Transcripts
Computer Programs and Systems, Inc. (CPSI) Q1 2023 Earnings Call Transcript
Operator
Thank you. [Operator Instructions] We’ll take our first question from Stephanie Davis from SVB. Please go ahead Stephanie.
Stephanie Davis
Hi guys. Thanks for taking my questions. I’ve got a few on the rev cycle business, which I thought ramped up. So first one, just when we think about the bookings, it does convert to revenues rather quickly. Can you help us understand the cadence of your rev cycle bookings? As the mix of rev cycle becomes bigger, will we see more smoothing versus the historical lumpiness we saw with your larger license sales?
Christopher Fowler
Wow, First of all, good morning Stephanie. Thanks for joining us so early. I wish I had a great answer for that question, but I think time is going to tell on that. What we’re focused on right now is obviously filling up the top of the pipeline, and we’re really excited about what we’re seeing coming in, both in our cross-sell, in our EHR cohort and also on the net-new side. I do think that we’re still going to see decisions be dependent on the buyer very much to the way we do on the EHR side. So the only thing I can say that’s going to create that smoothness is us just having that very healthy, steady flowing from the top, which, again, we’re very much focused on, and we’re continuing to see that really build up. So I would say that’s something that we’ll wait and see, but that would be my thought about how we could see that kind of lay out a little bit better.
Stephanie Davis
And maybe let’s frame that bookings question a little bit differently. We’ve got $3 billion of net patient revenue now as of this quarter. What sort of on-boarding capacity have you built out per year?
Christopher Fowler
So our ability to onboard is obviously set at the beginning of the year. We look at it from — as we’re doing the planning on the budget and as we set out what we’re going to do from a sales perspective, we make sure that our operations team has bought in. So when we think about what we’re going to need to book throughout the year to hit the number and then build into the next year, operations is in lockstep with that. So as we see these numbers come in across the year, we’re in good shape. Now as we see that demand pick up, we’re going to continue to expand our operations to be able to capitalize that. And that’s why the move to the offshore, to the global market is such an important part of this process. So…
Matt Chambless
Yes. And Stephanie, part of the answer there on the capacity that we have to bring customers live with the RCM solutions, it gets right back into our planning over the next couple of years, and it dovetails nicely with what we mentioned on the last earnings call, the expectation that will resume double-digit growth by the fourth quarter of 2024. And in order to achieve that, we think that we need to convert roughly $85 million worth of bookings into revenues over the next seven quarters or so. And so that’s kind of the cadence. And if you take — if you do that quick math and look at where bookings came in this quarter, you’ll see that, that capacity is there. It’s where we are right now.
Christopher Fowler
And while I’ve had a chance, when Matt was talking, to think a little bit more about your question, another part of this too, Stephanie, is just the start and difference in the size of the opportunities that we see in the 2 different cohorts. From our EHR portion, those — the average booking size is roughly $500,000. And when we move into the net-new, where we’re looking at the other EHRs, the opportunities could be anywhere from several hundred thousands of dollars to multiple million dollar deals.
So there’s a wide swing in those, which we don’t have a ton of visibility until we start seeing those opportunities come in. And so I think there’s always going to be some level of lumpiness based on that by itself. But again, I think as we see more opportunities come into the pipeline, I think it will start to — we’ll see that steady flow out the lot.
Stephanie Davis
That’s super helpful. And then the last one I have, just on the EHR business, so it doesn’t feel left out. Last quarter, you were talking about more like in-person, high-touch approach with your clients. So I’d love an update on that, and I’d love to hear a little bit more about the key pain points your customers that can bring it up.
Christopher Fowler
Yes. So we continue to move to our scaled agile model, which, along with the rollout of our new role of the client executive where we’re seeing much more in-person engaged opportunities with our customers. I was there at client conference last week, it was another — a good opportunity for us to get in front of our customers. So that is definitely leading to a higher level of engagement, which is also leading to a higher level of satisfaction. We saw a 30% increase in our NPS for our EHR from 2022 to first quarter of 2023 and feel really good about the direction that we’re trending there.
I would say from a — what are the pain points for our hospitals, staffing and that’s on all fronts, unfortunately. That’s for the providers, for the nurses, for the lab techs, for the business office for the dietary, it’s every position that they’ve got in their hospital that they’re struggling with. I think the shift to, I’ll say, value-based care, and it’s much more for our hospitals on the EHR front, it’s much more of the shift to the Medicare Advantage plan.
So macro that, say payer complexities that is — now they’re seeing a little bit more pressure on the collections to be able to get the dollars in that they need to operate their facilities.
So I would say those are the two biggest pain points is just access to talent and that’s, again, any position in the facility and then just the collection of the dollars based on how that landscape is changing.
Stephanie Davis
Got it and I’m good to go now. Thanks for taking my questions.
Christopher Fowler
Thanks Stephanie. Have a great day.
Operator
Thank you. And we’ll take our next question from Jeff Garro from Stephens. Please go ahead Jeff.
Jeffrey Garro
Yes, hi. Good morning guys. Thanks for taking the questions. I want to ask a little more on the National Client Conference. Great to hear on attendance there and you also just mentioned a great data point on NPS improvement. So I imagine that gives you the leeway to spend some time walking through the benefits of integrating the EHR with RCM software and services when you have all those clients together. But I’m curious how time was spent at the National Client Conference and how much you’re able to kind of translate that improved client satisfaction into spending time on the cross-selling opportunity?
Christopher Fowler
Yes, absolutely and I mean there is — first of all, good morning, thanks, Jeff. There’s really two aspects to this. One, we want to make sure that our customers are using and leveraging our EHR to its best benefit for them so that it’s actually a tool and not a hindrance so what it is that their mission is and that’s providing patient care. And so a great amount of the focus in energy is the enablement of the software that’s available, some education opportunities for them to actually see it and progress live and also be able to see what other applications are out there that they may not be using right now to make their facility run a little better.
Obviously, all of that leads to, hopefully, a happier customer, right? And so if they’re happy with the EHR, when they’re looking — when they have other issues, i.e., the RCM front, that we feel like it’s a natural turn for them to look to us to be able to deliver that. So very much a step one, make them happy with the EHR, make sure they understand all the investments and all the improvements we’re putting into that front.
And then secondly, it’s making sure that they understand how we can fold the RCM into that. So it’s a little — it’s very much education upfront, not so much of a hard sell, but we feel like that with the relationship that we have built over so many years with these customers, they’re continuing to show them the benefit of CPSI in total is the net win of the week.
Jeffrey Garro
Makes sense. And I also want to ask about the $2 million nTrust deal that was signed in the quarter. Just curious for more details there on the background and kind of the how and why, how long did it take for that to play out? And what ultimately drove the decision there to go with that model?
Christopher Fowler
Yes. So this one actually — it took a little bit of time. I want to say right around 6 months was the length of time to close the deal. And it’s a physician-owned four hospital — I think it’s four, maybe five hospitals. And they — made an acquisition of a hospital that was not on CPSI and it started with a less consolidated to a single system, which turned into a system search. So we went to war not just for the RCM business, but also to keep the EHR at those four hospitals.
I think the final factor was the fact that we were able to couple those together, and the fact that there was no — again, the fact that the EHR is part of the RCM service, meaning that it’s a percentage of collections, was very exciting to this organization that we were fully aligned with success and that them operating and adopting the EHR and using it successfully and us collecting all their dollars successfully, all led to both of us being satisfied with the relationship.
Jeffrey Garro
Great to hear the two sides of the business working well together there. One last one from me. I want to ask about the TruBridge pipeline. You had some positive comments there, but I also know you have some tough comps coming the rest of the year on the cross-sell side of things. So maybe you could discuss the integration with HRG that I know is kind of ongoing and going well so far and also the new leaders that you help bring in to build that pipeline and then help convert it to sales.
Christopher Fowler
Yes. Again, you’re right, we do have some tough comps coming up, but hopefully, that’s the hard work that we’re putting in and been putting them over the last several months that we’re going to see that pay off of that. Again, what we’re excited about is the diversity and the size of the deals that we’re seeing come into the pipeline, and I think some of that is definitely us being able to leverage the relationships to the HRG sales team. Also the new sales leader and the approach there about just being a little more scientific and systematic in the approach
And again, on the EHR front, we now have 31 sales team members that are focused on our customer base versus 14 that we had exiting last year. And so there is that transition of those team members getting up to speed with their customers and their relationships and that hand on process, but that’s something that we’re seeing that we think will be coming through that out of this quarter. And so when you put all those things together, it starts to feel like the excitement that we see in the pipeline, and the excitement that we see around the work that the team is doing that doesn’t show up in the pipeline really translates into a nice back half of the year.
Jeffrey Garro
Thanks again for taking the questions.
Christopher Fowler
You bet. Thanks for being up this morning Jeff.
Operator
[Operator Instructions] The next question comes from George Hill from Deutsche Bank. Please go ahead.
George Hill
Yes. Good morning Chris and Matt and thanks for taking the questions. I guess I’ve got a few myself. The first one I think about is the offshoring initiatives. And I guess I’d love to know how you guys think about the execution risk there and kind of how you’re managing around that.
Christopher Fowler
Yes. Super good question, good morning George. So this has been something we’ve been working on for the last 18 months and knowing that there was a tremendous amount of risk on a lot of fronts as it related to this initiative. We wanted to be super thoughtful in how we stepped into this. And so our operations team, led by Pat Murphy, was very intentional in one, identifying the workflows that we were comfortable moving offshore; and two, being very thoughtful in the partners that we selected to do that work.
And so it was an 18-month build to get to this 100 employees fully offshore, which if you think about it, a really long time, when you think about the size and scale of some of the offshore vendors that are out there providing this work, they have thousands and thousands of employees that we could have turned the switch and be at 600 employees in six, eight months.
And I’d say all that to say that we knew that there was risk. We wanted to make sure that more than anything that we did not put at jeopardy the service that we were providing and the relationships that we’ve created with our customers. And so again, being very intentional over that 18-month period to feel confident about, one, the workflows that we’ve now chosen to do offshore; and two, the partners that we’ve selected to perform that work so that now we feel confident in ramping this up.
George Hill
Okay. That’s helpful. My second was kind of like what I would call almost an accounting question. And I noticed that the RCM — I mean you’ve got the RCM pipeline growth, which is very strong. The RCM revenue growth, which is in the 20% category, yet the NPR growth seems to be a more modest, call it, kind of mid to high single-digit range. Can you help me bridge gap kind of between the revenue growth and the NPR growth figures?
Matt Chambless
Yes. So some of the revenue growth that we’ve seen year-over-year has been influenced by acquisition, whereas the NPS or the NPR numbers that you see quoted for the first quarter of 2022, those are as of the end of the quarter. So that’s probably the biggest factor as some of that NPS was acquired.
George Hill
Now, that’s pretty helpful. And humor me with two more…I’m sorry, go ahead?
Matt Chambless
And George, the other thing I was going to call out is when we measure NPR, we’re measuring NPR for only that CBO that what we would call the full business office outsourcing solution in the past and now the Central Billing Office solution. It’s just that full hour end-to-end revenue cycle management service offerings. So it’s not inclusive of things like the TruBridge RCM, subscription software product that’s a part of TruBridge’s not inclusive of TrueCode and either. So it’s a slice of that outsourcing business.
Christopher Fowler
Nothing modular. It’s got to be the full thing.
George Hill
No, that makes sense, and I probably should have known that. Two more quick ones is, number one, you guys highlighted a pretty strong EMR retention figure. Is there any reason that we should expect any change in that?
Matt Chambless
Yes. I mean no real expectation there. And frankly, we stated that our target has been 95%. And so far this year, things have been kind of outperforming our expectations. And the EHR business has been a positive surprise for us on the retention side for probably the last 18 months. So while we may stick to our conservative routes and stay at that 95% target for the full year, we don’t see any material headwinds developing on the retention side for the EHR business, which is positive.
Christopher Fowler
Yes. And I’ll say this, George. I think it goes back to — we knew that, that cohort was a big part of us converting on this RCM transformation and really being able to get to that $400 million. So we’ve invested a lot of time, money, effort into the satisfaction of that customer base. And I think it’s paying off. So I think they’re getting half of that. I think that’s the one part.
I think the other part is just a macro commentary on the EHR market in general, that I think the customer base out there is really looking at it and saying, hey, I’ve got some other things that I could probably spend money on that would deliver a higher return and then switching EHRs. So while that’s very positive for us in the retention. It obviously plays against us a little bit and seeing the business grow on the back end, which is why we’ve reflected the growth or lack thereof the EHR going forward like we have.
Matt Chambless
Yes. And I know we’ve mentioned it a couple of times on this call, but it’s worth reiterating as many times as we can that although the P&L is mostly driven by what’s happening in the RCM business, protecting that EHR customer base and keeping that customer base happy is critical to the growth story for the RCM business. As Chris mentioned in his earlier comments, happy customers with high NPS scores are great cross-sell targets, and that’s what we’re shooting for.
George Hill
Yes, that’s super helpful. I was looking at my questions, because I think you’re going to tick them all off between Stephanie, Jeff and your extended commentary, so I’ll pause there.
Matt Chambless
Thanks a lot, George.
Operator
And that was our last question. I’d like to turn the floor back to Mr. Fowler for closing remarks.
Christopher Fowler
Thanks, Karen, and thanks everybody for joining us this morning. I hope you have a wonderful rest of your Tuesday and look forward to staying in touch and reporting on how we continue to progress as we go forward. Have a great day.