Alignment Healthcare, a technology-enabled managed care company focused on the Medicare Advantage business, our top pick, and we think one of the highest quality MA plans in the country. So I'm very pleased to have with us today Chief Executive Officer John Kao and Chief Financial Officer Jim Head. So thank you very much for being with us today. So with that said, no introductory comments. Should we jump right into the Q&A? We do. Okay, great. So the hot topic, Star Ratings. Firstly, congratulations on maintaining at least 100% of members in four-star plus plans. I mean, that's great news, a huge testament to your execution. And I guess to start, I understand last year, John, you had mentioned you felt a little bit too close for comfort, too close to four-star threshold. But this year, even on your second quarter, before you had Plan Preview 2 data, you felt very comfortable that you would be once again maintaining. So I was wondering if you could talk about your confidence here. If your raw Star score was maybe teetering on the threshold last year, is it more firmly in 4.0 territory? And as we head into October, is there even a realistic chance that we could get to four-and-a-half-star? We're very proud of the 100% four-star. The raw scores absolutely went up. And so we did two things different than last year. We were just more conservative on the cut points. And I think that paid off. The other is we made a concerted effort to increase our CAHPS scores. And the initiatives that we took to address access to care and care coordination also paid off. And if we didn't do those two things, given the increase in the cut points, I think it would have been tight. But no, I think based on Plan Preview 2, we feel very good about where we are. With respect to reconciling the data and our projections with what CMS has, we're in that process right now. And we hope to have that sorted out in the next couple of weeks before October 1st. But last year, to your point, it was actually, I think, at your conference here that we actually had some visibility to Plan Preview 2. And we knew that we were reconciling the data and that CMS agreed with us on the data. Even though in Plan Preview 2, we were three and a half, we knew that the changes that we were talking to CMS about, that we would be a four. And I don't know if you guys remember, but October 1st came and in Plan Finder, they had us at a three and a half. And we go, "Oh God," because we knew we were at four. And then when the final rates were disclosed, we were at a four. This year, we got a lot more cushion. So we're good. Got it. Great. And on that last topic, last year, you were in discussions with CMS and you felt comfortable with getting to four, even though you're at three and a half. Any chance that could potentially happen this year, four or four and a half? I tried to avoid that question, Michael, but no, no, we're working on it. I would say it's possible, but premature to say anything. Okay, fair. And then on the cut points, another obviously hot topic. I know it's still fresh. You're still going through it. But any initial observations on the cut points? Everyone is saying how aggressive it is. Is that what you're thinking too? And then maybe more broadly, updated view long term on what you think cut points will do? I think all this is about is leveling the playing field, is making sure that four-star plans are really four-star plans, five-star plans are really five-star plans. There's no artificial support crutch like they had back in the day with COVID. And so I really think it's about leveling the playing field and really making sure that the original intent of this program is to provide optimum value to that consumer. I think this is all this is about. And the same would hold true for risk adjustment, is to normalize the playing field and to make sure that everybody is doing what CMS originally intended, which is to provide that beneficiary with the highest quality, real quality at the lowest cost. It's not high quality, lowest cost, and highest RAF. That's not what they were talking about. So I think once they go through this process of leveling the playing field, I think at least this administration, what we have heard directly from CMS and the White House and the Hill is everyone is very supportive of MA. So I expect to be very bullish on MA. Got it. And then in terms of the trajectory of cut points, it sounds like your view is maybe they'll ease up. There's not much higher they can go. I mean, it's aggressive. I got to tell you, Michael, you're right. I was surprised at the aggressiveness of it. But I think from their perspective, if you're four stars, you got to be pretty good. You got to be really, really good to be four and a half and five. And just to remind everybody, we have two five-star plans in North Carolina and Nevada, and we're working on the rest. But I think the beneficiaries deserve everyone in this program to strive for five stars. I think they deserve that. Got it. Got it. Helpful. So in terms of CAHPS, I know that's been a huge area of targeted improvement, focus, investment efforts. I know it's being downweighted this year, but still a pretty sizable chunk of the weighting, and I wanted to hear more about what efforts have you implemented? I think you may have a multi-phase sort of strategy, a plan of attack. It's clearly bearing fruit, but what does that look like, and what does a five-star CAHPS plan look like? It has been a challenge for many of the plans in California, and what's unique about California is there's such a kind of high level of intermediaries in the marketplace in the form of independent physician associations or IPAs that were kind of organized to contract on behalf of individual physicians. That's been a phenomenon in California for 40 years, and then also the preponderance of full risk-taking groups, so global cap value-based provider groups. And so not all IPAs have the same capabilities, and so what's going on is if in that market you are delegating certain parts of medical management or utilization management to these kind of organizations, some are better than others. One of the things that we did this year to increase the raw score of our CAHPS scores, which is what we did this year, was be very intentional about holding everybody in our IPAs and our provider groups to the same standards that we would hold ourselves. If you don't hit some of those standards, we would do the work. In our world, we would call that de-delegating certain administrative functions that were assigned to the IPAs. By doing that, we took more control and two things happened. One is our admissions per thousand went down. So we did a better job of doing the medical management. Number two is by ensuring that we could implement more care routing and transitions of care by taking more control. We were able to get access to our members faster to their subspecialists and facilities that they need access to. And so I think we started with the acute kind of call it medical management of acute admissions. And I think the next phase that we're going to be focused on is more institutional. So in addition to acute, do other institutional medical management with transitions of care that is all designed to route care to providers and facilities in a more timely fashion for that beneficiary. And so for example, right now, if a member gets a specialty referral, they go to their IPA. The IPA kind of really approves it. Nobody's blocking these things. There's nobody advocating for that member to go see the specialist, to go see a specialist in, say, 60-90 days. That's not okay. So what we're doing is we're saying, "Okay, you can go see your specialist or your facility here in your 60-90 days, your choice A. Choice B is you can see this, another five-star specialist in a week. It's kind of your choice." That's going to provide improved access to care and care coordination. Those are the kinds of things we're working on to kind of systemically address this CAHPS problem. You're clearly seeing it. And I'm sorry. And the other thing is once we're doing it now, everybody wins because the member's happier and the IPA who we de-delegate is surplusing more because it's working better and everybody's getting more and kind of sharing from the benefit of it all. And in the same year that you start de-delegating, you reach 140 admits per thousand, which, correct me if I'm wrong, one of the best. It's, yeah, I mean. Alignment history. Yeah, we've been consistent between 150-160 for like seven straight years, which again, when compared to Milliman best practice is like 190-200. Fee for service is about 250 per thousand. So it's like world class. What we were doing is world class. And then by kind of combining this acute medical management with the Care Anywhere program, we're getting the full benefit of the clinical model. And again, we're doing so in a way that also benefits that IPA. It's important to make sure that that IPA is getting incrementally more gain share and surplus. So everybody's happy. So would it be fair to say you're in phase one of de-delegation and you're doing 140 admits per thousand. As you continue to move to other institutional providers, is it a path even lower? The metric would be a little bit different because the acute is the acute. The other kind of non-acute institutional cost, you can see positive variance too. So it's a little bit different measure. The one area I do think that would fall into what you're saying is by doing that and being more proactive on the non-acute other institutional is that we're going to be transitioning the care to SNFs and rehab facilities that we know are high quality. And if you do that more consistently, your readmission rates from SNFs into acute should go down further. That will do exactly what you said to potentially drive that ADK on acute further down. The market, the fee for service is kind of around 20-22%. And we are pretty good at that right now. I think we're at 14-ish%. But if we implement this the right way, you could get that readmission rate down to 10%. And I think that'll manifest itself in the acute ADK. Great. And question for you, Jim. So this time last year, I think what was underappreciated was really the power of the cohort maturation story. 50% of your growth was in year one cohorts. And this time last year, where the street was at in terms of their consensus, EBITDA was a very comfortable place to be and you clearly outperformed. This year heading into next, you have the rate notice, you have stars, tailwinds, you have a benefit environment that's still very rational, if not margin first all over the country. So with the street currently at, I think, $135 million EBITDA, how are you feeling sitting here today and heading into next year? I guess I would say a couple of things. And I think you're asking for thoughts on 2026 guidance. We're not ready yet. We do that in February, but I'll explain. So 2025, we feel really, really good. As we go into 2026, we feel well positioned with the bids. John has talked about that. But we're five months out from providing guidance. And I think as I step into this role, I've been here for this my second quarter, we really want to make sure we stick with the core principles of this organization, which is delivering on our promises. So I'd like to go through the planning process, make sure we're really tight on it, and when we make our commitments, we will stand by them. Got it. Understood. And so on the topic of 2026, you've had the summer now, national broker conventions, I imagine in California. You have early glimpses of the competitive offerings out there. And I know, John, you've mentioned your thoughts about the smaller plans being perhaps very competitively priced, how that could be unsustainable. Is that something you're seeing and hearing? And in terms of now it's pencils down your benefits, how should we think about your benefit richness heading into next year, directionally stable, down, up? Yeah, our benefits were designed in a way that contemplated large nationals being more margin-focused heading into 2026. And I think that's pretty much across the board, maybe with the exception of one or two. But we're also very respectful of them in that if they are terminating products, terminating markets, there's probably a reason for that. And so we want to be very thoughtful about how fast we grow. And you combine that with what we also see to your point of call it the smaller players and some of the not-for-profit players heading into the third phase in of V28, where you're going to have revenue compression. Some organizations just they don't have the experience or they don't learn from their mistakes. And if they're super aggressive on benefit design for 2026, we're okay letting them have the share this year because I think they, like others that you all are reading about, that some of the large nationals, they get very aggressive on benefits. They don't have the medical management capability to manage the trend. They misprice and they blow the next three years. And so part of our strategy is to stay very disciplined, consistent, and we're telling everyone we're still very confident with 20% long-term growth. I do think heading into 2026, to Jim's point, we're in the process of the budgeting right now. I think we're going to be focusing on margin expansion. And I think in this environment in which we're in right now, that's probably the prudent thing to do. Having said that, two years ago heading into 2024, I didn't think we were going to grow at 60% either. And what I'm really proud of is we grew, but we had the infrastructure in place to manage that growth. And so it's a year of cautious optimism. And again, I feel very comfortable with where we are. Great. And I think that's a testament. I mean, you're growing 60% and driving margin expansion while other plans are barely growing and seeing hundreds of basis points of MA pressure, MA MLR pressure. So looking forward beyond 2026, over the next few years, I think you've been very vocal about a path to getting to $7-$8 billion. And then. Did I say $7 billion to $8 billion? Maybe. And then, well, $10 billion over time, right? Revenue. Michael's rounding it. Yeah, no, I think we're right around four right now. I think in the next three years, for we to get to $5 billion or $6 billion, I think is not going to be a huge lift. I think we have to execute, execute, execute. I think we have the people and infrastructure to allow us to do that and drive margin expansion. We've said long-term margins, we still feel comfortable at the 5%-6% range. When will we get there is a bit of an open question. We've outperformed this year. We're free cash flow. We think we'll be free cash flow positive this year. It's a year ahead of schedule. So we feel good about it. But I think getting kind of $5-$6 billion, getting the margins up, I think it's a 2x for everybody that gets in now. I think to get to $10 billion, we need to get to about 600,000 members given our revenue. I think there's some strategic things we would need to do to get there in kind of a five-year window, and it could happen earlier, but this is to say five years. I think that's very doable, and if we get to 5% margins at $10 billion, I think it's a 4x turn for everybody. I feel good about that. Ultimately, though, I think for we to be relevant in the bigger picture, we need to get to a million. If we get to a million, we're kind of X years down the long-term road. I think that gets you closer to somewhere between $15 billion and $20 billion, and I just don't think that's crazy anymore. None of these things are crazy. Internally, with our board, we're thinking about where we are today as, okay, we've kind of proven this concept. This proof of concept is working. And the big new data point for me is the ex-California markets are starting to grow. And the profitability in these ex-California markets are starting to take root. And so that's given us confidence to begin to start thinking about using free cash flow from operations to start funding some of these new markets that we're talking about. And we are just more comfortable with that. When that starts happening and as our infrastructure continues to mature, our automation continues to mature, our care model continues to mature, and we have this continuous improvement culture, I think this thing gets viral. That could be very exciting for everybody because I think it's the right thing to do for seniors in this country. Got it, so path to $20 billion at some point. Don't print that, Michael. Don't print that. But I mean, you're at 2% margins today. You mentioned 5%-6% while eventually getting to $10 billion in revenue. I guess what's the path forward in getting from 2% to 5%-6%? Jim, I know you've mentioned captive businesses and the opportunity there could be 5%. You're at sub-10% SG&A, creating a new sort of benchmark in the MA industry. So how do you get to 5%-6%? And why can't you be even more than 5%-6% over time? Wow. The ambitions, so why don't we start with SG&A, which I think is a little bit easier to get your arms around as we scale? We think we can drive essentially what is about 10% this year downwards. Some of that will be scale advantage on our fixed side of the thing. So as we get bigger, we'll be more productive in the fixed costs, but we're also going to reinvest back in the business, okay, so branding, infrastructure, things like that, further automation, which turns into a flywheel on growth and our ability to kind of sustain ourselves. The other aspect is on the MLR side. One of the things that really drew me to this organization was the care model. It's just very, very different. It flips it around and says, can we manage medical spend in a dramatically different way in the margins to add more profit? The answer is yes. I think it's just a question of how long it takes to get there. You mentioned supplementals. We spend about 5% on our supplemental spend of the MLR, okay? Five points. Some of it is just pure claims or benefit. There is a lot of vendor costs, administrative costs, and frankly, not great execution inside that. We think we're going to be able to grind that down over time. It might take some capital, small amounts on the margin, but we think we should be able to capture some of that. As we've talked about, this is a game of inches. There's a bunch of little ways to improve on the MLR over time. But I would also just note as we're executing through 2025, we've managed to take on through very disciplined bids and onboarding of members over the last couple of years. 50% of our membership is under two years. And we've managed to take that on without really having adverse issues. There's pockets. But that ability to digest that kind of membership with good product design, smart marketing, etc., is really interesting. So that gives us some real comfort that we should be able to execute going forward. Great. Perfect. And in the last few minutes, I wanted to shine a light on the expanded RADV audits. I think we had dinner last night. I think one big takeaway is that it's hard to imagine a world where it's not an issue for a lot of MA plans into next year or even into third quarter as 2019 audits are due. And if plans start realizing they need to book a reserve, it might start showing up on their P&Ls in third quarter. So I wanted to dive deeper into it because from my perspective, Alignment and the care model is seemingly purpose-built for RADV. You target that 10%. Those 10% of lives could be in the sample frame. And it helps you validate code. So could you talk about your preparation and the potential risk to the broader industry? Yeah. Yeah. I'll speak to what we're doing in Alignment. It's clearly a priority. And for those of you that don't know, CMS has started the RADV audit process starting with payment year 2019. And so the expectation is they want to audit 2019, 2020, 2021, 2022, 2023, and 2024. And they want to get these audits completed by mid-year next year. Whether they can actually execute on that, given the resource requirements, the technology requirements, remains unclear. But nevertheless, they have started it in 2019 for dates of service in 2018. Okay? And so what they do is they say, okay, here's your membership as of this date. And they create something called a sample frame, which is about 10% of your highest codes. Okay? And And then from that sample frame, they take a subset, a small percentage of that, and they actually focus on individual members. And then from that, they pull HCC codes attached to those members. Okay? Tracking? And so what they do is they then say, you have to validate all the HCC codes related to that sample of members that we picked. And if there are any unvalidated HCC codes for any of these members, they're going to extrapolate that to your sample frame, which is a point of contention, by the way. And so if you think about day one, this is your exposure associated with the fully extrapolated membership. And this is like zero of the HCCs validated. Okay? So day two, you validate some codes, your exposure comes down. Day three, you validate more codes, your exposure comes down. And so over 90 days, what we've been focusing on is literally daily tracking of it such that your validation, we're really close to 100% validated, which means your exposure is de minimis. That's a really good thing. Really good thing. And Michael, to your point, we're able to do that largely because of this Care Anywhere model that you heard about, AVA, the stratification, Care Anywhere is designed to focus on who we think that polychronic population is. So if we know who they are and we're taking care of them, it stands to reason that we have the documentation. So we feel really good about the 2019. We're waiting for the 2020. And I think we've scaled up from a management perspective, hiring leaders and new people to focus just on RADV. It's going to be a way of life for us, for everybody in this business. With respect to everybody else, I don't know. I can't say what their capabilities are. But I will say that if you go through that process and you submit these codes to CMS by September 30th, you should know what your exposure is. And then it's up to you to determine whether you need to disclose that or not. But I think it's something at least to be knowledgeable and conscious of that that is a potential disclosable item heading into even Q3. So I hope I explained that in a way that you guys understand, but it's a big deal to your point. Perfect. Well, that's time. So, thank you, John, Jim, Harrison as well. And thank you, everyone. So, hope you have a great rest of your day. Thanks, everybody.