Q1 2022 agilon health inc Earnings Call
In 2021 in partnership with answer Health now that we have established our infrastructure.
Including multi payer risk contracts and regional resources other physician groups in the state like United Physicians have the opportunity to transform their business model.
This is the power of being a first mover and what has driven our growth in markets like Ohio and Texas.
For this reason, adding four new states in 2023 is very important to us.
This will increase our total stage count from eight to 12 and end market membership opportunity from $4 seven to seven 5 million lives.
We will have the opportunity to define and shape value based care in these states for decades.
Our partner development team is now shifting their focus to 2024.
While it is very early we are seeing significant opportunities across diverse partner types and geographies.
This includes all types of groups, including primary care only multi specialty scaled networks and health systems in both new and existing states.
The sizable inflection in demand among physician groups for a sustained for a sustainable primary care model reflects two drivers one structural tailwind, including all payers pushing for value and an accelerating senior population and to the very visible level of success the <unk>.
Jalan groups are seeing on our platform.
Today, almost any type of physician organization in the country can look to the agile on network and see a group that looks like them, succeeding in value and succeeding in a big way.
I wanted to close by sharing some observations from our physician leadership retreat last weekend in Austin, Texas.
Power of our network as a learning tool was evident to everyone in the room as we gathered with 100 plus physicians from groups encompassing all of our existing partners. The implementing class of 'twenty, three and early partners and prospects from the class of <unk> 24, as a reminder.
Our physician partners are positioned to be the value based care leader in their community and they have a deep interest in learning from their peers across the country.
A few themes stood out from our time together.
First our newest partners, representing both the class a 'twenty two and the class of 'twenty three are leveraging the experience and learnings of our older partners to go faster and accelerate their success.
Meaningful differences within and across group performance were highlighted and correlated with best practices in areas like our new partners clinical peer reviewed process physician education and timely pod structure implementation.
Our year, one markets have already implemented some of these learnings and are off to a great start as reflected in their Q1 performance.
In addition, we have now period, all year zero physician leaders with mentors from our more experienced partners and we expect these insights and mentor relationships will translate into improved quality and faster medical margin progression in our newer markets.
Our second learning within the power of the network to drive accelerated performance across all of our partners.
By comparing performance metrics across a diverse network, we haven't been able to isolate the most impactful levers that translate into better access to primary care services and quality outcomes for patients.
Our best performers excel in their team based approach to care delivery the consistency of performance across their entire group and their primary care team touch points, particularly with their most complex patients in.
Investments in the necessary resources to drive this success are only possible. When you have an aligned primary care physician and value combined with agile ons data insights and centralized platform capabilities.
Our final takeaway from Austin was that our time together served as another catalyst for our women's physician leadership Council.
And given the robust support across the network, we expect the council's work to be a great source of differentiation for our groups, including the attraction and retention of women physicians with that let me turn things over to Tim.
Thanks, Steve and good evening, everyone I'll review some highlights from our first quarter results and our guidance for the second quarter and full year 2022.
Starting with our membership growth for the first quarter total members live on the <unk> platform increase the 342000, including both Medicare advantage and direct contracting.
Our consolidated Medicare advantage membership increased 51% to 250000 and direct contracting members ended the quarter at 92000.
For Medicare advantage, our membership growth was driven by the impact from adding six new geographies in January and 20% growth within our same geographies.
Normalized for the timing of a large retroactive group contract in the prior year Medicare advantage membership would've increased 43% with 14% growth in same geographies.
Revenues increased 58% on a year over year basis to $653 million during the first quarter.
Normalizing for the retro group contract I, just mentioned revenues would have increased 49% revenue growth was primarily driven by membership gains in new and existing geographies on a per member per month basis, or <unk> revenue increased 4% during the first quarter.
Medical margin increased 66% year over year to $86 million during the first quarter compared to $52 million in the prior year.
Even with the dilution from our membership growth medical margins increase as a percentage of revenue and on a <unk> basis medical margins were 13, 2% of revenue during the first quarter compared to 12, 6% last year and medical margin <unk> increased 9% to $116 compared to 106.
Last year the.
The growth in medical margin was primarily driven by the maturation of older markets and remember cohorts more than offsetting the dilution from new members.
Utilization trends were consistent with our expectations and remain near 2019 baseline levels.
Utilization for inpatient services continues to run below historical baseline, while outpatient utilization is modestly above baseline.
Covid related costs increased in January of this year with the omicron wave, but moderated significantly during February and March and total COVID-19 costs. During the first quarter of 2022 were similar to the prior year.
Network contribution, which reflects agile on share of medical margin increased 38% to $42 million during the first quarter.
The year over year increase in network contribution reflects the gain in 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 19% to $34 million.
Growth in our platform support costs remained well below our revenue growth and continues to highlight the light overhead structure of our partnership model.
As a percentage of revenue platform support cost declined to five 2% during the first quarter compared to six 9% last year.
Our adjusted EBITDA was $12 million in the quarter compared to $4 million last year. The increase to adjusted EBITDA reflects the gain in network contribution and leverage against platform support as well as a positive $3 million contribution from direct contracting.
Discuss previously will negatively impact the growth rate of our average membership and revenue metrics. During the second quarter. This will normalize in the third quarter and does not impact our full year growth rates on a normalized basis, we anticipate revenue in the second quarter will increase approximately 36% to 38% year over year.
We also expect continued progression with our medical margin and adjusted EBITDA as members and markets mature on the platform.
For the second quarter, we expect medical margin and a range of 80 million to $83 million, representing 43% growth and adjusted EBITDA positive 4 million to $7 million compared to a loss of $2 million in the prior year.
For the full year 2022, our previous guidance remains unchanged. We expect total membership on the agile on platform will go over 40% you over a year to 340000 to 350000 with revenue growth of 39% at the mid point to a range of $2.5 billion to $2.59 billion.
We also expect significant gains in medical margin and adjusted EBITDA, We continue to anticipate medical margin and a range of $290 million to $305 million and adjusted EBITDA in a range of breakeven deposit of $10 million, which will represent a year over year gain an adjusted EBITDA of approximately 40 to 50 million.
With that we are now ready to take your questions operator.
Of course, thank you.
If you would like to ask a question. Please press star followed by one on your telephone keypad.
Is there any reason you would like to address that question. Please press Star followed 19 again to ask a question that star one.
As a reminder, if you're using a speaker phone. Please remember to pick up your handset before asking your question. We will pause here briefly ask questions I registered.
Our first question comes from Lisa Gal with.
J P Morgan Lisa your line account open.
[laughter]. Thank you very much and congratulations on a great way to start the year first I I, just really want to understand as we think about medical costs going forward, especially if they start to think about 2024 speed and you know some of the new physician groups that you brought on that has specialty practices within you talked about main house in hospital real.
<unk>, how do you think that that can help to to shape. The the medical cost trend going forward.
Well Thankfully say, it's a great question I think that we see tremendous opportunity.
With our ability to leverage the specialists that fit within our multi specialty.
Practices and all of the ancillary capabilities at sit within our health system like main health.
Early days has been a lot around really optimizing the primary care model in those touch points, but it's yielding incredible information for us that really allows us to tune.
<unk> and the specialist that need to be accessed and given what are multi specialty groups in Maine health bring we think that we can see demonstrable improvements one of the learnings from our from a retreat in Austin was that we have multi specialty groups already really beginning to bend the cost curve around some of the specialty.
Areas, so we see tremendous opportunity going forward.
And then just one of the things that stuck out to me and you're prepared to come come and stay with around that the women physician leadership Council that you talked about I was thinking of female can you maybe just talk about that a little bit more in detail and talk about how you think that potentially can impact the business.
Yeah, well at least I think it's something that we're really proud of and believe can be a real differentiator for us it's a smart business move.
Our goal is to sustain and grow primary care.
In the communities, we serve and that starts with slowing the number of primary care physicians that are leaving because of burn out the data would say that women physicians are leaving adult primary care at a much faster rate than their male counterparts.
And that's really based around the challenges of fee for service and the treadmill, but what we found is in value base care and building a business that is focused around the.
The team being optimize coordinating across.
A series of <unk>.
Specialties longterm in-depth relationships with patients that are women physicians are really exceptional at that and we have an economic model that rewards them for that and so what we'd like to do is have more of our women in leadership positions really espousing the merits of our partnership.
And value based care and we think with that we're going to be able to achieve that goal of sustaining and growing primary care.
Makes sense. Thanks, so much for the comment.
Okay.
Thank you Lisa.
Our next question comes from.
Quit Mayo with S. D B Securities what your line is now open.
Hey, Thanks, just first question on United physician, I presume, there's nothing terribly different or about the process around the year, one preparation sounds like there's some learning is coming out of your Austin meetings, but anything distinct about this market versus your legacy or this group versus your legacy groups and.
Detroit's a little bit unique of a market they've had significant hospital consolidation would beaumont over the last few years. So just maybe any comment about the market and how perhaps this is a little bit different than any of your existing.
Geographies.
Sure with thanks for the question I mean, we're really excited about the partnership with United Physicians. They are the scaled independent physician organizations.
Organization in the greater Detroit area.
And they they they bring that and they're really the first in that area to do full risk value based care across multiple payors.
There is still a fair amount of fragmentation within that market and so we believe there is an opportunity for them really to grow and to become the vehicle for other physicians in.
In the organization to join in they have an exceptional reputation.
And it really done a great job managing the system dynamics within that that market. The other thing I would point out is it's obviously a much larger market. The greater MSA is almost 4 million people within it and so you need to have a scaled partner like United physicians in order to to build around the law.
Last point I would make is they are a.
IPA or physician organization type of.
Organization, that's the same as answer health, which we went live within 21 in the western part of the state and I think we've learned a lot through that implementation that we're able to leverage over and really get the benefit of that and we're able to leverage health plan contracts in the same team. So for a lot of reasons, we're very.
Excited about it.
Okay, well, maybe just one last one we've had this sort of evolving strategy around.
Palliative care and putting in in in this building out maybe some AI just any developments. This year I think you were piloting Suffolk something in Buffalo. If my notes are right. So just city update will be helpful.
Yeah, we had a deep dive session in Austin with actually three of our markets that have had great success within palliative care.
And we were really and we're expanding in N out too many more markets here in 2002 width, but I think one of the things that we found was the.
The ability to identify folks at the end of the life getting better at that really helps but perhaps the biggest impact on getting people to enroll in palliative and have a very good experience for the patient and the family at the end of life is around the quality of the physician conversation educating them on that.
Supporting them with social workers and others in terms of enrolling them and then also having any really trusted partner on the palliative and hospice side of that and so we were able to lay that out there's been some really significant improvements in terms of enrollment in the program duration.
<unk> in palliative and in hospice and just the experience scores that we're getting back from from the families. So I think we'll give you an update on our next call even more on that but it's there's been a lot of progress.
Awesome, Thanks, a lot.
Thank you <unk>.
Our next question comes from.
Brian <unk> with Jeffries.
<unk> your line is now.
Hey, good afternoon, excuse me I would say good morning, it's Jack I have enough for Brian Congrats on strong print numbers look really nice.
Yes.
Question here My my curiosity being looking at that 14% Same-store number X the retroactive.
Same store same geography growth number can you give us a little color on what that look like across geographies and I guess, what I'm looking for here is.
Are you seeing acceleration over the years and some of them I know hi, what's been the one example.
Branched off of to see where you go into new markets within the same state and continue to grow sand geography presence.
<unk> presence within those markets.
But trying to get a sense for you know.
With the geography, like Ohio tapped out a little bit or is there still a lot of runway there and how that's progressing across sort of the different cohorts you have thanks.
Yeah, no. Thanks, Brian for Jack for the question, there's still a lot of runway in Ohio in fact in the quarter, Ohio was very strong very strong contributor to that.
As we had some rather large groups join in the same geography.
In which we operate southeast has been extremely strong from a same geography growth and they're obviously seen market growth in the teens overall, so that kind of lifts up that average, Texas continues to be a very strong market in terms of.
Same geography growth.
And we see tremendous opportunity in our in our other markets as well. So I think it's distributed I think markets continue to run one and a half to two times sort of there the market overall growth level.
And that's that's what we're seeing across that.
Okay got it really helpful. And then just one more quick follow up I think a lot of investors continue to look at this based on on revenue multiples for better for worse.
Obviously with the direct contracting lives not fully consolidated you're not getting credit for those if you're looking on that metric I guess I just wanted to check in with how you guys are thinking about.
What you're looking for in order to flip those over to consolidated.
Or if there's any sort of check points or milestones that you'd like to see before you would you like to do that thanks.
Go ahead, yeah, I don't think so I mean, I think if anything when we originally ruptured the partnerships on the direct contracting side in a way that would facilitate us not consolidating and originally are concerned what what's the future of the program. How long lived is going to be and we didn't want to be in a situation where a revenue number was fluctuating around.
Obviously, we're a lot.
The programs more stable, we're actually quite pleased with the outcome of direct contracting so far through this year I mean, you probably noticed in either of my prepared remarks or in the release that we just put out.
That we actually swung it into a positive EBITDA contributor of about $3 million in the first quarter. So.
We're expecting it to be somewhat positive over the full year. After a loss last year. So it is the program is performing well, we're pleased with the underlying performance, but with the new changes that have been announced for the ACO reach program that will transition to next year and with the requirement that these.
Partnerships really be physician controls and all the other new requirements have been put in place I think that really leaves us with its going to remain on consolidated for the for the foreseeable future, we really don't see.
Over the coming over the coming couple of years I was I was making a change that having said that were pretty transparent about what the revenue is you can read it in our in our.
Did a full year in our 10-K there'll be put out last quarter and you can see in the 10-Q for Q1 exactly what the revenue is so that number is available we reported but but I don't think we're in will be consolidated anytime soon.
Got it really helpful. Thanks, guys.
Thank you Brian .
Our next question comes from.
Justin linked Quint Wolf research.
And your line is now open.
Hi, Thanks. This is here's an author address then.
Just.
First off curious as to why.
He kept the guide this quarter for the full year, given I'm pretty strong performance for the year I think DCE members came.
<unk> higher relative your expectations that you laid out for one Q.
Just curious why.
Hi to maintain the guidance integrated with it and then navy as part of that.
For D C.
You expect that to be kind of EBITDA breakeven for the for the remainder of the year call in at <unk> I think what you'd originally pointed us towards at the beginning of the year was low single digit millions contributor.
It looks like it Ah contributed $3 million already <unk>. Thanks.
Yeah, I'll take the first one and maybe Timmy, Texas Islands. So Harrison on the guide really strong Q1 really in line with our expectations.
And very comfortable with our queue to forecast out on the year.
And so we we felt like given where we're at early in the year strong start but in line with our expectations holding guidance was was the right thing to do and I would also say that with the high end of our guidance at almost $2.6 billion of revenue 270000 members.
The high end of our guidance on medical margins picking up over $120 million, a medical margin year over year and we're extremely excited of course about this being the first year that that were guiding too and projected to be EBITDA breakeven for the entire business. So we also think they'll pull your guidance is obviously, obviously quite strong.
Second part of the question was direct contracting Rick contracting and I think I'd decided in the last answer to about $3 million positive in Q1 on direct contracting profitability will follow a bit of Seasonalization like MA business does not quite.
As pronounced because we don't have.
The dilution of a bunch of agents coming under a contract me, but we'll still see the.
Progress of seasonality of of direct contracting EBITDA as we move through the year similar to to the side. So with that we would expect for the full year that direct contracting is going to be.
Modestly positive adjusted EBITDA.
And that's I think that's a good number considering just the second second full year of the program, where we're coming off.
2021, first first three quarters at a loss of about 5 million. So that's that's a nice turnaround in a pick up horse in the program.
Got it all hold hold on just one more.
Yeah, I think you guys talked about what kind of a closed loop system.
Some time last year, when we were having a discussion just and somebody just scaled market is having the ability to have some extra visibility into kind of the scheduling completion and I was kind of insurance specialist visits on your management platform.
Is there any more you could kinda sure on the progress of that in terms of have you extend it to other geographies outside of Kelly, Ohio or.
Austin It maybe on the progress on heavy extended it to other specialties as well I think you guys called out cardiology in neurology as places, where you're operating that with that model.
Yes.
Thanks, Harrison so we've made a lot of progress on it.
We're demonstrating the ability to identify the best performing specialist within the community and we're able to guide referrals to them and so 90% of our senior patients are relying on their PCP for their referrals, which is two.
Three times, what I've seen in any other model and remember 50% of our.
Seniors are in PPO broad networks. So that's that's really striking.
We have expanded it I think we're in six markets now we're across cardiology urology ortho spine.
Is that right yeah, that's right so.
That's sort of the update on that we did spend a fair amount of time in Austin going through that and we're just we're continuing to see the referral rates go up the satisfaction go up the other thing. That's interesting is that more specialists are sort of learning what they need to do to move into the top.
Tier.
Whether that's things from a diagnostic perspective or facilities that they're using and so we're seeing a larger proportion of specialists within the communities move into that top tier that we're comfortable with from our quality and cost perspective, so that.
The update.
Awesome. Thank you.
Thank you Harry.
Our next question comes from.
Stephen Baxter with lots of <unk>.
Even your line is now open.
Yeah, Hi, Thanks I.
Appreciate the early comments on 24, I was hoping that maybe you can step back and give us some perspective on where you are in the market cycle for 2024 compared to maybe where you were a year ago for 2023, what what would you say are the key things that are different how do you think the market development process is evolving any change to things like you know the <unk>.
Allison inbound interest first outbound opportunities things like that would be great. Thanks.
Yeah, No no absolutely. Thanks, Steven I I would say the macro tailwinds for the move to value have never been stronger <unk>.
Whether they are payers that are saying, we need to get more senior patients to value.
Obviously, the demographics surge continues the challenges of fee for service or just becoming greater and greater this labor situation. That's out there is really a challenge for practices, but it's particularly challenging in a fee for service Champ practice and so there is just tremendous advantages for the move to value.
The second thing I would say that's different is the success of the <unk> network.
Across 10 partner markets and we shared the data with you that literally there is now any group in the country can kind of look at a group that looks and sounds like them and understand that and we're able to really Taylor and share that with them and then allow them to visit that group and have that dialogue, whereas.
Even a year ago, we didn't have seven or eight sort of spots. They could visit with reference simple data and so I just think we're getting better than network is getting better there's more push towards value.
All of that is translating into.
More groups expressing interest also the depth of our relationships is getting greater so things like.
Answer health had the relationship with the United Physicians as an example, we see that as we're building towards the class of the 24 in many states across the country are very similar phenomenon. So I would say we're ahead I would also say that health systems are very interested.
We are working really hard to make sure that we learn from Maine health.
Really refine that criteria, but main health is very visible out talking about what they're doing with us and that's generating an awful lot of interests. So.
I would say we've got a lot more at the top of the funnel then we had a year ago.
It's greater in terms of the diversity.
Of those types of folks growth and breadth and depth. So.
I think I think we're very encouraged we continue to deem to make really smart choices around who those partners are because we're going to build around them for 20 years, but we're pretty encouraged where we're at.
Got it I appreciate that and then just one kind of quick numbers question. What are the large Medicare company's talked about you know as I look back to Q4 in their medical costs picture completed seeing some higher higher unit costs on the impatient side I seem to be some kind of issue around patients. They weren't really there for Covid Bowl familiar reclassified.
Is having COVID-19 would just be curious to get a sense of you know how PID impacted the quarter, whether you guys saw anything like that as you were closing the books and just any broader update on how your completion looked for Q4. Thanks.
Yeah, I don't think we saw anything in particular that is specifically related to COVID-19.
Is it reported in the turnkey that we just published we did have some nominal negative <unk>.
Prior development that flowed through into our first quarter.
It wasn't really related to any one particular payor or any one particular geography was pretty well spread across multiple pairs of multiple geographies and it's obviously captured within the $86 million a medical margin that was that big inquiries you over here that we've already reported so.
Nothing really of note to report on that just kind of some we're gonna see some normal fluctuation, obviously and development quarter to quarter positive or negative in this quarter. We had we had a bit of negative but nothing that I would.
Hi back to Covid or any any one specific <unk>.
<unk> geography or incident.
Okay. Thank you.
Thank you Steven.
Our next question comes from.
Gary paler with Kelly.
Carry your line account.
Hey, good afternoon, gentlemen, I have three numbers questions. The first is.
<unk>.
You said.
3 million EBITDA from direct contracting this quarter when I when I look at the queue and it shows that $2 million is there just unallocated I'm sorry, there's just some allocated.
Overhead on top of that gap number or is there or is there actually could do math ticket to the three.
Yeah, you can do it and you have to just look back into the.
Net income to adjusted EBITDA walk a little bit further back in the queue, there's about $1.2 million of.
Interest in taxes that we actually add back. So you are looking at the $2 million net income contribution from direct contracting if you put that AD backpack onto it you get the $3.2 million with the actual contribution in the quarter.
Okay. Good I couldn't stumped me with that one.
My second question, just just looking I'll try I'll try with the second one when.
When I look at the the direct contracting MLR so to speak this quarter again taken that medical expense and the revenue This court about.
92.8% in the back half of 21, you're kind of running 93.5, but your D. C enrollment jump you know almost 80%.
Sequentially. So that's I mean, that's really good performance better than we would have thought so is that is there anything notable to call out that the 2021 cohort improved a lot or that you're more comfortable now booking starting point MLR on class of 22 cohort or is there just just that.
Mix effect in there I mean, that's a pretty good.
Pretty good to build a book that lower MLR, given the the growth of enrollment sequentially.
Yeah, I think some of all of the above clearly just like we do on MMA as we roll the 2021 cohort through in 2022, we are clearly now we've had them under under the program for four three or four quarters, and we should be seeing some improvement but.
The second thing is you know we didn't have them in the first quarter of last year. We didn't have the program and there is some seasonality around that the best MLR, we're going to have as in the first quarter for both.
So the comparing kind of how we rolled through the end of last year, the first squirt might be a little bit of apples and oranges, but.
But yeah, otherwise, having said that we're we're I think we're getting smarter about how to understand how the program and how the mass of the program works and.
And yeah, hopefully having the the benefit of all of those members being on the same platform and that is in the same way as the <unk>.
Businesses, that's been around a little bit longer for us will continue to to benefit and like I said, we'll we'll roll out through the full year into some kind of a.
Low single digit.
Positive.
For the year and Gary This is Matt <unk> expand on this but I think the numbers are looking at are probably burden for the retro trend adjustment that was impacting the back half of the year numbers direction, Yeah, Yeah, I mean, that's.
Yeah. If you are looking at just the fourth quarter, that's gonna be R. That's going to be.
Just the third and fourth quarter, that's going to be even a little bit more negative because we started to take adjustments where that retro trend adjustment in the third and then more even more so in the fourth quarter of last year, but if you look at the full year, obviously that blends out to what you would have expected for the three quarters of last year and even that you would expect to be not quite as strong as a first quarter. This year for the <unk>.
We talked about we've had those members on the platform for Awhile now we.
And the first quarter is going to be the strongest MLR quarter anyway.
Yeah, and Gary I would just add the.
Six <unk>.
Markets that are now entering into their second year of direct contracting in particular are really seen the power of one line of business and so as we talk about the various programs are doing around specialty cost and others the ability to really impact that.
Is being seen in both lines of business.
Last one for me I think every quarter, we learned another lesson in sort of a virtual capitation accounting, but looking at.
ESO up about 20 days sequentially in D. C. PS up about 24 days sequentially, some really big moving on both receivables in medical tables.
This quarter I'm guessing the answer is some delayed plan settlement, but just wondering what the color is on that.
Not really I mean, the way to think about it is for each quarter. We have a different amount of time that we have visibility to capture that before we actually file the K.
Q for or the queue now for Q1.
An example would be I think are.
Days claims payable was about 75 days in Q1, and that's obviously up from Q4, it's actually up a little bit from Q1 of last year as well, where I think we reported.
60, $98 payable the different year over year is because last year.
Timing of the first quarter was driven by the IPO timing and we didn't have to report until right at the end of May So we had a little bit more visibility into the first quarter and we can incorporate that into our balance sheet. When were reported it for Q1. This year, obviously reporting right now only a week into me. So a couple of weeks difference would explain that difference.
The fourth quarter to the first quarter, even more pronounced because we have that full 60 days essentially to report that even a little bit longer than that this year until early March so that extra time period that we have to basically get visibility to completion of claims from our payers just puts us in a position where we can report.
More completeness and therefore have Lord.
Lower both.
Receivables and days claims payable so so it sounds like <unk> is always going to be the lowest then from that perspective, all else equal it sounds like.
It always will be the lowest because we just have the most time between when we split the board and when when we file.
Great. Okay. Thank you.
Thanks, Gary.
Thank you Gary.
Our next question comes fan.
Daniels with <unk>.
Diane Your line is now open.
Hey, guys speak out on for Orion. Thanks for taking my question I guess just to start you mentioned the success that you're seeing in your older cohorts as well as your the newer cohorts on kind of the med margin. Just wondering like are those newer cohorts actually tracking better than the older ones that have the same kind of point in their life cycle.
<unk>.
So the newer cohorts are tracking in line with kind of what we laid out at Investor day.
I think when we look at some of the operational indicators Nick.
Nick we're really encouraged and they're they're sort of getting the learnings from some of their older folks. So I think they're off to a good start it's too early to say that it's dramatically better than what we had laid out but I think we're very.
We're very encouraged by that each class comes in and starts at a different place and as we share. This class of 22 on average is a composite with lower than some of the other classes.
But I think what we're seeing in terms of what we had forecasted out we're just really encouraged with how the performance is going and the benefits that they're learning.
Great Yeah. Thank you and then I.
So so <unk>, obviously office utilization in the first quarter was affected by Covid I'm. Just wondering how is that tracking currently has that kind of success are we kind of rebalancing as far as credit about auto bosses birthday and offers utilization.
And then how does that affect embed margin has that kind of recalibrates back to back to normal.
So I think we are continuing to see.
In patients below baseline an outpatient above baseline.
Some of that may be some COVID-19 affect some of it may be a new normal that we're moving forward when we put it all together from a composite perspectives.
We continue to see it sort of in line with our with our expectations, if you're asking specifically about primary care in the office and telehealth are telehealth is running about 15%.
And has been there for a while ago. When there is a surge in January it went up as an example, but.
That that's the mix in terms of the primary care in office versus.
Virtual if that's what you're asking.
Okay, Yeah, no more the ladder, so as kind of inpatient services, if that does recalibrate it shouldn't affect margins in any way it shouldn't because it's it's kind of shaking out.
To have no effect essentially.
No I think we're feeling good about where it's at and what we're seeing from the indicators.
Okay, great. Thanks for the collar guys.
Okay.
Thank you Ryan.
Our next question comes from Sandy.
Sandy Draper with Guggenheim partners.
Can do your line account open.
Thanks, very much a lot of the questions have been asked but I did have a little bit of trouble dialing and so not sure can see that this was covered but.
The other medical expenses was was up and both of them.
Percentage basis, as well as dollars and didn't know if you had any commentary obviously medical margin was strong EBITDA was strong, but just trying to get any additional commentary, which you may have already said and I apologize just about that step up and other medical expenses in your life Geography's. Thanks.
Yeah, I mean other medical expenses has two components to it the biggest component of it is just our partner sharing so obviously that goes up as a medical margin increases in our partner sharing increases the second part of it.
The biggest component of the second part of it is actually the incentives that we pay two physicians to do things like complete annual wellness visits and we did have a little bit of a skew into the first quarter. That's actually good news for us it's not.
That's not an issue for the full year because the idea is to complete a high level of annual bonuses for the full year will pay incentives out against that but the fact that we're actually getting them done a little bit earlier, which did push a little bit more into the first quarter.
The way that was true across the board Steve talked about the idea that we're managing both DCNR may now is kind of one population, we actually saw a annual willingness visits accelerated a little bit more of them in the first quarter for both those populations and so that did have some impact on on the side that had some impact on on other medical expenses, but other than that I think the <unk>.
Overall number.
And the flow through from medical margin in network contribution that.
That that drives is actually a pretty positive number.
Well within the expectation that we had and help drive that.
Pretty strong adjust.
Jested EBITDA number down on the bottom line.
That has helped to basically just the big step up and medical margin just to share airports, and then a little bit <unk>, but nothing to really.
Yeah, a little bit about it.
Yeah, a little bit of a acceleration into the quarter of the non partner sharing but I mean, the biggest step up obviously and that number is just going to be as we continue to increase medical margin partner sharing goes up which is a good thing right or share goes up partner sharing goes up and that will continue to drive that number of.
That was my only question <unk> not congrats on the next corner.
So I think.
Okay.
Thank you Sandy.
Our next question comes from.
George Hell with Deutsche Bank.
What's your line account open.
Yeah. Good evening guys. Thanks for taking the question and Stephen Tim I kind of have a an inflation related question I know that a lot of the M. C. O's are protected on short term inflationary risks from their provider partners because of the nature of the multiyear contracting I, probably should notice, but I just wanted to check and make sure that you guys are kind of protecting.
The same way or maybe talk about kind of your your contracted with part of your contract with partner inpatient providers, especially when you're attributed beneficiaries.
Need to seek in patient care.
Probably over the next 12 to 18 months, he's probably going to try to be some cost cost inflation just had how does how does that work with you guys protection from inflationary constable provider side.
What is it about your direct provider partner.
Yeah. So.
The contracts that we're leveraging Georgia through our payers right. So we are using their networks and their deals and so to the extent that they're insulated around that were insulated around it.
We're obviously, taking the total risk underneath that.
But that that's sort of the short answer to that.
Click a picture that's helpful. Thank you.
Thank you George.
Our next question comes from [noise].
<unk> <unk> Bank of America.
So what's your line is now.
Have any lightning telecom.
Oh actually if Adam Ronan for Kevin, but thanks for sweeping and you.
You mentioned that you had billing of cash and whatever it was less than $5 million.
$50 million.
Soon be free cash flow breakeven so.
Just wander and you don't have a lot of Capex. So just wondering what the plan is for.
Some.
M&A makes sense or any capability that you need or just any.
What plans there are for the billion of cash.
Yes, Thanks Adam.
It's a pretty dynamic environment out there right now and clearly that presents some opportunities I think a.
A couple of things one is we really liked the fact that we have a business model that even as we're growing as fast as we are we're not burning a lot of cash and so we don't need to raise capital going forward and two is we really like having dry powder and the flexibility that that gives us.
And they are continuing to be two areas that we really look at.
In terms of how we want to deploy our capital.
First is around growth the best and highest use of our capital is in allowing our partners to be the aggregators in their community and really drive that same geography growth rate like we've talked about in the examples we've talked about on this call in multiple markets.
So that that's one second is really in terms of capabilities that have helped our partners deliver better medical margin and better quality.
There are.
Quite a few opportunities out there in both areas and the dislocation from this environment.
Present, some opportunities. So we're very methodical we're working our strategy very carefully right now, but we we really like where we're at and we're not necessarily in a rush.
Yeah, No that's helpful and that kind of segue into my next question is like a lot of the end market growth seems to be from adding adding capacity to your provider groups. So you mentioned that you didn't see labour of the problem is it seems like you are adding this is the platform, but I'm. Just curious can you did mention that you think the value based care model.
Because more conducive to see fewer labor issue grocery per service I'm wondering if you could comment on why you think that is an <unk>.
Do you think that will continue.
Yeah, No I I really appreciate the question I mean, I think we're in a different business than fee for service I think our partners have the benefit of being in that business and are able to.
Approach chat.
Challenges like this in a different way, if they need to pay five or 10% more.
In that that gets charged against our joint venture against the totality of the total premium dollar and the total expenses that are being managed.
It's a relatively small difference.
<unk> as they are able to leverage our network, we talked a lot about this is this.
This last weekend in Austin in terms of how we can share resources and they're able to leverage agile on resources. So there are a lot of things that we are able to do to help them in the market, but also from a centralized perspective, and we are getting smarter on that all the time, so I think that not that labor.
Not an issue I guess my point is it just more manageable.
In the partnership model that we've got because it really is a different business.
Great. Thanks.
Thank you Kevin.
There are no further questions at this time, so as a reminder to submit a question that star one on your telephone keypad.
Okay.
Thank you everyone talk to you soon.
Hey, Amber I think we can go ahead and wrap up the call and throughout the top of the hour.
That concludes today's <unk> help first quarter of 2020 <unk>.
You for your participation you may now disconnect your lines.