Both Karen and Christine will come on to join us today to hear our story and to see how much the company has transformed over the last couple of years. As many of you know, I was an analyst for about 20 years and family of ModivCare today, and I couldn't be more excited to be a part of this company. One quick housekeeping item, for those who need the Wi-Fi, the password is simple, 22. Just for more housekeeping, everyone will hear forward-looking statement w e're going to take some non-GAAP f inancial and provide you some non-GAAP financial information and make some forward-looking statements . We have an exciting day planned for you. Our meeting is really divided into two sections.
First, Dan Greenleaf, our President and CEO, will kick us off with some high-level comments and an overview of our supportive care platform, followed by Ilias Simpson, President of ModivCare Mobility, who will do a deep-dive into our non-emergency medical transportation business. Next, Mia Haney, COO of Personal Care Services, and Jessica Hylander, COO of Remote Patient Monitoring, w ill walk you through the ModivC are home business, followed by Walt Meffert, our Chief Information Officer, who will get into our tech-enabled platform. Following Walt, we'll have a Q&A session with these presenters, followed by a short break. The second part of our meeting will start with Brett Hickman, our Chief Commercial Officer, and Robert Pittman, SVP of Government Affairs, who will get into our duals strategy, which includes bundling, upselling, and value-based care.
Finally, our CFO, Heath Sampson, will finish the meeting with our financial outlook, followed by a second Q&A session. Again, we have two Q&A sessions, so please keep your questions focused on each part of the meeting. What I'm really trying to ask you guys is save all your financial questions for Heath after he's done speaking. As a reminder, we are having a reception at our headquarters following this meeting that will start at 5:45 PM. And now I'd like to play a little video.
I think I wanna stretch our legs after four hours on stage, so good idea . Now I'd like to play a video that provides an overview of who ModivCare is and what we do.
Now I'd like to introduce Dan Greenleaf, our President and CEO.
Okay. Well, first of all, I wanna thank you all for being here. I know this has been a while . There's a few of us that kind of awkwardly hug each other because, "Oh I haven't seen you in so long. That's what you look like." But I appreciate you making the effort , and you know, we've, you know most of us haven't been traveling for periods of time . And I know COVID is still running around. We had unfortunately, couple people cancelled because they got COVID , so we know it's still. And I understand, there's also a irlines that are working as efficiently as they always have as well. Listen, I wanna share with you a few things today.
One is I think for those of you who have been following the company for the last couple of years I've been here, we laid out what we felt were going to be the strategic pillars of the organization. What I would say about each of these categories, we'll walk through them, is that we delivered. You know, I think about the right people at the right seats, I got a couple slides here that they give you an overview of just the transformation that's occurred with your personnel and this organization. There's also been significant transformations with our board of directors as well which I really feel that how the great companies have had a great board.
We've got an extraordinary board but then, on the voice of the customer I think that was something that, if we thought about who we wanted to be in the future was. It's something I don't think the company historically had put a lot emphasis on and we've done a lot of work here and some of that works been through client advisory boards , some of that work has been through transportation advisory councils. Some of that works has been done through caregiver councils. It also shows up in our Net Promoter Scores. If you look at our example and Jess will talk about these. Our Net Promoter Score for example in our RPM business is somewhere in the 87% range, 86-87% range so that sort of remote patient monitoring. Our Member Experience Scores with our transportation business is in 75% range.
The reason I bring them up because both those by anybody standard are world-class although we still think there's still lots of work to do here, there's been a lot of work done as well. The other thing is that we are really focused on addressing, given the communities that we serve, are digital divide, which you'll hear as time goes on here, you'll hear more about that. You're gonna hear more about digital literacy and the issues that the patient populations that we serve have. As we think about the evolution of our business model, we're gonna continue to build on that.
Okay. I think we're getting ready to start the Q&A session. If I could ask the first session presenters to come to stage.
Okay. Yep. We need Dan and Mia, and then we'll start the Q&A session. Again, we've got another Q&A session after the second group of presenters present today, but I'll moderate Q&A. We can start off and see if there's any questions. How about Jack in the back? If you could give your name and firm, and then we'll keep it moving. Go ahead, Jack.
Thanks, Kevin. Jack Slevin with Jefferies.
Okay.
Appreciate you all doing this. A lot of really great content there and lots to work with. I guess to kick off.
Yeah.
Dan, I think there was a couple allusions to it in the presentation, but maybe to give you an opportunity just to set the record straight on this, there's a lot of confusion in the markets, pretty clearly reflected in the share price over the last couple of days. As it relates to the Medicare home health rule, is there any direct impact in your business? Furthermore, is there any read-through we can make to the personal care side of the business, or is it purely noise?
Yeah, there's no correlation. I mean, that's the issue at home health companies is they have pen stroke risk, right? It cuts both ways. They thought they were gonna get an increase, and they got a decrease. The states, the decision on personal care is made by the states. You know, what they decide to do in terms of reimbursement. In fact, it's even, you know, places like New York, it could be, you know, what they set for reimbursement could be, you know, county by county. Like I said, we've seen of the 7 states in 5 have afforded us reimbursement increases. In many of those instances, we didn't expect them. Mia talked about, like, why these states are so behind personal care, because it keeps people out of institutional care.
The wages are very different than what you're seeing. Again, I think some of the issues on the home care side is, you know, their EBITDA was in the 20-some% range, and I think people see that and they're like, "Holy mackerel." You know, we're not that company either. I just wanted to, again, 100% clear we're not home care. There was a reason for that. I didn't wanna get into nurse shortages, right? I didn't wanna get into excessive labor pressures, right? I didn't wanna have pen stroke risk, right? I didn't wanna get into episodic care. I wanted to get in the business of stable chronic care monitoring. You know, that's why, again, when you think about the supportive care business, that's it.
Our average length of service is four years. Again, I don't think the reimbursement environment is gonna get less favorable for us. I think it's gonna get more favorable. Is that, Jack, does that do it?
That's great. Yeah. If I can squeeze in one follow-up, and I think you-
Please.
Hit this right on the line. A lot of really great information. We've been very excited about the assets you pieced together.
Mm-hmm.
the implicit value there. As you think about moving forward, $300 million EBITDA target out there for 2025 now. By the time we get to 25, do you think you'll have moved the business forward and integrated everything on the capabilities front to be able to take risk and go into conversations with payers where they're gonna be willing to pass risk on to you? Or are there other capabilities or assets you think you need to bolt on, to get there?
Yeah. I mean, there are other assets that we might be able to bolt on, but what we have right now, we can do it. In fact, we are doing it. We've got a couple pilots happening right now that I think within. What would you say, Brett? 12 months?
12.
12-18 months, we're gonna make it happen. I think we'll have enough data at that point in time. I think we'll have our systems and companies integrated from an enterprise data platform at that point in time, and we're gonna be in a really good position to do that. That's, you know, well before 25. Let me say one other thing. Thank you. Ilias talked about this, but you know, we've been doing risk-based contracting for two decades. In some instances, we are in 44% of the instances, we're taking full risk. We've done this. This isn't like you know, you go out and talk to the companies that say they're taking full risk, and how many of 44% of their business is full risk?
It's few and far between, as you know, Jack. We're in a really unique position just based on our actuarial experience that I think also separates us from other companies who might consider that, and we're not afraid of it as a result either.
Let's go to Brooks up front.
Brooks O'Neil from Lake Street. You talked a lot about a national platform, and I saw a lot of white space in Minnesota. I'm kinda curious about that, but.
Two months a year, we'll be up there.
The national platform, in my opinion, is really, really exciting. The personal care business is very complementary to everything you're doing, but you're in eight states. Talk just a little bit about, you know, how we get to 50 states, how much time that's gonna take, and how big it's gonna be when you get there.
Yeah, I don't know if we need to get to 50 states because, again, you look at the patient populations that we serve. We're gonna follow kind of duals and Medicaid. That's not 50 states. I'll just put it to you that way. You know, I think Mia talked about it. I know what you're referencing about, you know, it's gonna be helpful to have more dots on the map. There's no question. There's a lot of opportunity even the states we're in. You know, I... This could be a several billion-dollar business just in the states we're in right now. I don't wanna lose sight of that from a revenue growth standpoint.
Brooks, if you look at our model, we absolutely unequivocally believe that we need to be in other places. You know what? We were so aggressive on our, I would say, acquiring these assets was because there weren't a lot of them. In fact, there are very few that had the scale of either Simplura or CareFinders. Thank you. I'm getting all these names mixed up right now. We had to move quickly on that. There aren't a lot of those other ones. That being said, I think we have a, you know, I think we'd have a plan to be able to, you know, secure states, and I think a very efficient manner and then build out around that.
I think that's, you know, kind of how we're thinking about it right now. I don't know, Heath, what else would you say?
Look, your one question was around size, right?
Right.
Maybe the $650 million revenue. In kinda large states, we're still less than 10% of our share. You can kinda do the math. They're just in those states, and then, of course, you already have these states. The size is very large.
Yeah. Great. You know, manifest destiny, go west, yes.
Uh, how about-
Oh.
Yeah.
Two months, promise.
Ready?
Super. Thanks. Bob Labick with CJS Securities. Thank you all, you for a great day so far. Fantastic presentations, and great to see and meet the whole team and everything. Really great job so far. Thank you. Just wanted to, you know, stick with kinda the big picture and the bundled care and the opportunity that you're presenting, and maybe give us a sense of kinda where the industry is right now. How many? You know, we're aware of, you know, I guess UnitedHealthcare at Home, you know, kind of Medicare Advantage opportunity that offers multiple of these offerings that you guys have. Where is the industry in general in terms of bundled care and providers of bundled care now?
Where is it kinda going in 2025 and beyond? Just give us a sense of where the industry is in this path, please.
Brett, why don't you answer that one?
Sure.
For the record, people don't know Brett. Brett was at Optum. Brett was at Aetna. Brett was recently at Cityblock, so he has a lot of, I think, insights in this area. One of the reasons he came here was for this reason.
Yeah. Exactly. Stealing my thunder, my intro. All the payers, it's not an issue right now of are they gonna get into SDOH or do they believe SDOH investments and bundling SDOH is gonna be impactful with their business. It's how are they gonna do it and who they're gonna partner with, right? All of them are making different investments, and most of them are partnering. Now, many of them made individual investments like point solutions. Like, you know, United went out, and they bought some housing. They bought some apartments. The reason we did that back then was we wanted to learn from it, so we knew how to partner better, so we knew what the real implications were, so we knew how to contract, 'cause that's what we're really good at, is contracting for networks, right?
Think of SDOH as a network, a bundled benefit that we can go and take risk on in the future. As we move into this, it's gonna be imperative that we have the data and the analytics, because you think about their blind spot. There's no CPT codes. There's some Z codes once in a while, right? But there's no, you know, UB-92 or HCFA 1500 being filed. So there's no claims data. We own all of that data, and we can actually enhance that data based on their needs, as we talked about with E3, and start producing real actionable data that they want for their plans to be more impactful. Hopefully, that answered your question.
Yeah, what?
Yeah.
When you think about the percent of payers that are, you know, I
Yeah.
Personally, I think it's build it, and they will come in some respects.
Yeah.
Go ahead.
All, I mean, the recent study just from this year, you know, from the health plans is that 80% of them are moving this direction with SDOH investments. You look on the state side, you know, the waiver programs and the HCBS, you know, pilot got held up with, you know, the work requirements and with the pandemic. Moving into these SDOH, you know, investments, even at the Medicaid, they're the regulations already exist through the ACA, right? They already exist through the waiver programs. They are making these investments. You know, when you ask the questions, I say it's 100%. I say they have to do it. It's table stakes. I mean, 30% of the excess deaths are due to SDOH. You know, this is something that we have to do as society.
It's the last bastion of being able to really control total cost of care.
Yeah. How many of your contracts or payers have multiple of your services now?
Yeah, great question. I'm gonna show you an example. When we go, we have one of our Big Six examples, and they have at least one of every one of our solutions. They're not tied together from an accountability perspective. You'll see even with that one payer, we still have an $800 million opportunity for growth with that one Big Six payer, even though we have significant presence in two or three of our major solutions.
Got it. My last one, I promise.
No, that's great.
How do you enable that cross-selling?
Yeah.
You know, combine all of your offerings with that payer?
Yeah. Number one is you gotta deliver. As you can see, we're delivering. I mean, on our home side, we're producing amazing results. You know, we're continuing to, you know, you know, invest in the NEMT side of the technology, and we're performing better and better every day and tying those together now and showing. We have to go into pilots, and we've got a couple pilots already. I think Mia and Jessica shared one of those with you on E3. To get to this journey, we need to invest in pilots with these big payers and go where they have, you know, need and just custom design these solutions with them and prove that we can drive total cost of care and quality outcomes.
Thank you.
Yeah. One other thing I wanna point out, too. If you've looked at Anthem and UnitedHealthcare, when it relates to their MA product, both of them stated in press releases there's three things they're focused on, transportation, meals, and personal care.
Yeah.
They're going on record saying this, so.
Mm-hmm.
You know, we put these assets together before they went on record for the record. Obviously, I think we're, you know, again, in a really extraordinary position.
Next question, let's go to Scott, and then Jessica, we'll come to you next.
He asked a tough question. Let's get somebody else.
Hi, Scott Fidel with Stephens. Wanted to ask a question on personal care and maybe just to contrast with obviously there's a lot of focus on the Medicare proposed cuts and the funding environment on the Medicaid side has been particularly strong. Then we've had the enhanced FMAP funding that's come through, and we're seeing a lot of that now get operationalized, you know, with the enhanced funding for home and community-based services. Just interested, you guys already gave us the stat around $6.5 million of reimbursement increases for personal care this year. I'm just interested how...
If you could give us some color on how your rate increases have just been breaking up between, you know, there's been some permanent rate increases we've been seeing, and then there's been some of these temporary rate updates that are flowing through the enhanced FMAP. Just can you give us some flavor for, you know, sort of how that breaks down, whether it's around the 6.5 million or just, you know, any way that you wanna sort of talk to that? Thanks.
Heath, do you wanna cover that one?
Yeah. Well, from a math perspective, Q1 over Q1, our reimbursement rate up 7% and our costs went up 4%. That's kind of a good proxy for where we're gonna be, if that was your question around rate versus cost. Some of that gets passed through, some of it doesn't, and some of it's required, some of it's by choice. You know, the states that we're in, as you know, are very favorable to rates. But yeah, that's kind of the delta that we had in Q1.
I guess, Heath, that's helpful, but also, would those be all sort of the baseline sort of permanent rate increases that you're talking to us compared to?
Oh, yes. Absolutely.
'Cause, you know, there's also been these additional.
Yes.
Sort of funding coming through on the HCBS-
That's correct.
From the ARPA bill as well.
Yeah, that's all.
All separate.
All permanent side. That's correct.
Okay, thanks.
Let's go to Jess.
Hi, Jessica Tassan from Piper Sandler. Thanks for having us out here in Denver. My question is just with respect to the NEMT business, what kind of oversight or performance measurement exists there? Once you get assigned a transportation contract, who is the body responsible for oversight, and what metrics are you being held to?
Yes, that's a great question. I talked a little bit about being obsessed with on-time performance. I would say that's the key metric that we're being held to. Again, if we're contracting with the state or if we're contracting with an MCO within that state, what they're mostly holding us accountable to is on-time performance. What that means is getting the member picked up from their home, getting the member delivered to their appointment on time, and then picking them up from their appointment on time. They also look at other metrics such as, you know, missed trips, no vehicle available, complaint metrics, obviously safety metrics. But I'd say the kind of core metric around NEMT specifically would be on-time performance.
Um-
I would say what's happened in the contact centers, too. Because
Yeah. In the contact-
Those targets.
Absolutely.
Are typically set at about 80%, and we're achieving 97% right now.
Right.
We're kind of blowing the doors off of the service levels at the contact centers.
Yep, absolutely.
Just a quick follow-up. On the reliability improvements, I think you guys cited 20 or 25%, in terms of on time rides or an improvement of 20%-25%. What's kind of driving those reliability improvements? Is it how you're vetting the drivers, compensating the drivers, incentivizing them? What-
Yeah. It's a combination of all those things. Again, if you think about the efforts that we have around digitization, being able to more accurately track the rides, being able to get in touch with providers proactively versus having to wait until a member is calling us to say, "Where's my vehicle?" We can see that maybe a ride's going to be delayed, and we can interact before we have a hit to our performance or before that member has a complaint and get out in front of that. I think digitization has played a major factor in us being able to increase our reliability and performance.
Then I think in addition to that, again, the partnership model with our providers and being able to get closer, a lot of our business is built around setting those providers up for success. You know, we are co-destined in terms of our relationship with those providers. They're the ones actually delivering the service at the end of the day. We have to be able to set them up for success. To do that, we need to understand what they need to be set up for success. In terms of our ability to efficiently assign them trips, if you will, and make sure that we're giving them trips within the right market, within the right ZIP code, within the right hours of operation for them, allows them to perform better.
Definitely, our efforts around digitization, but also our efforts in getting closer to our providers and becoming more of a partner with those providers.
Just a couple examples, like we've done. We've assigned certain transportation providers to certain dialysis clinics. They are our transportation provider for that dialysis clinic.
Absolutely.
Mental health, substance abuse, same thing, you know, because you could imagine the sensitivities associated with somebody with that condition. We're assigning specific companies to that. That's another way. The other one I would also mention, and Ilias talked about a little bit in his presentation, is this Privado product. Because as we looked at kind of overlaying where we have transportation providers and overlaying where we could use a Lyft or Uber or overlaying other services that we could offer them, there was white space.
Sure.
A lot of the problems we were running into was that white space where we didn't have that overlap was not being addressed. Privado has been an unbelievable tool for us, and particularly in those areas where we can't find. The guy who runs it, Ed Hoffman, has got some crazy-ass secret sauce. I mean, it's bananas. Like how he pulls this off and I know it sounds funny, but it's true. We're all kind of astounded by just how good he's at recruiting drivers to cover these spaces.
Yeah. That's something else that we've spent time focused on and are doing quite a good job with now.
We're able to stand Privado up within a matter of weeks. You know, with their ability to get certified in a new state, from the time it takes for them to do that to the time they're able to actually start doing rides, it's a matter of weeks, which is phenomenal. We can make an impact quickly when we see the need to move Privado into a network.
I think we have an online question, so we'll go back to Zach.
Hey, I would mention something else we haven't talked about that. Again, we got asked a lot about when we did our first debt deal. You know, these relationships we have with these states and payers are, like, decades upon decades in some instances. You know, again, I think the relationships have always been there, and that's why we love transportation because it's allowed us to establish up this relationship and acts as a tremendous conduit to bring other services to them. There's a high degree of stickiness to what we do as well that I think is important for you all to understand that.
Again, as we get more sophisticated, you know, as we expand our technology offerings, as we improve performance, which we're seeing, you know, significant improvement across the board, I think, you know, that just more to come. We've got, you know, there were some of this, and I don't know if Brett's gonna talk a little bit about this, but, you know, there are payers we only still have only-- We're their preferred partner, but we only have 44% of the business. We think there's massive opportunity not just to win more contracts, but also, and they want a one-stop shop, a NEMT too. I think there's gonna be some significant changes in terms of our market penetration in several large accounts over the next year.
Go ahead, Zach.
All right, this next question comes from Mike Petusky at Barrington Research. It's to the personal care side. Are caregivers currently compensated or incented to promote ModivCare's other services? And if not, how does ModivCare get these services into the home where a caregiver is?
Go, Mia.
We are not compensating our caregivers at this time to promote the other services. We are educating our caregivers about all of the services that we do provide, but it's new to everybody, right? Because this is something that is new to us. We are really just interested in educating them and empowering them to be an advocate for that client. The second part of that question, if you wanna remind me.
Incentives.
How are other services from ModivCare being brought into the home now?
I'll share this question with Jessica, but I would say that right now we're leveraging those relationships that we have with our referral sources, which are our case managers. Our case managers are aware that we all fall under one umbrella now, but we are also continuing to lean on those existing relationships.
We do have a model we can follow in terms of incentivizing them. We actually do within the NEMT space, incentivize within our care centers, as the CSRs, our reps taking calls. If they can promote other services, other modes of transit, there's incentives behind that for the CSR. We have a model that we could expand upon as we prove that to be successful. We have seen success in that. That's part of what's driven up those alternative modes of transport. We have something that we can base on as we move to the other business units.
Yeah. I would say that we're always sensitive to customer choice and wanna ensure that we're giving customer choice across the continuum.
Let's go to Brooks, and then let's move on after that. We can save the other questions towards the end. Go ahead, Brooks.
You guys were talking a little bit about Privado, and honestly, it's not something I know a lot about. Can you talk about, you know, the revenue opportunity, if there is one, and can you talk about the cost side? Are you buying cars and hiring drivers in that business?
Yes.
Just talk a little bit about some of the basic dynamics so I can understand.
Yeah. Again, Privado functions as a TNC, which again is kind of a fancy term for they use privatized vehicles. We're not really going out and having to purchase vehicles. We are recruiting drivers. That secret sauce that it has is its ability to recruit drivers who wanna do this, for the right reasons, they want that consistent work, and they're willing to serve these rural areas. When you think about why Privado is successful for us, it can solve some gaps, some of those white space gaps that Dan referenced. In addition, their performance far exceeds some of our other kind of traditional transportation providers. Their costs typically are a little lower as well, which again we see that with our rideshare business overall, we see that same thing on Privado.
I would say from a. It's not so much that there's a revenue opportunity per se. There's definitely a cost opportunity in terms of our unit cost, and then there's definitely a performance element as that we can increase our performance, increase our capacity, which ultimately will lead to increased revenue because we can take on additional business and new business. That's really where Privado plays. We have expansion plans to go. I think we're in seven states now. We're trying to double that in the coming months.
Okay. I think we're good for the first Q&A session. Keep in mind, we'll have another one after Heath is done presenting. Thank you all for coming up on stage and doing the Q&A. With that, I'd like to introduce our Chief Commercial Officer, Brett Hickman, and Robert Pittman, our SVP of Government Affairs to the stage so they can go over our growth strategy.
Thank you all for being here. I'm obviously very excited, and a little bit of my thunder was stolen here, but thank you. You know, nobody's more excited to be here with the opportunity that exists at this organization than I am, other than probably Dan. When I started looking at this organization, the platform that they had built, especially during an unprecedented time over the last two years in our industry, you know, it's amazing the assets that they pulled together that we now have to leverage and go to market, and really start to drive results for our payer partners, both at the state and the MCO level, but also the opportunity initially out of the gate. We don't have to wait to get to value-based.
We have so much green space, so much opportunity for additional revenue just by cross-selling and bundling our services and then moving to value-based care in a safe and prudent way. For me, the most exciting part of this is the growth we can experience over the next two years, positioning ourselves for amazing growth the following two years as we move into real value-based care and really taking on populations and cohorts. With that, you think about, you know, earlier we shared is how much of health is influenced by social determinants of health.
You know, whether we look at the 89% or we look at the 30% of, you know, unnecessary mortality, you know, related to social determinants of health plans are under extreme pressure to build capabilities and to create efficiencies within their organizations around things that rest outside the four walls of traditional clinical care. Right now, that's very fragmented, uncoordinated, and a lot of it lacks data and information to make good decisions. We're in a unique position now, and we already are collecting, as you heard from Walt, collecting that data, analyzing that data, and positioning that data to be actionable, not only real-time, but hopefully predictive as we move forward and start taking risks. We've got the right assets in place to do that. I mean, think about something as basic as transportation.
You can't age at home, you can't manage your care at home unless you know you have secure, safe, efficient transportation. If you don't, you have to be in an institution. For us, the basic core elements we have built on, this leadership team has built the amazing set of capabilities that now we're positioned to go to a payer and say, "Look, we can take the risk, we can organize the data, we can give you something that's gonna be really impactful to your bottom line, but more importantly, to the lives of these members that really need our care." This is the piece that got me the most excited. It's a platform business, right? You know, as you ask the question, you know, is there other assets? Absolutely. We can plug and play important assets to continue to enhance our capabilities.
What's most important is we've expanded exponentially the addressable market that we can go chase. When this business you know, when Dan took over 2 years ago, this was a $5-$7 billion addressable market, right? Now we're looking at in the next 2-3 years, a $150 billion addressable market. Look at, you know, if you just look at personal care alone, the opportunities we have to expand, and you know, you said earlier, I think it Brooks, it was you about where are you at with personal care geographically? What's beautiful about our platform that's been built is if we have a partnership in value-based care, let's say, with any of the big six, and they say, "Look, we've got an issue, we just can't address it here," right?
We don't have the assets, we don't have the network. We need you to go into this market. You heard about Privado. You heard about how easy it is for us to go into a market and expand and put those capabilities in place real time and be up and running and be effective for that, for our payer partner. That's the speed to market we can work at that we're now positioned to do, and this is the biggest reason I'm excited to be here. We talked earlier, and I mean, we had a great question about, you know, how are we getting these services? How are we like, you know, putting other services into this? At the end of the day, member engagement is the holy grail for payers. They struggle immensely with the populations we serve to get member engagement.
Did you see me and Jessica's member engagement? 89%. 60% recurring. It's unheard of in the industry, right? That type of engagement means that you can have an influence over their care and their decision-making and how they take care of their own health and wellbeing with you as a partner. You know, that efficiency we can create by bundling those services. Think of a case manager having to make 15 phone calls to coordinate services for one member versus they call ModivCare, and we say, "Look, we've got the core set of services." You're gonna see a slide later that we basically encompass like 80% of the demand. We can case manage the rest of it. We can leverage community-based resources.
We can coordinate the other gaps in care and make sure those members get that care, and we can be that one-stop shop and ensure that those health plans efficiencies can really improve. You know, it's all about relationships. As you know, someone mentioned earlier, you know, we have significant relationships. We have deep relationships. I was even blown away. I didn't even realize how deep until I got in here. I mean, I was really proud about all my relationships. Again, you're like, "Well, holy crud. This is unbelievable." Talk about a metric-driven business. Ilias mentioned to you one or two items on the scorecards. I couldn't believe the SLAs on the scorecards. This is a risk-smart organization that's performance-based and accountable every single day, and they measure it relentlessly. We're already performing like we have to be in a risk-based organization.
Now we got to bring those pieces together and leverage the data we have to be more proactive. You know, and you know, earlier you said, look, there is plenty of green space here. The biggest opportunity is we have unbelievable potential, not only geographically, but also from a, you know, a TAM perspective. But more importantly is we got to partner with our, you know, with our Big Six and other payers, these 30 MCOs and states, and we need to help them solve where they have the biggest issues in crisis. We need to be good partners, and so we've got to think differently about. That's why I'm so excited to be here, is help the organization think differently about how they work with these organizations, not as point solution vendors, but as true partners organized around the outcomes of care for the population.
I mentioned this. I forget. Bob, you asked earlier about the expansion. You know, this is the example of one of our Big Six clients, right? We have every point solution, every capability with this client. They are a very important client to us. We still have an $800 million opportunity to expand capabilities with them. If you just look at NEMT, out of the 20 markets where they have Medicaid-eligible markets for us that we're only in 4 of them, and we're doing great work with them. We've had conversations. They want to move. They are desperate to move to have one NEMT company. We are uniquely positioned because they now see this and how we can package these services and start moving along the value-based curve with them, and they're adamant about doing that.
Think about the level of conversations we're having within leadership now. It's not a vendor conversation. We're talking about having significant impact on the outcomes and the quality of their members, and they see it now, and they believe it, and they want to work with us to do that. For me, you know, as the revenue guy, you know, where's the low-hanging fruit? Where do we get started? Where can we really take advantage and really have a huge impact on the market? If you think about the duals population, it's about 12 million members today. It's growing almost double by 2025, which is huge. It represents today about 5%-10% of the, you know, of the Medicaid and Medicare marketplace or members, but it represents almost 15%-20% of the actual spend.
These are high utilizers that are highly engaged and highly need our services, you know, at a pretty extensive level, and we can have a huge impact. Each one of these members conservatively could be $20,000 a year to us. That gives us a market opportunity of $5 billion-$20 billion just in this one segment. But most importantly, it's a leverage point, a fulcrum to really expand our capabilities and our expansion of our. You know, we got about 15% of our revenue today from MA. Huge opportunity to move into value that we influence Star Ratings. You saw the NPS scores from our home division. Unbelievable. If they can capture that in their data, boy, would that really help their Star Ratings, right? For us, if you think about the growth in supplemental benefits, we are in the right spot.
This tells us that our services are growing as it relates to expansion of supplemental benefits in MA. A little bit of a delay in a lot of this, like you think about the CMMI program, you know, with the AHC. It got delayed, right? You know, it launched, it got delayed with work requirements and then the pandemic. We need to be front and center. We are the one organization that can say we can bundle SDOH, take risk, improve outcomes and performance for your organization. Huge amount of opportunity and upside in the MA side of the business. With that, I want to transition to Robert. Robert obviously, as mentioned earlier, is just a wonderful asset, and I'm so proud to be his partner now.
You know, Robert was very influential in getting codification of NEMT services and making sure that we were well-positioned to be the leader in that space. As you all know better than anybody, working with states is unique. It's a special skill set. He's a special guy, so I'll let him come up.
Special. I'll take that. Excellent.
I couldn't resist.
No. Brett kind of set this up right. The focus up to this point has really been on the commercial side of the business, but I'm kind of here to talk about states, which as he alluded to, a completely different animal requiring a fundamentally different approach, right? For the last 12 years, since I've been with this company, we've experienced tremendous growth. It's really been a product of our focus on developing key relationships with government officials, lobbyists, and industry groups throughout the country to further the company's business interests, right? Predominantly focused on NEMT. It's that infrastructure that is so critical as we seek to shape our future around SDOH and bundled services with states directly versus payers.
Now, as the slide indicates, roughly $300 billion a year is spent on home community-based services, with 57% of those dollars coming and flowing from Medicaid. State waiver authorities, as Brett alluded to earlier, provide ModivCare with a tremendous amount of opportunity to expand not only NEMT, but our bundle capabilities as states really, really lean into value-based care and value-based purchasing models, right? I think you alluded to this as well previously. With the elimination of work requirements from the Trump administration and the COVID emergency orders kind of going by the wayside, states are finally in a position to focus on investing in those key SDOH services, to focus on enhanced access, improved health outcomes, and ultimately, the main goal here, reduce total cost of care. But the point here is not really the opportunity.
While the opportunity for growth is strong, the real key to our success here is gonna be our investment in public policy and lobbying with the right states to ensure the right investments in SDOH programs are made so that we are in a position to capitalize on those. Speaking of public policy, right, and lobbying, we have a tremendous growth opportunity in our core NEMT business, so let's not lose sight of that. On the state side alone, we manage contracts in 15 of the 31 viable state-based markets and have a very clear and distinct roadmap for growth, representing over $500 million in new opportunities through 2025. We are, as we speak, investing in our resources and the infrastructure to ensure that happens, right? A couple things here.
Key takeaways for me, and I think for everyone here, is that our size, scale, and long-standing relationships that we've been talking about this entire day with state governments really provide us with a unique opportunity. With the future of a core business being strong and growing on the NEMT side, we're uniquely positioned to leverage our relationships with states to expand our bundle capabilities and aggressively, really aggressively pursue those value-based opportunities that will further separate us in the market. We know they want it, they're telling us they want it, and we're uniquely positioned to provide it. With that, I'll kind of turn it back over to Brett and allow him to talk about what some of these pilots are ultimately looking to solve for and how we get from here to there.
Thanks, bud.
Brett's special too. Yes.
I am special. I know the actual code sections. ACA Sections 1905, 1914, and 1945. It's codified. CMS came out in January of last year and gave specific direction to the states of how they can move into SDOH and value-based care if the market is sitting there waiting for our set of solutions. That's why I'm excited. I've been doing this for a long time, as you probably can tell. End of the day, we need to start moving into really significant pilots with our payer partners. We need to be with them as true partners in the markets where they're having issues and challenges to be able to prove this out and build the capabilities around these partners. We've already got a couple pilots.
We got great results, and now we can build on them, and we're already having those discussions at every one of the Big Six organizations as we speak. From a timeline perspective, this takes time, right? As you move it, you gotta do it the right way. You gotta do it prudently. From a revenue perspective, you know, we get our pilots up and running over the next in 2023. We start moving into real risk, and we start receiving dollars in late 2024 and 2025. We've got a clear roadmap of how we wanna move along this continuum. You know, it's no secret of how organizations work through this process, right? Now, what we will never be is full premium capitation. We're gonna take a sub-premium capitation.
As payers allocate more dollars from clinical to non-clinical, we want that premium. We want that risk, and we wanna perform and drive results, and we wanna share in those results with our payer partners and our state partners going forward. Today, we are heavily involved in capitation, as we heard earlier with PMPM and performance-based contracts. We have the DNA and the skill sets internally. It's how we think as an organization already. We think about performance every day, and that's how we interact with our clients every day as we're working with them. We'll continue to move up this continuum, you know, as we move into, you know, a bigger array of value-based capabilities. We're not gonna stop. Today and tomorrow, cross-selling and bundling our capabilities, we're not gonna let off the gas pedal.
As Dan mentioned, the $3 billion is a low watermark. You saw what the TAM is for this space. You saw our set of assets. If you're not as excited as I am, you're missing something. We have an unbelievable opportunity to move along this continuum, and we're gonna do it in a really prudent way. We're also gonna do it in a smart way, and we're gonna do it in a way that adds real value to our partners, both at the state level and the payer level.
Well, thank you very much for giving me the opportunity to come up, Robert. Thanks. We're gonna introduce. You all know Heath already, our CFO. Now all the boring stuff comes up. Yeah. I'm in trouble later, Gina.
Thanks. Thanks for having me back up here again. The first thing you'll see here is there's a slogan, "No margin, no mission." It's actually. If you come to the office, you'll see that on my wall, and Dan's like, "What does that mean?" Well, it's actually at our core. If you listen to me and Jessica, no question there's a mission there, and the mission is key to us having this success. I think, though, great healthcare services companies need to perform. You need to have great business people as well. That's the. It's all connected.
It's a flywheel. You have a great mission, you get a great margin. You have a great margin, you have a better mission. It's at my core. I'll show you my tattoo later. What I'm gonna do here as well is, well, obviously Dan talked about the 3 and 3. $3 billion in revenue, $300 million in EBITDA. What I'm also gonna do is simplicity, right? You know, Einstein said, "If you don't understand it, you can't explain it simply. You haven't explained it simply, you don't understand it." Well, as all of you have been saying to us, that's what you want. We're gonna show our businesses, all the great stuff that we're doing, we're gonna break it down and make it simple for you to understand, and then again measure us on a quarterly basis with that.
A couple key takeaways you're gonna see here, of course, are strong, consistent cash flow generation. Profitable growth through 2025, 7%-10% revenue growth that's durable and recurring that we've heard about. That continued transformation of our strategy, which is gonna have us move into the home base. Again, this three and three is today based on what we have today. It's not including the data opportunities, nor is it including the value-based opportunities which are larger. The one thing that I've completely failed at as well, but that's on purpose, is that I'm giving a deck that doesn't make sense to present to a large audience.
What you'll see in this information that I think just got posted to our website, there's a lot of data and information that I know you guys are all gonna like. I'm gonna this one slide, though, right off the bat is something you've all seen many times before. Now just a few different highlights that I wanna point out here. This is where you see on the revenue side, growth. Growth and also diversity. NEMT used to be 100%, 69% now. 28% personal care and remote monitoring growing. And then you can also see, and Dan also talked about this when he came, $51 million in EBITDA. Now TTM basis, all these assets together on a pro forma basis, $225 million. Growth and diversity.
The next slide, and I'm gonna see people squinting up here and can't wait to read this. The next part, I'm gonna walk through each segment, and we're gonna give how we make money. Then there are gonna be a few slides after that that show our key metrics. How do we calculate our revenue? What are our costs? We'll get to a gross profit, and then we'll get to that ultimate adjusted EBITDA. I'll spend a little time on this slide because this is the one we get most of the questions on. What we will be disclosing, and you'll see here on the revenue side, we're gonna give you membership, and we're gonna give you revenue per member per month. That'll allow you to really understand it.
In addition, we're gonna give you those two numbers, so all the discussions we've had around our contracts, 85% capitated, 15% fee for service, half of that 85% is kind of pseudo capitated. Well, now we're giving you the metrics on a quarterly basis, and if there's any change in that, we're gonna explain why. Now you understand, and you'll see here, you can kind of see into 2021. For us right now, 30 million members. In 2021, we had 4.13 PMPM. First time you've ever seen that number. All this will lead to, when we start doing this, we're also gonna give you this long-term guidance. The three and three, but specifically for NEMT business, the revenue growth is gonna be 7%-10% on a CAGR basis.
Moving down to the transportation cost side, a lot of questions around what is utilization, and then what are your costs. We're gonna be providing that. Specifically under the 2021, we haven't done this before. In 2021, we had 7.6% utilization. Our cost per unit was $36.34 per trip. We're gonna be giving that on a quarterly basis. What that results in, you can see here in 2025, we expect utilization to go up to 9%-10%. I'm gonna get into that. It's an important point that I know you'll ask me about. Where healthcare is today with what COVID has done, with what services like telemedicine have done, with mix changes, we're gonna be at 9%-10% utilization, which results in about a 71%-72% cost.
Just moving down, there's a lot within this under other services as well. With our leverage, with our cost optimizations that we have done for the last couple years, we're gonna get scale, and we'll be at that 11%-12%. All this will result in us getting to a margin of 9%-12% margin on a recurring basis through 2023 and 2025. Now this is how we made money, and I want to give you some confidence on some of these metrics, specifically on membership. What is membership gonna be? We have three, four different things that I want to talk about here. First, the existing health plan growth. It will be that 3%-4% range on a CAGR basis.
In addition, we're gonna sell, and we're gonna sell both on the MA side, and we're also gonna sell on the Medicaid side. The other item, which is probably gonna be a question here, which we're all knowing about right now, we know that there's redetermination on the Medicaid side. We're gonna grow above that. We know that it's gonna be about a 10%-15% drop, and for us, we have that accounted for. As you can see at the end with the membership growth, that we will still grow membership about 3%-5% through 2025 on a CAGR basis. The other item, there's a lot here, and I know you guys are squinting to see this slide and look forward to seeing the deck, but this is the discussion, and really around NEMT, we've talked about it a lot.
There's been a lot that have happened in the business over the last couple of years to show the durability and rigidness of our earnings. This will give you some more data to understand that. This is really the overview on what we think utilization's gonna be. We've provided historical context to what utilization was and what we think it is today and what it's gonna be in the future. You can see here on the top left-hand side that utilization in 2019 was close to 13%. It won't be there anymore. It's gonna be right now, in 2021, it was up about that 7.6%. It's gonna land in that 10%-9%. But why? Again, I talked about this a little bit before. Virtual visits.
2019 were about 3%. They've grown 5x. Another example with our data, right now our mental health visits are down about 35%. You put that together with what has changed because of COVID, and we mentioned this a little bit, our adult daycare is down. BIPs down, but those BIPs really matter because now, and if you think about it, not as many people are going to adult daycare 'cause they're staying in their home with their family. All this together, and by the way, it's not just us doing this. We spend a lot of money on consultants and analysis and data people, we feel really good about where utilization's gonna be at that 9%-10% range. I think that covers most of it.
The one other thing that is an important part, and we'll be talking more about this around utilization, our contract mix has changed. The bottom chart shows that. Pre-pandemic, we didn't have a lot of MA. Now we have more, and that's gonna continue. The point of all this, we haven't given you this data before. We're gonna give you this data on a quarterly basis so you can understand how we perform every quarter. In addition, the expense side, another important item. I'll focus on one part here. It really is the top left corner, which is our cost per trip or our unit cost. You see historically where we were, $32 and down to $31 in 2019. Today, 2021, $36. We know the reasons why. Labor, fuel, just general operating costs.
You can also see in this model, we actually don't expect it to come down. That's in our numbers today. Our financials today show this large cost that we have. However, the initiatives that we are doing, and we talked a lot about, Ilias talked about this, the multimodal strategy that's really gonna result in improved member experience. The other thing that it does for us, it actually reduce costs, and it kinda makes sense. If someone's gonna drive themself or have their family member drive and get the IRS reimbursement rate, well, that's anywhere from 5-10 times lower. Our strategies around mileage reimbursement, public transit, and what we're doing around reducing costs just in general, I'm estimating in our model right now that we think just based on cost that we could decrease cost by 3%-5% a year.
I think very conservative. Well, we're gonna offset that with these initiatives, and if you did the math on these initiatives, we actually can get a benefit. But in the model right now, what I'm showing you is that we expect that unit costs will be about flat to where we are today. All right, so that's NEMT. A lot to talk about, and I know you'll be talking about us a lot, you'll be talking after around how do you update your models. The PCS business, very simple business, hours and cost. So again, on a quarterly basis, we'll be telling you what our hours are, what our rate is around that, our reimbursement per hour, and then we'll also talk about what it costs, what costs we're flowing through, excuse me, that we're paying our caregivers.
With that'll result in 7%-9% CAGR through 2022 and 2023, through 2023 and 2025. Our fixed cost leverage that we will get here in the bottom will be 11%-12% that we start getting scale on. All this will result in 10%-12%. The point here again is that 10%-12% we're gonna show you every quarter with the hours and rates and costs that we give you. Again, the believability of these metrics. Historically, you can see here versus COVID, we have a 20% chance just to get back to pre-COVID levels, excluding the additional items that we are doing today and tomorrow around recruitment.
The point is our growth rates that we have here, very achievable in the context of if we could just get back to where we were pre-COVID, those growth rates would be exceeded. A bridge from 23 to 25. Reimbursement rate, as we talked about before, 3%-4%. Normalized hours. Another 3%-4%. Then if when we do the de novos, open up those locations in those areas where you don't have, we're just estimating a small 1%. A very reasonable rate of 7%-9% revenue growth for our PCS business. Remote monitoring, also a simple business, but we'll be starting to give you more metrics around what are the contracted rates, what is the variable cost.
There's a lot within here, but I'm just gonna focus on some of the metrics as well. The 14%-16% CAGR per year is what we're estimating. The other item you'll see in the service expense, and I wanna point this out because I think it's important. In 2021, we have service expense that was 34%, and you're going up. We're estimating we're going up, so that's in our model. But why we're doing that, and if you heard Jessica, if we invest, the amount of just investing a little bit more into that business, the bang for buck we get around growth, we're gonna get. Point is, we're doing it, we're investing. We're not just doing it to cut costs. We're gonna be investing, and we're gonna be increasing our service expense around that.
What that results in, again, is strong margins of 34%-36%. A little more detail. How do you do that? What is your revenue bridge for RPM? Our base business right now, just for the markets we're in, growing 6%-7%. Our new PERS contract wins about 4%-5%, and then the new E3 and Vital wins another 4%-5%. That's an easy bridge to the mid-teens revenue growth that we have. All right, where are we? Well, how does this all come together? Where are we today? From a consolidated outlook, everyone, your first quarter, where are you gonna be for 2022? We're halfway through. Our 2022, this is gonna be consistent.
I think all of our great analysts that are in the room are doing a good job right now. We're basically just confirming everything that you guys already have out there, but I'm saying it as guidance, so you guys should be happy for me. You guys have been asking for a while. Our revenue, $2.35 on the low end, and then $2.375 on the high end. Adjusted EBITDA, $203-$213, and you can see the related margins. The other items that we built up from the previous slide, getting to 7%-10% growth on the revenue side at that midpoint 10%.
A very reasonable and understandable organic growth without acquisition, without value-based care opportunity at the end of 2025, the $3.3 billion. Rightfully so, the next question's around the balance sheet. What's happening with the balance sheet? On the top left, just to explain it a little bit, in 2022 estimate, adjusted EBITDA of around $208 million. We know cash interest, taxes, CapEx, that adjusted free cash flow gets you to about $100 million a year of adjusted free cash flow. Excuse me. We have those strong credit metrics, and as noted earlier, very low capital requirements from a CapEx perspective. Then the other item that I wanna make sure I share with you today is around our contracts payable.
I've consistently been saying that we're going to be paying off $100-$125 million. We've appropriately negotiated predictability on that, and we expect to pay that $125 million off, ratably and kinda throughout the rest of this year. Where does that lead us from a leverage perspective? At the top right. 2021, we were 3.7. Today, an estimate at 2022 because of the great assets that we bought, we're at that 4.4. Then you can see from there, if we don't do anything else, we're gonna delever. Strong cash flow that we could decide to delever. '23 time, anywhere from that 3.5-3.8 range.
Then the other item, our 3.0 target is very reasonable, and you could do your math to see how quickly we can delever as we continue to generate cash flow. Again, durable, strong cash flow with a balance sheet that has this ability to delever, the flexibility to be opportunistic, strategic capital allocation is what we'll be able to continue to do, which leads me to one of the last slides. From a capital allocation perspective, what are our priorities? You can organic growth, we can do it now. Our best dollar used is to grow organically. We will continue to do tuck-ins. Of course, in this space, there's a lot of opportunity.
We're inquisitive, we're smart, we're always gonna be close to how we can think about anything broader, and share repurchases and debt repayment are always an option. The other item on this page, this is illustrative, it shouldn't be unreasonable by in 2025 or sometime in the future that our home business is 65% of our revenue and mobility is 35%. It's not that mobility is not important, it's not that we're gonna grow. The opportunity for us and the market share for us to grab and really execute on our strategy of being the premier social determinants of health company is in the home space too, so we think that could be close to 65%.
Finishing off again, by 2025, $3.3 billion in revenue, $300 million in adjusted EBITDA. Strong revenue growth, 7%-10% range with a margin expectation of 10%. I look forward to talking to a lot of you after. I can't say how proud I am to be a part of this team. Again, I look at these numbers. I'll digress a little bit 'cause we've done models up and down, and the hardest part we had is actually how to make sure that this is reasonable. Reasonable based on where we are with our current assets. All the stuff that we're talking about with Brett, we have a high-class problem, how to model those in and predict what the future's gonna be. Thanks for everybody coming.
I look forward to spending more time with everybody. Now I think it's the second tier of questions. Finish off questions on the financial side or anything else that you wanna talk about.
Sorry.
One over there.
Okay. This is the Q&A part two. Anybody have any questions in the audience? Let's go to Brooks, right up front.
Robert, should he be down here? Should not call you here now.
Should be in the cameras.
I apologize. Yeah.
One area that I think a lot of people are confused about is the contracts payable.
Mm-hmm.
Just talk to us a little bit about what that is.
Mm-hmm
how the conversations have been going with the
Mm-hmm
the people it's payable to, and how you view the ultimate realization of that liability.
The contracts payable are the result of the capitated contracts that we have. About half of those capitated contracts have a provision that we get paid on a PMPM basis. That's what we've been getting based on that. There's some provisions in there that say, "You can't take that to income." We actually stick it on the balance sheet. It shows up on cash, and it keeps growing and growing and growing. My point is, from a P&L perspective, what you've seen historically and what you're seeing today and in the future is gonna be very consistent. Modeling P&L makes sense. However, we got this cash flow that has come into the business.
The way it works, depending on the contract, we'll pay that back over 3 months, over 6 months, and then sometimes not until the end of the contract, which could be anywhere from 2-5 years. That's why it's been lumpy for us. We have some clarity on that now, which is why we feel really good about this large amount being paid back over the next year. Then within that balance, you're gonna see that continue to fluctuate, and we'll explain that on a quarterly basis, how it's fluctuating. 'Cause the contracts are operating as designed, so I expect it to go up, go down. The lumpiness gone this year, and it'll be normal kind of ins and outs.
I think I understand that.
It is a complicated thing to understand because really we have a lot of these contracts, and it's very state or MCO specific. The takeaway point again here is after this year, the $125 will be gone, and then it's more predictable in and out. Our cash flow will be easier to model 'cause it'll be more representative our adjusted EBITDA that comes on.
Go ahead, Bob.
Great. Thanks. Heath, thanks for all that detail and for all the work that you're giving us now to do.
Yeah. I know.
Appreciate it.
Yeah. Yeah.
Maybe just to help simplify on the NEMT side.
Yes.
It makes sense. Expect utilization to continue to increase.
Yes.
It also makes sense that it won't be quite as high for the reasons you stated.
Yes.
With utilization increasing.
Yes
What are the biggest components to enable margins to increase also? You had a chart with other OpEx down or whatever, but it was a little quick.
Mm-hmm.
So maybe just-
Yeah
You know, simplify, walk us through the costs coming out to offset, you know, the utilization increase and enable
Mm-hmm
Margin growth in NEMT.
Well, first on the utilization increase, and I should have talked this a little bit before. One of the questions that was earlier, we price our contracts either once a year or sometimes, depending on the contract, could be every three to five years. My point is that we're repricing contracts. No longer is it about, is it transactional. It's about your service, it's about the customer experience, about the investment you made in tech. We have seen consistently, and you know, when I first got here, rightfully so in the middle of COVID and even historically where this market has been, everyone's like, "What's happening on pricing? Are you getting beat up? Are you giving money back because of these contracts payable?" We haven't. It's been minor.
In fact, we've gone the other way, so that's a lever to pull, and it's happening today. This is an important point. I wanna make sure we bring this. NEMT is a business that our payers care about. One, because we know what it does for benefits. The other item, it's messy. It's messy and complicated, and they need a partner that can figure it out. Because if it's not done right, the actual CEO gets a call. The beauty of that is that we can get meetings with the CEO. Dan and Elias were with the CEO of a payer a month ago. That's where we learned, "Hey, when we get this right like we're getting it, this is why we're gonna give you the rest of the business." The other item, I was with a payer.
We were doing planning session on how to grow their MA business nationally. 8-hour working session with them. It was primarily around transportation. The other thing they said, "If we do what we're planning to do, Heath, we're just gonna give you everything else." My point there is that the relationships to the CEO level is enabling us to make sure that we increase the pricing.
If utilization was to increase by another 1%, the amount of negotiation that I need to increase on our contracts is in the single-digit range. First lever to pull, we're doing it today. That's why I feel really good. The other items which you see, well, we're primarily fixed costs. We're starting to get leverage around our fixed cost structure. The other item that Walt had talked about as well, and is a big part of what we've invested in the last couple of years, our technology's gone up. Well, we're gonna work through that. I actually expect that to come down about 20%. Then the last item, Project Storm and Lightning, you've been hearing it from Dan and the team for the last two years. Those have taken hold.
Real tangible cost savings, and the easy one that always talk about is what we've done in our contact center. Won from efficiency, reducing headcount, to BPO-ing, to containing calls and not having to talk to agents. All that together, which is why we feel really good about our margin range of that 9%-12% in the NEMT side.
Yeah. The other one that he referenced was ineligible ridership because that's gone from what, 6% down to 1%.
Yes.
It's somewhere between 0.5%-1% of, you know, we look at that 13%, and it's why is it gonna be 9, 10? Well, that's part of the reason, too. That was part of Storm.
Correct.
Follow up, Bob?
Sure. Kind of follow-up, and then I'll get. I forget, I think it was Robert referenced the opportunity of $500 million, and you've talked to it before.
Mm-hmm.
You know, new potential wins over the next few years. Maybe, you know, tying in some of the stuff you showed us today.
Mm-hmm.
You know, when you go to bid now.
Mm-hmm.
What are you bringing differently than two, three years ago? How has it changed, you know, winning percentages? Then what's the insight into that $500 million like, you know, rolling in? Or, you know, we've talked about one large contract that should have been awarded months ago.
Mm-hmm.
Months ago. Any updates on that or?
Mm-hmm.
All of those for the, you know, your new bid strategy, how are you received, and then insight into that $500 million, please.
You want me to go?
Sure. On the bid, our approach on NEMT is that all the automation we've done, the consumer experience, and our performance, right? Our relentless, you know, pursuit of better performance going forward with them, that's getting us, you know, the expansion opportunities. We've heard directly from all the big six is like, "We want, you know, one provider. We want someone we can go to for all these services and not have to go market by market." Those discussions will continue and give us, you know, great opportunities for future growth. I think the contract, I wouldn't.
What I would say is I think there's at this point in time actually a larger opportunity within our Big Six.
Yeah.
You know, there are accounts where we're the preferred vendor, and yet we have 44% of the market. There's—it's clear they would prefer us to have all of it. Again, I think we're in a really unique position now because of a lot of the other things we're bringing to the table. The fact, I think, you know, with Ilias and others, you know, we've resolved a lot of the issues. You know, it's—I don't wanna underestimate this, but, you know, when Walt got here, I mean, it was—we had a 30% error rate on our reports. It was just like every week we get a message from United or Centene, like Humana, Anthem, like, "Oh, my God, what are you guys doing?
I got another, you know, X number of reports you've done." I mean, it is Walt on a monthly basis, but that's by and large gone away. That took us a long time to get there. The encounter data information, you know, that we had not made as much progress on. Well, that's largely behind us as well. You know, the reason I bring this up is all this stuff adds up. You know, the service levels at 97%, it adds up. It allows us to say, "Hey, listen, we're ready to have that broader discussion now, and we're not just chasing our tail." Because when I got here, we were chasing our tail. We were just running around trying to, you know, hit one whack-a-mole after another.
Anyway, that's what I would say, Bob. What does that mean? Well, if we're 60% now payer versus 40% state, I actually like that because I think there's significant opportunities for us at the payer level. I think those relationships, because they tend to be a little more strategic at this point in time, how they're looking forward and combining these services is I think broader at this point. You know, I think that's gonna be a real benefit to us. You know, the state side, we go through all these RFPs, and again, we're in a really good position.
In most instances, we have those existing relationships, or if there is an RFP like there is in a couple other states, you know, we're in a good position to win those states. There's a couple of those coming up over the course of the next couple of years.
Yeah. We're very focused on process. We know when all the RFPs are coming out, we know when the renewals are, and we are now engaging much earlier and having an attack plan of how we prove performance and how we look at, you know, ModivCare differently than an NEMT business, right? That's really resonating. We are, you know, we have the entire roadmap for the next two, three years on every renewal, every RFP that's coming out, you know, for an NEMT perspective, both state as well as MCO.
You wanna say anything more about that, Rob?
Let's go to Jack at Jefferies.
Thanks, guys. Wanted to dive in on a couple components of the growth strategy. Maybe the first one on the dual-eligible population, $20,000 per year revenue potential, it's a pretty big figure. Could you just disaggregate.
Sure.
What the build is to get there and what the different components are across the offerings you have?
If you think about the biggest piece of that is gonna be PCS and then monitoring and NEMT along with meals. That package makes up more and the biggest piece of that is on the PCS side, on the personal care side to get to that $20,000. The reason we put all four of those pieces in there is that population, 80%, you know, you saw the growth of those benefits, they require all four of those components. Again, it could be as high as $36,000, and we're being conservative at $20,000 per member per year. That's a good question.
Got it. That's really helpful. The second one, more on sort of greenfield opportunities, and then I'm thinking to your NEMT business in the mix of the actual rides. We're seeing risk-taking providers along a variety of spectrums, one of which being kidney care that's moving really, really quickly, with, you know, one of those companies being right across town here.
Yep.
Is that potentially a greenfield opportunity you've thought about is direct contracting with at-risk entities rather than the plans themselves as you look at specialty areas like kidney care where the, you know, the PMPMs are very significant, and there's a lot of dollars that you can use to attack and save money?
Think about United, right? I mean, how much of their MA book the risk is already fully delegated to Optum Care. We're in those discussions, right? Those large risk-bearing entities out there, even on what we'll call, you know, an acute setting like with renal and dialysis, right? We're having those conversations with those major players, including the one you mentioned that's here in Denver about how do we partner with them better. If they're at risk, how do we actually partner with them to help them improve their performance so we can participate in that. It's a great-
One last one that I'll sneak in just on the structure of the value-based contracting as you move forward. It sounds like you're trying to sort of build a SDOH benefit that you would then sit as a benefit manager.
Yes.
What's the thought process on how to potentially be rewarded for savings that happen outside of that ring-fenced bit of spend, right? Because obviously.
Yeah.
-you showed all sorts of great examples of how even if you're not actually initiating the clinical intervention itself, you should-
Yeah.
You know, you're probably the reason that there are the savings there. What's the thought process in getting there from that channel?
Yeah. That's a great one. That's part of what the pilots are for because what we need to be rewarded for, and we've got to prove we deserve it, is getting rewarded for what's improving on the clinical side of that premium, right? I'll give you a great example. The evidence-based medicine is clear that if for these high-risk, high-need Medicaid patients, if they can get to their primary care physicians at least twice a year. Those are the ones that are going to the emergency 12-15 times a year, we can reduce it to 2. Think about that. What's the major reason that they're not getting to their primary care? One of the biggest reasons is transportation. They can't consistently get to it.
In my prior experience, when we sat and looked at the number one reason for cancellations or no shows, it was transportation every time. For us, we can have a huge impact. Think about the personal care business in home monitoring. If we can intervene very early, think of CHF, right? If they're on the scales and we start to see some weight gain, it's not the puppies this time, but it's real weight gain, right?
We can intervene and call them up and say, "Hey, something's going on." It may be a dietary thing, it may be, you know, social isolation, they just need some coaching, but we can make sure that member gets to the right site of care versus them crashing and calling 911 and ending up in the emergency room and having a 3- or 4-day stay in the hospital, right? Our job is to get them to the right site of care. The biggest challenge, if you think about where risk-bearing entities go, the one thing they're focused in on is right-sized care, right? Is getting it from the expensive to the appropriate level of care, and we can play a huge part in that. We can own that navigation, that care management, you know, component of it.
Excellent. Any other questions? Jess, up front.
Mine's very quick.
Mike's coming, Jess.
On the PMPM pricing in NEMT.
Mm-hmm.
How does it differ between Medicaid MCOs, Medicaid state, and Medicare Advantage?
Yeah. First, probably the biggest driver is the type of service we're providing. In certain states, there's just a mix issue. If there's a population that is heavily adult daycare, it would be X. If there's a population that needs a lot of stretcher ambulance, it'd be Y. The level of service is primarily the main driver for what that PMPM's gonna be. Then after that, it really is either relatively consistent depending on the type of contract we have. If it's full risk contract, we're gonna get a higher PMPM. If it's pseudo, a little bit lower. It really is then you layer on the risk discussion after that. Level of service, risk, in general, then it's pretty consistent.
It hasn't been in the past, but now it is because we're negotiating more appropriately.
Any other questions? Oh, I think Zach has an online question in the back.
The one thing, sorry, Jess. I'll say, here's what we're doing now. We're giving you the total contracts together. Every quarter, we're gonna give you that average number, which we know is not easy to understand completely. When it changes, we're gonna tell you why. You're gonna see the total number and understand how to model our business and the fluctuations that we have. We'll say, "Oh, it's because we picked up a new contract or utilization changed over here." The transparency around how we're performing will be more clear with that metric and other metrics that we just talked about.
Another question from Michael Petusky. How has the change in the interest rate environment impacted your thoughts around capital allocation?
I would tell Mike, I mean, we look pretty smart right now. We did those debt deals. I would say that, and I know that we're saying that a little facetiously. I would say we really don't. You know, from our standpoint, our goal is to get our leverage ratio down. We are not planning to, you know, use debt. You know, we were aggressive with debt because we knew that. First of all, we were in a good position because we didn't have debt previously, and that, you know, we wanted to move quickly, and we felt that, you know, raising equity wasn't a good option. We don't.
The things we're gonna be looking at, by and large, we believe we're gonna be able to pay from our balance sheet, and that's our plan. You know, it's no different than what we did with Guardian, right? We paid that out of our balance sheet and we would suspect that the deals we're looking at right now, our balance sheet is more than adequate for us to acquire those entities.
You know, the follow-on question probably will be, so interest rates are the next recession, right? That's probably on someone's mind, recession, right, which is still not good for our country. For us, though, really, recession drives people back into Medicaid. Recession for our population that does our work, they need to go back to work. Unfortunately, in a recession time for the country, for us, can be beneficial from what it means to us in the Medicaid population as well as getting our hourly people back to work.
Any other questions? If not, we'll wrap up this session and let Dan close the meeting.
First of all, again, I just wanna thank all of you for being here today. I appreciate your attendance in person. As you probably can tell, there was a ton of work that went into this. This is the first one with this team, so I will say if you've got feedback on things that we can do better, we're certainly very open to it, and ultimately, you're our customers, and the voice of the customer matters for you, too, and we wanna make sure we're meeting our customers' needs as well. Hopefully, you also got a sense of the excitement we have around this organization.
We are really a really unique company that kind of has all the right stuff to do pretty extraordinary things and, you know, ultimately alter healthcare for our country and address, you know, some of these persistent health inequity issues that, you know, for those of us who've been in healthcare know that exist. We know that zip codes matter more than genetic codes, which I think should be embarrassment for all of us. You know, we have adjacent zip codes where life expectancy is 15 years less, and the only thing you can attribute that to is they live in that zip code. That person lives in that zip code. I also think I hopefully got a sense of the quality of people that are on this team.
This is a really extraordinary team, and a lot of these folks, this is the first time they've presented in front of investors, and I think they did a terrific job. I think what you see is what you get, and these are folks that are, they're obviously very committed to really doing exceptional things here. They came here in many respects because there was opportunities to do extraordinary things above and beyond what has been done in healthcare. I would also say we also know that, listen, SDOH, the SDOH flywheel is only accelerating. You know, when the group that spoke about Biden's healthcare plan and what he was gonna do, the first thing out of their mouth was SDOH.
First thing they said. We've gotta deal with health inequity, and we've gotta deal with the social determinants of health because that 11% that's driving 60% of the cost is not getting it done. It's not working. You know, all we do is see cost increases with no discernible outcome improvements. So we know the model that we built doesn't work. That's, again, where SDOH plus clinical comes in. I think we're in an extraordinary place to do that. I think you're also aware the assets we've acquired were great. We did it quickly. We did it during COVID. You know, one of the books I love is Jim Collins' book on.
There's several, but there's one in particular that I love is Great by Choice. He talks about return on luck, and that companies that are more successful than companies that are less successful don't have more luck. They just take advantage of the luck they have. I think, you know, we have this window that we said, "Holy sh..." You know, I'm on tape, so I won't say that. Glad I caught myself. You know, we had this window of opportunity. We ran to it. You know, we ran to the roar, and now we've got this asset that's not like anything else anybody else has in this country. Lastly, we've got 32 million members. We manage 10% of the US.
Again, as you think about a company like us, well, we'll find one. We also know the best is yet to come because, you know, data collection, data analytics, data insights, value-based care is the future. I think we've got a platform business that's extremely well-positioned to do those two things, which we know people are gonna award a premium for. They will award a premium for in multiples. If you don't believe me, just talk to Brett in Cityblock. I, you know, again, another really good organization, but they've moved to this value-based care, and there's a multiple. They deserve it, and we deserve it. With that, again, thank you for being here.
I hope you all do come to where our office is, half mile from here, quarter mile. You can walk or you can take a bus. Like, what time do cocktails kick off?
5:45.
5:45. If you get there a little early, I'm sure not gonna be. Thank you very much for being here. We appreciate your attendance. Again, we would welcome your feedback as well. Thank you very much.