DocGo at Needham Conference: Strategic Shift to Payer Business

On Monday, 07 April 2025, DocGo (NASDAQ: DCGO) presented at the 24th Annual Needham Virtual Healthcare Conference, outlining its strategic shift from migrant-related contracts to a focus on payer business and in-home healthcare services. CEO Lee Beanstock shared both the company's successes and its challenges, emphasizing a data-driven approach and the company's infrastructure as key competitive advantages.

Key Takeaways

• DocGo is transitioning from migrant-related contracts to focusing on payer business, specifically care gap closures.
• The company anticipates $50 million in migrant-related revenue for 2025, mostly in the first half of the year.
• DocGo projects $250 million in revenue from its health systems business in 2025, with a 15% growth in medical transportation.
• The company is expanding its primary care practice and aims to enter value-based care contracts by 2026 or 2027.
• DocGo is retraining staff to optimize margins and improve service offerings.

Financial Results

• Migrant Related Revenue:

- Expected to reach $50 million in 2025, primarily in Q1 and early Q2.

- The revenue target is a reduction from a previous monthly run rate of $80-$100 million.

• Outstanding Receivables:

- $150 million in receivables with $20-$30 million in payables, net cash expected around $120 million.

• Hospital System Revenue:

- Anticipated to generate $250 million in 2025, with $225 million from medical transportation.

- Medical transportation is expected to grow 15% year over year.

• Gross Margins:

- Medical transportation margins are expected to stay in the mid-30% range.

- Payer business margins are projected to exceed 40% at full maturity.

Operational Updates

• Migrant-Related Business:

- The HPD component ended in December due to faster-than-expected asylum seeker departures.

• Payer Business (Care Gap Closures):

- Engaging with payers for over 700,000 patients, achieving a Net Promoter Score of 90+ for in-home visits.

• Medical Transportation:

- New launches in Dallas Fort Worth and Chattanooga, Tennessee, with plans to grow in existing and new markets.

• Primary Care Practice and Remote Patient Monitoring (RPM):

- Patient enrollment began at the end of last year.

• Staffing:

- Staff retraining initiatives for care gap closures and primary care practice work.

Future Outlook

• Payer Business:

- Significant growth expected, with plans to add primary care components and transition to value-based contracts.

• Medical Transportation:

- Targeting a 15% growth rate.

• Municipal Programs:

- Focus on health-oriented programs not linked to disaster relief or politics.

• Margins:

- Payer business margins expected to reach 40% plus at full maturity.

Q&A Highlights

• Cash Collection:

- DocGo plans to collect remaining migrant-related receivables by year-end, facing potential delays due to city finance department understaffing.

• Competition:

- Despite increased competition, DocGo believes its infrastructure and service breadth offer a competitive edge.

• Risk-Based Contracts:

- A gradual transition to risk-based contracts is planned, starting with fee-for-service and moving to full risk.

• Municipal Business:

- Municipalities are dealing with executive orders and awaiting program developments.

For more detailed insights, please refer to the full transcript below.

Full transcript - 24th Annual Needham Virtual Healthcare Conference:

Matt Shea, Host, Needham: Hello, everyone, and welcome to this next session of the twenty fourth Annual Needham Virtual Healthcare Conference. I'm Matt Shea, and I help with Needham's digital health research efforts. In this session, I'm pleased to be joined by Docco CEO, Lee Beanstock. Thank you for joining me today, Lee.

Lee Beanstock, CEO, Docco: Thanks, Matt. It's great to be with you.

Matt Shea, Host, Needham: So we have about forty minutes for our fireside chat today. We'll save, call it, the last five to ten minutes for audience q and a. So feel free to send questions into the chat or email me directly, and we can get those covered in our time today. But with that, let's get into it. Lee, so for those who are maybe less familiar with Dotco, how about a brief overview of the business?

Lee Beanstock, CEO, Docco: Sure. So Dotco is a mobile health care company. We bring care to patients where they need it, when they need it, and we do that at enormous scale today. Last year, we drove 8,800,000 miles to serve 1,500,000 patient, interactions. And we have a proprietary tech platform that allows us to orchestrate all of the mobile vehicles of which we have a thousand mobile units in the field every day with 5,000 w two clinicians going and serving care, in the field to where patients need it.

And we have a tech platform that optimizes the right vehicle with the right clinicians, with the right licensure, with the right credentialing, with the right equipment and diagnostics, all for the right patient need, stacked up in a way so that we could see the most patients with the highest quality possible. And, today, we do that in 30 states and The UK. Our clinical practice is licensed in 48 states, and, and that's basically a a brief overview of the business.

Matt Shea, Host, Needham: Perfect. We'll definitely, jump into the different businesses from there. But before we get to the core business, let's hit the migrant related portion of the business. You experienced an accelerated wind down relative to prior expectations. Maybe just for those that aren't up to speed, what was the catalyst that drove that expectation?

And how much visibility do you have the to the remaining migrant related work? And how has that business, you know, trended so far in 2025?

Lee Beanstock, CEO, Docco: Absolutely. So, for folks, the this migrant related work that that Matt's describing is a contract that we had with HPD. We also have a contract with New York City Health and Hospitals to provide medical care and wraparound services to the migrant population coming to New York City, of which there was over 200,000 asylum seekers and migrants that arrived in New York. We had a large famous contract, providing medical care and other services to that population. Really, when we started, it was core to our mission.

Right? Our mission is to serve the underserved, is to bring care to patients who need it. We were hoping not to get involved in any political commentary relating to that. Right? There's a a little girl who's the same age as my daughters or children that needs a vaccination, a lifesaving vaccination, or perhaps somebody suffering from depression and needs, social work and counseling.

We were there to provide that. Of course, it became politicized, and that's sort of, why people are talking about it. It became a big portion of our revenue in '23 '20 '4. We wound down, the HPD component, the housing and preservation component of that project in December. And when we talked about the accelerated wind down, we had put a cushion in that, wind down where we said, hey.

Let's start winding down these sites in the December thinking that perhaps asylum seekers won't exit the the sites, you know, upon first notice or as quickly, and we would have this buffer between the December to the December to sunset that that program. When we started to wind down those sites in Upstate New York in the December, a lot of the asylum seekers, you know, exited those sites quite quickly and were able to find more long term permanent housing and and sort of found their next leg of their journey. And so we ended up sunsetting that probably about three weeks faster through the course than we had anticipated, and that was reflected in the q four financials. And then into this year, we shared that we expect about $50,000,000 of migrant related revenue in '25, with the vast majority of that coming in q one and the first half of q two. And that's our medical related work, vaccinations, infectious disease control, depression screening, urgent care, that's happening at the remaining migrant sites that are winding down here in New York City, and we think that that will be done, sometime in q two.

Matt Shea, Host, Needham: Got it. That's helpful. So that $50,000,000 target you guys set was prior to this accelerated wind down. So maybe just for background, despite the accelerated wind down, you're maintaining that expectation. Given where you are in the year, how are you feeling about that target, especially with q one being a large portion of that?

Lee Beanstock, CEO, Docco: Yeah. And when so when we shared the 50,000,000 for this year, we had already basically discounted that number. We entered this year at a higher and basically monthly run rate. And so we were entering this year at sort of an 80,000,000 to a hundred million dollar monthly run rate from last quarter. But we understood post election and sort of the change in administration and seeing the numbers of border crossings and people coming, to New York City dropping, which has been widely publicized, we basically said, well, let's be very conservative on that on that number, and let's just, you know, peg it at 50,000,000, break it out, and disclose it, which we did.

And so we were, you know, quite conservative on that number. We still feel like that is an accurate number. We feel like we've gotten that pretty accurate, give or take, you know, around around the edges there, but 50,000,000 is is the is the best estimate. And given also that a lot of that revenue is coming in q one and sort of the first half of q two, we feel like, you know, that's been pretty spot on.

Matt Shea, Host, Needham: Okay. That's great. Yeah. I think the discounting portion is maybe a detail that that gets lost in translation, so that's helpful. Aside from the revenue components of it, the other major topic of discussion related to the migrant work is the cash collection.

So can you provide an update on when you expect to collect the remaining cash you're owed for the migrant contract? And given the recent clawback of payments from FEMA for migrant contract related services, do you have any concerns about your ability to collect, the remaining portion at this point?

Lee Beanstock, CEO, Docco: Yeah. So, Matt, so, we basically had we shared on our last earnings call about a hundred $50,000,000 of receivables relating to the migrant related work. And so with about twenty or thirty million dollars of payables associated with those receivables, so call it net, a hundred, hundred and $20,000,000 of of cash. And, we expect to collect that. We've been collecting that.

We expect to collect that here between now and, the next couple quarters here, maybe through the end of the year, depending on how quickly, we can work through all the invoicing and the payment cycle with the city. You know, candidly, I think our partners at the city and the and the finance side is they're understaffed, and, obviously, they they are they worked pretty hard. And so, we're working through the cadence of all the invoices to get those paid out, but we absolutely expect to collect on those invoices. We expect to collect here between now and call it, you know, q three, maybe the end of the year depending on how long that payment cycle stretches. But, absolutely, that's the that's the expectation.

And they've been paying, and they've been good partners so far, you know, working through the invoicing process with us.

Matt Shea, Host, Needham: Awesome. It's good to hear.

Lee Beanstock, CEO, Docco: Terms of, Matt, in terms of your question relating to the on the clawback, and that was, again, another widely publicized, news event there where, there was again, we we don't know a lot about it. We're we're a clinical service provider. But our understanding is that the budgets for the programs that we're working on are sitting at the agency levels. Right? So they've already been, they've already been assigned to the agency.

They're sitting in in those agency accounts. They're waiting to be paid out. That's that was the direction that we were given from those finance departments. And so in terms of those clawbacks, you know, we haven't been notified or, involved in any way in any of that conversation. And our understanding is that the budgets are sitting with those agencies.

And in addition, part of the big, conversation around all of these budget, process was very little money was coming from the federal government to begin with. That was that was a topic of conversation where the cities and the states were being very heavily burdened by the cost of this. And so our understanding is, you know, quite little of the funding was coming from the federal government. And in addition, the funding for all of our programs was already, sitting with the agencies with which we were serving.

Matt Shea, Host, Needham: Yep. Sounds set up and insulated. That's yep. That's good to hear. Okay.

But regardless, even if you were to fall short on some of this migrant related revenue or cash, you've made it clear that you can make it up with other opportunities with one principal opportunity being the burgeoning payer business. You're leading with Caregap closures today, which is a high demand which is in high demand among payers right now. How do you see growth playing out in this segment? How much opportunity is there to expand with, say, your existing clients versus how much of this is a effort of going to win new logos?

Lee Beanstock, CEO, Docco: So I would say it's both. We we have an active pipeline of new logos, and then we also have a quite active pipeline of expanding, the payers that we're working with. And it's actually twofold. One is the agreements that we have with our payers to do, care gap closure work, and we could talk, Matt, about what that looks like. But, there's opportunity for us to do additional services for the same payers that we're working with today, and we should really talk through that.

So what's happening today? We talked about this insurance business. Really, the whole advantage and the the the great aspect of our program is that we go and meet patients where they are. And in many cases, we meet patients in their home. And why is that important?

Well, because a lot of patients are not being well served by the traditional health care establishment today. They have accessibility issues. They have mobility issues. They have child care issues. For whatever reason, they are not getting the care they need from the traditional clinic infrastructure that, is set up today.

And so our whole approach is we call patients, and we meet them where they are. And we go into their homes, and we close gaps in care. And so what the payers are doing, they have a cohort of patients that are unattributed, that are drifting. These are their words, and they haven't seen their primary care provider in many cases in over a year. And we we get a list of those patients and what gaps in care those patients have, and then we engage those patients and go see them in their home and close out those gaps of care.

And the payers are very focused on this. One, because the more patients and the more members of their health plan that are being addressed, the better higher quality plan they have. The higher quality plan they have, the more, patients wanna be a part of that plan, will choose their plan as an example in the Medicare Advantage portal, and they get higher reimbursements. And so there's this great halo that happens when they have a high quality plan. In order to be a high quality plan, you have to be serving as many or all of your members as best you can and close those gaps in care.

The other piece is if a member and a, member of the health plan has a gap in care, it's something that could, result or precipitate into a high cost catastrophic event. So I'm gonna give you an example. We get a list from the payers. About a year and a half ago, we just we started doing this business. We had one payer give us a list of 2,000 patients.

Today, we have a multitude of payers that have given us over 700,000 combined patients with which to go and provide services to, provide proactive care to. And on that list, we get a patient. Patient may be suffering from diabetes. They need an a one c check. They need a diabetic retinal scan.

Maybe they need vaccinations. They need an annual wellness visit. We'll go to the home and close out as many of those care gaps as we can. But in addition, if we can't close the care gap, so we come back and a diabetic retinal scan is actually alarming and the patient's at risk of losing their vision, we alert the plan, the health plan, that this patient could become much sicker and become, as a result, much more costly. And so this wonderful insight that we're able to give to the plans and hopefully either close the gap in care, which means they have a high performing plan, or identify patients that still have open gaps in care that could become much more expensive and much more sicker patients in the future, that's really the value of the whole platform.

It's enormous. It's in its early innings, today, but the ability to go into a patient's home is something very valuable. All the health plans are looking at this. The patients absolutely love it. We have a net promoter score.

We just got back some data. Our most recent net promoter score was a 90 plus. So the patients love it when we come to their home. It feels custom. It feels, tailored.

It's obviously incredibly convenient. And then at the same time, the plans love it because every single one of these patients were patients that were not being addressed or they haven't been successful with before in the past. And so that's really kind of the the very exciting component of our business right now. All the infrastructure we built around medical transportation and mobile clinics and bringing care into communities and the tech platform we built is being leveraged for this business, and we think this business has enormous, enormous potential, you know, in the coming months and years. We're investing heavily into it.

We could talk about what all those investments look like. But we feel like if we can provide a great service to these payers, we could expand into more services with them, and we could expand into more geographies with them. And so the, you know, the opportunity is immense.

Matt Shea, Host, Needham: Yeah. I mean, before we jump to the additional services, just within Caregaps alone, it seems like there's plenty of reasons your list should continue to grow, whether it be saving the catastrophic events, helping with star ratings, there's a variety of problems that payers are dealing with that you guys can help address head on. But when we think about increasing the visits from those lists that they give you, actually getting the member to engage with you seems to be the biggest challenge for DOCTO as in many ways, there's a reason that these members have lacked engagement with the healthcare system. So what is your approach to driving engagement with the assigned member populations you have today? And are there any strategies you found to be the most effective?

And are you able to then leverage that across the markets? Or how is this how has this Caregap closure program sort of developed over the last year, year and a half?

Lee Beanstock, CEO, Docco: Yeah. So engagement, you mentioned, not just for us. It's really the whole the whole point is we say give us your unengaged. I that's what we're asking for here, and we think we can make great progress with this patient population, meeting them where they are. We've been doing a tremendous amount of capability building, experimentation, AB testing, of course, say, you know, dozens and dozens of variables.

And and, really, first and foremost, it starts with a partnership with the health plan. We cobrand and send out materials. First, it comes from the health plan. So say a large health plan saying that is gonna be reaching out to you to schedule a very needed health screening or health exam, then that primer has gone out. And we're even experimenting on how quickly we contact the patient.

So I'll tell you, Matt, in the early days, I might have shared this story with you, but, you know, for folks listening in, I was maniacal with the team. I said the second that mailer from the health plan that that day that it hits, I want us calling that patient. And we we did lots of different experimentation. The plan the team set out to, you know, effectuate that plan, and they come back to me quite happy to tell me that I was wrong. The best day to call the patient is actually twenty one days after they receive that mailer and all of the various different testing that we did.

Why? Because a lot of patients live in apartment buildings. A lot of the patients have mailboxes, and they don't check those mailboxes every single day. They check them a few times a month. Just this incredible insight that we have there.

We know certain demographics like to be called on Sunday mornings. Certain demographics don't like to be called on Sunday mornings. We know certain, age of population likes to be called by a certain gender, clinician that's reaching out on on our side. And so we've done all this different experimentation to understand truly who the patient is. And first and foremost, it's cobranded, and it's, initiated by the health plan partner, and we invest heavily into that to understand what the best messaging there is.

And then we have a sequence of, scientific backed, you know, statistically significant backed cadence of engagement that happens depending on who the patient is, what demographic they fall into, and, and all of that has been, you know, under experimentation. We're just getting better and better at it. In addition, in our tech platform, we have an automated dialing system. And when we first started doing this in the earlier days, our clinicians were dialing up and letting the phone ring. And now we have a system that we've built that in the background, all the phone calls are happening.

And then when there's actual patient on the phone, that's when it connects one of our human beings on the phone to connect with them to schedule the visit and discuss what health care they're needed. So we're making all of these investments in the capability to make us more efficient as we go forward to take on bigger and bigger lists of patients, and we're getting incredibly, insightful and scientific and data backed on how we engage the patients to to convert the highest percentage that we can. And, again, every single patient that we're able to convert and engage is an extra patient that the health plan wasn't able to, and so it's incredibly accretive.

Matt Shea, Host, Needham: Yeah. Those efficiency gains seem great, and it seems like with the AB testing, that should continue and help you kind of pursue this opportunity. But when you have an opportunity this big, it often breeds competition. And and you've commented on the past that the Caregap space is in a bit of a land grab right now. So from DOCO's perspective, how often have you guys been running into competition?

And how are your customers comparing you versus the top competitors? Or maybe where has DOCO been successful in standing out relative to the competition?

Lee Beanstock, CEO, Docco: Yeah. So there's a lot of competition that's being funded in the space. And what's great about our company is we're self funding a lot of this. We're not raising capital to go out and do this, and we're self funding it from all of the various different, businesses that we have. And we're leveraging the infrastructure from those other businesses and applying it here.

So we have a lot of advantages that, frankly, new entrants into the space just simply don't have. We have scale that new entrants don't have. We have other capabilities that we're taking from other components of our business. Again, we're we're funding a lot of, the growth there, so we feel really excited about that. But there are as absolutely people coming into the space.

And, really, I think it starts with CMS themselves and Bain and McKinsey and everybody really raising the flag here and saying a huge percentage of the health care dollars are gonna find their way into the home. And so if everybody just follows sort of that trend, right, you have an aging population. More than half of the country, by 2030 is gonna have at least one chronic condition. So you're talking about a hundred and sixty million Americans are gonna have at least one chronic condition. And so being able to bring care to the patient is obviously a tool that every single health system and health plan is gonna need to have in their arsenal, and we feel like, you know, we're enabling that.

And there are other companies that are coming into the space. A lot of them venture backed, and so, we see that there. I think from a competition standpoint, first off, we want them all to be successful. It's sort of this wonderful, environment where you have a lot of other companies in addition to us evangelizing, you know, how good this is for patients, how good this is for the system, how much better off the savings could be, and the, health outcomes can be improved through this mobile modality. And so the way I view it is the other companies in the space doing it alongside us are just helping us evangelize, helping the whole industry evangelize, really, the need for this.

And there's just such an enormous opportunity where I think there's room for and I hope we're all successful, and I think we will be. I think for us, our big competitive advantage is both having that medical transportation and the other infrastructure that we've built over the last ten years that we're now applying the tech platform that allows us to orchestrate all those thousand mobile units in the field at scale, really, very few other companies have, and we're applying that to this business. So that's a big advantage for us. The other piece that we've been told is a big advantage for us is the breadth of the scope of practice that we have. So we are now up to 35, 40 plus clinical offerings that we're providing in the home.

And the way I call it is we're sending our clinicians, we're training them in all of these different care gap closures and the ability to do annual wellness visits, and even some of the higher acuity care gaps we're able to close. And that breadth of practice is something that we that's we've been told is, a big differentiator for us. We sort of send these Swiss army knives into the home that are able to do a multitude. You know, we had one patient which I share. You know, we we closed six care gaps in one visit because our clinicians are able to do such a wide breadth of practice.

And so I think when you think about the infrastructure, the licensure, the tech stack, and the breadth of practice that we're bringing to the market, we we should be quite successful.

Matt Shea, Host, Needham: That's great. Beyond and beyond solely care gap closure, the ability to convert these patients then to primary care patients or remote patient monitoring patients is important to the long term opportunity, and you mentioned that earlier. And not only does this require patient buy in, it also requires amendments to existing payer contracts. So as we think about going after that long term opportunity of converting these care gap patients to additional programs, What has that process been like to add these inclusions onto existing payer contracts? And any way to think about the percent of payer contracts today that have these inclusions?

Lee Beanstock, CEO, Docco: Yeah. So, Matt, it's a great point. When we first started doing this business, we were signing care gap closure contracts. And they didn't contemplate PCP. They didn't have this sort of gradient of risk, right, which we which we should talk about.

But you say, hey. You'll give us a list of patients. We'll go and close care gaps, and you'll pay us our custom in home rate, and that's the way we started. And, actually, we've been inching that rate up as we've gone through and and signed newer contracts that have higher rates in them. And when we were going to to to into the home and providing these visits, you know, we found that one in one in four Americans one every if you will go down the street and you count four Americans, one of those four Americans doesn't have a primary care provider.

And, actually, we were finding in the patients we were serving an actually much higher incidence of that. Close to almost half didn't have a primary care provider at all. And so we started to say to ourselves, now we're in the home. The patients open the door to us, and they do have gaps in care. They need somebody to quarterback and be their primary care provider, and we can do that through our own primary care practice.

And so not only go and close care gaps, but also be their primary care provider. And so that is the journey that we launched basically at the end of last year. We started enrolling patients in our primary care practice. It's still very early days for us in that. But we feel fundamentally that if we're in the home, we're getting a 360 degree view of the patient and their social determinants of health and their home environment and a much deeper understanding for truly, how to manage their care.

Then we're closing care gaps. We're in their home, and now we're quarterbacking their care as their primary care provider. And now perhaps through our remote patient monitoring platform, we're getting their blood pressure every other day. Who is better than us to manage risk or enter into value based contracts than us? Now we're being very thoughtful about it.

We're not entering into value based, risk bearing, downward risk, contracts because we wanna go into that with the most data and the most educated view of the patient. So we're taking a very graduated and evolved approach to this. We're basically starting with fee for service. Then once we're in the home, then we'll start to build up build up our PCP panel. And then eventually, we think we will be in the best position to take on risk maybe in '26, maybe in '27 and beyond.

And we're being very thoughtful about our approach to that. And so that's really the big vision here. I think companies that are in the home like ours are going to be far more insightful about truly managing the total cost of care. But, certainly, I don't wanna take risk on a patient that won't open up their door to us as an example or that I'm not quarterbacking their care. You know, our practice is not.

So, really, those are the pieces that we need in place to do it well. And I think, again, everybody will benefit. The health plan will benefit because we'll truly be able to manage the total cost of care and drive cost down. Patients certainly will benefit. You know, the reason the way you drive cost down is patients are healthier, so they need the health care system less.

And then, of course, if patients are healthier and the health plans are doing well, then we'll have our value that will be unlocked that we'll be able to benefit from as a company. And then the more value that we can unlock as a company, the more patients we can help. The more patients we can help, the more we can grow our business. So that's really the way we look at it, and those are the pieces. But we're in early innings.

We're investing into this. Right now, we're really getting that critical density and, capability around the Caregap closure. I think there'll be capabilities we add either organically or inorganically as we go through here to add those other pieces I was just describing. And the company has a great balance sheet with which to, which which to capitalize on to go and and make those additional investments both organic and inorganic that, we feel we're gonna be very ambitious about over the course of this year and definitely heading into next year.

Matt Shea, Host, Needham: Okay. I wanna double click on the risk comments because I think that that's the right prudent approach to how you wanna approach it where start with fee for service, especially given the patients that you have. And then over the next couple of years, we could see you scale into risk. As we think about how that plays out, how do you envision the level of risk and how that progression looks over time? Would you flip from fee for service to say an upside downside with some risk corridors and then move to full capitation?

And with that, what kind of buy in do you need from the payers? What kind of contract amendments would And I'm sure that you're already in discussions, so maybe any kind of, you know, feedback that you've gotten from your payer partners so far.

Lee Beanstock, CEO, Docco: Yeah. So, exactly, that would be the gradient we wanna follow, which is no risk today. Fee for services is what we're in right now. And then adding sort of an upside only risk component. But, of course, if it's upside only, then it's sort of, you know, capped in some way.

It can't be the full benefit, and then eventually go to full risk upside and downside. The way we're approaching it is the first early contracts we signed in the care gap space did not have the PCP component of it. We really feel like we need the PCP component of it in order to truly manage the total cost of care. And so right now, we're going back to some of those original contracts, and we're adding on either an amendment or a brand new PCP contract to go alongside the CareGap contract that we're having. And in that PCP contract, there's that gradient of capitation that happens once we reach a certain patient panel size and what the capitation looks like, and sort of the capitation inherent in that capitation is the risk associated with that patient.

Right? That's sort of a PMPM model where perhaps we're getting $80 per member per month. And if it costs us more to care for that patient, then we have to bear the cost of that. If it costs us less and the patient's healthier, then, then we would benefit from that. And really getting that capitation right is something we're very focused on.

Being able to truly be a great PCP, partner, and truly be the best PCP in the world, we feel like we have the ability to do that, and we're aiding adding capabilities there. And so the better we are on the PCP side, the the better we can drive that capitation and sort of the, the margin in that capitation. That's really what they'll end up looking like.

Matt Shea, Host, Needham: Right. Exciting things to come. You know, I could spend this entire fireside chat talking about the payer business, but you also have two other businesses that we should probably hit on, in our time today. So one of those large customer bases is health systems where you're expecting to generate about $250,000,000 in revenue in 2025 from these customers. Maybe for those a little less familiar, what's the mix across transportation and mobile health within that segment, and where are you seeing the greatest opportunity for growth within that business today?

Lee Beanstock, CEO, Docco: Yeah. So for hospital systems, they're the vast majority of what we do with them today is medical transportation, which I described, which essentially allows, we have this deep integration within Epic that allows a discharging nurse to click a button and see exactly when the ambulance is gonna arrive to pick up the patient. And there's this wonderful cascade of events that happen where, again, we come to pick up the patient. The nurse knows when to get the patient ready. Intake knows when the bed's gonna be freed up for the next patient, and housekeeping knows when to come get the bed made made ready for the next.

The receiving facility knows when the patient's arriving. All this wonderful integration that happens when you digitize a really, you know, frankly, old business like medical transportation and bringing it into the next century, we've been very successful in doing that. So we we feel like we can do $250,000,000 of revenue with the hospital systems this year. 225,000,000 of that will be approximately medical transportation. Medical transportation, we feel like, will grow 15% year over year.

In some years, we've done a lot more than that. In some years, you know, that's been a little bit less, but the 15% growth rate is really what we target on the medical transportation side. And then the remaining will be programs with hospital systems that help avoid ED readmissions or, or basically, patients bouncing back to to intake into the emergency room. And hospitals get penalized when patients bounce back within a thirty day window. And so we have a transitional care program where we'll go to the patient's home after they've been discharged to work and help that patient not to recede back to the emergency room.

We have a a bunch of programs that we're running there. As an example, we have a program with LA Care in California and some of their participating hospitals. So it's sort of a payer hospital, hybrid approach. And we've been, successful in reducing ED readmissions from a very high lace index score patients with length of stay, acuity, chronic condition, very high, you know, acute patients. We've been successful in reducing readmissions by 60% in that cohort.

So now we're in big expansion mode on that. And so that's really what the hospital system will look like between basically medical transportation, which is the vast majority of it, you know, 9090% plus, and sort of these transitional care programs and hospital home style programs that we're now just starting, you know, to scale.

Matt Shea, Host, Needham: Okay. That's great. Yeah. And the health system is really underscored by that consistent 15% transport growth. It's really made the health system end market a durable business for you guys.

How durable do you think this end market is Is there a lot more opportunity out there for you to continue to pursue and see a good line of sight to that 15% growth continuing? And then in addition to that, how do you make sure that you continue to hit those 15% plus growth targets on the health system side and maybe not get distracted by how much excitement and opportunity is on the payer side?

Lee Beanstock, CEO, Docco: Yeah. So on the on the hospital system side, absolutely. I think know, it's a $9,000,000,000 industry of which, again, we have 225,000,000. Keep in mind too, we have a team, in The UK that's servicing the national health system with this medical transportation business as well. And so we have that market.

We have this US based market. Right now, we're focused on growing the states we're in. We did launch in Dallas Fort Worth, sort of in the back half of last year, and we feel like Texas could be a very large market for us. We operate in San Antonio, and we have licensure, in different parts of the state. So we feel like Texas, as an example, will expand by launching new markets.

Chief among them is Texas, which we did at the end of last year. We also launched in Chattanooga, Tennessee, which was a sort of neighboring market to Nashville, Tennessee, which we already operated in. So we feel like growing the markets we're already in, we can get to the 15% or launching new markets very thoughtfully, launching new markets with an anchor customer is really the approach we're taking on the medical transportation side. It's still a very fragmented industry. It's a very durable industry.

We're seeing actually more investment come into this space now. We see private equity coming into the space now. So, absolutely, we feel like this is gonna be a great industry and and a great business for us. It's been durable. We've been growing it, you know, quite extensively.

And we tend to we tend to keep the contracts we win, and we tend to win contracts. So, we've been, you know, very pleased with the performance of that business. We have great leadership in that business, a great dedicated team there, and so, you know, we're quite excited about that. And then, you know, in terms of distraction, I think, you know, first off, it's always a balance. Right?

We have our team, great leadership that's running the medical transportation business, right, as a perhaps more mature business within our portfolio and growing steadily on that 15%. And then we have another team that, shares best practices and leverages some of the shared infrastructure, but a team really focused on hyperscaling the insurance business and sort of solving for a different set of metrics on that side of the on that side of the business. But then, of course, very heavy communication across, you know, all all the different, teams servicing different customers.

Matt Shea, Host, Needham: Yeah. That's great. Yeah. And I think that durability point, you know, continues to be the theme with the hospital end market. And maybe as you compare where you are with the payer business today, are there any parallels that you see in the early days of the payer business that reminds you of the health system or transport end market that maybe gives you the belief that that too can be a durable business long term?

Lee Beanstock, CEO, Docco: Oh, yeah. I mean, we don't even have enough time for that, Matt. But that we don't have enough time for that question. But, yeah, so many so many so many corollaries between the two businesses. I mean, first off, you have fleet component, which I think we're frankly you know, we're we're light years ahead of where we are on on the mobile health side and the payer side because of all the ambulance work that we've done over the years and how to manage a fleet and so forth.

There's corollaries on the fleet. There's corollaries on billing. There's corollaries on sort of predictable flow of patients that once we, you know, get the flow of patients from a payer just like we had do from a hospital system, we know when their busy days are. We know when their seasonality. You know, one of the things we're finding on the payer side, which, again, we found out on the on the medical transportation side, like, Friday at 2PM and every everyone in the business knows this.

It's not like we figured out a medical transportation. But Friday at 2PM, that's the busiest. Right? And so there's this weekly ebb and flow to that business. There's also a seasonal ebb and flow to the business.

Like, this year, a lot of hospital executives and CEOs were telling me flu season was quite bad. Their ERs were quite full, and, there was a lot of infectious disease control with flu and and really flu season this year that was inundating their emergency rooms, and so we saw a big surge there and during flu season. Same thing we'll see on the seasonal side of the payer business. At the end of the year, a lot of these health plans are really pushing to close out these care gaps and to really check those boxes relating to, those care gap closure. And so q three, q '4, we expect to be big for us in that business.

And so that really is kind of what we're learning in terms of the seasonality and what the cyclicality of of the different times of the year and when their busy seasons are and when the medical transportation busy seasons are and kind of taking all those learnings. Absolutely. Then the other piece I think, you know, we didn't talk about, Matt, is the municipal side of the business. I mean, we talked about migrants. By the way, Matt, a lot of times when we would do these fireside chats, most of the call was about the migrants and not about the all the stuff we've been talking about.

So, quite refreshing to get a chance to talk about really a lot of the great areas we're excited about. I think on the municipal side, we see the migrant piece, which we talked about, you know, waning, but then we also are starting to think through, like, what are the actual municipal style programs that we wanna pursue as a company? And I know this is one of the things you and I had, you know, sort of talked about in exchange before doing the fireside chat was really we're now focused on the municipal side, on programs that are population health oriented. They're not tied to sort of disaster relief or emergency response. They're not tied perhaps to some sort of political side of the spectrum.

You know, as an example, one of the pieces of work we're doing with the VA is do health screenings and bring medical care to our veterans. I would hope most people would agree that's that's a worthwhile endeavor and that, you know, no matter where you sit in this country, supporting our veterans, making sure they get the medical care they need is absolutely an endeavor worth, working hard on. And so those are the types of things we're looking at. I definitely think I mean, obviously, very topic du jour today, very zeitgeist is really what's going on in in the municipal government. We absolutely see that also playing out on our side of the business, less on the reimbursement piece or perhaps, you know, funding piece.

But we are hearing from a lot of municipalities that, you know, they're they're implementing some of these flurry of executive orders, and they're inundated with that. They're waiting to kinda hear what's gonna happen with certain programs. And so as we go through here, we're gonna have to think through how we really approach this municipal piece, which has been a very big piece for the business, but at the same time, making sure that, we're being thoughtful about the type of municipal work we're doing so it's not disruptive to really our strategy. And then also make sure that that payer business absolutely has the resources it needs, less from, you know, medical transportation and maybe more from that municipal piece of the business.

Matt Shea, Host, Needham: Perfect. I was only gonna ask you one question on the municipal business anyway, so I think we covered it. We wanted to cover other topics today. Right? Okay.

So maybe stepping back then in our last couple minutes here, I wanna talk about margins more broadly. So as the business continues to transition away from the migrant contract work towards these newer opportunities we've talked about today, going through a bit of a transition period where you're retraining clinical resources, has a near term impact on margins while you retrain and drive that new revenue. Maybe for those that are newer to the story, help us understand the retention and retraining initiatives that go along with these kinds of transitional periods. And when do you start to break even on those retraining costs? And how should we think about margin inflection as you exit those retraining periods?

Lee Beanstock, CEO, Docco: So I would say, you know, margin on the medical transportation side and sort of the more core mobile health, we've always seen in sort of the 35, mid thirties range, give or take. On the payer side, we feel like we can get to 40% plus gross margins, but it will take us some time exactly as you're describing, Matt, to retrain some of the staff to be able to do those, you know, 40 care gaps in the home and and understand how to use the tech platform, to send back the diagnostics we need to, to oversee some of these visits and a treatment plan. So, you know, I would say in the in the shorter term, the margins there's actually two pieces happening on the margin side. One is we're retraining some of those staff to go into the home and do these care gap closure and PCP style work, and we are investing heavily into that because now we're taking somebody that might have been doing a vaccination in a, in a municipal style program, and now they're doing 30 plus different, you know, engagements in the home, care gaps, closures in the home. But the other pieces that's it's not not in the gross margin.

It's actually in SG and A relating to, really, the the SG and A as a percentage of revenue. And those are the pieces that, really are weighing on profitability in the short term here. But long term, we feel like medical transportation should be in the mid thirties. The payer business should be around 40 once it gets to full maturity. And then, as the revenue base grows, we can grow back into that SG and A base that right now is is, really set up for growth, and a higher revenue base.

Matt Shea, Host, Needham: That's great. A lot of margin accretive opportunities in the future then as we kinda scale into those. I think with that, unfortunately, we are out of time. We obviously could keep going for another forty minutes. But for today, we'll, we'll leave it there.

Lee, thank you so much for joining us, and, thank you everyone for tuning in, and good luck with the rest of the conference.

Lee Beanstock, CEO, Docco: Thanks, Matt. Same to you. Thanks, everyone. Be well.

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