Q1 2024 Option Care Health Inc Earnings Call

Participants

Michael Shapiro; Chief Financial Officer; Option Care Health Inc

John Rademacher; President, Chief Executive Officer, Director; Option Care Health Inc

Jack Slevin; Analyst; Jefferies LLC

David MacDonald; Analyst; Truist Securities, Inc.

Lisa Gill; Analyst; J.P. Morgan Securities LLC

Matt Larew; Analyst; William Blair & Company, L.L.C.

Pito Chickering; Analyst; Deutsche Bank

Michael Petusky; Analyst; Barrington Research Associates, Inc.

Joanna Gajuk; Analyst; BofA Global Research

Presentation

Operator

Good day and thank you for standing by. Welcome to the Option Care Health Q1 2024 earnings conference call. (Operator instructions) Please be advised that today's conference is being recorded.
I would now like to hand the conference over to your speaker, Mike Shapiro, Chief Financial Officer. Please go ahead.

Michael Shapiro

Good morning.
Please note that today's discussion will include certain forward-looking statements that reflect our current assumptions and expectations, including those related to our future financial performance and industry and market conditions.
These forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from our expectations. We encourage you to review the information in today's press release as well as in our Form 10-K filed with the SEC regarding the specific risks and uncertainties. We do not undertake any duty to update any forward-looking statements except as required by law.
During the call, we will use non-GAAP financial measures when talking about the company's performance and financial condition. You can find additional information on these non-GAAP measures in this morning's press release posted on the Investor Relations portion of our website.
And with that, I'll turn the call over to John Rademacher, Chief Executive Officer.

John Rademacher

Thanks, Mike, and good morning, everyone. As always, I'd like to share a few thoughts upfront on the performance of the enterprise as well as the quarter before handing the call back over to Mike to dive into the financial results a bit deeper.
Overall, the first quarter was very solid start to the year despite some of the challenges we recently disclosed regarding the Change Healthcare situation, which I will expand upon in a moment. Revenue growth of over 12% reflects the dedication of the more than 7,500 team members who are committed to unparalleled patient care and finding a way to serve more patients. We saw solid top-line growth with considerable contribution from a number of the newer chronic therapies launched over the past year.
The team is consistently executing across the country and across relationships with key stakeholders, including payers, referring physicians, hospital and health system teams as well as our pharma partners. And while we are proud of the top-line results from the quarter, we are equally as proud that our patient satisfaction remains quite strong in the quarter at 93% with a Net Promoter Score of 76.2, knowing that more than 9 out of 10 patients who, we have the privilege of serving, view the experience with Option Care Health quite favorably, despite managing through an acute medical event or a chronic condition is humbling and affirmation that our team is truly unique.
As you are all aware, on March 14, we made a voluntary disclosure regarding the potential impact from the Change Healthcare cybersecurity incident. Given the impact on our operations and the fact that it has been just over a month since we shared that disclosure, I wanted to provide a few updates.
First and foremost, the Option Care Health team responded immediately and decisively to help ensure that we secured our platform and that there was no impact on our patients. Throughout this situation, we maintained our ability to serve our existing patients and to seek and onboard new patients. Our team worked closely with our referral sources to establish alternative paths for referrals submission, qualification, and onboarding, which helped further strengthen our relationships and deepen our position as a trusted partner with them.
As I mentioned earlier, given our patient satisfaction results, we believe the patient experience was not significantly impacted by this event. My confidence in the agility of our team and the resilience of this platform has never been higher. As many of you know, the first quarter typically presents a number of challenges to our patient registration and revenue cycle operations as patients switch health plans, insurance plans reset, benefits require verification, and patients on service require reauthorization.
Although we planned well in advance for this annual event and prepared accordingly, we were just emerging from this bolus of activity when we were notified of the Change Healthcare incident in late February. Upon notification, we immediately severed connectivity between our systems and the Change Healthcare suite of applications that we rely upon. Those applications include claims, clearinghouse capabilities for both pharmacy and medical claims, along with a number of other tools we have incorporated into our highly automated revenue cycle management function.
During an already hectic time of the year, our patient registration and revenue cycle management teams quickly developed workarounds to maintain patient care. In many cases, we reverted to a more manual process or sought alternative tools and applications to maintain basic operations within patient registration, refill administration, benefit verification, and payer authorization workflow.
As we disclosed last month, the incident has resulted in certain inefficiencies and incremental costs within these functions. And while for the most part we have been able to return to our previous ways of working, some of those inefficiencies continue to this day. The most significant impact on our operations and related financial results was our ability to transmit a large percentage of our claims to the payers through the Change Healthcare clearinghouse.
Upon severing our connectivity, we aggressively pursued alternative methods to qualify patients and transmit claims. However, given the fact that the Change Healthcare clearinghouse was our primary conduit, this presented considerable challenges. In fact, from the date of the attack through the duration of the first quarter, we were unable to transmit more than half of our claims for payment during that period. This has resulted in a detrimental impact on our cash flow results in the quarter, which we believe is temporary and as you saw in our updated guidance this morning, we believe we will recover and we have not changed our cash flow expectations for the full year.
In the final days of the first quarter and into April, we were able to begin to submit both pharmacy and medical claims. As we sit here today, I'm very encouraged by our progress with respect to reconnecting to the Change Healthcare applications that are back online to establish and connect to alternative platforms we have implemented, and with the effort of our team has made in submitting claims for payment. We have made considerable progress in terms of working through the claims backlog and would expect cash flows to recover by the end of the year.
As we emerge from this chapter, there are lessons learned and insights we will use to strengthen our platform as we move forward. Again, I believe our ability to maintain focus, expand access, and provide exceptional patient care during such a challenging period, affirms the resilience of our model and the tenacity of our team.
The strength of our balance sheet and liquidity position also enabled us to weather this storm and we have not needed to draw upon our credit facilities for business operations or additional liquidity. It also reinforces our priority on investing in our own cybersecurity enterprise risk management process and market leading technology to help us remain vigilant and clear and present risks to our operations and agile in our response. I could not be prouder of how this team rose to the challenge and the level of patient care we maintained throughout this disruption.
Even with these distractions, our team remains on plan to execute on our commercial priorities, drive operational excellence, expand our capabilities, and explore new vectors of growth. We continue to invest in our teams through training and development programs, invest in our technology to create the next generation intelligent platform, and build out our clinical programs to deliver extraordinary care that helps improve outcomes, eliminate waste, and reduces a total cost of care for our patients and their families.
With that, I'll hand the call over to Mike to provide additional insights. Mike?

Michael Shapiro

Good morning, everyone.
As John mentioned, the first quarter was a solid start to the year. Double-digit top line growth was balanced across the portfolio as we delivered single-digit growth from our acute portfolio and mid-teens chronic therapy growth.
With respect to the revenue mix in this quarter, we saw especially strong growth from some of our newer chronic therapies introduced over the last year. Chronic therapy growth far outpaced acute therapy growth, which was not unexpected. Gross profit of $238.5 million, representing 20.8% of revenue and grew 4.1% over the prior year.
A few things to unpack that affected our gross profit in the quarter. Gross margin dollar growth was negatively impacted by the absence of the transitory procurement benefits that we have discussed over the past several quarters. Beyond the prior year comparison headwinds, there were three factors that affected gross margins in the quarter that we want to highlight.
First, gross margin was negatively impacted by the inefficiencies we've described related to the Change Healthcare incident.
Second, we experienced some supply chain disruptions for certain acute drugs and compounding inputs that led to higher-than-expected therapy costs. The supply chain disruptions led to higher input costs as well as inefficiencies in pursuing alternative sourcing strategies, and we anticipate these impacts to continue into the second quarter.
Finally, gross margin was also negatively impacted by our revenue mix. As a significant component of our chronic therapy revenue growth, was driven by newer chronic therapies launched over the last year that carry lower initial gross margins that we believe we can expand upward over time.
SG&A grew 4.7% and represented 13.5% of net revenue as we continue to drive spending leverage despite the challenges we encountered in the first quarter. As disclosed, the Change Healthcare incident led to inefficiencies in our patient administration and other functions, and we continue to see the impact today.
We're not in a position to quantify a specific impact from the disruption as our focus is on full recovery and remediation. But we were able to drive spending leverage in the quarter regardless. And as I'll cover in a minute, the impact did not lead us to lower our revenue and earnings expectations for the year.
Adjusted EBITDA of $98.3 million represented [8.6%] of net revenue. Overall, the results were consistent with our expectations despite the Change Healthcare disruption we've articulated and the gross margin impacts outlined above. Also note that we have not adjusted for any impact due to the disruption from our reported adjusted EBITDA results.
We believe the silver lining of the Change Healthcare incident has been the reflection on the resiliency of our capital structure and overall liquidity position. The inability to transmit a majority of our claims from February 21 clearly impacted our cash flow from operations in the quarter. Our prior efforts to strengthen our balance sheet and manage our capital efficiently helped ensure we were able to operate the enterprise and maintain business as usual in the eyes of our patients and referral sources.
At no time do we need to draw on our credit facilities or drop below what we believe are the minimum cash levels required to operate the business, nor do we anticipate needing to draw on the revolver with respect to the disruption in the foreseeable future. Our operational cash outflow in the quarter of approximately $69 million reflects the revenue cycle disruption, yet we still finished the quarter with over $219 million in cash on the balance sheet.
Earlier in the first quarter and prior to the incident, we did deploy $40 million towards share repurchase. And upon learning of the change health incident, we temporarily paused our capital deployment efforts to help preserve liquidity. As reiterated in this morning's release, we have reaffirmed our cash flow guidance for the year and expect to fully recover from the incident within the year.
Finally, to summarize, our revised guidance for the full year, we expect to generate net revenue of $4.65 billion to $4.8 billion, adjusted EBITDA of $430 million to $450 million, and cash flow from operations of at least $300 million.
And with that, we're happy to take your questions. Operator?

Question and Answer Session

Operator

(Operator instructions)
Brian Tanquilut, Jefferies.

Jack Slevin

Hey, good morning, guys. You've got Jack Slevin on for Brian. Congrats on the strong results despite all the challenges.
Maybe just wanted to touch back on the gross profit commentary. Appreciate the some of the supply chain disruption is going to extend into Q2. But if you could just maybe walk through how you're thinking about that progressing throughout the year overall that might be helpful as it relates to the couple of other call-outs you had there. Thanks.

Michael Shapiro

Yeah, Jack. Good morning. Thanks for the questions. It's Mike.
Look, obviously, part of the value equation that we've consistently articulated is it starts with gross profit dollar growth. I think on the Q4 call, we did highlight that we thought that growth would be a little muted earlier in the year relative to the back half.
Naturally, we didn't anticipate some of the curveballs with the incident. But again, the way that we're thinking about the full year, we're reaffirming expectations, and we would expect, again, given the fact that as we sit here today, we're still managing through some of the supply chain challenges around some of the antibiotics and parenteral nutrition inputs as well as we're still working through the back office remediation with the incident. We would expect those trends to continue into the second quarter with more meaningful gross profit dollar growth in the back half of the year, and we're confident in those trends.

Jack Slevin

Awesome. And then maybe one quick follow-up on the -- numbers look really strong, especially with the Change impact.
Can you get any sense now of if there's perhaps share gain opportunities that you're taking advantage of given size and scale relative to other players? And is it too transitory or too quick of an impact you think to maybe extend and open up tuck-in opportunities for smaller players that couldn't handle things as well as you could? Maybe you could just speak to some of that, that would be great.

John Rademacher

Yeah, Jack, it's John. Thanks for the question.
Our team focuses on reach and frequency is just part of our overall commercial strategy. There are always opportunities that we see to be efficient and effective in the marketplace and seize on any opportunities there.
As I said in my prepared remarks, we worked closely with our referral sources throughout some of the challenges that they were challenged as well with their operations in many instances. I think that the agility that our team was able to demonstrate, I think some of the workflow and workarounds that we were able to create and I think the ability that we had to not only service our existing patient census, but continue to focus on onboarding new patients just puts us in a really strong position to be that partner of choice as we move ahead.
We'll continue to take a look at opportunities in the marketplace. We believe that the strength of the platform and the resilience that we've been able to demonstrate are things that matter to those referral sources and more importantly to the patients. And try to take every opportunity that we have to extend that reach to increase that frequency and to take on a bigger portion of the market demand.

Jack Slevin

Awesome. Really helpful, and congrats again.

Operator

David MacDonald, Truist.

David MacDonald

Just wanted to come back to change for one quick minute.
John, I was wondering, you mentioned just where you were currently. Do you guys expect to be largely done with some of the inefficiency drags as you get through the second quarter. Is it a little early to tell there?
And then I just wanted to come back to the prior question a little bit. Are you guys seeing a little bit of a halo effect just around some referral sources and some things we heard infusion pharmacy scenario where there was certainly some dislocation. So your ability to continue to service I'm just curious if you're seeing any potential halo effect there with either referral sources or payers?

John Rademacher

Yeah, Dave, I'll start on Change.
The team has been working really hard just to get the backlog caught up and continue to move that forward. As we sit here today and as I said in the comments, there still is work in the second quarter. I think some of that will straggle a bit into the third quarter given just the work that we have to do, not only to submit the claims, but then there's the secondary aspects of posting the cash and everything else that's associated with that.
As we've said before, and we have talked about a lot is, we really have a lot of automation within our revenue cycle manage, which really drives that efficiency and effectiveness and a lot of that has been decoupled. So it's going to take time to really connect to some of that aspect to build new solutions around that. And I think more importantly, just to get through the bolus of activity that's really required to recover from Change how. So expectations are it's going to get better every day as we move it forward, but it's going to take us some time to move it forward, which is why we've called out that we'll recover by the end of the year within that.
On the halo effect, our expectations are this is a hustle business. You've got to be present to win. You really need to demonstrate on a consistent basis that you are back go to resource and that you can take the patients on the service. I think that what the team has done through this disruption has only strengthened our position there.
We will again utilize every aspect of our capability set to remind our referral sources of that consistency and the high quality that we have. I think the patient satisfaction scores, both for our patient satisfaction and our Net Promoter, just give us confidence that we were able to insulate the patient and we were able to insulate the referral sources from some of the disruption in the marketplace.
So I feel good about the performance of the team and the position that they've put us in. But it's a competitive environment and as I said, it's a hustle business and you've got to be there every day and you've got to be able to take patients on, on that consistent high-quality basis.

David MacDonald

I guess second question, just can you guys give us an update on the percentage of nursing visits from ambulatory in the quarter? If there's anything further that you're learning just as these continue to mature?
And I guess just the final piece of that is, are any of those facilities now operating at north of 50% capacity?

John Rademacher

Yeah. So I'll take that Dave as well.
We expanded the footprint even in the quarter. So we added three additional facilities on that. I would say that the percentages of in the same range that we were before. So ticking up a little bit but in that 30% range on that, the team continues to utilize the facilities effectively and continue to look for opportunities to help influence patients to utilize those facilities. So we feel really good about the progress that we're making. It continues to be a focus.
We do have some facilities that are at that 50% or higher range. We're seeing in certain markets that tick higher and getting closer in some of those that are longer in their vintages, if you want to think of it that way. And so the team is making really good progress. It's a great partnership between our commercial and operations team to help make that influence.
And I think as we continue down the path and continue to build out our chronic census and execute around there, we will continue to see some upward movement in that. And again, we're pleased because it brings both higher patient satisfaction as well as operating efficiencies. And so it is a focus of our organization to make certain that we're maximizing the value of those facilities.

David MacDonald

And then, John, I guess just last question, more strategic. I realized this obviously wasn't a focus in the quarter or maybe even in this quarter. But a disruption in the market tends to potentially create some opportunities. So I'm just curious in terms of maybe some regionals, the Wasatch's of the world, anything around the disruption that potentially creates opportunity or maybe a longer term look in terms of capital deployment?

John Rademacher

Yeah, look, every disruption creates opportunities on that. And so we have been disciplined in our approach as we're thinking about capital allocation, as we've talked about before, we're going to continue to be disciplined, but opportunities will present themselves on that.
The honesty is in the quarter, as Mike said in his prepared remarks, there were certain situations where when we weren't able to drop claims, preservation of liquidity, or preservation of capital was an important aspect of that as we're emerging out of that and gaining confidence.
I think the ability for us to think about capital deployment as we had before, as we get through the disruption will be something that will continue to put in the main space that Mike and I are spending time and looking at where the opportunity set and where opportunities may exist to drive strategic and economic value for our shareholders.

Operator

Lisa Gill, JPMorgan.

Lisa Gill

Mike, I want to go back to a comment that you made around gross profit or you talked about a meaningful gross profit growth in the back half. So can you maybe just talk through what's going to drive that?
And then secondly, when you talked about the single-digit growth in acute and then you also talked about gross margin that there is a supply chain for acute disruption. Did that have an impact on the sales on the acute side in the quarter as well?

Michael Shapiro

Yeah, Lisa. Thanks for circling back because again, we tried to in our prepared remarks, hit head on what obviously were some interesting dynamics in the gross profit line.
Our ability to onboard new patients in the acute portfolio of therapies was never affected. Again, you've probably seen some of the articles there, some shortages with key antibiotics. Obviously, parenteral nutrition is a meaningful component of our acute portfolio, which is basically compounding different inputs. A number of those inputs have been challenging in the supply chain environment, which again has led to higher costs.
So not really a revenue impact; definitely left a mark in the quarter on our therapy costs. And as we think about moving throughout the year, look, what we're expecting to see is some of those supply chain disruptions drop off. Again, they're still present here in the second quarter, but we are -- trade relations and procurement team are all over actively seeking additional sources.
Obviously, the expectation as John articulated is we sunset and get past some of the inefficiencies that the incident has talked our way. And as we've launched a number of newer, lower margin limited distribution in rare therapies, typically what we see is over time, we can expand those margins. And then just ultimately a lot of our bread-and-butter therapies, we're continuing to see momentum coming out of the first quarter. And we think that that's a glide path that gives us confidence in the trajectory of margins in the back half.

Lisa Gill

And then just as a follow-up when we think about the $300 million that you're expecting for free cash flow for the year, I think John made the comment that you stopped or you did make, you put on hold the share repurchase program after buying $40 million worth. How should we think about this year?
You did talk about the cash flow is going to be more back half weighted. Are you leaning more towards tuck-in acquisitions? Will we see you put back on the share repurchase program? How do we think about the uses of the cash?

Michael Shapiro

Yeah, I think obviously, we were in liquidity preservation mode over the last six weeks or so. And I think as John mentioned, we continue to remain active on the M&A front. Obviously, that wasn't a front burner priority over the last couple of weeks. Because as we go forward, I think we go back to our capital allocation policy, which we've been consistent with, which is we think that there are a number of M&A opportunities.
I think to the earlier question, there are some opportunities that are being shaken out of the tree, and we'll continue to balance looking for those accretive and strategic opportunities. And we won't be shy about deploying capital through share repurchase if we continue to recover on the cash front. So I think it's a little bit of all of the above, Lisa, because I think given our strength of the balance sheet, we have the ability to pursue M&A while deploying a reasonable amount of capital towards share repurchase.

Lisa Gill

Great. Thanks for the comments.

Operator

Matt Larew, William Blair.

Matt Larew

Over the last several years, you've driven quite a bit of leverage by automating processes and really improving your claims and payer interactions. Obviously, that change disruption caused a temporary disruption for you. But just curious if you think on the back end of this, do you think there will be long-term inefficiencies either because you will be forced to use perhaps multiple vendors that you didn't before or perhaps establish annual or other backups in place in case something like this happens in the future or the opposite that maybe you're able to extract better pricing or terms from changes as a part of your decision to move forward with them? Just trying to think less about the next one or two quarters here, but more longer term, how this might impact your operations?

John Rademacher

Yeah, Matt. It's John.
I think it's a little too early to think about renegotiations with Change Healthcare. But I think at the essence of your question. Look, there's lessons learned through the process that we will use to strengthen our position as we move forward and strengthen our platform. There are and I think there will continue to be opportunities in the short run and over the long run to drive operating efficiencies.
Decoupling from the clearing house or having alternative is something that will be our strategy as we move forward. And the team has done a tremendous job not only to identify alternative but also to utilize them as part of the solution moving forward.
We still are very excited about our partnership with Palantir. Part of that was the ability to think about some of the backroom operations and ways that we could use machine learning and artificial intelligence to drive even more efficiency with the way that we think about patient registration all the way through claim adjudication and cash posting.
So the disruption certainly rearranged some of our priorities to make certain that we kept the business functioning and did the things that we were necessary to respond to the near term. But I think over the long run, we're equally, if not more bullish that there are opportunities for us to drive operating efficiencies, both in the front end in the patient registration as well as in the back end in the revenue cycle management aspects of this business. And I think there are some really good learnings, and I think an opportunity to take best-in-class tools as we look for alternatives given the disruption with Change Healthcare.

Matt Larew

Okay, thank you.
And then the obviously strong top-line growth this quarter despite at what was the toughest comp of the year and the disruptions in the end market. You also had a number of moving pieces in terms of drugs rolling off.
As we just look through the remaining quarters of the year, anything to think about either additional drugs that we might have contemplated rolling off, any pricing dynamics, or perhaps other procurement impact just to consider growth for the rest of the year?

Michael Shapiro

Yeah, Matt. It's Mike.
Look, we don't anticipate any meaningful shocks on the pricing front of the pricing and rate environment has been relatively stable. I think you know, we typically will call those out if it's a deviation, have a meaningful magnitude.
Look, as always, this is a dynamic market. There's therapies that go subcu, that go biosimilar. All of that is incorporated into our calculus as we look into the back half of the year. Admittedly out of the gate, but we're thrilled with the top line in the quarter. There's a pretty meaningful tranche of those lower margin, new chronic therapies.
And we think over time, the margin profile of those and the predictability of that top line from some of those newer therapies becomes a little more predictable over time. But overall, we're I'm very confident in the trajectory. Again, the majority of the growth in the back half is going to come from the established therapies. But nonetheless, we're encouraged by the near-term progress on the LDD's in the rare therapies as well.

Operator

Pito Chickering, Deutsche Bank.

Pito Chickering

Just talk a little bit more about the gross margin pressure coming from these orphan drugs. When it launched, is your bigger upfront costs from boarding these new patients, does it get more efficient over time. Now the margins typically progress as the launch continues, delever such as data they can utilize to help get better margins from these drugs over time?

Michael Shapiro

Yeah, great question, Pito.
So look, when you're launching a new branded therapy in a less competitive category, typically the price and the margin is a little more limited. In some instances, it's mid-single-digit growth margin rates. Obviously, your question is going to be why would you launch something in a mid gross margin rate because typically it's on a much higher revenue base because you're dealing with a branded unique, very limited therapy.
And so typical progress that we've seen is when we launch these, there's an upfront investment, you're dealing with unique disease states that require idiosyncrasies around patient registration and onboarding. Those are investments that we make upfront to collaborate with biopharm. And then over time, as we get our sea legs, so to speak, we typically expand those margins from single-digit gross profit back in line with what's more commensurate with our chronic margin profile.
To your point, we get more efficient in the back office within pharmacy fulfillment as well as we typically earn the ability to expand our relationship with biopharm, whether it's monetizing patient, experiential data, work through certain financial incentives for volumes and performance on our end.
So again, some of them that we've talked about like the collaboration with Krystal to commercialize VYJUVEK, which is a very unique and novel new therapy as well as others like VYVGART and VYEPTI for chronic migraines. Overtime, it adds to the portfolio. But there's clearly an upfront cost in terms of gross margin rate.

Pito Chickering

Okay. And then there's nothing a lot of concern around the launch of these new orphan drugs at lower margins and/or biosimilars impact to gross margins. I guess if we take a 3- to 5-year view, can you give us a sense of the impact for both of these categories on a gross margin, more specifically if we think about the gross profit dollar growth, do we normalize 3- to 5-year range back at high single digits or more, or are we thinking more on mid-single-digits for next three to five years?

Michael Shapiro

Yeah, the way we've articulated the value proposition, Pito, is look, we've said, first and foremost that with a chronic portfolio that's growing at a pace considerably faster than the higher margin rate acute portfolio that over time, we do see that headwind in the form of gradual headwinds around our gross profit rate.
Our gross profit to some extent is out of our control and that it's expressed over a denominator that includes the ASP of chronic branded therapies over which we have limited or no control. And so the way we manage the business is we're relentless and we're focused on growing gross profit dollars.
With a gross profit rate headwind that would imply that the gross profit dollars over time would grow modestly slower than the top line because we would expect that the majority of our growth to consistently be driven from that chronic portfolio. But really focusing on that gross profit dollar growth is really how we think about it.
In terms of what the impact on certain of factors like things going biosimilar or subcutaneous, we've managed through and we've delivered solid top-line growth aside from a number of those events over the last five years, and we'd expect to continue to be able to do so.

Pito Chickering

And so if I just ask that a different way. I mean, as I think about gross profit, your growth in multiyear view based the gross profit dollars should still be growing in the high single-digit-plus range, even with all the orphan drugs and biosimilars?

Michael Shapiro

Yeah, we've articulated that the top line of this enterprise, we would expect to be in the high single digits. And so the gross profit dollars would expand a notch below that.

Operator

Michael Petusky, Barrington Research.

Michael Petusky

Mike, I may have missed it. I think I heard 50% of the claims were impact during the quarter in regards to the Change incident. But I didn't hear if you quantified -- did you quantify the impact on cash flow from ops in the quarter?

Michael Shapiro

We didn't. But if you look at the outflow on the cash flow -- on the balance sheet, you can see the pronounced increase in accounts receivable, which really was close to the impact from February 21 through the end of the quarter, the inability to transmit more than half of our claims.

Michael Petusky

Okay. And then just in terms of the cadence of the catch-up, and this isn't so much in terms of the submitting of claims and all that goes along with that. But just in terms of the catch-up cash flows, I mean, I'm assuming it's way better than a third, a third, a third for the next three quarters? I'm assuming it's much more front ended and loaded than that. Can you just speak to that?

Michael Shapiro

Yeah, I think that's right, Mike. I think you know we tend to be a little conservative on outlooks. Look, the team has made tremendous progress of working through the backlog. We're working with payers every single day. Obviously, they're getting flooded with backlogs as well.
And so we would expect to make considerable progress in the second quarter on recovering from the cash flows definitely within the year. So I would characterize it as better than your a third, a third, a third for sure.

Michael Petusky

Okay.
And just last just making sure I think I understand this. In terms of the challenges in the first quarter and all the things both on gross margin change that you listed, I'm assuming that that does not alter plans in terms of new ambulatory facilities over the course of the year. Is that fair?

John Rademacher

Mike, yeah, it's John.
No, there is no change in our approach to ambulatory infusion suites and our continued build-out there. And those are capital light so it allows us to continue to move forward. As I'd mentioned, we opened three in the quarter. We're continuing to continue our path of identifying the right geographies to continue that buildout. So no pause or no change in our strategy from that perspective.

Operator

Joanna Gajuk, Bank of America.

Joanna Gajuk

So I guess a couple of follow-ups here.
In terms of quantifying so you just talk about cash flow, but any way to help us understand that dollar impact on the cost side of things in the quarter?

Michael Shapiro

Hey, Joanna, it's Mike.
No, I mean, look, obviously, we tried to quantify things when we're deviating from our guidance ranges. And as you know, this is a dynamic environment. There's a lot of puts and takes. We tried to provide some subjective color around some of the things affecting. But honestly, given the fact we're still in remediation mode and it's still a dynamic environment, we're just not in a position to provide a simple dollar amount for the impact.
I think obviously, it's not something we anticipated going into the year, but as we model out our expectations, we modeled in a number of dynamics and contingencies. And I think given the fact that we've reaffirmed and actually brought up the bottom end, I don't think it's in our best interest to tried to put a specific number on the dynamics.

Joanna Gajuk

Sure, I mean, that makes sense, yes.
Raising the guidance, I guess, answers the question, I guess indirectly, but another one in terms of just numbers in the quarter of G&A. So I guess you did well there. I appreciate the commentary on gross margin. We talked about the sell side, but on the G&A, the $152 million or so excluding some items. Is there a good run rate going forward?

Michael Shapiro

Yeah. I mean, obviously, we've been very disciplined in how we invest in phase in our SG&A. I think that's a reasonable baseline. And again, we would expect that to grow in the low single digits as per usual as we drive the spending leverage.

Joanna Gajuk

Perfect. Thank you for that.
And I guess another question here. So you mentioned by this news of chronic therapies, largely that you've been onboarding and adding in over the last year the come with some additional cost. But then big picture question there on different categories of these drugs.
So first, any interest in oncology drugs? From our checks, it seems the industry is focused on this new therapy class. We attended the industry conference that does a lot of talk around oncology. So would like to hear from you in terms of your interest in adding more of these therapies into your portfolio?

John Rademacher

Yeah, Joanna, it's John.
You know, we have a dedicated team that's working upstream with biopharma, identify therapeutic categories as well as specific drugs to be able to bring on formulary. We continue to take a look and have interest in oncology. When you think of some of the pB1s, the products that you see advertised a lot on television, they have characteristics that really are in alignment with what we have as our platform, and more importantly, with the infusion suites that we're able to operate.
And so we are working right now. We know that's a competitive space. We know that both hospital outpatient departments as well as oncology clinics aren't looking to transition a significant number of their patients over. However, we think that we've got a very unique platform and a very efficient way in order to support patients that require those types of infusions or injections that have a health care professional oversight that's required that need that clinical care that we can provide.
And so we're always looking for opportunities whether in neurology or oncology to expand the portfolio of products that we are able to serve and expand the number of patients that we have on census.

Joanna Gajuk

Appreciate that. Thanks for that.
And I guess lastly, you mentioned subcutaneous, and I guess that's also, I guess, a new so to speak a therapy class to some degree, but there's obviously some existing infusions that are potentially being also being worked out as in a version of subcutaneous.
So how should we think about this ENTYVIO and OCREVUS therapies for you and I guess the OCREVUS label says the patient needs training. So can you talk about how you think about these drugs or these new therapies impacting your business? Would that be a lower revenue, lower margin?
And I guess to your point, can you leverage suites in delivering these therapies to your view of the subcutaneous drugs and how this could play out over time through P&L? Thank you.

Michael Shapiro

Sure, Joanna. It's Mike.
Look, introduction of subcutaneous administration is nothing new which we saw for immunoglobulins. There's been subcutaneous administration for well over a decade and nothing evolves from a product introduction that catches us by surprise.
Again, as John mentioned, our trade relations team has a finger on the pulse of everything in development. I think when you really look at the core of this enterprise, we're really focused on that clinical administration and patient support, that doesn't fit every therapy, that doesn't fit every situation. But really even when you have products that are being introduced with subcutaneous or alternative administration devices, quite often that doesn't become the standard of care overnight.
The far majority of immune globulin patients still receive their therapy intravenously and so we would expect that. And as we've articulated, our therapy mix is quite dynamic and it changes every single year. And so that's part of a calculus that goes into our outlook expecting to drive high single digits. Naturally, there's going to be some patients that migrate towards self-administration that may or may not fall under our clinical model if they require clinic support.
But I think you bring up a good point, which is you also have to read the label because some of those newer therapies still require health care professional oversight or training and patient support, which still falls well within the spirit of focus for this enterprise. So that's nothing new. It's something that we fully expect going forward as we think about the top line. And that's something that we're staying one step ahead of through our trade relations efforts.

John Rademacher

And the only thing I'd add, Joanna, is and that's part of the build-out of the infusion suites as well as just to make certain that we're well positioned should meet the needs of those patients, especially if you're moving towards shorter duration administration through some of those products that require a health care professional oversight.

Operator

And I'm showing no further questions. I would now like to turn the conference back to management for closing remarks.

John Rademacher

Great. Thank you all for joining us this morning and participating on our call.
As we outlined, the first quarter was very productive quarter and our team continue to execute at a very high level even with significant disruptions in the marketplace. We understand the important role that we play in delivering care to our patients and their family. And this remains a light that guides us as we continued on our path to serve even more patients in 2024.
Take care and have a great day. Thank you, everyone.

Operator

And this concludes today's conference call. Thank you for participating. You may now disconnect.