InnovAge Holding Corp. Common Stock Wells Fargo 21st Annual Healthcare Conference

Morning, everyone. My name's Josh Moradfar. I'm with Wells Fargo here. Excited to have you all. Today, I'm excited to introduce both Patrick Blair, Ben Adams from InnovAge to present on the business today. Thank you so much. Well, great.

Thank you. It's good to be with everyone this morning. As Josh said, I'm Patrick Blair, the CEO of InnovAge, and really appreciate the chance to walk you through the company, how the business has evolved over the last several years, and why we believe we have a strong investment thesis, and how we're different than other value-based care models. Why now is a unique inflection point in the company's history, given the internal transformation over the last few years and where we see it going from here. We released earnings yesterday, and we felt really good about the performance of the company over our last fiscal year and excited about the year ahead. Healthcare environment, I know has been challenging for a lot of companies, particularly the full-risk Medicaid and Medicare value-based care models.

Our goal today is not to sell a story, but really to show you how a platform has done the hard work to stabilize, rebuild, and transform. I'll take about 20, 25 minutes to walk through some slides, and then happy to open up to questions. At a high level, you can think of InnovAge as a scaled, vertically integrated payer-provider platform that delivers very personalized, value-based care to medically and socially complex individuals, primarily dual eligibles. Our mission is simple and very focused, and that is that we help frail seniors live independently, while delivering better care and support and meaningful cost savings that are predictable for our federal and state partners. Importantly, we do this by taking full financial responsibility for outcomes and the total cost of care across the full scope of Medicare and Medicaid services.

We really think that's what differentiates the company, and underpins the rest of the story. I want to just take a moment and level set on what we do, and since we don't spend a lot of time explaining PACE elsewhere in the presentation, I think this slide does a good job of providing some of the facts. We deliver a very personalized interdisciplinary care for high cost, primarily dual eligibles in a center-based model. We're supported by a network of contracted hospitals and specialists and ancillary providers. When you think of the population we serve, it's important to note that we're talking about seniors who are 75 to 80 years old. The group reflects kind of this leading edge of baby boomers, who were some of the early movers into Medicare and Medicare Advantage maybe 10 to 15 years ago.

These are individuals now that have very significant medical and social needs and who are often at risk of entering a nursing home. Many of these individuals require a much different and a much higher level of care than is typically offered through a traditional Medicare or a Medicaid managed care program. No other value-based care program controls as much of the healthcare premium dollar as a PACE program. We are at full risk for all of the Medicare services, all of the Medicaid long-term care services, and our monthly premium that we get from both the federal government and our state partners combine to about $10,000 per participant per month. Quick audio check. I think we have a little echo there. Okay. Thank you. Today, we operate 20 centers across six states. We have about 2,500 employees and a little over 8,200 patients.

The bottom row on the slide of metrics really underscores that the model is not theoretical. It is a scaled platform delivering consistent revenue growth, expanding margins, and positive cash flow. I think this slide is helpful because it puts into context where we are today, and where we were, and how the company has evolved over the last, let's say, four and a half years. What we refer to as InnovAge 1.0 was really about establishing a national platform. The company converted from a not-for-profit status to a for-profit status to access growth capital. It expanded geographically, doubled the number of centers it was operating, and ultimately became a public company. This is the time at sort of the end of 1.0 that I joined the company, and when we came in, the opportunity was really different.

The company had achieved scale, but the infrastructure and the operating disciplines and capabilities had not really kept pace with that growth. So the work that I ushered in in early 2022 was really InnovAge 2.0, and at that time, it was really about building a foundation required to operate at scale. It was about becoming a full risk healthcare company. We upgraded leadership, we strengthened the systems and accountability throughout the company, we made significant technology investments in Epic, in Oracle, in Salesforce. We built a much more sophisticated payer-oriented medical cost management model and capabilities, and we brought important clinical services that were at one time outsourced. We brought those into the platform to get the benefits of that greater integration that would both improve care and improve the economics of the business. What we now describe as 3.0 is really the next stage of that evolution.

It is not about rebuilding the company again. It really is about getting more out of the platform that we have already built. That means continuing to improve the care we provide, driving responsible organic growth, using data much more systematically to reduce variation in the company, applying technology and AI where we can to make our clinicians and our operations more effective, and it means being disciplined about where we deploy capital, whether that is joint ventures, acquisitions, de novos, or potentially other adjacent product opportunities that are upstream of the PACE program. So the objective is to build an increasingly sophisticated value-based care platform, capable of serving many more seniors while improving the efficiency and the economics of the model over time. You can see that the operational discipline is translating into tangible financial results. Census and revenue growth have become more consistent. Adjusted AEBITDA has improved meaningfully.

We kind of think of it as very clean EBITDA. There are very few adjustments in our book today, and that has improved meaningfully over time. This performance is not driven by one market or a one-time lever. It really reflects a broad-based improvement across the portfolio of centers and across all of our operational functions. This progression is really giving us confidence in the durability of that performance. One of the most important differentiators for us is that we are both a payer and a provider in many ways. There is a single operating model that brings these two mechanisms together with very unified economics. There is not delegated risk, or there is no coordination layer. In contrast to many other models that do rely on delegated risk or using a network to manage the risk, that creates a much more fragmented accountability and fragmented experience.

Our model is fully integrated, not delegated, and that distinction, we think, matters significantly when you are managing these complex populations. Our care model is designed for depth and outcome. It is not about maximizing throughput. Our doctors and nurses and care teams spend a lot of time with these participants. There are intentionally very small panels, allowing our physicians and care teams to spend a lot of time with every patient. Primary care is deeply integrated with nursing care, with behavioral health, with therapy services, with social services, and transportation. That structure really incentivizes clinicians to take the time they need and the time that is required to provide high quality rather than maximizing volume. The population we serve is also very meaningfully more complex than the average Medicare beneficiary. Our participants typically have multiple chronic conditions.

They require assistance with a number of activities of daily living, and they interact with our care teams very frequently. You can see that our average risk score is a 2.48, which is much higher than you see in a typical managed care plan. But despite this complexity, over 90% of our participants can remain living independently and not in an institution. That is really sort of the magic of the model, is we are able to slow the rate of progression into institutions or stop them altogether during the tenure of someone that was with us. That outcome is central to the value that we create for Medicare and Medicaid. Even while serving a more complex population, we deliver superior outcomes. We see lower inpatient rates, lower readmission rates, lower skilled nursing days.

These are all the key metrics that we impact that have a big impact to our payers. The outcomes are not accidental. They are the result of very proactive, frequent engagement with our participants, and government payers can then rebalance long-term care to a community-based approach rather than toward nursing facilities. That is really what creates the fiscal benefit and the predictability of the program for our partners. This slide really gets to the core of why we think the model is different. We are at full risk for both Medicare and Medicaid. Other models are generally at risk for one or the other, or they could be at risk at both through two separate programs. But we are at risk for all Medicare and Medicaid services through the PACE program. It includes all the primary care, the hospital care, the drugs, the long-term care.

That matters because we control these costs, and we control these services much more than a traditional managed care company, and that control sort of beats influence, as we like to say. Also, one of the things that kind of distinguish our model is about 40% of all care, sometimes 40%-50% of all of the healthcare dollar associated someone on an annual spending for an individual, we are providing that care in our centers with our employees. So we have a lot of control over the healthcare dollar, and that interdisciplinary team really allows us to manage this population longitudinally, and it gives us real visibility into the utilization and where there is opportunity to make better utilization decisions. When care does occur outside of the center, it is very tightly coordinated.

The orders that we write for care outside the center are very precise, they are very narrow, they are very intentional, and they result in a real deep understanding of what that participant needs. This is why we believe PACE is the only model that truly controls a meaningful share of the total cost of care, acute care, all the way through long-term care. Just going to jump ahead here. The market opportunity for PACE remains significant and under-penetrated. There is a growing, I think, bipartisan recognition that PACE can deliver extraordinary value, particularly for these high-risk dual eligibles. Policymakers increasingly view PACE as the most fully integrated care model that is available for this population, which helps reduce long-term regulatory risk.