Agilon Health at Bernstein Conference: Strategic Insights Amid Market Challenges

On Wednesday, 28 May 2025, Agilon Health (NYSE:AGL) presented its strategic initiatives at the Bernstein 41st Annual Strategic Decisions Conference 2025. The discussion, led by executives Steve and Jeff, highlighted the company’s focus on value-based care amid a challenging economic climate. While Agilon is pausing growth due to market volatility, it continues to drive payer engagement and enhance its financial data capabilities.

Key Takeaways

• Agilon is transitioning from fee-for-service to risk-based models, emphasizing value-based care.
• The company achieved $150 million in savings with a 13% gross savings rate in the ACO REACH program.
• Agilon aims to reach cash flow breakeven by 2027, focusing on cost containment and specialty care.
• A new financial data pipeline is enhancing revenue and claims information management.
• Agilon’s physician partners are highly engaged, with net promoter scores in the 70s and 80s.

Financial Results

• Agilon reported a 20% to 30% reduction in ER and inpatient utilization compared to local benchmarks.
• The Medicare Advantage program achieved quality scores of 4.25 stars or better, resulting in a 5% bonus.
• The medical margin in the ACO REACH program is over $100 PMPM, with a long-term goal of $150 to $200 PMPM in mature markets.
• The company ended 2024 with $440 million in cash, expecting a $110 million cash burn in 2025.

Operational Updates

• Agilon partners with scaled medical groups, averaging 3 to 5 payers per market.
• Growth has paused due to market volatility, with a focus on existing markets and the fee-for-service sector.
• Membership trends show a reduction in Part D exposure from 70% in 2024 to 30% in 2025.

Future Outlook

• Agilon expects a net 2% increase in risk adjustment due to the V28 transition.
• The company plans to expand ACO REACH and MSSP, which currently have only 20% penetration.
• Agilon aims to improve performance by reducing Part D exposure and enhancing quality incentives.

Q&A Highlights

• Agilon’s risk adjustment program focuses on managing chronic diseases and preventing progression.
• The transition to V28 aligns with the company’s clinical focus, despite logistical challenges.
• The company has exited two partnerships, resulting in improved performance and reduced Part D exposure.

For more detailed insights, please refer to the full transcript below.

Full transcript - Bernstein 41st Annual Strategic Decisions Conference 2025:

Lance Wilkes, Healthcare Services Analyst, Bernstein: have no idea who’s out there. Hi everybody. We’re at our last event of the day. I appreciate everybody coming in for this one. We probably have a few more people who are maybe getting a drink first and then coming in.

But we’re looking forward to this. So we’ve got Agilent. Again, let me just start off, especially for anybody online or anything. Lance Wilkes, I’m the healthcare services analyst for Bernstein. Really excited to have the Agilent team here.

Actually, I think it was about two years ago that Steve, you came to our Disruptor Conference. And so that was a great kind of kickoff to the beginning of the introduction of the relationship. And Amir has been really driving a lot of work on this name as well. So we’re going to kick things off. Maybe for the audience and for everyone tuned in, maybe we can just start off with a little bit of an introduction.

Yourself, the firm, and then we can kind of get into just a chat around the big topics that are hitting the market or

Steve, Unspecified, Agilent: the sector right Well, Lance, first of all, thanks for having Jeff and I here today. We’re happy to do it. Look forward to the conversation. So Agilent Company founded in 2016, really built around the idea that the primary care physician is the best positioned in the health care marketplace to manage total cost and quality, but they simply didn’t have a business model to make that happen. And so we’ve built kind of a unique long term twenty year partnership with scaled medical groups in communities with their primary care physicians who have longstanding ten plus year relationships with their senior patients.

And what we do is we go into these communities and we move these doctors in these groups, their patients and the health plans from a fee for service incentive or compensation model to a budget based or risk based model. And through that partnership and a long term relationship and the platform that we do that really supports that move to value based care, we’ve been able to really scale the company, 2,200 primary care doctors, 30 plus partnerships, 12 states, and 600,000 plus senior patients and driven really kind of best in class quality and cost outcomes in terms of beating local benchmarks by 20% to 30% and performing best in class in quality.

Lance Wilkes, Healthcare Services Analyst, Bernstein: That’s great. So there’s a host of questions that are going on right now related and kind of big picture questions related to Medicare Advantage market, related to value based care. I thought we’d kind of start off with some of the more fundamental things and walk through a little bit of, kind of how you look at the value based care market, how you deliver a value proposition, etcetera, and then move maybe pivot over to your turnaround plan or the execution you’ve been kind of going So to start off with, maybe if you can just kind of lay out for everybody, what are the most important ways in which you’re driving value for the key stakeholders here, whether they’re physician partners, whether they’re the plans, obviously for the patients?

Steve, Unspecified, Agilent: Yes. So I mean, whenever we talk about value creation, we always start with this trusted PCP patient relationship. So been there for a long time, seeing these patients across a long time. And with them at the center of everything we do and a platform that really focuses around the ABCs of value based care, we’re able to deliver quality scores. So in the Medicare Advantage program on a five scale scoring above four stars, you get a 5% bonus.

All of our year two plus markets run 4.25 or better, and increasingly with cut points going up, quality is a real differentiator. And so we were just saying before we hopped up we have payers reaching out to us in a more proactive way than we’ve ever seen. And they’re saying, hey, look, Agilent, if you could do 4.5 stars and our value based care partners could do that, they could literally lift our entire network above four stars. So quality is really a big one that we think about. Cost, being able to be the benchmark locally, so the Medicare fee for service population, being able to reduce ER and inpatient utilization by 20% to 30%, as we’ve been able to do is really a key driver for us in terms of driving value.

ACO REACH is probably the best example of that. We operate in two programs, MA and ACO REACH. Most recent published results there, about 150,000,000 of savings, 13% gross savings rate. And it’s really around those two things, cost and quality. And so when you put that all together, you’re able to drive a medical margin, which is the revenue you’re receiving less the total medical costs, and we split that fifty-fifty with those physicians.

And so, what you’re able to do is really change that economic model that I started with. So, that business model that wasn’t working in primary care suddenly starts to work. You’re able to reinvest in clinical programs, other physicians decide to join you. And so, that’s how we’ve been able to scale this in a really meaningful way. Quality and cost important to CMS.

It’s really important to payers, as we talked about. Obviously, it’s important to the physicians. And so the outcome for the patient, the physician, the health plan is really positive.

Lance Wilkes, Healthcare Services Analyst, Bernstein: That’s great. One thing just kind of at that sort of global level. As we’ve talked about value based care and we’re in obviously, at least my impression, very early stages of adoption, more so in the MA market, still early innings. Do you see, changes in the characteristics that you were just mentioning, the magnitude of payer involvement in discussions with you? And I guess part of where I’m going with this is, do you have a view that maybe there’s a tipping point when you’re like within a market of either within a practice, changing behaviors or within a market the need for adoption of value based care in order to keep up?

And how close are we to getting to a tipping point, something like that?

Steve, Unspecified, Agilent: Yeah, I mean, we’ve been talking about the move to value based care for a long I grew up in Southern California where it’s steeped. Kaiser kind of plowed the road fifty plus years ago and that entire market has moved. I mean, you fee for service is not very in that market. So I think there is a tipping point. Our philosophy was we went to markets that were not deep in risk.

We were teaching payers, we were teaching groups to make that move and getting critical mass with a scaled primary care physician group who has 20%, twenty five %, thirty % of the senior population in an equivalent amount of PCPs seem to be that sort of critical place. I think we’re coming through year three of a really challenging macro environment. So that’s made it kind of choppy. But what’s interesting, Lance, is the demand among physician groups for the move to value continues to be very strong. But among payers, it’s really strong.

I mean, it’s what I said earlier about people realizing given the macro and the policy terms out there around quality, around, you know, audits that really require pristine capture of diagnostics and reinforce the PCP patient relationship. I think that that’s what’s going to drive this as we go forward. And so, I think payers are pushing hard around it. I think physicians are extremely interested in it for all the reasons I talked about, because fee for service continues to be just not a great option. But this volatility in the market has probably certainly we’ve paused our growth.

We had classes in ’twenty three and ’twenty four, a 100,000 senior patients came in. ’twenty five is 20,000. For ’twenty six, we’ve said 30,000 to 45,000. But we’re being very measured given the macro that’s out there.

Lance Wilkes, Healthcare Services Analyst, Bernstein: Yes. Makes a ton of sense. And to me, it would seem that the reaction that you all are taking, is a really logical and thoughtful reaction to that, might be is driven by the funding environment, the pressures on margins and return for the business. I’d be interested in your thoughts as to I would think that the current environment from a payer perspective, the need for value based care is actually higher than it was three years ago. When you think of rates obviously nice rate next year, but in a low rate environment, in an environment where star scores and cut points keep moving up.

And what’s your sense as far as

Steve, Unspecified, Agilent: the engagement level of payers? The conversations are different. There’s an intensity to it. The entire senior team is around the table. So this is clearly a priority in the boardroom for payers and among their senior teams.

I think it’s the macro things that we talked about. But I also think that we’ve had a lot of frank conversations about we’ve taken some pain based on some payer decisions in the past. And we’re working really hard to be rewarded for the things we control and carve out or mitigate those things that we can’t control. Has sort of this is a eighteen month running conversation that we’re into, and we’re coming up on a big bid cycle, right, for 2026. The frequency of that, the ability for us to look at all these bids as we move to the fall, Jeff’s got a team that scores all of those and us being really honest about if this doesn’t work for us, we’re not going to be able to take risk around a particular product or maybe with a payer in a market.

And last year, we shrunk our payer footprint by 10% as a result of that. So I think there aren’t that many full risk value based care partners that are able to do this at scale. And so we think despite the environment, we’re in a good position in terms of where the puck is going. So anything you’d add, Jeff?

Jeff, Unspecified, Agilent: No. I think, again, it goes back to the value that we’re providing for the payer, which is cost savings, higher quality. And I think as Steve said, the demand’s there and the conversations have been, I would say, at that senior level and supportive.

Lance Wilkes, Healthcare Services Analyst, Bernstein: Yeah. So let me hit one of the other topics that’s front page for everybody right now, which is risk adjustment. And maybe we’ll flow right into kind of the current environment utilization and whatnot because you’ve got top line and medical costs there. From a risk adjustment standpoint, can you talk a little bit about your risk adjustment process? How you go about it, maybe kind of the credibility that is within that process?

And then thinking about V28, what are the implications? What have been the impacts of that to you? And then maybe how have the results differed from what your expectations were there?

Steve, Unspecified, Agilent: Yes. I mean, there’s a lot in that question. So and Jeff is so well versed on this, so you should chime in. But I mean, it always starts with the strength of the PCP patient relationship. And I think if I step back and look at B-twenty eight and RADV audits and other things, I think it’s pushing the world towards that and the importance of it.

You know, philosophically risk adjustment or as we call it our burden of illness program is sort of the foundation of our clinical model, and the early assessment and diagnosis is then managed is matched up with care plans to manage really chronic diseases and ultimately prevent or delay the progression of the disease and people unnecessarily ending up in the inpatient or ER setting. So, it’s we call it our BOI is a clinical program. It’s really at the heart of everything we do. So, that philosophy kind of permeates everything we do. I think as we look at V28, when it’s done, we think it’s a more clinical world.

And so if you look at the policy logic, I think it’s to say the largest chronic diseases that are driving the majority of inpatient ER utilization, congestive heart failure, COPD, dementia, cancer, those are the things that we want primary care physicians identifying and, you know, preventing people from an acute event in the ER inpatient setting. And so that’s a big part of what we do in our burden of illness program. You know, the RADV audits, as you expand those audits out, again, I think it pushes towards reinforcing people have a really pristine process around that. So, you know, we have 100% chart review process. We have a clinical peer medical record review process.

We have a process that requires, suspected conditions to be matched with data and evidence around that. All of that I think is where the world is intended to go and what people are trying to structure on that. So I think for us, we believe, again, the risk adjustment world is kind of moving towards what we do and we’ll reinforce that. There are big changes, So V28 running, this is the third year now, Side by side V24, V28, there’s a lot of logistics and operations within that. The headwind that you have to come over this year, it’s a net 2% increase in risk adjustment.

That’s overcoming probably a 3% headwind. So call it a gross five to get to a net two, that’s a lot. And running those two side by side was maybe a little bit more complicated than we realized. But now you’re 100%. You’re here.

It’s all that you’re focused on and really getting those appropriate diagnoses and thinking about it as a clinical program is kind of the heart. But Jeff?

Jeff, Unspecified, Agilent: Yeah, I think another factor is just where you started from. You know, we were coded at roughly the nationwide MA average. And so I think for those that were had higher coding efficiency, I think

Steve, Unspecified, Agilent: the

Jeff, Unspecified, Agilent: transition to V28 was a little more painful. We were right around the market average and as Steve I think Steve mentioned, a net 2% in ’twenty four, so gross five, net two, assuming the same thing here for 2025. And then of course, next year is the last year of the phase in.

Lance Wilkes, Healthcare Services Analyst, Bernstein: Yeah. Are you observing one of the things that’s been big from a competitor or not but other payers’ commentary from the last couple of weeks has been sort of a miscalculation or different outcomes coming from the V28 implications or impacts as opposed to what they’d expected going into it for 2025 with respect to like decent populations. Have seen anything, in your world like that?

Jeff, Unspecified, Agilent: Yeah. I mean, it’s I guess what I’d say is it’s still early for 2025. You know, we’re still getting the data in. I would say for ’twenty four, right, what we did is we said, listen, we think we have a 2% net lift in ’twenty four. That’s what we put into the guide for ’twenty five.

We haven’t seen anything at this point that says it’s different than that. But again, it’s still early.

Lance Wilkes, Healthcare Services Analyst, Bernstein: Got you. And maybe while we’re talking about risk adjustment, maybe we can put a little context for everybody around, what you’ve been seeing as far as utilization trends, you’ve got some great charts that you guys do in your quarterly calls or at least referenced to, and what you’ve observed with those trends kind of over the course of ’twenty four, and then what you’ve seen thus far in ’twenty five?

Jeff, Unspecified, Agilent: Yeah, sure. I think as you think about utilization, and I’ll go back to, 2023, you know, I think ’23 roughly 7% cost trend, ’24 roughly 7% cost trend. I think as we thought about ’25, we had 5.3% in the guide. Now you have to adjust that because of the payer bidding process, there was really 100 basis points of cost shifting to the member, and then you had the two midnight rule in 2024, which is roughly 50 basis points. So from our perspective, the way we thought about ’25 is we have a consistent amount of cost trend in the guide.

I think if you look at Q1, we came out around 5.5%, full year is 5.3, still comfortable with that, But that had a little bit of flu in it. And I would say, you know, the drivers exiting ’24 and the drivers in ’25 are very similar. It’s inpatient cases in Part B, B as in boy drugs.

Lance Wilkes, Healthcare Services Analyst, Bernstein: And

Jeff, Unspecified, Agilent: so it’s, I think our commentary, I would say resembles, the broad payer commentary, which is consistent utilization high, elevated, but consistent, exiting 2024.

Lance Wilkes, Healthcare Services Analyst, Bernstein: Gotcha. And maybe dabbling into the turnaround plan you guys have been executing on. Can you talk a little bit about maybe how prior periods and reserves are sort of developing with that and what some of the changes in your process have been to accelerate kind of your recognition there?

Jeff, Unspecified, Agilent: Yeah, yeah. So a big milestone this quarter, significant step forward for us. We’ve been working on a financial data pipeline for over a year and the pipeline provides detailed revenue and claims information down to the member level. So think about bifurcated premium by member, bifurcated claim line information by member. We haven’t had that level of detail before And so we went live on that at the end of in Q1, so at the March.

Complete change to our process. So the old reserving process is gone, new reserving process here. Now we’re still early, right? We just went live. Not all of our payers are on the financial data pipeline, so we still have more work to do.

We’re rolling another group of payers in by the end of Q2. We have some scheduled for Q3 and it’s a ramp, it’s a journey, it’s been a journey. And so what I would say is we’re a lot better from an information perspective and a process perspective than we were before, but we still have more work to do. And part of what we’re pushing on with our contracting team is getting more real time data. We have inpatient census data from our payers that help us with this estimation process.

And I would say we’re continuing to look at ways to accelerate the information flow between us and the payers and get third party information in order to inform our estimates.

Lance Wilkes, Healthcare Services Analyst, Bernstein: Got you. One question maybe at a local market level. And this would be informing some of the insights I think you’d have from a utilization outlook for utilization. What sort of what’s maybe the typical amount of payers you’re contracted with in a market? So you typically for the audience, you guys have a model where you’re not just popping up a clinic and there’s a single doc.

You’ve got big established practices, so you’ve got some market density. But what kind of coverage do you have as far as across payers there?

Steve, Unspecified, Agilent: Yeah. So we it goes back to sort of the founding principle of the model is scaled groups in a community and moving physicians, patients and payers into risk. So three to five is sort of the average within a marketplace. Now, given some of the decisions we made for January 1, you might have gone from five to four in a market. But you have strong density, you want to have options for payers.

And again, we believe the organizing principles around the PCP relationship. And so they can move from payer A to payer B, but all of the clinical work, all the quality, all of the assessment work continues with that patient. And so that continuity across time is really important.

Lance Wilkes, Healthcare Services Analyst, Bernstein: Gotcha. Maybe to tie in with that and just talk a little bit about some of the progress you’ve made on the turnaround and whatnot. Could you talk a little bit about the re contracting strategies and some of the things you’re carving out progress. We know the progress as of the end of the year, like any further progress as you’re renegotiating towards next year?

Steve, Unspecified, Agilent: Yes. I mean, I look, we’ve tried to be really disciplined and the headline is we’re trying to improve performance and reduce beta. And so, you know, elements within that were we exited out of two partnerships last year and saw improvement from that. We’ve been very measured from a growth perspective in terms of we’re doing from that standpoint. And then in terms of payer contracting that you asked about, we focused on a few things.

One is reducing our Part D as in dog exposure has the challenges that we talked about. We don’t have a, our primary care physicians don’t write the majority of the scripts. But the bigger issue is we don’t control the formulary and we don’t have visibility to the manufacturer rebates. And that typically settles the third quarter of the following year, it goes to the PBM and the payer, and then we get sort of an outcome. And when you’re running 30 partnerships, it just allows for massive volatility in a long tail.

So for all those reasons, we said we want to shrink our Part D exposure. Oh, I forgot what Jeff always talks about, which is the IRA came on board right for 2025 and dramatically increased the dollars associated with Part D. So our goal was to shrink that we had 70% of our membership that we had Part D exposure for in 2024. We shrunk that to 30% of our membership in 2025. It’s very early, but it’s at the top of our list for 2026.

We’ve already had one payer agree to carve out Part D for 2026. So that number will continue to come down. That’s priority one. Priority two is these quality incentives. We talked about how strong we are, how important it is to payers.

Half of our initiatives that are in our plan for this year, there’s $50,000,000 worth initiatives, half of that is quality. Those are from incentives we didn’t have a year ago from payers saying it’s worth a lot to us if you’re north of four and even north of four and a quarter. As we go to next year, we believe there’s more opportunity around that. And, you know, folks saying, if you can get to four and a half, it could really be worth a lot to me. So that’s number two.

Number three is just overall economics in terms of percentage of premium. And we kind of package with that, we need to make sure we have really quality data that Jeff always, always talks about. So that it’s not just the economics are good, but the predictability and visibility with that. And then number four, and it’s lowest on the list because it’s the smallest dollar amount is supplemental benefits. And for ’25, we saw 97% of our membership see a meaningful step down in supplemental benefit exposure.

I think as we’re going through conversations, we believe payers are going to bid very rationally for 2026, but we’re going to have an opportunity as we go to the fall to really see all of that. So 40% of our membership renewed for oneonetwenty five, ’50 percent renews for oneonetwenty six. So there’s a lot of opportunity, Lance, just for us to change some of those elements that we talked about. And so far, it seems to be very constructive.

Lance Wilkes, Healthcare Services Analyst, Bernstein: That makes a ton of sense there. From a one other thing on the turnaround that was real important is improving the cash flow position of the and the cash position of the company. Can you talk a little bit about progress you’ve made there, future steps do you still have to get and the like?

Jeff, Unspecified, Agilent: Yes, yes, sure. So just to set the set the framing here, at the end of the year, we outperformed our cash flow projection. So at the end of 2024, ended the year with roughly $440,000,000 of cash on the books. Ultimately, said we’re going to burn about 110 in 2025. I think 37,000,000 of that hit in Q1, so no real update there.

We still think that’s the number for this year. And then heading into the goal of being cash flow breakeven by 2027. Several levers in there that we have to pull and we can pull that still, I would say, not in that number. One is contracting. And so we continue to work with our payer partners on getting advanced payments, if you will, on our estimated margin settlements.

So that’s that’s in flight. Now you have to put that in the priority order that Steve put all these other economic items in, but it’s it’s on the list for sure. Two is really cost control. So focusing on tighter cost management, I mean those dollars are every month and they’re real. So we definitely have our pencil sharpened on cost control for this year and for 2026.

And last is there are some items in what I call working capital, so just receivables from vendors and others that we’re making an effort to go and collect and clean up, if you will, that could I would say add to our performance in ’twenty five and ’twenty six. So I would say we feel pretty comfortable that we’ve got the capital necessary to get to where we wanna go. And there’s more work to be done here, but I think there’s opportunity for us certainly to improve from where we are today.

Lance Wilkes, Healthcare Services Analyst, Bernstein: Gotcha. And maybe just tying up the turnaround and utilization. As you’re looking at both the things you’re controlling and then the streams of data that are coming back to you that are getting influenced. Are you seeing any changes in utilization behavior in your MA populations this year? Meaning, you seeing inpatient step down, outpatient step up?

Actually, obviously, one of the things that’s out there is, are you seeing like an unusual uptick in physician and outpatient nonsurgical? But just in general, obviously Part D is less exposed there, but that must be an area that’s stepping up. But in general, are there any changes from like the 27 key drivers sort of from a priority order?

Steve, Unspecified, Agilent: I mean, I think the headline is utilization sort of in line with our expectations. And from ’24 to ’25, it looks relatively consistent. You know, the big drivers in ’24 and now through the first four months of ’25 is inpatient spend that Jeff just talked about, and Part B is boy drug, primarily driven around oncology drugs. So those continue to be kind of those biggest places. Part of Q1 was heightened flu for us, but that was kind of true for everybody.

And that affected some inpatient spend. But that was kind of captured within our guide. And so that was sort of consistent with what we’ve seen. I think our you know, when we look at outpatient, we look at our physician utilization, it’s sort of in line with our expectations and tracking sort of in line with the overall utilization trends that Jeff talked about. So that’s what I would say.

I don’t know that we necessarily see big material changes. Like at the end of ’twenty three, it was hips and knees and outpatient surgeries that really surged, and that felt like pent up demand and coming out of COVID. I don’t know that today we see a material change like that. Okay.

Lance Wilkes, Healthcare Services Analyst, Bernstein: Shifting over to kind of the physician side of this and the opportunity to both your existing base, how is that operating from their perspective and the opportunity to add new physician practices? Could you maybe talk a little bit about kind of to start off with, what are the incentives that you put in place with the physicians? What’s the infrastructure you put in place with the practice and the services that you’re providing there? And then we can talk a little bit about okay, and then what sort of changes are you needing to make in this tough environment, macro environment out there to keep those folks engaged and happy with the partnerships? Yeah, well, I’ll just start

Steve, Unspecified, Agilent: by saying our net promoter scores from our physicians are 70s and 80s, right? So even through this challenging environment, our physicians are really engaged. The leadership of these groups are incredibly engaged in saying they’ve sort of made the leap, They kind of crossed the chasm and value based care is their future. And despite the volatility of the macro that we’ve been talking about, they need to be successful around it. And so we spent a lot of time talking about, you know, what are the basics that we have to do really, really well.

Some of it is around, you know, we call it the ABCs, but the attribution work that we’re doing with payers to make sure that we have the folks that we’re seeing are appropriately taking a risk for those folks. But, you know, burden of illness and quality, making sure that you are prioritizing and getting those most complex patients identified and in for visits, super important, making sure that you are touching those most complex patients most readily is incredibly important. And then the clinical programs. So, I think we talked about this world of V28, we talked about it more clinical model. That is where we’ve doubled down.

We’ve said those chronic diseases are what drive the majority of the spend. We have this incredibly trusted continuity of relationship. And regardless of people moving between payer, we want to continue that. And so, you know, we talked a lot on our call about congestive heart failure, we talked about advanced illness management through our palliative program. Those are areas where we are very detailed at the market level around how do you get people enrolled into advanced illness management?

How do you have those conversations that are hard for a primary care physician, even with someone who has a really trusted relationship, but it’s multiple conversations, Lance, with the patient, with the family to make that decision to ultimately go into palliative, and then ultimately you’re going to make the move into hospice at some point. And so, it’s that last mile. It’s really about how does it occur, who’s doing it well. We have the support of a great national partner around that that helps within those critical conditions. So, those are the things that we’re really focusing on.

And then the incentives are really around how do we make sure that we have these primary care physicians focused on those most critical things. In the early years, it’s probably around annual wellness visits, getting those assessments done. But as you move across time, it could be around these high risk touch points, making sure you’re seeing those most complex patients most often. Gotcha.

Lance Wilkes, Healthcare Services Analyst, Bernstein: For the practices you’re working with, what percent of their patients and what percent of their revenues are kind of comprised in the areas that you’re touching those practices?

Steve, Unspecified, Agilent: So it varies. I mean, we have many practices in which this is the 35% of their membership, but in terms of the economics of their practice, it’s two thirds or We have some in markets where this is 50% of their practice and proportionately even far greater from a revenue and an income perspective. When I said our groups have kind of crossed the chasm and said this is our future and where we’re going, I think they’ve really seen the impact. I mean, to give you context, you’re talking about physicians that maybe had an income of $150,000 to $175,000 and incrementally, you could double that. By doing these things, taking better care of patients, you’ve got this incredible satisfaction for the physician, how they want to practice medicine and for the patient.

Now, that’s moved a little bit with the environment, right? But they’ve seen sort of what that impact can be. And that’s why we’re so focused on those initiatives I talked to.

Lance Wilkes, Healthcare Services Analyst, Bernstein: And just for folks out there, like a couple of things in my experience, that doubling of the take home compensation for physicians, that’s always I know we’re talking with Herb Fritsch back when he was launching HealthSpring. And just in my experience as running docs, two percent, three percent quality bonus, you’re not going to really change what you’re doing. If you’re doing 50%, one hundred %, that obviously really changes what you’re doing. And then the other thing is I know in my past dinners with OptumHealth and over the years, One of the challenges that they would have with practices because they have a different model but still an existing practice model was if it would be 5% or 15% of the practice that they’re kind of impacting with risk and how do they get people engaged. The numbers you’re talking about, not just on the high end but the low end, are something that really is consistent with making changes.

It’s fascinating. Could you talk a little bit about as you’re looking for kind of growth in practices going forward, what’s the sort of stability you’re looking for in the firm before you really reinitiate the geographic aspect of it? Obviously, can put more membership through the existing practices and that works well.

Steve, Unspecified, Agilent: Yeah. I mean, we’ve definitely been very measured in our growth. It’s part of our action plan. We’ve called this a transition year because we understood the macro and kind of where we were at in our own journey. And I think we feel really good about that decision.

Part of that is this measured growth. To put in perspective, the class of ’twenty three, class of ’twenty four were 100,000 plus new members, four to six new partners, most of them in newer geographies, so expanding to your point. I think as we went to ’25, we said a couple of things. One is we’re going to shrink that down. So the class of ’20 is 25 is 20,000 members.

The class of ’26, we’ve said is going to be 30,000 to 45,000 members. We also said we were going to grow more through this challenging period in our existing footprint, because it’s lower beta. It’s existing clinical programs, it’s existing payer contracts, and those things. I think one other area for growth that is lower beta for us is in the Medicare fee for service world, right? We’ve got ACO reach, we’ve got MSSP in a couple of places.

We’re only 20% penetrated within our footprint today. So, the opportunity to expand that across time, I think is a real opportunity for us. So we’re trying to be measured on it. I do I know this is very attractive to a number of groups out there. We are just being really tight around pattern recognition and very honest with potential partners, we do a five year pro form a with them and kind of lay it out.

The movement right now around some of the macro things is meaningful. And so getting clear on that is important. But within your existing footprint, you have a really high recognition and so we’re more measured on it.

Lance Wilkes, Healthcare Services Analyst, Bernstein: Gotcha. As a result of the macro environment for physician groups, Right now, that’s not a huge emphasis of, Oh, let’s just go expand as frequently as we could. But what do you see as maybe the changes in outlook for physician groups going out in the future? Are physician groups more likely to want to stay independent and be enabled? Are they more likely to want to be sold?

Are they more likely to want to be sold to a hospital? Like how do they look at the world since you talked more physicians than me? We have a number

Steve, Unspecified, Agilent: of our groups where their mantra, literally the back of their business card is keep the independence independent. So fierce entrepreneurs, fiercely independent. It’s a fun group to have a network with. And so I think, the majority of the world is not independent, right? And it’s been on a decline.

I think in the markets we’ve seen, we’ve been able to stabilize it and start to grow and actually add some people move out of employed practice into independent practice. So I think that’s an opportunity. Having said that, we’ve got a couple of health system partners. We just had our board meeting last week and had our health one of our health system partners come and meet with our board, and they’re doing amazingly well around these things that we talk about and the clinical basis of this chronic care management programs really resonates within that setting. And so I think we see that as an opportunity.

I think we’ve learned through our pattern recognition about how you really take a tight focus on that and validate those key attributes that you’re looking for. But that’s I think that’s an opportunity as well.

Lance Wilkes, Healthcare Services Analyst, Bernstein: Let me ask you on the fee for service types of opportunities, ACO REACH, etcetera. What’s sort of the economics and margin opportunity in that sort of a business contrasted with traditional full risk global cap sort of business? So in our partnerships

Steve, Unspecified, Agilent: in which we have ACA reach today, the medical margin in that business is north of 100 PMPM in this environment. And MA is right now, it’s at like $50 PMPM below, right? So long term, we’ve talked about $150 to $200 for mature markets and getting that above 100. So that gives you kind of the order of magnitude Now, there’s a reason for that though. It’s the gap on revenue and cost that exists within MA and this catch up that you’re playing, ACO reach corrects within the year.

So that’s one big difference. Two is you get it’s really a cost business, Jeff always says. You get rewarded for beating the cost trend at the local level, and we’ve been able to consistently do that. That’s the savings that I talked about earlier. But then the third thing that’s interesting about ACA Reach is there’s no Part Ds in dog, there’s no supplemental benefits, and there’s no payer bidding dynamic.

And so, as we’ve talked about improving performance and reducing beta in MA, look at what we’re going down the road on what our priorities are, because we’ve demonstrated same docs, same clinical programs, different payer, slightly different rules in the program, we do incredibly well in that. And so that’s what gives us confidence within MA as we think about that, but also why we want to expand that Medicare fee for service penetration. Sure.

Lance Wilkes, Healthcare Services Analyst, Bernstein: Could we talk a little bit about the J curve? And maybe if you could frame for us a few years back how you might have looked at a J curve and maybe how it contrasts with different models. So obviously a model where you’re building a clinic and whatnot is going to have probably more exaggerated profitability increase curve than in your model. But how has that changed today as you’ve kind of refined the business model? A lot of times I’ll try to frame for folks we were talking about like history here.

Like To me, what you’re going through now is for me, but what maybe HMOs are going through in 1985 to 1995, up and down and refining and then like a period of really interesting growth. As you’re looking at that refining, I’d be interested in maybe what a J curve is going to look like in the future.

Steve, Unspecified, Agilent: Yes. Mean, you should jump in on this, Jeff. I mean, look, we’ve learned a lot. And I think the action plan that we talked about is intended to improve that performance and the margin progression that you’re asking about. I mean, I guess just one distinction I would make is we’re a capital light model, right?

We’re doing the partnership with groups who have been there for long terms. So there’s not that initial couple of years of where you’re running big losses around it. Typically, our year one is breakeven plus or minus. We talked about a range of $30 to $60 PMPM. 2025 was so challenging from the spread being upside down that we, for the first time, did that no downside care management fee contracts, but that’s one year and a twenty year partnership.

And the goal is to make them move to risk as quickly as the economics make that possible. The final rate notice for ’26 was a really good start on that. So that’s the idea. But then you progress up from there. You want to pick up, Joe?

Jeff, Unspecified, Agilent: Yeah, yeah. I mean, I guess what I’d say is our views on the long term margin haven’t changed. You know, Steve mentioned this earlier, one hundred fifty to two hundred PMPM on a medical margin basis. Yes, we’re operating in this challenging macro environment. So has the J curve been bumpy?

Yes, but ultimately we still think it goes up into the right into that 150 to 200 PMPM. And, you know, I think we mentioned this earlier, I mean, we have groups even in this challenging macro environment that are performing in that range today. And actually in groups that aren’t in that 150 to 200, there’s individual docs that are. And so and this is in a challenging macro backdrop, and so I think as we think about ’twenty six, ’twenty seven, obviously the rate notice is helpful. Know, net positive tailwinds heading into, we think, heading into 2026 to get us back on the curve trajectory, if you will.

Lance Wilkes, Healthcare Services Analyst, Bernstein: Yeah. Last question I’ve got here is, as you’re looking at enhancing and further improving your overall cost control and outcomes and looking at areas like specialty cost containment areas, Palliative, you mentioned. Could you talk about what you see as maybe some of the most important opportunities for that and magnitudes of difference that those sort of opportunities could make for you? I mean I’m thinking of the cost of

Steve, Unspecified, Agilent: Yeah, no, no. Yeah. So just like all throughout healthcare, the majority of our costs sit with the multi chronics, right? So, you you think about that pyramid as you move up the costs get greater. And so the focus of our program is around managing those multi chronics and ultimately managing really well through the end of life.

Congestive heart failure is a significant cost area for COPD, dementia. You know, people with four chronic conditions drive like 65, 70 percent of our costs, and so the idea around these programs is we’re gonna spend money early to identify them and manage that across time, and it’s going to show up coupled with things like high risk touch points and fewer people on inpatient setting and readmission rates dropping pretty significantly. And we’ve been able to see some real meaningful impacts in some of our programs, significant reductions in readmission rates that are material from low double digits to high single digits. So that those are in each point on readmission is worth a lot. So I think inpatient is a big cost category for us of impact.

All of our programs are going to impact that. And then end of life is just a massive area, and we’ve seen an increase enrollment, we’ve seen a reduction in our inpatient days per thousand and hospital based tests. Anything you’d add on that?

Jeff, Unspecified, Agilent: Yeah, no, I think, you know, oncology is an opportunity for us as well. So, more focus in rigor around that that we’re applying. I mean, think as Steve mentioned, we use go across the cost categories and have a clinical program matched up to it, that’s what we’ve been focused on.

Lance Wilkes, Healthcare Services Analyst, Bernstein: Perfect. Well, really appreciate you taking the time with us today. Hopefully, it’s been a useful day for you. Thanks, everybody, for coming to this. And I think that’s just about the end of our day one of Strategic Decision Conference.

I believe there might even be drinks out there somewhere. So I hope everybody has a great day. Thanks a lot.

Steve, Unspecified, Agilent: All right.

Lance Wilkes, Healthcare Services Analyst, Bernstein: Thanks, Lance. We appreciate it.

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