First Quarter 2016 Update on Catasys, Inc.

4 Minute Read

CATS-logo-transparent.pngThis week, Catasys, Inc. (CATS-OTC) reported its financial results for the first quarter 2016, ended March 31, 2016. Catasys provides Big Data–based analytics and predictive modeling–driven behavioral healthcare services to health plans and their members through its 52-week, outpatient OnTrak programs. The company reports that patient enrollment in its programs has increased by more than 175% since the beginning of 2015.


Catasys’ OnTrak integrated solutions serve individuals who have behavioral health disorders that exacerbate coexisting medical conditions, thereby resulting in higher hospital admissions and emergency room (ER) visits for the patient. Catasys’ proprietary analytics are used to identify which individuals on an insurance plan are high utilizers with impactable costs, meaning insured individuals who have above-average total annual claims costs due to having a substance dependency, anxiety disorder, or other behavioral health condition.

High-cost, substance-dependent members cost commercial health plans an estimated eight times more than other members, averaging $27,500 in annual claims versus $3,250 for a “normal” covered life. Catasys targets the people on a health plan who have been identified to be high utilizers through direct outreach, with the aim of enrolling them into OnTrak patient-centric treatment for their addiction. OnTrak integrates evidence-based medical and psychosocial interventions in a 52-week outpatient program. Successful patient outcomes have shown to require provider coordination, a whole-person-health treatment philosophy, member skill building (including the support of a dedicated Care Coach), and long-term reinforcement, all of which are emphasized in OnTrak.

Importantly, Catasys’ OnTrak programs have shown a greater than 50% reduction in total costs for health insurers’ enrolled members—stemming from decreases in hospital days, ambulance usage, and ER visits. Since health insurers are under constant pressure to reduce costs, they have an incentive to pay Catasys to enroll their members in the OnTrak program. The claims reductions benefit insurers, and the insurance coverage for a 52-week treatment program benefits patients, many of whom may have previously been prevented from pursuing treatment for an addiction due to cost (or who have had to withdraw early from a treatment program).

Market Adoption of Catasys’ Approach

OnTrak programs are operational in 13 states at present (Florida, Illinois, Louisiana, Kansas, Kentucky, Massachusetts, Missouri, New Jersey, Oklahoma, Pennsylvania, Texas, West Virginia, and Wisconsin) and serve multiple leading health plans, from insurers that include Aetna, Humana, Centene, and Coventry, among others. The company has announced that it expects to add additional states and contracts in 2016, and could see enrollment growth fueled by new business as well as expansion of current business, since patient enrollment is still in the initial stages for many of Catasys’ 13 state markets. 

Catasys, which ended 2015 with contracts for approximately five million commercially equivalent lives (CELs), reported 7.5 million CELs at the end of the first quarter 2016 and expects to ramp up to 20 million CELs under coverage by the end of 2016. CELs are a metric of growth potential, as increasing CELs may represent increasing future enrollment. Over the past few months, the company has added 2.5 million CELs, which generally take up to 90 days to implement and 12 months to scale to full enrollment.

The company reported an increase in patient enrollment of over 175% from the first quarter 2015 to the first quarter 2016. Quarter-over-quarter, patient enrollment in the first three months of 2016 was up 40% from the last three months of 2015.

Behavioral Health Market

National spending on mental and behavioral healthcare is at all-time highs—reaching $239 billion as of 2014. The Substance Abuse and Mental Health Services Administration (SAMHSA) reports that the growth in this market over the past decade (2003 to 2014) has expanded more than six times faster than GDP, and is almost on par with annual growth rates of total healthcare spending (7.2% for all healthcare; 6.4% for mental health). Trends fueling market growth include the impact of millennials and younger generations who are not afraid to seek treatment for a behavioral or mental health disorder, an erosion of some of the stigma around these conditions, new legislation requiring insurance coverage and spending for behavioral healthcare, and advancements in treatment methodologies capable of achieving better results.

First Quarter 2016 Financial Highlights

Catasys reported revenue growth of 68% in the first quarter 2016 versus the same quarter a year ago. Specifically, in the first quarter 2015, the company reported revenue of $433,000, which grew to revenue of $728,000 in the first quarter 2016, driven by a considerable increase in Catasys’ customer base. As compared to the year-ago period, Catasys today has a broader national presence, more health plan populations covered under its OnTrak programs, and higher patient enrollment.

The company also reported deferred revenue of $2.3 million at March 31, 2016, a 35% increase since the end of 2015. Depending on the customer, deferred revenue is either recognized over the course of the 52-week OnTrak program, or annually in cases where fees due Catasys are subject to customers’ achieving savings at least equal to program fees. Catasys has been able to record its deferred revenue as actual revenue during the course of the business cycle, except for limited cases where members terminated from the OnTrak program early.

Catasys’ general and administrative (G&A) expenses totaled $2.2 million for the first quarter, down roughly 20% from the year-ago term as a result of a decrease in share-based compensation expense. This decrease helped to offset a higher cost of providing healthcare services (stemming from increasing patient enrollment in Catasys’ services as well as the launch of new programs) in the first quarter 2016. Consequently, total operating expenses remained stable at $3.2 million versus the first quarter 2015.

At the end of the first quarter 2016, Catasys reported a net loss of $4.3 million, or ($0.08) per basic and diluted share, versus a net loss of $0.3 million, or ($0.01) per basic and diluted share, for the first quarter 2015. The company ended the period with cash and cash equivalents of $262,000, up from an ending cash balance of $84,000 at March 31, 2015.

Click here to view the complete release.

Visit our Corporate Profile and Key Points pages for more
information, including the latest research and headlines,
on Catasys, Inc. (CATS-OTC).