Release Date: April 29, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Option Care Health Inc (NASDAQ:OPCH) reported robust growth in its acute portfolio, contributing to a positive financial performance.
• The company successfully managed inventory levels, particularly with Stelara, which helped mitigate potential economic impacts.
• Option Care Health Inc (NASDAQ:OPCH) demonstrated strong execution in transitioning patients from hospitals to home care, enhancing its value proposition to payer partners.
• The company is leveraging technology and AI to improve revenue cycle management and reduce bad debt, enhancing operational efficiency.
• Option Care Health Inc (NASDAQ:OPCH) maintains a diversified portfolio of therapies, which helps mitigate risks associated with individual product fluctuations.

Negative Points

• There is uncertainty in the market due to potential tariff impacts, which could affect drug pricing and procurement costs.
• The company faces challenges in collecting out-of-pocket costs from patients, which could impact revenue collection.
• Option Care Health Inc (NASDAQ:OPCH) anticipates a $60 million to $70 million impact from Stelara inventory adjustments throughout the year.
• The company is cautious about the potential lag between procurement costs and reimbursement adjustments, which could affect financial performance.
• There is ongoing uncertainty regarding regulatory changes, such as Medicaid cuts and site-neutral payment policies, which could impact the business.

Q & A Highlights

• Warning! GuruFocus has detected 6 Warning Sign with OPCH.

Q: Mike, I just want to go back to the guidance update, talking about no impact thus far for tariffs. But you beat by $7 million raised by $2.5 million. Is there anything else that you're concerned about or looking at for the rest of the year from an underlying fundamental perspective? Or is this just you being conservative? A: Lisa, look, as you know, historically, we entered the year relatively cautiously. This year, to John's point, underscores the need to tread carefully. We don't provide quarterly guidance, so the first quarter can be a bit wonky with dynamics coming out of the holidays and benefit plans resetting. We saw robust growth within our acute portfolio and a muted impact from the Stelara economic reset. At the end of the day, we were able to bring up the bottom end of the range, and at the midpoint, we're still expecting earnings to grow in the high teens.

Q: There were a lot of changes with MAPD, with the out-of-pocket costs lowered. Are you seeing an increase in utilization due to some of those changes? A: Lisa, it's John. We saw strong growth in both acute and chronic. We think some changes will benefit us in aspects of patient obligations. We don't see a lot of that in the first quarter, but we expect to see it in the back half of the year. We work aggressively with patients to tap into assistance programs and other foundations to support them.

Q: Can you walk us through the mechanics of what happens if pharma increases their prices due to tariffs and how it could flow through your branded and generic business? A: Thanks, Pito. It's Mike. A large component of our revenue is reimbursement for the pharmaceutical or therapy. We have a good balance across reference prices in terms of how we invoice health plans, a mix of AWP and ASP. To the extent that drug prices increase, it would presumably have upward pressure on the reference prices that correlate to how we get reimbursed. Over time, the spread we make is relatively consistent, whether it's a generic or branded drug.

Q: John, you talked about demonstrating your value proposition to payer partners. How has that dialogue changed over the past year? A: With shifting market dynamics, Option Care Health has played a bigger role in transitioning patients out of the hospital into the home. We offer high-quality care at an appropriate cost in a setting where patients want to receive it. Conversations with payers, especially with competitive retrenchment, position us as a meaningful part of their network design. We provide a broad spectrum of products and are responsive at the local level.

Q: You mentioned AI in revenue cycle management. Is there an opportunity through some of these initiatives around potential bad debt in acute? A: Yes, Dave. The team has been relentless around efficiency in onboarding new patients and utilizing technology to ensure clean claims are put in front of payers. Automation helps us on the front end and creates a more confident revenue cycle event on the back end, resulting in much lower contractual bad debt.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.