Accretive Health Management Discusses Q2 2012 Results - Earnings Call Transcript

Accretive Health (AH)

Q2 2012 Earnings Call

August 08, 2012 8:30 am ET

Executives

Gary Rubin

Mary A. Tolan - Founder, Chief Executive Officer, President and Director

John T. Staton - Chief Financial Officer and Treasurer

Analysts

Atif A Rahim - JP Morgan Chase & Co, Research Division

Glen J. Santangelo - Crédit Suisse AG, Research Division

Ryan Daniels - William Blair & Company L.L.C., Research Division

Charles Rhyee - Cowen and Company, LLC, Research Division

Bret D. Jones - Oppenheimer & Co. Inc., Research Division

Jamie Stockton - Wells Fargo Securities, LLC, Research Division

Stephen B. Shankman - UBS Investment Bank, Research Division

Sean W. Wieland - Piper Jaffray Companies, Research Division

Eric W. Coldwell - Robert W. Baird & Co. Incorporated, Research Division

Presentation

Operator

Good day, ladies and gentlemen, and welcome to the Second Quarter 2012 Accretive Health, Inc. Earnings Conference Call. My name is Stephanie, and I'll be your coordinator today. [Operator Instructions] As a reminder, this conference is being recorded for replay purposes. I would now like to turn the presentation over to your host for today to Mr. Gary Rubin, Investor Relations Officer. Please proceed.

Gary Rubin

Good morning, and thank you for joining us. With me on the call today are Mary Tolan, Accretive Health's Founder and Chief Executive Officer; and John Staton, our Chief Financial Officer.

Earlier this morning, we issued a press release announcing Accretive Health's Second Quarter 2012 results. A copy of that release is available in the Investor Relations section of our website at www.accretivehealth.com. Please note that certain statements contained in this conference call may be considered forward looking as defined by the Private Securities Litigation Reform Act of 1995. In particular, any statements made about Accretive Health's expectations for future financial and operational performance, expected growth, new services, profitability or business outlook are forward-looking statements. Investors are cautioned not to place undue reliance on such forward-looking statements. No assurance that the matters contained in such statements will occur since these statements involve various risks and uncertainties that could cause actual results to differ materially from those expressed in such forward-looking statements. These risks and uncertainties include those listed under the heading Risk Factors in the company's quarterly report on Form 10-Q for the quarter ended March 31, 2012, filed on May 9, 2012, which is available on our website, as well as the SEC's website. The forward-looking statements made on today's call are based on Accretive Health's beliefs and expectations as of today, August 8, 2012, only and should not be relied upon as representing the company views as in any subsequent date. While the company may elect to update these forward-looking statements at some point in the future, Accretive Health specifically disclaims any obligation to do so even if our views change.

Please note that today's discussion will include references to certain non-GAAP financial measures. Please refer to today's earnings release for more information on these non-GAAP measures and the reconciliations to the appropriate GAAP measures. After the conclusion of Mary's and John's prepared remarks, they will be available to answer your questions.

At this time, I'd like to turn the call over to Mary Tolan, Accretive Health's CEO. Mary, please go ahead.

Mary A. Tolan

Thank you, Gary. Good morning, everyone, and thank you for joining today's call. Despite a challenging quarter, we have a number of promising updates to share with you. We recently signed our 5-year renewal with Ascension Health with a total contract value of $1.6 billion to $1.7 billion. As you know, Ascension Health is the nation's largest Catholic and non-profit healthcare system. We're proud of the strong working partnership that we've formed with Ascension, and we believe that this is a leading indicator of the sound and growing relationships we establish with our clients. We look forward to the next productive chapter of our partnership, and with this contract, we'll be providing expanding value.

Our intra-stay quality program continues to move forward, and we are now in final contracting with a multi-hospital roll out. This is a great opportunity to establish the value of intra-stay with one of our largest clients and to promote this offering to other hospital systems.

Regarding Quality and Total Cost of Care, we are now in final contracting with a leading national cancer physician network. This organization's identified Accretive as the right partner to help their practice group members provide and monitor care through a coordinated and integrated approach that delivers better outcomes for patients while controlling costs.

As far as the pipeline. We're very pleased that our pipeline in final contracting remains a robust $100 million to $120 million in annual PCARR, and we see an even greater book of business beyond the final contracting stage. To give you some more insight in how we view our pipeline, we're going to explain the stage right before final contracting, which we call "solution." In the solution portion of our pipeline, these prospects have already gained executive sponsorship behind the decision to engage Accretive as a partner. We've completed the long vetting process, and the top decision makers have decided to move forward, but we have not yet started the actual legal contracting. When we estimate the potential PCARR in the solution stage, it's another $100 million to $120 million in addition to the $100 million to $120 million in final contracting. So this gives us a line of sight to $200 million to $240 million in PCARR growth.

Our dedication to process excellence requires us to carefully examine our own practices to ensure that we're setting very high standards for our own performance in achieving the best possible outcomes for hospitals, patients and communities. To that end, we're committed to achieving the highest standards in confidentiality of patient health information through actively pursuing the high trust certification of our data security practices and procedures. We are targeting the end of October for being able to achieve this high-trust certification.

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