Welcome, everyone. My name is Michael Ha, the Managed Care and Healthcare Services Analyst at Morgan Stanley. Our next session, or first session today, is with agilon health, one of the largest providers of physician services through its capitated physician JV model. I'm pleased to have with us today, Chief Executive Officer, Steven Sell, Chief Financial Officer, Tim Bensley, and Head of Investor Relations, Matt Gillmor. With that, thank you again, and Steven, Tim, Matt, I'd like to turn it over to you for some introductory remarks. Great. Thanks, Michael. It's wonderful to be here. Just to kick things off, I'd like to frame. I think we've built a really powerful business around very unique partnerships, long-term, 20-year joint venture partnerships with physician groups who've been in their communities for decades. And what we focus on exclusively is moving their senior population, same doctors, same patients, same health plans, from fee-for-service, in which things are uncoordinated and fragmented and challenged, into a very holistic, full-risk, value-based care model. We've been able to build a tremendous network. This year, we're north of 500,000 senior patients. We're in 14 states. We're working with 30 partner groups. And the value to those primary care physicians is very distinctive, and our platform supports that. Two themes that I hope that we'll kind of reinforce throughout this is, one is, we are performing extraordinarily well, right? The power of our model in a period where people are talking about higher utilization and the results we're able to report to the first half, the guidance we're able to give for the second half, I think, really reflects that, and we're very confident in that for the full year. And then as we look out to 2024, we see another year of a really meaningful step up in terms of, EBITDA. A big part of that is our ability to really manage well this new risk model, the version 28 that people are talking about. Probably the best data point on that is for our existing markets and members, those folks that were here in 2023, will be here in 2024, we see our revenue PMPM up 1%-2% for those existing geographies, which is an important data point if you're thinking about that. With that, ready for the conversation. Great. Thank you. I definitely want to touch on everything. I think firstly, maybe we'll start with utilization, the differentiation of the agilon model. So year to date, I understand inpatient tracked better than expected. It's helped to offset some of the increase in outpatient trend. And your ability to drive better utilization is in large part, like you mentioned, the advantage of the agilon partnership model, how providers are incentivized to improve quality and control utilization. So to start off, could you talk more about that, specifically, the benefit of having all your members attributed to an agilon PCP versus MA plans, where the vast majority could be attributed to physicians on fee-for-service utilization and contracts? Yeah, I mean, I think there are real differences out there in terms of models, and different models will drive different results, and we're seeing that in this period of 2023. You know, this attributed PCP relationship, that's a big word, attributed, but it really means that PCP is in a long-term relationship with a patient, and they have the total care and cost and quality responsibility for managing that. When you've got that type of relationship, plus our platform, there are a few things that really allow those differences in terms of performance that I talked about. One is, there's a better information model. We're able to provide our primary care partners with visibility on their patients that they've never had before. We're able to identify those most complex patients that are consuming 50%, 60%, 70% of their total costs and really focus them. So better information model. There's a better resource model. We're able to provide them with resources that they've never had before: social workers, pharmacists, care managers, that really allow them to spend time with those most complex patients and make sure that they're managing them throughout their care journey. And then there's a better incentive model. So the economics of this relationship, because you're against a total care and cost and quality budget, is physicians are rewarded for their outcomes, not for their activities. So they can spend the time where they should. They've got the resources to do that, and they know who those patients are. And so those are really the distinctive differences. You know, the examples I'll give you are things like high-risk patients, 15% of patients driving a majority of costs. Our primary care partners know who those patients are. We know through technology and data when they're in the inpatient setting, which is the most expensive setting, and when they're being discharged, and we're able to follow up with those high-risk patients within two days, that shows a dramatic reduction in readmission rates. And so in the fee-for-service markets we're in, 17% readmission rate is sort of the average across those. Our best-performing partners are sub 10%. So if you think about the magnitude of that savings, it's really meaningful. In year to date, we've seen a 28% increase in terms of those high-risk patients being seen within that 2-day window. Previously, it was seven days or 14, but the difference that makes is really substantial. I think that's the power of the model through that information, the resource, and just the incentives. Great. Great. And I definitely want to jump deeper into the high-risk engagement model and the clinical care. But maybe second question on utilization, just an update. Is there a more recent update on utilization that you can provide? Are you seeing a continuation of these same trends, or perhaps has outpatient slowed down and moderated over the summer? Yeah, I mean, we haven't given a kind of inter-quarter update. We'll, you know, we'll give one here in a bit when obviously we report Q3. It was interesting when we were coming through Q2, you know, that's where we started to, and everyone else started to hear some commentary from the big payers that, hey, there may be some kind of a spike going on in utilization. Of course, when we reported Q2, we hadn't seen that in our numbers yet. And in fact, you know, our performance was more along the lines of what Steve was saying. But you know, even in that higher rate environment, or even potentially, I'm sorry, in that higher utilization environment, you know, we were pretty encouraged, obviously, by the overall trends that we're seeing and, you know, an absolute decrease in inpatient utilization. I mean, we are seeing, and we had been seeing, just like everybody else was talking about, an increase in outpatient, but that's not really new to us, right? We've been talking about that now for a number of quarters, even coming through last year, that there's been, you know, some shift, I think, going on in terms of site of service for procedures from inpatient to outpatient. But the overall decrease in inpatient, which is by far the largest, you know, the largest bucket of cost for us, has obviously been offsetting that, so. But the second thing that we did, of course, you know, coming through that and hearing that commentary from the payers was, we also strengthened our reserves for somewhat in Q2, and then also in our guidance for balance of the year, with the understanding that if there, you know, if we do then at some point, you know, see that, that there was some kind of a spike up or an increase in utilization, that we're adequately covered for that within, you know, within the reserves that we put out there and the guidance that we put out there. You know, all of that, you know, notwithstanding any commentary from the payers on utilization, leads us to believe, you know, we're well reserved, and we feel, you know, really confident with those guidance, with that guidance that we put forward for the balance of the year. You know, I'm sure we'll get into it later, but of course, one thing that allowed us to do that, and it's interesting when you look at the utilization data on the other side, was the fact that we're really performing well on the ACO REACH business this year and kind of outperforming our expectations. You know, one of the things we talked about at Q2, when you look at the ACO REACH data, which is very current for us, and we also get the benefit of seeing that kind of overall reference population data that we can compare to, we are significantly outperforming that reference population on cost trend, and that's really encouraging. I mean, we're treating those patients with the same techniques, with the same on the same platform that Steve talked about, with the same programs that Steve talked about. And we're seeing something like a greater than 300 basis point improvement in our performance versus the ref Medicare fee-for-service reference population. So that gives us a really good confidence that our model is working the way that Steve described, you know, in the last question. That's great, and then definitely wanna touch on ACO REACH. Sounds like prudent conservatism, though, for 2023 guidance, coupled with ACO REACH, which- Yeah is performing well, which is great. But for now, diving deeper into the agilon story, specifically the growth story, and this is gonna be a bit of a longer question, but as we think of the strength of your membership growth and revenue growth, 57% MA membership growth, 71% revenue growth year-over-year, and not to mention 50% ACO membership CAGR over the past, what, six years? One would think this growth eventually has to slow down, but lo and behold, you've locked up for the class of 2024, 145,000 MA lives and 25,000 more ACO REACH lives, and you've already begun signing partnerships for 2025. The question is, you know, with your pathway to 2026 target now becoming increasingly attainable, which is great, I wanted to focus more on how you view the sustainability of this growth pipeline, not just in 2020 through 2026, but going forward. So could you talk, number one, at a high level, just the sheer number of untapped, high-quality physician groups out in the country that you could potentially partner with and, you know, fuel the growth for years to come? Yeah, no, well, it's a great question. Thanks for all the detail. It's true. I mean, when you're growing 50% a year, and you've been able to do it, we've already, you know, announced 2024, which is another record class for us. We're out working on 2025 and 2026, so this is an incredibly forward-looking model. I mean, I think what's evident is, we are the choice for primary care doctors who wanna move their senior panel into full risk value-based care. The value for them that they're getting from this, the value they're seeing peers get, is making this the place that they wanna go. And, you know, there's 2 ways we grow. I know you know this, but just context is, new partners, new markets. People who are making the choice to move a large-scale group that's been in their community for decades. They might have 10, 15% of the adult primary care capacity within a market. And then our same geography growth, which has been just incredibly strong as other physicians decide to join in, and the practices patients turn age 65 every year. So both of those are really strong. You know, specifically to your question about the TAM, for new markets and new partners, which are, when we announce these classes, that's what we talk about. There are literally hundreds of groups that are available to us that are scaled, that could be available. And now, when you realize we've added regional health systems, MaineHealth was our first in this class of 2024. We've announced two more, Premier and Holland. There, there is infinite opportunity. The key is making sure that we're choosing those right partners because we're building around them for 20 years. And we really think about this as a community strategy. We are intentionally going to these markets that are 100% fee-for-service- and we're gonna move them to value for the first time. We're not in Southern California, Southern Florida, Arizona, right? Market's been doing it for a long time. We're trying to change the market. We're trying to do what Kaiser did 50+ years ago in Southern California. We're doing these markets around the country and building that, that infrastructure, and the success is what's attracting other people to that. And in terms of runway, I gave you the, the numbers, but think about the fact that we have 1.5% of the adult primary care physicians in the country right now, so a lot of it, and only 1% of, of seniors. So I mean, there is so much further to go, Michael, between the groups, between the natural aging population and sort of the evolution that I think we believe it's very sustainable. Great, thank you. Yeah, the TAM is just staggering. Hundreds of thousands of PCPs out there in the country. So I think you mentioned this in your response just now briefly, but if you could expand and talk more about what the value is to, for the PCP to join agilon platform versus other alternative value-based care platforms out there. Yeah. I mean, I think there's a few things. One is, if you're an independent physician or an independent group and you wanna stay independent, that's a big fork in the road. There's a lot of people out there that'll acquire your practice, but if you wanna stay independent, that's fork one. Two is, the ability to move in for your entire panel into full risk value-based care. You know, one of the distinctive things about our platform that I think really separates us and what we constantly hear is, we work with multi payers. So we're in a market with three, four, five payers. The significance of that for the primary care doctor is that it's for all of their senior patients. This isn't a partnership with one health plan, and it's 20% of their senior patients that you're working on. It's for everyone. So that means from a process perspective, it's the same processes, regardless of the card you've got for the front office staff, for the care team, for the PCP, and so it's easier to administer. Think about the things I talked about, better information, better resources, and then that incentive model. They can spend more time with the most complex patients, which is the way they were trained back in medical school, but fee-for-service has not given them the resource or the time to do that. So more time, the most complex patients, you stay independent, and then the economic value to them. What we consistently hear is the value that's being derived for our primary care partners from a financial perspective, which is really important to sustain their practice, is two to four times any other value proposition that they've been presented. Why? Because it's all of the senior patients, 400, 500 senior patients. They're able to drive by keeping patients out of the inpatient setting, out of the ER, with some of the clinical programs that I talked about, within a few years, $150-$200 PMPM, right? And so you can see an incremental $200,000 for these physicians within very short order, which is the difference between really thriving and changing that market and being a very challenging existence. It's hard to be a primary care doctor, and so I think just the magnitude of that and then just the experience. The better we do with our existing partners, the more the doctors wanna join. So that's really that value proposition. Yeah, you know, it kind of makes logical sense that the most opportunity for all that incremental surplus can be generated if you're at, obviously, at full risk, but it's not easy to get there. So one of the, you know, one of the big reasons to go with agilon, that they go with agilon is, you know, we, we can get them there across, you know, take full risk across all members and all payers in the market. And it's a matter of, you know, you have to be able to implement that process. You have to go in and, you know, there's a pretty big investment to go to do that, and obviously, we bring the financial capacity for them to make that transition into it. And then once you're in and running it, it's not like, "Hey, we got a bunch of payer contracts, everything's easy." You have to you know, get the contracts in place and manage those contracts, and manage those, relationships and information flow over time, and financial information flow over time, and we bring all that to our platform as well, in addition, of course, to all the incredible, operational, data, information, and insights that we bring to actually drive the outcome. So there's a lot that we bring from a capability standpoint that unlocks all of that, you know, all of that potential surplus upside that Steve was talking about. I imagine- Michael, if I could chime in real quick. Yeah. I'm glad you asked the question, 'cause I think it is something that's sort of probably underappreciated by the investment community. I think there's a view that sort of value-based care is value-based care, risk is risk, but being multi-payer full risk is really distinctive because of the, the things that Tim and Steve just described. But I'm glad you asked the question. Great. Great. Maybe a follow-up question. You mentioned you enter markets at 100% fee-for-service. So would it be appropriate to characterize that you're not necessarily competing against other value-based care platforms in those markets because they're complete, like, green space, white space opportunities, and you're more so pitching your model and to new physicians that are still on that archaic fee-for-service model? I mean, I think that's right. I think the opportunity is these markets are ultimately gonna move to value, and the advantage of being first gives us a distinctive advantage. We're looking at scaled groups. There may be smaller groups that are gonna decide to sell to a health system. We're looking at that big scale partner. But what's starting to happen, Michael, is that same geography growth is those groups that used to sell to the health system or Optum are saying: "Hey, I could stay independent." I wasn't big enough to do the initial partnership with agilon, but now the infrastructure is here, the contracts are here, the clinical and I can add into that. And so that's what's driving that really strong same store or same geography growth, on top of the record new classes of new partners and new markets. Great. Great. So I wanted to segue here to a hot topic as of late, risk model revisions to V28. And as we look forward and think about the beginning of the three-year phase next year, you know, it's becoming, like I said, an increasing topic, and especially toward high-quality, value-based care providers. And you've mentioned previously that it's gonna disproportionately impact providers with more aggressive risk coding, which doesn't necessarily apply to agilon. You guys have average risk score of 1.0, and I think you mentioned your existing members are gonna see 1%-2% revenue PMPM bump, and I think the overall membership- Yeah flat to slightly up. So, which is quite strong, and actually, that, if I'm not mistaken, would imply roughly minimal to negligible impact from this model revision. So question is, how confident are you in that slightly up revenue PMPM? And based on your own internal analysis, have you quantified the actual impact from risk model revisions each year? Yeah, we have absolutely, of course, quantified the impact, and we have all the, you know, the information and the systems to allow us to do that. So at this point, we're pretty confident in what the impact of V28 gonna be, and we can just talk about it in terms of impact on our 2024 outlook. And, you know, the revenue rate that we expect to see net at the end of this. But, you know, we think the gross impact is calculated of the change itself before anything else, is probably about a 2% hit or, you know, minus 2% to our revenue rate. Of course, there's a 2% benchmark increase that'll offset that. So you get kind of to a kind of a neutral starting point for us, as I think where we are. Now, on top of that, of course, we do all this great work every year with our processes and systems and platforms that drive improvement across our, across our partners in terms of their overall risk adjustment, and we'll get the continued benefit of that. So when you put that in and look at the... Let's just talk about the, you know, take out the, the new members for next year and just look at the, you know, our partners and our, our members that'll be on the platform for a year or two plus next year, so the ones that are already on the platform now. Yeah, we'll probably get a rate, increase next year of in the 1%-2% range up. So that's, that's a good spot for us to be next year. Now, we're gonna have a huge class coming next year that we talked about, a really strong class of 2024. So when you look at the overall blended rate, that'll bring that back down to probably a slightly positive. But the important part is that the year two-plus members are gonna be 1%-2% positive, and then those new that new class that is coming in, that'll be a little bit dilutive on a revenue rate basis. The good news for us next year is that they are a very positive or projected to be a very positive medical margin PMPM group. You know, we normally talk about our new partners starting in, like, the $30-$60 medical margin range, but usually, typically, right around that, the midpoint of about $45. That's about where we break even from a EBITDA standpoint with the market. It's about $4 and then partner market is about $45 medical margin PMPM. You know, we're looking at next year's class, and it will be coming in at or above the $60 range, which means, you know, the nice thing is that group will be accretive to EBITDA next year, which is, you know, not the usual case for a new market. So the, you know, base kind of group, year two plus and the 1%-2% revenue increase all in 100,000+ new members coming in that are gonna be, EBITDA accretive, puts us in really good shape for 2024. Great. Great. And so the 2% hit to risk model revisions, that's much lower than what, you know, being quoted by, like, AGP article, 10%-20%. Yeah. So significantly lower and sounds like your new class is gonna be accretive on medical margins. But in the sense that the growth impact, do you have any mitigation plans in place to directly address that, offset it? Is that something that you thought about and are gonna roll out pace and timing as well across the three years? Well, I mean, I think that, a, we're highly confident that in the numbers that Tim just walked through, because you've got all of those elements, and you can see it, we've got a lot of experience. So that's number one. I think that, you know, the fact that we're in these markets that are 100% fee-for-service, that the larger impacts that you're hearing about are folks who've been in geographies where it's much more mature, and I'll just say, kind of optimized, right? Southern California, Florida, or you're in very complex, narrow populations like duals. And so I think that's sort of the distinction that we made around that. But when you look out to 2024, think about what we've talked about. We've got this really large class of 2023. It's maturing very well, and so that run rate's gonna be strong. We've got really strong quality and clinical programs. You know, we are rapidly ramping those out. At our call, we were talking about a third to half of our markets being covered to date. By the end of the year, we're saying it'll be two-thirds, and by the end of 2024, Michael, all of our markets, including the class of 2024, will have these clinical programs, renal, palliative, high-risk patient management, in place. That what's driving the utilization you started with, the inpatient flat to down, that really cushions the investment in primary care and moving to that outpatient setting. So that's really powerful. There's the class of 2024 that Tim talked about, and why is that class gonna start so well? 'Cause the sales cycle is faster. The implementation is longer. We did this acquisition of the software platform that allows us to integrate more rapidly with the electronic medical records and get the data that allows you to get patients identified and in earlier. And this class has some larger folks in existing geographies in which they're able to take advantage of existing contracts, existing clinical programs. So you put all of that together, and it gives us tremendous confidence, and those are levers that I'm not sure everyone has, but that's what I'd call out. And then I think it. Oh, sorry. I was gonna say, I was gonna suggest, Steve, you hit on sort of what we're hearing from payers- Yeah, that's what I was gonna say. Something a little sort of newer to our thinking as well. Yeah. So we talked about this a little on our Q2 call, but, like, I'm right in the middle of meeting with the national leadership of the payers right now. And I think what we're finding is in the markets that we serve, because this is a market-by-market basis, you are seeing those payers being more conservative and having a reduction in terms of those benefits. And so when we had talked about next year, initially, we were not counting on that significantly. That's like a dollar-for-dollar benefit in terms of what that would look like from a cost perspective. And so I, I think that's, that's an added element to if you're talking about 2024 which would be a tailwind for us next year. That's incremental beyond your prior expectations of what was embedded in 2024. That's a positive. Okay. That's a positive, yes. That's good to know. You mentioned the clinical care initiatives, and it sounds like they're being deployed heavily by the end of 2024. I wanted to touch on the high-risk engagement program, though, the high-risk member engagement program. Yes. What does that exactly entail? Presumably, risk stratification, of course, to start, but what types of resources or care support do you provide thereafter? And, you know, what type of quality measurement improvements have you seen from this initiative? Yeah, I mean, I think we've seen tremendous benefit. This program is now in all of our markets. The renal and palliative program I talked about are gonna get to every market by the end of 2024, but this one is the most mature. And so first is the ability to stratify or identify those most. Who are those 15%? And really making sure that the primary care doctor and the care team understand who those are. Then it's knowing where they're at. So this is about technology and data, knowing when they're in the inpatient setting, rounding with them, and knowing when the discharge plan is. And then the ability to get those folks in within two days to see their primary care physician is this dramatic change in terms of the reduction in the readmission rate that I talked about. That's care team resources, that's scheduling, logistics, and understanding what the timing needs to be and holding those appointments on the schedule to get that done. That's significant. When you think about a readmission, $10,000, $15,000, I mean, it can be really massive in terms of cost, and you see that 28% increase in two-day follow-up, that's, that's meaningful in terms of what we've seen year to date, and it's only going to expand as we go further. There's care managers that for the most complex patients, Michael, they are literally contacting them, dialoguing with them every single day. And so if, you know, you look at our Investor Day and some of the case studies we shared, we talked about a care manager who's working with a patient and was able to get that patient to a plan of improving their health, where they could actually take a vacation for the first time in years and go see grandchildren. And so those are the things that are about that resource model, about that information model, and just being able to spend time with those most complex patients, that makes a really big difference. And that's the benefit, to Matt's point about multi-payer. You're able to do that across 400 or 500 senior patients and isolate in on those 15% that really need that. Great for the patients, and it's obviously great for the physician experience. That's great to hear. You know, the 15% that drive- Yeah 70, 80% of the healthcare costs. Maybe switching. I know we have one more minute. ACO REACH. You know, after a couple of volatile years, this year, you intentionally took a one-year hiatus, but performance has been great. As you return back to growth, could you discuss the sustainability of ACO REACH over the next few years? Yeah, absolutely. I mean, we're so much more confident in this now that we have great visibility. And all the variability in it for us has always been around the revenue side. And through the information that CMS is now giving us on a monthly basis, we have tremendous visibility into exactly what's happening to revenue. So we can kinda track what the size of that retro trend adjustment will be as we move along. And our performance, underlying performance, particularly in you know a bit of a higher utilization environment, has really started to shine, and we can really see the impact of our model on ACO REACH cost. So, you know, we talked about in addition to having much more confidence in what that revenue number is and being able to, you know, really project that and have-- and put that into our guidance, we're seeing this, you know, 300 or so basis points or more than 300 basis points spread between our performance and the underlying or the overall Medicare fee-for-service population. As we move forward into future years, you know, the revenue number on ACO REACH moves with that cost trend. So as long as, as we go forward, we are continuing to perform, you know, at or better than the reference population, we'll sustain that base profitability of $30 million-$35 million we're gonna generate this year and hopefully be able to expand that over time. And then the second thing is, of course, you know, next year we're returning to growth at about 25,000 ACO REACH members, and that will allow us to, you know, expand the overall size of the profit pool as well. Perfect. Well, right on time. Thank you, Steve, Tim, Matt, and thank you, everyone. Thank you, Mike. Thanks, Mike. Appreciate it.