Astrana Health Stock Slide Presents An Attractive Entry Point: Analyst

Astrana Health Inc. (NASDAQ:ASTH) stock on Tuesday fell around 22% to close at $21.48. The reaction was due to the Centers for Medicare & Medicaid Services (CMS) on Monday outlining proposed methodological and payment policy updates for Medicare Advantage that point to modest payment growth in 2027 while emphasizing program sustainability, accuracy, and administrative simplicity. If finalized, the proposals would result in a net average year-over-year payment increase of mere 0.09%, translating to more than $700 million in additional payments to Medicare Advantage plans. Citing analysts, the Wall Street Journal noted that it was estimated that the Medicare agency would propose a 2027 rate increase of between 4% and 6%. Analyst Take William Blair on Tuesday wrote, "Overall, we are surprised to see the level of pressure on Astrana Health shares." Astrana Health is a Management Services Organization (MSO) comprised of healthcare professionals and more than 600 employee associates serving Independent Physicians Associations (IPAs) and Medical Groups. The company offers comprehensive administrative support and various auxiliary services. Analyst Ryan Daniels noted that Medicare accounts for about 61% of Astrana Health's revenue. Despite this, the stock declined more sharply than several pure-play Medicare Advantage peers in his coverage universe. By comparison, Agilon Health Inc. (NYSE:AGL) fell about 10%, while Alignment Healthcare Inc. (NASDAQ:ALHC) dropped roughly 12%, both of which seem more reasonable relative to Astrana's price move. William Blair said Astrana Health's risk adjustment practices differ from many large payers, as the company does not use audio-only visits or standalone chart reviews. Instead, risk scores are driven by direct, encounter-based patient care, which is central to its model. Thus, while CMS estimates that these disallowed diagnosis sources represent a 1.53% risk score impact on the overall MA market, Astrana's exposure to this headwind is very small, analyst Daniels wrote on Tuesday. Thirdly, William Blair wrote that the proposed changes could actually enhance the long-term value of the company, as payers will need to look to fully delegated care delivery partners to help them manage patients (and costs) and better document clinical diagnoses via encounter data— especially in the absence of "chart pulls" and audio-only visits. Why The Stock Looks Cheap? "Here, we believe that Astrana Health offers a goal-congruent partnership model to achieve this goal. As such, it could spur more delegated contract agreements with MA plans in 2027 and beyond," analyst Daniels added. Given the sell-off, Astrana Health shares now trade at only 0.4x estimated 2027 sales and about 6x on an EV/2027 adjusted EBITDA basis, which William Blair views as an attractive entry point for a highly profitable company with a strong operating model and deep and experienced leadership team. The analyst reiterates the Outperform rating. Price Action: Astrana Health stock jumped 3.86% to $22.31 on Tuesday during after-hours trading, according to Benzinga Pro data. Photo by T. Schneider via Shutterstock