Alignment Healthcare at Leerink’s Global Healthcare Conference: Strategic Growth Insights

On Tuesday, 11 March 2025, Alignment Healthcare (NASDAQ: ALHC) presented at Leerink’s Global Healthcare Conference 2025, highlighting its strategic achievements and challenges. The company reported strong 2024 performance, driven by strategic investments and proactive market strategies. While optimistic about future growth, Alignment also acknowledged potential hurdles from industry changes.

Key Takeaways

• Alignment Healthcare achieved its first year of EBITDA profitability in 2024 with 60% growth.
• The Care Anywhere model targets the most vulnerable 10% of members using data-driven strategies.
• The company is adapting to the Inflation Reduction Act and changes in STAR ratings.
• A lawsuit with CMS over CAHPS scores reflects ongoing regulatory challenges.
• Alignment reported an impressive 149 admissions per thousand, outperforming industry benchmarks.

Financial Results

• 2024 marked Alignment’s first year of EBITDA profitability.
• Achieved 60% growth, with over half of members in their first or second year.
• Medical Loss Ratio (MLR) for new members ranged from the high 80s to low 90s.
• The company plans to expand consolidated margins while investing in products and growth.
• Implemented modest benefit changes to support 2025 goals.

Operational Updates

• Successfully in-sourced member services and focused on retention.
• Emphasized a tactical market-by-market approach.
• Care Anywhere model aims to increase member engagement from 60% to 75%.
• Virtual care teams conduct rounds on targeted populations, achieving 149 admissions per thousand.

Future Outlook

• The Inflation Reduction Act and Part D changes are expected to have a neutral impact.
• Anticipates modest effects from the second year of V28.
• Preparing for changes in STAR ratings weighting and the Health Equity Index.
• Ongoing lawsuit with CMS regarding CAHPS survey methodology.

Q&A Highlights

• Part D is crucial but not the primary growth driver.
• Growth exceeded expectations without disproportionate success from member switching.
• Investments in ground-level operations and conservative STAR modeling are ongoing.
• Efforts to de-delegate underperforming IPAs and medical groups continue.

Readers are encouraged to refer to the full transcript for more detailed insights into Alignment Healthcare’s strategies and performance.

Full transcript - Leerink’s Global Healthcare Conference 2025:

Whit Mayo, Lead LYNX efforts covering healthcare providers and managed care, LYNX: Alright. All right. Good to go. All right. Thanks.

Afternoon, everyone. I’m Whit Mayo. I lead LYNX efforts covering healthcare providers and managed care. It’s my pleasure to have the team from Alignment here with us today. John Thomas, thank you so much for joining us.

Sorry about the elevator situation. It’s a little frustrating. I’ve done the stairs a few times today, so I’ve got my steps in. 2024 breakout year, you guys hit EBITDA profitability for the first time. You sidestepped a lot of the more challenging controversial issues that have taken down some other managed care companies.

Maybe just reflect back on the year and how you were able to successfully outperform the market.

John Thomas, Alignment: Do I need this? Can you guys hear me?

Whit Mayo, Lead LYNX efforts covering healthcare providers and managed care, LYNX: I want to put webcast.

John Thomas, Alignment: Oh, it’s webcast. Okay. Sorry, guys. Yes. So thanks, Whit, for having us.

Great conference. Yeah. I mean, I think we got to go back to the first quarter of twenty twenty three, actually. And and by by that time, we knew that the model was going to produce relatively competitive star ratings relative to our competitors. And we also knew that V twenty eight was gonna create some disruption in the sector.

And we also knew that our relative advantage and our relative exposure to V-twenty eight was going to be less than our competitors. So when you take those two in combination, we knew we were going to be able to grow, just from a unit economic advantage for the 2024 bids and 02/1944 AEP. And so to get ready for that growth, we made a lot of investments in our member experience chassis. And so we had to replace out our FlexCard vendor. We in sourced our member services, and we just took control over the member experience.

And the whole idea was to make sure that we, improved retention. And so as we kind of realized that if we’re going to grow to the extent we were going to grow, we need to keep the members. That’s pretty much what what we did. That’s pretty much what happened. And so when we bid for ’24, I think we had really good growth for that year.

We ended up last year for a 60% growth. The thing I’m most proud of is the business model, the industrial logic of the business model held. And so our ingestion and onboarding of members was really, really good. Our clinical scalability to manage the growth was really, really good. And all of that, I would say, is a function of the way our data is organized, the business model of identifying the polychronic and the frail members, and making sure that we provide really good quality outcomes for that cohort that needs it the most.

And so we’ve done everything the same for the last four, five years. I just think that the market is realizing that with V-twenty eight and tighter two key stars, you got to do what CMS really intended, which is higher quality at a lower cost. And it’s not higher quality at a lower cost playing, you know, kind of coding games or just pawning off risk to undercapitalized providers of global cap deals or, you know, embedding AI in prior auth. Those things, I think, are yesterday’s methodologies to be successful in MA. Going forward, I I really think it’s it’s all about, service delivery, high quality, low cost.

Whit Mayo, Lead LYNX efforts covering healthcare providers and managed care, LYNX: When I look at thank you, John. When I look at the what you guys have historically said when you look at your year one members or year zero members, maybe that’s the way to look at it is we typically see MLRs in the low 90s, 91, 90 two, something like that. And if I apply that math to the growth that you saw last year, it would imply the prior year saw a decline overall in the MLR, and certainly, the guidance would imply further improvement this year. Is that an accurate conclusion to look at that we’re seeing like the cohorts improve?

Thomas, Alignment: Yes, yes. So maybe just one slight point of clarification. So I think that year one member is typically kind of high 80s to low 90s depends. And I think last year, right, we probably are on the higher end of that range in terms of our year one experience. But to your broader question, I think we’re feeling really good about sort of the overall cohort maturation story still.

And when we talk about sort of the profitability in 2024 and then kind of the 2025 guidance, keep in mind that that’s capturing the fact that over 50% of our members this year are in a year one or year two cohort. And so when we think about the kind of short term margin trajectory, but also the longer term margin trajectory, we think there’s a lot of opportunity to continue to expand consolidated margins while continuing to invest in the product and drive growth. So it’s a big part of the story both in the kind of near term but also over the medium to long term.

Whit Mayo, Lead LYNX efforts covering healthcare providers and managed care, LYNX: And looking at the 25 MLR, any other like optical factors that are influencing the change year over year that we should be aware of as we just think about the comparability?

Thomas, Alignment: Yes. I think we kind of broad buckets. So obviously, a tailwind is what I mentioned on kind of the year one to year two cohorts. Beyond that, it depends on the market and the product, but there were some slight benefit changes we made that should help us into 2025. I think on the other side of the coin, we do have the ongoing impacts of the Inflation Reduction Act and the Part D changes.

Those are, I’d say, intended to be mostly neutral for us, but but particularly on the low end of our guidance range where I think we’re probably a little more conservative. That is probably a slight headwind. And then the ongoing impact of the second year of V28. And as we’ve said before, we feel really good about our competitive positioning across the three year facing of E-twenty eight. But on absolute basis, we do have a modest impact we’re navigating for 2025 as well.

Whit Mayo, Lead LYNX efforts covering healthcare providers and managed care, LYNX: You’re growing your membership a lot, you have, in the last two years, and that probably will continue. How do you get comfortable with the pace of growth, that this is the right pace of growth that is sustainable going forward?

John Thomas, Alignment: Yes. It’s actually very consistent with the way we run the business from day one, and that is a very tactical approach market by market. And so as we did that heading into the year, we knew that we had the ability to reduce benefits a little bit and be more margin focused and still be able to grow. And so the only way you can do that is not at a kind of corporate macro level, but at an individual market level. We’re looking at competitors, we’re looking at MACVAT values, we’re looking at broker relationships, we’re looking at hospital relationships, we’re looking at doctor relationship.

And so it’s really like we kind of call it war game simulations market by market. And then you build that up and so you have very tactical operating plans that resulted in the kind of performance that we had. And in 2024, which we’re really happy with, we did the same thing heading into 2025, but we also knew again that people were still going to be more margin centric in our competitors. And so we said, okay, it’s okay to be a little bit more margin centric ourselves. So we took benefits down a little bit and we still got the kind of growth that we were able to achieve, and we’re happy with that.

Whit Mayo, Lead LYNX efforts covering healthcare providers and managed care, LYNX: I want to spend just a second on Care Anywhere, your clinical care model, I think it’s so unique versus what we’ve had the opportunity to diligence in the market. How quickly can you get your members this year into that clinical care model? And actually, if you could step back and maybe help us understand how you identified the members that are appropriate for that level of care?

John Thomas, Alignment: Yes. It’s kind of our hood ornament. What it really does is it reflects the culture and a core competency of the company, which is care management. And we’ve said this that to be successful in this business, we think you have to have a core capability to actually manage care. And so just to remind everybody, the model starts with our unified data architecture.

So you get the data. So you’ve got the eligibility data, the member accounting data. You’ve got all the claims data, the auth data, the lab data, the pharmacy data, the admission discharge transfer data from the hospitals, encounter data. You get this data in one area. And the way I describe it is different functional parts of the company and our trading partners externally look at the data through different viewers.

But the data there’s integrity in. And so what that allows for is we to take actions around that data. And so it starts with the data, we run it through our AI algorithms, and we stratify the members. And so the whole idea is if you know where the 10% of the membership is that’s accounting for 80% of your spend, you pinpoint and you laser focus your resources on that 10%. And that 10% is you’re vulnerable, you’re frail, you’re polychronic.

And so this notion of providing more care for that population, not less care, but more care, actually is just good business. And so we tell people, we make more money when we provide more care, not less care. And that’s a key, I think, philosophical difference. So once you know who those people are, then the whole idea of step two is you got to engage them. You have to outbound outreach to them, engage them.

We’re right around 60% engagement. We’re working hard to get that number up to 75%. But if you know so if you kind of like if you have let’s just say, let’s just pick a number, 10,000 members you know are eligible for this, engage 60% of it, that means you’ve got 6,000 in your cohort that you’re actually managing. So it stands to reason if you can get the 60% up to 75%, you’re going to be even more effective in driving utilization management. Once you know who the list is and then you engage them, and then the third part is we have interdisciplinary care teams of doctors, nurses, advanced practicing clinicians, social workers, case managers, mental health experts, etcetera, that form this team.

And they do virtual rounds every day on that population. And so we take care of those people at the home with these resources. So at the home, depending upon acuity. And so the whole concept, if you just think about the you have visibility with the data and then you have control to do something about it that’s actionable. And last year, we had hotspots in certain markets in the first quarter of last year.

We were not immune to high utilization like the rest of the market. We just happen to know specifically which providers, which members, what delivery systems were the issue. And then we had boots on the ground clinicians that solved the problem within sixty days. There’s lots of little technical things that we work with their doctors and we solve for it. And that’s how we manage the business.

That’s how we manage the high growth. And we did it, you know, pretty seamlessly.

Whit Mayo, Lead LYNX efforts covering healthcare providers and managed care, LYNX: Is that 10% of your membership the is that the number?

John Thomas, Alignment: Yeah. It’s about 10%, and I would say, of our shared risk membership base, we’re managing the institutional. And so about just to remind everybody, about 70% of our membership is shared risk. And so what that means is we’re managing the institutional dollars. We are at risk for managing that.

We prefer that model as opposed to the other 30%, which were globally capitated because it differentiates our ability to lower overall costs. If you can lower overall costs, you have a competitive advantage over everybody else because your cost structure is fundamentally lower for the bids. If we globally cap somebody or somebody, let’s just say whatever, 85% and that global cap provider is also globally capping competitor A, B, C and D at 85, we have no cost advantage. So if we’re managing our shared risk and we’re at 80%, right, that 5% delta is what the cost is embedded for these other folks in their cost structure. And our cost structure is 80%.

That five points is what we’re investing in benefits. And so it all stems from the data and the Care Anywhere care management competency to provide higher quality, I. E. STARS, at a lower cost. Last year, our admissions per thousand as an enterprise was 149 admissions per thousand.

That’s like insanely good, insanely good. Millman would say, Millman would say best practice well managed, is about $2.00 5, and fee for service about $2.50. Right? So just the managing that institutional dollar and specifically the acute institute institutional dollar because of the data and the care delivery mechanism, we found to be the most capital efficient way to to, you know, manage utilization. You don’t need to own all the PCPs, for example.

We don’t have a lot of bricks and mortar we got to worry about. You make the community doctors, more successful. That’s the model.

Whit Mayo, Lead LYNX efforts covering healthcare providers and managed care, LYNX: IRA, how did you maybe walk me through the process on how you got comfortable with the plan liability this year that you put into your bids? And I know it’s early, but just any observations thus far in 2025?

Thomas, Alignment: Yes. So I would say just broadly speaking in terms of our markets, Part D and the benefit offering across our product portfolio is really important to the overall competitive positioning. So as opposed to nationally where I know a lot of plans were cutting Part D benefits, we didn’t really do that and frankly neither did our local competitors. I’d say there’s a lot of stability in our markets on the Part D offering year over year. I think in terms of how we approach in the bids then, I think obviously we took into account our normal course trend assumptions and then tried to add some buffer on top of that in terms of what we might expect as a result of these changes like the lower maximum out of pocket for seniors.

And we’re sitting here sixty, seventy days in and we feel really good so far about what we’ve seen. I think as the year progresses, we’ll provide more commentary on how we think it impacts overall seasonality quarter by quarter. But in general, we think it will be a modest tailwind to our MBR year over year. And then the MBR, while it will still sequentially improve on Part D throughout 2025, it will improve at less of a clip in years past. So by the end of the year, kind of Q3, Q4, there will probably be a modest headwind to our MBR year over year.

But based on where we’re at through the first quarter, we feel good about those assumptions.

Whit Mayo, Lead LYNX efforts covering healthcare providers and managed care, LYNX: When I look at the changes you made in your Part D deductible, it didn’t stand out as looking as much of a change as we saw from many to national. But when I look at it more at the state local level, everything sort of aligns with what your competitors are doing.

Thomas, Alignment: Yes, absolutely. And I think beyond that, we got in the question just in terms of have we seen big pockets of growth stemming from our choices on Part D benefit design relative to others. And the answer is really no. I think we are probably top three in a lot of our markets on the Part D component of our overall product, but we’re not number one across the board. So I think from an overall value proposition standpoint, it’s an important piece of the overall product, but it hasn’t been sort of this outlier aspect of our benefits that’s really been driving the growth.

Whit Mayo, Lead LYNX efforts covering healthcare providers and managed care, LYNX: Coming into this year, I think you said you swapped out your flex card vendor. There have been some other changes in terms of benefits, maybe some of your agent broker strategy. Just what are some of the high level tweaks that you made to your benefits this year and or just your overall strategy with the distribution channel?

Thomas, Alignment: Yes. So I would say in general, what we did modestly change our benefits or take down benefits was probably more on the supplemental side. And it’s really about making sure that we’re offering the right sort of the right benefit in the right market to the right consumer. And I think in general, over the last, call it, five years, the industry has doubled the amount of value to the senior at a pace that probably wasn’t sustainable. So we looked at certain categories, OTC and flex cards, things that are still very, very rich to the senior, but pulled back slightly where we thought we could afford to from a competitive standpoint and create that lasting durability in the marketplace.

And I think we did a really nice job of balancing those decisions with our growth ambitions. And as a result of these financial pressures many of our competitors are facing on STARS and V-twenty eight phase in over three years, we were still able to have obviously a very successful AEP in spite of those changes.

Whit Mayo, Lead LYNX efforts covering healthcare providers and managed care, LYNX: Thomas, as you’ve had on open enrollment after the December 15 close date or whenever it is, like are we seeing I had this hypothesis that perhaps that, you know, as members would show up at Walgreens or CVS or whoever, it’s like, oh my god, like, my drugs not covered or the cost sharing is different or changes in my benefits? Are we seeing elevated switching at nothing at all?

Thomas, Alignment: No. In fact, our retention, just given the overall product value proposition, which again, we typically are top three in the market on our benefit richness, And then the quality, the stars, the member experience, etcetera, our retention is continuing to run this year similar to last year. Last year was our best year ever. And so I think compared to the overall industry, we typically have about 40% to 50% lower voluntary turnover as a result of the product and the experience and so forth. And so I think basically what we’ve seen so far because we’re still ahead of the pack on most areas, I think we’ve done a nice job trying to kind of create a win win scenario for the senior, the plan and for the taxpayer CMS.

Whit Mayo, Lead LYNX efforts covering healthcare providers and managed care, LYNX: I guess I meant the question more in the context of it. Are you seeing additional growth above and beyond your expectations from switching towards you, not away from you?

Thomas, Alignment: I think we’ve had a very successful OEP thus far. I think we’re feeling good about what we’ve seen through mid March. But at the same time, I wouldn’t say it’s disproportionately more successful than we would have anticipated at the start of the year or relative to prior years.

John Thomas, Alignment: I don’t think we’re going to see the kind of in year growth that we saw in 2024, if that’s what you’re asking. I think we’ll do well. I don’t think you’ll see an extra 30,000 or 40,000 members in the back end. Right. So Which we’re okay with.

Whit Mayo, Lead LYNX efforts covering healthcare providers and managed care, LYNX: Yeah. Okay. Maybe spend a second here on stars. We’ve got, just been a lot of fireworks the last few last year or so, and there’s some more changes coming. We know that you’re going to do better on the CAPTURE weighting, and you benefit with the reward factor transitioning to the Health Equity Index.

You’ve always sat really close on the cut points with that one big contract. So I know you’re constantly putting a lot of muscle around ways to improve. So maybe just unpack the areas where you’re investing a lot more time today than maybe prior years.

John Thomas, Alignment: Yes. No, I think it’s a very fair question. I think our I’d say our analytics and our data science around STARS, and it’s nothing short of data science, is really quite good. And so the investments that we’re making are around boots on the ground, gap closures, and number one. And then number two, being just more conservative on our modeling around the cut points.

I think I don’t think we were conservative enough this past year. We’re not going to make that mistake again. And I feel for, again, dates of service of 2025, I feel really good about where we’re going. And when you combine that, the kind of these operational initiatives along with some of the policy changes that hitting ’27 on the weighting of caps going down from four to two. And then the as you said, if the Health Equity Index survives into ’28 payment, both of those, I think, were very strongly in the four and maybe we’ll get into 4.5.

And then while I can’t really talk about the lawsuit in detail, suffice it to say that we think that I just think we are I think it’s a very good case that we have. I’ll leave it at that.

Whit Mayo, Lead LYNX efforts covering healthcare providers and managed care, LYNX: InsideStarz, I’ve always been surprised on the customer service and the care coordination that you don’t do better there and maybe that’s not a function of things that are in your control at this point, but like how do I make sense of that?

John Thomas, Alignment: Yes, it’s a great question. It’s and for those of you who don’t know, I mean, our HEDA scores, our Part D scores, our admin scores are all really, really good. The bane of our existence is cap scores. And so I think that’s partly a function of just the methodology of these surveys, which by the way, is the basis of our lawsuit with CMS on we don’t think the vendors that we’re using that did the right surveys did it in a way that was correct is the basis of the lawsuit. But in California, we have a lot of delegation of certain case management and utilization management to our IPAs and our medical groups.

And so one of the things we’ve just done is to say, if you can’t get us to four or five stars in terms of gap closures specifically focused on caps, we’re going to de delegate you. In other words, we’re taking control of that over. And when you’re a smaller plan, it’s hard to do that with some of these IPAs. When you get to a couple hundred thousand lives or more, you’re not so little anymore. And with the kind of growth rate that we’ve had, we have the philosophy of if you’re a medical group working with us, we want you to surplus.

We want you to make more money. We want to help you do that. But you got to work with us and hit these quality metrics basically. And so that’s a pretty significant change that I think will address part of your first question. But that’s the real essence of why California and it’s not just us, it’s all the folks in California and the competitors in California that rely on these kind of capitated arrangements.

Whit Mayo, Lead LYNX efforts covering healthcare providers and managed care, LYNX: Some of the other things that have been sort of in flight around STARS that CMS has written about or the industry has talked about. There’s been the hold harmless provision on those two large quality performance categories that I think in aggregate are 10% of your entire score. And I understand the logic for why should we hold everyone harmless. It’s four, four point five or five. I get the conversation or the debate.

But where do we stand on that as a potential change that CMS could look to implement?

Thomas, Alignment: Yes. I think for us, there’s sort of two sides of the coin. I think for the California H number, that would be a headwind to us. But it’s definitely less of a headwind than, say, the caps waiting going from four to two is a tailwind. So I think from a net standpoint, we feel pretty good on that front.

Conversely, on other contracts like our five star contract, North Carolina, Nevada, it would actually probably help us from a competitive differentiation standpoint. So I think we’ll see how it shakes out, but I think we feel relatively sort of well positioned either way.

Whit Mayo, Lead LYNX efforts covering healthcare providers and managed care, LYNX: We’ve got a couple of new categories and changes happening with STARS. How do you get confidence or how do you get comfortable when you have a new category that’s inserted into the formula when you don’t have the experience for it? I mean, you’re just seemingly flying blind for the first year.

Thomas, Alignment: Yes. But a lot of the time, CMS gives you some notice on certain measures that they’re likely to phase in over time. So I would say it’s not too often that you’re just completely blindly surprised by something with no notice. Usually, you have some visibility that, hey, we’re probably going to phase this in a year or two from now or we’re thinking about phasing it in, which gives you plans as the time to start to pilot things or take different operational workflows changes that need to be made.

John Thomas, Alignment: Yes. Tukey is the perfect example. I mean, we took it very seriously, which is why I think we still survived the stars, and it was tight to your point. But we did get it. And I think it’s something that if we become even more conservative on those cut points, it’s the only way to manage it, I think.

You just got to give yourself headspace, basically.

Whit Mayo, Lead LYNX efforts covering healthcare providers and managed care, LYNX: Yes. Sounds smart. The advance notice is sitting at the OMB. I’m going to guess the prevailing view in this room is that there could be a 50 to 100 basis point increase versus the proposal. But just any thoughts that you care to share around the preliminary rule or

John Thomas, Alignment: Yes. No, I think the way we’re looking at it, which is again part of the company’s business model is we should win either way. If rates go or held stable, I think we’re going to have the same kind of competitive advantage that we’ve had the last couple of years. If rates go up, I would think it would be even more than 100 basis points. But if that happens, I think for the next couple of years, my suspicion is a lot of the larger players at least are going to put that into margin expansion would be a guess as opposed to benefits to grow.

So either way, I think we would win certainly for the next couple of years. And the next couple of years, the bigger and stronger we get, I think there’s going to be more of a moat around our ability to both grow and increase margins. So that’s a long winded way of saying, I don’t know what’s going to happen. But if they actually factor in some of the kind of first half of twenty four claims experience into the trend, I think that’s not an insignificant number.

Whit Mayo, Lead LYNX efforts covering healthcare providers and managed care, LYNX: Right. We are just about out of time here. Harrison, I missed anything? Got it all. Got it all.

Okay. I’ve got a bunch more questions here, but we’re out of time. John, thanks for coming.

Thomas, Alignment: Thomas, thanks for everybody. Thanks, man. Thanks, man.

John Thomas, Alignment: Thanks, everybody. Thank you all.

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