Astrana Health Inc.

Hi, everyone, and welcome to today's Astrana Health first quarter 2024 earnings call. At this time, all participants are in a listen-only mode. Later, you will have the opportunity to ask questions during the question and answer session, and instructions will be provided at that time. Today's speakers will be Brandon Sim, President and Chief Executive Officer of Astrana Health, and Chan Basho, Chief Operating and Financial Officer. The press release announcing Astrona Health Inc.' 's results for the first quarter ended March 31, 2024, is available at the investor section of the company's website at www.astronahealth.com. The company will discuss certain non-GAAP measures during this call. Reconciliations to the most comparable GAAP measure are included in the press release. To provide some additional background on its results, the company has made a supplemental deck available on its website. A replay of this broadcast will also be made available at Astrana Health's website after the conclusion of this call. Before we get started, I would like to remind everyone that this conference call and any accompanying information discussed herein contains certain forward-looking statements within the meaning of the safe harbor provision of the Private Securities Litigation Reform Act of 1995. These forward-looking statements can be identified by terms such as anticipate, believe, expect, future, plan, outlook, and will, and include, among other things, statements regarding the company's guidance for the year ending December 31, 2024, continued growth acquisition strategy, ability to deliver sustainable long-term value, ability to respond to the changing environment, operational focus, strategic growth plans, and merger integration efforts. Although the company believes that the expectations reflected in its forward-looking statements are reasonable as of today, those statements are subject to risks and uncertainties that could cause the actual results to differ dramatically from those projected. There can be no assurance that those expectations will prove to be correct. Information about the risks associated with investing in Estrana Health is included in its filings with the Securities and Exchange Commission, which we encourage you to review before making an investment decision. The company does not assume any obligation to update any forward-looking statements as a result of new information, future events, changes in market conditions or otherwise, except as required by law. Regarding the disclaimer language, I would also like to refer you to slide two of the conference call presentation for further information. With that, I'll turn the call over to Astrana Health President and Chief Executive Officer, Brandon Sim. Please go ahead, Brandon.

Thank you, Operator. Good evening, and thank you all for joining us today. We began 2024 with a strong first quarter here at Astrana Health as we expand our innovative care model and technology platforms. to empower entrepreneurial providers and improve healthcare in local communities throughout the country. We continue to deliver against our strategic roadmap and are proud to announce compelling financial, operational, and clinical results to start the year. I'll start by highlighting our financial performance for the first quarter of 2024. Total revenue at Estrana reached $404 million, a 20% increase compared to the prior year period. and adjusted EBITDA rose to $42.2 million, up 42% compared to the prior year period. This resulted in an adjusted EBITDA margin of 10.4%. Both growth and profitability metrics were driven by robust membership growth across all our lines of business, coupled with ongoing success in managing the total cost of care for these members and value-based risk-bearing arrangements. We also continued investing in our teams, our technology platforms, and our new market entry operations. We believe these investments are critical towards our ongoing commitment to building a sustainable business even as we continue to expand rapidly. As a reminder, we have consistently talked about the four pillars of our business which we feel our platform is uniquely positioned to execute on. One, expanding our membership base across existing and new geographies. increasing the level of accountability and risk we are responsible for in our value-based care contracts, three, empowering our providers to achieve superior patient outcomes, and four, executing strategic acquisitions to further accelerate our growth trajectory. On the first pillar, we experienced robust growth and membership in both core and new regions. We now manage approximately 1 million lives driven by robust organic growth and strategic acquisitions. Our membership grew organically by around 10% year-to-date, a number that is net of Medicaid redetermination and does not include any strategic acquisitions. On the second pillar, we continue to take on greater responsibility for the total cost of care of our members, as we promised we would do. As of April 1st, our full risk business makes up approximately 60% of total capitation revenue, and we anticipate continuing to grow that percentage while consistently delivering high-quality care as the year progresses. In addition, we also began taking on full risk delegation in the state of Nevada. We believe that we are uniquely positioned to capture the embedded growth that this pillar represents because of the high level of visibility and consistency that our proprietary technology and clinical infrastructure affords us. I'd like to continue emphasizing a key aspect of our business that distinguishes Astrana Health from other providers and peers. We have always committed to serving all segments of our communities in value-based care arrangements, covering all payer types from original Medicare, Medicare Advantage, managed Medicaid, to commercial. And we continue to forge ahead in our transition to risk and being truly accountable for our members' whole health across those diverse business segments, even as others have shied away. The infrastructure, technology, and team that we have built allows us to do this well. It results in our ability to serve a wider patient population make our providers' lives simpler and more efficient, diversify our business and better manage risk, and support our payer partners across their entire business. With regards to the third pillar of our business, Estrana is focused on providing high-quality care and access to all members. We have noticed continued outperformance compared to historical years in terms of HEDIS, HCC, and other quality-related outcomes. We also continue to focus on making sure members receive the right care in the right setting, leading to our continued strong performance on clinical utilization metrics. Our bed days per thousand and admits per thousand improved in the first quarter when compared to previous periods. This improvement is consistent across all business segments, with Medicare, Medicaid, and commercial authorizations for inpatient and outpatient services marrying this trend. Moving on to the fourth pillar of the business, strategic acquisitions, we successfully closed the second and final part of our community family care acquisition this quarter as we had previously guided. This acquisition marks the largest in Astrana's history and serves as a successful example of a care enablement client deepening its relationship with Astrana Health and moving into the care partners segment. The integration of CFC was seamless as we were already powering the CFC business with our Care Enablement platform prior to the acquisition, showcasing the value and synergy of leveraging our Care Enablement tech-enabled services business. The completion of this transaction allows us to take on greater responsibility for the outcomes of the patients we serve with CFC's full risk Medicaid restricted Nox Scheme license. It also further strengthens our commitment to managing medical costs and providing quality care in our communities.

Looking ahead,