Agilon Health, Inc. (AGL) is at the forefront of transforming the healthcare industry by empowering primary care physicians (PCPs) to drive meaningful change in quality, cost, and patient experience. Through its purpose-built platform and long-term partnership model with existing physician groups, agilon is revolutionizing the way healthcare is delivered for seniors across the United States.

Financials

In the fiscal year ended December 31, 2023, agilon reported annual revenue of $4,316,363,000 and a net loss of $215,048,000. The company's annual operating cash flow was -$156,199,000, and its annual free cash flow was -$187,014,000. These financial results reflect agilon's continued investments in expanding its platform and geographic footprint to capture the growing demand for value-based care.

During the first quarter of 2024, agilon reported strong operational performance, with Medicare Advantage (MA) membership growing 43% year-over-year to 522,800 members. Total revenue for the quarter increased 52% to $1,604,354,000, driven by the expansion into new geographies and growth within existing markets. However, the company's net loss for the quarter was $6,034,000, as it continued to invest in its platform and incurred higher medical services expenses.

Business Overview

Agilon's business model is centered around three key elements: its platform, its long-term physician partnership approach, and its growing network. The company's platform provides the necessary capabilities, capital, and business model for existing physician groups to create a Medicare-centric, globally capitated line of business. By forming risk-bearing entities (RBEs) within local geographies, agilon enters into arrangements with payors that provide for monthly payments to manage the total healthcare needs of its physician partners' attributed patients.

Agilon's long-term partnership approach is a key differentiator, as it focuses on empowering community-based physician groups to evolve to a Total Care Model. This model allows physicians to manage the health outcomes and total healthcare needs of their attributed Medicare patients, removing the barriers that have traditionally prevented them from doing so.

The company's growing network of like-minded physicians is a critical component of its strategy. Agilon's partnerships with leading physician groups in new and existing markets, such as the five new groups in its "Class of 2025," demonstrate the strong demand for its value proposition among primary care providers.

Geographic and Revenue Breakdown

Agilon currently operates in 34 wholly-owned RBEs across multiple states, including Texas, Pennsylvania, Michigan, Kentucky, Minnesota, and North Carolina. The company's geographic expansion has been a key driver of its revenue growth, with the addition of seven new geographies in 2024 contributing to the 52% year-over-year increase in total revenue during the first quarter.

The company's revenue is primarily derived from capitation fees under contracts with various Medicare Advantage payors. These PMPM fees are based on a defined percentage of the premium that payors receive from the Centers for Medicare & Medicaid Services (CMS). Agilon also generates revenue from its participation in the CMS Shared Savings Program (MSSP) and the Accountable Care Organization Realizing Equity, Access, and Community Health (ACO REACH) Model.

Liquidity

Agilon's financial ratios reflect its focus on long-term growth and investment in its platform. As of March 31, 2024, the company's current ratio was 1.33, and its quick ratio was also 1.33, indicating a strong liquidity position. However, the company's debt ratio of 0.02 and debt-to-equity ratio of 0.05 suggest a conservative approach to leverage.

Agilon ended the first quarter of 2024 with $426 million in cash, cash equivalents, and marketable securities, along with an additional $26 million in off-balance sheet cash associated with its ACO REACH entities. The company expects to use $125 million to $150 million of cash during 2024, with a projected positive cash flow in 2026 and beyond.

Risks and Challenges

Agilon operates in a highly regulated industry, and its business is subject to various risks, including changes in government healthcare programs, consolidation and competition in the healthcare industry, and the ability to attract and retain qualified personnel. The company is also exposed to the risk of inaccurate estimates of its members' risk adjustment factors, medical services expense, and incurred but not reported claims.

For the full year 2024, agilon is maintaining its guidance for medical margin of $400 million to $450 million and adjusted EBITDA of negative $60 million to negative $15 million. The company's guidance reflects its cautious approach to medical cost trends, as well as the impact of recent payer contract renegotiations and the strategic exit from certain unprofitable contracts.

Recent Developments

Agilon is making tangible progress in executing its performance action plan, which focuses on four key elements: refining payer relationships, expanding support for primary care doctors, improving data visibility and analytics, and accelerating operating efficiency.

The company has successfully negotiated off-cycle percentage of premium rate increases with multiple payors, as well as retroactive relief on prior year medical margin losses and the exit of unprofitable contracts. These actions, taken in collaboration with its physician partners, are expected to improve the sustainability of agilon's payer relationships.

Agilon is also investing in enhanced support for its newest PCPs, including robust training sessions and active quarterly reviews of patient panels to ensure high-risk patients receive appropriate interventions. These efforts aim to improve and narrow the variability in physician performance across the company's network.

Furthermore, agilon is making rapid progress in standing up its financial data pipeline and leveraging additional data sources, which will enable faster data processing, improved forecasting, and more efficient operations. The company has already onboarded greater than 55% of member data from its large national plans and CMS, and it is on track to onboard more than 75% by the end of the second quarter.

Lastly, agilon has accelerated the centralization and better use of technology to reduce its platform support costs to just 2.8% of revenue during the first quarter, ahead of its full-year target of 3%.

Conclusion

Agilon Health is at the forefront of the healthcare industry's transformation, empowering primary care physicians to deliver value-based care and improve outcomes for seniors. Despite the challenging macroeconomic environment, the company is making significant progress in executing its performance action plan, strengthening its payer relationships, and investing in its platform and network.

As the demand for value-based care continues to accelerate among both physicians and payors, agilon's unique value proposition positions it well to capitalize on this trend and drive long-term growth. While the company faces various risks, its focus on operational excellence, data-driven decision-making, and strategic partnerships suggests a promising path forward in the evolving healthcare landscape.