Q4 2021 agilon health inc Earnings Call
Hello, and welcome to the agenda on Health fourth quarter 2021 earnings Conference call. My name is Katie and I'll be coordinating your call today, if you'd like to ask a question. During the presentation. You may do so by pressing star one on your telephone keypad.
I don't know how to read your highest Matthew Gilmore, Vice President of Investor Relations to begin Matthew. Please go ahead.
Thanks, Katie good morning, and welcome to our fourth quarter earnings Conference call with me. This morning is our CEO , Steve cell and our CFO , Tim Pendley following prepared remarks from Steve and Tim 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.
Believe that providing these measures helps investors gain a better and more complete understanding of our financial results and is consistent with how management views our financial results. A reconciliation of these non-GAAP financial measures to the most comparable GAAP measure is available in the earnings press release and form 8-K filed with the SEC and with that I'll turn the call over to Steve.
Great. Thanks, Matt Good morning, and thank you for joining us.
2021 was a very good year for agile on and we are entering 2022 with strong momentum across the business.
Over the past four years, we have made tremendous progress against our vision to transform health care and 100 plus communities by empowering primary care doctors in 2018, we launched our first partnership with Central Ohio primary care, starting with 180 primary care physicians and <unk>.
<unk> senior patients.
In 2022, we have long term partnerships in 17 diverse geographies across eight states with more than 1600 primary care doctors and 340000 senior patients live on the agile platform.
With the class of 2023, our business has reached another inflection point.
Day, we are announcing a class of seven new partners.
New states eight new markets and an additional 600 plus primary care doctors and 80000 members.
This level of growth is truly remarkable and provides clear evidence that powerful structural drivers and our distinctive platform and partnership model built around existing primary care capacity is rapidly transforming primary care its role in the overall healthcare system.
Our approach focuses on one deep alignment with primary care doctors to local market scale that influences care delivery and three being a first mover in fee for service dominated geographies that allow us to shape value in those communities.
In 2021, we delivered highly differentiated performance with predictable growth and margins across diverse geographies and partner groups, reflecting the strength and flexibility of our platform and the trusted long term relationship between our partner physicians and their patients we have been.
To deliver higher levels of membership growth, while still generating significant gains and profitability and.
And we expect to generate positive adjusted EBITDA in 2022.
Because of our focus on existing market capacity local market scale and platform insights. We are transforming how healthcare is delivered across our markets both in and outside of the primary care office with increased primary care touch points and impactful programs like specialty referral.
And palliative care.
We believe all primary care physicians will need to change their business model over the next decade ship.
Shifting from a transaction fee for service model to a value based subscription model. Ultimately this will improve quality lower cost and create better outcomes for our healthcare system.
Now to the focus of our call.
I'll cover three areas in my prepared remarks first highlights from our fourth quarter results and guidance for 2022.
Second an update on our pipeline for the class of 2023, New partners and third a few details on our progress in our non partner market of Hawaii and some comments on the direct contracting program.
Starting with a few highlights from the quarter total members live on the agile on platform increased 82% to 238000.
Our consolidated Medicare advantage membership increased 42%, including 15% growth within the same geographies that was broad based across our markets.
Our growth continues to benefit from the embedded membership and our physician partners practices and our established position as a first mover introducing risk for the first time in our markets.
And our MA membership translated to 44% year over year growth in total revenue during the quarter.
Medical margin was $31 million in the fourth quarter or six 8% of revenue our medical margin performance was ahead of our expectations for the quarter driven by strong results in our 16 partner markets in good year end performance in our non partner market of Hawaii.
Utilization was generally in line with our expectations for the quarter with Covid costs moderating on a sequential basis following the delta wave, but rising into year end following the omicron search.
As with prior waves, we continue to see suppressed non COVID-19 utilization during periods of higher COVID-19 activity.
Our partner markets continue to perform better than our internal expectations. During 2021 medical margin per member per month, and our partner markets was $94. While this is down from 2020 due to COVID-19 . It is higher than 2019, even with the dilution from.
Our significant growth in new members, which is up about three fold over the same period.
These results highlight our ability to drive substantial growth without sacrificing margin improvement.
For direct contracting consistent with our update in January our underlying healthcare cost experience was better than expected in the quarter.
And we did book a negative trend adjustment to revenue consistent with the program payment rules.
Given our healthcare cost and care coordination experience, we remain quite bullish on the benefits to patients from an aligned accountable ration relationship with their primary care Doctor and our physician partners are gaining efficiency by having a single experience across their Medicare business. As an example, our physician partners have less.
<unk> existing home visit programs, which expand access to preventive services and reduce the need for high cost of care seniors in both direct contracting and Medicare advantage.
Even with the direct contracting program offset our adjusted EBITDA for the quarter came in within the upper half of our updated guidance range, reflecting stronger medical margin performance within our MA business and positive operating leverage against our platform support costs.
Looking ahead to 2022, we are expecting another strong year of growth with membership and revenues, both growing 40% or higher at the same time, we expect our adjusted EBITDA will be positive in 2022.
Reflecting an increase in MA medical margin of greater than $120 million.
This significant year over year gain in adjusted EBITDA further highlights the power of our capital efficient partnership approach.
Our partner markets continue to mature above our expectations driven by our platform getting smarter with better insights and actionable information.
Our partnerships, becoming even more aligned and leveraging their growing scale and our network, becoming a growing source of best practices and constructive comparison on performance.
Based on the power of these factors, we expect existing partner market medical margins will increase to 127 to $130 per member per month in 2022 up from $94 per member per month in 2021.
Please note that these approximately 165000 members in existing partner markets, which are the 10 partner markets that we're live in 2021.
Have an average time in the platform of only two five years as of December 2022.
Moving to 2023 new partners.
2023 will be another record year for new market growth with seven new partners in four additional states eight additional markets 80000, additional members and more than 600 additional primary care physicians.
Both the incremental physicians and members joining the platform are roughly double our estimate at the time of our IPO in April 2021.
This significant inflection in the number of patients and physicians is indicative of the accelerating demand for primary care business model change the power of our platform and the results being experienced within our growing physician network.
In addition, the breadth of these new geographies should substantially enhance our in market addressable opportunity and with these new partners. There is the potential for significant membership upside through the revamped direct contracting program now known as <unk> ACO reach.
Our 2023 expansion will increase our footprint to cover 12 states.
Five geographies 23 partners and more than 2200 primary care doctors and with expected growth opportunity in the same geography, MAA and ACO reach we should approach 500000 senior patients on the platform by the end of 2023.
Hi.
With this growth we continue to build around the leading local partners at scale and we expect to guide and shape the growth of full risk primary care in these markets for decades, we look forward to sharing additional details at next week's Investor day.
Before I close I wanted to provide a brief update on the progress we are making in our non partner market of Hawaii and provide some perspective on the recently announced updates to the direct contracting program.
He is a strategically important market for Agila and represents 15% of our membership for 2022 and closer to 10% when including the 2023 partner class growth.
As we've discussed with you in prior calls unlike our 16 partner markets in the Continental U S. Hawaii is our one market that we have historically operated without a partner.
As a result, we don't have the same degree of primary care alignment in Hawaii and that lack of alignment has contributed to historical performance lagging behind our partner markets than our prior expectations. We believe we have the opportunity to shape the trajectory of this market.
I am excited to share that we are in the process of finalizing an exclusive partnership with Hawaii Health network.
Hawaii Health network or <unk> HN is comprised of the highest performing primary care physicians in Hawaii.
The award winning health system, and the largest provider of post acute and home based care in this state.
In total Hawaii Health network includes roughly 20% of the primary care capacity on Oahu.
This arrangement will shift nearly 20% of our MA membership in Hawaii to a partnership that will be jointly operated by agile on and HHS.
We expect this partnership will serve as the foundation to create stronger long term physician alignment and drive better performance in this important market.
Moving to direct contracting as many of you know the CMS innovation Center recently announced or direct contracting program will transition to a redesigned model called ACO reach which stands for realizing equity access in community health. We are encouraged with the stability of this announcement will bring to the pro.
Graham ACO reach will enable our existing and future partners to maintain a countable total cost relationship with our traditional Medicare patients. It make several adjustments to the program beginning in 2023, including an emphasis on health equity and an increase to provider governance requirements.
These changes align closely with agile arms mission and values at agile and we purposely established the governance of our direct contracting entities to be physician led and the governance change in ACO reach won't impact our accounting treatment or partnership economics. Additionally for.
33% of our partner practice locations are in federally designated underserved communities and we are proud to help sustain and grow PCP services in these communities consistent with <unk> goals.
Before I hand, the call over to Tim I wanted to let you know how excited we are to see you at our Investor Day next week, we hope Youll come away with a deeper understanding of why we are seeing outcomes in our partner markets are ahead of our expectations, how our partnership and platform model works and the significant.
Inflection in our growth opportunity as demonstrated by the class of 2023.
You'll also hear from members of our leadership team beyond Tim and me and from several of our physician partners on what the partnership with agile on is meant for their patients their practices and their communities. We look forward to seeing you next week with that I'll turn things over to Jim.
Thanks, Steve and good morning, everyone I'll review some highlights from our financial statements and provide some additional details on our 2022 guidance.
Starting with our membership growth for the fourth quarter total members live on the agile on platform increased 82% on a year over year basis to 238000, including both Medicare advantage and direct contracting.
Our consolidated Medicare advantage membership increased 42% to 186000 and are a contracting members ended the quarter at 52000.
For Medicare advantage, our growth was driven primarily by the impact of adding three new geographies in January 2021, which include our partners in Hartford, Buffalo and Toledo. Additionally, as Steve mentioned, we benefited from strong same geography growth of 15%.
<unk>.
Revenues increased 44% on a year over year basis to $463 million during the fourth quarter for the full year 2021 revenues increased 50% to $1 $83 billion.
Revenue growth was primarily driven by membership gains in new and existing geographies on a per member per month basis or P. M. P. M revenue increased two 6% during the fourth quarter.
Medical margin increased 15% year over year to $31 million during the fourth quarter compared to $27 million in the prior year.
For the full year medical margin was $182 million compared to $192 million in 2020.
As Steve mentioned medical margins came in ahead of our internal expectations for the quarter driven by strong results in our partner markets and better year end performance in our non partner market of Hawaii.
Overall utilization was slightly below 2019, baseline and largely consistent with our expectations.
Covid costs increase towards the end of the fourth quarter and continued into the early part of 2022, but have been offset by suppressed non COVID-19 utilization.
Network contribution, which we calculate as medical margin after surplus sharing with our physician partners was $13 million during the fourth quarter compared to $9 million in the prior year.
Full year network contribution was $85 million compared to $99 million last year.
The year over year decline in network contribution for 2021 reflects the impact Covid had on our prior year medical margin as well as the relative contribution of medical margin across our geographies.
Platform support costs, which include market and enterprise level, G&A increased 20% to $31 million full year 2021 platform support costs increased 24% to $124 million the growth in our platform support costs remains well below our revenue growth and continues to highlight the light overhead struck.
Sure of our model as a percent of revenue platform support was six 7% for the year down from eight 2% in 2020.
Our adjusted EBITDA was negative $26 $7 million in the fourth quarter and negative $38 $6 million for the full year adjusted EBITDA for the quarter includes $9 4 million of negative contribution from direct contracting.
While claims expense in direct contracting continues to trend better than our expectation CMI provided updated information on their full year retroactive trend adjustment calculation, which translated into a revenue reduction in the quarter that negatively impacted our adjusted EBITDA performance.
This was more than offset by stronger margins in our MA business and leverage against platform support.
Turning to our balance sheet, we remain extremely well capitalized as of December 31, we had over $1 billion of cash on hand, and under $50 million in outstanding debt, which is essentially unchanged from last quarter.
Cash flow from operations was negative $49 million for the quarter and negative $148 million for the year, which was in line with our expectations.
Given the capital light nature of our partnership model and trajectory for adjusted EBITDA in 2022, which I will discuss in a moment, we do not anticipate needing any external capital to fund our organic growth.
Turning now to financial guidance.
For the full year 2022, we expect ending membership live on the agile platform will grow over 40% to 340000 to 355000, including MA membership of 260000 to 270000 and direct contracting membership of 80000 to 85000.
We expect revenue in a range of approximately $2 5 billion to $2 6 billion.
Or 39% growth at the midpoint at.
At the same time, we expect to generate significant gains in adjusted EBITDA and medical margins during 2022 for.
For adjusted EBITDA, we expect to generate breakeven to positive $10 million gain up from negative $39 million in 2021.
For medical margin, we expect P. M. P M profitability will increase from $83 in 2021 or about 10% of revenue to a range of 97 to $99 in 2022 or 12% of revenue.
The gain in our medical margins and adjusted EBITDA, primarily reflects progress in maturing margins across older markets and remember cohorts, coupled coupled with platform support leverage partially offset by the dilution from growth in new markets and new members.
As we have mentioned our partner markets continue to mature at or above our expectations. We expect direct contracting will generate very modest adjusted EBITDA in 2022 with Hawaii also showing some improvement.
There were a few items within our guidance I wanted to call out first 2022 revenue guidance assumes relatively moderate growth in revenue P. M. P. M. This reflects 4% revenue P. M. P M growth for existing patients offset by the dilution from agents and new geographies.
Second as you can see in the guidance table from the press release, we expect normal seasonality in our medical margins will drive moderating adjusted EBITDA throughout the year. This.
This reflects the higher mix of agents in the latter part of the year.
Additionally, our revenue growth rates in the first and second quarter of 2022 will be impacted by the timing issue from the group contract we discussed last year.
This will cause cause higher revenue growth in <unk> than lower growth in <unk>, but averaging two or 40% projections.
With that we're now ready to take your questions operator.
Thank you if you'd like to ask a question. Please press star followed by one on your telephone keypad now.
If you'd like to send me. Your question. Please press star followed by T.
When preparing to ask your question. Please ensure your phone is muted locally.
We take our first question from Lisa Gill from Jpmorgan. Please go ahead.
Yeah.
Thanks, very much for taking the question and congratulations.
Steve I think really wanted to start first with the class of 2023, I know, we're talking about 2022 here, but very impressive seven new partners 80000 members.
Well ahead of that 40000, we anticipated and also if I think about the 500000 that you talk about by the end of 2023 that was actually our 2025 number. So a couple of questions in here, one what drove that strength.
These new agreements.
Is there anything unique when we think about these new market and then thirdly within those 80000 lives.
I heard you correctly, there's not anything in there for the new <unk>.
Right program I, just wanted to confirm that I heard that correctly.
I'll start with the last one that that's correct. The 80000 lives our MAA only Lisa and as I said there is opportunity with these seven partners coming on to add direct contractor ACO reach lives.
Going forward so.
Look we're thrilled with this class of 2023, it obviously is our largest class.
In history by a significant amount.
If you think about the progression that from 'twenty, one to 'twenty two to 'twenty three we had three new partners and 30000.
New new members coming on the platform in 'twenty, one that jumped to six partners 50022, and 23 as you said, we're talking about seven Mark.
Seven partners and 80000 members that that's double what we were thinking a year ago at the IPO and so.
Your question about what's driving it Lisa is.
There is just a real need for a new primary care business model and we're seeing that across all types of primary care groups smaller groups larger groups primary care only multi specialty scaled networks and it's a function of the aging population.
The challenge there facing from the Medicare business on a fee for service basis, and what that means for them economically what that means for them from a capacity perspective, and they can't spend the time they need with those most complex patients in and they are feeling real pressure from CMS to move to value there.
Feeling pressure from payers that is a very common conversation in markets across the country far more than even two years ago. When I joined agile on it. It is a dramatic inflection in of those structural factors that are out there, but I really think the biggest thing is the success that we've had.
We now have 11 markets that we were able to drive great results that we talked about in 'twenty. One we talked about what we're seeing as we go into 2022 in terms of what that can mean from partner medical margins.
Just to remind you we shared that 50 50 with these partners that is a significant change in the economics for them for their Medicare business versus what they experienced prior to coming on.
And all of these groups they see that they see groups that look like them that talk like them that think like them. They may be in a different community, but when you go to these site visits and we now have multiple locations, which we bring people too and they sit and talk with partners who've been on the platform for years, they're able to undo.
Stand what this looks like and feels like and how different. It is so I think that's just a really big difference in terms of what that looks like the uniqueness of this group is I would say there their diverse like I talked about the average size of these groups is larger than what we've seen.
Before.
And.
I think I hit all of those things, but it's a very strong class for us.
Great and then just my second follow up is just around direct contracting specific to 2022 can you talk about you know I think that Tim said that we do expect it to be profitable but has your.
Our thoughts around direct contracting in 2022 changed at all especially after the adjustment that you saw in the fourth quarter, how do I think about the impact on direct contracting specific to 2022.
So I think from a contribution perspective, we've moderated our expectations around that but we do expect it to be a positive contributor to adjusted EBITDA as we said I think strategically Lisa it's such a great fit.
For our partners to have a single experience for all of their Medicare patients and they're seeing the leverage that comes from that so for US. It's full speed ahead, and it lines up very well.
Great. Thanks for the comment and I'll see you next Friday.
See you then.
The next question comes from Justin Lake from Wolfe Research. Please go ahead Justin.
Thanks, Good morning.
Appreciate your comments on <unk>.
Existing market P. M P M growing to $1 47.
Can you give us some color within that in terms of where you thought you talked about being ahead of plan in some markets.
Where are you seeing that.
Those benefits felt broadly what types of markets do you feel like.
Are there things that are driving you ahead of plan number one number two where do you think will be which is starting to glass do you think you'll be proud of R&R archetype.
With the 2022 class or below or above that and then lastly, how does Hawaii and care.
<unk> got 127, maybe not COVID-19 as a specific number but just trying to figure out where you are there versus.
Got it.
More of a mature level.
Sure well just to note will walk you through some detailed cohort data next week that will amplify allows it but what's driving these partner markets up to $1 27, and $1 30.
When the patients in that group of 165000, we've talked about have only been on the platform for two and a half years I think it's really three things I think one the platform is getting smart we've got better insights that we're able to provide to the physicians that are actionable, we have clinical programs things like specialty referrals and palliative.
Care that are being spread across the network and yielding the impact.
Two I think our partnerships are they're just operating at a higher level, there's better alignment and that means that youre actually seeing behavior change youre seeing physicians spend more time with their more complex patients seen patients earlier post discharge from the hospital and then scale the ability to leverage that.
<unk> impact costs.
Outside of the primary care office and then the third thing is just the power of our network. We just have this incredible reference capability for groups to be able to compare how they're operating what are best practices whats driving that and so I would say, that's making all of our markets better and in <unk>.
Particular, our newer markets coming on are seeing an acceleration.
As they head into year end.
Tim you want to talk about the new markets, Yeah, Hey, Justin This is Tim I think the second part of your question is about the potential contribution he was talking about the existing members moving into 'twenty two medical margin maturing in that one to $1 27 to $130 range and Youre asking about the other what we've said is about 50000 members that are come on in those.
Six new geographies that went live in January and our expectation at this point as they will be likely below what you would be modeling probably is at archetype.
And generally those members come on a lower medical margin and <unk>.
Dilutive to somewhere around neutral from an EBITDA standpoint.
And that's you know that's going to vary year to year, just depending on where the starting point of each market is and we've always talked about that you know each market can start at a little bit of a different.
A little bit of a disappoint and to Steve's point, we will go into a little bit more detail about that at the at the Investor Conference next week, but for US that's not really a big concerned the bigger issue the bigger.
Positive point for us in bringing these members on is that we can develop their medical margin pretty quickly as the first point I mean, as Steve said those existing members that we have that are going to mature to a 127 to $130 medical margin I've only been on the market by the end of next year for two and a half years, so regardless of where the new markets are starting.
We'll get them pretty quickly or confident we'll get them pretty quickly to do good mature.
And the second thing is and I never want it I never liked let one of these questions go about.
Starting points are medical margin without without throwing this in the cost for us to bring those members on is really low we have an extremely efficient.
Up low capital.
Cost to bring market to bring members on the market it only cost us about $400 to bring each new member in a new market on and so we get you know when you think about the medical margin maturation process that you've talked about you would get very rapid paybacks on those so the combination of our low capital are our high capital efficiency low cost of acquisition.
And the speed to which we developed medical margin makes us pretty excited about those 50000 members coming on.
And could you give me the Hawaii comparisons to the 127.
Yeah, Hawaii as Steve talked about is our non partner market and for all the reasons you've talked about without the same level of alignment of a partner market is also lower than than the <unk>.
Then the partner markets and certainly lower than the 127 to $1 30, I think next week, we're going to go into detail and will actually go through.
Couple of things one we will give you a little bit of art will show you. The cohort progression that gets you to that blended $1 27 to $1 34 partner markets will go through a little bit about the progression of how Hawaii also has performed over that time as sort of a separate market or a separate cohort for non partner look and we will give you a little more detail about that.
About what's happening with the with the 50000, new members that are coming off into six new markets as well.
Okay, and then one last quick numbers question.
By my math I'm calculating your.
Title.
The organic growth.
Medicare advantage growth, that's not coming from new new markets.
Christian groups in 22 of about 15%.
First of all in the right ballpark there and then two can you split that between growth existing physician groups versus I know, it's an important part of your model is bringing new physicians in the same markets into the practices or into the partnerships can you split that between existing physician groups of new position groups product new market.
Yes, I mean, just and I think that sort of low to mid teens is kind of right on for same geography growth and it's historically it had been two thirds organic and one third physicians physicians are actually becoming a larger part of that and it's really because they're seeing the same thing that the new.
<unk> new groups are seeing which is the benefits of this platform and once we're there the vehicle for you to move in and so it's becoming a large if it was 10 and five before that that physician people, becoming a larger component of that.
Yeah.
Just doing the math on it.
Youre doing it depends on whether obviously, taking the low end or the high end of the guidance to six year juice, but I think we've told you there's going to be about 50000 coming off new market. So you can do the math on the low end is about 13% or so growth in the difference between that and the high end of the guidance really is as you are kind of stayed in kind of pushing a little bit harder on on same geography growth closer to.
15, and we also potentially have the ability for that 50000 would be bigger I mean, when you think about what we did this year our last year in 2021 with the markets we brought on.
Initially we kind of estimated they would come on at about the low 30, 31 30 31000 members. We actually ended the year with that group being about 36000 members. So.
Through age.
Agents and really good attribution work for their payers, we have the ability for maybe that to be a little larger so at the $2 70 kind of guidance number probably approaching 15% same geography growth and probably a little higher than the 50000 on new market number.
Thanks.
Thanks, Jeff.
The next question comes from Kevin Fischbeck from Bank of America. Please go ahead.
Great. Thanks, just wanted to get a little more color on this Hawaii announcements is this part of the 2023.
Numbers that you've given and I guess, you mentioned that it sounds like you're going to put part of your membership into that.
Arrangement are you expecting are you getting contribution from them on top of that I Didnt I don't know if I heard a number there yes.
So Kevin this is not included in that class of 23. This is an existing market. These are existing members. These are existing physician groups and health systems and post acute partners that we've worked with before so this is really trying to bring the alignment that we have been able to drive and other.
Markets to Hawaii, putting a about 20% of our membership into the this arrangement and so it's it's not included in those numbers. We think we can get the benefits.
<unk> that we've seen in some other places and drive much better performance and Tim will show you next week kind of what our expectation is in 'twenty, two and in terms of what that looks like but it really creates an integrated entity and allowed some of the changes we've seen in other markets to come to Oahu to start and so that's why.
We're excited about it.
Okay. So is it more about improving the margin than it is about.
It's absolutely absolutely, it's a different approach to an existing market to drive better performance.
Okay, and then I guess, maybe if you could just give a little bit more color about your thoughts about overall trends.
2022, obviously things kind of choppy. The last couple of years, how are you thinking about pent up demand how are you thinking about COVID-19 .
Uh huh.
Yeah, So our 'twenty two guidance includes utilization expectations, which our composites.
That is basically taking that 2019 baseline trended forward and our expectation that we will get back to that that level.
Don't have any explicit sort of COVID-19 surge built into that and that's namely because what we've seen is an offset in non COVID-19 utilization.
With with each of the most recent surges, we did see as I talked about a surge sort of in the back half of Q4 that carried a little bit into the early part of Q1, but there was a corresponding offsets on that so that's kind of a composite view in terms of utilization the last thing I'll say.
As we continue to see the shift from inpatient to outpatient and so for 'twenty two the inpatient utilization will probably below 2019 trended forward, but outpatient might might be over that and so that's that's kind of how the composite is calculated.
Alright perfect. Thanks.
The next question is from Brian <unk> from Jefferies. Please go ahead Brian .
Hey, good morning, guys and congrats I guess I'll start.
Piggybacking off of leases question earlier with a strong 2020 to reclassify 80000 Biogen.
Seemingly strong <unk> performance in the same geography growth at about 15% of the past few quarters. I mean is that sort of a new normal that we should be thinking thinking about as we look beyond 2023, if there is some growth rates.
Well, what I think we are clearly seen as demand among physician organizations is accelerating for a different primary care business model and so we expect that's going to continue.
There are.
A greater diversity of primary care organizations that are looking at that and so we believe that our our Tam has grown and so those pressures that I talked about that they are facing are not going to go away and so we believe our 24 class, which we're already working on is going to be very strong.
As we as we look going forward and in terms of the margin improvement. Yes. We believe we are on a higher trajectory will talk about it next week and we'll show you kind of the cohorts that contribute to that I think the takeaway is by getting members on the platform earlier with more of these partnerships and the Axa.
<unk>, we're seeing margins this is going to be a larger more profitable company.
In a few years than we had initially talked to you about and so we will give you an update on that at our Investor day.
I appreciate it.
Okay.
Hey, Brian This is Matt one bit of Colorado is going to add to Steve's comment is entering four new state is a big deal for US we begun the vehicle for risk in those states. Other independent groups can then join in on the network. So that does have a bearing on organic growth. Some of these states they were entering and are less.
Sure from an MA penetration standpoint, so they have natural.
Growth, that's higher at a market level for M&A enrollment and so that'll that'll be something sustain the same geography growth in the future.
Now that makes sense and actually perfect segue for my next question I guess, we've talked a little bit about Hawaii today, and I know the paas he's talking about Pittsburgh in the Q3 call are there any more specialized or one off operating models to call out in any of the geographies for the 2023 class and I guess the other question is are we finding ways to be more flexible or creative and.
So the discussions with prospective partners.
Going forward.
Well.
Look we built our platform to be able to work with existing physician organizations and they come in all sizes and they come in all types.
And we've demonstrated a track record of being able to do that with a diverse group and so I think the diversity continues to grow I wouldnt call them, one off Myles I mean, Hawaii is a little bit different for the reasons, we talked about it it's an existing market that we're making changes to improve performance, but our partnerships.
<unk> are very consistent in terms of how we're doing this I just think the need among physician organizations is growing and we're meeting that need and again, we'll give you more color next week on it.
Awesome. Thanks, guys.
We have a question from Gary Taylor from Cowen. Please go ahead.
Hi, good morning, excuse me.
Yeah.
Can you talk about or share with us.
Number of physician.
Partners in 'twenty, two and in these seven new groups for 23 years like how many physicians.
Physicians are represented.
A part of those groups.
Yeah, absolutely. So so today, we have 16 partners, we're going to 'twenty three with the class of 2023 partners with the class of 2023, we're going from 17% to 25 geographies. So an incremental eight as Matt said were gone from eight to 12.
States. So an incremental four primary care physicians are just north of 600 today and we're adding 600 incremental primary care doctors. So were going north of 2200 and that is that is really significant everything. We do is built around this alignment with the primary care physicians.
And so it's a big step up.
I appreciate that and then my just one other question.
Is there are there any.
Platform investments disease management programs, specifically I'm thinking of something you might do.
Do around behavioral, but but anything that you're looking at that it looks like it could be a material investment to make over the next couple of years.
Well I talked about our platform getting smarter and providing better insights and targeted clinical programs like palliative care or specialty referral, we're dealing with complex patients with chronic kidney disease. As an example, the investments that we're making is really around.
Owned.
Being able to enable that and so in 2022, our G&A reflects a step up from a technology perspective being able to support this many markets and be able to provide programs like that across.
The growth in markets in states that we talked about so it's reflected in kind of what we provided to you and again next week youre going to hear on some of those programs and what we're specifically doing around that.
Okay, great. Thank you.
The next question is from George Hill from Deutsche Bank. Please go ahead.
Yes, good morning, guys and thanks for the question I guess I kind of wanted to dovetail on Justin's line of thinking earlier, which is are you guys in a position yet to provide how you're thinking about what in market growth should look like in 'twenty three both from our membership and from a provider perspective, and maybe to go down that hallway a little bit further.
Hope to hear you guys just comment a little bit more about the in market provider growth, Steve you've talked a lot about providers needing a new business model.
Just kind of tactically is are you guys pulling them in are they wanting to you guys are they willing to practices that you guys are already partnered with and kind of a hub and spoke approach I'd love to hear you talk a little bit more about that.
Yes, I mean, I think a real distinctive part of our growth model is the power of our St geography growth. This idea of building around a partner at scale in a market and bringing risk to a market for the first time gives us the opportunity to really shape value in these communities for decades.
What we're seeing is an acceleration in physicians joining.
The platform and Thats, what I was trying to say that Justin is that we feel very comfortable in that low to mid teens and believed that that that will continue.
Going forward.
The physician component of that is becoming an uneven larger part is we're seeing more folks come in and and it's just it's an attractive vehicle. They can see the economics, it's very easy the payor contracts are set up and they can they can roll their group right into that and so we're seeing small groups join in.
We're seeing some large groups join in.
We had a very large group join us as of the first of the year in one of our communities that a few years ago had said, hey, I'm not going to do the partnership right now, but they've seen the compelling results in that community and they are a fantastic partner and they joined US as of the first of the year. So.
That's what's really driving a lot of this George.
That's helpful. Thanks, Steve.
Yes.
The next question is from Ryan Daniels from William Blair. Please go ahead.
Hey, guys Nick speaking on for Ryan. Thanks for taking my questions to start I guess I was wondering if you could provide a bit of an update on the competitive environment I mean, obviously with your 'twenty.
<unk> thousand three membership guide and things Youre inefficient too many headwinds, but just wondering if you can price a little bit of color there.
Sure I mean, I think for these scaled physician organizations that are looking to make the move to value in facing the challenges with their Medicare business I talked about.
We are doing incredibly well they may have talked to some other folks, but we don't see a lot of competition around that the place where we do see competition is really once we're in a geography. The idea is that our partnership and our partner is going to be the aggregator in that community and other other physicians are going to.
Joining in the competition that really we face and we'll talk more about this next week the next closest.
Organizations are typically health systems in terms of size the smaller independents seem to be joining into us at an accelerating rate.
We don't overlap with a number of the newer model players and in many of our states. When we do they are relatively small.
In comparison to our scale and so we do face competition, but we seem to be doing very well in the markets that we're in and obviously, we're doing well in terms of new markets and new partners.
Great. Thanks, that's helpful color.
Just kind of like a question on how you guys see kind of top line seasonality going in this year I know typically on the kind of bad margin and EBITDA, sorry, it's kind of like a declining seasonality throughout the year, but just wondering kind of how you guys see revenue shaking out and then do you expect that trend to kind of be.
What you expect going forward might be years out as we move out of Covid.
Yes, yes, the quarterly seasonality on our revenue will be similar to what we've seen in previous years are similar to 2021 pardon me there is a little bit it will look a little bit odd from an overlap standpoint, as we've talked about in my comments because of the.
Retro adjustment, we had to revenue in Q2 of last year because of that group or that group contract that we talked about last year or so.
Indices will be a little bit odd in Q1, and Q2 versus year ago, but average to a better overall, but as we move through the year.
Revenue will.
Kind of move on that same.
Historical trend that we've seen.
Generally revenue <unk> will decline as we move from Q1 to Q4 as we bring more of those a higher mix of agents, which would come in at a much lower revenue <unk> as we move through the year.
Okay, great. Thanks look forward to next week guys.
Yep Yep.
As a reminder, if you'd like to ask a question. Please press star followed by one on your telephone keypad now.
We take our next question from Stephen Baxter from Wells Fargo. Please go ahead.
Hi, Thanks, I was going to ask if you thought the evolution of the direct contracting program could potentially slow the growth of it going forward, but when I look at your comments around the 500000 members you expect by the end of 2023 and considering the 80000 growth class a typical same store it would still seem to be <unk>.
While you're looking for another 30 to 40000, DCE members or I should say CEO rich members in 2023, which is a similar level of growth to 2022 I was hoping you can confirm if that's in the ballpark of that obviously rounding can impact a thumb.
And then my follow up question. Thanks.
Well like I said I think we're really feeling good about the announcement on ACO reach I think we believe it's in our wheelhouse with the focus on equity and the focus on physician governance.
We've got existing partners and new partners that we're having that dialogue with now that there is clarity on that program and so I think the numbers that you talked about we'd be very comfortable.
Thanks, and then.
I appreciate the update on EBITDA and moving that into a positive territory. I was hoping you could also give us an update on whether you're expecting cash flow to also move positive in 2022. It seems like if not this year it should be soon and if that's the case you know how should we be thinking about $1 billion of cash on the balance sheet and how you might think about using that to enhance growth and returns.
Yes, Stephen we're not expecting cash flow to move positive in 2022 next week, we are going to talk a little bit about our cash flow projections out beyond 2022. So we'll give you an update on that.
Give you an update on that next week.
What I'll say is we do have a $1 billion in cash and I think our focus and the best and highest use of that is in two areas. One is on continuing to fuel our growth, particularly with our provider partners and allowing them to accelerate their growth in these geographies and then the second is.
In terms of capabilities that can drive better performance.
And reduce cost and improve quality, we have some things that we're working on we're not talking about right now, but I think there are we like our position given that we come in in a scaled position and we can drive improvement.
With some new capabilities.
We have no further questions I'll hand, it back to speak of team for any closing remarks.
Well I'll just say, we're really looking forward to seeing you next week I think youre going to get a chance to understand not just why we're seeing the inflection that we talked about.
Why the performance is accelerating ahead of what we projected but also what our partners are experiencing and what it means to them you're going to get a chance to meet other folks on the leadership team. So we're really excited about the day, we're excited to be together with those of you that can be in person and for those that are not it'll be virtual but thanks.
Everybody and we'll see in a week.
Thank you all for joining this now concludes today's call. Please disconnect your lines.
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