Atif Rahim - Head of Investor Relations Joseph Flanagan - President and Chief Executive Officer Chris Ricaurte - Executive Vice President, Chief Financial Officer and Treasurer.

Matthew Gillmor - Robert W. Baird & Co. Jeffrey Garro - William Blair and Company.

Good day, ladies and gentlemen, and welcome to the R1 RCM First Quarter 2017 Earnings Conference Call. At this time all participants are in a listen-only-mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions] As a reminder, this conference call is being recorded.

I would now like to introduce your host for today’s conference, Mr. Atif Rahim, Head of Investor Relations. Sir, you may begin..

Thank you, operator. Good afternoon, everyone, and welcome to the call. With us today, we have Joe Flanagan, R1’s President and CEO; and Chris Ricaurte, CFO and Treasurer. We’ll start with prepared remarks and then turn it over to Q&A.

Today’s conference call is being recorded and as a reminder, certain statements made during this conference call maybe considered forward-looking statements pursuant to the Safe Harbor provision of the Private Securities Litigation Reform Act of 1995.

In particular, any statements about our future growth, plans and performance including statements about our forecast for 2017 are forward-looking statements. These statements are often identified by the use of words such as anticipate, believe, estimate, expect, intend, design, plan, predict, project and similar expressions or variations.

The forward-looking statements made on today’s calls are based on R1’s current expectations and projections about future events as of today only and should not be relied upon as representing the company’s views as of any subsequent date.

Subsequent events and developments, including actual results or changes in our assumptions, may cause our views to change. While we may elect to update these forward-looking statements at some point in the future, we have no current intention of doing so except to the extent required by applicable law.

Investors are cautioned not to place undue reliance on such forward-looking statements. All forward-looking statements made on today’s call involve risks and uncertainties.

Our actual results and outcomes could differ materially from those included in these forward-looking statements as a result of various factors, including but not limited to, the factors discussed under the heading Risk Factors in our Annual Report on Form 10-K for the year-ended December 31, 2016. Now I would like to turn the call over to Joe..

Thank you, Atif, and welcome everyone to today’s call. Before we get started, I’d like to say thank you to all our R1 employees for their hard work this quarter. I’m proud of the continued devotion and passion shown in serving our customers, and I’m very grateful for everyone’s contribution.

Similar to our prior calls, we’ll start with a few highlights from the quarter and discuss the progress we’re making on our key initiatives. In addition, I’ll provide some color on the press release we issued this afternoon announcing the expansion of our relationship with Ascension in the Wisconsin market.

The expanded relationship increases both size and scope of our contract.

Specifically, we are adding a health system, which was acquired by Ascension after the signing of the MPSA last year, accelerating onboarding of our Phase 3 health system into Phase 2 by approximately one year, and increasing the scope of our contract by adding physician RCM services for all Ascension ministries in Wisconsin.

With this new win, we expect our 2020 revenue from currently contracted customers to be north of $800 million above the midpoint of the $700 million to $900 million range we previously communicated. We also expect 2020 EBITDA to be above the midpoint of the $105 million to $135 million range.

Our first quarter results were ahead of our internal projections. We generated revenue of $86.9 million and adjusted EBITDA of negative $1.4 million.

Both numbers are a substantial improvement from year ago levels, with revenue up 113% compared to last years comparable measure, adjusted EBITDA improved a $11.2 million from last years net cash generated from customer contracting activities. This puts us on track for sustained profitability and positive free cash flow in the second-half of the year.

I’m pleased to say, our first quarter results give us greater confidence in delivering revenue and adjusted EBITDA towards the higher-end of the ranges we have communicated for 2017.

This is especially important from an adjusted EBITDA standpoint when you take into account the upfront costs we expect to incur with the newly signed business we are announcing today from the Wisconsin market. You can see that we are executing well at the core.

We are just passed the one-year mark since the close of the transaction with Ascension and TowerBrook and the team has done a tremendous job of execution across the Board.

We have transitioned full control of the revenue cycle across 56 hospitals onto our platform, increased employee headcount by 3,500, and deployed our proprietary technology applications in 150 instances.

The first Phase of Ascension hospitals, which we refer to as the Additional Book Ministries, or ABMs are starting to deliver positive EBITDA to our financial results. This puts us ahead of schedule and we are encouraged by the current trajectory. Now, I’d like to provide an update against the strategic priorities we have laid out for 2017.

Our first objective was an effective relaunch of the company. This included rebranding to R1 and the adoption of new revenue recognition accounting, which we completed at the start of the year. The last major remaining item was relisting our shares on a major exchange, which was done on March 15.

We are happy to have completed all major elements of the relaunch in the first quarter. Next and most importantly, is the successful onboarding of the Phase 1 ABMs.

We have transitioned 88% of the work that is scheduled to move to our shared services centers, deployed 92% of the required technology, and rationalized close to 70% of targeted vendor spend. In addition, we have largely completed the employee transitions with the onboarding of 1,700 rules year-to-date, bringing our total employee count to 6,800.

We expect to complete the balance of deployment activities for Phase one by the end of May. Deployment planning for Phase 2 is well underway. Phase 2 is less complex than Phase 1, due to a less dispersed footprint and fewer facilities that are larger in size.

We are on track to start employee transitions in July for the Indiana and Florida markets, and expect to start the employee transitions for the Wisconsin market in the fourth quarter. In total, we expect to transition the rules of approximately 2,500 employees to our R1 over the course of Phase 2 onboarding.

We are applying the learnings from Phase 1 to accelerate the onboarding process for Phase 2. As a direct result of this commitment to continuous improvement, we are able to add the Wisconsin market growth into our Phase 2 plans. There are a couple of areas I’d like to highlight, which help us with respect to the Phase 2 deployment.

First, from a technology deployment and physical infrastructure standpoint, we have been creating capacity to efficiently scale our growth.

The core elements of this include upgrading our HR information system, adoption of an automated procure-to-pay platform, centralized accessibility of our operating procedures to help our front-line employees execute their jobs in a standardized way, and moving to a cloud-based user environment for improved infrastructure stability.

Second, we have invested heavily in our central operations infrastructure. This includes expansion of our shared services centers and investment in our central analytics and performance management function.

We continue to invest in our shared services infrastructure and capability in 2017, with the addition of a dedicated coding center scheduled to open in July. The central analytics and performance management function is a dedicated group of revenue cycle experts backstop by proprietary technology.

This group is responsible for monitoring and enforcing our performance standards across our installed base to ensure a consistent customer experience. The combination of our experience and proactive investment in scaling gives us a higher degree of confidence and visibility into earnings as we deploy the remaining ABMs.

More importantly, we believe the cumulative impact of these investments will competitively differentiate our ability to scale RCM services in the market. Technology continues to be a critical component of our offering. We have the broadest proprietary technology coverage of any and RCM vendor, and we continue to build on our functionality.

With that in mind, I feel it’s important to update you on some major initiatives we have underway. As discussed on our third quarter call last year, we launched the next-generation of our R1 decision platform, which manages payer billing and follow-up operations.

R1 decision allows us to optimize productivity, velocity and yield in our receivable and denial management functions.

We have extended the platform to 80% of our installed base, including our customers business office staff and global shared services teams, and we’re beginning to see strong performance in key areas including, productivity improvement from high-levels of process automation in some cases up to 30% improvement compared to previous manual follow-up activities, performance on follow-up yield of 99.6% across Ascension, where our R1 decision has been rolled out to nearly 100% of currently installed hospitals.

We have recently piloted R1 decisions most cutting edge and rigorous operating capabilities; we have consistently exceeded our internal benchmark of 0.5 days of AR overdue for work; this metric is a strong leading indicator for our ability to drive AR performance and minimize denials.

A direct result of this performance is improve the working capital and profitability for our customers. We’re proud of this accomplishment and expect to achieve further improvements in productivity, velocity and yields in the months ahead.

In addition, we have a major technology initiative underway to transform the patient and physician experience with the revenue cycle. For some context, we currently have a world-class front-end technology platform called ‘R1 Access, which delivers differentiated performance at scale across patient registration, insurance verification, and related.

This system has registered tens of millions of patients and has delivered payment solutions to a significant number of previously uninsured patients, reducing customer bad debt write-offs by as much as 34%.

However, despite front-end technology solutions to point in the market today, we continue to find patients that are often confused, inconvenienced, and/or dissatisfied with their interactions with the revenue cycle.

More patients complain about administrative cost processes than quality of care received, and over 60% of patients industry-wide don’t understand their bill. Physicians are also challenged with care coordination, scheduling issues, and too much administrative burden.

To solve these problems, we plan to fully modernize and digitize the patient access and physician referral experiences on behalf of our customers. We will do this by applying modernized simplified technology to the areas of scheduling and order intake and integrating that test technology with the core registration systems we already operate.

This will dramatically reduce non-value added work in our operations and enable us to meet the demands of patients and physicians.

While there is much rhetoric in the market about patient experience, we believe we are uniquely positioned to drive this transformation because of our extensive operating experience, our proven technology platform, and our full control of operations.

Another positive outcome of this effort will be the integration between the physician and acute environments from the patient’s perspective, which is increasingly sought by our customers and is strategically important to us.

For health systems and their stakeholders, our new approach means up to 30% reduction in talk time for physicians to book appointments for their patients significantly improved market share in service lines with traditionally high contribution margins, as much as a 50% reduction in outbound phone calls to patients, and elimination of scheduling errors that cause patient and clinician the satisfaction.

For R1, we expect this capability to drive market share growth, as well as improve margins by leveraging technology to reduce costs by as much as 25% in traditionally heavily resourced areas of our operations.

We are well underway on this initiative with a solution architecture in place inclusive of internal and third-party technology, we have initiated three pilots and expect results from these pilots by the end of the year. In 2018, we plan to roll this new front-end capability across our customer base.

On our past calls, we have talked about our three go-to-market models in our commercial services organization. The operating partner model and co-manage model are generally where we have focused our attention in the past. In Q2, we intend to launch the next phase of our modular offering suite.

This release builds on our 13-plus years of experience in the market and highlights our differentiated approach through our technology, shared services, and analytics. We already have a range of modular services deployed across several diverse health systems.

With the Q2 launch, we intend to improve the clarity of value proposition for these offerings through our marketing initiatives. Now, let me turn to the expansion of our Ascension relationship. We are especially pleased to have reached this agreement.

From our vantage point, the conveyance of this new business demonstrates the strength of our execution to-date with Ascension, more specifically the physician RCM win is a strong proof point of the capability we have developed, as well as our intend to execute on our vision to be an integrated rev cycle partner across all care settings.

It’s also a validation by a sophisticated customer of the value creation opportunity from an integrated physician acute offering. The expanded contract encompasses the following three areas. First, it accelerates the onboarding of $700 million in net patient revenue, or NPR from Phase 3 to the fourth quarter of this year.

Second, we’re adding an incremental $1 billion in NPR from a health system acquired by Ascension that was not in the original $8 billion NPR when we signed the master agreement last year. Lastly, a significant win for us as the additional $500 in NPR related to physician RCM services.

As you maybe aware, we’re the exclusive provider of revenue cycle needs for Ascension’s acute care entities. And until now, we did not have the physician RCM and scope. Deployment planning for the onboarding will begin immediately with employee transition scheduled to start in the fourth quarter.

We expect economics of the incremental business, which includes physician RCM to be in line with the operating partner model economics we have shared with you in the past. As I mentioned earlier, we expect our 2020 revenue based on currently contracted customers to be north of $800 million above the midpoint of the range we have provided.

We also expect contracted EBITDA to be above the midpoint in the range we have provided. In addition to the Ascension win, we also had a few modular services wins in the first quarter, including expansion of Medicaid eligibility and targeted balance collections for a large national health system.

Our PAS business also continues to grow and is on track to almost double in revenue this year aided by market share wins and the transition of Ascension’s PAS needs onto our platform. We continue to monitor developments in Washington D.C. for any affect they may have on our business.

Despite the uncertainty with healthcare legislation, we expect the trends around consumerism, downward pressure on reimbursement combined with increasing administrative complexity to continue in the markets.

The vast majority of healthcare providers do not have the standardized predictable commercial infrastructure to respond to the trends I just mentioned. We’re confident in our capability and positioning to build the infrastructure required and to be the operating partner of a choice to enable our customers to succeed going forward.

In closing, I’m pleased with the milestones we have reached, including a sizable business win, rebrand in the company, relisting, adoption of new accounting and turning to positive EBITDA contribution from the Phase 1 ABMs.

The path I had requires continued execution and we remain focused on successfully onboarding the remaining ABMs, as well as continuously improving our performance to differentiate us from our competitors. We look forward to updating you on our progress in the future. With that, I’ll turn the call over to Chris to discuss our financial results..

Thank you, Joe, and thank you all for joining us. There are three main items I’ll cover on the call today. First, I’d like to walk you through the changes brought about by the new revenue recognition accounting standard we adopted at the start of this year. Second, I’ll discuss our financials for the quarter.

And lastly, provide an update on our outlook. Let’s start with the new accounting. As we’ve discussed in the past, we have early adopted a new accounting standard called ASC 606, which pertains to revenue recognition for contracts with customers. Under the new standard, our GAAP revenue was now aligned with customer billing.

As you may recall, we have previously had large swings in GAAP revenue. This goes away now and our GAAP revenue is more aligned with the way we reported non-GAAP revenue in the past. As a result of timely revenue recognition, the deferred customer billing line that we used to have on our balance sheet is largely eliminated.

There is a small amount of revenue less than 1% of our projected 2017 revenue related to incentive fees from performance metrics, that needs to be deferred until the close of our customers fiscal year-end.

This is a relatively small number and the conversion timeline to GAAP revenue is a matter of a few quarters much shorter than in the past when we deferred revenue recognition until termination of the contract. The new standard also makes our adjusted EBITDA measure comparable to other companies in our peer group.

The only adjustment to EBITDA to arrive at adjusted EBITDA are the addition of stock-based compensation and severance and other items, such as reorganization-related and transaction-related expenses. The cost of services and SG&A numbers that are referenced on today’s call are on a non-GAAP basis.

The year-over-year comparisons I will discuss on today’s call are as follows, 2017 GAAP revenues to 2016 gross cash generated from customer contracting activities and 2017 adjusted EBITDA to 2016 net cash generated from customer contracting activities.

Table seven in today’s earnings press release provides a comparison of 2017 revenue and adjusted EBITDA to the prior year non-GAAP measures we reported. Turning to our quarterly results. For the first quarter, we generated revenue of $86.9 million.

This was a sequential increase of $17 million and $46 million on a year-over-year basis, driven in large part by the acceleration of the Phase 1 ABM onboarding during the first quarter.

Our PAS offering also performed well, with revenue of $7.6 million, up $2.8 million sequentially, driven by contribution from competitive wins last year, as well as the onboarding of the Ascension PAS needs.

Cost of services in Q1 were $76.8 million compared to $58.1 million in Q4 and $41 million a year ago, driven by costs related to employees we onboarded from Ascension CBMs during that quarter.

It’s worth noting, we are separating severance costs related to transitioned employees, which we have previously included in this line into the severance and other cost lines. These costs arise during the onboarding phase of the customer, where we have an operating partner type model.

Given the infrequent nature of these types of costs, we feel it’s better for operational comparison purposes to allocate these costs to our severance and other costs line. SG&A expenses were $11.5 million, down $0.6 million sequentially.

On a year-over-year basis, SG&A expenses declined by $1 million, driven by the restructuring actions taken last June to effectively scale the company. We continue to expect SG&A to remain at approximately $11 million to $12 million per quarter going forward.

Adjusted EBITDA was negative $1.4 million for the quarter, compared to net cash generated from customer contracting activities of negative $0.4 million in Q4 and negative $12.6 million in Q1 2016. Turning to the balance sheet. Cash at the end of March inclusive of restricted cash was $144 million, down from $183 million at the end of 2016.

This change of $38 million was driven by a $29 million increase in working capital and a $9 million for CapEx. The increase in working capital was driven primarily by AR and cash paid out for annual incentive compensation.

Our AR balance increased by $25.7 million at the end of March relative to year-end 2016, of which $14 million was related to the timing of base big payments from Phase 1 ABMs. We signed the supplemental agreements with the ABMs late in the first quarter and did not receive payment by quarter-end.

We expect to collect this $14 million in the current quarter and expect the build up in AR related to this to reverse. After this reversal, we would expect a modest build up in AR related to normal growth in our PAS business and payments from incentive fees.

On the share buyback front, we repurchased 270,000 shares on the open market during the March quarter for a total of $615,000. Turning to our outlook for 2017. As Joe mentioned, we expect to generate revenue and EBITDA at the higher-end of the ranges we have provided.

The addition of revenue from the expanded Ascension relationship we announced should benefit our top line starting sometime in the fourth quarter. But it’s important to keep in mind, we will have upfront deployment cost over the next couple of quarters as is typical in this case.

As a result, we expect the adjusted EBITDA for Q2 to be slightly below the level we reported for Q1. We continue to expect to be EBITDA positive in the second-half. The Ascension expansion in Wisconsin becomes profitable beyond the deployment phase. And we are therefore, more comfortable with our 2020 outlook.

As Joe mentioned, based on our currently contracted customer base, we expect 2020 revenue to be north of $800 million above the midpoint of the $700 million to $900 million range we provided. We expect adjusted EBITDA to be near the midpoint of the $105 million to $135 million range we provided.

In closing, I’m very pleased with the financial results for the first quarter. We remain focused on continued execution and turning our financials EBITDA positive, as well as free cash flow positive in the second-half of the year. Now, I’ll turn the call over to the operator for Q&A.

operator?.

[Operator Instructions] Our first question comes from the line of Charles Rhyee with Cowen & Company. Your line is open..

Hey, guys, it’s James on for Charles. Congrats on a strong quarter.

So I know, previously, you guys have noted that over 90% of the low-end of the 2020 targets were already contracted With the new expanded agreement, can you update us on how much this target is contracted now?.

Yes, the – as was commented in some of the opening comments, the under contract right now is above the midpoint of the revenue range and right at the midpoint of the forecast to the EBITDA range..

Okay.

And the $500 million of MPR related to Ascension’s physician revenue cycle, is that displacing Athena?.

Yes, let me comment on the $500 million of physician rev cycle growth. First thing, I would say is, to provide some context on the demographics in the market were deploying against. There’s essentially two core practice management systems that are being utilized in that market across that $500 million.

One of them is Athena and there’s also another practice management system in play there. The first thing I would comment on, and is a good opportunity for us to highlight the value that our workflow technology brings, we will deploy the full suite of R1 technology, that means R1 Access, R1 Link, R1 Decision, et cetera across that market.

And because we interface into the practice management system, we are able to centralize and facilitate the centralization and optimization of work across a distributed practice management system. So that’s the first comment that I would share.

In the technology stack, we’ll interface into Athena’s practice management system, and we will provide additional RCM logic that will drive further optimization of the revenue cycle via the technology.

As we extend off the technology and focusing a little bit on how do we compliment Athena, Athena handles today the posting process is in about 20% of the payer billing and follow-up work. That will remain as is always been. We will be taking over 80% of the billing and follow-up work.

We will be taking over all of the customer service, all of the coding operations for this market, as well as all of the denial management. And as I mentioned, we’ll leverage our technology. We’ll leverage our operating system. We will optimize that work to try value for Ascension and operating leverage for – from R1.

And so that’s essentially kind of some color on, how do we complement the current technology players and some of the services that are associated with those technologies..

Okay, great.

And lastly, what does the sales pipeline look like currently? Has it improved since hiring a new general manager of commercial services last quarter?.

It has, I mean, activity is up. BUT what I would say is, we still have quite a bit of work that we’re excited to bring to market over the next month or so relative to our go-to-market channels.

One thing I would highlight there is the introduction of the overhauled modular offerings that we think will be received well and will scale well in the market. And we also have an active search for a head of growth for the company, that will complement our commercial services organization, and we hope to close that soon.

So our pipeline is up evident by some of the not only Ascension, but some of the other signings we had in the quarter that we referenced. And that’s in a mode of operation that, still has investments that we’re making, and we’re excited. As we look to the second-half of the year, it should be fully up and running on our go-to-market channel.

But we are encouraged in the mode we’re in right now that that even in that mode of operation, we have increased activity. The first-half of this year, I would emphasize, our focus has been just making sure we get the relaunch of the company done. We get a good confidence in our execution and visibility financially on the Ascension deployment.

And as we make the turn coming out of this quarter and looking to Q2 and Q3, we only intend to increase the activity in that pipeline, and we think we have a very, very competitive product, if you will, vis-à-vis the the market alternatives that should get further growth and attraction as we more formally launch it outside of our current installed base..

Okay, great. Thanks..

Thank you. Our next question comes from the line of Matthew Gillmor with Robert W. Baird. Your line is open..

Hey, thanks for taking the question. I wanted to hit on the accelerated onboarding of the Ascension book. It seems like that was one of the key twin factors that moved the numbers up.

So can you maybe give us a flavor for what’s allowing you to accelerate the onboarding? Is that driven by your ability to take on the business sooner, or Ascension maybe comfort level and pushing more towards you?.

Well, I think we wouldn’t have the opportunity to accelerate if Ascension wasn’t comfortable. So I think they go part and parcel along those lines. But what I would say – what enables – what has enabled us to achieve confidence from Ascension to affect the schedule positively.

There’s probably two primary things; one, we’ve talked a lot about proactive investments we made in 2016; two, make scaling a competitive advantage and we think this is really important to emphasize the end-to-end players ourselves included.

If you look back in time, the track record in effectively scaling the operations of the rev cycle, given its complexity has been spotty. And so going into the deployment of Ascension, we really want to take advantage of the rich history and learnings we have and proactively drive some of those investments. And I think that is paying off.

And then the second thing, I would say, that compliments that is the operating system we’ve built.

We have a very specific set of standards whether that’s where work is done, how work gets done, how we monitor their performance, how we deploy the technology ensure the technology is used to the right way, that that operating system or performance stack there’s quite a bit of substance behind that.

and because we’ve built that combined with the infrastructure investments we’ve made, it allows us to be very surgical in how we deploy this business. That’s really driven confidence with Ascension. That has translated into them allowing us to accelerate from a schedule standpoint.

Now, as I said in my remarks, more importantly, I would emphasize that as we go out and start to grow outside of Ascension, we think that ability to scale systematically is a competitive advantage and we intend to play to that strength..

Got it. That’s helpful. And then maybe one or two follow-ups on the expanded relationship.

I guess, first, I want to confirm that this is covering the Wheaton Franciscan assets that were acquired by Ascension last year, is that correct?.

That’s correct..

Okay.

And then, I think, quite understand in terms of the dynamics with the current vendors, including Athena, are you saying, you’re mostly just complementing what they already do, or will there be some sort of shift in responsibilities between who’s doing what?.

Yes, what I would say is, let’s break the question into two parts. First on the technology stack, we have a world-class suite of technology that is focused on optimizing the revenue cycle performance. And that technology sits on top of the whole system, or the practice management system in this case.

And so, as it relates to technology, our technology will manage the revenue cycle. So there will be some replacement of functionality, if you will, transactions and the work that is being done will flow through our technology and our defect engines et cetera. So that’s one piece of our scope of work and there’s some overlap there.

The second piece is really the services that wrap around that technology. And as I said, we will be running the large percentage of services that are not done by those incumbent technology providers, which is in the Athena, it spends the majority of the follow-up activities into the payers.

The coding operations, the customer service operations, the patient residual collections, and the denial management type functions, posting and some segment of the follow-up activities will remain as it is. So we’re not displacing the incumbent service players.

The large amount of the services provided in that market for the physician revenue cycle was done in-house. And we will transition control of that. We will optimize it. We are able to do that, because we’re able to normalize work across two different practice management systems with our technology layer..

Okay, great, Thanks very much. I’ll hop back in queue..

Thank you. [Operator Instructions] Our next question comes from the line of Jeff Garro with William Blair. Your line is open..

Yes, good afternoon, guys, and thanks for taking my question. A few more still on the expanded Ascension agreement.

Maybe just a little bit more background about how that played out and why Ascension might view this acquired site in Wisconsin a little differently than their existing book of business? And how you view this as an opportunity to maybe expand to a more fully integrated offering across the comprehensive continuum of care with the rest of Ascension’s business?.

Right. So a little bit about the expansion. You’ve got – we’re accelerating the entire Wisconsin market on the acute care side. So that includes some properties in that market that were previously scheduled for Phase 3, we’re bringing them in to Phase 2 deploying in Q2 and we’re including the acquired entity in that broad deployment.

And then, we’re contracting end-to-end across all the systems, including the new acquired, but also the incumbent systems in that market for the physician revenue cycle management. So we’re contracting the physician revenue cycle management in its entirety for that market, just for clarity’s sake.

I think as we look at this market, there were certain criteria, two different host EMR systems, both on the acute as well as on the physician side. And other factors that that provided a good test platform for us to architect an integrated rev cycle, physician acute, and the smart optimization of those two process flows.

As we look broader and we’ve talked openly about this when we relaunched the company.

We believe strongly in the value prop that needs to be created by integrating where it makes sense, these two flows – process flows whether that would be simplifying the patient experience, simplifying the physician experience, or frankly, driving the performance from an operational excellence standpoint that our customers need, and this is a good opportunity for us to demonstrate that.

We intend to do that and then expand more broadly going forward..

Great, thank you. That was very helpful. And maybe a broader question. We know at some way offset here on this quarter in part related to softer revenue cycle consulting demand, which doesn’t seem to completely line up with you’re seeing.

So want to ask if you see a shift away from consulting engagements towards larger more comprehensive partnerships, or maybe there’s never really been a strong correlation between RCM consulting and more broad outsourced RCM?.

Our view and I don’t want to convey that, we’re seeing the market move in mass right now.

But our strong view and hypothesis is that, the historical way this market has served, whether it would be point to point technology solutions, transactional services that tend to be local in manner, or at the point-to-point consulting services, where the provider is on the hook to stitch together all of those service providers and deliver the results.

Our point of view is that, combined with provider consolidation, combined by just financial pressures that that are playing through, there’s fatigue with that approach.

We believe strongly that establishing a strong operating partnership, driving standardization, optimizing technology, leveraging the balance sheet and the infrastructure to deliver the scale advantage, those are really critical capabilities that have to be brought to the table.

And then a willingness and confidence to contract on a performance basis, whether that would be variablizing the cost to collect, or it having a percent of fees that are tied to the performance of our customers. And that’s what gets us excited about bringing that value prop to the broader market in a systematic way as we think going forward..

Makes sense. Thanks for taking the question..

Thank you. And we have a follow-up from the line of Charles Rhyee with Cowen & Company. Your line is open..

Hey, guys, this is James, again. So Just a follow-up regarding the expanded agreement for the physician rev cycle. It seems like now that you’re not displacing your complimenting.

But does that leave open the possibility of you down the line, given that business has Ascension made any indications about that possibility?.

Well, I don’t want to comment on Ascension’s intentions outside of kind of the announcement we’re making today.

But we – it’s not that we don’t – we will never displace the practice management system that our technology complements that practice management system, whether that be Cerner, Apex, Athena or the long, and we interfaced to all of the core EMR systems.

And the services that are largely done in-house today, not by the practice management system providers, that’s where our focus is, and that’s frankly, the bulk of services to run the physician rev cycle. And so we have a strong value prop that we talked about.

We intend to demonstrate that with this market win and earn the right to expand going forward within Ascension. But that’s the way we look at this footprint, if you will..

Okay, thanks..

Thank you. And I’m showing no further questions at this time. I’d like to turn the call back to Mr. Flanagan for closing remarks..

Operator, before we close the call, I just like to clarify a statement on cash in the quarter. The $38 million change in cash was driven by $28 million in cash used for operating activities, and the increase in AR was $24 million..

Great. Thanks, Chris. As we close the call, what I would like to highlight is just strong execution from our vantage point, as we mentioned, ahead of internal projections.

Growth both in terms of scope expansion as well as just continued growth of our acute care footprint gives us greater visibility as we look going forward highlighted by the increased revenue and EBITDA under contract in a 2020 range.

And then I would continue to emphasize and you’ll hear us talking more about this just because we see a ton of opportunities going forward, a renewed focus on our technology innovation with a constant eye towards how does that technology translate into value creation for our customers.

I can’t emphasize that enough in terms of our strong intent to build a great technology. But more importantly, drive the change management and the results from that technology. And so, with that, I just like to thank everybody for joining the call, and we look forward to updating on an ongoing basis the progress we intend to make. Thank you, operator..

Ladies and gentlemen, thank you for participating in today’s call. This does conclude the program, and you may all disconnect. Everyone have a wonderful day..