Certain data included on this quarterly report on Form 10-Q (“quarterly
report”) and the paperwork included by reference herein, if any, include
statements inside the that means of the secure harbor provisions of the U.S. Private
Securities Litigation Reform Act of 1995. All statements apart from statements
of historic truth are statements that may very well be ahead-wanting. You can
acknowledge these statements by way of our use of phrases comparable to “anticipate,”
“consider,” “proceed,” “may,” “estimate,” “anticipate,” “forecast,” “future,”
“intend,” “doubtless,” “might,” “would possibly,” “goal,” “plan,” “potential,” “predict,”
“venture,” “ought to,” “technique,” “will,” “would,” different related expressions and
their negatives.
Forward-looking statements are topic to recognized and unknown dangers, uncertainties
and different components, many of which can be past our management, that might trigger
precise outcomes to vary materially from any future outcomes, expressed or
implied, in ahead wanting statements. Such components embrace, however should not
restricted to:
? the affect on our enterprise of COVID-19, in addition to its impacts on the
Workers’ Compensation trade, the companies of our clients and on the
economic system typically;
? price discount efforts by our present and potential clients;
? competitors inside our trade, together with competitors from a lot bigger
opponents;
? enterprise combos amongst our clients or opponents;
? legislative and regulatory necessities or adjustments which may render our
providers much less aggressive or out of date;
? our failure to efficiently develop new providers and/or merchandise both
organically or by way of acquisition, or to anticipate present or potential
clients’ wants;
? our capacity to retain present clients and to draw new clients;
? worth will increase;
? cybersecurity and software program system failures and breaches;
? reductions in employee’s compensation claims or the demand for our providers,
from no matter supply; and
? delays, reductions, non-fee, or cancellations of contracts now we have
beforehand entered.
For extra detailed details about specific threat components associated to us and
our enterprise, see Item 1A Risk Factors of our Annual Report on Form 10-Ok for the
12 months ended December 31, 2020, filed the Securities and Exchange Commission (the
“Commission”) on March 31, 2021 (the “Annual Report”).
We function in a really aggressive and quickly altering atmosphere. New threat
components emerge occasionally, and it isn’t attainable for our administration to
predict all threat components, nor can we assess the affect of all components on our
enterprise or the extent to which any issue, or mixture of components, might trigger
precise outcomes to vary materially from these contained in any ahead-wanting
statements.
You mustn’t place undue reliance on ahead-wanting statements. The
ahead-wanting statements are based mostly on the beliefs of administration in addition to
assumptions made by and data at present obtainable to administration and apply
solely as of the date of this report or the respective dates of the paperwork from
which they incorporate by reference. Neither we nor every other individual assumes any
duty for the accuracy or completeness of ahead-wanting statements.
Further, besides to the extent required by legislation, we undertake no obligations to
replace or revise any ahead-wanting statements, whether or not because of this of new
data, future occasions, a change in occasions, circumstances, circumstances or
assumptions underlying such statements, or in any other case.
The following dialogue must be learn together with our unauditedcondensed consolidated monetary statements and the associated notes containedelsewhere on this report and in our different filings with the Commission.
Throughout this quarterly report, until the context signifies in any other case, the
phrases, “we,” “us,” “our” or “the Company” confer with Pacific Health Care
Organization, Inc., (“PHCO”) and our wholly-owned subsidiaries Medex Healthcare,
Inc. (“Medex”), Industrial Resolutions Coalition, Inc. (“IRC”), Medex Managed
Care, Inc. (“MMC”), Medex Medical Management, Inc. (“MMM”), Medex Legal Support,
Inc. (“MLS”) and Pacific Medical Holding Company, Inc. (“PMHC”).
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Overview
We included underneath the legal guidelines of the state of Utah in April 1970, underneath the
title Clear Air, Inc. We modified our title to Pacific Health Care Organization,
Inc., in January 2001. In February 2001, we acquired Medex, a California
company organized in March 1994, in a share for share alternate. Medex is in
the enterprise of managing and administering each Health Care Organizations
(“HCOs”) and Medical Provider Networks (“MPNs”) within the state of California. In
August 2001 we shaped IRC, a California company, as a completely owned
subsidiary of PHCO. Prior to closing IRC, IRC oversaw and managed our Workers’
Compensation carve-outs providers. In June 2010, we acquired MLS, a Nevada
company included in September 2009. Prior to closing MLS, MLS supplied
lien illustration providers and Medicare Set-aside providers (“MSA”). In
February 2012, we included MMM, a Nevada company, as a completely owned
subsidiary of the Company. MMM is liable for overseeing and managing
medical case administration providers. In March 2011, we included MMC, a Nevada
company, as a completely owned subsidiary of the Company. MMC oversees and
manages the Company’s utilization assessment and invoice assessment providers. In October
2018, we included PMHC, a Nevada company, as a completely owned subsidiary
of the Company to behave as a holding firm for future potential acquisitions.
In October 2021, to simplify enterprise procedures, bookkeeping and administrative
construction; and get rid of duplicative capabilities and cut back prices; we terminated
the existence of IRC, MLS and PMHC and wound up these subsidiaries. The
enterprise, belongings, liabilities, and providers of these entities have been
transferred to PHCO or its different subsidiaries. Medex will now provide our Workers’
Compensation carve-out providers beforehand supplied by IRC and Medicare-set
asides beforehand managed by MLS and MMC will oversee the lien illustration
providers beforehand supplied by MLS.
Business of the Company
We provide an built-in and layered array of complimentary enterprise options
that allow our clients to raised handle their worker Workers’
Compensation-related healthcare administration prices. We are always wanting
for tactics to increase the suite of providers we are able to present our clients, both
by way of strategic acquisitions or natural growth.
Our enterprise goal is to ship worth to our clients that reduces their
Workers’ Compensation-related medical claims expense in a fashion that can
guarantee injured workers obtain prime quality healthcare that permits them to
get better from damage and return to gainful employment with out undue delay.
According to research performed by auditing our bodies on behalf of the California
Division of Workers’ Compensation, (“DWC”) the 2 most vital price drivers
for Workers’ Compensation are claims frequency and medical therapy prices. Our
providers concentrate on containing medical therapy prices.
We provide our clients entry to our well being care organizations (“HCOs”) and our
medical supplier networks (“MPNs”). We additionally present medical case administration,
discipline medical case administration, community entry, utilization assessment, medical invoice
assessment, Workers’ Compensation carve-outs and Medicare set-apart providers.
Additionally, we provide lien illustration and skilled witness testimony,
ancillary to our providers. We present our providers as a bundled resolution, as
standalone providers, or as add-on providers.
Our core providers concentrate on decreasing medical therapy prices by enabling our
clients to share management over the medical therapy course of. This management is
primarily obtained by participation in a single of our medical therapy networks. We
maintain a number of authorities-issued licenses to function medical therapy networks.
Through Medex we maintain two of a complete of seven licenses issued by the state of
California to ascertain and handle HCOs inside the state of California. We additionally
maintain approvals issued by the state of California to behave as an MPN and at present
administer 26 MPNs. Our HCO and MPN applications present our clients with supplier
networks inside which our clients have some capacity to direct the
administration of worker claims. This is designed to lower the incidence of
fraudulent claims and incapacity awards and guarantee injured workers obtain the
vital again-to-work rehabilitation and coaching they want. Our medical invoice
and utilization assessment providers present oversight of medical billing and
therapy requests, together with medical case administration, which retains medical
therapy claims progressing to a decision and assures therapy plans are
aligned from a medical perspective.
Our clients embrace self-administered employers, insurers, third celebration
directors, municipalities, and others. Our principal clients are
corporations with operations situated within the state of California the place the excessive price
of Workers’ Compensation insurance coverage is a important downside for employers, although
we’re capable of course of medical payments nationally. Our supplier networks, which
are situated solely in California, are composed of suppliers skilled in
treating employee accidents.
Our enterprise typically has a protracted gross sales cycle, usually eight months or extra.
Once now we have established a buyer relationship and enrolled workers of our
clients, we anticipate our income to regulate with the expansion or retraction of
our clients’ worker headcount. Throughout the 12 months, we anticipate new workers
and clients to be added whereas others terminate for a range of causes.
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Impact of COVID-19 on our Business
To date, now we have been capable of adapt our enterprise operations to a primarily
distant workforce, with no materials interruptions in service, knowledge breaches,
know-how failures, or incapacity to finish mission-important capabilities. We
have been capable of successfully keep contact with workers, companions,
clients, and different associated events utilizing technological options comparable to
digital conferences and enhanced collaboration applications and have developed insurance policies
and protocols to make sure division and worker efficiency high quality is
maintained regardless of the change in work setting. This has resulted in prices
related to sustaining a distant workforce, together with reimbursing workers
for web, telephone, and workplace provide bills; prices of sanitizing and
cleansing the workplace after potential COVID-19 publicity occasions; prices of cleansing
and PPE provides; further laptop {hardware} prices; and some administrative
burdens in complying with California legal guidelines and laws associated to COVID-19.
Revenue for our providers is derived from our clients’ worker headcount and
employees’ office accidents. During the durations coated by this report, a number of
of our clients, together with some of our largest clients, have needed to droop
or considerably modify their operations throughout a lot or all of the pandemic.
While California has lifted many of its restrictions, it’s nonetheless making an attempt to sluggish
the unfold of COVID-19 and sure counties and companies have continued or
reinstated masking and now have vaccine necessities. Despite the lifting of
COVID-19 restrictions for many companies, some of our clients proceed to
expertise decrease than regular enterprise quantity and worker counts because of the
pandemic. Until the impacts of COVID-19 on our clients’ companies reduce,
workers return to extra regular workloads and the prevalence of office
accidents returns to extra conventional ranges, we anticipate our revenues will
proceed to be negatively affected.
California has handed laws to deal with employer legal responsibility in Workers’
Compensation for COVID-19 circumstances. The legislation creates two rebuttable presumptions
that COVID-19 sicknesses contracted by particular classes of workers are work
associated and subsequently eligible for employees’ compensation. The first presumption
applies to COVID-19 employees’ compensation claims filed by peace officers,
firefighters, first responders, and well being care employees, and doesn’t apply to
our workers, although it might apply to our clients’ claims. The second
presumption, for employers with 5 or extra workers, applies to workers who
take a look at optimistic for COVID-19 throughout an outbreak on the worker’s particular place
of employment. An outbreak happens when a set quantity of workers – relying on
the quantity of workers on the office – take a look at optimistic for COVID-19 throughout a
steady 14-day interval. This presumption applies to the Company. However, no
Workers’ Compensation circumstances associated to COVID-19 and/or by way of this California legislation
have been filed in opposition to the Company thus far.
In April 2020, the Department of Labor issued laws to implement the
Families First Coronavirus Response Act (“FFCRA”) which supplied workers paid
go away for COVID-19 associated sickness for themselves and/or a member of the family and
supplied employers with tax credit. The FFRCA expired on December 31, 2020. In
March 2021, the American Rescue Plan Act (“ARPA”) was signed into legislation. The ARPA
made tax credit obtainable to employers with fewer than 500 workers who
voluntarily selected to grant workers paid go away underneath the FFCRA by way of
September 30, 2021 and up to date sure FFCRA go away provisions. We voluntarily
selected to increase the FFCRA paid go away to our workers by way of its expiration on
September 30, 2021 and take the tax credit. Since its expiration, the corporate
has ceased to supply COVID-19-particular paid go away advantages to its workers.
Since its expiration, now we have ceased to supply COVID-19-particular paid go away
advantages to its workers. Family, medical, and different varieties of go away stay
obtainable to workers underneath present firm coverage.
In March 2021, California handed its personal COVID-19 Supplemental Paid Sick Leave
legislation (“CA SPSL”). It supplied workers paid go away for COVID-19 associated causes
comparable to caring for themselves, members of the family, or for vaccine associated
appointments or sicknesses brought on by COVID-19 or the vaccine from January 1, 2021
by way of September 30, 2021. The CA SPSL allowed workers to retroactively
request reimbursement for qualifying go away or to make use of it in direction of future requests
by way of September 30, 2021. Employers whose workers utilized CA SPSL are
eligible for federal tax credit to offset the prices of offering the CA SPSL.
As of September 30, 2021, the CA SPSL paid go away expired. Therefore, now we have
ceased providing COVID-19-particular paid go away advantages to our workers. Family,
medical, and different varieties of go away stay obtainable to workers underneath present
Company coverage.
In April and May 2020, PHCO, MMM and MMC had been granted Paycheck Protection
Program (“PPP”) loans within the mixture quantity of $460,700. In the spirit of the
PPP mortgage program coverage, which was to guard the continued financial stability
of workers, most of the PPP mortgage quantities went in direction of payroll and worker
profit bills. In February 2021, PHCO, MMC, and MMM obtained full forgiveness
of their PPP loans together with curiosity. MMM was eligible for and obtained a
Second Draw PPP Loan within the quantity of $218,900 on April 1, 2021. This Second
Draw PPP Loan can qualify for full mortgage forgiveness if the disbursements meet
the required forgiveness standards.
In June 2021, the Governor of California terminated the chief order that put
into place the Stay Home Order and Blueprint for a Safer Economy. This eliminated
restrictions on bodily distancing, capability limits on companies, and the
county tiers system. We have elected to permit workers to proceed working
remotely as a security precaution, and at present anticipate sustaining a
significant slice of our workforce totally distant after the pandemic.
We have taken measures to make sure knowledge safety in our transition to distant work
in the course of the pandemic, however there isn’t any assure that they are going to be fully
efficient, that our productiveness won’t be adversely impacted, or that we are going to
not encounter some of the frequent dangers related to a distant workforce,
together with workers accessing firm knowledge and methods remotely. As mentioned in
larger element in Item 1A Risk Factors of our Annual Report, our enterprise has
been and may proceed to be materially and adversely affected by the potential
interruptions to our enterprise operations arising from the COVID-19 outbreak.
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Results of Operations
Comparison of the three months ended September 30, 2021 and 2020
The following represents chosen parts of our consolidated outcomes ofoperations for the three-month durations ended September 30, 2021 and 2020,respectively, along with adjustments from interval-to-interval:
For three months ended
September 30,
2021 2020 Amount Change % Change
Revenues:
HCO $ 289,117 $ 264,781 $ 24,336 9 %
MPN 137,834 124,836 12,998 10 %
Utilization assessment 258,251 307,139 (48,888 ) (16 %)
Medical invoice assessment 117,685 77,075 40,610 53 %
Medical case administration 439,073 590,784 (151,711 ) (26 %)
Other 68,658 51,139 17,519 34 %
Total revenues 1,310,618 1,415,754 (105,136 ) (7 %)
Expense:
Depreciation 12,657 14,122 (1,465 ) (10 %)
Bad debt provision – 11,000 (11,000 ) (100 %)
Consulting charges 58,275 58,621 (346 ) (1 %)
Salaries and wages 679,530 694,352 (14,822 ) (2 %)
Professional charges 76,014 68,979 7,035 10 %
Insurance 86,527 91,951 (5,424 ) (6 %)
Outsource service charges 109,926 115,803 (5,877 ) (5 %)
Data upkeep 11,917 6,603 5,314 80 %
General and administrative 168,939 163,863 5,076 3 %
Total bills 1,203,785 1,225,294 (21,509 ) (2 %)
Income from operations 106,833 190,460
(83,627 ) (44 %)
Income earlier than taxes 106,833 190,460 (83,627 ) (44 %)
Income tax provision 29,987 53,463 (23,476 ) (44 %)
Net revenue $ 76,846 $ 136,997 $ (60,151 ) (44 %)
Revenue
HCO
During the three-month durations ended September 30, 2021 and 2020, HCO
income was $289,117 and $264,781, respectively. The 9% enhance was as a consequence of an
enhance in claims exercise and renegotiation of sure deliverables to an
present buyer, partially offset by the loss of one buyer within the third
quarter of 2021. HCO income is generated largely from charges charged to our
employer clients for entry to our HCO networks, per declare charges, notification
charges and charges for different ancillary providers the employer clients utilizing our HCO
networks might choose. HCO notifications are mailed out yearly and handed out by
the employer for all new hires.
MPN
MPN income for the three-month durations ended September 30, 2021 and 2020, was
$137,834 and $124,836, respectively, a rise of 10%. The enhance in MPN
income was as a consequence of a rise within the quantity claims reported by present
clients which resulted in additional declare community charges. Like HCO income, MPN
income is generated largely from charges charged to our employer clients for
entry to our MPN networks, per declare charges and charges for different ancillary providers
the employer clients utilizing our MPN networks might choose. Unlike HCOs, MPNs do
not require annual notifications. MPNs require a discover be given to an injured
employee solely on the time the employer is notified by the injured employee that an
damage has occurred.
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Utilization Review
During the three-month durations ended September 30, 2021 and 2020, utilization
assessment income was $258,251 and $307,139, respectively. The lower of $48,888
within the 2021 interval was as a consequence of a lower in utilization critiques from present
clients and the loss of two clients in 2021.
Utilization assessment is the assessment of medical therapy requests by suppliers to
present a safeguard for employers and injured employees in opposition to pointless and
inappropriate medical therapy from the angle of medical necessity,
high quality of care, appropriateness of choice-making, and timeliness of
therapy. Its objective is to scale back employer legal responsibility for medical prices that
should not medically applicable or accepted by the related medical and authorized
authorities and the payor.
Medical Bill Review
During the three-month interval ended September 30, 2021, medical invoice assessment
income elevated by $40,610, to $117,685, in comparison with $77,075 throughout the identical
interval a 12 months earlier. The enhance was primarily as a consequence of processing extra medical
and hospital payments from present clients, partially offset by the loss of a
buyer within the third quarter of 2021.
Medical invoice assessment entails analyzing medical supplier providers and gear
billing to determine correct reimbursement. Such providers embrace, however should not
restricted to, coding assessment and re-bundling, confirming that the providers are
customary and cheap, price schedule compliance, out-of-community invoice assessment,
pharmacy assessment, and most popular supplier group repricing preparations. Our
medical invoice assessment providers can lead to vital financial savings for our
clients.
Medical Case Management
During the three-month durations ended September 30, 2021 and 2020, medical case
administration income was $439,073 and $590,784, respectively. The lower in
medical case administration income of $151,711 was primarily as a consequence of a lower in
the quantity of claims managed with present clients.
Medical case administration retains medical therapy claims progressing to a
decision and assures therapy plans are aligned from a medical perspective.
Medical oversight is a collaborative course of that assesses, evaluates,
coordinates, implements and displays medical therapy plans and the choices and
providers required to fulfill an injured employee’s well being wants. A medical case
supervisor acts as a liaison between the injured employee, claims adjuster, medical
suppliers, and attorneys to attain optimum outcomes for injured employees and
clients. We work to handle the quantity of nurses in our program to take care of our
ratio of claims per nurse at a stage that ensures well timed and applicable medical
care is given to the injured employee and facilitates sooner claims closures for
our clients.
Other
Other income consists of income derived from community entry charges charged to
non-HCO, non-MPN clients to entry our community of medical suppliers, lien
illustration, authorized help providers, Medicare set-apart and Workers’
Compensation carve-out providers. Other income for 3-month durations ended
September 30, 2021 and 2020, was $68,658 and $51,139, respectively. The enhance
in different income of 34% was the outcome of will increase in community entry and
Medicare set-apart claims processed.
Expenses
Total bills for the three months ended September 30, 2021 and 2020, had been
$1,203,785 and $1,225,294, respectively. The 2% lower in bills was the
outcome of decreases in depreciation, unhealthy debt provision, consulting charges,
salaries and wages, insurance coverage, and outsource service charges, partially offset by
will increase in skilled charges, knowledge upkeep, and common and
administrative.
Depreciation
During the three-month interval ended September 30, 2021, we recorded depreciation
expense of $12,657 in comparison with $14,122 in the course of the comparable 2020 interval. The
lower in depreciation was primarily attributable to sure mounted belongings
being totally depreciated, partially offset by the buying of new mounted belongings.
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Bad Debt Provision
During the three-month interval ended September 30, 2021, unhealthy debt provisiondecreased by $11,000 or 100% in comparison with the identical interval in 2020. The decreasewas as a consequence of delinquent clients resolving excellent previous-due balances andstaying present of their fee obligations.
Consulting Fees
During the three months ended September 30, 2021, consulting charges decreased to
$58,275 from $58,621 in comparison with the three months ended September 30, 2020. The
1% lower was the outcome of a discount within the quantity of data methods
consultants retained as in comparison with the third quarter of 2020.
Salaries and Wages
During the three-month interval ended September 30, 2021, salaries and wages
decreased by 2% when in comparison with the identical interval in 2020. This lower was the
outcome of the layoff of two workers in July 2021 as a result of of the COVID-19
pandemic. As a outcome of the layoff, we anticipate salaries and wages to proceed to
be decrease all through the rest of 2021 than they had been in 2020.
Professional Fees
For the three months ended September 30, 2021, skilled charges elevated by
10% from $68,979 to $76,014 when in comparison with the three months ended September
30, 2020. The enhance in skilled charges was the outcome of will increase in
accounting, authorized, and medical administration charges, partially offset by decreases in
different skilled charges.
Insurance
During the three-month interval ended September 30, 2021, we incurred insurance coverage
bills of $86,527, a 6% lower over the identical three-month interval of 2020. The
lower in insurance coverage bills was primarily attributed to decrease medical
insurance coverage premiums and Workers’ Compensation protection because of this of our diminished
workforce, partially offset by will increase in insurance coverage bills for enterprise, and
administrators’ and officers’ legal responsibility for the three-month interval of 2021 in contrast
to the identical interval of 2020.
Outsource Service Fees
Outsource service charges consist of prices incurred by our subsidiaries in
outsourcing some capabilities of utilization assessment, medical invoice assessment, Medicare
set-apart providers and discipline medical case administration and usually fluctuates
with the demand for these providers. We incurred $109,926 and $115,803 in
outsource service charges in the course of the three-month durations ended September 2021 and
2020, respectively. The lower of 5% was as a consequence of a lower in quantity from our
clients which resulted in fewer outsource providers charges for
Medicare-set-asides, utilization assessment, and discipline medical case administration
assignments, partially offset by incurring extra outsource service charges for
medical invoice assessment as a consequence of a rise within the quantity of payments reviewed and a
$15,000 penalty paid to State of California Department of Industrial Relations
for errors discovered throughout our frequently scheduled utilization assessment audit. We
have since made the required corrections to our system and course of.
Data Maintenance
During the three-month durations ended September 30, 2021 and 2020, knowledge
upkeep charges had been $11,917 and $6,603, respectively. The enhance of $5,314
was the outcome of a rise in quantity of HCO, MPN, and new rent notifications
for present clients in the course of the three-month interval ended September 30, 2021,
when in comparison with the identical interval in 2020. Data upkeep charges are likely to
fluctuate month-to-month relying on when new clients are enrolled, annual renewals
for present clients, and the quantity of new workers our clients enroll in
our HCO or MPN applications.
General and Administrative
During the three-month interval ended September 30, 2021, common and
administrative bills elevated 3% to $168,939 when in comparison with the
three-month interval ended September 30, 2020. This enhance of $5,076 was
primarily attributable to will increase in charity – money contribution, dues and
subscriptions, training, IT enhancement, licenses and permits, parking,
printing and copy, workplace hire, shareholders’ expense, and journey and
leisure, partially offset by decreases in auto bills, financial institution prices,
gear/repairs, workplace provides, postage, hire expense for gear,
phone, miscellaneous bills, and trip bills.
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Income from Operations
As a outcome of the $105,136 lower in whole income in the course of the three-month
interval ended September 30, 2021, and the $21,509 lower in whole bills
throughout the identical interval, our revenue from operations decreased $83,627, or 44%,
in the course of the three-month interval ended September 30, 2021, when in comparison with the
identical interval in 2020.
Income Tax Provision
We realized a $23,476, or 44%, lower in our revenue tax provision in the course of the
three-month interval ended September 30, 2021, in comparison with the three-month interval
ended September 30, 2020, as a result of of the lower in revenue earlier than taxes
realized within the 2021 interval.
Net Income
During the three-month interval ended September 30, 2021, we realized a 7%
lower in whole revenues, a 2% lower in whole bills, and a 44% lower
in our provision for revenue tax when in comparison with the identical interval in 2020. As a
outcome, we realized a internet lower of $60,151, or 44%, in internet revenue in the course of the
three-month interval ended September 30, 2021, in comparison with the three-month interval
ended September 30, 2020.
Comparison of 9 months ended September 30, 2021 and 2020
The following represents chosen parts of our consolidated outcomes ofoperations, for the 9-month durations ended September 30, 2021 and 2020,respectively, along with adjustments from interval-to-interval:
For 9 months ended
September 30,
2021 2020 Amount Change % Change
Revenues:
HCO $ 936,382 $ 916,693 $ 19,689 2 %
MPN 396,497 363,902 32,595 9 %
Utilization assessment 796,927 854,922 (57,995 ) (7 %)
Medical invoice assessment 292,445 242,237 50,208 21 %
Medical case administration 1,381,929 1,855,314 (473,385 ) (26 %)
Other 174,251 202,101 (27,850 ) (14 %)
Total revenues 3,978,431 4,435,169 (456,738 ) (10 %)
Expense:
Depreciation 35,964 46,716 (10,752 ) (23 %)
Bad debt provision 494 11,101 (10,607 ) (96 %)
Consulting charges 173,796 195,978 (22,182 ) (11 %)
Salaries and wages 2,073,133 2,238,079 (164,946 ) (7 %)
Professional charges 221,970 223,747 (1,777 ) (1 %)
Insurance 242,334 274,974 (32,640 ) (12 %)
Outsource service charges 304,085 359,596 (55,511 ) (15 %)
Data upkeep 75,293 59,415 15,878 27 %
General and administrative 492,264 515,738 (23,474 ) (5 %)
Total bills 3,619,333 3,925,344 (306,011 ) (8 %)
Income from operations 359,098 509,825 (150,727 ) (30 %)
Other revenue (expense)
Paycheck safety program mortgage
forgiveness revenue 464,386 – 464,386 –
Paycheck safety program mortgage
curiosity expense (3,686 ) – (3,686 ) –
Total different revenue (expense) 460,700 – 460,700 –
Income earlier than taxes 819,798 509,825 309,973 61 %
Income tax provision 140,956 143,111 (2,155 ) (2 %)
Net revenue $ 678,842 $ 366,714 $ 312,128 85 %
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Revenue
HCO
During the 9-month durations ended September 30, 2021 and 2020, HCO income was
$936,382 and $916,693, respectively. The 2% enhance in HCO income was
primarily attributable to a rise in claims from present clients and
renegotiation of sure deliverables to an present buyer, partially offset
by the loss of three HCO clients and fewer customized community charges paid by
clients to take care of customized supplier lists.
MPN
MPN income for the 9-month durations ended September 30, 2021 and 2020, was
$396,497 and $363,902, respectively, a rise of 9%, as a consequence of a rise in
the quantity of claims reported by two clients. Like HCO income, MPN income is
generated largely from charges charged to our employer clients for entry to our
MPN networks, per declare charges and charges for different ancillary providers.
Utilization Review
During the 9-month durations ended September 30, 2021 and 2020, utilization
assessment income was $796,927 and $854,922, respectively. The lower of 7% in
the 2021 interval was primarily attributable to decreased utilization critiques from
the loss of two clients and fewer utilization critiques submitted by different
clients.
Medical Bill Review
During the 9-month interval ended September 30, 2021, medical invoice assessment
income elevated by 21% to $292,445 from $242,237 when in comparison with the identical
interval a 12 months earlier. This enhance was as a consequence of a rise in hospital and
non-hospital payments reviewed, partially offset by the loss of two clients in
2021.
Medical Case Management
During the 9 months ended September 30, 2021 and 2020, medical case
administration income was $1,381,929 and $1,855,314, respectively. The 26% lower
in medical case administration income was primarily because of the loss of two
clients and a lower within the quantity of claims and quantity of time spent on
claims managed with present clients. The lower was partially offset by the
addition of a brand new buyer in the course of the first quarter of 2021.
Other
Other income for the 9-month durations ended September 30, 2021 and 2020, was
$174,251 and $202,101, respectively. The lower of $27,850 was primarily the
outcome of fewer Medicare set-apart claims, partially offset by a rise in
community entry price income from an present buyer rising its utilization
of our supplier community.
Expenses
Total bills for the 9 months ended September 30, 2021 and 2020, had been
$3,619,333 and $3,925,344, respectively. The lower of $306,011 was the outcome
of decreases in depreciation, unhealthy debt provision, consulting charges, salaries and
wages, skilled charges, insurance coverage, outsource service charges, and common and
administrative bills, which was partially offset by a rise in knowledge
upkeep charges.
Depreciation
During the 9-month interval ended September 30, 2021, we recorded depreciation
expense of $35,964 in comparison with $46,716 in the course of the comparable 2020 interval. The
lower in depreciation was primarily attributable to sure mounted belongings
being totally depreciated previous to the quarter ended September 30, 2021, partially
offset by the buying of new mounted belongings.
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Bad Debt Provision
During the 9-month interval ended September 30, 2021, unhealthy debt provisiondecreased by $10,607 or 96% in comparison with the identical interval in 2020. The decreasewas as a consequence of delinquent clients resolving excellent previous-due balances andstaying present on their fee obligations.
Consulting Fees
During the 9 months ended September 30, 2021, consulting charges decreased 11%
to $173,796 from $195,978 in the course of the 9 months ended September 30, 2020. This
lower of $22,182 was as a result of we had fewer data methods consulting and
marketing consultant charges associated to our insurance coverage firm acquisition search.
Salaries and Wages
During the 9-month interval ended September 30, 2021, salaries and wagesdecreased 7% to $2,073,133 in comparison with $2,238,079 throughout the identical interval in2020. The lower was primarily the outcome of the layoff of two workers inthe third quarter of 2021. As famous above, we anticipate salaries and wages tocontinue to be decrease all through the rest of 2021 than they had been in 2020.
Professional Fees
For the 9 months ended September 30, 2021, we incurred skilled charges of
$221,970 in comparison with $223,747 in the course of the 9 months ended September 30, 2020.
The $1,777 lower in skilled charges was primarily the outcome of fewer charges
incurred for different skilled and medical administration providers because of this of
decreased medical case administration exercise, partially offset by will increase in
accounting and authorized skilled charges.
Insurance
During the 9-month interval ended September 30, 2021, we incurred insurance coverage
bills of $242,334, a 12% lower over the identical interval in 2020. The lower
in insurance coverage bills was primarily attributed to a lower in medical
insurance coverage premiums because of this of our decrease worker depend and decrease insurance coverage
expense for enterprise, administrators’ and officers’ legal responsibility, and Workers’
Compensation protection.
Outsource Service Fees
We incurred $304,085 and $359,596 in outsource service charges in the course of the
9-month durations ended September 2021 and 2020, respectively. The lower of
$55,511 was primarily the outcome of fewer Medicare set-apart claims, medical
payments reviewed, and utilization critiques processed partially offset by an
enhance in outsource service charges for discipline medical case administration and a
$15,000 penalty paid to State of California Department of Industrial Relations
for errors discovered throughout our frequently scheduled utilization assessment audit. As
famous above, now we have since made the required corrections to our system and
course of.
Data Maintenance
During the 9-month durations ended September 30, 2021 and 2020, knowledge
upkeep charges had been $75,293 and $59,415, respectively. The enhance of $15,878
was primarily the outcome of a rise within the quantity of workers enrolled in
our HCO and MPN applications with our present clients and a rise in
clients’ new rent notifications.
General and Administrative
During the 9-month interval ended September 30, 2021, common and
administrative bills decreased 5% to $492,264 when in comparison with the 9-month
interval ended September 30, 2020. This lower of $23,474 was primarily
attributable to decreases in promoting, dues and subscriptions,
gear/repairs, IT enhancement, licenses and permits, workplace provides,
parking, postage, printing and copy, hire expense for gear,
miscellaneous bills, and shareholders’ expense, partially offset by will increase
in charity – money contribution, auto bills, financial institution cost, training,
phone, workplace hire, journey and leisure, and trip expense.
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Income from Operations
Total income in the course of the 9-month interval ended September 30, 2021, decreased
by $456,738 to $3,978,431 in comparison with $4,435,169 in the identical interval in 2020. Our
whole bills decreased by $306,011 in the course of the 9 months ended September 30,
2021, in comparison with the identical interval in 2020. This led to a lower in revenue from
operations of $150,727, or 30%, in the course of the 9 months ended September 30, 2021,
in comparison with the 9 months ended September 30, 2020.
Other Income (Expense)
In February 2021, the principal and curiosity on the PPP loans issued to PHCO,
MMC and MMM in April and May 2020, was forgiven in full. As a outcome, we
realized revenue from paycheck safety mortgage forgiveness of $464,386 and mortgage
curiosity expense from paycheck safety loans of $3,686 in the course of the 9 months
ended September 30, 2021, leading to whole different revenue in the course of the interval of
$460,700. During the corresponding interval ended September 30, 2020, we realized
no different revenue (expense).
Income Tax Provision
We realized a lower of $2,155 or 2%, in our revenue tax provision in the course of the
9-month interval ended September 30, 2021, in comparison with the 9 months ended
September 30, 2020. The revenue realized from the PPP mortgage forgiveness is exempt
from federal revenue taxation, however not state revenue taxation.
Net Income
During the 9-month interval ended September 30, 2021, whole revenues was
$3,978,431, a lower of 10%, our provision for revenue tax decreased 2% and our
whole bills decreased 8% in comparison with the identical interval of 2020. These decreases
had been offset by the popularity of $460,700 in whole different revenue because of this of
PPP mortgage forgiveness by PHCO, MMM and MMC. As a outcome, we realized a $312,128,
or 85%, enhance in internet revenue in the course of the 9 months ended September 30, 2021,
when in comparison with the 9 months ended September 30, 2020.
Liquidity and Capital Resources
As of September 30, 2021, we had money readily available of $10,155,151 in comparison with
$9,498,457 as of December 31, 2020. The $656,694 enhance was the outcome of internet
money supplied by our working actions and financing actions, partially
offset by money utilized in investing actions.
As of the date of this report, now we have laid off six workers, together with 4 in
July 2020, and two in July 2021, because of this of the COVID-19 pandemic and loss
of clients. As famous above, now we have taken benefit of and might sooner or later
additional avail ourselves of federal, state, or native authorities applications to
defend our workforce as administration and our board of administrators decide to be
in the most effective curiosity of the Company and our shareholders. We have targeted on
utilizing our Second Draw PPP Loan for qualifying bills, comparable to payroll, and
at present plan to use for forgiveness of the Second Draw PPP Loan when
applicable.
We at present have deliberate sure capital expenditures in the course of the the rest of
2021 to decommission sure IT methods and transfer to a different platform. We consider
now we have sufficient capital readily available to cowl these bills and don’t anticipate
it will require us to hunt outdoors sources of funding.
Historically, now we have typically realized optimistic money flows from working
actions, which coupled with optimistic reserves of money readily available, have been used
to fund our working bills and obligations. Management at present believes
that absent any unanticipated COVID-19 affect, together with, however not restricted to a
vital longer-time period downturn within the economic system or the loss of a number of main
clients inside a condensed interval, money readily available and anticipated revenues from
operations will likely be enough to cowl our working bills over the
foreseeable future.
As the affect of the COVID-19 pandemic continues to play out all through our
trade and the broader economic system, we consider our robust money place, may
permit us to establish and capitalize on potential alternatives to increase our
enterprise both by way of the acquisition of present companies that will have
inadequate assets to beat the impacts of the pandemic, together with,
growth into the insurance coverage trade or by way of the creation of new strains of
enterprise. Depending upon the character of the alternatives we establish, such
acquisitions or growth may require larger capital assets than we
at present possess. Should we’d like further capital assets, we may search to
receive such by way of debt and/or fairness financing. We don’t at present possess an
institutional supply of financing and there isn’t any assurance that we may very well be
profitable in acquiring fairness or debt financing when wanted on favorable phrases,
or in any respect. We may additionally use shares of our capital inventory as consideration for a
enterprise acquisition transaction, however there may be additionally no assurance that there
could be vital market curiosity in our capital inventory.
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Cash Flow
During the 9 months ended September 30, 2021, money was primarily used to fund
operations. We had a internet enhance in money of $656,694 in the course of the 9 months
ended September 30, 2021. See beneath for added data.
For the 9 months ended September 30,
2021 2020
(unaudited) (unaudited)
Net money supplied by working actions $ 449,993 $ 700,538
Net money utilized in investing actions (12,199 ) (52,803 )
Net money supplied by financing actions 218,900 460,700
Net enhance in money $ 656,694 $ 1,108,435
During the 9 months ended September 30, 2021 and 2020, internet money supplied by
working actions was $449,993 and $700,538, respectively, a lower of
$250,545. This lower was primarily the outcome of decreases in whole income,
allowance for unhealthy debt, pay as you go bills, accounts receivable, receivable –
different, accounts payable, accrued bills, revenue tax payable, and deferred hire
expense, partially offset by will increase in deferred hire belongings and unearned
income. As a outcome of making use of the PPP mortgage forgiveness we realized an
enhance in internet revenue.
Net money utilized in investing actions was $12,199 and $52,803 throughout thenine-month durations ended September 30, 2021 and 2020, respectively. During thenine-month durations ended September 30, 2021 and 2020, internet money was used ininvesting actions to buy computer systems and gear.
Net money supplied by financing actions in the course of the 9 months ended September
30, 2021 and 2020, was $218,900 and $460,700, respectively. During 2020 we
obtained three PPP loans for PHCO, MMC and MMM within the quantities of $133,400,
$59,600, and $267,700, respectively. These loans had been forgiven in February 2021.
In April 2021, MMM obtained a Second Draw PPP mortgage within the quantity of $218,900. We
have targeted on utilizing these funds for qualifying bills and plan to use for
mortgage forgiveness sooner or later.
Off-Balance Sheet Financing Arrangements
As of September 30, 2021, we had no off-stability sheet financing preparations.
Critical Accounting Policies and Estimates
Our consolidated monetary statements are ready in accordance with GAAP.
Application of these rules requires us to make estimates, assumptions, and
judgments that have an effect on the quantities reported in our consolidated monetary
statements and accompanying notes. We regularly consider our accounting
insurance policies, estimates, and judgments and base our estimates and judgments on
historic expertise and numerous different components that we consider to be cheap
underneath the circumstances. Because of the inherent uncertainty in making estimates
and judgments, precise outcomes may differ from our estimates and judgments. We
take into account (i) income recognition, (ii) leases, (iii) allowance for uncollectible
accounts, and (iv) revenue taxes to be essentially the most important accounting insurance policies
as a result of they relate to accounting areas that require essentially the most subjective or
advanced judgments by us, and, as such, may very well be most topic to revision as new
data turns into obtainable.
Revenue Recognition: We acknowledge income when management of the promised providers
is transferred to our clients in an quantity that displays the consideration we
anticipate to be entitled to in alternate for these providers. As we full our
efficiency obligations that are recognized beneath, now we have an unconditional
proper to consideration as outlined in our contracts with our clients.
Generally, our accounts receivables are anticipated to be collected in 30 days in
accordance with the underlying fee phrases.
We provide a number of providers underneath our managed care and community options service
strains, which the shopper might select to buy. These providers are billed
individually as separate parts to our clients. Revenue is acknowledged as
the work is carried out in accordance with our buyer contracts. Based upon the
nature of our merchandise, bundled managed care parts are typically delivered in
the identical accounting interval. Advance funds from subscribers and billings made
upfront are recorded on the stability sheet as unearned income.
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Leases: We decide if an association features a lease at inception.
Right-of-use belongings symbolize our proper to make use of an underlying asset for the lease
time period; and lease liabilities symbolize our obligation to make lease funds
arising from the lease. Right-of-use belongings and lease liabilities are acknowledged
on the graduation date of the lease, renewal date of the lease or vital
reworking of the lease area based mostly on the current worth of the remaining future
minimal lease funds. Leases with a time period larger than one 12 months are acknowledged
on the stability sheet as proper-of-use belongings and brief-time period and lengthy-time period lease
liabilities, as relevant.
Operating lease liabilities and their corresponding proper-of-use belongings are
initially recorded based mostly on the current worth of lease funds over the
anticipated remaining lease time period. The rate of interest implicit in lease contracts is
usually not readily determinable. As a outcome, we make the most of our incremental
borrowing charge to low cost lease funds, which displays the mounted charge at
which we may borrow on a collateralized foundation the quantity of the lease funds
in the identical foreign money, for the same time period, in an identical financial atmosphere. Our
leases might embrace choices to increase or terminate the lease that are included
within the lease time period when it’s moderately sure that we are going to train any such
choices. Lease expense for lease funds is acknowledged on a straight-line foundation
over the lease time period.
Allowance for Uncollectible Accounts: We decide our allowance for
uncollectible accounts by contemplating a number of components, together with the size of
time commerce accounts receivables are overdue, our earlier loss historical past, the
clients’ present capacity to pay their obligations to us, and the situation of
the final economic system and the trade as an entire. We write off accounts
receivables once they turn into uncollectible.
We should make vital judgments and estimates in figuring out contractual and
unhealthy debt allowances in any accounting interval. One vital uncertainty
inherent in our evaluation is whether or not our expertise will likely be indicative of future
durations. Although we take into account future projections when estimating contractual and
unhealthy debt allowances, we finally make our selections based mostly on the most effective
data obtainable to us on the time the choice is made. Adverse adjustments in
common financial circumstances or traits in reimbursement quantities for our providers
may have an effect on our contractual and unhealthy debt allowance estimates, assortment of
accounts receivables, money flows, and outcomes of operations. Two clients
accounted for 10% or extra of accounts receivable at September 30, 2021 and 2020,
respectively.
Accounting for Income Taxes: We file a tax provision for the anticipated tax
penalties of our reported outcomes of operations. The provision for revenue
taxes is computed utilizing the asset and legal responsibility methodology, underneath which deferred tax
belongings and liabilities are acknowledged for the anticipated future tax penalties
of non permanent variations between the monetary reporting and tax bases of belongings
and liabilities, and for working losses and tax credit score carryforwards. Deferred
tax belongings and liabilities are measured utilizing the at present enacted tax charges
that apply to taxable revenue in impact for the years wherein these tax belongings
are anticipated to be realized or settled. We file a valuation allowance, if
vital, to scale back deferred tax belongings to the quantity that’s believed extra
doubtless than to not be realized.
We acknowledge tax advantages from unsure tax positions solely whether it is extra doubtless
than not that the tax place will likely be sustained on examination by the taxing
authorities, based mostly on the technical deserves of the place. The tax advantages
acknowledged within the monetary statements from such positions are then measured
based mostly on the biggest profit that has a larger than 50% chance of being
realized upon final settlement.
Management believes it’s extra doubtless than not that forecasted revenue, together with
revenue that could be generated because of this of sure tax planning methods,
along with future reversals of present taxable non permanent variations, will
be enough to totally get better the deferred tax belongings. In the occasion we
decide all, or half of the web deferred tax belongings should not realizable within the
future, we’ll make an adjustment to the valuation allowance that will be
charged to earnings within the interval such dedication is made. In addition, the
calculation of tax liabilities entails vital judgment in estimating the
affect of uncertainties within the software of GAAP and advanced tax legal guidelines.
Resolution of these uncertainties in a fashion inconsistent with administration’s
expectations may have a cloth affect on our monetary situation and
working outcomes. The vital assumptions and estimates described above are
necessary contributors to our final efficient tax charge in annually.
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