Claritev Corp (MPLN) 2020 Q4 法說會逐字稿

Ladies and gentlemen, thank you for standing by, and welcome to the MultiPlan Corporation Fourth Quarter 2020 Conference Call. (Operator Instructions) Please be advised, today's conference is being recorded (Operator Instructions) I would now like to hand the conference over to your speaker today, Shawna Gasik, EVP of Investor Relations. Thank you. Please go ahead, madam.

Thank you, Chris. Good morning, and welcome to Multiplan's Fourth Quarter and Full Year 2020 Earnings Call.

Joining me today is Mark Tabak, Chairman and Chief Executive Officer; Dale White, President, Payer Markets; 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. Also available on our Investor Relations website will be a supplement slide deck to today's call in addition to the fourth quarter and full year 2020 earnings press release issued earlier 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 Registration Statement on Form S-1 and other SEC filings. Any such forward-looking statements represent management's estimates 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 helps 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.

Welcome everyone to MultiPlan's fourth quarter and full year 2020 earnings call. Before we begin, I'd like to say that we hope everyone is staying safe and healthy. I would also like to acknowledge our more than 2,000 outstanding MultiPlan colleagues for their tireless efforts and thank our customers for their enduring trust and partnership.

We are very pleased to announce our results today. After reporting stronger than expected results in the third quarter, today we delivered even stronger fourth quarter results. We exceeded both our revenue and adjusted EBITDA guidance for the fourth quarter and for the full year.

Even with the continuing impact of COVID, revenues for the fourth quarter were up 14.2% over Q3 2020 and 3.6% over the fourth quarter of last year. Adjusted EBITDA for the fourth quarter was strong, up 17.8% over Q3 2020 and up 4.5% over last Q4 2019, again even with the continuing impact of COVID.

For the full year 2020, while revenues and adjusted EBITDA declined modestly compared to full year 2019, we believe that excluding the impact of COVID, both would have grown. We began 2020 with excellent momentum and delivered strong first quarter results. As the COVID pandemic unfolded, we responded quickly by enabling our teams to work remotely to ensure the health and safety of our employees while continuing to provide uninterrupted service to our customers. Like many other companies, our revenues absorbed a large hit in Q2 as healthcare utilization declined. However, by staying focused and ready to help our customers, we made solid progress in Q3, which carried into an excellent Q4. We are incredibly proud of the dedication and professionalism of our people, and because of their efforts, we are well positioned to continue that momentum into this year.

We are excited about our plans for 2021. We are deeply engaged with our customers in planning and implementing numerous engagements that will generate meaningful reductions in the cost of healthcare and drive performance for our customers as well as for MultiPlan.

We are making significant investments in machine learning and artificial intelligence to identify more clinical aberrations and leverage public and our own claims data to generate incremental healthcare cost savings. We are leaning hard into advancing our technology to further improve our data and analytics, enhance our claims processes, and expand our implementation bandwidth to drive additional growth.

We are also very busy integrating our November acquisition of HST, and our February acquisition of Discovery Health Partners, to further enrich our solution suite, deliver additional value and utility to our customers, and add 300 new colleagues to MultiPlan.

In Q4 2020, MultiPlan delivered more concrete, significant accomplishments than any other quarter in the history of this company. Not only did we complete the merger transaction that transformed MultiPlan into a public company, but we simultaneously restructured our debt to reduce interest expense, extend debt maturities, and increase our operating flexibility.

Let me linger on the word "operations". Those of you that have followed this company over time know that down to our core, we are operators. We create lasting and increasing value through a relentless focus on operational excellence. As a result, we are better positioned than ever to work with our customers to develop and implement unique and customized solutions that help them identify and address opportunities to make healthcare more affordable, efficient and fair.

The fourth quarter was really an extraordinary quarter for the company, and we are excited to continue the performance throughout '21. With that, I'd like to turn the call over to Dale White, who will provide a business update and further discuss our recent acquisitions. Dale?

Thank you, Mark.

Good morning everyone. As you just heard, we delivered a strong fourth quarter. We generated revenue up 14.2% over Q3, and up 3.6% over Q4, 2019. In fact, our Q4 2020 performance was slightly ahead of our performance in Q1 2020, the last quarter before COVID - signaling that our business and that of our customers is both buoyant and adaptable.

With the onset of COVID and subsequent lockdowns, we saw a dip in claims charges in Q2. By the start of Q3 we began to see a rebound, so the reduction in claim charges appears to have been only temporary. That said, the claims mix has been and continues to be different with more lower-dollar claims which makes sense considering all of the COVID testing, telehealth and to some extent, COVID treatment services. Weekly COVID testing claims between mid-June at the height of the pandemic and now are up by a factor of 10. Telehealth volume spiked starting in April and reached what has become a new normal, running about the same from week to week since May. Treatment services are about 50% less costly on average now compared to the early months as the healthcare system has stabilized around effective protocols. These trends, together with the limited health system capacity for non-urgent services due to the recent surge in COVID testing and cases, leads us to expect continued pressure on the business as a result of COVID into 2021. These headwinds should abate as 2021 progresses.

Spurred by their own COVID-driven business impacts, our customers have heightened interest in initiatives to strengthen cost management and payment accuracy. For example, in the second half of 2020: We were engaged by a payer to collaborate on developing a Medicare Advantage network across multiple states. We reached agreement with another national payer to add Data iSight services to their solution hierarchy, which is now scheduled to deploy July 1 of this year. We implemented program changes with all of our top payer customers to generate more savings.

Since our November acquisition of HST, we've wasted no time in taking to market the next-generation of reference-based pricing services. We call it Value-Driven Health Plan services, a new low cost, high engagement health plan design that is member empowered, provider friendly, and network compatible. And it's the only reference-based pricing service that comes with a national independent NCQA accredited physician network tightly integrated, which at this point is one of the most sought-after use of reference-based pricing.

Cross selling activities are already bearing fruit. We have two new employer groups covering about 2,200 lives implementing through a TPA that already works with our companies. We just completed training of over 160 sales and account servicers of a TPA that has worked with MultiPlan for years and is now a new preferred TPA for HST, and we've begun to introduce the Value-Driven Health Plan approach to both provider-sponsored and independent health plans. Interest is very high, particularly as healthcare payers seek new lower cost approaches to offering health benefits for employers emerging from the COVID pandemic financially strapped.

Mark mentioned how operations is at our core. As we do every year, in 2020, we planned for an operational component to our revenue growth through service improvements and enhancements that improve our ability to identify and deliver on savings on the claims we already receive. We implemented our first use of machine learning in this area - a model that prioritizes claims in a negotiator's work queue based on the predicted likelihood of success and level of savings. We saw an immediate productivity gain with negotiators working claims with a higher likelihood of success and are now beginning to see a lift in savings.

Also, this year, we built a model for predicting acceptance of payment integrity findings on lab claims which, beginning in the spring, will be made available for reviewers as additional consideration. Ultimately, we expect to use the model to automatically accept these findings where confidence is high, which will also improve productivity and savings. And we closed on the creation of a model for improving network matching accuracy which will help deliver similar benefits for this service category starting later this year.

As the underpinning of our Enhance growth strategy, machine learning is also the subject of a steering committee within MultiPlan that has identified over 50 potential use cases across all of our solution areas as well as key operational functions including sales and finance. We've also performed comparative testing with a number of big data companies and selected a partner to help drive these and other promising machine learning use cases.

And finally, as we just announced last week, we closed on the acquisition of Discovery Health Partners. Together with HST, this acquisition of Discovery delivers emphatically on our Extend growth strategy to strengthen penetration with in-network claims and under-served markets such as government and third-party administrators.

It greatly expands our footprint with Medicare Advantage and Managed Medicaid plans. It fills out our payment integrity product line with post-payment services and additional pre-payment analytics and functionality, including coordination of benefits and subrogation. It strengthens our impact on a payer's in-network claims. And it adds a new service category focused on improving revenue integrity for plans that receive premium dollars from CMS.

We have an aggressive integration plan for Discovery starting with our sales and account -- sales and marketing functions to hit the ground running on our many opportunities to cross sell and upsell into Discovery's nearly 80 health plan customers.

Before I turn it over to Dave, I want to speak to the federal surprise bill legislation, called the No Surprises Act, which was passed late last year and goes into effect on January 1, 2022. The rule making process is now underway to translate the spirit of the legislation into specific details that plans and providers can deliver to. In the meantime, we are engaged with our customers and exploring a number of service concepts that will facilitate their compliance. The act gives payers latitude in determining the amount they will reimburse, and then requires a negotiation followed by arbitration should the provider not agree with that reimbursement.

The act, and a separate mandate called the Transparency in Coverage Rule which was finalized last November, also establishes requirements aimed at creating price transparency and encouraging consumer shopping to help control the cost of health care. We are engaged with our customers to test concepts to meet these requirements as well. In fact, the No Surprises Act introduced a new transparency requirement for payers which we believe may present an interesting use case for our Expand growth strategy. While the outcome of the rule making process will ultimately determine the impact of surprise billing, we believe the overall impact of this legislation is unlikely to have a material negative impact and could be a modest positive as we help our customers achieve compliance.

I will now turn it over to Dave who will talk about the financials. Dave?

Thank you, Dale, and good morning.

Both our press release this morning and Mark's comments a few minutes ago on this call have already covered our strong performance in Q4 and our meaningful progress from Q2 to Q4 in 2020. Let me add a few comments about Q4 and the full year 2020. Along the way I will also review some key assumptions to help those of you maintaining financial models of the company, including some thoughts about COVID and the related -- recent acquisitions and cash flow. Our net loss in 2020 of $529.6 million included $405.8 million of stock-based compensation related to the vesting and value of Class B units of MultiPlan, which vested upon the closing of the transaction on October 8, $31.7 million of transaction costs which have been expensed in the period, and $103 million of costs related to the extinguishment of debt, our PIK/Holdco notes, and our 0.875% and 0.125% debentures, which were basically paid off in October of this past year, all in connection with the merger with Churchill on October 8 and subsequent replacement with -- of those notes by comparable debt.

These three expenses, aggregating $540.5 million, represent substantially all of the difference between the net loss of $556.4 million in 2020 and net income in 2019. In addition, substantially all of the difference between the net loss of $182.4 million in Q4 and net income of $11.8 million in Q4 2019 is from $106 million of the same stock-based compensation, transaction costs in the fourth quarter of $26 million, and again the $103 million of costs related to the extinguishment of the PIK/Holdco and 0.875% and 0.125% debentures.

Before getting into the numbers, let me spend a few moments on our budget process. Over the years, really over the last decade, we have established and refined a bottom up process where Dale and his team build a revenues plan for the coming year for each individual significant account. For larger accounts, these plans can be quite detailed and underpinned by significant data and analysis, and the result is an explanation for revenues, and for the resources needed to service these very important accounts.

But there is no magic to it, just a lot of methodical, dedicated work. The expectations for these accounts are then added together and combined with department level and cost center budgets to become the revenues and cost budget for the company. As many of you are aware, our cost structure is largely fixed. There are some variable components that flex with claims volume and overall scale but mostly fixed. But over the relatively short period of a single year, the main driver of our performance continues to be revenues. While we will not provide guidance for the current year, given the uncertainty of the COVID impact and the wide variations of potential impacts into 2021, we are pleased that we will continue to expect organic growth of mid-single digits, excluding the impact of COVID.

Let's spend a minute on the impact of COVID. As many of you are aware, COVID had a significant impact on our company in 2020. For example, our revenue was down $45 million compared with 2019, or about 4.6%. We believe this impact on results understates the actual impact on COVID. Prior to the emergence of COVID, our original 2020 budget included meaningful organic growth, such that we estimate the actual impact of COVID in 2020 was approximately $100 to $120 million reduction in our revenues.

For 2021, we are hopeful that this will moderate somewhat. It is, of course, virtually impossible to know in advance what path COVID will take in 2021, although we are all very optimistic and hopeful.

It's important to remember that we previously reported there was no material COVID impact in MultiPlan's Q1 2020 results. Then Q2 results reflected a significant impact from COVID, Q3 results reflected a modest moderation of the COVID impact from the Q2 levels, and Q4, while excellent relative to expectations, still carried some level of COVID impact.

It's also important to remember that healthcare volumes and trends tend to have a bit of a delayed impact on our results, typically 6 to 8 weeks, depending on the specifics of the episode and the site of care. This results in a time shift that could impact us in 2021. Specifically, we believe the heavy COVID volumes towards the end of '20 and early '21 could affect our results this year. Again, it is our current expectation that this COVID impact should abate as we progress throughout 2021.

While our overall cost structure is substantially similar between '20 and '21, there are two major specific items that differ: first, our public company costs in 2021 are expected to approximate $20 million to $25 million. These costs include costs related to legal, investor relations, additional accounting expenses, both in salaries and consulting fees, insurance costs, investor relations costs and the development and testing of policies to be Sarbanes compliant by the end of 2021. We previously noted that we expected expenses near these levels. They came in modestly higher than we anticipated, primarily due to D&O insurance costs, and we are optimistic that these expenses will be relatively stable, if not actually decline going forward.

The other item of note in our adjusted EBITDA expense structure is incremental investment in the business. We have added approximately $10 million to $12 million of additional investments in the business for 2021, primarily around our IT spend, including machine learning and artificial intelligence, which Dale and Mark talked about and expansion of our sales force among other minor initiatives. This is in addition to our typical annual IT capital expenditures of $70 million to $75 million in 2021.

We are big believers investing aggressively to continue to advance our solutions portfolio and deliver incremental savings and functionality to our clients and partners, and you should expect us to continue this approach. We believe these investments will yield meaningful returns over time. We expect depreciation of approximately $60 million to $65 million for 2021, consistent with $61 million in 2020.

We expect amortization of intangible assets of approximately $340 million to $345 million for 2021, I guess, consistent with $335 million in 2020. Please recall that this is 100% noncash and relates primarily to the acquisition by Hellman & Friedman in 2016 and the acquisitions of HST in November '20 and Discovery Health Partners in February 2021. As previously disclosed, we expect interest expense of approximately $280 million to $290 million in 2021. This reflects a reduction of $40 million to $50 million as a result of refinancing our PIK Holdco notes and debentures in Q4 of 2020.

We expect our cash interest expense in 2021 to be approximately $70 million less than 2020. We do not yet have an exact estimate of equity compensation for 2021. As most of you are aware, prior to Q4, MultiPlan was a private company and as a result of the transaction, the equity incentive program is being reworked. That should be complete prior to when we report Q1, and we will give you an update at that time. But we expect the range to be $10 million to $20 million.

As for taxes, we expect an effective tax rate for 2021 of 25% to 28%. This rate assumes existing tax law and does not contemplate any changes at the state or federal levels. We expect our fully diluted earnings shares outstanding for EPS calculation to approximate 660 to 670 million shares.

We expect CapEx for 2021, as previously stated of roughly $75 million to $80 million. We are evaluating a number of potential opportunities for incremental investment that would create additional value to our customers and partners and we may update this estimate during 2021.

We have a high-return threshold for all of these investments. With those core assumptions addressed, let me now turn to cash flow. As those of you who follow the company are aware, we have a long history of generating significant operating and free cash flow with a high conversion rate of adjusted EBITDA margin to cash.

We expect that to remain a key element of MultiPlan's financial dynamics. Turning for a moment to the balance sheet and the capital structure. We ended 2020 with leverage at the operating level of about 5x debt to adjusted EBITDA and at the consolidated holding company level of about 6.8x.

We have previously commented that we intend to meaningfully reduce these levels over time, both through growth in adjusted EBITDA from organic growth and reduced impact of COVID and through the allocation of free cash flow. Achieving our growth goals for the year will help drive deleveraging as will the application of the significant anticipated free cash flow we just discussed.

That said, it is important to remember that we have previously noted that if there are meaningful opportunities to grow and expand our business through M&A and other investments, we will aggressively pursue them, but with a highly selective and rigorous strategic approach.

So while our overall orientation is to delever, we feel comfortable with the strength of our business and cash flow to support our current net operating leverage of 5x. Due to the variability of COVID-19 case trends and public policy responses to the COVID-19 pandemic across different regions in MultiPlan's national footprint and the uncertainty in evaluating the impact of those dynamics on the company's customers and operating and financial results, the company is not providing annual or quarterly guidance at this time. The company will continue to monitor the impact of the COVID-19 pandemic on its business and may elect to communicate guidance later in 2021.

While the company is not providing guidance, it anticipates Q1 2021 revenues and adjusted EBITDA will reflect substantially similar operating performance as Q4 2020 adjusted for the usual seasonal softness of Q1, the impact of $2 million to $3 million of additional public company costs and the possible impact of the operational disruption related to the extreme weather in Texas during February.

With that, I will turn the call back to Mark for his closing comments. Mark?

Thanks, Dave. Thanks, Dale. Before we go to Q&A, I'd like to offer a few closing thoughts. I'm extremely excited about our company's future. MultiPlan plays an essential role in identifying, addressing savings opportunities in the U.S. health care system and remains a critical partner, delivering tens of billions of dollars in value to our payer customers through deep IT and process integration into their workflows. The foundation for growth is the long-standing strength of our business model which includes our data, our algorithms, our platform and our provider network. We are already connected to more than 700 payers and 1.2 million providers. We believe we are unique among the competition in providing an enterprise level platform that has capacity and scale to help even the largest and most complex of our payer customers address challenges and opportunities.

For a decade now, the strength of our business model has been and continues to be reflected in our financial results. The financial hydraulics of MultiPlan are powerful. Vast majority of our revenues are recurring. We have very limited customer turnover and are fortunate that many of our customers -- with many of our customers, we've routinely increased the level and scope of engagement. We remain excited about our organic growth and continued operations as we expand our relationship with our customers.

We have also, over time, made significant investments in technology. And as a result, many of our processes are highly automated. This automation leads to a virtuous cycle of high margins, converted to a high level of cash flow, a portion of which is then reinvested to further drive our technology, drive value to our -- for our customers and the whole cycle repeats again and again.

2020 was quite a year for every person, every family, every company. We are proud to have navigated the year successfully, and we recognize the challenges are not over yet. We are optimistic that the worst is behind us, and that '21 will be another year of meaningful progress. Before opening to questions, I want to establish ground rule. We have deep respect and gratitude for the unique relationships that we have with our customers. We also have great respect for our investors, including those of you on the call today. We understand that investors would like to understand every possible detail about our company.

We also understand that we have a duty of confidentiality to our customers. Our goal is to honor our relationships with both our customers and you, the investors. And to do that successfully, we will not be able to answer questions regarding specific customers or regarding businesses owned by those customers. We would appreciate for those asking those questions to respect this position. With that, I'd like to open the floor to your questions.

(Operator Instructions) The first question comes from Josh Raskin of Nephron Research.

First question is just actually a series of numbers clarifications. First, the $110 million COVID impact in 2020, how much was in the fourth quarter? I think you said the second part would be -- I think you said $20 million to $25 million of public company costs in 2021. What is that versus 2020? And then I think, Dave, you -- I couldn't get the CapEx number. I don't know if you said $70 million to $75 million or $75 million to $80 million. So just some quick clarifications there, and then I've got a question.

Dave, you want to walk through that?

The CapEx number is $70 million to $75 million. The -- well, actually, $75 million to $80 million is where we are now.

It was about $72 million last year. Relative to Q4, we estimate that the COVID impact was probably $12 million to $16 million, which is lower than it was in Q2 and Q3, Josh, but still certainly higher. And the last question was -- what was the third one?

The public company costs in 2020.

Public company costs in 2020 were relatively nominal. They were only about $2 million to $3 million. Most of that occurred late in the fourth quarter. So obviously, the big number is the D&O coverage stuff.

Got you. And then my real question is just maybe you could talk a little bit about 2021. I understand that there's a lot of uncertainty with COVID, et cetera. But maybe if you could just talk broadly about customer retention. I know you're not going to talk specifically about any individual customers, and I understand that, but maybe any meaningful additions or subtractions, again without naming names to start the year, any big changes that we should know about and then if you could just remind us of the seasonality that's causing the lower 1Q number? I guess I'm just not as -- I just -- we don't have a ton of history here, so I'm just not as familiar with the idea that there's seasonal weakness in 1Q.

Let me talk about seasonality and then turn it over to Mark and Dale for the customer discussion.

Typically -- and it's not a deep seasonality, it's probably 1% to 2% kind of as you go from Q4 to Q1. Mostly, it's a byproduct. Obviously, in Q1, most people are on calendar year health plans. And so your new deductible, your new co-pays kick in, and people tend to be a little bit reluctant to utilize a lot of services. Obviously, services that they have, they use, but elective stuff generally is pushed into later in the year after they kind of have a sense of where they are from a health plan perspective and what deductibles that they've used up. So it's a relatively minor number, Josh. I'd say it's probably 1% because we really are not heavily seasonally adjusted, but there is a slight softness generally in Q1.

Mark?

Yes, Josh, look, we are deeply engaged in discussions with our customers. We have a high level of persistency, and the relationship and services we offer to those customers continues to expand. Dale, why don't you just -- without naming names, why don't you just talk again about some of the projects that we have that are being implemented and other discussions that are underway to reinforce the fact that we are a valuable component, helping them rein in health care costs and make sure that health care can be made more affordable to their customers and their subscribers?

Yes. Thanks, Mark. As Mark said, we have a number of projects underway with our customers to continue to strengthen their response and affordability and payment accuracy. And they range across a number of engagements, if you will. As I mentioned, we're collaborating with payers on the development of Medicare Advantage and networks. As everyone knows, Medicare Advantage is growing significantly. And that's an opportunity for us. We continue to expand our Data iSight services and our reference based pricing services into payers. We have implemented program changes with a number of our clients.

And we continue to add new clients through our expanded sales efforts. We're continuing to add new clients across the commercial market, the third-party administrative market and the Blues market as well. And we're really excited, right? I mean, I think you've heard that in my remarks and Mark's opening comments about the opportunities through the acquisition of HST and Discovery.

We're super excited about both of these, and we've wasted no time and try hitting the market hard with initially HST and the next generation of reference-based pricing services, and we're already beginning to look at opportunities to cross-sell Discovery's services into their customers and to ours. And they clearly widened and deepened our payment integrity suite by the addition of the premium services, the coordination of benefits, the subrogation, and we're excited about those opportunities as well.

And Josh...

Go ahead, Mark.

I'm sorry, Dale, go ahead, finish it.

No. Go ahead and I will finish.

The words are important, but I'm going to guide you to the numbers. Even in a COVID environment, revenues for the fourth quarter were up over 14% over Q3, and they were up 3.6% over the fourth quarter of last year. That should punctuate the strength of the relationship and the ongoing expansion of the business as the customers recognize the value we bring to the marketplace.

Yes. I mean, that's helpful. I don't want to put words in your mouth, but if the bottom line as we sort of think about 2021 as a jumping off point is, 4Q is the right run rate, there'll be maybe 1%, 2% seasonality, maybe some disruption from Texas, but the remainder of the base business is intact with potential opportunities through new acquisitions and new customers, is that a fair way to frame 2021?

Organic supplemented by opportunistic inorganic M&A activities, and it leverages the incredible efficiency because in addition to the other metric I'd guide you to, obviously, in addition to the revenue growth, look at the adjusted EBITDA growth of Q4 versus Q3, up 17-plus percent and up 4.5% over Q4 of last year.

Your next question comes from Daniel Grosslight of Citi.

Just focusing back on that 2021 guide or lack thereof. It seems like it's just COVID right now that's preventing you from providing that type of clarity. And if I heard you correctly, in 4Q, that COVID impact was around, call it, $12 million to $16 million. And it doesn't sound like you expect that to increase heading into 1Q.

So putting this all together, it does seem like you have some clarity into 2021 right now. It seems like the impact of COVID has decreased substantially from 2Q and 3Q of '20. It seems like in the back half of 2021, you expect that to be even further dissipated. So I guess I'm just curious, what you need to see at this point to get more clarity for 2021 and provide that type of annual guidance.

I think, Daniel, we probably need to see another 40 to 60 days to just see how it plays out. Obviously, as we talked about, we have kind of a delay in our claims for 6 to 8 weeks. So we clearly want to make sure we understand what happened in Q4 in terms of claims and how that impacts us.

We're excited about the vaccine rollout. We're excited about a lot of the company opening up. As you know, I live in Florida. If we were 100% Florida-based company, we'd probably be a little bit more optimistic on a lesser COVID impact. But we're a national company with a national footprint and our 5 largest markets are California, New York, Illinois, Texas and Florida. And so Texas and Florida are a little bit different than the other 3 in terms of how much they've opened so far. There's been a lot of discussion about, I think California pretty much opens up in April.

And I think we just if you sat in a room and asked everybody, what do you think the COVID impact is and wrote down a number, that number just varies quite significantly, kind of depending on your -- everybody's point of view and the data that we have. And it made it really difficult for us to say, we're going to settle on this number, given not really having 100% of the information we think we needed to settle on a number.

Understood. Okay.

Despite the impact of COVID, we would not have been able to achieve these kind of results and along the customer base that we have.

Yes. Yes. Understood. Okay. And then just going back to the surprise billing comments you made, it seems like now you expect that could -- will not have a negative impact on you. It could even be positive. If you look at the literature of similar legislation passed at the state level, out-of-network claims dropped pretty dramatically. So I was wondering if you can bridge us to no net impact and possibly positive impact given we're likely to see claims -- out-of-network claims drop at the national level when this legislation is implemented.

Dale, why don't you speak to the role we played at the state level when Surprise Billing Legislation was implemented at the insured book of business, and then I'll punctuate that after that intro.

Yes. Let me take it, Daniel, from 2 perspectives: one, as you all know, there has been Surprise Billing Legislation on a state level for a year -- for several years now. In fact, I think about 30 states have surprised -- or are faced with Surprise Billing Legislation on their fully insured business.

And we had played a role with those inside those states with our health plan customers on helping them to achieve compliance in response to the state legislation that's in place.

And we've played a vital and critical role in that regard. As you also noted, the legislation at the federal level has just passed. And we only have the statute. HHS has to work through the rulemaking. And until it has critical questions about the process, will remain unsettled. At the same time, the way the law -- the way the law was passed, it certainly protects consumers from receiving balance bill when they seek emergency care and other ancillary related services related to that emergency care. The state -- it does not include any benchmark payment standard for insurers upfront to pay out-of-network providers.

There's a 30-day payer -- period for payers and providers to negotiate. And if those negotiations fail, there's a process for an independent dispute resolution. We think and believe all of these features of the statute suggest that Multiplan has the opportunity to continue to play a critical role in helping our clients to achieve savings for our customers and the plan members they serve after the legislation goes into effect.

I would just add on the reliance that those payer customers have MultiPlan to deal with the state level Surprise Billing Legislation that the same reliance will take place at a federal level with the insured book of business on even a broader scale because of the added complexity and the size of that ASO market governed by the recently enacted Surprise Billing Legislation.

And I'd just echo it, it's early. And the rule-making still needs to run its course, but we're already in discussions with a number of our customers about how to work with them, how to help them evolve solutions, how to help them comply into the new statute.

Understood.

(Operator Instructions) The next question comes from Andrew Kugler of Goldman Sachs.

Look, following up on the guidance. As we think about your 1Q and extrapolate it to the full year, is there a reason to believe that covered lives using your product should change materially after 1Q? Or given that, as you mentioned, the health care plans are typically renewed at the end of the year, November, December, are the covered lives going to be rather consistent through the course of the year? And then I have a follow-up.

Yes. Dale, you want to take that?

It's -- you would expect most of the lives to remain consistent throughout once you get past January, but there are changes that take place periodically throughout the year based on -- they're very cyclical in terms of when employer groups renew with their payers and providers. January is a big month for that. April, July and October tend to be smaller, but relatively meaningful months when payers benefit plans typically renew. So there's some -- there's typically some ups and downs throughout the course of the year.

I would add to, look, as you know, our top 10 national customers represent about 80% of our revenues and that relationship with those top 10 continues to grow and continues to expand as they expand their commercial book of business, as they expand their government business, particularly Medicare and Medicaid, they bring our services of networks, analytics and payment integrity along with that. So it's in addition to the expansion of lives, it's how they use our services on a much broader footprint.

All right. Good. And then maybe following up on that last comment. So in terms of switching programs and adding to the services that you're providing for these customers, can you guys just update us on sort of where you are with recouping revenues from the programs that ended up getting suspended in 2018 and that were resolved at the end of fiscal year, just given the growth that you saw year-over-year, even including the impact of the COVID headwinds, it does seem like there was a large benefit. So I'm just curious how that's evolved throughout fiscal year '20 and then how you're looking at it continuing to expand over the next year?

Dale, You want to step into that?

Yes. Mark, make a couple of comments first, and then I'll add on to you.

Look, again, I'll go back to my previous comment. We're deeply embedded in with the national customers, those top 10 customers. That business continues to grow and expand. We wouldn't have achieved those results without the expansion, regaining business that was suspended previously plus adding new business through new installations and new programs that are being rolled out by our customers. We're not going to talk about the customers. But when I look at that top customer base, our business continues to expand in terms of revenues, claims and charges submitted, claims that we match and reprice and the discounts that they use to drive efficiency and cost savings.

And the revenues from that particular customer continue to grow. So I mean to a great extent, 2018, 2019, what happened is behind us. Obviously, that customer has moved on and corrected what impacted our revenues in those 2 years. And our growth from that customer continues to grow every quarter. And so we believe that '18 and '19 is behind us and that all of our customers are working very closely with Dale on new initiatives and new savings opportunities and continue to grow moving forward.

And they have reimplemented -- they have reinstalled and reimplemented those programs that were suspended previously, and they've added new services and new installations that MultiPlan has brought to the market.

Let me just add a comment that like we have done for decades now, we work with our customers every year, every month, every day to find additional opportunities to generate savings and more value with our customers. And we do that through our sales and account management team. They are fully and deeply engaged with our customers to follow their needs and their desires and their direction and their focus, and we work with them on identifying new initiatives and the things that we get that either expand what we do for them today, move into payment integrity, add additional services, help them focus on Medicare Advantage if they're pursuing Medicare, all of those things take place and took place throughout 2020 despite COVID.

Our next question comes from Rishi Parekh of Barclays.

Just going back on the last question. You processed about $26 billion of claims in Q4 '19 and $29 billion of claims in Q4 '20. Can you bridge that increase? Can you just give us an idea -- just going back on the last question, we know that there are some challenges with some payers. How much of that increase, as you have said, improved through the year was realized in Q4? I don't know even now if you have this level of detail, but how much of it was due to delayed procedures that were in Q4? I'm just trying to better understand the run rate and also better understand your take rates for 2021.

We don't really have the ability to analyze how much is catch-up from delayed procedures. Our revenues as a percentage of our savings is up -- it's about 5.2% in Q4. That's up over numbers that were in the high 4s, 4.8%, 4.9% in the previous quarters. Q1, I think, it was about 5.1%. Q4 last year, it was about 5.2%. So we're basically at a revenue as a percentage of savings similar to where we were in Q4 last year and Q1, which really didn't have much COVID impact. And that's in spite of the fact that, as Dale mentioned in his call, a higher percentage of our claims are COVID-related claims, which result in a less savings number and lower reimbursement than what our claims had been previously. So we're pretty proud of where we are, revenue as a percentage of savings. And it has certainly expanded and rebounded from the levels that we were at in Q2 and Q3, which was primarily driven by COVID.

As you know, the delays were largely with -- in diagnostic and elective procedures, and we don't have that level of detail to discern electives from nonelectives, but we can look at the charges that we received and the relationship with our customers. And again, we would not have produced these kind of results quarter-over-quarter and year-over-year without that expansion that you've seen.

Yes. And then on your guidance, whether your organic growth rate is consistent to what you said in the past. But you also talked about opportunities. You've made 2 acquisitions HST, Discovery. You're working with some MA plans. You have the Blues opportunity as well. How should we think about those opportunities in '21? Is it mid-single digits, high-single digits, low single-digit type growth expectations and putting aside COVID, I get that COVID has an impact and is impacting your view on '21.

But putting aside all that, what do you think those opportunities are for these new programs that you're winning?

Dale, why don't you speak again to the attraction of HST and Discovery? And then let's talk about, again, the aggressive integration and cross-selling that is well underway with those 2 programs to expand our TAM and also expand the scope of services we can bring to the market.

Sure. Like we do every year, we -- and let me speak to a couple of different points. Like every year, we look for opportunities within our existing customer to -- customer base to deepen the relationships that we have through the implementation of additional services. Two, we always look for new opportunities and new logos through our sales talent. And as Mark mentioned earlier, we expanded our -- and we expanded our sales talent last year -- late last year and expect them to drive additional opportunities and grow through the addition of new logos and new opportunities.

Relative to HST and Discovery, HST is, as you know, was acquired in November 2020, and it expands our analytics-based services category by adding a new line of value-driven health plan services. And there's significant opportunity for us. We're excited about it because the physician has the next-generation of health care services and reference based pricing that it brings to the market for -- to both -- for both our TPA market space and our regional health plan or provider-sponsored and independent health plans.

Discovery is also interesting to us, very excited about that opportunity because it does a couple of different things. It certainly adds payment integrity and revenue integrity services. It grows our government market footprint. It's adding several new Medicare Advantage and new Medicaid customers.

It's expanding our portfolio of payment integrity products from 2 to 6. And we now have 6, a much more deeper and wider suite of payment integrity services spanning both pre and post payment modalities and significantly strengthening our ability to land and expand. And it also adds another service line focused on what we call premium payment accuracy for Medicare Advantage plans. And with the opportunity to look at Medicaid and perhaps ACA exchange based plans. It increases our footprint on in-network claims, as we've mentioned before, in our Extend strategy, one of our goals is not only to deepen our relationships in regional health plans and TPAs, but it's also to extend our reach into in-network claims of the payer, and the addition of Discovery does that.

At the same time, there's a number of clients that we don't work with today or they don't work with us today. And the cross-sell -- or the cross-selling opportunities between MultiPlan adding data -- or not Data iSight, Discovery services or Discovery's cross-selling, MultiPlan services into its unique client base is something we'll pursue this year as well.

There are no further questions at this time. I will now return the call to our presenters.

Thank you very much. We appreciate your continued support, and we look forward to speaking with you again following our - in our Q1 earnings call. Thank you very much. Stay safe.

Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.