Long Beach-based Agilon Health Inc. raised approximately $1.07 billion through its initial public offering and saw its share price soar 38% to close at $31 on April 15, its first day of trading as a public company.
Agilon, which helps primary care physician groups cap costs for their Medicare Advantage patients, had priced its offering at $23 a share, placing 46.6 million shares on the New York Stock Exchange. That translates to net proceeds of $1.07 billion.
The IPO’s underwriters have the option over the next 30 days of buying an additional 7 million shares at the same initial offering price.
Agilon, which was founded in 2016 and incorporated in 2017, has a platform that sets up regional risk-bearing networks that allow primary care physician groups to treat Medicare Advantage patients using an HMO-style capitated cost model.
The company is controlled by an investment fund associated with Clayton Dubilier & Rice, a New York-based private equity firm. According to Agilon’s prospectus with the SEC, the CD&R fund owned 69% of all shares prior to the IPO. After the offering closes, that fund is expected to own about 58% of shares, with the exact percentage depending on how many additional shares the underwriters purchase.
Agilon Health said in the prospectus that its goal is to bring capitated costs to physician groups that treat large numbers of Medicare Advantage patients. Medicare Advantage is the term the U.S. Centers for Medicare & Medicaid Services uses to describe all-inclusive Medicare coverage for seniors provided by the private sector. This includes the core government-funded Medicare program plus benefits such as vision, dental, physical fitness programs and the purchase of over-the-counter drugs.
Agilon typically signs 20-year contracts with physician groups to manage their costs. Through its regional networks, Agilon shares in the savings its capitated model may achieve.
The company also signs contracts with insurers in each region it serves, making it financially responsible for its physician groups clients’ provision of health care services to Medicare Advantage patients.
“Agilon Health’s mission is to be the trusted, long-term partner of community-based physicians as they reimagine the care delivery experience for older adults," the company said on its website. " We do this by focusing on Medicare Advantage patients and offering a model that rewards improving outcomes for patients, not fee-for-service. The incentive is for doctors to engage with patients and reduce risks, not be rewarded for more volume.”
The filing stated Agilon had 16 physician group clients across Hawaii, North Carolina, Ohio, Pennsylvania, and Texas. Those physician groups cumulatively serve about 131,000 Medicare Advantage patients. As of next January, another 49,000 Medicare Advantage patients are due to join under deals already reached with physician groups.
According to the initial securities registration filing on March 18, the company had losses of $282.7 million in 2019 and another $60.1 million in 2020. The company attributed much of its 2019 loss to its California business, which it sold off in 2020.