Astrana Health's Q3 2025: Contradictions Emerge on Medicaid Costs, Prospect Health Integration, and EBITDA Impact

Date of Call: November 6, 2025

Financials Results

• Revenue: $956 million, up 100% year-over-year and 46% sequentially

Guidance:

• Full-year 2025 revenue updated to $3.10B–$3.18B.
• Full-year 2025 adjusted EBITDA updated to $200M–$210M.
• Several payer contracts shifted from mid-2025 to Q1 2026; company expects these to start in Q1 2026.
• Synergy target reiterated at $12M–$15M to be realized through 2026.
• Free cash flow conversion expected ~40%–45% of adjusted EBITDA; net leverage ~2.5x with intent to reduce within 12 months.

Business Commentary:

* Revenue and Growth: - Astrana Health reported total revenues of $956 million for Q3 2025, up 100% year-over-year and 46% sequentially. - The growth was driven by the integration of Prospect Health and organic growth across the core business.

• Medical Cost Trend Management:
• The company maintained adjusted EBITDA of $68.5 million, up 52% year-over-year and 42% sequentially.

• This was attributed to stable medical cost trends across both legacy Astrana and Prospect operations.

• Strategic Partnerships and Market Expansion:

• Astrana expanded its strategic partnership with Intermountain Health in Nevada, enhancing its presence in one of its fastest-growing markets.

• The partnership combines Intermountain's clinical infrastructure with Astrana's value-based care delivery model.

• Guidance Adjustments and Transition Timing:

• The company updated its full-year 2025 revenue guidance to a range of $3.1 billion to $3.18 billion and adjusted EBITDA to $200 million to $210 million.
• This was due to a shift in several payer contracts from partial risk to full risk arrangements, delayed until the first quarter of 2026.

Sentiment Analysis:

Overall Tone: Positive

• Management emphasized 'another strong quarter' with revenues of $956M (up 100% YOY) and adjusted EBITDA of $68.5M (up 52% YOY), reiterated synergy targets of $12M–$15M, and stated confidence that delayed full-risk contracts will commence in Q1 2026 and that cost trends remain within expectations.

Q&A:

• Question from Jailendra Singh (Truist Securities): Were the revenue-guidance timing delays related to one payer or multiple payers? Can you be specific on the tech/data integration issues—were these contracts on the Prospect side or legacy Astrana? Do you have clarity that these will go live 1/1 or could there be further delays? Does this delay impact how you approach other partial-risk to full-risk transitions?
  Response: Delay is a timing/procedural issue across multiple payers and affects both legacy Astrana and Prospect, not due to tech/data, with about half procedural (regulatory/data feeds) and the rest in late-stage negotiations; firm expects contracts to commence in Q1 2026.

• Question from Jailendra Singh (Truist Securities): Is the ~$10M EBITDA reduction entirely due to this timing delay?
  Response: Yes—the ~$10M EBITDA impact is timing related; core medical cost trends remain in line to slightly better than expected.

• Question from Jailendra Singh (Truist Securities): Can you provide more details around the economics and level of engagement with the Intermountain Health partnership and what this opens up for new markets or expansion where Intermountain has presence?
  Response: Partnership leverages Intermountain's clinical infrastructure in Nevada combined with Astrana's delivery model to improve coordination and access; it's strategic for expansion in Nevada and could open further opportunities, though no specific economics were disclosed.

• Question from Matthew Mardula (William Blair): When do you expect Medicaid cost trends to align closer to the 4.5% target given the sequential improvement, and what gives you confidence that Q4 seasonality is properly factored into the guide?
  Response: Medicaid is improving but regulatory headwinds persist; management expects margins to stabilize possibly in late 2026 and remains encouraged by recent deceleration, with updates to be provided if trends change.

• Question from Matthew Mardula (William Blair): For the new Southern California group (~40,000 members), what's the payer mix, percent full-risk lives, and will onboarding be profitable from day one?
  Response: Client has a similar Medicare/Medicaid/commercial mix, is all shared-risk (not full risk), will be served under Care Enablement fee model, and is expected to be EBITDA-additive early due to operating leverage.

• Question from Meghan Holtz (Jefferies): Can you discuss segment margins this quarter—why was Enablement very high while Care Partners lagged?
  Response: Care Enablement margin benefited from rapid growth and Prospect's large enablement clients; Care Partners looked lower because Prospect runs at a higher trend than legacy Astrana but management expects to align trends over time.

• Question from Michael Ha (Baird): Are you seeing Medicaid disenrollment/acuity shifts in California and how are you digesting payer developments that expect negative Medicaid margins next year?
  Response: Year-to-date Medicaid disenrollment annualized is mid- to high-single-digit—less severe than some statewide reports; no alarming acuity shift reported and the company is scenario-planning for 2026 headwinds.

• Question from Michael Ha (Baird): Where are MA margins now and how should we think about margin trajectory into 2026/2027 given favorable rate notices?
  Response: Management won't provide per-line margins but expects margin stabilization and potential expansion in 2026–27 driven by favorable MA rate increases, though it's too early to quantify.

• Question from Ryan Langston (TD Cowen): Your guidance cut implies about $60M revenue midpoint and $15M EBITDA—are those the right numbers and are there other moving pieces?
  Response: The impact reflects roughly $15M of EBITDA in the latter half of the year (≈$30M annualized) tied to the full-risk timing delay; revenue shortfall was smaller than it may appear and the item should be resolved in Q1 2026.

• Question from Ryan Langston (TD Cowen): When you said Prospect performed ahead of stand-alone expectations, did that include the $12M–$15M synergies?
  Response: No—the comment referred to stand-alone Prospect medical and utilization performance; synergies were not included in that observation.

• Question from Thomas Walsh (Barclays): Can you share the standalone Prospect cost trend and is the delta versus legacy Astrana structural due to member population differences?
  Response: No exact Prospect trend disclosed; management said Prospect trend is several points higher than legacy Astrana but not viewed as structural and expected to improve as integration and onboarding to Astrana's clinical pathways proceed.

• Question from David Larsen (BTIG): What was medical cost trend in the quarter and how does it compare to expectations across commercial, Medicaid and Medicare? What are expectations for trend in 2026?
  Response: Blended weighted-average trend was just under 4.5%; Medicare trended favorably, Medicaid decelerated vs. Q2 and is improving, commercial stable; 2026 trend assumptions not yet disclosed and management will be conservative given regulatory uncertainty.

• Question from David Larsen (BTIG): Do you have material exposure to the individual exchanges?
  Response: Yes, but limited—exchange membership represents roughly 3% of revenue and is considered manageable.

• Question from David Larsen (BTIG): What percent of claims are complete so we can be confident there won't be negative surprises in Q4?
  Response: Claims completion rates exceed 85% quarter-over-quarter and there has been no recent negative prior-period development, including on risk adjustment.

• Question from Craig Jones (BofA Securities): Any color on the reconciliation bill work requirements—timing and California implementation speed?
  Response: Management expects work-requirement reconciliation to be a 2027 item as currently constructed and does not see immediate impacts in 2026.

• Question from Craig Jones (BofA Securities): Thoughts on potential V29 risk-adjustment changes and impact of nCounter data on Astrana?
  Response: Management is comfortable with current risk adjustment (believes RAF may be conservative) and is not especially concerned about V28/V29 or related coding impacts.

• Question from Zachary Haggerty (KeyBanc): Any guideposts/frameworks for the shift to full risk through the remainder of 2026 after the delays?
  Response: Expect full-risk revenue to remain in the high-70s percent range in 2026; additional full-risk and delegated arrangements (e.g., Texas) are proceeding and some begin 1/1/26.

• Question from Eugene Mannheimer (Prime Executions): If you back out Prospect, what is organic growth for core Astrana?
  Response: Core Astrana organic growth is in the low- to mid-teens; Prospect growth expected mid- to high-single digits (excluding full-risk movements and AEP impacts).

• Question from Eugene Mannheimer (Prime Executions): Was the new 40,000-life Southern California group an affiliate/offshoot of Prospect or was Prospect instrumental in that win?
  Response: No—this was a separate client from the pipeline and not driven by Prospect; the win is independent.

Contradiction Point 1

Medicaid Cost Trends and Expectations

It involves differing expectations and explanations regarding Medicaid cost trends, which are critical for understanding the company's financial outlook and risk management strategies.

When do you expect Medicaid cost trends to stabilize? What does the new partnership in Southern California entail? - Matthew Mardula(William Blair & Company L.L.C., Research Division)

2025Q3: Medicaid cost trends are expected to stabilize by late 2026. - Brandon Sim(CEO)

What caused the Q2 revenue guidance to fall below expectations, and what interest rate assumptions are included in the 2027 guidance? - Michael Ha(Baird)

2025Q1: Comfortable with trend and adjusted EBITDA guidance. Encouraged by 2026 rate notice; confident in 2025 and 2027 guidance. Rate increase favorable to assumptions but not quantified. - Brandon Sim(CEO)

Contradiction Point 2

Prospect Health Acquisition and Integration

It involves varying statements about the Prospect Health acquisition and integration, which is a significant strategic move with potential impacts on the company's financial performance and growth trajectory.

When do you expect Medicaid cost trends to stabilize? And what does the new partnership in Southern California entail? - Matthew Mardula(William Blair & Company L.L.C., Research Division)

2025Q3: The new partnership is with a similar payer mix (Medicare, Medicaid, commercial) and will be onboarded in the first half of 2026. These are shared risk members, managed like the rest. - Brandon Sim(CEO)

Can you assure the earnings potential of the Prospect acquisition? - David Larsen(BTIG, LLC, Research Division)

2025Q1: Prospect's financials align with expectations above $81 million EBITDA. Insights from claims and prior auth suggest solid earnings power. - Brandon Sim(CEO)

Contradiction Point 3

Medicaid Cost Trends and Reimbursement Expectations

It pertains to the company's expectations regarding Medicaid cost trends and reimbursement, which significantly impact financial projections and strategic planning.

When will Medicaid cost trends stabilize? What does the new Southern California partnership entail? - Matthew Mardula (William Blair & Company L.L.C., Research Division)

2025Q3: Medicaid cost trends are expected to stabilize by late 2026. - Brandon Sim(CEO)

How might Medicaid reimbursement cuts affect your business? - Jailendra Singh (Truist Securities)

2024Q4: We believe our California-based Medicaid business has some insulation from federal funding. We're not assuming any reimbursement increases in 2025 guidance. - Brandon Sim(CEO)

Contradiction Point 4

Exchange Membership and Impact

It highlights differing perspectives on the impact of Exchange changes on utilization and revenue, which are important for understanding potential financial risks and opportunities.

What was the Q3 medical trend, and how does it compare to expectations? Any exchanges exposure? - David Larsen (BTIG, LLC, Research Division)

2025Q3: Exchange membership is around 3% of revenue, manageable at present. - Brandon Sim(CEO)

Are you expecting a surge in utilization in the second half due to Exchange changes? - Jailendra P. Singh (Truist Securities)

2025Q2: We're being conservative about the impact of Exchange changes. While it's possible that there will be some utilization rush, it's a small part of our revenue, so manageable. - Brandon Sim(CEO)

Contradiction Point 5

EBITDA Impact of Contract Delays

It focuses on the company's accounting for contract delays and their impact on financial forecasts, particularly EBITDA.

Can you clarify the EBITDA and revenue guidance changes due to contract delays? - Ryan Langston (TD Cowen, Research Division)

2025Q3: The adjusted EBITDA reduction is due to timing delays and is not related to cost or trend issues. - Brandon Sim(CEO)

Given the higher-than-expected Medicaid trend, will there be a significant benefit in 2025? How will this impact EBITDA? - Michael Ha (Baird)

2024Q4: On the macro side, it will be a little bit of a headwind for the upcoming year as a result of this particular legislation not giving you the relief that you're looking for. - Brandon Sim(CEO)