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Participants

Michael Combs; President, Chief Executive Officer; CorVel Corp

Brandon O'Brien; Chief Financial Officer; CorVel Corp

Presentation

Operator

Thank you for standing by. Welcome to the Corvel Corporation quarterly earnings release webcast. During the course of this webcast, Corvel Corporation may make projections or other forward-looking statements regarding future events or the future financial performances of the company.
Corvel wishes to caution you that these statements are only predictions and that actual events or results may differ. Materially. Corvel refers you to the documents that the company files from time to time with the Securities and Exchange Commission, specifically, the company's last form 10-K and 10-Q files for the most recent fiscal year and quarter.
These documents contain and identify important factors that could cause the actual results to differ materially from those contained in our projections or forward-looking statements.
I would now like to turn it over to Michael Combs, President and Chief Executive Officer.

Michael Combs

Good morning. Thank you for joining us to review Corvel's September quarter, Brandon o'brien Corvel's Chief Financial Officer is on the call with me today today. I will review business performance, the current environment and market trends and progress on new product and service offerings. Brennan will then provide additional details on the financial results for the quarter, the September quarter, revenues were $224 million, which represents a 15% increase over the $196 million of revenue for the September 2023 quarter earnings per share for the quarter were a $35 a 17% increase from a $15 per share in the same quarter of the prior year.
Corel's conservative fiscal principles have given us a strong balance sheet with positive cash flow which provides us with financial flexibility. This allows us to prioritize investments in systems, technological innovation and growth initiatives. While returning value to shareholders, Coville has seen significant growth in its network solutions offerings due to increased investments made over the past several years.
This growth has sparked heightened market interest and contributed to more meaningful expansions in this area of our business.
Alongside this, the continued strong performance of Corvel's patient management segment is further enhancing our financial results.
The quarterly results benefited from revenue generated by several large network solutions programs launched in previous quarters.
As discussed in the June earnings call, the initial cost for staffing and training occurred before these programs went live. The upfront investments allowed for smooth and seamless implementations for new partners and enabled a rapid increase in transaction volumes effectively onboarding new customers sets corvel apart from competitors and we consistently review processes to identify additional opportunities to strengthen our advantage.
In addition to successfully winning and implementing new customers, we deeply value maintaining our partnerships and are thankful to have companies we have done business with for multiple decades.
To that end, we recently hosted our annual partnership meeting with many strategic clients. The meeting provided us an opportunity to showcase recent program enhancements, review, ongoing initiatives and outline our vision for products and services over the next few years.
During the meeting, we received valuable feedback that affirm the current key areas of focus, specifically, those that give us the opportunity to have the greatest impact on our partners' programs. We are thankful for the participation and active engagement.
Additionally, the team attended the National workers' Compensation Disability Conference where we hosted meetings with current partners, future prospects and brokers those conversations, especially with brokers validated our position in the market and the drivers for our increase in market share attributes cited were the engagement results achieved transparency and communication and technological innovation. We are honored to have the reputation we fostered in the industry and work tirelessly to protect it in health care. The trend towards vertical integration continues to reshape the workers' compensation industry.
The consolidation of health care organizations controlling multiple stages of the patient care process have been driven by the expansion of large health care systems and the decline of privately owned medical facilities and practices.
The number of physicians practicing at hospital owned sites increased by almost 15% over the last 10 years. On paper, this integration makes sense for health care if physicians work directly for hospitals, there should be improved efficiency. A higher quality of care, increased patient satisfaction and enhanced visibility and consultation amongst all parties.
However, individual injured workers saw a significantly higher number of providers leading to some frustration in the increased number of visits which grew by 11%.
The vertical integrations have resulted in an increase in advanced diagnostic tests, greater specialty engagement and higher overall treatment utilization which increase the overall cost of treatment by more than 10% with negligible impact to the outcomes achieved to address these increases in visits and costs. Due to vertical integration. Corvel utilizes an extensive network of health care providers to ensure that our partners have access to high quality medical care supported by state certified network programs such as MCOS, MPNS and HCMS.
These certified programs enable local engagement and expertise complemented by comprehensive case management and utilization programs designed to ensure appropriate effective treatment, optimal recovery outcomes and savings.
We are also leveraging technology including A I powered algorithms to identify and address claims that have high risk factors as well as advanced analytics to increase feedback too and transparency with our network providers.
Pharmacy pricing remains a hot topic with federal and state regulatory changes focusing on drug cost transparency. Currently, 49 of 50 states have proposed rules surrounding pharmaceutical costs and health care. And the FTC has an open investigation into PBMs centered around clawbacks on unaffiliated pharmacies, steerage to PBM owned pharmacies and the complexity of pharmacy reimbursements and rebates as such. Corvel is committed to offering flexible transparent pricing models to meet industry needs concerning the topic of rebates which has gained increased attention. Corvel does not accept rebates as a substitute for thorough and aggressive pricing negotiations.
The integration with our bill review platform allows us to leverage state fee schedules, formularies and acquisition cost standards which when paired with our high touch model allows us to provide employers with a comprehensive approach to managing pharmacy benefits.
Specifically, Corvel's cost transparency leads to meaningful cost savings, improved health outcomes for injured workers, reduced administrative burdens and enhance negotiation capabilities. Corvel's approach provides a strong return on investment by optimizing medication use which prevents costly complications and also streamlines processes inflated pharmaceutical costs are one of the major causes for the medical inflation trend in the US which is rising sharply and expected to continue well into 2025 for 2024. The medical cost trend has been revised upwards due to increased utilization of services and prescription drugs, particularly new therapies like GLP one drugs used for diabetes and weight management.
At Corvel, we advocate for the use of generic drugs when available to reduce costs. However, inflationary pressures from operational expenses, increased demand for behavioral health services and postponed care due to the pandemic are also significant factors. Driving the increases in health care costs.
Our solutions are geared towards driving the optimal outcomes for injured workers while mitigating rising costs in the health market. The demand for prepaid solutions remains steady to ensure claims are paid accurately. The first time ceris focused on the commercial health market utilizes extensive experience in the prepaid space to expand prepaid solutions.
With investments in A I and machine learning ceris delivers faster medical cost savings through tailored solutions for our partners.
The commercial health strategy focuses on differentiating our services through deep industry expertise, comprehensive product offerings and consistent proven results delivered.
As new products mature cost structures are optimized and operational efficiencies enhanced most recently with improvements to the DRG product. These include advanced machine learning and postpay and the launch of prepaid DRG.
The ceris is a trusted partner for payers consistently delivering incremental savings and industry leading Roi while remaining independent of M&A activity in the commercial space where volume based growth often results in price compression. We mitigate this pressure through A I driven efficiencies that streamline workflows and reduce manual processes.
Ceris is also expanding access to our solutions by partnering with claim technology platforms allowing payers to integrate ceris offerings through a single integration point. This approach increases market penetration and consolidates solutions on one platform.
Brandon will now provide additional texture on the financial results for the September quarter.