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agilon health, inc.

agilon health, inc.AGLEarnings & Financial Report

NYSE · Health Care · Services-Misc Health & Allied Services, NEC

agilon health, inc. is a U.S.-based healthcare company partnering with primary care providers to deliver value-based care solutions mainly for senior Medicare beneficiaries. It offers administrative support, clinical tools and risk management frameworks to help physicians improve patient outcomes and cut care costs, operating across over 20 U.S. states.

What changed in agilon health, inc.'s 10-K — 2022 vs 2023

Top changes in agilon health, inc.'s 2023 10-K

492 paragraphs added · 510 removed · 407 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

125 edited+21 added−26 removed111 unchanged
Violation of this statute, even in the absence of actual knowledge of or specific intent to violate the statute, may be charged as a felony offense and may result in fines, imprisonment or both.
Violation of this statute, even in the absence of actual knowledge of or specific intent to violate the statute, may be charged as a felony offense and may result in imprisonment, fines or both.
States have also passed privacy and security laws and regulations that apply across sectors and go beyond federal law, such as data security laws, secure destruction, Social Security number privacy, online privacy, biometric information privacy, and data breach notification laws.
States have also passed privacy and security laws and regulations that apply across sectors and go beyond federal law, such as data security laws, secure destruction, Social Security number privacy, online privacy, biometric information privacy, data breach notification laws.
ITEM 1. Business Overview Our business is transforming healthcare by empowering the primary care physicians ("PCPs") to be the agents for change in the communities they serve. We believe that PCPs, with their intimate patient-physician relationships, are best positioned to drive meaningful change in quality, cost and patient experience when provided with the right infrastructure and payment model.
ITEM 1. Business Overview Our business is transforming healthcare by empowering the primary care physicians (“PCP”) to be the agents for change in the communities they serve. We believe that PCPs, with their intimate patient-physician relationships, are best positioned to drive meaningful change in quality, cost and patient experience when provided with the right infrastructure and payment model.
Although we employ administrative, physical and technological safeguards to help protect confidential and other sensitive information from unauthorized access or disclosure, our information technology and infrastructure, and that of our third-party service providers, may be vulnerable to attacks by hackers or viruses, failures or breaches due to third-party action and employee (including contractor) negligence, error or malfeasance.
Although we employ administrative, physical and technological safeguards to help protect confidential and other sensitive information from unauthorized access, use or disclosure, our information technology and infrastructure, and that of our third-party service providers, may be vulnerable to attacks by hackers or viruses, failures or breaches due to third-party action and employee (including contractor) negligence, error or malfeasance.
Under Section 6031 of the Deficit Reduction Act of 2005, as amended, if a state enacts a false claims act that is at least as stringent as the federal statute and that also meets certain other requirements, the state will be eligible to receive a greater share of any monetary recovery obtained pursuant to certain actions brought under the state’s false claims act.
Under Section 6031 of the Deficit Reduction Act of 2005, as amended, if a state enacts a false claims act that is at least as stringent as the federal statute and that also meets certain other requirements, the state will be eligible to receive a greater share of any monetary recovery obtained pursuant to certain actions brought under the state’s FCA.
Some of these state laws may impose fines and penalties on violators and may afford private rights of action to individuals who believe their personal information has been misused. We are also subject to a provision of the federal 21st Century Cures Act that is intended to facilitate the appropriate exchange of health information.
Some of these state and international laws may impose fines and penalties on violators and may afford private rights of action to individuals who believe their personal information has been misused. We are also subject to a provision of the federal 21st Century Cures Act that is intended to facilitate the appropriate exchange of health information.
The combination of these subscription-like agreements, the sticky patient-physician relationship and our long-term partnership model, which is typically 20 years in duration, results in a growing and recurring revenue stream and provides significant visibility into the near-term and long-term financial trajectory for both agilon and our anchor physician groups.
The combination of these subscription-like agreements, the sticky patient-physician relationship and our long-term partnership model, which is typically 20 years in duration, results in a growing and recurring revenue stream and provides visibility into the near-term and long-term financial trajectory for both agilon and our anchor physician groups.
Our physician partners, as well as their nurse practitioners, must satisfy and maintain their individual professional licensing in each state where they practice medicine. Further, organizations that receive reimbursement from a federal or state government payor are expected by the federal government to have a compliance program.
Our physician partners, as well as their nurse practitioners and physician assistants, must satisfy and maintain their individual professional licensing in each state where they practice medicine. Further, organizations that receive reimbursement from a federal or state government payor are expected by the federal government to have a compliance program.
Any interruption in access to member information, unauthorized access to information, improper disclosure or other loss of information could result in, among other things, federal or state government investigations and liability under laws and regulations that protect the privacy of member information, such as HIPAA, potentially resulting in damages and regulatory penalties.
Any interruption in access to member information, unauthorized use of or access to information, improper disclosure or other loss of information could result in, among other things, federal or state government investigations and liability under laws and regulations that protect the privacy of member information, such as HIPAA, potentially resulting in damages and regulatory penalties.
Moreover, large, well-financed payors have in some cases developed their own managed services tools and may provide these services to their physicians and patients at discounted prices, or may seek to expand their relationships with additional competing physicians or physician networks.
Moreover, large, well-financed payors have in some cases developed their own managed care services tools and may provide these services to their physicians and patients at discounted prices or may seek to expand their relationships with additional competing physicians or physician networks.
The federal civil and criminal false claims laws and civil monetary penalties laws, such as the federal False Claims Act, 31 U.S.C. §§ 3729—3733, impose civil liability on individuals or entities that submit false or fraudulent claims for payment to the federal government.
The federal civil and criminal false claims laws and civil monetary penalties laws, such as the federal False Claims Act, 31 U.S.C. §§ 3729—3733 (“FCA”), impose civil liability on individuals or entities that submit false or fraudulent claims for payment to the federal government.
Corporate Practice of Medicine Some states in which we operate have laws prohibiting the corporate practice of medicine; such laws generally prohibit business entities with non-physician owners, such as agilon and certain of its subsidiaries, from practicing medicine.
Corporate Practice of Medicine Some states in which we operate have laws prohibiting the corporate practice of medicine (“CPOM”); such laws generally prohibit business entities with non-physician owners, such as agilon and certain of its subsidiaries, from practicing medicine.
The principal competitive factors in our business include the nature and caliber of relationships with physicians; patient healthcare quality, outcomes and cost; the strength of relationships with payors; the quality of the physician experience; local geography leadership position; and the strength of the underlying economic model.
The competitive factors in our business include the nature and caliber of relationships with physicians; patient healthcare quality, outcomes and cost; the strength of relationships with payors; the quality of the physician experience; local geography leadership position; and the strength of the underlying economic model.
The Health Care False Statement Statute, 18 U.S.C. § 1035, prohibits, in any matter involving a federal healthcare program, anyone from knowingly and willfully falsifying, concealing or covering up, by any trick, scheme or device, a material fact, or making any materially false, fictitious, or fraudulent statement or representation, or making or using any materially false writing or document knowing that it contains a materially false or fraudulent statement.
The False Statement Statute, 18 U.S.C. § 1035, prohibits, in any matter involving a federal healthcare program, anyone from knowingly and willfully falsifying, concealing or covering up, by any trick, scheme or device, a material fact, or making any materially false, fictitious, or fraudulent statement or representation, or making or using any materially false writing or document knowing that it contains a materially false or fraudulent statement.
This typically takes the form of letters of credit or restricted deposits, or the payor may retain a percentage of the capitation payments due under the applicable contract. Risk-bearing capital required by payors varies by payor and geography, but typically averages between 1.0-3.0% of projected annual gross revenue attributable to the corresponding agreement.
This typically takes the form of letters of credit, surety bonds, or restricted deposits, or the payor may retain a percentage of the capitation payments due under the applicable contract. Risk-bearing capital required by payors varies by payor and geography, but typically averages between 1.0-3.0% of projected annual gross revenue attributable to the corresponding agreement.
Looking ahead, it is possible that the American Data Privacy and Protection Act (“ADPPA”), a landmark federal privacy bill with significant bipartisan support, may gain traction. Although ADPPA would not apply to health data covered by HIPAA, it would apply to other health data, such as health data controlled by certain entities in the digital health space.
It is possible that the American Data Privacy and Protection Act (“ADPPA”), a landmark federal privacy bill with significant bipartisan support, may gain traction. Although ADPPA would not apply to health data covered by HIPAA, it would apply to other health data, such as health data controlled by certain entities in the digital health space.
Fee-splitting laws and their interpretations vary from state to state and are enforced by state courts and regulatory authorities that have broad discretion in their enforcement. Courts in some states have interpreted fee-splitting statutes as prohibiting all percentage of gross revenue and percentage of net profit fee arrangements, despite the performance of legitimate services.
Fee-splitting laws and their interpretations vary and are enforced by state courts and regulatory authorities that have broad discretion in their enforcement. Courts in some states have interpreted fee-splitting statutes as prohibiting all percentage of gross revenue and percentage of net profit fee arrangements, despite the performance of legitimate services.
In turn, in accordance with the PCC option, CMS compensates each physician partner for a portion of their billed services based on the applicable rate, and the remaining portion is paid to each DCE on a per Medicare beneficiary per month (“PBPM”) basis based on a prospective estimate of such remaining portion of billed services.
In turn, in accordance with the PCC option, CMS compensates each physician partner for a portion of their billed services based on the applicable rate, and the remaining portion is paid to each ACO on a per Medicare beneficiary per month (“PBPM”) basis based on a prospective estimate of such remaining portion of billed services.
We believe the power of a like-minded group of community-based physicians, many of whom are leaders in their community, will enhance innovation, growth, quality of care and patient experience, and ultimately strengthen the power of the independent physician business model in local communities across the country.
We believe this like-minded group of community-based physicians, many of whom are leaders in their community, will enhance innovation, growth, quality of care and patient experience, and ultimately strengthen the power of the independent physician business model in local communities across the country.
Additionally, CMS has the right to amend a participation agreement without the consent of the DCE for good cause, or as necessary to comply with applicable federal or state law, regulatory requirements, accreditation standards or licensing guidelines or rules.
Additionally, CMS has the right to amend a participation agreement without the consent of the ACO for good cause, or as necessary to comply with applicable federal or state law, regulatory requirements, accreditation standards or licensing guidelines or rules.
Additionally, several states have enacted physician self-referral laws. Notably, compensation pursuant to a risk-sharing arrangement between a managed care organization or an independent practice association and a physician (either directly or indirectly through a contractor) for services provided to enrollees of a health plan (an MA plan, for example) does not constitute a financial arrangement for Stark purposes.
Additionally, several states have enacted physician self-referral laws. 12 Table of Contents Notably, compensation pursuant to a risk-sharing arrangement between a managed care organization or an independent practice association and a physician (either directly or indirectly through a contractor) for services provided to enrollees of a health plan (an MA plan, for example) does not constitute a financial arrangement for Stark purposes.
The agilon Platform : The agilon platform is holistic in supporting the rapid transition to a Total Care Model with technology, people, process and capital. Our purpose-built platform comprises an integrated set of capabilities designed to continuously improve.
The agilon Platform : The agilon platform is holistic in supporting the rapid transition to a Total Care Model with technology, people, process and capital. Our purpose-built platform is comprised of an integrated set of capabilities designed to continuously improve.
In addition to the provisions of the False Claims Act, which provide for civil enforcement, the federal government also can use several criminal statutes to prosecute persons who are alleged to have submitted false or fraudulent claims to the government for payments.
In addition to the provisions of the FCA, which provide for civil enforcement, the federal government also can use several criminal statutes to prosecute persons who are alleged to have submitted false or fraudulent claims to the government for payments.
Securities and Exchange Commission (“SEC”). Additionally, the SEC maintains a website that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC, including us, at www.sec.gov. 23 Table of Contents
Securities and Exchange Commission (“SEC”). Additionally, the SEC maintains a website that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC, including us, at www.sec.gov. 17 Table of Contents
As earnings are generated at the local level due to improvements in quality of care and management of healthcare costs, we share those earnings with our anchor physician groups. 5 Table of Contents agilon’s Network : Enhancing the power and growth of the agilon platform is the rapidly expanding group of leading community-based physician partners, functioning as a collaborative group through the agilon network.
As earnings are generated at the local level due to improvements in quality of care and management of healthcare costs, we share those earnings with our anchor physician groups. agilon’s Network : Enhancing the power and growth of the agilon platform is the rapidly expanding group of leading community-based physician partners, functioning as a collaborative group through the agilon network.
Amounts collected on claims related to prohibited referrals must be reported and refunded generally within sixty (60) days after the date on which the overpayment was identified. Furthermore, Stark Law violations and failure to return overpayments in a timely manner can form the basis for False Claims Act liability, as further discussed herein.
Amounts collected on claims related to prohibited referrals must be reported and refunded generally within sixty (60) days after the date on which the overpayment was identified. Furthermore, Stark Law violations and failure to return overpayments in a timely manner can form the basis for FCA liability, as further discussed herein.
Thus, we cannot foreclose the possibility that we will face allegations subject to the CMPL with the potential for a material adverse impact on our business, results of operations and financial condition. Substantial civil monetary penalties may be imposed under the federal Civil Monetary Penalty Statute and may vary, depending on the underlying violation.
Thus, we cannot foreclose the possibility that we will face allegations subject to the CMPL with the potential for a material adverse impact on our business, results of operations and financial condition. Substantial civil monetary penalties may be imposed under the federal Civil Monetary Penalty Statute and may vary, depending on the 13 Table of Contents underlying violation.
By 2025, CMS will no longer pay any portion to such physician partner based on FFS compensation rates, and will transition to compensating physician partners through their applicable DCE on a PBPM basis.
By 2025, CMS will no longer pay any portion to such physician partner based on FFS compensation rates, and will transition to compensating physician partners through their applicable ACO on a PBPM basis.
The Health Information Technology for Economic and Clinical Health of 2009 (“HITECH”) dramatically expanded, among other things, (1) the scope of HIPAA to now apply directly to “business associates,” or independent contractors who receive or obtain PHI in connection with providing a service to a covered entity or another business associate, (2) substantive security and privacy obligations, including a new federal security breach notification requirement that unauthorized acquisitions, access, use or disclosure of PHI be reported to, depending on the number of people affected and their location, affected individuals, the Department of Health and Human Services and local media outlets, (3) restrictions on marketing communications, a prohibition on business associates from receiving remuneration in exchange for PHI, and a prohibition on covered entities from receiving remuneration in exchange for PHI without express patient authorization and (4) the civil and criminal penalties that may be imposed for HIPAA violations.
The Health Information Technology for Economic and Clinical Health of 2009 (“HITECH”) dramatically expanded, among other things, (1) the scope of HIPAA to now apply directly to “business associates,” or independent contractors who receive, create, maintain or obtain PHI in connection with providing a service to a covered entity or another business associate, (2) substantive security and privacy obligations, including a new federal security breach notification requirement that unauthorized acquisitions, access, use or disclosure of unsecured PHI that compromise the security or privacy of the PHI be reported to, depending on the number of people affected and their location, affected individuals, the Department of Health and Human Services and local media outlets, (3) restrictions on certain marketing communications, a prohibition on business associates from receiving remuneration in exchange for PHI, and a prohibition on covered entities from receiving remuneration in exchange for PHI without express patient authorization or applicable exception and (4) the civil and criminal penalties that may be imposed for HIPAA violations.
The rules, intended to enhance interoperability and prevent information blocking, create significant new requirements for healthcare industry participants, including requirements to (i) provide patients with convenient access to health care information, (ii) support electronic exchange of data for transitions of care and (iii) require participation in trust networks to improve 20 Table of Contents interoperability.
The rules, intended to enhance interoperability and prevent information blocking, create significant new requirements for healthcare industry participants, including requirements to (i) provide patients with convenient access to health care information, (ii) support electronic exchange of data for transitions of care and (iii) require participation in trust networks to improve interoperability.
In order to ensure compliance, we encrypt and back up data, maintain company-wide security awareness training, enter into business associate agreements with our partners, as well as ensure our partners have implemented physical security and safeguards at the data centers where our data is stored and conduct regular internal and external security audits.
In order to ensure compliance, we encrypt and back up data, maintain company-wide security awareness training, enter into business associate agreements with our partners and vendors, as well as ensure our partners and vendors have implemented physical security and safeguards at the data centers where our data is stored and conduct regular security audits.
Our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and any amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (the “Exchange Act”) are available on our website, free of charge, as soon as reasonably practicable after we electronically file such materials with, or furnish them to, the U.S.
Our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and any amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act are available on our website, free of charge, as soon as reasonably practicable after we electronically file such materials with, or furnish them to, the U.S.
In addition, the DCEs operate in partnership pursuant to participating medical group agreements with one or more of our physician partners in certain geographies. Our contracted physician partners provide Medicare services to their aligned beneficiaries, and bill CMS on a FFS basis for such services.
The ACOs operate in partnership pursuant to participating medical group agreements with one or more of our physician partners in certain geographies. Our contracted physician partners provide Medicare services to their aligned beneficiaries, and bill CMS on a FFS basis for such services.
Some government healthcare programs, including, but not limited to, the MA program, use a risk-adjustment model that adjusts premiums paid to contracted payors to reflect the specific characteristics of each enrolled member (including demographics, government program eligibility and health status).
Some government healthcare programs, including, but not limited to, 10 Table of Contents the MA program, use a risk-adjustment model that adjusts premiums paid to contracted payors to reflect the specific characteristics of each enrolled member (including demographics, government program eligibility and health status).
Further, state regulatory stances regarding downstream risk-sharing arrangements can change rapidly and codified provisions may not keep pace with evolving risk-sharing mechanisms. 18 Table of Contents Healthcare Reform In March 2010, the Patient Protection and Affordable Care Act (the “ACA”) and the accompanying Health Care and Education Affordability Reconciliation Act, collectively referred to as the ACA, were enacted.
Further, state regulatory stances regarding downstream risk-sharing arrangements can change rapidly and codified provisions may not keep pace with evolving risk-sharing mechanisms. Healthcare Reform In March 2010, the Patient Protection and Affordable Care Act (the “ACA”) and the accompanying Health Care and Education Affordability Reconciliation Act, collectively referred to as the ACA, were enacted.
In particular, a key managed care safe harbor under the AKS upon which we regularly rely allows for payments to providers for “healthcare services and items,” but does not allow incentive payments for marketing or to encourage member enrollment.
For example, a key managed care safe harbor under the AKS upon which we regularly rely allows for payments to providers for “healthcare services and items,” but does not allow incentive payments for marketing or to encourage member enrollment.
Additionally, many states also enacted laws that protect the privacy and security of confidential, personal and health information, which may be even more stringent than HIPAA and may add additional compliance costs and legal risks to our operations.
Additionally, many states and foreign jurisdictions have also enacted laws that protect the privacy and security of confidential, personal and health information, which may be even more stringent than HIPAA and may add additional compliance costs and legal risks to our operations.
We typically operate by forming RBEs which contract with payors on the one hand and provide professional services through contractual relationships with PCPs on the other hand.
We typically operate by forming RBEs that contract with payors on the one hand and provide professional services through contractual relationships with PCPs on the other hand.
These laws vary widely from state to state and change frequently based on new case law, opinions from state attorneys general and regulations promulgated by medical boards. A majority of states have adopted express corporate practice of medicine prohibitions, and several states that have not explicitly adopted the doctrine have, nonetheless, established regulations that echo its principles.
These laws vary from state to state and change frequently based on new case law, opinions from state attorneys general and regulations promulgated by medical boards. A majority of states have adopted express corporate practice of medicine prohibitions, and several states that have not explicitly adopted the doctrine, nonetheless, have regulations that echo CPOM principles.
The HIPAA Security Rule requires both covered entities and business associates to develop and maintain policies and procedures with respect to PHI, including adherence to HIPAA’s security standards through the implementation of administrative, physical and technical safeguards to protect PHI.
The HIPAA Security Rule requires both covered entities and business associates to develop and maintain policies and procedures with respect to PHI, including adherence to HIPAA’s security standards through the implementation of administrative, physical and technical 14 Table of Contents safeguards to protect PHI.
Violation can also give rise to federal healthcare program exclusion, liability under the False Claims Act and civil penalties, which may include monetary penalties of up to $100,000 per offense, repayments of up to three times the total payments between the parties to the arrangement and suspension from future participation in Medicare and Medicaid.
Violation can also give rise to federal healthcare program exclusion, liability under the FCA and civil penalties, which may include monetary penalties of up to $100,000 per offense, repayments of up to three times the total payments between the parties to the arrangement and suspension from future participation in Medicare and Medicaid.
Each DCE then remits payment out of the PBPM payments from CMS to its contracted physician partners on a monthly or quarterly basis pursuant to the applicable participating medical group agreement, which agreement also includes incentive compensation tied to the DCE’s net profits received for aligned beneficiaries.
Each ACO then remits payment out of the PBPM payments from CMS to its contracted physician partners on a monthly or quarterly basis pursuant to the applicable participating medical group agreement, which agreement also includes incentive compensation tied to the ACO’s net profits received for aligned beneficiaries.
Congress enacted HIPAA, in part, to combat healthcare fraud and to protect the privacy and security of patients’ individually identifiable healthcare information. Among other things, HIPAA requires healthcare providers and their 19 Table of Contents business associates to maintain the privacy and security of individually identifiable PHI.
Congress enacted HIPAA, in part, to combat healthcare fraud and to protect the privacy and security of patients’ individually identifiable healthcare information. Among other things, HIPAA requires healthcare providers and their business associates to maintain the privacy and security of individually identifiable PHI.
The 21 st Century Cures Act authorizes civil monetary penalties up to $1 million per information blocking “violation.” It is unclear at this time what the costs of compliance with the new rules will be, and what additional risks there may be to our business.
The 21 st Century Cures Act authorizes civil monetary penalties up to $1 million per information blocking “violation.” It is unclear what the costs of compliance with the rules will be, and what additional risks there may be to our business.
We have historically issued certain stock-based instruments, which we refer to as “partner physician group equity agreements,” to our anchor physician groups pursuant to which they are entitled to receive equity of their local RBE or agilon health, respectively, in the future only upon the occurrence of certain events deemed a “change of control” of the RBE, or a “change of control” of agilon health, if such event occurs before a “change of control” of the RBE.
We have historically issued certain stock-based instruments, which we refer to as “partner physician group equity agreements,” to our anchor physician groups pursuant to which they are entitled to receive equity of their local RBE or agilon health, respectively, in the future only upon the occurrence of certain events deemed a “change of control” of the RBE.
Federal and State Privacy and Security Requirements We are subject to various federal, state and local laws and rules regarding the use, security and disclosure of protected health information (“PHI”), personally identifiable information, de-identified data and other categories of confidential or legally protected data that our businesses may handle.
Federal, State, and International Privacy and Security Requirements We are subject to various federal, state and local laws and rules regarding the use, security and disclosure of PHI, personally identifiable information, de-identified data and other categories of confidential or legally protected data that our businesses may handle.
Available Information Our website address is www.agilonhealth.com. We use our website as a routine channel for distribution of information that may be material to investors, including news releases, financial information, presentations and corporate governance information. Information contained or connected to our website is not incorporated by reference in this Annual Report on Form 10-K unless expressly noted.
Available Information Our website address is www.agilonhealth.com. We use our website as a routine channel for distribution of information that may be material to investors, including news releases, financial information, presentations and corporate governance information. Information contained or connected to our website is not incorporated by reference in this Report unless expressly noted.
The False Claims Act provides, in part, that the federal government may bring a lawsuit against any person whom it believes has knowingly or recklessly: presented, or caused to be 14 Table of Contents presented, a false or fraudulent claim for payment or approval to the federal government; made, used or caused to be made or used a false statement or a false record to get a claim for payment approved, including a false or fraudulent claim; concealed, or knowingly and improperly avoided or decreased, an obligation to pay or transmit money or property to the federal government; or conspired to commit any of the foregoing.
The FCA provides, in part, that the federal government may bring a lawsuit against any person whom it believes has knowingly or recklessly: presented, or caused to be presented, a false or fraudulent claim for payment or approval to the federal government; made, used or caused to be made or used a false statement or a false record to get a claim for payment approved, including a false or fraudulent claim; concealed, or knowingly and improperly avoided or decreased, an obligation to pay or transmit money or property to the federal government; or conspired to commit any of the foregoing.
While we believe that our practices are in substantial compliance with the corporate practice of medicine laws to which we are subject, if a state determines that we are not in compliance that may result in a material adverse effect on our business, results of operations or financial condition.
While we believe that our practices are in substantial compliance with the CPOM laws to which we are subject, if a state determines that we are not in compliance that may result in a material adverse effect on our business, results of operations or financial condition.
For example, certain states may require DCEs to obtain specific licensure to participate in the Direct Contracting Model and assume risk directly from CMS. There likely will continue to be regulatory proposals directed at containing or lowering the cost of healthcare. Further, CMS also routinely adjusts the risk adjustment factor which is central to payment under the MA program.
For example, certain states may require ACOs to obtain specific licensure to participate in the ACO REACH Model and assume risk directly from CMS. There likely will continue to be regulatory proposals directed at containing or lowering the cost of healthcare. Further, CMS also routinely adjusts the risk adjustment factor which is central to payment under the MA program.
Federal and State Anti-Kickback Statutes The AKS, set forth in Section 1128B of the Social Security Act, prohibits the knowing and willful offer, payment, solicitation or receipt of any form of remuneration in return for, or to induce, (i) the referral of a person for items or services reimbursable under federal healthcare programs, (ii) the furnishing or arranging for the furnishing of items or services reimbursable under federal healthcare programs or (iii) the purchase, lease or order or arranging or recommending purchasing, leasing or ordering of any item or service reimbursable under federal healthcare 15 Table of Contents programs.
Federal and State Anti-Kickback Statutes The AKS, set forth in Section 1128B of the Social Security Act, is a criminal statute that prohibits the knowing and willful offer, payment, solicitation or receipt of any form of remuneration in return for, or to induce, (i) the referral of a person for items or services reimbursable under federal healthcare programs, (ii) the furnishing or arranging for the furnishing of items or services reimbursable under federal healthcare programs or (iii) the purchase, lease or order or arranging or recommending purchasing, leasing or ordering of any item or service reimbursable under federal healthcare programs.
In addition, any physician who participates in a scheme that violates the state’s corporate practice of medicine prohibition may be subject to disciplinary action or potential forfeiture of revenues from payors for services rendered, or may be punished for aiding and abetting a non-medical professional entity in the unlawful practice of medicine.
In addition, any medical professional who participates in a scheme that violates a state’s CPOM prohibition may be subject to disciplinary action, license revocation, or potential forfeiture of revenues from payors for services rendered or may be punished for aiding and abetting a non-medical professional entity in the unlawful practice of medicine.
In May 2020, the United States Department of Health and Human Services Office of the National Coordinator for Health Information Technology and CMS issued complementary new rules that are intended to clarify provisions of the 21st Century Cures Act.
In May 2020, the U.S. Department of Health and Human Services Office of the National Coordinator for Health Information Technology and CMS issued complementary new rules that are intended to clarify provisions of the 21st Century Cures Act.
These new final rules provide additional protections to our payment models with providers. We have also endeavored to structure our participation in the Direct Contracting Model to comply with waivers of the AKS issued by the Secretary of HHS.
These new final rules provide additional protections to our payment models with providers. We have also endeavored to structure our participation in the ACO REACH Model to comply with waivers of the AKS issued by the Secretary of HHS.
The Clayton Act also authorizes private parties to sue for treble damages when they have been 21 Table of Contents harmed by conduct that violates either the Sherman or Clayton Act and to obtain a court order prohibiting the anticompetitive practice in the future.
The Clayton Act also authorizes private parties to sue for treble damages when they have been harmed by conduct that violates either the Sherman or Clayton Act and to obtain a court order prohibiting the alleged anticompetitive practice in the future.
Our model operates by primarily forming RBEs within local geographies, that enter into arrangements with payors providing for monthly payments to manage the total healthcare needs of our physician partners’ attributed patients (or global capitation arrangements).
Our model operates by primarily forming risk-bearing entities (“RBEs”) within local geographies, that enter into arrangements with payors providing for monthly payments to manage the total healthcare needs of our physician partners’ attributed patients (or global capitation arrangements).
The CMS Innovation Center continues to test an array of alternative payment models, including the Direct Contracting Model to allow DCEs to negotiate directly with the government to manage traditional Medicare beneficiaries and share in the savings and losses generated from managing such beneficiaries. State regulation of DCEs will likely be variable.
The CMS Innovation Center continues to test an array of alternative payment models, including the ACO REACH Model, to allow ACOs to negotiate directly with the government to manage traditional Medicare beneficiaries and share in the savings and losses generated from managing such beneficiaries. State regulation of ACOs will likely be variable.
We typically maintain various contracts with a single national payor in order to reflect varying economic terms across our geographies, and to provide for distinct subsidiary entities of our company and a national payor as parties to these contracts. As of January 1, 2023, we have relationships with 23 health plan payors across 25 geographies.
We typically maintain various contracts with a single national payor in order to reflect varying economic terms across our geographies, and to provide for distinct subsidiary entities of our company and a national payor as parties to these contracts. As of January 1, 2024, we have relationships with 29 health plan payors across 32 geographies.
Consumer Protection Laws Healthcare providers are also subject to the Telephone Consumer Protection Act (“TCPA”), which regulates the manner in which a business may advertise its products and services to consumers by phone, text and fax. The TCPA was enacted by Congress to combat aggressive telemarketing and fax advertising practices believed to invade consumer privacy.
Consumer Protection Laws agilon may be subject to the Telephone Consumer Protection Act (“TCPA”), which regulates the manner in which a business may advertise its products and services to consumers by phone, text and fax. The TCPA was enacted by Congress to combat aggressive telemarketing and fax advertising practices believed to invade consumer privacy.
We believe our first-of-its-kind platform, partnership and network model enables us to compete favorably. 11 Table of Contents Intellectual Property We rely on a combination of trademark laws in the U.S. as well as confidentiality procedures and contractual provisions to protect our trade secrets, including proprietary technology, databases and our brand.
We believe our first-of-its-kind platform, partnership and network model enables us to compete favorably. 7 Table of Contents Intellectual Property We rely on a combination of international and U.S. trademark law as well as confidentiality procedures and contractual provisions to protect our trade secrets, including proprietary technology, databases and our brand.
While we believe we are in substantial compliance with fee-splitting laws in the states in which we operate, if we are found to be non-compliant, penalties for violating fee-splitting statutes or regulations may include medical license revocation, suspension, probation or other disciplinary action against our affiliated providers.
While we believe we are in substantial compliance with fee-splitting laws in the states in which we operate, if we are found to be non-compliant, penalties for violating fee-splitting statutes or regulations may include medical license revocation, suspension, probation or other disciplinary action against our affiliated providers. It could also result in monetary damages and penalties.
Court cases have resulted in the interpretation that a violation may occur where even one purpose of the remuneration is to induce or reward referrals, and the OIG, which has the authority to impose administrative sanctions for violation of the statute, has adopted a similar standard.
Court cases have resulted in the interpretation that a violation may occur even when only one of many purposes of the remuneration is to induce or reward referrals, and the OIG, which has the authority to impose administrative sanctions for violation of the statute, has adopted a similar standard.
In addition, courts have refused to enforce contracts found to violate state fee-splitting prohibitions. Further, fee-splitting arrangements could implicate other laws applicable to our business, such as anti-kickback and corporate practice of medicine laws and regulations.
In addition, courts have refused to enforce contracts found to violate state fee-splitting prohibitions. Further, fee-splitting arrangements could implicate other laws applicable to our business, such as anti-kickback and CPOM laws and regulations.
Our operations and relationships with healthcare plans and providers are subject to extensive and increasing regulation by numerous federal, state, and local government agencies including the Office of Inspector General (“OIG”), the Department of Justice (“DOJ”), the CMS, the Office of Civil Rights, and various state authorities.
Our operations and relationships with healthcare plans and providers are also subject to extensive and increasing regulation by numerous federal, state, and local government agencies including the Office of Inspector General (“OIG”), the Department of Justice (“DOJ”), CMS, the Office of Civil Rights (“OCR”), and various other authorities. Healthcare laws and regulations change frequently.
The federal government, including as a result of the passage of the ACA, and a number of courts have taken the position that claims presented in violation of certain other statutes, including the federal Anti-Kickback Statute (“AKS”) or the federal physician referral law, 42 U.S.C. 1395nn (the “Stark Law”), can also be considered a violation of the False Claims Act.
The federal government, including as a result of the passage of the ACA, and a number of courts have taken the position that claims presented in violation of certain other statutes, including the federal Anti-Kickback Statute (“AKS”) or the federal physician referral law, 42 U.S.C. 1395nn (the “Stark Law”), are a violation of the FCA.
Our efforts to promote a positive employee experience and build 12 Table of Contents culture are further supported and enhanced by local and national in-person and virtual events, including town halls, in-office celebrations, employee activity committees and most-valuable-player awards, meant to champion our employees and create a sense of community.
Our efforts to promote a positive employee experience and build culture are further supported and enhanced by local and national in-person and virtual events, including town halls, in-office and/or virtual celebrations, employee activity committees and recognition awards, meant to champion our employees and create a sense of community.
Section 1876 of the Social Security Act Section 1876 of the Social Security Act prohibits MA plans and their downstream entities from entering into compensation arrangements with physicians that may directly or indirectly have an effect of reducing or limiting services to individual members.
Section 1876 of the Social Security Act Section 1876 of the Social Security Act prohibits MA plans and their downstream entities from entering into compensation arrangements with physicians that may directly or indirectly have an effect of reducing or limiting services to individual members. We have sought to structure our compensation arrangements with physicians to ensure compliance with this requirement.
States that have corporate practice of medicine laws limit the practice of medicine to licensed individuals or professional organizations comprising licensed individuals; therefore, non-medical professional entities are prohibited from employing or contracting with physicians (unless the entity satisfies a limited exception), exercising control over medical decisions, or engaging in certain arrangements with other physicians, such as fee-splitting.
States with CPOM laws limit the practice of medicine to licensed individuals or professional 9 Table of Contents organizations comprising licensed individuals; therefore, non-medical professional entities are prohibited from employing or contracting with physicians (unless the entity satisfies limited exceptions), exercising control over medical decisions, or engaging in certain arrangements with other physicians, such as fee-splitting.
A violation of this statute may be charged as a felony offense and may result in fines, imprisonment, or both.
A violation of these statutes may be charged as a felony offense and may result in imprisonment, fines or both.
Such growth, and our long-term contracts with physician partners, could expose us to risks related to antitrust investigations and litigation. Competition and antitrust law inquiries often continue for several years and, if violations are found, can result in substantial fines.
Such growth, and our long-term contracts with physician 16 Table of Contents partners, could expose us to risks related to antitrust investigations and litigation. Competition and antitrust law inquiries often continue for several years and, if violations are found, can result in substantial financial exposure. U.S.
Lastly, our agreements with customers include confidentiality and non-disclosure provisions. We may be unable to obtain, maintain and enforce our intellectual property rights, and assertions by third parties that we violate their intellectual property rights could have a material adverse effect on our business, financial condition and results of operations.
We may be unable to obtain, maintain and enforce our intellectual property rights, and assertions by third parties that we violate their intellectual property rights could have a material adverse effect on our business, financial condition and results of operations.
Our company was formed in 2016, and we established our inaugural partnership with an anchor physician group in 2017. Our ability to rapidly build scaled positions in local communities has allowed us to grow to 23 anchor physician groups and 25 geographies in five years.
Our company was formed in 2016, and we established our inaugural partnership with an anchor physician group in 2017. Our ability to rapidly build scaled positions in local communities has allowed us to grow to 25 anchor physician groups and 24 geographies as of December 31, 2023.
Further complicating matters, state lawmakers are increasingly seeking to exercise oversight over healthcare transactions and allow state agencies to analyze potential anticompetitive effects of healthcare consolidation, including smaller transactions that do not meet federal reporting thresholds.
Further complicating matters, state lawmakers are increasingly seeking to exercise oversight over healthcare transactions and allow state agencies to analyze potential anticompetitive effects of healthcare consolidation, including smaller transactions that do not meet federal reporting thresholds. Private parties may also bring lawsuits to enforce antitrust laws.
The government may deem entities to have “caused” the submission of false or fraudulent claims by, for example, providing inaccurate billing or coding information, billing for services not rendered, billing services at a higher payment rate than appropriate and billing for care that is not considered medically necessary.
The government may deem entities to have “caused” the submission of false or fraudulent claims by, for example, providing inaccurate billing or coding information, billing for services not rendered, billing services at a higher payment rate than appropriate and billing for care that is not considered medically necessary. Suits filed under the FCA are also known as “qui tam” actions.
Pursuant to HIPAA, as amended by HITECH, we are required to report breaches of unsecured PHI to our covered entity clients, such as our physician group partners, within 60 days of discovery of the breach, and notify certain agencies and potentially the media in accordance with clause (2) above.
Pursuant to HIPAA, as amended by HITECH, we are required to report breaches of unsecured PHI to our covered entity clients, such as our physician group partners, within the time period specified in our applicable business associate agreement, but in no case later than 60 days from the discovery of the breach, and notify certain agencies and potentially the media in accordance with clause (2) above.
Various other federal and state laws may apply that restrict the use and protect the privacy and security of individually identifiable information, as well as employee personal information, including certain state laws modeled to some extent on the European Union’s General Data Protection Regulation.
Various other federal, state and foreign laws may apply that restrict the use and protect the privacy and security of individually identifiable information, as well as employee personal 15 Table of Contents information, including laws modeled to some extent on the European Union’s GDPR.
These risks are discussed in more detail in Item 1A below. Reimbursement Model and Organization Under a traditional FFS reimbursement model, physicians are paid a fixed amount for services provided during a patient visit, regardless of a patient’s medical need or health outcome.
Reimbursement Model and Organization Under a traditional FFS reimbursement model, physicians are paid a fixed amount for services provided during a patient visit, regardless of a patient’s medical need or health outcome.
In accordance with relevant accounting guidance, each of these RBEs is determined to be a variable interest entity consolidated by agilon, as we have: (i) the ability, through the management services and governance arrangements, to direct the activities (excluding clinical decisions) that most significantly affect the RBE’s economic performance; and (ii) the obligation to absorb losses of or the right to receive benefits that could be potentially significant to the RBE. 7 Table of Contents Through incentive compensation arrangements, we share a portion of the RBE’s savings from successfully improving the quality of care and reducing costs with our anchor physician groups.
In accordance with relevant accounting guidance, each of these RBEs is determined to be a variable interest entity consolidated by agilon, as we have: (i) the ability, through the management services and governance arrangements, to direct the activities (excluding clinical decisions) that most significantly affect the RBE’s economic performance; and (ii) the obligation to absorb losses of or the right to receive benefits that could be potentially significant to the RBE.
Under the Total Care Model, we typically operate by forming RBEs within local geographies. These wholly-owned RBEs enter into risk-bearing, global capitation agreements with payors, contract with agilon to perform certain functions and enter into long-term professional service agreements with one or more partner primary care or multi-specialty physician groups.
These wholly-owned RBEs enter into risk-bearing, global capitation agreements with payors, contract with agilon to perform certain functions and enter into long-term professional service agreements with one or more partner primary care or multi-specialty physician groups.
We maintain our intellectual property and confidential business information in a number of ways. For instance, we have a policy of requiring all employees and consultants to execute confidentiality agreements upon the commencement of an employment or consulting relationship with us.
We maintain our intellectual property and confidential business information in a number of ways. For instance, all employees and consultants sign agreements and/or acknowledgments reminding them of their confidentiality obligations upon the commencement of an employment or consulting relationship with us.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Our contracts with payors generally have terms of one to three years and are typically renewed for one-year periods unless terminated in accordance with the terms of such agreements. In the ordinary course of business, we engage in active discussions and renegotiations with our payors in respect of the services we collectively provide and the terms of our payor agreements.
Our contracts with payors generally have terms of one to three years and are typically renewed for one-year periods unless terminated in accordance with the terms of such agreements. In the ordinary course of business, we engage in active discussions and renegotiations with our payors with respect of the services we collectively provide and the terms of our payor agreements.
As our payors’ businesses respond to market dynamics and financial pressures, and as our payors make strategic business decisions in respect of the lines of business they pursue and programs in which they participate, certain of our payors have sought, and we expect that in the future additional payors will, from time to time, seek to renegotiate or terminate their contracts with us.
As our payors’ businesses respond to market dynamics and financial pressures, and as our payors make strategic business decisions with respect of the lines of business they pursue and programs in which they participate, certain of our payors have sought, and we expect that in the future additional payors will, from time to time, seek to renegotiate or terminate their contracts with us.
There likely will continue to be legislative and regulatory proposals at the federal level directed at containing or lowering the cost of healthcare that, if adopted, could have a material adverse effect on our business, financial condition, cash flows, and results of operations.
There likely will continue to be legislative and regulatory proposals at the federal level directed at containing or lowering the cost of healthcare that, if adopted, could have a material adverse effect on our business, financial condition, cash flows, and results of operations.
If we are unable to obtain sufficient funds from our subsidiaries to fund our obligations, our results of business, financial condition, cash flows and results of operations could be materially and adversely affected.
If we are unable to obtain sufficient funds from our subsidiaries to fund our obligations, our business, financial condition, cash flows and results of operations could be materially and adversely affected.
Any implementation delays, or disruption in the transition to new or enhanced systems, procedures or controls, could harm our ability record and report financial and management information on a timely and accurate basis.
Any implementation delays, or disruption in the transition to new or enhanced systems, procedures or controls, could harm our ability to record and report financial and management information on a timely and accurate basis.
For example, our Certificate of Incorporation and By-laws collectively: • authorize the issuance of “blank check” preferred stock that could be issued by our board of directors to thwart a takeover attempt; • provide for a classified board of directors, which divides our board of directors into three classes, with members of each class serving staggered three-year terms, which prevents stockholders from electing an entirely new board of directors at an annual meeting; • limit the ability of stockholders to remove directors if the CD&R Investor ceases to beneficially own at least 40% of the outstanding shares of our common stock; • provide that vacancies on our board of directors, including vacancies resulting from an enlargement of our board of directors, may be filled only by a majority vote of directors then in office; • prohibit stockholders from calling special meetings of stockholders if the CD&R Investor ceases to beneficially own at least 40% of the outstanding shares of our common stock; • prohibit stockholder action by written consent, thereby requiring all actions to be taken at a meeting of the stockholders, if the CD&R Investor ceases to beneficially own at least 40% of the outstanding shares of our common stock; • opt out of Section 203 of the Delaware General Corporation Law (the “DGCL”), which prohibits a publicly-held Delaware corporation from engaging in a “business combination” with an “interested stockholder” for a period of three years following the time the person became an interested stockholder, until the CD&R Investor ceases to beneficially own at least 5% of the outstanding shares of our common stock; • establish advance notice requirements for nominations of candidates for election as directors or to bring other business before an annual meeting of our stockholders; and • require the approval of holders of at least 66 2/3% of the outstanding shares of our common stock to amend our By-laws and certain provisions of our Certificate of Incorporation if the CD&R Investor ceases to beneficially own at least 40% of the outstanding shares of our common stock.
For example, our Certificate of Incorporation and By-laws collectively: • authorize the issuance of “blank check” preferred stock that could be issued by the Board of Directors (the “Board of Directors”) to thwart a takeover attempt; • provide for a classified board of directors, which divides the Board of Directors into three classes, with members of each class serving staggered three-year terms, which prevents stockholders from electing an entirely new board of directors at an annual meeting; • limit the ability of stockholders to remove directors if CD&R ceases to beneficially own at least 40% of the outstanding shares of our common stock; • provide that vacancies on the Board of Directors, including vacancies resulting from an enlargement of the Board of Directors, may be filled only by a majority vote of directors then in office; • prohibit stockholders from calling special meetings of stockholders if CD&R ceases to beneficially own at least 40% of the outstanding shares of our common stock; • prohibit stockholder action by written consent, thereby requiring all actions to be taken at a meeting of the stockholders, if CD&R ceases to beneficially own at least 40% of the outstanding shares of our common stock; • opt out of Section 203 of the Delaware General Corporation Law (the “DGCL”), which prohibits a publicly-held Delaware corporation from engaging in a “business combination” with an “interested stockholder” for a period of three years following the time the person became an interested stockholder, until CD&R ceases to beneficially own at least 5% of the outstanding shares of our common stock; • establish advance notice requirements for nominations of candidates for election as directors or to bring other business before an annual meeting of our stockholders; and • require the approval of holders of at least 66 2/3% of the outstanding shares of our common stock to amend our By-laws and certain provisions of our Certificate of Incorporation if CD&R ceases to beneficially own at least 40% of the outstanding shares of our common stock.
Our success depends upon our continued ability to collaborate with and expand a network of high-caliber physician partners who can provide high quality of care, improve clinical outcomes and effectively manage healthcare costs, which are key drivers of our profitability. While the precise terms of each relationship vary, we do not directly employ our physician partners.
Our success depends upon our continued ability to collaborate with and expand a network of high-caliber physician partners who can provide high quality of care, improve clinical outcomes and effectively manage healthcare costs, which are key drivers of our profitability. While the precise terms of each relationship vary, we do not employ our physician partners.
The departure of key personnel could adversely affect the conduct of our business, financial condition, cash flows, and results of operations. In such event, we would be required to hire other personnel to manage and operate our business, and we may not be able to employ a suitable replacement for the departing individual at favorable terms, or at all.
The departure of key personnel could adversely affect the conduct of our business, financial condition, cash flows, and results of operations. In such an event, we would be required to hire other personnel to manage and operate our business, and we may not be able to employ a suitable replacement for the departing individual at favorable terms, or at all.
Further, as a young and rapidly growing company with a limited operating history, it is uncertain whether our platform, partnership and network model will achieve and sustain high levels of demand, physician and payor acceptance and market adoption. Due to our limited operating history, it is also difficult for us to evaluate our business compared to prior periods.
Further, as a young and rapidly growing company with a limited operating history, it is uncertain whether our platform, partnership and network model will achieve and sustain high levels of demand, physician and payor acceptance, market adoption and profitability. Due to our limited operating history, it is also difficult for us to evaluate our business compared to prior periods.
In addition, subject to certain conditions and without the consent of the then-existing lenders, the loans under the Credit Facilities may be expanded (or new term loan facilities, revolving credit facilities or letter of credit facilities added) by up to $50.0 million plus an additional amount equal to the aggregate amount of certain prepayments, repayments and redemptions of term loans and/or permanent reduction in the revolving credit facilities.
In addition, subject to certain conditions and without the consent of the then-existing lenders, the loans under the Credit Facility may be expanded (or new term loan facilities, revolving credit facilities or letter of credit facilities added) by up to $50.0 million plus an additional amount equal to the aggregate amount of certain prepayments, repayments and redemptions of term loans and/or permanent reduction in the revolving credit facilities.
The financial aspects of the ACO REACH Model are set forth in an agreement between the ACO and CMS. CMS has the right to amend the agreement without the consent of the DCE for good cause or as necessary to comply with applicable federal or state law, regulatory requirements, accreditation standards or licensing guidelines or rules.
The financial aspects of the ACO REACH Model are set forth in an agreement between the ACO and CMS. CMS has the right to amend the agreement without the consent of the ACO for good cause or as necessary to comply with applicable federal or state law, regulatory requirements, accreditation standards or licensing guidelines or rules.
Numerous state and federal laws and regulations govern the collection, dissemination, use, privacy, confidentiality, security, availability, integrity and other processing of PHI and, more broadly, personally identifiable information whether or not related to healthcare. These laws and regulations include HIPAA, as amended by the HITECH Act.
Numerous state, federal, and international laws and regulations govern the collection, dissemination, use, privacy, confidentiality, security, availability, integrity and other processing of PHI and, more broadly, personally identifiable information whether or not related to healthcare. These laws and regulations include HIPAA, as amended by the HITECH Act.
The policies relating to corporate opportunities and transactions with the CD&R Investor set forth in our Certificate of Incorporation address potential conflicts of interest between agilon health, on the one hand, and the CD&R Investor and its officers, directors, employees, members or partners who are directors or officers of our company, on the other hand.
The policies relating to corporate opportunities and transactions with CD&R set forth in our Certificate of Incorporation address potential conflicts of interest between agilon health, on the one hand, and CD&R and its officers, directors, employees, members or partners who are directors of our company, on the other hand.
Any interruption in access to member information, unauthorized access to information, improper disclosure or other loss of information could also result in federal or state government investigations and liability under laws and regulations that protect the privacy of member information, such as HIPAA, potentially resulting in damages and regulatory penalties.
Any interruption in access to member information, unauthorized access to information, improper disclosure or other loss of information could also result in federal, state, or foreign government investigations and liability under laws and regulations that protect the privacy of member information, such as HIPAA, potentially resulting in damages and regulatory penalties.
The security of our technology platform and other aspects of our services, including those provided or facilitated by our third-party service providers, is important to our operations and business strategy because of the sensitivity of the PHI and other confidential information we and our providers collect, store, process and transmit.
The security of our technology platform and other aspects of our services, including those provided or facilitated by our third-party service providers, is important to our operations and business strategy because of the sensitivity of the PHI and other confidential information we and our providers access, collect, store, process and transmit.
We, as well as our physician partners and affiliates, have in the past, and could in the future, be subject to federal and state investigations, audits and enforcement actions. Expansion of federal, state and payor enforcement activity could adversely affect our business, financial condition , cash flows, and results of operations.
We, as well as our physician partners and affiliates, have in the past, and could in the future, be subject to federal and state investigations, audits and enforcement actions. Federal, state and payor enforcement activity could adversely affect our business, financial condition , cash flows, and results of operations.
If we are unable to protect the confidentiality of our know-how and other proprietary and internally developed information, our operations could be adversely affected. Our business depends on internally developed information, including our databases, confidential information and know-how, the protection of which is crucial to the success of our business.
If we are unable to protect the confidentiality of our know-how and other proprietary and internally developed information, our operations could be adversely affected. Our business depends on internally developed information, including our databases, confidential information, know-how and brand, the protection of which is crucial to the success of our business.
See “Business—Healthcare and Other Applicable Regulatory Matters—Federal and State Insurance and Managed Care Laws” in Item 1. We therefore expect significant uncertainty regarding whether our operations fall within the scope of certain laws or regulations.
See “Business—Healthcare and Other Applicable Regulatory Matters—Federal and State Insurance and Managed Care Laws” in Item 1. We therefore expect uncertainty regarding whether our operations fall within the scope of certain laws or regulations.
If our remedial measures are insufficient to address the material weaknesses, or if significant deficiencies or material weaknesses in our internal control over financial reporting are discovered or occur in the future, it may adversely affect us. ITEM 1B. Unresolved Staff Comments None.
If our remedial measures are insufficient to address the material weakness, or if significant deficiencies or material weaknesses in our internal control over financial reporting are discovered or occur in the future, it may adversely affect us. ITEM 1B. Unresolved Staff Comments None.
In order to retain and motivate valuable employees, in addition to salary and cash incentives, we provide stock options and restricted stock units that either vest over time or are based on the performance against predetermined financial targets.
In order to hire, retain, and motivate valuable employees, in addition to salary and cash incentives, we provide stock options and restricted stock units that either vest over time or are based on the performance against predetermined financial targets.
We utilize third-party service providers for important aspects of the collection, storage and transmission of PHI and other sensitive information and, therefore, we may be unable to control the use of such information or the security protections employed by such third parties.
We utilize third-party service providers for important aspects of the access, collection, storage and transmission of PHI and other sensitive information and, therefore, we may be unable to control the use of such information or the security protections employed by such third parties.
If we do not develop, if we develop more slowly than we expect, if we encounter negative publicity or if our value propositions for physician partners, patients and payors do not drive sufficient member growth, the growth of our business will be harmed.
If we do not develop, if we develop more slowly than we expect, if we encounter negative publicity or if our value propositions for physician partners, patients and payors do not drive sufficient member growth, the growth and profitability of our business will be harmed.
(“agilon management”) and its subsidiaries to: • incur additional indebtedness and create liens; • pay dividends and make other distributions or to purchase, redeem or retire capital stock; • purchase, redeem or retire certain junior indebtedness; • make loans and investments; • enter into agreements that limit agilon management’s or its subsidiaries’ ability to pledge assets or to make distributions or loans to us or transfer assets to us; • sell assets; • enter into certain types of transactions with affiliates; • consolidate, merge or sell substantially all assets; • make voluntary payments or modifications of junior indebtedness; and 51 Table of Contents • enter into lines of business. agilon management and its subsidiaries account for substantially all of our assets and total liabilities.
(“agilon management”) and its subsidiaries to: • incur additional indebtedness and create liens; • pay dividends and make other distributions or to purchase, redeem or retire capital stock; • purchase, redeem or retire certain junior indebtedness; • make loans and investments; • enter into agreements that limit agilon management’s or its subsidiaries’ ability to pledge assets or to make distributions or loans to us or transfer assets to us; • sell assets; • enter into certain types of transactions with affiliates; • consolidate, merge or sell substantially all assets; • make voluntary payments or modifications of junior indebtedness; and 45 Table of Contents • enter into lines of business. agilon management and its subsidiaries account for substantially all of our assets and total liabilities.
However, we may not be successful in making the improvements necessary to remediate the material weaknesses identified by management or be able to do so in a timely manner, or be able to identify and remediate additional control deficiencies or material weaknesses in the future.
However, we may not be successful in making the improvements necessary to remediate the material weakness identified by management or be able to do so in a timely manner, or be able to identify and remediate additional control deficiencies or material weaknesses in the future.
We may in the future be a party to various and material lawsuits, demands, claims, qui tam suits, government investigations and audits, of which any could result in, among other things, substantial financial penalties or awards against us, reputational harm, termination of relationships or contracts related to our business, mandated refunds, substantial payments made by us, required changes to our business practices, exclusion from future participation in Medicare and other healthcare programs and possible criminal penalties.
We may in the future be a party to various and material lawsuits, demands, claims, qui tam suits, government investigations and audits or government enforcement actions, of which any could result in, among other things, substantial financial penalties or awards against us, reputational harm, termination of relationships or contracts related to our business, mandated refunds, substantial payments made by us, required changes to our business practices, exclusion from future participation in Medicare and other healthcare programs and possible criminal penalties.
Furthermore, the existence of the foregoing provisions, as well as the significant amount of common stock that the CD&R Investor owns, could limit the price that investors might be willing to pay in the future for shares of our common stock.
Furthermore, the existence of the foregoing provisions, as well as the significant amount of common stock that CD&R owns, could limit the price that investors might be willing to pay in the future for shares of our common stock.
However, we do not directly employ or control our physician partners, and accordingly any adverse effects on us regarding their noncompliance with documentation requirements are uncertain and unpredictable.
However, we do not employ or control our physician partners, and accordingly any adverse effects on us regarding their noncompliance with documentation requirements are uncertain and unpredictable.
If we are found in violation of applicable laws or regulations, we could suffer severe consequences that would have a material adverse effect on our business, results of operations, financial condition, cash flows, reputation and stock price, including: • suspension or termination of our participation in federal healthcare programs; • criminal or civil liability, fines, damages or monetary penalties for violations of healthcare fraud and abuse laws, including the federal False Claims Act, CMPL, Anti-Kickback Statute and Stark Law; • enforcement actions by governmental agencies or claims for monetary damages by patients under federal or state patient privacy laws, including HIPAA; • enforcement actions by governmental agencies or monetary penalties for violations of the 21 st Century Cures Act; • repayment of amounts received in violation of law or applicable payment program requirements, and related monetary penalties; • mandated changes to our practices or procedures that materially increase operating expenses; • imposition of corporate integrity agreements that could subject us to ongoing audits and reporting requirements as well as increased scrutiny of our billing and business practices; • termination of various relationships or contracts related to our business; and • harm to our reputation which could negatively affect our business relationships, decrease our ability to attract or retain patients and physicians, decrease access to new business opportunities and impact our ability to obtain financing, among other things.
If we are found in violation of applicable laws or regulations, we could suffer severe consequences that would have a material adverse effect on our business, results of operations, financial condition, cash flows, reputation and stock price, including: • suspension or termination of our participation in federal or state health care programs; • criminal or civil liability, fines, damages or monetary penalties for violations of healthcare fraud and abuse laws, including the federal FCA, Healthcare Fraud Statutes, CMPL, Anti-Kickback Statute and Stark Law; • enforcement actions by governmental agencies or claims for monetary damages by patients under federal or state patient privacy laws, including HIPAA; • enforcement actions by governmental agencies or monetary penalties for violations of the 21 st Century Cures Act; • repayment of amounts received in violation of law or applicable payment program requirements, and related monetary penalties; • mandated changes to our practices or procedures that materially increase operating expenses; • imposition of corporate integrity agreements that could subject us to ongoing audits and reporting requirements as well as increased scrutiny of our billing and business practices; • termination of various relationships or contracts related to our business; and • harm to our reputation which could negatively affect our business relationships, decrease our ability to attract or retain patients and physicians, decrease access to new business opportunities and impact our ability to obtain financing, among other things.
In addition to federal regulations issued under HIPAA, some states have enacted their own data privacy and security statutes or regulations that govern the use and disclosure of a person’s health information or records. Such state laws, if more stringent than HIPAA requirements, are not preempted by the federal requirements, and we are required to comply with them.
In addition to federal regulations issued under HIPAA, several states have enacted their own data privacy and security statutes or regulations that govern the use and disclosure of a person’s health information or records. Such state laws, if more stringent than HIPAA requirements, are not preempted by the federal requirements, and we are required to comply with them.
Our actual medical claims liabilities have varied and will continue to vary from our estimates, particularly in times of significant changes in utilization, medical cost trends and populations and geographies served. If our actual liability for claims payments is higher than previously estimated, our earnings in any particular quarter or annual period could be negatively affected.
Our actual medical claims liabilities have varied and will continue to vary from our estimates, particularly in times of significant changes in utilization, medical cost trends and populations and geographies served. If our actual liability for claims payments is higher than previously estimated, our earnings in any particular quarter, annual period or forecasted periods could be negatively affected.
Accordingly, the loss or dissatisfaction of any physician partners, our inability to recruit and integrate physician partners into our model, or the failure of our physician partners to recruit additional PCPs or manage and scale capacity to timely meet patient demand, could substantially harm our brand and reputation, impact our competitiveness, inhibit widespread adoption of our platform, partnership and network model and impair our ability to attract new physician partners and maintain existing physician partnerships, both in new geographies and in geographies in which we currently operate, which could have a material adverse effect on our business, financial condition, cash flows, and results of operations.
Accordingly, the loss or dissatisfaction of any physician partners, our inability to recruit and integrate physician partners into our model, or the failure of our physician partners to recruit additional PCPs or manage and scale capacity to timely 20 Table of Contents meet patient demand, could substantially harm our brand and reputation, impact our competitiveness, inhibit widespread adoption of our platform, partnership and network model and impair our ability to attract new physician partners and maintain existing physician partnerships, both in new geographies and in geographies in which we currently operate, which could have a material adverse effect on our business, financial condition, cash flows, and results of operations.
We do not directly employ or control our physician partners, and accordingly any adverse effects on us regarding their noncompliance with laws and regulations are uncertain and unpredictable. 47 Table of Contents Our use, disclosure and processing of personally identifiable information, PHI, and de-identified data is subject to HIPAA and state patient confidentiality laws, and our failure to comply with those regulations or to adequately secure the information we hold could result in significant liability or reputational harm and, in turn, cause a material adverse effect on our members and revenue.
We do not directly employ or control our physician partners, and accordingly any adverse effects on us regarding their noncompliance with laws and regulations are uncertain and unpredictable. 41 Table of Contents Our use, disclosure and processing of personally identifiable information, PHI, and de-identified data is subject to HIPAA and state patient confidentiality laws, and our failure to comply with those regulations or to adequately secure the information we hold could result in significant liability or reputational harm and, in turn, cause a material adverse effect on our members, revenue, and operations.
Responding to lawsuits and other proceedings as well as defending ourselves in such matters will continue to require management’s attention and cause us to incur significant legal expense. It is also possible that criminal proceedings may be initiated against us or individuals in our business in connection with investigations by the federal government.
Responding to lawsuits and other proceedings as well as defending ourselves in such matters may require management’s attention and cause us to incur significant legal expense. It is also possible that criminal proceedings may be initiated against us or individuals in our business in connection with investigations by the federal government.
If we are unable to repay indebtedness, lenders having secured obligations, such as the lenders under the Credit Facilities, could proceed against the collateral securing the indebtedness. This could materially and adversely affect our business, financial condition, cash flows, and results of operations, and could cause us to become bankrupt or insolvent.
If we are unable to repay indebtedness, lenders having secured obligations, such as the lenders under the Credit Facility, could proceed against the collateral securing the indebtedness. This could materially and adversely affect our business, financial condition, cash flows, and results of operations, and could cause us to become bankrupt or insolvent.
In accordance with those policies, the CD&R Investor may pursue corporate opportunities, including acquisition opportunities that may be complementary to our business, without offering those opportunities to us. By becoming a stockholder in agilon health, you will be deemed to have notice of and have consented to these provisions of our Certificate of Incorporation.
In accordance with those policies, CD&R may pursue corporate opportunities, including acquisition opportunities that may be complementary to our business, without offering those opportunities to us. By becoming a stockholder in agilon health, you will be deemed to have notice of and have consented to these provisions of our Certificate of Incorporation.
Consequently, the restrictions in the Credit Facilities may prevent us from taking actions that we believe would be in the best interest of our business and may make it difficult for us to execute our business strategy successfully or effectively compete with companies that are not similarly restricted.
Consequently, the restrictions in the Credit Facility may prevent us from taking actions that we believe would be in the best interest of our business and may make it difficult for us to execute our business strategy successfully or effectively compete with companies that are not similarly restricted.
If we are unable to remediate these material weaknesses, or if we experience additional material weaknesses in the future or otherwise fail to maintain an effective system of internal controls, we may not be able to accurately or timely report our financial results, in which case our business may be harmed, investors may lose confidence in the accuracy and completeness of our financial reports and, as a result, our common stock price may be adversely affected and we may be unable to maintain compliance with NYSE listing requirements.
If we are unable to remediate this material weakness, or if we experience additional material weaknesses in the future or otherwise fail to maintain an effective system of internal controls, we may not be able to accurately or timely report our financial results, in which case our business may be harmed, investors may lose confidence in the accuracy and completeness of our financial reports and, as a result, our common stock price may be adversely affected and we may be unable to maintain compliance with NYSE listing requirements.
If we fail to achieve appropriate economies of scale, if we fail to manage or anticipate the evolution of the Total Care Model or if we fail to raise necessary capital to fund our startup costs, our business, financial condition, cash flows, and results of operations could be materially adversely affected.
If we fail to achieve appropriate economies of scale, if we fail to manage or anticipate the evolution of the Total Care Model throughout our markets or if we fail to raise necessary capital to fund our startup costs, our business, financial condition, cash flows, and results of operations could be materially adversely affected.
If we are unable or unwilling to incur such costs, our growth in new geographies may be less successful than in our current geographies. Further, our growth to date has increased the significant demands on our management, operational and financial systems, infrastructure and other resources.
If we are unable or unwilling to incur such costs, our growth in new geographies may be less successful than in our current geographies. Further, our growth to date has significantly increased the demands on our management, operational and financial systems, infrastructure and other resources.
Payments of dividends, if any, are at the sole discretion of our board of directors after taking into account various factors, including general and economic conditions, our financial condition and operating results, our available cash and current and anticipated cash needs, capital requirements, contractual, legal, tax and regulatory restrictions and implications of the payment of dividends by us to our stockholders or by our subsidiaries to us, and such other factors as our board of directors may deem relevant.
Payments of dividends, if any, are at the sole discretion of the Board of Directors after taking into account various factors, including general and economic conditions, our financial condition and operating results, our available cash and current and anticipated cash needs, capital requirements, contractual, legal, tax and regulatory restrictions and implications of the payment of dividends by us to our stockholders or 47 Table of Contents by our subsidiaries to us, and such other factors as the Board of Directors may deem relevant.
All of our employees are “at-will” employees or have offer letters or employment agreements that allow their employment to be terminated by us or them at any time, for any reason and without notice, subject, in certain cases, to severance payment rights.
Our employees are “at-will” employees or have offer letters or employment agreements that allow their employment to be terminated by us or them at any time, for any reason and without notice, subject, in certain cases, to severance payment rights.
Further, the agreements governing the Credit Facilities significantly restrict the ability of our subsidiaries to pay dividends or otherwise transfer assets to us, and we may enter into other credit agreements or borrowing arrangements in the future that restrict or limit our ability to pay cash dividends on our common stock.
Further, the agreements governing the Credit Facility significantly restrict the ability of our subsidiaries to pay dividends or otherwise transfer assets to us, and we may enter into other credit agreements or borrowing arrangements in the future that restrict or limit our ability to pay cash dividends on our common stock.
Although HIPAA does not itself provide a private right of action, it is commonly cited in consumer actions that allege improper use and disclosure of sensitive patient data: use of tracking technologies, such as cookies, web beacons, and pixels, by covered entities or their business associates has recently been subject to class action lawsuits alleging improper disclosure of patient information.
Although HIPAA does not itself provide a private right of action, it is commonly cited in consumer actions that allege improper use and disclosure of sensitive patient data: use of tracking technologies, such as cookies, web beacons, and pixels, by covered entities or their business associates has recently been subject to class action lawsuits alleging improper disclosure of patient 42 Table of Contents information.
Under our Certificate of Incorporation, the CD&R Investor and its affiliates and, in some circumstances, each of our directors and officers who is also a director, officer, employee, member or partner of the CD&R Investor and its affiliates, have no obligation to offer us corporate opportunities.
Under our Certificate of Incorporation, CD&R and its affiliates and, in some circumstances, each of our directors and officers who is also a director, officer, employee, member or partner of CD&R and its affiliates, have no obligation to offer us corporate opportunities.
If our subsidiaries are in compliance with certain coverage ratios set forth in the agreements governing the Credit Facilities, they may be able to incur substantial additional indebtedness, which could increase the risks created by our current indebtedness.
If our subsidiaries are in compliance with certain coverage ratios set forth in the agreements governing the Credit Facility, they may be able to incur substantial additional indebtedness, which could increase the risks created by our current indebtedness.
Factors that could contribute to a reduction in membership include: • failure to obtain new physician partners or members or to retain existing physician partners or members; • decision by a payor to not renew the existing contractual agreement upon termination of such contract; • low quality of care by our physician partners, including as a result of our failure to provide tools and information to deliver high-quality care; • alternative care opportunities that are more attractive than those provided by our physician partners; • premium increases, benefit revisions or other similar changes, which cause our current payor relationships to be less attractive to members than other alternatives, including traditional Medicare or MA plans with which we do not maintain a relationship; • negative publicity, through social media, news coverage or otherwise, related to us, our physician partners, payors or MA; • failure of our payors to maintain their annual ratings awarded by CMS to health plans which measure the quality of health services received by beneficiaries enrolled in MA based on various calculated quality metrics (“STAR ratings”), which leads to members disenrolling from such payors; and • federal and state regulatory changes.
Factors that could contribute to a reduction in membership include: • failure to obtain new physician partners or members or to retain existing physician partners or members; • decision by a payor not to renew the existing contractual agreement upon termination of such contract; • low quality of care by our physician partners, including as a result of our failure to provide sufficient implementation in our Total Care Model, tools and information to deliver high-quality care; • alternative care opportunities that are more attractive than those provided by our physician partners; 23 Table of Contents • premium increases, benefit revisions or other similar changes, which cause our current payor relationships to be less attractive to members than other alternatives, including traditional Medicare or MA plans with which we do not maintain a relationship; • negative publicity, through social media, news coverage or otherwise, related to us, our physician partners, payors or MA; • failure of our payors to maintain their annual ratings awarded by CMS to health plans which measure the quality of health services received by beneficiaries enrolled in MA based on various calculated quality metrics (“STAR ratings”), which leads to members disenrolling from such payors; and • federal and state regulatory changes.
Security breaches, cybersecurity attacks, loss of data and other disruptions to our data platforms could compromise sensitive information related to our business and expose us to liability, which could adversely affect our operations, financial condition, cash flows and results of operation.
Security breaches, cybersecurity attacks, loss of data and other disruptions to our information systems could compromise sensitive information related to our business and expose us to liability, which could adversely affect our operations, financial condition, cash flows and results of operation.
If our subsidiaries suffer losses due to their lack of performance, our physician partners’ failure to perform under their contracts or other reasons, we may be required to fund such losses or our subsidiaries may breach their payor contracts or incur regulatory consequences.
If our subsidiaries suffer losses due to their lack of performance, our physician partners’ failure to perform under their contracts or other reasons, we may be required to fund such losses or our subsidiaries may subject to allegations of breach of their payor contracts or may incur regulatory consequences.
This typically takes the form of letters of credit or restricted deposits, or the payor may retain a percentage of the capitation payments due under the applicable contract. Risk-bearing capital required by payors varies by payor and geography.
This typically takes the form of letters of credit, surety bonds, or restricted deposits, or the payor may retain a percentage of the capitation payments due under the applicable contract. Risk-bearing capital required by payors varies by payor and geography.
There is also a risk that such risk-bearing capital amounts may be increased in the future as a result of regulatory changes, changes in performance by our local operating subsidiaries and physician partners and expansion of our business. 42 Table of Contents Repayment obligations arising out of payor audits, such as CMS RADV audits, can be significant and adversely impact reimbursement rates.
There is also a risk that such risk-bearing capital amounts may be increased in the future as a result of regulatory changes, changes in performance by our local operating subsidiaries and physician partners and expansion of our business. Repayment obligations arising out of payor audits, such as CMS RADV audits, can be significant and adversely impact reimbursement rates.
Our success will depend to a substantial extent on our ability to demonstrate the value of our platform, partnership and network model to physicians and payors. Our ability to replicate the success of our model also enables us to attract and retain skilled physician partners.
Our success will depend to a substantial extent on our ability to demonstrate the value of our platform, partnership and network model to physicians and payors. We believe our ability to replicate the success of our model also enables us to attract and retain skilled physician partners.
We rely on our payors for membership attribution and assignment, data and reporting accuracy and claims payment.
We rely on our payors for membership attribution and assignment, timely data and reporting accuracy and claims payment.
In these Risk-Adjustment Data Validation Audits (“RADV audits”), the government reviews medical records to determine whether physician medical record documentation and coding practices are compliant, which can result in the recovery of payments from managed care organizations if errors are identified and influence the calculation of premium payments by CMS to MA plans.
In these Risk-Adjustment Data Validation Audits (“RADV audits”), the government reviews medical records to determine whether physician medical record documentation and coding practices are compliant, which can result in the recovery of payments and other monetary penalties from managed care organizations if errors are identified and influence the calculation of premium payments by CMS to MA plans.
The ability of agilon management to comply with the covenants and restrictions contained in the Credit Facilities may be affected by economic, financial and industry conditions outside our control including credit or capital market disruptions.
The ability of agilon management to comply with the covenants and restrictions contained in the Credit Facility may be affected by economic, financial and industry conditions outside our control including credit or capital market disruptions.
Any failure or interruption in the services provided by these third parties could negatively impact our ability to operate, relationships with members and physician partners and adversely affect our business, financial condition, cash flows, and results of operations. 36 Table of Contents We rely on third-party internet infrastructure and bandwidth providers for our operations, and any failure or interruption in the services provided by these third parties could negatively impact our ability to operate and our relationships with members and physician partners and adversely affect our business, financial condition, cash flows, and results of operations.
We rely on third-party internet infrastructure and bandwidth providers for our operations, and any failure or interruption in the services provided by these third parties could negatively impact our ability to operate and our relationships with members and physician partners and adversely affect our business, financial condition, cash flows, and results of operations.
As a young and rapidly growing company, we may be unfamiliar with the regulatory requirements in each geography that we enter, and we may be forced to incur significant expenditures to ensure compliance with requirements to which we are subject.
As a young and rapidly growing company, we may be unfamiliar with the regulatory requirements in each geography that we enter, and we may be forced to incur significant expenditures to ensure compliance with requirements to which we may become subject.
Our operations are subject to extensive federal, state and local government laws and regulations, such as: • Federal and state laws, and related regulations, including the CMPL, which impose civil and criminal liability on individuals or entities that knowingly submit false or fraudulent claims for payment, or knowingly make, or cause to be made, a false statement in order to have a false claim paid, including qui tam or whistleblower suits, and impose civil monetary penalties on entities that fail to disclose and repay known overpayments; • Federal and state anti-kickback laws, and related regulations, which generally prohibit transactions intended to induce or reward referrals for items or services reimbursable by a federal healthcare program; • Federal and state physician self-referral prohibition statutes, and related regulations, which generally prohibit physicians from referring a patient to an entity providing DHS if the physician (or his/her immediate family member) has a financial relationship with that entity; • Provisions of, and regulations enacted pursuant to, HIPAA, as amended, HITECH, and the American Recovery and Reinvestment Act of 2009, as well as similar or more stringent state laws, regarding the collection, use and disclosure of health information; • Provisions of, and regulations enacted pursuant to, the 21 st Century Cures Act, regarding interoperability and prohibitions against information blocking; • Federal laws and regulations that require providers to enroll in the Medicare program before submitting any claims for services, to promptly report certain changes in operations to the agencies that administer these programs, and to re-enroll in these programs when changes in direct or indirect ownership occur or in response to revalidation requests from Medicare; • Federal and state laws that govern managed care organizations, such as our payors, and downstream contracted entities, such as our RBEs, including laws governing timely payment of claims, quality assurance, utilization review, credentialing, financial solvency, downstream transfers of risk and payor-provider contractual relationships; • State laws that govern the activities of third-party administrators and utilization review agents; and • State laws that prohibit general business entities from practicing medicine, controlling physicians’ medical decisions or engaging in certain practices, such as splitting fees with physicians.
Our operations are subject to extensive federal, state and local government laws and regulations, such as: • Federal and state laws, and related regulations, including the fraud and abuse laws such as the FCA and Health Care Fraud Statute, which impose civil and criminal liability on individuals or entities that knowingly submit false or fraudulent claims for payment, or knowingly make, or cause to be made, a false statement in order to have a false claim paid, including qui tam or whistleblower suits, and impose civil monetary penalties on entities that fail to disclose and repay known overpayments; • Federal and state anti-kickback laws, and related regulations, which generally prohibit arrangements intended to induce or reward referrals for items or services reimbursable by a healthcare program; • Federal and state physician self-referral prohibition statutes, and related regulations, which generally prohibit physicians from referring a patient to an entity providing certain DHS if the physician (or his/her immediate family member) has a financial relationship with that entity; • Provisions of, and regulations enacted pursuant to, HIPAA, as amended, HITECH, and the American Recovery and Reinvestment Act of 2009, as well as similar or more stringent state laws, regarding the collection, use and disclosure of health information; • Provisions of, and regulations enacted pursuant to, the 21 st Century Cures Act, regarding interoperability and prohibitions against information blocking; • Federal laws and regulations that require providers to enroll in the Medicare program before submitting any claims for services, to promptly report certain changes in operations to the agencies that administer 38 Table of Contents these programs, and to re-enroll in these programs when changes in direct or indirect ownership occur or in response to revalidation requests from Medicare; • Federal and state laws that govern managed care organizations, such as our payors, and downstream contracted entities, such as our RBEs, including laws governing timely payment of claims, quality assurance, utilization review, credentialing, financial solvency, downstream transfers of risk and payor-provider contractual relationships; • State laws that govern the activities of third-party administrators and utilization review agents; • Laws relating to competition and anticorruption; and • State laws that prohibit general business entities from practicing medicine, controlling physicians’ medical decisions or engaging in certain practices, such as splitting fees with physicians.
Furthermore, our subsidiaries are permitted under the terms of the Credit Facilities to incur additional indebtedness that may restrict or prohibit the making of distributions, the payment of dividends or the making of loans by such subsidiaries to us.
Furthermore, our subsidiaries are permitted under the terms of the Credit Facility to incur additional indebtedness that may restrict or prohibit the making of distributions, the payment of dividends or the making of loans by such subsidiaries to us.
To estimate the related amount of revenue that will ultimately be realized for the periods presented, we estimate our members’ risk adjustment factors based on our knowledge of members’ health status, which is in turn based on physicians’ clinical assessment and documentation of members’ health status, existing risk adjustment factors and applicable Medicare guidelines.
To estimate the related amount of revenue that will ultimately be realized for the periods presented, we estimate our members’ risk adjustment factors based on our knowledge of members’ health status, which is in turn based on physicians’ clinical 24 Table of Contents assessment and documentation of members’ health status, existing risk adjustment factors and applicable Medicare guidelines.
We expect regulatory and economic conditions to result in additional consolidation. Physician groups or payors that have consolidated and are not already part of our network may try to use their increased bargaining power to negotiate better terms upon which to join our network.
We expect regulatory and economic conditions to result in additional consolidation. Physician groups or payors that have consolidated and are not already part of our network may try to use their increased bargaining power to negotiate better terms upon 32 Table of Contents which to join our network.
In addition, certain of our payor contracts incorporate language that enables payors to recoup funding from us in the event that CMS requires payment under an RADV audit.
In addition, certain of our payor contracts incorporate language that enables payors to recoup funding from us in the event that CMS requires payment under a RADV audit.
Such breaches of our infrastructure or information, or that of our third-party providers, whether as a result of physical break-ins, computer viruses, cyberattacks, or employee or contractor error, negligence or malfeasance, can create system disruptions, shutdowns or unauthorized disclosure or modification of sensitive information, including PHI.
Such breaches of our infrastructure or information, or that of our third-party providers, whether as a result of physical break-ins, computer viruses, cyberattacks, or employee, vendor or contractor error, negligence or malfeasance, can create system disruptions, shutdowns or unauthorized access, use, disclosure or modification of sensitive information, including PHI.
Financings, if available, may be on terms that restrict our operational flexibility, dilute the economic or voting rights of our stockholders or reduce the market price of our common stock.
Financing, if available, may be on terms that restrict our operational flexibility, dilute the economic or voting rights of our stockholders or reduce the market price of our common stock.
In the future, we may need to obtain additional licenses from third parties in connection with our growth into new geographies or provision of new or supplemental services, and such additional licenses may not be available on commercially reasonable terms, or at all.
In the future, we may need to obtain additional licenses from third parties in connection with our growth into new geographies or 31 Table of Contents provision of new or supplemental services, and such additional licenses may not be available on commercially reasonable terms, or at all.
We could, further, be liable for substantial penalties to the government under the False Claims Act for each false claim, plus up to three times the amount of damages caused by each false claim, which can be as much as the amounts received directly or indirectly from the government for each such false claim.
We could, further, be liable for substantial penalties to the government under the FCA for each false claim, plus up to three times the amount of damages caused by each false claim, which can be as much as the amounts received directly or indirectly from the government for each such false claim.
Because the techniques used to obtain unauthorized access or to otherwise disrupt computer systems change frequently and generally are not identified until they are launched against a target, we or our third-party service providers may be unable to implement adequate preventative measures or effectively respond to breaches 30 Table of Contents in a timely fashion.
Because the techniques used to obtain unauthorized access or to otherwise disrupt computer systems change frequently and generally are not identified until they are launched against a target, we or our third-party service providers may be unable to implement adequate preventative measures or effectively respond to breaches in a timely fashion.
Our information technology and infrastructure, and that of our third-party service providers, may be vulnerable to various forms of attacks by hackers or to viruses, other technical failures or breaches due to third-party action, or due to employee and contractor negligence, error or malfeasance.
Our information technology and infrastructure, and that of our third-party service providers, may be vulnerable to various forms of attacks by hackers or to viruses, other technical failures or breaches due to third-party action, or due to employee and contractor negligence, error 26 Table of Contents or malfeasance.
In addition, the agreements governing the Credit Facilities significantly restrict the ability of our subsidiaries to pay dividends, make loans or otherwise transfer assets to us.
In addition, the agreements governing the Credit Facility significantly restrict the ability of our subsidiaries to pay dividends, make loans or otherwise transfer assets to us.
While our contracts vary, generally, if the cost of medical care provided exceeds the corresponding capitation revenue we receive we may realize operating deficits, which are typically not capped, and could lead to substantial losses. Difficulties in obtaining accurate and complete diagnosis data could have adverse consequences.
While our contracts vary, generally, if the cost of medical care provided exceeds the corresponding capitation revenue we receive we may realize operating deficits, which are typically not capped, and could lead to substantial losses or otherwise impair our profitability. Difficulties in obtaining accurate and complete diagnosis data could have adverse consequences.
In addition, payors may disallow, in whole or in part, requests for reimbursement based on determinations that certain amounts are not covered, services provided were not medically necessary, or supporting documentation was 35 Table of Contents not adequate. Retroactive adjustments may change amounts realized from payors and result in recoupments or refund demands, affecting revenue already received.
In addition, payors may disallow, in whole or in part, requests for reimbursement based on determinations that certain amounts are not covered, services provided were not medically necessary, or supporting documentation was not adequate. Retroactive adjustments may change amounts realized from payors and result in recoupments or refund demands, affecting revenue already received.
Government funding for healthcare programs is subject to statutory and regulatory changes, administrative rulings, interpretations of policy and determinations by intermediaries and governmental funding restrictions, all of which could materially impact program coverage and reimbursements for both institutional and professional services. The healthcare industry in the United States is undergoing significant structural change and is rapidly evolving.
Government funding for healthcare programs is subject to statutory and regulatory changes, administrative rulings, interpretations of policy and determinations by intermediaries and governmental funding restrictions, all of which could materially impact program coverage and reimbursements for both institutional and professional services. The healthcare industry in the U.S. is undergoing significant structural change and is rapidly evolving.
We must continue to improve our existing systems for operational and 24 Table of Contents financial management, including our reporting systems, procedures and controls and management and mitigation of enterprise and operational risks. These improvements could require significant capital expenditures and place increasing demands on our management.
We must continue to improve our existing systems for operational and financial management, including our reporting systems, procedures and controls and management and mitigation of enterprise and operational risks. These improvements could require significant capital expenditures and place increasing demands on our management.
If any diagnosis information or encounter data are inaccurate or incorrect, claims or encounter data submissions to payors may not be compliant, resulting in potential overpayments, possible recoupments and liability under the federal False Claims Act or through RADV audits.
If any diagnosis information or encounter data are inaccurate or incorrect, claims or encounter data submissions to payors may not be compliant, resulting in potential overpayments, possible recoupments and possible liability under the federal FCA or through RADV audits.
Even an unsuccessful challenge by regulatory authorities could result in adverse publicity and could require a costly response. Additionally, on December 1, 2022, OCR issued guidance on the use of tracking technologies on websites and mobile applications, indicating that certain information collected from websites and applications may 48 Table of Contents implicate HIPAA.
Even an unsuccessful challenge by regulatory authorities could result in adverse publicity and could require a costly response. Additionally, on December 1, 2022, HHS OCR issued guidance on the use of tracking technologies on websites and mobile applications, indicating that certain information collected from websites and applications may implicate HIPAA.
Our revenues could be further reduced by budget reconciliation bills, which could increase the MA coding intensity adjustment. Negative publicity regarding the managed healthcare industry generally could adversely affect our results of operations or business.
Our revenues could be further reduced by budget reconciliation bills, which could increase the MA coding intensity adjustment. 37 Table of Contents Negative publicity regarding the managed healthcare industry generally could adversely affect our results of operations or business.
Regulatory proposals directed at containing or lowering the cost of healthcare, including the Direct Contracting Model, and our participation, voluntary or otherwise, in such proposed models, could impact our business, financial condition, cash flows and operations. The CMS Innovation Center continues to test an array of alternative payment models that could impact our business, financial condition, cash flows and operations.
Regulatory proposals directed at containing or lowering the cost of healthcare, including the ACO REACH Model, and our participation, voluntary or otherwise, in such proposed models, could impact our business, financial condition, cash flows and operations. The CMS Innovation Center continues to test an array of alternative payment models that could impact our business, financial condition, cash flows and operations.
We may not be successful in executing these strategies, or we may fail to implement such strategies in future markets as effectively as with our initial markets.
We may not be successful in executing these strategies, or we may fail to implement such strategies in future markets as effectively as with our current markets.
To the extent that utilization of medical services or the cost of providing such services increases beyond our expectations, the total cost to provide medical services to our members may exceed the corresponding amount of revenue we receive, which may result in losses and adversely impact our business, financial condition, cash flows, and results of operations.
To the extent that utilization of medical services or the cost of providing such services increases beyond our expectations, the total cost to provide medical services to our members may exceed the corresponding amount of revenue we receive, which may result in losses or profitability that does not meet expectations and adversely impact our business, financial condition, cash flows, and results of operations.
Enforcing a claim that a third party illegally disclosed or obtained and is using any of our internally developed information is difficult, expensive and time-consuming, and the outcome is unpredictable. In addition, courts outside the United States are sometimes less willing to protect know-how and other proprietary information.
Enforcing a claim that a third party illegally disclosed or obtained and is using any of our internally developed information is difficult, expensive and time-consuming, and the outcome is unpredictable. In addition, courts outside the U.S. are sometimes less willing to protect know-how and other proprietary information.
Any violation or 44 Table of Contents alleged violation of any of these laws or regulations by us or our affiliates, or our physician partners or payors, could have a material adverse effect on our business, financial condition, cash flows, and results of operations.
Any violation or alleged violation of any of these laws or regulations by us or our affiliates, or our physician partners or payors, could have a material adverse effect on our business, financial condition, cash flows, and results of operations.

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Item 2. Properties

Properties — owned and leased real estate

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ITEM 2. Properties As of December 31, 2022, we leased approximately 147,000 gross square feet relating to 16 office facilities. We believe our facilities are adequate and suitable for our current needs and that should it be needed, suitable additional or alternative space will be available to accommodate our operations. 55 Table of Contents
ITEM 2. Properties As of December 31, 2023, we leased approximately 142,000 gross square feet relating to 17 office facilities. We believe our facilities are adequate and suitable for our current needs and that should it be needed, suitable additional or alternative space will be available to accommodate our operations. ITEM 3.
Added
Legal Proceedings See “Legal Proceedings” section of Note 12 to the Consolidated Financial Statements for information regarding legal proceedings, which information is incorporated by reference in this Item 3. ITEM 4. Mine Safety Disclosures Not applicable. 51 Table of Contents PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Any future determination to pay dividends on our common stock will be made at the discretion of the Board and will depend upon, among other factors, our financial condition, operating results, current and anticipated cash needs, plans for expansion and other factors that the Board may deem relevant.
Any future determination to pay dividends on our common stock will be made at the discretion of the Board of Directors and will depend upon, among other factors, our financial condition, operating results, current and anticipated cash needs, plans for expansion and other factors that the Board of Directors may deem relevant.
ITEM 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information for Common Stock Our Class A common stock, par value $0.01 per share, is listed on the New York Stock Exchange under the symbol “AGL” and began trading on April 15, 2021.
ITEM 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information for Common Stock Our common stock, par value $0.01 per share, is listed on the New York Stock Exchange under the symbol “AGL” and began trading on April 15, 2021.
Total cumulative return is based on a $100 investment and assumes reinvestment of dividends before consideration of income taxes. Stockholder returns over the indicated periods should not be considered indicative of future stock prices or stockholder returns.
Total cumulative return is based on a $100 investment and assumes reinvestment of dividends before consideration of 52 Table of Contents income taxes. Stockholder returns over the indicated periods should not be considered indicative of future stock prices or stockholder returns.
In addition, our ability to pay dividends to holders of our common stock is significantly limited as a practical matter by the Credit Facilities insofar as we may seek to pay dividends out of funds made available to us by agilon health management inc. or its subsidiaries, because the Credit Facilities restrict agilon management’s ability to pay dividends or make loans to us.
In addition, our ability to pay dividends to holders of our common stock is significantly limited as a practical matter by the Credit Facility insofar as we may seek to pay dividends out of funds made available to us by agilon health management inc. or its subsidiaries, because the Credit Facility restricts agilon management’s ability to pay dividends or make loans to us.
Prior to that date, there was no public trading market for our common stock. Holders of Common Stock At February 24, 2023, we had 772 stockholders of record of common stock.
Prior to that date, there was no public trading market for our common stock. Holders of Common Stock As of February 24, 2024, we had 673 stockholders of record of common stock.
The actual number of holders of our Class A common stock is greater than the number of record holders, and includes stockholders who are beneficial owners, but whose shares are held in street name by brokers or other nominees.
The actual number of holders of our common stock is greater than the number of record holders, and includes stockholders who are beneficial owners, but whose shares are held in street name by brokers or other nominees. The number of holders of record presented here also do not include stockholders whose shares may be held in trust by other entities.
Issuer Purchases of Equity Securities There were no repurchases of equity securities during the year ended December 31, 2022. 56 Table of Contents Performance Graph The graph and table below compare the cumulative total return of agilon, the S&P 500, and the S&P 500 Health Care Index from April 15, 2021 (the date our common stock began trading on the NYSE) to December 31, 2022.
Performance Graph The graph and table below compare the cumulative total return of agilon, the S&P 500, and the S&P 500 Health Care Index from April 15, 2021 (the date our common stock began trading on the NYSE) to December 31, 2023.
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN RATE OF RETURN TREND COMPARISON April 15, 2021–DECEMBER 31, 2022 (April 15, 2021 = $100) Performance Graph Total Stockholder Return 4/15/21 6/30/21 9/30/21 12/31/21 3/31/22 6/30/22 9/30/22 12/31/22 agilon health, inc. $ 100 $ 176 $ 114 $ 117 $ 110 $ 95 $ 102 $ 70 S&P 500 100 104 105 117 111 93 89 96 S&P 500 Health Care 100 107 108 120 117 110 105 118 ITEM 6. [Reserved] 57 Table of Contents
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN RATE OF RETURN TREND COMPARISON April 15, 2021–December 31, 2023 (April 15, 2021 = $100) Performance Graph Total Stockholder Return 4/15/21 12/31/21 12/31/22 12/31/23 agilon health, inc. $ 100 $ 117 $ 70 $ 55 S&P 500 100 117 96 121 S&P 500 Health Care 100 120 118 120 ITEM 6. [Reserved] 53 Table of Contents
The number of holders of record present here also do not include stockholders whose shares may be held in trust by other entities. Dividend Policy We have never declared or paid any cash dividends on our capital stock, and we do not currently intend to pay any cash dividends for the foreseeable future.
Dividend Policy We have never declared or paid any cash dividends on our capital stock, and we do not currently intend to pay any cash dividends for the foreseeable future. We expect to retain future earnings, if any, to fund the development and growth of our business.
The issuances of these securities described above were deemed to be exempt from registration under the Securities Act in reliance on Section 4(a)(2) of the Securities Act as transactions by an issuer not involving a public offering.
The issuances of the common stock were exempt from registration under the Securities Act by virtue of Section 4(a)(2) of the Securities Act. These transactions did not involve any public offering, any underwriters, any underwriting discounts or commissions, or any general solicitation or advertising.
Removed
We expect to retain future earnings, if any, to fund the development and growth of our business.
Added
Unregistered Sales of Equity Securities and Issuer Purchases of Equity Securities Unregistered Sales of Equity Securities Certain of our agreements with our physician partner entities provide for grants of time-vested restricted stock units and performance stock units (collectively, (“RSUs”) to the physician partner entities.
Removed
Unregistered Sales of Equity Securities and Issuer Purchases of Equity Securities Unregistered Sales of Equity Securities During the fiscal year ended December 31, 2022, we issued 247,200 legacy director restricted stock units for retirement and amendment.
Added
On October 2, 2023, December 5, 2023, December 8, 2023, and December 15, 2023, we issued 37,627, 156,479, 98,788, and 8,743 shares of our common stock upon vesting of RSUs, respectively, to our physician partners for a total of $3,629,756.
Removed
The recipients of securities in each of these transactions acquired the securities for investment only and not with a view to or for sale in connection with any distribution thereof. Each of the recipients of securities in these transactions was an accredited investor within the meaning of Rule 501 of Regulation D under the Securities Act.
Added
The shares of common stock issued are subject to appropriate restrictive legends and the physician partner entities represented they would not transfer or distribute the common stock until all restrictions were cleared. All recipients had access, through their relationships with us or otherwise, to adequate information about us.
Added
Issuer Purchases of Equity Securities There were no repurchases of equity securities during the three months ended December 31, 2023.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Our enterprise functions include salaries and related expenses, stock-based compensation (including shares issued under partner physician group equity agreements), operational support expenses, technology infrastructure, finance, legal, as well as other costs associated with the continued growth of our platform.
Our enterprise functions include salaries and related expenses, stock-based compensation (including shares issued under partner physician group equity agreements), operational support expenses, technology infrastructure, finance, and legal, as well as other costs associated with the continued growth of our platform.
For certain of our California divestiture transactions, we continue to be responsible for any liabilities arising from the business that were incurred prior to the closing date of such transaction, including any fines, penalties, and other sanctions, the payment of claims for medical services incurred prior to the effective date of each transaction, a liability for unrecognized tax benefits for which we are indemnified, and other contingent liabilities that we currently believe are remote.
For certain of our divestiture transactions, we continue to be responsible for any liabilities arising from the business that were incurred prior to the closing date of such transaction, including any fines, penalties, and other sanctions, the payment of claims for medical services incurred prior to the effective date of each transaction, a liability for unrecognized tax benefits for which we are indemnified, and other contingent liabilities that we currently believe are remote.
Subject to specified conditions and receipt of commitments, the 2021 Secured Term Loan Facility may be expanded (or a new term loan facility, revolving credit facility or letter of credit facility added) by up to (i) $50.0 million plus (ii) an additional amount determined in accordance with a formula tied to repayment of certain of our indebtedness.
Subject to specified conditions and receipt of commitments, the Secured Term Loan Facility may be expanded (or a new term loan facility, revolving credit facility or letter of credit facility added) by up to (i) $50.0 million plus (ii) an additional amount determined in accordance with a formula tied to repayment of certain of our indebtedness.
Key Financial and Operating Metrics All of our key metrics exclude historical results from our California operations (which are included as discontinued operations in our consolidated financial statements). We monitor the following key financial and operating metrics to help us evaluate our business, identify trends affecting our business, formulate business plans and make strategic decisions.
Key Financial and Operating Metrics All of our key metrics exclude historical results from our Hawaii and California operations (which are included as discontinued operations in our consolidated financial statements). We monitor the following key financial and operating metrics to help us evaluate our business, identify trends affecting our business, formulate business plans and make strategic decisions.
Some of these limitations are: • Adjusted EBITDA does not reflect changes in, or cash requirements for, working capital needs ; • Adjusted EBITDA does not reflect interest expense, or the requirements necessary to service interest or principal payments on debt ; • Adjusted EBITDA does not reflect income tax expense (benefit) or the cash requirements to pay taxes ; • Adjusted EBITDA does not reflect historical cash expenditures or future requirements for capital expenditures or contractual commitments; • Although depreciation and amortization charges are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future, and Adjusted EBITDA does not reflect any cash requirements for such replacements ; and 68 Table of Contents • The expenses and other items that we exclude in our calculation of Adjusted EBITDA may differ from the expenses and other items, if any, that other companies may exclude from similarly titled non-GAAP financial measures.
Some of these limitations are: • Adjusted EBITDA does not reflect changes in, or cash requirements for, working capital needs; • Adjusted EBITDA does not reflect interest expense, or the requirements necessary to service interest or principal payments on debt; • Adjusted EBITDA does not reflect income tax expense (benefit) or the cash requirements to pay taxes; 64 Table of Contents • Adjusted EBITDA does not reflect historical cash expenditures or future requirements for capital expenditures or contractual commitments; • Although depreciation and amortization charges are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future, and Adjusted EBITDA does not reflect any cash requirements for such replacements; and • The expenses and other items that we exclude in our calculation of Adjusted EBITDA may differ from the expenses and other items, if any, that other companies may exclude from similarly titled non-GAAP financial measures.
Our operating expenses at the enterprise level include resources and technology to support payor contracting, clinical program development, quality, data management, finance and legal functions.
Our operating expenses at the enterprise level include resources and technology to support payor contracting, clinical program development, quality, data management, finance, and legal and compliance functions.
Adjusted EBITDA has limitations as an analytical tool and should not be considered in isolation or as an alternative to such GAAP measures as net income (loss), cash flows provided by or used in operating, investing or financing activities or other financial statement data presented in our consolidated financial statements as an indicator of financial performance or liquidity.
Adjusted EBITDA has limitations as an analytical tool and should not be considered in isolation or as an alternative to such U.S. GAAP measures as net income (loss), cash flows provided by or used in operating, investing or financing activities or other financial statement data presented in our consolidated financial statements as an indicator of financial performance or liquidity.
Interest payments on debt are calculated using outstanding balances and interest rates in effect on December 31, 2022. (2) See Note 6 for additional information regarding the maturity of lease liabilities under operating leases. (3) See Note 12 for additional information regarding capital commitments to physician partners to support physician partner expansion and related purposes.
Interest payments on debt are calculated using outstanding balances and interest rates in effect on December 31, 2023. (2) See Note 6 for additional information regarding the maturity of lease liabilities under operating leases. (3) See Note 12 for additional information regarding capital commitments to physician partners to support physician partner expansion and related purposes.
Based on our planned operations, we believe that our existing cash and cash equivalents, as well as available borrowing capacity under the Credit Facilities, will be sufficient to meet our working capital and capital expenditure needs over at least the next 12 months, though we may require additional capital resources in the future.
Based on our planned operations, we believe that our existing cash and cash equivalents, as well as available borrowing capacity under the Credit Facility, will be sufficient to meet our working capital and capital expenditure needs over at least the next 12 months, though we may require additional capital resources in the future.
Our ability to pay dividends to holders of our common stock is significantly limited as a practical matter by our growth plans as well as the Credit Facilities insofar as we may seek to pay dividends out of funds made available to us by agilon management or its subsidiaries because the Credit Facilities restrict agilon management’s ability to pay dividends or make loans to us.
Our ability to pay dividends to holders of our common stock is significantly limited as a practical matter by our growth plans as well as the Credit Facility insofar as we may seek to pay dividends out of funds made available to us by agilon management or its subsidiaries because the Credit Facility restrict agilon management’s ability to pay dividends or make loans to us.
Substantially all of the year-over-year decrease in general and administrative expenses is attributable to a $264.0 million decrease in non-cash stock-based compensation expense, which was largely related to shares issued under partner physician group equity agreements in connection with our IPO in April 2021 and the satisfaction of a performance condition associated with certain stock options in the third quarter of 2021.
Substantially all of the year-over-year decrease in general and administrative expenses is attributable to a $264.0 million decrease in non-cash stock-based compensation expense, which was largely related to shares issued under partner physician group equity agreements in connection with our initial public offering ("IPO") in April 2021 and the satisfaction of a performance condition associated with certain stock options in the third quarter of 2021.
We define Adjusted EBITDA as net income (loss) adjusted to exclude: (i) income (loss) from discontinued operations, net of income taxes, (ii) interest expense, (iii) income tax expense (benefit), (iv) depreciation and amortization, (v) geography entry costs, (vi) stock-based compensation expense, (vii) severance and related costs, and (viii) certain other items that are not considered by us in the evaluation of ongoing operating performance.
We define Adjusted EBITDA as net income (loss) adjusted to exclude: (i) income (loss) from discontinued operations, net of income taxes, (ii) interest expense, (iii) income tax expense (benefit), (iv) depreciation and amortization, (v) stock-based compensation expense, (vi) severance and related costs, and (vii) certain other items that are not considered by us in the evaluation of ongoing operating performance.
We define Adjusted EBITDA as net income (loss) adjusted to exclude: (i) income (loss) from discontinued operations, net of income taxes, (ii) interest expense, (iii) income tax expense (benefit), (iv) depreciation and amortization, (v) geography entry costs, (vi) stock-based compensation expense, (vii) severance and related costs, and (viii) certain other items that are not considered by us in the evaluation of ongoing operating performance.
We define Adjusted EBITDA as net income (loss) adjusted to exclude: (i) income (loss) from discontinued operations, net of income taxes, (ii) interest expense, (iii) income tax expense (benefit), (iv) depreciation and amortization, (v) stock-based compensation expense, (vi) severance and related costs, and (vii) certain other items that are not considered by us in the evaluation of ongoing operating performance.
Operating costs to support our live geographies and enterprise functions as a percentage of revenue decreased to 5% for the year ended December 31, 2022 compared to 7% for the same period in 2021.
Operating costs to support our live geographies and enterprise functions as a percentage of revenue decreased to 5% for the year ended December 31, 2023 compared to 7% for the same period in 2022.
Contracts with payors are generally multi-year arrangements and have a single performance obligation that constitutes a series, as defined by ASC 606, to stand ready on a monthly basis to provide all aspects of necessary medical care to members for the contracted period.
Contracts with payors are generally multi-year arrangements and have a single performance 68 Table of Contents obligation that constitutes a series, as defined by ASC 606, to stand ready on a monthly basis to provide all aspects of necessary medical care to members for the contracted period.
We 74 Table of Contents determine the fair value of stock-based option awards subject to a service condition on the date of grant using the Black-Scholes option pricing model, unless the awards are also subject to a market condition, in which case we use a Monte Carlo simulation valuation model.
We determine the fair value of stock-based option awards subject to a service condition on the date of grant using the Black-Scholes option pricing model, unless the awards are also subject to a market condition, in which case we use a Monte Carlo simulation valuation model.
We will discuss and provide our analysis in the following order: • Overview and Key Developments • COVID-19 • Key Financial and Operating Metrics • Key Components of Our Results of Operations • Results of Operations • Non-GAAP Financial Measures • Liquidity and Capital Resources • Critical Accounting Estimates Overview and Key Developments Our business is transforming healthcare by empowering the PCP to be the agent for change in the communities they serve.
We will discuss and provide our analysis in the following order: • Overview and Key Developments • Key Financial and Operating Metrics • Key Components of Our Results of Operations • Results of Operations • Non-GAAP Financial Measures • Liquidity and Capital Resources • Critical Accounting Estimates • Recent Accounting Pronouncements Overview and Key Developments Our business is transforming healthcare by empowering the PCP to be the agent for change in the communities they serve.
We believe network contribution and Adjusted EBITDA or similarly titled non-GAAP measures are widely used by investors, securities analysts, ratings agencies, and other parties in evaluating companies in our industry as a measure of financial performance. Other companies may calculate network contribution and Adjusted EBITDA or similarly titled non-GAAP measures differently from the way we calculate these metrics.
We believe medical margin and Adjusted EBITDA or similarly titled non-GAAP measures are widely used by investors, securities analysts, ratings agencies, and other parties in evaluating companies in our industry as a measure of financial performance. Other companies may calculate medical margin and Adjusted EBITDA or similarly titled non-GAAP measures differently from the way we calculate these metrics.
We also believe network contribution and Adjusted EBITDA provide useful information about our operating results, enhance the overall understanding of our past performance and future prospects, and allow for greater transparency with respect to key metrics we use for financial and operational decision-making.
We also believe medical margin and Adjusted EBITDA provide useful information about our operating results, enhance the overall understanding of our past performance and future prospects, and allow for greater transparency with respect to key metrics we use for financial and operational decision-making.
As a result, our presentation of network contribution and Adjusted EBITDA may not be comparable to similarly titled measures of other companies, limiting their usefulness as comparative measures. Adjusted EBITDA is not considered a measure of financial performance under GAAP, and the items excluded therefrom are significant components in understanding and assessing our financial performance.
As a result, our presentation of medical margin and Adjusted EBITDA may not be comparable to similarly titled measures of other companies, limiting their usefulness as comparative measures. Adjusted EBITDA is not considered a measure of financial performance under U.S. GAAP, and the items excluded therefrom are significant components in understanding and assessing our financial performance.
As the instruments were liability-classified, the amount of shares ultimately issued and related compensation cost were measured at the vesting date in April 2021, as a Change of Control Event was not deemed probable until consummated. Upon our initial public offering, we recognized stock-based compensation cost relating to these share-based instruments of $268.5 million.
As the instruments were liability-classified, the amount of shares ultimately issued and related compensation cost were measured at the vesting date in April 2021, as a 69 Table of Contents Change of Control Event was not deemed probable until consummated. Upon our IPO, we recognized stock-based compensation cost relating to these share-based instruments of $268.5 million.
For additional discussion related to our medical services expense, see “—Critical Accounting Estimates” and Note 2 to the Consolidated Financial Statements. 61 Table of Contents Other Medical Expenses Other medical expenses include: (i) partner physician compensation expense and (ii) other provider costs.
For additional discussion related to our medical services expense, see “—Critical Accounting Estimates” below and Note 2 to the Consolidated Financial Statements. Other Medical Expenses Other medical expenses include: (i) partner physician compensation expense and (ii) other provider costs.
Average medical services expense per member remained relatively flat compared to prior year.
Average medical services revenue per member remained relatively flat compared to prior year.
Base Rate Loans bear interest at a rate equal to the sum of 3.00% (stepping down to 2.50% on and following October 1, 2023) and the highest of: (a) 0.50% in excess of the overnight federal funds rate, (b) the prime rate established by the administrative agent from time to time, (c) the one-month LIBO rate (adjusted for maximum reserves) plus 1.00% and (d) 0%.
Base Rate Loans bear interest at a rate equal to the sum of 2.50% and the highest of: (a) 0.50% in excess of the overnight federal funds rate, (b) the prime rate established by the administrative agent from time to time, (c) the one-month LIBO rate (adjusted for maximum reserves) plus 1.00% and (d) 0%.
During the year ended December 31, 2022 , we received net proceeds of $33.1 million from the exercise of stock options . In February 2021, we refinanced our existing debt with a $100.0 million term loan, receiving net proceeds of $30.1 million.
During the year ended December 31, 2023, we used $200.0 million to repurchase our common stock. During the year ended December 31, 2022, we received net proceeds of $33.1 million from the exercise of stock options. In February 2021, we refinanced our existing debt with a $100.0 million term loan, receiving net proceeds of $30.1 million.
We believe network contribution and Adjusted EBITDA help identify underlying trends in our business and facilitate evaluation of period-to-period operating performance of our live geographies by eliminating items that are variable in nature and not considered by us in the evaluation of ongoing operating performance, allowing comparison of our recurring core business operating results over multiple periods.
We believe medical margin and Adjusted EBITDA help identify underlying trends in our business and facilitate evaluation of period-to-period operating performance of our operations by eliminating items that are variable in nature and not considered by us in the evaluation of ongoing operating performance, allowing comparison of our recurring core business operating results over multiple periods.
The borrower on the Credit Facilities is agilon management, our wholly-owned subsidiary.
The borrower on the Credit Facility is agilon management, our wholly-owned subsidiary.
Net Cash Provided By (Used In) Investing Activities Net cash used in investing activities was $444.4 million for the year ended December 31, 2022 compared to $90.5 million and $22.1 million for the years ended and December 31, 2021 and 2020, respectively.
Net Cash Provided By (Used In) Investing Activities Net cash used in investing activities was $44.0 million for the year ended December 31, 2023 compared to $444.4 million and $90.5 million for the years ended and December 31, 2022 and 2021, respectively.
Partner physician compensation expense increased by $42.8 million to $95.0 million in 2022 compared to $52.2 million in 2021 as a result of six new geographies that became operational in 2022 and growth in our existing geographies.
Partner physician compensation expense increased by $42.8 million to $94.6 million in 2022 compared to $51.8 million in 2021 as a result of six new geographies that became operational in 2022 and growth in our existing geographies.
We reflect our share of Adjusted EBITDA for equity method investments by applying our actual ownership percentage for the period to the applicable reconciling items on an entity-by-entity basis. Income (loss) from operations is the most directly comparable GAAP measure to network contribution. Net income (loss) is the most directly comparable GAAP measure to Adjusted EBITDA.
We reflect our share of Adjusted EBITDA for equity method investments by applying our actual ownership percentage for the period to the applicable reconciling items on an entity-by-entity basis. Gross profit is the most directly comparable U.S. GAAP measure to medical margin. Net income (loss) is the most directly comparable U.S. GAAP measure to Adjusted EBITDA.
Net Cash Provided By (Used In) Financing Activities Net cash provided by financing activities was $28.1 million for the year ended December 31, 2022 compared to $1.2 billion and $24.6 million for the years ended December 31, 2021 and 2020, respectively.
Net Cash Provided By (Used In) Financing Activities Net cash used in financing activities was $193.1 million for the year ended December 31, 2023 compared to net cash provided by financing activities of $28.1 million and $1.15 billion for the years ended December 31, 2022 and 2021, respectively.
The Credit Facilities include: (i) a $100.0 million senior secured term loan (the “2021 Secured Term Loan Facility”) and (ii) a $100.0 million senior secured revolving credit facility (the “2021 71 Table of Contents Secured Revolving Facility”) with a capacity to issue standby letters of credit in certain circumstances up to a maximum of $80.0 million.
The Credit Facility includes: (i) a $100.0 million senior secured term loan (the “Secured Term Loan Facility”) and (ii) a $100.0 million senior secured revolving credit facility (the “Secured Revolving Facility”) with a capacity to issue standby letters of credit in certain circumstances up to a maximum of $100.0 million.
For additional discussion on our debt obligations, see Note 11 to the Consolidated Financial Statements for additional information about our outstanding debt. Equity As of December 31, 2022, we had 412.4 million shares of common stock outstanding. See Note 13 to the Consolidated Financial Statements for additional information about our equity transactions.
Equity As of December 31, 2023, we had 406.4 million shares of common stock outstanding. See Note 13 to the Consolidated Financial Statements for additional information about our equity transactions.
The following table sets forth changes in cash flows for the periods indicated (dollars in thousands): Year Ended December 31, 2022 2021 2020 Net cash provided by (used in) operating activities $ (130,808 ) $ (148,159 ) $ (53,204 ) Net cash provided by (used in) investing activities (444,388 ) (90,506 ) 22,066 Net cash provided by (used in) financing activities 28,056 1,154,390 24,621 Net Cash Provided By (Used In) Operating Activities Net cash used in operating activities was $130.8 million for the year ended December 31, 2022 compared to $148.2 million and $53.2 million for the years ended December 31, 2021 and 2020, respectively.
The following table sets forth changes in cash flows for the periods indicated (dollars in thousands): Year Ended December 31, 2023 2022 2021 Net cash provided by (used in) operating activities $ (156,199) $ (130,808) $ (148,159) Net cash provided by (used in) investing activities (44,019) (444,388) (90,506) Net cash provided by (used in) financing activities (193,133) 28,056 1,154,390 66 Table of Contents Net Cash Provided By (Used In) Operating Activities Net cash used in operating activities was $156.2 million for the year ended December 31, 2023 compared to $130.8 million and $148.2 million for the years ended December 31, 2022 and 2021, respectively.
Operating costs to support our live geographies and enterprise functions (platform support costs) increased by $23.0 million to $146.5 million in 2022 compared to $123.5 million in 2021 due primarily to growth in operating costs incurred to support geographies that became operational in 2022.
Operating costs to support our live geographies and enterprise functions (platform support costs) increased by $31.1 million to $127.5 million in 2022 compared to $96.3 million in 2021 due primarily to growth in operating costs incurred to support geographies that became operational in 2022.
The assumptions for making such estimates and establishing liabilities are continually reviewed and updated, and any adjustments resulting therein are reflected in current period earnings. These estimates may differ from actual results, which could be material to our consolidated financial statements.
Such estimates are based on many variables, including utilization trends and historical and statistical lag analysis, among other factors. The assumptions for making such estimates and establishing liabilities are continually reviewed and updated, and any adjustments resulting therein are reflected in current period earnings. These estimates may differ from actual results, which could be material to our consolidated financial statements.
Management makes estimates and judgments about future taxable income based on assumptions that are consistent with our plans and estimates . 62 Table of Contents Total Discontinued Operations Total discontinued operations consist of the results of our California operations, which include the entirety of our Medicaid line of business.
Management makes estimates and judgments about future taxable income based on assumptions that are consistent with our plans and estimates. Total Discontinued Operations Total discontinued operations consist of the results of our Hawaii and California operations.
Deferred tax assets are reduced by a valuation allowance to the extent management believes it is not more likely than not to be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income .
Income Tax Benefit (Expense) We are subject to corporate U.S. federal, state, and local income taxation. Deferred tax assets are reduced by a valuation allowance to the extent management believes it is not more likely than not to be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income.
Through our combination of the agilon platform, a long-term partnership model with existing physician groups and a growing network of like-minded physicians, we are poised to revolutionize healthcare for seniors across communities throughout the United States. Our purpose-built model provides the necessary capabilities, capital and business model for existing physician groups to create a Medicare-centric, globally capitated line of business.
Through our combination of the agilon platform, a long-term partnership model with existing physician groups and a growing network of like-minded physicians, we believe we are poised to revolutionize healthcare for seniors across communities throughout the United States.
The Credit Facilities contain customary covenants including, among other things, limitations on restricted payments including: (i) dividends and distributions from restricted subsidiaries, (ii) requirements of minimum financial ratios, and (iii) limitation on additional borrowings based on certain financial ratios.
The Credit Facility is guaranteed by certain of our subsidiaries, including those identified as variable interest entities, and contain customary covenants including, among other things, limitations on restricted payments such as: (i) dividends and distributions from restricted subsidiaries, (ii) requirements of minimum financial ratios, and (iii) limitation on additional borrowings based on certain financial ratios.
Additionally, we pay a commitment fee on the unfunded 2021 Revolving Credit Facility amount of 0.50% (stepping down to 0.375% on and following October 1, 2023). We must also pay customary letter of credit fees.
Additionally, we pay a commitment fee on the unfunded 2021 Secured Revolving Facility amount of 0.375%. We must also pay customary letter of credit fees.
Additionally, 2020 benefitted from lower claims payments due to reduced utilization as a result of the impact of COVID-19. Our cash flow from operations is dependent upon the number of members on our platform, the timing of settlements with payors and the level of operating and general and administrative expenses necessary to operate and grow our business, among other factors.
Our cash flow from operations is dependent upon the number of members on our platform, the timing of settlements with payors and the level of operating and general and administrative expenses necessary to operate and grow our business, among other factors.
The increase in medical services revenue was also driven, to a lesser extent, by a 2% increase in PMPM capitation rates. 64 Table of Contents Medical Services Expense Year Ended December 31, Change (dollars in thousands) 2022 2021 $ % Medical services expense $ 2,399,798 $ 1,647,659 $ 752,139 46 % % of total revenues 89 % 90 % Medical services expense increased by 46% due primarily to average membership growth of 45%, which was attributable to six new geographies that became operational in 2022 and growth in our existing geographies.
The increase in medical services revenue was also driven, to a lesser extent, by a 7% increase in PMPM capitation rates. 60 Table of Contents Medical Services Expense Year Ended December 31, Change (dollars in thousands) 2023 2022 $ % Medical services expense $ 4,008,659 $ 2,093,860 $ 1,914,799 91 % % of total revenues 93 % 88 % Medical services expense increased by 91% due primarily to average membership growth of 69%, which was attributable to eight new geographies that became operational in 2023 and growth in our existing geographies.
The increase in net cash used in investing activities in 2022 compared to 2021 was due primarily to investments in marketable securities of $458.3 million during 2022.
Cash used in investing activities in 2023 was due primarily for the acquisition of our My Personal Health Record Express, Inc. acquisition for $44.4 million in 2023. The increase in net cash used in investing activities in 2022 compared to 2021 was due primarily to investments in marketable securities of $458.3 million during 2022.
At our option, borrowings under the Credit Facilities, as defined in the credit agreement, can be either: (i) LIBO Rate Loans or (ii) Base Rate Loans.
At our option, borrowings under the credit agreement can be either: (i) SOFR Rate Loans, (ii) Daily Simple SOFR Rate Loans, or (iii) Base Rate Loans.
Medical Services Revenue Our medical services revenue consists of capitation revenue under contracts with various payors. Under the typical capitation arrangement, we are entitled to PMPM fees to provide a defined range of healthcare services for MA health plan members through our contracted physician partners and affiliated PCPs.
Under the typical capitation arrangement, we are entitled to PMPM fees to provide a defined range of healthcare services for MA health plan members through our contracted physician partners and affiliated PCPs. Such fees are typically based on a defined percentage of corresponding premium that payors receive from CMS.
Medical services expenses are recognized in the period in which services are provided and include estimates of our obligations for medical services that have been rendered by third parties, but for which claims have either not yet been received, processed or paid. 73 Table of Contents Such estimates are based on many variables, including utilization trends and historical and statistical lag analysis, among other factors.
Medical services expenses are recognized in the period in which services are provided and include estimates of our obligations for medical services that have been rendered by third parties, but for which claims have either not yet been received, processed or paid.
For additional discussion related to our revenue, see “—Critical Accounting Estimates” and Note 2 to the Consolidated Financial Statements. Operating Expenses Medical Services Expense In each of our geographies, a network of physicians, hospitals, and other healthcare providers provide care to our members. Medical services expense represents costs incurred for medical services provided to our members.
Operating Expenses Medical Services Expense In each of our geographies, a network of physicians, hospitals, and other healthcare providers provide care to our members. Medical services expense represents costs incurred for medical services provided to our members.
Other provider costs increased by $43.9 million to $101.2 million in 2022 compared to $57.3 million in 2021, as the number of geographies and members on our platform increased in 2022.
Other provider costs increased by $41.8 million to $88.4 million in 2022 compared to $46.6 million in 2021, as the number of geographies and members on our platform increased in 2022.
The preparation of financial statements in conformity with GAAP requires us to use judgment in the application of accounting policies, including making estimates and assumptions. We base estimates on the best information available to us at the time, our historical experience, known trends and events and various other assumptions that we believe are reasonable under the circumstances.
We base estimates on the best information available to us at the time, our historical experience, known trends and events and various other assumptions that we believe are reasonable under the circumstances.
We reflect our share of Adjusted EBITDA for equity method investments by applying our actual ownership percentage for the period to the applicable reconciling items on an entity-by-entity basis. See “—Non-GAAP Financial Measures” for information regarding our use of Adjusted EBITDA and a reconciliation of net income (loss) to Adjusted EBITDA .
We reflect our share of Adjusted EBITDA for equity method investments by applying our actual ownership percentage for the period to the applicable reconciling items on an entity-by-entity basis.
Comparison of Year Ended December 31, 2021 and 2020 Medical Services Revenue Year Ended December 31, Change (dollars in thousands) 2021 2020 $ % Medical services revenue $ 1,829,735 $ 1,214,270 $ 615,465 51 % % of total revenues 100 % 100 % Medical services revenue increased by 51%, due primarily to growth in average membership of 44% that was attributable to three new geographies that became operational in 2021 and growth in our existing geographies.
Comparison of Year Ended December 31, 2022 and 2021 Medical Services Revenue Year Ended December 31, Change (dollars in thousands) 2022 2021 $ % Medical services revenue $ 2,384,889 $ 1,518,322 $ 866,567 57 % % of total revenues 100 % 100 % Medical services revenue increased by 57%, due primarily to growth in average membership of 45% that was attributable to six new geographies that became operational in 2022 and growth in our existing geographies.
LIBO Rate Loans bear interest at a rate equal to the sum of 4.00% (stepping down to 3.50% on and following October 1, 2023) and the higher of (a) LIBO, as defined in the credit agreement, and (b) 0%.
Daily Simple SOFR Rate Loans and SOFR Rate Loans bear interest at a rate equal to the sum of 3.50% and the higher of (a) SOFR, as defined in the credit agreement, and (b) 0%.
Other Income (Expense) Other Income (Expense), Net Other income (expense), net includes the following items : • Equity income (loss) from unconsolidated joint ventures; and • Interest income, which consists primarily of interest earned on our cash and cash equivalents, restricted cash and cash equivalents, and marketable securities, including amortization/accretion of discount/premium.
Other Income (Expense), Net Other income (expense), net includes interest income, which consists primarily of interest earned on our cash and cash equivalents, restricted cash and cash equivalents, and marketable securities, including amortization/accretion of discount/premium. Interest Expense Interest expense consists primarily of interest expense associated with our outstanding debt, including amortization of debt issuance costs.
For the purposes of calculating physician partner incentive expense, we allocate a portion of our enterprise general and administrative expenses to our geographies. General and administrative expenses also include severance, management fees paid to our largest shareholder prior to our IPO and accruals for unasserted claims.
For the purposes of calculating physician partner incentive expense, we allocate a portion of our enterprise general and administrative expenses to our geographies. General and administrative expenses also include severance and accruals for unasserted claims. Depreciation and Amortization Depreciation and amortization expenses are associated with our property and equipment and acquired intangible assets.
Platform Membership Details Medicare Advantage members increased 45% during 2022, which includes contributions from new geographies and growth within geographies existing prior to 2022. Total members live on the agilon platform include 269,500 Medicare Advantage members and 89,000 attributed Direct Contracting beneficiaries. Average Medicare Advantage membership during 2022 was approximately 263,900.
Platform Membership Details Medicare Advantage members increased 68% during 2023, which includes contributions from new geographies and growth within geographies existing prior to 2023. Total members live on the agilon platform include 54 Table of Contents 388,400 Medicare Advantage members and 89,300 attributed ACO REACH beneficiaries. Average Medicare Advantage membership during 2023 was approximately 379,400.
We believe this metric provides insight into the economics of our Total Care Model, as it includes all medical services expense associated with our members’ care as well as partner compensation and additional medical costs we incur as part of our aligned partnership model.
We believe this metric provides insight into the economics of our capitation arrangements as it includes all medical services expense directly associated with our members’ care.
Key Components of Our Results of Operations Revenues Medical Services Revenue Our medical services revenue consists of capitation revenue under contracts with various payors. Under the typical capitation arrangement, we are entitled to PMPM fees to provide a defined range of healthcare services for MA health plan members through our contracted physician partners and affiliated PCPs.
Under the typical capitation arrangement, we are entitled to PMPM fees to provide a defined range of healthcare services for MA health plan members through our contracted physician partners and affiliated PCPs. Such fees are typically based on a defined percentage of corresponding premium that payors receive from CMS.
We generally invest any excess cash in money market accounts, which are classified as cash equivalents, and marketable securities. Our investment strategies are designed to provide safety and preservation of capital, sufficient liquidity to meet the cash flow needs of our business operations and attainment of a competitive return .
Our investment strategies are designed to provide safety and preservation of capital, sufficient liquidity to meet the cash flow needs of our business operations and attainment of a competitive return. 65 Table of Contents As of December 31, 2023, we had cash and cash equivalents of $107.6 million and investments in marketable securities of $380.8 million.
Medical Services Expense Year Ended December 31, Change (dollars in thousands) 2021 2020 $ % Medical services expense $ 1,647,659 $ 1,021,877 $ 625,782 61 % % of total revenues 90 % 84 % Medical services expense increased by 61% due primarily to average membership growth of 44%, which was attributable to three new geographies that became operational in 2021 and growth in our existing geographies.
Medical Services Expense Year Ended December 31, Change (dollars in thousands) 2022 2021 $ % Medical services expense $ 2,093,860 $ 1,357,326 $ 736,534 54 % % of total revenues 88 % 89 % Medical services expense increased by 54% due primarily to average membership growth of 45%, which was attributable to six new geographies that became operational in 2022 and growth in our existing geographies.
General and Administrative Year Ended December 31, Change (dollars in thousands) 2022 2021 $ % General and administrative $ 218,945 $ 455,821 $ (236,876 ) (52 )% % of total revenues 8 % 25 % General and administrative expenses decreased $236.9 million, or 52%, for the year ended December 31, 2022 compared to 2021.
General and Administrative Year Ended December 31, Change (dollars in thousands) 2022 2021 $ % General and administrative $ 207,789 $ 427,502 $ (219,713) (51 %) % of total revenues 9 % 28 % General and administrative expenses decreased $219.7 million, or 51%, for the year ended December 31, 2022 compared to 2021.
The Credit Facilities are guaranteed by certain of our subsidiaries, including those identified as VIEs, and contain customary covenants including, among other things, limitations on restricted payments such as: (i) dividends and distributions from restricted subsidiaries, (ii) requirements of minimum financial ratios, and (iii) limitation on additional borrowings based on certain financial ratios. 70 Table of Contents Cash Flows The following summary discussion of our cash flows is based on the consolidated statements of cash flows.
The Credit Facility contains customary covenants including, among other things, limitations on restricted payments including: (i) dividends and distributions from restricted subsidiaries, (ii) requirements of minimum financial ratios, and (iii) limitation on additional borrowings based on certain financial ratios. 67 Table of Contents For additional discussion on our debt obligations, see Note 11 to the Consolidated Financial Statements.
Other Medical Expenses Year Ended December 31, Change (dollars in thousands) 2022 2021 $ % Other medical expenses $ 196,127 $ 109,487 $ 86,640 79 % % of total revenues 7 % 6 % Other medical expenses increased by $86.6 million, or 79%, for the year ended December 31, 2022 compared to 2021.
Other Medical Expenses Year Ended December 31, Change (dollars in thousands) 2023 2022 $ % Other medical expenses $ 238,034 $ 183,000 $ 55,034 30 % % of total revenues 6 % 8 % Other medical expenses increased by $55.0 million, or 30%, for the year ended December 31, 2023 compared to 2022.
The table below represents costs to support our live geographies and enterprise functions, which are included in general and administrative expenses (dollars in thousands): Year Ended December 31, 2022 2021 2020 Platform support costs $ 146,481 $ 123,521 $ 99,943 % of Revenue 5 % 7 % 8 % Income (Loss) From Operations and Network Contribution Income (loss) from operations is the most directly comparable U.S.
The table below represents costs to support our live geographies and enterprise functions, which are included in general and administrative expenses (dollars in thousands): Year Ended December 31, 2023 2022 2021 Platform support costs $ 163,652 $ 127,458 $ 96,314 % of Revenue 4 % 5 % 6 % Net Income (Loss) and Adjusted EBITDA Net income (loss) is the most directly comparable GAAP measure to Adjusted EBITDA.
Excludes costs in geographies that are in implementation and are not yet generating revenue. For the years ended December 31, 2022, 2021, and 2020, costs incurred in implementing geographies were $23.9 million, $12.0 million, and $8.9 million, respectively.
Includes costs in geographies that are in implementation and are not yet generating revenue and investments to grow existing markets. For the years ended December 31, 2023, 2022, and 2021, costs incurred in implementing geographies were $33.7 million, $23.9 million and $12.0 million, respectively. Medical Margin We define medical margin as medical services revenue after medical services expense is deducted.
The table above does not include future payments of claims to healthcare providers because certain terms of these payments are not determinable at December 31, 2022 (for example, the timing and volume of future medical services provided under capitation contracts). 72 Table of Contents Critical Accounting Estimates Management’s discussion and analysis of our financial condition and results of operations is based on our financial statements, which have been prepared in accordance with GAAP.
The table above does not include future payments of claims to healthcare providers because certain terms of these payments are not determinable at December 31, 2023 (for example, the timing and volume of future medical services provided under capitation contracts).
Platform support costs as a percentage of revenue decreased to 7% for the year ended December 31, 2021 compared to 8% for the same period in 2020. Investments to support geography entry increased to $20.6 million in 2021, compared to $17.9 million in 2020 due to increased costs associated with our geographies that become operational in the following calendar year.
Investments to support geography entry increased to $43.9 million in 2023, compared to $20.6 million in 2022 due to increased costs associated with our geographies that become operational in the following calendar year.
Total Discontinued Operations Year Ended December 31, Change (dollars in thousands) 2021 2020 $ % Total discontinued operations $ (1,303 ) $ 3,156 $ (4,459 ) (141 )% % of total revenues — % — % Discontinued operations generated losses of $1.3 million for the year ended December 31, 2021 compared to income of $3.2 million for the year ended December 31, 2020.
Total Discontinued Operations Year Ended December 31, Change (dollars in thousands) 2023 2022 $ % Total discontinued operations $ (67,550) $ (14,554) $ (52,996) (364) % % of total revenues (2 %) (1 %) Discontinued operations generated losses of $67.6 million for the year ended December 31, 2023 compared to $14.6 million for the year ended December 31, 2022.
Such fees are typically based on a defined percentage of corresponding premium that payors receive from CMS. We recognize capitation revenue over the period eligible members are entitled to receive healthcare services . Medical services revenue constitutes substantially all of our total revenue for the years ended December 31, 2022, 2021, and 2020.
We recognize capitation revenue over the period eligible members are entitled to receive healthcare services. Medical services revenue constitutes substantially all of our total revenue for the years ended December 31, 2023, 2022, and 2021. For additional discussion related to our revenue, see “—Critical Accounting Estimates” below and Note 2 to the Consolidated Financial Statements.
Platform support costs, which are operating costs to support our live geographies and enterprise functions, increased by $23.5 million to $123.5 million in 2021 compared to $100.0 million in 2020 due primarily to growth in operating costs incurred to support geographies that became operational in 2021, along with additional costs related to our operations as a public company.
Operating costs to support our live geographies and enterprise functions (platform support costs) increased by $36.2 million to $163.7 million in 2023 compared to $147.5 million in 2022 due primarily to growth in operating costs incurred to support geographies that became operational in 2023.
(5) Includes interest income and non-cash accruals for unasserted claims and contingent liabilities. 69 Table of Contents Liquidity and Capital Resources We have historically financed our operations primarily through funds generated from our capitation arrangements with payors, issuances of equity securities, and borrowings under credit agreements.
Adjusted EBITDA for the prior periods presented has been restated to the current period computation methodology. Liquidity and Capital Resources We have historically financed our operations primarily through funds generated from our capitation arrangements with payors, issuances of equity securities, and borrowings under credit agreements.
Future Cash Requirements The following table summarizes certain estimated future cash requirements under the Company’s various contractual obligations and commitments as of December 31, 2022, in total and disaggregated into current and long-term obligations (dollars in thousands ): Total Current Long-Term Term loan (1) $ 43,750 $ 5,000 $ 38,750 Operating leases (2) 15,950 3,840 12,110 Capital commitments (3) 134,835 112,092 22,743 Interest (1) 12,048 5,845 6,203 Total $ 206,583 $ 126,777 $ 79,806 (1) See Note 11 for additional information regarding the maturities of debt principal.
Future Cash Requirements The following table summarizes certain estimated future cash requirements under the Company’s various contractual obligations and commitments as of December 31, 2023, in total and disaggregated into current and long-term obligations (dollars in thousands): Total Current Long-Term Term loan (1) $ 38,558 $ 6,250 $ 32,308 Operating leases (2) 16,661 2,846 13,815 Capital commitments (3) 155,579 138,562 17,017 Interest (1) 7,663 4,563 3,100 Total $ 218,461 $ 152,221 $ 66,240 _____________________________________________________________________ (1) See Note 11 for additional information regarding the maturities of debt principal.
See “—Non-GAAP Financial Measures” for additional information, including reconciliations to the most directly comparable measures under generally accepted accounting principles (“GAAP”). Medicare Advantage Members Our MA members include all individuals enrolled in an MA plan that are attributed to the PCPs on our platform at the end of a given period.
Medicare Advantage Members Our MA members include all individuals enrolled in an MA plan that are attributed to the PCPs on our platform at the end of a given period. Medical Services Revenue Our medical services revenue consists of capitation revenue under contracts with various payors.
With our model, our goal is to remove the barriers that prevent community-based physicians from evolving to a Total Care Model, where the physician is empowered to manage health outcomes and the total healthcare needs of their attributed Medicare patients. 2022 Results: • Medicare Advantage members of approximately 269,500 as of December 31, 2022 increased 45% from 2021. • DCE attributed beneficiaries of approximately 89,000 as of December 31, 2022 increased 72% from 2021. • Total revenue of $2.7 billion increased 48% from 2021. • Net loss of $107 million, compared to $407 million in 2021. 2021 includes the impact of $292 million in non-cash stock-based compensation expense, substantially all of which relates to shares issued under partner physician group equity agreements in connection with our IPO in April 2021. 58 Table of Contents • Medical Margin of $305 million, compared to $182 million in 2021. • Adjusted EBITDA of positive $4 million, compared to negative $39 million in 2021.
With our model, our goal is to remove the barriers that prevent community-based physicians from evolving to a Total Care Model, where the physician is empowered to manage health outcomes and the total healthcare needs of their attributed Medicare patients. 2023 Results: • Medicare Advantage members of approximately 388,400 as of December 31, 2023 increased 68% from 2022. • ACO REACH attributed beneficiaries of approximately 89,300 as of December 31, 2023 remained flat from 2022. • Total revenue of $4.32 billion increased 81% from 2022. • Gross profit of $69.7 million, compared to $111.4 million in 2022. • Medical margin of $298.7 million, compared to $291.0 million in 2022. • Net loss of $262.8 million, compared to $106.9 million in 2022. • Adjusted EBITDA loss of $95.0 million, compared to Adjusted EBITDA loss of $45.5 million in 2022.
The following table sets forth a reconciliation of net income (loss) to Adjusted EBITDA using data derived from the consolidated financial statements for the periods indicated (dollars in thousands) : Year Ended December 31, 2022 2021 2020 Net income (loss) $ (106,864 ) $ (406,787 ) $ (60,052 ) (Income) loss from discontinued operations, net of income taxes (465 ) 1,303 (3,156 ) Interest expense 4,525 6,146 8,135 Income tax expense (benefit) 1,640 886 865 Depreciation and amortization 13,772 14,544 13,531 (Gain) loss on lease terminations 5,458 — — Geography entry costs (1) 67,741 32,572 27,100 Severance and related costs (2) 2,470 12,861 4,009 Management fees (3) — 433 1,530 Stock-based compensation expense 28,381 292,394 6,472 EBITDA adjustments related to equity method investments (4) 3,737 1,736 — Other (5) (16,144 ) 5,293 7,393 Adjusted EBITDA $ 4,251 $ (38,619 ) $ 5,827 (1) Represents direct geography entry costs, including investments to develop and expand our platform and costs in geographies that are in implementation and are not yet generating revenue.
The following table sets forth a reconciliation of net income (loss) to Adjusted EBITDA using data derived from the consolidated financial statements for the periods indicated (dollars in thousands): Year Ended December 31, 2023 2022 2021 Net income (loss) $ (262,803) $ (106,864) $ (406,787) (Income) loss from discontinued operations, net of income taxes 67,550 14,554 22,925 Interest expense 6,658 4,484 6,146 Income tax expense (benefit) 791 1,640 886 Depreciation and amortization 16,043 8,949 10,484 (Gain) loss on lease terminations — 5,458 — Severance and related costs (1) 188 2,470 12,360 Stock-based compensation expense 69,326 28,069 291,672 EBITDA adjustments related to equity method investments (2) 22,694 3,737 1,736 Other (3) (15,448) (7,967) 5,836 Adjusted EBITDA (4) $ (95,001) $ (45,470) $ (54,742) _____________________________________________________________________ (1) For the years ended December 31, 2022 and 2021, includes taxes and related costs on stock option exercises for departed executives of $2.0 million and $5.4 million, respectively.
Partner physician compensation expense declined by $13.1 million to $52.2 million in 2021 compared to $65.3 million in 2020. Other provider costs increased by $20.3 million to $57.3 million in 2021 compared to $37.0 million in 2020, as the number of geographies and members on our platform increased in 2021.
Other provider costs increased by $55.1 million to $143.5 million in 2023 compared to $88.4 million in 2022, as the number of geographies and members on our platform increased in 2023.
Other Medical Expenses Year Ended December 31, Change (dollars in thousands) 2021 2020 $ % Other medical expenses $ 109,487 $ 102,306 $ 7,181 7 % % of total revenues 6 % 8 % Other medical expenses increased by $7.2 million, or 7%, for the year ended December 31, 2021 compared to 2020.
The increase in medical services expense was also driven, to a lesser extent, by a 2% increase in PMPM capitation rates. 62 Table of Contents Other Medical Expenses Year Ended December 31, Change (dollars in thousands) 2022 2021 $ % Other medical expenses $ 183,000 $ 98,424 $ 84,576 86 % % of total revenues 8 % 6 % Other medical expenses increased by $84.6 million, or 86%, for the year ended December 31, 2022 compared to 2021.
During the year ended December 31, 2020, we raised net proceeds of $34.4 million from private sales of our common stock, including stock option exercises, and repurchased $6.7 million of common stock. Debt Obligations On February 18, 2021, we executed a credit facility agreement (as amended by the First Amendment to Credit Agreement, dated as of March 1, 2021).
Debt Obligations On February 18, 2021, we executed a credit facility agreement (as amended by the First Amendment to Credit Agreement, dated as of March 1, 2021 and the Second Amendment to Credit Agreement, dated as of May 25, 2023.
Depreciation and Amortization Depreciation and amortization expenses are associated with our property and equipment and acquired intangible assets. Depreciation includes expenses associated with buildings, computer and network equipment, furniture and fixtures, and leasehold improvements. Amortization primarily includes expenses associated with acquired intangible assets .
Depreciation includes expenses associated with buildings, computer equipment and software, furniture and fixtures, and leasehold improvements. Amortization primarily includes expenses associated with acquired intangible assets. 57 Table of Contents Other Income (Expense) Income (loss) from equity method investments Income (loss) from equity method investments consists primarily of income associated with our participation in the ACO REACH program.
The following table presents our medical margin (dollars in thousands): Year Ended December 31, 2022 2021 2020 Medical services revenue $ 2,704,396 $ 1,829,735 $ 1,214,270 Medical services expense (2,399,798 ) (1,647,659 ) (1,021,877 ) Medical margin $ 304,598 $ 182,076 $ 192,393 Platform Support Costs Our platform support costs, which include regionally-based support personnel and other operating costs to support our geographies, are expected to decrease over time as a percentage of revenue as our physician partners add members and our revenue grows.
Platform Support Costs Our platform support costs, which include regionally-based support personnel and other operating costs to support our geographies, are expected to decrease over time as a percentage of revenue as our physician partners add members and our revenue grows.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Our exposures to market risk for changes in interest expense relate primarily to the Credit Facilities. Indebtedness under the Credit Facilities is floating rate debt and is carried at amortized cost. Therefore, fluctuations in interest rates will impact our consolidated financial statements. A rising interest rate environment will increase the amount of interest paid on this debt.
Our exposures to market risk for changes in interest expense relate primarily to the Credit Facility. Indebtedness under the Credit Facility is floating rate debt and is carried at amortized cost. Therefore, fluctuations in interest rates will impact our consolidated financial statements. A rising interest rate environment will increase the amount of interest paid on this debt.
The goals of our investment policy are liquidity and capital preservation. We do not enter into investments for trading or speculative purposes. 75 Table of Contents
The goals of our investment policy are liquidity and capital preservation. We do not enter into investments for trading or speculative purposes. 70 Table of Contents
A hypothetical 100 basis point change in interest rates would not have a material impact on our interest expense. We held cash, cash equivalents, restricted cash equivalents, and marketable securities of $919.6 million and $1.1 billion as of December 31, 2022 and 2021, respectively, consisting of bank deposits, certificates of deposits, money market funds, U.S.
A hypothetical 100 basis point change in interest rates would not have a material impact on our interest expense. We held cash, cash equivalents, restricted cash equivalents, and marketable securities of $495.1 million and $887.8 million as of December 31, 2023 and 2022, respectively, consisting of bank deposits, certificates of deposits, money market funds, U.S.

Other AGL 10-K year-over-year comparisons