InnovAge Holding Corp. (NASDAQ:INNV) First Quarter 2023 Results Conference Call November 8, 2022 5:00 p. m. Eastern Time
Participating companies
Ryan Kubota – Director of IR
Patrick Blair – President and Chief Executive Officer
Bárbara Gutiérrez – Chief Financial Officer
Rich Feifer – Medical Director
Conference Call Participants
Calvin Sternick – JPMorgan
Madeline Mollman-William Blair
Jason Cassorla – Citi
Operator
Good morning, gentlemen, and thank you for being here. Welcome to the call of InnovAge’s Q2 2023 effects convention. [Operator Instructions]
At this point, I would like to pass the convention to Mr. Ryan Kubota, Director of Investor Relations. Please get started, sir.
Ryan Kubota
Thank you, operator. Good morning and thank you all for participating in InnovAge’s first quarter 2023 first quarter earnings call. With me today are Patrick Blair, President and CEO; and Bar Gutierrez, Chief Financial Officer. Rich Feifer, chief of staff, will also sign up for the Q&A portion of the call.
Today, after the market closes, we issued a press release with detailed data on our quarterly results. You can access the press release on our company’s website, innovage. com. For those who are listening to the repetition of this call, we remind you that the comments made here are from today, Tuesday, November 8, 2022, and have not been updated after this call.
During this call, we will address certain non-GAAP measures. Our Q1 2023 press release, which is published in the Investor Relations segment of our website, provides a reconciliation of those measures to directly comparable maximum GAAP measures. We will also make forward-looking statements, adding statements relating to our corrective movements, adding the expansion of our supplier functions, the expansion of our payer functions and the strengthening of our business functions, long-term expansion prospects, long-term regulatory standing and other expectations.
Auditors are cautioned that all of our forward-looking statements involve safe assumptions that are inherently related to threats and uncertainties that could possibly cause our actual effects to differ materially from our existing expectations. We encourage auditors to review the threat items discussed in our Annual Report on Form 10-K for fiscal year 2022 and upcoming reports filed with the SEC, adding our Quarterly Report on Form 10-Q for our first fiscal quarter. 2023. After the final touch of our ready comments, we will open the call for questions.
I will now pass the word on to our President and CEO, Patrick Blair. Patrice?
Patrick Blair
Thank you, Ryan, and good afternoon everyone.
I tried to start by thanking our workers for their determination in caring for our participants and their perseverance in those difficult times. Our government partners for their continued collaboration and our investors for their continued support.
Although it’s been two months since our last call, we’ve continued to make solid progress over the past 60 days. On the regulatory side, we are at a critical inflection point in our segment markets and now have greater visibility into the timing and next steps of validation audits, which is the last step in the audit procedure before sanctions can be issued through our spouse agencies.
At the same time, our operational excellence projects have also progressed well and we remain on track to have substantially completed them by the end of the calfinishar year. We continue to rent centrally to drive those improvements, which have injected new energy and momentum. We are also beginning to see the effect of our clinical pricing projects, or GIVs, on the pricing of our third-party providers.
As I mentioned earlier, our goal is to strengthen our operations to earn the right not to receive sanctions and position the company to serve a growing number of participants in the years to come.
Through investments in people, processes and technology, we consistently provide consistent, high-quality care. As we monitor the post-sanctions increase, building on this strengthened foundation, culpable expansion will become our most sensible priority. Our company’s project is to provide more nursing home-eligible seniors with access to independent living responses as a component of the PACE style of care. To meet this project, we will need to ensure that we can expand access to care at our existing and De Novo facilities.
With this in mind, we have begun formulating plans to drive the expansion of new entrants through rebuilding momentum in recently sanctioned markets and accelerating expansion in others, updating our planned opening hours for De Novo centers, and identifying new referral partners who can help build awareness and registration at PACE, while maintaining a laser focus on providing high-quality, highly compatible care at each and every center, each and every day for each and every participant.
As usual in recent quarters, my comments will focus on our most recent regulatory updates, recent advances in vendor operational excellence and payer capacity development, and the outlook for quarterly monetary results.
I’ll start with a regulatory update. Before we move on to market-specific updates, I need to take a moment to the overall progress we’ve made. In particular, we have invested in a permanent independent infrastructure at each site, allowing us to proactively identify and identify and address gaps and ensure that all sites meet the same superior standards. This includes tracking and tracking a large number of internal compliance movements on a virtual dashboard, adding the nine movements we track as a component of our existing corrective action plans.
Given our performance, our speed of improvement in consistency per month, i. e. in our sanctioned markets and in similar measures to clinical quality and safety, we are in a position to be evaluated to be in a position to be released from sanctions through our regulators. Our government partners have been very committed and have collaborated on the next steps and timing of validation audits.
In Sacramento, we have qualified the California Department of Health Care Services CMS that we are in a position to initiate the validation audit procedure based on six consecutive months of achieving 95% or more on all internal compliance actions. CMS and DHCS accepted our attestation and CMS validation began on November 7. We are in active discussions with DHCS regarding the next steps and timeline for the state validation audit.
Similarly, in Colorado, we experienced comparable operational momentum in our internal compliance metrics, with the assembly of our six centers or surpassing an average accuracy score of 95% in September.
As a result, we have qualified a CMS from the Colorado Department of Healthcare Policy and Financing, HCPF, that we are in a position to begin validation of the process. CMS has accepted our certification and the federal validation audit is expected to begin on December 5. We are in active discussions with HCPF about the next steps and timeline for the state validation audit.
In any case, it remains difficult to know when sanctions will be lifted and when we will be allowed to start recruiting new entrants into those markets. And to be clear, the audit validation program and decisions will be made independently and in the sole discretion of our federal and state regulators.
In our unsanctioned markets, we have gained the final effects of the San Bernardino, New Mexico audit and have a transparent view of corrective actions, which are already underway. In Pennsylvania and Virginia, markets where we have won a formal audit application, we self-audit our centers and see strong functionality across all internal compliance measures.
As stated in the past, we remain tirelessly focused on sustainably improving the way we deliver care by doing so in a highly compatible way. I have stated that we are following our internal goals through the end of the calfinishar year, and I am pleased to report that we continue to make progress throughout this schedule.
I am proud of our progress and pleased with how this positions us to resume a guilty and sustainable expansion after sanctions are issued. To that end, I sought to share some highlights of some recent investments in people, processes and technology.
Since January and September 30, we have hired more than 250 workers and increased full-time FTE at the center point by approximately 11%, while reducing critical vacancies by approximately 76% to help us provide effective and highly compatible care. to build our ING and centers in the long term despite the temporarily reduced penalties due to the census.
This investment positions us well to absorb new listings as we resume growth. We welcome five new leaders who not only bring deep subject matter expertise, leadership experience and energy, but also strengthen a culture of excellence that will serve us well. in the next years.
Most recently, we welcomed Cara Babachicos as our new Chief Information Officer, who has decades of experience in exercise generation targeting patient and provider experience, scaling the clinical generation and power of daily work.
We introduced a 5-pillar functionality control framework, which defines key functionality signs of operational good fortune across the people, service, quality, expansion, and finance pillars. This framework will be used to express what we seek to achieve, to align our daily work. work, prioritize projects and measure and track progress.
We have begun implementing a new Triad Leadership Model, which is a joint dynamic leadership style between the Center Administrator, the Center’s Medical Director, and the Center’s Director of Nursing, designed to foster accountability for functionality as opposed to the five pillars.
As noted above, we have invested particularly in our compliance procedures, adding the permit self-verification procedure for all series. These enhancements give us more physically powerful compliance tracking and a proactive ability to identify hazards across the enterprise. We have revised our interdisciplinary care team procedures, which are at the core of the pulp care delivery model, to make it simpler, more impactful for participants and standardized across the center.
We are implementing a new cloud-based recruitment platform that is helping us attract varied talent, have temporary engagement task seekers and applicants and more at scale, supported through a wonderful candidate and hiring manager experience. We implemented leading EMR and home care control software, which has been a difficult tool for documenting, optimizing operations, developing care compliance and communication between care teams.
And we’re making the largest generation investment in the history of our company, EPIC. We spent the last 18 months co-developing with EPIC, the first paid express example of their particular EMR platform designed for Core PACE workflows and streamline care. delivery.
We effectively implemented EPIC at two centers in Virginia and plan to implement it at the remaining centers in Virginia and Pennsylvania over the next 4 months for the purpose of rolling it out to our portfolio over the next 12 months and beyond.
We, EPIC, provide us with the equipment we want to work most successfully to perform certain standardized processes that meet the requirements and capture the clinical data needed to supply more specific carrier beds.
To conclude the segment on supplier operations, I am proud of the team and what they have achieved. Your frames will be our care and facilities for participants, further help for our employees and quality and performance. Together, these transformative cadres have also unveiled the flywheel that will position us to drive long-term expansion and margins.
Last quarter, we discussed the conclusion of an external assessment of our threat payment capabilities. Remember that they primarily surround provider network control, evidence-based care control, third-party control of care delivery resources, claims payment, and threat accuracy. payment.
At this point, we have seen quick gains, taken action, and are beginning to see the culmination of our hard work as a leading indicator in our PMPM trends of external medical charges. The exact allocation of charge discounts for express projects is complex and we are aware of seasonality considerations, however, we are pleased to see that the spending trend of our PMPM participants increases from an average of approximately 3850 in the fourth quarter to approximately 3700 in September and that those intentional projects are a significant contributor.
Some quick examples. We have reduced the use of qualified nursing care for short stays through our follow-up process. This resulted in a decline from about 120 basic problems to 2. 1% in September from the fourth-quarter average of 3. 3%.
Given the fragility of our participants, these movements can have a significant effect on MPMP spending. Our inpatient admissions also decreased by approximately 70 basic problems to 4. 9% in September from an average of 5. 6% in the fourth quarter. have had this effect through several clinically appropriate triage interventions to cancel out unnecessary emerging emissions.
As for the average daily attendance at the center, I was referring to an improvement of 50% in the last quarter in the 3 months that we have been a private initiative. We continue to make progress and have advanced around 10% until September. In addition, you will recall that last quarter we discussed the importance of recruiting new participants who are in the early stages of paying to a balanced risk group. Because we have not been able to onboard new entrants into our sanctions markets, they have not been able to offset the higher average charge of longer and more fragile participants.
When we are allowed to resume everything with the release of sanctions in Sacramento and Colorado, new entrants will help rebalance our participants in the group, resulting in a decrease in the average PMPM spending we have experienced over the past three quarters.
Over time, we will continue to expand a business framework and programmatic technique for managing the portfolio of clinical pricing projects to maximize impact. While we have leaders committed to the good fortune of the CVI process, this means that new organizational muscles emerge that take time, for example, to expand and benchmark new business instances for projects and continually launch evaluation and rebalancing projects. With that said, you can rest assured that we intend to pursue the same field and attention to detail that we are addressing for all other missions. -critical projects. Additionally, we believe the additional recurring savings on outpatient medical costs it will create over time will be significant.
Let us now turn to a room. We had revenue of $171. 2 million, a sequential low of approximately 1% from last quarter, due to census attrition in Colorado and Sacramento, which, as a reminder, represents a portion of our overall census. We ended the quarter serving approximately 6540 participants. For the first quarter, we reported a central-level contribution margin of $21. 4 million at a corresponding central level contribution margin ratio of 12. 5% to the site-level contribution margin for the fourth quarter of fiscal 2020 of $23. 6 million, a low of $2. 2 million.
This quarter’s financial functionality reflects this momentum and the effect of the sanctions as we continue to work to regain buy-in from our government partners and demonstrate a high-quality, compliant delivery model. In fact, we are also focusing on developing our charge design and accelerating margin recovery levers.
Now I would like to spend a few minutes on the expected path to progress and monetary growth. Last quarter, I explained that more investments would be made in key operational areas, as well as a planned resolution to increase staffing levels despite the decrease in the census. In sanction markets it created a compression of the contribution margin between levels of the sanction period. Some of those prices will be permanent and others temporary.
To accelerate the audit solution and compensate for lost worker productivity in midpoint audits, we use transient labor with a higher position and operate above average over time at the center point. Currently, this driving force of the position represents an average single-digit percentage of our total full-time equivalent workforce, resulting in a combination of suboptimal transience of W-2 workers, transient work, and overtime.
Going forward, we have the opportunity to reduce prices by replacing the most expensive transient hard work with full-time W-2 workers where possible and reducing overtime from existing levels, which will help optimize our operating charge structure. We have been intentional in our staffing decisions to ensure that we can provide high-quality care to participants while handling the audit burden and temporarily absorbing new senses after the seasons.
This resulted in higher staffing ratios relative to our long-term goals, which negatively impacted the quarter’s results. However, it also means that we have the built-in capacity to serve more participants at some of our existing centres without having to increase staff. Therefore, we expect the post-sanction census expansion to have a higher marginal contribution until we have achieved optimal staffing targets for the centres.
In short, it will take several quarters to return to a healthy margin, we have clarity and internal focus on the drivers, basically eliminating the hard work of high-cost transience as soon as possible. Accelerate the expansion of the census to player composition and optimize staffing ratios at the center point so that we can take advantage of operating leverage.
Increasing average daily attendance in the middle to proactively satisfy players’ healthcare desires in the most effective and cost-effective manner, frequently executing known clinical projects to improve player care and reduce unnecessary charges, grow organically and inorganically to better utilize the company’s constant load base. , and improve average productivity by employing state-of-the-art technology such as EPIC and optimizing the style of care to make certain doctors practice at the maximum of their license.
Now let’s move on to growth. Our investments in people, processes and generation have created a stronger foundation for the long-term of our business. While the exact type of sanction release cannot be known precisely, we have initiated agreements to resume growth. As a core component of our company’s project is to provide independent living solutions to more nursing home-eligible seniors across the country, we have been constrained by the higher purpose of building this capability, whether in our existing centers and in our de novo efforts.
We have invested approximately $30 million to build two new centers in Tampa and Orlando, which will have the capacity to serve approximately 2,000 new mature participants, a construction of more than 30% over our existing census.
While we have committed to Florida state regulators to suspend the remaining application stages for those two de novo centers, with the long-term CMS and our state partners, we hope to reactivate our efforts to open either center as soon as possible. In addition, they are also beginning to compare tenders in new states, adopting or expanding PACE.
As discussed above, we made the decision to build in Colorado and Sacramento despite the decline in the census, resulting in low capacity utilization. In those markets alone, we estimate that there is capacity to load another 3,000 people in additional censuses. As a result, we have the ability to expand access to care for our plan members and expand our stock of comparable retail establishments once sanctions are lifted.
In that regard, it is worth mentioning that we have also made significant efforts to revamp our registration processes to decrease friction for our participants and their families and the efficiency of registration. Specifically, we have reduced the time from application to enrollment by approximately 36% per year. -throughout the year for new entrants and we expect our expansion to reflect this over time.
Finally, on the topic of growth, given the many positives about InnovAge’s transformation, we intend to interact in a carefully planned and executed post-sanction effort of our logo with key stakeholders. We’re just not the same company we were before the audits started, and we need to tell the story.
In conclusion, we continue to work tirelessly to finish strongly the compliance and transformation projects we introduced in January, not to mention challenging ourselves to be better every day. While I’m pleased and proud of our progress, and we’re getting closer to the other aspect of sanctions, we obviously also have more to do in the coming quarters to make sure InnovAge is operating to its full potential.
I remain excited and positive about the upcoming bankruptcy of the business, however, we will remain vigilant in our efforts until we have demonstrated to our key stakeholders that we are delivering on our commitments and are in a position to expand access to more deserving eligibles. PACE participants nationwide.
With that, I’ll move on to Barb to take a look at the monetary functionality in detail.
Barbara Gutierrez
Thank you Patrick
I will provide some highlights of our functionality in the first quarter of fiscal 2023 and some insights into the trends we see in the first quarter of fiscal 2023. As with our previous earnings calls, I will refer to sequential comparisons with the fourth quarter of in order to provide a more meaningful picture of our functionality.
As of September 30, 2022, we serve approximately 6540 participants at 18 centers. Compared to last year’s era, this represents a low of 6. 4% at the end of the census. Compared to the fourth quarter of fiscal 2022, this is a minimum of 1. 8%. We reported approximately 19,740 member-months for the first quarter, down 5. 6% from the prior year and down 1. 8% from the fourth quarter of fiscal 2022.
Compared to the first quarter of fiscal 2022 and sequentially, Colorado’s enrollment freeze has the biggest impact on club months and census in the first quarter. Revenue decreased 1. 1% to $171. 2 million compared to the first quarter of fiscal 2022 and decreased 1% compared to the fourth quarter of fiscal 2022.
The reduction in any of the periods is due to reducing the club’s months due to ongoing penalties, the effect of reinstating the sequestration to 2% and, successively in the fourth quarter, the effect of adjusting the Medicare risk score at the end of the year. .
Increases in Medicaid fees beginning July 1 partially offset revenue declines in the first quarter of 2023 through the fourth quarter and first quarter of 2022. In addition, in the first quarter of fiscal year 2022, the decrease in income was additionally offset consistently with Medicare consistent with capita rates because they are consistent with the threat score and county rates.
The combined cumulative in the consistent capita rate for Medicare and Medicaid in the first quarter compared to last year was 4. 9%. External sales prices were $96. 2 million, an increase of 6. 9% compared to the first quarter of fiscal 2022. The main driving force of construction has been the construction in the position consistent with the player due to the construction and use of housing, the deconditioning of our players has resulted in a construction in the rates in the long term. Long-term placement and construction in housing rates, as required by some states.
Sequentially, outpatient pricing decreased 2. 5% due to decreased inpatient unit charge or inpatient consistent charge, reflecting some degree of seasonality, along with our newly developed clinical pricing projects we are implementing.
The third-party vendor’s charge consistent with the month-consistent member, pharmacy, has decreased 6% since the third quarter of fiscal 2022, which was the culmination of recent Omicron research. However, we expect prices to remain high compared to old levels, in components due to the post-COVID acuity effect on our components, which, as discussed last quarter, research indicates that component spending was approximately 88% more consistent with the average in the post-COVID diagnostic year.
Our care, depreciation and amortization charge of $53. 6 million was 31. 5% higher than in the first quarter of fiscal 2022. Key job drivers come with the following 4 elements: one, salaries, salaries and benefits, which account for 60% of the overall variation is higher due to increased staffing and transitory manpower due to staffing of key vacancies, as well as higher labor prices related to ongoing audit remediation and compliance efforts. some of which will be transient in nature.
This is combined with higher wage rates to ensure we remain competitive in today’s job market. Secondly, third-party auditing as we paint on existing audits in our sanctioned and audited markets and proactive self-auditing in our non-sanctioned markets. Third, fleet and transportation contracted for higher average daily attendance, higher external appointments and higher fuel costs.
And four, pre-opening losses related to De Novo’s locations, primarily in Florida. The care charge increased by 6. 1% compared to the fourth quarter of fiscal 2022, basically due to employee backlog and salary rates related to the continuation of the festival. in the labor market, which shows signs of moderation during the quarter.
Central-level contribution margin, which we describe as general income minus third-party vendor pricing and care, depreciation and amortization charge, was $21. 4 million in the first quarter, compared to $42. 3 million in the first quarter of fiscal 2022 and $23. 6 million in the fourth quarter of fiscal 2022.
As a percentage of revenue, the central contribution margin for the quarter was 12. 5%, compared to 24. 5% in the first quarter of fiscal 2022 and 13. 7% in the fourth quarter of fiscal 2022.
Our existing margin reflects the transition state of activity under sanctions. As Patrick mentioned, we expect to see margins normalize over time once we can resume quoting in our sanctioned markets, succeed in our staffing capacity at the central level, and realize the pricing of our clinical pricing projects on player rates.
Sales and marketing expenses were $4. 4 million, a low of $1. 9 million compared to the first quarter of fiscal 2022, primarily due to reduced marketing expenses due to penalties. Given that our sales and marketing expenses have declined in recent quarters, it is critical that we expect those prices to return to more historic levels once sanctions are fully lifted.
Corporate, general and administrative expenses totaled $30. 2 million, an accrual of $9. 1 million through the first quarter of fiscal 2022 and a cumulative of $2. 8 million through the fourth quarter of fiscal 2022.
The accrual in either period was primarily due to an accrual in reimbursement and benefits due to the accumulation of staff to assist compliance, IT infrastructure and a progression of must-have organizational skills and accrual of prices related to external experts as we presented it. Strengthen our 8 key vendor projects by editing our roles as a Hazard Paying Carrier and our corporate experience.
Net loss of $13. 7 million, compared to net revenue source of $7. 6 million in the first quarter of fiscal 2022. We reported a net loss consistent with the consistent percentage for the first quarter of the fiscal year of $0. 10 on a fundamental, diluted basis. Our weighted average of consistent percentages is 135,566,117 for the first quarter on a fundamental, fully diluted basis.
Adjusted EBITDA, which we calculate by adding interest, taxes, depreciation and amortization, one-time changes for transaction and supply prices and other non-recurring or exceptional prices to net income, negative by $3. 8 million compared to $18. 2 million in the first quarter of fiscal 2022 and negative to $600,000 in the fourth quarter of fiscal 2022.
Our negative adjusted EBITDA margin was 2. 2% for the first quarter, compared to 10. 5% for the first quarter of fiscal 2022 and well 0 for the fourth quarter of fiscal 2022.
The quarter-over-quarter sequential update in adjusted EBITDA and adjusted EBITDA margin is primarily due to higher care costs similar to higher staffing and salaries and higher general and administrative expenses, offset by lower third-party vendor prices and lower marketing expenses.
We include losses incurred in relation to our De Novo means in the calculation of adjusted EBITDA. Average losses De Novo, which we describe as the net losses prior to opening and start-up ramp in the first 24 months of De Novo’s operation. , was $800,000 for the first quarter, mostly similar to the middle of Florida.
Let’s move on to our balance sheet. We ended the quarter with $188. 2 million in cash and cash equivalents and total debt of $84. 8 million on the balance sheet, representing debt under our term secured principal loan plus lease obligations and other commitments. For the first quarter ended September 30, 2022, it recorded operating money of $13. 1 million and capital expenditures of $7. 7 million.
Finally, based on my feedback from the past few quarters, I will provide greater visibility into the following trends we are seeing in fiscal 2023. First, in the census. As we discussed last quarter, we continue to see new entrants at our unauthorized centers, resulting in a single-digit net census expansion at unauthorized centers and we expect those trends to continue in fiscal 2023.
As a reminder, we lose about 2% of our average census monthly, mainly due to involuntary cancellations of registrations. Based on this dynamic, we expect the net census to be minimized until the sanctions are lifted and we can begin to compensate for the month’s decline with new participants.
Also, regarding the seasonality of registrations. We do not delight in the significant seasonality of listings in our company. However, there are some periods that create variability from time to time. Historically, towards the end of the calfinishar year, we have noticed some volatility in voluntary enrollment and cancellations. due to the Medicare marketing cycle, as well as the vacation months.
In addition, we may see an accumulation of voluntary cancellations during the winter and spring due to the inherent fragility of our participants. As Patrick noted in his remarks, we are making measurable progress in our audit correction efforts, and we are pleased to enter the validation phase of the process.
As we continue our compliance efforts, we are now beginning to plan for a post-sanction environment, and we look to the future to share more as our plans unfold.
Operator, this concludes our prepared comments. Please open the call for questions.
Q&A session
Operator
[Operator Instructions] Our first comment comes from JPMorgan’s Calvin Sternick lineage. Sternick, your line is open.
Calvin Sternick
Yes, smart morning, smart afternoon. Just a quick inquiry about some of the additional investments you’ve made at the center level, and you also talked about some savings in the future. I mean, how do we think about investments and trade-offs, possible trade-offs starting in the first trimester?
Patrick Blair
We’ll ask Barb about that.
Barbara Gutierrez
Hi Calvin, I’m Barb. Thanks for the question. So the nature of those investments is in two areas, basically in terms of center-level staffing, because we’ve made wonderful progress, wonderful progress, and we’ve managed to decrease our vacuum rate over the last few months. So, it’s one of our very large investments. Another would be with respect to compliance, audit, remediation and compliance remedies, either internally or from a third party perspective.
And then, in addition, as we discussed in the ready comments, we are making an investment in EPIC, which is a very large investment for us, which will help us in many tactics, in many tactics from the point of view of power, as well as from the point of view of many other suppliers. So that would be the biggest investment.
Calvin Sternick
And I know you’ve talked about some of those hard work prices being transitory at this point, going into some of the CMS readiness discussions in the state, do you have visibility into how much of the hard labor prices you’ve incurred for How much transience can be versus how much can be just permanent?Or is it too early to tell?
Patrick Blair
I just need. . . Hi, Calvin, I’m Patrick. Me would like to upload that part of this depends on the task market. In fact, we are moving as temporarily as possible to convert some of the higher-cost transient work into permanent work. And we are making great strides in this regard in several areas. But I think how we can temporarily convert that labor at a lower cost depends a little bit on the market itself. But we are doing our best and making wonderful progress. .
Barb, to add?
Barbara Gutierrez
Oui. La only thing I would go up to that is that, as I mentioned, we’ve made wonderful strides to fill those vacancies. And at the same time, in our sanctioned markets, there has been a decrease in weeds in the census. So that’s where we talked about having the capacity in those centers to resume expansion when the time comes.
Calvin Sternick
It is ok. Super. Thank you.
Operator
Our next comment comes from Matt Larew’s line of William Blair. Mr. Larew, your line is now open.
Madeline Molman
Hi, I’m Madeline Mollman for Matt Larew. I’m just thinking about your patient mix, and I know that’s all you discussed last quarter. Is there a way to quantify or give us an idea of how much prices are relatively more expensive or higher for the type of legacy patients compared to the charge for newer and less frail patients?
Patrick Blair
Will I ask Barb to take that?
Barbara Gutierrez
Hi, Madeline, I’m Barb. Yes, just in terms of magnitude, I’m going to check to give a smart estimate in terms of magnitude. But certainly, those that decrease, the new participants have a decrease. And depending on the age of your cohort over time, prices are much higher. So I think in terms of scale, I would say about 20% or less, somewhere in this community in terms of the average charge difference with new entrants.
Madeline Molman
Super. It’s super useful. And then a follow-up. . .
Barbara Gutierrez
Sorry, another thing I forgot. We mentioned that because of COVID and the extended effect on our participants, the research we did some time ago would imply that prices are quite high for participants who have COVID. And research implies that in the year after COVID, they’re still about 88% above average.
Patrick Blair
One last concept I can make, Madeline, is that we also like to compare the threat scores of other people who have switched to long-term patients with our overall threat score. And we see about 2. 82% in our members’ time threat scores, and then our overall threat score is about 2. 3%, so it also gives you a concept of the threat or difference between the two.
Madeline Molman
Yes, it’s super useful. Very interesting. Another query about Florida De Novo. I know you discussed that you spent $30 million to build them. Are they fully built and are you just waiting for the CMS?Are you just curious to know what they look like right now?
Patrick Blair
I would say any of the facility is nearing completion, i. e. our Tampa facility. And in terms of thinking about the procedure from now on, actually, our progress on sanctions becomes the catalyst for kick-starting the tendering procedure. And, if you think about some of the key steps in the procedure that we will have left, we will have a readiness review. There is an application for an adult daycare license. We have to get approvals from CMS and the state and then sign a tripartite agreement.
So there are still steps in the procedure. We are very happy with the procedure and have an appointment with the state. So I think we’re all very excited about the opportunity to move forward.
Madeline Molman
Super. Thank you. That’s it for me.
Operator
[Operator Instructions] Our next comment comes from the lineage of Citi’s Jason Cassoral. M. Cassorla, your line is open.
Jason Cassorla
Great. Thank you. Good evening, guys. Given the significant investments they’ve made to address audits across the organization, Patrick, I’d be interested to hear your thoughts on whether those investments better position the company competitively. Can it help drive PACE’s penetration into your existing state footprint?Or how would you frame this construction?
Patrick Blair
Well, thanks for the question. In terms of our competitive positioning as a result of the charts we’ve done in audits, I think it contributes a lot to our ability not only to manage quality and care charge. But as we know, PACE is a very complex model. This requires that we be able to manage many other facilities for participants. And the audits themselves and the gaps that have been known are at the core of how to run a PACE business well. And we simply move forward month by month in all the spaces of operations. This has forced us to integrate new technologies and automation into our overall operational rhythms.
I think we are much more effective at empowering jobs that are done centrally. We discussed the Triad operating model, which ensures that we function as a cohesive team at the local level. And I think all of those things will allow us to scale faster if we’re looking at inorganic acquisition efforts, I think it will create an opportunity for us to achieve profitability faster than the company could have done in the past.
So I think there’s been a lot of advantages in some tactics from what we’ve been through. And I think in the future, there’s still a lot of things we’re going to implement and a lot of things we’re going to do. keep moving forward in.
Jason Cassorla
And then I need to go back to your comment, Patrick, about the functions of the at-risk payer. It turns out that the advantages of getting in the early stages are helping a bit in the margin aspect so far. , and has noticed that this is a complex street to determine the overall advantages of the implementation rate. But maybe it can help describe how you see the roles of ones and the trade-offs there compared to a senior management structure, only half of them. Would that simply audit remediation investments be helpful?
Patrick Blair
Well, I think overall, like any entity at risk, we believe there is room to improve access and improve care and appropriate use of care and address formula inefficiencies. I think we really believe there is a great opportunity.
If you take a look at third-party vendor prices, about 50% of our local prices compared to, say, our salaries, salaries and benefits and care charge, which represent, say, about 30% of our prices. Very hard lever for our company, and we are progressing every day, mastering more and more wonderfully all the dimensions of a wonderful player.
So I’m very confident that this will be a very vital component of our long term and a facet of our long term. And I think it’s actually going to offset some of the prices we’ve incurred and our type of charge. Design as a result of audits. I think there’s a genuine opportunity here, and we’ll pursue it harder.
Jason Cassorla
It’s bien. me they gave it Thank you. And then just my last question. I just wanted to ask about cargo control, I guess, with the highest levels of flu nationally. I guess you’re seeing an increase in flu activity in your patient and worker population lately in the first place?And then, just thinking about the upcoming winter months, are there tactics to ease the pressures that a complicated flu season can bring?
Patrick Blair
Of course. Well, I’ll tell Dr. Rich Feifer.
Rich Feifer
Of course. Jason, that’s a wonderful question. And of course, we are seeing the emergence of the flu in our population, just as society at large sings. But at this stage, we only see sporadic cases. We haven’t noticed an increase in our population at this point, however, the season is early.
And what we want to do now is prepare and protect our population by maximizing vaccination rates. And, in fact, we are doing a very intelligent job in this area. At this level of the season, we already have a vaccination rate of around 60% for our participants. This is expanding week after week as we continue to push and publicize vaccination. And similarly, for our staff, as they deserve, we have very high vaccination rates. Therefore, protecting our population right now is the domain of focus. Flu season can be challenging, as we’ve heard in the Southern Hemisphere, we’re doing everything we can to prepare.
Jason Cassorla
Impressive. Super. Thank you.
Operator
I do not show more questions in the comment of this queue. Ladies and gentlemen, thank you for appearing on today’s show. This concludes the conference. You can now log out. Everyone, have a glorious day.