Good morning, everyone. My name is Matthew Gillmor, I'm the Head of investor relations for agilon health. It's great to see you guys. It's great to see so many familiar faces here today. It's my pleasure to welcome you on behalf of the company to our Investor Day for 2023. Today is National Doctors' Day for those of you that did not know. We want to extend a special welcome to our physician partners that are here today to more about our model. Before we begin, I do need to remind you that we will be making forward-looking statements as part of the presentation and risk factors for the forward-looking statements can be found in our filings. We'll also be referencing non-GAAP financial measures, a reconciliation can be found in our SEC filings as well as the back of this presentation.
We've got a really great program for you today. We're excited to share a lot of details with you. You're gonna hear updates from many of our senior leaders with respect to quality performance, our growth, our financial outlook, and the evolution of our platform. The centerpiece of the day is really our PCP panel. They're gonna tell you about their evolution with agilon health. Not listed here, we will do a short Q&A panel with the PCP panel for the audience during that time. You can hear directly from them.
We are gonna begin with a short video. We hope that you come away from today with a deeper understanding of how our platform is impacting patient care and physicians across the United States, why more and more physicians are wanting to take part in this model, and ultimately how that's driving better access for primary care in more and more communities, and how that's translating to financial results for our shareholders that are providing the capital to make all of this happen. We're gonna start off with a video, and you're gonna hear from several physician partners, including a couple partners that will go live with us in 2024. Steve Sell, our CEO, will take the stage to kick us off. Thank you. Welcome. Why don't we go ahead and get started?
We spend so much money on healthcare, yet our outcomes measures and our statistics lag behind other countries. The reason that that occurs is because we practice under a sick model. We really don't have a structure to prevent disease. The outcomes that you see that are lagging, that are poor, could be prevented if we had a different model where we spent more time creating more relationships within our primary care practices.
Agilon Health is daring to reimagine primary care, to strive for a healthcare system that empowers physicians to truly care for their patients and enable seniors to receive the care they deserve: quality care delivered by physicians who are empowered with the time and tools that enable them to achieve better health outcomes.
In the past, in a fee-for-service model, physicians would always be looking at the amount of visits they were gonna see that day because they weren't paid on the outcome. They were paid on how many visits they could do. Agilon's resources allow us to grow our team, and in this model, we're able to give them financial security up front, which frees them from the shackles of churning more visits. Now they can do what's best for the patient. We've seen physician satisfaction improve, and it gives them that passion back that they've actually been missing in a fee-for-service model.
We have data which we can use, and we're finding out that there are a lot of patients out there who are actually quite sick, and now we're beginning to focus more and more on those sick patients. That is something which is happening very early in our partnership with agilon.
In cities across the country, our innovative solutions are allowing physicians to strengthen their practices and provide the right kind of care in their communities that enable America's seniors to achieve healthier lives.
We have a number of patients with congestive heart failure. These were patients who were in the emergency room often. We knew that if we could do something simple as weigh them every day, we could keep them safe at home where they want to be and not in the emergency room. There was no mechanism to pay for that. In the value-based world that agilon health helped us to transition to, we could make that investment in those people and in that IT to get the result that we imagined for those patients.
Since partnering with agilon health, the physicians and care team have everything they need to take care of the patient. That has been revolutionary because we've never had anything like that before, which has really helped us to impact their care, not just in the emergency room, but even when they get home. I'm doing so in a way that's sustainable and also good for my personal quality of life and my family's needs as well.
With a purpose-built platform, cutting-edge technology, long-term partnerships, and a peer network of like-minded physicians who care about their patients first, we're transforming how physicians and practices operate.
I am so ready for this transition in care to happen. Can't wait for an opportunity to see the nation change. This is healthcare reimagined.
Good morning. It's great to see all of you again. Our team and our partners are really excited to share with you this morning the incredible progress that we've made in the last 12 months. When you think about the magnitude of what we're gonna talk about and the inflection and the shift in people moving to value, it's hard to believe all of this has happened in the last 12 months. Before we dive into the formal presentation and discussion, there are three things that I thought I would call out for you. They're things that if I was sitting in your chair, I would wanna understand. The first, you're gonna hear from our team that our results are fantastic. That's not new news, but what I would wanna understand is how we're doing that across a diverse set of geographies and a diverse set of groups.
Literally, every type of physician group in the country we're now working with, and our results are incredibly strong.
How we're doing that across diverse geographies and partners. The second, as Matthew said, our partners are here. I think this is unique in terms of investor days, that you're gonna get a chance to hear from them directly, have a Q&A. What I would listen for is: How has this changed their life? How has it changed the way they're practicing medicine? What does it mean for their practice and for their patients? Finally, the third thing that I would listen for is probably the biggest change that I've seen in the last 12 months, and that is that we've reached the tipping point. The future is here. The move to value, literally every primary care doctor and group in the country is looking at making this move. That's happening locally.
We've announced a couple of new partners this morning that are in geographies we've been in for several years, and now they've made the decision to make that move. When Veeral Desai talks to you about that, listen for that process and that decision-making. How did they get to that? That tipping point is nationally. As every group looks to make the move to value, agilon health is the solution for primary care physicians to make that move. We'll dive into what we've set up for you formally. Three key themes that I wanna hit in these first 10 minutes to set the stage.
One, we are solving a fundamental problem for primary care physicians, and in so doing it, we're doing that for the healthcare system, and we're driving this shift from the challenges of fee-for-service that Dr. Steve Sell just talked about to a much better world of value-based care. Second, specific to agilon health, there is a very simple flywheel in our business. You're gonna hear us talk about this throughout the day. The better we're able to do in terms of driving that performance, better patient outcomes in terms of cost, access, and quality, our physicians win and benefit from that. It changes their economic outlook. It changes the ability for us to invest in more resources, more doctors want to join.
This performance to growth flywheel, very important for you to understand. The third is we have a very forward-looking business, and Tim Bensley will wrap up with a very upbeat long-term outlook for you. If you think about the things that we know today that we're gonna share with you, members coming on the platform earlier.
We're going to give you more dimension around the class of 2024. Cohort maturation across a diverse set of markets. All of this leads to a strong belief and a higher quality path to 2026, to 2027, and to 2030. Let's start with the problem. It's very challenging to be a primary care physician in fee-for-service, and it's particularly challenging being a primary care doctor in the Medicare program in terms of fee-for-service. I don't know of another business that in the last 20 years has seen a net 20% reduction in the effective unit economics. That's the reality for a primary care doctor in Medicare today. When you look at the Medicare fee schedule, when you look at the cost of running the practice, not only are they upside down, it's getting worse. Not surprisingly, physicians are burning out.
If you had to see 20% more patients a day just to stay level, that's incredibly challenging, not a great long-term outlook. That's pressuring capacity. One in five primary care doctors are considering leaving the practice in the next couple of years. Not only is it challenging to be a primary care doctor, but it's not great to be a senior patient today in Medicare with fee-for-service delivery underneath it. The variation in terms of the quality of service and the consistency of service that you get is highly dependent upon which primary care doctor you're seeing and where you live within the country. This variation is driving massive differences in terms of cost and utilization. Ultimately, all of that flows through the total cost of the Medicare trust fund. There is a tremendous opportunity within this, and you're gonna hear us talk about that.
There is a 2-3x variation in terms of total spend and the spend within the inpatient setting. It's challenging to be a doctor, it's challenging to be a senior patient in the world of fee-for-service, and the system is asking more of these doctors. Roughly a third of our partners' practices sit within the over 65 Medicare population, it's growing every day. 10,000 seniors a day are turning age 65. At the same time, key stakeholders like CMS and health plans are saying the key to solve this is to make that move to value. There is incredible structural support from Washington D.C. and beyond for this move. Everyone says primary care doctors are the key. The problem is they don't have the business model to do it. They don't have the time to do it, nor the capacity.
We're solving that problem for primary care doctors and for the healthcare system. Our total care model takes the same doctors, the same patients, and the same health plans and moves them from the challenges of that fee-for-service world into a total care and total cost relationship in which there is a budget, and there's the ability to invest ahead of the outcome and surround them with far more resources and far more information than they've ever had. Heidi Hittner and Dr. Ben Kornitzer will walk you through those results. We are delivering best-in-class results in the tenets of good care, which is the tenets of being successful in value-based care.
You have to have high-quality access for senior patients, getting them in for annual wellness visits, and we're seeing a 2-3x increase in terms of the patients within our partnerships relative to that challenge of fee-for-service. We're seeing those most complex patients being touched far more often. In fact, the most complex patients are receiving daily touches. Dramatic change in access. From a quality perspective, across these diverse geographies, across all types of groups, we are delivering quality scores at four and above. All of our year two partners, regardless of where they start, are getting across this critical threshold. Why is four stars on a five-star scale so important? Medicare will pay health plans a 5% bonus when their products reach that four-star threshold. agilon health's value proposition to health plans, incredibly strong given our ability to do that.
Better quality care results in better cost care. We're driving significant reductions. Seniors are spending far less time in the hospital. Far less seniors are accessing through the ER, which is really the last place that you want to access the healthcare system unless it's absolutely necessary. Through really tight structured work, we're seeing a substantial reduction in terms of readmissions. Senior patients being admitted back into the hospital within 30 days after they've been discharged. We talked about the flywheel. Better performance drives the ability to us to invest that surplus back into practices. If you're an investor, you're familiar with this number. This is the midpoint of our 2023 guidance for what we call medical margin. It's the difference between that total budget that's set at the member or patient level and the total cost, regardless of where that care is delivered.
It's a big number. $550 million. It's up $250 million from 2022. This number is incredibly important in terms of driving the step-up in adjusted EBITDA. This year, it's north of $80 million of improvement from 2022 to 2023. As an investor, you understand this. Tim will show you the cohort data and how this all builds out. What you're probably less familiar with is this second number. If you're a primary care doctor, if you're one of our partners in your groups, or if you're a policymaker in Washington, D.C., this is an incredibly important number. This is our forecasted reinvestment in 2023 back into our local partners and back into sustaining and growing primary care. Think about the problems that I started out with, the economic challenge, the capacity challenge.
We're stabilizing and growing primary care. Is it any question that more doctors wanna join and more groups wanna join? A quarter of a billion dollars this year will be reinvested back into local primary care. As we progress forward and our medical margin gets larger, the reinvestment back into primary care gets larger. The flywheel. Performance is driving growth. As we do better in terms of keeping patients out of the ER and avoiding unnecessary hospital admissions, our physician partners do better. It changes their practice. It changes their outlook. More doctors want to join. That's that tipping point that I talked about. You can see the impact of that in our growth results. Now with 2024 and the updates we're giving you this morning, 32 markets. Nearly 2,800 primary care physicians.
That's approaching 1.5% of all the adult primary care physicians within the country. Total MA members of 550,000. We're really excited to announce this morning that that's being driven by a class of 2024 that will now be at least 100,000 members. That's 20,000 members more than we shared with you just a few weeks ago. That translates into net new Medicare Advantage member additions of 145,000. It's another record class for agilon health. It's all a function of that flywheel turning faster and faster, more primary care docs and more groups making the decision to move to value. That growth drives scale.
There's an incredible competitive advantage that we have created over the last 6 years as we've built our platform, as we brought on 32 different groups, as we brought on 550,000 senior MA patients. When you look to reach that number in 2024 will be 650,000 members, and Tim will give you more information on that. That scale and that competitive advantage is significant. 32 markets or communities, 14 states. We've created value-based care infrastructure. It's easier and faster for any primary care physician in these communities to make that move. Veeral Desai will talk to you about Holland and Premier, as I mentioned at the top. They've made that decision. What's the opportunity in these 32 markets and 14 states? We've gone first. We've created this infrastructure.
There are 10.5 million senior patients and 33,000 primary care doctors in the communities in which we've created the mechanism for doctors to make that move over. That's an incredible advantage for us. That scale, though, also translates not just into a local competitive advantage, there's a national competitive advantage. When you listen to our physician panel today talk about the types of scaled clinical programs that they're able to take advantage of, that wasn't possible for us a few years ago. Today, in 2024, as we're projecting 650,000 senior patients, we believe we are the second-largest organization in the country in terms of serving senior patients in a full risk relationship. We're a six-year-old company. I can tell you we're a heck of a lot younger than number 1.
This acceleration, this macro, is working to our advantage. Tim will wrap up with this, but I think this long-term outlook for us is only stronger. The quality of the path that we have to 26, to 27, to 30 is substantially stronger than what we shared with you a year ago. Why? We're putting far more members on that platform earlier, and in a subscription model with high retention, that's hugely impactful. Two, the unit economics across all of our markets, across this diverse set of partners, they're stronger. We'll talk about starting points for classes coming in at higher points. We'll talk about a progression of cohorts. When you put those two things together, it's incredibly impactful. We're driving consistent operating leverage. This is an asset-light, efficient model. In each year, we're seeing about 100 basis points of further leverage.
If I'm in your chair and I'm an investor, I would say you're getting an incredible advantage from what we've built over the last six years, the investments we've made, the members that we've brought on the platform, these incredible partners that you're gonna hear from today. We find ourselves in a leadership position. As the macro shifts to value, agilon health is the solution. We're a leader, but we're not stopping there. We're gonna continue to push our leadership position, and there's three areas where we're gonna be able to do that. One, you're gonna hear from Ben Shaker, who's running our overall markets organization, and Heidi Hittner and Ben Kornitzer about our ability to deliver scaled clinical solutions. These are programs we didn't have a few years ago.
There's great success with those programs, but they're gonna lay out for you the incredible opportunity that's in front of us. Second, the ability with technology and data to provide our primary care partners and our care teams on the ground in each one of these markets with actionable information and a view across a population of senior patients, it's something our doctors have never had before. Girish Venkatachaliah will talk to you about how significant that is as an accomplishment. We recently have made an acquisition that's gonna allow us to go faster. It's gonna allow us to provide even more impactful data and to get clinical programs in earlier because we're gonna better understand who those complex patients are. Finally, we have roughly $900 million worth of capital. We really appreciate in this environment to have that and have that flexibility.
The best use of capital that we have is to make our partners more successful. They're in these communities. We have this incredibly aligned partnership. We'll think about investments that allow us to drive even better performance in medical margin, which allows higher reinvestment and is going to draw more doctors to come and join our platform. I think it's gonna be a great next two hours. I would ask you to be engaged. We're gonna have plenty of time for Q&A. With this, with that, I'll turn it over to Heidi Hittner and to Ben Kornitzer. Thank you.
Thank you, Steve. Hi, I'm Ben Kornitzer. I'm the Chief Medical Officer for agilon health. I'm also a primary care physician. I'm here with Heidi Hittner to talk about our clinical quality program and how we've been making impact for seniors across the country. Heidi?
Thanks so much, Dr. Kornitzer. It's nice to see so many of you back again this year. We're really happy to share with you today how we're making improvements in quality and cost at scale. As you heard Steve highlight, there is variability in the fee-for-service system, and there's a big opportunity there that's concentrated on chronic disease. Three themes that we want to take away from this section. First, we've created meaningful outcomes in quality for our patients, and you'll hear from our primary care physicians and patients how that's making a difference in their experience every day.
We've been able to do this across multiple communities, multiple partner types, geographies, and payers. This capability is scalable across conditions, diabetes, heart disease, kidney disease, and communities. We're focused on chronic conditions because that is where the cost and the opportunity are. Chronic conditions are the leading cause of death and disability in the United States, accounting for 90% of the U.S. nearly $4.3 trillion annual spending. Medicare spending is about $1 trillion of that. The most complex seniors, that 17% with six or more chronic conditions, accounts for 53% of the spend, nearly $500 billion of spend. One of the most common and costly conditions is diabetes. One in four U.S. healthcare dollars is spent on the management of diabetes.
We're proud to show you today how we've made meaningful improvements in cost and quality for our diabetic patients. Across key measures for chronic conditions and cancer screenings, we are better than the Medicare Advantage average, and we are improving faster over time. CMS established the Star Rating program to monitor and to reward ongoing improvement in the quality of care for plans that have MA beneficiaries. CMS rates plans from one-star to five-star. Five is the highest. Better performance results in higher payments and rewards for the plans. Each of the measures that make up the Star Rating is determined by how many patients meeting that consistent measure criteria have their gaps in care closed. Each year, CMS calculates how the nation performed. They establish the cut points, and of course, those thresholds go up over time to propel improvements in quality.
On the graph on the left-hand side, you'll see agilon health's performance, four and five star on key measures, cancer screening measures for chronic medication management, diabetes, cardiovascular disease. Key leading indicators of quality performance for patients with chronic conditions. Those same measures over time is what you see on the graph on the right as a % of gaps closed. You can see our performance improving much faster than the nation's average. Now, that's hard to do because every year we have more groups. We are in diverse geographies. We have new payers. We have new EMR systems. We're consistently demonstrating that we are providing better care for patients. How do we do that?
Across our access for patients, across our quality programs, we have a consistent process and a common operating system that helps us to narrow the variability across different communities, different payers, different EMRs, different partner types, and individual physicians to be able to create consistent outcomes. Each of these steps in the funnel are process steps, and the most important and critical step is at the top of the funnel to be able to identify all of the patients with that specific condition to be able to apply an evidence-based best practice care model to. We can monitor and measure each step in the process. That impacts our ability to affect outcome at scale for the population, for the community. Now, our superpower is our aligned and activated physician network across the country.
You combine that with a dataset of multi-year, multi-payer, multi-EMR. Now our physicians have information they never had before about their entire population. This allows them to treat patients in a way that they aspired to in medical school. You'll hear from Dr. Goggin and from Ben Shaker how that looks for a market. Right now, Dr. Kornitzer is going to show you how that looks for patients with chronic conditions.
Thank you, Heidi. What I'm gonna walk you through is how physicians can use our platform to better provide care for patients with chronic diseases like diabetes, and how our platform allows them to reach beyond the four walls of their office to bring better outcomes to those patients. From my experience as a PCP, I can tell you there is no intervention healthcare that is more valuable than the trusting relationship between a PCP and his or her patient. However, I can also tell you that the majority of a patient's care journey occurs outside of those four walls, and that experience tends to be fragmented, poorly coordinated, and leads to uneven outcomes. In a traditional fee-for-service model, primary care physicians have not had visibility into or the ability to impact care that happens outside of the walls of their PCP's office.
As a result, patients fall through the cracks and have bad outcomes. As a PCP, I don't necessarily have visibility if a patient has lost a follow-up or if they're homebound. If a colleague writes a prescription for a medication or even if I myself write that prescription, since it happens outside those four walls, do I really know if that patient has filled that prescription or is taking that medication appropriately? Critical longitudinal health data is lost when patients change health plans. There's limited visibility if a patient sees a specialist such as a cardiologist or even what happens during that encounter. Same thing goes for a hospital stay or an ER visit. All of those inherent defects in fee-for-service medicine lead to poor outcomes for patients.
What we've done here in the top right, talking specifically about diabetes, is looking at two of our most important measures for quality. Are patients getting their yearly eye exams, and are their blood sugars well controlled? We focused on a subset of lower-performing PCPs, those who are having the poorest outcomes. What I'll show you is that by breaking down the four walls of the PCP's office, by bringing all those areas that physicians didn't have access to into visibility, and most importantly, by giving physicians the ability to have impact outside of those four walls, we can dramatically change that physician performance and the outcomes that their patients have. For specific conditions like diabetes, we can also invest ahead of the outcome in resources such as pharmacists and care managers to make sure that those patients are taking the right medications.
We can also invest in retinal eye cameras so that patients can get their eyes examined in the convenience of their PCP's office without having to make a separate trip to the ophthalmologist's office. Through all of this work, we're actually able to do again is narrow that PCP variability and dramatically improve outcomes for those patients. What does that mean? If you take a look at those same underperforming physicians from 2020, by 2021, virtually all of those physicians were achieving at five stars or above on the critical measures of diabetes control. Let's step back and take a look at what that means across our entire population, and I'll show you that our patients with diabetes are getting significantly better outcomes than patients in either fee-for-service or in MA. Now why are we focusing on diabetes?
As Heidi mentioned earlier, chronic conditions are the most impactable portion of healthcare spend, and diabetes in particular is relevant. Let me give you three reasons. Number one, it is highly prevalent. It is the most prevalent chronic condition and impacts anywhere from a third to a fourth of seniors. Number two, it's extremely harmful. It's the leading cause of blindness, limb amputation, kidney failure leading to dialysis, and a leading cause of heart attacks and strokes. Third, and perhaps most important, the worst complications of diabetes are almost completely avoidable by better primary care management and managing patients' blood sugars. Primary care doctors are uniquely positioned to have an impact. If you think about those factors, diabetes is almost a perfect model to test the performance of a value-based care system built around primary care doctors.
I think as you'll see from our results, they're absolutely exceptional and confirm the impact that we're having around the country. The other piece of information I want to give you for context is that over the past few years, there has been a dense body of literature showing convincingly that patients in MA do really well. Patients in MA have better quality and efficiency markers than patients in fee-for-service. What's so impressive about our results is not only are we doing better than fee-for-service. Here, those orange dots and lines that represent fee-for-service, by the way, that's not overall CMS fee-for-service. Those are the most advanced primary care models that CMS sponsors. We are outpacing them by far. Even MA, where the benchmark includes purpose-built clinics targeting patients like ours, we're doing significantly better. It's not just a single point in time.
What we're able to show is that year-over-year, we are improving care faster than the MA benchmark. When you take a look at diabetes eye exams, we're improving at 3x that national benchmark. If you take a look at blood sugar control, we're at 2x year-over-year improvement compared to the MA benchmark. In fact, over 3x the national benchmark for fee-for-service. As a healthcare organization, our North Star should always be to provide better care to our seniors. Our promise needs to be the patients that we see today get better outcomes than they had yesterday, and from the work that we're doing today, they'll have better outcomes in the future.
By continuously raising the bar year-over-year, we're able to take patients and make sure that fewer patients will lose their vision, fewer patients will lose a limb, and fewer patients will wind up on dialysis. Not only are we improving significantly when it comes to those quality metrics, but that's translating into tangible improvements in utilization. Our patients with well-controlled diabetes are 50% less likely to be admitted to the hospital. In fact, they're 85% less likely to be admitted to the hospital with a diabetes-related condition. For seniors, an admission to the hospital is a non-trivial event. 40% of seniors who are admitted to the hospital are discharged unable to perform a basic activity of daily living, such as dressing themselves, bathing, or feeding themselves. Hospitalizations for seniors start a downward spiral that can change the entire trajectory of their lives.
We also see that our patients who have well-controlled diabetes have a significantly lower total cost of care. In fact, that lower total cost of care translates into almost 20% less out-of-pocket spend for those patients. For seniors on a fixed income, that could mean the difference between being able to pay for nutritious food, afford your medications, or cover utility and rent during the cold winter months. Also, for those of you who understand how diabetes works, the insidious nature of that disease that causes vascular damage over multiple years, we know from the literature that some of the most serious complications of diabetes, again, dialysis, heart attacks, strokes, they occur over multiple years, and so the investments that we're making now will result in even better performance for these patients in the years to come. Bending the cost curve is more than just an economic issue.
Avoidable healthcare utilization is a proxy for human suffering. It means patients with heart failure bouncing back and forth from the emergency room. It means patients at end of life spending their last days tethered to a hospital bed or an IV pole instead of at home with their loved ones. We've already shown you how we're able to address the quality of care and efficiency of care in chronic diseases like diabetes. We can apply those same approaches and chassis to a range of clinical areas where we see significant physician variability. While not comprehensive, we've included three areas of significant physician variability where we see a cost reduction opportunity for each of them of greater than $100 million per year based on our current MA population. I'd also point out for each of these entities, there's a certain important commonality.
That is, these are well-defined patient populations, so a very narrow set of patients with specific clinical criteria. The next is these are all areas that can be impacted directly by better primary care management. Finally, we see an incremental opportunity to drive further performance by layering in activities that go beyond the traditional reach of a PCP. For example, by seeing those patients and caring for them within the confines of their own home. Now, the way that we're able to size the clinical opportunity with variability is we take a look at our least efficient cohorts. Those would be the groups in the blue bar. We then are able to narrow that variability and pull their performance to be in line with our top-performing cohorts, here marked by the green bar.
Depending on the clinical entity, we see anywhere from a 12%-25% cost reduction opportunity. We also know that this is scalable and consistent, and we have learnings from those best practices that show us what it really takes to have better performance and better outcome for those patients. You'll hear a lot of this from partners and during our physician panel, as well as from Dr. Goggin in Southeast Ohio. It's things like, number 1, identifying who are your high-risk patients and then targeting them with the appropriate primary care touchpoints in a very purposeful way. Number two, it involves using additional care team members, such as pharmacists, to make sure that patients are taking their medications. Number three, it involves smooth transitions of care, so that patients don't wind up getting hospitalized or readmitted.
Moreover, in working with our partners and our panel of experts around the country, we've identified evidence-based, best-in-class clinical pathways that go beyond the traditional reach of primary care and can do things like meet patients where they are, for example, in a home setting. What does that look like? Well, in palliative care, that means our ability to provide 24/7 access to a care team, so that when a patient has a pain crisis, they don't need to go to the emergency room for treatment. For renal care, that means offering patients options around medication management, lifestyle modification, and nutrition to avoid the progression of that disease. For patients who have advanced to end stage, having discussions with them that involve multiple treatment options, including at-home therapies.
Then for cardiology, where we're still earlier in the life cycle, several of our partners have already launched remote patient monitoring programs for heart failure, where patients with heart failure can get daily weights and blood pressures, and their medications can be titrated in real time, avoiding the need for hospitalizations due to CHF exacerbations. By breaking down the four walls of the PCP's office, by bringing data and insights, by wrapping resource and process around our PCPs and their patients, we're seeing better outcomes for those patients. We're bringing back the joy of practice to PCPs, and we're redefining what good healthcare looks like for seniors around the country. As a primary care physician myself, as someone who's spent his entire professional career devoted to at-risk seniors, the work that we do is deeply meaningful and inspiring.
I think there's no better way to bring that to life than to hear from one of our physician colleagues, Dr. Gurneet Kohli, who's going to share with you what this has meant for him and for two of his patients with diabetes.
It was a husband and wife team. The husband had multiple comorbidities, including previous strokes, diabetes, and the wife was a diabetic. Both of them uncontrolled, have a lot of issues understanding and also affording the medicines. Diabetes is a chronic disease, an ongoing thing every day. Every day, you get sick of the finger sticks, you get sick of taking medicines. You don't feel good a lot of times. You know, when you're not feeling good, you don't really want to take care of themself. You would hear a lot of excuses, you know, they display frustration about trying to manage all these medicines. What I realized is that many of these patients need continuous motivation. They need way more support than a primary care doctor can give in the office.
We were very fortunate to have a partnership with agilon health, and through them, we were in partnership with a pharmacy group, and they were able to put the patients in touch with a pharmacist. That really opened the doors to a better care that I'd never witnessed before. The pharmacist would call them almost every week, talk to them about this new medicine that I wanted to give them, which would have given them better control of their diabetes, but they were afraid of how expensive it would be, and they were leery about it. This pharmacist was able to get them on a patient assistance program and have the medicine mailed to their home, and they tried it, and they had great results. When you're in a pure fee-for-service world, you don't have all these resources for your patients.
As I got all these resources, and the case manager, the pharmacist, the in-home nurse practitioner program, and I was able to outreach to my patients more. The patients had more trust in my practice. The patients felt very good about the extra resource I'm giving them free of cost. They were taking their medicines the right way they were supposed to. She was able to lose 20 pounds. She's more active than ever before. Her sugars are well controlled. The husband is doing much better. He's not had a stroke or a cardiac event in the last four or five years that he's been controlled. He's in a much better mood because he's not constantly having hyperglycemia, and also he's more active and more involved in their day-to-day lives.
They're happier, they're healthier, we have hopefully prevented or reduced the frequency of bad events that they're gonna get in the future because of the disease condition. I'm getting reimbursed now for providing the best care I can for my patient, giving the best patient satisfaction, and the highest quality of care. This is the best thing that happened to us, that's all thanks to this program we have with agilon health. This is healthcare reimagined.
Ben and Heidi, thanks so much. That was such a great video to conclude on. I'm really pleased next to bring up Dr. Kevin Spencer, agilon health's Chief Clinical Partner with three of our physician partners. Kevin's gonna lead a Q&A with them, describing how healthcare is different in their communities through their partnership with agilon health. We'll have about 10-15 minutes of audience Q&A with our partners at the conclusion of the session with Kevin. Kevin, please come up.
Thanks, Matt. It's good to be with all of you again this year. As Matt said, I'm the Chief Clinical Partner with agilon health, a family medicine physician by training. I'm gonna introduce three of our physician partners. Things I would note is these 3 partners have been with agilon health and its platform for varying periods of time, so you're seeing them at different life cycles. Really what I'd like you to highlight and take away from this is how is care different? What are they doing different? How is their life different? How is their business different? How are their patients and communities different in this Total Cost of Care model? I'll introduce each of them. First, Dr. John Notaro. John is with the Buffalo Medical Group in Buffalo, New York.
They're a multi-specialty clinic in Buffalo, New York, one of the leading practices there. They've been on the agilon health platform in risk now, this is their third year. John is the medical director for the group, we'll be hearing from him. Next, we have Dr. Brady Steineck. Brady is in Akron, Ohio. He's been on the platform now in his second year on risk. He's a practicing PCP, is also the CEO of a very successful group there in Akron and a strong partner with agilon health. We'll hear from him. Finally, Dr. Leigh Frey from Austin, Texas, has been on the platform for five years. Leigh has a very interesting story in what she's been able to bring to our at-risk patients in Austin, Texas.
She has provided palliative care in a home visit program, which she'll share with you. Those are our three partners that we're gonna highlight for this investor day. John, I'll start with you. In the Total Cost of Care model with agilon health, I've heard you speak about the visibility into the longitudinal care of the patient, and also I'd like you to highlight how are the specialists in a multi-specialty group participating in the model?
Sure. The longitudinal concept is important in value-based care. Fee-for-service medicine is episodic. It mostly waits for someone to become sick before they enter the system. Value-based medicine, where we are bound, is longitudinal. Longitudinal means you make investments in systems that help you to risk stratify your patients, or in other words, understand more deeply who they really are, what their comorbidities are, and then match them properly to clinical programs that also require investment, that carry them through, that improve the quality of their lives through its full continuum, so longitudinal. You asked me the question about how do we layer specialists? I'm a primary care physician by training. I belong to a group that is a multi-specialty group, so although primary care is the foundation of value-based medicine, there is a place to layer specialties in.
We went to each of our specialty divisions in Buffalo, and we asked them that question: Tell us, teach us what role you think you play in value-based medicine. What will you contribute to the Total Cost of Care model? Here's what one of them told us, our orthopedic surgeons. Actually, we expected our orthopedic surgeons to talk about place of service, right? We expected them to say, "We can take some of our surgeries and bring them out of the hospital setting into the outpatient setting, ambulatory surgical centers." Of course, they did say that. They taught us something more, they went beyond that. They taught us something that we didn't expect, which is what happens after the surgery. Most patients, after a total joint surgery, spend some time in-home physical therapy.
There's a natural point where in-home physical therapy should transition to community-based physical therapy. In the fee-for-service world, that is largely unmanaged. There's a clinical good in transitioning at the right time, usually earlier than in the fee-for-service system, because in-community physical therapy can bring more to bear for the patient, that's number one. It also gets the patient outside of the home and back into the rhythm of their lives, which is key after a surgery like that. That's number two. By managing that, you can improve the quality of the patient's experience after that kind of surgery. That was an important intersection point where improving value for a patient in their life also reduces the spend in the system.
When we talk to one of our specialty divisions, we look for those points of intersection where those two things meet.
Thank you, John. Brady, I know since you've joined the agilon platform, you've spoken about your ability to expand your care team and the way you're working with multiple different members of the care team. Can you talk a little bit about that, what you're doing in Akron?
Yeah.
Before joining agilon health, we had already invested in building multidisciplinary, highly functional care teams within our walls. In a fee-for-service world, our resources and our outreach to be able to do that kinda stopped there. After the partnership and the resource that that brought, we've been able to outreach past our walls. We've been able to hire RN care managers and transitions of care nurses that are actually embedded in the area hospitals where our patients go. What's amazing about it is they're able to actually greet our patients at the door in the emergency room and help them navigate what can be a very scary and disturbing time for them, very disruptive in their lives. That's often a time where communication and continuity of care is completely broken down in healthcare. There's no communication between the ER and the PCP.
The patient doesn't know what meds they're on. They don't know that they've had duplicative testing, over and over again over the last few weeks. We're able to break down that barrier and create that communication where our nurse is following them and navigating them. If the patient's admitted to the hospital, that nurse follows them up onto the floor and is with them, in rounds with them, and sees them every day while they're in the hospital, and then is able to facilitate discharge planning so that they can be transitioned back into our office for follow-up very quickly after the discharge, which is, again, another very dangerous time for patients where medications have been changed, new physicians and specialists are now involved in their care, and so many miscommunications and mistakes can happen.
It's been hugely valuable for us with our team, also for our patients. I have a patient who is in her mid-80s, she's a widow, doesn't have a lot of support, very much leans on our team for her care, she was admitted to the hospital for a few days. It was an extremely scary time for her. When I saw her back for her inpatient follow-up visit, she handed me a crumpled-up business card, it was the card that my nurse in the hospital had given to her on her first day there that said, "My name's Lee. I work with Dr. Steineck.
He knows that you're here, and I'm gonna tell him everything that happened to you." She said that she literally clutched that in her hand for the 3 days she was in the hospital because it felt comforting to her that I knew what was going on. It's the resource of being at full risk, being able to expand care teams, being able to invest before the outcome, has been hugely impactful for both our providers and our patients.
Thanks, Brady. Leigh, as a practicing geriatrician, can you share with the audience about your home visit program, what you're doing in palliative care, how you're leveraging data?
Sure. You know, house calls have been part of the fabric of American healthcare from forever. It was, you know, it's something that we remember, right? The doctor doing the house call in the small town or... But it all but eroded over the past 30 years with fee-for-service, and not because it's not valuable to patients or to physicians. When at the partnership with came into our market, that allowed us to build a home visit program. The success of that has been enormous. I'll give you an example. For me, a patient of mine, I mean, he was 89, and he is 80 at the time, and he is diabetic, hypertension, COPD. I mean, he has a long list. His problem list is almost overwhelming.
He had been doing fairly well flags in the, in that probably six months to a year. Things like he was looking more disheveled. He was missing appointments. We were having to increase the doses of his medications, which is always a little bit of a, of a red flag. With the help of the partnership with agilon health, we had now had a house calls program. I was able to go do a house call and see him in his home. It became very apparent there that he was not able to take his medications. He wanted to, but he wasn't able to. With a complicated but simple, but putting together a program, we were able to start with one medication. We started with his thyroid medication.
We got rid of everything else, got rid of his consultants, and we came up with this plan, and he took his thyroid medication. About two months later, with his thyroid now regulated, he was much, much, much better. His, he still has some cognitive impairment, but then we were able to add in all of two more medicines and control his multiple comorbidities without the need of consultants. If we fast-forward now, we're in our fifth year with agilon health, and he is gonna be 93 in May. He still lives in his house that he's lived in for 50 years. His children are grown. When I look back at him, you know, he most certainly was headed towards a nursing home and would be dead by now.
When I think of the investment that agilon's made, it really brings that home for me. When we look at that, in part, I like to think about the clinical programs 'cause I'm a doctor, but I also think about, well, how do we know which patients to focus on? That's been a huge part that I never even realized was there and also just didn't have, as a physician, the ability to bring the data and analytics to show us which patients we needed to apply those programs to. You know, right, agilon's been working on an algorithm.
It's got over 100 different data points to help us focus on which of those home patients we need to target with our palliative care intervention, ideally before they even have the signs that my patient had, so that we can not miss that opportunity.
I would say that collaboration together has allowed us to have some really incredible results. Our readmissions after SNF have gone from 20%- 11%. Our the home visit palliative care program that I was talking about, we've been able to decrease the cost of total care by $21,000 for patients that are in our program compared to not in the last six months of their life. Again, when I think about agilon, it's been, it's been sort of life-changing for me and my patients.
Thank you, Leigh. John, as part of your group, you also have oncologists within your group, and love to hear, you know, with cancer being such a large part of the total cost of care, just how you're seeing your oncologist in the total cost of care model participating?
We do have oncology in our group. We realized actually with the data that agilon provided for us, that in spite of that, maybe 60% of our patients left our group for their oncologic care and went to referral centers. Many of them would come back to us, to the primes, and say that, "We don't feel that the communication there is what we. It's difficult for us to make decisions, difficult decisions." We created, we invested in a new role. We asked our oncologists to become oncology navigators for those patients. So they're not the treating oncologists. They're oncologists, but they're oncology navigators. Here's how that felt. Here's how that program felt for one patient. Recently I had, a patient who's an 85-year-old gentleman. He was diagnosed with lung cancer.
He went to a referral center to have his surgery. He had a section of his lung, a wedge of his lung removed to remove the cancer. When that was finished, those oncologists said to him, "Now we want you to consider chemotherapy too. We want you to consider that." He came back to me and he said, "John, I was taken back by that question. I thought that the surgery was curative. Now they're asking me to consider one step more, chemotherapy. I have friends who've been through chemotherapy. I'm 85. I'm not sure that's the experience I want at this stage of my life, but I don't know how to make that decision." I introduced him to our oncologist, our oncology navigator. He became a navigator for him.
Their conversation went something like this. Our navigator, our oncology navigator said, "I'm gonna frame some questions for you, and when you go back, I want you to ask these questions, and the answers will give you the context that you need. On the benefit side, ask them, 'If I stay where I am right now, having had surgery, but not yet chemotherapy, what is my cure rate over five years? If I take the chemotherapy that you're suggesting, what is my cure rate then?' That's your incremental benefit. On the risk side, ask them these questions. 'Tell me the three most common side effects that are associated with this chemotherapy. What is the probability that I might experience them, and what will it feel like if I do?'" When he did that, he came back to me and he said this.
He said, "Here's the answers I got. They told me that my cure rate right now is about 80%. That's my five-year likelihood of being cured. If I take the chemotherapy, I'll get a 3%-4% increment, so I'll go up to 83, maybe 84." On the risk side, he said, "They told me it's a 6-month engagement. It's a somewhat toxic chemotherapy. They told me to be prepared to not play golf this summer." Here's what he told me. He said, "I'm 85. I don't know how many summers I'll have left where I can play golf and enjoy it. I don't think I'm gonna miss this summer for the 3% or 4% increment that they're promising me." Now, we're from Buffalo, right? If he misses this summer, it's a good long wait for the next one.
That's his decision. He made that decision, but here's the point that I'm making, that we've invested in this position. We've created an oncology navigator position. It's actually distinct from the treating oncologist. That position, that person, gave him the context that he needed to make a decision that was consistent with his values. That's a gift for a patient. Most of the time, if you empower a patient to make a decision that's consistent with their values, it will also be a decision that makes sense in the context of the delivery system too.
Thank you, John. Brady, as you've, in the last two to three years practicing this model, you've seen ways that you're using nurse practitioners, ways you're using physician and nurse practitioner schedules to deliver better care. Love for you to share that with the audience.
Yeah. The transition to value and to full risk has really enabled us to really fine-tune and become more intentional in our care teams. Most of the time, nurse practitioners are added to a physician office to create more access for patients. Very often across the country, there's absolutely no intentionality or really purpose to how the nurse practitioner is utilized. Basically becomes an overflow. Whatever patients can't be fit onto the physician's schedule that day are then put with the NP. There's no rhyme or reason to it, and the patient that is sent to the NP could very well have a problem or set of problems that are outside of the scope of that nurse practitioner's training or experience.
It becomes a huge burden for both the patient to get the right care and on the care team, because the nurse practitioner then has to come see his or her collaborating physician for help, and it can disrupt the entire office. That's how it's done. In a fee-for-service world, that's the only way it really could be done because you're only paid to see visits. So it's see more patients, not do the right thing. Being in a full value risk model, we have the resource up front to say, "Well, let's think about what we're doing here." When you think about the NPs, especially the ones we have at Community Health Care, they have a nursing background. They've been in ICUs. They've been in cardiac units.
They are very good at counseling patients, educating patients, talking about their risk factors, talking about their social determinants of health. Data shows that they're better than doctors in many cases at regulating blood sugars, as Dr. Kornitzer talked about was so important. At Community Health Care, we decided, well, let's pair up those type of patients with those kind of providers. We have tasked our nurse practitioners with taking 30 and 40 minutes to sit with chronically ill patients to educate them. The diabetics are learning how to inject insulin. Heart failure patients are learning how to manage their medications and weigh themselves daily. They're taking that extra time.
That enables us as physicians to be freed up to do things like see acute visits, the patient with chest pain, the patient that's very, very sick coming out of the hospital, and has had this huge domino effect of positive outcome in our patient satisfaction and in utilization. If my nurse practitioner is spending 40 minutes with a chronically ill patient, getting them under control, that frees me up to see three or four patients that are acutely ill that might have went to the emergency room or someplace where no one knows them, and they're getting care that isn't consistent with their goals. We've seen huge outcomes from this. Our cost of care has gone down dramatically. Our quality scores have gone up, and our patient satisfaction scores are very high because of this model.
Being at full risk and having the resource up front to do this and to be paid for the outcome and not the visit in the office has enabled us to work on how to be intentional with this model.
That's great. Thank you. Lean, we heard from Dr. Kornitzer that one of the things at agilon health with our national scale that we've been able to take to many of our markets is a renal care program for our sickest renal patients. I know we've done that in Austin. Would you please talk to the crowd about that?
Sure. In Austin, I've been in practice there 17 years, and I can tell you we have really good nephrologists. We have a couple of really solid groups. They are wonderful, well-trained, and evidence-based. We even have a medical school that they help teach at. Don't have very good outcomes. And I think a lot of that comes, again, back from you hear the sort of fee-for-service model, that they just aren't able to take that extra time that's needed to see those extra patients. With investment from agilon, we now have a renal program, which is similar to having the oncology navigator. We basically have a nephrologist that has a team that is the navigator for the patients, and they're able.
Just medications early on, get them in so that we are seeing much better results so that, you know, we're not having people that crash into dialysis in the hospital. We're having people who don't really meet criteria for dialysis. Having those conversations early, being able to get plugged in for symptom management so that they can have the best quality of life for them. People that are, if they are a candidate for dialysis, having that conversation, getting their vascular access early. Again, I feel like without the extra added resources to be able to do that, the healthcare system, the fee-for-service system just didn't have a way, despite the intense desire on our part as physicians, again, the nephrologists and ours, to make that happen.
It's been really rewarding to see the results.
That's great. Thank you. I think now we'll take a few minutes, 10 or 15 minutes, to take a few questions from the audience.
Yeah, and there's a couple mics floating around, so why don't we go to this gentleman up front in the front row? Good. I think Izzy's coming. Izzy, if you'd come right here. Thank you. All right, Jason.
Great.
Fire away.
Hey. Thank you so much. The panel was great. It's pretty universally acknowledged that the most important thing for a value-based model is the impact and influence of primary care physicians on the patient and their behaviors and activities. If you think about your mentality as primary care physicians in a value-based, in a full-capitated value-based model, as an independent physician group, when you talk to your colleagues who are in different models, whether they're employed in a hospital system, whether they're employed physicians in a clinic model like Iora Health, what are the differences that you can kind of tease out in the way that you approach this world as opposed to maybe some of your other cohorts or counterparts that you went to med school with or chatted with about the approach to value-based care?
The second question is that if you could talk directly to the heads of Medicare and CMS and opine on what they should be doing to encourage even a faster move to value-based care and the ways they're trying to do it, Medicare Advantage and ACO REACH, what would you say to them?
Ray, you wanna take the first part, and then-
Sure, I can take the first part. I think, you know, for us, the behaviors of physicians and providers in a full risk model are completely different from a fee-for-service. We were just talking before this morning about a practice in our market that was bought by a large group that owned them and actually gave them visit per day quotas. In a fee-for-service world, that's how medicine is done. You're doing widgets. You're creating visits and codes without any really knowledge or care for the outcome. In a full risk model that's fully capitated, that visit is just a very small part of the bigger picture, and it makes the physician and the care team really be cognizant of the entire patient on a longitudinal, like John talked about, in a longitudinal timeframe.
It gives us payment and alignment with the outcome. That's what we want the medical school to do. We want to take care of people, not to click boxes and do more visits. We've seen a huge increase in our physician satisfaction because they're able to now do what's just best for the patient, whether that's a phone call, a home visit, the navigator. We don't care who sees the patient as long as the patient's getting what they need, because we have the security of being compensated for that on the back end by being at full risk and by decreasing their utilization and doing what's best for them. It changes the mentality completely.
How about other physicians that are in value-based models, but as an employed physician, whether they're in a clinical model.
Yeah. As an, as an employed physician, they usually aren't being given access to the full risk that we are. They're giving some upside only. They're still, if they're owned and employed, there's still an unspoken, potentially, mood of feeding the system.
In my role as a chief clinical partner with Ben and Jeff and the BD team, we're able to interact with all of those archetypes of the physician groups. Really, the employed physicians have the same problem they're trying to solve in primary care, the hospital systems, as our independent groups do. They have the same pressures of labor costs, reduced reimbursement, et cetera. I think in order to get a sustainable primary care model to help feed their system with the patients and take care of their communities, they're needing to solve for this as well. That's how they view it.
The primary care physician may not have the business pressure that Brady's talking about, but I tell you what, those primary care doctors at MaineHealth and at Premier and Holland are awfully excited to sit down with the CFO during budget season and talk about resources going into primary care that's improving their lives and their patients' lives, staffing differently. Often they're understaffed, and primary care is considered a loss leader. I think it's just different stakeholders solving the same problem, is how I would view it.
It's a great question, though, right? The other system that has the size and wherewithal to contemplate risk would be a hospital system, as you said, as you asked. They typically employ physicians. That's in contradistinction to this model. This is a partnership model with Agilon. The physicians are not employed. They're independent physicians. They're partnered with Agilon. They co-invest in systems. It's a great question. Now, you said, what are the differences? Well, here's what I think the differences are. If you're a physician, and you're employed by a hospital system, and that system is contemplating risk, you are probably. Most hospital systems pay their primary care physicians on an RVU basis, you're basically still in a fee-for-service mode. You're not really in a capitated mode, number one.
Number two, most hospital systems are constrained in their journey to value because many of the things that we would do to increase value for patients and reduce expense are taking things out of the hospital system and putting them into an ambulatory setting. Because of those two constraints, a physician operating in that setting, I think, my opinion, will find themselves much more difficult to get to the endpoint in full risk, to really come to have that come to fruition, as opposed to this system, where we are independent physicians, not employed, but partnered and co-investing with Agilon. Don't have those constraints, and it can come to its full fruition.
All right, Jason. Thank you. I was gonna let another person ask a question. I saw Gary Taylor with his hand up over there. Gary, why don't you go ahead, please?
Hi, thanks. Maybe this is mostly to Dr. Notaro, just because of the multi-specialty. My question is, when you think about the impact that specialists can have, are you going to the discussions of, like in your orthopedic example, therapy versus surgical, or in cardiology, pharmaceutical versus procedural or stent versus surgery? Like, does agilon health provide tools or training or help to kind of have those types of conversations? My second question, just for the whole panel, would be, now that you're doing all this really great and powerful stuff, for your MA patients, how is that impacting, you know, how you treat your Medicare fee-for-service patients, where you're not necessarily having the same economic incentive or opportunity, but does it...
Do you end up treating them, you know, basically the same and giving them the same benefit of this kind of longitudinal care?
I'll take the part A. I think the question you're asking, let's run with orthopedic surgery since that's what I introduced earlier. I think the question that you're asking me, I just wanna make sure I understand it, is have we engaged our orthopedic surgeons around the concept of therapy for joint pain and maybe not even doing the surgery or not doing it yet? The answer is yes. That's something that obviously you could never have done in the fee-for-service world because they simply get paid for doing surgery in the fee-for-service world. In the value-based world, you can begin to contemplate that, right? You can begin to say, "Look, we've got a primary care base of 25,000 patients. We're going to prepay you.
We're going to capitate you in a sense for managing joint pain. You won't lose any money because we're gonna prepay you by not doing a surgery if you think that's the appropriate way to approach this patient's joint pain. If you think physical therapy ought to be coming first, do that, you will lose nothing by doing that. Absolutely. We're actually reshaping the payment model, beginning to. In primary care, that's pretty far down the road. In specialty, we're beginning to do that too.
Kevin, did you wanna maybe provide a little bit of setup in terms of how our physicians are treating their Medicare fee-for-service when they're not at.
Yeah. So many of our markets are also participating in the ACO REACH program in the agilon model. And we see that being advantageous from a physician mindshare perspective that they treat all of their Medicare folks the same. In every one of our offices, as we put in care management, pharmacy services, navigation services that we've discussed, social workers, I see all of our partners just offering that across all the entire set of patients. I know Brady does that in Akron. You know, it just so happens that given the Medicare age, more of them based on the age and their burden of illness need the services, and a smaller percentage of the commercial patients need that, but we're doing that.
In most of our groups, while we're not in a full risk model in commercial in many instances, we are in upside risk, and getting some upside, so we're seeing all boats rise. Generally, the agilon health partners, when we implement a clinical program, they offer it to all of their patients. It's just the Medicare Advantage and Medicare subscription model economics is what's funding it. We offer it to all the patients.
Maybe one or two more questions before we go. I saw Sean Dodge's hand up first.
Thanks. You talked about the investments back in your practice that partnering with agilon health enabled. Dr. Frey, you talked about the home-based care, and Dr. Steinick about extending beyond the walls of your practice. Where do the ideas for those come from? Like, are those ideas that agilon health came to you with or something that you'd always wanted to do kinda independently pre-agilon health? I guess, how much creative authority do you think you've been given with these?
I'll take that. you know, I think that one of the wonderful things about the agilon model is that it places a significant value in physician leadership. We, you know, as physicians, all of us here have been leaders in our group, but also know our communities well. We've been in our healthcare communities long time. We know the resources available. We also know the medicine behind it. We even know, you know, evidence-based medicine to be able to do some of the research. There's a huge value placed on our ability to bring to the table, innovative ideas.
I can speak from my perspective, it's been really nice and really great to have the resources of an entire almost 14 different states and 30 different other physician leaders to bring us together to bounce those ideas off of. You know, we were in our own practice, I know what it's like to have to pay the bills, right? I certainly don't wanna go make sense. I wanna be able to test that and talk about that with my colleagues, both on the finance analytics side as well as all of the physicians. That is a huge resource, and I really don't know where else I would be able to get that as a geriatrician in Austin if it weren't for this, you know, this for the relationship with agilon health.
You know, I think that's one of the difference. When you talked about the employed physicians or the fee-for-service, people are still in that model. Like, I think in that model, you think, "Okay, what can I do to make this patient's health better?" You never really think you can count on a team. If you work for the hospital, you're like, "Well, I mean, I could, I guess, send, you know, write up to the quality officer and say, 'We need to change this.'" There's this sort of defeatist feeling. That has been gone since we have moved into the agilon health partnership. There's a real excitement about really being able to create new systems, which has been great.
I mean, I think we've had some innovation and ingenuity within agilon health. There's, again, that network effect that Dr. Frey's talking about, where we bring the groups together across the country has been very, very powerful. I think really specifically to the platform at agilon health getting smarter and smarter is that only works as good as us enrolling the right patients. The programs themselves are less intellectually deep in their concept. It's the taking care of patients, we know what to do. We needed funding, we needed data to go after the right patients, we needed to reduce the execution risk by networking with one another and understanding how does the business of doing that well work so that you get the best outcome of the patient, which then, and the financial results follow from that.
One thing I'd like to add as well is that agilon does a great job of being collaborative as a partner. There's embedded agilon staff in our market, but if you ask some of the people in my offices on the ground floor, they don't know who works for agilon and who works for us because they're in our office, they're integrated together. The other thing is whenever we do wanna try something or we see an opportunity to do a clinical initiative, usually the default answer is, "How can we do that?" Not, "No, we don't wanna do that." There's a posture of innovation, and there's a posture of, "Let's try that." To Kevin's point, it really, you know, for us before the agilon partnership, it was riskier because we didn't have data.
We didn't know if the initiative we wanted to do was really, number one, truly needed, and number two, would it work? With enhanced data, we're able to really target new things to say, "Okay, these are the patients we're gonna use this for, and this is how we're gonna roll it out." It really allows faster innovation at a more successful clip than before.
Unfortunately, I'm gonna have to move us along, but the panel will be available for the second Q&A session at the end. If you all could join me in thanking these physician leaders for their. Up next, we've got Ben Shaker, our Chief Markets Officer. He's gonna lead also a discussion with several other leaders about the evolution of our platform. Ben, please take it away.
Good morning. Really great to see everybody again. I'm our Chief Markets Officer at agilon health. You know, basically, I work with our partners, our leaders, and our teams across all of our geographies. Really excited to kind of walk you through where we're at and how far we've come. I'm gonna build a lot of what you've already heard this morning. Three key takeaways that we're gonna walk you through. First is our model is driving consistent outcome across our diverse set of geographies. We're gonna walk you through what that operating system looks like to enable those outcomes. Second, really excited to have Dr. Patrick Goggin join us this morning from his role as a practicing physician in Southeast Ohio.
He's going to talk to you how that model and how that operating system is actually transforming patient care within his community. Third, our platform is getting smarter. Girish is going to talk to you about how that system continues to get better and better, and some of the investments that we're making in technology and data to make that happen. I started in agilon health back in 2017, right after the formation of the company. I was hired to stand up our very first partnership market in Columbus, Ohio, with Central Ohio Primary Care. Our aspiration at the time was to demonstrate that we could take a scaled risk model and bring it into a non-traditional geography like Columbus.
At the same time, we were focused on building out the foundation of our platform that would allow us to drive performance and growth at significant scale. A lot has changed over the last 5 years. We've gone from 1 partnership market back with COPC, where we started, to now we're operating across 32 geographies. We've gone from working with 4 payers to 28 payers. We've gone from, again, that starting point working in Columbus with 180 partnered primary care physicians to now working with more than 2,700 primary care physicians across our network.
Against that backdrop, regardless of how many primary care physicians we're working with in each of our markets, the dynamics in the market that exist, or the type of partner that we're partnered with, we're deploying our model on a very consistent basis, which is leading to strong outcomes across those geographies. In order to really understand the progress we've made and the results we're delivering, I think it's important to take a step back and understand what we're showing here. These blue dots represent individual physician performance, and the starting point that we're looking here is what we call our year 0 or the year before we actually go live with our partnership. You can see 2 important measures that we track here.
You heard Dr. Kornitzer and Heidi talk a lot about chronic care management, as well as access to annual wellness visits and valuable visits. What really jumps off the page here is look at the inconsistency of performance. Highly variable, lack of consistency, and overall, probably not the performance that we would expect. That's what our business model is solving for. If you fast-forward, those same blue dots are now green, and you can see a much different picture. This is data from 2022, our last full year of results. Those same blue dots that you saw have turned green, and you see much less variability. You see more consistency, you see better performance across these metrics, and they've moved to the top, right-hand, end of the graph. The same thing in terms of some of our key quality metrics.
Again, Heidi talked about the strong performance that we're driving in aggregate across all of our markets. When it comes to being able to manage that and drive that performance, this is how we look at it. We look at it on an individual physician basis and measure our ability to drive variability out of the system. What does this tell us? This tells us that we're doing better than CMS benchmarks. We're operating at a four-star level. Again, you heard Heidi talk through it, but for these two measures. We're getting there by being able to manage at an individual physician basis to drive that consistency. How do we do it? We deploy a common model across all of our geographies. It's actually anchored by a pretty simple algorithm that we deploy.
First off, in all of our markets, we have the same operating structure. If you look at Pittsburgh, if you look at Austin, Dr. Goggin's gonna talk about Southeast Ohio, it's all the same. Where we started in Columbus, this was our model. I was actually the operator that operated in that dyad structure with our physician medical director. Today, this is deployed across all of our geographies. Second, we're providing a comprehensive view of the patient population. Girish is gonna talk about just how hard that is. The number of sources of data that we're pulling together, the fragmentation that exists inherently in the current system or the historic system. He's gonna walk you through exactly how we make sense of all that information.
Our ability to get insight into the patient population. To understand who the high-risk patients are, who are the patients that need intervention, Dr. Goggin is really going to bring that to life for us. Finally, you've heard this a number of times this morning already, we are building out care teams to enhance the resource outside the walls of the primary care office. Finally, all of this is managed and measured through a common operating system. Regardless of market, regardless of partner type, we're measuring and managing the business in a very consistent way. We're taking advantage of the fact that we have such close proximity to our partners. We can measure things like high risk, primary care touch points, the % of gaps we're closing. We're doing that on a daily basis.
At the same time, we just talked about variability. We're looking at Medical Loss Ratio on an individual physician basis and understand how that's driving overall performance that Tim will talk about later in the presentation. To really bring this alive, again, really excited that Dr. Goggin is joining us here this morning. He's gonna talk to you about what this operating system and what this model, what it's meant for his practice, for his patients, and his overall community.
Thanks. Thanks, Ben. It's great to be back again here this year and to have the opportunity to share the story of growth and evolution of our market. I'm a primary care physician and a member of an IPA that's comprised of 37 independent PCPs. Most of us are in small one and two doctor practices. We're scattered across three counties in rural southeast Ohio. We formed that group in the early 2000s, primarily to negotiate more favorable commercial contracts, and we were successful. The economics of primary care changed. We found to keep our doors open, we were forced to see more and more patients in shorter, more compressed visits. Meanwhile, our patients were getting sicker, older, more complex. In 2019, we partnered with agilon health, and that partnership has unlocked a novel approach to healthcare for us.
Now, you see small, but now we're growing. Before, we had fragmented technology. We still had five practices on paper charts, and the rest were scattered across nine different electronic health records. Now you can see we've coalesced to two electronic health records unified by one practice management software. Before, we had minimal clinical integration. We were just independent practices doing the best we could, taking care of our patients with little data outside of our patient charts, no analytics and no cohesive strategy. Now, we understand that optimum management of our patients requires a team-based approach, a shared strategy for managing seniors. The backbone of that strategy is a centralized multidisciplinary care management team. RN care managers, care coordinators, social workers, clinical pharmacists. This team has a line of sight to our high-risk patients. They maintain their focus through daily huddles.
They have constant contact with our patients, our practices, and our PCPs, carrying out and coordinating the individualized care plans. Here's an example of our evolution. This graphic shows patient access as measured by frequency of quality visits. A quality visit is an individual one-on-one between the patient and their PCP. We schedule their preventive maintenance. We assess and manage their chronic conditions. We assess their risk score and update their care plan. Through teamwork, physician engagement, and practice transformation, we've dramatically increased the frequency of these visits. You can see the same for quality care. We have accurate care gaps at the point of care. We're working as a team, collaborating around things like staff training, improving office workflows, refining our technology, and all of that is driving very meaningful outcomes for our patients. We've talked a lot this morning about data.
I've shown graphs and scatter plots, but I'm a doctor. At the core, this platform is about empowering doctors to better care of patients. This is about people. Let's take a look at some of these people. I live and practice in my hometown, Cambridge, Ohio. I lived there my whole life. It's a small town, about 10,000 people. I've known many of my patients for decades. I've been their primary care doctor for 20+ years. They might've been my grade school science teacher, or I played high school ball with their kids. I see them in church on Sundays, and it takes me a few extra minutes to get to the grocery store. Sometimes it feels like I'm making rounds in the produce section.
I know these people, what I didn't know sometimes was that which was preventing my quality care for them. It's starting to look back now on how often we didn't know when they had been hospitalized or when they were seeing a specialist who was ordering tests and managing and changing their medications. We didn't even know about it. "You know, Doc, I was in the hospital last month. I was sick with pneumonia. They said something about following up on a lung nodule. You knew about this, right?" "No, I don't have any of that here." This happened all the time, okay? We have external lab data from multiple sources integrated right into our chart. One of those tells me that she's probably developing cardiac strain. Claims data tells me that a cardiologist the next town over recently diagnosed her with heart failure.
At the same time, a peer physician, one of my partners, is able to review her chart before her scheduled appointment and alerts me to important clinical information that might have been missed otherwise. In this case, a significant carotid blockage that needs follow-up. At the same time, a risk score right in the chart generated by agilon's algorithm tells me that now as a rising risk patient, she needs a more high level of coordinated care. This data integration dramatically changes what we do at the point of care. "Okay, Agnes, I see now. Here's what we need to do. Our care coordinator is gonna reach out to cardiology. We're gonna get that information, complete your clinical record. We're gonna order that carotid duplex, follow up on that. We need to make a couple of medication changes, and I need to see you more often.
Let's see you back in three months, circle back, follow up on all this, make sure we're on track. Okay? Okay." All right. Like Agnes, I would have known Valerie for years. I knew her well. I could tell she was getting sicker. Maybe she and I have been working together trying to manage her diabetes, her depression for years, but not seeing the outcomes that we had hoped for. The data integration tells a more complete picture. Real-time alerts to hospitalizations and ER visits tells me that she's recently been admitted for heart failure. At the same time, I get a med adherence alert from the payer, tells me she hasn't even picked up her diabetes medicines in three months. Again, a more comprehensive picture of her health status alerts us to the fact that she's now a high-risk patient.
That spurs me to develop an individual high-risk care plan, and that deploys our care management team to carry out that plan and coordinate it. For her, this includes care coordination with her specialist. We enroll her in our med adherence program. That means our pharmacist reaches out to her, connects with her, better understands what challenges she's facing. Is it cost of medicines? Is it side effects? Some other obstacle? We optimize her touchpoints. We know that I need to see her back every two months until we get this stabilized. Sometimes more immediate intervention is required. On a Monday morning, our care management team is alerted that George has just been admitted to the community hospital. Immediately, our transition of care nurse reaches out, connects with the inpatient team, gathers data.
It tells us he's been admitted with acute kidney injury, and he's got an infected foot ulcer. Furthermore, we know now that this is probably driven by housing instability and inability to pay for medications. At the same time, our RN care manager reaches out to me, tells me he's been admitted, secures an appointment with me in the hospital. I'm sorry, in the office for discharge follow-up within two days of that planned discharge. That appointment's scheduled before he even leaves the hospital. She also enrolls him in our kidney health program. A social worker reaches out to him, connects with him and his family, organizes and coordinates community resources, provides options for short-term housing, and outlines a strategy for more affordable medications. These patient cases demonstrate how far we've come in just a few short years.
In each case, care was improved because we have more comprehensive patient health information, including real-time alerts to let us know when they're in crisis. This allows us to identify and focus on our rising and high-risk patients. Now we have a wide array of clinical resources available to intervene and meet their unique needs. With agilon health as our partner, we're setting a new standard for primary care in our region. Thank you.
Great. Thank you, Dr. Goggin. Next up, Girish is gonna talk to us about how everything that Dr. Goggin just talked through, how we're enabling that, through data and technology. Girish.
Thank you, Ben. Dr. Goggin talked about how data and insights is making a difference for him in his care of patients. Let's talk about how we actually do it. It starts with data. We assemble data, integrate data from over 660 physician offices, 170 and more EMRs, 130-plus health plans and sources and regional plans and what have you, health information exchanges, and then a bunch of lab data and pharmacy data. All of you are wondering, the one thing that's synonymous with healthcare data is that it's messy. 660 offices is incredibly messy. 175 EMRs. Anyway, this is where our secret sauce actually amplifies. Every stage of our system, we run a massive amount of quality checks.
In 1 of the largest systems we have, we run over 2,000 automated quality checks. Every single second, every time the data traverses through our system. On top of that, we apply a proprietary set of matching techniques to ensure that that data is matched to that exact patient for that exact episode of care. We assemble a comprehensive patient information that we then use to derive insights that we deliver to the point of care at the time of care. As Dr. Goggin said, for better care. This is 1 patient we talked about so far. Dr. Goggin and everybody else, if they truly have to practice value-based care and improve health outcomes for their community, they have to think about their entire panel. Could be 1,000, could be 2,000, sometimes even more.
They have to worry about who are the ones that have high number of chronic conditions. What are the ones with higher acuity needs? They have to worry about who just saw a specialist. They have to worry about who just got discharged from the hospital this morning. Probably the worst of all, the ones who have simply not come in for a while. They have to do that every single morning. I ask you this, how many physicians do you know that do this daily, that have the ability to do this daily? Friends, this is where we use our artificial intelligence models. We sift through this data every single day, and from there, we discern who are the patients that people like Dr. Goggin has to focus on for that day. Who do they need to spend more time with?
Who do they need to have come in urgently every single day? To the answer to the question of how many doctors do you know, chances are you are probably thinking the answer is zero. The good news is that there are at least 2,000 doctors in the agilon network that have this information daily. Here's the thing I'll say. The single most valuable thing in healthcare is the time the physician spends with their patient. We spend a megaton of energy optimizing for that time and making it as efficient for the patient. We do that at scale. Over the summer last year, we sunset all of our data centers, and today we are 100% on the cloud. Infrastructure that used to take us weeks, sometimes months of planning, we do that in milliseconds now.
We've automated a lot of our data integration and synthesis. New markets, we used to take 7 months to stand up a market. Today, we do that in four months or less. What's wonderful is we acquired this absolutely awesome company called mphrX. They have this fantastic capability called Minerva that's been deployed in some of the leading health systems here in the U.S. We love three things about them. One, they have an amazing toolbox for EMR integration. What that means to us is that we can stand up markets even faster. Second, they do a fantastic job of processing the interoperability messages that happen in the health system. HL7, CCDA, you name it. What that means for us is that instead of daily insights, now we can get real-time insights into our patients.
Third, they look much deeper into the EMR, so we get a much more comprehensive data set. Faster, better, smarter. Here's my concluding comment. It's probably the only takeaway that probably matters, is that technology is at the center of everything we do here at agilon health. It is making a real difference to our physicians in their care of patients. As a technologist, with all the exciting things that's happening recently in technology, ChatGPT, Bard, pick whatever you want, we feel that we are well-poised to take advantage of the future. Thank you.
Great. Thank you, Girish. In closing, couple of key takeaways. Common model driving consistent outcomes across our diverse markets. That model is transforming patient care across the communities. As you just heard from Girish, that model continues to get better and better as our platform gets smarter. With that, really excited to invite Veeral Desai up on the stage. He's gonna talk to you about how we continue to inflect and talk about our continued growth story.
Thank you, Ben, Dr. Goggin, and Girish. I'll move forward. I'm Veeral Desai. I lead the strategy, development, and payer segment for the business. I am absolutely thrilled to be here again today. I'm fortunate to have been with our team since the inception of the company and to be able to watch firsthand the evolution of our network and our platform. As you heard today from so many of our wonderful physician partners and from Steve, we are very proud to report that our network is thriving and that our opportunity is actually bigger than what we reported this time last year. Three takeaways. We talked about an inflection that was happening in the market. That is occurring. Our network is growing dramatically, and the market has inflected as primary care, value-based care is mainstream. Our total addressable market has grown dramatically.
That's demonstrated both through the opportunity available to us through the addition of the new health system segment and the massive opportunity available to us in our existing geographies. Finally, by virtue of the Class of 2023 and Class of 2024, we have exceeded our growth targets. At the core of this inflection in market demand is what we've been talking about all morning, an unsustainable primary care business model. Flat compensation, rising labor costs, explosive growth in their underlying senior population, which from a PCP's perspective is unfortunately their most unprofitable line of business. All of those things translate into burnout, a major exodus of primary care physicians from the field, and fundamentally, an unsustainable model.
There are 200,000 primary care physicians in the country. Less than 10% of those are in full risk models. Our model, our partnership model, is the scaled solution for primary care existing capacity in this country. The success of our partners and the experiences of our partners, which you heard firsthand through the physician panel and Dr. Goggin, it is driving significant network effect, and it is dramatically expanding our competitive advantage. Our conversation with prospective groups has fundamentally changed.
When I sit down now with a group, let's say we're meeting with a primary care group with 50 providers on the athenahealth EMR, I can now point to that physician or that group to 12 primary care only groups, three groups that are on an athenahealth EMR, 13 groups that have the same group size and composition, and moreover, point them to a specific partner with a common set of partner and market characteristics. More powerfully, I get to introduce them to that partner and have them sit down and share what their experience in the network has been and how it's transformed their practice. That has resulted in a fundamental acceleration of our sales cycle. In the second half of 2022, we had already locked in four of our groups for the class of 2024.
We have a five-person partner development team that is driving over $1 billion in new market revenue a year. Most impressively is what you see on display here today, our superpower, the physician network, a group of aligned physician leaders that are fundamentally changing their communities and able to share directly with others their decision to join and their experience on the platform. I'm excited to share with you now the perspective of some of those partners, both new and existing, in the following video.
What I think is the benefit of choosing agilon health over other options in the market is that agilon health's model is the only one that doesn't own the physician. Agilon health is a partner, and in our market in Ohio, the people that agilon health have put with us to help us perform have been nothing but great partners. agilon health's model is nimble, it is growing quickly, and it enables doctors so that they can still control their own practice and the way they deliver care without a lot of the barriers and restrictions that were on them in previous models.
agilon health comes directly to the physicians and wants to build a better healthcare system with us, which makes a lot of sense that the people that understand how to take care of people's health needs, the physicians, be at the forefront of that.
Our purpose for existing in our markets is to help communities thrive. When agilon health comes in and speaks about really at the core helping communities thrive, really a quick mesh. The second thing is our number one core value is that relationships matter, specifically that physician-patient relationship that in primary care uniquely is longitudinal versus most anything else in healthcare. The idea that agilon health would honor that in a way that really invests in that relationship, which is what Catalyst has always tried to do, really created a quick sync from a marriage standpoint to know that we had a foundation that we could build on.
We could have been owned along the course of the last 30 years with multiple offers from different companies. We always turn those down because we always felt like those companies had a completely different mindset of what success is. For us, success is taking good care of people and putting the patient at the center of our work and creating relationships with patients in a way where they can trust us. With the means that we're provided through agilon health and that partnership with Catalyst, it's creating a new way for us to practice in a way we can achieve better results.
Everyone enters into this partnership for slightly different reasons, ultimately, we're all aimed towards the same thing. We wanna shift the value. We wanna change the way we're providing care. You can lean in on all these people from all across the nation who are sharing your values, and they're sharing your vision for how to transform primary care. This is healthcare reimagined.
Great. You heard directly from our partners, our network and our network effect is increasing. We started in Columbus, Ohio in 2018. We now span five markets with five terrific partners across the state of Ohio. We moved to Austin, Texas in 2019. We now span six geographies across the state of Texas. 32 markets, 14 states. Our platform is inflecting, and that is evidenced by the class of 2023 and the class of 2024. We are doubling the business, going from $2.7 billion in 2022 to over $5.5 billion in 2024. More importantly, that growth is being driven by high quality, world-class physician organizations spanning diverse market archetypes with classes that continue to grow in scale and diversity. Our total addressable market is expanding with the inclusion of the health system segment.
Last year at this time, we announced MaineHealth. We can't understate the significance of the health system segment and the commonality around the issues facing health systems and those facing our community-based medical group. They too face a crisis around addressing primary care sustainability. They too are challenged with accelerating labor costs, and they lack a Medicare value strategy. This has been validated in our experience at MaineHealth. They have a common DNA, a terrific leadership structure. Today, we're proud to report we had an excellent implementation phase, and in year one, we are driving comparable operating performance to our medical groups. Much like Columbus in 2018 formed this powerful proof point for what the opportunity was in medical groups across the country, MaineHealth serves as that proof point with health systems.
Today, we're very proud to announce the addition of two additional health system partners, Premier Health in Dayton and Holland PHO in Western Michigan. This reflects the changing mindset among health systems and the opportunity and the unmet need that we believe that's available in this segment. We have also demonstrated the ability to access the significant total addressable market in our existing geographies. Dayton, Ohio, this is a very powerful example. We created the market for risk in Dayton. We entered with a strong independent group, PriMed. We did that in 2020. In 2021, we expanded with them into the ACO REACH program, operating a single line of business across the entire Medicare population. Here in 2023, we're proud to report that we are now adding Premier Health, the leading local health system in that geography.
In Dayton, Ohio, we now have 39,000 lives in a market that is 191,000 lives. By way of reference, the largest payer in that geography has 44,000 lives. In a seemingly small market, our opportunity for care delivery transformation to impact communities at scale is reflected in our success. It's reflected in the competitive moat that we've built locally and the power of our first mover advantage in these highly attractive geographies. Western Michigan, a second example. We entered with a scale physician organization, an IPAPO called Answer Health. We have now added another health system partner in the Holland PHO. That gives us 42,000 lives in a market that we entered 14 months ago. That's against the backdrop of a total addressable market of 440,000 lives.
While we have 42,000 lives in that geography, we are early in the opportunity in Western Michigan. This example and Dayton are really representative of the massive opportunity that's available to us across all our geographies, which is what Steve talked about. We have 2,700 physicians on the platform. That is against the backdrop of 33,000 physicians that are available just in our existing geographies. Half a million lives against the backdrop of 10.5 million Medicare-eligible lives in our geography. That's less than 5% penetrated. All of this to say we are very early in the life cycle of our markets, in the life cycle of the care delivery transformation we're driving locally, and the overall growth opportunity for the business.
Finally, what is the benefit of the outsized growth that we have driven through the class of 23 and 24? Bringing on scaled classes, highly attractive geographies. Importantly, we have significantly de-risked our path to 2026. We already sitting here today have 550,000 lives in our installed base for 2024, and that's thanks to the outsized growth I talked about in 2023 and 2024 classes. That positions us incredibly well against the 750,000 lives that we set forth as our 2026 target, and we talked to you guys about at the last Investor Day. It's also informing why we are raising our expectations for 2026 to 850,000 lives. What's the power of that outsized growth? More physicians on the platform, more members on the platform.
We are accelerating our flywheel. We are growing our competitive advantage. We are enhancing our impact quotient at the local level, and importantly, we're dramatically enhancing the growth and the earnings potential of our business. I can tell you we are incredibly excited, as evidenced by the physician panel and the energy that exists within our network. We believe we're early in the journey of the impact we can have in our communities, and we're thrilled by the trajectory of both our network and our platform. With that, I'd like to hand it over to Tim Bensley, our CFO, to review our financial performance.
Thanks, Veeral. Good morning, everyone. I'm Tim Bensley, agilon health Chief Financial Officer. It's great to see everybody back one year after our first Investor Day. I'm really excited to have the opportunity this morning to update you on all the progress we've made over this last year, as well as the opportunity to share with you our improved financial outlook. Okay, three key themes I want you to take away from my talk today. Adjusted EBITDA at agilon health is inflecting in a positive way. That's a function of our accelerating growth, our improving unit economics, our maturing membership base, as well as our continuing operating leverage. All of that gives us high confidence in our 2026 outlook for members, medical margin, as well as overall profitability. We're doing this in a capital-light, high-returns model.
We're well-capitalized today, we expect to be generating positive cash flow in 2024 and beyond. A couple of important points to remember about how the agilon health model drives financial outcome. We enter into long-term, 20-year partnerships that build strong alignment between agilon health and our PCP partners. We have high visibility into both future members and revenue. Our model's capital light. We don't build clinics. We enter markets through our existing PCP capacity. That results in really low customer acquisition costs, high member retention, and that translates through to very attractive unit economics. We have significant margins embedded in our current membership. More than 65% of our current members have been on the platform for less than three years, and of course, those margins improve over time as those members and markets mature on the platform.
After a significant pickup of $43 million to get to positive adjusted EBITDA in 2022, we're projecting an even bigger inflection of $80 million to get to our 2023 adjusted EBITDA guidance of $75 million-$90 million. That's really a function of the acceleration in member and revenue growth that we've seen since our first market went live in 2018, with a revenue CAGR of 50% over that time period. That's gonna inflect up then to over $4 billion of revenue in 2023. When you consider all the members that we have live on the platform today, as well as all the members that we're implementing in this large class of 2024 that Veeral just talked about, we have clear line of sight to agilon health as a $5.5 billion revenue company today.
Medical margins growing at even a faster rate, with a 60% CAGR over that same time period, and we expect medical margin dollars to inflect up to about $550 million in 2023. That's an 80% year-over-year increase from what we just reported for 2022. I think that's a real hallmark of the agilon model, our ability to grow medical margin at the same time that we're growing membership. I'm gonna go into a bit more detail in the four key drivers of agilon profitability over time. Our ability to continue to add members to the platform, which we are doing at an accelerated rate.
Progressing medical margin at both the market and member cohort level, which we're doing consistent with our target of getting to $150-$200 medical margin PMPM blended across markets over time. Our mix of more mature, higher-margin markets is increasing over time. We see leverage, operating leverage against both market and corporate level, with really significant flow-through of each incremental medical margin dollar to agilon health-adjusted EBITDA. As Veeral just talked about, our membership growth is accelerating. It's accelerating at an even a faster rate than we expected a year or two ago.
That's a factor of us going from 17 geographies served in 2022 to 25 now live in 2023, and with all of our markets now on the platform, 32 geographies are currently on the agilon platform. That's resulted in our ability to increase and accelerate our membership adds each successive year. If you look at the middle panel, we added 55,000 MA members in 2021 and accelerated that to 84,000 MA members that we added last year in 2022.
We expect that to jump up to 135 total MA members added to the platform this year, and we'll take that even one step forward in 2024, adding 145,000 MA members year over year versus 2023. When you consider the MA membership plus all of the ACO REACH members that we have on our platform, we'll be approaching 500,000 members, Medicare members on the agilon platform in 2023 and getting closer to 700,000 members, in 2024, a 50% CAGR during that time period. Those large classes that we brought on board in 2023 and are implementing for 2024, this significantly de-risks our membership outlook for 2026. While we're growing membership, we're also growing margins.
This slide looks at our medical margin progression over time at the member cohort level. What that means is if you look at the top line, it represents all the members that we brought live on the agilon health platform in 2018, and how just those members have progressed over time. As you can see, although each of these member cohorts starts at a little bit different spot, all of them are progressing consistently. Three of those cohorts are already performing at over that $150 medical margin PMPM level, two of them in 2022 already surpassing that $200 level. I think it's important to remind you again that of all of that incremental medical margin that we're generating, about 50% of that surplus is reinvested back into primary care in our communities.
Okay, this chart looks at medical margin on a per member per month progression at the market cohort level. What this shows is each of these lines represents all the markets that went live during that year and how those full markets have progressed over time. This includes any dilution from same geography growth of the members that we've added over time in each of these member cohorts. You can see that their growth has been significant, double-digit or more in every single one of these member member cohorts. In this case, you can also see that they all start at a little bit different point, usually between $30-$60 medical margin PMPM in year one, but again, are all progressing consistently. We're expecting a pretty significant and positive inflection in 2023.
We have great visibility into what the drivers of that inflection is. It includes, for instance, all of the great work that we did in our burden of illness program, to accurately capture all the chronic conditions, for our members, which allows us to really put together a great care plan, for all of our members, especially our most, our most complex patients. It includes our increased confidence in our ability to deploy and execute against all those great clinical initiatives that you heard about during the day. It also includes the benefit of just the increased benchmark rates that we're seeing across each of our markets. Market vintage is also an important driver of agilon health profitability over time. In 2022, only about 64% of our members were in markets that were in a year 2+ market.
Because of the large class of 2023, that number is gonna actually go down to about 62% this year, and then we're bringing another large class, of course, of 2024. As those members progress on the platform, by the time we get to 2026, we expect that about 87% of our members will be in markets that have been on the platform for two years+. That'll take our overall member vintage from about three years today to almost five years out in 2026, and that's super critical because I just showed you on the last two curves, on the last two charts, our medical margin on a PMPM basis is approaching $150-$200 as we move through vintage year three to four to five and beyond.
Our ability to bring these really large classes on now in 2023 and 2024 significantly de-risks our profitability outlook for 2026. As we get the benefit of member market vintage mix increasing over time, we're also, of course, gonna continue to just improve our medical margin in each individual market. That's really driven by all the things you've been hearing about today, our ability to continue to address PCP variability, our ability to deploy and execute against all the clinical initiatives, just leveraging partner scale in our markets as we've talked about throughout the day. All of that comes together to our outlook for our medical margin in 2026.
What we're expecting for our most mature markets, those that came on the platform between 2018 and 2022. By the way, they're gonna make up about 40% of our membership in 2026. They will have been on the platform for an average of about seven years. We expect them to progress to the $200-$225 medical margin range. For those big classes of 2023 and 2024 that we're bringing on board right now, they're also gonna make up about 40% of our membership in 2023-- I'm sorry, in 2026. They'll be in that three-four year market vintage range, generating about $150-$200 medical margin PMPM.
The classes that'll be coming on in 2025 and 2026, they'll be, of course, a smaller part of our mix and still in the earlier life cycle of their medical margin progression. By the time we get to 2026, we would expect that about 95% of the medical margin that we're generating is gonna be coming from those partner markets, less than 5% from our partner market in Hawaii. Our average overall market vintage is about five years, and that's gonna be generating blended across all markets, a medical margin PMPM of between $165 and $170.
The last point I wanna make about EBITDA inflection, which I think is kind of underappreciated, is our ability to actually leverage market operating costs to drive positive flow through of each incremental medical margin dollar as we grow. First of all, let me just say, when we bring a market on in year one, as we just talked about, it's at the low point of our medical margin PMPM, usually like $30-$60 in year one. We're of course bringing the full infrastructure into that market that we need to develop and grow that market over time. Because of that, in year one, you know, a market's typically not really generating any significant amount of adjusted EBITDA to our partnership or to agilon health.
As we move into year two and are developing that medical margin, as that medical margin grows, we leverage those market operating costs and get a significant amount of flow through of EBITDA to both our partnership and to agilon health. This chart represents the 10 markets that were in year two plus in 2022, and what their medical margin growth was year-over-year. You can see that those markets grew medical margin by about $90 million over 2021. About 80% of that $90 million flowed through to our partnership EBITDA, about half of that or 40% of the $90 million flowed through to agilon health EBITDA.
When you look at this, I think it really demonstrates, at the end of the day, if you will, the overall power of agilon same-store growth and our ability to drive, to drive adjusted EBITDA over time. 2022 was a benchmark year for us, you know, moving to positive adjusted EBITDA, and of course, a big point of inflection that I just talked about in 2023 as we get close to 500,000 Medicare members live on the agilon platform. $550 million expected of medical margin dollars, 80% increase over a year ago, and we'll continue to get great leverage out of our platform support costs, with an expectation of more than 100 basis point increase as a percentage of revenue.
We are expecting that our ACO REACH business will take a little bit of a step back in profitability. That's a function of both, that we'll have a little bit lower membership as we're not bringing any new markets on in 2023, as well as the fact that I think everyone knows this is the last year, where CMS has increased negligible discount rate, which is a bit of a headwind as well. All of that will translate to our guidance of somewhere between $75 million and $90 million of overall agilon-adjusted EBITDA. Of course, we're bringing on this very large class of 2024, all that will put us on a glide path for our 2026 guidance of about 850,000 MA members.
That'll get us close with the additional ACO REACH members that we expect to bring on in the coming years to almost 1 million Medicare members live on the agilon health platform by 2026. About $168 blended medical margin PMPM across our markets, which will yield almost $1.7 billion in medical margin dollars. Again, we'll continue to get over the next few years significant leverage against our operating costs. Taking a more prudent approach to the ACO REACH, we now expect it will get up to about $35 million in EBITDA contribution by 2026, building off the $14 million that we generated in EBITDA contribution in 2022.
All of that will yield overall more than $600 million of agilon health EBITDA expected in 2026. We continue to get really great return on our investment in growth. Our member acquisition cost in the last years has stayed, you know, in that $350-$400 range, which is extremely low. When you put that in context of the how rapidly we build network contribution over time and our great member retention, I mean, it yields significantly low lifetime value to customer acquisition ratios of about 12 to 1, and we're really paying back those investments in most cases in about one year. Have a very strong balance sheet.
At the end of last year, we had about $900 million in cash and marketable securities. We anticipate generating positive cash flow in 2024 and beyond. All that leads us to a position of not having to, we have no expectation of having to access any external capital to drive our growth projections over the coming years. We'll continue to use that capital to deploy that capital against our primary objectives of supporting our partners to drive growth in their markets, as well as investing in any enhancements that we can make to our capabilities to continue to drive improved patient outcome. With that, adjusted EBITDA is inflecting, more members coming onto the market earlier, continued medical margin progression in a positive direction, great operating leverage.
All of that gives us high confidence in our 2026 outlook of 850,000 MA members live on the platform, flowing through to over $600 million of adjusted EBITDA. Our model is capital light, but we're very well capitalized, and we expect to be generating positive cash flow in 2024 and beyond. With that, I'm gonna turn it back over to Steve for some closing remarks before we move to Q&A.
Great. Thanks, Tim. We've shared a lot with you. Clearly, we have a very enthusiastic team and partners really driving meaningful change in these communities we're serving around the country, and we see it an incredible forward opportunity. I thought before we went to Q&A, I'd try and connect some dots. Let's go back to what I asked you to listen for at the beginning of this discussion.
First thing I said was, "Hey, the results are great. What's driving that, and how are we able to do it across diverse geographies and diverse partner types?" What did you hear around that? You heard Girish talk about our platform is getting smarter. You heard Heidi and Dr. Kornitzer talk about we're better identifying complex patients, and we're better engaging and enrolling them in the programs that serve them. You heard our partners talk about the additional resources that they have and the ability to spend more time and in a more actionable way with those most complex patients.
Finally, you heard Ben Shaker talk about we have a common operating system. We're doing this in every market, and the reason you have cohort results like Tim just showed you is that you're able to effectuate through our platform and partnership consistent outcomes. That's number one. Second thing we talked about is the flywheel. Flywheel is turning. As we have better performance, our physicians do better, and more doctors wanna join.
Veeral did a nice job talking to you about how that growth is translating through, and we upped our 2024 guide to 145,000 new MA members coming on the platform. Third, we talked about the competitive advantage and the competitive moat that we've built. Several of you have said to me, "One of the most underappreciated things, Steve, about agilon health is the incredible end market opportunity that you've got." What did Veeral tell you? In 32 communities in 14 states, there are 10.5 million senior patients, and there's 33,000 primary care physicians. With this inflection, we're seeing more and more of the groups in those communities and doctors making the decision to come on, and we see that as a big part of our growth going forward.
Finally, Tim just did a really nice job walking you through the long-term outlook to 2026. What I'll tell you is the same things that are driving this move up to north of $600 million in 2026 continues a really nice progression out to 2027 and all the way out to 2030. What did he tell you? More members on the platform earlier and how powerful that is. He showed you cohort maturation, and when you put those two together, what that would look like. He introduced the concept of market vintage and showed you across time how that market vintage is going to evolve and how powerful that is as we move going forward. We talked about our 2022 to 2023 step-up in terms of adjusted EBITDA and how impactful that was driven by these partner markets.
The partner market performance is incredibly strong. It gives us this ability to give you this high-confidence guide out to 2026, where we make adjustments on things like the REACH program that Tim talked about, given updates from CMMI. All of that gives us incredible confidence in the future. One last comment I'm gonna make, which is from me, not from the team. I'm the CEO. My job is to make sure that we keep pace with this incredible opportunity that's in front of us. We often talk about scaling our platform and how do we bring in more capability around this. At the end of the day, this is a people business. Our physician partners, who are amazing, we're lucky to work with them, do a great job every day taking care of complex senior patients who have very dynamic needs.
Their ability to do that is a function of the quality of the team that we have here at agilon health. I spend a disproportionate amount of my time making sure we have the right people, that we're developing them, we're giving them tremendous opportunities. My commitment to you is we're gonna keep pace with that. We're gonna continue to add high-quality partners. We're gonna continue to bring on the best people. If we do that, the future for healthcare in the U.S. looks pretty good, and it looks really good for agilon health. With that, we're gonna go to Q&A.
We're gonna invite the agilon health speakers up for Q&A. I think we've got about 25 to 30 minutes for open Q&A. We can go to David Larsen here first. The team will be around for a little bit after we conclude the Q&A session if you'd like to catch up with us. We're gonna go to David Larsen first.
Great. Thanks very much, and thanks for all the information. It's been very, very helpful. Appreciate it. I'd like to hear from one of the doctors, please. Can you talk about the ease of use of the platform itself? Like, having access to all that data is so important, identifying what the gaps in care are, who the actual patients are, and then how do the communications with the patients actually happen? Is it like an app where the patient can text your office, or is it up to the physician to determine how they wanna communicate with the patient? Do they pick up the phone and call them? Sort of related to that, I'm sorry, how much more money can the doctors actually make?
Years ago, there used to be, like, a withhold, and the doctors would just kind of throw their hands up and be like, "Oh, there's a withhold." There was some sort of complicated reconciliation process that maybe did or didn't happen at the end of each year with the plans. If the average PCP is making $200,000 a year, how much more money are they taking home? Thanks very much.
Maybe I can start on the second one, but I thought Kevin and Ben, maybe you guys can talk about the experience on the ground and what it's like for partners in terms of dealing with this. What did we talk about? About moving closer to the primary care physician. The better we do in terms of better patient care, less time in the ER, less time in the hospital, that increases the surplus and the ability to reinvest in local primary care. That's that quarter of a billion dollars this year. What that translates to for a primary care physician after a few years within the program is you could see a 50%- 100% increase in terms of their total compensation. That's an average.
Depends on how large your senior panel is and what you're able to drive, what that opportunity sits within that. That's on average. It is meaningful. It is changing the lives for these doctors. It's stabilizing primary care. In these communities, we're growing primary care for the first time in decades. Guys, you wanna take this?
Sure. Yeah. Your question was how do we use technology? How easy is it to use? What does it look like? I think Dr. Goggin's part of his presentation highlighted that pretty well. The Agilon platform and everything Girish and team have built feeds at the point of care in the EMR. We also have, to Ben's point, a common operating structure in the markets. We have analysts, coders, Agilon operators that help us so that the physicians can meet physicians and physician with a standard set of reports looking at utilization. This many of your patients should enroll in these programs and are eligible. How many are you enrolling? Do you have a care plan for each of the chronic conditions? That's how we think about it.
They have it at the point of care in the EMR while we're seeing the patient, and then we meet at least monthly through a governance structure that we've implemented in our medical groups, where physicians are meeting with their peers and going over the performance so that the variability and the scatter plots that you saw start to go away. It's human capital within the market serving us, and then it's technology serving us at the point of care.
Yeah, just the one thing I would add too is, you know, when we talked about when we launched the business in 2018, we launched it with our physician partners. A lot of the ease of use, how the systems were deployed, you know, this wasn't agilon health trying to figure it out over here and then deploying it into the market. You know, we actually from the very start, built that together with our physician partners. Over time, when we talk about our platform getting smarter, now we're getting input from a lot of different places, and we're constantly working to improve the experience.
All right. Why don't we go to Justin right next to David? Justin, Mike.
Thanks. A couple questions. One, the 2018- 2020 cohorts are inflecting about 50% year-over-year in terms of that PMPM medical margin. Anything you could share with us on what gives you confidence in that? Maybe it's just slower growth of new patients, so, you know, you start seeing the maturation there. You know, really appreciate all the increased visibility on 2026, especially on the top line. From an EBITDA perspective, what's the slope of that line from $80 to, I think it was $660 in 2026? How much of an impact do you think, or how dependent is that slope on what looks like might be a tougher Medicare Advantage reimbursement environment, at least for 2024 and maybe for a couple years beyond that?
Yeah. Maybe I can start, Tim.
Yeah.
On the second one first. The midpoint of 2023 is 82, 83, and a step-up to, we said 600 plus, right? We did. That means there needs to be meaningful step-ups 2023, 2024, 2025, 2026. I think the same phenomenon that you see in the acceleration from 2022- 2023 and these partner markets driving 90%+ of that continues, Justin, in terms of what that looks like. That is inclusive of this advance notice. No one knows exactly what's gonna happen next week, we're assuming as though it's fully implemented, and that's reflected within that judgment for 2024 in a more modest sort of unit revenue outlook going forward. It's the power in these partnerships that you saw that's really driving all of that.
Tim also highlighted the REACH program adjusts down 25-
Like $30 million.
... about $30 million versus what we told you a year ago. That's taking a more modest approach on it. Do we think there's opportunity there? Yes, but that program has dynamics that ties to the overall fee-for-service run rate in the country or trend, and we don't know what that is. It seems appropriate to adjust that within that reflection. That's the first part of it. Sorry, that's your second question. What was the first part?
Yeah, I think I got the first part.
Okay.
Just in addition to that, you know, obviously, we're not guiding specifically for 2024 EBITDA at this point. I think all the things that Steve said, you know, clearly the revenue rate's gonna be different than we would've expected a year ago. We would expect it's still gonna be net positive once all the factors are built in that we've talked about previously.
Yeah.
There'll be some other ways that we have to get there in 2024. We'll talk about that more in the future. I think generally speaking, we feel like, hey, you know what? The kind of progression that we expect to be for, which is, you know, continued even progression up to 2026 is probably still a pretty good assumption. For the inflection up for the class of 2018 or the class of 2019, I don't know if you were asking specifically about going to 2023 or where they came out in 2022.
No, the 2023, where they go from $130- $140 up to $200.
Yeah.
I mean that kind of thing.
Yep. Yeah. One of the things that you anticipate in your question is partially right. I mean, we're still getting really good same geography growth across all our markets. They had particularly big same geography growth in the early years, so that was more suppressing them than it probably will out to 2023. More importantly, though, you know, those are our most mature markets, and so we have the most confidence in our ability to drive outcome behind all of these clinical programs that we've got in place. That'll be a really positive note. You know, as well as, you know, just our continued progression and all the work that we did last year, behind our burden of illness.
I mean, they would be our most developed market in terms of, you know, being able to not only capture, our burden of illness correctly, but also use it most effectively as a clinical program as well. That's really a positive thing. In addition to it, I mean, it's a positive benchmark year, right? We're gonna get, you know, the tailwind of those increased benchmark rates across all of our markets. You know, some of the differential between a market cohort progression is just representative of where that benchmark increase might be a little bit higher or lower across geographies.
Great. Thanks.
Why don't we go to George Hill over here from Deutsche Bank?
Yeah. Good morning, guys. Thanks for taking the question. First, Steve, it's great to see the, I'd say, the explosion of the map as the company expands all over the country. My quick question for you would be talk about comfort with the ability to enter new markets. Tim, my question for you would be, it's around operating leverage and the cost to enter new markets. Maybe can you talk a little bit about the company's learnings and its impact both on the cost to enter new markets? I'm thinking about SG&A per doc or however you guys frame or measure the cost to enter new markets, and maybe operating leverage, and how does that develop your ability to continue to reduce operating costs in market?
Yeah. I'll start, but I want Veeral to really kind of elaborate on this new market opportunity and the implementation. His team, everyone's doing an amazing job around that. I think we've said there's this inflection and there's this move to value, George, and that we are seen as the solution. I think there are multiple opportunities for us out there, I think you'll continue to see new markets, whether it's in existing states or in new states. We've got two new states within this class. We build our platform to be able to do that. We build our platform to be able to scale. We have exceptional health plan relationships. They would like us to go to many more places faster. I think there's a real alignment.
There's a structural change, and everyone's sort of lining up to move to value that sets up well for us, and then we've sort of built our organization to be able to match that opportunity. Veeral?
Yeah. No, I think that's great. I'll double time here. From a, from a new market perspective, you know, starting with the core independent medical group segment, that remains very robust. What's changed is a little bit of what we talked about in the presentation, which is the nature of the conversation we can have with any medical group in the country based off the proof points of like markets and like partners and what their performance has been. The connectivity and the network effect between our physicians that are on the platform and those prospective groups has dramatically accelerated the sales cycle, and we still see a very robust opportunity in that core independent segment. The new segment for us is the health systems. There's 400 health systems. We are not selecting any given health system partner to some of the discussion we had earlier.
Partner selection is always really critical, which is why we emphasize the quality of our growth. From a health system perspective, you see it here. We're adding two new health systems, those health systems are actually in our existing markets. You know, that kinda takes you to every market in the country that we previously didn't think was addressable is now addressable because we can go partner with the health system. I think we've hit it hard, but the end market opportunity is something that really excites us, right? Have 10.5 million lives available in the 30 geographies we're in and having the level of penetration we have at this point, there's tremendous runway when we think about same market geography. That's also a significant area of our focus.
By virtue of being first mover, by virtue of having the payer infrastructure established, our ability to bring physicians onto the platform at rapid pace is very differentiated. We can compete incredibly well from an end market standpoint.
All right, I saw a couple hands up over here. Jailendra , you, fire away.
Yeah. Thank you. Jailendra Singh from Truist Securities. On your 2026 outlook, clearly, ACO REACH EBITDA contribution was around $60 million when you gave guidance last year, now it's $35 million. Basically, your core ACA, core MA guidance is actually going up for 26 years, if I mixed that. My question is on ACO REACH. How do you think about the program now you are a few years into it? Have your views changed in any ways how you think about that program versus like MSSP program participation, any color there?
Well, I'll start. I think we still believe it's highly strategic for us. I think that the value that we hear from our partners in which all of their senior patients are in a total care relationship is it allows better performance on both sides of the equation. We perform extremely well from a quality perspective. Our cost trend is better than the national average by about 1% this year. I think we line all those things up, we feel good about it. There is this revenue component to it that adjusts based on the national trend each year. That just reflects sort of the, I don't know, appropriate dose of cautiousness in terms of that.
Frankly, given the strength within the core and the power of what's happening with our partners, we're able to do that.
Yeah. I think, Steve, the only thing I would add is, you know, for everything that Steve said, which is correct, I mean, we actually are performing positively in ACO REACH for all the reasons, you know, we're on track, I think, to recover 100% of the quality withhold from 2022, which is great. It means we're performing great on a quality standpoint. We are beating cost benchmarks. And we generated $14 million of positive EBITDA out of the program last year. It is positive. Having said all that, it's gonna be like 5% of our-
Yeah
... EBITDA contribution over time. I think we're being much more prudent about assuming it's not going to be really a hugely meaningful contributor to our EBITDA going forward, and certainly not by 2026. I want to go to Adam.
Is there a microphone or-
There is.
Yeah, he's coming, he's coming around here, Adam.
Hey, thanks. We were talking to a payer in Florida, and they were saying the value-based care penetration is so high that MA plans have started clawing back some of the savings in terms of additional rebates, making it harder to manage costs potentially. Since you're a first mover in some markets, I was wondering if, you know, over time, we should expect some rate pressure in the form of rebates from MA plans, and if that's at all contemplated in 2026 or if you've seen that play out at all in some of your mature markets.
No, I really appreciate the question. Conscious choice on the markets that we're going to. We love being first. We love creating this infrastructure, and we love being able to stand this up with health plans in those markets for the first time in that move to value. We've just come through a renewal cycle with payers. People ask that question all the time is, "Hey, the visibility of how well you're performing, is there gonna be rate pressure?" We're able to just come through a renewal cycle, and we are able to maintain. It's really a % of premium that you're looking at. There's always the macro kinda unit movement that Justin was asking about, but it's that % of whatever that budget is from CMS at the county level is where we're able to maintain that.
I think we're very strong around that. The other thing I would say is, think about the value that we're providing to these payers. Quality scores, 4+ in all of our year two markets. What do they get? They get a 5% bonus when their products. They want more patients in an agilon health partnership model versus less. Growth rates, 1.5x or north, the market average within those areas. I think payers are getting incredible value. The nationals are looking for us to go to more places. I don't expect unit pressure based on that. The penetration levels in the markets we're at is a long way from Southern California or Southern Florida, and that's why we're in the markets we're in.
The only thing I'd add, Adam, is we're a multi-payer model.
Yeah.
By virtue of being in a geography, we're contracted with all the health plans in that geography. That creates the right dynamics around everything you're describing. You know, what is our ultimate % of premium relationship, the seat at the table we have around benefit design and rebates. From an economic standpoint, it creates parity. I'd say the biggest evolution, if I think about the last five years, is we have now taken, we got 25+ health plans we're working with, many of which we are the first full risk contract that they've done. We're accelerating that move, creating that framework, and they are winning in the model, so much so that many of our closest health plan relationships were on a multi-market basis. They're introducing us to groups to go partner with.
Yeah.
-to go effectuate the model because of the benefits around growth, because of the benefits around quality, because of the consistency around experience, which is you asked us that if, you know, five years ago, we were sort of getting started, that's a sort of a wholesale shift, is just the depth of those relationships and the way in which all stakeholders are winning.
Thank you. If I could ask one follow-up. You know, from our perspective, it feels like there is a little bit of a shift in Washington potentially on the way they view risk adjustment, whether it be through RADV or the 2024 rate or the bill that came out from Bill Cassidy-
Sure.
which is where it goes. You know, ultimately, the question is like how much of gap is there between value-based care doctors and service doctors? I guess, is there any visibility you have into your payer contracts in terms of how much of an outlier you are in terms of risk adjustment load versus where the other doctors are, especially in mature markets? 'Cause sometimes you mention you have a 1.0, you know, weighted risk score, but I'm not sure how that affects, you know, contemplating new members who maybe aren't risk-coded or that you're in lower acuity markets. Just any way we could think about, you know, the relative positioning of agilon's risk scoring versus.
Yeah.
You know, maybe service members in your markets.
Sure. Yeah, I mean, I would tell you all of the regulatory discussion, whether it's the advance notice adjustments on RAF, whether it's RADV, tighter enforcement, or whether it's the bill that you just talked about, I think the goal and the direction is people wanna push things closer to the primary care physician and the patient working together. That's what you heard about all day today. That's what we do with our partners, and that's incredibly powerful. Two, we do risk adjustment in the right way. It's peer-reviewed. It's that primary care physician who's ultimately making that choice around that, and it translates with a full population. Our population kinda looks like the national average. It's not surprising that our RAF score would be just north of 1.0.
I think all of those things make us feel like we have a very durable model, and it's the right way to do things. I think it's the way, ultimately, CMS and the Innovation Center and others would like to see the RAF or Burden of Illness Program effectuated. You know, to us, the Burden of Illness Program, it's a clinical program. What Heidi does every day is. You know, the Burden of Illness Program is at the front side of it, and it identifies those most complex patients that match up with that process that you talked about in the programs we stand up. The better we do on that, the better we match them. This is a world that's all about cost and quality.
I don't think cranking the revenue lever is the long-term solution to sustainable better care overall, and that's what we're focused on 100%. That's what our partners expect from us.
I think the advance notice is manageable for us for all those reasons. I think we're doing it the right way, and I think you're gonna have more doctors and patients join for those reasons. Do you add anything?
Thank you.
Okay.
I'm gonna go to this gentleman over here.
Thanks. Calvin Sternick from JPMorgan. I wanted to ask a little bit, I know you've talked about longer implementation cycles, and the benefits in medical margins there. Just curious, I mean, just given the demand you're seeing, one, how you're thinking about implementation timelines through classes of 2025 and beyond. Then I also wanted to dig a little deeper on some of the reinvestment of medical margin that you guys talked about. You know, about half of 2023 is gonna be reinvested there. How does that change over time as markets mature, and is there any way to sort of break out, you know, how much medical margin improvement over time is just the baseline agilon model versus how much incremental benefit you get from reinvesting?
Why don't you start on the longer implementation cycle, maybe class of 24, class 25, and then we can go to the second.
Sure.
We talked about the acceleration of the sales cycle. The byproduct of that is, as an example, four of our groups for the class of 2024, we had in place by the third quarter of 2022. The benefit of that is we have a much longer implementation cycle, to your point. The activity sets that need to occur in terms of what Girish talked about around data ingestion, normalization, physician activation around all of our clinical programs, we effectively have a much longer runway to be able to execute while the platform is getting smarter.
Our, you know, our experience and our expectation is, you know, every market is gonna look different in terms of what the starting points are, but that is allowing us in aggregate to look at these classes in terms of our expectations and see an enhanced opportunity out of the box. That's what we see with the class of 2024.
Yeah. The one thing I would add to that, to just building on Veeral's point, is when you look at these new markets, all of these new markets are being implemented in an existing regional geography. What's different today than maybe earlier in the life cycle of the company is we were creating these regions as we brought new partners onto the platform. Where today, you know, as we're bringing in, you know, new partner in Western Michigan, you know, we have infrastructure in that market. You have a leadership structure. You have market awareness already on the ground. That also, in addition to the longer time period, we also have a lot more infrastructure that allows us to go faster too.
I was just gonna throw in because I think, Justin, it gets back to your question as well. The class of 2024 is a great example of this because we are getting such an elongated implementation for some of these more complex partners that we're bringing in. Because of that, and we've said this a couple of times before, we're gonna actually have a better starting point. It's a big class with a better starting point for a medical margin PMPM. You know, we're obviously, continue to talk about the rate notice potential impact in 2024. One of the tailwinds we're gonna have is a big class with a higher starting point already generating positive surplus in 2024. That's a really, you know, tangible outcome of that longer implementation cycle.
Then on your second question, I mean, I think maybe the headline is we're gonna keep reinvesting close to 50% into our partner markets. I mean, this is a partnership. We govern it 50/50. We share the surplus 50/50. There are incentives on top of that. You have to get above a local market operating expense number, but once you get above that's that true split 50/50. We make all the decisions together. What do we get out of it? We get the flywheel. I mean, there's incredible benefit to the physician group, to the practice. Other doctors wanna join. That brings more patients. It's the growth curve that Veeral showed. That's the value in this.
I think we've got time for just one or two more questions.
Gary, why don't you take it, and then we'll get over to Jamie.
I just wanted to clarify two things. When we think about 2024, you've talked about the new risk model having a revenue impact. I think that's well understood. I think what you said at our conference two weeks ago was you thought your risk score would probably decline in line roughly with the industry, that actually makes a lot of sense to me. We also think the health plans will cut benefits, that brings your expenses down.
Yeah.
Are you yet saying or contemplating or willing to say that there's some EBITDA step down in 2024, or are you still just talking about revenue effect? Second question is, on DCE, there's going to be some risk score decline there, presumably, probably not as large, but there's no offsetting step down in expense. There's an upstream health plan bringing your cost down. Is your 2026 DCE guidance, does that assume that this HCC version 28 gets applied to the DCE program as well?
Yeah. I think on the first question, And, you know, we can talk a little bit more detail, but when we go into all the ups and downs that we expect to happen in 2024, and as you isolate the impact of, and we don't know what the final is, but let's assume that-
Yeah
... the advanced rate notice is close to what the final is. you know, without the risk adjustment modifications, you know, the expectation would be that there's like a, you know, a 1% or so increase in rate, and then that takes it down 3%, kind of gross before any other impacts you can make on risk adjustment. The analysis we've done would say, yeah, I mean, not surprisingly, we look kind of like the average. We have a pretty broad spectrum of members across a pretty broad set of geographies. We think our impact before anything else is also...
CMS also said, "Hey, there'll be normal progression in risk adjustment each year that can partially or largely offset that number." We're not particularly obviously aggressive with risk adjustment in terms of trying to push the envelope. We are very good at it in terms of a good process that will allow us to make that transition and make sure that we don't, yeah, we don't have anything fall through the cracks in the transition. We think at the end of the day, you know, CMS says, you know, the net average should be maybe about a 1% net rate increase. We think it's gonna be somewhere in that range as well. That, that's kinda just a settle where that's gonna be. There can be some other things.
You know, we're much more confident now in our ability to drive medical margin improvement through claims control through all of these clinical initiatives we put out there. I do think there's likely, if the rate notice stays where it is, folks here can talk about it in a more educated way than I can, but I think there is likely gonna be some benefits compression that will help us. The last thing is, in terms of just EBITDA dollars, we have more members on the platform this year and next year than we thought we were gonna have, and we think we're gonna start at a higher rate next year than we would have historically. All of that would lead to we're definitely not gonna talk about a step down in medical margin.
I mean, I'm sorry, in EBITDA progression in 2024 in dollars for sure. We're not guiding to a new number, I can tell you it's not gonna be lower than 2023, no.
No, I didn't mean to imply that.
Okay.
Any impact. The second piece was just, are you assuming the new risk score model gets applied to DCE and that's reflected in that 26?
Yes, that's yeah, it does. Yeah. No, absolutely. It's certainly that and several other reasons are why we're definitely taking a more prudent approach, I think, to where we think ACO REACH can go. Again, I mean, it's strategically a great idea for us to stay in it. If you talk to some of our physician partners that are here that are in the model, I mean, they wanna be in it, obviously. We are, you know, we are generating some positive profitability out of it. At the end of the day, it's just not gonna be a primary driver of our performance. Like I said, I think out in by the time we get out to 2026, it'll be, you know, less than 5% of the contribution to overall EBITDA.
Yeah, we have included that assumption, and we are, I think, being, you know, appropriately prudent in what that can do over time.
Gary, just to clarify for you, the direct contracting program has a different risk adjustment model. It's not automatically tied to MA. If it is applied the way the risk adjustment process works in direct contracting, the members are tied to a base period, so it just moves.
Yeah.
In the same direction.
You do risk adjustment the same way, but then there's these caps and, you know, conditions on how much you can progress.
That's why I don't think you'd have the same risk or decline.
Yeah.
I think the revenue impact would be less than DCE, I would imagine, for you, so. Thank you. Why don't we go to Jamie as our last question, then we'll conclude.
Thank you. Jamie Perse, Goldman Sachs. Tim, you spent some time on the incremental flow through from revenue to medical margin and ultimately EBITDA. The medical margin guidance you gave for 2026 is going up $200 million plus or so. I get there's direct contracting headwinds relative to what you gave last year, but can you give any more context on how you're thinking about EBITDA, the $600 million plus? Again, just in the context of the incremental margin you talked about before.
Yeah. Yeah, I don't think it's going up $200 million over what we said last year because last year we started with a base of 750,000 members getting to, like, $580 million of adjusted EBITDA and said there was an upside case. Now what we're saying is, "Hey, we have a lot of confidence in the upside case." Our improved outlook says 850,000, which was our upside case last year, is now our base case. That's great, and that's driven by all the things we talked about. Obviously, our ability to, you know, now have really clear line of sight to 550,000 members by 2024, which is way bigger than we would've expected last year.
It gives us a lot of confidence in getting there. We are obviously then projecting overall an improvement of over $100 million, versus what we said last year at that, you know, the high end of our forecast for medical margin. That's hugely driven by those earlier members coming on, and they'll be further up the medical margin ramp by 2026. Against that, we've done a couple of things that we think de-risks our path there, which I think is positive. Should give us more confidence in our ability to get to over $600 million. Lower ACO REACH profitability assumption.
We don't talk about this a lot, but we've also assumed the contribution from our Hawaii non-partner market is going to be lower than what we would've assumed in the past. We don't have a full partnership model there, we really don't get the same benefit of an aligned physician outcome that drives medical margin on the same kind of curve. In that market, we do get 100% flow through of the medical margins, we don't share it. We're assuming that's gonna be lower contribution. That gives us a little bit lower risk path to that $600 million as well.
The last thing I would just put in there is, when you look at the, at the flow through, we are assuming that we're gonna make a little bit more investment in these markets. Not in operating costs. We still get tremendous leverage out of operating costs. We are making some more investments, in all the things that you heard the physician panel talk about today that will show up in other medical expenses, that'll help us drive outcome with our members and give us even more confidence that we can get to that improved medical margin number. When all that flows through, last year, the high end of our range was $850. That's our base case now.
The high end of our range on medical margin dollars was over $600 million. That's our base case now, over $600 million EBITDA. I don't know, Jamie, does that get...
Yeah.
Yep. Okay.
All right. Great. I think that's all the time we have for questions. We appreciate you all being here, and the team will be around for a couple of minutes after if you want to follow up at all. Thanks very much.
Thank you.
Appreciate it.
Appreciate it, everybody.
Thank you.
Yeah. Good job.
Yeah.