InnovAge Holding Corp.

What they do

InnovAge operates the Program of All-Inclusive Care for the Elderly (PACE), a fully capitated managed care model in which the company assumes 100% risk for participants' healthcare costs. It directly contracts with Medicare, Medicaid, the Veterans Administration and private pay sources, without relying on third-party health plans. Services include in-home care, in-center primary care and therapies, transportation, meals, and care management. As of June 30, 2026, it served approximately 8,230 participants and operated 20 PACE centers across California, Colorado, Florida, New Mexico, Pennsylvania and Virginia.

Revenue drivers

• PACE capitation revenue — The company operates as one reportable segment, PACE, and receives capitation payments directly from Medicare Parts C and D, Medicaid, the VA and private pay sources; total fiscal 2026 revenue was $989.7 million.

Recent performance

Fiscal 2026 total revenues were $989.7 million, up 15.9% from $853.7 million in fiscal 2025. Income before income taxes was $0.3 million versus a $34.0 million loss before income taxes in fiscal 2025, and net loss attributable to InnovAge was $2.5 million, or $0.02 per share, compared with a $30.3 million net loss, or $0.22 per share, a year earlier. Adjusted EBITDA rose to $94.6 million (9.6% margin) from $34.5 million (4.0% margin), and center-level contribution margin increased 48.3% to $227.8 million. Census grew to approximately 8,230 participants from 7,740, with member months of approximately 96,050 versus 89,130. Fourth-quarter revenue was $262.0 million with net income attributable to InnovAge of $8.3 million and diluted EPS of $0.06.

Strategy

Management points to clinical value initiatives and operational value initiatives as levers to offset anticipated cost-of-care increases and improve margins. The growth strategy centers on recruiting and retaining participants, finding suitable geographies for new centers, and pursuing acquisitions, joint ventures and strategic partnerships, though the company cites government actions that may preclude opening centers in certain jurisdictions. To address labor shortages in geriatrics, primary care and direct care roles, it is implementing targeted market-based compensation, retention programs for critical roles, and measures to reduce reliance on agency staffing. No specific new center count or capital plan is disclosed in the excerpts.

Risks

• Government payor dependence — Revenue depends on a limited number of government payors, exposing InnovAge to funding reductions, legislative changes and federal and state budgetary pressures, including reduced Colorado Medicaid premium rate increases expected for the fiscal year beginning July 1, 2026.
• Cost of care exceeds capitation — The company is at risk for 100% of participants' healthcare costs, and increased third-party provider costs, state Medicaid budget cuts and supply inflation could cause the cost of providing services to exceed PACE compensation.
• Labor shortages and wage pressure — Workforce shortages in geriatrics, primary care and direct care roles, plus competition from health systems and home health providers for nurses, drivers and caregivers, have increased wage and benefit costs and could constrain enrollment capacity and services.
• Regulatory audits and investigations — The company faces periodic inspections, reviews, audits and investigations, including current civil investigative demands by federal and state agencies, and risk that submissions to government payors, including risk adjustment scores, may be inaccurate or unsupportable.

Outlook

For fiscal 2027, management issued guidance of total revenues of $1.050 billion to $1.085 billion, Adjusted EBITDA of $105 million to $115 million, census of 8,625 to 8,850 participants, and total member months of 101,000 to 102,500. The company said it enters fiscal 2027 with a durable foundation and remains focused on disciplined execution. It expects Medicaid rate pressures, including in Colorado and California, to impact margins, and continues to monitor cost-of-care trends and the effects of the OBBBA.