1life Healthcare Inc (ONEM) Q3 2021 Earnings Call Transcript

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1life Healthcare Inc (ONEM)
Q3 2021 Earnings Call
Nov 3, 2021, 4:30 p.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Good day, and thank you for standing by. Welcome to the One Medical Fiscal 2021 Third Quarter Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question-and-answer session. [Operator Instructions]

And now I would like to hand the conference over to Ivy Tseng. Thank you. Please go ahead.

Ivy Tseng -- Senior Corporate Counsel

Thank you, operator. Hello, everyone, and welcome to One Medical's fiscal 2021 third quarter earnings call. I am joined today by Amir Dan Rubin, Chair and CEO of One Medical; and Bjorn Dollar, Chief Financial Officer of One Medical. A complete disclosure of our results can be found in our press release issued earlier today as well as in our related Form 8-K, all of which are available on our website at investor.onemedical.com. As a reminder, today's call is being recorded, and a replay will be available on our website.

As part of our comments today, we will make forward-looking statements. These statements are based on management's current views, expectations and assumptions and are subject to multiple risks and uncertainties. Actual results may differ materially, and we disclaim any obligation to update any forward-looking statements or outlook. Please refer to the risk factors in our most recent annual report as updated from time to time by our other reports and filings with the SEC, including our quarterly reports. We believe that the COVID-19 pandemic continues to create particular complexity when it comes to providing a forward-looking view of the business, and we are providing our guidance on a good faith basis per recent SEC recommendations. We would like to specifically caution investors that our future performance will be harder to predict for the foreseeable future. Our forward-looking statements are based on assumptions that we believe to be reasonable as of today's date, November 3, 2021. Information contained in today's statements should not be relied upon as representing our estimates as of any subsequent date. Of note, it is One Medical's policy to neither reiterate nor adjust the financial guidance provided on today's call, unless it is also done through a public disclosure such as a press release or through the filing of a Form 8-K. Today, we will discuss certain non-GAAP metrics that we believe aid in the understanding of our financial results. A historical reconciliation to comparable GAAP metrics can be found in today's earnings release. Finally, during the call, we may offer incremental metrics to provide greater insights into the dynamic of our business. These details may be onetime in nature, and we may or may not provide updates in the future.

And with that, I shall turn the call over to Amir and Bjorn for their prepared remarks and to take your questions.

Amir Rubin -- President & Chief Executive Officer

Thank you, everyone, for joining us. Q3 was an exciting quarter for One Medical, as we welcome in Iora and further expanded our services for the senior population and as we also launched in another new market, Raleigh-Durham, North Carolina. With that backdrop, we are pleased to share with you today results from our third quarter and update you on how we continue to perform, innovate and grow. We continued our strong financial performance in Q3 as our human-centered and technology-powered model continues to deliver results for a growing number of members, employers and payers, providers and partners.

We ended the quarter with 715,000 members, 18,000 above the high end of our updated guidance from September 1, up 40% year-over-year. Similarly, our revenue also has outperformed coming in at $151 million, $3 million above the high end of our updated guidance from September, up 49% year-over-year. We also continued to show our ability to innovate, recently publicly showcasing results from our clinical programs. For example, we were delighted that New York State has recognized one medical for the second time in three years as the number one performer in New York's HIV care continuing program with one medical demonstrating 100% viral load suppression among its patients with HIV. Furthermore, we continued our strong growth this quarter. We grew organically through in-market and new market growth, including opening new offices, going live with our partnership with Duke University's health system in Raleigh, North Carolina, and further growing our One Medical.

Now, national digital health services and our One Medical mindset behavioral health services. We also grew through the acquisition of Iora, which closed on September 1. Our vision has always been to create the premier human-centered and technology-powered healthcare organization. And we have been consistently executing against this vision well before we went public in January 2020. Indeed, we've expanded the number of geographies we are in from 8 markets at the end of 2018 to soon to be 28 markets. We have grown our membership from 397,000 members as of September 30, 2019, to 715,000 members in two years. We've expanded our care margin for the stand-alone One Medical business from $80 million for the first nine months of 2019 to $153 million for the first nine months of 2020, 21. We have delivered positive adjusted EBITDA for several quarters in a row. And as we announced previously, expected to reach adjusted EBITDA breakeven 1 year earlier than expected at the time of our IPO and prior to the addition of Iora. We have done all of this while simultaneously adding to our product portfolio, including with our One Medical for Kids pediatric services, one medical mindset behavioral health services, One Medical Now, 24/7 virtual national service offering and One Medical impact chronic disease model.

Moreover, we have done this while navigating a global pandemic, launching our Healthy Together services and supporting our members with COVID-19 screening, testing, vaccination and vaccination verification services. Our incredible team has been able to keep medical offices open and virtual services flowing to help our members and stakeholders return to their lives, jobs and schools. We believe our operating and technology model continues to position us to consistently execute against our vision and goals. Furthermore, we are now also executing against this vision with the addition of Iora, leveraging core strength in enrolling and engaging members, delighting and retaining members, delivering outstanding care and experiences, advancing health outcomes and reducing the total cost of care, leveraging our proprietary technology and dedicated providers to simultaneously address the needs of multiple key stakeholders.

We are further applying these competencies to now also care for seniors and at-risk model, expanding our total addressable market to $870 billion across markets and geographically positioning ourselves to reach nearly 40% of the US population in the markets in which we'll be operated. As we've previously noted, we believe the addition of Iora creates many potential synergies, including an opportunity to serve parents and grandparents of One Medical's 683,000 consumer and enterprise members. Furthermore, we can now more seamlessly age in members as they transition from commercial insurance to Medicare and enter into Medicare Advantage and other Medicare risk models, further extending lifetime relationships with members. The addition of Iora will allow us to further grow Medicare and Medicare risk in legacy one medical markets and also expand into consumer and enterprise services and legacy Iora market.

At the same time, we are leveraging the One Medical performance system of standard operations, technology, clinical and business practices across the enlarged enterprise, leveraging approaches, which have been successful in supporting our execution against our plan. We are integrating our technology system into one combined platform to deliver differentiated results from multiple key stakeholders. We will be using the One Medical brand across the enlarged business to extend growth opportunities. We are building on our aligned culture and vision to help drive effective and efficient healthcare for all our key stakeholders, better care and better health for our members, lower costs for payers such as enterprise clients, managed care plans and governmental payers, a more rewarding environment in which to practice medicine for our providers and team members and clinical and digital integration with our health network partners to deliver more coordinated care.

Even though we've been a combined company for just a little over two months, we are already advancing opportunities to drive results in combination. We have launched efforts in select legacy One Medical geographies to extend our excellent care to all Medicare recipients, including those in at-risk models such as Medicare Advantage and direct contracting, which we expect to create incremental revenue for us beginning in 2022. For example, we are already engaging with current on medical Medicare members in these geographies who have so far overwhelmingly confirmed what we believed all along, that they look to us as their primary care provider and are voluntarily choosing to align to us as their provider in the Medicare direct contracting program. In addition to growing our app risk member enrollment, we are also working on taking advantage of our combined care management capabilities and programs, including, for example, our modernized chronic care management model, which has demonstrated a 2-point reduction in average heboglobin/A1c levels compared to baseline. As a reminder, previous studies have found that a 1-point reduction in hemoglobin A1c is linked to a reduction in risk of death by 21%, heart attacks by 14% and microvascular complications by 37%.

Additionally, we are building upon Ira's proven population health and capitation management approaches to serve even more at-risk members. Even as we pursue these synergies, we continue to be pleased with Ira's stand-alone performance, which is in line with our overall expectations at the time of announcement of the transaction. Moreover, Ira's stand-alone membership revenue and medical cost trends have performed in line or better than announced expectations for the quarter.

Turning more specifically to our overall Q3 performance; we are very pleased with the quarter. We ended Q3 with 715,000 total members, growing our membership base 40% year-over-year. We added 94,000 members during the quarter and have added more than 204,000 members over the past 12 months. We delivered $161 million in Q3 net revenue, which was up 49% year-over-year. We delivered a Q3 care margin of $46.8 million or 31% of net revenue. We delivered Q3 adjusted EBITDA of negative $6 million. As a result of our collective performance, we are pleased today to increase our full year guidance across all our guidance metrics: membership revenue, care margin and adjusted EBITDA.

Please note, that as expected, due to the addition of Iora, our care margin as a percent of revenue declined this quarter, and we expect it to decline further in the next quarter as Q3 only included Iora from September 1 onward. Also, as we've previously described, with the addition of new Medicare risk cohorts, as we grow members, we predictably expect the initial year of such cohorts to have higher relative third-party medical expense ratios and those lower care margins, while more mature cohorts are expected to generate greater care margins and adjusted EBITDA in the medium and long term. As a reminder, we are targeting 17% plus adjusted EBITDA margins in the long-term. Together, we believe this will enable us to deliver continued strong membership and revenue growth while achieving rising care and EBITDA margins in the long term.

While we are proud of our performance, we believe our human-centered and technology-powered innovative model sits at our core. Through our model, we deliver a premier member experience and can also drive better health outcomes and lower costs with coordinated care in a better team environment. As a reminder, on average, for our consumer and enterprise members, we had 10 interactions last year, including approximately 2x in person and 8x digitally. Similarly, for our senior population in Iora Health, we averaged 19 interactions per member, including 3x to 4x in person and about 15x to 16x digitally. This compelling combination of in-person and digital member engagement, along with their salary providers and proprietary technology platform further supports our ongoing innovation and clinical performance and facilitates our continued deployment to an even greater population base. For example, in Q3, as previously noted, we were pleased to highlight that New York City's health department, HIV Care Continuum Report has ranked One Medical as the leading HIV care provider in viral load suppression among HIV patients, achieving 100% viral load suppression among patients with HIV. These outcomes come on the heels of our Q2 announcement of a peer-reviewed published study, which highlighted how our model delivered outsized impacts in controlling diabetes. These studies in turn, followed a peer-reviewed study published in JAMA Network Open last year that showed a 45% reduction in the cost of care for an importer. As a result of our continued performance and innovation, we also continue to grow.

In Q3, we continued to see strong membership growth across our consumer and enterprise as well as senior channels. Our consumer membership continues to grow across our geographies, benefiting from increased brand awareness as we continue to invest in our marketing and advertising campaigns. On the enterprise side in Q3, we began new relationships with organizations and industries across legal, financial services, manufacturing, entertainment, real estate, biotech and consumer goods, among others. Our national digital health services and our increasing in-person geographic reach soon to encompass 28 geographies continues to be a growing competitive differentiator as larger multi-market employers look for multi-market solution. This past quarter, we were excited to open our doors in the Raleigh-Durham, North Carolina region for consumer and enterprise members and to expand our in-person presence with new locations in a number of our existing markets.

We look forward to upcoming launches of additional new markets, as previously announced, including Columbus, Ohio, Houston, Texas, Milwaukee, Wisconsin, the Miami, South Florida region and Dallas-Fort Worth, Texas. Similarly, we continue to see strong interest in our growing set of service offerings with recent examples, also including our vaccination verification program in addition to One Medical now, on medical for kids, Healthy Together workplace return services and mindset behavioral health services.

Turning to our senior business, which is largely represented by our acquisition of Iora on September 1, we believe we are off to a great start with at-risk membership of 32,000 coming in at the high end of our guidance as well as beating our revenue guidance by $3 million. Also, as previously mentioned, we are working to deliver care through our One Medical for seniors at risk models in our legacy one medical market, including launching in select markets beginning in 2022. We also continue to grow our health network partnerships, expanding with both existing and new health network partners. Additionally, as a result of Iora now being multiplayer rather than only contracting with a single health plan, Iora, over the past several months has signed several new contracts with Medicare Advantage plans, including Aetna, Centene, Cigna, Devoted, UnitedHealthcare, Blue Cross Blue Shield plans and other plans across a variety of geographies, thereby expanding our pool of potential at-risk members. In closing, we delivered an outstanding Q3 as our team and technology help us continue to perform, innovate and grow.

With our strong performance, we are now expecting our full year membership to reach 728,000 to 736,000 members. Our full year revenue to reach $606 million to $615 million and our annual adjusted EBITDA to be between minus $37 million to minus $32 million. We continue to perform, delivering impacts to our members and all our stakeholders as our multimodal model technology platform, geographic reach and breadth and depth of services differentiate us in the market. We continue to innovate with our model, recently highlighting how our technology-powered and team-based approach embedding chronic care management into a member-based primary care model delivers better results for consumers, employers and payers, team members and partners. And we continue to execute across our many growth opportunities, serving more consumers and enterprise clients, expanding our footprint, aligning with premier payers and partners and growing our service offerings.

While we have seen much success to date, we believe we are just getting started in our mission to transform healthcare. We are excited to further perform, innovate and grow with the addition of Iora Health, expanding our model to further serve the senior population and expanding our reach to serve members of all ages and across every stage of life. As we look forward to 2022 and beyond, we will continue to invest in our service offering, our team members, our technology, our care programs and our digital and physical presence. We look forward to keeping you updated on our progress and appreciate your engagement with us.

Now, let me turn it over to our CFO, Bjorn Toler.

Bjorn Thaler -- Chief Financial Officer

Thank you, Amir, and hello to everyone on today's call. I look forward to providing you an update today on our third quarter results, which highlight the continued momentum in our business as well as an update on our full year 2021 outlook. As this is our first earnings call after the acquisition of Iora, I will also take some extra time to provide you with additional details on our financial performance and our disclosures going forward. And finally, I will also share a brief update on our integration efforts to date.

First, turning to Q3. Please keep in mind that the Iora acquisition closed on September 1. And as such, our financial results include the impact of one month of Iora. We finished the third quarter with a total membership count of 715,000 members, exceeding the high end of our total membership guidance of 697,000 members by 18,000 members and growing 40% year-over-year. Specifically, we finished the quarter with 683,000 consumer and enterprise members, exceeding the high end of our September 1 guidance for Consumer and Enterprise members by 18,000 members and growing 34% year-over-year. Please note, this membership count includes approximately 3,000 consumer and enterprise members for Iora as well as an estimated 18,000 to 25,000 consumer and enterprise members, who we believe have signed up predominantly for employer-mandated vaccine verification purposes and with whom we now have a great opportunity to engage with on the left of our service offering. These incremental members were in part included in our updated guidance issued in connection with the closing of the acquisition of Iora as they signed up predominantly in August and September.

Turning to our add-risk membership. We ended the quarter with 32,000 ad list members, the high end of the guidance issued in connection with the closing of the Iora acquisition. As a reminder, an Addis member is a person for whom one medical is financially responsible for managing that member's healthcare costs, for example, through Medicare Advantage or Medicare direct contracting.

Moving on to revenue. In total, we delivered $151.3 million in net revenue in Q3, up 49% year-over-year and $3.3 million above the high end of our guidance. This revenue includes $30.5 million in Medicare revenue as well as $120.9 million in commercial revenue. Please note that our Medicare revenue, which includes capitated Medicare revenue exclusively associated with our at-risk members as well as fee for service and other Medicare revenue is the result of our acquisition of Agora effective on September 1. Our strong Medicare revenue performance was driven in part by the strong Edris membership number I shared earlier, as well as higher-than-expected per member revenue. Our commercial revenue, which continues to include partnership revenue, net fee-for-service revenue and membership revenue is up 19% or $19 million year-over-year. This commercial revenue growth was driven in part by our continued strong growth in membership revenue, which was $21.5 million, up 24% or $4.2 million year-over-year and which reflects in part the higher-than-anticipated membership number I shared earlier.

Our strong commercial revenue performance was also driven by our third quarter partnership and net fee for service revenue of $99.4 million in total, which was up 18% or $15.2 million year-over-year. This growth was driven in part by our continued strong membership growth and the normalization of primary care consumption compared to the same period last year during shelter-in-place orders and other restrictions implemented as a result of the COVID-19 pandemic.

Looking at the revenue performance for the Iora stand-alone business prior to any reclassifications, Iora contributed $30.6 million to our total revenue in Q3 or $2.6 million more than the high end of our guidance for the yoga business at the time of closing. Similarly, the One Medical revenue prior to the Iora contribution was $120.7 million or $0.7 million above the high end of our revenue guidance at the time of closing and up 19% year-over-year. We are providing this play out at this time solely to ease the transition to our combined financial reporting going forward and will not break out the revenue performance of Iora or on Medical, excluding Aura past 2021 as we integrate our businesses.

Moving down to P&L. We recorded medical claims expense in Q3 of $26.1 million. Medical claims expenses associated with third-party care received by our at-risk members, where we are financially responsible for a range of healthcare services, resulting in a medical claims expense ratio of 87%. This medical claims expense ratio was approximately in line with our expectations, both at the signing of the yoga transaction and at the time of its closing. As a result, we are pleased with the medical claims performance of our Adidas [Phonetic] membership to date, which shows the power of longitudinal relationship-based care that focuses on improving the health outcomes for our members. Our combined cost of care was $78.4 million, up 33% year-over-year. This increase reflects the continued growth in membership and investments in our operations as well as the addition of Iola. As a result of our revenue, medical claims expense and cost of care performance, our combined care margin for Q3 was $47 million or 31% of net revenue.

As we demonstrated over the last few quarters, we have been able to drive increasing leverage in our care delivery assets, and we look forward to improving the utilization and efficiency of our combined operations, including Iora over time, while ensuring continued strong focus on managing the health of our members. Excluding the impact of Iora, we estimate the One Medical Care margin was $49.3 million or 41% of net revenue, representing another strong quarter following the highest care margin ever reported in our history last quarter and considering that we opened six new offices and one new market during the quarter and continue to prepare to enter five new markets over the next 12 months. Similar to my prior comments, please note that we are providing our care margin performance, excluding the estimated impact of Iora solely to ease the transition to our combined financial reporting going forward and do not anticipate providing this level of detail past 2021 as we integrate our businesses.

Moving below cost of care. Our remaining Q3 operating expenses, excluding our non-GAAP adjustments, were $52.9 million or 34% higher year-over-year. This includes the results of Aura beginning September 1, 2021, and reflects our continued investments in sales and marketing, technology and support functions and compares to a 49% year-over-year increase in revenue. As a result of our Q3 revenue and expense performance, our Q3 adjusted EBITDA was negative $6 million or negative 4% of net revenue compared to positive $3.5 million or 3% of total net revenue one year ago.

Turning to our balance sheet. As of the end of Q3, we had $590 million in total cash and short-term marketable securities. Our reduction in total cash and short-term marketable securities compared to Q2 was predominantly the result of cash needs related to the acquisition of Iora.

Let us now turn to guidance. For the full year, we expect to finish 2021 with a total membership count in the range of 728,000 to 736,000, which continues to reflect our strong and growing value proposition in the marketplace. This membership guidance includes approximately 695,000 to 702,000 consumer and enterprise members and 33,000 to 34,000 at-risk members. We also expect to deliver annual net revenue of approximately $606 million to $615 million, including one medical revenue, excluding Iora, of $483 million to $490 million and AR revenue of $123 million to $125 million. As a reminder, we are providing this breakout of our revenue guidance at this time solely to ease the transition to our combined financial reporting going forward and will not take out the revenue performance of Iora or One Medical excluding Iora past 2021 as we integrate our businesses. We also expect to generate annual care margin of approximately $184 million to $189 million and adjusted EBITDA of approximately negative $37 million to negative $32 million.

In total, we are pleased to increase all of our guidance metrics, membership, revenue, care margin and adjusted EBITDA when compared to our prior guidance, demonstrating continuing strong execution and tailwinds we expect for the remainder of 2021. We-Before we close, let me briefly share a few thoughts on our ongoing integration efforts with Ayoba. The transaction closed on September 1, and our teams have worked tirelessly since then to refine and execute our integration plans. As we noted previously, we consider the ability to drive profitable membership growth, engage with our members, improve their health and lower their healthcare costs, core strengths of One Medical. And we remain very excited about doubling down on these strengths with Iora and Medicare eligibles in at-risk programs. We have already made meaningful progress in bringing our two organizations together, having consolidated our leadership teams, technology road map and real estate strategy, just to name a few. Additionally, we will overtime, combine both organizations under the one medical brand across all of our geographies, and we will further roll out the advice model to one medical senior population. We continue to believe that this transaction will provide attractive revenue growth opportunities, coupled with an accretion to our adjusted EBITDA margin profile. These financial opportunities will support us in delivering even greater value and impact for all our key stakeholders.

In closing, we are pleased to deliver another quarter with strong financial results, including strong membership and revenue growth, medical claims and cost of care expense management, coupled with continued SG&A leverage. We remain on track to deliver a great 2021 and feel incrementally even more positive about One Medical and Iora's 2021 stand-alone performance. With the addition of Iora, we can now serve nearly 40% of the US population across every stage of life in person in our combined existing and announced 28 markets and nationally through our virtual offering, helping us create a national model for exceptional high-quality and high-value care.

We thank you for your time today, and we'll now open up the call for questions.

Questions and Answers:

Operator

We will now begin the question-and-answer session. [Operator Instructions] Your first question is from the line of Lisa Gill with JPMorgan. Your line is open.

Lisa Gill -- JPMorgan -- Analyst

Good afternoon. And thank you for all the detail. Bjorn, I'm disappointed that this is the one and the only time we're going to get this detail, but I appreciate you're going to put the two entities together. As I think about the one traditional One Medical business, and we think about the delta variant and testing as well as you talked about vaccine verification as well as vaccine administration. Can you talk about what the impact in the quarter was for testing and vaccination?

And then secondly to that, do you see an opportunity, especially now that you have pediatric practices to be able to do the vaccine for peds. And as we think about Iora and the aging population opportunity around boosters. So if you can help us just starting there with how we think about what we saw for testing, vaccines, that same verification in the quarter? And then what you see in your fourth quarter as well would be helpful.

Bjorn Thaler -- Chief Financial Officer

Yeah, absolutely. Thank you, Lisa. So I think when you look at the impacts of cover certainly on the consumer and enterprise business, I would probably describe it as sort of a modest tailwind, right? We've said in the past that the relationship between revenue and our coat vaccination efforts and core testing efforts is not necessarily a state line given that a big part of our revenue, as you know, comes from our partnerships with health network partners where oftentimes, they actually get the direct revenue from COVID testing, for example. But certainly, on balance, I think we saw a little bit of a tailwind certainly on the consumer and enterprise side for that in the quarter, which frankly was part of what drove the outperformance on the revenue side. And I think on the senior side of the business, obviously, a variety of ins and outs, you had certainly a little bit of pent-up demand that you see across the industry.

And frankly, we see this, too, right, particularly in the 2021 cohort, i.e., the members that just recently joined us. We see that they are coming in unmanaged oftentimes with health conditions that frankly are things that we can manage much better, whether that's on the chronic care side, whether it is just making sure that they get the appropriate care. And as the result, what we are actually really proud of is when you look at the cohorts, 2020 and prior, really, most of them are actually trending better than last year despite all of the noise that's out there relative to COVID. So that really goes to show the power of the longitudinal model. It goes to show the power of the execution that both, I think, the one medical and taste are known for, and we are pretty proud of that, and we'll continue to show that.

Lisa Gill -- JPMorgan -- Analyst

And just as a follow-up to that. As we think about the cohorts, when we think about the data you'll give going forward, will you give us some data around cohorts? And then secondly, how do we think about the time line to where those members become profitable? Is it X number of years? Will you break down those cohorts of here those in year one and by year, whatever it is, is where they're profitable? Just so we have a time line to how to think about as those members come online and congratulations on a good quarter.

Bjorn Thaler -- Chief Financial Officer

Yeah, absolutely. We obviously shared some cohort data as part of the S4. And the way we think about this right now is that we continue to share this, probably about annually as part of our 10-K.

Lisa Gill -- JPMorgan -- Analyst

Thank you.

Operator

Your next question is from Craig Hettenbach with Morgan Stanley. Your line is open.

Craig Hettenbach -- Morgan Stanley -- Analyst

Yes, thank you. It's Craig on for Ricky. Could you provide any more color on the conversion in Iora from fee-for-service at risk? You talked about 2022 kind of a step up. How do you think about the cadence next year and in the subsequent years? And what about from kind of a PMPM perspective?

Bjorn Thaler -- Chief Financial Officer

Yes. Thanks. There's obviously a lot in that question. But maybe just take a step back. At the end of March, you all had about 21,000 sort of Adidas [Phonetic] members. As you today, we've got about 32, so really a step-up of 11,000 members. Over those six months. And this step-up is really driven both by continued growth on the MA side and by style contracting. But certainly, the direct contacting site has outperformed sort of the Medicare Advantage side, certainly mostly de on the voluntary alignment side. And I think that really goes again to the strength of the relationships, frankly, that our providers and us as a company are building with our members. They really look to us to take care of them. And I think there are voluntary alignment with us is a testament to that. Obviously, that will provide a little bit of a tailwind into 2022 in terms of PMPM revenue. Certainly, when you just think about the fact that they are coming in sort of curate or sort of sort of throughout this year. Obviously, next year, to the extent that we hang on to those members, which we fully expect will have obviously a higher revenue cost.

Craig Hettenbach -- Morgan Stanley -- Analyst

Got it. And then just as a follow-up, the strength in the membership comfortably above the high end. Is there anything in particular you would call out there that helped it? And how do you think about perhaps the sustainability of some of the momentum you're seeing there as you go into next year?

Amir Rubin -- President & Chief Executive Officer

Yes. Well, we think this continues to show the power of our model and the proof points that we've been putting up in the market, we're known for people loving one medical, loving the experience. We've talked in the past about our very high retention rate, 90-plus percent retention. We talked today in our prepared remarks about the additional clients we've brought on an additional enterprise accounts we brought on across multiple industries. We've kept putting up more and more proof points, whether it's serving the whole family with one medical for kids, whether it's our one medical mindset, whether it's serving employees in multiple markets through our One Medical. Now and the various studies that we pointed to earlier this year, that peer-reviewed study showing approximately 2x the performance on managing diabetes and other published results. We talked about the JAMA study last year, showing 45% cost reduction. We talked about the chronic disease management and managing complex cases like HIV that we mentioned again today on our call. So I think, yes, these are strong proof points, and I think they are very sustainable. And I think we've shown that we can not only delight members but help them live healthier lives, help employers and payers reduce costs, and we can retain them. And we can do this across the consumer and enterprise populations, but also across the senior population. So yes, we believe this is a really good signal.

Craig Hettenbach -- Morgan Stanley -- Analyst

Appreciate the color. Thanks.

Operator

Your next question is from the line of Jailendra Singh with Credit Suisse. Your line is open.

Jailendra Singh -- Credit Suisse -- Analyst

Thank you. Thanks for taking my questions. First, a quick clarification, Bjorn. You mentioned that you will not report Iora revenue separately, but you will still report the breakdown between commercial and Medicare revenue, right?

Bjorn Thaler -- Chief Financial Officer

That's correct.

Jailendra Singh -- Credit Suisse -- Analyst

Okay. All right. So my question is around the Medicare MLR of 87%. I know that's only for one month of Iora, it seems to us in line with your expectations. Can you give us some color what was like pro forma for the whole quarter for IRR? And if you can compare with historical trends. And as we think about the puts and takes of utilization around COVID cost and non-COVID cost, anything you can share there, how trends were? And what are you expecting for Q4 on utilization trends built into your guidance?

Bjorn Thaler -- Chief Financial Officer

Yeah. Let me start there and then Amir feel free to jump in here as well. Really, when you think about the 87%, it goes a little bit back to what I mentioned earlier. It's really a lot of that is driven by the rapid growth that we had in 2021 so far on the other side. As we've always said, as the new member sort of comes in, they tend to run at higher MLRs because their health conditions tend to not be documented. The health conditions tend to not be managed. And that's really where sort of our model of care can shine over time. And that's certainly what we are seeing. So the folks who are coming in unmanaged this year, they're certainly running at medical claims expense ratios that frankly are higher than what we've typically seen. I think that's a little bit where we see some of that catch up here on the deferred care and also some of the some of the challenges as a result of COVID coming in here. But as I mentioned earlier, really, when you look at the values as how the cohorts perform once they are part of one medical and Iola, once we actually have a chance to manage them, we are quite pleased with that performance. And this is really, in many ways, the result of our strong growth that you are seeing. On the rest of the question relative to COVID. I think we've certainly seen in a couple of geographies, increase in COVID cases, just like the nation overall. That's all baked into that 87% on the at-risk side and certainly also baked into our full year guidance.

Jailendra Singh -- Credit Suisse -- Analyst

Okay. And another issue several healthcare companies have been highlighting and experiencing is the labor shortage and pressure and related higher costs. Just wondering if you can share what you are seeing in your business, both on one medical side and Iora side? And what are some of the offsets you guys are focused on?

Amir Rubin -- President & Chief Executive Officer

Yes. Well, overall, we are continuing to add and grow a ton of team members. Obviously, we're growing from 8 markets, 1 medical stand-alone, where we were a couple of years ago to 28 combined with Iora. So we're adding a lot of team members. And we feel very well positioned there. We believe that part of our approach is to simultaneously address the needs of multiple stakeholders. And that's certainly members and consumers and employers and payers, but it's also to be the best place to be a team member. And as we've talked about in the past, we think we have a differential model here that helps attract and retain team members. So for example, we try to reduce the burdens of desktop medicine with our own built-for-purpose technology. We reduced those tasks. We have a virtual medical team that not only serves the members directly but can take tasks off of providers. So, overall, we're feeling very good about the team, our ability to recruit and retain. I think overall, while there might be some puts and takes in terms of recruitments in one area or another, we feel we're continuing to be a very attractive employer, and we think all of our kind of labor costs and everything else is all built into the forecast and into our projections.

Jailendra Singh -- Credit Suisse -- Analyst

Great. Thanks, and congrats on a good quarter.

Operator

Your next question is from the line of Stephanie Wissink with Jefferies. Your line is open.

Chris Neamonitis -- Jefferies -- Analyst

It's Chris Neamonitis on for Steph. Thanks for the question, and congrats on a great quarter. It sounds like you guys are having a pretty good traction with potential enterprise clients on the One Medical side of the house. Can you give us any color on how those conversations are really evolving? I'm thinking really about the expanded menu of offerings alongside Iora, that an additional market expansion. So does that change anything in the way your sales teams go to market to better resonate. And then on top of that, if I might, how are activity levels in those conversations trending versus prior year and prior expectations? And I know you talked about a few different industries. So I'm wondering, are you seeing any changes in terms of customer size?

Amir Rubin -- President & Chief Executive Officer

Yes. Thanks, Chris. Yes, overall, we're continuing to see great uptake with a range of importers. We're now in more and more markets. So multi-market importers are even more interested in us. And with our One Medical, now services, we can even turn our services on in markets where we don't yet have a physical presence. So those are certainly positive. As we mentioned on our last call in September, a big proportion of our top accounts are using us for multiple services, and that might include our one medical mindset, behavioral health services. We talked about our Healthy Together services. So they're just kind of more and more reasons for poor to work with us. I think clearly, for many employers, the health and well-being of their employees is on their mind. They're thinking about vaccine and verifying vaccination. They're thinking about testing. Now people are thinking about their kids and what to do. And having that partner with the importer and with the employee has been incredibly valuable. So we continue to see that. I think the combination with Iora is also intriguing. As we mentioned before, we now have on the consumer and enterprise side, 683,000 members. Many of those folks have parents or grandparents who might be eligible and be interested, I should say, in joining our senior health programs that might be something of interest to employers to help reach out to the parents and grandparents of their employees. So we just see continued tailwinds and kind of more proof points on the importer side, but also, frankly, on the consumer side. So we're seeing strong growth there as well.

Chris Neamonitis -- Jefferies -- Analyst

That's great. And then just a quick point of clarification. You mentioned kind of uptake on multiple services. Is that just among new client wins? Or is that inclusive of upsells among existing clients?

Amir Rubin -- President & Chief Executive Officer

Yes. Good clarification. We certainly are also seeing this on existing clients, certainly with new ones, but also with existing for sure.

Chris Neamonitis -- Jefferies -- Analyst

Awesome. Thanks, again.

Operator

Your next question is from Elizabeth Anderson with Evercore.

Unidentified Participant

This is Eduardo [Phonetic] on for Elizabeth. I was just wondering if you could circle back to the 87% MLR. And I mean, previously, or reported an 81% MLR in 2020 at 78% MLR in Q1. So is this step-up primarily all related to the new direct contracting members? And maybe if you could just bifurcate the two, the traditional MA members and direct contracting and how we should think about that MLR?

Bjorn Thaler -- Chief Financial Officer

Yes. I would probably say that the step-up is related to the meaningful growth that we've seen this year, right? So when you look at the NCI, again, I think is as those new members come in, frankly, both on the Medicare Advantage side, certainly, where we've got better data than as well as on the direct contracting side, where obviously the program is still relatively new. But as those new members come in, they do come in at a meaningfully higher MLR, even relative to the historical context. So this is, again, where sort of the launch took over time really comes in and comes into play, and it really helps us manage these people, create value for them to love better health and then also reduce the total healthcare cost that I assorted with them. So it's really the function of the meaningful EXO's [Phonetic] that we've seen for the most part in this year.

Unidentified Participant

So would it be fair to say that those members that were sort of in that Q1 cohort where the remember they were in Q1 where you had a 70% MLR did not see a 9 percentage point increase in their MLR. It was just-is more these new members plus direct contracting that started in April?

Bjorn Thaler -- Chief Financial Officer

Yeah. I don't know that it's particularly helpful to look at cohorts between like quotas, right? And we think of these as members who join us throughout the years. And as I said earlier, when we look actually at our members who joined us in 2020 and before, most of these cohorts actually show an improvement year-over-year, which again goes to, I think, the power of the model here. And I think that's sort of how we look at this year.

Unidentified Participant

All right. Thank you.

Operator

Your next question is from the line of George Hill with Deutsche Bank. Your line is open.

George Hill -- Deutsche Bank -- Analyst

Good evening, guys. And I appreciate you taking the question. I'd just be very interested in me to hear you guys talk about what your conversations have been like with your health system and provider partners post the close of the Iora transaction and what opportunities they see there? Thank you.

Amir Rubin -- President & Chief Executive Officer

Yeah. Thank you, George. Yeah, this is a really exciting opportunity. I think one of the things that our partners look to us for is ways to innovate. And in the consumer and enterprise side, we are a great way to innovate in a very consumer-driven, technology-powered direct-to-employer model for attributable commercial lives. And here, similarly with our senior health with our ER program, we're a great way to partner in how do you start edging into risk on the health system side. And certainly, for health systems, it may be quite difficult to go at global capitation for their entire system, given their multiple service lines and tertiary care, but they can do it with us and we can take on that risk, and we can coordinate care with them, and they can potentially participate in some portion of that risk as we think about this going forward. So those are, I think, really exciting opportunities. Moreover, for us on the care delivery side, now we have these built clinically integrated technology integrated models where we can have tighter relationships with our health network partners with their providers. So we can coordinate that care even more tightly for our seniors, whether or not there is shared risk. So we think this is a tremendous differentiator in the One Medical model, great for our members and also great for our partners. So that's quite exciting, and we're pushing ahead on that front with our partners.

George Hill -- Deutsche Bank -- Analyst

Thank you.

Operator

Your next question comes from the line of Richard Close with Canaccord. Your line is open.

Richard Close -- Canaccord -- Analyst

Yeah, thanks. Congratulations on the closing of the transaction. Bjorn, I was curious on the membership number. If you could go back to that, the commercial and enterprise. You said $683,000. And then you mentioned the 18,000 to 25,000 I think it was members. Can you just go over the details of that? Was that originally included in the September 1 guidance? And I just want to be clear on all that.

Bjorn Thaler -- Chief Financial Officer

Yes. Thanks for the question. So certainly, some of those NIMs really included in the September 1 guidance. As I mentioned earlier today, we really saw an uptick on vaccination verification members across the months of August and September. So part of that was certainly included in the September guidance. The way I think about this is really that if you sort of normalize the guidance both for or and the 25,000 or 18,000 to 25,000 vaccine verification members. The way I think about it from an underlying business trends is that we really beat the high end of the September guidance by 8,000, right? And in many ways, another way to think about this is relative to what relative to the August guidance, which didn't include any of these members, we kind of beat by 10,000 is kind of the way I'm thinking about this once everything is set and done. And then we are raising Q4 obviously by 11,000. So I think that sort of goes to the strength of the membership that we are seeing so far this year.

Richard Close -- Canaccord -- Analyst

Okay. And are they actually members? Or did they just sign up for a trial period and get the vaccine. You said something about you have the opportunity to bring them in? Or I forgot how you rank that.

Bjorn Thaler -- Chief Financial Officer

Yes. So these are members. They need our definitions of a membership, right? And in many ways, we are now on their cellphones. We are an app that's installed with them. We know their details. They are actually now used to interacting with us. So similar to what we did with COVID testing earlier last year, where we said, look, we're going to open up our membership model. We're going to have others come in, others experience the one medical difference. And in many ways, we use this as an opportunity to really showcase our liabilities, we have now the ability to showcase dose incremental vaccine verification members, which are full-fledged members, which have access to all of our services, we can really now show them what it means to be a one medical member. What does the rise levels are, what they can expect and will engage with them on their health? And I think that's going to be a great opportunity for us over time to get them familiar with our service offering and really have them use us for their day-to-day longitudinal care needs.

Richard Close -- Canaccord -- Analyst

Do you guys have any like conversion rates in terms of how they convert in terms of full membership or anything along those lines?

Bjorn Thaler -- Chief Financial Officer

Yes. So again, they are four members, right? So I want to be very clear. They are full members today. And it's a little bit too early to say how all of those engagement efforts where they're going to land, but we are certainly very encouraged by the trends that we are seeing so far.

Richard Close -- Canaccord -- Analyst

Okay. Thank you.

Operator

Your next question is from the line of Daniel Grosslight with Citi. Your line is open.

Daniel Grosslight -- Citi -- Analyst

Hi. Thanks for taking the question, and congrats on the quarter. We've seen the capitated primary care space become increasingly competitive. Walgreens made a big investment in VillageMD. Oak Street is getting into virtual specialty console with the recent acquisition. As we head into 2022, it would be great to get your view on the Medicare competitive landscape and how you intend to stay competitive. And as we think about Medicare membership growth in 2022, do you think that will be driven by members outside of Humana?

Amir Rubin -- President & Chief Executive Officer

Yeah. Thanks for the question. Yes, I think there's a number of things that are very differentiated about us at one medical and on medical now serving across pediatrics, adults, aging adults and seniors. I think the first point is we have a model here that's known for an incredible experience and incredible performance at scale.-right? We've been delivering historically 90 Net Promoter Scores. We have a model that is very digital as well as in person. So at One Medical, we have about 10 touches per member per year. About two of those are in person, the remaining 8 or so are digital. At Iora Health, similar. We have about 19 touches per member per year with about a 4:5:1 ratio of digital to in-person. So that's very different. High-digital touches in both models, very high service levels, as we've talked about in the past, 90 Net Promoter Scores, very high retention levels across One Medical. We've talked about 90-plus-percent retention in the S-4, we talked about Iora at 80-plus-percent retention. So these are quite differentiated. And now we have the opportunity to not only serve this whole range across every stage of life, we can age people in right? So we've been serving people for years and now they might age into Medicare. And we've talked about this in the past. We have thousands of seniors in legacy One Medical, who are over 65 who we can now look to bring in to at-risk relationships should they choose to do so, whether voluntarily aligning in direct contracting or whether they choose to join Medicare Advantage plans. We also have those aging in every year, and then we have the parents and grandparents. And then we'll have the reach into 28 markets. So if you think about who has a really high service level, very technology powered has showed they could scale nationally into 28 markets and can age people in across populations. We think that is very highly differentiated. Of course, Medicare is a giant market, 60 million or so people out there, a huge TAM, $870 billion for us, 40% of seniors now in Medicare Advantage, let alone in direct contracting. So we believe what we've done is extremely differentiated, and we believe our model is the model that will serve a wide swath of people and will be, frankly, people's preferred choice. If you had a choice, would you choose this? Would you choose this one medical approach, digital and in-person care, very high service? And we're the ones who have published demonstrated outcomes demonstrated results. So we feel very great about our positioning going into the new year.

Daniel Grosslight -- Citi -- Analyst

Got it. That makes sense. And maybe in that same vein of differentiation, and you launched a new chronic care management program this quarter impact. What's the revenue model for that program? And is that available to both commercial and the capitated Medicare. Any details around the revenue from that and any adoption you're seeing heading into next year?

Amir Rubin -- President & Chief Executive Officer

Yes. Thank you. So our impact by One Medical indeed is our chronic care disease management model, and it is part of our membership, and it's available as part of our program to both our enterprise and consumer accounts. And it's building upon the great chronic disease management that we've done in the past. We mentioned the 2x results on diabetes management. We mentioned the ability to manage complex chronic patients, including those with conditions like HIV. And that means titrating medications. It means reaching out to people. It sometimes means senior PCP, it sometimes means having a health coach or a guide that sometimes requires care navigation across a health network partner. That is all built into our impact program, and that is available to our population base. And one of the things that we can do, given our technology and our membership model is we can risk-stratify our population, and we can do proactive outbound outreach to populations that might be eligible for or in need, I should say, of those programs. Everybody is eligible, but might have diabetes or hypertension or anxiety or stress. And often, it's multiple comorbidities, and that's part of what so powerful about our impact model. It's embedded, it's a chronic disease management model embedded in a primary care system because people usually are not just one condition. They don't have diabetes or anxiety or stress or prediabetes or hypertension. It's usually a combination of these things. And when we can embed this in our model, we can show this really powerful impact, that's the impact. And now we're extending these programs across our commercial and our at-risk senior population. So this is super exciting as well and the kind of leverage that we're getting by bringing Iora and One Medical together.

Daniel Grosslight -- Citi -- Analyst

Got it. Thanks for the color.

Operator

Your next question is from the line of Sean Wieland with Piper Sandler. Your line is open.

Sean Wieland -- Piper Sandler -- Analyst

Hi. Thanks. Just two quick clarification questions. These vaccine verification members, is it reasonable to expect there to be some greater level of churn in that or should our model just treat them like all the rest of the numbers?

Bjorn Thaler -- Chief Financial Officer

Yes. Great question. One of the reasons I am pointing this out there partly is they probably are a little lumpier than others, right? So as we think about our growth heading into 2022 as we think about retention rates, there certainly is the opportunity for there to be a little more churn than with other members. Having said that, as I said earlier, it is early days. And I think this is now a great opportunity for us to engage with them to have the conversation about their health, which is really what we are good at and sort of doing day in and day out with all of our members. So I think it's a great opportunity, but there's certainly also a little bit of a risk of incremental churn for sure.

Sean Wieland -- Piper Sandler -- Analyst

And is there a pipeline of new vaccine verification members? Like is this going to become a paying every quarter?

Bjorn Thaler -- Chief Financial Officer

Yes. It's obviously hard to predict. I mean, we just gave guidance earlier today for where we think that the fourth quarter will land. Nothing specific on the vaccine verification has been based in there at this point. So I'm not sure that I would bet too much on that going forward.

Sean Wieland -- Piper Sandler -- Analyst

Okay. And then the second one was on the-where should we target an MLR for the Iora business?

Bjorn Thaler -- Chief Financial Officer

Yes. So again, I don't know that we are quite ready to give 2022 guidance. As you know, last year, we gave 2022 guidance on our full year call in February. So I think that's a little bit too early to tell. And again, where I'm coming from is growth early on actually is a rack to the MLR. But these are investments that we'd be happily doing because we think we are going to get a great return on our invested capital on those members as we retain them as we manage their health. So yes, in many ways, it's sort of the balance between growth and MLR. But given the long-term nature of our view here and our approach to really changing the health outcomes for these members in the long-term, that's more important for us than the near-term MLR target.

Sean Wieland -- Piper Sandler -- Analyst

Okay. Thank you very much.

Operator

Your next question comes from the line of Ryan Daniels with William Blair. Your line is open.

Ryan Daniels -- William Blair -- Analyst

Hey, guy. Thanks for taking the questions. In the interest of time, I'll stick with just one. And this is around Iora and their future growth. If we think about the business model, it seems like it would be more natural to have care transitions from one medical into the Iora segment, if you have physical locations in the same area. And number two, it seems like a big strategic advantage potentially for your organization managing MLR risk longer term if you can move into markets where you have health system partnerships because that's a huge downstream costs and you might be able to get either referral relationships or centers of excellence or better rates, if you will, for that institutional care, which is a big piece of the cost pie impacting the MLR longer term. So can you talk a little bit about your thoughts on the future of Iora in that regard? Thanks.

Amir Rubin -- President & Chief Executive Officer

Yeah. Thanks for that. I think a few things. I think, one, as we think about growing together going forward, we will likely have blended operations, blended locations. As we've moved in legacy One Medical from the city center to the suburb right? You have children and adults and seniors. So we'll have that opportunity and we don't necessarily need to migrate a person from one model or one location to another. We still may have certain locations that are more focused on seniors and ones that may have pediatrics. But I think what you'll see here is the blending of this and the blending of the technology, blending of the capabilities, and then we'll have a continuum of capabilities, we'll be able to risk-stratify all of our population. We'll be able to have chronic disease management programs for all of our population. And then we can figure out on the continuum of complexity where that member is clinically and what services do they need. In terms of the opportunities with our partners, absolutely, this is an opportunity to partner more closely on coordinating care across the continuum, whether it's on specialty care and the cost of that care, whether it's they want to take some risk, whether it's tighter post-discharge management or handoffs because we have the clinical and technology integration already with those partners. We know them. Our systems speak to each other. So this, we believe, is a tremendous opportunity and differentiator for us.

Ryan Daniels -- William Blair -- Analyst

Great. Thank you so much.

Operator

Your last question is from David Larsen with BTIG. Your line is open.

David Larsen -- BTIG -- Analyst

Hi. Congratulations on the quarter. Just one very quick one for me. Can you maybe talk about your expectations around like Medicare pricing? So for the MA plans, they get their capitated amounts from CMS and then they turn around and pay Iora, a piece of that. What are your expectations around the dollars coming into Iora with respect to capitation, given like the utilization levels that we've seen in 2020, 2021?

Bjorn Thaler -- Chief Financial Officer

Yes. So yes, obviously, there is a little bit of an uptick. But keep in mind that this is really, in many ways, the Medicare reimbursement rate is based on the health status of your members that you're sort of documenting in many ways in the prior year. So yes, I think, yes, what we'll see here over the next couple of months here is certainly a continued focus on making sure that we understand the health needs of our members that we document them. And I think over time, you'll see certainly you certainly have the opportunity for an uplift in the average reimbursement rate per member. Now having said that though, if you take a step back and actually look at our member roster, our members, they pretty much look like the average Medicare recipient, right? So this is not a model that goes after sort of a niche within Medicare. This is something that really works for the average recipients as well. So that's something that I think you should keep in mind here as you think about where the potential PMPM goes over time.

David Larsen -- BTIG -- Analyst

Okay. So that's great. So there's no challenges. There's no headwinds that you might foresee like lower utilization in 2021 because of the delta variant and COVID might result in lower reimbursement in 2022. You're not seeing that is what I'm hearing and that things look normal and good, quite frankly. Is that right?

Bjorn Thaler -- Chief Financial Officer

Well, it's interesting to say what is normally in these time times with covet, right? And it's sort of hard to decipher. But we feel very good about our engagement with our members. We feel very good about the times that we see them over the year. We feel very good about our documentation and our ability to manage the eco care conditions over time. So, we feel good about where we are relative to the year.

David Larsen -- BTIG -- Analyst

Okay, great. Thanks very much. Congrats, again.

Operator

And that concludes the question-and-answer session for the call. I'll hand the conference back to Amir Rubin for closing remarks. Sir?

Amir Rubin -- President & Chief Executive Officer

Well, great. Well, thank you so much, everybody. Thank you for engagement. Thank you for your support, and we look forward to seeing you next time. Have a great evening. Thanks, everyone.

Operator

[Operator Closing Remarks]

Duration: 74 minutes

Call participants:

Ivy Tseng -- Senior Corporate Counsel

Amir Rubin -- President & Chief Executive Officer

Bjorn Thaler -- Chief Financial Officer

Lisa Gill -- JPMorgan -- Analyst

Craig Hettenbach -- Morgan Stanley -- Analyst

Jailendra Singh -- Credit Suisse -- Analyst

Chris Neamonitis -- Jefferies -- Analyst

Unidentified Participant

George Hill -- Deutsche Bank -- Analyst

Richard Close -- Canaccord -- Analyst

Daniel Grosslight -- Citi -- Analyst

Sean Wieland -- Piper Sandler -- Analyst

Ryan Daniels -- William Blair -- Analyst

David Larsen -- BTIG -- Analyst

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