Good morning, and welcome to American Oncology Network's Q3 2023 earnings conference call. Today's call is being recorded, and we have allocated one hour for prepared remarks and Q&A. At this time, I would like to turn the conference over to Dave Gould, Chief Financial Officer at AON. Thank you. You may begin.
Good morning, everyone, and thank you for joining us to discuss American Oncology Network's Q3 year-to-date results. Before we begin, we would like to remind you that this conference call may include forward-looking statements. These statements, which are subject to various risks, uncertainties, and assumptions, could cause our actual results to differ materially from these statements. These risks, uncertainties and assumptions are detailed in this morning's press release, as well as our filings with the SEC, which can be found on our website at investors.aoncology.com. We undertake no obligation to revise or update any forward-looking statements or information except as required by law. During our call today, we will also reference certain non-GAAP financial information, such as adjusted EBITDA and adjusted net income, which are derived from their closest GAAP measure, net income.
We use these non-GAAP measures as we believe they supplement GAAP measures and we believe they are useful to our investors. The presentation of this non-GAAP information is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with GAAP. Reconciliations of GAAP to non-GAAP measures can be found in this morning's press release and in our SEC filings. Joining me on the call today is our CEO, Todd Schonherz. Following our prepared remarks, we'll open the call for your questions. With that, I'll turn the call over to Todd.
Thank you, Dave. Good morning, everyone. Thank you for joining us on our first earnings call as a publicly traded company. We are happy to report strong Q3 results, and I look forward to telling you more about our company, our unique strategy, and our value proposition. To begin, while our public listing in September was a very exciting milestone, it was just one important step in AON's journey. Since our inception in 2018, our mission has been to bring a unique and differentiated approach to oncology by providing the highest quality, cost-effective care within the communities where our patients live and work each and every day, and that mission continues to drive us forward. Our North Star remains creating an optimal experience and outcomes for our patients, who are often going through the most challenging times in their lives.
Before I get into our operational developments and performance, I want to take a moment to share more color on the market we operate in and why it drives our mission. Oncology care is a large and growing market that is estimated to be well above $200 billion in the United States, but one that is also very fragmented and inefficient. Cancer care is complex and expensive and makes up a significant portion of total healthcare spend in the U.S. every day. As a result, there is increasing demand for oncology services, driven by many macro factors like an aging population, earlier detection, and cancer becoming more of a chronic condition versus a terminal illness. These factors are further compounded by the pressure placed on providers today from increased complexity created by an explosion of new drugs and new indications, reimbursement headwinds, and demand for personalized medicine.
And on top of that, we are currently facing a shortage of oncologists, which is only expected to worsen in the coming years. To that end, most oncology groups are still fairly small when measured by number of providers or number of sites. And while a large number of practices have closed or sold off to hospitals, we do not believe that hospitals are the answer, as they are often not physician-friendly and increase the overall cost of care. With this consolidation pressure, small practices will need to make a choice about their future. Our model ensures that practices that are located in markets with a significant number of oncologists remain competitive, and markets with limited capacity remain viable for the long term.
AON is the lifeline to preserve and enhance community oncology by ensuring practices have a solution to remain in the community and the resources to provide access to needed care. Turning to our business model, we are building one of the largest and fastest-growing community oncology practice networks in the United States, helping to deliver high-quality, cost-effective cancer care all across the country. Since our inception, we have done things differently to disrupt the existing community oncology landscape in a cost-effective and scalable way. The platform we've built is unique in that we operate as a true national physician network that provides a number of novel advantages to patients and providers through our integrated care platform.
Our key differentiators include our integrated in-house services, like specialty pharmacy and lab, as well as our centralized operations and technology platform, which drive better practice economics, reduce administrative burden, and allow physicians to focus on what is most important: delivering high-quality patient care. We've demonstrated our highly successful growth strategy by growing the business from $0 of revenue in 2018 to $1.2 billion on an LTM basis. Together, today, we partner with over 200 providers across 77 sites of service, spanning 19 states plus the District of Columbia, to ensure the delivery of high-quality, cutting-edge cancer care to patients across the United States. Turning to the quarter, Q3 included a number of significant highlights, notably the successful completion of our business combination with Digital Transformation Opportunities Corporation to become a publicly traded company, as well as the celebration of our fifth anniversary.
We have made great progress executing our growth priorities and strategic imperatives. From the growth perspective, we added 19 providers to the AON platform during the quarter, and 36 year to date. AON expanded into new strategic markets, including Florida this quarter and Texas during Q2. Both these markets represent significant growth opportunities, driven by the demographics of their respective populations and increasing demand of oncology services. To complement our traditional growth, AON also expanded our service offerings to adjacent and complementary specialties. During the quarter, we welcomed the 5 providers from Triple Crown Urology in Arkansas. In addition to the cutting-edge services provided by the clinical team at Triple Crown Urology, the patients and providers will now benefit from access to cutting-edge therapies provided by our medically integrated pharmacy, in-house pathology services, and imaging services. Overall, AON continues to do a great job executing on our strategic imperatives.
We continue to experience positive year-over-year same-store growth across our markets, accretive growth through appropriate utilization of our ancillary services, and expansion of clinical services, including imaging and research. We continue to be a leader in transformative payment programs, demonstrated by being one of only 44 practices in the country to participate in CMS's alternative payment program for cancer care , the Enhancing Oncology Model. We have also made significant investments to further strengthen our leadership team, bringing in the talent needed to support our ambitious growth strategy and our focus on innovation. In July, Alti Rahman joined AON as Chief Strategy and Innovation Officer, and Susan Sabo-Wagner joined us as Vice President of Clinical Innovation. We are excited to have Alti and Susan as part of our team. They have both made significant contributions in advancing our strategy since joining AON.
These continued investments in our business and patient-first focus has led to best-in-class patient engagement scores and has generated strong results in the quarter, highlighted by year-over-year revenue growth of 13%. Now I'll turn the call over to Dave to provide more financial detail on our Q3 results.
Thanks, Todd. Since this is our first earnings call as a public company, I want to provide a framework of our key performance metrics and how we evaluate the business. The key metrics we will report on a quarterly basis outside of the core financial statements and metrics are organic growth based on patient encounters, revenue per encounter, and cost per encounter. Organic growth is important to note as it demonstrates that even years after practices join our platform, those cohorts continue to grow as a result of the joint efforts we make with our providers in marketing and community outreach. This continues to demonstrate AON's ability to deliver the highest quality of care where our patients need it, in the communities where they live.
We remain firm in our mission to help community oncology practices expand so that they can improve access to cancer care, and our results are a testament to this. Now, a couple of items I'd like to highlight prior to diving into a discussion of our results for the quarter are: at the end of the Q2 this year, we entered into a strategic partnership with AEA Investors, a world-class private equity firm. We also completed our reverse merger with DTOC to become a publicly traded company on September twentieth of this year. Following the reverse merger, we announced an opportunistic share repurchase program of up to $10 million, as we believe that our stock represents tremendous value.
Operationally, I'm proud to announce that we completed our revenue cycle system upgrade to athenaIDX, which is part of our overall strategy to ensure AON is always on the cutting edge of technology to drive performance. Switching gears, let's dive into our quarter and year-to-date results. With respect to our overall financial performance for the Q3, revenues increased $39 million, or 13.1% to $336.3 million, as compared to $297.3 million in Q3 of 2022. This increase was primarily driven by a 6% increase in patient encounters, resulting in a $38.6 million increase in revenues.
Year to date, revenues increased $105.7 million, or 12.4% to $955 million, as compared to $849.3 million in the year prior. Approximately, $86 million of the overall increase was attributable to organic growth, resulting from an increase of 5.7% in patient encounters. Additionally, $19.1 million of the increase was driven by the impact of adding 6 practices to our platform in 2022, which are fully reflected in the nine months ended September 30, 2023, results, as well as the addition of 3 practices during the nine months ended 2023. During the quarter, cost of revenues increased $43.2 million to $310.9 million, up from $267.6 million in Q3 of 2022.
The increase we experienced was primarily driven by drug and medical supply costs as a result of both patient encounters and cost per encounters increasing. The volume of patient encounters at our practices increased cost of revenue by $13.4 million, and the cost per encounter drove a $24.2 million increase. The increased cost of patient encounters was driven by a combination of higher drug and medical supply pricing, as well as drug and service mixed patients require for their treatments. We also had a $4.8 million expense related to non-cash stock compensation paid out to our AON team members. The remaining increase was driven by the addition of two practices added to our platform during the current quarter.
Year-to-date, our cost of revenue increased $100.2 million to $880.8 million, which is up from $780.7 million in the prior year. The increase was again primarily attributable to increased drug and medical supply costs due to an increase in both patient encounters as well as an increase in cost per encounter. Specifically, the volume of patient encounters at our practices increased the cost of revenue by $35.7 million, and the cost per encounter drove a $44.1 million dollar increase.
An additional $15.9 million of the increase in cost of revenue related to drug and medical supply costs from the addition of 6 practices in 2022, which are fully reflected in the nine-month ended September 30, 2023 results, as well as the addition of 3 practices during the nine months ended September 30, 2023. As noted previously, we also incurred $4.8 million from the non-cash stock compensation expense. During the 3 and 9 months ended September 30, 2023, general and administrative expenses were $25.2 million and $72.8 million, respectively, as compared to $23.4 million and $66.2 million for the same period in the prior year. The $2 million increase for the 3 months ended was related to costs associated with the growth and optimization of our revenue cycle function.
The $6.6 million increase during the nine months ended related to $5.5 million of costs associated with that same growth and optimization of the revenue cycle platform, as well as a $1.1 million increase in depreciation and amortization. For the three and nine months ended September 30, 2023, transaction costs were $24.6 million and $29.9 million, respectively. These costs were driven by the legal, accounting, and consulting fees incurred by the company, as well as the costs that were incurred on behalf of the SPAC as of the closing of the business combination. Now, total other expense was $4.5 million and $11.7 million for the three and nine months ended September 30, 2023, as compared to $0.5 million and $1.1 million, respectively, in the prior year.
The increase in other expense is attributable to non-cash charges of $3.5 million and $8.5 million for the three and nine months ended, respectively, related to the mark-to-market adjustment of certain derivative liabilities that were eliminated as of the closing of the business combination. Additionally, interest expense increased $0.6 million and $2.5 million for the three and nine months ended, respectively, driven by the numerous interest rate hikes by the Federal Reserve over the last year. For the three and nine months ended September 30, 2023, Adjusted Net Income was $3.6 million and $2.3 million, respectively, after adjusting for non-recurring transaction and the non-cash derivative costs, as well as non-cash stock compensation expense.
Adjusted EBITDA for the quarter was $7.1 million, which is down from $9 million from the prior year due to an increase in DIR fees during the quarter. Adjusted EBITDA for the year is $13 million, up $3 million from $10 million reported in the prior year. As of the quarter end, our liquidity was a healthy $90.1 million. I'm proud to report. I will now turn it back over to Todd for closing comments.
Thank you, Dave. To recap, I am proud of all that we have accomplished in this quarter. We delivered solid double-digit revenue growth, we entered new markets and expanded our suite of services, we made new strategic hires to strengthen our team, and we entered the public market. With that, I'll turn it over to the operator to open the line for any questions.
At this time, we'll be conducting a question and answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we pull for questions. Once again, if you'd like to ask a question, please press star one on your telephone keypad. There appears to be no questions at this time. I can turn the call back over to Dave Gould for closing remarks.
Thank you, Operator. We are excited about the opportunities ahead of us, and we are committed to delivering value to our patients, partners, and shareholders. We look forward to updating you on our full year results on our next earnings call. Thank you, and have a wonderful day, everyone.