Q4 2021 Privia Health Group Inc Earnings Call
Good day and thank you for standing by welcome to the Premier Health fourth quarter Conference call.
At this time all participant lines are in listen only mode.
After the presentation, there will be a question and answer session.
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Please be advised today's conference maybe recorded.
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I'd now like to hand, the conference over to your host today, Robert Barcia Senior Vice President Investor and corporate Communications. Please go ahead.
Thank you Liz and good morning, everyone. Joining me today are Sean Morris, Our Chief Executive Officer, Parker Road, Trepp, 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 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. Following our prepared comments, we will open the line for questions. We ask you. Please limit yourself to one question and one 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-K for the year ended.
The year ended December 31, 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 March 23, 2022, such statements, including those related to our future financial and operating performance and future business plans and objectives are subject to risks.
[noise] 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 and 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 and good morning, everyone. Today I'm excited to report that pretty good health delivered another strong quarter financial and operating performance in Q4, and our full year financial results were above the high end of our previous guidance.
This performance positions our company for accelerated growth in 2022, as we continue to build our national position organization engage with and organize physicians into scaled provider networks across our country.
Today I'll provide an overview of key highlights that are driving our continued business momentum David will cover our recent financial performance and then park will discuss our outlook for 2022 and conclude with a more detailed business update on our growth drivers and value based care initiatives before we take your questions.
We also announced that Jeff Sherman resigned from his position of Chief financial officer to pursue other opportunities Jeff joined in January of this year.
It was not a result of any disagreement or issues with regard to previous helps operations, our accounting policies and practices. Following jeff's decisions, we appointed David Mountcastle, Executive Vice President and Chief Financial Officer.
David joined <unk> in 2014, as our CFO and he has an intimate understanding of our company's business operations and financial and accounting practices. Fortunately we are on track to file. Our 10-K later this week as originally planned.
We remain very excited about our business momentum and our financial performance will speak for itself now on to our business highlights.
Previous help executed at a very high level in our first year as a public company, we have materially advanced our business entering three new markets in the last five months, adding close to 500 physicians and providers through our anchor partnerships in California, Montana and West Texas.
Long term our strategy is to align with and enable provider partners and leverage our underwriting expertise to transition profitably to risk based reimbursement arrangements overtime.
Effectively January one this year, we launched three new accountable care organizations and now have seven acos participating in the Medicare shared savings program caring for over 168000, Medicare beneficiaries, we have shown sustainable success when the MSP program and four of our seven Acos are now participating in the enhanced track with.
The actual upside in shared savings as well as some downside and financial risk.
In addition, our Florida and mid Atlantic Acos entered into previous first captained arrangements covering approximately 23000 Medicare advantage beneficiaries, we now managed care and more than 80 value based arrangements across the risk spectrum.
This highlights our forward progress in executing on our long term strategy in full alignment with our provider partners across their entire patient panels.
As I noted our exceptional operational execution delivered financial performance. It was way above the high end of our previous guidance and our operating model continues to generate strong cash flow without needing new sources of liquidity.
In aggregate, our 2021 performance and operational achievements are expected to drive acceleration of the top line growth this year as well as increasing profitability and adjusted EBITDA, while we continue the Bachelor operations talent and technology capabilities to support this growth.
We have made great strides in building a scaled national delivery network.
You can partner with all providers every setting from single and multi specialty to employed or health system affiliated providers. Our model offers a tremendous market opportunity for growth and the positioning maybe much space. The previous platform is applicable in every single state with our recent new market entries, we have shown the ability to be flexible as we look to enter new <unk>.
<unk> our national footprint now includes over 3300 providers caring for over 3 million patients and 870 locations in eight states and the district of Columbia, We are one of the largest provider groups in the country with scale and geographic density. We're looking forward to continuing to expand the number of providers in existing markets and entering many new.
New markets over the next few years.
Pretty good health has four distinct attributes that position us as a clear alternative for providers looking to maintain their autonomy and optimize their performance first in each of our geographies, our integrated medical groups risk bearing entities and tech enabled clinical and performance operations platform serve as one of the most unique models.
And the health care ecosystem. This attains maximum physician alignment and outcomes and value based arrangements without our ownership of the underlying practice second we partner with all provider types in all reimbursement models. This combination has created a very balanced diverse and sustainable financial model and is a key driver of positioning.
Referrals and our momentum in signing up new providers third our proven success across risk bring spectrum is supported by previous physician led governance structure at the local market and national level. This is crucial and optimizing performance sharing best practices and helping physicians improve outcomes and fourth our capital.
Efficient partnership and operating model generates positive and increasing EBITDA and free cash flow with minimal capital expenditures now I'll ask David to review, our most recent financial results.
Thanks, Sean.
Previous address previous addressing a significant market opportunity and is well positioned to capitalize on the growing shift to value based care with health plans provider and physician groups looking for help in navigating this transition.
Our performance through 2021 underscores this with guidance raised in each of the last three quarters and culminating with above guidance results for the full year.
Our operating momentum continued to drive strong results in the fourth quarter.
Practice collections were 513 million, a 45, 8% increase from Q4 a year ago.
<unk> margin increased 33, 8% and adjusted EBITDA was $7 5 million, an increase of 18, 2% over the prior year.
But it was down sequentially from Q3 to Q4 due to our outperform in Q3 related to our MSP shared savings results.
As well as the expected new market entry costs in Q4 that we discussed last quarter.
New market entries are part of our ongoing strategy. So we do not add back these costs to arrive at adjusted EBITDA.
We also increased our quarterly bonus accruals by an incremental $2 million in the fourth quarter based on our strong full year performance. So if you spread this incremental expense over the quarters Q4, adjusted EBITDA would have been $1 $5 million higher than the reported number.
For full year, 2021, or 31% growth and implemented providers and 15, 2% increase in value based attributed lives.
With ambulatory patient volumes.
Led to all of our financial results, beating the high end of our previous guidance.
Practice collections increased 25%.
Which was five 5% above the top end of our guidance at Q3, and 11% higher than the top end of our initial guidance back in May.
<unk> margin was up 27, 1% and adjusted EBITDA grew 49%.
Our adjusted EBITDA margin reached 17, 4% of care margin, a 170 basis point increase year over year, which highlights the operating leverage of our models.
One of <unk> key Differentiators is our solid balance sheet and positive cash flow.
We ended 2021 with a net cash position of more than $287 million and significant cash flow generation heading into 2022.
Cash flow from operations was $55 million, an increase of 41, 6% from 2020.
With capital expenditures of less than $1 million free cash flow was $54 6 million.
Our strong performance positions Privy of very well as we move into 2022, we continue to gain traction with providers looking to partner with scale financially sound organization to improve outcomes for their entire patient population.
With our liquidity strength low leverage and a strong cash position. We are highly confident in our ability to fund all of our growth initiatives and opportunities, including new market development and strategic investments.
Now I'd like to ask part to discuss our 2022 outlook and update you on our growth drivers and value based care initiatives.
Thanks, David we are excited about our recent performance and operating momentum heading into 2022.
We intend to continue this success by growing within existing practices, increasing attribution and risk based contracts, adding new providers opening new markets and identifying opportunities to expand our platform for 2022 implemented providers is expected to reach 3675 with attributed lives increasing to 875.
At the midpoint, which is double digit year over year growth.
We expect practice collections to grow 37% to more than $2 1 billion and adjusted EBITDA increased 34% both at the mid point of our guidance, we plan to invest across our business enterprise in sales and leadership clinical and operational performance talent and our technology infrastructure to support this accelerating topline growth.
<unk>.
We expect practice collections and GAAP revenue to ramp through the year and adjusted EBITDA to follow as newly signed providers are implemented and come online and the full top line run rate.
Beginning in Q1, we anticipate reporting our <unk> revenue is a new line item in the sources of revenue section of our 10-Q.
We also expect to rename our physician and practice expense line to provider expense, which will capture the complete medical cost related to the at risk appetite had contracts.
Here are several assumptions underlying our 2020 do guidance our growth outlook includes the impact of our new <unk> agreements and only previously announced new market entries. Adjusted EBITDA guidance includes approximately $4 million to $6 million and accelerated investment spend this is to support our recently announced new market.
<unk> and value based care initiatives, all of which were ahead of our expectations from a timing perspective.
We are making prudent financial assumptions for this first year of our new <unk> agreement and are resuming minimal incremental care margin in EBITDA contribution at this point in 2022.
We would anticipate greater operating leverage from our growth investments to follow in 2023, assuming no new market entries this year or next with a capital efficient partnership model, we expect 90% plus of our adjusted EBITDA to convert to free cash flow with capital expenditures of less than $1 million in 2022.
Our financial performance is allowing us to focus on growth and Premier health is executing at a high level.
This is highlighted by a number of recent operational activities and achievements that are driving our broad based growth.
First during 2021 and through the fourth quarter, we continued to see solid and resilient same store growth in our practices driven by the strength in ambulatory utilization across all of our markets with visits up on a seasonally adjusted basis and well ahead of pre COVID-19 baseline.
<unk> gained market share and grew by adding providers in existing locations.
Second our success across more than 80 value based arrangements provides a solid baseline and supports our confidence in taking additional financial risk. We've launched three new acos and $4. Seven are now participating in the MSP enhanced track effective January one of this year, which provides us substantially more upside opportunity.
Previous first <unk> arrangements in our Florida and mid Atlantic Acos are also expected to add more than $180 million to our top line. This year on a net basis.
We incrementally added attributed lives to each of our core value based care programs and are focused on increasing both the top and bottom line yield for life.
We achieved this through better clinical and operations performance as well as by increasing the level of risk and resulting shared savings in various programs.
Third we continue to witness the flywheel effect of our success and presence in our existing geographies, we generated record number of new provider additions through our organic sales efforts in existing markets during the year.
A key component of our growth strategy is to monetize the premier platform through value added ancillary services such as our state of the art lab in our mid Atlantic market and clinical research program in partnership with Tomorrow or add scale integrated medical group and risk bearing entity on a common platform allows us to uniquely offer these value added.
Services to our physician and payer partners.
Ford.
Key component of our growth strategy is our active business development pipeline and we are tracking well ahead of our long term plan.
Our partnership with vast medical group in California, and surgery partners, Great Falls clinic in Montana reflect the strength and flexibility of our model across geographies and provider types.
Our Montana entry in particular provides surgery partners and a clinic with access to best in class technology and services platform that drives efficiencies and allows doctors to focus on their patients. We look forward to seeing how this partnership evolves.
<unk> health has one of the broadest value based care platforms in the industry with our at risk payer contracts covering approximately 786000 attributed lives across commercial Medicare Medicare advantage and Medicaid arrangements.
As we've noted at the bottom of this slide starting January one of 2022, we are taking upside and downside risk in many of our payer contracts covering two thirds of the attributed Medicare lives across our MSP and Medicare advantage programs.
This thoughtful move to risk continues to provide opportunities for significant topline and EBITDA growth as we execute on our goals to reduce costs and improve patient outcomes to earn greater shared savings in the years to come.
It is important to emphasize that the tremendous size scale performance and capability of previous value based care platform is not recognized in our current topline practice collections and GAAP revenue.
This slide shows that we manage a total of approximately $5 2 billion in total medical spend associated with our attributed lives with $2 2 billion managed under upside and downside risk arrangements. However, we would only recognize approximately $300 million topline on a forward annual basis today. So we have an additional one.
One 9 billion opportunity to add to our topline if or when we convert these lives into cap, David all full risk contracts overtime.
A key differentiator is Privy is very thoughtful approach to risk we match the majority of our patient pools with the risk parameters in each of the requisite value based programs.
Our goal is to have a high level of confidence that we can succeed in limiting financial risk and increasing profitability as we move to greater risk in each value based care arrangements improve patient outcomes and lower medical costs.
Previous proven model has been increasingly successful in managing risk. It is called risk for a reason and we balanced risk across a diverse set of contracts and leverage our extensive clinical performance management healthcare economics, and actuarial expertise to closely manage this transition to risk profitably.
Our close alignment with our physicians is critically important to successfully manage patient panels across the risk spectrum.
This is accomplished through our physician led governance structure and hands on day to day work of our clinical and operations team.
We provide robust audit and compliance oversight and help influence key levers of physician practice performance.
Our comprehensive technology platform is deeply embedded in our practices and drives the everyday workflows as well as providing data analytics to support and measure of practice performance.
This is why we are confident in our ability to influence value based care outcomes across all providers entire patient panels, while preserving the autonomy and ownership structure.
The <unk> platform is gaining momentum with provider adoption scale and value based lives and resulting top line growth as shown on this slide.
We have further proven that our business model can deliver not only consistent topline growth, but also translate that down the P&L with consistent growth in care margin platform contribution adjusted EBITDA and free cash flow, while increasing margins.
Since our initial public offering almost a year ago. We have performed ahead of the expectations, we set internally and communicated externally at that time.
We are well ahead of our internal IPO expectations in terms of new market entries implemented providers and attributed lives. We expect to see accelerated topline growth and reached approximately $2 1 billion in practice collections for 2022 at the midpoint of our guidance range.
The more we have translated that topline growth into a solid 80 plus percent EBITDA growth over a two year period.
<unk> is well positioned to continue to grow our scalable integrated care delivery model and expand our deep value based care capabilities in both existing and new markets.
I'd like to thank all of our physician partners and <unk> for their hard work and dedication in delivering high quality patient outcomes and achieving these financial results, which position us for future success.
With that operator, we're now ready for the first question.
Our first question comes from Josh Raskin with Nephron research.
Alright, thanks, and good morning.
My first question is just how many of those 3700 implemented providers. This year sort of midpoint of guidance will be in global cap arrangements and what's a reasonable cadence of growth over the next four years I fully understand it's lumpy so kind of just looking for averages.
Yeah, Thanks, Josh I'll start and Sean can add.
We don't split out how many providers typically 70% of our provider base is as you know what we call a gatekeeper providers primary care in total medicine family Medicine, Pediatricians, and Obgyns and 30% plus our specialists in some nature.
A subset of our BCBS bolt in mid Atlantic and in Florida will be in those global cap arrangements.
So, it's obviously going to be a pretty small number and it's about 23000 lives as we.
Related in a press release earlier this year.
And is the idea.
The idea of sort of convert these lives, but is it more of a focus on getting the provider ready to do that is I assume that's kind of the.
Sort of operations order of operations right is that you have to get that provider to take the risk and then kind of the lives follows that the right way to think about it.
Yes, Josh this is Sean think about I think it's obviously the provider.
You are familiar with that slide we presented multiple times kind of the.
First couple of buckets of getting the technology in place stabilizing the practice teaching them, you'll get the cash flow of that Didnt move them up the risk spectrum. So obviously theres a provider element to that but there's also a payer element to that and making sure that.
We're confident they're going to get us to write data, making sure. We have the arrangement the right the right contractual arrangements and into that that theyre going to kind of stand up too and we've been pretty upfront about those type of arrangements, we like or whether the payers still have some risk in that and that were operating all with an aligned incentives.
From a payer all the way down to provider gotcha.
Gotcha, and then just a quick follow up I think I heard you say that health care utilization your fee for service trends were running.
The pre pandemic baseline.
Let me make sure I understand is that do you think overall health care utilization is now back to or above.
<unk> line or was that just your providers are taking market share and so they are actually doing more business than they were pre pandemic.
Yes, I think it's important to identify the two buckets of broad utilization one is where we are concerned as ambulatory utilization in the community docs that we havent previa.
And we take that utilization is pretty much back as we experienced seasonally adjusted at or above the pre COVID-19 baseline. It was it was better than expected. Despite the recent variant in Q4 and Q1.
The inpatient utilization trends our facility base still varies by geography, and probably gets more impacted that obviously does not impact our providers as much.
And so I think that's the that's the key difference, yes, Josh one thing I would add.
As you know <unk> been covered managed care long time access is absolutely critical we worked with our our providers.
A couple of years of Covid and up till now.
As you know we introduced very early on the.
The ability to for virtual care and all those things. So I think they're utilizing a lot of those aspects getting their patients in and it's where I think we did it with like we've said take some market share and we're seeing that ambulatory utilization up which is we think is a very good thing, especially in our value based arrangements.
Perfect. Thanks.
Okay.
Thank you.
Our next question comes from Whit Mayo with SBB Securities.
Oh, Hey, thanks, good morning.
First question I have is just around the Acos and as you look at the financial performance standing up and starting your your historical Acos is there any reason that we shouldn't look at that as a guidepost for what the performance should be this year do you think you can do better and really the corollary to this question is also in the transition.
Towards the enhanced tracked and why your experience.
And the new three acos moving into the enhanced track may or may not be any different than what's been your experience in the mid Atlantic.
Yes, thanks for the question whether its fog.
Yes, I think it is.
An important point to note we are obviously much more mature as an organization today.
Relative to what we were five years ago. When we first started in mid Atlantic So that would manifest itself in two particular areas as it pertains to this question one is our ability to take on more risks sooner.
And the capabilities that we've developed are obviously much better. So it allows us to do that sooner than what we what we were at five or six years ago.
And that would mean moving these.
The newer acos into enhanced Frac sooner.
Obviously it depends the answer it also depends on the geography no two geographies are the same.
We look at the patient pools, we look at I'll provider density we look at the payer relationship in any particular market all else being equal you should expect we would accelerate that move.
Given the maturity of the organization, but it will depend by the geography.
Okay. That's helpful.
Second question, just around the investments that youre, making not terribly surprising, but I think it might be helpful. Just to maybe break out a little bit more discretely some of the buckets and I'm just wondering if I take $5 million at the midpoint how much of that should we look at is perhaps being really one time in.
I'm thinking.
I think that as you move into new markets. Some of this is probably going to continue to repeat itself. So I'm just trying to make sure I properly understand exactly what where the $5 million is going.
Yes definitely.
So number one it's fairly broad based.
When you experience.
This kind of growth, which is across both the fee for service book the value based book in existing markets and then also new market entries.
I'd expect we're investing across across the spectrum.
And then we.
Typically think about this about as fixed and variable costs. There are certain costs that are variable in nature that would that would ramp up.
Mainly pertaining to the <unk>.
New market entries sales cost implementation costs as we get more providers in in those new geographies.
But then a lot of the costs are fixed in nature that happened at the upfront as we either enter new geographies or enter into some some enhanced caffeinated arrangements. As an example, where we are beefing up some of the capabilities that we have and you should expect those to scale overtime more G&A in nature, but also some fixed costs in.
Other areas of the company and then broadly speaking it is it is both.
Leadership cost, we are adding a lot of great talent across the organization to support this growth and then also infrastructure and technology investments.
Yeah, the only thing I would add is we.
And we report this above the line because it's our ongoing operations.
<unk> youre going to see us continue to expand in.
And grow the business.
Thanks, guys.
Thank you.
Our next question comes from Julien Youre seeing with credit Suisse.
Yeah. Thank you and good morning, everyone.
I have a question on the orders like our long term outlook I mean, clearly 2022 practice.
Doctors collection revenue outlook, and EBITDA guidance kind of implies mid 'twenty to mid 30% growth rate, but it does include some puts and takes in terms of new market contract Rollouts and investment spending as skewed as with all these puts and takes I mean, what's your latest thoughts on the long term revenue and EBITDA growth and margin outlook for the company in Elektron.
Three and beyond.
Thanks Linda.
When we went public.
We had articulated that over a long term, which we define a decade plus you should expect this business given the substantial dam that is in front of US and then also the broad based platform that we have at <unk> to hopefully deliver 20 plus percent.
Top line growth over that long period of time.
And then as the operating leverage kicks in that will translate into 30 plus percent EBITDA growth.
Our hope is we can accelerate that obviously no no business grows in that straight line fashion youre going to see.
Spikes and we've experienced that in our in our recent past as well. So our hope is to keep delivering at a high level accelerate that as much as possible to make thoughtful investments.
The key differentiator for US is we are not sacrificing profitability as we grow.
And I think this is a perfect year for 'twenty two as you see.
Both topline is growing 30%, but EBITDA is also growing 30 plus percent at the midpoint of the guidance. So while we are growing top line at a more accelerated pace than that 20%, we're not really sacrificing EBITDA growth. This year and then we expect to continue that operating leverage in future future years.
And just a quick clarification I mean do those targets include any exploration in like a shift to full risk capital arrangements or even your involvement in ACO reach Martin if you decide to do so.
Yes, you know our view is it will be across the platform. So whether it's entering new markets, adding providers in existing markets converting some of the lives we have into capital arrangements as we did this year.
Or entering into new value based program. So so again I think the broad based drivers are pretty meaningful for us in this platform and allows us to pull many levers.
As you can see this year.
Attributed lives and implemented providers are growing double digits low double digits, but then that can translate into much more significant practice collections growth given given those broad based drivers.
Okay and then my follow up on the comment you guys made earlier about.
The company's key differentiation being a solid balance sheet and positive cash flow a couple of questions there.
Was like $300 million in net cash ins on our strong cash flow you had expected. This year do you think there are opportunities for you guys to get more aggressive with respect to capital deployment in any way and second just a quick a number clarification here what exactly was $32 million of business acquisition that you had in the fourth quarter.
Yeah. Thanks, So I'll take them in line.
Number one just from a capital allocation perspective, if we think about it in four buckets.
First is what we think is a sleep well at night bucket, where in our business as a provider entity that is growing this fast taking on additional financial risk. We believe we should have significant cushion.
And have a very conservative balance sheet low leverage and a solid cash flow profile that is what helps when the risk presents itself and our view is not to rely on the capital markets when that happens that can be very dilutive.
Second is obviously given the significant dam that we have.
We're looking to continue to invest organically in existing and new markets. The beauty of this business. There's a lot of that happens on the P&L and so EBITDA expansion may not happen, but that is that as part of capital allocation from all perspective.
So it is opportunistic M&A.
If or when the right opportunity arises we have not relied on that historically.
Given how well we've grown organically and we're fairly disciplined but when whenever that happens you obviously want to have some cushion and then finally from a completeness perspective look if we do have excess cash.
And.
And the valuation of the business materially differs from what we think is intrinsic value. We can obviously look to return capital in accretive manner to our shareholders.
So that's kind of the first part of the question you asked the second is.
The free cash flow generation capability, I think is truly differentiated as we articulated.
The EBITDA number is fairly straightforward not do any add backs, we prefer it that way, it's mainly stock based comp.
And then our business also tends to have this.
Negative working capital or a positive float.
In some periods like in 2021 the phenomenon.
<unk> itself given.
Given the timing of cash flows from our payer partners to our medical groups or a risk bearing entities and then flowing downstream to our physicians and then obviously given the minimal capex is a pretty high EBITDA to free cash flow conversion, thus far as well.
We're still utilizing our Nols the <unk> 2 million spend was related to our acquisition of the services platform of bass.
<unk> in California.
And the and the medical group in West Texas.
Got it thank you.
Our next question comes from Lisa Gill with J P. Morgan.
Hi, Thanks for taking my question I Hope you can hear me.
Okay. Thanks, Greg.
Yes.
Yeah.
Right.
I think that as being an interesting area.
Yeah.
Hi.
We participate in how youre thinking about that from a brands would be my first question.
Thanks, Dan.
Okay.
90%.
Okay.
Thank you.
At one point.
Thank you.
Okay.
Hey, Alicia this is Sean.
We got most of that I believe so I'll take the first part of that I believe you asked about the ACO reach program. So I'll talk specifically about that with any program.
You know with US I mean, it's about it's.
It's about balancing risk and reward.
We thoroughly and were going to do the analysis do it do it internally as well as sometimes externally, bringing in external consultants to look at look at those programs we want to.
Projecting that risk reward understanding the different rules understanding the levers it'll it'll make you successful and and as you know that the company has significant experience in MSP Medicare advantage and the management team goes decades back in government programs, so but specific to ACO reach there was there was some.
Incremental improvements in this latest variation but.
Current assets outlined today.
It really doesn't provide the clarity that we would desire for the risk of additional risk. We're assuming so our positions do really really well and <unk> seen it you see it in the results. We just just published we're moving additional acos three more into enhanced end and with two thirds of our entire book of Medicare and Medicare advantage or <unk>.
SP.
And risk programs, so about roughly about it looks like 245000 lives. So.
I hope that adds a hope that's the question you ask on the first part and the second question was well I'll take the second question I think it was around EBITDA to free cash flow conversion of 90% and how that moves going forward.
We heard that correctly. So given we are still running through our Nols and the stock comp impacts that I think the cash taxes paid would be a key item on the cash flow statement to look out for the next few years, obviously, the EBITDA to free cash flow conversion would be it would be fairly high around that around that.
90, plus percent level and then once we burn through the Nols.
You will have to obviously tax effected, but again, our hope will be there'll be minimal add backs to get to the adjusted EBITDA number and then Capex will continue to be fairly muted below below at or below 1 million number.
Alright, Thank you very much.
Thank you.
Our next.
<unk> comes from Jessica <unk> with Piper Sandler.
Hi, Thank you so much for taking my question and Keith.
Do you mind reminding us what the status of progress is on cardiac care partners and what are the expectations for 2022.
Great. Thanks.
Hi, Geoff it's mark Thanks for the question so as we articulated.
In our Q3 call.
We expected about 30000 lives in previous care partners.
We are running at or ahead of those expectations.
Those are included in the guidance, we've given today for 2022 and.
And we'll continue to do after that going forward.
Obviously, not going to split out the reporting of that number we don't manage that business separately. It sits within all of our existing markets, but we are seeing a lot of momentum.
Really excited about that about that product and service offering.
Yes.
Thanks, and then maybe just as a follow up and we had some expectations just comparing previous care partners to default Tech stack can you maybe help us understand what the financial model is pretty your carrier partners and how it compares.
On a revenue care margin.
And EBITDA per life.
The full tech stack.
Jack.
Yes sure so.
The margins on the carrier partners book would actually be slightly higher.
Similar to the margins we have on our value based book today.
We don't break out margins for fee for service and value based as you know, but but generally speaking the tech stack is a lighter component in the care partners model.
And the economics are similarly shared we keep the care management fees.
And then the shared savings are split 60, 40 between physicians and <unk>. So the economic profile is very similar to the rest of our value based book and Thats. Why these lives would be embedded in our in our ACO attribution that we report going forward.
Got it thank you.
Thank you.
Our next question comes from Richard close with Canaccord Genuity.
Yes, good morning, thanks for the questions.
Can you talk a little bit about the outperformance in practice collections.
Revenue in the fourth quarter was that primarily.
The new markets.
That were added and if you strip that out.
What would the growth.
Ben.
You mentioned same store growth, but maybe you can provide that for us.
Yes, thanks for the question Richard.
Obviously, the extent of the beat was fairly significant relative to what we guided and it really was very broad based so there was not one particular element.
And there were four key components. So one was utilization was much much stronger than what we anticipated given the omnicom variant, obviously tough to predict and guide to but it came in much better than we expected. We also think our practices actually gained market share so both utilization being higher and then on a same store.
<unk>, we added new providers, we saw record low gross attrition and on a net basis, we actually grew our same store.
And that contributed pretty significantly.
And then the value based book continued to outperform we saw some of that outperformance in Q3, but then that that continued into Q4, and then finally, both California and West, Texas, The new Mark the contribution from the new markets in.
Q4, it was one quarter was better than our expectations when we guided back in Q3.
It's really broad based which is great to see.
Not one particular element that drove that kind of lift.
Okay and my follow up question is you talked a little bit about surgery partners.
And that relationship.
And then you also said.
You're not really looking at additional new markets. This year or next year is that completely off the table or how are you thinking about that is that just not included in guidance.
You also talked about business development and being really strong so just trying to.
You get a little bit more detail there.
Yes, definitely so to be clear the business development pipeline is really strong and we are looking to open new markets as soon as we can just given the dam we're in eight states plus D C.
And so we're continuing to look actively at opening new markets this year and going forward.
What's in our guidance is only the markets, we have announced so far so which is California, Montana in West, Texas, which was the recent new markets.
Along side, our other existing markets. So much like 2021, where our initial guidance did not include any new markets. We're doing the same in 'twenty two.
This guidance does not include the impact of any new markets, which we may open.
The timing on that is uncertain, so as and when we do announce those we will update our guidance going forward.
And.
In reference to surgery partners.
You think about their business model.
She's with physicians.
Listing in future markets it lines up with what we do it's a site of service lower cost of care higher quality and we've been working with their team Greg Great Group, Great management team and it just lines up really well with what we do and we will see where the partnership takes us.
Okay. Thank you.
Yeah.
Our last question comes from Ryan Daniels with William Blair.
Hey, guys Nick speaking on for Ryan. Thanks for taking my question I guess, just a clarification to start what was the cadence that you said was going to be on that kind of additional 400 providers you expect in.
2022.
And that gets parked not sure we fully understand the question.
Our guidance at the midpoint is 3675 and.
It'll be spread evenly through the year much similar to the progression you saw in 'twenty one.
A lot of those providers are sold but not implemented it.
It takes about six to six months to implement and get them fully fully on ramp. So you should expect a similar cadence to what we had in 2021 based on that ramp.
Okay.
In Q4, there was a pretty big jump over Q3, so but that was mostly new markets coming online. So it should be pretty kind of evenly spread out throughout the year.
That's correct, okay, great. Thanks.
And then the next one I was wondering if you can kind of sort of <unk>.
Walk through at a high level almost like a waterfall from your 2022 guide versus your expectations from your IPO. So for example, like how much of the 2022 outperformance from IPO as from 2021 outperformance how much was from incremental new market entries and then how much of that is from moving.
Further kind of down the risk spectrum.
Yeah I appreciate the question. So look obviously, we're not going to pinpoint it specifically and breakdown the practice collections bridge.
But generally speaking again it was similar to the last question very very broad base. So what we saw in the existing geographies were three three components.
One was really good utilization.
Second was very strong same store growth very low attrition.
Thirdly record new provider adds in existing markets.
And all of those were ahead of or better than our expectations on the value based book, we performed much better than expectation.
What our initial guidance was in 'twenty, one in the existing markets about the MSP program and other other value based programs.
During the course of the year and then obviously.
Our initial guidance did not include in 'twenty, one any new markets. So when we entered California, West, Texas, Montana all of those obviously ahead of our expectations from a timing perspective.
That happens when you get this acceleration in.
In topline growth.
In the following six to 12 months, so youre seeing some of that play out in 'twenty two.
Then.
These providers ramp up youll see that come through the course of this year and then if you add new markets that would hopefully accelerate that beyond but we'll update that when that happens.
Yes, the only thing else I'd add there was the addition of the capitate range, which late.
We've had.
None of those were in our IPO.
IPO projections.
Okay. Thanks, that's helpful color and congrats on the quarter guys.
Alright.
Thank you.
We have a follow up question from the line of Richard close with Canaccord Genuity.
Yes, thanks for squeezing that and I guess, just a follow up to <unk> question earlier on with respect with respect to moving the full risk.
Do you guys think you need a year or two with how first and humana.
Before you feel comfortable moving more lives to pull risks or could it be shorter than that.
Yes. Thanks for the question Richard look our view is we will do.
Enter into these agreements when it makes the most sense both from a fair perspective.
Providers and the risk pools, we have so so theres really no cookie cutter formula It will vary by market and it will vary based on our ability to manage that pool and make money at the end of the day and I think that last block really differentiates us.
We're not doing it just to get top line growth.
And move lives and just recognize that topline bnb M.
When you do that based on accounting rules.
The key is can you can you make money both for the payers can we have shared savings can we get the patient outcomes share that with the pay our share of that with our physicians and we are all in it from a from a skin in the game perspective. So I think the answer it will just vary we could we could have zero editions or we could double the number of <unk> lives. It just depends on how we believe the.
Risk pools move and what the best decision might be for the company.
Okay. Thank you.
Yes.
That concludes today's question and answer session I would like to turn the call back to Mr. Morris for closing remarks.
Thank you for listening to our call today.
<unk> proven model supports all providers in all patients across all reimbursement models are scalable capital efficient integrated care delivery model a significant momentum in the physician market and we look forward to continuing to execute at a high level and delivering accelerated growth in 2022.
We appreciate your continued interest and support of our company and look forward to speaking to you soon again and enjoy the rest of your day and thank you.
This concludes today's conference call. Thank you for participating you may now disconnect.
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