Agilon Health Inc ((AGL)) has held its Q4 earnings call. Read on for the main highlights of the call.
The recent earnings call for Agilon Health Inc. presented a mixed sentiment, highlighting both achievements and ongoing challenges. The company reported strong membership and revenue growth for 2024, yet struggles with adjusted EBITDA losses and a projected membership decline for 2025. While there are positive strides in reducing Part D exposure and improving quality performance, significant hurdles in cost management remain.
Significant MA Membership Growth
Agilon Health reported a substantial increase in Medicare Advantage (MA) membership, which grew by 36% year-over-year, reaching 527,000 members. This growth was largely driven by the expansion of the 2024 partner class and a 4.1% growth in the same geography, showcasing the company’s ability to expand its member base effectively.
Substantial Revenue Growth
The company experienced a remarkable 44% increase in total revenue for the quarter, amounting to $1.52 billion, and a 40% rise for the year, totaling $6.06 billion. This growth was primarily fueled by the class of 2024 markets and organic growth, underscoring the company’s strong financial performance in the current year.
Reduction in Part D Risk Exposure
Agilon Health successfully reduced its Medicare Part-D exposure to less than 30% of its membership for 2025, surpassing its previous target of 50%. This strategic move is expected to mitigate some of the financial risks associated with Part D.
Quality Performance Improvements
The company reported significant improvements in quality performance, with readmission, hospital admission, and ER visit rates being 20% to 30% better than the local fee-for-service benchmark. Additionally, quality scores are approaching or exceeding 4.25 stars, reflecting Agilon Health’s commitment to enhancing healthcare quality.
Adjusted EBITDA Loss
Despite the positive growth metrics, Agilon Health reported an adjusted EBITDA loss of $84 million for the quarter and $154 million for the year, which was at the low end of their guidance. This indicates ongoing financial challenges that the company needs to address.
Projected Membership Decline in 2025
Looking ahead, Agilon Health anticipates a 4% decline in full-year MA membership for 2025, equating to a loss of approximately 22,000 members due to exits and contract terminations. This projected decline poses a challenge for the company’s future growth.
Continued Elevated Medical Cost Trends
The full-year 2024 medical cost trend was reported at 6.8%, with expectations for a gross trend of 6.3% in 2025. This continued elevation in medical costs remains a significant concern for Agilon Health.
Challenges in Managing Part D Costs
Despite efforts to reduce exposure, Agilon Health faces challenges with Part D costs, as the remaining risk is expected to lead to doubled PMPM losses due to the Inflation Reduction Act. This highlights the ongoing financial pressures associated with Part D.
Forward-Looking Guidance
In its guidance for 2025, Agilon Health expects a 4% decline in Medicare Advantage membership, with numbers ranging between 490,000 to 520,000 members. Revenue is projected to decrease by 2% to $5.925 billion, primarily due to the membership decline, though improved payor contracts and member mix changes are expected to offset this. The medical margin is forecasted to grow by 46% to $300 million at the midpoint, despite elevated cost trends. Adjusted EBITDA is projected to be negative $75 million at the midpoint, with a gross medical cost trend of 6.3%. The company is also taking strategic actions to reduce Part D exposure and aims for cash flow breakeven by 2027.
In conclusion, Agilon Health’s earnings call reflected a mixed sentiment, with notable achievements in membership and revenue growth, alongside challenges in cost management and projected membership decline. The company’s strategic efforts to reduce Part D exposure and improve quality performance are commendable, yet financial pressures remain a concern. Investors and stakeholders will be keenly watching how Agilon Health navigates these challenges in the coming year.