Q4 2023 P3 Health Partners Inc Earnings Call
Operator: Good day and welcome to the P3 Health PRtnrs 4th Quarter 2023 Earnings Conference Call. All participants will be in listen-only mode.
Good day and welcome to the P. Three health partners fourth quarter 2023 earnings Conference call, all participants will be in listen only mode.
Operator: Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then 1 on your telephone keypad.
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Operator: To withdraw your question, please press star- Please note today's event is being recorded. I would now like to turn the conference over to Ryan Halstead. 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 being made during this call are forward-looking statements under the U.S. federal security laws, including statements regarding our financial outlook and long-term targets. These forward-looking statements are only predictions and are based largely on our current expectations and projections about future events and financial trends that we believe may affect our business, financial condition, and results of operations. These statements are subject to risks and uncertainties that could cause actual results to differ materially from historical experience or present expectations.
So it's all your question. Please press Star then two.
Please note today's event is being recorded.
I would now like to turn the conference over to Ryan Halstead. Please go ahead Sir.
Ryan Scott Daniels: 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 being made during this call are forward looking statements under the U S Federal security laws, including statements regarding our financial outlook and long term target.
Ryan Scott Daniels: These forward looking statements are only predictions and are based largely on our current expectations and projections about future events and financial trends that we believe may affect our business financial condition and results of operations.
Ryan Scott Daniels: These statements are subject to risks and uncertainties that could cause actual results to differ materially from historical experience or present expectations.
Ryan Scott Daniels: Additional information concerning factors that could cause actual results to differ from 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 EBITDA, adjusted EBITDA per member per month, medical margin, medical margin per member per month, medical margin per member per month for persistent lives, 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 similarly titled non-GAAP financial measures differently.
Additional information concerning factors that could cause actual results to differ from statements made on this call is contained in our periodic reports filed with the SEC.
Ryan Scott Daniels: 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.
Ryan Scott Daniels: We will refer to certain non-GAAP financial measures on this call, including adjusted operating expense adjusted EBITDA adjusted EBITDA per member per month medical margin medical margin per member per month.
Ryan Scott Daniels: Margin per member per month for persistent lives 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.
Ryan Scott Daniels: Other companies May calculate similarly, titled non-GAAP financial measures differently. Please.
Ryan Scott Daniels: Please refer to the appendix of our earnings release for a reconciliation of these non-GAAP financial measures to the most directly comparable GAAP measure. 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 Investors page of the P3 Health PRtnrs website. I will now turn the call over to Dr. Abdou, CEO and co-founder of P3. Thanks, Ryan, and welcome everyone to our year-end 2023 conference call. We would like to update you on our fourth quarter and full year 2023 financial results as well as provide further thoughts on 2024. Our momentum remains robust. We are reaffirming 2024 guidance based on several key observations in the early part of the year. Number one:
Please 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 S. T SEC filings, which may be accessed from the investors page of the P. Three.
Sherif Abdou: Health Partners website, I will now turn the call over to Doctor Abdou, CEO and cofounder of piece of it.
Thanks, Ryan and welcome everyone to our year end 'twenty two 'twenty three conference call.
Would like to update you on our fourth quarter and full year 2023 financial results as well as provide further thoughts and 2024.
Sherif Abdou: Our momentum remains robust.
Sherif Abdou: We are reaffirming 'twenty 'twenty four guidance based on several key observation in the early part of the year.
Sherif Abdou: Number one.
Sherif Abdou: Starting with our membership, the annual enrollment period was a success, and our January membership increased by approximately 11% from December to a count of approximately 121,000 Medicaid Advantage and Medicare ACO REACH lives. Number two. Consistent with our stated objective of discipline and purposeful growth, we have broadened our service area by expanding into two adjacent counties in Arizona and six contiguous counties in Oregon, bringing us to a total of 23 counties at the start of 2024. Our revenue in 2023 grew approximately 21% year over year, and our per member per month funding was up approximately 16% year over year. And despite the challenges others in our sector have voiced around V24 to V28 and declines in reimbursement, as we indicated in earlier commentary, we are realizing an increase in our funding.
Sherif Abdou: Starting with our membership the annual enrollment period was a success and our January membership increased by approximately 11% from December do I, Kevin ROE of approximately 121000 mitigate advantage and Medicare ACO reach lives.
Sherif Abdou: Number two.
Sherif Abdou: This is consistent with our stated objective of discipline and purposeful growth, we have broadened our service area by expanding into two adjacent counties in Arizona and six contiguous counties in Oregon, bringing us to a total of 23 counties at the start of 'twenty.
Sherif Abdou: 24.
Sherif Abdou: Number three.
Sherif Abdou: Our revenue in 2020 three grew approximately 21% year over year our per member per month funding was up approximately 16% year over year and despite the challenges other than our sector have bought it at around the 24 to <unk> 28 and declines in <unk>.
Sherif Abdou: Reimbursement as we indicated in earlier commentary, we are realizing an increase in our funding.
Sherif Abdou: Number four, medical margin improved by 118% from 2022 to 2023. You will hear from Atul that the increase in utilization is in part attributed to the EBITMS, but what gives me further confidence in 2024 is that medical claim expense decreased by 26% in January from December, returning to a normalized level. Number 5, The initiatives we put in place to enhance operational efficiency continue to materialize as platform expense came down by 32% year over year to a high single-digit percentage of revenue for the year, as previously indicated. Our fourth quarter trend is even more impressive, and we believe it will establish the baseline for 2024. Number six. Considering the adjustment to EBITDA was mostly non-cash items, our net cash use and operation significantly improved over the first half of the year. Number seven.
Sherif Abdou: Number four medical margin improved by 118% from 'twenty to 'twenty to 'twenty two 'twenty three you'll hear from a tool that the increase in utilization is in part attributed to the EBITDA mess, but.
Sherif Abdou: What gives me further confidence in 'twenty 'twenty four is that medical claim expense decreased by 26% in January from December returning to a normalized level.
Sherif Abdou: Number five.
Sherif Abdou: The initiatives, we put in place to enhance operational efficiency continued to materialize as platform expense came down by 32% year over year to be a high single digit percentage of revenue for the year as previously indicated.
Sherif Abdou: Our fourth quarter trend is even more impressive and we believe it will establish the baseline for 'twenty 'twenty four.
Sherif Abdou: Okay.
Number six.
Sherif Abdou: Considering the adjustments to EBITDA were mostly noncash items, our net cash used in operations significantly improved over the first half of the year.
Sherif Abdou: Number seven.
Sherif Abdou: We continue toward our inflection point.
Sherif Abdou: We continue towards our inflection point, and we expect to become EBITDA positive in 2024, consistent with our previous guidance of positive 20 to positive 40 million by end of year. Number 8.
Sherif Abdou: And we expect to become EBITDA positive in 2024, consistent with our previous guidance of positive 22 above the $40 million.
Sherif Abdou: By end of year.
Sherif Abdou: Number eight.
Sherif Abdou: We continue to advance a robust, tight line of growth opportunities and expect positive developments across multiple strategic partnerships in the coming quarters. And finally, number nine. The team remains highly motivated to deliver in 2024, and combined with our early data points, we are confirming and reaffirming our previous 2024 guidance. In conclusion, we believe the demand for the P3 model is as high as ever, and we believe that our demonstrated ability to manage the medical margin, improve funding, and GROW membership are driving this demand. We remain confident in 2024 results based on the utilization trend we are seeing early in the year, despite the increase in December 2023. Our payer, provider, and health system discussions are ongoing, including potential joint venture and strategic partnership opportunities. I am encouraged by the tremendous strides the P3 team continues to make on the clinical and operational sides.
Sherif Abdou: We continue to advance our robust pipeline of growth opportunities and expect positive development across multiple strategic partnerships in the coming quarters.
Sherif Abdou: And finally number nine.
Sherif Abdou: The team remains highly motivated to deliver in 2024 and combined with our early data points, we are confirming and reaffirming our previous 2024 guidance.
Sherif Abdou: In conclusion, we believe the demand for P. Three model is as high as ever and we believe that our demonstrated ability to manage their medical margin.
Sherif Abdou: Improved funding.
Sherif Abdou: And grow membership are driving this demand.
We remain confident in 'twenty 'twenty four results based on the utilization trends. We are seeing early in the year. Despite the increase in December 2023.
Sherif Abdou: Our payer provider and health system discussion are ongoing including potential joint venture and strategic partnership opportunities I am encourage by the tremendous strides the b three team continued to make on our clinical and operational side I am confident in our ability.
Atul Kavthekar: I am confident in our ability to achieve profitability this year and scale it in the coming year. With that, I would like to turn it over to Atul Kavthekar, our Chief Financial Officer. Thanks, Sheriff.
Sherif Abdou: To achieve profitability this year and the scale in the coming years.
Sherif Abdou: With that I would like to turn it over to Atul Carr, our Chief Finance Officer.
Atul Kavthekar: Thanks sure.
Atul Kavthekar: Sherif hit the highlights, but I want to provide a bit more detail on the fourth quarter and the full year 2023 results, which brought us below our full year EBITDA guidance we confirmed in early January 2024. I will discuss in some detail some of the new information we received in February of 2024 that caused these changes to Q4, but we'll also speak about the encouraging factors around our 2024 expectations and the reason we are so excited about P3's future. First, let me walk you through the fourth quarter and full year 2023 numbers. Top-line results in 2023 were strong, as the team executed and delivered revenue of $1.266 billion, representing 21% growth and above our guidance range. On a p.m. p.m. basis, revenues grew by approximately 15 percent over 2022.
Atul Kavthekar: Sure ill hit the highlights, but I want to provide a bit more detail on the fourth quarter and the full year 2023 results, which brought us below our full year EBITDA guidance, we confirmed in early January 2024.
Atul Kavthekar: I will discuss in some detail some of the new information we received in February of 'twenty 'twenty four and cause these changes to Q4, but will also speak about the encouraging factors around our 'twenty 'twenty four expectations and the reason, we're so excited about P threes future.
Atul Kavthekar: First let me walk you through the fourth quarter and full year 2023 numbers.
Atul Kavthekar: <unk> results in 2023 were strong.
Atul Kavthekar: Team executed and delivered revenue of one point to six $6 billion, representing 21% growth and above our guidance range on a P. M. P. M basis revenues grew by approximately 15% over 2022.
Atul Kavthekar: In the fourth quarter, we had revenue of $347 million, a 34% increase over the fourth quarter of 2022. As we've discussed on previous calls, we developed a model to estimate the amounts we expect to receive related to our 2023 wrap paid in June or July of 2024. Going forward, we expect to be able to accrue our estimated final sweep amounts for the 2024 payment year that will be paid in mid 2025 in the fourth and potentially the third quarter of 2024.
Atul Kavthekar: In the fourth quarter, we had revenue of 347, million% to 34% increase over the fourth quarter of 2022.
Atul Kavthekar: As we've discussed on previous calls we developed a model to estimate the amounts we expect to receive related to our 2023 wrap paint in June or July of 2024.
Atul Kavthekar: Going forward, we expect to be able to accrue our estimated final sweep amounts for 2020 for payment here that will be paid in mid 2025, and the fourth and potentially the third quarter of 2024.
Atul Kavthekar: In 2023, as Sherif mentioned, our medical margin, which represents the amounts earned from capitation revenue after medical claims expense, improved 118% over the prior year to $135 million, or $108 on a PMPM basis. We believe that, despite the large adjustments to our reserve taken in the quarter, which I'll discuss in more detail, the positive trend in this critical metric is continued proof that our model works and is only improving. To that end, we continue to optimize our provider and payer networks to enhance medical margins going forward. Our platform support costs are another demonstration of our commitment to driving operating leverage and shareholder value and have continued to decrease as a percentage of revenue. In fact, we decreased our platform costs as a percentage of revenues from around 15% in 2021 and 11% in 2022 to approximately 8% for the full year 2023, consistent with the guidance of high single digits we've provided in the past.
Atul Kavthekar: In 2023 of Sharif mentioned, our medical margin, which represents the amounts earned from capitation revenue after medical claims expense.
Atul Kavthekar: Proved 118% over the prior year to $135 million or $108 on a P. M. P M basis.
None: We believe that despite the large adjustments to our reserve taken in the quarter, which I'll discuss in more detail. The positive trend in this critical metric is continued proof that our model works and it's only improving.
None: To that end, we continue to optimize our provider and payer networks to enhance medical margins going forward.
Our platform support costs are another demonstration of our commitment to driving operating leverage and shareholder value and have continued to decrease as a percentage of revenue and.
None: In fact, we decreased our platform costs as a percentage of revenues from around 15% in 2021 and 11% in 2022 to approximately 8% for the full year 2023, consistent with the guidance of high single digits, we've provided in the past.
Atul Kavthekar: Adjusted EBITDA loss was $86 million in 2023 compared to an adjusted EBITDA loss of $128 million in the prior year. On a per member per month basis, adjusted EBITDA loss was $68, an improvement of $39 PMPM compared to the prior year, as we successfully improved margins and lowered costs on a per member basis. For the quarter, Adjusted EBITDA was $44 million, or approximately $138 on a PMPM basis.
None: Adjusted EBITDA loss was $86 million in 2023 compared to an adjusted EBITDA loss of $128 million in the prior year.
None: On a per member per month basis, adjusted EBITDA loss was $68 an improvement of $39 P. M. P M compared to the prior year as we successfully improved margins and lowered costs on a per member basis.
None: For the quarter adjusted EBITDA loss was $44 million or approximately $138 on a P. M. P M basis.
None: Now I'd like to provide more details around the two main items that made up roughly 40 million of Q4 2023 adjustments that drove our miss relative to our EBITDA guidance.
Atul Kavthekar: Now I'd like to provide more details on the two main items that made up roughly $40 million of Q4 2023 adjustments that drove our miss relative to our AIMPIT.gov. The single biggest factor, accounting for approximately $30 million, is the combined impact of increased utilization in December among some of our health plans, along with an increase in our claims reserve at the end of 2023. In the past few weeks, we determined that it would be prudent and appropriate to increase our reserves by approximately $23 million to reflect greater conservatism in our allowances for claims which have not yet been presented. In addition to this, we recognize incremental medical claims expense of approximately $7 million for higher than expected utilization by some of our health plans for December of 2023 and which were presented to us in February of 2024. Although our own estimates of future claims related to those dates of service were lower, we chose to maintain our recent protocol of booking according to the estimates of our independent actuary.
None: The single biggest factor accounting for approximately $30 million.
None: The combined impact of increased utilization in December among some of our health plans.
None: Along with an increase in our claims reserves at the end of 2023.
None: In the past few weeks, we determined that it would be prudent and appropriate to increase our reserves by approximately $23 million to reflect greater conservatism in our allowances for claims which have not yet been presented.
None: In addition to this we recognized incremental medical claims expense of approximately $7 million for higher than expected utilization by some of our health plans for December of 2023, and which are presented to us in February of 2024.
None: Although our own estimates of future claims related to those dates of service were lower we chose to maintain a recent protocol of booking to the estimates of our independent actuary.
Atul Kavthekar: Over the next several quarters, we will work with our actuaries to observe the actual claims experience and reevaluate our reserve estimates. It is worth noting that medical margins and adjusted EBITDA would benefit in the future to the extent that trends on actual claims are favorable when compared to the estimates reflected on the balance sheet in the fourth quarter. The other significant factor reflected in the quarter's results relates to the write-down of approximately 10 million settlement receivables which are open and subject to continuing dialogue.
None: Over the next several quarters, we will work with our actuaries to observe the actual claims experience and reevaluate our reserve estimates.
None: And it's worth noting that medical margins on adjusted EBITDA with benefit in the future to the extent that trends on actual claims are favorable when compared to the estimates reflected on the balance sheet in the fourth quarter.
None: The other significant factor reflected in the quarter's results relates to the write down of approximately $10 million of settlement receivables, which are open and subject to continuing dialogue.
Atul Kavthekar: We are engaged in a review process with our payer partners regarding the resolution of these amounts. However, because the resolution of those discussions is subject to an ongoing review, we've taken a conservative approach, consistent with GAAP, and have deferred recognition of that revenue until such time as the final disposition is reached. Shifting Toward 2024 Outlook Early 2024 data from our health plan suggests a strong start to the year. A few specific examples.
None: We are engaged in a review process with our payer partners regarding the resolution of these amounts.
None: However, because the resolution of those discussions is subject to an ongoing review we've taken a conservative approach consistent with GAAP and have deferred recognition of that revenue until such time as the final disposition is reached.
None: Shifting to our 2024 outlook early 'twenty 'twenty four data from our health plans, suggesting strong start to the year.
None: Few specific examples.
Atul Kavthekar: On the membership front, early indicators for our annual enrollment period were strong. By the end of January, we had already recognized about 121,000 Medicare at-risk members. This is already approaching the lower end of our full year guidance of 125,000 to 135,000 members by the end of 2024. With our plans for expanding our network over the course of the calendar year, we believe we are well positioned to meet and potentially exceed our guidance. Our early indicators of funding also showed strong improvement over the prior year and are proving to line up well with our initial guidance assumptions. This has been verified by reports received to date by our health plan partners and is another point of validation of our expectations. Our California market, which is 100% delegated, showed particularly strong growth in funding, as evidenced by our cash receipts.
On the membership front early indicators for our annual enrollment period were strong by.
None: And by the end of January we already recognized about 121000 Medicare at risk members.
None: This is already approaching the lower end of our full year guidance of 125000 to 135000 members by the end of 2024.
None: With our plans for expanding our network over the course of the calendar year. We believe we are well positioned to meet and potentially exceed our guidance.
None: Our early indicators of funding also showed strong improvement over the prior year and are proving to line up well with our initial guidance assumptions.
This has been verified by reports received to date by our health plan partners.
And another point of validation of our expectations.
None: Our California market, which is 100 per cent delegated showed particularly strong growth in funding as evidenced by our cash receipts.
Atul Kavthekar: With regard to medical expenses, Dr. Amir Bacchus, a Chief Medical Officer, and Bill Betterman, a Chief Operations Officer, will go through this in more detail. We observe a clear return to normalized, seasonally adjusted metrics for two of our KPIs, admits per thousand and emergency department visits per thousand. This is a clear indicator of recovery for both these metrics from elevated levels in December.
With regards to medical expense and Doctor Amir Baucus, our Chief Medical Officer, and Bill Betterment, Our Chief operations Officer will go through this in more detail.
None: We observed a clear return to normalized seasonally adjusted metrics for two of our Kpis admits per thousand and emergency Department visits per thousand. This is a clear indicator of recovery for both of these metrics from elevated levels in December.
Atul Kavthekar: So to summarize, our full year fiscal 2024 guidance included Medicare Advantage members ranging between $125,000 and $135,000, total revenues ranging between $1.45 and $1.55 billion, medical margin ranging between 230 and 250 million, and medical margin on a p.m. p.m. basis ranging between $165 and $175. And finally, adjusted EBITDA ranging from plus $20 million to plus $40 million. Our practice is not to provide quarterly financial guidance, but I would encourage our analysts and investors to consider the timing of some of the bigger factors in the quarterly gains over EBITDA in 2024. As a reminder, our first quarter, with the regular seasonal cold and flu patterns, tends to be an under-contributor to our annual EBITDA. Some additional points to consider are first, the IB&R refresh will continue on a quarterly basis in 2024, and, as mentioned before, the actual claims run out will impact the reserve amount through any potential adjustments over the next few quarters.
None: So to summarize our full year fiscal 2024 guidance included Medicare advantage members ranging between 125000 and 135000.
None: Total revenues ranging between $1 45, and 155 billion.
None: Medical margin ranging between 230 and $250 million.
None: Medical margin on a P M P M basis, ranging between $165 and $175.
None: And finally, adjusted EBITDA, ranging from plus $20 million to plus $40 million.
None: Our practice is not to provide quarterly financial guidance. However, I would encourage our analysts and investors to consider the timing of some of the bigger factors in the quarterly cadence of our EBITDA in 2024.
None: As a reminder, our first quarter with a regular seasonal cold and flu patterns tends to be an under contributor towards our annual EBITDA.
None: Some additional points to consider are first the IV in our refresh will continue on a quarterly basis in 2024 and as mentioned before the actual claims run out will impact the reserve amount through any potential adjustments over the next few quarters.
None: Second the.
Atul Kavthekar: 2024 RAAF accrual will likely take place primarily in the fourth quarter as it did in 2023 and not smoothly across the calendar year as previously believed. Finally, the benefits of the medical cost reductions that are new for this year will be mostly visible in the latter half of the year, although potentially some in the second quarter. I want to finish by mentioning that our cash flow used in operations in the fourth quarter was approximately negative $16 million, substantially better than that at the start of the year. I'm very pleased at the recent close of the $25 million and note that, on a pro forma basis, should leave us with over approximately $55 million in cash at the end of the quarter. And with that, I'd like to thank you all again for taking the time to hear about the P3 story, and we'll hand off to Dr. Bacchus for more additional detail around early 2024 observations. Thank you, Atul.
The 2020 for RAF accrual will likely place take place primarily in the fourth quarter as it did in 2023.
And not smoothly across the calendar year as previously believed.
None: Finally, the benefit of the medical cost reductions that are new for this year will be mostly visible in the latter half of the year, although potentially some in the second quarter.
None: I want to finish by mentioning that our cash flow used in operations in the fourth quarter was approximately negative $16 million substantially better than that at the start of the year I'm very pleased with the recent close of the $25 million in notes that on a pro forma basis should leave us with over approximately $55 million in cash.
None: At the end of the quarter.
None: And with that I'd like to thank you all again for taking the time to hear about the P. Three story and will hand off to Doctor Baucus for more additional detail around early 2024 observations.
Unknown Executive: Thank you a tool like many of our peers in the value based care space P. Three also has experienced increased fourth quarter cost, but specifically in December of 2023. This is due to COVID-19 and flu exacerbations and part B cost. However, beginning in January we saw a return to seasonally adjusted normalization, including me.
Amir Bacchus: Like many of our peers in the value-based care space, P3 also experienced increased fourth-quarter costs, but specifically in December of 2023. This was due to COVID and flu exacerbations and Part B costs. However, beginning in January, we saw a return to seasonally adjusted normalization, including more normalized inpatient and outpatient utilization. In fact, in January, we saw a 6.7% reduction in hospital admissions and a 6.6% decrease in emergency department visits since December, and a 26% decrease in MedExpense from December of 2023 through January of 2024.
Unknown Executive: Normalized inpatient and outpatient utilization in fact in January we saw a six 7% reduction in hospital admissions and a six 6% decrease in emergency Department visits since December.
Unknown Executive: And a 26% decrease in med expense from December of 2023 through January of 2024.
Amir Bacchus: Another way that P3 has been able to generate medical cost savings is through the tight utilization management of our delegated lives, which make up approximately 30% of our total. Prior authorization and concurrent review activities on procedures like diagnostic imaging, high-cost Part B medications, steerage to appropriate sites of care for high-cost procedures such as orthopedics, and managing emissions all have shown improved savings month over month. A 9.5% improvement in Part B cost avoidance from December to January. It is because of P3's philosophy to not only manage our primary care physicians with our teams, tools, and technology but also manage our entire network of specialists and pharmaceutical costs that allow us to drive deeper relationships in all of our markets. We believe that if you are managing care for patients, you must manage the entire continuum of care to drive the best outcomes at the lowest possible cost. Now, I would like to turn the call over to Bill Bettermann, our Chief Operating Officer. Thank you, Amir.
Unknown Executive: Another way that <unk> has been able to generate medical cost savings is through the tight utilization management of our delegated lives.
Unknown Executive: Which makes up approximately 30% of our total lives.
Unknown Executive: Prior authorization and concurrent review activities on procedures like diagnostic imaging high cost part D medications steerage to appropriate sites of care for high cost procedures, such as orthopedics and managing emissions all have shown improved savings month over month.
Unknown Executive: A nine 5% improvement in part B cost avoidance from December to January.
Unknown Executive: Because the P threes philosophy to not only manage our primary care physicians with our teams tools and technology, but to also manage our entire network of specialists and pharmaceutical costs that allow us to drive deeper relationships in all of our markets. We believe that if you are managing care for patients you must manage the entire continuum of care to drive the best outcome.
Unknown Executive: The lowest potential costs.
Now I would like to turn the call over to Bill Betterment, our Chief operating officer.
William Bettermann: Thank you Amir I'll begin by reviewing the operation activities for 2023 related to ACO reach across all markets, the California, and Oregon markets.
William Bettermann: I'll begin by reviewing operation activities for 2023 related to ACO REACH across all markets, the California and the Oregon market. Our Oregon market saw a $171 PMPM capitated revenue increase from 2022 to 2023, which was a $67 million increase year over year, as well as $108 PMPM improvement in medical margin year over year. The work done to reduce medical costs and improve revenue resulted in $21 million of EBITDA improvement year over year, demonstrating the effectiveness of our tools, our technology, and the teams, even in a nascent market. We believe we have the ability to create significant value in a short period of time and anticipate continued performance in medical expense reduction and accurate coding and documentation for patients with chronic health conditions, ensuring the Oregon market reaches profitability in 20 We continue to see significant member growth in Oregon. From 2023 to early 2024, we expanded from five counties to 11 counties, growing from 21,858 members to 33,229 members, which is a 52% increase in membership year over year.
William Bettermann: Our Oregon market saw a 171 dollar P. M. P. M. Capitation revenue increase from 2022 to 2023, which was a $67 million increase year over year.
William Bettermann: As well as $108 P. M P M improvement in medical margin year over year.
William Bettermann: The work done to reduce medical costs and improve revenue resulted in $21 million of EBIT EBITDA improvement year over year, demonstrating the effectiveness of our tools, our technology and the teams even in a nascent market.
We believe we have the ability to create significant value in a short period of time and anticipate continued performance in medical expense reduction and an accurate coding and documentation for patients with chronic health conditions, ensuring the Oregon market reaches profitability in 2024.
While simultaneously improving quality scores.
William Bettermann: We continue to see significant member growth in Oregon from 2023 to early 2024, we expanded from five counties to 11 counties growing from 21858 members to 33229 members, which is a fifth.
William Bettermann: <unk>, 2% increase in membership year over year, we attribute this growth to our strong partnerships with key health plans across the state and our proven delivery model.
William Bettermann: We attribute this growth to our strong partnerships with key health plans across the state and our proven delivery models. In 2023, our California market had a $931 PMPM medical expense compared to a $1014 PMPM medical expense in 2022, representing an 8.1% improvement year over year. California's medical margin in 2022 was a $57 PMPM loss compared to a positive $215 PMPM in 2023, which is a staggering $272 PMPM improvement, leading to a $32 million improvement in medical margin year over year. The California market had 9.2 million EBITDA in 2023, compared to a negative $13 million EBITDA in 2022, which is a 22 million EBITDA improvement year over year.
William Bettermann: In 2023, our California market had a $931 P. M. P. A medical expense compared to a 1014 dollar P. M. P. M medical expense in 2022, representing an eight 1% improvement year over year.
William Bettermann: California's medical margin in 2022 was a $57 P. M. P M loss compared to a positive 215 dollar P. M. P. M. In 2023, which is a staggering 272 dollar P. M. P M improvement lead.
William Bettermann: Due to a $32 million improvement in medical margin year over year.
William Bettermann: The California market had $9 2 million EBITDA in 2023 compared to a negative $13 million EBITDA in 2022, which is a $22 million EBITDA improvement year over year. We achieved these results by optimizing our planned mix.
William Bettermann: We achieve these results by optimizing our plan mix, reducing medical expenses, and accurately coding conditions of our patients, allowing us to grow profitably. We expect to add several new health plans in 2024, continuing to build on our 2023 profitable growth. Through our ACO REACH program, we continue to cement our value-based care programs with PCPs.
William Bettermann: Reducing medical expense and accurately coding conditions of our patients, allowing us to grow profitably.
William Bettermann: We expect to add several new health plans in 2024, continuing to build on our 2023 profitable growth.
William Bettermann: Through our ACO reach program, we continue to cement our value based care programs with Pcp's in January 2024, we recorded 10505 lives up from 7510 lives in 2023. These lives.
Operator: In January 2024, we recorded 10,505 lives, up from 7,510 lives in 2023. These numbers are expected to increase substantially over the coming years. We view this increasing engagement as a promising signal for the adoption of value-based care models and for the future of our clinical, financial, and operational performance. Thank you all once again for your interest in the P3 story. And with that, I'm going to turn it back to the operator to open the floor to questions. Operator?
William Bettermann: <unk> are expected to increase substantially over the coming years. Since we began expanding into ACO reached during 2023, we have grown to 32 provider groups. That's a 15% increase year over year, we are able to improve engagement across patient panels for our affiliates with.
William Bettermann: In the Medicare ACO reach program and improve the overall cost of care, we view the increasing engagement as a promising signal for the adoption of value based care models and for the future of our clinical financial and operational performance.
Operator: Thank you. We will now begin the question and answer session. To ask a question, you may press star then 1 on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the button.
Thank you all once again for your interest in the P. Three story and with that I'm going to turn it back to the operator to open the floor to questions operator.
None: Thank you well now begin the question and answer sessions.
None: To ask a question you May press Star then one on your telephone keypad.
Unknown Executive: If at any time your question has been addressed and you would like to withdraw your question, please press star then 2. At this time, we will pause for just a moment to assemble our roster. And today's first question comes from Brooks O'Neill with Lake Street Capital Partners. Please go ahead. Thank you very much. We appreciate all the color. I might have missed it, but I don't think I heard any discussion about the element talked about in 8K a few weeks ago about Go and Concern Language.
Operator: If youre using a speakerphone please pick up your handset before pressing the keys.
None: If at any time in your question that hasn't been addressed and you would like to withdraw your question. Please press Star then two.
At this time, we will pause for just a moment to assemble our roster.
None: Okay.
None: And today's first question comes from Brooks O'neil with Lake Street Capital Partners. Please go ahead.
Brooks O'neil: Thank you very much I appreciate all the color.
Brooks O'neil: I might have missed it but I don't think I heard any discussion about the element.
Brooks O'neil: <unk> talked about in the.
Brooks O'neil: 8-K, a few weeks ago about going concern language would you say, we should expect to read that in the 10-K or are you in better shape today based on your in your auditors assessment.
Atul Kavthekar: Would you say we should expect to read that in the 10K, or are you in better shape today based on your and your auditor's assessment? Yeah, Brooks, just a quick, this is Atul speaking, a quick word on that. You know, the guidance we'd received from external counsel suggested that we include that language in the filing, and we did so as we believe that that was the appropriate protocol. But the going concern language is not new. That was in prior filings as well, so this is not a new development for the company at all, just wanted to make that clear. But as far as going forward, the expectation for that to be removed, and that will be a decision that's made by the auditors, not necessarily by us, the expectation is that there will need to be a period, and it's a bit unclear as to how many quarters of profitability or at least some calcul So that will need to continue for some period of time until they feel comfortable with removing that. Unfortunately, that's not something that we can actually just remove on our own will.
Tool: Yeah Brooks just a quick one this is a tool speaking a quick word on that.
You know the the guidance we received from external counsel suggested that we include that language in the filing.
Tool: And didn't sell as we believe that that was the appropriate protocol.
Tool: But the going concern language is not new.
That was in prior filings as well. So this is not a new development for the company at all.
None: Just wanted to make that clear.
None: But as far as going forward the expectation for that to be removed.
None: And that will be a decision that that's made by the auditors not necessarily by us.
The expectation is that they will need to be a a period and that is a bit unclear as to how many quarters of profitability or at least.
None: Some calculus around medical margin positivity in and as you know we posted some.
None: Some meaningful medical margin of $135 million this year.
None: So that will need to continue for some period of time until they feel comfortable and removing that unfortunately that's.
None: That's that's not something that we can actually just remove on our own.
None: One well.
Unknown Executive: That's how auditors think, I guess, right, guys? It's part of their requirements, so I'm not suggesting it's appropriate. The company has made losses, and that's the reason for the disclosure. Let me ask two more quick questions, hopefully. The first one is... obviously, the December increase in medical expenses. It's probably more seasonally related and episodic than it is related to some of the factors that you attempt to control in the P3 model. Would you say there are elements in your model that can protect you or minimize the impact of these seasonal factors? Or should we expect that to be, you know, a possible recurring factor depending on what the cold and flu season is like in any particular year? Hi Brooks, this is Amir.
None: That's how auditors think I guess right guys.
None: Uh huh.
None: It's part of our as part of their requirement. So you know it's not enough.
Appropriate the company has made losses and that's that's the reason for the disclosure.
None: Sure Let me ask two more quick ones hopefully first one is.
None: Obviously the December increase in.
None: Medical expense.
None: Probably more seasonally related and episodic than it is related to some of the factors that you attempt to control is the P. Three model.
None: Would you say there are elements in your model that can protect you or minimize the impact of these seasonal factors or should we expect that to be.
None: A possible recurring factor, depending on what what cold and flu season is like in any particular year.
None: Hi, Bruxism here. So I'll answer that question. So yes, I think what you will you will definitely see the seasonality that happens through basically in the fourth quarter and part of the first quarter of every year in regards to increasing.
Amir Bacchus: So I'll answer that question. So yeah, you will definitely see the seasonality that happens basically in the fourth quarter and part of the first quarter of every year in regards to increasing exacerbations of flu, etc. Obviously, this year, we had the combination of a mild or moderate COVID spike with the flu that led to overall increased costs, so we did see that. P3, obviously, we work collectively, not only with our plans and our providers, to make sure we improve access during that period of time because that engagement is always important with our providers to improve access, which is something we can do to help decrease the potential risk of increased costs that we see in those seasonal months But in addition to that, as we've talked about before, it's making sure that we can look at more delegation as we move forward into 2025, so we can have more control over all the overall medical costs and not necessarily just spikes or just increased medical illnesses. Sure, that makes sense. Thank you for that.
Bruxism: Exacerbations of flu et cetera, obviously this year, we had the combination of a mild or moderate cobot spike with the flu that led to an overall increasing admission. So we did see that Petrie, obviously, we work.
You know collectively not only with our plans and our providers to make sure we improve access during that period of time.
Bruxism: Because that engagement is always important with our providers to improve access.
Bruxism: Which is something we can do to help decrease the potential risk of increasing costs that we see in those seasonality months, but in addition to that as we've talked about before is making sure that we can look at more delegation as we move forward into 25. So we can have more control.
Bruxism: With all the overall medical costs and not necessarily just spikes or just increased medical illness.
None: Sure that makes sense. Thank you for that color. Let me ask one more quick one do you guys anticipate a substantial change.
Unknown Executive: Let me ask one more quick one. Do you guys anticipate a substantial change in your business relative to the changes in the CMS risk methodology? Do you expect any further substantial changes in 2025? I know it's early, but what are you hearing, what are you seeing? Yeah, hi, Brooks.
None: In your business relative to the changes in the CMS rate methodology.
None: Thank you and were implemented in 2024 do you expect any further substantial changes in 2025 I know it's early but what are you. What are you hearing what do you see.
Yes, Hi, Brooks. This is bill betterment. So as we've stated in the Hi, Brooks as we stated in the past you know the changes from version 24 to 28, we do expect some slight headwinds not nearly as impactful as we're seeing with some of our competitors.
William Bettermann: This is Bill Betterman. So as we've stated in the past, you know, the changes from version 24 to 28, we do expect some slight headwinds, not nearly as impactful as we're seeing with some of our competitors or others in the sector and industry. So we will continue to monitor that closely. But, you know, there's a couple things that we've talked with you and others about that we think really differentiate us. So one of the factors that helps us is the education work that we do with our providers and affiliates.
Bill: <unk> are others in the sector and industry. So we will continue to monitor that closely but.
Theres a couple of things that we've talked with you and others about that we think really differentiates us. So one of these factors that helps US is the education work that we do with our providers and affiliates. So we have a very robust program.
William Bettermann: So we have a very robust program that's ongoing. And obviously, there are costs and people associated with that. And that's why we said there's still some headwind to this, as we have to prepare for additional work around this area throughout the rest of this year and into 2025. But we do anticipate it will continue as a slight headwind for the foreseeable future. Okay, thank you very much for taking my question. Thank you. And our next question today comes from Josh Raskin at Nefron Research. Please go ahead.
Bill: That's ongoing and obviously there is cost and people associated with that and that's why we said there is still some headwind to this.
As we have to prepare for it for additional work around this area throughout the rest of this year and into 25, but we do anticipate it will be continue.
Bill: As a slight headwind for the foreseeable future.
None: Okay. Thank you very much for taking my questions.
None: Thank you and our next question today comes from Josh Raskin of Nephron Research. Please go ahead.
Unknown Executive: Hi, thanks. Good afternoon. Just trying to dig into the medical expenses here, obviously way above what we were looking for. So, you know, the MLR was reported at 107%. I know there was that 30 in the 10, maybe 40 million of what you guys deem to be sort of unusual or out of period expenses. But even without that, the MLR is still in the, you know, sort of mid-high 90s.
Joshua Richard Raskin: Hi, Thanks, Good afternoon, I'm, just trying to dig into the medical expense here, obviously way above what we were looking for so you know the MLR was reported at 107% I know there was that 30 and the 10, maybe 40 million of what you guys deem to be sort of.
Joshua Richard Raskin: Unusual or out of period expenses.
Joshua Richard Raskin: But even without that the MLR is still in the sort of mid high <unk> 90, and so I understand a couple of the metrics you've talked about for January but but what gives you confidence that you know you've got medical expense, that's going to trend more in line with expectations and how are you doing that especially with some of the change outage that.
Unknown Executive: And so I understand a couple of the metrics you've talked about for January, but what gives you confidence that, you know, you've got medical expenses that are going to trend more in line with expectations, and how are you doing that, especially with some of the change outage that, you know, impacted claims for February and March? What data are you getting from the plans? And, you know, are you doing anything differently from a member perspective around, you know, inpatient utilization or ER visits to monitor your membership? Yeah, Josh. This is Amir again.
Joshua Richard Raskin: That impacted claims for February and March I, just what what data are you getting from the plans and you know are you doing anything differently from a member perspective around inpatient utilization or ER visits to monitor your membership.
Mere: Yeah, Hey, Josh is the mere again.
None: So a couple of things.
Amir Bacchus: So, a couple things. First of all, when you look at our MLR and things like that, part of the MLR increase we've seen year over year came a lot from the ACO reach as well. So our ACO reach population has a much higher med expense overall than what we've seen in MA, which has driven up the overall cost, even though our funding actually has been able to offset that from what we've. So it's still, for us, still a very good business for us to continue to take on, even with the higher cost that we see in that cohort or in that population. But in addition to that, as we look forward to the things that we're doing collectively in working with our plans and communicating with our plans to do those very things that we've talked about before and getting in front of that med expense, particularly in the things we have visibility to. People I ask in our 30% are delegated lives, breach procedures, the Part B cost, expenditures, et cetera. And as you heard me say, Part B expenditures have been significantly higher, I think, throughout all the markets, not necessarily just P3, but everybody. So these things will require more control and management. And we look forward to working with our plans to do that very thing besides just what we're delegating. Hey Josh, this is Bill Betterman.
First of all when you look at our MLR and things like that part of the MLR increase.
Joshua Richard Raskin: We have seen year over year came a lot from the ACO reach as well so our ACO reach population has a much higher <unk> expense overall than what we've seen in EMEA, which has driven up the overall costs, even though our funding actually has been able to offset that.
Joshua Richard Raskin: What we've seen from what we're getting in ACO versus M&A.
Joshua Richard Raskin: It's still for us still very good business for us to continue to take on even with the higher cost that we see in that cohort or in that population.
But in addition to that as we look forward to the things that we're doing.
Joshua Richard Raskin: Collectively and working with our plans and the communication with our plan is to do those very things that we've talked about before and getting in front of that met expense.
Joshua Richard Raskin: Typically in the things we have visibility to from whether it.
Joshua Richard Raskin: People asking our 30% are delegated lives Brexit procedures, the part D cost expenditures et cetera, and as you heard me say the part D expenditures have been significantly higher I think throughout all the markets.
Joshua Richard Raskin: Not necessary just P three but everybody.
Joshua Richard Raskin: So these things will require more control and management and we work in.
Joshua Richard Raskin: And look forward to working with our plan to do that very thing. Besides just where were delegated hey, Josh, whereas bill betterment I just wanted to add to what Dr. Baucus had shared one.
William Bettermann: I just want to add to what Dr. Bacchus shared. You know, one of the things from an operational perspective is this year, we've really doubled down and focused on some things around MedX reduction that we weren't looking at last year, but we've got some new cohorts that have patients of how we're looking at and addressing early in the year. Again, not that we weren't looking at these folks last year, but we have new programs that are available to our patients that weren't available at the beginning of 2023. So we're excited about some of our opportunities that we didn't have in front of us to reduce that cost that we saw last year. Gotcha. And how much? I'm trying to figure out how much it was for December. So, you know, we're, what was the MLR, I guess, in October and November versus what December was? October, November. I'm going to go and give you some general guidance. I don't have the numbers exactly in front of me, but they were generally consistent with what we saw in the third quarter.
None: One of the things from an operational perspective is this year.
Really double down and focused on some things.
None: Around med ex reduction that we not that we weren't looking at last year, but we've got some new cohorts of patients of how we're looking.
Looking at and in addressing early in the year not again not that we weren't looking at these folks last year, but we have new programs that are available to our patients that weren't available beginning of 2023. So so we're excited about some of our opportunities that we didn't have it in front of us to.
None: Use that cost that we saw last year.
None: Gotcha, and and how much I'm trying to figure how much was December. So you know what was the MLR I guess in October and November versus what December wise.
None: That's cool.
None: You know October October November I'm going to go and give you. Some general guidance I don't have the numbers exactly in front of me, but.
They were generally consistent with what we saw in the third quarter.
Unknown Executive: And then the balance, obviously, was in December, and that blended out for the entire quarter. And when you said med claims expense was down 26% in January versus December, was that including all the extra of, you know, the 40 million items in December? Or is that, you know, sort of a more normalized number?
None: And then the balance obviously was in December and that that blended up for the for the entire quarter.
None: And when you said med claims expense was down 26% in January versus December is that including all the extra $40 million of items in December or is that sort of a more normalized number.
None: Yeah.
Unknown Executive: That was straightforward medical expense that we saw from December to the drop that we saw in January since we were able to get completion or more completion on the January numbers. And obviously, February and March are still we're still waiting for all the numbers to come back in, but definitely from December. It was that 26% drop that we saw in utilization into GM, and the December included the write down of the $10 million write down of a reserve. No, it did not. Okay, so just three cents. And then just last one.
None: That was straightforward medical expense that we saw.
None: In from December to the drop that we saw in January since we were able to get completion or more completion on the January numbers.
None: And obviously February and March are still.
None: We're still waiting for all the numbers to come back in but definitely from December.
None: It was at 26% drop that we saw in utilization into January.
None: And in the December include the write down the $10 million write down of reserves.
None: No it did not.
None: So it just makes sense and then just last one I I heard the 55 million of expected cash at the end of the quarter do you have an expectation of cash on the balance sheet end of year.
Unknown Executive: I heard the 55 million in expected cash at the end of the quarter. Do you have an expectation of cash on the balance sheet at the end of the year? Uh... we don't and as we talked about in the past, it's rather difficult to get the timing right when you're forecasting cash to that level of precision.
None: We don't and we've talked about in the past is it.
None: It's rather difficult to get the timing right when you're forecasting cash to that level of precision.
Unknown Executive: So we haven't really put out any specific guidance on end-of-year cash for that reason. But as I said earlier, I think that the addition of the cash from this note offering provides us with a nice cushion. It gives us some protection from unforeseen and unexpected things that are happening in the year, but all in all, we feel pretty good about where we are.
None: So we haven't really put out any specific.
None: Guidance and end of year cash for that reason, but you know as I said as I said earlier I think the the the addition of the cash from this note offering it provides us with a nice cushion. It gives us some protection from unforeseen and unexpected things that are happening in the year, but but all in all we feel.
None: Pretty good about where we are.
Unknown Executive: All right, thanks. Thank you. And our next question today comes from David Larson with BTIG. Please go ahead.
None: Alright. Thanks.
None: Thank you and our next question today comes from David Larsen with BTG. Please go ahead.
Unknown Executive: Hi, can you talk about the medical trend? Like when we last spoke, I think you had mentioned it was actually minus 1% for members that have been on the platform for a year or more. Do you have, did you highlight what the medical trend was in the quarter or what it's trending at? Hey Dave, this is Amir.
None: Hi.
David Larsen: Can you talk about the medical trend like when we last spoke I think you had mentioned medical trend was actually minus 1% for members that have been on the platform for a year or more do you have could you highlight what the medical trend wasn't in the quarter or what it's what's coming up.
None: Yeah, you know.
The Mirror: Hey, Dave This is the mirror I do not have the medical trend right in front of me right now because of the December blip.
Amir Bacchus: I do not have the medical trend right in front of me right now because of the December blip, but we can get that to you. So we can, you know, have a call offline, and we can show you what that was. Okay, and then, I'm sorry, how much revenue did I think was pushed from 4Q into 2024? None really pushed.
Mira: But we can get that to you. So we can have a call offline and we can show you it that way.
Dave: Okay, and then I'm sorry, how much revenue pushed I think from <unk> into 2024.
Dave:
Dave: So not really pushed David are you asking about how much did we accrue in the fourth quarter for our sweep revenue.
Unknown Executive: Dave, are you asking about how much we accrued in the fourth quarter for our sweeps revenue? Yeah, so the amount we booked in the fourth quarter is relatively consistent with the numbers that we've been talking about. He's got $20 million.
David Larsen: Yes, it does a 20.
None: Yeah. So.
The amount we booked in the fourth quarter relatively consistent with the numbers that we've been talking about.
David Larsen: So you've got at least $1 million.
Unknown Executive: They were roughly that number in that zip code in the fourth quarter. We recognize, Okay, and then can you talk about the nature of the claims expense? What was it? Were they hips? Were they knees?
David Larsen: There roughly that number in that ZIP code in the fourth quarter, we recognize that revenue.
None: Okay, and then can you talk about the nature of the claims expense, what what was it where they hips where they knees.
Amir Bacchus: Was it Medicare Advantage? Was it cough cold flu? Because I mean, we had a call with an expert this afternoon, and he specializes in this space. And he's saying that these medical expenses are going to trend higher for the next year. Just any color on what the costs were?
None: Was it Medicare advantage was a cough cold flu because I mean, we had a call with an expert in this afternoon and spur.
None: <unk> specializes in this space and he's saying that these medical expenses are going to trend higher for the next year just any color on what what were the costs.
Amir Bacchus: Yeah, so Dave is Amir again. So there's a number of, You know, as I said up front, obviously COVID and flu, that's one of them. The Part B costs, which is a big bag, right? And they'll be in the Part B costs, deal with everything from what you see from whether it's electric procedures or Part B drug utilization, all those together led to elevated Part B costs that we saw towards the end of the year. So we can sit there and try to rustle up as far as how many actual procedures versus admissions and things like that. We absolutely know we're elevated due to some of those things. But for us, it's making sure that we can continue to evaluate under the changes that we see within health plans and what we can do, especially from the delegated standpoint, to have more control versus just some plans having more open referrals to specialists without being able to do that prior authorization and evaluation. So it is kind of a mixed bag.
Amir: Yeah, So David as Amir again.
Amir: Or are things.
Amir: As I said upfront, obviously, COVID-19 and flu that's one of them the part D cost, which is a large bag right in part because the deal.
Amir: Deal with everything from what you see from a weather.
Amir: Whether it's electric procedures and are a part b drug utilization all of those together.
<unk> led to elevated part be costs that we saw towards the end of the year in December.
Amir: So we can sit there and try to Russell out as far as how many actual procedures versus better admissions and things like that we absolutely know were elevated.
Amir: Due to some of those things, but for us, it's making sure that we can continue to evaluate odder.
Amir: The changes that we see within health plans and what we can do.
Amir: Actually from the delegated standpoint.
Amir: Have more control versus just you know somehow some plans having more open referrals.
Two specialists without being able to do that prior authorization any valuation.
Amir: So it is kind of a mixed bag. So you kind of see it's not just one thing was part b drugs or just out outpatient or electric procedures.
Sherif Abdou: So you kind of see it's not just one thing was part B drugs or just outpatient or elective procedures. We definitely do know it was to some degree from the COVID and flu combination that led to those things. Okay, and then what are your expectations for revenue in 2024 on a PMPM basis, like in terms of health plans raising premiums, most of them are, I think, saying that they have to raise premiums significantly to account for utilization and the RAF scores, like just thoughts there and then as well as the impact of you know coding and then perhaps your ability to capture more of the premium. Are there clauses in your contract that say, hey, if So we definitely are able to renegotiate a contract at any time. I mean, no, no, no one can stop us from doing that.
We definitely do know was to some degree.
Amir: From the Covid and flu combination.
Amir: The led to those things in December.
None: Oh, Okay, and then what are your expectations for for revenue in 2024, and a P. M. P M basis like in terms of pulse.
None: Health plans raising premiums most of them are I think are saying that they had to raise premiums significantly to account for the utilization and the RAF scores.
None: Like just thoughts there and then as well as the impact of coding.
None: And then perhaps your ability to capture more of the premium.
Are there clauses in your contracts to say Hey, if medical claims expenses are higher than expected you can get more of the premium just any thoughts there would be great.
None: So hi, David Sharif here.
Unknown Executive: So we.
Unknown Executive: We definitely.
Unknown Executive: Are able to.
Unknown Executive: Renegotiated contract anytime I mean, no no no one can stop us from doing that in most health plans understand the situation.
Sherif Abdou: And most health plans understand the situation. But the example that I would like to share with you and the rest of the analysts here that we were able to do in this year, in this past year, and the prior year, is to look at certain benefits and then limit our liability or exposure to the downside risk. For example, we noticed, like most other health plans, that dental benefits usage has been on the rise and increased, and it's part of our goal or division of financial responsibility to take risk on these ancillary services or benefits. So we went to the two largest health plans that we contract with, and we showed them the trend, and we showed them the cost, and we were able to flatten the liability and the cost to the prior year per member per month cost Same thing with the flex cards.
Unknown Executive: But the example that I would like to share with you in the at risk elements here that we were able to do any air and this past year and the prior year.
Unknown Executive: To look at certain benefits and then limit our liability or exposure to the downside risks for example.
Unknown Executive: We notice that most of other health plans that the dental benefits you.
Unknown Executive: <unk> has been on underwrites, an increase and it's part of our Gulf War or division of financial responsibility to take risk on these ancillary services.
Unknown Executive: Our benefits so we went to.
Unknown Executive: The two largest health plan that we contract with and we showed them the trend and we showed them the cause and we were able to flatten the liability and the cost to the priority or per member per month costs and anything above that was removed from our percentage of premium.
Unknown Executive: To the health plan percentage of premium same thing with the flex cards.
Sherif Abdou: Some health plans had increased the margin or the size of the benefits of the flex card. We were able to go to the health plan and say we're going to pay up until it was last year; whatever you increased this year was yours, and the health plan agreed to that because they knew that they went there to acquire market share, so they were able to absorb it. Does that answer your question? Yes, it does.
Some health plans that increase.
Unknown Executive: The margin or the size of the benefits of the flex card we were able to go to the health plan says we are going to pay up until it was last year whatever you increase this year. If it was yours and have been agreed to that.
Unknown Executive: Because they they knew that they weren't there to acquire market share. So they they were able to.
Absorb it.
None: Does that answer your question.
None: It does thank you. Thank you very much and then and then just one final one and I'll hop back in the queue. Thank you for being so patient with me here.
Unknown Executive: Thank you. Thank you very much. And then, and then just one final one, and I'll hop back in the queue.
Unknown Executive: Thank you for being so patient with me here. And I guess in the last two weeks of February and in the first two weeks of March, you received, I mean, I guess you must have received additional data on December utilization. And that's what drove the spike relative to expectations. Is that correct?
None: And the last two weeks of February and in the first two weeks of March.
None: Did you receive I mean, I guess you must have received additional data on December utilization and that's what <unk>.
None: The spike relative to your expectations is that correct.
Unknown Executive: That's correct. Okay. All right, so it takes at least two and a half months or 90 days to get all the data. So if we're thinking about January, like do you have all the data for January, or are there still a couple of files you're waiting for?
None: That's correct.
None: Okay.
None: <unk>.
None: So so it takes at least we'll call it.
None: Two and a half months or 90 days to get all the data.
None: So if we're thinking about January.
None: Do you have all the data for January or are there still a couple of files you're waiting for.
Unknown Executive: So we have a lot of data for January, and you understand that it was never going to be complete until like six or nine months down the road.
None: So we have.
None: A lot of data for January.
None: And you you.
None: You understand that.
None: It was never going to be complete till like six or nine months down. The road. However, we have enough indication to calculate.
Unknown Executive: However, we have enough indication to calculate the liability and IBNR and overall medical, P3 Health Prtnrs. Okay. All right. Appreciate it. Thanks very much. I'll hop back in the queue.
None: The liability and the IV in our in overall medical cost.
None:
Okay, Alright appreciate it thanks very much I'll hop back in the queue.
Jack A. Senft: Thanks. Thank you, and our next question today comes from Ryan Daniels, William Blair. Yeah, hey guys, this is Jack Senft. I'm for Ryan Daniels.
None: Okay. Thank.
None: Thank you and our next question today comes from Ryan Daniels of William Blair. Please go ahead.
None: Yeah, Hey, guys. This is Jack I'm done for Ryan Daniels most of my questions have been answered already but just wanted to go back to the medical margin I mean, it is expected to increase pretty substantially. This year. So just kind of curious with the largest driver is yours or is it more of a mature lives just starting to shine through versus like less less new lives coming on or is it really you know majority coming from <unk>.
Jack A. Senft: Most of my questions have been answered already, but just wanted to go back to the medical margin. I mean, it is expected to increase pretty substantially this year. So I'm just kind of curious what the largest driver is here.
Unknown Executive: Is it more of the mature lives just starting to shine through, you know, versus, like, less, less new lives coming on? Or is it really, you know, the majority coming from the ACO region that could be, you know, additional upside? Just kind of curious if you can double click on that again.
None: Our region that could be additional upside just kind of curious if you can double click on that again.
Amir Bacchus: Thanks. Yeah, certainly. This is Amir again.
Mere: Yeah, certainly this is a mere again so a couple of things you you're absolutely right as far as the EZ reach with the higher revenue, which is which is great and we appreciate seeing that however, as far as our number of lives that are persistent yeah through this AEP, we actually had an even improved a number of persistent lives even than previous years.
Amir Bacchus: So a couple things. You're absolutely right as far as the issue of reach with the higher revenue, which is great, and we appreciate seeing that. However, as far as our number of lives that are persistent, yeah, through this AEP, we actually had an even improved number of persistent lives even than in previous years.
Amir Bacchus: So we're actually looking at probably a 92% persistency, which gives us, or I should say makes us more excited to achieve that medical margin because of that. So because it's been better than last year, it gives us much more opportunity to continue to work with those patients to improve not only the documentation and understand their diagnosis burden, but at the same time, get them more plugged in, especially with their providers in the care model. And as we do that, we will see that margin increase to that margin that we described in the 230 to the 250 range. Okay, I understand. Thanks. And just a quick follow up. Can you guys just talk about the demand you're seeing from health systems and kind of how those partnerships have progressed? You know, I think that's a pretty good opportunity.
Mere: So we're actually looking at it.
Mere: Probably a 92% persistency, which gives us.
Mere: Or I should say makes us more excited to achieve that medical margin because of that persistence persistency.
Mere: So because it's been better than last year gives us much more opportunity to continue to work with those patients to improve not only the documentation.
Mere: And understand their diagnosis burden, but at the same time get them more plugged in especially with their providers in the care model and as we do that we will see that margin increase to that margin that was that we described to the.
Mere: The $2 32 to $2 50 range.
None: Okay understood. Thanks, and just a quick follow up can you guys just talk about the demand you're seeing from health systems and kind of how those partnerships have progressed and I think that's a pretty good opportunity to just kind of curious how those are shaping up for this year and if youre still generally seeing demand from from health systems.
Sherif Abdou: So just kind of curious how those are shaping up for this year, and if you're still generally seeing demand from health systems. Thanks. Yeah, thanks, Jeff. Sheriff here.
None: Yes, Thanks, Jeff.
None: <unk>, Yes, we continued to see demand from health system and as you all.
Sherif Abdou: Yes, we continue to see demand from health system. And as you all may or may not know that 61% of primary care are employed or staffed through health systems in this country. So that's why we're focusing on a joint venture and strategic partnership opportunities with the health system overall, because of the access to that large pool of providers and physicians that are looking for improved working condition, workflow, and returning to the joy of practice in the medicine as well. And we believe that our model provides and supports that. Alright, thank you. Well, that appears to end our question and answer session, so I'd like to turn the conference back over to the management team for any closing remarks. Great.
None: Old Mei.
None: You may not know that 61% of primary care, our employee door to step through health systems. In this country. So that's why we were focusing on our new joint venture and strategic partnership opportunities with health system overall, because of the access to that large pool of.
None: Oh providers and physicians that looking for an improved working condition workflow and returning to the joy of the practice and the medicine as well and we believe that our model provide and support that.
None: Alright. Thank you well that appears a question and answer session. So I'd like to turn the conference back over to the management team for any closing remarks.
None: Great. Thank you very much.
Sherif Abdou: Thank you very much, operator. So for everybody, I really wanted to thank you for attending our fourth quarter and end of year 2023. And I want to conclude what we discussed today with the group, which is that we had a very strong growth year in 2023. It was a 21% increase in top line revenue, and we're reaffirming and confirming 2024 full guidance of positive EBITDA of 20 to $40 million.
None: Operator, so for everybody I really wanted to thank you for attending our fourth quarter and end of year 2023, and I went on a cap what we.
None: Discussed today.
None: The group, which is we had a very strong growth year in 2023. It was 21% increase in the top line revenue and we're reaffirming.
None: Reaffirming and confirming 2024 full guidance of positive EBITDA of $20 million to $40 million. Thank you very much.
Sherif Abdou: Thank you very much, and have a great afternoon. Thank you, sir. This concludes today's conference call. We thank you all for attending today's presentation. You may now disconnect your lines and have a wonderful day.
None: Have a great afternoon.
None: Thank you Sir This concludes today's conference call. We thank you all for attending today's presentation.
None: So that's your lines and have a wonderful day.
None: [music].