Evolent Health (EVH) Stephens 26th Annual Investment Conference | NASH2024 summary

Key industry trends and cost drivers

• Specialty cost trends, especially in oncology, have accelerated, driven by rapid scientific advances, increased cancer prevalence, and evolving therapy combinations.

• Pharmaceutical innovations like Keytruda with multiple indications and high costs are major contributors.

• Cancer prevalence has spiked in both Medicaid and Medicare Advantage populations, with some causes still unclear.

• Combination therapies are increasingly used, raising per-encounter costs.

• October financials closed within expectations, with continued focus on adjusted EBITDA guidance.

Business model and value proposition

• Demand for solutions to manage specialty costs is at an all-time high, as traditional benefit management is insufficient for complex cases like oncology.

• The approach leverages clinical expertise and technology to influence provider behavior and align with the latest evidence.

• Subspecialty-to-subspecialty peer interactions help keep care aligned with rapid scientific developments.

• The Performance Suite invests more in operational expenses to drive outcomes, justified by higher ROI compared to tech and services models.

• Tech and services models focus on administrative cost reduction, while Performance Suite targets medical cost savings.

Risk management and contract adjustments

• Performance Suite contracts are priced using detailed historical claims and are designed to deliver cost reductions below industry trends.

• Annual inflators are built in to account for expected medical cost increases, but recent trends have outpaced these assumptions.

• A $100 million revenue increase is being sought to offset higher cancer prevalence and unit costs, with about $45 million contractually protected and $55 million subject to negotiation.

• Rate increases are tied to metrics like prevalence and acuity, but future medical trends remain uncertain and could impact profitability.

• The company is narrowing risk corridors and may accept lower upside to limit downside exposure in volatile environments.