Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following management’s discussion and analysis should be read in conjunction with the audited consolidated financial statements and the notes thereto included in Part II, Item 8, “Financial Statements and Supplementary Data” of this Annual Report on Form 10-K.
In this section, “we,” “our,” “ours,” and “us” refer to Astrana Health, Inc. (“Astrana”) and its consolidated subsidiaries and affiliated entities, as appropriate, including its consolidated variable interest entities (“VIEs”).
Overview
Astrana Health, Inc. is a leading physician-centric, technology-powered, risk-bearing healthcare management company. Leveraging its proprietary population health management and healthcare delivery platform, Astrana operates an integrated, value-based healthcare model, that aims to empower the providers in its network to deliver the highest quality of care to its patients in a cost-effective manner. Together with our affiliated physician groups and consolidated entities, we cost-effectively provide coordinated outcomes-based medical care.
Through our risk-bearing organizations (“RBOs”) with more than 20,000 contracted physicians, we were responsible for coordinating the care for approximately 1.6 million patients, primarily in California, as of December 31, 2025. These covered patients are managed care members whose health coverage is provided either through their employers, directly from a health plan, or as a result of their eligibility for Medicaid or Medicare benefits. Our managed patients benefit from an integrated approach that places physicians at the center of patient care and utilizes sophisticated risk management techniques and clinical protocols to deliver high-quality, cost-effective care.
Industry Trends
The One Big Beautiful Bill Act (the “OBBBA”), signed on July 4, 2025, introduces Medicaid work-requirement pilots and tighter provider tax rules beginning in 2026. We expect to see tax impacts from the following changes, including the restoration of 100% bonus depreciation, allowing the current year deduction of research and development expenses, and changing the 163j interest limitation from earnings before tax to EBITDA. We anticipate the OBBBA will not have a material impact on tax expense and did not identify a material impact in 2025. While we are still evaluating the full downstream effects, we believe Astrana is well-positioned to navigate these changes and view these headwinds as manageable. Our diversified footprint, strong track record of Medicaid performance, and investment in care-enablement infrastructure provide meaningful insulation. We remain focused on maintaining continuity of care and supporting our state partners through this policy transition.
On January 26, 2026, the Centers for Medicare & Medicaid Services (“CMS”) issued an advance notice detailing proposed 2027 Medicare Advantage payment rates (the “2027 Advance Notice”). CMS accepted comments on the 2027 Advance Notice until February 25, 2026 and intends to publish the final 2027 rate announcement no later than April 6, 2026. If the proposed rates are finalized, we anticipate impact to the Medicare line of business. We expect the impact of the proposed risk adjustment model changes to be materially less significant for Astrana than for the broader Medicare Advantage market. While we are still evaluating the full downstream effects, we believe Astrana is well-positioned to navigate these changes and view these headwinds as manageable.
69
Table of Contents
2025 Highlights
Acquired Businesses and Assets
Certain businesses and assets of Prospect Medical Holdings, Inc. (collectively, “Prospect”) (such acquisition, the “Prospect Acquisition”)
On July 1, 2025, we completed our previously announced acquisition of Prospect, including its California-licensed health plan (Prospect Health Plan), its medical groups in multiple states (Prospect Medical Groups), its management service organization (Prospect Medical Systems), its pharmacy (RightRx), and Foothill Regional Medical Center (“FRMC”). Prospect is a physician-centric, risk-bearing healthcare company that operates an integrated healthcare delivery platform, enabling a network of over 11,000 providers to participate in value-based care arrangements, and empowering them to deliver accessible, high-quality care to patients in a cost-effective manner. Prospect enables physicians to deliver payer-agnostic, patient-centered care across Medicare Advantage, Medicaid, and Commercial lines of business. The acquisition significantly expanded our provider network and enhanced our ability to offer increased access, quality, and value to our members (see Note 3 — “Business Combinations and Goodwill” to our consolidated financial statements under Item 8 in this Annual Report on Form 10-K).
Second Amended and Restated Credit Agreement
On February 26, 2025, we amended and restated our credit agreement with Truist Bank, in its capacities as administrative agent for the lenders (the “Second Amended and Restated Credit Agreement”). The Second Amended and Restated Credit Agreement provides for (a) a five-year revolving credit facility (“Revolver Loan”) to us of $300.0 million, which includes a letter of credit sub-facility of up to $100.0 million and a swingline loan sub-facility of $25.0 million, (b) a five-year term loan A credit facility (“Term Loan”) to us of $250.0 million, and (c) a five-year delayed draw term loan credit facility (“DDTL A” and, together with the Term Loan, the “Term Loans”) to us of $745.0 million of which $707.3 million was drawn to fund the Prospect Acquisition. The Term Loan and Revolver Loan were used to, among other things, refinance certain existing indebtedness of ours and certain subsidiaries, pay transaction costs and expenses arising in connection with the Second Amended and Restated Credit Agreement, and provide for working capital needs and other general corporate purposes. The DDTL A was used to fund the Prospect Acquisition, and, in addition to the foregoing, the Revolver Loan was used to finance certain future permitted acquisitions and permitted investments and capital expenditures (see Note 10 — “Credit Facility and Bank Loans” to our consolidated financial statements under Item 8 in this Annual Report on Form 10-K).
Partnerships
We partnered with a provider group in Southern California and with Intermountain Health across southern Nevada with the collaboration goal to expand access to coordinated, high-quality care, enhance primary care access, improve patient outcomes, and advance the healthcare infrastructure through shared technology and care management programs.
70
Table of Contents
Key Financial Measures and Indicators
Operating Revenues
Our revenue, which is recorded in the period during which services are rendered and earned, generally on a monthly basis, primarily consists of capitation revenue, risk pool settlements and incentives, management fee income, fee-for-services (“FFS”) revenue, and other revenue primarily consisting of revenues earned from maternity care and Hospital Quality Assurance Fee Program (“HQAF”). The form of billing and related collection risk for such services may vary by revenue type and customer.
Operating Expenses
Our largest expenses consist of the cost of: (i) patient care paid to contracted providers; (ii) information technology equipment and software; and (iii) hiring staff to provide management and administrative support services to our affiliated physician groups, as further described in the following sections. These services include claims processing, utilization management, contracting, accounting, credentialing, and administrative oversight.
Adjusted EBITDA and Adjusted EBITDA Margin
Our Adjusted EBITDA and Adjusted EBITDA margin are supplemental performance measures of our operations for financial and operational decision-making, and are used as a supplemental means of evaluating period-to-period comparisons on a consistent basis. Adjusted EBITDA is calculated as earnings before interest expense, interest income, income taxes, depreciation, and amortization, excluding income or loss from equity method investments, non-recurring and non-cash transactions, and stock-based compensation. We define Adjusted EBITDA margin as Adjusted EBITDA over total revenue.
Adjusted Net Income Attributable to Astrana and Adjusted Earnings Per Share (“EPS”) - Diluted
Our adjusted EPS - diluted is a supplemental performance measure of our operations for financial and operational decision-making and is used as a supplemental means of evaluating period-to-period comparisons on a consistent basis. We define adjusted EPS - diluted as adjusted net income attributable to Astrana over weighted average shares of common stock outstanding - diluted. Adjusted net income attributable to Astrana is calculated as net income, excluding income or loss from equity method investments, non-recurring and non-cash transactions, stock-based compensation, amortization of intangibles, certain tax adjustments, and amounts related to non-controlling interest.
Free Cash Flow
Our free cash flow is a supplemental performance measure of our operations for financial and operational decision-making and is used as a supplemental means of evaluating period-to-period comparisons on a consistent basis and reflects the cash flow trends in our business. We define free cash flow as net cash provided by operating activities minus cash used in purchases of property and equipment.
71
Table of Contents
Results of Operations
2025 Compared to 2024
Our consolidated operating results for the year ended December 31, 2025, as compared to the year ended December 31, 2024, were as follows:
Astrana Health, Inc.
Consolidated Statements of Income (in thousands)
Years Ended December 31,
Revenue
Operating expenses
Other expense
Unrealized (loss) gain on investments (68 ) 731 (799 ) (109 )%
Net income attributable to noncontrolling interests 1,589 6,783 (5,194 ) (77 )%
72
Table of Contents
Risk-Bearing Organizations and Patients
As of December 31, 2025 and 2024, we managed a total of 28 and 20 independent risk-bearing organizations, including both affiliated and non-affiliated, respectively, and the total number of patients for whom we managed the delivery of healthcare services was approximately 1.6 million and 1.1 million, respectively.
Revenue
Our total revenue in 2025 was $3,181.8 million, as compared to $2,034.5 million in 2024, an increase of $1,147.2 million or 56%. The increase in total revenue was partially attributable to the acquisition of Prospect, which contributed approximately $616.3 million of revenue from the acquisition date. In addition, capitation revenue increased by $539.0 million primarily as a result of our 2024 acquisitions within our Care Partners segment, along with enrollees transitioning to full risk through our Restricted Knox-Keene plans.
Cost of Services, Excluding Depreciation and Amortization
Expenses related to the cost of services, excluding depreciation and amortization, in 2025 were $2,840.2 million, compared to $1,763.2 million in 2024, an increase of $1,077.1 million or 61%. The overall increase was primarily due to increased participation in a value-based Medicare FFS model and medical costs associated with both professional and institutional risk of our Restricted Knox-Keene licensed health plan as a result of our recent acquisitions, of which Prospect contributed approximately $538.3 million from the date of acquisition.
General and Administrative Expenses
General and administrative expenses in 2025 were $217.3 million, compared to $154.1 million in 2024, an increase of $63.1 million or 41%. This increase was primarily due to approximately $30.9 million from the inclusion of Prospect’s results of operations from the date of acquisition, transaction costs related to our acquisitions that were driven by the Prospect Acquisition in 2025, as well as other general and administrative expenses to support operational growth.
Depreciation and Amortization
Depreciation and amortization expenses were $45.7 million and $27.9 million for the years ended December 31, 2025 and 2024, respectively, an increase of $17.8 million driven by $17.3 million due to the Prospect Acquisition. This amount includes depreciation of property and equipment and the amortization of intangible assets.
Income from Equity Method Investments
Income from equity method investments in 2025 was $1.7 million, compared to $4.5 million in 2024, a decrease of $2.7 million. This amount includes the Company’s portion of the equity method investment’s net earnings or losses. The decrease was primarily due to APC’s equity method investment in LaSalle Medical Associates and reduced income pickup due to the sale of our equity method investment in CAIPA MSO, LLC.
Interest Expense
Interest expense in 2025 was $49.9 million, compared to $33.1 million in 2024, an increase of $16.8 million. The increase in interest expense for the year was primarily due to the increased borrowings under the Second Amended and Restated Credit Facility to finance the Prospect Acquisition, partially offset by a decrease in interest rates on our floating-rate debt, including the interest rate swap agreement entered to manage our interest. Our outstanding borrowings, as of December 31, 2025, increased to $1,052.2 million on the Second Amended and Restated Credit Facility from $428.2 million borrowed under the facility as of December 31, 2024. The interest rate on the Term Loans and $100.0 million of the Revolver Loan was 5.72%, and the interest rate on $22.0 million of the Revolver Loan was 5.77%, as of December 31, 2025. The interest rate swap has a fixed rate of 3.179% and covers $200.0 million of our credit facility. As of December 31, 2024, the interest rates for the Term Loan and Revolver were 6.67% and 6.23%, respectively.
73
Table of Contents
Interest Income
Interest income in 2025 was $12.2 million, compared to $14.5 million in 2024, a decrease of $2.4 million. Interest income reflects interest earned on cash held in bank accounts, money market and certificate of deposit accounts, and on our loans receivable. The change in interest income was primarily due to decreases in interest rates related to cash held in interest-bearing bank accounts.
Other (Loss) Income
Other loss in 2025 was $2.8 million, as compared to other income of $4.9 million in 2024, a decrease of $7.7 million. The decrease was primarily due to a $5.3 million reimbursement in 2024 from Allied Pacific Holdings Investment Management, LLC, with no similar transaction occurring in 2025 and $5.0 million of debt issuance costs that were expensed in connection with the Second Amended and Restated Credit Facility in 2025. The decrease was partially offset by a $3.6 million employee retention tax credit related to COVID-19 relief.
Provision for Income Taxes
Provision for income taxes was $15.5 million in 2025, as compared to $30.9 million in 2024, a decrease of $15.4 million. The decrease in provision for income taxes was primarily due to a decrease in pre-tax income.
Net Income Attributable to Noncontrolling Interests
Net income attributable to non-controlling interests was $1.6 million in 2025, as compared to a net income of $6.8 million in 2024, a decrease of $5.2 million. The decrease was primarily driven by a decrease in net income.
Net Income Attributable to Astrana Health, Inc.
Net income attributable to Astrana Health, Inc. was $22.5 million in 2025, as compared to net income of $43.1 million in 2024, a decrease of $20.7 million, driven by a decrease in our operating income and an increase in our interest expense, partially offset by a decrease in our provision for income taxes and a decrease in net income attributable to noncontrolling interests.
Adjusted EBITDA
Adjusted EBITDA was $205.4 million, as compared to $170.4 million in 2024, an increase of $35.1 million. The increase was primarily due to the acquisition of Prospect, partially offset by a decrease in operating income as a result of higher utilization and an increase in general and administrative expenses.
2024 Compared to 2023
See Part II, Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Results of Operations” of our Annual Report on Form 10-K for the year ended December 31, 2024 filed with the SEC on March 14, 2025, for a discussion of our results of operations during the year ended December 31, 2024, compared to the year ended December 31, 2023.
Segment Financial Performance
We have three reportable segments: Care Partners, Care Delivery, and Care Enablement. We evaluate the performance of our operating segments based on segment revenue growth and operating income. Management uses revenue growth and total segment operating income as measures of the performance of operating businesses, separate from non-operating factors. We integrated the Prospect Acquisition into our three reportable segments. For more information about our segments, see Note 1 — “Description of Business” and Note 20 — “Segments” to our consolidated financial statements under Item 8 in this Annual Report on Form 10-K for additional information.
74
Table of Contents
2025 Segments Compared to 2024 Segments
The following table sets forth our revenue and operating income by segment for the year ended December 31, 2025, as compared to the year ended December 31, 2024:
Years Ended December 31,
Segment Revenue (in thousands) 2025 2024 $ Change % Change
Years Ended December 31,
Segment Operating Income (Loss) (in thousands) 2025 2024 $ Change % Change
* Percentage change of over 500%
Care Partners Segment
Revenue increased $1,073.6 million and operating income increased $13.7 million for the year ended December 31, 2025, compared to the corresponding period in 2024. The increases in revenue and operating income were primarily due to $542.3 million of revenue from the Prospect Acquisition, other recent acquisitions within our Care Partners segment, and members transitioning to full risk through our Restricted Knox-Keene plans. The increase in operating income was partially offset by recognition of a $13.0 million loss contingency in the third quarter of 2025.
Care Delivery Segment
Revenue increased $114.1 million and operating income decreased $2.1 million for the year ended December 31, 2025, compared to the corresponding period in 2024. The increase in revenue was primarily driven by $105.1 million from the inclusion of Prospect, as well as an increased volume in patient visits at our primary, multi-specialty, and ancillary Care Delivery entities. Operating income decreased $2.1 million due to an increase in expenses incurred to support growth in our Care Delivery segment, including new clinic locations and related lease costs.
Care Enablement Segment
Revenue increased $91.2 million and operating income increased $21.4 million for the year ended December 31, 2025, compared to the corresponding period in 2024. The increase in revenue was primarily due to managing more IPAs in our Care Partners segment, including $83.8 million from Prospect. As of December 31, 2025, and 2024, the total number of affiliated physician groups we managed was 28 groups and 20 groups, respectively. The increase in operating income was primarily due to the acquisition of Prospect, partially offset by higher costs incurred by the Care Enablement segment as a result of an increase in the workforce that provides management and administrative services.
2024 Segments Compared to 2023 Segments
See Part II, Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Segment Financial Performance” of our Annual Report on Form 10-K for the year ended December 31, 2024 filed with the SEC on March 14, 2025, for a discussion of our segment financial performance during the year ended December 31, 2024, compared to the year ended December 31, 2023.
75
Table of Contents
Reconciliation of Net Income to EBITDA, Adjusted EBITDA, and Adjusted EBITDA Margin
Set forth below are reconciliations of Net Income to EBITDA and Adjusted EBITDA for the years ended December 31, 2025 and 2024.
Years Ended December 31,
Income from equity method investments (1,708 ) (4,451 )
Adjusted EBITDA margin 6 % 8 %
(1)
Other, net for the year ended December 31, 2025, relates to $13.0 million for a legal matter with a provider associated with CFC HP, $25.9 million for transaction and integration costs primarily for the acquisition of Prospect, debt issuance costs incurred in connection with our Second Amended and Restated Credit Facility, certain costs and final settlement for some of our acquisitions, and severance fees incurred, partially offset by employer retention tax credits related to COVID-19 relief.
(2)
Other, net for the year ended December 31, 2024, relates to transaction costs incurred for our investments and tax restructuring fees, anticipated recoveries from one-time losses relating to third party payor payments associated with the CHS transaction, a financial guarantee via a letter of credit that we provided in support of two local provider-led ACOs, non-cash gain on debt extinguishment related to one of our promissory note payables, non-cash realized loss from the sale of one of our marketable equity securities, non-cash changes related to change in the fair value of our call option, non-cash change in the fair value of our financing obligation to purchase the remaining equity interests in one of our investments, non-cash changes in the fair value of our contingent liabilities, non-cash changes in the fair value of the Company’s Collar Agreement, and reimbursement from a related party of the Company for taxes associated with the Excluded Assets spin-off.
76
Table of Contents
Reconciliation of Net Income to Adjusted Net Income Attributable to Astrana and Adjusted EPS - Diluted
Set forth below are reconciliations of net income to adjusted net income attributable to Astrana as well as the reconciliation to adjusted EPS - diluted for years ended December 31, 2025 and 2024.
Years Ended December 31,
(in thousands, except for share and per share data) 2025 2024
Income from equity method investments (1,708 ) (4,451 )
Adjusted non-controlling interest (13,203 ) (4) (11,629 ) (5)
Adjusted net income attributable to Astrana Health, Inc. $ 108,581 $ 93,045
Adjusted earnings per share - diluted $ 2.20 $ 1.94
(1)
The components of other, net, as set forth in the table above, are described in the footnotes to the table under “Reconciliation of Net Income to EBITDA, Adjusted EBITDA and Adjusted EBITDA Margin”. Please see the footnotes for additional information.
(2)
Tax adjustments for the year ended December 31, 2025, includes the tax effect for, at a 27.1% statutory blended tax rate, the adjustments made to net income of $33.3 million, partially offset by 162(m) impact of $7.5 million.
(3)
Tax adjustments for the year ended December 31, 2024, includes the tax effect for, at a 28.0% statutory blended tax rate, the adjustments made to net income of $19.2 million, partially offset by 162(m) impact of $5.3 million.
(4)
Includes net income attributable to non-controlling interests ("NCI") of $1.6 million, and adjustments attributable to NCI of $11.6 million, for the year ended December 31, 2025.
(5)
Includes net loss and income, respectively, attributable to NCI of $6.8 million, and adjustments attributable to NCI of $4.8 million, for the year ended December 31, 2024.
77
Table of Contents
Reconciliation of Net Cash Provided by Operating Activities to Free Cash Flow
The following table provides a reconciliation of net cash provided by operating activities to free cash flow for the years ended December 31, 2025 and 2024 (in thousands):
December 31,
Net cash provided by operating activities $ 114,597 $ 52,198
Purchases of property and equipment (10,106 ) (8,031 )
Use of Non-GAAP Financial Measures
This Annual Report on Form 10-K contains the non-GAAP financial measures EBITDA, Adjusted EBITDA, Adjusted EBITDA margin, adjusted net income attributable to Astrana, and adjusted EPS - diluted, of which the most directly comparable financial measure presented in accordance with U.S. generally accepted accounting principles (“GAAP”) is net income. This Annual Report on Form 10-K also contains the non-GAAP financial measure free cash flow, of which the most directly comparable financial measure presented in accordance with U.S. GAAP is net cash provided by operating activities. These measures are not in accordance with, or alternatives to, GAAP, and may be calculated differently from similar non-GAAP financial measures used by other companies. We use Adjusted EBITDA, Adjusted EPS - diluted, and free cash flow as supplemental performance measures of our operations, for financial and operational decision-making, and as supplemental means of evaluating period-to-period comparisons on a consistent basis and, for free cash flow, to reflect the cash flow trends in our business. Adjusted EBITDA is calculated as earnings before interest expense, interest income, income taxes, depreciation, and amortization, excluding income or loss from equity method investments, non-recurring and non-cash transactions, and stock-based compensation. We define Adjusted EBITDA margin as Adjusted EBITDA over total revenue. Adjusted net income attributable to Astrana is calculated as net income, excluding income or loss from equity method investments, non-recurring and non-cash transactions, stock-based compensation, amortization of intangibles, certain tax adjustments, and amounts related to non-controlling interest. We define adjusted EPS - diluted as adjusted net income attributable to Astrana over weighted average shares of common stock outstanding - diluted. We define free cash flow as net cash provided by operating activities minus cash used in purchases of property and equipment.
We believe the presentation of these non-GAAP financial measures provides investors with relevant and useful information, as it allows investors to evaluate the operating performance of the business activities without having to account for differences recognized because of non-core or non-recurring financial information. When GAAP financial measures are viewed in conjunction with non-GAAP financial measures, investors are provided with a more meaningful understanding of our ongoing operating performance. In addition, these non-GAAP financial measures are among those indicators we use as a basis for evaluating operational performance, allocating resources, and planning and forecasting future periods. Non-GAAP financial measures are not intended to be considered in isolation, or as a substitute for, GAAP financial measures. Other companies may calculate EBITDA, Adjusted EBITDA, adjusted net income attributable to Astrana, adjusted EPS - diluted, and free cash flow differently, limiting the usefulness of these measures for comparative purposes. To the extent this Form 10-K contains historical or future non-GAAP financial measures, we have provided corresponding GAAP financial measures for comparative purposes. The reconciliation between certain GAAP and non-GAAP measures is provided above.
Liquidity and Capital Resources
Cash, cash equivalents at December 31, 2025, totaled $429.5 million. Working capital totaled $248.0 million at December 31, 2025, compared to $272.9 million at December 31, 2024, a decrease of $24.9 million.
78
Table of Contents
We have historically financed our operations primarily through internally generated funds and borrowings on long-term debt. We generate cash primarily from capitation contracts, risk pool settlements and incentives, fees for medical management services provided to our affiliated physician groups, FFS reimbursements, and other revenues. We generally invest cash in money market accounts, which are classified as cash and cash equivalents. In February 2025, we entered into the Second Amended and Restated Credit Agreement, which amended and restated our prior amended credit agreement and provided for a five-year revolving credit facility of $300.0 million, a term loan of $250.0 million, and a delayed-draw term loan of $745.0 million, which were primarily used to refinance certain existing indebtedness and to fund the costs associated with the Prospect Acquisition. In July 2025, we drew down the delayed-draw term loan for $707.3 million to fund the Prospect Acquisition and terminated the remaining commitment. In addition, we have a current shelf registration statement filed with the SEC under which we may issue common stock, preferred stock, debt securities, and other securities in one or more offerings on terms to be determined at the time of each offering. We believe we have sufficient liquidity to fund our operations through at least the next 12 months and the foreseeable future.
Cash Flow Activities
Our cash flows for the years ended December 31, 2025 and 2024 are summarized as follows (in thousands):
Years Ended December 31,
* Percentage change of over 500%
Operating Activities
Cash provided by operating activities during the year ended December 31, 2025, was $114.6 million, as compared to $52.2 million during the year ended December 31, 2024. The increase in cash provided by operating activities was primarily driven by favorable changes in working capital relative to 2024 and higher adjusted net income. The change in working capital for the 2025 and 2024 periods included the timing of claims payments related to our medical liabilities, and a decrease in cash paid for income taxes. For the year ended December 31, 2025, net income, exclusive of depreciation and amortization, amortization of debt issuance costs, share-based compensation, non-cash lease expense, deferred tax, and other was $117.7 million, as compared to $115.8 million for the year ended December 31, 2024.
Investing Activities
Cash used in investing activities during the year ended December 31, 2025, was $539.0 million, primarily due to payments for business and asset acquisitions, net of cash acquired for $548.6 million, purchases of property and equipment for $10.1 million, and issuance of loans for $1.7 million. The cash used in investing activities was partially offset by proceeds from the sale of an equity method investment for $15.1 million and other investing activities of $6.3 million, including proceeds from repayment of loans and sales of marketable securities. Cash used in investing activities during the year ended December 31, 2024, was $192.4 million, primarily due to payments for business and asset acquisitions, net of cash acquired, of $146.3 million, issuance of loans receivable of $26.0 million, purchases of property and equipment of $8.0 million, purchases of investments – equity method of $6.0 million, purchase of a call option issued in conjunction with an equity method investment of $3.9 million, and other investing activities of $2.2 million mainly related to a $2.5 million purchase of a privately held investment.
79
Table of Contents
Financing Activities
Cash provided by financing activities during the year ended December 31, 2025, was $569.3 million, primarily due to borrowings of long-term debt of $1,119.3 million, partially offset by repayments of debt of $495.3 million, payment of deferred financing costs of $19.2 million, repurchase of treasury shares of $15.4 million, payment of contingent liabilities for $8.3 million, dividend payments of $7.9 million, and tax payments from net share settlement of restricted stock awards and units of $6.2 million. Cash provided by financing activities during the year ended December 31, 2024, was $135.1 million, primarily attributable to borrowings on long-term debt totaling $171.9 million. This was partially offset by repayments of debt of $18.5 million, payment of a financing obligation of $8.5 million, tax payments from net share settlement of restricted stock awards and units of $4.7 million, and dividend payments of $4.0 million.
Credit Facilities
Our debt balance consisted of the following (in thousands):
Less: Current portion of debt (47,865 )
Less: Unamortized financing costs (13,474 )
The following are the future commitments of our debt for the years ending December 31 (in thousands):
Amount
Second Amended and Restated Credit Agreement
The Second Amended and Restated Credit Agreement provides for (a) Revolver Loan to us of $300.0 million, which includes a letter of credit sub-facility of up to $100.0 million and a swingline loan sub-facility of $25.0 million, (b) Term Loan to the Company of $250.0 million, and (c) DDTL A to us of $745.0 million, of which $707.3 million was drawn down, and the remainder of the commitment terminated, in connection with closing the Prospect Acquisition. As a result, as of December 31, 2025, we had a combined borrowing of $930.2 million on our Term Loans and $122.0 million under the Revolver Loan under the Second Amended and Restated Credit Agreement. The maturity of the Term Loans and the Revolver Loan remains February 26, 2030.
See Note 10 — “Credit Facility and Bank Loans”to our consolidated financial statements under Item 8 in this Annual Report on Form 10-K for additional information on the Second Amended and Restated Credit Agreement.
80
Table of Contents
Effective Interest Rate
Our average effective interest rate on our total debt during the years ended December 31, 2025, 2024, and 2023 was 6.18%, 7.05%, and 6.19%, respectively. Interest expense in the consolidated statements of income included amortization of deferred debt issuance costs for the years ended December 31, 2025, 2024, and 2023 of $4.1 million, $1.8 million, and $1.1 million, respectively.
Standby Letters of Credit
We established irrevocable standby letters of credit with Truist Bank under the Second Amended and Restated Credit Agreement, totaling $25.7 million for the benefit of CMS and certain health plans as of December 31, 2025. Unless the institution provides notification that the standby letters of credit will be terminated prior to the expiration date, the letters will be automatically extended without amendment for additional one-year periods from the present or any future expiration date.
Certain affiliated IPAs consolidated by us established irrevocable standby letters of credit for a total of $2.1 million for the benefit of certain health plans as of December 31, 2025. The loan under which the standby letters of credit can be issued had an original loan availability of $4.1 million. The standby letters of credit are automatically extended without amendment for additional one-year periods from the present or any future expiration date, unless notified by the institution in advance of the expiration date that the letter will be terminated.
See Note 14 — “Commitments and Contingencies”to our consolidated financial statements under Item 8 in this Annual Report on Form 10-K for additional information on our standby letters of credit.
Critical Accounting Policies and Estimates
The consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”), which require management to make a number of estimates and assumptions relating to the reported amount of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and to the reported amounts of revenues and expenses during the period. We base our estimates on historical experience and various other assumptions we believe are reasonable under the circumstances. Changes in estimates are recorded if and when better information becomes available. Actual results could differ from those estimates under different assumptions and conditions. We believe that the accounting policies discussed below are the most important to the presentation of its financial condition and results of operations, and that they require our management’s most difficult, subjective, and complex judgments. Our significant accounting policies are described in Note 2 — “Basis of Presentation and Summary of Significant Accounting Policies” to our consolidated financial statements under Item 8 in this Annual Report on Form 10-K.
Principles of Consolidation
The consolidated balance sheets as of December 31, 2025 and 2024 and consolidated statements of income for the years ended December 31, 2025, 2024, and 2023 include Astrana’s wholly owned subsidiaries and consolidated variable interest entities (“VIEs”).
81
Table of Contents
Use of Estimates
The preparation of the consolidated financial statements and related disclosures in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities, at the date of the consolidated financial statements, as well as the reported amounts of revenues and expenses during the reporting period. Significant items subject to such estimates, and assumptions include collectability of receivables, recoverability of long-lived and intangible assets, business combination and goodwill valuation and impairment assessment, accrual of medical liabilities (incurred but not reported (“IBNR”) claims), determination of hospital shared-risk and health plan shared-risk revenue and receivables (including estimations of affiliated hospitals’ claims costs which involves assumptions for IBNR, such as utilization of healthcare services, historical payment patterns, cost trends, seasonality, changes in membership, and other factors), income tax-valuation allowance, share-based compensation, right-of-use assets and lease liabilities. Management evaluates its estimates and assumptions on an ongoing basis using historical experience and other factors, including the current economic environment, and makes adjustments when facts and circumstances dictate. As future events and their effects cannot be determined with precision, actual results could differ materially from those estimates and assumptions.
Receivables, Other Receivables, and Loans Receivable
Our receivables are comprised of capitation receivables, fee-for-service receivables, risk pool settlements, incentive receivables, management fee income, and receivables from related parties. The Company’s receivables are recorded and stated as the amount expected to be collected.
Capitation receivables relate to each health plan’s capitation revenue and are usually received by us in the month following the month of service. Capitation receivables also include receivables from CMS related to our participation in the ACO REACH model. Fee-for-service receivable involves our hospital and clinics. Both our hospital and the clinics receive amounts from third-party payers and patients for patient care services, while the clinics additionally receive amounts from hospitals. Risk pool settlements and incentive receivables mainly consist of our hospital shared-risk pool receivable, which is recorded based on reports received from our hospital partners and management’s estimate of our portion of the estimated risk pool surplus for open performance years. Settlement of risk pool surplus or deficits occurs within 6 to 12 months after the risk pool performance year is completed. Other receivables consist of amounts due from the seller associated with acquisitions and stop-loss insurance premium reimbursements. Loans receivable consist of promissory notes that accrue interest per annum and are recorded and stated at amortized cost plus accrued interest. Receivables from related parties primarily consist of hospital-shared risk pool settlements from AHMC Healthcare Inc., of which one of our directors is an officer. These amounts are recorded quarterly based on reports received from our hospital partners and management’s estimate of our portion of the estimated risk pool surplus for open performance years. Final settlement occurs within 18 months after the risk pool performance year is completed.
We maintain reserves for potential credit losses on the receivables. Management reviews the composition of our receivables and analyzes historical bad debts, customer concentrations, customer creditworthiness, current economic trends, and changes in customer payment patterns to evaluate the adequacy of these reserves. We also regularly analyze the ultimate collectability of accounts receivable after certain stages of the collection cycle using a look-back analysis to determine the amount of receivables subsequently collected, and adjustments are recorded when necessary. Reserves are recorded based on historical trends. Any change in such an estimate of reserves is recorded in the period when such a change is identified.
Receivables are recorded when we are able to determine amounts receivable under applicable contracts and agreements based on information provided, and collection is reasonably likely to occur. Regarding the credit loss standard, we continuously monitor our collections of receivables. Our expectation is that the historical credit loss experienced across our receivable portfolio is materially similar to any current expected credit losses that would be estimated under the current expected credit losses (“CECL”) model.
We assess outstanding loans receivable under the CECL model by evaluating the party’s ability to pay, which involves reviewing quarterly interest payment history, annually reviewing financial history, assessing the value of any collateral, and reassessing any identified insolvency risk.
82
Table of Contents
Fair Value Measurements
Our financial instruments include cash and cash equivalents, restricted cash, investment in marketable securities, receivables, loans receivable, accounts payable, certain accrued expenses, lines of credit, long-term debt, and certain other liabilities. The carrying values of the financial instruments classified as current in the accompanying consolidated balance sheets are considered to be at their fair values due to the short maturity of these instruments. The carrying amount of the loans receivable, net of current portion, lines of credit, and long-term debt approximates fair value as they bear interest at rates that approximate current market rates for debt with similar maturities and credit quality. The FASB’s Accounting Standards Codification (“ASC”) 820, “Fair Value Measurement” (“ASC 820”), applies to all financial assets and financial liabilities that are measured and reported on a fair value basis and requires disclosure that establishes a framework for measuring fair value and expands disclosure about fair value measurements. ASC 820 establishes a fair value hierarchy for disclosures of the inputs to valuations used to measure fair value.
This hierarchy prioritizes the inputs into three broad levels as follows:
Level 1 — Inputs are unadjusted quoted prices in active markets for identical assets or liabilities that can be accessed at the measurement date.
Level 2 — Inputs include quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability (i.e., interest rates and yield curves), and inputs that are derived principally from or corroborated by observable market data by correlation or other means (market corroborated inputs).
Level 3 — Unobservable inputs that reflect assumptions about what market participants would use in pricing the asset or liability. These inputs would be based on the best information available, including our own data.
Business Combinations
We use the acquisition method of accounting for all business combinations, which requires assets and liabilities of the acquiree to be recorded at fair value, to measure the fair value of the consideration transferred, including contingent consideration, to be determined on the acquisition date, and to account for acquisition-related costs separately from the business combination, which are expensed as incurred.
Intangible Assets and Long-Lived Assets
Intangible assets with finite lives include network relationships, management contracts, member relationships, patient management platform, tradename/trademarks, and developed technology. The valuations of these intangible assets are based on the multi-period excess earnings method, the cost to recreate method, or the relief from royalty method. Network relationships and management contracts are amortized using an accelerated method based on expected patterns of economic benefit or using the straight-line method. Patient management platform, tradename/trademarks, and developed technology are amortized using the straight-line method. Member relationships are amortized using an accelerated method based on expected patterns of economic benefit. Intangible assets are net of accumulated amortization and impairment losses, if any.
Finite-lived intangibles and long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If the expected future cash flows from the use of such assets (undiscounted and without interest charges) are less than the carrying value, a write-down would be recorded to reduce the carrying value of the asset to its estimated fair value. Fair value is determined based on appropriate valuation techniques.
Goodwill and Intangible Assets
Under ASC 350, “Intangibles – Goodwill and Other”, goodwill and indefinite-lived intangible assets are reviewed at least annually for impairment under a two-step process.
•
Step 1 — Under a qualitative assessment, determine if there are indicators of impairment. If so, proceed to Step 2.
83
Table of Contents
•
Step 2 — Under a quantitative assessment, if the fair value of each reporting unit is less than its carrying value, there is an impairment.
We may also elect to skip the qualitative testing and proceed directly to quantitative testing. Our five reporting units consist of the following:
•
Care Partners – IPA;
•
Care Partners – ACO;
•
Care Delivery – Foothill Regional Medical Center;
•
Care Delivery – Others; and
•
Care Enablement.
An impairment loss is recognized if the carrying value of a reporting unit exceeds its fair value. If this event arises, the impairment loss recorded is equal to the excess of the carrying value of the reporting unit over its fair value.
At least annually, indefinite-lived intangible assets are tested for impairment. Impairment for intangible assets with indefinite lives exists if the carrying value of the intangible asset exceeds its fair value. The fair values of indefinite-lived intangible assets are determined using valuation techniques that rely on estimates, judgments, and assumptions that management believes are appropriate in the circumstances.
Accrual of Medical Liabilities
Our Care Partners segment is responsible for integrated care provided by the associated physicians and contracted hospitals to their enrollees. Our Care Partners segment provides integrated care to HMOs, Medicare, and Medi-Cal enrollees through a network of contracted providers under sub-capitation and direct patient service arrangements. Medical costs for professional and institutional services rendered by contracted providers are recorded as cost of services, excluding depreciation and amortization, in the accompanying consolidated statements of income.
An estimate of amounts due to contracted physicians, hospitals, and other professional providers is included in medical liabilities in the accompanying consolidated balance sheets. Medical liabilities include claims reported as of the balance sheet date and estimated IBNR claims. Such estimates are developed using actuarial methods and are based on numerous variables, including the utilization of healthcare services, historical payment patterns, cost trends, product mix, seasonality, changes in membership, and other factors. The estimation methods and the resulting reserves are periodically reviewed and updated. Many medical contracts are complex and may be subject to differing interpretations of amounts due for the provision of various services. Such differing interpretations may not come to light until a substantial period of time has passed following the contract implementation.
84
Table of Contents
Capitation, Net
We participate in the ACO REACH model with CMS. By entering into a contract with CMS, an ACO voluntarily assumes operational, financial, and legal responsibilities and risks that no party, individually or collectively, has under the existing FFS model. For each performance year, CMS will pay a total benchmark amount, determined unilaterally by CMS in advance and subject to prospective adjustments throughout the year, for the totality of care provided to the ACO’s population of aligned beneficiaries during that year. The benchmark is net of a quality withholding applied by CMS. At the end of each performance year, a portion, or all, of the quality withholding can be earned based on the ACO’s performance. ACO REACH capitation revenue is recognized based on the estimated transaction price to transfer the service for a distinct increment of the series (i.e., month) and is recognized net of quality incentives/penalties. We recognize revenue related to the ACO Reach Model within capitation revenue in our consolidated statements of income because of the similar shared characteristics to our other capitation revenue. Revenue is recorded on a gross basis and is comprised of capitated fees for medical services provided, for which we are assigned the responsibility and management.
Risk Pool Settlements and Incentives
Certain IPAs enter into hospital shared-risk capitation arrangements with certain health plans and local hospitals, where the hospital is responsible for providing, arranging, and paying for institutional risk, and the IPA is responsible for providing, arranging, and paying for professional risk. Under a hospital shared-risk pool-sharing agreement, the IPA generally receives a percentage of the net surplus from the affiliated hospital’s risk pools with health plans after deductions for the affiliated hospital’s costs. Advance settlement payments are typically made quarterly in arrears if there is a surplus. Our risk pool settlements under hospital shared-risk capitation arrangements are recognized using the most likely amount methodology, and amounts are included in revenue only to the extent that it is probable that a significant reversal of cumulative revenue will not occur once any uncertainty is resolved. The receivables related to these risk pool arrangements incorporate estimates of the affiliated hospitals’ claims costs, including IBNR claims, which include actuarial methods based on utilization of healthcare services, historical payment patterns, cost trends, seasonality, changes in membership, and other factors.
Under capitated arrangements with certain HMOs, certain IPAs participate in one or more health plan shared-risk arrangements relating to the provision of institutional services to enrollees and thus can earn additional revenue or incur losses based upon the enrollee utilization of institutional services. Health plan shared-risk arrangements are entered into with certain health plans, which are administered by the health plan, where the IPA is responsible for rendering professional services, but the health plan does not enter into a capitation arrangement with a hospital, and therefore, the health plan retains the institutional risk. Health plan shared-risk deficits, if any, are not payable until and unless (and only to the extent) risk-sharing surpluses are generated. At the termination of the HMO contract, any accumulated deficit will be extinguished. Final settlement of health plan shared-risk for prior contract years generally occurs in the third or fourth quarter of the following year. We have limited insight into the amount and timing of the health plans’ shared-risk payments. These amounts are considered to be fully constrained and only recorded when such payments can be reasonably estimated, and to the extent that it is probable that a significant reversal will not occur once such settlement occurs.
We also receive incentives under “pay-for-performance” programs for quality medical care, based on various criteria. As an incentive to promote quality care, certain HMOs have designed quality incentive programs and commercial generic pharmacy incentive programs to compensate us for our efforts to improve the quality of services and efficient and effective use of pharmacy supplemental benefits provided to HMO members. The incentive programs track specific performance measures and calculate payments to us based on the performance measures. Our incentives under “pay-for-performance” programs are recognized using the most likely methodology.
85
Table of Contents
Share-Based Compensation
We maintain a stock-based compensation program for employees, non-employee directors, and consultants. From time to time, we issue shares of its common stock to its employees, directors, and consultants, which shares may be subject to our repurchase right (but not obligation), that vest based on time-based and/or performance-based vesting schedules. The value of share-based awards is recognized as compensation expense and adjusted for forfeitures as they occur. Compensation expenses for time-based awards are recognized on a cumulative straight-line basis over the vesting period of the awards. Share-based awards with performance conditions are recognized to the extent that the performance conditions are probable to be achieved. Compensation expenses for performance-based awards are recognized on an accelerated attribution method. The grant date fair value of the restricted stock awards is the grant date’s closing market price of our common stock. The fair value of options granted is determined using the Black-Scholes option pricing model and includes several assumptions, including the expected term, expected volatility, expected dividends, and the risk-free rate. The expected term is presumed to be the midpoint between the vesting date and the end of the contractual term. The expected stock price volatility is determined based on an average of historical volatility. The expected dividend yield is based on our expected dividend payouts. The risk-free interest rate is based on the U.S. Constant Maturity curve over the expected term of the option at the time of grant.
Leases
We determine if an arrangement is a lease at its inception. The expected term of the lease used for computing the lease liability and the right-of-use asset, and for determining the classification of the lease as operating or financing, may include options to extend or terminate the lease when it is reasonably certain that we will exercise those options. We elected practical expedients for ongoing accounting that were provided by the new standard, which is comprised of the following:
•
The election for classes of underlying assets to not separate non-lease components from lease components, and
•
The election for short-term lease recognition exemption for all leases with under twelve-month terms.
The present value of the lease payments is calculated using a rate implicit in the lease, when readily determinable. However, as most of our leases do not provide an implicit rate, we use our incremental borrowing rate to determine the present value of the lease payments for the majority of its leases.
Variable Interest Model
If an entity is determined to be a VIE, we evaluate whether we are the primary beneficiary. The primary beneficiary analysis is a qualitative analysis based on power and economics. We consolidate a VIE if both power and benefits belong to us — that is, we have:
•
The power to direct the activities of a VIE that most significantly influence the VIE’s economic performance (power), and
•
The obligation to absorb losses of, or the right to receive benefits from, the VIE that could potentially be significant to the VIE (economics).
We consolidates VIEs whenever it is determined that we are the primary beneficiary.
86
Table of Contents
Investments in Other Entities — Equity Method
We account for certain investments using the equity method of accounting when it is determined that the investment provides us with the ability to exercise significant influence, but not control, over the investee. Significant influence is generally deemed to exist if we have an ownership interest in the voting stock of the investee of between 20% and 50%, although other factors, such as representation on the investee’s Board of Directors, are considered in determining whether the equity method of accounting is appropriate. Under the equity method of accounting, the investment, originally recorded at cost, is adjusted to recognize our share of net earnings or losses of the investee and is recognized in the accompanying consolidated statements of income under “Income from equity method investments” and is also adjusted by contributions to and distributions from the investee. During the year ended December 31, 2025, we recognized no impairment loss.
Non-controlling Interests
We consolidate entities in which we have a controlling financial interest. We consolidate subsidiaries in which we hold, directly or indirectly, more than 50% of the voting rights, and VIEs in which we are the primary beneficiary. Non-controlling interests represent third-party equity ownership interests (including equity ownership interests held by certain VIEs) in our consolidated entities. Net income attributable to non-controlling interests is disclosed in the consolidated statements of income.
Mezzanine Deficit
Pursuant to APC’s shareholder agreements, in the event of a disqualifying event, as defined in the agreements, APC could be required to repurchase its shares from the respective shareholders based on certain triggers outlined in the shareholder agreements. As the redemption feature of the shares is not solely within the control of APC, the equity of APC does not qualify as permanent equity and has been classified as mezzanine or temporary equity. Accordingly, we recognize non-controlling interests in APC as mezzanine deficit in the consolidated financial statements. APC’s shares were not redeemable, and it was not probable that the shares would become redeemable as of December 31, 2025 and 2024.
Income Taxes
Federal and state income taxes are computed at currently enacted tax rates, less tax credits, using the asset and liability method. Deferred taxes are adjusted for both items that do not have tax consequences and for the cumulative effect of any changes in tax rates from those previously used to determine deferred tax assets or liabilities. Tax provisions include amounts that are currently payable, changes in deferred tax assets and liabilities that arise because of temporary differences between the timing of when items of income and expense are recognized for financial reporting and income tax purposes, changes in recognition of tax positions, and any changes in the valuation allowance caused by a change in judgment about the realizability of the related deferred tax assets. A valuation allowance is established when necessary to reduce deferred tax assets to amounts expected to be realized.
We use a recognition threshold of “more-likely-than-not” and a measurement attribute on all tax positions taken, or expected to be taken, in a tax return in order to be recognized in the consolidated financial statements. Once the recognition threshold is met, the tax position is measured to determine the actual amount of benefit to recognize in the consolidated financial statements.
Effect of New Accounting Standards
See “Recent Accounting Pronouncements” under Note 2 — “Basis of Presentation and Summary of Significant Accounting Policies”to our consolidated financial statements under Item 8 in this Annual Report on Form 10-K for additional information.
87
Table of Contents
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Interest Rate Risk
Borrowings under the Term Loans and Revolver Loan provided for under our Second Amended and Restated Credit Agreement, as of December 31, 2025, were $930.2 million and $122.0 million, respectively. The loans under the Second Amended and Restated Credit Agreement bear interest at an annual rate equal to either, at our option, (a) the rate for term SOFR published by the CME Group Benchmark Administration Limited two days prior to the first day of the applicable interest period, plus a spread of 1.25% to 2.50%, as determined on a quarterly basis based on our leverage ratio, or (b) a base rate, plus a spread of 0.25% to 1.50%, as determined on a quarterly basis based on our leverage ratio. We had entered into a collar agreement for our Revolver Loan to effectively convert our floating-rate debt to a fixed-rate basis. The interest rate collar set a cap of 5.00% and a floor of 2.34% for the SOFR portion of the interest rate and expired in December 2025. In August 2025, we entered into a five-year interest swap agreement to effectively convert our floating-rate debt to a fixed-rate basis with a termination date of August 31, 2029, provided that the bank has the right to change the swap to a two-year term. The interest swap agreement sets a fixed rate of 3.179% for the first $200.0 million of our aggregate debt balance. The principal objective of the collar and swap agreement was and is to eliminate or reduce the variability of cash flows associated with our floating-rate debt, thereby reducing the impact of interest rate changes on future interest payment cash flows. Based on our current outstanding borrowings as of December 31, 2025, a hypothetical 1% change in our interest rates for our outstanding borrowings would have increased or decreased our interest expense, on an annual basis, by $8.5 million.
88
Table of Contents
Item 8. Financial Statements and Supplementary Data
Index to the Consolidated Financial Statements Page
Report of Independent Registered Public Accounting Firm (PCAOB ID No. 42) 90
Consolidated Balance Sheets as of December 31, 2025 and 2024 93
Notes to the Consolidated Financial Statements 97
89
Table of Contents
Report of Independent Registered Public Accounting Firm
To the Stockholders and the Board of Directors of Astrana Health, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Astrana Health, Inc. (the Company) as of December 31, 2025 and 2024, the related consolidated statements of income, mezzanine and stockholders' equity (deficit) and cash flows for each of the three years in the period ended December 31, 2025, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2025 and 2024, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2025, in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2025, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated March 12, 2026 expressed an adverse opinion thereon.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.
90
Table of Contents
Valuation of Incurred but not Reported (IBNR) Claims Liability
91
Table of Contents
/s/ Ernst & Young LLP
We have served as the Company’s auditor since 2020.
Los Angeles, California
March 12, 2026
92
Table of Contents
ASTRANA HEALTH, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share data)
Assets
Current assets
Receivables, net (including amounts with related parties) 374,465 275,990
Prepaid expenses and other current assets 26,264 25,239
Loans receivable 4,926 —
Non-current assets
Income taxes receivable, net of current portion 26,220 15,943
Loans receivable, net of current portion 48,724 51,266
Investments in other entities – equity method 25,637 39,319
Investments in privately held entities 2,896 8,896
Liabilities, Mezzanine Deficit, and Stockholders’ Equity
Current liabilities
Current portion of long-term debt 47,865 9,375
Non-current liabilities
Operating lease liabilities, net of current portion 31,552 30,654
Commitments and contingencies (Note 14)
Mezzanine deficit
Stockholders’ equity
(1)
The Company’s consolidated balance sheets include the assets and liabilities of its consolidated VIEs. The consolidated balance sheets include total assets that can be used only to settle obligations of the Company’s consolidated VIEs totaling $1,276.5 million and $712.3 million as of December 31, 2025 and 2024, respectively, and total liabilities of the Company’s consolidated VIEs for which creditors do not have recourse to the general credit of the primary beneficiary of $376.0 million and $207.9 million as of December 31, 2025 and 2024, respectively. These VIE balances do not include $152.2 million of investment in affiliates and $58.3 million of amounts due from affiliates as of December 31, 2025, and $224.9 million of investment in affiliates and $48.1 million of amounts due to affiliates as of December 31, 2024, as these are eliminated upon consolidation and not presented within the consolidated balance sheets. See Note 18 — “Variable Interest Entities (VIEs)” for further detail.
See accompanying notes to consolidated financial statements.
93
Table of Contents
ASTRANA HEALTH, INC.
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share data)
Years ended December 31,
Revenue
Operating expenses
Other (expense) income
Unrealized (loss) gain on investments (68 ) 731 (4,581 )
Net income (loss) attributable to noncontrolling interests 1,589 6,783 (2,868 )
Earnings per share – basic $ 0.46 $ 0.91 $ 1.30
Earnings per share – diluted $ 0.46 $ 0.90 $ 1.29
See accompanying notes to consolidated financial statements.
94
Table of Contents
ASTRANA HEALTH, INC.
CONSOLIDATED STATEMENTS OF MEZZANINE AND STOCKHOLDERS’ EQUITY (DEFICIT)
(in thousands, except share data)
Interest in APC Shares Amount Paid-in Capital Earnings Interest Equity
Purchase of non-controlling interest — — — — — (78 ) (78 )
Sale of non-controlling interest — — — — — 106 106
Issuance of shares for business acquisition — 22,340 — 800 — — 800
Transfer of common control entities 1,768 — — (2,447 ) — — (2,447 )
Tax impact from dividends (3,076 ) — — — — — —
Tax impact from investments (361 ) — — — — — —
Purchase of non-controlling interest — — — — — (40 ) (40 )
Sale of non-controlling interest — — — — — 150 150
Shares issued for cash and exercise of options — 84,599 — 755 — — 755
Purchase of treasury shares — (19,509 ) — (937 ) — — (937 )
Acquisition of non-controlling interest — (22,340 ) — (856 ) — 244 (612 )
Tax impact from investments 1,797 — — — — — —
Purchase of non-controlling interest — — — — — (53 ) (53 )
Sale of non-controlling interest — — — — — 528 528
Shares issued for cash and exercise of options — 109,821 — 1,617 — — 1,617
Repurchase of subsidiary’s shares (1,227 ) — — — — — —
Acquisition of non-controlling interest — — — — — 6,187 6,187
See accompanying notes to consolidated financial statements.
95
Table of Contents
ASTRANA HEALTH, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Years ended December 31,
Cash flows from operating activities
Change in fair value of contingent consideration liabilities 5,166 3,526 —
Changes in operating assets and liabilities, net of business combinations
Prepaid expenses and other current assets 4,718 (10,854 ) (2,956 )
Accounts payable and accrued expenses (6,994 ) (30,919 ) (170 )
Cash flows from investing activities
Purchases of investments – equity method — (5,968 ) (325 )
Proceeds from sale of equity method investment 15,100 — —
Cash flows from financing activities
Taxes paid from net share settlement of restricted stock (6,169 ) (4,662 ) —
Payment of financing obligation — (8,542 ) —
Payment of contingent consideration liabilities (8,284 ) (518 ) (1,000 )
Supplemental disclosures of cash flow information
Supplemental disclosures of non-cash investing and financing activities
Common stock issued in business combination $ — $ 21,952 $ 800
Common stock issued for contingent consideration payment $ 2,600 $ 4,023 $ —
Acquisition of business through loan conversion $ — $ 5,175 $ —
Draw on letter of credit through Revolver Loan $ — $ 4,732 $ —
Tax impact from APC dividends to APC Shareholders $ — $ — $ 3,076
Distribution of real estate investments $ — $ — $ 152,767
Effective settlement of note payable upon consolidation $ 9,488 $ — $ —
Transfer of investment in privately held to equity method $ 6,000 $ — $ —
Repurchase of treasury shares outstanding payable $ 922 $ — $ —
Dividend paid in form of stock $ 21,935 $ — $ —
(1)
Following the adoption of ASC 2023-09 “Income Taxes (Topics 740): Improvements to Income Tax Disclosures”, cash paid for income taxes is presented net of tax refunds, for the year ended December 31, 2025 and prospectively. See Note 11 — “Income Taxes” to the consolidated financial statements.
The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the consolidated balance sheets, that sum to the total amounts of cash, cash equivalents, and restricted cash shown in the consolidated statements of cash flows (in thousands).
December 31,
(1)
Restricted cash is included in other assets on the consolidated balance sheets.
See accompanying notes to consolidated financial statements.
96
Table of Contents
ASTRANA HEALTH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1.
Description of Business
Overview
Unless the context dictates otherwise, references in these notes to the financial statements, the “Company,” “we,” “us,” “our,” and similar words are references to Astrana Health, Inc., a Delaware corporation (“Astrana”) and its consolidated subsidiaries and affiliated entities, as appropriate, including its consolidated variable interest entities (“VIEs”).
Headquartered in Alhambra, California, Astrana is a leading physician-centric, technology-powered, risk-bearing healthcare company. Leveraging its proprietary end-to-end technology solutions, Astrana operates an integrated healthcare delivery platform that enables providers to participate in value-based care arrangements, empowering them to deliver accessible, high-quality care to patients cost-effectively. Together with Astrana’s affiliated physician groups and consolidated subsidiaries and VIEs, the Company delivers value-based care to patients, of whom the majority are covered by private or public insurance provided through Medicare, Medicaid, and health maintenance organizations (“HMOs”), with a small portion of its revenue coming from non-insured patients. The Company provides care coordination services to each major constituent of the healthcare delivery system, including patients, families, primary care physicians, specialists, acute care hospitals, alternative sites of inpatient care, physician groups, and health plans. The Company’s physician network consists of primary care physicians, specialist physicians, physician and specialist extenders, and hospitalists.
Segments
The Company’s three reportable segments are Care Partners, Care Delivery, and Care Enablement, described as follows:
Care Partners
The Company’s Care Partners segment is focused on building and managing high-quality and high-performance provider networks by partnering with, empowering, and investing in strong provider partners aligned on a shared vision for coordinated care delivery. By leveraging the Company’s unique Care Enablement platform and ability to recruit, empower, and incentivize physicians to effectively manage total cost of care, the Company is able to organize partnered providers into successful multi-payer, risk-bearing organizations that take on varying levels of risk based on total cost of care across membership in all lines of business, including Medicare Advantage, Medicaid, Commercial, Exchange, and Medicare fee for service (“FFS”). The Company’s healthcare delivery entities in this segment consist of a network of risk-bearing organizations (“RBOs”) that encompass independent practice associations (“IPAs”), accountable care organizations (“ACOs”), and state-specific entities such as Restricted Knox-Keene licensed health plans in California. These entities are tasked with coordinating and providing high-quality care to patients within Astrana's ecosystem. This helps ensure seamless continuity of care among patients across different age groups, life stages, and life circumstances. The Company participates in the Accountable Care Organization Realizing Equity, Access, and Community Health Model (“ACO REACH”), and in the Medicare Shared Savings Program (“MSSP”). The MSSP was created to promote accountability and improve coordination of care for Medicare beneficiaries.
Care Delivery
The Company’s Care Delivery segment is a group of patient-centric, data-driven organizations focused on delivering high-quality, accessible care to all patients. This segment includes the following:
•
Primary care clinics, including post-acute care services and an acute care hospital facility;
•
Specialty care clinics and inpatient services, including cardiac care, endocrinology, and ophthalmology, as well as hospitalist and intensivist services; and
•
Ancillary service providers, such as urgent care centers, outpatient imaging centers, ambulatory surgery centers, full-service labs, and a specialty pharmacy.
97
Table of Contents
Care Enablement
The Company’s Care Enablement segment represents a comprehensive platform that integrates clinical, operational, financial, and administrative information, all powered by the Company’s proprietary technology suite. These tools are leveraged across the Company’s lines of business as well as third-party providers outside of Astrana’s ecosystem. The Company provides solutions to payers and providers, including independent physicians, provider and medical groups, and ACOs. The Company’s platform meets providers and payers wherever they are on the spectrum of total cost of care, offering solutions for fee-for-service entities and providers open to taking upside and downside risks on professional and institutional spending and across all patient types, including Medicare, Medicaid, Commercial, and Exchange-insured patients. This segment includes the Company’s wholly owned subsidiaries that operate as management services organizations (“MSOs”), which enter into long-term management and/or administrative services agreements with RBOs and other providers. By leveraging our Care Enablement platform, providers and payers can improve their ability to deliver high-quality care to their patients and achieve better patient, clinical, and financial outcomes.
2.
Basis of Presentation and Summary of Significant Accounting Policies
Basis of Presentation
The accompanying consolidated financial statements have been prepared by management in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”).
Principles of Consolidation
The consolidated balance sheets as of December 31, 2025 and 2024 and consolidated statements of income for the years ended December 31, 2025, 2024, and 2023 include Astrana’s wholly owned subsidiaries and consolidated VIEs. All intercompany transactions and balances have been eliminated in consolidation.
Reclassifications
Certain amounts disclosed in prior period financial statements have been reclassified to conform to the current period presentation. These reclassifications were made to reclass receivables, net – related parties within receivables, net, investments in marketable securities within prepaid expenses and other current assets, restricted cash within other assets, dividend payable and finance lease liabilities within other liabilities, and finance lease, net of current portion within other long-term liabilities on the accompanying consolidated balance sheet as of December 31, 2024. The reclassifications were also made to reclass receivable, net – related parties within receivables, net within changes in operating assets and liabilities, net of business combinations, change in fair value of contingent consideration liabilities, gain on debt extinguishment, unrealized (gain) loss on investment, income from equity method investments, unrealized gain on interest rate swaps, gain on sale or distribution of investments to other within net cash provided by operating activities; proceeds from repayment of promissory notes, including those with related parties, purchase of marketable securities, proceeds from sale of marketable securities, purchase of investment – privately held, purchase of call options issued in conjunction with equity method investments, and contribution to investment – equity method to other within net cash used in investing activities: and payment of finance lease obligations, proceeds from the exercise of stock options, proceeds from ESPP purchases, purchase of non-controlling interest, and proceeds from sale of non-controlling interest to other within net cash provided by financing activities for the years ended 2024 and 2023. The reclassification had no effect on net income, earnings per share, retained earnings, cash flows provided by (used in) operating, investing, or financing activities, or total assets.
98
Table of Contents
Use of Estimates
The preparation of the consolidated financial statements and related disclosures in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements, as well as the reported amounts of revenues and expenses during the reporting period. Significant items subject to such estimates and assumptions include collectability of receivables, recoverability of long-lived and intangible assets, business combination and goodwill valuation and impairment assessment, accrual of medical liabilities (incurred but not reported (“IBNR”) claims), determination of hospital shared-risk and health plan shared-risk revenue and receivables (including estimations of affiliated hospitals’ claims costs which involves assumptions for IBNR, such as utilization of healthcare services, historical payment patterns, cost trends, seasonality, changes in membership, and other factors), income tax valuation allowance, share-based compensation, and right-of-use assets and lease liabilities. Management evaluates its estimates and assumptions on an ongoing basis using historical experience and other factors, including the current economic environment, and makes adjustments when facts and circumstances dictate. As future events and their effects cannot be determined with precision, actual results could differ materially from those estimates and assumptions.
Variable Interest Entities
On an ongoing basis, as circumstances indicate the need for reconsideration, the Company evaluates each legal entity that is not wholly owned by the Company in accordance with the consolidation guidance. The evaluation considers all of the Company’s variable interests, including equity ownership, as well as management services agreements. To fall within the scope of the consolidation guidance, an entity must meet both of the following criteria:
•
The entity has a legal structure that has been established to conduct business activities and to hold assets; such entity can be in the form of a partnership, limited liability company, or corporation, among others; and
•
The Company has a variable interest in the legal entity; i.e., variable interests that are contractual, such as equity ownership, or other financial interests that change with changes in the fair value of the entity’s net assets.
If an entity does not meet both criteria above, the Company applies other accounting guidance (see “Investments in Other Entities — Equity Method” within Note 2 — “Basis of Presentation and Summary of Significant Accounting Policies”). The Company evaluates such entity for consolidation under either the variable interest model if the legal entity meets any of the following characteristics to qualify as a VIE, or under the voting model for all other legal entities that are not VIEs.
A legal entity is determined to be a VIE if it has any of the following three characteristics:
•
The entity does not have sufficient equity to finance its activities without additional subordinated financial support;
•
The entity is established with non-substantive voting rights (i.e., where the entity deprives the majority economic interest holder(s) of voting rights); or
•
The equity holders, as a group, lack the characteristics of a controlling financial interest. Equity holders meet this criterion if they lack any of the following:
•
The power, through voting rights or similar rights, to direct the activities of the entity that most significantly influence the entity’s economic performance, as evidenced by:
•
Substantive participating rights in day-to-day management of the entity’s activities; or
•
Substantive kick-out rights over the party responsible for significant decisions;
•
The obligation to absorb the entity’s expected losses; or
•
The right to receive the entity’s expected residual returns.
99
Table of Contents
If the Company determines that any of the three characteristics of a VIE are met, the Company will conclude that the entity is a VIE and evaluate it for consolidation under the variable interest model.
Variable interest model
If an entity is determined to be a VIE, the Company evaluates whether the Company is the primary beneficiary. The primary beneficiary analysis is a qualitative analysis based on power and economics. The Company consolidates a VIE if both power and benefits belong to the Company — that is, the Company has:
•
The power to direct the activities of a VIE that most significantly influence the VIE’s economic performance (power), and
•
The obligation to absorb losses of, or the right to receive benefits from, the VIE that could potentially be significant to the VIE (economics).
The Company consolidates VIEs whenever it is determined that the Company is the primary beneficiary. See Note 18 — “Variable Interest Entities (VIEs)” to the consolidated financial statements for information on the Company’s consolidated VIEs. If there are variable interests in a VIE but the Company is not the primary beneficiary, such variable interests are accounted for under accounting standards as deemed appropriate, see Note 6 — “Investments in Other Entities” for entities that qualify as VIEs but the Company is not the primary beneficiary.
Business Combinations
The Company uses the acquisition method of accounting for all business combinations, which requires assets and liabilities of the acquiree to be recorded at fair value, to measure the fair value of the consideration transferred, including contingent consideration, to be determined on the acquisition date, and to account for acquisition-related costs separately from the business combination, which are expensed as incurred.
Reportable Segments
The Company operates as three reportable segments:
•
Care Partners;
•
Care Delivery; and
•
Care Enablement.
See Note 1 — “Description of Business” and Note 20 — “Segments” to the consolidated financial statements for information on the Company’s segments.
Cash and Cash Equivalents
The Company’s cash and cash equivalents primarily consist of money market funds and certificates of deposit. The Company considers all highly liquid investments that are readily convertible into known amounts of cash and have original maturities of 90 days or less from their date of purchase to be cash equivalents.
The Company maintains its cash in deposit accounts with several banks, which at times may exceed the insured limits of the Federal Deposit Insurance Corporation (“FDIC”). The Company believes it is not exposed to any significant credit risk with respect to its cash and cash equivalents and restricted cash. As of December 31, 2025 and 2024, the Company’s deposit accounts with banks exceeded the FDIC’s insured limit by approximately $447.0 million and $332.2 million, respectively. The Company has not experienced any losses to date and conducts ongoing evaluations of these financial institutions to limit the Company’s concentration of risk exposure.
100
Table of Contents
Restricted Cash
Restricted cash consists of cash held as collateral in the event of default as required by certain health plan contracts.
Receivables, Other Receivables, and Loans Receivable
The Company’s receivables are comprised of capitation receivables, fee-for-service receivables, risk pool settlements, incentive receivables, management fee income, and receivables from related parties. The Company’s receivables are recorded and stated at the amount expected to be collected.
Capitation receivables relate to each health plan’s capitation revenue and are usually received by the Company in the month following the month of service. Capitation receivables also include receivables from Centers for Medicare and Medicaid Services (“CMS”) related to the Company’s participation in the ACO REACH model. Settlements for the current performance year are settled within the following fiscal year. Fee-for-service receivables involve our clinics and hospital. Both our hospital and the clinics receive amounts from third-party payers and patients for patient care services, while the clinics additionally receive amounts from hospitals. Risk pool settlements and incentive receivables mainly consist of the Company’s hospital shared-risk pool receivable, which is recorded based on reports received from the Company’s hospital partners and management’s estimate of the Company’s portion of the estimated risk pool surplus for open performance years. Final settlement of risk pool surplus or deficit occurs within 6 to 12 months after the risk pool performance year is completed.
The Company’s receivables from related parties consist of hospital-shared risk pool settlements with AHMC Healthcare Inc. (“AHMC”), for which one of our directors is an officer, management fee income from equity method investments, and other receivables. Hospital-shared risk pool settlement receivables from related parties are recorded quarterly based on reports received from the Company’s hospital partners and management’s estimate of the Company’s portion of the estimated risk pool surplus for open performance years. Final settlement of risk pool surplus or deficits occurs within 18 months after the risk pool performance year is completed. Receivables from related parties are recorded and stated in the amount expected to be collected. As of December 31, 2025 and 2024, receivables from related parties were $46.4 million and $50.3 million, respectively (see Note 15 — “Related-Party Transactions”).
Other receivables consist of amounts due from the seller(s) associated with acquisitions and stop-loss insurance premium reimbursements.
The Company’s loans receivable consists of promissory notes that accrue interest per annum and are recorded and stated at amortized cost plus accrued interest. Interest income is accrued based on the outstanding principal amounts. As of December 31, 2025 and 2024, the balance of the Company’s aggregate loans receivable was $53.7 million and $51.3 million, respectively, of which loans receivable from related parties in aggregate was $1.8 million and $0.1 million, respectively. For the years ended December 31, 2025, 2024, and 2023, the Company accrued $4.5 million, $4.2 million, and $1.1 million, respectively, of interest related to loans within interest income on the accompanying consolidated statements of income.
The Company maintains reserves for potential credit losses on the receivables. Management reviews the composition of the Company's receivables and analyzes historical bad debts, customer concentrations, customer creditworthiness, current economic trends, and changes in customer payment patterns to evaluate the adequacy of these reserves. The Company also regularly analyzes the ultimate collectability of accounts receivable after certain stages of the collection cycle using a look-back analysis to determine the amount of receivables subsequently collected, and adjustments are recorded when necessary. Reserves are recorded based on historical trends. Any change in such estimate of reserves are recorded in the period when such change is identified.
Receivables are recorded when the Company is able to determine amounts receivable under applicable contracts and agreements based on information provided, and collection is reasonably likely to occur. The Company continuously monitors its receivable collections, and expects that the historical credit loss experienced across its receivable portfolio is materially similar to any current expected credit losses that would be estimated under the current expected credit losses (“CECL”) model.
101
Table of Contents
The Company assesses outstanding loans receivable under the CECL model by evaluating the party’s ability to pay, which involves reviewing quarterly interest payment history, annually reviewing financial history, assessing the value of any collateral, and reassessing any identified insolvency risk. As of December 31, 2025, the promissory notes are expected to be collected without default.
Concentrations of Credit Risks
The Company disaggregates revenue from contracts by service type and payer type. This level of detail provides useful information on how the Company generates revenue by significant revenue stream and by type of direct contracts, as used by our chief operating decision maker (“CODM”). The consolidated statements of income present disaggregated revenue by service type. The following table presents disaggregated revenue generated by each payer type (in thousands):
Years Ended December 31,
The Company had major payers that contributed the following percentages of total consolidated net revenue. These payers are primarily within the Care Partners segment.
Years Ended December 31,
The Company had major payers that contributed to the following percentages of receivables, net, and other receivables:
As of December 31,
Payer D * 18.3 %
*Less than 10% of total receivables, net and other receivables
Property and Equipment, Net
Property and equipment, including leasehold improvements, are carried at cost less accumulated depreciation and amortization. Depreciation is provided principally on the straight-line method over the estimated useful lives of the assets, ranging fromtwo to thirty-nine years. Leasehold improvements are amortized on a straight-line basis over the shorter of the terms of the respective leases or the expected useful lives of those improvements.
Maintenance and repairs are charged to expenses as incurred. Upon sale or retirement, the asset cost and related accumulated depreciation and amortization are removed from the accounts, and any related gain or loss is included in the determination of consolidated net income.
102
Table of Contents
Fair Value Measurements of Financial Instruments
The Company’s financial instruments consist of cash and cash equivalents, restricted cash, investment in marketable securities, receivables, loans receivable, accounts payable, certain accrued expenses, lines of credits, long-term debt, and certain other liabilities. The carrying values of the financial instruments classified as current in the accompanying consolidated balance sheets are considered to be at their fair values, due to the short maturity of these instruments. The carrying amounts of loans receivable, net of current portion, and long-term debt approximate fair value as they bear interest at rates that approximate current market rates for debt with similar maturities and credit quality.
Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 820, “Fair Value Measurement” (“ASC 820”), applies to all financial assets and financial liabilities that are measured and reported on a fair value basis and requires disclosure that establishes a framework for measuring fair value and expands disclosure about fair value measurements. ASC 820 establishes a fair value hierarchy for disclosure of the inputs to valuations used to measure fair value.
This hierarchy prioritizes the inputs into three broad levels as follows:
Level 1 — Inputs are unadjusted quoted prices in active markets for identical assets or liabilities that can be accessed at the measurement date.
Level 2 — Inputs include quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similarassets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability (i.e., interest rates and yield curves), and inputs that are derived principally from or corroborated by observable market data by correlation or other means (market corroborated inputs).
Level 3 — Unobservable inputs that reflect assumptions about what market participants would use in pricing the asset or liability. These inputs would be based on the best information available, including the Company’s own data.
There have been no changes in Level 1, Level 2, or Level 3 classification and no changes in valuation techniques for these assets and liabilities for the years ended December 31, 2025 and 2024.
Intangible Assets and Long-Lived Assets
Intangible assets with finite lives include network relationships, management contracts, member relationships, patient management platform, tradename/trademarks, and developed technology. The valuations of these intangible assets are based on the multi-period excess earnings method, the cost to recreate method, or the relief from royalty method. Network relationships and management contracts are amortized using an accelerated method based on expected patterns of economic benefit or using the straight-line method. Patient management platform, tradename/trademarks, and developed technology are amortized using the straight-line method. Member relationships are amortized using an accelerated method based on expected patterns of economic benefit. Intangible assets are net of accumulated amortization and impairment losses, if any.
Finite-lived intangibles and other long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If the expected future cash flows from the use of such assets (undiscounted and without interest charges) are less than the carrying value, a write-down would be recorded to reduce the carrying value of the asset to its estimated fair value. Fair value is determined based on appropriate valuation techniques.
Goodwill and Indefinite-Lived Intangible Assets
Under ASC 350, “Intangibles — Goodwill and Other”, goodwill and indefinite-lived intangible assets are reviewed at least annually for impairment under a two-step process.
•
Step 1 — Under a qualitative assessment, determine if there are indicators of impairment. If so, proceed to Step 2.
103
Table of Contents
•
Step 2 — Under a quantitative assessment, if the fair value of each reporting unit is less than its carrying value, there is an impairment.
The Company may also elect to skip the qualitative testing and proceed directly to quantitative testing. The Company’s five reporting units consist of the following:
•
Care Partners – IPA;
•
Care Partners – ACO;
•
Care Delivery – Foothill Regional Medical Center (“FRMC”);
•
Care Delivery – Others; and
•
Care Enablement.
An impairment loss is recognized if the carrying value of a reporting unit exceeds its fair value. If this event arises, the impairment loss recorded is equal to the excess of the carrying value of the reporting unit over its fair value.
At least annually, indefinite-lived intangible assets are tested for impairment. Impairment for intangible assets with indefinite lives exists if the carrying value of the intangible asset exceeds its fair value. The fair values of indefinite-lived intangible assets are determined using valuation techniques based on estimates, judgments, and assumptions management believes are appropriate in the circumstances.
The Company had no impairment of its goodwill or indefinite-lived intangible assets during the years ended December 31, 2025, 2024, and 2023.
Investments in Other Entities—Equity Method
The Company accounts for certain investments using the equity method of accounting when it is determined that the investment provides the Company with the ability to exercise significant influence, but not control, over the investee. Significant influence is generally deemed to exist if the Company has an ownership interest in the voting stock of the investee of between 20% and 50%. However, other factors, such as representation on the investee’s board of directors, are considered in determining whether the equity method of accounting is appropriate. Under the equity method of accounting, the investment, originally recorded at cost, is adjusted to recognize the Company’s share of net earnings or losses of the investee and is recognized in the accompanying consolidated statements of income under “Income from equity method investments” and is also adjusted by contributions to and distributions from the investee.
Medical Liabilities
The Company’s Care Partners segment is responsible for integrated care that the associated physicians and contracted hospitals provide to their enrollees. The Company’s Care Partners segment provides integrated care to HMOs, Medicare, and Medi-Cal enrollees through a network of contracted providers under sub-capitation and direct patient service arrangements. Medical costs for professional and institutional services rendered by contracted providers are recorded as cost of services, excluding depreciation and amortization, in the accompanying consolidated statements of income.
104
Table of Contents
An estimate of amounts due to contracted physicians, hospitals, and other professional providers is included in medical liabilities in the accompanying consolidated balance sheets. Medical liabilities include claims reported as of the balance sheet date and estimated IBNR claims. Such estimates are developed using actuarial methods and are based on numerous variables, including the utilization of healthcare services, historical payment patterns, cost trends, product mix, seasonality, changes in membership, and other factors. The estimation methods and the resulting reserves are periodically reviewed and updated. Many of the medical contracts are complex in nature and may be subject to differing interpretations regarding amounts due for the provision of various services. Such differing interpretations may not come to light until a substantial period of time has passed following the contract implementation.
Fiduciary Cash and Payable
The Company’s Care Partner segment collects cash from health plans on behalf of their sub-IPAs and providers and passes it through to them. The fiduciary cash balance of $3.5 million and $8.2 million as of December 31, 2025 and 2024, respectively, is presented within prepaid expenses and other current assets, and the related payable is presented as fiduciary payable in the accompanying consolidated balance sheets.
Revenue Recognition
The Company receives payments from the following sources for services rendered:
•
Commercial insurers;
•
Federal government under the Medicare program administered by CMS;
•
State governments under Medicaid and other programs;
•
Other third-party payers (e.g., hospitals and IPAs); and
•
Individual patients and clients.
Revenue primarily consists of the following:
•
Capitation revenue;
•
Risk pool settlements and incentives;
•
Management fee income;
•
FFS revenue; and
•
Other revenue.
Revenue is recorded in the period in which services are rendered, or the period, generally on a monthly basis, in which the Company is obligated to provide services. The billing form and related collection risk for such services may vary by revenue type and customer.
105
Table of Contents
Capitation, Net
Capitated revenues of the Company consist primarily of capitated fees for medical services provided by the Company under capitated arrangements made directly with various managed care providers, including HMOs. Capitation revenue is typically prepaid monthly to the Company based on the number of enrollees selecting the Company as their healthcare provider. Capitation revenue is recognized in the month in which the Company is obligated to provide services to plan enrollees under contracts with various health plans. Minor ongoing adjustments to prior months’ capitation, primarily arising from contracted HMOs finalizing their monthly patient eligibility data for additions or subtractions of enrollees, are recognized in the month they are communicated to the Company. Additionally, Medicare pays capitation using a “Risk Adjustment” model, which compensates managed care organizations and providers based on the health status (acuity) of each individual enrollee. Health plans and providers with higher acuity enrollees will receive more, and those with lower acuity enrollees will receive less. Under the Risk Adjustment model, capitation is determined based on health severity, which is measured using patient encounter data. Capitation is paid on a monthly basis based on data submitted for the enrollee for the preceding year and is adjusted in subsequent periods after the final data is compiled. Positive or negative capitation adjustments are made for Medicare enrollees with conditions that require more or fewer healthcare services than were assumed in the interim payments. These changes in capitation amounts as a result of Risk Adjustment are recognized as revenue to the extent that it is probable that a significant reversal of cumulative revenue will not occur once any uncertainty is resolved.
Per-member-per-month (“PMPM”) managed care contracts generally have a term of one year or longer. The Company assesses the profitability of its managed care contracts to identify contracts where current operating results or forecasts indicate probable future losses. If anticipated future variable costs exceed anticipated future revenues, a premium deficiency reserve is recognized. No premium deficiency reserves were recorded as of December 31, 2025 and 2024. All managed care contracts have a single performance obligation that constitutes a series of services for the provision of managed healthcare services for a population of enrolled members for the duration of the contract. The transaction price for PMPM contracts is variable, as it primarily includes PMPM fees associated with unspecified membership, which fluctuates throughout the contract term. In certain contracts, PMPM fees also include adjustments for items such as performance incentives, performance guarantees, and risk-sharing arrangements. The Company generally estimates the transaction price using the most likely amount methodology, and amounts are included in the net transaction price only to the extent that it is probable that a significant reversal of cumulative revenue will not occur once any uncertainty is resolved. The majority of the Company’s net PMPM transaction price relates specifically to the Company’s efforts to transfer the service for a distinct increment of the series (e.g., day or month) and is recognized as revenue in the month in which members are entitled to service.
Under the ACO REACH model, CMS contracts with ACOs, which are composed of healthcare providers operating under a common legal structure and accepting financial accountability for the overall quality and cost of medical care furnished to Medicare FFS beneficiaries aligned to the entity. The combination of the FFS model and the ACO REACH model changes the distribution of responsibilities, risks, costs, and rewards among CMS, ACOs, and providers. By entering into a contract with CMS, an ACO voluntarily assumes operational, financial, and legal responsibilities and risks that no party, individually or collectively, has under the existing FFS model. Each ACO bears the economic costs, and reaps the economic rewards, of fulfilling its responsibilities and managing its risks as an ACO.
For each performance year, CMS will pay a total benchmark amount, determined unilaterally by CMS in advance but subject to prospective adjustments throughout the year, for the totality of care provided to the ACOs’ population of aligned beneficiaries over the course of that year. The benchmark is net of a quality withholding applied by CMS. At the end of each performance year, a portion, or all, of the quality withholding can be earned based on the ACOs’ performance. ACO REACH capitation revenue is recognized based on the estimated transaction price to transfer the service for a distinct increment of the series (i.e., month) and is recognized net of quality incentives/penalties. We recognize revenue related to the ACO Reach Model within capitation revenue in our consolidated statements of income because of the similar shared characteristics to our other capitation revenue. Revenue is recorded on a gross basis and is comprised of capitated fees for medical services provided, for which the Company is assigned the responsibility and management.
106
Table of Contents
Risk Pool Settlements and Incentives
Certain IPAs enter into hospital shared-risk capitation arrangements with certain health plans and local hospitals, where the hospital is responsible for providing, arranging, and paying for institutional risk, and the IPA is responsible for providing, arranging, and paying for professional risk. Under a hospital shared-risk pool-sharing agreement, the IPA generally receives a percentage of the net surplus from the affiliated hospital’s risk pools with health plans after deductions for the affiliated hospital’s costs. Advance settlement payments are typically made quarterly in arrears if there is a surplus. The Company’s risk pool settlements under hospital shared risk capitation arrangements, which include arrangements with related parties (see Note 15 — “Related-Party Transactions”), are recognized using the most likely amount methodology, and amounts are only included in revenue to the extent that it is probable that a significant reversal of cumulative revenue will not occur once any uncertainty is resolved. The receivables related to these risk pool arrangements incorporate estimates of the affiliated hospital’s claims costs, including IBNR claims, which include actuarial methods based on utilization of healthcare services, historical payment patterns, cost trends, seasonality, changes in membership, and other factors.
Under capitated arrangements with certain HMOs, certain IPAs participate in one or more health plan shared-risk arrangements relating to the provision of institutional services to enrollees. They can earn additional revenue or incur losses based on enrollee utilization of institutional services. Health plan shared-risk arrangements are entered into with certain health plans, which are administered by the health plan, where the IPA is responsible for rendering professional services, but the health plan does not enter into a capitation arrangement with a hospital, and therefore, the health plan retains the institutional risk. Health plan shared-risk deficits, if any, are not payable until and unless (and only to the extent) risk-sharing surpluses are generated. At the termination of the HMO contract, any accumulated deficit will be extinguished. Final settlement of health plan shared-risk pools for prior contract years generally occurs in the third or fourth quarter of the following year. The Company has limited insight from the health plans on the amount and timing of the health plan shared-risk payments. These amounts are considered to be fully constrained and only recorded when such payments can be reasonably estimated, and to the extent that it is probable that a significant reversal will not occur once such settlement occurs.
The Company also receives incentives under “pay-for-performance” programs for quality medical care, based on various criteria. As an incentive to promote quality care, certain HMOs have designed quality incentive programs and commercial generic pharmacy incentive programs to compensate the Company for its efforts to improve the quality of services and to promote the efficient and effective use of pharmacy supplemental benefits provided to HMO members. The incentive programs track specific performance measures and calculate payments to the Company based on the performance measures. The Company’s incentives under “pay-for-performance” programs are recognized using the most likely amount method.
CMS sponsors the Medicare Shared Savings Program. The MSSP allows ACOs to receive a share of the cost savings they generate in connection with the managing of costs and quality of medical services rendered to Medicare beneficiaries. Payments to ACO participants, if any, are calculated annually and paid once a year by CMS on cost savings generated by the ACO participant relative to the ACO participants’ CMS benchmark. Under the MSSP, an ACO must meet certain qualifications to receive the full amount of its allocable cost savings, or it either receives nothing or is responsible for shared losses. The MSSP rules require CMS to develop a benchmark for savings to be achieved by each ACO if the ACO is to receive shared savings. An ACO that meets the MSSP’s quality performance standards will be eligible to receive a share of the savings to the extent its assigned beneficiary medical expenditures are below the medical expenditure benchmark provided by CMS. A Minimum Savings Rate (“MSR”) must be achieved before the ACO can receive a share of the savings. Once the MSR is surpassed, all the savings below the benchmark provided by CMS will be shared at a certain percentage with the ACO. The MSR varies depending on the number of beneficiaries assigned to the ACO.
107
Table of Contents
The Company participates in the MSSP through our ACOs. The MSSP has multiple risk tracks, and Astrana is currently participating in the ENHANCED risk track. Under the MSSP Model, Astrana recruits a group of Participant and Preferred (in-network) Providers. Based on the Participant Providers that join our ACO, CMS grants the Company a pool of Traditional Medicare patients (beneficiaries) to manage (the “MSSP Aligned Beneficiaries”). The Company’s MSSP Aligned Beneficiaries will receive services from physicians and other medical service providers that are both in-network and out-of-network. CMS continues to pay participants and preferred providers on a fee-for-service basis for Medicare-covered services provided to MSSP Aligned Beneficiaries. The Company continues to bear risk on all Medicare expenditures (both in-network and out-of-network), excluding drug expenditures covered by Medicare Part D, based on a budgetary benchmark established with CMS. Astrana’s shared savings or losses in managing the Company’s beneficiaries are generally determined on an annual basis after reconciliation with CMS. Pursuant to Astrana’s risk-share agreement with CMS, the Company is eligible to receive the surplus (“shared savings”) or is liable for the deficit (“shared losses”) according to the budgetary benchmark established by CMS based on Astrana’s efficiency, or lack thereof, in managing the expenditures associated with the Company’s MSSP Aligned Beneficiaries. The Company estimates shared service revenue by analyzing activities during the relevant time period. taking into account the agreed-upon benchmarks, metrics, performance criteria, and attribution criteria, as well as any other contractually defined factors. Revenue is not recorded and is constrained until the shared service revenue can be reasonably estimated by the Company and to the extent that it is probable that a significant reversal will not occur once any uncertainty associated with the variable consideration is subsequently resolved. Due to its similar shared characteristics, the Company recognizes MSSP revenue within risk pool settlements and incentives revenue in its consolidated statements of income.
Management Fee Income
Management fee income encompasses fees paid for management, provider access, physician advisory, healthcare staffing, enrollment outreach, administrative, and other non-medical services provided by the Company to IPAs, ACOs, hospitals, health plans, and other healthcare providers. Such fees may be in the form of billings at agreed-upon hourly rates, percentages of gross revenue or fee collections, amounts fixed on a monthly, quarterly, or annual basis, as a fixed payment amount per enrollee, or as cost recovery assessments based on the specific or allocated expenditures related to the managed entities. The revenue may include variable arrangements measuring factors, such as hours staffed, patient visits, or collections per visit, against benchmarks, and, in certain cases, may be subject to achieving quality metrics or fee collection targets. The Company recognizes such variable supplemental revenues in the period when such amounts are determined to be fixed and therefore contractually obligated as payable by the customer under the terms of the applicable agreement.
The Company provides a significant service of integrating the services selected by the Company’s clients into one overall output for which the client has contracted. Therefore, such management contracts generally contain a single performance obligation. The nature of the Company’s performance obligation is to provide services over the contractual period, representing a series of distinct periods of time. The Company’s performance obligation is satisfied as the Company completes each period’s obligations.
Consideration from management contracts is variable in nature because the majority of the fees are generally based on revenue or collections or the costs of services that are provided under the contract, which can vary from period to period. The Company generally has control over pricing. Contractual fees are invoiced to the Company’s clients generally monthly, and payment terms are typically due within 30 to 60 days. The variable consideration in the Company’s management contracts meets the criteria to be allocated to the distinct period of time to which it relates because (i) it is due to the activities performed to satisfy the performance obligation during that period, and (ii) it represents the consideration to which the Company expects to be entitled. The Company’s management contracts generally have terms ranging from
one to thirty years and may include renewal terms, although they may be terminated earlier under the terms of the applicable contracts.
108
Table of Contents
Fee-for-Service Revenue