R1 RCM Inc (RCM) 2017 Q1 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the R1 RCM First Quarter 2017 Earnings Conference Call. (Operator Instructions) As a reminder, this conference call is being recorded.

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

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

Today's conference call is being recorded. And as a reminder, certain statements made during this conference call may be considered forward-looking statements pursuant to the safe harbor provision of the Private Securities Litigation Reform Act of 1995. In particular, any statements about our future growth, plans and performance, including statements about our forecast for 2017 are forward-looking statements. These statements are often identified by the use of words such as anticipate, believe, estimate, expect, intend, design, plan, predict, project and similar expressions and variations. The forward-looking statements made on today's call are based on R1's current expectations and projections of our future events as of today only and should not be relied upon as representing the company's views as of any subsequent date. Subsequent events and developments, including actual results or changes in our [assumptions are subject] to change. While we may elect to update these forward-looking statements [at some point in the] future, we have no current intention of doing so except to the extent required by applicable law. Investors are cautioned not to place undue reliance on such forward-looking statements. All forward-looking statements made on today's call involve risks and uncertainties. Our actual results and outcomes could differ materially from those included in these forward-looking statements as a result of various factors, including, but not limited to, the factors discussed under the heading Risk Factors in our annual report on Form 10-K for the year ended December 31, 2016.

Now I'd like to turn the call over to Joe.

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

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

The expanded relationship increases both size and scope of our contract. Specifically, we are adding a health system, which was acquired by Ascension after the signing of the MPSA last year, accelerating onboarding of a Phase III health system into Phase II by approximately 1 year and increasing the scope of our contract by adding physician RCM services for all Ascension ministries in Wisconsin. With this new win, we expect our 2020 revenue from currently contracted customers to be north of $800 million, above the midpoint of the $700 million to $900 million range we previously communicated. We also expect 2020 EBITDA to be above the midpoint of the $105 million to $135 million range.

Our first quarter results were ahead of our internal projections. We generated revenue of $86.9 million and adjusted EBITDA of negative $1.4 million. Both numbers are a substantial improvement from year-ago levels with revenue up 113% compared to last year's comparable measure. Adjusted EBITDA improved $11.2 million from last year's net cash generated from customer contracting activities. This puts us on track for sustained profitability and positive free cash flow in the second half of the year.

I'm pleased to say our first quarter results give us greater confidence in delivering revenue and adjusted EBITDA toward the higher end of the ranges we have communicated for 2017. This is especially important from an adjusted EBITDA standpoint when you take into account the upfront costs we expect to incur with the newly signed business we are announcing today from the Wisconsin market. You can see that we are executing well at the core.

We are just past the 1-year mark since the close of the transaction with Ascension and TowerBrook, and the team has done a tremendous job of execution across the board. We have transitioned full control of the revenue cycle across 56 hospitals onto our platform, increased employee headcount by 3,500 and deployed our proprietary technology applications in 150 instances. The first phase of Ascension hospitals, which we refer to as the Additional Book Ministries or ABMs, are starting to deliver positive EBITDA to our financial results. This puts us ahead of schedule, and we are encouraged by the current trajectory.

Now I'd like to provide an update against the strategic priorities we have laid out for 2017. Our first objective was an effective relaunch of the company. This included rebranding to R1 and the adoption of new revenue recognition accounting, which we completed at the start of the year. The last major remaining item was relisting our shares on a major exchange, which was done on March 15. We are happy to have completed all major elements of the relaunch in the first quarter.

Next, and most importantly, is the successful onboarding of the Phase I ABMs. We have transitioned 88% of the work that is scheduled to move to our shared services centers, deployed 92% of the required technology and rationalized close to 70% of targeted vendor spend. In addition, we have largely completed the employee transitions with the onboarding of 1,700 roles year-to-date, bringing our total employee count to 6,800. We expect to complete the balance of deployment activities for Phase I by the end of May.

Deployment planning for Phase II is well underway. Phase II is less complex than Phase I due to a less dispersed footprint and fewer facilities that are larger in size. We are on track to start employee transitions in July for the Indiana and Florida markets and expect to start the employee transitions for the Wisconsin market in the fourth quarter. In total, we expect to transition the roles of approximately 2,500 employees to R1 over the course of Phase II onboarding.

We are applying the learnings from Phase I to accelerate the onboarding process for Phase II. As a direct result of this commitment to continuous improvement, we are able to add the Wisconsin market growth into our Phase II plans. There are a couple of areas I'd like to highlight, which help us with respect to the Phase II deployment. First, from a technology deployment and physical infrastructure standpoint, we have been creating capacity to efficiently scale our growth. The core elements of this include: upgrading our HR information system, adoption of an automated procure-to-pay platform, centralized accessibility of our operating procedures to help our frontline employees execute their jobs in a standardized way and moving to a cloud-based user environment for improved infrastructure stability.

Second, we have invested heavily in our central operations infrastructure. This includes expansion of our shared services centers and investment in our central analytics and performance management function. We continue to invest in our shared services, infrastructure and capability in 2017 with the addition of a dedicated coding center scheduled to open in July. The central analytics and performance management function is a dedicated group of revenue cycle experts backstopped by proprietary technology. This group is responsible for monitoring and enforcing our performance standards across our installed base to ensure a consistent customer experience.

The combination of our experience and proactive investment in scaling gives us a higher degree of confidence and visibility into earnings, as we deploy the remaining ABMs. More importantly, we believe the cumulative impact of these investments will competitively differentiate our ability to scale RCM services in the market.

Technology continues to be a critical component of our offering. We have the broadest proprietary technology coverage of any end-to-end RCM vendor, and we continue to build on our functionality. With that in mind, I feel it's important to update you on some major initiatives we have underway. As discussed on our third quarter call last year, we launched the next generation of our R1 Decision platform, which manages payer billing and follow-up operations. R1 Decision allows us to optimize productivity, velocity and yield in our receivable and denial management functions.

We have extended the platform to 80% of our installed base, including our customers' business office staff and global shared services team. And we're beginning to see strong performance in key areas, including: productivity improvement from high levels of process automation, in some cases, up to 30% improvement compared to previous manual follow-up activities; performance on follow-up yield of 99.6% across Ascension, where R1 Decision has been rolled out to nearly 100% of currently installed hospitals; we have recently piloted R1 Decision's most cutting-edge and rigorous operating capabilities; we have consistently exceeded our internal benchmark of 0.5 days of A/R overdue for work. This metric is a strong leading indicator for our ability to drive A/R performance and minimize denials. A direct result of this performance is improved working capital and profitability for our customers. We're proud of this accomplishment and expect to achieve further improvements in productivity, velocity and yield in the months ahead.

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

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

However, despite front-end technology solutions deployed in the market today, we continue to find patients that are often confused, inconvenienced and/or dissatisfied with their interactions with the revenue cycle. More patients complain about administrative processes than quality of care received, and over 60% of patients industry-wide don't understand their bill.

Physicians are also challenged with care coordination, scheduling issues and too much administrative burden. To solve these problems, we plan to fully modernize and digitize the patient access and physician referral experiences on behalf of our customers. We will do this by applying modernized, simplified technology to the areas of scheduling and order intake and integrating that technology with the core registration systems we already operate. This will dramatically reduce non-value-added work in our operations and enable us to meet the demands of patients and physicians.

While there is much rhetoric in the market about patient experience, we believe we are uniquely positioned to drive this transformation because of our extensive operating experience, our proven technology platform and our full control of operations. Another positive outcome of this effort will be the integration between the physician and acute environments from the patients' perspective, which is increasingly sought by our customers and is strategically important to us.

For health systems and their stakeholders, our new approach means up to 30% reduction in talk time for physicians to book appointments for their patients, significantly improved market share in service lines with traditionally high contribution margins, as much as a 50% reduction in outbound phone calls to patients and elimination of scheduling errors that cause patient and clinician dissatisfaction. For R1, we expect this capability to drive market share growth as well as improved margins by leveraging technology to reduce costs by as much as 25% in traditionally heavily resourced areas of our operations.

We are well underway on this initiative. With a solution architecture in place inclusive of internal and third-party technology, we have initiated 3 pilots and expect results from these pilots by the end of the year. In 2018, we plan to roll this new front-end capability across our customer base.

On our past calls, we've talked about our 3 go-to-market models in our commercial services organization. The operating partner model and co-managed model are generally where we have focused our attention in the past. In Q2, we intend to launch the next phase of our modular offering suite. This release builds on our 13-plus years of experience in the market and highlights our differentiated approach through our technology, shared services and analytics. We already have a range of modular services deployed across several diverse health systems. With the Q2 launch, we intend to improve the clarity of value proposition for these offerings through our marketing initiatives.

Now let me turn to the expansion of our Ascension relationship. We are especially pleased to have reached this agreement. From our vantage point, the conveyance of this new business demonstrates the strength of our execution to date with Ascension. More specifically, the physician RCM win is a strong proof point of the capability we have developed as well as our intent to execute on our vision to be an integrated rev cycle partner across all care settings.

It's also a validation by a sophisticated customer of the value creation opportunity from an integrated physician acute offering. The expanded contract encompasses the following 3 areas: First, it accelerates the onboarding of $700 million in net patient revenue, or NPR, from Phase III to the fourth quarter this year; second, we are adding an incremental $1 billion in NPR from a health system acquired by Ascension that was not in the original $8 billion NPR when we signed the master agreement last year; lastly, a significant win for us is the addition of $500 million in NPR related to physician RCM services. As you may be aware, we are the exclusive provider of revenue cycle needs for Ascension's acute care entities, and until now we did not have the physician RCM and scope.

Deployment planning for the onboarding will begin immediately, with employee transition scheduled to start in the fourth quarter. We expect economics of the incremental business, which includes physician RCM, to be in line with the operating partner model economics we have shared with you in the past.

As I mentioned earlier, we expect our 2020 revenue based on currently contracted customers to be north of $800 million, above the midpoint of the range we have provided. We also expect contracted EBITDA to be above the midpoint of the range we have provided.

In addition to the Ascension win, we also had a few modular services wins in the first quarter, including expansion of Medicaid eligibility and targeted balanced collections for a large national health system. Our PAS business also continues to grow and is on track to almost double in revenue this year, aided by market share wins and the transition of Ascension's PAS needs onto our platform.

We continue to monitor developments in Washington, D.C. for any effect they may have on our business. Despite the uncertainty with health care legislation, we expect the trends around consumerism, downward pressure on reimbursement, combined with increasing administrative complexity to continue in the markets. The vast majority of health care providers do not have the standardized predictable commercial infrastructure to respond to the trends I just mentioned. We are confident in our capability and positioning to build the infrastructure required and to be the operating partner of choice to enable our customers to succeed going forward.

In closing, I'm pleased with the milestones we have reached, including a sizable business win, rebranding the company, relisting, adoption of new accounting and turning to positive EBITDA contribution from the Phase I ABMs. The path ahead requires continued execution, and we remain focused on successfully onboarding the remaining ABMs as well as continuously improving our performance to differentiate us from our competitors. We look forward to updating you on our progress in the future.

With that, I'll turn the call over to Chris to discuss our financial results. Chris?

Thank you, Joe, and thank you all for joining us. There are 3 main items I'll cover on the call today: First, I'd like to walk you through the changes brought about by the new revenue recognition accounting standard we adopted at the start of this year; second, I'll discuss our financials for the quarter; and lastly, provide an update on our outlook.

Let's start with the new accounting. As we've discussed in the past, we have early adopted a new accounting standard called ASC 606, which pertains to revenue recognition for contracts with customers. Under the new standard, our GAAP revenue is now aligned with customer billings. As you may recall, we have previously had large swings in GAAP revenue. This goes away now and our GAAP revenue is more aligned with the way we [defined] GAAP revenue in the past.

As a result of timely revenue recognition, the deferred customer billings line that we used to have on our balance sheet is largely eliminated. There is a small amount of revenue, less than 1% of our projected 2017 revenue, related to incentive fees from performance metrics that needs to be deferred until the close of our customers' fiscal year-end. This is a relatively small number, and the conversion time line to GAAP revenue is a matter of a few quarters, much shorter than in the past when we deferred revenue recognition until termination of the contract.

The new standard also makes our adjusted EBITDA measure comparable to other companies in our peer group. The only adjustment to EBITDA to arrive at adjusted EBITDA are the addition of stock-based compensation and severance and other items, such as reorganization-related and transaction-related expenses.

The cost of services and SG&A numbers that I'll reference on today's call are on a non-GAAP basis. The year-over-year comparisons I will discuss on today's call are as follows: 2017 GAAP revenue to 2016 gross cash generated from customer contracting activities and 2017 adjusted EBITDA to 2016 net cash generated from customer contracting activities. Table 7 in today's earnings press release provides a comparison of 2017 revenue and adjusted EBITDA to the prior year non-GAAP measures we reported.

Turning to our quarterly results. For the first quarter, we generated revenue of $86.9 million. This was a sequential increase of $17 million and $46 million on a year-over-year basis, driven in large part by the acceleration of the Phase I ABM onboarding during the first quarter. Our PAS offering also performed well with revenue of $7.6 million, up $2.8 million sequentially, driven by contribution from competitive wins last year as well as the onboarding of the Ascension PAS needs. Cost of services in Q1 were $76.8 million compared to $58.1 million in Q4 and $41 million a year ago, driven by costs related to employees we onboarded from Ascension CBMs during the quarter.

Worth noting, we are separating severance costs related to transitioned employees, which we have previously included in this line, into the severance and other cost lines. These costs arise during the onboarding phase of the customer where we have an operating partner type model. Given the infrequent nature of these types of costs, we feel it's better for operational comparison purposes to allocate these costs to our severance and other cost line.

SG&A expenses were $11.5 million, down $0.6 million sequentially. On a year-over-year basis, SG&A expenses declined by $1 million, driven by the restructuring actions taken last June to effectively scale the company. We continue to expect SG&A to remain at approximately $11 million to $12 million per quarter going forward. Adjusted EBITDA was negative $1.4 million for the quarter compared to net cash generated from customer contracting activities of negative $0.4 million in Q4 and negative $12.6 million in Q1 2016.

Turning to the balance sheet. Cash at the end of March, inclusive of restricted cash, was $144 million, down from $183 million at the end of 2016. This change of $38 million (sic) [$39 million] was driven by a $29 million increase (sic) [$28 million decrease] in working capital and a $9 million for CapEx. The increase (sic) [decrease] in working capital was driven primarily by A/R and cash paid out for annual incentive compensation.

Our A/R balance increased by $25.7 million at the end of March relative to year-end 2016, of which $14 million was related to the timing of base fee payments from Phase I ABMs. We signed the supplement agreements with the ABMs late in the first quarter and did not receive payment by quarter-end. We expect to collect this $14 million in the current quarter and expect the buildup in A/R related to this to reverse. After this reversal, we would expect a modest buildup in A/R related to normal growth in our PAS business and payments from incentive fees.

On the share buyback front, we repurchased 270,000 shares on the open market during the March quarter for a total of $615,000.

Turning to our outlook for 2017. As Joe mentioned, we expect to generate revenue and EBITDA at the higher end of the ranges we have provided. The addition of revenue from the expanded Ascension relationship we announced should benefit our top line starting sometime in the fourth quarter. But it's important to keep in mind, we will have upfront deployment cost over the next couple of quarters, as is typical in this case. As a result, we expect the adjusted EBITDA for Q2 to be slightly below the level we reported for Q1. We continue to expect to be EBITDA positive in the second half.

The Ascension expansion in Wisconsin becomes profitable beyond the deployment phase, and we are, therefore, more comfortable with our 2020 outlook. As Joe mentioned, based on our currently contracted customer base, we expect 2020 revenue to be north of $800 million, above the midpoint of the $700 million to $900 million range we provided. We expect adjusted EBITDA to be near the midpoint of the $105 million to $135 million range we provided.

In closing, I'm very pleased with the financial results for the first quarter. We remain focused on continued execution and turning our financials EBITDA positive as well as free cash flow positive in the second half of the year.

Now I'll turn the call over to the operator for Q&A. Operator?

(Operator Instructions) Our first question comes from the line of Charles Rhyee with Cowen and Company.

It's James on for Charles. So I know, previously, you guys have noted that over 90% of the loan, the 2020 targets were already contracted. With the new expanded agreement, can you update us on how much of this target is contracted now?

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

Okay. And the $500 million of NPR related to Ascension's physician revenue cycle, is that displacing athena?

Yes. Let me comment on the $500 million of physician rev cycle growth. The first thing I would say is, to provide some context on the demographics in the market we're deploying against, there's essentially 2 core practice management systems that are being utilized in that market across that $500 million. One of them is athena, and there's also another practice management system in play there. The first thing I would comment on -- and this is a good opportunity for us to highlight the value that our workflow technology brings. We will deploy the full suite of R1 technology. That means R1 Access, R1 Link, R1 Decision, et cetera, across that market. And because we interface into the practice management system, we are able to centralize and facilitate the centralization and optimization of work across a distributed practice management system. So that's the first comment that I would share. In the technology stack, we will interface into athena's practice management system, and we will provide additional RCM logic that will drive further optimization of the revenue cycle via the technology. As we extend off the technology and focusing a little bit on how do we complement athena, athena handles today the posting processes in about 20% of the payer billing and follow-up work. That will remain as is, as has always been. We will be taking over 80% of the billing and follow-up work. We will be taking over all of the customer service, all of the coding operations for this market as well as all of the denial management. And as I mentioned, we'll leverage our technology. We'll leverage our operating system. We will optimize that work to drive value for Ascension and operating leverage from R1. And so that's essentially kind of some color on how do we complement the current technology players and some of the services that are associated with those technologies.

Okay, great. And lastly, what's the sales pipeline look like currently? Has it improved since hiring your new General Manager of Commercial Services last quarter?

It has. I mean, activity is up, but what I would say is we still have quite a bit of work that we're excited to bring to market over the next month or so, relative to our go-to-market channels. One thing I would highlight there is the introduction of the overhauled modular offerings that we think will be received well and will scale well in the market. And we also have an active search for a head of growth for the company. That will complement our commercial services organization, and we hope to close that soon. So our pipeline is up, evident by some of the -- not only Ascension, but some of the other signings we had in the quarter that we referenced. And that's in a mode of operation that still has investments that we're making, and we're excited, as we look to the second half of the year, to be fully up and running on our go-to-market channel. But we are encouraged, in the mode we're in right now, that even in that mode of operation, we have increased activity. The first half of this year, I would emphasize, our focus has been just making sure we get the relaunch of the company done. We get a good confidence in our execution and visibility financially on the Ascension deployment. And so as we make the turn coming out of this quarter and looking to Q2 and Q3, we only intend to increase the activity in that pipeline. And we think we have a very, very competitive product, if you will, vis-à-vis the market alternatives that should get further growth and traction as we more formally launch it outside of our current installed base.

Our next question comes from the line of Matthew Gillmor with Robert W. Baird.

I wanted to hit on the accelerated onboarding of the Ascension book. It seems like that was one of the key swing factors that have moved numbers up. So can you maybe give us a flavor for what's allowing you to accelerate the onboarding? Is that driven by your ability to take on the business sooner or Ascension's maybe comfort level, in pushing more towards you?

Well, I think we wouldn't have the opportunity to accelerate if Ascension wasn't comfortable. So I think they go part and parcel along those lines. But what I would say, what enables -- what has enabled us to achieve confidence from Ascension to affect the schedule positively is probably 2 primary things. One, we've talked a lot about proactive investments we made in 2016 to make scaling a competitive advantage, and we think this is really important to emphasize. The end-to-end players, ourselves included if you look back in time, the track record in effectively scaling the operations of the rev cycle, given its complexity, has been spotty. And so going into the deployment of Ascension, we really want to take advantage of the rich history and learnings we have and proactively drive some of those investments. And I think that is paying off. And then the second thing I would say that complements that is the operating system we've built. We have a very specific set of standards, whether that's where work is done, how work gets done, how we monitor the performance, how we deploy the technology, ensure the technology is used the right way. That operating system or performance stack, there's quite a bit of substance behind that. And because we've built that, combined with the infrastructure investments we've made, it allows us to be very surgical in how we deploy this business. And that's really driven confidence with Ascension. That has translated into them allowing us to accelerate from a schedule standpoint. Now as I said in my remarks, more importantly, I would emphasize that as we go out and start to grow outside of Ascension, we think that ability to scale systematically is a competitive advantage and we intend to play to that strength.

Got it. That's helpful. And then maybe 1 or 2 follow-ups on the expanded relationship. I guess, first, I wanted to confirm that this is covering the Wheaton Franciscan assets that were acquired by Ascension last year. Is that correct?

That's correct.

Okay. And then I didn't quite understand in terms of the dynamics with the current vendors, including athena. Are you saying you're mostly just complementing what they already do? Or will there be some sort of shift in responsibilities between who is doing what?

What I would say is let's break the question into 2 parts. First, on the technology stack. We have a world-class suite of technology that is focused on optimizing the revenue cycle performance, and that technology sits on top of the host system or the practice management system in this case. And so as it relates to technology, our technology will manage the revenue cycle. So there will be some replacement of functionality, if you will. Transactions and the work that is being done will flow through our technology and our [defact] engines, et cetera. So that's one piece of our scope of work, and there is some overlap there. The second piece is really the services that wrap around that technology. And as I said, we will be running the large percentage of services that are not done by those incumbent technology providers, which is, in the athena instance, the majority of the follow-up activities into the payers, the coding operations, the customer service operations, the patient residual collections and the denial management type functions. Posting, and some segment of the follow-up activities, will remain as it is. So we're not displacing the incumbent service players, but the large amount of the services provided in that market for the physician revenue cycle was done in-house, and we will transition control of that. We will optimize it. We are able to do that because we're able to normalize work across 2 different practice management systems with our technology layer.

(Operator Instructions) Our next question comes from the line of Jeff Garro with William Blair.

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

Right. So a little bit about the expansion. You've got -- we're accelerating the entire Wisconsin market on the acute care side, so that includes some properties in that market that were previously scheduled for Phase III. We're bringing them in to Phase II -- deploying in Q2, and we're including the acquired entity in that broad deployment. And then we're contracting end to end across all the systems, including the new acquired, but also the incumbent systems in that market, for the physician revenue cycle management. So we're contracting the physician revenue cycle management in its entirety for that market, just for clarity's sake. I think, as we look at this market, there were certain criteria, 2 different host EMR systems, both on the acute as well as on the physician side. And other factors that provided a good test platform for us to architect an integrated rev cycle physician acute and the smart optimization of those 2 process flows. As we look broader, and we've talked openly about this when we relaunched the company, we believe strongly in the value prop that needs to be created by integrating, where it makes sense, these 2 flows, process flows. Whether that be simplifying the patient experience, simplifying the physician experience or, frankly, driving the performance from an operational excellence standpoint that our customers need. And this is a good opportunity for us to demonstrate that. We intend to do that and then expand more broadly going forward.

That was very helpful. And maybe a broader question. We noted some layoffs that -- here on this quarter, in part related to softer revenue cycle consulting demand, which doesn't seem to completely line up with what you're seeing. So wanted to ask if you see a shift away from consulting engagements towards larger, more comprehensive partnerships or maybe there's never really been a strong correlation between RCM consulting and more broad outsourced RCM.

Our view -- and I don't want to convey that we're seeing the market move en masse right now but our strong view and hypothesis is that the historical way this market is served, whether it be point-to-point technology solutions, transactional services that tend to be local in manner or at the point-to-point consulting services, where the provider is on the hook to stitch together all of those service providers and deliver the results. Our point of view is that combined with provider consolidation, combined by just financial pressures that are playing through, there is fatigue with that approach. We believe strongly that establishing a strong operating partnership, driving standardization, optimizing technology, leveraging the balance sheet and the infrastructure to deliver the scale advantage, those are really critical capabilities that have to be brought to the table. And then a willingness and confidence to contract on a performance basis, whether that be variablizing the cost to collect or having a percent of fees that are tied to the performance of our customers. And that's what gets us excited about bringing that value prop to the broader market in a systematic way, as we think going forward.

And we have a follow-up from the line of Charles Rhyee with Cowen and Company.

It's James again. Just a follow-up regarding the expanded agreement for the physician rev cycle. It seems like now that you're not displacing, you're complementing. But does that leave open the possibility of you, down the line, getting that business? Has Ascension made any indications about that possibility?

Well, I don't want to comment on Ascension's intentions outside of kind of the announcement we're making today. But we -- it's not that -- we don't -- we will never displace the practice management system that our technology complements that practice management system, whether that be Cerner, Epic, athena or the long -- and we interface to all of the core EMR systems. And the services that are largely done in-house today, not by the practice management system providers, that's where our focus is. And that's, frankly, the bulk of services to run the physician rev cycle. And so we have a strong value prop that we talked about. We intend to demonstrate that with this market win and earn the right to expand going forward within Ascension. But that's the way we look at this footprint, if you will.

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

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

Great. Thanks, Chris. As we close the call, what I would like to highlight is just strong execution from our vantage point, as we mentioned, ahead of internal projections. Growth, both in terms of scope expansion as well as just continued growth of our acute care footprint. It gives us greater visibility as we look going forward, highlighted by the increased revenue and EBITDA under contract in our 2020 range.

And then I would continue to emphasize, and you'll hear us talking more about this just because we see a ton of opportunities going forward, a renewed focus on technology and innovation with a constant eye towards how does that technology translate into value creation for our customers. I can't emphasize that enough, in terms of our strong intent to build great technology but more importantly, drive the change management and the results from that technology.

And so with that, I'd just like to thank everybody for joining the call, and we look forward to updating, on an ongoing basis, the progress we intend to make. Thank you, operator.

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