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| Steve Sell And, Adam, what I would say is, just we’re seeing tremendous leverage on the efficiency side from the investments we’re making in technology and the – centralization, standardization of activities that we’re doing, like chart reviews that previously got done within the local markets |
| We expect these efforts will improve our BOI performance and clinical program enrollment in the back half of the year, supporting our financial performance in 2025 and beyond |
| We actually finished the year at a much stronger rate than we had been projecting, particularly in a couple of large markets and that drove our 2023 number up |
| In our 2021 and 2022 member cohorts are showing positive margin progression |
| The underlying fundamentals of our business model remain intact, reflected in member economics, member growth, quality outcomes and physician NPS scores, and we are well positioned to accelerate performance over the medium and long-term |
| Tim Bensley And we get very good leverage against our operating costs in our existing markets |
| Second, in light of this new information and the dynamic utilization environment, we have strengthened our reserves as we close 2023 |
| One is in terms of an increased percentage of premium for capitated business that we’ve got and we’ve been able to have some success around that |
| Despite our higher utilization assumption, we expect to grow our medical margin by 40% in 2024 and drive meaningful gains in adjusted EBITDA |
| This is reflected in the updated member cohort information we have shared, which is translating into significant economics to our PCP partners, reinvestment into local primary care and our ability to drive consistent improvement in quality measures across our network |
| We expect this repricing cycle will benefit our financial performance in future periods |
| Second, we have a strong balance sheet with approximately $500 million in cash and short-term investments |
| And so I think just the scale that we’ve got, there’s a tremendous opportunity, not just in things like discussions with payers, but also from an efficiency perspective, for us to drive further – further around that |
| We had really good success in ‘23 with those with – at in-patient medical down 2%, which is far better than sort of what we’ve seen nationally |
| We remain confident in the strength of our platform and physician network, as well as the long-term opportunity for agilon |
| We have a really strong Class of ‘25, very excited to be implementing them right now |
| Said differently, our strong same-store growth has created an embedded opportunity in our earliest markets to focus on new doctors and their senior patients to drive performance of those markets |
| And the higher completion rate we get, obviously, the better that is for us, because it allows us to have a positive impact on the next year’s revenue, as well as do a better job of getting our members enrolled in all of these clinical programs we’re talking about |
| Two, leveraging our strong payer relationships |
| And four, boosting our operating efficiency |
| We just get really good leverage out of cost in those markets |
| And then that would put us on a good trajectory to be positive cash flow in 2026 and beyond |
| This data pipeline will enable our internal teams to process and analyze payer data faster and with much more detail, which will improve our forecasting and operations |
| What that does for us is it gives us the ability to really have a very consistent data set across three quarters of our members |
| We continue to make progress against our plan, which will position us to accelerate our path to profitability and cash flow generation |
| As we continue to deliver significant value to patients, payers and our PCP partners |
| And I think we’ve got lots of data points like the one I just shared on ACO REACH or locally with our payers that we can outperform that fee-for-service environment |
| We have had some success across some very key markets, across a couple of payers |
| agilon and the industry, including CMS and our health plan partners, will adjust to this new environment, supporting our ability to return to a more normalized margin trajectory over time |
| Finally, our growth algorithm of growing markets, growing members and growing medical margins remains intact, albeit with a more measured and narrowed focus given the macro environment and its impact on our results |
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| Our medical margins for the fourth quarter in 2023 were $51 million below the midpoint of the guidance range we provided in early January |
| Additionally, we had a handful of markets in an EBITDA loss position, including several markets from the Class of 2023 |
| Turning to the ‘24 guide, we have also lowered our 2024 medical margin guidance by $155 million to $425 million at the midpoint and lowered our ‘24 adjusted EBITDA guidance by $87 million to negative $38 million at the midpoint |
| While the near term dynamics are negatively affecting our financial results, demand for our platform has never been stronger |
| Second, our assumption that higher costs from 2023 will carry forward into 2024, including a reduced outlook for the Class of 2024 |
| This was due to the prior year development we recorded in 2023, which lowered our medical margin |
| Our updated guidance assumes the $38 million medical margin shortfall attributed to the fourth quarter ‘23 is not seasonal and will persist into 2024 |
| During 2023, the relatively modest growth we generated in medical margins of $8 million created negative leverage to our consolidated adjusted EBITDA |
| As I noted before, agilon and the Medicare Advantage industry are navigating a challenging transition period during 2023 and 2024 |
| Those are dragging those markets |
| We do expect to be like a slight headwind in 2024 with 20 basis points or so, but that’s coming off a very big headwind that we had in 2023 so |
| We think that there’s a little bit of supplemental benefit headwind in those numbers as well |
| It looks like the Class of 2024 medical margin declined more than the total medical margin relative to your January expectations |
| And so, we see it persisting |
| Medical costs are temporarily outpacing revenue benchmarks during 2023 and 2024 |
| Is that a reasonable way to think about ‘25 as well, just on a dollar basis for platform support costs? And then finally, I think the adjusted EBITDA in ‘23 was around negative $90 million |
| What the data shows, is that our three earliest market classes, with annual growth rates of 12% to 24%, have seen between a $36 to $86 per member per month reduction in medical margin due to new member dilution |
| Actual results may differ materially from those stated or implied by forward-looking statements due to risks and uncertainties associated with our business |
| So you have $250 million a year of medical cost PMPM kind of headwind versus $141 million before |
| No, listen, I really appreciate the question, and we obviously are in a volatile environment, as we’ve talked about |
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