ASTH - NASDAQ

Good morning, everyone, and welcome to Astrana Health, Inc. Fourth Quarter and Year End 2025 Earnings Call. At this time, all participants are in a listen-only mode. Later, you will have the opportunity to ask questions during the question-and-answer session and instructions will be provided at that time. Today's speakers will be Brandon Sim, President and Chief Executive Officer of Astrana Health, Inc., and Chandan Basho, Chief Operating and Financial Officer. The press release announcing Astrana Health, Inc.'s results for the fourth quarter and year ended 12/31/2025 is available at the Investors section of the company's website at www.astranahealth.com. The company will discuss certain non-GAAP measures during the call. Reconciliations to the most comparable GAAP measures are included in the press release. To provide some additional background on its results, the company has made a supplemental deck available on its website. A replay of this broadcast will be available at Astrana Health, Inc.'s website after the conclusion of this call. Before we get started, I would like to remind everyone that this conference call and any accompanying information discussed herein contain forward-looking statements within the meaning of the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements can be identified by terms such as anticipate, believe, expect, future, plan, outlook, and will, and include, among other things, statements regarding the company's guidance, continued growth, acquisition strategy, ability to deliver sustainable long-term value, ability to respond to the changing environment, liquidity, operational focus, strategic growth plans, and acquisition integration efforts. Although the company believes that the expectations reflected in these forward-looking statements are reasonable, as of today, those statements are subject to risks and uncertainties that could cause the results to differ materially from those projected. There can be no assurance that those expectations will prove to be correct. Information about the risks associated with investing in Astrana Health, Inc. is included in the filings with the Securities and Exchange Commission, which we encourage you to review before any investment decisions. The company does not assume any obligation to update any forward-looking statements as a result of new information, future events, change in market conditions or otherwise, except as required by law. Regarding the disclaimer language, I would like you to refer to Slide Two of this conference call presentation for further information. With that, I will now turn the call over to Astrana Health, Inc.'s President and Chief Executive Officer, Brandon Sim. Brandon, please go ahead.

Good morning. Thank you for joining us today. Astrana Health, Inc. delivered another year of record revenue, adjusted EBITDA, and free cash flow, extending our track record of consistent performance. In a year marked by regulatory recalibration, industry cost pressure, and broader market volatility, our model performed exactly as designed, demonstrating stability, predictability, and operating leverage. Our mission remains clear: to deliver high-quality, high-value, and accessible care to communities nationwide. We are building the nation's leading patient-centered, payer-agnostic healthcare platform, and our results reflect the advantages of that strategy. By empowering providers to deliver the highest quality care at the lowest total cost, we create durable value for patients, physicians, payers, and shareholders. The predictability of our delegated risk model, combined with our integrated care model, diversified payer and market exposure, and technology-driven leverage, provides clear visibility into long-term scalable growth. Periods of complexity tend to differentially reward operational excellence. In that environment, we expanded deliberately, strengthened our competitive position, and further advanced a business designed to compound consistently across cycles. I will begin first with highlights for 2025, then turn the call over to Chandan to review our financial results and guidance in greater detail, before we open the line for questions. In the fourth quarter, total revenue was $950.5 million, increasing 43% year over year, and adjusted EBITDA was $52.5 million, up 50% year over year. For the full year 2025, revenue reached $3.2 billion, adjusted EBITDA totaled $205.4 million, free cash flow was $104.5 million, and non-GAAP adjusted EPS on a fully diluted basis was $2.20, each a record for the company. Stepping back since 2019, through multiple regulatory cycles, evolving risk adjustment models, varying macroeconomic and cost trend conditions, and the global pandemic, Astrana Health, Inc. has grown revenue by 467%, representing a 34% compound annual growth rate. Over that same six-year period, adjusted EBITDA increased 79%, or 25% annually, and free cash flow grew 727%, or 42% annually. Taken together, this performance reflects the remarkable consistency and scalability of our model. It underscores the strength of our fully delegated care approach, where aligned physicians, disciplined risk management, and the purpose-built technology and AI-driven platform work together to deliver predictable clinical, financial outcomes over time. This sustained performance is the result of deliberate execution against a clear strategic framework quarter after quarter. First, we continue to grow memberships deliberately. We ended the year serving 1.6 million members in value-based care arrangements, driven by sustained demand from both payer and provider partners for coordinated, accountable care. Our expansion remains measured, grounded in disciplined underwriting and aligned partnership across all of our markets. We focus on cultivating physician leadership, partnering with high-quality payers, and deploying the Astrana Health, Inc. care model, enabled by our technology and AI-driven infrastructure, to scale with visibility and control. That disciplined approach was reflected in a constructive annual enrollment period, with mid single-digit growth in Medicare Advantage membership year over year, supported by strong alignment with our payer partners. More broadly, that disciplined growth translated into strong performance across both our core and expansion markets. California revenue grew 50% year over year, reflecting continued strength in our foundational market. Outside of California, revenue grew 90% year over year as newer markets scaled. At year end, approximately 19% of total revenue was generated from membership outside California, reflecting continued geographic diversification and a progressively more balanced revenue base. Importantly, this growth is anchored in strong provider engagement across the platform, with high retention and disciplined provider network expansion. Second, our growth continues to be anchored in disciplined risk progression. For more than 30 years, we have taken a measured approach to assuming full risk, entering arrangements only when rates are aligned with underlying medical cost trends and when the data infrastructure and clinical programs are in place to manage that risk responsibly. That philosophy underpins the long-term stability and predictability of our business. In the current environment, some participants have responded to elevated medical cost trends in the industry by retrenching from risk exposure. That can be prudent when rate alignment or operational readiness is constrained. But our model was designed to operate through complexity. Our performance is driven by care delivery infrastructure, technology, physician alignment, not by coding intensity or arbitrage. We prioritize repeatable economics over transient performance. The strength of our care model, payer relationships, and technology platform enables us to secure appropriate economics and manage medical cost volatility across cycles with discipline and predictability. As a result, we are able to expand thoughtfully into full-risk structures even as others recalibrate. We are still on track for approximately 80% of our revenue, and more than 36% of our owned membership, to be in full-risk arrangements by the end of the first quarter 2026, reflecting alignment with patient outcomes while maintaining clear control over the pace and structure of that risk assumption. Consistent with prior commentary, several full-risk contracts that were expected to commence in mid-2025 instead began in early 2026 as part of the coordinated implementation process. The economics of those arrangements were agreed in line with our underwriting standards, and we are seeing encouraging early performance as they come online. Third, we continue to deliver strong clinical outcomes while maintaining disciplined control over medical cost trend in 2025 across both our legacy Astrana Health, Inc. and legacy Prospect businesses, in both the fourth quarter and full year. Medical cost and utilization trends remained well controlled. Legacy Astrana Health, Inc. performed slightly ahead of our projected 4.5% cost trend, and legacy Prospect met expectations. This performance underscores the durability of our delegated care model and our ability to manage medical cost volatility across diverse populations. Engagement remains a core driver of performance. Annual wellness visit completion rates approached 80% in our legacy Astrana Health, Inc. markets, with meaningful gains in newly integrated Prospect populations. This level of engagement enables earlier intervention, tighter care coordination across care settings, and more predictable cost management. These outcomes are powered by our proprietary platform, which embeds real-time insights, next-best-action workflows, and automated authorization processes directly into provider and care team workflows, increasingly supported by AI agents. More than two-thirds of prior authorizations are automatically approved, improving access while reducing administrative burden. Within our delegated risk model, providers operate with transparent performance data and financial alignment, reinforcing accountability at the point of care. We observe a 24% higher gap-closure rate and a 30% higher annual wellness visit completion rate compared to less engaged providers. These differences translate into stronger quality performance and more consistent financial results, and we expect similar improvements over time as newly integrated populations adopt our platform. We see this translate into predictable cohort maturation in our expansion markets. Southern Nevada achieved run-rate profitability in 2025, with a 20% year over year improvement in medical loss ratio. This improvement reflects the scalability of our delegated care model which we have observed across prior expansion markets. As we launch our full-risk delegated model in Texas this year, we expect to see a similar maturation curve over time. Fourth, our Astrana Health, Inc. care enablement technology platform continues to drive meaningful operating leverage across the enterprise, enabling disciplined, capital-efficient growth in new markets while expanding margins within our existing business. On the growth side, our platform makes the J-curve shallower and accelerates time to profitability as we scale into new markets, by standardizing and automating workflows, accelerating clinical integration, and embedding real-time data and risk infrastructure from day one. This was demonstrated by the successful onboarding and integration of a new care enablement client and its affiliated hospital at the beginning of the year. We also launched a fully delegated partnership with a large payer partner in Texas on January 1, expanding our delegated Medicare Advantage footprint with limited incremental overhead. Within our existing operations, we continue to drive measurable efficiency gains. G&A as a percentage of revenue was 6.8% in 2025, down 75 basis points year over year despite $26 million of one-time transaction-related costs, and down 110 basis points on an adjusted basis. This reflects operating leverage embedded in our platform as revenue scales. We believe our model supports continued EBITDA margin expansion as we scale revenue and continue to embed AI-driven automation across the enterprise. In combination, these four pillars—disciplined membership growth, measured risk progression, consistent clinical execution, and technology-driven operating leverage—form a model that is structurally positioned to expand margin and share across cycles. Before turning it over to Chandan, let me briefly address two important items. First, on Prospect, integration remains on track and continues to validate the strategic rationale for the transaction. During the fourth quarter, we completed the standardization of financial reporting across the combined organization, established live visibility into medical economics and utilization trends, and aligned clinical workflows and organizational structure under the Astrana Health, Inc. care model. As a result of this progress and early performance, we now expect to achieve the high end of our previously communicated $12 million to $15 million in annualized synergies over the coming quarters. Provider engagement has remained strong throughout the integration. More than six months after closing, we continue to see over 97% gross retention among Prospect primary care physicians. This level of stability reflects strong continuity of provider relationships and alignment with the Astrana Health, Inc. model. Looking ahead, I would also like to address the 2027 Medicare Advantage Advance Rate Notice. While the industry-level rate update was approximately flat, our preliminary analysis suggests that the impact to Astrana Health, Inc. is expected to be meaningfully more favorable than for the industry at large, reflecting the structure of our care model and strengthening our competitive position in the current environment. First, we do not rely on audio-only visits or unlinked chart reviews for risk adjustment. CMS has estimated that the disallowance of these diagnosis sources represents a 1.53% headwind to the industry. But given our encounter-based longitudinal delegated care model, we expect our exposure to this change to be minimal. With respect to the risk model revision and normalization, CMS estimates an industry headwind of 3.32%. Based on our initial actuarial review of the updated risk model coefficients, we expect a materially lower impact than the industry-wide estimate given our historically conservative approach to risk adjustment and our emphasis on preventive care, quality performance, and medical cost management. More broadly, this environment favors organizations that generate performance through clinical execution and disciplined cost control, rather than coding intensity. That is precisely how Astrana Health, Inc. operates. As regulatory changes level the playing field with respect to risk adjustment, we believe the strength of our clinical infrastructure and technology platform positions us to widen our advantage over time. Over three decades and multiple regulatory cycles, we have demonstrated consistent growth and sustained profitability. That track record gives us confidence in the durability of our model and the diversity of our revenue streams. As we enter 2026, we expect continued disciplined membership growth, measured risk progression, stable medical cost performance, and further operating leverage from our technology platform. We are operating from a position of structural strength. Our platform is designed to expand margins, generate consistent free cash flow, and gain share across regulatory cycles. Our history demonstrates that resilience clearly. In an environment where underwriting discipline, physician alignment, and clinical execution matter more than ever, we believe Astrana Health, Inc. is structurally advantaged. We see opportunity, not constraint, to continue compounding growth and advance our mission to provide high-quality, high-value care to the communities we serve. With that, I will now turn the call over to Chandan Basho to review our financial results and outlook in greater detail.

Thank you, Brandon, and good morning, everyone. Our fourth quarter and full-year results reflect disciplined execution during a period of significant scale and integration. We successfully closed the Prospect Health acquisition while continuing to invest in our platform and maintaining solid performance across the legacy Astrana Health, Inc. and Prospect businesses. Before turning to the financial highlights, I wanted to address our annual report filing timeline. We will be filing a Form 12b-25 due to a material weakness in internal controls over financial reporting related to acquisition and purchase accounting processes. The matter relates to the timing and documentation of certain control procedures. The financial results reported today are in accordance with U.S. GAAP, and the matter did not result in any material misstatement or restatement of prior periods. We have already implemented enhancements to our accounting processes and expanded our team's resources. We will continue to invest in the accounting function in order to complete remediation on an expedited basis. We expect to file the 10-Ks within the 15-day 12b-25 extension period. We are pleased with the performance of the business in the fourth quarter and full year of 2025. Total revenue for the fourth quarter was $950.5 million, up 43% versus the prior-year quarter, driven by the full-quarter contribution from Prospect and continued organic growth in our Care Partners segment. For the full year 2025, revenue was $3.2 billion, representing 56% year-over-year growth and at the high end of our guidance range. Adjusted EBITDA for the fourth quarter was $52.5 million, up 50% versus the prior-year period. Adjusted EBITDA for the full year was $205.4 million, up 21% year over year. Medical cost performance in the quarter for both legacy Astrana Health, Inc. and legacy Prospect remained well controlled for both and slightly better than our expectations, continuing to reflect the differentiated outcomes of our fully delegated, technology-enabled care model. For the fourth quarter, net income attributable to Astrana Health, Inc. was $6 million and earnings per share was $0.12, compared to negative $0.15 in the prior-year period. Adjusted earnings per share for the quarter was $0.54, and for the full year 2025, adjusted earnings per share was $2.20. Turning to cash flow and the balance sheet. For the full year 2025, free cash flow totaled $104.5 million, with an over 50% conversion rate relative to adjusted EBITDA. This exceeded the high end of our previously communicated conversion range and reflects strong underlying cash generation. We continue to expect strong free cash flow growth into 2026 as new full-risk contracts ramp, working capital normalizes, and integration-related investments decline. We ended the quarter with $429.5 million of cash and $648.7 million of net debt. Our net leverage ratio on a pro forma basis was 2.6 times. We continue to expect meaningful deleveraging over the next twelve months through profitable growth, free cash flow generation, and disciplined debt reduction. During the fourth quarter, we repurchased 634,000 shares at an average price of $22.23, reflecting our disciplined capital allocation framework and confidence in the long-term value of the business. In addition, the Board has increased the maximum aggregate amount of shares that may be purchased on the company's existing stock repurchase program from $50 million to $100 million. The company may determine to continue to make repurchases under the program following the filing of the 10-Ks. Entering 2026, we expect continued revenue growth and adjusted EBITDA expansion driven by growth across our core and expansion markets, ramping full-risk contracts, realization of Prospect synergies, and sustained cost discipline. While medical cost trends remain elevated across the industry, our disciplined contracting approach, diversified payer mix, and proven clinical model position us to manage these pressures while preserving margin discipline and cash flow generation. For the full year 2026, we expect revenue in the range of $3.8 billion to $4.1 billion, adjusted EBITDA between $250 million and $280 million, and free cash flow between $105 million and $132.5 million. For the first quarter of 2026, we expect revenue between $900 million and $1.0 billion and adjusted EBITDA between $60 million and $70 million. The midpoint of 2026 guidance reflects our operating plan. The low end assumes a stacked downside case rather than a shift in underlying execution or operating trajectory. Our guidance reflects a deliberately prudent planning framework. On the headwind side, we have embedded expected declines in Medicaid and exchange enrollment, adverse selection associated with expected Medicaid and exchange disenrollment, losses associated with new cohorts in expansion markets, incremental new market entry costs, conservative medical cost trend assumptions, and zero contribution from the California Hospital Quality Assurance Fund (HQAF). On the tailwind side, we have modeled improved 2026 Medicare Advantage rates, realization of Prospect synergies, continued maturation of full-risk cohorts, and ongoing operating efficiencies driven by automation and AI deployment. Performance to the higher end of our range would be driven primarily by medical cost trends outperforming our conservative assumptions, lower-than-modeled Medicaid and exchange disenrollment, stronger-than-expected new market maturation, and potential continuation of the HQAF program. Taken together, our guidance reflects disciplined underwriting, embedded conservatism, and confidence in the durability and scalability of our operating model. With that, operator, we will now open for questions.

Thank you. We will now be conducting a question-and-answer session. Our first question is coming from Ryan Daniels from William Blair. Your line is now live.

Hello, this is Matthew Contarion. Thank you for taking the questions. So given that you finished this year with cost trends in line with expectations for the legacy Astrana Health, Inc. business and the Prospect Health business, what are the expectations of cost trends for 2026? And I know in your prepared remarks, you talked about the conservative cost trend you took for 2026. But if you could share a number, that would be great. And then how are you expecting the cost trend across the different patient segments for 2026? If you could provide some color into what went into the cost trend guide for the different patient segments and their expectations, that would be great.

Matthew, good morning. Thank you for joining the call. And please tell Ryan hello. On 2025, as we mentioned on the call, we did come in slightly ahead of expectations for our trend, which you may recall was in the mid-4% range, blended across our lines of business. Going forward in 2026, we are conservatively embedding assumptions of just over a 5% trend, a slight increase due to our expectations, as Chandan outlined in the prepared remarks, of potential Medicaid and exchange disenrollments, as well as potential adverse selection related to those disenrollments. However, we do expect that trend continues to be well controlled in that mid-single-digit range, and our estimates and guidance are predicated on that conservative trend assumption. In terms of per line-of-business split of that trend assumption, similar to 2025, we expect Medicare Advantage to be slightly lower than that and Medicaid and commercial and exchange to be slightly higher than that. Hopefully, that helps.

Thank you. Our next question is coming from Michael Hopp from Baird. Your line is now live.

Thank you. On the 2026 EBITDA guide range, $250 million to $280 million feels a little bit wider than your typical cadence. I know, Chandan, you listed out the headwinds and tailwinds, but I am trying to get a bit more comfort on the bridge. So I was wondering if you could provide some extra quantification. The way I am thinking about it is a $205 million jump-off. Get the full annualized Prospect, so now you are up to, call it, $246 million. Get about $15 million, if I am not mistaken, coming back from those negotiated full-risk contracts. So you are at $261 million. That is what I can bridge so far. The pieces I cannot quantify are, like, how much of the $12 million to $15 million Prospect synergies can you realize this year, expected G&A improvement from the AI and efficiency, and then lastly, those expected exchange and Medicaid headwinds, how much is in your guide and how much offset is from positive MA rates, organic growth? Just more color there, and whether you think I am missing any notable pieces. Thank you.

Hey, Michael. Good morning. Thanks for the question. This is Brandon. With regards to the range of the guide, we do believe it is consistent with past ranges. I believe last year's range was around just over 10% of the guide, and this year it is also around 11%. So it is a similar percentage as a range—percentage of the range is a similar percentage of midpoint, that is. That being said, happy to provide more color on the earnings call bridge. We ended the year just above $205 million of adjusted EBITDA. There is obviously the run-rate full-year impact of Prospect, as well as synergies coming in on the high range—the $12 million to $15 million annualized. We expect in the high single digits contribution for the 2026 full year because of the phasing in of those synergies over time. We also expect in the mid-$20 million range in terms of forward conversion and contract rates, as well as $5 million—$5 million to $10 million—high single digits in terms of expansion market improvements. We expect in the tens of millions, and happy to quantify that more, you know, as well, on Medicare rate versus acuity, and that is a tailwind, not a headwind. On the headwind side, however, in terms of Medicaid enrollment and the rate-acuity mismatch, we are expecting approximately a 1% to 1.5% negative spread on Medicaid rate/acuity, as well as conservatively assuming 10% to 15% Medicaid disenrollments throughout the year. And so doing the math there, that is, call it, a negative $20 million or so impact, and perhaps another mid-single-digit impact for exchange enrollment and mix. There are some other puts and takes, including, as Chandan mentioned, assuming $0 for the Hospital Quality Assurance Fund for California, which is a mid-single-digit impact as well. And so adding all of those together, with some puts and takes around the edges, you do get from the $205 million number to the midpoint of guide, which is $265 million. And as Chandan implied in the prepared remarks, the low end of that range really is a stacked downside case. It assumes that all of the variables are negative at the exact same time, and we view the midpoint of the range, as Chandan mentioned, to be more reflective of our operating plan at this time.

Thank you. Our next question today is coming from Jailendra P. Singh from Truist Securities. Your line is now live.

Thank you, and thanks for taking my questions. I want to follow up on your comments around the 2027 MA Advance Notice. Thanks for the color there. Are you willing to put a stake in the ground in terms of what the all-in rate update means for you guys, like, Advance Notice? And in the event rates do not improve in the final notice—hopefully they do—but if they do not improve, how do you think about your ability to hit your 2027 EBITDA target? My point is that where we stand today, just wondering if you still feel good about that $350 million target?

Hey, Jailendra. Good morning. Thank you for the question. On the Medicare Advantage rate notice, as I mentioned in the prepared remarks, we do believe that Astrana Health, Inc. will be less materially impacted—or will be more positively impacted, that is—by the impact of the Advance Notice versus the industry at large. As I remarked, the 1.53% that CMS has embedded in industry average is related to disallowed diagnoses that Astrana Health, Inc. does not rely on for its risk coding practices. As we mentioned in the past, Astrana Health, Inc.'s risk adjustment factor across its Medicare Advantage membership is just over 1.0, which is the national average for Medicare Advantage. And so the risk model renormalization and the risk model coefficients, which were published along with Advance Rate Notice, are not a 3.5% or 3.3% headwind as CMS has suggested on average for the industry. A reminder that these 3.32% and 1.53% numbers are industry averages, not necessarily the impact for any given organization. And so when our actuarial team, for example, used the newly revised risk model coefficients on our HCC profiles, we found that, in combination with the renormalization factor, that was not as large of an impact. We are not willing to necessarily quantify that at the moment, because these risk factors could obviously still change. The coefficients could still change, and our HCC behavior—our providers—could change. But we do believe it places a great floor for us in terms of the maximum negative impact that this could have for us. If nothing changes about the Advance Rate Notice, as you asked, we still believe that rates should be a positive, you know, 2.5% to 3% as it relates to Astrana Health, Inc. as an organization, which, given our industry-leading ability to control Medicare Advantage cost trend, should position us for either a margin-flat or only slightly margin-dilutive year even in 2027, even in the face of contracting rates for the industry at large. This is not even including changes that payers may make, such as changes to benefit design, reducing benefits in order to protect their profitability pools. With regards to the 2027 guide, we continue to believe that the 2027 guide is within the range of outcomes. That being said, much has changed in the world since we put that guidance out, I think, over a year ago now, and we will continue to operate the business in a rational way in order to optimize for medium- and long-term value. Thank you, Jailendra.

Thank you. Our next question today is coming from Craig Jones from Bank of America. Your line is now live.

Great. Thank you. Maybe to follow up on what we think might happen on the final rate notice, Brandon. So we saw, like, you know, comments out of UNH indicating that the 5% trend CMS used should be 9% to 10%, even MedPAC seemed to indicate it might be going higher. An opinion on what that rate should have been for the national average and then maybe what you think CMS will actually end up doing for the final notice? Thank you.

Thanks for the question. We have been working very hard, along with other organizations, to advocate for a constructive rate notice environment so that we can continue providing great care with great value to American citizens. That being said, it is hard for me to prognosticate necessarily. We do believe that effective growth rate should be in the high single-digit range, and we have been in contact with CMS in order to inform them of those views and explain how the actuarial analyses and the math might support that view. That being said, it is very difficult for me on this call to predict what would happen, but I would say that we would agree with industry consensus that the effective growth rate should be in the high single digits. That being said, we are very supportive of efforts to reduce risk coding as a differentiated competitive advantage. We believe that clinical efficacy and efficiency should be the competitive advantages that organizations have when taking risk, rather than risk model gamification. So we are generally broadly supportive of changes to the risk model to make the playing field more equitable and fair for all care delivery organizations.

Thank you. Our next question today is coming from David Michael Larsen from BTIG. Your line is now live.

Hi, congratulations on a good quarter and year. You talk a little bit more about Prospect. It is sort of my understanding that this hospital that you now own, a portion of it, is Astrana Health, Inc. members where you are bearing risk. What percentage of Prospect revenue and earnings is fee-for-service versus risk? And then within that risk pool, how are your margins coming along? And can you just remind us of the expected EBITDA contribution from Prospect? Thanks very much.

Good morning, David. Thank you for the question. You are right in that there is one acute care hospital, which we report as part of the Care Delivery segment. That being said, the vast majority of Prospect revenue maps to what we would call the Care Partner segment and has been reported in the Care Partner segment, similar to the legacy Astrana Health, Inc. business. And so it is not a large portion of the Prospect revenue that is fee for service. I would say approximately 10% to 15% is fee for service—that is my guess. I will have that confirmed for you. That being said, I think that Prospect integration continues to be strong. As I mentioned earlier, provider engagement is extremely strong and retention is strong, with over 97% gross retention among Prospect PCPs. And the hospital operates in a very much managed care setting, which means that it is serving Prospect—now Astrana Health, Inc.—membership as well as membership from other managed care organizations in a way that allows us to optimize for quality of care, as well as deliver value for our physicians, our patients, and our care partners.

Thank you. Our next question today is coming from Ryan M. Langston from TD Cowen. Your line is now live.

Hi, good morning. This is Christian Borgmeier on for Langston. Could you provide color on the nature of those AI tools that represent the tailwind for 2026? And then how are you thinking about sort of the AI opportunities for Astrana Health, Inc. over the next couple of years, beyond 2026?

First, clarifying my comment on the last question: actually closer to the 10% number, so very similar in terms of fee-for-service versus value-based revenue percentages to the legacy Astrana Health, Inc. business. On the AI question, very excited about the AI tools that are being developed on a day-to-day basis here at Astrana Health, Inc. Of course, I would first want to comment that in other parts of the country, where payers and providers are not as seamlessly coordinated in a unique delegated risk payor-provider model such as the one that we run here at Astrana Health, Inc., there is an escalating war, so to speak, in terms of using AI to increase reimbursement and selectively push down reimbursement. We believe that these are nonproductive items for the American healthcare system. We believe that we must use AI to fulfill its promise and allure of lowering healthcare costs, not increasing it, and that has been the focus for us as we develop AI tools here at Astrana Health, Inc. As a reminder, we have over 100 U.S.-based data scientists, machine learning engineers, AI engineers, software engineers, and staff supporting our AI efforts to build a fully proprietary platform using state-of-the-art AI technology that is being developed on a day-to-day basis. Our AI software platform includes automated tools for payer-related functions, such as automating and improving prior authorizations much more quickly and giving members prior authorization approvals in hand on their phones in a text message during the visit itself, right after the conclusion of the visit, so that they have access to specialty and follow-up care immediately. We have built AI tools for automatically processing and adjudicating claims, as well as ensuring that fraud, waste, and abuse is minimized in terms of the revenue cycle and reimbursement process. And we have also built AI tools around other parts of the payer-delegated functions such as credentialing, eligibility, and more. On the provider-facing side, we built a suite of AI tools that allow providers to have access to real-time data and insights both at the point of care and for our care teams so that there is continuity of care between episodic visits, which is consistent with the Astrana Health, Inc. care model and longitudinal care model that we have developed for over 30 years here at Astrana Health, Inc. That means that providers have access to next-best-action workflows, they have access to real-time claims and utilization data, as well as real-time insights into where patients might be high risk in their given panels. That same information is also piped to our care teams—hundreds of clinical staff that we employ—that also take care of members, engage them post discharge, engage them in transitions of care, and ensure that they are being routed appropriately in the right time frame to the appropriate site of care. In aggregate, we believe that this AI infrastructure that we built not only allows us to execute our care model in a consistent and scalable way from market to market, including our expansion markets, but also allows us to reduce G&A over time, which is shown in the over 100 basis points of adjusted G&A improvement on a year-to-year basis, even as revenue grows very strongly year over year. We are very excited about the potential going forward. We expect further G&A improvements as a percentage of revenue, as well as consistent scalability and cohort maturation in our expansion markets.

Thank you. Our next question today is coming from Matt Shea from Needham & Company. Your line is now live.

Hey, thanks for taking the question. I wanted to touch on the Care Enablement business. Last quarter you talked about a robust pipeline here. Would love to get an update on that. Maybe comment on the win to start the year. And are there any other late-stage deals in the pipeline that might convert in 2026 or any deals contemplated in the guide? And then on the gross margins, how should we think about the right level for the Care Enablement business? Can we get back to 50% plus? Or is this lower level sort of the near-term expectation for the combined business? Thanks.

Thanks for the question. On the Care Enablement business, we are pleased to have onboarded the new client that we discussed last year as smoothly at the beginning of this year. There continues to be a pipeline for care enablement. Clients are obviously longer sales cycles given the extensive nature of the integration and moving infrastructure to the Astrana Health, Inc. infrastructure. That being said, we do think that there is a strong pipeline of care enablement clients and we continue to actively develop that business. On EBITDA margins, we do think that over the last couple of quarters, we have operated at the 20% to 25% EBITDA margin range, and we expect that to be the correct EBITDA margin range going forward for the Care Enablement business.

Thank you. Our next question is coming from Andrew Mok from Barclays. Your line is now live.

Hi, good morning. You mentioned Medicaid and exchange disenrollment as drivers of the higher trend this year. Can you share what you are expecting from a disenrollment perspective for each of those business lines and what level of visibility you have into those declines at this point in the year? Thanks.

Thanks for the question, Andrew. On Medicaid, I think I mentioned in an earlier answer, we are expecting approximately around the 10% range in disenrollments, plus or minus a few percent in terms of our base and more aggressive cases, as well as some rate-acuity mismatch due to potential adverse selection baked into our 2026 guidance. On exchange, we are expecting in the low tens of percentages of decline. Of course, we are not necessarily seeing that at the moment, but that could change as automatic re-enrollees see the higher premiums, and we are actively watching that concern. On Medicaid, we are actively seeing enrollment on a monthly and real-time basis. Historically, we have lost members in Medicaid due to the effects of redeterminations at around 0.5% to 1% a month, and that is the assumption going forward as well.

Thank you. Our next question today is coming from Matthew Dale Gillmor from KeyBanc Capital Markets. Your line is now live.

Hey, thanks for the question. I wanted to follow up on the Prospect integration, but more focused on the member engagement metrics. I think Brandon mentioned that legacy Astrana Health, Inc. wellness visits are up to 80% and Prospect is gaining. Can you give us a sense for the AWV improvement you are driving at Prospect? What are some of the key systems and processes that are behind that? And how that might affect cost trend in your results in 2026 and beyond? Sure thing. Thanks so much.

Thanks for the question. On Prospect, while it is early—we closed the deal in July 2025—we are already merging the two organizational structures, the clinical side and the quality teams. We are ensuring that they are engaging in the exact same care processes. They are using our technology platform to ensure that they understand, and that we understand, where the gaps in care are for our patients, and using our engagement tools such as our automatic calling systems, our care delivery sites, and the legacy Prospect care delivery sites in order to get out in front of the patients and into the community to encourage higher annual wellness visit rates. To be clear, it is not that legacy Prospect was doing a poor job engaging members. They have been running a very successful business—had run a very successful business for over 30 years as well—and a profitable one also with high quality. And so I think with the combined strength, infrastructure, and technology enablement of our platform, we really will expect strong annual wellness visit engagement and quality score growth in the legacy Prospect business. That being said, it is a bit early to share numbers, but we will certainly be sharing that as the year progresses. And, as a reminder, we do continue to expect on the high end of the range in terms of synergies because of the advanced state of the integrations thus far.

Thank you. Next question today is coming from Gene Mannheimer from Freedom Capital. Your line is now live.

Thanks. Good morning. Congrats on a good finish to 2025. I just wanted to ask, with respect to the guidance, is there any seasonality to it that you want to call out in particular? And is this guidance all organic? That is to say, is there any tuck-in M&A contemplated? Thank you.

Thanks for the question, Gene. To answer the latter question first, there is no planned M&A in the currently provided 2026 guidance. While the company reserves the right, certainly, and we are seeing a lot of opportunities on the market at this time, we will evaluate these opportunities, as well as the opportunity to buy back our own stock, according to our capital deployment guidelines and models internally from the finance team. But there is no M&A currently embedded in the 2026 guidance. In terms of the cadence, we expect, as in prior years, that the third quarter is a stronger quarter than the other quarters. We also guided to Q1 as well, and so we expect that cadence to hold up into the remainder of this year.

Thank you. We have reached the end of our question-and-answer session. I would like to turn the floor back over for any further or closing comments.

Thank you very much, operator. Thank you, everyone, for joining the call. We believe that our delegated care model is built to compound through complexity. We are excited to take on this year for the opportunities that abound, and we look forward to continuing to create value for our patients, our providers, payer partners, and shareholders. If you have any questions, please feel free to reach out to [email protected] and have a wonderful week. Thank you.