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American Renal Associates Holdings (NYSE:ARA)
Q1 2020 Earnings Call
May 12, 2020, 9:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:


Operator

Greetings and welcome to the American Renal Associates first-quarter 2020 earnings conference call. [Operator instructions] It is now my pleasure to introduce your host, Darren Lehrich, senior vice president for American Renal Associates. Thank you, sir. You may begin.

Darren Lehrich -- Senior Vice President, Strategy, and Investor Relation

Thank you operator. Good morning everyone, and welcome to our first-quarter 2020 earnings conference call and webcast. We hope you're all safe and healthy. Joining for today's presentation are Joe Carlucci, our chairman and CEO; Mark Herbers, our interim chief financial officer; and Dr.

Don Williamson, our COO. Also joining on the call today are Syed Kamal, our president; and Jillian Bernard, our controller. We are participating today remotely from several different locations. I want to remind everyone that we may make certain remarks today that constitute forward-looking statements within the meaning of the federal securities laws.

The company's actual results may differ materially from such statements due to a number of risks and uncertainties including those described in our most recent SEC filings. Any forward-looking statements made in this call are effective only as of today, and the company undertakes no obligation to revise or update any forward-looking statements for any reason. On today's call, we will refer to certain non-GAAP financial measures. Reconciliations of these non-GAAP financial measures to the most comparable GAAP measures are available as is important information concerning the use of non-GAAP measures generally, in the earnings press release and our current investor relations presentation deck, both of which are available within the investor relations section of our website at americanrenal.com.

I also want to remind you that our adjusted EBITDA less NCI calculations do not include the cost of certain legal and other matters including costs related to certain litigation and the SEC investigation. With that, I'm pleased to turn the call over to Joe Carlucci.

Joe Carlucci -- Chairman and Chief Executive Officer

Thank you Darren and good morning everyone. The past few months have represented an unprecedented time for our country and for our healthcare system. The COVID-19 pandemic has led to incredible disruptions to our daily lives, our economy, and it has impacted the health and well-being of hundreds of thousands of Americans. During this time, our responsibility as a provider of life-sustaining dialysis services could not be more important, and I'm proud of how our organization has risen to the occasion.

ARA caregivers across 27 states and the district of Columbia are playing a critical role day to day to keep patients and staff healthy and safe during this time. We have remained operational throughout our network of 247 dialysis clinics and have been working collaboratively with dialysis company peers, hospitals and other healthcare providers to manage a growing number of COVID positive and presumptive positive patients in both the inpatient and outpatient dialysis settings. I'm grateful to our staff and physician partners for everything they're doing during this public health crisis. I will begin my remarks with some thoughts about COVID and some high-level observations regarding the first quarter.

I'll then turn it over to Dr. Don Williamson for additional comments on COVID from clinical and operational perspective and an update on our progress in home therapies. And then Mark Herbers will provide a detailed review of the quarter, our financial position and our outlook. As it relates to COVID-19, the safety of our patients, staff and physician partners continues to be our primary focus, and we have undertaken a number of steps to provide for their protection and enable our continued operation in the face of the pandemic.

We are following the Centers for Disease Control and Prevention guidance and working closely with local and national health authorities to ensure we implement appropriate infection control and clinical best practices in response to COVID-19. In addition, we have created a dedicated COVID-19 task force to proactively implement business continuity plans and develop measures to ensure the ongoing availability of our dialysis services while maintaining patient and staff safety. I want to highlight a number of measures we have implemented. Restricting entry to our clinics to only patients, staff and medical professionals, screening all individuals for symptoms and exposure to COVID-19 before allowing access to our clinics, implementing a mask policy for every patient and staff member who enters our clinics and requiring that masks being worn at all times in our clinics, increased purchases of use of personal protective equipment for patients and staff and of cleaning and sanitization materials at our facilities to maintain the infection control protocols that meet CDC guidelines, securing COVID-19 testing for patients and staff, implementing screening procedures for corporate office staff prior to entering our corporate offices, requiring social distancing within workspaces and throughout our corporate office and restricting access to our corporate offices to only ARA staff, engaging a physician, infectious disease consultant to assist us in the development of policies and procedures to protect our patients and staff, establishing dedicated COVID-19 treatment shifts at certain of our clinics where necessary to care for patients with confirmed or suspected COVID-19 and modifying our sick leave policy to accommodate quarantine and isolation when warranted.

In addition to these safety measures, we implemented a hazard pay program to provide increased pay to our clinic staff on the front lines of the pandemic. We currently expect this program to be limited to the second quarter, but we may extend it or shorten it as appropriate in light of developments with the pandemic. These and other measures we have taken in response to COVID-19 have resulted in increased operating expenses including higher salary and wage expense from the hazard pay program, incremental hours and overtime needed to work the dedicated treatment shifts for patients with confirmed or suspected COVID-19, increased expenses from the high utilization and cost of personal protective equipment and additional costs to purchase additional supplies and cleaning materials. In addition, we've also incurred corporate office costs related to legal, consulting and cleaning costs as well as increased purchases of computer equipment and information technology to provide additional infrastructure for staff who are working remotely.

These added expenses began to rise during the month of March and became more significant into April. We expect to incur many of these additional operating expenses for the duration of the pandemic. And if the severity or geographic coverage of the pandemic increases, these additional expenses could also increase. From a volume perspective, patients suffering from end-stage renal disease generally have comorbidities that often place them at increased risk with COVID-19 resulting in increased hospitalizations, missed treatments and higher mortality.

Through March 31, 2020, we experienced an immaterial reduction in treatment volume as a result of patients contracting COVID-19, but this impact increased subsequent to March 31, 2020, and could become more significant in the event of a prolonged or increasingly severe pandemic. In response to the pressures we are seeing from COVID-19 as well as our first-quarter 2020 performance which was below internal forecast, we have begun implementing a series of actions during the second quarter, some of which are temporary that will allow us to reduce corporate expenses. None of these corporate changes will impact our ability to deliver life-sustaining dialysis services or are expected to directly impact clinic staff or our regional operations teams that are providing on-site support to our clinics during these unprecedented times. We do not believe any of these changes will have an impact on the quality of management support services we provide to our clinical operations.

In addition, we are also appreciative of Congress and the administration's recognition of the burden this pandemic is having on our nation's healthcare system and providers like ARA, who have remained fully operational during this crisis to continue to provide life-sustaining care and prevent, prepare and respond to COVID-19. The passage of the CARES Act in late March, in combination with other regulatory relief from CMS, will help healthcare providers like ARA manage through this public health crisis. Some aspects of this relief received by ARA include the following: approximately $5 million of additional revenue due to the CARES Act provision that eliminates the 2% sequestration cut from May 1 until December 31, 2020; approximately $27 million of CARES Act grant funds received during April 2020, although these funds are subject to terms and conditions, and we may not be able to utilize all of this money. The guidance from CMS has been fluid on this topic, and CMS extended the attestation period to give providers more time to evaluate.

We believe the intent of the grant fund was to reimburse providers for extraordinary expenses and lost revenue related to the COVID pandemic. So ARA plans to utilize these funds consistent with that intent and to reconcile their use fully in accordance with the terms and conditions. Approximately $83 million of advanced payments on future Medicare revenue received during April 2020 under the CMS Accelerated and Advance Payment Program, an estimated $12 million to $13 million liquidity benefit over the next three quarters related to the CARES Act provision that permits payment deferral of the employer portion of social security payroll taxes; and an estimated cash tax refund of approximately $5 million expected before December 31, 2020, related to specific tax code provisions of the CARES Act. Finally, before I move on to the quarter, let me take a moment to welcome two new board members to ARA's board of directors.

I'm pleased to share that we recently announced that Jeremy Gelber M.D. and Christopher Hocevar joined ARA's board. Jeremy has significant experience as a healthcare investor, and he has led Centerbridge Partners healthcare vertical since 2018. He joins the ARA board in connection with Steve Silver's departure after many years of service.

We are all very grateful to Steve Silver for his many contributions and his friendship. And we believe the addition of Jeremy reinforces Centerbridge's strong commitment to its investment in ARA. Chris Hocevar joins the ARA board with significant health insurance industry experience following a distinguished 16-year career at Cigna. Now onto the first quarter.

At a very high level, we fell short of our internal plan by approximately $5 million on an adjusted EBITDA less NCI basis. While treatment growth and expense management was consistent with our plan, our revenue per treatment was below our expectations. We continue to make strong progress in home therapies with double-digit first-quarter home treatment growth. Commercial treatment mix was up year over year, yet weaker collection trends explain the bulk of the impact to our revenue performance.

We are devoting additional resources and even greater focus to ensure that our collections and realized revenue rate improve as we move beyond the first quarter. During the month of April, our cash collections improved 4% year over year as compared to relatively flat year-over-year performance during the first three months of the year. And so I believe our focus in this area should show some improvement in Q2. Mark Herbers will cover the numbers in detail in a few moments.

With that, I'm pleased to turn the call over to Dr. Don Williamson, our Chief Operating Officer, to provide a clinical update. Don?

Don Williamson -- Chief Operating Officer

Thank you Joe. I am pleased to join everyone today to provide the First-quarter 2020 clinical update. I'm going to focus my comments on some operational insights into how we are managing patients with COVID-19 and then I will share a brief update on our continued progress in home therapies. First, in terms of how we are managing patients with COVID-19.

Let me echo Joe's sentiments about how grateful we are to our staff and physician partners for everything that they are doing to care for our patients. They are responding to this pandemic heroically. In recent weeks, we have operationalized dedicated COVID-only treatment shifts in many of our clinics to provide patients who are presumed positive or who have tested positive for COVID-19. These shifts are more expensive to operate because they involve additional PPE, cleaning and disinfecting, may require staff overtime and may disrupt patient and staff schedules resulting in decreased productivity and higher staffing-to-patient ratios which in turn, results in higher personnel costs for a period of time.

In certain markets, we are also working collaboratively through a participation agreement with other non-ARA providers to manage these patients in a single dedicated COVID-19 unit. Currently, we have a minimal number of COVID patients that are dialyzing at these non-ARA units. All of these efforts are designed to ease the inpatient hospital burden, to free up scarce acute care beds and manage patients in a lower cost outpatient setting. Finally, we are hearing about many acutely ill COVID-19 hospitalized patients developing acute kidney injury resulting in the need for dialysis.

We have not seen a significant increase in volume related to these patients as they move out of the acute care setting. But we are watching that trend closely. As the pandemic eases, we will be evaluating ways to safely dialyze occasional COVID-19 patients in isolation areas of our clinics without the need to establish as many COVID-only treatment shifts. Moving on to the update on home therapies, I am pleased to report that our normalized home therapy treatment growth during the first quarter was approximately 13%, consistent with the double-digit growth we experienced in the fourth quarter of 2019.

Our home treatment mix during the first quarter of 2020 reached 10.8%, up 90 basis points year over year. We remain pleased with the additional focus within our entire organization on growing home therapies. We are seeing the biggest gains in our peritoneal dialysis programs, and we put additional emphasis within our clinic expansion plans to add PD and HHD training rooms and staff in many of our markets. Finally, as we look into the future, we believe that COVID-19 pandemic could ultimately speed the adoption of home modalities for certain of our patients, although we are not seeing that effect as of yet.

That concludes my remarks for the clinical section. So let me now turn it over to Mark Herbers, our Interim chief financial officer.

Mark Herbers -- Interim Chief Financial Officer

Thank you Dr. Williamson and good morning everyone. I plan to cover three key topics this morning. First, I will provide some additional details regarding our first-quarter financial and operating trends.

Second, I will review our balance sheet position and cash flow performance for the first quarter as well as our current liquidity position. And third, I will review our 2020 outlook. First, let me cover the first-quarter trends. First-quarter 2020 adjusted EBITDA was $17.8 million and adjusted EBITDA less NCI was $12.9 million as compared to $19.2 million and $13.9 million, respectively, in the first quarter of 2019.

Our volume performance remained solid in the first quarter, normalized for clinic sales and treatment days, total treatment growth during the first quarter was 4.7%. Our first-quarter normalized nonacquired treatment growth was 4.4%, and acquisitions contributed 0.3% to our total normalized treatment growth. First-quarter treatment volumes were consistent with our expectations, and we did not experience a material reduction in volumes as a result of COVID-19. Subsequent to March 31, 2020, we experienced an increased negative impact to our treatment volumes as a result of COVID-19.

The impact could become more significant in the event of a prolonged or increasingly severe pandemic. Our first-quarter revenue was $193.2 million, up 0.7% from the first quarter of 2019. Despite our solid treatment volume trends, revenue growth was impacted by lower-than-expected revenue per treatment performance. Our first-quarter 2020 revenue per treatment was $312 as compared to $324 in the first quarter of 2019.

Although our commercial treatment mix improved year over year, to slightly over 12% as compared to 11.5% in the prior-year first quarter, three factors impacted our revenue per treatment trend including collections performance, lower contribution from calcimimetics and continued growth in our network mix. Among these three factors, weaker-than-expected collections was the biggest driver of the revenue per treatment performance in the first quarter versus our internal plan. To address our collections performance, we have brought in additional outside resources and have action plans in place to improve in this area, and we are starting to see some early results. Turning to the expense side.

First-quarter 2020 patient care cost per treatment was $249, representing a $2 per treatment improvement year over year. We experienced consistent labor productivity and normal wage increases during the first quarter. The improvement primarily reflects lower ancillary costs including ESAs and calcimimetics. We began to experience higher patient costs related to the COVID-19 pandemic throughout the month of March as a result of increased stocking of PPE and other supply costs as well as additional labor costs.

Overall, the impact on our patient care cost is expected to be more significant during the second quarter of 2020 due to much higher PPE and supply cost usage, the implementation of our hazard pay program for clinic staff, additional staffing and overtime costs associated with the COVID-only treatment shifts and negative impacts to labor productivity due to scheduling disruptions stemming from the pandemic. Moving over to general and administrative expense. First-quarter 2020 adjusted G&A expense per treatment was $38, a $6 per treatment improvement year over year. We implemented certain corporate expense saving initiatives during 2019 and the effect of those initiatives continue to carry over into 2020 because many of the 2019 actions occurred during the second and third quarters.

As Joe indicated in his prepared remarks, we now have additional corporate savings initiatives planned for 2020 to improve our operating efficiency as well as manage the business during this period of uncertainty. The aforementioned adjusted G&A expense per treatment figure excludes certain nonrecurring amounts that are described in the supplemental business metrics schedule in our press release. Certain legal and other matters expense was $2.3 million during the first quarter of 2020 as compared to $5.3 million in the prior-year quarter. And down from $2.5 million during the fourth quarter of 2019.

We continue to expect these costs primarily related to the restatement of certain prior-year financials and other legal matters should decline going forward. I should also note that we are well under way in our process to appoint a new independent auditor for our fiscal year 2020 audit. I will now move on to a review of our balance sheet and cash flow. At March 31, 2020, we had consolidated cash of $62.4 million and consolidated debt of $617.9 million, net of unamortized discounts and fees.

As a precautionary measure to strengthen our liquidity in light of the COVID-19 pandemic, in March, we drew down the full available capacity under our $100 million revolving credit facility, bringing our first-quarter draw to $35.5 million. That additional cash is reflected on our balance sheet as of March 31. Adjusted for our pro rata ownership of clinic cash and a pro rata portion of the clinic level debt that we guarantee, our adjusted owned net debt was $519.4 million at March 31, 2020, up $4.3 million from December 31, 2019, due primarily to the first-quarter earnings performance and seasonal factors that are typical of our first quarter offset slightly by favorable working capital management. As of March 31, 2020, we were in compliance with the consolidated net leverage ratio covenant in our credit agreement.

For the first quarter of 2020, cash provided by operating activities was $13.7 million as compared to a $10 million use of cash during the first quarter of 2019. Adjusted cash provided by operating activities less distributions to NCI was $2.9 million. First-quarter 2020 capital expenditures totaled $5.8 million as compared to $8.5 million during the prior-year quarter primarily reflecting a more moderate development pace of activity and careful prioritization of routine capex needs. During the first quarter, we opened one de novo clinic.

We continue to take steps to enhance our financial flexibility including the expense management initiatives discussed previously, and anticipated asset sales during 2020, with held for sale assets totaling $49 million on our balance sheet. Furthermore, we have been able to secure additional liquidity subsequent to March 31, 2020, related to various government relief programs including approximately $27 million of CARES Act grant funds received during April 2020. Although these funds are subject to terms and conditions, and we may not be able to utilize all of this money. Approximately $83 million of advance payments on future Medicare revenue received during April 2020, under the Accelerated and Advance Payment Program, an estimated $12 million to $13 million liquidity benefit over the next three quarters related to the CARES Act provision that permits payment deferral of the employer portion of social security payroll taxes.

50% of the deferred amount is due December 31, 2021, and the remaining 50% is due December 31, 2022. And lastly, an estimated cash tax refund of approximately $5 million expected before December 31, 2020, related to specific tax code provisions of the CARES Act. Let me conclude my remarks with a brief discussion related to our outlook. Given the COVID-19 pandemic, there are many new variables now part of our operating environment that were not originally contemplated with our original 2020 guidance.

However, our dialysis clinics have remained fully operational and the demand for the life-sustaining dialysis services we provide continues to be durable. At the same time, our operating costs are higher as a result of the pandemic, and the treatment volume losses we experienced in the coming quarters could be influenced significantly by the duration and severity of the pandemic which still remains fluid and out of our control. We are responding to the first-quarter revenue shortfall by redoubling our efforts to improve collections. We believe there should be progress to report on related to our collections in future quarters given the additional resources focused in this area.

We have taken a series of actions to reduce corporate expenses as discussed in Joe's prepared remarks. And there are a number of government relief programs that should help offset higher expenses and lost revenue due to COVID as well as improve our liquidity. In relation to the guidance range we established in March, we believe it is prudent to widen the 2020 adjusted EBITDA less NCI range at the lower end to account for increased uncertainty in the environment and to reflect our first-quarter results. As such, we are providing guidance for 2020 adjusted EBITDA less NCI to be in a range of $87 million to $95 million.

And I note the lower end of the range to $90 million from the original range of $90 million to $95 million. Other specific detailed guidance items provided in March such as revenue per treatment and normalized treatment volume growth, are being withdrawn at this time due to the uncertainty in the environment due primarily to COVID. I'd like to provide a qualitative view on the key variables that could impact our guidance range as compared to the original guidance issued in March 2020. Those variables include a positive impact from the CARES Act grant.

At this time, we are unable to confirm how much of the approximate $27 million grant money our clinics received will be able to be utilized under the CMS terms and conditions as there could be additional guidance. A positive impact from additional corporate expense initiatives that have been activated or planned for subsequent to March 31. They'll frame a potential positive impact from these initiatives. We expect them to approximate the first-quarter shortfall in a roughly offsetting manner.

Positive impact from the CARES Act sequestration impact of approximately $5 million to revenue and approximately $3 million on an EBITDA less NCI basis. Negative impact from COVID including lost revenue due to treatment volumes and additional operating expenses attributed to COVID. It is difficult to quantify these amounts. However, we believe much of the grant funds should serve as an offset.

Negative impact from our first-quarter results as compared to our internal expectations. Finally, we see revenue per treatment for the remainder of 2020 to have negative risks associated with higher unemployment and potentially lower commercial mix, although those are more likely to be longer-term impacts. We believe revenue per treatment trends could be offset slightly by our expectation for improved collection and the previously mentioned sequestration impact. Finally, while we are reiterating our commitment to reduce leverage by year-end 2020, as compared to December 31, 2019.

The pace and impact of our delevering will depend on some of the factors we've outlined in our guidance as well as the timing of divestitures planned in our assets held for sale group. With that, let me turn it back to Joe for closing remarks.

Joe Carlucci -- Chairman and Chief Executive Officer

Thank you, Mark. In closing, I want to thank our entire team and our physician partners for their contributions and their unwavering dedication to providing excellent patient care. I am incredibly humbled by how much sacrifice, compassion and poise our staff has demonstrated during these challenging times. I hope everybody participating on the call stays healthy and safe, and thank you.

With that, operator, can you please open up the Q&A session. Thanks again, everybody.

Questions & Answers:


Operator

[Operator instructions] Our first question comes from the line of Andrew Mok with Barclays. Please proceed with your question.

Andrew Mok -- Barclays -- Analyst

Hi. Good morning. Hope everyone is well. I appreciate all the color in your prepared remarks.

I was hoping you could provide a bit more color on the developing COVID impact on 2Q volumes and operations. It sounds like the impact has picked up, but it's hard to get a sense of the disruption level. Are you able to size the COVID-related costs incurred in April? And anything you can share on current volume trends would be helpful. Thanks.

Joe Carlucci -- Chairman and Chief Executive Officer

Andrew, thanks for the question. It's Joe. I'd like to turn that over to Darren and then maybe Dr. Williamson can give additional color.

Darren Lehrich -- Senior Vice President, Strategy, and Investor Relation

Thanks. Good morning Andrew. I think as far as the second-quarter volumes go so far, it's been immaterial in terms of the impact. We certainly have seen increased expenses as the pandemic has unfolded, and we're monitoring the volumes very closely, but don't have any numbers to put around that at this stage.

In terms of the costs, Dr. Williamson, in his prepared remarks, discussed a number of things that we're doing with these COVID-positive shifts, we have hazard pay and a number of programs really to be able to respond to the crisis and make sure that our clinic staff are safe and taking care of with the right types of equipment. I think, Andrew, in terms of the framework as you think about the costs and how that factors into our guidance, really, I think the best way to really frame that would be to think about it in three pieces. From a COVID standpoint, you should assume all the impacts that we're seeing should essentially be offset by the government relief.

So both the grants and the sequestration. And we expect to be able to utilize some or all of that grant money in relation to those expenses. Number two, from the standpoint of the first quarter, I think you should assume that our corporate expense initiatives should essentially offset the shortfall, and that was about $5 million for the first quarter. So that's an offset in terms of the expenses.

And then third, we did widen the range. And really, that's just to reflect the potential for downside risk related to revenue per treatment. We do expect to see improvements in our collections performance, as Joe discussed, we are seeing that in the second quarter so far, but we think that's a prudent step given some of the other uncertainties in the environment.

Joe Carlucci -- Chairman and Chief Executive Officer

Thanks Darren. Don, do you want to add?

Don Williamson -- Chief Operating Officer

Yeah. Andrew, I'll just add that they're in the initial stages of the outbreak, many of the COVID-positive patients were dialyzing in the acute care hospitals. And we are now seeing a trend for more of those patients to dialyze in our outpatient setting. So I think as Darren said, the volume impact is just a little hard to size at this point.

But we are getting most of those patients dialyzing in the outpatient facilities at this point.

Joe Carlucci -- Chairman and Chief Executive Officer

Thank you Don. Andrew, any other questions on that?

Andrew Mok -- Barclays -- Analyst

Yeah. Just a couple of follow-ups. On the COVID aid and specifically as it relates to the $27 million in grant funds, how do you plan on accounting for that? Will all $27 million that you received in April be recognized as revenue in Q2? Just any clarity on the recognition of the CARES grant that was in the income statement would be helpful.

Joe Carlucci -- Chairman and Chief Executive Officer

Yeah. Before I pass that on to -- it's Joe, before I pass that on to Mark Herbers, essentially, the way we look at the CARES grant monies are for reimbursement due to additional costs for PPE, overtime, hazard pay, etc. And so we think about them as reductions in expenses not increases in revenues. But Mark, I'd like to turn it over to you for additional thoughts on that.

Mark Herbers -- Interim Chief Financial Officer

Yes, I concur. The nature of the grant funds as a grant is an offset to existing expenses and lost revenues. So as we recognize those expenses, and incur those lost revenues, we will be able to draw the CARES grant funds, and there'll be a reduction of our expenses primarily and lost revenues would be an increase to our income. But we do -- we expect revenues to be fairly nominal.

Andrew Mok -- Barclays -- Analyst

So it's a contract expense account, so to speak, and it would only be recognized to the extent that you have explicit expenses that you can point to?

Mark Herbers -- Interim Chief Financial Officer

Right. Those are the conditions of the grant. Yes.

Andrew Mok -- Barclays -- Analyst

Got it. OK. That's helpful. And then on the revenue side, collections came in below expectations for the last two quarters now, you mentioned that you're allocating additional resources to improve that.

What specific actions are you taking to improve collections here?

Joe Carlucci -- Chairman and Chief Executive Officer

Yeah. Mark Herbers can answer that and then maybe Darren can give additional color.

Mark Herbers -- Interim Chief Financial Officer

Sure. So Andrew, we did experience slight deteriorations in our agings and our DSO increased slightly, but it remains within our normal bounds. We're pursuing any and all collections available to us that primarily in the older aging categories that for a number of internal reasons, we were distracted from pursuing, but we are now fully bent on and pursuing all aged receivables, zero to the aging of the accounts.

Joe Carlucci -- Chairman and Chief Executive Officer

Thanks, Mark. Darren, any thoughts?

Darren Lehrich -- Senior Vice President, Strategy, and Investor Relation

Yeah. So Andrew, I would just add to that. I think our first quarter is always the lowest quarter of the year due to patient responsibilities. And on a year-over-year basis, the first quarter was lower by approximately 4%, and it was below our original expectations, just a little more than that.

So the drivers, as you heard, were collections, the calcimimetics and the network shift, but the collections was the biggest factor of the 3. If you think about the lower by 4%, most of that driven by the collections and the aging issue that Mark just mentioned. We do not have any major recent contract renewals that impacted this result. And overall, the commercial mix was up slightly from last year.

The collections piece is driven by our actual cash performance versus what's expected. In this quarter, that was just simply a low trend. On the positive side, we've got more resources and focus. We did see some improvement in the 4% area in April, and we're optimistic that we'll continue to see improvement in that area.

Andrew, thanks for the question. Maybe we can open it up to another questioner.

Operator

Thank you. Our next question comes from the line of Pito Chickering with Deutsche Bank. Please proceed with your question.

Pito Chickering -- Deutsche Bank -- Analyst

Hey good morning guys. Thanks for taking my questions. On the commercial revenue, a couple of questions before this one. The number of treatments from commercial went up about 800 basis points and revenue from commercial also went up 200 basis points.

And the in-network also increased a couple of hundred basis points to 84%. So I assume that means that commercial pricing saw positive price increases across the book. Is there any way you can quantify that or is this a positive mix issue of less exchanges and more commercial?

Joe Carlucci -- Chairman and Chief Executive Officer

Darren, you want to take that one?

Darren Lehrich -- Senior Vice President, Strategy, and Investor Relation

Sure. Yes, so Pito, our commercial volume mix was up slightly. And if you're looking at the table in the Q which I think you are, on a revenue basis, they're in whole numbers. So I can take that offline and maybe help you think through those numbers.

But as far as the rate environment goes, we had a Medicare rate update, we are seeing relative stability in terms of our like-for-like pricing with our in-network payers. And so I think that the real driver is just the collections piece, not pricing.

Pito Chickering -- Deutsche Bank -- Analyst

OK.

Joe Carlucci -- Chairman and Chief Executive Officer

And Darren, it's Joe. Let me just add to that. As I mentioned in my prepared remarks, we had a favorable trend in the month of April, and we believe that we've got the right resources on this challenge, and we'll continue to focus in this area of improved collections, Pito.

Pito Chickering -- Deutsche Bank -- Analyst

All right. So on the cash collections, can you still walk us through I guess a little bit more, I'm a little bit confused sort of what really changed in the first quarter? Are payers making the patients pay more money or got a network payer sending the funds directed to the patients and forcing to collect those? Can you break out the payer mix on the collections? Was it collecting -- directing from patients, was directing from commercial and remind us of what time period you guys reserve 100% of collections?

Joe Carlucci -- Chairman and Chief Executive Officer

Darren, do you want to take a crack at that one and then maybe Mark can fill in.

Darren Lehrich -- Senior Vice President, Strategy, and Investor Relation

Yeah. So Pito, we're not going to get into the specific payer categories and what the collections performance was in an individual payer. I think the issues we've discussed and said a few times here is collections in general and the agings of those collections. And so I would leave it at that.

And Mark, I don't know if you have anything else to add.

Mark Herbers -- Interim Chief Financial Officer

No. The first quarter is our most difficult quarter as all insurance plans reset, the coinsurance and deductibles. And as you're aware, more plans are moving toward higher patient responsibilities, so.

Pito Chickering -- Deutsche Bank -- Analyst

But what age do you guys reserve, 100%? Can you kind of give me at least that number?

Joe Carlucci -- Chairman and Chief Executive Officer

Darren?

Darren Lehrich -- Senior Vice President, Strategy, and Investor Relation

Yeah. I don't have the waterfall percentages in front of me, Pito. We have a standard approach as things age. So we can get that number for you offline.

OK?

Joe Carlucci -- Chairman and Chief Executive Officer

And I think Mark could assist you in that question as well, Pito.

Pito Chickering -- Deutsche Bank -- Analyst

OK. One more question here. We're obviously seeing large spikes of unemployment today. What are you seeing sort of currently in terms of patients who are losing jobs? Are those going to COBRA funded by the AKF? Are they going into exchanges or they drop right into Medicare? Thanks so much.

Joe Carlucci -- Chairman and Chief Executive Officer

That's a great question, Pito. We're focused on helping thorough our patient insurance educators. A lot that allow patients to make decisions on what's best for themselves and their families with regard to insurance and COBRA. So as where we sit today, we've not seen any changes.

But clearly, to the extent that unemployment remains very, very high going forward, that could change. Again, I want to just mention that it's important for patients to choose the best plans for themselves and their families. And to the extent that they lose their job and have COBRA benefits available to them.

Pito Chickering -- Deutsche Bank -- Analyst

So in theory, for dialysis patients, they have 29 months of coverage due to visibility under COBRA, correct?

Joe Carlucci -- Chairman and Chief Executive Officer

Yes.

Pito Chickering -- Deutsche Bank -- Analyst

All right. Thanks so much. I'll jump back in the queue.

Joe Carlucci -- Chairman and Chief Executive Officer

Thanks Pito.

Operator

Thank you. Our next question comes from John Walsch with Crescent Rock Capital. Please proceed with your question.

Unknown speaker

Hey guys. The question I think has been answered, but just wanted to reconfirm. So with respect to the CARES Act grants, the $5 million of additional revenue basically is money good, and that's sort of implicitly assumed or included in your revised guide, but the $27 million because there are some terms attached to that, with respect to the guide, you're basically assuming that that is going to offset the additional expenses that you incur this year as a result of COVID. Is that correct?

Joe Carlucci -- Chairman and Chief Executive Officer

Yeah. This is Joe. That's correct. The 2% sequestration has been eliminated from May 1 until the end of the year.

So that's an increase in our Medicare rate essentially. And moving over to the grant funds, those are, in fact, funds to be used for increased COVID expenses and loss revenue. So I think you have it correct. Darren, you want to add anything to that?

Darren Lehrich -- Senior Vice President, Strategy, and Investor Relation

No. Yes, I think that's right.

Unknown speaker

OK. Great. And my only other follow-up is in the $83 million of advanced payments, is there a sort of an amortization schedule on that or do you just -- you get the $83 million in the door, and then as the reimbursements would typically be paid back, that's effectively an advanced payment that you burn off and you'll just continue burning it off until you've met that $83 million in expenses that you would have otherwise been billing sort of post-treatment to Medicare? Is that how that works?

Joe Carlucci -- Chairman and Chief Executive Officer

Well, it's a little bit different. It's an advance made to our company which will be recouped in 210 days from the date -- I believe, the date that it's received. So that's how it works. And I don't know if that answers your question or not, John?

Unknown speaker

Yes, I believe it does. Thank you.

Joe Carlucci -- Chairman and Chief Executive Officer

Sure. My pleasure. Thank you.

Operator

Thank you. We do have a follow-up question coming from the line of Pito Chickering with Deutsche Bank. Please proceed with your question.

Pito Chickering -- Deutsche Bank -- Analyst

Hey guys. Thanks for taking the follow-ups. A couple of quick ones here. You talked about home treatments are growing, 10.8% for total treatments.

What percent of those treatments are PD? How fast do you think that grows? And where do you see we exiting 2020 on PD? And then more importantly, how do you view home treatments impacting margins and free cash flow?

Joe Carlucci -- Chairman and Chief Executive Officer

Yes. So Darren, you want to take the beginning of that with regard to margins I think would be appropriate. And Don, if you would mind taking the question about growth.

Darren Lehrich -- Senior Vice President, Strategy, and Investor Relation

Sure. So Pito, we don't get into the margin of a particular product line. So I don't know that we'd comment necessarily on PD, in general. I would say that the commercial mix tends to be a little bit higher in PD.

So that is one factor to consider when you think about the overall margin profile. But from a growth perspective, I'd turn it to Dr. Williamson to just talk about some of the progress that we're seeing and have really continued to see over the last year in particular.

Don Williamson -- Chief Operating Officer

Sure. Thanks, Darren. No, this is -- we've seen a good growth in our home dialysis. It represented about 10.8% of our treatment mix in Q1, and that was up from 10.6% in Q4, and that was up about 0.9% from Q1 of '18.

So the trajectory of our home treatment growth continues to be very strong. Full-year growth in 2019 was 10%. Q1 of this year was 13%. And we would expect that trajectory to continue.

Joe Carlucci -- Chairman and Chief Executive Officer

Thanks, Don. And we're very focused, Pito, on home therapies, as I think you probably know, and we've employed many of nephrologist partners that have experienced excellent growth and percentage of total patients with home therapies to help build our best practice and improve our education for not only our staff, but our physician partners and work together from the -- it's really a ground-up solution, and I'm pretty happy with the growth thus far. Thanks, Don. Thanks, Pito.

Darren Lehrich -- Senior Vice President, Strategy, and Investor Relation

And Pito, most of that -- just to follow-up and add to, I think you asked about the PD versus the home hemo, and I'd just say that most of that mix is PD. Just wanted to get that there.

Pito Chickering -- Deutsche Bank -- Analyst

OK. One more follow-up on calcimimetics. Can you walk us through what the mix today is a Parsabiv versus oral calcimimetics? And how we should think about that changing throughout 2020? Thanks so much.

Joe Carlucci -- Chairman and Chief Executive Officer

Darren, could you take that one, please?

Darren Lehrich -- Senior Vice President, Strategy, and Investor Relation

Sure. Happy to. Yes, we are still seeing the majority of our physician partners are prescribing the IV. I don't have a breakdown, but it's most of the activity there, and it's hard to really predict any changes that it's a physician preference item.

In terms of the calcimimetics overall, they were a headwind in the first quarter on our revenue due to the lower ASP for both the oral and the IV and erosion in the ASP as you've seen from the published TDAPA rates from CMS that continues. We'd expect lower contribution from calcimimetics as we progress through the year. And overall, we'd expect the headwind on revenue per treatment to be approximately $10 for the year, but it was slightly less than that in the first quarter.

Pito Chickering -- Deutsche Bank -- Analyst

Great. Then last one follow -- a quick modeling question, to follow-up actually on Andrew's question. Obviously, a lot of moving parts right now, but can you quantify for us what the cost per treatment was in April versus first quarter, $249, is that -- we had another $5 in there? Is that in the right ballpark? And it's last one. Thanks so much.

Joe Carlucci -- Chairman and Chief Executive Officer

Darren, do you want to take that?

Darren Lehrich -- Senior Vice President, Strategy, and Investor Relation

Yeah. I don't think we're going to quantify the expenses. But as they -- because we haven't closed April. So I think we'll provide an update in our second quarter.

And as far as the COVID costs and loss revenue goes, we fully expect those to be offset by the grant money.

Pito Chickering -- Deutsche Bank -- Analyst

Great. Thanks so much.

Joe Carlucci -- Chairman and Chief Executive Officer

Thank you.

Operator

We have an additional follow-up coming from the line of Andrew Mok with Barclays. Please proceed with your question.

Andrew Mok -- Barclays -- Analyst

Hi. Thanks for the follow-up. Just a quick one on home dialysis. Have your patients expressed an elevated interest to pursue home therapy in response to the pandemic? And have your home training programs remained up and running during the crisis?

Joe Carlucci -- Chairman and Chief Executive Officer

Yeah. Don, can take that.

Don Williamson -- Chief Operating Officer

Yeah Andrew, I'll answer that for you. The answer is yes. Our home programs have continued to be up and running. We've taken special precautions in the home programs as well to make sure that every patient and -- is screened when they come in the front door, exactly like we do with the in-center facilities.

And I do think that it has stirred interest in our patients to pursue home. We -- as I said in our prepared remarks, we haven't seen that rise yet. But as you can imagine, patients who have to come into dialysis three times a week for life-sustaining dialysis, if they have an option to do that at home in this pandemic environment where patients are quarantining, there is some potential advantage there. So I think our patients are more interested.

But once again, we just haven't seen that come to fruition at this point.

Joe Carlucci -- Chairman and Chief Executive Officer

But it makes sense. Yeah absolutely. Answer your question, Andrew?

Andrew Mok -- Barclays -- Analyst

Got it. That's helpful. That's all for me. Thank you.

OK. Thank you Andrew. Any other question?

Operator

Thank you. We have no additional questions at this time. So I would like to pass the floor back over to management for any additional closing comments.

Joe Carlucci -- Chairman and Chief Executive Officer

Yeah. Thank you. Thank you. It's Joe Carlucci.

I just want to end the session today by thanking all of our staff, especially all of the caregivers at the front lines, physician partners, Don Williamson heading up the COVID task force here at the company, along with Ross Betts, Dr. Ross Betts and Dr. Jeff Walker and Shari Cousins, our senior vice president. I usually don't name individuals, but these folks have worked tirelessly to take good care of patients and keep our staff and our physician partners safe.

So thanks very much to everybody in the organization. And thank you today for having interest in American Renal. So that will conclude our remarks. Have a great day.

Operator

[Operator signoff]

Duration: 56 minutes

Call participants:

Darren Lehrich -- Senior Vice President, Strategy, and Investor Relation

Joe Carlucci -- Chairman and Chief Executive Officer

Don Williamson -- Chief Operating Officer

Mark Herbers -- Interim Chief Financial Officer

Andrew Mok -- Barclays -- Analyst

Pito Chickering -- Deutsche Bank -- Analyst

Unknown speaker

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