Rede D'Or Sao Luiz SA
BOVESPA:RDOR3
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Rede D'Or Sao Luiz SA
Earnings Call Analysis
Q4-2023 Analysis
Rede D'Or Sao Luiz SA
The company closed the fourth quarter of 2023 with a total gross revenue of BRL 7.022 billion, marking a robust year-on-year growth of 8.7%. This performance caps off the year with a significant total growth in revenue to BRL 28.4 billion, up by 10.3% from the previous year. Contributing factors include a modest increase in patient days and a stronger average ticket growth of 8.4% to 8.5%.
A specific highlight within the revenue mix is the oncology segment, which in the fourth quarter generated BRL 715 million, showing an impressive 15.8% growth when compared to the same quarter of the previous year. This surge is attributable to both an increase in the number of infusions and an 11% increase in the average oncology ticket. Overall, the oncology gross revenue for the year reached BRL 2.736 billion, up by 17.3%, driven by a notable average ticket hike of 15.3%.
Operationally, the company managed to contain costs of hospital services in the fourth quarter to BRL 4.8 billion, 6.1% higher than that period in the previous year, but still lower than revenue growth. Such efficiency paved the way for a gross margin increase to BRL 1.4 billion for the quarter, while the yearly gross margin grew by 15% to BRL 5.9 billion, effectively raising the gross margin percentage by 1 point to 23%.
General and administrative expenses for the fourth quarter stood at BRL 261 million, consistent with the previous three quarters, stabilizing the costs against company revenue. When adjusted for nonrecurring events, the administrative expenses for the year were at BRL 1.1 billion, growing by 11% and thus remaining proportional to the revenue growth.
The company's adjusted EBITDA for the year amounts to BRL 7.4 billion, with a standalone EBITDA of BRL 1.4 billion in the fourth quarter for Rede D'Or which reflects a substantial year-on-year growth of 17.2%. The annual accounting EBITDA also witnessed a remarkable increase of 19.7% to BRL 6.346 billion, maintaining an EBITDA margin of 25%. The adjusted net income, with the exclusion of amortizations due to M&A activities, was BRL 721 million for the quarter, and the company projects continued improvements and growth into the next year.
SulAmérica's standalone revenue for the fourth quarter was BRL 7 billion, contributing to an annual revenue of BRL 27 billion, marking a growth of 14.6% for the year. Highlighting the efficiency in operations, the consolidated loss ratio dropped by 7.4 percentage points from the fourth quarter of the previous year to 85% and showed a yearly recovery, as the loss ratio decreased by 2.1 percentage points to 86.4%.
The company is enthusiastic about several upcoming projects, including the launch of new hospitals such as Memorial Hospital São Luiz at Alphaville and expansions that address unmet patient needs. Investments amounted to BRL 2.9 billion, which was sufficient to cover financial expenses and still resulted in a positive working capital of BRL 600 million.
Total assets exceed BRL 90 billion with BRL 33 billion in cash and equivalents. Net debt stood at BRL 16.8 billion with a net debt over EBITDA of 2.3x, which includes insurance provisions at BRL 11.5 billion, lowering the ratio to 1.8x. The company strategically managed its cash flow with positive working capital and balanced investments against operational cash generation.
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Good morning, and welcome to the earnings call of the fourth quarter of 2023 of Rede D'Or. We have today Paulo Moll, the President; Otavio Lazcano, the VP of RI Financial Statements and the CEO of Dentistry of SulAmérica. We will have the event lasting one hour and the recording will be available at the RI website of the company after the first presentation, we're going to continue with the Q&A.
Before continuing, we would like to clarify that any statements that are placed in this earnings call regarding the business perspectives of Rede D'Or projections, operational goals and financial goals are based on beliefs and premises of the Board of Directors based on information that is currently available.
Forward-looking statements are not a guarantee of performance. They involve risks and uncertainties. They are referred to future events and circumstances that may or may not occur. Investors should understand the macroeconomic conditions, industry conditions and other operational factors might affect the future performance of the company and might lead to results that are materially different from those of the forward-looking statements.
I'll give the floor to Mr. Paulo Moll, and he will start the earnings call. Mr. Paulo Moll, the floor is yours.
Thank you. Good morning. Let's start with the highlights, operational highlights of the fourth quarter of 2023. Let's start with the net revenues, BRL 12.7 billion gross revenues in the fourth quarter of 2023. The year '23 closing, we get BRL 50 billion, EBITDA consolidated BRL 1.5 billion fourth quarter of '23 and BRL 6.4 billion in the year of '23.
And remember that if we consider the financial results of the assets, insurers restricted assets, we would have an adjusted EBITDA of BRL 7.4 billion. Net income, BRL 668 million fourth quarter of '23 getting to BRL 2.2 billion in '23.
Adjusted net income with the exclusion of the amortization of the portfolios of SulAmérica because of the M&A, we would get BRL 721 million in the fourth quarter of '23.
Rede D'Or standalone, we have BRL 7 billion in the fourth quarter of '23 growth in regards to the fourth quarter of '22, 7.4 percentage points. And we have the growth that is pulled by the growth in ticket, which is 8.5%.
Looking at the fourth quarter against the third quarter, 8.4% if you consider the full year comparison '23, '22. Occupancy, 74%. They very much aligned with the seasonality with an occupancy that is very strong, along with our best years getting to 79.5%. Good growth in surgeries, and I'd like to highlight that we've done several movements all throughout the year, where we had forgone a few contracts because these contracts. We have a bit more difficulty in the receivables or they might be a bit more difficult in the future. We focused on profitability and this is translated in our numbers.
Nonetheless, we are growing in the number of surgeries 5% in the fourth quarter. 120,000 surgeries in the close year of' '23, a growth of 6.2% year-on-year, 498,000 surgeries.
Materials and medications. We are seeking the number of 2019. We are close to that. We delivered 19.6% in this fourth quarter, with a drop of 1.2% in regards to the fourth quarter of 2022, if we adjust the oncology weight in our revenue composition, we are much aligned to what we did in 2019, and we continue to see opportunities to dilute this expenditure line of throughout '24.
Talking about EBITDA of Rede D'Or standalone, we got to BRL 1.4 billion in the fourth quarter of '23, growth of 17.2% year-on-year. And we would like to highlight the result of the year close of BRL 6.3 billion with a growth of almost 20% year-on-year. Here, I would like to highlight that we had a lot of value creation. Specifically, if you consider the difficult year in the health care sector.
And there are many challenges that we are facing as we have commented in the adjustments from several contracts. And it shows the capacity of our team in executing the plan and we're getting very close to our highest level of EBITDA margin. If I'm not wrong, about 26%, even having done a great number of M&A acquisitions, 17 of hospitals, and they had lower margins than the company margin itself. We are closing the year of '23. We are talking about 25% of EBITDA margin in the accounting books, very close to our record.
SulAmérica standalone, we did a revenue of BRL 7 billion, fourth quarter '23, close year of BRL 27 billion, which is the claims -- the consolidated loss ratio of 85%. This is a drop of 7.4 percentage points in the comparison of fourth quarter '22. We had a record there -- the close year of '23 also showing a great recovery in regards to '22. We got to 86.4% mark in the loss ratio. And we have a great -- an important recomposition of the reserves of the company. This is a movement that we understand is necessary and impacts the consolidated loss ratio.
Looking at the beginning of '24, we are seeing once again an improvement, sequential improvement in the way that we have it quarter-on-quarter. This is due to the several initiatives of the company. Renegotiations, control of claims, fraud -- fighting frauds, and great work done in administrative expenses reductions. At SulAmérica, we brought over 7% of administrative cost improvement in regards to the premium to below 5% of our deliveries in '23 [indiscernible] . Adjusted EBITDA, SulAmérica that adjustment, therefore, the financial revenue of the assets, we did BRL 300 million in the fourth quarter of '23, close year in 2023, BRL 993 million.
Also qualitatively, we've had progressive improvements in the claims. We had the 80% in the selling of SulAmérica with co-participation products. This is significant in regards to the records you can comment it, but also in the retail, we've done products with the reimbursement that is modular more restrictive issuing a greater control of the consolidated loss ratio.
Anyway, let's talk about the expansion of Rede D'Or. We're going to have a great year in April. We're going to start the operation. We are doing the conditioning, and we have the Torre Star Memorial Hospital in Recife. In the middle of the year, we have the teams being trained. We have the new Vila Nova Star here in Sao Paulo, and we have Aliança in Salvador.
In the third quarter, the beginning of the operations of Macaé D’Or and towards the end of the third quarter, fourth quarter, we have the new Barra D'Or very advanced in the words.
Hospital São Luiz at Alphaville and São Luiz at the city of Guarulhos, very important and expressive year. We are very excited with the deliveries on these projects, either by the growth of the hospital structure that we understand that we have a great opportunity and a repressed demand and the capacity to a current market share and also the possibilities of servicing other areas that are the unmet patient needs.
I'll give the floor to Otavio so we can continue with the presentation. And before that, I'd like to highlight the consolidated number, very important in 2023 at Rede D'Or, we generated in the company. And consolidated in '23, BRL 5.5 billion after the payment of income tax and social contribution tax. That was enough to fully finance the investment cycle of the company.
We have a CapEx that is BRL 2.9 billion. This is enough to pay our financial line expenses, net expenses of BRL 1.88 billion. This operational generation finance, the entirety of the net expenses of the company, and we still have a cash working capital of BRL 600 million. In the last line after the payment of the -- payment of our own interest on capital, we have BRL 245 million before the financial capture. And it shows the enormous capacity for the execution of our team here at Rede D'Or in a sector that had a challenging year, the operators with the claims still very high.
We're continuing with the contracts that are with the volume. I wouldn't say representative, but some of the cases still significant. So the challenge of growing the operations, seeking more profitability and having this cash generation level shows once again our capacity of the team of seizing opportunities. I would like to congratulate everyone for the year '23. Otavio continue, please.
Thank you, Paulo. Let's start reminding you all the numbers, all the analysis here, they're following IFRS 4 done in such a way so we can understand the -- we can benefit the reader and the users so they -- so you can understand better the financial books of the company. The IFRS 17 of the company, the impacts are all described on number 2 in our financial statements.
I'm on Page 5, starting with the graph on your left. The company reported in the third quarter of 2023, an average occupancy rate of 76.4%, absolutely aligned with the record of the company. For the fourth quarter of the year, average occupancy, 79.5% on average. We have 673,000 patients a day. This is aligned with a records of the company for the fourth quarter of any year.
On the right, you can see 120,000 surgeries for the fourth quarter of '23. This is an increment of 4.9%, if you compare it to fourth quarter of '22. 1 year, 490,000 over that in surgeries, a growth of 6.2% in the surgical volumes.
So on the left, on Page 6, the company reported at the end of '23, 9,600 operational beds, actually. On your right, you have the reported of the total beds at the end of the FY 11,737 beds. Here, we have Memorial Star with 650 beds. And approximately 100 beds that are from smaller projects. All throughout '24, the company will have the launch of enterprises, investments on Vila Nova Star. We'll continue with the 140 beds, Aliança Star, also 146 beds, Macaé, new Barra D’Or as well, 100 over 200 beds, [indiscernible] many beds and Alphaville 212 beds. All the number of beds fully working after the usual ramp-up of the enterprises of the company.
Page 7. Company reported in the fourth quarter of '23. The total gross revenue is BRL 7 billion and BRL 22 million, growth of 8.7% in the comparison with fourth quarter '22. Results of the growth of the patient days, 0.2% and an average increase of the ticket of 8.5%.
At the center of the page, the company reports the average growth -- the total growth revenue, BRL 28.4 billion, growth of 10.3%, an increase in the patient day volume and an increase in the average ticket of 8.4%.
Page 8. Company reported in the fourth quarter of '23 gross revenue that stems from oncology, BRL 715 million, a growth of 15.8% in the comparison with the fourth quarter '22. This is due to the number of infusions in Greece and the average ticket on oncology on the average ticket, sorry, of 11%. The gross revenue once again from oncology at the center of the page in '23, BRL 2.736 billion, a growth of 17.3% in regards to the previous FY, an increase in the infusions and an increase in the average ticket of 15.3%.
Page 9. On the left, company reported cost with hospital services in the fourth quarter of '23, BRL 4.8 billion. This is a growth of 6.1% growth, it is lower than the growth in the gross revenue in the same window of time that allowed for the growth on the -- growth margin that allowed for the growth of BRL 1.4 billion in the fourth quarter of '23.
In the same way, at the center of the page, the company reported the total cost by hospital services BRL 19 billion, a growth of [ 18.8% ] if you compare to the FY '22, the growth that is lower than the growth of the gross revenue of 10.3% that allowed for a growth of 15% of the gross margin in '23, BRL [ 5.9 ] billion, a growth of 1 percentage point in the gross margin to 23%.
On your right, we have BRL 261 million of general and administrative expenses in the fourth quarter of '23. Value that is aligned with what was reported in the previous 3 quarters. Taking into consideration here the one-off, the reversion of the provision for contingencies of the third quarter. This number, when you have it against the revenue of the company is stable in all throughout the year. In the year, we have BRL 735 million of general and administrative expenses when adjusted to the nonrecurring events, BRL 1.1 billion, a growth of 11% phasing aligned with the gross in revenue -- gross revenue in the same period.
Page 10, once again, to your left, the company reported an EBITDA accounting in -- of BRL 1.4 billion in the fourth quarter, growth of 17.2% facing the fourth quarter of '22 and accounting margin you can see here on the slide. And the center of the page, the accounting EBITDA in '23, BRL 6.346 billion, a growth of 19.7%. And in regards to the FY '22, margin EBITDA of 25%.
On your right, the company reported the net income and consolidated of BRL 668 million in the fourth quarter of '23, respectively. Here, the adjustments are related to the amortization of the SulAmerica portfolio and the costs for the release on synergies once we incorporate SulAmerica. The company reports a net adjusted income of BRL 2.1 billion and BRL 2.3 billion, respectively.
On Page 11, on your left. SulAmerica report the net revenue in the fourth quarter of '23, BRL 6.9 billion, almost BRL 7 billion, a growth of 8.8% when you compare it to the fourth quarter of the FY '22.
In the year, '23 -- almost BRL 27 billion. In 2023, a growth of 14.6%. Top right, the consolidated loss ratio dropped of 4 percentage points between the fourth quarter of '23 and the fourth quarter of '22, 7 percentage points actually and a year, a drop of 2.1 percentage point from 86.4% of consolidated loss ratio of 23%, facing 88.5% in '22. Still the stability in the number of health and dental beneficiaries.
Page 12. The company reports total assets of over BRL 90 billion, including real estate, the applications of cash and cash equivalents BRL 33 billion. If we exclude the technical reserves, then we have BRL 17 billion. We have a net debt of BRL 16 billion -- BRL 16.8 billion and the net debt over the EBITDA 2.3x. The net debt including the insurance provisions, BRL 11.5 billion, which results in the net debt over EBITDA still lower of 1.8 billion -- 1.8x. The indebtedness of 5 years in the third-party -- well, the average cost of debt we are working CDI plus 1. We don't have revenues in euros or dollars and on the right, see the amortization schedule until the indebtness.
Page 13, last page. We are starting on the left with the managerial cash flow reconciliation. Starting with an EBITDA reported of BRL 6.359 billion. Moving to the right, we have the working capital positive of BRL 1 billion. We have thereafter on the right, the other balance sheet item of BRL 474 million negative. That adjustment is necessary and it's referring the PIS and COFINS over the financial revenue and the ISS over the insurance of Rio de Janeiro sorry, and ICMS saved BRL 99.4 million that impacted positively the EBITDA of the company.
Then the adjustment for the reconciliation, great reconciliation. On the right, we have BRL 741 million of leasing expenses, thereafter BRL 602 million of taxes paid, resulting in an effective aliquot.
Thereafter under right, the investments of BRL 2.9 billion, including BRL 767 million in greenfield projects, BRL 588 million, in big brownfields, BRL 411 million -- in brownfields, BRL 314 million; investments in maintenance, BRL 355 million; in IT, Rede D'Or investments, other BRL 65 million of investment in IT on SulAmérica, capitalized interest rates of BRL 200 million, the acquisition of real estate, BRL 42 million among others less relevant items.
On the right, we had the use of cash, resulting the financial activities of the company, BRL 1.3 billion. The result and the balance between capture amortization of debt revenues, net revenues of the company, all the cash, you can see BRL 1.2 billion.
On the right, we show some statistical data, the average days of receivables, inventory and paid outstanding exclusively of the hospital sector. Therefore, I finish the presentation and we are open for the Q&A session. Thanks.
[Operator Instructions] First question, Samuel Alve, BTG Pactual.
Two questions on our side. First, I wanted to know more about the improvement of the consolidated loss ratio of SulAmérica, this is an improvement in quarter-on-quarter more is shy than the seasonality could suggest in the beginning but just so we can understand or maybe get something else, some color, if it was a growing frequency above the seasonality of the record of the fourth quarter. If you have any information on how that evolved throughout the fourth quarter that would help us understand? That's the first point.
Second, regarding the drop in depreciation and the financial results quarter-on-quarter. Based on our analysis, there seems to have happened because of our reevaluation of the right of use. Was there a one-off gain in the fourth quarter. In regards to this accounting revaluation of the rights of use and can you quantify that? That's it.
So let me get the second question. We had a change in practice in the accounting of IFRS 16, no impact on the result, impact only on the balance and we had a provision of TPC of assets, and we decelerated the depreciation of some assets and that has an impact in the financial results of the company.
Samuel, this is Raquel. Thank you for the question. To answer, I will allow myself to do a recap of the year. We can see a gradual improvement, very consistent, responsible of claims. You know the sector and the actions here of a maturation that has 12, 15 months from the inception. And every month of '23, new actions were taken, including '24, giving you this [ color ]. I can list as an example, several of these actions such as the renegotiation of the oncology and milligrams that we've mentioned in the conversation, renegotiation of the policies, materials, medications to bid in regards to the renegotiation of home care and transition, very incisive representative of the reimbursement in the problem.
And there is an increase in the preparation that reflects the more conservative management of SulAmerica of the claims, each of these actions, they happen and that has a reduction of one point -- over one of '23 and a reduction of almost 8 points in regards to the fourth quarter of '22. When we look year-on-year, the picture is very positive reduction of 2.3 points.
Since the administration of the company, we have the satisfaction of a result that is showing to be very consistent and continuously improving.
Next question, Ricardo Boiati, Banco Safra.
My first question is in regards to the evolution of the ticket in the hospital services. There is an increase of 8.5% year-on-year. I wanted you to explore the main components. I think that there is -- I think that the complexity should have increased with an increase of 5% in the volume of surgeries. But if you can elaborate in that issue of complexity, the readjustment of the tables and also mix of contracts that you observed throughout the quarter would be interesting.
Second question, given that we closed the fourth quarter, can we -- can you comment, if possible, on how you saw the operations in the first quarter of '24. Specifically, if dengue-fever might have had a perceptible impact whether if it's claims or any other points?
Thank you for the questions. Boiati, this is Paulo. About the ticket. The color that we can give you is that our readjustments, they are along the IPCA plus 2 since we had the lower inflation in the year. You can consider that to get to that 8.5% in the growth of the ticket. The -- what we have here is the gains and mix, mainly complexity, and maybe a contract of the lower discontinued ticket but doesn't have a big impact. They were smaller contracts. But there are some contributions. Of course, about the beginning of the year, our limitation, of course, to talk about the first quarter, we have that. But as Raquel has said, SulAmerica, we continue to see sequential improvements. This is what we have told you and we continue to see this in the first months of '24. And in the case of Rede D'Or, specifically from the middle of January, we can also see the occupancy of the hospital is very strong.
In the case of dengue fever, of course, it has a higher impact in emergency, not so much the admittance to the ICU but I don't think that there is a financial impact here in the consolidated of the company that is significant. There is a flow, of course, of services that is more heavy duty and our emergency with our care of adjusting our teams. So we can continue to have a good experience of the clients that seek our emergency rooms. Along with dengue, we have a lot more research for COVID, which has impacted the workflow in our emergency rooms that will be normalized over the next few months.
Next question, Joseph Giordano from JPMorgan.
My question is in 2 fronts. The first, looking at that issue of the improvement in the public health care system in the country, I wanted to hear from you, do you see any movement for the change in regulatory changes in the individual plans that would be the first question.
And the second point, well, thinking about the trajectory for normality. I know that it's very difficult to do the predictability exercise with the news mentioning that this is another increase of 25% in the prices. So I really wanted to understand how do you see the normalization of the ROE in SulAmerica.
And the financial side, for Paulo, when we look at the clients, a great deal of that comes from the accumulation of receivables that is higher. We imagine that maybe the worst was past us. And we would be at a more stable regime. There is the adjustments of receivables over the last quarter. But I wanted to hear from you. How are these renegotiations for the monetization of receivables. We have the ticket, I wanted to understand how that affects your receivables.
Thank you for the questions. Can I get the first one and the third and then I'm going to get to Raquel to speak of the second. Well, first, in regards to regulatory issues. We've discussed there is the demand, of course, of several operators, the technical review of the individual portfolio. So that obviously will go through the analysis of the agency is predicted in law. And we've seen cases of transfer portfolio that we -- that it's been applied.
This is the theme of highlight and regulatory. In regards to the receivables, we should highlight that there is an increase in the number of days that's concentrated with a few payments of our great partner that slipped from December to January, we've had an improvement. I wouldn't say complete improvement in normalization, but partial already in January due to this concentration. But I'd like to highlight that we have basically -- the accounts receivable is stable if we compare it to the third quarter and with a great quality.
So we've tried to be sensitive to the demand of operators for some more days or maybe in the update process. So we have a lot of tranquility in the quality of our receivables. And movements that we've done were along that direction, qualifying our main partners and relationships there, including their concentration and decreasing the ones that we had the expectation that we had more delays and more difficulties. I'm going to give the floor to Raquel to speak about the second question.
Right, Joseph, thank you for the question. Of course, last year, there was a cycle of readjustment, very big for the recovery of the market itself, as you've seen all the operators. And this continues to be the adjustments of the claims, even though where there is an improvement, consistent improvement of the results. There are still a cycle of another 12 or 16 months.
So speaking of the readjustment, the pool that we should get over the next few weeks for the operators, basically here, we see a number that is significantly less than the year '23. But a readjustment still 2 digits, very important for those of us -- for those that are receiving.
Speaking of prognostics, once again, everything that we planned has a maturation time. Last year, we invested very much in claims, but we invested in products. So to have the -- we have better products and we're going to get better fruits from our labor with these new products in the future. We launched 23 products with the modular reimbursement. What is the -- the base of the pyramid for all the operators, there is a reimbursement exams, medical [indiscernible] therapy for what we launched in a modular reimbursement, specifically for wholesale, there is reimbursement in emergency.
All the rest is within the inner network. The modular reimbursement, there is the reimbursement for emergency and there is also for [indiscernible]. As you go up the pyramid, of course, you get to the full reimbursement. So that's why we call it, a platform of products that is much more intelligent. So these 23 products that were launched on throughout last year have over 100,000 lives implemented considering February of '24.
Certainly, this will bring a better management of the claims and a better relationship with the beneficiary with the health care plan. Co-participation Paulo also commented at the beginning, we see a growth of co-participation. He mentioned the percentage, 83% with the contracts with co-participation. And this is not news. We've heard about this for a long time. And this is for the here for the small and medium-sized companies, 30% is the selling of the modular, the only product available and co-participation.
So people are choosing co-participation. That generates a more use, more -- better utilization and also with entrepreneurial insurance, there is a change in the big companies -- in the big hiring companies, even those that had co-participation, 10%, 15% going to 20%, 25%, it's growing to 25%, these are excellent news.
Reimbursement. What we started from last year continues. We get at a certain moment of participation of the reimbursement in the claims over 14% of representativeness. Now we have one higher digit, 9.7%, 9.8%. This is due to a very strong work of the entirety of the team over 140, over [ 20 ] communications to the COEF of suspicious financial activities, biometrics for reimbursement, the -- so you have to have the disimbursement invoice for the reimbursement and that generated an invitation for everything inviting to over 2,500 users to leave and this shows our strength in management and mainly we will have the claims that will be more -- management that will be more consistent in the future.
Well, also your question, I wanted to reinforce the message at the beginning. Maybe the way that you should follow more efficiently our cash flow is looking at our operational cash flow. Even though there is a small number of increase in the number of days, there is a record year for the company. There is over BRL 5.5 billion in operational cash after the payment of the income tax, which is enough to pay the investment flow.
We are at the peak of the investment flow and to pay the financial net financial expenses of BRL 1.88 billion and still have a cash generation of over BRL 600 billion that is only negative when we have the payment after the interest overall capital over BRL 180 billion. This is to highlight that this is a year of strong cash generation, always trying to improve. We are working with our base on receivables, but I think that the company shows a lot of resiliency at a difficult moment, bringing this record cash flow.
Next question, Fred Mendes of Bank of America.
I have 2 questions. If we can go back to SulAmérica and correct me if I'm wrong, we have the understanding that when Rede D'Or did the M&A, there is the smaller -- more efficiency in the reimbursement and that can impact the NPS and you will release the NPS and having the lives. How about the specification of this a bit below on the claims quarter-on-quarter. So I wanted to understand if this is a little bit more? Or is it business as usual? Or that's a trend? That's the first question.
And maybe the second one, Moll, so we can apply it more technical with the interest over net revenue, 7% of the revenue, and it went to 5.1% this quarter. So just so we can model if this is more efficient or it was a one-off, and then it should go to the 5.6%.
Fred, thank you for the question. From what I understand, you saw last year a strong movement of the operators of SulAmerica in regards to the regulation of reimbursement that impacted the experience of the company or decline and your doubt is if in the fourth quarter, there is an effect of maybe stopping this management. No, the main effect that you can observe in the fourth quarter is more connected to the reserves with being more conservative.
Now the point that you talk about the client experience is very important. If I can show the main point that we have in 2024 is how to retain the good client in-house. So keeping the aquarium full so that in moments of economic growth, they can multiply. We learned on '23 to treat differences, there is even the implementation of a Board of Concierge to give differentiated services for those that we have as differentiated, and that's in rollout. There is a premium differentiated that will be available.
So NPS is part of the contract of management of 100% of the executive of this company, whether if it is business area or corporate, this is an obsession for us. Of course, without any loss to the results.
Well, in regards to the second question, we, from time to time, take the credit for PIS and COFINS over the canceled non-submitted revenues from the paying parties. To model that on time, 5.7% -- 5.7% in the fourth quarter, that dropped to 5.1%. It's within the best income -- the best management of the taxes of the company to keep them under control.
Next question, Vinicius Figueiredo, Itaú BBA.
I wanted to explore in detail the results of SulAmerica. I think there were the questions of the colleagues, it was approached. But the thing that I noticed over the last quarters, we had a strong growth in revenue, mainly due to the pass on of the tickets. But in the fourth specific quarter when we look from the third to the fourth quarter, there is a deceleration. So I wanted to understand if there is a more seasonal component that we should take into consideration for the ticket. Can that impact and maybe be a part of the explanation for the claims not having improved according to the record.
And the second point is another follow-up and the question is following up on the question of Samuel. There is a review of the assets that Otavio has commented. There is a deceleration of the depreciation. And with that, when we look at the depreciation plus the interest over rent, it dropped. So I wanted to understand if this threshold that we see in the fourth -- the third quarter is the threshold for '24 or will there be a carryover of a one-off effect in the specific quarter, just so we can try and model this better.
Let me start. Well, first of all, there is a growth of average ticket of all the portfolios last year that was very expressive. Of course, I'm going to give you an example. Of entrepreneurial, I have an adjustment applied to '23. Talking about company, it's 22%. So this is a historical record when we look at the previous years.
You're going to tell me, well, Raquel, how do I correlate this adjustment with the growth of ticket that I see under the records. Well, that involves a seasonality in regards to the big contracts, the small business companies, medium-size companies that is adjusted in May. And there is another important point that we want to do a recomposition of the results of the big contracts of the big portfolios that not necessarily are going to focus on the ticket.
So if I have the 24% of the readjustment and an increase of co-participation plus a contractual extension. Certainly, I will choose the second because we will have more consistent crops, like you say, in the future. So determine of the response is that there isn't any response and what we have done before. A point that we haven't mentioned and it's good that everybody has in radar is, 2023 is a year that is expressive in all the portfolios, specifically all the entrepreneurs portfolio. So we had the pent-up on the Southern region in Joinville.
We had cleanups also here, so that impacts in a certain way, the numbers that you're looking at, but all -- but planning a more consistent threshold.
Well, Vinicius, the change in practice and the adoption of IFRS is repeated on Page 16, 17 on the financial demonstration. The impact on the -- it's BRL 1 billion in the expenses, yes, there was a smaller expense in the fourth quarter. And from now on, it's going to be in the middle of the road between what was the expenses in the fourth quarter and the previous 3 quarters.
Next question, Mauricio Cepeda, Morgan Stanley.
Let's go back to the working capital that you were discussing. There is an increase on the accounts receivable, specifically the drop in the contract. But also I see that the denials, the decline -- the deny of the claim has increased in the number of accounts receivable and there is some receivables with an aging that is older, above 180 days and it seems that there isn't the bad debt provision for all this volume of the older. The first question would be, is there any possibility that, that will reflect on a structural change of what is the recurring level of claims, deny of the claims and also the paying party in the worse cases.
The second question, going back to SulAmerica. You mentioned several examples that what you have done in fighting costs, frauds, also some redesigns in regards to modular reimbursement and co-participation. Do you think that somehow do you have strategies to make the networks more restricted even if that involves the partner that we'll give you more control, which is the claim of the portfolio than simply responding to a claim that is completely outside of the breadth of the scope that you have.
To get all throughout the FY '23, we -- the company has made a lot of administrative decisions. So we can see in the countries you can see the bad debt and we increased the provision in hospitals that were recently acquired with the financial demonstration of 5.4%. And topography is reflected on the administration of the company in the market dynamics today present.
In regards to the coverage, of receivables that are overdue more time on Page 62 and 63. The books, we have the provision of BRL 1 billion -- over BRL 1 billion. And on the next page, we have receivables that have been due of over BRL 1 billion. So we have a provision of BRL 400 million, superior to the volume of the accounts receivable that is over 1 year. And I would like to remind you that there is always a work of the recovery of the titles. We're always recovering 1 or 2 years, sometimes beyond 2 years, titles that are here overdue, of course, reflected in the aging list of the company. So nothing abnormal here.
This is Raquel. Yes. In regards to your question, in regards to the products, with the more restricted network, notably at the basis of the pyramid, this is part of the strategy for many, many, many years before -- well, you can see the products that were launched in 2018. And of course, they are being perfected. So we are learning on how to do this. It is fundamental that we have the alignment of incentives amongst the participants on the value chain. So the product is not a problem of the operator, and it starts to be on issue that has to be administered by all the involved parties, including the service provider.
So this is analyzed with the regional and cultural issues. And of course, the competitors, they change a lot. The more that we leave from this obvious access of Rio Sao Paulo, we have more players and regulatory is part of this strategy and in others, not so much. And we have others being launched in commercialization.
Next question comes from Gustavo Miele, Goldman Sachs.
I wanted to go over two points. First question. Trying to reconcile that stability quarter-on-quarter that we saw in the operational goals of the company. So saying that you have an ongoing ramp-up of company that should be something about 20 beds per quarter, wanted you to correct me if I'm wrong in this point. Maybe here, there is a closing of 20 beds quarter-on-quarter, so mature and organic. So I wanted to understand if this understanding is correct? And is disclosing more due to seasonality? Or is there any point that you can mention?
Also, the second question is more for Raquel. I just want to get a quick update of what would be the KPIs of SulAmérica? Do you see the levels of claims and readjustment of prices similar to the corporate portfolio of SulAmerica. And do you see any type of variation that is relevant in the number of lives for this type of product.
As you know, in the fourth quarter, we have obviously a smaller volume and the hospitals to keep the good profitability, they do small, I would say, small adjustments in the size of the operation and the size of the availability of headcount and consequently, and the number of operational beds. That happens every year.
Looking at 2023 as a whole, it wasn't a year that we grew the number of beds that we imagined at the beginning of '23. But due to these decisions of discontinuity of some contracts, so that has nothing to do with the ramp-up of the new hospitals of Campinas. Campinas is above -- it's above the planning. We are expanding the beds this week and we are getting to a larger amount of beds and what we project for the 12 months of operation. Remember that we stopped operating at the end of May of last year.
So where we had the impact throughout '23 and the reduction in the number of beds was where we had the discontinuity of contracts that were important for these specific hospitals. For example, 2 of our hospitals in Brazilia, also our hospital in São Luiz [indiscernible] . This big operator that we discontinue the contracts, and it was representative and the good news is that in 2024, we are restarting, and we have the same number of beds as we had before the removal of this partner.
So we have a strong volume this year. And from the mid-January, we had the demand that is high and pinpoint the fourth quarter of this adjustment, the most important in this question is the analysis of this year of '23. The impact is more the same-store rent. We didn't have the growth that we expected. The ramp-up of the new bed. Well, we had the other brownfields. We have some [indiscernible] that we started last year with 80 beds and it delivered all the growth, we're 180 beds in it's full occupancy.
I think we got to 90% of occupancy some previous weeks. We're very satisfied with our organic growth and enthused with the beds that we have for all the structures that I just mentioned. I'll give the floor to Raquel.
Gustavo, in regards to the direct the national. Well, in terms of readjustment, yes, because we have to remember that this is a line with the portfolio. We have to remember that this is part of a pool. We have the readjustment. And in the entrepreneurial, it's a part of a contract that has a lot of plans, the national direct is one of those plants. But of course, they help with that result. What we've seen in terms of KPIs, it's lower frequencies, conversion for the maintenance, PMI that is lower and the reimbursement, modular reimbursement, which is -- which are the premises of this type of product also helped a lot in this result.
These are difficult products for the competition and we have a privileged position in regards to the competition.
Next question Leandro Bastos, Citi.
I just have one question on our side. I wanted to get the message for the commercial for SulAmérica, you commented that this is for the claims. But on the basis, do you still see a lot of space for the cleanup of the portfolio? Or can we imagine that this is the acceleration of growth?
Well, SulAmerica has 4,000 commercial employees. So selling is the focus of all the areas of the company. And even though there is a movement in the base of the beneficiaries of the company, considering the cleanup we have to mention the historical record of selling between health care and dental. We have [ million and 700 ] lives sold. This is a historical record in the 129 years of company. All this appetite and this aggressiveness, commercial is for this year in the fourth quarter, very important relevant movements for the corporate and wholesale and we do not think that it's going to be different this year.
Since we don't have any more questions, the Q&A session is adjourned. We would like to give the floor to Mr. Paulo Moll to close the call.
Well, thank you very much for the participation in the call of results. We will see each other in the first quarter call. Have a nice day.
While the earnings call is closed. Thank you very much for your participation. Have a nice day.
[Statements in English on this transcript were spoken by an interpreter present on the live call.]