Post by
donmayne on Sep 15, 2021 10:24am
2020 & 2021 CC comments on acquisitions and VA contracts
2020 Q1
Casey Hoyt
The VA has also been moving faster than normal as they helped to assign two large national contracts with their remaining third party payers. The VA has also pursued payments for our services which has been the confirmation that we have been waiting for to expand.
During the pandemic phase, we also provided multiple staffing contracts through our FBB or SP partners to help with the underserved VA facilities. While we did have to cancel our bellringing ceremony with the NASDAQ and a few other physical roadshows, we have been very active with virtually communicating to our institutional investors.
Brooks O’Neil
Okay, that’s very helpful. Secondly, I’m glad to hear about progress with the VA. Can you just talk a little bit about what steps you need to take to begin to ramp the patient population that’s covered in that national contract?
Casey Hoyt
Yes, it’s—and it’s no—there was really two other payers with—we were trying to get on with nationally beyond the BCA contrast which we announced in the last call. We ended up…
Brooks O’Neil
Yes.
Casey Hoyt
…inking those deals—we inked those deals in Q1, so from a payer standpoint we’re good to go. The next piece, as we probably remember, we’re waiting on getting paid. That has been solved as well. We started collecting on payments.
Then, as the pandemic should—a lot of the work that we were going to be doing for the VA was on the front end. Getting R2’s into the home and assessing the home environment and recommending equipment and services that they would need, well, as you can imagine that got put on a halt, however, just because they saw the need for the vent, they were quickly wanting us to get in network with the other two large payers. We were able to accomplish that.
We have orders that are being uploaded into a VA queue (phon) right now, so we’re seeing the shift in folks getting reading to release us to go out into the home again. That’s exciting for us because now we know not only do they want it—we knew they wanted it. We just didn’t know that we were going to get paid for—we solved our problem as we started collecting on payment, so we’re very—we’re geared up and ready to ramp up here in the Q2 for both doing business with the VA.
2020 Q2
Casey Hoyt:
Since the VA centers began limiting physical visits from our salespeople and clinicians, we decided to pivot and build out another call center campaign around rural access to care for VA patients. Many of our other campaigns are targeted to communicate directly to physicians and referral sources, but this one is designed to create awareness of our rural access to care directly for the patients themselves. The initiative is designed to get patients requesting Viemed respiratory services as they visit their local VA facility.
Brooks O'Neil
… do you still see a big opportunity with the VA? Are you making progress with the VA? Is there some near-term white space out there that will turn the VA into a more meaningful revenue contributor in the next few quarters.
Casey Hoyt
Yes. We still are very excited about the VA, Brooks. In June, we really got back out into the field, and then we had to pull back in July. That halted us a little bit. But we saw new VA centers coming online. They're paying—the VA centers, just to give you an example, in Arkansas are paying attention to what the centers are doing in Oklahoma that are doing business with us. You can see signs of how we can build up on that momentum to get our business going. As mentioned in previous calls, we are—we're in with all the third-party administrator payers, got the national contract with the VCA.
We've got all of our services uploaded. We've begun to get paid on our pulmonary rehab program. We expect, once we can get back into the home, physically, that we'll get a lot of momentum in the VA, but it we—we got turned back on, we got turned back off right at the end of the quarter. That's the reason that we have a little bit of a hold up right now. But we remain very excited about the opportunity, for sure.
Khadir Richie
With your cash balance growing so quickly, are there any new thoughts on how to deploy, whether investing in new technology or seeking out inorganic opportunities?
Todd Zehnder
Yes. Right now, it's—the top two uses are technology-based solutions, whether that's—we've both made comments about remote patient monitoring and following up and finalizing this PEP program. Technology investment is a big one. Obviously, continue to invest in equipment as we continue to grow our patient base and get ready for that. Then ultimately, we will look at inorganic opportunities. As we've always said, it's just not our number one focus with the cash right now.
2020 Q3
Casey Hoyt
Another contract that came in the third quarter was a national contract with our Home Sleep Delivered division to provide home sleep studies to the VA. We have already started receiving orders for HSDs from multiple centers across the country. This contract will help us grow the sleep business, and assist us with our goal of being a one-stop-shop for all VA respiratory home-care needs.
Additionally, our inside salesforce has experienced success with setting up 42 meetings in less than 60 days for reps within various VA facilities. With these centers being difficult to access during the pandemic, it was nice to execute on a safe strategy to stay in front of our VA network with their granted permission.
While we have traditionally not been an acquisitive company, we recognize that an opportunity exists for prudent acquisitions to help expedite our market share growth in the future.
Todd Zehnder:
Additionally, we filed a shelf registration during the third quarter that will offer us the flexibility in the future should we have the use of proceeds necessitating a capital raise. We became eligible to file this shelf after being an SEC registrar for one year; therefore, we filed a during September.
Brooks O'Neil
… in your prepared remarks a little bit more focus on acquisitions this quarter.
And you highlight the shelf offering, I mean do you think are you trying to say to us, we should expect to see an acquisition here over the next 12 months or something?
Todd Zehnder
I think so, Brooks. We are putting the focus on starting to do our homework on various opportunities, not just other medical equipment businesses in our space that are in areas that were not in with contracts that we don't have, but also strategic acquisitions that might be a good fit for our technology initiatives that are underway. So, the one thing about the pandemic that was great, it helped us grow our cash balance and we're sitting pretty now, it's time to put that cash to work, and so we are actively looking at becoming more acquisitive.
2020 Q4
Casey Hoyt
At the VA, we are actively participating in a pilot program which stands to prove the cost savings associated with treating COPD patients with NIV. Our first phase goal is to show these savings and have the VA adopt NIV as the gold standard of care for their veterans struggling with COPD. The second phase would be to have the VA utilize VieMed to help nationwide with their hospitals at home initiatives.
Brooks O’Neil
Yes. Okay, that's good.
When you guys think about the business, I have a sense that organic growth in the core business is still the highest priority, but would you say strategic partnerships and acquisition opportunities in the short term might take precedence? Or, do you just kind of continue to view the business in the long-term context, and think these will all play a role in your growth going forward?
Casey Hoyt
Yes. I mean the latter. It's all going to play a role in driving our organic growth. But strategic partnerships and initiatives with health systems and ACOs are very much a part of our growth model for 2021. I mean, Brooks, you know, we've been talking about doing deals with ACOs for about a year and a half, two years now. It's now at the point where we have some successful ACOs that are actually generating savings; they are understanding the value of post-acute care, and how it prevents readmissions. COVID is shining a light too on how we need to treat more of these folks in the home and keep them safe.
So that's all playing into our hands. Because we were such a provider that was very resourceful and useful to them throughout the pandemic, it's opened a lot of doors for us to have some more C-level and strategic discussions that are transparent, and we don't have to have everything figured out, we'll figure it out together. Because there's not many folks out there that are doing these value-based types of contracts, or even contracts with ACOs or post-acute home health companies such as us.
To sum it all up, it's very much a part of our focus, and we expect it to drive the organic growth part of the business as well.
Brooks O’Neil
Cool. So, last question, and I confess I zoned out for a second when you were talking about the VA. But have you begun to get traction at the VA? Or, is that still a work in process in your opinion?
Casey Hoyt
I was that dynamic whenever I was presenting the VA.
Brooks O’Neil
Sorry …
Casey Hoyt
No, the VA, we have a pilot program that we've been really in the beginning phases of for the past six months, that is now starting to take off. It's a program that's funded by the VA for us to enter patients into our system and treat them on non-invasive ventilation, it's for COPD patients, very similar to the way that we performed all three of our studies. The goal was to generate the same results that we've already proven in these three studies.
So, we're working with a cared innovation team at the VA, which is a little bit unique. It's not like we're working with one VA system, it's above all the VA systems. That part is exciting for us. They have initiatives beyond just non-invasive ventilation to treat COPD patients; they want to take advantage of more in-home programs, more "hospital to the home" type of programs, specifically designed to treat some of their rural pockets of veterans that can't get into the facilities. So, all of that eventually will play into our hand, but right now we're focusing this pilot on just cost savings. That is really just setting it up to be designed just like the KPMG study or the Precision or the Harvard Medical School study as well.
Brooks O’Neil
Cool, and what's the timing on that? When do you ...
Casey Hoyt
They're saying that we start in April, but Brooks, we're dealing with the VA. So you can't hold me to the time, whenever we're talking about the VA.
Brooks O’Neil
All right, I appreciate it. Keep up all the good stuff, guys.
Doug Cooper
The cash balance continues to grow. If you don't do any acquisitions, would you ever consider share buybacks?
Casey Hoyt
I guess the short answer is yes; we've done them in the past. Right now, we've always been very clear that the best investment opportunity for us is to continue to buy equipment and get new patients. Right now we've put a clear number two as being acquisitive. I would say the third would be, just like we did last time, potentially buy back stock at some point. Right now we don't have an NCIB in place, and we don't have an active one working. But in the event that we wanted to, we've proven that we could execute on that, like we did a couple years ago.
2020 Q4
Casey Hoyt
On the acquisition front, we have been exploring multiple data rooms and learning a lot about several companies that could help springboard our patient growth. We are uncovering many synergies as it relates to product mix, care contracts, and further patient diversification. Our strategy is to look for accretive companies that come with strong human resources to help us carry our VieMed initiative forward at a faster rate. The companies we are evaluating are of medium to large sizes and are in areas that we have a geographic coverage gap. Acquisitions have not been part of our strategy in the past but with the new regulatory stability and our M&A team in place, we will make acquisitions a meaningful part of our expansion in 2021 and beyond.
Brooks O’Neil
Yes, that’s great. That’s very helpful. I appreciate that color.
Secondly, I think Casey used the word medium to large in regard to potential acquisitions and I’m hoping you guys might frame that up for us in terms that we can get our arms around in terms of, are you thinking about a $2 million acquisition, $10 million, $50 million, $500 million? How are you thinking about it?
Casey Hoyt
Well, I’ll say that we’re not interested in doing about 10 acquisitions that are worth $2 million, Brooks. While I don’t…
Brooks O’Neil
Okay.
Casey Hoyt
… have an exact number to throw on medium to large, we are really focused on finding quality companies. Less of your fixer upper if you will; more quality management teams that are in place that5 carry our VieMed mission forward. We could introduce them to our technology platforms. We can leverage some of their payor contracts that are in place in areas that we’re not.
I’d rather not just talk about what that number is because we’re looking at so many different…
Brooks O’Neil
Sure, sure.
Casey Hoyt
I’d rather it be a larger acquisition than a smaller one. That’s our preference.
Brooks O’Neil
Yes, I get that. That’s very helpful.
Then, just a little color. Obviously, you’re not announcing any transactions today but from your perspective, are you pleased with what you’re seeing in the marketplace in terms of pricing for these acquisitions? Are you shocked but willing to go to where the market is? What are you seeing out there?
Todd Zehnder
We’re not seeing enough to be giving a ton of color but I think that the environment is one in which, this isn’t a low single digital multiple type world and we’re going to be looking at things that are important to us. We’re not just, like Casey said, we’re not going to do a bunch of little things that we can buy at four and five times. That’s not what we’re focused on, so I don’t think we’re surprised because we’ve watched some of our peers be very acquisitive and we’re watching what it takes to be in the game, I guess. Nothing that’s necessarily surprised us yet but we’re also not at the point where we have one teed up either.
Brooks O’Neil
Yes, yes. Okay, that’s very helpful.
Then I’ll just ask one more. Obviously, you didn’t say anything about VA but it’s still an area of, in my opinion, immense opportunity. Is there any progress you can comment on with the VA and maybe do you have any line of sight to when you might see some decent revenue from that source?
Todd Zehnder
Yes, the VA Pilot Study is still ongoing, Brooks, so there’s no real major update from the last quarter so I didn’t put it in my prepared remarks. It’s moving forward. It’s probably going to take us six to 12 months to really generate some real data that they can prove out and then from there you have to think about the national roll out. As far as to think about when we’re going to realize that VA revenue, and that’s why I’m just talking a little bit less about it. I really want to get through this pilot program and then reset with these guys on what the strategy will be for incremental revenue.
I agree with you 100% and we’re not giving up by any means. This is a huge opportunity with the VA being the second to largest payor in the country and them not servicing COPDers on an IV, major, major opportunity. It’s just, it’s slow moving, and it’s bloodying your nose out there for our Company but we’re taking the necessary steps and moving forward with VA Pilot Study.
2021 Q2
Casey Hoyt
On the acquisition front, we continue to look at deals that are prudent for spring-boarding our growth. We want to remain in a strong cash position as we keep a close eye on how the recall will affect the industry, while also being mindful of any solutions that we can provide related to a relapse of the pandemic.
Brooks O’Neil
..any update on the VA, or any progress you're seeing or any cracks in the wall, if you will, there?
Casey Hoyt
Yes. If anything, we were slowed down a little bit, Brooks, just because of the transition of the administration, and we saw a lot of the folks we were working with had to go elsewhere, and some—and we got to meet some new faces. However, all that being said, our pilot study stayed on track, and it's still moving forward. It's just moving forward with another group, so unfortunately, just slow moving. It's still the same report as last year—as last quarter, but it's definitely one that remains a large opportunity. We still identify the VA as the—we know it's the second-largest payer in the country, and there's lots of folks that need us, so we’re going to continue to press forward.
END