Q1 2021 agilon health Inc Earnings Call
Yes.
Good day, and thank you for standing by and welcome to the agile on Health first quarter 2021 earnings Conference call. At this time all of the participants are in a listen only mode. After the speaker's presentation. There will be a question and that's the session to ask a question during the session.
The need to press star 1 on your telephone if you require any further assistance. Please press star zero and I would now like to hand, the conference over to your host Matthew Gilmore, Vice President of Investor Relations. Please go ahead.
Thank you operator, good morning, everyone and welcome to agile on health first quarter 'twenty to 'twenty, 1 earnings conference call.
With me. This morning is our CEO, Steve <unk>, and our CFO Tim Bentley.
Following prepared remarks from Steve and Sam will conduct the Q&A session.
Before we begin I'd like to remind you that our remarks and responses to questions may include forward looking statements actual results may differ materially from those stated or implied by forward looking statements due to risks and uncertainties associated with our business.
These risks and uncertainties are discussed in our SEC filings. Please note that we assume no obligation to update any forward looking statements.
Additionally, certain financial measures, we will discuss in this call are non-GAAP financial measures. We believe that providing these measures helps investors gain a better and more complete understanding of our financial results and.
And it's consistent with how management views our financial results. A reconciliation of these non-GAAP financial measures to the most comparable GAAP measure is available and the earnings press release and form 8-K filed with the SEC.
With that I'll turn the call over to Steve Steve.
Thanks, Matt Good morning, everyone and thank you for joining our first earnings conference call at the public company.
I'd like to start by welcoming our new shareholders. We really enjoyed meeting many of you last month on the IPO Roadshow and.
And appreciate the trust placed and the agile on.
We're doing today's call from Columbus, Ohio, which is home to our founding partner Medical group Central Ohio primary care.
C O P C. As the largest independent primary care group in the country and like all of our partner groups is a leader in their community.
And Columbus as in all of our markets agile on health is co located with our partner groups and our employees work each day to enable our physician partners to transform the health of their local community.
We take our mission seriously to be the trusted long term partner of community based doctors today, our partners spans 17 diverse geographies and provide integrated total care to nearly 275000 senior patients on the agile on platform.
And while the last 15 months with the Covid pandemic have been extremely difficult for our senior patients the dedication and innovation and perseverance of our physician partners and our employees has been extraordinary and I could not be more proud of the positive impact they have made on patient and commute.
The health.
I will cover for areas of my prepared remarks for.
First some background on agile on.
Second some highlights on our first quarter results.
Third on update on of New program direct contracting and force our priorities following last month's IPO.
Tim will provide a more detailed review of the numbers and our guidance and after that we'd be happy to answer your questions.
Some background on agile on and our strategy.
Our focus is enabling primary care doctors to be the agent for transforming health care at the community level.
We do this in a unique way by partnering with leading independent physician groups and entering into long term exclusive joint venture agreements.
And that focus on their senior patients in the Medicare advantage.
And Medicare advantage and starting last month the indirect contracting.
Our partnerships move existing doctors senior patients and payers from a fee for service model to a long term value based subscription model in which the primary care Doctor is responsible for our patients total care cost and quality.
Our platform and partnership provide doctors with the information resources and time, they need to meaningfully improve their patients' health will aligning physician practice economics with improved patient outcomes and <unk>.
Just for and a half years, the momentum and the business is tremendous and we've entered into long term partnerships partnerships across 17 diverse geographies.
11 of which are revenue producing today and 6 of which were implementing for 2022.
With our partners, we have nearly 225000 Medicare advantage patients and 50000 of direct contracting patients on the platform.
Our business model has 3 distinct components platform partnership and network the.
And the agile on platform includes people process capital and technology and provides the capabilities that are required to succeed and a value based model such as payer contracting and clinical programs are.
Our platform is portable and scalable across markets.
Zero long term partnership with physician groups, we operate a new line of business focus on Medicare.
And our partnership generates of surplus by improving health outcomes of senior patients we split it with our physician partners.
Our platform and partnership model is deployed in a common way across markets and our success has created a growing network of like minded entrepreneurial physician groups that are both learning from each other and constructively challenge from 1 another.
And.
With our approach all stakeholders are winning.
Patients and physicians report World class net promoter scores.
Physicians are able to practice medicine the way they were trained to and access recurring subscription economics tied to the long term health outcomes of their patients.
<unk> experienced consistent growth and gross margins, while enjoying higher patient quality scores and retention.
And Medicare and local communities benefit through more sustainable primary care and effective management of health care costs.
The financial attributes of our model are highly attractive.
Our business is capital light member.
The member acquisition cost started of relatively low level, and then decline within the geography over time.
Our same geography growth is driven by patients within existing physician panels, choosing MAA or new physicians, joining our anchor partner.
We don't spend money on brick and mortar or sales and marketing.
This results in a highly efficient growth model with extremely strong returns on investment.
Because our partners our leaders and their community and have scale at the local level, we have multiple levers to improve outcomes outside of the primary care office.
This makes our model successful and diverse markets with varying plan offerings, which supports our ability to access a broad total addressable market.
We have a high degree of visibility into future revenues and margin progression.
From a revenue perspective, we implement new geographies up to 12 months in advance for example during 2021. We are currently implementing the 6 new geographies I mentioned with approximately 49000, new members. These new geographies will start generating revenue and 2022.
70% of our current members have been on the platform of less than 3 years as.
As these members mature on the platform. We believe this provides high visibility to consistent medical margin expansion over the next several years.
And the success of our early partners in terms of sustaining both strong membership and medical margin growth gives us confidence that we can successfully scale our platform into additional geographies.
Now let me discuss a few highlights from our first quarter results, we're pleased with our quarterly performance.
Adjusted for the retroactive group MA contract revenue growth was 50% and membership growth was 42%.
We also reported positive year over year gains and medical margin network contribution and EBITDA.
Same geography membership growth a key differentiator of our model was 15%, including the retroactive group contract.
In 1 of our markets our group Medicare advantage contract covering about 9000 members shifted between 2 national payers effective January 2021.
While we work with both health plans and multiple geographies, we did not have of contract in place with the receiving payer covering these members at the beginning of the year, primarily because of the timing required to complete the transition.
And as a result these members are not reflected in our first quarter financial results. We were pleased to complete a new multiyear agreement covering this membership within the past several weeks and we expect to recognize some retroactive revenue during the second quarter.
Most importantly patients covered by this group plan, where under the continuous care of their primary care doctor during the transition from 2020 into 2021, we.
We think this helps to underscore the very sticky relationship between our physician partners and their patients and the power of our multi payer model on patient retention and experience.
From a new market perspective, 3 new partners and Hartford, Buffalo and Toledo went live on the agile and platform in January 2021, covering approximately 33000 members. Additionally, we signed 6 new partners.
Definitive agreements covering 49000 members during the first quarter.
The 6 partners began implementation on the Agila and platform in late 2020 early this year and will generate revenue starting in January 2022.
Our development team is now focused on signing letters of intent for new groups that will begin implementation. During late 2021 early 2022 and generate revenue starting in January 2023.
We are already in active dialogue with physician groups and multiple new states and markets and are encouraged by the growing and robust level of interest and partnering with agile on.
First quarter results also demonstrated the efficiency of our growth model platform support costs, which includes the local market and enterprise G&A represent just 7% of revenue during the first quarter compared to 8% in the prior year.
On a per member per month basis platform support costs declined 11% year over year.
And now let me pivot to talk about direct contracting.
On April 1 we launched 5 direct contracting entities in conjunction with 7 of our physician partners.
These 5 dce's cover more than 50000 and traditional Medicare pays for patients in a value based subscription model and we believe agile and as 1 of the largest participants in this program.
The agile on platform allows physician groups to operate of single line of business for their Medicare patients across both MAA and direct contracting.
Well, it's still very early and government programs can change overtime. Our initial experience has been in line with our original expectations.
Consistent with the idea of new government programs evolving over time on April 8 the CMS innovation Center announced its intention not to solicit applications for new Dcs for 2022.
Despite this we will be able to utilize the existing dcs as well as our for deferred dce's as a vehicle for new or existing physician groups to participate in the direct contracting program.
More recently on May 21.
CMS announced that next Gen acos will be eligible to apply for new Dce's for 2022.
We take these announcements and the recent conversations with the innovation center as encouraging as we believe the direct contracting program is aligned with the administration's goal of advancing primary care centric value based care.
Finally, I'd like to touch on some key priorities following our IPO last month.
We plan to increase our investments and the agile on platform and support our overall growth strategy, both with our existing partners and current geographies and with new partners in new markets.
In terms of technology platform and investments.
A key focus for us is to enhance our data ingestion and normalization capabilities, which we expect among other things to accelerate clinical insights and further improve areas such as member attribution.
We expect these technology investments will also improve internal efficiency and the scalability of our platform.
As an example, we recently deployed a referral insite program and our Akron market, which provides important cost and quality information about specialist care to our primary care partners.
And just 2 months, our physician partners and Akron have increased referrals to identified high value cardiologists from 37% to 60%.
While we're still early with this initiative, we expect our referral Insite program will have a positive impact on patient outcomes.
From a growth perspective, the IPO not only increased agile loans capitalization, but it also increased the capital available for our physician partners to improve care delivery and accelerate growth and their markets.
Our partners through agile on our now effectively some of the best capitalized physician groups in the country.
Together, we can accelerate the transformation of care delivery for seniors, we see a tremendous runway in front of US and are excited to help more doctors more senior patients and more communities with that I'll turn the call over to Tim.
Thanks, Steve and good morning, everyone as Steve mentioned, we're pleased with our first quarter results I'll review some highlights from our financial statements then provide an updated view on our cash and debt position post the IPO as well as some details on our guidance for the second quarter and full year 2021, starting with membership membership increased by 35.
Percent on a year over year basis during the first quarter to approximately 165000 and including the recently completed group Medicare advantage contract membership at the end of Q1 would have increased 42% to approximately 174000.
Membership growth was driven by a combination of same geography growth and the impact from 3 new geographies. The went live on the platform in January.
Same geography membership growth was 8% for the first quarter and including the recently completed group contract same geography membership growth was 15%.
Aside from the geography temporarily impacted by the group and May contract transition all of our geographies grew membership at or above the national trend for MA enrollment growth.
Several of our geographies were well above the national trend.
As we previously discussed our group Medicare advantage contract and 1 of our geographies shifted from 1 national payer to another and January.
This included about 9000 patients attributed to our partners.
We completed an agreement during the second quarter with the new MA payer covering these members.
These members are not included on our first quarter financial results, but will be included on our second quarter results, including retroactive revenue and costs associated with the first quarter. We expect the retroactive the retroactive revenue associated with the first quarter to be approximately $24 million.
Subsequent to the end of the quarter, we launched 5 direct contracting entities with 7 partners covering over 50000 members as a reminder of the revenue and cost for these members will not be consolidated and agile on financial results, including.
Including the estimated 49000 members currently and implementation for 2020 to go live as well as 50000 direct contracting members total membership on the agile on platform is now approaching 275000.
Revenues increased 42% on a year over year basis to $413 million during the first quarter.
Revenue growth was primarily driven by membership gains the suspension of the Medicare sequester and changes the CMS County, benchmarks and member of acuity or burden of illness on.
On a per member per month basis revenue increased 5.3%.
Medical margin increased 23% during the first quarter to $52 million compared to $42 million and the prior year.
Consolidated medical margin on a per <unk> basis was $106 compared to $116 and the prior year.
Medical margin PMT and performance reflects a number of factors, including the positive impact from clinical programs deployed through the agile on total care model. The maturation of members that have not been on the platform that had been on the platform for a longer period of time and lower non COVID-19 utilization.
This was offset by the dilution from new members, which typically started of lower medical margin and COVID-19 related costs, which were higher and the earlier part of the quarter.
Network contribution defined as medical margin less partner sharing and other medical expenses increased 22% during the quarter to $30 million compared to $25 million and the prior year.
All of our new geographies were profitable on a medical margin and network contribution basis during the first quarter, which demonstrates the efficiency of our growth and the implementation model.
Yes.
Platform support costs, which include market and enterprise level of G&A increased 21% to $28 million the increase and platform support cost was well below our revenue growth rate highlighting the very life overhead structure of that is associated with the partnership model as a percentage of revenue platform support cost was 7% during the first quarter down from.
8% and the prior year on of <unk> basis platform support cost declined 11% of $58 compared to $65 and the prior year.
Adjusted EBITDA for the quarter was $4 million, which compared to $3 million and the prior year. The increase to adjusted EBITDA, primarily reflects the higher medical margin and leverage against our platform support costs.
Turning to our balance sheet and cash flow, we ended the quarter with $105 million and cash and $100 million of debt outstanding under our secured term loan.
Cash flow from operations during the quarter reflects the use of $41 million compared to the use of $26 million of the prior year. The increase of net use of cash was primarily driven by the transition from a delegated claims payment model to our non delegated model with the health plan and 1 of our geographies.
Following the completion of our IPO on April 19th we of approximately $1.1 billion of cash and $50 million of debt outstanding under our term loan.
Turning to our financial guidance for the second quarter of 2021 for the second quarter, we expect ending membership and a range of 175000 to 177000 and revenue in the range of 470 million to $475 million it.
It is important to keep in mind, our second quarter guidance includes the revenue and cost from the group MA contract, we discussed earlier, including retroactive amounts that are associated with the first quarter we.
We estimate the retroactive revenue and membership will be approximately $24 million and 9000 members respectively.
During the second quarter, we will also recognize onetime expenses associated with the completion of our IPO, including $275 million.
And non cash compensation associated with the issuance of stock to our physician partners.
These 1 time expenses will be excluded from our adjusted EBITDA.
Finally platform support costs will increase increased sequentially and the second quarter, reflecting the ongoing public company costs, such as increased D&O insurance.
For the full year 2021, we're expecting and ending membership and a range of 182000 to 184000 revenue and a range of $1 billion $765 million to 1 billion and $780 million and adjusted EBITDA loss of 41 million to $38 million.
We expect revenue growth will be driven by similar factors that drove growth during the first quarter from an EBITDA perspective, we expect non COVID-19 costs will increase on a year over year basis as vaccination rates rise and people feel more comfortable utilizing the health care system. We anticipate this dynamic along with the increase the platform support will more than.
And offset the positive impact from members maturing on the platform, resulting in lower medical margin P. M. P M and 2021 compared to 2020 as the result, we expect the adjusted EBITDA losses reflected and our guidance will be weighted towards the second half of the year.
With that we're now ready to take your questions operator.
As a reminder to ask a question you will need to press star 1 on your telephone and the interest of time. Please ask 1 question and 1 follow up to withdraw your question from the queue press the pound key please standby, while we compile the Q&A roster.
Yeah first question is from the line of Lisa Gill with J P. Morgan.
Thanks, Paul and match and good morning, Congratulations on your first public quarter.
Steve I just want to go back to some of the comments around the medical margin and just Pat I understand the couple of things a little bit better..1 can you just maybe bifurcate the new birthday gifts the existing more mature member when we think about the cost of those.
And as individuals number 1 and number 2 I know that you made the comment around Covid costs can you talk about what you thought for Covid costs and the first quarter and then.
The comments of non Covid costs coming back how do we think about the progression of medical cost for the second and third and fourth quarter of this year.
Sure, maybe I can start and Tim Tim kind of fill in on that so I think we're pleased by continuing to see medical margin improvement in our.
Recurring members those that were with us for quarters ago.
And so that that improved nicely, there's a dilutive. The fact that comes in from the new members that are coming on and the platform, which is reflected in the quarter and the strong growth.
Has some of the effect on the medical margin Lisa.
In terms of kind of the seasonality we.
We do expect to see a step up in costs in the back half of the year as the country reopens. The vast majority of that is I would call tied to non COVID-19 utilization.
We're seeing extremely high vaccination rates with our with our seniors.
We expect that it's above the national average, which is now of almost at 80% in terms of seniors with at least 1 shot and in the low seventies with those of 2 shots. Many of our communities are higher than that so.
And we don't expect the COVID-19 related cost to be spiking up as much but there was some of that within the quarter that Tim can talk to yes, absolutely Hey, Lisa good morning, and thanks for the question.
The amplify a little bit on what Steve said I think the best way to think about the first quarter is first of all yes, we're really happy with the overall increase and medical margin to $52 million of $10 million year over year on of PM PM basis, I think Steve did a good job of walking through the cause of change.
Seeing and increase in medical margin on the PMT and basis for retained members on a year over year basis.
That's obviously diluted by.
On the high same geography growth new members coming in as well as the 33.
The new members that we brought in and new geographies and so both of those kind of diluting that number and then we did see some continue to see some lower utilization in Q1.
<unk> sort of our 2019 baseline, but still overall COVID-19 utilization of our overall utilization in Q1.
On a bit higher than it was during the first quarter of last year. So that's still a bit of a headwind as well. So the combination of that kind of drove the first quarter.
Medical margin PM PM change over a year ago, and yes, we work walk through the rest of the year of couple of factors, we expect to see utilization sort of start to track back towards that 2019 baseline as we move to the lay of.
And the rest of the year, so probably a bit better and Q2, but sorry to move back towards the 2019 levels and the second half of the year and so you can get a pretty good idea of the seasonal <unk> of what we expect for medical margin and adjusted EBITDA from the adjusted EBITDA guidance that we've given.
Would expect that.
And both medical margin adjusted EBITDA will decline versus Q1 on an absolute basis and each of the subsequent quarters, but based on the real.
Heavy overlap of Covid, we would expect most of that.
The EBITDA loss to be weighted towards the second half of the year and 1 thing to just remember as youre looking at that EBITDA progression and 1 of the things that I mentioned was and we are going to see some increase and platform support cost already and the second quarter as well that'll be a driver of that primarily related to the costs associated with being a new public company. We mentioned for instance, joke with significantly higher.
Cost for and just for D&O insurance.
Okay, great. Thank you.
Your next.
Question is from the line of Justin Lake with Wolfe Research.
Thanks, Good morning.
Wanted to go through the membership numbers.
And and a little bit of detail. So just looking at the yearend membership of 131000 net included the 9000.
Group net net like you had that in the membership at the end of the year correct.
Thats correct Justin.
So then and if I look at your guidance, you're assuming a little over 50000 members members of our patient growth year.
Year over year, and it looks like its about evenly split between new markets and kind of see markets right.
Yes, 33000 from from new markets and the balance from same geography.
Growth.
Okay, Yeah, because you'd have to add the 90000 would be also.
Okay. So the new markets 33, So then.
Of the 20 low 20, so that the approach at the kind of high teens membership growth on.
Out of the same market give or take I think could you break that down for us between.
Either the existing docs, what you were talking about.
For market growth and then the benefit from adding new docs and I didn't know it.
Part of the model.
Yes, Justin.
Yes.
And almost half and half.
In terms of what we're seeing for for the year.
And that sort of bread and butter core <unk>.
<unk> agents people, turning 65, choosing Medicare advantage or fee for service conversions and then.
And then the other half being of with new physicians joining into.
The existing markets, which were which were already on.
Okay, Great and then.
And lastly, can you talk a little bit about the pipeline for for 2023, both in terms of kind of how it looks now versus let's say for the last couple of years and then and.
And.
The.
The timing that investors should expect.
For you to be sharing and kind of new those new AD and D.
Sort of happened through the year when do you kind of typically sign those contracts.
Yes, yes, yes, happy to do that and I tried to lay out some of that and my prepared remarks. So let me start by saying I think the 23 pipeline is strong.
It's robust and we're seeing.
And interest in.
New.
Cities within our existing states as well as the number of new states, which are out there and I would say that that pipeline has only grown over the course of the of the last couple of months.
As per usual our current partners have made introductions to a number of folks our business development team has done a great job identifying.
Groups, but.
But we're also seeing a higher level of inbound.
The folks that.
We hadn't necessarily identified before that are aware of agile on.
And the partnership approach that we bring and Theres a lot of interest and that so I think it's it's strong and we're in active dialog right now with.
The number of those groups in terms of kind of the timeline that you asked about.
Our Biz Dev team is really focused on signing letters of intent.
With these new partners for 2023, new geographies in the back half of this year.
We immediately once we have those letters of intent we will go into implementation because as we've shared we really like to have up to a full year to be able to implement around that and the.
And then next year, we will be signing definitive agreements with.
And with those groups and our plan is to sort of share that at 1 time, just and in terms of those partners for 2023, and what that associated membership looks like in the meantime, I think we'd point back to.
And what we've shared previously about new geography members at about 40000.
And for 2023, and that's what I.
I would point to but we will be giving updates on that.
And you didn't ask about 2022, but we've got the 6 new partners in geographies with the 49000 members that we talked about and as we move through the back half of this year, we'll be signing payer contracts and giving an update on that with our on our Q4 call in terms of what that looks.
Like as well so that's kind of how the new markets are rolling out and what that timeline will look like.
And I'm sorry, So you just you mentioned the.
You mentioned, you'll be funding of these payer contracts on the 49000.
Yes.
It should I read that as you're saying that the the.
The the 6 groups that you signed up for <unk>.
49000 patient that you the huge probably has some discounting it for.
And the strong student you don't sign up and repay or for 1.1 and as you roll that forward, you'll get it can update and you could actually be some upsides of that number.
The address.
Yes, I think Thats, a fair way to to get we're comfortable with the 49000 and we'll be updating that based on.
And the progression with these payers will be at we have 16 payers today, Justin and we will be adding quite a few for.
For 2022, given these new geographies that we're going into and as we get into that we always get more information and were able to refine that.
Thanks, guys appreciate all of the call.
Yes, no problem.
Your next question is from the line of Kevin Fischbeck with the Bank of America.
Great. Thanks.
A few companies talk about coding being a headwind I guess, how are you thinking about that and your business. If it's been a headwind at all of this year and if it has how do you think about.
The capturing that next year.
Yes, so I think.
Folks had talked about the challenges of the pandemic, creating.
And some headwind in terms of being able to capture codes I think it's a real strength of our model Kevin that we have this physician patient and tight relationship we were able to maintain that.
Through the pandemic both in terms of in person and in terms of Tele health.
And so we were very strong from an annual wellness visit perspective, very strong from a reassessment perspective, so as it relates to activity last year for this year and activity for this year for next year.
We have not seen.
The headwind that some others have talked about just to remind you.
And we don't do in home nurse based assessments for purposes of burden of illness or or wrap and that is an area that I think was much more challenged throughout the pandemic.
Okay, Great and then I guess the.
The <unk> contracts.
As you guys were able to I guess transfer.
Works well for you. This time I guess, what's the risk that that <unk> and the future of Theres. Another large contract net debt that shifts I guess, how much visibility do you have into that when did you know about this shift and then b.
Of course, what's your track record on being able to keep.
Like for like this.
Yes, I mean I.
Think of the group contracts don't move all of that often.
We don't have a ton of of group business. So it's somewhat limited by that.
But when they do move it's not uncommon to have the sort of long term drawn out relationship I think in terms of prop.
Process.
In terms of exposure I think it kind of speaks to the power of our model right. So when group contracts moved typically the receiving payer wants to main continuity, particularly for seniors and the power of the sticky patient physician relationship and the multi payer.
Approach that we've got really allows us to support that and meaningful way.
And so I think as we look out we did know about this 1 and in advance and.
We will know about other ones as they approach that again, Kevin and they don't happen all of that often but I think given our approach. We believe that we're and we're in a pretty strong position our partners our leaders and their community.
And for the group contracts that they've got today those patients and their sponsors are going to want to keep that relationship.
Alright, great. Thanks.
Thanks, Kevin.
Your next question is from Ryan Daniels with the William Blair.
Hey, guys. Thanks for taking the question congrats on the first quarter out of the box can you speak a little bit more Steve to the investments Youre, making in regards to the referral management program I assume.
1 outside of maybe oncology and cardiology is probably on a fairly large specialty costs. So a little bit about the potential to drive medical margins and how quickly something like that can be replicated and rolled out throughout the network. Thanks.
Yeah no. Thanks for the question Ryan.
It's a great point.
I think the fact that we're able to develop these programs and run them through our partnerships gives us the ability to affect and awful lot of markets. The specialty referral Insite program that we talked about in the remarks with specifically.
And in Akron around cardiology, and as and when you have of cardiac condition youre with your cardiologist for a while and so the ability to.
The increase referrals to these top tier specialists that have substantial.
Cost savings of <unk> as much as the $100 per member per month for those cardiology patients.
Is is really substantial and that would be across a long period of time, but the Insite program provides that primary care doctor at the point of referral information on those top tier specialists and net cost savings, but at equivalent or better quality, which is a really important component of.
Of that.
It's exportable to other markets, but it's exportable to other specialties oncology Gi just to name a few and so the components that we're building around this I think gives us that opportunity.
Great. That's very helpful color and then.
Little bit off the cuff question, but I'm curious with the increased exposures of public company that you're getting and kind of.
Notoriety is that actually opening up the partner recruiting pipeline and all were.
Theres more inbound I think you mentioned.
Is that just the market reality of MAA or are you actually getting a little bit more inbound interest now given your growth and success and markets. Thank you.
Yes, no. Thanks for the follow up I.
And I think it's a little bit hard to separate exactly what's driving that we are definitely seen of step up in terms of the the inbound activity.
Obviously, we have we do have a higher profile and that could be of part of it but.
I think it's just to reflect a reflection of this interest in the move to value specifically for that over 65 Medicare population.
And for independents, who want to remain independent.
Which is a.
A key differentiator for us so I think it's a combination of those the factors thats driving it but it's definitely stepped up and the last couple of months.
Okay, great. Thank you guys.
Thanks, Brian Thanks, Brian.
Your next question is from the line of George Hill of Deutsche Bank.
Good morning, guys and thanks for taking the question I guess I wanted to jump in with 1 on direct contracting.
Just affirm that the any kind of.
Economic impact from direct contracting is still not included in the numbers for fiscal 'twenty, 1, but I guess can you talk about when do you start to include maybe when does it become material.
And I'll start right there. Thank you.
Do you want me to give the macro or and you wanted to get at once the answer and let me answer. The specific question and then maybe Steve you can come back and give some macro comments about DC, but yeah. So overall.
All of the economic impact of D. C will be and our 2021, we just won't consolidate those results. So you just see the net impact into the P&L, but to your point for the full year, we expect the impact of DC to be relatively slight loss to breakeven.
You won't see a big impact on the 2021 results from that but it will be actually and our results just not just not a big bottom line impact.
Okay can you kind of quantify the top line expectation.
And we're not going to consolidate revenue so there won't be any top line impacted all of the FTC.
And then Steve would love kind of on.
Context that I would give you is.
It's a new government program right. So its subject to change of 6 year program and it started last month. So I mean, we're literally in the early days I think our.
The initial view on performance is kind of in line with expectations and attribution.
But we did talk with the innovation Center just this week and I think they were very clear about this as part of their approach to how they can drive more primary care centric value based care and so that's encouraging for us and.
I think they want this to be a successful program from a cost of quality and and access standpoint. So we spent a fair amount of time talking to them about this idea of keeping and independent physicians independence, increasing primary care and.
Communities diverse communities.
The country and so I.
I think thats, just the added context that I would give and.
And there is the option as I mentioned with our DC ease to add in for January of 2022 and <unk>.
Any of the membership numbers that we've talked about do not reflect reflect that.
That's helpful. Thank you.
Your next question is from the line of Stephen Baxter with the Wells Fargo.
Hey, good morning, Thanks for the questions.
So as we look at the payer disclosures and your Q. It looks like the growth for your largest payer was fairly modest sort of well below the same geography growth. You saw was wondering if there is anything worth highlighting there about what that payers doing perhaps that was impacted by this group Medicare advantage true.
And and whether you have.
The other yes, sorry go ahead, yeah, Hey, Stephen Yeah. Thanks, It's Tim Yeah of 100% it doesn't have the and that is that payer and it doesn't have the $24 million or retro revenue and it. So when you put that revenue back in that Payors.
And on par with the rest of the growth numbers on the page.
Got it Yeah I was go ahead.
Steve and I mean, I guess, just the only other thing I would call out is.
We're up to 16 payers now that number is going to go up again in 2020. So just as kind of a trend I think you are going to see continue to see kind of a dilutive effect.
From regional payers that are coming on I think we have fantastic partnerships with the nationals and we will continue to grow with those but it's going to be of balance in terms of what that what that looks like and.
Just specifically youre talking about Payor, a and the release, if you put the $24 million retroactive and it would be about of 25% growth for that payer.
And the quarter.
Perfect and that makes a lot more sense then.
And then you mentioned that you don't have a lot of.
Membership I was wondering if you could talk about that a little bit and why that's the case, whether there's any structural barriers there and whether it could be more of an opportunity for you overtime.
Well I think 1 is groups the minority in the country and so thats, probably the biggest part of that.
And so that's what I was trying to call out is I don't think it's it's a big part of the membership overall and then 2 it group contracts don't move all of that that off and so that was really the point.
Got it Okay and then just 1 clarifying question on the pipeline for 2020.2 so I appreciate the color on the the 49000 members and some of the dynamics you were talking about an earlier question. There should we think about the 49000 members as those are the existing members today or as we think about what that will look like.
The year from now and is there also consideration that that would move higher as it relates to <unk>.
Same market growth of those those practices of recruiting physicians and this calendar year.
Yes.
I think we're comfortable with the 49000 members. Those are members that are with those practices today and we.
Which our physician partners are seeing those and.
And they would be obviously eligible for attribution.
The need to get all of those payer contracts done and we'll refine that.
And let you know.
If there is some additional opportunity within that as we go forward.
And then there's also these partners are constantly growing within the within their communities and that can happen during implementation as well so for that that could be affected.
Got it thank you very much.
Okay. Your next question is from the line of Sandy Draper with true as Securities.
Thanks, so much and good morning.
1 of the questions have been asked maybe just on extinct.
Question.
Look rearview mirror looking but also forward.
Last year, the new geography of geography entry costs were heavily weighted towards the fourth quarter, there was a pretty meaningful step up on 1.
And when we're thinking about the new geographies, you're already playing and go into 2022 or should.
Should we really think about the weighting towards the fourth quarter every year and Thats, where the bulk of the costs are and.
And it's really dependent on number of geographies could you actually have situation, where fewer geographies. There for whatever reason theres more cost just trying to think about longer term how to be thinking about those geography entry costs. Thanks.
Yes, it's a little.
Sandy Thanks for the question, it's a little bit different for each geography, and but probably more of our relationship with the number of members that were bringing on and the number of geographies, it's not really a <unk>.
Not really dependent on the number of new partners as much as the number of members and each partner most of our new.
<unk>.
Our implementation costs are really the.
AWP incentives that were paying to kind of get the system up and going during implementation.
1 of the things that drives it is just how much implementation time do you have we're actually in pretty decent shape. This year with a longer implementation time for most of those new members that'll be our most of those new geographies and partners that'll be coming on board in January of 2022. So you would expect that those.
The implementation costs for new geography costs. This year will be more spread over the quarters and then back loaded into the into the second half of the year.
And I think they're okay, great and cope with it.
And some COVID-19 effect last year that made it a little bit more lumpy.
Was just tough to beyond the ground with partners earlier in 2020.
During those implementations and so.
That was probably some of the effect of that and getting get the interim and even the timing of when AWS are completely out of the correct.
It should be.
We're out there early this year and implementation, but the most of those partners.
And so you would expect it to be or we would expect it to be more evenly spread than than the back half loaded as it was last year.
Okay and that makes a lot of since it's very helpful. Thanks, again and congrats on a good first quarter.
Sure. Thanks, Sami alright, thanks, Andy.
At this time there are no further questions and I'll now turn the call back to Steve <unk> for any closing remarks.
Great I would just say thanks for the good questions and the discussion. We're obviously excited about our quarter and excited what's in front of us and.
And we look forward to speaking with each of you soon so thanks everyone.
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