Business Overview
Agilon Health, Inc. (AGL) is a unique healthcare company that has positioned itself as the trusted partner empowering physicians to transform healthcare in communities across the United States. With a focus on providing comprehensive, value-based care for Medicare Advantage (MA) and Medicare fee-for-service (FFS) patients, Agilon has built a scalable platform that is redefining the way primary care is delivered.
Agilon Health, Inc. was formed in 2016 with the goal of transforming healthcare by empowering primary care physicians (PCPs) to be the agents for change in their communities. The company established its inaugural partnership with an anchor physician group in 2017, marking the beginning of its unique platform, partnership, and network model.
Agilon's business model is focused on existing community-based physician groups, providing them with the necessary capabilities, capital, and business model to create a Medicare-centric, globally capitated line of business. By forming risk-bearing entities (RBEs) within local geographies that contract with payors, Agilon is able to provide its anchor physician groups with a base compensation rate and share in the savings from successfully improving quality of care and reducing costs.
Over the years, Agilon rapidly built scaled positions in local communities, growing to 29 anchor physician groups and 30 geographies as of December 31, 2024. This growth allowed the company to expand its total membership, which included approximately 526,500 Medicare Advantage members and 132,100 Medicare fee-for-service beneficiaries through the Centers for Medicare & Medicaid Services (CMS) Accountable Care Organization Realizing Equity, Access, and Community Health (ACO REACH) Model and Medicare Shared Savings Program (MSSP) as of the end of 2024.
Despite this growth, Agilon has faced some challenges over the years. In 2023, the company completed the disposition of its Hawaii operations, representing a strategic shift that had a major effect on its operations and financial results. Additionally, the company has navigated a dynamic and difficult environment, including elevated medical cost trends and regulatory changes, which have impacted its financial performance in recent years.
Financial Performance
Agilon has experienced significant growth since its inception, with total revenue increasing from $2.39 billion in 2022 to $6.06 billion in 2024, a 40% year-over-year increase. This growth has been driven primarily by the expansion of the company's 2024 partner class and continued organic growth in its existing geographies.
However, the company has also faced various challenges that have impacted its profitability. In 2024, Agilon reported a net loss of $260.15 million, compared to a net loss of $262.60 million in 2023. This was largely due to elevated medical cost trends, unfavorable prior-period development, and higher Medicare Part D and supplemental benefit expenses.
For the full year 2024, Agilon's gross profit decreased from $69.67 million in 2023 to $4.84 million, and medical margin declined from $298.69 million to $205.19 million over the same period. This was primarily due to higher medical services expense, which increased 46% to $5.84 billion, driven by the membership growth and a 6% increase in average medical services expense per member.
In the most recent quarter (Q4 2024), Agilon reported revenue of $1.52 billion, up 44% year-over-year. However, the net loss for the quarter was $105.79 million, impacted by higher medical costs, including elevated Medicare Part-D expenses and unfavorable prior period development.
Despite these near-term headwinds, Agilon remains focused on strengthening its business for long-term success. In 2024, the company took several actions to reduce its exposure to costs outside of its control, pursue measured growth, enhance its clinical strategy and capabilities, and maintain cost discipline.
Liquidity
As of December 31, 2024, Agilon reported cash and cash equivalents of $188.23 million. The company has a strong liquidity position with a debt-to-equity ratio of 0.08, indicating low leverage. Agilon has access to $37.90 million under its $100 million revolving credit facility, providing additional financial flexibility.
The company's current ratio and quick ratio both stand at 1.27, suggesting that Agilon has sufficient short-term assets to cover its short-term liabilities. However, it's worth noting that the company reported negative operating cash flow of $57.78 million and negative free cash flow of $99.06 million for the full year 2024, reflecting the ongoing investments in growth and platform expansion.
2025 Outlook
For the full year 2025, Agilon is guiding for a 4% year-over-year decline in MA membership to a range of 490,000 to 520,000 members, reflecting a strategic decision to constrain growth in the near term to balance risk and opportunities. The company expects total revenue to decline 2% to $5.925 billion, driven by the impact of the membership decline, offset by improved revenue yield and better payor contracts.
Agilon is forecasting medical margin to improve 46% to $300 million at the midpoint, reflecting the benefit of underperforming contract and market exits, premium increases, and risk adjustment improvements, partially offset by continued elevated medical cost trends. Adjusted EBITDA is expected to be minus $75 million at the midpoint.
The company's 2025 guidance assumes a gross medical cost trend of 6.3% and a net trend of 5.3%, in line with its 2024 experience, and a series of strategic actions to mitigate the impact of these headwinds. Agilon believes these actions, combined with a more favorable MA rate environment expected in 2026 and beyond, will support a potential reacceleration of medical margin and adjusted EBITDA growth.
Additionally, Agilon is pursuing a more measured growth approach in 2025, with a smaller 20,000 member partner class. The company has also reduced its Medicare Part D exposure to less than 30% of its 2025 membership. Agilon expects its actions and investments in 2025 to be more fully reflected in its 2026 performance.
Risks and Challenges
Agilon faces several risks and challenges that could impact its future performance. These include its ability to identify and develop successful new geographies, physician partners, and payors, as well as execute on its growth initiatives. The company also faces risks related to medical expenses exceeding its revenues, its reliance on a limited number of key payors, and its ability to secure contracts with MA payors on favorable terms.
Additionally, Agilon operates in a highly regulated healthcare industry, which exposes the company to various federal and state laws and regulations. Failure to comply with these laws and regulations could result in significant penalties and have a material adverse effect on the company's business.
The company also faces competition from a range of companies that provide value-based care services, including hospitals, managed service organizations, provider networks, and data analysis consultants. As the healthcare industry continues to evolve, Agilon's ability to adapt and differentiate itself will be crucial.
Industry Trends
The managed care industry has seen consistent growth, with a compound annual growth rate (CAGR) of 5-7% over the past 5 years, driven by increasing Medicare Advantage enrollment. This trend bodes well for Agilon's long-term prospects, given its focus on the MA market.
However, the industry has also faced challenges related to rising medical costs and regulatory changes. These headwinds have impacted Agilon's recent financial performance and are reflected in the company's near-term outlook. The ability to navigate these industry-wide challenges while continuing to grow and improve operational efficiency will be crucial for Agilon's success.
Conclusion
Agilon Health is a unique healthcare company that is transforming the way primary care is delivered in communities across the United States. While the company has faced various challenges in recent years, it remains focused on strengthening its business for long-term success. With its scalable platform, long-term physician partnerships, and collaborative network, Agilon is well-positioned to continue empowering physicians and improving healthcare outcomes for senior patients.
The company's financial performance reflects both the opportunities and challenges of its rapid growth strategy. While revenue has grown significantly, profitability has been pressured by higher medical costs and investments in expansion. Agilon's 2025 guidance suggests a more measured approach to growth, with a focus on improving medical margin and adjusted EBITDA.
As the company navigates the current market environment, investors will be closely watching its ability to execute on its strategic initiatives and deliver sustainable growth and profitability. The long-term trends in the managed care industry remain favorable, but Agilon's success will depend on its ability to effectively manage costs, leverage its platform, and continue to attract and retain physician partners and MA members.