Introduction
American Oncology Network (AONC), a rapidly-growing network of community-based oncology practices, has established itself as a steadfast pillar in the evolving landscape of cancer care delivery. With a mission to ensure accessible and equitable healthcare for all, AONC has been at the forefront of transforming the oncology landscape, leveraging its innovative model to empower community-based providers and enhance patient outcomes.
Company Background
Founded in 2018 by an alliance of physicians and seasoned healthcare leaders, AONC has quickly emerged as one of the largest and fastest-growing oncology networks in the United States. The company’s impressive growth trajectory is a testament to its unwavering commitment to supporting community oncology practices and addressing the critical gaps in cancer care accessibility. As of September 30, 2024, AONC boasts a presence across 38 oncology practices located in 20 states, with approximately 256 physicians and advanced practice providers serving patients.
Value Proposition
AONC’s unique value proposition lies in its ability to preserve and elevate community oncology by providing a comprehensive platform that empowers physicians to navigate the complex healthcare landscape. The company’s robust offerings include access to revenue-diversifying adjacent services, practice management expertise, and a resilient, integrated technology infrastructure. This holistic approach has enabled AONC to drive exceptional patient experiences, enhance care quality, and achieve cost-effective outcomes – all while preserving the personalized touch of community-based oncology.
Service Offerings
From its early years, AONC focused on building its network and providing affiliated practices with a wide range of care-enhancing patient services. These services include a centralized specialty pharmacy, clinical lab and pathology services, clinical research, diagnostic imaging, and an integrated technology platform. By offering these comprehensive services, AONC allows community oncology practices to benefit from economies of scale while delivering high-quality, cost-effective cancer care close to where patients live and work.
Technology and Innovation
One of the key drivers of AONC’s success has been its focus on leveraging data and technology to streamline operations and improve clinical decision-making. The company has invested significantly in developing a proprietary technology platform that includes a fully integrated electronic health record system and a robust analytics engine. This platform not only enhances operational efficiency but also enables the network’s affiliated providers to deliver more personalized and data-driven care.
Value-Based Care Initiatives
AONC’s commitment to innovation extends beyond its technological prowess. The company has also been at the forefront of value-based care initiatives, actively participating in programs such as the Enhancing Oncology Model (EOM) introduced by the Centers for Medicare & Medicaid Services (CMS). By aligning its practices’ incentives with improved patient outcomes and reduced healthcare costs, AONC is positioned to play a pivotal role in the industry’s transition from volume-based to value-based care.
Resilience During COVID-19
Despite the challenges posed by the COVID-19 pandemic, AONC has demonstrated remarkable resilience and adaptability. The company swiftly implemented measures to ensure the safety and well-being of its patients and staff, while also leveraging telehealth technologies to maintain continuity of care. This proactive approach has enabled AONC to not only weather the storm but also emerge stronger, positioning the company for continued growth and expansion.
Financials
Financially, AONC has exhibited a solid track record, with revenue growing from $943.75 million in 2021 to $1.28 billion in 2023. However, the company has also faced its fair share of challenges, reporting a net loss of $63.15 million in 2023 due to a variety of factors, including increased operating expenses and transaction-related costs associated with the company’s reverse recapitalization in September 2023.
For the fiscal year 2023, AONC reported a net income of -$5.5 million, operating cash flow of -$18.1 million, and free cash flow of -$30.4 million. The company’s performance improved in the most recent quarter (Q3 2024), with revenue reaching $470.28 million, a 39.8% year-over-year increase. This growth was primarily driven by a 40.1% increase in patient service revenue, which rose to $465.47 million. The increase in patient service revenue was attributed to a 25.2% rise in patient encounters and an 11.9% improvement in revenue per encounter.
AONC’s net income for Q3 2024 was -$1.07 million, while operating cash flow improved significantly to $45.14 million, and free cash flow reached $41.01 million. The improvement in cash flows compared to the prior year quarter was primarily due to changes in working capital.
The company’s cost of revenue increased by 39.5% year-over-year to $433.75 million in Q3 2024, driven by higher patient volumes and rising drug and medical supply costs. General and administrative expenses also rose by 37.9% to $34.74 million, generally in line with overall revenue growth.
AONC’s other revenue, which includes data contracts and clinical trial services, totaled $4.80 million for Q3 2024, up 16.9% year-over-year. This increase was primarily due to a $2.9 million rise in revenue from data contracts, offset by a $2.2 million decline in clinical trial revenue as a prior contract concluded.
Liquidity
As of September 30, 2024, AONC reported cash and cash equivalents of $19.43 million. The company’s debt-to-equity ratio stood at -2.35, while its current ratio was 1.36 and quick ratio was 1.11. AONC has a $125 million credit facility with PNC Bank, of which $81.25 million was outstanding as of September 30, 2024, with $13.6 million available. Additionally, the company has a $1 million revolving line of credit, which remained undrawn as of the same date.
Throughout its history, AONC has had to navigate significant challenges, including a nationwide shortage of nurses and other clinical staff, which drove up labor costs across the healthcare industry. To address this issue, AONC worked to mitigate cost increases through strategic vendor partnerships and continuous monitoring of local market conditions. Additionally, the company has had to navigate the complex regulatory environment of the healthcare sector, ensuring its practices remained compliant with all applicable laws and regulations.
Corporate Transformation
In 2023, AONC underwent a significant corporate transformation through a reverse recapitalization transaction, which allowed the company to become publicly traded and gain access to additional capital for future growth initiatives. While this process resulted in significant one-time transaction expenses, it also positioned AONC for further expansion and development.
Future Outlook
Looking ahead, AONC remains focused on its strategic priorities, which include further expanding its geographic footprint, strengthening its technological capabilities, and deepening its partnerships with community oncology practices. The company’s recent acquisition of Central Georgia Cancer Care and Hawaii Cancer Care, as well as its expansion into the Southeastern and Hawaiian markets, underscores its commitment to bringing high-quality, cost-effective cancer care to underserved communities.
During the nine months ended September 30, 2024, AONC entered into affiliation agreements or completed acquisitions in Maryland, Texas, Hawaii, and Georgia, further expanding its network and geographical reach. This growth strategy aligns with the company’s mission to provide comprehensive oncology services across a wide range of communities.
Conclusion
As the oncology landscape continues to evolve, AONC’s innovative model and steadfast dedication to community-based care have positioned the company as a critical player in the industry. With its robust platform, data-driven insights, and relentless focus on improving patient outcomes, AONC is poised to play a pivotal role in shaping the future of cancer care delivery in the United States. The company’s strong revenue growth, expanding network of practices, and commitment to technological advancement provide a solid foundation for future success, despite the challenges of operating in a complex and rapidly changing healthcare environment.
Disclaimer: This article is for informational purposes only. It does not constitute financial, legal, or other types of advice. While every effort has been made to ensure the accuracy of the information presented here, the author and the publisher do not make any guarantees about the completeness, reliability, and accuracy of this information.