Astrana Health Q3 Earnings Call Highlights

Key Points

• Record Q3 results: Revenue rose 7% year over year to $1.02 billion and adjusted EBITDA increased 13% to $77.2 million, supported by Medicare Advantage growth, maturing risk-bearing populations and improved medical costs.
• 2026 outlook maintained: Astrana narrowed its full-year guidance ranges but kept the midpoints, expecting revenue of $3.9 billion–$4.0 billion and adjusted EBITDA of $261 million–$274 million. It generated about $105 million in free cash flow through nine months and aims to approach 2.0x net leverage by year-end.
• Growth tempered by Medicaid attrition: Medicare Advantage membership grew at a high-single-digit rate, while Medicaid and exchange enrollment declined. Astrana expects further Medicaid losses in 2027, but is expanding full-risk contracts and anticipates at least mid-to-high-teens growth in ACO program membership.

Astrana Health NASDAQ: ASTH reported record third-quarter revenue and adjusted EBITDA as growth in Medicare Advantage membership and full-risk contracts helped offset declines in Medicaid and exchange enrollment.

Revenue rose 7% year over year to $1.02 billion for the quarter ended Sept. 30, 2026, while adjusted EBITDA increased 13% to $77.2 million. Net income attributable to Astrana was $13 million, and adjusted diluted earnings per share were $0.71.

President and CEO Brandon Sim said adjusted EBITDA growth was organic, supported by maturing risk-bearing populations, particularly in Texas, improved medical cost performance in the Care Partners business and operating efficiencies. Prospect, which Astrana acquired more than a year ago, was included in both periods being compared.

Outlook Maintained as Company Invests in Growth

Astrana narrowed its full-year guidance ranges while maintaining their midpoints. The company expects 2026 revenue of $3.9 billion to $4 billion, adjusted EBITDA of $261 million to $274 million and free cash flow of $107.5 million to $130 million.

For the fourth quarter, it forecast revenue of $939 million to $1.04 billion and adjusted EBITDA of $48.5 million to $61.5 million. COO and CFO Chan Basho said the final quarter is expected to be the year’s least profitable, consistent with prior years.

Basho said third-quarter results included Medicare Shared Savings Program accruals and final Medicare Advantage risk adjustment sweeps that are not expected to recur in the fourth quarter. He said the sweeps added approximately $5 million to $10 million in the third quarter, in line with expectations and the prior-year period.

The fourth-quarter outlook also includes continued Medicaid attrition and spending to onboard new payer contracts and other growth opportunities. Asked about the width of the quarterly guidance range, Sim said the company continues to expect performance around the midpoint.

Astrana generated approximately $105 million in free cash flow through the first nine months of 2026 and repaid approximately $116 million in debt. It ended the quarter with $396 million in cash, $581 million in net debt and net leverage of 2.2 times trailing 12-month earnings. Basho said the company remains on track to approach two times net leverage by year-end.

Medicaid Pressures Offset by Medicare Growth

Astrana ended the quarter with approximately 1.5 million members under management. Sim said Medicare Advantage membership grew organically at a high-single-digit rate year over year, partly offset by Medicaid and exchange attrition.

The company expects Medicaid membership attrition this year to land in the middle to high end of its initial 10% to 15% assumption. For 2027, Astrana is planning for another 10% to 15% decline as it considers changes including work requirements, more frequent eligibility checks and the transition of UIS members to fee-for-service.

Sim said the company is seeing modest signs that remaining Medicaid members have a higher-risk profile. He expects Medicaid to be a roughly mid-single-digit percentage-point headwind to adjusted EBITDA growth in 2027, net of rate adjustments.

Overall medical cost trend remains slightly better than the approximately 5.2% assumption in Astrana’s full-year guidance, Sim said. Medicare Advantage and Original Medicare trends have been favorable to expectations, while Medicaid costs are above initial assumptions and commercial costs are slightly above expectations, primarily because of clinician-administered drugs.

Sim expects Medicare Advantage margins to remain stable in 2027, with rate increases moving roughly in line with medical cost trends. He also said Astrana expects the share of its Medicare Advantage members in four-star plans to rise from about 30% to more than 50%, barring dramatic enrollment changes.

Full-Risk Contracts and New Partnerships

Astrana expects approximately 82% of capitation revenue to come from full-risk arrangements by the end of 2026, up from 76% at the end of 2025. In Care Partners, approximately 46% of members were in full-risk arrangements at quarter-end, compared with 34% a year earlier.

In Texas, Astrana transitioned approximately 7,000 Medicare Advantage members from gain-sharing to global-risk arrangements during 2026 and added 3,000 members under professional-risk contracts. Sim said the Texas business is performing ahead of plan, with favorable medical costs and faster-than-expected profitability improvement.

The company also completed a tuck-in acquisition of a Georgia independent physician association on Oct. 1 and signed several new Medicare Advantage partnerships effective Jan. 1, 2027. Its Care Enablement platform added a Connecticut provider group and a California hospital as clients; both are expected to be onboarded by early 2027.

Sim said the Care Enablement business generates more than $300 million in segment revenue and could allow Astrana to expand its technology services without initially assuming premium risk or making major clinic acquisitions.

ACO Reporting and 2027 Planning

With the ACO REACH model ending in 2026, Astrana is preparing for the transition to CMS’s LEAD model. Basho said the company expects LEAD revenue to be recorded on a gross basis, as under ACO REACH, while MSSP revenue reflects only Astrana’s share of savings.

To provide a comparable measure across the programs, Astrana introduced “premiums at risk,” which includes the full Medicare expenditure benchmarks for MSSP populations. The company expects approximately $4.45 billion on that basis in 2026, compared with its reported revenue guidance of $3.9 billion to $4 billion.

Sim said Astrana expects at least mid-to-high-teens membership growth in its ACO programs in 2027. The company plans to issue formal 2027 financial guidance with its fourth-quarter results and remains confident in at least mid-teens annual adjusted EBITDA growth over the medium term.

Asked about a cyber incident announced in September, Sim said an investigation involving law enforcement is ongoing. He said Astrana has engaged cybersecurity and digital forensics experts and would provide further updates as appropriate.

About Astrana Health (NASDAQ:ASTH)

Astrana Health, Inc NASDAQ: ASTH, formerly known as Apollo Medical Holdings, is a healthcare enablement company focused on helping providers and health plans deliver coordinated, value-based care. The company combines physician networks, care-management capabilities, technology and data analytics to support improved clinical outcomes and more efficient healthcare delivery.

Astrana Health's services include population health management, physician practice support, utilization management, care coordination and clinical analytics.

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