Q2 2024 Astrana Health Inc Earnings Call
"...Carrie has come to visit Mass Utopia Prince Edward'sdyi dromacherie. She will then tell the veritable life of Colonel Osborne and our new summoness. She will tell us about the principal of Osborne, as well as its reign." Whe we won the nós a favor, I did as you wish. Courtyard This house Is a large and interesting retreat. It seems to becentric and abundant with treasures.
Operator: Good day, everyone, and welcome to today's Astrana Health Second Quarter 2024 Earnings Call. At this time, all participants are in a listen-only mode.
Speaker Change: Good day everyone and welcome to today's Astrana Health second quarter 2024 earnings call. At this time all participants are in a listen-only mode. Later you will have the opportunity to ask questions during the question and answer session and instructions will be provided at that time. Today's speakers will be Brandon Sim, President and Chief Executive Officer of Astrana Health and Chandan Basho, Chief Operating and Financial Officer. The press release announcing Astrana Health Inc.'s results for the second quarter ended June 30, 2024 is available at the investor section of the company's website at www.astranahealth.com.
Operator: Later, you will have the opportunity to ask questions during the question-and-answer session, and instructions will be provided at that time. Today's speakers will be Brandon Sim, President and Chief Executive Officer of Astrana Health, and Chandan Basho, Chief Operating and Financial Officer. The press release announcing Astrana Health, Inc.'s results for the second quarter ended June 30, 2024, is available in the Investors section of the company's website at www.astranahealth.com. The company will discuss certain non-GAAP measures during this call.
Operator: Reconciliations to the most comparable GAAP measure are included in the press release. 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 Health's website after the conclusion of this call.
Speaker Change: The company will discuss certain non-GAAP measures during this call. Reconciliations to the most comparable GAAP measure are included in the press release. 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 Astrana Health's website after the conclusion of this call. Before we get started, I would like to remind everyone that this conference call and any accompanying information discussed herein contains certain forward-looking statements within the meaning of the Safe Harbor Provision of the Private Securities Litigation Reform Act of 1995. These forward-looking statements can be identified by term.
Operator: Before we get started, I would like to remind everyone that this conference call and any accompanying information discussed herein contain certain forward-looking statements within the meaning of the safe harbor provision of the Private Securities Litigation Reform Act of 1995. These forward-looking statements can be identified by terms such as anticipate, believe, expect, future, plan, outlook, and will include, among other things, statements regarding the company's guidance for the year ending December 31, 2024, continued growth, acquisition strategy, ability to deliver sustainable long-term value, ability to respond to changing environment, operational focus, strategic growth plans, and merger integration efforts.
We will be covering 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 31st, 2024, continued growth, acquisition strategy, ability to deliver sustainable long-term value, ability to respond to changing environment, operational focus, strategic growth plans, and merger integration efforts. Although the company believes that the expectations reflected in its forward-looking statements are reasonable as of today, those statements are subject to risks and uncertainties that could cause the actual results to differ materially
Operator: Although the company believes that the expectations reflected in its forward-looking statements are reasonable as of today, those statements are subject to risks and uncertainties that could cause the actual results to differ materially from those projected. There can be no assurance that those expectations will prove to be correct. Information about the risks associated with investing in Astrana Health is included in its filings with the Securities and Exchange Commission, which we encourage you to review before making an investment decision.
Speaker Change: from those projected. There can be no assurance that those expectations will prove to be correct. Information about the risks associated with investing in Astrana 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 obligation to update any forward-looking statements as a result of new information, future events, changes in market conditions or otherwise, except as required by law. Regarding the disclaimer language, I would also like to refer you to slide 2 of the conference call presentation for further information. With that, I'll turn the call over to Astrana Health.
Operator: The company does not assume any obligation to update any forward-looking statements as a result of new information, future events, changes in market conditions, or otherwise, except as required by law. Regarding the disclaimer language, I would also like to refer you to Slide 2 of the conference call presentation for further information. With that, I'll turn the call over to Astrana Health's President and Chief Executive Officer, Brandon Sim. Please go ahead, Brandon. Thank you, April.
Speaker Change: President, and Chief Executive Officer, Brandon Sim. Please go ahead, Brandon. Thank you, Operator. Good evening and thank you all for joining us today.
Brandon Sim: Good evening, and thank you all for joining us today. Continuing our strong start to the year, the second quarter results we reported today reflect the progress, scale, and momentum we continue to build here at Astrana Health as we drive towards our mission to empower entrepreneurial providers and deliver high quality, high value, and accessible health care to local communities across the country. I'll start with some key financial and operational updates for the quarter, which continue to deliver on our strategic roadmap of, one, increasing membership to drive sustainable growth and, two, increasing alignment through total cost of care responsibility in value-based arrangements.
Brandon Sim: Continuing our strong start to the year, the second quarter results we reported today reflect the progress
Brandon Sim: scale and momentum we continue to build here at Astrana Health as we drive towards our mission to empower entrepreneurial providers and deliver high quality, high value and accessible health care to local communities across the country.
Speaker Change: i'll start with some key financial and operational updates for the quarter which continue to deliver on our strategic road map of one increasing membership it drives sustainable growth
Speaker Change: 2. Increasing alignment through total cost of care responsibility in value-based arrangements, and 3. Empowering our providers with our technology and clinical infrastructure in order to achieve superior patient outcomes while managing costs.
Brandon Sim: And three, empowering our providers with our technology and clinical infrastructure in order to achieve superior patient outcomes while managing costs. Then, I'll cover the partnerships and acquisitions we announced since the quarter closed, and Chon will discuss our financial performance and guidance outlook. Starting with financial highlights, we continue to execute at a high level as Astrana Health revenue grew to $486.3 million, a 40% increase compared to the same period last year. Adjusted EBITDA rose to $47.9 million, a 34% increase year-over-year.
Speaker Change: Then, I'll cover the partnerships and acquisitions we announced since the quarter closed, and Chand will discuss our financial performance and guidance outlook.
Chand: Starting with financial highlights, we continue to execute at a high level as Astrana Health revenue grew to $486.3 million, a 40% increase compared to the same period last year.
Chand: An adjusted EBITDA rose to $47.9 million, a 34% increase year-over-year.
Brandon Sim: This resulted in an adjusted EPSOM margin of approximately 10%, continuing to demonstrate our differentiated ability to drive profitable growth. Our strong revenue and profitability growth was driven primarily by robust, organic growth in our care partner sector, as well as the successful completion and integration of the Community Family Care Acquisition, along with continued success in managing the total cost of care for our members and value-based risk-bearing arrangements. Moving on to business updates,
Chand: this resulted in an adjusted ebitda margin of approximately ten percent continuing to demonstrate our differentiated ability to drive profitable growth
Speaker Change: Our strong revenue and profitability growth was driven primarily by robust, organic growth in our care partner segment, as well as the successful completion and integration of the community family care acquisition.
Speaker Change: along with continued success in managing the total cost of care for our members and value-based risk-bearing arrangements.
Brandon Sim: Astrana continued to execute on our first strategic pillar, increasing membership in new and existing GRs. During the second quarter, we entered the state of Arizona through our Care Partners segment, partnering with an anchor primary care physician group with over 45 primary care providers serving over 50,000 patients across Medicare, Medicaid, and commercial lines of business. Astrana will serve as the group's exclusive care enablement provider, with providers anticipated to onboard into our care enablement platform by the end of 2024 and expected to begin participating in value-based arrangements in 2025.
Speaker Change: Moving on to business updates, Astrana continued to execute on our first strategic pillar, increasing membership and new and existing geographies.
Speaker Change: During the second quarter, we entered the state of Arizona through our care partner segment, partnering with an anchor primary care physician group with over 45 primary care providers, serving over 50,000 patients across Medicare, Medicaid, and commercial lines of business.
Speaker Change: Astrana will serve as the group's exclusive care enablement provider with providers anticipated to onboard into our care enablement platform by the end of 2024 and expected to begin participating in value-based arrangements in 2025.
Brandon Sim: We also continue to make progress on our second goal, increasing our responsibility for members' total cost of care and value-based reimbursement. From a timing perspective, the movement of several partial risk contracts into full risk arrangements is expected to occur in the second half of the year.
Speaker Change: We also continue to make progress on our second goal, increasing our responsibility for members' total cost of care and value-based arrangements.
Speaker Change: From a timing perspective, the movement of several partial risk contracts into full risk arrangements is expected to occur in the second half of the year.
Brandon Sim: As of July 1st, 2024, our full risk business makes up approximately 60% of total capitation revenue, compared to 46% as of July 1st, 2023. And we continue to be on track to meet our previously stated goal of having around two-thirds of our capitation revenue coming from a full risk ecosystem by January 1st, 2025. Finally, consistent with recent quarters, our utilization and cost trends in the second quarter have remained within expectations for our Medicare Advantage, Managed Medicaid, and Commercial Book, given our continued focus on ensuring members are receiving timely and appropriate care in the right setting.
Speaker Change: As of July 1st, 2024, our full risk business makes up approximately 60% of total capitation revenue, compared to 46% as of July 1st of 2023.
Speaker Change: And we continue to be on track to meet our previously stated goal of having around two-thirds of our capitation revenue coming from a full risk ecosystem by January 1st of 2025.
Speaker Change: Finally, consistent with recent quarters, our utilization and cost trends in the second quarter have remained within expectations for our Medicare Advantage, managed Medicaid, and commercial books to business.
Speaker Change: Given our continued focus on ensuring members are receiving timely and appropriate care in the right settings.
Brandon Sim: We are noticing an uptick in inpatient utilization related to a surge in COVID-19 cases throughout California, but we believe we remain within expectations in terms of current year guidance, and we will continue to monitor the situation as it relates to our Medicare agents. We have noticed an uptick in cost turns, but that increase remains lower than the national average.
Speaker Change: We are noticing a small uptick in inpatient utilization related to a surge in COVID-19 cases throughout California, but we believe we remain within expectations in terms of current year guidance, and we will continue to monitor the situation.
Speaker Change: As it relates to our Medicare ACOs, we have noticed an uptick in cost trends, but that increase remains lower than national trends.
Brandon Sim: Moving on to recent activity, we continue to believe that our platform, consisting of clinical capabilities, proprietary technology, and a strong operating team, drives our differentiated ability to produce operating leverage, great patient outcomes, and ultimately, our goal of sustainable high growth with effectively managed costs. And after the quarter ended, we continued to be active in order to capitalize on those advantages, investing in continued organic and inorganic growth through several partnerships as well as an acquisition. First, we deepened our relationship with one of our important payer partners.
Speaker Change: Moving on to recent activity, we continue to believe that our platform consisting of clinical capabilities, proprietary technology, and a strong operating team
Speaker Change: drives our differentiated ability to produce operating leverage, great patient outcomes, and ultimately, our goal of sustainable high growth with effectively managed costs.
Operator: [inaudible] Continuing our strong start to the year, the second quarter results we reported today reflect the progress, scale, and momentum we continue to build year at Astrana Health as we drive towards our mission to empower entrepreneurial providers and deliver high quality, high value, and accessible health care to local communities across the country. We'll start with some key financial and operational updates for the quarter, which continue to deliver in a strategic roadmap of one, increasing membership to drive sustainable growth, two, increasing alignment through total cost of care responsibility, and value-based arrangements, and three, empowering our providers with our technology and clinical infrastructure in order to achieve superior patient outcomes while managing costs.
Speaker Change: And after the quarter ended, we continued to be active in order to capitalize on those advantages, investing in continued organic and inorganic growth through several partnerships as well as an acquisition.
Brandon Sim: Anthem Blue Cross by entering into a partnership where we will build and operate primary care clinics that are jointly branded between AstranaCare and Anthem Blue Cross. The partnership underscores our organization's commitment to increasing access to care, and in particular, we'll be focused on providing a convenient, delightful consumer experience. With readily available walk-in visits, same-day telemedicine, online appointment scheduling, and the latest technology, our very first AstranaCare Anthem Blue Cross clinic has already opened in Whittier, California, and we look forward to continuing our partnership with a pipeline of clinics across the state of California.
Speaker Change: First, we deepened our relationship with one of our important payer partners, Anthem Blue Cross, by entering into a partnership where we will build and operate primary care clinics that are jointly branded between AstranaCare and Anthem Blue Cross.
Speaker Change: The partnership underscores our organization's commitment to increasing access to care, and in particular, we'll be focused on providing a convenient, delightful consumer experience.
Speaker Change: Complete with readily available walk-in visits, same-day telemedicine, online appointment scheduling, and the latest technology.
Speaker Change: Our very first AstranaCare Anthem Blue Cross clinic has already opened in Whittier, California. We look forward to continuing our partnership with a pipeline of clinics across the state of California.
Brandon Sim: Next, we announced that we joined forces with Galatian Health, a primary care-focused electronic health record company serving over 32,000 clinicians, in order to form a nationwide partnership to empower primary care providers in valley-based care. The first part of our partnership is a collaboration to build and scale risk-bearing entities, including accountable care organizations and clinically-integrated networks, anchored by providers on Alation's platform. Salation will support providers in these networks with its EHR and billing technology, while Astrana will serve as the exclusive care enablement partner for these risk-bearing entities, as well as take on risk when appropriate in our care partners. Together, we believe that this partnership will demonstrate that the right tools and organizational capabilities can jointly scale sustainable value-based care. The second part of the partnership is to put that model into practice.
Speaker Change: Next, we announced that we joined forces with Galatian Health, a primary care-focused electronic health record company serving over 32,000 clinicians in order to form a nationwide partnership to empower primary care providers in value-based care.
Speaker Change: The first part of our partnership is a collaboration to build and scale risk-bearing entities, including accountable care organizations and clinically integrated networks, anchored by providers on a latience platform.
Speaker Change: Salation will support providers in these networks with its EHR and billing technology, while Astrana will serve as the exclusive care enablement partner for these risk-bearing entities, as well as take on risk when appropriate in our care partners' business.
Speaker Change: In combination, we believe that this partnership will demonstrate that the right tools and organizational capabilities can jointly scale sustainable value-based care.
Brandon Sim: We entered the state of Hawaii as part of this collaboration, partnering with a provider organization of over 100 primary care providers serving just under 20,000 mostly Medicare patients in Hawaii. Operationally, we have already onboarded the organization onto our care enabling platform, with full integration expected to be completed by the end of the third quarter of 2020. In addition, we expect to begin participating in risk-bearing arrangements through our care partner segment in that state by 2025.
Speaker Change: The second part of the partnership is to put that model into practice. We entered the state of Hawaii as part of this collaboration, partnering with a provider organization of over 100 primary care providers, serving just under 20,000 primarily Medicare patients in Hawaii.
Speaker Change: Operationally, we have already onboarded the organization onto our Care Enablement Platform, with full integration expected to be completed by the end of the third quarter of 2024.
Speaker Change: In addition, we expect to begin participating in risk-bearing arrangements through our care partner segment in that state by 2025.
Brandon Sim: Finally, I'm excited to share more about our recently announced definitive agreement to acquire Collaborative Health Systems, or CHS, a value-based care enablement organization serving around 2,500 primary care providers and 100,000 primarily senior members, and a company of Centene Corporation. The acquisition of CHS further supports our mission to expand our footprint in order to provide high quality and high value care to all Americans. Strategically, CHS is a natural fit in three ways
Speaker Change: Finally, I'm excited to share more about our recently announced Definitive Agreement to Acquire Collaborative Health Systems, or CHS.
Speaker Change: A value-based care enablement organization serving around 2,500 primary care providers and 100,000 primarily senior members. And a company of Centene Corporation.
Speaker Change: The acquisition of CHS further supports our mission to expand our footprint in order to provide high quality and high value care to all Americans.
Brandon Sim: First, CHS's provider network bolsters and complements our existing Texas network, as well as provides this meaningful density across states in the South and along the East Coast, including New Mexico, Alabama, Georgia, Florida, Virginia, Maryland, and Connecticut.
Speaker Change: Strategically, CHS is a natural fit in three ways.
Speaker Change: First, CHS's provider network bolsters and complements our existing Texas network, as well as provides us meaningful density across states in the South and along the East Coast.
Speaker Change: including New Mexico, Alabama, Georgia, Florida, Virginia, Maryland, and Connecticut.
Brandon Sim: Second, we believe that there exists an opportunity for us to further develop clinical processes and care models and drive operational efficiencies across the CHS enterprise through our care enablement platform, a playbook that we've deployed successfully before across multiple markets. Third, CHS and its existing full-risk contracts across multiple payers and geographies advance our ability to participate in value-based arrangements that will allow us to make greater investments in local communities and align reimbursement with. The intended acquisition of CHS requires regulatory approval and is not expected to close until later this year.
Speaker Change: Second, we believe that there exists an opportunity for us to further develop clinical processes and care models and drive operational efficiencies across the CHS enterprise through our care enablement platform, a playbook that we've deployed successfully before across multiple markets.
Speaker Change: Third, CHS and its existing full-risk contracts across multiple payers and geographies advances our ability to participate in value-based arrangements that will allow us to make greater investments in local communities and align reimbursement with outcomes.
Speaker Change: The intended acquisition of CHS requires regulatory approval and is not expected to close until later this year.
Brandon Sim: The business is expected to run up to a $10 million loss on a stand-alone basis in 2024, but the performance impact to Astrana will be dependent on the closing, which we expect to occur in the fourth quarter of the year. Upon closing, we plan to rapidly integrate the business and anticipate annualized run rate revenue of around $450 million in 2025 with a break-even adjusted EBITDA contract. Over a three to four year period, we expect to operate the business at a more normalized Adjusted EBITDA margin profile, like that of the core Astrana business.
Speaker Change: The business is expected to run up to a $10 million loss on a stand-alone basis in 2024, but the pro forma impact to Astrana will be dependent on the close date, which we expect to occur in the fourth quarter of this year.
Speaker Change: Upon closing, we plan to rapidly integrate the business and anticipate an annualized run rate revenue of around $450 million in 2025 with a break-even adjusted EBITDA contribution.
Speaker Change: Over a three to four year period, we expect to operate the business at a more normalized Adjusted EBITDA margin profile, like that of the core Astrana business.
Brandon Sim: With the deployment of our technology and clinical capabilities and with the synergies we believe exist across our complementary organizations, we believe that we can drive access to and high-quality care for CHS's members while also capturing the embedded EBITDA in the business in the near to mid-term. As you've now heard, Astrana Health is entering a new phase of scale. Through the three new partnerships and the acquisition I discussed today, we continue to not only reinforce our existing markets in California, Nevada, and Texas but also plant meaningful footholds in nine new states across the Hawaiian Islands, the South, and the East Coast. Beginning in 2025, we anticipate that Proforma, the CHS acquisition, will proudly serve over 1.1 million patients in value-based care arrangements across 12 states.
Speaker Change: With the deployment of our technology and clinical capabilities, and with the synergies we believe exist across our complementary organizations, we believe that we can drive access and high-quality care for CHS's members, while also capturing the embedded EBITDA in the business in the near to midterm.
Brandon Sim: Then, I'll cover the partnerships and acquisition we announced since the quarter close, and guidance outlook. Starting with financial highlights, we continue to execute at a high level as Astrana Health Revenue grew to 486.3 million, a 40% increase compared to the same period last year, and adjusted EBIDOC rose to 47.9 million, a 34% increase year over year. This resulted in an adjusted EBIDOC margin of approximately 10%, continuing to demonstrate our differentiated ability to drive profitable growth.
Speaker Change: As you've now heard, Astrana Health is entering a new phase of scale.
Speaker Change: Through the three new partnerships and the acquisition I discussed today, we continue to not only reinforce our existing markets in California, Nevada, and Texas,
Speaker Change: but also plant meaningful footholds into nine new states across the Hawaiian Islands, the South, and the East Coast.
Brandon Sim: Our strong revenue and profitability growth was driven primarily by robust organic growth in our care partner segment, as well as the successful completion and integration of the community family care acquisition, along with continued success in managing the total cost of care for our members and value-based risk bearing arrangements. Moving on to business updates, Astrana continued to execute on our first strategic pillar, increasing membership and new and existing geographies. During the second quarter, we entered the state of Arizona through our care partner segment, partnering with an anchor primary care physician group with over 45 primary care providers serving over 50,000 patients across Medicare, Medicaid, and commercial lines of business.
Speaker Change: Beginning in 2025, we anticipate that Proforma the CHS acquisition
Speaker Change: Astrana Health will proudly serve over 1.1 million patients in value-based care arrangements across 12 states.
Chandan Basho: And we plan to continue to grow at a rapid pace while maintaining a focus on ensuring long-term sustainability and profitability. As we've demonstrated in partnerships and acquisitions in the past, we intend to do this by driving the Astrana flywheel of, one, using our technology platform and operating leverage to drive efficiency, and reinvesting those savings into patient access to care and local clinical capability, all powered by our scalable care models and analytics, which should ultimately, three, drive better patient outcomes and savings in risk-bearing arrangements.
Speaker Change: And we plan to continue to grow at a rapid pace while maintaining a focus on ensuring long-term sustainability and profitability.
Speaker Change: As we've demonstrated in partnerships and acquisitions in the past, we intend to do this by driving the Astrana flywheel of one, using our technology platform and operating leverage to drive efficiency.
Speaker Change: Two, reinvesting those savings into patient access to care and local clinical capabilities all powered by our scalable care models and analytics.
Speaker Change: which should ultimately, three, drive better patient outcomes and savings in risk-bearing arrangements.
Brandon Sim: Astrana will serve as the group's exclusive care enablement provider with providers anticipated to onboard into our care enablement platform by the end of 2024 and expected to begin participating and value-based arrangements in 2025. We also continue to make progress on our second goal, increasing our responsibility for members total cost of care and value-based arrangements. From a timing perspective, the movement of several partial risk contracts into full risk arrangements is expected to occur in the second half of the year.
Chandan Basho: We believe that our continued growth validates the Astrana flywheel, reinforces our depth in core markets, expands our organic growth opportunities, and continues to prove that value-based care can be done successfully in communities across the country. In closing, I want to thank all our teammates, providers, and partners for their unwavering belief in our mission. With that, I'll now turn it to Chand Basho to discuss our financial performance and guidance outlook. Chand.
Speaker Change: We believe that our continued growth validates the Astrana flywheel, reinforces our depth in core markets, expands our organic growth opportunities, and continues to prove that value-based care can be done successfully in communities across the country.
Speaker Change: In closing, I want to thank all our teammates, providers, and partners for their unwavering belief in our mission.
Joan Basha: with that i'll now turn it to joan basha to discuss our financial performance and guidance outlook
Chandan Basho: Thank you, Brandon. And good evening, everyone. We achieved strong financial performance in Q2 thanks to focused execution of our strategy while operating in a dynamic environment. We're pleased with the continued progress we are making in Q2 towards meeting our financial and company-wide commitments. Total revenue this quarter increased 40% to $486.3 million compared to the prior year period, with care partners contributing $463.3 million in revenue, an increase of 44% compared to the prior year period.
Brandon Sim: As of July 1st, 2024, our full risk to business makes up approximately 60% of total cavitation revenue, compared to 46% as of July 1st of 2023. And we continue to be on track to meet our previously stated goal of having around two-thirds of our cavitation revenue coming from a full risk egosystem by January 1st of 2025. Finally, consistent with recent quarters, our utilization and cost trends in the second quarter have remained within expectations for our Medicare Advantage, managed Medicaid, and commercial books, of this.
Joan Basha: John
Joan Basha: Thank you, Brandon, and good evening, everyone. We achieved strong financial performance in Q2 thanks to focused execution of our strategy while operating in a dynamic environment.
Speaker Change: We're pleased with the continued progress we are making in Q2 towards meeting our financial and company-wide commitments.
Speaker Change: total revenue this quarter increased forty percent to four hundred and eighty six point three million compared to the prior year period
Speaker Change: with care partners contributing $463.3 million in revenue, an increase of 44% compared to the prior year period.
Brandon Sim: Given our continued focus on ensuring members are receiving timely and appropriate care in the right settings. We are noticing a full uptake in impassioned utilization related to a surge in COVID-19 cases throughout California, but we believe we remain within expectations in terms of current year guidance, and we will continue to monitor the situation. As it relates to our Medicare years, we have noticed an uptick in cost trends, but that increase remains lower than national trends.
Chandan Basho: This growth was mainly fueled by higher capitation revenue, which resulted from the shift of full risk arrangements within our core risk-bearing organizations and the incorporation of CFC earlier this year. Adjusted EBITDA was $47.9 million in the quarter, which represents a 34% increase from $35.8 million in the prior year period. Net income attributable to Astrana Health was $19.2 million, an increase of 46% from $13.2 million in the prior year quarter. Earnings per share on a diluted basis were $0.40, up 43% from 28 cents in the prior year period.
Speaker Change: This growth was mainly fueled by higher capitation revenue, which resulted from the shift of full-risk arrangements within our core risk-bearing organizations and the incorporation of CFC earlier this year.
Speaker Change: Adjusted EBITDA was $47.9 million in the quarter, which represents a 34% increase from $35.8 million in the prior year period.
Brandon Sim: Moving on to recent activity, we continue to believe that our platform, consisting of clinical capabilities, proprietary technology, and a strong operating team, drives our differentiated ability to produce operating leverage, great patient outcomes, and ultimately our goal of sustainable high growth with effectively managed costs. And after the quarter ended, we continue to be active in order to capitalize on those advantages, investing in continued organic and inorganic growth through several partnerships as well as in acquisition.
Speaker Change: Net income attributable to Astrana Health was $19.2 million, an increase of 46% from $13.2 million in the prior year quarter.
Speaker Change: Earnings per share on a diluted basis.
Speaker Change: were $0.40, up 43% from $0.28 in the prior year period.
Chandan Basho: Now focusing on our balance sheet, our liquidity position remains strong with $325 million in cash and cash equivalents and total debt amounting to $446 million, compared to $335 million in cash and cash equivalents and total debt of $393 million last quarter. Our total debt changed due to a strategic drawdown on our credit facility to finance the CFC acquisition. Tax flow from operating activities in the first half of 2024 was $29.2 million, which is a decline of 4.3 million compared to the prior year period, primarily driven by an increase in working capital associated with the ACO REACH program and income tax payments.
Speaker Change: Now, focusing on our balance sheet, our liquidity position remains strong, with $325 million in cash-in-cash equivalents and total debt
Brandon Sim: First, we deepen our relationship with one of our important payer partners, Anthem Blue Cross, by entering into a partnership where we will build and operate primary care clinics that are jointly branded between astronomy and Anthem Blue Cross. The partnership underscores our organization's commitment to increasing access to care, and in particular, we'll be focused on providing a convenient, delightful consumer experience. Complete with readily available walk-in visits, same-day telemedicine, online appointment scheduling, and the latest technology.
Speaker Change: amounting to $446 million compared to $335 million in cash and cash equivalents and total debt of $393 million last quarter. Our total debt changed due to a strategic drawdown on our credit facility to finance the CFC acquisition.
Speaker Change: Cash flow from operating activities in the first half of 2024 were $29.2 million.
Speaker Change: which is a decline of 4.3 million compared to the prior year period, primarily driven by increase in working capital associated with the ACO REACH program and income tax payments.
Brandon Sim: Our very first, astronomy care, Anthem Blue Cross clinic has already opened in Whittier, California, and we look forward to continuing our partnership with a pipeline of clinics across the state of California. Next, we announced that we joined forces with Elation Health, a primary care-focused electronic health record company serving over 32,000 clinicians in order to form a nationwide partnership to empower primary care providers in value-based care. The first part of our partnership is a collaboration to build and scale risk bearing entities, including accountable care organizations and clinically integrated networks, anchored by providers on Elation's platform.
Operator: We continue to expect our cash flow from operating activities for the year to be approximately 50 to 55% of adjusted EBITDA, as I've mentioned previously. Finally, I'll wrap up my remarks by sharing our financial outlook for the year. After taking our recent initiatives and capital allocation strategy into account, we are raising the bottom end of our revenue guidance to $1.75 billion while maintaining the top end of the range at $1.85 billion.
Speaker Change: We continue to expect our cash flow from operating activities for the year to be approximately 50-55% of adjusted EBITDA, as I've mentioned previously.
Brandon Sim: Elation will support providers in these networks with its EHR and billing technology, while Australia will serve as the exclusive care enablement partner for these risk bearing entities, as well as take on risk when appropriate in our care partners' business. In combination, we believe that this partnership will demonstrate that the right tools and organizational capabilities can jointly scale sustainable value-based care. The second part of the partnership is to put that model into practice.
Speaker Change: Finally, I'll wrap up my remarks by sharing our financial outlook for the year.
Speaker Change: After taking our recent initiatives and capital allocation strategy into account, we are raising the bottom end of our revenue guidance to $1.75 billion, while maintaining the top end of the range of $1.85 billion.
Operator: We're maintaining our full year outlook for adjusted EBITDA as we continue to invest incremental profitability into developing new markets, such as Arizona and Hawaii. In addition, due to the purchase price allocation related to the acquisition of Community Family Care IPA and Health Plan, we're updating our amortization of intangibles. As a result, we're revising our EPS guidance to a range of $1.12 to $1.36 per share. For a closer look at the quarterly cadence for the remainder of the year, we expect revenue to come in at around a $455 million run rate as we continue to move members into full risk arrangements in the latter part of the year, in terms of adjusted EBITDA.
Speaker Change: We're maintaining our full-year outlook for adjusted EBITDA as we continue to invest incremental profitability into developing new markets.
Speaker Change: such as Arizona and Hawaii.
Speaker Change: In addition, due to the purchase price allocation,
Speaker Change: related to the acquisition of community family care IPA and health plan.
Speaker Change: We're updating our amortization of intangibles. As a result, we're revising our EPS guidance to a range of $1.12 to $1.36 per share.
Brandon Sim: We enter the state of Hawaii as part of this collaboration, partnering with a provider organization of over 100 primary care providers serving just under 20,000 primarily Medicare patients in Hawaii. Operationally, we have already onboarded the organization onto our care enablement platform with full integration expected to be completed by the end of the third quarter of 2024. In addition, we expect to begin participating in risk bearing arrangements through our care partner segment in that state by 2025.
Speaker Change: For a closer look at the quarterly cadence for the remainder of the year, we expect revenue to come in at around a $455 million run rate, as we continue to move members into full-risk arrangements in the latter part of the year.
Operator: Consistent with comments on our Q1 call, we expect the second quarter adjusted EBITDA contribution to represent the highest quarter this year, followed by a step down in the third quarter and another in the fourth. This deviates from historical patterns due to the inclusion this quarter of sweeps and quality incentive payments in the high single-digit millions range, which we typically recognize during the third quarter in previous years. Overall, we believe that our year-to-date results and revised guidance continue to demonstrate the strength and differentiation of the Astrana Health plan.
Speaker Change: In terms of adjusted EBITDA, consistent with comments on our Q1 call, we expect the second quarter adjusted EBITDA contribution to represent the highest quarter this year.
Brandon Sim: Finally, I'm excited to share more about our recently announced definitive agreement to acquire collaborative health systems for CHS. CHS, a value-based care-enablement organization serving around 2,500 primary care providers and 100,000 primarily senior members and a company of Centine Corporation. The acquisition of CHS further supports our mission to expand our footprint in order to provide high quality and high-value care to all Americans.
Speaker Change: followed by a step down in the third quarter and another in the fourth.
Speaker Change: This deviates from historical patterns due to the inclusion this quarter of sweeps and quality incentive payments in the high single-digit millions range.
Speaker Change: which we typically recognize during the third quarter in previous years.
Speaker Change: Overall, we believe that our year-to-date results and revised guidance continue to demonstrate the strength and differentiation of the Astrana Health platform.
Operator: Moving forward, we will continue to prioritize execution, operational efficiency, and strategic capital allocation to position us to drive sustained growth and improve the market presence of our business. With that, I'll leave it to you, operator, with questions.
Brandon Sim: Strategically, CHS is a natural fit in three ways. First, CHS's provider network bolsters and compliments are existing Texas network, as well as provides this meaningful density across states and the South and along the East Coast, including New Mexico, Alabama, Georgia, Florida, Virginia, Maryland, and Connecticut. Second, we believe that there exists an opportunity for us to further develop clinical processes and care models and drive operational efficiency across the CHS enterprise through our care-enablement platform, a playbook that we've deployed successfully before across multiple markets. Third, CHS and its existing forward-to-contracts across multiple payers and geographies advances our ability to participate in value-based arrangements that will allow us to make greater investments in local communities and align reimbursement with outcomes.
Speaker Change: Moving forward, we will continue to prioritize execution, operational efficiency, and strategic capital allocation to position us for driving sustained growth and improving the market presence of our business.
Speaker Change: With that, I'll leave it to you, Operator, for questions.
Operator: Thank you. Ladies and gentlemen, the floor is now open for questions. If you do have a question, please press star 1 on your telephone keypad at this time. Again, that's star 1 if you have a question or comment. And we'll take our first question from Jailendra Singh from Truist Securities. Please go ahead.
Speaker Change: Thank you. Ladies and gentlemen, the floor is now open for questions. If you do have a question, please press star 1 on your telephone keypad at this time. Again, that's star 1 if you do have a question or comment.
Speaker Change: And we'll take our first question from Jailendra Singh from Truist Securities. Please go ahead.
Brandon Sim: Thank you, and thanks for taking my questions. I was wondering if you could provide a little bit more color on the utilization trends you experienced in Q2. I believe for Q1, you guys talked about bookmarking the 5% trend but ended up seeing 2.5. I know you called out COVID-driven some inpatient utilization in California, but just curious how trends played out for Q2 versus your expectations and any breakdown in terms of areas we are seeing favorable trends and areas where trends are running slightly higher.
Jailendra Singh: Thank you and thanks for taking my questions. I was wondering if you could provide a little bit more color on the utilization trends you experienced in Q2. I believe for Q1, you guys talked about bookmarking the 5% trend but ended up seeing 2.5. I know you called out COVID-driven some inpatient utilization in California, but just curious how trends played out for Q2 versus your expectations and any breakdown in terms of areas we are seeing favorable trends and areas we have a chance of running slightly higher.
Brandon Sim: The intended acquisition of CHS requires regulatory approval and is not expected to close until later this year. The business is expected to run up to a $10 million dollar loss on a standalone basis in 2024, but the performance impact to astronomy will be dependent on the closed base, which we expect to occur in the fourth quarter of this year. Upon closing, we plan to rapidly integrate the business and anticipate an annualized run rate revenue of around $450 million in 2025 with a break-even adjusted EBITDA contribution.
Brandon Sim: Hey Jailendra, Thanks for the question. It's great to hear from you. Yeah, in terms of utilization, they're very much overall within expectations for the second half of the year. We do expect to see a slight uptick in utilization, and it's pretty consistent with seasonality, as you can see in the latter part of the second half of the year. And also, as many of you've seen, there has been a slight uptick in terms of COVID in California as well. We have built that into our guidance for the remainder of the year, and it's nothing out of the blue, and it's, you know, what we're prepared for.
Speaker Change: Hey Jailendra, thanks for the question. Great to hear from you. Yeah, in terms of utilization, they're very much overall within expectations for the second half of the year.
Speaker Change: We did expect to see, we do expect to see a slight uptick in utilization.
Brandon Sim: Over a three to four-year period, we expect to operate the business at a more normalized adjusted EBITDA margin profile, like that of the course drawn in business. With the deployment of our technology and clinical capabilities, and with the synergies we believe exist across our complementary organizations, we believe that we can drive access and high-quality care for CHS members, while also capturing the embedded EBITDA in the business in the near-to-midterm.
Speaker Change: And it's pretty consistent with seasonality as you see in the latter part of the second half of the year. And also, as many of you have seen, there has been...
Speaker Change: a slight uptick in terms of COVID in California, as well as we
Speaker Change: We have built that into our guidance for the remainder of the year and it's nothing out of the blue and it's you know what we're prepared for.
Brandon Sim: As you've now heard, astronomy health is entering a new phase of scale. Through the three new partnerships and the acquisition I discussed today, we continue to not only reinforce our existing markets in California, Nevada, and Texas, but also plant meaningful footholds into nine new states across the Hawaiian Islands, the South, and the East Coast. Beginning in 2025, we anticipate that the performance of the CHS acquisition, astronomy health will proudly serve over 1.1 million patients in value-based care arrangements across 12 states.
Chandan Basho: And just to clarify, is that the primary reason why you did not narrow down the EB-DA guidance range, but you did narrow down the revenue guidance range, such that you can calculate the... Any outcome there?
Speaker Change: And just to clarify, is that the primary reason why you did not narrow down EBITDA guidance range but you did narrow down revenue guidance range to incorporate any outcome there?
Chandan Basho: I think with the transactions that we've announced and our commitment to continuing to reinvest in the business, we are in a good place in terms of our current profitability and, and we'll be using any opportunities to reinvest in the business as possible.
Speaker Change: I think with
Speaker Change: with the transactions that we've announced and our commitment around continuing to reinvest.
Speaker Change: In the business, we're at a good place in terms of our current profitability and we'll be using any...
Brandon Sim: And we plan to continue to grow at a rapid pace, while maintaining a focus on ensuring long-term sustainability and profitability. As we've demonstrated in partnerships and acquisitions in the past, we intend to do this by driving the astronaut flywheel, of one, using our technology platform and operating leverage to drive efficiencies, two, reinvesting those savings into patient access to care and local clinical capabilities, all powered by our scalable care models and analytics.
Brandon Sim: Okay, and a quick follow-up on the CHS margin ramp expectations. As Brandon talked about getting to break-even in 2025 after the deal is closed and improving in out-years, can you provide more specifics around synergies and key drivers, considering that there are not many market overlaps between Astrana and CHS? And does the part of the margin ramp include moving some lives from partial risk to full risk?
Speaker Change: opportunities to reinvest in the business as possible.
Speaker Change: Okay, and a quick follow-up on the CHS margin ramp expectations as Brandon talked about getting to break-even in 2025 after the deal is closed and improving in out years.
Speaker Change: Can you provide more specifics around synergies and key drivers considering that there are not many market overlaps between Astrana and CHS and does the part of the margin ramp include moving some lives from partial risk to full risk?
Brandon Sim: Service, which should ultimately thrive better patient outcomes and savings in risk-bearing arrangements. We believe that our continued growth validates the Astrana Flywheel, reinforces our depth and core markets, expands our organic growth opportunities, and continues to prove that value-based care can be done successfully in communities across the country.
Brandon Sim: Jailendra, thank you for that question, and thank you for joining the call. Then, just to clarify, the current guidance that Sean provided does not include any subperiod for CHS's intended acquisition. To answer your question, I believe in the RAIN supplement, we provided some details around that ramp. CHS is expected to lose on an annualized run rate basis around $10 million or so on a run rate basis in 2024. We will update our guidance when we figure out when that is going to close, which is anticipated to take place in the fourth quarter of this year, pending regulatory approval and customary closing conditions.
Speaker Change: Jailendra, thank you for that question and thank you for joining the call.
Speaker Change: Just to clarify, the current guidance that Sean provided does not include
Speaker Change: Any sub-periods for CHS's intended acquisition? To answer your question, I believe in the RAIN supplement we provided some details around that ramp. CHS is expected to lose on an annualized run rate basis around...
Brandon Sim: In closing, I want to thank all our teammates, providers, and partners for their unwavering belief in our mission.
Chandan Basho: With that, I'll now turn it to Chandan Basho to discuss our financial performance and guidance outlook. Chandan, thank you, Brandon, and good evening, everyone. We achieved strong financial performance in Q2, thanks to focused execution of our strategy while operating in a dynamic environment. We're pleased with the continued progress we are making in Q2 towards meeting our financial and company-wide commitments. Total revenue this quarter increased 40% to 486.3 million compared to the prior year period.
Speaker Change: around $10 million or so on a run rate basis in 2024.
Speaker Change: We will update our guidance when we figure out when that is going to close, which is anticipated to take place in the fourth quarter of this year, pending regulatory approval and customary closing conditions.
Brandon Sim: We think that, as mentioned before, by 2025, we should, with synergies, break even on that business on a just, even dollar contribution basis. We've committed to that being profitable on a margin in 2026 and then at the $10 million mark or more in 2027. And that is on the Marine Supplement.
Speaker Change: We think that...
Speaker Change: As mentioned before, by 2025, we should, with synergies, break even on that business on a just, even dollar contribution basis. We've committed to...
Chandan Basho: With care partners contributing 463.3 million in revenue, an increase of 44% compared to the prior year period. This growth was mainly fueled by higher-capitation revenue, which resulted from the shift of full risk arrangements within our core risk-bearing organizations and the incorporation of CFC earlier this year. Adjusted EBITDA was 47.9 million in the quarter, which represents a 34% increase from 35.8 million in the prior year period. Net income attributable to a strong health was 19.2 million, an increase of 46% from 13.2 million in the prior year quarter.
Speaker Change: That being at a profitable margin in 2026, and then at the $10 million mark or more in 2027.
Speaker Change: And that is on the earnings supplement as well.
Operator: Excellent, thank you. And if we could just keep the questions to two, we'll be happy to have you Adam Ron, Bank of America. Hey, thanks for the question.
Speaker Change: pal out
Speaker Change: Excellent, thank you. And if we could just keep the questions to two and we'll be happy to have you hit star one for a follow-up question. And we'll take our next question from Adam Ron from Bank of America. Please go ahead, Adam.
Operator: Hey, thanks for the question. Going sort of to Jailendra's question, I think last quarter on the earnings call, you said that utilization was coming in a couple hundred base points better, and I believe that that was on a claims completion rate that was through the quarter end. So first, to clarify, there wasn't any negative development from Q1. And then two, if you're saying that now utilization is in line with expectations, but Q1 was so much further below, are you now saying that Q2 is running, you know, 300 basis points above what you booked coming into the year. Just trying to understand the magnitude of what you're saying.
Adam Ron: Hey, thanks for the question. Going sort of to Jailendra's question, I think last quarter on the earnings call you said that utilization was coming in a couple hundred base points better and I believe that
Speaker Change: that was on a claims completion that was through the quarter end. So there, first to clarify, there wasn't any negative development from Q1, and then two, if.
Chandan Basho: Earnings for share on a diluted basis were 40 cents, up 43% from 28 cents in the prior year period. Now, focusing on our balance sheet, our liquidity position remains strong. With 325 million in cash and cash equivalence and total debt amounting to 446 million compared to 335 million in cash and cash equivalence and total debt of 393 million last quarter, our total debt changed due to a strategic drawdown on our credit facility to finance the CFC acquisition.
Speaker Change: You're saying that now utilization is in line with expectations, but Q1 was so much further below, is that now saying that Q2 is running, you know, 300 basis points above what you booked coming in to be, or just trying to understand the magnitude of what you're saying?
Chandan Basho: Yeah, so just to kind of open up and kind of break apart that question, last quarter, we, and as we can see now, Q1 was better than expected. In Q2, it's coming in line with what our expectations are for the quarter. And yeah, and does that make sense? Yeah.
Speaker Change: adom
Speaker Change: We, and as we can see now, Q1 was better than expected. In Q2, it's coming in line with what our expectations are.
Chandan Basho: Casual from operating activities in the first half of 2024 were 29.2 million, which is a decline of 4.3 million compared to the prior year period, primarily driven by increase in working capital associated with the ACO reach program and income tax payments. We continue to expect our cash from operating activities for the year to be approximately 50 to 55% of adjusted EBDA, as I mentioned previously.
Speaker Change: are for the quarter and yeah and does does that make sense?
Chandan Basho: Yeah, but is it better than when you came in the year, like versus initial guidance, or not?
Speaker Change: Yeah, but but is it better than when you came into the year like versus initial guidance or?
Chandan Basho: I would say it's really around where we expected for the quarter. We saw a slight uptick in the ACO population, less than the national trends. We, you know, as you can see, in terms of our guidance, we, we, we, we continue to see the year progressing well.
Speaker Change: I
Speaker Change: Bye.
Chandan Basho: Finally, I'll wrap up my remarks by sharing our financial outlook for the year. After taking our recent initiatives and capital allocation strategy into account, we are raising the bottom end of our revenue guidance to 1.75 billion. While maintaining the top end of the range of 1.85 billion. We're maintaining our four-year outlook for adjusted EBITDA as we continue to invest incremental profitability into developing new markets such as Arizona and Hawaii. In addition, due to the purchase price allocation related to the acquisition of Community Family Care IPA and Health Plan, we're updating our amortization of intangibles.
Speaker Change: I would say it's really around where we expected for the quarter, that we saw a slight uptick in the ACO population, less than the national trends.
Speaker Change: We, you know, as you can see in terms of our guidance, we continue to see
Chandan Basho: Okay, and then. For the rest of the year, and kind of just thinking about it, you mentioned outperformance, funding, additional expansion into new markets. And so does that mean that basically, no matter what, you're not planning on raising EBITDA guidance for the rest of the year, given that if there is upside, you would be invested? And then, in terms of future years, how are you thinking about what you consider to be excess upside versus what you would allow to flow to the bottom line? Like, are you targeting like a 20% EBITDA growth number and then investing the rest? Like how are you weighing those things? Thanks.
Speaker Change: the year progressing well.
Speaker Change: Okay, and then
Speaker Change: For the rest of the year and kind of just thinking about you know, you mentioned outperformance
Speaker Change: funding additional expansion into new markets. And so does that mean that basically no matter what you're not planning on raising EBITDA guidance for the rest of the year, given that if there is upside, you would reinvest it? And then in terms of like future years, how are you thinking about
Chandan Basho: As a result, we're revising our EPS guidance to a range of $1.12 to $1.36 per share. For a closer look at the quarterly cadence for the remainder of the year, we expect revenue to come in at around a $455 million run rate as we continue to move members into full-risk arrangements in the latter part of the year. In terms of adjusted EBITDA, consistent with comments on our Q1 call, we expect the second quarter adjusted EBITDA contribution to represent the highest quarter this year, followed by step down in the third quarter and another in the fourth.
Speaker Change: You know, what you consider to be excess upside versus what you would allow to flow to the bottom line. Like, are you targeting like a 20% EBITDA growth number and then investing the rest? Like, how are you weighing those things? Thanks.
Chandan Basho: Hey Adam, thanks for the question. You know, I wouldn't...
Speaker Change: Hey Adam, thanks for the question.
Chandan Basho: I want to hold an EBITDA guidance change out of the question, necessarily, that we absolutely wouldn't. I think we're weighing the very strong pipeline of development activity that we're seeing, especially given some of the recent announcements. We've been putting an effort into continuing to diversify the business, including, for example, our partnership with Alation and working on deepening the now 12 states that we will be in, pro forma, in 2025, and deepening our relationships and networks and ability to hit the ground running there and capitalize on some of the synergies that we expect to do so in 2025.
Speaker Change: No, I wouldn't.
Speaker Change: I'm going to hold an EBITDA.
Speaker Change: I think we're weighing the very strong pipeline of development activity that we're seeing especially given
Speaker Change: some of the recent announcements.
Speaker Change: We've been putting effort into continuing to diversify the business, including, for example, with our
Chandan Basho: This deviates from historical patterns due to the inclusion of this quarter of sweeps and quality incentives payments in the high single-digit millions range, which we typically recognize during the third quarter in previous years. Overall, we believe that our year-to-date results and revised guidance continue to demonstrate the strength and differentiation of the Astronah Health Platform. Moving forward, we will continue to prioritize execution, operational efficiency, and strategic capital allocation to position us for driving sustained growth and improving the market presence of our business.
Speaker Change: partnership with Alation, and working on deepening the now, you know, 12 states that we will be in pro forma in 2025.
Speaker Change: And deepening our relationships and networks and ability to hit the ground running there and capitalize on some of the synergies that we expect to do so in 2025. So, no, I wouldn't say necessarily that it's out of the question, but I do think that we're happy with.
Chandan Basho: So, no, I wouldn't necessarily say that it's out of the question, but I do think that we're happy with, 20% EBITDA, a near-to-midterm kind of growth rate consistently, and we want to make sure that we're setting the foundation to really win and be the preeminent value-based care platform in the country in the near to midterm as well. So we're balancing those two things, and that's kind of where our investment and capital allocation is shaking out.
Speaker Change: 20% EBITDA, near to mid-term kind of growth rate consistently and we want to make sure that we're setting the foundation to really win.
Operator: With that, I'll leave it to you, operator, for questions. Thank you. Ladies and gentlemen, the floor is now open for questions. If you do have a question, please press star one on your telephone keypad at this time. Again, that star one if you do have a question or comment.
Speaker Change: and be the preeminent value-based care platform in the country in the near to mid-term as well. So we're balancing those two things and that's kind of where our investment in capital allocation is shaking out.
Jailendra Singh: And we'll take our first question from Jolendra Singh, from Shoest Truest Securities. Please go ahead. Thank you, and thanks for taking my questions.
Operator: Thank you. And we'll take our next question from Ryan Daniels of William Blair. Please go ahead, Ryan.
Speaker Change: Appreciate it.
Ryan Daniels: thank you and we'll take our next question from ryan daniels from william blair please go ahead ryot
Operator: Yeah, thanks for taking the questions and congrats on the quarter and, even more so, the strategic developments. Maybe a couple on that.
Ryan Daniels: Yeah, thanks for taking the questions and congrats on the quarter and even more so the strategic developments.
Brandon Sim: with the Elation EHR partnership to empower VVC for their providers. Can you double-click on that a little bit? I'm curious if that's something that's going to be sold by Elation again...
Brandon Sim: I was wondering if you could provide a little bit more color on the utilisation French experience in Q2. I believe for Q1, you guys talked about bookmarking of 3.5 percent trend, but ended up seeing 2.5. I know you called out COVID-driven, some innovation utilisation in California, but this Q2 was the few expectations and any breakdown in terms of areas we are seeing, failed load trends and areas with chance that are slightly higher.
Ryan Daniels: Maybe a couple on that, with the Alation EHR partnership to empower VBC for their providers.
Brandon Sim: back into that 32,000 clinician base, number one.
Speaker Change: Can you double-click on that a little bit? I'm curious if that's something that's going to be sold by Elation back into that 32,000 clinician base, number one. And then number two, do you know how many of them are already in value-based care arrangements such that
Brandon Sim: Number two, do you know how many of them there are...
Brandon Sim: are already in value-based care arrangements such that, you know, it's not part of the addressable market. Is it really looking for those clinicians that haven't yet moved to less-
Brandon Sim: that haven't yet moved to leverage the care enablement platform to do so. Hey Ryan, thanks for the question.
Speaker Change: You know, it's not part of the addressable market. Is it really looking for those clinicians that haven't yet moved to leverage the Care Enablement Platform to do so?
Brandon Sim: Thank you, Jolendra. Thanks for the question. Great to hear from you. Yeah, in terms of utilisation, they're very much overall within expectations. For the second half of the year, we did expect to see, we do expect to see a flight the second half of the year. And also, as many if you've seen, there has been a flight uptick in terms of COVID in California as well as, and we We have built that into our guidance for the remainder of the year, and it's nothing out of the blue and it's, you know, what we're prepared for.
Brandon Sim: Yeah, so there are two parts to this, or three parts, really. I'll answer your questions first. So we really do see it as a bidirectional partnership. For example, we're working to jointly sell Elation's electronic health record, as well as our billing services, which are part of our care enabling platform, for example, to affiliate providers that are already bearing risk with us in some form or fashion. That's one. Two, certainly, we look to bring our risk-bearing capabilities and enablement capabilities to clinicians, you know, the 32,000 clinicians that are already on the electronic health record and, you know, sold by Elation.
Speaker Change: Hey Ryan, thanks for the question. Yeah, so there are two parts to this, or three parts really. I'll answer your questions first. So, we really envision it as a bi-directional partnership. For example, we're working to jointly sell
Ryan Daniels: Elation's electronic health record as well as our billing services which we've which are part of our care enabling platform for example to affiliate providers that are already bearing risk with us in some form or fashion.
Speaker Change: That's one. Two, certainly we look to...
Speaker Change: Bring our risk-bearing capabilities and enablement capabilities
Brandon Sim: So there's definitely a large opportunity, we believe, to organize and aggregate providers into risk-bearing entities such as ACOs or CINs in that population. I believe that a large majority of the 32,000 clinicians do not yet participate meaningfully in a value-based arrangement today. Certainly not, you know, all-part B-risk, certainly not full-risk. So we think there exists a meaningful market capture opportunity in terms of helping providers who are on elation, which is suited to value-based care, especially given the integrations we're building out with them, to participate and move along that risk ladder with us. Okay, that's super helpful. And then I'm gonna ask a similar question about your partnership with Anthem.
Speaker Change: to clinicians, you know, those 32,000 clinicians that are already on the electronic health record.
Ryan Daniels: you know, sole violation. So there's definitely a, a large opportunity, we believe to organize and aggregate providers into risk-bearing entities, such as ACOs or CINs in that population. I believe that a large majority of the 32,000 clinicians
Brandon Sim: And just to clarify, is that the primary reason why you did not narrow down EB-DUG guidance range, but you did narrow down revenue guidance range, let's look into the outcome there? I think with the transactions that we've announced and our commitment around continuing to reinvest in the business, we are at a good place in terms of our current profitability and we'll be using any opportunities to reinvest in the business as possible.
Ryan Daniels: do not yet participate meaningfully in a value-based arrangement today. Certainly not, you know, all-the-part BUA, certainly not full-risk.
Ryan Daniels: So, you know, we think there exists a meaningful market capture opportunity in terms of helping providers who are on elation, which is...
Ryan Daniels: suited, you know, for value-based care, especially given the integrations we're building out with them, to participate and move along that risk ladder with us.
Brandon Sim: Okay, and my quick follow-up on the CHS margin ramp expectations as Brandon talked about getting to breakeven in 2025 after the deal is closed and improving in out years, can you provide more specifics around synergies and key drivers considering that there are not many market overlaps between astronaut and CHS and there's a part of the margin ramp include moving some lives from partial risk to full risk. Please, Elandra, thank you for that question and thank you for joining the call.
Speaker Change: Okay that's super helpful and then
Brandon Sim: I'm curious how you think about, you know, those ramping up to scale or what we would call the J-curve, I guess, in the industry, given that they seem to be exclusive to Anthem and some of the Allied Pacific IPA members. Is there such scale in that market just with that pair and Allied Pacific that you expect those to ramp pretty quickly, and maybe more broadly? How might those clinics ramp up over time and contribute? Thanks.
Speaker Change: I'm going to ask a similar question on your partnership with Anthem Blue Cross and Astrana Care Clinics.
Speaker Change: I'm curious how you think about, you know, those ramping to scale, or what we would call the J-curve, I guess, in the industry, given that...
Speaker Change: They seem to be exclusive to Anthem.
Speaker Change: in some of the outlied pacific i p a members is there such scale in that market just with that paay and like pacific that you expect those to ramp pretty quickly and it maybe more broadly how might those clinics ramp out over time and contribute thanks so much
Brandon Sim: The, just to clarify, the current guidance that John provided does not include any subperiod for CHS that was intended acquisition. Thanks for your question. I believe in the rain supplement we provided some details around that ramp, CHS is expected to lose on an annualized run rate basis around $10 million or so on a run rate basis in 2024. We will update our guidance when we figure out when that is going to close, which is that this phase should take place in the fourth quarter of this year pending regulatory approval and customary closing conditions.
Brandon Sim: Thanks for your time and contribution.
Brandon Sim: Thanks, Ryan. You're right, those clinics are exclusively for Astrana and one of our affiliate IPAs who are participating in an Anthem Blue Cross plan. We think that the ramp-up would look, frankly, very similar, if not slightly better than the typical ramp-up, given that there is... We specifically chose to build those clinics in areas where we think there could be a lot of gain for Allied, Pacific, as well as for Anthem Blue Cross. So they were strategically chosen, not necessarily in areas where
Ryan: Thanks, Ryan.
Speaker Change: We, you're right, those clinics are exclusively for
Speaker Change: and one of our affiliate IPAs who are who are participating in an Ally or sorry participating in an Anthem Blue Cross plan. We think that the ramp-up would look frankly very similar if not slightly better than the typical ramp-up given that there is
Ryan: We specifically chose to build those clinics in areas where we think there could be a lot of gains for Allied, Pacific, as well as for Anthem Blue Cross. So they were strategically chosen, not necessarily in areas where...
Brandon Sim: We think that as mentioned before by 2025 we should with synergies breakeven on that business on an adjusted EBITDA activation basis and we've committed to that being at a profitable margin in 2026 and then at the $10 million mark or more in 2027. And that is on the earnings supplement as well.
Brandon Sim: You know, we already have full saturation in areas where we think there could be improvements in terms of access to high-quality care providers in that community. So, given our presence in California and Anthony Blue Cross' presence in California, we actually do think that membership at those clinics will ramp up pretty nicely. We're tracking that very closely as we start, for the first clinic, certainly, and for the couple that we plan to build, you know, during the remainder of this year.
Ryan: You know, we already have full saturation but areas where we think
Speaker Change: There could be improvements in terms of access.
Speaker Change: to high quality care providers in that community. So given our presence in California and Anthem Blue Cross' presence in California, we actually do think that membership at those clinics will ramp up pretty nicely. We're tracking that very closely as we start.
Operator: All right, thank you. Excellent, thank you and if we could just keep the questions to two and we'll be happy to have you hit store one for a follow-up question.
Ryan: For the first clinic, certainly, and for the couple that we plan to build in the remainder of this year.
Brandon Sim: Super helpful. Congratulations again on all the strategic processes during the quarter. Thanks.
Speaker Change: Super helpful. Congrats again on all the strategic process during the quarter. Thanks.
Adam Ron: And we'll take our next question from Adam Ron from Bank of America. Please go ahead, Adam. Hey, thanks for the question. Going sort of to Jill and Drus question, I think last quarter on the earnings call you said that utilization was coming into couple hundred baselines better and I believe that that was on a claims completion that was through the quarter end. To first to clarify there wasn't any negative development from Q1 and then two if you're saying that now utilization is in line with expectations but Q1 was so much further below is that now saying that Q2 is running you know 300 basis points above what you book coming to the year just trying to understand the magnitude of what you're saying.
Operator: Thank you. And next, we'll go to David Larsen from BTIG. Please go ahead, David. Hi.
Speaker Change: Thank you. And next we'll go to David Larsen from BTIG. Please go ahead, David.
Operator: Hi. All of the health plans have been talking about pressure on their Medicare cost ratio. Like, for example, CVS this morning talked about pressures within the exchanges and also Medicaid and then also, obviously, Medicare Advantage. Part of this is being driven by the conversion to version 28.
David Larsen: Hi, all of the health plans have been talking about pressure on their Medicare cost ratio, like for example, you know, CVS this morning talked about pressures when in the exchanges and also Medicaid and then also obviously Medicare Advantage.
Speaker Change: Part of this is being driven by the conversion to version 28. Just any thoughts there like how are you managing through this? It seems like you're managing through it very well.
Brandon Sim: Just any thoughts there, like how are you managing through this? It seems like you're managing through it very well. Can you provide a number, a percent, for the medical trend that you saw in the quarter? And then just, can you maybe just remind me about the risk sharing arrangements when you're not at full risk? How do the dollars flow? Like how much risk does the doctor, plan, hospital, and you take?
Speaker Change: Can you provide a number, a percent, for the medical trend that you saw in the quarter?
Speaker Change: and then just can you maybe just remind me on the risk-sharing arrangements when you're not in full risk how do the dollars flow like how much risk does the doc plan hospital you take thank you
Adam Ron: Yeah, so just to kind of open up and kind of break apart that question. Last quarter, we, and as we can see now, Q1 was better than expected in Q2. It's coming in line with what our expectations are for the quarter. And, yeah, and does that make sense? Yeah, but is it better than when you came into the year like versus initial guidance or? I would say it's really around where we expected for the quarter that we saw a flight uptick in the ACO population less than the national trends.
Brandon Sim: Thank you.
Brandon Sim: Hey Dave, thanks for the question. So I think we're seeing relatively stable utilization, as we mentioned earlier, as John mentioned earlier. You know, low to mid single digits, depending on the line of business relative to last year. Transcripts by Transcription Outsourcing, LLC. Again, all of the anticipated uptakes are included in 2024. For a long time, I have not relied on, uh, all of you who are participating today. And more, you know, the hybrid affiliate and employee model, you know, the access to care that we're providing by building these neighborhood sites, so on and so forth, really have allowed us to moderate utilization and revenue headwinds in a way that others maybe are not, are struggling a little more with.
Speaker Change: Hey Dave, thanks for the question.
Speaker Change: So I think we're seeing relatively stable utilization as we mentioned earlier, as Sean mentioned earlier.
Sean: You know low single low to mid single digits depending on line of business relative to last year cost trend and those continue to stabilize for us
Speaker Change: in all of the anticipated updates are included in in two thousand and twenty four guidance if you reiterated and the reason for that are really the what we believe to be the strength of theastronic airmo know we've
Speaker Change: revenue capture, right, from a V28 or risk coding perspective, in order to maintain the medical loss ratios that we do. We've had very, very tight integrations between primary and specialty care providers, as well as with the hospital ecosystem, especially to move into full risk arrangements. We think
Adam Ron: And we, you know, as you can see in terms of our guidance, we continue to see the year progressing well. Okay, and then for the rest of the year and kind of thinking about, you know, you mentioned out performance, funding, additional expansion into new markets. And so does that mean that basically no matter what you're not planning on raising keep it out guidance for the rest of the year given that if there is upside, you would be invested.
Speaker Change: Those and more, you know, the hybrid affiliate and employee model, you know, the access to care that we're providing by building these neighborhood sites, so on and so forth, really have allowed us to moderate utilization and revenue headwinds in a way that others
Brandon Sim: And we believe that's why payers will want to continue working with us, especially as we expand our presence across the United States from coast to coast. So, you know, we do think that that's part of our advantage, and we are continuing to see that low to mid single-digit trend as sustainable and, you know, properly accounted for for the rest of the year, even with things like COVID or the Australian flu portending a worse flu season for us, all the things that John mentioned.
Ryan: We believe that's why payers will want to continue working with us, especially as we expand our presence across the United States from coast to coast.
Adam Ron: And then in terms of like future years, how are you thinking about, you know, what you consider to be excess upside versus what you would allow to flow to the bottom line? Like are you targeting like a 20% EBITDA growth number and then investing the rest? Like how are you weighing those things? Thanks. Yeah, thanks for the question. No, I wouldn't, I wouldn't hold the EBITDA guidance change out of the question necessarily that we absolutely wouldn't.
Ryan: You know, we do think that's part of our advantage, and we are continuing to see that low to mid-single-digit trend as sustainable and, you know, properly.
Ryan: accounted for for the rest of the year, even with things like COVID or with Australian flu, you know, portending a worse flu season for us, all things that John mentioned earlier.
Brandon Sim: Great, that's very helpful. Thank you.
Speaker Change: Great, that's very helpful, thank you. And then when we think about you taking on more full risk, going from like maybe 60%, I think, up to two-thirds or higher.
Adam Ron: I think we're weighing the very strong pipeline of development activity that we're seeing, especially given some of the recent announcements. We've been putting effort into continuing to diversify the business, including, for example, with our partnership with relation and working on deepening, you know, you know, 12 states that we will be in. Goforma in 2025 and deepening our relationships and networks and ability to hit the ground running there and capitalize on some of the synergies that we expect to do so, you know, in 2025.
Brandon Sim: And then when we think about you, you are taking on more full risk, going from like maybe 60%, I think up to two thirds or higher. What does that mean in terms of revenue growth? And when I look at your managed lives of, like, over a million managed lives, are we saying that 60% of those are full risk, or is it something far lower as a percentage of lives? So, I guess what I'm getting at is, is the revenue growth potential by going to full risk for more lives much higher than what people might think it is? If there's any more color there, it would be great. Thank you.
Speaker Change: What does that mean in terms of revenue growth and when I look at your managed lives of like over a million managed lives
Speaker Change: Are we saying that 60% of those are full risk or is it something far lower as a percentage of lives? So I guess what I'm getting at is, is the revenue growth potential by going to full risk for more lives
Adam Ron: So no, I wouldn't say necessarily that is out of the question, but I do think that we're happy with a 20% EBITDA near to midterm kind of growth rate consistently. And we want to make sure that we're saying the foundation to really win and be the preeminent value based care platform in the country in the near to midterm as well. So we're balancing those two things and that's kind of where our investment capital allocation is shaking out. Appreciate it. Thank you.
Speaker Change: much higher than what people might think it is.
Chandan Basho: Dave, in terms of as we move from the 60% to the two-thirds percentage in terms of revenue by year end, we do expect to see that revenue growth, as you alluded to, is built into our revenue forecast for this year, and as we start seeing that membership move over, you will You'll see, in a large portion, there'll also be an equivalent improvement in terms of the number of lives in CP. Is that helpful? Yeah, that's very helpful.
Speaker Change: Just any more color there would be great. Thank you
Speaker Change: We do expect to see that revenue growth as you alluded to. It's built into our revenue forecast for this year and as we start seeing that membership move over
Ryan Daniels: And we'll take our next question from Ryan Daniels from William Blair. Please go ahead, Ryan. Yes, thanks for taking the questions and congrats on the corner and even more so the strategic developments. Maybe a couple on that with the Elation EHR partnership to empower VVC for their providers. Can you double-click on that a little bit? I'm curious if that's something that's going to be sold by Elation back into that 32,000 and Clinician-based number one.
Speaker Change: You will
Speaker Change: You'll see in a large portion there'll also be an equivalent improvement in terms of the the number of lives in CP. Is that helpful?
Chandan Basho: Maybe we can jump in quickly and just note that... You know, today 60% of the revenue, capitated revenue by risk, by risk arrangement breaks down around 60-40 between full risk and partial risk. We've got it for that to be around two-thirds by the end of the year. In terms of membership, because of how we've.
Speaker Change: Yeah, that's very helpful. Maybe we can jump in quickly and just note that.
Ryan Daniels: And then number two, do you know how many of them are already in value-based care arrangements such that it's not part of the addressable market? Is it really looking for those clinicians that haven't yet moved to leverage the care enablement platform to do so? Hey, Ryan, thanks for the question.
Speaker Change: You know today 60% of the revenue, capitated revenue by risk by risk arrangement breaks down around 60-40 between full risk and partial risk
Speaker Change: We've got for that to be around two-thirds by the end of the year in terms of membership
Chandan Basho: Prioritize, as I mentioned in the past, which members to bring over to Forrest first, based on the contracts, based on the utilization, our knowledge of the patient base, cohorts, so on and so forth. Around 28% of the members are in a Forrest arrangement on a membership basis, not on a percentage of capitated revenue basis. You can find some of these details on slide nine of our supplement deck for this earnings quarter.
Speaker Change: because of how we
Speaker Change: Prioritize, as I mentioned in the past, which members to bring over to Forrest first, based on the contracts, based on utilization, our knowledge of the patient base, cohorts, so on and so forth. Around 28% of the members are in a Forrest arrangement on a membership basis, not on a percentage of capitated revenue basis.
Ryan Daniels: Yeah, so there are two parts to this for three parts, really, I'll answer your questions first. So we really envision it as a bi-directional partnership. For example, we're working to jointly sell relations electronic health record as well as our billing services which are part of our care enable and platform. For example, two affiliate providers that are already bearing risk with us in some form or fashion. That's one. Two, certainly, we look to bring our risk bearing capabilities and enablement capabilities to clinicians, you know, those 32,000 clinicians that are already on the electronic health record sold by Elation.
Speaker Change: You can find some of these details on slide 9 of our supplement deck for this earnings quarter. So what that means is really...
Chandan Basho: So what that means is really, we think there's still a long road ahead to continue moving members into risk. We're going to do so prudently in order to protect margins and make sure that we're able to provide the same standard of care that we were used to providing in the past, and we'll continue to provide updates on a quarterly basis on both the percentage of revenue as well as the percentage of members that have moved over to full risk.
Speaker Change: We think there's still a long road ahead
Speaker Change: to continue moving members at risk.
Speaker Change: We're going to do so prudently in order to protect margins and make sure that we're able to provide the same standard of care that we're used to providing in the past, and we'll continue to provide updates on a quarterly basis on both percentage of revenue as well as percentage of members that have moved over to full risk.
Ryan Daniels: So there's definitely a large opportunity we believe to organize and aggregate providers into risk bearing entities such as ACOs or CINs in that population. I believe that a large majority of the 32,000 clinicians do not yet participate meaningfully in a value-based arrangement today. Certainly not, you know, all the part of BURA is certainly not for risk. So, you know, we think there exists a meaningful market capture opportunity in terms of helping providers who are on Elation which is suited, you know, for value-based care especially given the integrations we're building out with them to participate and move along their risk letter with us. Okay, that's super helpful.
Chandan Basho: That's very helpful. Thank you. What I'm hearing is that as more of those lives move into full risk arrangements, the benefit in the revenue growth from full risk will far surpass what you see at the end of fiscal 24 in terms of the full risk revenue impact. It can keep going much higher in 25 and beyond as more of those lives convert over to full risk.
Speaker Change: that that's very helpful thank you so so what I'm hearing is is that as more of those lives move into full risk arrangements
Speaker Change: The benefit in the revenue growth from full risk will far surpass what you see at the end of fiscal 24 in terms of the full risk sort of revenue impact. It can keep going much higher.
Speaker Change: in 25 and beyond as more of those lives convert over to full risk.
Chandan Basho: Yeah, that's correct. That's correct. Okay, that's absolutely correct. And the other thing is around timing as well. You know, if there's a contract that begins halfway through the year or three quarters of the way through the year, the full financial year will only record the sub period will not include the full impact. So certainly in 25, you'll see a more wholesome revenue impact from the conversion forward.
Speaker Change: Yeah, that's correct. That's absolutely correct. And the other thing is around timing as well. You know, if there's a contract that begins...
Speaker Change: halfway through the year or three quarters of the way through the year.
Ryan Daniels: And then I'm going to ask a similar question on your partnership with Anthem Blue Cross and the Astronomical Care Clinics. I'm curious how you think about, you know, those ramping to scale or what we would call the J-Curve, I guess, in the industry given that they seem to be exclusive to Anthem and some of the allied Pacific IPA members. Is there such scale in that market just with that pair and allied Pacific that you expect those to ramp pretty quickly and maybe more broadly, how might those clinics ramp out over time and contribute?
Speaker Change: We will not include the full impact. Certainly in 2025 you will see a more wholesome revenue impact from the conversion for us.
Ryan Daniels: Thanks so much. Thanks, Ryan. You're right. Those clinics are exclusively for Astrona and one of our affiliate IPAs who are participating in an ally or sorry, participating in an Anthem Blue Cross plan. We think that the ramp would look frankly very similar if not fully better than the typical ramp up given that there is we specifically chose to build those clinics and areas where we think there could be a lot of gains for allied Pacific as well as Anthem Blue Cross.
Chandan Basho: Great. Thanks very much. Congratulations on a good quarter.
Operator: And we'll take our next question from Brooks O'Neill from Lake Street Capital. Please go ahead, Brooks.
Speaker Change: Great, thanks very much, and congrats on a good quarter.
Speaker Change: Thank you. And we'll take our next question from Brooks O'Neill from Lake Street Capital. Please go ahead, Brooks.
Operator: Good afternoon guys, nice quarter. I've got a couple questions, and I'm going to try to be sneaky by wrapping three questions into one in my second question, so stay tuned. But number one, I think in your CHS press release you mentioned specifically Centene as a major payer relationship there, and then I thought I heard you say earlier on the call that there were maybe as many as 10 or 12 payers. Just talk a little bit about the opportunity with Centene and the opportunity you see with some of these other payers.
Brooks O'Neill: Good afternoon guys, nice quarter. I've got a couple questions and I'm going to try to be sneaky by wrapping three questions into one in my second question, so stay tuned.
Brooks O'Neill: Number one, I think in your CHS press release, you mentioned specifically Centene as a major payer relationship there, and then I thought I heard you say earlier on the call that you
Speaker Change: I thought I heard you say earlier on the call that there were maybe as many as 10 or 12 payers. Just talk a little bit about the opportunity with Centene and the opportunity you see with some of these other payers.
Brandon Sim: Good to hear from you. Thank you for the question.
Speaker Change: ABRAMS
Ryan Daniels: So there were strategic reasons not necessarily in areas where. We already have full saturation, but areas where we think there could be improvements in terms of access to high quality care providers of that community. So, given our presence in California and Anthem Blue Cross's presence in California, we have to do things that membership at this clinic will ramp up pretty nicely. We're cracking that very closely as we start for the first clinic certainly and for the couple that we plan to build in the remainder of this year. Okay, super helpful.
Speaker Change: Good to hear from you. Thank you for the question. Thank you, Brandon. Yes, that's right. We, you know, the Collaborative Health Systems asset was acquired from...
Brandon Sim: Yes, that's right. We, we, you know, the collaborative health systems asset was acquired from Centeen, but it was not a Centeen-only asset. It was a payer-nostic, you know, multi-payer, multi-line of business enabling organization. We believe we collaborate very well with the Centeen organization. We have contracts, we have value-based arrangements today already with them, and we plan to, you know, jointly expand those relationships in order to serve traditional markets and members in the communities that Centene serves as well.
Speaker Change: Sentine, but it was not a Sentine only asset, it was a payer agnostic, you know, multi-payer, multi-line of business.
Speaker Change: We believe we collaborate very well with the Centene organization, we have contracts, we have value-based arrangements today already with them, and we plan to...
John: , and John . We look forward to expanding those relationships in order to serve additional markets and members in the communities that Centene serves as well. So that's something that we look forward to expanding. But at the same time, as I mentioned earlier, it is a paragnostic
Brandon Sim: So that's something that we look forward to expanding. But at the same time, as I mentioned earlier, it is a payer-agnostic, land business-agnostic organization. So we do plan to, in addition to that, continue to enable CHS and its providers to serve members across all payer types and payer partners. So I think it's a multi-pronged approach that will be taken there.
Ryan Daniels: Congrats again on all the strategic process during the quarter. Thanks.
David Larsen: Thank you and next we'll go to David Larsen from BTIG. Please go ahead, David. Hi, all of the health plans have been talking about pressure on your Medicare cross ratio. Like, for example, you know, CBS is wanting to talk about pressures on women in the exchanges and also Medicaid and then also obviously Medicare advantage part of this is being driven by the conversion to version 28. Just any thoughts there like how are you managing through this seems like you're managing through it very well.
Brooke: plan business agnostic organization. So we do plan to, in addition to that, continue to enable CHS and its providers to serve members across all payer types and payer partners. So I think it's a multi-pronged approach, Brooke, that will be taken there with CHS.
Brandon Sim: Makes total sense. Okay, here's my big question, and I apologize, but it's required by your operator. So, when I was young, my parents used to constantly caution me not to let my eyes get bigger than my stomach. I don't know if your parents used the same phraseology with you when you were young, but you probably know what they were talking about and, I'm curious, as you think about three main things related to your significant business expansion and development, I'd love you to reassure me that you're not letting your eyes get bigger than your stomach and you can really manage all of this stuff.
Brooke: Makes total sense. Okay here's my big question and I apologize but it's required by your operator. So when I was young my parents used to constantly caution me not to let my eyes get bigger than my stomach.
Speaker Change: I don't know if your parents used the same phraseology with you when you were young, but you probably know what they were talking about.
David Larsen: Can you provide a number of percent for the medical term that you saw in the quarter? And then just to maybe just remind me on the risk sharing arrangements when you're not in full risk, how do the dollars flow that how much risk does the doc plan hospital you take. Thank you. David, thanks for the question. So I think we're seeing relatively stable utilization as we mentioned earlier, as John mentioned earlier, you know, load single load of mid single digits, depending on line of business relative to last year.
Brandon Sim: So one thing is the assumption of global risk, which I know you have a lot of experience with. The second thing is your focus on all three of the major market segments, which are, you know, Medicare, Medicaid, commercial, and Medicare Advantage. And then thirdly, you know, your relatively aggressive addition of strategic partnerships and acquisitions over the past couple of years. Just help us a little bit to think about your organization and your management team's ability to manage all this stuff and continue to deliver the exceptional results you've been delivering since I got involved a couple of years ago.
Speaker Change: I'm curious, as you think about three main things related to your significant business expansion and development, I'd love you to reassure me that you're not letting your eyes get bigger than your stomach and you can really manage.
Speaker Change: All of this stuff. So one thing is the assumption of global risk, which I know you have a lot of experience with.
Speaker Change: Second thing is your focus on all three of the major market segments, which is, you know, Medicare, Medicaid, commercial, and Medicare.
David Larsen: Cross-trend and those continue to stabilize for us. Again, all of the anticipated updates are included in 2024 guidance which you reiterated. And the reasons for that are because are really the what we believe to be the strengths of the strontic air model. You know, we've for a long time have not relied on excess revenue capture, right? From a V28 or risk coding perspective in order to maintain the medical loss ratios that we do.
Speaker Change: And then third is, you know, your relatively aggressive addition of strategic partnerships and acquisitions over the past couple of years.
Speaker Change: Just help us a little bit to think about your organization and your management team's ability to manage all this stuff and continue to deliver the exceptional results you've been delivering since I got involved a couple years ago.
David Larsen: We've had very tight integrations between primary and specialty care providers, as well as with the hospital ecosystem, especially to move into forward arrangements. And we think those and more, you know, the hybrid affiliate and employees model, you know, the access to care that we're providing by building these neighborhood sites. So on and so forth, really have allowed us to moderate utilization and revenue had wins in a way that others maybe are not struggling a little more with.
Brandon Sim: Thanks for the question, Brooks, and I appreciate the saying. Absolutely, Robert, but I heard it growing up as well.
Speaker Change: Thanks for the question, Brooks. I appreciate the saying. Absolutely is a proverb that I heard told me growing up as well. We definitely share that common common thinking here. You know, I think the way we think about it is we've certainly turned down our share of
Brandon Sim: We definitely share that common, common thinking here. You know, I think the way we think about it is we certainly turn down our share of Partnership or Potential Acquisition. Capital Deployment Opportunities in the past couple of years, especially when there was what we perceived to be a bid at spread between what was being demanded based on the market conditions at the time and what we could reliably underwrite, given our care model and structure. I think that that has changed now.
Speaker Change: partnership, potential acquisitions, capital deployment opportunities in the past couple of years.
David Larsen: And we believe that's why peers will want to continue working with us, especially as we expand our presence across the United States from coast to coast. So, you know, we do think that that's part of our advantage and we are continuing to see that low to mid single digit trend. As sustainable and, you know, properly accounted for for the rest of the year, even with things like COVID or for the Australian flu, you know, pretending to work with even for ourselves.
Speaker Change: especially when there was what we perceived to be a bid at spread between
Speaker Change: what was being demanded based on the market conditions at the time and what we could reliably underwrite, given our care model and structure. I think now that that has changed,
Brandon Sim: And in addition to conditions changing, our capabilities have changed. We feel a lot more comfortable expanding at the pace that you're now seeing because we have spent the past couple of years building out the systems, the automation, the infrastructure, the teams, the people, and the muscle memory, frankly, in order to do this in a repeatable way at larger and larger scales. So, you may recall a couple of years ago, we were talking about $5 to $10 million acquisitions, small tuck-ins, small IPA client improvements. Late last year, we talked about CFC, which we've now fully integrated and have had no issues doing so in a pretty seamless fashion.
Speaker Change: And in addition to conditions changing, our capabilities have changed. We feel a lot more comfortable expanding at the pace that you're now seeing because we've spent the past couple of years.
David Larsen: Great, that's very helpful. Thank you. And then when we think about you taking on more full risk, I'm going from like maybe 60% I think up to two thirds or higher, what does that mean in terms of revenue growth? And when I look at your managed lives of like over a million managed lives, are we seeing that 60% of those are full risk, or is it something far lower as a percentage of lives?
Speaker Change: building out these systems, the automation, the infrastructure, the teams, the people, and the muscle memory, frankly, in order to do this.
Speaker Change: in a repeatable way at larger and larger scales.
Speaker Change: So, you may recall a couple of years ago, we were talking about, you know, five to ten million dollar acquisitions, small tuck-ins, small IPA client improvements.
Speaker Change: Late last year we talked about CFC, which we've now fully integrated and have had no issues doing so in a pretty seamless fashion.
David Larsen: So I guess what we're getting at is is the revenue growth potential by going to full risk for more lives much higher than what people might think it is, to any more color there will be great. Thank you. Dave, in terms of as we move from the 60% to the to the two thirds percentage in terms of revenue by year end, we do expect to see that revenue growth as you alluded to is built into our revenue forecast for this year.
Brandon Sim: And we feel comfortable repeating that muscle, using that muscle memory, rather, and repeating the motion, the Astronaut Flywheel that I talked about earlier, to continue expanding across the market and bringing what we're doing to more communities across the country as our mission. So, I absolutely hear you. We'll continue to make sure that. I don't understand, uh, you know. To add to that, we do feel that we are prepared, and we have spent a lot of time and energy building infrastructure to make sure we are going to succeed and have a scalable platform. Well, I'll take two minutes.
Speaker Change: And we feel comfortable repeating that muscle, using that muscle memory rather and repeating the motion, the Astrana Flywheel that I talked about earlier, to continue expanding across the market and bringing
Speaker Change: What we're doing to more communities across the country as our mission. So Absolutely hear you. We'll continue to make sure that
Speaker Change: I don't get you know
Speaker Change: Too aggressive, but we do feel that we are prepared and we've spent a lot of time and energy building infrastructure to make sure we're going to succeed and have a scalable platform.
Brandon Sim: Awesome. Well, I'll say two things in closing. One is that you guys are doing a great job. And two, I know there's an immense opportunity out there, and I applaud you for continuing to go after it.
Speaker Change: Awesome. I'll say two things in closing. One is you guys are doing a great job and two, I know there's an immense opportunity out there and I applaud you for continuing to go after it.
David Larsen: And as we start seeing that membership move over, you will see in a large portion, there will also be an equivalent improvement in terms of the number of lives in CP. Is that helpful? Yeah, that's very helpful. You can jump in quickly and just notice that you know today 60% of the revenue, capital revenue by risk, by risk arrangement, raised down around 60, 40, between 40% and partial risk. We're guys for that to be around two thirds by then in the year in terms of membership, because of how we prioritize the mention of the patch, which members to bring over to four thirds first based on the contract phase and utilization and our knowledge of the patient base towards so on and so forth.
Operator: And next, we will take a question from Jack Slevin from Jefferies. Please go ahead, Jack.
Speaker Change: Thank you. And next we will take a question from Jack Slevin from Jefferies. Please go ahead, Jack.
Operator: Hey guys, thanks for taking the question and congrats on solid work this quarter. I'll try to keep these a little on the shorter end.
Jack Slevin: Hey guys, thanks for taking the question and congrats on solid work this quarter. I'll try to keep these a little on the shorter end and a lot of my questions have been asked already.
Operator: And a lot of my questions have already been asked. Maybe you want to take, you know, with the first one, go with CHS, but from a little bit of a different angle, just wondering if you could give a little more details on sort of the bridge from that current unprofitable state to break even next year and sort of what the groundwork is to get there and why you have confidence in it.
Speaker Change: Maybe you want to take...
Speaker Change: You know for with the first one go with CHS, but from a little bit of a different angle Just just wondering if you give a little more details on
Speaker Change: Sort of the bridge from that current unprofitable state to
Operator: And then, you know, what it looks like to progress forward from there towards more normalized margins or sort of that target you put out of above 10M of EBITDA by 2027. Is that sort of, you know, business as usual, or are things going to be a bit different just given, you know, different geographies and a little bit different of an asset than some of the others you've integrated in the last couple of years? Hey Jack, thanks for the question.
Speaker Change: to break even next year and sort of what the groundwork is to get there and why you have confidence in it and then
Speaker Change: you know, what it looks like to progress forward from there towards...
David Larsen: Around 28% of the members are in a fourth arrangement by on a membership basis, not on a percentage of capital revenue basis. You can find some details on slide nine of our settlement deck for this year in the quarter. So what that means is really, we think there's still a long road ahead to continue moving members in a risk. We're going to do so prudently in order to protect margins and make sure that we're able to provide the same standard of care that we're used to providing in the past and we'll continue to provide updates on a quarterly basis on both revenue, percentage of revenue and well percentage of members that have moved over to four thirds.
Speaker Change: more normalized margins or sort of that target you put out of above 10 million of EBITDA by 2027. Is that sort of, you know, business as usual or are things going to be a bit different just given, you know, different geographies and a little bit different of an asset than some of the others you've integrated in the last couple of years?
David Larsen: That's very helpful. Thank you. So what I'm hearing is that as more of those lives move into full risk arrangements, the benefit in the revenue growth from full risk will far surpass what you see at the end of fiscal 24 in terms of the full risk or revenue impact. It can keep going much higher in 25 and beyond as more of those lives can work over to full risk. Yeah, that's correct.
Brandon Sim: As we said before, we believe in delivering vocal care in a scalable fashion. And, like I thought, and as I spoke about with Brooks. A second ago, we spent a lot of time building out what we believe to be scalable care models, operational systems, and technologies that allow us to deliver that local care at scale in an efficient way. You know, when we were talking about doing this deal, it was really not a... I don't think there necessarily is a scaled book of business.
Speaker Change: Hey Jack, thanks for the question.
David Larsen: That's correct. Okay, that's absolutely correct. And the other thing is around timing as well. There's a contract that begins halfway through the year or three quarters of the way through the year in 24 for financial year will only record the sub-period and will not include the full impact. So certainly in 25 you'll see a more full-time revenue impact from the converting force. Great. Thanks very much. You can go out on a good quarter.
Speaker Change: As we said before, we believe in...
Speaker Change: delivering vocal care in a scalable fashion. And like I thought, like I spoke about with Brooks a second ago, we spent a lot of time building out
Speaker Change: what we believe to be scalable care models, operational systems and technology that allow us to deliver that local care at scale in an efficient way. When we...
Speaker Change: When we were talking about doing this deal
Speaker Change: It was really not necessarily a scaled book of business.
Brandon Sim: Not necessarily the core market of or the core business of the owner, you know, I think provider organizations' provider enablement really is our core competency, and we have both had a lot of tools that will allow us to bridge to that break-even mark. Primarily via cost energies, and I talked about earlier in my prepared remarks around year 1, really focusing on using our operating leverage, using the technology platform and infrastructure to drive savings, investing that into local care capabilities. And then reinvesting those dollars so that in the medium to long term, there is a lower trend in terms of total cost of care.
Speaker Change: unnecessarily the core market of or the core business of the owner you know i think provider organizations provider enablement really is our core competency and we have buboth had a lot of tools that will allow us to
Speaker Change: At least in the first year, to bridge that break-even mark, primarily via cost synergies. I talked about earlier, my prepared remarks around year one, really focusing on...
Brandon Sim: And that's what we plan to do here with CHS. So to answer your question, you know, in the first year, it's really going to be a little bit of, you know, maybe low-hanging fruit in terms of clinical, but primarily, efficiency improvements driven by our Caring and Loan Platform. We're going to reinvest some of those dollars into making sure that we have a long-term sustainable base in these markets, build out the depth of those markets, and then, over the medium term, we believe that that will drive medical margin up as it has in other acquisitions and partnerships that we've done in the past.
Speaker Change: and then reinvesting those dollars so that in the medium to long term...
Brooks O'Neill: Thank you and we'll take our next question from Brooks O'Neill from Lake Street Capital. Please go ahead Brooks. I'm good afternoon guys.
Speaker Change: There's a lower trend in terms of total cost of care. And that's what we plan to do here with EHS. So, to answer your question, you know, in the first year, it's really going to be a little bit of, you know, maybe low-hanging fruit in terms of clinical, but primarily
Brooks O'Neill: Nice quarter. I've got a couple questions and I'm going to try to be speaking by rapid three questions into one and my second question. So stay tuned. But number one, I think in your CHS press release, you mentioned specifically centine as a major payer relationship there. And then I thought I heard you say earlier on the call. I thought I heard you say earlier on the call that there were maybe as many as 10 or 12 payers.
Speaker Change: efficiency improvements driven by our caring mo platform we're going to reinvest those dollars and you some of those dollars into making sure that we have a long term sustainable base
Speaker Change: in these markets build out the death of those markets and then over the medium term you know we believe that that would drive medical margin up as it has been other acquisitions partnerships that we've done the vbest
Brooks O'Neill: Just talk a little bit about the opportunity with centine and the opportunity you see with some of these other payers. Hey Brooks, good to hear from you. Thank you for the question. Yes, that's right. We, we, you know, the contract health systems asset was acquired from centine, but it was not a centine only asset. It was a payer, not a multi payer, multi-life business, naval and organization. We, we believe we collaborate very well with the centine organization.
Brandon Sim: Really helpful. Thanks for that, Brandon. And then my second one, you know, just quickly, maybe taking it from the deck.
Speaker Change: got it really helpful thanks for that brand and and then my second one you know just quickly maybe taking it from the deck
Operator: You know, I think this is the first time you've called Nevada a quote, existing market, right, rather than talking about it as sort of a new entry. And the news that we got there, you know, for May and what's going to sort of roll on for the back half of this year in 2025 seems to be, you know, along a line of significant momentum there. I guess the question would be, you know, a lot of the sort of boxes have been checked, from my perspective, for that to look a lot like California. Do you feel that way?
Speaker Change: You know, I think this is the first time you've called Nevada a, quote, existing market, right, rather than talking about it as sort of a new entry and the news that we got there, you know, for May and what's going to sort of roll on for the back half of this year in 2025 seems to be, you know.
Speaker Change: along the line of significant momentum there.
Speaker Change: I guess the question would be, you know...
Brooks O'Neill: We have contract. We evaluate there isn't even today already with them. And we plan to, you know, jointly stand as relationships in order to. To serve traditional markets and members in the communities that, that, that, some teachers as well. So that's something that we look forward to expanding, but at the same time. As I mentioned earlier, it is a pair of not sick. Land business and not the organization. So we do plan to, in addition to that, continue to enable CHS and its providers to serve members across all payer types. So I think it's a multi-pronged approach that will be taken there with teachers. Makes total sense.
Operator: And sort of what does it look like in terms of getting that to sustainable profitability and profitability that looks like California? What's left to do there? Is it just a little bit more work beyond 25? Or does it feel like you have the density there to sort of weave it into the overall operations? Thanks. Hey, Jack.
Speaker Change: A lot of the sort of boxes have been checked, from my perspective, for that to look a lot like California.
Speaker Change: Do you feel that way? And sort of what does it look like in terms of getting that to...
Speaker Change: you know, sustainable profitability and profitability that looks like California. What's left to do there? Is it just a little bit more work beyond 25? Or does it feel like you have the density there to sort of weave it into the overall operations? Thanks.
Brandon Sim: So in terms of Nevada, we, as you know, we've been scaling rapidly, we feel very strongly about the market, we are, we've opened up new locations, and we've continued to expand in terms of our affiliate provider network in the geography. By 2025, we do feel we're going to be over that hump. And it is very much turning into a sustainable business. Awesome, great to hear, and thanks again guys. Congratulations on the quarter. Thanks.
Jack Slevin: Hey Jack, so in terms of Nevada, we
Jack: As you know, we've been scaling rapidly. We feel very strongly about the market.
Brandon Sim: Okay, here's my big question. And I apologize, but it's required by your operator. So, when I was young, my parents used to constantly caution me not to let my eyes get bigger than my stomach. I don't know if your parents use the same phraseology with you and your young, but you probably know what they were talking about. And I'm curious as you think about three main things related to your significant business, expansion and development.
Speaker Change: We've opened up new locations and we've continued to expand in terms of our affiliate provider network.
Speaker Change: in the geography.
Speaker Change: 2025, we do feel we're going to be over that hump and it is very much turning into a sustainable business.
Speaker Change: Awesome, great to hear and thanks again guys, congrats on the quarter.
Operator: Thank you, and we'll take our next question from Michael Ha from Baird. Please go ahead, Michael. Hey, thank you.
Speaker Change: Thanks.
Speaker Change: Thank you and we'll take our next question from Michael Ha from Baird. Please go ahead Michael.
Brandon Sim: And I, I love you that to reassure me that you're not letting your eyes get bigger than your stomach and you can really manage all of this stuff. So one thing is the assumption of global risk, which I know you have a lot of experience with. Second thing is your focus on all three of the major market segments, which is, you know, Medicare Medicaid commercial and Medicare. And then third is, you know, you're relatively aggressive of addition of strategic partnerships and acquisitions over the past couple of years.
Operator: I just wanted to ask you another question, or a couple of questions on this one. So $450 million of anticipated run rate revenue on 129,000 lives would seemingly imply close to, I think, $300 revenue PMPM. And I know you mentioned PHS has full risk contracts, but 300 bucks would seem to imply you're taking a partial risk on a book that's mostly MA lives. Is that true? And if I'm running the math correctly, assuming 12 and a half, 25% target margins on partial risk, the embedded earnings opportunity over three to four years, would that be around $56 to $113 million of annualized EBITDA off of, of course, the current $450 revenue? So I'm wondering if that's roughly in the ballpark, and maybe if I can squeeze one more.
Michael Ha: Hey, thank you and congrats on CHS.
Michael Ha: I just wanted to ask another question, or a couple questions on this one. So, $450 million of anticipated run rate revenue on 129,000 lives would seemingly imply close to, I think, $300 million.
Speaker Change: dollars revenue PMPM. And I know you mentioned PHS has full risk contracts, but 300 bucks would seem to imply you're taking partial risk on a book that's
Speaker Change: Mostly M.A. lives. Is that true? And if I'm running the math correctly, assuming 12.5-25% target margins on partial risk.
Brandon Sim: Just help us a little bit to think about your organization and your management teams ability to manage all this stuff and continue to deliver the exceptional results you've been delivering since I got involved a couple of years, to go. Thanks to the question, Brooks, and I appreciate the saying that Lily is a proverb that I heard that both of me growing up as well. We definitely share that common stink in here.
Speaker Change: The Embedded Earnings Opportunity over 3 to 4 years, would that be around $56 to $113 million of annualized EBITDA off of, of course, the current $450,000?
Speaker Change: I'm wondering if that's rough in the ballpark and maybe if I can squeeze one more. The 21.5 earn out potential, I'm curious, what are the targets or specific performance targets it's tied to? Thank you.
Chandan Basho: The 21-5 earn out potential, curious; what are the targets or specific performance targets to tie to? Hey, Michael, great to hear from you. So in terms of your first question, in terms of the lives as well as the revenue PMPM, a large portion of, or a certain portion of those lives are actually MSSP lives, and we do not account for the top line revenue associated with those MSSP lines. So for the value-based care lives, which are Medicare Advantage lives, as well as the ACO REACH lives, we are recording the revenue. So that's the net of the 450 million.
Chandan Basho: And in terms of the MSSP, you would really see, you would not see the revenue impact. What you will see in terms of revenue on the MSSP will really be the net profitability for that book of business. If that works for you, I'll move on to the second part of the question.
Speaker Change: Hey Michael, great to hear from you. So in terms of your first question in terms of the lives as well as the revenue PMPM
Brandon Sim: You know, I think the way we think about it is we certainly turned down our share of partnership, potential acquisition, capital deployment opportunities in the past couple of years. Especially when there was what we perceived to be a bit at the spread between what was being demanded based on the market conditions at the time and what we could reliably underwrite given our care model and structure. I think now that that has changed and in addition to conditions changing, our capabilities have changed.
Speaker Change: a large portion of
Speaker Change: or a certain portion of those lives are actually MSSP lives?
Speaker Change: and we do not account for the top line revenue associated with those MSSP lives.
Speaker Change: So, for the value-based care lives.
Speaker Change: which are Medicare Advantage lives as well as the ACO REACH lives, we are recording the revenue. So that's the net of the 450 million. And in terms of the MSSP, you would really see
Brandon Sim: We feel a lot more comfortable expanding at the pace that you're now seeing because we've spent in the past couple of years building out the systems, the automation, the infrastructure, the teams, the people, and the muscle memory, frankly, in order to do this in a repeatable way at larger and larger scales. So, you know, you may recall a couple of years ago, we were talking about, you know, five to ten million dollar acquisitions, small tuck-ins, small IPA client improvements.
Speaker Change: you would not see the revenue impact. What you will see in terms of revenue on MSSP will really be the
Speaker Change: the net profitability for that book of business.
Speaker Change: oh
Speaker Change: If that works for you, I'll move on to the second part of the question.
Chandan Basho: Yeah, that's great. Thank you. That makes sense. Okay, great.
Brandon Sim: Last late last year, we talked about CFC, which we've now fully integrated and have had no issues doing so in a pretty seamless fashion. And we feel comfortable in repeating that muscle, using that muscle memory rather and repeating the motion. The astronaut flywheel that I talked about earlier to continue expanding across the market and bringing what we're doing to more communities across the country as our mission. So, absolutely hear you. We'll continue to make sure that I don't get, you know, two addresses, but you know, we do feel that we are prepared and we spent a lot of time in energy building the infrastructure to make sure we're going to succeed and have a scalable platform.
Chandan Basho: So in terms of the burnout, we prefer not to get into specific details in terms of the performance targets for the burnout, but they are focused on aligning both our long-term incentives as well as the partner organization. And we're, we're very excited about this growth chapter. And we're very focused on the integration efforts post, post-close and look forward to really growing into these new geographies. Thank you. And let me ask another question, maybe two-in-one.
Speaker Change: Yeah, that's great. Thank you. That makes sense.
Speaker Change: Okay, great. So, in terms of the earn out, we prefer not to get into specific details in terms of the performance targets for the earn out, but they are focused on aligning both, you know, our
Speaker Change: our long-term incentives as well as the partner organization and we're we're very excited about this growth chapter and we're very focused on the integration efforts post
Speaker Change: Post close and and look forward to really growing into these new geographies.
Brooks O'Neill: Awesome. I'll say two things and closing one is you guys are doing a great job. And two, I know there's an immense opportunity out there and I applaud you for continuing to go after. Thank you.
Operator: In the press release for DHS, you mentioned Astrana and Centene will continue to work together to expand the scope of value-based partnerships. Am I reading too much into this, or is there a plan that you guys are now going to work more closely where Centene might increase their alignment with Astrana, perhaps move more of their MA or Medicaid members over to Astrana and, like, full-risk, global cap, and maybe even just more broadly, just given the funding environment, 25-year challenge, and elevated cost trend?
Speaker Change: got it thank you and uh let me ask another question maybe two-in-one in the press release for DHS
Speaker Change: You mentioned Astrana and Centene will continue to work together to expand the scope.
Jack Slevin: And next, we will take a question from Jack Sleven from Jeffries. Please go ahead, Jack. Hey guys, thanks for taking the question and congrats on its hard work this quarter. I'll try to keep these a little on the shorter end and a lot of my questions have been asked already. Maybe you want to take, you know, through with the first one, go with CHS, but from a little bit of a different angle.
Speaker Change: a value-based partnership. Am I reading too...
Speaker Change: much into it, or is there a plan that you guys are now going to work more closely where Centene might increase their alignment with Astrana, perhaps move more of their MA or Medicaid members?
Speaker Change: over to Astrana and like full-risk, global cap. And maybe even just more broadly just given the funding environment in 25 is so challenged and elevated cost trends.
Operator: I feel like it's accentuating the need for MA plans to align members to value-based care. So I'm wondering if you're seeing any change in appetite from MA payers to really want to accelerate that, increase member attribution to Astrana. In other words, are you seeing this funding environment creating maybe a more favorable member growth pipeline into Astrana? Yeah, I think there are a couple things you mean by that. The first is that CENTINE and CHS today have a relationship where they are delegating risk, as well as delegated functions to CHS, which we believe is very innovative, and we would anticipate that to continue post the close of the transaction, similar to how we work with CENTINE in its subsidiary today in California.
Brandon Sim: Just wondering if you give a little more details on sort of the bridge from that current unprofitable state to break even next year and sort of what the groundwork is to get there and why you have confidence in it and then, you know, what it looks like to progress forward from there towards more normalized margins or sort of that target you put out of above 10 million of EBITDA by 2027. Is that sort of, you know, business as usual or there are things going to be a bit different, just given into different geographies and in a little bit different of an asset than some of the others you've integrated in the last couple of years.
Speaker Change: I feel like it's accentuating the need for MA plans to align members to value-based care. So I'm wondering if you're seeing any change in appetite from MA payers to really want to accelerate that, increase member attribution into Astrana, in other words.
Speaker Change: Are you seeing this funding environment creating maybe a more favorable member growth pipeline into Astrana?
Speaker Change: Yeah I think there are a couple things you mean by that. You know the first is that
Speaker Change: You know 17 and DHS today
Brandon Sim: Hey Jack, thanks for the question, as we said before, we believe in delivering vocal care in a scalable fashion. And like I talked like I spoke about with Brooks, second ago we spent a lot of time building out what we believe to be scalable care models, operational systems and technology that allow us to deliver that local care at scale in an vision way. When we were talking about doing this deal, it was really not a necessarily a scaled book of business and not necessarily the core market or the core business of the owner.
Speaker Change: have a relationship where they are delegating risk as well as a delegated function to CHS, which we believe is very important.
Speaker Change: innovative and we would anticipate that to continue post the close of the transaction similar to how we work with
Operator: We think that that allows for a great degree of collaboration, data sharing, data visibility, and ultimately better outcomes for patients because of that model, and that's something that we're excited about. So there's part of that, kind of, that we threw in there. We also believe them to be a very good partner of ours. They're obviously a good partner of CHS, and we think that there is a lot of room to work together, as we already do, to continue serving members in areas where, you know, both of our organizations want to improve the health care delivered to those communities. So we are looking forward to continuing doing that with Centene in particular but also, you know, some of the other. Continuing the relationship with THS.
Speaker Change: We think that allows for a great degree of collaboration, data sharing, data visibility, and ultimately better outcomes for patients.
Speaker Change: Because of that model and that's something that we're excited about. So there's part of that Kind of read through there. We also
Speaker Change: I believe they seem to be a very good partner of ours.
Speaker Change: They're obviously a good partner of CHS's and we think that there's a lot of room.
Brandon Sim: I think provider organizations, provider enablement really is our core competency and we have both had a lot of tools that will allow us to at least in the first year to braces that break even mark primarily via cost energy. And I talked about earlier my prepared remarks around you know, year one really focusing on using our operating leverage, using the technology platform and infrastructure to drive savings, investing that into vocal care capabilities, and then reinvesting those dollars so that in the medium to long term, there's a lower trend in terms of total cost of care.
Speaker Change: to work together, as we already do, to continue serving members.
Speaker Change: and areas where, you know, both of our organizations watch you.
Speaker Change: We are looking forward to continuing doing that with Cintin in particular, but also, you know, some of the
Speaker Change: and Continuing the Relationship with THS RDFJ.
Operator: Thank you, and we'll take, I'm sorry, go ahead. And we'll take our next question from Craig Jones from Stifle. Please go ahead, Craig.
Speaker Change: Got it. Thank you, guys.
Speaker Change: Thank you, and we'll take, I'm sorry, go ahead.
Speaker Change: And we'll take our next question from Craig Jones from Stifle. Please go ahead Craig.
Brandon Sim: And that's what we plan to do here with with CHS. So thanks for a question, you know, the first year, it's really going to be a little bit of, you know, maybe low heating fruit in terms of clinical, but primarily, you know, efficiency improvements driven by our care enablement platform, we're going to reinvest those dollars into some of those dollars into making sure that we have a long term sustainable base in these markets. Build out the depth of those markets, and then over the medium term, you know, we believe that that will drive medical margin up as it has in other acquisitions, partnerships that we've done the best.
Craig Jones: Thank you. Yeah, most of them have already been answered, but...
Craig Jones: You know, maybe with all these new states that you're entering, do you expect you need to do more M&A to build out the provider density and all these new geographies, or do you think you can do it largely organically?
Brandon Sim: Thanks for the question. I think it'll be a combination of both. I mean, look, we've done a lot of M&A. This was a deal that we thought was, that we modeled to be, uh, you know, um..., that crosses our thresholds internally to do M&A. If we continue to see opportunities to rapidly develop our depth in some of these new markets, that's something we'll do. Obviously, we're always in organic growth mode, and we continue to drive depth, especially with some of the brand recognition that CHS and CHS-affiliated entities have in their local markets. I think there's a great opportunity to expand the rate of organic growth in those markets because of that jumpstart. I think it's going to be a combination of both.
Speaker Change: Thanks for the question. I think it'll be a combination of both. I mean, look, we've done a lot of M&A. This was a deal that we thought was, that we modeled to be, you know,
Speaker Change: that crosses our threshold internally to do M&A, if we continue to see opportunities to rapidly develop our depth
Jack Slevin: Got it, really helpful thanks for that, Brandon. And then my second one, you know, just quickly maybe taking it from the deck. You know, I think this is the first time you've called Nevada a quote existing market right rather than talking about it as sort of a new entry. And the news that we got there, you know, for May and what's going to sort of roll on for the back half of this year in 2025 seems to be, you know, a long line of significant momentum there.
Speaker Change: and some of these new markets, that's something we'll do.
Speaker Change: Obviously, we're always in organic growth mode.
Speaker Change: And we continue to drive steps, especially with some of the brand recognition that the CHS and CHS-affiliated entities have in their local markets. I think there's a great opportunity to expand the rate of organic growth in those markets because of that.
Brandon Sim: CHAN, I think, has guided to a certain leverage ratio in the past that's been maintained for this quarter. We're going to continue to look for opportunities to creatively deploy capital to meet our strategic needs. In the meantime, we think this gives us a great jumping-off point to expand organically in these markets.
Speaker Change: Jumpstart. So I think it can be a combination of both. You know, Chan, I think, has guided to a certain leverage ratio in the past that's maintained, you know,
Jack Slevin: I guess the question would be, you know, a lot of the sort of boxes have been checked from my perspective for that to look a lot like California. Do you feel that way? And sort of what does it look like in terms of getting that to, you know, sustainable profitability and profitability that looks like California? What's left to do there? Is it just a little bit more work beyond 25? Or does it feel like you have the density there to sort of weave it into the overall operations?
Speaker Change: for this quarter. And we're going to continue to look for opportunities to creatively deploy capital to meet our strategic needs. And in the meantime, we think this gives us a great jumping off point to expand organically in these new states.
Operator: Thank you, and we'll take our next question from Ryan Langston from TD Cowen. Please go ahead, Ryan.
Speaker Change: Okay, great, thanks.
Speaker Change: Thank you. And we'll take our next question from Ryan Langston from TD Cowen. Please go ahead, Ryan.
Operator: Great and good evening. Thanks for squeezing me in. I appreciate it. Just quickly on kind of this moving more partial risk to full risk, I guess what those conversations are like with your payer partners kind of given the utilization environment and maybe the benefit landscape backdrop? Are they more willing now to maybe give you a higher proportion of premiums than maybe typical, you know, we think of 85% or something like that or maybe more willing to carve out you know particular areas of benefits that you might not be able to affect maybe as much? Just wondering what those conversations are like. Thanks. Hey Ryan, thanks for the question.
Brandon Sim: Thanks. Hey Jack, so in terms of Nevada, we, as you know, we've been scaling rapidly. We feel very strong. We about the market. We are, we've opened up new locations and we've continued to expand in terms of our affiliate provider network in in the geography. 2025, we do feel we're going to be over that hump, and it is very much turning into a sustainable business.
Ryan Langston: Great and good evening. Thanks for squeezing me in, appreciate it. Just quickly on kind of this moving more partial risk to full risk.
Ryan Langston: I guess, what are those conversations like with your payer partners, kind of given the utilization environment and maybe the benefit landscape backdrop? Are they more...
Speaker Change: willing now to maybe give you a higher proportion of premiums than maybe typical, you know, we think of 85% or something like that, or maybe more willing to carve out, you know, particular areas of benefits that you might not be able to affect maybe as much. Just wondering what those conversations are like. Thanks.
Brandon Sim: Hey, Ryan, thanks for the question. Our conversations with our pair partners are quite collaborative. We're here to support them, help them scale, as well as, you know, our goal is to provide our overall comprehensive care model to more and more communities across America. And we're going to do that while we have a certain level of delegation. We have a certain set of rates, rebates, quality payments, and division of financial responsibilities. But it really varies by pair. And we work in collaboration to make it work for all parties involved, the provider that's caring for the member, the member in terms of net benefits, the pair, as well as us.
Jack Slevin: Awesome, great to hear and thanks again, guys, you can grab some of the quarter.
Speaker Change: Hey Ryan, thanks for the question. Our conversations with our pair partners are quite collaborative. We're here to support them, help them scale, as well as you know, our goal is to provide our overall
Michael Ha: Thanks. Thank you, and we'll take our next question from Michael Ha from Baird. Please go ahead, Michael.
Michael Ha: Thank you and congrats on CHS. I just wanted to ask another question or a couple questions on this one. So, 450 million of anticipated run rate revenue on 129,000 miles would seemingly imply close to, I think, $300 revenue PMCAM. And I know you mentioned CHS has full risk contracts, but 300 bucks would seem to imply you're taking partial risk on a book that's mostly MA lives, that's true. And if I'm running the math correctly, assuming 12 and a half, 25% target margins on partial risk, the embedded earnings opportunity over three to four years would that be around 56 to 113 million of annual ID beta, off of, of course, the current 450 revenue.
Speaker Change: comprehensive care model to more and more communities across America and we're going to do that where we have a certain level of delegation, we have a certain set of rates, rebates,
Speaker Change: Quality, Payments, Division of Financial Responsibility. So it really varies by pair and we work in collaboration.
Speaker Change: to make it work for all parties involved. The provider that's caring for the member, the member in terms of the net benefits, the payer, as well as us.
Speaker Change: Great, thank you.
Operator: Thank you. Ladies and gentlemen, this does conclude today's teleconference. We thank you for your participation. You may disconnect your lines at this time, and have a great day.
Michael Ha: So, I'm wondering if that's rough in the ballpark, and maybe if I can squeeze one more, the 21 side earn out potential. What are the targets or specific performance targets to tie to you? Michael, great to hear from you. So, in terms of your first question, in terms of the lives as well as the revenue PMPM, a large portion of or a certain portion of those lives are actually MSSP lives, and we do not account for the top line revenue associated with those MSSP lives.
Speaker Change: Thanks for the question. Thank you. Ladies and gentlemen, this does conclude today's teleconference. We thank you for your participation. You may disconnect your lines at this time and have a great day.
Michael Ha: So, for the value-based care lives, which are Medicare Advantage lives as well as the ECO reach lives, we are recording the revenue. So, that's the net of the 450 million. And in terms of the MSSP, you would really see, you would not see the revenue impact. What you will see in terms of revenue on MSSP will really be the net profitability for that book of business. If that works for you, I'll move on to the second part of the question.
Speaker Change: Now Playing...
Michael Ha: Yeah, that's great. Thank you. Okay, great. So, in terms of the earn out, we prefer not to get into specific details in terms of the performance targets with the earn out, but they are focused on aligning both our long-term incentives as well. The partner organization, and we're very excited about this growth chapter, and we're very focused on the integration efforts. Post-Close, and look forward to really growing into these new geographies. Thank you.
Michael Ha: And I may ask another question, maybe two in one. And the press release for GHF, you mentioned Astrana and sent him a community to work together, expand the scope of value-based partnership. Just, am I reading too much into it? Or is there a plan that you guys are now going to work more closely where sentin might increase their alignment with Astrana. Perhaps move more of their MA or Medicaid members over to Astrana and like full-risk co-bocat.
Michael Ha: And maybe even just more broadly, just given the funding environment in 25 is so challenge and elevated cost trends. I feel like it's accentuating the needs for MA plans to align members to value-based care. So I'm wondering if you're seeing any change in appetite from MA pairs to really want to accelerate that, increase member attribution into Astrana. In other words, are you seeing this funding environment creating maybe a more favorable member growth pipeline into Astrana?
Michael Ha: Yeah, I think there are a couple of things you mean by that. The first is that sentin and GHF today have a relationship where they are delegating risk as well as the delegated function to GHF, which we believe is very innovative. And we would anticipate that to continue post-eclosed of the transaction similar to how we work with sentin in its subsidiaries today in California. We think that allows for a great degree of collaboration, data sharing, data visibility, and ultimately better outcomes for patients.
Michael Ha: Because of that model, that's something that works that is part of that kind of as we do there. We also believe sentin to be a very good partner of ours. They're obviously a good partner for the judges and we think that there is a lot of room to work together. As we already do, to continue serving members in areas where both of our organizations want to better the health care to lower those communities.
Michael Ha: So we are looking forward to continuing doing that with sentin in particular, but also, you know, some of the continuing relationships that GHF already have today. Thank you guys. Thank you, and we'll take, I'm sorry, go ahead.
Craig Jones: And we'll take our next question from Craig Jones from Styphal. Please go ahead, Craig. Thank you.
Craig Jones: Yeah, I'm not sure I've already been answered, but, you know, maybe with all these new states that you're entering. Do you especially need to do more than an A to build out the provider density and all these new geographies? Or do you think you can do it larger advancements? Thanks. Thanks for the question. I think it'll be a combination of both. I mean, look, we've done a lot of them. This was a deal that we thought was a remodel to be, you know,[inaudible] that crosses our threshold internally to do an update.
Craig Jones: If we continue to see opportunities to rapidly develop our depth in some of these new markets, that's something we'll do. Obviously, we're always in organic growth mode, and we continue to drive depth, especially with some of the brands, our recognition that the CHS and DHS affiliated entities have in their local markets, and there's a great opportunity to expand the rate of organic growth in those markets because of that jump start. So I think it's going to be a combination of both.
Craig Jones: And Sean, I think it's guided to a certain leverage ratio in the past that's maintained, you know, for this quarter. And we're going to continue to look for opportunities to creatively deploy capital to meet our strategic needs. And in the meantime, we think this is a great jumping off point to expand organically in these new states.
Ryan Langston: Okay, great. Thanks. Thank you.
Ryan Langston: And we'll take our next question from Ryan Langston from TD Cowan. Please go ahead, Ryan. Great. Good evening. Thanks for squeezing me in. Appreciate it.
Ryan Langston: Just quickly on kind of this moving more partial risk to full risk, I guess what are those conversations like with your payer partners, kind of given the utilization environment and maybe the benefit landscape backdrop? Are they more willing now to maybe give you a higher proportion of premiums than maybe typical, you know, we think of 85% or something like that, or maybe more willing to carve out, you know, particular areas of benefits that you might not be able to affect maybe as much.
Ryan Langston: Just wondering what those conversations are like. Thanks. Ryan, thanks for the question. Our conversations with our payer partners are quite collaborative. We're here to support them, help them scale, as well as we, you know, our goal is to provide our overall comprehensive care model to more and more communities across America. And we're going to do that where we have a certain level of delegation. We have a certain set of rates, rebates, quality payments, division of financial responsibilities.
Ryan Langston: So, so really varies by pair and we work in collaboration to make it work for all parties involved. The provider that's caring for the member, the member in terms of the net benefits, the pair, as well as us. Great. Thank you. Thanks for the question. Thank you.
Operator: Ladies and gentlemen, this does conclude today's teleconference. We thank you for your participation.
Operator: You may disconnect your lines at this time and have a great day.
Jailendra Singh: [inaudible] Dr. Jailendra Singh, Dr. Jailendra Singh, Dr. Jailendra Singh, Dr. Jailendra Singh, Dr. Jailendra Singh, Dr. Jailendra Singh, Dr. Jailendra Singh, Dr. Jailendra Singh, Dr. Jailendra Singh,