Astrana Health, Inc.
For the period ended Dec 31, 2025. Filed Mar 12, 2026.
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FY2025 · Filed Mar 12, 2026
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Item 8. Report of Independent Registered Public Accounting Firm
Report of Independent Registered Public Accounting Firm
To the Stockholders and the Board of Directors of Astrana Health, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Astrana Health, Inc. (the Company) as of December 31, 2025 and 2024, the related consolidated statements of income, mezzanine and stockholders' equity (deficit) and cash flows for each of the three years in the period ended December 31, 2025, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2025 and 2024, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2025, in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2025, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated March 12, 2026 expressed an adverse opinion thereon.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.
| Valuation of Incurred but not Reported (IBNR) Claims Liability | |
| Description of the Matter | At December 31, 2025, the Company’s medical liabilities totaled $335.7 million. As discussed in Note 2 of the consolidated financial statements, medical liabilities include reserves for incurred but not reported (“IBNR”) claims. The IBNR liability is an estimate that management developed using actuarial methods and is based on numerous variables, including the utilization of healthcare services, historical payment patterns, cost trends, product mix, seasonality, changes in membership, and other factors, which are utilized in the determination of completion factors and per member per month trend factors.Auditing management’s estimate of the IBNR liability involved a high degree of subjectivity due to the complexity of the models used by management and the nature of the assumptions used in the estimation of the liability. We involved our actuarial specialists to assist with the testing due to the highly judgmental nature of assumptions used in the valuation process, including completion factors and per member per month trend factors. These assumptions have a significant effect on the valuation of the IBNR liability. |
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| How We Addressed the Matter in Our Audit | We obtained an understanding, evaluated the design, and tested the operating effectiveness, as applicable, of the Company’s controls over the process for estimating the IBNR liability. This included testing management review controls over completion factors and per member per month trend factors, and management’s review of actuarial methods used to calculate the IBNR liability, including the completeness and accuracy of data inputs and outputs of those models.To test the IBNR liability, our audit procedures included, among others, testing the completeness and accuracy of data used in the Company’s models by testing reconciliations of underlying claims and membership data recorded in source systems to the actuarial reserve models, and comparing claims to source documentation. With the assistance of our actuarial specialists, we compared management’s methods and assumptions used in their analysis with historical experience, consistency with generally accepted actuarial methodologies used within the industry, and observable healthcare trend levels within the markets the Company operates. With the assistance of our actuarial specialists, we used the Company’s underlying claims and membership data to develop an independent range of IBNR estimates and compared management’s recorded IBNR liability to our range. Additionally, we performed a hindsight review of prior period estimates using subsequent claims development, and we evaluated management’s disclosures surrounding IBNR. |
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| Valuation of member relationships intangible asset acquired in a business combination | |
| Description of the Matter | As discussed in Note 3 of the consolidated financial statements, on July 1, 2025, the Company and its affiliates, acquired substantially all the assets of certain direct and indirect subsidiaries of PHP Holdings, LLC, and all of the outstanding equity interests of Prospect Health Plan, Inc., and Foothill Regional Medical Center. The acquisition was accounted for as a business combination in accordance with Accounting Standards Codification Topic 805, Business Combinations. The consideration paid in the acquisition was allocated to the acquired assets and liabilities assumed generally based on their fair value with the excess of the purchase price over those fair values allocated to goodwill.Auditing the Company’s accounting for the acquisition was complex primarily due to the significant estimation uncertainty involved in estimating the fair value of the member relationships intangible asset. The total fair value ascribed to the member relationships intangible asset, using the multi-period excess earnings method, was $123.5 million. The significant assumptions used to estimate the fair value of member relationships intangible asset included forecasted external revenue growth, earnings before income taxes, depreciation and amortization (EBITDA) margin, and discount rate. These significant assumptions are subjective and could be affected by future economic and market conditions. |
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| How We Addressed the Matter in Our Audit | We obtained an understanding, evaluated the design, and tested the operating effectiveness of internal controls over the Company’s accounting for the recognition and measurement of the member relationships intangible asset and management's judgments and evaluation over the underlying assumptions with regard to the valuation model applied. We also tested management’s internal controls over the completeness and accuracy of the data used in the valuation models.To test the estimated fair value of the member relationships intangible asset, our audit procedures included, among others, assessing the appropriateness of the valuation methodology used, evaluating the significant assumptions discussed above, and evaluating the completeness and accuracy of the underlying data supporting the significant assumptions and estimates. For forecasted external revenue growth and EBITDA margin, we compared the financial projections to current industry and economic trends, the historical financial performance of the acquired businesses, the Company’s history with other acquisitions, and forecasted performance of guideline public companies. We also performed sensitivity analyses to evaluate the changes in the fair value of the member relationships intangible asset that would result from changes in the significant assumptions. We involved our valuation specialists to assist in evaluating the methodologies used to estimate the fair value of the member relationships intangible assets and to test significant assumptions, including the discount rate. |
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/s/Ernst & Young LLP
We have served as the Company’s auditor since 2020.
Los Angeles, California
March 12, 2026
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