The market class data, what we’ve shown you for the first time within that, is the impact of dilution from mid-teens same-store growth year in, year out. And so it’s very impactful in terms of what you’re able to drive across those markets. And our action plans are focused on. We’ve added 400 providers and 100,000 MA members since the initial year one. Those are dragging those markets. So you see a $36 PMPM impact in the market Class of ‘18, an $86 PMPM impact in the Class of ‘19, and a $44 PMPM impact in the Class of ‘20. Those are dragging those market numbers that you see on the next page. And so our opportunity is in that action plan I talked about around addressing PCP variability. How do we focus on those new doctors? How do we focus on those new patients?
How do we get them more educated and understanding sort of the elements of the value based care model and really what’s available to them within the care team to drive that improvement. We see that as a major opportunity for us to drive those up. And so I think we believe based on ‘18, ‘19 and ‘20, you can get members to that level. And with markets, we’ve got to be able to accelerate and drive that cohort maturation for those newer members and newer PCPs at the same level. So that’s kind of how we’re thinking about it. That’s a lever we can control. You’ve talked about levers outside of our control, like how plans file their bids and their benefits. We are encouraged based on what we’re hearing around that and how they’re thinking about ‘25.
That would obviously flow through dollar for dollar to us. That’s part of that payer economics and risk sharing discussion that I talked about. And then there’s obviously what will happen from a benchmark perspective and how much of this accelerated utilization will be captured within that. But we think we’re in this two-year cycle, we think those elements should improve the spread ‘25, ‘26, ‘27. But we’re really focused on what we can control and we see this variability with newer doctors and with newer members as a great opportunity for us.
Stephen Baxter: Okay, thank you for the color.
Steve Sell: Sure.
Operator: We now have George Hill of Deutsche Bank on the line.
George Hill: Yeah, thanks for taking the question, guys. And Steve, this is kind of like a big picture question for you, which you talked about some of your health plan partners bidding for margin [technical difficulty], but there’s kind of guardrails around what they can do, right based upon what the final rate that looks like, the TBC, how close they want to bid to the benchmark and impact the rebate levels and things like that. So I’m wondering kind of from where you sit, what do you think about the margin expansion potential in 2025? And kind of like, I’m going to kind of use that as the proxy, what can that look like for you guys? Because some of your health plan partners talked about needing to increase margin low double-digit dollars per member per month as you look out to 2025? I’d be interested to hear how you think about those moving at a big picture level?
Steve Sell: I think the math is, if you do a $10 PMPM adjustment in terms of a bid across a 0.5 million seniors in MA, I think it’s an annual number of $60 million, right. So that if you talk about low double-digits, that gives you the ability, the sort of dimension what that could look like. And that’s one element of this, George. And so, I think we’ve had conversations with people. Some people are thinking more than that, some people, I think, are still trying to figure that out. But I think that’s one piece of it. But I will come back to what I was just talking to Stephen about, the thing we can control is really around this variability and the new docs and the new patients, we think that can be very material in terms of the improvement that we can see from that perspective as well.
And then there’s just this natural maturation in the cohorts, right. In a very difficult year, you’re seeing us projecting a 40% step up in medical margin from ‘23 to ‘24, a big part of that is this Class of ‘24 that comes on great experience, longer implementation. But I think if you think about our business as members mature across time, you should see this natural evolution and this spread should correct from where it sits today.
Tim Bensley: Thanks, George.
Operator: We now have Adam Ron of Bank of America on the line. You may proceed with your question.
Adam Ron: Hey, thanks for the question. I’m going to ask something very similar to what’s been asked already, but maybe from a different angle. So the payers are also talking about 2025 in terms of actual margin improvements. So like Humana saying something like 100, 150 basis points of margin. And most of that comes from cutting rebates and they’ve given a number, something like $40 at the max, looking at some ways of looking at it. On a percentage basis, if they’re talking about 100 basis points of margin, would that be higher for you just because if that does come in the form of rebates, it’s a higher percentage of the capitated benchmark? And just separately, is there a way that they do cut benefits and somehow it doesn’t flow to you?
Because you’re talking about carving out risk on supplemental benefits. And if supplemental benefits are the thing that are getting cut and you carve them out, does it somehow not end up impacting your P&L just trying to understand how much visibility you have into that and how much capacity payers have to cut benefits and not flow it into agilon?
