Astrana Health credits its AI-native operating system with a 210 basis point cut in G&A as a share of revenue. On our arithmetic from its 10-Q, about 76 of those points are earn-out remeasurements that the company books in G&A.
Astrana is a risk-bearing care company that coordinates care for about 1.5 million patients. Its 2025 annual report says it operates primarily in California. On September 15, 2026 it furnished an updated corporate presentation that sets its prior authorization automation next to that ratio. For any executive team asked what AI in utilization management is worth, the filings behind the slide are a worked example.
What the deck says
Slide 24 reports a "~70%" auto-approval rate "of all prior auth requests" and a decision time under two minutes "for auto-adjudicated requests." It adds 500,000 agentic patient interactions a month by voice and SMS, and a 30 percent reduction in administrative time per care manager. A footnote narrows the 70 percent to "Care Partners equipped with automated prior authorizations," and slide 9 bases it on calendar 2025 volume, excluding CHS providers. The 30 percent carries no period or baseline.
Slide 14 makes the financial link: "AI-native operating system has led to 210 bps G&A improvement year over year (5.6% in Q2 2026, 7.7% in Q2 2025)." The line above it reads: "On track to achieve high end of $12-15M synergy range related to Prospect."
What the 10-Q shows
Revenue for the quarter ended June 30, 2026 was $972.5 million, up 49 percent, "primarily attributable to the Prospect acquisition, which contributed $281.5 million of revenue." Astrana closed that acquisition on July 1, 2025. Capitation revenue rose another $45.0 million, primarily from enrollees moving to full risk through its Restricted Knox-Keene plans.
G&A was $54.2 million against $50.7 million, up 7 percent, "primarily due to $13.3 million from the acquisition of Prospect as well as other general and administrative expenses to support operational growth." The 10-Q attributes no part of that change to AI.
One accounting item sits inside the line. The 10-Q states that changes in the CFC and CHS contingent consideration, earn-outs from earlier acquisitions, "are presented in general and administrative expenses." From the cash flow statements, the change in their fair value reduced G&A by $5.4 million in the second quarter of 2026. A year earlier it added $1.9 million. The swing is $7.3 million.
Rebuilding the 218 basis points
Unrounded, G&A fell from 7.747 percent of revenue to 5.568 percent, or 218 basis points. The deck's 210 matches the difference of the rounded ratios.
Measured against second quarter 2026 revenue, our split has three parts. The earn-out swing accounts for about 76 basis points. G&A outside Prospect and earn-outs fell $2.5 million, from $48.8 million to $46.3 million, which is about 26 basis points. The remaining 116 come from revenue: Prospect joined at a G&A ratio of 4.7 percent, and revenue outside Prospect grew 5.5 percent.
The half year gives the same order of magnitude. On that basis, G&A outside Prospect and earn-outs was $90.9 million in the first six months of 2026, against $91.3 million a year earlier. The base quarter also sat high: G&A was 7.3 percent of revenue in the first quarter of 2025 and 7.7 percent in the second, a quarter whose 10-Q cited transaction costs for the Prospect deal.
Where the gain did not reach
Adjusted EBITDA, a non-GAAP measure, rose 43 percent to $68.9 million. The company reports the margin at 7 percent in both quarters. Computed on its definition, it moved from 7.35 to 7.08 percent. Cost of services excluding depreciation and amortization rose from 88.1 to 89.3 percent of revenue, and that line now includes an acquired hospital.
The AI claim sits on a line worth 5.6 cents of each revenue dollar. A full-risk business is decided on the line worth 89 cents. Hikari Blue · operator note
What the rules let software decide
In Medicare Advantage, 42 CFR 422.566(d) requires a partially or fully adverse medical necessity decision to "be reviewed by a physician or other appropriate health care professional" before the plan issues it. On February 6, 2024, CMS told plans that software "can be used to assist" coverage determinations, and that the plan answers for its compliance. For inpatient admissions, CMS added that AI alone cannot be the basis to deny.
The duty sits with the Medicare Advantage organization, which "maintains ultimate responsibility" for its CMS contract. It reaches a delegated medical group through the written agreement that 42 CFR 422.504(i) requires. In California, SB 1120 bars an AI tool from denying, delaying or modifying care on medical necessity, including through contracted medical groups. It bears on commercial and Medi-Cal business; Medicaid and commercial were 36 percent of Astrana's second quarter revenue. For Medicare Advantage, 42 CFR 422.402 supersedes state law other than licensing and solvency rules, so we do not rely on SB 1120 there.
Our reading of these texts: software can finalize approvals, but a clinician reviews every adverse medical necessity decision. A 70 percent auto-approval rate removes volume. The clinician time sits in the remainder.
Since January 1, 2026, CMS-0057-F sets a seven calendar day limit for standard prior authorization decisions on items and services, which a plan can extend by up to 14 days in defined cases. Plans post prior authorization metrics each year at contract level, first by March 31, 2026, including approval rates and the average and median decision time across standard requests. A decision time under two minutes for auto-adjudicated requests is not that metric.
The honest counterpoint
Revenue grew 49 percent while G&A grew 7 percent. Holding administrative cost nearly flat through that growth is operating leverage, and automation can be part of it. So can Prospect synergies, which management says are on track for the high end of a $12 million to $15 million range. The $2.5 million fall outside Prospect and earn-outs is real. Astrana raised its 2026 Adjusted EBITDA guidance to $255 million to $280 million. Nothing in the filings says the AI does not work. They cannot say how many basis points it earned.
What changes on Monday
For a health system, plan or risk-bearing group putting AI into utilization management, the board slide needs a perimeter an auditor can rebuild. Report administrative cost per member per month for the same members in both periods. Remove acquisitions, deal costs and fair value remeasurements. Put the medical cost ratio for those members next to it.
Then split the automation metric three ways: requests finalized without a clinician, clinician minutes per adverse decision, and the plan's published approval rate and median decision time. The first is volume. The second is cost. The third is what regulators and competitors now see.
The constraints are contractual and clinical. Delegation terms decide who owns an adverse decision. Clinician capacity caps how many adverse reviews clear in a day. A loose approval rule would not show in G&A. It would show in care cost. Holding all three in one view is governance your board can look in the eye, and ordinary work for an AI operating layer.
In healthcare, a constant-perimeter figure is harder to publish and easier to defend. On our arithmetic, one accounting item moved this ratio by 76 basis points.
If we remove acquisitions, deal costs and remeasurements from our AI slide, how many basis points remain, and what did the medical cost ratio do for the same members?
Carry one metric into the next finance committee: administrative cost per member per month on a constant perimeter, next to the medical cost ratio for the same members. Public filings rarely allow it. An internal ledger does.
- Astrana Health, Inc. (September 15, 2026). Form 8-K, Item 7.01, and Exhibit 99.1, updated corporate presentation, furnished to the US Securities and Exchange Commission. Primary source, read on the slide images, for: slide 24, "~70%" auto-approval "of all prior auth requests" with footnote 1 "Care Partners equipped with automated prior authorizations," "<2 min" decision time "for auto-adjudicated requests," "500K" agentic patient interactions per month through voice and SMS, and "30%" reduction in administrative time per care manager; slide 9, footnote 3, "based on CY 2025 prior authorization volume and approval data; excludes CHS providers"; slide 10, revenue by payer type for the quarter ended June 30, 2026 of 61 percent Medicare, 27 percent Medicaid, 9 percent commercial and 3 percent other third parties; slide 14, "AI-native operating system has led to 210 bps G&A improvement year over year (5.6% in Q2 2026, 7.7% in Q2 2025)" and "On track to achieve high end of $12-15M synergy range related to Prospect." sec.gov, Astrana Form 8-K, September 15, 2026 · sec.gov, Exhibit 99.1 corporate presentation
- Astrana Health, Inc. Form 10-Q for the quarterly period ended June 30, 2026. Primary source for: capitation and other revenue, net, of $972,520 thousand against $654,808 thousand; general and administrative expenses of $54,150 thousand against $50,725 thousand, and $115,888 thousand against $94,623 thousand for the six months; cost of services, excluding depreciation and amortization, of $868,498 thousand against $576,839 thousand; revenue growth "primarily attributable to the Prospect acquisition, which contributed $281.5 million of revenue," and the $45.0 million capitation increase from enrollees transitioning to full risk through Restricted Knox-Keene plans; the quarterly G&A increase "primarily due to $13.3 million from the acquisition of Prospect," and $29.8 million from Prospect for the six months; the July 1, 2025 Prospect acquisition; the statements that changes in the CFC and CHS contingent consideration "are presented in general and administrative expenses"; the six-month change in fair value of contingent consideration liabilities of negative $4,820 thousand in 2026 and $3,351 thousand in 2025; and approximately 1.5 million patients managed at June 30, 2026. sec.gov, Astrana Form 10-Q, quarter ended June 30, 2026
- Astrana Health, Inc. Form 10-Q for the quarterly period ended March 31, 2026. Primary source for: the first quarter change in fair value of contingent consideration liabilities of $581 thousand in 2026 and $1,407 thousand in 2025; and first quarter 2025 G&A of $43.9 million on revenue of $601.0 million. sec.gov, Astrana Form 10-Q, quarter ended March 31, 2026
- Our arithmetic on the two 10-Qs above, in thousands of dollars. Second quarter earn-out effect: negative 4,820 minus 581 is negative 5,401 in 2026; 3,351 minus 1,407 is 1,944 in 2025; the swing of 7,345 is 75.5 basis points of 972,520. G&A outside Prospect and earn-outs: 54,150 minus 13,300 plus 5,401 is 46,251 in 2026; 50,725 minus 1,944 is 48,781 in 2025; the decline of 2,530 is 26.0 basis points of 972,520. Ratios: 50,725 divided by 654,808 is 7.747 percent; 54,150 divided by 972,520 is 5.568 percent; the difference is 217.9 basis points, of which 116.4 remain after the two dollar effects and reflect revenue growth. Revenue outside Prospect: 972,520 minus 281,500 is 691,020, up 5.5 percent; Prospect G&A ratio: 13,300 divided by 281,500 is 4.7 percent. Six months: 115,888 minus 29,800 plus 4,820 is 90,908 in 2026, against 94,623 minus 3,351, or 91,272, in 2025. First quarter 2025: 43.9 divided by 601.0 is 7.3 percent. Cost of services: 868,498 divided by 972,520 is 89.3 percent; 576,839 divided by 654,808 is 88.1 percent. Assumption, stated: the quarterly change in fair value of contingent consideration sits in G&A, as the notes state for the CFC and CHS earn-outs; the cash flow line may include a small liability those notes do not name.
- Astrana Health, Inc. (August 6, 2026). Second quarter 2026 results, Exhibit 99.1 to Form 8-K. Primary source for: Adjusted EBITDA, a non-GAAP measure, of $68,889 thousand against $48,101 thousand, up 43 percent; Adjusted EBITDA margin reported at 7 percent for both quarters, defined as Adjusted EBITDA over total revenue; and the raised 2026 Adjusted EBITDA guidance of $255 million to $280 million. Our arithmetic: 68,889 divided by 972,520 is 7.08 percent; 48,101 divided by 654,808 is 7.35 percent. sec.gov, Astrana Q2 2026 earnings release
- Astrana Health, Inc. Form 10-Q for the quarterly period ended June 30, 2025, and Form 10-K for the fiscal year ended December 31, 2025. Primary sources for: the second quarter 2025 G&A increase "primarily due to increased general and administrative expenses to support operational growth such as stock-based compensation and transaction costs incurred for the Prospect transaction"; $19.6 million of acquisition-related costs incurred for the Prospect transaction as of December 31, 2025 and recorded as general and administrative expenses, with no quarterly amount given; and the statement "we currently primarily operate in California." sec.gov, Astrana Form 10-Q, quarter ended June 30, 2025 · sec.gov, Astrana Form 10-K, fiscal 2025
- Electronic Code of Federal Regulations, Title 42. Section 422.566(d), review of partially or fully adverse medical necessity decisions by "a physician or other appropriate health care professional" before the MA organization issues the decision; section 422.504(i), under which the MA organization "maintains ultimate responsibility" for its contract with CMS and flows obligations down to first tier, downstream and related entities by written agreement; section 422.568(b), seven calendar days for standard decisions on items and services subject to section 422.122 beginning January 1, 2026, and "may extend the timeframe by up to 14 calendar days" in listed circumstances; section 422.122(c), public reporting of prior authorization metrics at the MA contract level by March 31, including approval and denial percentages and average and median decision time; section 422.402, federal standards superseding state law other than licensing and solvency laws. The inference that software can finalize approvals but not adverse medical necessity decisions is our reading of these sections. ecfr.gov, 42 CFR 422.566 · ecfr.gov, 42 CFR 422.504 · ecfr.gov, 42 CFR 422.568 · ecfr.gov, 42 CFR 422.122 · ecfr.gov, 42 CFR 422.402
- Centers for Medicare and Medicaid Services (February 6, 2024). Frequently Asked Questions related to Coverage Criteria and Utilization Management Requirements in CMS Final Rule (CMS-4201-F), HPMS memo to all Medicare Advantage organizations and Medicare-Medicaid plans. Quoted: "An algorithm or software tool can be used to assist MA plans in making coverage determinations, but it is the responsibility of the MA organization to ensure that the algorithm or artificial intelligence complies with all applicable rules," and, for inpatient admissions, "algorithms or artificial intelligence alone cannot be used as the basis to deny admission or downgrade to an observation stay." cms.gov, HPMS memo, February 6, 2024 (PDF)
- Centers for Medicare and Medicaid Services (January 17, 2024). Fact sheet, CMS Interoperability and Prior Authorization Final Rule (CMS-0057-F). Primary source for: the compliance date starting January 1, 2026 for the prior authorization process policies, and "the initial set of metrics must be reported by March 31, 2026." cms.gov, CMS-0057-F fact sheet (PDF)
- California Legislature (approved September 28, 2024). Senate Bill 1120, Chapter 879, Statutes of 2024, amending Health and Safety Code section 1367.01 and Insurance Code section 10123.135. Primary source for: the artificial intelligence, algorithm or other software tool "shall not deny, delay, or modify health care services based, in whole or in part, on medical necessity," and the extension to plans that delegate utilization review "to medical groups or independent practice associations." Its reach into Medicare Advantage decisions is limited by federal preemption and is not relied on above. leginfo.legislature.ca.gov, SB 1120
The Hikari Blue team · Austin, September 2026