OSH (2021 - Q4)

Hello, and welcome to the Oak Street Health Fourth Quarter 2021 Earnings Conference Call. My name is Alex. I'll be coordinating the call today. I will now hand over to your host, Sarah Cluck, Head of Investor Relations. Over to you, Sarah. Sarah Cl

Good morning, and thank you for joining us today. With me today, are Mike Pykosz, Chief Executive Officer, and Tim Cook, Chief Financial Officer. Please be advised that today's conference call is being recorded, and that the Oak Street Health press release webcast link, and other-related materials are available on the Investor Relations section of Oak Street Health's website. Today's statements are made as of March 1st of 2022, and reflect management's view and expectations at this time and are subject to various risks, uncertainties, and assumptions. This call contains forward-looking statements. That is statements related to future, not past events. In this context, forward-looking statements often address our expected future business performance and often contain words such as anticipate, believe, contemplate, continue, could, estimate, expect, intend, may, plan, potential, predict, project, should, target, will, and would, or similar expressions. Forward-looking statements by their nature, address matters that are to different degrees uncertain. For us, particular uncertainties that could cause our actual results to be materially different than those expressed in our forward-looking statements, include our ability to achieve or maintain profitability, our reliance on a limited number of customers for a substantial portion of our revenue, our expectation and management of future growth, our market opportunity, our ability to estimate the size of our target market, the effects of increased competition, as well as innovations by new and existing competitors in our market. And our ability to retain our existing customers and to increase our number of customers. Please refer to our annual report for the year ended December 31st, 2021, filed on Form 10-K with the Securities and Exchange Commission, where you will see a discussion of factors that could cause the company's actual results to differ materially from these statements. This call includes non-GAAP financial measures. These non-GAAP financial measures are, in addition to and not a substitute or superior to, measures of financial performance prepared in accordance with GAAP. There are a number of limitations related to the use of these non-GAAP financial measures. For example, other companies may calculate similarly titled non-GAAP financial measures differently. Refer to the appendix of our earnings release for a reconciliation of these non-GAAP financial measures to the most directly comparable GAAP measures. With that, I'll turn the call over to our CEO, Mike Pykosz. Mike?

Thank you, Sarah. And thank you, everyone, for joining us this morning. Joining me on today's call, in addition to Sarah, Tim Cook, our Chief Financial Officer. In this call, I'll start with a review of our 2021 performance then turn it over to Tim to discuss more specifics around 2021 financial performance. We'll then turn to 2022 and I'll share more on our goals for the year, and Tim will provide guidance for Q1 and the full year of 2022. I want to first thank our team for the continued dedication and focus on our patients, our communities, and our mission. Our team continues to navigate through a challenging operating environment, including the Omicron COVID surge and the historically tight labor market, especially in healthcare. Despite these headwinds, we achieved strong results across all the major drivers of performance for the fourth quarter. We had strong revenue growth driven by new patient adds in both new and existing centers. We finished near the 129 centers, including 50 new centers opened in 2021. Third-party medical costs, which we'll cover in more detail, were in-line with expectations going into the quarter, despite significant headwinds from Omicron -driven hospitalizations, which were obviously not factored in the guidance we gave in early November. Direct cost of care and corporate costs were all in-line with expectations as well. The net result is a quarter in which we exceeded the top end of our guidance range against revenue, membership, and adjusted EBITDA. In the fourth quarter, we generated a record revenue of $394.1 million in the quarter, exceeding the high end of our guidance range and representing a 58% growth compared to Q4 2020. For the year, we generated $1.43 billion in revenue, representing 62% growth compared to 2020. Our revenue growth continues to be driven by our organic B2C marketing approach. This includes both central channels, such as digital marketing and our core community-based outreach team. costs have trended in line with guidance we shared following Q3. This combined with cost of care, sales and marketing, corporate costs, all in line with expectations, and higher-than-projected revenue growth, resulted in adjusted EBITDA loss of $228.9 million for the year, which is favorable to the top end of our Q4 guidance. When we look back at 2021 as a whole. We exceeded our revenue center growth in patient growth targets our third-party medical costs were higher than anticipated driven directly and indirectly by the COVID pandemic, leading to lower adjusted EBITDA performance. Tim will cover in more detail how these trends, progress across the year and are expected impact in 2022 beyond the financial metrics, we took a big step forward in 2021 in our mission to rebuild health care as it should be. We made significant accomplishments across the key components of our business. This will lead to a greater impact on our patients and communities, which will drive our future financial performance. We opened 50 new centers in both existing markets as well across eight new states. To put that into context, it took us seven years to put up our first 50 centers. This expansion will allow us to serve additional community patients, investing continuous improvement in our care model and patient experience in greatly increases the embedded profitability in the business. To help mitigate 2021 headwinds in running our community-based marketing model from the Delta and Omnicom surges, we markedly scaled our central marketing channels to help fill the gap and continue to see strong results in the channels. We're excited for the time when we can have both our community and central marketing channels working in concert. We reflected by the AARP as our exclusive primary care partner, a relationship that we believe will lead to increased patient growth and retention, while being differentiator for years to come. Additionally, we continue to build on our core platform, adding new care model capabilities and services for patients, which we believe will continue to improve health outcomes and lower third-party medical costs. For example, we published results from the impact of enhancements to our data and technology platform, such as implementing new machine learning algorithms to better stratify our patients. We expect to acquisition of RubiconMD will allow us integrate their virtual specialty network into our care model, creating innovative and differentiated approach and specialty care, resulting in improved care quality, lower unnecessary medical costs, and improve patient experience. We accomplished all of the above while navigating the twists and turns of 2021. We operated vaccine clinics early in the year and delivered 200,000 plus vaccine doses. We navigated COVID surges in the second half of the year while still executing it's all aspects of our business. We heard thousands of team members, including a 100 providers spike historically tight labor markets. I couldn't be prouder of what our team accomplished in 2021, and I'm excited to see what they've accomplished in 2022. Before I turn over to Tim, I have two recent topics I'd like to address quickly. The Department of Justice inquiry that we disclosed in November and the recent announcements from CMS related to the direct contracting program. On the status of the DOJ inquiry, we have begun and will continue to provide documents in response to that inquiry. Our discussions with the DOJ as to date largely been among the scope of the request and the document collection process, and not about the substance of the inquiry. As such, we are currently unable to make any meaningful predictions about the timeline or outcome in this matter. As we have said previously, we strive to operate in a compliant manner, and we will work with the DOJ in a collaborative and transparent manner as we address their inquiry. On direct contracting and the recently announced changes to the program, we have participants in the direct contacting program that enabled Oak Street to provide our care model to patients with traditional Medicare with increased supporting services that are typically provided in primary care for traditional Medicare patients. In fact, in 2021, 100% of Oak Street health patients in the direct contracting program were located in areas designated by HSS as medically unreserved mental health provided shortage areas for both. Last week, CMS and CMI announced important changes to the program aimed at advancing health equity to bringing the benefits of accountable care to unreserved communities, promoting provider leadership in governance, and protecting beneficiaries in the model with more participant spending, monitoring, and transparency. Having been a Medicare Shared Savings Program ACO participant for several years prior to joining direct contracting, we are excited to participate in the ACO program and appreciate the time and effort CMS and CMI invested to modify the program. We'll also take into account stakeholder concerns. We believe these changes fit well with Oak Street's model, given the communities we serve and our longstanding focus on health equity. The exact details with CMI are still pending. But if the ultimate changes are consistent with what's both communicate last week, we do not expect the material to impact Oak Street. With that, I'll turn it over to Tim to cover some more of the details regarding our financial performance in 2021.

Thank you, Mike and good morning, everyone. We continue to generate strong growth for the Oak Street platform in 2021. To recap the year, we eclipsed $1 billion in revenue, generating $1.433 billion in revenue in 2021. A resenting growth of 62% from 2020. We exceeded a high end of our initial 2021 revenue guidance issued in March 2021 by 8% and better than the high end of the revenue guidance provided during our third quarter 2021 call. As of December 31st, 2021, we cared for approximately 114,500 patients on an at-risk basis, 4% ahead of the high end of our initial 2021 guidance and above the high end of our guidance range on our Q3 call, we opened 50 new centers in 2021, increasing our total center count to a 129 as of December 31st. This represents eight more centers than the high end of our initial guidance range. Capitated revenue for the year of $1.397 billion represented growth of 64% year-over-year, driven by increases in our at-risk patients’ base and our capitated rates. Total prior period development related to capitated revenue from prior years, primarily 2020 was favorable by $20.8 million, driven by the result of our 2020 full year risk adjustment payments compared to our accruals. And patient retroactivity. Other revenue for the year was $36 million representing growth of 13% year-over-year. Approximately $6.5 million of the $36 million was related to favorable prior period developments from our performance in 2020 under our shared savings arrangements. The majority of which was related to the results of our Acorn ACO. Our medical claims expense in 2021 was $1.109 billion, representing growth of 80% compared to 2020, driven by the increase in patients under capitated arrangements and the increase in medical cost per patient. Total prior period development from prior years, primarily 2020 related to medical costs was unfavorable by approximately $6.7 million driven primarily by patient retroactivity. The majority of these costs were directly offset by the Capitated revenue prior-period development. As a reminder, patient retroactivity is typical and occurs when health plans pay Oak Street retroactivity for patients managed in prior periods, but not previously included in our rosters, and therefore not previously recognized in revenue or medical claims expense. During our last two earnings calls, we highlighted three drivers of our elevated medical costs. These areas represented an estimated $110 million headwind in 2021. But we continue to believe they are direct results of the pandemic and largely temporary in nature. The first cost from COVID admissions. In our Q3 earnings call, we shared that in the first three quarters of the year, Oak Street experienced approximately $25 million of costs directly related to COVID admissions. We estimate full-year COVID costs were approximately $38 million in 2021, including an estimate for the surge in COVID cases related to the Omicron variant in December. We expect January and February 2022 to have elevated costs from COVID admissions as well. We remain focused on ensuring our patients are vaccinated and have received their booster shots. We also have programs in place to ensure our patients have access to new oral antivirals. We hope as these therapies become more available, they will be effective in reducing hospitalizations and other poor outcomes in future COVID waves for our patients. The second element was nonacute utilization. In our Q2 earnings call, we discussed that nonacute utilization, including specialist visits, diagnostics, and outpatient procedures, increased in March and April following the vaccine roll out for older adults compared to our historical experience. We believe the increase in costs during the spring was partially driven by patients’ increased comfort in accessing medical care once they were vaccinated, relaxed payer standards due to the public health emergency, and specialist and hospital system behavior. In our Q3 earnings call, we shared that these costs began to decrease in late spring into the summer. As the year progressed, this trend continued. Comparing to our historical experience, we estimate nonacute utilization with a $35 million headwind in 2021, driven in large part by the elevated costs in the spring. However, we do not expect it to be as significant a headwind in 2022 given the lower run rate exiting the year. This is also the cost category where we feel the acquisition of RubiconMD will have the greatest impact. The final driver was new patient economics. In our Q3 Earnings Call, we discussed our new patient medical costs were elevated compared to historical levels, while per patient revenue for new patients declined to a level less than what we received for new patients in 2019, both on an absolute basis and significantly less than what we would have expected when considering premium trend. The net result is a decline of new patient economics driven by a combination of higher costs and lower revenue than what we have experienced historically. We estimate patient contribution for new patients was $38 million lower in 2021 compared to our 2019 new patient economics. We have looked at new patient contribution by geography, center vintage, provider tenure, and marketing channel. And we saw a similar decrease across all cuts of the data. For this reason, we do not believe the new patient economics in 2021 were negatively impacted by new centers or markets, but instead continue to believe the primary driver of lower new patient economics is lower engagement of adult -- older adults, especially those in lower-income communities, by the health care system in 2020. Lower engagement results in both higher medical costs because of unaddressed medical conditions and lower revenue because these conditions go undocumented. As a reminder, risk scores lag by a year and depend on diagnosis captured during provider visits. Thus, the lack of engagement before joining Oak Street likely had a double effect of reducing the incoming risk score, while also increasing disease burden. As discussed on prior calls, we expect the increase in per patient revenue in 2022 for these patients who joined in 2021, to be larger than our historical experience, which we believe will largely offset the higher medical costs from these patients. At this point in 2022, it is too early and we have two patients set a firm view on what revenue, medical costs, and therefore patient contribution will look like for our new patients in 2022. While these three drivers led to higher than anticipated medical claims expense and therefore lower profitability than we expected coming into the year, we are seeing these higher costs begin to subside and continue to believe that the remainder will subside over time as COVID evolves from pandemic to endemic. Moving onto cost of care. Cost of care excluding depreciation and amortization in 2021 was $294 million. A 57% year-over-year increase driven by higher salaries and benefits expense from increased headcount, as well as greater occupancy costs medical supplies, and patient transportation costs. The growth in these costs related to the significant growth and our patient base at our existing centers, as well as the growth in number of centers we operate. Sales and marketing expense was a $119 million during the year, representing an increase of 86% year-over-year and was driven by a $36 million increase in advertising spend to drive new patients to our clinics, as well as an increase in salaries and benefits of $17 million related to headcount growth. As a reminder, growth in year-over-year sales and marketing expense was artificially inflated as our costs were partially depressed during Q2 and Q3 of 2020 due to the pandemic, which included the temporary suspension of community outreach activities and other marketing initiatives. Corporate, general, and administrative expense was $307 million in 2021, an increase of 65% or a $121 million year-over-year, primarily driven by headcount costs necessary to support the continued growth of the business. Stock-based compensation represented a $156 million of total corporate general and administrative costs in 2021, and $79 million of the year-over-year growth. Excluding stock-based compensation, corporate, general, and administrative expense grew 39% compared to our total revenue growth of 62%. As a reminder, the vast majority of our stock-based compensation expense is related to the accounting treatment of equity awards issued prior to our IPO in 2020. I will now highlight three non-GAAP financial metrics that we find useful in evaluating our financial performance. Patient contribution, which we define as capitated revenue less medical claims expense, grew 23% year-over-year to $288 million. We expect at-risk per patient economics to improve the longer that our patients are part of the Oak Street platform. Platform contribution, which we define as total revenue less to some of these medical claim expense and cost of care, excluding depreciation and amortization was $31.5 million, a 59% decrease year-over-year from $77.5 million. This year-over-year decrease was driven by the previously discussed increase in medical claims expense, as well as the significant recent growth in our center base. And therefore, the portion of our centers which are immature. The data we provided during our JPMorgan presentation reflected in losses we expect for new centers as their performance ramps over time. We expect new centers to generate an operating loss for the first two years. As of operation and approximately breakeven in year three as of December 31st, approximately 60% of our centers have been opened for less than two years. And approximately 70% have been opened for less than three years. Adjusted EBITDA, which we calculate by adding depreciation and amortization transaction offering related costs. Income taxes, and stock or unit-based compensation, but excluding other income to net loss was a loss of $228.9 million in 2021 compared to a loss of $92.6 million in 2020. We finished the year with a strong balance sheet and liquidity position. As of December 31st, We held approximately $790 million in cash, restricted cash, and marketable debt securities in Q4, we closed our acquisition of RubiconMD. The base purchase price was a $130 million and was paid in cash. Our liquidity position will support our continued growth initiatives, primarily our de novo center-based expansion. For the year ended December 31st, 2021, cash used by operating activities was a $197.2 million while our capital expenditures were $81.3 million. I'll turn it back to Mike now to discuss our focus areas for 2022.

Thanks, Tim. Turning to 2022, we're excited to continue on our journey to transform care for older adults. Our focus for 2022 will be on our four core objectives of Oak Street: 1) provide the best care anywhere, 2) deliver an unmatched patient experience, 3) grow the number of patients and communities served, and 4) be the best place to work in health care. For last two years, we've acquired a huge amount of nimbleness and flexibility from our teams in order to meet the needs of our patients and communities. In Q2 2020, we essentially morphed into a Telehealth company for a time, going from near zero to 90% of our business being virtual. In Q1 2021, we ramped up vaccine clinics across dozens of our locations to ensure equitable access to vaccines for older adults in the neighborhoods we serve. I am incredibly proud of these and many more efforts from our teams to be there for our patients and communities. 2022, we're excited to have our teams, both at our corporate offices and in our centers, focusing on the core of what we do in advancing our performance across all of our objectives. We believe this focus will result a continual improvement to and scalability of our model. As we shared in our January -- during JPMorgan Healthcare Conference presentation, we expect the Oak Street platform to drive strong center economic performance in 2022. Our expectation is that our centers that are over six years old will continue to be highly profitable with subsets of these get up 2300 or more adverse patients driving center contribution of approximately $8 million each. Additionally, as we showed the conference, our intermediate centers are ramping better financially than our mature centers to at this point in the maturation. And our newest vintage of the starting off similar to our stronger than our mature centers from key KPIs that drives on results. It is for these reasons that we're confident in the unit economics of our centers and in return they will generate for investors while improving the well-being of thousands of patients. Tim will share in more detail in a couple minutes. Our view of 2022 center level performance that we shared at the conference remained unchanged and as a basis for our guidance. Because of our confidence in our unit economics, the differentiation of our model, and the massive market opportunity that will enable sustained growth over the next decade. We believe we can pursue a strategy that delivers meaningful near-term and longer-term value creation for all stakeholder while mitigating risks from current market volatility. We are updating our new center target of 40 new centers in 2022. Our 30 to 40 new centers per year through 2024. By growth of 40 new centers per year over the next few years. Basically, we will achieve substantial growth with an expected revenue compounded average growth rate of over 40% will recent profitability in or before 2025. Additionally, both continue to grow our already substantial embedded EBITDA with embedded EBITDA of over a billion dollars for centers open by year-end 2022, and more than $1.5 billion for centers open by year-end 2024, assuming the unit economics we shared in January. As we have previously indicated, we have considerable control of our capital consumption through the cadence of new center growth. If we're able to further improve our unit economics, lowering capital needed over the next couple of years. We will reinvest that capital into an accelerated pace of center openings, by our new center growth in this way, we believe that we have sufficient capital to fund center growth, until the businesses cash-flow positive without the need to raise equity capital now or in the future. Given the recent market volatility, we think this is the most prudent path to control our own destiny. Mitigate any risk for market volatility and build value for our shareholders. As noted above, we remain confident in our unit economics and our team's ability to execute across the range of new center openings we've considered. We believe this approach allows us to build fast-growing, value-creating, transformative organization with sustained compounded annual revenue growth 40%, and significant and even better profitability. We remain excited to continue to execute our mission to rebuild health care to should be. I'll turn it over to Tim discuss in more detailed guidance for 2022.

Thanks, Mike. As Mike just discussed, we are setting our initial guidance for our center growth up 40 centers, resulting in the year-end center count of a 169 centers. We expect to care for a total at-risk patients in a range of a 152,500 to a 157,500 to generate revenue for the year in the range of $2.1 billion to $2.135 billion, representing growth of approximately 45% over 2021. We expected our adjusted EBITDA loss to be $325 million to $290 million. Implicit in our adjusted EBITDA loss guidance range is platform contribution performance within the range that we outlined in the JPMorgan conference for each vintage. Recall that our JPMorgan range took into account unknowns around future direct costs from COVID hospitalizations as well as new patient economics. Our guidance incorporates the realities that there will be COVID costs, particularly given the Omicron surge in Q1, and new patient economics are largely unknown at present, given a relatively few of them at this point in the year. Note that due to the fewer centers in 2022, we will not generate the same level of operating leverage as we would have had we opened 70 centers. We will continue to invest in our platform to drive future performance. We will manage our 2022 new centers to minimize potential costs from delayed openings, but we do expect to incur one-time dead costs included in our guidance related to centers originally scheduled to open 2022 that will now open in 2023. As we look forward to 2023 and 2024, we expect to open 30 to 40 centers in each of these years. At this pace, we will continue to strategically grow the business, while minimizing the potential for a future equity raise. With performance consistent with our 2022 guidance, this pace would result in 2022 being the trop of our adjusted EBITDA losses and cash burn, and will position us to the adjusted EBITDA positive in 2025, while generating a revenue CAGR from 2021 through 2025, an excess of 40%. For the first quarter of 2022, we expect the following: total centers in the range of a 138 to 139; at-risk patients in the range of a 122,500 to 123,500 as of March 31st; total revenue in the range of $505 million to $510 million; and an adjusted EBITDA loss of $45 million to $50 million. And with that, we will now open the call to questions. Operator?

Thank you. We will now proceed with the Q&A. Thank you. Our first question for today comes from Lisa Gill of JPMorgan. Lisa, your line is now open.

Thanks very much. And thank you for all the details Mike and Tim. Just going back to our conference where you talked about 70 centers opening. What truly ensued in the last seven to eight weeks, is it just simply the current markets and not wining tap to go back to the equity markets to gain additional capital or has something else changed in the way you're thinking about center growth for 2022.

Thanks for the question. From an operational market opportunity standpoint in our view nothing has changes, as Tim noted that the range of center ramps that we shared seven weeks ago, the conference remains the basis for our guidance. I think we still see a huge market opportunity out there for us. In some ways, I think the change in center growth was actually somewhat driven by that size of that market opportunity. We don't feel like this is a land grab. We thought we will be putting up centers over the next decade and beyond. And so when we looked at the market volatility, we didn't want to be in a position where we had to access the equity capital markets in the future. We want to make sure we really control their own destiny and felt that with this level of growth, we can achieve, as we discussed, very strong growth, bringing up the timeline to profitability and really remove the need for an equity capital raise and the kind of that combination felt like the right approach to us given the volatility in the markets.

Very helpful. And then Mike, just a quick follow-up. You kind of rushed across the new direct contracting that the CMS came out with. There are two areas that I feel people are really focused on. One governance, maybe you can just suggest that I don't think that's an issue for you since you employ your doctors. But then secondly, how we think about risk adjustments and the cohort of patients that are looking at.

Yes, on the governance one, I think we have the same read on that one that we are a provider organization, so I think the government's rules will be more relevant for organizations that are more contractual or aggregators of doctors versus Oak Street where that's what we are. So that one's pretty straightforward for us. We do think risk adjustment, the devil is always in the detail, so we'll pay close attention as more and more details are released. But our initial read is this shouldn't be a big change or impact on Oak Street. I think one of the thing that's unique about Oak Street, and I think we're very proud of is we've been taking care of traditional Medicare patients since the onset of the company. And over that time period, we don't -- we haven't differentiated the quality of care and the investment we make in our patients based on insurance type. And so the type of care that patients received in 2014, '15, '16, '17, '18, '19, all before direct contracting was a program, was very similar. And our baseline patient population was a patient population that's directly cared for by Oak Street at that time as well. And so because of that changing the reference year or how you're measuring that baseline of the patient, has, we believe, limited impact on Oak Street, therefore, should have limited impact going forward. Obviously, as more details come out, we'll pay close attention, but our initial read is that shouldn't really make a big difference for us in the program.

Great. Thanks for the comments.

Thank you. Our next question comes from Ryan Daniels of William Blair. Ryan, your line is now open.

Good morning, guys. Thanks for taking the questions. Thanks for all the data as well. Tim or Mike, maybe one for you guys regarding the ARK type model that you shared recently at JPMorgan with the various vintages and I'm curious if you could compare or contrast that to where we were maybe pre-IPO a few years ago and how that's evolved. Now, I realize COVID probably has an impact here that's transitory in nature, but just any commentary there would be helpful.

Thanks, Ryan. This is Tim. I'll handle that. I know there were some unintended confusion after JPMorgan regarding how they cohort data shared at that time compared to our expectations at IPO. And I kind of think of this through three different lenses and the first two point of your question is what has changed. Our initial model archetype model is created in the latter half of 2019 ahead of a potential 2019 IPO that we subsequently delayed until 2020. When we updated the model in the summer of 2020 at that time, we were hopeful, like I think many of the marketplace we're that be relatively short-lived and the financial impact will be limited and also time-bound. As we sit here today, we continue to be impacted by COVID, both via direct costs as well as indirect costs -- indirect impacts such as the growth of our centers as well as a slower growth we experienced in 2020, which has a cumulative effect on results today. So as we step back and think about the net present value of the center, which is how we evaluate our center performance, we believe the impact from all these changes related COVID was about 5%. So relatively immaterial overall, just given the fact that our centers are still achieving the same level, ultimate profitability that we thought they would at the time of IPO. The second lens is just a number of proof points substantiating our performance. So at the time of the IPO, we had four centers that were -- we categorize as most scaled, and they generated approximately $8 million each of annual contribution. Today that number is 10 centers that we expect to generate $8 million each of contribution in 2022. Additionally, we had 19 centers today that are six years or older versus only seven at the time of the IPO. And we expect those 19 centers to generate on average about $6.5 million of contribution in 2022. And that leads me to third, which is our IPO archetype wasn't based upon our oldest centers performance. We provided in January is based more on historical performance. And our more recent centers that are outperforming that historical performance, which is why we have a lot of confidence as we think about our future results.

Okay, that's super helpful color clarifies a lot and then just my follow-up, just looking at growth in the expected at-risk lives, it looks a little bit lower on an absolute basis. Year-over-year versus 2021. So I'm curious if you can go into some thoughts around that and maybe as part of that, you can address just how your marketing may change here as COVID appears to be winding down and we had in the spring with things warming up, do you expect your community-based marketing to ramp up a little bit here past . Thanks.

Ryan, I like the reference. That's an FX Chicago reference right there as opposed to -- Great. But on the, on the kind of patient acquisition front are our assumptions that were even for guidance, projected similar level of growth per center as we saw in 2021. So I think. Obviously what we're projecting to is net growth. And so there's multiple factors that go into it, more centers, but obviously a larger installed patient base, etc., last year with moving by direct contracting coming in in Q2 where that's obviously in the baseline starting this year. But I don't our numbers today aren't assuming, we reached what I talked about earlier as a goal of maintaining our central channels, but getting our community marketing back to where we had in 2019. Now, obviously that's our goal, and as COVID transitions from pandemic to endemic and people become more and more comfortable beyond the communities. Our hope is we can get our community events ramping back up again and really get back to the types of activities from our center base teams as we were doing a couple of years ago. And we still have the same kind of staffing and approach there. So that's our hope operationally, but that -- both of those working in concert is not baked into our guidance. Because there's one thing I've learned over the last couple of years, Ryan, as to stopped predicting what's going to happen in the swift in terms of the spend on mix. So we're so we'll keep assuming performance for 2021. I hope we can improve from there.

Thank you. Our next question comes from Justin Lake of Wolfe Research. Justin, your line is now open.

Hi, this is Harrison on for Justin, I think you just touched on this a little bit earlier. But I want to make sure I'm not missing anything. I'm looking at this correctly, currently, your 1Q risk-based patient guidance implies 8.5 thousand patient adds in the first quarter, which would appear to imply 11000 patient adds in each of the following quarters to hit the full-year guidance. I think historically we're kind of seeing the member grow with more weight towards the first quarter versus the other quarters or anything unique this year driving the shifting Cadence. Is it maybe the voluntary attribution of DC patients or anything else to ?

Yes, I do think direct contracting has slightly changed the shape of our growth across quarters. Historically, we had a fair amount of traditional Medicare patients coming into the ATB period and an effect of those would change from traditional Medicare to Medicare Advantage. And so they will go from non-risk to at-risk. Obviously, with our contracting in place, a large portion of our traditional Medicare patients are in that program and so they're already at risk. And so if those patients who are on direct contracting choose to move over to Medicare Advantage, they move -- they remain at risk and you don't really see that movement in our numbers. So I think that what used to be a time in AARP of getting a bump in the beginning of the year from traditional Medicare patient moving to risk. The good news is those patients are already at risk. And so it's an improvement overall, but I think you'll see more kind of similar growth quarter-over-quarter where you won't have as much seasonality, which, again, I think that's a nice positive for us that we can be very consistent in growth across the year versus being reliant on one period of the year.

Got it. Super helpful. And maybe one last one just the one offering leverage. Would you mind expanding upon maybe your updated thoughts on pacing as the leveraging of the cost ratios given that you're slowing center growth and presumably still have a certain amount of overhead spread across your centers and maybe just relative to how you're thinking about it prior to the changing of that through or growth.

Sure. This is Tim. Thanks for the question. As you know, what you're referencing is we provided a framework about G&A growth during the JPMorgan conference. That was just a simple heuristic. If you think about it in a more nuanced level, our G&A costs have -- there's a fixed component, there's a component that's more driven by patient volumes, and there's a component that's more driven by center volumes. The fixed cost component obviously is what it is. There won't be any change to that based upon the changes in the number of centers we're going to open. A center patient-driven costs will not be that significantly reduced this year given the relatively few patients that the 30 centers that were pushed would've had because those are likely centers that will be opened later in the year anyhow. If the center was ready to open in April, obviously, we weren't going to push it to 2023 and incur the dead cost of almost an entire year for those centers. And then on the center-based costs, they're going to be some savings here. But much of these costs are regional in nature. And while we may be opening fewer centers in eventually fewer regions in this instance. So we were going to have six centers in the region before, it might be four today. We'll get the benefit of that in the future years as we ultimately still open those incremental two centers in that example. So we're still going to see nice year-over-year improvement in operating leverage, just not to the same degree that we'd expected at JPMorgan. It's fundamentally just given the fact that we are doing the math based upon center months and there's going to be obviously fewer center months in 2022 than we had contemplated at that time.

Got it. Thank you.

Thank you. Our next question comes from Kevin Fischbeck of Bank of America. Kevin, your line is now open.

Great. Thanks. Maybe just a follow up a little bit on that question there. When you think about opening up 40 new sites a year versus maybe the 70 plus that you might have been thinking about previously. Is there a change at all about where those sites are being opened, you mentioned eight new states this past year, would you expect the new sites to be concentrated in states that you're already in or would you still expect to be entering new geographies, entering new states?

I appreciate the question. I think the approaches is the same, we'll open centers both in existing markets at some of our will be in the, in Chicago as we continue to see opportunity to take care of more patients and the demand that exceeds the number of centers we currently have. We'll also be opening up in new markets. In Q1, we opened up our Centers in Phoenix, Arizona. . So it will be a combination of both as it was prior. Probably the way I think about it a bit more is 70 centers we were planning to open this year, we'll still open all of those , we'll just push some of those into 2023, but I don't think the approach is different.

Okay. And then maybe just to better understand the economics of opening up these centers. Does opening up a center adjacent to an existing center, is that a better long-term investment? I'll be at maybe at the risk of short-term dilution from one of the existing or surrounding centers. We're entering a new market kind of a better .

I don't think there's huge divergence between a new center and an existing market or a new center in a new market. We have -- if you look at our mature centers, the first 19 we've put up, the ones Tim referenced earlier, a huge amount of variability in the types of markets those centers are in, so obviously a number are in Chicago are our first market, but even in Chicago, some of them are in more blue-collar, middle-class kind of think retired teachers in that (ph) neighbor, or some of them are in kind of density and city neighborhoods that are -- have a much higher high rate of poverty. Some of them aren't predominantly Hispanic communities, but also initiatives Chicago, those firstly night 19 Centers are in places like Rockford, Illinois, Fort Wayne, Indiana where you have one center each. And those kind is actually doing quite well and are certainly in line or better than the average in those vintages. We're also enhancing in Gary, In Indianapolis, Detroit, and all those places are part of those first 19. The reason I say that is I think our approach remains similar to go to that breath and that type of market, both from a size of market perspective and from a kind of demographic income perspective. And when we look at kind of the ramps of the centers, it's very similar, usually speaks to the scalability and replicability of what we do. And I think I always think about it Kevin, it's almost more retail in nature. What drives your market is the are the center is the catchment around center. And so whether you're going to Rockford or the Southside Chicago, it's really about who are the 20,000 or so older adults are trying to serve and are you able to engage that community and bring people in and our teams have been historically very good at that across a wide, wide range of markets.

All right. Great, thanks.

Our next question comes from Jessica Tassan of Piper Sandler. Jessica, your line is now open.

Hi. Thank you for taking my questions. And so if that's the case, can you just remind us of the impact that payer diversification has on patient recruitment revenue and operating expenses.

Jess, I'm sorry, you broke up there in the middle of your questions, you mind asking it again?

Yeah.

Sorry, my apologies Jessica, your line isn't the most strongest. Is it okay if I can just disconnect your line?

Is this better?

And if you press star one you can re-ask a question. Apologies for that, our next question comes from Jamie Perse of Goldman Sachs. Jamie, your line is now open.

Hey, good morning, guys. I wanted to go through some of those areas of increased medical costs this year and what you're assuming for 2022, it sounds like on nonacute utilization, you're expecting that to be in line with prior trends on a PM basis and adjusted for vintage and all that, just If you can confirm that, and then in the ranges, the low and high end of your guidance range, what are you assuming for COVID costs and for the new patient economics relative to prior trends?

Sure. This is Tim, thanks for the question. I think you categorize the nonacute utilization well, my guess is just probably going to be some carry forward effect, particularly given the Omicron and how it impacted not just patients, but more of the system's ability to manage patients. I know even at our centers, we had a number of employees who were out because there were sick. So we'll see if there is any potential carrier forward into 2022, just from the end of the year, but I would expect it to be relatively limited. From a COVID and new patient experience, I think it's hard to be overly specific with COVID, just given the number of unknowns at this point in the year, and sitting here with the Omicron surge not that going behind us. If we look -- think back to 2021, when we got to May, we all felt pretty comfortable that with the level of vaccinations increasing --, the vaccination rate increasing that we were going COVID than we had Delta and Omicron. We'd about 35 million excuse me, $35 PMPM around $30 million of COVID costs in 2021. And I'd say that PMPM ray would be implicit at the bottom end of our range. Our new patient economics are again, very much an unknown, but I'd say the low end of the range we're assuming a similar level of experience than what we had in 2021.

Okay. Thanks for that. There has been a lot of discussion on the environment in the last couple of months and just curious what you're seeing in terms of MCO pricing for patients and how that impacts you on a longer-term basis for your PMPM assumptions, when you get to that $1 billion and $1.4 billion and contribution for your 22 and 24 centers. Just any thoughts around what's going on in the market and impact on Oak Street.

Yeah, obviously, the MA market, and this is a continuation of a trend that's been going on for the prior decade now. The MA market seems to get more competitive with more new plan entrants and the large existing players expand into new markets and invest to grow share. And so we're obviously seeing, as you're well aware, higher benefits across markets and across plans. And so that creates two implications for Oak Street. On the one hand, obviously, being at risk, we're also at risk for the benefits. And so if there's richer supplemental benefits or richer cost sharing, that obviously creates an expense for Oak Street. Although oftentimes that expense is also offset by higher benchmarks and higher rates to the plans or higher performance, etc. The other side of it, as Medicare Advantage penetration increases, a higher percentage of the people that we mean that community that are already at Medicare Advantage, which obviously helps us get a higher percentage of our patients at risk faster. And so there's also some benefits from that increasing penetration as Medicare Advantage becomes more and more compelling for people. So there's some countervailing factors there as we think about not just 2022, but into the future. Obviously, a higher percentage of our patients at-risk helps. Obviously, as in plans or investing, it's something we'll watch closely. Again, I think it's -- I mean, they're positive trends overall because what it also means is that patients, especially the patients, they're still getting more benefits to help them stay healthy and increase their overall being. And so that's the most important thing and that also does help us take care of them.

Okay. Thank you.

Thank you. Our next question comes from Elizabeth Anderson of Evercore. Elizabeth, your line is now open.

Hi, guys. Thanks so much for the question. Tim mentioned that part of the difference in terms of how you're thinking about the model for this year versus maybe some of the expectations you laid out earlier in the year was a result of the deferral of center openings originally planned from 2022 to 2023. Is it possible to quantify the impact on that so that we could just see the run rate difference in those core versus some of that, which is presumably like more one-time cost shifting to the center openings in 2023? Thanks.

But it's Tim, thanks for the question. I'd say for those 30 centers, as you can imagine, as Mike walked through before, our thought process on reducing number from 70 to 40, we did not -- we were focused to set accuracy. We've had great success across all the synergies and over time, never closed the center. Therefore, as we thought about one versus another, we're fairly indifferent with rare exception. Therefore, we were -- we had a mind towards what can we move most effectively, both from a team bandwidth perspective as well as the cost perspective into 2022. As you can imagine, the centers that were slated to open earlier in the year by and large are going to open earlier in the year. The centers that were moved to 2023, we're centers that we're going to probably open later. So on average, those centers we're going to have less of an impact in 2022 from a loss perspective, than what an average new center might have in 2022. From a dead cost perspective, I'd say it's going to be approximately $5 million of costs that we'll incur in 2022 that we otherwise wouldn't had we opened 70 centers. Obviously, the benefit is we would've lost far more than that on the 30 centers that we are no longer going to open.

Got it. That's helpful. And I know you've been helpful and providing updates previously. Do you have anything to say in terms of the hiring market in terms of both doctors and then for the other clinical staff at each of the centers in terms of just wages and hiring pace?

Yeah. It's certainly a more challenging hiring market than we've seen in the past. But from a provider standpoint and provider hiring is obviously never been easy. There's going to short providers since the day we started Oak Street, and we've had a lot of success over the past months and year, continue to expand, continue to hire more providers, both for our new centers and also more providers to give us capacity existing centers. And I think that speaks to our team and our provider, sort of team, that's how that works, right? And for us, we really thought we have a differentiated value proposition for our providers, just as we thought we have a great value probably prefer our patients, where they can really practice medicine the way that they want to help care for patients have more resource to help them care for patients. Their incentives are all against quality of care versus volume etc. And we see that in our scores, right? Where 95% of our providers say they recommend place to work to friends or family and 99% of them say Oak Street allows them to do their best work. And we're very proud of that. And so I think that despite it being a tough labor market, the higher end, I think that value proposition allows us to hire and be successful in this environment. And so our recruiting, I'd be in trouble if I said it was recruiting team would be outside the door waiting for me, but they're doing a great job in a tough environment and kind of allowing us to . So far the labor shortages haven't had an impact on our ability and our goals.

And that's true on the other clinical staff and sort of as well as the provider’s level?

Obviously highlighted providers, but I think that same concept is true across the board.

Okay, thanks.

Thank you. . Our next question comes from Jessica Tassan of Piper Sandler. Jessica your line is open.

Thanks for coming back. So curious to know if 2022 is the first year where Oak Street has Bureau Exclusive Centers, and if so, just what's the impact of that payer diversification on patient recruitment, revenue per patient in Opex at the impacted cohort in 2022? Thanks.

Thanks for the question, Jess (ph), we haven't opened exclusive Centers up for a number of years now. That was always something that was a large number of them in 2015, 2016 and 2017. Very different period of time for Oak Street and experienced and I think we learned as I think you kind of alluded to, that, it's harder to grow Centers, our exclusive and that impacts the economics. And so we also didn't have any last year or the year before that or I think the year before that either. So I think that the kind of ramps we shared seven weeks ago, that's kind of our expected ramp going forward, that kind of takes into account these are all multi-payer Centers and we actually highlighted in that presentation kind of what Centers looked like, what's the coworkers looks like without the exclusivity. So I kind of would guide you to the non-exclusive boxes in that presentation.

Got it. I thought there were a couple of still rolling off this year. That's my mistake. And then just as a follow-up, can you clarify the $190,000 sales and marketing plus G&A per month per center. It's still kind of the correct way to think about OpEx in 2022 given the slower center growth? Thanks.

Hey, Jess, it's Tim, thanks. I'd say that $190,000 number that we provided a few weeks ago is more -- was contemplated more center months in the year. Obviously going from 70 to 40, we're still going to need to make many of the G&A investments we're otherwise going to make. So based on my earlier comments, that number will be higher. I believe, I'm doing this from memory, that that number in 2021 was about $215,000, so it won't be that high. We'll still see some year-over-year leverage, but it won't be as low as $190,000, just given many of those costs are what we will still incur.

Thank you.

Thank you. Our next question comes from Gary Taylor of Cowen. Gary, your line is now open.

Hi. Good morning. I think that last answer hit on what I was wanting to get after just from a little bit other angle. But when we think about your archetype with the lower center openings, it looks like platform contribution would be targeting around $80 million this year. And then I'm presuming the $35 million EBITDA range in your guidance is probably more around the platform contribution than the G&A spend?

By platform contribution? Yes, that is correct, Gary. I'd say the range is really driven by the two variables that I mentioned around COVID costs and new patient economics. We have a high degree of control over our G&A expenses, as well as our sales and marketing. So there's relatively little range for that included in the guidance.

Got it, and then just a follow-up. AR days were up a lot sequential and year-over-year but also days’ claims payable or just your third-party medical expense payable was up a lot year-over-year and sequentially. Usually that medical claims is more tied to health plan final settlement timing, less so than your reserving. But can you comment on either one of those to AR days or medical claims days?

Gary, I apologize if you hear some sirens in the background, we had that car accident at our office. But the way our contracts work and I'll be brief and happy to follow-up, folks if there's questions. For some of our contracts, we're paid -- I'll call it sort of on an ongoing basis where we're making an estimate of what our surpluses is, our surplus being the premiums that the plans would pay to Oak Street last the medical costs that are being paid to third-party providers. And so for some of our contracts, we're paid sort of an estimate of what that net amount will be because obviously you don't ultimately know what that net amount is until all medical claims are cleared. That's about half our contracts. The other half are paid more in a manner where we're given a payment upfront by the health plan, to cover some fixed costs, visit arbitrary and recall a $150 PMPM. And then what we're doing is we're settling up that 150 relative to our actual surplus performance interferes. Because of the way the accounting works in until that -- until we settle with the health plan for that period of time. We're carrying that full balance of both the receivable related to the revenue and the payables related medical claims. And so you're going to see that buildup overtime, it's actually not IBNR. It's just a function of how those contracts settles . nothing unusual in there or difference in Q4 than there would've been in periods past, other than the fact that we're continuing to grow the business and that's obviously going to grow those amounts, in direct contracting has also been a factor and that a bit year-end because it's a bit of a different flavor, but more akin to that, that last -- excuse me, the second structure I mentioned where we're not getting paid an estimate from CMS as to our performance.

Okay. Thank you.

Thank you. Our next question comes from Ricky Goldwasser of Morgan Stanley. Ricky, your line is now open.

Hi, and good morning. So when we think about stores center growth, 22, 23, 24, this is a compounding effect, right? It too adds up to hundreds of centers ultimately. How does that impact your long-term top-line target beyond 2022, is my first question? And then second question, just going back to the question about labor and you being successful in hiring physicians, which clearly is great. But it would cost, i.e. What are you seeing in terms of wage inflation and how does that impact sort of your 22 guidance in SGNA trajectory.

On the first part of question around the growth. Maybe just nomenclature, but I wouldn't say it's an 100s of Centers impact if we're thinking 70 Centers and now we're -- update that to 40 centers. Over the three years, it would be 30 Centers to 90 Centers, so innovate decrease. By the end of 2024 will still have 250 Centers, and that should give us an embedded EBITDA of over a $1.5 billion, as we still building a large profitability. From our revenue growth rate, we think that compound growth rate over the next few years will be 40% plus. So again, we still think it'll be a robust revenue growth rate. To your second question around at what cost. Our acquisition compensation packages, have remained similar to what they've been in the past. We haven't changed them in a meaningful way and obviously, we always have cost of living increases every year and small adjustments by them. Its team shared in the guidance, right? It's still based on the same range we did for the JPMorgan presentation. One other note I would say about inflation. This is more of a longer term view, but Oak Street is actually very insulated from inflationary pressures in healthcare in the longer-term because our revenue is derived from the benchmark costs for Medicare. And to the extent that there is higher costs for labor in health care, that would be doctors or nurses or medical assistants, etc., that will directly impact the cost of traditional Medicare, which obviously directly impacts the benchmarks, which directly impacts our revenue. And so obviously in any given year, the benchmark doesn't automatically increase real-time. So it may have some headwinds and tailwinds in any given year. But if you think about in the 2, 3, 4, 5, 6, 7-year period of time, any inflationary pressure that the whole health care market is feeling, it may be felt by Oak Street, but it will be offset by an increase in our revenue. And actually think about it very simply. The cost of hospitalization will go up to the extent that healthcare labor costs go up, and that means the value of the hospitalization we've saved will also go up.

Our next question comes from Brian Tanquilut of Jefferies. Brian, your line is now open.

Hey, good morning, it's Jack serving on for Brian. Thanks for taking my questions. Not to belabor it on SG&A, but maybe I'll ask the question a slightly different way. We're shaking out at about a $30 million GAAP that is SG&A is 30 million higher at the high end of your guidance range versus the low end. Assuming that the cohort data you provided is consistent. For the low and higher end of the range you had provided previously. So I guess I just want to understand what sort of driving that Delta and I know Mike, you alluded to it a little bit in terms of the variable costs that are in those buckets. But is it more sales and marketing to hit a higher patient number? Is it systems cost that comes in on per-member basis, I guess any color to help us bridge that gap and be helpful.

Hey, Jack, it's Tim. Maybe just to compare notes on exactly sort of what numbers you're using to get to that. As I mentioned, to getting with the Gary, we've a relatively narrow range for assumption around G&A and sales and marketing between the high and low end of the range or I'm not certain if it is something good, my guess is it's something -- whatever is driving that is more in platform contribution. Maybe we'll just refine assumptions around what's going into that number, because I wouldn't expect to see that wider range on the for in sales and marketing.

Okay, got it. And then just a quick follow-up. An interesting point on conversions from direct contracting to MA. Along that line, have you seen conversion from either MSSP lives under Acorn into MA consistently or anything from direct contracting in '21 over into '22. Is that something that's actually happening and worth noting? If so, how should we be thinking about impacts on PMPM? Thanks.

Historically, we've always seen some patients who will be on traditional Medicare and choose Medicare Advantage. And obviously there are some patients who are Medicare Advantage that move back to traditional Medicare, it works both ways. Although, in general, we see a net increase in the number of patients who choose MA compared to those that move back out of it. And that's obviously a micro approach -- that's a macro trend across healthcare over the last decade as MA's penetration continues to increase. So we certainly see that. And direct contracting or the Medicare Shared Savings Program ACO is obviously a claims-based alignment. So the patient, you generally didn't know that existed or that we're part of the program in the shared savings program. And so that program has 0 impact on the patient's choice of health plan coverage, right? I guess they definitely whether they have shared savings are not is relatively irrelevant to how the patient thinks about their health plan coverage. And direct contracting, it's a little more known to the patient because they have to sign a form to voluntary line. Well, a lot of them do, some of them are so claims aligned. But from a patient 's standpoint, direct contracting and now the ACO, at least, next year, it doesn't have an impact on what the patient gets. From -- there's no -- it's not an insurance coverage, it's not benefits. It's about how we get paid. And so a patient still have the same choice. Is Medicare Advantage a better way to get my Medicare coverage than traditional Medicare. That choice hasn't changed just because Oak Street get paid differently for the patient's care. And so that's why I think you still see the same movement you've seen in past years.

Awesome. Thank you.

Thank you. Our next question comes from Whit Mayo of SVB Leerink. Whit, your line is now open.

Thanks for keeping the call going for just a little bit. Can you guys just spend a minute on just the competitive landscape? I mean, we're obviously seeing more providers put a strategy around primary care and it just feels like perhaps we're seeing a little bit more capacity in some of your legacy or new markets. Obviously, a lot of new look like Oak Street models, which is flattering, probably frustrating at the same time. I'm just trying to get a handle on how this is maybe coloring your views internally about some the economics in your existing legacy markets in future markets. How do you guys think about what feels like more and more people sort of encroaching on your turf? Thanks.

I appreciate the question. Overall, I think we have a positive that more and more people are entering value-based care, and investing in value based guided care. It is the right answer for healthcare and we need higher quality at a lower cost in this country. So one of the things that we're proud of at Oak Street is that there are, to use your term lookalikes out there because that means we're helping catalyzed change, and so we think that's great. There's a lot of obviously investment in the space from different groups in the space, but there is a huge variety of how people are addressing the problem, how they're going to market, and the relative performance. So value-based care was around long before Oak Street started and it's hard to do what we do. And I think we've really proven our level of success and scalability. So from our perspective, the market is still massive. As many -- as much as you hear kind of noise around different groups doing things et cetera, a lot of them aren't center-based model, they are more partnered with existing provider groups. Which we don't really feel like is necessarily competition per se because from a patient perspective, their experience is still the same, even if their doctor gets paid differently. So from our perspective is all about creating a really compelling patient experience, which is what really drives our growth. And so I think a lot of the groups that are attacking the problem, I hope there's very successful, but they're really not doing in the same way we are. We don't think it's really directly competitive. And even the small number of groups that are more similar to Oak Street and in kind of more incentive-based model. We're all just a drop in the bucket compared to the number of providers out there. I think we share JPMorgan. There's something in the magnitude of 450 thousand kind of primary care doctors and primary care nurse practitioners at this time. So even if Oak Street had a thousand full centers with six care teams each, we would still be like percent of half of the total providers out there. So and again, what we know we're a long way for a thousand full Centers at this time. So again, I think that that just highlights the massive size of the market. And so let me, it's great, more people are doing it. And I think over the next decade our hope is us and others can really transform the way care is delivered and along the way, really lower costs and improve quality for this country.

Okay thanks.

Thank you. Our next question comes from Sarah James of Barclays. Sarah, your line is now open.

Thanks for squeezing me in. Can you talk about what you're doing to drive earlier new patient engagement? And when you think about profitability in 25, does that assume any change to first year cost of care for new members are earlier patient engagement?

Yeah. So on the patient engagement front, I mean one other aspect of the way we grow right in the BDC model is, by that definition, patients are coming to Oak Street they're engaged when they start. They're coming in for we call welcome visit and they come back a couple years later for call it appropriately welcome back visit, and then we get into regular cadence of care. We don't want to see them so often they gave really trying to understand what their conditions are, what the risk factors are, and make sure they're in the right programs and risk stratify the right way. We really invested a lot over the last couple of years in our data and stratification process. So we actually published a paper in New England Journal Medicine catalyst publication I think about a year ago or so now. That talks about how we're using machine learning along more data points to, kind of better risk satisfy patients. That makes a big difference in kind of understanding, who is at risk of harmful? How do you make sure they have the appropriate resources available to them? So that has been a focus and obviously will continue to be a focus, to really make sure we're taking great care of people when they first come in and making impact quickly on their care. But I think different than like say, a health plan or kind of partnership model. We're not coming in and then starting from scratch kind of with a population of patients. It's one-by-one as we add patients and make an impact on them. And so thinking through to the projections, through -- there's no, what I would say, assumptions of performance improvement embedded in that plan to get to profitability in 2025. I think our -- how we built our assumptions is that how we are performing today is how we will continue to perform. And that's how we created the plan, whether it's the growth rate or profitably in 2025 or before, or all the different components of that. And so obviously, we'll keep focusing -- our team will keep focusing and improving across all dimensions. That's the right thing to do for our patients and obviously will also drive better performance. But there's no assumptions around that performance improvement built into what Tim shared.

Great. And follow-up is you've mentioned a couple of times new center cohorts are progressing a little faster towards profitability than old cohorts. Could you give us any color on why that's happening and if you expect that trend to continue?

Look, we are a much more effective organization today than we were in 2013, 2014, 2015, 2016. So, if you look back and you say that the 19 centers we opened up in those years, obviously they're making, since then, $6.5 million this year in contribution and the ones that are closer to fall are making $8 million or more. Those centers were started in that period of time. And so we are better across the board, whether it's our care model has more programs, is more robust, we've gathered better, we have better technology, we have better training. Kind of across the board, I think we are better at operating than we were in those days. And so we are seeing improvements. Our 2018 and 2019 vintages, despite being much bigger vintages than the earlier ones, ramp much faster. We shared that data in our presentation seven weeks ago. And you can see the ramps at like years from those centers. And then we look at the 2021 and 2020 centers that we just -- that are relatively recently opened, if you look at the KPI for the care model metrics or on the growth metrics, they're similar to or better than those same centers. So I think that one of things that gives us a lot of confidence going forward is that obviously the return from those early centers, they're very profitable, they're working very well. And we feel like the model is better than it was then and we have a lot of data to support that. That's what gives us confidence that all the centers we're putting up now will, in three or five or six years, depending on when they open, will be at that $6.5 million and eventually that $8 million in the contribution range.

Thank you.

Thank you. Our final question for today comes from David Larsen of BTIG. David, your line is now open.

Hi, congratulations on publishing your EBITDA break even timeline. One quick question for Fiscal '23. The Medicare advantage advanced rate notice, look pretty good in terms of expected change in revenue for MA plans coming in well above 2022. Any thoughts around that? What are you modeling in your longer-term plan for growth in revenue per Capitated patient? If it's anywhere near 8% in '23, would that be above in line with how, would that compare to your model? Thanks.

Appreciate the congrats. On the 2023 rate notes in revenue, one thing to always keep in mind is that, we are one step removed from how the benchmark and rate changes because the health plans in the middle. The health plan actually provides a buffering mechanism, when you go about Oak Street economics. So to the extent that rates go up, generally, plans will take some of that increase and they will invest in better benefits for patients, which obviously to the conversation we had earlier in the call, is a net benefit that will drive more penetration in more patients on risk for Oak Street. But from an economic Oak Street perspective, even if our revenue goes up also our medical costs and are largely offset. Same thing happens if there's a worse rate increase noticed it wouldn't have necessarily a negative impact on our patient economics because, the same buffering mechanism exists. So again, we are less sensitive to those types of things and then say a health plan. Still from a patient revenue growth rate, we had a higher step-up in 2022 from 2021, than we would see an average year. And that has in part because we have a full-year direct contracting, and obviously without the plan in place, on taking higher PMPM revenue than a health plan would at the same risk or. And then Number 2, as we talked about pretty extensively we felt that our patient basis, especially new patients were very under documented in 2021 driven by block engaged with the health care system in 2020. And so obviously now that we've had a chance to understand the patient’s conditions and document accurately in 2021, we're kind of reversing out that under documentation, so I don't think that's going to be ongoing phenomenon. I think it's more of a one-time catch-up in that case. So hopefully that gives you a little bit more color on how we think about the increases.

That's great, thanks very much.

Thank you. We have no further questions for stake. That concludes today's conference call. Thank you for joining. You may now disconnect.