Q3 2023 P3 Health Partners Inc Earnings Call
Okay.
Sure.
Good afternoon, everyone and welcome to the P. Three health partners third quarter results Conference call.
All participants are in a listen only mode. Later, we will conduct a question and answer session.
And instructions will follow at that time.
As a reminder, this conference is being recorded.
I will now turn the conference over to Karen Bloomquist, Vice President of Investor Relations of P. Three. Please go ahead.
Thank you operator, and thank you for joining us today before we proceed with the call I would like to remind everyone that certain statements made during this call are forward looking statements under the U S. Federal Securities law, including statements regarding our financial outlook and long term targets. These forward looking statements are only predictions and are based largely on our current expectation.
And projections about future events and financial trends that we believe may affect our business financial condition and results of operation.
These statements are subject to risks and uncertainties that could cause actual results differ materially from historical experience or present expectations.
Information concerning factors that could cause actual results could differ from these statements made on this call is contained in our periodic reports filed with the SEC.
The forward looking statements made during this call speak only as of the date hereof and the company undertakes no obligation to update or revise the forward looking statements.
We will refer to certain non-GAAP financial measures on this call, including adjusted operating expense adjusted EBITA adjusted EBITA per member per month medical margin medical margin per member per month.
Medical margin per member per month to a persistent wise and cash burn. These non-GAAP financial measures are in addition to and not a substitute or superior to the measures of financial performance prepared in accordance with GAAP. There are a number of limitations related to the use of these non-GAAP financial measures for example, other companies may calculate.
Titled non-GAAP financial measures differently refer to the appendix of our earnings release for a reconciliation of these non-GAAP financial measures to the most directly comparable GAAP measures information presented on this call is contained in the press release that we issued today and in our SEC filings, which may be accessed from the events investors page.
The P three health partners website.
I will now turn the call over to Dr. <unk>, <unk> CEO and co founder of P. Three.
Thanks, Karen and thank you all for joining our third quarter 2023 conference call.
I'd like to update you all on our third quarter financial results 2023 guidance as well as provide preliminary 2020 for guidance.
I'll start off with some few big picture comes we are pleased to be able to reported that we are tracking towards our 'twenty to 'twenty three full year guidance as expected.
Our overall momentum remains very strong.
While our third quarter EBITDA is lower than anticipated by approximately $15 million.
This is predominantly due to some timing elements impacting our EBITDA realization, which atul will provide further details on shortly.
The key point is that we expect about $15 million to $20 million final payment for 2023 for 2022 data services to be realized in the fourth quarter and that will drop to they are down to adjusted EBITDA.
I'm also pleased to be able to report that our cash burn defined as cash flow from operation less capex for the third quarter was $8 million and we are on track to be cash flow breakeven in 'twenty 'twenty four as previously discussed.
We are providing a preliminary 2024 adjusted EBITDA guidance of positive 22 positive $40 million the guidance range assumes 60 million.
EBITDA from persistent lives that's our baseline we will provide more detailed guidance in January 2024.
Onto our third quarter and year to date highlights.
Revenue for the quarter was $288 million, an increase of approximately 16% over the prior year's quarter and year to date revenue of $920 million also grew 16% versus the prior year period.
Medical margin for the quarter was $36 million 126 million year to date on track to meet our guidance of 455 to 175 million for the year Mehdi.
Medical margin per member per month for the quarter on all lives was $115 per member per month, and 135 dollar P. M. P M on a year to date basis.
Medical margin P. M. P M for our persistent lives was 241.
Dollar P. M. P M on a year to date basis that is consistent with the mature market range of 150 to 200 plus P. M. P. M reported by our peer Azure Ma.
Which we considered valuable benchmark.
Or is it the lives are defined as the lives where in our platform in December 2022 and are on our platform in January 'twenty two 'twenty three.
Medical claim expense P. M. P M for our Medicare advantage lives were approximately negative 2% year to date that is a reflection of the power of the P. Three model and the ability to bend the cost curve with more persistent lives on our platform.
Adjusted EBITDA for the quarter was negative $22 3 million.
Compared to a negative $40 3 million in the prior year. The $22 3 million includes the impact of a noncash in the quarter $3 8 million true up of employee health care costs and does not take into account the accrual for the revenue recognition.
For the final payment of 2023, and four data service 2022 that we expect will be captured in the fourth quarter year to date adjusted EBITDA was negative $41 2 million compared to the prior year of negative $87 9 million, which is 53 per.
Sent improvement.
Said differently, we cut our losses in half.
As we look forward to 'twenty 'twenty four we would like to provide you with some insight on that.
As to how we see next year shaping up.
As I just shared our baseline for 2024 starts with the expectation that our persistent lives will contribute approximately $60 million of EBITDA in the year. Additionally, we expect to take a meaningful new lives and growth in 2024.
We are expecting to achieve this growth in a very capital efficient.
Way by continuing to focus on existing and adjacent markets, while leveraging our existing infrastructure in a meaningful way.
We have various conversations ongoing with payors providers, and health system, including potential JV and strategic partnership opportunities based on all of this I remain bullish on our opportunities to thrive in the years to come.
Now I would like to turn the call over to Bill Berman, our Chief operating officer.
Thank you Sherif I plan to cover three topics today first how we judge our own operating performance and the effectiveness of the P. Three model.
Second ACO reach and third highlights from our California market.
We as a management team judge our own operating performance on a P. M. P M basis, as well as versus publicly available benchmarking data.
On the last point, we are a publicly traded peer agile on health with a similar affiliate business model. So the data is readily available and relevant.
We have the utmost respect and admiration for what <unk> has achieved and use it as a natural benchmark for the P. Three business. Knowing there are some differences in the model and mix and membership.
The first relevant data point is revenue per member per month growth for the quarter.
This is a relevant data point to answer the question is the P. Three model effective at engaging patients and assessing the disease burden appropriately.
<unk> revenue P. M. P M girls for the quarter was 11% and <unk> was the same.
P threes revenue P. M. P. M year to date was $985 agile loans was $945. We are pleased about that.
The second data point is medical margin P. M. P M, which is directly tied to the effectiveness of P. Threes model in absolute terms and relative to a JV model.
It answers the question does the Petri model Bend, the cost curve as effectively as the JV model.
It is the fundamental value prop and value based care premiums less medical claims.
P Threes medical margin P. M. P. M is $135 year to date agile lines was $119 P. M. P M year to date and $134 P. M. P M for two year plus markets.
P threes persistent lives medical margin P. M. P. M is $241 year to date.
We're already operating at mature margins of a JV model.
The third data point is gross profit P. M. P. M. P. Threes year to date gross profit P. M. P. M was $56 P. M. P M versus agile launch at $45 P. M. P. M. We feel really good about that.
There are some differences in the two models were not fully scaled yet and expect to leverage our infrastructure in a similar fashion as we grow over the coming years.
P. Three owns roughly a 100% of its adjusted EBITDA and so we don't expect significant minority interest expense going forward as we become adjusted EBITDA profitable.
We don't have significant geographic entry costs, we generally grow adjacent to our existing markets given the significant white space available to pursue this strategy.
<unk> cash burn year to date was $61 million versus agile on at $107 million.
We also enjoyed lower cost of membership acquisition than our peers. The majority of our provider ads are driven by inbound inquiries by those attracted to our operating model and this really allows us to avoid long sales cycles. Additionally.
Additionally, 20% of P. Threes revenue was delegated which has positive cash flow dynamics attributed to it.
We expect to grow that over time, so our cash flow dynamics will mirror that of a health plan premiums upfront pay claims later.
The delegated model also enables important operating benefits related to better data clarity accuracy and timing versus non delegated which is helpful to drive physician adoption of our P. Three model and better manage medical cost trend.
Finally, we have a lower mix of ACO reach lives today.
Regarding ACO reach we have roughly 7000 lives today and plan to increase that substantially over the coming years.
With our current 2700 and growing PC piece that we have the ACO reach program allows us to create greater depth into each of our practices by offering the benefits of this program to patients being seen by those Pcp's, who are not currently in a risk based arrangement.
Migrating those patients to an ACO reach program further entrenches the value based care concept with our clinicians and allows us to better serve those patients we.
We continue to see an increase in engagement level of our clinicians as they deepen their understanding of the value based care program due to proper incentive alignment increased use of our data tools and education as well as working with our care management teams for very sick high utilize.
<unk> patients.
This increase adoption and engagement is very encouraging and bodes very well for our clinical financial and operational performance going forward.
Lastly, I want to take a minute to focus on one of our newer markets, California, which we entered in December of 2021, we have approximately 8500 Medicare advantage members in this market much of this market is based solely on affiliate.
It providers as we don't have a medical group presence here.
If we compare the California market for September of 2023 year to date versus prior year to date, you will see some significant improvements we've made in this market's performance if.
If you start with revenue P. M P M.
Third quarter 2023 year to date.
It was $1134 P. M P M versus year to date prior it was $976 P. M. P. M. That's an increase of 16%.
Medical margin P. M. P M third quarter year to date 2023, it was positive $244 P. M. P M <unk>.
First is year to date prior it was negative $45 P. M. P M.
Nearly $300 positive swing.
One key element driving this performance is our commitment to building very strong relationships with our affiliate providers, we've partnered with them to see many of their patients and our senior center, where we believe we have done a tremendous job of clothing care gaps in identifying their chronic conditions to help aid their PC piece.
In providing the best care.
We believe we have also optimized our health plan contracts to assure full alignment with our payer partners and will expand upon the coordination of care with the stronger performing plants.
I want to thank you for your time today and now I will turn the call over to a tool catheter car our CFO.
Thanks, Bill and good afternoon, everyone I'll start by discussing our recent quarter and how we are progressing towards meeting our full year guidance.
Then I'll provide updates on our liquidity position and our significantly lower cash burn in the quarter and finish up with some thoughts around our preliminary 2024 adjusted EBITDA guidance.
I'll begin with our results for the quarter and year to date Todd.
Topline results for the third quarter were strong with capitation revenue of $285 million and total revenue of $288 million, representing growth of 17% and 16% respectively compared to the prior year year to date Capitate revenue was $910 million and total revenue.
It was $920 million, representing an improvement of approximately 16% on each metric compared to the same period in the prior year.
On a P. M. P M basis, it's roughly equates to a 16% improvement reflective of improved funding on the nearly 75% are persistent members on our platform, which we define as members who have been with P. Three since the start of the calendar year.
In the third quarter, our medical margin improved to $36 million or $115 on a P. M. P M basis, which is a roughly six times improvement compared to the prior year year to date medical margin improved nearly 25 times to $126 million.
Gross profit in the quarter improved significantly over the prior year to $9 million or $29 P. M. P M compared to a slight loss in the prior year.
Year to date gross profit increased to $52 million or $56 million P. M. P M compared to a loss in the prior year.
This is yet another quarter in which we have demonstrated significant progress on these measures and that provides a clearer picture on our ability to manage and improve our members' health going forward. We have targeted several new initiatives that we will be laser focused on that are designed to be even more impactful in managing our medical costs will be.
Sharing much more about them and the delivered results in subsequent calls.
As it relates to operating expense trends, we saw a significant drop in our platform support costs going from 12% of revenue in the third quarter of 22 down to 9% in the current quarter I continue to be very pleased with the team's commitment to continuous improvement and operational innovation and as I.
Sat in the past, we will continue to monitor our spending carefully and incorporate this mindset into our everyday cash management.
Adjusted EBITDA for the quarter was a loss of $22 million, a significant improvement compared to a loss of $40 million in the prior year year to date 2023, adjusted EBITDA loss was $41 million.
Compared to a loss of $88 million in the same period of 22, another significant area of improvement.
Let me provide some additional color on this quarters adjusted EBITDA.
Our adjusted EBITDA for this quarter reflect several notable elements, including a favorable IV in our adjustment recommended by our actuaries.
Roughly $3 8 million noncash charge related to employee insurance costs and finally, no recognition of any revenues in connection with our estimated 2023 final payment related to the 2022 dates of service.
All in all we're pleased with the quarter's results and plan to drive the company to higher performance over the next several quarters to that end, we are reaffirming our full year 2023 guidance.
We still expect 2023 revenue to be between $1 2 billion and $1 two 5 billion.
Adjusted EBITDA of between negative 30 to negative $50 million.
In our medical margin to be between 155 million and $175 million.
With regards to our liquidity our position is solid we ended the quarter with approximately $58 million in cash.
And consistent with our messaging last quarter, our cash burn was substantially lower than in prior quarters at approximately $8 million of burn in Q3.
While this is reflective of a more normalized burn rate in the near term. We continue to March down the path that leads us to profitability next year and positive cash flow soon thereafter looking.
Looking forward and as Sharif mentioned earlier, we are expecting to continue the positive trends. We've seen in terms of member growth revenue medical margin and operating expenses, specifically, we have high visibility into some of the key drivers of our business, including our persistent member economics.
Our new membership growth pipeline.
Our funding in 2024 adjusted for the V 28 model.
Our growing ACO reach penetration along with its better unit economics and specific areas of opportunity and our medical cost management.
We will provide further details at a future Investor conference in early 'twenty 'twenty, four but are expecting to generate adjusted EBITDA between positive 20 and positive $40 million.
We are pleased to share continued optimism and excitement at the near term and long term prospects of P. Three and look forward to sharing more specific details with you in the coming weeks.
Okay.
Operator, let me make some closing comments and then we'll go to Q&A.
So today in the call we shared with you reaffirmed our EBITDA and medical margin guidance for 2023.
We shared with you that our revenue was up 16% our capitation revenue was up 17%.
We also shared with you that our Medicare advantage medical experience year to date per member per month, when you compared with the mitigate advantage.
Year to date 2022, the trend is down negative 2% improvement in the medical costs and that reflects.
The power of <unk> model and the success that we're seeing the medical margin improved 306% year over ear.
$36 million for the quarter over 9 million last year quarter.
Gross profit was 9 million positive versus 6 million negative.
Last year same quarter.
Opex is down 18% to 20% year over year, our cash burn as we shared with you is $8 million for the entire.
Quarter, our EBITDA improved from last quarter and year to date 2000.
Three over 22 by 53% as we mentioned and shared with you that basically we cut our losses in half over this year and we've shared with you our preliminary.
Our projections for EBITDA positive to any 24 between 20 and $40 million.
So with that operator, we're ready for Q&A.
We will now begin the question and answer session to ask a question you May Press Star then one on your Touchtone phone if youre using a speakerphone. Please pick up your handset before pressing the keys.
If at any time. Your question has been addressed and you would like to withdraw your question. Please press Star then two.
First question comes from Brooks O'neil with Lake Street Capital markets. Please go ahead.
Afternoon, everyone and congratulations on the significant progress you've made.
I have a couple of questions I guess.
I'd like to first just to ask you.
Sure. If you mentioned that you expect a.
A meaningful drop down in Q4 related to the.
The claims experience in the prior year.
When you're thinking about the $20 million to $40 million positive EBITDA you commented about that.
Acting in 'twenty 'twenty four is that dependent on any kind of similar dropped down from prior year.
Well I think Brooks first thank you very much and I appreciate the question.
That's exactly why I put those summary caps.
<unk> at the end, it's we're going to continue to improve that the revenue will continue to go up 16% to 17%.
The medical cost will continue to trickle down and as a result, our actuarial.
You said they recommended that we start releasing some of the reserves are there.
That we are we put in <unk>, our medical margin is.
Improved 300% year over over here I don't even have to do that but if it continued to improve.
And and are they the.
<unk> from they they persist alive is 241 dollar a P. M. P. M. So you can extrapolate that continuation of revenue medical costs go down medical margin go up gross profit go up Opex. We're all focused on continue to to be more efficient.
And then leverage the infrastructure.
The cash burden continues.
To go down.
That then that's our path for the $20 million to $40 million EBITDA.
That's great I think it's I think it's going to be important for you to get there.
It sounds like you're on track to do so so that's fantastic let me just ask you.
About the growth you commented about new lives for 2024, obviously historically when you've had new lives come in they tend to be depressing to.
Some of the profit.
In performance you've had how confident are you that you can bring in new lives next year and still continue the improvement Youre seeing now.
We're very confident.
Brooks and because we.
We've added some lives this year with Adam on the same network with Adam on the same geography and markets we went to.
The market in the County next door, so we can leverage.
<unk> structure, and we're going to continue to do so and we're seeing more and more as not only the patient and maturation take place, but the physician engagement maturation takes place.
At that time from landing in our platform and soaring into a successful.
Medical margin is getting shorter and shorter so we're very confident that we will be able to grow.
And maintain.
The trajectory that we shared with you today.
Greg Let me ask one last question I think was the tool mentioned.
Funding.
Improvement that you've achieved this year.
My sense is that our friends at CMS have made some changes to.
The risk adjustment mechanisms in Medicare advantage.
Again, how confident are you that you can continue to drive improved funding next year in the environment, We all anticipate for 'twenty to 'twenty four.
I will turn the they are the answer to Dr. Baucus is here with us in the room, He's our co founder and Chief Medicare Chief Medical Officer.
That Quebec, because hey, Brooks good to hear you Ryan.
Yes, I mean for us as you've heard me describe before a few different factors are real important in making sure that we can continue to perform.
And driving.
Not only proper documentation for each and every one of our patients through our education modules and things that we do today, but also it comes from Sharif is describing the maturity of those practices that understand it so those things all bode well.
Usually bode well for US upfront in addition to that as we've talked about we've also had a we have a better opportunity in regards to when we're looking at where we currently reside in our current RAF with the opportunity that still exists. So when analyzing our populations. We still know we have significant opportunity.
Even with the revenues that <unk> described so where we are quite excited as we even we move diversion 24 to 28 to continue to perform in.
In the risk adjustment coatings standpoint.
Great. Thank you and thank you all for taking my questions today.
Sure.
The next question comes from Josh Raskin with Nephron Research. Please go ahead.
Hi, Thanks, Good evening, guys I got a couple as well I think I heard affiliated Pcp's was 2700, correct me if I'm wrong, if that's not the updated number and if you have a total member total at risk membership number for the quarter as well.
Thanks for that question. So so that's right. So we are just a little over 2700 pcp's in the overall platform.
And members.
And total members are about a 110000 members.
Year to date Medicare at risk Yeah, Yeah, Yeah, yeah.
That sounds good and then they're done.
More on the platform, but if you just kind of that at risk population.
Uh huh.
<unk> thousand and theirs.
There's 4000 or 5000 that we.
<unk> basic share savings share risk with.
Humana and Blue Cross in Arizona, So it's.
You can put the mitigated at 114000.
Okay got you and then can you talk about negotiations with payers for 2020 for I assume you're mostly sat on all of that I'm, specifically thinking about how you're dealing with you know there's changes to the risk model that you mentioned and then you know where are they are they you know your cash.
Payments, increasing or are they cutting out some benefits I'm just curious on data like that and then also curious if you're having conversations with any new payers at this point that you don't currently work with.
Yeah. So.
We're pleased to announce that we did sign a multi year multi state.
Contract with scan health.
Which we did not have a contract with before and it's probably they are the only new payer that we did not have any contract that we extended our relationship with Aetna in our in Oregon, We expanded our relationship with.
It's real the local health plan to multiple new counties and.
And then in Oregon and.
That's that's about a and I think we're in a product we haven't signed anything new in California, but we will.
Okay, and then but how are the negotiations just in terms of you know how are they trying to keep you all that you know.
In light of the reimbursement changes for 2024 are you getting an extra percent or two on the cat payments or just any color on that would be helpful. Tim.
Yes.
The biggest.
Driver for the percentage of premium that as you improve the rab that value of that percentage of premium that would increase as you saw we had a 17% increase in our <unk> P. M.
Year over year.
So there's no change in the percentage of premium that we initiated we are we have a multi year contract. It's not open for negotiation most of them arent there this year.
However, we participate two things about the benefit we participated in putting the benefits that impact our and I think that's the majority of health plan, we're very logical and very supportive and very mindful of that impact downstream on us.
Second we have a.
A language to protect us in medical the.
Benefit change and that will adjust our premium if there is any adjustment adjusted on the outboard.
<unk>.
Okay got you got you that's helpful. And then just to sneak one last one it sounded like $60 million of EBITDA expected in 2024 on the persistent members.
Think about the 20 to 40 sort of the expectation would be to lose $20 million to $40 million on sort of the new.
Cohort of members I'm, just curious how does that compare on a P. M. P M basis, maybe relative to what new members are losing in 2023.
So.
I'm not sure.
We want to go back to 'twenty three.
Have a tools either answer that or can get back to you on this as far as 24, the only thing that we're giving right now.
Josh as is the EBITDA guidance, we'll have a lot more details and by.
By January maybe JP Morgan conference or so so okay. All right. That's fair that's fair we could we could wait thank you.
Our next question comes from Gary Taylor with TD Cowen. Please go ahead.
Hi, Good evening, just a couple for me I do just want to make sure I understand.
Hey, Adam you were referred the timing issue, you're referring to from <unk> to <unk>. So this is.
15 to 20 million of <unk>.
Non delegated.
Revenue that she couldn't go revenue line straight to EBITDA.
Isn't run through any of your health plan.
Receivables and that's just primarily from one plan.
Is there any more you can tell us about that.
That is in reference to the settlement.
The final settlement that is associated with 22 data service. That's that is considered 23 revenue payment and so.
The expectation and we're working with our auditors to make sure that Thats auditable and recognized in the year in which we believe it should be and there is and that's consistent with the way we've treated in the past.
Is to is to be able to recognize that and that's just sort of a rough estimate that's a constrained estimate that we.
We've arrived at based on a couple of years now of history and performance.
That's what that's in reference to Gary.
Okay, but that's not that's you're still treating that on a cash basis basically it's not.
Yeah.
Accruals so far.
So far and sure if had mentioned this at the end of the last call in fact, but today, we're trading at all as cash basis, what we feel is a it.
It is more informative and it is it is.
It is easier for our investors to understand if it's treated on an accrual basis in the period in which it it has to be recognized and that's something that we're working with your auditors on this.
That's not a it's not really a question of whether or not it's twenty-three revenue. The question is are we able to audit it and actually recognized on an accrual basis before the end of the year.
But this is different from the sweep revenue for example, you booked in the in the <unk> the difference.
It is the same the sweep revenue that was booked in the second quarter.
The sweep revenue that was booked in the second quarter is related to 'twenty. One data service that is really 'twenty two.
22 revenue, but since the 'twenty to 'twenty two year was closed that was recognized in this current year. So if you recall in 'twenty. One we were we booked essentially two sweeps in 'twenty two we booked essentially no sweeps and what we're trying to do is to get back into a much more.
Have a systematic.
Basis of accruing this once a year and there is there is this is the year, we think we can demonstrate that.
I'm, an audit standard that we can get back on track to accruing it again in the year than that it should be recognized.
Is that helpful.
Yeah, I think so and so.
I was just trying to piece together, a little bit of seasonality, but if that would have showed up this quarter.
Quarter, EBITDA would be better fourth quarter EBITDA would be worse that would reflect the typical seasonal pattern in your profitability I think does that is that correct.
I think that's that's correct Gary.
But I think here's the here's the key going forward what it does I think it just takes.
It's sort of smooth out revenue to a degree.
And I think it just makes it a little bit easier to understand and that's the whole point of this is to get away from some of this choppiness that.
That makes it more challenging to understand that the model.
Last one for me I mean, the 2020 for EBITDA guidance is pretty impressive well above.
Consensus I know you don't want to give us a whole lot on 24 at this point, but.
You know that that you know that's going to be driven by obviously medical margin improvement, but also depends on the size of the cohort you bring in and at this point of the year I think you'd have pretty good line of sight on <unk>.
New payor contracts new physician.
Physician affiliations et cetera, So I guess, maybe could you answer. This do we do we think about you had kind of slowed down the growth in <unk>.
'twenty three.
You know focused on medical margin is his 24 year, where we think the the new cohorts.
Materially start accelerating again in size or do we think.
Fairly static insights you can give us sort of any sense on what you're thinking about the.
Direction of revenue growth next year.
So we expect meaningful growth in revenue and membership.
An improvement on the EBITDA as we shared with you for 2024.
Okay, all rock with that thank you.
Thanks.
Okay.
Our next question comes from Ryan Daniels with William Blair. Please go ahead.
Yeah, guys. Thanks for taking the questions I'm going to continue with that trail a question I'm curious at this point in the year how visible the growth in at risk lives is for you, meaning do you have new partners or new payers signed and if we take that in the move with more ACO reach lives can help visible is the member.
At this point in the year as we look to 2024.
It's a very visible right. It's comfortably that's why we're comfortable calculating the EBITDA, we're just not prepared to give any guidance on membership revenue.
Any other items and it will be meaningful growth wouldn't be new counties will be coupling, new payors will be some partnerships as well.
Okay, So a little bit of everything and then a couple of financial questions. Just the corporate G&A costs, obviously down nicely year over year, but still up about $6 million sequentially. I think you mentioned there was the insurance hit of nearly $4 million, which explains a lot of that uptick I would assume it's in that line item, but how shall we think of that SG&A spend on a go forward basis.
Our models is this a pretty good quarterly run rate or do we need to adjust that.
No. So for the quarter I think you hit it correctly. So in the quarter, we actually had about it was closer to $5 million of a hit about three eight of it is related to periods outside of the third quarter. So so that's kind of how you can think of a normalized.
Think of about 1 million Bucks, a little bit over $1 million per quarter, but going forward I think one of the things that we've been stressing here and you've seen some demonstration of it as a continued.
Prioritization focus on efficiency and.
We will just continually get better I think over time you know.
Opex will grow as the company grows but I think it will grow at a much much slower rate than what you've seen in the past, it's going to be disciplined and it's gonna be.
In a way that is.
That is more appropriate for a growing company.
So I think if you looked at the third quarter. If you if you shave off about 4 million bucks for sort of out of period.
$1 I think that gives you a good starting point, but I think that we will still expect to see I am still expecting a little bit of improvement in the fourth quarter.
But.
As I said going into 'twenty four it will give some more specific guidance around that but yes.
Yes.
Helpful. And then last question I, just want to make sure I have a complete understanding of the nomenclature you're using when you talk about persistent lives can you remind us is that lives that have been on the platform for more than a year or that were on the platform to start with like 2022, what defines that because those are some impressive metrics and kind of shows the power of the <unk>.
Model overtime, so want to make sure I understand that.
Our <unk>.
Definitions of resistant is similar to what.
CMS use.
So.
The patients that are in our platform of December of the prior year.
And as I said it in a cold December 'twenty two that the definition of our present some I've been twenty-three anybody that wasn't in our platform in December that showed up again in January that we considered those resistant lives some of them.
Then here only for like a month.
Some of them were done for 36 plus months some of them will then for 11 months.
Since the beginning of the year. So that's the the distance right.
Do you have an average age of that cohort four patients that are persistent given that you know some of them.
Ron in December, but they've been on for multiple years do you know the age of that cohort on and if that's something you can calculate it.
I'm sure somebody does so.
I can get it to you by the end of the day today as a matter of fact I already got a message our analytics folks certainly somebody does yes, I'll get to you I'm not shared with the group Okay. Great. Thank you so much.
Our next question comes from David Larsen with BTG. Please go ahead.
Hi, This is Danny on for Dave Larsen, Congrats on the quarter and thanks for taking my question I. Just wanted to know if you could elaborate more on the opportunity that you see with the fully delegated lives I think you mentioned that you're making around 20% right now just the off.
<unk>, there and maybe what percent you expect to reach by 2024.
So yeah.
Thank you nice.
Nice to meet you too.
David and say hi.
So.
The the delegated lives are now with like I said, it's about 20% we are targeting to.
We are targeting two two to reach.
But I.
I'm going to say, 30%, 35%.
Pretty much all the new contracts that we sign liquids, Ken and others are fully delegated so a lot of that growth and humana that we signed in Nevada, It's fully delegated. So all this will come in with the full delegated and we're hoping to grow those we are in discussion with United and Aetna and Centene too.
To convert and that would be the other 60% of flights that we have that then we will head the 90% Mark so that is the.
Okay great.
Trajectory that we have.
Okay that sounds great and then just on the ECL reached side of the business I think you've mentioned before that they generally start out with lower margins and they but they ramp up to be equal or even better just any thoughts on that opportunity and timeline to ramping.
Hi, Penny this is bill so actually.
Some of the recent data that we've seen is that even overall the new lives coming in on ACO reach.
Our are actually quite profitable.
But as as we see over time, they continue to grow just like our Medicare advantage lives. So we actually see a very nice pop.
With our new ACO reach lives as well as those persistent ACO reach lives that we will see in the coming years.
Okay, Great and just a last one for me any thoughts on the current utilization trends and any details in terms of like inpatient versus outpatient utilization and maybe some thoughts on G. L. T. One thanks.
Sure had any Dr. Back is here so as far as resetting I mean, we've actually been able to bend that cost curve down.
We were down by 2% over this last year with the expenditures that people, who are very very concerned with so jumping right to the G. O. P. One question, yes, we do have patients that are utilizing GOP one, but we're also seeing clinical improvements in regards to cardiovascular disease and the other things that we used <unk> for not necessary.
For blood sugar alone.
It is nice to see that for our population being senior population is not necessarily something that you see like in commercial population, where a lot of people are using G. O P. One for a potential weight loss and things like that so we are a little bit.
I'll say.
Covered.
With our senior populations that we manage.
From an inpatient standpoint, and things like that we continue to do and work with our plan. We are able to do concurrent review, especially on the not only those delegated lives, but also we do have some.
M U M opportunities, where we're not fully delegated so we're continuing to do that as well and work with our plans to.
To improve inpatient utilization, whether it's direct hospitalization or even post acute so those are all things that we look at as well as being able to risk stratify, our population very very well to understand who are those populations at risk that are very high cost high risk rising risk population. So that our care management teams are working directly.
With that already our CMO and her market, but with directly with our providers and patients to maximize their care and access. So these are all things that we do collectively to drive down that medical expense and we have some real good actions going forward into 'twenty four.
Great. Thanks for taking my questions and congrats on the quake.
Thank you very much penny.
Ryan by the way the question about the age the average age of the persistent life is 73 years old.
This concludes our question and answer session I would like to turn the conference over to Doctor Sharif Abdou for any closing remarks.
Thank you operator, so today, we reaffirmed the guidance for EBITDA in medical margin for 'twenty three as I shared with you before I shared with you the revenues up 16% to 17% our medical claim expense for the.
Medicare advantage lives, 2% better negative lower than it was last year and our medical margin is 300%.
Improved our gross profit is $15 million better than it was the same quarter last year, our opex is 18% to 20% improved in lower year over here, our cash burn is down to $8 million for the entire quarter and our EBITDA losses compared to last year is 53% better.
We've also shared with you our 2024 preliminary Ah.
EBITDA and adjusted EBITDA guidance.
Positive 22 positive $40 million for 2024 with that thank you all very much and look forward to.
Our next conversation.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.