Go ahead and get started. Thanks for coming in today, guys. We've got Jim Head, the new CFO, John Kao, CEO of Alignment. I'm happy to have you guys here today. Maybe just at a high level, John, you have been able to successfully sidestep a lot of the challenges presented to the industry in the last, you know, two years. I've called this the deep cleansing, and you continue to perform really well in both growth and margins and profitability. What do you attribute those factors to?

The strategy all along has been do MA the way it was designed to be done, which is provide high quality at a low cost. And I think Dr. McClellan kind of focused the industry on this in 2004 with the Medicare Modernization Act. The whole thesis is if you provide high quality at a low cost, you create high value. And those competitors that can create value should be advantaged to grow. It's kind of pretty basic. And so we really designed the strategy in a way to just do that. We specifically did not want to focus on high quality, low cost, and high ref. That's what we didn't do. And so strategically, it was all about how do you make sure you have a care model that can scale and produce great clinical outcomes and bend the cost curve? And so that's what we've done. And so when you do that, you become the most affordable producer of care at a high quality. And that has been a smart strategy for us. The other thing I would say is I think over the last 15 years or so, a lot of the competitors took a path of financial engineering of, And I would say not, you know, exceeding the law, but certainly going up to the line of the law on coding. They're aggressive on coding. I think it was legal. If not the intent of CMS, they did a lot of global capitation, which is transfer risk into different provider entities or this whole value-based cap model or global cap model. and it's basically, again, risk transference to a different P&L and then denials. People were focused on prior off denials, none of which I think are going to be acceptable going forward. And I think the market is coming to us. I think we're doing things the way it should be done. And to your point, the strategy was where the rates go up, we'll win. If rates go down, we'll win more. Basically, it's how we think about it. I thought the answer was you hired Dawn. Well, that too. That too. And stay out of her way. He's like, Dawn, you run it, stay out of your way.

Pretty successful AEP this year. If you could just maybe spend a minute talking about the growth, retention, plan growth from switchers. You had a lot of D-SNP this year.

Yeah, it was 31% year-over-year growth. A lot of that was attributed to a really good retention. Like our disenrollment rate was like down to 6%. People like us. People like our product. People like our service delivery. Switchers is about 83% consistent with what we've done in prior years. We made a very conscious decision to not grow at all cost. We were very mindful of a couple things. Get good growth, which we wanted about 30%. We did not engage in opportunities that we did not think were durable. And so what I mean by that is it's very public that United exited a lot of products and a lot of provider groups, and those provider groups were looking for alternative payers. And so they had certain rate expectations that we were not prepared to meet because we didn't think they were durable and we didn't think they were going to be accretive. So we just stuck to our model of profitable, consistent growth. I mean, I think we could have grown 50%, 60% if we wanted to, and we chose not to. And part of that logic also was in 27, I think a lot of our larger competitors are still going to be more margin-focused. I think that's probably not too much of a surprise to anybody. Some of the smaller private or not-for-profit organizations were very aggressive in 26. I think are going to be experiencing some indigestion heading into 27. And so that, I think, gives us that much more of an opportunity to grow in 27, consistent probably with what we did in 25. And again, the public line that we're saying is we expect to grow at least by 20%, so we're going to stick to that. But I think the opportunity set for us in 27 is very, very, is very good.

You've got your premium payments for January, February, so you've seen the MMOR file. Any surprises, any inconsistencies in RAF or anything?

No, I think, you know, when we put out the guide for 2026, we had a very good, we had January and February point of view. And I would just back up to say that we came into the year, I think, in retrospect, the bids were spot on in terms of what we expected. So that rolled into a very good level of visibility into 2026. On the cost side, we did a good job. So there was really no surprises as we got through that. Newbies are always a challenge to predict, but on our loyals, we're very accurate. And so across the board, pretty good.

Yeah. Maybe talk a little bit about member engagement in year one, Care Anywhere, how many members you've kind of gotten into the system, anything you've learned, and maybe how it compares to prior years.

We're still around 65% engagement, and what Witt's talking about is once we enroll members, we stratify the members, and we look at different markers, and we look at their lab data, their pharmacy data, encounter data, their hospitalization history. We look at claims, authorizations, et cetera, and we even try to get history from them on a fee-for-service basis from some of the clearinghouses. We try to get as much data as we can on these folks. We stratify them to determine whether they're eligible to be in our quote-unquote care anywhere program, which is designed to take care of that 10% of the population that account for 75 to 80% of the spend in your healthcare costs. And so once you have the list of, gee, these are the people that we want, it's typically 10%. And we have to engage them. It doesn't automatically just happen. We have to engage them. We have to outbound call them. We have to tell them what the program is about. The most common feedback we get is we don't believe it. It's too good to be true. Like our health plan, no health plan does this. And we say, no, we do that. We have thousands of people we serve on this area. And so it's still about 65%, which is not bad. It's not a bad industry-wide number. We want that to be closer to 75, if not 80%. And I think that'll come as we mature our operations, which we're going through right now, which includes the clinical operations area and our nurse practitioners, better training, better workforce management, better tools to help them make their engagement easier. So, you know, we're working on it, but right now it's still about 65%. Yeah.

And maybe for those in the room or listening that may not know as much about your organization and the investments that you've made into the backbone technology infrastructure around AVA, maybe cite a few examples for, you know, how that system works and how you're able to engage with those members and have, you know, care interventions and ultimately lower cost.

Yeah, it starts with what we call a unified data architecture. And so a lot of the data is coming into a system, a data lake, if you will, that requires us to have predefined metrics and predefined definitions. An example would be a bed day. There's like 20 different definitions of a bed day that you could actually take. And so we define it clearly. A membership. Is it membership as of 1-1? Is it membership as of 12-1? Is it membership as of 3-1? Is it average membership? Et cetera, et cetera. We have all the metrics predefined, so when the data is ingested, it is clearly defined, and then it is accessed by different parts of the company internally and to some of our provider partners externally have visibility to it. And so what that does is it cuts down on latency. A lot of the legacy payers out there have back-end systems on claims, eligibility, provider warehousing, et cetera. And all of that has to get reconciled. It takes 30 to 45 days. That's a step that we have the benefit of designing up front from a clean slate of paper that eliminates that latency. And so when you have the data available to you, it becomes more actionable. And so the whole concept between that is then you have visibility and control of your business. And Don and her team, Don's the president of the company, they're looking at data every single day, every single morning. They're going through metrics. And to the extent there's any kind of anomaly or negative variance, if you will, on the cost side or a utilization metric or anything that seems out of whack, we have boots on the ground that do something about it. And we deal with it every single day. And so it's this kind of notion of a maniacal attention to detail bolstered by actionable data that I think is allowing us to manage trend differently than anybody else. That's helpful.

Historically, you guys have always said year one, MLR is sort of in the low 90s. I don't know if there'd be any reason that it would be that different this year. And when you do the math, you can kind of work backwards, and it does imply making some adjustments that, you know, MLR on the legacy is going down. So, would that, any reason that that relationship wouldn't carry forward?

Yeah, I'll take that, John. We've said MLRs for new members are typically in the high 80s, low 90s, and that really hasn't And then they kind of mature as the years pass into mid-80s and maybe even lower type of MLR. The only thing that is different is we've had to absorb all three phases of V28 against So the cohorts are doing just fine underneath it, but the RAF adjustments in V28 is what we've had to work through. So as we think about our 26th guide, the two big elements that were prevalent there were the fact that V28 final phase came through, and we had a cohort that was perhaps a little bit more intense on a mixed basis than we've had in the past, and that was intentional. And so that's been a little bit of a governor on our ability to drive MLR down quickly. But over time, there's a lot of embedded value. So that thesis is absolutely intact.

A lot of duels, too. Yeah, dual eligible. Some payment last year, small things that add to this collection of MLR. Which of the non-California markets are you the most excited about this year? And if you could maybe talk a little bit about the broker strategy, the mind share, market share.

Yeah, no, I would say literally all of them. I'm very proud of the teams. Nevada's over 22,000 members. Texas is 10,000. Arizona's 10,000. North Carolina, I think, is over 15,000. And so, you know, just being in the game in each of these markets, We've said it takes about five years to get to 10,000 members, but it's easier to get from 10,000 to 50,000 than it is to get from zero to 10,000. And you have credibility. We have the star ratings. We're five stars in North Carolina, five stars in two five stars in Nevada, four and a half stars in Texas, four stars in Arizona. So you start with the stars. That's number one. The other thing is the portability of the care model, as reflected in our admissions per thousand. is almost as good outside of California as it is inside California. So the care model is portable. You take those two things, and then you add to the mix the ability to have very competitive benefits, and then you push that against the market backdrop where you have the legacy players taking a step back on benefits, which opens the door for we to engage in brokers differently than we did the first couple of years of entering each of these markets. And so their receptivity is much greater. Our reputation in terms of a quality plan is much higher. The providers like us because of the alignment and the ways that we engage with the providers. And so I think you're going to see, you know, more profitable growth coming from these markets. And I'll just remind everybody, I think it should be easier for we to get the kind of margin profile we want and growth outside of California, partially because we don't have a lot of the intermediaries outside of California that we have inside California. And we effectively are the IPA. We're the ones building the networks, managing the networks. That's why we've been able to get five stars in all these ex-California markets.

How are you sharing risk with your physician partners on non-institutional cost trend? And what type of change in behavior do you see with physicians when you do have these risk sharing relationships?

Well, it's why we named the company Alignment Healthcare. It's creating alignment with the providers, not only financially, but operationally and clinically. And so with respect to the financial component, we are very flexible. We will work with PCPs and specialists and hospitals. We typically pay hospitals, Medicare, 100% of Medicare fee-for-service. We typically pay specialists 100% fee-for-service. There are some specialties that we will enter into value-based agreements in. PCPs, we'd like to pay them a guaranteed monthly payment and then have an arrangement with them that is like a partnership. And so we have a guaranteed monthly payment. That's an important concept, and it's different than fee-for-service, because if we have our Care Anywhere teams of people taking care of patients that are their patients, but we take care of them at the home, it's an extension of that practice. We don't want to lower their reimbursement. We want that reimbursement to them to be very consistent and reliable. And the whole idea is if we dedicate clinical resources to their practice as an extension of their practice, they make more money, they work less on that polychronic member and collectively we have better clinical outcomes which in in talking to all these doctors the money's got to make sense the operations needs to be clean but what they really care about and like is the care model they'd like the fact that it's a team approach with them as the captain basically taking care of that 10% of the population at home. And so that risk dynamic is really an incentive dynamic. It's probably not risk per se. We're not asking them to take downside risk. We want them to be incentivized and aligned with us.

Yeah, participate in the surplus.

Yeah, exactly.

Yeah. I believe you're taking some of the UM away from some of the IPAs. So maybe just to explain like what you were doing before and what you're doing now.

Yeah. In California, you have a very kind of saturated market with provider group intermediaries referred to as independent physician associations or IPAs. And they were formed really like 30 to 40 years ago to contract on behalf of the individual doctor and negotiate against the plants. And so the capitation and the professional capitation is typically 35 to 40 percent of premium, typically. In addition to the actual financial payment, there is a division of delegated responsibilities, so the administrative work. And in California, just historically, the administrative work related to utilization management and kind of closing risk adjustment gaps, as an example, and certain medical management was also delegated to these IPAs. And our view was, if an IPA is doing a great job and meeting our metrics and our quality standards, we have absolutely no problem delegating to them. It's fine. It's okay. What we found is we could do a better job with the utilization management, specifically for inpatient admissions. We could do a better job than they could. And what has transpired is exactly that. We've done a more effective job, and the result is better MLRs for us, but more surpluses for them. Again, you're aligned with that medical group and that IPA. And so we've de-delegated about starting a year or two ago, and the feedback has been very positive across the board by all the different IPAs because they're making more money. so you know and it's not like it's a it's not like religious thing that they want to do um i mean it's like i don't care as long as their their their doctors are happy as long as um they're surplusing more you get more alignment right right um it's gonna be a busy week in dc um any i guess there's no answer to this but just the advanced rate notice final rate notice

conversations within CMS that you've had, anything that you care to share or not?

Well, we'll make sure we ask Chris tomorrow when we're in D.C. Yeah, I mean, I think if you just look at the historical differences between the advance notice and the final notice, there's usually a pretty meaningful gap, an uptick. You know, I don't have any more information than than any of you have, but I weigh different objectives that I think the administration's considering, one of which is to ensure program integrity. I think they're very, very serious about that, mitigating fraud, waste, and abuse. I think they're very mindful of balancing that with just affordability, this cost. Where's the money coming from to fund all these different programs? And also, just frankly, the politics of it, this being a midterm election year. And so I think when you balance all that and you actually look at the actual numbers, I think the effective growth rate potentially can come up a little bit with additional claims data that they're getting. I think that's what will happen. But in addition, I think they might be looking at cutting the takeaways also. And there's some, I think, well-written analyst reports that suggest that there's a bit of a double dip between subtracting the skin substitute off of the effective growth rate and also hitting the recalibration of the HCC codes pretty aggressively. And so I think if you think about that, there's potentially what most people that I've heard would say that, you know, 150 to 200 basis points increase is kind of the norm I'm hearing from people. I think that when you take that and you add kind of the real effect of the HRA delinking is worth one and a half points, I think the opportunity for a lot of people that that might be an overly conservative number. So when we have some inside, you know, polymarket type bets on this, we don't know. I think it's like maybe four, I would say maybe 4%, which is higher than what most people would guess. Most people are saying, you know, 2% to 3% is where they expect the net to land.

So that's what I'm hearing. yeah there was i read a really interesting weekly report that they they looked at all their their clients and um um you could see like there are some individuals are going to see north of a six percent you know cut from the delinked chart reviews so i think it's the very wide variation and um stars.

Meaning an additional negative. Yeah. Yeah. Yeah. One and a half.

It's more like six and a half.

I would not be, I would not be surprised by that. Just, just on that point, I mean, just back in June of 25, United, Humana, and we, and so on the Wall Street Journal, you know, very publicly supported this. So it would not surprise me that that would impact others, you know, materially. Yeah.

You've had a relentless focus on STARS pretty much since I've met you and pretty successful performance, getting up to four and five on all your contracts. And the technical notice back in November, CMS is noodling around this idea of deleting, eliminating 12 of the measures that the industry generally does pretty well on. And I think you framed it as kind of a wash in your mind for you. But the question really is more specific if you've looked into what that means for some of your competitors within some of the local markets and whether or not that would be more of a headwind to them and maybe thus a tailwind for you.

Yeah, to your point, we looked at it and it was basically a push for us and how we think about stars. Honestly, I have not dived into what our competitors are doing counting on you to do that. And, you know, but, but, you know, like, I can control what we control, you know, it's an action that I, in all seriousness, it's an action that we will look at. I think with what we can extract from the public available data as we head into the bid seasons, the bids are essentially business plans for every single county we compete in. And so it's very molecular, it's very strategic. We look at what our competitors' MACVAT is. We look at what we think the brokers are going to be aligned with. We think about who the IPAs are going to be aligned with, the medical groups. I mean, just think about it's like five-dimensional chess. And I would say for the last two or three years, we've been, like, spot on. Like every market by market, we've been spot on. And our team and our product team is just very, very good. So shout out to them. And Don writes a very tight ship in that.

You guys announced, I think, on the conference call that you were putting into place a new revolver and credit facility. I don't know if that's just proper housekeeping or if there's another, you know, driver of that. so maybe, Jim, if you want to talk about it.

Jim O' Yeah, I would say kind of two things of note. And the first one was, as we turned profitable in 2025, our ability to access capital changed. And so one of the first things that I noticed was that we had an ability to put in a, I'll call it short-term liquidity financing, which is revolver. It's undrawn, we probably won't even use it but it's kind of the first step in maturing our capital structure and so public company that's growing fast we want to have that in place but it's not it's not financing to do big things because it's it's a relatively short term so it's starting relationship with the banks it's getting our capital structure rights right size for the future and as our leverage ratio comes down our convertibles 330 million our leverage ratios coming down we're going to start kind of getting ourselves organized for the longer run so to me this is was a natural next step and it's nice to have cheap you know cheap cost of capital with access to it when you need it but in the end it's starting a

relationship with a group of banks that you'd want to be associated with yeah well great well I think we're just a bit out of time here if you try to make it for 30 minutes so you can have it on the website but uh John Jim thank you so much for joining us today. Thanks, Whit.