that occurred in 2017, where we had - 2016 have been going through the claims initiative. And as we normalized across that year, progressively through 2017, I think that also helped the progressive growth rate resumption.

[Jason Plagman:]

Great, that's helpful. And then, regarding the reduction in disallowances, how much further improvement do you think you can deliver on that metric, both kind of in the shorter term, next one to two years and then longer-term opportunity as well?

[Thomas Kiraly:]

Yeah. I would say that we're - when you look at the sizeable amount over the last three to four years, I don't know that we can count on significant further improvements. Our team's really gotten down to more of a normalized level, at the levels we're currently at. I can tell you that we're currently working on a variety of initiatives to try to go and further improve the overall effectiveness of our recovery of revenue. But I wouldn't account on anything at this point in terms of the modeling. So I think we're pretty much stable in same clinic growth at this point. It would probably be pretty much normalized.

[Jason Plagman:]

Okay, it makes sense. And on the Products & Services segment, what opportunities are there that you see to right-size the cost basis of that segment, if you're not able to drive revenue growth in that area because of the kind of macro headwinds?

[Vinit Asar:]

Hey, you got to think of our Products & Services segment as one that has multiple cloak [ph] points. So, certainly, we call on skilled nursing facilities with our therapeutic solutions business, and then we also have our distribution business that calls on independent O&P clinics as well as podiatrists. So you got to think about all these three avenues. Certainly, the way we're looking at the therapeutic solutions business is we're looking at ways to stabilize it and then maximize the value. We are going to be investing a little bit of capital as Tom alluded to in his comments to refresh some of the therapy equipment. And we believe that's going to help us. But also we do anticipate some modest growth in the distribution side of the business to independent O&P clinics as well as podiatrists.

[Jason Plagman:]

Okay. And last one for me, regarding the EMR implementation costs, will those largely go away in 2019 or will there be some ongoing costs as well with that initiative?

[Vinit Asar:]

Well, as we said, we're currently anticipating that we would complete the EHR rollout in the first half of 2019. At that point, we think that those expenses should decrease. But I would caution we're currently undertaking a variety of other technology initiatives at the company and some of that may get redeployed for other training and implementation costs with our other systems. So that's a bit of why we don't add that back, but we call it out, because we certainly don't think it's a permanent part of the expense stream. But it's something that is currently burdening expense stream.

[Jason Plagman:]

Okay. Thanks. And thanks for taking the questions.

[Vinit Asar:]

Thank you.

[Operator:]

Thank you. [Operator Instructions] Our next question comes from the line of Dana Hambly with Stephens Inc. Please proceed with your question.

[Jacob Johnson:]

Hey, thanks. This is Jacob Johnson on for Dana. As you look to M&A possibly later this year, what are the key criteria you're looking for in a target? What kind of synergies can you realize and what does the integration process look like?

[Vinit Asar:]

Yeah, thanks for your question, Jacob. For us certainly patient access to care is a big piece of our criteria. Certainly, we look to see where we may not have a presence. We would look at that. We certainly would look at areas such as how the independent provider stacks up with regards to compliance issues in terms of documentation, how they provide pro-care, their reputation. And also, the culture piece is a big element for us as well, the cultural match for us in our clinicians and our company. So in essence, those would be the criteria when we look at targets for independent O&P providers. In terms of the integration piece, certainly over the last three years that we have not done acquisitions, our team has spent a fair amount of time, thinking through what best practice in terms of integration would be now that we have our Electronic Health Records, we have clinical outcomes pieces that we do have to offer our patients. Our plan to do integrations would be to rapidly as we bring in targets into the company, into the fold, we would pretty rapidly bring them on to our HR system as opposed to keep them on their existing system, which we did in the past, and that really doesn't make any sense for us going forward. So the integration has a little bit of a different view to it, because we will look to a more thoughtful, but more deliberate integration process.

[Thomas Kiraly:]

And let me add, Jacob, just a couple of thoughts on synergies. The company, we do have the benefit obviously of the sizeable amount of supply-chain capability and procurement capability, which helps us in the economics, is that we do through the revenue cycle function believe that we can - depending on the acquired entity, we can go and potentially add some value from a standpoint of revenue realization. But generally, when we're pricing these out and when we're going to undertake them, we're really going to look at them pretty pragmatically and make sure that there is a fit and there really a part of an overall decision to expand our capabilities from a care standpoint.

[Jacob Johnson:]

Got it. Thank you. And then, on the margin side, as you look out over the next few years, what are the expectations for EBITDA margins and what are the main drivers impacting those expectations?

[Thomas Kiraly:]

Yeah, right now, we're not really guiding on the longer term, because we're still viewing the company as reemerging. I would say that you could - as we talked about back in January and you saw in the results, we saw a nice rebound to about 11.5% EBITDA margin from a low of 10.4% last year or in 2016 I should say. I would at this point not say that we're expecting any dramatic change in that in the near term, but obviously the company is focused on a longer-term ability to go ahead and enhance its performance. But it's not something we can really guide to at this point.

[Jacob Johnson:]

That's fair. And then, I guess, last question for me, can we get an update on the Linkia subsidiary and maybe remind us of the strategic benefits that brings to Hanger?

[Vinit Asar:]

Really, we view that subsidiary as important to our managed markets function, which is our overall relationship with the payers to offer them a full access to high-quality care. So our partners in the Linkia network are really part of a care equation, where we're expanding into markets that we don't have what we believe to be enough of a presence. And from a payer perspective, it gives them a sort of a one-stop-shop. So it's not really something that I would characterize as a huge economic angle for the company, but it's much more of an opportunity that we offer payers to have better access to care.

[Jacob Johnson:]

As we move to a value-based world, are those relationships in that subsidiary sort of part of our plan going forward?

[Thomas Kiraly:]

Yeah, we are. And we consider those relationships now at a slightly different level in the sense that we started meeting with also the medical directors of some of the payers, which is important, because we want the payers to understand the value of O&P care through our clinical outcomes in the study that we're working on. So the conversations are not just with the contracting folks, but also with the medical directors, because we believe they go hand-in-hand.

[Jacob Johnson:]

Great, that's it for me, and congrats on the progress.

[Vinit Asar:]

Thanks, Jacob.

[Operator:]

Thank you. There are no further questions at this time. I would like to turn the call back over to Mr. Asar, for any closing remarks.

[Vinit Asar:]

Great, thanks, Michelle. And thank you everyone for joining. Just a reminder, given that we've provided color on the first quarter of this year, the next time we have our earnings call will be at the conclusion of our second quarter financial filings. So thanks again.

[Operator:]

Thank you. This concludes today's teleconference call. You may disconnect your lines at this time. Thank you for your participation and have a wonderful day.