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What changed in agilon health, inc.'s 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of agilon health, inc.'s 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+343 added−339 removedSource: 10-K (2025-02-25) vs 10-K (2024-02-27)

Top changes in agilon health, inc.'s 2024 10-K

343 paragraphs added · 339 removed · 280 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

91 edited+10 added−23 removed143 unchanged
Biggest changeAll ACOs are subject to the following requirements: (i) to develop and implement a robust health equity plan to identify and better serve underserved communities; (ii) 75% control of each ACO's governing body must be held by participating providers or their designated representatives and (iii) each ACO must have at least two beneficiary representatives on its governing board (at least one Medicare beneficiary and at least one consumer advocate), both of 6 Table of Contents whom must hold voting rights. agilon implemented these changes for the 2023 performance year with minimal disruption.
Biggest changeOur ACOs participating medical group agreements provide for mutual indemnification rights, and have an initial term through December 31, 2026, unless earlier terminated. 6 Table of Contents All ACO REACH entities continue to be subject to the following requirements in 2025: (i) implementation of a robust health equity plan to identify and better serve underserved communities; (ii) 75% control of each ACOs governing body must be held by participating providers or their designated representatives and (iii) each ACO must have at least two beneficiary representatives on its governing board (at least one Medicare beneficiary and at least one consumer advocate), both of whom must hold voting rights.
The ability to share best practices, influence the development of the platform, compare notes on the 3 Table of Contents transition to a Total Care Model and learn from one another represents a valuable opportunity for physicians.
The 3 Table of Contents ability to share best practices, influence the development of the platform, compare notes on the transition to a Total Care Model and learn from one another represents a valuable opportunity for physicians.
Members are able to select the plan and benefit design that meets their individual needs while our platform enables a seamless experience regardless of plan or product for all patients and physician groups. 5 Table of Contents The agreements with our payors outline the range of healthcare services for which we are financially responsible and at risk, the services for which we are contracted to perform on the payor’s behalf and the key financial terms.
Members are able to select the plan and benefit design that meets their individual needs while our platform enables a seamless experience regardless of plan or product for all patients and physician groups. 5 Table of Contents The agreements with our payors outline the range of healthcare services for which we are financially responsible and at risk and the services for which we are contracted to perform on the payor’s behalf and the key financial terms.
As a result, more states are expected to enact laws that are similar to the federal FCA in the future along with a corresponding increase in state false claims enforcement efforts. Penalties for violations of the federal and state FCAs are severe.
As a result, more states are expected to enact laws that are similar to the FCA in the future along with a corresponding increase in state false claims enforcement efforts. Penalties for violations of the federal and state FCAs are severe.
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 Health Information Technology for Economic and Clinical Health of 2009 (“HITECH”) 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.
Violations of federal and state fraud and abuse laws may be punishable by criminal and/or civil sanctions, including significant penalties, fines, disgorgement, additional reporting requirements and oversight under a corporate integrity agreement or similar agreement to resolve allegations of noncompliance with these laws, and/or exclusion or suspension from federal healthcare programs, such as Medicare, and debarment from contracting with the U.S. government.
Violations of federal and state fraud and abuse laws may be punishable by criminal and/or civil sanctions, including significant penalties, fines, disgorgement, additional reporting requirements and oversight under a corporate integrity agreement or similar agreement to resolve allegations of noncompliance with these laws, and/or exclusion or suspension from federal healthcare programs, such as Medicare, debarment from contracting with the U.S. government or criminal prosecution.
As healthcare companies, such as ourselves, increasingly rely on mobile delivery platforms and other technologies to communicate with patients about appointments, billing and other issues, the potential for legal exposure under the TCPA also increases. Each call or text made in violation of the TCPA can cost up to $1,500 per instance in fines and damages.
However, as healthcare companies, such as ourselves, increasingly rely on mobile delivery platforms and other technologies to communicate with patients about appointments, billing and other issues, the potential for legal exposure under the TCPA also increases. Each call or text made in violation of the TCPA can cost up to $1,500 per instance in fines and damages.
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.
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 equivalent to the FCA.
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.
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 and the accompanying Health Care and Education Affordability Reconciliation Act (collectively referred to as the “ACA”), were enacted.
In recent years, the DOJ has brought a number of investigations and actions under the federal FCA against both payors and providers for alleged upcoding or improper coding of diagnosis coding under the risk-adjustment methodology. The FCA and Social Security Act also prohibits the knowing retention of identified overpayments (known as “reverse false claims”).
In recent years, the DOJ has brought a number of investigations and actions under the FCA against both payors and providers for alleged upcoding or improper coding of diagnosis coding under the risk-adjustment methodology. The FCA and Social Security Act also prohibits the knowing retention of identified overpayments (known as “reverse false claims”).
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.
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 quality and health outcomes and the total healthcare needs of their attributed Medicare patients.
Each of the ACOs selected the Global risk-sharing option, in which the ACO assumes accountability for the total cost of care of the FFS beneficiaries aligned to such ACO. In addition, each of our ACOs selected the Primary Care Capitation Payment (the “PCC”) option.
In ACO REACH, each of the ACOs selected the Global risk-sharing option, in which the ACO assumes accountability for the total cost of care of the FFS beneficiaries aligned to such ACO. In addition, each of our REACH ACOs selected the Primary Care Capitation Payment (the “PCC”) option.
We compete against other entities that provider value-based care services, in addition to numerous local provider networks, hospitals and health systems.
We compete against other entities that provide value-based care services, in addition to numerous local provider networks, hospitals and health systems.
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.
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 ACOs net profits received for aligned beneficiaries.
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.
The federal government, including as a result of the passage of the ACA (as defined below), 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.
In certain of our payor arrangements, we are also financially responsible for Part D pharmaceutical costs for prescriptions rendered to our members.
In certain of our payor arrangements, we are also financially responsible for Medicare Part D pharmaceutical costs for prescriptions rendered to our members.
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.
The ACOs operate in partnership pursuant to participating medical group agreements with one or more of our physician partners in certain geographies. In ACO REACH, our contracted physician partners provide Medicare services to their aligned beneficiaries, and bill CMS on a FFS basis for such services.
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.
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 10 Table of Contents government; or conspired to commit any of the foregoing.
Sanctions for violation of the Stark Law include denial of payment for claims for services provided in violation of the prohibition, refunds of amounts collected in violation of the prohibition, a civil penalty of up to $15,000 for each service arising out of the prohibited referral, a civil penalty of up to $100,000 against parties that enter into a scheme to circumvent the Stark Law prohibition, civil assessment of up to three times the amount claimed, and potential exclusion from the federal healthcare programs, including Medicare and Medicaid.
Sanctions for violation of the Stark Law include denial of payment for claims for services provided in violation of the prohibition, refunds of amounts collected in violation of the prohibition, a civil penalty of up to $15,000 for each service 12 Table of Contents arising out of the prohibited referral, a civil penalty of up to $100,000 against parties that enter into a scheme to circumvent the Stark Law prohibition, civil assessment of up to three times the amount claimed, and potential exclusion from the federal healthcare programs, including Medicare and Medicaid.
Physician and Payor Contractual Relationships Physicians Our business model combines the agilon platform, a network of like-minded physicians and a long-term partnership model in order to provide physician groups with the necessary capabilities, capital and business model to create a Medicare-centric, globally capitated line of business.
Physician and Payor Contractual Relationships Physicians Our business model combines the agilon platform, a network of like-minded physicians and a long-term partnership model to provide physician groups with the necessary capabilities, capital and business model to create a Medicare-centric, globally capitated line of business.
The FCPA also requires public companies like aglion to maintain sufficient internal controls to prevent and detect FCPA violations and to keep books, records, and accounts, which, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company.
The FCPA also requires public companies to maintain sufficient internal controls to prevent and detect FCPA violations and to keep books, records, and accounts, which, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company.
There are certain AKS “safe harbors” which, if the respective requirements are met, would afford protection from the AKS. Failure to meet all requirements of an AKS safe harbor does not necessarily mean the arrangement violates the AKS, but it may be subject to scrutiny by legal authorities, in light of the parties’ intent and arrangements.
There are certain AKS “safe harbors” which, if the respective requirements are met, would afford protection from the AKS. Failure to meet all requirements of an AKS safe harbor does not necessarily mean the arrangement violates 11 Table of Contents the AKS, but it may be subject to scrutiny by legal authorities, in light of the parties’ intent and arrangements.
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.
States with CPOM 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 limited exceptions), exercising control over medical decisions, or engaging in certain arrangements with other physicians, such as fee-splitting.
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.
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.
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.
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 are leading community-based physician partners, functioning as a collaborative group through the agilon network.
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.
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. In 2018, the U.S.
Our internally developed technology is continuously refined to support the needs of our platform and partners. Although we do not currently hold a patent for CORE or HCC Manager, we continually assess the most appropriate methods of protecting our intellectual property and may decide to pursue available protections in the future.
Our technology is continuously refined to support the needs of our platform and partners. Although we do not currently hold a patent for CORE, HCC Manager, or Minerva, we continually assess the most appropriate methods of protecting our intellectual property and may decide to pursue available protections in the future.
The participation agreements between our ACOs and CMS expire two years after the “Model Performance Period” established by CMS, which lasts from April 1, 2021 through December 31, 2026. The ACO may terminate its participation agreement with CMS at any time upon advance written notice.
In ACO REACH, the annual participation agreements between our ACOs and CMS expire two years after the “Model Performance Period” established by CMS, which lasts from April 1, 2021 through December 31, 2026. The ACO may terminate its participation agreement with CMS at any time upon advance written notice.
Only the FTC brings cases under the FTC Act. The Clayton Act, 15 U.S.C. §§ 12-27, addresses specific practices that the Sherman Act does not clearly prohibit, such as mergers and interlocking directorates (that is, the same person serving as an officer or director of two competing companies).
Only the FTC may bring cases under the FTC Act. The Clayton Act, 15 U.S.C. §§ 12-27, addresses specific practices that the Sherman Act does not clearly prohibit, such as mergers and interlocking directorates (that is, the same person serving as an officer or director of two competing companies).
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.
Our efforts to promote a positive employee experience and build culture are further supported and enhanced by local and national in-person and 8 Table of Contents 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.
A number of states have enacted laws that are similar to the federal FCA.
A number of states have enacted laws that are similar to the FCA.
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).
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).
Among other changes, the new regulations contain safe harbors for value-based arrangements centering around value-based enterprises, which are enterprises composed of participants collaborating to achieve one or more value-based purposes, including coordinating and managing the care of a target patient population and coordinating and managing the care of a target population.
Among other changes, the rules contain safe harbors for value-based arrangements centering around value-based enterprises, which are enterprises composed of participants collaborating to achieve one or more value-based purposes, including coordinating and managing the care of a target patient population and coordinating and managing the care of a target population.
Additionally, the Privacy Rule contains requirements with respect to the use and disclosure of individuals’ PHI, including a prohibition on a covered entity or business associate using or disclosing an individual’s PHI unless the use or disclosure is authorized by the individual or is specifically required or permitted under the Privacy Rule.
Additionally, HIPAA contains requirements with respect to the use and disclosure of individuals’ PHI, including a prohibition on a covered entity or business associate using or disclosing an individual’s PHI unless the use or disclosure is authorized by the individual or is specifically required or permitted under HIPAA.
Through this partnership, our physician partners’ existing MA patient panels are attributed to our platform through our subscription-like per-member per-month ("PMPM") agreements with payors.
Through this partnership, our physician partners’ existing MA patient panels are attributed to our platform through our subscription-like per-member per-month (“PMPM”) agreements with payors.
Because of the continued uncertainty about the implementation of the ACA, including the timing of and potential for further legal challenges, repeal or amendment of that legislation and the future of the health insurance exchanges, we cannot quantify or predict with any certainty the likely impact of the ACA on our business, financial condition, operating results and prospects.
Because of the continued uncertainty about the implementation of the ACA, including the timing of and potential for further legal challenges, repeal or amendment of that legislation, through the legislative or executive branches, and the future of the health insurance exchanges, we cannot quantify or predict with any certainty the likely impact of the ACA on our business, financial condition, operating results and prospects.
We have formed long-term partnerships with diverse leading community-based physician groups in geographies such as Ohio, Connecticut, Maine, Michigan, Minnesota, New York, North Carolina, Pennsylvania, South Carolina, Tennessee, and Texas.
We have formed long-term partnerships with diverse leading community-based physician groups in geographies such as Connecticut, Georgia, Kentucky, Maine, Michigan, Minnesota, New York, North Carolina, Ohio, Pennsylvania, Tennessee, and Texas.
We conduct annual employee engagement surveys to solicit feedback and help guide annual planning on efforts and initiatives to support our team members. 8 Table of Contents Total Rewards We recognize how vital our employees are to our success and strive to offer comprehensive and competitive compensation and benefits to meet the varying needs of our employees.
We conduct annual employee engagement surveys to solicit feedback and help guide annual planning on initiatives to support our team members. Total Rewards We recognize how vital our employees are to our success and strive to offer comprehensive and competitive compensation and benefits to meet the varying needs of our employees.
We have developed proprietary technology and processes that support our operational programs and clinical insights, including our “CORE” technology platform and HCC Manager risk adjustment software application, both of which are proprietary systems that aid in the aggregation and analysis of third-party data we collect.
We have proprietary technology and processes that support our operational programs and clinical insights, including our “CORE” technology platform, HCC Manager risk adjustment software application, and Minerva clinical data platform, all of which are proprietary systems that aid in the aggregation and analysis of third-party data we collect.
Human Capital Overview People join agilon because of our vision: To transform the future of healthcare in communities across the country by empowering exceptional patient-physician relationships. Together with our employees and physician partners, we have defined our company values and commitments to guide our everyday actions in executing our mission: • Partnership and Collaboration: We are One Team.
People join agilon because of our vision: To transform the future of healthcare in communities across the country by empowering exceptional patient-physician relationships. Together with our employees and physician partners, we have defined our company values and commitments to guide our everyday actions in executing our mission: • Partnership and Collaboration: We are One Team. We collaborate deeply.
Under the ACO REACH Model, CMS contracts directly with each ACO pursuant to participation agreements, in which such ACO selects risk-sharing and fee payment options. The participation agreements included various terms and conditions each ACO must comply with, including meeting certain operational requirements.
Under both the ACO REACH Model and MSSP, CMS contracts directly with each ACO pursuant to participation agreements, in which such ACO selects risk-sharing and fee payment options. The participation agreements include various terms and conditions each ACO must comply with, including meeting certain operational requirements.
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.
Cybersecurity included in this Report. 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.
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.
By 2025, CMS has indicated that they 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.
We therefore carefully analyze all payment structures to ensure that they 11 Table of Contents constitute “services and items” that fall within this safe harbor or are otherwise in compliance with the AKS.
We therefore carefully analyze all payment structures to ensure that they constitute “services and items” that fall within this safe harbor or are otherwise in compliance with the AKS.
Most of our contracts with our anchor physician groups contain exclusivity or other provisions intended to promote interconnectedness with our physician partners for applicable lines of business in order to facilitate the longevity and stability of the partnership.
Most of our contracts with our anchor physician groups contain exclusivity or other provisions intended to promote interconnectedness with our physician partners in order to facilitate the longevity and stability of the partnership.
We collaborate deeply. We embrace diversity. Together with our physician partners, we empower the care that our families and friends deserve. • Innovation: We rapidly adapt to our changing world and embrace the creativity of our physician partners and each other. • Quality and Service Excellence: We value results, not activity.
We embrace inclusion and belonging. Together with our physician partners, we empower the care that our families and friends deserve. • Innovation: We rapidly adapt to our changing world and embrace the creativity of our physician partners and each other. • Quality and Service Excellence: We value results, not activity.
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.
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 29 anchor physician groups and 30 geographies as of December 31, 2024.
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.
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. Additionally, several states have enacted physician self-referral laws.
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 physician groups, multi-specialty practices, independent practice associations, and hospital physician groups within systems.
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.
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 financial exposure. 16 Table of Contents U.S. Foreign Corrupt Practices Act of 1977 and Various Anticorruption Laws The U.S.
Foreign Corrupt Practices Act of 1977 and Various Anticorruption Laws agilon is subject to the U.S. Foreign Corrupt Practices Act, as amended, 15 U.S.C. §§ 78dd-1, et seq. (“FCPA”). The FCPA prohibits offering, promising, providing or authorizing others to give anything of value to a foreign government official to obtain or retain business or otherwise secure a business advantage.
Foreign Corrupt Practices Act, as amended, 15 U.S.C. §§ 78dd-1, et seq. (“FCPA”) prohibits offering, promising, providing or authorizing others to give anything of value to a foreign government official to obtain or retain business or otherwise secure a business advantage.
In connection with the Regulatory Sprint, the OIG issued final rules amending the AKS by adding new safe harbors and modifying existing safe harbors that protect certain payment practices and business arrangements from sanctions under the AKS in order to remove potential barriers to more effective coordination and management of patient care and delivery of value-based care.
Department of Health and Human Services’ (“HHS”) OIG issued final rules adding new safe harbors and modifying existing safe harbors that protect certain payment practices and business arrangements from sanctions under the AKS in order to remove potential barriers to more effective coordination and management of patient care and delivery of value-based care.
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.
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.
ACO REACH agilon, in conjunction with some of our physician partners, participated in the ACO REACH Model in certain geographies, through eight approved ACOs. The ACO REACH Model is a voluntary payment model option aimed at reducing expenditures and preserving or enhancing quality of care for beneficiaries in traditional Medicare FFS established by the CMS Innovation Center.
CMS ACO Models agilon, in conjunction with some of our physician partners, participated in the ACO REACH Model and MSSP in certain geographies, through 10 approved ACOs. Both the ACO REACH Model and MSSP are voluntary payment model options established by CMS aimed at reducing expenditures and preserving or enhancing quality of care for beneficiaries in traditional Medicare FFS.
These programs, in addition to focusing on career development, and professional development, reinforce the importance of compliance and ethical behavior embodied in our Code of Conduct and related policies and training, which all employees must complete upon hire and annually thereafter. We also include online courses designed to strengthen technical and hard-skills and enhance leadership development.
These programs, in addition to focusing on career development, and professional development, reinforce the importance of compliance and ethical behavior embodied in our Code of Conduct and related policies and training, which all employees must complete upon hire and annually thereafter.
We have developed local contracts across multiple payors, along with national form contracts with certain key payors, which provide a consistency of non-financial contract terms, data sharing, operational processes and governance structures and support portability of the agilon platform.
We have developed local contracts across multiple payors, along with national form contracts with certain key payors, which provide a consistency of non-financial contract terms, data sharing, operational processes and governance structures and support portability of the agilon platform. We typically maintain various contracts with a single national payor in order to reflect varying economic terms across our geographies.
Our platform has enabled us to grow our total membership by 68% and revenue by 81% from December 31, 2022 to December 31, 2023.
Our platform has enabled us to grow our total membership by 36% and revenue by 40% from December 31, 2023 to December 31, 2024.
We have endeavored to structure our business arrangements with healthcare providers to comply with the AKS or fit within an AKS safe harbor.
These rules also provide additional protections to our payment models with providers. We have endeavored to structure our business arrangements with healthcare providers to comply with the AKS or fit within an AKS safe harbor.
Our focus is on outreach to existing community-based physician groups to join our platform, establishing and maintaining our local branding and strategies to support education for our Medicare-eligible members in evaluating their Medicare options.
Marketing and Distribution In accordance with Medicare marketing guidelines, health plan payors are responsible for marketing directly to patients. Our focus is on outreach to existing community-based physician groups to join our platform, establishing and maintaining our local branding and strategies to support education for our Medicare-eligible members in evaluating their Medicare options.
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.
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, liability under HIPAA, potentially resulting in damages and regulatory penalties.
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 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. We believe our first-of-its-kind platform, partnership and network model enables us to compete favorably.
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.
Among other things, HIPAA requires healthcare providers and their business associates to maintain the privacy and security of individually identifiable PHI. HIPAA 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 TCPA also regulates the use of automated equipment to deliver calls or text messages to mobile phones without prior express consent. Congress empowered the FCC to interpret the TCPA through rules, regulations and declaratory rulings.
The TCPA was enacted by Congress to combat aggressive telemarketing and fax advertising practices believed to invade consumer privacy. The TCPA also regulates the use of automated equipment to deliver calls or text messages to mobile phones without prior express consent. Congress empowered the FCC to interpret the TCPA through rules, regulations and declaratory rulings.
None of our employees are members of a labor union, and we have not experienced a work stoppage. Our employees do not include our physician partners, whom we do not directly employ. Healthcare and Other Applicable Regulatory Matters The healthcare industry is highly regulated under state, federal, and international laws and regulations.
Our employees do not include our physician partners, whom we do not directly employ. 9 Table of Contents Healthcare and Other Applicable Regulatory Matters The healthcare industry is highly regulated under state, federal, and international laws and regulations.
For additional discussion related the agilon health related instruments, see “Critical Accounting Estimates – Stock-Based Compensation.” In addition to our contractual arrangements with our physician partners, we also maintain relationships with other providers who care for our members, including hospitals, specialists and ancillary providers. Such providers either contract with agilon or directly with payors.
In addition to our contractual arrangements with our physician partners, we also maintain relationships with other providers who care for our members, including hospitals, specialists and ancillary providers. Such providers either contract with agilon or directly with payors.
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.
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.
In addition, the CMS Innovation Center announced that ACO REACH would include technical adjustments to the model’s parameters, including changes to benchmark calculations, and the adjustments will continue into 2024. The overall effect of these changes on our ACO’s benchmarks has been minimal.
In addition, as in previous years, the CMS Innovation Center announced that ACO REACH would include technical adjustments to the model’s parameters, including changes to benchmark calculations, and the adjustments will continue into 2025. The overall effect of these changes on our ACOs financial performance is expected to be minimal.
We support career coaching, mentorship and accelerated leadership development programs to ensure mobility and advancement for our employees. Our employees are also encouraged to participate in mentoring programs with people of various backgrounds and cultures. We view mentoring as an essential development tool for sharing skills and knowledge so we can all succeed.
Our employees are also encouraged to participate in mentoring programs with people of various backgrounds and cultures. We view mentoring as an essential development tool for sharing skills and knowledge so we can all succeed. Our commitment to mentoring feeds the successful future of our company.
We could be exposed to a wide range of allegations to which the federal CMPL would apply. We perform monthly checks on our employees, affiliated providers and certain affiliates and vendors using government databases to confirm that these individuals have not been excluded from federal programs.
We perform monthly 13 Table of Contents checks on our employees, affiliated providers and certain affiliates and vendors using government databases to confirm that these individuals have not been excluded from federal programs.
Payors with which we contract include large national health plans as well as smaller local and regional insurers. We believe our ability to offer multiple MA plans and products to our physician partners in each geography creates significant value for our physician partners and the members that they serve.
We believe our ability to offer multiple MA plans and products to our physician partners in each geography creates significant value for our physician partners and the members that they serve.
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.
The agilon Platform : The agilon platform is holistic in supporting the rapid transition to a Total Care Model with technology, people, process and capital.
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 2020, the HHS Office of the National Coordinator for Health Information Technology and CMS issued complementary new rules that are intended to enhance interoperability and prevent information blocking and created requirements to (i) provide patients with convenient access to health care information, (ii) support electronic exchange of data for transitions of care and (iii) participate in trust networks to improve interoperability.
As of December 31, 2023, the PCPs on our platform serve approximately 388,400 MA members and 89,300 Medicare fee-for-service (“FFS”) beneficiaries through eight Accountable Care Organizations (“ACOs”) through our participation in the Centers for Medicare & Medicaid Services’ (“CMS”) Accountable Care Organization Realizing Equity, Access, and Community Health (“ACO REACH”) Model.
As of December 31, 2024, the PCPs on our platform serve approximately 526,500 MA members and 132,100 Medicare fee-for-service (“FFS”) beneficiaries through ten Accountable Care Organizations (“ACOs”) through our participation in the Centers for Medicare & Medicaid Services’ (“CMS”) Accountable Care Organization Realizing Equity, Access, and Community Health (“ACO REACH”) Model and Medicare Shared Savings Program (“MSSP,” and together with ACO REACH, the “CMS ACO Models”) through its equity method investments.
For example, if an entity violates the federal FCA, the government may seek up to three times the actual damages (known as “treble damages”), plus substantial penalties for each false claim. Exclusion from federal healthcare programs is also possible.
For example, if an entity violates the federal FCA, the government may seek up to three times the actual damages (known as “treble damages”), plus substantial penalties for each false claim. The DOJ has also sought to enforce cybersecurity compliance through its Civil Cyber-Fraud Initiative under the FCA.
For agreements where the payor retains responsibility for paying claims on our behalf, as is the case today in the majority of our payor agreements, funding under the applicable agreement is utilized by the payor to pay such claims, and we receive surplus distributions on a monthly or quarterly basis.
The payor generally retains responsibility for paying claims on our behalf, funding under the applicable agreement is utilized by the payor to pay such claims, and we receive surplus distributions on a monthly or quarterly basis. In these arrangements, the payor maintains the responsibility for entering into contractual agreements with network hospitals, network specialty physicians, and ancillary or other providers.
This base compensation is initially negotiated with the RBE for the first ten years of each agreement, subject to annual increases based on current market rates and other agreed upon adjustment factors, after which it is subject to renegotiation. 4 Table of Contents Although our RBEs are wholly-owned subsidiaries of agilon, our anchor physician groups participate in each RBE’s governance, with individuals designated or nominated by the applicable anchor physician groups having representation on each RBE’s board of directors.
This base compensation is initially negotiated with the RBE for the first ten years of each agreement, subject to annual 4 Table of Contents increases based on current market rates and other agreed upon adjustment factors, after which it is subject to renegotiation.
Each geography includes the anchor partner’s name and “Senior Health Connect” as part of the naming convention to help reinforce the value of our national network to payors, policy makers and other industry constituents.
We create a local brand that embodies the value of the Total Care Model for patients and of our physician partner’s commitment to quality care. Each geography typically includes the anchor partner’s name and “Senior Health Connect” as part of the naming convention to help reinforce the value of our national network to payors and other industry constituents.
Our business model is differentiated by its focus on existing community-based physician groups and is built around three key elements: (1) agilon’s platform; (2) agilon’s long-term physician partnership approach; and (3) agilon’s network.
For a description of our significant activities during 2024, see “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—2024 Results” in this Report. Our business model is differentiated by its focus on existing community-based physician groups and is built around three key elements: (1) agilon’s platform; (2) agilon’s long-term physician partnership approach; and (3) agilon’s network.
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.
The 21 st Century Cures Act authorizes civil monetary penalties up to $1 million per information blocking “violation.” 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 information, including laws modeled to some extent on the European Union’s General Data Protection Regulation.
A 2015 order from the FCC clarified that calls or text messages that have an express healthcare-related purpose—such as treatment follow-up, appointment confirmations and reminders or pre-operative instructions—are exempt from the TCPA. In these instances, providers are not required to receive prior express consent from patients before reaching out by phone or text.
The FCC has determined that calls or text messages that have an express healthcare-related purpose—such as treatment follow-up, appointment confirmations and reminders or pre-operative instructions—are exempt from the TCPA.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeThese risks include, but are not limited to, the following: Risks Related to Our Business • our history of net losses and the expectation that our expenses will increase in the future; • failure to identify and develop successful new geographies, physician partners and payors, or execute upon our growth initiatives; • success in executing our operating strategies or achieving results consistent with our historical performance; • medical expenses incurred on behalf of our members may exceed revenues we receive; • inability to secure contracts with MA payors; • inability to grow new physician partner relationships sufficient to recover startup costs; • availability of additional capital, on acceptable terms or at all, to support our business in the future; • significant reduction in our membership; • transition to a Total Care Model may be challenging for physician partners; • public health crises, such as COVID-19, could adversely affect us; • inaccuracy in estimates of our members’ risk adjustment factors, medical services expense, incurred but not reported claims, and earnings pursuant to payor contracts; • the impact of restrictive clauses or exclusivity provisions in some of our contracts with physician partners; • inability to hire and retain qualified personnel; • ability to realize the full value of our intangible assets; • security breaches, cybersecurity attacks, loss of data and other disruptions to our information systems; • ability to protect the confidentiality of our know-how and other proprietary and internally developed information; • reliance on our subsidiaries; • ESG issues; Risks Related to Our Reliance on Third Parties • reliance on a limited number of key payors; • the limited terms of contracts with our payors and our ability to renew them upon expiration; • reliance on payors for membership attribution and assignment, timely data and reporting accuracy and claims payment; • dependence on physician partners and other providers to effectively manage the quality and cost of care and perform obligations under payor contracts; • ability to obtain accurate and complete diagnosis data; • dependence on physician partners to document their services and any inaccuracies could result in overpayments, recoupments or liability under the federal FCA or through RADV audits (defined below); • reliance on third-party software, data, infrastructure and bandwidth; 18 Table of Contents Risks Related to Our Industry and Government Programs • consolidation in the healthcare industry; • discontinuance or reductions in federal government healthcare programs’ reimbursement rates or methodologies applied to derive reimbursement; • uncertain or adverse economic and macroeconomic conditions, including a downturn or decrease in government expenditures; • competition in our industry; • dependence on government performance standards and benchmarks; • 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; • 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; • federal and state investigations, audits and enforcement actions; • regulatory inquiries and corrective action plans imposed by our payors; • repayment obligations arising out of payor audits; • modification the methodology utilized to determine revenue associated with MA members; • negative publicity regarding the managed healthcare industry generally; Legal and Regulatory Risks • regulation of the healthcare industry at the federal, state and local levels and our ability to comply with applicable laws or regulations; • our and our physician partners’ ability to comply with federal and state fraud and abuse laws, including physician incentive plan laws and regulations; • implication of laws and regulations regarding marketing, beneficiary inducements, telemarketing and use of protected health information; • our use, disclosure and processing of personally identifiable information, PHI, and de-identified data is subject to HIPAA and state patient confidentiality laws; • failure to obtain or maintain an insurance license, a certificate of authority or an equivalent authorization; • regulation of the corporate practice of medicine could restrict the manner in which we are permitted to conduct our business, and the failure to comply with such laws, or any changes to such laws or regulations or similar laws or regulations; • inadvertent employment or contract with an excluded person by us or our physician partners; • lawsuits not covered by insurance; • changes in tax laws and regulations, or changes in related judgments or assumptions; Risks Related to Our Indebtedness • incurrence of substantially more indebtedness, which could increase the risks created by our indebtedness; • restrictions and limitations in our agreements and instruments governing our indebtedness; 19 Table of Contents Risks Related to Our Common Stock • dependence on our subsidiaries for cash to fund all of our operations and expenses; • our Certificate of Incorporation, Clayton, Dubilier & Rice, LLC (“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; • anti-takeover provisions in our Certificate of Incorporation and By-laws; • ability to achieve a return on your investment depends on appreciation in the price of our common stock; • exclusive forum provisions in our Certificate of Incorporation; and • material weakness in our internal control over financial reporting and our ability to remediate such material weakness.
Biggest changeThese risks include, but are not limited to, the following: Risks Related to Our Business • our history of net losses and the expectation that our expenses will increase in the future; • failure to identify and develop successful new geographies, physician partners and payors, or execute upon our growth initiatives; • success in executing our operating strategies or achieving results consistent with our historical performance; • medical expenses incurred on behalf of our members may exceed revenues we receive; • inability to secure contracts with MA payors; • inability to grow new physician partner relationships sufficient to recover startup costs; • availability of additional capital, on acceptable terms or at all, to support our business in the future; • significant reduction in our membership; • transition to a Total Care Model may be challenging for physician partners; • public health crises, such as COVID-19, could adversely affect us; • inaccuracy in estimates of our members’ risk adjustment factors, medical services expense, incurred but not reported claims, and earnings pursuant to payor contracts; • the impact of restrictive clauses or exclusivity provisions in some of our contracts with physician partners; • inability to hire and retain qualified personnel; • ability to realize the full value of our intangible assets; • security breaches, cybersecurity attacks, loss of data and other disruptions to our information systems; • ability to protect the confidentiality of our know-how and other proprietary and internally developed information; • reliance on our subsidiaries; • our use of AI and machine learning in our business and challenges with properly managing the development and use of these technologies; Risks Related to Our Reliance on Third Parties • reliance on a limited number of key payors; • the limited terms of contracts with our payors and our ability to renew them upon expiration; • reliance on payors for membership attribution and assignment, timely data and reporting accuracy and claims payment; • dependence on physician partners and other providers to effectively manage the quality and cost of care and perform obligations under payor contracts; • ability to obtain accurate and complete diagnosis data; • dependence on physician partners to document their services and any inaccuracies could result in overpayments, recoupments or liability under the federal FCA or through RADV audits (defined below); • reliance on third-party software, data, infrastructure and bandwidth; Risks Related to Our Industry and Government Programs • consolidation in the healthcare industry; • discontinuance or reductions in federal government healthcare programs’ reimbursement rates or methodologies applied to derive reimbursement; 18 Table of Contents • uncertain or adverse economic and macroeconomic conditions, including a downturn or decrease in government expenditures; • competition in our industry; • dependence on government performance standards and benchmarks; • 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; • 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; • federal and state investigations, audits and enforcement actions; • regulatory inquiries and corrective action plans imposed by our payors; • repayment obligations arising out of payor audits; • modification of the methodology utilized to determine revenue associated with MA members; • negative publicity regarding the managed healthcare industry generally; Legal and Regulatory Risks • our ability to comply with regulation of the healthcare industry at the federal, state and local levels; • our and our physician partners’ ability to comply with federal and state fraud and abuse laws, including physician incentive plan laws and regulations; • implication of laws and regulations regarding marketing, beneficiary inducements, telemarketing and use of protected health information; • our use, disclosure and processing of personally identifiable information, PHI, and de-identified data is subject to HIPAA and state patient confidentiality laws; • failure to obtain or maintain an insurance license, a certificate of authority or an equivalent authorization; • regulation of the corporate practice of medicine; • inadvertent employment or contract with an excluded person by us or our physician partners; • changes in tax laws and regulations, or changes in related judgments or assumptions; Risks Related to Our Indebtedness • incurrence of substantially more indebtedness, which could increase the risks created by our indebtedness; • restrictions and limitations in our agreements and instruments governing our indebtedness; Risks Related to Our Common Stock • dependence on our subsidiaries for cash to fund all of our operations and expenses; • volatility of, or decline in, our stock price, could result in substantial losses for your investment; • coverage by securities analysts may not be favorable or may cease; • under our Certificate of Incorporation, Clayton, Dubilier & Rice, LLC (“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; • anti-takeover provisions in our Certificate of Incorporation and By-laws; • ability to achieve a return on your investment depends on appreciation in the price of our common stock; • exclusive forum provisions in our Certificate of Incorporation; General Risks • lawsuits not covered by insurance and securities class action litigation; and • sustainability issues, and our reporting on them. 19 Table of Contents You should carefully consider each of the following risk factors and all of the other information set forth in this report.
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.
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 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; 38 Table of Contents • 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.
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.
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 to thwart a takeover attempt; • provide for a classified board of directors, which divides the Board 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, including vacancies resulting from an enlargement of the Board, 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.
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.
Payments of dividends, if any, are at the sole discretion of the Board 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, 47 Table of Contents and such other factors as the Board may deem relevant.
We may not be successful in managing or expanding our operations, maintaining adequate financial and operating systems and controls, executing upon our growth initiatives and achieving required operational scale to support our growth. If we do not successfully manage these processes, our business, financial condition, cash flows, and results of operations could be harmed.
We may not be successful in managing or expanding our operations, maintaining adequate financial and operating systems and controls, executing upon our growth initiatives and achieving required operational scale to support our growth. If we do not successfully manage these ongoing processes, our business, financial condition, cash flows, and results of operations could be harmed.
See “Business—Healthcare and Other Applicable Regulatory Matters—Federal and State Privacy and Security Requirements” in Item 1 above. Although we have implemented preventative measures, as described in Item 1C of this Annual Report, such measures may not be sufficient to prevent, mitigate or offset a cyber incident.
See “Business—Healthcare and Other Applicable Regulatory Matters—Federal and State Privacy and Security Requirements” in Item 1 above. Although we have implemented preventative measures, as described in Item 1C of this Report, such measures may not be sufficient to prevent, mitigate or offset a cyber incident.
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.
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; • 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.
These estimation methods and the resulting reserves are periodically reviewed and updated. COVID-19 has also resulted in fluctuations in our medical expenses and increased challenges in accurately estimating the amount of medical expenses which have been incurred by our members.
These estimation methods and the resulting reserves are periodically reviewed and updated. COVID-19 also resulted in fluctuations in our medical expenses and increased challenges in accurately estimating the amount of medical expenses which have been incurred by our members.
These provisions may prevent our stockholders from receiving the benefit from any premium to the market price of our common stock offered by a bidder in a takeover context or from changing our management and Board of Directors.
These provisions may prevent our stockholders from receiving the benefit from any premium to the market price of our common stock offered by a bidder in a takeover context or from changing our management and Board.
In particular, we have experienced, and may in the future experience, financial or operational impacts as a result of COVID-19 or other public health crises which may be material, including: impacts on our medical costs and medical services revenue, therefor affecting our total cost of care; increased delayed costs as a result of our enrolled members being unable to see their PCPs or long term complications of COVID-19; labor shortages; complete or partial closure of partner medical care facilities; and inability to implement clinical initiatives to manage healthcare costs and chronic conditions of our enrolled members and appropriately document their risk profiles.
In particular, we have experienced, and may in the future experience, financial or operational impacts as a result of COVID-19 or other public health crises which may be material, including: impacts on our medical costs and medical services revenue, therefor affecting our total cost of care; increased delayed costs as a result of our enrolled members being unable to see their PCPs or long term complications of any pandemics or health crisis; labor shortages; complete or partial closure of partner medical care facilities; and inability to implement clinical initiatives to manage healthcare costs and chronic conditions of our enrolled members and appropriately document their risk profiles.
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.
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.
Such factors include the following: • Changes to the Medicare fee schedule or other rate schedules that serve as the basis for payments issued to hospitals, specialty and ancillary physicians and other providers; • Contractual rates paid to hospitals, specialty and ancillary physicians and other providers; • The utilization rates of healthcare services, including inpatient hospitalization, outpatient procedures, high risk and chronic conditions and other services that result in medical expenses, by our members; • Changes to member benefit types, categories, and levels established and otherwise offered by payors; and • The utilization rate and cost of pharmaceuticals or specialty drugs utilized by our members.
Such factors include the following: • changes to the Medicare fee schedule or other rate schedules that serve as the basis for payments issued to hospitals, specialty and ancillary physicians and other providers; • contractual rates paid to hospitals, specialty and ancillary physicians and other providers; 21 Table of Contents • the utilization rates of healthcare services, including inpatient hospitalization, outpatient procedures, high risk and chronic conditions and other services that result in medical expenses, by our members; • changes to member benefit types, categories, and levels established and otherwise offered by payors; and • the utilization rate and cost of pharmaceuticals or specialty drugs utilized by our members.
Certain state regulatory bodies have taken the position that an arrangement that confers too much control over a physician practice to a non-medical professional entity may violate the corporate practice of medicine doctrine. See “Business—Healthcare and Other Applicable Regulatory Matters—Corporate Practice of Medicine” in Item 1.
Certain state regulatory bodies have taken the position that an arrangement that confers too much control over a physician practice to a non-medical professional entity may violate the corporate practice of medicine doctrine. See “Business—Healthcare and Other Applicable Regulatory Matters—Corporate Practice of Medicine” in Item 1 of this Report.
(“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.
(“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 • enter into lines of business. agilon management and its subsidiaries account for substantially all of our assets and total liabilities.
The transition to a Total Care Model may be challenging for our physician partners, and fully capitated or other provider-risk arrangements have had a history of financial challenges for physicians. It may take time for physician partners to acclimate to a capitation model, and some physician partners may not be successful at transitioning to a Total Care Model.
The transition to a Total Care Model may be challenging for our physician partners, and fully capitated or other provider-risk arrangements have presented a history of financial challenges for physicians. It may take time for physician partners to acclimate to a capitation model, and some physician partners may not be successful at transitioning to a Total Care Model.
We may require substantial additional capital to support our business in the future, and this capital might not be available on acceptable terms, or at all. Our operations have consumed substantial amounts of cash since inception, and we expect to spend substantial amounts of cash for the foreseeable future.
We may require substantial additional capital to support our business in the future, which might not be available on acceptable terms, or at all. Our operations have consumed substantial amounts of cash since inception, and we expect to spend substantial amounts of cash for the foreseeable future.
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.
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.
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.
See “Business—Healthcare and Other Applicable Regulatory Matters—Federal and State Insurance and Managed Care Laws” in Item 1 of this Report. We therefore expect uncertainty regarding whether our operations fall within the scope of certain laws or regulations.
Examples of currently known data security threats facing us and our third-party service providers include, but are not limited to, ransomware, phishing, business email compromise and credential stuffing. Additionally, cyber threats and the techniques used in cyberattacks change, develop and evolve rapidly, including from emerging technologies, such as advanced forms of AI and quantum computing.
Examples of currently known data security threats facing us and our third-party service providers include, but are not limited to, ransomware, phishing, business email compromise and 26 Table of Contents credential stuffing. Additionally, cyber threats and the techniques used in cyberattacks change, develop and evolve rapidly, including from emerging technologies, such as advanced forms of AI and quantum computing.
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.
Even 42 Table of Contents 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.
Although we 39 Table of Contents provide some high-level training, and, if needed, supplemented clinical or coding staff as appropriate, to ensure that all health conditions are assessed and sufficiently documented by our physician partners and network providers, and we perform audits on this process, we do not as a general matter supervise or control our physician partners or network providers; accordingly, any adverse effects on us regarding their noncompliance are uncertain and unpredictable.
Although we provide some high-level training, and, if needed, supplemented clinical or coding staff as appropriate, to ensure that all health conditions are assessed and sufficiently documented by our physician partners and network providers, and we perform audits on this process, we do not as a general matter supervise or control our physician partners or network providers; accordingly, any adverse effects on us regarding their noncompliance are uncertain and unpredictable.
Our failure to protect the confidentiality of our know-how, brand and other proprietary and internally developed information could have a material adverse effect on our business, financial condition, cash flows, and results of operations. 27 Table of Contents Our subsidiaries’ lack of performance or ability to fund their operations could require us to fund such losses.
Our failure to protect the confidentiality of our know-how, brand and other proprietary and internally developed information could have a material adverse effect on our business, financial condition, cash flows, and results of operations. Our subsidiaries’ lack of performance or ability to fund their operations could require us to fund such losses.
Similarly, if physicians join a physician partner following the initial implementation period for a new partner market and we are unable to manage the integration of such new physician into our Total Care Model, the new physician may not achieve expected improvements in patient outcomes and related 22 Table of Contents profitability.
Similarly, if physicians join a physician partner following the initial implementation period for a new partner market and we are unable to manage the integration of such new physician into our Total Care Model, the new physician may not achieve expected improvements in patient outcomes and related profitability.
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.
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.
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 35 Table of Contents have a material adverse effect on our business, financial condition, cash flows, and results of operations.
In addition, our physician partners are subject to federal, state and local licensing regulations relating to, among other things, professional credentialing, the ability to practice medicine, professional ethics and prescribing medication and controlled substances. See “Business—Healthcare and Other Applicable Regulatory Matters—Other Laws and Regulations” in Item 1.
In addition, our physician partners are subject to federal, state and local licensing regulations relating to, among other things, professional credentialing, the ability to practice medicine, professional ethics and prescribing medication and controlled substances. See “Business—Healthcare and Other Applicable Regulatory Matters—Other Laws and Regulations” in Item 1 of this Report.
As such, we cannot guarantee the quality and efficiency of services from such providers, over which we have no control. Members who receive 29 Table of Contents poor quality healthcare from such providers may be dissatisfied with our physician partners, which would have a negative impact on member satisfaction and retention.
As such, we cannot guarantee the quality and efficiency of services from such providers, over which we have no control. Members who receive poor quality healthcare from such providers may be dissatisfied with our physician partners, which would have a negative impact on member satisfaction and retention.
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.
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, particularly due to the sensitivity of the PHI and other confidential information we and our providers access, collect, store, process and transmit.
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.
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.
All such arrangements can implicate, and must be structured to be in compliance with, all applicable federal and state fraud and abuse laws including the federal Anti-Kickback Statute and the Stark Law. See “Business—Healthcare and Other Applicable Regulatory Matters—Federal and State Anti-Kickback Statutes” and “Business—Healthcare and Other Applicable Regulatory Matters—Stark Law” in Item 1.
All such arrangements can implicate, and must be structured to be in compliance with, all applicable federal and state fraud and abuse laws including the federal Anti-Kickback Statute and the Stark Law. See “Business—Healthcare and Other Applicable Regulatory Matters—Federal and State Anti-Kickback Statutes” and “Business—Healthcare and Other Applicable Regulatory Matters—Stark Law” in Item 1 of this Report.
Further, our physician partners may not engage with our platform sufficiently to assist in improving overall quality of care and management of healthcare costs, which could produce results that are inconsistent with our estimates and financial models and negatively impact our growth.
Further, our physician partners may not engage with our platform 29 Table of Contents sufficiently to assist in improving overall quality of care and management of healthcare costs, which could produce results that are inconsistent with our estimates and financial models and negatively impact our growth.
At the conclusion of such audits or investigations, we may be required to repay such agencies or payors, and may be subjected to pre-payment reviews, which 36 Table of Contents can be time-consuming and result in non-payment or delayed payments for the services we or our affiliates provide.
At the conclusion of such audits or investigations, we may be required to repay such agencies or payors, and may be subjected to pre-payment reviews, which can be time-consuming and result in non-payment or delayed payments for the services we or our affiliates provide.
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.
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.
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.
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 be subject to 27 Table of Contents allegations of breach of their payor contracts or may incur regulatory consequences.
It is possible that the licenses and rights necessary to use the software and data necessary for the provision of our services may not continue to be available on commercially reasonable terms, or at all, or that our use of such software or data may be restricted.
It is possible that the licenses and rights necessary to use the software and data necessary for the provision of our services may not continue to be available on commercially reasonable terms, or at all, or that our use of such software or 31 Table of Contents data may be restricted.
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 reimbursement levels.
Government funding for healthcare programs is subject to statutory and regulatory changes, executive branch action, administrative rulings, interpretations of policy and determinations by intermediaries and governmental funding restrictions, all of which could materially impact program coverage and reimbursement levels.
We may also fail to address factors within our control that could contribute to a reduction in enrollment, including providing our physician partners with sufficient implementation in our Total Care Model, as well as other tools and information to provide high-quality care. The transition to a Total Care Model may be challenging for physician partners.
We may also fail to address factors within our control that could contribute to a reduction in enrollment, including providing our physician partners with sufficient implementation in our Total Care Model, as well as other tools and information to provide high-quality care. 23 Table of Contents The transition to a Total Care Model may be challenging for physician partners.
Reimbursement is conditioned upon, in part, physician partners providing the correct procedure and diagnosis codes and properly documenting the services themselves, including the level of service provided and the medical necessity for the services.
Reimbursement is conditioned upon, in part, physician partners providing the correct procedure and 30 Table of Contents diagnosis codes and properly documenting the services themselves, including the level of service provided and the medical necessity for the services.
If we are subject to an audit or investigation, a finding could be made that we have violated relevant state or federal legal standards in our operations or in how we have structured our arrangements and relationships or that we or our affiliates have erroneously billed or were incorrectly reimbursed.
If we are subject to an audit or investigation, a finding could be made that we have violated 36 Table of Contents relevant state or federal legal standards in our operations or in how we have structured our arrangements and relationships or that we or our affiliates have erroneously billed or were incorrectly reimbursed.
We have been the subject of regulatory inquiries 43 Table of Contents regarding our compliance with the corporate practice of medicine doctrine, and we cannot guarantee that we will not be subject to such inquiries in the future.
We have been the subject of regulatory inquiries regarding our compliance with the corporate practice of medicine doctrine, and we cannot guarantee that we will not be subject to such inquiries in the future.
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.
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 44 Table of Contents additional indebtedness, which could increase the risks created by our current indebtedness.
Our estimates of IBNR liabilities may be inadequate in the future, which would negatively affect our results of operations for the relevant time period or for forecasted periods.
Our estimates of IBNR liabilities may be inadequate in the future, which would negatively affect our results of operations for the relevant time period or for 24 Table of Contents forecasted periods.
Our actions and disclosures related to these and other ESG issues may impact our reputation and relationships with various stakeholder groups. Further, current and future mandated reporting requirements on ESG topics, including climate-related disclosures, may impact our reporting and compliance costs, and require a significant time investment.
Our actions and disclosures related to these, and other sustainability issues may impact our reputation and relationships with various stakeholder groups. Further, current and future mandated reporting requirements, including climate-related disclosures, may impact our reporting and compliance costs, and require a significant time investment.
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.
As a young and rapidly growing company, 20 Table of Contents 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.
For example, payors may not allow contracted physicians to accept/collect scope of appointment forms but may allow contracted physicians to make available communication materials regarding MA plans in areas where care is being delivered. Notably, the 2023 Final Rule includes, among other things, significant new MA marketing requirements and modifications.
For example, payors may not allow contracted physicians to accept/collect scope of appointment forms but may allow contracted physicians to make available communication materials regarding MA plans in areas where care is being delivered. Notably, the 2024 Final Rule includes, among other things, significant new MA marketing requirements for agent and broker compensation.
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.
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. 39 Table of Contents 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.
In addition, in Ohio, we are contractually prohibited from forming our own 28 Table of Contents health plan, which effectively prohibits us from directly marketing to members in accordance with the CMS Medicare Marketing Guidelines.
In addition, in Ohio, we are contractually prohibited from forming our own health plan, which effectively prohibits us from directly marketing to members in accordance with the CMS Medicare Marketing Guidelines.
If our cash and cash equivalents and any cash generated from operations are not sufficient to meet our future cash requirements, we will need to access additional capital to fund our operations and our continued growth and expansion.
If our cash and cash equivalents and any cash generated from operations are not 22 Table of Contents sufficient to meet our future cash requirements, we will need to access additional capital to fund our operations and our continued growth and expansion.
The MA program accounted for substantially all of our revenues for our immediately preceding fiscal years. While the ACO’s are not consolidated, they still have an impact on our profitability. The policies and decisions made by the federal government regarding these programs have a substantial impact on our profitability.
The MA program accounted for substantially all of our revenues for our immediately preceding fiscal years. While the ACOs are not consolidated, they still have an impact on our profitability. The policies and decisions made by the federal government regarding these programs, including the legislative and executive branches, have a substantial impact on our profitability.
In addition, through our participation in the CMS ACO REACH Model, we (either as an ACO or as a service provider to our physician partners who are participating in the model) must comply with provisions in the participation agreements with CMS regarding marketing and outreach activities.
CMS finalized these changes to reduce the aggressive marketing practices. In addition, through our participation in the CMS ACO REACH Model, we (either as an ACO or as a service provider to our physician partners who are participating in the model) must comply with provisions in the participation agreements with CMS regarding marketing and outreach activities.
See “Business—Healthcare and Other Applicable Regulatory Matters—Federal and State Privacy and Security Requirements” in Item 1.
See “Business—Healthcare and Other Applicable Regulatory Matters—Federal and State Privacy and Security Requirements” in Item 1 of this Report.
See “Business—Healthcare and Other Applicable Regulatory Matters—Consumer Protection Laws” in Item 1.
See “Business—Healthcare and Other Applicable Regulatory Matters—Consumer Protection Laws” in Item 1 of this Report.
The existing federal deficit and continued deficit spending by the federal government and significant economic pressure on state budgets have the potential to lead to reduced government expenditures, including for government-funded programs in which we participate such as 33 Table of Contents Medicare.
Historically, government budget limitations have resulted in reduced spending. The existing federal deficit and continued deficit spending by the federal government and significant economic pressure on state budgets have the potential to lead to reduced government expenditures, including for government-funded programs in which we participate such as Medicare.
Additionally, COVID-19 has impacted and could continue to impact our ability to accurately project medical cost trends. The impact of COVID-19 on the worldwide economy and the healthcare industry underscores risks we face related to public health crises and pandemics.
For example, COVID-19 impacted our ability to accurately project medical cost trends. The impact of COVID-19 on the worldwide economy and the healthcare industry underscored the risks we face related to public health crises and pandemics.
The CMS STAR rating system considers various measures, including, among others, quality of care, preventive services, chronic illness management and customer satisfaction. Agreements with certain of our payors may condition amounts paid to us based upon improvements to contracted payors’ STAR ratings.
Such ratings impact the percentage of any cost savings rebate and any bonuses earned by such health plan. The CMS STAR rating system considers various measures, including, among others, quality of care, preventive services, chronic illness management and customer satisfaction. Agreements with certain of our payors may condition amounts paid to us based upon improvements to contracted payors’ STAR ratings.
We also currently maintain managed care errors and omissions insurance. We cannot be certain that our insurance coverage will be adequate to cover liabilities arising out of claims asserted against us, our affiliated professional organizations or our affiliated physicians.
We cannot be certain that our insurance coverage will be adequate to cover liabilities arising out of claims asserted against us, our affiliated professional organizations or our affiliated physicians.
See “Business—Healthcare and Other Applicable Regulatory Matters—Health Care Fraud Statute.” 30 Table of Contents In addition, CMS and the HHS Office of Inspector General perform audits of selected MA contracts related to risk adjustment diagnosis data.
See “Business—Healthcare and Other Applicable Regulatory Matters—Health Care Fraud Statute” in Item 1 of this Report. In addition, CMS and the HHS Office of Inspector General perform audits of selected MA contracts related to risk adjustment diagnosis data.
Our physician partners are subject to federal and state healthcare fraud and abuse laws and regulations. Our physician partners are subject to various federal and state laws pertaining to healthcare fraud and abuse, including, among others, the federal Anti-Kickback Statute, Stark Law and FCA and analogous state laws. See “Business—Healthcare and Other Applicable Regulatory Matters” in Item 1.
Our physician partners are subject to federal and state healthcare fraud and abuse laws and regulations. Our physician partners are subject to various federal and state laws pertaining to healthcare fraud and abuse, including, among others, the federal Anti-Kickback Statute, Stark Law and FCA and analogous state laws.
Our growth initiatives in our existing geographies depend, in part, on our physician partners’ ability to grow their practices through the addition of PCPs to increase their capacity to service Medicare patients, and to effectively meet increased patient demand.
We contract with a limited number of physician partners and rely on physician partners within each geography. Our growth initiatives in our existing geographies depend, in part, on our physician partners’ ability to grow their practices through the addition of PCPs to increase their capacity to service Medicare patients, and to effectively meet increased patient demand.
Our payors are subject to a number of risks including reductions in payment rates from governmental programs, higher than expected healthcare costs and lack of predictability of financial results when entering into new lines of business, particularly with high-risk populations. If the financial condition of our payors declines, our credit risk could increase.
Our payors are subject to a number of risks including reductions in payment rates from governmental programs, including STARS ratings, higher than expected healthcare costs and lack of predictability of financial results when entering into new lines of business, particularly with high-risk populations. For example, utilization rates in 2024 resulted in higher healthcare costs.
CMS has oversight over all MA marketing materials and outreach activities. To maintain appropriate beneficiary safeguards while not impeding the physician-patient relationship, the Medicare Marketing Guidelines set forth acceptable activities in the healthcare setting.
Medicare Managed Care marketing requirements are outlined in the Medicare Marketing Guidelines, a sub-regulatory guidance document updated annually. CMS has oversight over all MA marketing materials and outreach activities. To maintain appropriate beneficiary safeguards while not impeding the physician-patient relationship, the Medicare Marketing Guidelines set forth acceptable activities in the healthcare setting.
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.
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.
In addition, we have experienced employee turnover and expect to continue to experience employee turnover in the future. Continued increased competition for, or a shortage of, qualified personnel due to pandemics, general labor market conditions, low levels of unemployment, or general inflationary pressures, may require that we enhance our pay and benefits package to compete effectively for such personnel.
Continued increased competition for, or a shortage of, qualified personnel due to pandemics, general labor market 25 Table of Contents conditions, low levels of unemployment, or general inflationary pressures, may require that we enhance our pay and benefits package to compete effectively for such personnel.
Liability exposures in the managed care industry in which we operate vary greatly by state. The status of tort reform, availability of non-economic damages or the presence or absence of other statutes, such as elder abuse or vulnerable adult statutes, influence the incidence and severity of managed care litigation.
The status of tort reform, availability of non-economic damages or the presence or absence of other statutes, such as elder abuse or vulnerable adult statutes, influence the incidence and severity of managed care litigation.
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.
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.
If any of our contracts with our payors is terminated, we may experience a reduction in the number of members attributed to our platform, which may result in a reduction of our revenues and may have a material adverse effect on our business. With respect to certain of our discontinued operations, we may recognize impairment charges for such terminations.
If any of our contracts with our payors is terminated, we may experience a reduction in the number of members attributed to our platform, which 28 Table of Contents may result in a reduction of our revenues and may have a material adverse effect on our business.
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.
Risk-bearing capital required by payors varies by payor and geography. 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.
See “Business—Healthcare and Other Applicable Regulatory Matters—Federal and State Anti-Kickback Statutes” and “Business—Healthcare and Other Applicable Regulatory Matters—Civil Monetary Penalties Statute” in Item 1. Our physician partners and the payors with which we contract risk violating applicable state and federal fraud and abuse laws—including the Anti-Kickback Statute and CMPL—and laws governing marketing and member outreach (e.g., the Medicare Marketing Guidelines).
Our physician partners and the payors with which we contract risk violating applicable state and federal fraud and abuse laws—including the Anti-Kickback Statute and CMPL—and laws governing marketing and member outreach (e.g., the Medicare Marketing Guidelines).
For example, ACOs must have their plans for marketing activities approved by CMS and are prohibited from engaging in some forms of marketing activities such as door-to-door solicitation.
For example, ACOs must have their plans for marketing activities approved by CMS and are prohibited from engaging in some forms of marketing activities such as door-to-door solicitation. Similarly, state laws governing managed care organizations also address allowable marketing and enrollee communication practices.
Similarly, state laws governing managed care organizations also address allowable marketing and enrollee communication practices. 40 Table of Contents Marketing and outreach activities undertaken in the healthcare industry—whether undertaken by or on behalf of providers and payors—are subject to a complex web of laws and regulations designed to prevent fraud and abuse.
Marketing and outreach activities undertaken in the healthcare industry—whether undertaken by or on behalf of providers and payors—are subject to a complex web of laws and regulations designed to prevent fraud and abuse.
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.
When we enter into a new payor contract, we are typically required by the payor to contribute risk-bearing capital to the local operating subsidiary. 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.
Under our agreements with our payors, we receive a PMPM-based capitation payment, and we assume financial risk for the expense of providing medical services on behalf of our physician partners.
Amounts of medical expenses that are incurred on behalf of our members may exceed the amount of medical revenues we receive to provide care for such members. Under our agreements with our payors, we receive a PMPM-based capitation payment, and we assume financial risk for the expense of providing medical services on behalf of our physician partners.
To the extent our subsidiaries are restricted from making such distributions under applicable law or regulation or under the terms of our financing arrangements or are otherwise unable to provide funds to the extent of our needs, there could be a material adverse effect on our business, financial condition, cash flows, and results of operations.
To the extent our subsidiaries are restricted from making such distributions under applicable law or regulation or under the terms of our financing arrangements or are otherwise unable to provide funds to the extent of our needs, there could be a material adverse effect on our business, financial condition, cash flows, and results of operations. 45 Table of Contents For example, we are currently contractually required, and may in the future be required by state laws or regulations, to maintain specific prescribed minimum amounts of capital in certain subsidiaries.
Any such investigations, enforcement actions or litigation could require us to take actions that would adversely affect our business, financial condition, cash flows, and results of operations or could require us to pay substantial amounts of money.
Any such investigations, enforcement actions or litigation could require us to take actions that would adversely affect our business, financial condition, cash flows, and results of operations or could require us to pay substantial amounts of money. Additionally, defending against these lawsuits and proceedings may involve significant expense and diversion of management’s attention and resources from other matters.
If a payor does terminate or elects not to renew its relationship with us, our ability to retain members associated with that payor is limited. We and our physician partners must comply with the CMS Medicare Marketing Guidelines regarding communication and information provided to members, which limits the types of permissible communications that may be made to members.
We and our physician partners must comply with the CMS Medicare Marketing Guidelines regarding communication and information provided to members, which limits the types of permissible communications that may be made to members.
Accordingly, if we are unable to effectively manage our growth and replicate the success of our platform, partnership and network model in new geographies and with new partners, our business, financial condition, cash flows, and results of operations could be harmed. 21 Table of Contents Amounts of medical expenses that are incurred on behalf of our members may exceed the amount of medical revenues we receive to provide care for such members.
Accordingly, if we are unable to effectively manage our growth and replicate the success of our platform, partnership and network model in new geographies and with new partners, our business, financial condition, cash flows, and results of operations could be harmed.
Our competitors could also be better positioned to serve certain segments of the healthcare delivery industry, which could create additional pressure on the premiums that our payors are able to charge. If we are unable to successfully compete, our business, financial condition, cash flows, and results of operations could be materially adversely affected.
Our competitors could also be better positioned to serve certain segments of the healthcare delivery industry, which could create additional pressure on the premiums that our payors are able to charge.
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.
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. Our stock price may be volatile or may decline regardless of our operating performance, resulting in substantial losses for investors of our common stock.
In order to pursue our strategy successfully, we must effectively implement our platform, partnership and network model, including identifying suitable candidates and successfully building relationships with and managing integration of new physician partners and payors. We contract with a limited number of physician partners and rely on physician partners within each geography.
In order to pursue our strategy successfully, we must effectively implement our platform, partnership and network model, including identifying suitable candidates and successfully building relationships with and managing integration of new physician partners and payors. Additionally, we must annually evaluate the payor contract negotiations and the impact to the profitability of the partnerships to develop the RBE’s payor strategy.
Lawsuits for tort liabilities associated with managed care activities that we conduct in our managed care business are common in the healthcare industry. Common liability exposures we face include performance of utilization review, performance of credentialing and peer review, provider network contracting determinations, and vicarious liability for the conduct of affiliated providers.
Common liability exposures we face include performance of utilization review, performance of credentialing and peer review, provider network contracting determinations, and vicarious liability for the conduct of affiliated providers. Liability exposures in the managed care industry in which we operate vary greatly by state.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeThe results of such assessments, audits and reviews are reported to senior management and the Board, and we adjust our cybersecurity policies, standards, processes, and practices as necessary based on the information provided by these assessments, audits, and reviews.
Biggest changeThe results of such assessments, audits and reviews are reported to senior management and the Board, and we adjust our cybersecurity policies, standards, processes, and practices as necessary based on the information provided by these assessments, audits, and reviews. 50 Table of Contents The risks from cybersecurity threats have not to date materially affected us or are not reasonably likely to materially affect us, including our business strategy, results of operations, or financial condition.
Our Board, Audit Committee, and Compliance and Quality Committee provide oversight of risks from cybersecurity threats through the following activities: • Cybersecurity risk governance including high-level guidance and oversight for us gleaned from each Director’s extensive senior level operational management experience; and assessment of whether risks are being appropriately considered, evaluated and managed by management. • Oversight of cybersecurity risk ownership through assessment of our requirements and resources; and identification and evaluation of cybersecurity risks impacting our business. • Oversight of our cybersecurity risk mitigation operations through deployment of information technology, assessment of our cybersecurity risk management framework and review of our programs to meet business requirements. • Our Board, Audit Committee, and Compliance and Quality Committee receive regular presentations and reports on cybersecurity risks from management that address a wide range of topics, including: • recent developments, evolving standards, vulnerability assessments, third-party and independent reviews, the threat environment, technical trends and information security considerations arising with respect to our peers and third parties; 50 Table of Contents • integrating cybersecurity oversight into the work of the Board, Audit Committee and Compliance and Quality Committee, allocating oversight responsibilities and leveraging Director skill sets; and • the role of the Board, Audit Committee, and Compliance and Quality Committee in potential incident response and recovery. • Oversight of the management of vendor and third-party service provider cybersecurity risks. • Oversight of data governance, automated intelligence and machine learning as applied to the Company’s operations. • The Board, Audit Committee, and Compliance and Quality Committee, also receive prompt and timely information regarding any cybersecurity incident that meets established reporting thresholds, as well as ongoing updates regarding any such incident until it has been addressed.
Our Board, Audit Committee, and Compliance and Quality Committee provide oversight of risks from cybersecurity threats through the following activities: • Cybersecurity risk governance including high-level guidance and oversight for us gleaned from each Director’s extensive senior level operational management experience; and assessment of whether risks are being appropriately considered, evaluated and managed by management. • Oversight of cybersecurity risk ownership through assessment of our requirements and resources; and identification and evaluation of cybersecurity risks impacting our business. • Oversight of our cybersecurity risk mitigation operations through deployment of information technology, assessment of our cybersecurity risk management framework and review of our programs to meet business requirements. • Our Board, Audit Committee, and Compliance and Quality Committee receive regular presentations and reports on cybersecurity risks from management that address a wide range of topics, including: • recent developments, evolving standards, vulnerability assessments, third-party and independent reviews, the threat environment, technical trends and information security considerations arising with respect to our peers and third parties; • integrating cybersecurity oversight into the work of the Board, Audit Committee and Compliance and Quality Committee, allocating oversight responsibilities and leveraging Director skill sets; and • the role of the Board, Audit Committee, and Compliance and Quality Committee in potential incident response and recovery. • Oversight of the management of vendor and third-party service provider cybersecurity risks. • Oversight of data governance, automated intelligence and machine learning as applied to the Company’s operations. • The Board, Audit Committee, and Compliance and Quality Committee, also receive prompt and timely information regarding any cybersecurity incident that meets established reporting thresholds, as well as ongoing updates regarding any such incident until it has been addressed.
We maintain processes for identifying, assessing and managing material risks from cybersecurity threats including: • Ongoing development of our understanding of cybersecurity risk and its impact our systems, data, employees and capabilities through assessment of business context of information security, cybersecurity access management, information security governance and risk management strategy such as vulnerability assessments. • Ongoing development and implementation of appropriate technical safeguards to ensure delivery of critical infrastructure services through access control, awareness and training, data security, 49 Table of Contents information protection policies and procedures, proactive maintenance and protective technology such as firewalls, intrusion prevention and detection systems, and anti-malware functionality. • Ongoing development and implementation of appropriate activities to identify the potential occurrence of a cybersecurity event and actions necessary to address a detected cybersecurity event through anomaly and event detection, continuous monitoring of information security and ongoing detection processes. • Ongoing development and implementation of appropriate activities necessary to address a potential detected cybersecurity event through incident response planning, communications, analysis and mitigation.
We maintain processes for identifying, assessing and managing material risks from cybersecurity threats including: • Ongoing development of our understanding of cybersecurity risk and its impact our systems, data, employees and capabilities through assessment of business context of information security, cybersecurity access management, information security governance and risk management strategy such as vulnerability assessments. • Ongoing development and implementation of appropriate technical safeguards to ensure delivery of critical infrastructure services through access control, awareness and training, data security, information protection policies and procedures, proactive maintenance and protective technology such as firewalls, intrusion prevention and detection systems, and anti-malware functionality. • Ongoing development and implementation of appropriate activities to identify the potential occurrence of a cybersecurity event and actions necessary to address a detected cybersecurity event through anomaly and event detection, continuous monitoring of information security and ongoing detection processes. • Ongoing development and implementation of appropriate activities necessary to address a potential detected cybersecurity event through incident response planning, communications, analysis and mitigation.
Our CTO and CISO have a combined over 50 years of experience in managing large company technology operations and extensive expertise in the management of cybersecurity defense. • The CTO holds an undergraduate degree in computer science and a master’s degree in business administration and has served in various roles in information technology for over 27 years, including serving as either the Chief Technology Officer or Chief Information Officer of large companies.
Our CTO and CISO have a combined over 50 years of experience in managing large company technology operations and extensive expertise in the management of cybersecurity defense. 51 Table of Contents • The CTO holds an undergraduate degree in computer science and a master’s degree in business administration and has served in various roles in information technology for over 27 years, including serving as either the Chief Technology Officer or Chief Information Officer of large companies.
We have implemented a cross-functional approach to identifying, preventing and mitigating cybersecurity threats and incidents, while also implementing controls and procedures that provide for the prompt escalation of certain cybersecurity incidents so that decisions regarding the public disclosure and reporting of such incidents can be made by management in a timely manner. • Technical Safeguards.
We have implemented a cross-functional approach to identifying, preventing and mitigating cybersecurity threats and incidents, while also implementing controls and procedures that provide for the prompt escalation of certain cybersecurity incidents so that decisions regarding the public disclosure and reporting of such incidents can be made by management in a timely manner. 49 Table of Contents • Technical Safeguards.
The Board is actively involved in oversight of the Company’s risk management program, and cybersecurity represents an important component of our overall approach to enterprise risk management.
Cyber Governance Board Oversight of Cybersecurity Risks . The Board is actively involved in oversight of the Company’s risk management program, and cybersecurity represents an important component of our overall approach to enterprise risk management.
Like other companies in the healthcare industry that handle protected health information and companies in all industries that rely on technology to run their operations, a material cybersecurity incident could potentially impact our results of operations and financial condition. Cyber Governance Board Oversight of Cybersecurity Risks .
Like other companies in the healthcare industry that handle protected health information and companies in all industries that rely on technology to run their operations, a material cybersecurity incident could potentially impact our results of operations and financial condition.
Removed
The risks from cybersecurity threats have not to date materially affected us or not reasonably likely to materially affect us, including our business strategy, results of operations, or financial condition.
Added
Refer to the risk factor titled “ 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 ” in Item 1A of this Report for additional information about the risks associated with cybersecurity threats.

Item 2. Properties

Properties — owned and leased real estate

2 edited+0 added−0 removed0 unchanged
Biggest changeITEM 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.
Biggest changeITEM 2. Properties As of December 31, 2024, we leased approximately 105,800 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. ITEM 3.
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
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. 52 Table of Contents PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

7 edited+5 added−1 removed6 unchanged
Biggest changePerformance 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.
Biggest changeIssuer Purchases of Equity Securities There were no repurchases of equity securities during the three months ended December 31, 2024. 53 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, 2024.
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.
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.
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.
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 health management, inc.’s ability to pay dividends or make loans to us.
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.
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.
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
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN RATE OF RETURN TREND COMPARISON April 15, 2021–December 31, 2024 (April 15, 2021 = $100) Performance Graph Total Stockholder Return 4/15/21 12/31/21 12/31/22 12/31/23 12/31/24 agilon health, inc. $ 100 $ 117 $ 70 $ 55 $ 8 S&P 500 100 117 96 121 151 S&P 500 Health Care 100 120 118 120 124 ITEM 6. [Reserved] 54 Table of Contents
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.
Prior to that date, there was no public trading market for our common stock. Holders of Common Stock As of February 21, 2025, we had 749 stockholders of record of common stock.
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.
On January 11, 2024, January 16, 2024, and January 25, 2024, we issued 8,743, 31,871, and 23,992 shares of our common stock upon vesting of RSUs, respectively, to our physician partners for a total of $447,287.
Removed
Issuer Purchases of Equity Securities There were no repurchases of equity securities during the three months ended December 31, 2023.
Added
On February 7, 2024, we issued 178,402 shares of our common stock upon vesting of RSUs to our physician partners for a total of $1,168,533. On February 15, 2024, we issued 1,973,830 shares of our common stock to our physician partners to settle provider incentive liabilities for a total of $14,330,006.
Added
On March 14, 2024, we issued 503,326 shares of our common stock upon vesting of RSUs to our physician partners for a total of $2,632,395. On April 4, 2024 and April 11, 2024, we issued 23,992 and 131,801 shares of our common stock upon vesting of RSUs, respectively, to our physician partners for a total of $818,621.
Added
On May 19, 2024, we issued 80,092 shares of our common stock to our physician partners to settle provider incentive liabilities for a total of $433,298. On June 16, 2024 and June 24, 2024, we issued 14,401 and 38,958 shares of our common stock upon vesting of RSUs, respectively, to our physician partners for a total of $352,983.
Added
On September 1, 2024, September 7, 2024, and September 22, 2024, we issued 178,401, 56,255, and 100,222 shares of our common stock upon vesting of RSUs, respectively, to our physician partners for a total of $1,242,706.
Added
On November 11, 2024, we issued 98,788 shares of our common stock to our physician partners to settle provider incentive liabilities for a total of $213,382. On December 15, 2024, we issued 114,679 shares of our common stock to our physician partners to settle provider incentive liabilities for a total of $256,881.

Item 7. Management's Discussion & Analysis

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

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Biggest changeFor additional discussion, see Note 20 to the Consolidated Financial Statements. 58 Table of Contents Results of Operations The following table summarizes key components of our results of operations (dollars in thousands): Year Ended December 31, 2023 2022 2021 Revenues: Medical services revenue $ 4,307,350 $ 2,384,889 $ 1,518,322 Other operating revenue 9,013 3,331 3,172 Total revenues 4,316,363 2,388,220 1,521,494 Expenses: Medical services expense 4,008,659 2,093,860 1,357,326 Other medical expenses 238,034 183,000 98,424 General and administrative (including noncash stock-based compensation expense of $69,326, $28,069, and $291,672, respectively) 285,760 207,789 427,502 Depreciation and amortization 16,043 8,949 10,484 Total expenses 4,548,496 2,493,598 1,893,736 Income (loss) from operations (232,133) (105,378) (372,242) Other income (expense): Income (loss) from equity method investments 16,489 10,720 (6,766) Other income (expense), net 27,840 13,930 2,178 Gain (loss) on lease terminations — (5,458) — Interest expense (6,658) (4,484) (6,146) Income (loss) before income taxes (194,462) (90,670) (382,976) Income tax benefit (expense) (791) (1,640) (886) Income (loss) from continuing operations (195,253) (92,310) (383,862) Discontinued operations: Income (loss) before gain (loss) on sales and income taxes (20,002) (14,528) (25,085) Gain (loss) on sales of assets, net (47,548) — 473 Income tax benefit (expense) — (26) 1,687 Total discontinued operations (67,550) (14,554) (22,925) Net income (loss) (262,803) (106,864) (406,787) Noncontrolling interests’ share in (earnings) loss 207 311 300 Net income (loss) attributable to common shares $ (262,596) $ (106,553) $ (406,487) 59 Table of Contents The following table summarizes our results of operations as a percentage of total revenues: Year Ended December 31, 2023 2022 2021 Revenues: Medical services revenue 100 % 100 % 100 % Other operating revenue — — — Total revenues 100 100 100 Expenses: Medical services expense 93 88 89 Other medical expenses 6 8 6 General and administrative (including noncash stock-based compensation expense of 2%, 1%, and 19%, respectively) 7 9 28 Depreciation and amortization — — 1 Total expenses 105 104 124 Income (loss) from operations (5) (4) (24) Other income (expense): Income (loss) from equity method investments — — — Other income (expense), net 1 1 — Gain (loss) on lease terminations — — — Interest expense — — — Income (loss) before income taxes (5) (4) (25) Income tax benefit (expense) — — — Income (loss) from continuing operations (5) (4) (25) Discontinued operations: Income (loss) before income taxes — (1) (2) Gain (loss) on sales of assets, net (1) — — Income tax benefit (expense) — — — Total discontinued operations (2) (1) (2) Net income (loss) (6) (4) (27) Noncontrolling interests’ share in (earnings) loss — — — Net income (loss) attributable to common shares (6) % (4) % (27) % Comparison of Year Ended December 31, 2023 and 2022 Medical Services Revenue Year Ended December 31, Change (dollars in thousands) 2023 2022 $ % Medical services revenue $ 4,307,350 $ 2,384,889 $ 1,922,461 81 % % of total revenues 100 % 100 % Medical services revenue increased by 81%, due primarily to growth in average membership of 69% that was attributable to eight new geographies that became operational in 2023 and growth in our existing geographies.
Biggest changeFor additional discussion, see Note 20 to the Consolidated Financial Statements in Item 8 of this Report. 59 Table of Contents Results of Operations The following table summarizes key components of our results of operations (dollars in thousands): Year Ended December 31, 2024 2023 2022 Revenues: Medical services revenue $ 6,047,715 $ 4,307,350 $ 2,384,889 Other operating revenue 12,815 9,013 3,331 Total revenues 6,060,530 4,316,363 2,388,220 Expenses: Medical services expense 5,842,530 4,008,659 2,093,860 Other medical expenses 213,159 238,034 183,000 General and administrative 268,912 285,760 207,789 Depreciation and amortization 24,463 16,043 8,949 Impairments 3,596 — — Total expenses 6,352,660 4,548,496 2,493,598 Income (loss) from operations (292,130) (232,133) (105,378) Other income (expense): Income (loss) from equity method investments 14,992 16,489 10,720 Other income (expense), net 34,489 27,840 13,930 Gain (loss) on lease terminations — — (5,458) Interest expense (6,177) (6,658) (4,484) Income (loss) before income taxes (248,826) (194,462) (90,670) Income tax benefit (expense) (1,451) (791) (1,640) Income (loss) from continuing operations (250,277) (195,253) (92,310) Discontinued operations: Income (loss) before gain (loss) on sales and income taxes (1,061) (20,002) (14,528) Gain (loss) on sales of assets, net (8,763) (47,548) — Income tax benefit (expense) — — (26) Total discontinued operations (9,824) (67,550) (14,554) Net income (loss) (260,101) (262,803) (106,864) Noncontrolling interests’ share in (earnings) loss (50) 207 311 Net income (loss) attributable to common shares $ (260,151) $ (262,596) $ (106,553) 60 Table of Contents The following table summarizes our results of operations as a percentage of total revenues: Year Ended December 31, 2024 2023 2022 Revenues: Medical services revenue 100 % 100 % 100 % Other operating revenue — — — Total revenues 100 100 100 Expenses: Medical services expense 96 93 88 Other medical expenses 4 6 8 General and administrative 4 7 9 Depreciation and amortization — — — Impairments — — — Total expenses 105 105 104 Income (loss) from operations (5) (5) (4) Other income (expense): Income (loss) from equity method investments — — — Other income (expense), net 1 1 1 Gain (loss) on lease terminations — — — Interest expense — — — Income (loss) before income taxes (4) (5) (4) Income tax benefit (expense) — — — Income (loss) from continuing operations (4) (5) (4) Discontinued operations: Income (loss) before income taxes — — (1) Gain (loss) on sales of assets, net — (1) — Income tax benefit (expense) — — — Total discontinued operations — (2) (1) Net income (loss) (4) (6) (4) Noncontrolling interests’ share in (earnings) loss — — — Net income (loss) attributable to common shares (4) % (6) % (4) % Comparison of Year Ended December 31, 2024 and 2023 Medical Services Revenue Year Ended December 31, Change (dollars in thousands) 2024 2023 $ % Medical services revenue $ 6,047,715 $ 4,307,350 $ 1,740,365 40 % % of total revenues 100 % 100 % Medical services revenue increased by $1.74 billion, or 40%, for the year ended December 31, 2024 compared to 2023 due primarily to growth in average membership of 38%, which was attributable to seven new geographies that became operational in 2024 as well as growth in our existing geographies.
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.
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.
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.
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 in 2022.
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) 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.
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.
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.
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.
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 • 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.
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, we pay a commitment fee on the unfunded Secured Revolving Facility amount of 0.375%. We must also pay customary letter of credit fees.
See “—Non-GAAP Financial Measures” below, for information regarding our use of medical margin and a reconciliation of gross profit to medical margin.
See “—Non-GAAP Financial Measures” below, for additional information regarding our use of medical margin and a reconciliation of gross profit to medical margin.
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.
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 69 Table of Contents necessary medical care to members for the contracted period.
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%.
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 SOFR rate (adjusted for maximum reserves) plus 1.00% and (d) 0%.
The increase in income from equity method investments were partially offset by $15.2 million of additional expenses related to certain physician partners that elected to reduce their compensation percentage in current and future years in exchange for agilon common stock.
The increase in income from equity method investments were partially offset by $15.2 million of additional expenses related to certain physician partners that elected to reduce their compensation percentage in current and future years in exchange for our common stock.
General and Administrative Year Ended December 31, Change (dollars in thousands) 2023 2022 $ % General and administrative $ 285,760 $ 207,789 $ 77,971 38 % % of total revenues 7 % 9 % General and administrative expenses increased $78.0 million, or 38%, for the year ended December 31, 2023 compared to 2022.
General and Administrative Year Ended December 31, Change (dollars in thousands) 2023 2022 $ % General and administrative $ 285,760 $ 207,789 $ 77,971 38 % % of total revenues 7 % 9 % General and administrative expenses decreased $78.0 million, or 38%, for the year ended December 31, 2023 compared to 2022.
Other income (expense), net Year Ended December 31, Change (dollars in thousands) 2023 2022 $ % Other income (expense), net $ 27,840 $ 13,930 $ 13,910 100 % % of total revenues 1 % 1 % Other income (expense), net generated income of $27.8 million for the year ended December 31, 2023 compared to $13.9 million in 2022 primarily from interest income as a result of our marketable securities investments, with investing activities beginning at the end of the first quarter of 2022.
Other income (expense), net Year Ended December 31, Change (dollars in thousands) 2023 2022 $ % Other income (expense), net $ 27,840 $ 13,930 $ 13,910 100 % % of total revenues 1 % 1 % 64 Table of Contents Other income (expense), net generated income of $27.8 million for the year ended December 31, 2023 compared to $13.9 million in 2022 primarily from interest income as a result of our marketable securities investments, with investing activities beginning at the end of the first quarter of 2022.
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).
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, 2024 (for example, the timing and volume of future medical services provided under capitation contracts).
See “—Non-GAAP Financial Measures” below, for information regarding our use of Adjusted EBITDA and a reconciliation of net income (loss) to Adjusted EBITDA. 56 Table of Contents Key Components of Our Results of Operations Revenues Medical Services Revenue Our medical services revenue consists of capitation revenue under contracts with various payors.
See “—Non-GAAP Financial Measures” below, for additional information regarding our use of Adjusted EBITDA and a reconciliation of net income (loss) to Adjusted EBITDA. 57 Table of Contents Key Components of Our Results of Operations Revenues Medical Services Revenue Our medical services revenue consists of capitation revenue under contracts with various payors.
The decrease in net cash used in operating activities in 2022 compared to 2021 was primarily a result of the increase in medical margin contributed from new and existing geographies, partially offset by increased provider costs, including partner physician incentive expenses and the timing of settlements with payors from new and existing geographies.
The increase in net cash used in operating activities in 2023 compared to 2022 was primarily a result of the increase in medical margin contributed from new and existing geographies, partially offset by increased provider costs, including partner physician incentive expenses and the timing of settlements with payors from new and existing geographies.
The maturity date of the Credit Facility was extended to February 18, 2026. Effective with the Second Amendment to Credit Agreement on May 25, 2023, we transitioned to the Secured Overnight Financing Rate (“SOFR”) as a benchmark interest rate used in the credit agreement.
The maturity date of the Credit Facility is February 18, 2026. Effective with the Second Amendment to Credit Agreement on May 25, 2023, we transitioned to the Secured Overnight Financing Rate (“SOFR”) as a benchmark interest rate used in the credit agreement.
In the event estimates or assumptions prove to be different from actual results, adjustments are made in subsequent periods to reflect more current estimates and assumptions about matters that are inherently uncertain. For a more detailed discussion of our significant accounting policies, see Note 2 to the Consolidated Financial Statements.
In the event estimates or assumptions prove to be different from actual results, adjustments are made in subsequent periods to reflect more current estimates and assumptions about matters that are inherently uncertain. For a more detailed discussion of our significant accounting policies, see Note 2 to the Consolidated Financial Statements in Item 8 of this Report.
Our medical services expense trends primarily relate to changes in per visit costs incurred by our members, along with changes in health system and provider utilization of services.
Medical services expense represents costs incurred for medical services provided to our members. Our medical services expense trends primarily relate to changes in per visit costs incurred by our members, along with changes in health system and provider utilization of services.
In 2023, we completed the disposition of our Hawaii operations and recognized a loss on sale of assets of $47.5 million. For additional discussion related to discontinued operations, see Note 20 to the Consolidated Financial Statements.
In 2023, we completed the disposition of our Hawaii operations and recognized a loss on sale of assets of $47.5 million. For additional discussion related to discontinued operations, see Note 20 to the Consolidated Financial Statements in Item 8 of this Report.
Income (loss) from equity method investments Year Ended December 31, Change (dollars in thousands) 2023 2022 $ % Income (loss) from equity method investments $ 16,489 $ 10,720 $ 5,769 54 % % of total revenues — % — % 61 Table of Contents Income (loss) from equity method investments increased $5.8 million, or 54%, for the year ended December 31, 2023 compared to 2022 primarily from our ACO REACH equity investments as a result of stronger performance driven primarily by increased medical margin during 2023 compared to 2022.
Income (loss) from equity method investments Year Ended December 31, Change (dollars in thousands) 2023 2022 $ % Income (loss) from equity method investments $ 16,489 $ 10,720 $ 5,769 54 % % of total revenues — % — % Income (loss) from equity method investments increased $5.8 million, or 54%, for the year ended 2023 compared to 2022 primarily from our CMS ACO Models investments as a result of stronger performance driven primarily by increased medical margin during 2023 compared to 2022.
The increase in net cash used in operating activities in 2023 compared to 2022 was primarily a result of increased provider costs, including partner physician incentive expenses, and the timing of settlements with payors from new and existing geographies, partially offset by the increase in gross profit contributed from new and existing geographies.
The decrease in net cash used in operating activities in 2024 compared to 2023 was primarily a result of decreased provider costs, including partner physician incentive expenses, and the timing of settlements with payors from new and existing geographies, partially offset by the increase in gross profit contributed from new and existing geographies.
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.
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, 2024, 2023, and 2022, costs incurred in implementing geographies were $5.4 million, $33.7 million and $23.9 million, respectively. Medical Margin We define medical margin as medical services revenue after medical services expense is deducted.
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.
Based on our planned operations, we believe that our existing cash and cash equivalents, investments in marketable securities, 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 (i.e., beyond the next 12 months).
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.
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 health management, inc. or its subsidiaries because the Credit Facility restricts agilon health management, inc.’s ability to pay dividends or make loans to us.
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.
Investments to support geography entry increased to $40.8 million in 2023, compared to $43.9 million in 2022 due to increased costs associated with our geographies that become operational in the following calendar year.
The borrower on the Credit Facility is agilon management, our wholly-owned subsidiary.
The borrower on the Credit Facility is agilon health management, inc., our wholly-owned subsidiary.
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.
For additional discussion related to our medical services expense, see “—Critical Accounting Estimates” below and Note 2 to the Consolidated Financial Statements in Item 8 of this Report. Other Medical Expenses Other medical expenses include: (i) partner physician compensation expense and (ii) other provider costs.
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.
Depreciation includes expenses associated with buildings, computer equipment and software, furniture 58 Table of Contents and fixtures, and leasehold improvements. Amortization primarily includes expenses associated with acquired intangible assets. 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 CMS ACO Models programs.
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.
Net Cash Provided By (Used In) Financing Activities Net cash used in financing activities was $2.6 million and $193.1 million for the years ended December 31, 2024 and 2023, respectively, compared to net cash provided by financing activities of $28.1 million for the year ended December 31, 2022.
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.
Net Cash Provided By (Used In) Investing Activities Net cash provided by investing activities was $139.9 million for the year ended December 31, 2024, compared to net cash used in investing activities of $44.0 million and $444.4 million for the years ended and December 31, 2023 and 2022, respectively.
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.
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, 2024 2023 2022 Platform support costs $ 169,402 $ 163,652 $ 127,458 % of Revenue 3 % 4 % 5 % Net Income (Loss) and Adjusted EBITDA Net income (loss) is the most directly comparable U.S.
The following table sets forth a reconciliation of gross profit to medical margin using data derived from our consolidated financial statements for the periods indicated (dollars in thousands): Year Ended December 31, 2023 2022 2021 Gross profit (1) $ 69,670 $ 111,360 $ 65,744 Other operating revenue (9,013) (3,331) (3,172) Other medical expenses 238,034 183,000 98,424 Medical margin $ 298,691 $ 291,029 $ 160,996 _____________________________________________________________________ (1) Gross profit is defined as total revenues less medical services expense and other medical expenses.
The following table sets forth a reconciliation of gross profit to medical margin using data derived from our consolidated financial statements for the periods indicated (dollars in thousands): Year Ended December 31, 2024 2023 2022 Gross profit (1) $ 4,841 $ 69,670 $ 111,360 Other operating revenue (12,815) (9,013) (3,331) Other medical expenses 213,159 238,034 183,000 Medical margin $ 205,185 $ 298,691 $ 291,029 _____________________________________________________________________ (1) Gross profit is defined as total revenues less medical services expense and other medical expenses.
The Company’s costs of revenues consist of medical services expense and other medical expenses, which represents the costs that are directly related to providing the services that generate revenue. 55 Table of Contents The following table presents our gross profit (dollars in thousands): Year Ended December 31, 2023 2022 2021 Total revenues $ 4,316,363 $ 2,388,220 $ 1,521,494 Medical services expense (4,008,659) (2,093,860) (1,357,326) Other medical expenses (1) (238,034) (183,000) (98,424) Gross profit $ 69,670 $ 111,360 $ 65,744 _____________________________________________________________________ (1) Represents physician compensation expense related to surplus sharing and other care management expenses that help to create medical cost efficiency.
The Company’s costs of revenues consist of medical services expense and other medical expenses, which represents the costs that are directly related to providing the services that generate revenue. 56 Table of Contents The following table presents our gross profit (dollars in thousands): Year Ended December 31, 2024 2023 2022 Total revenues $ 6,060,530 $ 4,316,363 $ 2,388,220 Medical services expense (5,842,530) (4,008,659) (2,093,860) Other medical expenses (1) (213,159) (238,034) (183,000) Gross profit $ 4,841 $ 69,670 $ 111,360 _____________________________________________________________________ (1) Represents physician compensation expense related to surplus sharing and other care management expenses that help to create medical cost efficiency.
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.
The following table sets forth changes in cash flows for the periods indicated (dollars in thousands): Year Ended December 31, 2024 2023 2022 Net cash provided by (used in) operating activities $ (57,777) $ (156,199) $ (130,808) Net cash provided by (used in) investing activities 139,891 (44,019) (444,388) Net cash provided by (used in) financing activities (2,583) (193,133) 28,056 67 Table of Contents Net Cash Provided By (Used In) Operating Activities Net cash used in operating activities was $57.8 million for the year ended December 31, 2024 compared to $156.2 million and $130.8 million for the years ended December 31, 2023 and 2022, respectively.
We believe the following key metrics are useful in evaluating our business (dollars in thousands): As of and for the Year Ended December 31, 2023 2022 2021 MA members 388,400 230,800 147,700 Medical services revenue $ 4,307,350 $ 2,384,889 $ 1,518,322 Gross profit $ 69,670 $ 111,360 $ 65,744 Medical margin (1) $ 298,691 $ 291,029 $ 160,996 Platform support costs $ 163,652 $ 127,458 $ 96,314 Net income (loss) $ (262,803) $ (106,864) $ (406,787) Adjusted EBITDA (1) $ (95,001) $ (45,470) $ (54,742) _____________________________________________________________________ (1) Medical margin and Adjusted EBITDA are non-GAAP financial measures.
We believe the following key metrics are useful in evaluating our business (dollars in thousands): As of and for the Year Ended December 31, 2024 2023 2022 MA members 526,500 388,400 230,800 Medical services revenue $ 6,047,715 $ 4,307,350 $ 2,384,889 Gross profit $ 4,841 $ 69,670 $ 111,360 Medical margin (1) $ 205,185 $ 298,691 $ 291,029 Platform support costs $ 169,402 $ 163,652 $ 127,458 Net income (loss) $ (260,101) $ (262,803) $ (106,864) Adjusted EBITDA (1) $ (154,215) $ (95,001) $ (45,470) _____________________________________________________________________ (1) Medical margin and Adjusted EBITDA are non-GAAP financial measures.
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 6% for the same period in 2021.
Operating costs to support our live geographies and enterprise functions as a percentage of revenue decreased to 3% for the year ended December 31, 2024 compared to 4% in 2023.
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.
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 six new geographies that became operational in 2023 as well as growth in our existing geographies.
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.
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.
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.
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.
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.
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, 2024 2023 2022 Net income (loss) $ (260,101) $ (262,803) $ (106,864) (Income) loss from discontinued operations, net of income taxes 9,824 67,550 14,554 Interest expense 6,177 6,658 4,484 Income tax expense (benefit) 1,451 791 1,640 Depreciation and amortization 24,463 16,043 8,949 Impairments and (gain) loss on lease terminations 3,596 — 5,458 Severance and related costs 4,577 188 2,470 Stock-based compensation expense 50,657 69,326 28,069 EBITDA adjustments related to equity method investments (1) 17,582 22,694 3,737 Other (2) (12,441) (15,448) (7,967) Adjusted EBITDA $ (154,215) $ (95,001) $ (45,470) _____________________________________________________________________ (1) Includes elimination of certain administrative services provided by us to our equity method investments.
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.
Comparison of Year Ended December 31, 2023 and 2022 Medical Services Revenue Year Ended December 31, Change (dollars in thousands) 2023 2022 $ % Medical services revenue $ 4,307,350 $ 2,384,889 $ 1,922,461 81 % % of total revenues 100 % 100 % Medical services revenue increased by 81%, due primarily to growth in average membership of 69%, which was attributable to eight new geographies that became operational in 2023 as well as growth in our existing geographies.
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.
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. 2024 Results: • Medicare Advantage members of approximately 526,500 as of December 31, 2024 increased 36% from 2023. • The CMS ACO Models attributed beneficiaries of approximately 132,100 as of December 31, 2024 increased 48% from 2023. • Total revenue of $6.06 billion increased 40% from 2023. • Gross profit of $4.8 million, compared to $69.7 million in 2023. • Medical margin of $205.2 million, compared to $298.7 million in 2023. • Net loss of $260.1 million, compared to $262.8 million in 2023. • Adjusted EBITDA loss of $154.2 million, compared to Adjusted EBITDA loss of $95.0 million in 2023.
The increase in medical services expense was also driven by an increase in average medical services expense per member of 14%. During 2023, we experienced an increase in medical claims expenses attributable to higher-than-expected utilization. The increase in medical service utilization trends became visible during the fourth quarter as a result of additional updated information provided by our payors.
The increase in medical services expense was also driven by an increase in average medical services expense per member of 14%. During 2023, we experienced an increase in medical claims expenses attributable to higher-than-expected utilization.
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.
Platform Membership Details Medicare Advantage members increased 36% during 2024, which includes contributions from new geographies and growth within geographies existing prior to 2024. Total members live on the agilon platform include 55 Table of Contents 526,500 Medicare Advantage members and 132,100 CMS ACO Models attributed beneficiaries. Average Medicare Advantage membership during 2024 was approximately 522,100.
Non-GAAP Financial Measures In addition to providing results that are determined in accordance with U.S. GAAP, we present medical margin and Adjusted EBITDA, which are non-GAAP financial measures. We define medical margin as medical services revenue after medical services expense is deducted. Medical services expense represents costs incurred for medical services provided to our members.
GAAP, we present medical margin and Adjusted EBITDA, which are non-GAAP financial measures. We define medical margin as medical services revenue after medical services expense is deducted. Medical services expense represents costs incurred for medical services provided to our members. As our platform matures over time, we expect medical margin to increase in absolute dollars.
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.
Other provider costs increased by $6.0 million to $149.8 million in 2024 compared to $143.5 million in 2023, as the number of geographies and members on our platform increased in 2024.
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.
Net cash provided by investing activities in 2024 was due primarily to maturities of marketable securities of $206.9 million. Net cash used in investing activities in 2023 was due primarily for the acquisition of My Personal Health Record Express, Inc. for $44.4 million.
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.
Operating costs to support our live geographies and enterprise functions (platform support costs) increased by $5.8 million to $169.4 million in 2024 compared to $163.7 million in 2023 due primarily to growth in operating costs incurred to support geographies that became operational in 2024.
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.
Interest payments on debt are calculated using outstanding balances and interest rates in effect on December 31, 2024. (2) See Note 6 to the Consolidated Financials Statements in Item 8 of this Report for additional information regarding the maturity of lease liabilities under operating leases.
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 increase in medical service utilization trends became visible during the fourth quarter as a result of additional updated information provided by our payors. 63 Table of Contents 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.
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.
GAAP measures as net income (loss), cash flows provided by or used in operating, investing or financing activities or other 65 Table of Contents financial statement data presented in our consolidated financial statements as an indicator of financial performance or liquidity.
(2) The year ended December 31, 2023 includes $15.2 million of physician compensation expenses to reduce the physician partners’ compensation percentage in current and future years in exchange for the Company’s common stock. (3) Includes interest income and transaction-related costs. (4) Effective in 2023, we no longer exclude geography entry costs from our computation of Adjusted EBITDA.
The year ended December 31, 2023 includes $15.2 million of physician compensation expenses to reduce the physician partners’ compensation percentage in current and future years in exchange for our common stock.
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.
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.
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.
However, medical margin PMPM may vary as the percentage of new members brought onto our platform fluctuates. New membership added to the platform is typically dilutive to medical margin PMPM. 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.
Other provider costs in 2022 include $23.9 million related to geographies that became operational in January 2023, while other provider costs in 2021 include $12.0 million of costs related to geographies that became operational in 2022.
Other provider costs in 2024 include $5.4 million related to geographies that became operational in January 2025, while other provider costs in 2023 include $33.7 million of costs related to geographies that became operational in 2024.
Recent Accounting Pronouncements For the impact of new accounting standards, see Note 2 to the Consolidated Financial Statements.
The estimate of medical costs payable represents our best estimate of our liability for unpaid medical costs. Recent Accounting Pronouncements For the impact of new accounting standards, see Note 2 to the Consolidated Financial Statements in Item 8 of this Report.
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.
General and Administrative Year Ended December 31, Change (dollars in thousands) 2024 2023 $ % General and administrative $ 268,912 $ 285,760 $ (16,848) (6) % % of total revenues 4 % 7 % General and administrative expenses decreased $16.8 million, or 6%, for the year ended December 31, 2024 compared to 2023.
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.
We recognize capitation revenue over the period eligible members are entitled to receive healthcare services. In certain of our payor arrangements, we are also financially responsible for Medicare Part D pharmaceutical costs for prescriptions rendered to members. Medical services revenue constitutes substantially all of our total revenue for the years ended December 31, 2024, 2023, and 2022.
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.
For additional discussion related to our revenue, see “—Critical Accounting Estimates” below and Note 2 to the Consolidated Financial Statements in Item 8 of this Report. Operating Expenses Medical Services Expense In each of our geographies, a network of physicians, hospitals, and other healthcare providers provide care to our members.
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.
For additional discussion on our debt obligations, see Note 11 to the Consolidated Financial Statements in Item 8 of this Report. 68 Table of Contents Equity As of December 31, 2024, we had 412.2 million shares of common stock outstanding.
Final reconciliation and receipt of amounts due from payors are typically settled in arrears, following completion of the contractual program year. 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.
Final reconciliation and receipt of amounts due from payors are typically settled in arrears, following completion of the contractual program year.
Investments to support geography entry increased to $43.9 million in 2022, compared to $20.6 million in 2021 due to increased costs associated with our geographies that become operational in the following calendar year.
Investments to support geography entry decreased to $28.5 million for the year ended December 31, 2024, compared to $40.8 million in 2023 due to the decreased costs associated with our geographies that are expected to become operational in the following calendar year and expansion into existing geographies.
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.
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, 2024, in total and disaggregated into current and long-term obligations (dollars in thousands): Total Current Long-Term Term loan (1) $ 34,904 $ — $ 34,904 Operating leases (2) 10,448 2,606 7,842 Capital commitments (3) 117,272 105,775 11,497 Interest (1) 5,655 5,205 450 Total $ 168,279 $ 113,586 $ 54,693 _____________________________________________________________________ (1) See Note 11 to the Consolidated Financials Statements in Item 8 of this Report for additional information regarding the maturities of debt principal.
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.
(2) Includes interest income, transaction-related costs and elimination of certain administrative services provided by agilon health, inc. to equity method investments. 66 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.
As of December 31, 2023, we had $25.1 million outstanding surety bonds related to health plan payor risk-bearing capital contributions. Cash Flows The following summary discussion of our cash flows is based on the consolidated statements of cash flows.
Cash Flows The following summary discussion of our cash flows is based on the consolidated statements of cash flows.
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.
Other Medical Expenses Year Ended December 31, Change (dollars in thousands) 2024 2023 $ % Other medical expenses $ 213,159 $ 238,034 $ (24,875) (10 %) % of total revenues 4 % 6 % Other medical expenses decreased by $24.9 million, or 10%, for the year ended December 31, 2024 compared to 2023.
Removed
Disposition of Hawaii Operations On October 31, 2023, we completed the disposition of MDX Hawaii, Inc. (“MDX Hawaii”), a wholly-owned subsidiary, and its related operations. Acquired by agilon in 2016, MDX Hawaii is a provider network with fully-delegated risk contracts and management services organization capabilities, including claims processing and utilization management.
Added
The increase in medical services revenue was also driven, to a lesser extent, by a 2% increase in PMPM capitation rates.
Removed
Our decision to exit Hawaii and the Independent Practice Association line of business represents a strategic shift that will have a major effect on our operations and financial results. As such, our Hawaii operations are reflected in the consolidated financial statements as discontinued operations. See Note 20 to the Consolidated Financial Statements for additional information.
Added
The increase in medical services revenue was partially offset by higher costs associated with prescription drug benefits provided under the Medicare Part D program, which is a reduction to medical services revenue, and lower risk adjustment revenue related to unfavorable prior period development. 61 Table of Contents Medical Services Expense Year Ended December 31, Change (dollars in thousands) 2024 2023 $ % Medical services expense $ 5,842,530 $ 4,008,659 $ 1,833,871 46 % % of total revenues 96 % 93 % Medical services expense increased by $1.83 billion, or 46% for the year ended December 31, 2024 compared to 2023 due primarily to average membership growth of 38%, which was attributable to seven new geographies that became operational in 2024 as well as growth in our existing geographies.
Removed
Average medical services revenue per member remained relatively flat compared to prior year.
Added
The increase in medical services expense was also driven by an increase in average medical services expense per member of 6%, which was primarily due to the continued impact of elevated medical cost trends and unfavorable prior period reserve development.
Removed
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.
Added
Partner physician compensation expense decreased to $63.4 million in 2024 compared to $94.5 million in 2023 as a result of the losses generated in our geographies, which is a function of medical services revenues less the sum of medical services expenses, other provider costs and market operating costs, for the respective geography.
Removed
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.
Added
Stock-based compensation expense decreased $18.7 million in 2024 primarily due to the cancellation of stock-based instruments during 2024. 62 Table of Contents Other income (expense), net Year Ended December 31, Change (dollars in thousands) 2024 2023 $ % Other income (expense), net $ 34,489 $ 27,840 $ 6,649 24 % % of total revenues 1 % 1 % Other income (expense), net increased $6.6 million, or 24%, for the year ended December 31, 2024 compared to 2023 primarily from income related to services rendered to our CMS ACO Models investments.
Removed
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.
Added
Total Discontinued Operations Year Ended December 31, Change (dollars in thousands) 2024 2023 $ % Total discontinued operations $ (9,824) $ (67,550) $ 57,726 85 % % of total revenues — % (2 %) Discontinued operations generated losses of $9.8 million for the year ended December 31, 2024 compared to $67.6 million for the year ended December 31, 2023.
Removed
Income (loss) from equity method investments Year Ended December 31, Change (dollars in thousands) 2022 2021 $ % Income (loss) from equity method investments $ 10,720 $ (6,766) $ 17,486 258 % % of total revenues — % — % Income (loss) from equity method investments increased $17.5 million, or 258%, for the year ended 2022 compared to 2021 primarily from our new ACO REACH equity investments in 2022 and a full year of operations from our existing ACO REACH investments, which became operational in April 2021. 63 Table of Contents Other income (expense), net Year Ended December 31, Change (dollars in thousands) 2022 2021 $ % Other income (expense), net $ 13,930 $ 2,178 $ 11,752 540 % % of total revenues 1 % — % Other income (expense), net generated income of $13.9 million for the year ended December 31, 2022 compared to $2.2 million in 2021 primarily as a result of our marketable securities investments in 2022.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeA 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.
Biggest changeA hypothetical 100 basis point change in interest rates would not have a material impact on our interest expense. 70 Table of Contents We held cash, cash equivalents, restricted cash equivalents, and marketable securities of $405.6 million and $495.1 million as of December 31, 2024 and 2023, respectively, consisting of bank deposits, certificates of deposits, money market funds, U.S.
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
The goals of our investment policy are liquidity and capital preservation. We do not enter into investments for trading or speculative purposes. 71 Table of Contents

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