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MultiPlan Corp (NYSE:MPLN) Q3 2021 Earnings Call Nov 3, 2021, 10:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good day, and thank you for standing by. Welcome to the MultiPlan Corporation Third Quarter 2021 Earnings Conference Call. [Operator Instructions]. Please be advised that today's conference is being recorded. [Operator Instructions]. I would now like to hand the conference over to Shawna Gasik, AVP of Investor Relations. Thank you. Please go ahead.

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Shawna Gasik -- Associate Vice President of Investor Relations

Thank you, April. Good morning, and welcome to MultiPlan's third quarter 2021 earnings call. Joining me today is Mark Tabak, Chairman and Chief Executive Officer; Dale White, President and Chief Operating Officer; and David Redmond, Chief Financial Officer.[Operator Instruction]. I would now like to turn the call over to our Chief Executive Officer, Mark Tabak. Mark?

Mark Tabak -- Chief Executive Officer Chairman

Thank you, Shawna. Good morning, everyone. Let me join in welcoming you to our third quarter '21 earnings call. I would like to thank our stockholders for their continued support. The third quarter was an important and busy one for MultiPlan. During the quarter, we refinanced $2.3 billion of debt, extending the maturity of our debt five to seven years. We announced a $250 million share repurchase program to take advantage of the dislocated price of our shares and executed the repurchase of over 19 million shares, at a total cost of $107 million, through October of this year. And above all, for the fifth consecutive quarter as a public company we reported strong operating and financial results.

I also would like to take a moment to convey my deep appreciation and admiration to our MultiPlan colleagues, whose passion and commitment continue to drive the growth of our business. In Q3 of '21, results continued to attest to the recurring nature of our revenue model and to our considerable cash generation. In fact, we delivered new quarterly records for both revenues and adjusted EBITDA. We also exceeded the midpoint of our Q3 revenue guidance and exceeded the top end of our Q3 EBITDA guidance by over $3 million.

As shown on Page five of our supplemental deck, in the third quarter total revenues were $288.2 million, representing an increase of $28.9 million (sic) 28.9% over the third quarter of 2020 and an increase of 4.3% from Q2 of '21.And as shown on Page six, excluding the impact of the COVID pandemic and the contributions from our recent acquisitions, organic growth in revenues was 10.2% versus the prior third quarter and 3.8% versus the second quarter of this year. Adjusted EBITDA for the third quarter was $218.4 million, an increase of 31.9% from Q3 2020 and an increase of 6.3% from Q2 of '21. Excluding the effect of COVID, the contributions from our newly acquired businesses and the incremental public company costs, organic growth in adjusted EBITDA was 15.5% versus the prior third quarter and 5.2% versus the second quarter of this year.

Operational excellence and expense control continue to be among our highest priorities. EBITDA margin was 75.8% in Q3, up from 74.1% in Q3 of 2020 and up from 74.3% in Q2 of '21. Our business continues to generate high levels of cash flow, with $167 million in cash flow from operations in Q3, very close to the record we set in the first quarter; an unlevered free cash flow conversion of 73% for Q3 '21 and 73% year-to-date. Our confidence in our business remains incredibly strong. We continue to enhance our services and provide exceptional customer service. Customer retention remains excellent. We continue to prepare ourselves and our customers for the implementation of the No Surprises Act, as Dale will discuss in a moment.

During Q3, we continued to see normalization in the effects of the COVID-19 pandemic on our business. Taking into account our strong business momentum, we currently expect our Q4 revenues and EBITDA to be above those of Q3. For the full year '21, we are increasing the midpoint of our guidance range for revenues and increasing the guidance for adjusted EBITDA, as Dave will review with you shortly. In summary, the third quarter marks yet another installment of solid performance in our first year as a public company, and we remain confident that we'll continue our progress in Q4 and beyond into '22. With that, I'd like to turn the call over to Dale White, President and Chief Operating Officer, to review the business. Dale? Thanks, Mark. Good morning, everyone. As Mark said, we had a terrific third quarter. At $288.2 million, Q3 2021 revenues came in just over the midpoint of our guidance and reflect growth of 28.9% over Q3 2020.This morning, I will take you through the highlights of that growth. But first, I want to spend a few minutes addressing the topic that I know is top of mind for everyone, and that is the No Surprises Act. We now have the benefit of two published interim final rules and more clarity around how the law's requirements will be operationalized. With that detail and the hundreds of discussions we've held with our customers individually and otherwise, we can now speak with some certainty to the Act's expected impact on our business. We continue to be in deep conversation with our customers. Given the newness of the regulation, client strategies for implementing the NSA are still firming up and there are still some moving pieces. That said, based on our customer conversations and our understanding of how client strategies are evolving, we still do not expect the NSA to significantly change the volume of claims and charges we receive, the scope of services we offer in support of the surprise bill claim processing or the fee structure for servicing those claims. Let me provide four points of support for this statement. First, it's important to reiterate that the No Surprises Act targets a finite set of out-of-network claims: emergency services and other out-of-network services incurred at an in-network facility that a plan member wouldn't typically select, such as anesthesiology or radiology. They represent a slice only about 10% to 12% of our identified savings. For all other claims, the NSA should have no impact. Second, on the whole, our customers, including our largest customers, will continue to send us surprise bill claims for processing. While the second interim final rule released early last month instructs the independent dspute resolution entities to presume the QPA, or the plan's median in-network contracted rate, as the appropriate out-of-network reimbursement, the QPA will not function as a rigid payment standard. This is because payers cannot force providers to charge or accept the QPA as fair payment. As such, payers will continue to need processes for adjudicating surprise bill claims, and we continue to expect to play a significant role in providing and administering those processes, as we have been doing for these customers for four decades. At the same time, the No Surprises Act introduces significant complexity into the reimbursement process for in-scope claims. What used to be a straightforward one- or two-step process for surprise bill claims now involve five intricate steps. These steps include: identify whether the claim is a surprise bill; calculate the qualifying payment amount for the QPA and append it to the claim; price and edit the claim, taking the QPA into account; attempt to negotiate a settlement if the provider rejects the initial payment; and manage the independent dispute resolution process from intake through decision if the negotiation with the provider is unsuccessful. This complexity plays to MultiPlan's strength. In fact, the NSA presents significant opportunities for MultiPlan. These additional claims processing steps call for skills and capabilities that are not always readily available to a payer, but that are squarely in MultiPlan's wheelhouse: data capture, data manipulation and management, data analysis, claims pricing, provider appeal management and case defense.The payers need and are asking for our support. To that end, we've been hard at work building a modular end-to-end service that helps payers through the five key steps involved in managing NSA-related claims. Today, we have about 80 active surprise bill implementations and over 100 customer opportunities progressing through the pipeline. Our customers' needs run the gambit from full end-to-end service involving all key steps to targeted assistance to fill select capability gaps. For example, a national health plan will use MultiPlan to attach the QPA to surprise bill claims using a QPA schedule it created, price the claims based on the QPA and negotiate a settlement as needed. Another national health plan will use a hierarchy of MultiPlan services to price surprise bills, negotiate a settlement and manage arbitration as needed. A number of regional health plans will use our new end-to-end service that takes out-of-network claims through all five required steps. Several third-party administrators will use MultiPlan to identify surprise bill status and calculate QPA when any of its numerous primary networks are unable to do so. A number of Blues plans will use MultiPlan's post-payment negotiation and arbitration services for the claims they price. In short, we've modeled, developed and tested these services, and we are already going to market, and we have a healthy implementation pipeline to support each customer's unique needs.Third, given the services and significant value we bring to processing NSA-related claims, we believe our savings-based, pay-for-performance fee structure remains intact. And as such, we expect to maintain fees that are consistent with historical levels. While there is some potential for certain payers to offer the provider the QPA as initial payment and, in some of those instances, we will be less likely to help the payer price surprise bills, we expect those instances to be at least partially offset by fees for new services, like identifying surprise bills, calculating the QPA, appending the QPA to the claim, and for post-payment services, including negotiation and arbitration management. In the majority of instances where MultiPlan will still price NSA-related claims on behalf of payers, we believe the opportunity to identify savings remains significant. Generally, we expect the historical methodology used to calculate identified savings will remain unchanged. To that point, we recently compared our Data iSight results to the median in-network contract rates for the professional claims of a basket of commercial payers using publicly available data. The results vary significantly by both geography and procedure. But on balance, we conclude the savings yield is likely to be similar to that which MultiPlan services deliver today. And fourth, the market is currently trying to assess the longer-term implications of the NSA on provider/payer contracting strategies and negotiations, particularly since the second rule proved favorable to payers. As you know, MultiPlan contracts with 1.2 million healthcare providers and has a team of over 100 people that interact daily with these providers. We have been in discussions with many of these that fall under the scope of the NSA, and we have no indication at this point that the No Surprises Act will spur these providers to rush into payer networks. The calculus around network contracting is complex and multifaceted for both payers and providers and will remain so under the NSA, and the NSA has potentially weakened some of the traditional motivations for network contracting. This includes diminished financial incentives to contract, assuming in-network and out-of-network rates converge toward the QPA. It also likely includes weaker incentives around administrative trade-offs, as providers are likely to be less concerned with payment collections from patients and the risk of bad debt, and so are likely to be more circumspect about accepting administrative obligations involved with network participation. In addition to these considerations, it remains to be seen what precedents will be established as payers and providers test the arbitration process over the next couple of years. The second interim final rules' emphasis on the QPA is payer-friendly, but the final chapter has yet to be written. Providers will appeal for higher charges on the basis of other factors specified by the NSA, which could yield provider-friendly arbitration outcomes, encourage out-of-network billing and forestall an equilibrium in which the QPA is the expected price. Undoubtedly, providers will become very skillful in presenting requisite clinical evidence to support their billings. To recap, the No Surprises Act impacts a limited set of claims, strengthens the value we deliver in processing those claims, leverages all the services we have offered to the market for over 40 years and significantly expands operational complexity to our benefit. We have played a significant role in helping each of our large clients think through their implementations to comply with the NSA. Given the newness of the regulation, there are still some moving pieces, but based on our knowledge of how client strategies are taking shape we do not foresee a significant change in claim volume, scope of services utilized or fee structure. We do expect increased opportunity, tighter alignment with our customers' operations and an overall deepening of our partnerships with our customers. Now let's talk about Q3. Despite the significant attention our customers began to devote to NSA compliance and the persistence of COVID-19, we had a very strong quarter. As I said earlier, revenues in Q3 grew by nearly 30% over the same quarter last year. They grew 4.3% over Q2, beating our forecast for the quarter. Moreover, we saw sequential revenue growth in Q3 in all customer segments, including all top customers. We have a robust and growing pipeline. In Q3, we added 99 new business opportunities, with an estimated annual contract value of $57 million. During the quarter, 136 deals progressed through the pipeline, representing over $105 million in ACV. We closed 27 deals, accounting for an estimated $6.4 million in ACV, bringing the year-to-date backlog to 87 closed deals and $10.1 million in ACV. And we continue to close new business across all service categories. Here are just a few Q3 highlights, if I may. We signed a health plan new to MultiPlan which will use a combination of our primary and complementary networks. A Blue plan revised business rules to improve negotiation and success and expand its use of Data iSight following our analysis and recommendation. We were awarded and are in the final contracting stages to build a Medicare Advantage network for a payer in a number of counties for the 2023 plan year. We closed two prepayment integrity services opportunities, one including a national payer and another for a Blue plan. Meanwhile, the integrations of our two recent acquisitions, Discovery Health Partners and HST, continue to progress well, and we are seeing excellent opportunities to extend in the marketplace with these assets. For example, we expanded a regional health plan's use of coordination of benefits. We upsold two revenue integrity services to a national Medicare Advantage payer, adding this service category to their mix of MultiPlan services. We leveraged our extensive footprint in the third-party administrative market to sign 32 PPAs as resellers of our value-driven health plan services. We sold 18 new employer groups, adding nearly 35,000 new lives for value-driven health plan services. With that, let me now turn it over to Dave, who will talk about our financials. Dave?

Dave Redmond -- Chief Financial Officer Executive Vice President

Thanks, Dale, and good morning, everyone. As Mark mentioned, Q3 2021 was an excellent quarter for MultiPlan, with new records for both revenues and adjusted EBITDA. Q3 revenue of $288.2 million was the highest-ever quarter in MultiPlan's history, increasing 28.9% over Q3 2020 and increasing 4.3% sequentially over Q2 2021. We exceeded the midpoint of our Q3 2021 revenue guidance, and revenues were $36.2 million, or 14.4%, greater than Q1 2020, our last pre-COVID quarter. Organic growth, primarily in our analytics-based services, was very strong.

Excluding the revenue contributions from HST and Discovery and normalizing the decline in the impact of the COVID-19 pandemic during the quarter, revenues in Q3 2021 were up approximately $26 million, or nearly 10.2%, over Q3 2020 and about $10 million, or 3.8%, sequentially. We estimate the COVID-related revenue impact in Q3 2021 was approximately $8 million to $10 million, about $1 million lower than the COVID-related revenues impact in Q2 2021 and approximately $32 million to $35 million lower than the COVID-related revenue impact in Q3 2020.

Of the $8 million to $10 million in Q3 2021, we estimate approximately $5.5 million to $6.5 million of the impact was really related to our network-based service line revenues, with similar dynamics impacting our workers' comp and auto business in our primary travel network, as we saw in Q2 2021. We estimate less than $1 million impact was related to our analytics-based service revenue, which is basically back to where it was pre COVID. And finally, we estimate approximately $2 million to $2.5 million of the impact is related to our Payment Revenue Integrity service line revenues, driven primarily by a little bit lower mix of volumes of surgical, ED and anesthesia claims.

The total estimated impact of $8 million to $10 million for Q3 2021 primarily reflects trends we are seeing in our claims receipts and does not include indirect costs of COVID on business conditions, such as delayed implementations or a longer sales cycle due to limited in-person interactions. Third quarter adjusted EBITDA expenses were $69.8 million and included operating expenses of HST and Discovery of approximately $9.1 million. The increase of $11.9 million over Q3 2020 was predominantly $5 million of additional public company costs and the remainder in growth initiatives, net of some reductions in overhead, including costs associated with HST and Discovery acquisitions. As we've mentioned before, our annual rate of public company costs is approximately $20 million.

The combination of increased revenues and controlled expenses resulted in an adjusted EBITDA of $218.4 million in Q3 2021, our highest quarter in the history of MultiPlan. Q3 2021 grew 31.9% from Q3 2020, up $165.5 million, and 6.3% from Q2 '21, up $205.3 million, and was up $22.5 million, or 11.6%, from Q1 2020, our last pre-COVID quarter. Our third quarter adjusted EBITDA exceeded by over $3 million the high end of our guidance that we set in August and set a new quarterly record for the company.

Excluding the EBITDA contributions from HST and Discovery and normalizing the impact of COVID pandemic during the quarter, EBITDA for Q3 2021 was up $31 million, or 15.5%, over Q3 2020 and up about $8 million, or 5.2%, sequentially. Our adjusted EBITDA margin was 75.8% in Q3 2021, versus 74.1% in Q3 '20 and 74.3% in Q2 2021. The increase from Q2 '21 was primarily due to excellent organic revenue growth and judicious control of our growth in expenses.

Moving to our 2021 guidance. As noted in our press release this morning and on Page 12 of the supplemental slide deck, we are increasing the midpoint of our guidance for full year 2021 revenues and increasing the guidance for Fiscal Year 2021 adjusted EBITDA. This change reflects the combination of year-to-date results, including stronger-than-anticipated adjusted EBITDA for Q3 2021, and continued organic growth in revenues, driven by a strong pipeline of service implementations with customers. We now expect full year revenues of approximately $1.105 billion to $1.120 billion. This includes revenues in 2021 of approximately $47 million to $50 million related to our acquisitions of Discovery and HST.

Our revenue guidance assumes a full year 2021 COVID impact of approximately $45 million to $50 million. We have methodically worked through a variety of assumptions, including the ongoing risk from the Delta variant, to drive these estimates, and we have incorporated these into the guidance range I mentioned a moment ago. As we've said previously, given the nature of MultiPlan's business, forecasting the COVID impact is always, at best, an estimation and involves assumptions. Moving to adjusted EBITDA, as shown on Page 12, we expect adjusted EBITDA for 2021 of approximately $830 million to $840 million. Our full year 2021 adjusted EBITDA guidance reflects an estimated impact from COVID of approximately $36 million to $44 million.

The combination of our revenue and adjusted EBITDA guidance imply an adjusted EBITDA margin in the 74% to 75% range for the full year 2021. This range is a little bit lower than we have achieved historically, but as we've mentioned previously, this reflects increased public company costs, investments in the business this year and lower incremental margins from Discovery and HST. For 2021, we expect operating cash flow of approximately $410 million to $420 million, and our adjusted unlevered free cash flow conversion remains strong, at 73% for the quarter and 73% year-to-date.

As outlined on Page 13 of the supplemental slide deck and in the press release this morning, for Q4 we anticipate revenues of $285 million to $300 million and adjusted EBITDA of $215 million to $225 million. This includes a COVID impact of $9 million to $11 million in Q4, which is just slightly higher than what we experienced in Q3, driven by the surge in Delta variant cases in August and September and the potential for an associated change in claim mix, which we experience with a six- to eight-week lag.

To summarize and reiterate, we are very proud of the strong growth we have achieved, and we have continued to show growth quarter-over-quarter, which, as Mark says, continues to demonstrate the overall strength of the MultiPlan business. With that, I will turn it back to Mark. Mark?

Mark Tabak -- Chief Executive Officer Chairman

Thanks, Dave. Thanks, Dale. Before we open up to your questions, I expect you're all looking for answers to three critical questions, and I want to comment on those right now. First, regarding the identification of Dave's successor, our CFO search is progressing nicely. We are going about it in an orderly and systematic manner, and we hope to be announcing our new CFO within the next few weeks. So stay tuned.

Second, the impact of the No Surprises Act. The market price of our stock appears to suggest that the No Surprises Act is the death knell for MultiPlan. I can say, emphatically, that is not the case. All indications from everything we know from being in the trenches with our customers to work through the implementation of the requirements is that the No Surprises Act is very unlikely to have a significant impact one way or the other on our claim volume or on our revenues. That may sound like a bold statement to some of you, but there is indeed some moving parts as the clients firm up their strategies. But if you listened carefully to Dale's remarks, you should have a good idea of why we feel confident in making that statement.

And third, guidance for '22. As has been our practice for a long time, as long as I can remember, this is the time of the year when we are working through the bottom-up, client-by-client granular forecast and budget for next year. As you can imagine, that is a bit more complex this year, as we're dealing with the most sweeping piece of legislation in this company's history and we still have some uncertainty with respect to COVID. And those dynamics, on top of the typical puts and takes, we must aggregate as we put together our final forecast for next year.

What I can tell you is that our customers, including all of our largest customers, continued to rely on us in '21, and we anticipate they will continue to do so in '22. So while it's still too early to convey any detailed projections at this point in time, we are excited about the growth opportunities Dale discussed in his remarks and the impact of the growth on our income statement next year. In '22, we will continue to show this strength. I look forward to sharing our specific guidance with you after the first of the year. Operator, let's open it up to questions now.

Questions and Answers:

Operator

[Operator Instructions] Your first question comes from Joshua Raskin, with Nephron Research.

Joshua Raskin -- Nephron Research -- Analyst

Two questions, actually. The first one is, do you think any of these No Surprises Act opportunities that you're talking about and some of these big implementations it helps, especially with the national plans, do you think any of these are sort of temporary fixes for them? Do you think the national plans are going to create their own solutions over time? Or is this sort of the same thing we've been saying for 20 years, which is they kind of need MultiPlan as that independent source within the conversations with the providers?

Mark Tabak -- Chief Executive Officer Chairman

I believe the compelling value proposition we've given these customers for over four decades will continue to rely on us to make them more efficient, more effective and drive their success, as well.

Joshua Raskin -- Nephron Research -- Analyst

So your conversations, though, they are not saying, Hey, help us get through 2022. These, you believe, are permanent solutions.

Mark Tabak -- Chief Executive Officer Chairman

Correct.

Joshua Raskin -- Nephron Research -- Analyst

Okay. And then, the second, do you think there's any requirements or sort of short-term issues, etc, for your payer customers to get aligned with the new legislation? I'm just curious if you think there's going to be sort of a temporary impact on claims receipts and savings opportunities, etc, as this kind of comes on relatively quickly in terms of how legislation has been passed historically.

Mark Tabak -- Chief Executive Officer Chairman

Dale, why don't you comment on their needs today? And we can anticipate changes maybe in the coming months or years.

Dale White -- President Chief Operating Officer

Sure, Josh. Thanks for the question. Look, I mean, sitting here today on November three and with the regulation itself, the final regulation, just being issued last month and even additional rules yet to come, everyone is scrambling to make sure that they are in compliance with the law come December 1. And as I said in my comments, we have been in discussions with our payer customers and continue to be to help them and ensure their compliance with the law come December one, and we're not anticipating any significant disruption early on.

Certainly, it's a learning process for both payers large and small as they enter into a new environment with new rules and regulations. And so I expect, as we always do with our payers, we're going to collaborate with them, we're going to work with them, we're going to help ensure their compliance and all of us will learn as we move forward throughout the year.

Joshua Raskin -- Nephron Research -- Analyst

Great. Great. And if I could sneak in one more. Just on the Medicare Advantage side, I heard the anecdote of a plan building up their primary and secondary network in a new geography. Could you sort of talk to traction or anything you're seeing in there? We continue to hear the larger national carriers are still expanding their counties, there's new entrants. Just sort of how do we think about that opportunity.

Dale White -- President Chief Operating Officer

You're spot on in your comments, right? The payers, both large and the new entrants, are looking to expand their network footprint. And MultiPlan is ideally positioned to assist in that regard, right? I mean, we're always in the early innings on this, but we stand ready and are willing and are working with our clients to support their expansion strategies. And like I said, we were awarded an opportunity to build the Medicare Advantage for a payer in a number of counties. It's for the '23 plan oear. So as you know, we're doing all the work this year and early into next so the plan is ready when it has to file in early 2023.

But there's a lot of priority, a lot of corporate emphasis on expansion of their footprint beyond where they are today, and we stand ready in two ways. One, we have over 100 people in our network development team that are experts in provider contracting. And two, we have a 1.2 million-member provider network that has a footprint in all 50 states that enables us to leverage that asset as we work with our clients to expand their footprint.

Mark Tabak -- Chief Executive Officer Chairman

Josh, MultiPlan provides a very compelling value to those Medicare Advantage plans. We bring improved access by virtue of our current 1.2 million-provider network, plus our ability to build additional networks. And a result of our payment and premium integrity program, we can deal with the quality issues. And if you can address the needs of access and quality, you're well positioned to grow that business.

Joshua Raskin -- Nephron Research -- Analyst

Alright, perfect. Thanks.

Operator

Your next question is from Daniel Grosslight, with Citi.

Daniel Grosslight -- Citi -- Analyst

Thanks for taking the questions. Congrats on another quarter above plan. Mark, you anticipated all of my questions, and I hate to belabor the point, on the NSA, I just want to confirm what I heard, that you think that there's not -- you don't expect an impact from the NSA on both claims volume and revenue in 2020-2022? Sorry.

Mark Tabak -- Chief Executive Officer Chairman

That's correct. We don't believe -- as Dale articulated in his comments, we don't believe that there will be a meaningful impact on claim volume or charge volume flowing to MultiPlan, and we believe that our customers will rely on MultiPlan for a whole set of an array of services that Dale articulated in a very complex compliance program resulting from the No Surprises Act.

Daniel Grosslight -- Citi -- Analyst

Got it. Okay. So claims volume. What about revenue for 2022? Will there be any impact on revenue for 2022?

Mark Tabak -- Chief Executive Officer Chairman

Dave, do you want to-have we completed our modeling on that?

Dave Redmond -- Chief Financial Officer Executive Vice President

I think as it relates to the No Surprises Act, we do not think that the revenue impact as a result of the No Surprises Act will have a material impact one way or another. We've always kind of said that it was relatively neutral. I mean, like always, we may have a little bit of up and a little bit of down, but not a monstrous impact either positively or negatively on our revenue in 2022. But obviously, as Mark said, we're in the process of going through our budgets. We have not finalized that, and we're not at this point providing guidance, but we see no basis based on what we know today that we'll have a significant impact as a result of the No Surprises Act.

Daniel Grosslight -- Citi -- Analyst

Gotcha. That's helpful. And one thing I'm trying to square in my mind is that stat on 10% to 12% of savings will be subject to the NSA and the fact that the QPA does, while not as rigid as a benchmark, it does kind of look like a de facto benchmark. So as you kind of look at the space, what percent of the claims that are subject to the NSA that flow through MultiPlan, what percent of those claims do you think will just take the QPA? And what is the revenue model for MultiPlan when there's no real negotiation or deviation from the QPA?

Dave Redmond -- Chief Financial Officer Executive Vice President

Well, the revenue model of MultiPlan will not change. We've not seen any indication from many of our customers that our model is going to change regardless of how the QPA is calculated. So we believe, as Dale said in his comments, that the model is the same. As we said, we expect to see roughly the same claim volumes that we have today. We're, far and away, the primary receiver of all out-of-network claims for certainly the big four payers. We do not see a significant change in how savings is calculated and how our revenue based on those savings calculations is derived, and we do not see an exodus of providers moving in-network as a result of the No Surprises Act. Dale, you can certainly comment. We're better off having the Chief Operating Officer than the Chief Financial Officer probably comment on that, but that's our position.

Dale White -- President Chief Operating Officer

I would just add, look, as I-look, the process itself introduces significant complexity into the reimbursement process for these in-scope planes. And what you said, to your point, Daniel, what used to be a very straightforward process, even if they use QPA, there are lots of -- it's just there's now five intricate steps, right? It's not only just apply the QPA. It's identify a surprise bill. It's calculate the QPA. It's attach it to the claim. It's make that initial payment offer to the provider. It's reprice and pay that claim. It's negotiate a settlement with the provider if the provider rejects the payment and understand them and how do you go about managing the arbitration process to achieve success.

That complexity plays to our strengths, and that's what all of these additional steps calls for skills and capabilities that aren't always readily available to a payer, but we believe are clearly the things that we do extraordinarily well.

Mark Tabak -- Chief Executive Officer Chairman

Daniel, let me give you a concise reply to a very complex question, if I can, for you and others on the call. Look, we're exiting 2021 very, very strong, as you can see from the first three quarters of the performance and the guidance that we just issued. We continue to see strength in '22 for the very reasons Dale articulated in his presentation. Thirdly, we do not see the No Surprises Act as a regulatory headwind for us as we move into '22, and we think it will not have a material impact on our claim volume, on our charge volume or on our revenue model. So we're very optimistic about the future, and we think the continued strength we've shown in '21 will continue in '22 and beyond.

Daniel Grosslight -- Citi -- Analyst

All very helpful color. And then switching to the COVID impact for this quarter and next, $8 million to $10 million of negative impact this quarter. Some of the volume-oriented companies that have announced earnings have actually called out COVID as a tailwind. And I suspect that it's still a headwind for you guys because there is a lag between kind of when you get a claim and when you're actually generating revenue from it. So I was curious if you can just put a finer point on why COVID continues to be a drag for this quarter and next. And because of that lag, should we see the bolus of the Delta impact really affect 4Q?

Dave Redmond -- Chief Financial Officer Executive Vice President

As we said in our comments, we think the COVID impact in Q4 is roughly what it was in Q3, maybe slightly higher. I think we've estimated about $1 million. I think we said $8 million to $10 million of revenue in Q3, $9 million to $11 million in Q4. Partly because, Daniel, we have, as you know, six to eight weeks lag as to when we get claims. So claims that data services the 1st of September will come to us in October and early November. In most parts of the country, the Delta variant kind of peaked in the late-August, early September time frame, and we want to be cautious in looking at that.

But as we said, in Q3, our COVID impact was predominantly in our network services business. The impact in our analytics business is almost back to 0; I think we basically said $1 million. And in our Payment Integrity business, it's a couple of million dollars. I would hope that with some of the tailwinds that you're hearing from various providers that those numbers pretty much get back to 0 and don't produce really headwinds or tailwinds, but are relatively neutral, going forward.

I think the biggest factor is the $5.5 million to $6.5 million that we talked about COVID in the network space, and that's primarily related to three things. It is related to the impact that COVID has had on workers' comp and auto, as we use our network for workers' comp and auto. That continues to be down. And we have regional health plans and PPAs that lease our network for what we call a travel network. So they have a network potentially in their primary service area but not across the country. So they lease our network. And we continue to see revenues below where the pre-COVID levels were, without losing any customers, but just based on volumes as a result of travel, workers' comp and auto.

And I believe, and obviously it's subject to interpretation by a lot of people, but I believe we'll probably see a little bit of that continue into 2022, but I would hope that any real impact of COVID in 2022 is really limited to that small aspect of our network services revenue.

Mark Tabak -- Chief Executive Officer Chairman

Daniel, another concise reply. The residual effect of COVID as you move into Q4 and possibly Q1 of next year will be the claim mix in terms of the volume of testing or vaccines and then the site of care. And both of those continue to normalize as we move through '21 and into '22.

Daniel Grosslight -- Citi -- Analyst

Very helpful comments, thanks again guys and congrats on the quarter.

Operator

Your next question is from Steven Valiquette, with Barclays.

Steven Valiquette -- Barclays -- Analyst

Thanks, good morning everybody. So just a follow-up, obviously, on NSA. To the extent that the second interim rule is fairly widely perceived to be favorable to payers and not so favorable to providers, which you guys mentioned as well, when we do think about the American Hospital Association, other provider-backed organizations that have been pretty vocal in their opposition to this, what are your current thoughts on the probability that the provider-backed lobby efforts can still lead to some material amendments to the second interim rule? Or is it just more prudent to assume that it will be finalized as is and we should all just start making our assumptions for '22 based on this?

Dale White -- President Chief Operating Officer

It would be -- it's -- you're right. Certainly, there have been active lobbying by AHA and others in the industry to counter and object to the latest round of interim final regulations. And I know there's been thousands of comments into the federal government on the NSA Act and the interim final regulations.

We're proceeding, and I can tell you from the conversations with our customers, we are proceeding going into 2022 as if this rule and the interim final rule is what we will operate under in the near term. I can't speak to if it changes; that would be speculation. But I can tell you our payer customers and our clients and MultiPlan are proceeding as if the rules, the two interim final regulations -- and we understand, too, that there is still some comments to be made and there are still some rules, some open items that need to be defined by the federal government, but we're going into '22 clearly operating as if what's in place today will be in place for next year.

Mark Tabak -- Chief Executive Officer Chairman

Look, as evidenced by yesterday's election results, we can't predict the future from politics or from a regulatory perspective. But what we can do, we can understand the rules of the road as they exist today, put our head down, develop those capabilities to assure that when our customers come to us and want our assistance in complying we're prepared to do that. And that's exactly what we're doing for our customers, and that's exactly what we're doing for our 1.2 million-provider network, because we have the same requirements for our proprietary network, as well.

Steven Valiquette -- Barclays -- Analyst

Okay. Maybe a real quick follow-up is, are you aware of any entity that's pushing for a preliminary injunction to halt the implementation of the rule if it is finalized? Or is that kind of unprecedented for any sort of a court-related interjection into a CMS rule implementation?

Mark Tabak -- Chief Executive Officer Chairman

There's been a lot of chatter, but we haven't seen any definitive action at this point, but there's been lots of conversations, as you would predict.

Steven Valiquette -- Barclays -- Analyst

Alright great, thank you.

Operator

Your next question is from David Common, with JPMorgan.

David Common -- JPMorgan -- Analyst

Thank you for the opportunity. I had two questions. One is I'm wondering if you could share with us some of what I might call your visibility on sort of the contracting cycle and what that may mean to what I would call covered lives, the run rate of covered lives going into the new year. And then, secondly, it might be a nice break to talk about, away from the out-of-network business, the Payment Integrity business. I'm wondering how you're seeing that developing. Do you see that as something that you're entirely happy with your current service offering and business? Or does it still need some business development?

Mark Tabak -- Chief Executive Officer Chairman

Dale, do you want to comment first? And then I'll back you up.

Dale White -- President Chief Operating Officer

Sure. Let me take your latter comments first. Then Mark, you can jump in. We're very excited about the addition of Discovery Health Partners to the MultiPlan portfolio. It widened and deepened our Payment Integrity offering and with the addition of services like coordination of benefits, subrogation, post-pay data mining and others. But we still have work to be done. We're excited by the pipeline. We've added multiple -- we've added over 50 new opportunities just this quarter alone for Discovery services.

And so it's always a work in progress, right? We always want to make our products better and deepen them and further our penetration in our customer base. But with the addition of Discovery and HST, frankly, to our product portfolio, we feel real good about achieving our extend strategy and deepening our penetration, to your point, David, on in-network claims.

David Common -- JPMorgan -- Analyst

Great. And then the visibility?

Dale White -- President Chief Operating Officer

The visibility into, I think you said membership and member of lives, going into 2022, we rely on our payers, the payers as they navigate January one renewals. Typically, January one renewals play for the larger, for the ASO customers play have more significant impact earlier in the year than later in the year. We don't speculate on the movement of those lives between our customers or if we see any changes in terms of additional lives, too, because it's impacted, too, by unemployment. And so if the unemployment rate lowers and more people are coming back to work, there's more covered lives, and just on the in-house existing business you can see numbers go up and down.

David Common -- JPMorgan -- Analyst

Suffice it to say that you're not seeing anything unusal.

Dale White -- President Chief Operating Officer

Mark?

Mark Tabak -- Chief Executive Officer Chairman

I don't -- not as of today, no.

Dale White -- President Chief Operating Officer

[Indecipherable], did you want to add something?

Mark Tabak -- Chief Executive Officer Chairman

I'm good. I'm good.

Operator

Your next question is from Frank Jarman, with Goldman Sachs.

David Common -- JPMorgan -- Analyst

Thanks for taking my questions. Just a couple. One, first of all, thank you for your clarification on the NSA impact. I guess, just based on your guidance that it won't materially impact your business, what percent of those 10% to 12% of your in-scope claims that you're assuming are rejected -- sorry, what percent of those in-scope claims would be potentially rejected by providers and sort of transferred to Step two of the arbitration process where you capture a little bit more of a valuable role and saving spread? How are you thinking about just the potential for those to actually go to Step rwo?

Dale White -- President Chief Operating Officer

I think, look, I'd say from the-again, it's too early to speculate in terms of what percentage of claims the providers will be unhappy with the reimbursement. I think, too, early on, we expect both payers and providers to look deeply. And as I said in my comments, the providers will want to challenge, right? We think they'll be smart about how they go about challenging the QPA or the amount paid by the provider with their initial payment.

And we know providers will appeal for higher charges. Based on that basis, they're going to test the arbitration process that could yield more provider-friendly outcomes. There's arguments -- remember, the QPA is the primary variable, but there's a set of other variables, like provider education, provider experience, acuity of the patient, severity of the injury or illness, sort of the attempts made by the provider to be in-network. All of those are factors that the provider can use in their challenge in that process.

Remember, there's two steps before arbitration. If the provider is unhappy with the amount paid, there's a 30-day window for the payer and the provider to negotiate a settlement that's satisfactory to both parties. And then, two, if that fails, then it goes to arbitration. And that process, as you know, happens very quickly.

Mark Tabak -- Chief Executive Officer Chairman

Maybe one footnote to that. It's very difficult to model the number of claims that will be rejected and then go to arbitration. It's going to vary by customer type, and it's going to vary by the specialty of the physician.

A big variable there is also going to be the early stages. And if you recall, Dale walked through those five stages. A lot of that appeal process, or acceptings or rejectings, will be a function of once you identify that it is a surprise bill, the actual calculation of the QPA, and then editing that claim and then presenting that to the provider for discussion and either acceptance, [depreciation] or arbitration. So it's a very complex problem. It's a complex issue at this point with lots of moving parts, as Dale had articulated.

As a result of the complexity, there's just increased reliance on MultiPlan's capabilities. One of our many competencies is data aggregation and data analytics across a wide spectrum of claims and across a huge spectrum of provider types.

Frank Jarman -- Goldman Sachs -- Analyst

Great. And then I guess just if I could fit one more in. Just going back to early July, UnitedHealthcare had indicated it would no longer cover non emergency services at out-of-network facilities if they were out of their member service areas. So just curious, given your results this quarter and the guidance update for the full year, it looks like this likely hasn't impacted your business, but just curious if you would agree with that or if this is a timing issue that has a greater impact down the road?

Mark Tabak -- Chief Executive Officer Chairman

I think there was a wholesale misinterpretation of the United policy change. So Dale, why don't you just articulate so we're all at the same level what the policy change was designed to do and what it was designed to address and how it had no impact on MultiPlan?

Dale White -- President Chief Operating Officer

I mean, look, there was a policy change that was announced by our customer, and it really had to do with a specific set of claim types and specialties that had nothing to do with a member's sort of selection of a provider in-network or inside their service area. It had to do more with out of their area or what I'll call destination. It focused on certain types of providers. It focused on nonacute providers, step-down providers. And it was out of their service area.

And as I think we said back in July, we didn't expect to have any impact, any material impact, on our business this year. `

Mark Tabak -- Chief Executive Officer Chairman

It's interesting because in the marketplace whenever there is a policy change, whenever there is a regulatory change, the assumption is it's negative for MultiPlan. And in our 40 years of existence, that's not the case. That's not the case. And you can look at the track record of this company. Quarter-over-quarter, year-over-year, we continue to drive revenues, expand our margin, expand our EBITDA.

Policy changes and regulatory changes are not in inherently evil or bad for this company. In many cases, they're a tailwind, not a headwind.

Operator

There are no further questions at this time.

Mark Tabak -- Chief Executive Officer Chairman

Thank you very much. We appreciate your continued support, and we look forward to reporting our Q4 quarter after the first of the year. Thank you again.

Operator

[Operator Closing Remarks]

Duration: 60 minutes

Call participants:

Shawna Gasik -- Associate Vice President of Investor Relations

Mark Tabak -- Chief Executive Officer Chairman

Dave Redmond -- Chief Financial Officer Executive Vice President

Dale White -- President Chief Operating Officer

Joshua Raskin -- Nephron Research -- Analyst

Daniel Grosslight -- Citi -- Analyst

Steven Valiquette -- Barclays -- Analyst

David Common -- JPMorgan -- Analyst

Frank Jarman -- Goldman Sachs -- Analyst

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