Option Care details impact of cyberattack

BANNOCKBURN, Ill. – Option Care Health’s cash flow during the first quarter was negatively impacted by the Change Healthcare cyberattack, but the company has not changed its outlook for the full year, executives said on a recent earnings call. 

From the date of the cyberattack on February 21 through the rest of the quarter, Option Care was unable to submit more than half its claims, said John Rademacher, president and CEO.  

“This has resulted in a detrimental impact on our cash flow results in the quarter, which we believe is temporary,” he said. “We have made considerable progress in working through the claims backlog and would expect cash flows to recover by the end of the year.” 

Option Care reported cash flow from operations was $(68.8) million in the first quarter this year compared to $89.8 million in the same quarter last year, but the company still expects free cash flow from operations of at least $300 million for the full year. 

Once it learned of the cyberattack, Option Care went into “liquidity preservation mode,” said CFO Mike Shapiro, including pausing its share repurchase program and moving M&A off the front burner. 

“As we go forward, I think we go back to our capital allocation policy, which we’ve been consistent with, which is that we think there are a number of M&A opportunities,” he said. “There are some opportunities that are being shaken out of the tree and we’ll continue to balance looking for those accretive and strategic opportunities. And we won’t be shy about deploying capital through share repurchase if we continue to recover on the cash front.” 

Despite the disruption, Option Care posted revenue of $1.14 billion for the quarter, an increase of 12.8% compared to the prior year. Gross profit was $238.5 million, or 20.8% of net revenue, up 4.1% compared to the same quarter last year. Adjusted EBITDA was $98.3 million, up 4.8%.  

Longer term, Option Care will use lessons learned from the cyberattack to strengthen its operations, said Rademacher. 

“There are and I think there will continue to be opportunities in the short run and over the long run to drive operating efficiencies,” he said. “Decoupling form the clearinghouse or having alternatives is something that will be our strategy as we move forward.”