Agilon Health, Inc. (AGL) Q2 2026 Earnings Report, Transcript and Summary

Hello, everyone. Thank you for joining us and welcome to the Agilon Health Second Quarter 2026 Earnings Call. After today's prepared remarks, we will host a question-and-answer session. [Operator Instructions] I will now hand the conference over to Evan Smith, Senior Vice President, Investor Relations. Evan, please go ahead.

Thank you, operator. Good afternoon, and welcome to the call. With me are our CEO, Tim O'Rourke, and our CFO, Jeff Schwaneke. Following our prepared remarks, we will conduct a Q&A session. Before we begin, I would like to remind you that our remarks and responses to questions may include forward-looking statements. Actual results may differ materially from those stated or implied by forward-looking statements due to risks and uncertainties associated with our business. These risks and uncertainties are discussed in our SEC filings. Please note that we assume no obligation to update any forward-looking statements. Additionally, certain financial measures, which we will discuss in this call, are non-GAAP financial measures. Non-GAAP measures are supplemental and not a substitute for GAAP results. However, we believe that providing these non-GAAP measures helps investors gain a better and more complete understanding of our financial results and are consistent with how management views our financial results. A reconciliation of these non-GAAP financial measures to the most comparable GAAP measures is available in the earnings press release and Form 8-K filed with the SEC today. And with that, let me turn the call over to Tim. Timothy O’Rourke: Good afternoon, everyone, and thank you for joining us today. For those I have not yet had the opportunity to meet, I'm Tim O'Rourke. I joined Agilon as Chief Executive Officer in early May. Over the past 90 days, I have met with nearly all of our physician partners, shadowed PCPs, and have witnessed firsthand how we can help and continue to improve how they care for their patients. Their passion and caring reinforces our mission at Agilon, the proximity and durability of our physician partnerships, and our absolute responsibility to support these physicians in their work across all of our communities. I have been engaged in good discussions with our payer partners and have engaged with the Agilon team. I am listening, learning, and focusing on key areas to drive additional value for all of our stakeholders. I came to Agilon because I believe it sits at the center of where value-based care is going. By partnering with community-based primary care physicians and providing them with enhanced economics, technology, and clinical tools, we enable PCPs to focus on what they are trained to do, keeping patients healthy. To further our mission, Agilon continues to advance new clinical, quality, and AI initiatives that will build upon our historical success in delivering improved patient outcomes while reducing unnecessary medical costs. We believe our collaboration with and proximity to our PCP partners enables us to embed solutions and insights directly into their daily workflows, supporting improved patient care. In turn, our proximity and understanding of our patient populations place both Agilon and our PCP partners in what we believe is the best position to have meaningful impact on members' lives. Against that backdrop, I am pleased to report that Agilon exceeded our second quarter guidance across our key financial metrics. We are also raising our full year 2026 guidance driven by 3 key components. Our performance in the second quarter, the improved medical cost trend we began to see in the first quarter, and a stronger-than-expected performance of our Burden of Illness program that reflects the quality and completeness of the care our physician partners are delivering. Our performance for the quarter reflects our disciplined operating approach and execution across our PCP network. With advances in our enhanced data pipeline, we continue to gain earlier insights to further improve both operational execution and support our PCP partners to drive improved patient outcomes through earlier identification, diagnosis, and intervention of high-risk conditions and gaps in care. With respect to medical cost trends, we are seeing early signs of moderation in macro cost trends as well, as the impact from systematic work at Agilon, investments and execution in clinical and quality programs. Claims and clinical data power the model, helping us stratify high-risk patients more effectively, trigger real-time intervention sooner, and avoid unnecessary medical costs while improving outcomes and member satisfaction. These are not short-term fixes. We believe these are structural changes to how care is delivered in our markets. But I don't want this call to be just about a strong quarter. I want to talk about what is happening inside Agilon that gives us confidence, not just in 2026, but in the future. We feel the results are evidence that our transformation efforts are gaining traction, our physician partnerships continue to strengthen, and our operating model is becoming increasingly resilient, scalable, and durable. At Agilon, our mission remains unchanged, empowering primary care physicians to transform health care for seniors. Everything we do begins and ends with supporting our physician partners in delivering better outcomes, improving the patient experience, and reducing the total cost of care. As we look across our business today, we believe we are positioned to capitalize on the long-term shift toward value-based care. Over the past year, the Agilon team has been highly focused on strengthening the fundamentals of our platform. Our transformation initiatives have centered on 3 priorities. First, driving greater clinical and operational performance across our markets through more consistent execution and deeper physician engagement. Second, enhancing our data, real-time insights, and risk management capabilities to improve both care delivery and financial predictability. Third, creating a more scalable operating model that allows us to support physician groups with greater efficiency while maintaining the local market expertise that differentiates Agilon. We see measurable progress across each of these areas, contributing to stronger medical cost performance, improved care management effectiveness, and better alignment between operating discipline, clinical outcomes, and financial results. The underpinning of the model remains, providing our PCP partners with greater insights and tools embedded in the workflow at the point of care to reduce unnecessary medical costs while driving better patient outcomes. To drive additional improvement, we will look to further reduce variability across our PCP network, implementing operating programs, and embedding technology to drive improved performance across the Agilon team and our PCP partner network by unlocking deeper insights and standardizing best practices at scale. A key element of this will be continued investment in AI tools to drive greater operational and clinical insights, creating more efficient workflow and improved member care, reducing administrative burden, and surfacing evidence-based interventions so physicians can allocate their time to the highest acuity patient populations. We view AI not as a replacement for physicians, but as a force multiplier for primary care. We are also making significant progress in advancing evidence-based clinical pathways across our network. Through greater alignment around proven care protocols, we are improving consistency of care delivery while preserving physician autonomy. These pathways support better management of chronic disease, more appropriate specialty utilization, and ultimately better health outcomes for the populations we serve. The CHF program is deployed across 90% of our markets. It is our most mature pathway, and as such, it serves as the clearest proof point for what these programs can deliver. As we have stated before, as a result of the program, our inpatient first diagnosis rates within our network have improved from approximately 25% to less than 5%. These are the types of clinical outcomes that are possible when we more closely link payment and care delivery. We are also expanding our pharmacy-integrated approach for heart failure patients as fewer than 10% of heart failure patients nationally are on the appropriate medications. We are working systematically to improve that rate for our population, which we expect to further reduce downstream complications and avoidable admissions. We are also moving decisively with our lung health and our dementia guideline-directed programs with the dementia pathway expected to be rolled out to a number of our markets by the end of the year, and the continued expansion of the COPD program. Our focus for both programs is on earlier identification, expanded screenings, and increased utilization of advanced diagnostics by our physician groups, each of which is designed to drive earlier intervention, improve treatment adherence, and prevent avoidable complications and hospitalizations. Looking ahead, we also remain highly encouraged by the opportunities emerging in the next phase of the value-based care ACO models. This is evidenced by our recently announced ACO REACH program results for the 2024 performance year, which found delivery of $229 million in gross savings and an average quality score of 96% across 8 ACOs. We believe our continued strong performance in ACO REACH establishes a strong foundation as we move into 2027. For 2027, the Medicare Shared Savings Program and the future ACO LEAD model represent important opportunities to further align incentives around quality, affordability, and patient-centered care. We are evaluating the best path forward for both existing and new ACO partners as we enter 2027, with the expectation for both to be positive contributors to our performance in the coming years. This quarter's results confirm that our strategy for delivering on our mission is working. We exceeded in our raising guidance. Our transformation is advancing. Our physician partnerships are deepening. And our investments in AI and technology are beginning to show the kind of clinical impact that justifies our conviction. Our competitive advantage is not a product feature nor a technology platform alone. It is our proximity to the patient mediated through a trusted primary care physician partner who knows that patient, lives in that community, and has aligned economic interests in keeping that patient healthy. That is extraordinarily difficult to replicate. You cannot build it in a quarter. You build it over years through thousands of individual physician relationships and the trust that forms when a doctor sees that Agilon's model is successful in improving patient outcomes. Those relationships create richer clinical insight, earlier intervention opportunities, stronger patient engagement, and ultimately better outcomes. We believe the future of value-based care will increasingly reward organizations that can combine sophisticated technology, actionable data, and local clinical relationships. We believe Agilon sits at the intersection of all three. We have more work to do. We are working to reduce physician and group performance variability. We are establishing and advancing clinical pathways for earlier high-risk patient identification and intervention in order to improve outcomes and quality, as well as overall cost. Markets are still maturing, capabilities are still improving, and there are patients whose outcomes we have not yet fully transformed. I am confident Agilon is on the right path. And that path leads to a genuinely better health care system for the communities and patients we serve. I want to thank our physician partners, our employees, and our health plan partners for their continued commitment and collaboration. Your dedication is the foundation of our success and the reason we continue to make meaningful progress in our mission. With that, I'll turn the call over to Jeff to discuss our financial results and updated outlook in greater detail.

Thank you, Tim, and good afternoon. As Tim mentioned, we're pleased by our second quarter results, which exceeded the high end of our guidance for medical margin and adjusted EBITDA. The positive results and increase to our full year guidance were driven by better-than-expected performance in the diagnosis, assessment, and treatment of our members in 2025, and favorable medical expense development for both 2025 and the first quarter of 2026. This, combined with our enhanced data visibility and estimation process, provide confidence in the underlying performance of our business. I'll cover 3 things today. First, our strong second quarter financial performance. Second, an update on cost trends in the macro environment. And finally, our increased full year 2026 outlook and third quarter guidance. First, let me highlight our second quarter performance. Medicare Advantage membership at the end of the second quarter was 437,000 members compared to 426,000 members at the end of Q1 2026 and 498,000 members in the second quarter of 2025. As a reminder, the year-over-year decline reflects our disciplined, profitability-focused approach to contracting in 2026 and measured approach to growth. ACO REACH membership for the second quarter was 112,000 members compared to 110,000 in Q1 2026 and 116,000 in the second quarter of 2025. As a reminder, a subset of our Medicare Advantage members remain in care coordination fee arrangements. These contracts are primarily net neutral to Agilon with an incentive opportunity based on quality and cost performance. We continue to view these as a long-term risk-adjusted growth opportunity to potentially recontract these members to full risk when appropriate. Revenue for the second quarter was approximately $1.5 billion compared to $1.4 billion in the second quarter of 2025. The year-over-year increase reflects the membership decline I just mentioned, which was more than offset by more constructive rates for 2026 from the CMS benchmark, favorable payer contracting, and higher revenue associated with improved diagnosis of our members' health conditions. Our performance in the second quarter was driven by higher-than-expected revenue associated with the risk adjustment, which is now estimated at approximately 3% year-over-year net of the V28 impact. This is above our prior estimate of approximately 1.5% increase at the end of the first quarter. We continue to see the benefit of the enhanced data pipeline, which provided additional visibility from intra-quarter midyear risk adjustment data from payers, which is validated with midyear MAO-4 and MMR data. It also reflects the success of our Burden of Illness program, which serves as the foundation for our clinical and quality programs through the treatment of patients' comprehensive health conditions. Moving on to medical expense. The cost trends from the second half of 2025 continue to develop favorably. This is supported by early signs of potential moderation in macro trends as mentioned in public commentary by the large MCOs. We also believe it reflects Agilon's ability to impact unnecessary medical costs as we continue to advance our clinical and quality programs. The full year 2025 cost trend is now estimated at 5.8%, down from the 6.2% we estimated when we reported our first quarter results. First quarter 2026 cost trends have developed favorably as well and are now in the low 6% range. In addition, while we have seen some moderation in cost trends, we recorded a second quarter cost trend in the low 7% range, which reflects our prudent reserving approach given the limited paid claims data we have at the end of any given quarter. Medical margin for the second quarter was $197 million, compared to negative $53 million in the second quarter of 2025. This exceeded the midpoint of our second quarter guidance by approximately $74 million. This was driven by favorable prior year development of $22 million, the year-to-date impact from our revised risk score estimates of $38 million, and favorable first quarter cost trend development of $14 million. Adjusted EBITDA for the second quarter was $70 million compared to negative $83 million in the second quarter of 2025. This exceeded the midpoint of our second quarter guidance by approximately $50 million. This was driven by favorable prior year development of $22 million, the year-to-date impact from the increase in our revised estimate for risk adjustment of $20 million, and favorable development of first quarter cost trends of $7 million. In addition, results include ACO REACH adjusted EBITDA contribution of $7 million, which was roughly in line with our Q2 guidance. On the balance sheet, we ended the quarter with $257 million in cash and marketable securities and $83 million of off-balance sheet cash held by our ACO entities. We continue to expect year-end 2026 cash of at least $125 million. Now let me turn to our outlook. We are revising our full year 2026 guide to reflect the strength of the second quarter results, including better-than-expected revenue associated with higher estimated risk scores for the year and the second quarter performance. Using the midpoint of our guidance ranges for the full year 2026, we now expect revenue of approximately $5.8 billion, medical margin of approximately $485 million, and adjusted EBITDA of approximately $85 million. The increased full-year 2026 guidance reflects the year-to-date performance, prudent assumption for cost trends in a 7% range for the remainder of the year, and the positive impact for the second half of the year from the increase in our revenue associated with the better-than-expected risk adjustment estimate contribution to 3% net of the V28 impact. It also includes ACO REACH adjusted EBITDA between $25 million and $30 million. Our confidence is rooted in the same key tenets we have outlined throughout the year: operating execution across our clinical and quality programs, improved data visibility and forecasting from the enhanced data pipeline, payer contracting improvements that emphasize profitability for both medical margin and cash flow, and a conservative cost trend assumption. Turning to the third quarter outlook, utilizing the midpoint of our guidance ranges, we expect revenue of approximately $1.46 billion, medical margin of approximately $110 million, and break-even adjusted EBITDA. I will close by saying we are encouraged by the continued progress across the business. The work our physician partners and employees are doing every day is showing up in our results, and we believe the foundation we're building supports durable, predictable performance into 2027 and beyond. With that, operator, let's move to the Q&A portion of the call.

[Operator Instructions] Your first question comes from the line of Jack Slevin with Jefferies.

Maybe just to start here, I just want to confirm it because the line cut a little. That PYD, the $22 million, that's the only item that would make the first half not reflective on the EBITDA line of sort of what we've seen in the first half as far as what we have both now in 1Q and 2Q. Is that a fair way to frame it?

Yes, yes, that's a fair way to frame it, Jack. Just recall, we did have some favorable prior year development in the first quarter, but we offset that with additional accruals on Part D for 2025 dates of service. So you're right. On the 6-month, the $22 million is really the only piece that's, I would say, included in EBITDA from prior period.

Okay. I appreciate that, and then to get to my real questions here. So, a little bit forward, but on the current year, you know, with the flat EBITDA in 3Q, the really strong first half performance, it obviously assumes a dip off in 4Q. I guess just balancing maybe to take a step back on sort of what you're thinking from a cost trend perspective, in those back 2 quarters and how that accounts for, you know, pulling back some of the exposure you had in-year? Just thinking about how a lot of the plans are calling out steeper seasonality, but Part D is the big driver in MA. So that's the question on the in-year, and then for next year we'd love to just get an update on what you've seen now that we sit here in August from early conversations with payers around 2027 bids and then any potential recontracting that might need to get done.

Yes, yes, so that's a lot there, Jack. But first, I'll get into the Part D. So one thing to remember for us is that we record Part D net in revenue. So it really doesn't impact seasonality like it does the payers. So as you think about our income statement, I would think about the way it was before the changes to Part D. So your highest earning quarters are in the first half. Your lowest would be in the second half, right? That's the way I would frame it. The second piece is really related to contracting. I would say it's early. You know, we don't have the bid detail yet. We ultimately get that bid detail in the third and late in the third quarter. And obviously we have to complete our contracts by the end of the year. Again, discussions with payers have been productive. We're in continuous conversations with them. We believe that they recognize the value that we bring in quality, cost of care, and overall patient satisfaction. And as we think about contracting into next year, we're really focused on the same disciplined approach, including profitability, gaining economic value for the value we deliver in quality and improved outcomes, and obviously continuing to reduce our exposure to Part D. And we're less than 15% of our book has Part D exposure now. We look to continue to further reduce that. And then just as a reminder, you know, we touched 80% of our contracts last year and 50% of them are open. So again, it's early. We expect to hit full stride in the third quarter and get them all wrapped up by the end of the year.

Your next question comes from the line of Jailendra Singh with Truist Securities.

Congrats on a strong quarter. So I want to talk about the 2026 medical margin guidance. Updated guidance clearly includes current year medical cost performance. I think we tabulate $36 million PYD year-to-date and some changes around risk adjustments. So as we think about 2027, not looking for guidance, but want to make sure we have the right 2026 jump-off point. Should we think of medical margin guide net of PYD a good starting point, or are there other items we should be aware of as we think about the building blocks for next year?

Yes, sure, Jailendra. I can walk you through that. So first is on PYD, it's in the medical margin line, it's roughly $22 million. So it's both $22 million on the medical margin and $22 million on EBITDA, given our performance last year. So there's really 100% flow-through on that because a lot of our partners were in negative positions last year. And so if there's improvement, we get 100% of that benefit coming into this year. So that's really the only thing in the 6-month period that I would call out is in the medical margin line. So hopefully that helps you get to what I call the jumping-off point.

Okay. And then, Tim, thanks for sharing your first few months of experience and your focus area. Clearly, the company has seen some nice operational improvement over the past 12 months, but curious on how you think about the next phase for the company. Do you see the growth coming from existing markets and payer relationships? Or will your strategy be more get more opportunistic in terms of adding new physician markets? And related to that, what financial and operating thresholds would you want to see before committing meaningful capital to new market growth? Any color on that would will be helpful. Timothy O’Rourke: Jailendra, I really appreciate the question. Thanks for that, and it's great to be here. Look, as we kind of think about growth and the next phase of growth, we continue to remain focused on the execution and strengthening the foundation of our current markets. Those current markets have additional growth opportunities as we sit here today. Jeff talked a little bit earlier about care coordination fee contracts. Converting those into full risk is a growth opportunity that exists in our current markets today. We have the ability to reengage with our partners who we did not come to terms with, and our payer partners in 2026, and revisit those agreements. We have the ability to take a look at our ACO relationships with partners and look at those as new opportunities for the organization with both LEAD and MSSP. And then we also have historical Agilon opportunity in our current markets through the MA program and ACOs. As respect to new markets, as we sit here today, we are going to remain measured and disciplined as we approach that new market opportunity and continue to kind of assess those market conditions moving forward. I want to remind you of 2 things. First of all, the demand for our model is strong. The demand sits there today, we continue to get inbounds from potential new partners. And if you remember correctly, before we put a pause on growth, we were in conversation with several new partners that we can reengage with at this point in time. A reminder, we have a pretty long implementation timeframe on new markets, I think 12 to 18 months. So we're really evaluating that new market growth as we look at 2028.

Your next question comes from the line of George Hill with Deutsche Bank.

Yes, it's Max Young for George. You talked about medical cost trend trending favorable in the quarter. Could you provide a little bit more detail on what you're seeing across inpatient, outpatient, pharmacy, and supplemental, and expectations embedded in the guide?

Yes, certainly. I think what we've seen is while the trends are still high, they're a little bit lower in inpatient and surgical and ER. And so we've seen that moderate a little bit. So while they're still high from a historical perspective, I think if you look year-over-year, we're seeing trends come down a little bit in those categories, I think consistent with what other public payers have said. And then I think this circles back to Jack's question that I missed earlier here, but as we think about cost trend for the back half, what we've assumed in this guide is roughly 7% for Qs 2 and 3. And as a reminder, we recorded in the low 7% range also for -- sorry, Q2, 3, and 4, all roughly in the low 7% range.

Got it. Just a quick follow-up. I don't know if it's too early to discuss membership outlook for next year right now, but could you talk about the key puts and takes we should consider in modeling 2027 membership growth?

Yes, yes, certainly. It is a little bit early, right? We're in the contracting process now with our payer partners. But I think, as Tim mentioned, we have an opportunity for growth with the care coordination fee members. So there's opportunity to potentially go to full risk there. Additionally, there's potential growth, just organic growth in our existing markets as well, certainly on the ACO side. I think Tim discussed that. So I think it's a little early, but there's certainly opportunity for us to increase membership, not through new partners, as we mentioned, but there's certainly opportunity there.

Your next question comes from the line of Ryan Langston with TD Cowen.

Great, thanks. In the first quarter you had talked about a new risk contract that you had taken on. Can you maybe give us an update on how that particular new contract is progressing?

Yes, yes, certainly. I think recall we budgeted that at roughly break-even. I would say, you know, it's early. As you know, as we talked about, we don't have a lot of paid claims visibility for the second quarter. So really all we have is, you know, I'd say paid data for Q1, but it's in line with expectations and ultimately we just need a few more quarters under our belt to get a clear view.

Got it. And then on the enhanced data pipeline, can you just remind us how much of your membership is actually flowing through that? And if there's substantially more opportunity to enhance the performance of that pipeline?

Yes, absolutely. So data pipelines, above 80% of our payers are included in the data pipeline. I think I mentioned this in the past, but obviously we're starting with the largest payers and working our way down. And so progress towards the end is a lot more number of payers, so it will go slower, but we're certainly looking to continue to put more payers into the enhanced data pipeline. And so we've certainly made progress, and we'll update you as we go throughout the year.

Your next question comes from the line of Matt Shea with Needham.

Congrats on the really nice quarter here. Maybe kind of piggybacking on the last question with the data pipelines, obviously member risk score uplift was a nice improvement in the quarter. Anything to call out in terms of conditions driving this, just thinking as you better identify conditions and properly risk adjust, how that potentially aligns with your current clinical pathway programs? And then just in conjunction with that, how much of this 3% do you view as something that is potentially repeatable versus just a one-time catch-up as the data pipeline matures?

Yes, thanks for the question, Matt. You know, you're right, results were better than expected, really driven by the rollout and execution on our clinical programs in 2025. So the programs were ramping throughout 2025, so the results were back-end loaded. We did have some indication that we were performing well, which is why we increased our risk adjustment estimate in the first quarter. With additional claims run out in the midyear data, we now expect that increase to be roughly 3%. The important piece is that our members are now receiving the care that they need sooner. And as you think about 2027, given the rollout of our programs last year, we would still expect RAF to be a net positive contributor on a net basis next year, but probably not to the level we are experiencing this year. Tim, anything to add on that? Timothy O’Rourke: The only thing I'd add is just a reminder of the clinical pathway work that we do. CHF is a great example. As we identify these diagnoses earlier, we're able to create the right intervention for the patient and help support that physician. Again, a great example of that is heart failure diagnosis in the inpatient setting. As I talked in the opening remarks, for our population dropped from 25% to under 5%. So again, a great opportunity for us to identify with the physician conditions for that patient sooner, drive an earlier intervention, and keep them out of the hospital in the ER.

Okay, appreciate that. And then maybe continuing on the clinical pathways thread, I think last quarter you had talked about targeting COPD and dementia pathways in 50% to 70% of markets by the end of Q2. Just curious if you hit that, and then are you seeing any early claims-based benefit yet? Might still be too early, so maybe still kind of a back half of the year 2027 event, but curious on your thinking there. And then as we think about the evolution of those clinical pathways, any new programs you're starting to contemplate, areas you're starting to build out, or any kind of initiatives that we should maybe be aware of? Timothy O’Rourke: Yes, appreciate the question. This is Tim. I'll start and then hand it to Jeff. I think you're right, we continue to look at clinical pathways as really a continued opportunity to identify those chronic conditions early, help identify those patients for physicians, create those interventions, and help them with that identification at the point of care in their workflow and help them with early treatment. To your point, our next focus after CHF continues to be dementia and COPD. We're working through our markets in terms of the deployment of those pathways. We'll continue to progress with those as we kind of finish out the rest of the year. And if you take a look at our focus, I would say those are the 3 clinical pathways we're focused on as we run out the rest of 2026. Jeff, anything to add?

Yes, no, I think certainly there's opportunity there that we see, but, you know, I'd stick with my previous comment that, you know, I think we expect it to be a positive next year, but obviously not to the level this year.

Your next question comes from the line of Andrew Mok with Barclays.

Hi. What is the follow-up on the guidance raise. I think you beat the 2Q guide by $57 million and raised the full year guide by $60 million. The 2Q beat was related to the higher risk adjustment revenue. Is that isolated to the quarter or is that going to flow through for the balance of the year? And if so, would that contribute to the raise in the guidance?

Yes, so maybe I can take a second and kind of walk you through the bridge for the guide. So you're right, the Q2 performance compared to our previous midpoint, the previous guide midpoint was roughly $50 million ahead. And so you have Q2 performance, and then you're right, the risk adjustment, there is a second half impact. So I would call that roughly $19 million at the EBITDA line for an impact on the rest of the year for the improvement in risk scores. And then that's offset a little bit by incentive compensation and incremental annual wellness visit dollars. So obviously with the performance of the company, there's additional incentive compensation costs. And that kind of brings you down to roughly the new mid of $85 million. So I hope that helps.

Got it. That's helpful. And then maybe just a follow-up on the trend commentary. The favorability you called out in the quarter, was that what you observed in 2Q, or was that related to the 1Q trend revision that you recorded in the second quarter results, and any color on sort of like trend going from 6% to 7% would be helpful.

Yes, yes. There's a couple of pieces. First, we saw improvement in 2025. So recall we had 2025 and at the end of the first quarter, roughly 6.2% cost trend. That's now at 5.8%. So we had favorable development from 2025 dates of service. And then Q1, we initially recorded at 7.4% and that's now in the low 6s. And so there's favorability there as well. And again, as I mentioned before, we really have limited paid claim data for Q2, and so we felt it prudent to record a cost trend in the low 7% range.

Your next question comes from the line of Michael Ha with Baird.

And just another one on medical cost trends. In terms of monthly progression through second quarter, you know, now trends are getting into that 6% area. Was the degree of favorability relatively consistent throughout the quarter? Do you see any moderation as you move into June? And then on trend more broadly, you talked about like the macro backdrop improving. Are there any distinct like macro factors that you think might be pretty notable? For example, across inpatient, are you seeing better unit costs maybe from moderating provider coding intensity, anything to call out there?

Yes, Michael, thanks for the question. As I mentioned before, we really have limited paid claims visibility for Q2, and so not much to say on the specifics there. And additionally, I think as you look at months, right, you have to adjust for day count, etc. It's kind of hard to look at cost trends on a monthly basis is what I would say. So, really nothing more to add from that perspective. And on the cost trends, I think we mentioned earlier, the moderation in really inpatient and ER, still high trends from a historical perspective, but certainly lower than they have been last year. Timothy O’Rourke: Just to add, Jeff, on top of the macro trends. Michael, remember our clinical programs, our data, our interventions, we're actually starting to see the impact of that as well in our markets as we move forward. So again, that early identification, input into the physician workflow at the point of care, the intervention and treatment on an earlier basis. We're starting to see that pull through as well in our business.

Got it. Thank you. And one more question, just more higher level question into '27. When I think about the path into '27, I think last quarter you mentioned final rate notice about 5.3% starting point across your markets trend, and you're still assuming 7% in the back half of the year. I was wondering if you could bridge us from that starting point to potential margin recovery. Should we be thinking about it like, okay, you add on another 1 to 2 points in coding improvement, another 1 to 2 points of plan pricing benefit design, all that is before cohort maturation, like trend initiatives, as that being like potentially sufficient to drive revenue PMPM growth above trend? Or are there other missing components in that framework?

Yes, Michael, it is a little early for 2027, but I would just think broadly about the value creation levers that you've heard us talk about in the past. I think I've given you kind of a range on the net impact of risk adjustment. And then, you know, I think that's a good place to start, but it's early for us to really get too far ahead on 2027.

Your next question comes from the line of Daniel Grosslight with Citi.

This is Luis on for Daniel. Congrats on the quarter. I'll ask you another one on clinical programs. I know in 2025, you said, I think it's $25 million benefit from the clinical programs, which I think was largely from the quality of care program. And I know you spent a decent amount of this call talking about ramping up other programs. And my question is how much of the medical margin improvement in guidance this year is driven by the continued ramping of clinical programs. I'm just trying to parse out what is really just more macro benefits versus more the idiosyncratic initiatives.

Yes, yes, sorry, you cut out there at the end. But I think I have the question. The $25 million that you're talking about, that was really in 2025 related to our quality program. So the payers incentivize us to perform in quality, and we had $25 million of opportunity for 2025. What we've said in the past is that opportunity has doubled. I think the importance of quality has obviously increased for payers, and so there's more dollars on the table for us to earn. What we have in this guide is a consistent level of performance from '25 to '26. So although we're striving to improve our performance in quality, as far as guidance purposes are concerned, it's an equal level of performance from '25 to '26. So I hope that clarifies the number.

Understood. Thank you.

There are no further questions at this time. I will now turn the call back to Tim O'Rourke for closing remarks. Timothy O’Rourke: Well, I want to thank everyone for joining us and for all the questions here today. As you heard us discuss, we continue to stay focused on driving improved performance, executing it across our operations, and really delivering value to our partners, patients, and our shareholders. I want to thank all of our employees and partners for their continued dedication and collaboration to Agilon's mission as we continue to strengthen our model and relationships together. Have a great night, and we'll talk soon.

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