Ladies and gentlemen, thank you for standing by. Welcome to the First Quarter 2011 BioScrip Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded Tuesday, May 3, 2011. I would now like to turn the conference over to Lisa Wilson, Investor Relations, BioScrip. Please go ahead, ma'am.

Good morning, and thank you for joining us today. By now, you should have received a copy of our press release issued this morning. If you have not received it, you may access it through the Investor Relations section at our website. Rick Smith, President and Chief Executive Officer; and MJ Graves, Interim Chief Financial Officer will host this morning's call. The call may be accessed through our website at bioscrip.com. A replay will be available shortly after the call. Interested parties can access the replay by dialing (800) 633-8284 in the U.S. and (402) 977-9140 internationally and entering access code 21521052. An audio webcast will also be available under the Investor Relations section of the BioScrip website at www.bioscrip.com. Before we get started, I would like to remind everyone that any statements made on the call today or in our press release that express a belief, expectation or intent, as well as those that are historical facts, are considered forward-looking statements and are protected under the Safe Harbor of the Private Securities Litigation and Reform Act. These forward-looking statements are based on information available to BioScrip today, and the company assumes no obligation to update such statements as circumstances change. These forward-looking statements may involve a number of risks and uncertainties which may cause the company's results to differ materially from such statements. Forward-looking statements are subject to inherent risks and uncertainties surrounding future expectations generally and may differ materially from any actual future experience. Risks and uncertainties that could affect forward-looking statements include the failure to realize annualized cost savings associated with any restructuring or cost reduction efforts, the impact of members of management in executing these efforts, our ability to leverage core competencies or maximize margins and operating cash flow and the risks described from time to time in the company's report filed with the SEC, including the company's annual report on Form 10-K for the year ended December 31, 2010. In addition, as required by Regulation G, reconciliation of non-GAAP financial measures, mentioned during our call today, most comparable to GAAP financial measures can be found in Schedule 4 of today's press release. That schedule is available as well on our website under the link to News found in the About Us section of our homepage at bioscrip.com. And now I would like to turn the call over to Rick Smith. Rick?

Thank you, Lisa. Good morning, everyone. Thank you for joining today's call. Overall, we are starting to realize the results of the restructuring efforts put in place in the fourth quarter of last year to lower our corporate overhead and improve our cost structure and competitive position. For the first quarter, sequential gross margin increased to 17.6%, and adjusted EBITDA increased to $16.6 million. This was a result of positive shift in our revenue mix and cost reduction initiatives resulting from our strategic assessment. Additionally, we generated strong operating cash flow through improved inventory management, as well as other working capital activities. We believe we will see further improvement over the next several quarters. While the first quarter is a positive step in the right direction, we do not want to get ahead of ourselves. We are in a period of transition and there's still more work to do. MJ will provide more detail on the financial results; however, I will highlight some key items. As we expected, sequential revenue was down compared to the fourth quarter. A large component of this decrease is a result of our decision to exit $15.6 million of certain low-margin Pharmacy Services revenue in this quarter. This was offset by revenue growth in other areas. Our Pharmacy Services segment continues to be a solid contributor, and we are leveraging its strong clinical reputation to achieve positive results. As a result, the segment experienced revenue growth of 13.8% year-over-year. This is primarily driven by the new managed care contract we started in the fourth quarter of last year, the drugstore.com revenue and oncology revenue growth compared to the fourth quarter and year-over-year. March 25 marked the one-year anniversary of our introduction of CHS into the BioScrip family, which continues to positively impact the Infusion/Home Health…

Thank you, Rick, and good morning. For the first quarter 2011, we reported revenues of $439.3 million compared to $335.1 million for the same period a year ago, an increase of $104.2 million or 31.1%, primarily as a result of the CHS acquisition. Infusion/Home Health Services revenue for the first quarter of 2011 was $110.5 million compared to $46.1 million in the prior year, an increase of $64.4 million or 139.6%. CHS revenue contributed $68.3 million during the first quarter of 2011. Pharmacy Services revenue for the first quarter of 2011 was $328.8 million compared to $289 million for the prior year period, an increase of $39.9 million or 13.8%, driven primarily by organic growth. For the first quarter, gross profit increased to $77.3 million or 17.6% of revenue compared to $38.9 million or 11.6% of revenue in the prior year period. This was a result of the CHS acquisition and other revenue enhancement initiatives already discussed. SG&A for the quarter was $59.1 million, up from $36.4 million in the prior year period, primarily due to the inclusion of CHS expenses. The Infusion/Home Health segment operates at a higher level of operating expense than the Pharmacy Services segment, due to higher labor costs associated with the management of patient care. The company's income from operations was $10.4 million for the quarter compared to a loss of $6.3 million in the prior year period. For the first quarter, interest expense was $7.3 million compared to $3.2 million in the prior year as a result of the CHS acquisition. Net income for the first quarter was $2.9 million or $0.05 per diluted share compared to a net loss of $7.2 million or $0.18 per share in the prior year. During the first quarter of 2011, BioScrip generated $25.1 million of segment adjusted…

Thanks, MJ. As we continue to make incremental progress implementing and executing our strategic plan, we believe that through all of our focus and consistent work, we have created a solid foundation from which to grow. I also want to commend our employees and express my appreciation to the entire BioScrip team for their efforts during this transition period. We feel good about our start to 2011 with the strategy we have in place and look forward to building that on our progress. And with that, operator, I'll open up the line to questions.

[Operator Instructions] And our first question comes from the line of Brooks O'Neil. [Dougherty & Company] Brooks O'Neil - Dougherty & Company LLC: As you might imagine, I have a few questions. I'll probably just ask a couple and then hop back into the queue. I guess, I'd start with a question about whether you think that 17.6% gross margin level is sustainable. Was that a baseline? Or was that due to seasonal factors this quarter?

Well, Brooks, the tough part, we've told you, we're not going to provide guidance. However, we are pleased with the margins, but we don't expect it to necessarily be linear while we're implementing the strategic assessment. Brooks O'Neil - Dougherty & Company LLC: Sure. Okay, I think I understand that. So secondly, you mentioned, MJ, in your prepared comments a couple times the cash card business. Maybe you could just give us a little bit of background on that business. What exactly is it? Why were the expenses up? How do you view that business strategically going forward?

The cash card business has been a solid area of growth for us. As far as from a pure business perspective, what it represents is, it's the mechanism that provides patients who do not have insurance coverage to buy this card and be able to get a discounted insurance equivalent rate in obtaining -- getting their prescriptions filled. We work with a number of brokers with the cash card business, and that brokerage fee is really the key driver of what goes into the SG&A cost as that revenue grows. We have a number of -- a large number of participating providers within the network that are part of this. But as far as the growth we see there, we see it as a combination of things: one, if we have very good broker relationships; and number two, in spite of all the health care reform, there's still a significant need of patients to have some type of pharmaceutical coverage. They just don't have that today. As far as how that affects the financial, Brooks, what you're going to see in the financials is growth in the revenue, but you will also have corresponding increase in the brokerage fees. It's a variable cost that's associated with that revenue growth. So as we have that growth in the revenue, you're are also going to see some increase in SG&A, but you're not going to see an impact to gross margin. Brooks O'Neil - Dougherty & Company LLC: Okay, good. I think I understand that. I'll just ask one more for now, and then I'll hop back into the queue. I'm just curious, as you look at your Home/Infusion business, I think, if we strip out the legacy BioScrip Infusion and the CHS contribution, revenue growth was relatively modest this quarter. And it's always struck me that you have tremendous long-term growth opportunities in that business. Is that how you would assess it today? And do you think we could see a more sort of organic revenue growth in that business, going forward?

Yes, I do. I mean, one of the things that we've been doing on the Infusion side of the house, as Rick talked about in his comments, is the same thing we've been doing with the other aspects of the business. And that's really trying to weed out some of the less profitable drugs and contracts. So even though that has put a little bit of pressure on the revenue line, from a margin perspective, we think we've uplifted the margins, and we're in a good position, going forward. Based on the relationships we have today and the specific clinical programs that we have, we still see this as a strong area of growth, especially, with all the pressures with health care reform, what everyone continues to look for is the low-cost provider.

Brooks, this is Rick. We had -- as I mentioned in my comments, we had about $3 million in the BioScrip legacy in 2010. Some revenue relationships we moved away from later in the year, and essentially, if you eliminate those and on an apples-to-apples basis year-over-year, the legacy side was up about 11%. And then on the CHS side, they had a huge concentration in Synagis, which again is a seasonal drug, but on an organic basis year-over-year comparative, they are up 9%, so -- on the infusion side. So I think we still have a lot of work to do in terms of our managed care pull-through. And so I think we believe we're in the beginnings of just those initiatives. And so our expectation is, with a lot of hard work, our goal is to continue to organically grow that business in a very strong way. Brooks O'Neil - Dougherty & Company LLC: That's great. And did I understand you to say that you were going to deemphasize the Synagis business going forward?

We look at our business and that business every year, and essentially margins have come down in a lot of areas, especially this past season, as well as other restrictions on use, so we essentially saw a decrease from what CHS had done in the prior year. And I think every season, we'll continue to assess whether or not it makes sense for us in a particular market.

Yes. You really have to look at it, Brooks, on a state-by-state basis. Brooks O'Neil - Dougherty & Company LLC: So you see some states where you have good opportunity and other states where maybe not so much.

Yes. And it's not necessarily directly tied to the recession, even though what we're all expecting is for the states to be putting more downward pressure on the margins. However, the states go through cycles. They'll see sometimes they push it too low, and they'll come back. So it's not an automatic assumption. That's why every year, you just have to reassess. At a certain point, if a state presses too low and pushes too low, we may opt out that year and with the confidence that over time, they're going to have to increase their rates again.

And our next question comes from the line of Mike Petusky. [Noble Financial Group]

Let me take another -- I know you guys aren't providing specific guidance, but I want to take a -- maybe a little different tact. In terms of the gross margin improvement, which was pretty remarkable for the quarter, I guess -- and I suspect some other investors probably were modeling 16% to 16.5% or 16% to 17% throughout the year. I mean, is it at least fair to say, in general terms, that maybe a new baseline is somewhere in the 17% or higher range? I mean, can we at least say that based on the shedding of the contracts and some of these other factors?

Let me see if it would help you for me to respond in this way. As far as how we achieved it, I think the most important thing for you to hear is that it was not a one-off. It was not a result of a non-recurring item. It's a result of specific supply chain initiatives. The restructuring efforts, which did impact cost of sales as well from the standpoint -- we have direct labor that goes into cost of sales, so to the extent that we have restructured employee benefits, that had an impact. Additionally, as we've talked about on the call, we've shed some of the low margin business. That had an impact on revenues, and in some cases, revenues appearing a little bit flat, but you're seeing such an uplift in the gross margins that's permanent as well.

Okay. It sounds like you're not really, particularly, walking me back from what I just said. Is that fair?

Yes.

And I think that we've said before, Mike, that depends on the growth in the particular areas will impact what the overall margins end up being. And we've seen specialty grow at a faster clip in some regards just based on net revenue per patient in the Pharmacy Services side versus the Infusion side as well. So I think, the ultimate goal, as we've talked about, is continue to look for improvements in everything we do. And so I think that we're happy with what was produced. But we still have more work to do as well.

Sure. Let's talk a little bit -- because, obviously, you did a fantastic job on gross margin. SG&A, I was actually expecting a little improvement in terms of percentage of revenue you didn't really get. It was flat, actually, slightly up. And I understand that the cash card business probably impacted that. But I guess, looking at the fact that you guys said the $15 million of cost savings is implemented or has basically been implemented and will start to be recognized the next few quarters, and the other $5 million you're starting on, I mean, is it a fair assumption, I guess, for me to suggest that we should start to see that number come down over -- as a percentage over the next couple of quarters?

Well, actually, the way I look at it is if we're doing a good job growing our organic business, if we have organic growth and the business is growing strong, the tough part is you guys will not see it on one line, because the growth we're having in the business overall is causing some increases to SG&A that are masking where the cost reduction is occurring. So we see that as good news, but it does make it more challenging for you. My recommendation would be, let's focus on the bottom line results. Let's take a look at what EBITDA is doing and follow the EPS. But as far as where the impact of the cost reduction initiatives are occurring, we're seeing those both at the margin line as well as the SG&A. As we discussed for the SG&A, we did have some increases in the broker fees, some increases in the other sides of the business, as we're having some overall growth, that curves that up a bit, that offset some of the reductions we had. Rather than trying to show a lot of bridges, to show x, y and z increase these incremental amounts, and then it was offset by this other, we're really trying to just rely on the bottom line results and let that show for itself.

Okay. So if we're looking, going forward. . .

I think, from our perspective -- as we say, when the initiatives began, we said they're implemented in Q1 on our last call, again, today. And so we expect to see the full realization of those. But I think what our focus is, is we identified $15 million of cost that could be taken out or reduced out of our existing infrastructure. There's going to be a level of increase based on staffing level, that it will be tied to revenue growth. That will be reflected in both the cost of sales as well as on the SG&A line, as well as other areas. And so our focus is to take a look, as we've talked about, in areas that don't touch a patient, don't generate revenue, don't collect cash or close our books. And so everything continues to be looked at in terms of process improvement, efficiency and streamlining, and so we feel good as we continue to monitor that $15 million block that we're essentially there. And we'll see that continue to layer in, in subsequent quarters. And then also take a look at the additional $5 million that we think we can obtain in future quarters as well.

And Mike, to your point, and I didn't mean to dodge that, but to your point, we will see more of an impact in Q2 and Q3. Approximately 45% to 50% of that $15 million of savings went into effect at the beginning of the quarter for Q1. But there was also about 50% that went into effect mid-quarter or so, towards the middle part or even towards the end of the quarter. So we'll see more of a full impact on that basis. And then, as far as our next stretch, a lot of those initiatives we've already kicked off, but we may be seeing the savings of those more like in Q3 and Q4. We've got those implemented, but it's going to take a little bit of time for those costs to peel off.

Right. And I'll get off this topic right after this question, but of the 50% of the $15 million, and then the other $5 million that you guys are looking at, I mean, most of that -- or let me not even characterize it, how much of that is kind of on the -- would hit the SG&A line versus the cost of goods line?

The majority. The majority is going to be SG&A.

Okay. All right, great. And one more, I guess, P&L question. Bad debt levels, is that a level we can kind of see -- the level that's reported, 1.15, I believe, I mean, is that a percentage that is reasonable going forward, do you think?

The bad debt levels, if you pull out the prior period's anomalies, as far as that contract termination, they've been fairly consistent, and the DSO, we've been pleased with it. It's been consistent as well. So I would agree that it's a good starting point for you. Obviously, a lot of effort's going on the back end as well as the front end of our processes, and we are always pressing for improvement. But as far as that as a baseline, I think that's fine.

Okay. And I guess another question. Rick, I think you had said on the last call that the fourth quarter results were negatively impacted by the delay of the onset of flu season, and then potentially you might benefit. I mean, did that have much of a positive impact in Q1? Can you just talk about that?

Yes, we actually saw a continuation. I think the industry did -- they --kind of where the hospitals followed through in terms of census. So I think, first couple of months were -- that we saw on the acute side were a little bit softer than we anticipated. March came back very strong. And so we were essentially a little bit softer than our expectations in the anti-infective.

Okay. Does that mean anything in terms of the second quarter? Or not really?

I think it's just we're seeing -- just, I think our census growth was consistently strong each month in the first quarter, and we're seeing some of that strength continue. And so it's really about our call point and widening our call points as well. But I think that a lot of the industry saw in February some softness whether in different markets as well.

Okay. And last question, I've been getting a number of questions from investors about CFO, if there's a search on, if any offers have been made, where you guys are in that process. Can you comment on that?

Right, MJ is committed to stay through for the duration through the year -- and which is, I think based on what we have going on, the work that we're doing, the project, she's fully committed to the success of our organization and what we need to do with our plan and execution of the plan. She's building -- essentially bringing the team together in the finance organization. The morale has been significantly improved. The level of energy has significantly been upgraded as well. And so she's working wonders in terms of that leadership and just bringing the organization together. So she's -- I'm happy to say she's staying, so we potentially have suspended, indefinitely, that search.

Okay, so she's still -- "interim" is still on the business card, but effectively, at least through the end of this year, she's in the seat.

Yes.

Yes, I would say I have a year ahead of me. I've told Rick that I'm fully committed to this part of the project.

And our next question comes from the line of Kyle Smith. [Jefferies & Company]

The strategic review, as long as, obviously, it's driving these sorts of sequential improvements, I'm happy to see it continue, but do you have a sense as to how long you're going to be continuing a formal strategic review? And when you might be in a position to issue guidance?

We said that we anticipated our work on the assessment would go through the first half of this year, Kyle. And so we'll essentially report with an update on our next call. But that's pretty much where we're at today, and as we originally envisioned, all the work that was necessary and continuing to assess, refine, implement the different parts of our strategic plan.

Okay, great. So still looking to finish up at the middle of the year. And then with the contracts that you shed during the first quarter, is that something where we should continue to expect a material number of -- bits of less profitable specialty Pharmacy business to come off, so the top line might be impacted a bit by that? Or have you gotten rid of the bulk of that at this point?

Yes, we originally said on the last call, we expect about $10 million to $15 million would go away on a quarterly basis. $15.6 million was reported. We had about $5 million in Q1 that will not show up in Q2. And so I think that's the bulk of it.

Okay, great. And you briefly mentioned winter weather. Do you have any quantification of what the winter weather effect might have been? I know you've got a fair amount of exposure to the areas that were really hard hit this first quarter.

I think just volume, we anticipate is about $1.3 million, in terms of impact to the quarter.

Okay. So not too much. And then, MJ, I just wanted to make sure I followed you correctly on the timing of the $15 million of savings. It sounds like half was in effect at the beginning of the quarter; the other half, call it, mid-quarter. So we see 75% of that reflected in the first quarter, so another 25% of the $15 million should be showing up on a run rate basis, correct?

Right.

Great. And then my last question has to do with the seasonality in the Home/Infusion business. You talked a little bit about Synagis, which is mostly a winter revenue line. But as I look at the 4 quarters of EBITDA contribution from the segment, I see stronger results in the second and third quarters of 2010, a little bit weaker EBITDA contribution in the fourth quarter and first quarter. Help me understand a little bit better how the seasonality plays out in that segment.

Well, I think the Synagis is typically from -- has been depending on the state, October through about March, maybe early April, and sometimes it's year-round in some states. But we also, typically -- you should see a stronger build, sequentially, each quarter to the Infusion business with the first quarter typically being your lightest quarter with a lot of discharges to homes in the holidays in the fourth quarter. And so we were impacted, I think, by a little bit of weather and other impacts in Q1. But the overall, that's really no excuse. I think our overall objective is to build each quarter sequentially and essentially continue to build a strong foundation of both chronic and acute Infusion business to ensure that we're always stepping up in terms of revenue levels. And so we're -- I think that our Q1 was okay. I don't think it was great. And we still have a lot of work to do in terms of competitive market share pull-through on the Infusion business as well.

Okay. So we probably shouldn't expect to see this level of differential between the winter half of the year and the summer half of the year in EBITDA performance by that segment going forward.

No. We've got some opportunities for continuing to improve operating performance in all areas of the business.

Okay. And is the Synagis business, is that a negative contributor to EBITDA? I'm just -- I'm very surprised to see it's a $2 million or $3 million differential in the quarterly EBITDA in the past 2 quarters versus what you had last summer. And I'm trying to figure out how I should be shaping my expectations for this summer.

It's not a negative to EBITDA; otherwise, we would question ourselves on why we were doing it to begin with. Even though, I will tell you, there are times that you may do a negative contributor because of a relationship, a referral and a payer relationship, but that's not the situation here. If you do Synagis well, it will contribute a small amount, but it's not much. It's a very low-margin, low-profitability business. The objective, really, is to get the dispense out, make sure you adjudicate the claim before it goes out the door, so you know you have no bad debt risk and try not to touch it more than one time for the time [ph]. You got to make sure you process it efficiently.

Okay. I guess what I'm getting at is, as I think about the next couple of quarters, should I be keying off of the performance of the first quarter? Or should I be keying off the performance of the second quarter of last year as an indicator for the second quarter of 2011?

I would key it off of the first quarter, because it's really very low overhead factor.

[Operator Instructions] And we have a follow-up question from Brooks O'Neil. [Dougherty & Company] Brooks O'Neil - Dougherty & Company LLC: I just had a couple more questions. First, I noticed in the 8-K you published yesterday that you have a new distribution agreement with AmeriSource. Would you expect that to be a benefit to you all? And if so, could you help us to think about how much of a benefit?

As part of a -- it's not immaterial, but I think it's just a continuation of our supply chain initiatives. It's just simply an amendment to the agreement. I think we have a very strong supply chain organization, and they are always identifying opportunities to continue to support the business and anticipate the direction we're heading. So I think it just was an opportunity for them to sit down with our partner, AmeriSource, to go over some things that could be improved. Brooks O'Neil - Dougherty & Company LLC: Right. And then could you give us -- I think, somebody mentioned one of your national managed care agreements. I think you have at least 3 potentially sort of newer ones with United, Aetna and Humana. Can you just give us an update on how those are going? And if you see additional opportunity either with them or with other payers?

I think they're fine. I think we -- their license is to hunt. And as we've mentioned, one investment we're making this year is an additional managed care sales force on a regional basis as well as national. And so we've got a couple of new additions that have joined us within the last 6 months. And they're hard at work in terms of looking to identify areas for improving our pull-through and creating awareness within these plans as well. So as I said earlier, I think we can continue to do better and improve our positioning in all of our markets and relationships. Brooks O'Neil - Dougherty & Company LLC: Great. And then in the quarter, Rick or MJ, did you notice any particular strength or weakness in any of your key therapeutic areas or particular drugs? One, I'm thinking about, I'd just love an update on your IVIG situation, but I'm just curious what you saw in some of the bigger therapeutic or clinical areas that you're focused on.

I think, we -- as I said, a little bit of impact on the antibiotic side. We saw a slight decrease from Q4 to Q1 in IVIG. Typically, beginning of the year, you have changes in insurance, as well as delays in getting prior authorizations to get patients started. So that impacted us a little bit. And then on the Pharmacy Services side, we had strong growth in oncology, MS and psoriasis on a year-over-year basis that continues to do well for us. Brooks O'Neil - Dougherty & Company LLC: Great. And then the last question I have. Just curious, I think MJ mentioned a little bit about payers and the situation with, for example, state Medicaid payers. But do you have any comments or insights with regard to what you're seeing there from the payer environment? Is there a lot of pricing pressure out there? Or is it kind of steady state business-as-usual kind of environment right now?

Actually, the biggest impact we probably had from a payer, Brooks, was Medicare on the nursing side. Medicare implemented a 5% cut to the nursing rate effective January 1. And that's had about a $500,000 impact on revenue for the quarter. It's about $2 million a year. So that was the biggest impact we had. The good news for us, we don't have huge exposure to Medicaid, and it's a diversified risk. The diversified patient base that we have across 50 states, the concentration of where the patient base is, it doesn't put us in a vulnerable position with one state's budget. So at the present time, we're not seeing any significant pressure that we're really concerned about, as far as what it would do to the revenue-oriented margins or our ability to serve the patients. This is obviously something we continue to monitor very carefully. Brooks O'Neil - Dougherty & Company LLC: That's great. And then just -- I actually lied, I thought of one more question while you're talking about the nursing -- it may be obvious to you or investors that I historically haven't focused duly on the Home Health segment. Obviously, it appears that that's an important component of what came in with CHS. Can you just give us a quick overview of that business and how you're doing at it? Whether you see significant opportunities or if that's going to just be a sort of steady business going forward.

We've been pleased with home nursing. It's been almost like a utility stock, if you will. It's very steady. The cash is very reliable. The team that is based down in Mississippi, that's where the nursing headquarters is located. They do a magnificent job. The primary states, not all the states, but the primary states that we're in are really Tennessee and Mississippi, even though we also do some nursing in Illinois and Kentucky. But yes, I think one of the reasons that nursing has been so successful for us has been we have good geographic concentration in the markets where we are. We have good coverage of the states down in Mississippi and Tennessee, and there's a nice complement with the Infusion side of the business as well. We find that the staff that we have on the nursing side tend to be innovators. They're very active in national nursing organizations. They do a lot of peer-to-peer networking to get a sense of what other large nursing agencies are doing to reduce their operating costs and deliver excellent patient care in a more efficient manner. I know that when I was with CHS, I've had firm discussions with other large national nursing organizations that our group, actually, is more technology proficient and has more of a constant drive towards operating improvement than what a lot of the larger corporate companies have experienced. For example, our nurses out in the field, they've been using their note tablets or pads or notebooks for years to enter the patient information while you're in the field. And that may sound like a minor difference, where a lot of the nationals, they're still doing paper, and the nurses take it back to the office to put it in at the office. You may think, "Okay, why would you want to pay a nurse at a higher rate per hour to do that paper input or do the patient input as opposed to a clerk?" Well, the reason you do it is because you get the feedback right there while you're in the field in front of the patient, if you have any issue with the oasis [ph] evaluation. So that's why we get better results. And we've got a great crew. We're very pleased with their results. We may -- to answer the second part of your question, we may look at some good tuck-in acquisitions or opportunities to expand. We're not opposed to that, but obviously, we want to make sure that we do it in a logical way.

And our next question is a follow-up question from the line of Mike Petusky. [Noble Financial Group]

Yes, just a real quick one. In terms of the gross margin improvement, you guys cited the increase in the cash card business as well as the shedding of low-margin contracts. Is there any way to quantify, I guess, the relative impact of both of those? And maybe if there are any other factors that drove gross margin?

Well, supply chain initiatives were another factor.

And some of the cost in our $15 million was up in our cost of goods as it related to employee activities and other cost of goods related to those employees on the clinical side. So then the Infusion/Home Health segment cost of goods includes those clinical services for patient care.

But is there -- I mean, is there any way to essentially say, "okay, we had 150 basis points of incremental improvements sequentially. X amount was attributable to cash card growth, x amount was attributable to low margins." Is there any way to kind of quantify that? Or just kind of give me a rough ballpark as to the relative impacts of these different items.

If you look at the improvement, probably the 2 biggest factors, the cash card growth represented about 60 basis points. The reduction of the wholesale was another 60 basis points. The supply chain initiatives were about 30.

And Rick, we have no further questions at this time. I will now turn the call over to you.

Okay. Well, thank you for your time this morning, and we'll talk to you if not sooner but on our next call. And I know a lot of BioScrip employees are on this call, so again, thank you for all your efforts in contributing to our success this quarter. And we got more to do this quarter. Thanks. All right. Bye, everyone.

Ladies and gentlemen, that does conclude the conference call for today. We thank you for your participation and ask that you please disconnect your lines.