Evolent Health (EVH) Q1 2022 Earnings Call Transcript

Evolent Health (EVH -2.89%)
Q1 2022 Earnings Call
May 04, 2022, 5:00 p.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Welcome to Evolent Health earnings conference call for the first quarter ended March 30, 2022. As a reminder, this conference call is being recorded. Your hosts for the call today from Evolent Health are Seth Blackley, chief executive officer; and John Johnson, chief financial officer. This call will be archived and available beginning later this evening via the webcast on the company's investor relations website, which can be found at ir.evolenthealth.com.

I will now hand the call to Seth Frank, Evolent's vice president of investor relations. Please go ahead.

Seth Frank -- Vice President, Investor Relations

Thank you, and good evening. This conference call will contain forward-looking statements under the U.S. federal laws. These statements are subject to risks and uncertainties that could cause actual results to differ materially from historical experience or present expectations.

A description of some of the risks and uncertainties can be found in the company's reports that are filed with the Securities and Exchange Commission, including cautionary statements included in our current and periodic filings. For additional information on the company's results and outlook, please refer to its first quarter press release issued earlier today. Finally, as a reminder, reconciliations of non-GAAP measures discussed during today's call to the most direct comparable GAAP measures are available in the summary presentation available in the Investor Relations section of our website or in the company's press release issued today and posted on the Investor Relations section of the company's website ir.evolenthealth.com and the Form 8-K filed by the company with the SEC earlier today. During management's presentation and discussion, we will reference certain GAAP and non-GAAP figures, and metrics that can be found in our earnings release as well as a summary presentation available on the events section of Evolent's IR website, ir.evolenthealth.com.

And now I'd like to turn the call over to Evolent's CEO, Seth Blackley.

Seth Blackley -- Chief Executive Officer

Good evening, everyone. Thank you for joining the call. I'll start by summarizing our first quarter results and discuss progress on our three core operating priorities. John will discuss the numbers in more detail and share our updated guidance.

As always, we will close with Q&A. Turning to our results. The first quarter marked a strong beginning to the year for the company on the heels of a successful 2021, with continued growth, margin expansion and strategic product innovation. For the first quarter of 2022, Evolent reported total revenue of $297.1 million, growth of 38% over Q1 2021.

Adjusted EBITDA for Q1 2022 was $24.3 million, 63% growth over Q1 2021. The significant flow-through of revenue growth resulted in adjusted EBITDA margin expansion of 130 basis points to 8.2%, compared to 6.9% in the first quarter of 2021. Relative to guidance, the quarter was also a success. We exceeded the high end of our revenue outlook range for the quarter of $280 million to $295 million, and we delivered at the high end of our outlook for first quarter adjusted EBITDA, which was $20 million to $25 million.

We ended the quarter covering 20.3 million lives on all platforms, compared to 11.6 million one year ago, growth of 74%, driven primarily by New Century Health and Evolent Care Partners, which together constitute our clinical solutions from a segment reporting perspective. Revenue from New Century Health and Evolent Care Partners combined grew 46% year over year, while Evolent Health Services, our administrative segment grew 26%. This highlights balanced growth across the enterprise with continued outsized growth from the clinical segment. I want to take a moment to go a little bit deeper into New Century Health, specifically, given our strong continued growth in that area and what we believe to be significant potential growth ahead in that business.

There are two dynamics driving the strong growth at New Century. The first one is the addition of new lives to the platform. New Century today only touches approximately 6% of the U.S. population, and so there remains a large opportunity to add revenue and margin through the addition of new client logos, and geographic and product expansion with existing partners.

For example, New Century's largest clients cover approximately 40 million lives across the country, but New Century only serves approximately 10 million of those lives today. And those are mostly in the technology and services suite, representing a significant future opportunity. The second growth dynamic is the upsell from our New Century tech and services suite to our risk-based performance suite in one or more specialty areas. With almost 17 million lives on the tech and services platform today, this upsell represents a significant ongoing opportunity for future growth.

We continue to look for opportunities to transition some of these oncology and cardiology lives in various states from tech and services to the performance suite. The upsell from the technology and services to the performance suite drives more than a 50-fold increase in per member per month revenue and significant increases in adjusted EBITDA per member. Now I'll turn to updating you on the continued progress across our core operating priorities of: one, strong organic growth; two, expanding margins; and three, optimal capital allocation. Looking at the first priority of organic growth, I'll highlight a few of the new opportunities we recently signed that helped continue to drive our growth trajectory in 2022 and 2023.

Today, we're pleased to announce two new operating partnerships in the clinical segment and a significant life expansion in 2023 with an existing EHS client. In February, we announced four new partnerships. And so these two new announcements take us to six thus far for the current year versus our annual target of six to eight. So we're on track for 2022 and increasingly well set up for 2023.

As a reminder, we include new performance suite wins with existing clients toward our annual operating partner count given the financial size and by dynamics of these relationships. Turning to the detail on the partner announcements, we're delighted to announce the expansion of our relationship with AvMed to add our New Century Health performance suite for oncology. Headquartered in Miami, AvMed is a highly respected not-for-profit health plan that has been in operation for more than 50 years, providing its approximately 230,000 members with high-quality cost-effective care. AvMed has been a valued client for our technology and services in our cardiology solution, and we're excited to now add AvMed's Medicare members to our performance suite for oncology.

In addition, we've placed another vendor to help AvMed manage radiation oncology quality for a majority of their commercially insured membership through our tech and services platform. Our second announcement today is our new Evolent Care Partners agreement with a significant independent physician group headquartered in California. This is an organization with over 200 physicians and it's the largest in the county where it operates. The physician group was looking for opportunities to improve care for their members, provider, Medicare fee-for-service population.

After they evaluated different options, including the direct contracting model, they elected to collaborate with Evolent Care Partners through our Medicare Shared Savings program, ACO. We've already begun working with this group for a portion of their primary care practices and seek to expand this relationship over time. Based on our years of experience facilitating independent practices transition from fee-for-service to value, we think the Medicare Shared Savings program Enhanced Track ACO, often provides the best initial value-based care opportunities for providers, payors, and patients. That said, we are increasingly adding private payor performance suite contracts as well, as illustrated with our recently announced Blue Cross Blue Shield North Carolina arrangement.

We also continue to evaluate the ACO Reach program and other models as they mature. Turning to Evolent Health Services. Today, we announced that following the successful implementation of 330,000 new individual family plan commercialized the Bright Healthcare on January 1st of this year, we anticipate an expansion to include all of Bright's IFP commercial membership in 2023. Across all of our solutions, we believe the macro environment continues to be a tailwind for growth across our enterprise.

With elevated medical expenses and inflationary pressures across the country creating increased urgency for health plans, and other risk-bearing entities to drive quality of care while lowering their overall cost burden, which is the core proposition of our value-based care solutions. With strong revenue growth and new business opportunities progressing, let's talk about our progress toward continued margin expansion, which is the second core operating priority for Evolent Health. Going forward, we anticipate continued strong revenue growth in our clinical solutions and specifically from a higher number of lives on our Evolent Care Partners and New Century Health performance suite solutions, both from net new logos and from Technology and Service Suite upsells. As discussed previously, growth of our performance suite solutions across New Century Health and Evolent Care Partners typically will drive higher growth rates, solid year one dollar adjusted EBITDA contribution, slightly lower year one adjusted EBITDA margin percentages, and higher annual adjusted EBITDA margin dollars and percent as contracts mature.

As shared last quarter, we continue to believe that adjusted EBITDA dollars are the best indicator to measure success relative to our margin expansion targets, and we continue to feel good about our progress toward our medium-term margin goals. Let's turn to our third core operating priority, optimizing shareholder capital allocation. When we talk about investment, we aim to drive innovation, value, and market leadership within our performance-based solutions, while maintaining appropriate leverage and a flexible balance sheet to support growth, incremental to long-term growth. Our first priority for capital deployment is always building and strengthening internal capabilities.

In addition to organic development, we also consider M&A an avenue to address assets that make sense financially and strategically. Our primary goal for acquisitions is to create shareholder value by adding capabilities that support our core strategic and operating objectives. The acquisition of Vital Decisions, which closed in October, and the successful integration into Evolent Health, we believe, is illustrative of the types of accretive M&A opportunities available. Through this transaction, we added important capabilities to both increase the value creation in New Century Health and expanded our portfolio by adding a technology-enabled advanced care planning solution.

In the early stages of post-integration, we're seeing positive indications that pairing New Century's core expertise in managing highly complex chronic and acute onuses with Vital Decisions offerings will be very compelling to our performance suite clients. Two quarters after closing the acquisition, the reception of the solution in the market has been positive. We believe payors will see the value and economic benefits of incorporating new services into their approach to managing health populations. For example, Vital Decisions went live with the pilot program over the last few weeks with one of New Century's largest performance suite clients, potentially unlocking significant clinical and financial benefits.

We look forward to expanding Vital Decisions' advanced care panning solutions across several of our other New Century clients later this year. When we speak with our payor and risk-based provider clients, we often hear them say that they prefer fewer partners or vendor touchpoints in value-based care generally. That is, they would prefer fewer partners, who can each provide more comprehensive services, especially in the specialty care areas, where there is significant fragmentation in the vendor ecosystem. In fact, we often have our clients ask us directly if we can cover additional specialties or cover additional capabilities within our existing specialties.

Given that dynamic and given our market leadership within New Century Health, we continue to see opportunities to expand our platform to accretive, targeted M&A. Over time, we also see a significant opportunity to drive additional profitable long-term growth as we build a durable leadership position as a top independent specialty platform in the market, while adhering to our principles around disciplined capital allocation. To conclude, we see continued strength across the business in terms of operational success, growth, and long-term market leadership. The three core operating priorities for managing the company continue to guide me, the management team, and our board of directors.

By executing on these priorities, we believe we'll be able to invest in product innovation, which will extend our market leadership, our financial results, our shareholder returns, and ultimately help us achieve our mission of using value-based care to help change the way healthcare is delivered in the United States. I'll now ask John to give some detail on the numbers this quarter and provide our outlook for 2022 and the second quarter.

John Johnson -- Chief Financial Officer

Good afternoon, everyone. We are pleased with our first quarter results with our key metrics coming in ahead or near the high end of the guidance we communicated in February. We are building upon the momentum we carried into '22. In total, our quality and cost management solutions covered 20.3 million lives during Q1, and we are well situated to grow that reach both across the remainder of this year as well as into 2023.

We outperformed the high end of our revenue range for the quarter due to stronger-than-projected performance payments within both our clinical solutions and Evolent Health Services segments. Our adjusted EBITDA was likewise driven by continued strong outcomes in our performance-based arrangements. With typical seasonality in working capital during the first quarter, our operating cash flow declined versus the beginning of the year, in line with our expectations, and we anticipate during the remainder of 2022 to build upon our cash flow momentum from 2021 with continued focus on our disciplined capital allocation strategy. Now let me take you through consolidated results, before turning to segment-specific results and ending with an update on guidance.

Revenue in the quarter was $297.1 million, a 38.1% increase compared to the same period in the prior year. This was due to growth from new partner additions as well as same-store sales growth across our enterprise. Adjusted EBITDA for the quarter was $24.3 million, compared to $14.9 million in the same quarter of the prior year. This represents year-over-year adjusted EBITDA growth of 62.7% and margin expansion of 123 basis points.

Turning to our segment results. Within our clinical solutions segment, revenue in the first quarter increased 46.1% to $190.2 million up from $130.2 million in the same period of the prior year. This strong revenue growth is due to continued same-store sales and new client growth, including the previously announced partnership with Blue Cross Blue Shield in North Carolina, where we are now managing over 10,000 Blue Premier members on our Evolent Care Partners platform. Q1 adjusted EBITDA from clinical solutions was $22.2 million, compared to $16.0 million in the prior year, driven by continued strong performance at New Century Health.

As previously discussed, the growth in Evolent Care Partners is expected to have lower than average year one margin, progressively ramping to more meaningful profitability over approximately three years. Membership in our performance suite for clinical solutions was 1.5 million, compared to 1.4 million in Q1 of the prior year, with a PMPM fee of $38.07 versus $26.32. This increase in PMPM was principally driven by the addition of the Blue Cross Blue Shield of North Carolina lives, where the full revenue premium is recognized. Membership in our technology and services suite for clinical solutions was 16.7 million relative to 8.2 million in Q1 of the prior year, with a PMPM fee of $0.38 versus $0.43 in Q1 of the prior year.

Within our Evolent Health Services segment, first quarter revenue net of intercompany eliminations of $500,000 increased 25.9% to $106.9 million, up from $84.8 million in the same period of the prior year. Growth in this segment was driven by new clients go lives, including the previously mentioned addition of approximately 330,000 incremental price Bright Healthcare lives. We also benefited from higher-than-projected performance-based revenue in the quarter, which was largely offset by certain pass-through and onetime costs. Membership in our performance suite for Evolent Health Services was 2.1 million, compared to 2.0 million in Q1 of 2021, with a PMPM fee of $19.17 versus $14.60.

Adjusted EBITDA from our Evolent Health Services segment for the quarter was $8.2 million, compared to $5.9 million in the prior year, demonstrating the progress we have made in driving significant unit cost reductions across our operating model. Finally, corporate costs decreased 12.2% to $6.2 million from $7.0 million in the same period of the prior year. The steps we have taken to lower overhead costs and become more efficient continue to benefit our consolidated adjusted EBITDA margin, even in the face of continuing growth. Turning to the balance sheet.

We finished the quarter with $210.2 million in cash, cash equivalents, and investments, including $53.9 million in cash held in regulated accounts related to the wind down of passport. Excluding cash held for passport, we had $156.3 million of available cash, a decrease of $59.3 million versus the end of the fourth quarter. As I mentioned, this decrease was principally driven by seasonality in working capital, including year-end incentive compensation, and we expect to be meaningfully cash flow positive across the remainder of the year. Cash deployed for capitalized software developments in the quarter was $6.4 million.

Finally, turning to guidance. Based on continued strong performance, we now expect total revenue for the year to be in the range of $1.16 billion to $1.21 billion, and we are raising our outlook for adjusted EBITDA to between $85 million and $95 million for the year. For the second quarter specifically, we are forecasting adjusted revenue of $290 million to $305 million and we are forecasting adjusted EBITDA of $18 million to $23 million. As a reminder, we continue to expect Quarters 1 and 3 to be high points for adjusted EBITDA this year based on timing of performance revenue.

We continue to forecast between $25 million and $30 million in annual capitalized software development expenses. With that, I will turn the call back to the operator to take your questions.

Questions & Answers:

Operator

Thank you. [Operator instructions] Our first question comes from Richard Close with Canaccord Genuity. Please go ahead.

Richard Close -- Canaccord Genuity -- Analyst

Great. Thanks for the questions and the time today. And congratulations on the progress. Seth, I was wondering or Seth or John, I was wondering if you could talk a little bit about the Oncology Care Partners relationship.

And then you also announced Strive Health here recently. So I was wondering if you could just walk us through the structure of each of those relationships. What the opportunity is? And maybe from a financial perspective, are they relevant for 2022? Or how should we be thinking about 2023 contribution?

Seth Blackley -- Chief Executive Officer

Yes. Great, Richard. Thanks for the question. So I think the way we think about this part of our business is around innovation, right? So across all three parts of the business, Evolent Care Partners, Evolent Health Services, New Century, we think about innovation in kind of three buckets.

One is, well, things we can build internally and that we do build internally, software development and the like. Second is M&A, right, accretive M&A that we use. And then in the third bucket, we have partnerships from time to time like the couple that you mentioned. They may be in Evolent Care Partners.

They may be in New Century. They may be in Evolent Health Services. They tend to be very capital light or zero capital deployed, but add some sort of innovation in the case of Evolent Care Partners -- or excuse me, Oncology Care Partners that you mentioned. We see in certain markets, places where there needs to be new oncology capacity, and having a separate company in this company, you mentioned, be able to help us in that way in those markets as a value-add doesn't take our capital up.

And so it's really part of our broader innovation methodology that we use, again, internal development, M&A, and then we have select partnerships in targeted areas, that are capital light and yet continue to innovate our product. It's all with an eye toward market leadership across all three products. Yes. I think the financial point to your question, Richard, I mean it's more about market leadership, and therefore, our ability to continue to grow at really fast rates over time, but also our ability to deliver on our targets and expectations on the earnings front.

So it really fits within that framework. So I wouldn't think of it as an additive thing from a financial perspective necessarily in the short term.

Richard Close -- Canaccord Genuity -- Analyst

OK. But I guess I'm trying to understand, is Oncology Care Partners, you would be -- I think that's a JV. So would you be -- is that like a revenue share? And then Strive Health, it seems like that's somewhat sort of like your Cardiology or Oncology performance suite but on the Kidney Care. So is that a revenue share as well?

John Johnson -- Chief Financial Officer

Hey, Richard. This is John. I'll take some of those. On both, think of them as in our network -- partners in our network.

So just like we partner with a number of oncology groups across the country in New Century, Oncology Care Partners will be part of our network as they grow. And so we're happy to support them in that way. As Seth mentioned, it's not an investment that we've made. On Strive, think of that as a classic sub-capitation agreement wherein these -- the Evolent Care Partners lives, which, as you know, are mostly in the Medicare Shared Savings Program, we were seeking a partner to help us manage the costs of kidney care and selected Strive to do that.

And so we're excited to roll that out as a pilot with them in a couple of markets and see what kind of savings they can drive on our population.

Richard Close -- Canaccord Genuity -- Analyst

OK. Thank you.

John Johnson -- Chief Financial Officer

You're welcome.

Operator

Our next question comes from Ryan Daniels with William Blair. Please go ahead.

Ryan Daniels -- William Blair -- Analyst

Hey, guys. Thanks for taking the questions. I'll add my congratulations on another strong quarter. Seth, you talked about in your prepared comments the massive opportunity you have, both to upsell New Century and then cross-sell solutions into that marketplace.

So I'm curious if you can speak a little bit to specifically what you're seeing there with clients and with existing clients that are already using you and seeing such good results. How do you push the needle forward more rapidly there to drive growth in that segment from a sales or investment standpoint? Thanks.

Seth Blackley -- Chief Executive Officer

Yep. Good question, Ryan. So yes, I mean, we -- it is down two vectors, right, to your point. One is we've got -- across our biggest clients, we only have, say, 10 million lives covered out of their 40 million, right? So there's an opportunity to go to different geography or different specialty or something like that, we're not touching it all today.

And then the other vector is out of the base of the Technology and Services lives upselling them to the performance suite, even if they already are lives, that 50-fold increase that we talked about, those are the two opportunities. They're each a little bit different, right? On the upsell opportunity of going from tech services to performance, we already have the data. We already are supporting the partner in some way, shape, or form, and we can make very specific credible data in front of them about the opportunity to upsell to the performance suite. And so those things are happening on an ongoing basis.

We've obviously talked about several of those with a couple of our big national payors in the last few calls. Those are going well. And it's really about increased savings, Ryan, for them in those markets. And particularly where they might have the biggest pain points within their business.

With the other dimension, where we're not touching a lot at all today, it's a brand-new market or something like that. The same messages are true, but the sales cycle is a little bit different, right, because we don't yet perform services on those markets. And I think across both the common theme is, hey, where is there a pain point for our customer, which is the growth of oncology or cardiology or end of life, which stitches into both of those. And I think the good macro news for us is there's a lot of challenge in managing those segments, and I think we have a unique ability to help manage them at a lower rate than they can on their own.

And so we're seeing a lot of strong progress across kind of both of those dimensions you asked about.

Ryan Daniels -- William Blair -- Analyst

OK. I really appreciate that color. And then you mentioned Vital Decisions relationship I think with an existing client where they're doing a pilot, can you dig into that a little bit more? Is that something where they're doing just small amount of lives and the potential is for expansion? Or is it -- just I guess more color on that would be helpful.

Seth Blackley -- Chief Executive Officer

Yes. Yes. So this is one of our larger performance suite relationships today. So we already are kind of managing the population and the cost, and we have relationships with these physicians and their patients today.

So it's only natural that we would be able to stitch in the capabilities that Vital brings to help manage that aspect of a, say, cancer patient or a cardiology patient. And our team at Vital's fantastic and all the right abilities from an empathy perspective, getting them with the physician and the patient and their families to have those conversations. So I think we're seeing a lot of positive receptivity in terms of the clinical leadership of these plans, say, yes, that makes a lot of sense, let's bring it in and stitch it in. And so the pilot is with one of our bigger partners.

It is rolling out pretty broadly across that population quickly. And again, we don't really sell it. I think we talked about this early in the Vital. It's not a sales thing.

We're bringing the capabilities to bear, because it's the right thing for the patient, first and foremost. It often results in better care and longer life span, the life for the patient, but also has a savings opportunity that can accrue back to us over time, quality first always. And that's how we do it, and it's working quite well.

Ryan Daniels -- William Blair -- Analyst

OK. Perfect. And then two more, and I'll get off. One for John very quickly.

On the performance-based fees, were those generally in line with your expectations during the quarter? Or was there any pull forward that helped drive the upside to sales and EBITDA?

John Johnson -- Chief Financial Officer

Yes. Good question, Ryan. I would say they came in slightly ahead of our projections, but not from a pull forward, but based on the final read of the data that we got to base those performance fees on. So nice to see those in the quarter.

Ryan Daniels -- William Blair -- Analyst

OK. And then the last one. Seth, you always talk about the third kind of investment platform being M&A opportunity. I'm curious with the weakness we've seen in the public equity markets and in particular with the digital health companies of late.

Have you seen a reset in seller expectations such that you're seeing more attractive opportunities to enhance your product or service offering through M&A going forward and might that cause a reallocation of capital from internal to external M&A opportunities going forward? Thanks.

Seth Blackley -- Chief Executive Officer

Yes. I think what we'd say about the M&A, we don't need to do it, Ryan. We've kind of had this really good organic path, and that's ahead of us, and we feel really confident in that path. So we don't need to do it.

I think what we -- the times when we will do it, Ryan, there's got to be a couple of things present. One is we see a strategic fit. It fits with what we're doing in the core. It needs to be a short-term win.

So it needs accretive quickly. And then the third thing is it needs to be a win in the long term, which is sort of strategic upside from the transactions. I think that's our main framework for it. When the prices of the assets go down a little bit, it can help on the short-term accretion thing.

And I think we are seeing a little bit of that right now. But I think just the broader point is that, especially within the specialty space, really interesting opportunities to meet all three of those criteria. So it sort of helps the business in the short and the long term. We definitely see some opportunities out there.

And I think to your point, it should be more attractive even in the six, 12 months ahead as the markets adjust a little bit.

Ryan Daniels -- William Blair -- Analyst

All right. Great. Thank you so much, guys.

Seth Blackley -- Chief Executive Officer

Thanks, Ryan.

Operator

Our next question comes from Anne Samuel with J.P. Morgan. Please go ahead.

Anne Samuel -- J.P. Morgan -- Analyst

Hi, guys. Thanks for taking the question. Maybe just a follow-up to Ryan's question. You talked about opportunity to expand beyond your existing specialties.

What areas are your customers asking for that might make sense to round out the portfolio?

Seth Blackley -- Chief Executive Officer

Yes. So I think it's interesting, Anne. We certainly thankfully hear a lot about oncology and cardiology and end of life. So it feels like the ones that we're in are spot on.

There are some other ones that are just big and are also growing, musculoskeletal is an example of that. There's some needs around patients and helping the patient navigate a little bit more that is talked about quite a bit. And I think there are a few others like I put neurology on that list that were also higher cost. And so there's certainly opportunities and across the ones that I just mentioned.

And then I think the most important fact is we are getting a lot of our customers coming to us, to your point saying, hey, we want you to do more. I think we're doing a good job delivering on what we've got in front of us, which is always job one in life. But I think there's also a dynamic, which is they prefer to buy more from one place. And so our ability to add more is certainly part of the commentary around M&A, but also could be organic additions.

And we're quite excited about the opportunities around New Century in general.

Anne Samuel -- J.P. Morgan -- Analyst

That's great. You continue to add new partnerships at the rate you always have, but you've also got a nice base now of larger existing clients. So I was just wondering, how should we think about that composition of same-store versus new growth going forward? And might that look different? Or is that supportive of maybe kind of higher growth than you've seen in the past?

John Johnson -- Chief Financial Officer

Hey, Anne. This is John. I'll take that one. The -- typically, 60% of our growth has come from new partner adds and about 40% has come from same-store expansions.

And I do think that given the dynamic that you described, this is an opportunity in front of us to further penetrate our existing customer base. We expect that to shift a little more toward the same-store side. Now is that 50-50 or 60-40 to the other way, it's not going to go 80-20. We continue to believe that there's a lot of new flags out there to plant.

But we do see that dynamic happening. I think the other thing that you'll see across this year, just to mention it, is that conversion of lives that are in the tech and services Suite today up to the performance suite. And so maybe not as much change on the total life count and more of a change in the aggregate PMPM, as we're able to drive more revenue, more profitability, and ultimately more value for the customer and the patient through that performance suite.

Anne Samuel -- J.P. Morgan -- Analyst

That's really helpful. And maybe just one more housekeeping. Perhaps I missed it, but I was hoping maybe you could provide just some color on the lives and PMPM of the new partnerships? And then also just how to think about the expansion at Bright Health and maybe timing of that?

John Johnson -- Chief Financial Officer

Yes. Let me do those in backwards order. So on Bright Health, as we mentioned, anticipating to have all of their IFP lives on our platform in January of next year. So I believe on the call this morning, they mentioned about 1 million lives, plus or minus their growth, that will be our membership.

So really excited to continue to grow with them and provide really strong service. On the couple of other announcements today, AvMed, as we mentioned, the main focus of this performance suite is in the Medicare Advantage book of business, which is a fraction of their lives. So think of it in the $20 million to $30 million of care in terms of total revenue. And on the ECP add, as you know, that is a longer -- it takes longer to show up in the revenue since it is a shared savings model.

So really there, we're talking about revenue impact for next year, where we see that anticipated.

Anne Samuel -- J.P. Morgan -- Analyst

Very helpful. Thank you.

Operator

Our next question comes from Charles Rhyee with Cowen. Please go ahead.

Charles Rhyee -- Cowen and Company -- Analyst

Yeah. Thanks for taking the questions. Maybe just a follow-up question around Vital Decisions. Seth, with the pilot, maybe I missed it from Ryan's question.

When -- how long do you expect this kind of pilots to last? And do you see pilots as the primary way you're going to get Vital Decisions into your existing client base? Or do you see maybe this one pilot being a reference site in effect for other clients to just sign on for Vital Decisions going forward?

Seth Blackley -- Chief Executive Officer

Yes. It's a good question, Charles. So we -- this pilot will flip into, I think, a full relationship later this year. And it's rolling out pretty quickly.

And then we expect a couple more of these this year, too. So we're not having issues getting our partners to adopt it. And I don't think we're going to really need to use a pilot methodology. It's just sort of where we are with this first big one, given the timing of the integration.

But generally speaking, they're going to just roll in and become part of the operational platform that is New Century Health. And so it feels really good, and we're not having any issues in terms of adoption.

Charles Rhyee -- Cowen and Company -- Analyst

And then as we move forward for potential new clients in New Century Health, sort of new logos, is the Vital Decisions going to be just part of the package when they -- or is it an option they can select into as they sign up?

Seth Blackley -- Chief Executive Officer

Yes. I think it will often be part of it. It will be a conversation. And so sometimes they can opt-out of it, but I think it will be more of an opt-out than an opt-in in most cases.

And it just makes so much sense, right? When you're contacting the oncologist or cardiologists already stitching the same platform end. So it will be, I think, part of the default relationship.

Charles Rhyee -- Cowen and Company -- Analyst

Great. And then last question for me, just in terms of -- I think on the fourth quarter call, you guys talked about lives from the Molina expansions ramping up in the performance suite lives. But sequentially, I think we're still at 1.5 million. How should we think about the ramp of those lives to flow through? Is that to be more back-half weighted? And then maybe similarly for Blue Cross Blue Shield.

I know you may have mentioned it, but I think I missed that.

John Johnson -- Chief Financial Officer

Yes. Yes. That's right. The Blue Cross Blue Shield lives are in the number as of 1/1.

On the Molina performance suite contracts, two went live in April, and we expect the other two will phase in at some point this quarter.

Charles Rhyee -- Cowen and Company -- Analyst

OK. So we should be stepping up. Should we step up the full 500,000 in the second quarter? Or should we have some of that step up in the third quarter?

John Johnson -- Chief Financial Officer

I would expect that is the magnitude of the step-up in the second quarter, but just to be really precise about it, Charles, that is a move from tech and services lives to performance suite, not a move to lives, yes.

Charles Rhyee -- Cowen and Company -- Analyst

Yep. OK. Perfect. Thanks.

Appreciate it and congrats on the quarter.

John Johnson -- Chief Financial Officer

Thank you.

Operator

Our next question comes from Jessica Tassan with Piper Sandler. Please go ahead.

Jessica Tassan -- Piper Sandler -- Analyst

Hi. Thanks for taking my question. So I think just we had estimated that there was a 1/1 Molina Kentucky launch for New Century performance suite. I guess, which would have added like roughly 165,000 lives.

So I guess just are there any kind of underlying dynamics behind the flat sequential reported lives in performance suite within clinical solutions?

John Johnson -- Chief Financial Officer

Yes. No underlying dynamics there are still on track for Kentucky to flip to the performance suite. And also just in aggregate, as we've talked about, the Molina relationship this year, continue to expect that $75 million revenue Zip code. So that is on track.

Jessica Tassan -- Piper Sandler -- Analyst

Got it. That's helpful. And then I guess, just within clinical solutions performance suite, what's the mix between Medicare and Medicaid? And within the base, should we be expecting just those populations to grow roughly in overall growth year over year outside the contract expense there for new deals?

John Johnson -- Chief Financial Officer

Yep. Medicare revenue in the quarter represented a little more than half of the total clinical solutions revenue. Medicaid is the next largest commercial, was 10-ish percent. Overall, in terms of how that shapes, I -- it's going to depend on specific deal cadence.

Generally speaking, Medicare is a bigger markets for the oncology and cardiology services. And so I would expect that probably to grow a bit faster.

Jessica Tassan -- Piper Sandler -- Analyst

Got it. And then can you just maybe like help us think about what the potential impact of Medicaid redeterminations might be? How much of that membership possibly convert to exchange deals? Yes, just what the potential impact of that might be?

John Johnson -- Chief Financial Officer

Yes. And so just to ballpark it, at the end of 2020, when most of that impact happened, we made an estimate that our members -- the aggregate membership at the time was about two to three percentage points higher than it might have been, absent the public health emergency and the redetermination pause. So then the question is how much of that might we give back when the redeterminations turned back on. I think the -- most of the forecasts that are out there have a reasonably slow ramp in terms of that membership rolling off, whether it's across six months or 12 months.

And that's consistent with our forecast as well. So we have incorporated that into our guidance. We do expect to see it. We don't think it will be that big of an impact given that two to three percentage point initial impact to the positive.

Jessica Tassan -- Piper Sandler -- Analyst

Thank you.

Operator

Our next question comes from David Larsen with BTIG. Please go ahead.

David Larsen -- BTIG -- Analyst

Hi. Congratulations on a very good quarter. For the Molina $75 million, how much of that was actually in 1Q '22?

John Johnson -- Chief Financial Officer

Very little, Dave. Very little. The majority of the relationships went live on 4/1 and are going live later this quarter.

David Larsen -- BTIG -- Analyst

OK. So the revenue --

John Johnson -- Chief Financial Officer

One of the reasons -- yes, just to be precise on it. That's one of the reasons for the step-up in the revenue guidance moving from where it was to where it is in Q2.

David Larsen -- BTIG -- Analyst

Right. So the revenue beat happened despite the fact that most of that Molina will be in future quarters, OK. And then with the Bright lives, those 1 million lives, what exactly are those -- are you providing to them? Is it the cardiology or is it the oncology service? I'm just trying to get a sense for the PMPM fee.

John Johnson -- Chief Financial Officer

Yeah, of course. Of course, the core services that we're providing to Bright are out of the Evolent Health Services segment. That's the administrative platform, the Claims Payments, the UM, CM, etc, for a portion of those lives. And so PMPM, that's going to vary by market, scope of services, and so on.

Obviously, it is somewhat of a vast relationship. So a number of different pricing models in there. But overall, I think we said in the last call, somewhere between $7 and $11 PMPM is a decent place to start.

David Larsen -- BTIG -- Analyst

So if we assume $10 per member per month, that's like $100 million -- how much is it on an annual basis, is that like a $120 million?

John Johnson -- Chief Financial Officer

A little less. If you use the midpoint of my $7 to $11 range. But yes, it's a large contract. We're excited to grow with them.

David Larsen -- BTIG -- Analyst

OK. That's a very large contract, OK? And then what were the performance fees in the quarter that you recognized? What was the dollar amount?

John Johnson -- Chief Financial Officer

Yes. Recall, in our Evolent Health -- this is in our Evolent Health Services segment principally, where we saw the outperformance in that line this quarter. And those are relationships where we have upside with our customers, based on value that we're able to drive for them. Usually, and in this case, that is based on savings that we're able to drive relative to a benchmark.

And so we were -- we got some final data in the quarter that allowed us to recognize that amount in those areas and contributed to top-line fees. Now as I mentioned in my prepared remarks, that was offset by some onetime costs associated with that revenue. It passed certain along -- amount of that downstream, for example, so the EBITDA impact in EHS was a little lower, but really pleased with the magnitude of that result.

David Larsen -- BTIG -- Analyst

OK. That's very helpful. I think there's a little bit of a delay in some performance revenue in like 3Q of '21 or something like that. Was it related to that, like you finally got all the data agency you collected all that?

John Johnson -- Chief Financial Officer

Yes. It was not. At the outset of the year, and I mentioned again today, we do expect Quarters 1 and 3 of this year to be high points for performance revenue. The third quarter impact is largely driven by the timing of the Medicare Shared Savings settlement files that we received for Evolent Care Partners.

David Larsen -- BTIG -- Analyst

OK. And then just the last one and I'll hop off. In terms of like your TAM or your in-sell potential, I heard the phrase 50-fold. What -- can you put a dollar amount on that? Is it $4 billion? Just what are we looking at in terms of dollars?

John Johnson -- Chief Financial Officer

Yes. So the way that we've tried to paint that picture, Dave, is if you were to assume that we could penetrate our -- those top customers by 25% with both Oncology and Cardiology performance suite products, would represent revenue in excess of $4 billion. So a significant opportunity there that we are obviously highly focused on attacking.

David Larsen -- BTIG -- Analyst

OK. Fantastic quarter. Congratulations. I'll hop back in the queue.

John Johnson -- Chief Financial Officer

Thank you.

Operator

Our next question comes from Sandy Draper with Guggenheim. Please go ahead.

Sandy Draper -- Guggenheim Securities -- Analyst

Thanks very much and good afternoon and glad to be back on the back on the calls and as usual, I'm slow slowing in the queue. So really no detailed question, but maybe a high level since you guys are right outside D.C. As we come into the midterm elections and thinking about the second half of the Biden administration, is there anything that you guys are particularly watching that could be an upside risk or downside risk? Or do you think it's pretty much status quo, no changes over the next couple of years coming out of D.C.? Thanks.

Seth Blackley -- Chief Executive Officer

Hey, Sandy. Yes. I think the short answer is it's pretty much status quo with respect to our business. And that -- the reason is that almost everything that we're talking about today and all of our opportunities are really oriented back to the private payor, risk-bearing provider markets, and the dynamics that are driving them are just the core dynamics of managing care.

And those have been around for a long time and are going to be around for a long time. We use value-based care to solve it. But if policy changes a lot or a little, that opportunity is going to still be there. So I think because of those dynamics, for us and for Evolent, no big changes that we're thinking about up or down really to what we have going on.

I could give you a more nuanced answer around what we see in the macro environment with inside the beltway. And I think there it's probably net positive on value-based care. But even those things, they're helpful to us, but it's moderate. And I think the core thesis for Evolent is a little bit less connected to what happens in elections and the like.

Sandy Draper -- Guggenheim Securities -- Analyst

Great. That's helpful. Congrats on a quarter.

Seth Blackley -- Chief Executive Officer

Thanks.

Operator

Our final question is a follow-up from Richard Close of Canaccord Genuity. Please go ahead.

Richard Close -- Canaccord Genuity -- Analyst

Thanks for the follow-up. Seth, I was wondering maybe if you could just comment a little bit about the pipeline. Obviously, you guys have been adding a higher level of new partnerships, but maybe some just commentary on the pipeline. How it may be compared than last year? And then second on that, and maybe a little follow-up on Sandy's question, but really more on the economics side.

So I'm curious if we go into recession or whatnot, how you think that's going to maybe impact the pipeline? Does that stop people from maybe adding performance services or performance suite? Just any thoughts in and around that would be helpful.

Seth Blackley -- Chief Executive Officer

Yes. Yes. So I'd say, first, on the pipeline, it's at the highest point it's been at, and it feels very, very good. So that's a positive.

And it's -- as John said, it's weighted a bit more toward our existing customers, and that upsell opportunity that we've been talking about versus net new logos. There's, of course, new logos in there, too, but the weighting has shifted a little bit per John's earlier answer, and it just feels quite good. I think it's a bunch of different dynamics, including just general pressure on the growth in oncology, cardiology, end of life, etc. With respect to your second question, I think it is one of the positive elements of Evolent from a profile perspective.

I don't think that the macroeconomic environment affects us that much one way or the other. Recession happens, people unfortunately still get cancer, that cancer needs to be managed. The health plans are still trying to make their numbers and need help doing so. The differentiation of our product and the ability to do that in a way that it saves money, but also is good for the patient.

These things are evergreen issues, and they don't really ebb and flow with the economy. And so we feel good about our pipeline being in a really nice place a year from now as well, two years from now kind of independent of what happens in the macro environment.

Richard Close -- Canaccord Genuity -- Analyst

OK. Thank you.

Seth Blackley -- Chief Executive Officer

You're welcome.

Operator

This concludes our question-and-answer session. I would like to turn the conference back over to Mr. Blackley for any closing remarks.

Seth Blackley -- Chief Executive Officer

Thanks for everybody's time. We look forward to connecting in the days ahead. Have a good evening.

Operator

[Operator signoff]

Duration: 55 minutes

Call participants:

Seth Frank -- Vice President, Investor Relations

Seth Blackley -- Chief Executive Officer

John Johnson -- Chief Financial Officer

Richard Close -- Canaccord Genuity -- Analyst

Ryan Daniels -- William Blair -- Analyst

Anne Samuel -- J.P. Morgan -- Analyst

Charles Rhyee -- Cowen and Company -- Analyst

Jessica Tassan -- Piper Sandler -- Analyst

David Larsen -- BTIG -- Analyst

Sandy Draper -- Guggenheim Securities -- Analyst

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