First Choice Healthcare Solutions (OTCQB:FCHS) CEO Chris Romandetti had a chance to sit down with Executive Casts to elaborate on important aspects of his company. The four segments highlighted in this post are the first of many that are going to be featured over the next several months so that you will have a chance to connect with Mr. Romandetti on a level that far surpasses what you can glean from a regular conference call. Please enjoy the videos. Today, we are featuring the following subjects:
- FCHS Background
- Orthopedic Services and FCHS Business Model
- How FCHS’ Service Offering Developed
- Overview of FCHS’s Financial History and Guidance
Chris Romandetti on First Choice (FCHS) Background
That’s a great question. So, I took over the company in late 2010. We started to get our model organized on what we wanted to do and our field of business is in healthcare and we’re actually in Orthopedics. We finally established our first operation in April of 2012. It took about a year and a half to get the infrastructure in place to proper licensing and that was to organize our first group with two orthopaedic positions. Company was public, the original company started in 1984 and then it went public in 2007 and it was organized in Colorado. I redomesticated it to Delaware and took it over in late 2010.
Chris Romandetti on Orthopedic Services and First Choice Business Model
Orthopedic services are being provided across the country. It’s approximately 28000 surgeons in the company in the country doing this. What we have found is a unique motto is either you are a private practice, either you work for a hospital or ultimately, we’re putting another option out there right now where they can work for us being a non-owner. So, we’re the only non-physician owned Orthopedic delivery platform system that’s public in the country. So, that’s a lot to hear, but that’s essentially what our group does. Non-physician owned, being capable of running the back office and having doctors do what they do best, allowing a doctor to be a doctor.
Chris Romandetti on How FCHS’ Service Offering Developed
We started with sports medicine – total joint, shoulders, extremities and hips and knees. And then two years ago, when we took over the back center known as the Back Center, they did heavy spine. So, we do spine complimenting it out and then naturally any interventional pain around people that have a surgery or in need of a surgery or post-surgery, we take care of those folks. And we’ve also added neurology because a lot of neuro testing has to be done in the midst of doing this.
Since then, we’ve now… We started that in say 2012 and ’13, we’ve expanded in ‘15 to spine and then what we found out is that our doctors write a lot of prescriptions for services we weren’t doing. So, what does that mean? We call these ancillary services. So, when a patient comes in all payers today want to see patients fail conservative care before they just rush you to surgery and it’s the right thing to do. And unfortunately, a lot of surgeons out there today don’t take these steps and that’s where we think we’re a little bit more unique.
So, we set up basically a protocol where you come in, we get your diagnostic work done, we test you we look at you and they will put you into Physical Therapy, will work on that for a period of time. And we’ve now found that three out of four of our patients that are coming in do not require a surgery and this is a great thing to be recognized for known the patients like that and yet we now have captured all these other services that come from not having a surgery.
So, you can have an MRI, you can have an X-ray, you can get some medical equipment like a brace or eventually if you do need a surgery we’ve now added our own Surgery Center that we do some of them in-house on patients.
Chris Romandetti on Overview of FCHS’s Financial History and Guidance
All right! Well, that’s a great question. So, when I took it over it was all negative and virtually no sales in 2010 and ’11. As I was organizing to open up what I wanted to transform the existing company, I took over which was doing a little bit in DME and medical billing virtually hardly any revenues.
When we really launched in 2012 of April, that started our first year out to where we did about six million dollars in revenue and we were learning as we went. We then went to eight million dollars the following year and then we started to catch a feeling on what we we’re doing and from that point, we jumped up to 19 million and change.
From the 19 million dollar, number it’s still not profitable because it was start-up we then went to 29 and a half million dollars. Now, understand when we were at nine million my corporate overhead was over 27% because it takes a couple hundred grand a month to be public and run a company the right way with all the requirements. So, when we went up to the 29 and a half million dollar… No 19 million dollar number the following year we, our overhead didn’t move but our growth started to affect and so our overhead dropped to 15%.
Well, last year we completed that 29 and a half million from the 19 and our corporate overhead was pretty close to single digits and yet our profitability started to come in to under EBITDA, but it’s where it started to expand to 3.35 million I believe for last year.
Then, we put out some numbers for this year that we expect our growth to continue and we actually put out some guides numbers which we adjust quarterly right now and the only hesitation we had in this year which we’re very proud of is that one of my doctors got deployed to Iraq which lost a couple hundred surgeries term of his deployment and then our delay in right now bringing PT online is taking a little bit longer but it’s still all there and then bringing on additional physicians as getting them credential.
So, our growth this year although slated that it could be as high as 40 million dollars will be measuring that and reporting on our quarterly on our next conference call if it’ll need some adjustments but our ideal office platform for profitabilities has been set to be that we feel comfortable between a 15 and 20% EBITDA number at a medical location. We were on track to run rate that last year towards the end.
One of the hard problems with doing that is do you want a growth or do you want to just do state level and then bring your profitability in? Because, you would know this, under GAAP every time I expand I can’t advertise any of my numbers I have to expense them. So, as I’m opening up new divisions of whether it be therapy this year that went from nothing last year to a run rate we’re open this year seven or eight million dollars.
All those start-up training costs, capital costs had to get expensed. And that we don’t add back so that immediately affects your steady run rate of profitability. So, we’re going to do a better job now in our accounting to start putting out steady run rate versus start-up cost and all and showing people, but we’re pretty excited that our growth is…everything we’re going to bring in that we forecasted is coming online, to expand a little bit further on that, what we mean by that is that in Melbourne, we still think this is about a 75 million dollar market for us.
Melbourne is a platform over 70 miles long in our County and as we get straight and steady on what we’re doing on surgeries coming on board and doctors filling up their buckets of surgeries and tests that are being done, that’s where we think steady will be here for this county before we then look to move on to other Counties or other areas.