Q3 2023 Alignment Healthcare Inc Earnings Call
Okay.
Good day, and thank you for standing by.
Welcome to alignment healthcare third quarter 2023 earnings conference call.
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I would now like to hand, the conference over to John Co founder and CEO. Please go ahead.
Okay.
Hello, and thank you for joining us on our third quarter earnings Conference call.
We are pleased to deliver strong results through the third quarter as we exceeded our outlook expectations across each of our four key performance indicators.
For the third quarter 2023, our total revenue of $456 7 million represented approximately 27% growth year over year we.
We ended the quarter with help prime membership of a 115600 members growing approximately 18% year over year.
Adjusted gross profit was $60 6 million producing a consolidated MBR of 86, 7%, while our MBR, excluding ACO reach was 85, 7%.
Lastly, our adjusted EBITDA was negative $8 4 million ahead of our outlook range.
Our third quarter success continues to demonstrate that we are executing against our founding vision of delivering high quality and low cost outcomes through our member first operating model. This includes strong performance across three key value drivers growth utilization and stars.
In terms of growth our strong intra year membership growth momentum as a tangible signs that our sales and retention improvements are yielding results.
Following our third quarter outperformance, we are raising the midpoint of our membership guidance to reflect 20% membership growth for year end 2023, while also increasing our revenue guidance to reflect 24, 8% growth year over year.
Further as I'll share more during our call today, we're feeling confident about our AEP positioning and membership growth outlook for 2024.
Regarding utilization our MBR results in the quarter reflect continued progress in our clinical operations improvements to our medical management model and steady utilization performance our provider engagement at Carrington, where teams enabled by Eva delivered a 152 admissions per thousand in the third quarter.
<unk>, despite absorbing higher than anticipated new membership growth.
Lastly, turning to stars we're pleased to announce that 92% of our health plan members are in plans rated four stars or above for 2024.
This significant achievement is a testament to the quality of our member experience delivered through the seamless relationship between our internal team and our external providers.
Each of these achievements demonstrate the power of having a purpose built platform, which unites the best in class technology with integrated member experience and provider engagement.
Expanding further upon our stars results are four star, California, HMO contract rating marks the seventh consecutive year in which our largest contract has achieved at least four out of five stars are strong result is particularly notable this year as the percentage of members in plans rated four star or.
<unk> fell from approximately 80% to 55% across our California markets.
In 2025, many competing plants will now face declining stars payments and the phased in effects of the new B 28 risk model.
Amidst this environment, we will continue to capitalize on our relative funding advantage at our high quality low cost operating model.
Outside of California, Our North Carolina, and Nevada markets will have four or five star rated contracts.
As we continue to grow at our new States. We are driving continued improvements in star ratings by doubling down on our support with doctors across these regions to create a seamless experience for our providers.
Turning to AEP, we are pleased with our results for the first two weeks of AEP and we expect to grow January one membership at or above 20% year over year.
For the 2020 for plan year, we once again enhanced our portfolio of curated products supported by the strength of our stars and cost management capabilities, while many of our local competitors have declining or flat benefits.
Alignments low cost position and commitment to quality and product innovation enabled us to fund increased benefit richness across all of our flagship plans for 2024.
Specifically, we are excited to share that 95% of our non SNP members of the same or lower maximum out of pocket costs and monthly premiums with expanded dental allowances across many of our plants.
We also curated our selection of products to address the distinct needs of seniors everywhere, whether it's a health conscious member who values direct savings or someone in need of more dedicated care regime.
Further the recent collaborations with leading household brands like instant cart at Walgreens exemplify our drive to integrate innovative solutions into the health care landscape.
This is just a sample of our pioneering and disciplined approach to product design leads us to be optimistic about 2020 for membership growth.
We look forward to providing you with a more fulsome update on our AEP results in early January.
In conclusion.
Our year to date progress reinforces our confidence in achieving our 2023 guidance, our 20% growth target in 2024.
And adjusted EBITDA breakeven result next year.
Now I'll hand, the call over to Thomas to cover the third quarter financials as well as our outlook for the remainder of the year Thomas.
Thanks, John for the quarter ending September 2023, our health plan membership of 115600 members increased approximately 18% compared to a year ago, the year over year improvement and outperformance against guidance for led by both sales and retention improvements as investments made earlier this year on our sales.
<unk> distribution and member experience began to take hold our favorable membership growth combined with sustained revenue Pmt's performance drove our third quarter revenue to $456 $7 million, representing approximately 27% growth year over year year to date revenue grew approximately 27% year.
Over year and grew approximately 22% excluding ACO reach.
Adjusted gross profit in the quarter was $60 6 million, reflecting an MBR of 86, 7% or 85, 7%, excluding ACI reach as John mentioned our results in the third quarter marked our second quarter in a row, where inpatient admissions per thousand ran in the low $1 50 range continued strength in our performance with <unk>.
Ported by strong member engagement with our clinical programs and stable underlying utilization trends.
SG&A in the quarter was $83 1 million.
Including equity based compensation expense SG&A was $71 3 million, an increase of approximately 19% year over year.
SG&A, excluding equity based compensation expense as a percentage of revenue decreased year over year by approximately 100 basis points in the third quarter and 180 basis points year to date.
Taken together, our adjusted EBITDA of negative $8 4 million wasn't better than our expectations heading into the quarter.
Moving to the balance sheet, we remain solidly positioned and ended the quarter with $515 6 million in cash and short term investments our cash balance at the end of the quarter again included an early payment from CMS of approximately $146 3 million. We recorded the early payment as deferred premium revenue in Q3, they will recognize.
It is revenue in Q4 as a reminder, this does not have any impact on our income statement metrics cash and short term investments, excluding the early payment or approximately $369 million.
Turning to our guidance for the fourth quarter, we expect health plan membership to be between 117600 and 118600 members.
It can be in the range of $422 million and $442 million.
Adjusted gross profit to be between $46 million and $54 million.
And adjusted EBITDA to be in the range of a loss of $18 million to a loss of $10 million.
For the full year 2023, we expect revenue to be in the range of $1 78 billion and $1 8 billion adjusted gross profit to be between $206 million and $214 million.
And adjusted EBITDA to be in the range of a loss of $34 million to a loss of $26 million.
On the back of strong third quarter performance. We are once again, increasing our full year 2023 membership guidance and raising our full year revenue guidance, our latest membership and revenue guidance reflects 20% and 24, 8% growth at the midpoint, respectively, consistent with our long term objective to reliably drive <unk>.
3% annual growth.
Meanwhile, our narrowed adjusted gross profit guidance range for the full year implies an MBR of 88, 3% at the midpoint roughly unchanged from our prior outlook. Our latest guidance reflects MBR tailwind from our strong year to date outperformance in utilization balanced by a higher mix of new members in the fourth quarter as a reminder, our year.
And membership outlook has increased by 4100 members at the midpoint relative to our initial guidance and new members typically start at higher <unk> as we ramp up our clinical engagement activities.
Additionally, we are reinvesting some of the year to date favorability towards certain clinical and annual wellness visit activities in support of our 2024 objectives.
Lastly, our adjusted EBITDA range of negative $34 million to negative $26 million now implies a 200 basis point year over year improvement in our implied SG&A outlook as a percentage of revenue.
Includes incremental SG&A from the ramp up of resources to support our anticipated January 1st growth as John mentioned, we are pleased that the strength of our product positioning is translating into solid performance. During the first two weeks of AEP and we expect to deliver January 1st membership growth at or above 20% year over year.
To wrap things up our year to date results continue to demonstrate the headway, we are making towards our long term growth and profitability targets and we look forward to updating you on our AEP results in January with that let's open the call to questions operator.
Thank you Sir.
As a reminder to ask a question you will need to press star one one on your telephone.
To withdraw your question. Please press star one again.
Please standby, while we compile the Q&A roster.
And I show. The first question comes from the line of John Ransom from Raymond James. Please go ahead.
Hey, good afternoon everybody.
Just thinking long term I know you've got some long term margin goals.
Look a little bit more like a traditional Ma.
And where you sit now what kind of revenue or annual membership do you think you need to get to get to those longer term margin Gulf.
Hey, John This is Thomas here.
But the way we would think about that.
We should have not just a certain level of membership revenue, but additionally, taking into consideration the pace of our new market expansion initiatives over time, just given the drag on profitability, both MBR and SG&A that a new market and so for instance, I think if we were to.
Focus on only driving market share gains in our existing geographies and not add a single incremental county or are new state over time, I think we could likely reach their goals faster I think given the value proposition of extending our care model and kind of capturing some of that growth opportunity outside of our existing geographies means we will likely continue.
<unk> to add new markets looking at maybe 2025 or 2026, and so I'm not sure we're going to draw a line in the sand on a certain revenue our membership target.
How we sort of think about the main drivers as to the pace of that.
Thank you.
Thank you.
And I show. Our next question comes from the line of Scott Fidel from Stephens. Please go ahead.
Hi, Thanks, good evening and nice to be joining you all on the call Tonight.
A question just I appreciate the initial color and visibility into the growth and the AEP, but just be interested in.
You can break that down a little bit more in terms of.
What youre seeing in terms of growth.
Traditional individual Ma as compare to.
<unk> snap and then maybe some observations on sort of how the growth is looking and the core California market as compare to your other markets. Thanks.
Hey, Scott happy to provide some color there. So we're obviously a little over two weeks and now and I'd say, what we're seeing so far is generally consistent with our expectations heading into AEP. So we've shared in the past that we see a significant growth opportunity across our counties in California, and that will likely continue to be the largest driver of our.
Overall net membership growth looking out into 2024 based on the first two weeks of results I believe that will continue to be the case and continue to see that be the largest driver looking ahead to next year.
Outside of California, It's probably a little too early to provide too much commentary, but we're seeing some pretty solid progress across most markets and we're excited about what that means for our 2024 setup and.
In terms of our product mix as John mentioned in his section.
We really tried to take a balanced approach to design products for different populations.
Across the acuity spectrum across the income spectrum.
Different products tailored for different ethnicities and the idea is that we really want to have a product offering that meets the needs of really every type of senior consumer and so I'd say, what we've seen so far is a pretty balanced level of growth across our different types of products to your point, we do have about 30% of our members today, but are duly eligible.
And we've enhanced some of our Ccs products heading into 2024, I think we'll see some nice growth there, but we've also designed products on the other end of the spectrum looking at <unk>.
Products that are more cash rich or rebate products that tend to attract a younger or healthier seniors. So we're really seeing a nice traction across the board and we'll continue to try to drive a balanced mix of growth across all products in the future.
Okay. Thank you.
Thank you.
And I show. Our next question comes from the line of Nathan Rich from Goldman Sachs. Please go ahead.
Hey, good afternoon. Thanks, so much for taking the questions.
John I Wonder if you could maybe provide a little bit more color on the relative funding advantage you called out I guess.
Particularly in California, and maybe where you invested.
In the business.
I guess as it relates to retention as well.
What you're expecting for 2024 relative to 2023 I think you saw some improvement this year that helps so just be curious what your expectations are for next year and then just as a follow up how should we be thinking about MBR next year just in light of the growth expectations that you have this should result in what seems to be some market share.
<unk>.
Yeah, sure Hey, Nate.
Good to hear from you.
With respect to the <unk>.
Relative funding advantage, what I'm really talking about is.
The revenue <unk> associated with stars.
And obviously thats going to be something that impacts.
Everyone. In this sector are the stores that we just were notified on.
Heading into 2025.
But I think that combined with the.
The <unk> 28, a risk model changes.
And the two together, we think are material advantages to us.
I mean by that is.
Getting the stars advantage.
Is <unk>.
Pretty significantly I think we're one of four health plans in California that have four stars or higher.
And two of those.
Other health plans are essentially vertically integrated health systems.
<unk>.
And the third one is really interesting got a four star rating, but only 20% of their membership actually resides in California, and the <unk> number is actually outside of California.
So the significance of that is that the way in which we work with our delivery system.
As a competitive advantage is all about provider.
Provider engagement and making our.
Contracted provider network more successful and whether that's in the form of ipas medical groups or directly contracted providers.
So thats starting to manifest itself through the star ratings.
That's going to <unk>.
Continue to be just competitively.
Competitive advantage on day 28, we've said this before we have not run the business at <unk>.
Very high RAF number we've been very very conservative and compliant.
We will continue to do so.
Save others.
<unk> been more aggressive and I would say.
The relative advantage, we have with some of the.
Headwinds RMB 28 are significantly.
To our to our favor.
Those two I would expect to be reflected in the upcoming.
Not only are the upcoming 2024 bids for 2025.
But also.
We predicted a lot of this in the 'twenty three bids for 2024, and it's starting to all manifest itself. The last thing I'd say is.
The financial discipline, we've exhibited to protect margin.
It is going to start paying off and I think thats what are the underlying reasons why I feel so confident that we're going to get to our margin profile and get.
Two at least EBITDA breakeven next year.
And those are the two big drivers and.
Our bid strategies were spot on.
I'm feeling very very comfortable with where we are two weeks in.
And we'll share a lot more.
In January.
Okay.
That helped that helped to answer all of it did I Miss one or two.
No that's helpful. Maybe just a.
A follow up on just the MBR and how we should think about that next year any color early thoughts, yes, no I think we're going to make is well two things.
We're gonna make incremental improvements on retention.
I think we signaled earlier in the year that we had some abrasion with some supplemental vendors I think we've addressed all of that cleaned all that up.
Already starting to show in all of our <unk>.
This member satisfaction metrics and retention metrics. So I would expect us to have continued improvement in that.
And then MBR Theres a lot of initiatives that we are undertaking are both that are Eva centric, meaning more refined stratification models more consistent stratification.
Consistency.
Higher degrees of engagement with our chair anywhere.
Levels of engagement.
I would say continued.
Focus on the mitigation efforts associated with the 28, so a risk adjustment is going to we're going to get that.
<unk> offsets operational workflows.
So all of that and I would say also this whole notion of.
Just having more doctors talking to doctors.
We've already proven I think again through stars and some of the shared risk MLR that we've got we're working with these ipas really well.
Setting ourselves apart from everybody else that we're making it work and supporting <unk> that we don't know we contract with them.
And the next.
Logical step for us is to.
Work closer with some of the.
Doctors that want to work closer with us to have even higher degrees of performance management.
I think those two things.
Give me a lot of optimism for even improved.
MBR performance heading into 2024.
No I would say we got to focus on the members that we have in 2023.
And kind of the members that have the longer with us for a year. Obviously, we're going to continue working on the MBR of the newer members as well.
But overall I feel very very good about just every operational part of the company right now.
Great. Thanks, very much for the color.
Got it.
Thank you.
And I show. Our next question comes from the line of with May have from Leerink partners. Please go ahead.
Your line is open.
And if you have your phone on mute please mute your line.
Can you hear me now yeah, Yeah, Hey, Rick.
Alright.
Headset problems.
I had a question just on stars and kind.
Kind of an exciting start of season for everybody and just looking at the new numbers.
I mean, I think you guys may be tight on.
At least one of your contracts and I just wanted to hear kind of what you were happy with not happy with any initiatives you have underway.
Ensure that you retain the four star designation, whether focus on caps or anything specific you'd like to call out.
Yeah, Hey, John Yeah, No we.
We're happy with what what was just announced for the 24 stars.
And.
Again.
I think the new methodology, the two key methodology.
Was tighter for everybody across the board.
So I'm just very happy about that.
For dates of service in 2023, I feel even better positioned than then that I did earlier in the year about age of service in 2022.
And a lot of the initiatives that we've taken.
<unk> administration on heat us and in part D I feel very comfortable with.
And then cap obviously is something that we have had challenges with.
And it's it's.
I think.
Central to some of the initiatives we're focused on in terms of.
Provider operations and provider engagement.
Not just IPA management, which I think we do a very good job of and we support the ipas.
But also working with some of the underlying doctors and making sure that there.
Success and performance metrics continues to improve.
And so I.
Feel good about the initiatives with undertaking of caps.
But I got to tell you with what I have seen thus far in terms of all the other measures.
We're basically tracking numerator and denominator for every single measure on a daily basis. So that we can ensure that gaps get closed on a daily basis.
And I sit in a lot of these conversations.
I see it live I'm very comfortable we're going to be four stars or more and really pushing people to get higher.
That's kind of the mode that we're in.
Okay. Good that's helpful and second question just.
Maybe just an update on <unk>.
Broker strategy I know you guys have really tried this year to tie up tighter with a number of brokers I don't know market like Texas or something kind of comes to mind, just feedback feeling better or worse, if youre seeing other plan offerings that are out there.
How do you feel about the progress you're making.
Yes.
Tailwind.
Again, it gets back to some of the.
Just kind of comparative benefit advantages that we have that I think are a result of what I said earlier tailwind with respect to stars until loans with respect.
The 28.
It all manifest itself in and.
The product strategy and we have very strong products very strong products and you have the operational sales control that I think we have in place now with respect to distribution.
We're getting very very good.
Results from the brokerage community and the quality of the brokers.
The compliance of the brokers has been very good.
And we need five star brokers.
You can if youre not a five star brokers measured by.
Kind of CGM.
Kind of just general satisfaction.
To work with us.
Really just implementing and enforcing that.
So I'm very happy with that.
I would also really shut out our sales leadership and sales operations teams have done a very good job.
Each year.
It's just it's at a level of.
Just kind of organization and control and visibility and transfer all of its very very good.
So again I'm very optimistic about that and again I think that shows in the first couple of weeks.
Of AEP.
Yes.
That momentum as I keep asking every day is that momentum continuing and people are saying, yeah. So we'll see what happens, but but so far so good okay.
Okay. Thanks, guys.
Thank you.
And I show. Our next question comes from the line of Jessica <unk> from Piper Sandler. Please go ahead.
Hi, guys and thanks for taking the question. So I wanted to ask just Don Lino align with kind of first on the debit card supplemental benefits can you just discuss any areas of innovation for 2024, and just what would you expect the member or how would you expect membership mix shift as a result of that that supplemental benefit innovation.
Yeah.
Yeah, Hey, Jeff It's Jon.
We're pretty excited about a couple of them.
Announcements that we've made one as was Walgreens <unk> got some co branded.
<unk> plans.
Select markets with Walgreens that is going exceedingly well.
The brand name is helping us a lot of brokers love it.
And then the other one I would call out as instant card.
Which is very very innovative.
And.
We're looking to deepen relationships with them across more geographies, but but kind of introducing instant card as.
Primary.
Grocery benefit is very innovative and and we have bulked up.
Some of our resources and our member experience teams to ensure that we can navigate and to help our members through that.
And so far the early indications are very positive people love it.
And once it kind of get the hang of you.
Using the App.
And navigating the App.
They really love it so so that's that.
That's something that I think youre going to see more and more.
This is retail.
Technology convergence with with.
With benefits design.
And I think I think when you kind of combine that with the degree of service that we provide them, which I'm super happy with.
This is this kind of a promise of convergence between health insurance or traditional MA health insurance with.
Senior lifestyle.
And kind of health.
Actual determinants of health.
See that convergence starting to materialize.
That's really helpful. I guess, just one quick follow up there on the Ns Descartes benefit do you have any more visibility into purchasing patterns or just better control over kind of discounting relative to a retail store and then just a follow up would be on the community center in Southern California, just interested to know kind of what is the plan there.
A one off or is that is the intention at those types of centers expand across market.
Guys appreciate it.
Thanks, Jess Yeah, the first one a little bit too early.
<unk>.
But we will we will share that once we get through AEP and get you some more.
Metrics on instant card I think thats a good question.
With respect to the Laguna Woods retail center.
That has been met with a huge amount of positive feedback from the community.
And so I think youre going to see us.
We have more of these I would call it mixed use centers that would not only necessarily be.
<unk> centers.
But also b.
Clinical centers.
And so you so it's a little bit of a hub and spoke model if you will but in other cases.
Finding it to be positive that you have.
So it's kind of the bulk of the engagement, particularly around that chronic patient at the home through our charity or models that is still the most capital efficient most effective way of of serving the needs of these folks, but we're also finding having a physical presence that people can actually see a big sign that says.
Alignment.
And they can go in and just get all of their.
Our questions answered.
They can go in and have an annual wellness visits.
It's going to it's not only going to be.
Kind of a branding.
Advantage, but but it's going to I think accelerate the degree of engagement that we get on the clinical side.
Just before anybody goes to crazy just like we're not going to be doing a whole bunch of bricks and mortar we're not doing that I think thats very expensive.
But in select markets I think you can expect us to do that.
Got it. Thank you so much you got it.
Thank you.
And I show. Our next question comes from the line of Adam Ron from Bank of America. Please go ahead.
Hey, thanks.
Wanted to ask a question about.
Guidance update.
I know you mentioned that like the implied MLR is pretty similar to what it was before but it didn't go up a bit and just want to clarify that that's related to basically new membership outperformance and the higher MLR on those new members and then I have one quick follow up to that.
Yeah, Hey, Thomas here.
Yes, I think thats it.
Right, so, particularly coming out of the third quarter with the favorable utilization, we've been able to achieve year to date. We also invested a few million dollars and plan to invest a bit more head into Q4, regardless of our clinical engagement and annual wellness activities, which is really about setting us up for a successful 2024 and beyond.
To your point. We also then added that we did raise our guidance for the full year by 4000 roughly members at the midpoint, which as you know our year. One members typically do have higher <unk> than our loyal or returning members. So that's the second part of the driver, but I would think about it as favorable outperformance on utilization essentially funding a lot of these <unk>.
<unk> that we're making to set us up for a successful 2024, and then the incremental growth on top of that.
That makes sense and then.
I guess.
Following up on the discussion from last quarter, where like national payers and MAA had problems scrap utilization.
And you weren't really seeing it but now that you have more claims data from like May and April in the time period from when payers are really worried about utilization is there anything that youre, saying that similar to that commentary or youre still really.
Having a different experience from all the other public company then.
If so is it just geographic by geography that would explain the difference.
Sure.
Alex would you point to.
Yes, so from an outpatient standpoint, similar to our comments last quarter, we have not seen a considerable increase in 2023 relative to our 2022 experience. So I think on a year over year basis. Our overall outpatient claims <unk> are up.
Low single digits.
Again, we're kind of within the realm of our expectations heading into this year.
I think our kind of.
Theory as to why that is is twofold.
First of all we saw a pretty considerable increase in our outpatient spending 22 relative to 2021, and so I think to a certain extent.
Based on the markets, we're in or other factors I think we saw some of that return maybe earlier than others.
And that was kind of captured as part of our run rate in 'twenty two heading into 2023.
I think additionally, while a lot of our focus with care anywhere is on those chronic complex members who.
We have the opportunity to really improve things like unnecessary or avoidable hospital admissions.
The readmission rates and things of that nature I do think there is obviously some benefit with our broader clinical model and provider engagement efforts that helps on the outpatient side as well they tend to be less of a material driver of where we generate the savings, but I think that's a tailwind for us relative to many of our competitors.
Awesome. Thanks.
Thank you.
And I show our last question comes from the line of John Ransom from Raymond James. Please go ahead.
Hi, there thanks for the follow up.
There's been some industry trade chatter that hospitals are dropping in MA plans, and that's getting harder to assemble networks.
How is your go to network strategy either changed not changed in light of some of that or do you think that's number one.
Yeah, Hey, John It's John I'll take that one.
Yes no.
There's been a lot of.
Public.
The scrutiny around this topic, where you've had.
Health systems that that have entered into global cap arrangements.
With different payers.
<unk>.
The business and they're just not taking.
Global cap anymore.
And.
And the conversations that I've had with many of the health system Ceos.
They are concerned about the headwinds associated with Starz funding and B 28 funding so.
When youre, taking global cap and I've said this from from the get go Youre essentially you've got essentially two insurance companies within one supply chain.
There's not enough money to go around.
Right now and so that's why a lot of these health system or getting out of it.
Other problem that the health systems have right now.
Accessing capacity problems.
A lot of the branded.
Kind of a.
Would you all consider a tier health systems.
Running out of space. There is so much demand because the brand is so strong.
And so what's interesting is a lot of them are approaching us where their solution is not to just take global cat, that's not what they want to do rather what they want to do is actually leverage Eva.
Anywhere.
And lower senior admissions into their hospitals.
And in turn.
Replace those admissions with commercial.
Admissions, which are frankly, just better funded.
So I think semantically, that's going to be a trend you start to see.
And as a growth opportunity there.
And I think what are the things that they've commented to us is some of the larger national folks.
<unk>.
<unk>.
The kind of the long term viability of working with some of these folks is really challenging for them.
And.
So I would see that trend continuing across the board kind.
Kind of geography.
Agnostic.
A consistent theme that I'm seeing everywhere.
I don't know that answer yet.
That's interesting so just to tack one more on <unk>.
Our reach is that ever going to be any kind of material profit driver or do you think the government is.
That program attractive enough.
Pay down or is it just going to be one of the whole. Another one of these Medicare programs, where the government takes money, but nobody makes any money.
Well, it's just it's hard it's hard to it's hard to underwrite.
We've been consistent with that also.
Think it's probably a pretty good program for sure.
For physicians.
And it has an onboarding an on ramp to value based care.
But it's hard to underwrite it when they reset the benchmark every year.
It's just like it's covered.
Say, if it's kind of a race to the bottom.
Which is why we have not deployed capital like some of the others. Okay.
<unk> seen that before.
So.
I do think it's important to have it.
As a part of our portfolio is simply because we want to help doctors.
So a lot of the doctors that we have good relationships with.
Do you have a component or the other at MSP or ACO richer.
Just kind of some form of <unk>.
<unk> program and <unk> program.
And.
From a workflow point of view, we don't want it to be different than the MA book, So we're helping them.
Just.
Provide better care and better economics.
But for us I'm not sure it's something that we would.
Yeah, we would you would underwrite.
Thank you Sarah.
And for me.
Thanks.
Thank you.
Sean we have one more question in the queue that question comes from Scott Fidel from Stephens. Please go ahead.
Thanks, and I guess since John started round round, two I'll tack on there.
And actually wanted to get your view Q1 industry level, just dynamic that thats sort, where California has been a bit more of the tip of the spear recently just in terms of.
The Union dynamics, where we saw Kaiser I agree to that new contract and then the minimum wage bill that was approved for health care workers and definitely interested in how you're sort of factoring that into your thinking on sort of upcoming unit cost in negotiations with the systems out in California.
Not really I guess as much for 24, but even taking more $4 25 and 26.
Hey, Scott Thomas here, I guess, there's kind of two parts to how we might think about that so the first is in terms of its direct impact on our clinical workforce.
The impact is generally negligible just given.
The level of nurses and doctors that we employ across the state.
It's something that we view as a major driver of our kind of 'twenty five and beyond outlook I think in terms of your point on on how that may eventually flow through to our conversations with hospitals.
We typically are contracting with hospitals on a percentage of Medicare basis, typically it's 100% of Medicare.
And so the way it will work for us in general is as those hospitals getting pressure, we often see that that leads to greater levels of.
Medicare rate increases, which flows through to our contract to your point, but it also flows through to our revenue benchmark. So I think in general our kind of contracting approach is pretty well insulated from some of those dynamics over time.
Okay. Thank you.
Thank you.
That concludes our Q&A session and today's conference call.
You all for attending you may all disconnect at this time.
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