Alignment Healthcare at William Blair Conference: Data-Driven Medicare Advantage

On Wednesday, 04 June 2025, Alignment Healthcare (NASDAQ:ALHC) showcased its strategic vision at the 45th Annual William Blair Growth Stock Conference. The company highlighted its robust Medicare Advantage model, emphasizing a unique approach to care management and data-driven insights, while acknowledging the competitive challenges in the healthcare sector.

Key Takeaways

• Alignment Healthcare reported strong Q1 2025 results, surpassing guidance and projecting a 22% increase in membership and 40% revenue growth.
• The company’s proactive care model and data-driven approach are central to its success, featuring lower inpatient admissions and high member retention.
• CEO John Kaya emphasized the company’s commitment to disciplined growth and strategic partnerships to expand its market presence.
• The embedded gross margin potential of $600 million underscores the long-term value of member retention.
• Alignment’s focus on clinical excellence and quality outcomes positions it well against industry competitors.

Financial Results

• Q1 2025 performance exceeded the high end of guidance ranges.
• 2025 projections include 230,000 members and $3.8 billion in revenue, reflecting significant growth.
• EBITDA is expected to see a substantial increase in 2025.
• Gross profit per member per month (PMPM) is $90 for year one members, rising to $230 by year five.
• The embedded gross margin stands at nearly $600 million, assuming growth halts.

Operational Updates

• Alignment’s care model prioritizes management over financial engineering, supported by a unified data architecture.
• The "Care Anywhere" teams deliver in-home care, reducing minor issues from becoming major.
• The company boasts a 40% better retention rate than the sector and maintains a 1.9% denial rate.
• Inpatient admissions are significantly lower at 149 per thousand, compared to industry benchmarks.
• A high 98% of members are in plans rated four stars or above.

Future Outlook

• Alignment plans to leverage its competitive advantage through strategic partnerships and expansion beyond California.
• The company aims for consistent, disciplined growth, with a mission to transform healthcare for seniors nationwide.
• Projected growth includes a 22% increase in membership and a 40% rise in revenue for 2025.

The full transcript of the conference call provides further insights into Alignment Healthcare’s strategies and outlook.

Full transcript - 45th Annual William Blair Growth Stock Conference:

Ryan Daniels, Health care services and IT analyst, Blair: Thank you for coming to the Alignment Healthcare presentation. For those of you I’ve not yet met, my name is Ryan Daniels. I’m the health care services and IT analyst here at Blair that covers Alignment. And I’m joined by the founder and CEO, John Kaya, who is to my left. We will do the breakout session up in Burnham B.

Immediately afterwards, we’ll walk up there together, so we’ll hold the q and a for that. Also, just wanna remind everyone that a list of disclosures is available at our website at williamblair.com. So before I turn the mic over really quickly, excited to have Alignment here. I think this is another year they’ve come since their IPO. They’ve been here every year.

It’s been a great story to follow, and I think most importantly, in getting to know the team and the organization, it’s got a really unique operating culture. I think it’s an interesting time to reflect on this given all the challenges that many of their peers are seeing in the marketplace and some of the skepticism with insurers. This is really an envy that’s been created to, you know, care for seniors like you would want your family members to be cared for, and they’ve made all their investments and cultural decisions along that path. So I think kudos to the management team, and you’re seeing it pay off in tremendous growth and accelerated profitability, great quality ratings, and just a great reputation in the market. So I think it’s resonating now more than ever.

And, as such, it’s a great time to be here with the team to hear a little bit more about the story. So with that, I’ll turn it over to the man that founded the organization to tell you more about it.

John Kaya, Founder and CEO, Alignment Healthcare: Thank you. Thank you, Ryan. Can you guys hear me? Okay. You know, over the past couple of years, the number one question I get is, why are you at alignment doing so well when the industry is blowing up?

Literally, that’s the number one question. And, hopefully, in the next twenty seven minutes, I’m not not only gonna tell you how we’re doing it, I’m gonna give you the blueprint of how we do it. Alright? And it it really starts with kind of this foundational slide. 2024 was a bit of a breakout for us.

We had a 89,000 members, improvements to, SG and A, got to EBITDA positive and, focused on quality. 98% of the members are in four star and above plans. In 2025, it’s both, continued growth and margin expansion. We just announced q one results. We exceeded the high end of guidance ranges across, you know, all all of our metrics.

So very good q one. We feel very, well positioned for hitting guidance in, q two and in 2025. Guiding to 230,000 members, 3,800,000,000.0 in in revenue. That implies 22% membership growth, 40%, revenue growth, and you can see the the the the the the significant jump in EBITDA. So the the whole premise of why we started the business was a very personal experience I had with my mom who had a heart attack, who got mired in this health care system that we’ve all been reading about and heard about.

And it was a traumatic experience. And rather than complain about it, I decided to do something about it. And the whole concept of the of the company is based on the principles that are so simple. Number one, just put that senior first in everything you do. Treat that senior like your mom or your dad.

Very basic. Very simple. If you take that philosophy, it changes a lot of perspectives of how you treat that that member. Number two, support the doctor. Make sure that the doctor has the tools that that he or she needs to be successful.

Third is really use data in a way that I would say the sector has not applied data to change the lives of people. And fourth, and potentially the most important, is to have a serving heart. Just care. Just care about the well-being of your mom or your dad. It’s that simple.

Okay? And this calling that I had to do this was so strong that I really just said, given the background that I have with FHP, Pacific Air, Trizetto, CareMore, they they gave me the experiences that you put together, this concept of vertical integration, partnering with providers, deploying systems and core systems, and and integrating chronic disease management. You put all that together and you get alignment. You get alignment health care. K?

So I I personally experienced the pain. I didn’t like it. Didn’t think it was right. And and and we did something, given this experience set, to basically change health care. And, I would say we’re in the very early innings of our journey to actually do that.

But I think if if you look around what’s happening to MA and insurers in general and you conclude that there’s not some form of disruption in the marketplace, some seat change, then you’re missing something. And I would offer to you that what has been successful in MA for the past ten years is not going to be what’s gonna be successful in the next ten years. And I think if you listen to what I have to say, I think that model is gonna be what prevails going forward. K? So the first thing I would say is, it’s a different approach toward MA.

It’s it we think about it differently. First and foremost, you have to think of it as a care management business. It’s not an insurance actuarial underwriting financial engineering business. It’s a care delivery business. And so you have to have a commitment to clinical excellence and quality outcomes to serve that senior.

The core competency we have is we’re good at managing the risk because we have a very good care model that I’ll describe to you in a moment. Okay? The care model is is everything. It’s it’s the it’s it it allows us not to rely on downstream value based providers. We do it ourselves.

And the margin that would otherwise go to that, downstream delegated capitated provider, we invest in benefits and or pay directly to the individual provider. Okay? To the member and and and to the provider. We have actionable data. So everything we do starts with actionable data.

So the investments that we made was to have a unified data architecture that gives us a single source of truth, and I’ll talk more about that. And the other thing is the business model is designed to scale. It’s designed to partner with providers in each community. It is not designed to buy doctors or buy their practices and to compete with other providers. It’s to make existing community providers better and have them be more successful, and I’ll show you how we do that.

Okay? This whole notion of the virtuous cycle is the is the operating platform. So the whole idea is through this unified data architecture, we applied algorithms. And the algorithms tell us who are the 10 to 15% of the membership that cost 80% of the spend. Right?

So if you know who they are, you can do something about it. So step one is who are they? And so we we were very, very, I think, very thoughtful about the specific AI that we applied to know who are these people, then you have to engage them. And we engage about 60 to 65% of the people we know need extra help and extra care. If you know who they are, that’s kind of the first point.

The second point is you then have to take care of them, and we take care of them for free at the home with our internal employed clinical resources. Okay? So the idea is a very capital efficient way of bending the cost curve. Think of it that way. Right?

So invest in the data architecture, have actionable data, have a deployment mechanism, which we call our care anywhere teams, to see patients at the home. Alright? And that whole thing is about making sure little things, little problems, don’t turn into big problems. So it’s it’s not, about, hail Mary catches all the time. It’s just consistency, and it’s very actionable, and it’s just be it’s showing up.

It’s being there for the seniors, and it depends on the the acuity level. If you can do that consistent, you can bend the cost curve. If you bend the cost curve, the way that the MA, process works is you you have low costs. You have the ability to have aggressive bids in the bid process. If you have aggressive bids, you can grow.

And if you grow, the next step is you gotta keep the people. You gotta keep them happy. The dumbest thing you do is you you you, you know, spend a lot of acquisition costs, get the member, not properly service them, and lose the member. Our, retention rates are, 40 better than the entire sector. So so I used to say this, somewhat in jest, but it’s not so funny anymore.

Our members actually like us. Our members actually like us. You know, when’s the last time you heard an insurer say that? K? So this notion of this virtuous cycle is what what we’re very proud of because it it allows us to, do do do well by doing good.

K? We’re we’re taking the most vulnerable people that need the care. We’re serving them. We’re taking care of them. Then we’re translating that into, bids that can create value, for the entire population.

K? Here’s an example of, our data. Through the stratification AIs that we have, you kinda see on the left here, 71% of the membership account for 5% of the institutional costs. Okay? 71.

We would deem that cohort to be healthy, generally healthy. As you move to the right, the blue circle, you see we would call a healthy utilizer. Right? Those people would have markers for for their, their their health record, we would say generally healthy, but they had some episode of care requiring them to hit the hospital. It could have been an accident, could have been a fall, it could have been, a hip or a knee replacement, whatever that is, but, generally, they’re healthy.

Okay? That’s eight percent of the population. That costs sixteen percent of institutional cost. The next circle is what we would call prechronic, which is just the opposite of the healthy utilizer. Those folks need a lot of help, but they haven’t hit the emergency room yet.

But you gotta manage them as if they are sick and need a lot of care. That’s 8% that account for 1% of the institutional dollars. And, obviously, the red one, the orange circle, the chronic, 13% of the membership account for 78% of the institutional costs. Right? So the whole idea is if you take that membership in the chronic and the prechronic, call it 21%, that account for 79, call it 80% of your cost, it stands the reason you need to focus your resources on that population.

Everybody else on the left, they’re generally doing pretty well. And so if you look at the blue bars underneath, they, people on the left, the healthy and the healthy utilizers see their PCPs, you know, five times a year. It’s okay. The system works for them. Right?

On the on the right, the system doesn’t work for them. And so on the right, we will see patients, and our members potentially once a week or once every other week. They go to the home, check up on them, make sure they’re okay, make sure we take their vitals, and sometimes just talk to them. We have so many of our our members that just look forward to one of our nurses talking to them, visiting them. They they they set up desserts for them.

It’s like a social thing to deal with some of the loneliness. It’s it’s like a real deal. And so what happens is we see, you see on the far right, an interdisciplinary care team, of doctors, advanced practice clinicians, nurse practitioners, medical assistants, social workers, behavioral health coaches, case managers. That whole team basically does virtual rounds by market daily. And they’re looking at the data.

They’re looking at the EHR. We have all that data that people take action on daily. And so our clinical team would call it a a maniacal attention to detail, making sure that the seniors are taken care of. Alright? That’s how we manage, utilization.

We make sure that we take care of it. We get ahead of it. It’s preventative care. It’s knowing. It’s having the transparency from the data, the visibility to take action, the control mechanism, boots on the ground to do something about it.

That gives us a durable business model. K? I would contrast that with some of our competitors, which I would say have relied on coding, have relied on risk transference to value based providers, and have relatively high denial rates. I don’t think any of those levers can be used going forward. K?

V ’28 put an end to just the coding game. Global cap is the interesting effect of having lower revenue, puts a lot of pressure on that value based provider. There’s not enough money in the supply chain to support two effective insurance companies. Okay? And socially, the social acceptance of high denial rates is isn’t gonna fly anymore.

Right? And so it leads that model leads to these results. But we got a 78 NPS on our Care Anywhere. We’re trying to get that above 80. That’s not bad.

You know? Our overall NPS is 61, four point nine Google ratings, 98% of the members on four star and above plans, 1.9% off denial rate. What we figured out is you can make this model work by providing more care, not less care, more care. You just have to pinpoint that care to the right people that need it in a very capital efficient way. Without a bunch of bricks and mortar, without buying a lot of doctors, you make the existing community doctors more efficient, and you take the bricks out of their backpack, and you do the work for them and with them.

And then you engage them, and you make them successful financially. Everybody wins. The member wins. The doctor wins. We win.

The shareholder wins. Everybody wins. Our retention rates, they like us. They’re not going anywhere once we get them. Sales, five year membership CAGR of 30%.

If this if you’re an investor looking for for a pure play MA plan, it is us. Right? 80% of that growth comes from plan switchers. It’s a better mousetrap. And then the clinical outcomes are

It’s so good. A hundred and forty nine inpatient admissions per thousand. To give you a sense of context, well managed based on Millman, would say 200 admissions per thousand is really good. Fee for service is about 250. So we’re we’re so much better by keeping people out of the hospital.

And by by deploying those, resources on on on this Care Anywhere team, it’s about 3% of our, overall premium. So it’s a cost for us, and it’s embedded into our MLR. But the payoff and the yield comes in the form of keeping people out of the hospital. Nobody wants to be in the hospital. They don’t have to be.

So we we really kinda just prevent unnecessary admissions. K? And what’s even more encouraging is the performance outside of California from a clinical perspective is better than what we’re experiencing in California. That gives us confidence that the repeatability of this is not geographically limited. Alright?

And so here’s a case study of an actual this is an actual, IPA that we work with in, LA, I believe it is. And you can kinda see on that far left chart that a year one MLR of a member is, and that’s kind of the, the blue line, is right around ninety percent. And our inpatient admissions is right around two hundred to get the kind of the the the first year we we are able to get a member. As we ingest that member and and and onboard that member and start taking care of that member, you can see the MLR starts going down and the admissions per thousand keep keep going down. Again, that gives us the fuel to have more aggressive rebates.

And the rebate, for those of you who don’t know, is basically the difference between what fee for service offers you and the incremental benefits to the member in in the form of additional, benefits, they call that a rebate. And you can see, if you start at a hundred dollars of, rebate, it goes up to $250. That’s what drives the growth while preserving the margin. And you can see on the far right side, the outcome is growth. And so you think about that in the context of the last couple of years when there’s been revenue compression both in the form of tighter stars and tighter risk adjustment, why have we grown?

Because philosophically, we never played the RAF game. In this business, what is the number one exposure to you from a risk perspective? Government reimbursement. Right? Only way to beat that is if your cost structure is the lowest cost.

That way, irrespective of what happens to reimbursement, you win. And that was evidenced last year when they introduced, v ’28. They tightened up revenue. Our costs were so much better than everybody else’s because we could manage the risk. Right?

And then that got reflected, remember that virtuous cycle I talked about, into richer benefits that cause us to grow by 60%. Okay? Here’s an interesting chart. This is based on fiscal year twenty twenty four. If you look at the x axis, that is, growth.

The y axis, the the vertical axis is the year to year change in MBR. Alright? And if you look at us, you know, we grew 60 some odd percent, and our, MBR went up about, a 20 basis points. Okay? Now that will normalize back down as the proportion of our members gets more and more mature.

If you look at everybody else, you know, I I don’t need to point out who’s who here in the zoo here, but you look at somebody that grew at 30%, well, they’re they’re they they didn’t have the kind of model we have. Their MBR went up 600 basis points. Right? And what everybody else did was they didn’t grow intentionally. Right?

And even some of the others didn’t grow, they still lost. It had had increases in MBR. Alright? So it’s distinctly a model that is working, and we’re working really hard to try to scale this in a very disciplined way. And, again, the mission is to change health care for seniors in the country.

That’s the ambition, to set a new standard by which we can all be proud of how we serve our seniors. K? Everybody wins, ergo the name alignment. Our seniors get better health outcomes. They get more benefits.

Our providers work less and make more with this model. I I can walk you through that. If you have questions in the breakout, I can tell you how that works. CMS is happy because we actually achieve what they’re trying to accomplish with the triple aim, and our shareholders do well. Everybody wins if if this model is adopted by everybody.

It’s really hard to do, though. The switching costs for the our legacy folks on just the data architecture is a lot. It’s tough to do. Add to the fact that the cultural dynamic think of us as an organization with really good health plan competencies with a care delivery culture. That’s the big difference.

Getting over that cultural thing is is a challenge for some of the bigger folks. So this slide, if you think about the growth from year to year, about 35%, you also look at the middle slide where the growth rate outside of California is starting to pick up. We grew over a %. Okay? And we see that trend continuing in ’25 and ’26.

We think that it will be easier for us to get from 10,000 to 50,000 than it was for us to get to zero to 10,000. And in Nevada, we’re already about 15,000 members. Okay? And all the other markets are getting close to 10,000. But here’s the interesting thing.

If you look at the the the far right, the switching resulted from the decline of star ratings of our competitors. Okay? If if star ratings go down of our competitors, they can afford less benefits. While we maintain the quality of our star ratings and we’re getting more scale, so we’re benefiting from, operating leverage, those two things give us a distinct advantage and the fact that we haven’t relied upon risk adjustment to get us to where we are. Okay?

So what does that mean? That means look at this. Star ratings, just on the far left hand side, in 2025, we have 98% of our membership four star and above. The market is at 64%. In California, on the right hand side, we’re at a hundred percent four star and above.

Our PPO is four and a half star, and our competitor is 61%. Okay? So you have a distinct unit economic advantage just on more revenue afforded to you by actually doing what CMS wants you to do, which is take care of seniors. Higher quality, lower cost. It’s easy to say it’s hard to do.

Alright? That leads to this, which, I got two more slides in three minutes. The embedded gross margin potential. This is really important. If you think about the proportion of our membership right now, a lot of it is in a year one or year two cohort.

Okay? The gross profit of a year one member is about $90 gross profit PMPM. The gross margin is about $230 PMPM on a year five cohort. So if you get the member and you keep the member and you take care of the member, that’s the outcome of this. And so what happens is if we grew nothing more, like no more, we we kind of reported 290,000,000 of gross margin, there’s an embedded margin gross margin of close to 600,000,000 just from the dynamics associated with that that that gross margin expansion because of the cohort.

I think that’s that’s the big power of this thing. The bigger we get, the more mature we get, the more proportion of the membership are beyond just one or two years. That staying power and durability gets stronger and stronger and stronger. Okay? And so just in summary, strong ’24.

’20 ’5, solid year of focus on margin expansion. We’re very comfortable with our guidance. Strong q one results lay the foundation for a very good ’25. We think we have sustained competitive advantage both on Starz and v twenty eight. That’s not going away.

And our ex California markets are beginning to grow and produce cash that gives us more confidence to continue to expand. Okay? And so the takeaway is we’re gonna stick to what works. We’re going to be very consistent, very disciplined in how we grow. We’re gonna be very opportunistic.

There’s a lot of, organizations out there both on the value based provider side and the plan side that need a lot of help. A lot of people are reaching out to us, and we’re being very opportunistic and very selective in finding the right partners to grow. Okay? And I just invite you to join us in this journey. We want to make, care delivery for seniors just better.

We wanna do Medicare Advantage right. Doctor Mark McClellan, who invented MA through the Medicare Modernization Act 2,004, he’s on our board. He always says to me every time he sees me, he goes, John, you gotta make this work. The industry needs it to work. So with that, I think that’s it.

Thank you very much.

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