Go ahead and get started on our next presentation. Thank you again for attending Canaccord Genuity's Growth Conference. I'm Richard Close with Canaccord Genuity Research, covering digital and tech-enabled health. We're excited to have DocGo with us today. It's, you know, I definitely think one of the most interesting companies in our coverage, one of our focus stocks. A lot of investor interest for sure. And for the first time, we have CEO Anthony Capone to dive into the story. So, you know, before we dive into a lot of the details, Anthony, you know, maybe just give us the DocGo pitch, and then we'll get into your background.
Sure, yeah. Richard, thank, thank you for having us and having me here. High-level perspective, DocGo is probably the nation's largest, fully mobile medical provider, meaning that all of the medical care that we provide, which is primary, urgent, preventative-type care, is provided outside of the fixed four walls of a traditional healthcare institution. Outside of the hospital setting, outside of the subacute, outside of the nursing home, we provide that to people where they need it, on their terms, when they need it. That's a big, big difference, because majority of Americans have some barrier by which to get care, whether that's a socioeconomic barrier, whether that's accessibility barrier, whether it's just a scheduling and time barrier, and those are different barriers relative to urgent, preventative, primary, but lots of barriers when we break those down.
The focus of DocGo really is on serving the underserved. This underserved could be those individuals who are underinsured or homeless, it could be the individuals who are Medicaid, it could be individuals who are polychronic and have mobility issues. All of those are kind of the individuals that we serve. The key is that we use our large workforce. We have almost 6,000 employees, clinicians around the country, that are providing care either in someone's home, in a homeless shelter, in the back of a mobile primary care clinic, in a Dollar General parking lot. They're providing care where those patients need it across 28 states, the U.S., Canada, and the U.K. 70% of our business is what we call Mobile Health, which is where we bring care to patients.
About 30% of our business is ambulance transportation, where we bring people to care. We have the entire 360 of what a patient would need, which is whether we need to transport them emergently, or we can treat them in their home or where they need it. That's a little about DocGo, it's about seven years old, a little over seven years old, headquartered in Midtown Manhattan. I've been with the company since pretty much the beginning. The most important thing to understand is why all of that works, why we can scale so rapidly, at 30%, 40% growth year-over-year, why we can deliver care to some of the most, most difficult challenged populations, why we can do so with high degrees of efficiency and generating good returns for the investors that have taken risks on DocGo, is because of our technology.
That's where I really came in originally. When we started the company, I was our Chief Technology Officer. My graduate degree is in computational learning theory, which is a subset of artificial intelligence. All of the tech that we have at DocGo, whether that's that tech to distribute, disperse, dispatch thousands and thousands of people every single day to varying different settings across the entire globe, or whether that's the ability to pair together the medical necessity of a patient with the clinical competency of a provider, all of that is done with high sophistication, with our AI systems, in order to need as little people as possible, so we have as little error as possible to deliver as much care as possible.
You just reported on Monday, you know, very strong results. You know, what would you say is the biggest takeaway from the second quarter and, you know, updated guidance, as we, you know, entering, 3Q here?
I think it would be a window into the future and understanding the relationship between the two of our largest segments of the business. One you have is our government vertical, which is where we provide care for the underserved. We're usually contracting with municipalities, and we're treating tens, hundreds of thousands of people. I mean, just to give you a scope, DocGo has treated about 7.5 million people since we started the company. Connecting that government vertical back to our payer vertical, and we announced our massive care gap closure program. We've have over 73,000 patients that have now been attributed to us, that we're going out and closing care gaps for, like a diabetic retinal exam, your annual A1C, diabetic foot exam. It could be a long list.
There's about 83 HEDIS measures, about half of those we can actually impact. The connection between the two, which is a subtle impact when we, we announced our Q2 earnings, is that the individuals that come in through our government vertical, we have the ability to then continue to provide care for on a long-term basis. Many of our programs, when the individuals come in, they don't have a primary care provider. They're not getting treated for their preventable disease, or they're not getting preventable care for a decompensation of their existing disease. DocGo gets them. Every single day, we're treating thousands and thousands of people, and we don't have to pay for those. The biggest issue with usually acquiring patients is that you have to pay. You have a large customer acquisition cost to bring that patient in. We have none of that.
Actually, somebody pays us, the municipality pays us to treat these individuals, to treat the, the homeless, who are all eligible for Medicaid in most states, to treat people who are coming in, who are seeking asylum in this country. All of that coming in allows us to bring in more and more patients at a very rapid rate. Just in the one program that I mentioned, which was part of the reason why we raised our earnings, was a migrant contract that we have with New York City. We've already signed up over 3,000 asylum seekers onto New York State Medicaid through UnitedHealthcare.
Now because we signed them up, now we have the ability to become their primary care provider and treat their preventable diseases on a long-term basis, being able to eventually get this per member per month reimbursement, because we are now comprehensively taking their care. In that particular case, you know they're coming into the country with no primary care provider, and they have no health plan. Of course, they don't.
You're saying that you've transferred essentially, you know, from New York State to UnitedHealthcare in terms of their Medicaid contract with the state, or is that?
Yep.
Am I understanding that correctly?
That's right. United has that managed Medicaid contract with New York State, and so we have the ability to enroll them in United's managed care program. In doing so, we become their attributed PCP, and we can begin to provide care for them on a long-term basis. Even post this municipal contract or this person's existence in that municipal contract, we can see long-term revenue streams that come from it. This is the first time we're really showing how the municipal sector has long-term revenue opportunity in our payer vertical because it gives member attribution at no cost.
Okay, let's dig into the asylum contract a little bit, little bit more. Obviously, very political issue and whatnot. Just based on what you're saying now, you know, is it safe to say that, you know, the contract was $432 million for a 12-month period, I, I believe? You're not gonna recognize all that revenue, obviously, and you can get into that. The fear, I think, you know, or the confusion or fear of some investors on a contract like that, really dates back to, you know, where a ton of growth for DocGo came from initially, and that was COVID testing, right? That went away. You successfully replaced that. Should we have a high degree of confidence from the New York State contract that we're not gonna see a revenue cliff?
Yeah, I would say a high degree of confidence for a number of reasons. One is that you, you're not going to... Just look at the macro factors here. There's almost no chance that there's going to be federal legislation which solves this problem. Almost none. All you have to do is understand the, the dilemmas with each one of the solutions and know that it will not happen. It's certainly not happening before the next election cycle, but I doubt that it will happen ever. It's been 20 years since DACA, the last major immigration legislation. That means you're gonna have the same inflow, actually, probably more of an inflow coming into the country, which means it's going to be the responsibility of the states and the cities to solve it. We 85% of the individuals coming through this asylum contract are families with children.
Nobody's putting a family with children on the streets. It's not gonna happen. Just not gonna happen. Every day, every week, between 2,000 and 3,000 new asylum seekers arrive in New York. The volume increase is significant, and it takes two to three years today to get your asylum status actually adjudicated. This is a long-term problem, long-term problem, and they're in our care. Nobody's gonna just say, all of a sudden, one day they're in your care, and you're caring for all of them, and the next day, they no longer need care. That's crazy. I think there's a high degree of confidence. Even more confidence in the existing line of business with just New York, New York City, with multiple asylum-seeking programs.
We did this in large part because it gave us all of the credibility to win the Border Patrol RFP, which we've been working on for seven to eight months, and that's a five-year contract worth over $4 billion, that contract is. Almost $1 billion a year, that contract is worth. That one allows us to treat all the asylum seekers as soon as they come across the border in that 72-hour stint, and we've been working on that for a very long time. Now that we are one of the largest care providers for asylum seekers in the country, it gives us enormous credibility, and we have references from the city who handles the largest amount. New York City has 93,000 asylum seekers in it right now.
Wasn't the Border Patrol already awarded at some point last year, or was that a different contract?
Same-
I'm confusing.
Same one. There was some questionable behavior in the way that it was awarded, so it was protested, and it was tossed out, the person that awarded it. That actually worked to our benefit. At the time, we were very frustrated because it, it, you know, kept getting protested and this is a, this is a multi-billion contract, so it was contentious. Now that we've been able to resubmit it, and the resubmission, I think, we just submitted, and the, the award is supposed to come out in September now, and that is, we have all this expertise now. Now, when we resubmit our application, we've seen through our Arrival Center, you know, 20,000+ asylees of varying degrees of clinical ability and, and clinical, clinical competencies that we need in order to provide.
Our, our, our application is a lot stronger. Now, to understand the financials of the one contract with New York City, yes, it's $432 million. That's over 12 months. Of that, about $120 million are for services that are not core to DocGo, and we're not going to recognize this revenue. Like, the city has asked us, "Hey, we also need you to provide food." That's okay. Just a pass-through reimbursement. It's not healthcare; it's not what we do. We did it as a way to make it easier for the city to quickly expand and grow. Again, it's not revenue that we're going to recognize. It's just a pass-through cost, direct reimbursement, food, laundry, legal services, stuff like that.
The $300-ish million, which we will recognize as revenue, which is our core, is from now over to next year. That's a maximum awarded amount. When you look at how much we have actually attributed to our both guidance and backlog, we've taken in about $150-ish million, plus or minus a little bit there. We've increased our guidance this year by about $40 million, which is predominantly in large part due to that contract. We added another $100 million, which we are confident we're going to get in revenue from this contract. We just don't know the exact date, so it could be next year, Q1, Q2 of next year, or it could be Q3, Q4 of this year.
We're estimating about up 50% of the contract value we're gonna be able to bring in with high confidence, which leaves another $150-ish million of the maximum contract's value, which is really upside, which we very well could get. At the current growth rate of 2,000-3,000 asylees coming into New York City every single week, we will achieve.
Okay, just to be clear, of the, call it $200 million in backlog, announced on May 8th or something like I, I believe...
Well, it was about $325 in total. We increased it-
But-
-by 120.
Okay. like, how much of that increase from, you know, the new... From the old number to the new number is, is contract?
About $100 million.
Okay, $100 million.
Yeah.
Okay. You know, one of the things, you know, much of the investor focus and questions I get is on the Mobile Health business. You know, you talked about the government and all the opportunities here. You talked a little bit about the care gap, and obviously, your business is rapidly evolving, right? You've stepped in on COVID, now you're stepping in here on asylum. People get confused on what the Mobile Health business is, and, you know, we've heard in the past, is this home health? You know, that's really not accurate. You know, just talk a little bit about the different businesses. I... You know, we understand the asylum business and, you know, maybe some of these government contracts, but you also do Mobile Health for health systems.
You do, you know, the care gaps, for payers, some other stuff for payers. How should we think about the, the Mobile Health business evolving over time?
Yeah. First, I would recommend when you look at DocGo and you analyze it, it's not so much the focus on exactly what service, clinical service is being done, but more importantly, who is doing it. We look at ourselves much as a utility, so we build a very, very large, large workforce built on a very sophisticated technology stack of a lower-level provider, that's like an LPN, who, when they are doing the clinical encounter, is being supervised by an independent licensed practitioner, like a PA or an NP. That gives a significant cost savings and allows us to deliver care to people where normally the reimbursement would not allow that care. Now, that individual that's physically on-site is a jack/jill of all trades. They can do specialty care, they can do preventative care, urgent care.
They can do all of that because they're being supervised by somebody who is a specialist in that area, who might be an emergency medicine-trained NP, or a pediatric-trained NP, or a psychiatric-trained NP. They can give specialized care because the person physically on-site is a jack/jill of all trades. We think about ourselves like a utility. It's less about, Oh, well, I have this health system contract, which I'm gonna do transition of care for, or I have this asylum-seeking program, or I have this mobile clinic in the, in the Dollar General parking lot to try and solve rural healthcare for payers. It's less about exactly what the application is and more about, is the clinical service which is being requested of us, fitting into that simple product of a lower-level clinician on-site and a higher-level clinician off-site?
You're gonna see us continue to expand in many, many other areas. You may think, where is the focus? Focus is on, does our product work? Can the product of that clinical model be applied to whatever somebody's asking us to do? If the answer is yes, then great. Obviously, within marginal profiles, and then they protect our downside because our reimbursement model is not fee for service. We like fixed margins where we have the ability to predict. Somebody pays us per day, per team, per person. However it is, they give us that fixed margin because we don't like to take risk. When you see us grow increasingly, the most exciting part about what we announced in Q2 was that care gap closure.
Now as part of that same model, with that same clinical workforce, with that same product, that same clinical product, we now have 73,000 lives attributed to us, where we're gonna be doing those care gap closures. In doing those care gap closures, Our niche in this whole market is you have patients that are polychronic, who have not seen their PCP in over a year, which means they likely have mobility issues, they likely, they were not willing to go to the doctor. That's a wonderful opportunity for somebody to go to them. They're already... They have the largest healthcare wallets because they're polychronic. Average person is gonna be between $20,000-$30,000 per year in reimbursement for their kind of MA life.
We have the ability to then take those care gap closures, become the PCP on record for these thousands, tens of thousands of members, and then eventually move into something where we can take on increasing upside opportunity for delivering positive patient outcomes. That's the pathway, the vision for DocGo, is to start at this massive care gap closure with our very hard-to-build clinical workforce and take on the primary care responsibilities, more of the comprehensive care responsibilities, and then eventually get a part of the savings, which we're truly delivering.
Any thoughts in terms of the 73,000 that you have on care gap now that you can target, you know, what that number could be ultimately?
How many could?
Yeah.
Average for a managed care plan, about 20% of those individuals, have care gaps, and about 25% of an average Medicare plan, does not have an attributed PCP. That what is where I would say we wanna focus. We don't wanna focus on the whole thing.
Mm.
We wanna focus on those individuals who are the sickest, the most acute, who also are not seeing a doctor. We're not trying to go in there and steal a live from an existing PCP, where they have a good relationship and they're healthy. That's not us. We wanna go in and we want that live, who really is not getting care, and they are sick, and so we can impact their care the largest amount possible. You take somebody who and like, we, we announced the largest strategic partnership for our company with Fresenius Medical, right? That gives us access to hundreds of thousands of patients with chronic kidney disease.
If you take somebody who has chronic kidney disease, stage, you know, three, and you can delay their, their crashing into ESRD by six months, by one year, the savings are in the hundred thousands of dollars range, right? That's where we can impact, 'cause we can go on site. We have the ability to do their Remote Patient Monitoring and their Chronic Care Management, that preventive care program, so that they actually do not decompensate, and they can actually get healthier.
In the last 5 minutes that we have here, I do wanna spend some time on margin. You know, there's been a lot of focus on that, mostly in the Mobile Health business. You know, you've targeted 40% plus margins in Mobile Health. You talk about it's not utilization-based necessarily. You know, you have this rapid normalization program that you implemented in the first quarter. You're seeing some benefits there. You know, just talk a little bit about the process of the rapid normalization, what you've actually done. It's phase one, what's phase two look like, and how confident you can, you know, keep the 40% gross margins on Mobile Health long term?
Great question. In our Q1 earnings call, we talked about, you know, the reasons for margin compression was purely because of startup-related costs. Those startup costs are 'cause we ramp very quickly with our projects, and so as a result of that, we have higher overtime. We were a lot more reliant on staffing agencies. We were using things like rental cars versus leases, a number of things we iterated through, and we hit it hard. We instituted what we called our rapid normalization project, basically reducing the startup time from 120 days to 60 days, and we were super successful at that. We increased our margin by over 500 basis points from, from Q1 to Q2, and that's almost entirely attributed to the success of the rapid normalization project. The changes we made weren't one time.
It wasn't just like: Oh, we decreased the number of staffing agencies that we had, or people that percentage that we're using staffing agencies. What we did was we changed the relationship with them. Now we have the ability with those staffing agencies to convert a staffing agency employee to a DocGo employee in half the time. Thus, we've cut the time period by which we're paying a premium for that employee in half. We've also taken down what the rates are. We no longer pay for overtime with staffing agencies. It's a number of blocking and tackling items, one by one, that gives you 30 basis points here, and a full point there, and 50 basis points there, and that's how we got that 500 basis point increase, Q1 over Q2. We're not we weren't even done.
Really, even phase one of rapid normalization is coming to fruition, through Q3. We'll begin it in Q4, and we'll see the benefits in Q1 of phase II. Phase II, is, probably another few, few points, which are gonna be able to improve our margin, and it has a combination of factors that are related in large part to the staffing model that we have. The biggest component, that I would say in trying to achieve that, is also bringing in higher margin business. As you've seen in our investor presentation, you know, we, we are growing rapidly in the RPM and CCM space. That's Remote Patient Monitoring and Chronic Care Management. Hoping to have 50,000 patients that we're monitoring or managing by the end of this year. That business is even higher. That's like a 55% gross margin business.
As that becomes a larger portion of overall revenue, it will drive our consolidated margin up, and we'll start beginning in our Q3 earnings call, giving more statistics on where we are with RPM and CCM, and likely sometime in 2024, we'll begin reporting that as its own segment and operating income.
Playing devil's advocate here, if you have success in the Border Patrol and I mean, RPM revenue can grow, but, like, as a percentage of the overall revenue, if you sign big contracts in Border Patrol, it's not gonna be essentially that meaningful. How do you think about that?
Very good point. Very good point. You know, the biggest thing on there is staff. Staff is, like, 75% of our, our, our COGS. That's really what it comes down to. The Border Patrol, federal contracts tend to be at a higher margin right off the bat than a local municipal contract. That one, I'm not overly concerned about the margin profile there. I think it'll still get to the 40%, but even in that one, the reason why we are one of the only people that could truly do the Border Patrol RFP ourselves, is because we have this network of staffing agencies that feed into us, that represent over 1 million clinicians, we can rapidly start.
Again, those staffing agencies that we use are on those new contracts with those shorter conversion periods, so that we have the ability to get more accretion on every single employee that they give us. If we get that staffing agency employee, we'll announce it. It'll be a big deal. It'll come with, you know, its own original startup costs, but nowhere near on a per capita basis, per employee basis, the kind of startup cost that we saw at the end of 2022 and the beginning of 2023.
Well, I think we're about out of time. I didn't get through all my questions, and, you know, I think it's an interesting company. You know, most of the companies I cover have one growth channel, right? You got government, you have payers, you have providers, health systems, so a very interesting story.
Yeah.
Thanks for being with us.
Richard, thank you so much.