Welcome back. I'm Jonathan Aschoff, Senior Biotechnology Analyst at Roth Capital, and with me now is Ontrak. We have CEO Brandon LaVerne and CFO James Park. So Brandon and James, thanks for joining. Thanks for coming over.
Thanks for having us.
Thanks for having us.
Yeah. So I understand that, you know, you've gone through quite a change the last year, when it comes to your product portfolio. You know, what can you tell us about that evolution?
Sure. It's been, you know, from where we've been to where we've become is-
Maybe start by telling people what you do.
Absolutely. So Ontrak, and I'll skip ahead on a slide here too. You know, Ontrak is a company that looks at the intersection between folks with multiple chronic conditions, and un or under-addressed behavioral health issues. So these people are high-cost members. They're impacting the health plan, usually north of $7,500 a year, average probably $20,000 a year. And we come in and try and address the behavioral health side of things rather than just the physical conditions. And we do that, and we'll get into some of the interesting facts of that. But ultimately, it's a sector of behavioral health that not a lot of people are treating and engaging in because it's these folks aren't seeking out care. They're likely not seeing a therapist, not seeing a psychiatrist.
Their anxiety is starting to keep them from treating, whether it's their diabetes or their COPD or CAD. And so they're not adhering to the advice that their PCP might be giving them, probably because of some anxiety and depression. But they're not seeking out that help, and so that's where we come in, to play. And so when we think about how we've shifted over time, before we were focused almost entirely on the financial value, the financial impact, of you know, treating this member. We've seen, and I'll talk about studies, but we've always had a big savings in cost. But we haven't had a lot of focus on the clinical value, the clinical improvement of these members, and so we've put in a lot of new assessments in place, and we've seen significant results.
You know, 40%, 50%, 60% improvements in folks on PHQ-9 or GAD-7 screeners after they've been in our program. We didn't have that a year ago, and we've put in all kinds of operational efficiencies and technological improvements to help ultimately our coaches do a better job once they see the member. But even backing up, help our engagement folks reach the member and actually get them to enroll, whether that's, you know, phone number adoption, whether that's best time to call.
There's a lot of AI infused all throughout the process, you know, starting from the identification with you know, our own predictive models that we continue to evolve to identify these folks, impute diagnoses for substance use or depression, and all the way to the end of, you know, who do we ultimately send the member to from a therapy perspective or a psychiatry perspective?
How are you different from other chronic care solutions?
Sure. So, you know, a lot of chronic care solutions today are very reactive, for one, or they're looking at members who are seeking care. So you see a gazillion apps out there trying to take care of behavioral health, you know, but those are members who already know they want to seek a therapist-
Right.
or want to talk to a therapist.
Yours don't have that initiative. You have to find them.
Exactly. We've got to find them. And the other thing is, just for clarity, is we are not treating diabetes as an example. We're not treating COPD. But what we want to do is make sure that there's no inhibitors into that. So whether it's, you know, bringing in... We focus on the physical and the behavioral health, but also the social determinants of health. That, you know, if there are issues out there for transportation or meals or any other inhibitors in folks getting to care, then we're gonna be addressing that through our coaching and setting these members up with the help that they need and with services that might be local in their community. And a lot of this is done because it's we have humans, right?
It's a human-centered approach, and looking at the member's, you know, personal situation and what their needs are. So seems like there's so many, you know, care management solutions that are, you know, whether they're purely digital, it's data-driven, which is great. There's nothing wrong with that. But some of them are missing that human connection as well. So we combine both.
Okay, so you've seen some recent expansions with you guys and what you do for key payers of yours. So what's driving them to utilize more of what you're offering?
Sure. So, you know, we just announced a couple of expansions with one of our customers, and they—we had a nice, you know, reset with them, I'd say, a little over a year ago, and really focused on quality, on delivering real nice financial outcomes for them, as well as clinical outcomes. And so as we've seen that progress, and that was at a high-cost threshold, you know, they ultimately agreed that let's move that down. Let's increase the number of members that we can serve. You guys are doing a great job. And so part of it is that we can serve members at all acuity levels now.
So we're having conversations about, you know, our Engage solution, which is one of the changes that we've put in, is taking our classic Whole Health Plus solution and taking all the core components of it and offering those independently. But one of the most interesting ones is our ability to now coach anywhere up the acuity chain. We don't have to identify folks. We don't have to outreach. Maybe there are folks who are lower acuity, who are seeking care, but just need a coach. They don't necessarily need to go to therapy. We have those solutions, too, and so it's opening up conversations that we can be much more of a player with the payers than just the 2%-4% high acuity folks with these chronic conditions.
So who are your biggest competitors, and who are you mostly pitching against?
So everyone's trying to solve for behavioral health, right? And a lot of the times, what we compete with is the time, the space, the vendor fatigue that comes with, you know, another widget coming in the door and trying to sell what they have. Oftentimes, you see a lot of folks, they don't have any kind of studies. They don't have anything behind what they've done. We have a treatment effect study that was published in The American Journal of Managed Care. And so that is something that we think adds much more tremendous value competitively. But then also, you know, it's we are unique in that we have physical health and behavioral health together.
And so we're trying to bring those together, and so when we're talking to health plans, we've got to talk to folks on both sides of the house because they're still very vertically aligned. And so, hopefully, that's changing, and we see a lot of the CMS trying to encourage that. But ultimately, we still have a lot of independent physical health, behavioral health folks at the payers that we work with, and they each have their own solutions that they work with. Care management, as we talked about before, someone's treating diabetes. That's not what we do. Someone's, you know, checking a box and saying that we, you know, support behavioral health, and we've created a network. Great.
We're making sure that the two can speak to each other, and ultimately, the member, at the end of the day, is gonna be able to work their care through the entire pathway.
Right. And when you do better identify for your clients, you know, here's a life you cover. You figured out they have a mental illness that's keeping them from treating their physical illness. Is the overwhelming majority of the way you save these payers money by keeping these people out of the hospital? Isn't that, like, the biggest-
That's the hospital and inpatient care are the two main drivers. We see, you know, improved utilization, good utilization with PCPs and regular provider visits on regular scheduled visits, by removing those, you know, crashing into the ER because they weren't taking their meds, they weren't tracking their disease properly, and then end up in the ER because something happened. And so when we look at our costs, which have been very consistent over time, we're saving, you know, you know, 40%-50%, you know, on a pre-post basis, and even if you look at a difference and different statistical study, we're saving a lot of money. It's been very, very consistent, and our data would show that, you know, a lot of that is the ER and the inpatient care.
So what do your clients say to you in terms of feedback, and is there anything iterative about that? Does it, did it, or does it change the way you do what you do?
I'd say it's really that whole person, right? We have so much that we work on with these folks, that they're coming from a different perspective and different health plans have different ways of skinning that cat. It's, you know, we're always competing with a care manager. As an example, we're not trying to replace care management in any way, shape, or form. So, you know, depending on what the health plans need and the payers need, we can evolve and grow with them. We can support super high acuity folks. We can support lower acuity folks.
We can come in the door and only identify people, and we're looking at various proposals with prospects on how we can just identify and outreach to people and send them to their own payer plans, and their resources, which is fine, too. And this is all new for us, that we didn't have the ability to do before because we only had one solution. Now we've bifurcated into quadricated, if that's a word, and into these different categories.
Okay.
We just, we're doing a better job of listening.
So you have, you know, a pipeline of people that you haven't, you know, brought on yet. You know, what's the progress like with them? What sort of covered lives numbers do these potential clients have?
So certain things I can say or not, since we're in where we're at. But you know, we just we have a very nice pipeline. We have a very robust pipeline. We've increased the staffing in our sales function to go after them more diligently and expeditiously and deeply. And we've got, you know, 20+ million lives in the pipeline. The bottom of the funnel has, you know, million-plus lives. And which, you know, we we, we've been talking about for a little bit, and we are very hopeful that those are gonna, those are gonna happen for us. It can be very transformative for Ontrak.
And so, you know, we continue to have discussions, you know, with the bottom of the funnel, the middle of the funnel, and the top of the funnel, and we continue to get new folks in every day. We, you know, new folks literally pop over the wall, and, like, they, they end up near the bottom of the funnel or at least one step up, sometimes in a matter of weeks. Even though our sales cycle can be much longer, we've had people jump to the front of the game.
So tell us how, you know, how you get paid. You know, how do they pay you? They pay you for what? You know-
James, want to-
Yeah.
Yeah, so I can cover that. So our customers, you know, are the insurers. Our fee is based on members that are enrolled in the program. So we don't bill out until we have members enrolled, and it's usually on a per month basis, per month of enrollment. We have, you know, flexible pricing structure-
Enrollment into the coaching plans.
Yes, into the whole health or in coaching, coaching sessions. Now, with the diversified portfolio, there's a fee-for-service component that on a per event that we can bill out as well. But mostly it's PEMPM, per enrolled member per month. Couple of our prospects have shown interest in a shared savings model, which is low upfront, and we share in the savings, with the customer on the back end as we are delivering the savings to them.
Okay, Brandon, do you want to talk about two recent study outcomes?
Sure
... we've had?
So it was about a little over a year ago, what we call the treatment effect study, and it was, again, published in The American Journal of Managed Care. We looked at 900 individuals who were enrolled in the program, compared to 900 who did not enroll in the program, but had very similar backgrounds and everything. And so that resulted in a $485 per member per month savings, durable over two years. And that's one of the, one of the things I love about our program is it's not just a quick fix. It's not a six-week program, where you're really not gonna change behaviors.... it's durable.
Just to be clear, the two-year durability comes after a one-year coaching period?
It's actually part. So the 1-year coaching, we look at 2 years starting from the time that they enroll. So we look at 1 year history prior to enrollment, and then we look at the 2 years post-enrollment, one of which is after they've graduated the program.
Right.
And so, you know, during that two years, you know, the payers are paying for one of those years, and then they're not paying anything for the second year. And we're still showing and proving, and to James's point on shared savings, there's ways that we can be flexible with how we get paid for those. If we're on a shared savings, great. If we're not on a shared savings, then there's no cost at all for those. And the second one that we like to refer to is, you know, looking at those patient-reported outcomes, and so we have... You know, we looked at GAD-7s for anxiety and PHQ-9s for depression. And with these screeners, we started a little over a year ago to, you know, give an initial assessment and then every three months.
What we found is that, you know, we're seeing upwards of 60% improvement in a clinical, clinically significant improvement, meaning 5 points or better, in folks who are going through our program. So it's not just that we're saving money, but people are reducing the severity of their depression and anxiety symptoms significantly as they've gone through the program. We just recently launched a new outcome called ReQoL, which is Recovering Quality of Life. So while I don't have any data to share yet, it's just another one of these screeners that we're gonna have that this one's tracked more frequently, and it'll show on 10 or 20 different questions, depending on which one we're using, how members are seeing different facets of their quality of life.
So we'll have more real-time feedback, which is ultimately how we can coach better, is giving our coaches real-time feedback into what is going on with their member, so when they're on the phone with them, they are, you know, giving them the best care possible.
Okay, and maybe James, again, you mentioned different ways that you get paid, you know, upfront more versus a piece of the performance. What are you pitching more these days, and how do you prefer to get paid by your future clients?
You know, that's a mixed bag. You know, we have a lot of prospects that prefer the shared savings model. Of course, that's the lower upfront and savings on the back end. You know, we prefer, you know, of course, the fixed rate 'cause we get the cash upfront. But interestingly enough, with the shared savings model, we actually end up generating more revenue, 'cause our savings end up being higher, or the portion that's attributable to the savings is higher revenue.
Yeah, it's proportionate with risk. And so for us, where we're at in our life cycle with these prospects, if they don't yet believe, even though we can show them studies, but if they don't wanna believe, great, we have the ability to give them shared savings and give them basically almost barely over break-even-type costs up front, and let us prove it out. But the key is flexibility, right? Depending on... We can price in numerous different ways, whether it's fee for service, PEMPM , shared savings, combinations within there, and then now with the different coaching and other aspects, you know, different ways to help reduce that vendor fatigue, and be that all source behavioral health solution for them.
Right. 'Cause earlier on, a large upfront commitment proved to not be the best way to go.
That's correct. Right. That was great from cash flow perspective, but, you know, ultimately, the ROI was, you know, wait and see. Now, while in that particular instance, our, from our perspective, the ROI was amazing, one of the highest of any of the customers we've had. But it still, you know, especially when you cross calendar years and things like that, you know, it makes it a little bit more challenging to continue to prove that. And so or at least over, you know, upfront when you're enrolling a lot of people. And so, you know, for us, I think a balanced approach is best, and so we don't lead with that. In fact, in that case, we didn't lead with it either. It was just an option that made financial sense at the time, for everyone involved.
But you know, we listen, right? And I say over the last year or two, one of the things that Ontrak's learned a lot is listening to the customers, listening to the feedback they give us. What is it that they need and want? They want clinical outcomes, we're giving them clinical outcomes. They want more data robustness, we're giving them data robustness. Insights into their members, we're giving them that. And so, you know, we had a customer who was on a shared savings switch to a PEMPM because ultimately it was costing them more money. And we obliged, right? That is, it's the right thing to do, and we don't need to profit off of, you know, risk-adjusted if it's not, doesn't need to be risk-adjusted anymore, so.
Right. Lastly, are there any financial metrics whatsoever you can share with us post the close of the third quarter that you know you obviously reported? And, given the raise that you did in the second half of last year, also the second part of that question is, how long will that cash fund operations?
Yeah, sure. The one thing I can share is, you know, over the past year or two, we've significantly improved our cash burn or even the cost structure, predominantly with our care coaches. You know, we're very person-centric in how we care for our members, so that was our biggest cost. With a lot of initiatives that we completed last year, we're able to increase the efficiency of our care coaches, which then, of course, decreases the cash burn. Our margins are doing very well right now, so we went from 30% margin to up to 60%, almost 70%. That's through the ability of the coaches to double their capacity, automated workflow improvements in how they care for the coaches.
So while we're still burning cash, we made a lot of improvements... and with some execution of the pipeline, we feel pretty confident that we can continue our growth.
The cash runway?
I don't think we've disclosed that.
Okay.
But, you know, at last September, you know, we had $9 million of cash. We raised $6 million in November, so that's all public. We're burning about $1.5 million at that point. We've reduced that slightly. So-
So, give you one, I'll give you another last question. Now, you know, can you tell people to what extent AI factors into identifying these patients?
Uh, it's-
-that are suboptimal?
It's huge. From an identification perspective, it's a big part. It's one of the key differentiators for Ontrak. You know, we have about 30% of the folks who we identify into our program have been done so through imputing a diagnosis of substance use disorder or depression. And so AI is 100% part of that process. And these are people who are likely to have these diagnoses in the next year. So when you think about the payers, you know, this is risk-adjusted revenue. And we've got some recent statistics also that show, you know, 25% of the members who are diagnosed after are new diagnoses after they've joined our program. And so that's just new money coming into the payers.
And so it's a testament to, you know, one, that we, you know, we're finding these members. We're actually engaging and outreaching and engaging to them, as opposed to them being lost into the system. And so AI is now infused all throughout. It's not just in the identification, but it's in the outreach. It's finding, you know, appending numbers. It's when's the best time to call. It's in the coaching, it's transcribing. So we're not diagnosing people with AI. That's a big discussion out there. But we're using AI to become more efficient and effective at how we treat the members, and so that we're targeting care. We are making sure that the members, you know, next best action is understood by our coaches, and so that they can...
Whether it's, you know, getting them into a therapy treatment, whether it's making a phone call, whether it's using a virtual assistant to go and ping them and say, "How are you doing?" Or to deliver them one of these assessments. You know, all of these now are conditioned on these factors about where this member is and how are they making it through their journey with Ontrak.
You're only gonna care to even look at these members if they're costing more than $7,500 a year to these payers. Do any of these payers, you know, shift that threshold for you, you know, their, their care threshold, or is it $7,500 for everybody?
So classically, where we think that everyone is, you know, has the appropriate skin in the game is at that level, so there's an ROI attached to them. Given our cost structure, much lower than that is gonna be harder to effectuate, you know, giving them, you know, 18 provider visits and 10 med management visits, and 52 weeks of coaching for a member that's not costing a lot of money. Now, one of the AI features we're looking at building is: how do we find those members who are rising risk, who, based upon their claims history, are likely going to cost more money next year or the year after, and what could we be doing in advance of that-
Right
-to help stop that trajectory? That's a tough sell, but the AI can help us get to it, and we just need to train the models to do it.
Well, Brandon and James, thank you very, very much for going through Ontrak for us.
Thank you. Appreciate it.