Q4 2023 Option Care Health Inc Earnings Call
Participants
Michael H. Shapiro; CFO; Option Care Health, Inc.
John Rademacher; President and CEO; Option Care Health, Inc.
Lisa Gill; Analyst; JPMorgan
Pito Chickering; Analyst; Deutsche Bank
Brian Tanquilut; Analyst; Jefferies
Matt Larew; Analyst; William Blair
David MacDonald; Analyst; Truist
Joanna Gajuk; Analyst; Bank of America
Jamie Perse; Analyst; Goldman Sachs
Michael Petusky; Analyst; Barrington Research
Presentation
Operator
Good day, and thank you for standing by, and welcome to the Option Care Health Fourth Quarter 2023 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 to ask a question. During the session, you will need to press star one one on your telephone You will then hear an automated message advising your hand is raised to withdraw your question, please press star one one again. Please be advised that today's conference it is being recorded I would now like to hand the conference over to your speaker today, Mike Shapiro, Chief Financial Officer. Please go ahead.
Michael H. 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, and 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. And 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 Ridemakerz, Chief Executive Officer.
John Rademacher
Thanks, Mike, and good morning, everyone.
To say that 2023 was an eventful year for Option Care Health is quite the understatement. It was a dynamic year for the team and we advanced our mission to set the pace in home and alternate site infusion care and treat more patients by providing innovative services designed to improve outcomes, reduce costs and deliver hope for our patients and their families.
In 2023, we treated more than 270,000 distinct patients and expanded our portfolio of life-saving therapies through our collaboration with referral sources, payers and biopharma partners. As always, Mike will dive into the financials in a few minutes, but it could not be more pleased with the effort, dedication and results generated by devoted colleagues that option Carecast. For the full year, we delivered a revenue of $4.3 billion, representing 9.1% growth over the prior year.
Adjusted EBITDA of $425 million, representing 24% growth over 2022 and significantly exceeded the initial expectations we articulated in early [2020] since the merger in August of 2019, the Option Care Health team has consistently delivered solid growth and met or exceeded our commitments to our shareholders, reflecting back on 2023.
Beyond the solid financial results, I'd like to highlight a number of key accomplishments and milestones. In the second quarter. We launched naviHealth, one of the largest infusion nursing platforms in the industry comprised of more than 1,500 clinical projects. Nuvion is a critical component in our mission to serve more patients and strategically, the platform is vital to our continued success. We continue to invest in our ambulatory infusion suites footprint.
And in 2023, we expanded our network to 164 suites and over 660 carriers nationwide. Again, this is a key investment strategy designed to enable continued growth while unlocking clinical labor efficiency. We advanced our use of advanced analytics and repetitive process automation within our pharmacy and revenue cycle management operations to reduce waste and improve cash velocity.
We also recently announced our multiyear collaboration with talent here to deploy their artificial intelligence technology across our operations to drive efficiencies and improve the patient experience. We launched a number of new therapies in 2023 through our collaborations with biopharma, including by V with Gart biopsy and CCAvenue, but to name a few, we believe our integrated national network of state-of-the-art pharmacies and expanded number of infusion suites combined with the clinical know-how and our leading technology platform continues to resonate with the biopharma partners and positions us well to continually expand our portfolio.
Every member of the Option Care Health team understands that behind every dose is a local and behind the scenes is a comprehensive team of pharmacists, pharmacy technicians, dietitians, infusion nurses, patient support professionals and supply chain experts. Their focus dedication and collaboration help ensure that we deliver unparalleled care in the comfort and convenience of our patients' homes for one of our infusions making certain we are an employer of choice and a destination for health care professionals is also critical to our continued success in 2023.
we were thrilled to have earned the designation of the gallop exceptional workplace and a Military Friendly Employer. These recognitions affirm our relentless focus on recruiting our team every day and delivering extraordinary care to our patients. As the old saying goes, you can do well by doing good. And we believe that our financial results for 2023 demonstrate that we are doing just exiting 2023. Our balance sheet has never been stronger and our liquidity position is in great shape.
During 2023, both S&P and Moody's upgraded our credit profile to the highest ratings yet our net debt leverage profile is well under two times, and we generated more than $370 million in operating cash flow in 2023 and deployed $250 million towards the share repurchase. So reflecting on 2023, we continued to deliver strong growth while investing in this unique platform and our capabilities to enable sustainable growth.
As we outlined in our 2024 guidance this morning. We expect to continue this trend of delivering strong financial performance as we grow and serve more patients. I've never been prouder of the Option Care Health team and the level of service that we deliver to our patients every single day, and I remain confident in the road ahead.
With that, Mike will provide additional color on the results.Mike
Michael H. Shapiro
Thanks and good morning, everyone. As John mentioned, we're quite encouraged by the solid finish to 2023 fourth quarter revenue of $124 million, representing 9.5% growth over Q4 of 2022. Performance was solid across the portfolio, and execution in the field was very strong. Full year revenue of just over $4.3 billion was up 9.1% despite a number of headwinds we've talked about throughout last year, including two exited therapies and the impact of the divested respiratory therapy assets. So overall, we're quite pleased with the top line performance. Q4 gross margin of 22% represented dollar growth of 6.9% as we saw some mix shift impact towards the chronic portfolio as well as a smaller procurement benefit in the quarter.
In recent quarters, I've spoken about the favorable procurement dynamic that persisted in 2023 and in Q4, we estimate we realized approximately $8 million benefit related to the dynamic for the year. We estimate that we realized $33 million to $35 million of these transitory procurement benefits, which we believe will not continue into 2024.
Sg&a of $147.8 million actually declined versus Q4 of 2022 and spending leverage improved to 13.1% of revenue, which we believe affirms the scalability of the platform and adjusted EBITDA of $111.6 million in Q4 representing 9.9% of revenue and was up 18.4% over the prior year.
Again, Q4 adjusted EBITDA included roughly an $8 million procurement benefit. beyond the P&L. We generated more than $370 million of cash flow from operations for the year, which again includes approximately $85 million from the Emeritus transaction termination fee net of related expenses. During the year, we deployed $250 million towards share repurchases and still finished the year with approximately $344 million of cash on hand and a net leverage ratio of 1.8 times.
This is the 5th year end that we have reported as Option Care Health and reflecting back to 2019 when we completed the merger, we socialized the combined enterprise at the time is generating roughly $2.7 billion in revenue and roughly $200 million in pro forma adjusted EBITDA four years later, we've increased revenue by 50% to $4.3 billion and more than doubled adjusted EBITDA to $425 million.
We've also driven dramatic improvements in our balance sheet reduced the leverage profile by more than two thirds from 6.2 times to 1.8 times and slashed net interest expense by more than half from $110 million to $51 million. And while we're proud of how far we've come, we're equally excited about the road ahead.
As disclosed in this morning's press release, we anticipate delivering another year of solid growth for our shareholders. In 2024, we expect to generate revenue of $4.6 billion to $4.8 billion. We expect to generate adjusted EBITDA of $425 million to $450 million, and we expect to generate cash flow from operations of at least $300 million to provide some additional data points.
We expect net interest expense of $55 million to $60 million, approximately $45 million in stock comp expense and an effective tax rate of 26% to 28%. So overall, 2023 was a very productive year, and we expect to continue our track record of leverage growth into 2024. With that, we're happy to take your question. Operator.
Question and Answer Session
Operator
As a reminder and ask a question, please press star one one on your telephone and wait for your name to be announced to withdraw your question, please press star one. Once again, please stand by while we compile the Q&A roster.
Our first question comes from Lisa Gill with JPMorgan. Your line is now.
Lisa Gill
Thanks very much and good morning and congratulations. Just really want to understand a couple of things a little bit better as we think about 2024 and the first would be just the mix. So I think, Mike, you noted in the quarter a stronger growth in chronic versus acute, which had an impact on the mix. How do we think about mix going forward? Would be my first question.
And then secondly, as it plays into that, how do we think about the swing factor between the $425 million and for $450 million on the EBITDA line for guidance?
Michael H. Shapiro
Yes, good morning, Lisa. Maybe I'll give it a start here. Like I mean, as we've talked about consistently within our two portfolios of therapies, we see the growth trajectory of the chronic portfolio being in that low double digit ZIP code with the acute therapies being those those therapies are really a more mature category. That's growing in the low single digits. Having said that, obviously, during 2023 and 2022, there are some pretty interesting market dynamics with some competitive closures, which accelerated some of the reported acute growth.
I think as we're going into 2024 is absent any of those large shocks to the comparables are like the exit therapies we talked about I think we're back to what we see are the underlying therapy growth dynamics, which is to say we see that acute category growing in the low single digits. And at the other end of the barbell, the chronic therapies have grown low double digits, given the fact that the chronic, as we've talked about consistently carries a lower gross margin rate.
We would expect going forward that there's going to be some some mix shifts towards that lower chronic our therapy, profitable profitability profile. Having said that, obviously, you know, we fight for every every basis point and the way we really focuses on maximizing the the dollar growth and we're giving the I'd say about $425 million to $450 million. Look, there's a lot of dynamics.
Obviously, we have some some new emerging therapies that we're still ramping up on, given the fact that on the acute side, the duration of our therapy is from two to six weeks, we haven't met the majority of the acute patients that will have the privilege of treating this year. And so on and behind the scenes, there's always $1 million moving dynamics on that that we're trying to manage on the procurement and payer and and local competitive front. So I wouldn't I wouldn't attribute it anything more than just the typical volatility of the markets that we're operating at.
Lisa Gill
And then just last quarter, you talked about again strong cash flow and you've obviously just guided to strong cash flow of $300 million for 2024 for John, when we think about the strategy around acquisitions, I know last quarter you talked about look, there's kind of a sweet spot for us and tuck-in and some other things. But maybe can you just update us on how you're thinking about capital allocation and how you're thinking about any kind of potential strategy around acquisitions in '24?
John Rademacher
Yes, Lisa, good morning. We are continuing to do a lot of work to understand those market dynamics and what's the U.S. What's in the pipeline for consideration as we move forward. I think one of the biggest things Mike and I have talked about we talked about it on the last quarter call as well is being very disciplined in the approach that we take, we are looking at things both strategically and economically.
It must meet those of those hurdles on both and as we're looking at that and we're going to kiss a lot of frogs before we find a prince in that in that process. And we really pride ourselves in the discipline that we that we adhere to as we're looking at that there aren't many books that are out there that we don't get a look at. And we have been very active in our corporate development process and the ability to take a look at opportunities, but we apply that discipline and we're going to continue to do that as we've talked about before.
And as we outlined in the third quarter and the press release coming in the fourth quarter, we exhausted the $250 million of the original authorization. We have an additional offer that authorization of $250 million for share repurchase. We will continue to balance that priority of making certain that we're doing everything we can to maximize the value to our shareholders and whether that's through deployment for M&A or whether it's through continued share repurchase as well as from our our investments into our businesses, part of our normal flow of Capa CapEx, we will continue to balance across those dimensions and maximize the value for our shareholders.
Lisa Gill
I appreciate the comments.
John Rademacher
Thank you.
Operator
Pito Chickering with Deutsche Bank lines now.
Pito Chickering
Good morning, guys. Thanks for taking my questions. Just looking at the midpoint of '24 guidance, if we exclude the say at $34 million procurement benefits EBITDA guidance is a blended 20% growth. Are there any one-timers in next year we should be thinking of thinking about as we think about 2025 does e-procurement benefit this really stop on January first on the chronic side, what are the new other merchant therapies you just reference? Nor are there any therapies that we should be aware of for honor on the negative side. And on the chronic side, we saw pretty strong inpatient utilization in 2023 producing that continues into 2024.
Michael H. Shapiro
Thanks, Pito. While one question and 15 parts appreciate that.
Hey, listen, I look at the midpoint a good thing and I think you've heard this in some of our public comments. A good thing going into 2024. We don't have the prior year comp challenges, the exited respiratory therapy assets, the exited therapies. So I think the growth algorithm and this story is a lot cleaner and a lot more digestible for all of you to to get your hands on.
Naturally, the one thing I would say is look growth is going to be a little more muted in the first half, just given the fact that we did have some of those Makena and Rod cover revenue in the first half of the year. So but overall, I think it's just a much it's a much cleaner story going forward. So the short answer is no no big box cars on the track that you guys have tried to model with and without them.
John Rademacher
So yes, Pito, on the on on the chronic side and some of the therapies that we outlined, we continue to see strong progress from our commercial team our focus around reach and frequency and making certain that we are developing those relationships and deepening them with our referral sources continues to be a high priority and an execution path or the team.
We continue to see a focus by the payers around thinking about site of care and making certain that they're maximizing wherever they can achieve high-quality care at an appropriate cost in a setting in which patients want to receive it. So we think that the market dynamics will remain strong for us on that. And we're going to continue our execution path of being that partner of choice and being able to onboard those patients and continue to provide them them care.
And Peter, the only thing I'd add is looked at specific on your question around any positives negatives, look, there's always going to be some incremental therapies that we're looking at. I wouldn't say there's anything in the hopper that I would say, is a major needle mover in the 1st year. And on the negative side looking, we've had this conversation with folks repeatedly.
There's there. This is a dynamic marketplace, and there's always therapies that will be going subcutaneous that will have different delivery methodologies, and that's all something that we're never surprised by that. And that's fully accommodated in our guidance range.
Pito Chickering
Okay. Great. And then sort of you, John, a follow-up to the payer commentary. Are you seeing any different behavior from payers that own infusion companies, so CVS, Aetna or obviously United and our relevance with their infusion? Or have you seen any changes of how those referrals are changing now that there's maybe have to have their own their own options as well? So thanks so much.
Michael H. Shapiro
Yes, as we always have, we are vigorous competitors. And so we take all of that into a full full full view as we're approaching the marketplace. And one of the things that we bring to all of the payer community is that consistency of care. We've talked before about our ability on a national basis, both leverage our platform to provide that high consistency and high quality care, whether you're a patient in Portland, Oregon or Portland, Maine.
And so that ability that we have to provide a consistent, high quality care across the country is something that they seek. Our ability to be in-network with those payers is something that we work very hard to make certain that we achieve that were focusing around key areas of pharma, delivering high quality care of providing access to their members of driving high member satisfaction or patient satisfaction. When we have the opportunity to serve their members and so we will never discount, you know, the competitive dynamics that we operate within.
But on the other side of that, we provide a very valuable service, especially when you look at the breadth of the product that we can provide on both the acute and the chronic portfolio. And we will continue to foster those relationships and be a partner of choice for the plans as they're trying to find a place for their members to receive high-quality care.
Pito Chickering
Right. Thanks so much.
Michael H. Shapiro
Thanks, Peter, and thanks, Bill.
Operator
Thank you. One moment for our next question.
Our next question comes from Brian Tanquilut with Jefferies. Your line is now open.
Brian Tanquilut
Hey, good morning, guys. I guess my first question, maybe sort of a follow-up to Peter's question as we think about Mike, the and like the normalized growth rate going forward, obviously, there are a few moving parts for 2024. And how are you thinking about how investors should be modeling or thinking about your growth going forward and what the drive for those drivers should be?
Michael H. Shapiro
Yes, Brian, thanks for the question. Like the way we've consistently articulated. What we view is a reasonable way to think about the growth horsepower of this platform is we see this as a high single digit top line enterprise. That's on a broader market growth. And I know you have 15 people what they think the infusion markets grow and you'll get 20 answers. But as we look at the therapies in the areas of focus.
We see this industry growing in the mid-single digits, call it the 5% to 7%. We think with our unique platform and and competitive strengths, we think folks should expect us to consistently deliver in the high single digits on the top line, given the scalability of the platform and the investments we've made, we think we can consistently deliver leverage growth. And on an organic basis, that should manifest in low double digit earnings growth as kind of a our medium term growth outlook.
Brian Tanquilut
Got it. And then yes, during the quarter it's clear that the G&A line was very well managed as we think about that rate. I think some of that is probably the benefits from your infusion suite strategies. How should we be thinking about the remaining opportunity to open infusion suites into Boston, but the gross margin compression from just the growth in chronic?
Michael H. Shapiro
Yes. Look, I'll start and let John jump in like we fight for every dollar. And we always have and we always will come with the with the spending actually coming down versus the prior year. Admittedly, we did move some of the investments, some of some of the more discretionary investments on new programs earlier in the year as we knew that we had some some margin favorability of note in the fourth quarter that does have some year-over-year burden from the 20 or so infusion suites that we opened during the year.
And again, from a P&L geography, the cost of those facilities resides in SG&A, the rent, utilities, insurance, et cetera. The benefit through the the nursing leverage actually is in the gross margin line. So with the SG&A, as we reported, it has the gross increase from the infusion suite investment, but the benefit is actually north up in the up and the gross profit line.
So look, we're going to continue to drive leverage growth at the SG&A line and a lot of the results in the fourth quarter beyond some of the intra-year timing are that the efficiencies and as John mentioned, the investments and in technology and automation, which which has manifested in much more efficient spending.
John Rademacher
Yes. The only other thing I'd add, Brian, is on the infusion suite side continued really great progress by the team of opening the new facility. As you know, as we've talked before, we do a thorough analysis. When we're looking at the market, we look at density maps of patient subpopulations. And we're really selective in the way that we're looking at where we place them and how to utilize them.
In the quarter, about 30% of our nursing interventions were done in not in one of our infusion suites with that growing population of chronic patients as well as our ability to serve some of the acute patients that may need a dressing change or a lab draw or those types of things. We're going to continue to maximize that as we move forward.
So as we built out the network, we're getting closer and closer to not having the full sum this that we are that we want there will continue to make investments on that, but I wouldn't set the stage that that may start to slow as we are then utilizing and optimizing the infrastructure that we have. We added over our almost 100 chairs and over the year. And so now the trick for the team is really focused around the execution of utilizing capacity that we have there as we continue to build out probably at a bit slower pace than what you've seen over 22 and 23
Brian Tanquilut
U.S. I'm thinking of getting spring front.
Operator
Thank you. One moment for our next question.
Our next question comes from Matt Larew with William Blair. Your line is now open.
Matt Larew
Good morning. And just wanted to ask about kind of the other piece of the gross profit line beyond procurement, which would be labor costs and maybe a sense for what your expectations are 2024 and sort of within that question, maybe an update on how Nathan helps it's helping you better manage your labor needs.
Michael H. Shapiro
Hey, good morning, Matt. Look, it's we've tried to be as transparent as possible. And again, this isn't binary in the fourth quarter as expected. We saw that transitory situation that we tried to be as open as we could. From a competitive perspective, it pretty much dissipated down to nothing by the end of the fourth quarter. And so but in that it was real. It was a great it was a great milestone for our procurement team who we think are the best in the business.
And well, you know, part of it is you know our direct relationship with manufacturers and biopharm that John talked about in the prepared remarks. Going forward, we're always looking for coins in the sofa cushions and the procurement team is constantly looking. And as we've said, there's always procurement puts and takes it typically nets in a typical year to a modest tailwind well below the numbers we talked about in 2023.
And I think that's kind of how we're expecting 2024 to shape up. So I mean, we it was great while it lasted it manifested in real earnings and cash in the bank and the team gets knocked us off and looks for those next opportunities.
John Rademacher
Yes, Matt, it's John. On the uneven standpoint, again, continued really great progress from that platform standpoint, we've made investments into the technology that continues into 2024. We're really excited about some of the efficiencies and effectiveness that that can help to maximize the capacity and the utilization of that to that workforce to support not only Option Care Health, but other market participants from that platform.
And that has been part of our overall growth story is the ability to have access to highly qualified nurses to be able to oversee the infusions and oversee the care for our patients is something that it enables us to continue to grow. So a lot of focus not only internally on Option Care Health around recruiting our team members every day of recruiting and creating a great place to work. But then also the investments that we're making in need and will allow us to have that additional capacity and that additional growth driver for us as we move ahead.
I had a question that has been asked before it got from a turnover. And from that standpoint, just across the board, we have seen a significant improvement really from 22 as we exited 23 around, you know, our retention rates and U.S. and reducing of overall turnover. We do a lot of work to focus around the employee value proposition, and we have a really great dedicated team of HR professionals that are thinking about what are the Total Rewards and what are the type of programs to not only invest in our people to help them develop and grow in their roles and responsibilities, but also on the culture and those aspects that make it a great place to work.
So as I announced in my prepared remarks, really excited about some of the designations that we were awarded in 2023. And we know that as much as we invest into our technology. We are a people business. We need highly skilled clinicians and we need highly skilled professionals across our organization. And that will continue to be a top priority for me and the leadership team to make certain we're doing everything we can to be an employer of choice.
Matt Larew
Okay, thank you. And then the follow-up is on G&A and obviously down nearly $10 million sequentially in the fourth quarter and down year over year. I just want to make sure we have the right sort of jumping off point, if there were any one-time benefits in that quarter, if there's anything from the fourth quarter to the first quarter with respect to incentive comp reset or other dynamics. And we've kind of given us the procurement piece on the gross margin line but anything to think about as we model out G&A for the
Michael H. Shapiro
year, you're not and not so much, Matt, it's a good question. You know, some of it has to do more with the fourth quarter of 2022 to remember, we had a respiratory therapy business that did have some SG&A burden. You know that that obviously went away as we rightsized from that we scaled a little bit and shifted some dollars after we exited a couple of our therapies. But for the most part, I think it's a pretty clean jump up.
Matt Larew
Okay.
Michael H. Shapiro
Thanks, Matt.
Operator
David MacDonald with Truist your lines now.
David MacDonald
Hey, guys, good morning and congrats for this expedite pulled back from that, but I'm just two quick questions I wanted to ask about just the durability of profitability improvement given kind of the ongoing growth in chronic relative to acute. Sounds like you guys aren't expecting anything meaningful in terms of percentage growth or between products in 2024.
I was wondering if you can talk about the ambulatory infusion suite footprint and as that matures is your labor productivity are improving from either increased utilization of existing earnings. It's the maturation issue that you guys have kind of talked about at roughly 10% lift historically a bill and that presumably just wondering if you could comment on that.
John Rademacher
Yes. They've been more has had listened, as we've talked about, and we always get challenged a little bit around, hey, 10% labor productivity for these investment teams, you know, seems a little conservative. Just just a quick reminder. We've really only started our our infusion suite aggressive expansion strategy. We've been at it for just or just a hair over two years. And so we're seeing in some of those more mature centers, labor product, clinical labor, productivity of 20% or more.
Again, we're not paying for windshield time with many therapies we can infused concurrently. And so those later tranches or the earlier tranches, which are really only around two years old. We're still ascending to cruising altitude, and we still have capacity in those centers remarkably. And so the ultimate target for how we think about those from unlocking labor productivity, which not only helps our margins, but also obviously creating 10% to 20% more nursing labor units.
That's why you hear us talking so much about about the strategy and I would just finish up, look, it not only does it help us from an economies of scale, but it helps us from an economies of scope because as we think about other therapies like infusible that require healthcare professional oversight, utilizing those as a strategic platform to think about therapies that frankly, you wouldn't send a nurse for hours in the car to to administer all of a sudden clinically and economically are viable in the suites. And that's something that's helped us from a portfolio management perspective.
Michael H. Shapiro
Yes. The only other thing I'd add to that, Dave is certainly along the questions that you asked for the infusion suite and utilization and helping to drive that. We also focus a lot around just the productivity of our entire labor force, right? So we're always working through and looking for ability to drive that productivity and efficiency across the platform. And we talked before about some of the U.S. deployments of the technology, both in the prepared remarks, but in previous calls, comments around repetitive process automation and efficiencies up to really help our teams take some of the more routine and road aspects out and drive higher productivity and efficiency across the platform. And we'll continue to focus on that in 24.
But we believe there's still opportunities for us to drive those operating efficiencies. And with every deployment of technology or the releases that our technology team has, it's putting into the environment and we're looking for ways to to maximize the the licensure of our workforce of the capabilities and capacity of the workforce. And we'll continue to do that unrelenting because we know there's opportunities to take cost and waste out of the process.
David MacDonald
And then guys, I guess just to follow up on the ambulatory infusion suite, is there a specific timing breakpoint, you know, let's say, 12 months, 18 months before you start to see it at 10% lift are to drift higher towards the 20? And then it sounds like you've obviously have meaningfully expanded the footprint over the last couple of years as it sounds like that's slowed a touch. You guys digest more of these. Is there any reason to think at the overall book just because you'll have fewer new starts so to speak, shouldn't continue to lift higher in terms of nursing productivity?
Michael H. Shapiro
Yes. I mean, we look we have a very disciplined model with expectations on utilization and adoption. That's one of the reasons why we don't just go out and open 600 of these overnight because as we're being rather surgical and methodical and local ops and commercial leadership are held accountable to fill the centers. And so what we've said is typically by the first anniversary on average, these are breaking even so the nurse productivity covers the cost of rent insurance utilities and just operating costs.
And typically, you know, by that 18 to 24 months, they're they're generating a net 10% profit. We've had some that have have moved faster, but we we make sure they're there following the expected trajectory. And so I'd say conservatively you of somewhere after the second anniversary. And again, it's not a it's not an exact science on those are going to be close to that 20% productivity uplift.
The great thing is, as John highlighted, we open 20 new centers in 2023. We still have a tremendous amount of proof of capacity within the roughly 170 centers we have across the country. And so it's not as our ability to drive leverage and value from these is it necessarily corresponding to how many are reopening every single quarter to now that we have a truly national network of 170 centers across the country, how do we also continue to drive utilization within the existing footprint.
And so I think that at some point, we'll hit a point where we feel good, but we're not capital constrained. And if we see an opportunity, local market will be very quick to open an additional center.
David MacDonald
And then guys, just last question. You mentioned earlier this kind of conversations with players. I'm curious in those conversations, we've seen a willingness by the payers to put a little bit more teeth around site of service redirection, whether that's plan design or whatever on with regards to the regulatory infusion suite, is there an opportunity? I mean, you talked about other services outside of confusion, but was there an opportunity and an appetite for potentially some non infused products, maybe some injectables where there's interesting component? Just any color there would be helpful.
John Rademacher
Yes, Dave. So the conversations that we've had and continue to have with the payer community around site of carry. I would I would say there's a broad range of those conversations. We are seeing certain circumstances where some of the payers are directing with a little bit more heavy hand and the utilization of these lower sites or lower costs of sites of care and and putting that into the way that they're up, they're managing their membership.
I wouldn't say that widespread across the entire industry, but we are starting to see that uptake in local pockets or some of the more regional players on that. So we're trying to stay ahead of that. We are in active conversations and we believe that with some of the focused around medical loss ratios, especially in some of the capitated programs that the payers are dealing with.
We offer a really valuable solution to them of offering that high-quality care at a more appropriate cost than some of the other settings in which the patients could receive it. So we expect that that will be an impetus for us to have those conversations. And we're going to continue to talk about the values and the virtue that we can bring to them through that process.
And the second part of your question, we are doing that today, Dave, where again, we take a look at the portfolio within the infusion suite itself, where there are either products that may not be infused, but they may be injectables that require a health care professional oversight. We are doing those in in the infusion suite. One of the products I called out that Kevin NuVa is a part of that really fits within that, that category that requires that HCP. two to provide that oversight.
And we'll continue to look for those opportunities and continue to partner upstream with biopharma as being a channel partner for those type of products as well as continue to discuss the the the cost value of being able to provide care to their members to the payers and why they should help to choose that as a site of care as they're moving forward.
David MacDonald
Yes, John, the better way to ask that would have been just in terms of the growth around that end of the non infused products, are you seeing any kind of meaningful on acceleration, increased acknowledgment of the services that you guys provide, increased appetite for manufacturers, et cetera?
John Rademacher
It's incorporated in the guidance that we provided. I mean, we've there are some positive aspects of that. But nothing that I'd say is a is a major needle mover on that are disproportionate, but we're going to continue to look for every opportunity we can to, as Mike said, build the chairs and utilize the capacity that we have in an efficient and effective way.
David MacDonald
That's very much.
John Rademacher
Thanks.
Operator
Joanna Gajuk with Bank of America. Your line is now.
Joanna Gajuk
Hi, good morning. Thanks so much for taking the questions. So I guess first on the follow-up, just to clarify, as you said, the procurement benefit was some $8 million sort of sounds like maybe a little bit less than what you were expecting. So like I saw, is that right? And then was that and also, can you remind us what was it for the full year? And also with that, the source rock is zero benefit in January or in Q1?
Michael H. Shapiro
Good morning, Joanna. Yes, it's Mike. Yes. So we in my prepared remarks, I mentioned that we estimate and again, this isn't an exact science because you have moving patient census. It's multiple codes across a number of different payers. Some that are ASP., some that are AWP., but to the best of our estimation, we estimate that we had approximately $8 million of benefit in the quarter and so on our best estimate is when you when you look in the $425 million that we reported there's roughly $33 million to $35 million of total benefit.
Again, it doesn't show up the first day of a quarter doesn't go away the last day of the quarter. And so it really dissipated throughout Q4 as we had expected. And so I think as we talked about on our third quarter call, I think our commentary that you're using you roughly at three 90 jump-off point. Normalizing for those transitionary benefits is a logical a baseline. There are no benefits going into it. Specific to this situation. There is there are no benefits going into 2024. So it's a it will be a clean break.
Joanna Gajuk
Great. Thank you for that. And I guess it's somewhat related because you mentioned right of the 24, it's more of a normalized year. You don't have any major headwinds or tailwinds that you had in 23. Because on one hand, you you exit a business and there were some therapies going way, but then you have this benefit from procurement, but 24, maybe not.
But I guess the sort of couple of things, I guess going a going on in the markets are like there's a biosimilar, I guess, for one of the infusions to sharply on coming to the market. So I guess how meaningful this could be or maybe that's just a wash because maybe there's new therapies coming in and I guess NPV accretive to a data on those until the makers of those structures work in a subcutaneous formulation, mainly those are not coming 24 maybe later.
But I guess as it relates to our subcutaneous on kind of what do you expect the launches to actually happen and how would this impact your business and to the point? And last point you were making around a suite and using dose for injectables. Is this something that you would have the interior and curriculum example, it's a continuous battle formulations being utilized in both location. Thank you.
Michael H. Shapiro
Yes, Joe, I know look, the one thing that we tried to underscore as we engage with investors is this is a very dynamic marketplace. It is not a static portfolio of therapies. And if you look at what we will infuse and inject into that our patients in 2024. It's markedly different than it was five years ago and is probably markedly different than what it will be five years from now, our business development team. Again, we have very direct lines into manufacturers.
Nothing comes to market, no new administration method. No filing is hitting that. That is of a major surprise to us. And so as we look whether it's two months or 20 months out, we're constantly trying to anticipate the dynamics in the marketplace. And so a lot of the manufacturers, you talked the used products you quoted, we have regular dialogues with them and we fully anticipate and have incorporated into our guidance on therapies that will go subcutaneous arm or that will eventually have biosimilar entrants. And so that that's something that we stay well ahead of.
And when something and again, just to remind just when when something goes subcutaneous to John's point, you need to read the labels because sometimes someone goes subcutaneous that still requires health care, professional oversight and so on. And even if it doesn't require an HCP oversight, that still remains within our clinical model, admittedly, maybe with some different economics. And so and all of those are developments that we're constantly anticipating and incorporating into our commercial and operational strategy.
Joanna Gajuk
Again, if I may last last follow-up, I guess on the commentary around that, it's very strong cash flow. You still expect for 24, right, vis-a-vis a year-over-year headwind of the of the termination fee that you got in 23, it's not going to repeat, but when it comes to acquisitions, can you have any latest updates in terms of things that will be of interest you know, how far away are you willing to veer off of the core home infusion business? I mean, are there any considerations for report and it may be expanding and the drugs that you deliver say, I mean, we talk about the injectables, but maybe more of the oncology drugs. So any color of things kind of are you looking at on that date. Good to hear. Thank you.
John Rademacher
Yes, Joanna, I mean, we're constantly focused on how do we grow and we think that driving top line and bottom line growth is a surefire way to create value for our shareholders, whether it's organic and utilizing our suites and infrastructure to add therapies to the bag, so to speak or deploying capital through and M&A strategy and I think, look, I think we've tried to alleviate concerns and reinforce our strategy on the corporate development front, which is to say, look simply by generating more cash that doesn't lower the bar and John has preached that things have to be both strategic and economic value that we can articulate to our shareholders.
We're very active on that front. We're going to be very, very disciplined. There's a lot that we could do that's strategic that that doesn't represent an economic proposition and vice versa. And so we see a number of opportunities I think, frankly, without laying out our playbook, we're going to be disciplined and patient. The great thing is the base business we expect based on our guidance to perform very well this year.
And so there isn't the anxiety or pressure to do a deal just for the sake of doing a deal and done given given our capital structure, I think we're in a very advantageous position. And as John also highlighted, we also have the pressure valve of a share repurchase authorization. That's another channel through which we can deploy capital for our shareholders.
Joanna Gajuk
Thank you.
Operator
Jamie Perse with Goldman Sachs. Your line is now open.
Jamie Perse
Thanks. Good morning. John, you rattled off a number of therapies that are driving chronic growth at the moment. Can you spend a little more time on a few of those the faster growing or larger categories and where you think they are in their own life cycle, what visibility that gives you for chronic growth over the next couple of years?
And just your sense of innovation upstream with biopharma for infusible drugs?
John Rademacher
Yes. So in prepared remarks, I called out, you know, some of the products that we had launched, we had talked about us by Cubic in previous earnings calls, a biopsy did guard as well as cabin NuVa. I wouldn't say these are outsized growth proportion on it. We feel privileged to have the partnership that we do with an organization like crystal and helping to be a channel partner to serve their their patients or patients that require their gene therapy across the entire fleet.
On the chronic side, again, we continue to have a very diverse and a broad portfolio of products there. And as Mike just called out there, they don't move in tandem and we have things that are moving up. We have things that are moving down that it is a dynamic environment there. We really appreciate. And but we continue to hear and work with the biopharma partners is around the platform that we're able to provide that high quality clinical knowledge and know how the logistics and the national platform in which we can serve patients.
And that ability now to have an expanded capability set to not only serve patients in the home, but in IA, the infusion suites all puts us in a really strong position to continue to work with biopharma to be a channel partner and to be able to continue to expand our list of limited distribution drugs or expand the list of products that we have within our portfolio.
So the focus of our business development team is around those relationships of continue to focus around on maximizing the value of our platform and we'll continue to look for those opportunities with new and emerging products as you that second part of your question, we're actively managing and monitoring of what is that pipeline of new products.
What of those products have the characteristics that fit well within our platform and are active in conversations with are those biopharma partners around the role that we can play in helping to support the launch of those products, the support of existing products and the ability to serve the patients in one of the settings that our clinical team is well-equipped to serve.
Jamie Perse
Okay. Great. And then, Mike, I had one follow-up on the procurement benefits. I know you guys are hesitant to talk about this too much while you're in the midst of getting those benefits, but at this point or are you able to is safe if the benefits came from a branded drug or biosimilar? And I'm on a question, I know you guys have been asked many times over the years, just the the impact on gross margin from biosimilar or generic events on this experience over the last six months, give us a signal on how those events might impact your profitability?
Michael H. Shapiro
Yes, Jamie, look, I mean, obviously for competitive purposes, we're going to be reluctant. All I'll say is, you know, it wasn't one drug. It was one code. It was a little bit of a confluence of a limited number of therapies that have gone away. And again, I would say we always have some puts and takes. There's also some areas last year where we had some some procurement headwinds on some of the nutritional therapies that we support and the team tries to do their best to to mitigate logo.
And on a yes, on the biosimilar front, again, no two biosimilar events are exactly the same. It typically isn't a bad development from our perspective we we provide therapy and we build payers based on ANASPAW. peer wax brides. So as as a category becomes more competitive, typically there's a SP. and AWP. pressure over time. It's not overnight, which you know, typically as headwind on our on our revenue. However, when you have multiple manufacturers and providers that typically tips the scale from a procurement leverage and we can typically drive a gross margin rate expansion.
How that manifests in dollars. All I'll say is, look, it's very much more of a revenue event for us than it is a gross profit dollar event and it from a supply chain risk management. It typically de-risks our supply chain. And given our direct relationships with virtually all of the manufacturers we can we can be very responsive as payers want to actively manage formularies and can pretty much turn on a dime.
Jamie Perse
Okay, great. I'll leave it there. Thank you.
Michael H. Shapiro
Thanks, and thanks, David.
Operator
Michael Petusky with Barrington Research. Your line is now open for
Michael Petusky
Good morning. Sorry. Let me ask one more real quick. On the 33 or 35 throughout. It feels like most of 23, the but you did say I think Mike, typically you do get sort of am I live here some bit? Yes.
Can you just talk about what historically I mean that number and mean like $5 million, $10 million? What's the what's the typical?
Michael H. Shapiro
Yes. I mean, it's probably in the ZIP Code, Mike. I mean, again, there's there's there's puts and takes every year. You know it, you know, on on the scale that we have, it's somewhere in the ZIP code of what you articulated.
Michael Petusky
Great. And then just one more quick one. Just in terms of you sort of 12, great history of Hyatt as anything in terms of 24 guys, your methodology for price more aggressive or has it essentially the methodology that you've historically used to get to your initial guide?Sorry.
Well, yes.
Michael H. Shapiro
Thanks, Mike. I think it's not lost on us that, you know, we've built a reputation of laying out expectations that we have a high degree of confidence going into the year that we can deliver. And our track record is one that we're proud of. We have a very robust process looking at a number of dynamics that.
Yes, as we get bigger, there's a little bit of a bigger range from a from a plus minus perspective. But the fundamental approach of how we approach communicating expectations for the year has not changed.
Michael Petusky
Thanks, guys. Congrats on a great year.
Michael H. Shapiro
Thanks. Thanks, Mike.
John Rademacher
Thanks, Mike.
Operator
Thank you. I'm showing no further questions at this time. I would now like to turn it back to management for closing remarks.
John Rademacher
Thank you all for joining us this morning and participating on our call. As we outlined, 2023 was a very productive year and our team continued to execute at a very high level. We understand the important role that are that we play in delivering care to our patients and their families. And we look forward to serving even more patients in 2024. Take care and have a great day. Thank you.
Operator
This concludes today's conference call. Thank you for participating. You may now. Disconnect.
