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Ontrak, Inc. (NASDAQ:OTRK)
Q1 2021 Earnings Call
May 06, 2021, 4:30 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:


Operator

Welcome to the Ontrak first-quarter 2021 earnings call. My name is Sylvia and I'll be your operator for today's call. At this time all participants are in a listen-only mode. Later we will conduct a question-and-answer session.

[Operator instructions] I will now turn the call over to Caroline Paul, investor relations. Caroline you may begin.

Caroline Paul -- Investor Relations

Thank you. And thank you all for participating in today's call. Joining me today are Terren Peizer, executive chairman; Jonathan Mayhew, chief executive officer; and Brandon LaVerne, chief financial officer. Earlier today, Ontrak released financial results for the quarter ended March 31, 2021.

A copy of the press release is available on the company's website. Before we begin, I would like to make the following remarks concerning forward-looking statements. All statements in this conference call other than historical facts are forward-looking statements. The words anticipate, believes, estimates, expects, intend, guidance, confidence, targets, projects and some other expressions typically are used to identify forward-looking statements.

These forward-looking statements are not guarantees of future performance but may involve and are subject to certain risks and uncertainties, other factors that may affect Ontrak business, financial condition and operating results, which include, but are not limited to, the risk factors described in the risk factors section of the Form 10-K and Form 10-Q as filed with the SEC. Therefore, actual outcomes and results may differ materially from those expressed or implied by these forward-looking statements. Ontrak expressly disclaims any intent or obligation to update these forward-looking statements. With that, I'd like to turn the call over to Terren.

Terren Peizer -- Executive Chairman

Thank you. Good afternoon everyone. And thank you for joining us. Today is National Nurses Day and the first day of National Nurses Week.

And we are profoundly grateful to all of the care coaches with a nursing background at Ontrak. They play a vital role in ensuring that those with untreated behavioral health conditions and medical co-morbidities receive the care they need. We will be recognizing and thanking nurses and healthcare workers as part of our new Ontrak marketing campaign launching this week. When I founded Ontrak, our mission was clear to help improve the health and save the lives of as many people as possible.

I'm very proud that the Ontrak team has been able to do the unimaginable and build a platform that uses advanced analytics to predict people whose chronic disease will improve with behavior change, recommended effective care pathways that people are willing to follow and guide those with unrelated, untreated behavioral health needs to our network of high-quality behavioral health providers. This platform and the Ontrak program have enabled us to deliver cost savings of 40% to 50% to healthcare members and improve health outcomes for those suffering from behavioral health conditions and chronic disease. Our industry-leading position and capabilities have enabled us to consistently generate revenue growth in excess of a hundred percent these past few years. We now have an excellent team in place to lead Ontrak to our next growth chapter.

As you know from our March press release, Jonathan Mayhew, has succeeded me as CEO. I have long looked forward to handing over the CEO reins to an executive of Jonathan's stature. And the Ontrak board of directors and I, are confident that he is the right leader to build upon our growth trajectory and scale the business. Jonathan is now in week-four at Ontrak.

And I'm deeply impressed by how fast he is moving. His energy, passion and strategic thinking are inspiring. They will soon permeate the entire company and drive us to greater heights. Thank you, Jonathan.

Under Jonathan's leadership, we will continue to capitalize on the tremendous growth opportunities ahead of us. We are just getting started on our journey to engage not only care avoidance, but also care seeking individuals and to broaden our reach within Medicare, Medicaid, commercial health list, and ASO membership basis. I'm excited to become executive chairman and intend to focus on capital formation, shareholder value-added transactions and collaborating with Jonathan on our long-term growth strategy. Now I'd like to hand it over to Jonathan to share his observations and take us through a more detailed review of the first quarter and our growth initiatives for the year.

Jonathan?

Jonathan Mayhew -- Chief Executive Officer

Thank you, Terren. I'd like to start by thanking you and the board of directors for the opportunity to lead Ontrak. I look forward to working with you in your new role as executive chairman. This opportunity was irresistible to me for two reasons: first, I understand firsthand how challenging it can be to access high quality behavioral health services when families need it the most.

And I want to solve the inequities that too often become insurmountable barriers to care. Second, Ontrak has a remarkable team that's dedicated to our mission an unparalleled technology and insights to treat depression, anxiety, substance use disorder, and a host of other chronic conditions. There's a massive addressable market of those who can benefit from our integrated intervention platform. In my fourth week at Ontrak, I'm even more optimistic about Ontrak's future and our ability to drive long-term value for our shareholders.

I'm excited about the opportunities ahead and would like to spend a moment sharing some of my early observations that will shape our priorities as we move forward. Number one, we are privileged to have an exceptional roster of health plan and employer clients. We must ensure that we listen closely to their needs and become a truly customer-centric organization. In that spirit, I want to explore more deeply how Ontrak's outstanding net promoter scores can increase member ratings of health plans and impact things like HEDIS scores, star ratings, and cap scores.

Health plans care greatly about the customer satisfaction scores for their members. Number two, our customers need a portfolio of solutions for high and low acuity, behavioral health conditions in chronic disease. Ontrak has a powerful combination of digital health and care coach supported interventions that give us a strategic flexibility for the future. I also see a tremendous opportunity for us to increase our value to our customers by aligning and integrating closely with their existing customer support programs.

It's hard to be physically well if you're not mentally well. Customers want to work with a smaller number of high value partners that meet a spectrum of healthcare needs. We must earn the right to partner with them as a partner of choice. Number three, we have a number, very promising opportunities in our sales pipeline that would diversify our portfolio and expand our business development approach.

My conversations to date with prospects lead me to believe that there's a strong interest in the Ontrak program from provider organizations who work with high acuity, chronic care populations. I believe that our services are especially relevant for government lines of business, where the disease burden is greatest and we can add new value with a very high level of efficiency. Number four, we believe the new Treatment Effect study is a key milestone in further establishing impact in value to our overall program. This rigorous study concluded that the Ontrak program reduced inpatient utilization by 64%, while increasing office visits for preventive care and behavioral health services.

The savings for members who completed the 12-month program were also statistically significant and notable at $486 per member per month above the control group. Remember that our members are the highest cost, most vulnerable care avoidant individuals who may be using the emergency room as their general practitioner. The members in our study cost an average of $2,779 per member per month before treatment. In the two years post treatment, the treated individuals' costs reduced to $1,551 PMPM or a 44% reduction and a $486 per member per month lower than the control group.

Two things are really striking to me first, the rigor of the methodology. The research team simulated a randomized control trial by pairing propensity score matching with a difference, indifference analysis to establish the treatment effect of the Ontrak program. Secondly, the study found that cost-savings continued for 12 months after the Ontrak program ended, which is evidence of the lasting impact of our approach. Dr.

Hilary Placzek, who leads the Ontrak research team is now developing the manuscript for peer review and publication. We will be conducting a series of briefings on the research study as it unfolds, and we analyze specific sub populations within the treatment groups. And number five, I'm extremely impressed by the talent and the commitment of the Ontrak care community and our member engagement specialists, who establish trusted relationships with members, remove barriers to care and guide those in need of behavioral health services to the right clinical pathways. I'd also like to recognize all of the Ontrak team members involved in our data and analytics.

They are building out the Ontrak behavioral health system of individuals and person-centered care that connects an ecosystem of stakeholders to much needed solutions. As Terren mentioned earlier we're moving fast and participating fully in client, industry, analyst and investor forums. Let's now turn to the first quarter results. We believe we began the year strongly with revenue of $28.7 million, reflecting 133% growth from last year.

Amid the ongoing mental health crisis, we continue to engage, care avoidant individuals in order to reduce their medical expense and improve their health and wellbeing. As the pandemic subsides, we anticipate normalized non-COVID utilization across our health plan customers' membership basis. That being said, I'm adjusting our 2021 guidance to be sure we're setting expectations with the intent to overachieve. We believe our revenue range of $80 million to $85 million appropriately factors in the headwinds and the tailwinds we're seeing for the remainder of the year, yet provides upside should we sign and launch new logos throughout the year.

With that as a backdrop, I'd like to provide updates on the headwinds and tailwinds we're seeing, starting with the headwinds. The most significant headwind remains the customer contract termination. In June, we disenrolled our Medicare book of business with this customer in early April, and we'll continue to graduate and disenroll commercial members through the end of June. At this time, we are not anticipating services for these members beyond the end of June.

Turning to utilization. Our outreach pool excluding the terminated contract continues to be impacted by lower utilization of non-COVID-19 healthcare services. As we previously discussed, this lower utilization during the pandemic causes higher cost members to drop below the medical expense threshold for inclusion in our outreach pool. Over the course of 2021, as vaccinations increase, this headwind is expected to become a tailwind to help drive growth of our outreach pool.

Let's now turn to the tailwinds that remain important to our growth trajectory. First, our enrollment statistics have never been better. There are three primary reasons for this. Number one, our remaining outreach pool is refreshed by our customers far more often than it has historically been.

Number two, our outreach pool is now approximately 41% tied to Medicare and Medicaid government programs compared to an average of 26% in the fourth quarter. With the upcoming Medicare and Medicaid expansion with one of our customers, we believe it will continue to grow. Number three. After the unfortunate reduction in force, after a customer contract loss, the remaining engagement specialists are exceptional and perform at a higher level than our historic average.

All of these factors have contributed to enrollment rates that we've never seen before, with our Q1 2021 annualized enrollment rate hitting 56%. And we believe bodes well for the long-term success of the program. Number two, as expected, we signed a national contract with LifeStance, which adds more than 3,000 behavioral health clinicians, bringing our network of behavioral health providers to a total of over 15,000. In light of the severe national shortage of behavioral health providers accepting insurance, our network is a clear differentiator for Ontrak in the marketplace.

Number three, we've maintained high member satisfaction levels demonstrated by industry leading Q1 2021 net promoter score of 75 for the Ontrak program. The net promoter score for our care coaches last quarter was an outstanding 84. Fourth, we continue to have both revenue visibility and a robust pipeline as evidenced by the recent renewal of our customer contracts. Turning to our growth plan for 2021.

We've made a meaningful strides toward expanding the addressable market in the value proposition. Earlier this week, we launched a national marketing campaign to increase Ontrak's, brand awareness through both high-profile digital advertising and media programs. As Terren has said previously, we're the clear industry leader in our ability to significantly improve the health and the lives of our targeted care and treatment avoidant populations. And yet Ontrak has been the least known and best kept secret.

Our goal is to highlight the real world impact of our behavioral health program and our compelling clinical and economic outcomes. In summary, I'm confident in our unique ability to deliver outstanding results among cohorts of members who are extremely costly and very difficult to engage. And among those who are actively seeking care. I look forward to updating you in the coming months on our work to expand our addressable market and become a truly customer centric organization.

I'll now turn the call over to Brandon LaVerne, our chief financial officer.

Brandon LaVerne -- Chief Financial Officer

Thank you, Jonathan. I'd like to congratulate you and I look forward to continuing to work closely with you. And I'd also like to thank Terren for his leadership, and it's been a pleasure to work together. During the first quarter, we recorded revenue of $28.7 million, a 133% increase over last year.

And this included a full quarter of members from our last customer. Deferred revenue increased to $24.9 million in the first quarter, up from $21 million at year end, as we continue to enroll many new members using a case rate or payment upfront. We amortize case rate revenues over the approximate average time in the program or nine months. At the beginning of the quarter, we had 15,702 enrolled members and ended the quarter with 14,868, a decrease of 834, and a simple average of 15,285.

That equates to revenue of about $626 per enrolled member per month for the quarter, and compared to $527 per enrolled member per month in Q1 2020. Recall that with our last customer business in particular, they were subject to co-pays and co-insurance when the members plan your changes, which typically impacts our per enrolled member per month rates in the first quarter. Going forward, we do not expect to see that seasonality continue as none of our other customer plans reduced payments for co-pays and co-insurance. Breaking down the Q1 enrollment a bit more, we enrolled a total of 5,900 members during Q1 compared to 6,714 in Q4 or 12% decrease sequentially due to the termination notice, but still 26% more than the 4,693 gross enrollments in the first quarter of last year.

Dividing Q1 gross enrollment by our outreach pool, which averaged approximately 115,000 for the quarter, which was partially impacted by the loss of the major customer. It annualizes to a 21% enrollment rate compared to 18% annualized rate we saw in Q4. However, when we exclude the impact of the last contract on all periods, the annualized enrollment rate for Q1 was 56%, up from 55% in the fourth quarter, reflecting the enrollment tailwinds that Jonathan discussed earlier. Our disenrollment rate averaged approximately 10% per month during the quarter, resulting in us disenrolling a total of 4,902 enrolled members during the quarter.

This compares favorably to the 13% average monthly disenrollment rate we saw in Q1 of last year. Further, we graduated 1,822 enrolled members during the quarter, which equates to about 12% of the enrolled members in the program at the beginning of the quarter. The net impact of all that was a net enrollment decrease of 834 in the first quarter of 2021. At the very beginning of the second quarter, as part of the transition plan, we disenrolled all of the 2,100 Medicare advantage members for the last customer.

We are still serving their commercial members and expect to do so throughout the second quarter. As of this call, they remain approximately 4,160 members that we expect will graduate or disenrolled by the end of Q2. Our gross margin for the first quarter of 55.6% increased sequentially from 54.1% and compared to 41.4% in the first quarter of last year, and also has increased sequentially each quarter since Q1 of 2020. We ended the quarter with 303 team members included the cost of sales, down 38% sequentially from 486 at the end of the fourth quarter due to our reduction in response to the customer loss.

But still up 13% from 269 at the same time last year. The team members and cost of sales are primarily made up of care coaches and member engagement specialists. Turning to the balance sheet and cash flow. We saw cash flow from operations in the first quarter at a positive $6.4 million compared to negative $4.6 million in the first quarter of last year.

This was mainly due to the timing of billing and collections of our health plan expansions combined with our positive adjusted EBITDA for the quarter. As we continue with our plan to invest in our technology and operations, we do not expect to experience this significant level of positive operating cash flow in the near term. On the balance sheet, we ended the quarter with cash and cash equivalents of $92.5 million, but including restricted cash, total cash was $106.6 million. We remain confident that we have sufficient capital and access to future capital to manage our operations and execute on the strategic initiatives we've outlined.

We are currently in compliance with the financial covenants with our in lender, and we'll be working with them during Q2 in light of our updated revenue and EBITDA projections in the near term. Regarding our outlook for the remainder of the year, as Jonathan indicated, we're targeting revenue in the $80 million to $85 million range. Well, we're proud that we're able to achieve positive adjusted EBITDA throughout the fourth quarter and first quarter, we expect adjusted EBITDA to be negatively impacted by the lost contract in the remaining quarters of the year as the members disenrolled from our program. We anticipated operating leverage improvements as we add additional customers and expansions to our platform in subsequent quarters.

I'd now like to turn the call back to Jonathan.

Jonathan Mayhew -- Chief Executive Officer

Thank you, Brandon. In summary, I'm encouraged by our accomplishments in the first quarter. And I'm confident that we're well positioned for continued growth in the years to come. We're executing on our strategic plans to expand our addressable market, further investing in our platform and increasing our brand recognition for those who serve individuals with behavioral health and chronic conditions.

Our continued execution and intense focus on our growth initiatives will drive us toward greater predictability while also expanding our impact on those in need across the nation. With that, we'll now open it up to questions. Operator?

Questions & Answers:


Operator

Thank you. We will now begin the question-and-answer session. [Operator instructions] And our first question comes from Richard Close from Canaccord Genuity.

Richard Close -- Canaccord Genuity -- Analyst

Yes. Thanks for the questions. Jonathan, welcome, look forward to working with you going forward. I was curious if you could dive in a little bit deeper on some of the topics that observations that you made.

In terms of exploring how you can work with your payer customers in terms of improving scores. What do you mean by that exactly? Is that – and the opportunity to monetize that works somehow? And how is that different from what you guys are doing now?

Jonathan Mayhew -- Chief Executive Officer

Richard, thank you for the call. Thank you for the question. I appreciate the opportunity to work with you as well. I just, so much of the Medicare advantage and in the Medicaid markets are driven by not just medical expense reductions, but the revenue that's associated with customer satisfaction scores demonstrating that a health plan has the ability to direct people to the care settings that drive improved clinical outcome.

And those are the very things that we do. And I think that we have an opportunity to share claims diagnostic information that our nurses are capable of obtaining to help drive those scores. And I think just create another value opportunity or a value lever for our health plan partners. I don't know that we've engaged deeply enough given the concentration that the organizations had around more commercial membership than say government Medicare in particular.

So I think as we partner more deeply understand ways that we can contribute and add value to our health plan customers, one of the areas that just seems to be sort of a top area to explore with the health plans to date has been around an exchange of information that can contribute to their [inaudible] and caps performance. Does that helpful?

Richard Close -- Canaccord Genuity -- Analyst

Yes, that's helpful. With respect to sort of feel obliged to ask this way. With respect to the loss contract, can you just discuss your knowledge of the situation there and if you think there's an opportunity to secure business with that client at some point in the future?

Jonathan Mayhew -- Chief Executive Officer

I sure hope so. My responsibilities at the organization did not have me in direct contact or sort of proximity to the decisions that were made. I respect the decision that the organization made. I obviously know the people well.

I think we have mutual respect for each other, having worked together for a long time and partnered with initiatives like putting clinical resources into retail locations. What we've talked about to date is first and foremost, the priority that we both have around the transition of care of the existing members that are in our program today. And so we will care for those individuals and be vigilant and extremely well focused on the transition of care. And then once we're through those transition of care arrangements, I truly hope that we'll have the opportunity to talk about what we can do with our program to more deeply partner across a number of dimensions.

I obviously have a feeling about what some of those real opportunities to partner could look like. But I have not been permitted the opportunity just given sort of my newness in the timing of the transition to go have those conversations.

Richard Close -- Canaccord Genuity -- Analyst

That makes sense. Thank you. And then I just want to hit quickly on the study because the results there are pretty impressive. And you guys did lower guidance, so I'm not really too surprised by that.

But how big of an impact do you think these studies results will have in terms of new opportunities with clients, how important is something like this?

Jonathan Mayhew -- Chief Executive Officer

I mean, I'm happy to give you my perspective and welcome Brandon and Terren's comments and perspective as well. But I think it's foundational, right? I mean, just the thoroughness of looking at reasonably large cohorts for a proximity of 12 months before treatment, the 12 months during treatment, and 12 months post-treatment makes it a really durable, right set of observations that are foundational. What it suggests? And even if I take you up to maybe 20,000 feet and then come back down to like, how are our customers digest this? It fundamentally suggests if you invest in behavioral health services, you keep people out of really bad, really expensive institutional settings, right. And it's so easy to say that, and it's so hard for the payers to invest in primary preventative care, right.

Preventative behavioral health services, because it's a real and tangible cost that you absorb in the short term to offset really expensive conditions in the future. And I think that there's policy implications, right. If we can continue to drive society and both the large and small payers around providing support for shifts in behavioral health interventions that impact long-term care savings, right. Go lower deductibles for people, right.

Take out-of-pocket expense, limitations, remove financial barriers that, we refer to as social determinants in the industry. There's a lot that we can do, right. That this study would suggest go foundationally to what it takes to really treat people who are stressed and distressed with disease burden of common and chronic conditions. So I think, fundamentally, right, I don't know that there's been a study that's been conducted as thoroughly over a 36-month period of time.

Number two, right, as we go and introduce the program to our customers, it gives us a lot to model off of new relationships, right. And for the existing customers, I think it adds credibility to the development of the pipelines and the outreach pools that we establish as I know, you've heard in other conversations, it can take us, months and years to build reasonable pipelines in outreach pools for some of our customers. And these studies lend validity to what the savings could and should look like when we graduate in the range that we've talked about in the study of 40% of the graduates in the study completed the 12-month program, and you see the durability that's associated with really sick people being in a behavioral health study for 12 months. So I think on a number of levels that adds credibility to our program, it creates an impetus to invest in behavioral health services.

And we'd look to compare, each customer that's in the programs achievement of a financial outcome that looks something like what we can witness across our entire book.

Richard Close -- Canaccord Genuity -- Analyst

OK. Thank you. I'll jump back in the queue.

Jonathan Mayhew -- Chief Executive Officer

Yes. Thanks.

Operator

Our next question comes from Charles Rhyee from Cowen.

Unknown speaker -- Cowen and Company -- Analyst

Hi, this is actually James on for Charles. I just wanted to touch on guidance for a minute. So, the updated guidance of 80 to 85, presumably assumes all contracted business. But the previous kinds of 100 million, assumed 88 million of contracted business.

Did something change there? Is it maybe because some people didn't qualify given the lower utilization or maybe it's just some level of conservatism, some specificity there'll be helpful.

Brandon LaVerne -- Chief Financial Officer

Yes. Hi. This is Brandon. I would say there's a couple of factors there.

I mean, you hit it on the head as far as contracted lives. At the same time, we announced that there was a contract about a month ago or so that's had to be sent to the state for approval. That's pushed out ultimate expectation of launch of that particular program. We're still waiting to hear back it's due any day now, so to speak.

And so we've had to move out a little bit of those kinds of expectations. And just as you said, there was some element and the impact on the utilization that it's a little bit hard to model what that's going to look like for the year. It's been up in the year. We do want to be conservative there.

And to the extent that if utilization pops back and we see big lifts in the outreach pool resulting, then I would think you would expect to see changes in our future. And so I think that's the best way to think about it, as we continue to refine how each of our contracts are looking? How the enrollment rates? How the outreach pools are shaping over time and continue to evolve month-to-month? It's good, it's conservative, and we believe that it's reflective of all those things that Jonathan had mentioned is the headwinds and tailwinds.

Unknown speaker -- Cowen and Company -- Analyst

OK, great. That's really helpful. Also, last quarter, it was stated that, you expect to grow a 100% in 2022. Is that expected growth rates still stand maybe an update on that front?

Brandon LaVerne -- Chief Financial Officer

I would answer that this way. I mean, so we were looking at, I think we've tried to clarify along the way too. This we expect to get to that growth rate in 2022, not the 2022 was that growth rate for the year. And that aside though, we're looking at our model and how we can best be most efficient.

Where can we grow the revenue not just the fastest, but the best in quality and most efficient. And so, all those things are coming into play. Jonathan has obviously been here for four weeks now and putting his fingerprints on the organization and we're evolving along there with it. And so I'd say, generally speaking, when we look at our business, it grew over the past three years at a 100% plus per year.

I think we would all look at our business and say that's absolutely reasonably possible. When we look at our pipeline and monetize that pipeline out, it's hundreds of millions of dollars in potential. And so you've got definitely the opportunity. And so it's up to us to go in that business.

And as we signed launch contracts throughout the year as the plan would hopefully be that will help us get into the 2022 outlook way more with specificity.

Unknown speaker -- Cowen and Company -- Analyst

OK. And just maybe you could touch on, I remember last quarter just talked about launching tiered products, any updates there in terms of timing of launch, maybe any indications of interest in the market, have any customers maybe, indicated to you guys that they plan to sign on for this offering?

Jonathan Mayhew -- Chief Executive Officer

Brandon, do you want to take that this time, yes, go ahead.

Brandon LaVerne -- Chief Financial Officer

Yes, if you want to take that?

Jonathan Mayhew -- Chief Executive Officer

I think, what we've heard from our customers is our real need for us to take the very comprehensive program of today, that's focused on a 12-month duration for a population that might look to be 3% to 5% on the commercial, and maybe as high single digits for the government programs with the kind of impactable spend that I know we've highlighted a lot. And there is a deep need and desire to make sure that the digital capabilities that I think you're referencing are connected to our care team, help improve our ability to engage telephonically and in-person and digitally engage at the front end. And throughout the course of treatment will only make our program increasingly more effective at each of the stages. Right.

And we've heard that loud and clear, and as we continue to build out those digital health and care team solutions, it absolutely puts us in a position to be able to move into the middle acuity ranges. And I think as we start to do that, obviously it improves our addressable market opportunity. It starts to have us collide with some of the digital and the lower acuity and lower touch programs. And I would tell you from sort of four weeks of observation and a lot of conversations with our stakeholders, it seems to me that it's easier for us to move down the acuity curve, right, and improve the overall level of support we provide to our existing high acuity customers through the digital capabilities that we already have in the platform that we've acquired than it is for some of those other vendors to potentially move up the acuity curve have to deal with the clinical resource and the reachability and the acuity dynamics that we support every day.

So it's an important part of our roadmap, and I think it can even improve, in a nutshell, what we currently do with our care teams for the high acuity programs.

Unknown speaker -- Cowen and Company -- Analyst

OK, great. That's very helpful.

Operator

And the next question comes from Sean Dodge from RBC Capital Markets.

Thomas Keller -- RBC Capital Markets -- Analyst

Hey, good afternoon. This is Thomas Keller on for Sean. Welcome Jonathan. And thanks for taking the questions.

Jonathan Mayhew -- Chief Executive Officer

Good afternoon.

Thomas Keller -- RBC Capital Markets -- Analyst

Can you give us a sense of how Cigna is tracking me relative to the 40 million expected in the first year? I guess any update on timing of expansions in the new states or attraction on the commercial side would be helpful?

Jonathan Mayhew -- Chief Executive Officer

I'm going to ask Brandon to clear that.

Brandon LaVerne -- Chief Financial Officer

Sure. Thomas, we're not really commenting that specifics on individual customers, if you kind of telling in scripting a little bit. And so, obviously we talked about how we performed, in part of the first quarter, during our fourth quarter call and it's contributed obviously to our results in the first quarter. I'd say that, we're trying to stay away from any specific commentary on individual customer sizes.

We know what their overall total budget was, which was $90 million over three years. And ultimately believe and expect that we're going to be within that range at least. And so, it's been a very positive contributor for us this year so far for sure.

Thomas Keller -- RBC Capital Markets -- Analyst

OK. That sounds good. Thank you. And then Jonathan, I think you touched on it earlier a little bit, but you've talked about some of the interest, excellent providers side, some of them looking to augment some of their services.

You guys given me more thought to how these relationships might look and kind of the potential opportunity there?

Jonathan Mayhew -- Chief Executive Officer

Yes. I mean, I'm happy to comment a little bit. I think it could and should replicate or feels, greatly similar to the health plan model. I would say, and as we talked to some of these provider organizations who are deep and steep into the Medicare advantage and the dual eligible populations.

They absolutely recognize the kind of model that we represent, right. We're people with a heavy disease burden will benefit from behavioral health intervention. You've got various models that these primary care organizations have tried to adopt as it relates to putting social workers and other kinds of therapy, support mechanisms in place. And we're a great partner, right? When you think about right, you can access our services, you don't have to hire those clinicians.

You can take advantage of the breadth and the depth of our 15,000 contracted providers. We've got nurses who can be available face-to-face, telephonically, virtually. And so it just, it becomes an easier discussion. And I will tell you, this might be right as we all sort of debate what the durability of some of the changes from COVID are.

If those patients were all accessing care in a primary office setting previously and now, right. We know they're transitioning maybe back to some normal practice dynamics, but in the event that they're not, if you've got a hired social worker, that's sitting in our office versus a virtual model like ours. I think it's worth really test driving, right. And that's sort of the feedback I think that we're starting to receive is if we can demonstrate the kind of cost reduction, these primary care groups, as you might be aware, at significant financial risk, right, because they've taken a delegated contract with a lot of payers.

So in many respects, they're closer to the patient and the member, then the health plan. And they've got more financial exposure or risk than the health plans have. And so it just creates a deeper level of integration in a virtual model. And so I am deeply interested in us, exploring that in and some of these provider groups are larger than health plans in certain instances.

But I think the model to answer your question, I think could completely or in a material way replicate a lot of what we've learned from our health plan operating model.

Thomas Keller -- RBC Capital Markets -- Analyst

OK. It sounds great. That's all for me.

Jonathan Mayhew -- Chief Executive Officer

Does that help? Yes. Yes.

Thomas Keller -- RBC Capital Markets -- Analyst

Yes. That's helpful. I appreciate it.

Operator

Our next question comes from Andrew D'Silva from B. Riley Securities.

Andrew D'Silva -- B. Riley Securities -- Analyst

Good afternoon. Thanks for taking my questions. And let me know if you answered any of these already. I did top between calls here.

But just looking at the print, it's just very clear right now that the enrolled member rate out of the outreach pool is just going to be significantly higher on a percentage basis than it was historically. I'm guessing just due to the dynamics with Aetna. Can you give a little bit more context there, even when you strip out the 4,000 enrolled members that you referenced in your press release, it seems like you're tracking several times better enrollment rate now than you would have previously. What are some of the dynamics there and is that sustainable as we go forward?

Brandon LaVerne -- Chief Financial Officer

Sure, I can take that. This is Brandon. So ultimately when we look at the pool, without the prior last customer, we come up with a much more government focused outreach pool. And if you think of these folks, they are a lot more reachable and available to, to enroll, to participate in the program and ultimately, effectively complete the program.

And so, there's a lot of opportunity cost there, there's a very high-cost type folks. And so, the outreach pool itself becomes way more efficient. And I think we've talked about this before, where the actual funnel from health plan lives into our outreach pool is much, much greater for people in the government side versus the commercial side. So, we already start with an equal sized pool in government is not only a smaller life associated with it, and health plan lives associated with it, but a much higher enrollment rate.

Combine that with the fact that we have a much more focused member engagement specialist team at this point that are looking at our data. The data is much fresher from our current customer base than what it used to be. All of our data suggests that the time in the pool is one of the biggest drivers of enrollment. Combine that with enroll-ability, from the type of patient, and then the member engagement specialist, and who is actually doing the enrollment upfront, all those factors are contributing to this high level.

So, when we think about how durable is that over the long-term, we're in territory that we haven't seen before. We said multiple times, we expect it to normalize. We've seen it now continue for two quarters in a row. And so, again, when we're backing out the prior loss contract.

And so we'd like to think that it's sustainable. Obviously, we want to expect that it's going to normalize some. Some of this has to do with the quality of the outreach pool and how between us and our health plans are ultimately slicing and dicing the ultimate inclusion into the pool itself. Ultimately trying to get a pool that is highly enrollable, highly successful and ultimately would benefit most from our program at the end of the day.

And so, we do as I said today, I'd like to think that we can continue to see numbers like this. I don't want to count on it, but I don't see big reasons short of us moving into big commercial space or something of that nature that's going to do a big change to what we're seeing right now.

Andrew D'Silva -- B. Riley Securities -- Analyst

OK. That's useful context and the dynamics there. Is that kind of the same reason why you had a much stronger ASP per enrolled member during the quarter than you would typically have during a first quarter, or was there anything else that caused that?

Brandon LaVerne -- Chief Financial Officer

Well, I think there's a couple of factors. I mean, coming off the Medicare space, we did have some deferred revenue that because of the ending of the Medicare Advantage program, ultimately for this customer that shows up in the first quarter, it was a small component. But we've continued to have really good timing of the information as far as enrollments and dis-enrollments. And so the key there is disenrolling people quickly, enrolling people quickly to offset those the best you can so that when the plan change information happens, we processed it through when we're not basically treating people that unfortunately we're not contractually able to treat anymore.

And so I think statistically, it's going to become a smaller if not zero part of the program at this point to have that the dip in the first quarter from not just the plan change, but the bigger dip historically, it was from the co-pays and co-insurance. And so that piece is going to go away. And so that as we look forward, it should be a little bit more normalized throughout the year and more of a factor of the mix between our future customer based than what we had in the past.

Andrew D'Silva -- B. Riley Securities -- Analyst

OK, very useful.

Brandon LaVerne -- Chief Financial Officer

Did that answer the question, I went in a couple of directions there?

Andrew D'Silva -- B. Riley Securities -- Analyst

No. They gave me a lot of color. And it seems like it's actually going to be more durable, particularly from a seasonality standpoint, it's probably going to be less impacted going forward, as long as the current makeup states consistent of government versus commercial, and so on and so forth.

Brandon LaVerne -- Chief Financial Officer

Correct, yes.

Andrew D'Silva -- B. Riley Securities -- Analyst

OK. And then just really last question for me. I understand now you are not really focusing on naming any specific customer. So, I guess On Trak-CI was the program you were referencing last quarter and you mentioned that you were running much faster than expected.

And maybe the budget there would be increasing. Is that something that kind of still on the table, or how should we think about that? It seemed very promising on your last quarter call.

Jonathan Mayhew -- Chief Executive Officer

The way I would answer that is yes. I mean, all of our customers do have budgets and we need to be cognizant of what those budgets are. I think we saw this last year where we ultimately turn off one of our programs during the fourth quarter, as a result of hitting their budget. Even though we were over budget at the time, it became too far over budget.

And so, we really never know definitively what that's going to happen until it absolutely does. And so, this year is a little bit different because there's a lot more utilization expected than there was last year. And so, I think, tailwind of what we saw in 2019 that enabled us to go far beyond certain budgets may not be there. But I'd say that conversations continue with all of our customers in making sure that we're meeting their expectations and trying to grow the business reasonably and proving our business model is working for them along the way.

Andrew D'Silva -- B. Riley Securities -- Analyst

OK, great. I think that's everything for me. Thank you very much and best of luck going forward.

Jonathan Mayhew -- Chief Executive Officer

Thank you.

Operator

Our next question comes from Gene Mannheimer from Colliers Securities.

Gene Mannheimer -- Collier Securities -- Analyst

Thanks. Good afternoon. And welcome aboard, Jonathan.

Jonathan Mayhew -- Chief Executive Officer

Thank you.

Gene Mannheimer -- Collier Securities -- Analyst

I wanted to ask how much of the sequential decline in the outreach pool was driven by the loss of a large customer? Was it all of it?

Jonathan Mayhew -- Chief Executive Officer

It was nearly all of it. Our outreach pool now, was averaging around 25,000 during the quarter and without that particular customer. And they had well over a 100,000 into the pool. And so it was nearly all of it.

Our outreach pool has shifted a little bit with what I call everybody else and come down a little bit during the quarter, but nothing near what we saw with the loss of the customer.

Gene Mannheimer -- Collier Securities -- Analyst

Got you. OK. Very helpful. And Brandon, I think, you may have already answered this, but I mean, with the conversion rates clearly going up as you discussed, it sounds like that mid-50s enrollment rate may be the right rate to think about going forward.

I'm just wondering if that can go even higher or is it primarily a function of the mix of enrollees?

Brandon LaVerne -- Chief Financial Officer

It's partially a function of mix. We do have the expectation that we're going to be launching an additional Medicare and Medicaid expansion, once that comes back from the state. And that will increase our Medicare and Medicaid mix. That's a positive fact on the enrollment rate, which ultimately may mitigate against any, what I'll call normalization, of the enrollment rate as we get through some of these outreach pools with the other customers.

And so it's from my perspective, I don't think that that's a bad place to think about. And there is upside and there's downside models that you can derive from that. But it's not a bad place to think. Could we go higher if I use the word could as opposed to will or should? Yes, there are ways to derive that.

Ultimately, we still have to fit in with what are our customer expectations and how are we ultimately solutioning for all the different needs of not just us, but our customers as well.

Gene Mannheimer -- Collier Securities -- Analyst

Great. Makes sense. Thanks very much.

Operator

Our next question comes from Bill Sutherland from Benchmark Company.

Bill Sutherland -- The Benchmark Company -- Analyst

Thanks. Hello everybody.

Jonathan Mayhew -- Chief Executive Officer

Hello.

Bill Sutherland -- The Benchmark Company -- Analyst

Jonathan, you mentioned opportunities in addition to the providers partnering in the government space. I'm wondering if you could just give us a little more sense of what you are referring to there?

Jonathan Mayhew -- Chief Executive Officer

I would say primarily, those things, right. And just to pick up a little bit, I guess, on some of the previous thread, but the more we expose ourselves to the higher acuity pools in Medicaid and in Medicare and right, the overlapping populations for duals, it increases our exposure to high-cost members, which is the foundational aspect of how the program is built. So, I think there's other ways to try to go access those members. And obviously provider groups is one way, you can think about PDMs and where drug spend is an increasingly material part of a chronic patient spend.

We've got some pharmacy data that we access today through the data feeds that we receive. But there's real value in managing chronic spend for organizations other than health plans. And so I just think we have a tremendous opportunity to understand what some of the other channels and pathways to intersect with some of these chronic individuals who've got expression of behavioral health need. And health plans is one way, but it's not the only way to try to add value to the same core cohort of person that we've demonstrated some real impact with.

Bill Sutherland -- The Benchmark Company -- Analyst

And then second question I had was related to, as you look at the assets in place to broaden the tiers of care do you feel like the pieces are there, or just need to be further developed, or do you need to – are there assets that you think are still needed?

Jonathan Mayhew -- Chief Executive Officer

It's a really good question. And I would say it's a little bit of both. Right? I mean, we've got a personalization platform that we really like. And so, our ability to continue to use that, to develop more digital capabilities around how we assess our members.

When you think about what we can do digitally to help provide improved diagnoses of these individuals, when we can understand their preferences to interact, whether it's by type of individual to coach with whether it's by the kinds of therapists that would be the best match, we can really enhance our ability to do those things for today's product and program with enhancements around that personalization platform that that we own. So, some of it is we have it and we want to continue to develop it so that we can provide greater assessment diagnoses, matching preferences for our customers. We can drive deeper insights into our members, right, more digital information that we possess. And all of that just provides more data for us.

And the more data that we've got will glean further insights sort of around the virtuous sort of aspects of doing that. And that will all lend itself to this sort of conversation that we've been having, right. It'll make our outreach capabilities more effective. Can you be more efficient with how we access and drive people into our outreach pools? Can we be more effective at driving up the graduation rates? I mean, all of that really should happen as we continue to build out and invest in that personalization platform.

And if we stay right, primarily focused in the short term, around the durability of these high-cost individuals, it gives us every right to expand into the middle acuity ranges. But I guess, if we continue to expose ourselves to Medicare and the government programs around high acuity, we just want to be thoughtful about sort of when is the right time to move down the acuity curve.

Bill Sutherland -- The Benchmark Company -- Analyst

Right. Got it. OK, thanks for that.

Jonathan Mayhew -- Chief Executive Officer

Yeah.

Operator

Our next question comes from Richard Close from Canaccord Genuity.

Richard Close -- Canaccord Genuity -- Analyst

Great. Thanks for the follow-up question here, Jonathan. I'm curious since you've been there for, I know it's only been four weeks, but have you been able to really scrub the pipeline, analyze it? And maybe give your view on the potential that's in there, did the pipeline essentially change at all in terms of after analyzing if you did that and that caused some of the guidance the lower guidance.

Jonathan Mayhew -- Chief Executive Officer

So, thanks for the question. I appreciate it. You always want a bigger, better pipeline, right. There's no such thing as sort of good enough when it comes to a pipeline, I would say.

That said, we've got a quality pipeline. It is a set of marquee names, marquee geographies. The exposure to government programs in the pipeline, right, is the feeder to ultimately what we put the outreach pool and trying to make sure that are enrolled and eligible individuals in the outreach pool continues to reflect a Medicare, Medicaid kind of dynamic that is very much true in the pipeline. So, from a size and number of lives from a line of business being exposed to Medicare and Medicaid, I like a lot, right.

And sort of the stature, if you will, associated with some of the sophisticated purchasers, I feel good about that. What I'd like to see more in there for sure. And I think just to pick up on one of the things that Brandon said, one of the things we're learning, right, we like the outreach characteristics and the penetration rates that we're able to achieve around some of these government individuals. Yet there are a number of sales, and enrollment, and compliance and approval steps that take us a little bit longer to stand some of these Medicare and Medicaid programs up.

And so, if there's any flip side to sort of the higher acuity curve and the greater reachability, and more individuals at higher cost thresholds that are associated with government programs, there are more steps to, I wouldn't say sell it, but there are more steps to make sure that implementation, and compliance and regulatory approvals are all attended to. And so that does drag out a little bit. I think the close date to our go live and implementation date. And I think we're experiencing a little bit of that right now.

Richard Close -- Canaccord Genuity -- Analyst

OK, that makes sense. And my final question is, is obviously you've been on the health plan side for years, and must have a lot of contacts. Are you talking, are you heavily involved in the sales process in terms of talking with those, the pipeline opportunities?

Jonathan Mayhew -- Chief Executive Officer

I am, I will be, I don't know that I've had the opportunity yet to sort of open up my contacts and start driving activity into the pipeline. I sure hope I can do that, but you never know. I've spent most of my time listening to our existing customers, listening to our prospects, listening to some of the customers that recently left us. I've spent a lot of time listening to our employees, who've got a lot of great ideas about what we need to make sure we're prioritized on.

And so, I really have been a bit on a listening and a learning tour, mostly to understand the capabilities and the opportunity of the organization. And I welcome the opportunity to sort of shift into anything I can do to activate new prospects. But I've been more intent on making sure I understand our current customers. And I understand the opportunity with the customer and the pipelines that have been cultivated to date.

And I fully expect to be close to it. I enjoy it. Yes, thank you.

Richard Close -- Canaccord Genuity -- Analyst

Great. Thanks.

Operator

We have no further questions at this time. I will now turn the call over to Jonathan Mayhew for closing remarks.

Jonathan Mayhew -- Chief Executive Officer

Sure. Well, I just would like to say thank you very much for everybody's time this evening. Thank you for your support. And I wish everybody a nice evening.

So, thank you very much.

Operator

[Operator signoff]

Duration: 64 minutes

Call participants:

Caroline Paul -- Investor Relations

Terren Peizer -- Executive Chairman

Jonathan Mayhew -- Chief Executive Officer

Brandon LaVerne -- Chief Financial Officer

Richard Close -- Canaccord Genuity -- Analyst

Unknown speaker -- Cowen and Company -- Analyst

Thomas Keller -- RBC Capital Markets -- Analyst

Andrew D'Silva -- B. Riley Securities -- Analyst

Andrew DSilva -- B. Riley Securities -- Analyst

Gene Mannheimer -- Collier Securities -- Analyst

Bill Sutherland -- The Benchmark Company -- Analyst

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