The primary care company agilon health (NYSE: AGL) sustained a gut-punching third quarter as it seeks to build out its palliative care model.
The company is a value-based organization that partners with primary care physicians nationwide to jointly take on the total cost and quality of care for their senior patients through Medicare Advantage or the the U.S. Centers for Medicare & Medicaid Services’ (CMS) Accountable Care Organization Realizing Equity, Access and Community Health (ACO REACH) model. Earlier this year, the company voiced plans to double the size of its palliative care program.
Though the company saw significant revenue growth in Q3, it missed the mark on gross profit and medical margins.
“We are clearly disappointed with the results we are sharing today, and expect to drive meaningful improvement in the future, but we believe our core business is strong, and we are taking the necessary actions to continue to strengthen the platform, improve execution and manage through a challenging environment,” agilon CEO Steve Sell said in a third quarter earnings call.
The company currently operates in 35 markets in 15 states. Through agilon’s partnership model, it can arm community-based physicians with the technology, data capabilities, human resources and insights that are often necessary to improve patient outcomes at scale along with reducing costs. Its care model, which agilon is working to scale across its network, integrates palliative care into primary care.
A recent study published in the Journal of Pain and Symptom Management found that the primary care-led, integrated approach to palliative care espoused by agilon were two-thirds less likely to die in a hospital and on average spent five more days at home near the end of life.
The company’s profits and medical margins were negatively impacted by unfavorable Medicare Advantage risk adjustments, Part D and supplemental benefit spending, according to Sell.
Gross profit was negative $64 million in the Q3 compared to positive $37 million in the prior year’s quarter. Net loss was $118 million in the third quarter of 2024 compared to a net loss of $31 million in the third quarter 2023.
Medical margin showed a $58 million loss in Q3, compared to a positive $111 million in the third quarter of 2023.
Nevertheless, agilon experienced growth when it comes to total revenue and patient membership. The company’s revenue reached $1.45 billion in Q3, up 28% from $1.14 billion year-over-year. These gains were largely driven by membership growth.
Total members on the agilon platform increased to 657,000 as of Sept. 30, 2024, comprising 525,000 Medicare Advantage members and 132,000 ACO model beneficiaries. Medicare Advantage membership increased 37% year-over-year.
The company is taking corrective action to right its ship, according to Sells.
For one, agilon will exit two partnerships that have suffered “substantial adjusted EBITDA losses in 2024, as well as approximately 10% of its payer contracts. It will also narrow its 2025 exposure to part D risk and delay the onboarding of one class of 2025 position partner given local payer dynamics. The company is exiting or not renewing payer contracts that it deems would take too long to achieve profitability, Sells indicated.
These reductions would reduce its membership by 45,000 to 75,000 people and cut annualized revenue by $470 million to $785 million; agilon maintains that these reductions are necessary to support the company long term.
“We believe in the value proposition for our network and platform to be a sustainable performance vehicle for physicians and payers in full-risk value-based care,” Sells said. “Pursuing this long-term vision has required some tough near-term decisions to exit selected partnerships and narrow the footprint of health plans we will work with in 2025. Our positioning for long term sustainability includes a current cash position and cash flow management levers intended to allow us to weather the storm, even as we take actions to accelerate the path to profitability and positive cash flow.”
