Q4 2023 Apollo Medical Holdings Inc Earnings Call
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Operator: Good day, everyone, and welcome to today's Astrana's Health fourth quarter and full year 2023 earnings call. At this time, all participants are in a listen only mode.
Good day, everyone and welcome to today's astronomy health fourth quarter and full year 2023 earnings call. At this time all participants are on a listen only mode. Later, you will have the opportunity to ask questions. During the question and answer session. If anyone should require.
Operator: Later, you will have the opportunity to ask questions during the question and answer session. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Today's speakers will be Brandon Sim, President and Chief Executive Officer of Astrana Health, and Chan Beso, Chief Operating and Financial Officer. The press release announcing Astrana's health results for the full and fourth quarter ended December 31st. 2023 is available in the investor's section of the company's website at www.astronahealth.com. To provide some additional background on its results, the company has made a supplemental deck available on its website. A replay of this broadcast will also be made available on Astrana's health website after the conclusion of the call.
Operator assistance during the conference. Please press Star zero on your telephone keypad.
Today's speakers will be branded Sim President XI, Chief Executive Officer of Australia, Health and churn based so chief operating and financial Officer.
The press release announcing our strong as health results for the full year full and fourth quarter ended December 31st.
2023 is available at the investors section of the company's website at Ww Astana health Dotcom.
To provide some additional background on its results. The company has made a supplemental deck available on its website. A replay of this broadcast will also be made available at a strong as health website. After the conclusion of the call.
Operator: Before we get started, I would like to remind everyone that this conference and any accompanying information discussed herein contains certain forward-looking statements within the meaning of the Safe Harbor Provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements can be identified by terms 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 31, 2021. Continued growth, acquisition strategy, ability to deliver sustainable, long-term value, ability to respond to the changing environment, and operational focus.
Before we get started I would like to remind everyone that this conference at any accompanying information discussed herein contains certain forward looking statements with the in the meaning of the safe Harbor provisions of the private Securities Litigation Reform Act of 1995. These forward looking statements can be identified.
By terms such as anticipate believe expect future plan outlook and will and include among other things statements regarding the company's guidance for the year ended December 31st 2023 continue gross acquisition strategy ability to deliver sustainable long term value ability to respond.
To the changing environment operational focus strategic growth plans and our merger integration efforts.
Operator: Basic Growth Plans and Merger Integration Efforts Although the company believes that the expectations reflected in these forward-looking statements are reasonable as of today, those statements are subject to risk and uncertainties that could cause the actual results to differ dramatically from those projected, and there can be no assurance that those expectations will prove to be correct. Information about the risks associated with investing in Astrona's health is included in its filings with the Securities and Exchange Commission, which we encourage you to review before making an investment decision. The company does not assume any obligations to update any forward-looking statements as a result of new information, future events, and changes in marketing conditions or otherwise, except as required by law.
Although the company believes that the expectations reflected in these forward looking statements are reasonable as of today. Those statements are subject to risks and uncertainties 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 our strong as health is included in its filings with the Securities and Exchange Commission, while we encourage which we encourage you to review before making an investment decision.
The company does not assume any obligations to update any forward looking statements as a result of new information future events and changes in market conditions or otherwise, except as required by law.
Brandon Taylor: Regarding the disclaimer language, I would also like to refer you to slide 2 of the conference call presentation for further information. With that, I'll turn the call over to Astronis Health President and Chief Executive Officer, Brandon Taylor. Please go ahead, Brandon.
Regarding the disclaimer language I would also like to refer to you to slide two of the conference call presentation for further information.
With that I'll turn the call over to a strong as health President and Chief Executive Officer, Brandon said.
Please go ahead Brendan.
Brandon Taylor: Good evening, and thank you all for joining us today. We are proud to announce another year marked by rapid scaling of our unique care model to empower providers and improve health care for local communities at Pastrana Health. We coupled that with robust financial achievements, ensuring that our growth efforts are sustainable and maintaining a focus on profitability. We continue to execute against their multidimensional strategic roadmap. One, focusing on expanding our membership base across existing and new geographies; and three, increasing the level of accountability and risk we are responsible for in our value-based care contract.
Good evening and thank you all for joining us today.
We are proud to announce another year marked by rapid scaling of our unique care model to empower providers and improve health care for local communities Episternal health.
We coupled that with robust financial achievements.
Hearing their growth efforts are sustainable.
And maintaining a focus on profitability.
We continue to execute against their multi dimensional strategic roadmap, one focusing on expanding our membership base across existing and new geography.
Q, increasing the level of accountability and risk we are responsible for our value based care contracts.
We are empowering our providers to achieve superior patient outcomes and four executing strategic acquisitions to further accelerate our growth trajectory for the foreseeable future.
Brandon Taylor: Empowering our providers to achieve superior patient outcomes, and 4. executing strategic acquisitions to further accelerate our growth trajectory for the foreseeable future. We are confident that the infrastructure we have built and the momentum we have in our value-based care platform will continue to accelerate the country toward their vision, one in which every American has access to high-quality, high-value health care. I'll begin by highlighting our financial accomplishments for the fourth quarter of 2020. We recorded total revenue of $353 million, an increase of 20%, and adjusted EBITDA of $29 million, an increase of 22.7% from the fourth quarter of 2022. For the full year of 2023, Estrana Health achieved total revenues of $1.39 billion, an increase of 21.2% year-over-year, and adjusted EBITDA of $146.6 million, up 4.7% year-over-year, yielding an adjusted EBITDA margin of 11%, which is within our short-term target EBITDA range of 10 to 15%.
We are confident that the infrastructure, we have built and the momentum we have in our value based care platform will continue to accelerate the country towards their vision.
One in which every American has access to high quality high value health care.
I'll begin by highlighting our financial accomplishments for the fourth quarter of 2023.
We recorded total revenue of $353 million, an increase of 20% and adjusted EBITDA of $29 million, an increase of 22, 7% from the fourth quarter of 2022.
For the full year of 2023, Australia Health achieved total revenues of 1.39 billion, an increase of 21, 2% year over year.
Adjusted EBITDA $146 6 million up four 7% year over year.
Building, an adjusted EBITA margin of 11%, which is within our short term target EBITDA range of 10% to 15%.
Brandon Taylor: This was despite headwinds in terms of Medicaid redetermination, increased utilization, and costs due to our investments in growth, infrastructure, and new market entry. Turning now to business updates for the year. Since our last earnings call, we have formed a new partnership with Bass Medical Group. A key pillar of Astrana's unique care model is the deep integration between primary care providers and specialist networks.
This was despite headwinds in terms of Medicaid to beat the termination.
Increased utilization and costs due to our investments in growth infrastructure and new market country.
Yeah.
Turning now to the business update for the year.
Since our last earnings call, we have formed a new partnership with bass Medical group.
A key pillar of Australia is unique care model is the deep integration between primary care providers and specialists networks, our long term strategic partnership with bass is in our view the expression of this thesis.
Brandon Taylor: And our long-term strategic partnership with BASC is, in our view, an expression of this default. This relationship is set to enhance the value-based care framework and operational capabilities for Bass Medical Group, which boasts over 400 providers across key Northern California counties. Our collaborative efforts aim to deliver top-tier care through value-based models to a diverse patient base across all lines of business throughout Northern California. Operationally, our collaboration with BAS involves establishing a premier high-quality independent provider network, or IPA, in Northern California, which we expect to fully transition to full risk in 2025 and beyond by leveraging a restricted Noxikine license to foster new aligned care models. Our primary care provider networks will have wider access to an aligned, high-quality specialist, which will enable care coordination and will help manage cost effectiveness. Assist providers will also be supported by our technology platform as they join Astrana's care enablement platform in 2024.
This relationship is set to enhance the value based care framework and operational capabilities for bass Medical group.
Which boasts over 400 providers across key Northern California counties.
Our collaborative efforts aim to deliver a top tier care through value based models to a diverse patient base across all lines of business throughout northern California.
Operationally, our collaboration with bass involves establishing a premier high quality independent provider network or I P. A northern California.
We expect to fully transition to full risk in 2025 and beyond by leveraging our restricted Knox Keene license to foster new lines care models.
Our primary care provider networks will have wider access to an aligned high quality specialist network, which will enable care coordination and will help manage cost effectiveness.
That's just providers will also be supported by our technology platform.
He joined US trying to care enablement platform in 2024.
Brandon Taylor: This will extend our value-based care footprint in the greater San Francisco Bay Area while enriching our network with more primary care physicians and specialists. Next, I'd like to highlight our ability to replicate our success in Southern California in new markets, having recently entered several new states. Our approach to market expansion is flexible, rooted in our history of building partnerships with physician practices and adapting to local market dynamics. Whether through partnerships, de novo builds, acquisitions, or technology offerings, our ability to flexibly utilize our care partners, care delivery, and care enablement offers to adapt to the needs of local providers and communities allows us to remain adaptive and nimble as we enter these new markets. In Nevada, the notable presence of both the payer and the health system partner has guided our expansion into Clark County, where we have established over a year of operations. In addition to our initial entry via a chain of own primary care clinics in our care delivery segment, we have now augmented that footprint by building a care partners network of over 300 high quality, high value primary care providers and specialists.
This will extend our value based care footprint in the greater San Francisco, San Francisco Bay area, while enriching our networks with more primary care physicians and specialists.
Next I'd like to highlight our ability to replicate our success, Southern California, and new markets, having recently entered several new states.
Our approach to market expansion, it's flexible rooted in our history of building partnerships with physician practices.
Captain to local market dynamics.
Whether through partnerships de novo builds acquisitions, our technology offerings, our ability to flexibly you by our care partners care delivery and care enabled and offerings to adapt to the needs of local providers and communities.
Allows us to remain adaptive and nimble as we enter these new markets.
In Nevada, the notable presence at both the payer and the health system partner has guided our expansion into Clark County, where we have established over a year of operational experience.
In addition to our initial entry via a chain of one primary care clinics in our care delivery segment.
We've now augmented that footprint by building our care partners network of over 300 high quality high value primary care providers and specialists.
We continue to focus on building density in each new market we enter.
We expect our Nevada market to be run rate breakeven by the end of the year.
Following our acquisition of Texas independent providers and independent provider Association into our care partner segment in September of 2023, we.
Brandon Taylor: We continue to focus on building density in each new market we enter, and we expect our Nevada market to be run rate break even by the end of the year. Following our acquisition of Texas Independent Providers and Independent Provider Association into our care partner segment in September of 2020, we have achieved significant advancements within the state of Texas as well.
We have achieved significant advancements within the state of Texas as well.
Our efforts have successfully expanded our network of exclusive primary care providers and our membership base.
As we strategically continue to add specialty coverage in Harris County, we have made notable strides in securing incremental Medicare advantage contracts with health plans.
We are committed to further enlarging our clinical footprint within the region.
And thereby enhancing our delivery of value based care.
We continue to view our pipeline of partnerships and expansion opportunities is very robust and will provide further updates as they occur.
Brandon Taylor: Our efforts have successfully expanded our network of inclusive primary care providers and our membership base. As we strategically continue to add specialty coverage in Harris County, we have made notable strides in securing incremental Medicare Advantage contracts with health plans. We are committed to further enlarging our clinical footprint within the region and thereby enhancing our delivery of value-based care. We continue to view our pipeline of partnerships and expansion opportunities as very robust and will provide further updates as they materialize. As previously communicated, we plan to enter at least one to two new markets per year. Invest $5 to $10 million per market to do so.
As previously communicated we plan to enter at least one to two new markets per year.
Invest $5 million to $10 million per market to do so.
The 'twenty 'twenty four guidance that John will discuss later on this call will include the cost of planned new market entry.
Next we have significantly advanced our capability engage and manage our patients in full risk arrangements since announcing our acquisition of community family care or C. A T in November of 2023.
We're excited to share that on January 31, 'twenty 'twenty four we seamlessly on boarded he has fees I T E as in its chronic care partner.
Which manages the health care of over 200000 members in the Los Angeles, California area across Medicare Medicaid and commercial payers.
The acquisition of the CRC Health plan and MSR entities are still on track to close by the end of the first quarter 2024.
Brandon Taylor: The 2024 guidance that Chan will discuss later on this call will include the costs of the planned new market. Next, we have significantly advanced our capability to engage and manage our patients in full-risk arrangements since announcing our acquisition of Community Family Care, or CFC, in November of 2026. We're excited to share that on January 31st, 2024, we seamlessly onboarded CFC's IPA as an astronaut care partner, which manages the healthcare of over 200,000 members in the Los Angeles, California area across Medicare, Medicaid, and commercial payers. The acquisition of the CFC health plan and MSO entities is still on track to close by the end of the first quarter of 2020.
We are also excited to announce our rebranding to Australia House, NASDAQ ticker E. S T H.
February 26th 2024.
This new brand identity reflects our expanding national presence and commitment to delivering quality care and nationwide as we support forward thinking providers and care teams and creating a constellation of high quality care.
Additionally, we've made several key leadership changes to continue to support that Chris.
Adding new roles for Dr. Thomas Lam myself and John Bosco.
I'll also warmly welcoming Doctor Dinesh Kumar <unk>, Chief Medical Officer.
Our commitment to accessible high quality value based care and our proven track record in managing care costs and patient outcomes give us confidence in our ongoing profitability and growth.
The momentum we are experiencing is a testament to our team's dedication and the innovative strategies, we're employing to enhance health care delivery.
In closing I extend my deepest gratitude to our team our providers and our partners for their unwavering support and shared vision of transforming health care in communities across the nation.
John Basho: We are also excited to announce our rebranding to Astrona Health, NASDAQ ticker ASTH, as of February 26, 2024. This new brand identity reflects our expanding national presence and commitment to delivering quality care nationwide as we support forward-thinking providers and care teams in creating a constellation of high-quality care. Additionally, we've made several key leadership changes to continue to support that growth, including new roles for Dr. Thomas Lamb, myself, and Chan Basho, while also warmly welcoming Dr. Dinesh Kumar as Chief Medical Officer. Our commitment to accessible, high-quality, value-based care and our proven track record in managing care costs and patient outcomes give us confidence in our ongoing profitability and growth. The momentum we're experiencing is a testament to our team's dedication and the innovative strategies we're employing to enhance health care delivery.
I will now pass the discussion to John Bacci, Chief Financial and operating officer for a detailed review of our financial results.
Thank you Brandon we continued to deliver strong results reporting total revenue of $1 three 9 billion for 2023 an.
An increase of 21% from $1, one 4 billion in 2022.
Our topline growth was driven by growth in all three of our core segments.
In aggregate adjusted EBITDA was $146 6 million.
Up four 7% from $140 million in the prior year.
Net income attributable to smaller health was 67 million and.
An increase of 34, 3% from $45 2 million in 2022.
Earnings per share on a diluted cases, where $1.29.
Up 33% from 99 cents in the prior year.
Now turning over to the balance sheet.
John Basho: In closing, I extend my deepest gratitude to our team, our providers, and our partners for their unwavering support and shared vision of transforming health care and communities across the nation. I will now pass the discussion to John Basho, Chief Financial and Operating Officer, for a detailed review of our financial results. Thank you, Brandon. We continue to deliver strong results, reporting total revenue of $1.39 billion in 2023, an increase of 21% from $1.14 billion in 2022. Our top-line growth was driven by growth in all three of our core segments.
We remain well capitalized and well positioned to execute.
On our growth initiatives.
We ended the fourth quarter with $293 8 million in cash and cash equivalents compared to 288 million at the end of 2022.
Total debt at the edge.
Ended the fourth quarter was 282 million.
Our substantial liquidity continues to support our strategy around sustained growth.
I'd like to formally announce the spin off of the real estate portion of the a P. C excluded assets as we have discussed in prior quarters.
As a reminder for all.
The real estate portion of P. P C excluded assets.
Are the consolidated real estate assets held by a P C common shareholders.
As we've described in the past they are solely for the benefit of our S. E T C and its shareholders.
John Basho: In aggregate, adjusted EBITDA was $146.6 million, up 4.7% from 140 million in the prior year. Net income attributable to Astrona Health was $60.7 million, an increase of 34.3% from 45.2 million in 2022. Earnings per share on a diluted basis were $1.29, up 30.3% from 99 cents in the prior year.
On December 26 2023.
E. P C. A consolidated affiliate of Australia health completed a restructuring transaction to separate agencies real estate business.
As a result of the strategic spinoff, we're now able to consolidate our tax filing status into a single entity.
This will avoid our historical tax implications related to intercompany dividends.
Due to this change our tax rate in 2023 was 35, 6% versus our tax rate of 47, 2% in 2022.
John Basho: Now turning over to the balance sheet, we remain well-capitalized and well-positioned to execute on our growth initiative. We ended the fourth quarter with $293.8 million in cash and cash equivalents compared to $288 million at the end of 2022. Total debt at the end of the fourth quarter was $282 million.
Moving forward 2020 for a full year effective tax rate is expected to be approximately 34%.
I should note as you review our 2023 financials.
Our balance sheet as of December 31, 2023, no longer reflects the real estate distressed assets and liabilities.
John Basho: Our substantial liquidity continues to support our strategy around sustained growth. I'd like to formally announce the spinoff of the real estate portion of the APC Excluded Asset, as we have discussed in prior quarters. As a reminder for all, the real estate portion of APC's Excluded Assets is the consolidated real estate assets held by APC common shareholders. As we've described in the past, they are solely for the benefit of our affiliate, APC, and its shareholders on December 26, 2023. APC, a consolidated affiliate of Astrana Health, completed a restructuring transaction to separate its real estate business.
However, our income statement reflects the results of operations of such businesses through December 26, 2023.
I want to highlight a nuance in Q4 associated with bonuses paid out by EPC excluded assets to their provider shareholders.
This one time bonus in Q4, 2023, a 14 million ran through Cogs and will skew medical costs.
One is using cards as the numerator and calculated revenue as the denominator.
Going forward post spin off our financial statements will no longer need to be separated between those trauma.
John Basho: As a result of this strategic spinoff, we are now able to consolidate our tax filing status into a single entity. This will avoid our historical tax implications related to intercompany dividends. Due to this change, our tax rate in 2023 was 35.6% versus our tax rate of 47.2% in 2022. Moving forward, our 2024 full-year effective tax rate is expected to be approximately 34%.
And excluding the assets.
As we wrap up 2023, and think about 2024 I'd like to touch on four key areas.
D C O utilization management, HCC model changes and our movement to full risk.
We now have over 37000 members in a Medicare advanced payment program.
In 2024, we launched a new M. S. S. P for providers strata whole family or at an earlier stage in their value based care journey for their fee for service Medicare patients.
Cornerstone of our strategy is empowering these providers with some old data to ensure exceptional patient outcomes.
John Basho: As a note, as you review our 2023 financial... Our balance sheet, as of December 31st, 2023, no longer reflects the real estate business assets and liabilities. However, our income statement reflects the results of operations of such businesses through December 26, 2023. I want to highlight a nuance in Q4 associated with bonuses paid out by APC-excluded assets to their provider shareholders. This one-time bonus in Q4 2023 of $14 million ran through COGS and will skew medical costs if one is using COGS as the numerator and capitated revenue as the denominator. Going forward, post-spinoff, our financial statements will no longer need to be separated between Astrana Health assets and Excluded Assets.
Across both our SSP and our full risk ACO reach we continue to invest in our care management and technology infrastructure to ensure both programs continued success.
In regards to utilization management, we continue to monitor utilization trends with the latest data, indicating a very slight uptick in Medicare advantage utilization as seen across the industry.
However, due to our diverse pair mix our overall utilization is in line with historical trends are.
'twenty 'twenty four forecast includes these assumptions moving forward.
Around the HCC model changes to V 28.
We see a nominal change within our managed care population in 2024, and a less than 1% change in our ACO population in 2024 versus 2023.
Our 2024 forecast also includes the projected impact from these changes moving forward.
John Basho: As we wrap up 2023 and think about 2024, I'd like to touch on four key areas: ACO, Utilization Management, HCC model changes, and our movement to full risk. We now have over 37,000 members in a Medicare Advanced Payment Program.
Now when we look at our financials today. The majority of our managed care financials are on a partial risk basis.
What that means is today, we are recording the professional risk off our overall care model.
Over the next 24 months, we expect to move more and more from a professional risk basis to a full risk basis.
John Basho: In 2024, we launched a new MSSP for providers in our Astrona Health family who are at an earlier stage in their value-based care journey for their fee-for-service Medicare patients. The cornerstone of our strategy is empowering these providers with actionable data to ensure exceptional patient outcomes. Across both our MSSP and our full-risk ACO reach, we continue to invest in our care management and technology infrastructure to ensure both programs' continued success. In regards to utilization management, we continue to monitor utilization trends with the latest data indicating a very slight uptick in Medicare Advantage utilization as seen across the industry. However, due to our diverse pair mix, our overall utilization is in line with historical trends. Our 2024 forecast includes these assumptions moving forward. As the HCC model changes to V28, we see a nominal change within our managed care population in 2024 and a less than one percent change in our ACO population in 2024 versus 2023.
We will capture a higher portion of the premium dollar.
Proving our ability to coordinate care across the health care spectrum for patients and improving our financial unit economics.
Last quarter, our full risk book of business made up 46% of total capitation revenue.
As of January 1st our full risk business makes up 49% of total capitation revenue.
We expect our full risk business to continue to grow this year.
In summary, we have the capacity today to manage full risk members and to perform delegated per life functions, such as utilization management care management and claims processing.
With this change we are now moving further up the risk continuum, while continue to deliver high quality care for our members.
Turning now to our 2020 for guidance.
We expect to be between 165 billion and $1 eight 5 billion of revenue.
We remain confident in our growth due to the execution of our organic and inorganic growth plans as well as our transition to full risk.
We anticipate that our adjusted EBITDA will range from 165 million to 185 billion.
Our expectations are based on the stability of utilization trends across our at risk portfolio and a conservative approach to projections.
John Basho: Our 2024 forecast also includes the projected impact from these changes moving forward. Now, when we look at our financials today, the majority of our managed care financials are on a partial risk-based basis. What that means is today we are recording the professional risk of our overall care model. Over the next 24 months, we expect to move more and more from a professional risk basis to a full risk basis. We will capture a higher portion of the premium dollar, improving our ability to coordinate care across the health care spectrum for patients and improving our financial unit's profitability. Last quarter, our full risk book of business made up 46% of total capitation revenue.
As we shift towards accommodating a greater number of full risk patients, we foresee enhancements and our operational efficiencies and institutional risk management.
This strategic shift is expected to positively impact our unit economics.
In regards to GAAP earnings per diluted share, we expect to be between $1 28, a share and $8 52 per share.
While we are providing guidance on a full year basis, we recognize the importance of understanding the nuances that each quarter per se.
With the closing of CFC IPA and the future planned closing of CFC Health plan, we anticipate a notable uplift in our revenue from Q4 2023 to Q1, 'twenty 'twenty four and even further in Q2 'twenty 'twenty four when we will experience a full quarter of impact.
John Basho: As of January 1st, our full-risk business made up 49% of total capitation revenue. We expect our full-risk business to continue to grow this year. In summary, we have the capacity today to manage full-risk members and to perform delegated part-life functions, such as utilization management, care management, and claims processing. With this change, we are now moving further up the risk continuum while continuing to deliver high-quality care for our members. Turning now to our 2024 guide, we expect it to be between $1.65 billion and $1.85 billion in revenue. We remain confident in our growth due to the execution of our organic and inorganic growth plans, as well as our transition to full risk. We anticipate that our adjusted EBITDA will range from $165 million to $185 million.
From CFC in our financials.
Historically, our business has experienced seasonal trends in line with industry norms.
Our margin typically is normalized for Q1, while expanding in the second and third quarters. As one time settlements are recognized before returning to a normalized level in the fourth quarter.
It's important to note that while we strive for operational excellence and margin improvements, our strategic investments and market expansion and transition to full dress or time to optimize the long term growth, which may result in quarter to quarter margin variability.
We believe this context is crucial for our investors as it provides the lens through which to view our quarterly performance within the framework of our annual guidance.
John Basho: Our expectations are based on the stability of utilization trends across our at-risk portfolio and a conservative approach to projection. As we shift towards accommodating a greater number of full-risk patients, we foresee enhancements in our operational efficiencies and institutional risk management. The strategic shift is expected to positively impact our unit economy. In regards to GAAP earnings per diluted share, we expect them to be between $1.28 a share and $1.52 per share.
Finally, I want to reiterate the bright future ahead for our strong business development pipeline, coupled with the strength of farm bottle as we look ahead to 2025 2026 and beyond.
With that I'm going to hand, it back over to Brad.
In conclusion, we are proud of the positive impact we've had on the communities we serve our growth partnerships, our financial achievements and our capital deployment strategy over the past year.
John Basho: While we are providing guidance on a full year basis, we recognize the importance of understanding the nuances that each quarter may present. With the closing of CFC IPA and the future planned closing of CFC Health Plan, we anticipate a notable uplift in our revenue from Q4 2023 to Q1 2024, and even further in Q2 2024, when we will experience a full quarter of impact from CFC in our financials. Historically, our business has experienced seasonal trends in line with industry norms.
Showcasing our platform's capacity to consistently achieve three main operational objectives, one expanding our member base, both existing and new geographies too.
Q supporting our care delivery and care partners providers in their transition to value based care.
And three empowering our providers to achieve outstanding patient outcomes for full risk.
The recent partnership with Best Medical group the acquisition of P. S. T E. P. A M T M C health plan and the continued move towards full risk further diversify our membership mix and provide us with pathways to expand our value based care exposure.
John Basho: Our margin typically is normalized for Q1 while expanding in the second and third quarters as one-time settlements are recognized before returning to a normalized level in the fourth quarter. It's important to note that while we strive for operational excellence and margin improvements, our strategic investments in market expansion and transition to full risk are timed to optimize long-term growth, which may result in quarter-to-quarter margin variability. We believe this context is crucial for our investors as it provides a lens through which to view our quarterly performance within the framework of our annual guidance. Finally, I want to reiterate the bright future ahead for our strong business development pipeline coupled with the strength of our model as we look ahead to 2025, 2026, and beyond. With that, I'm going to hand it back over to Brad.
He's got a health platform provides a highly differentiated pure play value based care company that is not only growing rapidly, but also yields a profitable and sustainable growth.
We have made strong progress across all three objectives and have established a solid foundation for a bright future of continued growth and impact in 2024.
And we're excited to further accelerate our mission.
To provide every American with access to high quality high value health care.
Thank you all for your time today.
With that operator, let's open it up for Q&A.
Thank you we will now be conducting a question and answer session. If you would like to ask a question. Please press star one on your telephone keypad.
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Brandon Taylor: In conclusion, we are proud of the positive impact we've had on the communities we serve, our growth partnerships, our financial achievements, and our capital deployment strategy over the past year, showcasing our platform's capacity to consistently achieve three main operational objectives. 1. Expanding our member base in both existing and new geographies.
For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.
One moment, please while we poll for questions.
Thank you.
Our first question comes from the line of Ryan Daniels with William Blair.
Please proceed with your question.
Yeah, Hey, guys. This is Jack on for Ryan Daniels. Thanks for taking the questions in terms of EBIT margins. You ended 2023 with EBIT margins of about 11% and if we take the midpoint of the 'twenty 'twenty four guide adjusted EBITDA margin is right at about 10%, which is still impressive but I know the integration of the arcade K license is supposed to bring some margin.
Brandon Taylor: Supporting our care delivery and care partners' providers in their transition to value-based care. And three, empowering our providers to achieve outstanding patient outcomes for forward. The recent partnership with Bass Medical Group, the acquisition of CFC IPA and CFC Health Plan, and the continued move towards full risk further diversify our membership mix and provide us with pathways to expand our value-based care exposure. The Astrana Health Platform provides a highly differentiated, pure play, value-based care company that is not only growing rapidly but also yields profitable and sustainable growth.
Improvement in I know that you're focused on operational efficiency. So it's a flat margin outlook just more conservatism is it that the archaic he won't have too much of an impact yet in 2024 is it maybe just like the new market entry costs, causing it.
Can you just kind of walk us through the puts and takes to the EBITDA margin for 2024.
Operator: We have made strong progress across all three objectives and have established a solid foundation for a bright future of continued growth and impact in 2024, and we're excited to further accelerate our mission to provide every American with access to high-quality, high-value healthcare. Thank you all for your time today. With that operator, let's open it up for Q&A. Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question area. You may press star 2 if you would like to remove your question. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the switch.
Hey, Jack and thank you for joining the call and thanks for the question you're.
Youre right the.
The midpoint of revenue and adjusted EBITDA implies around a 10% margin.
And there are a couple of puts and takes there are you know we would first note that we've historically been conservative and are our first attempt at it the guidance.
So the range of our numbers for the year, we'd also point out that there are a couple of headwinds.
And the industry, obviously around Medicare advantage around the risk model. While we think we are relatively insulated from some of the changes that others may be experiencing.
Due to an abundance of caution.
We've you know that that does put a slight headwind towards versus historical margins. I would also note that the impacts of Medicaid redetermination as well as.
Any lingering effects of that as well as.
Continued investment in our platform and new market entry are all baked into our guidance as currently contemplated I'll turn it over to John to add anything else.
Operator: One moment, please, while we pull for questions. Thank you. Our first question comes from the line of Ryan Daniels with William Blair. Please proceed with your, Hey guys, this is Jack Dunstan for Ryan Daniels.
Yeah, No I think you covered everything.
Okay, great. Thanks, guys I appreciate that just a quick follow up then two so just kind of focusing on the growth outside of California, I'm just kind of curious how we should think about that I know a lot of the commentary lately has been focused on the California market. Just you know given the art KK for Medicare and.
Jack Dunstan: Thanks for taking the questions. In terms of EBITDA margins, you ended 2023 with EBITDA margins of about 11%. And if we take the midpoint of the 2024 guideline adjusted EBITDA margin, it is right at about 10%, which is still impressive. But I know the integration of the RKK license is supposed to bring some margin improvement. And I know that you're focused on operational efficiency. So is the flat margin outlook just more conservatism? Is it that the RKK won't have too much of an impact yet in 2024? Or is it maybe just like the new market entry costs causing it?
Medicaid, though and I think you in your prepared remarks, you mentioned that Nevada will be run rate breakeven by year end. So just kind of given the success that you are seeing outside of California are you beginning to possibly look at additional geographies as well or just kind of what is your mindset with respect to further furthering penetration outside of the California market.
Yeah definitely so as previously guided we will continue to.
We look to expand into one or two new markets per year.
So it was a market entry costs, which you've typically run at the low end of the five to 10 million range that I got you on the call.
<unk> had been baked into.
Guidance ranges for the year as well.
Brandon Taylor: Can you just kind of walk us through the puts and takes for the EBITDA margin for 2024? Thanks. Hey, Jack.
And the adjusted EBITDA line.
Yeah.
We typically look at markets.
A building depth rather than.
John Basho: Thank you for joining the call. And thanks for the question. You're right, the midpoint of revenue and the adjusted EBITDA applies around a 10% margin. And there are a couple of footsteps there.
Trying to fill every single state on the map.
So I think there's a certain level of deliberation, when we enter a new market, but when we do we want to ensure that the care model technology infrastructure is deployed in a systematic way that allows us to continue breaking even within that two year time period, as we had guided to before as well so that's kind of the intense.
Brandon Taylor: You know, we'd first note that we've historically been conservative in our first attempt out at a guidance set of range numbers for the year. We'd also point out that there are a couple of headwinds in the industry, obviously around Medicare Advantage, around the risk model, while we think we are relatively insulated from some of the changes that others may be experiencing. Again, due to an abundance of caution, that does put a slight headwind versus historical margins, impacts of Medicaid redetermination as well as or any lingering effects of that as well as continued investment in our platform and new market entry are all baked into our guidance as currently contemplated. I'll turn it over to John to add anything else. Yeah, no, I think you covered everything, Brian.
You know with Nevada, and Texas ramping up in Nevada expected to be run rate profitable this year.
We we are certainly looking towards additional markets.
Okay, great. Thanks, and then if I could just sneak one final one in here so PP&E decreased pretty substantially this quarter just wanted to double click is this all because of the a P. C real estate spin off or was there something else that just caused that impact. Thanks again guys.
Yeah.
I think youre correct in terms of.
With our changes in terms of the real estate spin off you will see those appropriate changes on the balance sheet.
Thank you.
Our next question comes from the line of Brooks O'neil with Lake Street Capital markets. Please proceed with your question.
Thank you very much good afternoon.
John Basho: Okay, great. Thanks, guys. I appreciate that. Just a quick follow up then, too. So, kind of focusing on the growth outside of California, I'm just kind of curious how we should think about that.
Just following up on that last question I, just wanted to be 100% clear that you guys are including this five to 10 million.
Her new market entry, but you haven't included any assumption about the impact of <unk>.
Brandon Taylor: I know a lot of the commentary lately has been focused on the California market, just, you know, given the RKK for Medicare and Medicaid. So, and I think, too, in your prepared remarks, you mentioned that Nevada will be run rate break even by year end. So, just kind of given the success that you are seeing outside of California, are you beginning to possibly look at additional geographies as well? Or just kind of what is your mindset with respect to furthering penetration outside of the California market? Yeah, definitely.
Whatever you could do to enter these new markets in terms of affiliations partnerships et cetera.
Okay.
Hey, Bob how are you good good.
So our 24th for test.
Includes our.
The investments, we will be making for these one to two markets.
It is built into the numbers today.
The investments are but not there.
The impact of all of them.
New group or new partnership or whatever and in these new markets.
Brandon Taylor: So, as previously guided, we will continue to look to expand into one or two new markets per year. Those market entry costs, which we've typically run at the low end of the 5-10 million range that I got to on the call, have been baked into our guidance ranges for the year as well on the Just Be Bedell line. We typically look at markets in terms of building depth rather than, you know, trying to fill every single state on the map.
You know what I'm asking.
Both the investment into the business development marketing et cetera, as well as potential.
Ongoing operating costs of operating the group are baked into the guidance.
Okay, I think I got that right.
Obviously, there's been a lot of talk about elevated medical costs from some of the payers in particular United.
Aetna Humana.
I'm curious.
Do you have any sense that.
Brandon Taylor: So I think there's, is going to talk about, you know, with Nevada and Texas ramping up, and Nevada expected to be run very profitable this year, we are certainly looking towards additional markets. Okay, great. Thanks. And then if we can just sneak one final one in here.
Providers in your core market.
So elevated medical costs.
Yeah.
Do you have a sense that it was yeah.
Your approaches to medical management.
Here that enabled you to do a good job of controlling those medical costs or do you have any comment you see what I'm asking.
Yeah, Let me give it a try brooks. Thank you for the question.
Jack Dunstan: So PP&E decreased pretty substantially this quarter. Just wanted to double check. Is this all because of the APC real estate spinoff? Or was there something else that just caused that impact?
I think I would say that it's difficult for us to comment on the regional performance of any of our payer partners, but.
Given the level of interest that we're seeing from from our carrier partners in terms of.
John Basho: Thanks again, guys. Yeah, I think you're correct in terms of our changes to the terms of the real estate spin-off. You will see those appropriate changes come about. Thank you. Our next question comes from the line of Brooks O'Neill with Lake Street Capital Market. Please proceed with your question. Thank you very much. Good afternoon. Just following up on Jack's last question, I just want to be 100% clear that you guys are including this $5 to $10 million per new market entry, but you haven't included any assumption about the impact of whatever you do to enter these new markets in terms of affiliations, partnerships, etc. Hey Brooks, how are you?
Mining.
Members to our value based care platform.
We think that you know what we can speak about is that the strength of our care model.
And the durability and management of costs medical costs associated with the patients that we are financially and clinically responsible for.
It has been a value add to our payer partners and we continue to see strong interest in partnership and expanding our already successful partnerships into new regions and to growing the book of business that we have with our payer partners.
And we look forward to continue serving them.
And helping them decrease and he flicked fluctuation that they may be facing.
Well for our patient panels.
Sure.
That's that's very helpful. Thank you. So let me just ask one last one in.
Brooks O'Neill: Great to see you. So, our 24-4 task includes the investments we will be making for these women. Sorry, it is locked into the... The investments are the impact of a new group or a new partnership or whatever in these new markets. Both the investment in business development, marketing, et cetera, as well as the potential ongoing operating costs of operating the group are baked into the guidance. Okay, okay. I think I got that. Obviously, there's been a lot of talk about elevated medical costs from some of the payers, in particular United Health Care and Humana. I'm curious.
I'm just trying to get my arms around the whole.
The notion of you guys taking full risk.
Believe is a great development and something you are more than capable of handling.
I'm, assuming that the big <unk>.
Opportunity in the marketplace is to reduce inpatient hospital costs.
Can you just talk a little bit about that how the hospitals are viewing the transition that's going on out there in the world that that you know, yes, dear how he feels about the other being in the field, but.
Tell me what did you see in the marketplace to what the conversations are like out there.
Thanks for the question I think there are.
There's a bit of a.
The Virgin and the health systems and hospitals, we work with them.
Brandon Taylor: Do you have any sense that... providers in your core market, star, elevated medical costs and, Do you have a sense that it was your approaches to medical management and value-based care that enabled you to do a good job of controlling those medical costs? Or do you have any comments?
Does that.
Have had a plan in place.
As there.
You know there are changes in Medicare advantage and as there are changes in utilization trends, we've seen and been successful, especially when they're working with us to keep the lower acuity and lower dollar per bed day patients out of the hospital and ensuring that the appropriate place of care is being used for.
Brandon Taylor: Do you understand what I'm asking? Yeah, let me give it a try. Brooks, thank you for the question. I think I would say that it's difficult for us to comment on the regional performance of any of our payer partners, but given the level of interest that we are seeing from our peer partners in terms of, um, aligning members to our value-based care platform. We think that, you know, what we can speak about is that the strength of our care model and the durability and management of costs, medical costs associated with the patients that we are financially and clinically responsible for have been a value add to our payer partners. We continue to see strong interest in partnership and expanding our already successful partnerships into new regions, into growing the book of business that we have with our payer partners, and we look forward to continuing serving them and helping them decrease any fluctuations Sure. All that makes sense. That's very helpful.
Given procedure for a given patient.
Why are we you know, we think there's greater and greater awareness among hospitals and health systems around the benefits of doing that.
And we continue to be in conversations with a lot of large health systems and hospitals to bring that model.
Could you do the geographies that we serve.
Brooks I may have missed one of your earlier questions I apologize around.
What was baked into our 24 ethnically Walt maybe I'll answer that quickly okay.
After a new market market new market entry are baked into the bottom.
Bottom line guidance, but.
Our revenues.
<unk> are pretty minimal.
Okay minimal baked in on the top line for new groups that we may partner with this year and so that that's been impacting top and bottom line for when your partnerships in new markets and for 'twenty going forward.
Brandon Taylor: Thank you. So, let me just ask one last question. You know, I'm just trying to get my arms around the whole notion of you guys taking full risk, which I believe is a great development and something you're more than capable of handling. I'm assuming that the big opportunity in the marketplace is to reduce inpatient hospital calls. Can you just talk a little bit about that and how hospitals are viewing the transition that's going on out there in the world? Not that, you know, you ask the deer how he feels about the hunter being in the field, but just tell me what you see in the marketplace and what the conversations are like out there. Thanks for the question. I think there are...
Thank you for clarifying that I was thinking that was the answer but I didn't actually hear you say it. So here you say it is very helpful. Thank you again.
Thank you Brooks.
Okay.
Thank you. Our next question comes from the line of David Larsen with B P. I G. Please proceed with your question.
Can you please talk a little bit more about the data files churn. How currently are like Avalon talked about getting more data higher utilization claims Privy you talked about getting a sort of a more accurate forecast with data and high utilization.
Do you basically have all of the 23 data in now or are we through that and we have high conviction about where they are sorry for the background noise. Thank you.
Brandon Taylor: There's a bit of a... divergence in the health systems and hospitals we work with, you know, those that have a plan in place as there are changes in Medicare Advantage and as there are changes in utilization trends. We've seen it be successful, especially when they're working with us to keep the lower acuity and lower dollar per bed day patients out of the hospital and ensuring that the appropriate place of care is being used for a And we continue to be in conversations with a lot of large health systems and hospitals to bring that model to the geographies that we serve. Brooks, I may have missed one of your earlier questions. I apologize about what was baked into our 24 estimates as well, so maybe I'll answer that quickly. Okay.
Yeah.
Hey, David Thank you for the question did you hear from you.
Around.
Our visibility.
<unk> data.
You know I think we have.
That's good of you know as good visibility as good a visibility as it could be had as we had mentioned before we operate under delegated environment, where we are responsible for authorizing prior authorization requests.
Managing the referrals in our network.
As well as paying the claims associated or the costs of the claims associated with it.
The claims and authorizations that we process them.
That combined with our proprietary data infrastructure.
And our teams ability to predict based on historical usage and the trends that we're seeing give us a good amount of visibility into.
Where utilization might trend.
Brandon Taylor: You know, all of the costs of new market entry are baked into the bottom line guidance, but our revenues are pretty minimal, zero to minimal baked in on the top line for new groups that we may partner with this year. So that's the impact on the top and the bottom line for new partnerships and new markets for 2025. Thank you for clarifying that. I was thinking that was the answer, but I didn't actually hear you say it.
Call it a quarter or two ahead of time, it's not to say of course, you know that.
That's something couldn't happen you know, we're talking about elective procedures here, but in terms of our data visibility. We think we I felt you know we're pretty confident in our ability to.
Two do you see how trends are evolving over time.
As far as 2023 I think John can answer how much of that is baked in at today.
Yeah, Okay, that's great.
Oh.
Oh, Yeah go.
John Basho: So hearing you say it is very helpful. Thank you again. Thank you, Gertrude.
Go ahead please.
Yes sure David.
Our unique delegated model really allows us to have close to real time authorization data.
John Basho: Thank you. Our next question comes from David Larson with BTIG. Please proceed with your question. Can you please talk a little bit more about the data files, Chen, how current they are?
At this time in terms of our authorization.
It's been more.
90, 899 percentile range.
In terms of claims that we expect in the future.
We feel quite comfortable around dart.
Managed book of business.
Okay, that's great and can you talk a little bit about past. Please privy I mentioned them its different from what they said it sounds like their relationship with us isn't going to change can you just talk about how that's going to fit into your entire network. It seems like it makes a lot of sense to me like the specialty services. Your primary care groups can refer there you can basically keep the care in your network.
David Larson: Like, Agilent talked about getting more data, higher utilization claims. Privia talked about getting sort of more accurate forecasts with data and higher utilization. Do you basically have all the 23 data now? Are we through that? And we have high conviction that we're there. Sorry for the background noise. Thank you. Hey, David.
And perhaps improve cost trend as well a little more description there would be helpful. Thank you.
Sure thing.
Brandon Taylor: Thank you for the question. It's good to hear from you about our visibility into data. You know, I think we have as good of visibility as could be had. As we mentioned before, we operate in a delegated environment where we are responsible for authorizing prior authorization requests, managing the referrals in our network, as well as paying the claims associated or the cost of the claims associated with the claims and authorizations that we process. That combined with our proprietary data infrastructure and our team's ability to predict based on historical usage and the trends that we are seeing That's not to say, of course, you know, that something couldn't happen.
I haven't heard the exact comment, but I think based on your portrayal I would agree.
You know there are different services that are being provided to best Medical group and it is a day. Our goal is to help those providers mm multi specialties Ballston primary care and best medical group to be as successful as possible and to you.
Deliver a high quality of care to their patient population in a differentiated way what we are going to provide to them is that we're going to provide a risk ecosystem, including contracts value based care infrastructure. The full suite of delegated services as we've talked about before contracting Credentialing utilization management care management claims payments et cetera.
To best in addition to.
Performing some of the care management and clinical programs necessary in order to succeed in a value based care contract overtime and that's something we're beginning to do this year I think in my prepared remarks, we talked about creating a network in ipas as well as moving that as as appropriate and to the restricted Knox Keene full risk.
John Basho: You know, we're talking about elective procedures here, but in terms of our data visibility, we think we are pretty confident in our ability to see how trends are evolving over time. As far as 2023, I think time will answer how much of that is baked in today. Yeah, thanks, Brendan. Okay, that's great. Oh. Go ahead, please.
Downside construct.
I'm goes on probably in 2025.
We think that this will lead to better accountable care results for the patients that bachelors and I think that as a separate business than the one.
Brandon Taylor: Yeah, sure, David. Our unique delegated model really allows us to have close to real-time automation at this time in terms of our authorization. It's in the... 98, mission control, and in terms of claims that we feel quite comfortable around our manager. Okay, that's great. And can you talk a little bit about BAS, please?
That that best maybe currently using <unk>.
Another company for them again at the end of the day, we think there's room for everyone and we look forward to helping bathroom, it's providers execute.
And provide really good care to the San Francisco Bay area community.
Brandon Taylor: Privy, I mentioned them, and from what they said, it sounds like their relationship with BAS isn't going to change. Can you just talk about how that's going to fit into your entire network? It seems like it makes a lot of sense to me, like they have specialty services your primary care groups can refer to there. You can basically keep the care in your network and perhaps improve the cost trend as well. A little more description there would be helpful.
Okay. That's very helpful. Thank you and then just one last quick one for CFC I think that they bring an incremental 20 million or more of EBITDA.
That included in your guidance, Thanks, very much and then I'll hop back in the queue.
Yes in terms of CSC.
<unk> T is baked into our guidance, we did close in terms of the two step acquisition.
In January.
And.
We're still on track to close the second part, which is the full risk bearing restricted Knox Keene license at the end of Q1.
Brandon Taylor: Thank you. Sure thing. I haven't heard the exact comments, but I think, based on your portrayal, I would agree.
Yeah.
Okay, great. Thanks, Congrats on a great quarter. Thank you.
Thanks.
Brandon Taylor: You know, there are different services that are being provided to Bass Medical Group, and at the end of the day, our goal is to help those providers, you know, multi-specialty as well as some primary care in Bass Medical Group, to be as successful as possible and to deliver a high quality of care to their patient population in a differentiated way. What we are going to provide to them is that we are going to provide our risk ecosystem, including contracts, value-based care infrastructure, the full suite of delegated services, as we talked about before, contracting, credentialing, utilization management, care management, claims payments, et cetera, to Bass. In addition to performing some of the care management and clinical programs necessary in order to succeed in a value-based care contract over time. That's something we're beginning to do this year,
Thank you. Our next question comes from the line of Adam Ron with Bank of America. Please proceed with your question.
Hey, Eric question about.
You know how this art J K license loves and over the next 24 months as you mentioned it was.
A little surprised to hear that you set.
For risk as a percentage of total compensation went from like 46 to 49, I would've expected a bigger swing given it was January and but you know if you were gonna renegotiate a contract with an insurer I would assume most of it happened in January and so when.
When you mentioned 24 months did you really mean like 12 months from now and then 12 months after that one those things take effect or can you renegotiate throughout the year.
Hey, Adam.
Thanks for the question so first.
It's less about the contract negotiation and it's more about the regulatory approvals.
So even if the contracts negotiated theres a joint filing and then there's a process with the D. M. A C for us to be able to move these numbers too.
So this so as you're thinking about the Medicare advantage membership.
Brandon Taylor: I think in my prepared remarks, we talked about creating a network, an IPA, as well as moving that, as appropriate, into the Restricted Noxiquine Full-Risk Upside-Downside construct as time goes on, probably in 2025. We think that this will lead to better accountable care results for the patients that BAS serves, and I think that is a separate business than the one that BAS may be currently using another company for. Again, at the end of the day, we think there's room for everyone, and we look forward to helping BAS and its providers execute and provide really good care to the San Francisco Bay Area community. It's very helpful. Thank you. And then just one last quick one for CFC.
Is it that will continue to happen throughout this year in terms of the.
P S T.
Medicaid members.
You won't see that change and so the CFC Archie take classes.
Okay. So it is.
What would what would cause it to be evenly distributed across 24 months. If it's waiting on a regulatory license like is it something thats going to be lumpy, where one quarter finally approved and.
You get most of the benefit there or.
Yes.
Would it be lumpy, it's not it's not going to be evenly distributed.
So as we have a contract is that the D. MHC approves you will see that step up in membership.
Okay, and when you say contract is that.
So with each individual payer for each individual product line, you have to get a separate approval and.
John Basho: I think that they bring an incremental 20 million or more of EBITDA. Is that included in your guidance? Thanks very much. Yes, in terms of CSC.
Separate that's correct yeah. So every county for each line of business and contract there's a separate approval.
Okay and are you specifically trying to.
John Basho: GFC is baked into our guidance. We did close, in terms of the two-step acquisition, the IPA in January, and we're still on track to close the second part, which is the full wrist-bearing restricted Nox Q license at the end of Q1. Okay, great.
Do this in a more.
Like are you trying to measure the pacing of it or is it just you're you're applying.
Passenger cabinet and you just expect that it.
It would take 12 to 24 months.
We are going as fast as we can through the process. It does take time.
David Larson: Thanks. Congratulations on a great quarter. Thank you. Thank you. Our next question comes from the line of Adam Ron with Bank of America. Please proceed with your question.
Yeah.
Yeah.
Okay, and then on the M. S. S. T was interesting. So can you give us like how many members are in MSP versus ACO reach in 2024, and then kind of a recap maybe what happened with ACR reach in 2023.
Adam Ron: Hey, I have a question about, uh..., how this RKK license will flow in over the next 24 months, as you mentioned. I was a little surprised to hear that you said the full risk, the percentage of total capitation went from like 46 to 49. I would have expected a bigger swing given it was January.
And then you mentioned the B 28 might be you know 50 basis points 100 basis points of revenue at least to get reach in 'twenty four.
Brandon Taylor: And that, you know, if you were going to renegotiate a contract with an insurer, I would assume most of it happened in January. When you mentioned 24 months, did you really mean like 12 months from now and then 12 months after that when those things take effect, or can you renegotiate throughout the year? Hey Adam.
And I think there is an increase in the discount rate or another 1%. So.
You know would you expect 23 your performance to repeat or would there be a degradation exploration, maybe that's why you're moving into MSP and so just understanding more you know some of that.
The.
Original Medicare programs would be really helpful.
Sure thing.
I don't think we have officially disclosed that Mississippi numbers I would say its between yeah.
John Basho: Thanks for the question. So, first, it's less about the contract negotiation, and it's more about the regulatory environment. So even if the contract is negotiated, there's a joint filing, and then there's a process with the DMHC for us to be able to move these numbers. So, good.
So on the more than 5000 members.
Since it.
It has to be and then I would say probably less than 10000 members. So it's in that range are the rest of the.
Accountable care organization numbers are in our easier each program.
In terms of V 28 impact a channel to.
John Basho: So as you're thinking about the Medicare Advantage FYB membership, if that will continue to happen throughout this year, in terms of the CFC and Medicaid-related members, you won't see that change until the CSCE RKK program. Okay, so what would cause it to be evenly distributed then across 24 months if it's waiting on a regulatory license? Like is it something that's going to be lumpy where one quarter is finally approved, and you get most of the benefit there, or not? Yeah, it is going to be lumpy. It's not going to be evenly distributed.
I think that part of the question.
So in terms of impact on the ACO reach.
We're expecting a 1% impact.
Due to <unk> and 'twenty.
In 2024.
These numbers are baked into our full year guidance.
Hugh.
Is that helpful or.
Okay.
But is there any way to think about how I guess, maybe just so we have the ACR reach numbers in 'twenty two.
The government and so did 2023, an improvement and do you expect further improvement in 'twenty four.
John Basho: And so, as soon as we have a contract that the DMHC approves, you will see that step up in membership. Okay, and when you say contract, is that so with each individual payer for each individual product line, you have to get separate approval and separate? That's correct. Yeah, for every county, for each line of business and contract, there's a separate Okay, and are you specifically trying to do this in a more like, are you trying to measure the pacing of it, or is it just you're applying it, you know, basically as fast as you can, and you just expect that it would take 12 to 24, We are going as fast as we can through the process. It does take time,
Okay.
Yeah.
We expect our.
Performance in 24 to be a little.
A little bit better than 2023, so about.
Overall, our 2% to 3%.
Margin in 2024.
Okay, that's super helpful.
Just to be clear.
With your percent margin jobs discussing as is post.
Post.
I would say that's care platform quote unquote contribution post distributions to provider as opposed to dentists plus bonuses quality.
Yeah.
Oh interesting okay.
And then.
Just to understand your comment about the quarterly cadence earlier, it sounds like the quarters are going to be somewhat well.
Brandon Taylor: Yeah. Okay. And then the MSSP was interesting.
The variance in terms of earnings contribution and so it is the seasonality be similar to 'twenty three or 'twenty, two or is it the way we could think about first half second half just because we don't have to be surprised in Q1.
Adam Ron: So can you give us like how many members are in MSSP versus ACO Reach in 2024 and then kind of recap, maybe what happened with ACO Reach in 2023? And then, you know, you mentioned the V-28 might be, you know, 50 base points, 100 base points of revenue of ACO reach in 24, and I think there is an increase in the discount rate of another 1%, so, you know, would you expect 20 for your performance to repeat, or would there be a degradation in the IC region? Maybe that's why you're moving into MSSP, and just understanding more of, you know, some of the original Medicare programs would be really helpful.
Yeah, maybe that's going to be the highest contributor or just more of a finer point around that would be helpful.
Yeah.
Yeah, you'll see some you will see similarity to 2023.
Q3.
As we've seen historically is the highest.
Quarter, followed by Q2 than Q1, and lastly in Q4.
That's helpful.
And.
And the utilization comment that was that new comment I thought that the previous commentary or the way you were kind of talking about it was that you weren't seeing really embody utilization pressure in that.
Maybe you thought that regionally it was more of a problem elsewhere, but it sounds like in Q4, you were kind of surprised by that and so you do have like you know with delegated claims more visibility into it but.
Brandon Taylor: Sure thing. I don't think we have officially disclosed the MSSP numbers. I would say it's between, you know, certainly more than 5,000 members since it has to be. And then I would say probably less than 10,000 members.
Why it wouldn't.
Why wouldn't that have been picked up kind of in like the Q3 call.
Yeah, I think what we're trying to say is.
In Q4.
Yeah.
November December we saw a slight up tick as we have seen in historical years and that is captured in our guidance.
Okay. So a slight uptick it was similar to like sequentially are you, saying that that's a similar sequential increase to historical are you, saying.
John Basho: So it's in that range. The rest of the Accountable Care Organization members are in our ACO REACH program. In terms of V-28 impact, John will take that part of the question.
You're starting to see some of the pressure that the outcome.
Outsized pressure the other payers are talking about.
Yeah, that's correct I mean, I think we had commented before that we are seeing flight.
John Basho: So in terms of our impact on the ACO region, we're expecting a 1% impact due to U-28 in 2024. Those numbers are baked into our four-year guidance. You? Is that helpful or not?
Increases in certain pockets no invasion senior utilization for example, starting elective surgeries, we have discussed on previous earnings calls, but nothing that we couldn't manage through and nothing that would.
Brandon Taylor: But, but is there any way to think about how, I guess, maybe just so we have a feel for the reach numbers and twenty-two from the government, twenty-two three and improvement, and do you expect further improvement in twenty-four? Yeah. We expect our performance in 24 to be a little, a little bit better than 2023, so about an overall two to three percent margin in 2024. Okay, that's super helpful.
We have changed our guidance.
You know I don't want to say that there is literally zero impact that we're feeling I mean, it's something that we've managed through and is it and is included here.
For 2024.
Okay.
And I heard you I heard you were just trying to clarify the last thing if I heard you correctly, you're saying that what is the $14 million bonus you were mentioning that was in cost of services.
So.
Adam Ron: Just to be clear, the 2% or 3% margin John's discussing is post, you know, post. I would say it's a care platform, quote unquote, contribution, you know, post-distribution to providers, post-incentives, post-bonuses, quality, et cetera. Oh, interesting, okay.
Pre the spinoffs of the ATC excluded assets, it's a P. C excluded assets does the bonus distribution as they did in Q4 two there.
Shareholders that ends up running through our consolidated P&L.
So oftentimes there's a question around well why did.
Implied MTR go up so I just wanted to be very clear in terms of what that bonus was done now and when it happened.
John Basho: And then, just to understand your comment about the quarterly cadence earlier, it sounds like the quarters are gonna be somewhat, well, you know, variance in terms of earnings contribution, and so is the seasonality gonna be similar to 23 or 22, or is there a way we could think about, you know, first half, second half, just so we don't have to be surprised in Q1. Thank you. Yeah, you'll see some, you will see similarity to 2023. Q3, as we've seen historically, is the highest-earning quarter, followed by Q2, then Q1, and lastly, Q4. A couple
Yeah going forward you won't see this happen.
Okay, I guess last one if I could squeeze it in.
The cost of service ratio, if we just divide and maybe take out the $14 million payment in 'twenty three.
Would you think it would be higher or lower in 2024, and what would be the drivers around that.
That'd be my last question. Thanks.
I would say, it's going to be pretty consistent.
If you look at the partners segment, specifically in the cost of care ratio for 'twenty, three and partners, we expect it to be pretty consistent in 'twenty four.
Perfect. Thanks, so much.
Thank you. Our next question comes from the line of Jack Sullivan with Jefferies. Please proceed with your question.
Hey, guys congrats on the quarter and thanks for taking the question I'm happy to be jumping on here.
Adam Ron: And on the MA utilization comment, that was a new comment. I thought that the previous commentary or the way you were kind of talking about it was that you weren't really seeing MA utilization pressure and that, you know, maybe you thought that, regionally, it was more of a problem elsewhere, but it sounds like in Q4, you were kind of surprised by that. And so you do have, you know, with delegated claims, more visibility into it, but... Yeah, why? Yeah. Why wouldn't that have been picked up kind of like in the Q3 call?
Yeah.
A lot of them already asked for me I guess.
Looking forward right. It's been a couple of months since we've seen announcements of new partnerships, whether it be enablement or or some others right since <unk> call How's the pipeline shaping up when do you think about the enablement business both.
In California, and then may be filling out some of the other geographies any color you can get there would be really great.
Hey, Jack Thank you for joining the call.
So.
I think overall the.
New business development pipeline remains.
Very strong I'm, probably as strong as we've ever seen it.
John Basho: Yeah, I think what we're trying to say is that in Q4 and December, we saw a slight uptick as we have seen in historical years, and that is captured in our guidance. Okay, so slight uptick similar to like sequentially you're saying, and that's a similar sequential increase to historical, or you're saying, "You're starting to see some of the pressure that the outsized pressure that other payers are talking about." Yeah, that's correct, Adam. I think we had commented before that we are seeing slight increases in certain pockets, you know, inpatient, senior utilization, for example, certain elective surgeries We had discussed that on previous earnings calls, but nothing that we couldn't manage through and nothing that would... would have changed our guidance. You know, I don't want to say that there's literally zero impact that we are feeling.
With the turmoil in the market.
And some of the headwinds facing some of our.
Or other companies in this space.
We think where we are one of the few.
Differentiated players who can take risk.
We're not shying away from taking risk in a prudent fashion and a data driven analytics driven fashion and are able to succeed in those constructs.
That means that when we go talk to your provider groups. When we look for partnerships, even when we're selling are carrying the open solutions into the market and remember that it's a flexible model deterrent.
For a given geography dependent on what the providers preferences are in that market.
We have a variety of tools to address those preferences. When we are selling the suite of products across and he went blurry and partners.
We're seeing a tremendous response.
You know I think over the past couple of years they have been.
They're there, but there has been noise, there's been a lot of capital.
At very low cost of capital that has.
John Basho: It is something that we have managed through and is included in our guidance for 2024. And I heard you just want to clarify the last thing, if I heard you correctly, you're saying, but what is the $14 million bonus you were mentioning that was in the cost of services? So, free the spinoff of the APC Excluded Assets. If APC Excluded Assets makes a bonus distribution, as they did in Q4 to their shareholders, that ends up running through the Consolidated P&L.
Shielded or hidden kept it in.
Actual performance.
And as that environment has changed as we're all aware in this call.
Our model continues to stand out as a differentiated model that is helping us win and participate in a large number.
Business development opportunities some of which we have already shared with with a public. So it's very strong and we're we're excited to continue growing our impact across the country.
Adam Ron: So oftentimes, there's a question around, well, why did implied MCR go up. So I just wanted to be very clear in terms of what that bonus was the amount and when it, Yeah, going forward, you won't see this happen. Okay, I guess my last question is if I could squeeze it in the cost of service ratio if we just divide and maybe take out the $14 million payment in 23, would you think it'd be higher or lower in 2024 and what would the drivers be like? That'd be my last question, thanks.
Got it really really helpful. One more for me I'm just thinking about the the commentary on continued 25% growth in the medium term and beyond in a.
In our presentation.
You know when you when you look at that revenue growth has been really strong I guess the sense that the rest of the industry has is that 'twenty four is sort of the bottom when it comes to margins.
And profitability and in risk based businesses do you get the sense that you've scaled through it and whether it's some of it in there there's opportunity for an acceleration in sort of core economics as he looked at 25, and 26 or let us know I guess, how you're thinking about.
Adam Ron: I would say it's going to be pretty consistent if you look at the partners segment specifically and the cost of care ratio for 23 and partners; we expect it to be pretty consistent in 23. Perfect. Thanks so much.
That that's sustainable growth outlook, and where are we sort of sit as far as your financials from a utilization perspective in 'twenty four.
Sure.
No. Thanks for the question.
Jack Sylvan: Thank you. Our next question comes from the line of Jack Sylvan with Jeff. Please proceed with your question. Hey guys, congrats on the quarter and thanks for taking the time to answer the question. Happy to be jumping on here. A lot of them have already asked for me, I guess, looking forward, right? It's been a couple months since we've seen announcements of new partnerships, whether it be enablement or some others, right? Since 3Q call. How's the pipeline shaping up when you think about the enablement business both in California and then maybe filling out some of the other geographies? Any color you can get there would be really great.
I want to start off quickly by.
Remembering you know what the company looks like in 2019, when I joined this organization.
We had done $561 million of revenue $54 2 million of adjusted EBITDA.
The midpoint of guidance for this year is $1 75 billion of revenue and 175 million of adjusted EBITDA that is where we have grown the business at a 26% CAGR equipped and both the top and the bottom lines for five years in a row.
And that's not going to change going forward, that's something that we have the proven ability to manage through.
Whether it's cycle times the cycle goes company's common peers calm appears go.
Brandon Taylor: Hey, Jack. Thank you for joining the call. So, I think overall, the new business development pipeline remains very strong, probably as strong as we've ever seen it, with the turmoil in the market and some of the headwinds facing some of our... or other companies in this space. We think we are one of the few, differentiated players who can take risks, who are not shying away from taking risks in a prudent fashion, in a data-driven and analytics-driven fashion, and are able to succeed in those constructs. That means that when we go talk to provider groups, when we look for partnerships, even when we're selling our care enablement solutions into the market, and remember, it's a flexible model for a We have a variety of tools to address those preferences when we are selling that suite of products across any one delivery platform and partner.
Our model has been durable it is diversified across lines of business. It is now becoming increasingly diversified across geography, and it is backed by a world class data engineering team and software engineering platform that allows us to have visibility into the future and we think will serve us well as we take on more risk.
Given the immediate levers that trying to discuss for example, some of the.
Movement into.
Sorry movement into fourth contracts in California, we believe that already has.
That already gives us strong visibility into that continued near term revenue and EBITDA growth.
And frankly any geographies continuing to succeed.
Our almost a cherry on top.
But it is part of our growth algorithm to continue growing one or two markets here, we are seeing new markets. So far ramped as expected and we're very optimistic, especially given the visible pipeline as I mentioned earlier around where we can go for the next three to five years at least.
Brandon Taylor: We're seeing a tremendous response. You know, I think over the past couple of years, there have been, There's been noise, there's been a lot of capital, a very low cost of capital that has shielded or hidden, you know, kept hidden, actual performance or lack thereof. And as that environment has changed, as we're all aware on this call, our model continues to stand out as a differentiated model, and that's helping us win and participate in a large number of business development opportunities, some of which we have already shared with the public. So it's very strong, and we're excited to continue growing our impact across the country. Got it. Really, really helpful. One more for me.
Really helpful color Brandon appreciate it congrats again on the quarter and all the recent developments.
Thank you.
Our next question comes from the line of Scott Leandro thing with Truth Securities.
Thank you and thanks for taking my questions first one I want to go back to a vast medical group partnership topic was this a competitive process I'm more of it more of an exclusive discussion and there was some confusion on the loan that was all put Tabasco bottle Skintight partnership maybe you can help clarify that as well.
Jack Sylvan: Just thinking about the commentary on continued 25% growth in the medium term and beyond in the presentation, you know, when you look at that, revenue growth has been really strong. I guess the sense that the rest of the industry has is that 24 is sort of the bottom when it comes to margins and profitability in risk-based businesses. Do you get the sense that you've scaled through it and weathered some of it, and there's opportunity for an acceleration in sort of core economics as you look to 25 and 26? Or, let me know, I guess, how you're thinking about that sustainable growth outlook and where we sort of sit as far as your financials from a utilization perspective in 24? Sure. No, thanks for the question. I want to start off quickly by saying.
Hi, it's Linda Thank you for joining the call it's great to hear from you.
Yeah happy to answer those questions.
Oh, without saying too much I would say that the process was a competitive one.
Right.
We're not the only yeah.
Better in the in the process and.
We are glad that we were chosen.
And I think the durability of the model, although we've proven the growth consistent growth of that bottle, both on the revenue and adjusted EBITDA lines.
Where we're proof points for that group among others, including our.
Yeah demonstration of our technology demonstration of our care models, the alignment mechanisms that we use etcetera.
Help.
When that process them, but to answer your question.
To our knowledge it was a competitive process.
Brandon Taylor: Remembering, you know, what the company looked like in 2019 when I joined this organization. We had $561 million in revenue, and $54.2 million in adjusted EBITDA. The midpoint of guidance for this year is $1.75 billion of revenue and $175 million of adjusted EBITDA. That is, we have grown the business at a 26% gig or clip on both the top and the bottom lines for five years in a row. And that's not going to change going forward.
Randy alone.
We disclose more.
Information around alone in our press release associated with our full year earnings.
So happy to answer any other questions around awareness.
If.
That has not been answered, but the intent is for them to you.
Invest those dollars alongside us to continue to expand the footprint of both primary and multi specialty care across the San Francisco Bay area.
Okay and then my follow up here is that I know you gave some color around revenue and EBITDA growth on a consolidated basis. I was just wondering if you can provide a little bit more color around expectations microscopy.
Brandon Taylor: That's something that we have the proven ability to manage through, whether a cycle comes, a cycle goes, companies come, peers come, and peers go. Our model has been durable, it is diversified across lines of business, it is now becoming increasingly diversified across geography, and it is backed by a world-class data engineering team and software engineering platform that allows us to have visibility into the future that we think will serve us well as we take on more risk. Given the immediate levers that China discussed, for example, some of the movement into, sorry, movement into full-risk contracts in California. We believe that already has, that already gives us strong visibility into continued near-term revenue and EBITDA growth, and frankly, any geographies continuing to succeed are around the world.
This segments like Kid enablement partners and delivery, either directionally or quantitatively in terms of revenue growth and EBITDA trends in 'twenty for the West coast the last year.
Thank you Linda.
Yeah.
Thanks for the question.
The majority of our growth.
Will be based in our partners Division.
Since it is the majority of our revenue today.
Okay.
With our continued growth in relationships as well as our rich deep pipeline.
You will see a large portion of that growth come through partners.
Enablement.
We'll grow equivalently to partners and.
And in terms of delivery.
Hi.
I would not do it.
Delivery will grow as it's grown historically.
It won't scale up the loving partners.
Okay, and then my last one around the community families go back where you shouldn't I believe when you when I was the deal. It was expected to generate around 119 million revenue with 25 minute EBITDAR, but based on some filings in California. It looks like perhaps its Oh I got it and then data revenue.
Brandon Taylor: Really helpful caller, Brandon, appreciate it. Congratulations again on the quarter and all the recent developments. Thank you. Our next question comes from the line of Deleondra Singh with Truist Security.
Deleondra Singh: Thank you and thanks for taking my questions. First of all, I want to go back to the BAS medical group partnership topic. Was this a comparative process or more of an exclusive discussion?
Is that driven by moving some of these lives to Florida.
Articulations that isn't being acquired here.
Yes, exactly you Andre Thank you for doing the research there.
That's great I think we had.
We had previously noted.
Brandon Taylor: And there was some confusion on the loan that was offered to BAS as part of the partnership. Maybe you can help clarify that as well. Hi Jalendra.
That in the middle of 2023.
When he was still a care enablement client of ours that we had like helps them successfully moved from a.
Brandon Taylor: Thank you for joining the call. It's great to hear from you. Yeah, happy to answer those questions. Without saying too much, I would say that the process was a competitive one, uh, We were not the only bitter in the process, and we are glad that we were chosen. And I think the durability of the model that we've proven, the growth, the consistent growth of that model, both on the revenue and adjusted EBITDA lines, were proof points, you know, for that group, among others, including our, to help when that process. But to answer your question, to our knowledge, it was a competitive process around the country alone.
Partial risk to a full risk construct and the 190 number was a.
Trailing 12 month number as of.
The reported date.
The date, but it was not including the full year impact of that changed from partial reason for forest. That's also part of why we had previously noted in previous calls that there was infrastructure, we had invested in technology people services et cetera operations.
In 2022, and 23 in order to fully enable that shift of our carrier enabled and clients.
Close to 200000, maybe 190000 members into a forest construct that's also why we guided to.
That's being confident that we can do this well continue to do this rather across.
Brandon Taylor: I think we disclosed more information around the loan in our press release associated with our four-year earnings. I'm so happy to answer any other questions around the loan. If, That has not been answered, but the intent is for them to invest those dollars alongside us to continue to expand the footprint of both primary and multi-specialty care across the San Francisco Bay Area. Okay, and then my follow-up here is that I know you gave some color around revenue and EBITDA growth on a consolidated basis. I was just wondering if you could provide a little bit more color around expectations across the three, you know, business segments like care, enablement, partners, and delivery either directionally or qualitatively in terms of revenue growth and EBITDA trends in 24 versus last year.
Both our own restricted Knox Keene license that we had already had as well as the one that we hope to close on that John mentioned earlier.
Sometime it you know by the end of Q1.
So.
To answer your question, Yes that was part of the impact was the movement into the restricted Knox Keene full risk construct for 190000 or so members.
Great. Thanks, guys.
Thank you so much stronger.
Thank you.
Our next question comes from the line of Gary Taylor with TD Cowen. Please proceed with your question.
Hi, good evening most of my questions.
Answered just wanted to ask a couple you talked about just a little bit elevated trend in may and obviously your.
Brandon Taylor: Thank you, Linda. Thanks for the question. The majority of our growth will be based in our Partners Division since it is the majority of our revenue today. With our continued growth in relationships, as well as our rich BD pipeline, you will see a large portion of that growth come through partners. Enablement will grow equivalently to partners, and in terms of delivery. I. I would not if delivery grew as it's grown historically, it wouldn't scale at the level of part. Okay, and I believe when you announced the deal, it was expected to generate around 190 million revenue and 25 million EBITDA. But based on some filings in California, it looks like perhaps it's generating a higher run rate of revenue. Is that driven by moving some of these lives to full risk with the RKK license that is being acquired here? Yeah, exactly, Jandra.
Moving increasingly to full risk how are you guys tackling.
Supplemental benefits, particularly around OTC and flex that really seemed to catch a lot of.
Calculated groups off guard because one they have a carved those out and two they haven't been able to find much beleaguer the impact that benefit consumption.
Yeah, Hey, Gary good to hear from you.
So.
It is a continuous focus within.
The California market, especially Los Angeles County, being one of the most competitive in terms of OTC and supplemental benefits.
Overtime, we've worked with the plans to get to the appropriate.
Contract type that allows us to make sure.
We are getting.
The appropriate dollars that we need to take care of their members.
And we're not impacted by potential changes.
Brandon Taylor: Thank you for doing the research there. That's great. I think we had previously noted that in the middle of 2023, when CFC was still a care enablement client of ours, that we had helped them successfully move from a partial risk to a full risk construct. And the 190 number was a trailing 12-month number as of the reported date, but it was not including the full year impact of that change from partial risk to full risk.
Okay benefits another supplemental other supplementing supplementary benefits.
I also know that.
There's good payer diversity in terms of the percentage of our revenue that comes from any one health plan and so there is.
You know there there is a bit of a hedge.
Of course, our business across both lines of business, Medicaid and Medicare commercial as well as in terms of which plan that we are talking about in terms of the specific supplemental benefits as well.
Brandon Taylor: That's also part of why we had previously noted in previous calls that there was infrastructure we had invested in, technology, people, services, et cetera, operations in 2022 and 23, in order to fully enable that shift of our care enablement clients, you know, close to 200,000, maybe 190,000 members into a forest construct. That's also why we guided to us being confident that we can redo this, or continue to do this, rather, across both our own restricted Noxicane license that we had already had, as well as the one that we hope to close on, that John mentioned earlier, sometime at, you know, by the end of Q1. So, To answer your question, yes, that was part of the impact of the movement into the restricted NOx scheme full risk construct for the 190,000 or so members.
Got it so well apparently some pretty good foresight, there then versus our peers My last one would just be.
My understanding is California D. H C. S is going to hold restricted Knox Keene and other risk bearing groups to 85% MLR.
In 25, but the actual formula for how that'll be calculated hasn't been.
Finalizing the rigs or at least I haven't seen it do you know if those Reds are finalized and then how do you think about that.
Minimum MLR impacting your shift to the full risk in California in the next couple of years.
Yeah.
Yeah, It's a great question Gary.
The first part of your question the regs have not yet been finalized and we're working closely with other providers in a coalition to better understand the regulations as they come together.
In terms of the second part of your question you are right. There is this huge T S requirement.
Deleondra Singh: Great. Thanks, guys. Thank you so much, Sondra. Thank you. Our next question comes from the line of Gary Taylor with TD Cowan.
So seeded with the Medicare book of business and the MLR.
Gary Paul Taylor: Please proceed with your question. Hi, good evening. Most of my questions have been answered.
But associated with it.
Now just wanted to remind you we have.
Gary Paul Taylor: Just wanted to ask a couple of questions. You talked about just a little bit of an elevated trend in MA and, obviously, you're moving increasingly to full risk. How are you guys tackling supplemental benefits, particularly around OTC and flex that really seem to catch a lot of capitated groups off guard because, one, they haven't carted those out and, two, they haven't been able to find much ability to impact that
Multiple lines of business and we believe we will be able to work through this as we have done without the regulatory changes within the state.
Okay got it thank you.
Thank you there are no further questions at this time.
Thank you all for joining our earnings call today and for discussing some of the results from our 2023 full year as well as some of our guidance for 'twenty 'twenty four we greatly appreciate the time you spent this evening and please reach out to us at investors at is trying to help them com. If you have any further.
John Basho: Good to hear from you. So. It is a continuous focus within the California market, especially Los Angeles County being one of the most competitive in terms of OTC and supplemental benefits. Over time, we've worked with the plans to get to the appropriate contract type that allows us to make sure we are getting the appropriate dollars that we need to take care of them, and we're not impacted by potential changes around OTC benefits and other supplementary benefits.
Thank you again and good evening.
Okay.
Thank you that concludes today's teleconference. You may disconnect. Your lines at this time. Thank you for your participation.
Yeah.
Uh huh.
Uh huh.
Hum.
Gary Paul Taylor: Also, know that there's good payer diversity in terms of the percentage of our revenue that comes from any one health plan. You know, there's a bit of a hedge across our business, across both lines of business, you know, Medicaid and Medicare commercial as well as in terms of which plan that we are talking about in terms of the specific subliminal benefits involved. Well, apparently, some pretty good foresight there versus peers.
Uh huh.
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John Basho: My last one would just be, my understanding is California DHCS is gonna hold restricted Noxkene and other risk-bearing groups to 85% MLR and 25%, but the actual formula for how that will be calculated hasn't been finalized in the regulations, or at least I haven't seen it. Do you know if those regulations are finalized, and then how do you think about that? Minimum MLR impacting your shift to full risk in California in the next couple of years. Yeah, it's a great question, Gary.
Yeah.
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John Basho: To the first part of your question, the regs have not yet been finalized, and we're working closely with other providers in the coalition to better understand the regulations as they're coming together. In terms of the second part of your question, you are right; there is this DHCS requirement associated with the Medi-Cal Book of Business and the MLR associated with it. Now, I just want to remind you we have multiple lines of business, and we believe we will be able to work through this as we have done with other regulatory changes within the state. Okay.
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Gary Paul Taylor: Thank you. Thank you. There are no further questions at this time. Thank you all for joining our earnings call today and for discussing some of the results from our 2023 full year as well as some of our guidance for 2024. We greatly appreciate the time you spent this evening and please reach out to us at investors at astronahelp.com if you have any further questions. Thank you again and good evening. Thank you. That concludes today's telecom, you may disconnect your lines at this time. Thank you for your participation. Meeeeeeeeeeeeeee!
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Operator: www. ApolloMed.com ApolloMed.com Thanks for watching! www. ApolloMed.com. Thanks for watching! www.
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