Prepared remarks
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 were provided. 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.
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.
Questions and answers
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, 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 included in EBITDA from prior periods.
Okay. I appreciate that, and then to get to my real questions here. So, a little bit forward, but on the current year, 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 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, that's a lot there, Jack. But first, I'll address Part D. 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. Your highest earning quarters are in the first half. Your lowest would be in the second half. The second piece is related to contracting. It is early. 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. 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. As we think about contracting into next year, we're focused on the same disciplined approach, including profitability, gaining economic value for the value we deliver in quality and improved outcomes, and continuing to reduce our exposure to Part D. We're less than 15% of our book has Part D exposure now. We look to continue to further reduce that. And as a reminder, we touched 80% of our contracts last year and 50% of them are open. So 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?
Sure, Jailendra. I can walk you through that. On PYD, it's in the medical margin line, it's roughly $22 million. So it's $22 million on medical margin and $22 million on EBITDA, given our performance last year. There's really 100% flow-through on that because a lot of our partners were in negative positions last year. 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 as in the medical margin line. 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 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 be helpful.
Jailendra, I really appreciate the question. As we think about growth and the next phase, we continue to remain focused on 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 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 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. We also have historical Agilon opportunity in our current markets through the MA program and ACOs. Regarding new markets, we are going to remain measured and disciplined as we approach that opportunity and continue to assess market conditions moving forward. I want to remind you of two things. First, the demand for our model is strong. The demand sits there today; we continue to get inbounds from potential new partners. Before we paused growth, we were in conversation with several new partners that we can reengage with at this point. Second, we have a long implementation timeframe on new markets, roughly 12 to 18 months. So we're really evaluating 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?
Certainly. What we've seen is while trends are still elevated, they're a bit lower in inpatient, surgical, and ER. We've seen moderation in those categories. So while they're still high from a historical perspective, year-over-year we're seeing trends come down in those categories, consistent with what other public payers have said. As we think about cost trend for the back half, we've assumed roughly 7% for Q2 and Q3 in this guide. As a reminder, we recorded in the low 7% range for Q2, Q3, and Q4, 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?
It is a bit early, as we're in the contracting process now with our payer partners. But as Tim mentioned, we have an opportunity for growth with the care coordination fee members. There's an opportunity to potentially go to full risk there. Additionally, there's potential organic growth in our existing markets, particularly on the ACO side. So while it's early, there's certainly opportunity to increase membership without adding new partners.
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. Recall we budgeted that at roughly break-even. It's early. We don't have a lot of paid claims visibility for the second quarter. All we have is paid data for Q1, but it's in line with expectations. We 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. Above 80% of our payers are included in the data pipeline. We're starting with the largest payers and working our way down. Progress towards the end will involve more payers and go slower, but we've made substantial progress and will continue to add more payers into the enhanced data pipeline. 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?
Thanks, Matt. Results were better than expected, driven by the rollout and execution on our clinical programs in 2025. The programs ramped throughout 2025, so the results were back-end loaded. We had some indication that we were performing well, which is why we increased our risk adjustment estimate in the first quarter. With additional claims runout 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 they need sooner. For 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.
The only thing I'd add is a reminder of the clinical pathway work. 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. A great example of that is heart failure diagnosis in the inpatient setting: for our population it dropped from 25% to under 5%. That's a clear opportunity for us to identify conditions earlier, drive earlier intervention, and keep patients out of the hospital and 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 initiatives that we should be aware of?
Appreciate the question. We continue to look at clinical pathways as an opportunity to identify chronic conditions early, help identify those patients for physicians, create tailored interventions, and assist physicians at the point of care. After CHF, our next focus continues to be dementia and COPD. We're working through our markets on the deployment of those pathways and will continue to progress as we finish out the year. Those are the three clinical pathways we're focused on for the rest of 2026.
There's opportunity that we see, but I'd stick with the previous comment that we expect these programs to be positive next year, though not necessarily to the same level as what we're experiencing 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?
I'll walk you through the bridge for the guide. The Q2 performance compared to our previous midpoint was roughly $50 million ahead. There is a second half impact from risk adjustment. I'd call that roughly $19 million at the EBITDA line for the impact on the rest of the year from improved risk scores. That is offset a bit by incentive compensation and incremental annual wellness visit dollars. With the company's performance, there's additional incentive compensation costs. That brings us to the new midpoint of $85 million EBITDA. 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.
A couple pieces: we saw improvement in 2025. At the end of Q1, it was roughly 6.2% cost trend for 2025; that's now 5.8%, so we had favorable development from 2025 dates of service. Q1 was initially recorded at 7.4% and that's now in the low 6% range. Again, we have limited paid claim data for Q2, so we felt it prudent to record a cost trend in the low 7% range for the quarter.
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, 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 the macro backdrop improving. Are there any distinct macro factors that you think might be notable? For example, across inpatient, are you seeing better unit costs maybe from moderating provider coding intensity, anything to call out there?
We have limited paid claims visibility for Q2, so there's not much to say on specifics. Looking at months requires adjusting for day counts, so it's hard to analyze cost trends on a monthly basis. On cost trends generally, we noted moderation in inpatient and ER; trends are still high historically, but lower than last year.
To add, our clinical programs, data, and interventions are starting to show impact in our markets. That early identification and integration into the physician workflow at the point of care, along with earlier intervention and treatment, are beginning to pull through in our business.
Got it. Thank you. And one more question, higher level into 2027. When I think about the path into 2027, I think last quarter you mentioned final rate notice about 5.3% starting point across your markets, 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 adding another 1 to 2 points in coding improvement, another 1 to 2 points of plan pricing benefit design before cohort maturation and trend initiatives, as potentially sufficient to drive revenue PMPM growth above trend? Or are there other components missing in that framework?
It is early for 2027, but broadly think about the value creation levers we've discussed previously. We have given a range on the net impact of risk adjustment. That's a good place to start, but it's early to get too far ahead on 2027 modeling.
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 it's a $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. 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 the idiosyncratic initiatives.
The $25 million you referenced was in 2025 related to our quality program. Payers incentivize us to perform in quality, and we had $25 million of opportunity for 2025. We've said that opportunity has doubled; the importance of quality has increased for payers, and there's more dollars on the table for us to earn. In this guide, we've assumed a consistent level of performance from 2025 to 2026. So while we're striving to improve quality performance, for guidance purposes it's an equal level of performance from 2025 to 2026.
There are no further questions at this time. I will now turn the call back to Tim O'Rourke for closing remarks.
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 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.