Pito Chickering: I mean just — should we take the from 1Q into crack that from the 2Q consensus just from ballpark?
Jason Clemens: I mean, generally it’s a fair way to think about it. Practically, obviously, it doesn’t work exactly like that.
Pito Chickering: Great. Thanks so much, guys. Nice job on the quarter.
Operator: The next question comes from the line of Eric Coldwell at Baird.
Eric Coldwell: I want to start off with making sure we understand the growth comps in the product categories here in first quarter ’24 versus first quarter ’23 because I think you’ve suggested that some of the Humana work was in those categories in the first quarter of last year, but now it’s in the capitated lines. So is there any additional detail you could give to quantify as we look at the segment growth rates ex-capitated compared to what was reported last year. Is there any way you could quantify that impact?
Jason Clemens: Great question, Eric. It’s going to be tough to quantify since we’re not breaking it out specifically in our filings or reporting. However, the way that we’re thinking about it and attempting to message things is thinking about sleep as a revenue category, diabetes as a revenue category, and then everything else, which includes capitated and includes HME and respiratory and the other revenue categories. It’s not perfectly precise to think of it that way but it does help simplify. And so what we’ve said is we expected sleep to grow about mid-single digits over the prior year. We saw that in Q1 at 4%. We also said that we expected rental to have a tough comparable year. And if we ended flat, we’d be thrilled for the full year.
Might be down a touch, might be up a touch, but we’d be pleased to flat. We’ve said in diabetes, as someone mentioned earlier, that we had expected to be down to potentially flat in the first half of this year and then adding maybe 1 point and hopefully another 2 or 3 points of growth in the third and fourth quarter of this year. And then for the rest of the revenue categories, the average growth makes up the full year guide number at a little over 3%. So hope that helps, Eric.
Eric Coldwell: Okay. And then on 2Q, I know during the — I think during some of this Humana transition, I know you won’t quantify, can’t do that perhaps, but is there still a comp issue on a year-over-year basis in Q2 in the product categories? Or is that fully worked through as Q1 — Q2 ’23 began?
Jason Clemens: Yeah, it won’t be a material difference in Q2, Eric. I mean, we committed to substantially transitioning all patients by the end of the first quarter. We executed on that. I mean, as we stand here today, I think we’re down to about 130 or so patients left. So we’re down to the nitty-gritty. We did transition within the quarter faster than we had anticipated. And so what that means is you’ve got nearly a full clean quarter for Q1, so we don’t expect that capitated number to really move too much as we’re looking into Q2 as it relates to transition.
Eric Coldwell: And then in terms of the capitated payments across Humana and your other existing accounts, is there any an outlook you could give us for, and maybe you did and I missed it, but is there a revenue target for 2Q or the year? Is there a seasonality in these payments? Just two new line we’re trying to figure out how to model.
Jason Clemens: Yeah. Good question, Eric. I mean, I think the right way to think about it is generally flat revenue. The reason for that is that the PMPM is set at the beginning of the calendar year and the membership is generally set at the calendar year, so utilization will shift. So utilization we expect would pick up seasonally just like the rest of our business, so that could be a bottom-line impact, but top line — that’s how we’d expect to think about it. Now, Richard mentioned an expectation for more growth in capitated wins. We have not accounted for any of that in guidance. We don’t expect at any time to include any potential wins in the guidance, but we are deploying resources against pursuing those arrangements.
Eric Coldwell: Okay. And then on the revenue outlook for — so obviously, Q1 was very strong, better than expected, and 2Q margin looks good. Overall, commentary for the year sounds good. 2Q doesn’t sound so good. What’s going on this quarter?
Jason Clemens: It’s really comparably. I mean, that’s really what’s driving Q2. So comparably on the revenue side, I mean, the comps are just significantly tougher in Q2 versus Q1, specifically around the diabetes step-up as well as sleep. I mean, if you look prior year that sleep rental number was up $7 million against the first quarter of ’23. I mean, we expect sequentially from Q1 to be generally flat. I mean, we would be pleased with flat performance in Q2 out of sleep rental. I mean, that would mean that we are starting more patients than we are trading from the 13-month rental cycle from a year ago where we had record setup. So that’s one key call-out on revenue. Second, we are keeping an eye on some supply chain slowdowns in sleep resupply.
I can’t say anyone’s getting too worked up about it impacting a full year number. But within the quarter from a timing perspective, it’s just something we’re keeping an eye on and we thought it made sense to account for it in the Q2 number. Finally, as thrilled as we are with the performance of our revenue cycle team on this Change Healthcare matter, it is very costly on the back end. I mean, just now that payments are — inflows are normalizing, the challenges — now you have to apply that payment in your systems, right, you got to year end, which is now manual opposed to electronic [indiscernible] you got to produce patient accountability. Great. I mean, you have to go through all those procedures. And in many cases, we’ve got labor approaching these one by one like logging in the portals, pulling things down manually.
I mean, it’s very costly. And obviously, wasn’t planned. As we started the year, that said, with an outperforming Q1 and are just firm views on the rest of the year, we think we’ll overcome it for the rest of the year. So some of this is largely timing as opposed to something structural that’s changing inside of it.
Eric Coldwell: All right. Last one for me. I know it’s a lot. Just again, coming back to 2Q, it does — I don’t want to put words in your mouth, but it doesn’t sound like you have or at least you’re not calling out a change in market demand, customer losses, sales force issues. I’m just wanting to hear you say that or say no, in fact, there are some other stuff on the 1% revenue growth outlook. I mean, I think we can all look at the year-over-year comps and understand that, but — very understandable, but I just want to make sure there’s nothing structural, secular, more fundamental here that you would call out something worrisome.
