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DATE
Aug. 13, 2025 at 5 p.m. ET
CALL PARTICIPANTS
Chief Executive Officer — Daniel Virnich
Chief Financial Officer — Rob Carter
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TAKEAWAYS
Revenue--The Oncology Institute(TOI -0.24%) reported continued sequential growth expected in Q3 and Q4 2025 due to new risk contracts and pharmacy expansion.
Pharmacy revenue-- $62.6 million in pharmacy revenue for Q2 2025, up 41% year-over-year and 27% sequentially, driven by increases in both capitated and fee-for-service lives.
Patient services revenue-- $55.9 million for Q2 2025, accounting for 47% of total revenue, up 7% year-over-year.
Gross profit-- Gross profit was $17.5 million for Q2 2025, increasing 34% year-over-year and 1.5% sequentially; gross margin was 14.6% for Q2 2025, up 140 basis points year-over-year, but down 190 basis points sequentially due to a prior-quarter one-time rebate impact.
SG&A expense-- $26.9 million in SG&A for Q2 2025, or a 12% decrease year-over-year after normalizing for a one-time $2.4 million write-off related to outsourced clinical trials.
Operating loss-- Loss from operations was $11.2 million for Q2 2025.
Adjusted EBITDA-- Adjusted EBITDA loss of $4.1 million for Q2 2025, an improvement from negative $8.7 million in Q2 2024 and a key step toward anticipated positive adjusted EBITDA in Q4.
Free cash flow-- Free cash flow was negative $14.6 million for the first half of 2025.
Value-based contracts-- Over 50,000 new capitated lives added in Nevada and California in Q2 2025, with an additional 49,000 Medicaid patient lives secured in Nevada starting July 1, 2025.
Florida capitation expansion-- Verbal agreement to expand an Elevance partnership to cover over 40,000 additional Medicare Advantage lives in two new Florida counties, with the contract expansion starting in April, doubling the payer relationship in that state.
Total Medicare Advantage lives under capitation (Florida)-- Expected to exceed 100,000 Medicare Advantage lives under capitation in Florida by year-end 2025.
Guidance-- Full-year 2025 revenue (GAAP) projected at $460 million to $480 million, with management indicating a likely result near the high end; adjusted EBITDA loss guidance between $17 million and $8 million for the full year, with current progress trending toward the midpoint.
Pharmacy growth outlook-- Forecasted pharmacy growth of over 35% for the full year 2025, enabled by new locations and reduced prescription leakage to outside pharmacies.
AI initiatives-- Three AI-enabled projects launching in Q3 for revenue cycle management, prior authorization, and call center operations targeting both performance and cost improvements.
Leadership changes-- Kristen England appointed as Chief Administrative Officer, and Anne McGeorge elected as new board chair following the retirement of Richard Barish.
SUMMARY
For fiscal Q2 2025 (ended June 30, 2025), management highlighted a substantial shift toward risk-based contracting in Medicare Advantage and Medicaid, with accelerated capitation growth outside California and the adoption of a fully delegated risk model. The scalable platform’s improved operating leverage supports future profitability as SG&A shrinks as a percentage of revenue, reaching 22% of total revenue in Q2 2025—a 580 basis point reduction year over year. Margin expansion is enabled by scaling in retail and specialty pharmacy, discipline in clinical payroll, and technology investments in AI-driven operational functions. Growth in new capitated patient lives in Nevada and Florida will begin impacting revenue in upcoming quarters, with revenue recognition for the Florida Elevance contract expansion expected to start in Q4 2025, supported by exclusivity wins and contractual expansions. The shift in revenue mix, management’s disciplined cost control, and ongoing pharmacy growth form the core thesis underpinning the positive full-year guidance.
Rob Carter stated, "SG&A represented 22% of total revenue, a 580 basis point reduction year over year," reflecting improved operating leverage as the business scales.
Daniel Virnich confirmed, "We anticipate these efforts will continue to gain momentum through the rest of the year and that we remain on track to deliver adjusted EBITDA positivity in Q4 2025."
The company’s fully delegated model allows control of utilization management, network design, and claims adjudication for managed populations, cited as the foundation for value-based expansion into new markets.
Contract launches in Florida and Nevada in 2025 feature higher per-member revenue, attributed to increased utilization rates outside California, which management identifies as a source of future earnings growth.
Gross margin pressure on new capitation contracts in Q2 2025 is expected to ease as patients transition to the company’s care model, with management stating margins should "pick up over the next three months" following continuity of care periods for new capitation contracts launched in March within the Florida Oncology Network.
Pharmacy margin improvements are attributed to increased scale, improved drug procurement, and higher rebates—specifically in Part D oral and self-injectable specialty medications, not primarily in Part B-infused drugs.
INDUSTRY GLOSSARY
Capitation: A payment arrangement in which a provider receives a set fee per enrolled patient for a defined period, covering specified medical services, regardless of the actual number of services provided.
Fully delegated model: A risk-sharing approach in which a provider assumes responsibility for managing network design, utilization management, and claims adjudication within a defined risk contract.
MSO (Management Services Organization): An entity that provides non-clinical administrative services to healthcare practices, often enabling network expansion and operational efficiencies under value-based care models.
Medicare Advantage: A private insurance alternative to traditional Medicare, typically involving risk-based capitated payment structures to providers such as The Oncology Institute.
Full Conference Call Transcript
Daniel Virnich: I'm pleased to report another strong quarter of performance for The Oncology Institute on our path to profitability driven by the contributions of our over 650 outstanding clinicians and teammates. The strong momentum we saw in the first quarter continued into the second quarter with year-over-year revenue growth of more than 20%. Our second quarter revenue of $120 million was driven by monthly records set in our pharmacy business, as well as 10% year-over-year growth in our fee-for-service business driven by strong organic growth performance in Florida and Oregon. Our value-based contract pipeline remains equally strong, with contracts effective in Q2 adding over 50,000 capitated lives in Nevada and California.
We anticipate new value-based partnerships to continue strong momentum in the second half of the year through several new contracts, which I will provide more detail on shortly. At this point in the year, we remain confident in achieving positive adjusted EBITDA in the fourth quarter. Adjusted EBITDA loss of $4.1 million in Q2 represents a $4.6 million improvement compared to the same quarter last year, reducing the EBITDA loss by more than half. This was primarily the result of organic fee-for-service and pharmacy revenue growth discipline in clinical payroll and SG&A across higher volumes, as well as improving drug margins across IV and pharmacy as The Oncology Institute leverages its increased buying power and distributor relationships.
Turning first to our patient service business, we delivered several new capitated contract wins and expansions in the second quarter and continue to work through a robust pipeline of future opportunities which will go effective in Q3 and Q4. In addition to the two contracts, which went effective in Q2, in Nevada and California, on July 1, we went effective on an expanded capitation relationship with Silver Summit Health Plan in Nevada to serve all of their Medicaid patients in Clark County, adding an additional 49,000 patient lives to this market. The integration is underway and tracking according to plan.
Additionally, in the quarter, we received exclusivity on a capitation contract for another key Optum region in California which we attribute to our high-quality outcomes and ongoing strength of this important partnership. Finally, we have reached a verbal agreement on the expansion of our existing fully delegated capitated partnership in Florida with an Elevance health plan into two new counties in Central Florida starting in April, which will add over 40,000 additional Medicare Advantage lives, more than doubling our current relationship with this payer and bringing our total Medicare Advantage lives under capitation in the Florida market across all payers to over 100,000.
This contract expansion will allow us to increase utilization of the existing clinic investments The Oncology Institute has made in the state without adding significant SG&A and further validates the compelling value proposition of The Oncology Institute's fully delegated model in Florida, where we are now capable of delivering high-quality, coordinated cancer care across our hybrid employed clinic and MSO model. As a reminder, our fully delegated offering gives The Oncology Institute control over utilization management, network design, and claims adjudication for the patients that we serve. We believe this will be our primary model of delivering value-based care in markets outside of California where we will work more directly with health plans and risk arrangements.
This increases our ability to not just deliver outstanding quality care and utilization improvement, but also enables access to ancillary services, such as pharmacy and clinical trials for our MSO practice partners which will drive value for them as well as The Oncology Institute. As we look at the remainder of 2025 and beyond, we see opportunity in nearly every market where we operate to add new capitated relationships or expand upon existing partnerships. In regards to our pharmacy business, we experienced impressive growth of over 40% in the quarter versus 2024. We are currently forecasting that our pharmacy will grow over 35% for the full year versus prior.
The primary drivers of this impressive growth are an increase in patient volumes leading to additional fill opportunities, as well as a reduction in leakage of prescriptions written by The Oncology Institute providers to outside pharmacies through operational discipline. We are expecting an additional The Oncology Institute pharmacy location to open in Florida in the second half of this year, which will help fill both Part B and Part D medications where appropriate to our MSO affiliate practices. This would drive down the unit cost of medications where The Oncology Institute has risk and offer a convenient alternative for our MSO providers to fill Part D medications where appropriate. Now I would like to turn to leadership and culture.
On our last call, we shared the addition of Dr. Jeff Langsam, our new Chief Clinical Officer, who is focused on leading our efforts around therapeutics, utilization management, and MSO practice engagement. This is the core of our value proposition at The Oncology Institute and will enable scalability of our delegated model across geographies, as well as unlock tremendous value for The Oncology Institute and our payer partners. I'm also pleased to announce that Kristen England joined us in July as The Oncology Institute's new Chief Administrative Officer. Ms. England brings over two decades of leadership experience in care management and operations, most recently serving as a senior executive within McKesson's US Oncology Network.
She will be overseeing our enterprise central business operations and technology strategy. Her role will be instrumental in driving our transformation into a technology and AI-enabled care delivery organization. This will not only drive a better patient and physician experience but further reduce OpEx as a percent of revenue as we grow driving margin and profitability. We are launching three AI enablement efforts in Q3 to make meaningful changes in performance and cost for revenue cycle management, prior authorization services, and our patient call center. Lastly, our current chairman, Richard Barish, has decided to retire and will be stepping down effective August 12.
Richard has been an incredible mentor for the management team and we thank him for his steady leadership of our board through our first years as a public company. I'm very pleased to announce that the board has voted unanimously to elect Anne McGeorge as our new chair. Anne has been a The Oncology Institute board member and chair of our audit committee since we went public in 2021. Anne has a wealth of public and private company experience as both a senior executive and board member. She was the former national managing partner of healthcare for Grant Thornton, and prior to that, a partner at Deloitte.
We are thrilled that Anne has been promoted into her new role and look forward to continuing to build on the success of The Oncology Institute under her mentorship. I'll now turn the call over to our Chief Financial Officer, Rob Carter, to cover the second quarter financials in more detail. Rob?
Rob Carter: Thanks, Dan. Good afternoon, everyone. I want to echo Dan's enthusiasm about our solid second quarter results. In the quarter, we've seen continued momentum across our business, demonstrated margin expansion, and improved working capital, all while making meaningful progress on achieving adjusted EBITDA and free cash flow positivity by year-end. I'll start today with a review of the Q2 results and then close my prepared remarks by reviewing our financial outlook. Consolidated revenue of $119.8 million increased 21.5% compared to 2024. Patient services revenue, which represents 47% of total revenue this quarter, was $55.9 million.
This growth represents a 7% increase compared to a year ago, driven by fee-for-service revenue, and a 5% sequential increase driven by CAF and fee-for-service revenue. Pharmacy revenue of $62.6 million increased 41% compared to Q2 of last year and 27% sequentially, and that represents 52% of total revenue. This strong growth was driven by increases in both our capitated and fee-for-service lives and improved performance of our retail and MID pharmacies. Total trials and other revenue was $1.3 million in the quarter. Recall that we outsourced our clinical trials business to Helios in the middle of the second quarter.
Moving down the P&L, our gross profit in the quarter of $17.5 million increased 34% year over year and 1.5% sequentially. Gross margin of 14.6% increased 140 basis points year over year driven by expansion in our dispensary gross margin, partially offset by a slight decline in patient services gross margin. Within patient services, The Oncology Institute saw a decrease in margin on capitation revenue, and an increase in margin on fee-for-service revenue.
As a reminder, when a new capitation contract begins, as several did in Q2 2025, we tend to experience lower margin as The Oncology Institute generates value in our risk business through discrete and active management of patient populations, which includes utilization management, formulary, and steerage activities, which take time to operationalize and mature. As a result, we expect margin in our capitation business to improve over time as these new populations are conformed to The Oncology Institute's medical model. Meanwhile, we are seeing better profitability in the fee-for-service business, driven by increased provider utilization on higher patient volumes and improving drug margin performance due to the increasing scale and sophistication of The Oncology Institute's drug inventory management system.
On a sequential basis, you may note that gross margin declined 190 basis points from Q1. Recall that last quarter benefited from a one-time rebate from a drug supplier partner. If not for that, Q2 would have increased sequentially. SG&A of $26.9 million in 2025 decreased from $27.9 million in a similar period last year, representing a 3.5% decrease. SG&A includes a $2.4 million one-time write-off of net assets related to outsourcing our clinical trials business, as mentioned earlier, which was added back to adjusted EBITDA in the quarter. Normalizing for this one-time item, SG&A would have decreased 12% year over year. The operating leverage in our platform represents another lever pull on our path to profitability.
SG&A represented 22% of total revenue, a 580 basis point reduction year over year. We think there's further leverage in the model with increased scale, as well as the adoption of AI enablement we noted on our first quarter call. We are planning to launch AI pilots around prior auth, patient advocacy, and a next-gen call center in the third quarter and we'll keep you posted on their progress. Loss from operations was $11.2 million, an improvement from a $16.4 million loss in 2024. Adjusted EBITDA was negative $4.1 million, compared favorably to negative $8.7 million in 2024. Moving on to the balance sheet and cash flow.
As of the end of Q2 2025, our cash and cash equivalents were $30.3 million. Cash flow from operations for the first half of 2025 was a loss of $15.2 million, representing a 52% improvement in 2024. Free cash flow was negative $14.6 million for the first six months ended June 30, 2025, a reduction of 54.1% from the same quarter in the prior year. Integral to our management of rising drug costs is maximizing our drug rebates through strategic purchasing as well as more active formulary management. The net effect is improved drug margins, a temporary use of cash, and an increase to our rebate AR as payment of rebates vary by manufacturer generally extends for multiple subsequent quarters.
Additionally, with multiple months of consecutive increases to our pharmacy revenue, pharmacy AR has also increased. All positive indicators for where the business is trending but as such, we expect to end the year at the lower end of free cash flow guidance. Finally, turning to guidance. For the full year, we are reiterating our full-year 2025 outlook. Specifically, we expect revenue of $460 million to $480 million. Given the growth we've seen in the first half of the year, we believe that we will reach the high end of that range. Adjusted EBITDA of a loss of $17 million to a loss of $8 million.
At this point in the year, we have a solid line of sight to the midpoint of that range. And our Florida oncology networks are just starting to ramp. I'd also like to take a moment to talk about some of the assumptions that support second-half work. In terms of revenue, we expect quarterly revenue to continue to increase sequentially in Q3 and Q4. Driving this is the initiation of new risk contracts, particularly our delegated network deal in Florida, continued growth in our pharmacy business, and a substantial positive year-over-year organic fee-for-service performance in Florida and Oregon.
As we think about gross margin in the back half of the year, we anticipate sequential improvement as we further optimize risk margins, partially offset by the start of new contracts, and benefit from natural expansion in drug pricing spread through year-end and continue our process of optimizing our drug supply chain and clinical formulary management. Specifically, our increased scale allows us to work more effectively with our drug distributor and manufacturer partners and our investments in personnel and clinical technology allow us to be more active and precise in managing patient utilization and drug formulary. For adjusted EBITDA, we anticipate further sequential improvement. In Q3, we expect adjusted EBITDA of negative $2.5 million to negative $3.5 million.
And as Dan noted, we are on track to show positive results in Q4. With that, I'll turn the call back over to Dan for closing comments. Thanks, Rob. In closing, in the second quarter, we delivered solid top-line growth in all lines of our business, while driving meaningful year-over-year reduction in EBITDA loss. We made meaningful progress expanding our capitated partnerships, saw strong growth in our pharmacy and fee-for-service business, reduced SG&A over 12% from the same quarter prior year, and set a path for further efficiencies in our cost structure as we scale through technology enablement.
We anticipate these efforts will continue to gain momentum through the rest of the year and remain on track to deliver adjusted EBITDA positivity in Q4. Operator, at this point, let's open the call to questions.
Operator: Thank you. Ladies and gentlemen, we will now be conducting a question and answer session. If you would like to ask a question, please press star and one on the telephone keypad. You may press star and 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Ladies and gentlemen, we will wait for a moment while we poll for questions. Our first question comes from David Larsen with BTIG. Please go ahead.
David Larsen: Hey, congratulations on the very good quarter. Can you talk a little bit about the dispensing gross margin? That looked like it was up a lot year over year, maybe almost 600 basis points. Just any thoughts on what's driving that? Are there any specific drugs? Is it Part B or is it Part D? Just any color there will be very helpful. Thank you.
Rob Carter: Hey, Dave. It's Rob. Yeah. So Q2 of last year was the worst impact from the DARP callback. And so that's the quarter specifically where we took a 2023 date of service reduction. And so dispensary margin in 2024 was, I would say, artificially low because of that. Even normalizing for that, though, you're looking at double-digit growth year over year. That actually has a lot to do with the way in which we're procuring drugs at this point. Our scale at this point is providing new opportunities for us, including incremental rebates, as well as some other pricing considerations that's just yielding better rebates and margin overall.
David Larsen: Are these infused oncology medications dispensed in the office as part of, like, Part B as in boy?
Daniel Virnich: No. Hey, Dave. It's Dan right now. We're talking about Part D medication, so primarily oral specialty or self-injectables where they can be compliantly given in a Part D.
David Larsen: Okay. Great. And then just any thoughts on the potential impact for drug pricing reform, the Inflation Reduction Act, most favored nation comments. Just any thoughts on how that would impact your business, if at all.
Daniel Virnich: Yeah. We continue to follow that very closely, and we continue to believe that it's going to be net positive for The Oncology Institute. For a couple of reasons. One, reduction in pricing on our capitated business is obviously favorable for capitated margins, and for our patients. And then on the fee-for-service side of the house, which is what most practices in the country are doing exclusively, we believe there will be some sort of make whole through rebates or another mechanism to help keep those practices afloat. So in totality, those two forces will be net positive for The Oncology Institute.
David Larsen: Okay. And then just, like, Option Care as an example, they've been talking about certain drugs like Stelera. There's some changes in price for that medication. It's not even an oncology drug. I think it's more like in the gut. But that one drug changes in pricing for that one drug is having a significant impact on Option Care's EBITDA. Is there anything like that in your book of business that investors should be aware of as we get to the back half of the year or into 2026? Are there any one or two or three drugs that might be going, like, biosimilar with one manufacturer? Just any thoughts there would be helpful.
Rob Carter: No. Not that we foresee. You've looked very extensively at our current drug portfolio. I think oncology benefits from the fact that within any given class, there's multiple different options that can be clinically equivalent, including biosimilar or non, as well as other combinations. And within that, we see no situation where we have a single drug that is placing substantial risk on The Oncology Institute's portfolio related to that sort of situation.
David Larsen: And then just one more quick one for me before I hop in the queue. Can you just talk a little bit more about the pressure on the gross patient service margin? Like, how much of that gross profit is, we'll call it, capitated versus how much is fee-for-service? And then, you know, how much time will it take for that margin to kind of pick back up? Thank you.
Daniel Virnich: Yeah. It's primarily related to cap margin. And so we had a pretty sizable contract launch in March. This is in our Florida Oncology Network. We are barely through the continuity of care period, where patients are remaining with the existing provider before moving over to The Oncology Institute. And so it wasn't a surprise at all. Yeah. It's at this point where we expect to see the patients being transferred over to us, the margin will correspond and pick up over the next three months. So no surprise there. And that's one of the main catalysts for future margin progression is these new cap contracts maturing as they age.
David Larsen: So I think what I heard you say is you are now responsible for those members. You're collecting the PMPM rate. But they're getting their care where they had been originally and they haven't yet transferred their care into The Oncology Institute clinics. And once they do that, then we'll see the margins improve. Did I hear that correctly?
Daniel Virnich: That's right.
David Larsen: Okay. I got a bunch more, but I'm gonna hop back in the queue. Thanks.
Rob Carter: Thanks, Ed.
Operator: Thank you. Our next question comes from Yuan Zhi with B. Riley Securities. Please go ahead.
Yuan Zhi: Thank you for taking our questions, and congrats on a good quarter. I got a couple. So first, one of your value-based care peers experienced the highest level of oncology spend in history and continue to forecast a high level of spend in 2025. What was your observation in Q2 2025? And will you be able to continue managing the cost at a relatively low level in the second half of 2025?
Daniel Virnich: Hi, Yuan. It's Dan. Thanks for the great question. Yeah. I mean, Q2 2025 was no surprise in the sense that we saw another year of huge increases in drug cost trend, driven by again, overutilization as well as just an increase in costs overall for procurement. So, that benefits The Oncology Institute in the sense that there is more opportunity for us to provide value to our payer partners. We, as a whole, have seen our MLR remain relatively stable. And, again, that's due to different things. One is our ability to narrow networks to drive care to lower-cost sites of care.
And the high degree of control that our program provides over ensuring NCCN compliance, but also value-based therapeutic decision-making. So while the overall, oncology-wide cost trend went up, again, that provides opportunity for us to engage and provide more value to payer partners, and then internally, when we look at our drug cost trend, it's been stable.
Yuan Zhi: Got it. Can you quickly comment on the timeline of this opportunity with Elevance in Florida? I think it starts in April. Can you recognize the revenue in April, or is it more in the first half of 2026?
Daniel Virnich: So we are tracking towards Q4 at this point, and that's when we would start recognizing revenue.
Yuan Zhi: Got it. And one last question from me. Maybe related to the prior question from David, that some PBMs are shifting infusion drugs from clinic to their own pharmacy as a way to shift the margin. Basically, from provider-administered drugs to from medical benefits to pharmacy benefit coverage. Did you notice that and will that be a net impact to you or any oncology infusion driver?
Daniel Virnich: Yeah. Are you referencing, you said PBMs is the game. Are you saying is that an opportunity for The Oncology Institute to fill under pharmacy benefit versus Part B as a way to manage our risk or am I misinterpreting the question?
Yuan Zhi: Yeah. So some of the PBMs are shifting infusion drugs, which have provider-administered and the medical benefits, to their own pharmacy benefit coverage. So yeah, it could be to your pharmacy, but it could also be, for example, CVS pharmacy out there. I'm just curious. Have you noticed such a trend, and will that impact you or have a negative impact on you?
Daniel Virnich: Yeah. So almost without exception, our risk contracts are Part B as in boy, risk only. So shifting drugs from Part B to Part D would shift them out of risk. So that would remove cost that was at risk to The Oncology Institute, so it would be net positive for us. Assuming you could compliantly fill a medication under Part D in a PBM drug that change.
Yuan Zhi: Got it. Thank you for taking our questions.
Daniel Virnich: Thanks.
Operator: Thank you. Our next question comes from Robert LeBoyer with NOBLE Capital Markets.
Robert LeBoyer: Congratulations on a very nice quarter. I had a question about the new patients that are coming on from the contracts you had previously announced, as well as the ones that you mentioned for the second half.
And I was wondering if you could give any details about the ones that are online and getting the monthly payment compared with those left to go from the first half or contract signed in the first half, and the ones that will be coming on in the second half just to get an idea of the additional patient lives that'll be added going forward and who are the start-ups at the higher cost compared with who's going to be in the continuing care at the slightly improved costs.
Daniel Virnich: Hey, Robert. It's Dan. Thanks for the great question. So yeah. So our growth in 2025 is primarily occurring outside of California. It's primarily Medicare Advantage, but then we also just, as we discussed, started a new Medicaid risk contract outside of California. Because of the nature of utilization outside of California being much higher, across product lines, these are at higher utilization, therefore, higher PMPMs still generating substantial savings for our payer partners. So you would expect on a per-member basis higher revenue contribution.
Robert LeBoyer: Okay. Great. And you mentioned Florida and the expansion there. Is there any percentages of the new people compared with continuing patients or any sense of how much expansion in the number of lives that there will be in Florida or in the entire network?
Daniel Virnich: Yeah. I mean, just broadly speaking, we project that Florida will end the year for The Oncology Institute with around 100,000 Medicare Advantage lives for Medicare Advantage, that we're taking risk on. We have some non-Medicare Advantage risk in that market as well. Versus current, is about half that. So that's a substantial amount of growth just within Florida. If you look at the total number of lives that The Oncology Institute has under risk right now, we're right around 1.9 million. So that 50,000 in Florida that we're gonna see is about 2.5% on our total portfolio roughly.
Robert LeBoyer: Great. Thank you for that detail.
Daniel Virnich: Thank you.
Operator: Our next question is a follow-up from David Larsen with BTIG. Please go ahead.
David Larsen: Can you talk a little bit more about your, you used the phrase fully delegated risk arrangements, like what does that mean? Are you taking full risk for all services being provided to those members? Including non-oncology care?
Daniel Virnich: No. Great question, David. Thanks for bringing it up. Now when we say fully delegated, what we are saying specifically is we are taking risk for Part B for oncology, medical and radiation oncology, spend, but the delegation part of that refers to The Oncology Institute is now given authority by our payer partner for three services: utilization management, not just for The Oncology Institute employed positions, but on behalf of the physicians in our network outside of our employed four walls, so the independent oncologists, who are providing care for those patients. Two is network design meaning we work closely with our payer partners to get high-cost centers out of the network to show poor clinical care, poor utilization.
And, align more closely with providers that have a value-based orientation. But, ultimately, that contract exists between The Oncology Institute and the independent provider. Not the payer and the provider. And then three, claims adjudication. So The Oncology Institute is getting prepaid capitation for the risk that we're taking, and then we are paying the claims for those non-The Oncology Institute providers in the network. So it gives us a great degree of control over oncology spend across broader populations. It allows the faster, more cash-efficient scalability of our MSO model.
And as we develop that MSO, it allows us to provide value to those independent practices and The Oncology Institute engaging with them not just on value-based care, but also engagement with our pharmacy services and clinical trials support. So it's a much more robust model in terms of being able to provide scale value-based care than the legacy model in California where we simply have a narrow network The Oncology Institute is the only oncology provider in the network. And we're not delegated. We're just given risk in managing our four walls. And frankly, better for patients and our payer partners.
David Larsen: So what I'm hearing is you've been doing a really good job for the plans, so they're giving you more lives and more responsibility to continue to manage the care for those lives. And you also have the power of prior auth, I'm assuming. And the ability to narrow the network and influence formulary. So have a high level of control, more control over the care that will be delivered over this expanded base. Right?
Daniel Virnich: That's absolutely right.
David Larsen: Okay. So it's not like an Agilent, for example, where that stock has been under enormous pressure because they're bearing risk for everything in the world. You're focused in on oncology. Where you know how to basically drive margin and improve clinical care. Okay. Thanks very much.
Daniel Virnich: Yeah. Just sorry. Just one last comment on that. Yeah. We're taking the exact same risk. We're just giving additional tools to help manage that risk and drive performance.
David Larsen: Okay. Thank you. Thanks very much. I'll hop back in the queue.
Rob Carter: Thank you.
Operator: At this time, there are no further questions. The conference of The Oncology Institute has now concluded. Thank you for your participation. You may now disconnect your lines. Thank you.