Signify Health, Inc. (SGFY) Q2 2022 Earnings Call Transcript

Signify Health, Inc. (SGFY)
Q2 2022 Earnings Call
Aug 04, 2022, 8:30 a.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Ladies and gentlemen, thank you for standing by. Welcome to Signify Health's second quarter 2022 earnings conference call. My name is Irene, and I will be coordinating this event. [Operator instructions] I would like to turn the conference over to our host, Jason Plagman, vice president of investor relations.

Jason, please go ahead.

Jason Plagman -- Vice President, Investor Relations

This morning's call is being webcast live, and a recording will be available on the Events page of our investor website at signifyhealth.com for one year. Throughout the call this morning, we will be referencing the financial tables that appeared in our press release dated August 3, 2022. We will also be referencing the second quarter earnings call slide presentation we have posted on the Events page of the investor relations website. On today's call, we will discuss Signify Health's business outlook and we'll make certain forward-looking statements within the meaning of the federal securities laws.

Please note the cautionary language about our forward-looking statements as presented in our earnings press release and in our quarterly report on Form 10-Q, which will be filed later today. That same language applies to this conference call. We will also discuss certain non-GAAP financial measures, including adjusted EBITDA and adjusted EBITDA margin. Reconciliations to the relevant GAAP numbers for these non-GAAP measures are included in the earnings release filed on Form 8-K yesterday and also in our Form 10-Q, which will be filed later today.

Joining me on the call today are Kyle Armbrester, chief executive officer; and Steve Senneff, president, chief financial and administrative officer. Kyle will provide a business overview followed by a financial review by Steve. We will have our facilitated question-and-answer session after our prepared remarks. Now, I will turn the call over to Kyle.

Kyle Armbrester -- Chief Executive Officer

Thank you, Jason. Good morning, everyone, and thank you for joining us. Last night, Signify Health announced another quarter of strong financial and operational results. Total revenue in the second quarter of $246 million grew 16% on a year-over-year basis, including 18% growth from home and community services, or HCS, as well as strong contributions from Caravan Health.

Total adjusted EBITDA was $62.6 million, which is the highest level in our company's history. As we announced in July, Signify Health has decided to focus on our fast-growing and profitable businesses, home and community services and Caravan Health. This decision will allow us to invest more in supporting the growth of our in-home services, our total cost of care enablement platform and the needs of our health plan and provider clients. With our clients and shareholders in mind, we are winding down our Episodes of Care services business including ending our participation in bundled payments for care improvement advanced program or BPCI-A.

We are confident that our HCS and Caravan businesses are well positioned for continued robust growth due to our leading capabilities, including hard-to-reach gaps in care, including engaging people in their homes, and connecting primary care providers with the actual insights required to be successful and value-based models. We are already having success in converting BPCI-A clients to total cost of care programs, including several signed contracts in the four weeks since we moved past the BPCI-A program. Additionally, we're moving quickly to deploy our existing in-home capabilities as well as our experience managing specialty and post-acute services and our total cost of care contract in order to drive incremental share savings. Client interest in these capabilities is extremely high given that home, post-acute and specialty settings are all areas that primary care providers have historically struggled to reach.

Overall, we are excited about accelerating our investments in our fast-growing businesses. Going forward, Signify will have a financial profile that is a greater mix of revenue from businesses with strong visibility and growth, higher margins and improved free cash flows, which positions us to continue to expand and diversify our capabilities in order to help our clients be more successful in their value-based care contracts through improved outcomes for patients. In the HCS business, we continue to see strong demand for in-home evaluation. And during Q2, we completed 624,000 IHEs, which was a record for our company.

Our HCS segment is generating robust growth and clients prioritize access to the home as part of their focus on closing clinical, behavioral, and social care gaps. Clients are seeing the value in our unique capabilities such as our ability to see patients in the home and refer them to care for pressing needs, particularly with social behavioral needs that are crucial for improving health and that are often easier to identify and assess in the home than in traditional care settings. Our growth in the HCS business is supported by our strong execution and expanding our clinical capacity while also driving improvements in network productivity and operational efficiency. Growth in our clinical capacity has been powered by a combination of expansion of our provider network as well as increases in the average number of IHE completed per provider, which is supported by our technology platform.

This demonstrates that we are having success recruiting providers, and the providers are devoting more of their available time to our platform. Feedback from the providers in our network indicate that they value the flexibility we offer to control their own schedule. They also value our ability to keep their schedule filled and productive, which is aided by our industry-leading technology platform, our ability to reach members across the country and the strong client relationships we have with leading health plans. Our operational execution has allowed us to continue to expand our IHE volume with new and existing clients, including national and regional health plans, and we're having a very successful selling season for incremental business in 2023.

We're also seeing momentum in extending our client relationships into additional books of business such as managed Medicaid and commercial plans as our clients recognize the value of IHE as an effective method for engaging members, identifying barriers to their health, addressing health disparities and connecting them to the right care. These positive trends reinforce our confidence in our ability to continue to deliver robust growth in our HCS business over the coming years. In addition to our comprehensive and home evaluations, many of our healthcare partners are working with us on initiatives to connect the members we serve with primary care providers, specialists, mental health resources and care management programs, which we call our return to care offering. This is something that CMS has been vocal about supporting as a key component of the IHE.

An example of one of our return to care initiatives is that earlier this year, we launched a program with a national payer to engage with members who may need a mammogram. Breast cancer is most commonly diagnosed among middle aged and older women, with 70% of new cases diagnosed among women 55 and older. Based on preliminary results of our mammogram program, we had a 90% retreat and identify that 56% of those members do not have a mammogram scheduled. We've been able to meaningfully reduce that percentage by engaging with members in -- schedule a mammogram, which will lead to earlier detection, intervention, and improved health outcomes.

We also continue to expand the breadth and complexity of the services we provide in the home through diagnostics and preventative services, or DPS. So far this year, we have made significant progress as we evaluate pilot opportunities to expand the menu of in-home diagnostics and preventative services that are available to our clients and the people we serve. For example, we are significantly expanding the availability of spirometry testing, which is used to assess respiratory health and identify conditions such as COPD, that often go undiagnosed and untreated. This diagnostic test provides significant value for health plans and members we serve through earlier identification and management of chronic conditions and support our client strategies to improve health outcomes.

We believe our pipeline of additional add-on diagnostics and preventative services positions us to drive growth in revenue per IHE over the coming years, willing us to connect to the more than two million members we serve with innovative cost-effective diagnostics from the comfort of their home. Shifting to Caravan. The team has outperformed our expectations since we closed this acquisition in March. Our shared savings performance before this year has exceeded our projection, and we believe our in-home capabilities will unlock incremental savings in 2023 and beyond.

Additionally, we plan to leverage the resources and expertise we developed in managing post-acute care transitions and specialty care in the episodes business by bringing those capabilities into our total cost of care model. For example, we plan to deploy our transition to home program with our ACO clients. Transition to home is focused on building and scaling remission reduction programs by leveraging our clinical and social care coordination capabilities to engage with adverse patients on an inpatient discharge, including identifying and addressing social and nonmedical needs. Signify launched Transition to Home in early 2021, and during this program's first year, more than 3,000 social determines of health gaps were identified and nearly 55% were addressed through coordination with local providers, community-based digital service organizations and genuine members.

Last month, we reported our findings from the first year of the transitional home program in a case study published in the New England Journal of Medicine Catalyst. By focusing on care plan review, facilitating access to home and community-based services and reconnecting patients with the primary and specialty care providers, the transition to home program reduced 30-day readmissions by 14% and 90-day remissions by 13%. This reduction in avoidable readmissions can generate significant savings for the health system and our clients since the average cost of the prevented Medicare readmission is estimated at $15,000 to $17,000. When we bring these capabilities in the total cost of care models with our health system partners, we believe it will help drive material savings and better experiences for the patients.

We are wrapping up a very strong selling season for new ACO clients, and we are on pace to significantly exceed our targets for growth and attributed lives as we look ahead to 2023. We are also seeing momentum in transitioning clients that are currently enrolled in the basic track of the MSSP program to the enhanced track for 2023, which allows clients and Signify to share in a greater percentage of the savings generated while also benefiting from our unique collaborative ACO model that reduces downside risk. Following the decision to exit this business, we met with our BPCI-A clients to discuss the road map for future participation in value-based care programs. During these discussions, many of our BPCI clients expressed interest in evaluating the opportunity to join the MSSP ACO program for 2023 or 2024.

Several clients have already moved into the contracting phase and are expected to add tens of thousands of lives to an attributed population in 2023, which is a testament to the value and partnership that Signify Health has created with these clients. Normally, closing shared savings contracts with health systems take several months, but we were able to transition many of the BPCI-A clients to the MSSP program in a matter of weeks due to their conviction and our ability to drive savings as well as their desire to participate in stable, permanent value-based programs such as the MSSP ACO program. And we're also seeing growing interest from large multi-data health systems to recognize the power of our unique combination of total cost enablement capabilities plus Signify's ability to access the home and to manage post-acute and specialty care transitions. In May, we hosted Caravan's annual clients symposium.

The event brought together more than 600 in-person attendees from health systems, physician practices and other healthcare providers to discuss the future of patient care, developments and health policy and the accountable care landscape over the last few years, and our vision for how the combined Signify and Caravan platform will help our clients succeed in total cost of care programs. Based on my discussion with Caravan clients, a few things are clear. One, Caravan's technology, including Caravan Coach, is viewed very favorably and is a true differentiator. Two, health systems are looking for partners such as Signify to help them access the home in order to assess and manage conditions appropriately.

Three, health systems also need to help with managing care transitions and processing care. Overall, it was a very productive and inspiring event, and our team and our clients left the symposium with renewed energy conviction and the value of bringing together the capabilities of Signify and Caravan. On the regulatory front, we believe the recently released 2023 physician fee schedule proposed rule is indicative of CMS' intention to incentivize participation and value-based care through the MSSP structure. There are a number of provisions in the proposed rule that we encourage the creation of new ACOs, including advanced incentive payments for inexperienced ACOs serving rural and understood communities to invest in technology platforms and care redesign.

For existing ACO participants, revisions to the benchmarking methodology expected to reduce the rushing effect of an ACO's historical savings performance on their future benchmarks, which should encourage high performing participants sustain the program. Overall, we view the proposed changes as a positive development for Signify and our client, and is a sign that CMS used ACOs as the primary vehicle to achieve their goal of having all Medicare fee-for-service beneficiaries in an accountable care relationship by 2030. I'm also excited to report that Signify continues to attract leading talent to our organization. In July, Paymon Farazi joined as chief product officer.

Paymon has more than two decades of experience, leading product strategy for healthcare and technology companies, including serving as the chief product officer at OptumInsight. Paymon's deep experience in healthcare payments and technology will be valuable as we expand our portfolio of services to help our clients improve quality and outcomes for the people they serve. We've also expanded our footprint by opening new offices in Oklahoma City and Ireland. The Oklahoma City office is our third regional service center and can be home to several hundred employees with a focus on member engagement and return to care coordination services.

Our office in Galway, Ireland is a technology center and provide access to market with significant software development and engineering talent. And during the second quarter, Michelle Concannon joined Signify as the SVP of Engineering based out of Ireland. Michelle joined us from Microsoft and previously held senior roles at Optimum and Cisco. As you can probably tell, I'm extremely excited about the team we've built at Signify and the momentum we see in our business.

Overall, I have never felt better about the strategy and growth trajectory of the organization and our ability to continue to scale our services to help patients have better healthcare experiences. I'll now turn it over to Steve to discuss our financial results.

Steve Senneff -- President, Chief Financial and Administrative Officer

Thank you, Kyle. Good morning, everyone. Signify had another strong quarter in Q2, reflecting our success in growing the business while delivering significant value to our clients and individuals. During my comments, I will refer to the tables that appeared in the earnings press release issued yesterday as well as the earnings presentation posted on the Events page of our investor relations website.

As shown in Table 1, we had total revenue of $246 million in the second quarter, which was up 16% compared to the year-ago quarter. The increase was primarily driven by ACO revenue growth of 18% year over year to $208 million. This was another record high for the company. Total evaluation volume for the second quarter was approximately $624,000.

Virtual valuations represented 15% of our total valuations during the second quarter, which was up from 9% in the year-ago period. On a monthly basis, we saw a steep increase in the percentage of virtual valuations in April, which we attribute to the spike in COVID-19 cases associated with the Omicron variant around that time. Our mix of virtual visits in May and June returned to more normalized levels. Given the continued strong demand from clients for IHEs, we are increasing our outlook for overall IHE volume in 2022 to a range of $2.42 million to $2.45 million.

We expect the increase in volume will offset the slightly higher percentage of virtual visits that we have been experiencing. EPS revenue in Q2 grew 3% to $39 million. Caravan contributed $16.6 million of revenue in the second quarter, which was ahead of our expectations due to evidence of a better-than-expected savings rate in our total cost of care programs, and an upward revision of our shared savings revenue estimate that provides the benefit of a true-up in the quarter of approximately $3 million, which is not expected to reoccur in Q3 or Q4. For the episodes business that we are winding down, revenue in the second quarter declined sequentially, primarily due to smaller BPCI program sizes.

As a reminder, our reported episodes revenue is based on our estimates as we await CMS' response to our objections to the most recent BPCI-A reconciliation. Additionally, we are in the process of evaluating our segment reporting going forward, given the changes in our business. Moving to Table 4. Total company adjusted EBITDA for the second quarter was $62.6 million and grew 15% compared to the year-ago period.

Adjusted EBITDA for the HCS segment of $65.2 million grew 17% year over year. ECS adjusted EBITDA in the second quarter was negative $2.6 million compared to negative $1.2 million in prior-year's quarter. Caravan contributed significant positive adjusted EBITDA in Q2, although this was more than offset by negative adjusted EBITDA from the episodes business. Back to Table 1.

Net loss for the second quarter was $490 million, which includes a $520 million loss on impairment of goodwill and intangible assets related to the wind down of the episodes business. As shown in Table 2, our balance sheet remains strong, and we ended the quarter with $439 million of cash and equipments. Total debt outstanding at the end of Q2 was $338 million and Signify remains in a negative net leverage position since our cash exceeds our debt levels. Operating cash flow for the second quarter was negative $3 million compared to negative $21 million in the year-ago quarter.

Our days sales outstanding, or DSO, for the HCS segment improved by nine days in Q2 compared to Q1. We expect operating cash flow to continue to improve in Q3 driven by continued sequential improvement in DSOs for the HCS business. I'd also note that our cash flow in the second half of the year will be impacted by onetime cash costs related to our exit from the episodes business such as severance and contract termination costs. Our updated outlook for full year 2022 is as follows.

HCS revenue in the range of $800 million to $810 million. Caravan revenue in the range of $45 million to $48 million for the 10-month period following the acquisition on March 1. Adjusted EBITDA margin for HCS and Caravan combined of approximately 29% to 30%, which is before shared costs that are currently allocated to ECS. Of the approximately $60 million of annualized shared costs that are currently allocated to the ECS segment, we continue to expect to be able to eliminate approximately $30 million to $35 million in annualized expenses by the end of 2022.

We aren't providing guidance for the episodes business given the significant number of moving parts related to the wind down of our episodes business and our pending objection with CMS. Regarding the episodes business, we were recently notified that CMS declined a request to waive the 90-day termination notice period for our exit from the BPCI-A program. As a result, our participation in the program will continue through the fourth quarter and the majority of our expected expense reductions will occur in Q4 as we wind down the business. As far as sequential trends, we expect HCS volume and revenue in the third quarter to be flat to down slightly compared to the second quarter, which is consistent with last year.

We also anticipate the percentage mix of virtual visits to in-home business to increase in Q4, similar to what we saw in the fourth quarter last year. Overall, our HCS and Caravan businesses had significant momentum heading into the second half of the year and 2023, and we are excited about our go-forward financial profile, including improved revenue visibility and growth stronger margins and improved free cash flows. Now, I'd like to turn the call back to Kyle for closing remarks.

Kyle Armbrester -- Chief Executive Officer

Thanks, Steve. Signify's aim is to give providers, payers and the people they serve the data, tools and support needed to achieve the best possible health outcomes and reduce in a cost-effective manner. As an organization, we are pleased with our results for the first six months of the year and excited about our strong growth outlook for the second half of 2022 and beyond. And we remain focused on the opportunity in front of us to positively impact the fragmented healthcare system in partnership with risk payment providers and payers to get patients to their options for maintaining and improving their health.

Regarding recent media reports focused on potential M&A, we do not comment on market speculation, and we will not answer questions on this topic during the Q&A session. I will now turn it over to the operator to take your questions. Operator?

Questions & Answers:

Operator

Thank you. [Operator instructions] Our first question comes from Jessica Tassan from Piper Sandler. Jessica, over to you.

Jessica Tassan -- Piper Sandler -- Analyst

Hi. Thanks so much for taking the question. Good morning. So I think kind of more recently, we've come to appreciate that IHEs and annual wellness exams both have a place in the course of care for an MA member.

Can you just discuss exactly why that's the case, why there's room for both? And then just the extent to which that view is actually resonating with your health plan customers?

Kyle Armbrester -- Chief Executive Officer

Jessica, thrilled to see your note about your experience with your grandmother. Literally made my day. Made the round all over the office here. It was actually really cool.

We're now -- a bunch of employees were trying to do secret shopper now too. I've got a woman, Annie on my team want to go in and see her grandma, get an IC done now, too. So we're going to ask everybody who's going to be doing that. You picked up a trend.

Jessica Tassan -- Piper Sandler -- Analyst

Very cool.

Kyle Armbrester -- Chief Executive Officer

AWB and -- yes, yes, yes. AWB is a separate reimbursed billable thing, but it's very much focused on a quick check-in, annual wellness visit. They predominantly happen in provider offices, obviously, and they're pretty quick in duration, but they're designed, and their purpose was to try to draw folks back into care. And now we know that doesn't happen all the time.

So what we do is it's totally different than that. We're in the wellness is the compliant. But when we go in, as you saw, it's an hour long, very comprehensive exam. We're explaining the seniors medication, walking them through chronic conditions they might have, helping them to understand why they need to go to see a specialist and then booking a lot of that care, follow-up care for them.

And so it's a totally different and more comprehensive activation point being in the comfort of the home with them. And that's why we continue to see this free service that the Medicare Advantage plans provide for their members. The demand for it continue to rise. I would also say we've been excited to see as the Medicare Advantage plans realize the benefit of this and see the satisfaction that this drives during very intense recruiting periods for Medicare Advantage.

Many of them are carving in our visits, or IHEs, end of member benefits and actually advertising them very directly as they're talking to group accounts or even their individual brokers. And I think the biggest assessment to all just is that 80% year-over-year reengagement rate, we're going to see the same person time and time again because they like, your grandma, got to see a lot of the benefit. And understand that we're there to help them understand their conditions, explain those to them and connect them back to care more than anything.

Jessica Tassan -- Piper Sandler -- Analyst

That's really helpful. And maybe just a quick follow-up would be, can you help us understand where completion rates are today, how they've trended pre versus post COVID and where you think they have the potential to go? Thanks, again.

Kyle Armbrester -- Chief Executive Officer

Yes, absolutely. Completion rates today are, as you saw, we issued an all-time high quarter the number of homes we've gotten into. And so we're doing great on the completion rate front. I would say two things are continuing to happen.

We're seeing conversion, which is just the number of attempts that we do to reach somebody via email, SMS, phone, mail, etc., and then the actual completed visit going up. And then our doctors are bringing us more capacity, and nurses are bringing us more capacity than ever. I mean they're showing up and realizing that Signify gives them an opportunity to get paid more with less administrative burden and offers them a flexible schedule daily and even week-to-week, if they decide they want to work in a different state or travel around six months of the year, we offer that flexibility, which I think many of them have come to enjoy even more so whatever phase the pandemic we're in now. So it's both conversion and capacity, and that's the driver between or behind us, I should say, our continued success.

Jessica Tassan -- Piper Sandler -- Analyst

Thank you.

Operator

Thank you. Our next question comes from George Hill from Deutsche Bank. George, your line is open.

George Hill -- Deutsche Bank -- Analyst

Yeah. Good mornig, guys. Thanks for taking the question. Kyle, it's going to be hard to top the energy from that last answer.

I guess, so I'll start with Steve. When we talk about the decline in revenues per visit, you talked about the impact of virtual. Can you also talk about whether or not there was an impact from client mix as we think about the first half of the year? And I know that we've discussed in the past kind of like who you -- who's the company is focused on servicing in the first half of the year from an MCO perspective. I'm just wondering if client mix also had an impact on the revenue growth.

Steve Senneff -- President, Chief Financial and Administrative Officer

Yeah, George, absolutely. And it's something that I've said a few times that this year, don't expect a lot from the revenue price. It's going to be slightly down. Don't read too much into it because if you look at it -- when we look at like-for-like across our client base, it's moving up.

It's just a matter of the mix piece is driving it down. We'll see 2023, that start to go back up as we normalize. So this year, it's really just mix, a little bit of the virtual in the first half. And when we do that virtual, obviously, there's less connected devices as well.

So put those there together, but by and far, the biggest one is mix.

George Hill -- Deutsche Bank -- Analyst

Nope, that's helpful. And then I guess as a follow-up, I guess, can you talk about the slope of getting to the stranded costs? There's $60 million now. I guess, the target is to turn $60 million to $25 million, I guess. So how should we think about the slope? And is there any change as we think about '23 and beyond just trying to take the $25 million number lower?

Steve Senneff -- President, Chief Financial and Administrative Officer

Yeah. So look, we think -- we started with the $60 million. We've spent a lot of time over the last few weeks identifying exactly where all that's going to come from. The slope's really going to be, given the notice warning and everything that we've given to employees, will be Q4 focused.

So we'll start to see a little bit of a wide down in Q3, but the majority of it will happen in Q4 with our exit run rate being in that $25 million to $30 million heading into 2023. As far as going farther, look, there's always opportunities for us to find efficiencies. But right now, we're comfortable with that $25 million to $30 million.

George Hill -- Deutsche Bank -- Analyst

OK. And then I guess, Kyle, you with one thematic question, which is just as we see more and more MA patients heading into value-based care programs that are led by provider organizations, I guess, how do you expect that to impact the home versus office IHE mix? And is there an opportunity to market to these provider organizations given that we know that there's room in the model for both the IHE plus the wellness exam?

Kyle Armbrester -- Chief Executive Officer

Yeah, absolutely. I mean we call them inviters, and we have several of them as clients, and -- without a doubt. I mean, the plans and the providers, everyone understands that there's just a really unique set of data and access you get from the home. That's why the -- our clients are always pushing for more in-home presence versus virtual.

It's just a way better experience. And I think the providers too see us because of our nationwide reach and scale and our ability to get every county in the U.S., we're bringing them something that they could not scale easily on their own in a cost-effective way, and we're driving all the volume back into them, right? So it's super important to remember, we never compete with these provider organizations. We don't bill. We don't do procedures.

We're out just doing gap in care closure and quality work, condition identification and then driving folks back in a really directed way with a ton of information. We send all of that medical information, clinical and social information, behavioral information back to those providers. So we're giving them a leg up to better manage risk in this contract. And in fact, just to really put an emphasis on it, this is exactly what we're planning on doing with the Caravan base, right? They're in the ACO arrangements.

We're going to take our in-home services to those folks in the ACO and don't make sure that they're going to see their specialists. So they're going to get rehabilitations onto their meds or -- and track. They have a bunch of social issues. They're helping to close those gaps to them.

I mean it's a great program and a platform to be able to run across all of Medicare and now that's why we could be more excited. The CMS moved risk adjustment in HCC into the ACO book, and that we've got this nationwide platform to really make it work for all Medicare beneficiaries.

George Hill -- Deutsche Bank -- Analyst

That's helpful. Thank you.

Kyle Armbrester -- Chief Executive Officer

Yeah. Thanks, George.

Operator

Thank you. Our next question comes from Michael Cherny from Bank of America. Michael, your line is open.

Mike Cherny -- Bank of America Merrill Lynch -- Analyst

Good morning. Congratulations on a really nice quarter. Maybe to take George's question, but a little different vein. Obviously, you had a pretty meaningful extension, expansion earlier this year with one of your largest clients.

Can you give us a sense on whether you're seeing any changes or any behavioral dynamics on the broader and deeper partnership and how that's factoring into your IHE volume?

Kyle Armbrester -- Chief Executive Officer

Yeah. I would say we've seen pretty good expansion across all of our national plans this year and deeper engagement is the M&A really has been focused with us on conversion in particular, and how can we get and see and activate more and more of their members. And they're moving us into new populations and these long talks about managed Medicaid is to turn into a double-digit million business over the last two years, when it was effectively zero when I showed up in at Signify five years ago. So with the new populations, and it's getting deeper into the existing population, I would also say that we've gotten increasingly better co-market and co-branding with group accounts and other folks inside the plan.

And so we're seeing with like a big group of retiree account of getting involved more during the bidding and governance process, with their plan clients. And so it's been a really nice synergy of deeper engagement and deeper member touch points that's really resonated. I would also say we're seeing a lot of gains from our multimodal member engagement platform. And so we're seeing a real uptick in self-scheduling, email, SMS engagement from seniors, and so helping to meet them where they are and allowing them real flexibility to book and reschedule and cancel and rebook an appointment, all that is just getting tighter each and every quarter as our technology teams continue to deliver a lot of this automation and more innovative engagement points.

And so I do think the plans are viewing us as a -- we are physically in their members' home, almost 2.5 million of them this year all across the country. And they see that this as a real activation point where we've gained the trust and the license to be there. And we're sitting in a medical professional with a master's degree. So someone who's really working at the top of their license, and they're asking us to do more.

And so while we've been very focused for the last five years, just going from almost 250,000 to 2.5 million homes on those this year, we're really focused now on expanding and doing more inside of those homes. And making sure that we're helping to manage conditions, returning folks back to care is really exciting. And the stories that come out of it and the impact that we're having in these individuals lives. It's really exciting, really invigorating for our providers and for the employees here at Signify.

Mike Cherny -- Bank of America Merrill Lynch -- Analyst

Got it, Kyle. And then if I can ask just one more. You referenced the idea to evaluate M&A. Obviously, a lot going on, on the one hand, with the wind down of ECS, yet at the same time, Caravan out-of-the-box appears to be outpacing your expectations on a pretty nice clip.

So how do you feel the organization as a whole is positioned in the event that M&A comes down the pipeline? Or is this just more thinking about this as opportunistic in the event that you do find something that's fit? Is it more an active or a passive approach toward potential for further deals?

Kyle Armbrester -- Chief Executive Officer

For us to do M&A, you mean?

Mike Cherny -- Bank of America Merrill Lynch -- Analyst

Correct. Yes. Sorry.

Kyle Armbrester -- Chief Executive Officer

Yeah. Yeah. No problem. So we've got a good pipeline of organizations and companies that we're engaged with.

I mean, I think our focus always is on tuck-in acquisitions. The ones that have out-of-the-gate synergies, Caravan with that case. I think what we're really excited about Caravan is we landed integration materially in three months. And I think that's what happens when the team that we've built out here and the amount of rigor that we pulled into really having a good capability set to manage M&A integration tightly.

And keep in mind, Michael, we ran that integration as we were forced, frankly, to wind down the BPCI-A program. So we were doing a lot of activities. So I couldn't be more proud of the team here and all the hard work that they did. I mean, it was a lot of long focused evenings getting all that pulled together, but the results speak for themselves, but Caravan has just been a smashing success.

And I think that more than anything, it's given us energy and conviction that more tuck-in acquisitions like that in the future is something that we, without a doubt, are in the right to do, and we'll continue to succeed and execute on as we pull them through.

Mike Cherny -- Bank of America Merrill Lynch -- Analyst

Awesome. Thank you.

Kyle Armbrester -- Chief Executive Officer

Yeah, good questions. I'm always impressed you get your research note out in 30 minutes to it. It's unbelievable.

Operator

Thank you. Our next question comes from Sandy Draper from Guggenheim. Sandy, your line is open.

Sandy Draper -- Guggenheim Securities -- Analyst

Thanks so much. I'm not sure my questions are going to be quite as pointed as Michael's. But my question is probably for Steve. On the cash flow side, and I apologize I had to jump on the call late.

I don't think you covered it. But just it was better in the second quarter, but still tracking below last year. Any commentary there? And then I know you don't break it out, but when we think about the cash flow impact of the BPCI business versus the other, how much of a drag is that the issue? And can you mitigate that in the back half of the year as you're winding down the business? Can you do things to sort of impact or slow down any negative cash flow, so you're not burning cash, if you are in a business you're trying to exit?

Steve Senneff -- President, Chief Financial and Administrative Officer

Yeah. Good questions, Sandy. Let me go through it. So as you mentioned, cash flow improved over Q1.

It improved over last year. HCS is -- incredible growth, is driving higher AR. Our DSOs improved by nine days, but we'll continue to see that improve in the second half. I had mentioned earlier that one of the challenges we had is we had a couple health plans with system changes.

The majority of that's resolved. We had big cash collections in July. And so we'll continue to see our cash collections improve in the back half of this year. So that sets us up.

Then to the second part of your question on ECS, absolutely. We've probably got a burn rate around $10 million on the ECS business that will -- primarily hitting Q3. Look, we've got a lot of obligations. We still have to fulfill for the program.

But starting October, we'll see that dramatically come down. And so you're part about managing the two pieces that we'll be managing. And you'll see the big drop off and the burn rate come down dramatically will be on the stranded costs and the ECS direct costs, and that will be winding down. And we should be in a place by end of the year where we're down to our projected stranded costs going into 2023.

And then you'll see with the business that we have remaining, the HCS business, we get those DSOs in the right place, 2023 will be a return to very strong cash collections.

Sandy Draper -- Guggenheim Securities -- Analyst

OK, that's helpful. And then just one, and you may have touched on it at the end of that, but I want to just make sure I'm clear. You're planning to wind down the majority of it is in the fourth quarter. But just from an accounting perspective, is there any residual spillover so there may be either some liabilities or assets on the balance sheet at the beginning of '23 and maybe some -- even some revenue that triples in? Or basically, is this something that on December 31, you shut everything down and the new year comes and you're not under any obligations and so it's just completely clean? Or is there sort of a de minimis but still somewhat of a trickle effect of maybe some revenue and expenses that spill into the first quarter?

Steve Senneff -- President, Chief Financial and Administrative Officer

There's likely to be some that's built in '20, but it will be diminished. And -- we're also -- we believe that we'll be able to qualify for discontinued ops in Q4 because we'll have the majority of it shut down. And then that way, it will be a one line item where you can really highlight what's going through there, but it should be a minimal amount in 2023.

Sandy Draper -- Guggenheim Securities -- Analyst

OK. Perfect. So by the fourth quarter, you can get discontinued ops and then heading into 2030, anything that's there would just show up down there and we'll have a clean income statement?

Steve Senneff -- President, Chief Financial and Administrative Officer

Exactly.

Sandy Draper -- Guggenheim Securities -- Analyst

Great. Thanks so much. Those are my questions.

Steve Senneff -- President, Chief Financial and Administrative Officer

Thanks, Sandy.

Kyle Armbrester -- Chief Executive Officer

Thanks, Sandy.

Operator

Thank you. Our next question comes from Cindy Motz from Goldman Sachs. Cindy, your line is open.

Cindy Motz -- Goldman Sachs -- Analyst

Great. Thanks for taking my questions. Yeah, I'm just -- Sandy cleared up the housekeeping question I had. So we start 2023 kind of fresh.

Can you give any guidance in terms of revenue growth or EBITDA growth because anything that you see -- because it really looks like when we look at the macro picture here, you're not being into it. In fact, your momentum is picking up I mean, just from Kyle's comments and everything. So we get a lot of questions on the macro front, but for you guys, it actually seems like if we do go into a downturn, if we are in a downturn, you're actually pretty recession-resistant. Would you agree with that? And just any color you can give either on the growth rates or the macro comments? Thanks.

Steve Senneff -- President, Chief Financial and Administrative Officer

Yeah. Sure, Cindy. So yeah, exactly right. Like if you look at our back half of the year, we're expecting that our growth rates are going to accelerate.

So we're projecting ACS is going to be in the mid-20s to high 20s growth rate compared to 20% in the first half. You add on Caravan, and on the upside case, the total of those two combined could be approaching 30% total growth. And so that's really encouraging. We're seeing a ton of demand.

I mentioned Q2, Q3, it's usually a box up every year, which one is going to be a little bit stronger. We think this year Q2 will be. But what's interesting is we have so much demand. We think we're going to buck some of the seasonality that we've historically said about a big drop off in Q4, which is an indication that we're able to be recession-proof through all of this and continue to see that demand.

So Q4 should be another big quarter for us, and we'll round out the year with some really nice growth rates. Caravan, as Kyle mentioned, is beating all expectations. And so they're going to have another great second half. And so we're not ready to provide guidance for '23.

But with the growth momentum we have in the back half, with ACS and Caravan, where we have a lot of momentum heading into 2023.

Cindy Motz -- Goldman Sachs -- Analyst

Great. And just on Caravan because originally, I thought, yes, the margins there were going to be about -- EBITDA margins is about 25%. But now you're saying it actually -- I guess, the combined with HCS -- I mean, in next year, we can expect 29% to 30% for the entire thing. That would imply as definitely a pickup from what you had said with Caravan before?

Steve Senneff -- President, Chief Financial and Administrative Officer

Yeah. So we're -- going forward, we'll just do those two combined. So there's obviously a blended rate that's in the HCS and Caravan. But like I have said previously, we do expect that, that Caravan margin will grow over time, and we're starting to see that just in what they've been able to do in the first half.

Cindy Motz -- Goldman Sachs -- Analyst

That's great. Congratulations. Thanks. Appreciate the color.

Operator

Thank you. Our next question comes from Sean Dodge from RBC Capital Markets. Sean, your line is open.

Sean Dodge -- RBC Capital Markets -- Analyst

Yeah. Thanks, and good morning. Maybe on Caravan. Kyle, you mentioned client transitioning from the basic track to the advanced ones.

Can you give us a sense of what proportion of lives there right now are in basic? And how big that shift to advance could or should be next year? And then you mentioned the economic benefit of that to Signify when that happens. Maybe if you could just help quantify that for us? What's the potential multiplier effect that has on revenue when you can get clients to make the shift into two-sided risk?

Kyle Armbrester -- Chief Executive Officer

Yeah. I'll talk about the strategy kind of component and the market dynamics, and you can go over the specifics over the shift amount. So basic and enhanced, same clients, same Medicare beneficiaries, same workflow, same everything. What they're getting conviction, and the big change, as you mentioned, is it moves from downside protection and basics.

There's no downside risk to two-sided risk or there is downside. They have consistently seen the outperformance and overperformance of the Caravan team. And now with the expanded Signify services, the in-home work we do, the post-acute work we do and all the additional investment we're putting in to those clients into the Coach platform, they feel more conviction than ever that it's the right time to move over into the enhanced program. And the punchline on enhanced, the government gives you a bigger chunk of the savings because you're taking that downside exposure.

And so it is just straight profit to ourselves and to our clients, all that shared savings by moving into it. And so it's been a big win for us. Our clients are excited about it. And it's frankly given us the ability to go out -- we've mentioned in the call, to go out and overperform a lot of our sales forecast that we had this year.

We're in a really good spot and many of them are signing up out of the gate into the enhanced track because they see our story, see our historic results. And it's been something we've really enjoyed. And we've also been excited to see larger health systems coming around and signing contracts as well. So we're moving up market, too, with the solution set.

And I'll just let Steve cover the financial transition specifics.

Steve Senneff -- President, Chief Financial and Administrative Officer

Yes. Sean, there's a nice multiplier just moving even if you keep the same savings rate. So in the basic program, roughly 40% goes into the ACL pool. And so we would share with our partners in that.

CMS would keep the other 60%. But when you move to enhanced, it accelerates to 75% goes to the ACL pool. So even if you have the same savings rate, you're going from a 40% savings of the pool to 75%. So it's a really nice multiplier.

And we -- as Kyle said, because of the confidence this year, a little over half of our clients have moved into the enhanced and we think next year, based on our selling process that's wrapping up this week, we -- that number is going to go even higher. So we're really excited about how that's going to be a multiplier on our revenue growth as we go forward.

Sean Dodge -- RBC Capital Markets -- Analyst

OK. And then the instances you mentioned you've been able to convert BPCI program partners into total cost of care. When those clients are doing that, are they typically entering the basic tracker because they're a little bit more versed in taking risk? Are they going straight into the advanced ones?

Kyle Armbrester -- Chief Executive Officer

Yes, enhanced, just to be clear. But yeah, they're going more into the enhanced track. I mean I -- if there's a testament to the trust and relationship that we have, I mean, we help in several weeks managed the -- starting the wind down of the entire program, we'll contract and then to move into a full ACO MSSP program with their Medicare lives. I mean those sales cycles never take weeks, right? I spent my time in CMS and selling into hospitals and help us on the multi-month long sales processes.

So we're excited to see that, and it's going to be a big source of additional pipeline growth for us next year, but we're adding tens of thousands of lives from the BPCI program this year. It will be live in calendar year '23. So we're very excited by that. And there, to your point, going in with more conviction into the enhanced track and realize that we're going to be able to shield them from that downside risk.

They had -- and they're comfortable with downside risk because they obviously had that in BPCI-A in the past. Appreciate picking up coverage.

Operator

[Operator signoff]

Duration: 0 minutes

Call participants:

Jason Plagman -- Vice President, Investor Relations

Kyle Armbrester -- Chief Executive Officer

Steve Senneff -- President, Chief Financial and Administrative Officer

Jessica Tassan -- Piper Sandler -- Analyst

George Hill -- Deutsche Bank -- Analyst

Mike Cherny -- Bank of America Merrill Lynch -- Analyst

Sandy Draper -- Guggenheim Securities -- Analyst

Cindy Motz -- Goldman Sachs -- Analyst

Sean Dodge -- RBC Capital Markets -- Analyst

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