Q1 2022 Alignment Healthcare Inc Earnings Call
Well go to the alignment healthcare first quarter 2022 earnings conference call.
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I would now like to turn the conference over to Mr. John Kim founder and Chief Executive Officer. Please go ahead.
Hello, and welcome to our first quarter earnings Conference call.
I appreciate you joining us.
We are proud to report another strong quarter, beating guidance across each of our four key performance indicators.
For the first quarter, our total revenue of $346 million represented 29% growth year over year.
This was led by our health plan premium revenue of $331 million, representing 25% gross.
<unk> plan membership ended at 94200 members growing 13.4% year over year.
Adjusted gross profit of 45 million in the first quarter was also ahead of expectations.
Our gross margin engine continues to produce strong M. P. R outcomes coming in this quarter at 87.0%.
Lastly, our adjusted EBITDA was a loss of only $4 million is the vast majority of our adjusted gross profit outperformance fell to the bottom line.
The outcomes that our first quarter indicate continued progress towards our long term profitability objectives. After a solid start to the year I'm truly optimistic about our ability to continue to successfully execute against our strategic and financial objectives for the remainder of 2022.
Where our conversation today, we would like to cover three topics with you, including an overview of how we uniquely engaged with the primary care community.
An update on growth and our investments in market management and <unk>.
Preview into our 2023 plant.
During our initial public offering last year, we shared that our operating model centers around core principles that drive our virtuous cycle and are critical to building a successful Medicare advantage platform.
In the past you've heard us talk about the achievements of our clinical model and our proprietary <unk> technology.
The day, we want to talk to you about the third key piece of the model provider engaged.
Which is an essential component of how we create our strong MPR results that translate into high value products for seniors.
Our engagement was based on three important value propositions for the primary care provider number one better care number two better practice operations and number three better financial results.
As we build out in the field focused on our growth initiatives. What are the most encouraging things. We've experienced is that our provider engagement model and value proposition continue to uniquely resonate.
Our approach to partnering with primary care physicians is different from others as we do not have to employ primary care physicians in order to achieve successful outcomes. So we are certainly open to that dialog should the provider have interest.
Nor do we forced them to change the way they practice medicine at the point of care.
Instead, we create clinical operational and financial alignment, allowing us to form win win relationships between the Doctor The front office staff and alignment healthcare all for the benefit of the senior.
From a clinical perspective, we believe that most clinicians are great at what they do and.
And we don't want to change what has made them successful.
Alignment is committed to helping its primary care providers become even better and deliver even better care we.
We support the provider by helping them care for the most vulnerable seniors through our care anywhere program, which we view as an extension of their practice.
Arc here anywhere employed clinical teams provide extra care in the home or virtually to the 10 to 20 per cent of remembers or chronically ill or high risk.
This support gifts tied back to our primary care physicians to provide more care to more patients.
We do all of this free of charge for alignment members and free of charge.
The provider.
Importantly members enrolled their eye care anywhere program stay panel to the existing primary care provider.
In addition, we support our providers with actionable insights and valuable member data, which are made available to them real time.
From an operational perspective, our proprietary <unk> technology tools and data help providers navigate the complex world of value based care and optimize their performance positions.
Physicians front office staff and provider organizations leadership are provided with access to our population health data for their panel as well as monthly reporting and stratification tools that we believe help them manage their practice.
While we do not require providers to use our applications are tools at the point of care, we consistently hear feedback from our network of providers, but our approach to sharing information is more transparent.
Comprehensive timely and insightful that other health plans.
Whether it's stratification tools.
GAAP closure list are natural and utilization performance dashboards for clinical insight applications, our models facilitates greater collaboration and more efficient and streamlined operations.
From a financial perspective, we strongly believe and aligned incentives with our provider partners in order to achieve this we typically enter into gained share profit share at or risk sharing contracts with a lot of physician incentives to alignments total cost of care or N B R for their panel.
More than 97% of our members a paddle two providers that participate in some form of gained shaw or risk sharing opportunity.
Since our partners are financially aligned to provide clinical and quality outcomes a.
Our members are able to have a greater member experience as reflected in our net promoter scores, while our providers are able to experience better financial results.
These three key components of our provider engagement model have been critical to how we differentiate ourselves in the market and how we plan to grow our business model.
Turning to 'twenty, 'twenty, two and 'twenty to 'twenty three growth initiatives.
Caribbean for growth remain the same.
To provide high quality at a low cost and best on local market management and focus on our products partnerships and expansions.
While early we're starting to see positive traction with our market management initiatives.
Our membership as of April .
Which reflects both the startup Q2 and the end of the open enrollment period.
Ended at 95000 health plan members.
Well on our way toward the 97 399000, a year end membership guidance.
While our primary short term focus is on 2022 growth. Our activities are also designed to support our 2023 growth plans as we build a repeatable scalable platform.
Though it is too early to comment on our specific 2023 product strategies due to the competitive nature of the bids we intend to maintain our balanced approach targeting sustainable products and profitable growth.
Meanwhile, the bolster our 2023 growth objectives, we're planning for both contiguous county expansions to go deeper in our existing states as well as new states of 2023 subject to regulatory approval.
Given our 12 to 18 months new market sales cycle, we're very pleased with our progress towards 2023, new provider partnerships.
Market launches.
We look forward to sharing more information later this summer after our bids have been submitted.
Wrapping up 2022 is off to a great start as evidenced by our first quarter results.
In addition to our financial performance, we continued to make great progress scaling our Medicare advantage platform.
Lastly, it is the steadfast commitment of our mission driven employees that makes all of this possible for our seniors as always thank you to the entire alignment team.
The tireless work, putting seniors first of all you do.
With that I'll turn the call over to Thomas to review, our financial performance Thomas.
Thanks, John turning to the first quarter results as John mentioned, we had another strong quarter in which we exceeded the high end of our guidance ranges across each of our four kpis for the quarter ending March 2020 to our health plan membership up 94200 increased 13, 4% compared to a year ago as we can.
Turning to see positive momentum across our markets total revenue was $346 million in the quarter, increasing 29% compared to a year ago. This was led by our health plan premium revenue of 331 million, reflecting growth of 25% year over year.
It's worth noting that our first quarter health plan premium growth of 25% with a combination of both 13.4% membership growth along with 9% Health plan revenue P. M. P. M growth our revenue P. M. P. M accrual for the first quarter reflects slightly earlier visibility to our projected full year revenue.
M P M compared to this point in time last year Accordingly, the 9% increase in our health plan revenue P. M. P. M year over year was largely due to timing in the first quarter on our last earnings call. We commented that our full year 2022 guidance incorporates an increase in our health plan revenue P. M. P M of approximately 2% compared.
2021, I will cover this in further detail momentarily, but we still believe that to be the case today and we do not anticipate that the earlier Q1 visibility we'll change our full year expectations.
Our top line outperformance in the quarter was coupled with strong and be our management.
Our adjusted gross profit of $45 million reflects an MBR of 87.0%, including the impact of Covid utilization in the back half of January and the first part of February as a reminder, our Cobra inpatient admissions per thousand peaked in January at a rate that was close to two and a half times the COVID-19 admissions per thousand we experienced.
The Delta variant wave last summer however, as we've seen in prior waves, we did experience an offset from a reduction in non COVID-19 utilization that continued throughout the remainder of the quarter.
It's also worth noting that our $45 million of adjusted gross profit in the quarter included approximately $6 million of prior period favorable adjustments related to incurred but not paid claims estimates we reflect our latest estimates of prior period developments each quarter as part of our normal business cycle. However, this quarter was slightly more favorable than previous quarters.
Excluding the prior period favorability, we were pleased to still deliver adjusted gross profit well above the high end of our guidance range.
SG&A in the quarter was $74 million, excluding equity based compensation expense or SG&A was $49 million, an increase of 24% year over year.
Lastly, our adjusted EBITDA was a loss of 4 million exceeding our expectations for the quarter on the back of our strong adjusted gross profit performance as well as continued demonstration of SG&A scalability.
Our consolidated adjusted EBITDA performance for the first quarter reflects our more mature markets continuing to build momentum towards consolidated profitability, while we continue to invest in our newer market and growth initiatives.
In terms of the balance sheet, we ended the quarter with $294 million and net cash has mentioned on previous calls we view our balance sheet as an area of strength given our ability to continue to fund our organic growth and working capital needs without requiring external financing with that in mind. We also continue to evaluate small but accretive.
<unk> to deploy capital towards M&A.
Turning to our guidance for the second quarter, we expect health plan membership to be between 95500 95700 members.
Revenue to be in the range of $335 million and $340 million.
Adjusted gross profit to be between $41 million and $43 million and adjusted EBITDA to be in the range of a loss of $11 million to a loss of $8 million.
For full year 2022 we expect health plan membership to be between 97390 9000 members.
Revenue to be in the range of 1.335 billion and $1 350 billion.
Adjusted gross profit to be between 165 and $174 million.
And adjusted EBITDA to be in the range of a loss of $46 million to a loss of $39 million.
We are reiterating our full year 2022 membership guidance and raising our full year revenue guidance on the back of a solid conclusion to the OE P period as well as revenue outperformance in the first quarter. We note that our revenue forecast includes a 1% return of sequestration in the second quarter as well as the full 2% return of sequestration beginning in.
The third quarter as mentioned previously due to our revenue P. M. P M visibility and first quarter revenue accrual. We note that our second quarter revenue guidance implies a lower growth rate year over year. However, this is simply timing between quarters and we encourage investors to focus on our full year revenue outlook.
Given our first quarter adjusted gross profit outperformance, we are raising our full year 2022, adjusted gross profit expectations. In addition to narrowing our guidance range as we think about our adjusted gross profit and M. B our assumptions over the next nine months, we remain mindful that we are early in the calendar year, and we will likely continue to see some variability in utilization.
<unk> as the rest of the year progresses, our guidance expectations are predicated upon utilization running approximately in line with our historical baseline experience inclusive of the potential for a modest spike in COVID-19 related utilization.
Lastly, we are raising the low end of our adjusted EBITDA guidance as we said before it's a strategic imperative of ours to continue to balance our short term profitability objectives with our longer term growth objectives as the year progresses, we anticipate continuing to evaluate ways to reinvest any adjusted gross profit outperformance towards our <unk>.
2023, and 2024 growth initiatives in.
In summary, we are very pleased with our first quarter results I think it's a solid start to the year. Our team is executing on our strategic initiatives across markets and we look forward to updating you on our progress throughout 2022 with that let's open the call to questions operator.
Thank you we will now begin the question and answer a question to ask a question you May Press Star then one on your Touchtone phone. If you are using a speakerphone. Please pick up your handset before pressing Mickey.
My question has been addressed and you would like to withdraw your question. Please.
First Arlington at this time, we will pause momentarily to assemble all of that.
The first question comes from Ryan Daniels with William Blair. Please go ahead.
Okay. Thanks for taking the questions and congrats on the strong start to the year John I wanted to address a question to you you spent a lot of time talking about how your relationship with physicians is different than that which they have with a lot of other payers, which is more adversarial and I'm curious in this market where there's lag.
For shortages in burn out working with you you can improve their time, you can kind of make it easier to practice you can provide additional incentives. So my question is how do you get that message out into the market and leverage here a unique position to help drive your growth engine.
Hey, Ryan. Thank you for that question I Love that question.
It's really something we talked about at the last conference call when we talked about making the investments in both community reps.
And provider development resources.
And so it's it's taking all of the value proposition that was inherent with the way in which we started the company and then really packaging. It up so that every single person in the company really understands why the primary care physician is so important.
And so it's getting in the field and talking to them, which is what we've been doing.
Since the beginning of the year and I got to tell you I am so energized and excited about the response back from.
From a P. C piece that we talked to I mean, they're there they're looking for a solution and again.
You know theres a lot of talk around consolidation. There's a lot of talk about staff models are a lot of talk about different kinds of models.
And they just want to practice really good medicine, they want to remain autonomous they wanna be entrepreneurial, but they need help in getting into value based care and we provide the tools, we understand them, we come from a delivery culture.
And so its just its boots on the ground Ryan and.
I'm really excited about that in the context of how we're growing the business.
Perfect I appreciate that and then as my follow up.
It looks like social determinants of health are really entering the mainstream and I think in the.
Medicare 2023 notices they're going to incorporate that a lot more in regards to how they view plan. So can you address how you look at our social determinants of health I think it's an area you've actually focused on collecting data in investing and probably ahead of anyone else in the industry. So love to hear what Youre doing there and what the plans are thank you yeah Ryan again.
Well that question.
From the IPO, we've said, we think theres going to be a convergence between traditional health insurance, but also supplemental benefits that.
Support social determinants of care and in the context of the final notice and where CMS is going we love what they're doing we'd love the focus on health equity, we love to focus on care coordination and coordination of benefits with the states and we'd love the transparency associated with this topic.
Round supplemental benefits and and I, just think that it's going to be more and more important that we look at whole health.
I actually barring that praise from somebody else, but I think it's appropriate I mean, our whole health care and all the social determinants.
Getting them groceries getting them.
Caregivers and again to personalize a lot of this my my family members My Mom and my my my brother, they they're they're just beneficiaries of this and the amount of.
Just improvement in their daily lives is huge having a shout out here for you Andrew Papa is is really additive to our seniors because they have an hour a week just to drive around and get groceries. It's a big deal, let's say I think you're going to have more and more.
More of that and and I think the transparency associated with that from CMS, what they're what they're looking for I think it was great.
Great. Thank you for all that color I'll hop back in the queue.
Next question.
I'm Ricky Goldwasser with Morgan Stanley . Please go ahead.
Yeah, Hi, good evening, so I wanted to focus on MLR I'm clearly you guys did a great job in managing our medical costs down sort of continuation of what you did in the last couple of quarters.
How should we think about MLR guidance for.
But the rest of the year because I don't think he is here you've changed who didn't update that and gain.
We think about sort of the opportunity can you maybe share with us some data points about how.
M D. B here two cohorts are progressing I know that you have shown meaningful improvement in the California, cold or just curious to see how.
This is progressing also in kind of like in any of our other states.
Yeah, absolutely Hey, Ricky this is Thomas here, so so first off.
Very proud of our first quarter results and to your point I think it's another quarter, where we just demonstrated the consistency of our of our operating model and our clinical model and so when you think about the rest of year outlook I think we feel very comfortable that another COVID-19 wave has come in past, which didn't cause us to have a significant deviation from our.
Expectations as we shared earlier in the call and I think we shared a little bit that's in our last call.
Our experience with the Omicron was that we had higher utilization to the tune of two and a half times compared to what we experienced during the Delta wave last year that inpatient utilization. So the fact that we were able to kind of manage through that without skipping a beat is something we're very proud of having said that we also recognize we're only three months ended the year and we got a ways to.
And so when you think about our full year outlook I think we feel very very comfortable with our approach in terms of our kind of 87 ish range for full year. If you look at our adjusted gross profit on the low and the high compared to the revenue you're back into something in the 87% range and again, that's inclusive of our D. C E venture, which as everyone knows is running north of that and so that obviously implies that our.
Our kind of core MH business is running better and so we really feel great about the way, we're set up and put a lot of thought into how we think the rest of the year might might play out.
In terms of your question on the year, two cohorts, where we make a lot of progress and again, we look at cohorts both on a member level and also on a market level and so on the member level. I mean, you all have seen our vintage analysis before we typically see about a five to 10 point improvement on our membership from year, one to year, two and similarly from a market standpoint, we saw.
See the same concept, except we also get the benefit of improved operating leverage both within the SG&A line, but also inside of MLR as we start to get more membership relative to our our local clinical model resources and so right now I think all things are tracking consistent with our original investment cases are very excited about the opportunities in.
In both North Carolina, and Nevada, and Arizona as of year, one market and looking forward to continuing to grow those heading into 2023.
Okay.
Our next question comes from Jeff Garro Piper Sandler. Please go ahead.
Yeah. Good after noon and thanks for taking the questions I wanted to ask a little bit more about your progress on the market management efforts.
I guess, given the tough labor environment that we're in right now wanted to specifically ask if you're achieving your hiring goals for community reps and provider development resources in terms of both the quantity of people you want to hire and the quality you were expecting.
Yeah, Hey, Jeff It's Jon another great question. The answer is we are at about 60% of goal in terms of what we were anticipating hiring for the entire year. So from a timing point of view, we're really happy about that.
Not only setting us up well for the 2023 market, but really helping us.
With a variety of initiatives in 2022.
On the growth side.
So part one is we're absolutely getting really really good quality people I would agree with you that the competition for quality people that are familiar with value based care and managed care is very competitive these days.
I'd also say.
We are a little bit <unk>.
Different in that.
What we do and how we do it is different than say a traditional legacy managed care organization and.
So we're looking for the best athlete and we're training them and we're spending a lot of time on people development. We're spending a lot of time on workforce management, we're being flexible.
We are respectful of compensation related issues with respect to peer groups equity all of that and we were committed to getting the best people. So yeah. It's it's competitive out there, but we're getting we're getting the people, we want and we're going to train them.
Excellent great to hear and it may fall a little bit more there I know that initiative was put in place thinking about 2023 open enrollment and it's great to have hit the ground running in and laid the framework for success there, but you mentioned initiatives in 2022, so curious.
You know what those are if they're more focused on enrollment or if they're focused on stars or retention or or other components of your success.
Yeah, I'm I'm really happy with the.
Kind of I call it kind of clinical operations throughout the company in terms of stars compliant Ah MRA.
And kind of operational efficacy I'm really happy with the way in which the company is progressing along all of those fronts and all of the markets.
And so the you know we're while we're still in Thomasville kind of nudge me here, but while we're still sticking to the range on membership that we've just shared.
We've got a lot of things we're doing.
I'm not at Liberty quite yet to talk about them, but you know, we're you know us which we're working hard we're very competitive group and.
We're working hard and you know I still stand by my 20% long term growth and and we're not we're.
We're not.
Uh huh.
Stopping in 2022, so we're everybody is very focused on growth.
And as Thomas mentioned, our clinical model is working well.
And our provider engagement is going really well.
And so really it's answered your question is we really want to translate all of that into.
And into the growth.
Excellent you dropped some interesting crumbs there thanks again for taking the questions.
It's usually alright, thanks, Jeff.
The next question.
Please go ahead.
Yeah.
Yeah.
Hi, John is your line muted.
Hello.
I'm sorry can you hear me.
We can hear you now.
Sorry about that I didn't catch my name.
Hey, My question is as you look three to five years out you know and the market sort of impatience for you know real profit Center L. EBITA have you changed your thinking at all about getting to you know real EBITA profit are you just thinking more about the topline growth.
Hey, Jonathan this is Thomas here.
Definitely something that we were mindful of and it really I think we've been pretty consistent since IPO that we were not believers in kind of a growth at all cost model and so are our approach is really been to try to strike a balance of of solid growth. While also doing it in a way that we think allows us to get to that point of EBITDA breakeven or.
Our EBITDA profitability.
You know over the next several years and so we shared last call that our California franchise, which again is where we've been operational the longest that was really approaching EBITDA breakeven last year and our forecast called for EBITDA positive this coming year and so I think that's really a great data point and testament to kind.
The ability of our consolidated profile to get to EBITDA breakeven.
But at the same time were very big believers in what we're accomplishing it. So we do want to continue to invest in growth and there's a lot of our losses. This year are related to those 'twenty, one 'twenty two new markets as well as the anticipated spend over the back half of the year related to our 2023, new launches. We think that's the right thing to do to create long term.
Value for all shareholders and so I think you'll see us continue to be disciplined.
But also continue to be growth oriented over the next couple of years as we march towards that that EBITDA breakeven on a consolidated basis.
Hey, do you have.
Maybe a low to high revenue number where it would be reasonable to think about the EBITDA breakeven on a consolidated basis.
You know what I would tell you is it's partially a function of.
The amount of growth between our existing markets in our new markets and what I mean by that is when we launch a new market. There are certain investments we make both on the medical expense side, but also in the SG&A side that are typically short term debt economy to scale. Conversely that same growth if it happens in one of our existing markets, we tend to get faster operating leverage.
On it so I'd be hesitant to give you a single kind of a point estimate on revenue in and of itself because I think it's the composition of that revenue that that's really important.
But as you've heard John say you know, we're we're very dedicated to targeting that 20%.
Kind of annual growth rate in the future.
And I do think that we will be approaching EBITDA breakeven over the next several years. So I think you'd kind of do some back of the envelope math I'd, probably get you directionally to what you were asking about.
Sure. Thank you.
Your next question comes from Lisa Gill with JP Morgan. Please go ahead.
Yeah, Hi, this is <unk> on for Lisa.
Just a question since you guys touched on M&A earlier I know that's something that you guys have been looking at for a while and I think on our side, we're all sort of waiting for that should drop.
So just curious if you could give us a sense for what youre seeing in the market either in terms of helping opportunities or provider opportunity.
Hey, Kyle it's John .
Yeah, just to kind of talk about that in the context of say Q4 of last year.
I think we were.
Very aggressive on that front.
Think in the first quarter of this year, our priority is to ensure that we protect the balance sheet.
And to be very very thoughtful about cash such that we don't have to raise any cash to execute and grow on our organic growth numbers.
Having said that we're being very opportunistic and what we're seeing is opportunities with very.
Name brand providers wanting to work with us in Medicare advantage.
And and value based care and I would say both on the.
Hospital side and the provider side.
And so so I think we're being very thoughtful about that I think we're being very selective about that.
And I think that.
There's going to be a normalization if you will with some of the.
Private.
Companies and their valuation expectations with the public markets et cetera.
And I think and I think we're gonna be just very very prudent along that line.
I will say that also are kind of ability to analyze and in my opinion implement.
Acquisitions is something I'm getting very very comfortable with.
And so I think we are.
<unk>.
Being very selective, but we are still.
We're still looking at it.
A few.
Very interesting opportunities.
Okay, Great and then if I could just ask a.
A couple of other companies some of your competitors have mentioned.
As to the way that they're incentivizing brokers for next year.
Curious if you have any plans to structure your relationships differently heading into the 2023 AEP and if you could just give any color there.
Hey, Kyle this is Thomas.
No no real plan to changes on our side I think maybe what you are referring to is is some of the discussions around certain distribution channels that have had higher churn in the past in and how the payments to some of those distribution channels were.
Impacting that churn that others have experienced well, while we are very much <unk>.
Partnering with the external broker channel, we typically work more with the F. M O channel than some of the kind of more telephonic and online channels and so for us it's a fairly small percentage of our overall distribution and so not something that we've necessarily seen that I know others in the market have talked about so I think we're kind of.
Heading down the path of staying consistent with our approach and we want to continue to work with these brokers, who we've known for many many years, who are great supporters of us really understand our value proposition not just in terms of the benefit richness, but also the overall experience of about it.
What it means to be a part of alignment so no no planned changes there on our end.
Our next question comes from Nathan Rich with Goldman Sachs. Please go ahead.
Hi, good afternoon, if I could start with a follow up for Thomas on the on the MBR.
Guidance I think you said it assumes utilization kind of running in line.
With kind of a baseline.
And also includes a modest Viking COVID-19 utilization I, just wanted to clarify that and could you maybe add any color just in terms of how you saw utilization trend coming out of the omicron Spike you know in March and kind of how you expect that to play out in <unk>.
Yeah, Yeah, absolutely so.
So it kind of heading into the back part of January as I mentioned in our Covid admissions per thousand peak at a rate that was about two five times, what we experienced during the other way by summer.
Importantly, though.
Our overall COVID-19 admissions in the month of January we're still significantly lower than what we experienced pre vaccination. During December 2020 in January 2021, and so while it was higher it.
It was not near as severe or intense we had seen before vaccinations and so as we thought about our experience over the back half of the quarter, where COVID-19 came down in a very very rapid pace and while we did see some increase in non COVID-19. It didn't quite come back at the pace. We've seen in prior waves, we felt pretty comfortable in thinking that the next nine months.
Our overall expectation that utilization should run in line with our historical experience is a pretty reasonable starting point for the year now I will say that if you had asked most folks back in October of last year, whether they thought the soon to be called Omicron way would be worse than that Delta wave I think most folks would have probably told you.
They they didn't think that was possible in the delta away. It was hopefully the last of it if we've learned anything I think over the last almost two years now is that there's always a bit of unpredictability with respect to how COVID-19 will continue to impact the medical expense line item and so with that in mind, we thought it was a.
Sort of prudent of us to assume some portion of that utilization at baseline over the next nine months to be inclusive of the impact of Covid and the reason of course is the our Covid unit costs are about 50% higher than our non COVID-19 inpatient unit costs. So that mix is a really important kpis, we track daily here to make sure we're not surprised.
By any of that experience.
That's helpful and maybe as my second question, John you talked about the different types of gain share and risk share contracts in the market and it seems like you know your discussions with providers.
For 2023 or are well underway I guess I'd just be curious from alignments perspective, like what type of risk relationship do you feel like puts the company in the best competitive position.
Do you have kind of have a preference for that type of relationship that you have with the provider.
Yeah, Yeah, great Great question.
I would say, making sure that we are flexible.
With our providers and that's the individual practitioner as well as ipas as well as medical groups.
And in that regard, we want to make sure that whatever kind of arrangement we have as good a result in the best.
Hum outcomes for the member and will result in our ability to grow.
And so what I mean by that is if we do.
Do a shared risk arrangements.
And we're really managing a lot of the institutional dollars higher risk cost dollars and we're deploying our care anywhere model and we're doing it with providers in the community, which is really largely what we've done in California about two thirds of our business is shared risk.
That gives us the opportunity to have a differentiated cost structure, while maintaining better clinical outcomes and.
Better quality, which is which is really for the benefit of the beneficiary.
I have mentioned several times before we do not mind global cap deals.
We have a lot of great global cap partners that have been with us from the beginning.
Since we started the company.
So.
What we want though is to make sure that those relationships are.
Delivering on all the aspects.
We have delegated to them, we need to make sure. The stars as what that meets our expectations, we need to make sure that the coding is compliant and.
In line with prevalence data.
You know kind of all of those kind of operational elements or value drivers as I like to say that's kind of lineup with contracting.
So we're flexible.
We want the right outcomes.
We want to have.
Persistency of the of the delivery systems that gives us a competitive advantage.
Globally cap somebody in at X percent and five other plans or at X percent, how would we differential from everybody else. That's kind of one concept. The concept I would say that I think the market really doesn't understand but should is diversifying globally capping somebody for medical related.
Costs and also the notion of a delegation of certain administrative services like claims payment or utilization management.
Those are two very different things a lot of our competitors I think do do we do things right, which is your very thoughtful about who you delegate too.
Right because you know what if you pay claims and do do a lot of the U M. You have the data and you have the information you know which is what we have.
So how we get that information into Eva how quickly we get it to be transparent to our provider partners. I think is a competitive advantage we have vis vis some other folks.
I've kind of this 45 to 90 day latency window on data.
For people taken risk so.
Hum very flexible.
And.
It's worked thus far and we want persistency that's the key.
That's helpful. Thank you.
Okay.
The next question comes from Kevin Fischbeck with Bank of America. Please go ahead.
Great. Thanks, I'm actually a little bit confused about how to think about the quarter comments you gave a couple of things in there.
Round.
The rate in the quarter being nine instead of two.
Because of the timing of that.
You know revenue.
And then 6 million of favorable development I mean, obviously, if we if we said that revenue grew 2% and then we add 6 million costs you'd be having an MLR like in the mid nineties. So.
Why isn't that the right way to think about it where does the other adjustments in there and I guess, how did Q1 play out versus what your thoughts were.
Yeah, Yeah. So so Q1 was sort of right in line with expectations. So maybe we'll start at the revenue side. So when we put out our guidance.
He had a that was in early March we had some visibility to how we're tracking on our first quarter revenue rates and and really that timing I alluded to was related to us having earlier visibility. This year on our returning members. So as a reminder, that the way we sort of look at our membership in a given year is which members we've had with us in the prior year and therefore.
We have the data in house that allows us to quantify and and appropriately accrue for their expected revenue rate and the final sweep for 2022 payment and we also have our new members were where were really kind of subject to what we get paid starting in January of that year and then we typically see a form of a true up in the mid year ship over the course of summer and so what.
When I mentioned earlier that we were having earlier visibility on that returning members set that's really a function of a lot of great operational progress last year, and just less of an impact of COVID-19 for prior year dates of service.
As compared to our 2021 Q1, our 2021 payment year, where obviously, we're coming out of the back part of Covid in 2020, and I had a disruptive effect across the industry. So so no surprise on the on the revenue side very consistent with expectations in terms of the medical expense side, we obviously like everyone else in the industry have.
A true up on our IV are every quarter and the way we've approached it has to be really really focused on ensuring that we have all the data we can possibly capture in house on our membership and tracking it not just from a utilization perspective, but also looking at the actual form of utilization where the sites of service are occurring.
Which cases might be high cost outliers to ensure that when we close our books every quarter. We think we've done a really thoughtful job of making sure we're appropriately reserved and so what we typically see in most quarters is there's often a true up and more often than not intended to be a little bit favorable that unfavorable I would say, yes. It is.
This quarter, the $6 million was a bit more favorable than normal and so back to your question on M. P. R.
I would not assume that all of the $6 million was sort of a onetime surprised I think a part of that is sort of normal course for the business and on the revenue side I also would not assume that all of that is just flowing to the bottom line as John mentioned, we do have a variety of gain share profit share and risk share type relationships, where we're accruing for a payable at the.
Same time, we are accruing for the receivable on that on that revenue right and so those two things net out such that I think.
He even absent those two items, our MBR for the quarter, what sort of solidly in the 80 Sevens.
And then still ahead of both our kind of implied low would imply high guidance range.
Okay. That's that's helpful.
And then I guess.
John I like the discussion you started off with and that's gone on to this.
Quarter about your physician engagement, because it's a great preview for the panel you guys are gonna behind our conference next week.
Looking forward to that.
But I guess.
You mentioned that 97% of your doctors are already kind of aligned financially I mean, when you think about the improvement in in MLR from here to kind of get to that profitability metric.
It sounds like you basically are engaged in a position to some degree already.
What is the main driver to that is it is a deeper engagement with physicians is it getting into just to be on the system for a longer I mean, how do we think about that physician engagement and.
The levers to pull to get to profitability.
That's another great Great question, Yeah, I think if we look at.
Our existing markets I think we've got a lot of things working well in our existing markets.
Really kind of the new markets.
In terms of the new markets in 2023, but also the new markets that we launched in 'twenty, one and 'twenty two.
It's kind of going deeper with that level of engagement.
And so when I define engagement with our team defines engagement.
It's first and foremost again consistent with our values do everything for the senior number one number two it's support the doctor.
Support the Doctor and so the kind of the six engagement metrics that we track per doctor by the way.
If you have time can I can go through it right now but number one.
With the ingestion of timely accurate and complete data.
And so we've got a lot of information flowing back and forth from the doctors the hospitals et cetera number two is ensuring that we make it easy for them.
For the key value drivers in Medicare advantage. So when we talk about closing gaps in heat is closing gaps in caps closing gaps in hospice. If all the stars are made at clinical metrics, we got to make it easy for them and so that's where the Ava comes into play number three is compliant Lee and two.
To.
Kind of.
Consistently close gaps on Medicare risk adjustment.
Number four is to really work with us and the care anywhere model.
And to trust that we are really an extension of their practice.
Not doing anything and taking away their members is still their members there still getting paid.
They are making more and working more efficiently and more effectively.
Working with us and and and letting us grow there theyre paddle.
Those are those are the things that that we work with and we track.
And if we do that in some of the newer markets in California, and the newer markets that we've just set up in the other states and how we do that in the new states.
Right.
I really I'm very very encouraged with just the reaction we've had when we've talked when we've been talking to the doctors.
About that.
Yeah.
It's.
I'm not sure I answered your question, Kevin but yeah.
That's perfect that's exactly what the going forward. Thank you.
Got it.
The next question comes from Kevin Caliendo with Wells Fargo. Please go ahead.
Yeah, Hi, Thanks for taking my call.
What were you seeing during the OAP exactly the membership was a little bit better than we thought or are you seeing yourselves, taking a greater percentage of the share of new enrollees are you seeing potentially was there maybe a higher switch out from other plans any any color around the early.
Stages of OA in terms of what Youre seeing.
Yes.
Yeah. So when you look at sort of our California marketplaces. As an example, I think you'd see our our markets grew under 1%.
If you look at the overall Medicare advantage growth for all payers, whereas we grew closer and I want to say about two 5% in that time period. So to your point, we are growing faster than the market in our existing geographies, which is obviously occurring through taking share and so I think we're seeing positive traction there I think the.
The performance was consistent with expectations, both on the sales and the retention side. So I don't think there was one of the two that really drove any of the outperformance more than the other.
And I think lastly, I think some of the some.
Some of the general I think just kind.
Kind of market.
Awareness of some of these products we've talked about in the past that we're we're competitive as it is continuing to take shape and a lot of dialogue is already turning towards 2023, and so as we engage with the broker community with the provider community and with seniors themselves a lot of folks are looking at AEP being only about five or six months away and in <unk>.
What we think and so as John mentioned earlier, we won't probably get into too. Many details today on that but it's certainly top of mind and I think it's going to be important for folks over the course of summer as well as they continue to think about.
And if its stability year over year, and making sure that all of the seniors have access to the same level of quality.
And the richness of the off rate heading into next year.
Well it is a nice segue into my my follow up which is.
When you see rates being as sort of robust as they are the final rates came in.
Does that help you think about accelerating.
The pace of profitability does it.
Do you think about your.
Faster growth like how do you how do you as a high touch company think about the impact of maybe faster or higher growth or higher rates excuse me than what you maybe would have expected. If you are modeling this out six months ago.
Yes.
You would take that.
Yeah, Hey, Kevin It's John Yeah at a macro level.
I would say that it just kind of underscores I think the investment thesis for Medicare advantage overall.
I remember at least six months ago, there's a lot of noise around coding intensity adjustments and RAF adjustments so the other.
And but I think I think that it just underscores the value proposition for MAA.
So I think we're very encouraged about that as well as some of the other more technical details associated with the final notice. We're all very supportive of all of that CMS, we really like.
<unk>.
The focus on health equity, we'd like to focus on transparency, how all of that lines up to what we think our core competencies and how we differentiate ourselves from everybody else.
And so.
Those are slight changes, but when we think about the bids and we think about ensuring that the bids lineup with the level of provider engagement in each one of our markets were kind of think about okay is this a market where we have the level of engagement with the providers to do the kind of.
Kind of.
Execution to help us execute together with the providers to realize those key value drivers that we know are going to be successful for an MAA. Now are we going to are we going to take and invest in the bids to double down on those kinds of markets, but that's kind of how we think about this.
And.
The other side of the coin is we also know that the other competitors ours, they're going to view the the rates equally as tailwind.
And so I don't think it changes our view of having this balanced approach toward kind of consistent growth and getting to profitability.
And I think this is just my opinion I think this whole theme that we've been kind of preaching from the beginning in terms of convergence between traditional health insurance and supplemental benefits whole health care focusing on the 20% of the chronic frail may how can you get into MA really without chronic disease management model that.
Really takes care of that.
80% of the money is right. So so I think all of that plays to us.
But from a macro point of I see I see things.
With some of the larger competitors growing slower.
See the smaller people getting very aggressive on benefits and that I do not think are sustainable.
I see.
Abrasion between the global cap providers and the plants, because we're putting pressure on on.
On benefits because were lower cost and higher quality.
And people want to match us.
They're going to get aggressive, but if they can't afford to do it they're going to try to dump. It on the global cap provider. So I think thats it.
We've seen it looks like.
Our first rodeo on this I mean, we've seen this happen and occur and so all of those things factor into the way we look at a market in terms of defining.
You had kind of how fast we want to grow.
And so I think there are cracks and what we've been preaching I.
I see cracks.
And kind of the.
Kind of the legacy model starting.
And.
And we're going to be again, very opportunistic about where we apply the investments to double down on growth I hope that made sense Kevin.
No it does and it's actually very thoughtful I appreciate it thanks.
Okay got it.
Okay.
Okay.
Please go ahead.
Hey, Thanks, Good afternoon, maybe just one more question on the whole topic of physician engagement.
And my sense has been that the broad physician community specifically primary care has been pretty distracted over the last few years with this pandemic do you find that part of the deepening engagement I guess as you call it or the receptivity to partner or have conversations.
Is accelerating as a function of just less distraction today.
Yeah, Hey, John .
Great question.
I think.
I think it.
It is causing.
Kind of providers that have traditionally been fee for service providers.
It gets scared.
Right because.
The last two years and your fee for service.
Youre practice revenue is has been its been lower.
I mean, so so.
The practices that we work with you know and we will do fee for service, we love them, but we just happen to think.
Yeah.
<unk> monthly payment for it and we really don't use the word capitation, but really.
Guaranteed monthly payment.
Two primary care is win win win.
And so I think to your point the pandemic has caused more receptivity to value based care.
And so they think about okay, well, how do I do value based care, how do I sell the.
Big ABC consolidator or X y Z consolidator do.
Join Us staff model.
Hum.
Or or Ken.
Independent and really do it do it myself in my own boss.
That's at the individual practice level. So we're getting a lot of that we're getting I would say five to 10 practice groups that.
Want to grow in and want to become.
Risk, taking ipas grow into that.
So they see our tools and have seen what we've done.
Yeah, they they want our help to do that.
And so we are helping them do that.
So thats part of it.
What's really interesting to me is.
The again the learnings from the last seven or eight years since we started the business.
The providers from a lot of the large integrated delivery systems.
We're having conversations within the context of helping them with value based care.
And I think people are really getting sophisticated in terms of it's not just about.
Kind of heads and beds for hospitals, it's not just about volume, it's actually how do we create better clinical outcomes and higher value.
So that frankly, you can move market share.
So it's all about direct to consumer marketing strategies and products that improve the human beings life.
And so the large integrated delivery systems understand that the product.
He is driving market share and.
And.
I think I think it's a way for again win win with.
We.
Land the provider and the hospital I think hospitals are going to be important ingredients to the success of.
Our value based care and analysis.
I think the pandemic.
Fourth it forced people to really think through that.
That model that reimbursement model.
Does that answer your question Yeah, No no. It was I don't know if there's a right or wrong answer, but I think directionally you're onto something and I was just thinking about care anywhere in the tools and the omicron surge and I feel like it gives you kind of a unique ability to meet your members whenever wherever they need. It is there any data that you can share around like the <unk>.
Level of member engagement through the quarter and I mean, you have the sort of omni channel platform and how that May have helped your members. But also you on MLR I just kind of have a suspicion, but I don't I don't know if there there's anything or substance behind that.
Yes. This is Thomas here. So so that's something we absolutely track and we look at it both in terms of kind of performance across markets across provider groups, but also in terms of how long that members have been eligible because obviously members become eligible and only at that point, we begin the outreach and it does take a bit of time to engage but but overall, we actually share.
Recently that pre pandemic, our average engagement was kind of hovering in the mid fifties and actually over this past year in 2021 in spite of the pandemic, we actually got that engagement up into the mid <unk> and our goal is to continue to increase that into the seventies and hopefully <unk> down the road and so we've actually seen improved engagement in spite of some of the barriers.
Would expect during Covid and that's been a function of not only just the vast solid outreach teams here at alignment as well as the care teams around the field, but also this notion of a virtual care center, we introduced during the pandemic and so Thats a 24 seven call line for all members, but a big part of that and we can also service a lot of our care anywhere members to really try to help them not just.
Just in the home, but also virtually either through telephonic means or video means. So that's been another great way for us to continue to engage with our seniors, particularly those who to your point are our most frail most high risk.
Okay. Thanks, guys.
This concludes our question and answer a question from.
<unk> has also now concluded. Thank you for all of Goldman Today's conference you May now disconnect.
Okay.