Good morning. My name is Mary, and I will be your conference operator today. At this time, I would like to welcome everyone to the Oak Street Health First Quarter 2022 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, press the pound key. We ask that you limit yourself to one question and one follow-up. Thank you. I would now like to hand the call over to Sarah Cluck, Head of Investor Relations. Please go ahead. Good morning, and thank you for joining us. With me today are Mike Pykosz, Chief Executive Officer, and Timothy Cook, Chief Financial Officer. Please be advised that today's conference call is being recorded and that the Oak Street Health press release, webcast link, and the other related materials are available on the Investor Relations section of Oak Street Health's website. Today's statements are made as of May fourth, reflect management's view and expectation at this time and are subject to various risks, uncertainties, and assumptions. In addition to historical information, certain statements made during today's call are forward-looking statements. Please refer to our 2021 annual report on Form 10-K and other periodic reports filed with the Securities and Exchange Commission, where you will see a discussion of certain risks, uncertainties, and other important factors that could cause the company's actual results to differ materially from these statements. Certain statements made during this call include non-GAAP financial measures. These non-GAAP financial measures are in addition to and not as a substitute or superior to measures of financial performance prepared in accordance with GAAP. Please refer to the appendix of our earnings release for a reconciliation of these non-GAAP financial measures to the most directly comparable GAAP measures. With that, I'll turn the call over to our CEO, Mike Pykosz. Mike? Thank you, Sarah. Thank you to everyone for joining us this morning. Joining me on today's call, in addition to Sara, is Timothy Cook, our Chief Financial Officer. I wanna first thank our team for the continued dedication and focus on our patients, our communities, and our mission. I feel privileged to work with such a dedicated group of individuals, and I'm impressed with the stories I hear every day of Oak Street team members going above and beyond for our patients. We are pleased with the start of the year in both the positive momentum we feel across our organizational objectives and the operational results from the quarter itself. With performance above the top end of our guidance range for revenue, at-risk patients, and adjusted EBITDA. It remains a difficult operating environment in healthcare more broadly, and is a testament to our team that we are able to continue to drive strong results. At Oak Street, it is an exciting time across the organization. We are focused on the programs and services that our patients need to stay healthy and out of the hospital, and that will transform the way care is delivered for older adults over the next decade and beyond. This is a welcome change from the past two years, when we often need to react to in-the-moment COVID-driven needs of our patients and communities. For example, today we're investing in Canopy, our proprietary technology platform, using our deep set of patient data to provide actionable decision support to our care teams through applications that are both easy to use and improve workflow adherence. A specific example is our technology integration work with RubiconMD. After completing the first phase of the integration of RubiconMD into our referrals module, we have seen an increase in eConsult volume over 200% over the last several weeks. As we complete phase two and phase three of the integration, we expect to see an even larger jump in volume. I'm confident that the investments we are making today will drive higher quality care and lower costs for the long term. We continue to focus on our team, our culture, and our mission to rebuild healthcare as it should be. We believe our deliberate approach to building and reinforcing our culture, combined with our team's focus on our mission, is a key driver of Oak Street's success and will continue to be a differentiator. Today's operating environment is not without its challenges. We are watching the current COVID wave closely, making sure our patients are protected by vaccines and receive therapeutics if they do contract COVID. It remains a difficult labor market. We continue to navigate this environment without seeing a negative impact on our financial or operational results. We have not and do not expect to experience delays in opening centers due to labor shortages. To date, we have not experienced higher labor costs than forecasted coming into the year. We have been able to leverage our culture, mission, and the advantage of working at Oak Street to team members. Inflationary pressures have a different impact on our business than traditional healthcare providers. First, our labor costs at our centers are relatively low on a comparative basis, representing a little over 10% of revenue versus hospital systems and home health companies that are more in the 50% range. If there are future increases in labor costs, the overall impact on the business will be much less than traditional healthcare providers. Second, in future years, increases in the cost of healthcare labor will impact Medicare rates, which will increase Medicare benchmarks and therefore Oak Street revenue, making Oak Street largely insulated from inflation in the medium and long term. If there is a sustained increase in labor costs in healthcare, our revenue will rise alongside the increases in labor costs, allowing us to maintain our margin on higher revenue. Said differently, if the high cost of healthcare labor increases across the board, that will increase the cost of hospitalizations and therefore increase the value of the hospitalizations we are reducing, increasing the savings we are capturing and more than offsetting any change to our cost structure. More tactically, at our centers we continue to see a return to normalcy with our focus on patient experience, care model execution, and making Oak Street the best place to work in healthcare for our team. Our outreach teams are ramping up events in the community, allowing us to meet thousands of older adults who can benefit from our care model. We are bringing back events in our community rooms. In April, we partnered with AARP's Wish of a Lifetime program to do events in all of our centers. Next month, we are bringing back open houses for prospective patients in our community rooms across the organization. We remain hopeful that bringing back the in-center and community-based events that were a core part of our marketing approach pre-pandemic will allow us to return our field-based outreach team to the level of success they achieved pre-pandemic. We believe we are just scratching the surface on the potential of our AARP partnership. One of the greatest aspects of being part of Oak Street is the tight alignment between our mission, the impact we make, and our financial performance. We make an impact by providing meaningfully higher quality care and an unmatched patient experience to a growing number of older adults. We recently published our first-ever social impact report detailing out the impact we make on our patients, our communities, and the healthcare system. I'm incredibly proud of the impact our teams have made. The full report can be found on our website. If we continue to make a greater and greater impact by providing high quality care to an increasing number of patients and communities, we'll continue to drive strong financial performance. We are pleased with the impact we have made and the resulting financial performance so far in 2022. In the first quarter, we generated record revenue of $513.8 million in the quarter, exceeding the high end of guidance and representing 73% growth compared to Q1 2021. Our revenue growth continues to be driven by our organic B2C marketing approach. This includes both central channels such as digital marketing and our core community-based outreach team. We also opened 11 additional centers, including our first centers in Arizona, and remain on pace to open 40 centers in 2022, bringing our total at the end of the year to 169 centers. Medical claims expenses have trended in line with our expectations coming into the year. Cost of care, which includes care team labor, marketing, and corporate costs, were all in line with expectations. Higher than projected revenue, combined with costs in line with original projections, resulted in an adjusted EBITDA loss of $42.4 million for the quarter, which is favorable to the top end of our Q1 guidance. Tim will cover the specifics around medical costs and other trends shortly. Taking a step back, we shared projected center ramps for 2022 by cohort earlier this year, most recently at our Investor Day in March. Continual performance along these ramps creates an outstanding financial return on the capital invested in new center development. Our guidance this year is based on center-level performance within that range. Performing favorably to our guidance for the first quarter means we are on our way to achieving the center-level performance we set out. By continuing this level of performance, just the 169 centers we will open by the end of this year will generate over $1 billion in EBITDA when they are scaled. We are pleased with our performance in the first quarter and what it means for our center-level results. We're optimistic about the investments we are making to continue to improve our platform, and we're excited to continue the journey to transform healthcare. Now, I'll turn it over to Timothy to cover some more details regarding our financial performance in the first quarter. Thank you, Mike, and good morning, everyone. As Mike shared, we were pleased with our first quarter as we delivered results above the high end of the guidance we provided in February for at-risk patients, revenue, and adjusted EBITDA, and at the high end of the range for centers. In terms of membership, our at-risk patient base, the key driver of our financial performance, grew by 64% year-over-year to 124,000 patients, driven by our B2C marketing model, the introduction of Direct Contracting in Q2 2021, and growth in the number of centers. At the end of the first quarter, we operated 140 centers, an increase of 11 centers compared to December 31, 2021, and representing growth of 54 centers or 63% versus the 86 we operated at the end of the first quarter of 2021. Capitated revenue of $506.1 million grew 74% year-over-year, driven by growth in our at-risk patient base. Excluding the favorable benefit of prior period development related to Q1 2021, capitated revenue grew 76% year-over-year. Total revenue grew 73% year-over-year to $513.8 million. Our medical claims expense for first quarter 2022 of $379.4 million represented growth of 90% compared to first quarter 2021. When adjusting for prior period medical claims expense related to Q1 2021 recorded in the first half of 2021, medical claims expense grew approximately 75% year-over-year, which is 100 basis points slower than our comparable capitated revenue growth over the same period. Recall, this year-over-year comparison includes Direct Contracting, which is reflected in our first quarter 2022 results, but not in our first quarter 2021 results as the program went live on April 1, 2021. As we have previously described, Direct Contracting has higher per member per month medical costs relative to its per member per month revenue compared to Medicare Advantage, and therefore skews the year-over-year comparison. Adjusting capitated revenue and medical claims expense for the prior period effects I just mentioned, as well as adjusting Q1 2022 for the Direct Contracting program, our capitated revenue growth rate was 350 basis points greater than our medical claims expense growth rate in the first quarter on a year-over-year basis. I want to briefly comment on the key headwinds we experienced in 2021 related to medical costs: direct COVID costs, non-acute utilization, and new patient economics. We estimated that COVID costs in Q1 2022 were approximately $10 million, which is comparable to our Q1 2021 direct COVID costs. We estimate we incurred $40 million in total COVID costs in 2021 based upon claims received through March. It is too early to predict what COVID costs will be in 2022, given uncertainty around local prevention strategies and emerging variants. December 2021 and January 2022 represented some of the highest COVID-related hospitalization levels we have experienced during the entire pandemic. However, these hospitalization levels decreased dramatically in February and March to some of the lowest levels we've experienced. As we stated on our Q4 call, the non-acute utilization increase we experienced in the spring of 2021 dissipated as 2021 wore on. We estimate our non-acute utilization was within a historically normal range in Q1 2022, as it was in Q4 2021. Finally, for new patient economics, it remains early given the number of new patients we are caring for today relative to the total new patients we expect to add during the year. Early indicators are that we will not experience the same level of revenue degradation we did in 2021 on new patients, though we do not expect overall new patient economics to return to their 2019 levels this year, as was assumed in our guidance. Our cost of care, excluding depreciation and amortization, was $95.2 million the first quarter, an increase of 58% versus the prior year, driven by growth in the number of centers we operate and accordingly, the number of team members supporting our significantly larger patient base. Sales and marketing expense was $33.8 million during the first quarter, representing an increase of 40% year-over-year as we continue to invest in this area to support patient growth and a much larger footprint of centers. Corporate general and administrative expense was $88.7 million in the first quarter, an increase of 21% year-over-year. Majority of this year-over-year increase is related to an increase in headcount to support our growth. Stock-based compensation expense included in corporate general and administrative expense represented $38.2 million in the first quarter of 2022 compared to $41.2 million in the first quarter of 2021. Excluding stock-based compensation, corporate general and administrative expense grew 54% year-over-year. We decreased our corporate general and administrative expense, excluding stock-based compensation as a percent of total revenue by approximately 90 basis points in Q1 2022 compared to Q1 2021. I will now discuss three non-GAAP metrics that we find useful in evaluating our financial performance. Patient contribution, which we define as capitated revenue less medical claims expense, grew 38% year-over-year to $126.7 million during the first quarter. Excluding the impact of prior period revenue and medical costs related to Q1 2021, patient contribution grew approximately 77% year-over-year. Platform contribution, which we define as total revenue less the sum of medical claims expense and cost of care, excluding depreciation and amortization, was $39.8 million, an increase of 8% year-over-year. Excluding the impact of prior period revenue and medical costs related to Q1 2021, platform contribution grew approximately 140% year-over-year. As an individual center matures, we expect both platform contribution dollars and margins to expand as we leverage the fixed costs associated with our centers, as well as improving our per-patient economics over time. Adjusted EBITDA, which we calculate by adding depreciation and amortization, transaction offering related costs, litigation costs, and stock-based compensation, by excluding other income to net loss, was a loss of $42.4 million in the first quarter of 2022 compared to a loss of $17.4 million in the first quarter of 2021. We finished the first quarter with a strong balance sheet and liquidity position. As of March 31, we held approximately $660 million in cash and marketable securities. As discussed on prior calls, we expect our liquidity position will support our continued growth initiatives, primarily our de novo center expansion. Cash used by operating activities was $91 million in the first quarter of 2022, while our capital expenditures were $20 million for the quarter, both in line with our expectations for the quarter and the year, and our ability to fund the growth of the business in line with the center growth we previously outlined. Now I'll provide an update to our 2022 financial outlook. We are reiterating our full year 2022 guidance across all key metrics, and for the second quarter of 2021, we are forecasting revenue in a range of $517.5 million-$522.5 million and an adjusted EBITDA loss of $62.5 million-$67.5 million. We anticipate having 144-145 centers at an at-risk patient count of 131,500-132,500, including Direct Contracting patients at June 30, 2022. Regarding the shape of our full year guidance, I would note that we expect around two-thirds of our remaining new centers in 2022 to open in Q3. We historically have seen greater new patient growth just in terms of the sheer number of patients in Q3 and Q4 due to seasonal trends such as weather and the annual enrollment process. In closing, we remain optimistic about the momentum and the underlying trends we are seeing in the business. With that, we will now open the call to questions. Operator? Thank you. At this time, I would like to remind everyone in order to ask a question, press star then the number one on your telephone keypad. We ask that you limit yourself to one question and one follow-up. Thank you. We'll pause for just a moment to compile the Q&A roster. Our first question comes from the line of Lisa Gill from JP Morgan. Your line is open. Good morning, and thanks for all the detail. Mike, I just really wanna go back to, you know, what we saw in the quarter around MLR and then what you're talking about going forward. You know, it sounds like things are starting to normalize, talking about Omicron here at the beginning of the year like many of the other managed care companies. As we think about Trends going forward, maybe just give us some color. I know you feel like things have gotten more boring and normalized, but you know, anything that you would call out as we think about trends going into the second quarter. Lisa, I appreciate the question. I think from our perspective, you know, our company exists to take better care of older adults, to improve the quality of care and lower acute hospitalizations and therefore save costs. Obviously, over the last 2 years, the kind of ebbs and flows of the pandemic and some of the kind of secondary implications of that have kind of had a big impact on our third-party medical costs. You know, what we're seeing today, and I think what we're excited about, knock on wood, for the remainder of this year and beyond, is that we're kind of really back to our care model and the quality of care we're providing our patients, driving a reduction in hospital admissions and therefore driving savings, and that's driving our MLR. You know, I certainly think, you know, January, as we talked about, had a high amount of COVID costs due to Omicron that dropped very quickly into February and March. You know, again, now we're feeling like our performance is really being driven by our care model efficacy. That's always gonna be a focus at Oak Street Health and always something we wanna control. You know, we think we're back to a place of kind of, you know, really driving the med cost performance and, you know, more predictability around that, similar to what we saw pre-pandemic. You know, obviously, you know, there could be another variant and that could change things. You know, at least right now it feels like a much more normal time and that should drive you know, more normal performance on the MLR front. You know, just as we think about the sales and marketing aspect of it, you did talk about, you know, more of a normalized people coming back to the community, coming into your centers. Your sales and marketing expense was better than what we had modeled. I know last night you told me that it was in line with your expectations. Do you think that as people come back in, you're gonna have more of an opportunity to leverage some of your costs as we move throughout the year? Yeah, Lisa. Yeah, I think our costs from a sales and marketing sector are really kind of two pieces. One, and the largest chunk of that, is the labor costs for our outreach executives in our centers. There is a number of kind of team members, think about them as a cross between a community health worker and a salesperson, at all of our centers whose job it is to be in the community, meeting older adults and, you know, helping them become patients. That cost is relatively consistent, you know, month-over-month, quarter-over-quarter. Obviously it rises in proportion to the number of centers we have. I think that's the cost we hope to leverage, you know, more effectively. As we get back in the community, they're meeting more people, you know, their cost doesn't go up a whole lot if they add a lot more patients, which can give us more leverage. I think we're pretty excited about the opportunity as the year goes on. The other part of our cost is more, you know, marketing expense, things, you know, digital advertising, things of that nature, commercials. We do a little television. Not a lot, but a little television. That actually we did lower a bit in January just because of the kind of magnitude of the Omicron wave and, you know, just even things like staff being out sick, things of that nature. That might be a little bit why Q1 was a little bit lighter on marketing as I reflect. Although, I think that, you know, we do expect it to rise over the course of the year in proportion with the number of centers. Again, our goal is to really better leverage the kind of community sales force to drive more patients. I think that's a big opportunity for us. Great. Well, thanks for the comments, and congrats on the first quarter. Our next question comes from the line of Kevin Fischbeck from Bank of America. Your line is open. Hey, thanks. This is Adam Ron on for Kevin. Going to the membership guidance for the full year, and I guess now that you've reiterated it, when you initially guided to that membership at the beginning of the year, did you assume a relatively normal ability to run in-person events? You know, you said COVID was deteriorating, the levels were deteriorating exiting March, and so if it were to continue at these levels, would that be upside as you're able to do more in-person events? The upper end of the guidance was based on cohort performance from 2019 before Direct Contracting. Since, you know, the largest input into ramping a center is filling capacity, and now that you have, you know, a lot more ability to add at-risk patients with Direct Contracting, just wondering how those two dynamics would play out as, you know, if COVID levels were to persist at these levels. Yeah. When we created our guidance on membership, and similar to what we reiterated in our guidance this quarter, we didn't and have not baked in or assumed a bump in our outreach performance driven by in-center events, I think, and out-of-center events. I think we are hopeful that that can occur. But obviously, there's been so many ebbs and flows across the last couple of years that we don't wanna rely on it in our numbers. Number two, it's always gonna take time to get back to where we were in 2019. You know, there's both getting back out in the community, completing the events. There is, you know, getting older adults back to getting used to meeting in person, which obviously is, you know, happening at different rates in different parts of the country. Once you're meeting people, there's forming relationships, which takes time, getting them to try visits and getting them to move on to risk rosters. It is a, you know, it's a process. Even if the community events were at the exact same place they were in 2019 today, it'd be months before we saw that flow through to our at-risk rosters. You know, again, we're hopeful that as the year progresses, we kind of see the benefits of that, not baked into our numbers. You know, it may be a situation where we really don't see the benefits for, you know, a couple periods out if and when they occur. That's kind of the first part around, you know, how we thought about kind of the return to normalcy in our guidance. On the second question, you know, we did not actually look at 2019 performance as the across the board for centers as the basis of kind of the top end of the range we shared in Investor Day on our center ramps. We actually looked at 2019 level performance across just two dimensions. One being COVID, which obviously 2019 performance of COVID was $0 of COVID costs. I think we know at this point in the year, we're not gonna see $0 of COVID costs, although our hope is that it continues to remain low like it is today versus where it was in January. Number two, the other thing we looked at that was really impacted by COVID last year was our economics on new patients. As we, you know, we've talked about, the kind of patient contribution was very different in 2021 than it had been historically on new patients. You know, we believe that was driven by a variety of pandemic-related factors impacting both the revenue and costs of those patients. We did assume kind of in the top end of that range that was back to kind of a more steady normal state. It wasn't full 2019 level performance as the basis for the top end of the range. It was just on kind of those two pandemic-related measures, and everything else was driven off of kind of the current performance and the current guidance performance. Great. Appreciate it. Our next question comes from the line of Justin Lake from Wolfe Research. Your line is open. Hi, this is Harrison on for Justin. Maybe if we could just get an update on, in terms of DCE membership, just, you know, what that's trending like, and maybe what you expect for that to be, you know, within the membership composition by calendar year-end or end of 2023. You know, I guess we're just a little curious, you know, why, you know, more of the fee for service isn't, you know, converting over. You know, I think it was our understanding that, you know, as some of these other CMMI payment models kind of sunset, you know, there'd be more opportunities to align under DCE. Just, you know, wanna get the latest on that. Thanks. Hey, Harrison. It's Timothy. Thanks for the question. You know, on Direct Contracting, I think we've described this once or twice. We're excited about the program even with the changes made as part of the transition to ACO REACH. The challenge that we've had in Direct Contracting is related to the attribution logic that CMS uses for patients that are going to be voluntarily aligned. You know, our organization is different than many other healthcare providers that are participating in the program because we're growing very rapidly in new markets and bringing in new providers to Oak Street. When those new providers join Oak Street, by and large, they do not bring any patient panel with them. The net patients we're adding to the program are really voluntarily aligned by and large. What happens within the logic of direct contracting is that patients, when they come in, they're voluntarily aligned. CMS checks whether that patient could be claims aligned to any participant in other CMS programs, particularly the ACO programs like MSSP. We don't have visibility to know when a patient walks into an Oak Street center, whether or not that patient is aligned to an ACO, and I can promise you that no patient knows whether or not he or she is aligned to an ACO. That is where we've had a challenge, which is we have had great success as patients come into Oak Street, you know, join our platform, become part of our program, signing those forms, and aligning to Oak Street. The problem is that when we ultimately see who flows through from CMS, that number ends up being much lower than we would have originally thought when the program started because of this attribution logic. Now, as we fast-forward over the course of the next couple of years, and we continue to care for those patients, at some point, those patients will be claims aligned to Oak Street, and that will be a, you know, a tailwind to growth. You know, that's going to take at least a year, if not two years, for us to represent the plurality of that patient's claims and therefore for them to be claims aligned. That has been a challenge. I'd say growth has been at the lower end of the range that we had outlined last year. I think we had said 2,000-3,000 patients per quarter. I'd say they're more on the lower end of that just because of this dynamic where it's been more pronounced than we had expected. Again, at some point, that will reverse a bit as the patients we've added last year that weren't able to be voluntarily aligned become claims aligned, but that's just gonna take time. Got it. That's really helpful. You know, maybe really quickly just on in terms of the guidance, you know, kind of maintained for the full year. I think you beat the street by maybe $7 million this quarter, and then you've guided maybe $7 million below. Maybe just for the back half, is there something we're not contemplating in our numbers? Is there maybe some stranded costs with the centers that you're no longer opening this year that kind of land in the back half that drag a little bit? I think that was previously sized around $5 million. I just wanna make sure we're not missing anything here. Yes, Harrison. I apologize. I'm not familiar with your specific assumptions, but I know I think what you're describing is probably true for a number of others. I'd say the biggest thing is perhaps just the assumptions around the pace of new center openings over the course of 2022. I think generally speaking, the street had it relatively evenly distributed across the year, where you know, we obviously had 11 in Q1. We've guided to 4-5 in Q2, which leaves you know, roughly, more than half 24 in the second half of the year. Just generally speaking, what that shape would typically look like is Q2 and Q3 would be the busiest months from a new center opening perspective. Q1 would be busier than Q4. This year was a little bit different. You know, we came into the year with the expectation of opening 70. We obviously had a number of centers ready for Q1 in order to achieve that pace. You know, as January and February wore on, we had the centers ready to open. We had the teams hired. It didn't make sense to defer opening because they were ready to go. In a more typical year, if we had gone into the year expecting 40, I would have expected more in Q2 and less in Q1. I say all that because as I think about the shape, I think generally speaking, you know, the full year, I think the street is aligned with our full year guidance. The composition across quarters looks a little different. My guess is Q2 folks were a little more conservative. My assumption, and again, this is an outsider looking in, is that is driven by a center count growth in Q2 and Q3. Then, you know, Q4 folks are probably better than we are from an EBITDA perspective. When you net all that out, it nets to zero, right? Because from an annual perspective, we're in the same place. But my sense is that's probably what the driver is. Okay. That's helpful. I appreciate it. Thanks. Yes. Our next question comes from the line of Ryan Daniels from William Blair. Your line is open. Yeah, guys, good morning. Thanks for taking the questions. A couple on the growth outlook. Mike, very helpful commentary on the labor front. Obviously, key concern, big issue for healthcare, so good to hear that it's not impacting you on the cost front. What's unique about your growth model is that you're not acquiring practices. You're not dependent on trying to find affiliates. You kind of control your own growth with center openings, but that does mean you're hiring a lot. Can you just comment on that portion of the growth? Are you having any challenges finding the right staff, whether it's outreach coordinators or clinicians, as you continue your growth pattern? Thanks. Thanks, Ryan. Appreciate the question. I think you're right. I think, being a de novo organization, it means we're hiring great team members for all of our new center openings. We have not seen any issues so far this year on having to delay centers or not having them, you know, staffed where they need to be to open. We don't anticipate those issues going forward. I think what it really nets down to for us is, you know, as I mentioned before, you know, the mission and the culture of Oak Street Health and kind of the atmosphere we can create for our teams. We've had a lot of success bringing people into our model, whether that be, you know, community outreach associates or providers or nurses or medical assistants and everything between, who really believe in our model and believe in the way we're practicing healthcare, you know, get to know our culture. We have a great team now that does a great job of providing referrals of their network to join Oak Street, and that's, you know, that's our favorite way to recruit and hire. I think we've been able to leverage those aspects of what we do. We've been able to leverage the fact that, you know, it's from, you know, a healthcare professional, we can provide a lot more, you know, consistency in hours and days of the week than, say, a hospital system could. Again, I think we've been able to really navigate those things to date. You know, I think we'll expect to for the rest of the year. I mean, you know, certainly it's harder to hire people in a lot of different roles than it was, you know, five or seven years ago. Again, it's something that we've been able to successfully navigate through so far, and we expect to continue to do so. Great. I appreciate that. Maybe one for Tim. You know, I think an important part of the thesis is just the implied EBITDA at scale of $1 billion just in the current footprint at year-end. I'm wondering if you can just remind us what some of the key considerations are in getting there, meaning, you know, how long would it take for that footprint to scale to that level, and any assumptions that could, you know, move the needle one way or the other to get you above or below that $1 billion? Thanks. Thanks, Ryan. Yeah, I'd say it's just an assumption. It is an extrapolation of the center level results that we outlined at our Investor Day and then earlier this year at the J.P. Morgan conference. As folks may remember, we have 10 centers this year that we expect to generate over $8 million of four-wall margin. If you take the centers that we'd expect to open by the end of the year and use it as a proxy and then apply you know some normalized level of sales and marketing and G&A to that's how you arrive at the billion, Ryan. From today, I'd say based upon that performance, you're talking about you know 6-7 years. Our goal obviously is to shorten that timeframe to the best of our ability. I think that's what's applied in the logic. Our next question comes from the line of Jamie Perse from Goldman Sachs. Your line is open. Hey, good morning, guys. I wanted to follow up on some of the questions around MLR experience in the quarter, and I'm looking at this versus 2019 and 2018 trends. Yeah, things have obviously changed since then, just in terms of COVID and some of the new patient economics. I was wondering if you could help us bridge and how to think about the rest of the year. You're 800 or so basis points above where you were in 2019. How should we think about that spread progressing throughout the rest of the year as COVID costs hopefully come down and you get a handle on some of these non-acute costs? Any comments on how RubiconMD integration helps with that? Hey, Jamie, it's Timothy. I'll start, and Mike, feel free to jump in if you'd like. I'd say there's a couple key drivers that have changed since Q1 of 2019. The first is just direct contracting, as I described. Direct contracting has a higher MLR than our MA business, and it's, you know, it's a relatively meaningful part of our business in Q1 of 2022, and it was not a part, not any part of the business in Q1 of 2019 obviously. That's one of the drivers. Second is, you know, the COVID costs that I mentioned, that's $10 million in Q1 that we didn't have in Q1 of 2022, excuse me, that we didn't have in Q1 of 2019. That's roughly 2% right there. Those are the two largest drivers. I'd say that the last thing is, as we described, patient economics improve the longer patients are with Oak Street. If we think about the center growth that we've experienced over the last two years, and, you know, correspondingly, the number of new patients we have as a percent of our total, that number has grown a lot. That is going to all else equal blend up the medical loss ratio. It doesn't change our expectations of where those patients will be when they've been with us for the same period of time, but the weighted average tenure of our patients, just like the weighted average tenure of our centers, is less today than it was in Q1 of 2019. Okay, that's helpful. This is a question on cash flow from operations, -$91 million in the quarter. You said that was in line with your expectations. It looks like there was some development around accounts receivable. Can you walk us through that specific dynamic and how we should be thinking about modeling cash flow for the rest of the year? It was within our expectation. I'd say your Q1, when we think about Q1 cash flow or Q1 operating cash flow, there's a few drivers. One is I'd just say, depending on when health plans settle with us, that will drive the working capital balances at the end of Q1, any given period. Depending upon the plan, we settle more or less frequently, but to the extent that you settle on last week in March versus the first week in April, that can change obviously what you reflect on the balance sheet. For folks, just for folks' recollection, for over half our plans, the way our contracts work is we are paid an upfront payment that is meant to help defray some of the costs that we incur to support our care model, which are obviously, you know, more expensive than what you'd receive in a more fee-for-service environment. Then we settle with plans on a monthly or quarterly basis, depending upon the plan, where they true up that upfront payment to what we were actually owed. Because of our performance, typically speaking, we're owed a lot more than what was paid upfront. Until we've actually settled with the plan for that period, we carry the full amount of the revenue in AR, and we carry the full medical claims expense and our liability for unpaid claims. You're gonna see that build. I mention that only because, again, depending upon the timing of those settlements, we saw some settlements slip into Q2 that would've otherwise closed in Q1. That balance probably looks higher than it would have. The other thing I'd mention is we accrue for what we expect our risk scores to be in our patients. As folks know, you know, risk scores adjust on an annual basis, but you don't have an update until the mid-year sweeps over the course of the summer. Based upon all the work that we do to care for our patients, we document about 85% of all the codes associated with our patients. We have a very good understanding of where our risk score will ultimately be once risk scores are settled and, you know, this year's reimbursement won't be settled till next summer, right? Summer of 2023, just the way the risk adjustment process works. We're making an estimate today for what that risk score will ultimately be and what we'll be paid on. That number is highest in the first half of the year because we're waiting for that mid-year settlement where it trues up the payment for the part of the year that has transpired. Said another way, for the first two quarters, that balance will grow more significantly than it would in Q3 and Q4. What you're seeing in operating cash flow in Q1, which I think the question is a combination of the timing of settlements as well as this risk adjustment. The last thing is Direct Contracting, which plays a little bit in with settlements. Direct Contracting settles on an annual basis, so it's actually the least preferable of all the contracting settlement timelines. The combination of those three things led to operating cash flow being where you outlined. I'd say that's timing, by and large, timing related from our perspective, and that's why I mentioned it was expected. Okay. Thanks for the color. Our next question comes from the line of Elizabeth Anderson from Evercore ISI. Your line is open. Hi, guys. Thanks so much for the question today. I think I heard you say earlier in the call that eConsults are up about 200% in the last couple of weeks. I guess I would be curious, sort of how do you think about the penetration of RubiconMD into your current base versus sort of where you expect it to be over the longer term, just as sort of we think about that ability to help with the cost line there? Thanks. Yeah, thanks for the question. The reason, if you go back to when we first announced the acquisition, that we felt it was important to, you know, purchase RubiconMD versus partner with them, is we really believe that making it kind of easy and embedded in the workflows for our provider teams would allow us to get the full benefit of what the potential of the eConsults to really drive better patient care, better quality, lower costs. We're one of kind of our three phases of kind of the first set of integrations we're doing. The good news is it's become a lot easier for our team. Now, you can now kind of choose the eConsult option within our broader referral module. You don't have to go to a separate portal to do it, and again, that only makes it easier. We've seen, you know, a huge percentage, almost all of our providers at least do one or a couple eConsults and try it and get a sense to understand why it works. We had some, you know, early adopters who are doing kind of a much larger portion of their kind of eligible referrals in eConsult. We like the direction we're moving, because again, it's both the technology and also kind of the culture, the buy-in, and the understanding of our provider teams around the value of it. I think when we get to phase two and phase three of the tech integrations we're gonna have across the year, it'll just keep making it easier and easier, and do kind of more and more of the kind of preparing the eConsult and sending it out, doing more and more of that automatically, which I think will drive, you know, higher and higher adoption of the program. As I said in the call, I think we have, you know, 2 or 3x more that we will get by the end of the year in eConsult volume from where we are today. We're already obviously way up from where we were, you know, before we made the acquisition. You know, we feel like we're where we wanted to be kind of in realizing our underwriting case and kinda getting to a place where this is just a, you know, just a core part and the vast majority of eligible referrals are leveraging an eConsult. Again, if we're leveraging eConsults, that means we're gonna save costs because some percentage of the referrals we would've made, we find out we don't need to make because of, you know, an expert, a specialist kind of reaffirms the care plan or helps adjust it without having to actually go see the specialist, provides better patient experience so they don't have to go see the specialist and don't pay the copays. I think it also benefits of just getting faster and better coordinated specialist opinions integrated into our model. Again, we're really excited for it. I don't think you're seeing much, if any, you know, cost impact in Q1 so far from it. Again, that's one of the things that we've obviously made a you know, an investment in the company and then an even bigger you know, a very time-intensive investment in the integration work. We're excited to see the results play out by the end of this year and then into next year. Got it. That's super helpful. How do we think about the G&A spend, either on a per center basis or total sort of scaling across the year, given what you said about the pacing of center openings? Sorry, Elizabeth, was that just the amount of G&A we expect over the year, how that will follow center openings? Yes. Yes. Heard that. Yeah. Mm-hmm. Yeah. I'd say there as I think we mentioned on the call several weeks ago, one is, you know, there are investments that we had made that we're already gonna make coming into the year that were to sup- Excuse me. This is the operator. Please remain on the line. Your conference will resume shortly. Excuse me, presenters. You may now continue your conference. Okay. Thank you. Our next question comes from the line of Richard Close from Canaccord Genuity. Your line is open. Thanks for the questions. Question for you, Timothy, maybe. Good progress, I guess, on COVID and non-acute care trends. Can you talk a little bit about geography? Is there any geographic comments that you can talk about? Are you seeing those trends over, you know, the whole center base? Richard, I'd say by and large, from a financial performance perspective, we're seeing trends across the whole business. I'd say generally speaking, you know, COVID has been more of a factor in the northern geographies of our business than the southern. By and large, I'd say it's been pretty consistent. Growth has been better in southern geographies only because they've been more open, and the weather is just frankly better. Other than that, I'd say everything's pretty normal and pretty consistent across the business. Okay. That's helpful. Our next question comes from the line of Jessica Tassan from Piper Sandler. Your line is open. Thank you. So I just want to ask one on the 2017 cohort or the year 5 centers in 2022. How long post-exclusivity, I guess, does it take for those centers to catch up with their peers in that particular year? Or like how long will it take for the 2017 centers to match the historical performance of other cohorts? Thanks, Jess. Appreciate the question. You know, two things to keep in mind on the 2017 cohort. One, I believe it's 5 centers, and so it's actually a very small number of centers, you know, especially given the, you know, total number of centers we have today. That's why kind of the uniqueness of a couple exclusive centers can really kind of move the average on the whole cohort. When you think about catching up to results, it's really more of a cumulative membership catch-up. If you are a couple of years behind in growth, you're gonna continue to be a couple of years behind in until you get to kind of more the near capacity level, and then you will catch up. I would think about it more of a, you know, they'll remain behind every year, but they'll have improvements longer than a more normal center would, right? They'll have a larger growth in kind of the latter years of the center from a contribution perspective, as they start to catch up on membership. 'Cause at some point, you know, your near capacity centers start slowing down their membership growth as they're reaching capacity. These centers are just gonna reach capacity a couple of years later. Therefore, they'll get to the same economics long term, it'll just take a little longer for them to get there. That actually makes a lot of sense. I guess just I think the consistency and repeatability of the model is one of our favorite things about Oak Street, but just if you had to isolate kind of one factor that does vary the most between centers or between markets, what would it be? Just like marketing responsiveness, specialty care management, chronic condition prevalence. What is it, and how do you guys manage it? Yeah. I think probably if I had to pick two, I think one kind of density of the market, the types of community organizations that will obviously impact your approach from a community outreach perspective. You know, some of the communities, your denser urban markets, your New Yorks, your Chicagos, those types of places, obviously you're working with large senior living buildings. You're working with pretty dense community groups. In some of your other markets that are, you know, more your Rockfords and your Fort Waynes. It's just, you know, it's a more spread out community, so you're looking for kind of more hyper local groups, things of that nature. Again, I think there's a kind of a difference in how the team on the ground needs to kind of figure out who are the key aggregators for older adults, who are the groups to work with. Look, we've had a lot of success in the Rockfords and the Fort Waynes. We've had a lot of successes in Chicago. I don't know if I'd say one is definitely better than the other. It's just kind of finding the right way to get in front of older adults. When we get in front of older adults, we're very good at helping them understand why Oak Street Health is a great place for them to get their care. The second one, I think some of the aspects, especially around like post-acute care and some of those. I mean, the aspect in Medicare where the most geographic variation is kind of post-acute costs and post-acute practice patterns. That's one I think that as we go to a market, we really try to figure out, you know, what are the referral patterns for discharge coordinators at hospitals? What are the preferred skilled nursing facilities? Those types of things. 'Cause that's a place where you see a lot of variation, not necessarily by patient need, but just by kind of patterns in the community. Got it. Thank you. Our next question comes from the line of Ricky Goldwasser from Morgan Stanley. Your line is open. Hey, guys. This is Michael on for Ricky. Question on incidental COVID admissions. Last week, Humana mentioned seeing higher incidental COVID admissions, which shows unfavorable PBD. Wondering, did you see this occurrence where just a greater percentage of your admissions turned out to be COVID than was initially tagged as non-COVID? Curious on your visibility and you didn't disclose PBD, so I was wondering if it was an unfavorable guide or could this potentially be a negative item come 2Q? Yeah. Michael, Timothy, thanks for the question. We have been experiencing that headwind related to COVID being a secondary diagnosis or even a tertiary diagnosis for hospital admissions. It has been relatively small for us. It has stayed small. We had no material prior period development in Q1. There's always some truing up estimates, of course, but nothing material. As it pertains to this specific issue, I'd say our Q4, our 2021, med cost accruals are still in line with all the data that we've received since the end of the year. I don't expect that this issue, the issue that you may have mentioned, to create any incremental headwinds to what we've already reported. That's been relatively prevalent in the market over the course of the time that incremental payments to health hospitals has been around. Got it. Just one more question. With your AARP partnership, I think Mike mentioned, you know, we're just scratching the surface of what's possible. Fully understand the power of marketing, the co-branding, but could you talk more specifically about how you view the membership opportunity? Like, how should we think about this benefiting membership growth near term and long term? You know, how does the partnership work outside of the co-branding element? How should we think about the economics of the arrangement as well? Yeah, I mean, I think when you think about the AARP, it's the most trusted brand for older adults. The reach of the brand is massive. I believe that the AARP kind of magazines are the number one and number two most distributed magazines in the country just as an example of the scale they have. I think from our perspective, there's just a large number of ways that we can you know tap into the scale and the trust and the breadth of what they do. When we come back to what drives growth at Oak Street, right? Again, we're not buying or partnering with practices as our source of growth. We're a consumer organization where we're educating older adults of why they can get a better patient experience and better quality care at Oak Street. What we find is if we get in front of people, we get them to believe us and try us, that they'll be very happy with Oak Street and stay as long-term patients. I think there's really two ways in that framework that we can really benefit from the relationship with the AARP. You know, way number one is it allows us to get in front of more people. It'll be another channel to meet people. We can invite AARP members into open houses and health education events and some of the things we do. We, you know, again, we find a very large percentage of people we meet, and certainly a large percentage of people that come to visit a center end up becoming patients. I think that's kind of piece one is a way to meet more people and get more people engaged. Number two, I think is a way to engender more trust early on. I think one of the challenges we have is rising above kind of the noise in healthcare where everyone's saying the same thing and, you know, people are used to things that are too good to be true, you know, being that way. A situation where if we can leverage the fact that's the most trusted brand and they have selected us as their sole primary care partner nationally, I think that's a great way to you know to kind of overcome the fear of the unknown for people. Again, if people try us, they're really gonna be satisfied. That's really a huge opportunity. It's kind of hard to quantify exactly at this time, but again, we remain you know optimistic over you know the coming years is gonna be a nice driver of our growth. Got it. Thanks, guys. Our next question comes from the line of Brian Tanquilut from Jefferies. Your line is open. Oh, excuse me, Brian. Thank you. I wanted to go back to the comment on new member economics, the expectation that it's not gonna look like 2019. Is that primarily because of COVID or are there other dynamics going on there? When would you expect that to get to 2019 levels? Thanks, Sarah. It's Tim. I'd say COVID has been the primary driver, and it's impacting the dynamic through a few different angles. The first is just patients accessing the healthcare system in a way that's consistent with how they did in 2019 and prior. It's hard to predict when the world will look more normal, particularly when we've got, you know, new variants every 3-4 months, creating different levels of responses across the country, right? If we think about, generally speaking, the northern geographies, they've reacted more strongly towards COVID versus our southern geographies. It's a challenge to put a specific time as to when the world might look more normal from a healthcare utilization perspective, but that would be the biggest driver. That and a combination of just, you know, lower COVID costs in the system more generally. It's a combination of both revenue and med costs, and unfortunately, it's almost akin to predicting when COVID will be less of a driver in the market than it is today. I think that's or you know look more endemic a la the flu, and I think that's just hard to predict at this point. Got it. On DCE, you commented that structurally it's got a higher medical cost ratio, but are you still thinking of it as an EBITDA margin profile similar to your other business, or how should we think about the profit contribution? Yes. The MLR or the medical cost ratio is higher, but the revenue is higher, therefore, the net PMPM dollars to us from managing those patients is fairly comparable to our average MA patients. That has remained unchanged. Okay. Thank you. Our next question comes from the line of Andrew Mok from UBS. Your line is open. Hi, good morning. Given the increases in input costs, even outside of labor, can you help us understand how the start-up cost of a new clinic today compares to 18 months ago? Is that $5 million of cash investment over a 2-year period still a good number to anchor to, or are you starting to see that number drift upwards? Thanks. Apologize if we misspoke. I don't think we mentioned our input costs being higher. I think you know, we're seeing similar cost structures to what we have seen in the past, whether that be labor or other inputs to our model. I don't anticipate or see any changes to kind of you know, from what we shared in Investor Day and what we shared previously to kind of the cost to start up the center and kind of the return profile of those centers. Got it. You're not seeing any inflation on either, you know, construction costs or raw materials on the de novo side? No, not no. Okay, that's helpful. Independent of clinic openings, is there a natural component to elevated SG&A in Q4 related to the Medicare open enrollment period that we should consider? No, there's nothing specific related to AEP that would create higher levels of G&A seasonality as it exists is more tied to the pace of investments that we're making in the business and our center growth. There's nothing really. There aren't really one-time costs related to G&A. I would say from a sales and marketing perspective, we would expect heavier investment in Q4 just to support that time of year when there's a lot of seniors focused on their healthcare for the following year, and correspondingly, you know, lower investment in sales and marketing in Q1, generally speaking. From a G&A perspective, nothing that AEP is going to drive. Got it. Okay. Thank you. Thanks for all the color. Our last question comes from the line of David Larsen from BTIG. Your line is open. Hi. Can you talk a little bit about the capitated revenue per at-risk patient, like the dollars you're bringing in from the MA plans, how do you expect that to trend over 2022? It looks like it was up around 6% year-over-year this quarter. Related to that, how do you expect the patient contribution margin to trend over the course of 2022? It looks like it was down over 600 basis points year-over-year, but up sequentially. Thanks a lot. Yeah. David, Timothy. From a revenue PM-PM perspective, I would say. Your question, I believe, was how is that gonna trend over 2022 or over the longer term? Sorry, just to clarify. Well, since you brought it up, over the course of 2022, and then the MA rate increases for 2023 look very healthy, up anywhere from 4%-8% or more. Any thoughts there would be helpful as well. Thanks. Sure. For 2022, I'd say I'd expect, you know, last year, we had the benefit from Q1 to Q2 of Direct Contracting entering the mix. That was a little bit anomalous in 2021. I think generally speaking, you know, you can look at our historical financials, and I wouldn't expect anything tremendously different from intra-year seasonality on revenue PMPM perspective. The one caveat being that, you know, to the extent that we have faster new patients that will tend to lower that rate because new patients are gonna come in at a lower revenue level. Over the longer term, it's hard to know exactly how those rate increases what those rate increases from the government to the plans, the benchmark increases will be. It's also hard to know how those rate increases will work themselves into the MA plan bids and then ultimately flow down to Oak Street. So I think it's difficult. I mean, you can look at kinda where we're at year-over-year and make some suppositions. I'd say, you know, over the course of time, I wouldn't expect for MA rates to increase 6% annually into perpetuity, of course. From a patient contribution perspective over the course of the year, you know, generally speaking, Q1 is always gonna be the most profitable quarter, from a margin perspective, and Q4 the least. Back to this dynamic on new patients. In Q1, the average patient tenure is the highest because, you know, we have more of our patients were patients in 2020, in the prior year than will be the case at the end of the year, right? Over the course of the year, we'll have attrition of patients. Much of that attrition will be for patients who have joined us in the prior year, and those patients, again, are more profitable. So you're replacing more profitable tenured patients with less profitable newer patients, and you're also growing the business of course. So the combination, the effects of that new patient growth are gonna blend down that patient contribution over the year. Then you'd expect a step up from Q4 to Q1, as you mentioned. Okay. Very helpful. Thanks a lot, Tim. There are no further questions at this time. Now I turn the call back over to the presenters. That is all. Thank you. Apologies, everyone, for the technical difficulties and happy to follow up if there are additional questions. Thank you very much for your time this morning. This concludes today's conference call. Thank you everyone for participating. You may now disconnect.