Astrana Health, Inc. Q3 FY2024 earnings call

Key Pillars

• Sustainably grow membership to bring better care to more Americans.
• Increase alignment with outcomes by taking on greater total cost of care responsibility through value-based and accountable care arrangements.
• Focus on achieving superior patient outcomes while managing total cost of care by empowering providers with technology and clinical infrastructure.
• Drive operating leverage across the business through the Care Enablement suite.

Financial and Operational Updates

• Revenue grew to $478.7 million, adjusted EBITDA $45.2 million. Year-to-date adjusted EBITDA up 15%.
• Membership around 1 million, Astrana Care Partners Affiliates added over 200 primary care providers and over 900 specialists.
• Full risk business capitation revenue percentage increased to 61% from 46% year over year, on track for 2/3 by Jan 1, 2025.
• Cost trends in mid-single-digit range, Medicaid has acuity rate mismatch from redetermination but expected to resolve.
• Acquisition of Collaborative Health Systems closed, expect ~$4 million adjusted EBITDA impact in Q4, with full year 2025 revenue contribution ~$450 million and breakeven adjusted EBITDA by end of 2025.

Astrana Health revenue grew to $478.7 million. Adjusted EBITDA was $45.2 million. Year-to-date, adjusted EBITDA has grown 15% from $117.6 million in the first 3 quarters of 2023 to $135.3 million in the first 3 quarters of 2024. Membership was around 1 million members as of September 30. Astrana Care Partners Affiliates organically added over 200 primary care providers and over 900 specialists to the network. As of October 1, 2024, the full risk business makes approximately 61% of total capitation revenue compared to 46% as of October 1, 2023, and is on track to meet the goal of around 2/3 of capitation revenue from a full risk ecosystem by January 1, 2025. Cost trends are in the mid-single-digit percentage range, with senior lines of business (Medicare Advantage and ACO reach) having stabilizing cost trends, managed commercial having slower than expected trend, and Medicaid having higher than expected trend due to acuity rate mismatch from redetermination, partially offset by lower-than-expected cost trend in commercial book.

• Revised revenue guidance: $1.95 billion - $2.03 billion (previously $1.75 billion - $1.85 billion).
• Revised adjusted EBITDA guidance: $165 million - $175 million (previously $165 million - $185 million).
• Revised earnings per diluted share guidance: $1.06 - $1.19 (previously $1.12 - $1.36).
• Q4 expected ~$200 million top line from CHS, ~$4 million adjusted EBITDA hit.

• Medicaid redetermination causing acuity rate mismatch leading to higher cost trend than expected.
• Cost trends in some business lines exceeding expectations.
• Integration risks associated with the acquisition of Collaborative Health Systems.

Q: Can you remind us on the top line and bottom line impact of adding CHS?

A: In Q4, expecting about $200 million in additional top line from CHS, and about a $4-ish million hit to EBITDA.

Q: What is Proposition 35 in California and its impact?

A: It's increased Medicaid funding in California, a population we invest in, and we're pleased with it, with ongoing discussions with payers on its impact.

Q: How do you treat Part D risk in your contracts?

A: Typically have a corridor or minimal level of risk related to Part D and supplemental benefits, focusing on risks we can control.

Q: Any update on the Anthem partnership for primary care clinics?

A: Identified a site for a clinic in progress, attributed a few thousand members to the first clinic, and things are going well but not material yet.

Q: What could you get the full risk membership up to over time and revenue impact?

A: Could go to maybe 50% long term, impact is significant but depends on line of business and geography.