David Mountcastle: So we think this is one of the most underappreciated parts of our business. As we highlighted, we grew our commercial value-based lives very significantly. It’s about 675,000. We’re one of the only platforms that actually does commercial value base at this level of scale. We are partnering with a number of payers across our different states. So you see both care management fees and shared savings reflect that. We are typically, as we noted in our prepared remarks, we’re getting $2 or $3 or $5 PMPM depending on the contract on these lives, which is a pretty significant step-up over the fee-for-service reimbursement for us to do all the work. And then obviously, we’re getting shared savings on top of that based on certain quality and cost metrics.
We think our ability to bend the curve for the payers, both self-insured employers, commercial payers, is a very significant value proposition. It’s 50% of the U.S. population. It’s not going away anywhere soon. It’s not MA. And it’s not a population where you can take full risk, but it’s a population where you can make a pretty significant impact on the cost trends in health care. And I think we’re a great platform to demonstrate that. So you’re seeing some of the strength in the commercial book, and it’s a very stable income stream as is reflected in the results. So we really like how that balances out some of the variability on the MA book.
Operator: Our next question comes from the line of Adam Ron from Bank of America.
Adam Ron: I wanted to follow up on A.J.’s question. When you mentioned the puts and takes for 2024, you really only mentioned tailwinds, whereas last year, you kind of emphasized that there was a tough comp from growing really quickly and from new markets starting out with not a lot of providers. It seems like the geographic entry costs are running at a really high exit rate given the 6-state entries that you mentioned. And so should we still be thinking about 30% long-term EBITDA growth guidance as like the run rate or how we should think about core growth from here? Or are there actual headwinds that we should be conflicted about?
David Mountcastle: We highlighted both tailwinds and headwinds. I mean the new market entry costs will continue into next year as demonstrated by these six new markets. I think we’ve been fairly consistent with that over the last few quarters. Obviously, shared savings is the other one where we’ll just look at all the puts and takes on the MA book. You’re hearing commentary about increased utilization, benefit design changes by payers, impact from 328 coming. And so we’ll just tally all that up and there will be puts and takes on both sides. So I think when we issue our guidance, we’ll reflect all of that in our book. So it will be a combination of both as it always is.
Operator: Our next question comes from the line of Jack Senft from William Blair.
Jack Senft: In terms of the 2023 adjusted EBITDA guidance, I know you noted $10 million in start-up costs for the new geographies and ACOs. Is this mainly a function of just entering the fixed dates over the past year, which is faster than the one state your target that you initially guided to? Or is there something additional in there? And then just a quick follow-up, too. Do you have any earlier or maybe an updated view for the new geography costs next year? I know you aren’t guiding for 2024 yet, but I know it’s a topic of discussion in the past. So just trying to see what you’re expecting there for next year.
Parth Mehrotra: So it’s very similar to what we’ve said previously. We are spending anywhere from $1 million to $3 million in any new market. It’s mainly comprised of sales and marketing, leadership, implementation costs, all those come in before we sell a single provider to join the platform. The size of spend correlates to the size of the market, and it’s fairly consistent from that perspective. We’ve entered some of these new markets in the middle of this year. So obviously, the full run rate of cost you’ll see that next year. And that’s no different from what we’ve seen previously. So I think it’s a normal part of doing the business. I think what’s exciting for us is you can see the leverage on the P&L, where despite entering more new geographies, we are outperforming on platform contribution.
That would have likely flowed into our performance on EBITDA as well, had it not been for some of the newer geographies in an accelerated manner. So our hope is that we can continue to scale the P&L and absorb these costs. We don’t add them back, as you know. So I think we’ll continue to do that. And on top of that, like we said, the existing markets are really scaling in our most mature markets are exhibiting unit economics, which are very consistent with our long-term margin profile. And so we’re really excited to see that. And now it’s all about just execution in all these new states and get them up the curve.
Operator: Our next question comes from the line of Whit Mayo from Leerink Partners.
Benjamin Mayo: I was just wondering what changes you guys are beginning to plan for an MSSP for 2020, any plans to move any of your legacy ACOs into the enhanced track, take advantage of some of the other changes? And are you planning for any new ACOs? And then I had just one clarification, David. Did you say in your prepared comments that you guys are paying or providing your physicians with 65% of the savings? I thought in my notes, I had that it was 60%, but maybe I just misheard you.
Parth Mehrotra: So we’re going through our entire book. As you saw last year, we added three new ACOs. We have seven out of 10 in Enhanced Track, so we make all those determinations in some of these new markets, you may add some of the lives in an existing ACO just given the timing. So we’ll announce any new ones like we did last year in January-February time frame. So I think we’ll just go through that. But it’s been fairly consistent. We do this every year as we enter new states and look at the entire book and what makes sense for us. Sometimes it makes sense to move to the enhanced track sometime it doesn’t. So again, I think we’ll evaluate. I think all the existing ENHANCED tracks should expect that we’ll continue to maintain an ENHANCED track. So I don’t think we go backwards and we’ll hopefully continue our good performance.
David Mountcastle: And our value-based care book is still 60-40. So I apologize if there was any mishearing there or whatever, but it’s still 60-40.
Operator: Our next question comes from the line of Jeff Garro, from Stephens, Inc.
