Good morning. Welcome everyone to the last day of the Stephens Investment Conference. I'm Jeff Garro, the healthcare IT research analyst here at Stephens, and it's my pleasure to have CPSI join us here at the conference, and specifically CEO Chris Fowler. So thank you again, Chris. Great to see you.
You bet. Thanks for having us, Jeff.
So I'll just jump right into the questions, if you don't mind. We'll see how much we can get through. You know, start with some of your comments that you made on the last quarterly earnings call, talking about your visits with numerous clients and prospects, and coming away with a couple conclusions, specifically that hospitals in your market either need to outsource their revenue cycle now, or alternatively, they at least recognize that there is some way they could improve their operations and finances by outsourcing at some point. So what are the key elements around labor, volumes, and reimbursement policies that are creating this situation for your end customers?
Yeah, and I would, you know, to add a little bit to the top, I think it's they either they've come to the realization that it has to happen today or it's going to happen in the next, you know, several years. And by that, to kinda quantify that a little, you know, The sites that are performing or the hospitals that are performing have staff that have been there, very experienced staff, and they're probably in the back end of their career. And so this kinda ties into the labor situation. So they're performing today, but there is an event coming where the staff that's currently performing the work is gonna retire, and there's no new talent coming into this part of healthcare.
You know, the provider and the nurse shortage is what gets all the headlines, but what's driving the demand for us is the lack of labor, or one of the stimulators is the lack of labor that's available, and secondly, the price of the labor when you get there. So, I think it's more than just the ones that are underperforming that have come to that realization. I think it's every facility that's out there has put this on their list of priorities, that this is gonna have to be something that happens.
But directly to the point, I would say, you know, with the labor, there's the outsized inflation that is, you know, creating huge pressure on the ability to collect the money and create any sort of margin, if at all, at the hospitals. And the volume. You know, for us, the volume, we haven't really seen any big fluctuations in that. There's obvious seasonality that happens, and that remains to be what we see from a volume standpoint. But I think the last piece of it, you talked about the reimbursement changes, is a dynamic that's really starting to put some pressure on the operations of the facility.
By that I mean our standard hospital has been propped up, may be the wrong word, but let's use that, but propped up by their Medicare reimbursements and traditional Medicare payments, which would account for somewhere around 60%-65% of their overall cash that they receive. You can say what you want about Medicare in the past, but there was always two things that would happen: you got paid quickly, and you got paid what you were supposed to be paid. You may not think it was enough, but you were those two things always came true. It was within 14-21 days, and if you were supposed to be paid 28 cents on the dollar, you got paid $0.28 on the dollar.
But what's happened over the last few years is the shift to Medicare Advantage, which is really the shift to commercial payments. And so what happens with that is the payments—the payment schedule elongates, and all of a sudden, you've got to start paying attention to what you're getting paid and making sure that you're getting your $0.28 on the dollar. And I think that's where we're seeing some of our hospitals struggle, because the claims don't go out the door and come right back in, and they're not getting all that they're supposed to be getting. And so there is new opportunity through that, through that dynamic.
Okay. Fascinating to hear kind of the other side of the shift to Medicare Advantage, 'cause you hear a lot about the positives of it.
Yeah.
I mean, you hear your fair share of criticisms as well, but a lot of companies look at that as such a growth vector, and here it creates a headwind for your clients, but an opportunity for you.
That's right.
It's, you know, a macro set that's fueling pipeline growth. Last quarter, you cited 20% year-over-year growth in the three-month weighted pipeline, and however, the pipeline isn't converting into closed bookings. I wanna ask what the catalyst is for conversion, and, you know, just how much of that is timing that you think will sort itself out? Lastly, 20% pipeline growth sounds positive, but I wanna check in if you're really happy with that internally, given that, you know, presumably, if not as much is coming out of the pipeline in closed bookings, that you'd potentially like to see more go in to the pipeline too.
Yeah, absolutely. So there's a couple of factors there. One, I would say, you know, we are, we are pleased to see the pipeline continue to grow year-over-year. Obviously, that's a tremendous leading indicator for us to have confidence in the growth opportunities for the company going forward. As we think about, you know, catalysts to push those opportunities all the way through, there's really kind of two different angles that we're going down, and leverage that we have inside of our existing customer base compared to the prospects that are not running our EHR. So as we continue to... You know, we had the work that we did several years ago about, you know, if we're going to be an RCM company, do we still have an EHR?
And we've continued to believe that as we stay focused on the community healthcare space, our ability to deliver on the EHR is gonna be, one, a benefit to that space, but also a differentiator for us as we continue to try to drive more of our RCM opportunities in. So with that, we have, you know, been very intentional about how we leverage the opportunities with our EHR customer base, with the RCM, and we have a program called nTrust, where we combine the two offerings together... and instead of our customers paying a flat support amount and additional dollars for new either licenses or subscriptions to software going forward, it all becomes part of a percentage of collections.
So what it does is it aligns our, aligns our successes completely together, so that if we're not successful in collecting the dollars, then they're not paying for the EHR as they would have been. It also aligns us from a volume standpoint, so that, you know, as their business goes up and down, so does ours. A great example of that is COVID. You go back a couple of years ago, their volume was virtually nothing. They were continuing to pay us the same flat dollar amount every month, from a support standpoint. So that's one of the factors. We've also leveraged some partnerships. You know, we're talking about Medicare Advantage a little bit a second ago, from a Value-Based Care standpoint.
You know, this is the ability for rural hospitals to really leverage value-based care is still a bit challenging. You know, one of the things that we probably see an opportunity in is how do we help them kind of back away from the picture a little bit because they're so focused on just the day-to-day operations. Our ability to help them be a little more strategic and take opportunities and find new money that's out there. So we've partnered with a company here in Nashville, i2i Population Health, to help be that catalyst for them from a value-based care standpoint.
So, and primarily focused in the Medicaid space, but they've also started creating inroads into the commercial payers and the Medicare Advantage, so that the work that's being done at the facility, that the providers are getting credit for that work through those value-based care options. So, finding additional programs that we can bring in as a part of the billing service for those EHR companies or for the EHR customers is sort of the catalyst that we're using to drive those deals all the way through.
Another piece on that, staying on the EHR side, you know, last year, I guess in my honeymoon period as CEO, I, you know, went on a big road tour, saw about 40 hospitals, and, you know, the one thing that we saw was we have, we have about 50% of our hospitals have been on our system for over seven years, which is great from a retention standpoint, but the thing that popped out was their utilization of the system of our EHR is about seven years old, which shouldn't be surprising to anybody. If you download applications on your phone or your laptop, you figure out how to use it for yourself right then, and then you really don't stay plugged into the updates that come.
So another hook that we put into that nTrust deal is an optimization service that we're going to be a little more aggressive with our customers, to hold them accountable to staying on the front edge of where our software is, so that they're getting the benefit out of that. So that's kind of the box that we're using for the EHR. And I think, you know, if you wrap around both the EHR and the out-of-network opportunities, you know, the acquisition of Viewgol is substantial from a price standpoint and a cost for us, and we're able to pass some of that cost along or cost savings along to the prospect while still increasing our margin.
So these deals that we've got in the pipeline, we've got pricing prior to the Viewgol acquisition, that we're now able to use, that lower price as a stimulant to see if we can push them over the line. It's... We're pretty excited about the responses that we're getting as they're seeing the new pricing coming out and what we think that's gonna be.
Very interesting. A lot, a lot of interesting stuff there. Maybe follow up on a few items. First is the nTrust model. You know, I think we've maybe heard less about that, the last few quarters, but you're talking about it as the first thing in terms of catalyzing conversion of pipeline to bookings. Could you give us a progress update on adoption of that model and-
Yeah.
where you see it trending in the future?
Yeah. You know, for me, you know, I would love for us to be in a world where our entire EHR customer base was in that nTrust model, and that's, that's the direction that we're driving to and continuing to build the strategy around. That's how our sales staff is gonna go out and push. We have had good progress this year, and I would say the pipeline growth that we've seen quarter-over-quarter and year-over-year is almost solely in that nTrust space. And the hospitals that I'm going out to visit are nTrust opportunities that are in the EHR base. And in our mind, you know, if you're an EHR customer, and you're interested in the RCM service, there'd be no reason for you to go to not combine the two.
And so part of it, and I know, you know, we've talked about our sales force and the work that we're doing there, part of it is getting our sales force comfortable with the idea of pushing those two together and making sure that our customers see the value. But I think that, you know, what you'll see in 2024 is the vast majority of the RCM opportunities in the EHR space are gonna be nTrust. I think we've got... And I can go back and get you solid numbers on this, but I think we're somewhere around 70 of our hospitals are in that nTrust model, and I would say 70-75% of our pipeline in the EHR space for RCM is nTrust.
So it's the thing that's becoming the straw that stirs the drink, for lack of a better term, all the EHR opportunities.
... Interesting. And I think, you know, maybe helpful to clarify for people, you've seen a license to SaaS-
Mm-hmm.
kind of shift in demand, and we should think of nTrust as a subset of SaaS?
Yeah, that's a good way to think of it. So with our, you know, installed customer base of over 600 hospitals, that the vast majority of those are in that license model, you know, there's really no, it's hard to take one of those customers with a $80,000 or a $100,000 EDIS or a clinic software opportunity to convert them to a SaaS model, because they don't necessarily see the value in converting all of that license acquisition that they've made to the SaaS model. But with the nTrust, with the RCM and us being able to get aggressive on the cost standpoint, there is the push for them to move to that SaaS.
So that's the direction that we're 100% heading, is using nTrust as the-
Mm-hmm.
as a, I guess, a crowbar to get that EHR customer base to a full-blown SaaS model.
Understood. Thank you. Another follow-up on something you mentioned there, the kind of optimization model. You know, my hunch is that might be modeled after what that big company in Madison does to offer customers a discount on their maintenance fees, software maintenance fees, to kind of stay current and follow some other kind of restraints. Is that the correct hunch, or is it a little bit different?
Yeah, I mean, I guess you could say they're kind of the bellwether in the EHR space, and so, they haven't made a lot of missteps. But to the point is, that's exactly where this goes, is that there, there's two sides to it. One, they're better EHR customers, which means our need for support is less because they're staying engaged and staying on top of the software and are better users. But secondly, when you look at it through the billing lens, if they're operating the system efficiently, then the information flows to the end more accurately and allows us to bill and collect better. And so it's kind of two sides to that. There's the...
It helps the support staff on the EHR side, but it also helps the billing staff because the information is coming through the system timely and accurately, because they're using the system appropriately.
Makes sense. Lots of positive feedback loops there. So maybe turn back to the bookings conversation. And, you know, we know year-to-date bookings have been impacted somewhat by the macro environment, but, you know, I would assume you had planned for better execution to start the year. Could you discuss what's worked and what hasn't from reorganizing the sales force last fall?
Yeah. I would still say, you know, we look at the sales reorganization overall as a success. I think what hasn't worked or what didn't work was our expectation that we would hit the ground running in January, and there would be no lag or a delay that we've seen. But what has happened is we have very successfully taken the staff that we've got that covers the installed customer base that the relationships have been developed. They've been on multiple visits to their customers now, inroads are being made, and it's still, you know...
There is a part of this where it's quantitative, and the numbers need to come out for there to be value, but there is definitely a relationship aspect of our business, and that cannot be denied or dismissed. And so it took that first half of the year to really get those relationships built, and now we're seeing kind of the fruits of that work, and I think that's another part of the pipeline that we're cautiously optimistic. We don't want to get, you know, too far out over our skis, but feel like we're starting to see a trend of this build, and that's where, you know...
It's coming off of the fact that we now have sales staff that understands the needs of their hospitals, understands the dynamic of the people, and how we need to drive those opportunities to really see that RCM opportunity going forward. You know, as far as other things that maybe could have worked better or, you know, that we can continue to press on, you know, I would say for us, you know, like any other business or sports or whatever, we're going to make bad draft picks or people are gonna, you know... We're gonna need to make changes in positions, and we've got to be, we've got to build that muscle of making that decision sooner rather than later.
That definitely applies in the sales area, because it is a what-have-you-done-for-me-lately position. While we try to be careful of making sure that, you know, we don't have too much turnover from a relationship standpoint, we've got to make sure that we've got people in there that are, you know, not just building the relationship, but also pushing the sales opportunities.
Understood. Another one on this front. So if we, if we look from 2018 to 2022 and round up a little bit, $90 million has been the high watermark for annual bookings. Structurally, do you think you have the resources in place to meet or achieve that level of bookings going forward?
Yeah, so there's a couple of dynamics there that, you know, I think with the work that we've done to change where the sales force is and what they're focused on to continue to achieve that number. But I do think as we look at the RCM opportunity unlocks, yeah, we're going to have to invest additionally to make sure that we're out there to get those deals. But talking about that $90 million and the staff that we have today, you know, one of the dynamics that's really changed is, you know, three years ago-ish, it was probably 70/30 EHR to RCM, right? And so now that has completely switched to where it's 70/30 RCM. And so where we've beefed up our staff is in that account role.
Those 21 client executives that cover the accounts is really where the big part of that opportunity is coming from in the installed base. We've kind of seen the net new EHR market soften, and so we've adjusted where the staff is based on that. I think the next opportunity for us to see expansion is in the out-of-network or the non-CPSI RCM deals, and how we see that market continuing to convert. You know, that's conversations that Don and I have weekly as far as where the pipeline is, where those opportunities are. Are we able to make sure that we're getting in front of enough? Or back to your point, are we pushing enough in the top to see it come out the bottom?
And then I think the last piece to that is just paying attention to what's going on in the EHR space. Like today, you know, and we've said this, this is not a surprise or shouldn't be a surprise, you know, we are not banking on the EHR growth to be a driver for the business going forward. We want to kind of hold serve there, and convert that market to the RCM, but right now, it's not—we don't see that as a big sales, a big growth driver going forward. Now, there's a couple of dynamics that may be coming that may drive some opportunity there, and based on that, we'll adjust the sales force to capture what opportunities there are.
Interesting. Interesting. And guess we'll follow up a little bit on, on mix. You know, thinking about EHR bookings, you know, pretty stable around $40 million for a couple of years in 2021, 2022. And, and then we kind of look at the trend this year, it's probably closer to $30 million-
Mm-hmm.
In EHR bookings for 2023, I think is what we have modeled. So is $30 million kind of the new normal, and is there RFP volume and pipeline activity to support at least that level of bookings annually, if not a rebound?
Yeah, I think there's—we have pipeline activity support that level. And I kind of alluded to this a second ago. I would say you know, trying to read the tea leaves of what's going on in the market right there, there's a couple of things that we look at, maybe we would say... I wouldn't go so far as to say cautiously optimistic, but we're paying attention to. And obviously, there's quite a bit of disruption in who the players are and, you know, what's going on with the other EHR companies. It you know, there's been some acquisition, consolidation, so the faces have changed a little bit.
You've still got, you know, several hundred hospitals that are with vendors that I would say are not necessarily focused in the community space, but they have community hospitals running their EHR. So there is a disruption opportunity there to some extent, and I think a potential driver for that is the HTI-1 proposal that's in, you know, in final stages right now, should be coming out at the end of this year, first of next year, which is basically meaningful use stage, you know, whatever that's going to be. And, you know what? We just sat through a... Our executive team had a presentation earlier this week.
What HTI is going to be is the next wave of this, and the reason why they went to HTI was to kind of normalize the language so that it's HTI-1, then it's going to be two, then three, and they're already working on stage two of this. If it's anything like MU was, or Meaningful Use was, which it appears that it's going to be, there's going to be some fallout in the vendors that are in the space and their ability to be compliant or stay compliant and deliver that for their customers. And so, you know, we saw a nice boom from the Meaningful Use days. I don't think the incentive is going to be there with HTI-1, but there is definitely the stick.
and so we'll be positioned, obviously, as we have in the past, that we'll be compliant, we'll continue to stay compliant, and that could potentially drive some new demand on the EHR side.
Excellent. Thank you. Maybe we'll toggle over from bookings to revenue, and I know you probably don't want to give long-term targets today for revenue growth, but you, you are welcome to. But I want to see if there's a general framework for how investors should think about growth for the RCM side of the business versus the EHR side of the business.
Yeah. So our thoughts there haven't changed dramatically. Maybe the slide has pushed out a little bit, as we're trying to, you know, be a little muted into watching that pipeline convert. But I would think, you know, as we've said in the past, you know, we see the EHR business relatively flat to maybe, you know, 1%-2% growth year-over-year. And the RCM business, based on the execution from the sales staff, you know, it's very realistic that we get back to that mid-teens growth in that business going forward. When that's going to happen, you know, stay tuned. We're continuing to work on that.
But, you know, our plan for 2024, and said this on the last call, is to make sure that we've got the house back in order, that operationally, we're as efficient as we can be, and that we've built ourselves properly, continuing to work on the global expansion and prepared for the opportunities as they drop through the pipeline. That's the best non-answer you're going to get.
Well, I'll try with a follow-up. So just, you know, just thinking a little bit further about the, the growth algorithm, you know, from, from a high level, maybe you could discuss how much of the business you currently view as recurring?... how patient volumes can impact revenue in any given year, and what your targets are for, for customer retention-
Yeah
- across the businesses?
Yeah, so we're low 90s, high 80s, low 90s in the recurring revenue for the business. We have seen a new dynamic this year, and we talked a little bit about it on the call, with these short-term projects that we're taking on in the RCM space, which is a great opportunity for us to add new labels and to explore new opportunities and land and expand, but it is creating that dynamic that we were sort of running away from in that one-time revenue. So we will continue to quantify that, and see what that's gonna shake out to. But, you know, going back to the sales team, you know, when we're out there asking them to go get opportunities and this is what comes back, it's hard to say no, right?
Mm-hmm.
So we've gotta be mindful of, you know, what we think the thesis is, that if there is a specific problem that we can solve, then the next problem that they have, or as they continue down the road of offshoring of outsourced business office, that we're already there to be able to step in. So there is a dynamic where we felt like we were tracking closer towards the 100, you know, based on what this one-time revenue opportunity is gonna do on the RCM space, that there may be a little bit of a shift in that over the next couple of years. What was the second part of the question?
Customer retention.
Customer retention, still around, still 95%. That's the number that we see going forward, really on both sides of the business. You know, I think we're gonna come in just a little short of that this year, on the EHR side, but we have a specific dynamic that's really kind of been a catalyst for that number being lower than we had anticipated, and that's the move of the Centric customer base, which is the old Healthland customer set to Thrive.
Mm-hmm.
Saw a little more fallout than we thought we would from that, but we're, we're kind of wrapping that project up, and so feel like going back into, into 2024, that we get back into that 95%, 95% number. Same thing on the RCM side of the house. You know, when you look at it from a label standpoint, we're, we're ahead of that 95% there. But we had, you know, we had an outsized customer, that we lost a year and a half ago, not due to service, due to acquisition, that, that was, you know, at one-- when we signed them, they were a little more than 10% of the business, and so we had a $5 million, downturn based on one customer that we lost on the RCM side.
But going forward, we, you know, 95% is the number that we're gonna continue to shoot for on that side. There was a third, there was a third metric you asked for.
Patient volumes.
Patient volumes. Yeah, sorry. So we haven't... You know, outside of COVID, we, our patient volumes seem to hold pretty, pretty good. There's seasonality, obviously. The first part of the year, if you get the flu season and that's a positive for the hospitals, which is a positive for us from a volume standpoint. There's a little bit of a lull, and then, you know, deductibles get met, and you start to see the volume kind of swing back up in the end. And so year-over-year, we see the volumes being pretty steady going forward.
So maybe one follow-up there on the Healthland Centric customer base conversion.
Mm-hmm.
Could you give a percentage of kind of where you are in terms of getting through those decisions?
Yeah.
Like, how many decisions have you made? How many decisions are left on a percentage basis?
Yeah. I would say we're 85%-90% of the way done. We're down to less than 15 decisions to be made. And I think overall, we've been right around 50% on the conversion of those hospitals, which was right about where we modeled this to shake out, just based on the consolidation of the work and of that side of it, to have one single platform, and not have to continue to try to keep two EHRs compliant and serving two customer bases. So hopefully, by the end of 2024, we will have all of that work done.
Makes sense. And so I'm gonna ask the similar question, but more near-term in nature, just given the guidance reset after last quarter. Want to think about the different variables that make your Q4 revenue targets achievable. And so if you talk about what's baked into the guidance in terms of customer retention and patient volumes, and maybe more importantly, for this near-term-oriented question, bookings to revenue conversion-
Mm-hmm
... and contribution from the Viewgol acquisition.
Yeah. So, let's see. I'll go in reverse, so that way I won't forget anything, or I'll probably-
I can understand.
I'll still forget something. Viewgol, I think, is right around $4 million top line and $1 million EBITDA contribution for the fourth quarter. The bookings to revenue conversion, you know, because we're, you know, 60-120 days out, typically from sign to convert, we're not, we're not—there's not a risk there in new bookings coming in that are gonna have an impact on the quarter. Volumes seem to be, you know, as I said a second ago, volumes seem to be right where they need to be, and our attrition for the quarter is right. Our retention is right at 95%.
So from a top-line dashboard look, Q4 looks like, you know, based on where we've given that guidance, or reset, there's not a lot of risk built into that number right now.
Understood. Maybe we'll move on to profitability. I think the biggest topic on the expense side is likely the move to push more TruBridge RCM resources offshore.
Mm-hmm.
Can you review where you are and where you're going in those efforts, and why the Viewgol acquisition is crucial to take those next steps?
Yeah. So right now, absent if we take the Viewgol employees out of the mix, and we just talk about core TruBridge, we're about 80/20 onshore to offshore with that staff today. Our goal is to get to closer to 30% onshore, 70% offshore. And that's for the current book of business, and that's also, you know, for the new business going forward. It's a bit of a jigsaw puzzle on how we get there, because one of the things when we're bringing in new customers is the employees that they have that are onshore that work for them, that I would say probably 7/10x , we bring that staff on.
So that does create a bit of a hurdle, or it elongates our ability to get to that model or that mix. And so we continue to, you know, from a performance management and natural attrition, that number continues to move in the right direction. From the benefit of that, you know, if you look at it just from a numbers standpoint, an onshore billing resource today costs us, let's say, $28 an hour by full contribution. Through our offshore partners, we made that number closer to $16 an hour, and now we see that number via Viewgol being closer to $6 or $7 an hour.
So when you take, you know, you look at the expense that we've got from a payroll standpoint at 80/20, shifting that to 30% onshore, 70% offshore, going from $28 an hour to $7 an hour, you know, it's an eight-figure savings opportunity in the core business. And then you also get to add that, as we go forward, going on. So, you know, we think that that's gonna take probably the next 2 years. So, you know, the hope is that, or not the hope, but the goal will be at the end of 2025, that we'll be at that 70/30 mix, on the RCM business.
And I would say, you know, the 800 number that we put out for the end of next year is probably still a good waypoint. Now, you know, we've got in the earn-out with Viewgol, we've got an opportunity for them to stand up 240 employees. So of that 800, we'll see 240 be that Viewgol, and we'll still be reliant on our partners in the next 24 months. I think we'll always have a relationship with an offshore partner, but we'll continue to see the reliance of that go down as we continue to stand up the Viewgol or the new TruBridge offshore operations.
That's amazing. If I remember the filing right, that 240 number is kind of at the high end of the range for the earn-out for Viewgol in terms of number of resources-
Yeah
- deployed. So it's... How high is the confidence level that they can achieve the high end of that range?
It's pretty high. And now there is a nuance in there as well. So there's two sides to the earn-out, right? There's an EBITDA trigger of $6 million. That's the step one, and then there's the employees, but they are tied together. So they've got to hit the $6 million to get the benefit of the 240. And that was important to us, one, because we wanted to make sure that they were continuing to be focused on the business that they had at hand, which is, you know, continuing to grow their core ambulatory business-
Mm-hmm
... but also give them incentive to help us, on one of the reasons why we made the acquisition. From a confidence level in getting to that 240, I think it's pretty high, but we're also just a few weeks into this.
Mm-hmm.
We'll obviously continue to give color to that as we go, but I feel good about us being able to get, if not all the way to that number, very close to that number throughout the 2024 year.
Understood. Maybe to discuss kind of some of the blocking and tackling of this effort, better understand some of the challenges involved in kind of executing against that pretty compelling margin opportunity. Could you help us think through the timeline of how long it takes to train and deploy a single offshore RCM professional, and what you can do post-Viewgol to repeat that process in waves.
Yeah
... at a much bigger scale?
Yeah. So it, it's about 60 days, 60-90 days, to get somebody trained up and staffed and ready to go. And they have... You know, so I think it's worth talking a little bit about how they built that operation. So, you know, they started. Their original idea was that they were gonna be a tech company, and so they built this platform, an analytics platform, in the provider space. Were very successful first in NextGen because that's where their roots were, and they had relationships, but started to branch out into other EHRs. But at. What they were finding is, as they were delivering the tech, and there was satisfaction there, there was no improvement that was happening, and so they saw the opportunity to provide the service that goes along with that technology.
Well, that happened right around 2020 when COVID hit, and they made the decision, which was, yeah, if you look at it, kinda outside, kinda crazy, that they said: "We're just gonna go stand up our own staff in India, and on top of that, we're gonna do it remotely." And so they went over to India, made some strong relationships with some key people that built a leadership team, and then started a recruiting process to go get the staff, and have, you know, kind of one at a time, built the framework for a training model, for a productivity model, for onboarding, and continued development of the staff, and have built a really tight-knit...
Very engaged group that enjoy what they do, and I think have a unique life work-life balance that I don't think you find over there as much as you do here, but have created kind of the same thing that we have with the work from home opportunity there. So I say all that to say that, you know, they have a high retention rate. You know, we see somewhere in the 35%-40% attrition with our partners, and we're seeing closer to. You know, their numbers are closer to 15%-20%, which is very amazing. It's amazing that they're able to pull that off, but it also allows that ramp up to go faster because you're not having to refill from the people that are leaving.
They also have a very strong network of into the other companies that are providing the RCM service to be able to recruit. So we think that, you know, they've been very successful growing that, growing their staff from 0 in 2020 to just short of 900 employees over the last three years. So they built the infrastructure, they built the framework to be able to continue to scale that. We think that them building into their new business opportunities for 2024, plus that $240, should be something that only gets easier as we go down the road.
Makes sense. I think that's a really interesting data point on their scaling over the last couple of years, and I think that's helpful in terms of the repeatability of that now under the CPSI umbrella. Want to hit on the kind of the other side of Viewgol's business and just ask, what needs to be done to integrate their domestic operations, and are there expense synergies you can realize on that front?
Yeah. So having the earn-out for 2024 gives us a little bit of luxury from a... You know, we're going to let them operate and go get that number, because we want to see them be as successful as they can in growing that ambulatory business. There are probably a few opportunities, you know, in the leadership ranks as we think about consolidation. But right now, we're as focused on giving them the opportunity to go achieve and execute on their earn-out opportunities, and also working towards the conversion of the TruBridge staff through that India operations. That's really where the synergy opportunity is.
I mean, there's a little bit there, but when you talk about, you know, what you go again back to the opportunity of the TruBridge staff to be converted, that's the headline.
Mm-hmm.
So the rest of it's just, it'll just be a little bit extra. And so, you know, one of the things that I would say that we will also do and through the earn-out, as we've done with other acquisitions, is continue to look for areas where, you know, if we've got an opportunity to upsize talent or, you know, create new opportunities for people that are in the Viewgol operation within CPSI going forward, we're definitely going to take advantage of that.
Understood. Another one on the profitability side. Want to ask about the R&D line and R&D spend. It's grown considerably over the last couple of years, particularly if you're including capitalized software development in that expense. Want to ask: What are you considering when trying to figure out the right level of spend on that line? And how should investors think about the mix of that spend between the EHR and the RCM business? And to ask more pointedly, is some of that R&D budget and innovation, or is a majority of it now going towards RCM innovation and efficiency versus the EHR business, where you've talked about where the growth is going forward?
Yeah. So I think on the, on the EHR side, we're at about 17% of, revenue. Our, our PD cost is about 17% of revenue, which the industry standard, you know, for that business and where we see it, is 15%. So we're, we're right in line with, with where... or pretty close to in line with where we would like to be there. We do, and we have invested a tremendous amount on the R&D side into that innovation section, specifically into the RCM efficiencies with the, with the, bot technology and continued, opportunities from a, a artificial intelligence standpoint.
So, you know, I would say what we're going to see. You know, one of the things we're kind of having to keep an eye on right now is what's going to happen with HTI-1 and what that's going to do from a spend standpoint on the development side. But I think going forward, that, that 17%, 15%, 17% on the EHR business, excuse me, is a, is a pretty good placeholder for where we think that that's going to be. From a capitalization standpoint, you know, I would say the vast majority of that's going to be in the, in the RCM side, in the innovation world, where it is trying to drive towards more efficiencies going forward.
Excellent. Understood, and couple minutes left here. Try to close out by giving a little bit of time to the balance sheet and cash flow. Maybe you could just give us a comment on slightly lighter free cash flow conversion in 2023, and then how you're thinking about capital deployment after the Viewgol deal. And one more, give us a reminder on interest expense ramifications of a higher net leverage ratio from Viewgol.
Yeah. So if we go... I'll start at the end first and go backwards.
Mm-hmm.
So if we're at, if we're over 3x levered, our interest rate increases by 50 basis points. And so obviously, when we think about capital deployment right now, through two lenses, one, we just finished an acquisition, and two, to your point, if we look where, you know, how the year has shaken out, you know, we're gonna obviously probably keep the money, one, on the sideline, or two, working towards getting delevered, for right now. You know, for a couple reasons: one, the balance sheet, you know, reflects that that's probably what we need to do, but also organizationally, just from a capacity standpoint, you know, we don't need to take anything else on right now. We need to get the Viewgol integration under wraps and going in the right direction.
From a free cash flow standpoint, and sorry, I'm looking at my notes. This is usually where I would let Matt jump in, and so, I wanna make sure I get this right. Well, when we're looking at free cash flow, what, what's really kinda hit us a little bit, over the last couple of years, is we have seen our CapEx go up. We have seen interest rates increase dramatically, and so our... Sorry. Let me get my glasses on. Our Adjusted Free C ash Flow approach, EBITDA less interest, less taxes, less CapEx, is about $11 million, so 23% of EBITDA.
We're going to, again, work towards getting back under that 3x leverage standpoint, and make sure that the dollars that we're spending from a PD perspective, you know, we wanna be aggressive on innovation, but at the same time, we wanna make sure that we're getting a return there, and making sure that, you know, we have our balance sheet, our cash, in order where it needs to be.
I think it's also worth saying that we've had a lot of events this year, from going back to the early retirement, going back to the transaction costs, that have been one-time in nature that, you know, have put some pressure on that cash flow, that we're not gonna have those events next year or don't foresee having those events next year. So we should see a nice little rebound in the cash flow forward.
Higher percentage of cash relative to Adjusted EBITDA?
Correct. Correct.
Excellent. I think we'll have to cap it there-
Cap it there.
- but really appreciate the time and insightful comments, Chris. Thank you again for joining us.