Q2 2024 P3 Health Partners Inc Earnings Call

Speaker Change: Good day and welcome to the P3 Health Prtnrs

Speaker Change: 2ND QUARTER 2024 EARNINGS CALL

Speaker Change: All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing star then zero on your telephone keypad. After today's presentation, there will be an opportunity to ask questions.

Speaker Change: To ask a question, you may press star then 1 on your telephone keypad. To withdraw your question, please press star then 2. Please note this event is being recorded. I would now like to turn the conference over to Ryan Halsted, Jr., Investor Relations, Gilmartin Group.

Unknown Executive: 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 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.

Operator: 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 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.

Speaker Change: Please go ahead.

Speaker Change: Thank you, Operator, and thank you for joining us today.

Speaker Change: 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 laws, including statements regarding our financial outlook and long-term target.

Speaker Change: 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.

Operator: These statements are subject to risks and uncertainties that could cause actual results to differ materially from historical experience or present expectations. 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 you are speaking, and the company undertakes no obligation to update or revise these forward-looking statements.

Speaker Change: These statements are subject to risks and uncertainties that could cause actual results to differ materially from historical experience or present expectations.

Speaker Change: 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.

Speaker Change: The forward-looking statements made during this call speak only as of the date you're of, and the company undertakes no obligation to update or revise these forward-looking statements.

Operator: 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 used. These non-GAAP financial measures are in addition to and not a substitute for 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.

Speaker Change: 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 used.

Speaker Change: These non-GAAP financial measures are in addition to and not a substitute for or superior to the measures of financial performance.

Speaker Change: 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.

Operator: For example, other companies may calculate similarly titled non-GAAP financial measures differently. 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 SEC filings, which may be accessed from the investors page of the P3 Health Prtnrs website. I will now turn the call over to Aric Coffman, CEO of P3 Health Prtnrs.

Speaker Change: 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.

Eric Kaufman: 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 Partners website. I will now turn the call over to Eric Kaufman, CEO of P3 Health Partners.

Aric Coffman: Good afternoon, everyone. Let me start by expressing how thrilled I am to be at the helm of P3 as CEO for our first quarter. P3 Health Prtnrs is a scaled capital light platform comprising 2,900 PCPs in five states across 27 counties, and we are taking full risk at scale on 128,100 lives. I would first like to emphasize some key aspects of P3 that give me confidence that we're in a great position to deliver value to our patients, providers, payers, along with our investors over a multi-year time horizon.

Unknown Executive: Good afternoon, everyone. Let me start by expressing how thrilled I am to be at the helm of P3 as CEO for our first quarter. I would first like to emphasize some key aspects of P3 that give me confidence that we're in a great position to deliver value to our patients, providers, and payers, along with our investors over a multi-year time horizon. We are partnered across local, regional, and national health, and we're seeing a clear trend in this volatile MA market. Health plans are turning to P3.

Eric Kaufman: Good afternoon, everyone. Let me start by expressing how thrilled I am to be at the helm of P3 as CEO from our first quarter.

Eric Kaufman: P3 Health Partners is a scaled capital light platform comprising 2,900 PCPs in five states across 27 counties and we are taking full risk at scale on a hundred and twenty eight thousand one hundred lives.

Eric Kaufman: I would first like to emphasize some key aspects of P3 that give me confidence that we're in a great position to deliver value to our patients, providers, payers, along with our investors over a multi-year time horizon.

Aric Coffman: First, we are operating in a large and rapidly growing market, with our total addressable market approaching $1 trillion, and this will be further accelerated by CMS's goal to have 100% of Medicare fee-for-service beneficiaries in value-based care arrangements by 2030. Our core focus is the Medicare market, of which Medicare Advantage represents approximately 51% of the overall market, or nearly 31 million Medicare-eligible lives in 2023. Less than 15% of contracts in the Medicare space are full risk today, which means we have tremendous opportunity to expand our reach through new contracts and geographies over time. Our unique business model is built on a fully delegated risk strategy, which offers three key advantages.

Eric Kaufman: First, we are operating in a large and rapidly growing market with our total addressable market approaching $1 trillion.

Eric Kaufman: Further accelerated by CMS's goal to have 100% of Medicare fee-for-service beneficiaries in value-based care arrangements by 2030.

Eric Kaufman: Our core focus is the Medicare market, of which Medicare Advantage represents approximately 51% of the overall market, or nearly 31 million Medicare-eligible lives in 2023.

Eric Kaufman: Less than 15% of contracts in the Medicare space are full risk today, which means we have tremendous opportunity to expand our reach through new contracts and geographies over time.

Eric Kaufman: Our unique business model is built on a fully delegated risk strategy, which offers three key advantages. First, it directly links our company into the daily operations of our health plans, creating avenues for collaboration and building strong partnerships.

Aric Coffman: First, it directly links our company to the daily operations of our health plans, creating avenues for collaboration and building strong partnerships. Secondly, it facilitates meaningful interactions with clinicians, essential for success in value-based care. Lastly, it provides early upstream insights into requested services, ensuring consistent and best practice protocols are followed for a superior patient experience. Next, our diversified payer mix puts us in a position of strength. Today, no one payer makes up greater than 20% of our revenue; we're partnered across local, regional, and national health, and we're seeing a clear trend in this volatile MA market. Health plans are turning to P3.

Eric Kaufman: Secondly, it facilitates meaningful interactions with clinicians, essential for success in value-based care. Lastly, it provides early upstream insights into requested services, ensuring consistent and best practice protocols are followed for a superior patient experience.

Eric Kaufman: Next, our diversified payer mix puts us in a position of strength. Today, no one payer makes up greater than 20% of our revenue.

Eric Kaufman: We're partnered across local, regional, and national health plans, and we're seeing a clear trend in this volatile MA market. Health plans are turning to P3.

Aric Coffman: They value our expertise in managing senior populations and our proven ability to help primary care physicians succeed in value-based care. This positions us as a key partner to their continued success. Similar to our strong position with the top health plans in our markets, we enjoy excellent relationships with many of the leading independent primary care groups that serve our patients. One of the key aspects I've identified early on is the dedication among the clinicians in our network.

Eric Kaufman: They value our expertise in managing senior populations and our proven ability to help primary care physicians succeed in value-based care.

Eric Kaufman: This positions us as a key partner to their continued success.

Eric Kaufman: Similar to our strong position with the top health plans in our markets, we enjoy excellent relationships with many of the leading independent primary care groups that serve our patients.

Unknown Executive: One of the key aspects I've identified early on is the dedication among the clinicians in our network, and all are motivated by their own independence and ability to provide excellent value-based care to their patients. We are targeting care quality gaps, such as improving medication adherence, increasing preventative screenings, and enhancing chronic disease management. However, going forward, when those best efforts don't lead to improved performance, we will adjust these network relationships with underperforming provider groups accordingly.

Speaker Change: One of the key aspects I've identified early on is the dedication among the clinicians in our network.

Aric Coffman: We partner with 2,900 primary care physicians, but our reach goes well beyond that with thousands of additional clinicians, such as specialty physicians, to round out the entire patient care continuum, and all are motivated by their own independence and ability to provide excellent value-based care to their patients. Building on these key strengths, I have identified several initiatives during my first 90 days as CEO that will further enhance our capabilities and drive sustainable profitability.

Eric Kaufman: We partner with 2,900 primary care physicians, but our reach goes well beyond that, with thousands of additional clinicians, such as specialty physicians, to round out the entire patient care continuum.

Eric Kaufman: and all are motivated by their own independence and ability to provide excellent value-based care to their patients.

Eric Kaufman: Building on these key strengths, I have identified several initiatives during my first 90 days as CEO that will further enhance our capabilities and drive sustainable profitability.

Aric Coffman: First, we are intensifying our focus on star ratings performance. Additionally, we are targeting care quality gaps, such as improving medication adherence, increasing preventative screenings, and enhancing chronic disease management. At the same time, we are ensuring that patients with chronic conditions are linked back to their primary care physician to ensure that they get the care that they need. We know what the unique needs of our patients are. There are geographical nuances that allow us to develop targeted interventions to address needs and get people the care that they need.

Eric Kaufman: First, we are intensifying our focus on star ratings performance.

Eric Kaufman: We are targeting care quality gaps, such as improving medication adherence, increasing preventative screenings, and enhancing chronic disease management. At the same time, we are ensuring patients with chronic conditions are being linked back to their primary care physician to ensure that they get the care that they need.

Eric Kaufman: We know what the unique needs of our patients are. There are geographical nuances that allow us to develop targeted interventions to address needs and get them the care that they need.

Aric Coffman: Next, upon evaluating our existing risk contract portfolio, I've identified substantial opportunities to better align our agreements with payers. Our goal is to ensure these contracts accurately reflect our enhanced value proposition, which has significantly evolved over the past two years. In doing so, we are ensuring better care for our members while improving the financial prospects of our business. Transitioning to our Provider Network Performance Well, our provider network is an incredible asset. We have identified opportunities to elevate our provider partners to an even higher level of differentiated patient outcomes.

Speaker Change: Next, upon evaluating our existing risk contract portfolio, I've identified substantial opportunities to better align our agreements with payers.

Speaker Change: Our goal is to ensure these contracts accurately reflect our enhanced value proposition, which has significantly evolved over the past two years.

Speaker Change: and doing so we are ensuring better care for our members while improving the financial prospects of our business

Speaker Change: Transitioning to our Provider Network Performance.

Speaker Change: Well, our provider network is an incredible asset we enjoy.

Speaker Change: We have identified opportunities to elevate our provider partners to an even higher level of differentiated patient outcomes.

Aric Coffman: We've always focused our efforts on those provider groups that show the most potential for improvement, and we will continue to put energy and effort behind our partners. However, going forward, when those best efforts don't lead to improved performance, we will adjust these network relationships with underperforming provider groups accordingly.

Speaker Change: We've always focused on our efforts on those provider groups that show the most potential for improvement, and we will continue to put energy and effort behind our partners.

Speaker Change: However, going forward, when those best efforts don't lead to improved performance, we will adjust these network relationships with underperforming provider groups accordingly. We've already begun addressing these provider groups, and we'll be further scrutinizing our partnerships in the coming quarters.

Unknown Executive: We've already begun addressing these provider groups, and we'll be further scrutinizing our partnerships in the coming quarters. Next, we're pursuing smart growth strategies, with a particular focus on increasing member density within our existing PCPs. The company has worked hard over the past quarters to make our operations more efficient, and I expect a continued evolution of our business. Turning to our second quarter financial performance, we reported strong Q2 results that were in line with our expectations.

Aric Coffman: We've already begun addressing these provider groups, and we'll be further scrutinizing our partnerships in the coming quarters. Next, we're pursuing smart growth strategies, with a particular focus on increasing member density within our existing PCP. For example, in ACO REACH, we are enhancing the depth of our existing practices by adding Medicare ACO REACH membership to capture more mindshare of the providers we serve. This quarter, we recorded 1,700 new voluntarily aligned ACO lives, bringing our total ACO lives to 12,700, up from 7,400 at the end of last year.

Speaker Change: Next, we're pursuing smart growth strategies, with a particular focus on increasing member density within our existing PCPs.

Speaker Change: For example, in ACO REACH, we are enhancing the depth of our existing practices by adding Medicare ACO REACH membership to capture more mindshare of the providers we serve.

Speaker Change: This quarter we recorded 1,700 new voluntarily aligned ACO lives.

Speaker Change: bring our total ACO lives to 12,700, up from 7,400 at the end of last year. Additionally, we submitted 200 PCPs into ACO REACH in this last cycle for a January of 2025 start date.

Aric Coffman: Additionally, we submitted 200 PCPs and ACO reach in this last cycle for a January 2025 start date. One of the first principles of my management team is to deliver the highest level of service to our partners, providers, and patients, and to do so profitably. The company has worked hard over the past quarters to make our operations more efficient, and I expect a continued evolution of our business. We are seeing an increasing amount of momentum with medical cost reduction initiatives. I'm looking at every part of our operations across people, processes, and technology for opportunities to improve efficiency.

Speaker Change: One of the first principles of my management team is to deliver the highest level of service to our partners, providers, and patients, and to do so profitably.

Speaker Change: The company has worked hard over the past quarters to make our operations more efficient, and I expect a continued evolution of our business.

Speaker Change: We are seeing an increasing amount of momentum with medical cost reduction initiatives.

Speaker Change: I'm looking at every part of our operations across people, process, and technology for opportunities to improve efficiency.

Aric Coffman: We will employ an even higher level of rigor, accountability, and focus on return on invested capital in the future. Turning to our second quarter financial performance, we reported strong Q2 results that were in line with our expectations. Starting with the top line, our revenue for the second quarter of 2024 grew approximately 15 percent year over year, supported by a strong pipeline, an increased retention rate of our PCPs of 96 percent, and an improving persistency rate at 90 percent of patients.

Speaker Change: We will employ an even higher level of rigor, accountability, and focus on return on invested capital in the future.

Speaker Change: Turning to our second quarter financial performance, we reported strong Q2 results which were in line with our expectations.

Unknown Executive: Starting with the top line, our revenue for the second quarter of 2024 grew approximately 15 percent year-over-year, supported by a strong pipeline, an increased retention rate of our PCPs of 96 percent, and an improving persistency rate at 90 percent of patients. With that, I would like to turn it over to our CFO, Atul Kavthekar.

Speaker Change: Starting with the top line, our revenue for the second quarter of 2024 grew approximately 15%, year over year, supported by a strong pipeline, an increased retention rate of our PCPs of 96%, and an improving persistency rate at 90% of patients.

Aric Coffman: Turning next to our medical cost ratio, medical costs per member per month were $869, a decrease of 6% sequentially, supporting our view of a normalizing utilization trend and reflecting strong execution. Moving on to Adjusted EBITDA, we continue to show improvement on a quarter-over-quarter basis, improving our Adjusted EBITDA loss by approximately 50%. For the second quarter, our Adjusted EBITDA loss was $9 million. The improvement in our medical cost ratio was offset by a conservative reserve approach. Atul will expand on this in his section.

Speaker Change: Turning next to our medical cost ratio, medical costs per member per month were $869, a decrease of 6% sequentially, supporting our view of a normalizing utilization trend and reflecting strong execution.

Speaker Change: Moving on to Adjusted EBITDA, we continue to show improvement on a quarter-over-quarter basis, improving our Adjusted EBITDA loss by approximately 50%. For the second quarter, our Adjusted EBITDA loss was $9 million.

Speaker Change: The improvement in our medical cost ratio was offset by a conservative reserve approach. Atul will expand on this in his section.

Atul Kavthekar: Overall, we are on track with the initiatives set forth and acknowledge the work that needs to be done to be able to drive us towards sustained profitability. Accordingly, we are reiterating our previous full year guidance of adjusted EBITDA in the range of positive $20 million to positive $40 million. With that, I would like to turn it over to our CFO, Atul Kavthekar. Thank you, Eric.

Speaker Change: Overall, we are on track with the initiative set forth and acknowledge the work that needs to be done to be able to drive us towards sustained profitability.

Atul: Accordingly, we are reiterating our previous full year guidance of adjusted EBITDA in the range of positive $20 million to positive $40 million.

Atul Kavthekar: With that, I would like to turn it over to our CFO , Atul Kavthekar.

Atul Kavthekar: I'll begin today by reviewing the recent quarter and our progress towards achieving our full year guidance. Following that, I'll share updates on our liquidity position as of the end of the quarter. Second quarter top line results were in line with our expectations, with capitated revenue of $374 million and total revenue of $379 million, reflecting a growth rate of 15% compared to the previous year. The two key drivers of our revenue growth include our member growth, which increased approximately 23% year over year to over 128,000 members, along with our funding, which was up approximately 2% year over year. A few notes around this.

Atul Kavthekar: Thank you, Eric. I'll begin today by reviewing a recent quarter and our progress towards achieving our full year guidance. Following that, I'll share updates on our liquidity position as of the end of the quarter.

Atul Kavthekar: Second quarter top line results were in line with our expectations with capitated revenue of $374 million and total revenue of $379 million.

Atul Kavthekar: Reflecting a growth rate of 15% compared to the previous year. The two key drivers of our revenue growth include our member growth, which increased approximately 23% year over year to over 128,000 members.

Atul Kavthekar: First, that level of membership already exceeds the low end of our guidance range for the full year. And second, the second quarter of 2023 included the benefit of recognition of sweeps revenue in that quarter, which impacts our year over year comparison. Our medical margin was $41 million, or $107 on a PMPM basis. This reflects a 6% sequential improvement in our medical cost ratio. We consider this a clear demonstration of the impact of our medical expense initiatives and a precursor to continued improvement in our profitability this year and going forward.

Atul Kavthekar: along with our funding, which was up approximately 2% year over year.

Atul Kavthekar: A few notes around this.

Atul Kavthekar: First, that level of membership already exceeds the low end of our guidance range for the full year.

Atul Kavthekar: And second, the second quarter of 2023 included the benefit of a recognition of SWEETS revenue in that quarter, which impacts our year-over-year comparison.

Atul Kavthekar: Our medical margin was $41 million, or $107 on a PMPM basis. This reflects a 6% sequential improvement to our medical cost ratio.

Atul Kavthekar: We consider this a clear demonstration of the impact of our medical expense initiatives and a precursor of continued improvement in our profitability this year and going forward. For added context, this includes a modest increase in our reserves in the quarter reflecting our continued prudence in accruing for potential anticipated claims. We will continue to work with our actuaries and auditors to ensure our reserves are adequately aligned with actual claims paid during the rest of the year.

Atul Kavthekar: We consider this a clear demonstration of the impact of our medical expense initiatives and a precursor of continued improvement in our profitability this year and going forward.

Atul Kavthekar: For added context, this includes a modest increase to our reserves in the quarter, reflecting our continued prudence in accruing for potential anticipated claims. We will continue to work with our actuaries and auditors to ensure our reserves are adequately aligned with actual claims paid over the rest of the year. Regarding our operating expense trends, these decreased 14% year over year to be 6% of revenue in the current quarter.

Speaker Change: For added context, this includes a modest increase to our reserves in the quarter, reflecting our continued prudence in accruing for potential anticipated claims. We will continue to work with our actuaries and auditors to ensure our reserves are adequately aligned with actual claims paid over the rest of the year.

Speaker Change: Regarding our operating expense trends, these decreased 14% year-over-year to be 6% of revenue in the current quarter.

Atul Kavthekar: This is a continued demonstration of our ongoing focus on expense management. We continue to investigate new opportunities to harvest cost efficiencies, including leveraging technology where appropriate, and are confident in our ability to deliver on smart efficiencies that still support our profitable growth. Adjusted EBITDA loss for the quarter was $9,000,000 or $23,000,000 PMPM.

Atul Kavthekar: This is a continued demonstration of our ongoing focus on expense management. We continue to investigate new opportunities to harvest cost efficiencies, including leveraging technology where appropriate, and are confident in our ability to deliver on smart efficiencies that still support our profitable growth. Adjusted EBITDA loss for the quarter was $9,000,000 or $23.00 PMPM. Again, this illustrates strong momentum from the first quarter with a 56% sequential improvement. We expect membership to range between 125,000 and 135,000 members, with revenue projected between $1.45 billion and $1.55 billion.

Speaker Change: This is a continued demonstration of our ongoing focus on expense management.

Speaker Change: We continue to investigate new opportunities to harvest cost efficiencies, including leveraging technology where appropriate, and are confident in our ability to deliver on smart efficiencies that still support our profitable growth.

Speaker Change: Adjusted EBITDA loss for the quarter was $9,000,000 or $23.00 PMPM. Again, this illustrates strong momentum from the first quarter with a 56% sequential improvement.

Atul Kavthekar: Again, this illustrates strong momentum from the first quarter with a 56% sequential improvement. Additionally, during the quarter, we successfully completed a capital raise of approximately $42 million in gross proceeds. This infusion of capital significantly strengthens our balance sheet, providing us with additional financial flexibility to support our path to cash flow positivity and sustainable growth. We ended the quarter with $78 million in cash while cutting our net cash used in operating activities to approximately $10 million, which represents a roughly 50% reduction from Q1.

Speaker Change: during the quarter we successfully completed a capital raise of approximately forty two million and gross proceeds

Speaker Change: This infusion of capital significantly strengthens our balance sheet, providing us with additional financial flexibility to support our path to cash flow positivity and sustainable growth.

Speaker Change: We ended the quarter with $78 million in cash, while cutting our net cash used in operating activities to approximately $10 million, which represents a roughly 50% reduction from Q1.

Atul Kavthekar: Turning to the full year, we are reiterating our full year 2024 guidance. We expect membership to range between 125,000 and 135,000 members, with revenue projected between $1.45 billion and $1.55 billion. Our anticipated medical margin will be between $230 million and $250 million, or $165 to $175 on a per-member, per-month basis, and our adjusted EBITDA guidance is $20 million to $40 million in 2024. We are confident in reiterating our guidance for several reasons.

Speaker Change: Turning to the full year, we are reiterating our full year 2024 guidance. We expect membership to range between 125,000 and 135,000 members, with revenue projected between $1.45 billion and $1.55 billion.

Speaker Change: Our anticipated medical margin will be between $230 million and $250 million.

Speaker Change: or $165 to $175 on a per-member, per-month basis. And our adjusted EBITDA guidance is $20 million to $40 million in 2024. We are confident in reiterating our guidance for several reasons.

Atul Kavthekar: First, as you know, our revenue recognition policy enables us to recognize revenues related to final sweeps once we've received appropriate documentation from our health plan partners and from CMS. At this time, we have received documentation for most of our health plans and are currently working with them to determine these final revenue amounts. We anticipate completion of this work in the second half of the year and expect to recognize this revenue as each plan is finalized.

Atul Kavthekar: First, as you know, our revenue recognition policy enables us to recognize revenues related to final sweeps once we've received appropriate documentation from our health plan partners and from CMS. Second, we've talked about our efforts around medical cost management and recorded a nearly 6% sequential reduction in our medical claims expense, PMPM, between the first and second quarters of the year. Finally, we are committed to capturing additional cost efficiencies in the second half with several new initiatives already underway. These efficiencies are under the principle of reducing waste without any adverse impact on our members. Thanks, Atul.

Speaker Change: First, as you know, a revenue recognition policy enables us to recognize revenues related to final sweeps.

Speaker Change: Once we've received appropriate documentation from our health plan partners and from CMS.

Speaker Change: At this time, we have received documentation for most of our health plans and are currently working with them to determine these final revenue amounts. We anticipate completion of this work in the second half of the year and expect to recognize this revenue as each plan is finalized.

Atul Kavthekar: Second, we've talked about our efforts around medical cost management and recorded a nearly 6% sequential reduction in our medical claims expense, PMPM, between the first and second quarter of the year. We continue to see traction in important operating metrics, as Dr. Bacchus will elaborate on in a moment, and anticipate further improvements as we continue through the year. Finally, we are committed to capturing additional cost efficiencies in the second half with several new initiatives already underway. These efficiencies are under the principle of reducing waste without any adverse impact on our members.

Speaker Change: Second, we've talked about our efforts around medical cost management and recorded a nearly 6% sequential reduction in our medical claims expense, PMPM, between the first and second quarter of the year.

Speaker Change: We continue to see traction in important operating metrics, as Dr. Bacchus will elaborate on in a moment, and anticipate further improvements as we continue through the year.

Speaker Change: Finally, we are committed to capturing additional cost efficiencies in the second half with several new initiatives already underway. These efficiencies are under the principle of reducing waste without any adverse impact to our members.

Atul Kavthekar: While this is not an exhaustive list, we see these as major factors driving our optimism for the second half and look forward to reporting on our initiatives as they progress through the year. Thank you again for your time, and I'd like to turn it over to Dr. Bacchus to provide some important updates on our clinical operations. Thanks, Atul.

Speaker Change: While this is not an exhaustive list, we see these as major factors driving our optimism for the second half and look forward to reporting our initiatives as they progress through the year. Thank you again for your time, and I'd like to turn it over to Dr. Bacchus to provide some important updates on our clinical operations.

Amir Bacchus: Let me start by addressing the macro environment that investors follow closely and how P3 operations are. We haven't experienced the same level of medical cost inflation as some payers have been reporting. As Eric mentioned earlier, our diversified payer base prevents us from having any meaningful overexposure to a single payer. Turning to some metrics, our overall admits per thousand decreased sequentially, as did our emergency room visits per thousand. Admits per thousand decreased 11.7%, and emergency department visits decreased 10.3%.

Unknown Executive: Let me start by addressing the macro environment that investors follow closely and how P3 operations are, demonstrating our ability to execute around the two midnight rule. Observations for thousands sequentially decreased by over 22%, and readmission rates for the company also decreased by 4-5% sequentially.

dr bocas: Thanks Atul. Let me start by addressing the macro environment that investors follow closely and how P3 operations are different.

Dr. Bocas: We haven't experienced the same level of medical cost inflation as some payers have been reporting. As Eric mentioned earlier, our diversified payer base prevents us from having any meaningful overexposure to a single payer.

Speaker Change: Turning to some metrics, our overall admits per thousand decreased sequentially as did our emergency room visits per thousand. Admits per thousand decreased 11.7% and emergency department visits decreased 10.3%.

Amir Bacchus: In addition, we continue to improve on observation rates, demonstrating our ability to execute around the two midnight rule. Observations for thousands sequentially decreased by over 22%, and readmission rates for the company also decreased by 4 to 5% sequentially. Additionally, we continue to see decreasing utilization in our delegated plans for Part B costs around unnecessary procedures, oncological drug utilization, and using appropriate places of service. Our care management and transition of care programs are consistently enhancing the health of our most critically ill patients and contributing to a reduction in our overall medical expenses, including through the use of hospice care, where appropriate.

Speaker Change: In addition, we continue to improve on observation rates, demonstrating our ability to execute around the two midnight rule. Observations for thousands sequentially decreased by over 22%, and readmission rates for the company also decreased by 4-5% sequentially.

Speaker Change: Additionally, we continue to see decreasing utilization in our delegated plans for Part B costs around unnecessary procedures, oncological drug utilization, and using appropriate places of service.

Speaker Change: Our care management and transition of care programs are consistently enhancing the health of our most critically ill patients and contributing to a reduction in our overall medical expenses, including through the use of hospice care where appropriate.

Amir Bacchus: Furthermore, our ability to connect and touch more patients is allowing us to improve both our quality gap closures and in the understanding of the acuity of our patient mix, thus leading to better knowledge of their conditions and hence better management.

Speaker Change: Furthermore, our ability to connect and touch more patients is allowing us to improve in both our quality gap closures and in the understanding of our acuity of our patient mix, thus leading to better knowledge of their conditions and hence better management.

Amir Bacchus: As we look forward into the second half of the year in 2025, our strategy will center on...

Unknown Executive: As we look forward into the second half of the year in 2025, our strategy will center on...

Unknown Executive: Our strategy will center on collaborating with our highly committed medical groups and directing patients toward providers with more extensive experience.

Speaker Change: As we look forward into the second half of the year in 2025, our strategy will center on collaborating with our highly committed medical groups and directing patients toward providers with more extensive experience.

Amir Bacchus: Our strategy will center on collaborating with our highly committed medical groups and directing patients toward providers with more extensive experience. We plan to complement this approach by integrating enhanced clinical awareness tools directly into providers' EMRs and partnering with enablement specialists. This comprehensive strategy will allow us a greater scope to achieve our goal. With that, I'll pass it back to Aric for closing remarks. Aric? Thanks, Amir.

Speaker Change: We plan to complement this approach by integrating enhanced clinical awareness tools directly into providers' EMRs and partnering with enablement specialists.

Speaker Change: This comprehensive strategy will allow us a greater scope to achieve our goals.

Speaker Change: With that, I'll pass it back to Eric for closing remarks. Eric?

Aric Coffman: In closing, I'm confident in the future of our sector in the healthcare industry, the compelling P3 business model, our clear path to profitability, and our experienced team. We have a growing TAM, a push by CMS to move all seniors into value-based care by 2030, and a market that reflects the opportunities of value-based care with less than 15% of contracts for seniors in a full risk model. As you heard from Amir, P3 is showing improvement across key metrics in Q2, and I believe, at my core, we are on sound footing and positioned for success. We're not just participating in the healthcare transformation; we're leading it. Thank you for your time, and I look forward to sharing more about our progress in the near future.

Eric Kaufman: Thanks, Amir. In closing, I'm confident in the future of our sector and the healthcare industry, the compelling P3 business model, our clear path to profitability, and our experienced team.

Speaker Change: We have a growing TAM, a push by CMS to move all seniors into value-based care by 2030, and a market that reflects the opportunities of value-based care with less than 15% of contracts for seniors in a full risk model.

Speaker Change: As you heard from Amir, P3 is showing improvement across key metrics in Q2, and I believe at my core, we are on sound footing and positioned for success. We're not just participating in the healthcare transformation, we're leading it.

Speaker Change: Thank you for your time and I look forward to sharing more about our progress in the near future.

Operator: We will now begin the question and answer session. To ask a question, you may press star then one on your telephone keypad. If you're using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been answered and you would like to withdraw your question, please press star then two. At this time, we will pause momentarily to assemble our roster.

Operator: We will now begin the question and answer session. To ask a question, you may press star then one on your telephone keypad. If you're using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been answered and you would like to withdraw your question, please press star then two. At this time, we will pause momentarily to assemble our roster. The first question comes from Brooks O'Neill with Lake Street Capital Markets. Please go ahead.

Speaker Change: We will now begin the question and answer session.

Speaker Change: 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 keys.

Speaker Change: 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 momentarily to assemble our roster.

Speaker Change: The first question comes from Brooks O'Neill with Lake Street Capital Markets. Please go ahead.

Brooks O'Neill: Thank you very much and good afternoon everyone. Thanks for your comments and prepared remarks. I have a couple of questions. I'd like to first start by asking Aric if he could give us a quick sense for how affiliated providers have responded to the change at the CEO level.

Brooks Onneal: Thank you very much and good afternoon everyone. Thanks for your comments and prepared remarks.

Speaker Change: I have a couple of questions. I'd like to first start by asking Arc if you could give us a quick sense for how affiliated providers have responded to the change at the CEO level.

Aric Coffman: Hey Brooks, Eric here. Thanks so much for the question. And, you know, I've had the chance to get out into the markets and meet with partners, I would say generally very positive. And it hasn't really created waves at all. I think Sherif, as my successor, was a great partner during this transition over the last 90 days and continues to be.

Speaker Change: Hey Brooks, Eric here. Thanks so much for the question and I've had the chance to get out into the markets and meet with partners.

Brooks: I would say generally very positive and it hasn't really created waves at all. I think Sherif, as my successor, was a great partner during this transition over the last 90 days and continues to be.

Brooks O'Neill: Great. Now, let me ask you a different question. So when you and I had dinner together a couple weeks ago, we talked at some length about the opportunity you have to go deeper, terms of getting access to more Medicare Advantage members per doctor and how that might have a profound impact on your results. Could you just refresh my memory exactly what you said and why you view that as a significant opportunity for P3?

Brooks: Great. Let me ask you a different question. So when you and I had dinner together a couple weeks ago,

Speaker Change: We've talked at some length about the opportunity you have to go deeper in terms of getting access to more Medicare Advantage members per doctor.

Unknown Executive: terms of getting access to more Medicare Advantage members per doctor.

Speaker Change: and how that might have a profound impact on your results. Could you just refresh my memory exactly what you said and why you view that as a significant opportunity for P3?

Aric Coffman: Yeah, Brooks, I appreciate the question. It's a really important part of how we think about value-based care transformation, and so as we discussed that night whenever we had the chance to meet, the more repetition each clinician gets, the better they're going to be able to practice the new things they're learning and perform on those things. And so as we look at our network today, we already have efforts underway, even though it's only been 90 days in, of adding additional density within providers and doing so in a way that is smart growth.

Speaker Change: Yeah, Brooks, appreciate the question. It's a really important part of how we think about value-based care transformation. And so, as we discussed that night, whenever we had the chance to meet, the more repetition each clinician gets,

Unknown Executive: The better they're going to be able to practice the new things they're learning and perform on those things.

Speaker Change: The better they're going to be able to practice the new things they're learning and perform on those things.

Speaker Change: And so as we look at our network today, we already have efforts underway, even though it's only been 90 days in, of adding additional density within providers, and doing so in a way that is smart growth.

Aric Coffman: And I think that you'll see that over time as we continue to evaluate both the network as well as the payer contracts where we have opportunities to expand more deeply on a per provider basis. So that panel density is really important.

Brooks: And I think that you'll see that over time as we continue to evaluate both the network as well as the payer contracts where we have opportunities to expand more deeply on a per provider basis.

Brooks O'Neill: And Eric, refresh my memory. I think you told me that with many of your affiliated providers, you only essentially are touching or have control over a small percentage of the providers' Total Medicare Advantage Enrollment Base. Refresh my memory. Roughly what is that number today? What might you think it could go to down the road?

Speaker Change: So that panel density is really important for us.

Unknown Executive: And Eric, to refresh my memory, I think you told me that with many of your affiliated providers, you only essentially are touching or have control over a small percentage of the providers. Total Medicare Advantage Enrollment Base.

Speaker Change: And Eric, refresh my memory. I think you told me that with many of your affiliated providers, you only essentially are touching or have control over a small percentage of the providers.

Speaker Change: Total Medicare Advantage Enrollment Base. Refresh my memory roughly what is that number today and what might you think it could go to down the road.

Aric Coffman: Yeah, Brooks, what I'll say is that we have lots of opportunity for growth in our existing network, with our primary care providers adding additional seniors to their panels, and that includes a combination of both Medicare Advantage as well as programs like ACO REACH. And so, you know, the density, yeah, so the density that we'd like to get to with each one of our clinicians is as many patients as they can handle within their panels. And we help them do that with the same processes that we're using with the existing patients that they have today.

Speaker Change: Yeah, Brooks, what I'll say is that we have lots of opportunity for growth in our existing networks with our primary care providers to add additional seniors into their panels. And that includes a combination of both Medicare Advantage as well as programs like ACO Reach.

Unknown Executive: with our primary care providers to add additional seniors to their panels, and that includes a combination of both Medicare Advantage as well as programs like ACO REACH. And so, you know, the density, yeah, the density that we'd like to get to with each one of our clinicians is as many patients as they can handle within their panels, and we help them manage that with the same processes that we're using with the existing patients that they have today.

Speaker Change: And so, you know, the density, yeah, so the density that we'd like to get to with each one of our clinicians is as many patients as they can handle within their panels. And we help them manage that with the same processes that we're using with the existing patients that they have today.

Brooks O'Neill: Great. And then, let me just ask Atul one quick one. Atul, I think I heard you mention something about sweet timing, but I confess, it's been a busy day and my brains are a little bit scattered. So could you just rephrase that or say it again? whether you thought the impact of sweep timing had an impact on the year over year comparison. Derrick Gutierrez.

Speaker Change: Great. And then let me just ask Atul one quick one. Atul, I think I heard you mention...

Atul Kavthekar: something about sleep timing, but I confess it's been a busy day and my brains are a little bit scattered. So could you just rephrase that or say again?

Atul Kavthekar: Whether you thought the impact of sweep timing had an impact on the year-over-year comparison here in Q2? Yeah.

Atul Kavthekar: So Brooks, a couple of things. The nature of sweeps in our business, and this is just the reality of it, the timing can be a bit unpredictable, whether they fall into one quarter or another. Then last year, as you may recall, we had accrued sweeps for Calendar 22's final payment in the second quarter, which made that second quarter and, therefore, the year-over-year comparison a little bit higher. That's all I'm, that's all I was alluding to. Okay, that you're

Atul Kavthekar: So Brooks, a couple of things. So the nature of sweeps in our business, and this is just the reality of it, the timing can be a bit unpredictable whether it fall into one quarter or another.

Speaker Change: Then in last year, as you may recall, we had accrued sweeps for calendar 22 final payment in the second quarter, which made that second quarter and therefore the year-over-year comparison a little bit higher. That's all I was alluding to.

Brooks O'Neill: Okay, that's very helpful. Thanks a lot. Now, I'll jump back in the queue. Thanks for taking my question.

Unknown Executive: Okay, that you're

Speaker Change: Okay, that's very helpful. Thanks a lot. Now, I'll jump back in the queue. Thanks for taking my questions.

Josh Raskin: The next question comes from Josh Raskin with Nefron Research. Please go ahead.

Atul Kavthekar: The next question comes from Josh Raskin with Nefron Research. Please go ahead.

Josh Raskin: Hi, thanks. Good evening. I just want to start with, I want to make sure I got this right. Did you say observation stays were down 22% sequentially on a per 1000 lives basis? And then, I'm just curious, how are you, you know, like, I guess, maybe year over year and impacted to midnight? Well, it just seems incongruous with what we're hearing from plans and what we're seeing at the provider

Josh Raskin: Hi, thanks. Good evening. Just want to start with, I want to make sure I got this right. Did you say observation stays were down 22%?

Speaker Change: sequentially on a, you know, per 1,000 lives. And then

Speaker Change: I'm just curious, how are you, you know, like...

Amir Bacchus: Hi Josh, this is Amir. Good to see you and good to hear from you again.

Amir Bacchus: Hi Josh, this is Amir. Good to see you and good to hear from you again.

Amir Bacchus: Yes, actually, we were surprised too as we looked at the data and said, okay, and for us, as you know, we like to be delegated on as many plans or as many lives as we can. So as we do that, we directly work through a concurrent review and monitor that two midnight rule. It doesn't just come through the plan, and we just accept it. We're actively working with the hospitals to see if those patients meet the two midnight rule or deny admission and or deny the observation stay.

Amir Bacchus: Yes, actually, we were surprised too as we looked at the data and said, okay, and for us, as you know, we like to be delegated on as many plans or as many lives as we can. So as we do that, we directly work through a concurrent review and monitor that two midnight rule. It doesn't just come through the plan, and we just accept it. We're actively working with the hospitals to see if those patients meet the two midnight rule or deny admission and or deny the observation stay.

Amir Bacchus: In doing that, we have the opportunity to reduce it. So for us, yes, after having what we saw in the third, excuse me, the fourth quarter of 2023, which was a significant increase, we were able to see that bend to 22% sequentially from quarter to quarter.

Amir Bacchus: In doing that, we have the opportunity to reduce it. So for us, yes, after having what we saw in the third, excuse me, the fourth quarter of 2023, which was a significant increase, we were able to see that bend to 22% sequentially from quarter one.

Amir Bacchus: Consequentially, from quarter one to quarter two of 2024.

Amir Bacchus: from Q1 to Q2 of 2024.

Unknown Executive: Alright, so you reacted to 4Q, and I assume 1Q, like you may still be running up year over year if possible, right?

Josh Raskin: Alright, so you reacted to 4Q, and I assume 1Q, like you may still be running up year over year if possible, right?

Amir Bacchus: Say that again, Josh?

Speaker Change: Say that again, Josh your observation stays.

Josh Raskin: Your observation stays, you know, in terms of, like, the decrease there, like, on a year over year basis, the 22% is versus 1Q, but I was curious if it was down year over year.

Josh Raskin: In terms of like the decrease there like on a year, but you had a 22% as versus <unk>, but I was curious if it was down year over year.

Josh Raskin: I can get back to you on that for sure in terms of what it is year over year, and we could probably have that chat a little bit later or possibly tomorrow.

Amir Bacchus: I can get back to you on that for sure and tell you what it is year over year, and we can probably have that chat a little bit later or possibly tomorrow.

Unknown Executive: I can get back to you on that for sure and tell you what it is year over year, and we can probably have that chat a little bit later or possibly tomorrow.

Josh Raskin: On the 2025 strategy, you know, you're talking about this increased density within the physician. I'm curious how you compare that against other growth opportunities, even for increasing density in, say, local markets by adding local physicians or even, you know, potentially new markets and, you know, maybe adjacent markets. How are you sort of weighing the pros and cons of those growth avenues?

Unknown Executive: On the 2025 strategy, you know, you're talking about this increased density within the physician. I'm curious how you compare that against other growth opportunities, even for increasing density in, say, local markets by adding local physicians or even, you know, potentially new markets and, you know, maybe adjacent markets. How are you sort of weighing the pros and cons of those growth avenues?

Speaker Change: All right no worries on the 2025 strategy you're talking about this infill density within the physician I'm curious how you compare that against other growth opportunities even for increasing density in state local markets by adding local physicians or even potentially new markets and maybe adjacent mark.

Speaker Change: How are you how are you sort of weighing the pros and cons of those growth avenues.

Speaker Change: Hey, Josh this is Eric good to hear from you. So thanks for the question and I think in terms of the strategy we have.

Aric Coffman: Hey Josh, this is Eric. Good to hear from you. So thanks for the question. And I think, you know, in terms of the strategy that we have, it's really around smart growth. And when we say smart growth, we want to bring in growth that's going to be both profitable as well as cash flow positive for the business. And as we look at the underwriting for some of the opportunities that we have in front of us, what that means is, we're going to try to go deeper in the markets where we are today, rather than have something like a big geographic expansion into a new area because we know those opportunities exist.

Eric Hoffman: Hey Josh, this is Eric. Good to hear from you. So thanks for the question. And I think, you know, in terms of the strategy that we have, it's really around smart growth. And when we say smart growth, we want to bring in growth that's going to be both profitable as well as cash flow positive for the business. And as we look at the underwriting for some of the opportunities that we have in front of us, what that means is, we're going to try to go deeper in the markets where we are today, rather than have something like a big geographic expansion into a new area because we know those opportunities exist.

Eric Kaufman: It's really around smart growth and when we say smart growth is we want to bring in growth that's going to be both profitable as well as cash flow accretive to the business.

Eric Kaufman: And as we look at the underwriting for some of the opportunities that we have in front of US what that means is we're going to try to go deeper in the markets, where we are today rather than have something like a big geographic expansion into a new area, because we know those opportunities exist.

Speaker Change: Okay that makes sense and then just last one.

Unknown Executive: Okay, that makes sense. And then just last one, maybe an update on working with health plans, you know, and sort of where you got to before they submitted their bids for MA for 2025? And maybe any contractual changes that, you know, you were keen on getting?

Josh Raskin: Okay, that makes sense. And then just last one, maybe an update on working with health plans, you know, and sort of where you got to before they submitted their bids for MA for 2025? And maybe any contractual changes that you were keen on getting? Yeah, another one.

Speaker Change: Maybe an update on and working with health plans, you know sort of where did you get to before they submitted their bids for MA for 2025, and maybe any contractual changes.

Speaker Change: No you were keen on getting.

Speaker Change: Yeah. Another great question, Josh. Thank you for that one two and the team has been working hard there's a lot of work and a lot of would love to shop and the rest of the year to get to our 2025 and point. We have several discussions are currently ongoing in terms of what we're hearing from the bid process and the bid cycle.

Aric Coffman: Yeah, another great question, Josh. Thank you for that one, too.

Josh Raskin: And, you know, the team's been working hard. There's a lot of work and a lot of wood left to chop during the rest of the year to get to our 2025 endpoint. We have several discussions that are, you know, currently ongoing. In terms of what we're hearing from the bid process and the bid cycle, very consistent is that we're hearing a lot of discussion around rationalizing benefits to match the funding and the trends that people are seeing in the marketplace.

Speaker Change: Very consistent as you know we're hearing a lot of discussion around rationalizing benefits to match the funding and the trends that people are seeing in the marketplace.

Josh Raskin: And as soon as we have full visibility into what those benefit changes are, we'll have a little better sense of exactly what we think the impact will be across multiple fronts, whether that's AP growth or whether that's overall product performance.

Speaker Change: And as soon as we have full visibility into what those benefit changes or will have a little better sense of exactly what we think the impact will be across multiple fronts, whether that's a growth or whether thats overall product performance.

Speaker Change: Okay. Thanks.

Speaker Change: The next question comes from David Larsen with <unk>. Please go ahead.

David Larsen: The next question comes from David Larsen with BTIG. Please go ahead.

Operator: The next question comes from David Larsen with BTIG. Please go ahead.

Jenny Shen: Hi, this is Jenny Shen on for Dave. Thanks for taking my question. I just wanted to touch on some of your conversations that you're having with your auditors. I know that in Q1 of 24, they were asking you guys to reserve about 9% of your claims cost, which was up from the 3 to 5% historically. What is that trending at now, and just how are those conversations progressing?

Jenny Shen: Hi, this is Jenny Shen on for Dave. Thanks for taking my question. I just wanted to touch on some of your conversations that you're having with your auditors. I know that in Q1 of 24, they were asking you guys to reserve about 9% of your claims cost, which was up from the 3 to 5% historically. What is that trending at now, and just how are those conversations progressing?

Jenny Zhang: Hi, This is Jenny Zhang on for Dave. Thanks for taking my question I just wanted to touch on you mentioned some of your conversations that you're having with your auditors I know that.

Jenny Zhang: In Q1 of 'twenty four they are asking you guys to reserve at 9%.

Jenny Zhang: Of your claims cost, which is up from the 3% to 5% historically what is that trending out now and just how are those conversations progressing.

Speaker Change: While the conversations are progressing very well, but just one one finer point that the conversations are really with our actuaries.

Atul Kavthekar: Well, the conversations are progressing very well, but just one finer point: the conversations are really with our actuaries. So the actuaries are the third parties that are reviewing claims triangles, establishing risk levels, and pad factors, and then assessing what they think our reserves ought to be.

Unknown Executive: Well, the conversations are progressing very well, but just one finer point: the conversations are really with our actuaries. So the actuaries are the third parties that are reviewing claims triangles, establishing risk levels, and pad factors, and then assessing what they think our reserves ought to be.

Speaker Change: So the actuaries as of third parties that are reviewing claims triangles, establishing risk levels and pad factors and then assessing what they think our reserves at a b. So to answer your question those conversations are going very well.

Jenny Shen: So to answer your question, those conversations are going very well. We have been working with them since our last call, and we continue to work with them, and we'll continue to work with them in the future, helping them understand some of the nuances of each of our contracts. Each one of our contracts is just a little bit different in terms of the risk profile and the nature of some of the information. One of the things that we're going to be stressing with them going forward are some of the really excellent operational characteristics and KPIs that we are seeing and having them factored into their calculus.

Unknown Executive: So to answer your question, those conversations are going very well. We have been working with them since our last call, and we continue to work with them, and we'll continue to work with them in the future, helping them understand some of the nuances of each of our contracts. Each one of our contracts is just a little bit different in terms of the risk profile and the nature of some of the information. One of the things that we are going to be stressing with them going forward are some of the really excellent operational characteristics and KPIs that we are seeing and having them factored into their calculus.

Speaker Change: We have been working with them since our last call and we continue to work with them and we will we will.

Speaker Change: Continuing going forward working with them, helping them understand some of the nuances with each of our contracts in each one of our contracts is just a little bit different in terms of the risk profile and the and the nature of some.

Speaker Change: Some of the information one of the things that where we are we're going to be stressing with them going forward or some of the really excellent operational characteristics and and Kpis that we are seeing and having them factored into their calculus. In fact, we had a few of the plans where the.

Jenny Shen: In fact, we had a few plans where the actuaries determined that it was appropriate at the time, in the quarter, for us to actually reduce some of that pad factor, that safety factor that they apply, and we'll continue working with them as we go forward, so hopefully that answers your question.

Unknown Executive: In fact, we had a few plans where the actuaries determined that it was appropriate at the time, in the quarter, for us to actually reduce some of that pad factor, that safety factor that they apply, and we'll continue working with them as we go forward, so hopefully that answers your question.

Speaker Change: The actuaries determined that it was appropriate at the time in the quarter for us to actually reduce some of that that pad factor that safety factor that they apply and will continue working with them is as we go forward.

Speaker Change: So hopefully that answers your question.

Jenny Shen: Yeah, is the 9% pretty similar to what it was in Q2, or has it gone down from there?

Atul Kavthekar: Yeah, is the 9% pretty similar to what it was in Q2, or has it gone down from there?

Speaker Change: Oh yeah.

Speaker Change: Is the 9% pretty similar to what it was in Q2 or has it gone down from there.

Jenny Shen: It has gone down. We'd like to see that go down further, but we will continue to work with it on a plan-by-plan basis. It's not an aggregated percentage factor. It is at a specific plan-by-plan level. Some of them have been completely eliminated.

Speaker Change: It has gone down a we'd like to see that go down further, but we will continue to work with it out on a plan by plan basis. Its not an aggregated percentage factor. It is indeed had a specific plant by plant level some of them have been reduced absolutely.

Amir Bacchus: Okay, that sounds great. And just for a quick follow-up, just wanting to ask about P28. Any updates there? One of your peers recently said that they expected to have a 2% impact in 2024. I was wondering if you could help quantify what you think the impact will be for P3. Thanks.

Speaker Change: Okay that sounds great and just for a quick follow up just wanted to ask about the 28 any updates there one of your peers recently said that they expect.

Speaker Change: If I could have 2% impact on 2024 I was wondering if you could help quantify what you think the impact will be for Petrie.

Speaker Change: So thanks, Danny this is amir.

Jenny Shen: So thanks, Jenny. This is Amir. You know, again, as we've had this conversation,

Speaker Change: Again as we've had this conversation before.

Amir Bacchus: before with version 24 adapting to 28 obviously.

Amir: Four with version 24 adapt into 28, obviously going into our last year of it.

Amir Bacchus: Other entities are involved.

Speaker Change: Yes, we with our baseline wrap it.

Speaker Change: For us it basically around 1.0 overall for the company.

Amir Bacchus: Basically, around 1.0 overall for the company. We knew and

Amir Bacchus: We knew and we have always felt that we can continue to improve the RAF Despite version 28 and we've done that. I don't have an exact number or percent that I could give you right now today However, we could tell you as we just described in the call that we had an actual overall revenue lift Based on what we saw from our RAF and I think as Atul described early on we had about a 2% increase in overall revenue Which bodes well as we look at our current and continued MRA or medical risk adjustment activities So we're confident as we continue to move not only from what we've seen in the past, but where we're going towards in the future With continuing to improve that As we stand today

Speaker Change: We knew and we get always felt that we can continue to improve the RAF Despite version two <unk> and we've done that.

Speaker Change: I don't have exact number or percent that I can give you right now today. However, we can tell you is we just described in the call that we had at actual overall revenue lift based.

Speaker Change: Based on what we saw from Iraq, and I think as a tool described early on we had about a 2% increase in overall revenue.

Speaker Change: Which bodes well as we look at our current and continued.

Moray: Moray or Medicare risk adjustment activities. So we're confident as we continue to move not only from what we've seen in the past, but where we're going towards in the future with continuing to improve that as.

Speaker Change: As we stand today.

Speaker Change: Alright, thanks for the question.

Unknown Executive: Alright, thanks for the question.

Amir Bacchus: All right, thanks for the question.

Ryan Langston: Well, the next question comes from Ryan Langston with TD Cowan. Please go ahead.

Speaker Change: The next question.

Operator: The next question comes from Ryan Langston with TD Cowan. Please go ahead.

Speaker Change: The next question comes from Ryan Langston with TD Cowen. Please go ahead.

Ryan Langston: Hi, good afternoon. Thanks for the question. We've heard some of the insurers talk about simplifying contracts, maybe re-evaluating footprints into 2025. Have you had any of those discussions with your payer partners or any, I guess, anticipated changes that you know of in 2025 that you'd be willing to call out? Hey, Ryan, thanks for the question. This is Eric Coffman.

Speaker Change: Hi, good afternoon. Thanks for the question.

Ryan Langston: Heard some of the insurers talk about simplifying contracts, maybe reevaluating footprints into 2025 have you had any of those discussions with your payer partners or any I guess anticipated changes that you know of and twenty-five it you'd be willing to call out.

Speaker Change: Hey, Ryan Thanks for the question this is Eric Hoffman.

Aric Coffman: I'll give it a shot and then have the team answer anything additionally. But absolutely, you know, we've had these conversations with our payer partners. And I think that, you know, a lot of folks in this space on the payer side are taking a hard look at what counties work. And, you know, we think about the business a lot the same way. This is a county by county view of how the bids are built up and what their products look like and the success that they have or haven't had.

Eric Hoffman: Hey, Ryan, thanks for the question. This is Eric Hoffman.

Eric Hoffman: I'll give it a shot and then had the team answer anything Additionally, but absolutely. We've had these conversations with our payer partners and I think that you know a lot of folks in this space on the payer side are taking a hard look at what counties work and we think about the business a lot. The same way. This is a county by county view of how the bids are bill.

Eric Hoffman: I'll give it a shot and then have the team answer anything additionally. But absolutely, you know, we've had these conversations with our payer partners. And I think that, you know, a lot of folks in this space on the payer side are taking a hard look at what counties work. And, you know, we think about the business a lot the same way. This is a county by county view of how the bids are built up and what their products look like and the success that they have or haven't had.

Speaker Change: Up in what their products look like and the success that they have or haven't had that'll be a continuing process and as I as I mentioned, a little bit earlier, we're in the early stages of getting to our completion for what 2025 will look like for all of that still in discussion I think it'll be a little bit premature for us until we get there.

Aric Coffman: That'll be a continuing process. And, you know, as I mentioned a little bit earlier, we're in the early stages of getting to our completion for what 2025 will look like. So all that's still in discussion. I think it'll be a little bit premature for us until we get visibility into everything around benefit design and how that's shaking out for the plans as to exactly what that will look like heading into 2025. But it's a big priority for us, and we've got our attention on it. Yeah.

Eric Hoffman: That'll be a continuing process. And, you know, as I mentioned a little bit earlier, we're in the early stages of getting to our completion for what 2025 will look like. So all that's still in discussion. I think it'll be a little bit premature for us until we get visibility into everything around benefit design and how that's shaking out for the plans as to exactly what that will look like heading into 2025. But it's a big priority for us, and we've got our attention on it. Yeah.

Speaker Change: Ability into everything around benefit design and how that's shaking out for the plans as to exactly what that will look like heading into 2025, but it's a big priority for us and we've got our attention on it.

William Bettermann: Yeah, and Ryan, this is Bill Bettermann, and I would just add that in addition to looking at payers, we also, as I've talked about in the past, are looking at our providers as well, right? Are they performing at the level that we would expect? And so we're evaluating not just our payers but also the providers that we're working with.

Bill Betterman: And Ryan This is bill better man I would just add that in addition to looking at payers. We also as I've talked in the past our looking at our providers as well right are they performing.

Ryan Langston: Got it. And then just one quick one.

Ryan Langston: At the level that we would expect and so we were evaluating not just of our payers, but as well as the providers that we're working with.

Ryan Langston: Got it and then just one quick one.

Ryan Langston: For me, how should we think about maybe free cash flow for the rest of the year? I don't think I heard anything in the prepared remarks, but it looks like the loss narrowed a bit. Actually, I shouldn't say a bit, but a pretty decent amount, at least from the first half of this year to last year, but just curious, anything on the cadence of

Speaker Change: For me, how how should we think about maybe free cash flow for the rest of the year I don't think I heard anything in the prepared remarks, but it looks like the loss narrowed a bit actually I shouldn't say a bit pretty decent amount at least from the first half of this year to last year, but just curious anything on cadence of that or maybe where we might end the year on free cash. Thanks.

Atul Kavthekar: This concludes today's webinars. Yeah, Ryan, this is Atul Kavthekar. First, welcome. I'm glad you're part of the team here.

Ryan Langston: Yeah. Ryan this is a tool counting our first welcome.

Atul Kavthekar: But yeah, we are really expecting the second half of the year to look a lot like the first half of the year in terms of cash burn. One of the things that I think will be a potential uptick factor is with regard to the time lag for some of the cost reduction that we are expecting in the third and fourth quarter to actually show up kind of through the claims lag and surface themselves within the delegated plans that we have. So that's a direct reduction in the cash outflow for paying claims that we hope to see in the year.

Ryan Langston: Glad you're glad you part of the team here, but yeah.

Speaker Change: We are expecting really the second half of the year, probably to look a lot like the first half of the year.

Speaker Change: In terms of cash burn and one of the things that I think will be a potential.

Bill Betterman: Uptick factor is with regards to the time lag that some of the cost reductions that we're expecting in the third and fourth quarter to actually show up kind of through the claims lag in surface themselves within the delegated plans that we have so that's a direct reduction in the cash.

Ryan Langston: Outflow for paying claims that we hope to see in the year, but it's really a factor of timing.

Atul Kavthekar: But it's really a factor of timing. There are a lot of other factors that go into it as well. I don't want to oversimplify it. But I think the takeaway should be something along the lines of, you know, the second half will be very similar to the first half.

Bill Betterman: There's a lot of other factors that go into it as well I don't want to oversimplify, it but I think the takeaway should be something along the lines of the second half will be very similar to the first half.

Speaker Change: Okay. No. That's very helpful. Thank you very much.

Speaker Change: The next question comes from Ryan Daniels with William Blair. Please go ahead.

Ryan Daniels: The next question comes from Ryan Daniels with William Blair. Please go ahead.

Jack Senft: Hey guys, this is Jack Senft on for Ryan Daniel. Thanks for taking the questions. The first half medical margin totals around 78 million, so your full year guide implies a pretty solid improvement in the back half of this year. Can you just talk about the visibility you have here in achieving that and just your confidence level in hitting this metric? Or really, should we kind of think of this as a function of the expected revenue coming in that you mentioned in your prepared marks against the general medical margin improvement? Thanks. Yeah, no

Jack Senft: Hey guys, this is Jack Senft on for Ryan Daniels. Thanks for taking the questions. The first half medical margin totals around 78 million, so your full year guide implies a pretty solid improvement in the back half of this year. Can you just talk about the visibility you have here in achieving that and just your confidence level in hitting this metric? Like really, should we kind of think about this as a function of the expected revenue coming in that you mentioned in your prepared marks against the general medical margin improvement? Thanks. Yeah, no.

Jack dumped: Hey, guys. This is Jack dumped on for Ryan Daniels, Thanks for taking the questions.

Speaker Change: The first half medical margin told around $78 million to your full year guide implies a pretty solid improvement in the back half of this year can you just talk about the visibility you have here in achieving that and just your confidence level of getting this metric like really should we kind of think about this as a function of the expected revenue coming in that you mentioned.

Speaker Change: In your prepared remarks against the general medical margin improvement. Thanks.

Atul Kavthekar: Yeah, no, thanks for the question. Let me start off, and then I'm sure some of my colleagues may want to add on to it, but I wouldn't put it all on the expectation of revenue improvement. One of the things that we talked about is the expectation, and again, it's a matter of timing when we settle with the health plans on an individual basis, what any adjustments related to the sweeps accrual will be and when they show up, but we expect those in the second half of the year.

Unknown Executive: Yeah, no, thanks for the question. Let me start off, and then I'm sure some of my colleagues may want to add on to it, but I wouldn't put it all on the expectation of revenue improvement. One of the things that we talked about is the expectation, and again, it's a matter of timing when we settle with the health plans on an individual basis, what any adjustments related to the sweeps accrual will be and when they show up, but we expect those in the second half of the year.

Speaker Change: Yeah no. Thanks for the question, let me start off and then.

Speaker Change: I'm sure. Some of my colleagues may want to add onto it but I wouldn't I wouldn't put it all on the expectation on revenue.

Speaker Change: Improvement one of the things that we talked about is the expectation and again, it's a matter of timing when we settle with our health plans on an individual basis, what the any adjustments related to the sweeps accrual will be and when we when they show up but we expect those in the second half of the year. So those are things that.

Unknown Executive: So those are things that we have increasing visibility into. And the other part that is going to be a big factor here is medical cost reduction. Now, we saw a pretty significant movement from Q1 to Q2. Our expectation, given everything that we see and hear in the field and see in the data, suggests that we should be able to make at least that much of an improvement going into the back half of the year. And so those are really the two things that factor together to give us increased confidence in our ability to hit.

Speaker Change: We have increasing visibility into.

Atul Kavthekar: So those are things that we have increasing visibility into. And the other part that is going to be a big factor here is medical cost reduction. Now, we saw a pretty significant movement from Q1 to Q2. Our expectation, given everything that we see and hear in the field and see in the data, suggests that we should be able to make at least that much of an improvement going into the back half of the year. And So those are really the two things that factor together to give us increased confidence in our ability to hit.

Speaker Change: And the other part that we that is going to be a big factor here is the medical cost reduction that we saw a pretty significant movement from Q1 to Q2, our expectation given all everything that we see.

Jack Senft: Okay, thanks. If I can ask another quick second question,

Speaker Change: And here in the field and seeing the data suggests that we should be able to get at least that much of an improvement going into the back half of the year.

Speaker Change: And so that's those are really the two things that factored together, they give us increased confidence in our ability to hit.

Speaker Change: Okay. Thanks.

Amir Bacchus: In your prepared remarks, I think you noted that you guys identified provider groups that could be elevated, which I'm assuming those are just some that are underperforming on average. So when it comes when it comes to kind of like elevating those providers, what does the process typically look like? Is it fairly easy to encourage them to kind of perform more efficiently? Or just kind of what are the puts and takes here before exiting the relationship?

Speaker Change: I can ask another quick second question in your prepared remarks, too I think you noted that you guys identified provider groups that could be elevated which I'm. Assuming those are just some some that are underperforming on average so when it comes when it comes to kind of like elevating those providers. What does the process typically look like is it fairly easy to encourage them to it.

Speaker Change: Kind of perform more efficiently or just kind of what are the puts and takes here before exiting the relationship.

Speaker Change: Yeah. Thanks for the question. So you know as Eric described earlier in the conversation.

Amir Bacchus: Yeah, thanks for the question. As Eric described earlier in the conversation, in the prepared remark, you know, getting density into those practices is very important. And the more you get into their mindshare of what they need to be doing, then you get them practicing more efficiently. So for us, even in our large practices that we have, we're having conversations with them to sit there and say, can we concentrate some of the patients into even more experienced providers? In doing so, you can create better results, right?

Speaker Change: And in the prepared remarks.

Speaker Change: Getting density into those practices is very important and the more you get into their mind share of what they need to be doing then you would get them practicing more efficiently. So for us even in our large practices that we have we're having conversations with them to sit there and say can we concentrate some of the patients into even more experience providers in doing so you can create better results.

Speaker Change: Right. So those are some of the things in the conversations we're starting to have with some of our large groups in the different markets.

Aric Coffman: So those are some of the things in the conversations we're starting to have with some of our large groups in the different markets to actually have them improve even better than where they stand today. The incentives that we align with them, as well as the, you know, sharing the surplus savings, align with that very thing, as well as our back-end care management programs, etc., that work directly with those practices to achieve those results, all work hand-in-hand.

Speaker Change: And actually have them improve even better than where they stand today, the incentives that we align with them as well as the Sharon.

Speaker Change: Surplus savings aligned to that very thing as well as our backend care management programs et cetera that worked to rocket with those practices to achieve those result, all work hand in hand.

Aric Coffman: So we are confident, especially with the enthusiasm we have with our providers, to be able to move more in that accord versus some of the practices that may have very, very minimal lives that are not used to and want to do Medicare Advantage. So those types of conversations are the ones that we're having today. And I'll add, this is Eric, a couple of finer points here to agree with everything Amir said.

Speaker Change: So we are confident especially with the enthusiasm we have with our with our providers to be able to move more in that a court versus some of the packages that they may have very very minimal lives that.

Speaker Change: Are not used to and want to do Medicare advantage risk. So those types of conversations are the ones that we're having today.

Unknown Executive: And I'll add this is Eric a couple a couple finer points here too.

Speaker Change: Agree with everything you know Amir said we.

Aric Coffman: We additionally have made specific investments in the network and in our capability set that will enhance their ability to perform. And then we've stratified groups to understand, because it's not just about people that are underperforming; it's also about people that might be in the middle and moving the middle up a bit as well. And so those are some of the tactics that we've deployed that will give them better access to and quicker access to more information on their performance and allow us to, in more real time, address anything that comes up, or maybe there's a misunderstanding, or maybe they need more education.

Unknown Executive: We Additionally have made specific investments in the network and enter our capability set that will enhance their ability to perform.

Unknown Executive: And then we've stratified groups to understand because it's not just about people that are underperforming. It's also about people that might be in the middle of moving the middle up a bit as well and so.

Unknown Executive: So those are those are some of the tactics that we've deployed that will give them better access and quicker access to more information on their performance.

Speaker Change: Allow us to win more real time address anything that comes up where maybe there was a misunderstanding maybe they need more education and this is a one of the things that we emphasize this is a relationship heavy business and so it's those relationships than in the market and with a 96% persistent providers in a 90% persistent pain.

Aric Coffman: And this is one of the things that we emphasize; this is a relationship-heavy business. And so it's those relationships that are in the market with 96% of persistent providers and 90% of persistent patients. That's the other place where we get a lot of efficiencies in the way we think about our provider panels and networks.

Unknown Executive: <unk>.

Unknown Executive: The other place, where we get a lot of efficiencies in the way, we think about her provider panels and network.

Speaker Change: Okay perfect understood. Thanks again guys.

Jack Senft: Okay, perfect. Understandable. Thanks again, guys.

Speaker Change: This concludes our question and answer session and the P. Three health partners second quarter 2024 earnings call. Thank you for attending today's presentation. You may now disconnect.

Operator: This concludes our question and answer session and the P3.

Operator: This concludes our question and answer session and the P3 Health PRtnrs second quarter 2024 earnings call. Thank you for attending today's presentation. You may now disconnect.

Operator: Yeah.