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Option Care Health, Inc (NASDAQ:OPCH)
Q3 2020 Earnings Call
Nov 3, 2020, 8:30 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Ladies and gentlemen, thank you for standing by, and welcome to the Option Care Health Third Quarter 2020 Earnings Conference Call. [Operator Instructions]

I would now like to turn the conference to your speaker today, Mike Shapiro, Chief Financial Officer. Please go ahead, sir.

Mike Shapiro -- Chief Financial Officer

Thank you. And good morning. And thanks for joining us for the Option Care Health third quarter earnings call. I'm joined this morning by John Rademacher, Chief Executive Officer.

Before we begin, please note that, during the call, we will make certain forward-looking statements that reflect our current views related to our future financial performance, future events and industry and market conditions. These forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from our comments. We encourage you to review the information in the reports we file with the SEC regarding the specific risks and uncertainties. You should also review the section entitled Forward-Looking Statements in this morning's press release.

During the call, we will use non-GAAP financial measures when talking about the Company's performance and financial condition. You can find additional information on these non-GAAP measures in this morning's press release posted on the Investor Relations portion of our website.

With that, I'll turn the call over to John.

John C. Rademacher -- President and Chief Executive Officer

Thanks, Mike, and good morning, everyone. We are very pleased with our progress in the third quarter, both in terms of our financial results as well as our efforts to lay the foundation for sustained growth. Mike will review the results in more detail, but I'm very proud of the team's execution in the quarter in which we delivered double-digit revenue growth, our highest EBITDA margin on record, and expanded our cash on the balance sheet by over $20 million.

A year ago, on our third quarter earnings call, which was our first call at Option Care Health, we outlined a strategy to drive sustained profitable growth by integrating two industry leaders and establishing a truly unique platform to deliver infusion therapy in the alternate setting. At that time, we established four key objectives for the business, realize over $60 million in net cost synergies, deliver organic revenue growth in the mid-to-high single digits, deliver EBITDA growth of 2 times to 3 times revenue growth through operating leverage, and improve the claim to cash conversion to drive over $50 million in operating cash flow. As we sit here today, we have clearly executed on that strategy. And I am extremely proud of how the Option Care Health team has performed in an extremely challenging environment.

One of our first priorities as a new enterprise was to reengineer our commercial organization and deploy resources for maximum effectiveness. While it was admittedly disruptive at first, it is clear that our sales team of more than 550 is operating much more effectively in identifying and capturing new patient referrals. In the third quarter, new patient referrals increased to pre-COVID levels for both acute and chronic therapy portfolio. And in fact, for many therapies, we are generating solid revenue growth over the prior year.

As the marketplace continues to react to the COVID-19 crisis and the home and alternate sites outside of the hospital are becoming the site of choice, we saw very strong results in our chronic therapy lines that focused on specialty drugs. In the third quarter, we saw a broad improvement in most markets with scheduled procedures and physician visits beginning to accelerate off the second quarter low watermarks. And given our integrated technology between our commercial and operational teams, our success rates in terms of efficiently converting new patient referrals to revenue has continued to improve. While overall, we have seen encouraging referral trends, recoveries vary by market and the overall trend we saw in the third quarter is far from universal. We are also closely monitoring the recent spikes in COVID-19 cases and hospitalizations that have resurged in many cities and states.

The team continues to shine through adversity. And the dedication of the over 5,000 team members at Option Care Health continue to focus on the patients and family members on the receiving end of every dose. Our resilient, interconnected, and technology-enabled network of care management centers has provided a strong backbone that has allowed us to adapt to the dynamic environment that we are operating in and maintain the dependable consistency our referral sources are counting on. We continue to make progress on integration efforts. And while some technology harmonization efforts will continue into the first half of 2021, we will effectively be complete on integrating the two organizations by the end of this year. And the more efficient platform we have created is beginning to unlock operational leverage.

Our EBITDA margin has expanded 200 basis points from the third quarter of the prior year through our spending and operational discipline. The scalability of our network is the key tenet of our growth strategy going forward. And the third quarter underscores our ability to leverage the network efficiently.

Shifting to the pandemic situation, by no means are we out of the woods despite our improving top line results. Like all healthcare enterprises, we continue to focus on the safety and well-being of our team members and the patients that we serve. We continue to aggressively manage our supply chain for critical personal protection equipment, vital drugs, and medical supplies.

Our technology backbone has enabled us to operate and manage our workforce and inventory effectively across our network, and we continue to enhance our technology ecosystem through new software releases and further deployments to enhance our telehealth, e-visit, and virtual capabilities. And with these tools, we continue to collaborate with health systems and physicians to identify patients who could benefit from receiving their infusion services safely and effectively in their home or one of our dedicated infusion suites. We know that patients who have underlying health conditions and/or are immunocompromised have the highest risk of severe impacts from the coronavirus. So our ability to partner closely and then demonstrate our ability to safely serve these patients has only strengthened our position. I am confident we have solidified many referral source relationships over the past several months as a reliable and trusted service provider.

Going into the fourth quarter, we would anticipate continued momentum in our sales effectiveness. Although, we have seen some markets retract and hospital and physician practices begin to postpone procedures given the recent flareups. Also, we continue to actively monitor supply chain dynamics as product and supply disruptions continue to emerge in certain therapy classes and medical supplies.

Finally, as I've shared in the past, care and pharma manufacturing collaborations are critical components of our growth strategy. And we are uniquely positioned as the only national independent provider with a technology enabled clinical advantage. We've announced a number of new payer collaborations this year, and we continue to make tremendous progress.

Today, I'm very pleased to announce that we have recently entered into new multi-year relationships with both Centene and Cigna. We are excited as both of these agreements allow for deeper collaboration with these health plans to actively manage their members who require high-quality infusion services at an appropriate cost.

We pride ourselves in our ability to collaborate with both local and national health plans to deliver real value to them and their population. And while our efforts on payer front continue, I'm extremely proud of the team and the progress that we've made in 2020. We remain the only provider that is in network with all major health plans, and that is a key competitive strength for us going forward.

We have also highlighted the strength of our platform to provide manufacturers with clinical support and channel access for new product introductions. In the third quarter, we also announced a key collaboration with NS Pharma to help commercialize their recently approved therapy for the treatment of muscular dystrophy. Neuromuscular therapies is an area of clinical focus for us, and we are thrilled to be selected as a key partner in their limited distribution network based on our clinical expertise. Our business development team continues to actively collaborate with biopharma manufacturers to identify opportunities to utilize our clinical expertise and care management platform in support of the commercialization goals.

As we sit here today, in the front half of the fourth quarter, I'm very encouraged and proud of the Option Care Health team both for their resilience and persistence in relentlessly pursuing our shared mission but also for the tremendous progress we've made in our first full year as a new enterprise. We will have completed our merger-related integration activities, established or deepened our new payer collaborations, launched multiple new therapies and dramatically improved the financial profile of the Company. With the strength of our execution and continued progress against our goals, we announced this morning that we are raising our 2020 full-year EBITDA guidance. And given the positive momentum, I've never been more confident in the Option Care Health team or our potential going forward.

In short, the team has executed the strategy we outlined a year ago exceptionally well, adapted and responded to a very dynamic and challenging environment and never lost focus on the most important thing we do, provide extraordinary care that changes lives.

With that, I will turn the call over to Mike to review the financial results in a bit more detail. Mike?

Mike Shapiro -- Chief Financial Officer

Thanks, John. Clearly, we continue to generate strong financial results and establish a solid foundation for the future. The third quarter is also the last quarter in which I must remind all of you that the reported growth reflects legacy Option Care results up through the merger date August 6, 2019, and the combined results for the merged enterprise thereafter. Going forward, our growth profile will be much more transparent.

I'll try to provide comparable growth where possible based on our estimated combined prior year results and the impact of harmonized accounting policies.

Revenue in the quarter of over $781 million represents comparable infusion revenue growth of approximately 13%, driven by mid-teens chronic therapy growth which offset relatively flat acute revenue. Reported revenue growth also benefited from a meaningful improvement in revenue deductions for bad debt, which declined more than a full percentage point year-over-year to the mid-twos.

Our chronic portfolio continues to benefit from the transfer of patients from hospitals, HOPD and other sites of care to the home or one of our infusion suites. Acute referrals and revenue did improve modestly over the second quarter in most markets as acute activity in hospitals did sequentially improve. Clearly, we're pleased with the overall revenue results for the quarter.

Gross profit of $174 million represented 22.3% of net revenue in the quarter. Despite considerably faster growth in our chronic portfolio, which represented a little over two-thirds of our revenue in Q3, our gross margin is holding tight as our operations team continues to drive efficiencies to mitigate the mix impact. And spending of $123 million is down slightly from Q2 spending levels and represented 15.7% of revenue. And note that it includes approximately $4.5 million of integration-related expenses, which is detailed in the reconciliation of adjusted EBITDA in this morning's press release. We expect sustained spending leverage to continue as integration-related expenses decline, and we leverage the established infrastructure.

Adjusted EBITDA of $59.2 million represented 7.6% of net revenue. And it reaffirms our conviction in the ability to expand profit margins over time. Despite our chronic portfolio growing at a faster pace as expected, we continue to demonstrate our ability to expand EBITDA margins, and we would expect that trend to continue. Our mantra regarding earnings has always been that it only counts if it shows up in the bank accounts.

Regarding cash flow results, we continue to drive meaningful cash from operations and further enhance our capital structure. Free cash flow, which we define as net change in cash balances was $22 million despite the return of $11.7 million in the quarter to HHS related to the CARES Act grants. Year-to-date, we have generated over $70 million in free cash flow and ended Q3 with $140 million in cash balances. Additionally, as we've disclosed, we increased our revolver capacity in the quarter to $175 million with $165 million available after letters of credit. So we exited Q3 with over $300 million in total available liquidity.

Regarding our leverage profile, we committed a year ago to a consistent deleveraging trend through both earnings growth and cash flow generation. We emerged at the time of the merger with a net debt-to-EBITDA ratio of 6.2 times and we exited Q3 at 5.0 times. Based on the guidance I'll review in a minute, we expect to be below 5 times at the end of the year. And while we're not in a position to provide 2021 guidance at this time, we would expect to improve our leverage profile considerably next year and ultimately expect to be below 4 times in short order.

Finally, given the strength of our results and momentum, we are increasing our outlook for the year and expect to generate between $62 million and $66 million in EBITDA in the fourth quarter or between $216 million and $220 million for the full year. We also expect to continue generating strong cash and expect to finish the year with more than $150 million in cash balances or at least an additional $10 million in free cash flow in Q4.

With that, we will open up the call for Q&A. Operator?

Questions and Answers:

Operator

[Operator Instructions] And our first question is coming from the line of Brooks O'Neil from Lake Street Capital. Your line is now open.

Brooks O'Neil -- Lake Street Capital Markets -- Analyst

Good morning, John and Mike. Congratulations on a terrific first full year as Option Care Health.

Mike Shapiro -- Chief Financial Officer

Thanks, Brooks.

Brooks O'Neil -- Lake Street Capital Markets -- Analyst

I have a couple questions. While I know investors and I are curious about your outlook for 2021, maybe we should start with the outlook for Q4. I know Mike commented a little bit about it, but could you comment in particular on whether you think you can continue organic revenue growth in the double-digit range? And it looked like gross margin was essentially flat here in 3Q. And I'm curious what your outlook for gross margin in Q4 might be as well.

John C. Rademacher -- President and Chief Executive Officer

Yeah. Good morning, Brooks. It's John, and thanks for the call. I'll start out, and then I'm sure Mike will want to add some color as well. I think we are really excited about the progress that we made in Q3. Just to remind you though, last year was an interesting comparable. We were going through a significant amount of change with the reset of our commercial team in Q3 last year, if you remember. And that was a big part of our integration effort. We wanted to get that behind us as quickly as possible and reset the team so that we had better reach and frequency in the marketplace. So we looked at Q3 as being a softer comparable than most other quarters because of that disruption.

That being said, look, we're monitoring closely the situation as we continue to see flare-ups across the country with COVID-19 and spikes in local communities. We do believe that the healthcare system is much better equipped today to handle both COVID and non-COVID related care much better than we were in March when this all unfolded. And so we're cautiously optimistic that we're going to continue to drive our team to be in a position to capture the referrals that are available to work closely with the providers to identify patients that can come on to service with us and to continue to focus around both the acute and chronic patients that can come on service. And I think we'll see that momentum continue. But I do want to say that there is a little bit of caution in both of our voices just with the uncertainty of the recent flare-ups and the increase in hospitalizations that we're seeing. Mike?

Brooks O'Neil -- Lake Street Capital Markets -- Analyst

Okay, that makes sense.

Mike Shapiro -- Chief Financial Officer

Yeah, Brooks, the only thing I'd add is, look, clearly with the guidance we're providing for Q4, we're signaling and expecting that we'll see a constructive Q4 compared to the momentum exiting the third quarter. And again, as it relates to gross margin, we've been very open given the two verticals that we operate in with our acute and chronic therapies. With chronic, which we expect to consistently grow at a faster pace, that will have some downward margin rate pressure. But again, hats off to the operations team who is driving cost efficiencies. And the other thing I mentioned in my prepared remarks that helps our gross margin is, we've seen over a full point of reduction in our bad debt reductions from gross revenue. And that's really a result of our patient registration and our revenue cycle teams, really driving superior collection performance. So that's helped us, up to this point we're not in a position obviously to provide specific gross margin guidance, but rest assured, we're fighting for every basis point.

Brooks O'Neil -- Lake Street Capital Markets -- Analyst

Great. And then I'll just ask one more. Obviously, you guys are doing a terrific job with deleveraging and strengthening the balance sheet. I think I recall that hedge and secondly notes comes out during November. Can you just give us any feel for what you're thinking about in terms of interest expense maybe for Q4 or thinking out into 2021?

Mike Shapiro -- Chief Financial Officer

Yeah. Brooks, the swap, as we disclosed in our filings, we had two swaps, the first lien and the second lien. The second lien swap does expire actually later this week. Our initial guidance for the year was we would be at around $105 million to $110 million of run rate interest expense. When you look at the meaningful pay down in the second lien in early August as well as the expiration of that swap, we will exit this year with a cash interest rate of around $90 million. So we've taken $15 million to $20 million of cash interest out through those two actions. And we'll obviously provide more granular thoughts on our next call regarding 2021.

Brooks O'Neil -- Lake Street Capital Markets -- Analyst

Great. Thank you very much, and congratulations.

Mike Shapiro -- Chief Financial Officer

Take care, Brooks.

Operator

Our next question is coming from the line of Matt Larew with William Blair. Your line is open.

Matt Larew -- William Blair -- Analyst

Hi, good morning. Obviously, a strong quarter, guys. Congrats. You referenced kind of the category perhaps taking share in the home in terms of patients shifting out of the hospital and then maybe the HOPD. But also it sounds like Option Care itself is gaining share, which maybe you can help us understand sort of from your angle why are you gaining share particularly right now. Is it, John, you referenced the sales force kind of hitting on all cylinders, you referenced the tech platform you've integrated, you've obviously referenced some new payer contracts, obviously, the scale is an advantage. So maybe help us parse out what is the broader home infusion category gaining share versus Option Care itself?

John C. Rademacher -- President and Chief Executive Officer

Yeah, Matt. Good morning. Thanks for the question. Look, I think what you just mentioned are the keys. First and foremost, we knew it was going to take -- it was going to be disruptive and take a bit of time to get the sales force realigned and pushing in the right places. And hats off to the team. We've done a lot of training. We've refocused the call points. We've done a lot around the reach and frequency to make certain that we are in the right places, working with the right providers in order to capture that share. And so a lot of it has to do with the execution of that team.

The second thing we mentioned, and I mentioned in my comments is, look, the technology platform really allows our selling resources and our operations team, especially those in patient registration, to work much better together. We have continued to see improvements in the amount of conversions of referrals to starts, right. A referral is important, but it doesn't really generate revenue until we create a start out of it. And so the teams have continued to focus on that. We continue to refine and upgrade the technology with new releases. And we continue to get better with that. That also is something that we feel really good about.

The last thing that you mentioned is, we continue to cultivate and develop deep relationships with the payer communities. And we believe that those collaborations are important to serve their members and to make certain that we are well positioned to be a national provider that can cover 96% of the U.S. population and have access to the most plans from a health plan standpoint. And so across all of those dimensions, we continue to execute our strategy. And we believe that continues to put us in a really strong position in order to capture that.

One last thing I'll mention is, we have invested a lot in the technology platform to allow us to do things in a virtual environment. We are trying to be touchless wherever we can, using digital documentation and other tools that we have at our disposal to be able to help to capture those patients that are transitioning out of the hospital without necessarily having to show up at the hospital. And so the work of the team and the use of that platform to do virtual teaches, virtual visits, e-discharges, all of that is paying benefits to us as an organization.

Matt Larew -- William Blair -- Analyst

Okay, fair enough. And then I think the kind of longer-term growth algorithm you talked about was growing at least in line with market growth of 5% to 7% and 2 times to 3 times in terms of earnings growth. I appreciated the comp in the third quarter was easier. But obviously, the client portfolio now, I think that's two-thirds of the book versus 60% before, is there a reason to think that kind of that long-term growth algorithm you had outlined, perhaps actually could be more attractive in a post-COVID world?

Mike Shapiro -- Chief Financial Officer

Yeah, Matt. It's Mike. So obviously, as we emerge, we try to lay out what we thought were very realistic growth profiles. And again, as we generally characterize this industry, which is really a portfolio of virtually dozens of different infused therapies, one of the benefits of our model is the balance. We have an extremely balanced revenue base across a variety of therapies, some which in our portfolio are admittedly growing in the low single digits, balanced with a rapidly growing portfolio of chronic therapies. And so the way we've generally characterized the revenue potential, I think, remains intact. We've characterized that broad portfolio is a 5% to 7% baseline proposition. And as John alluded, I think our confidence here sitting a year later with a very well performing and cohesive commercial go-to-market strategy, I think, is giving us more confidence that we'll be growing at a faster pace. And again, it's not just the existing chronic therapies, but as John also mentioned, we're introducing a couple of new therapies a year. And so that gives us confidence, especially with that chronic portfolio. So short-winded answer to your question is, yes, I think that growth profile remains intact with probably a little more confidence.

Matt Larew -- William Blair -- Analyst

Okay, thank you.

Mike Shapiro -- Chief Financial Officer

Thanks, Matt.

Operator

Our next question is coming from the line of David MacDonald with Truist Securities. Your line is open.

David MacDonald -- Truist Securities -- Analyst

Hey, good morning, guys. Couple quick questions. First, Mike, can you talk a little bit about working capital, I mean, if you look at the cash flows, they've obviously been very strong. What in terms of working capital has maybe gone a little bit better? Where are there continued opportunities? And then if we look at the growth of the chronic business relative to acute, just looking at the bad debt characteristics of that product portfolio, is there an opportunity to kind of further drive that bad debt number down?

Mike Shapiro -- Chief Financial Officer

Yeah, we've been very active in managing our working capital. Obviously, looking at what we refer to as our cash GAAP, our days of inventory and our DSO offset by our days payable. Overall, we feel we're in a very strong position. It really starts with the collectability, which as I mentioned, has driven down our provision for bad debt. We've improved not only the balance of AR, if you look at our disclosures, we've taken tens of millions of dollars out of our AR balances over a horizon where the top line has grown meaningfully. And that's really a testament to our patient registration and our billing teams who are converting that revenue to cash significantly faster. That has afforded us to manage and reduce our overall working capital balance. As you will also see with inventory, they also affords us the ability to make some strategic investments in PPE, in med supplies, in what we think could be some challenged supply markets going forward. And so we've been making some strategic elections on our working capital and investments where we think it's prudent. So overall, I think, working capital, you ask the teams out in the field, they're just getting started, and they think there is continued efficiency and we would agree with that. So overall, I think working capital will be relatively neutral and probably grow modestly as a fraction of revenues going forward.

With the bad debt, you're absolutely right. As we think about the different therapies, one of the benefits on the chronic therapies is these are a higher cost regimen. Virtually, all of our chronic starts are prior authorized by the payers. And so we typically see a lower bad debt profile for our chronic therapies, simply because our patient registration teams are so diligent around following up with payers who obviously want to have some involvement in the treatment regimen for those therapies. So overall, with the mix moving forward, we think that there is still some room to improve on our bad debt provisions as well.

David MacDonald -- Truist Securities -- Analyst

And then just a quick question on payers and payer contracting. John, you mentioned in the prepared remarks, deeper collaboration payers. And I'm sure you don't want to get specifically into kind of Centene or Cigna. But broadly, when we think about these conversations, we're hearing every payer talking more and more about value-based care. Is there -- when you think about contracting, is there an opportunity over time to move toward more of a construct where, as you guys are able to drive better outcomes, there is an opportunity to potentially participate or are you seeing payers increasingly narrow networks? Just any broad commentary in terms of the payer conversations that you're having.

John C. Rademacher -- President and Chief Executive Officer

Yeah, Dave. Look the conversations that we've been having with payers continues to evolve and to change. I'll have to tell you that they are much more productive and in alignment with what you're hearing in the marketplace. That is a significant amount of interest in understanding some of the construct of what a value-based care reimbursement model could look like, opportunities for us to work closely with them around managing cohorts of their members that require the therapy set. And I think as we've disclosed before, I mean, most of those start out in the area of performance guarantee and putting at-risk dollars both forward as well as punitive on that. And we think that's going to continue to evolve. We're really excited about the relationship that we announced with Cigna and Centene. We think that they're solid foundations for us to then build on. And I think that this is going to continue to evolve moving forward. And I wouldn't be surprised that the evolution would move down the path of some risk share for performance and for making certain that we're managing effectively the outcomes for the patients that we are privileged to serve.

David MacDonald -- Truist Securities -- Analyst

Okay. And then it sounds like in the chronic therapies, you guys called out the ongoing migration to home and alternative site and just given some of the reticence we think we're going to see in terms of kind of ongoing COVID flares and reengaging with institutional settings, how do you guys think about your ambulatory infusion suite footprint? Is there some areas where you may put some additional dots on the map? Just how you think about that in terms of further complementing the portfolio?

John C. Rademacher -- President and Chief Executive Officer

Yeah, Dave. As we discussed and, I think, disclosed before, we today operate over 130 infusion centers across the country. On that, we believe that this will be a big part of the growth strategy as we move forward. We continue to focus around utilization of the existing infrastructure. And we're identifying opportunities to make some smart investments, where local markets need it, demand it, and we have the patient volume to justify it. So I think you'll continue to see us move in that direction. We're thoughtful about it, as you would expect, in looking at how we want to deploy the capital, but we're pleased with the progress that we're making. We believe there is still opportunity for further utilization of the existing infrastructure and we're going to continue down that path to make certain that we have the right facilities in the right place to capture that demand in the marketplace.

David MacDonald -- Truist Securities -- Analyst

Okay. And then just last question from me, guys. When the pandemic started, you mentioned pretty meaningful uptick in terms of new referral sources. When we look at the growth this morning, can you give us a little bit of perspective in terms of, are you continuing to see outsized new referral growth or is the vast majority of this being driven by just kind of increased depth within your existing referral base?

Mike Shapiro -- Chief Financial Officer

Yeah, I think it's quite balanced, Dave. And again, as John mentioned, we're thrilled with the revenue performance and the fact that, on a comparable basis, we're in the double digits, again, admittedly with an easier comp. We did see a sequential improvement in both the acute and chronic therapies relative to the second quarter. And I think, on the chronic side, it's really balance. There is still a number of referral sources that are looking to shift the modality of care, but it's also there is just some pent-up demand with people going to the specialist for those chronic conditions. And so we're seeing, it's not that the third quarter is still the swell of site of care shifts. It's really balanced. We're admittedly still seeing some of those migrations. But we're seeing uptick in some of our newer therapies for myasthenia gravis and MS as well as some of the chronic inflammatory. So really good balance in where those starts are coming from.

David MacDonald -- Truist Securities -- Analyst

Okay. Thanks very much, guys.

Mike Shapiro -- Chief Financial Officer

Thanks, Dave.

John C. Rademacher -- President and Chief Executive Officer

Thanks, Dave.

Operator

Our next question, coming from the line of Kevin Fischbeck from Bank of America. Your line is now open.

Adam Ron -- Bank of America -- Analyst

Hey. This is Adam Ron on for Kevin. Just a couple quick questions. So your deleveraging comments kind of imply that you're going to grow next year. But as you think about 2021, should we think about the growth off the base of the new 2020 guidance that you just gave or is there any kind of like one-time adjustments that you would adjust out as you think as the jumping-off point for 2020?

Mike Shapiro -- Chief Financial Officer

Hey, Adam. It's Mike. No, I think the jump-off point for the guidance that we provided is a solid baseline. Again, our adjusted EBITDA normalizes for some of the integration costs as detailed in the reconciliation. So I think while we're not in a position to provide -- I think the reported adjusted EBITDA for this year is a solid base.

Adam Ron -- Bank of America -- Analyst

Okay, thanks. And then going back to kind of the contracts with Centene and Cigna, is there anything additive from these new contracts? New geographies, new services covered or are these kind of more just renewals?

John C. Rademacher -- President and Chief Executive Officer

Yeah. So it's John. I would say that it's a renewal for Centene. It continues to be a strong partnership that we have there. The Cigna is a little bit new in the sense of it is a direct contract with Cigna. Historically, they utilized CareCentrix as being their intermediary, and so we're -- early stages of the relationship directly with Cigna, and our hope is that it will continue to develop and deepen as we start to work closely together in a direct basis.

Adam Ron -- Bank of America -- Analyst

All right. Okay. That's helpful. Thanks. And then maybe one more, just kind of curious, have you administered remdesivir to any COVID patients so far? And I've seen some reports like Lilly and other manufacturers are working on kind of COVID infusion treatments. And I'm wondering if that was the route that we ultimately head down. Is that an opportunity that you would be focused on or are you more focused on kind of core volumes?

John C. Rademacher -- President and Chief Executive Officer

Yeah. So at this point in time, the emergency use for that product is in hospital only. And so there is no application or ability for it to be done in the home or outside of the hospital. So first and foremost, it will be done within the four walls of the hospital in an in-patient setting. I think as we are looking forward, we as an organization continue to work closely with pharma manufacturers wherever we can. If we can help provide solutions into the healthcare system, we by all means, will look for those opportunities. But at this point in time, there really is no drug or an infusion therapy that can be done safely and effectively in the home or in one of ATSs that would have any benefit for coronavirus victims. So our focus is around the core of what we do. Our focus is around making certain that we're working closely with those hospitals to help with the patient discharge to free up the beds to make certain that they're well equipped to handle any surges for COVID patients and to be working with the physician practices to really identify those patients that require chronic therapy and move them onto service safely and effectively in the home or one of our infusion suites.

Adam Ron -- Bank of America -- Analyst

Thanks. Appreciate it.

Mike Shapiro -- Chief Financial Officer

Thanks, Adam.

Operator

And our next question, coming from the line of Richard Close with Canaccord Genuity. Your line is open.

Richard Close -- Canaccord Genuity -- Analyst

Great, thanks. Congratulations on a first year. Just maybe a follow-up to Dave's question. Just on the strong 13% growth there and strong referrals, any thoughts in terms of a gut feeling and whether this is like the pent-up demand from the last couple of quarters with COVID versus the reengineering of the sales force. Obviously, the comp was easier because you just started that last year. But any thoughts in and around that would be helpful.

Mike Shapiro -- Chief Financial Officer

Sure, Richard. Look to state the obvious, it's been an extraordinary period. And when you're looking at all of the variables that occurred in the third quarter as well as the baseline, look, there is no science to this, if you ask me, I'd probably say that our true comparable normalizing for some of the floods -- it's probably in the high single digits, if you normalize for the comp and some of the transition benefits that we've seen.

Richard Close -- Canaccord Genuity -- Analyst

Okay. That's helpful. And then thinking about your comments, you said the results were varied market by market. Can you provide any more details there, like maybe not specific markets, but are any markets down, any markets outperforming, maybe the range that you're thinking about there or seeing?

John C. Rademacher -- President and Chief Executive Officer

Yeah. It's John. I'll start and then Mike certainly could add color. Look, I think you can follow the trend that you're seeing in -- where you're seeing the resurgence of coronavirus in those local markets. So certainly, we saw in the third quarter and especially toward the back half, continued pressures in the Midwest and some of the Southern states in which we started to see some retraction, hospitals delaying some procedures, as well as patients not going to their physician office visits. And so that's where the strength of our national network is. We have that diverse portfolio, and we're seeing kind of different impacts market by market on that. But we do follow closely what's happening within the markets. And there is probably a very strong correlation between where you're seeing spikes in coronavirus cases and positives and hospitalization and some of the drag that puts on the referral patterns that we see, especially from the acute care setting.

Mike Shapiro -- Chief Financial Officer

Yeah, the only thing I'd add -- the only thing I'd add, Richard, it's Mike. We alluded to this on the second quarter call as well. Look, out of this episode, I think one of the silver linings from our perspective is that, on the heels of our technology, we've reached into a lot of newer markets and cast a broader shadow into some of the regional areas that we had boots on the street historically. And so the Peoria, Illinois, or the La Crosse, Wisconsins, where through our technology, we can help to seamlessly transition patients. And we fortified new referral relationships, even though we might not have commercial resources in that zip code. And so on the heels of that, while there is a variety of experiences we've seen across different geographies and metropolitan areas, I think we are encouraged that our referral base has meaningfully expanded during this period. We'd hope to sustain that.

Richard Close -- Canaccord Genuity -- Analyst

Okay, that's very helpful. And then, obviously, I spend a lot of time on the virtual tech side of things. And I was just wondering if you can dive deeper into the technology you're utilizing whether it's on the e-visits and training and just thoughts in terms of how much legs this has going forward in terms of maybe improving revenue or revenue growth or margin improvement for you guys going forward?

John C. Rademacher -- President and Chief Executive Officer

Yeah. Richard, look, the platform itself is a tool that we have been working to design. The interesting aspect that I think we've disclosed before is a lot of the building blocks that we utilized are best-in-class solutions. So the platform itself allows our nurses to do virtual visit, to use things like video conferencing as well as support tools in order to really enhance that patient's experience and support through the process. It also allows for digital documentation to quickly and effectively capture the information that's required and then seamlessly provide that throughout the organization. So we can track a patient from the moment that we receive the referral all the way through ultimate discharge and have visibility across the entire chain. So we do believe this is going to continue to be an opportunity for us to drive efficiency as an organization. We believe it's an opportunity for us to have an ability, as Mike just said, to reach into areas that might be a little bit more remote and utilize the technologies in support of those patients in those rural markets. And we believe that it's an opportunity for us to continue to look and enhance that overall wrapper that we put around the patient to provide them with comprehensive care. So we're excited about the platform. We're excited about the potential that it has. We're just really scratching the surface at this point in time. And expectations are that we'll continue to capitalize on it as we move forward.

Richard Close -- Canaccord Genuity -- Analyst

Excellent. Congratulations again.

Mike Shapiro -- Chief Financial Officer

Thanks, Richard.

John C. Rademacher -- President and Chief Executive Officer

Thanks, Richard.

Operator

And our next question coming from the line of Mike Petusky with Barrington Research. Your line is now open.

Michael Petusky -- Barrington Research -- Analyst

Hey, good morning, guys. Just a few questions. I guess, I appreciate the detail on the slight change in the Cigna relationship. John, can you just speak to, I mean, was that a relationship in which you guys feel like you were underpenetrated relative to your market share in general?

Mike Shapiro -- Chief Financial Officer

I don't know that I would describe it that way. Look, we worked closely with CareCentrix, but again, didn't have that direct relationship with Cigna. So our expectations are that we fought vigorously for every one of the Cigna members. We took them on the service, even though it was being managed through that third party. We're encouraged about what the future can hold in a direct relationship and potentially looking to expand from that. But I wouldn't want to represent that we were under-indexed on that on a historical basis.

Michael Petusky -- Barrington Research -- Analyst

Okay.

John C. Rademacher -- President and Chief Executive Officer

And, Mike, the only thing I'd add is, I think, as you look at the number of investments they've made and a lot of the comments that Cigna specifically has made around their focus on post-acute, it's quite an innovative team. And I think they're looking for collaborative partners in the post-acute space. And I think that's the -- that's what gets us excited from a relationship development perspective.

Michael Petusky -- Barrington Research -- Analyst

Okay. Great. I guess on some other conference calls, healthcare service executives have sort of -- some have said, hey, we've had a chance during COVID to look at our business in some ways that we probably never would have in the past. Is there any one or two sort of learnings that have come directly as a result of sort of the backdrop of COVID and sort of the challenges you faced and just looking at the business maybe in a different way?

John C. Rademacher -- President and Chief Executive Officer

Yeah, look, I think that if you go back and you said, at least for your office-based workforce, that you'd be working remote and be able to continue to operate at the level we have and execute at the level that we did, I don't think that that was on anyone's drawing board. And so I think there are things that we're going to continue to take a look at around the use of remote work where appropriate. We are going to continue to take a look at the need to travel, and whether that is -- we need to do it at the extent that we do. We have invested in making certain that we can train and onboard people in a virtual environment. And I think that's going to prove to be beneficial as we continue to move forward. So I think the fundamentals of the business itself, look, we need pharmacists and pharmacy techs and our warehouse teams to show up into our care management centers. We need nurses to be able to knock on the doors and go into the homes to do home infusion. So a lot of the core of what we do remains. But on the edges and on all of the support things that wrap around it, we continue to challenge ourselves to think differently to capitalize on the technology stack that we invested in to make certain that we're as efficient and as effective as possible.

Michael Petusky -- Barrington Research -- Analyst

Okay, great. And just last one, in terms of -- I've heard there's an election today. Just in terms of that issue, are there any politicians that have been champions for the home infusion industry or parties that are more generally sympathetic and I guess understanding of the value you guys provide? Just any thoughts around the election and what that can mean for home infusion? Thanks.

John C. Rademacher -- President and Chief Executive Officer

Yeah, look, I think that we're pretty neutral. Regardless of the outcome of the election today, we do believe that a couple of things just are self-evident. Number one is, we're on the right side of cost-quality equation. We're providing a service in a site in which most patients want to receive the care, and we can do it in a very efficient, safe and cost-effective manner. And so I think that all bodes well. I would tell you that we've had bipartisan support. When we tried to move this forward, we believe that we've had the legislative intent to expand the offering of home infusion broadly on that. And CMS is the one that at this point in time continues to interpret in a different way. And we're cautiously optimistic that, look, we're on the right side of this argument. We know that seniors are the most vulnerable to the severe impacts of coronavirus. And we believe that we have a real solution that's available to CMS and to really all of the government programs. And we're going to continue to beat that drum and shout that message from the mountain top.

Michael Petusky -- Barrington Research -- Analyst

Great. And hey, congratulations on this first year post BioScrip. Great job. Thanks.

John C. Rademacher -- President and Chief Executive Officer

Great, thank you.

Mike Shapiro -- Chief Financial Officer

Thanks, Mike.

Operator

And I'm showing no further questions at this time.

John C. Rademacher -- President and Chief Executive Officer

Great. Well, thank you. As I hope you hear from our update and remarks, we are very pleased with the progress we have made in the third quarter and as our first year as Option Care Health. The team has delivered on the commitments that we made, and we are just getting started. We know that we are on the right side of the transformation happening in healthcare. And with our more than 5,000 Option Care team members focused on providing extraordinary care that changes lives, we expect to see continued momentum in the fourth quarter. Please take care and stay safe. Thank you for attending our call.

Operator

[Operator Closing Remarks]

Duration: 53 minutes

Call participants:

Mike Shapiro -- Chief Financial Officer

John C. Rademacher -- President and Chief Executive Officer

Brooks O'Neil -- Lake Street Capital Markets -- Analyst

Matt Larew -- William Blair -- Analyst

David MacDonald -- Truist Securities -- Analyst

Adam Ron -- Bank of America -- Analyst

Richard Close -- Canaccord Genuity -- Analyst

Michael Petusky -- Barrington Research -- Analyst

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