theinvestor22 wrote: Ok, so here's what Reliq has said about the issue of compliance, with some interpretation from me.
From the perspective of monitoring a patient, compliance is when a patient is providing sufficient data on their condition(s) in a given month to meet Medicare/Medicaid's minimum standards for payment. Reliq, of course, will issue gentle reminders to patients in order to get them up to speed, but still, they often take two or three months to get into the routine of regularly providing data on their conditions. Once they are up to speed, Reliq can then report revenue for services provided. So, prior to that tipping point, Reliq doesn't report anything as revenue for that patient, doesn't bill for that patient, doesn't have any accounts receivable for that patient and therefore cannot encounter any collection issues for that patient. Essentially, there is no financial transaction for monitoring that patient until compliance occurs.
Once a patient is regularly reporting, Reliq reports revenue, bills and collects regularly. Since Reliq's software does everything to ensure Medicare/Medicaid eligibility, Reliq's clients should be able to collect from CMS and pay Reliq normally. This is why I don't think there should be any collection issues going forward for normal operations.
Now, let's say something happens either to the patient or to the client. If a patient stops being eligible for CMS reimbursement in a given month, either because they go into the hospital, or they start receiving more intensive care in the home or they simply stop for personal reasons, then Reliq's software would determine that no claim can be made for that patient for that month. No revenue would be reported, no billing would take place and once again there would be no collection issue. If the client itself stops performing its service (to M/M standards), perhaps because of temporary overwork on the covid front, then Reliq might have an issue. Perhaps someone can recall better than I can about this situation, but I seem to remember Reliq saying that their software ensures full M/M eligibility before revenue is reported and an invoice is produced, and it even produces the M/M claims. Even though I'm a bit fuzzy on this, it is actually a short term and temporary thing which might be behind us at this point. Certainly, since monitoring is so profitable for doctors, it would be in their interests to provide the required service to patients.
Just to finish with my thoughts here, Reliq has said that their system has way better compliance than others, but I don't recall the numbers offhand. Perhaps someone does. Of course, there will be some drop off over time, but they're making a lot more seniors these days (i.e., the population is aging), which would be more than an offset. IMHO, if they wind up with a compliance rate of 75%, that would be a huge win. As I recall, Reliq has said the compliance rate is way higher than that (90+% perhaps?).
qwerty22 wrote: So theinvestor22, let's say 75% of patients become compliant (just a random number). How would they handle the revenue recognized from the 25% of patients that don't become compliant? It will never get collect, presumably they would need to subtract it at a later date. You would actually expect them to have a compliance rate in mind, even if it's a poorly constrained number. Maybe they have this already baked into the process and are just not talking about it?
theinvestor22 wrote: There seems to be some confusion here as to when revenue is recognized by Reliq. Some folks still equate revenue recognition in the financial statements with collections from clients. These are not the same thing.
Once Reliq has performed a service for which it expects payment under a contract, that's when the revenue is recognized. It seems that Reliq doesn't expect payment until a patient is compliant with Medicare/Medicaid requirements , so there could be some period of time after onboarding where no revenue is being generated. Having said that, once a billable service has been provided to a client who is expected to pay, that's the moment of revenue recognition.
Since Reliq's clients don't pay at the moment of revenue recognition, the unpaid amount owed by clients leads to accounts receivable. When a payment is received from a client, no revenue is generated, but the accounts receivable balance is reduced. Delays in receiving payments affect the company's cash flow, so a company can have a good quarter as far as revenue and income go, but it might be accompanied by poor cash flow. Later on, when clients pay bills, that same company can have a decent revenue quarter with great cash flow.
In terms of cash burn (or negative cash flow), Reliq had numerous quarters where collections from clients were minimal. For several of those quarters, Reliq stated that they gave generous payment terms to clients during covid. Whether or not you agree with that, the auditor did accept that argument as a legitimate reason as to why the accounts receivable balance was growing and collections were lagging. Lately, Reliq has begun collecting on those older accounts receivable and Reliq has stated that receivables older than one year have been collected. One can imagine that Reliq's clients should be able to pay their bills at this time for numerous reasons that have been discussed here before, but can be rehashed if anyone is interested. Regarless, accounts receivable and collections are something to be watched.
I hope this helps.