CareCloud, Inc. 10-K

Item 1. Business Overview CareCloud, Inc., formerly MTBC, Inc. (“CareCloud,” and together with its consolidated subsidiaries, the “Company,” “we,” “us” and/or “our”) is a leading healthcare information technology company that provides a full suite of proprietary cloud-based solutions and related business services, to healthcare providers, from small practices to enterprise medical groups, hospitals, and health systems throughout the United States. Healthcare organizations today operate in highly complex and regulated environments, and our suite of technology-enabled solutions helps our clients increase financial and operational performance, streamline clinical workflows, and improve the patient experience. Our Software-as-a-Service (“SaaS”) platforms include practice management (“PM”), electronic health record (“EHR”), business intelligence, telehealth, patient experience management (“PXM”) solutions, and robotic processing automation (“RPA”) bots, along with complementary software tools and business services such as revenue cycle management (“RCM”), premiere healthcare consulting and implementation services, and on-demand workforce staffing capabilities for high-performance medical groups and health systems nationwide. At a high level, these solutions can be categorized as follows: ● Technology-enabled business solutions, which are sometimes provided as individual SaaS offerings and often provided in combination with each other, including: ○ EHRs, which are easy to use and sometimes integrated with our business services, and enable our healthcare provider clients to deliver better patient care, streamline their clinical workflows, decrease documentation errors and potentially qualify for government incentives; ○ PM software and related capabilities, which support our clients’ day-to-day business operations and financial workflows, including automated insurance eligibility software, a robust billing and claims rules engine and other automated tools designed to maximize reimbursement; ○ PXM solutions designed to transform interactions between patients and their clinicians, including smartphone applications that assist patients and healthcare providers in the provision of healthcare services, including contactless digital check-in solutions, messaging and online appointment scheduling tools; ○ An RPA solution that leverages the power of our own proprietary healthcare-specific microbots, designed to automate routine financial and clinical workflows across the healthcare industry. Our solution allows clients to automate costly, labor-intensive tasks, alleviate the surge in demand for additional labor while driving efficiencies across a large array of healthcare settings nationwide; ○ Telehealth solutions which allow healthcare providers to conduct remote patient visits; ○ Healthcare claims clearinghouse which enables our clients to electronically scrub and submit claims and process payments from insurance companies; ○ Business intelligence and healthcare analytics platforms that allow our clients to derive actionable insights from their vast amount of data; ○ Interoperability and data transformation software to support the complex realities of data exchange with healthcare trading partners, including labs, insurance companies, and other healthcare IT vendors; ○ RCM services including end-to-end medical billing, eligibility, analytics, and related services, all of which can be provided utilizing our technology platform or through a third-party system; ○ Customized applications, interfaces and a variety of other technology solutions that support our healthcare clients; ○ Professional services consisting of application and advisory services, revenue cycle services, data analytic services and educational training services; and ○ Workforce augmentation and on-demand staffing to support our clients as they expand their businesses, seek highly trained personnel, or struggle with staffing shortages. ● Medical practice management services are provided to medical practices. In this service model, we provide the medical practice with appropriate facilities, equipment, supplies, support services, nurses, and administrative support staff. We also provide management, bill-paying and financial advisory services. Our solutions enable clients to increase financial and operational performance, streamline clinical workflows, get better insight through data, and make better business and clinical decisions, resulting in improvement in patient care and collections while reducing administrative burdens and operating costs. 6 The modernization of the healthcare industry is transforming nearly every aspect of a healthcare organization from policy to providers; clinical care to member services, devices to data, and ultimately the quality of the patient’s experience as a healthcare consumer. We create elegant, user-friendly applications that solve many of the challenges facing healthcare organizations. We partner with organizations to develop customized, best-in-class solutions to solve their specific challenges while ensuring they also meet future regulatory and organizational requirements and market demands. Market Overview In December 2020, Centers for Medicare & Medicaid Services (“CMS”) reported that national healthcare expenditure in the U.S. grew 9.7% to $4.1 trillion in 2020. U.S healthcare spending will grow 5.4% annually on average during the years 2021 through 2028, reaching $6.2 trillion by 2028. CMS also projected that health spending will grow 1.1% faster than gross domestic product (“GDP”) annually during the years 2021 through 2028; and as a result, the healthcare share of GDP is expected to rise from 17.7% in 2018 to 19.7% by 2028. Additionally, analysts from Markets & Markets have estimated the US Healthcare IT industry market to be approximately $177 billion with its largest sub-segment RCM at approximately $87 billion in 2019, growing at a 12% compound annual growth rate (“CAGR”). The North American EHR market has been estimated to be approximately $40 billion, growing at a CAGR of 6% per year. The Analytics and AI sub-segment was estimated to be approximately $30 billion, growing at a 27% CAGR and the Telehealth market is estimated to be approximately $20 billion with a CAGR of 17%. Standalone billing and practice management solutions are reported to be declining in the market today as medical practices move towards integrated, end-to-end systems that incorporate front and back-office data flows, provide seamless access to clinical data from EHRs, and streamline the entire revenue cycle management process. 7 Our Market Opportunity Considering the evolving needs of our clients and the market, we believe we continue to be uniquely positioned to provide tremendous value and support for our clients. We believe there are dynamics at play that are significantly increasing market need for our products and services. These market dynamics present opportunities for us to innovate and focus on impacting the day-to-day challenges our clients face as they work to provide excellent patient care, all while managing and expanding their businesses. Medical practices and health systems alike are transitioning to increasingly complex reimbursement delivery models. As an example, the industry has been gradually shifting from fee-for-service payments to value-based/clinical outcomes-based care payments. This transition comes in a multitude of forms including reimbursement models associated with quality incentive programs, capitation payments models, bundled payments, and at-risk payer contracts. There are continuing legislative and regulatory reform efforts, as well as growing compliance requirements mandated by the federal government and other governmental agencies. This ever-evolving regulatory landscape increases the pressure placed on healthcare organizations to stay abreast of these changes and in compliance. The complexities associated with emerging reimbursement models and continued government regulations present opportunities for us as healthcare organizations seek out partners that offer a broad range of software and services to help meet their needs. Our clients also have to factor in the rising cost of health insurance, changes in health benefit plan design, and the impact that these factors have had on the increase in patient consumerism. Patients are seeking lower cost care in response to insurance carriers shifting more of the cost burden onto patients, causing healthcare organizations to reconsider the full patient experience. Healthcare providers now need to think more deeply about patient expectations. This is especially true as COVID-19 has reshaped the sector and accelerated its digital transformation. Strategic-thinking healthcare organizations across the country are aggressively addressing these new realities and are finding opportunities for growth and expansion. We see medical groups across the country and within all specialties and market segments, growing through consolidation and investing in their businesses at an accelerated pace. This is also leading clients to focus on delivering emerging and disruptive care delivery settings. Much of this change is driving executives and leaders to assess their IT and data strategy and reevaluate what it means for the future of their organizations. The healthcare industry has seen tremendous change over the past decade. Our study of the evolving needs of our clients leads us to believe that there will be a continuing need for our services and products and emerging needs for the products and services that we are already developing. These trends will fuel growth over the next several years. In order for healthcare organizations to continue to succeed, these new realities require robust solutions and careful execution. Legacy tools that once powered these healthcare organizations are insufficient to support their growth and long-term strategies. Our solutions facilitate the transition needed by these organizations to drive their future growth. Our expansive product and services portfolio enables us to displace competitors and gain market share across a vast array of specialties, care settings and customer segments across the country. Our Business Strategy Our objective is to be a market leading provider of integrated, end-to-end SaaS and business services solutions to healthcare organizations. Our mission is to create flexible and comprehensive products and services to help our clients with the business of medicine. To that end, we invest significant resources toward improving our current offerings and building new solutions that help transform our clients’ organizations. We expect to have increased software capabilities and offer additional complementary business services that will address the needs of the ever-changing, dynamic market conditions of the U.S. healthcare space. To achieve our objective and mission, we employ the following strategies: P roviding comprehensive product and services suite to medical practices and hospitals. We believe that healthcare providers are in need of an integrated, end-to-end solution and a flexible service delivery model to manage the different facets of their businesses, from care delivery software, to claim submission, financial reporting, and data analytics. 8 Enhancing our solutions. We intend to continue to enhance our solutions with new functionality and features leveraging our own teams, partnerships, and acquisitions. We will continue to dedicate significant resources to research and development to bolster our existing applications and drive new opportunities for innovation on behalf of our clients. Expanding into new categories/specialties/markets. We are focused on always reassessing the market landscape, seeking new opportunities to meet the needs of the clients in our addressable market with our products and services. This means developing new and exciting technologies, launching new services, entering new specialties that can leverage our solutions and enabling growth for our clients or expanding into adjacent markets that we may not serve today. Expanding our client base. We believe the market for our expansive value proposition is underserved, and we will continue to make investments to capture market share. We will invest in our sales and marketing activities, partners, and products to expand our client footprint. Extending our relationships with existing clients. We intend to increase the number of SaaS subscription licenses and services purchased by our current clients as they use our solutions. We are also focused on converting SaaS clients into higher revenue per client offerings such as revenue cycle management and other business services. This expansion of services typically represents a 3-4x increase in overall revenue per client. Strengthening our client community. We realize that our success is tied directly to our clients’ success. Accordingly, a substantial portion of our highly trained and educated workforce is devoted to client service. Leveraging significant cost advantages provided by our technology and global workforce. Our unique business model includes our web-based software and a cost-effective offshore workforce located in Pakistan, Azad Jammu and Kashmir, and Sri Lanka (together, the “Offshore Offices”). We believe that this operating model provides us with significant cost advantages compared to other revenue cycle management companies and it allows us to significantly reduce the operational costs of the companies we acquire. Pursue acquisitions. We intend to continue to pursue acquisitions over time. As with most of our acquisition transactions, our goal is to retain the acquired clients over the long-term and migrate those clients to our platforms soon after closing and cross-sell our products and services to this newly acquired client base. A core component of our model is to strip out expensive third-party software and vendor costs while improving efficiency and scale with our proven operational model and integration methodology. Developing our partner ecosystem. We offer an integrated partner ecosystem providing healthcare organizations access to a variety of innovative solutions that complement our suite of products and services. Our partner ecosystem is a comprehensive collection of apps, services, specialty solutions, and clinical connections. This is an integral part of our vision to be the premier cloud-based platform for healthcare. As the market continues to evolve, we may choose to build or partner for some or all of these solutions in order to broaden our product set. In the longer term, we also envision how this will allow for frictionless flow of information and care-coordination capabilities between medical providers and their patients. Additionally, given the nature of our large data repository, which is ever-growing as each patient encounter is captured, opportunities exist to potentially monetize this data in an identified manner to help improve clinical outcomes and other financial metrics. 9 Our Offerings Our solutions are designed to systematically drive clinical quality and patient outcomes, while streamlining staff and provider workflows and reimbursements and to support different settings of care and healthcare models. Our product and service strategy is simple: we build products and deliver solutions that meet clients’ needs. Our product and services portfolio is organized across six strategic areas: Cloud-based Software - the core systems that power medical practices across clinical, financial, and patient workflows, including our PM systems, EHR solutions and our PXM applications or customized purpose-built applications. Technology-enabled Services - software-enabled RCM offerings and other business services, such as medical coding, credentialing, authorization management and the like are geared towards driving patient and insurance collections across the reimbursement life cycle. Our Apps and App Ecosystem Partners - additional proprietary software products, including our business intelligence platform, robotic process automation bots, CareCloud Conductor, our interoperability and data transformation suite, telemedicine applications, mobile apps and more of those applications that consume our APIs or other interfaces built by the market at large. Premier Healthcare IT Consulting & Staffing (medSR) - an extensive set of services including EHR vendor-agnostic optimization and activation, project management, IT transformation consulting, process improvement, training, education, and staffing for large healthcare organizations including health systems and hospitals. On-demand Workforce (CareCloud Force) - leveraging our unique resources, and in turn selling this capacity at scale directly to partners and clients at a reduced rate as compared to other competitors in the same space. These on-demand workforce capabilities include offshore engineering capacity for development and offshore RCM operations personnel. Additional Business Services - additional services in support of our wide-ranging client base. These include medical practice management services to a select group of medical practices, a group purchasing organization with negotiated discounts with pharmaceutical manufactures containing more than 4,000 physician and mid-level provider members and other ancillary services. 10 This categorization approach allows us to be both methodical and nimble across the healthcare organizations and market segments we serve while providing us a framework to create solution sets for the market today and more importantly, for what our clients will need tomorrow. We believe that our fully integrated solutions uniquely address the challenges in the industry. In most cases the standard fee for our complete, integrated, end-to-end solution is based upon a percentage of each client’s healthcare-related revenues, with a monthly minimum fee, plus a nominal one-time setup fee, which is competitively priced. Research and Development Our research and development focuses are on enhancing and expanding our service offerings while ensuring all offerings meet regulatory compliance standards. We continually update our software and technology infrastructures, regularly execute releases of new software enhancements, and adapt our offerings to better serve our medical group and health system clients confronting rapid changes in the healthcare market space. Our agile software development methodology is designed to ensure that each software release is properly designed, built, tested, and released. Our product, engineering, quality assurance and development operations teams are located both onshore and offshore. We complement our internal efforts with services from third-party technology providers for infrastructure, healthcare ecosystem connectivity needs such as prescriptions, clinical laboratories, or specific application requirements. We also employ product management, user experience and product marketing personnel who work continually on improvements to our products and services design. Clients 11 We estimate that as of December 31, 2021, we provided software and services to approximately 40,000 providers (which we define as physicians, nurses, nurse practitioners, therapists, physician assistants and other clinicians that render bills for their services) practicing in approximately 2,600 independent medical practices and hospitals, representing 80 specialties and subspecialties in 50 states allowing for significantly low revenue concentration risk. In addition, we served approximately 200 clients that are not medical practices, but are primarily service organizations who serve the healthcare community. The foregoing numbers include clients leveraging any of our products or services and are based in part upon estimates where the precise number of practices or providers is unknown. We service clients ranging from small practices to large groups and health systems. Our clients span from the single doctor independent medical practices to large medical groups, including an enterprise specialty-specific healthcare organization with more than 2,300 providers located across multiple states. We also service large major academic medical institutions, small and large hospitals and health systems with service areas covering millions of patients. Sales and Marketing We have developed sales and marketing capabilities aimed at driving growth of our client base, including small medical practices, large groups, and health systems. We expect to expand by selling our complete suite of software and services to new clients and up-selling additional solutions into our existing client base. We have a direct sales force including team members focused on areas such as our CareCloud Force and medSR deals. In addition, our direct sales are augmented through our partner initiatives and marketing campaigns. Our Growth Levers We believe that we are in a great position to continue to grow by leveraging a multi-faceted growth strategy: 12 Organic Growth and Direct Sales We have organized our sales force into different segments for sales of all of our products and services in order to best address our clients’ needs and our markets. With this design, our sales team can address a client’s specific needs, whether a new client is seeking our products or services for the first time, or a current client is in need of additional solutions. Our marketing team operates in support of our salesforce and provides specialized demand generation capabilities for sales efforts and product marketing for sales efforts. Our sales approach is consultative in nature for most of our offerings, which generally includes an analysis based on a prospective client’s needs, crafting service proposals, and negotiating contracts that culminate in the commencement of services. Our go-to-market strategy is designed to meet our customers’ needs. Our vast array of products and services allow us to craft solutions that can meet our customers’ unique needs within a specific product category, client segment, or both. Our latest go-to-market strategy takes this dynamic into account: Growth through Partnerships In addition to our direct sales force, we maintain business relationships with third parties that utilize, promote, or support our sales or services within specific industries or geographic regions. Some of these partners are customers through CareCloud Force and others are more traditional channel partners who help promote our solutions. We believe we can further accelerate organic growth through industry participants, whereby we utilize them as channel partners to offer integrated solutions to their clients. We have entered into such engagements with industry participants, and from which we began to derive revenue starting in mid-2014. We have developed application interfaces with numerous EHR systems, together with device and lab integration to support these relationships. Growth through Acquisitions The Healthcare IT service industry is highly fragmented, with many local and regional RCM companies serving small medical practices and hospitals. We believe that the industry is ripe for consolidation and that we can achieve significant growth through acquisitions. We further believe that it is becoming increasingly difficult for traditional RCM companies, together with a variety of other healthcare industry vendors and healthcare IT companies, to meet the growing technology and business service needs of healthcare providers without a significant investment in an information technology infrastructure and the utilization of a talented, cost-efficient global team. Since the Company went public in July 2014, we have completed 17 transactions, acquiring complementary assets to grow our business. We typically leverage our technology and our cost-effective offshore team to quickly deliver additional value to the newly acquired customer base, while reducing costs. Often, we will incur initial costs associated with the integration of the acquired business with our existing operations, but this early investment is designed to increase customer satisfaction and retention, while laying the foundation for long-term accretion. 13 Competition The market for practice management, EHR and RCM solutions and related services is highly competitive, and we expect competition to increase in the future. We face competition from other providers of both integrated and stand-alone practice management, EHR and RCM solutions, including competitors who utilize a web-based platform and providers of locally installed software systems. Many of our competitors have longer operating histories, greater brand recognition and greater financial marketing. We also compete with various regional RCM companies, some of which may continue to consolidate and expand into broader markets. We expect that competition will continue to increase as a result of incentives provided by various governmental initiatives, and consolidation in both the information technology and healthcare industries. In addition, our competitive edge could be diminished or completely lost if our competition develops similar offshore operations in Pakistan or other countries, such as India and the Philippines, where labor costs are lower than those in the U.S. (although higher than in Pakistan). Pricing pressures could negatively impact our margins, growth rate and market share. We believe we have a competitive advantage, as we are able to deliver our industry-leading solutions at competitive prices because we leverage a combination of our proprietary software, which automates our workflows and increases efficiency, together with a global team that includes more than 600 experienced health industry experts onshore. These experts are supported by our highly educated and specialized offshore workforce of approximately 3,400 team members at labor costs that we believe are approximately one-tenth the cost of comparable U.S. employees. Our unique business model has allowed us to become a leading consolidator in our industry sector, gaining us a reputation for acquiring and positively transforming distressed competitors into profitable operations of CareCloud. Employees Including the employees of our subsidiaries, as of December 2021, the Company employed approximately 4,100 people worldwide on a full-time basis. We also utilize the services of a small number of part time employees. In addition, all officers of the Company work on a full-time basis. Over the next twelve months, we anticipate increasing our total number of employees only if our revenues increase, our operating requirements warrant such hiring, or we are hiring for specific functions where we place additional emphasis, such as marketing and sales. Voting Rights of Our Directors, Executive Officers, and Principal Stockholders As of December 31, 2021, approximately 35% of both the shares of our common stock and voting power of our common stock are held by our directors and executive officers. Therefore, they have the ability to control the outcome of matters submitted to our stockholders for approval, including the election of our directors, as well as the overall management and direction of our Company. Corporate Information We were incorporated in Delaware on September 28, 2001, under the name Medical Transcription Billing, Corp., and legally changed our name to MTBC, Inc. in February 2019. On March 29, 2021, we legally changed the name of the Company to CareCloud, Inc. Our principal executive offices are located at 7 Clyde Road, Somerset, New Jersey 08873, and our telephone number is (732) 873-5133. Our website address is www.CareCloud.com. Information contained on, or that can be accessed through, our website is not incorporated by reference into this Annual Report on Form 10-K, and you should not consider information on our website to be part of this document. MTBC, CareCloud.com, A Unique Healthcare IT Company, CareCloud and other trademarks and service marks of CareCloud appearing in this Annual Report on Form 10-K are the property of CareCloud. Trade names, trademarks and service marks of other companies appearing in this Annual Report on Form 10-K are the property of their respective holders. We are a smaller reporting company. As a smaller reporting company, we may take advantage of specified reduced reporting requirements and are relieved of certain other significant requirements that are otherwise generally applicable to public companies. As a smaller reporting company, we have reduced disclosure obligations regarding executive compensation in our Annual Report, periodic reports and proxy statements and providing only two years of audited financial statements in our Annual Report and our periodic reports. This year the Company is required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, as amended. Effective with this Form 10-K, the Company is now an accelerated filer. 14 Where You Can Find More Information Our website, which we use to communicate important business information, can be accessed at: www.carecloud.com. We make our Annual Reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and all amendments to those reports available free of charge on or through our website as soon as reasonably practicable after such material is electronically filed with or furnished to the Securities and Exchange Commission (“SEC”). Materials we file with or furnish to the SEC may also be read and copied at the SEC’s Public Reference Room at 100 F Street, NE, Washington, D.C. 20549. Information on the operation of the Public Reference Room may be obtained by calling the SEC at 1-800-SEC-0330. Also, the SEC’s website (www.sec.gov) contains reports, proxy and information statements, and other information that we file electronically with the SEC.