Q2 2021 Privia Health Group Inc Earnings Call
[music].
Good morning, My name is snacks range that will be your conference operator today at this time I would like to welcome everyone to the for you get health second quarter conference call all of them.
Lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. As a reminder, this conference is being recorded.
And now I would like the turn of called the pinch the Robert Richard SPV, and Investor and corporate Communications. Please go ahead Sir.
Thank you Sarah and good morning, joining me on today's call are Sean Morris, Our Chief Executive Officer Pardon The road truck, President and Chief operating Officer, and David Mountcastle, Our Chief Financial Officer. This call is being webcast and can be accessed from the Investor Relations section of pretty of health Dot com.
Today's press release, highlighting our financial and operating performance as well as the slide presentation accompanying our formal remarks are posted on our IR website pages.
The only Sean and part of the opening comments, we will open the line for questions. We ask you. Please limit yourself to 1 question and 1 follow up so we can get through the full queue in a timely fashion the.
Financial results reported today and in the press release are preliminary and are not final until our form 10-Q for the second quarter ended June 30 of 2021 as filed with the Securities and Exchange Commission.
Some of the statements we will make today are forward looking in nature based on our current expectations and our view of our business as of August 9.2021, such statements, including those related to our future financial and operating performance and future business plans and objectives of subject to risks and uncertainties that may cause actual results to differ materially.
As a result these statements should be considered in conjunction with the cautionary statements in today's press release and the risk factors described under the company's most recent SEC filings.
Finally, we may refer to certain non-GAAP financial measures on the call.
Reconciliations of these measures to comparable GAAP measures are included in our press release and the accompanying slide presentation posted on our website.
Now I'll turn the call over to Sean.
Thank you Robert Good morning, everyone I'll provide a brief performance summary.
Based on our continued business momentum and success.
The last part of them all for a detailed review of our financial and operating performance of the outlook for the year before we take your questions.
The pretty health partnership model continues to gain traction and greater awareness with our providers. This is underscored by our growth in both implemented providers can attributed lives across a number of value based reimbursement programs since year end 2020.
This has helped propel our strong potential financial performance for the second quarter with practice collections, increasing 33 per share 2 or $367 million and our care margin increased from 33, 7% when compared with the second quarter of last year. We also continue to drive operating leverage through our platform with adjusted.
It.
EBITDA growing 43% in the quarter the strong year to date performance across all our service lines of positions Premier health very well for the remainder of the year.
This is especially true given our diversified patient provider and payer mix against the backdrop of current utilization trends, we see if rosh partner practices underpinning our top line growth as the continued expansion of provider partners from both existing markets and as we enter new markets, we expect rfps from value based programs.
The grow faster than fee for service dollars of as we continue to increase the number of patient lives of attributed to at risk reimbursement models and as more of these lives moving from partial to full risk arrangements over the coming quarters when key update.
We've recently launched Privy of care partners. This lighter version of our traditional model also partners with providers meeting them, where they are on their value based journey and age and transitioning their practices to specific value based programs. This aligns perfectly with our capital efficient operating structure and primary potential growth to drive significant apo.
Rating leverage and profit margin expansion, which we expect to continue as we execute from multiple growth opportunities.
As I noted pretty good care partners as our new flexible model.
Expands our current our opportunity to partner with the writers as you can see on the slide the primary difference between our traditional model and a lighter version of that Theres no need for provider groups of join our single track side the medical group.
For the good change electronic medical record vendors and yet they can still participate in various high value of arrangements providers joining per your carrier partners will be supportive of the lighter version of our tech stack advanced analytics to enhance their existing EHR system.
The physician led governance structure and select and the so service to help them succeed in value based care.
Our focus with pretty of care partners, just expand the premier relationship to new positions and grow value based attributed lives in both existing and new markets. We expect the program will officially start from January 1.2022, so we intend to provide additional details over the next few quarters.
We continue to be optimistic about the significant opportunity as we expand our risk sugar range, which across many value based reimbursement models from taking a very thoughtful business approach of the shopper.
The health all of the peer space for more than 70 at risk value based care programs and payer contracts across commercial Medicare Medicare advantage and Medicaid in fact of our 739000 of attributed lives today more than 140000 already.
The Medicare shared savings and the Maryland primary care programs in which we take both upside and downside risks and importantly, our financial interest are closely aligned with our per bureau providers and that we jointly share in both the financial benefit and risks associated with these value based care programs. In addition, our Medicare.
The advantage lives increased 13% sequentially 2 of 100 in 2000 at the end of the second quarter.
We are already at scale and are executing on the deliberate long term plan to enable our providers to transition profitably to increase risk and value based programs. We will continue to grow attributed lives and intend to move more of those lives in 2 downside in full risk arrangements overtime.
An important point is our current top line reflects only fee for service collections care management piece and shared shavings under our current partial risk contracts, we do not recognize the full per member per month premium for our Medicare advantage lives, but the really health leadership team has decades of experience in managing and underwriting risk and we certainly expect of.
More of these attributed lives from partial to full risk arrangements now ask mark to provide additional detail on our second quarter performance and outlook for the remainder of 2021 Park.
Thanks, Sean.
The business delivered a strong quarter with double digit organic top line growth, which we expect to continue for the remainder of 2021 and beyond given the high forward visibility of our operating model.
On the golf ball of the slide you can see the continued growth of implementing provider and valuable at the end of lives like the work.
The only 1.3 per cent of increase in practice collections when compared for the second quarter a year ago, we all of.
We recognize that last day of second quarter was impacted by the onset of Covid.
Our second quarter of same store visits, whereas the barwood are higher than the historical baseline pre COVID-19 across all our markets.
Margin increased 8.
The 7% from Q2 of last year.
There's a lot of key financial metric cash.
For the margin is essentially the gross profit generated by Premier health after the cost of care delivery, which includes provider of compensation.
The <unk> share of any shared savings and value based contracts and the cost of build maintain and operate the guys centers are.
So if the broke out of margin at a faster rate than for apples collections, and then drive operating leverage all the way down our P&L.
Shawn noted our business model showed significant operating leverage this quarter driving adjusted EBITDA growth of 43% from the second quarter of a year ago, adjusted EBITDA margin as a percentage of the scatter margin expanded 110 basis points year over year as we scaled our sale of the marketing platform development and corporate G&A costs.
And with positive free cash flow and the net cash position of 2 <unk>.
Hundred and $66 million, we have sufficient capital and liquidity to invest in our business and of course of our various growth initiatives.
The slide highlights the day performance with breakfast collections up almost 17% EBITDA.
The margin, increasing approximately 21 per cent and adjusted EBITDA growing 42% over the first half of 2020.
Given the first half performance operational execution and the less momentum.
I'm confident in our outlook for the remainder of 2021.
I expect it could be the lives lack of collection GAAP revenue and margin from.
Contribution and adjusted EBITDA. So all of the near the high end of our guidance ranges with implemented provider is expected to be at the mid to high end of our guidance range.
As a reminder, this guidance does not include any potential new markets in 2020 of them or any of them back from previous Guy partners, which is expected to begin January 1st of 2022.
Privy of health continues to be well positioned to monetize the platform and drive growth for our 5 core strategies.
These are the same store growth and cleaning attribution and risk based contracts, adding of providers in existing markets opening new markets and the thing that M&A opportunities to expand our platform.
In summary, our leadership team has purposely built forget health to be of next generation position. The organization that engages the web and organize the physicians into large scale of medical groups building density in each state.
Consolidated position of autonomy, while preserving the current ownership structure, we spoke of.
The all providers and all of patients across all of the reimbursement models and we are directly aligned with our provider of financial success.
We will continue to leverage off of the actually found expansion strategy and take a portfolio approach. The long term top line growth and profitable growth with that operator, we're now ready for the first question.
Yeah.
Yeah.
Yeah.
That's sort of a ready sound for the question. Thank you.
Okay I'm sorry.
A reminder to ask the question you will need the press star 1 on your telephone to ignore it.
Question. Please press the pound key.
Please limit your questions. The 1 question and 1 follow up from Michigan for participants. Thank you lease them out of compile the Q&A roster.
Our first question comes from the line of Robert Ryan Daniels from William Blair.
Go ahead, asking the question.
Hey, guys congrats on the quarter. Thanks for taking the questions in regards to care partners can you offer a little bit more detail around the genesis of that and I'm curious if it's if it's really just for value based care and no fee for service will you be doing RCM and kind of how deep will you go within these groups would be my first question and then second.
Is this the response to maybe moving into the hospital and group market.
What are the perhaps don't want to switch over to the platform that's already inpatient like epic core hesitation in the market for doctors to switch platforms, such as it opens up that opportunity more thanks guys.
Thanks, Ryan this is Sean.
If you wish.
Does.
The to the IPO and otherwise we talked a lot about the quadrants and our ability to kind of kind of pivot and move into the the various quadrants of truly we felt its ability to expand for you know pretty of care partners with physicians.
Like I mentioned is the lighter version there will be.
So services specifically related as you noted the value based care programs.
It does not.
For the Rev cycle on the fee for service and those type of services, but it specifically.
The organizing positions not.
The form of our governance model of form of our tech stack chips that kind of lighter version and then it's just the specifically related to different value based arrangements, but they could range from commercial to Medicare advantage.
Yeah.
Great. Thank you and then is that of response to trying to work with hospital groups or just doctor groups.
They don't want to switch over platforms or move into the kind of broader offering and kind of what was the genesis of of this outside of market expansion given how larger current market is.
Sorry, sorry to the answer that question.
That's not necessarily of the health system in the.
Physicians are out there and there is no doubt some kind of the health systems that you know maybe the invested billions of dollars of epic.
But you'll kind of.
Most of them I don't want to move off the platform, but organize the independence into a different kind of scenario, but its really just not aimed at independent shneur.
Health systems independently of the Genesis is really about our ability to expand into existing of new markets reach a reach a provider that kind.
Kind of what it wants to participate with Serbia in certain of our value based arrangement, but not necessarily ready to make the full switch over into the the deep model, but it's our ability to kind of ex.
Expand and get the middle of these physicians do you think about we think about our ability to kind of do commercial but for the Medicare advantage market is in that market and ready. This is our ability to reach for binders that are not ready to kind of move to the full.
The C PMG medical group, but have a relationship and build that way.
Yeah.
And our next question is from Josh Raskin from Nephron Research. Your line is open.
Great. Thanks.
So first question just we've heard a lot this quarter about utilization trends picking up sooner than expected, let's say on the non COVID-19 utilization I think payers seeing some pressure providers, saying a little bit of upside can you just remind us how this impacts privy at both the fee for service and value based sides of the business.
Josh Thank you for the question.
It's net.
There's no doubt, we're all seeing in Canada and boxes of Covid I think it really speaks to the.
You guys all sort of just wanted to cover the hospital.
You know the hospital public hospital carriers and you obviously cover of the MSA.
See you I'm, sorry carriers, you're seeing some of these utilization rates I really I mean, we talked about the diversification of M. <unk> in the the models for all went from commercial to Medicare advantage and it really I mean, it plays to our kind of the our ability to for physicians and health systems that need the transition.
We all know that you know all of you.
We we respect and really appreciate you know kind of moving the.
The risk Medicare advantage at the right time, but it's at the right time and and as your your provider groups are.
We're ready to go and as you can influence that geography at scale. So again, it's the diversification of what we offer these.
The east provider groups and.
And the ability to do deep for service all the way to global cap when it when it makes sense again, it's just I think it's some of the flexibility of diversification of our model really is of differentiation and I think it's going to be for decades, I don't think we're all going to see a flip the go global cap in the.
The immediately and when we do we're ready to move that market as necessary or if you want to add anything of that.
Yeah. The only couple of points as of 1 is you also I think we are seeing.
Our model is a little bit of an all weather.
Pro forma <unk>.
Last year, we did pretty well utilization was down this year, we're doing pretty well the utilization is up and so you can see is performing well in both scenarios across across the cycle and the more importantly, I think.
Not only are we performing really well on the top line.
Growing the business, adding lives and go on practice of collections, but also.
<unk> and MAA for <unk> GAAP model, you're seeing a negative impact down the P&L and we're not the 1 thing that with our diversified book of business.
Got you that's Super helpful. And then if I could just sneak 1 more in on the implemented provider guidance, you're moving to the upper half.
Of the previous guidance range of up so obviously I know directionally of where that's gone, but can you speak of the provider pipeline and as you move towards 22, and just remind us of any factors that impact the seasonality of when physicians move out for I don't know if there is.
Sort of the MAA cycle or tax implications of if theres anything that kind of gets physicians moving more at 1 time than the other during the year.
Park for him.
I can think of that.
Look we sell of pretty consistently throughout the year.
No real seasonal impact the selling as many of you.
State of previously and as you know it takes about 5 to 6 months to implement the providers on the platform and the <unk>.
For the medical group model in it.
Mainly related to.
Of the providers being credential and our single Doc Saidi and we work with all of the players. So obviously sitting at the midpoint of the year.
The pipeline now through the end of the year for implementation is all in the contract. So we don't have to find these provide us.
Body that we are selling now.
We'll likely get implemented in 2022.
It gives us a lot of forward visibility. So I think we're doing pretty well in terms of adding new providers consistent consistently for the first half and we see the momentum continuing into the second half and as we do that that provides a lot of visibility going into 2022, but the implicitly stating our guidance from mid to high end.
All of these are on the contract as we speak today.
Perfect. Thanks.
Thanks, Josh.
Your next question is from Thailand, and the same with credit Suisse.
On the silicon.
Yeah. Thank you and good morning, everyone I wanted to go back to previous of care partners.
Sure understand the economics, there. So do you expect the economics of savings you'll generate a part of provide us the wide joining the thing that caught the people that care partners model versus the traditional model is significantly different and how does the pitch to these potential providers going to change with the launch of this of our baby care partners and the <unk>.
Last question of that should we think of this as a as a module, which is competing directly with models like Avalon and added it just maybe help us close some of that.
The part do you want to speak to that.
Kind of addition to the comments I made on the first question.
Yeah, and the Linda Thanks for the question Yeah.
So I think our economics will be pretty much the same.
As we have today on our value based book.
Obviously, the key metric for this line of business would be attributed lives number 1 number 2 when we anticipate participating in all kinds of value based programs, whether it's commercial Medicare share savings and then Medicare advantage.
Similar to what we do today.
Then I think over time, our hope is a lot of these providers were joined the full for the medical group model and wouldn't be able to provide for.
For the value add in terms of the fee for service book has enjoyed the single <unk>. So no change in economics, obviously each of these programs when the for both by market and by state of evolution.
And then the of final question, Yes, I think look we love and given the model we would end up competing with the couple of names that you that you mentioned.
Okay, and then my quick follow up I want to better understand your implied second half guidance for GAAP revenue of the Doctor's collection. It seems your guidance does imply a sequential step up in the practice collection for the first half to second half of around 6%, but flat from Florida, GAAP, but help us investing to understand the talk buses the.
Why not the growth in GAAP revenue.
Yeah.
Yeah, I think what point so of course, there's obviously as you know GAAP revenue reflects collections in the states.
They don't have corporate practice laws and that we that we owned the backside, it's restricted to a couple of for geographies not all of them. So as we grow faster in some of these other states.
That's the new have corporate practice laws and we don't on the backside.
That's the difference.
Number 2 is look we were kind of really good about the first half performance.
Still the 6 months ago.
And I think of the momentum continues without the opportunity to update you in 3 months here. So we're hoping that that trend continues.
Great. Thanks for that day.
Thanks, Sheila and the effect.
We have the question from weaker growth with Canaccord Genuity. Your line is open.
Yeah. Thanks, just on the carrier partners side.
I'm just curious.
They're not using the full tech stack, how do you feel in terms of your ability to drive the better outcomes from the at risk programs just.
Obviously with your tech stack that was 1 of the value proposition from being able to successfully.
Participate in these programs. So how are you thinking about that.
It's Richard I'll start and I'm sure part of demand.
A lot of our management team said decades running models similar to Purdue care partners.
Like our ability to pivot.
<unk> mentioned that the.
Lastly, during the IPO and even in the first quarter. So we've been kind of building. This I guess for muscle memory and strength in.
It's no doubt.
Yeah.
Our what we know and what we learned from running a single stack and kind of the I guess, what we're going to use from those learnings to kind of the kind of move into this adjacent model unusual strength, along with our with our governance model of care.
Management programs that we use.
The things that we know from running the.
The deeper model, we think we kind of the disarm provides us a great opportunity to the kind of get to know providers kind of meet them, where they are on their journey kind of steps before pretty of carrier partners and expense like we mentioned expand our current.
Within our current from existing footprint as well as open new markets for the models such as this so.
Excited about the opportunity.
When I have something of that.
Yeah, 2 quick points with the back for the questions. So of course, there's obviously with the interoperability of gaining steam and a lot of innovation on the on the technology stack side, you know a lot of the legacy EMR platform, they're opening up and I think that gives us an opportunity to.
Extract the right data perform analytics and support of these providers in the southern value based programs and that's been done for.
For many years now in ACO entities of Ipas et cetera that the participates joined to the just access from value based contracts.
Part of the equation would be a.
A version of our MSL services, where we can focus on things like risk adjustment of quality measures bought engagement reporting then obviously total cost of care management I think the 2 go hand in hand to make sure you've got and given the success, which is which is far greater than 1 of these providers are doing today and then all the time of like us.
Members of the offensive strategy it allows us to interact and get the no. Some of these providers and a lighter setting in a quicker setting.
And then overtime move them into the bulk of the of medical group model, where we have a lot the offer from a fee for service perspective.
Okay and as a follow up is there any update on the anthem your relationship with anthem. The came about at the time of the IPO.
Yeah rich the.
We continue to kind of work with anthem and.
In our existing markets, we've done that relationship continues to improve even more so and we brought them. We're talking obviously from you know kind of new markets that we participate with them and organizing.
Pin of DOCSIS is even even in the other models that were running so well that I think it's kind of early stages. We're maturing the relationship we like the potential of where that could go and it's you know as you know, it's not exclusive or we continue to talk to other players and.
Kind of doing some very similar things.
We're excited about it.
And kind of thinking.
Thank you.
Again, if you like the last session fresh SAR 10 of the number 1 understanding of her when she fat. That's star then the number 1 on your telephone keypad.
And you have a question from Sean Raymond from Piper Sandler Your line is open.
Hi, Thank you very much good morning, I'm still excuse me stepped on per.
The of care partners.
I don't really understand.
The economics and how this is going to flow through the P&L.
But the kind of hit that again.
And then also.
Yes.
Yeah.
Does the new pitch the that the the single tax idea of the single pack.
The stack was such an important feature of trivia and this seems to dilute that a little bit so I don't really understand the pivot.
Part 2 and touched on the.
The P&L impact.
Yeah, Hey, Sean Thanks for the question so the P&L. Thanks.
It wouldn't work no differently than the Investor day.
We'll participate in various value based programs.
And have shared savings.
Or kind of management fees.
The accrual true ups.
Those programs, depending on the nature of the program. So they'll have practice of collections and we will take.
Take a percentage of that.
And that will flow through kind of margin as it does for our existing value based book, So so any kind of like.
<unk> had a similar at a similar percentage of collections.
That's correct similar or higher.
Yeah.
And I don't know.
Got it.
Okay I just out.
I understand why.
Billing under the single tax IV was so important for the rest of the of the business, but it's not important here.
Yeah, So Sean.
The field ipas.
I ends of existed for a long time, but that's the brands and providers are able to access.
Very selective adding of based programs, whether it's a commercial MSP or Medicare advantage without.
The giving up the backside and the bill on the fee for service book for their own tax items, but but access from select value based programs for it.
2 of these different forms of and I think this of the strategy due to attack that market.
It allows us to obviously, even from an M&A perspective go out and acquire select Acos are ibs and other such structures and an increase of attributed lives at a much faster rate and then have a relationship with these providers and then overtime move them for the single tax I D.
There's no doubt the <unk>.
Single backside the model.
And the integrated 5 component that we highlighted we still tangled the preferred model, we still tankers.
It's a very deep moat and very hard to execute on that the I don't think that's easy to replicate and we don't see anybody else doing it.
Think of it gives us an opportunity to have a relationship with providers.
Sooner and faster and in existing but also new markets and then all the time and moved them into the program of medical group model.
Yeah.
Okay. Thank you.
Yeah.
Thanks, Sean.
[noise] any kind of a fresh for them from Lisa Gill with Jpmorgan Silvana something.
Alright, Thanks for your Max and I, just wanted to follow up to that last comment it's really understand the competitive landscape right now so and I I understand wanting to offer of kind of a lighter model is it the kind of doctors are becoming more apprehensive is it because you know providers have more options in the marketplace day, you want to have.
A couple of different options to be able to capture that position.
And any thoughts on what youre seeing in the competitive landscape right now would be helpful.
Actually for the show.
You know, it's a it's like the spark mentioned our preferred model all of it.
The speed of the pretty.
The medical group for all the right you know the all the things we've talked about.
And its very sticky its very.
It's just you know it performs well, but at the same time, we want them.
We want to.
I'll be able to kind of.
Touch base with providers in a way when the.
That they want to connect the end up privy of but they're not ready to make that make that jump in it's just it's a natural expansion for us we've been working on it for some time.
And it's not necessarily of reaction to the market places as much as we think that you know.
Just moving into these other quadrants and Adjacencies just wanted to kind of the continued to expand our Tam and the.
Its provider should get to know Privy of and we believe they're going to want access to all of the contracts and all of the services, but this is just the way to expand that kind of first tier base and.
Which interest.
The way as we've mentioned that we can expand our same store footprint as well as grow into new markets didn't bring the preview of medical group then.
Thank you.
Okay.
Yeah.
There are no further question of this time I would now like the turn the conference back from the Robert Moshe.
Not surprisingly they came back in the Sean do you of any closing remark.
No just 1 of them can thank you for dialing in and thanks for listening we're excited about the future. Thank you for continuing to build your relationship with US in the you know for the continued to execute on the.
1 of the things we discussed today and we're excited about the next couple of quarters and we'll talk to you soon thanks a lot.
Yeah.
This concludes today's conference call thinking of for the Chinese you may now disconnect.
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Good morning, My name is from external that will be your conference operator today at this time I would like to welcome everyone to the free.
You get health second quarter conference call.
All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. As a reminder, this conference is being recorded.
And now I would like to turn the call, but the Mr. Robert Richard SPV.
And corporate Communications. Please go ahead Sir.
Thank you Sarah and good morning, joining me on today's call are showing more of our Chief Executive Officer Park, The road truck, President and Chief operating Officer, and David Mountcastle, Our Chief Financial Officer. This call is being webcast and can be accessed from the Investor Relations section of pretty of health Dot com.
Yeah.
Today's press release, highlighting our financial and operating performance as well as the slide presentation accompanying our formal remarks are posted on our IR website pages.
The only Sean and parts of opening comments, we'll open the line for questions. We ask you. Please limit yourself to 1 question and 1 follow up so we can get through the full queue in a time the fashion.
Financial results reported today and in the press release are preliminary and are not final until our form 10-Q for the second quarter ended June 32021, as filed with the Securities and Exchange Commission.
Some of the statements we will make today are forward looking in nature based on our current expectations and our view of our business as of August 19, 2021, such statements, including those related to our future financial and operating performance and future business plans and objectives are subject to risks and uncertainties that may cause actual results to differ materially.
As a result these statements should be considered in conjunction with the cautionary statements in today's press release and the risk factors described in our company's most recent SEC filings.
Finally, we may refer to certain non-GAAP financial measures on the call.
Reconciliations of these measures to comparable GAAP measures are included in our press release and the accompanying slide presentation posted on our website now I'll turn the call over to Sean.
Thank you Robert good morning, everyone.
I'll provide a brief performance summary, and an update on our continued business momentum and success.
The last part of all for a detailed review of our financial and operating performance of the outlook for the year before we take your questions.
The purview of health partnership model continues to gain traction and greater awareness with our providers. This is underscored by our growth in both implemented providers and attributed lives across a number of value based reimbursement programs at year end 2020.
This has helped propel our strong financial.
Financial performance for the second quarter, the practice collections of accretion of 33% to over $367 million and our care margin increased from $33.7 per cent when compared with the second quarter of last year. We also continue to drive operating leverage through our platform with the adjusted.
EBITDA growing 43% in the quarter the strong year to date performance across all our service lines of positions, you're Privy of health very well for the remainder of the year.
This is especially true given our diversified patient provider and payer mix against the backdrop of current utilization trends, we see it for all partner practices.
Underpinning our top line growth as the continued expansion of provider partners in both the existing markets and as we enter new markets. We expect rfps for value based programs to grow faster than fee for service dollars of as we continue to increase the number of patient lives attributed to at risk reimbursement models and as more of these lives moving from partial to the.
The risk arrangements over the coming quarters, 1 key update.
We have recently launched pretty of care partners. It's lighter version of our traditional model also partners with providers meeting them, where they are on their value based journey and age and transitioning their practices to specific value based programs. This aligns perfectly with our capital efficient operating structure and primary potential growth to drive significant <unk>.
Operating leverage and profit margin expansion, which we expect to continue as we execute of multiple growth opportunities.
As I noted pretty good care partners as our new flexible model the expands our current our opportunity to partner with the writers as you can see on this slide the primary difference between our traditional model and the lighter version of that Theres no need for provider groups of join our single tax items Medical group.
The change electronic medical record vendors and yet they can still participate in various high value of arrangements providers joining preview of care partners will be supported by the lighter version of our tech stack advanced analytics to enhance their existing EHR system.
<unk>, let governance structure and select and the so service to help them succeed in value based care.
Our focus with pretty of care partnerships to expand the premier relationship to new physicians and grow value based attributed lives in both existing and new markets. We expect the program will officially start on January 1.2022, so we intend to provide additional details over the next few quarters.
We continue to be optimistic about the significant opportunity as we expand our risk sugar range, which across many value based reimbursement models from taking a very thoughtful business approach of a shocker.
The health already participated in more than 70 at risk value based care programs and payer contracts across commercial Medicare Medicare advantage and Medicaid and the fact of our 739000 attributed lives today more than 140000 are in the.
The Medicare shared savings and the Maryland primary care programs in which we take both upside and downside risk for.
Currently our financial interest are closely aligned with our purview of providers and that we jointly share and both of the financial benefit and risks associated with these value based care programs. In addition, our Medicare advantage lives increased 13% sequentially..2 of 100 in 2000 at the end of the second quarter, we're already at scale.
And are executing on a deliberate long term plan to enable our providers to transition profitably to increase risk and value based programs.
We'll continue to grow attributed lives and intend to move more of those lives in 2 downside in full risk arrangements overtime.
An important point is our current top waters reflects only fee for service collections care management piece and shared shavings under our current partial risk contracts, we do not recognize the full per member per month premium for our Medicare advantage lives of pretty health leadership team has decades of experience in managing and underwriting risk and we certainly expect Jimmy.
More of these attributed lives from partial to full risk arrangements now I'll ask mark to provide additional detail on our second quarter performance and outlook for the remainder of 2021 Park.
Thanks, Sean.
We delivered a strong quarter with double digit organic top line growth, which we expect to continue for the remainder of 2021 and beyond given the high for what visibility of our operating model.
On the copper all of the slide you can see the continued growth of implementing provider and value based off the data lives like day 1.
The only 1.3 per cent of increase in practice of collections line.
For the second quarter a year ago.
We recognize that last day of second quarter was impacted by the onset of Covid.
The air our second quarter same store visits, whereas the bar web are higher than the historical baseline green COVID-19 across all of all markets.
Our catalogs and increased 7% from Q2 of last year.
The financial metric cataloging of is essentially the gross profit generated by Privy of health. After the cost of care delivery, which includes provider of compensation I'll provide a share of any <unk> savings and value based contracts and the cost of build maintain and operate the guys centers our goal with the broker margin at a faster rate than for apples of collections.
And then drive operating leverage all the way down our P&L.
As Sean noted our business model showed significant operating leverage this quarter driving adjusted EBITDA growth of 43% from the second quarter of a year ago.
For the EBITDA margin as a percentage of kind of margin expanded 110 basis points year over year as we scale of our sales and marketing platform development and corporate G&A costs and with positive free cash flow and the net cash position of $266 million, we have sufficient capital and liquidity the investing our business per se.
Of our various growth initiatives.
The slide highlights.
The day performance.
But the collections up almost 17% cash.
Our margin increased from approximately 21 per cent and adjusted EBITDA growing 42% over the first half of 2020.
Given the first half performance operational execution and the growth momentum we remain confident in our outlook for the remainder of quantities of any of them. We now expect attribute of lives lack of collection GAAP revenue and margin.
The contribution and adjusted EBITDA. So all of the near the high end of all the guidance ranges with implement the provider is expected to be at the mid to high end of our guidance range.
Under this guidance does not include any potential new markets in 2021 or any of them back from <unk> partners, which is expected at the beginning January 1st of 2022.
Privy of health continues to be well positioned to monetize the platform and driving growth for our 5 core strategies.
These are the same store growth, increasing attribution and risk based contracts, adding of providers in existing markets opening new markets and looking at M&A opportunities to expand our platform.
In summary, our leadership team has purposely belgravia health to be of next generation position. The organization that engages the web and organize the physicians and the large scale of medical groups building density in each state.
Consolidated position of autonomy, while preserving the current ownership structure.
The all providers and all of patients across all of the reimbursement models and we are directly aligned with our provider of financial success.
We will continue the leverage off of nationally.
Expansion strategy and take a pothole approach the long term top line growth and profitable growth with that operator, we're now ready for the first question.
Okay.
Okay.
Yes.
That's sort of already sound for the question. Thank you.
Okay. As a reminder to ask the question you will need the press star 1 on your telephone to enjoy your question. Please press the pound key.
Your question for 1 question and 1 follow up the restaurant per participant. Thank you, let me spend I will compile the Q&A roster.
Okay.
For our first question comes from the line of for all of them.
Oh, Ryan Daniels from William Blair.
Please go ahead ask your question.
Yeah, Hey, guys. Congrats on the quarter. Thanks for taking the questions in regards to care partners can you offer a little bit more detail around the genesis of that and I'm curious if it's if it's really just for value based care and no fee for service will you be doing RCM kind of how.
The deep where you go within these groups would be my first question and then second is this the response to maybe moving into the hospital on group market.
What are the perhaps don't want to switch over to the platform that's already inpatient like epic or hesitation in the market for doctors to switch platforms, such as it opens up that opportunity Mark thanks, guys.
Yeah.
Thanks, Ryan this is Sean.
If you have them.
You guys over.
Over the kind of a degree of the IPO and otherwise we talked a lot about you know the quadrants of our ability to kind of kind of pivot and move into the the various quadrants of Chile. We felt we are its ability to expand when all for pretty of care partners with physicians.
Like I mentioned, it's the lighter version there will be.
And then so services specifically related as you noted the value based care programs.
In the not be offered Rev cycle on the fee for service and those type of services, but it's specifically the org.
<unk> position is not.
The form of our governance model of form of our tech side chip stacking of lighter version and then it's just the specifically related to different value based arrangements, but they could range from commercial to Medicare advantage.
Yeah.
Great. Thank you and then is that of response to trying to work with hospital groups or just doctor groups.
They don't want to switch over platforms or move into the kind of broader offering and kind of what was the genesis of this outside of market expansion given how larger current market is.
Sorry, sorry, I didn't answer that question.
That's not necessarily of the health system in the.
Physicians out there and there is no doubt some kind of a health systems that maybe the invested billions of dollars in epic.
For yoga.
Most of them I don't want to move off the platform, but organize the independence into a different kind.
Scenario, but its really just not aimed at independent shneur.
Health systems independently of the Genesis is really about our ability to expand into existing of new markets reach a reach a provider that.
Kind of what it wants to participate with Serbia in certain of our value based arrangements, but not necessarily ready to make the full switch over into the the deep model, but it's our ability to kind of expand and get the none of these physicians do you think about we think about our ability to kind of do commercial before of the Medicare advantage market as a net marketing.
Ready this is our ability to reach for binders that are not ready to kind of move to the full.
See you on the PMG medical group, but us having relationship and build that way.
Okay.
Yeah.
Your next question is from Josh Raskin from that for me true. Your line is open.
Great. Thanks.
So first question just we've heard a lot this quarter about utilization trends picking up sooner than expected, let's say on the non current utilization I think payers seeing some pressure providers, saying a little bit of upside can you just remind us how this impacts privy at both the fee for service and value based sides of the business.
Josh Thank you for the question.
It's.
Net it's a there's no doubt we're all seeing in Canada and boxes of Covid I think it really speaks to.
You guys all sort of just wanted to.
Some of the hospital.
You know the hospital public hospital carriers.
Obviously cover of the M S O N.
And for you I'm, sorry carriers, you're seeing kind of these utilization rates I really I mean, we talked about the diversification of pretty high in the the models for all went from commercial to Medicare advantage and it really I mean, it plays to our you know kind of the our ability to for physicians and health systems that need the transition.
We all know that you know all of the deal we.
We we respect and really appreciate kind of moving the ball risk Medicare advantage at the right time, but it's at the right time and and as your your provider groups are already to go and as you can influence that geography at scale. So again, it's the diversification of what we offer.
The east provider groups and the ability to do the.
For service all the way to global cap when it when it makes sense again, it's just I think it's end of the flexibility of diversification of our model really is of differentiation and I think it's going to be for decades, I don't think we're all going to see a flip the go global cap in the end.
The immediately and when we do we're ready to move that market as necessary or do you want to add anything of that.
Yeah, you know the only a couple of points..1 is you also I think we are seeing.
You know our model is a little bit of an all weather.
Pro forma last year, we did pretty well utilization was down this year, we're doing pretty well.
Elevation is up and so you can see is performing well in both scenarios across across the cycle and then more importantly, I think not.
Not only are we performing really well on the top line.
Growing the business, adding lives and gone back of collections, but also you're saying you're seeing outperformance on the down the P&L and GAAP margin from.
Contribution in EBITDA. So I think the key is and that's what I think the there's a clear differentiation, where an MAA for <unk> GAAP model.
The negative impact down the P&L and we're not the ones nothing that with our diversified book of business.
Got you that's Super helpful. And then if I could just sneak 1 more in on the implemented provider guidance, you're moving to the upper half of them.
Of the previous guidance range up so obviously I know directionally of where that's gone, but can you speak of the provider pipeline as we move towards 22, and just remind us of any factors that impact the seasonality of when physicians move bulk or I don't know if there is.
Sort of the MAA cycle or tax implications of if theres anything that kind of gets physicians moving more at 1 time than the other during the year.
Park for him.
Yeah, I can take that.
Look we sell of pretty consistently throughout the year.
No real seasonal impact the selling.
Let me state of previously and as you know it takes about 5 to 6 months to implement of the providers on the platform and the phone could be of medical group model in it.
Mainly related to the.
The providers being credential and our single backs I D and we work with all of the pairs. So obviously setting of the midpoint of the year.
The pipeline now through the end of the year for implementation is all on the contract. So we don't have to find these providers.
Anybody that we are selling now.
The likely get implemented in 2022.
It gives us a lot of forward visibility. So I think we're doing pretty well in terms of adding new providers consistent consistently for the first half and we see the momentum continuing into the second half and as we do that that provides a lot of visibility going into 2020 day, but the implicitly stating our guidance for make the high end.
All of these are on the contract as we speak today.
Perfect. Thanks.
Thanks, Josh.
Your next question is from jail and her team credit of the Chris Your line is open.
Okay. Thank you and good morning, everyone I wanted to go back to previous care partners just to make sure I understand the economics. There. So do you expect the economics. Some savings you generate for provide us the wide joining things of that car.
Partners model, what's the traditional model is significantly different and how does the pitch to these potential providers going to change with the launch of this Oh, maybe I kind of partners and the last question is that the should we think of this as a oh the model, which is competing directly with models like Avalon and added it just maybe help us close some of them.
The part you want to speak to that.
Kind of addition to the comments I made on the first question.
Yeah, and the Lando thanks for the question.
So I think our economics will be pretty much the same.
As we have today on our value based book you know.
Obviously, the key metric for this line of business wouldn't be attributed lives of 1 number 2 when we anticipate participating in all kinds of value based programs, whether it's commercial Medicare shared savings and then Medicare advantage.
Similar to what we do today.
Then I think over time, our hope is a lot of these providers will join the full for the medical group model and we'll be able to provide for the value add in terms of the fee for service book hasn't don't want the single <unk>.
No change in economics, obviously each of these programs when day for both by market and by the state of evolution.
And then the final question, Yes, I think look we've given the model we wouldn't end up competing with the couple of names that you that you mentioned.
Okay, and then my quick follow up I want to better understand your implied second half guidance for GAAP revenue of the Doctor's collection. It seems your guidance does imply a sequential step up in practice collection for the first half to second half of around 6%, but flat.
Flat from Florida, GAAP revenue help us understand the talk buses the why why not the growth in GAAP revenue.
Yes, that's true.
Yeah, I think what Bryan so of course as honestly as you know GAAP revenue reflects the collections in the states the matter.
That don't have corporate practice laws and that we that we owned the backside, it's restricted to a couple of other geographies not all of them. So as we grow faster in some of these other state of the new.
Corporate practice laws and we don't on the backside.
The key difference.
There was look line.
We feel really good about the first half performance.
The 6 months ago, and and I think of the momentum of continues without the opportunity to update you in 3 months here. So we're hoping that the that trend continues.
Great. Thanks, a lot of that.
Thanks, you learned of fast.
We have a question from weaker growth with Canaccord Genuity. Your line is open.
Yeah. Thanks, just on the carrier partners side.
I'm just curious with the.
Not even some of the full tech stack, how do you feel in terms of your ability to drive the better outcomes in the at risk programs just.
Obviously with your tech stack that was 1 of the value proposition from being able to successfully.
Participating in these programs. So how are you thinking about that.
It's Richard I'll start and I'm sure part of demand.
A lot of our management team said decades running models similar to perjury of care partners.
Yeah, all of that our ability to pivot we've kind of mentioned that over the last.
During the IPO and even in the first quarter. So we've been kind of building. This I guess for muscle memory strength in.
It's no doubt.
Yeah.
Our what we know and what we learned from running a single stack.
Kind of I guess, what we're going to use from those learnings to kind of you know kind of move into this adjacent model unusual strength, along with our with our governance model of care management programs that we use.
The things that we know from running.
The deeper model, we think we kind of the disarm provides us a great opportunity to the kind of get to know providers kind of meet them, where they are on their journey kind of steps before pretty of carrier partners in exactly like we mentioned expand our current.
Within our current zone existing.
The existing footprint as well as open new markets for the models such as this so.
We're excited about the opportunity.
When I have something of that.
Yeah, 2 quick points with the thanks for the question. So of course, there's obviously with the interoperability of gaining steam and a lot of innovation on the on the technology stack side, you know a lot of the legacy EMR platform, they're opening up and I think that gives us an opportunity to.
Extract the right data perform analytics and support of these providers and southern value based programs and that's been done for.
For many years now in an ACO entities of ipas et cetera that the bullets of base joined to the just access from value based contracts.
Thank the part of the equation it would be a version of our MSL services.
You know, where we will focus on things like with the risk adjustment already measure of bought engagement reporting then obviously the total cost of care management I think the 2 go hand in hand to make sure you've got and given the success.
Which is far greater than 1 of these providers are doing today.
All of the time like I said 1 of this is the offensive strategy. It allows us to interact and get the no. Some of these providers and of lighter setting in a quicker setting.
And then overtime move them and do the bulk of the of medical group model, where we have a lot the offer from a fee for service perspective.
Okay and as of for.
Follow up is there any update on anthem you were.
The relationship with anthem the came about at the time of the IPO.
Yeah rich the.
We continue to kind of work with anthem and.
In our existing markets, we've done that relationship continues to improve even more so and rebound. We're talking obviously, Scott you know kind of new markets and how we participate with them and organizing the independent DOCSIS is even you know even in the other models that were running so well that I think it's kind of early stages.
The maturing the relationship we like the potential of where that could go and it's you know as you know, it's not exclusive or we continue to talk to other players.
Kind of doing some very similar things.
We're excited about it.
Okay. Thank you.
Thank you.
Again, if you like the last question fresh SAR 10 of the number 1 of your tariff when she fast that's star then the number 1 on your telephone keypad.
And we have a question from Sean Raymond from Piper Sandler Your line is open.
Hi, Thank you very much good morning, I'm still excuse me stuck on a per.
For the of care partners.
I don't really understand the.
The economics and how this is going to flow through the P&L.
Could the kind of hit that again.
And then also I guess.
Does the you pitched the that the the single tax idea of the single pack.
Text stack was such an important feature of Privy of and this seems to dilute that a little bit so I don't really understand the pivot.
Part of 2.1 touched on the.
Of the P&L impact.
Yeah, Hi, Sean Thanks for the question so the P&L.
It wouldn't work no differently than the Investor day.
We participate in various value based programs.
And I have shared savings.
Or kind of management fees.
The accrual for 2 of those programs depending on the nature of the program. So they'll have practice of collections and we will take a percentage of that.
And that'll flow through care margin as industrial other existing value based book, so so any kind of ex out.
Similarly at a similar percentage of collections.
That's correct similar or higher.
Yeah.
And I don't know.
Okay I guess.
I don't understand why you know.
The new single tax I D was so important for the rest of the of the business, but it is not important here.
Yeah, So Sean.
Acos Ipas C. I ends of existed for a long time, but that's the brands and providers are able to access very selective value based programs, whether it's the Marshall M FSP or Medicare advantage without.
Getting out of the backside, Ian and the Bill on the fee for service book for their own <unk>.
But what access from select value based programs.
For these sort of these different forms.
And I think this of the strategy due to attack that market.
Allows us to obviously, even from an M&A perspective go out and an acquirer of select Acos are ibs and other such structure than an increase that could be the lives at a much faster rate and then have a relationship with these providers and then overtime move them for the singles ex Heidi.
There's no doubt the.
The single backside model.
In the integrated 5 component that we highlighted we still tangled up of phone model the still tankers.
It's a very deep moat and very hard to execute on that the.
Think of it's easy to replicate and we don't see anybody else doing it I think there's it gives us an opportunity to have a relationship with providers sooner and faster and in existing but also in new markets and then all the time of them into the program of medical group model.
Okay.
Okay. Thank you.
Thanks, Sean.
And then kind of a freshman from Lisa Gill from Jpmorgan. Your line is open.
Alright, thanks very much.
Just wanted to follow up to that last comment it's really understand the competitive landscape right now so I understand wanting to offer of kind of a lighter model is it kind of doctors are becoming more apprehensive is it because you know providers have more options in the marketplace day, you want to have a couple of different options to be able to cash.
For that position.
And any thoughts on what you're seeing in the competitive landscape right now would be helpful.
Explanations shown the.
It's it's you know like the spark mentioned our preferred model.
Peter the proof.
The medical group.
For all the right you know, they're all of the things we've talked about.
And its very sticky its very.
It's just.
It performs well, but at the same 10 of them we want them.
So we want to be able to kind of.
Touch base with providers in a way win.
That they want to connect the end up privy of but they're not ready to make that make that jump in it's just it's a natural expansion for us we've been working on it for some time.
It's not necessarily of reaction to the market places as much as we think that you know.
Moving into these other quadrants and Adjacencies just wanted to kind of the continued to expand our Tam and the providers.
Provider should get to know Privy of.
And we believe they're going to want access to all of the contracts all of the services, but this is just the way to expand that kind of first tier base and.
It which of them.
It's just the way as we've mentioned that we can expand our same store footprint as well as grow into new markets and didn't bring the purview of medical group in.
Okay.
Thank you.
Yes.
Yeah.
There are no further question of this time I would now like to turn the conference back from the Robert Moshe.
And it's surprising that you came back in the Sean do you of any closing remark.
No just 1 of them. Thank you for dialing in and thanks for listening we're excited about the future. Thank you for continuing to build your relationship with us in the you.
You know for.
The continued to execute on the.
1 of the things we discussed today and we're excited about the next couple of quarters and talk to you soon thanks a lot.
Yeah.
This concludes today's conference call thing of for Chinese and you may now disconnect.