Patrick Blair: I’ll start, Ben, you may clean me up. I think we’re probably more focused on Medicaid rates, it is still probably a bit too early to know what that’s going to look like in the next fiscal year. I think what Ben pointed out is in California, we came in below what we had targeted. I would qualify that by saying that, think of that as an industry impact in terms of pace and not an InnovAge specific impact. Lots of moving parts, but one notable part is — notable driver would be the periods of time that states use in the rate build-up and with the passage of time, the further we get from COVID, the more reflective, actual experiences, predicting future experience, reclaims perspective. There’s still a lot of noise, if you will, in the rate setting process that I think is a little bit of the lingering impacts of the data set related to COVID.
So California’s, I think, are only staying on a fiscal year. So, it’s having an unexpected impact in the back half of this fiscal year. Ben, can you add?
Benjamin Adams: No, I think it’s absolutely right.
Jason Cassorla: Okay, understood, thanks. If I could squeeze in one last one, I just wanted to quickly follow up on cash flow. It looks like there’s a $25 million headwind on deferred revenue year to date. Can you just help reconcile what that was related to? If there’s any color there?
Benjamin Adams: Yeah, the deferred revenue really relates to Medicare and it relates to how the first day of a month falls relative to a weekend. So what happens is if the first of the month falls on like a Sunday, if you will, well, Medicare payments or reimbursements are due in the first of the month. What happens is we receive it on the Friday beforehand. So essentially in the prior month, if you will, by a couple of days. So when that occurs, we set up a deferred revenue account to adjust for that. When all of a sudden the first of a month falls on a weekday, that gets cleaned up in the following quarter. So when you think about that deferred revenue payment, think about it as does the first of the month fall on a weekend or not and how does that impact the timing of the Medicare payment?
Operator: And our next question will come from Jared Haase from William Blair. Your line is open.
Jared Haase: Yeah, hey guys. Good afternoon and thanks for taking the questions. The first one from us, we’re just hoping to dig into the de nova ramp a little bit. Congrats on getting the Tampa facility open. Could you maybe just walk through or remind us a little bit on what the expectations are in terms of how both census and profitability ramp for a de nova facility? And I think a related question here, obviously with the concerns of acquisition in mind, maybe you could talk a little bit about how that profitability ramp kind of informs the equation in terms of your perception of sort of a build versus buy opportunity in terms of future growth. Thanks.
Benjamin Adams: Yeah, sure. Why don’t I start it off here and then Patrick will jump in with some comments here. First of all, thanks for the congrats. It was a great transaction for us. We’re really excited about it. If you were to think about the Concerto acquisition, I guess really think of it as two facilities. There’s one which is in Crenshaw, which is up and running, but it’s a very small census. So think of that as almost like a de-risk de novo because our census is in the, call it 20 folks. And then think about the Bakersfield one, which is a center that’s essentially fully constructed, basically awaiting approval to open, right? So when we look at that acquisition, we think of it as a basically de-risk de novo. But generally the way we think about de novo’s is that it will take us on the order of six quarters, probably to fill them up to the point where we get to a positive center level contribution margin.
And then it’ll take us some time beyond that before they hit maturity. But really it’s in that first six quarters that we really watch the cash flow impact, especially carefully, because we obviously want to get them up to be contributors as quickly as possible. And so when we do our forecasting and we go through our strategic analysis about do we want to do de novo’s or do we want to do acquisitions, or in this case kind of a hybrid de novo, that’s the way we model out the business.
Patrick Blair: Yeah, I’ll just add, I mentioned the Investor Day on February 27. One of our goals at Investor Day is to bring more clarity to the de novo ramp up and sort of the unit economics of the business. So we’ll do that. In terms of what to expect with the de novo, each market is different. There’s different density, there’s different managed care landscape, different alternatives, but I would say that Sacramento’s probably not a bad proxy for what we think we can accomplish in say a Tampa or an Orlando. It’s a big market. There’s a lot of opportunity and we feel pretty good about our offering and we’ve got a great team on the ground and we’ve got a grand opening scheduled I think on March 03rd, 04th, excuse me and so we’ve got a great opportunity just to introduce that product to the community and we’re feeling really good about it.
And we’re also feeling good about Sacramento growth. Just as, while it’s not a new market, in terms of a timeline, it was sanctioned not long after it was operational. So in many ways, Sacramento is a new market as we think about the ramp and we’re really pleased with how the team is doing there.
