Hi, good morning. This is Frank Williams, Executive Chairman of Evolent Health. I'm happy to welcome you today to our twenty twenty Investor and Analyst Day. This is a day that we normally look forward to seeing all of you, having a large body of our executive team and customers present. It's been a very different year, and so we're going to do this in a slightly different format.
First of all, I'm joined by our CEO, Seth Blackley and CFO, John Johnson. I'm really happy to have them here.
If we think about
the cadence for the day, we're going to try to stay pretty focused in running through the materials. We're not going to have a lot of handoffs simply because I know we're on Zoom, And, we also know really long meetings on Zoom, don't go too well. And so we're really going to try to keep it relatively focused and then make sure that we allow time for questions at the end of the day. If you look at our agenda, you can see how the day will go. We'll start out with the key investment themes, then talk about our focused strategy for shareholder value, how our solutions create differentiated value and then touch a little bit on our financial profile.
Starting with the next slide, which is really the executive summary. The executive summary, if you go in one more slide, really serves as a roadmap for the presentation. We're going to try to go in greater detail on three major themes. The first, how our focused strategy will create shareholder value. If you think about where we sit today, we have great products and solutions, a very strong balance sheet, and we feel very ready to execute and are in a strong position to continue to grow revenues, continue to grow the bottom line and ultimately create shareholder value.
Second, we're going to touch on how our solutions create value for our partners. If you think about health care today, there are a lot of really significant issues. You've got rising costs. We're not sure if we're getting the return for everything that we're spending. There's been a lot of sort of strife in between providers and payers.
We've also got, you know, a very significant crisis, public health crisis with COVID. And yet Evolent sits right in the center of working with payers, working with providers, helping them add clinical and financial value, and ultimately take care of patients better. The managed care market that we tap in today is a huge opportunity. It exists today. It's obviously very large, over 100,000,000 lives, you know, covered in that segment.
So we have a tremendous opportunity serving national and regional payers. And then ultimately, if you look at the addressable market, over $130,000,000,000 we're approaching $1,000,000,000 in revenue this year, so you have a sense of the penetration opportunity going forward. Lastly, if you look at our financial profile, a few things to highlight. First, we have a recurring revenue model with a diversified customer base. As we grow revenues, given our scale today and sort of where we are from a G and A and infrastructure perspective, we have the potential to significantly expand margins in the coming years and also generate positive cash flow and ultimately, using that cash flow to continue to strengthen our balance sheet.
So those are the main topics we're going to cover today. And again, we'll make sure to allow thirty minutes at the
end for
questions. I'm excited at this point to turn over the presentation to Seth Blackley. As many of you are aware, this is a new era for Evolent with Seth taking the reins. Seth co founded the company, with me going back to 2011 and has been an amazing contributor in almost every area of the business. Most recently, he led the integration of New Century Health.
He also has been really the architect of the three solution strategy, which is powering our outlook and perspective across the next couple of years, and he'll obviously touch on that today. But the Board and I are both incredibly excited about Seth and the impact we know he's going to have on the business. And with that, I'll turn it over to Seth to Okay, take it from
great. Thank you, Frank, and welcome to everybody to the Investor Day. I just wanted to first say thank you to Frank, and we're excited to have him supporting us in the time ahead. As we dive into the presentation, I also just wanted to say that I'm personally very excited about helping lead the team into the future. I think we are at an inflection point with the business.
We're going to put forth today an incredibly specific plan around shareholder value creation. And I think you're going to be excited about what you see today as well. But before we dive into all of that, I'd like to start with a little bit of a refresh on Evolent. You're new to the story and want a little bit of background. We're going to touch on that first.
So if you flip to Page five here just in brief, we have three core solutions at Evolent. Two of them are clinical and one of them is administrative. We address specialty care manage specialty costs through our care management platform. We address total cost of care, and then we have an administrative simplification platform. You can see the numbers on the far right in terms of last quarter revenue and EBITDA.
We touch about 35 partners, both payers and providers across the country, just over 3,000,000 lives today. I think in the middle of the page, importantly, we have nice balance as between the provider market and the payer market. Provider market is about 60% of our revenue today and about 40% is payer. Obviously, that 40% number on the payer side is up dramatically over the last couple of years, due to the New Century acquisition. We do expect that number to continue to grow.
But, as we'll talk about in just a moment, we continue to have very good success on the provider side as well. So with that, we'll flip to the next page. Just a moment in terms of what is the problem we're trying to solve. You all seen the statistic that there's over $1,000,000,000,000 of waste in health care. The waste is driven by a number of different issues, one of which is out of control specialty spending, which has been growing at a rate that is very challenging to sustain.
It's also driven in the middle by just a lack of coordination, particularly among elderly patients, and we address that through our total cost of care management solution. And on the far right, across both specialty and the total cost primary care space, the ability to have the data, the information and the process underneath all that for it to run smoothly from an administrative perspective. Those are the major issues that we address and we're going to talk about today. You flip in another slide, just wanted to start briefly with a bit of outcomes data from, our work at Evolent. We recently had a journal article published in the American Journal of Managed Care around the outcomes we're driving.
These sorts of outcomes, which we're going go into a lot of detail today, really do power our business. It powers our top line, and it powers our bottom line. These are just two examples into the work we do. Along with lower costs, we also see very significantly improved quality for patients. And almost everything we're going to talk about today is underpinned by these sorts of outcomes, and so we wanted to start with that.
If you flip to the next slide, with respect to this $1,000,000,000,000 of waste that we've talked about, the pace of growth of that is actually unsustainable. I remember when that number was $600,000,000,000 It's now $1,000,000,000,000 It continues to grow each year, and the solutions and the status quo in the market aren't really addressing it. And so just to touch on it, what is the problem fundamentally, structurally? From our perspective, it's that on the right hand side of the page, have providers. Providers have the ear of the patient.
It's obviously said the pen, the physician's pen is most expensive piece of medical equipment in health care. They drive the decisions, they drive cost. And yet, generally, providers do not have an incentive to manage the cost of care. On the left hand side of the page, have the payers who have every incentive to manage the cost of the care, but they do not have the ear of the provider and often don't have the ear of the patient either. And so when people talk about value based care, it's really, in our minds, working to coordinate between these two entities, supporting the patient, the payer and the provider and coordinating care, a huge set of untapped opportunities.
It could be a patient that gets admitted that could have stayed at home. It could have been a therapeutic regimen that cost twice as much as it could with, lower efficacy. It could be adherence to medication that might be preventative over time and keep the patient home and healthy. There's unfortunately hundreds of things that are not happening in this sort of disconnected system. Those missed opportunities are certainly what Evolent's focused on.
Our three solutions focus on those opportunities, and that's going to be the framing for everything we talk about today. If you flip into the next slide, just in terms of Evolent's role in all this, we really are serving as a bridge to support the divide that I just described between the provider and the payer. There are three primary things that we do to support that bridge. We'll talk a lot about them, so I'm not going to talk too much now. But, one is proprietary technology.
We have proprietary two proprietary technology platforms that that link payer and provider coordinate care, help identify missed opportunities, and drive those opportunities from the payer perspective down to the provider side. Two is our deep clinical intellectual property that is embedded in the technology and drives the recommendations and the workflows that support the changes in care patterns. We intervene thousands and thousands of times every month with these sorts of interventions across our three solutions. And that, again, is core. And then third and finally is our scaled services model, which we'll talk about today.
It's efficient, has an automation element, has an offshoring element. And when you take all that together, that really is role across the ecosystem. You flip into the next slide, Page 10, we get the question a lot of, hey, where does Evolent fit within the value landscape? There are a lot of different organizations out there, and there are a number of great value companies. I'd say all the companies on this page are working to do disruptive things.
They disrupt the status quo and address this trillion dollars of waste that's in the system. You know, they each are coming at it, from from a different perspective. On the right hand side of the page, you have what we would call new provider models. These are organizations like Oak Street Health, VillageMD, Chinmed, excellent organizations that are getting getting great outcomes, but they are becoming a provider. They are building clinics, and they are employing physicians to get at this trillion dollar issue.
On the other end of the spectrum, there are a number of payers, that are new and disruptive, Bright Health, Oscar Health, Devoted Health that are, again, running at this same issue but coming at it as a payer. They've sort of said it themselves like we need to be a payer to run at this issue. In the middle, where Evolent sits, I think, is a category of payer provider enablers. And I think some of the benefits of the middle category are one that most of the two fifty million people who are insured today, get their care from an existing payer and an existing provider. And so as the bridge, we're actually supporting that segment.
We can scale reasonably quickly. And second, the middle category is less capital intensive. This is about technology and intellectual property and connecting existing payers and existing providers. So that's where we fit. Some other organizations you may know of that fall into this category, Livongo, Progyny, we don't compete with either of those two organizations, but I would say the business model and approach is similar.
So hopefully, that's helpful in giving you a little snapshot of where we sit. You flip on one more slide to Page 11. And we also get asked a lot about the evolution of Evolent. Gosh, you've done a lot of things over time. How did you get here?
And why did you land in this position? I would just say that in general, when we started the business, we were doing all of our work around total cost of care management. And all of our work at the very beginning was with health systems and then independent physicians. And over time, we've obviously added two new solutions in administrative simplification and specialty management space, which has opened up the payer side of the market, which has been very helpful to us. We'll talk about this in a minute.
But I think two of the benefits of this evolution are: one, a much larger TAM across a diversified set of solutions And two, when we first started the business, particularly focused on health systems, we were more dependent on the pace of regulatory value based care. That's changed a lot, which we'll talk about in a second. So if you flip to the next page, just briefly a little bit on our solutions here at the beginning. We're going to go into a lot of detail today, so I'll hit these briefly. But our solution we have three main solutions, two of which administrative.
On the clinical side, we have specialty care management, which is really about working with oncologists and cardiologists to make sure that the treatment pathways being followed for a given patient are best evidence and make sense from a cost and quality perspective. Generally, we find very substantial cost reduction opportunities when we do this work, often 10% reduction, and that grows over time. The total cost of care management space, which, again, we'll go deeper on today, is really about primary care. And think of this as total budget health care. The primary care physicians we partner with, get a budget set for them around their population.
Their goal is to beat the budget and do so by providing higher quality preventative care. We provide the systems to allow them to do that. And on the right, administrative simplification. Again, this is about having the data and the information flow to the specialists, the primary care physicians, and the transactions happen in a way that is effective but also supports the clinical interventions on the left hand side of the page. From an operating model perspective, it's interesting.
It's actually very consistent across all three areas, and that's why there's scale that we're building into across all three areas. The three things we do: one, proprietary technology, Identify, supports the far right in the middle CarePro, which is part of New Century, the specialty space. We'll talk a lot about those technology platforms, but they are absolutely critical to everything we do and the outcomes that we achieve. Second, the scalable clinical IP and infrastructure that I mentioned, we'll talk a lot more about that. But there's a tremendous amount of fifteen plus years in the case of New Century and nine years of depth in clinical IP creation that underpins everything we do.
And then third and finally, we're not just a technology business and IP business. We do support our partners in actually achieving the savings. And part and parcel of that is having an efficient services model that's onshore, offshore, it's automation, it's AI, and we're going to talk about those things today. Those three pieces, you're going to see them show up across the entire presentation today, and they're consistent across three. Economic model is similar across all three of our businesses.
It is all recurring revenue. There is a fee component for everything. On the far right is all fees. In the blue area, it's fee plus performance based. And that performance based element is one of the reasons we're differentiated.
We're willing to stand behind our results. It's also some of the things that have driven, the improved financial performance across this year and about, again, three fourths of the business is in the left two and about a quarter is in the far right. Flip me to the next slide. The other thing we get a lot of questions on are one, hey, there's an election coming up in few weeks. Does that have a big impact on you depending on what way it goes?
And the second question is, does the pace of value based care matter for you? And I'll take those questions in order. So the first question, does the election matter? You know, I think I'd say, interestingly, the work we do, and I'll and I'll term it really anything and everything to address that trillion dollars of waste, which is what we're focused on, is incredibly bipartisan. You saw it under the Obama administration.
You've seen it at CMS and CMMI under Seema Verma and the Trump administration. The idea of controlling health care costs and reducing waste is a bipartisan issue. And specifically, we really don't see much of an impact, whether it's it's Trump or Biden, come November. In the bottom, the second question is, hey. Does the shift of value and the pace of that matter?
I'd say four or five years ago, it did matter for us a lot. I'd say today, it does not matter very much. And in general, we control our own destiny. We put a data point in here to help illustrate that. A lot of the work we do is with the managed care organizations or around evergreen programs with providers.
Based on that, less than 10% of our current pipeline is dependent on the pace of value. Should there be a massive regulatory change around the pace of value, we don't think it has a big impact on us in terms of our ability to drive revenue and growth. So just to cap this section, to be clear, we're going to show you a lot of specific data today in terms of medium term metrics, cost reduction plan, growth plan. And I think I want you to hit the point head on at the beginning that all of those metrics are really independent of these two issues. And regardless of the path here, we feel good about achieving those metrics.
There are some outcomes around the pace of value that could accelerate our opportunity to go beyond the metrics we're going to show you today. But everything we've shown you today is isolated from these two issues. All right. So if we flip in a slide, we're now going to dive into the three themes that Frank started with at the very beginning. I'm excited about this.
This is really I think we're going to get into the part that is the inflection with Evolent and a couple of specific things that speak to where we're headed with a lot of confidence. And so if you flip into the next page, we're going to talk about three specific areas within the first area, which is focused strategy. First is driving continued organic growth in the core services business. The second is expanding our adjusted EBITDA margin. And the third is around optimizing our capital structure and simplifying the portfolio.
So I'm going to dive into each of these in turn. So first, we want to put forth a set of medium term targets. From our perspective, these are very clear expectations as a shareholder of what you can expect from us. We feel very confident in achieving these metrics, so we want to start the presentation with these metrics. So first, adjusted services revenue.
We've talked about this, but we are confident in mid teens annual growth on the core adjusted services business. We'll talk about what that looks like and how we get there in a second. Secondly, perhaps more importantly, is a lot of confidence and commitment around mid teens adjusted EBITDA margin through annual twenty twenty two hundred to 300 basis point expansion coming off of 2021. And again, we're going to show you a lot of detail on how we get there, and, we can have confidence in this metric. And then third and finally, we're to talk about capital structure and portfolio.
As you know, we have a number of things underway that are returning capital to the business. We're going to be using those proceeds to delever. All right. So let's flip into the next page, which just tees up the first of these, which is driving continued organic growth towards the mid teens, long term target. If we flip again to 18, in terms of how we get there, if you think about this target of mid teens, our historic organic growth rate over the last four years has been 15%.
We'll talk about that in a second. So we've been doing this. We expect to continue to do this. How have we gotten there? Historically, about 40% of the growth has been from existing customers cross sell expansion on the far right, and about 60% of it's been from new customers, which 6% to eight on a normal year.
We share this to just sort of say, hey, we have a road map. We've been doing this. And also, I think importantly, the fact that a very substantial portion comes from our existing customer base gives us a lot of confidence that our customers like what we're doing with them, but also just makes the 15% much more achievable or mid teens much more achievable based on having that built in growth with our relationships that are in place today. If you flip to Page 19, the other factor that obviously underpins the confidence around a mid teens target is TAM. The TAM is big.
We've been talking about the TAM for a long time. It's grown a lot since we started the company. Today, it's well over 100,000,000,000 It's around these three areas that we've been talking about. The specialty space when we acquired New Century Health is closer to $10,000,000,000 We've done a number of things to expand this in terms of new line of business and a new approach to the scope, which has been fantastic. I would say this space is hot space in general.
It's a pain point for payers. Oncology drugs are huge in the pipeline, and there's a lot of concern even with COVID of cancer bounce back as people have delayed their ability to get screened. There's a concern about that. And so this is continues to be a very strong solution space for us. We think we are the market leader in this space, and this probably continues to be our most differentiated, fastest growing solution.
In the middle, total cost of care space. This is the work with the primary care groups and other providers. Here again, this continues to be a very big opportunity. Post COVID, a lot of providers are saying, you know, fee for service isn't so great when nobody's coming to the doctor. I sort of like the idea of a little bit more predictability.
I like the idea of being able to have a business model that that that is a little bit more linked to, how the performance goes across the course of the year. And if if folks stay home or I prevent care, there's an opportunity for me. And so this this this space, so as COVID quieted down, has has really heated up for us. And, obviously, we have, two new announcements that fall into this segment today, which we'll talk about and we're very excited about. And then third and finally, the far right, the administrative space.
This has been very solid and predictable for us. We have Maryland Physicians Care in this space going live soon. This is a strong space. It's been around for a long time and is going to continue to be predictable, both on the top
and bottom line for us.
Going into Page 20, just a little bit in the rearview mirror. On the left hand side of the page, we've grown at close to 30% CAGR since 2017, 28% there. If you strip out any acquisition activity, that number is 15% on a pure apples to apples basis from a true organic growth rate, which, again, is in the zone that we expect to continue growing into the future. If you think about how we get there, again, it's new customers, and then it's further penetrating our existing customer base same store growth, and we're going to talk about both of those. I mentioned the 40% number earlier.
That continues to be a big part, and it's going to continue to be important in the future. Next slide. So if you go to twenty twenty one on the new customers front, we have announced a number of new partnerships over the last several quarters. I'm obviously excited about Merrell Physicians Care, which is going live the first part of next year. That's around the administrative simplification space with our Evolent Health Services business.
We've also had a number of strong announcements with New Century, some of which are listed here, And, we will continue to obviously add to this over time. On the right hand side, excited today to announce, two new provider, partners. These two are in our total cost of care space. One is Physicians Accountable Care of Utah and the other is Tar River Health Alliance, one in Utah, one in North Carolina. These are two excellent physician groups.
These are independent physicians. And importantly, these are incredibly efficient, high quality regional physician groups who we think are very well positioned to take on the total cost of care opportunity. These aren't, bigger national brands that you might see on the left, but they are the types of organizations. If you think back to that bridge slide, this is where, people are receiving their primary care today with groups like this in many cases. And these are going to be great partners for us.
They'll be going live, earlier part of 2021, initially with 20,000 lives, cumulatively, and then there'll be an opportunity, across the panels of those physicians to cross sell and grow up to closer to 100,000 lives over time. So incredibly excited about these two, and we'll be talking a lot more about our total cost of care solution in a few minutes. Flip me to Page 22. Let's turn for a second to talk about cross sell. We have 35 partners today.
Four of those partners are national payers. If you just take, those four national, payers and think about a case example here with New Century Health and what could it mean if we took one of those national payers and expanded the work we do today. We picked a payer that today, we have an oncology solution in place in one state. And we said, gosh, what would happen if we added cardiology in that same state? That's $15,000,000 of incremental revenue.
What then if we went just for one line of business, Medicare, which is roughly 500,000 lives for this payer and went to, across the country for both cardiology and oncology, and that's $450,000,000. And obviously, this is one of our four national payers and four of our 35 partners. There is a very, very substantial cross sell opportunity just for New Century for this one line of business. There's close to $500,000,000 opportunity for this one payer. Obviously, across just the four national payers, we would see several billion dollars of opportunity over time and consistent with our TAM is much more than that across the entire customer base.
Turning now to expanding adjusted EBITDA margins. We have the target here, mid teens adjusted margins in the medium term through this 200 to 300 basis points annually. Okay. So how do we get there? If we go into Page 24, I want to be very specific about this as we have quite a bit of confidence, so we can flip forward one slide.
There's really three levers around the metrics that I just shared. One, on the far left is a onetime targeted cost reduction that will be executed rolling into 2021. We size that at 20,000,000 to $25,000,000 We know where to go get those dollars, and we're working on that today. In the middle is really, over time, growth through leveraging SG and A. We've made a lot of the investments, we think there's at least one point there every year.
And then third and finally, we think there's a lot on gross margin annually, and that's through product mix and automation. So that gets you to the two to three points a year, plus a onetime activity that we are undertaking currently. Flipping to 25, a little more detail on each of these three areas. We've taken out already, between 2019 and 2020 about 700 basis points, and that's through a lot of SG and A reductions, getting greater yield on our tech asset, our move to Pune, and also disciplined targets around what does it mean to have a customer from profitability perspective and where do we not, have that and what actions should we take to get there. So we've already done a lot.
And then we'll continue to intensify this effort into 2021. We've actually hired we hired right at the end of Q2, beginning of Q3, an outside adviser to help us on our cost targets and cost reduction activities to have a fresh set of eyes. And that gives us incremental confidence in achieving the 20% to 25% that we talked about, and we'll be executing on those across the months to come. In the bottom part of the page, I mentioned growth leverage on SG and A. In many ways, I'd say at this point, we are harvesting the value of all the hard work we put in over the last eight or nine years.
We've made lots of investments. I think today, have lower investment required on an ongoing basis. So each incremental dollar of revenue has higher incremental flow through, and we're going to be harvesting that over time. And then at the bottom of the page, on the gross margin front, there's really two pieces here. One, on product mix, this is an important one.
Actually really excited about the fact that we're announcing today acceleration of a lighter technology solution as part of New Century Health. It complements our full New Century Health performance suite. This is a solution we've been testing now for quite some time with one partner, and we've recently begun to roll it out to two more partners with a lot of positive feedback in the market. This solution is going to be a lower PMPM product, but a much higher margin percentage product. And obviously, that's going to contribute to where we land from a EBITDA margin perspective over time.
I think it also is going to allow us faster entry into certain markets with new payer partners. So really excited about the addition of this new piece in the New Century Health suite. And then at the bottom, automation. We've talked a lot about this. You've been on our calls.
We've talked a lot about our investment in Pune, India. We have done a tremendous amount around automation through technology investments, and AI, and those things are starting to yield. And so I just say, in general, across this page, led by John Johnson, our CFO, but the whole team, A lot of hard work has gone into this. It gives us a lot of confidence in being able to execute on the plan to get to this mid teens target that we've been talking about. All right.
So flipping to '26. Next piece to plan is really optimizing the capital structure and simplifying the portfolio. We're going be using these proceeds to delever, as we talked about. So first, on '27. We obviously completed and closed the Passport transaction recently.
And if you think about the metric on the far left of debt less cash at EUR260 million prior to that, and then look at what the business looks like after the Passport capital return is complete, that obviously drives a very substantial reduction in this metric of debt less cash. So the delevering in some ways is underway. If you think about it in this way, and I just make one comment with respect to the 130,000,000 to 170,000,000 We still have more work to do. But based on where we are in the year right now with the proper caveats, let's say we're likely to end at kind of the higher end of this range of 130,000,000 to 170,000,000 which would leave us on the far right kind of at that net metric of debt less cash closer to $100,000,000 a very substantial change, obviously, from just a few months ago. So as that capital comes back, we are expecting to delever.
As I said, we'll be using the passport proceeds to pay down our senior term loan in 2021. Flipping to '28. We've talked a lot about what our focus is. Our focus is on our three core services business. We want to put our management attention, our efforts, our energy and our capital against those three areas to be true to that.
We also then have to look at any attention or capital that's not focused on those areas. And we've been talking about for some time now, we've been exploring strategic alternatives for each of these three health line assets, which are our three health line assets. Obviously, we've made a very clear public statement that we're not going to be investing any new assets like this. These were important to us at a very specific time in our evolution. There was always a plan to monetize those investments at some point and be able to achieve the services revenue growth and the portfolio expansion that came along with it.
That time is now. We've announced the Passport transaction. It's closed. We'll be anticipating the return of capital that I talked about over time with a lot of confidence in where that metric sits. And importantly, we have the New Century Health relationship that has been attached to that and have been very impressed with the Molina team and a lot of good work going on there between New Century and Molina.
Second, Florida Medicaid. We have a number of relationships across Florida. We are announcing today that we're in a strategic process with those partners right now to consider options and get the right path forward for those plans. I'm excited to also announce that we did sign a definitive agreement in Q2 to sell the Lighthouse Health Plan, where we own 40% of the business to Anthem. We expect that to close in Q1 of twenty twenty one.
And while we didn't put a lot of capital into this plan, it will return two to 3x our initial joint venture capital investment, like Passport, a good return as this divestiture happens. And then third and finally, with respect to True Health New Mexico, we announced a couple of weeks ago, that we are exploring strategic alternatives for this asset. We did formally hire a financial adviser to do this work for us in the first half of the year. We should have a good sense towards the end of the year on the outcome here. So across all three of these, interesting, when you step back and look, we've deployed just shy of $100,000,000 these three assets, based on just the returns that we know about today from Passport and the One Florida plan.
We'll obviously, return well north of that, and, we expect to have some new information on, True Health in the time ahead. So we're going to pretty quickly flip into a deeper dive on our differentiated solutions. But, before we do that, I did want to touch just briefly on our team and our board. I get the privilege of standing up and, sharing all this great work with you. They're doing all the hard work.
We have a phenomenal team. On the left hand side of the page, you can see a select subset of our leadership team, incredible depth, many years of experience in this sort of work. I'll pick out one example just to kind of dive into it. Doctor. Andy Hertler, has been with New Century for a long time.
Under he and Dan, the CEO of New Century Health, we have several 100 clinicians that are executing on the types of, pathways and interventions that I talked about earlier. And that's just one example. You've got hundreds of people with, decades of experience, doing this kind of work, and there's a tremendous amount of skill, very deep bench. And I think this team is the right team to execute on the plan that we've been talking about today. On the right hand side, similarly, I'd say that our Board is an excellent Board to support the work that we're doing.
They have expertise that's closely aligned with the strategy that I just laid out. I would say that we're coming up on five years since the IPO. It's a natural time to think about governance adjustments, I'd say, over the last year plus. We've had very detailed conversations about those adjustments with our Board. I would say we're going
to
have continued considerations. We think about the governance, and we're announcing today that we're commencing a process to declassify the Board or propose declassification at the annual meeting, and also, be eliminating the supermajority provisions as well headed into annual meeting. So, I think with those government adjustment governance adjustments, the governance organization that we have in place and the strong leadership team we have in place, I think we've got the right team, and expertise to execute on the plan that we've been talking about, and we're incredibly excited about it. So I think we are now taking a five minute break. Let everybody grab something to drink, take a bathroom break, and we'll start back in five minutes, and we'll go, much deeper into each of the solutions.
All right. Great. Let's get started again. Welcome back. Let's flip in one slide here.
So we're gonna now go into our second theme that Frank introduced at the beginning, which is around our solutions and how they, create differentiated value. Normally, we would have, an array of our talented team here to walk through each of these, and you get a lot of exposure to them. Given the, virtual video format, I will lead this. But fortunately for you, we hope we'll splice in three separate customer case examples, video conversations between our partners. So with that, let's start with Page 32, which is our specialty care management solution.
Just a little bit of introduction as we dive into it, you think about what this solution is. We are serving payers and risk bearing providers. The work here, again, is really about driving adherence to the best evidence around cardiology and oncology cases. So when a given patient is diagnosed with cancer or has a cardiology condition, the ability to map that patient back to our clinical algorithms using our technology, calling the physician or reaching out in a technology different way to the physician to propose adjustments to certain care plans that drive quality up and costs down. That is fundamentally what we do.
The value proposition, as I mentioned earlier, is driving real, immediate savings to our payer partners, better administrative processes for our providers, and in certain cases, also better income for our providers. The key solutions, I just touched on them, we're going go through those in detail. So you flip in one more page to Page 33, and you oncology to start, oncology is growing incredibly rapidly. A huge proportion of the drugs that are in the FDA pipeline address this issue. It is a huge societal issue, and the spending is predicted to reach $240,000,000,000 annually by 2023.
You can see the 11 to 12 drugs in the pipeline were priced at $100,000 plus per year. So this is an issue that is, again, if you're a payer, is a rapidly accelerating problem with respect to the cost of care. And I would say even for the patients and the physicians, the oncologists, the quantity of new information, new therapeutics that are coming to market is incredibly confusing. So this is both a quality and a cost problem in oncology. Cardiology, similar set of issues, a complicated space, a huge spending category that's growing.
And as you can see, it's 14% of total health, health expenditures today. You put these two together, cardiology and oncology together are 25% of all Medicare spending. So when we take on these two issues, and you go talk to a payer about it, you know, oh, it's two specialties. It is also onefour of their total spending. So it's a very significant area, and this is going to be the focus of the next couple of pages.
So we go flip in. In the simplest way possible, this is the value proposition of our Specialty Care Management space. It's underpinned, as I talked about, with New Century Health, which we acquired several years ago. Sometimes we refer to it as NCH. But as simply as possible, this is the value proposition for the payer, which is before we show up, the payer is spending dollar x, which is the red line.
And after we show up, we often immediately shift that line down, which is a significant reduction out of the gates. And then importantly, over time, our trend is much flatter than the trend of the payer through the same management techniques that I talked about earlier. And so when we put our solution in place, this is an oncology and cardiology example. These are real savings numbers from a real client. We made it illustrative by adjusting the number of lives to blind the case study.
But if you apply this to 100,000 lives, these savings numbers that we actually see, it's $79,000,000 of value for the payer over five years. So put simply, this is why, payers work with us is to help manage this. And again, we'll talk about in a second, it's not that we're, withholding care or adjusting care to the worst. This is higher quality care at the same time. And in fact, we start with quality and we start with what's right for patient, but this is the result that you'll see financially.
Flip into the next slide. Let's talk a little bit about why, traditional payers don't solve this on their own. Why do we get hired to do it? There are three barriers that we would point out and three solutions on the right hand side that we think we address. First, suboptimal network performance.
This is around misaligned incentives and the fact that, again, the physician has the ear of the patient and the payer does not have the ear of the patient or the provider. We help align those two things through our network work and our high performance networks in the middle. There is rapidly increasing complexity with respect to both cardiology and oncology, and the same is true for, some other specialties with these two in particular. And we'll talk about it in a minute, but huge new influx of new drugs, new influx of clinical trial information to sift through. And it's tough for any given physician, even tough for any given payer to stay current on it and do all the work to have the right scientific advisory board.
We have a 20 person scientific advisory board that helps us think about what those pathways are on the right to be able to address this medical complexity and figure out what's the right plan of attack for each given patient. And then third and finally, if you're the physician, the cardiologist, the oncologist dealing with this work, in the traditional model, it's labor intensive, it's manual, it's frustrating, to get approvals from the payers. We simplify that through our specialty care management workflow platform, which is called CarePro. Go on to the next page. We're gonna click in the network for a second.
Essentially, three things we do with
the network. One is we set the network up, and design the network. And that's around using our data. We have, a huge base of data over many years for cardiology and oncology to understand who are the high performing physicians and who are the less high performing physicians. We construct our network in a very thoughtful way based on that data, which is, again, more data than any one payer would have and more experience than any one payer would have.
In the middle, we set up the right financial alignment with the cardiologist or the oncologist to make sure that there is alignment. Again, why does the payer not have the ear of the physician? Well, one reason is misaligned financial incentives. And so I'll give you an oncology example just to kinda make this come to life. Let let's let's assume that there are two treatment possibilities for a given patient.
One costs $50,000 a year, in terms of the therapeutic, and one costs $25,000 a year in terms of the therapeutic. Let's assume for a second the $25,000 therapeutic has better efficacy, and lower toxicity to the patient. Having the physician, the oncologist switch from the $50,000 therapeutic to the $25,000 therapeutic, given the buy and bill system that exists, would cost that oncologist probably over over a thousand dollars of income. And so when you think about that, it's a real challenge to actually go out and have a a conversation when you're asking, very tricky, trade offs with respect to income. Let's say maybe the two things are actually therapeutically equivalent even, to ask that physician to take out, $1,500 out of his or her pocket is tough.
And so one of the things we do is align the financial incentives more closely between the payer and the provider so the the linkage is there. One example of that would be to minimize the buying the bill incentive with oncology drugs. So meaning if you prescribe the 25,000 or the 50,000, as long as you're getting great quality and good outcomes, you get paid the same thing as that physician. Just take away the incentive or the misaligned incentive that exists. And on the far right, really, working with the physicians, engaging them.
Again, this is when we say who has the ear of the physician, often the payer doesn't. We build relationships so we do have their ear. That's through the systems, but also a lot of the things listed here on the right side of the page. We have a dedicated team, that works on these issues. We help them get their claims issues resolved, all sorts of things that, again, build relationships and stickiness with those physicians, in a way that we have the right to have the conversation, around a pathway change that I mentioned.
So if you flip to the next page, just an example of, I think, on the network issue for New Century Health and our specialty work in particular. Take a look at Florida. It's a very interesting case study where from 2015 to 2020, New Century increased the number of oncologists in network by about 25% and the total number of lives under contract by 50%. And as that number increased, the particular number of lives under management, you think about the effect on our payer customers and the oncologists. We start to build a single set of tracks into each provider so that more and more of the patients they see for oncology are using our CarePro system, and it reduces the administrative burden for them.
On the payer side, it gives a greater savings because we have more of an all payer model and increases provider satisfaction. So there's sort of a two sided network benefit that develops here in each geography, Florida being a good example. You can see at the bottom, because of that in Florida, you take a look at our provider satisfaction and portal ease of use scores. These are not scores out of five you would normally see with respect to payer provider communication. Why do we have the ear of the provider?
It scores like this. And then what is the result of all that? In Florida, over this time, we've had a you know, from 2015 to 2020, a 25% improvement in savings versus unmanaged trend. So we've always saved a lot of money. That that rate of savings is accelerating, which again, I think reinforces this two sided network effect that exists.
Let's flip to the next slide. Okay. So how does this work specifically, with respect to cardiology and oncology? We picked an oncology example here just to walk you through the brass tacks of it. It starts on the left hand side of the page.
We do is rooted in deep clinical evidence. I mentioned the 20 person scientific advisory board. I mentioned, Doctor. Hertler earlier. But across a broad group of people, who are pharmacists, physicians, medical economics experts, we have developed what we call our Level one Precision Pathways.
And those Precision Pathways are best evidence for any given patient with any given diagnosis, what is the right course of treatment given that patient's profile, age, comorbidities, genetic profile, all those things. And we've this is a huge asset for us, the Level one pathway. We do use some of the national guidelines or some of the other practicing physician input, but ultimately, are our proprietary pathways and are very core to the things that we do. Once you have those pathways, what we do is we, you know, every day, every hour of every day, we're getting data back from physicians, that's in this case oncologists, which say, here's a new patient that I'm treating for a given oncology diagnosis. Let's say it's small cell lung cancer.
There are a huge array of treatments because of the number of therapeutics and the number of different combinations of therapeutics. There might be as many as 10 different options for a given treatment. You can see those lined up in the middle, A, B, C, D, etcetera. The first screen that our algorithm applies, we take the data in through CarePro, and it says, this is the patient, this is the condition. We put that through CarePro, our clinical algorithms and bounce it against our pathways.
Out of that comes a funnel of sorts that said, well, out of these total, usually these five, B, C, E, G and H are most efficacious for patient, meaning survival rates, tumor reduction rates, etcetera. After that, we look at toxicity. And when you look at toxicity, toxicity is what impact does it have on the patient, quality of life, ability to get up and do the things that they want to do. You apply that filter and see an H fallout, meaning B, E and G are the best therapeutic regimens to pursue. And then finally, and finally, this is the order we put it in.
Last, we apply a cost filter. And when you apply that, G drops out and B and E are the optimal pathways for that given patient. And again, I'm representing this incredible fifteen plus years of work from New Century and our incredible team there, but, it's a highly tuned system to get to this answer. If the physician is doing something different than B and E, we will pick up the phone and do a peer to peer consult. One of our oncologists will call a treating oncologist to have a conversation about the literature.
An interesting fact is that, today, there's several 100 new journal articles that come out every month on oncology treatments. The average oncologist has time to read three a month. If you think about the disparity in knowledge from a system and an algorithm that takes in all that, with one physician, the kind of care that you or I would wanna receive or families should receive, is in the middle where you have a system that that thinks about it in this way and boils it down to best evidence. I truly believe almost all oncologists wanna do the right thing, but it's pretty darn hard to keep up with everything here. And so getting down to B and E is the best choice for the patient, quality first, toxicity second, cost third, yields what you see on the right hand side of the page.
A different treatment, we intervene and we make changes in many cases across the year, and you can see what happens when we make that intervention. And often the intervention recommendations are accepted and taken by the physician. You see very significant reductions in cost per treatment. So if you had that small cell lung cancer example and you were going to follow path a and you end up following path b, you see a $12,000 reduction in the cost of treatment. You multiply that times hundreds of thousands of opportunities across a year, these are very substantial dollars that flow to our partners, and this is also the thing that drives our economic model.
So flipping to the next slide, a little more detail on the system itself, how does it work. I mentioned that we take data from the practices of the treating oncologists or cardiologists. The data comes in at data aggregation layer. We then run our prioritization engine against the algorithm from the Scientific Advisory Board against that data.
That creates the targeted engagement that I mentioned, which for us is not calling the patient, it is calling the physician or reaching out to the physician's practice or sending a message through CarePro, to actually, recommend the change. You can see a screenshot of the system on the far right. And then we do close the loop. We pay the claim, at New Century in many cases. And, that gives us the ability to match the data then and understand the total value that was created, and that's a big part of those value propositions as well.
Flipping into the next page. You think about the work we're doing today. Today, NCH is managing actively 66,000 cancer patients through these base of lives that we have. Obviously, the populations are much, much bigger that we're touching to get to these sixty six thousand. This is the subset of people who actually have cancer, and this is an annual number.
You think that there's 1,800,000 new cancer diagnoses a year. We're treating a very small slice of that one point eight million today through this sixty six thousand number. You'd see a similar kind of disparity on cardiology with respect to what we're doing today versus what we could be doing. This harkens back a little bit to the growth portion of the presentation. We think our solution is an excellent solution for the payer, for the patient and for the physician, and yet it has a reasonably modest market share.
And this is, I think, core to why we have a lot of confidence in the growth rate ahead. All right. So you get to take a break from me for a second. If you flip into Page 41, we did want to provide a case study for one of our new partners, Neighborhood Health Plan. They have about roughly 200,000 lives.
They're based in Rhode Island, excellent plan, regional payer. And, the work that we do is very consistent with all the things that I just talked about. We launched in September 2020 across medical oncology, radiation therapy and genomic testing, and we're off to a good start. We wanted to hear directly from our partners. So Giselle Havich, our Senior Vice President of Network at New Century Health is interviewing Casey Stockman, the VP of Pharmacy there at Neighborhood Health Plan.
So we'll flip to a video and let you see a little case study.
Hi. My name is Giselle Havaj, and I'm the Senior Vice President of our National Provider Solutions team here at New Century Health. In my role, I'm accountable for provider alignment and engagement strategies. My team is primarily responsible for onboarding providers across all payers, which may include provider contracting, and we also provide ongoing support. We strongly believe in this approach as it's been a hallmark of our success through the years.
I'm happy to be joined today by Casey Stockman, and she's the Vice President of Pharmacy at Neighborhood Health Plan in Rhode Island. Nice to see you, Casey, and thanks for joining me today to discuss our partnership with New Century Health. To get started, Casey, do you mind telling us a little bit about the organization and specifically about your role?
Sure. I was going to say it's great to see you as well, Giselle. It's a pleasure to be here, and thank you for having me. Neighborhood Health Center Rhode Island was founded over twenty five years ago by in collaboration with our Rhode Island Community Health Centers. Our focus is providing high quality, cost effective care, especially to the most vulnerable populations.
We serve about 200,000 members in Rhode Island, which is about one in every five Rhode Islander. 80% of our membership is Medicaid eligible. 7% are in a dual demonstration Medicare Medicaid plan, and fourteen percent are folks who are able to purchase the commercial plan from Neighborhood through the state's health benefits exchange. So as VP of pharmacy at Neighborhood, I'm responsible for compliantly managing coverage, access, delivery of all types of medications, whether they're specialty or traditional, whether they're covered through the medical or the pharmacy benefit, anything drug related across the enterprise. And as part of my role, I was intricately involved in the implementation, the work with New Century Health and oversaw the rollout and the operations of the recent program that we launched together.
Great. Thanks, Casey. Another quick question, guess. Why did the organization seek out an operational partner to provide specialty care management, specifically on oncology? And then what were the goals at the time for NHP?
Yeah. It's a good question. We had several goals in mind that we were looking for. Cancer care is extremely complex. It requires lots of deep expertise to really manage it.
And so one is we were looking for a holistic solution. So we weren't just looking for drug management. We were looking for beyond oncology drug management and other services that oncology patients would receive. We were looking for a partner that did have deep expertise and understanding and being on top of all the latest regimens and changes and new drugs to market, etcetera. We were looking for somebody who would focus not only on on adult patients with cancer diagnoses, but also pediatric patients with oncology or hematology diagnoses as well.
We were focused on finding a solution that would work with our provider network and really help them to understand evidence based treatment patterns and therapies and protocols and really work with them to get a patient to optimal treatment versus a standard approach of each individual service being looked at separately and it's approved or denied. We really wanted an educational approach. And I think lastly, we were looking for a solution that could really bend the oncology cost trend curve here for us at Neighborhood while still maintaining quality.
Thanks, Casey. As I think about it further, like what were some of the reasons you selected New Century Health as opposed to other alternatives that are there? If you can give me a little bit of color on that.
Sure. You know, we did an extensive evaluation to understand who would be the right partner for Neighborhood. There's a couple of things that really stood out. One, New Century Health has many, many years of performing these services and has a lot of great experience with payers and payers with similar lines of business as our own, which gave us a lot of confidence. One is how they have very strong presence with the providers in our network.
We were looking for a partner that had deep clinical expertise, and New Century Health has many employed oncologists, hematologists, board certified oncology pharmacists, and that really shone through as we were evaluating the program. And, you know, I think two more points that really stood out to us. One was their technology solution. They have the CarePro platform, which we really thought would be something that our provider network would gravitate towards and see as a great improvement to what their current experience with would be at Neighborhood. And so the CarePro technology was a big factor as well as really their willingness to partner with us in ensuring that that the program would be successful from a financial perspective as well and being a real partner in ensuring the cost and trends in oncology would would experience, you know, a shift because of these services that we're putting in place.
That's great to hear, Casey. So thanks for that context. Can you touch upon how New Century Health is supporting the organization today?
Sure.
Yeah. We just actually launched our oncology management program with New Century Health this month. We've been engaged in implementation activities since the beginning of the year. So September is a very exciting month
for us.
So we are live with New Century Health's oncology care management program, which covers medical oncology, radiation therapy, and genomic testing. It is live across our full membership. And New Century Health has their care care pro platform up and running. Our providers are engaged in using it. New Century Health has been doing extensive provider detailing with our network, already having collaborative discussions on optimal cancer care.
So those are the services New Century is providing us today, and we're excited about it and look forward to any continued opportunities as they arise.
Effie, thanks again. I I echo your sentiments. We're just as equally as excited to be working with, Neighborhood, and we're we're happy to be in a partnership and looking forward to more. So thanks for your time today, Effie.
You're welcome. Thank you.
All right. Great. That was excellent. Excited that you got to hear from Giselle. Giselle has been with New Century Health for fifteen years.
She's a good example of the kinds of people we have in the organization with an incredibly strong bench of talent that really knows how to do this kind of work. And really excited to be partnering with Neighborhood Health Plan. All right. So we can flip into Slide 42, just to wrap the New Century section around specialty care management. I think we've talked about this, who we're addressing on the left.
In the middle, it is a big market, and we have very modest penetration. I think we have the leading solution around cardiology and oncology and a lot of running room ahead of us. And so that's going to be our focus, is taking that market penetration to significantly higher number. And hopefully, you've gotten a feel for why we're differentiated both from the things I share, but maybe more importantly, hearing directly from a customer. I do think at the end of the day, that we are performance oriented and we can drive real savings or have the confidence to do it and we have the expertise clinically and from a technology perspective to stand behind it, that really ultimately is the, I'd say, the biggest driver of our success in this space.
And we look forward to a lot of good success ahead in this segment. All right. So let's go to the next one, second of three solutions, which is our total cost of care management space. We work here with risk bearing providers. Here, think about often independent physician groups.
Think about independent physician groups who, as an example, may decide that they would prefer to have a piece of their revenue or business under a model where they have, what I would call prepaid health care versus a fee for service version of health care. That has been a trend over time. I think COVID will accelerate that. And, again, the the way to think about this is Evolent supporting an independent physician in taking and managing these value contracts. The opportunity here is to beat the budget, you know, so called beat the budget, and the budget is the total cost for a given population.
We have a proven track record of doing this, and we use our, you know, our clinical and technology platform just like with New Century to to achieve that outcome. So if you look on '44, let's talk for a second about the profile of these primary care physicians that we're working with. It's not been easy for primary care physicians for a long frankly. Sixty one percent see decline in reimbursement, historically, and that goes back for a while. A lot of challenges in finding, time to actually do the right kind of work and keep up with the compliance and other clinical knowledge that's coming down the pipe.
And as a result of that, you get a lot of physician burnout. And I'd say in general, if you're in an independent physician group out there, you have a couple options in life. One could be to sell your practice to an aggregator, to an Optum or maybe a regional, plan of some sort that wants to acquire physicians or a health system. But if you want to stay independent, you don't have that many options to address these issues on this page. And I think the value proposition that we bring to physician really does get at these in terms of helping these physicians make more money, helping them provide better care and, making life more livable for them.
And that's, ultimately the value proposition of these independent physicians. Go to the next page. We've been doing this for a while. This could be anything from an ACO program with CMS to a risk contract with a Blue Plan or a National Plan. And we've been doing this for a long time.
We've learned a lot of approaches that work and the techniques from an underwriting actuarial perspective that are critical to get this right as well as the clinical impact that you have to have to realize the dollars. And you can see here, we've got a lot of good proof points that we know how to do it. We had $100,000,000 total savings across our ACO partners in 2017 and 2018. We're ranked number three, in 2018 by CMS for those ACO populations. Again, it's not just with CMS.
We have some non CMS contracts as well with these physician groups on the right. I talked about this study earlier, but these are very dramatic numbers that power this business and ultimately make it work. You flip into 46. Okay. A little bit more on how it works specifically.
Think about we partner with these physician groups to help set up the right arrangement for them, the right value contract with CMS or another payer. We put in place the things in the very top left of this slide, which are the care management systems, the networks, and the things Giselle was just talking about. Same for New Century is in total cost of care. There's a network element. We set up our quality work, risk adjustment, and then actuarial analytics, and we use our technology platform, to to actually drive the interventions that we need.
And that could be, again, keeping a patient out of the hospital, delivering home care, adherence to medication, behavioral health support, on and on and on. There are thousands of different intervention points across a given month, across our network. And our Identify system is sort of the air traffic control that drives all that. We take the data in. This is like a broken record with New Century, but it's a similar process.
You take the data in. We run it through our predictive stratification engine that we think is market leading. Out of that, it says, oh gosh, out of these 500,000 patients, here are the fifty thousand that need the intervention. And that's based on a predictive model and their future costs, relative to the interventions they're already getting. We then drive targeted engagements, which have a lot of our clinical programming infused.
So for example, when a patient, has multiple chronic conditions, we have a very certain program that we launch. It has a care plan. Our care managers and the physician staff work together, to drive that care plan back to the patient. We do it with the physician because, you know, again, the physician is the one that has the ear of that patient. We then, you know, again, drive it all the way through continuous improvement and in some cases, actually also do the claims payment.
So that is a little bit on on Identify and how it works and how it powers things. And, again, it's just some more methodology. I think this is another good opportunity to to drop in and get a, a case study. And so I want to welcome Jessica Landon and Michigan Health Care Professionals. Michigan Health Care Professionals is a network in Michigan, and we're supporting their ACO work.
And you're going to hear from that team and hear a little bit about the detail, going on in Michigan.
Hi, I'm Jessica Landon, Chief Operating Officer at Evolent Care Partners. And I'm happy to be joined today by one of our partners, Doctor. Barry Feldman, who's one of the leaders of Michigan Health Professionals, which is a provider group in the Greater Detroit area that ECP is supporting in the enhanced model MSSP ACO. Doctor Feldman, thanks very much for joining me today to talk a little bit about your organization's partnership with Evolent. To start, could you tell me a little bit about, MHP and your specific role in the organization?
Thank you, Jessica, for having me here. Michigan Healthcare Professionals is a multi specialty group of providers in the Detroit area, including over 200 primary care providers. We are a truly independent group of physicians that are focused on delivering the highest quality, highest value care to our patients. I lead one of the largest divisions of MHP, Millennium Medical Group, and also sit on the MHP Board of Directors.
Great. Well, thanks. And as we think back to 2019 when we first partnered together, can you shed some light on why Michigan health professionals originally sought out an operational partner like Evolent? What were your goals at the time and what was the key problem that you were trying to solve?
Well, we were coming up on a big decision with our shared savings program and ACO, to move forward into new Pathways for Success program or exit the MSSP program altogether. We had been in the MSSP program previously with mixed success. We knew that to succeed in Pathways to Success, we needed more robust value based infrastructure with solutions that would help us build upon our existing physician engagement. We needed dashboards. We needed real time information, and we need more patient centeredness and commitment to value.
So what are some of the reasons that you ultimately selected Evolent as your partner?
We selected Evolent for its population health, Medicare ACO, and provider and patient engagement expertise, as well as Evolent support for independent provider practices. We knew Evolent had a great track record of working with providers in CMS ACO programs. While helping to drive cost savings, Evolent was also able to help partners deliver superior quality results as well. The experience was a critical asset for us while we needed a partner that understood what it takes to succeed in value based care, from the clinical administrative side, reporting and risk infrastructure.
Now that you've been in the Pathways to Success program for the better part of the year, can you speak to some of the results that you've seen so far in terms of physician and patient engagement and any other outcomes? And also, now that you've partnered with Evolent in the context of the response to the COVID-nineteen pandemic, which has certainly been a challenge for everyone. Can you talk a little bit about how that's, worked and how that partnership has helped in Michigan and in your community?
Well, first and foremost, we've been incredibly impressed by the way Evolent Partners have supported our response to the pandemic. As a group, MHP has been at the forefront of in our community of keeping our patients safe. We started a testing center back in March long before anybody else in our area to provide an outpatient service for testing of our most vulnerable people. Most recently, we've extended in that center flu immunizations because people still being afraid to come into the office are not getting immunized. We've started immunizing in our testing center.
But having said that, it's been very challenging for our providers during this time. And having 20,000 ACO beneficiaries that we care for, we've taken on a huge role in our community, and Evolent has been there with us shoulder to shoulder, fighting this battle. Evolent's care advisors, their support staff have acted as an extension of our practice based teams and have supported our frontline nurses and other frontline workers by using their analytics to help target the patients at highest risk from complications of COVID-nineteen, and even did direct outreach to the highest risk patients, in some instances directing them for testing, and we hope in the future directing them for flu immunizations to our immunization center. Evolent has opened a direct phone line where our patients could call to be put in touch with Evolent nurse or community health worker. We continue to work with them on ensuring smooth transitions to home and avoiding readmissions to hospitalized patients and other care management to help beneficiaries receive the care they need along with other things.
Secondly, and more broadly, we've appreciated the way that Evolent has helped us navigate the new rules of the pathways to success program, and we're pleased at how Evolent partnered with our leadership to help drive physician engagement, which is considerably up during our partnership with Evolent, and this is leading to direct improvement in patient care. Using Evolent's panel insight tool, we've collectively completed over 20,000 timely patient interventions avoiding readmissions. On a personal note, I was recently hospitalized with COVID for over two weeks. Didn't have any of this. Wish I was an ACO patient.
Wish Evolent was my care provider. We didn't have it, had to manage all of that myself. No nurse navigator, nobody to call and no phone number. The crux of this is that close to 85% of the practices in the ACO, because of these performance tools are meeting their targets through the second quarter.
Well, Thank you so much, Doctor. Feldman, again, for taking the time to speak with me today and for the great continued partnership between our organizations. We definitely look forward to continuing our work with you and, in support of Medicare beneficiaries in Michigan. So thank you again.
Thank you, Jessica.
All right. Great. Hopefully, was helpful to get a better feel for the kind of work we're doing. Doctor Feldman has been an excellent partner, with the MHP team. And, you know, Jessica, again, is long time volunteer, has a lot of experience in this and give you a sense of the type of talent that we have, in the organization.
Now I would say a couple of quick comments with respect to this case study to kind of tie back to some of the earlier conversation we had. You know, earlier, we said, look, we're not that dependent on value, and now we're talking about ACOs. Just a couple of comments there. One, groups like MHP and the other ones that we have around the country, ACO is a piece. We also have a number of private arrangements with private payers, and, those will continue to grow over time.
And then secondly, just to sort of highlight it, the Pathways to Success program is now an evergreen program within CMS. So we think of it like MA. It's a program that exists. It's not up for, you know, tweaking annually by, CMMI. It's actually now part of the mainstream part of CMS.
And, again, that's been tested over now, I guess, to seven years and part of the permanent program. And so as we think about why we feel confidence around continued growth in this space, those are some of the reasons. And again, we'll have some opportunities on the backs of these partnerships to expand, even beyond the ACO program. Let me just close on 48. We can flip one slide in.
We've talked a lot about what this total cost of care solution is, how big it is, and the fact, again, we have very modest penetration today. I think the reason, we win the two new announcements today, you heard this from Doctor. Feldman a little bit, is we do have proven track record of success in this area, and then we have these integrated technology and clinical programs that we can drive all the way down to the front lines. But again, drive the results that power the economics, for both our physicians and us. To again draw another analogy, the work we do in this area is not that dissimilar to some of the things that other leading physician groups like Chinmed or others that I mentioned earlier are doing.
The difference again is that we're doing this not owning the clinic and not employing the physician, but we're actually doing it with these independent physicians that exist. And I think the final part of the differentiation is the ability to partner with those physicians in a way that they remain independent, which is life goal for them. They're not getting acquired by an aggregator like an Optum, but they are able to continue doing the practice of medicine the way they like to do it. And there's a very significant market out there for us to continue to do the work like we just heard about from Doctor. Feldman.
All right. Last one, administrative solution. Here, our work is really serving both payers and risk bearing providers. So you'll see partners in this category that are similar to Maryland Physicians Care, which you'll hear from in a second, but also organizations like SOMOS, which is ultimately a physician group, but needed access to a set of administrative tools. There's a broad base of administrative tools that, frankly, have some overlap with some of the things you just heard about from Doctor.
Feldman, but these are really purchased on a more of an a la carte basis or a platform basis, technology basis, and they also include many of the health plan back office competencies that you need as either a risk bearing provider like Somos, or a plan like Maryland Physicians Care. And so that's a quick overview of what you're going to hear about today. I would say, importantly, these solutions do also support the work that we do in specialty and total cost of care space. So in many ways, our three businesses are interlinked and the scale efficiencies we get from providing administrative simplification solutions to the market, third party, we also then benefit across our total cost of care management space and our specialty space because there is integration from a team, automation, offshore and etcetera, spaces. Going to the next slide.
Think about the problem for these risk bearing providers or regional plans. There's two big problems. One is the infrastructure is not great. It's antiquated. And the second is that the patient and the physician, again, often have a very disconnected experience.
So when I said earlier that physicians are the ones that have the ear, the patient, the plans less so, We try to fix that problem with our risk bearing providers or our plans using our Identify platform, our ability to intervene in the same ways you just heard about, frankly, providing that capability to a regional plan like Maryland Physicians Care to access that kind of engagement with their physicians, is ultimately the kind of work we're doing and trying to address these sorts of issues you see listed on Page 50. Next slide. This gives you a quick sense of types of results that we're getting in terms of financial procedural accuracy, but also on automation. So we actually only touch one out of five claims on a manual basis to the four out of five have been fully automated. And again, some of the clinical outcomes you saw earlier will be the same kind of clinical outcomes that the Somos, or Maryland Physicians Care or our other partners would receive, on the right hand side of the page.
So this is what we would call best in class stack. I think when we win, we win because of the integration across both the patient and member side, but also the Healthline side. If you go to the next slide, we just wanted to share with you the breadth of capability that's here, identify, powers all of this. Originally, we did an acquisition about four years ago of Valence and Aldeyra, and that's been integrated into this picture with our Identify platform. And again, the ability to touch on the front and middle office, including clinical and the back and corporate offices, which you think of as the administrative side tied together, that's what makes, our platform different than the other platforms that are out there.
I think, again, as with before, a little case study is helpful to bring all this to life. So if you flip then to Page 53, we're really lucky to have the CEO of Maryland Physicians Care, with Emily Rafferty, who's the President and COO of our, Evolent Health Services business. So I'll let them take it away.
Good morning. I'm Emily Rafferty, President and COO of Evolent Health Services, accountable for the design, implementation and ongoing execution of an operating model in which ultimately our partners feel like we are operating as an extension of their team, working towards a shared vision and shared set of goals. And with that, I'm happy to be joined today by one of our partners, Cindy Demerest, President and CEO of Maryland Physicians Care. Cindy, thank you for joining me today to discuss your organization's partnership with Evolent. To start, can you tell us a bit about Maryland Physicians Care and your role specifically?
Pleasure to join you today, Emily. Thank you. Maryland Physicians Care is a local managed care organization owned by four Maryland hospital systems. For the past sixteen years, I have served as CEO, leading the organization's strategy and partnership with our great leadership team.
Great. Thanks, Cindy. Evolent and MPC launched our partnership together last year. As you reflect back, why did your organization seek out an operational partner to help support Medicaid health plan operations? And then what were your goals at the time and the key problems you were trying to solve?
Overall, we realized we needed to forge a true partnership versus purely a vendor agreement. Specifically, we needed greater transparency into our health plan operations data as well as more comprehensive reporting capabilities. We believe that Evolent's solution, including its analytics capability, provide a comprehensive approach to successfully managing overall health plan performance. Having real time access to data is critical to addressing the needs of our members and our providers.
What are some of the reasons you selected Evolent as your partner instead of some of the alternatives?
Well, as we evaluated existing relationships and several alternatives, Evolent really stood out. First, we were and remain really impressed by Evolent's partnership model. Based on your successful track record and partnerships, particularly on the Medicaid side, we knew Evolent would be the type of partner with the experience to provide not only a comprehensive set of solutions, but the level of transparency and true partnership needed to be successful with an operation as large as ours. Secondly, we felt that Evolent's expertise in Medicaid operations was a unique asset, and we're impressed by Evolent's ability to integrate clinical and administrative functions involved with managing operations. Medicaid is a challenge to manage in any state, but with a true partner such as Evolent, we believe we will achieve best in class operations.
And Evolent is a one stop shop, which made it an attractive partner for us given its integrated independent service offering. For us, that's a key differentiator with Evolent compared to other alternatives in the market.
Well, Cindy, thank you. Thank you for your partnership and taking the time to join us today. We appreciate it. We're excited to continue the great work we've done with you so far and look forward to the launch early next year.
Great. Again, hopefully, that was helpful to go deeper into our third and final solution. I think what you see here is an organization like Maryland Physicians Care that cares deeply about their connectivity back to the provider market. Again, that's one of our differentiation. We do feel like, in general, the market is evolving that way, irrespective of the value movement, that the idea of connecting more directly with physicians, having the tools and technology to pay the claims right and do the back office right, but be very connected to clinical side, where our depth sits, is core to our differentiation, and we see organizations like MPC recognizing that.
And I think we will continue to see, plans across the country move in that direction. So if you flip to the last slide in this Section 54, again, it's another story that's similar with respect to a significant market where we have modest penetration. We do have we think the right scaled infrastructure that's pretty differentiated relative to the other platforms in the marketplace and the ability to integrate clinical and financial continues to be our calling card over the time ahead. So with that, I'm going to take us to Theme three and pass it to our Chief Financial Officer, John Johnson.
Thanks, Seth, and good morning, everyone. If we flip ahead into the next page here, I thought I would just take a few and tie together some of the key themes from Seth's presentation this morning into our overall financial model and touching on our revenue model, talk about how we grow that revenue model through multiple channels, spend some time talking about our specific margin improvement targets and how we intend to achieve them, review our capital allocation strategy, both historically and going forward, and touch on our balance sheet before giving a quick update on guidance for this quarter and the full year. If you flip ahead to the next page, as we think about our revenue model, there are a couple of important characteristics. The first is that it is recurring in nature. So the vast majority of our platform and operations revenue in our services segment is derived through contracts, which in a highly simplified form look like the top of the page here, where we have a certain number of members, who are enrolled in our platform.
We are paid a fixed per member per month fee for those members. And in many cases, we have the opportunity to earn additional payments based on performance against specific contractual objectives or guarantees. This recurring nature gives us a high degree of visibility into our forward revenue, and that, combined with the long term nature of our contracts, also supports our visibility. Finally, our revenue is diversified, and we worked hard to create this diversification, as Seth mentioned, over the years. It's diversified both across our solutions, both clinical and administrative.
It's diversified across our line of businesses, with a little more than 50% of our members in Medicaid and then members also in commercial and in Medicare. And it is diversified by customer across health systems and more recently physician groups and regional and national payers. And this is the revenue model that we look to grow at that mid teens organic growth rate per year that Seth has indicated. So we flip to the next page. How do we do that?
How do we grow at that rate? First, we add new customers. As Seth mentioned, we've added seven so far this year against a target of six to eight and continue to feel good about our pipeline behind that as we move into next year. Once we add a partner, we can expand with them. We can do that by expanding geographically, for example, adding a new state with a national payer.
We can do that by adding a line of business, expanding with a partner as they add Medicare Advantage to a Medicaid plan or vice versa. Or we could simply grow membership organically with our partner, both Medicare Advantage and managed Medicaid being growth areas, for membership enrollment overall across the country right now. Finally, we have the opportunity to cross sell services into an existing client, whether that's adding specialty care management to an administrative services client, adding oncology to a cardiology client or vice versa. We see a significant amount of white space opportunity there with our existing partners. The combination of our ability to expand membership with our existing partners and to cross sell new services and products into those customer relationships together has resulted in significant net positive same store growth over the last three years since 2017, contributing about 40% of our organic growth during that time.
Given the white space that we have with our current partner set, we see that theme continuing into the future, and this cross sell and expansion opportunity continuing to drive, part of our growth forward. As we flip from growth into margins for the next page, we've set both near term and medium term targets here. In the near term, we intend to continue our aggressive approach to managing our cost structure, which we started last year and which has delivered significant margin improvement since Q2 of last year, driving more than $60,000,000 of year over year, cost annualized cost reductions Q2 to Q2. We've set a target going into next year to take out an additional gross $20,000,000 to $25,000,000 in incremental SG and A cost reductions to set up our margin for next year. On a medium term basis, we have set a target of achieving a mid teens adjusted EBITDA margin.
And we see that a path to that is adding a couple of points, 200 to 300 basis points of annual adjusted EBITDA margin per year from our 2021 baseline. We can do that through two key areas. The first is improving our gross margins, and the second is leveraging our fixed costs as we continue to scale. On the gross margin side, there are a number of different projects and initiatives that we have here that we will continue to focus on in the years to come. The first, as I mentioned on the prior slide, we have an opportunity to grow membership with our existing customers.
That membership growth tends to come with high flow through, much higher gross margins on the incremental life with an existing partner in an existing line of business than on the initial cohort with that partner. Second, we have been able to begin to deploy automation, whether that's robotic process automation or machine learning, to the core, manual efforts that happen within our organization. As an example, we have used machine learning and RPA to significantly reduce the amount of manual intervention that a claim must go through before it is adjudicated and paid. That's an opportunity that has, already started to bear fruit. And given the current composition of our business, one that we see, as a meaningful opportunity to propel gross margin expansion into the medium term.
As we think about our SG and A and overhead expense, over the years, Evolent has invested in driving and building the scalable platform that will be able to best serve our clients and deliver the results that we are out to deliver. And we're now at a point where we see an opportunity to drive about one point of adjusted EBITDA margin expansion per year as we grow at our targeted revenue rate. The combination of that gross margin opportunity and the SG and A leverage opportunity result in that 200 to 300 basis point improvement per year that we see from our 2021 baseline until we reach that mid teens target, a few years from now. We flip now into, looking at our allocation of capital. We have taken a strategic approach over Evolent's history to deploy capital in ways that has significantly expanded our total addressable market, accelerated our path to market leadership and accelerated our differentiation.
We've been able to do that by deploying the vast majority of our invested capital into both internal product development and core services M and A. As an example, both the Valence Health and New Century Health acquisitions were highly strategic. They were mission aligned. They expanded our total addressable market, and they continued to be strong contributors for our growth going forward for Evolent today. As Seth indicated earlier in the day, earlier in the year, we initiated a strategic review process for our health plan assets that has resulted to date, in an expectation of a nice aggregate cash return, on those assets, and we have made it clear that we will make no further investments in health plans.
Finally, turning to the balance sheet on the next page. We started we ended Q2 with $115,000,000 of cash and investments on the balance sheet, dollars 75,000,000 in a senior term loan and two tranches of convertible notes due in 2021 and 2024. Across Q3, we've taken three important actions to set up our balance sheet for a strong 2021. The first was refinancing our 2021 convertible notes, pushing the vast majority of the amount until 2024 and eliminating, the near term maturity on the balance sheet. The second is the Passport Molina transaction, which closed in September on the first of this this month and is expected to return between 130,000,000 and $170,000,000 in total capital back to Evolus.
We would expect, subject to regulatory approval, for a portion of that capital to come back this fall and the vast majority of it to come back during the first half of next year. Finally, we've initiated a plan to prepay our senior term loan with proceeds from the Passport transaction as they return to Avalon. The combination of those three actions set us up for a 2021 where we have prepaid our senior term loan. We have no maturities until 2024. We expect positive EBITDA less CapEx and, of course, a much lower cash interest burden with the prepayment of the senior term loan.
Finally, before I hand it back to Seth to wrap, I thought I'd touch briefly on guidance on the next page. Just wanted to reiterate our recently raised guidance for both the quarter and for the year. And for Q3, we expect to be in an adjusted revenue range of between $258,000,000 and $272,000,000 and an adjusted EBITDA range between 10,000,000 and $14,000,000 And for the year, we continue to expect to be within our raised range of $995,000,000 to $1,035,000,000 in adjusted revenue, with adjusted services revenue being 900,000,000 and $930,000,000 of that, and full year adjusted EBITDA to be in the range of 32,000,000 to $38,000,000 We'll, of course, provide more details on our Q3 conference call, which we expect to be in early November. With that, I will turn it back over to Seth.
All right. Let's advance ahead to, sixty four just to wrap up here. Thanks for sticking with us. I know it's hard, long sessions here on video, but hopefully, you found it useful. I think just to reiterate the main messages from the day that we started with and then we covered throughout the day.
First, our strategy, I think, is incredibly focused right now, and we are at an inflection point. You see that, I think, in how we're thinking about profitability, how we're thinking about specific metrics around growth and how we're thinking about sharpening the portfolio. So we feel really good about the strategy, feel like it's achievable, and we're very confident in the metrics we talked about today and look forward to staying very focused executing on those. I think second, I think you've got some flavor for the specific solutions that underpin that strategy. And I think each of the three have market leadership within their space, and it's nice to be focused around those.
And as a result of all that, out of the bottom of this, I think, as John just covered, translates a business that grows really nicely, has good profitability characteristics, good cash flow characteristics. And I think we'll create strong shareholder value over time. And I hope that today's detailed look in each of these gives you incremental confidence in where we're headed. So that's it. We appreciate it, and we remain really excited on behalf of the whole team.
We look forward to connecting with many of you in the weeks and months ahead. I think we're going to transition to Q and A. Chelsea Griffin is on the line and will be our moderator for the Q and A. And I know we got a bunch of questions during the session. We'll try to take those in order that we got them.
And starting, I think, with the analysts. And Chelsea, I'll pass it to you.
Thanks, Seth. So John, the first question is for you. Don Hooker has asked, in June, Evolent hosted a conference call with investors to discuss the loss of Passport Health Plan contract. At that time, management indicated Evolent should be able to generate total 2021 revenues, including True Health of approximately $900,000,000 and approximately flat EBITDA margins. To be clear, does Evolent management continue to expect this post passport?
Hey, Don. Thanks for the question. So let me hit on the revenue piece first. I think, obviously, some things to wrap up as we close the year before we give formal guidance, usually in February. But I'd say at this point in the year, we continue to feel quite good about that $900,000,000 figure, which, as you note, includes True Health premiums.
On the bottom line, as we look at next year, I tried to outline some of our key focus areas on, margin improvements, particularly into next year with that SG and A cost takeout. And so I'd say we're highly focused on it. I think we would expect to see the probably a small margin improvement next year. And then that 200 to 300 basis points, is really intended to be the medium term target after next year as we continue to grow business.
Thanks, John. Seth, the next question is for you. Ryan Daniels has asked, can you offer a bit more detail on the new IT offering from New Century? Does it replace the existing offering, augment it? How is it different?
Can it also be cross sold to existing clients? Or is it more of a novel offering for smaller payers?
Right. Good questions, Ryan. So first of all, it's distinct offering from our existing performance suite. So a partner could have one or the other, they wouldn't have both. So it doesn't replace it, but it's additive.
And I think it's valuable and that there are certain segments of the market where this newer solution may make more sense and help accelerate our penetration into that part of the market. Just to answer your question of like what is it exactly, you think about New Century, there's three pillars to to that solution that we talked about today. There's the network component. There's the ability to sort of close the loop with the claim on the back end. And then there's the, technology, clinical IP, and kind of care management services, the third.
And this solution really is the care management, clinical and technology piece and doesn't have the claim and network. So works well in a market where a payer sort of says, Hey, I want to move quickly. I don't want to go through the process of implementing the full network and redesigning and changing physician comp, but I do want to get at the clinical savings opportunity around the care management using the technology. So we think it yields slightly lower savings than the full stack, but is another way to get at it if a payer wants to move more quickly. I also would just say the economic model, because a thinner service, more technology oriented, it's lower PMPM and a lot higher margin percentage, Brian.
And the last thing is because we're not controlling all three of the pieces, it's less performance oriented than the Performance Suites. On the Performance Suites side, we take more accountability for the full outcome. If the payer doesn't feel like they need us to do that and they want to keep more of the upside and take more of the downside associated with these relationships, then this is also a nice fit there. So what I love about it is it I think it expands the speed with which we can get into certain markets. I do think, to your question, there are some organizations where we may have the full performance suite in certain markets.
And in other markets, they may decide that they have the technology solutions. I think it provides cross sell and diversification of how we do things. And again, I think there are certain segments of the market where the market might actually prefer this solution. It will it will certainly help on our gross margins over time. Hopefully, answers it.
Seth, another question for you. Charles Rye has asked a question on the Medicaid business. With the exit from Passport, but the new partnership to Molina, how would you characterize your Medicaid opportunity going forward? Is it in direct management like Passport was or more like working with Molina?
Yes. So our Medicaid opportunity going forward is big and substantial. It's big, Centene, Molina, these various partners that we have. But it is focused on serving those organizations versus the more direct management or versus in the Florida example, helping, create de novo organizations. And so, Medicaid is still really important to us.
It's big and it's growing, and we think it will be a big opportunity for the company. So it's not that we're getting away from Medicaid. Way we're addressing it with similar tools and approaches is really just going to the existing managed Medicaid plans and doing the work that we talked about today.
And a follow-up from Charles. You note you're exploring strategic alternatives for True Health. First impression would be you are exploring a sale, which sounds like a significant departure from prior strategy. What has changed?
Yes. So as we think about the strategic alternatives, it could include a sale and we're looking at all the various options. What I would say is when we first invested in New Mexico, we were very focused on our provider approach and the kind of joint venture model at the time was the thing that was the market was demanding. And we also felt like we needed a learning lab for the kinds of things we were doing in New Mexico. And so and it's I think we've had success getting those things out of it also service relationship and the plan has performed as we've expected during that time.
But yes, I would say now we feel like in our core business, with our Core three solutions in a very capital light way, We can scale the business, and we don't need to make those investments. It's done what we needed it to do. And let's take the capital back and put it against the three solution areas that we're focused on. And so I think I'm not sure I'd call it a shift in strategy as much as I would, an acceleration of these three focus areas and a signal, frankly, that, look, we are going to focus on these three areas, because we've been working on this since the first half of the year. This is something that's been underway for a period.
Passport followed the same path, and I would say the Anthem announcement with Florida down that same vector, Charles. So it leaves us very excited about our three solutions and frankly, the organic opportunity that's right there in front of us just to expand share on the top and bottom line.
Okay. The next question is from Bob Jones. Given the evolution of the company since the IPO and the focus now in the three focus areas, any thought to different reporting structure and any sense of the organic growth contributions from New Century versus total cost of care versus administrative relative to the goal of mid teens growth?
Bob, I'm happy to take that one. I'll take the last part of the question first. I think certainly, as you've seen, our announcements over the last couple of years, certainly, in the last year or so, there's been a lot of New Century announcements. As we look at last year, there was a number of announcements around Evolent Health Services. So I think if we look at an aggregate, view over the last couple of years, seeing nice growth across the portfolio here.
Nice to announce today the two ACOs in the total cost of care solution. I think as we think about aggregate growth, probably New Century right now is a little bit ahead of the other two, but generally seeing a strong pipeline, across all three. Seth, could you comment further on pipeline? As you talk about, breaking out more specifically, always have been a bit tricky to do, given the integration, that we've done on, some of these operations. So it's, the way that we look at it and manage it here.
Okay. And, John, another one from you from Sandy Draper. Is the 20,000,000 to $25,000,000 cost savings for 2021 a run rate number, or will it be achieved in 2021?
Good question, Sandy. We would look to achieve that for 2021. And that is just to be clear, it is a onetime savings relative to our current cost structure.
And Sean Wieland has asked regarding the 130,000,000 to $170,000,000 expected on the Passport return. It seems like a wide range. What gets you to the low end versus the high end of this?
Yeah. Hey, Sean. Good question. So if you think about the two components of our Passport transaction, the first is a return of the statutory capital in the plan. That defines the lower end of the range.
At $6.30, that was $130,000,000 And as Seth mentioned in his section the presentation, that has continued to grow since then, which gives us confidence, in the strength of that capital return. The second major piece of our opportunity here is a $40,000,000 performance payment that we are eligible for from Molina that will be measured and paid out in the first quarter of next year. That is largely based on membership retention for Molina into next year. So that will be measured in, late January, early February, and paid out in Q1 of next year.
Okay. And a question from Matt Gilmore. Passport sale closed nineone. How should we think about passport related revenue coming out of Evolent Services revenue? Does that phase out over a few quarters?
Or does that occur on nineone?
Matt. Good question. So we will continue to serve the Passport plan through the rest of this year. We've transitioned now to serving Molina, on nineone, and we'll continue to serve those members through the end of this year with no change, to our 2020 operation. As you've probably seen, historically, as we wound down some of these plans, the, we would expect then a drop off in revenue into Q1 with a little bit of, run out revenue during the first part of next year, before it ends entirely.
And then, of course, on the flip side of that, we'll have, starting oneone going live, our New Century relationship with Molina in Kentucky and Washington.
Okay. Thanks, John. The next question is for Seth, from Dave Larson. What impact has COVID had on the business? Is there an impact on the ability to sell new business since you can't access the sites?
Or has COVID caused an acceleration in pipeline?
Yes. So maybe just to take the kind of the pipeline in general, I'd say the pipeline feels good. We're in a good place right now. If you look at the way we think about it in terms of weighted average bookings opportunities, we feel like there's the right amount in there to support the metrics we talked about. So I think that's the top line statement.
I'd say with respect to COVID in particular, I'd say it's helped in some areas, and it's it's hurt in some areas. Net, I think it's been about neutral, roughly. Places where it's hurt would be just being able to get out on the road and do traditional sales activities. And I would say between March and, sort of May, June, I think the provider community in particular was pretty shell shocked and so harder to get in those conversations, but that's picked back up. And so we're sort of okay there and in good place.
And then on the payer side, I think that's where it helps in some ways, the acceleration. And I think it also will help in the long term on the provider side. In the short term on the payer side, I think a lot of payers are thinking about and worrying about, COVID bounce back. It's a term you'll hear a lot. And the the risk of, reaccelerating costs as you come out of COVID, and they need a lot of help managing that.
Think also just generally with budgets, state budgets, federal budgets, there's gonna be more pressure over time, because of COVID. And so that will probably be a longer term tailwind. And then on the provider side, as I said, that's come back now. And I'd say a lot of the mindset from the physicians is, gosh, fee for service is not riskless. When you have a dip or reduction in utilization, then you lose revenue.
If you have a model that's more akin to our total cost of care model, and actually it's quite interesting. So I think we'll again see probably a long term tailwind based on COVID. But net it all down, I call it neutral.
Okay. We have another question for you, John, regarding Passport from Sandy Draper. Passport Health was $115,000,000 in the first half of 'twenty. Is that the level we should expect in the second half of 'twenty? Or will it trend down at all with the sale to Molina?
Thanks, Andy. So question about Passport's top line. And I think we would expect largely a similar second half to the first half given that we have now transitioned to serving Molina in exactly the same capacity that we were serving Passport for the rest of this year.
Okay. We have a few investor questions. The first one is for assessed. What needs to happen for these national payers to expand both vertically and across lives and their entire cover live?
Well, I think the, you know, the biggest thing is we need to do a fantastic job for them. I think we're off to a very good start. If I look at the work we're doing with, Centene and Molina, but we have to deliver and create a lot of value for them and help them see the differentiation of the solution. And I think organically over time after that, we're going to have opportunities to expand in new states and also, in some cases, expand the line of business. While there's some places where we're only doing cardiology and not yet oncology and some where we're doing oncology and not yet cardiology.
And so there's lots of different ways this can go. I think the biggest thing we do a great job. I think there's also an element of just the continued cost pressure that they're facing that irrespective of the job that we do, I think the pressure is mounting in general. And so I see a lot of local plan CEOs, regional plan CEOs, chief medical officers beginning to proactively outreach and say, hey, I need a solution to this problem. Or if you pick up the phone and call them and you say, hey, we have a solution to this problem, and we're already working with your counterpart in XYZ region, I think there's a lot of sort of tailwind to taking that call and exploring the opportunity.
So again, the biggest thing is we got to deliver, and I feel like we are right now. But there's some normal market trends as well that should be helpful to us.
Okay. We have a follow-up from Charles Vye. John, Page 58, you spoke multiple growth channels. Can you add this to the impact of customer churn retention, excluding Passport, as we think about modeling net top line growth?
Charles, it's a good question. So the net impact of that turn is included in our net same store growth figures, that I was talking about on that page. Overall, if we take a step back and look at the partner base right now, it looks it feels pretty stable. And if we look across the last three years, that aggregate 40% net growth, coming from net same store growth would translate into about 105 ish percent retention rate. And so that's the way we think about it going forward, that in aggregate, net same store growth should continue to be a positive driver of our growth towards that 15% target.
Thank you. We have an investor question. On cardiology and oncology, can you discuss how actually change physician behavior? For instance, ask 10 cardiologists about stenting. You'll probably get 10 invest 10 different answers.
Ask second, the fee for service is very profitable for physicians in these segments. How are you changing behavior and getting physicians to buy in?
Yes. It's great. Fantastic question. It is at the heart of the work we do, with New Century Health. I think, a couple of things I would say in terms of, the behavior change.
One is around science and evidence. You know, our experience has been that when you're credible and you bring great evidence and great science to the table, and present it to the physician the right way through all the techniques and technology we talked about earlier. You can you can have a conversation, often peer to peer. It needs to be cardiologist to cardiologist, oncologist to oncologist. Again, credible.
You can get a change, from path one to path two. Not always, not 100% of the time, but we get them at rates that are plenty to actually drive the value that we've been talking about. So that's one. Two is, again, not in every situation or every market, but we are continuing to expand our value based contracting under NCH to the individual cardiologists and oncologists. So I mentioned the issue earlier of an oncologist can make more money with the expensive therapeutic than they can with therapeutic.
If the lower cost therapeutic is equal or better from an efficacy perspective, for a whole host of reasons, we need to follow that one. One of which is if it's better, you just got to do it for the patient. If it's the same efficacy but lower cost, those are dollars that are coming out of the health care system that are surely not being invested in other things, home care, proactive outreach, all these other things that you could be doing. And so I think whether you do it with the same efficacy or better efficacy, you got to make these changes. And I would say that's the second factor, just putting in place an incentive model financially that makes the physician indifferent to sort of looking at what their income is and instead think about the right answer for the patient.
Again, there's gray areas between all these things and nothing works 100%, but it generally works very well. With respect to your fee for service point, fee for service is very profitable. I think it is in general. I think if we change the financial incentives the way I described, you can make the value arrangements equal for those physicians where you're focused on the total cost of care. Again, this is the problem in health care is that the physicians are over here and the payers are over there, and the alignment doesn't exist.
So that is our job is to get the financial alignment in place. And I would just say post COVID, especially for the primary care physicians, you know, there is a realization that cash fee for service maybe isn't so great. And that's that's been a help to us in terms of pipeline and tailwind. So it's a complicated, thorny issue. It's what we get paid to do.
We've been working on this issue since we started the company. New Century has been working on it since they've started. And it's a great question. It's very core to everything we do.
Thanks, Seth. And a couple questions on pipeline. You mentioned that less than 10% of Evolent's pipeline is based on the pace of value based care. Can you describe what that means? And does direct contracting create an opportunity on the provider side seeking help in participating in this new capitation program?
Yes. Great question. So the way we think about the 10% is, hey, if there was an administration change or a policy change that can be made easily, you know, with a new administration or a new head of CMS or a new sense of where things go, and that would somehow affect our ability to close that pipeline in any way, then that's what we categorize. So it you know, these an example of something that would fall in that category, in my opinion, is direct contracting. So direct contracting is an opportunity for us.
It's interesting, but it's very new. It's in the CMMI portion of CMS right now, which means it's it's a test program right now. There are pieces being tweaked. A new administration can come in and change that. And, it's a very small part of our pipeline, but it's an opportunity.
And I think it could be very interesting over time. But I think the main point we're trying to make today is if you add up all those opportunities like direct contracting are a little bit at the pace of value and dependent on the pace of value and can change in short order as a very small part of our pipeline, the programs that are evergreen and stable. And frankly, just working with managed care companies that always have an incentive to manage cost the vast majority of our pipeline. Again, as I said earlier, in all of our metrics today, medium term targets, etcetera, outlook is based on an assumption that we don't need value to be x or value to be y in terms of pace. I do think if direct contracting, as an example, other things like it, there's something called the oncology care model that's under discussion with CMS and CMMI.
If those kinds of things become evergreen and real and roll out in a big way, those will be new programs that will create very significant tailwinds for us. And so those would be what I would think of as kind of upside to kind of our current metrics and all the numbers we put out today.
Okay. And our last question is from Bob Jones. A good portion of savings from New Century seems to be from drugs. How do they see IPI drug pricing legislation impacting the value proposition outlook?
Yes. I mean, we've studied this in a bunch of different ways. And in general, we feel like it could modify things a little bit, but there's still going to be huge deltas in the total cost of care for different therapeutics and the pipeline is explosive around that. So in general, I'd say modest impact and something that we're keeping an eye on, but not something that we're that worried about.
Okay. With that, I'll hand it back over to you, Seth, for closing remarks.
All right. Well, I know we're finishing a little early as we'd hoped to do. Really appreciate everybody joining today. Hopefully, you got a better sense of what we're up to. And I'll just reiterate that the the team and I are incredibly focused on executing the plan we laid out today.
We have a lot of confidence in the plan, and we're gonna stay incredibly focused on on executing it. And other than that, we're excited to see many of you through our virtual roadshows and touch bases over the weeks to come. Thanks for joining.