And I think that’s kind of how we’re expecting 2024 to shape up. So I mean, it was great while it lasted. It manifested in real earnings and cash in the bank and the team gets off, dust off and looks for those next opportunities.
John Rademacher: Yes, Matt, it’s John. On the Naven standpoint, again continued really great progress from that platform standpoint. We’ve made investments into the technology that continues into 2024. We’re really excited about some of the efficiencies and effectiveness that that can help to maximize the capacity and the utilization of that workforce to support not only Option Care Health, but other market participants from that platform. That has been part of our overall growth story, is the ability to have access to highly qualified nurses to be able to oversee the infusions and oversee the care for our patients is something that enables us to continue to grow. So a lot of focus, not only internally on Option Care Health, around recruiting our team members every day of recruiting and creating a great place to work.
But then also the investments that we’re making in Naven will allow us to have that additional capacity and that additional growth driver for us as we move ahead. A question that has been asked before is from a turnover and from that standpoint, just across the board, we have seen a significant improvement really from ’22 as we exited ’23 around our retention rates and reducing of overall turnover. We do a lot of work to focus around the employee value proposition and we have a really great dedicated team of HR professionals that are thinking about what are the total rewards and what are the type of programs to not only invest in our people to help them develop and grow in their roles and responsibilities, but also the culture and those aspects that make it a great place to work.
So as I announced in my prepared remarks, really excited about some of the designations that we were awarded in 2023 and we know that as much as we invest into our technology, we are a people business. We need highly skilled clinicians and we need highly skilled professionals across our organization and that will continue to be a top priority for me and the leadership team to make certain we’re doing everything we can to be an employer of choice.
Matthew Larew: Okay. Thank you. And then the follow-up is on G&A. Obviously, down nearly $10 million sequentially in the fourth quarter and down year-over-year. I just want to make sure we have the right sort of jumping half point, if there were any one-time benefits in that quarter, if there’s anything from the fourth quarter to the first quarter with respect to incentive comp reset or other dynamics. We’ve kind of given us the procurement piece on the gross margin line, but anything to think about as we model out G&A for the year?
Mike Shapiro: Yes. Not so much, Matt. It’s a good question. Some of it has to do more with the fourth quarter of ’22. Remember, we had a respiratory therapy business that did have some SG&A burden that obviously went away as we rightsized from that. We scaled a little bit and shifted some dollars after we exited a couple of therapies. But for the most part, I think it’s a pretty clean jump off.
Matthew Larew: Okay, thank you.
Mike Shapiro: Thanks, Matt.
Operator: Thank you. One moment for our next question. Our next question comes from David MacDonald with Truist. Your line is now open.
David MacDonald: Hey guys, good morning. I apologize if a lot of these was asked, my call dropped for a minute. But just a quick question. I wanted to ask about just the durability of profitability improvement given kind of the ongoing growth in chronic relative to acute. It sounds like you guys aren’t expecting anything meaningful in terms of percentage growth between acute and chronic in 2024. I was wondering if you can talk about the ambulatory infusion suite footprint. And as that matures, is your labor productivity further improving from either increased utilization of existing [Technical Difficulty]. I know you guys have kind of talked about a roughly 10% lift historically build better than that. But just wondering if you could comment on that?
Mike Shapiro: Yes, Dave, good morning. Listen, as we’ve talked about — and we always get challenged a little bit around, hey, 10% labor productivity for these investments seems a little conservative. Just a quick reminder. We’ve really only started our infusion suite aggressive expansion strategy. We’ve been at it for just a hair over two years. And so we’re seeing in some of those more mature centers, clinical labor productivity of 20% or more. Again, we’re not paying for windshield time with many therapies we can infuse concurrently. And so those later tranches or the earlier tranches which are really only around two years old, we’re still ascending the cruising altitude and we still have capacity in those centers remarkably.
And so the ultimate target for how we think about those from unlocking labor productivity, which not only helps our margins, it also, obviously, it’s like creating 10% to 20% more nursing labor units. That’s why you hear us talking so much about the strategy. And I would just finish, look, not only did it help us from an economies of scale, but it helps us from an economies of scope, because as we think about other therapies like infusables that require healthcare professional oversight, utilizing those as a strategic platform to think about therapies that frankly you wouldn’t send a nurse four hours in the car to administer, all of a sudden, clinically and economically are viable in the suites. And that’s something that’s helped us from a portfolio management perspective.
John Rademacher: Yes. The only other thing I’d add to that, Dave, is certainly along the questions that you asked for the infusion suite and utilization and helping to drive that. We also focus a lot around just the productivity of our entire labor force, right? So we’re always working through and looking for ability to drive that productivity and efficiency across the platform. And we talked before about some of the deployment of the technology, both in the prepared remarks, but in previous comments around repetitive process automation and efficiencies to really help our teams take some of the more routine and road aspects out and drive higher productivity and efficiency across the platform. And we’ll continue to focus on that in ’24.
We believe there’s still opportunities for us to drive those operating efficiencies. And with every deployment of technology or the releases that our technology team is putting into the environment, we’re looking for ways to maximize the licensure of our workforce of the capabilities and capacity of the workforce. And we’ll continue to do that unrelenting because we know there’s opportunities to take cost and waste out of the process.
David MacDonald: And then I guess just kind of to follow-up on the ambulatory infusion space. Is there a specific breakpoint, it looks like almost 18 months before you start to see that 10% lift start to drift higher towards the 20%? And then it sounds like you’ve obviously meaningfully expanded the footprint over the last couple of years as it sounds like that slows a touch and you guys got get more fees. Is there any reason to think that the overall book just because you’ll have fewer new starts, so to speak, should continue to lift higher in terms of nursing productivity?
Mike Shapiro: Yes. I mean, look, we have a very disciplined model with expectations on utilization and adoption. That’s one of the reasons why we don’t just go out and open 600 of these overnight because we’re being rather surgical and methodical and local ops and commercial leadership are held accountable to fill the centers. And so what we’ve said is typically by the first anniversary, on average, these are breaking even. So the nurse productivity covers the cost of rent insurance utilities and just operating costs. And typically, by that 18 to 24 months, they’re generating a net 10% profit. We’ve had some that have moved faster. But we make sure they’re following the expected trajectory. And so I’d say, conservatively, somewhere after the second anniversary, and again, it’s not an exact science, those are going to be close to that 20% productivity uplift.
The great thing is, and as John highlighted, we opened 20 new centers in 2023. We still have a tremendous amount of capacity within the roughly 170 centers we have across the country. And so it’s not as — our ability to drive leverage and value from these isn’t necessarily corresponding to how many are we opening every single quarter to now that we have a truly national network of 170 centers across the country, how do we also continue to drive utilization within the existing footprint. And so I think that at some point, we’ll hit a point where we feel good, but we’re not capital constrained. And if we see an opportunity in the local market, we’ll be very quick to open an additional center.
David MacDonald: And then guys, just last question. You mentioned earlier this kind of conversations with payers. I’m curious in those conversations to be seeing a willingness by the payers to put a little bit more teeth around site of service redirection whether that’s plan design or whatever? And then with regards to the regulatory infusion suites, is there an opportunity — I mean, you talked about some other services outside of infusion. But is there an opportunity and an appetite for potential non-infused drugs, maybe some injectables where there is a nursing component? Just any color there would be helpful.
John Rademacher: Yes, Dave. So the conversations that we’ve had and continue to have with the payer community around site of care, I would say, there’s a broad range of those conversations. We are seeing certain circumstances where some of the payers are directing with a little bit more heavy hand, the utilization of these lower sites or lower costs of sites of care and putting that into the way that they’re managing their membership. I wouldn’t say that’s widespread across the entire industry, but we are starting to see that uptake in local pockets or some of the more regional players on that. So, we’re trying to stay ahead of that. We are in active conversations and we believe that with some of the focus around medical loss ratios, especially in some of the capitated programs that the payers are dealing with, we offer a really valuable solution to them of offering that high-quality care at a more appropriate cost than some of the other settings, in which the patients could receive it.
So, we expect that that will be an impetus for us to have those conversations and we’re going to continue to talk about the values and the virtue that we can bring to them through that process. The second part of your question, we are doing that today, Dave, where again, we take a look at the portfolio within the infusion suite itself, where there are either products that may not be infused, but they may be injectables that require a healthcare professional oversight. We are doing those in the infusion suite. One of the products that I called out, the Cabenuva, is a product that really fits within that category that requires that HCP to provide that oversight. And we’ll continue to look for those opportunities and continue to partner upstream with biopharma as being a channel partner for those types of products, as well as continue to discuss the cost value of being able to provide care to their members, to the payers and why they should help to choose that as a site of care as they’re moving forward.
David MacDonald: I guess, John, the better way to ask that would have been just in terms of the growth around that kind of the non-infused product. Are you seeing any kind of meaningful acceleration, increased acknowledgment of the services that you guys provide, increased appetite from the manufacturers et cetera?
John Rademacher: Yes. It’s incorporated in the guidance that we provided. I mean, there’s some positive aspects of that. But nothing that I’d say is a major needle mover on that or disproportionate. But we’re going to continue to look for every opportunity we can to, as Mike said, build the chairs and utilize the capacity that we have in an efficient and effective way.
David MacDonald: Okay. Thanks very much.
Mike Shapiro: Thanks, Dave.
Operator: Thank you. One moment for our next question. Our next question comes from Joanna Gajuk with Bank of America. Your line is now open.
Joanna Gajuk: Hi. Good morning. Thanks so much for taking the question. So, I guess first, the follow-up, just to clarify. So, you said the procurement benefit was $8 million. So, this sounds like maybe a little bit less than what you were expecting. So, I guess, is that right? And then why is that? And also, can you remind us what was it for the full year? And also with that, do you still assume like zero benefit in January or in Q1?
Mike Shapiro: Good morning, Joanna. Yes, it’s Mike. Yes. So, we — in my prepared remarks, I mentioned that we — we estimate and again, this is an exact times, because moving patient times as it’s multiple codes across a number of different payers, some that are ASP, some that are AWP. But to the best of our estimation, we estimate that we had approximately $8 million of benefit in the quarter. And so our best estimate is when you look in the $425 million that we reported, there’s roughly $33 million to $35 million of total benefit. Again, it doesn’t show up the first day of a quarter. It doesn’t go away the last day of the quarter. And so it really dissipated throughout Q4 as we had expected. And so again, I think as we talked about on our Q3 call, I think our commentary that using roughly a 390 jump-off point normalizing for those transitionary benefits is a logical baseline.
