Astrana Health Q1 2025 Earnings Report

Astrana Health EPS Results

• Actual EPS: $0.14
• Consensus EPS: $0.23
• Beat/Miss: Missed by -$0.09
• One Year Ago EPS: $0.31

Astrana Health Revenue Results

• Actual Revenue: $620.39 million
• Expected Revenue: $628.11 million
• Beat/Miss: Missed by -$7.72 million
• YoY Revenue Growth: +53.40%

Astrana Health Announcement Details

• Quarter: Q1 2025
• Date: 5/8/2025
• Time: After Market Closes
• Conference Call Date: Thursday, May 8, 2025
• Conference Call Time: 5:30PM ET

Astrana Health (NASDAQ:ASTH), Inc., a physician-centric technology-powered healthcare management company, provides medical care services in the United States. It operates through three segments: Care Partners, Care Delivery, and Care Enablement. The company is leveraging its proprietary population health management and healthcare delivery platform, operates an integrated, value-based healthcare model which empowers the providers in its network to deliver care to its patients. It offers care coordination services to patients, families, primary care physicians, specialists, acute care hospitals, alternative sites of inpatient care, physician groups, and health plans. The company's physician network consists of primary care physicians, specialist physicians and extenders, and hospitalists. It serves patients, primarily covered by private or public insurance, such as Medicare, Medicaid, and health maintenance organization plans; and non-insured patients. The company was formerly known as Apollo Medical Holdings, Inc. and changed its name to Astrana Health, Inc. in February 2024. Astrana Health, Inc. was incorporated in 1985 and is headquartered in Alhambra, California.

Astrana Health Q1 2025 Earnings Call Transcript

Key Takeaways

• Astrana Health reported first quarter revenue of $620.4 M (up 53% year-over-year) and adjusted EBITDA of $36.4 M, driven by strong membership growth and acquisitions.
• Care Partners membership reached 910,000, with 38% of members in full risk contracts (up from 5.5% a year ago), contributing 75% of capitated revenue.
• The CHS acquisition integration is complete, unlocking over $10 M in G&A efficiencies, and is expected to reach breakeven in 2025 and profitability in 2026.
• Astrana remains on track to close the Prospect Health deal this summer, which will add about 1.7 M value-based arrangement members and is forecast to contribute $81 M in adjusted EBITDA plus $12 M–$15 M in synergies.
• Full-year 2025 guidance was reiterated at $2.5–$2.7 B in revenue and $170–$190 M in adjusted EBITDA, with medium-term EBITDA of at least $350 M by 2027.

Presentation

[Operator]

Good day, everyone, and welcome to today's Astrana Health First Quarter twenty twenty five Earnings Call. At this time, all participants are in a listen only mode. Later, you will have an 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 Chand Basho, Chief Operating and Financial Officer. The press release announcing Astrana Health Inc.

[Operator]

Results for the first quarter ended 03/31/2025, is available at the Investors section of the company's website at ww.astronahealth.com. The company will discuss certain non GAAP measures during this call. Reconciliations to the most comparable GAAP measures 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 the broadcast will also be available at Astrana Health's website after the conclusion of this call.

[Operator]

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 12/31/2025, continued growth, acquisition strategy ability to deliver sustainable long term value ability to respond to the changing environment liquidity operational focus strategic growth plans and acquisition integration efforts. Although the company believes that the expectations reflected in its forward looking statements are reasonable as of today, these statements are subject to risks and uncertainties that can cause the actual results to differ materially from those projected. There can be no assurance that these expectations will prove to be correct. Information about the risks associated with investing in Astrana Health is included in its filings with the Securities and Exchange Commission, which we encourage you to review before making an investment decision.

[Operator]

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, 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 Strana Health's President and Chief Executive Officer, Brandon Simp. Please go ahead, Brandon.

[Brandon Sim, President & CEO at Astrana Health]

Good afternoon and thank you all for joining us today. We are pleased to report a strong start to the year with first quarter results that reflect the continued momentum behind our strategy to build the nation's leading patient centered healthcare platform. At Astrana, our progress is rooted in disciplined execution across four strategic pillars. First, we are sustainably growing our membership to expand access to high quality care for more Americans. Second, we are strengthening alignment between patient outcomes and financial performance through thoughtful risk progression in our value based arrangements.

[Brandon Sim, President & CEO at Astrana Health]

Third, we are improving care quality and patient outcomes while managing costs effectively. And fourth, we are driving operational excellence through our proprietary care enablement platform, which supports clinical teams, enhances workflow efficiency and scales our impact. What continues to differentiate Astrada and what really drives our consistent performance across all market and policy environments is a combination of our physician led clinical capabilities and our delegated model, which enables us to act as a single payer for our physicians. Our care delivery infrastructure integrates high performing provider networks with direct care delivery capabilities in our clinics and with our care management teams, enabling us to manage care more proactively and more consistently. In parallel, our delegated payer agnostic model allows us to build longitudinal patient relationships and gives us real time visibility into utilization and claims, for earlier interventions, more coordinated care over time rather than episodic interventions and ultimately better outcomes.

[Brandon Sim, President & CEO at Astrana Health]

When paired with our proprietary technology platform, we're able to address regional differences in a consistent way, identify anomalies and act on insights in real time. The result is greater stability and predictability in both medical cost trend and MLR performance regardless of geography, policy environment or economic cycle. With that, I'll share some financial highlights from the first quarter. In the quarter, Astrana generated total revenue of $620,400,000 a 53% increase compared to the prior year period and delivered adjusted EBITDA of $36,400,000 Revenue growth was driven by our Care Partners segment, which grew 57% year over year to 600,000,000 CHS contributed $95,000,000 in the quarter, which was in line with our expectations. Adjusted EBITDA in the first quarter reflected our continued success in growing membership and value based arrangements, while managing cost trend effectively.

[Brandon Sim, President & CEO at Astrana Health]

Margins were moderated by planned ongoing investments in growth, integration and technology, as well as by revenue growth in areas with lower near term margin profiles, such as the CHS acquisition and newly converted full risk members, which was consistent with expectations. We expect this to improve in 2026, as previously guided, as CHS moves towards breakeven this year and as our full risk cohorts further mature. Medical cost trend in the quarter was in line with expectations in the mid single digits, blended across all lines of business. With Medicaid trend above and Medicare and commercial trend below that blended average. Diving a little deeper here, despite a challenging flu season, which drove higher than normal ER and lab utilization, we are pleased to be on track with our full year trend and profitability guidance.

[Brandon Sim, President & CEO at Astrana Health]

Turning to growth. Our Care Partners segment continues to expand, reaching 910,000 members as of Q1 twenty twenty five. We're also making disciplined progress in transitioning our membership into more strategically aligned full risk arrangements. As of this quarter, approximately 38% of our members are now in full risk contracts, up from 5.5% a year ago, and those members now account for 75 of our capitated revenue. Turning to our emerging markets, Nevada and Texas, we are seeing encouraging progress in both growth and operational execution in those markets.

[Brandon Sim, President & CEO at Astrana Health]

In Nevada, we achieved breakeven in both our risk bearing network and our Astrana Care clinics during Q1, right on track with expectations. Membership in our risk bearing network grew 40% and clinic visit volume increased by 35% year over year, reflecting strong momentum in Nevada. And in Texas, we continue to transform the market to align with our single payer delegated model over time, and we remain on track with reaching profitability in late twenty twenty five. These results reinforce the portability and scalability of the Astrana model, and we're pleased to see performance in these markets tracking in line with our strategic plan. Now turning to acquisitions.

[Brandon Sim, President & CEO at Astrana Health]

In 2024, our focus was on expanding our footprint and deepening our presence in key communities across the country. In 2025, our priority shifts to executing on that growth to unlock greater value across the platform. Starting with CHS. Integration onto the Astrana platform for CHS is now complete. As expected, we've identified and executed on over $10,000,000 in G and A efficiencies as CHS has onboarded to our proprietary technology platform.

[Brandon Sim, President & CEO at Astrana Health]

CHS's Q1 performance was in line with expectations. And as we continue to implement our care model and scale it, we anticipate CHS will reach breakeven profitability in 2025 and achieve profitability in 2026. We're also making measured progress in expanding our delegated activities in 2026 and beyond. As for our planned acquisition of Prospect Health, we remain highly confident in the opportunity ahead. The transaction will significantly expand our provider network in Southern California and will position us to serve approximately 1,700,000 members in value based arrangements.

[Brandon Sim, President & CEO at Astrana Health]

We continue to expect Prospect to contribute around $81,000,000 in adjusted EBITDA and to deliver between 12,000,000 to $15,000,000 in synergies, and we look forward to closing on the acquisition this summer. As we integrate and scale these acquisitions, it's equally important that we continue strengthening the foundation of our organization. To that end, we've made several exciting additions to our leadership team this quarter. Georgie Sam has joined us as Chief Data and Analytics Officer to lead our enterprise wide data analytics and AI strategy. Glenn Sabatka has come on board as Chief Accounting Officer, bringing deep experience to support our continued financial discipline and scalability.

[Brandon Sim, President & CEO at Astrana Health]

And we're excited to have Rita Pugh step up into the role of Chief People Officer, helping us further invest in the talent and culture that drives Astrana forward. Now, I'd like to touch on several recent industry wide developments. Starting with Medicare Advantage rates, we're encouraged by the 2026 Medicare Advantage rate notice, which we believe signals continued federal support for both the MA program and value based care more broadly. The final rates reinforce a stable reimbursement outlook and should serve as a tailwind for Astrana's current business and even more so for the pro form a business once the Prospect acquisition is complete, given the combined scale of the pro form a platform. Turning to California's Proposition 35.

[Brandon Sim, President & CEO at Astrana Health]

This was not a headwind for Astrana in Q1. While we are still working through the broader implications of the legislation with our plan and provider partners, our current view is that the net impact will be neutral to EBITDA once resolved. With regards to V28, we have not seen a negative impact on our business. We have always taken a principled approach to value based care, finding success by driving better patient outcomes and higher quality of care, not by exploiting reimbursement mechanics. We believe that this is the only way to build a durable company and to deliver on a differentiated care experience and improved outcomes for our patients.

[Brandon Sim, President & CEO at Astrana Health]

Similarly, our exposure to Part D risk remains de minimis with less than two percent of our members with any exposure. That is entirely by design. We have always remained disciplined about taking on risk where we believe we can have a meaningful impact. We have avoided exposure where that control is limited. To close my prepared remarks, we believe that our ability to grow rapidly while delivering consistent profitable results is a direct outcome of our proven care model, disciplined execution and proprietary AI enabled technology infrastructure built to scale.

[Brandon Sim, President & CEO at Astrana Health]

We are proud to continue demonstrating that value based care can be both scalable and effective, driving strong performance while improving patient outcomes. With that, I will now hand it over to Chan to discuss our financials in more detail.

[Chan Basho, CFO & COO at Astrana Health]

Thanks, Brandon, and thank you all for joining today. Turning to our first quarter results, I'm pleased to report Astrana Health delivered a strong start to the year with performance in line with our expectations across all lines of business. Revenue for the quarter was $620,400,000 representing a year over year increase of 53%. This growth was driven primarily by strong organic growth in our core business and the acquisitions of CFC and CHS supplemented by our continued ramp in new geographies. Adjusted EBITDA came in at $36,400,000 Net income attributable to Astrana for the quarter was $6,700,000 and EPS was $0.14 per share.

[Chan Basho, CFO & COO at Astrana Health]

Looking at the balance sheet, we closed the quarter with $260,900,000 in cash and short term investments. As we look ahead to closing the Prospect acquisition this summer, our expected pro form a net leverage will be approximately 3.4 times with the goal of delevering below three times within twelve months post close. For the quarter, we generated $13,600,000 in free cash flow, which included a non recurring debt issuance cost of $5,000,000 related to the recent amendment of our credit agreement with Truist. Excluding this one time financing cost, free cash flow was $18,600,000 representing 51% of adjusted EBITDA for the quarter. We remain confident in our ability to deliver within our previously stated full year guidance for revenue of 2,500,000,000.0 to $2,700,000,000 and adjusted EBITDA of 170,000,000 to $190,000,000 For second quarter twenty twenty five, we expect to generate between $615,000,000 to $665,000,000 of revenue with adjusted EBITDA ranging between $45,000,000 to $50,000,000 Finally, we want to reiterate our previously stated medium term adjusted EBITDA guidance of at least $350,000,000 in 2027.

[Chan Basho, CFO & COO at Astrana Health]

Despite the current environment, we remain confident in our ability to drive sustainable, profitable growth. With that, I'll turn it back to Brandon for closing remarks.

[Brandon Sim, President & CEO at Astrana Health]

Thank you, Chan, and thank you everyone for your time today. In summary, we are proud of the progress we made in Q1, and we look forward to a strong rest of the year. We'll now open it up for Q and A.

[Operator]

Thank you. We will now be conducting a question and answer session. Our first questions come from the line of Ryan Daniels with William Blair. Please proceed with your questions.

[Ryan Daniels, Group Head–Healthcare Technology and Services at William Blair & Company, L.L.C]

Yes. Thank you for taking the questions and congrats on the strong start to the year. Hoping you could go into a little bit more detail on the CHS integration. It sounds like that's progressed pretty smoothly. But curious of any key integration activities or milestones that still remain and just wanted to hear overall thoughts on how that's progressing.

[Ryan Daniels, Group Head–Healthcare Technology and Services at William Blair & Company, L.L.C]

I know you indicated it's trending towards that breakeven level, but any more color there would be great to start.

[Brandon Sim, President & CEO at Astrana Health]

Hey, Ryan. Thank you for the question. I appreciate it. On CHS, as I commented earlier, we're happy to say that integration is now complete. What that means is we have their staff onto our platform.

[Brandon Sim, President & CEO at Astrana Health]

We've deployed some of our technology platform into the provider groups. We've identified opportunities over $10,000,000 worth of G and A efficiencies by bringing on CHS. And we continue to expect improvements in care margins over the next several years as we fully implement the care model. So there's still opportunity to go and work to be done in terms of fully integrating propagating the care model downstream, but we're very encouraged by the progress so far.

[Ryan Daniels, Group Head–Healthcare Technology and Services at William Blair & Company, L.L.C]

Okay, great. And then can you speak a little bit to the Prospect deal? I know you got the Hart Scott Rodino expect it to close during the summer. Are you active in any integration activities yet? Or do you have to wait till the close of that deal?

[Ryan Daniels, Group Head–Healthcare Technology and Services at William Blair & Company, L.L.C]

And then secondarily, can you just remind us what your Medicare Advantage exposure will look like as a combined entity? Obviously, you deployed capital before seeing the rate increases, so that looks even more strategic and profitable probably today than it

[Ryan Daniels, Group Head–Healthcare Technology and Services at William Blair & Company, L.L.C]

was at the time of

[Ryan Daniels, Group Head–Healthcare Technology and Services at William Blair & Company, L.L.C]

the announcement. So I want to get a feel for that too. Thanks.

[Brandon Sim, President & CEO at Astrana Health]

Sure, Ryan. Yes. So on prospects, as you mentioned, we have passed HSR approval. There are several regulatory approvals that we are still waiting for, primarily related to the State of California with the Department of Managed Healthcare and the California Department of Public Health. So there are some items that we're still working on.

[Brandon Sim, President & CEO at Astrana Health]

And until we have a full close, we do want to be mindful and compliant. So we haven't been able to dig as far under the hood as we will once the acquisition closes. That being said, there are integration activities that we are doing in order to prepare for adding 600,000 members to our Care Enablement platform. So we're making the necessary upgrades to our data layers, to our technology platforms, and staffing up appropriately ahead of time. That's part of why we hired some of the individuals that we did, and added to our leadership teams, among many others at all levels of the company.

[Brandon Sim, President & CEO at Astrana Health]

So that's something we're excited about. In terms of the pro form a numbers for, the combined entity, these are estimates of course, but our anticipation today is that approximately 60% of the combined revenue of the businesses together will be related to Medicare. So and prospect as we had indicated before will generate or generated $1,200,000,000 of revenue in 2024 full year. So we're excited again for the opportunity to continue onboarding or to start onboarding prospects into our platform and to serve those seniors once the deal closes.

[Ryan Daniels, Group Head–Healthcare Technology and Services at William Blair & Company, L.L.C]

Okay, great. And then one final one and I'll hop off. You mentioned that Medicaid is trending above average trends, Medicare and commercial below. On the Medicaid, is that solely due to the flu season and kind of more visits, ER and lab? Or is it primarily due to redetermination and kind of the mismatch between acuity and rates, which should settle out kind of midyear or in October when all the states update their rates?

[Ryan Daniels, Group Head–Healthcare Technology and Services at William Blair & Company, L.L.C]

Thanks guys.

[Brandon Sim, President & CEO at Astrana Health]

Sure, Ryan. That's right. Medicaid was above the blended average as we had expected. There was a large spike in ER and lab utilization as you had pointed out and that did contribute to the excess utilization. We're not seeing much we're not seeing any impact really from a determination at this point.

[Brandon Sim, President & CEO at Astrana Health]

It's really around utilization and that trend even though above the blended average is still as expected for the year. So we're comfortable with that in Q1. We're going to continue monitoring in Q2. But at this time, we're comfortable with the overall trend guidance we gave for the year, as well as what that translates into in terms of our adjusted EBITDA forecast for the year.

[Ryan Daniels, Group Head–Healthcare Technology and Services at William Blair & Company, L.L.C]

Great.

[Ryan Daniels, Group Head–Healthcare Technology and Services at William Blair & Company, L.L.C]

Thank you.

[Brandon Sim, President & CEO at Astrana Health]

Sure. Thanks.

[Operator]

Thank you. Our next questions come from the line of Michael with Baird. Please proceed with your questions.

[Michael Ha, Senior Research Analyst at Robert W. Baird & Co]

Hi, thank you. So it looks like second quarter revenue guide $615,000,006 55,000,000 a bit light versus The Street and actually at the low end of your guide would imply a sequential decline, which a bit surprising to me since I was expecting just continuing full risk member conversion, more organic MMA growth to really help drive sequential improvement. I know exchange members maybe some attrition there, still going through FTR checks, but I wouldn't think that would be material enough to really fully offset the other positive drivers. So I'm curious what's driving the low end of your guide range? What would have to happen for that to play out?

[Michael Ha, Senior Research Analyst at Robert W. Baird & Co]

And also what would have to happen for the high end to play out as well?

[Brandon Sim, President & CEO at Astrana Health]

Hey, Michael. Thanks for the question. Some of these quarterly variances are simply just a seasonality thing. I'm we're very confident in the overall guide for revenue. The guide is at the midpoint $2,600,000,000 is something we're very, very confident in.

[Brandon Sim, President & CEO at Astrana Health]

There's going to be additional or probably more of the full risk conversion is weighted towards the back half of the year, especially as we try to get through some of the Medicaid renegotiations that we discussed before, and the volatility in that sector right now. But again, we're very I would say that we're very confident in the 2.5% to 2.7% guide that we put out for revenue at the beginning of the year.

[Michael Ha, Senior Research Analyst at Robert W. Baird & Co]

Okay. Thank you. And with the '26 FONO rate coming in so favorably, just curious what rate assumption was embedded in your $350,000,000 adjusted EBITDA 2027 target? Just trying to figure out how much better the new final rate notice is relative to that. And then when it comes as it relates to the Medicaid, 70% of your contracts are locked rates.

[Michael Ha, Senior Research Analyst at Robert W. Baird & Co]

Just curious what percentage of those contracts are up for renewal in twenty five, twenty six, twenty seven? Just trying to better visualize how the Medicaid economics can improve over the next three years and the magnitude of rate increase flow through? Thank you.

[Brandon Sim, President & CEO at Astrana Health]

Hey, Michael. I'm sorry, you did you were a little choppy in that question. I think I caught the gist of it, but if I didn't, please let me know. I apologize. But, I think the question was how much of the rate increase did we assume in our 2027 medium term guide of at least $350,000,000 the answer there is that we did assume some rate pickup.

[Brandon Sim, President & CEO at Astrana Health]

I would say probably that the rate increase that we saw was favorable to our assumptions. At this moment, we're not ready to size exactly, how many dollars that's worth in 2027, given the dynamics of how the plans bid and how those dynamics play out in a couple of years. But we are encouraged by, the administration support for Medicare Advantage and we continue to be confident in our in both our '25 and '20 '7 guides. I think the other question you asked was around the Medicaid contracts and what percentage of them are up for renewal. Is that right, Michael?

[Michael Ha, Senior Research Analyst at Robert W. Baird & Co]

Yes. Sorry, I note 70% of your contracts are locked rates. Just trying to understand how many are up for renewal over the next three years. I want to better visualize as, those renewals happen, how it can improve your Medicaid book over time.

[Brandon Sim, President & CEO at Astrana Health]

Got it.

[Michael Ha, Senior Research Analyst at Robert W. Baird & Co]

Thank you.

[Brandon Sim, President & CEO at Astrana Health]

Right. Almost all of our, you're right. Most of our Medicaid contracts are fixed rate PMPM today. And to answer your question, almost all of our Medicaid contracts at some point in the next three years will be up for renewal. Those are typically staggered over time intentionally by plan, by county, and even by state, I suppose, and by county.

[Brandon Sim, President & CEO at Astrana Health]

So, it will be a continuous a fairly continuous set of renegotiations over the next two to three years.

[Operator]

Thank you. Our next questions come from the line of Jack Slabin with Jefferies. Please proceed with your questions.

[Jack Slevin, VP - Healthcare Services Equity Research at Jefferies & Company Inc]

Hey guys, thanks for taking the question and nice work on the quarter. I think it's going to be quite similar to Michael's commentary or to his question, but really just want to maybe ask in a slightly different way. You gave the metrics on where utilization is trending right now. Your path has been quite different from many others in the industry. And so to me, the 26 rate update sort of lags is something that could be have an outsized impact relative to others that are undergoing different trends.

[Jack Slevin, VP - Healthcare Services Equity Research at Jefferies & Company Inc]

And so if it's trending below that 5% level right now, I guess I just want to think about sort of the confidence that we stay within that relevant range, in which case we'd be looking at a 26% where at least on headline numbers and not assuming any mitigation of V-twenty eight, you'd still be able to see rev trend outstripping cost trend. Maybe just some thoughts generally on sort of how you see things progressing or what your confidence is in sort of the improvement of that MA market that you've done a lot of work to get to higher levels of risk on over the past couple of years? Thanks.

[Brandon Sim, President & CEO at Astrana Health]

Thanks for the question. Yes, I hear you and Michael on the question. I think at the moment we're not it's still early on. We play an active role in how the plans bid, but we don't have ultimate control obviously over that process. So I don't want to be premature at this moment by sizing up the impact.

[Brandon Sim, President & CEO at Astrana Health]

We are encouraged certainly very much so by the rate notice in 2026. It's something that we predicted and partially was part of our strategy to increase not only risk on the existing members that we have, but also to grow our senior membership via inorganic and organic means in 2024. So all of this is what's partially expected by us and we're very encouraged by the fact that it happened. That being said, at the moment, the guide is at least $250,000,000 in twenty twenty seven million We're very confident in that, given the prospect, a pending prospect health close. And I'm not sure that we have an exact EBITDA improvement number for you at this moment.

[Brandon Sim, President & CEO at Astrana Health]

But we are very encouraged by the rate update and we think that we will be able to take advantage of it, given our renewed scope.

[Jack Slevin, VP - Healthcare Services Equity Research at Jefferies & Company Inc]

Okay, got it. Appreciate that, Brandon. It's really helpful. And then just my follow-up here. The commentary on Prop 35 was really helpful.

[Jack Slevin, VP - Healthcare Services Equity Research at Jefferies & Company Inc]

I guess that to me adds a layer of complexity to a broader discussion on the California MCO tax. It sounds like OMB like we don't have a lot of details, but it sounds like OMB may be taking a look at the MCO provider taxes and the structure of the one in California and New York. I guess I just want to get a general sort of temperature check on what you're hearing or what you guys are trying to get smart on right now as it relates to that. I guess my understanding is not all the dollars have flowed through from the government yet on that provider tax and a lot of that was being sort of held to the side by California to push through whether it be in rate increases or other things for a longer period of time. So maybe the immediate risk on that front would be lower.

[Jack Slevin, VP - Healthcare Services Equity Research at Jefferies & Company Inc]

But we'd just love to get your thoughts either on that sort of moving piece specifically or sort of how you guys are thinking about attacking the problem? Thanks.

[Brandon Sim, President & CEO at Astrana Health]

Yes. This is still an ongoing situation to be honest. As far as our best understanding of the situation, which I think you're very accurate on, those dollars have not flowed through to us. Almost all of the dollars have not flowed through to us at this point in time. And there is an ongoing discussion at the state level as to when and how those funds will be used from the managed care organization tax.

[Brandon Sim, President & CEO at Astrana Health]

There's obviously a federal policy portion of this as well, where depending on how the budget reconciliation goes, and by the way, are promising signs, although I don't want to be overly optimistic so early that Medicaid will be protected or at least somewhat protected, in the budget reconciliation process in a bipartisan effort. But that being said, there are a lot of variables and our only certainty is that we believe the situation will be at

[Brandon Sim, President & CEO at Astrana Health]

the moment we're anticipating it to

[Brandon Sim, President & CEO at Astrana Health]

be net neutral to us in terms of adjusted EBITDA impact. If there are increased rates that would be great. We would flow a lot of those through to our providers. And if not, we are prepared to absorb that without an adjusted EBITDA impact. So even with the lack of clarity, we continue to be confident in the twenty five and twenty seven guides for Medicaid and we'll keep, you all updated certainly as we find out more.

[Jack Slevin, VP - Healthcare Services Equity Research at Jefferies & Company Inc]

Got it. Appreciate all the color as always and nice work to again to you and the team.

[Operator]

Thank you. Our next questions come from the line of Jalendra Singh with Truist Securities. Please proceed with your questions.

[Jailendra Singh, Managing Director at Truist Securities]

Thank you and thanks for taking my questions. Apologies if I missed this, but one of your peers on the ACO REACH side saw decent results in Q1. Just curious how did the company perform from a profitability perspective there? We also saw there was some retro trend adjustment update through March 31, which lowered the RTA and likely creates a modest drag for the industry. Did you guys book that in Q1 or will that be in Q2 and it's in your outlook now?

[Chan Basho, CFO & COO at Astrana Health]

Hey, Chelinda. How are you? Thanks so much for the question. In terms of overall ACO, we did absorb the RTA and it was overall offset via stop loss and other puts and takes.

[Brandon Sim, President & CEO at Astrana Health]

But you are seeing the slight drag on revenue, GeLundra especially due to the RTA coming in 1.0097 just under the 1.01, which maybe what you're alluding to.

[Jailendra Singh, Managing Director at Truist Securities]

Okay. And then my follow-up, congrats and best wishes to the new leadership team members. Can you share some thoughts on Georgie's role as Chief Data and Analytics Officer? What are some of focus areas you guys have identified as near term and even long term opportunities?

[Brandon Sim, President & CEO at Astrana Health]

Yes, of course. We're very excited to have him on board. He has a long and storied career helping healthcare organizations better utilize data to improve quality measures, to get to better stars, and to be proactive about insights for physicians and for our care teams. So very excited to have him. In the near term, he's going to be ensuring that we have the data infrastructure or continuing to ensure rather that we have the data infrastructure set up to properly ingest over $1,000,000,000 of revenue, 600,000 members across all lines of business, multiple counties, full risk members, partial risk members, the whole gamut from pending Prospect Health acquisition.

[Brandon Sim, President & CEO at Astrana Health]

It is going to be a large lift to ensure that all the data pipelines are flowing appropriately into our data lake, into our unified data model and then downstream into the applications that our care managers, clinicians and ultimately the physicians use. So I think that's going to be as very much as near term goal for the next six months as we head towards the close here. And in the future, I think there are a lot of exciting opportunities that we've already been investing in that he will turbocharge in terms of, AI applications. So, summarizations of discharge notes, risk stratification, automation of workflow processes both for, our delegated services as well as for physicians in the office, better integration, with our data sources and real time insights at the point of care and more. So, Georgie is really excited I think to be joining us.

[Brandon Sim, President & CEO at Astrana Health]

We're excited to have him. And it just continues to reflect the investments that we're making in data engineering and AI.

[Jailendra Singh, Managing Director at Truist Securities]

Great. Thanks guys.

[Operator]

Thank you. Our next questions come from the line of Ryan Langston with TD Cowen. Please proceed with your questions.

[Ryan Langston, Director & Senior Analyst - Healthcare Research at TD Cowen]

Hey, thanks. Kind of on top of the guidance questions, if I take the first quarter and the guided second quarter EBITDA, it

[Ryan Langston, Director & Senior Analyst - Healthcare Research at TD Cowen]

looks like the full year,

[Ryan Langston, Director & Senior Analyst - Healthcare Research at TD Cowen]

looks like it's slightly back half weighted, which is a little bit different than 2024, I believe. I guess, is this from expected improvements in CHS as we move through the year? Or are those kind of $15,000,000 investments that you called out being more front loaded or maybe you just kind of walk us through the details of the cadence of those expectations?

[Chan Basho, CFO & COO at Astrana Health]

Hey, Ryan. How are you? Thanks. Thanks so much for the question. Yes, as we think about our guide for this year and what you saw last year, in 2024, you saw Q4 was skewed due to CHS and there's other factors that contributed to the 2024 EBITDA.

[Chan Basho, CFO & COO at Astrana Health]

If you look at this year, flu impacted us. As we think about the rest of the year, we're very confident in terms of our guide based on our expectations. Quarterly cadence for 2025 is very much in line with what we're seeing. And what you'll really see is, you'll see a larger percentage of our profitability coming in the back half of the year.

[Ryan Langston, Director & Senior Analyst - Healthcare Research at TD Cowen]

Got it. And then just finally, can you tell me, what MSSP shared savings, if any, you booked this quarter? I think it was $5,000,000 last quarter, and I'm pretty sure it was $5,000,000 embedded in this year's full year guide. So just looking if you booked anything in the first quarter? Thanks.

[Chan Basho, CFO & COO at Astrana Health]

Hey, Ryan. So we booked zero in terms of MSSP in regards to the 2025 performance year. And as you will see in the latter half of the year, as we gain more insight in terms of 2025 MSSP, we'll be booking something at that point. And yes, you're correct. In 2020 in Q4 twenty twenty five, we accrued $5,000,000 for or Q4 twenty twenty four, we accrued $5,000,000 for 2024 dates of service, and we guided to that 5,000,000 to $6,000,000 for 2025 dates of service.

[Ryan Langston, Director & Senior Analyst - Healthcare Research at TD Cowen]

That's great. Thank you.

[Operator]

Thank you. Our next questions come from the line of Brooks O'Neil with Lake Street Capital Markets. Please proceed with your questions.

[Brooks O'Neil, Senior Research Analyst at Lake Street Capital Markets, LLC]

Thank you very much. Good evening, guys. I'm just curious, realistically, you've grown the organization at a far above average rate over the past couple of years. I give you tremendous credit for taking those opportunities. But could you give us a sort of a broad assessment of any stresses you feel for the organization right now?

[Brooks O'Neil, Senior Research Analyst at Lake Street Capital Markets, LLC]

And how you feel about the addition of Prospect into any parts of the organization that are feeling stresses now?

[Brandon Sim, President & CEO at Astrana Health]

Hey, Brooks. Good evening. Thanks for the question. I appreciate it. Yes, as with any rapidly growing organization, over 50% growth year over year for this quarter, last year was over it was around 40% for the whole year in terms of growth.

[Brandon Sim, President & CEO at Astrana Health]

There are stresses, of course. There are when I joined this organization, we had fewer than 300 teammates and we're over 2,000 today. We'll probably be close to 3,000, if not more, pending or accounting pro form a, pending acquisition. So I think there's certainly a lot of stress, in terms of ensuring that we're managing employees in many dozen states at this point in time, making sure that we're able to integrate those employees into our cultural fabric, making sure that our systems are scalable, yet also customizable for each local market that we enter. Over 15 markets at this point in time, in many, many states relative to the one when I joined this business many years ago.

[Brandon Sim, President & CEO at Astrana Health]

So, certainly a lot of stresses due to that. It's a dynamic environment to use a kind word at the moment. So are trying to navigate that and I'm really proud of the team for despite the rapid growth being able to hold it together, continue to focus on our patients, which is the most important thing and continue to deliver growth while being profitable at the same time. We're really going to be focused Brooks this year on integration. We spent a lot of time integrating CHS and sharing that the G and A synergies that we thought existed or came to fruition.

[Brandon Sim, President & CEO at Astrana Health]

And we're going to focus on much of the same thing for the next six to nine months, as we get closer to the prospect close here.

[Brooks O'Neil, Senior Research Analyst at Lake Street Capital Markets, LLC]

Great. I appreciate all that color. Last thing I was curious about, obviously, you're having big growth in the amount of fully capitated lives or globally capitated lives. And I'd just love to hear any thoughts you have about the experience you've had as that number has gone up. Is the behavior consistent with your expectations?

[Brooks O'Neil, Senior Research Analyst at Lake Street Capital Markets, LLC]

Or are you seeing anything different than what you thought you'd see as the organization goes in that direction?

[Brandon Sim, President & CEO at Astrana Health]

Thanks Brooks. Yes, we're seeing things in line. For the full risk cohorts, we're not going to see the as I guided before, we're not going to see the profitability pick up necessarily day one. But we are seeing those cohorts progress nicely as they move into full risk. We've invested in the infrastructure, most importantly, to make that happen.

[Brandon Sim, President & CEO at Astrana Health]

So the inpatient case managers, the admin discharge transfer feeds, all of that being piped into our care management applications that are a couple of hundred, now 300 to 400 clinical staff are using to manage the populations, in close to real time. So those cohorts are progressing nicely, we believe and, we're continuing to be encouraged by that strategy of moving more members into full risk while growing prudently into other markets. I think the interesting thing is that Prospect has been doing much of the same process in terms of moving members into these full risk arrangements. And we think we're going to be able to turbocharge that when the two organizations are together in terms of the infrastructure we have to manage the total continuum of care for these patients.

[Brooks O'Neil, Senior Research Analyst at Lake Street Capital Markets, LLC]

Great. Thank you very much. I'm looking forward to seeing that happen.

[Brandon Sim, President & CEO at Astrana Health]

Thank you, Brooks.

[Operator]

Thank you. Our next questions come from David Larsen with BTIG. Please proceed with your questions.

[David Larsen, Managing Director at BTIG]

Hi. I've received a couple of questions about the Prospect Medical transaction, mainly from debt investors. And my sense from them is there may be some concern, I guess, about the transaction and the EBITDA, in particular, from Prospect Medical. I think you had talked about $94,000,000 of EBITDA from Prospect. Can you maybe just, I guess, give us a little more comfort around the earnings power of Prospect?

[David Larsen, Managing Director at BTIG]

How due diligence has that been? And then how much EBITDA will Prospect add to your book when the deal actually closes? Very much.

[Brandon Sim, President & CEO at Astrana Health]

Hey, Dave. Thanks for the question. So the audited financials, for their fiscal year, which ends in Q3, plus the stub period that we had announced to the public last year was well above the $81,000,000 of adjusted EBITDA that we anticipated to bring on that we announced at the close. We remain very confident in the 81,000,000 number. And I'm not sure what the debtors are alluding to or the creditors necessarily, but we have been looking at admin discharge transfer data.

[Brandon Sim, President & CEO at Astrana Health]

We've been looking at inpatient data. They also are in a delegated model. So we're looking at prior auths and claims as well. Of course, we can't see contractual details yet, to ensure that we stay compliant with on a pre closing basis. But all signs point to that 81,000,000 number being a solid number of which we can work with if and once we close the deal.

[Brandon Sim, President & CEO at Astrana Health]

So, we look forward to we genuinely, genuinely look forward to showing you all the first quarter post close and helping to spell some of those concerns.

[David Larsen, Managing Director at BTIG]

Great. Thanks very much. And then can you just please remind me what was the medical trend in the quarter? What is the projection for the year? And then what is your visibility on that?

[David Larsen, Managing Director at BTIG]

One of your peers said that they typically have about 60% of claims by the end of each quarter. So there's a lot of IBNR that goes into any medical trend estimate for the quarter. Just thoughts around that and what sort of the key drivers are in particular oncology and oncology costs? Any thoughts there would be helpful. Thank you.

[Brandon Sim, President & CEO at Astrana Health]

Sure thing. We as I mentioned in the prepared remarks, we remain confident in the full year trend, which we had previously guided to of 4.5% blended across all the lines of business. We came in slightly higher than that this quarter because of the flu. That was entirely contemplated for in our 4.5% full year guidance. And we anticipate being able to meet that comfortably in the next three quarters to come.

[Brandon Sim, President & CEO at Astrana Health]

We are not seeing any spikes necessarily in oncology as you mentioned. In Q1, the areas that we did see were mostly related to emergency room usage and especially laboratory usage. So that's something we're going keep an eye on. But because of our ability to see claims, and prior auths and inpatient data, the latter two on a more real time basis, we feel confident in the 4.5% trend for the year at this moment.

[David Larsen, Managing Director at BTIG]

Last quick one, tariffs. Any impact potentially to your business raising COGS or from your customers? Just any thoughts on tariffs 25% on pharma potentially? Thanks.

[Brandon Sim, President & CEO at Astrana Health]

Thanks, Dave. As I mentioned in the prepared remarks, we're not taking much Part D risk at all. Less than two percent of our members have even a bit of Part D risk at all to them. The rest have zero exposure to that. Of course, there are minor secondary or maybe even tertiary type effects.

[Brandon Sim, President & CEO at Astrana Health]

If there are increased costs goods, medical equipment, etcetera that our physicians would use. But, for the most part of our 12,000 plus providers, these are partnered physicians that we are enabling and helping them earn far above the average primary care provider in their region. And so we believe that our model is going be very resilient, and at least in the first, second, third probably plus degree not impacted by potential tariffs at this time.

[David Larsen, Managing Director at BTIG]

Thanks very much. I'll hop back in the queue.

[Brandon Sim, President & CEO at Astrana Health]

Thank you.

[Operator]

Thank you. Our next questions come from the line of Matthew Gillmor with KeyBanc Capital Markets. Please proceed with your questions.

[Zach Haggerty, Equity Research Associate at KeyBanc Capital Markets]

Hey, good afternoon. This is Zach on for Matt. So, Payer talked about some unexpected variability with some new member risk adjustment coding. So, I wanted to confirm you guys haven't seen any of these issues along those lines. And if you could maybe speak to your process as well, I'd appreciate it.

[Zach Haggerty, Equity Research Associate at KeyBanc Capital Markets]

Thank you.

[Brandon Sim, President & CEO at Astrana Health]

Hey, thanks for the question. Typically, new members absolutely do come in at a slightly lower raft depending on, what was coded for them the prior year. So I can understand why some would have that dynamic. I think we've been prudent to balance the new membership, ensuring that we're taking full risk on that membership once members are appropriately documented for in terms of their chronic conditions and once we're able to appropriately manage those chronic conditions from a cost perspective and a trend perspective. So overall, yes, to our newer cohorts, our net newer cohorts have slightly lower raft than our overall book.

[Brandon Sim, President & CEO at Astrana Health]

They do, but that's a normal dynamic that we've been dealing with for over thirty years. It's something that is already been contemplated in our guide for the year. From a go forward basis, we feel confident in our risk adjustment strategy. We've always, as I mentioned before, documented accurately and the V-twenty eight headwinds that I suspect some may be facing are we don't believe to apply to us as much or if at all.

[Zach Haggerty, Equity Research Associate at KeyBanc Capital Markets]

Great.

[Zach Haggerty, Equity Research Associate at KeyBanc Capital Markets]

Thank you.

[Operator]

Thank you. Our next questions come from the line of Gene Mannheimer with Freedom Capital Markets. Please proceed with your questions.

[Gene Mannheimer, Managing Director, Senior Research Analyst at Freedom Capital Markets]

Thanks. Good afternoon. I thought you dropped me. Good job on the quarter. I just have one quick one.

[Gene Mannheimer, Managing Director, Senior Research Analyst at Freedom Capital Markets]

On CHS, you called out that you're tracking the breakeven exiting 2025. I'm just curious how long before you can get that asset, say back to your corporate margin, how long would that take? Thank you.

[Brandon Sim, President & CEO at Astrana Health]

Hey, Gene. Thanks for the question. We would never drop you. We remember that you were there from the beginning, Gene. Thank you.

[Brandon Sim, President & CEO at Astrana Health]

Worry, but yes, no, we would never. Thank you for the question, Gene. Thanks for hopping on. In terms of CHS, we will be we are expecting to be breakeven this year, run rate breakeven this year as we had previously guided. We expect that we'll be profitable in 2026.

[Brandon Sim, President & CEO at Astrana Health]

I think we had guided or yes, had guided to at least $10,000,000 of profitability in 2027. So at least in the near term till 2027, that is kind of the ramp up that we expect for CHS. In terms of enterprise margins, over the long term, we do believe that we can operate that business at enterprise margins, which would be in the high single digits EBITDA margin percent for Medicare Advantage and probably lower for Medicaid and ACO membership.

[Gene Mannheimer, Managing Director, Senior Research Analyst at Freedom Capital Markets]

Okay. Excellent.

[Gene Mannheimer, Managing Director, Senior Research Analyst at Freedom Capital Markets]

Thanks very much.

[Brandon Sim, President & CEO at Astrana Health]

Thanks, Gene.

[Operator]

Thank you. Our next questions come from the line of Andrew Mock with Barclays. Please proceed with your questions.

[Thomas Walsh, Equity Research Associate at Barclays Investment Bank]

Hi. This is Thomas Walsh on for Andrew. Group Medicare Advantage has come under some pressure across the industry. And I was hoping you could share what your group MA mix is and how it's performed relative to individual? And more generally, if you've seen any changes in patient behavior this quarter?

[Chan Basho, CFO & COO at Astrana Health]

Hey, how are you? In terms of our overall group versus individual mix, 're mostly individual and we haven't really seen any change in terms of

[Chan Basho, CFO & COO at Astrana Health]

mix shift.

[Thomas Walsh, Equity Research Associate at Barclays Investment Bank]

Got it. Okay. And I guess following up on the acceleration in ER and lab utilization in the Medicaid book, did you see a consistent acceleration through the end of the quarter or more of a spike which reverted?

[Brandon Sim, President & CEO at Astrana Health]

Yes, we did see a spike particularly in January and a little bit into February. I would say that trends are as expected, especially now that we're here in May. And a lot of this spike was contemplated in our guidance when we first gave it back at the beginning of the year here.

[Thomas Walsh, Equity Research Associate at Barclays Investment Bank]

Great. Thanks for the color.

[Brandon Sim, President & CEO at Astrana Health]

Thanks.

[Operator]

Thank you. We have reached the end of our question and answer session. And with that, I would like to bring the call to a close. We appreciate your participation today. You may disconnect your lines at this time.

[Operator]

Enjoy the rest of your

Participants

Executives

• Brandon Sim, President & CEO
• Chan Basho, CFO & COO

Analysts

• Ryan Daniels, Group Head–Healthcare Technology and Services at William Blair & Company, L.L.C
• Michael Ha, Senior Research Analyst at Robert W. Baird & Co
• Jack Slevin, VP - Healthcare Services Equity Research at Jefferies & Company Inc
• Jailendra Singh, Managing Director at Truist Securities
• Ryan Langston, Director & Senior Analyst - Healthcare Research at TD Cowen
• Brooks O'Neil, Senior Research Analyst at Lake Street Capital Markets, LLC
• David Larsen, Managing Director at BTIG
• Zach Haggerty, Equity Research Associate at KeyBanc Capital Markets
• Gene Mannheimer, Managing Director, Senior Research Analyst at Freedom Capital Markets
• Thomas Walsh, Equity Research Associate at Barclays Investment Bank