Alignment Healthcare, Inc. Q3 FY2022 Earnings Call

Good afternoon, and welcome to Alignment Healthcare Third Quarter 2022 Earnings Conference Call and Webcast. Please note that this event is being recorded. Leading today’s call are John Kao, Founder and CEO; and Thomas Freeman, Chief Financial Officer. Before we begin, we would like to remind you that certain statements made during this call will be forward-looking statements as defined by the Private Securities Litigation Reform Act. These forward-looking statements are subject to various risks and uncertainties and reflect our current expectations based on our beliefs, assumptions, and information currently available to us. Descriptions of some of the factors that could cause actual results to differ materially from these forward-looking statements are discussed in more detail in our filings with the SEC, including the Risk Factor section of our annual report on Form 10-K for the fiscal year ended December 31, 2021, and our quarterly report on the Form 10-Q for the quarter ended September 30, 2022. Although we believe our expectations are reasonable, we undertake no obligations to revise any statements to reflect changes that occur after this call. In addition, please note that the company will be discussing certain non-GAAP financial measures that they may believe are important in evaluating performances. Detail on the relationship between these non-GAAP measures to the most comparable GAAP measures and reconciliation of historical non-GAAP financial measures can be found in a press release that is posted on the company’s website and in our Form 10-Q for the quarter ended September 30, 2022. I would now like to hand the conference over to your speaker today, John Kao, Founder and CEO. Please go ahead.

Hello, and welcome to our third quarter earnings conference call. We are pleased to announce another strong quarter in which we exceeded the high end of guidance across each of our four key performance indicators and raised guidance for full year 2022 top and bottom line metrics. For the third quarter, our total revenue of $360 million represented 23% growth year-over-year, beating our high-end guidance by $25 million. Our ending health plan membership of 98,000 members grew 14% year-over-year, beating our high-end guidance by 700 members and placing us solidly in the range of our previous year-end membership guidance of 97,300 to 99,000 members. Adjusted gross profit was $49.5 million, beating our high-end guidance of $40 million and resulting in an MBR of 86.3%, 180 basis points better than implied at the high end of our guidance. Meanwhile, our adjusted EBITDA was negative $9.5 million, beating the high end of guidance by $10.5 million. Lastly, on the back of our strong performance, we’re pleased to share that we are raising our full year revenue guidance to reflect growth of greater than 20% year-over-year, consistent with our long-term annual revenue growth objective. Closing out the third quarter, we are encouraged to see continued progress in the replicability and scalability of our operating model. Our investments in our risk prediction models, clinical workflow tools, provider engagement activities, and our local community representatives are yielding outstanding results, both inside California and in our new geographies as well. Meanwhile, our investments to optimize service delivery are on track to produce operating results quicker than anticipated. Our continued success delivering high quality at a low cost across markets gives us confidence in the repeatability of our platform and our long-term runway as we carry that momentum into next year. Key to this repeatability of our model is AVA. While plans have historically leaned on scale and unit cost to create the competitive advantage, our success is founded upon data science, information, and analytics. AVA allows us to effectively compete and outperform by providing the insights required to optimize our key value drivers at the local level. Our teams rely on this actionable information to deliver a tailored and agile approach to each market. We believe technology alone cannot change health care. Rather, it is the interconnected nature of AVA and its actionable insights leveraged by the people across our business, including our clinical care teams and our provider partners, that is driving the consistency of our performance across geographies. Simply said, providing the right data at the right time to the right people is allowing us to improve member outcomes and deliver durable financial results. This is the culmination of our founding vision for what value-based technology-enabled health care should be. Turning to stars, CMS recently announced the 2023 plan year star ratings, which measure the quality of health and drug services received by our seniors. We are pleased to report that our California HMO contract achieved 4 out of 5 stars, which marks the sixth consecutive year we have achieved 4 stars or greater. In total, for the 2023 plan year, we anticipate approximately 95% of our members will be in plans that CMS rated as 4-plus stars. Additionally, due to the strength of our weighted average parent rating, our plans in Florida, Texas, and Arizona, which are currently too new to be measured, will also adopt a 4-star rating. Given that 2023 stars determine 2024 reimbursement, we are excited for the continued momentum our results will provide us over the next two years. We are also proud of the strides our teams have made this year to produce a 5-star result in North Carolina. This is a crucial step forward in demonstrating the portability of our model and the traditionally fee-for-service market. To achieve this result, our clinical teams, community physician partners, and member concierge teams took a hands-on approach with members. The actions of these teams are aided by AVA-enabled insights to identify gaps in care and make targeted actions to support care navigation and address member concerns. These capabilities are core to our model and allow us to consistently deliver high quality at a low cost. As we previously shared, we are continuing to make focused investments in quality and service delivery to not only maintain our strong company-wide results but also push our ratings higher across all plans in the future. As we enter this annual enrollment period, we are once again enhancing benefits and lowering monthly premiums for our members while distinguishing our plans through product innovation. We continue to explore new ways to create benefits that improve our members’ standards of living and address social determinants of health. This summer, we published the Alignment Health 2022 Social Threats to Aging Well in America survey results. Our inaugural report revealed that economic instability, loneliness, and food insecurity are the top three social barriers impacting seniors’ access to comprehensive, affordable, high-quality health care. We further recognize that these elements of day-to-day life for our seniors have been exacerbated by an uncertain economic environment and inflationary pressures. Understanding these obstacles, we introduced a variety of new products and benefits this AEP to address these challenges, including a gas and utility benefit for low-income subsidy-eligible members to address economic instability. In addition, many of our plans now feature $300 to $600 of annual reimbursement for personal caregivers, including family members as we strive to directly aid our senior support system and combat social isolation. We have also expanded over-the-counter benefits across our spectrum of products, moved many of our plans to zero premium, and expanded our flagship Black Card benefit to include a flex allowance for a wider variety of services. Our capacity to drive product innovation and improved benefits year after year is a direct result of our care model, powered by AVA’s insights and the MBR outperformance we’ve been able to achieve. In aggregate, our enhancements this year, along with the continued support of our 24/7 concierge services, give our seniors greater benefits and choice at no additional cost. We are proud of our role in supporting our members and look forward to sharing more about AEP results in January. As I wrap things up, I’d like to sincerely thank our employees for their continued outstanding contributions to our company and our members' well-being. The results of this quarter added significant momentum to our impressive first half of the year and further solidifies our conviction in our strategy of balancing growth with long-term profitability. Now I’ll turn the call over to Thomas to cover the third quarter financial results as well as our outlook for the remainder of the year.

Thanks, John. Turning to the third quarter results. As John mentioned, we are proud to deliver another strong quarter in which we exceeded the high end of our guidance ranges across each of our four KPIs. For the quarter ending September 2022, our health plan membership of 98,000 increased 14% compared to a year ago. Our third quarter revenue of $360 million represented 23% growth year-over-year. Our third quarter outperformance brings our year-to-date revenue growth to 23%. And as John mentioned earlier, that sets the company up for its full year 2022 revenue growth of greater than 20%, consistent with our long-term annual revenue growth target. Our adjusted gross profit in the quarter was $49.5 million, representing an MBR of 86.3% as our California franchise and newer states, both contributed to outperformance versus our MBR expectations. While we previously noted that we had seen an uptick in COVID cases at the beginning of the third quarter, the early increases in COVID admissions abated as we progressed throughout the remainder of the quarter. In total, inpatient admissions per 1,000 continue to run below baseline. We also benefited from a final adjustment to our 2021 final suite accrual, which contributed a few million of adjusted gross profit outperformance in the quarter. While we do not anticipate this event to recur in the fourth quarter, we note that we would have still run meaningfully ahead of gross profit and MBR expectations in the third quarter, excluding this pickup. SG&A in the quarter was $76.5 million. Excluding equity-based compensation expense, our SG&A was $59.7 million, an increase of 22% year-over-year. Due to the timing of some of our sales and marketing spend around AEP as well as the ramp-up of our year zero market spend, we experienced a couple of million of SG&A timing favorability in the quarter that we anticipate to reverse in the fourth quarter. Lastly, our adjusted EBITDA was negative $9.5 million, solidly ahead of expectations. As we rounded out the third quarter, we are proud to note that our adjusted EBITDA loss for the first nine months of the year is only negative $3 million. We view this trend and outperformance as another indicator of our ability to leverage our operating model to produce strong growth while balancing our long-term profitability objectives. Turning to the balance sheet. We ended the quarter with $402 million in net cash. Our cash position at the end of the quarter included an early fourth quarter payment from CMS of approximately $117 million. We recorded the early payment as deferred premium revenue in Q3, and we’ll recognize it as revenue in Q4. Note that this does not have any impact on our income statement metrics. Net cash, excluding the early payment, was $285 million, which was in line with expectations. In prudent management of our balance sheet, during the third quarter, we announced the close of a $250 million senior secured term loan facility, of which $165 million was funded upon closing of the transaction. The initial proceeds were principally used to refinance our existing term loan facility, which was otherwise due in approximately 12 months. The remaining $85 million is available under a delayed draw, subject to certain conditions. We continue to expect our balance sheet strength to fund our organic growth and working capital needs without requiring external financing. Turning to our guidance. For the fourth quarter, we expect health plan membership to be between 98,000 and 99,000 members, revenue to be in the range of $338 million to $343 million, adjusted gross profit to be between $34 million and $37 million, and adjusted EBITDA to be in the range of a loss of $30 million to a loss of $27 million. For the full year 2022, we expect revenue to be in the range of $1.41 billion and $1.415 billion, adjusted gross profit to be between $189 million and $192 million, and adjusted EBITDA to be in the range of a loss of $33 million to a loss of $30 million. Following continued strong performance in the third quarter, we are raising the lower end of our full year 2022 membership guidance and raising our full year revenue guidance. We note that the anticipated step down from our third quarter to our fourth quarter revenue considers both the additional suite pickup that we do not anticipate to recur in the fourth quarter as well as normal course seasonality of our revenue PMPM as a portion of our membership that is comprised of new members trends higher throughout the year. Additionally, we are raising our full year 2022 adjusted gross profit expectations and narrowing our guidance range, which now represents growth of over 30% year-over-year. We remain cautiously postured against potential increases in utilization due to COVID and the flu as we enter the colder months of the year. As such, our clinical teams and provider partners are actively working to encourage our members to get their annual flu shot and latest round of COVID boosters. As mentioned last quarter, we also continue to invest towards our member engagement and care quality efforts given our strong outperformance year-to-date. While a headwind on short-term MBR, we believe these efforts will be meaningful to our performance in years to come. Lastly, we are also raising our adjusted EBITDA guidance, which reflects our strong year-to-date outperformance and increased visibility as we approach the final months of the year. Our adjusted EBITDA outlook also takes into account our SG&A timing favorability from the third quarter into the fourth quarter. From our initial 2022 guidance provided in March to our updated outlook as of today, the midpoint of our EBITDA guidance range improved by $11.5 million or 27%, and our implied MBR improved by approximately 90 basis points. In conclusion, we are delighted with our year-to-date results and believe we are well-positioned heading into 2023.

Let’s open the call to questions.

Good morning. This is Jared Haase in for Ryan. Thanks for taking the questions, and congrats on the strong results year-to-date. I wanted to ask a question just around stars and specifically looking at the 5-star rating in North Carolina. I would love to hear if you’re able to share any color here. I would love to hear a bit more about the dynamics that just led to the early successes in the early days of that franchise for you guys. How much of that is sort of related to the external provider networks in that market? How much of it is just related to the execution of your own internal teams over there? And how are you thinking about any kind of learnings there that might be applicable to extend to your other markets?

Jared, it’s John. Yes, it’s something we’re really proud of. But I think equally important, it’s something that forms the basis of a template that shows us what will work. As we get into some of these new markets, I think you really have to focus on this notion of high quality to low cost. The ingredients of that are having the right like-minded provider partners, overlaying our clinical model, using AVA, and really just being very hands-on with all of the members. What you get is what you get, which is this 5-star kind of highly satisfied member. And that’s relevant and important because if we get that, it helps on the unit economics. It gives us year-round marketing, and it allows us to be aggressive on product. We’ll use that and really kind of force our way into some of these new markets. Every single market is a tough market, as we know in MA. But this gives us the kind of formula to make these new markets very successful, and I think that’s the significance of it with respect to the portability of our business model.

Got you. Yes, that’s helpful color there. And then just as a quick follow-on from us. This is more related to guidance, maybe one for Thomas. But I think at the end of your prepared remarks there, you talked a little bit about some SG&A favorability that’s reversing and that was sort of factored into the EBITDA guidance. I mean, if I look at where the updated EBITDA guide is, it’s coming in a little bit lighter relative to the Street. So I guess, number one, did you actually size that SG&A favorability? And were there any other dynamics that were kind of unique to 3Q or that are showing up in 4Q that we should be thinking about?

Yes. Yes. Maybe let me speak to your SG&A question and then also maybe just comment on gross profit because that’s obviously a critical factor in terms of looking at EBITDA. So from an annual perspective, our full year EBITDA guidance increased meaningfully from our previous EBITDA guidance, which is now meaningfully ahead of where the consensus EBITDA was heading into the quarter. With respect to kind of the Q3 versus Q4 timing dynamics you mentioned, we shared in our prepared remarks that it was a couple of million of SG&A timing favorability from Q3 into Q4. It’s more of a timing thing than anything else, and we’re really feeling very proud of the Q3 results and how that sets us up for Q4 and full year 2022.

Thank you. One moment for our next question.

Hi. This is Kal on for Lisa. I wanted to ask a quick question on profitability. So I think you guys have talked about 2024 as getting to breakeven, but you’ve already outperformed your own initial expectations this year pretty meaningfully. I think adjusted EBITDA about $15 million higher at the midpoint versus your original guidance. So just curious how you guys think about the ability to maybe hit EBITDA breakeven in 2023. I’m wondering if you can comment on current consensus, I think, about $23 million loss for next year and whether you think that’s a reasonable estimate.

Kal, Thomas here. I think in terms of commenting on 2023 guidance, we’re probably not going to do that today. We’ll look to share our 2023 guidance in our fourth-quarter earnings call after we have the benefit of the full AEP period. I think in terms of your question, though, that’s more directed towards our year-to-date outperformance and how that translates to our timeline to profitability in the future. While we are extraordinarily pleased with our first nine months and clear that sets us up to outperform for the full year; I think we would probably caution folks on how that translates into our ability to breakeven in 2023. We obviously continue to make that a top priority for the organization to get to EBITDA positive in aggregate, but at the same time, I think we’re also mindful of the fact that we are launching Florida and Texas in 2023 as year-one markets, and those will require investment next year.

Great. If I could just ask a follow-up. I know you’ve talked before about altering some of the relationships you have with brokers and your distribution strategy there. Can you remind us what some of those changes you made were? And I know we’re early in the AEP so far, but maybe some of the early returns you’re seeing on those?

Kal, John. Yes. The formula that’s worked for us for the past several years in terms of some of the FMOs that we’re working with continues to be something that we’re comfortable with. The newer markets where we’re really trying to establish a foothold are kind of the areas in which we look. You’re really using product, having very competitive products, which in turn requires you to have really good stars, excellent MLRs, et cetera, and driving that. We’ll work with the brokers in those markets that are engaged, loyal, and just performing. In certain markets that we don’t have those, we’re going to have our own distribution channels, whether it be telesales and/or employed sales. I think we’re also continuing to be thoughtful about some of the, I’ll call them, e-brokers. Some of them have been good partners for us. We have not been dependent on that, and therefore, some of our retention initiatives have been pretty good. So we’re not really exposed there, I think, like some other folks have communicated. So you can see more of that, particularly as we get more physicians outside of California.

All right. Thanks, and congrats again on the quarter.

Thanks, Kal.

Thank you. Please stand by for our next question.

Hey there. One boring model question and one strategic question. It’s hopefully a little more interesting. So the PMPM came in a little bit higher this quarter versus our model by about 7%. So maybe you could talk about that. And then John, for you, just kind of interested when you go into a market like, say, Jacksonville, where nobody knows who you are, and there are a bunch of plans, just kind of what is the first one or two or three things that you do? And how do you establish your brand in a crowded market where some of the incumbents have been there for a long time and have established a foothold much more than you have?

John, Thomas here. Maybe I’ll take the first one and then turn it over to John for the second one. So in terms of the revenue PMPM, the third quarter did benefit from a final true-up on our 2021 final suite from CMS. We mentioned this on our second-quarter earnings call, and we actually continue to see a bit of upside in the third quarter. That relates to CMS having the last two years slightly changed their payment schedule by creating an interim final in the second quarter and then an actual final which takes place in the fourth quarter. I think that’s a lot of what you’re seeing from Q3 to Q4 is just we don’t anticipate that portion of the Q3 outperformance to continue in Q4. Having said that, we think Q4 is set up for great success otherwise.

Yes. Thanks, Thomas. John, yes, it’s something that we think about all the time, obviously, and it starts with finding like-minded providers. Every single market inside California and outside California, you really start with 20 to 25 PCPs who understand the model, are willing to work with us on stars, want to work with us on our AVA tools, and want to work with us on our Care Anywhere model, home-based care. As you create this connection with these providers, that then gives us the ability to put our clinical infrastructure in place and then have very aggressive products. I think that’s how you get into the market and have a durable profitability profile. Our product will then attract members, and those members will leave other PCPs and come and join the PCPs that we contract with. We’ll slowly add to that network of engaged providers as we augment that with good and strong broker relationships, good and strong employed distribution strategies, and then we’ll relay that with branding. That’s the only way we think this can work.

Just as a follow-up on that. So I mean, these doctors are pushed for time, and 1 million people try to go see them. So you probably bang your way in there, get 5 minutes with some guy in the coffee room, what’s kind of the – if you just have a little bit of time with this person, what do you tell them that makes them kind of set up and pay attention and block out the noise from the other dozens and dozens of vendors who are trying to get their attention?

Yes. I’ve done this hundreds of times. You talk to the physician, speak with the office manager, and as they sit back in their chair, you walk them through our alignment story. You talk about the care model, you talk about the data, then you talk about how we are an extension of their practice, and how our clinicians are not in any kind of provider directory. After that, we explain the compensation structure and how they get paid. They then understand the math, where at the end of the day, they get paid more for working less and for jointly providing a better clinical outcome for that member. That story resonates with these folks.

Thank you, sir.

Thank you. One moment for our next question.

Thank you, guys, for the question, and congrats on the 5 stars in North Carolina. So I guess now that OEP has started, I’m curious about just your thoughts on the competitive landscape? Are you seeing evidence of any surprising, highly competitive benefit offering dynamic, almost similar to what happened with Part B buydowns last year? Or is it a more rational marketplace? And just any early thoughts on any growth expectations relative to your 20% long-term growth target?

Michael, John here. Yes, we’re three weeks into AEP. First thing I would say is we’re a lot happier this year than relative to last year, just in terms of the rationale, in terms of what we see regarding products. Having said that, I think people are, at least for the first two weeks, focused a lot on minimizing churn, given some of the experiences last year. I’m encouraged by the last week in terms of the applications we received. I would say that, given three weeks of data, we would be looking for, and again, this is Thomas making sure I say this properly, we’re not giving any kind of guidance expectations for 2023. But based on three weeks, if you extrapolate, I think we’re kind of in the high teens, the low 20s growth rate on membership would be something that, again, I’m just – you have to remember, 70% of the growth comes in the back end of our AEP process. But if the last week is any indication, I’m really happy about that.

Thank you, guys. I appreciate that color. Maybe just a quick follow-up, a quick one on stars. Just related to CAP, some of your peers have mentioned just basically having trouble adapting to the weighting methodology. I know the sample size is small per cap, but how do you feel about your care model and AVA performing here? Do you feel like you have a competitive advantage because of your closely aligned model that gives you an upper hand?

Yes, Michael. The North Carolina results are proof of the pudding. It’s how we work with our providers in a very collaborative way. I’d really make the point that there’s a difference between capitation and delegation. There are certain core capabilities that we have: claims payment, the UM process, the crack disease management programs, and utilizing real-time data and information that’s actionable in partnering with our community doctors. If we can control those fully, we get the outcome we see in North Carolina. We’re working hard on ensuring that some of the IPAs we’re partnered with in California remain good partners, and we have to work with them on access for our members. That’s really the bottom line on caps. We need to ensure that we have access and a coordinated approach.

Perfect. Thank you guys.

Thank you. One moment for our next question.

Hi. Thank you so much for taking the question. I’m just curious to know in markets like Nevada where maybe stars came in a little bit lower than average, how has your approach to local marketing changed, if at all? Do you kind of take a more passive approach? Or do you deploy additional resources to kind of help supplement in the market?

Jess, it’s John. Great question. No, it’s consistent with my last response. If you contract with the provider group and we have no problem globally capping with folks if they perform. We’ve got a good partner there, and we’re helping them with the gaps that we think aren’t well executed on caps on stars-related items. We’re being very aggressive with this. They’re working with us. That contrasts with North Carolina, where we’re entering with kind of our model end-to-end, which allows us to drive more durability and consistency in terms of all aspects of what makes MA successful.

Okay. Great. Thank you.

Thank you. One moment for our next question.

Jess, Thomas here. So in terms of what we’re seeing, I would say that so far, we have not seen much of an uptick in flu. But having said that, we recognize that the last two years have been atypical. As we thought about our fourth-quarter guidance and our utilization expectations for the fourth quarter, we approached our kind of baseline assumption that utilization for the inpatient setting would run in line with our historical experience, inclusive of a portion which would be flu-driven and potentially COVID-driven. Overall, we feel pretty good about where things stand.

Okay. Great. Thank you.

Thank you. One moment for our next question.

This is Nabil Gutierrez on for Kevin. Thanks for taking the question. Can you talk about how direct contracting has been trending for you? And can you remind us about the plan for 2023 and beyond?

Happy to. This is Thomas here. If I flash back to when we first began the direct contracting program, that would be the second quarter of 2021. I think what we shared out of the gate is that we didn’t have a lot of visibility around our IBNR experience, but we had booked our first quarter of the program right around 110% MBR. I’d say flashing forward now, we’ve been in the program now for the better part of 18 months. We continue to see some operational traction and momentum that we’re pleased with. On a cumulative basis since the program began, we’re probably about even from an EBITDA standpoint, and I think we have opportunity to continue to improve that given some of the traction we’ve seen. In terms of 2023, we are interested in continuing in the ACO REACH program. That all depends on the upcoming enrollment files from CMS, which we are looking forward to getting in the next month or two.

Thanks. And then how are you thinking about utilization next year?

I think big picture, we’re continuing to be pleased with what we’re seeing from an inpatient standpoint, and I give our clinical teams a lot of credit for engaging those seniors who are most in need. We feel good about inpatient trends and don’t see a lot of pent-up demand or something that concerns us. Outpatient seems to be fully back to normal. We’ve really seen that over the last couple of quarters. If we learned anything in the last two years during COVID, it’s that these things do change pretty quickly. We’ll give you a more comprehensive update when we release our 2023 guidance here in a few months.

Thanks.

Thank you. One moment for our next question.

Great. Thank you. If I could just ask a follow-up to that previous question. As we think about cost trend next year, how are you thinking about a few different factors? First, the normalization of inpatient volumes, and do you feel like there’s any notion of pent-up demand that might still be out in the system? How are you thinking about potentially paying for more of the COVID and vaccine treatments if that’s kind of left-footed by the government? Lastly, on the cost trend, contracting with providers and inflation, could you maybe just talk about what you’re seeing there?

In terms of our inpatient results, I think while we’ve seen continued performance this year, we’ve run around 155 to 165 inpatient admissions per 1,000, inclusive of some of the ebbs and flows we’ve seen around COVID. We feel good about our continued ability to maintain those results. We don’t see a lot of pent-up demand. Regarding COVID vaccines, I don’t think we view that today as a material headwind. There are always pluses and minuses that go into our updated forecasting process. As it relates to contracting, the majority of our contracts are fee-for-service. We have good visibility into the rates we’ll see next year, and we feel positive about the unit cost standpoint for 2023 while remaining mindful of broader environmental trends.

Great. Thanks, Thomas, for all those comments. I’ll ask a shorter follow-up. I wanted to follow up on your comments on AEP. I’d be curious about how traction in new markets like Texas and Florida is going relative to your expectations, specifically in terms of both growing awareness and aspects of the planned value where you feel differentiated versus competitors?

Nathan, this is John. I think our product design is pretty good. But we set the products with a multiyear view of growth. I think it’s trending slightly below our budgets, but I don’t think they were material to begin with. What we really needed was the engagement with the provider community and to get our staffing, particularly on the clinical side, in place to deepen our relationships with the brokers. I think we’re going to get traction like we had in Arizona and Nevada, but it’s going to take a couple of years.

Thank you.

Thank you. One moment for our next question.

Thanks. I’ve only got one question. Can you discuss any of the IT priorities that you have around AVA for 2023? I know you’re going through the budgeting process right now, but are there any new modules in development? Anything that you’re particularly excited about, or would you care to share anything with Care Anywhere that’s new?

Yes. Whit, it’s John. The investments in kind of the care coordination chassis are one of the reasons that we were able to get the 5 stars and maintain the 4 stars in California. It’s an integrated approach or call it a health CRM system. That got put in this year, and we’re going to ensure that it gets continued to be refined next year. I think the investments we’ve made in automating some of the broker online broker app submission processes and how we get brokers paid faster are things you’re going to see us make investments in. The stratification model will be incorporating more consumer data to understand social determinants and how that plays into the experience for that consumer.

Okay. Thanks, guys.

You got it.

Thank you. One moment for our next question, please stand by.

Thank you. Can you give us an idea of what the pacing of physician engagement adoption curve looks like for AVA in a new market? How does what you’re seeing on that engagement adoption curve impact your long-term strategy on clinic partnership versus ownership?

That’s a big question. To get a physician kind of educated, engaged and trained on using some of the tools that we have, I would say it takes about 6 to 9 months. It’s a combination of our on-the-ground clinical operational and practice management kinds of resources. Our engagement model with providers is really born from years of experience. We work with community doctors. They have the existing infrastructure in place and need support. We navigate the polychronic population to extend the care team. We provide a lot of the heavy lifting, including health assessments. There’s full transparency, and we give them access to our P360 record.

Okay. And then just digging into what kind of details you can see, as you start to have a new physician partner bend the cost curve, are you able to see actions taken by them that are care navigation and inpatient diversion and reward them for that? What level of clarity do you have on that?

Yes, we feel lucky to be at the plan level because we have top of the food chain access to actionable data; there’s no latency. Within our company, we talk a lot about a maniacal attention to detail. But we really focus on the 10% to 20% population that costs 80% of our resources. That engagement with those specific physicians is very effective. Our Care Anywhere program focuses on those members. We do a lot of work to support their practices, and there’s full transparency. Our data is accessible to them.

Okay. Thank you.

You got it.

Thank you. I’m showing no further questions at this time. This concludes today’s call. Thank you for participating. You may now disconnect.