William Donovan – Chairman, President & CEO
John Bergeron – Chief Financial Officer and Director
Eric Groteke – CTO and SVP of Sales/Marketing
Timothy Donovan – SVP of Operations & Administration
Spine Pain Management, Inc. (OTCQB:SPIN) Q2 2013 Earnings Conference Call August 14, 2013 4:20 PM ET
Good afternoon ladies and gentlemen, and welcome to the Spine Pain Management, Inc. Second Quarter 2013 Investors Conference Call. Before I turn this over to our panelist, let me take a moment to familiarize newcomers to the webinar control panel you should see to the right of your screen.
At the top of your control panel, you’ll see an audio section. (Operator Instructions) So let me now begin the presentation by introducing Dr. Donovan SPIN’s Chief Executive Officer.
Good afternoon, and thanks for being part of this conference call. Slide 2, before I turn over the meeting to John Bergeron, our CFO, I would like to make several comments.
During Q2 of this year, shareholders equity and working capital ratio increased. We paid down over 390,000 of debt during this quarter. In addition, during Q2 of this year, we had 260,000 in non-cash charges. To present the financial numbers to our investors, I turn the meeting over to John Bergeron our CFO. John?
Thank you, Dr. Donovan. Before we start I need to read the forward-looking statement. This presentation includes forward-looking statements as determined by the U.S Securities and Exchange Commission, the SEC. All statements other than statements of historical facts included in this presentation that address activities, events or developments that the company believes or anticipates will or may occur in the future are forward-looking statements. Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the company to be materially different from any future results. Performance or achievements expressed or implied by such forward-looking statements.
Such factors include general economic and business conditions, the ability to acquire and develop specific projects, the ability to fund operations, healthcare services demands, changes in healthcare practices, government regulation, and other factors which the company has little or no control.
The company does not intend and is not obligated to update publicly any forward-looking statements. The contents of this presentation should be considered in conjunction with the warnings and cautionary statements contained in the company’s recent filings with the SEC.
Now, if you please look at page four, Slide four, looking at page four, you see the graphs on our gross revenue, net revenue, EBITDA, and net income on the slide. Excluding non-cash charges, SPIN would have had a profit of $160,000 for the quarter. With the inclusion of these non-cash charges, the company incurred a loss of 101,000 for the quarter.
For the three months period ending June 30, 2013, we reported revenue net of allowance for discounts of net revenue of $867,000. This compares to net revenue of $919,000 for the Q2 2012. The decrease in net revenue was partially due to the decision not to fund as many cases, since the private place of memorandums totaling net $350,000 would be paid on June 30, 2013 and then we will pay.
The company incurred a quarterly net loss of $101,000 or $0.01 per basic share, which includes non-cash charges of $261,000 comprised primary of the executives and directors or managerial stock options, accretion of debt and provision for bad debt. This compares to a net loss of $386,000 or $0.02 per diluted shares for the second quarter of 2012.
That also included a non-cash charge of $327,000 related to the settlement of a lawsuit. General and administrative expenses during the second quarter of 2013 were $477,000 which was a 15% reduction in the G&A expenditures over the previous quarter of 2012. For the six months period ending June 30, 2013, we recorded net revenue of $1.9 million and a net loss of $56,000, which included non-operating charges of $521,000, again, related to the Executive and Director’s managerial stock options accretion of debt provision for bad debt. This compares to $2.2 million in the net revenue and the net profits of $95,000 or $0.01 per diluted share for the same period in 2012.
You can see the footnotes at the bottom page 4, that emphasize our debt repayment positive EBITDA for the 2013 year and the positive income when excluding non-cash charges.
Looking at page 5, you’ll see our year-end balance sheet as of June 30, 2013 and 2012. As of June 30, 2013, we had aggregate accounts receivable of $7.1 million. Total outstanding share on this day were $18.4 million with fully diluted shares totaling $18,415,882.
I want to notice the current ratio of improvement of 2.7 to 1 to 4.4 to 1 in 2012 to 2013. The shareholders equity section has also increased over the last year. Shortly, before the end of the second quarter, the company paid back 350,000 of private placement memorandums, while renewing $100,000 in notes for two additional years. The warrant conversion in these notes allows the note holder to purchase up to 100,000 shares as Spine Pain Management’s common stock at $0.45 per share
Additionally, we paid back $40,000 in related party debt bringing our total debt repayment of $390,000 for the quarter. You can also explore this further in our 10-Q. The highlight I want to bring out is that the collection are increasing while our debt is decreasing, our collections are trending up. In 2013, we had positive income when deducting the non-cash charges and for the shareholders equities increased.
Everybody always ask me during these events how we are going to do in the future. Well, based on what I’ve seen in the first six weeks of this quarter, coupled with the fact of the changes that we made better vetting, I believe the second half will definitely will surpass the first half and it will surpass the third quarter of 2012.
Now to further discuss our business opportunities, I will now turn the call back over to Dr. Donovan, Founder and CEO of Spine Pain Management.
Thank you, John, and good afternoon ladies and gentlemen. It is my pleasure and honor to be the CEO of this very unique company. Spine Pain Management is a medical services and technology company that provides transparency of the medical services provided by our affiliate doctors. My priority as CEO is the proper allocation of capital and maximizing shareholder return. Spine Pain will pursue every opportunity to create value for our shareholders.
Slide 7, during 2013, I have listed some of the key developments today. We will discuss the new San Antonio affiliate in more detail, but essentially we entered a competitive market with affiliated doctors who did not perform procedures on personal entry cases. By combine in CLE marketing programs and utilizing the QVH HALO, we have developed a significant opportunity in San Antonio.
In addition, we have reduced our long-term debt by over $390,000 and have initiated joint venture discussions with potential partners for new revenue centers. Of particular interest, we paid off the very last check for a lawsuit for many years ago that was part of a previous company. In July, we had two major highlights of settling our 1,000 case, and July happened to be the highest monthly collection ever.
Next slide, recently, in fact, I was invited to the Houston Trial Lawyers Association to present the HALO technology.
Next slide, Slide 9, I would like to specifically take the time this afternoon to specifically discuss where we stand in leveraging our business into our long-term growth story. But for those of you who are new to our company, I wanted to take a moment to summarize our core business.
Slide 9 is a snapshot of the company. Our share and our positive working capital ratio is 4.4 to 1. Our outstanding share is $18.4 million and we have managed over 5,600 procedures.
Next slide, Slide 10. As of Q2 2013, we have preformed over 5,600 procedures and treated over 3,200 cases. Only 1.6% of cases settled with no collections.
Next slide, on Slide 11, our collections have increased to $6.2 million on 973 cases. As I mentioned previously, we just recently settled our case number 1,000. So this leaves us with over 2,200 cases yet to settle.
Next slide, I would like now to turn over the meeting to Dr. Groteke to discuss the business model and the Quad Video HALO. Eric?
Thanks, Dr. Donovan, and thanks to everybody for joining us today. For those of you that are not familiar with SPIN’s business model, SPIN funds diagnostic, non-invasive testing and spinal Epidural Steroid Injections and diagnostic facet nerve blocks on patients that are involved in liability accidents, specifically, motor vehicle accidents, commercial cases and slip and fall accidents.
SPIN funds the affiliated attending physicians practice once the treatments have been completed at an average of 18% to 20%. They take ownership of that billing and collections process and the patient sign an Assignment of Benefits and their legal counsel signs, the letter of protection with Spine Pain Management.
Since 2009, on average, SPIN received approximately 48% of its billing once the case is settled. In line with its experience, for SEC reporting purposes, SPIN reports approximately 48% of its billing as revenue. It closely monitors this rate throughout the year and adjusts it accordingly on an annual basis.
From this point forward, SPIN is exposed to risk of a rare, but possible, zero payment on a settled case. Approximately 1.6% of total cases have resulted in no payment. On average, settlement occurs within 12 to 18 months. And obviously SPIN owns no brick & mortar as it has no medical liability.
Next slide please. This is our Quad Video HALO Technology. This as you look at the screen, you see our four different windows there. Basically what this technology does is it allows cameras to hover just above the sterile field and it creates a video of what’s going on outside the body and inside the body. So you see those the top left, the top right, and the bottom left windows are all outside the body different points of view. And then on the bottom right, you see the fluoroscopic view, which is the actual X-ray, that’s been taken during the procedure as the doctor tries to diagnose the few patients pain generator. This becomes part of the medical record and this is delivered via a DVD for documentation purposes.
Next slide please. I’d like to turn this over to my colleague, Mr. Tim Donovan. Dr. Donovan for his shareholder value.
Obviously, we’re all shareholders and what does the future look like? Well, this time first about the QVH technology. We are using it right now as me as an affiliated doctor for identifying what’s the cause of the patients pain in the Spine. While there are certain cases – types of cases that do not need injections, however, they need documentation of motion and stability and so forth.
We’re working with a group right now to take our existing technology and to adopt it for additional revenue centers. In addition as you know, we filed for a patent on QVH in 2011, expanded the patent in 2012, and we anticipate in expanding it even further in the very near future. What we do now is we’re attracting a lot of the attention where even last week I was asked to come and give a talk on the technology.
So it’s good for all parties, because it provides transparency. The technology has buyer and the AMA is saying that we as doctors we have to be more open and transparent about what we do. As I just mentioned, we want to expand this technology for further diversification revenue. We anticipate taking this technology and our systems – the management systems into new state.
And Tim will discuss this based on some new things that have developed in San Antonio. Obviously, we have to collect the receivables. What we do now on the first thousand cases, we have collected $6.2 million. We still have 2,200 cases existing right now that need to be settled. We have to continue implementation of a strategy that results in the best collections. We have to increase the amount. And we have to choose the best cases by implementing risk and then manage assessment methods.
Next slide, here are our goals for the rest of 2013. We want to continue to increase the market share in San Antonio. Basically, we want to clone San Antonio both in other cities into Texas and other states. Tim will speak more about the San Antonio facility. We want to pursue newer and recurring revenue overlays of existing business. We have contacts with our affiliated doctors and they are receiving patients sensitively affiliated doctors for many doctors. Well, those doctors need other types of services. We’re exploring this right now.
We’re using the QVH to really find the best of the docs to be affiliated with us, and it’s paying off with better type of cases, better technology, better procedures. And obviously, we are going to diversify our portfolio away from Florida because of all the upheaval down with the PIP Laws.
And lastly, we’re still looking for the right person to come in and take the lead as the CEO with certain requirements. And we have been discussing with various people. So to me these are the management goals that we want to focus on.
I now want to turn over the conversation and PowerPoint to Tim Donovan, Senior VP, Operations & Administration. Tim?
All right. Thank you very much and good afternoon. On page 16, Slide 16, we are going to review some of the success of our San Antonio pilot program. Again, for those of you that are not familiar San Antonio is an affiliate that we opened in later February of this year, the unique characteristics of this affiliate is what we believe makes it a pilot for future growth. It was the first affiliate that was entered into, that had no prioritized to SPIN’s active management. It is the first sensor that we have started working with those an affiliate that prior to working with SPIN had never worked in the personal entry arena.
Therefore, we were able to bring in element of business that was additive to an affiliate. And as many of us know with healthcare right now and the changes that are coming soon, there is a lot of medical providers out across the United States who are looking for ways to grow their business in new segments of the market.
So again, the San Antonio affiliate had no existing PI revenue prior to working with SPIN. It was the first standalone affiliate to launch with the Quad Video HALO system from inception. Why is that important, because I know many shareholders have been following the launch of the HALO, the continued development of version 2.1 and they wanted to know what effects the HALO has on our business and what effect it’s going to have on our business moving forward.
Again, San Antonio is a great pilot affiliate, because it had no relationships in place in the San Antonio market. The reason why the attorneys have been working with our affiliate there is specifically, because the Quad Video HALO is exclusively available at this affiliate.
Therefore, we know now without a doubt the Quad Video Halo is what allows Spine Pain Management to enter into a new marketplace with an affiliate and to determine the long-term viability of that business strategy, it’s been working. It’s very clearly been working, I think in our first quarter conference call we discussed the fact that the affiliate was growing. I can now confirm that our Q2 2013, they were able to quadruple the revenue of the first quarter. And again, I can assure you that just between July 2013 and the previous month we were again able to grow that revenue by over 94.7%.
So we have not hit a plateau in the growth that we can experience in that market. In fact, our affiliate in that city is now interested in bringing us into two additional states and conversations have started on that. And I believe that we have indicated that we will be in this state prior to the end of the fiscal year 2013.
What is this really mean for the shareholders that are on the phone, I think it’s continued indication that the model is working. I can tell you administratively that we’ve just recently reached our all-time collection high at a time of the year where settlements are usually coming in, and they are very average in the numbers. Not the worst month of the year, but it’s never been close to being the best.
I really think that a lot of the procedures that we put in place in Florida and Texas have allowed us to really drill down and get these cases settled, it’s in the best interest of all parties. To get these cases settled and I think that Spine Pain Management again, with the Quad Video HALO technology has been able to facilitate settlement of even older cases that we had logged into our system.
That is one of the unique attributes of the Quad Video HALO, it ties in with the transparency that I know we’ve discussed in previous calls that the AMA, that JAMA has been publishing articles about the Los Angeles times et cetera. This transparency is what’s needed for this market wise, and I believe that the Quad Video HALO and the PPV is that document the procedures that Spine Pain Management pre-fund of helping to get settlements on older cases.
July 2013 collections on Slide 17, we are reviewing again, the collection seem to be getting much stronger. I would indicate from my point of view operationally and administratively that third quarter is off to a great start. Those collections in July – our collections were a bit softer in the second quarter.
I don’t believe that if there is any reason for that especially towards the end of the quarter other than timing, there were some settlements that didn’t hit us before the holidays in July 4, and then it was softer in April, I believe due to the tax month, that was across the board with everyone that I talked with. But overall we’re headed short of really great rest of the year when it comes to collection.
Of note, December is normally our strongest time for collection before the end of the year. July was almost 10% up, over December 2002, which to me is fantastic. And again, one thing that I think is important older cases, specifically higher policy limited cases that we’ve discussed in the past are starting to settle. And they are settling at a very good rate for the company and again, I believe that when you look at the number of cases that had outstanding which is over 2,200 cases yet to settle. If you look at the average settlement per case which was discussed earlier was $6,400.
If you look at the fact that the industry as a whole is now requesting transparency and that we’re the only company currently being able to offer transparency in this type of procedures. I think we’re really headed in a great direction. I can tell you that we all live now less than half way through the third quarter, and where we are at right now things look particularly strong.
What we wanted to do now is go to a question and answer. So I’ll turn this over back to the moderator if he has any questions. We’ll repeat the question and then we’ll choose one of the staff to management to answer.
All right. Let’s start with a question from [Austin Graff]. How will Obamacare impacts SPIN’s business model? We’re making sure that Americans help or hurt the company’s revenue – that’s the end of that question.
Well let me – I’ll take that. This is Bill. The question was how will Obamacare affect our market. It actually doesn’t affect it at all in a negative way. In a positive way, it’s going to be much easier for Spine Pain to find quality affiliate doctors, because these affiliate doctors are going to be looking for new revenue centers, because Obamacare is going to affect doctors income. There is no question on that. So it will make us much easier, because a lot of the doctors in orthopedics, neurosurgery, PM&R, most of them never treated patients that are work injuries or auto accidents, where their personal injury type accidents. So Obamacare is actually going to help us.
Okay. Next question, also from Austin Graff. We’ve heard many times here, there are no lawsuits left outstanding. What was the lawsuit you settled all about?
Oh, Oh yeah. Good question. We sent the last payment. This was a suite that originated 10 years ago and the preexisting company. It was found, I think in 1985 or something maybe 1995. It was incredible and then it sat on somebody’s desk for seven years. There was a judgment no one knew about it. Well, it’s gone, thank god. So it had nothing to do with Spine Pain Management, but it was a predecessor company and it’s a way back. I think it was in the 1990.
How are you going to find and identify those future affiliate doctors, the best of the best from [Harris Goldman].
Tim, why don’t you take that?
Yes, I would like to address this. Again, just like in many things in life and in business world is now is the best form of marketing. As I indicated our affiliate in San Antonio is very pleased with the growth that we’ve been able to provide them through the Quad Video Halo to the implementation of the continuing like legal education seminars that we’ve launched in Florida and Texas.
It’s driving traffic there and therefore – they have friends that they went to medical school with years ago. They have people that they are doing consulting with. Everyone within the community as Dr. Donovan just indicated is looking for ways to grow their revenue, especially in the face of the implementation of Obamacare.
Therefore, when someone is really pleased with what you’ve doing and the results speak for themselves, they have friends who say, how do I get involved with that? And obviously, we carefully about the physician that we are going to be getting him business with and also the states and what the business climate is like within the injury – personal injury segment of the marketplace. Not every state offers us the same opportunities. So we’ve been able to use the due diligence that we have about the states that we’re interested in and the referrals that we are getting from people who are already pleased and working with us.
And again, target best of the best the doctors who are seeking out Quad Video HALO technology, you cannot underestimate the fact that doctors who would not be best of the best, the last thing that they want to do is document all of their procedures. So it goes hand in hand, transparency, high-quality, best of the best, and success breaths new opportunity in new markets.
I’d like to add one more thing to this. We’re in the process of evaluating various joint ventures. I have four NDAs right now for potential partners. Some of these potential partners could expose us to a very larger number of potential affiliated doctors. That’s all I can really say at this point.
Okay. Here is a long question from Austin Graff. Why are you not selling more HALO’s? You need to hire experienced salesmen. You’ve talked about the HALO for 18 months, you sold one. Yes, it will help with collections, but you had said, it was another revenue driver either the product isn’t any good or you have a horrible sales staff, you have a terrible sales staff.
I’ll talk that. This is Bill. I just mentioned about various joint venture discussions. I believe by the end of the Q3, I will have some positive answers to that question. That’s all I can say at this point.
I’d jump in again. In past phone calls, I think it has been discussed that we believe that the HALO can be leveraged as standalone sales. However, the first and foremost goal for the HALO technology is for Spine Pain Management to continue to attract affiliate and to fill those affiliates with a lot of great cases. It has not been our number one priority to sell standalone units in areas that we are not currently pre-funding the business. And in regards to the comment I believe going back to February when we announced that we were exploring recurring revenues streams.
Our recurring revenue streams that come from the HALO via our existing affiliate business. It doesn’t simply come from selling standalone unit that you don’t control how and where it’s being used. I think doctor Dr. Groteke as the inventor of the Quad Video HALO has worked carefully on its development through stages 1, 2 and now 2.1 can give you a little bit more information about what we expect and when as far as the pursuit of individual unit sales.
Okay. From John (inaudible) San Antonio have excess – has San Antonio settled any cases yet. I know they have always been around 5 or 6 months?
Actually they have settled cases not only have I settled cases in San Antonio. I think we settled six or seven at this point. We’ve been paid on half of those as well. So the indication is, again, with no relationships there with the HALO and CLE leading the transparency into the marketplace. There are attorneys who believe that their client can benefit from having procedures done in an environment with the HALO, with the transparency, and obviously it has led to case resolution at an earlier day.
The next question from Mark Robins. I’m confused by Tim statement regarding the quicker settlement of older cases helped by Quad system. It must refer to older cases, but those still monitor by the Quad, yes?
Mark, I apologies if I wasn’t clear. On your larger higher policy limit cases, Spine Pain Management could have started trading a patient in 2010 in one of our affiliate centers. And that patient because maybe they are going to trial or it’s a much larger more complicated case, maybe having additional medical treatment over a one to two-year period. So it’s very possible that we have people who originally came to our affiliate centers had treatment when the HALO was not available and has had subsequent treatment with the HALO that has been used in the resolution of their cases.
Follow-up from Mark Robins. You mentioned other services, help me better understand what this means?
This is Bill. And Eric I want you to get in on this too. The doctors who refer to the affiliated doctors have need for other types of products and services that we don’t enough right now. And having access to these doctors, we feel there is an opportunity for additional services to this with other joint venture people. Eric, may be you can add to this or whatever.
Yes, hey, Mark. Basically these – the cases that the affiliates see some of the cases require other types of services or products that we could easily overlay on top of the existing networks that we have. So that’s about all I can say on that part of it right now without getting too specific, but it’s pretty exciting actually.
From Harris Goldman, what is happening in San Antonio that you see it as the clone of the future for SPIN?
Tim, why don’t you take that?
Again, I just want to be clear. San Antonio was a virgin market. There was not any doctors that were closely involved with Spine Pain Management, who had been in the market working in personal injury for years and therefore it had well established relationships with the attorneys. We went in with nothing. We knew no one. We had no existing relationships with the attorneys.
What we had and what we have is a better mousetrap. We offer transparency and technology to a segment of the market that needs it. There is a lot of skepticism. There is a lot of doubt that unfortunately often a company’s people who are victims of accidents. Therefore, what we have to offer them has been proven that this is what people are looking for. This is the future and the future is now and with no built-in marketplace to drive to the affiliate, the numbers are growing very quickly, and they’re solid numbers from a lot of different firms, and the feedback that they get Harris is very interesting.
A patient involves in an accident getting the procedure, any type of medical procedure at the clinic. When they find out that that treatment is going to video, that there is going to be a DVD of their case. They realize that they are getting best of the best care. People know that. People know that if you are not providing good care or conversely that a patient didn’t need treatment, they are certainly not going to go to a place where it’s found. It’s an indication of the quality of care that we provide. It’s also a huge competitive advantage. Nobody else has the technology. It’s exclusive.
So if you are an attorney and you want the best of the best for your client, they have to go there. Other markets in Florida, Houston, the Valley, places that we’ve opened affiliates to prove to our shareholders the value of our business and the potential growth, it’s not as clear, because people were working there prior to working with Spine Pain Management. So you can see why we consider a pilot city that be one that utilizes our strength with the technology in a new market, and on its own with that it’s been able to generate really great business in a short period of time.
I just want to add to that. This is Eric Groteke. One of the CEOs that did – I believe it was just this one in Houston. There was another position there that had focus well on electronic health records. And I’m not going to mention their name, but they had run it a couple of AR departments at some of the major hospitals. And it was interesting to see the comments from the attendees coming from his part of the presentation on electronic health records, because the big complaint is that the electronic health records don’t really tell the whole story about what’s going on in that patient case or what happened with that medical encounter.
This is why you are seeing the Journal of the American Medical Association put these kinds of articles out there on the importance of transparency not only in the procedure, but also in the actual and form consent process, rather than just having a hand written. So I think that the Quad Video HALO and its transparency and that kinds of higher standard of medical records is something that the demographic markets that we are in are appreciated, and we are all experiencing the effects of that.
From [Harry Jain] There is a major disconnect apparently with your stock price and what you told us about today. Dr. Donovan, do you plan on buying any more stock?
As we go back to Slide 5 and you go back to July 2012. According to the slide the stock I guess was around about 20. Now, a year later, our assets to liabilities ratio has doubled, our shareholder equity have doubled, but the stock is about $0.25 or whatever. I don’t understand how the market works, but I think at some point people are going to appreciate what we are doing. And with an opportunity at the appropriate time, I’ve always been buying stock. I mean, I would rather invest in something that I’m involved with, then something that I did someway in London we would get chance.
So, do I anticipate buying stock in the future? Sure, yeah. Why not? I mean, I’m seeing what’s happening. I deal with this 24 hours a day, everyday, and I surrounded myself with some really capable management people, and some unique technology. So yes, I anticipate on buying stock in the future.
Hey, another question from Mark Robins Are we selling Quad’s or just leasing them to our own affiliates?
To our affiliates, we’re leasing them. And I tell you why Mark. If you have an affiliate that goes south and you want to make adjustments that affiliates stays with us. So I mean…
The HALO stays with us.
I mean the HALO stays with us, I’m sorry. So yeah, we want to control with the affiliates. We want to control the HALO.
You mentioned other kinds of services for your affiliates. What are you contemplating from Harris Goldman?
I think, again, we can’t get specific about the discussions of joint ventures. But one would indicate that it will be technology related. It has applications within the personal entry segment of the marketplace and things that our patients currently need.
Okay Harris Jenkins asks, are you planning on opening any new centers right away? And is that necessary to increase your revenues?
Yes, we anticipate opening additional centers.
And the second part of that was, is that necessary to increase revenues?
No, I’ll jump ion, this is Tim. We don’t have to open 10 – an indication of our future of revenue growth is not predicated on the number of centers we open. We have learned that it is better for us to be in the top markets and to add more clinic dates per month and drive a higher volume of patients through those clinics then just spread ourselves into markets that maybe can’t support the level of growth that we are at.
So as we’ve indicated there will be additional growth here in Texas. I think there is also going to be two additional states that will be opening. And I think our shareholders will be really pleased with the opportunities that are at hand.
Another question from Harris Goldman. What competition did you have in San Antonio before you introduced the HALO system?
I’m sorry, I didn’t hear that question.
San Antonio before you entered – what competition did you have in San Antonio before you introduced the HALO system?
Again to be clear about San Antonio, I believe it’s the sixth or seventh largest market in the United States. It’s in many ways a small town market and it’s mentality there is two or three providers that were handling the majority of all the work there. We met them, because again, we were trying to seek out who we wanted as our affiliate. Who would be the best match with technology bringing transparency to the market. And I can tell you, it’s a competitive market, but we’ve done really well in a short period of time. And again, why we have, I think I’ve gone over and over. Why we’ve been able to do that, it’s the technology, it’s the CLE marketing programs that we put in place.
[Paul Verso] What were the mistakes you made in the past, because you’d be so wrong in estimating your numbers and why should investors believe the current optimism when you were so wrong in the past?
So I will take that. Let me discuss. At about a year and a half ago, the company made or gave some guidance. Well, that was a mistake in the sense you can’t – our biggest problem is we can’t gauge the settlement of a case, it’s number one. Number two; there were the due diligence on risk management was not strong. So there was probably cases and affiliates that should never have been gotten involved.
So we’ve learned a lesson. And all we are saying now, we settled a 1,000 cases. We know what the average payment of that is. And we know that as of today, we have 2,200 cases that are not settled. We know the failure rate that is a case it settles and we don’t get paid. So we’ve learned a lot in the last two years. And we’re building on those errors that we made to proceed in a positive way. We were focused very heavy in certain areas that we should have probably been diversified more, but we’ve learned from that. So this is why in the fourth quarter 2012, we have to redirect and steer the shift in the right direction. And I think we’re heading there.
We’ve got two more questions. Another from Harris Goldman, what are you doing differently that’s increased your collection rate?
Tim, I think you can address that.
Internally, I think we’ve discussed in the past that we have developed technology. We are utilizing technology not only at the affiliate level to record procedures, but we are using technology within the house to track communication and to lead to other faster resolution on settlements. And again, without getting too specific, because this seems to come back.
As the company from other avenues, I will start, it’s the constant communication that we have on our cases. It’s the organization of the information, and it is again, what we can bring to a case to help all parties involved get things resolved. That is resulting in the numbers that we are seeing. The indication is do we believe that we’re doing better? Yes, as we’ve just said, we’re not even half way through the third quarter and things are dramatically increasing.
The last question, you almost have answered just then I believe. Have you determined what your average time for collection on cases and how does this year compared to last year?
Every case is different. And I think, again, when you try to pigeonholed a specific type of procedure, where it happened? When it happened? Where it was treated? Who had got referred to us from? As a medical provider, what the rules and the jurisdiction are? It makes it very difficult. I think the takeaway should be the thousand cases settled, 2,200 more that are to be settled. Less than 1.7% of our cases have resulted in zero collection, and the average collection is over $6,400 per case. I think you can view and take those numbers, and I think you’ve got a lot to be positive about moving forward.
I believe that was our last question. I want to thank everybody for being part of this conference call. I thank you for spending time with us and in particularly those who asked the questions. If you need to reach us, our contact information is here. And I think the rest of this year and next year is going to be very exciting. And I hope that we will see all healthy and happy at the next conference call. So thank you very much and have a great day.
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