Weekly Health Tech Reads | 3/2/25

Public Company Earnings Updates

There were a ton of earnings calls this week, so if that is not your cup of tea you can skip the next couple sections. I focused on six earnings calls this week that seemed particularly strategically relevant, and broke them down into pairs below: provider enablers (agilon and Privia), MA insurers (Clover and Alignment), and virtual care (Hims and Teladoc).

There were a number of other earnings calls this week too — Astrana, Health Catalyst, GoodRx, etc — but alas my brain can only handle so many earnings sessions during a given week.

Public Company Earnings: provider enablers converge on “glide path to risk” strategies

For years, agilon and Privia have taken polar opposite approaches to payor contracting on behalf of PCPs, with agilon focused solely on fully capitated MA contracts while Privia has focused on FFS, while taking a cautious approach to VBC. At this point, it appears that Privia’s approach has clearly won out, with agilon sharing during earnings that the challenges in Medicare Advantage have caused it to embrace taking a “glide path to risk” with new payer contracts. It very similar to the approach Privia has taken the last five years, as one analyst noted on Privia’s call. While agilon didn’t fully commit to the approach longer term, it seems clear it is taking a more thoughtful approach to what type of risk it can and can’t manage — namely carving out Part D and supplemental benefits as two things it can’t manage.

When you look at recent financial results for the two organizations, it is pretty clear why agilon made this shift after its experience over the last 12+ months. Privia posted another solid quarter and beat expectations for 2024, with its stock ending the week up ~1%. Meanwhile, agilon’s stock was down 13% on the week as it continues to struggle with its capitated book of lives, viewing 2025 as a transition year for the business.

More on strategic takeaways below:

Privia (report, transcript, slides)

• Privia’s VBC contracts. Privia shared its views on VBC pretty succinctly: “Ultimately, our job is to take as much risk that pays us and pays our medical groups and risk entities by the payers to assume that risk.” Privia mentioned during the call that its book of Medicare Advantage capitated lives are running at a positive 2% contribution margin in 2024. It renegotiated two capitated MA contracts at the beginning of last year while staying in one remaining contract. On a number of occasions during the call, Privia leadership discussed the need to enter VBC contracts that are margin positive and its focus on driving increased earnings for medical groups. If you’re interested in VBC contracting strategies, it is worth perusing the earnings transcript above.

• The new provider pipeline & M&A opportunities. Given Privia’s solid performance, some analyst questions were focused on where Privia is focused on driving growth moving forward. Per the chart below, 2025 will be the first year since 2018 that Privia won’t grow into a new state. It appears more focused on increasing density in existing markets (note: this is a theme across both Privia and agilon’s calls). 70% of Privia’s new provider pipeline is coming from referrals, and new providers will grow ~10% in 2025. With nearly $500 million of cash on the balance sheet, analysts asked about the M&A pipeline for Privia. Privia mentioned it is looking at medical groups, risk entities, and MSO entities, and will be very flexible given its model. Still, it will also be disciplined in acquiring anything given the environment.

• ACO REACH vs MSSP. Privia has historically chosen not to participate in ACO REACH, instead focusing on the MSSP program. Given the uncertainty around ACO REACH’s future, Privia noted the potential outcome for convergence of the two programs, which could benefit Privia if ACO REACH sunsets and more providers look to participate in MSSP. Note that agilon also discussed that it is optimistic about the future of ACO REACH, whether as a standalone program or within the construct of MSSP. Either way, it seems that both of these organizations expect to see some combined version of MSSP and ACO REACH moving forward.

agilon (report, transcript, slides)

• 2025 as a transition year. In 2025, agilon expects to shrink the number of members on its books across Medicare Advantage and ACO REACH, dropping ~40,000 members in total. It expects to end 2025 at 615,000 members at the midpoint of its guidance. The 2025 class of new partners is smaller than historically the norm for agilon, as only 3 new partners will join the platform, resulting in 20,000 new members (which are included in the number above). agilon does expect a larger 2026 class again, which its already signed LOIs with.

• agilon’s “glide path to risk”. The 2025 class of provider partners is the first class for agilon that will have no downside risk, instead starting with a care management fee in year 1 before moving to full-risk deals over time. It sounds like there are also some quality incentives that will be paid out if payers hit a Stars threshold around 4 Stars. agilon didn’t commit to using this approach again in 2026, calling it just one option available for them. At the same time, agilon also noted it is taking a narrower focus on managing risk, looking to manage risk for the things it can control. Namely, this means excluding Part D and supplemental benefits. agilon has made significant progress carving out Part D benefits, getting that exposure down to 30% of members. For those 30% of members still on Part D, agilon estimates its PMPM losses will double in 2025 due to the Inflation Reduction Act. It has made less progress on carving out supplemental benefits, in part because 97% of payer bids saw decreases in supplemental benefits for 2025. agilon will still look to carve out supplemental benefits moving forward.

• 2025 Medical Margin. agilon has a rather complicated bridge to its expected 2025 Medical Margin, demonstrated in the slide below from its investor deck. Specifically, expects to lose $90 million more in 2025 in existing markets than it expected in its “2024 Step Off” column, and will need to make up for that primarily via $50 million of operating initiatives, some of which are bonuses from hitting Stars targets. It’ll be interesting to watch how the year progresses toward these targets:

Public Company Earnings: Startup MA plans trumpet care management approaches

Alignment and Clover both reported Q4 results this week, with Alignment’s stock jumping 17% on the week while Clover’s stock fell almost 11%. Despite the mixed financial returns, both seem to be having good success growing membership and managing medical expense as Medicare plans with very similar underlying narratives as care management plays. Check out these quotes from opening remarks of the earnings call for each:

• Clover: “The market is validating what we've known all along. Technology-driven care management isn't just the future of MA, it's the key to making it sustainable.”

• Alignment: “Our success starts with approaching Medicare Advantage as a care management business, not just an actuarial underwriting business.”

There are a lot of similarities across the narratives of the businesses at the moment — both seem to feel well positioned to capitalize on the MA market dislocation, with Stars key performance as a key differentiator. While both are turning an Adjusted EBITDA profit, both are also still generating a meaningful net loss. Let’s dig more into takeaways from the calls below:

Clover (Report, Transcript, Slides)

• Clover’s Stars performance and membership growth. Clover announced it hit 100,000 MA members in open enrollment for 2025, representing 27% YoY growth while it saw a 95% retention rate. Most of its new membership were switchers for other plans, which should come along with positive economics (versus new MA members, switchers from other plans already have risk adjustment data). Clover also noted it feels well positioned for AEP heading into 2026, and it will see a bump in PMPM revenue from Stars in 2026 as 95% of members are now in 4 Star plans. It seems pretty clear that Clover is investing in growing membership ahead of that PMPM bump in 2026, combined with seeing a 7% improvement in MCR in year two. That will presumably be a significant boon to profitability for the business. Clover invested heavily in marketing during open enrollment to drive that growth, and as one analyst noted that resulted in higher SG&A than expected.

• 2025 as a year of investment. Clover hit $70 million of Adj EBITDA in 2024, and is aiming for $45 - $70 million of Adj EBITDA in 2025. You can see in the chart below some of the puts and takes Clover calls out. It’s interesting to see how Clover is positioning itself now — having hit profitability, it is time to invest in top-line growth again across the business. Yet at the same time, Clover still lost $46 million in net income from continuing operations in 2024, which seems like a good indicator that the business isn’t actually profitable yet. On top of that, while 2025 guidance projects an improvement of 2% in SG&A spend, SG&A will still be around 19% to 20% of Clover's revenue. It seems challenging for an MA plan to operate profitably while running SG&A costs that high, particularly when back office insurance operations have already been outsourced to a vendor (UST HealthProof). Clover noted that efforts to reduce SG&A in the future are a key priority. It will be a key part of the narrative here in 2026 and beyond as Clover looks to accelerate profitability.

• Counterpart Health’s momentum. Clover called out that Counterpart has meaningful upside potential, between a recently signed third partner contract and a solid pipeline of payers and health systems evaluating Counterpart. Yet the first analyst question also highlighted the challenge for Clover here: when will Counterpart be financially meaningful enough to show up on Clover’s financials? I am sure analysts remember the +Oscar narrative, and it strikes me that there are many similarities with the Counterpart narrative if you rewind the clock. It remains to be seen if Counterpart can break through and become a meaningful part of the business. Clover noted that it is not yet sharing when it will incorporate Counterpart into financial results.

• A reminder of Clover’s ACO REACH miss. Clover had to pay $39 million in cash to CMS in 2024 related to its ACO REACH loss in 2023. It’s a confusing thorn in the side in the Clover Assistant narrative for me — if I buy that Clover’s technology platform for care management allows it to perform so much better than its peers in managing medical expenses in MA, why was Clover’s performance so much worse than others in ACO REACH?

Alignment (Report, Transcript)

• Solid membership growth. Similar to Clover, Alignment saw solid membership growth during open enrollment. Alignment now has 209,900 members, growing 35% YoY. Its core market, California, grew 28%, while other geographies grew >100% off a low membership base. Nevada now has >10k members; Alignment’s other states have 5k - 8k members. As noted above, Alignment attributes its success in growth and performance to its focus on care management. It employs 400+ clinical staff, which account for 25% of Alignment’s workforce and 4% of medical expenses. Alignment continues to tell a consistent narrative around how it is well positioned for outperformance in the MA market because of its clinical focus, which shows up in its impressive Stars results and should give it a solid tailwind to grow over the next few years.

• Alignment’s embedded Gross Margin opportunity & profitability. Given Alignment’s rapid growth, 50% of its members are in year 1 or year 2. As those members mature, gross profit grows from $90 PMPM to $230 PMPM from year 1 to year 2. Alignment shared that it sees a $600 million gross margin improvement opportunity from maturing its current membership. It’s a similar story to what Clover shared regarding how it expects to drive MLR improvement between year 1 and 2. The narratives are also similar in that Alignment is running a high ratio, which it expects to improve as it scales markets outside of California. Alignment hit an Adj EBITDA of $1 million in 2024, targeting $47.5 million in 2025. When you look at Clover’s performance in that context, it’s impressive that Clover hit $70 million of Adj EBITDA in 2024 and should again be higher than Alignment in 2025.

Public Company Earnings: Has D2C telehealth emerging as the winning play?

It is fascinating to watch the diverging narratives for Hims and Teladoc, as highlighted by their stock price performance over the last several years. As you can see in the stock performance chart below, Hims has wildly outperformed Teladoc since mid-2022, when the two stocks began diverging in performance as you can see below.

Despite Hims falling 20% on earnings this week due to GLP-1 news, it has clearly performed well over the last several years, and I actually left this earnings call more bullish on Hims than ever, even despite the stock decline. I still have a lingering question about how durable the business will be over time, but it is really impressive what they have built as a consumer brand serving healthcare needs.

Here are some other takeaways from each call below:

Hims & Hers (report, transcript, slides)

• Hims financial performance is really impressive. The business is projecting ~60% revenue growth in 2025 to $2.35 billion at a 12% EBITDA margin while already kicking off almost $200 million of free cash flow in 2024. In a world where profitable growth is the holy grail every investor seeks, it seems Hims has found it. Regardless of your opinions of compounding GLP-1s and the durability of the business, those are impressive results. Hims noted that it sees 10 million customers as within reach for the company, potentially within the next 5 to 6 years, up from 2.2 million subscribers in 2024. At the same time, Hims spent 46% of revenue on marketing in 2024, which it expects will drop by 1% to 3% a year going forward. It’ll be interesting to keep an eye on this and try to better understand what Hims churn numbers look like underlying the financial success its had. The key risk here seems to be that this growth is all a facade driven by GLP-1s and marketing dollars that mask an underlying churn issue, as has been raised in short seller reports on Hims in the past.

• Is Hims the consumer healthcare disruptor we’ve been waiting for? Hims kicked off the earnings call with the standard disrupter trope about how it is the Uber / Airbnb / Amazon / Shopify / Netflix / Spotify / PayPal / Square of healthcare. I think for many folks who have worked in healthcare for a while, there is a certain sense of cynicism when hearing those comparisons — many companies have tried and failed there. But when you look at the numbers, it seems hard to argue that this is exactly what Hims is doing. It now has five lines of business expected to clear $100 million of revenue in 2025, with 30% of its business now coming from Hers, and the potential to expand its product offering via the Trybe acquisition. Is this the consumer-friendly front door to healthcare that everyone has been seeking for the last decade? Increasingly it seems like Hims is demonstrating the answer to that is yes.

• GLP-1s took center stage. Not surprisingly, a ton of analyst questions were around the GLP-1 opportunity moving forward. Hims made ~$225 million in GLP-1 revenue in 2024, while acknowledging that many of those members from 2024 will explore other branded options when it stops offering commercially available doses of semaglutide after Q1 2025. Despite that, Hims is still projecting $750+ million in GLP-1 revenue in 2025 from oral-based offerings, liraglutide, and personalized doses of semaglutide. It’s worth noting that Hims non GLP-1 revenue increased by 43% to $1.2 billion in 2024. Lots of interesting dynamics at play here, but overall it seems like Hims is still growing really well through the semaglutide compounding issues.

• Side note: Hims opened the Q&A on its earnings call to questions from a subscription retail investment community, Hims House, members of which are known as Hims Homies. Reminiscent of when Clover had folks from Reddit asking questions on earnings calls after its SPAC.

Teladoc (report, transcript, slides)

• The declining BetterHelp business. Teladoc continues to face pressure from its declining BetterHelp business. BetterHelp actually saw sequential growth in average paying users from Q3 to Q4. However, segment revenue still declined during that period from $257 million to $250 million, and 2025 revenue guidance is down 3.75% to 9.75% year-over-year.

• The shifting nature of Teladoc contracts. Teladoc noted that PMPM models that charge access fees are increasingly a thing of the past in its contracts with customers. While that model is still predominantly used in the market, as the space has matured, customers are increasingly interested in contracts based on utilization for virtual visits. Teladoc said its in the “middle innings” of this transition. As it make this transition, Teladoc increasingly feels like a FFS provider for virtual care to the healthcare industry, which seems like a challenging spot to be in strategically. There certainly seems to be a role for that business in the industry, but as the excitement around virtual care has subsided since the pandemic, it has left Teladoc in a tough spot strategically. I’d expect they navigate through this issue in time, and then the question will be how they continue to build back on top of the foundation of being the leading FFS telehealth provider for the industry.

CMS releases Medicare Advantage enrollment data

It was a big week in the Medicare Advantage space as CMS released enrollment files with 2025 open enrollment data. I won’t spend too much time digging into this now given the amount I wrote above about earnings calls. Instead, I’d point you to this blog post from Marc Ryan and this post from Modern Healthcare, both of which I think do a nice job discussing the results from the year.

The headline: slower growth rates indicate the broad headwinds MA is dealing with, particularly for the larger players. Meanwhile, SNP plans are where the growth is at, albeit on a small number of member still.

The Modern Healthcare visual below highlights the biggest winners and losers. It’s no surprise that Aetna and Humana shed so much membership. However, it is a bigger surprise that Devoted Health shed 15% of 243,000 members, particularly while Alignment and Clover grew so much during open enrollment. It’s a pretty clear indicator that Devoted experienced some substantial financial headwinds in 2024 (and that its strategy of remaining private allows it to work through those challenges relatively quietly).

PCPs’ interest in adopting AI tools

I enjoyed checking out this survey from Rock Health and the AAFP exploring the potential for AI and digital health to impact primary care. It’s fascinating to look at the chart below on the adoption of AI tools by PCPs — clerical support is the category with broadest adoption, with only 32% of PCPs using an AI tool. Yet, over 90% of PCPs in every category say they’d like to try AI tools. I look at a category like “behavioral health support for patients” — it’s surprising to me to see that only 7% of PCPs don’t want to try AI tools for that, particularly given all the discussion around the use of AI Chatbots.

It’s pretty straightforward to see why so many venture dollars are going into AI at the moment, even if PCPs have concerns about the eventual impact of these tools, as also discussed in the report.

Featured Jobs

HTN Community Happenings

I’m excited to share that we’ll be hosting fellow HTNer Andrew Schutzbank to chat with folks about bridging the clinical and product worlds in healthcare delivery organizations over the next few weeks. Andrew has written extensively on the topic in a multi-part blog series (see part 1 and part 2 here) based on his experience leading organizations like Iora Health and Cricket Health.

I’ve gotten the chance to learn from Andrew on multiple occasions during my career, most recently during his excellent presentation at the CareOps conference a few weeks ago. I’ve always appreciated the way he is able to break down complicated topics into understandable mental models for me.

Given the level of interest in integrating clinical and product teams in the community, we thought it’d be fun to dig into this topic further in live sessions. HTN members can sign up for sessions below:

• March 17 @ 11am CT

• March 27 @ 11am CT

Other Noteworthy Headlines

• New Mountain Capital and Anne Wojcicki have submitted a proposal to take 23andMe private for ~$75 million. Given New Mountain Capital’s general playbook of bringing together multiple assets to form larger businesses — i.e. see this recent example with Machinify — it will be interesting to see what New Mountain and Wojcicki have planned here, assuming this deal eventually goes through. Somehow it would seem they’ll need to get the business to profitability, and quickly, for New Mountain to be interested here. I can’t help but wonder, particularly when looking at the cash flow Hims is kicking off above, if there is a broader D2C healthcare platform play in the works. It seems like it’d be quite interesting if so.

• The Financial Times reported that the PE firm Sycamore Partners' deal to take Walgreens private is coming together. FT is reporting that financing will not be an issue, and that Sycamore plans to separate Walgreens into three separate businesses after the deal — the Walgreens US pharmacy business, the Boots UK pharmacy business, and the Shields Health Solutions specialty pharmacy business. No update on VillageMD in the report.

• This Business Insider reporting does a nice job exploring why it seems likely that it may be a quiet year for big M&A deals, as many large potential buyers appear set to sit on the sidelines.

• Medcity News featured an interesting interview from ViVE with Baptist Health’s CEO describing its negotiating strategy with Blue Florida in a protracted network dispute that ended last year.

  • Situations like this always provide a fascinating lens into the complex, high-stakes negotiations that occur between large payors and providers every few years. A nonprofit health system complains that it is being paid rates 40% below others in the market. A nonprofit health plan complains that the health system is asking for a 70% rate increase. Both sides argue they are the good actor, trying to protect the local community from the negative consequences of the other bad actor. Around and around we go.

• Axios reported that asset manager General Catalyst is in the early stages of considering an IPO. The report notes it joins Andreessen Horowitz in considering the IPO route, and that GC is slightly further down the path.

• FemTech Insider reported that HerMD is shutting down. HerMD, which operated four clinics that provided in-person and virtual women’s health care, raised a total of $30 million in venture funding.

Funding Announcements

• Camber, a company simplifying RCM, raised $30 million.

• Avandra, a network for medical imaging and clinical data, raised $17.5 million.

• Charta Health, a startup applying AI to chart reviews, raised $8.1 million.

• SimCare AI, an AI-driven simulation platform for medical training, raised $2 million.

• Bias Capital announced it canceled its $25 million investment in Parker Health, a FQHC look-a-like model in DC, amid fraud allegations.

Other Good Reads

Report: Navigating the Future of ICHRA by James Metcalf and Rebecca Springer
If you’re looking for an explainer of the ICHRA market, this is the best document I’ve seen. In particular, the section describing the approaches each startup is pursuing is helpful in parsing out what each company is up to in the market. Read more

Private Equity Healthcare Deals: 2024 in Review by Mary Bugbee, Eileen O’Grady, & Michael Fenne
This report provides great data on private equity deal activity in healthcare in 2024. Read more

Looming deadlines for ACA subsidies: What will the future of the Premium Tax Credit look like? by Brandon Dunk
A good quick read from Deft Research on what the conversation around ACA subsidies will look like in 2025, including a timeline of key dates for the ACA. Read more

Improving Medicare–Medicaid Integration: Priorities of Dual-Eligible Adults Under Age 65 by Barbara Lyons and Jane Andrews
This Commonwealth Fund report provides a helpful look into the dynamics of the Dual-Eligible population, summarizing four conversations with Dual-Eligible focus groups. Read more

A New Medicare Agenda—Moving Beyond Value-Based Payment and the Managed Care Paradigm by Hayden Rooke-Ley and Andrew Ryan
An interesting opinion in Health Affairs last week arguing that CMS should abandon its emphasis on value-based care and instead focus on a new fee-for-service paradigm focused on reining in high prices of care. Read more