Q3 2023 Privia Health Group Inc Earnings Call
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Be advised that today's conference is being recorded.
I would now like to hand, the conference over to your Speaker today, Robert Borchert, SVP Investor and corporate Communications. Please go ahead.
Thank you Gigi and good morning, everyone. Joining me today are Parker Ultra our Chief Executive Officer, and David Mountcastle, Our Chief Financial Officer. This call is being webcast can be accessed from the Investor relations, it's actually a pretty help dot com.
Today's financial press release, and slide presentation are posted on the Investor relations pages of Privy Health Dot Com. Following our prepared remarks, we will open the line for questions. We ask you. Please limit yourself to one question only and return to the queue. If you have a follow up so we can get to as many questions as possible.
The financial results reported today and in the press release are preliminary and are not final until our Form 10-Q for the third quarter and nine months ended September 32023 is filed with Securities and Exchange Commission.
Some of the statements we will make today are forward looking in nature based on our current expectations in view of our business as of August three 2023, 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.
These statements should be considered along 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 reconciliation 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 partner. Thank.
Thank you Robert and good morning, everyone.
<unk> delivered another solid performance in the third quarter as we continue to execute on multiple fronts to extend our market reach and drive future growth.
This morning, I'll provide an overview of key business highlights and David will discuss our MSP and recent financial performance and our 2023 guidance outlook before we take your questions.
Yeah.
As we build one of the largest ambulatory provider network in the nation and positively impact their delivery.
Operating model continues to gain market share with providers.
We experienced solid new care center and same store provider additions as we increased our provider density in existing states.
We added 235 implemented providers in the quarter and a record 499 implemented providers through the first nine months of 2023, which highlights our momentum.
In addition.
Our year to date gross provider attrition in 2023 remains near the lowest in our company's history.
These factors helped drive practice collections growth of more than 18% adjust.
Adjusted EBITDA was up 20% in Q3 versus the same quarter a year ago as we continue to scale, our operating model in existing states, while increasing the number of providers and investing in new states.
Today, we announced our entry into the state of South Carolina.
We are partnering with Greenville, Emt and allergy associates as our anchor partner launching for via Medical Group South Carolina.
We expect the specialty group practice with approximately 20 providers to be implemented on the premier platform in the first half of 2024.
South Carolina is the six new state we've entered over the past 12 months and we are excited about our significant progress in expanding our national presence.
In addition, as you can see from our financial performance, we are absorbing all new market entry costs, while delivering year over year, EBITDA and free cash flow growth at the mid to high end of our original guidance.
We continue to expand previous national footprint, which now includes more than 4100 implemented providers in our medical groups caring for over $4 7 million patients.
Our more than 1000 care center location span across 14 states and the district of Columbia.
We remain focused on building one of the largest multi specialty medical groups and ambulatory care delivery network in the country.
And our scale and diverse provider and payer partnerships are true differentiators.
<unk> serves approximately $1 1 million attributed lives across more than 100 at risk payer contracts in commercial and government programs.
Total attributed lives increase more than 29% from a year ago.
This positions our business as one of the broadest and most balanced and diversified value based care platforms in the industry.
The diversity of our value based book of business this quarter the strength of our operating model.
Our commercial attributed lives increased 35% from a year ago to 675000.
Across our commercial Medicare advantage and Medicaid value based contracts, we on care management fees as well as incremental shared savings in addition to fee for service reimbursement.
We offer a highly differentiated value proposition to payers to drive better patient outcomes and lower costs. This generates financial benefits for providers payers and <unk> across a broad population.
As we noted last quarter, there remains a significant embedded opportunity for us to move our Medicare advantage lives in the upside and downside risk arrangements over the next few years.
We remain focused on thoughtfully moving to increase risk arrangements, while continuing to provide significant opportunities for EBITDA and free cash flow growth.
Our strong overall performance could not be accomplished without the strength of our 4000, plus physician and provider partners as well as the hard work and dedication of all previous employees now.
Now I'll ask David to review, our 2022 MSP performance recent financial results and 2023 outlook.
Thank you Park.
We continue to see solid performance across our value based care book, including our success in the Medicare shared savings program in the 2022 performance here.
The results publicly released in late August show that across our seven acos, we lowered utilization and cost significantly below that of our peer acos.
This performance was even better when compared to fee for service Medicare.
We generated total shared savings of almost $132 million up 32% from a year earlier.
We operate one of the country's largest acos in the mid Atlantic region carrying for about 61000 patients in the MST enhanced track.
We delivered savings of 10%, which for the second year in a row with the highest savings rate of all acos with greater than 40000 attributed lives.
With 77% of total MSP lives than downside risk in 2022.
<unk> health is well positioned to expand further into and succeed in value based care arrangements across the risk spectrum.
For the 2022 performance here, we are 10, Acos and MSP with seven and the enhanced track.
During the 2022 performance year for MSP Premier helps Acos managed over a $1 8 billion and medical staff.
However, we only recognized our share of the growth shared savings and practice collections and GAAP revenue, which was approximately $91 million.
This performance clearly demonstrates our success in transitioning to value base and downside risk contracts over time.
As we generate increased profitability.
Certainly it helps operational execution continued to deliver strong financial results in the third quarter of 2023.
Our implemented provider count was 4105 up 14, 2% year over year.
New implemented providers and strong ambulatory utilization trends led to practice collections, increasing 18, 2% from Q3, a year ago to reach $723 5 million.
Adjusted EBITDA was up 20% over Q3 last year to $18 8 million highlight.
Highlighting our ability to continue to generate operating leverage as we expand and grow in existing and new markets.
For the first nine months of 2023 practice collections increased 16, 4% from a year ago to almost $2 1 billion.
<unk> margin was up 87% and adjusted EBITDA grew 18% to reach $55 million.
Our business profile continues to show very strong cash generation, coupled with no debt and pro forma cash balance of approximately $371 million.
As noted in the table on this slide we received $91 2 million in cash from CMS in October as payment for <unk> portion of shared savings generated in the 2022 performance here of MSP.
As you May recall, we received the CMS payment in the fourth quarter last year as well.
We then share approximately 60% with our providers for their participation in our success and MSP, leaving net cash of approximately $47 million to premier.
Our year to date free cash flow was $57 3 million pro forma for the net cash received from CMS.
Our updated 2023 guidance highlights the strength and resiliency of our operating model and diversified book of business.
We are raising our guidance for implemented providers and platform contribution to above the high end of our initial ranges.
And maintaining our previous updated guidance for the other metrics as communicated in our Q2 report.
Our year to date performance gives us a very high level of confidence to achieve our updated guidance and closed the year strong.
Our robust financial and operating model is enabling us to deliver EBITDA and free cash flow growth, while absorbing approximately $10 million and new market entry in expansion costs for 2023.
We expect our new market to scale significantly in the coming years as we grow our provider base and attributed lives in these new states.
Ill delivering proven unit economics, similar to our more mature markets.
We continue to expect 80% to 90% of our adjusted EBITDA to convert to free cash flow. This year, given our capital efficient partnership model and annual capital expenditures of less than $1 million.
We remain focused on building <unk> into one of the largest ambulatory care delivery networks in the nation and we look forward to continuing to serve our physicians providers and health system partners and their patients.
Operator, we are now ready to take your questions.
Thank you Sir.
Binder to ask a question. Please press star one one on your telephone and wait for your name to be announced to withdraw. Your question. Please press star one one again.
Our first question comes from the line of Joshua Raskin from Nephron research.
Yeah.
Thanks, Good morning.
I guess, starting with just where is the upside of the implemented providers coming problem I'm just curious if thats more in some of these new markets that you've been building out or in some of the older networks and the density I think get par spoke to and then Conversely, I guess the other question would be are you seeing more competition for providers I'm thinking specifically for sort of a big health system opportunities.
Yes, thanks for the question, Josh So it's a combination as.
As we had noted in our prepared remarks, we've had a record.
Implemented providers in the first nine months and Thats reflected off very strong sales.
And that happens with a five month lag we're seeing very good increase in density in the existing states and then we've obviously added six new states as we as we noted so it's really very broad based which are which is really good to see.
Our model is getting a lot of traction.
It's a very proven model.
With unit economics proven and everybody we speak to understands what they are partnering with.
With <unk>. So I don't think we've seen an increase or decrease in competition that we did.
Last year over year before a lot of the participants have been around for a while so I just think we're gaining a lot of traction and momentum in a lot of new sales are coming from referrals from our existing physicians were just speaks to the strength of the model S. That's what you'd like to see.
Thank you.
One moment for our next question.
Okay.
Our next question comes from the line of Elizabeth Anderson from Evercore ISI.
Hi, guys. Thanks, so much for the question.
Can you talk about a little bit more detail on the MSS T accrual I think there's some confusion out there in the market perhaps.
Mr expectation, so just kind of explain to us.
I know you've provided the math, which was helpful.
Just think about that how you're thinking about the accruals there versus performance and anything else you can say.
And that would be helpful.
Yes, I appreciate the question of Elizabeth Arden.
Our methodologies fairly consistent as we've noted in prior quarters on the earnings call, we get data from CMS on a quarterly basis.
We are updating both the prior year accruals as well as the current year based on that data. So at this point of the year with 2022 results.
Finally, a true up in the payment received is obviously.
Nothing on the accruals from 'twenty, two perspective, Thats not reflected and then our 23 accruals reflect all the data we received so far so we update that every quarter our guidance reflects those updated estimates.
I'm not sure what youre, referring to do from a market expectations perspective, but our methodology has been fairly consistent and thats reflected in our guidance.
Thank you.
One moment for our next question.
Our next question comes from the line of a J rice from UBS.
Hi, everybody. Thanks.
Maybe I know, it's early but when you look out because obviously we have to pull these thoughts together and think about 24 at this early date.
Any thoughts on puts and takes or things, we should keep in mind, even if youre not ready to give specific guidance, but generally as we think about the year ahead.
Yeah, Hi, I appreciate the question.
Look its fairly consistent from past years, we will guide 24, when we issue our Q4.
Results early next year.
Puts and takes are pretty much similar to what you would expect.
Seeing very strong provider additions this year.
That's the number one factor.
Being attributed lives grow so that impacts our value based book, obviously, we'll update our estimates on chat savings across our very diversified value based book of business across commercial MAA MSP as we get new data. So that'll be number three and then obviously we've entered six new states as we mentioned so.
Momentum in those states investments in those states.
I think we will be number four as we have communicated this year, we have absorb about $10 million of that costs, you would expect that to continue.
And then obviously we are scaling our operating model as you can see the outperformance on platform contribution.
The unit economics are really proven in the most mature markets, we're able to deliver to that down the P&L and into free cash flow. So I think you will hope to see that continue into next year. So those I think are the key puts and takes and will tally. It all up try to close the year strong and then as your guidance early next year.
Thank you one moment for our next question.
Our next question comes from the line of Jay Lynn dressing from <unk> Securities.
Good morning, and thanks for taking my questions I actually wanted to follow up on Elizabeth's question. Let me ask that question slightly differently. So shared savings figure it wasn't down $19 million sequentially I understand it includes MSR speed as though did you have any true up related to that program in the quarter and more important as more a lot of focus on your non MSP.
Savings in that item as well maybe spend some time like what key business out there now have been trends in those businesses.
Yes, Julian here, Thanks, a lot David.
Yes.
In any typical year, we definitely have a lot of our true ups I'll say in Q2 and Q3 of every year from the prior year.
So I think what Youre seeing there is just some I would say normal variability that we see from on a quarter over quarter basis.
We really take an annual and would probably.
Say, you really want to look at sort of a 12 month view of this.
On a 12 month rolling basis, and on a 12 month rolling basis, Youll see that where we're up.
Pretty significantly from last year.
And again.
On a go forward basis, that's what we're that's really what we're using to test.
Look at it so we're not expecting any.
No.
Thank you.
One moment for our next question.
Our next question comes from the line of Richard close from Canaccord Genuity.
Great Alright, thanks for the question and congratulations I was just.
Looking at the care margin.
I think it was 13, 1% of collections in the second quarter ratcheted down to $12 seven if I'm not mistaken here in <unk>, just anything to call out on that.
<unk> would be helpful.
Yeah, Thanks, Richard as far as I think Thats, just pretty minor quarter over quarter movement, it's impacted by care management fee shared savings on the value based book some fee for service trends in existing and new states. So again nothing significant.
Variability from our expectations you can see from our guidance.
It's pretty much in line with what we've outlined at the beginning of the year. So I would just say that thats quarter over quarter variance.
Thank you one moment for our next question.
Our next question comes from the line of Brian <unk> from Jefferies.
Hey, good morning, guys and nice work on the quarter, it's Jack So Evan on for Brian.
Wanted to ask a couple on care management fees line looked really strong in the quarter. One are there any one timers to call out or or how should we be thinking about the progression of that going forward and then two we've been getting a lot of questions on commercial risk for you. All can you just confirm where any commercial risk contracts with land I would think it's in shared savings, but just want to make sure thats enough.
The contribution on that care management fee strength, yes, I. Appreciate the question. So we think this is one of the most underappreciated parts of our business as we highlighted.
We grew our commercial value based lives very significantly it's about 675001 of the only platforms that actually does commercial value base at this level of scale.
We are offering with a number of payers across our different states. So you see both care management fees and shared savings reflect that.
We are typically as we noted in our prepared remarks, we're getting.
Two or three or $5 <unk>, depending on the contract on these on these lives which is a pretty significant.
Step up over the fee for service reimbursement for us to do.
All the work and then obviously, we're getting shared savings on top of that.
Based on certain quality and cost metrics.
We think our ability to bend the curve for the payers both self insured employers commercial payers is a very significant value proposition, it's 50% of the U S population.
It's not going away anywhere soon it's not MMA and.
It's not a population where you can take for risk, but it's a population where you can make a pretty significant impact on the cost trends in health care and I think we're a great platform to demonstrate that so youre seeing some of the strength in the commercial book and its a very stable income stream.
As a as is reflected in the results. So we really like how that balances out some of the variability on the MMA book.
Thank you one moment for our next question.
Our next question comes from the line of Adam Ron from Bank of America.
Hey, Thanks for the question I wanted to follow up on a J 's question.
When you mentioned the puts and takes for 2024, you're really only mentioned.
Tailwind, whereas.
Last year, you kind of emphasized.
There was a tough comp from growing really quickly and from new market starting out with not a lot of providers.
It seems like the geographic entry costs are running at a really high exit rate.
Given the six to eight entries that you mentioned and so should we still be thinking about 30% long term EBITDA growth guidance of like.
The run rate for.
How we should think about core growth from here or are there actual headwinds that we should be concerned about.
And then another question Adam I mean, we highlighted about tailwind and headwinds.
The new market entry costs will continue into next year as demonstrated by the six new markets I think we've been fairly consistent with that.
Over the last few quarters.
Obviously shared savings is the other one where we'll just.
Look at all the puts and takes on the on the MA book Youre hearing commentary about increased utilization benefit design changes by bears impact from week 28 coming.
And so we'll just stop daily all of that up and there'll be puts and takes on both sides. So I think when we issue our guidance will reflect all of that in our book such that it'll be a combination of both as it always is.
Thank you one moment for our next question.
Our next question comes from the line of Jack Xu from William Blair.
Hey, guys. This is that Jack Daniels in terms of the 2023 adjusted EBITDA guidance I know you noted the $10 million in startup costs for the new geographies and Acos is this mainly a function of just entering the fixed rates over the past year, which is faster than the one state your target that you initially guided to or is there something additional in there and then.
Just a quick follow up too do you have any earlier, maybe an updated view for the new geography cost next year I know you aren't guiding for 2020 for yet.
Topic topic of discussion in the past so just trying to see what youre expecting there for next year. Thanks.
I appreciate the question.
Very similar to what we've said previously we are <unk>.
Spending anywhere from $1 million to $3 million in any new market, it's mainly comprised of sales and marketing leadership implementation costs all of those come in before.
We sell a single provider to join the platform.
The size of spend correlates to the size of the market.
And its fairly consistent from that perspective.
We've entered some of these new markets in the middle of this year. So obviously the forward run rate of costs will youll.
Youll see that next year.
And that's no different from what we've seen previously so I think it's a normal part of doing the business.
I think what is very exciting for us as you can see the leverage on the P&L, where despite entering more new geographies.
We're outperforming on platform contribution that would have likely flowed into our performance on an EBITDA as well had it not been for some of the newer geographies.
Accelerated manner. So our hope is that we can continue to scale the P&L and absorb these costs, we don't add them back as you know so I think we'll continue to do that and on top of that like we said the existing markets are really scaling in our most mature markets are exhibiting unit economics, which are very consistent with our long term margin profile and so on.
We're really excited to see that and now it's all about execution in all these new states and get them up the curve.
Thank you one moment for our next question.
Our next question comes from the line of Whit Mayo from Leerink partners.
Hey, thanks.
<unk>.
I'm wondering.
What changes you guys are beginning to plan for an MSP for for 2000 2040 plans to move any of your legacy acos into the enhanced track taking advantage of some of the other changes.
Are you planning for any new Acos and then I had just one clarification. David did you did you say in your prepared comments that you guys are.
Paying or providing physicians with 65% of the savings that thought at my notes I had that it was $60 maybe I just misheard you. Thanks.
Yes, so I'll take the first part David ill answer the second part.
So we're going through our entire book as you saw last year, we added three new Acos, we have seven out of 10 and enhanced track. So we make all of those determinations and some of these new markets you may add some of the lives in an existing ACO.
Given the timing.
So we will announce any new ones like we did last year in January.
In January February timeframe. So I think we'll just go through that but it's been fairly consistent we do this every year as we enter new states and look at the entire book and what makes sense for us sometime.
Sometimes it makes sense to move to the enhanced track some time it doesn't and so again I think we will evaluate I think all of the existing enhanced track you should expect that we'll continue to maintain and enhance track. So I don't think we go backwards and we'll hopefully continue our good performance.
And our value based care book is still 60 40, so I apologize if there was any miss hearing you there whenever but it's still 60 40.
Thank you one moment for our next question.
Our next question comes from the line of Jeff Garro from Stephens, Inc.
Yes. Good morning, Thanks for taking the question and congrats on the quarter I have a couple that are lumped together on the capitate at MA book I was hoping that you could discuss the profitability for that book year to date, it looks like a pretty favourable inflection quarter over quarter.
It looks like you benefited from a small prior period development in the quarter. So good to see that reverse but would love to get more detail there and lastly, how should we think about year to date performance influencing trivia and providers interest in growing that portion of the business in 2024 as you collectively make decisions about contracts for next.
Sure.
Yes, yes, yes. So you are correct and we are seeing some positive momentum in our full.
Full risk cap business.
Again, our process for estimating that amount is the same it's been this year as it has in years past the more data that we received from the payers as we get farther into the year, obviously, the better estimates that we have and again, we're seeing some favorable trends in.
In that business.
<unk> I would say sort of a mix of higher premium yields and lower medical costs.
<unk>.
And on the second half of the question.
I think we are going to be very consistent with our process and assuming more risk as you. As we've stated previously we take a much more thoughtful very deliberate approach when all backstopping risk, we do it together with or without providers together with our medical groups, but we look at each each state each risk pool and make that determination.
With the payer partner, we ideally like to have some payers have skin in the game.
So jumping into a 100% risk thats just our preferred methodology, if you see the broader M&A environment.
Again with benefit design changes.
Some of the utilization commentary that youre seeing from pretty broad number of managed care companies from.
From the <unk> 28.
Changes coming down the Pike.
New drugs being approved so that impact spot D from a risk equation perspective, I just think our thoughtful approaches.
As more prudent in this kind of an environment. We don't think it's an environment, where you're blindly take risk. So we're looking as we have said previously to maximize shared savings maximize earnings power.
For the payers for for us for our providers.
So we're just adding all that up and see if it makes sense to dial up the risk <unk>.
You have to recognize that our providers are not going anywhere the patients that they see don't go anywhere. So then it's just a financial contract and a determination every year and if it makes sense in this environment to dial up risk, we will and if it doesn't we won't so I think we're just going to continue to take a very thoughtful approach.
Thank you one moment for our next question.
Our next question comes from the line of Gary Taylor from Cowen Inc.
Hi, good morning.
Sorry to go back to the shared savings for a minute, but I was just hoping for a more direct.
Answer that that down $19 million.
Sequentially as far more than the typical quarterly variability we see so did you have to lower your accruals for the 22 performance here are you lowering.
What you've accrued year to date for the 23 performance here in the I mean, the primary reason I ask because we just wanted to think about the run rate.
Going forward that line had been up <unk>.
60% in the first half of the year now only up 11. So is it is it weighed upon by an accrual adjustment here and how to move back higher to what we've been seeing in the first half of the year is that the way to think about the go forward modeling. Thanks.
Yes, so again as I talked about earlier I mean, again I would really look at a 12 month view of this so.
Change in a quarter was a mix of 2022 and 2023 estimates, it's not one or the other we've got 100 plus contracts out there and.
Some of the timing of this depends upon when in the year, we get the final results from 2022, and if you look sort of our years over years certain years. They come in at different times, it's really when we get the final information from the payer so.
Again from a future modeling perspective, I'd really stress looking at a 12 month view and not and not looking at it on a quarter by quarter basis.
The other color I would give us this is spread across commercial MSP MMA.
So unlike.
One line.
Focused business.
You can have variability that just to Davids point some of the data and the results in commercial it can be more lagged.
Than you typically see in <unk>.
An MSP RMA CMS is very consistent in how they give us the data its a very structured program everybody gets it at the same time, that's not how it is in commercial sometimes so again our book of business is pretty diversified and you can see some of that variability as a result, so the annual.
Run rate is probably the best way to go about it we understand that that causes some quarter over quarter jumps like it did this quarter.
But we've got kind of maintained our view.
Year over year, and when we give guidance that's what we're looking at.
Thank you one moment for our next question.
Our next question comes from the line of Jamie <unk> from Goldman Sachs.
Hey, Thank you good morning.
Can you give us an update on how youre implemented provide air partners breakdown by primary care versus National T. Outgrowth is trending between the two if there's been any kind of mix shift and just how to think about unit economics between the two categories.
Okay.
Thank you.
Yeah. Thanks for the question Jami, so the broad mix on our 4000 plus providers remains pretty consistent we have about $60 to 65 that what we call as gatekeeper provider. So thats primary care family Medicine Internal medicine. We also include Ob Obgyns and Peter editions. So whoever is the first point of contact and the.
<unk> and then the remaining 35% to 40% given the states can be specialists and again there we are more focused on the non surgical specialties.
Endocrinology, pulmonology and so forth and some of the states, where we have a health system partner. That's on the platform, Florida is a good example would have first you can see the specialty mix skew. The other side as you would expect but as we grow that business across the rest of the states and add more.
Standalone independent providers that mix kind of normalizes. So it just varies a little bit by state, but that's the overall mix and so what we've implemented this year reflects that mix.
The second question the unit economics.
Pretty similar on both primary care and specialty on the fee for service book.
That obviously specialists on more of a provider and certain specialties and so the pricing reflects a very consistent unit economics on the value based book obviously the primary care has once we start MSB MMA.
And start to get into some of the risk contracts.
The unit economics significantly increase we are also the.
Take rate is 40% on those shared savings versus.
The management fee on the fee for service. So the unit economics over time really increase on the primary care and that's what we'd like to see in the business.
Thank you one moment for our next question.
Our next question comes from the line of Jessica <unk> from Piper Sandler.
Hi, Thanks for taking my question.
So I think just strengthened commercial value based care is really stood out to us at the time of the IPO I think we were thinking about those lives is a low single digit P. M. P. M. So just interested to know if that's still a reasonable assumption on those slides and then is there an opportunity to sustain a really robust 2023 growth rates.
2024 through either lives growth or pricing.
Or kind of both thanks.
Yes, thanks for the question Josh.
We would agree I think that's a very underappreciated part of our business.
You can almost think of our business model as.
On the FIFA service side, it's a.
Very ERP like <unk>.
Pricing model that has inherent in flavors with the rates.
So as as.
As we have in theaters on the contracts the management fee generally increases and we are also looking at same store provider on a port provider growth with patient panel increases so that really helps on a same store basis and then if you add the <unk>.
That I would say, it's a very.
From an analogy perspective, a netflix like two or three or $4 <unk> thats on top of the fee for service reimbursement, we get that's a very good margin business and that adds to a very good annuity stream on top of that.
We are doing very good work with a very broad population and like we said previously in one of the questions.
Theres really bends the curve for the bears you can bend their MLR you can bend the MLR for self insured employers we are having very advanced discussions with some of the payers on how do we take this model forward on the commercial book very few medical groups take commercial risk and our density in the strength of our network and the platform allows us to do it at a very large scale in some of the <unk>.
<unk>. So I think we're pretty excited about this book of business.
Again from a Nexium perspective, we guide in February, but it'll be a combination of.
Growth in providers commercial attributed lives contracts that we enter.
As you can see we saw $4 7 million patients.
And the value based book is about a quarter of that or less than a quarter of that with commercial at just 675000.
Our our operating model as you get the providers, who get their lives you optimize fee for service and then we layer in these value based contracts commercial MMA MSP on top and that can take two or three years and some of the new markets, but we think the earnings power is pretty strong and very stable when that when all that machinery works, you're seeing some of that play out in the numbers this year.
Thank you.
One moment for our next question.
Our next question comes from the line of David Larsen from <unk>.
Hi, can you talk a little bit about how volumes trended in the quarter relative to your own expectations and can you comment on obesity diabetes GOP ones. It.
It looks like your cash collections growth was very good.
Our more volumes are positive for your fee for service pick or a headwind because of the risks or does it all sort of net to be neutral. Thank you.
Now to answer the question David So as we've said on previous calls you almost have to distinguish between ambulatory gatekeeper doctors volumes, which we have a.
Pretty predominant way in our book versus inpatient and surgical utilization.
So the former has been running pretty strong we expect it to be fairly strong from all the data we see you see that in the numbers.
And thats good utilization in our minds as as individuals are seeing their primary provider.
Across the age cohorts.
I think the latter you've seen some of the commentary from from managed care companies that has been trending high but that does not impact us directly on the fee for service on the value based book given the diversity of our book between commercial MSP MMA.
We're fairly hedged in spikes in <unk>.
Surgical our inpatient utilization the commercial value book were not taken downside risk.
<unk> based with some upside risk shared savings so.
You don't see too much impact MSP is a relative benchmark program. So again, there could be some impact, but it's not that acute and then where we are exposed obviously as the MMA book.
And we're trying to manage that as much as we can.
So from an overall perspective, I think we are seeing favorability across across all lines of business.
And to.
The second question look it's still early on on <unk> I know its a pretty hot topic, given all the media news I think we're still about 12 24 months away to see some real empirical data. Our hope is that as utilization of these drugs takes up.
Gatekeeper providers non surgical specialties those that we have predominantly in our network should see more patient interaction as patients try to see the impact of these drugs and try to have more of a conversation as to how it's impacting their existing chronic condition or whatever it might be so again, we think the.
Ambulatory utilization should go up as a result.
And then on the value based book as is broadly expected. If this leads to lower chronic city. If it leads to lower surgical volumes as people are much more healthier than that should impact positively on the value based side. So we'll see how the empirical data plays out but overall I think it should be positive.
Thank you at this time I would now like to turn the conference back over to Mr Park Mehrotra for closing remarks.
Thank you for listening to our call today. We appreciate your continued interest and support of <unk> and look forward to speaking with you again in the near future.
This concludes today's conference call. Thank you for participating you may now disconnect.
Okay.
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