Hapvida Participacoes e Investimentos SA

BOVESPA:HAPV3

Earnings Call Transcript 2020-Q3

[Operator]

Good afternoon. Welcome to Hapvida's Third Quarter 2020 Results Conference Call. Joining us today are Mr. Jorge Pinheiro, CEO; Bruno Cals, CFO; and Guilherme Nahuz, Investors Relations Director. We would like to inform you that this event is being recorded. [Operator Instructions] Today's live webcast may be accessed through the Internet address at www.hapvida.com.br/ir.

Before proceeding, let me mention that forward-looking statements are based on the beliefs and assumptions of Hapvida's management and on information currently available to the company. They involve risks, uncertainties and assumptions because they relate to future events and therefore, depend on circumstances that may or may not occur in the future. Investors should understand that general economic conditions, industry conditions and other operating factors could also affect the future results of Hapvida, leading to results that differ materially from those expressed in such forward-looking statements.

Now I will turn the conference over to Mr. Jorge, who will begin the presentation. Mr. Jorge, you may begin your conference.

[Jorge Fontoura Pinheiro de Lima, executive]

Good afternoon, everyone, and thank you so much for joining us for our results conference call today. It is a great satisfaction to disclose to the market Hapvida's results for the third quarter 2020 and the first 9 months of 2020.

I'd like to take this opportunity to congratulate all of our teams. We have 35,000 employees, over 15,000 physicians and 15,000 dentists who are part of the Hapvida system. We're still fighting this pandemic, and it's very gratifying to know that we can keep on counting on you. To all health care professionals who are working in the frontline, physicians, physical therapists, nurses, nursing assistants, all of you in the midst of so many uncertainties, you moved on heroically with courage and selflessness, and you have shown once again that you have a noble commitment to life. This reflects Hapvida's vision, and we are very, very grateful to each and every one of you.

We are very happy with Hapvida's performance this quarter. The consolidated net revenue grew by 61.6%, boosted by acquisitions and by the increase in the number of members through new sales. EBITDA closed the quarter at BRL 512.2 million, up 93.8% year-over-year. This is due to a combination of organic and inorganic growth and an efficient claim management as well as discipline with operating expenses.

Speaking about organic growth, we're very happy with the new contracts that we signed and Hapvida has been chosen by over 180,000 new users of health care plans and dental plans. It's important to mention that our MLR was positively impacted this quarter because in spite elective procedures and urgency procedures are gradually returning to pre-pandemic levels, the frequency of use has not yet been completely normalized. We've also kept a good management of sales and administrative expenses. The latter has achieved its lowest ever level compared to our revenue.

From the operating perspective, this quarter was marked by major events. I'll mention some of them. We renewed our brand, and we saw the need to adopt a new corporate brand to achieve even more recognition and performance. And we also changed our purpose, which has become providing access to high-quality health care to our people. This is our focus. We're going to do our best in order to care for people with the quality that they deserve.

We signed a partnership with a Swiss company, Roche, to consolidate our lab diagnostics activities in one single central unit that will have state-of-the-art technology. This operating technical center located in the city of Recife in the state of Pernambuco will be the first of its kind outside of Europe and it will be able to process up to 5 million tests per month, replacing the current 18 regional facilities that we have. This center will process around 95% of lab tests, increasing our verticalization level even further. Up until today, we've conducted over 125,000 visits through our telemedicine channels. Our continuous investment in technology and data analytics enabled us to create one of the most robust telemedicine platforms in the country. Today, we can say that we have the most varied types of digital visits or service.

In addition to that, in order to provide more security in the telemedicine interactions, we've been adopting facial recognition identification of the members. We also reinforced our Board with the coming of Mr. Igor Lima, an executive with best experience in integration, technology and innovation. These topics are key for us to face our current challenges. We also opened organically 5 new service units and 1 distribution center and pharmaceutical supply center. We announced a series of acquisitions in recent months, both in terms of client portfolio as well as in hospital infrastructure assets. We've made 7 transactions that Bruno Cals will give you further details about later. This shows our continued search for positive assets and our focus on inorganic growth in other regions.

We are talking about a large number of acquisitions, but all of them, each and every one of them was executed with discipline and rationality. We've been acquiring assets and integrating them in a quick and efficient way and bringing operating indicators of the acquired companies to levels that are close to ours. We also concluded the incorporation and integration of the operators that are part of the Americas group (sic) [ América Group ]. By the end of 2020, we'll also complete the incorporation and deployment of systems in the dozens of health care units that were part of the América Group, completing the integration in about 1 year after the closing of the operation, which shows that we have complete possibilities to repeat our business model.

We have grown, and therefore, we changed. This is a great new moment and operating changes are key to take us further, but our essence will always be capped the same. Having said that, I'd like to turn the floor over to Bruno Cals, our CFO; and to Guilherme Nahuz, our IR Director, who will give you further details about the numbers of our quarter, and then we'll have a Q&A session. Thank you very much.

[Bruno de Oliveira, executive]

Thank you so much, Jorge. Good afternoon, everyone. First, I have to explain that since we concluded the incorporation of the operators and the dozens of health care units that are part of the Americas group (sic) [ América Group ] in September 1 2020 and the consequent deployment of systems, SAP operating systems and Hapvida hospital system, the individual numbers of the operating and financial numbers of the acquired companies cannot be compared to previous quarters. Starting in the fourth quarter of 2020, the acquisition of Medical in Limeira, São Paulo has already been concluded, and we might have new closings still by the end of the year. Therefore, Hapvida's results will be presented only in a consolidated way. When possible, we'll also mention effects of the acquired companies on our numbers, as you saw in our earnings release.

So let's start on Slide #2. You can see our main financial and operating highlights of the third quarter of 2020, so consolidated Hapvida data. There's been an increase of 61.6% in our net revenue, boosted mainly by the revenues of the acquired companies, the São Francisco Group, América Group and RN Saúde. There's also been an increase of 7.6% in the average ticket of health care plans, boosted by price increase of our existing contracts and new sales. Individual health care plans have not had a price increase this year. And for group plans, the increase will be enforced starting in 2021.

We also had a 56.9% growth in the number of members, boosted by the increase of the client base of health care and dental. In addition to the organic growth of Hapvida, the ex-SUS MLR drop was of 0.6 percentage points and the cash MLR dropped 3 percentage points. This is a spectacular performance, considering that the acquired companies are still operating with MLR levels that are much above ours. But as Jorge mentioned, our MLR this quarter was positively impacted because although our elective and urgency procedures are gradually increasing, the frequency of use has not yet been normalized. And finally, our EBITDA grew by 93.8% with an increase in margins of 4 percentage points. That was because we were able to manage our MLI (sic) [ MLR ] appropriately and also, we had a good management of expenses. Our sales expenses achieved 7.9%, and the administrative expenses achieved 9.4%.

On Slide #3, you can see our acquisitions and rental of one hospital that was made recently. They are all located in the Center West and Southeast regions of Brazil. These acquisitions add value to our business and they have a strategic fit in our operations. The largest, the Promed Group, will enable us to enter Belo Horizonte, the capital city of Minas Gerais, and this will contribute to our consolidation in the state. We just announced the acquisition of Premium Saúde, located in Minas Gerais as well. And we have great synergies with this company because most of their clients is located where we already have hospital infrastructure. So we'll be able to quickly verticalize the service. We also announced acquisitions in the state of Goiás in the city of Rio Claro and the countryside of the state of São Paulo, and we rented a maternity hospital in the city of Ribeirão Preto, state of São Paulo. So many new acquisitions this quarter, consolidating our presence in the Southeast and Central West regions. But these acquisitions are still waiting for regulatory approval.

We'd also like to highlight that in these regions, we have a few units under construction, one hospital in Dourados, the state of Mato Grosso do Sul; one hospital in Uberlândia; and 3 hospitals in the countryside of São Paulo in the cities of Barretos, São Carlos and Bauru. On the right-hand side of the slide, you can see the status of the acquisitions announced in 2019. On September 1st, we incorporated the Americas (sic) [ América ] units, as Jorge mentioned. The São Francisco Group has been incorporated, and we expect to capture synergies in the expected time line. For RN Saúde, our systems have already been implemented. We also announced the closing of the Medical -- of the acquisition of Medical in Limeira on November 3, and it's now already part of our structure. Promed is still being requiring approval by CADE.

On Slide #4, you can see the map of our hospital distribution. 41 hospitals by the end of September, 42 walk-in emergency units, 188 clinics and 175 lab and imaging diagnostics units in a total of 446 service centers. This puts us closer to our clients throughout all 5 regions in the country. In the third quarter, we opened 2 hospitals in the city of Lauro de Freitas in the state of Bahia and hospital Mário Palmério in the city of Uberaba, state of Minas Gerais. 11 medical clinics, 7 were closed; 2 walk-in emergency units, 1 was closed; and wait -- 8 diagnostic units, 7 were closed in the period as part of our consolidation in new units. We closed the quarter with 2,939 beds, 1,097 beds over the same period of 2019. This quarter, we also made 890 beds available for the treatment of COVID-19, a reduction of 124 beds compared to the second quarter of 2020.

The market share of the company at the end of September indicated a total market share of around 7.5%. Here, you can also see the breakdown of the market share per region with gains in the Center West, and the Southeast and South still have great potential of growth. We did not take into account the newly acquired companies. Now I'd like to turn the floor over to Guilherme Nahuz, who will give you further details about our results.

[Guilherme Nahuz, executive]

Thank you, Bruno. Thank you, Jorge. Good afternoon, everyone. So moving on to Slide #5, you can see the number of members we have. As Jorge and Bruno said, we've had a spectacular growth, almost 50% growth in health care and almost 70% growth in dental. Of course, this has the contribution of members coming from the acquired companies. But as Jorge said, the highlight of the quarter for us was the recovery of our organic growth. We grew by 53,000 lives in the health care unit and 130,000 members in the dental plants.

In spite of this very challenging scenario that we faced in the third quarter because of the economic effects of the pandemic on society as a whole, we grew in every region of the country. Those 53,000 health care lives, I mean, half of them were in the Center West and this was organic growth. We had 10,000 extra lives in the North; in the South, 2,000 lives; and in the Southeast, 8,000 lives. So these were the number of members that we gained in the third quarter of 2020 compared to the second quarter of 2020. The acquired companies are growing in about 30,000 lives. And Hapvida in the North and Northeast, ex acquisitions, had about 20,000 lives in terms of growth. So 30,000 lives of organic growth. This is what we were talking about when we mentioned that more -- this was about more than acquiring portfolios, and we were focusing on creating regional hubs, and this is what we've been doing in the third quarter.

Just a reminder, we're not yet working with new products or our own network products, which are even more affordable in these new regions of operations. But in Goiânia, for example, we just launched our own network product on September 1st. So no impact whatsoever on the third quarter. But that shows that we can grow organically in these new regions from now on. We will probably launch our own network products when our investments in medical and hospital infrastructure in those units, are completed. So this is the path forward. When it comes to dental, we're still growing firmly, but the opportunities are abundant, especially in the new regions of operation and also with the recently acquired companies that are currently being integrated. This growth is also possible in the regions where we are planning to acquire companies, just waiting for the approval. Many of those companies don't offer a dental product. So this is a major opportunity.

The company can only achieve this type of growth that we achieved in the third quarter because our commercial department is the most competent in the country, and we have an amazing distribution force compared to our competitors. Our commercial area was reinforced recently, and that gave us scalability and robustness to make the most of the opportunities that are arising. Now on the next slide, you can see our average monthly ticket. We grew almost 8% in the health care business. That is quite a significant growth considering that we did not have price increases for individual plans, which account for about 30% of our members and 40% of our revenue. In spite of that, we were able to grow by 7.6%. Our ticket is achieving almost BRL 200, which is one of the lowest ticket prices in the country, which enables Hapvida to provide high-quality health care to the greatest possible number of clients and that is our goal. The dental ticket is stable. This is a strategic and synergic product for the company, as I mentioned previously.

Now on the next Slide #7, about our net revenue. We already shared the numbers related to members and average ticket, and that's the main reason why we grew so much. Our net revenue grew by 63.2% in the first 9 months of 2020 compared to the first 9 months of 2019. And in these first 9 months of 2020, we grew around 10% -- we achieved over 10% growth compared to the whole year of 2019. Now on Slide #8, you can see our medical costs and our medical loss ratios. All of our indexes improved, cash MLR, ex-SUS MLR and total MLR, which is what you can see here on the slides. This is, of course, a consequence of the excellent claim management we have in our company and all this innovation process we're going through with intensive use of technology and artificial intelligence.

We also achieved relevant gains of synergy from the acquired companies. We -- the volume of synergies captured is pretty much aligned with what we expected, but these synergies were captured earlier than we planned. There is also a positive impact of the pandemic here, as Jorge and Bruno said. SUS, or S-U-S, reimbursement has been decreased. I will talk about that later. But we reduced the backlog of surgeries created in the second quarter because of the pandemic, and this has not impacted our loss ratios. We created a sale for that. We got in touch with the members and with the physicians in regions where there was no restriction, and we performed 100% of the surgeries in those locations. Service levels are going up gradually throughout the third quarter, I mean, in terms of the number of procedures delivered. And we entered the fourth quarter of 2020 at levels that are very close to the pre-pandemic era. So that is a very important point.

There's also been an increase in the number of services provided for respiratory syndrome in some locations, but that has not led to an increase in the number of hospitalizations. Our acquisitions have an MLR that is above ours. So if it weren't for the pandemic, we would probably be presenting a total MLR that was higher than what we presented in our history. But of course, we are completely prepared to reduce the MLR of the acquired companies, and that's what we've been doing. So the consolidated MLR that you see on the slide already includes the impact of the implementation of our business model in the acquired companies. The beauty of Hapvida's vertical model is to see this return to normal with a very low risk of overshooting our MLR.

Now in Slide 9, you can see SUS reimbursement, a total cost of BRL 27 million in the quarter, half with claim costs and the other half with financial expenses. The volume was lower than the usual levels because many of the ABS -- ABIs were not sent to us or ABI is the identified beneficiary notice. But also because of the deadlines that were frozen because of decree 928. ANS, the Brazilian regulatory agency for private health care plans, has been trying to normalize the levels of ABIs and invoices. The operator is receiving 2 ABIs in November and a few in December. So we think this is probably going back to normal in the first quarter of 2021.

On Slide 10, you can see our operating expenses number. Jorge and Bruno have already mentioned that this is one of the highlights of the quarter, and that shows how disciplined we are when managing our expenses. In spite of the new acquisitions, new assets and new geographies, we've been able to do that very efficiently. Our selling expenses have had positive impact with lower losses or lower PDD and the positive impact of the acquired companies that work with a selling expense level that is below Hapvida's. So the consolidated numbers are being positively impacted by that.

Now administrative expenses. Here, you can see all the efficiency gains coming from innovation projects in the company. And we've also been able to capture synergies in the acquired companies, São Francisco, Grupo América and RN. But this process has not been completed yet. It's still ongoing, and there are other synergies to be captured in all those 3 acquired companies I mentioned. Now next slide. EBITDA grew 4 points in the quarter. We achieved over BRL 0.5 billion in EBITDA, a great level. And on Slide 12, you can see our free cash flow and CapEx. In this quarter, we achieved a free cash flow of BRL 415 million, which is higher than the free cash flow throughout the first 9 months of 2019. And CapEx, BRL 290 million. Like we said at the end of last year and beginning of this year, we were planning to invest about BRL 400 million in 2020 and in 2021.

Okay. That's the end of our presentation. We would now like to open for questions. Thank you very much.

[Operator]

[Operator Instructions] Our first question is by Mr. Vinicius Ribeiro from UBS.

[Vinicius Ribeiro, analyst]

Well, I have 2 questions. First, the legacy operations of Hapvida, do you see any improvements when we think about the new contracts and existing contracts? And what can we expect for 2021, considering the product offer before the acquired companies? Now about price increase, can you tell me a bit more what was your accounting procedure for your receivables?

[Jorge Fontoura Pinheiro de Lima, executive]

Thank you for your question. I will answer the first part, and then I'll turn the floor over to Bruno to talk about the price increases. When it comes to organic growth, we need to emphasize that the company has a unique position. We are the first Brazilian company to be present with our own network, our own hospitals in all 5 regions of the country. Thus, we can make the most of the potential of each region. We know that some regions are usually faster than others. So this model gives us a competitive edge compared to the competitors. With regards to growth, in recent months, we have noticed very strong interest of the Brazilian population to acquire a private health care plan. This pandemic has shown how important the services we provide are. We have worked relentlessly and our rates are completely out of the curve. The death ratio of Hapvida user compared to the rest of the country is much lower, and we've been showing that through our daily newsletter. And although the economy has not recovered completely, although we have -- we are very optimistic about this recovery, this has been boosting retail channels, individual plans. The small and medium enterprises are almost at pre-pandemic levels. And when it comes to group plans, we have noticed that the second quarter of 2020 was impacted by new bids of small, medium and large enterprises, and we've been benefiting from that.

The third quarter already includes many major clients in all regions of the country. The fourth quarter will also see new clients joining us. So we think that these 2 aspects are quite favorable. Companies are hiring employees once again, but their head count is not yet at the levels they were before the pandemic. It's great news that they are already hiring employees again, but they have not gone back to pre-pandemic levels yet. Generally speaking, I'm sure 2021 will be a great year when it comes to organic growth. The worst is over. When it comes to the pandemic in the state of Amazonas, we saw a second wave, but that was much smaller than the first wave. That shows that we've been treating this disease much more efficiently now. So in spite of this new second wave of COVID-19, we've provided great care through our protocols to our clients. So there has been no increase in the number of hospitalizations. So we think that 2021, we will achieve organic growth levels similar to those that we had before the pandemic.

Now I turn the floor over to Bruno to talk about price increases.

[Bruno de Oliveira, executive]

Vinicius, thank you for your question. Well, price increases were suspended starting in September only. So only 1 month of the third quarter. And we are in contact with the regulatory authorities to define those price increases that have been negotiated. So in the fourth quarter, we will take into account the price increases, although they will only go into force starting in January 2021. For group plans, we've been negotiating the price increases and therefore, they're already taken into account in our revenue. Now for individual health care plans, the market has not been authorized to increase the prices of individual plants this year. But starting next year, we do expect to see price increases starting in May because that's the time line defined by the regulatory authorities.

[Operator]

Now our next question by Gustavo Miele from Itaú BBA.

[Gustavo Miele, analyst]

I have 2 questions. The first one about organic growth. I'd like to go back to that topic, but from a different perspective. Comparing quarters, these numbers were great, even better than what the ANS data was suggesting. But there was not an increase in selling expenses. There was actually a drop in selling expenses compared to last quarter. So can you tell me a bit more about how this works? When we look at this comparison of the third quarter with the second quarter, is that a better control of the churn rate? How do you control the selling expenses? Do you have any specific policies at the company? So this is my first question, how these 2 variables correlate. So if you can answer that question first, and then I'll move on to my second question.

[Jorge Fontoura Pinheiro de Lima, executive]

Thank you for your question. Well, there are some variables. The first one, São Francisco Group brought us a very interesting experience of our own sales. So they had an in-house sales team that was working very efficiently. And we were working here at the company to identify in which regions we -- it would be best to have our own sales team and in which regions it would be best to have brokers selling for us. So we may choose to have one or another in each specific region, but we can also choose to have both in a specific region. So some -- in some regions, we have already decided to have our own sales team. This commercial approach has lower costs to us when compared to the brokers' channel. This is still a significant channel for us, but the regional characteristics of the places where we operate and the sales characteristics of those locations will be factors taken into account when deciding which model to use. The volume of commissions and our -- when we have our -- on corporate team are smaller than with the other model. The churn rate also had a positive impact on that.

You still have another question right, Gustavo?

[Gustavo Miele, analyst]

Yes, I do. My second question is a bit simpler. You mentioned on your release and Guilherme emphasized that the backlog of elective surgeries has been 100% addressed by you throughout the quarter. What about the backlog of other procedures? Can you give me any update about the month of October and the backlog of other elective procedures?

[Jorge Fontoura Pinheiro de Lima, executive]

Thank you, Gustavo. As we predicted, the second quarter was indeed marked by our ability to perform all the elective procedures that had been withheld because of the pandemic. We were extremely active. We took the first opportunity to perform surgeries once the restrictions were removed. And we always worked with high levels of safety, both to our clients and employees, and we were able to 0 our backlog of surgeries and high complexity procedures in the second quarter. The fourth quarter now has levels of elective procedures that are very, very close to pre-pandemic levels. So we see that people are slowly resuming the use of medical procedures.

[Operator]

Our next question is by Mauricio Cepeda from Crédit Suisse.

[Mauricio Cepeda, analyst]

I'd like to talk about organic growth. When you talk about individual plans in new regions, this is a leverage that you've been using a lot. But you mentioned that in some of the regions, you don't have your own network products. So generally speaking, both in group plans and individual plans, do you have a different commercial positioning to make the most of the current conditions in which other health care operators might be a bit weakened, so to speak?

[Jorge Fontoura Pinheiro de Lima, executive]

Thank you for your question, Mauricio. We actually have different stages of verticalization in each region. So we have our M&A area and our integration area working hard, and we are currently creating an integration book. This book includes many activities that will help us implement our business model completely so that we can reproduce this model in all of the companies. An example of that is our verticalization. We are performing due diligence, assessing the assets, but our teams already start assessing the possibilities to verticalize labs, support services and other types of services in the region. So after our team maps that out and we start operating on the asset, we have this very detailed plan to implement our business model. The assets acquired usually have verticalization levels that are below ours. Ex acquisitions, I'd say we are the most verticalized company in Brazil and around the world. So as soon as we acquire a company, we start this verticalization process. Most of the times, that process happens organically, but we can also acquire a hospital, for example, to add or to help us in that process.

Once we achieve the expected verticalization levels and after we implement the new systems, which have lots of technology embedded to control claims, control MLR and other synergies that are already very clear, such as DNA, supply and so on. So all that enable us to review the product offer for the region. And as a consequence, we also review our price list. Our goal is to implement our model fully and then offer the best products at the lower possible costs in a responsible and efficient way. But we don't want to leave quality aside. Quality is always in the center of our approach. History shows that once we go into a new region, we don't focus only on gaining market share, but we also focus on expanding the market. This has been our model, and that's the model that we want to continue reproducing throughout the country. So once again, each region has a different maturity level. In some cities, we've been able to implement our model completely. And in others, this process is already ongoing, but that's all part of our integration process.

Now when it comes to group plans, of course, there is always a possibility, an opportunity for us to offer our product, but the economy has been hardly hit by the pandemic and companies are reviewing benefits. So we are making the most of this opportunity and using that to grow. Group plans are highly customizable. You can offer participation plans, family plans, prevention programs and others that enable us to customize our product and adjust it to the reality of the company. We have the example of Joinville in which we entered the market as per customer's request. So we signed a long-term contract with a client. And during that time, we built a high complexity hospital, our own clinics, our own lab units, a verticalized network. And right after we entered the region, we were able to attract the 3 largest clients in the region. So affordability is really important to us, and this has been showing great results.

[Operator]

Next question is Gustavo Tiseo from Bradesco.

[Gustavo Tiseo, analyst]

I have a few questions. First, about your organic growth, which was very strong. You said you had 5,000 lives coming from the Center West region. Some regions depend on seasonal activities. So for example, in places where there are many power plants, did that have an impact on your numbers? And now can you give us further information about the impact of COVID-19? Did that impact your MLR? And finally, my last question can you give us an idea of how much you pay in commission for group plans and individual plans?

[Jorge Fontoura Pinheiro de Lima, executive]

Gustavo, thank you so much for your questions. Now about the Center West, just like here in the Northeast, we went through an important consolidation. And then we went to the North region to start a similar process. We've been creating new clusters of growth and the Center West is one of them. We have studied all the opportunities in that region thoroughly. We started with São Francisco, that had operations in Mato Grosso, Mato Grosso do Sul and Goiás; and then Americas (sic) [ América ] that had a strong presence in Goiânia. Then we made 3 other acquisitions. One of a health care plan portfolio in Anápolis, and we have a hospital under construction there in Anápolis. We purchased another portfolio in Goiânia. We are building another hospital in the Center West region. Our M&A and our expansion teams are working really hard on that region. We entered organically in Brazilia as well. So we've mapped out all the important cities that would give us good conditions to implement our model. So that's what we've been doing.

And in the short and medium terms, that's what we want to do to consolidate the major hubs of the Center West region. The Center West region is very strong in agribusiness and agribusiness is boosting the economy of the country. It's able to overcome economic crisis. So right now, we are very well prepared to make the most of the opportunities in the Center West region and also in the country side of the state of São Paulo. After São Francisco, we also rented an asset in the city of Ribeirão Preto. We have made other acquisitions in the countryside of São Paulo, and we're also building hospitals there. We also have a verticalization plan for labs. So this is what we do. We study the region thoroughly. We identify the best opportunities to implement our model efficiently. Goiânia had a very interesting platform with their own labs, their own hospitals. So we were able to implement our own network there we increased the number of beds. We created a mega walk-in emergency unit in one of the regions of Goiânia with the largest population. We also have a great diagnostics unit there. So we achieved results faster in Goiânia because the platform was more mature and enabled us to do that. So it is indeed a new cluster of growth, and we want to continue benefiting from that growth in the Central West region and others.

Now you also asked about MLR and what would be our MLR without COVID-19. Well, it's very hard to answer that question. But Hapvida ex acquisitions is very well managed, and the MLR ex acquisitions is always around 60%. This is the third year in a row -- I mean we've been listed for 3 years now, and you saw that our MLR ex acquisition has always been very stable, around that level of 60%. But the market as a whole has been growing. Great companies have an MLR of around 70%. Ours is the only in the country with MLR around 60%. But sometimes, we acquire companies that have MLRs at 70% or even 80%. Medical, if I'm not mistaken, has an MLR of 85%. So of course, it is something that requires a transition process to implement our systems, technologies, new products, supply, DNA, G&A. And depending on the maturity level of the asset, then the MLR ratio is different, is higher, and it takes us longer to take the MLR levels to numbers that are closer to Hapvida's. But today, in the South, in the Central West and the North, Northeast and Southeast, we already have locations with standard MLR, Hapvida's MLR because our models -- our model has already been implemented in those regions.

Now the other regions in which we're still implementing our model, then the MLR may be a bit higher. They start at 70% or even 80%, and slowly, we reduce MLR to achieve our own levels. So in places where we can implement our model completely, then we are able to achieve MLRs of around 60%. But in regions that our model cannot be completely implemented, like small towns in which it doesn't make sense for us to have our own hospital, well, in those locations, the MLR will be around 65% or 70%, which is a great MLR level. Now about your last question, commission for large group plans are around 60%; retail, 320%. So the retail channel has higher commission rates. For corporate plans, in some situations, we also pay lifelong fees.

[Operator]

This concludes the questions-and-answer session. Now I'd like to turn the floor back to Mr. Jorge for his closing remarks.

[Jorge Fontoura Pinheiro de Lima, executive]

I would like to thank our partners and investors who make it possible for us to offer high-quality health care to our clients. Thank you so much for helping us in such a special mission. Once again, I'd like to thank our 35,000 employees, 15,000 physicians, 15,000 dentists, especially those who were in the frontline this year. Many of these health care professionals were exposed to the virus, but they did not get infected. They are working even harder than they were before the pandemic. They have this noble commitment to life. So I would like to thank once again our team, especially our hospital's team. So thank you very much for doing that. Together, we've been overcoming this very challenging pandemic. And finally, a message to our clients, thank you so much. I'm sure that we are very well prepared to serve you in the best possible way. Thank you very much, and have a great afternoon.

[Operator]

Thank you. This concludes today's presentation. You may disconnect your line at this time, and have a nice day.

[Statements in English on this transcript were spoken by an interpreter present on the live call.]