Astrana Health (ASTH) Q3 2026 earnings review
Astrana Health third-quarter profit rises, but fourth-quarter growth slows
Astrana Health, which manages doctor networks paid fixed monthly fees to care for patients, grew third-quarter profit faster than sales as more contracts shifted to full medical risk. In the first quarter after the one-year anniversary of the Prospect acquisition, revenue rose 7% from a year ago and operating cash profit rose 13%. Chief executive Brandon Sim highlighted double-digit underlying earnings growth, but the company's fourth-quarter plan has both revenue and cash profit growing only about 5%.
| Revenue | $1,023.6M +7.1% from a year ago |
|---|---|
| Operating cash profit (Adjusted EBITDA) | $77.2M +12.7% from a year ago |
| Full-risk share of capitation revenue | 85% 81% last quarter |
| Full-year Adjusted EBITDA outlook | Narrowed middle of the range unchanged at $267.5M |
⚖️ Verdict: ⚪ Neutral
The story is unchanged because a strong third quarter was offset by a softer fourth-quarter outlook. Moving 85% of monthly capitation fees into full-risk contracts lifted revenue per patient and kept care costs below plan, yet management did not raise the middle of its full-year revenue or cash profit targets and cut its net income forecast.
The question now is whether underlying profit growth in 2027 will run near the third quarter's 13% pace or the fourth quarter's 5% outlook. Either new Medicare Advantage and clinic contracts in January restart patient growth, or Medicaid losses and maturing contract costs keep holding the business back. Management's first 2027 outlook next quarter will settle it.
🐂 Bull Case
Full-Risk Contracts Keep Lifting Revenue Per Patient
Astrana Health runs doctor networks that get paid a fixed monthly fee, called capitation, to care for patients. Under full-risk contracts, the company takes responsibility for all of a patient's medical bills, including hospital stays, in exchange for a much larger monthly fee. Critics worry that state Medicaid rollbacks are shrinking Astrana's patient base, while supporters argue that moving existing patients into full-risk contracts will keep revenue growing.
This quarter was the first after the one-year anniversary of the Prospect Medical acquisition, so it showed underlying growth for the first time in a year. Total revenue rose 7.1% from a year ago to $1,023.6 million, even though total patients on the platform stayed at 1.5 million, down from 1.6 million a year ago. Full-risk contracts generated 85% of capitation revenue in the quarter, up from 81% last quarter and 77% a year ago.
By our math, quarterly revenue per patient reached $682, up from $648 in the second quarter and $598 a year ago. That higher fee per person more than made up for the smaller patient pool. Because only 46% of members in Care Partners, its main doctor network segment, are in full-risk contracts today, Astrana still has room to convert the remaining 54% over time.
What to watch: total patient counts and the full-risk share of members in the fourth-quarter report. If patient numbers drop again when new Medicaid rules take effect in January 2027, contract conversions alone will have to work harder to keep revenue growing.
Care Costs Stayed Below Plan in the First Clean Quarter
When Astrana takes on full-risk contracts, it keeps the savings if patients stay healthy, but it pays the bill if hospital and medical costs run high. Chief executive Brandon Sim credited the company's "physician-centric, AI-native healthcare operating platform" for helping doctors manage the total cost of care.
In the third quarter, the cost of services — what the healthcare group pays to doctors, hospitals and clinics for patient care — fell to 87.9% of revenue, down 1.9 percentage points from 89.8% a year ago. The company said its medical cost trend for the first nine months of the year tracked "below our full-year assumption of approximately 5.2%", helped by annual wellness visits that reached nearly 65% of eligible members. General and administrative overhead was 6.2% of revenue over the first nine months, down 0.8 percentage points from a year ago, though it ticked up to 6.6% in the third quarter alone.
What to watch: the medical cost trend in the fourth quarter, when winter illnesses typically push clinic and hospital visits higher. Holding care costs below the 5.2% full-year assumption through December would show the new Prospect networks are running efficiently.
New Payer and Clinic Deals Set Up 2027 Expansion
With the Prospect integration largely complete, Astrana is signing new health plans and doctor groups across the country to restart patient growth. In its Care Enablement unit, which sells Astrana's software and back-office management services to outside doctors, revenue grew 5.4% from a year ago to $92.0 million.
- Georgia expansion: closed the purchase of an independent doctor association on October 1, 2026
- Care Enablement wins: signed a provider group in Connecticut and a hospital in California to join the platform in early 2027
- Medicare Advantage plans: signed several new health plan contracts starting January 1, 2027 in Southern California, Texas and Arizona
These agreements matter because total patient membership has been stuck at 1.5 million since the second quarter. Adding new Medicare Advantage plans and outside software clients in January 2027 gives the business a way to add members without relying on large, debt-funded acquisitions.
What to watch: first-quarter 2027 membership numbers and initial 2027 revenue targets. Those figures will show whether the new January contracts add enough patients to offset ongoing Medicaid losses.
🐻 Bear Case
Fourth-Quarter Outlook Points to Slower Profit Growth
"We delivered record revenue, record adjusted EBITDA, and double-digit organic earnings growth while continuing to invest in the next phase of our growth," chief executive Brandon Sim said. In the third quarter, Adjusted EBITDA — operating cash profit before interest, taxes, depreciation, stock pay and one-offs — rose 12.7% from a year ago to $77.2 million.
The company's own fourth-quarter outlook tells a much slower story. Astrana forecast fourth-quarter revenue of $939 million to $1,039 million and Adjusted EBITDA of $48.5 million to $61.5 million. At the middle of those ranges, revenue grows 4.1% from a year ago and Adjusted EBITDA grows 4.9% to $55.0 million. That $55.0 million middle point is also $2.3 million lower than the $57.3 million fourth-quarter figure implied by the company's full-year plan three months ago, because the third-quarter beat was not added to the full-year midpoint.
At the same time, management lowered its full-year net income outlook to $55 million to $61 million, down from $59 million to $74 million last quarter, as stock-based compensation and integration add-backs rose. Exiting 2026 at 4.9% cash profit growth makes it harder to reach the mid-to-high teens growth rate management has targeted for 2027, and leaves the old $350 million 2027 target further out of reach.
What to watch: full-year 2027 outlook when Astrana reports fourth-quarter results early next year. A 2027 Adjusted EBITDA target below $305 million would confirm that underlying profit growth has settled below the mid-teens goal.
Uncollected Bills Slowed Third-Quarter Cash Generation
Astrana often books shared-savings bonuses and risk-pool settlements from health plans months before the cash actually arrives. That timing gap widened again in the third quarter, tying up cash on the balance sheet even as reported profits hit a record.
- Net receivables: $530.9 million at September 30, up 41.8% from $374.5 million at year-end and up from $465.1 million in June
- Third-quarter free cash flow: $12.4 million by our math, down from $92.9 million across the first two quarters combined
- Nine-month free cash flow: $105.4 million, down 4.6% from $110.4 million in the same period last year
Because cash was tied up in receivables, working capital — short-term assets minus short-term bills due — dropped to $193.9 million from $248.0 million at the start of the year. Management still narrowed its full-year free cash flow plan to $107.5 million to $130 million, raising the middle of the range slightly to $118.8 million.
What to watch: fourth-quarter cash collection and net receivables at year-end. Collecting the accrued health plan settlements will determine whether Astrana hits its $118.8 million full-year free cash flow midpoint.
Risks this quarter didn't answer
Several standing accounting, customer-concentration and regulatory concerns cannot be checked until Astrana files its full quarterly report on Form 10-Q and holds its conference call.
- Prior-period medical claims development: after $43.5 million of favorable adjustments in the first half, the third-quarter medical liability rollforward table lives in the 10-Q.
- Care Enablement outside revenue: the press release reports total segment revenue of $92.0 million but does not split out third-party clients from internal fees; the 10-Q segment footnote will show it.
- Payer concentration and disputed receivable: whether the top health plan still accounts for over 38% of receivables, and whether the reserved payer balance was collected, awaits the 10-Q.
- Internal control weakness: the release's forward-looking disclaimer still notes an ongoing material weakness in financial reporting controls over acquisition accounting.
💲 Other KPIs
Total debt fell by $11.1 million in the third quarter and is down $113.4 million since the end of 2025, as the company repaid $115.9 million of borrowings over the first nine months. Lower debt cut quarterly interest expense to $15.0 million from $17.7 million a year ago. By our math, net debt now sits at 2.0 times trailing 12-month Adjusted EBITDA.
Adjusted diluted earnings per share rose 4.4% from a year ago, from $0.68 to $0.71, slowing from 45.5% growth in the second quarter when results lapped pre-acquisition numbers. Per-share profit grew slower than the 12.7% rise in Adjusted EBITDA because stock-based compensation doubled to $15.6 million and diluted share count rose 0.9% to 49.9 million.
🔮 Guidance
Unchanged at the middle of the range. Astrana narrowed the full-year band by $100 million on each side, keeping the midpoint at $3,950 million, or 24.1% growth over 2025. That high full-year growth rate reflects adding Prospect in July 2025; the fourth-quarter plan shows the underlying pace.
New. The middle of the range is $989 million, which means revenue grows 4.1% from a year ago and drops 3.4% from the third quarter. Three months ago, the full-year outlook pointed to about $997 million for the fourth quarter by our math, so the new quarterly plan sits $8 million below that earlier implied midpoint.
Unchanged at the middle of the range. Management raised the bottom of the band by $6 million and trimmed the top by $6 million, keeping the midpoint at $267.5 million, up 30.2% from 2025. Over four quarters, the midpoint moved from $265.0 million to $267.5 million and held steady.
New. The plan calls for $55.0 million at the middle of the range, up 4.9% from $52.5 million a year ago and down 28.8% from the seasonally strong third quarter. Astrana has beaten its quarterly midpoint five times in a row by an average of 1.9%; if the pattern holds, fourth-quarter Adjusted EBITDA would land near $56.1 million by our math.
Unchanged at the middle of the range. Narrowing the band by $2.5 million on each side keeps the midpoint at $118.75 million, up 13.6% from $104.5 million in 2025. By our math, that leaves $13.4 million of free cash flow for the fourth quarter, slightly above the $12.4 million generated in the third quarter.
Cut. In its reconciliation table, the company lowered its full-year net income range to a midpoint of $58.0 million, down $8.5 million from the $66.5 million midpoint given last quarter. Higher full-year assumptions for stock-based compensation ($50.5 million vs $37.2 million through nine months) and $24.0 million of other add-backs drove the reduction.
Unchanged at the middle of the range. The reconciliation table narrows the band around the same $135.0 million midpoint, up 17.8% from $114.6 million in 2025. With $117.1 million collected in the first nine months, the plan implies $17.9 million of operating cash flow in the fourth quarter by our math.
Unchanged. Astrana kept its full-year property and equipment spending plan at a $16.25 million midpoint. Having spent $11.7 million in the first nine months, the company has $4.5 million of planned capital spending left for the fourth quarter by our math.
❓ Key Questions
Why does the fourth-quarter outlook point to 5% profit growth?
Third-quarter Adjusted EBITDA grew 12.7% and beat the middle of the outlook range by $2.2 million, yet management left the full-year midpoint unchanged. That implies fourth-quarter growth slows to 4.9% from a year ago. Investors need to know if medical costs or new-contract losses are rising.
When will the $531 million in net receivables turn into cash?
Net receivables jumped by $156 million over the first nine months, holding third-quarter free cash flow to $12.4 million by our math. Management should detail how much of that balance comes from government shared-savings programs and which quarter the cash will arrive.
How much did prior-period claims adjustments help third-quarter margins?
In the first half of 2026, Astrana recorded $43.5 million of favorable medical claims adjustments from earlier periods. Because the press release does not include the medical liability footnote table, management should state the net profit impact of prior-period development in the third quarter.
How many patients will the January 2027 contracts add?
Total patients in value-based arrangements have stayed at 1.5 million for two quarters, down from 1.6 million a year ago. With new Medicare Advantage plans in California, Texas and Arizona starting January 1, management should size the incoming membership against expected Medicaid losses.