Matthew Gilmore

Matthew Gilmore asked about the drivers behind InnovAge's stronger-than-expected census growth, specifically inquiring whether the success stemmed more from InnovAge's internal Medicaid redetermination processes or improvements at the state level. He also followed up on the magnitude of the reduction in revenue write-offs and whether it represented a one-time pickup or a sustainable go-forward improvement.

Answer

CEO Patrick Blair stated that initial progress was primarily due to InnovAge's internal control over rigorous patient accounting systems and workflow management for eligibility and premium reconciliation. CFO Ben Adams elaborated that more participants who had previously lost Medicaid coverage were reestablished than anticipated, providing an enrollment cushion in the first half. Ben Adams explained that a new Salesforce-built patient accounting system allows for more precise and methodical setting of monthly revenue reserves, leading to a tighter process and appropriate conservatism, though it's too early to conclude on the extent of future revenue reserve improvements.

Matthew Gilmore inquired about the drivers behind the stronger-than-expected census growth, specifically asking whether the success stemmed more from InnovAge's internal Medicaid redetermination processes or improvements at the state level. He also asked about the magnitude and nature (one-time vs. ongoing) of the reduction in revenue write-offs.

Answer

CEO Patrick Blair explained that initial progress was primarily due to InnovAge's internal control over rigorous patient accounting and workflow management processes. CFO Ben Adams added that many participants who had previously lost Medicaid coverage were successfully reestablished, providing an enrollment cushion. He clarified that while the company is now on a regular glide path for enrollments, disenrollments are being closely monitored. CFO Ben Adams further detailed that a new Salesforce-built patient accounting system allows for more methodical and precise setting of monthly revenue reserves, leading to a tighter process and appropriate conservatism, though it's too early to conclude on the exact magnitude of future write-off reductions.

Matthew Gilmore inquired about the current member mix, the progress of acuity normalization following census growth, and how these factors are influencing margins and cost trends.

Answer

CEO Patrick Blair and President and COO Michael Scarborough explained that the member mix has largely rebalanced as anticipated since sanctions were lifted, with a balanced pool of enrollments focused on keeping participants in the community. They noted that while this mix can negatively impact risk scores, it contributes to growth and margin expansion. CFO Ben Adams added that the V-28 Medicare Advantage payment model phase-in is expected to be a slight headwind to revenue over the next couple of years, though it is factored into current guidance.

Matthew Gilmore from KeyBanc inquired about the normalization of member mix and acuity, its progression, and the impact on InnovAge's margins and cost trends, as well as the expected effects of the V-28 Medicare Advantage payment model phase-in on revenue growth for fiscal year 2026 and beyond.

Answer

Patrick Blair (CEO, InnovAge) and Michael Scarborough (President and COO, InnovAge) stated that the member mix has largely rebalanced since sanctions were lifted, with a balanced pool of enrollments for community and assisted living residents. They noted that the mix of population, age, and acuity has progressed as anticipated, reaching target levels. While this shift can impact revenue due to lower risk scores, the right clinical model ensures appropriate contribution to growth and margin expansion. Ben Adams (CFO, InnovAge) confirmed that the V-28 phase-in is included in the FY2026 guidance and is expected to be a headwind over the next couple of years, though only one year of guidance is provided.

Matthew Gilmore asked for clarification on the sequential revenue decline implied in the Q4 guidance and requested an update on the engagement progress for the Care Anywhere program.

Answer

Executive Robert Freeman explained that sequential revenue declines in Q4 are typical, as growth from new, lower-PMPM members and disenrollment of higher-acuity members offset overall membership gains. He also confirmed that Care Anywhere engagement reached over 40% of targeted new members in Q3, keeping them on track for their year-end goals despite higher-than-expected growth.