InnovAge Holding Corp.INNVNASDAQ
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Operator: Good day, and thank you for standing by. Welcome to the InnovAge Holding Corp. Second Quarter 2026 Earnings Conference Call. At this time, all participants are in a listen-only mode. Please be advised that today's conference is being recorded. After the speakers' presentation, there will be a question and answer session. To ask a question, please press 11 on your telephone, and wait for your name to be announced. To withdraw your question, please press 11 again. I would now like to hand the conference over to your speaker today, Ryan Kubota, Director of Investor Relations.
Ryan Kubota: Good afternoon, and thank you all for joining the InnovAge Holding Corp. 2026 Fiscal Second Quarter Earnings Call. With me today is Patrick Blair, CEO, and Ben Adams, CFO. Today, after the market closed, we issued an earnings press release containing detailed information on our fiscal second quarter results. You may access the release on the Investor Relations section of our company website, Innovh.com. For those listening to the rebroadcast of this call, we remind you that the remarks made herein are as of today, Tuesday, 02/03/2026, and have not been updated subsequent to this call. During our call, we will refer to certain non-GAAP measures. A reconciliation of these measures to the most directly comparable GAAP measures can be found in our earnings press release posted on our website. We will also make statements that are considered forward-looking, including those related to our 2026 fiscal year projections and guidance, future growth prospects and growth strategy, clinical and operational values, Medicare and Medicaid rate increases, the effects of recent legislation in federal budget cuts, enrollment and redetermination processing delays, seasonality of cost trends, the status of current and future regulatory actions, and other expectations. Listeners are cautioned that all of our forward-looking statements involve certain assumptions that are inherently subject to risks and uncertainties that can cause our actual results to differ materially from our current expectations. We advise listeners to review the risk factors and other discussions included in our annual report on Form 10-K for fiscal year 2025 and any subsequent reports filed with the SEC, including our most recent quarterly report on Form 10-Q. After the completion of our prepared remarks, we will open the call for questions. I will now turn the call over to our CEO, Patrick Blair.
Patrick Blair: Thank you, Ryan, and good afternoon, everyone. I'd like to start by thanking our colleagues, our participants, and their families, our government partners, and our investors for joining us today and for their continued support. We appreciate the opportunity to share an update on our fiscal 2026 second quarter results and the progress we are making against our strategic priorities. Our second quarter results reflect continued momentum across the business and disciplined execution across our clinical, operational, and financial initiatives. For the quarter, we reported total revenues of $239.7 million, center-level contribution margin of $52.8 million, Adjusted EBITDA of $22.2 million, and net income of $11.8 million. To put those results in context, we generated $39.8 million of adjusted EBITDA in the first half of the fiscal year, exceeding our full-year fiscal 2025 adjusted EBITDA of $34.5 million. Two years ago, at our Investor Day, we outlined an intermediate-term adjusted EBITDA margin target of 8% to 9% over a two to four-year horizon. This quarter, for the first time, we achieved that target, delivering an adjusted EBITDA margin of 9.2%. It's important to emphasize that this level of margin is consistent with what's required to sustainably operate a full-risk, investment-intensive, highly regulated healthcare delivery model and to continue reinvesting in our people, infrastructure, and the quality of care we provide to our participants. As we talk about the strength of our first-half results, I want to be clear about how we think about this performance and what's driving it. Over the past several years, InnovAge Holding Corp. operated from a very different financial position as we worked through operational, compliance, and organizational challenges. The progress we are seeing today reflects a deliberate effort to rebuild and strengthen the foundation of the business across every dimension: our talent, clinical model, service delivery, operational discipline, compliance capabilities, and growth engine. Importantly, financial performance is not the result of any single action or short-term lever. It's the natural outcome of delivering higher quality, more consistent care to a highly complex population, improving day-to-day utilization management, and operating with greater rigor and accountability. When the model works as intended, quality improves, outcomes improve, costs are better managed, and financial results follow. This progress also reflects our commitment to being a strong, reliable partner to our federal and state regulators. As we strengthen our financial position, we are better able to invest in our people, our centers, and our participants, and to serve more seniors in a model of care that improves quality while lowering total cost to the system. When InnovAge Holding Corp. performs well, our government partners benefit as well because more vulnerable seniors are cared for in a setting that delivers better outcomes and better value for taxpayers. We see this quarter as further evidence we are delivering on the commitments we've made to government partners, participants, and investors, and that the model is increasingly operating as designed. Let me spend a few minutes on what drove our second-quarter performance and why we exceeded expectations. First, we made meaningful progress strengthening revenue integrity, particularly around Medicaid eligibility and redeterminations. As discussed on prior calls, we encountered challenges last year that led to elevated revenue reserves and write-offs. Over the past few quarters, we've taken a comprehensive approach, investing in people, improving workflows, strengthening data and reporting, and upgrading technology. As a result, we've improved timeliness and accuracy, reduced reserves, and reinstated coverage for a number of participants where outcomes had been previously less certain. While there's more work to do, we're encouraged by the progress and the visibility we now have. Second, we continued to demonstrate strong medical cost management in an environment where many healthcare organizations are under pressure. This reflects the strength of the PACE model and the daily decisions made by our interdisciplinary teams. We saw particular strength in managing inpatient and skilled nursing utilization through proactive care coordination, earlier interventions, better length of stay management, and appropriate side of care decisions. It's about delivering the right care at the right time in the right setting. Third, we're operating our centers more efficiently as the platform matures. We've improved consistency in staffing models, scheduling, and throughput while maintaining a strong focus on quality, service, and participant experience. These gains come from standardizing best practices, better leveraging Epic, and strengthening local execution, not from one-time actions. Fourth, our SG&A performance reflects the structural work we've done to simplify the organization and improve accountability. The spans and layers work over the past year clarified roles, streamlined decision-making, and reduced unnecessary complexity. We're now seeing the benefit in a cost structure that better supports frontline care delivery. Stepping back, I want to touch briefly on the rate environment across both Medicaid and Medicare. On the Medicaid side, we're experiencing a slightly more favorable blended rate environment this fiscal year relative to our initial assumptions. This reflects state-specific dynamics and timing and is consistent with our conservative approach to forecasting, which assumes variability rather than relying on rate upside. On the Medicare side, I want to address the CMS advance notice for calendar year 2027 Medicare Advantage rates released last week. PACE is subject to the same core Medicare payment as Medicare Advantage, including county rates, risk adjustment changes, coding intensity adjustments, fee-for-service normalization, and underlying cost trends. As a result, changes to Medicare Advantage policy do affect PACE. At the same time, PACE includes unique elements, most notably the frailty adjuster based on activities of daily living, which recognizes that diagnosis-based risk adjustment alone does not fully predict costs for a highly frail population. CMS has also proposed a blended risk score for calendar year 2027 using 50% of the 2017 CMS HCC model and 50% of the proposed 2027 model, accelerating the transition relative to the prior timeline. As we look ahead, we continue to have a robust portfolio of clinical and operational value initiatives that we believe can unlock additional value across participant experience, quality, compliance, efficiency, and revenue. One key area is participant experience. We're working to more clearly define the InnovAge Holding Corp. participant experience end-to-end, from enrollment and onboarding through ongoing care, with a focus on early engagement, systematic feedback, consistent service recovery, and continuous improvement. We believe a more intentional experience will drive higher satisfaction, stronger engagement, and better retention over time. Another significant opportunity is reducing unwarranted variation in provider practice patterns. Physician decision-making sits at the center of the PACE model, influencing nearly every aspect of care delivery. While this has always been actively managed, we see an opportunity to further improve consistency and appropriateness across the platform. This work will take time and thoughtful change management, but we believe advances in AI can increasingly support physicians with peer benchmarks and evidence-based guidance, augmenting, not replacing, clinical judgment. We've also stabilized our pharmacy insourcing and are now positioned to pursue additional opportunities across pharmacy distribution, utilization management, and care coordination. With greater visibility and control, we believe pharmacy can continue to improve outcomes, efficiency, and total cost of care. Finally, we see continued opportunity to optimize center productivity, capacity, and care delivery while strengthening participant retention. We're exploring the application of advanced analytics and AI to scheduling and transportation, areas central to the PACE operating model. This work is early, but our confidence is increasing that there is meaningful value to be unlocked. Taken together, these initiatives reinforce our belief that there is still substantial opportunity ahead. The progress we've made gives us confidence, not complacency. With that context, I want to briefly touch on how our governance is evolving to support the next phase of execution and oversight. As we strengthen the operating, clinical, and compliance foundations of the company, we've continued to evolve our governance to support the next phase of execution. As part of that evolution, Tom Scully returned to the role of chairman of the board, and Pavitra Mahesh and Sean Trainor rejoined the board, effective January 28. I also want to recognize Jim Carlson for his leadership as chairman since June 2022. Jim provided steady, thoughtful guidance during a very critical period, helping InnovAge Holding Corp. navigate operational, compliance, and strategic change. We're grateful for Jim's leadership and pleased that he'll continue to serve as an independent director. Together, this governance structure strengthens oversight, reinforces alignment, and positions the company well to continue delivering for participants, regulators, and shareholders. Before turning to guidance, I want to briefly share how we think about pacing and expectations. As a full-risk, value-based care organization, quarter-to-quarter results can be influenced by timing, rate dynamics, and the maturation of initiatives. We therefore focus less on any single period and more on sustained trends across multiple quarters. With that context, the results we delivered through the first half of the fiscal year give us increased confidence in our outlook for the remainder of fiscal 2026. We believe the platform is increasingly operating as designed while still recognizing inherent variability in the model. As a result, we are raising our full-year fiscal 2026 guidance. We now expect member months between 92,900 and 95,700, total revenue between $925 million and $950 million, and adjusted EBITDA between $70 million and $75 million. To close, we're encouraged by the progress we're making and proud of how the organization is performing. These results reflect a company executing with greater consistency, accountability, and purpose in service of a highly complex senior population. We have strengthened the foundation of the business and are seeing the benefits across quality, compliance, participant experience, and financial performance. We remain grounded in the realities of a full-risk, highly regulated model and committed to managing the business with a long-term mindset. InnovAge Holding Corp. is better positioned today than at any point in recent years, not because the work is finished, but because the platform is working as designed. We're committed to executing responsibly, investing thoughtfully, and aligning the interests of participants, government partners, and shareholders. With that, I'll turn it over to Ben for more detail on the financials.
Ben Adams: Thank you, Patrick. Today, I will provide some highlights from our second quarter fiscal year 2026 financial performance and insight into some of the trends we are seeing in the current quarter. Starting with census, we served approximately 8,010 participants across 20 centers as of 12/31/2025, which represents growth of 7.1% compared to 2025, and sequential quarter growth of 1.5%. We reported 23,960 member months in the second quarter, an increase of approximately 7.9% compared to 2025, and an increase of approximately 2% over 2026. Our second-quarter census growth exceeded expectations, driven primarily by our continued success in reinstating participants who had previously lost Medicaid coverage. Total revenues of $239.7 million increased 14.7% compared to $209 million in 2025, driven by an increase in member months and capitation rates. The increase in member months was primarily due to growth in our existing California, Florida, and Colorado centers. The increase in capitation rates was primarily due to an annual increase in Medicaid and Medicare capitation rates, partially offset by revenue reserve. Compared to 2026, total revenues increased 1.5% due to an increase in member months. We incurred $112 million of external provider cost during 2026, an increase of 3.8% compared to 2025. The increase was driven by the increase in member months, partially offset by a decrease in cost per participant. The decrease in cost per participant was primarily driven by a decrease in permanent nursing facility utilization and a decrease in pharmacy expense associated with the transition to in-house pharmacy services. This decrease in cost per participant was partially offset by an annual increase in assisted living and permanent nursing facility unit cost, an increase in assisted living utilization, and an increase in inpatient unit cost. Compared to 2026, external provider costs increased 2.9%. The increase was primarily driven by the increase in member months and a modest increase in cost per participant due to seasonal growth in inpatient admissions. Cost of care, excluding depreciation and amortization, was $74.9 million, an increase of 16.9% compared to 2025. The increase was due to an increase in cost per participant coupled with an increase in member months. The total increase in cost was primarily driven by a net increase in salaries, wages, and benefits due to higher wage rates and costs associated with organizational restructure, partially offset by a reduction in headcount. Higher third-party fees and shipping costs associated with in-house pharmacy services, and higher fleet costs inclusive of contract transportation. Cost of care, excluding depreciation and amortization, decreased 1.3% compared to 2026. The decrease was primarily driven by reduced headcount associated with organizational restructuring and the timing of benefits and supply expense, partially offset by higher contract transportation costs. Central level contribution margin, which we define as total revenues less external provider costs and cost of care, excluding depreciation and amortization, includes all medical and pharmacy costs, was $52.8 million in the quarter, compared to $37.1 million for 2025. As a percentage of revenue, central level contribution margin of 22% increased approximately 430 basis points in the quarter compared to 17.7% in 2025. Compared to 2026, central level contribution margin increased 2.7% from $51.4 million. As a percentage of revenue, increased 20 basis points compared to 21.8% in the same period. Sales and marketing expenses of approximately $8.1 million increased 4.9% compared to 2025, due to higher wage rates. Sales and marketing expenses increased by approximately 6.2% compared to 2026, driven by marketing spend timing. Corporate general and administrative expenses of $26.6 million decreased 5.3% compared to 2025. The decrease was primarily due to a decrease in legal and consulting fees. Corporate, general, and administrative expenses decreased 12.1% compared to 2026, primarily due to reduced headcount associated with organizational restructuring, lower contracts and consulting costs, decreased legal expenses, and the timing of software license fees. Net income was $11.8 million for the quarter, compared to a net loss of $13.5 million in 2025. We reported net income per share of 8¢, and our weighted average share count was approximately 136.4 million shares for the quarter on a fully diluted basis. Adjusted EBITDA was $22.2 million for the quarter, compared to $5.9 million in 2025, and $17.6 million in 2026. Our adjusted EBITDA margin was 9.2% for the quarter, compared to 2.8% in 2025, and 7.5% in 2026. We do not add back losses incurred by our de novo centers in the calculation of adjusted EBITDA. De novo center losses are defined as net losses related to preopening and start-up ramp through the first twenty-four months of de novo operations. For the second quarter, de novo losses were $4.7 million, primarily related to our Tampa and Orlando centers in Florida. This compares to $4 million of de novo losses in 2025 and $3.9 million of de novo losses in 2026. Turning to our balance sheet, we ended the quarter with $83.2 million in cash and cash equivalents, plus $42.8 million in short-term investments. We had $69.9 million total debt on the balance sheet, representing debt under our senior secured term loan revolving credit facility and finance leases. For the second quarter, we recorded positive cash flow from operations of $21.4 million and had $2.4 million of capital expenditures. Building on the strength we saw in 2026, I would now like to walk through our updated fiscal year 2026 guide. Based on information as of today, we are revising our fiscal year outlook from the guidance we shared in September, except for our ending census, which remains unchanged. We expect our ending census for fiscal year 2026 to be between 7,900 and 8,100 participants. In member months, to be in the range of 92,900 to 95,700. We are projecting total revenue for fiscal year 2026 in the range of $925 million to $950 million, and adjusted EBITDA in the range of $70 million to $75 million. And finally, we anticipate that de novo losses for fiscal year 2026 will be in the $11.5 to $13.5 million range. As we look toward 2026, we have increased our guidance based on the following factors. First and foremost, we are seeing continued improvement in the operations of the business each quarter, as our operational and clinical value initiatives produce results. Second, we have had success in reinstating participants who had previously lost Medicaid coverage, which reduced the impact on member months and top-line revenue relative to our original expectations. Third, Medicaid rates for the fiscal year are higher than our original estimates. And fourth, Medicare risk scores were less affected than we originally anticipated due to the phased-in implementation of risk adjustment model version 28 effective January 1. Overall, these factors contribute to improved visibility and give us more confidence in our performance for the remainder of fiscal year 2026. In closing, we remain focused on disciplined execution for the remainder of the fiscal year. We believe our updated guidance more closely reflects our stronger-than-expected performance to date in our current view of the operating environment. Operator, that concludes our prepared remarks. Please open the call for questions.
Operator: Thank you. Press 11 on your telephone and wait for your name to be announced. To withdraw your question, please press 11 again. And our first question comes from Benjamin Rossi with JPMorgan. You may proceed.
Benjamin Rossi: Hi. Afternoon, everyone. Thanks for taking my questions. So just on the back half EBITDA progression following the raise, in context of your year-to-date adjusted EBITDA margin coming in north of about 8%, my math here kind of suggests back half margins are coming maybe closer to a mid-seven EBITDA margin as you move forward with these restructured operating costs. Just walk through some of the variables going into those margin expectations and maybe how you're thinking about margin progression for the remainder of the year?
Ben Adams: Yes. Yeah. Hey, Ben. It's Ben Adams. How are you? Yeah. What I would say is remember that the third quarter for us is always the soft quarter, and there are probably a couple things going on in there. One is when we go through the open enrollment period at the end of the year, we often have slower enrollment gains in the first couple months of the third quarter. You've seen that happen over the last several years. And I think our expectation is you'll probably see something similar like that evolve this year. The other thing I think to be mindful of is the flu season, which has been, you know, particularly bad this year. We were talking earlier about the fact that the vaccine was only partially effective against the flu. And saw a relatively high incidence of the flu going into year-end and in through January. And so our expectation is we may see a little additional pressure on that side in Q3. You know, it's all, you know, it's all preliminary at this point because the data is just coming in. But because of that, I think what you'll see is, you know, sort of the softer third quarter that we typically exhibit. And then you'll see a return to a more normalized Q4 growth rate that you've seen. So that will just play through the margins just naturally.
Patrick Blair: Then I might add to that just the continued work we're doing on the Medicaid redeterminations. You know, as I shared in my prepared comments, we made a tremendous amount of progress and some aspects of that work have worked out better than expected, but it's still a work in progress. Still a continued effort to ensure that our enrollment and our enrollment applications are being processed in a timely fashion. And so I think we were also cognizant of that as we put the guidance forward.
Benjamin Rossi: Great. Appreciate that. And I just I'm kinda flipping over to with the shift in v28 beginning earlier this year. I know you're only a month in. But just hoping to better understand your thinking on the impact to your maybe your raw risk scores and how that might flow through to subsequent graph scoring for some of your members. I appreciate there's a lot of variables in here with some of the changes to the HCC for conditions like dementia and CKD, and you might have the frailty score come in there. Just following the guidance raise, can you just maybe help us understand how any of the back half guidance factors, those changes flowing through? I know it's only 10% at this point, but just trying to get an idea of how that maybe impacts your rates, how that could be impacted maybe overall by rates and when that on the other set of the variables.
Patrick Blair: Yeah. I mean, I'll start with more of kind of a macro view, and then let Ben talk about the flow through to risk scores. You know, I think the first point is we share more in common with, you know, the Medicare rate adjustment model than we share differences. You pointed out, you know, a couple differences. You know, but I also just remind folks that only about 45% of our total per member month premium is actually Medicare. And so for that reason, and the fact that v28 is a phase-in for PACE, it has moved from a five-year phase-in to a three-year phase-in, but still is a phase-in. So we're sort of structurally less exposed to v28, you know, when comparing to other MA plans. And when you think about the frailty adjustment, you know, that is not inconsequential. You know, as it were. It is one of the some of the beauty of the system for PACE is that it, you know, it captures the disability and functional status that wouldn't otherwise be reflected, you know, in a diagnosis alone. You know, someone can have a severe set of functional disabilities that relates to bathing, dressing, eating, you know, using the toilet, walking, without necessarily having a dramatically different diagnosis than someone that say has fewer diagnoses. So there is a real opportunity for us as it relates to the differences that exist. And, you know, there actually is a floor on that frailty adjuster of, I think it's point one two nine. So, you know, I just want to point out that we do share a lot of the same challenges that the rate notice revealed. Preliminary rate notice revealed last week. But at the same time, there are some notable differences. And I'll let Ben maybe share through how he thinks about the flow through.
Ben Adams: Yeah. You know, I think that Patrick pretty much hit it. I think the one thing I would say is that when we went through and did a reforecast of the business, we factored in our latest thinking about what the impact is going to be over the next two quarters till we get to the end of our fiscal year. And we think we've kind of captured appropriately in the guidance.
Benjamin Rossi: Appreciate the additional color there. Thanks.
Operator: Our next question comes from Matthew Gillmor with KeyBanc. You may proceed.
Matthew Gillmor: Hey, thanks. Quick question. Good afternoon. I guess I wanted to start off on the census growth that was, you know, I think a bit stronger than at least we expected, and there was some commentary around being better in terms of the work you've done on Medicaid return redeterminations and improving your processes. I thought I might just ask sort of where you're seeing more success. Is that on your side and your processes, or has there been some success in just the processes at the state level and getting approvals through?
Patrick Blair: Thank you. I'll let Ben kind of clean me up here. But, you know, I think there's a couple of ways to break this apart. You can think about the processes for which we sort of have complete control of. And, you know, that involves a very sort of rigorous let's call it kind of a patient accounting system. Where we can really match someone's eligibility to the premium that we receive. And we can reconcile that and we can track that throughout the company and in some ways, think of it as sort of a workflow management process as well where we're constantly sharing data between our finance organization, our enrollment organization, and our local centers on where follow-up is needed, etcetera. I think our progress in the first half, first couple quarters of the year has been on what we control. The other part of this is at some point, we're essentially handing files off, enrollment files off to the state. And depending on the state, there can be, you know, different levels of work that's required on their end. I think going forward, I think our caution is, you know, not to be overly confident about what we've accomplished internally, but we have to be mindful of where the states are and the resource challenges they're grappling with and how do we ensure that we're being as sort of collaborative as we can, timely as we can. And producing very high-quality data that allows them to do their job very effectively. That's kinda how we break it up. I'll let Ben kind of...
Ben Adams: Sure. Yeah. No. I think Patrick hit it pretty well. I guess what I'd say you may remember from our prior earnings calls that we had a number of cases at the end of the fiscal year where people had lost their Medicaid coverage. And we had assumed that there'd be some attrition in our census over the first six months of this year as that happened. As we said, I think before we ended up getting a lot more of those folks re on Medicaid than we originally anticipated. Right? So that provided us a little bit of an enrollment cushion in the first six months of the year. The other thing that's nice about it is because a lot of them got reestablished relatively early, you kind of get that compounding effect of the member months. So that gave us a little bit of a member month cushion going in. You know, we're through most of that now as of the end of the fiscal year. And now we're on what I think of as our regular glide path of enrollments. And so we're seeing gross enrollments that are doing pretty well, coming in generally in line with what we'd expect. We're probably seeing a little bit more in disenrollments than we'd like, and so we're spending a lot of time on that. But you know, as we said in the beginning of the year, there are a lot of factors that are kind of coming into play into enrollment numbers this year because of the washing through of some of the changes I talked about before. But I think we seem to be tracking okay.
Matthew Gillmor: Got it. That's very helpful. And then just as a quick follow-up, how does that influence the reduction in you mentioned there's a reduction in revenue write-offs. Any sense for the magnitude of that and was there some was there any sort of one-time pickup, or is that just a better go forward you think about some of the improvement in these processes?
Ben Adams: Yeah. I mean, I can tell you sort of conceptually how it all works. Which is we go through a process that's pretty rigorous on the revenue write-offs. Where we look at individual participants, where they are in the redetermination process or even the enrollment process in some cases, and we come up and we look at historical write-off patterns and then we also go through and risk score them depending on where they are in the process. And compare those two results to figure out how we actually set our revenue reserves. The good news is we built a new system we didn't have last year so we can actually do this in a much more methodical fashion than we could in the past. And that was the patient accounting system, which Patrick referenced before, which is built in Salesforce for us. It's been a great tool for us. So we can track those people going through a lot more easily than we could before. So it's a much tighter process. So when we go through and set our monthly revenue reserves, we can be much more precise in the way they play out. And we can put in what I would think of as sort of an appropriate level of conservatism. Without being, you know, overly conservative. So I think the process has worked really well for us in the last six or seven months. I think we're pleased with the way it's going. I'm not sure we'd be ready to draw any conclusions yet about how far ahead we are in revenue reserves because those patterns tend to adjust month by month. But right now, I would say we're tracking to expectations.
Matthew Gillmor: Got it. Thanks a lot.
Operator: Thank you. And as a reminder, to ask a question, please. And our last question comes from Jared Haase with William Blair and Company.
Jared Haase: Yes. Hey, guys. Thanks for taking the questions and congrats on the results. Maybe just unpack a little bit more, and I guess this is a little bit related to the question that Matt just asked. But, you know, the comment, Patrick, that you made on participating participant experience, I'm curious if you could unpack just a little bit more, you know, some of the specific areas within that patient journey that you believe could be the most impactful? And then I guess a related question, you sort of alluded to potential improvement in patient retention. You know, I'm wondering if there's any way to contextualize just where you sit today from a retention standpoint and, you know, where that might go, as you implement some of these initiatives.
Patrick Blair: You know? Yeah. Let me just maybe start with just kinda giving you the order of magnitude. And we talked about kind of voluntary disenrollment, it's about 6% annualized on an annualized basis. So, you know, just gives you a sense of kind of what we're the magnitude of sort of what we're faced with as our as the denominator, our census grows. And so where we see some of the opportunities, you might expect not unlike other service providers, we're very interested to understand how what people expect when they enroll, how does that line up to what they experience once they come to the center and experience, you know, sort of the day in a life of a PACE member. And as we dig into data like that process, it sort of covers everything from the sales process through sort of onboarding communications to onboarding them physically in the center. And we've identified there's our example where people will disenroll within a short period of time. So there could be a misalignment between what they expected and what they experienced. And so tackling that end-to-end onboarding experience really isolating the moments of that experience that matter most, and then understanding, you know, where there may be misalignment or opportunity and then sort of defining that and determining if we can't build kind of the InnovAge Holding Corp. way one single way that if you walked into any center of in the country, you'd get the exact same sales experience. You get the exact same onboarding experience, etcetera. And so you could take onboarding as a part of that. You could go further to think about, you know, grievances. In the world of PACE, grievance means something very different than a typical, say, managed care or health plan model. Grievances are kind of our eyes and ears on where participants are satisfied or dissatisfied. As we dig in, have better data, we're able to profile and trend grievances and identify specific opportunities for improvement that exist. And so using grievance data to define could be another great example. How do we create a better experience to avoid that in the future? Service recovery. If something goes bump in the night, how do we respond to it? How quickly do we respond to it? Do delays in response, can they impact disenrollment? So think about it as we're sort of analytically breaking down that entire experience all the way through with another offering. To the point that one of our participants is approached, say a Medicare Advantage offering, a special needs plan offering, how do we if we lose people there, what kind of an experience can we create so that we don't lose as many people? So it's a big opportunity for us to get our arms around it. You know? I think everything we're doing today to improve the core operations of the business better execution, better accountability. Allows us to now tackle that. And so as we look forward, to where's the potential value unlocks for the company, think participant experience is one. And this notion of, I'll call it, ordering variation. Practice pattern variation. You know, that's another where the data clearly shows us meaningful variation in ordering patterns, intensity, duration of services across clinicians, across markets. Some of that variation is clinically appropriate. Some of it's not adding value to the participant. So in terms of magnitude, that in participant experience, these are not one-time levers and it's not a small and it's not a small one. We think of it as an opportunity to create more durable multiyear opportunity within our model and we're now ready as a business to take on those bigger challenges. And so as we look forward, those are some of the opportunities we see for the company.
Jared Haase: Got it. I really appreciate all the detail. That's super helpful. You know, as I think about sort of the implications of, let's say, retention and patient experience, one follow-up that comes to mind. I assume you typically see sort of MLR improve as patient cohorts mature over time. So are you kind of explicitly thinking about this as, you know, if we can drive that retention better by, you know, whatever number, 50 basis points, 100 basis points, whatever number, that that kinda directly flows to MLR by just, you know, further increasing the mix towards those more tenured? Is that fair to say?
Patrick Blair: It is fair to say. It's an astute question. And, you know, Ben and team are spending a lot of time right now really trying to understand those cohorts. You know, in our model, we kind of roughly say, tenure and pace is like high school. Have freshmen, sophomores, juniors, and seniors. And we're starting to look at each of those cohorts and the resources they consume, the needs they have, and really trying to understand, you know, back to this notion of kind of elevating our consumer centricity model understanding each of those cohorts, their needs, and their contribution financially is something that we're really digging into. And so to your point, for many members, there is a period of time as they progress from a freshman to a senior, there are points in time where contribution is greater. There's also points in time where, let's say, an assisted living facility may become the most appropriate solution for that person. You might see an impact contribution. And so we're really starting to dig into that data, see some really interesting opportunities to create a much more informed participant experience that's dialed in to the needs of specific cohorts. At the same time, trying to understand how the mix of those cohorts can impact the company going forward. And that's where there's a lot of work. Ben, anything to add?
Ben Adams: No. I think that encapsulated it really well. You know, the nice thing about pace rates, obviously, is they're set to basically take care of a portfolio of participants who are at all different places along their journey. Right? So as long as you maintain the right proportions in your mix, the rates work very effectively. And so as we see steady enrollment growth over periods of time, the mix is much more predictable and more closely aligns with what goes on on the rate side. Probably the only thing I'd add to the disenrollments is the interesting thing about voluntary disenrollments because they really happen in the first six months of a participant's experience with us. So when we're going through and developing programs to make sure that we minimize those voluntary disenrollments, there's really a discrete period of time. Because we know once people have been with us for six or nine months, they're sort of stable in the program and they like the program and they stay. It's during that first six months or so they're getting comfortable with the PACE program, getting used to how to use it in a slightly different set of expectations versus they had before. That's the period that we really need to focus on. And today, we've got roughly probably 10% to 12% of voluntary disenrollments over the course of the year. If we can bring that down a couple of points through a bunch of these initiatives, it's very beneficial to the health of the organization.
Jared Haase: Perfect. Once again, I appreciate all the detail, and I'll go ahead and leave it there and hop back in queue.
Operator: Thank you. This concludes the conference. Thank you for your participation. You may now disconnect.