LifeStance COO Resigns, Company Optimistic About Federal Noncompete Ban 

LifeStance Health Group Inc. (Nasdaq: LFST) faces the challenge of finding a successor for a departing top executive. 

Danish Qureshi, president and chief operating officer of LifeStance, announced his resignation on the company’s first-quarter earnings call. 

“For me, now is the right time to step away and take on my next challenge,” Qureshi said on the call. “As an entrepreneur and builder as part of the desire and drive to make a similar impact on other parts of the healthcare ecosystem as I’ve had the privilege of doing so here at LifeStance.”

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Qureshi said the decision, which he acknowledged had not been easy to make, took a month of consideration. He will maintain his position through the end of June. LifeStance CEO Ken Burdick said he does not have immediate plans to replace him. 

“Many of the changes needed to ensure a smooth transition have been put into place over the course of the last two years as we’ve built out our leadership bench strength and work together to solidify our foundation,” Qureshi said.

Along with the disclosure of Qureshi’s departure, LifeStance disclosed a total Q1 revenue of $300.4 million, a 19% increase year over year. Its Q1 visit volumes also increased, up 15% to 1.9 million. 

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The company raised its center margin expectations from $353 million to $373 million and adjusted EBITDA expectations from $88 to $98 million. Leadership also doubled down on optimistic expectations for positive free cash flow in 2024.

The results follow a substantive restructuring of the company’s resources.

LifeStance announced the closures of 82 clinics and plans to slow de novo growth in its 2023 year-end earnings call to optimize the business’s potential, Burdick said in the company’s last earnings call. 

LifeStance’s leadership said they anticipate the company to maintain Q1’s robust performance in future months. 

“This is a two-year journey of rebuilding and strengthening the foundation, improving the processes,” Burdick said. “I would view this as initial progress and some demonstration of the benefit, but my view is we’re five quarters into what is likely going to be an eight or nine-quarter improvement in our operating efficiency and therefore operating leverage.”

LifeStance has “no intention” of raising additional debt or equity thanks to a delayed draw term loan of $8 million and a $50 million revolving debt facility, David Bourdon, chief financial officer, said. 

Company executives shared an optimistic outlook on news that may be worrisome to some behavioral health providers.

The Federal Trade Commission recently voted to ban businesses from entering new noncompete agreements and making existing noncompetes unenforceable, starting in late August.

LifeStance currently includes noncompetes in its contracts in states where it is legal, Qureshi said, but the company “never built [its] value proposition around noncompetes.”

“For us, this is not something where it’s a particular worry,” Qureshi said. “If anything, we’d be hopeful that it creates more movement on the recruiting side and our ability to attract clinicians from other practice groups where they currently may feel restricted to explore other opportunities.”

While LifeStance may expect staffing advantages from the new noncompete ruling, it is already experiencing hiring success. The company recruited more clinicians than expected in Q1,  adding 221 net clinicians for a total clinician base of 6,866. 

While a “meaningfully lower” number of clinicians are expected to be onboarded in Q2, Bourdon said this pattern aligns with what Lifestance experienced in 2023, wherein the trend reversed in the second half of the year.

In addition to touting its workforce successes, the company’s executives announced the overall successes of its recently overhauled payer strategy, which involved becoming “more assertive and demand[ing] appropriate reimbursement.”

Leadership implemented the new approach in several contract negotiations at the end of 2023 and early 2024, resulting in a 4% year-over-year increase in total revenue per visit in the first quarter, Burdick said.

However, the negotiations lead to one lowered reimbursement rate.

“We had a single outlier with historically above market rates, but negotiated reimbursement that will now bring them in line with our overall book of business,” Burdick said. “This will create short-term downward pressure on total revenue per visit for the back half of 2024 and the first part of 2025.”

The temporary dip was included in LifeStance’s 2024 guidance and will de-risk the company’s portfolio, Burdick said. 

Executives also discussed the implications of the cyber attack on UnitedHealth-owned Change Healthcare.

Some behavioral health providers experienced disruptions to reimbursement processes due to the cyber attack, resulting in financial impacts to their clinicians.

“Thanks to our scale and flexibility we have been able to absorb 100% of the impact of reimbursement delays without financial disruption to our clinicians,” Burdick said. “Additionally, we have been able to achieve this without the need to raise debt or equity capital.”

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