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Founded in 1974, BrightSpring Health Services provides home and community-based health services for patients in need of specialized or chronic care. Formerly known as Phoenix Parent Holdings, the company services over 400,000 people daily with home health care, hospice care, pharmacy therapy management, and more. BrightSpring Health Services also offers infused, injectable, and oral medication services and rehabilitation services, including physical, speech, and occupational therapy.

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BrightSpring Health Services (BTSG): Company Profile, Stock Price, News, Rankings

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BrightSpring Health Services

brightspring health services

Good day and thank you for standing by. Welcome to the BrightSpring Health Services Inc. Fourth Quarter and Full Year twenty twenty four Earnings Call. At this time, all participants are in a listen only mode. After the speakers' presentation, there will be a question and answer session.

Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, David Deichler, Investor Relations. Please go ahead.

Good morning. Thank you for participating in today's conference call. My name is David Deichler, and I'm responsible for Investor Relations at BrightSpring. I'm joined on today's call by John Russo, Chief Executive Officer and Jen Phipps, Chief Financial Officer. Earlier today, BrightSpring released financial results for the quarter and full year ended 12/31/2024.

A copy of the press release and presentation is available on the company's Investor Relations website. Please note that today's discussion will include forward looking statements that reflect our current assumptions and expectations, including those related to our future financial performance, industry and market conditions. Such forward looking statements are not guarantees of future performance. These forward looking statements are subject to risks and uncertainties that could cause actual results to differ materially from our expectations. We encourage you to review the information in today's press release and presentation as well as our annual report and Form 10 ks filed with the SEC, including specific risk factors and uncertainties discussed in our 10 ks.

Such factors may be updated from time to time in our periodic filings with the SEC, and we do not undertake any duty or to update any forward looking statements except as required by law. During the call, we will use non GAAP financial measures when talking about the company's performance and financial condition. You can find additional information on these non GAAP financial measures and reconciliations to their most directly comparable GAAP financial measures to the extent available without unreasonable effort in today's press release and presentation, which again are available on our Investor Relations website. This webcast is being recorded and will be available for replay on our Investor Relations website. And with that, I'll turn the call over to John Soe, Chief Executive Officer.

Good morning. Thank you for joining BrightSpring's fourth quarter and full year twenty twenty four earnings call. I'd like to begin this call by expressing my appreciation and gratitude to and for the BrightSpring team across the country. Our employees and caregivers work very hard with diligence each day to deliver compassionate and attentive care to the people we provide critical services to. I would also like to welcome Jim Phipps as Chief Financial Officer and thank Jim Mattingly for his excellent service over the years as we transition the CFO position.

During Jim's tenure, the company has achieved some exceptional results, including the sale and recapitalization to KKR and WBA, one hundred and seventy five percent revenue and 109% EBITDA growth since that time, implementation of best in class financial systems, completing the IPO and executing multiple successful refinancings underpinned by the company's performance. We appreciate all of Jim's leadership and contributions as he moves to other priorities and next steps. And after appropriate and thorough consideration and evaluation, we are extremely pleased that Jen will assume the role of Chief Financial Officer. With Jen's overall background and eight year tenure at BrightSpring, she is extremely well suited for this role. Jen has served as the Chief Accounting Officer at the company since January 2017 and Principal Accounting Officer since the IPO.

Jen has also served as the CFO of the Home Health and Hospice business and she has run numerous other departments within the company, including procurement, real estate and tax. She has been deeply involved in all financial systems and processes over the years, as well as all acquisitions and divestitures and many automation and efficiency initiatives. Jed is well prepared, knows the entirety of the company and is very deserving of this position. Turning to 2024, it was another year of milestones, continued quality improvements and leadership, further growth and significant ongoing impact for the customers, patients and communities that BrightSpring serves. And we are proud of how our businesses and people have performed.

Throughout 2024, we've also deepened our focus on operational efficiencies across the organization to best support employee effectiveness and high quality services. In addressing significant needs for individuals across the country, the company has increased its reach to more patients and delivered strong growth across both pharmacy and provider businesses through strategic prioritization, disciplined investments, company scale and execution. Our results are ultimately a reflection of the reliable relatively lower cost and coordinated care that drive high customer and patient satisfaction rates. In the fourth quarter, we are pleased to have realized total revenue growth of 29% year over year, leading to total company and segment revenues for full year 2024 at the high end of our guidance range and in line with our preliminary results provided in January. Total revenue of $11,300,000,000 in 2024 represented 28% growth year over year, which included pharmacy solutions revenue of $8,800,000,000 and provider services revenue of $2,500,000,000 representing thirty four percent and nine percent growth year over year respectively.

Full year 2024 adjusted EBITDA was $588,000,000 representing 16% growth year over year when excluding a certain $30,000,000 quality incentive payment from 2023. Adjusted EBITDA also came in at the high end of our guidance range and in line with preliminary 2024 results communicated in January. Today, we are increasing total revenue and adjusted EBITDA guidance for 2025 with our adjusted EBITDA guidance for this year increasing by $5,000,000 at each the low and high ends of the prior range provided in January and which excludes the community living business. We announced in January that we entered into a definitive agreement to divest the Community Living business to Savita and expect the transaction to close this year, subject to regulatory approvals and typical closing conditions. Jen will discuss our fourth quarter and full year 2024 financial results along with our 2025 outlook in more detail shortly.

Before I discuss business performance, I would like to further reinforce our commitment to both quality and continuous improvement and efficiencies across the organization, which go hand in hand. For example, in quality, our most recent net promoter scores in specialty pharmacy for Onco360 and CareMed were ninety eight and one hundred respectively, almost a perfect rating for Onco360 and a perfect 10 out of 10 rating for CareMed from all participants. Also scores that are the best among specialty pharmacies. After the past year of investments in people and process in our infusion business, we are now seeing best in class referral to in home turnaround times for specialty patients. Our home and community pharmacy on time delivery metrics approach ninety seven percent.

Approximately eighty five percent of our home health branches now have a predicted CMS star rating of four or five out of five. And we have 97% timely initiation of care above industry average. In hospice, we have a 9.3 Hospice Care Index score out of 10, significantly above the national average. And we provide 16% more nursing visits to patients and 27% more patient visits in the last week of life with 90% of our locations above national average on visits provided to patients. In primary care, our ACO is reporting 13% lower healthcare costs for patients in skilled nursing facilities and 31% lower costs for patients in assisted living through our more attentive, local and proactive care and quality.

And our special needs plan has already improved its star rating by 0.5 in less than a year under our ownership with a six percent reduction in hospitalizations in the last year, a ninety nine percent capture rate for health risk assessments and ninety nine percent of our patients receiving annual wellness visits within ninety days of enrollment. In personal care, we have a likelihood to recommend a 4.54 out of five. In rehab, we have overall stakeholder satisfaction of over ninety seven percent among case managers, discharge planners, physicians, claims managers, etcetera. And we have a patient satisfaction score of over ninety five percent. In community living, our external audits outperform the national average and we hold more third party accreditations than anyone in the industry.

While we have deployed innovative and leading technologies to drive client risk stratification and care plans. These are just some select mentions and highlights among many other strong and leading service and quality measures in the company. Across the organization, we continue to invest in and deploy new and or enhanced technologies, EMRs, ERPs, applications and analytics and reporting, numerous of which now incorporate new automation and AI use cases to the benefit of our people and to drive outcomes for the individuals we serve. We also continue to invest heavily in compliance with literally thousands of on-site internal compliance visits and audits conducted across our operations last year. On the efficiency front, since the start of last year, the company has over 100 procurement, workflow augmentation and automation programs completed or ongoing, driving process improvements, cost efficiencies, best practices and streamlining across all business lines.

We are more dedicated than ever to lean into process and technology innovation and leadership in healthcare services and provide all of our stakeholders with the best possible experiences over the years. Now taking a closer look at fourth quarter results, pharmacy solutions revenue of $2,400,000,000 represented 34% growth compared with the fourth quarter of last year. Growth for the business was primarily driven by total script volume of $11,000,000 in the fourth fourth quarter, which represented 14% growth compared to the prior year's quarter. The infusion and specialty business has continued to deliver above expectations growing revenue 42% year over year in the quarter driven by specialty script growth of 35%. Our results in specialty and infusion this quarter and throughout the year have been a function of cross functional operational execution and continued LDD brand launches and generic drug utilization.

Our total LDD portfolio now stands at 125, which includes 12 LDDs launched in 2024 in either an exclusive or ultra narrow pharmacy network. We continue to see the potential for an additional 16 to 18 limited distribution drug launches over the next twelve to eighteen months, while also facilitating the adoption of new generic products. We are honored that we are selected by our pharma manufacturing and biotech partners as a limited distribution drug specialty pharmacy for each of these therapies and are committed to helping and improving the lives of patients who are battling cancer, rare, orphan, neuro and a number of other diseases through market leading service levels and satisfaction scores. Within infusion in 2023 and through 2024, we initiated and completed operational initiatives and investments to deploy standardizations and process improvements. And we believe that results in the infusion sub segment will begin to benefit from these investments in 2025.

In Home and Community Pharmacy, revenue grew 17% year over year in the fourth quarter, driven by script growth and new customer wins. We continue to be pleased with our execution across a variety of home and community pharmacy settings, including behavioral, hospice, assisted living, skilled nursing, hospital and rehab settings, as well as other locations where patients need at home pharmacy support. We believe we have an additional market share and growth potential opportunity in all of these markets and we will also be entering the PACE pharmacy market this year. We remain focused on driving more operational and technology driven efficiencies in the business and the continued expansion of our pharmacy services is important to ensuring that as many people as possible receive the highest quality and most comprehensive medication management and care. Turning to Provider Services, segment revenue grew 11% year over year and segment adjusted EBITDA margin expanded by 70 basis points year over year to 15.2% in the fourth quarter, which was primarily driven by strong service and quality based volume growth and broad based operational efficiency and execution.

In Home Health Care, revenue grew at a rate of 17% year over year in the fourth quarter with average daily census growth of 9% to 46,000. We saw continued growth in the home health and hospice businesses, both in the fourth quarter and for the full year 2024. Personal Care has been a consistent performer this year as well with steady billable hours and very consistent operational execution. Our primary care business has seen expansion and growth where we leverage proximity and access to patients including through core pharmacy and provider services and we believe home based primary care represents a significant opportunity in the coming years with ACO and payer strategies continuing to develop. Community and rehab care also performed well again in the quarter with strong revenue growth of 8% year over year and consistent growth in rehab persons and hours served.

In the rehab business, billable hours grew in the mid teens year over year for the fourth quarter and full year. We continue to add numerous de novos through new home and community neuro rehab programs and new rehab in motion programs and assisted living facilities. And we anticipate attractive growth from rehab in motion over the next five years as we continue to add location. The community living business has shown solid growth through 2024 through operational continuity, a service focus and continued investments in technology and employees. As I mentioned earlier, the divestiture of Community Living remains on track anticipated to close in the second half of twenty twenty five subject to customary regulatory approvals and closing conditions.

We expect that the transaction will create a streamlined organization of BrightSpring and augment both provider services and company revenue and adjusted EBITDA growth rates. Our strategic focus in provider will narrow to the remaining home health care, rehab and personal care businesses, each of which continues to perform in line with our high expectations. Consistent with the announced divestiture of community living, our capital allocation priorities remain on both debt pay down and continued tuck in acquisitions at disciplined valuations, consistent with our prior strategy. To summarize, 2024 was an excellent year for BrightSpring and I'm pleased with our execution so far in 2025 as we always continue to look for any ways to serve more people and improve their outcomes with mission driven and meaningful services. We are focused on delivering on our 2025 financial outlook through quality, volume growth, process optimizations and cost efficiencies, accretive acquisitions and effective portfolio and asset management and deployment.

With that, I'll turn the call over to Jen to discuss our twenty twenty four fourth quarter and full year financial results and 2025 guidance in more detail.

Thank you, John. In the fourth quarter of twenty twenty four, the total company revenue was $3,100,000,000 representing 29% growth from the prior year period. Pharmacy Solutions segment revenue in the quarter was $2,400,000,000 achieving 34% year over year growth. Within the Pharmacy segment, Infusion and Specialty revenue was $1,800,000,000 representing growth of 42% from prior year and Home and Community Pharmacy revenue was $6.00 $1,000,000 representing growth of 17% year over year. In the Provider Services segment, we reported revenue of $656,000,000 in the fourth quarter, which represented 11% growth compared to the prior year period.

Within the Provider Services segment, Home Health Care reported $280,000,000 in revenue, growing 17% versus last year, and Community and Rehab Care revenue was $376,000,000 representing growth of 8% year over year. For the full year 2024, total company revenue was $11,300,000,000 representing 28% growth from 2023. Pharmacy Solutions segment revenue was $8,800,000,000 representing 34% growth from the prior year and Provider Services segment revenue was $2,500,000,000 also representing very strong 9% growth from the prior year. Moving down the P and L, in Q4 company gross profit was $422,000,000 representing growth of 14% compared with the fourth quarter of last year. For full year 2024 company gross profit was $1,588,000,000 representing growth of 13% compared to 2023 when excluding a $30,000,000 quality incentive payment.

Adjusted EBITDA for total company was $167,000,000 in the fourth quarter growing 17% compared to the fourth quarter of twenty twenty three. For full year 2024, adjusted EBITDA for the company was $588,000,000 representing 16% growth compared to 2023 when excluding a certain $30,000,000 QIP in 2023. Adjusted EPS for the total company was $0.22 for the fourth quarter. Turning back to segment performance in the fourth quarter, pharmacy solutions gross profit was $2.00 $5,000,000 growing 20% compared to the fourth quarter of last year. Adjusted EBITDA for pharmacy solutions was $113,000,000 for the fourth quarter growing 22% compared to last year representing an adjusted EBITDA margin of 4.7% which was in line with our expectations.

Provider services gross profit was $217,000,000 growing 10% versus the fourth quarter of last year. Adjusted EBITDA for provider services was $99,000,000 for the fourth quarter growing 16% versus last year, representing an adjusted EBITDA margin of 15.2%, up 70 basis points versus last year. On a total company basis, cash flow from operations was $116,000,000 in the fourth quarter excluding IPO fees paid in Q4 and $90,000,000 of cash flow from operations in the quarter including these fees. We expect to deliver over $300,000,000 of annual run rate operating cash flows in 2025 as we remain focused on improving our leverage ratio towards our pro form a goal of three point zero times to 3.5 times and are now long term target of two times to 2.5 times. As of December 31, our net debt outstanding is approximately $2,700,000,000 with a leverage ratio of 4.16 times, which was in line with our internal projections.

As a reminder, net interest expense includes interest income related cash flow hedges due to our three received variable pay fixed interest rate swap agreements that we have in place set to mature on 09/30/2025. Prior to any proceeds from the pending Community Living divestiture, quarterly interest expense is expected to be approximately $43,000,000 per quarter, including approximately $1,200,000 in interest expense related to the TEU instrument. Turning to our guidance for 2025, we are increasing our expectations for revenue and adjusted EBITDA that was provided in January, which excludes the Community Living business. Total revenue is expected to be in the range of $11,600,000,000 to $12,100,000,000 including pharmacy solutions revenue of $10,150,000,000 to $10,600,000,000 and provider services revenue of $1,450,000,000 to $1,500,000,000 This revenue range reflects 15.2% to 20.1 growth over full year 2024 excluding community living in both years. Total adjusted EBITDA is expected to be in the range of $545,000,000 to $560,000,000 for full year 2025.

This would reflect 18.4% to 21.7 growth over full year 2024, excluding community living in both years. With that, I will now turn it back to John.

Thank you, Jen. And thank you for your time today to go through BrightSpring's fourth quarter results and 2025 outlook. We will now open it up for questions. Operator?

And our first question comes from A. J. Rice of UBS. Your line is open.

Congratulations, Jen. Best wishes in the new role. When you think about your limited distribution drug business and pipeline, it seems like you guys are seeing more exclusivity, more fewer and fewer people are getting the contracts, you're getting with less and less competition. I know some of that is obviously the strength of your franchise and what you've done. But I also wonder, is there any changes in the competitive landscape?

Obviously, in the pipeline of new LVDs continues to look robust, but it seems like you might be capturing more of those or getting more narrow contracts. Can you just comment on that?

Yes. Good morning, A. J. Thank you. Nothing material has shifted in the market and we've had about a ten to fifteen year history with our team of really focusing on operational process and service levels for our partners.

Here in the most recent quarter, we pulse the market on net promoter scores and we actually had 198 net promoter score for CareMed, which is really the non oncology and then Onco360 in satisfaction ratings, which we were obviously incredibly pleased with. So the team has just done a nice job of servicing our partners over the years. And there is a general trend to more and more, I would say, more niche micro therapies in the market. And perhaps there's something there in terms of partners being more and more comfortable with fewer and fewer pharmacies serving those niche targeted populations. But we have seen a trend towards the narrowing of networks and we've been pleased that we've been able to continue to be a strong and chosen partner through that process.

Okay. Then a couple of times you mentioned in the prepared remarks about the investments you made over the last eighteen to twenty four months in the infusion business and you sort of feel like it's positioned to grow from here. I wonder if we could get you to talk a little bit more about the opportunity now, what the growth trajectory might look like for that business as well as where you're at with respect to margin and what level of upside there might be on margin at this point?

Yes. No, good question. Just tying off the LDD point there as well. In 2025, we've now launched two LDDs so far this year in the first two months. So good to see that momentum happening in the first part of the year too.

And importantly, a handful, three or so of our more recent launches have been in the rare and orphan category. As we continue to not only focus on oncology, but more and more other relevant indications where we can apply our operating model similarly. On infusion, certainly the last two years as has been mentioned multiple times, there has been a real focus on the business operationally trying to implement more commonality and standardization across the 30 plus infusion pharmacies across the country, really trying to apply best practices and really balance what gets more centralized and what stays more local. That's a critical decision in infusion and we've been very thoughtful about that. We generally have a totally new team there at infusion over the last, I would say, six to seven months.

That team has been locked in its entirety for a good six months or so now. And we are seeing really good progress, whether it's on the operational front, whether it's on the AR and bad debt front, things are really trending in the right direction. And from here, we need to just focus on now starting to drive more referrals again as we've been more focused operationally over the last eighteen months. But a key metric in that industry is turnaround time, how fast can you get a referral and then get the patient through the process and be ready to schedule them in the home on the specialty side, not acute on the specialty side. And for us, we're seeing ten to eleven day turnaround times in the last three or four months as a result of all of our efforts, which would be generally best in class in that industry.

So, we're excited about where that can go. Infusion, we believe is a market with a ton of opportunity looking ahead. We're hopeful that that business could grow above 20% this year on a growth rate basis. And that's what we're pushing for. And I think longer term, I think staying in that range or even above is our internal goal.

But 2025 will be an important year for us to get back to growth mode there.

And our next question comes from Whit Mayo of Leerink. Your line is open.

Hey, thanks guys. I think in the past you've talked about a lot of internal operating cost saving and efficiency opportunities, maybe 60 different projects or programs that you've had kind of in flight. I think you recently rebid your wholesaler. Just maybe any sense on the cumulative savings from a lot of these initiatives and the opportunity on the margin side for this year?

Yes. Good morning, Whit. I would say it's really amalgamation across a lot of different areas of our company. Fundamentally, we have for a very long time had a lean and PMO focus in the organization just driving process and cost opportunities. We really put that in place going back about eight years ago and it really cuts across procurement well beyond anything like drug spend, I mean, medical supplies, delivery, just go down the list all across IT.

We're very focused in that area. And then we just look at processes across the organization from an RPA, from an automation perspective as well. So you think about something like onboarding of all of our new employees. That's something that we're leaning into and trying to automate a lot of touch points in that process. You look at something like scheduling, instead of a human being trying to figure out schedules across 100 nurses and 100 patients in a city and what's the most efficient route, doing that in an automated way.

We have a process going on there right now as well. So it really just cuts across almost everything in our company, rev cycle, where can you eliminate things that can easily be replicated in a more automatic way versus hands touching everything. We're literally looking at every function in our company. And I would say just the attention and the focus to that while it's been going on for eight years, I would say is really deepened. In the last eight years, we're leaning into AI applications now as well.

We'll see about that as a lot of people will. A lot of AI today is just sort of glorified scribing. You have the obvious chat stuff. But even in new EMRs we're looking at within some of the provider side, It's the idea that the EMR can be the doctor and there's recommendations coming out of that and there's charge prepopulating going on that's driving a ton of efficiency. So these are the things that we have a BPO, a business process optimization team that works across everywhere in our organization.

I would say the cumulative results of literally it's been now over 100 projects actually as we look back over the last fifteen months. The cumulative results of all of those was a helpful driver to our EBITDA last year, but not even necessarily EBITDA. A lot of the proceeds from those efficiencies we're driving just go right back into the business, whether it's IT, compliance, quality, sales and marketing, hiring great people, etcetera. So, you drive a lot of these efficiencies for quality and just running good process in an organization. Some of the benefit of that does drop to EBITDA, but a lot of it goes back into reinvesting for future growth and winning in the future as well.

But certainly getting into the eight figures that there has been a benefit of that to EBITDA last year and a lot of these things happen later in the year and even and they'll happen even a lot of these happen later last year and more will happen this year. So we expect to see continued contribution from that program in 2025. And this we've always tried to and we'll continue to try to make this a hallmark of the organization.

No, that's helpful. And maybe just wondering how you're feeling about home health and hospice really on the development side. There's maybe some distraction with some of your peers tied up with acquisitions or whatnot. And just wondering how you're thinking about the potential development opportunity over the next year or so? Thanks.

a market that we're certainly committed to and have been for the last four or five years as we've really sought to build that out. I mean, you go back five years ago, we really had nothing. And in 2024, home health and hospice revenue was $600,000,000 That's a business we'd like to double in the next five years and potentially more. But it's an area of focus. I think we see hopefully a more conducive reimbursement environment on the home health side going forward.

I think we're hearing things from D. C. Where a lot of people acknowledge that there does need to be more support there. Ultimately, the ROI data for home health in terms of the outcomes that can drive for people keeping them out of hospitals, lowering mortality rates has never been more positive. Interestingly, and it still has to be worked through, we're talking to several more of the innovative payers leaning in on enhanced rates, but there's a quality component to that.

And that's fair and that's the way it should be. And we're leaning into those conversations and we're pleased that we feel like we're at the table on those because of our quality. We got started in home health through some acquisitions. It's been more of an organic push over the last couple of years, but we inherited a lot of branches early on, which didn't have the world's best star ratings. And what's been really pleasing to me is, if you look back about three or four years ago because of that history, we probably had about 15%, twenty % of the branches with four stars or better out of 5%.

We're now up to about 85%. And so that is just really tremendous performance on the quality side. And so we're trying to have a lot of interesting conversations with MA that could result in enhanced rates for the outcomes we're delivering, but you have to prove that quality out. So that's exciting. And then on the hospice side, the benefit is just so obvious and the data is so clear on hospice being obviously an incredible experience for the family with patient satisfaction rates above ninety nine percent, but really a lot of data that shows that hospice is ultimately a cost reducer for the system.

And we've got a nice platform there. Still today about two thirds of our business mix between home health and hospice is on the latter. And for us, really, really strong quality as I mentioned in some of our comments on the call earlier. And for us, it's just trying to provide as much access to people as possible through our clinical liaisons in the field every day, driving referrals for that terrific service.

Thank you. And our next question comes from Brian Tanquilut of Jefferies. Your line is open.

Hey, good morning guys and congrats on the quarter and the year and congrats on the promotion. Maybe John, as I think about the your prepared remarks, clearly growth has been really good and seems to be tracking well. So as we think about maybe the sustainability of these growth rates or just these elevated growth levels and with community out of the picture now, how should we be thinking about your view on blended growth going forward?

Yes. We have good morning, Brian. We have at this point going on in '8, it will be a nine year track record at this point of demonstrating double digit top and bottom line growth in the organization. So nothing about that will certainly change going forward. If the community living divestiture occurs and everything there at present is just working through the process in a very expected and normal way at this point in time.

That enhances our growth rate from an adjusted EBITDA standpoint about 5% or 6% as we see it going forward. In 2025, there was a couple of percent growth as you pro form a that for 2024, but as we look forward, probably more of a 5%, six %, seven % uptick in our growth rate going forward. As we look out at least to next year, I think we see we feel very good about this year in the guidance we've put out there, which we obviously raised today. As we think about next year, there would be nothing that would change our view of a similar growth rate this year for next year. But some of the things in D.

C. Need to play out. And there's just certain things that we just do not have visibility into yet. It's really just principally IRA. And how that plays out, that's not going to have a massive impact one way or another on our performance in 2026.

But certainly, there is a couple of points up and down based on how that ultimately plays out. And we continue to feel like the pharmacy industry will be well protected through that process, but it needs to play out over the balance of the year. But what we can sit here and tell you is that in a fairly steady state exogenous environment, we don't see a whole lot changing. And our focus in the organization has been drive quality through very strong operational infrastructure, drive efficiency and lean processes, and leverage all that with great people, reach as many people as you can and continue to drive volume above market growth rates. That's been the playbook for the last five or six years in particular.

And we will continue to drive that playbook in the future. So as always, there are some things in the external environment that need to play out. But in terms of what we can control and in a fairly steady environment as it looks today, we're very confident in continuing to drive the level of growth that we see in the business this year.

That makes a lot sense. And then maybe John, just to follow-up on A. J. Question earlier on infusion. As we think about your Quorum exiting markets and then maybe thinking about the mix of business that you have in terms of being heavy on the acute versus chronic, just trying to think about the dynamics that we are seeing or we should be expecting in that infusion business for the year?

Yes, that is a good point and something we've talked about before. It's a good characterization of our business. I would say we probably are a little bit more tilted towards acute versus chronic and specialty in the infusion space versus what you might see in the broader landscape of some providers out there. Certainly, if anybody were to exit any markets on the acute side, that's helpful. The acute margin is something that is one that we are fine with.

And we believe that if you have a broader set of services to payers, that is more well received and welcome with payers. And it ultimately will help us nurture and cultivate better and deeper relationships with payers over time. So acute is a market that we are committed to. There is volume there. There is nothing about acute therapies that is changing anytime soon.

And so we like the idea of just growing more market share. I think what that ultimately says on the chronic and specialty side is that we've got hopefully real opportunity there versus where some other people are today. And as I mentioned, really pleasing to see some of these turnaround times on specialty, which is really the linchpin for that business. How quickly can you manage people through the process, that's what referral sources care about. And it will really deepen our focus on the specialty growth side this year.

We would be very disappointed if specialty isn't growing well into the 20% range and above going forward.

And our next question comes from David Larson of BTIG. Your line is open.

Hey, congratulations on another very good quarter. John, can you maybe talk a little bit about your the ACO arrangements that you're involved in? I mean, one of the things I've always liked about your business is that you're in what people call the post acute space, it's lower cost than the acute care environment. But at the same time, a lot of investors are maybe a little bit wary of anything that says ACO or value based care given how some of the stocks in the sector have kind of performed over the past year. So can you maybe just talk about your approach to your volumes and your pricing looked great on the provider side?

Yes. Thank you, David. Two quick points on that. For us, building out the home based primary care was really an augmentation and complementary to our pharmacy and provider services and just allowing us to ultimately better manage outcomes for patients. Really secondarily, there is an economic stream there if you can get more appropriately compensated for the great outcomes that you're providing.

Otherwise, the incredible quality work you're doing is enduring to everybody else in the system. And so those were really the two driving forces of the logic. I would say for us anything around ACO is purely upside. There is zero downside there. It is purely upside.

And so, amongst our patients that we serve across assisted living, skilled nursing facilities and some people in their own homes with our home based primary care, the subset of those that would be Medicare, straight Medicare patients. We have a partnership with another organization to get an ACO capability. Last year was the first year of that. And nine months after last year, so October one of this year, we will receive ultimately what our performance was from Medicare. But we do have line of sight into our outcomes and what's happening on the cost side, albeit with a little bit of a delay, with about a quarterly delay.

But we're pleased with what we're seeing in terms of our ability to drive outcomes and cost reduction versus the benchmark. And so we would expect the shared savings to be realized this year. We are just being conservative until we get through the first actualization of what those results were. But we've got about 15,000, 16 thousand patients today, a subset of those are in the ACO. And our focus in home based primary care is how do we continue to drive that incredibly valuable service to as many patients as we can and get them in the ACO so that we can drive more and more shared savings.

We've said before our five to seven year goal is how are we serving at least 100,000 or more people and that's what we're working towards.

Okay, great. And then just one more quick one. In terms of specialty pricing, looks like your specialty revenue growth is very good. Is there anything in your mind that could slow that down? And obviously a tailwind for the overall organization, the pricing increases, right?

Yes. We've seen overall stability in the market for specialty. Ultimately, your revenue per script and your margin in that business is really a function of about 150 different drugs, some brands, some generics at different parts of their life cycle. And but just given the diversity of that portfolio and the complementary nature of brands and generics, we've just ultimately seen all of that come out of the bottom of the bucket, if you will, in just a very steady way year over year. We do everything we can not only to provide great outcomes to manufacturers, but those great outcomes are really focused on being the best partner we can for the PBMs and the payers and their members as well.

So they get the best outcomes possible. And we're as focused on our payer and PBM partners and nurturing great relationships with them as anybody. And those have been really stable over time and we're very thankful for that. And our team's got a long history of working with stakeholders across the value chain and that's been very consistent.

Great. I'll hop back in the queue. Nice quarter.

Thank you. Our next question comes from Joanna Gadzak of Bank of America Securities. Your line is open.

Hey, good morning. Thanks so much. So I guess my question will be around the IRA. So just follow-up on the answer you gave earlier to the question about long term outlook for growth after 2025. So what do you mean by there's a downside risk there?

What would need to happen for this to be a headwind in the IRA? Because I guess there's obviously the price reductions, but then there's some Part D redesign under the IRA. And in the past, we spoke about this being a tailwind to the company as utilization increases. So just trying to understand the different dynamics and what would need to happen that you're referring to in terms of being IRA being swing faster?

Yes. Good morning, Joanna. There's two pieces there. So in IRA, one of it is lowering the out of pocket for patients. Certainly, anything that makes drugs more affordable is helpful for patients.

It's helpful for the utilization of specialty medications for them and increasing patients on therapy. So that's helpful. The second point and it's really for us focused on our home and community pharmacy. There's eight drugs there on the IRA list for 2025 and we just have to see that play out. What CMS issued guidance on last October, endorsed using a true up on the MFP to WACC.

So as your reimbursement moves to MFP on those eight drugs, getting a true up on that to WACC, so those drugs certainly would not be negative in margin. And the discussion this year is all around what's going to be the mechanism to ensure those specific eight drugs have an appropriate and current margin to them. And I think there is a ton of support around the logic for that and needing to do that in DC and at CMS. It was literally written into IRA. This is not intended to harm any pharmacies.

Pharmacies are the last mile to the home and they have to be they have to be more or less held harmless to continue to be that last mile. And so, we're optimistic about how all this will play out. But it needs to play out this year and with a lot going on D. C. In the last two months, I think we just have to see how this plays out further into the year.

I think what I've said before is, this is a swing factor on the downside of a couple of percent of EBITDA, which we would fully expect to grow through, given growth in the other parts of our company. That's really the benefit of our complementary, but diversified organization with a lot of different growth drivers. And we would be very confident that something like that, we would just absorb. That said, we are very focused and think what is fair is for there to be a proper resolution for the long term care pharmacy industry around these drugs and having a fix for that. And that's what the industry is focused on and we see a lot of support for it, but those mechanisms need to play out through the balance of the year.

And our next question comes from Erin Wright of Morgan Stanley. Your line is open.

Great. Thanks. So following the community divestiture, which made sense to us, but are there other areas that you would be looking to refine in terms of the business mix? And how do you think about that in contrast with the efforts to better integrate the offering from a provider and pharmacy standpoint? And then I'll just ask my second upfront too, which is just on the government business as well.

You mentioned kind of partly, but I wanted to ask about Medicaid. Just how you're thinking about the exposure there obviously comes down with the divestiture. But can you talk walk us through some of the potential risk factors as well as how you're just thinking about the outlook for that group given the unknowns in terms of that backdrop right now? Thanks.

Yes. No, the streamlining of our organization post the Community Living divestiture, assuming that closes, I think that gives us with a very tight set of pharmacy and provider services in a platform that we think is very unique and advantaged in a lot of ways in healthcare services. We view that as a terrific platform for the future. From a Medicaid standpoint, Trump and the Trump administration has said that they do not see touching Medicaid or Medicare. That's what they've said so far.

The House Republicans are certainly talking about other things. Notwithstanding that, the populations we serve would not be in the conversations for some of that Medicaid discussion in the House. The folks that we're serving, seniors and people with disabilities, that is very, very different from things being discussed with work requirements for the general population of otherwise healthy people on Medicaid. Our populations are very different and not in the relevancy in the context of those conversations. Thank you.

BrightSpring Health Services Q4 2024 Earnings Call Transcript | Fortune

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BrightSpring Health Services (BTSG) Q4 2024 Earnings Call Transcript

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