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Date

Wednesday, May 6, 2026 at 4:30 p.m. ET

Call participants

  • Executive Chair — Ronald Williams
  • Chief Financial Officer — Jeffrey Alan Schwaneke
  • Operator

Takeaways

  • Medicare Advantage membership -- 426,000 at quarter-end, down from 491,000 in the prior-year period due to measured growth and market exits.
  • ACO REACH membership -- 110,000 for the quarter, a decrease from 114,000 in the same period the previous year.
  • Revenue -- $1.42 billion reported, versus $1.53 billion in the comparable prior-year quarter; membership decline was partially offset by higher risk scores, CMS benchmark benefit, and new payer contracting.
  • Medical margin -- $149 million versus $128 million in the same period of 2025, exceeding the high end of company guidance due to improved revenue and lower expenses.
  • Adjusted EBITDA -- $54 million for the quarter, up from $21 million a year ago; results reflect higher medical margin, expense discipline, and favorable ACO REACH results.
  • ACO REACH adjusted EBITDA -- $27 million, $5 million above expectations, attributed to CMS removal of suspect urinary catheter and skin substitute claims for 2025.
  • Risk score uplift -- 1.5% increase in risk scores estimated for the full year, compared to the prior 0.4% estimate, both figures net of V28 impact.
  • Medical cost trend -- 6.2% full-year 2025 estimate (down from earlier 6.5% guidance); 7.4% recorded for this quarter; full-year 2026 outlook remains at 7% due to early-year limited paid claims visibility and prudent reserving.
  • New full-risk payer contract -- Signed in an existing market, modeled at approximately $200 million revenue and breakeven margin for the year; anticipated to deliver multi-year margin improvement.
  • OpEx efficiencies -- AI-driven process improvements have early, limited impact on operating expense line; greater benefit accruing to medical cost and revenue lines, with value expected to show later in health care cycles.
  • Revised full-year 2026 guidance -- Revenue of $5.7 billion, medical margin of $375 million, and adjusted EBITDA of $25 million at the guidance midpoint.
  • Q2 2026 outlook -- Expected revenue of $1.45 billion, medical margin of $123 million, and adjusted EBITDA of $20 million at the midpoint of guidance.
  • Quality initiatives -- Less than 5% of heart failure diagnoses now occur in inpatient settings, down from 25%, reflecting earlier identification and intervention under the CHF pathway, now active in 90% of company markets.
  • Clinical program expansion -- COPD and dementia care pathways expected to be live in 50%-70% of markets by end of Q2 2026, with potential to contribute to 2026 profitability if claims data materializes within the year.
  • Reverse stock split -- Executed at quarter-end; additional details available on investor website.
  • Year-end cash position -- Expected to be at least $125 million, with $47 million in off-balance-sheet cash held by ACO entities.
  • 2027 CMS rate notice -- Company’s starting point aligned with the 5.33% effective growth rate; minimal exposure to unlinked chart reviews, and plans to offset the 1.12% normalization factor.

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Risks

  • Jeffrey Alan Schwaneke noted, "Given we have limited paid claims visibility for 2026, we recorded a cost trend of 7.4% for the quarter," signaling cautious reserving due to data constraints early in the year.
  • Exposure to escalated Part B and inpatient costs continues, with trends described as consistent with sector-wide pressures.
  • The company continues to prudently reserve for Part D costs due to limited data, stating, "we have limited information until final reconciliation in the third quarter of 2026."
  • Management is "not here yet" on resuming offensive new market growth, focusing on current pipeline execution and in-market growth amid dynamic industry conditions.

Summary

agilon health (AGL +4.15%) reported quarterly results that included a sequential decline in Medicare Advantage and ACO REACH membership, but delivered upside in medical margin and adjusted EBITDA, driven by improved risk scores, cost management, and a new full-risk contract. Company leadership has revised full-year 2026 guidance upward, reflecting stronger-than-expected operational execution in clinical programs, payer contracting, and advanced data pipeline utilization. Enhanced clinical pathways—particularly congestive heart failure, COPD, and dementia—are scaling across the network, with measurable quality and cost outcomes beginning to materialize. The transition to a new CEO, finalized 2026 payer contracts, and favorable positioning for forthcoming regulatory changes point to strategic continuity and a focus on margin durability.

  • Schwaneke emphasized, "the $5 million benefit that we saw in the quarter was really related to 2025 performance," for ACO REACH, clarifying the source and timing of upside in that segment.
  • The impact of improved payer contracting is fully flowing through Q1, with the CFO confirming, "Those contracts were executed, so that benefit is flowing through in the first quarter."
  • Management stated that company exposure to unlinked chart review risk is low, with Schwaneke noting, "We do not believe we have material exposure to disallowed sources of diagnosis given our model’s design."
  • The company plans further disciplinary payer contracting for 2027, targeting lowered Part D exposure, increased capture corridors, and carving out items beyond control, such as supplemental benefits.

Industry glossary

  • ACO REACH: Accountable Care Organization Realizing Equity, Access, and Community Health, a CMS model aligning payment and delivery for traditional Medicare.
  • MAO-004 and MMR data: Data files sent from CMS to Medicare Advantage Organizations used for risk adjustment and payment reconciliation.
  • CHF (Congestive Heart Failure) pathway: A structured clinical protocol deployed for earlier detection and management of heart failure within agilon's physician network.
  • Part D: Medicare prescription drug benefit, with associated medical costs and reserving implications for managed care organizations.
  • V28 impact: Refers to Version 28 of the CMS-HCC risk adjustment model, impacting revenue and risk scoring for Medicare Advantage plans.

Full Conference Call Transcript

Ronald Williams: Thank you, Evan, and good afternoon, everyone. In 2026, we remain focused on disciplined execution and building a durable foundation for sustainable long-term performance. We are advancing the same strategy and mission—empowering best-in-class physicians through long-term partnerships to deliver high-quality, cost-effective patient care that delivers value for all of our stakeholders. In 2025, we made meaningful progress across all of our initiatives, which has translated into strong first quarter performance and increased expectations for our full-year 2026 outlook. As we announced last week, we are excited to welcome Tim O'Rourke as our new CEO beginning tomorrow, May 7, 2026.

Tim brings significant experience across the payer and provider space with a deep understanding of what is needed to succeed in value-based care. Tim is fully committed to furthering our mission and strategy to continue driving improvement in Agilon Health, Inc.'s performance for all of our stakeholders. In the first quarter, we delivered results that were above our expectations. Our performance demonstrates operational discipline, the strength of our long-term physician partnerships, and early benefits from the strategic decisions we made last year.

Operationally, we are building upon several key initiatives you have heard me discuss before: the enhanced data pipeline and improved actuarial visibility enabling earlier identification and validation of trends; continued advancement of our clinical and quality programs, with our congestive heart failure program now scaled broadly across the network; and ongoing execution of disciplined payer contracting and operating expense optimization focused on profitability and sustainability. Each of these efforts is designed to improve predictability and alignment with our physician partners, reduce variability, and support durable margin expansion over time.

With the enhanced data pipeline, we now have more timely direct payer data feeds with validated and highly correlated member-level clinical and claims data, as well as member-level risk scores, on approximately 85% of our members. The increased visibility and alignment of our financial and operational data enable us to more quickly identify and drive improvements. As Jeffrey Alan Schwaneke will discuss in more detail, this has enabled us to increase our revenue and adjusted EBITDA expectations in part due to better progress on the validation of our burden of illness initiatives. Going forward, we will continue to enhance the data pipeline to support clinically actionable insights, as well as improved network design and care model innovation.

In combination with our physician reviewers, we are integrating generative AI-based insights directly into clinical workflows to drive more informed physician decision-making at the point of care, and we are seeing encouraging results. This capability is helping physicians intervene at the most appropriate points of care earlier. We are continuing to increase our focus on high-risk patients, an increasingly important focus for all constituents in the Medicare space. We have grown the richness of our member-level data and are now aligning it better with PCP actions. This is helping physicians improve the quality of their intervention with higher-risk patients, identifying gaps in care, and leveraging industry-standard guideline-directed clinical pathways.

Greater access to timely and high-integrity data has also improved the quality of our forecasting, as demonstrated in the ongoing development of our 2025 cost trends. We have favorable medical cost trend development from 2025 and are seeing slight moderation within inpatient census so far in 2026. With that said, given it is early in the year, we believe it remains prudent to maintain our net cost trend outlook of approximately 7% for full-year 2026. Our full-risk total care model is delivering clinical and quality outcomes and driving strong patient and PCP net promoter scores while demonstrating the ability to effectively manage utilization and medical cost trend.

Next, let me discuss clinical and quality programs, focusing primarily on our clinical execution which is a core driver for our model. As a reminder, the congestive heart failure, or CHF, program remains the most mature pathway deployed across 90% of our markets. Let me start with why this program is important to patients. Approximately 40% to 50% of patients nationally are diagnosed at the time of first admission to the hospital. That means missed opportunities for earlier detection, leading to less than ideal care and unnecessary hospital costs. The second thing we know about heart failure is that less than 10% of patients are actually on the right therapies.

Through a proactive and guideline-directed approach, our physician partners have been able to shift CHF diagnosis to earlier in the care continuum, with inpatient first diagnosis rates improving from approximately 25% to less than 5%. So less than 5% of heart failure diagnoses are now in the inpatient setting. Additionally, we are expanding our pharmacy-integrated management approach for heart failure patients across the network and observing positive trends in guideline-directed therapy rates, which we expect to improve functional outcomes for patients and prevent downstream complications of disease that lead to admissions.

Current results reflect the combination of our early detection and diagnosis, supported by in-office or increased access to diagnostics, structured and physician-supported clinical protocols, and ongoing patient engagement, including virtual pharmacy support. These pathways are increasingly informed by AI-driven risk stratification and early detection models, enabling more proactive intervention with this high-risk population. We plan to utilize this evidence-based approach by rapidly scaling COPD and broader lung health pathways through 2026. The initial focus for these programs will be earlier identification of COPD, expanded lung cancer screenings, and increased use of advanced diagnostics by our physician groups, each of which is designed to drive earlier intervention, improve treatment adherence, or prevent avoidable complications and hospitalizations.

In addition, we are seeing good engagement as we continue to roll out the dementia program in conjunction with our physician partners. Increased health care costs and the burden on caregivers are being driven by the approximately 50% of dementia patients across the broad population that go undiagnosed, increasing both health care costs and the burden on caregivers. We are working with partners to deploy enhanced caregiver models, structured early-stage pathways, and virtual diagnostics. Moving to our quality and STARS performance, Agilon Health, Inc.'s STARS performance is a result of a highly integrated quality operating model that combines data infrastructure, physician engagement, and payer alignment.

Operationally, quality performance starts with our ability to identify care gaps early and deliver actionable insights directly to our physician partners. Because we are working closely with our physician partners, quality measures are embedded into their everyday clinical workflow. Our partners and their care teams have clear visibility into their performance and the actions needed to efficiently close care gaps for their patients. Looking ahead, we expect to see continued opportunity to expand our performance through deeper data integration and earlier intervention, leveraging analytics to identify patients at risk of missing key quality measures earlier in the measurement year.

Ultimately, our approach is about building durable infrastructure that supports physicians in delivering high-quality care that is aligned with key objectives of the Medicare Advantage Program while ensuring performance is accurately measured and rewarded. Now let me move on to ACO REACH. As evidenced in the quarter's results, we continue to demonstrate the strength of our model and the ability to deliver superior performance across both Medicare fee-for-service programs and Medicare Advantage. In addition, we are pleased that CMS took a pragmatic approach to addressing fraudulent claims related to urinary catheter and suspect skin substitute claims for 2025. Finally, we have finalized 2026 payer contracts, which Jeffrey Alan Schwaneke will discuss in a moment.

We are beginning our 2027 payer contracting process, and we plan to take the same disciplined and partnership-oriented approach with our payers, focused on shared profitability and durable margin expansion. In closing, we have had a strong start to 2026 and feel good about the progress we are making. We are seeing it across all areas that matter: payer contracting, burden of illness, clinical and quality initiatives, and cost discipline. First, the work we have done with our physician partners around burden of illness initiatives and clinical pathways is starting to show up more clearly in our clinical results and financial performance.

Second, our AI-enabled technology platform and enhanced data capabilities are deployed in very close proximity to the physician, allowing us to identify opportunities earlier, act faster, and manage performance with greater precision. We are beginning to see the benefits of AI more deeply integrated into both physician and operational workflows. Third, the discipline we applied, particularly around payer contracting and cost structure, is starting to come through. We are raising our outlook for financial performance this year due to the early impact of these initiatives and remain confident in the long-term strength of our unique partnership model. With that, I will turn the call over to Jeffrey Alan Schwaneke to go through the financials.

Jeffrey Alan Schwaneke: Thank you, Ronald, and good afternoon. As Ronald mentioned, we are very pleased that we exceeded our guidance for the quarter and are increasing our expectations for the full year. The positive results and increase to our full-year guidance were driven by the strategic actions we took throughout 2025 and the continued strong work of our physician partners across the country. These include the significant improvement in our data visibility and estimation process, execution of our clinical and quality programs across our network, cost management, and disciplined payer contracting, all of which were focused on improving our operations and creating a strong foundation for durable and predictable performance this year and beyond.

During our call today, I will cover three key areas of our financials. First, I will discuss our financial performance for the first quarter. Second, I will provide an update on cost and macroeconomic trends, including the recently announced final rate notice for 2027. And finally, I will discuss our second quarter and revised full-year 2026 outlook along with key assumptions we have made. Moving to our financial performance for 2026, we exceeded the top end of our guidance range for total revenue, medical margin, and adjusted EBITDA. The performance in the quarter was driven by higher-than-expected revenue from risk adjustment, an additional full-risk contract with a new payer in an existing market, and strong performance in ACO REACH.

Starting with membership, Medicare Advantage membership at the end of the quarter was 426,000, compared to 491,000 in Q1 2025. Our ACO REACH membership for Q1 was 110,000 members, compared to 114,000 in the same period of 2025. As a reminder, Medicare Advantage membership was affected by our measured approach to growth, previously disclosed market exits which were finalized as of 01/01/2026, and payer exits in certain markets which were a result of our discipline and profitability-focused contracting efforts. Additionally, a subset of our members are under care coordination fees. These contracts are primarily net neutral to Agilon Health, Inc. with financial opportunity based upon strong quality and cost performance.

Next, revenue for the first quarter was approximately $1.42 billion compared to $1.53 billion in the same period of 2025. Our year-over-year revenue decrease is driven by the membership decline I just mentioned, partially offset by more constructive rates for 2026 from both the CMS benchmark and favorable payer contracting benefits, as well as increased revenue from higher estimated risk scores from our previous expectations. Revenue for the first quarter was higher than our expectations, driven by the execution of an additional full-risk contract in an existing market and the estimated benefit of higher-than-expected risk scores. Using the enhanced data pipeline, for a meaningful portion of our membership we calculated member-level risk scores for the midyear data period.

This enhanced data is based on claims data as well as MAO-004 and MMR data that our payer partners receive from CMS. These data files are both claims and plan-submitted encounters that are accepted for risk adjustment. As a reminder, we did not have this increased visibility into member-level clinical and claims data as well as member-level risk scores until the pipeline went live at the end of 2025. Our revised estimate for the increase in risk scores over 2025 for the full year is now 1.5%, which is above our previous estimate of 0.4% for the full year 2026, both net of the V28 impact.

This was driven by the improvement in our data and forecasting capabilities as well as the operational process improvements we put in place over the past 18 months. Moving on to medical expense, the cost trends for 2025 continue to develop favorably, further demonstrating our ability to effectively manage medical costs. The full-year 2025 cost trend is now estimated at 6.2%, down from the 6.5% we estimated when we reported our 2025 full-year results. The favorable development for 2025 medical expense was offset by additional reserves related to Part D costs for 2025 which, as a reminder, are recorded net in premium revenue.

Given the lack of data for 2025 Part D costs, we continue to take a prudent approach to Part D reserving as we will not get final reconciliations of the cost typically until the third quarter of this year. Given we have limited paid claims visibility for 2026, we recorded a cost trend of 7.4% for the quarter. I would note that based on our census data, cost trends remain in line with what has been mentioned nationally by our payer partners and others. However, given our limited paid claims visibility early in the year, we took what we believe is a conservative approach in the quarter.

Medical margin for the first quarter was $149 million compared to $128 million in 2025, which exceeded the high end of guidance. This was driven by higher revenue, as I previously discussed, and lower overall medical expenses in the quarter. ACO REACH adjusted EBITDA for the first quarter was $27 million and ahead of our expectations by approximately $5 million. The favorable performance was primarily driven by CMS's removal of fraudulent urinary catheter and suspect skin substitute costs from our 2025 performance and the corresponding benchmark changes. Adjusted EBITDA was $54 million as compared to $21 million in the same period of the prior year.

The favorable overall performance reflects higher medical margin, OpEx discipline, and the favorable ACO REACH performance I previously highlighted. As Ronald mentioned, ACO REACH results underscore our confidence in our model and the potential for driving continued value creation as we look forward to the advancement of both the MSSP and CMS LEAD model in 2027. On the balance sheet, we ended the quarter with [inaudible] in cash and marketable securities and $47 million of off-balance sheet cash held by our ACO entities. Year-end cash position is still expected to be at least $125 million. Last, we executed a reverse stock split at the end of the quarter. Additional details can be found on our investor website.

Now moving to guidance. We are revising our full-year 2026 guide to reflect the strength of the first quarter results, including better-than-expected revenue associated with higher estimated risk scores for the year, and the first quarter performance in ACO REACH. In addition, as previously mentioned, it also includes a new full-risk contract signed in Q1 2026 in an existing market with a new payer.

Our confidence remains rooted in the same key tenets we have previously outlined, including operating execution across clinical and quality programs; improved data visibility and forecasting capabilities related to the enhanced data pipeline; payer contracting improvements, which emphasize profitability for both medical margin and cash flow; and a conservative cost trend assumption supported by factors previously mentioned. Utilizing the midpoint of guidance ranges provided within our earnings release, we now expect revenue of approximately $5.7 billion, medical margin of approximately $375 million in 2026, and adjusted EBITDA of approximately $25 million. As I indicated, while 2025 saw favorable claims development, we continue to be prudent in our reserving and are maintaining our full-year net cost trend outlook of 7%.

Focusing on the second quarter and utilizing the midpoint of guidance ranges, we expect revenue of $1.45 billion, medical margin of $123 million, and adjusted EBITDA of $20 million. I will close by saying that we are very pleased with our first quarter performance, including delivering strong positive adjusted EBITDA. The enhanced data and reserving models are improving our visibility to claims and revenue trends. We have executed on our strategic transformation and continue to drive improved performance across all aspects of the business. As Ronald mentioned, we also remain optimistic about our runway for continued improvement beyond 2026 based on the continued execution across our initiatives and the final 2027 rate notice.

With respect to the final rate notice for 2027, we believe our starting point across our markets is in line with the 5.33% effective growth rate CMS noted, with additional opportunities based on our BOI, quality, and contracting efforts. Based on our model review across the business, we believe we have minimal exposure to unlinked chart reviews, and with respect to the 1.12% normalization factor, I will remind everyone that we have been able to more than offset the V28 hurdle over the past couple of years. Further supporting our potential will be continued discipline around payer contracting, implementation of programs to lower overall medical costs, and further driving operating efficiencies.

The team will remain focused on minimizing risk related to Part D, emphasizing our quality initiatives, and balancing payer priorities with our own profitability. And last, we believe CMS continues to demonstrate their support for full-risk value-based care models focused on clinical and quality programs that drive improved outcomes, reduce cost, and enhance member satisfaction, and, therefore, we remain optimistic about the potential for Agilon Health, Inc. With that, Operator, let us move to the Q&A portion of the call.

Operator: We will now open the call for questions. We will now begin the question and answer session. Please limit yourself to one question and one follow-up. If you would like to ask a question, please press star 1 to raise your hand. To withdraw your question, press star 1 again. We ask that you pick up your handset when asking a question to allow for optimum sound quality. If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question comes from the line of Jailendra Singh with Truist Securities. Your line is now open. Please go ahead.

Jailendra Singh: Thank you, and thanks for taking my questions. I want to ask about ACO REACH EBITDA—kind of nice number there, $26.5 million—but you are maintaining the guidance for full year at $25 million to $30 million for the full year. Why are you not expecting any further contribution for that business for the rest of the year? And then my follow-up: you talked about AI helping you to capture more efficiencies in the provider operational workflow and admin. The efficiencies you are seeing right now—should we think of those as incremental to the OpEx benefit of $35 million you have talked about for 2026, or is that already reflected in your guidance?

Jeffrey Alan Schwaneke: The $5 million benefit that we saw, we increased that in the guide for the year for the REACH program. But the $5 million benefit that we saw in the quarter was really related to 2025 performance, and it was associated with the suspect skin substitutes and the urinary catheters. CMS decided to back those out of the cost for 2025, and so we got a pickup there. It is a little early in the year for us to adjust REACH performance beyond that at this point in time. On AI, I would bifurcate the programs. One is OpEx efficiencies; the other would impact more above the line—medical cost and revenue.

We have mentioned the AI-driven risk stratification, which really looks at medical costs. We also use AI in our suspecting algorithms on the revenue side. So I would say limited early impact on the OpEx line, more significant on both the revenue and medical cost line, with value showing up later in health care cycles.

Operator: Your next question comes from the line of Matthew Dineen Shea with Needham. Your line is now open. Please go ahead.

Matthew Dineen Shea: Nice to hear about the scaling clinical programs. At a conference a couple months ago, you had talked about by end of Q2 expecting to get 50% to 70%+ of markets live on dementia and COPD pathways. Is that still the right way to think about the rollout? And on the financial side, how long does it take to generate benefit from these programs—does scaling COPD and dementia add benefit to 2026 profitability, or is that more of a 2027 benefit?

Jeffrey Alan Schwaneke: I would say yes on the COPD and dementia rollout, and yes again that it could add value in 2026. However, it has to show up in the claims, and that takes time. We initiated the heart failure program a year ago; it is our most mature program, and we are seeing the benefit of that today with improved member outcomes. We are excited about rolling out the other programs and continuing to focus on additional clinical programs going forward.

Ronald Williams: The only point I would add is how our physicians feel about being actively engaged in these clinical pathways. They see this as part of the reason they went to medical school—to improve the quality of people's lives. The ability to identify conditions earlier and get people on the right therapies not only avoids unnecessary hospitalization but, most importantly, improves patients' lives. They feel very positive about that.

Operator: Your next question comes from the line of Analyst with Deutsche Bank. Your line is now open. Please go ahead.

Analyst: I was wondering if you would talk about your conversations with your ACO REACH clients about how they are thinking about the LEAD program for next year. Are you expecting to see the same level of participation, and do you expect your economics to look the same?

Jeffrey Alan Schwaneke: The details of the LEAD program just came out. We are analyzing that information and determining which path is best between LEAD or MSSP. The good news is we have participated in MSSP and REACH and have been very successful. We think we can be successful in both programs moving forward, and they will be positive contributors to financial performance in 2027 and beyond. It is a little early, but we are having conversations and running the calculations to figure out the best path.

Analyst: As you think about the improvement in the guidance in 2026, do you feel like the results are something that can be built on for 2027, or is there a risk of a reset as you go into contracting?

Jeffrey Alan Schwaneke: It is a foundation that can be built on. That is what we have been focused on over the last 18 months—driving toward profitability. We will take that same lens into 2027 contract negotiations, which are in active discussions now, for all the reasons Ronald previously mentioned. It is a solid foundation to build off.

Operator: Your next question comes from the line of Stephen Baxter with Wells Fargo. Your line is now open. Please go ahead.

Stephen Baxter: I want to make sure we understand all the sources of medical margin upside in the quarter versus your guidance. I think you sized the full-year expected benefit from the higher risk scores at the one level—on a quarterly basis something like $14 million to $15 million of additional medical margin. When we look at the balance of the beat, which I think was closer to $35 million, trying to make sure we have all the pieces there. You had a benefit from PYD, but you are also saying you are booking cost trends to guidance levels versus modeling any improvement. Can you clarify?

Jeffrey Alan Schwaneke: For Q1, bridging to the prior guide mid for medical margin, the variance is roughly $26 million. There are a couple of components. The risk adjustment update is about $50 million for the full year; obviously, we would get roughly half of that in the first half, so a piece hits Q1. We also mentioned the new contract. Although we modeled it as breakeven margin for the year, given seasonality there would be margin on that contract in Q1. Those are the two primary items impacting margin versus the prior midpoint. On 2027 contracting objectives, our perspective has not changed.

Percent of premium is at the top of the list, continued reduction of Part D exposure—we are at less than 15% exposure this year and would like to see that go down more—plus capture corridors and carving out items outside our control like supplemental benefits. The same levers we discussed a year ago are what we are focused on for 2027. It is early in the contracting cycle, but conversations with payers are productive and supportive of our model.

Operator: Your next question comes from the line of Luismario Higuera with Citigroup. Your line is now open. Please go ahead.

Luismario Higuera: Last quarter you said there was $15 million of new geography entry expenses. I know some are for current providers, but some would be for possible investments for additional growth. Can you provide an update on that? And are you able to break out the 7.4% cost trend embedded in guidance—any particular categories expected to drive much of that, and what would give you comfort to revise that down?

Jeffrey Alan Schwaneke: On geo entry in the guide for the full year, those costs are generally in line with expectations in the first quarter—nothing out of the ordinary. To clarify on trend, the 7.4% is what we recorded in Q1 given limited paid claims visibility early in the year. For the full year, our guidance is 7% net. With limited data in Q1, what we are seeing continues the theme of escalated Part B costs and inpatient costs. That has been a common theme over the last year. As we get more data, we will reassess, but it is consistent with national commentary.

Operator: Your next question comes from the line of Amir Farahani with Evercore. Your line is now open. Please go ahead.

Amir Farahani: You previously discussed roughly 50 bps of tailwind from improved payer bids. How is that tracking year-to-date? And with the 2027 bidding season around the corner, what are you hearing from payer partners in terms of benefit design and premiums, and how might that impact next year?

Ronald Williams: The messages we are hearing are a strong focus on margin improvement. We expect their bids, product positioning—everything—is about restoring to what they view as reasonable margins, which we think is good for us.

Jeffrey Alan Schwaneke: On the benefit from payer contracting, the number we quoted in the initial guide was roughly $127 million for the full year. Those contracts were executed, so that benefit is flowing through in the first quarter.

Amir Farahani: As a follow-up, on group MA mix, several payers flagged recovery in MA margin in 2026. Are you targeting structurally better economics in your book, and is that upside captured?

Jeffrey Alan Schwaneke: Our group mix is roughly unchanged from last year—very consistent. Negotiations and the quoted contracting benefit are inclusive of that mix.

Operator: Your next question comes from the line of Jack Garner Slevin with Jefferies. Your line is now open. Please go ahead.

Jack Garner Slevin: To clean up the upside in the quarter, just to be clear—there was no PYD recognized in Q1? And on the favorable 2025 development, was that a continuation of outlier cases abating from late 3Q?

Jeffrey Alan Schwaneke: The prior-year development is in the 10-Q medical cost roll-forward—roughly $12 million for the quarter related to 2025 dates of service. There was effectively no flow-through because during the quarter we added additional reserves to Part D. In 2025, 30% of our members had that risk, and we have limited information until final reconciliation in the third quarter of 2026. Part D is recorded in revenue for us, so the good news on the medical expense line from PYD was offset by a reduction in revenue representing Part D.

Jack Garner Slevin: On 2027, last quarter you suggested you could expand margins even considering the advance notice, given BOI improvements. Given the more positive numbers now, has anything changed in your confidence for 2027 on the core business?

Jeffrey Alan Schwaneke: The main change is our performance this quarter on risk adjustment. We now have more confidence going forward. This year we said we would outperform the final year of V28; now we have more confidence that it will be even higher. That gives us more confidence in 2027 and beyond to offset the 1.12 normalization factor. We do not believe we have material exposure to disallowed sources of diagnosis given our model’s design closely aligned with primary care physicians. For the 2027 growth rate, we are zeroing in on the 5.33% effective growth rate.

Operator: Your next question comes from the line of Ryan M. Langston with TD Cowen. Your line is now open. Please go ahead.

Ryan M. Langston: On the new full-risk contract with the new payer, what was attractive about that contract? Is this generally members you had before who switched to this payer, or a new cohort? And what was the pickup in guidance from this contract?

Jeffrey Alan Schwaneke: It is in a market with an existing physician group, and it is a new contract with a payer. We modeled it at roughly $200 million in revenue and roughly breakeven margin for the year. For us, it is an opportunity for multi-year margin improvement, and we think we can deliver that. It is not uncommon for year zero to be modeled conservatively at breakeven.

Operator: Next question comes from the line of Craig Jones with Bank of America. Your line is now open. Please go ahead.

Craig Jones: You mentioned pretty much no impact from the unlinked chart reviews that we will see in 2027. CMS seems focused on leveling the playing field—looking to 2028 and beyond, what impact would you see from linked chart reviews and health risk assessments, and is there any other low-hanging fruit CMS could go after?

Ronald Williams: We feel good about where we are. Our physicians see every patient, and charts are audited very carefully. That does not mean we will not have some issues, but we are much more rigorous than we believe some others have been historically. We expect CMS will continue to spend the taxpayers’ dollar wisely. Our focus on ensuring documentation is linked to real care delivered to real patients is the best approach.

Operator: Your next question comes from the line of Michael Ha with Baird. Your line is now open. Please go ahead.

Michael Ha: Regarding the LEAD model, as you run your calculations to determine which path to go down, how are you contemplating the eventual AI-inferred risk adjustment model that is being phased into the LEAD program? How much visibility do you have into how this AI model might impact risk adjustment? And then last quarter you mentioned the opportunity to possibly more than double payer incentive contributions in 2026, which were $25 million for 2025, and your 2026 guide conservatively assumed the same. How is that tracking, and how much visibility do you have today?

Jeffrey Alan Schwaneke: There are not a lot of details on the AI-inferred risk model right now, so it is hard to model something without details. We will reassess as CMS provides more information. On payer incentives, the opportunity has roughly doubled, which underscores the importance of quality for payers. Our 2026 guide assumes a similar level of performance to 2025. It is very early, and we do not have data yet, but we feel confident we are delivering superior quality to our payer partners and members.

Operator: Your next question comes from the line of Ryan Daniels with William Blair. Your line is now open. Please go ahead.

Ryan Daniels: Given the operational improvements, clinical pathways, and better data feeds, when does the company consider going back on the offensive—growing the member base and reinvigorating the new partner pipeline—especially given payer demand to expand partnerships?

Ronald Williams: Our partners are deeply embedded in their communities with large commercial panels, and every month people turn 65 and enter Medicare Advantage. There is embedded growth—nowhere near opening a new market—but it helps mitigate attrition. Some groups also add new physicians. Our focus right now is on in-market growth and execution. The time will come when we turn our attention to other things, but that time is not here yet.

Operator: We have reached the end of the Q&A session. I will now turn the call back to Ronald Williams for closing remarks.

Ronald Williams: I want to thank everyone who joined us this evening. Since stepping in as Executive Chair eight months ago, I have worked very closely with the leadership team. We have been highly focused on increasing the sense of urgency and heightening the focus on key priorities that drive improved performance for our members, our primary care partners, and payers. While the environment remains dynamic, we are confident that the actions we have taken will deepen the existing strengths of our partnership model. We think it is a very unique model because of the proximity to the physician.

It gives us the ability to ensure that the suspects and things that we determine are resulting in real clinical interventions, which is extremely important to patients and to CMS. I want to close by welcoming Tim O'Rourke, our new CEO. I am thrilled to have Tim join us. He brings the right balance of understanding the payer, the provider, and the importance that primary care physicians bring to our unique delivery model. He conducted extensive due diligence, and we feel very good about having him as part of our team.

Our employees have worked very hard to get us where we are, and I want to give a special thank you to everyone in Agilon Health, Inc. who helped us achieve the results we are reporting today.

Operator: This concludes today's call. Thank you for attending. You may now disconnect.