Q3 2023 Apollo Medical Holdings Inc Earnings Call
Good day, everyone and welcome to today's Apollo Medical Holdings third quarter 2023 earnings call.
At this time all participants are in a listen only mode. Later, you will have the opportunity to ask questions. During the question and answer session by pressing star one on your telephone keypad.
Today's speakers will be brand and some co chief Executive Officer of Apollo Medical Holdings, and Sean Boshart, Chief strategy and financial Officer.
The press release announcing Apollo Medical Holdings, Inc. 's results for the third quarter ended September 30th 2023 is available at the investors section of the company's website at Www Dot Apollo Med dot net to provide some additional background on its results. The company has made a supplemental.
Back available on its website.
A replay of this broadcast will also be made available at Apollo match website. After the conclusion of this call.
Before we get started I would like to remind everyone that this conference call and any accompanying information discussed herein contains certain forward looking statements within the meaning of the safe Harbor provision of the private Securities Litigation Reform Act of 1995. These forward looking statements can be identified by <unk>.
I'm such as anticipate believe expect future plan outlook and will and include among other things statements regarding the company's guidance for the year ending December 31st 2023 continued growth acquisition strategy ability to deliver.
<unk> long term value and ability to respond to the changing environment operational focus strategic growth plans and merger integration efforts, although the company believes that the expectations reflected in its forward looking statements are reasonable as of today those statements are subject to risks and it.
Certainties that could cause the actual results to differ dramatically from those projected there can be no assurance that those expectations will prove to be correct information about the risks associated with investing in Apollo Mad is included in its filings with the Securities and Exchange Commission, which we encourage you to review.
We're making an investment decision the company does not assume any obligation to update any forward looking statements as a result of new information future events changes in market conditions or otherwise, except as required by law regarding the disclaimer language I would also like to refer you to slide two.
The conference call presentation for further information with that I'll turn the call over to Apollo Meds Co Chief Executive Officer, Brandon them. Please go ahead Brandon.
Thank you operator.
Good evening and thank you all for joining us to discuss our parliament third quarter performance.
We are pleased to deliver another strong quarter out of Parliament.
One in which we not only continued to deliver strong operational clinical and financial results.
But also continued to grow the momentum we've had in transforming healthcare for local communities across the country.
The infrastructure that we've built and the alignment we have with our partners continues to accelerate the country towards our vision one.
One in which everyone has access to high quality accessible and high value care.
Starting with financial highlights for the quarter revenue of $348 million grew 10% compared to the prior year period.
As we experienced growth in all three of our segments care partners care delivery and care enablement.
Compensated revenue grew almost 34% to around $306 million in the quarter.
Impaired to the prior year period.
Adjusted EBITDA of 52 million benefited from the aforementioned strong growth and cabinet heated revenues they care partners business.
And our continuing successful effort.
Managing total cost of care for these members and value based risk bearing arrangements.
Adjusted EBITDA margin was around 15% as we continue to grow while building a sustainable business.
Before getting into strategic and operational developments from the quarter I wanted to comment on our announcement today of our intent to acquire assets related to community family care Medical group or CFC.
Including their independent physician Association.
Strict and Knox Keene license Health plan and managed service organization.
Community family care is a skilled full risk bearing provider group made up of more than 350 primary care providers and more than 500 specialists.
Managing care for over 200000, Medicaid Medicare and commercial members in Los Angeles County.
He had been a care enabled clients since January of 2020 and.
And we will continue to utilize those solutions with no further onboarding period necessary as a care partner going forward.
In addition to its unique network and robust clinical capabilities.
He will also bring pending regulatory approval its existing restricted Knox keene or our KK license, where Medicaid members, which will accelerate our path to scale and full risk for this important population.
Furthermore, we expect to harness synergies and shifting our existing Medicaid populations to Bulgaria.
[noise] arrangement.
While also moving Cfcs Medicare members into full risk arrangements utilizing our senior focused Archie.
We anticipate that this will allow us to more effectively manage total cost of care across our Medicaid book of business, while expanding access to high quality care to even more patients across the Los Angeles Metropolitan area.
Importantly, the acquisition of an existing client chose the value and synergy leveraging both our clarity of women and care partners business segment.
Transitioning from a vendor client relationship into one in which we are responsible for the total cost of care of their skilled membership base and.
And a de risked and accretive fashion.
We are excited to not only recognized several cost and revenue related synergies and partnering with CFC and its providers.
But far more importantly.
Continuing to deepen our commitment to local communities across Los Angeles, and continuing to drive access quality and value in these community.
Jon will dive more deeply into the financial details of this acquisition later in this call.
Turning now to business updates from the third quarter, we continue to build on our momentum this year with two new provider partnerships since our last earnings call.
First we have partnered with associated with panic physician.
A group of over 150 primary care providers and over 450 specialists in Los Angeles.
With around 25000, Medicaid Medicare and commercial members and value based care arrangements.
In order to support that group with our care enablement offerings.
We expect associated Hispanic physicians providers to be on boarded onto our care enablement platform by March of 2024.
Next we expanded our relationship with advantage Health network, a group of approximately 15 primary care providers and several hundred specialists in Los Angeles, which support around 4500, Medicaid Medicare and commercial members and value based care arrangements.
As part of the partnership advantages providers are slated to join our care partners business.
We also acquired five primary care clinics in the advantage health network, which will be integrated into our care delivery business.
Of note advantage health network has been a long time care enablement client of ours and will continue to benefit from the care enablement offerings.
As in the case of CFC vantage health networks providers are already on boarded onto that Parliament platform.
This is another example of our ability to support our care enablement claim seamlessly and more deeply.
Care partners business, where we manage the members total cost of care on a calculated basis.
We believe this tuck in acquisition and partnership will be immediately accretive and will further expand our care delivery and care partners geographic footprint in the Los Angeles area.
Until <unk> the partnerships with community family care associated Hispanics visit physicians and advantage health network.
Our ability to provide high quality accessible and coordinated care for local communities throughout Los Angeles.
Finally, we are excited to share that we have entered a strategic partnership with wider circle appear based community health organization, working with payers and providers to connect Nabors for better health.
Under this partnership.
Our two organizations will provide comprehensive patient centered care.
Enhanced care management for Medicaid members with complex needs.
An integral component of the California, advancing innovative medical or Cal aim initiatives.
By pairing wider circles community based engagement model and our core clinical offerings and proprietary care management platform.
We will strive to beat bring community based interdisciplinary in person centered care. So all we need it.
Especially those most underserved.
We believe that this joint venture will be especially valuable offering given our definitive agreement to acquire community family care, a full risk bearing Medicaid organization as well as the managed Medicaid scale that already exist in our existing and new provider group partners.
This brings our total number of provider group partnership signed for the year. So far two five with two of those in Texas and three of those in California.
<unk>, our joint venture with wider circle, and our planned acquisition of community family care.
And our outlook for additional provider group partnerships for the remainder of this year.
In both California and beyond is very strong.
Overall, we continue to be a leader in value based care with a focus on all populations, including members and managed Medicaid Medicare advantage and Medicare fee for service and commercial lines of business.
We believe that our skilled and highly diversified business with over 10000 providers on platform, serving approximately 900000 members and value based care arrangements alongside over 'twenty payer partners.
Positions us very strongly to accomplish our mission to provide high quality accessible and high value care to all.
Communities across the country.
And with over 90% of our revenue related to value based care.
Our incentives are truly aligned with those of the patient and provider.
Weather in our core markets in southern California, or in our newer markets, Northern California, Nevada, Texas and beyond.
Our scaled value based care infrastructure and long proven ability to effectively manage total cost of care and patient outcomes.
Allows us to have confidence.
And sustained profitability as we invest to grow our model into local communities across the country.
We are excited by the continued momentum we are seeing in the business and we will continue to work to improve our members' health.
Power physicians and effectively manage total cost of care for those reserves.
To close my prepared remarks, I would like to thank our teammates and partners for believing in our vision.
<unk> form health care and local communities across the country.
The accelerating growth and outcomes of our business would not be possible without your passion dedication and support.
With that I'll turn it over to John to review our financial results.
Thank you Brandon before I review, the third quarter results I wanted to discuss our recent acquisition of community family care Medical group, including.
They are independent physician Association restricted Knox Keene license to health plan and manage service organization entities.
Or in aggregate the CFC.
As well as our recently announced term loan a and the financial flexibility that it provides.
As Brendan already highlighted the strategic benefits of the CFC transaction I'm going to provide an overview of the financials.
CSC is expected to generate approximately 190 million of revenue this year and approximately 25 million of adjusted EBITDA.
Once the transaction is closed which.
Which we expect to happen in Q1 2024.
We'll transition there are approximately 200000 members to our care partners platform.
This will be meaningfully additive to our care partners revenue.
It will also slightly increase our intersegment eliminations. Since this population will continue to utilize our care enablement solution.
The transaction price of $202 million is a combination of 152 million of cash from our balance sheet.
Billions of equity and up to $30 million of performance based earn outs.
Today, We also announced an oversubscribed term loan of 300 billion.
Which increases the company's facility to 700 million with our existing 400 million dollar revolver.
We intend to use these funds to position us for future M&A transactions, which allow us to continue to expand our geographic footprint and grow our membership base.
Through this process, we were able to negotiate expanded baskets within our overall facility, including increasing the maximum levels of certain forms of permitted indebtedness, increasing the maximum levels of restricted payments, including share repurchases and increasing the maximum levels of certain index.
Yes.
The term loan.
Okay.
Also being used to fund our recent $100 million share buyback from APC excluded assets.
We have confidence in the future growth and profitability of our business and with this buyback.
<unk> about our ability to generate sustainable shareholder value in the years to come.
This buyback also allows us to work towards a consolidated tax return and solve for effective tax rate.
Now turning to our third quarter results.
Our third quarter revenue of $348 2 million increased 10% compared to a year ago and was driven by growth in all three of our core segments are compensated revenue grew by 34% annually. During the same period from $227 6 million to 300.
$5 7 billion.
We ended the third quarter with 900000 members.
Which is the total number of unique members, we support in our care partners care delivery and care enablement segments.
As a reminder.
We take some level of medical risk in each of our care partner members and received the appropriate level of reimbursement.
<unk> enablement, we received a smaller fee to utilize our technology platform to support third party providers and their value based care efforts.
Yeah.
Yeah.
Because of the different financial profiles of each member.
Wanted to take a moment to share how our membership.
Has changed and we will be changing within our segments. Our care enablement membership decreased to approximately 900000 members. This quarter as a result of a previously reported care enablement client ending their contracts.
Additionally, when CFT closes we expect to see the growth of approximately 200000 members and our care partners business as we begin to take risks for those members total cost of care.
Okay.
Adjusted EBITDA was $52 million compared to $57 1 million a year ago.
Sequentially adjusted EBITDA benefited from our continued care management efforts.
On a year over year basis. The decline was a result of our onetime 2021 N G ACO payment in Q3 2022.
As a reminder, the impact of that program was recognized in one quarter in 2022 and going forward.
We have been and will continue to accrue the profitability of the ACO program throughout the year.
Okay.
Our effective tax rate of 26% in the third quarter was lower than our historical levels due to the release of valuation allowances.
As previously mentioned last quarter, our effective tax rate has been historically high due to the income tax associated with certain intercompany dividend.
The release of valuation allowances offsets our high historical tax rates as we continue to work to implement measures to bring down our effective tax rate, which we anticipate being in the mid thirties by the first quarter of 2024.
Net income attributable to Apollo met in the third quarter was $22 1 million compared to $23 2 million in the prior year period.
Earnings per diluted share.
47% compared to 50 a year ago.
Now turning to our balance sheet, we ended the quarter with $273 9 million in cash and total debt of $209 2 million.
As it relates to our long term view on our leverage ratio. We aim to have a net leverage in the range of $2. Two five to 275 times, but my experience short term variation.
The last topic I want to cover on today's call is our guidance.
Given where we are in the year.
We are narrowing our range for the full year and now expect the following.
Yes.
In regards to revenue, we expect to be between $1 three four and $1 three 9 billion compared to our previous range of one three to $1 5 billion.
We anticipate coming in slightly below the midpoint of our previously disclosed guidance range, primarily due to small headwinds around Medicaid redetermination and the rolling off of her previously mentioned client.
We still remain very confident in our ability to continue to grow in the 20% to 30% range.
We expect adjusted EBITDA to be between 135 and 150 million.
Third to our previous range of $120 million to $160 million.
We continue to see utilization trends being stable across our at risk book of business because of the unique capabilities of our clinical model and some initial conservatism.
We expect to come in on the upper half of our previously disclosed guidance range as well as within our target at scale EBITDA margins, even as we expand into new regions and grow value based care membership.
In regards to earnings per diluted share, we expect to be between $1 10, and $1 20.
Compared to our previous range of 95 to $1 20.
In conclusion, we're pleased with our financial performance growth partnerships and capital deployment during the third quarter.
Further demonstrating our platform's ability to continue to execute on three key operational goals growing our membership and core and new geographies.
Powering our care delivery and care partners providers to successfully move downward glide path towards value based care.
And enabling our providers to deliver excellent patient outcomes in order to effectively manage risk.
The CFC transaction further diversifies, our membership mix and provides us a pathway to expand our value based care exposure.
The Parliament platform provides a highly differentiated pure play value based care company that is profitable growing rapidly and yields profitable and sustainable growth. We've made meaningful progress in all three areas and will continue to use this roadmap as we close out the year, having established a solid foundation.
Nation for continued growth in 2024.
Brandon and I want to thank you all for your time today.
We're always open to a dialogue with investors and welcome visitors to our offices in Alhambra should any of you be in the L. A area.
With that operator, let's open it up for Q&A.
Thank you ladies and gentlemen, the floor is now open for questions. If you do have a question. Please press star one on your telephone keypad at this time again star one if you do have a question or comment please hold as we poll for questions.
And we will take our first question from Ryan Daniels from William Blair. Please go ahead Ryan.
Hey, guys. Congrats on all the momentum and thank you for taking the questions Brandon maybe one for you strategically it just seemed like a bevy of partnerships in the acquisition are all coming together here towards year end and I'm curious to hear your view on what's driving that obviously some of these or prior partnerships moving to.
More integrated relationships, but what's really driving such strong momentum over the last few months and driving your partnership growth.
Yeah.
Hey, Ryan.
So much for joining the call today and thanks for the kind words.
I think we've we're really seeing a lot of momentum across all aspects of the business organically in terms of kind of same provider member number panel growth organically in terms of number of partnerships are signing with provider groups and other entities such as the wider circle partnership and of course, the larger acquisition that was announced today.
I think the way I would characterize it as that.
These are partnerships we've been working on.
Throughout the year.
I think it happened to land.
In this quarter, and we decided to announce them all at the same time here.
As I mentioned earlier.
My prepared remarks, I think we have a very strong pipeline.
Or even further partnerships.
Potentially even for the class of 2024, and so I don't think Theres anything necessarily special about this quarter.
These are longer term.
Things that we've been working on in and we're glad to be able to announce them today.
Okay, that's great and then with the pending transaction you mentioned, you'll have our KK for Medicaid I know you already had one with the F Y B deal before.
Are those different licenses, meaning do you need separate ones to run Medicaid and commercial and Medicare in the state.
So that this actually does expand your risk bearing capabilities.
Yes, so in terms of the restricted Knox Keene licenses, which all my comments here are going to be pending regulatory approval of the transaction of course.
There are there are actually separate licenses necessary or at least separate approvals necessary for each line of business and each health plan in each county and so.
While the plan was always to expand our existing.
License into new counties and into new payer relationships.
It will drastically accelerate the process, we believe again pending pending regulatory approval to take on full risk for Medicaid populations across California.
Okay. That's helpful and then.
Maybe one financial one and I'll hop off and save the rest for later, but just in regards to the expanded credit line I know, it's up to $700 million you have just over $200 million in long term debt is that all part of that revolver, meaning.
Secondly, you have $500 million available or is there a different structure to that 200 million plus debt that's already outstanding.
Yes.
Hey, Brian.
Yes, you're correct the the $180 million is today.
Today as part of the 400 million dollar facility, which has now been expanded to $700 million.
Okay perfect. Thank you so much I'll hop back in the queue and congrats again.
Thank you.
Thank you and we will take our next question from Brooks O'neil from Lake Street Capital. Please go ahead Brooks.
Thank you good afternoon, everyone.
I guess I'll follow on with Ryan as you guys know I'm, particularly excited about the opportunity you have to take out in the global risk skewed the arcade case.
And I'm just curious.
Obviously, Brandon just said the opportunity exist now too.
Go after.
Medicaid full risk, but can you give us any update on what's going on with regard to the Medicare.
Instead, I think you acquired up in San Francisco, and whether you've had any success beginning to think about moving those capabilities across the state.
Hey, Brooks. Thank you for joining the call it's great to hear your voice again.
Thank you Ryan for the question failure. So Brooks I ran your question on the existing restricted Knox Keene license F O b.
We've continued to expand.
The geographies the counties in California, where it's able to take on full risk for Medicare populations and there've been et.
Several new contracts with payers that we signed.
Since the last time, we've seen burst here on a quarterly call and we.
We continue to see.
Good momentum in terms of getting our Medicare advantage book of business into full risk arrangements.
Goodbye by next year.
Yeah, that's great.
And then I think.
Oh, it's chon, who said that utilization has been stable one of the big.
We've been hearing from people around the United States has been sort of.
Wrong procedure activity and growth.
<unk> quite sure exactly what it's all about a rebound from the pandemic.
Lockdowns and whatnot or some other phenomenon, but would you say that your stable utilization.
And at the station of the success of your business model and your approach to value based care can you just talk about what youre seeing out there in your markets.
And how you're responding to it.
Sure thing.
We've seen fairly stable.
Utilization and MTR trends across a.
Across the business in totality of course, there are slight.
Movements up and down based on line of business, because we are a diversified business across.
Government and commercial programs.
Overall on both the inpatient and outpatient side of utilization and we believe that our unique care model is.
It has always been focused on providing excess and we aren't seeing a large.
Rebound can quote so to speak.
In terms of utilization.
In this quarter and that kind of showed it in terms of our.
Our ability to continue delivering.
The results that we expected.
Yeah, that's great. Thank you for taking my questions and congratulations on continued success.
Thank you Brooks.
And next we'll go to Adam Ron from Bank of America. Please go ahead Adam.
Hey, Thanks for taking my question.
Our perks of thing.
I know you don't guide quarterly, but it seems like versus the consensus estimate EBITDA outperformed significantly and even if you just look seasonally.
The cost of care line was down sequentially more than it usually is usually sometimes giving up.
And so I'm, taking that to mean that there was actually MLR outperformance or at least like you are accruing.
Something more positively it teams.
So like 'twenty, 'twenty, two or 2023 expectations that right or is there not anything really to call out on MLR outperformance.
Hey, Adam how are you the the main item I'd highlight is <unk>.
In Q1 and Q2.
With the limited data that we have around ACO.
It's really breakeven and so in Q3, we had a slight ACO true up.
<unk>.
That's number one number two our managed care business MCR was stable and those two things together have.
Led to this quarter.
Okay.
Yes, because there was a significant.
Outperformance versus consensus and I think the guidance increase was pretty minimal so I guess.
Is there anything in Q4 that you're you're kind of worried about or for assuming it's a big step up in utilization or is it really just the street model.
So it will be relatively short.
Oh I'm sorry go ahead, please alright, okay.
As Youll see historically.
To force for Us are usually relatively quiet it is.
Yeah.
We don't necessarily have the same level of quality bonuses or any type of.
Shared risk true ups and so.
As you can see for our guidance that we.
We do expect Q4 to be in line with what you've seen in historical years.
No problem.
On the revenue guidance cut due to Medicaid redetermination there.
Is there any margin implications.
Losing enough membership that would actually impact your your revenue guidance and would you continue that pressure to extend into 2034. It both on the revenue side and how are you building anything in on margins.
So for every three Medicaid members that.
Through Redetermination.
Or are leaving the organization one is re enrolling is what we're seeing in <unk>.
And.
<unk> product.
So in terms of margin the net margin impact is quite minimal I'd say, it's on a on an annualized basis probably.
One to one and a half million.
In terms of revenue as you saw from our decrease in guidance.
That is probably more of a impact where on an annualized basis, it's in the $5 million to $10 million range.
For 2024.
That's helpful.
And then.
And B E T C share buyback would that purely motivated by the attacks.
Patients that you mentioned or do they want to sell or did you go to that but I'm just curious what drove that and if the plan is to buyback all the shares.
Necessary to reach your.
Our tax rate targets.
Hey, Adam Thanks for dialing in I'll take this question around the APC share buyback, which is around just approximate $800 million of value.
There are a couple of reasons. The first is that as you know from the last quarter.
We're experiencing elevated levels of taxation do too.
Essentially filing separately.
And not being a consolidated tax entity.
Part of the reason is to as John mentioned earlier to call for that.
But I think regardless of that.
We are.
Very optimistic and.
I think that there is a great.
The amount of potential ahead in terms of the pipeline opportunities we've been signing the way we've been deploying our capital and the continued strength that were seeing in our clinical models and then we felt that this was a good time to.
Two.
To exercise that $100 million buyback.
I appreciate the questions one my last one would be.
And when you guided for this year, you gave basically flat EBITDA guidance at the midpoint with the rationale being that there was like Medicaid redetermination headwinds than reinvestments into growth and so for next year are there any.
A major moving pieces that we should consider I guess Medicaid Redetermination will continue the our KK license should be.
Somewhat.
Lifting revenue it sounds like on the <unk>.
May side at least there are some deals closing and so other than those are there any.
Moving pieces, we should be considering thanks.
Yes of course, so I think.
Yeah.
Business continues to be.
Quite strong.
We don't anticipate.
Huge variations in medical cost ratio next year either of course, we haven't put out official 'twenty 'twenty four guidance.
So we will certainly update the market when that happens, but given the amount.
Mt of new partnerships that we've already signed five for the year.
A few in the pipeline and the acquisition of CFC and continued same provider gross.
We are quite optimistic that EBITDA will continue to grow.
At a healthy clip.
Perhaps even more at higher rates.
Than it did this year relative to last.
As you remember you May remember Adam this year, there was a bit of a harder comp in terms of the one time Nextgen ACO payment.
In Q3 of last year.
Yes.
The rest of the business has grown tremendously.
Which will continue to happen and that comp is not expected to be.
There for the next year.
For the next year.
Fair enough. Thank you so much.
Thank you so much.
Thank you and we'll take our next question from David Larsen from BT I G. Please go ahead David.
Hi relative to our model the gross profit really beat our estimate can you maybe just talk a little bit more about your the utilization you're seeing the cost of services. It sounds like there was an ACO true up what does that mean does that mean that the actual claims cost came in.
Lower than expected or did you get some sort of an incentive.
Payment from from CMS in the quarter, just any more color there would be very helpful and more importantly, do you expect that trend to continue into next year. Thank you.
Hi, David Great to hear from you.
Yes. Thanks, so much for the question so in terms of our MCR.
I'll start with the ACO, what we're seeing on ACO is that we have more data really to evaluate the performance of the program in 2023.
And.
We were able to true up where we were coming in in costs for the first three months of the year relative to <unk>.
Hmm.
Where we were in Q1, and Q2, which was really breakeven.
In terms of our overall managed care business as.
As we've mentioned before we.
Due to our unique clinical model as well that really provides access and quality and we're continuing to see stable institutional metrics. Both of those put together have really led to that.
Our strong performance.
Lastly.
I also would want to mentioned, we we we saw strong sweeps payments in Q3 associated with our Medicare advantage members.
Okay, Great. That's very helpful. Thank you and then as some of these acquisitions and partnerships roll into the care partners division of the business.
I'm, assuming that since they were already care enablement clients.
You have very good visibility into the membership there utilization trends the premium.
Our margins on each member so it's not like there's going to be in an increase in cost as you try to stabilize these newer members like like we see on some other.
Business models, they're already sort of well known and well manage to you is that correct.
Hey, David Brendan here, Thanks for the question.
Youre absolutely correct for the for the clinics for example that we acquired the five clinics that are moving into our care delivery segment there'll be some minor implementation.
Integration costs, but you know very very minor, but we expect those to be accretive.
One because of the.
The length of the relationship that we've developed over time the care enabling segment.
For the larger groups.
<unk> for example.
<unk> advantage health network.
We're already care enablement claims we absolutely expect to also see that synergy does providers are already on boarded onto the technology platform.
Hey.
There will not be additional incremental cost or time associated with getting them onto the platform and we have a very good line of sight into all of those metrics that you mentioned and how we can best take care system empower them to take care of their patient panels, and so we view that as a very.
We view that as part of the synergy of having all three business segments.
It gives us kind of a much more shallow J curve so to speak.
Okay.
Great. That's very helpful. Thank you and then do you have any initial thoughts on 2024.
Call it like Medicare premiums or reimbursement that you expect to see from your docs from CMS Theres been a lot of noise around you.
You know rod we're there it's a lower premium increases in 24 relative to the increase that was seen in 2023.
There's a lot of adjustments that are going on in terms of like risk stratification, just any thoughts or color. There do you do you expect an increase in dollars coming from CMS on a on a per member basis in 'twenty four relative to 'twenty three thank you.
Of course, there is there has been a lot of noise of course lately around reimbursement rates.
B B 28 am and other reimbursement.
Items Starz as well.
I think overall, we are navigating.
Through this in a couple of ways. One we continue to use our scaled platform to you.
Ensure that we have solid contracts with our payer partners, where I'm, helping them manage their quality stars and risk adjustment better than others relatively speaking and we think there's a lot of value, we're providing to payers such that we are.
More than quote unquote paint us kind of the types of contracts that we have with payers.
In terms of Red V.
We've spoken about before we don't think will be impacted significantly if at all.
Our average risk score is still fairly low.
Across all of our Medicare advantage population.
Round, one point out which is the national average.
And we don't think we've been particularly aggressive.
Especially when doing analysis on the actual HCC that we'd been coded coding for in the past. So we don't expect a headwind from rugby either.
Overall, we are.
Not foreseeing headwind in terms of Medicare premiums P. M. P M for our patients going into 2024.
Okay. That's that's very helpful.
Then just one last quick one if we assume a Medicaid is around 24% of revenue and let's say, 15% of Medicaid lives are re determined in total that seems like it's maybe around 4% of revenue for Apollo medical spread over say two years, which would be maybe one or 2%.
Of of impacting revenue.
Annually for Medicaid Redetermination, she guys does that sound reasonable or not I mean, it doesn't really sound that material to me.
Yeah.
Think your structure. David is is spot on I I don't think we're seeing the level of Redetermination in terms of the 15% range.
Okay.
So.
You can probably assume maybe half of that.
Okay. So the drag from Medicaid Redetermination will be even far lower than then what idea actually said okay.
Alright Super Congrats on a good quarter. Thank you.
Thank you.
As a reminder, that star one if you do have a question or comment and we will take our next question from Gary Taylor from T. D. Cowen. Please go ahead.
Hi, Good evening had two quick questions won the midpoint of EBITDA guidance up about two and a half million dollars is it fair to think that's roughly the magnitude of the ACO true up in the in the quarter or would use scare us.
Materially differently from that.
I think it's more than <unk>.
Just the ACO true up we are experiencing.
Hmm.
Very.
Very strong overall sweeps payments, so I'd I'd say that's number one.
Number two it is the M. A R K case and membership moving to dose M. A R. K case.
And number three is the ACO that you mentioned and and of course, we're seeing.
And we've mentioned this before we're continuing to invest in new market development.
I'd say, our new market development overall.
I think we said about $5 million to $10 million per market.
<unk>.
Investments are coming in at the lower end of the range.
Got it and then my other question would be just a follow up on <unk>.
Redetermination the Medicaid M. C. O's are you now seeing.
You can either call it adverse selection or higher acuity and they claim that the states are giving them positive acuity adjustments in their rates to account for the.
Remaining population I was just wondering do your your contracts for the for the professional fee risk that you're taking from the Medicaid M. C. O do they just automatically flow through any sort of rate increase like that that the states, giving to the managed care plan upstream.
Yeah, Hey, Gary definitely Oh, sorry go ahead Greg.
Oh I'll start quickly I was going to say.
Our contracts are.
Our REIT adjusted.
On the contract increases.
Increases in premiums could also pass through to us as a percentage of the premium that we're taking for either professional or full risk.
In terms of our planned and announced the acquisition of my family Care Medical group.
And there are teekay license in order to take on full risk in terms of Medicaid in California.
We believe that allows us to.
Move our membership as I mentioned earlier across the entire Medicaid business into both kind.
Kind of taking on both professional and institutional risk.
And our full risk setting.
Which will also help us blunt.
Some of the impact of.
Professional rates being kind of fixed.
Even as acuity potentially.
Slides slightly upwards after restart nation.
Okay, I'll think about that thank you.
As a reminder, that star one if you do have a question or comment.
And there are no further questions at this time I'll turn the call back to Brandon <unk> for closing remarks.
Thank you everyone for joining our earnings call for quarter. Three this afternoon or this evening, we're very.
Excited about the potential to work together with.
Many new partners that we announced this quarter. We think these results are reflective of our ability to build relationships.
Locally, but very shortly as well nationally.
And we're very excited about the momentum that the business has going forward. Thank you again for joining the call.
Speak to you all soon.
Have a good evening.
Thank you ladies and gentlemen, this does conclude today's teleconference. We thank you for your participation you may disconnect. Your lines at this time and have a great day.
Hum.
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