No idea who's out there. Hi, everybody. We're at our last, last event of the day. 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. We've got agilon. Again, let me just start off, especially for anybody online or anything. Lance Wilk, some of the Healthcare Services Analyst for Bernstein. Really excited to have the agilon team here. Actually, I think it was about two years ago that, Steve, you came to our disruptor conference.
Yeah.
That was a great kind of kickoff to the beginning of the introduction of the relationship. Amir has been really driving a lot of work on this name as well. We are gonna kick things off. Maybe, you know, for the audience and for everyone tuned in, maybe we can just start off with a little bit of introduction, you know, yourself.
Yeah.
The firm, and then we can kind of get into, you know, just a chat around the big topics that are hitting the market or the sector right now.
Yeah. Lance, first of all, thanks for having Jeff and I here today. We're happy to do it.
Yeah.
look forward to the conversation. so agilon health company founded in 2016.
Yeah.
Really built around the idea that the Primary Care Physician is the best positioned in the healthcare marketplace to manage total cost and quality, but they simply did not have a business model to make that happen. We have built kind of a unique, long-term 20-year partnership with scaled medical groups in communities, with their Primary Care Physicians who have longstanding, 10-plus year relationships with their senior patients. 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 20-30% and, per-performing best-in-class in quality.
That's great. There's a host of questions that are going on right now related and kind of big picture questions related to the 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, etc., and then maybe pivot over to your turnaround plan or the execution you've been.
Sure.
Kind of going through. 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, and obviously, for the patients?
Yeah. I mean, whenever we talk about value creation, we always start with this trusted PCP patient relationship. Been there for a long time, seeing these patients across a long time. 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.
Yeah.
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 four and a quarter or better. Increasingly, with cut points going up, quality is a real differentiator. We were just saying before we hopped up here, we have payers reaching out to us in a more proactive way than we have ever seen. They are saying, "Hey, look, agilon, if you could do four and a half stars and our value-based care partners could do that, it could literally lift our entire network above four stars." Quality is really a big one that we think about.
Cost, being able to beat a benchmark locally, so the Medicare Fee-for-Service population, being able to reduce inpatient utilization by 20-30%, 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 million of savings, 13% gross savings rate. It is really around those two things, cost and quality. 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. We split that 50/50 with those physicians. What you're able to do is really change that economic model that I started with.
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. That's how we've been able to scale this in a really meaningful way. Quality and cost are important to CMS. It's really important to payers, as we talked about. Obviously, it's important to the physicians. The outcome for the patient, the physician, the health plan is really positive.
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, but still, you know, early innings. Do you see changes in the characteristics? You were just mentioning the magnitude of payer involvement in discussions with you. 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, or either within a practice, changing behaviors, or within a market, the need for adoption of Value-Based Care in order to keep up? How close are we to getting to a tipping point in something like that?
Yeah. I mean, we've been talking about the move to value-based care for a long time.
Yeah.
I grew up in Southern California where it's, it's steeped. You know, Kaiser kind of plowed the road 50-plus years ago, and that entire market has moved. I mean, you, you, the fee-for-service is not very prominent.
Right.
In that market. 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. Getting critical mass with a scaled Primary Care Physician group who has 20%, 25%, 30% of the senior population and an equivalent amount of PCPs seemed to be that sort of critical place. I think we're coming through Year Three of a really challenging macro environment.
Yeah.
And so that's made it kind of choppy. What is interesting, Lance, is the demand among physician groups for the move to value continues to be very strong. 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 gonna drive this as we go forward. I think payers are pushing hard around it. I think physicians are extremely interested in it, for all the reasons I talked about, 'cause fee-for-service continues to be just not a great option. This volatility in the market has probably certainly we've paused our growth.
Right.
We had classes in 2023 and 2024, 100,000 senior patients came in. 2025 is 20,000. For 2026, we have said 30,000-45,000. We are being very measured given the macro that is out there.
Yeah. No, that makes a ton of sense. To me, it would seem that the reaction that you all are taking, which is a really logical and thoughtful reaction to that, might be, you know, is driven by the funding environment, the pressures on margins and return for the business. Like, it'd be interesting 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 rate, maybe obviously nice rate next year, but in a low-rate environment, in an environment where star scores and cut points keep moving up. You know, and, you know, what's your sense as far as the engagement level of payers?
The conversations are different. There's an intensity to it. The entire senior team is around the table. 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. 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.
Yeah.
That has sort of, this is an 18-month running conversation that we're into. 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. Us being really honest about, if this doesn't work for us, we're not gonna be able to take risk around a particular product or maybe with a payer in a market. You know, last year we shrunk our payer footprint by 10%.
Yeah.
As a result of that. I think there aren't that many full-risk Value-Based Care partners that are able to do this at scale. We think, despite the environment, we're in a good position in terms of where the puck is going.
Yeah.
So.
Anything you'd add, Jeff?
No, I think, again, it goes back to the value that we're providing for the payer, which is, you know, cost savings, higher quality. I think, as Steve said, the demand is there and the conversations have been, I would say, at that senior level and, you know, supportive.
Yeah. Let me hit one of the other topics as it's front page for everybody right now, which is Risk Adjustment. And then maybe we'll flow right into kind of the current environment and utilization and whatnot, 'cause you kind of 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?
Yeah. I mean, there's a lot in that question.
Yeah.
And Jeff is so well-versed on this, so you should chime in. I mean, it always starts with the strength of the PCP-patient relationship. I think if I step back and look at V28 and RADV audits and other things, I think it is 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. The early assessment and diagnosis is then matched up with care plans to manage really chronic diseases and ultimately prevent or delay the progression of a disease, and people unnecessarily ending up in the inpatient setting. We call it our BOI as a clinical program. It is really at the heart of everything we do.
That philosophy kind of permeates everything we do.
Yeah.
I think as we look at V28 and what it's done, we think it's a more clinical world. If you look at the policy logic, I think it's to say the largest chronic diseases that are driving the majority of inpatient and utilization, congestive heart failure, COPD, dementia, cancer, those are the things that we want primary care physicians identifying.
Yeah.
And, you know, preventing people from an acute event in the or inpatient setting. That, 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. You know, we have a 100% chart review process. We have a clinical, pure medical record review process. We have a process that requires, you know, 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 around that. 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, right? V28 running, this is the third year now, side by side V24, V28, there is a lot of logistics and operations within that. The headwind that you have to come over this year, you know, it is a net 2% increase in Risk Adjustment. That is overcoming probably a 3% headwind. Call it a gross 5% to get to a net 2%. That is a lot. Running those two side by side was maybe a little bit more, you know, complicated than we realized. Now you are, it is 100%. You are here. It is all that you are focused on. Really getting those appropriate diagnoses and thinking about it as a clinical program is kind of the heart. But, Jeff.
Yeah. I think, I think another factor is just where you started from. You know, we were coded at roughly the nationwide MA average.
Yeah.
I think for those that had higher coding efficiency, I think the transition to V28 was a little more painful. We were right around the market average. As Steve, I think Steve mentioned, a net 2% in 2024, so, you know, gross 5%, net 2%, assuming the same thing here for 2025. Of course, next year is the last year of the phase in.
Yeah. Are you observing, you know, one of the things that's been big from, 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 the Descent Populations.
You seen anything in your world like that?
Yeah. I mean, it's, I guess what I'd say is it's still early for 2025.
Yeah.
You know, we're still getting the data in. I would say for '24, right, what we did is we said, "Listen, we think we have a 2% net lift in '24." That's what we put into the guide for '25. We haven't seen anything at this point that says it's different than that. Again, it's still early.
Gotcha. 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, you've got some great charts that you guys do in your quarterly calls or at least reference to. And what you've observed with those trends, you know, kind of over the course of 2024, and then what you're seeing thus far in 2025.
Yeah. Sure. I think as you think about utilization, and I'll go back to 2023, you know, I think 2023, roughly 7% cost trend, 2024, roughly 7% cost trend. I think as we thought about 2025, we had 5.3% in the guide. Now you have to adjust that because, because of the payer bidding process, there was really, you know, 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. From our perspective, the way we thought about 2025 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%. You know, full year is 5.3%. You're still comfortable with that. That had a little bit of flu in it.
I would say, you know, the drivers exiting 2024 and the drivers in 2025 are very similar. It's inpatient cases and Part B, B as in boy, drugs.
Yeah.
and 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.
Gotcha. 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?
Yeah. Yeah. 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. Think about bifurcated premium by member, bifurcated claim line information by member. We haven't had that level of detail before, and we went live on that at the end of Q1, so at the end of March. Complete change to our process. 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. 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. You know, 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. 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.
Gotcha. One question maybe at a local market level, and this would be informing some of the insights that I, 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? You typically, you know, for the audience, you guys have a model where you're not just popping up a clinic and there's a single doc. You know, 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?
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. 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.
Yeah.
In a market, you have strong density. You want to have options for payers. You have the organizing principle around the PCP relationship. 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. That continuity across time is really important.
Gotcha. You know, maybe to tie in with that and to 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 recontracting strategies and some of the things you're carving out progress? You know, we know the progress as of the end of the year. Like any further progress as you're renegotiating towards next year?
Yeah. I mean, I, look, we've tried to be really disciplined and the headline is we're trying to improve performance and reduce beta.
Yeah.
And so, you know, elements within that where 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 what we're doing from that standpoint. 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, 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 rebate. That typically settles, you know, the Third Quarter of the following year, it goes to the PBM and the payer, and then we get sort of an outcome.
When you're running 30 partnerships, it just allows for massive volatility and a long tail.
Yeah.
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. 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 is very early, but it is at the top of our list for 2026. We have already had one payer agree to carve out Part D for 2026. That number will continue to come down. That is 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 is $50 million worth of initiatives.
Half of that is quality. Those are from incentives we did not have a year ago from payers saying it is worth a lot to us if you are north of four and even north of four and a quarter. As we go to next year, we believe there is more opportunity around that. And, you know, folks saying, "Boy, if you can get to four and a half, it could really be worth a lot to me." That is Number Two. Number Three is just overall economics, in terms of percentage of premium. 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 is not just the economics are good, but the predictability and visibility with that. Number Four, and it is lowest on the list because it is the smallest dollar amount, is Supplemental Benefits.
For 2025, 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. Forty percent of our membership renewed for 2025, 50% renews for 2026. There is a lot of opportunity, Lance, just for us to, you know, change some of those elements that we talked about. So far it seems to be very constructive.
That makes a ton of sense there. From a, one of the things 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 that you still have to get and the like?
Yeah. Yeah. Sure. Just to set the framing here, at the end of the year, we outperformed our cash flow projections. At the end of 2024, ended the year with roughly $440 million of cash on the books. Ultimately said we're going to burn about $110 million in 2025. I think $37 million of that hit in Q1. No real update there. We still think that's the number for this year. Heading into the goal of being cash flow break even by 2027. Several levers in there that we have to pull and we can pull that are still, I would say, not in that number. One is contracting. We continue to work with our payer partners on getting, you know, advanced payments, if you will, on our estimated margin settlements.
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 on the list for sure. Two is really Cost Control. Focusing on tighter cost management. I mean, those dollars are every month and they're real. We definitely have our pencils sharpened on Cost Control for this year and for 2026. Last, there are some items in what I call Working Capital, 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 2025 and 2026. I would say we feel pretty comfortable that we've got the capital necessary to get to where we want to go.
There is more work to be done here, but I think there is opportunity for us certainly to improve where we are from where we are today.
Gotcha. And maybe just tying, 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 know, are 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 non-surgical? 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?
I mean, I think the headline is utilization sort of in line with our expectations. From 2024 to 2025, it looks relatively consistent. You know, the big drivers in 2024 and now through the first four months of 2025 is Inpatient Spend that Jeff just talked about. And Part B is boy drug, primarily driven around Oncology Drugs. 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. That affected some Inpatient Spend, but that was kind of captured within our guide. 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. That, that's what I would say. I don't know that we necessarily see big material changes. Like at the end of 2023, you know, it was hips and knees and outpatient surgeries that really surged. That felt like pent-up demand and coming out of COVID. I, I don't know that today we see a material change like that.
Gotcha. Okay. Shifting over to kind of the physician side of this and, the opportunity to, you know, both your existing base, you know, how is, how is that, operating from their perspective and then 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, you know, what, 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, with the partnerships?
Yeah. I'll just start by saying our net promoter scores from our physicians are, you know, 70s and 80s, right? Even through this challenging environment, our physicians are really engaged. The leadership of these groups are incredibly engaged in saying they, they've sort of made the leap. They've kind of crossed the chasm and Value-Based Care is their future. Despite the volatility of the macro that we've been talking about, they need to be successful around it. 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 risk for those folks.
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. The clinical programs, I think we talked about this world of V28. We talked about a more clinical model. That is where we have doubled down. We have said those chronic diseases are what drive the majority of the spend. We have this incredibly trusted continuity of relationship. Regardless of people moving between payer, we want to continue that. 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 that 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. It is 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. Those are the things that we're really focusing on. 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. As you move across time, it could be around these High-Risk Touch Points, making your scene, making sure you're seeing those most complex patients most often.
Gotcha. For the practices you're working with, about what percent of their patients and what percent of their revenues are kind of comprised in the areas that you're touching, those practices?
It varies. I mean, we have many practices in which this is the, you know, 35% of their membership. In terms of the economics of their practice, it's two-thirds or more. We have some in markets where this is 50% of their practice and proportionally 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, just 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.
Yeah.
By doing these things, taking better care of patients, you've got this incredible satisfaction for the physician, it's 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. That's why we're so focused on those initiatives I talked about.
Yeah. And just for folks out there, like, you know, in a couple of things in my experience, you know, that doubling the, you know, take home, compensation for physicians, that's always, I know we were talking with Herb Fritch back when he was launching HealthSpring and just in my experience as running docs, you know, a 2%-3% quality bonus, you're not going to really change what you're doing. You know, if you're doing 50%, 100%, that obviously really changes what you're doing.
The other thing is I know in, in like my past dinners with Optum Health and, 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 maybe 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, you know, are, are something that really is consistent with making changes. It was 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, in the firm before you really reinitiate the, the geographic aspect of it?
Obviously, you can put more membership through the existing practices and that works well.
Yeah. I mean, we've definitely been very measured in our growth. It's part of our, you know, 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. I think we feel really good about that decision. Part of that is this measured growth. To put it in perspective, the Class of 2023, Class of 2024, we're 100,000 plus new members, four to six new partners, most of them in newer geographies. Expanding to your point. I think as we went to 2025, we said a couple of things. One is we're going to shrink that down. The Class of 2025 is 20,000 members. The Class of 2026 we've said is going to be 30,000-45,000 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. The opportunity to expand that across time, I think, is a real opportunity for us. We're trying to be measured on it. I do believe, 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. You know, we do a Five-Year Pro Forma 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.
Gotcha. As a result of the macro environment for Physician Groups, you know, right now that's not a huge emphasis of, oh, let's just go expand as frequently as we could. 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 about it?
Yeah. No, I have a number of our groups where their mantra, literally the back of their business card is Keep the Independence Independent. Fierce entrepreneurs, fiercely independent. It's a fun group to have a network with. I think, you know, the majority of the world is not independent, right? 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 had some people move out of Employed Practice into Independent Practice. 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 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.
The clinical basis of this Chronic Care Management programs really resonates within that, in that setting. 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. I think that's an opportunity as well.
Let me ask you on the Fee-for-Service types of opportunities, ACO Reach, et cetera. What sort of the economics and Margin Opportunity in that sort of a business contrasted with traditional Full Risk, Global Cap sort of business?
In our partnerships in which we have ACO Reach today, the Medical Margin in that business is north of $100 PMPM in this environment. MA is right now, it's at like $50 PMPM below, right? Long term we've talked about $150-$200 for mature markets and, you know, getting that above $100. That gives you kind of the order of magnitude difference. 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. 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. 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 ACO Reach is there's no Part D, isn't, dog. There's no Supplemental Benefits and there's no payer bidding dynamic. 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. That is what gives us confidence within MA as we think about that, but also why we want to expand that Medicare Fee-for-Service penetration.
Gotcha. Oh, could we talk a little bit about the J Curve? And maybe if you could frame for us, you know, a few years back, how you might have looked at a J Curve, and maybe how it contrasts with different models. Obviously a model where you're building the clinic and whatnot is going to have probably a more exaggerated profitability increase curve than your model. How has that changed today as you've kind of refined the business model? You know, a lot of times I'll try to frame for folks, we were talking about like history or, you know, like to me what you're going through now is for me, but what maybe HMOs were going through 1985 to 1995, you know, up and down and refining and then like a period of really interesting growth.
You know, 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.
Yeah. I mean, you should jump in on this, Jeff, but 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've been there for a long term. So there's not that initial couple of years of where you're running big losses around it. Typically our year one is break even plus or minus. We talk about a range of $30-$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, you know, one year in a 20-year partnership.
The goal is to make them move to risk as quickly as the economics make that possible. The Final Rate Notice for 2026 was a really good start on that. So, so that's the idea, but then you progress up from there. You want to pick up, Jeff?
Yeah. Yeah. I mean, I guess what I'd say is our views on the Long-Term Margin haven't changed. You know, one, Steve mentioned this earlier, $150-$200, you know, PMPM on a Medical Margin basis. Yes, we're operating in this challenging macro environment. Has the J Curve been bumpy? Yes. Ultimately we still think it goes up into the right, into that $150-$200 PMPM. 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. Actually, in groups that aren't in that $150-$200, there's individual docs that are. This is in a, you know, a challenging macro backdrop.
And so I think as we think about 2026, 2027, and obviously, the Rate Notice is helpful, you know, net positive tailwinds heading into, we think heading into 2026 to get us back on the Curve Trajectory, if you will.
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, you know, 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?
Yeah. I mean.
I'm thinking of cost of.
Yeah. No, no. Yeah. So, just like all throughout healthcare, the majority of our costs sit with the Multi-Chronics, right? You know, you think about that pyramid, as you move up, the costs get greater. Our, 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% of our cost. The idea around these programs is we're going to spend money early to identify them and manage that across time. 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.
You know, 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 into high single digits. Each point on readmission is worth a lot. I think Inpatient is a big Cost Category for us of impact. All of our programs are going to impact that. End of Life is just a massive area. We've seen an increase in enrollment. We've seen a reduction in our Inpatient Days Per Thousand and Hospital-Based Deaths. Anything you down there?
Yeah. No, I think, you know, Oncology's an opportunity for us as well. More focus in regard around that that we're applying. I mean, I think as Steve mentioned, we just go across the Cost Categories and have a clinical program matched up to it. And that's what we've been focused on.
Perfect. Really appreciate you taking the time with us today. Hopefully it's been a useful day for you. Thanks everybody for coming to this. 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. Hope everybody has a great day. Thanks a lot.
All right. Thanks, Lance.
Thank you guys. I really appreciate it.