COMPREHENSIVE HEALTHCARE SYSTEMS, INC. (FORMERLY GREENSTONE CAPITAL CORP.) MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE YEAR ENDED DECEMBER 31, 2021 (Expressed in US dollars)
This management discussion and analysis ("MD&A") of the consolidated financial position of Comprehensive Healthcare Systems Inc. ("CHS", the "Company" and "Company," "our" or "we"), formerly known as Greenstone Capital Corp., including its wholly owned subsidiaries Health Plan Systems Inc., New York Medical Management Inc. and Health Plan Systems Services Corp. ("The Company") and results of its operations for the year ended December 31, 2021 and 2020 is prepared as at May 6, 2022. This MD&A should be read in conjunction with the unaudited consolidated financial statements for the year ended December 31, 2021 and 2020 and the related notes thereto. Those consolidated financial statements have been prepared in accordance with International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board ("IASB"). All currency amounts are expressed in US dollars, unless otherwise noted.
Certain statements in this MD&A that are not based on historical facts constitute forward-looking information. Such information, although considered to be reasonable by the Company's management at the time of preparation, may prove to be inaccurate and actual results may differ materially from those anticipated in the statements made. This MD&A may contain forward-looking statements that reflect the Company's current expectations and projections about its future results. When used in this MD&A, words such as "estimate", "intend", "expect", "anticipate" and similar expressions are intended to identify forward-looking statements, which, by their very nature, are not guarantees of the Company's future operational or financial performance, and are subject to risks and uncertainties and other factors that could cause the Company's actual results, performance, prospects or opportunities to differ materially from those expressed in, or implied by, these forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this MD&A or as of the date otherwise specifically indicated herein. Due to risks and uncertainties, including the risks and uncertainties identified above and elsewhere in this MD&A, actual events may differ materially from current expectations. The Company disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
Such statements reflect our management's current views with respect to future events and are subject to risks and uncertainties and are necessarily based upon a number of estimates and assumptions that, while considered reasonable by the Company, are inherently subject to significant business, economic, competitive, political and social uncertainties and known or unknown risks and contingencies. Many factors could cause our actual results, performance or achievements to be materially different from any future results, performance, or achievements that may be expressed or implied by such forward-looking statements. Please see the risk factors discussed under the heading "Risk Factors" in this Prospectus.
Comprehensive Healthcare Systems, Inc. (the "Company"), formerly known as Greenstone Capital Corp., was incorporated on June 6, 2018 and became a "Reporting Issuer" in each of the Provinces of Alberta, British Columbia and Ontario pursuant to applicable securities legislation on April 11, 2019.
On September 29, 2021, the Company completed a reverse takeover with Comprehensive Healthcare Systems Inc. ("CHS"), a Delaware "C" Corporation founded in 2015, providing healthcare administrative software, licensing and maintenance services to various interests in the healthcare industry, including insurance companies, hospitals, doctors and labor unions,. Pursuant to the reverse takeover, the Company changed its name to "Comprehensive Healthcare Systems Inc." and began trading on the TSX Venture Exchange under the stock symbol CHS. The head office of the Company is at 2025 Lincoln Highway, State Route 27 - Suite 340, Edison, NJ 08817, US. The Company's registered and records office is at 220 - 333 Terminal Avenue, Vancouver, BC V6A 4C1.
The Company's state of the art HPS NOVUS Healthcare Welfare and Benefits Administration ("HPS NOVUS") SaaS platform is used by clients for all aspects of healthcare benefits administration (including insurance companies, hospitals, doctors and labor unions) through various corporations in which the majority shareholder has controlling ownership, providing healthcare administrative software, licensing and maintenance services. This system simplifies how organizations and individuals transact benefits. The Company's customers rely on the platform to manage, scale and exchange benefits seamlessly. This creates solutions that drive value for all participants in the US. healthcare ecosystem.
The Company's upcoming Telehealth user-facing app will integrate the benefits administration ecosystem into one single platform. The Telehealth platform will be available on the web, and iOS and Android will be fully integrated with the HPS NOVUS platform. Any user can interact with doctors, clinics and hospitals in the Company's network. The app will allow its users to connect to most major electronic medical records databases, payment gateways and billing systems. All the records on the app will be encrypted giving full control to its users.
The US healthcare system is not a universally accessible system like Canada, and most insured Americans are under employer-sponsored health insurance. One variant of this is that the employees and the employers will jointly pay contributions into a healthcare fund, then the funds will be used to purchase a group insurance or a create a self-insured plan. Self-insured plans usually cost less for larger employers compared to traditional insurance policies, which incentivises a shift towards self-insurance. The daily operations of insurance claims, billing and other related procedures for self-funded insurance plans can be managed through "Third-Party Administrators" ("TPAs") or managed in-house. Under this structure, the industry operator is a software provider or TPA and is processes health benefit payments on behalf of clients.
TPAs play a critical role in the insurance market by enabling businesses to outsource claims processing, administration and risk management. When an employee uses a healthcare provider (such as a clinic, a hospital or a doctor), the employee can monitor their claim through a TPA. The TPA processes the claim after receiving the claim from the healthcare provider, and then pays out claims on behalf of the insurance plan. Generally and historically, TPAs are highly reliant on manual, labor- intensive procedures for claims processing. TPAs subscribe to various software to manage filing, as well as communication of claims, thereby reducing cost margins. Such software is typically designed to streamline operations, reduce process complexity and costs, manage compliance with new regulations and increase customer satisfaction. However, the industry is fragmented because different software is used for different steps in the claims process. Given that different software will use different mechanisms for filing, processing and reimbursement, there are several manual handoffs in the entire process. The industry is rapidly shifting towards cloud computing, in order to expand software capabilities on platforms previously limited by hardware. The industry is also striving to make data more accessible, which paves the wave for new business models, such as SaaS.
The Company's goal is to be a leader in the development, sale and maintenance of a sophisticated platform for all aspects of healthcare and benefits administration.
The Company can transform how employers, insurance brokers and insurance carriers deliver value for employees and their families. This is to be achieved by strengthening the Company's position as a leading cloud-based benefits management platform for buyers and sellers, working closely with insurance brokers as partners in the ecosystem. Key elements of the Company's growth strategy includes the following:
HPS NOVUS - Software Platform
HPS NOVUS is a fully integrated and extensible platform of health and benefits administration, including insurance plan design, claim processing, recording keeping and more. The platform was built with a modular approach that provides an extensible and scalable solution for all services related to insurance and benefits. HPS NOVUS ensures that an organization or a TPA fully automates every aspect of its insurance claims administration by bringing everyone from the employee to the insurer onto a single platform.
HPS NOVUS is compliant with the US Health Insurance Portability and Accountability Act of 1996 ("HIPAA") standards, as well as the US Health Information Technology for Economic and Clinical Health Act ("HITECH Act"). All data and communication on HPS NOVUS is encrypted.
Sterling MM - Clinical Utilization Services
Sterling MM provides a comprehensive medical management program and it specializes in using modern technical tools, such as Electronic Data Interchange ("EDI"), with confidentiality and security features mandated by HIPAA and the HITECH Act. Sterling MM services are managed by physicians and nurses with over 60 years of experience in healthcare management and administration. Sterling MM's platform can serve as primary service provider or as a sub-contracted servicer for another TPA service provider. Sterling MM is URAC (Utilization Review Accreditation Commission) accredited for Health Utilization Management and has been managing healthcare in partnership with payers since 1995.
Services provided by Sterling MM follow the following steps:
LionGen is a licensed TPA in the US and has experience running TPA's on HPS NOVUS with great service efficiency. The Company is seeking a target TPA acquisition pipeline to integrate the highly fragmented market where currently no TPA has more than a 5% share.
LionGen is a TPA that manages different functions of benefits such as: claims processing, utilization review and membership functions, including the processing of retirement plans and flexible spending accounts. For self-funded entities, LionGen administers: medical/dental provider networks, stop loss insurance, pharmacy benefit manager, medical management, voluntary benefits and more.
Telehealth is an emerging market in the United States that has only recently ramped up in terms of patient visits due to the COVID-19 pandemic. The Company's upcoming Telehealth platform will include a user facing app available on the web, iOS and Android that is fully integrated with the HPS NOVUS platform. Any user can interact with doctors, clinics and hospitals.
The app allows its users to connect to most major electronic medical records databases, payment gateways and billing systems. All of the records on the app will be encrypted giving full control to the user. Every transaction from benefit to claim is now in one single system.
The Company licenses its healthcare administrative software, HPS NOVUS, to customers, providing customization to the core software, ongoing maintenance services and consulting services therein. The Company's customers include: unions, union funds, self-insured funds, insurance companies, TPAs, hospitals, doctors, dentists and practitioners, and healthcare consumers. The licensing of core software involves a multiple-element arrangement consisting of delivery of a core license, customizations and installations of modules, and subsequent maintenance services (such as telephone consulting, product updates and releases of new versions of products previously purchased by the customer, as well as error reporting and correction services).
Claims Processing and Related Services
CHS provides claims processing and related services, such as consulting, implementation and training.
Reverse Takeover and Listing Transaction
On December 7, 2020 and as amended on May 20, 2021, Greenstone Capital Corp. ("Greenstone") and CHS entered into a merger agreement to complete a reverse takeover transaction (the "Transaction"). The Transaction was closed on September 29, 2021.
Under the terms of the Transaction, Greenstone consolidated all of its issued and outstanding common shares on a 3.5323:1 basis.
Prior to the completion of the Transaction, CHS converted all issued and outstanding preferred shares into common shares in accordance with the conversion terms as set out in its certificate of incorporation. CHS also enacted a stock split on a 2,178.2738:1 basis immediately prior to the completion of the Transaction such that holders of the CHS's common shares as at the merger date would hold an aggregate of 41,333,333 common shares in the resulting issuer following the Transaction. After completion of this transaction, the current shareholders of CHS would own the majority of the issued and outstanding common shares of the resulting issuer. CHS would become a wholly-owned subsidiary of the resulting issuer. In order to facilitate the completion of this transaction, the Company intends to complete a private placement of not less than 9,976,949 subscription receipts for total proceeds of $3,622,303 ($4,489,627 CAD). Each subscription unit is comprised of a common share of the Company and one-half of a share purchase warrant. Each share purchase warrant entitles its holder to acquire one share of the Company at $0.75 CAD. Following this transaction, the resulting issuer would be a publicly listed company.
After completion of the Transaction and concurrent private placement, on a non-diluted basis, the former holders of CHS shares will own approximately 66,237,286 Resulting Issuer shares, representing 96.97% of the shares of the Resulting Issuer. The existing holders of Greenstone will own 2,066,667 shares, representing 3.03% of the total Resulting Issuer shares.
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