Good day and thank you for standing by. Welcome to the MultiPlan Corporation Third Quarter 2021 Earnings Conference Call. At this time all participants are in a listen-only mode. After the speaker presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today's conference is being recorded. [Operator Instructions] I would now like to hand the conference over to Shawna Gasik, AVP of Investor Relations. Thank you. Please go ahead.

Thank you, April. Good morning, and welcome to MultiPlan's third quarter 2021 earnings call. Joining me today is Mark Tabak, Chairman and Chief Executive Officer; Dale White, President and Chief Operating Officer; and David Redmond, Chief Financial Officer. This call is being webcast and can be accessed through the Investor Relations section of our website at www.multiplan.com. During our call, we will refer to the supplemental slide deck that is available on the Investor Relations portion of our website along with the third quarter 2021 earnings press release issued earlier this morning. We will refer to the supplemental slide deck during our discussion this morning. Before we begin, I'd like to remind you that our remarks and responses to questions may include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those stated or implied by forward-looking statements due to risks and uncertainties associated with our business, which are discussed in the risk factors included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2020, and our quarterly report on Form 10-Q for the fiscal quarter ended June 30, 2021, and other documents filed or to be filed with the SEC. Any such forward-looking statements represent management's expectations, beliefs and forecasts based on assumptions and information available as of the date of this call. While we may elect to update such forward-looking statements at some point in the future, please note that we assume no obligation to do so. Certain financial measures we will discuss on this call are non-GAAP financial measures. We believe that providing these measures help investors gain a more helpful and complete understanding of our financial results and is consistent with how management views our financial results. A reconciliation of these non-GAAP financial measures to the most comparable GAAP measure, to the extent available without unreasonable effort, is available in the earnings press release and in the slides included in the Investor Relations portion of our company's website. I would now like to turn the call over to our Chief Executive Officer, Mark Tabak. Mark?

Thank you, Shawna. Good morning, everyone. Let me join and welcome you to our third quarter of 2021 earnings call. I'd like to thank our stockholders for their continued support. The third quarter was an important and busy one for MultiPlan. During the quarter, we refinanced $2.3 billion of debt, extending the maturity of our debt five to seven years. We announced a $250 million share repurchase program to take advantage of the dislocated price of our shares and executed a repurchase of over 19 million shares at a total cost of $107 million through October of this year. And above all, for the fifth consecutive quarter as a public company, we reported strong operating and financial results. I also would like to take a moment to convey my deep appreciation and admiration to our MultiPlan colleagues, whose passion and commitment continued to drive the growth of our business. In Q3 of 2021, results continued to attest to the recurring nature of our revenue model and to our considerable cash generation. In fact, we delivered new quarterly records for both revenues and adjusted EBITDA. We also exceeded the midpoint of our Q3 revenue guidance, and achieved the top end of our Q3 EBITDA guidance by over $3 million. As shown on Page 5 of our supplemental deck, in the third quarter total revenues were $288.2 million, representing an increase of $28.9 million over the third quarter of 2020 and an increase of 4.3% from Q2 of 2021. And as shown on Page 6, excluding the impact of the COVID pandemic and the contributions from our recent acquisitions, organic growth in revenues was 10.2% versus the prior third quarter and 3.8% versus the second quarter of this year. Adjusted EBITDA for the third quarter was $218.4 million, an increase the 31.9%…

Thanks, Mark. Good morning, everyone. As Mark said, we had a terrific third quarter at $288.2 million Q3 2021 revenues came in just over the midpoint of our guidance and reflect growth of 28.9% over Q3 2020. This morning, I will take you through the highlights of that growth, but first I want to spend a few minutes addressing the topic that I know is top of mind for everyone and that is the No Surprises Act. We now have the benefit of two published, interim final rules and more clarity around how the law's requirements will be operationalized. With that detail and the hundreds of discussions we've held with our customers individually and otherwise, we can now speak with some certainty to the act’s expected impact on our business. We continue to be in deep conversation with our customers. Given the newness of the regulation, client strategies for implementing the NSA are still firming up and there are still some moving pieces. That said, based on our customer conversations and our understanding of how clients’ strategies are evolving, we still do not expect the NSA to significantly change the volume of claims and charges we receive, the scope of services we offer in support of the surprise bill claim processing or the fee structure for servicing those claims. Let me provide four points of support for this statement. First, it's important to reiterate that the No Surprises Act targets a finite set of out-of-network claims, emergency services and other out-of-network services incurred at an in-network facility that a planned member wouldn't typically select such as anesthesiology or radiology. They represent a slice only about 10% to 12% of our identified savings. For all other claims the NSA should have no impact. Second on the whole, our customers, including our…

Thanks, Dale, and good morning, everyone. As Mark mentioned, Q3 2021 was an excellent quarter for MultiPlan with new records for both revenues and adjusted EBITDA. Q3 revenue of $288.2 million was the highest ever quarter in MultiPlan’s history, increasing 28.9% over Q3 2020 and increasing 4.3% sequentially over Q2 2021. We exceeded the mid-point of our Q3 2021 revenue guidance and revenues were $36.2 million or 14.4% greater than Q1 2020 our last pre-COVID quarter. Organic growth primarily in our analytics-based services was very strong. Excluding the revenue contributions from HST and discovery and normalizing the client and the impact of the COVID-19 pandemic during the quarter. Revenues in Q3 2021 were up approximately $26 million or nearly 10.2% over Q3 2020, and about $10 million or 3.8% sequentially. We estimate the COVID-related revenue impact in Q3 2021 was approximately 48 million to $10 million, about $1 million lower than the COVID-related revenues impact in Q2 2021 and approximately $32 million to $35 million lower than the COVID-related revenue impact in Q3 2020. Of the $8 million to $10 million in Q3 2021, we estimate approximately $5.5 million to $6.5 million of the impact was really related to our network-based service line revenues with similar dynamics impacting our workers’ comp and auto business and our primary travel network as we saw in Q2 2021. We estimate less than $1 million impact was related to our analytics-based service revenue, which basically back to where it was pre-COVID. And finally, we estimate approximately $2 million to $2.5 million of the impact is related to our payment and revenue integrity service line revenues, driven primarily by a little bit lower mix of volumes of surgical ED and anesthesia claims. The total estimated impact of $8 million to $10 million for Q3 2021…

Thanks, Dave. Thanks, Dale. Before we ended up and up to your questions, I expect you all looking for answers to three critical questions. And I want to comment on those right now. First, regarding the identification of Dave's successor, our CFO search is progressing nicely, we're going through – we are going about it in an orderly and systematic manner and we hope to be announcing our new CFO within the next few weeks. So, stay tuned. Second, the impact of the No Surprise Act. The market price of our stock appears to suggest that the No Surprise Act is the death knell for MultiPlan. I can say emphatically, that is not the case. All indications from everything we know from being in the trenches with our customers to work through the implementation of the requirements is that the No Surprise Act is very unlikely to have a significant impact one way or the other on our claim volume or on our revenues. That may sound like a bold statement to some of you, but there is indeed some moving parts as the client’s firm up their strategies. But if you listen carefully to Dale’s remarks, he said the good idea of why we feel confident in making that statement. And third guidance for 2022. As has been our practice for a long time as long as I can remember, this is the time of year when we were working through the bottom-up client-by-client granular forecast and budget for next year. As you can imagine that is a bit more complex this year, as we were dealing with the most sweeping piece of legislation in this company’s history, and we still have some uncertainty with respect to COVID and those dynamics on top of the typical puts and takes, we must aggregate as we put together our final forecast for next year. What I can tell you is that our customers, including all of our largest customers, continue to rely on us in 2021, we anticipate they will continue to do so in 2022. So, while it’s still too early to convey any detailed projections at this time – at this point in time, we are excited about the growth opportunities Dale discussed in his remarks and the impact of the growth on those – income statement next year. In 2022, we will continue to show this strength. I look forward to sharing our specific guidance with you after the first of the year. Operator, let’s open it up to questions now.

[Operator Instructions] Your first question comes from Joshua Raskin with Nephron Research.

Great. Thanks. Two questions, actually. The first one is, do you think any of these No Surprises Act opportunities that you’re talking about and some of these big implementations and helps, especially with the national plans. Do you think any of these are sort of temporary fixes for them? Do you think the national plans are going to create their own solutions over time or is this sort of the same thing we’ve been saying for 20 years, which is they kind of need MultiPlan as that independent source within the conversations with the providers?

I believe the compelling value proposition we’ve given these customers for over four decades will continue and it continue to rely on us to make them more efficient, more effective and drive their success as well.

So, your conversations though, they’re not saying, hey, help us get through 2022, you believe are permanent solutions.

Correct.

Okay. And then the second one, do you think there’s any requirements or sort of short-term issues, et cetera for your payer customers to get aligned with the new legislation? I’m just curious if you think there’s going to be sort of a temporary impact on claims receipts and savings opportunities, et cetera, as this kind of comes on relatively quickly in terms of how legislation has been passed historically?

Dale, why don’t you comment on their needs today and what the anticipate changes may be in the coming months or years?

Yes. Sure, Josh. Thanks for the question. Look, I mean sitting here today on November 3rd and with regulation itself, the final regulation just being issued last month and even additional rules yet to come, everyone is scrambling to make sure that they are in compliance with the law coming December 1st. And as I said in my comments, we are – we have been in discussions with our payer customers and continue to help them and ensure their compliance with the law come December 1st. And we’re not anticipating any significant disruption early on. Certainly, it’s a learning process for both payers, large and small as they enter into a new environment with new rules and regulations. And so, I expect as we always do with our payers, we’re going to collaborate with them. We’re going to work with them. We’re going to help ensure their compliance and all of us will learn as we move forward throughout the year.

Great, great. And if I could sneak in one more, just on the Medicare Advantage side I heard the anecdote of plan building up their primary and secondary network in new geographies. Could you sort of talk to traction or anything you’re seeing in there. We continue to hear the larger national carriers are still expanding their counties. There’s new entrance. Just sort of how do we think about that opportunity?

Yes. You’re spot on in your comments, right? That payers both large and the new entrance are looking to expand their network footprint and MultiPlan is ideally positioned to assist them in that regard, right? I mean, we’re always in the early innings on this, but we stand ready and are willing and are working with our clients to support their expansion strategies. And like I said, we were awarded an opportunity to build the Medicare Advantage for a payer in a number of counties it’s for the 23-plan year. So, as you know, we’re doing all the work this year and early into next. So, the plan is ready when it has to file in early 2023. But there’s a lot of priority, a lot of corporate emphasis on expansion of their footprint, beyond where they are today. And we stand ready in two ways, one, we have over 100 people in our network development team that are experts in provider contracting. And two, we have a 1.2-million-member provider network that has a footprint in all 50 states, that enables us to leverage that asset as we work with our clients to expand their footprint.

Yes, Josh, mostly provide a really compelling value to those Medicare Advantage plans. We bring improved access wherever two of our current 1.2 million provider network. That's our ability to build additional networks. And as a result of our payment and premium integrity program, we can deal with the quality issues. And if you can address the needs of access and quality, you're well positioned to grow to that business.

All right. Perfect. Thanks.

Your next question is from Daniel Grosslight with Citi.

Hi guys. Thanks for taking the question and congrats on another quarter above plan. Mark, you anticipated all of my questions, and I hate to belabor the point, on NSA I just want to confirm what I heard, do you think that there's not, you don't expect an impact from the NSA on both claims volume and revenue in 2020?

That's correct. We don't believe as Dale articulated in his comments, we don't believe that there'll be a meaningful impact on claim volume or charge volume flowing into multi plan. And we believe that our customers will rely on MultiPlan for a whole set of an array of services that Dale articulated in a very complex compliance program resulting from the No Surprises Act.

Got it. Okay. So claims volume. What about revenue for 2022? Will there be any impact of revenue for 2022?

Dale, you want to, we completed our modeling on that?

I think as it relates to the No Surprises Act, we do not think that the revenue impact has resulted in No Surprises Act will have a material impact one way or another. We've always kind of said that it was relatively neutral. I mean, we like, always may have a little bit up a little bit of down, but not a monstrous impact or either positively or negatively on our revenue in 2022. But obviously, as Mark said, we're in the process of going through our budgets. We have not finalized that, and we're not at this point providing guidance, but we see no basis based on what we know today that will have a significant impact as a result of the no surprises.

Got it. That's helpful. And one thing I'm trying to square in my mind is that stat on 10% to 12% of savings will be subject to the NSA. And the fact that the QPA does well, not as rigid as a benchmark, it does kind of look like a defacto benchmark. So, as you kind of look at the space, what percent of the claims that are subject to the NSA that flow through MultiPlan? What percent of those claims do you think we'll just take the QPA? And what is the revenue model for MultiPlan when there's no real negotiation or deviation from the QPA?

Well, the revenue model of MultiPlan will not change. We've not seen any indication from any of our customers that our model's going to change regardless of how the QPA is calculated. So, we believe, as Dale said in his comments that the model is the same, as we said, we expect to see roughly the same claim volumes that we have today, where the far and away the primary receiver of all out of network claims for certainly the big four payers. We do not see a significant change in how savings is calculated and how our revenue based on those savings calculations is derived. And we do not see an exodus of providers moving in network as a result of the Surprises Act. Dale, you can certainly comment.

Yes. Let me…

A better, Chief Operating Officer than the Chief Financial Officer probably comment on that. But that’s…

Yes, I would just add, I would just add, look as I look that the process itself introduces significant complexity, right? Into the reimbursement process for these in scope claims and what used to your point, what used to be a very straightforward process, even if they used QPA it's, it, there are lots of it's just, there's now five intricate steps, right? It's not only just apply the QPA, it's identify a surprise bill it's calculate the QPA. It's attach it to the claim. It's make that initial payment offer to the provider. It's pay – reprice and pay that claim. It's negotiated a settlement with the provider. If the provider rejects the payment and understand then, and how do you go about managing the arbitration process to achieve, to achieve success, that complexity placed to our strengths. And that's what all of these additional steps calls for skills and capabilities that, that aren't always readily available to a payer. And but we believe are clearly the things that we do extraordinarily well.

Hey, Dale, let me give, let me give, let me give you a concise reply to a very complex question if I can, for you and others on the fall. Look, we're exiting 2021 very, very strong, as you can see from the first three quarters of the performance and the guidance that we – we just issued. We're – we continue to see strength in 2022 for the very reasons Dale articulated in his presentation. Thirdly we do not see the no surprise act as a regulatory headwind for us as we move into 2022, and we think it will not have a material impact on our claim volume, on our charge volume or on our revenue model. So, we're very optimistic about the future and we think the continued strength we've shown in 2021 will continue in 2022 and beyond.

Yes. All very helpful color. And then switching to the COVID impact for this quarter and next, $8 million to $10 million of negative impact this quarter. Some of the volume-oriented companies have announced – that have announced earnings have actually called out COVID as a tailwind. And I suspect that it's still a headwind for you guys, because there is a lag between kind of when you get a claim and when you're actually generating revenue from it. So curious if you can just put a finer point on why COVID continues to be a drag for this quarter and next, and should we see the – because of that lag, should we see the [indiscernible] of the Delta impact really affect 4Q?

As we said in our comments, we think the COVID impact in Q4 is roughly what it was in Q3, maybe slightly higher. I think we've estimated about $1 million. I think we said $8 million to $10 million of revenue in Q3, $9 million to $11 million in Q4, partly because Daniel, we have, as you know, six to eight weeks lag as to when we get claims. So, claims that data services, the 1st of September will come to us in October and early November. And so, in most parts of the country, the Delta variant kind of peaked in the late August, early September timeframe. And we want to be cautious in looking at that, but as we said in Q3, our COVID impact was predominantly in our network services business. The impact in our analytics business is almost back to zero. I think we basically said $1 million in our payment integrity business. It's a couple of million dollars. I would hope that with some of the tailwinds that you're hearing from various providers that those numbers pretty much get back to zero and don't produce really headwinds or tailwinds but are relatively neutral going forward. I think the biggest factor is the 5.5 million to 6.5 million that we talked about COVID in the network space and that's primarily related to three things is related to the impact that COVID has had on workers comp and auto, as we use our network for workers comp and auto that continues to be down. And we regional health plans and TPAs at lease our network for what we call a travel network. So, they have a network potentially in their primary service area, but not across the country. So, they lease our network, and we continue to see revenues below where the pre-COVID levels were without losing any customers, but just based on volumes as a result of travel, workers comp and auto. And I believe, and obviously it's subject to interpretation by a lot of people, but I believe we'll probably see a little bit of that continue into 2022. But I would hope that any real impact of COVID in 2022 is really limited to that small aspect of our network services revenue.

Hey, Daniel, another concise reply, the residual effect of COVID as you move into Q4 and possibly Q1 of next year will be the claim mix in terms of the volume of testing or vaccines, and then the site of care, and both of those continue to normal as we move through 2021 and into 2022.

Very helpful color. Thanks again, guys, and congrats on that quarter.

Thanks.

Your next question is from Steven Valiquette with Barclays.

Great, thanks. Good morning, everybody. So just the follow up, obviously on NSA, and to the extent that the second interim rule is fairly widely perceived to be favorable to payers and not so favorable to providers, which, you know, you guys mentioned as well. When we do think about the American Hospital Association, other provider backed organizations that have been pretty vocal in their opposition to this, what are your current thoughts on the probability that the provider backed lobby efforts can still lead to some material amendments to the second interim rule? Or is it just more prudent to assume that the – to be finalized as there, that we should all just start making our assumptions for 2022 based on this?

It would be – it's, you're right, there is certainly there have been active and lobbying by the – by AHA and others in the industry to counter and object to the latest round of interim for final regulations. And I know there's been thousands of comments into the federal government on the NSA Act and the interim final regulations. We're proceeding and I can tell you from our – the conversations with our customers, we're proceeding going into 2022 as if this rule and the interim final rule is what we will operate under in the near term. Can't speak to if it changes that would be speculation, but I can tell you our payer customers and our clients, and MultiPlan our proceeding as if the rules – the two interim final regulations. And we understand too that there is still some comments to be made, and there are still some rule that some open items that need to be defined by the federal government, but we're going into 2022 clearly operating as if what's in place today will be in place for next year.

Look, as evidenced by yesterday's election results, we can't predict the future from politics or from a regulatory perspective. But what we can do, we can understand the rules of the road as they exist today, put our head down, develop those capabilities to assure that when our customers come to us and want our assistance in complying, we we're prepared to do that. And that's exactly what we're doing for our customers. And that's exactly what we're doing for our 1.2 million provider network, because we have the same requirements for our proprietary network as well.

Okay. Let me real quick follow up is are you aware of any entity that's pushing for a preliminary injunction to halt the implementation of the rule, if it is finalized or is that kind of unprecedented for any sort of a court related interjection into a CMS rule implementation?

There's been – we – there's been a lot of chatter, but we haven't seen any definitive action at this point. But there's been lots of conversations as you would predict.

Got it. Okay. All right. Great. Thank you.

Your next question is from David Common with JPMorgan.

Very good. Thank you. For the opportunity. I had two questions. One is I'm wondering if you could share with us some of what I might call your visibility on sort of the contracting cycle and what that may mean to what I would call covered lives, the run rate of covered lives going into the New Year. And then secondly might be a nice break to talk about away from the out-of-network business, the payment integrity business. I'm wondering how you're seeing that developing. Do you see that as something that you're entirely happy with your current service offering and business, or does it still need some business development? Thanks.

Dale, you want to comment first, and then I'll back up.

Sure. Let me take your latter comments first. And then Mark, you can jump in. The – we're very excited about the addition of Discovery Health Partners to the MultiPlan portfolio with widened and deepened our payment integrity offering and with the addition of services like coordination of benefit, subrogation, postpaid data mining and others. And – but we still have work to be done. We're excited by the pipeline. We've added multiple – we've added almost over 50 new opportunities. This is just quarter alone for Discovery Services. And so, it's always a work in progress, right? We always want to make our products better and deepen them and further our penetration and our customer base. But with the addition of Discovery and HST, frankly to our product portfolio, we feel real good about our – achieving our extend strategy and deepening our penetration to your point, David on in network claims.

Great, thanks. And then on the visibility?

The visibility is into – I think you said membership, member lives going into 2022. We rely on our payers, the payers – as they navigate January 1 renewals, typically January 1 renewals play for the larger – for the ASO customers play more significant – have more significant impact earlier in the year than later in the year. We don't speculate on the movement of those lives between our customers or if we see any changes in terms of additional lives too, because it's impacted too by unemployment. And so, the unemployment rate lowers and more people are coming back to work. There's more covered buys and just on the in-house existing business, you can see numbers go up and down.

Suffice to say, you're not seeing anything unusual, Mark?

I don't – not as of today, no.

Thanks.

Did you want to add something?

I'm good. I'm good.

Okay.

Your next question is from Frank Jarman with Goldman Sachs.

Great. Thanks for taking my questions guys. Just a couple one. First of all, thank you for your clarification on the NSA impact, I guess, just based on your guidance that it won't materially impact your business. What percent of those 10% to 12% of your in-scope claims that you're assuming are rejected or sorry, what percent of those in-scope claims would be potentially rejected by providers and sort of transfer to step two of the arbitration process where you capture a little bit more of a valuable role and saving spread? How are you thinking about just the potential for those to actually go to step two?

I think, look, I'd say from the perspective, again, it's too early to speculate in terms of what percentage of claims we – the providers will be unhappy with the reimbursement. I think too early on, we expect both payers and providers to look deeply. And as I said, in my comments, the providers will be, will want to challenge, right? We think they'll be smart about how they go about challenging, the QPA or the amount paid by the provider, in that, with their initial payment. And, we know providers will appeal for higher charges based on that basis. They're going to test the arbitration process that could yield more provider friendly outcomes. There's arguments remember the QPA is the primary variable, but there's a set of other variables like provider education, provider experience, acuity of the patient, severity of the injury or illness that the, sort of the attempts made by the provider to be in network. All of those are factors that the provider can use in their challenge. In that process, remember, there's two steps before arbitration. The provider is unhappy with the amount paid, there's a 30-day window for the payer and the provider to negotiate a settlement that's satisfactory to both parties. And then two if that fails, then it goes to arbitration, and that process as you know, happens very quickly.

Okay. And then

And one foot note to that look, it's very difficult to model the number of claims that will be rejected, and then go to arbitration. It's going to vary by customer type. And it's going to vary by the specialty of the physician. It's also a big variable. There is also going to be the early stages as if you call Dale walk through those, those five stages. A lot of that appeal process or accepting or rejecting will be a function of once you identify that it is a surprise bill, the actual calculation of the QPA, and then edging that claim, and then presenting that to the provider for discussion and either acceptance negotiation or arbitration. So, it's a very complex problem. It's a complex issue at this point with lots of moving parts as Dale had articulated. As a result of the complexity, there's just increased reliance on MultiPlan’s capabilities. One of our many competencies is data aggregation and data analytics across a wide spectrum of claims and across a huge spectrum of provider types.

Great. Thanks for that. And then, I guess just if I could fit one more in just going back to early July United healthcare to indicated it would no longer cover, not emergency services at, out of network facilities if they were out of, their member service area. So just curious, you know, given your results this quarter and the guidance update for the full year, it looks like this likely hasn't impacted your business, but just curious if you would agree with that, or if this is a timing issue that, has a greater impact down the road.

Dale? I think there was a wholesale misinterpretation of the United policy change. So, Dale, why don't you just articulate that we're all stopped set at the same level, what the policy change was designed to do and what it was designed to address and how it had no impact on MultiPlan?

Yes, I mean, I look, there was a policy change that was announced by our customer and it really had to do with a specific set of claims that claim types and specialties that on it had nothing to do with the member's, sort of selection of a provider in network or inside their service area. It had to do more with out of their area or what I'll call destination, it focused on certain types of providers. It focused on non-acute step-down providers, and it was out of their service area. And, as I think we started back in July we didn't expect to have any impact any material in fact, on our business this year.

And one of the, it's interesting because, in the marketplace, whenever there is a policy change, whenever there is a regulatory change, the assumption is it's negative for MultiPlan. And in our 40 years of existence, that's not the case and if you can look at the track record of this company, quarter-over-quarter, year-over-year. We continue to drive revenues, expand our margin, expand our EBITDA, policy changed and regulatory changes are not inherently evil or bad for this company. In many cases, they're a tailwind, not a headwind.

There are no further questions at this time.

Thank you very much. We appreciate your continued support, and we look forward to reporting our Q4 quarter at the first of the year. Thank you again.

This concludes today's conference call. Thank you for participating. You may now disconnect.