Sometimes the market shoots first and asks questions later. Astrana Health Inc. (ASTH) got absolutely hammered on Tuesday, closing down about 22% at $21.48, and according to William Blair analyst Ryan Daniels, investors may have overreacted.
The trigger? The Centers for Medicare & Medicaid Services dropped its proposed Medicare Advantage payment updates for 2027 on Monday, and the numbers were underwhelming to say the least. CMS emphasized program sustainability, accuracy, and administrative simplicity while pointing to modest payment growth ahead.
Here's the kicker: if finalized, these proposals would deliver a net average year-over-year payment increase of just 0.09%. That translates to more than $700 million in additional payments to Medicare Advantage plans, which sounds like a lot until you realize it's essentially flat growth. The Wall Street Journal reported that analysts had been expecting something in the 4% to 6% range, so you can see why the sector collectively winced.
Why The Selloff Looks Excessive
William Blair came out Tuesday saying they were "surprised to see the level of pressure on Astrana Health shares." And they have a point.
Astrana Health operates as a Management Services Organization comprised of healthcare professionals and more than 600 employee associates serving Independent Physicians Associations and Medical Groups. The company provides comprehensive administrative support and various auxiliary services. Medicare accounts for about 61% of the company's revenue, which is significant but not overwhelming.
Yet Astrana dropped harder than several pure-play Medicare Advantage peers that Daniels covers. Agilon Health Inc. (AGL) fell about 10%, while Alignment Healthcare Inc. (ALHC) dropped roughly 12%. Those moves seem more proportional to the news than Astrana's 22% faceplant.
The Risk Adjustment Angle
Here's where things get interesting. William Blair points out that Astrana Health's risk adjustment practices differ meaningfully from many large payers. The company doesn't use audio-only visits or standalone chart reviews to generate risk scores. Instead, risk scores come from direct, encounter-based patient care, which sits at the core of its operating model.
Why does this matter? Because CMS estimates that disallowed diagnosis sources like audio-only visits and chart pulls represent a 1.53% risk score impact across the overall Medicare Advantage market. Astrana's exposure to this particular headwind is minimal, according to Daniels.
There's another angle too. William Blair suggests the proposed changes could actually enhance Astrana's long-term value proposition. As payers navigate tighter payment growth and new documentation requirements, they'll need partners who can help manage patients, control costs, and properly document clinical diagnoses through encounter data—especially now that chart pulls and audio-only visits are under scrutiny.
A Potential Opportunity in Disguise
"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," Daniels wrote.
After the selloff, Astrana shares now trade at just 0.4x estimated 2027 sales and approximately 6x on an EV/2027 adjusted EBITDA basis. William Blair views this as an attractive entry point for what they describe as a highly profitable company with a strong operating model and deep, experienced leadership team. The firm reiterated its Outperform rating.
Price Action: Astrana Health stock jumped 3.86% to $22.31 during after-hours trading on Tuesday, according to market data.
