Good day and thank you for standing by. Welcome to the Option Care Health Third Quarter 2022 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. Please be advised that today's conference is being recorded. I would now like to hand the conference over to our speaker Mike Shapiro. Please go ahead.

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. With that, I'll turn the call over to John Rademacher, Chief Executive Officer.

Thanks Mike and good morning everyone. The quarter results reflect our continued strong execution in a very challenging operator environment. Overall, we are quite pleased with the progress we made in the third quarter, while delivering solid growth in revenue and earnings. Growing EBITDA earnings by nearly 10% year-over-year during a period of significant disruption demonstrates the strength of our team and the resilience of the platform. The team responded to dynamic market conditions including repositioning by some market participants, a significant natural disaster, and escalating inflationary pressure to help ensure we are providing real solutions to our referral partners and setting the standard for patient care across the industry. In the third quarter, revenue growth of more than 14% is a result of mid-single-digit growth in key acute therapies and mid-teens growth in the chronic portfolio. We continue to focus on streamlining the onboarding process with referral sources and we have made progress across a number of key therapeutic areas. Our collaborations with health systems across the country enable us to accelerate growth in the quarter for key acute therapies given favorable market dynamics and the Option Care Health team responded to acute opportunities in specific markets to ensure our referral sources rely on us for efficient transactions of care. Although this cost strains our operations at the market level in the near-term, we believe the strength and resilience of our technology-enabled national network was a significant asset. Our ability to dynamically shift workload to utilize our capacity and respond to the needs of hospital partners in the local markets helps reaffirm our position as partner of choice. I would also like to recognize the incredible work of our team in Florida and across our enterprise as they supported our patients and referral sources in the path of Hurricane Ian. The devastation the storm brought to southwest Florida and across the state was unimaginable and heart-wrenching, and our team rose to the challenge to help ensure all of our patients were prepared and had access to their medicines and supplies throughout the emergency. We continue to work in partnership with our referral sources and patients in the communities most affected to help with the recovery efforts through our facility in Fort Myers and across the state. As always, Mike will impact the financial results in a few minutes. We continue to pay inflationary pressures across a variety of categories, including clinical labor, transportation, medical supplies, and several key business services. We do not see cost pressures subsiding in the near term, and in fact, we have seen heightened pressure in several areas. As always, we continue to relentlessly focus on operational efficiencies to offset the pressure. And in some instances, we have negotiated improved reimbursement for therapies and services most impacted by the inflationary environment with payers. We continue to work closely with our health plan partners through our dedicated market access team to highlight these cost pressures and discuss ways we can work together to help ensure we are being reimbursed fairly and appropriately for the value we bring to their members. On the M&A front, late in the third quarter, we acquired Rochester Home Infusion, a regional leader in home infusion based in Rochester, Minnesota. As we have consistently mentioned, we will actively seek complementary infusion assets that we believe are well-positioned strategically and represent sustainable financial returns. Rochester has emerged as a rapidly growing leader in the Upper Midwest with key relationships with leading health systems, and we are thrilled to welcome them to the Option Care Health family. We also continue to evaluate our portfolio of assets to ensure we are optimizing the capital base. And in October, we entered into an agreement to divest a Respiratory Therapy service line we operated in the Northeast. This operation was part of BioScrip organization and it is both capital-intensive and strategically different from our core enterprise with different call points. We believe it is more logical that the operation resides within an organization oriented to and focused on the Respiratory Therapy market. We continue to invest in our organic growth strategy. Our technology enablement and digital strategy took a significant step forward as we began to pilot TouchPoints, our mobile app that improves patient engagement through self-service functions and secure two-way communication, as well as increasing the data capture and analytics we can provide. This has been part of our overarching multi-year technology environment and it is great to see the fruits of our labor beginning to ripen. This is part of a multifaceted approach we are taking to enhance care and improve clinical outcomes through capturing the care plan digitally, identifying trends through analysis, and exchanging insights with the prescriber and other members of a patient care team through interoperability. Also, through Q3, we have opened 16 new ambulatory infusion centers across the country this year and have expanded our total share count to over 570 infusion chairs across the country. We are on track to open a total of 25 new facilities this year, and further expand our capacity to serve patients conveniently and effectively close to where they live and work. Again, increasing utilization of our infusion centers is a key growth strategy, as it enables us to more effectively treat patients and better utilize our clinical resources. Currently, approximately 23% of our nursing events occur in one of our centers and we are focused on further increasing center penetration. Finally, as Michael outlined, we're tightening our guidance heading into the fourth quarter by slightly increasing the midpoint of our expected adjusted EBITDA results for the year. Overall, 2022 is shaping up to be an extremely productive year for Option Care Health across a variety of measures, and we remain focused on finishing the year strong, while continuing to invest for the future. Before turning over the call, I would like to bring to your attention that we have enhanced our Investor Relations website to include a dedicated page that highlights our current ESG initiatives and outlines other ESG efforts underway. And with that, I'll turn the call over to Mike to review the results in a bit more detail.

Thanks John. Revenue growth in the quarter of 14.5% was well balanced as John mentioned, as we saw solid mid-single-digit growth in the acute portfolio and continued mid-teens growth in the chronic portfolio. Our quarterly net revenue exceeded $1 billion for the first time as our team has driven double-digit revenue growth on a sustained basis. Gross margin of 21.4% declined 140 basis points year-over-year, as a result of continued mixed impact towards chronic therapies and unprecedented cost pressures that continue to affect our margins. I had previously estimated quarterly inflationary impact of $10 million to $12 million and in fact, we continue to see emerging cost pressures across a number of categories. While that range was an estimate, we are currently seeing inflationary impact about $10 million to $12 million a quarter, impacting primarily our gross margin, but also to a lesser extent in SG&A. With respect to spending, SG&A grew a little over 5% and declined as a percent of revenue to 13.9% despite the inflationary pressures I just discussed. We remain vigilant on cost management and efforts to drive additional efficiencies, which are enabled to a great extent by our investments in technology. This has also enabled a more proactive staffing strategy given the labor market backdrop and has resulted in a more efficient labor model in many markets and functions. Adjusted EBITDA of $85.6 million grew 9.8% over the prior year and adjusted EBITDA margins came in at 8.4%. Again, at a high level the cost pressures we absorbed in the quarter impacted EBITDA margins by over a full point. Despite the near-term challenges, our conviction around the scalability of the platform and ability to expand adjusted EBITDA margins over time remains intact. As you all know, our mantra is that revenue only counts if it hits the bank account and cash flow in the quarter was very strong. Cash flow from operations of $87 million drove an increase in our cash balances to more than a quarter billion dollars for the first time despite investing in Rochester Home Infusion in the quarter. We exited the quarter at a net debt to adjusted EBITDA ratio of 2.5 times and our capital structure has never been stronger. I wanted to add on to John's remarks regarding the strategic moves announced this morning. We're very excited to share the news regarding the acquisition of Rochester Home Infusion, which we believe is incredibly well-positioned in the Upper Midwest and complements our operations quite well. As disclosed, we paid $27.4 million in the quarter at roughly a low double-digit adjusted EBITDA multiple. And while we're not disclosing specifics on the Respiratory Therapy divestiture, we anticipate closing on that transaction in Q4 and the ongoing adjusted EBITDA impact from those two transactions will effectively be awash in the near-term. But I do think it's important to reiterate John's comment that we remain focused on our entire portfolio of assets to ensure we have the right capital invested in this platform. Finally, based on the third quarter results, we are tightening our expected financial results for the full year and slightly raising the midpoint of our expectations for adjusted EBITDA for the year, we now expect to generate revenue of $3.9 billion to $3.95 billion and adjusted EBITDA of $336 million to $341 million. We continue to expect that we will generate at least a quarter billion dollars of cash flow from operations for the year. Reflecting on our revised earning expectations, I think it's worth highlighting that despite unforeseen and continued inflationary pressures, we've raised the midpoint of our guidance range by more than $18 million relative to our initial range of $310 million to $330 million entering the year. So, overall, we anticipate finishing the year strong and delivering another productive year from the Option Care Health team. And with that, we'll open the call for Q&A.

Certainly. Our first question will come from Matt Larew of William Blair. Matt, your line is open.

Good morning, Mike. I’d like to start with your comments on inflation to understand where you might be experiencing worse conditions than expected. Is it a widespread issue, or are there specific areas improving? Additionally, how should we consider the timeline for these challenges as we move into 2023?

Thanks, Matt, and good morning. As we've mentioned frequently over the last few quarters, the battle against inflation is complex. We've been straightforward that some of the main challenges are related to clinical labor in our nursing and pharmacy departments. Crude oil affects our operations in various ways, including shipping and logistics for therapies, our compounding pharmacies, and the mileage we reimburse our clinical teams for daily. Additionally, the costs associated with medical plastics and supplies are a concern. There isn't a single category that has worsened significantly; rather, we've observed that building utilities, electricity, and natural gas have increased by double digits compared to Q4 of last year, along with many business services such as facility management and maintaining our fleet of over 40,000 infusion pumps. It’s more like a series of small challenges adding up. Looking ahead, while we cannot predict next year at this time, we agree that these costs are unlikely to decrease soon and are not just temporary. This reality drives our internal push for greater efficiency and productivity.

Okay, got it helpful. And then the top line obviously was strong again, and that a little bit bucked the trend from other providers in the space where maybe there's been lower referral volumes or lower hospital volumes cited. So, maybe just give us a sense of if you're sensing some share taking that maybe benefiting from competitors leaving the market in some acute markets, just maybe help us to understand the top line strength a little bit better?

Yes, Matt, it's John, good morning. Look, I think overall, we feel like we're really well-positioned to be that partner of choice for those health systems and especially in some of those markets where there was disruption and a little bit of shift in the competitive dynamics. I think as we went through the quarter, we found a better rhythm on that. Needless to say, there were some capacity constraints as we're building up our ability to take on additional patients. We always try to operate pretty efficiently and effectively. And that's part of the operational and business acumen of our team is adjusting around that and using the capacity where we could. So, look, we saw, I'd say better referral volumes in some of those markets and I think we were able to convert that over which added to the strength. But as I said, in my prepared remarks, it did put some strain on the system, as we were adjusting to some of that market dynamic, and I think also contributed to some of the cost structure just because we had to move things around as part of the workload balancing that we can do across our network based on the technology. So, all-in-all pleased about it; we think there is some share shift that was recognized in the third quarter and the focus of the team is always from a commercial standpoint, is around reach and frequency and making certain that we have those relationships to help support our health system and our prescriber partners, as they're looking for transitioning patients on the service. And I think we executed well, even though there were some strains that were caused by the workload that got shifted because of market dynamics.

All right. Thank you.

Thanks Matt.

Thanks Matt.

Our next question will come from Lisa Gill of JPMorgan. One moment Lisa.

Good morning. Okay, great. Thanks very much. Good morning. I just want to go back. You made a comment around three areas, you said repositioning, the hurricane, and inflationary pressures. You've talked about the inflationary pressures. Is there a way to quantify the impact from the hurricane in the quarter whether it's to revenue or operating profit?

Yes, Lisa, there was definitely some disruption during the period. I want to highlight the excellent efforts of our team. We had to prepare in advance to ensure our patients had the necessary medicines and supplies to get through the emergency, especially since many relocated away from the coast. We worked hard to ensure we were well-prepared to serve our patients during that time. The long-term effects in Southwest Florida, as seen in videos and on television, will have some moderate impact on the care delivery model in that region. However, it’s challenging for us to quantify those effects. Mike, do you have anything else to add?

Yes, John. Hey, Lisa, the only thing I would say is look that, Ian hit later in the third quarter, but as John mentioned, we're maniacal about making sure we know where our patients are and whether they have the supplies and the therapies. And so there was some inefficiency and some spike later in September, I'd say in the third and fourth week, as we tried to compound ahead. We have compounding pharmacies in Fort Myers and Tampa, and we wanted to make sure that we were shifting production. I think that speaks to the resiliency of our model. But there was some disruption in referrals and in costs, which were always going to put patient care above everything else.

Great. And then just a quick follow-up, you talked about Rochester Home Infusion, you talked about low double-digit EBITDA multiple that you paid for it, but can you help us to maybe understand what types of services this business provides? Is there any way to break down between acute and chronic? Is there new functionality you're going to get? Any other incremental details that you think would be important for us to understand around that acquisition?

Yes, we're very enthusiastic about this. As we've indicated regarding our approach to mergers and acquisitions, we plan to be very careful as we consider other infusion assets to ensure they align strategically and are economically viable. We're not only focusing on competitors in the same metropolitan area. Rochester is quite distinctive; they have a solid presence in Rochester, Minnesota. There are a couple of well-known health systems in that region, where their focus is strong. Additionally, they have a significant influence across the Upper Midwest, including Wisconsin, Minnesota, and Iowa, leveraging their relationship management within the health system alongside our infrastructure, technology, and procurement. We view this as an outstanding opportunity to expand our operational reach with what we consider to be a strategically well-placed operator within a somewhat limited geographic area. However, their connections in that region are very complementary to our commercial initiatives.

Yes, the only other thing I'd add to that Lisa is look, when you have that depth of a relationship, and certainly with some of the health care providers in that marketplace, there is a traveling aspect for many of their patients. And the ability for us to service with our national network as they're discharged back home to their local communities, the Option Care Health network just fits really well within that service model as well. The mix of business, I think, is in alignment with our standard book between acute and chronic. But it was really the depth of the relationship and the presence that they had in the market that I think was really intriguing, as well as, I think a really strong cultural fit putting the patient at the center of everything that they do and developing those deep relationships with the referral sources in their community.

Great. Thanks for the comments, and congratulations on another solid quarter.

Thanks, Lisa.

Thank you.

And our next question will come from David MacDonald of Truist. Your line is open, David.

Yes. Good morning, guys. Couple questions. You guys mentioned 23% of the nursing visits being through the ambulatory infusion suite, can you give us a percentage sense of what is that percentage amongst new patients that are coming on? And then can you also talk about just the importance of that setting as new products come to market? I mean, I'm thinking about potentially, eventually something around the Alzheimer's area. If there's something on the reimbursement side, we'll work out, just how you guys think about the importance of that, and how leverageable that is with payers and manufacturers as new products come to market?

Good morning, Dave. It's Mike. I'll start with the straightforward question and then pass it to John for the second one. We’re really excited about our expanded footprint. We opened an additional four centers in the quarter, and as John mentioned, we are on track to launch 25 new centers. Earlier this year, we discussed our nursing visits being around 20% to 21% at the center. In the third quarter, we noticed some progress there. It's worth noting that this is primarily among our more ambulatory patients, as we usually see a greater penetration with chronic conditions. A significant part of our approach involves engaging with patients upfront, ensuring our facilities are convenient and visually appealing to fit their lifestyles. This enables us to have more discussions as we continue to open new centers. In short, we are experiencing significantly more traction, particularly with some of our newer chronic patients. This is especially true when we can provide them with a convenient alternative. Our patient satisfaction levels in our centers are as high, if not higher, than those at home. We are truly excited about this progress and anticipate it continuing in the future.

Yes, David, this is part of our overall strategy. We view this platform as a way to enhance our capacity to assist biopharma companies and patients more broadly in the market. We are constantly exploring opportunities to broaden our product offerings, whether through the limited distribution drugs we have access to or by partnering with biopharma in introducing new products or enhancing marketing efforts for existing ones. This platform facilitates that. As Mike mentioned, our expansion is focused on deeply penetrating markets to provide convenience for patients, particularly those with chronic conditions who are engaging in daily activities, going to work, and participating in their communities. Having a convenient and efficient place for care is crucial. Furthermore, there are promising new products on the horizon for conditions like Alzheimer's and others, and the infrastructure we are building and the facilities we operate position us well to serve that patient group, assuming there are approvals and payment pathways. While there are many uncertainties in this journey, we believe our investments will keep us well-positioned as the preferred partner for biopharma manufacturers and prescribers seeking solutions to support their patient populations.

Okay, and guys, just two other quick questions. I don't know if you want to get into this level of detail, but just on the acute side. Can you give us a sense in terms of just the impact of some of the competitors moving markets? If you think about kind of mid-single-digit growth? I mean, was this enough that it contributed a point or two? Or is it more around the edges? And would you expect to kind of continue to see opportunities to pick up share in some of these markets? As you know, potentially some competitors exit?

I would describe it as a marginal benefit. We have clearly stated that our strategy focuses on the breadth of both acute and chronic portfolios, which we believe is a winning approach for us moving forward. However, the acute business is challenging, as we need to be responsive to our health system partners many times a day, and that requires investment. We've been transparent about our investments over the years to ensure we have a strong and reliable platform. There's no metropolitan area where we face just one or two competitors; every market is competitive, and the current environment is tough due to inflation and labor availability. We're not specifically tracking our performance against a couple of others, but we feel confident in our reliability across the market. Every market remains competitive, which we believe will benefit us in the future. I would agree that it was a solid quarter with mid-single-digit growth, and we've acknowledged our perspective of low single-digit growth for this portfolio in the medium term. We're optimistic about our near-term execution. Can you discuss the potential benefits of TouchPoint in terms of data capture and how that might be advantageous not only for your team but also in building relationships with your payers and sharing information with them? Yes, Dave, look, we're really excited about the progress and the fact that we've gotten to this point in our development plan and roadmap that we had laid out. Look, we have always focused on data. As an organization when you think about what we're capturing on the patients that we have the privilege to serve, it is of really important value as we see it. The TouchPoint tool is just going to enable that even more. And as part of our overall digital strategy of digitizing the care plan and every interaction that we have, and then being able to put that into structured data that we can utilize to interrogate and to identify opportunities for us to improve clinical protocols for us to make certain that we're driving superior clinical outcomes, and then be able to share it with partners, whether in biopharma with the identified data set or with prescribers, or with payers as we move that forward. And so this allows us to have a much greater opportunity to collect data on a longitudinal basis; it allows us to have a much more direct and intimate relationship with the patient base; it allows us to have secure two-way communication between our clinicians and our patients that we're serving through that process. So, we're really excited about it. Look, it's early stage. But when you think about capturing social determinants of health, and you think about all of the other components that we have a privileged insight, given the fact that we have a depth of relationship, whether in the home or one of our infusion suite, given the amount of time that we spend with the patient. We are really excited about this next phase and the potential that this platform will bring for us to enhance the already rich data set that we're collecting today.

Okay. Thanks very much, guys.

Thanks, Dave.

And our next question will come from Kieran Ryan of Deutsche Bank. Kieran, your line is open.

This is Kieran on for Pito. How's it going?

Hey, Kieran.

First, I just wanted to get your thoughts on the implied 4Q revenues; on a sequential basis, it seems a little wide versus kind of what you've done over the last couple of years as far as the step up from 3Q to 4Q. So, I was wondering if you could kind of just talk about what would drive revenues to be flattish sequentially.

I think we've provided a reasonable and prudent range, considering some challenges. Our guidance suggests a typical step-up from Q3 to Q4, which is common in this business. With solid performance in the third quarter, we aren't indicating any slowdown in the business. We expect to maintain productive revenue growth as we move into the fourth quarter, though it may appear a bit more modest due to the third quarter's performance.

Okay. Okay, got it. And then so I guess if you're seeing revenues flat, maybe slightly up, then. you talked about a few of these inflation and other cost pressures. It sounds like they're not necessarily supposed to get worse from 3Q to 4Q. But since the revenue growth isn't huge, can you talk about what would be driving the 50 basis points of margin expansion from 3Q to 4Q? Then is there anything like rolling off there sequentially or?

There's no real items in Q3, in terms of comparability, as you, as you imply, we're obviously based on our implied ranges, we are anticipating a modest EBITDA margin expansion from Q3 to Q4. And I think it just really comes back to the fact that look with some additional revenue, and given our focus on productivity and cost containment, again, I don't think that we're expecting the inflationary pressures to subside. I would correlate that to our focus on just continuing to drive productivity and profitability going into the fourth quarter.

Okay. Thank you so much.

Thanks, Kieran.

And our next question will come from Joanna Gajuk of Bank of America. Your line is open. Joanna, your line is open.

Good morning. I hope you're doing well. I wanted to follow up on the discussion regarding staffing and labor. Are you noticing any improvements in that area? It seems like you've grouped all inflationary pressures together, which appear to be somewhat higher than your earlier expectations. Can we specifically discuss labor? Is there any easing or acceleration in difficulties? Additionally, are you experiencing issues with staffing to accommodate patients? You haven't mentioned that yet, and I would appreciate your insights. Thank you.

Yes, Joanna, it's John. Look, it's a tough market out there for labor across all of the different job categories that we have, as part of our team. I would say that the pressures remain there, I think the team has done a really good job in recruiting; we continue to see really strong results in our recruiting efforts through that process, the areas that are a little bit more constrained are certainly in the nursing and the pharmacy technician area. And we've got a lot of work underway to make certain that time to fill is in an adequate range as we go through that. To your question, look, we liked the model that we operate, especially in the nursing that gives us some flexibility with our full-time, part-time, and per diem structure and utilizing our nursing network with the Infinity and Spin acquisitions that we did. So, we are able to flex really well to meet the demand in the marketplace. Given some of the market disruption, there were some near-term challenges that we felt just because we don't run heavy. As an organization, we operate pretty efficiently around our staffing models and making certain that we're matching capacity to where demand was when there was some market disruption. The ability for us to ramp up takes a bit of time, especially in the operations perspective, when you bring in people and you've got to onboard them, train them to your policies and procedures, and make certain that they are certified to be able to operate within our environment. So, there's a little bit of lag there. And so, I think the team has done a fantastic job of responding to that and I don't see anything that is over the midterm, an overall concern other than just look, their wages and labor pressures, we think are going to be persistent. And we're doing everything we can to focus around making certain that we have the right team members in place, but also focused around productivity and efficiency of the resources that we have.

Great, thank you. Regarding your follow-up, you mentioned gaining traction with your payers. Is there any way to share if there's an acceleration in your pricing moving forward?

Yes. I would describe the situation as such: no one is approaching us with offers to increase reimbursement, but our market access team maintains strong relationships with over 800 payers and manages 1,400 contracts. There have been instances where we have modernized some of the reimbursement rates for nursing and per diem due to the pressures we are experiencing. Our aim is to ensure that we can provide access to their members and receive fair compensation for the value we deliver. While I don't want to suggest that we can simply impose prices, we are engaging in constructive discussions and partnerships in various areas. It seems that there is a growing recognition that to provide high-quality care, increasing costs must be addressed, leading to a greater willingness to discuss and help us update some of the necessary rates to continue supporting their members. We have explained before that our reimbursement comes from three areas: drugs, clinical per diem, and nursing rates. We consider these elements together, ensuring they are in balance as we manage our business. We adopt a practical approach by examining the overall economics of each contract and identifying where rate adjustments are needed. We will address these matters in a formal and disciplined manner.

Just to close it off, so we don't want to staffing and pricing. And I understand you're not providing guidance for next year. Not at this point. But any other considerations we should be thinking about, as we think about the next year, when it comes to headwinds and tailwinds?

Yes, look, Joanna, as you mentioned, we're just not in a position to share any thoughts, we'll obviously do that in late February when we come back with the fourth quarter call. We're assessing quite a few variables going into next year. So it's not in a position to unpack anything at this point.

Okay. I understand. And I guess just one last one, I guess in terms of the stake that Walgreens has, I don't know whether you can share any views around their plans around it, and kind of how you view their potential investment in the company and going forward? Thank you.

Yes, Joanna, as you can imagine, we're not in a position that's their stake, I'd refer you to John and the team over there. Obviously, we are not in a position to share anything regarding their intentions on their remaining stake.

One moment. And our next question will come from Jamie Perse of Goldman Sachs. Jamie, your line is open.

Hey, good morning, guys. I wanted to follow up first, on the acute side. I think some of the facility closings and operation closings are pretty late in the quarter. I'm sure, there's a wind-down period, but just any comments on whether you saw the impact of share gains and acute, across the quarter or just any timing comments there or if there's shares gains might still be ahead of us.

Yes, Jamie. Good morning, it's Mike. Look, I'd caution to directly link the mid-single-digits solely to repositioning by others. Again, as I mentioned, every market is quite dynamic. We see repositioning every quarter. We see folks entering and consolidating. We see some folks, as we've seen around midyear where they've closed down some of the pharmacies. And so, again, there's no market where we're disproportionately benefiting because of a position because there's multiple providers in every single market that we operate. And so look, we saw a number of moves throughout the quarter. We saw some folks making moves as early as the late second quarter. And again, not to try to be a little bit elusive, but really our focus is just on being reliable and collaborative with the health systems, whether it's new patients coming on service, or transitioning patients where they receive notice that provider is no longer willing and able to support them. So I wouldn't make it directly just to a couple of moves from other participants or try to map it out in one month or another.

Okay. Thank you. And then we've just seen utilization across healthcare a little bit subdued in the third quarter, some are calling out vacations or various challenges across healthcare. Can you comment on the seasonality you saw for chronic new patient referrals, if it was in line with historical trends, or any more seasonality that you might have seen this year?

Yes, Jamie. It’s John. Look, as you see the tea leaves as we do, look, I'll start with the acute side, hospital admissions and utilization was lower. I do think, again, that kind of speaks a little bit to your last question around our team really focusing around reach and frequency and making certain that we are a Partner of Choice to be able to capture the demand that is in the marketplace to on that. And so I think it was subdued, as you said. I'd say from the chronic standpoint, I'd say similar trends; we saw, I guess, new patients, let's call it naive patients coming on service with us probably in alignment with our expectations, but I'd say it's a little bit lower than where the historical trends have had been on that. And I think everyone's trying to understand what's going on kind of across utilization across the board from the payers to the providers through that process. But I think we'll see the trend just continue as we're not seeing significant changes in either direction around the quantity of patients that we're seeing through the referral process.

Okay. Great. And then last quick one, I can you size STELARA within the portfolio, and others lots of exclusivity coming next year for that asset. Just any color on size, and how to think about impact probably not too much in 2023, but potentially in 2024?

Yes, Jamie, it's Mike. As you know, we don't disclose specific therapies. What we have mentioned is that our largest therapy category, which is immunoglobulin, accounts for about 20% of our revenue. Chronic inflammatory therapies are significant but not as large. When you analyze that further, it spans various indications and therapies, including Remicade, STELARA, Inflectra, and Renflexis. As we've discussed, we take pride in our broad portfolio of therapies. We have a strong relationship with Janssen for STELARA, but I wouldn't describe it as an outsized risk to our revenue moving forward.

Okay. Thanks. Appreciate all the color.

Thanks, Jamie.

And one moment. And our next question will come from Michael Petusky of Barrington Research. Your line is open, Mike.

Good morning. I guess a couple of questions real quick on some forecasters are saying heavy flu winter possible; COVID spikes possibly. I'm just wondering, my instinct is that's probably cuts for you guys in a positive way. Even COVID with potential site of care shifts? I mean, can you just comment if we do see heavy flu or reemergence of COVID or COVID spikes in parts of the country, how you guys think that cuts for you? Thanks.

Yes. I think the ability for us to service patients in the home or in a dedicated infusion suite certainly had some benefits for those that are immunocompromised and don't want to be in a community setting to receive their care given influenza or other contagious diseases on that. So, look, I think we're well positioned with what we've done both in the expansion of our dedicated infusion suites as well as our ability to reach into the home. And so we think there are some positive aspects of that; again, we feel today, we felt through some of the changes in the healthcare delivery system with the impacts of COVID through that standpoint. It's hard to quantify, but I just say we normally see that as something that supports care in the home or in an isolated setting, as opposed to a community setting.

Thank you. I have a question regarding the federal government. There have been reports about an expanded standard tax deduction and Social Security benefits due to inflation. You've mentioned having positive discussions and renegotiations with commercial payers. Is there a possibility that the ongoing inflation could lead to a more logical reimbursement structure from the federal government, both in the short term and long term? Thank you.

Yes, it's unfortunately a typical response that I provide each quarter. We are doing everything possible to collaborate, both independently and with the national home infusion association, to encourage Congress to act on preserving patient access to the Home Infusion Act. A lot of behind-the-scenes work is taking place with bipartisan support to secure that legislative fix. However, there are many competing priorities in Washington right now, and it seems like everyone is waiting to see what the midterms will bring. We will continue to advocate for home infusion and strive to raise awareness about the challenges Medicare beneficiaries face under the current reimbursement structure. It's difficult to predict the outcome, and one can only hope that common sense prevails, but given the situation in Washington, there are many factors competing for attention.

So just a quick follow-up. So you don't feel like this sort of persisting inflation in any way to sort of move the needle any closer to some kind of rational reimbursement policy, is that fair?

I think that's fair. I mean, I think the merits of what we've been trying to do are the merits of what we've been trying to do; I don't think that the inflationary conversation does really anything to support that. There has to be a recognition of the deficit of access first and the fact that total cost of care would be reduced for Medicare beneficiaries if they utilize home or alternate site infusion therapy, as opposed to where those patients are receiving care today. So inflation is certainly an aspect of that. But there's just a fundamental misunderstanding within CMS around the value and virtues of the home as being a place of care for infusion services.

Got you. Thank you so much.

Yes. You're welcome.

And I am showing no further questions. I would now like to turn the conference to John Rademacher for closing remarks.

Yes. Thank you for attending our third quarter call this morning and for your interest in Option Care Health. As you heard, we had a very productive third quarter and we are confident in the strategy we are executing and the strength of the platform and our team. Take care and be well.

This concludes today's conference. Thank you for participating. You may now disconnect.