Ladies and gentlemen, thank you for standing by, and welcome to the BioScrip Third Quarter Earnings Conference Call. [Operator Instructions] And as a reminder, this conference is being recorded today, Thursday, November 6, 2014. I would now like to turn the conference over to Lisa Wilson, Investor Relations with BioScrip. Please go ahead.

Good morning, and thank you for joining us today. By now you should have received a copy of our press release issued yesterday after the close of market. If you've not received it, you may access it through the Investor Relations section at our website. Rick Smith, President and Chief Executive Officer; Tom Pettit, Chief Operating Officer; and Hai Tran, Chief Financial Officer, will host this morning's call. The call may be accessed through our website at bioscrip.com. A replay will be available shortly after the call and will remain available for a period of 2 weeks. Interested parties can access the replay by dialing (800) 633-8284 in the U.S and (402) 977-9140 internationally, and entering access code 21737716. An audio webcast will also be available for 30 days following the call under the Investor Relations section of the BioScrip website at bioscrip.com. Before we get started, I would like to remind everyone that any forward-looking statements made during the call are protected under the Safe Harbor of the Private Securities Litigation and Reform Act. Such forward-looking statements are based upon current expectations and there can be no assurance that the results contemplated in these statements will be realized. Actual results may differ materially from such statements due to a number of factors and risks, some of which are identified in our press release and our annual and quarterly reports filed with the SEC. These forward-looking statements are based on information available to BioScrip today, and the company assumes no obligation to update statements as circumstances change. During this presentation, we will refer to non-GAAP financial measures such as EBITDA, adjusted EBITDA, including pro forma adjusted EBITDA and adjusted earnings per diluted share. A reconciliation of such measures to the most comparable GAAP financial measure is contained in our press release issued yesterday after the close of market, which, again, may be found at our website at bioscrip.com. And now, I'd like to turn the call over to Rick Smith. Rick?

Thank you, Lisa. Good morning, everyone, and thank you for joining us to discuss our results for the third quarter of 2014. Entering this year, we established 3 priorities: One, to continue to generate double-digit infusion revenue growth with a primary focus on core therapies; two, to generate increased operating cash flow sequentially throughout the year to increase cash collections; and three, to generate increased adjusted EBITDA and expand adjusted EBITDA margin. We've consistently achieved double-digit organic growth through -- double-digit organic growth in core therapies, and we expect this trend to continue. We have also achieved consistent improvement in operating cash flow performance and have generated over $25 million of operating cash flow during this last 2 quarters. We expect to continue to improve the performance of the first and second priorities in Q4 and into 2015. The last focus area of generating increased adjusted EBITDA has been impacted by many factors involved in the integration of the acquisitions. We now have the integration work substantially behind us, and we look forward to entering the strongest revenue and adjusted EBITDA part [ph] of the year. We expect to continue to drive year-over-year, double-digit organic growth with core revenue continuing to grow strong. We also expect the Infusion division to generate over $20 million of adjusted EBITDA in Q4. To get to this stage, and as we've been discussing with you for some time, we invested heavily in resources to assist in integration, training, system enhancement, call center solutions, cash collections and analysis. We have held on to the infrastructure longer than anticipated to ensure the process improvement initiatives secured a solid foundation, which we believe they have. As we invested heavily in internal and external resources for reimbursement and cash collections toward the aged accounts of the legacy and…

Thanks, Rick. Good morning, everyone. Our team continues to make progress in our key priorities: delivering clinical excellence and superior service; driving core therapy mix and gross margin expansion; accelerating cash and reducing bad debt; and improving productivity and operating leverage. I'll now highlight progress on cash and productivity. As Rick mentioned, reimbursement and cash collection efforts continued to be front and center during the third quarter. I'm pleased with the progress the team is making and momentum that is accelerating. We are now in Phase III of our cash collection program to motivate our front-line team members. Cash collections improved by $11 million compared to the prior quarter. Overall, that program has increased both the dollar amount collected as well as the speed of collections, yielding, during the 9-month period ending September 30, $751 million of cash collected on $731 million of revenue. Our cash-per-day measure was up over 25% from January 2014 to September 2014, or $800,000 per day to $4 million per day in September. In addition to progress on the back-end in reimbursements, we've seen a significant and accelerating progress on the front-end of the process in intake. As you know, improvement in speed and quality of intake will yield additional benefits and faster cash and reduce bad debt. To improve our front-end intake, we have focused on improving the quality and speed of the subprocesses of intake, including benefits verification, insurance authorization, documentation and patient payment. We have begun improving the patient payment process by collecting more payments on the front end, accelerating our cash. Our incentive program for fourth quarter cash will reward our branch team members for success in clean intake and collecting patient payments. So they are very focused on dialing this in. We've accomplished these improvements by implementing lean processes of…

Thank you, Tom, and good morning. As a reminder, before we review our third quarter financial performance, we have changed the operating reportable segments of the company to Infusion Services and PBM Services. As a result of the sale of the company's Home Health business on March 31, 2014, the company's financial statements are presented with the Home Health business as discontinued operations on the consolidated statements of income for the 3 months ended September 30, 2013 and 2014, and are excluded from the results from continuing operations of the business. In addition to new segment reporting, the financial statements reflect continuing versus discontinued operations classification for all periods presented. In reviewing our financial performance, we will focus primarily on the continuing operations. We also report adjusted earnings per basic and diluted share, which excludes the same elements in calculating adjusted EBITDA and also taking into account the impact of acquisition-related intangible amortization, as noted in our press release. With that, for the third quarter 2014, we reported revenue from continuing operations of $244 million, compared to $190.6 million in the prior year period, an increase of $53.3 million or 28%. The Infusion Services segment revenue increased 32.6% year-over-year, primarily driven by double-digit organic revenue growth and the addition of CarePoint Partners. Revenue in the PBM Services segment was $12.4 million, versus $16 million in the prior year period. Gross profit for continuing operations was $65 million, compared to $61.7 million for the same period in 2013, an increase of $3.3 million or 5.4%. Gross profit as a percentage of revenue decreased to 26.6% from 32.3% in the second quarter of 2013. The increase in gross profit was due to growth in revenue in the Infusion business, offset by a decrease in gross profit in the PBM Services segment. The…

Thank you, Hai. As we approach the end of 2014, it's sure to say that BioScrip has come a long way since the year began. Our Infusion business continues to see double-digit organic growth and our integration efforts are substantially complete, and as you just heard, we have begun to drive the next wave of EBITDA improvements. We'll continue to focus on streamlining operations, maximizing productivity and enhancing the customer service experience in line with our strategic objectives. With that, operator, we'll open it up to questions.

[Operator Instructions] And our first question comes from the line of Brooks O'Neil with Dougherty & Company. Brooks G. O'Neil - Dougherty & Company LLC, Research Division: Welcome, Tom. As you might expect, I have a few questions. So I guess I'll start off by asking you, it looks like the -- even using every adjustment I can think of to make for the Infusion segment adjusted EBITDA or adjusted, adjusted EBITDA margin percentage, we're still nowhere near the 12% to 14% adjusted EBITDA margins you commented were possible from acquired businesses last year, and that 13% to 14% adjusted EBITDA margin we've seen from some industry peers. Obviously, you talked a lot about steps you're taking to improve those margins, but can you give us a perspective on sort of the level of adjusted EBITDA margin you think is achievable over the next few quarters?

Yes. We believe that the steps we're taking -- I think that with Q4 we stated that -- I believe we can reach towards the 10% that we set out for the beginning of the year. But essentially, it could be impacted by Synagis and some of the other chronic, that we'll have a lower gross margin percentage. Believe that the steps we've taken with the cost reductions in eliminating some of the infrastructure that we've held on to, to go after our aged receivables will essentially wind down into 2015, so we'd expect to get north into that 10% to 12% range into 2015 on the Infusion side. We are seeing the drop-through rate on the acquisitions that we said that we were targeting. We do have a large chronic business that, for the overall Infusion division, essentially will take some time to work through. But I think on an overall basis, we'll continue to drive our core mix as a higher percentage of revenue. And at the same time, taking out the cost that I had mentioned, as well as Tom had mentioned, based on the initiatives that we set for ourselves. Brooks G. O'Neil - Dougherty & Company LLC, Research Division: Can you give us a sense, Rick, for what the mix is right now? I forget exactly what the target mix is do you think it's achievable over time. But what do you think it is right now?

Well, at the beginning of the year, we said we were looking to target -- to get close to 40% of core therapy as a total Infusion revenue by the end of the year. That was essentially -- and not anticipating the impact of SOVALDI coming out because we don't actively sell it, but it's a long-term patient. So when you take a look at that, including our hep C, we're just under 36%. And we have -- continue to sequentially increase our total revenue from core each quarter this year; and year-over-year, very strong. When you exclude SOVALDI and Synagis, we're closer to 38% of, essentially, core as a mix of that revenue, essentially including other chronic therapies, but in terms of the areas that are sold and we manage. So I think that we continue to make progress. As I mentioned in my prepared remarks, we have renewed some of our national agreements with opportunities to drive core in nutrition. The transplant program that I mentioned is primarily core infusion and opportunities in complex patients, in complex medical management programs, that we believe will continue to take us longer term. As you know, our target is 50% of Infusion revenue over time. So I think that the steps we're taking, aggregating with -- are essentially aligning with aggregators of lives enable us an opportunity to continue to push towards our overall objective. Brooks G. O'Neil - Dougherty & Company LLC, Research Division: That's good and that's very helpful, Rick. I appreciate that. So secondly, obviously the AR write-down on many levels seems appropriate. But I'm hoping that maybe Hai can give us a sense for sort of the mix or the aging of receivables that remain in AR today. I mean, what percentage are, say, over 90 days? Or have you cleaned out 100% of the uncollectible receivables that you've been carrying at this point?

Yes. I mean, as I mentioned the -- what we've done is substantially de-risk the balance sheet here, right? So -- and as I said in my prepared remarks, Brooks, there is a long tail in health care collection. So when we -- let me give you little more color and detail around what we did in our analysis, right? We went back into 2012, and we looked month-by-month at all the revenue we billed by each month in 2012. And the reason we chose 2012 is that was what we called the pre-disruption period, that's prior to the acquisition of HomeChoice and acquisition of CarePoint, right? So that would be a clean year for us, right? And so what we did is, on that month-by-month basis, we then tracked each subsequent month the amount of cash that was collected that was specifically related to that month's billed revenue. And so we created what we call a waterfall chart, right? We looked at cash collected versus amount billed on a month-by-month basis. And what that showed is -- that's how we got to the ultimate cash collection, is about 97.3% to 97.5%. But what really stands out is there's really a long tail in health care collection. Because one of the things that people say is, "Hey, look, if stuff is over a year old, is it really uncollectible?" Not really. Because we're still collecting today. We're still collecting cash relating to amounts billed in 2012, right? And so what we look at is, clearly, there are things that, like, if it's over 720 days, it's 100% reserved, right, because that's not -- at some point, it just isn't practical, right? And if it's over 360 days, between 360 days and 720 days, we've got around 70% of that reserved,…

That's -- I think, Brooks, what you have to do, you have to take the $23.1 million and you have to bifurcate in 2 buckets. $3.2 million of that is contractual, that is essentially like a contra revenue, it goes against revenue, right, and so it depresses our gross profit margin for the quarter. And as I stated, we don't expect that to recur, right? And then, obviously, you have -- the balance, $19.9 million, is the bad debt. That's what you should go against, all right? And once again, we will never see a bad debt charge anywhere close to this level again at the company. This is a -- this helps to substantially de-risk the balance sheet and clean it up. Brooks G. O'Neil - Dougherty & Company LLC, Research Division: That's good. So just the last question I'd like to ask. I am guessing you think you'll be profitable on a cash flow basis, at least hopefully even from an operating earnings perspective, the next few quarters. Is that a fair assumption?

Yes. I mean, I think if you look at -- what we firmly believe is when we look at 2015, right, we believe -- although we're clearly still in the throes of our budget process here, right, I think it's safe to say that we expect consolidated adjusted EBITDA to be north of $60 million in 2015.

And our next question comes from the line of David MacDonald with SunTrust.

A handful questions. Rick, first, can you talk about some of the contracting that you guys have done? A, this national transplant contract, who is that with and how many centers, again, did you say that it ties into? Secondly, just some of the deals you've re-upped with your national accounts. Has there been any pricing increases? Are there any escalators? Or is there, more importantly, some type of mix opportunity within those on a go-forward basis? And then I've got a couple more.

Yes -- well, it's with a national customer, a division of a national customer. And essentially, it's a national program where we'll be the exclusive provider. And it essentially is a program that services over 160 transplant hospitals across the country, Center of Excellence hospitals. And so it's 100% focused on core therapies and assisting in the complex medical management of these transplant patients. In addition, on your second question relative to the national agreements, we are seeing stability in pricing. And we are also seeing the opportunity, as I mentioned, being designated as national nutrition provider enables us an opportunity to drive core mix in all of the targeted areas. We also are strengthening our positions at -- within the planned and at the hospital discharge level in order to essentially get the discharges in patients out of the hospitals, and also bring to the market the transitional care and post-acute management programs and early discharge and avoidance programs we've talked about before. I think that what we've seen, as I mentioned in our -- in my remarks, with that growth in our national customers year-over-year and that's been building each quarter this year. It's really being driven in the core therapies for the most part. And essentially, the positioning that we sought when we established these relationships and then added the footprint quickly over the last 2 years has enabled us to provide that national footprint in which to grow the core therapy.

Okay, guys. A couple of questions on the balance sheet and cash flow. First of all, do you expect to be free cash flow breakeven by the fourth quarter? Secondly, Hai, can you tell me what your target DSOs are for 2015? And also, can you guys give us a sense of what percentage of collections are being done on the front-end now and where that was, say, a couple of quarters ago?

Yes. I have to get back to you on that last part, Dave, but in terms of the first 2 parts of your question I think the free cash flow -- clearly, we're targeting to get the free cash flow in the fourth quarter. I think the only risk, and I've said this before, is -- and it's what I call a good problem to have, is that we have really hyper growth in the fourth quarter, it will cause a working capital drag for us, right? It's just timing. And so that will be the headwind we face, right? But in terms of continuing to improve our cash performance, continuing to -- in terms of faster cash and more cash, as I mentioned in my prepared remarks, we're still going to go after the aged receivables here, and we expect to collect a portion of that. And as Tom indicated in his prepared remarks, we are collecting more than 100% of our live revenue, right? So we are making -- gaining some ground here absolutely. The only risk is around that working capital drag from growth.

Okay. And then target DSOs for '15?

The target DSOs, I don't have a specific number yet, but I would tell you that at the beginning of the year we said we wanted to get into the 60s, right, and we're in the 60s. I think we -- I'd like -- and if you ask Rick, he'd have a lower number than I would have. But I mean, I think in -- anywhere from the high 50s, low 60s is probably a decent target, which would represent continued improvement in our cash from this year to next year.

Okay. And then just one last question. Hai, did you say that for 2015 you expect adjusted EBITDA of at least $60 million, so there's no way you'd do south of $60 million, is that fair?

That's kind of our expedition right now. Like I said, when we look at the preliminary numbers in our budget, we don't view it as being lower than $60 million in adjusted EBITDA.

Okay. And then just one other question. I know you guys have talked about north of $20 million in the fourth quarter. Can you give us a sense of a number of at least what do you think the consolidated -- I mean, I know that corporate's running a little bit south of $8 million, but I mean, is $15 million or higher a fair number for the fourth quarter?

Yes. I mean, there's still some moving pieces in the corporate. But the reason we're quoting the Infusion -- obviously, PBM we expect to be stable. But the reason we're including Infusion because that's what we're focused on right now, right, because that's where all the leverage is, Dave, right? So for us, our focus is we think we're going to get north of $20 million. Tom signed up for that, Rick signed up for that, I signed up for that and that's what we're clearly focused on.

And our next question comes from the line of Brian Tanquilut with Jefferies.

Hai, just a question on that comment you made on the $60 million. As I think about bridging that, I mean, even if you're looking at double-digit organic growth, I mean, there's still a little bit of a hole in there. So I'm guessing that's related to the infrastructure on the billing and collection side. Is that something that you guys can share to try to quantify for us, like what the opportunity is in terms of reducing the expense related to collections?

Yes. But I mean, it's -- if you go back to Rick's prepared remarks, right, he said we, look, announced a $4 million -- we already announced an initiative to streamline the operation and take $4 million out, right? That's well on the playing field [ph]. Then on top of that, you've got the $9 million that -- through Tom's initiatives. So that's already $13 million in just pure cost reduction above and beyond our run rate. So that in and of itself should bridge you to the number there, Brian.

Okay. And then on the national agreements, we've been asked in the past, obviously, you're giving some better pricing to the national payers. Do you think you can help us just qualitatively understand what the delta is between the growth rate that you're getting from the national agreements versus your traditional contract?

Yes, I think as I've said before on the -- on core Infusion, the pricing is pretty consistent between regionals and nationals. I think the value of what our industry provides in terms of reducing a bed-day, the intended 20% of the cost of bed-day in a hospital, I think is demonstrated. So I think that there are different variances in structures and price of drug and for DNs and nursing rates. And I think that we've essentially -- we believe that the pricing in those agreements are consistent with what we see in other types of contracts.

Rick, what about the growth rates in terms of like how much faster is the national book growing compared to the regionals and the out-of-network stuff?

Well, we've essentially no out-of-network, because that -- I mean, every business we've got, been to are contract rate. I think that we've got -- the nationals are growing faster than any -- pretty much any other book of business that we have, but it's really that sponsorship and presence where we're able to enable our one-stop shop pull through of those other relationships.

Okay, got it. And then last question for me. Hai, in terms of your leverage ratios and your covenants, if you don't mind just reminding us what their restrictions are in your debt. I know that it's a pretty loose credit facility, but I just wanted to get the scale from now on [ph].

Yes, sure. So we have what's called a springing covenant. And what that means is if our revolver is -- at any quarter end date if our revolver is drawn by less than 25% of our $75 million line or $18.75 million, if it's less than $18.75 million drawn on that line, the covenants don't come into play. If it's north of $18.75 million drawn on the line, than the covenants come into play. Now the covenant, it is a leverage covenant, but it's senior leverage, so it's only on the senior debt. So -- which means it excludes $200 million of bonds in that calculation, right? And our current -- and so the current test is -- even though it doesn't apply to us, if we don't have the $18.75 million drawn on the line, our current test is about at 7.25x senior leverage, that's our threshold under the covenant. And we are significantly below that, we're under 5x. Because there are add-backs for things like noncash charges, right? And so the noncash -- so for example, the $23.1 million charge that we took here was a noncash charge, so that would not go against us in terms of calculation for covenant purposes.

Our next question comes from the line of Kyle Smith, Jefferies.

I did want to just make sure I was clear. It sounded like there were 3 buckets of cost savings that you talked about. There's the $4 million that was previously announced well on its way, should be complete on a run-rate basis by the end of fourth quarter. So maybe we get a little bit of benefit in the fourth quarter from it, but then it'll be fully flowing through starting early next year. Rick, I think you mentioned that there was an additional $2 million from other areas of cost reduction during your prepared remarks. This should also be reflected in the fourth quarter. Is that reflected as in it will be implemented by the end of the quarter? Or that we should see an annualized full $2 million benefit in the fourth quarter?

Yes, I think there's a -- we were expected to contribute to our EBITDA target that is expected in Q4. These are from a number of initiatives that Tom outlined in his prepared remarks in terms of different initiatives.

It's what helped us get to the north of $20 million in adjusted EBITDA in our Infusion segment.

Okay, got you. So it's $4 million plus $2 million plus the $9 million of infrastructure that's coming out. So all in, $15 million of costs that are coming out from various pockets.

Yes, correct.

Okay. I just wanted to make sure I understood that. And the $9 million dollars of infrastructure coming out, I imagine that's going to be a lot of people and sort of additional things that you brought in, in little bit of a rush to deal with the disruptions that you were experiencing. Should we anticipate any significant severance or other costs to take out that $9 million of annual infrastructure cost?

So, Kyle, it isn't just that. If you go back to what Tom talked about, right, some of the major initiatives that are going to drive some meaningful cost savings for us are things like our nursing initiative, right? So when you look at the nursing initiatives, it isn't necessarily about people, it's about enhanced productivity and lower reliance on agency costs, right? So that would not result in any sort of any restructuring costs, for example, right? Or shipping, right, initiatives, right? Those won't result in it. Clearly, there will be some streamlining, right? And to the extent there are, then will incur some restructuring charges there.

The other noteworthy point here is that we do have a recent amount of turnover, so that it can be just not replacing those positions and avoiding some restructuring charges in certain areas due to our turnover.

And one other -- we've had, as I said, we've burned the infrastructure this year with holding on to some consulting and some outside resources that are in our current cost structure that would -- now that a lot of the work is complete in the integration and the process improvement and training, there's still some lean activities going on in the market -- in the company, and that will wind down by the end of the year as well. And so that -- a lot of those products will essentially go away. So it's all -- a lot of the delayed holding on to those infrastructures I mentioned, to finish the integration, do the training, knowledge transfer, process improvements, systems enhancements, all that is rapidly coming to a close by the end of the year.

Okay. Great, that's helpful. And sorry, I had perhaps misunderstood. I thought that $9 million number was purely stuff like consultants or hiring extra bodies to process bills. And I didn't realize it included the initiatives that Tom is working on. So it was helpful for that clarification. And then taking all this together and the guidance that you've given for your Infusion segment margins for the fourth quarter, it looks like you're probably going to settle out for the year of, on an all-in corporate basis, $45 million, $46 million, maybe $47 million of EBITDA depending on where all of the pieces fall, which is substantially below the guidance that you had been giving to the market in the first part of the year. What was it that failed? Is it primarily things that failed to materialize? Or was it primarily timing on the things that you're working on or that you just didn't get the juice or you had longer disruption? I'm trying to understand where it is that the mark was missed. Because that is a fairly substantial revision in outlook for the year.

Well, I think the additional bodies necessary to collect the AR to prepare the integration, to work through all of the accounts and the bills and accelerate the cash collections, we essentially put in over investment in internal resources as well as external resources. And then as a result of some of the process improvements and training with -- ensuring that the processes would stick and the front-end process would stick, that is primarily where we saw the -- essentially the difference in cost structure.

Okay. And then I think the last question for me is, my understanding is that the majority of the disruption that you've experienced in AR and the majority, if not, the totality of what's behind the charge-off is from the situation where you had to get new pharmacy licenses provider numbers, experienced some delays around that. But you're talking about process improvements across the board. Where does that -- is the right way to look at this, that the disruption was mostly around your acquisitions last year and the things that followed naturally from those? You then moved to react to that. And because of the process improvements that you've put in place, perhaps you still had to charge off most of the ARs on collectible, but you'll have an ongoing benefit from the enhancements to your people, processes and then systems. Is that the right way to look at that?

That is. I mean, there's -- through the system enhancements and conversions, we essentially consolidated 5 instances of CPR+ into 1 upgraded. There was paper on the legacy side and accounts that were moved around. And essentially, due to understaffing to essentially manage the integrations plus handle the growth of the ongoing business, essentially some timely filing deadlines were missed as a result of the disruption and, essentially, just made those dollars uncollectible. So I think it's behind us. The front-end, as Tom mentioned -- by having all of our branch locations on one system, we have visibility. We've essentially enhanced our daily reporting and visibility to the business to our branch managers, reimbursement centers, our teams, everyone has essentially dashboard view in terms of visual management of what's going on with the business at the local level, and has drill-down capability as well. So the -- so essentially, a lot of the work in putting the system environment, the controls, the training, has improved as well.

Okay. And I apologize, I said that was the last one. If you'll allow me, just one more. Now that you've completed these integrations and you've got a lot of initiatives that seem to be delivering very well on the top line, how should we be thinking about seasonality in the business? I know there were some parts that historically have been very significant, but you mentioned some things are moving around. Q4 to Q1, et cetera, how should we be looking at seasonality overall?

Yes. I mean, seasonality, it still is exactly the same as we've indicated. And the fourth quarter remains strong. And oftentimes, it will represent over 1/3 of our -- instead of a 25-25-25-25 type straight line split, fourth quarter oftentimes will represent over 1/3 and maybe even up to about kind of 35%, 36% of both revenue and EBITDA.

And our next question comes from the line of David -- I'm sorry, Dana Hambly with Stephens Inc.

I did want to follow up on Kyle's question on -- just on visibility. I think you answered quite a bit on what the challenges have been with the EBITDA visibility. I do want to get a sense of -- you've been very good with estimating revenue and the cash collections have been pretty much on target. So I'm trying to get a sense of the challenges on EBITDA guidance. And has there been anything in the gross margins and the particular therapies that have been surprising? And I guess, more importantly, Tom, if you can just talk about, since you joined, what gives you so much confidence in the visibility for hitting EBITDA targets going forward?

Sure. So confidence in hitting the targets going forward is really about the momentum that we've gotten in terms of executing the initiatives and being able to do the reviews and kind of see some of the progress building monthly. And we sequence that out multiple months ahead to see when those hit and then we review those each month in terms of the progress. And we have a rule of thumb that we'd like to have 1.5x to 2x the number of initiatives in the funnel that we need to come out because we know that everything doesn't always hit to the top of the expectation, so we have initiatives that are greater than that. So that's the program that we built for 2015 that we're executing against.

Okay. Just coming from a different industry, different background, in your view, is this some pretty low-hanging fruit?

Oh, as I mentioned, I called it a target-rich environment. Excited about the opportunities and -- in productivity and speed and quality. And we've got a great team that, I think, is well organized to get after.

Okay. And Rick, on the earlier question. Has there been any surprise in the margins of the different therapies that you guys have been delivering? Or has there been a surprise in the mix of therapies that maybe made visibility so difficult?

No. I think that -- the thing that we discovered early on this year, and that was one of the initiatives we identified, was on the nursing productivity and the shipping. And I think that as we brought the different companies together and started mapping out the processes in essentially early part of the year with the Alvarez team, we noticed that there was a different mix of full-time nurses, per-diem nurses and then a heavy utilization of agency nurses. And so the cost structure and the management was not pulled into the normal branch operations and normal visibility. And so we think that there is -- I was going to say, I think we believe there's at least $1 million a quarter of opportunity in nursing through essentially pricing, through cost, through management, and Tom mentioned the RFP that we've initiated. And so that's just an opportunity in tighter management and also scheduling logistics that we are implementing some tighter rules around. We saw some initial start of cost reductions and margin improvements in Q3 from this one initiative. We also have seen through the shifting initiatives that we identified in terms of driving per shipment per patient down that can essentially drive some significant savings as well. So that's all going to be in the gross margin. So some of these initiatives is just pulling 61 infusion pharmacies together with -- that had different practices. We're all in the same system, we have visibility to all of it. And essentially now we believe that with the programs and the processes and review that Tom has put in place, we're making some good progress very quickly on it.

Okay, that's good information. And then on the national accounts -- I think you may have answered and I apologize. There was a lot of background noise. On the -- one, can you just -- there was 27% growth, can you just give us a sense of the size of that book of business? And then, again, if I missed it, I apologize. Did you say it was -- the margins there were fairly comparable to the regional payers?

On the core therapies, they are -- they're fairly comparable across the whole industry.

Okay. And as to the size of that book of business?

Well, it's a fair amount of our -- the national accounts on a quarterly basis represent a fair amount of our quarterly revenue.

Okay. All right. Last one, Hai, just -- you updated us on the material weaknesses. I think you remediated one of them and just where we are on the other one.

Yes. So we did remediate one in the first quarter. The one that's left is -- we expect it to remediate by the end of this year. We've already -- we've gone through all the steps. We previewed it both with Ernst & Young, who will be leaving us, this will be the last quarter for their review; as well as KPMG, who is coming on board, will be conducting the full year audit. And so we've previewed our -- all the steps, all the models necessary to remediate the second material weakness by the end of this year.

Okay. And I'm sorry, you said that was previewed with KPMG?

Yes.

And there are no further questions. I turn the call back over to our speakers today.

All right, great. All right. Well, thank you, everyone, for your time today. And thank you very much to the BioScrip employees for your great work in patient care. Thank you.