Rede D'Or Sao Luiz SA
BOVESPA:RDOR3
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Rede D'Or Sao Luiz SA
Earnings Call Analysis
Q3-2023 Analysis
Rede D'Or Sao Luiz SA
The company has maintained a steady growth trajectory, with almost a 1% increase quarter-on-quarter and a notable 8.3% increase year-on-year in hospital services' gross revenue. Despite operational bed stability, the growth in total beds can be attributed to strategic expansions, including new facilities like São Luiz Campinas. This expansion strategy is echoed in the other business segment's performance, which enjoyed an 11.6% increase in gross revenue compared to the previous year and a healthy increase in average ticket size of 12.6% year-on-year.
Operating costs also rose, but at a slower pace than revenue, indicating effective cost control measures with a 7% increase year-on-year after accounting for non-recurring events. General and administrative expenses rose by BRL 110 million in comparison to the previous year, suggesting some pressure but overall manageable growth. These numbers show the company's ability to manage costs effectively while continuing to grow its business.
EBITDA, a key profitability metric, improved significantly by 70% in the year-on-year comparison, suggesting robust operational efficiency and profitability enhancement. The EBITDA margin increase, both reported and adjusted for non-recurring events, underscores the company's strong ability to translate revenue growth into actual profits.
Net revenue in the reported segment achieved a 14.1% year-on-year increase. This was complemented by an improved loss ratio, which dropped by 1.2%, pointing to effective cost containment strategies.
With net debt over EBITDA at 2.3x, leverage is within healthy limits considering the industry norms and is likely reflective of strategic investments rather than operational mismanagement. The managerial cash flow showed a positive variation of BRL 1.116 billion in the first nine months of 2023, an indicator of strong cash management and liquidity.
The company achieved a reduction in administrative expenses related to premiums, which declined from 7.4% to 4.4% in the third quarter, indicating a leaner, more efficient overhead structure. Expectations are set to continue this trend of improved claims management in subsequent quarters, further improving the efficiency of operation.
The company faced a temporary halt in growth volume within its oncology sector, primarily due to discontinued services in one of its regions . Nonetheless, the selection of geographic areas for greenfield hospitals indicates a clear strategic intent to capture market segments with higher income and good healthcare plan penetration, aiming to become not just another hospital in crowded markets but rather the go-to facility within those locales.
Management's discussion around medical materials and delinquency points to a focus on efficiency and claims ratio improvement despite potential complexities. The aim to close the gap between accounting and adjusted EBITDA within the next one to two years is a positive signal for future financial health.
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Good morning, everyone. Welcome to the earnings call of the third quarter of 2023 of Rede D'Or. We have here, Mr. Paulo Moll, President; Otavio Lazcano, VP of Finance and IR, Investor Relations; Raquel Reis, CEO of Health and Dentistry of SulAmérica.
The event will last for one hour and the recording will be available at the IR website of the company. Our presentation, we -- after the initial presentation, we're going to have the Q&A.
Before we continue, we would like to clarify that any statements that might be done during the earnings call regarding the business perspectives of Rede D'Or, projections, operational goals and financial goals are based on premises and beliefs of the Board of Directors based on information that is currently available.
Forward-looking statements are not guarantees of performance, involve risks and uncertainties. They are related to events and circumstances that might or might not take place. Investors should understand that economic and industry conditions and other operational factors might affect the future performance of the company and might lead to results that are different from the forward-looking statements.
Now I would like to give the floor to Mr. Paulo Moll. He will start the earnings call. Mr. Moll, the floor is yours.
Thank you. Have a nice day. I'm going to start with the operational highlights of the third quarter of 2023.
In a consolidated way, Rede D'Or and SulAmérica, if we can compare with the second quarter and the first quarter of '23, we don't have the consolidated reference for 2022. And the gross revenue, we have the BRL 12.9 billion, 3.6% growth according in comparison to the previous quarter.
The EBITDA consolidated BRL 1.9 billion, it's a growth of 18.4% against the second quarter of '23 and a growth of 42% against the first quarter of '23, reaching a net income of BRL 760 million, 74.6% above the second quarter of 2023, 150% above the first quarter of '23.
To remind you, the adjusted net income -- so excluding the amortization of the portfolio of SulAmérica because of the acquisition, we would reach the number of BRL 811 million, which would be a greater growth.
Now the stand-alone, we have the BRL 7.4 billion. This is a growth of 8.3% against the third quarter of '22. We're talking about the average ticket of a growth of 7.4% based on the third quarter of 2022. So it's very healthy.
The occupancy of 80.1%, record number of surgeries, 132,000, a growth of almost 5% in regard to the third quarter of '22 and the operational beds 9,500 -- 9,600, which is 46 beds less than the second quarter of '23.
So we would like to clarify that the company prioritized profitability. We discontinued a series of contracts with operators that had difficulty receiving the pricing, our readjustments, annual readjustments, operators with a lower average ticket than the ticket of the company and with a greater risk -- associated risk. The company [indiscernible] would be conservative and we will discontinue these contracts.
Obviously, part of these patients migrate to other operators or other products that have access to our hospitals. Only 3 that we discontinued the contract over the last few quarters. We're talking about 300 beds that these products, these operators used to occupy in our hospitals, and we managed to get growth in the other operators, the other products. We replenished almost the totality of the 300 beds that were occupied by the discontinued products.
Now moving on. Let's talk about the materials and total gross revenues of hospital services. So there is the comparison with the quarter of '22, we can see that as we've signaled to you before, our average -- our goal was to reach the goals of 2019, and we're very close to our best quarters in the company.
Let's talk about the EBITDA of Rede D'Or stand-alone, so we're talking about BRL 1.841 billion, that is 22% above the third quarter of '22, 13.5% above the second quarter of '23.
We have a series of effect, the effects that are nonrecurring in our results, negative and positive effects. We have 330 million positive because of a reduction of a provision and victory that we had in the PIS and COFINS tax and 2 adjustments, nonrecurrent in terms of [indiscernible] delinquencies that we wanted to protect some discontinued contracts with the operators. It doesn't mean that we're not going to not seek these receivables. We have the expectation of receiving them, but we are going to be conservative and we're going to do the provision.
With that, we have a net effect of the nonrecurring effects of BRL 151 million positive. So adjusting with the recurring EBITDA, so we would have the BRL 1.690 billion adjusted EBITDA, which would be a growth in regard to the third quarter of 2023. The margin of EBITDA, which was 22.3%, if adjusted by the nonrecurring events, it goes to 25.8% with a growth of 0.9% in regard to the third quarter of '22 and with a growth of 0.05% in regard to the second quarter of '23.
Now let's talk about SulAmérica. We have the net revenue of BRL 6.9 billion, growth of 4.7% in regards to the second quarter. The user base, BRL 5 million of beneficiaries, 2.9 in health, the other in dentistry. Comparison year-on-year, we have a growth of 2.3%. In the comparison quarter-on-quarter, we have a reduction that stems from a big contract that the company decided to discontinue. A contract that was -- had a lot of deficit associated.
Now looking at the debt profile. We have 86.1% in the third quarter, the consolidated loss ratio, if we compare it to the 87.3% in the third quarter '22, so there is an improvement in 1.2 percentage points. And also quarter-on-quarter, we have a reduction in the consolidated loss ratio if you compare to the third and the second quarter is 23.2%.
So still, even though we are talking about quarters that have a worse seasonality, second and third, we show an evolution that we are still at a level that we consider high, but with great expectations to continue to evolve down the future.
I would also like to highlight that SulAmérica there has been a great work, and we have the administrative synergies. We are going to show you the numbers. I would like to highlight that in the third quarter, we deliver a level of administrative expense of 4.4% of the revenue. That number, it in '22, was above 7%. So there is an important gain of efficiency as we pointed out that we would seek and it is a very efficient number, and we will continue to work with it.
Let's talk about the expansion projects. We have a few projects that are very advanced, brownfields such as the new tower of Vila Nova Star. We have the expansion as well of Alianca Hospital, the expansion of Memorial Hospital, brownfields that we have a high convention of occupancy in Nova Star, in Alianca and Memorial already have occupancy levels in its current beds, very high occupancy levels.
In the case of Alianca Hospital, in addition to the high occupancy that we have in the hospital, we covered over 35,000 lives of SulAmérica. Lives of products that are above in some other geography, that didn't have previous access to Alianca Hospital, so it increases our completion of our very quick ramp-up of the brownfields.
So let's talk about the greenfields as well. They are relatively advanced. We have Macae D'Or Hospital in a region that is under-serviced for reference hospitals. We have a great optimism. Also, Alphaville and Guarulhos in the state of Sao Paulo, these are regions that have good coverage and good -- well, with an income that is compatible with the presence of Sao Luiz and lack of quality hospital beds. So we're going to work with these projects. And also, we have a great optimism that we're going to have a ramp-up that is similar to Campinas. In the city of Sao Paulo, we launched it in the end of May and we should get the breakeven in the sixth month of operations. This increases our conviction of the other greenfields that were selected in regions that really like a lot of beds.
I'm going to give the floor to Otavio. I will be here available for the Q&A.
Thank you, Paulo. Once again, good morning, everyone. I'm going to work on what Paulo said. So patient day and surgical volume, we can see on the graph on the left, we have the occupancy rate of 80.1% in the third quarter of '23, an increase of 0.5 percentage point if you compare it to the same period in the previous year. The company also reported 707,000 patients. This is a decrease of 2.4% in comparison quarter-on-quarter, a growth of almost 1% if you have year-on-year comparison.
On the graph on the right, the company reported 132,000 surgeries total. Growth of 4.9 -- growth since second quarter and a growth of 4.9% if you compare it year-on-year. The company also reported 96,000 large surgery. So there's a great -- there is a growth of over 8% and a growth of over 4% year-on-year, 8% was quarter-on-quarter.
So hospital beds evolution. On the left, you can see the reported 9,600 operational beds. A stability in comparison quarter-on-quarter and year-on-year, Paulo already discussed this. The decision of the company to reduce its exposure to paying parties where we have an average ticket that is lower, and therefore, the credit risk would be higher and its impacts in the follow-up of the total number of beds is there.
On the right, we have reported 11,512 total beds for the third quarter of '23, stability quarter-on-quarter growth of 450 beds in the comparison year-on-year. We include here the 325 beds of São Luiz Campinas, open doors in mid-May of this year as well as the brownfield [indiscernible] and other small brownfields are in addition.
Page 7, gross revenue and average ticket. We have the hospital services. At the left, we reported a total gross revenue for that segment of BRL 7.3 billion in the third quarter of 2023, a growth of 2.5% in the comparison quarter-on-quarter, a growth of 8.3% in the comparison year-on-year. In the same way, the total gross revenue of BRL 21.4 billion for the first 9 months of '23, a growth of almost 11% if you compare it year-on-year.
On the right, we have the total average ticket consolidated of BRL 10,425 in the third quarter of '23, a growth of 5.1% in the quarter-on-quarter comparison, a growth of 7.4% in the comparison year-on-year.
Page 8, gross revenue and average ticket, now in the oncology segment. On your left, the company reported a gross revenue of BRL 699 million in the third quarter of '23. We have a growth of 5.1% in the comparison quarter-on-quarter, growth of 11.6% comparison year-on-year. The company also reported a gross revenue in that segment of [ BRL 2 billion ] for the first 9 months of this year, a growth of almost 18% in the comparison year-on-year.
On your right, we have the reported average ticket for that segment, BRL 11,739 in the third quarter of '23, a growth of 4.2% in a comparison quarter-on-quarter, a growth of 12.6% in the comparison year-on-year.
Page 9, costs and expenses for the hospital services. As usual, on the left, we will start with the cost with hospital services. The reported costs of BRL 4.949 billion in the third quarter of '23, a growth of 1.3% in the comparison quarter-on-quarter, a growth of 8.6% in the comparison year-on-year.
As Paulo has previously stated, except the amortization of the event of the portfolios of SulAmérica and the exclusivity contracts, that growth in the annual growth would be 7% in the same analysis in the same period.
Also, the company reported costs, BRL 14.553 billion for the first 9 months for the FY of '23, a growth of 9.8% if you compare it to the first 9 months of '22, and with the same adjustments, the growth would be lower, it would be a growth of 8.1%. Once again, lower than the growth of the revenue for that comparison 9 months of this year in comparison to the FY '22.
If you compare it to the right, the company reported expenses, general and administrative expense, negative of 275 million -- of minus 54 million, I'm sorry. Once you disregard the reversal in the provision of the contingencies, it would be BRL 275 million, a growth of BRL 13 million, facing the second quarter and the same FY '23. The BRL 13 million can be justified with a growth of expenses and personnel and growth of subcontracted services, which is included in the IT maintenance and so on and so forth.
The company reported SG&A of BRL 474 million for the first 9 months of this FY. Once again, if you adjust it by the reversal of the provision for the contingencies of [indiscernible], it would be a growth of BRL 110 million facing the first 9 months of '22, which can be justified as a growth of expenses of depreciation of the investments in the area of IT of BRL 34 million, with an increase of BRL 45 million, other expenses with personnel here provisioning for the payment of the profit sharing for the FY '23. Once in '22, the company was away from getting to its goals at that time.
Page 10, EBITDA and net revenue. Once again, on your left, company reported an EBITDA -- accounting EBITDA, BRL 1.841 billion in the third quarter of '23, a growth of 13.5%. In the previous quarter comparison, a margin of EBITDA of 28.3%.
Paulo highlighted, adjusted by the nonrecurring events, this EBITDA accounting would be 1.690 billion, the margin EBITDA will be 25.8%. As the same way, the company reported an accounted -- for the first 9 months of BRL 4.9 billion, a margin EBITDA of 25.8%.
Once again, once you adjust it for nonrecurring events, it would be BRL 4.771 billion and margin EBITDA, 25% and still a growth in the EBITDA in the year-on-year comparison of 70%.
On your right, the company reported a net revenue, net income of BRL 1.4 billion for the third quarter of -- for the first 9 months of '23. Once you adjust the accounting effect of the amortization of the value of the portfolio of SulAmérica and exclusively the contracts, it would be having BRL 811 million, BRL 1.673 billion for the third quarter and the 9 months, respectively.
Page 11, SulAmérica. On your left, the company reported the net revenue in that segment of BRL 6.951 billion, a growth of 14.1% in the comparison year-on-year. On your right to the top, consolidated loss ratio of 86.1%, drop of 0.2 percentage points in the comparison quarter-on-quarter, drop of 1.2% in the year-on-year comparison.
Still on your right, below, the beneficiaries for health and dental, we have 4.9 million, a small drop when you compare it to the previous quarter, and an increase if you compare it to the third quarter of '22.
Page 12, debt profile. The company reported the cash and cash equivalents -- sorry, the total [indiscernible], 33.4. If we exclude the technical provisions, BRL 17.5 billion for net cash for technical reserves, the leverage with the net debt over the EBITDA LTM, 2.3x. The average deadline 5 years for indebtedness, so with the control of CDI + 0.9%.
On the right, we have the schedule for the debt amortization of the company that can be easily faced with the available cash for the company. There is no big refinance, no rollout of the debt up ahead that couldn't be easily faced with the available cash for the company.
Page 13, almost finishing. Always starting on the left. The reconciliation of the managerial cash flow as a company if you start with the reported EBITDA for the first 9 months of BRL 4.8 billion, we have an adjustment positive for the working capital of BRL 518 million. Thereafter, we have the negative adjustment of BRL 429 million for other balance sheet items.
Here, we have 330 million of the reversion of the provision for the PIS and COFINS tax. There's going to be an accounting effect immediately for the company. We have a cash effect as we remove the judicial deposits that were done with several causes related to this issue. And we have a negative adjustment of BRL 544 million regarding the leasing and the application of IFRS-16.
And once again, on your right, we have the payment of taxes, BRL 390 million. Once again, on your right, we have the investments, 2.171 billion here -- we have BRL 1.960 billion for the development of greenfields and brownfields, BRL 212 million ended in other, 43 million in M&A expenses and we have an adjustment negative BRL 695 million regarding the financial activities, treasury, amortizations, payment of [indiscernible] and net financial expenses of the bank of the company. A positive variation in the cash flow of BRL 1.116 billion in the first 9 months of 2023.
Last but not the least, on your right, we have the average days receivables and the DIO exclusively for the services of hospital services. We have a stability and records.
So therefore, I finished the presentation of the results. Once again, thank you very much, and I open for Q&A.
We will start the Q&A session for investors and analysts. [Operator Instructions] First question, Mr. Joseph Giordano from JPMorgan.
Paulo and Otavio, I'm wanting to explore 2 issues on the hospital. The first one, Paulo commented at the opening bit about the ramp-up of the hospitals that were recently launched. If you can give us some color and the movement of beds all throughout the last months and the last year, and we're talking about capacity, but we do not see an addition of operational capacity per se in the period. So I understand that there was discontinuity in some operations of materiality in Rio, and that brings efficiency to the group. So if you can give us a bridge so we can understand what was the opening of new beds and rationalization for the portfolio. I understand that there was -- you finished a few contracts that end up affecting, temporarily speaking, a bit of the demand. So that's the first question.
Second question is along the issue of provisions and PDD debtors that are in doubt. What is the recurrent, I mean, I understand that there has been some agreements, and it's larger in the long term, but what would be the percentage of the revenue from up ahead that line of PDD?
Hello. This is Paulo. Let me try and give you more on the ramp-up and the movement of beds. We're here at the hospitals that we have the biggest impact. We have 3 operators for the adjustments of registry. They occupied, they ended up occupying these products. On average, 300 patients -- 300 for Rede D'Or.
Concentration was in 4 hospitals. The hospital of Sao Carlos, Fortaleza, Aracaju and Sao Lucas and 2 of our hospitals from Brasilia. So we're talking about Santa Luzia and Santa Helena. These are important volumes, very relevant. So the 300 beds, they were distributed amongst those hospitals that I just mentioned.
In the case of Aracaju and Sao Carlos, we would like to say that about 50% of those beds that had the occupancy because through those products, we managed to replenish with the migration of the lives with a natural growth with the other operators in the case of Brasilia. I would like to say that even more 60%. And we have the expectation that those 50%, 40% -- after all, next year, we'll manage to replenish them.
This is the big impact in the reduction of capacity. Of course, we did not reduce our capacity in 350 -- 150 beds, because we have other effects of opening different beds in different units.
For example, Campinas. You remember that we always, in the greenfields, we have a projection that we think is conservative of opening 80 beds per year. In the case of Campinas, we have over 50 open beds that occupied with almost 70% of occupancy gets us to the breakeven that I commented that we are reaching now in the 6 months of operations.
So we are launching in the greenfields. We have the same mindset and the projections, and we have the capacity and demand we're getting into markets that are not well served. So the demand that it exists and it's not serviced locally, so the patients are going to the central area in the case of Guarulhos and Alphaville, they are going to [indiscernible] and seeking service of quality, well, around those geographies, there is lower quality. So we are sure that we're going to do the ramp-up of those units.
Even thinking about the size of the challenge, Campinas in regards to the other units, it has a larger challenge, because you have 70% of the lives concentrated in operators that we did not service within the hospital. So that reality is very different once we go to [indiscernible] and Macae as well.
And when we are talking about brownfields, of course, comfort is larger with the demand that we know. The hospital is already operating and with high utilization, and we are more at ease.
In the case of the bad debt, it's a one-off based on the contracts that we do not continue. We have a horizon that this shouldn't happen in the next quarters. It's not in the plans. And we have in the hospitals -- acquired hospitals a variation, and after observing them for a longer period and seeing the recovery of delinquency levels, they should have a provision for the delinquency that is larger.
And the impact of that, if I tell you the number, well, Otavio, correct me if I'm wrong, the impact in the consolidated is 0.3%. So we're talking about removing with our provision of delinquency to 5.3%, and this is a recurring effect.
Next question from Mr. Ricardo Boiati from Safra Bank.
Paulo, Otavio, I have 2 questions. First, if you can complement the issue of expansion. There are some interesting clues in regards to the expansion, but if you can give us an update of what are the openings expected for the fourth quarter and throughout 24, how you have -- how you're going to implement the expansion of the brownfield and greenfield? How has it been implemented in accordance to your projections? And if that movement for a normalization of the delinquency can benefit this expansion for 2024, we see a lot of operator health care -- health care plans to correct this. Can this help you with the equalization in the -- and maybe there is an acceleration in the expansion.
And the second point is in regards to SulAmérica. SulAmérica has shown an increase of sequentiality in the delinquency, so there might be an acceleration that is stronger from the fourth quarter of '24 as the readjustments start to accumulate in the portfolio and so they can be more relevant. And in regards to the evolution of SulAmérica's delinquency that has evolved a lot.
So I'm going to get part of your question. And then in regards to the expansion, I'm going to give it to Otavio. We have -- I'm going to give it to Otavio, so he can be more specific.
In regards to the part of the normalizations of the accidents and the health care plans, we have the expectation of an improvement for '24. We still imagine that '24 is going to be a year of replenishing. We see the market worried about getting profitability and rebalancing. So we imagine that this is going to have an improvement in the claims in 2024 [indiscernible], and this is going to be a more balanced scenario when you have more balance between the health care operators.
In the case of SulAmérica, we have shown an evolution still. We have a high standard but we have the expectation of continuing with an improvement -- progressive improvement in the claims. There's still a lot of work to do, but great perspectives, we expect them to be aligned with what we discussed over the last earnings call, progressive improvements in the claims once you observe the seasonality between the quarters. There are some quarters that are more under pressure than others, but we expect to improve quarter-on-quarter observing the seasonality.
I'm going to give the floor to Otavio in regards to the more specific dates of our launches.
Paulo commented that the investments are substantially aligned with the temporary line plan for them. So the answer here, so we don't go over project per project. We have the reference form of the company, and we present from Page 209 onwards project per project, the number of beds, the budget, the geographic placement, the difference between brownfields and greenfields. This is the best information of the company at the time, what is in the reference guidelines.
Next question is from Samuel Alves from BTG Pactual.
Paulo, Otavio, Raquel, 2 questions on my side. First, regarding subject that Paulo talked about, the claims in SulAmérica in the previous call in the second quarter, the company mentioned that they really believe in a normalization of 18 or 24 months and maybe before. Question is, is that affirmation still true or there is any new variable than we -- that might change that?
Second question, well the synergies with SulAmérica, a company showing once again the amount of synergies that is a big volume of over BRL 600 million of synergies already captured. But looking the DRE of SulAmérica, we see that the general and administrative expenses even went up quarter-on-quarter in the third quarter.
Question is that due to the nonrecurrent that initial synergy or should we see these synergies, these capture of synergies flowing for the administrative expenses that are lower in the P&L of SulAmérica? That's it.
I'm going to answer the part of SulAmérica along with Raquel.
The best way for you to follow those synergies is for you to see that we are delivering the administrative expenses in regards to premiums, we're talking about a reduction of 7.4% to 4.4%, now in the third quarter of '23.
As we pointed out, a great deal of the BRL 600 million, there are things that are impacting the claims volume. And we are talking about the negotiation of medication materials [indiscernible], the procurement that we gather with the Rede D'Or together the benefits, but a great deal of the BRL 600 million is in the administrative and you see the dilution, which is very relevant.
Maybe there are some contingency effects when you see the aggregate, you cannot do the follow-up of those reductions. But if you observe in an isolated way, the administrative, we are at a more efficient and on exhaustive threshold.
We are still going to capture a few things or as an execution on the example is the building that we are going to migrate to [indiscernible] lower in an area that is less than the area that we occupy and it's going to be within the BRL 600 million that is [indiscernible], but it's not in the numbers of the third quarter. It will be in from '24 onwards.
I'm going to give Raquel the floor to complement your questions about our vision of improving -- progressive improvement of the claims volume, reinforcing that our vision is still intact. We are positive still at a high threshold about the future and the improvements quarter-on-quarter. Raquel?
Samuel, thanks for the question. In regards to the claims volumes, as Paulo has stated, we expect to continue with this gradual trajectory of improving in the claims over the next quarters. We know that historically, the fourth quarter ends up having a lower seasonality, but with the pandemic, we still did not feel a normalized fourth quarter. So we need to see what's up ahead.
We continue to believe -- I would like to say that over the next 18 months, we should have a threshold that is more stabilized. We're closer to what we knew in the pre-pandemic scenario. This is due to several levers. There is a readjustment, there is sales, there is the management, the claim itself and creativity in the budgeting of products.
For example, now if you remember, 2 calls back, we commented on the launch of the new portfolio for the wholesale for the retail, they have a more intelligent reimbursement. And we zeroed the reimbursement for the base of the pyramid and we have a reimbursement that is more adequate for the top of the pyramid. So that is still over the last 2 months, whereas integrally of these new products, and we didn't have any loss of volume. So this is a great new -- because it plans harvests that are more -- that are healthier, that should have a lower claims volume.
For the next year, we still expect levels of readjustments that are above the thresholds that we used to see due to this adjustment post pandemic and the explanation -- it was -- the operation is still affected, but it's still moving along the lines that what we commented in the previous talks. Thank you.
Next question is from Mr. [indiscernible], Bank of America.
Two questions. First, I wanted to talk about the SulAmérica. There was an increment of 1 billion in the third quarter. It's above what happened in the first semesters of 1.6 million [indiscernible] that's what really withhold the claims in SulAmérica.
And the second question is on oncology. Oncology, it has a volume that is very flat in the first quarter. In the third, if you compare it year-on-year, there was a drop. Is there anything specifically increase in competitiveness that makes that volume more stable? Those are the questions.
I'm going to get the first one from oncology, we didn't have a growth of volume due to the discontinuity of products -- specific products that we used to service in one of our regional geographies. So we would have a growth, but we discontinued services. It's a very similar analysis to what I provided to the hospitals.
In regards to [indiscernible], I'm going to give the floor to Raquel. Thank you.
Thank you for the question. As I always prefer to talk about [indiscernible], which reflects the provisions -- general provisions that we consider [indiscernible] and everything that was discussed. There is no change in methodology. We still practiced over the last few years. I think that we should say that there is a degree of conservative, being more conservative because of all the scenario of uncertainties in the post-pandemic moment. But the constitution of these clients [indiscernible] are due to the seasonality that we are observing in the quarters in the box.
Of course, if we need to adjust it up or down over the next few months, it should happen. But we, for now, are seeing this constitution that is very adherent to our day-to-day operations.
Next question, Mr. Gustavo Miele from Goldman Sachs.
I want to ask 2 questions as well. More -- the first one related to the hospital operations [indiscernible]. There was quarter-on-quarter variation 5%, a threshold that is close to the third quarter of last year with an inflation of this year and the threshold that is lower.
I wanted to hear from you, if you can help us see the performance of the ticket in the technical level with the readjustments that you implemented in the third quarter. I wanted to followed a concentration -- a reasonable concentration of adjustments in the quarter of this year and an increment in the mix, as Paulo has commented at the beginning about the increase in the volume of surgeries. So I wanted to know if there is a relevant impact in the performance of the ticket in this quarter?
Second question, I want to restart the discussion of the claims of SulAmérica. Based focusing on the claim itself. If you look at the [indiscernible] data, you see the percentage of the reimbursement for the claim, total claim of SulAmérica was about 10%. In '23, we have a threshold close to 12%.
So I want to understand, what is the space that you see to maybe with the rationalization of reimbursement, you have a diligent fight against [indiscernible]. So it would be factual for us to think about reimbursement with the percentage of the claim that is going back to the threshold pre-pandemic close to 10% or maybe something larger? So we can try to map what can be mitigated in terms of costs. Those are the 2 questions.
About the hospital ticket, of course, when we increase the number of total surgeries and big complex surgeries in the company, we have a positive impact in the ticket. We also have the -- as time goes by, we have a cumulative effect of all the readjustments of all the health care plans, all the paying parties that were done with the fiscal FY that are appearing in each of the quarters.
You are correct. In fact, we have a concentration with readjustments with the main parties that are relevant in the context of invoicing as a company that happened in the third quarter. That some factors result in a growth of 5.1% and the variation of the average ticket year quarter-on-quarter.
Hi, Gustavo. Raquel. In regards to the claim and reimbursement. Here, there is no silver bullet. Here is a series of actions, and we are very diligent. As you highlighted, we have a big team [indiscernible] and we have a protocol several judiciary issue. So we cut the intermediaries that were benefiting, and this continues to be accelerated.
In regards to the percentage that you mentioned, over the last few months, that are outside of the period that we discussed, we still see a curve of trends in reducing the representativeness of reimbursement. There was a month that we already got to the 10%. But it's not good that we have a goal. So like you say that this operation will be healthy when it's 10 or 11. No, it's not that because that depends on your portfolio mix.
Once you have products, it's not reasonable that the percentage of reimbursement is above 1%. So 5 years ago, we had the basic lines. The reimbursement will represent half of the claim. When we talk about products, we did with an average ticket that is higher, a hospital network that is broader, of course, that would mean more. So products that run with a good claims, and there is a participation in reimbursement in the -- even 40%.
So we have to see the mix of products or trying to understand if the representativeness of the reimbursement is at a bet or not. But being very objective in -- over the last few months, we are seeing continuous drop of that representativeness of the reimbursement because of all the legal actions that we implemented.
What's also going to accelerate this is the harvest that is being planted for sales. So all those products that I sell monthly, 15,000 lives to get in the retail that come with a modular reimbursement. So that means that the basic plants, they have a reimbursement only for emergency appointment. So there's no reimbursement. For example, it was a big [indiscernible]. There is no reimbursement for therapy, which was another [indiscernible] a good well-dimensioned network [indiscernible] network is not necessary.
Next question is from [indiscernible].
I want to start talking about SulAmérica. Regardless of the fact that we've seen in this quarter, the average ticket expanding a lot in the quarter-on-quarter, I think it was 7% or 8%. We've also seen a strong increase in the claims for the beneficiary. The group, 6% quarter-on-quarter.
So I wanted to understand what would you attribute that increase -- the increase in complexity, surgeries that we've seen in the hospital side and Rede D'Or, was it something that you've observed in the network of accredited in SulAmérica? Is there still a lot of negotiation with SulAmérica in the registered network that might mitigate the cost that is growing so high over the next quarters?
And my second theme here would be, given that we are seeing the medical materials and the improvement on the quarters, and we've seen the delinquency that you commented, there would be larger with the recurrent [indiscernible] parties related to the complexity maybe. But the expectation of you closing the gap of EBITDA accounting and adjusted in one or 2 years still makes sense?
Hi, this is Raquel. On your first question. We always try to see that ticket. Well, if the premium is going higher than the claim, that would be the idea. So it would be, how can we attribute the numbers that you gave us? The seasonality, of course, we know that the third quarter is very complex in terms of frequency, it's also affected by the payments in regards to the well -- the admittance due to the flu and the mosquito-borne diseases, and there is the seasonality of also in oncology.
We live a moment of incorporation of new medications that were medications that I mean, how -- when would you hear about a drug of BRL 8 million for one application? So the incorporation of gene therapy, let you say, that increases the average claims it increases.
So seasonality, there is still several lines of renegotiation happening, several partners sitting down with us. What we are always seeking is an alignment of interest. So it has to be good. It has to be sustainable for all the parts of the chain and even for the service provider. So that's strong with all the claims team.
[indiscernible] 2 different things. The dilution of the relevance of the category, hospital and medications, all throughout time is our -- as we -- this means more efficiency and with the exercise with the lever of operations that are very strong, which is our relevance within our health care sector in regards to the providers of medication [indiscernible].
I would like to highlight that 19.4% reported in the third quarter of 89%, when we adjusted the mix between hospital services and the oncology business, it already gets us in the hospital business in a position that is even lower than the one that prevailed at the pandemic. That's one thing.
The increase in provisioning for delinquency to 5.3%, the impact in this quarter of BRL 85 million and the full period of 9 months within this FY, this reflects on our decision to protect more the operational results and accounting results in a transitional moment that we still have a lot of claims, dispute of working capital and the paying parties and service providers.
So the adjusted EBITDA, that made sense at the worst times of the pandemic where a lot of items above our [indiscernible] medications, we didn't have coverage in the paying parties. So we wouldn't even have the right to invoice and receive that, so it would make sense then that we would have to highlight the adjusted EBITDA. But as time goes by and as the pandemic is left behind, those differences between the accounting EBITDA and adjusted, they tend to be very small in the future, and they should be just limited to ERSO and long-term mechanisms that are similar and M&A expenses. So the differences tend to decrease as time goes by.
Our next question is from Mr. Leandro Bastos from Citi.
Two quick questions. The first of all, SulAmérica -- depending, well, still working with the comment of Raquel, oxygenation of harvest and modular adjustments. Can you give us the difference of the claims between the products and the legacy? I mean what are -- what can help with the claims in the future?
Second is a specific question on the financial results of the quarter. The company had a positive result. Usually that line is negative or close to neutral. So I just wanted to understand if there was anything atypical in the quarter? That's it.
Hi, Leandro. Raquel here. I'm going to start by answering the issue of the difference in the claims of the new modular product in the portfolio versus the previous one. We still cannot measure. It's still very recent. We are in a period -- we still have products that get in. Specifically retail [indiscernible] time period. So these claims in this product is not going to be recurrent.
But if I saw a basic line running product -- running at 7%, 8% of reimbursement. And when I remove the reimbursement, I have to consider that a part of that goes to the cost of network, the other part goes away. So in the limit, we hope for a [indiscernible] difference in the claims between these 2 products of about 4%. This is an estimation. I am -- well, we have the internal pricing that we still have to observe and as they're going to mature over the next few months.
For us to have some trust in the numbers only from 2024, mid-'24 [indiscernible] and then we're going to have a more mature harvest. Thank you.
How about the financial results?
Nothing extraordinary.
Next question. Mr. Caio Moscardini from Santander.
I ask first about the registering of new paying parties, specifically in the hospitals -- greenfield hospitals that you have launched. How has it been? Have they been successful adding new paying parties and also regarding [indiscernible], have you managed to register [indiscernible] in these hospitals?
And the second question is in regards to the working capital. We've observed a positive working capital. So I wanted to understand that this is a dynamic that should continue up ahead. Maybe the main line that is benefiting the working capital are the technical provisions. So should we be thinking about those lines up ahead?
I'm going to answer the first question, and I'm going to give the floor to Otavio. The greenfields, if you observe Rede D'Or, we selected areas where we are building the best hospital in the geography. We're not just getting a new hospital in a competitive with -- in a competitive region with quality reference space, no. We are effectively building the hospital infrastructure in places that we understand that there is income or good penetration of health care plans of medium to high tickets and they're going to have access to those infrastructure, and this is a situation in Campinas, in Guarulhos. This is the situation in Alphaville, this is the situation in Macae because of the amount of companies connected to oil and gas and Petrobras itself.
So when we look at those infrastructures, the more recent one that we launched, we registered almost all the health care plans that work, the operators that work with that profile of ticket. SulAmérica [indiscernible] once you have a great deal of the operators registered, then you'll have an ease where the client that wants to access that hospital for them to access whether if it's by the operator that they already are a client or if they need, seeking an improvement in the health care plan level within the operator. They have all the levels, which is the case of Sao Luiz Campinas as well. And if there is another operator that having interest to access this infrastructure, the family or in HR, we see a lot of movement when we -- in the average to high ticket where we are positioning Sao Luiz Campinas, we see a growth that is important and a good perspective for the software plans that were registered.
Now I give the floor to Otavio to talk about working capital.
In this year, we brought back home BRL 518 million in working capital. And this is one of the several aspects, positive aspects of the acquisition of SulAmérica. First, you received the cash and then you have the use of cash in the future. But this year, this is one of the positive effects of this transaction that allows us to include, to have a better management -- more efficient management of the working capital.
Q&A session is closed. I'm going to give the floor to Mr. Paulo Moll so that he can close the earnings call.
Thank you very much for everyone that took part. And briefly, we will be together again, and I hope that we can continue with our works for the integration of SulAmérica, growth of our hospital network. The moment is a very challenging one, but we are at a position that is unique for the health care sector to offer better conditions and for us to accelerate, once again, the rate of growth and considering the market conditions we can deliver in terms of profitability with growth -- interesting growth, and I hope that we can accelerate more with the country growing, the unemployment decreasing, and also with the market controlled claims volume, this is very important for work for the SulAmérica team to work with Raquel, also being a leader of the group and briefly, we should be adjourned. Thank you very much.
[Statements in English on this transcript were spoken by an interpreter present on the live call.]