Unidentified Analyst: Thank you.
Operator: Our next question comes from Scott Fidel with Stephens. Please proceed.
Scott Fidel: Hi, thanks. Good morning, everyone. I wanted to start just around the service expense per trip metric and some of the sort of savings that you’re now providing to us in the deck. In the third quarter, that metric was at just around $48.50, which was down around 4% sequentially. Interested if you can share with us if you do have a sort of point projection on how we should be thinking about that metric in the fourth quarter. And then as we think about sort of ultimately landing back into that 9% to 12% long-term target margin for NEMT where you think you need to take that $48.50 to sort of, let’s say, sort of get back within that range?
Heath Sampson: Yes. Well, the per trip metric is the right metric because it normalizes – it will show the execution of our initiatives. So the per trip, whether that’s purchased services, which is what you were talking about there or whether that is kind of the payroll and other line per trip. And we – in the Q, you can see that in our notes where we break out purchased services and payroll and other and then also in our supplemental information, you see that. So it’s the right metrics to track. Starting with the payroll and other metric and why I’m starting with that, that’s where the majority of the cost is going to come out with our omnichannel, multimodal and digital engagement. That’s where we’re manual and doing normal automation is going to get that up.
So tracking that metric and seeing the progress is probably the best way to look at that and ensure that we start getting our margins up. And as I said and we said in our script, if you look at where we are on a run rate normalized perspective, that’s about $2 million to $3 million in this quarter kind of per trip improvement. So really good progress and still early on. And the purchased services trip, that’s also a good metric to track, but important to note, and this is why we always talk about our contracts being restructured. A lot of our shared savings is ensuring that we pass that through. So the cost increase and that purchased services per trip has been increasing over the last kind of 24 months and over the last 12 months. It’s stabilized and normalized.
So I don’t expect that to increase, one, because of where the labor market is and our model that we put in place on multimodal has really kind of stabilized that, and I expect that to continue to tick down. Not to the extent of the payroll and other, but it will continue to tick down. So expect a modest decrease kind of quarter-over-quarter. So I’ve been really good about those are the metrics to track. All of them – I mean, sorry, both of them will continue to decline. The payroll and other will be more steep because that’s where most of the cost is going to be coming out.
Scott Fidel: Okay. Perfect. And then just a follow-up question. So you’ve now sort of detailed a pretty expensive cataloging of the cost savings that you’re sort of driving towards to optimize the cost structure in NEMT. Interested if you have sort of a similar type of framing that you’re planning to give us for the Home segment. I know you’ve talked about a number of these initiatives underway as sort of One ModivCare and the centralization, the automation going on in the home. Interested if that is sort of going to be, I guess, quantified for us in any type of cost savings? Or is it more that you’re pretty close to your margins. At this point, you’re going to have savings, you’re going to have investments, but there’s not like this sort of explicit on cataloging of the cost savings to get to target margins in the same way that you need for an NEMT.
Heath Sampson: Yes. Yes, not cataloging in the same manner, mainly because it’s not implicated from a standpoint of all the automation that needs to happen. However, the centralization and standardization primarily within personal care, but across all of home is a big change from having these numerous offices across the Northeast that kind of did everything. So it’s a big change, but relatively simple from a tracking perspective. And a big part of this year and was really putting that start of the framework in place, the standard platforms, the pointing of the organization, some of the centralization. So we’re kind of halfway through that centralization standardization, which is why we’re still on the low end of our margin guidance there.
We’ll start to see that tick up as we exit next year. And then we’ll likely get to the high end of that 10% to 12%, but I wouldn’t expect that to get any more. Why? Because what we want to do with these additional savings and leverage that we’re going to get is to reinvest back into that caregiver. That is where the value comes so we can outgrow the market. Right now, we’re kind of growing in line with the market from a sales – kind of same-store sales perspective. I expect when we finish that and a lot of the investments that we’re going to make in the caregiver that is driven by and who’s been here for six months, Enrique, our new Chief People Officer, who has a lot of background in this, we’ll start seeing that growth. So margins, on the low end, centralization, standardization will get us to the high end exiting next year and then growth on that.
Monitoring for us, strong margins, right? It’s all about a growth perspective there. And for us, and I really look forward to talking about this in 2024 and beyond. There’s a tip of the spear for us getting paid differently, specifically sharing in that value-based care. That’s where – we’ll have strong growth, strong margins in that business, but really more exciting is we’ll start seeing different payments on different revenue models in 2024 and beyond.
Scott Fidel: Okay. All right. Thank you.
Operator: Our next question comes from Brooks O’Neil with Lake Street Capital. Please proceed.
Brooks O’Neil: Good morning, all. And welcome Barb, nice to you on the team there. I have a couple of quick questions. I guess, one of my recollection is that labor had historically been a bit of a constraint on your business, particularly in Personal Care. I see the unemployment rate ticked up a little bit this morning, but can you just give us an update on what you’re seeing across your businesses from a labor availability, labor rate, et cetera, perspective.
