Q3 2024 Privia Health Group Inc Earnings Call
Max: Thank you for standing by. My name is Max and I'll be your conference operator for today. At this time, I would like to welcome everyone to the PrevioHealth third quarter conference call.
All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number 1 on your telephone keypad. If you would like to withdraw your question, press star 1 again.
Speaker Change: Thank you. I would now like to turn the call over to Robert Borchert, SVP, Investor and Corporate Communications. Please go ahead.
Robert Borchert: Thank you, Max, and good morning, everyone. Joining me are Parth Mehrotra, our Chief Executive Officer, and David Mountcastle, our Chief Financial Officer. This call is being webcast and be accessed in the Investor Relations section of PriviaHealth.com.
Robert Borchert: Today's financial press release and slide presentation are posted on the Investor Relations pages of PreviaHealth.com
Robert Borchert: Following our prepared comments we will open the line for questions. Please limit yourself to one question only and return to the queue if you have a follow-up so we can get to as many questions as possible.
Robert Borchert: The financial results reported today are preliminary and are not final until our Form 10-Q for the third quarter ended September 30, 2024 is filed with the Securities and Exchange Commission. Some of the statements we will make today are forward-looking in nature, based on our current expectations and view of our business as of November 7, 2024.
Robert Borchert: Such statements, including those related to our future financial and operating performance and future business plans and objectives, are subject to risk and uncertainties and may cause actual results to differ materially.
Robert Borchert: As a result, these statements should be considered along with the cautionary statements in today's press release and the risk factors described in our company's most recent SEC filings.
Robert Borchert: Finally, we may refer to certain non-GAAP financial measures on the call. Reconciliation of these measures to comparable GAAP measures are included in our press release and the accompanying slide presentation posted on our website. Now I'd like to hand the call over to our CEO, Parth Mehrotra.
Thank you, Robert, and good morning, everyone.
Parth Mehrotra: Previa Health posted another strong quarter of financial performance as we continue to execute very well operationally and drive growth across all our markets.
Parth Mehrotra: This morning, I'll cover some key highlights and provide a business update, then David will discuss our recent financial performance and provide an update to our 2024 Guidance Outlook before we take your questions.
Parth Mehrotra: During the third quarter, our momentum continued across all aspects of the business.
Parth Mehrotra: In particular, implemented providers increased 13.1% and adjusted EBITDA was up 25.8% from a year ago as we drove operating leverage while investing in new markets.
Parth Mehrotra: Our strong year-to-date performance and high visibility through the remainder of the year gives us confidence to increase guidance to at or above the high end of the initial range for all metrics.
Parth Mehrotra: Our results continue to validate the success of our diversified, broad-based business in the current healthcare environment.
Parth Mehrotra: CMS released 2023 results for the Medicare Shared Savings Program in late October and Previa's Accountable Care Organizations delivered another year of strong results.
Parth Mehrotra: Our 10 ACOs in aggregate achieved shared savings of $176.6 million, a 34.1% increase from 2022.
Parth Mehrotra: This success is a testament to the dedication and skill of our physicians who provide exceptional, high-value, cost-effective care to nearly 195,000 Medicare patients in the program.
Parth Mehrotra: Our Q3 ending cash balance, pro forma for the cash to be received for 2023 MSSP shared savings, is approximately $473 million with no debt.
Parth Mehrotra: This positions us well to support our organic growth, business development initiatives, and provides us with substantial financial flexibility.
Parth Mehrotra: Today, we also announced our entry into the state of Indiana in partnership with a multi-specialty practice of more than 35 providers.
Parth Mehrotra: We are excited to continue expanding our footprint and introducing the PREVIA business model to providers in the Midwest.
Parth Mehrotra: Our pipeline for new market business development remains robust, coupled with a very strong balance sheet to deploy capital in the current environment.
Parth Mehrotra: The strength of Privia's business model, strategy, and execution is validated by our consistent growth and operating performance over the past seven years, including the last four as a public company.
Parth Mehrotra: This slide shows empirically how we have compounded growth across all key business and financial metrics, including free cash flow, through a variety of macroeconomic conditions.
Parth Mehrotra: two political administrations, and now a challenging Medicare Advantage and Medicaid environment.
Parth Mehrotra: We have consistently balanced growth and profitability during the past seven years while building one of the largest ambulatory care delivery networks in the country.
Parth Mehrotra: In addition, the deliberate breadth and diversification of our business model.
Parth Mehrotra: Partnering with every physician specialty, seeing every patient in any reimbursement model with any payer, has helped us deliver consistent and sustainable results over time for both our medical groups and our shareholders.
Parth Mehrotra: This foundation of our business model results in strong recurring revenue and EBITDA that we expect to continue to compound one quarter at a time for years to come.
Parth Mehrotra: Previa continues to progress well towards our long-term vision to build one of the largest ambulatory care delivery networks in the nation.
Parth Mehrotra: Our footprint comprises 4,642 implemented providers, caring for over 5.1 million patients across 14 states and the District of Columbia.
Parth Mehrotra: This highlights our ability to build large-scale, high-quality, community-based medical groups across every state we operate in.
Parth Mehrotra: Our gross provider retention remains over 98% and our net promoter score of 85 highlights our very high patient satisfaction.
Parth Mehrotra: Previa now serves over 1.2 million attributed lives across 100 plus commercial and government programs.
Parth Mehrotra: Total attributed lives increased 14% from Q3 a year ago, positioning Privia as a balanced and highly diversified value-based care organization.
Parth Mehrotra: Commercial attributed lives increased 14% from last year to reach 770,000.
Parth Mehrotra: Medicare Advantage attributed lives increased more than 24% from a year ago and attributed lives in Medicaid programs increased 41.7% year-over-year.
Parth Mehrotra: This growth in attributed lives across programs was driven by new provider growth and related patient attribution, as well as new value-based contracts in certain programs.
Parth Mehrotra: The diversified nature of our value-based contracts across the risk spectrum is a core value proposition to our medical groups.
Parth Mehrotra: This deliberate and flexible approach is key to driving consistent and sustainable future earnings growth. We are seeing real-time validation of this strategy in the current healthcare environment.
Speaker Change: Now, I'll ask David to review our 2023 MSSP performance, recent financial results, and our updated 2024 guidance outlook.
Thank you, Parth.
David Mountcastle: We continue to see solid performance across our value-based care book, especially in the Medicare Shared Savings Program. Across our 10 ACOs, we lowered utilization and cost significantly below that of our peer ACOs during 2023.
This performance was even better when
David Mountcastle: We generated total share savings of 176.6 million, up 34.1% from a year earlier. We operate one of the country's largest ACOs in the Mid-Atlantic region, caring for about 60,000 patients in the MSSP enhanced track.
David Mountcastle: We delivered savings of 10.6%, which for the third year in a row was the highest savings rate of all ACOs with greater than 40,000 attributed lives.
David Mountcastle: Eighty-one percent of our MSSP lives were in downside risk in 2023. For 2024, we have nine ACOs in MSSP, with six in the enhanced track.
David Mountcastle: During the 2023 performance year for MSSP, previous ACOs managed over $2.3 billion in medical spend, 27% greater than in 2022.
David Mountcastle: Remember that in practice collections and gap revenue, we only recognize our share of gross shared savings, which was $117.4 million for performance year 2023.
David Mountcastle: This significantly understates our spend under management in our top line.
David Mountcastle: Our aggregate savings rate was 7.6% across all 10 ACOs, or 8.2% when you exclude the Delaware ACO Privia proactively exited at the end of 2023.
David Mountcastle: This performance continues to demonstrate our success at generating increased savings and profitability while we look to add additional value based and downside risk contracts over time.
David Mountcastle: Turning to our operational and financial performance, Trivia showed continued strength through the third quarter of 2024. Our implemented provider count grew 138 sequentially from Q2 to reach 4,642 at September 30th, an increase of 13.1% year-over-year.
David Mountcastle: The continuation of solid ambulatory utilization trends, new implemented providers, and additional attributed lives led to practice collections increasing 2.3 percent from Q3 a year ago to reach 739.9 million.
David Mountcastle: As we previously mentioned, the flexibility of our operating model enabled us to shift attributor lives out of capitated agreements at the beginning of 2024 for improved contribution margin and mitigate potential downside.
David Mountcastle: Excluding third quarter 2023 revenue from the renegotiated Medicare Advantage capitation agreements, practice collections increased approximately 10.9% year-over-year in the third quarter of 2024.
David Mountcastle: Adjusted EVA to increase 25.8% over Q3 last year to reach 23.6 million, a margin of 23.3% of care margin.
David Mountcastle: This is a 290 basis point improvement from a year ago as we continue to generate operating leverage while increasing investments in existing and new markets.
David Mountcastle: The first nine months of 2024, practice collections increased 4.5 percent to reach 2.18 billion. Care margin was up 10.6 percent and adjusted EBITDA grew 19.3 percent to reach 65.5 million.
David Mountcastle: Our business model continues to generate very strong free cash flow, coupled with no debt, and a pro forma cash balance of approximately $473.5 million.
David Mountcastle: As noted in the table on this slide, we expect to receive $117.4 million in cash from CMS by the end of 2024 as payment for the Privia ACO's portion of shared savings generated in the 2023 performance year of MSSP.
David Mountcastle: As you may recall, we received a CMS payment in fourth quarter last year as well.
David Mountcastle: After expenses attributed to the program, we then share approximately 60% with our providers for their participation and success at MSSP, leaving net cash of approximately $51.5 million to Privia.
David Mountcastle: Our year-to-date pre-cash flow was $87 million, pro forma for the net cash expected to be received from CMS.
David Mountcastle: Our updated 2024 guidance highlights the strength and resiliency of our operating model and diversified book of business in the current healthcare environment. We are raising guidance for all of our metrics to the high end of our initial range, with attributed lives expected to be above the high end.
David Mountcastle: We now expect approximately 90% of our full-year adjusted EBITDA this year to convert to free cash flow given our capital-wide operating model.
David Mountcastle: Previous business momentum and diversified book of business has positioned us well to drive organic provider growth and increase operating leverage for long-term adjusted EBITDA and free cash flow growth as we build our national footprint.
David Mountcastle: We continue to target annual adjusted EBITDA growth of 20% or greater.
David Mountcastle: We look forward to continuing to serve our physicians, providers, and health system partners and their patients on our long-term journey together. We are now ready to take your questions.
Speaker Change: Thank you. We will now begin with the question and answer session. At this time, I would like to remind everyone, in order to ask a question, press star, then the number one on your telephone keypad.
Speaker Change: We do request for today's session that you please limit to one question and one follow-up. We will just pause for a moment to compile the Q&A roster.
Speaker Change: Your first question comes from the line of Joshua Raskin with Nefron Research.
Speaker Change: Hey, good morning. This is actually Mark Golan for Josh. I appreciate you guys taking the question.
Speaker Change: Looking at just the Indiana expansion, it looks like the entry is coming with a relatively modest starting footprint, at least compared to some of the previous state entries we've seen. So we're just hoping you could provide a little more detail around the anchor practice. Any thoughts around whether it takes long to scale?
scale that state given the lower starting point. Thank you.
Speaker Change: Yeah I appreciate the question Mark. So I mean it's fairly consistent with how we've entered some other states. You know Washington was similar size.
Speaker Change: When we entered Georgia back in the day, Gulf Coast back in the day in Texas, very similar sizes. So, as we've said, we can have an anchor partner of all shapes and sizes. You can start with zero, you can start with 400, you can start with 35.
So, you know, it's fairly consistent from a historical perspective.
Speaker Change: and you know we're building large-scale dense medical groups over 5-10 years so the strategy is no different in Indiana as it is in the other 13 states and you know we think there's a big opportunity a lot of independent providers who need a solution like Privia.
Speaker Change: in the state of Indiana, so we're really excited to get going.
Next question, please.
Speaker Change: Your next question comes from the line of AJ Rice with UBS. Please go ahead.
AJ Rice: Thanks, hi everybody. I know it's a bit early, but I just thought I would ask as you, at this early date, think ahead to 25, what are some of the headwinds and tailwinds that you'd call out for us that we should keep in mind as we do our modeling?
Speaker Change: Yeah, I appreciate the question, AJ. So obviously not going to provide 25 guidance yet, but if you just look at empirically last four years as a public company, you know, when we sit on December 31st
close to 90-95% of all our business financial metrics.
Speaker Change: that we guide to are very predictable with that rate. Our guidance annually has been very narrow ranges.
Speaker Change: We've consistently come at the high end or above the high end for most of the metrics over the past four years including this year's guidance
Speaker Change: I think that is underappreciated so while there's always anxiety at this point of the year.
Speaker Change: If you're saying we're having a good year, we had a record sales year, I don't think it'll be any materially different. The key headwinds, tailwinds remain the same every year. The biggest variability is...
Speaker Change: could we have materially misjudged our value-based care book in its entirety? And, you know, we mitigate that with over a hundred programs diversified across all lines of business. That's kind of the biggest source of variability.
Speaker Change: Other than that there's the FIFA service book which ebbs and flows with utilization trends but given how large the platform has become now there's a lot of diversification to it and and we take that into account.
Speaker Change: New markets are never included in our guidance when we guide, so if we enter new states that come with material provider additions or we do any business development activity or acquisitions, we've usually not included that.
Speaker Change: As we've said, we're going to target 20% EBITDA growth, even in the current environment, which is challenging from a Medicare Advantage perspective.
Speaker Change: in taking risk. You've seen our performance this year. We said the same thing in January, February this year and we grew EBITDA 25%. So we feel really confident going into 2025 with the strength of the platform, proven results.
Speaker Change: and close to 500 million of cash to deploy and take advantage and keep growing the platform.
Great, thanks.
Your next question comes from Andrew Mock with Barclays.
Andrew Mock: Hi, good morning. You've raised the free cash flow conversion from 80% to 90% today. Does that higher free cash flow number reflect outperformance or is that driven by outperformance in 2023 MSSP results relative to your initial accruals?
Speaker Change: And is there any change to your expectation for minimal growth and shared savings revenue for 2024? Thanks.
Speaker Change: Yeah, I appreciate the question, Andrew. So, I think it's outperformance across all lines of business. You're seeing it in strong fee-for-service book. You know, you're seeing it in the
Speaker Change: Value-Based Care Book, MA-MSSP Commercial. So it's fairly broad-based, which is the strength of the platform.
Speaker Change: You know, it generally follows top-line and bottom-line metrics prior to the cash flow. So, you know, if adjusted EBITDA is towards the high end.
We have effectively zero CapEx for the first nine months.
Speaker Change: So that flows pretty much straight down. We're still going through our NOLs. So, you know, if you look at our average EBITDA to free cash conversion over the past four years, it's been over 100%, which is 3x.
Speaker Change: to the closest comp that is actually profitable and generates any free cash. So I think it's a key source of differentiation and we continue to expect to do that. So that's the first part of the question.
On the second part...
and SSP.
Speaker Change: Sorry, could you repeat the second part of the question? I don't think you were clear.
Speaker Change: for Minimal Growth and Shared Savings Revenue this year, but it looks like Shared Savings came in ahead, so I just wanted to know if there was any change in expectations.
Speaker Change: I got to thank you so yeah I think look when we started the year if you read our transcript and as you recall from the call for from our Q4 results last year we entered the year with
Speaker Change: What we anticipated to be pretty significant headwinds in MA. We took our capitation book down
Speaker Change: and so at that point you know our view was if you're able to have a pretty flat ear from a shared savings perspective
Speaker Change: That'll be actually a good year, and that's what we factored into our guidance.
Speaker Change: You know, I think we outperformed that, even though everything we anticipated came to fruition from a headwinds perspective in MA. Star scores, V28, utilization, benefit plan changes, not changes to Part D.
Speaker Change: and so I think with that perspective that was our guidance and I think we have outperformed
Speaker Change: across all lines of business, that's reflected in shared savings being a little bit higher, which is reflected in the results. There will always be some quarter-over-quarter variability, but if you look at year-over-year, I think it's a little bit better than what we anticipated.
Speaker Change: plan for the worst and, you know, hope that we outperform.
Speaker Change: Your next question comes from the line of Richard Close, Canaccord Genuity.
Thank you.
Richard Close: Yes, thanks for the question and congratulations on the continued success here.
It was great to hear the year-to-date signings.
Speaker Change: commentary in the Strong Pipeline. Parth, I was wondering if you could just talk to us a little bit about the discussions with potential physicians or physician practices.
Speaker Change: You know, what are the key topics or problems that they are asking about when they're, you know, discussing, you know, potentially joining Privia? And, you know, has this changed at all over time? And then the follow up, you know, as you talk about these signings.
Speaker Change: you know, maybe a little bit more new market versus same store performance.
Speaker Change: Yeah, I appreciate the question, Richard. So, you know, generally speaking, nothing fundamental has changed in our value proposition or discussions when we, when the sales team's out there speaking with new provider groups. I think what's different is
Speaker Change: We have validated the strategy, our results are now publicly available over the last four years.
and I think the platform and the performance differentiates itself.
Speaker Change: That leads to really good performance by our physicians that are on the platform.
are referrals from our existing physician groups.
That leads to really high conversion rates.
Speaker Change: that's backed by really good empirical data and performance at the practice level, at the market level, at the company level.
So I think as there's disruption in the space...
and we end up being the outperformer and a survivor.
Speaker Change: A lot of groups looking to partner with an entity like ours, which has a really unique value proposition.
Speaker Change: keeping the groups independent or autonomous or in their legacy ownership structure while helping them across all lines of business, every specialty, every patient, every payer, doing value-based care in every single type of arrangement that's out there, commercial, MA, MSSP, Medicaid.
Speaker Change: It's just a very different value proposition and the typical practice in America reflects that kind of composition.
and so I think you're seeing the snowballing effect.
I think our performance, both same store.
and with new providers, you know, reflects that.
Speaker Change: We are able to grow these practices organically, on a per-physician basis, per-provider basis, seeing more patients.
getting higher yield per patient.
Speaker Change: both on the FIFA service book and the value-based book and then organically growing those practices by adding
additional providers and or additional locations.
Speaker Change: which is a very key value proposition. These are very small businesses.
Speaker Change: that just started these operations years ago and were just not formalized or organized or didn't have a partner that could help them in such a broad way. So I just think it's a combination of all of that that is leading to some of the sales momentum that we've had.
kids.
Speaker Change: Yeah, I think new signings are very broad-based too, you know, we're in 14 states
Your next question comes from the line of...
Geo-landtracing with tourist securities
Please go ahead.
Speaker Change: Thank you and good morning. Thanks for taking my questions. So I want to go back to the new partnership provider announcement in India, and congrats on that.
A few questions there.
Speaker Change: And related to that, this is a new partnership announcement for the company in quite some time. A lot of things have changed over the past 12 to 18 months, including the past 24 hours. Some directly relevant to the company, some not. Keeping that in mind, how would you describe your approach with this new partnership compared with your prior partnership in terms of implementation, expansion?
Speaker Change: Push for value-based care, technology, just anything you think that your approach will change this time versus a year back to your specs?
Speaker Change: Yeah, thanks for the question Jalendra. So on the first half Yeah, we've acquired the tax ID. We loan 100% of the medical group, 100% of the ACO entity that we'll establish
Speaker Change: and the MSO Entity, so all three is 100% owned by the company. There's an immaterial small monetary consideration that will be over time.
Speaker Change: and so and that's very consistent with again how we've entered some other states so so nothing different but it's just for us to disclose
Speaker Change: We would expect to implement them, you know, with the typical lag of four or five months, so you should expect that early next year in Q1 sometime.
Speaker Change: So that hasn't changed. And then to the second half of the question, look, our strategy has been the same. I mean, we've said enough prepared remarks we've had.
you know
Speaker Change: I've been here through three political administrations, we've been public through two.
Speaker Change: You know, our strategy is pretty much the same, I think with the cash balance we have.
Speaker Change: You know, we think we can see a lot of opportunities and be aggressive with business development in a very accretive manner, try and grow the business or inflect growth, you know, over 20% hopefully. We are EBITDA cash flow buyers.
I think, as the disruption happens in our space.
Speaker Change: There are a lot of provider groups that will look for a new home. I think we are very well positioned.
Speaker Change: just building on the previous question to continue to partner with such groups.
Speaker Change: So, we're going to be as aggressive as we can, you know, running the company pretty efficiently, but nothing fundamental has changed in terms of doing deals.
Speaker Change: Implementing faster or slower, like it's pretty much the same. New business development activity just depends on when they can hit. There was a 12-month period when we entered four or five states.
Speaker Change: you know we've entered one state this year that could accelerate not accelerate you know it'll be what it'll be but I think we continue to operate with the same cadence
Speaker Change: Your next question comes from the line of Jamie Parth with Goldman Sachs. Please go ahead.
Jamie Parth: Hey, thank you. Good morning. You just mentioned, you know, the rapid
Jamie Parth: kind of expansion in new markets you had a couple years ago. I wanted to spend a minute on that and just, you know, if you can update us how those maturing or ramping markets are doing versus your expectations. You know, just how physician recruiting is going in those markets. And then, you know, you've always talked about the you know, year one, year two, you've got headwinds from from new markets. Yeah, how much are you absorbing here in 2024? And how should we think about the progression of those headwinds into next year?
Thank you
Speaker Change: Yeah, thanks for the question, Jamie. So, you know, all markets generally progress over time as we expect. I mean, it's been a pretty consistent approach.
Jamie Parth: We have a five to ten year view on these states. So, you know, some states can be slightly slower, faster year over year
Jamie Parth: But in general, we feel really good about all the markets that we entered, you know, in that 21, 22, 23 timeframe.
Jamie Parth: And you can see, you know, most of these markets lead to operating leverage improvements subsequently.
We entered four new states.
Jamie Parth: 22 to 23. If you look at that slide 5 that we showed you can clearly see the data. You can see our EBITDA growth 22 to 23 was a little bit muted around 20%.
Speaker Change: and you absorb some of those costs and now we're growing EBITDA 25%. You know, when we've not entered, we just entered one state and we even had headwinds in MA, we took our capitation book down. So despite that, EBITDA has grown 25% which was faster than the previous year.
Speaker Change: You know, our unit economics are really proven, how we enter these markets, build our budgets, go about our business is very consistent, it's a very replicable.
strategy.
Speaker Change: and so we we anticipate this going in and and so if we actually enter a lot of new markets
Speaker Change: EBITDA growth might slow, but we'll articulate that clearly as we did in the past. So I think the results just speak for themselves and the operating leverage you're seeing reflects that momentum. The sales results we are talking about reflects that momentum. You can see all that very empirically in the financial results. So that just speaks for itself.
Speaker Change: Your next question comes from Elizabeth Anderson with Evercore ISI. Please go ahead.
Speaker Change: Hi guys, this is Samir Patel on for Elizabeth Anderson. Congrats on a quarter. Just kind of following up on some of the points that have been mentioned here.
Speaker Change: You kind of mentioned that you're still targeting 20% EBITDA growth.
Speaker Change: Is it safe to say that, you know, for next year, 2025, realizing you're not providing guidance, but that the 20% growth can be maintained even after absorbing, let's call it the $2 to $3 million headwind from Indiana?
Speaker Change: Yeah, thanks for the questions. Yeah, so that's a long-term guidance, you know, there'll be a year we'll be lower, there'll be a year we'll be higher. We're at 25% this year. We stopped giving, you know, specific guidance on new market entry costs, like that's part of doing business, that's part of growing the company.
Speaker Change: So it's all reflected in, you know, we're going to target 20 plus percent with new market costs.
increasing operating leverage in existing markets.
Speaker Change: Headwinds in MA, whatever the case might be, that's our target. Now, that's over a long term. It's not a year-by-year target. So, there could be years we are lower, years we are higher. We could do business development, so on and so forth. So, I think from everything we see, we have good momentum in the business. You can see our results this year, and we feel pretty good about next year.
Speaker Change: Got it, and just as a follow-up I think you answered this, but you mentioned that Indiana would be 100% owned just from a modeling perspective. That implies it would fall into the patient care fee-for-service line, right, not the admin?
Speaker Change: No, you will see that basically means that GAP revenue would reflect all the top line, so I think what you're saying is accurate. Yeah, that's correct, right. It's fee-for-service revenue, not the ASO revenue.
Thank you.
Speaker Change: Your next question comes from Matthew Gilmore with Keybank. Please go ahead.
Matthew Gilmore: Hey, thanks for the question. I wanted to ask about the practice collections guidance. I think if I did the math right, the high end implied some sequential.
Matthew Gilmore: moderation and the practice collections into the fourth quarter. I was curious if that just sort of reflected some conservatism on your part or maybe some puts and takes with the capitated book, but just any comments there would be great.
Speaker Change: Yeah, I appreciate the question Matt. So yeah, we're just being prudent as we always have been. There's nothing that we see in the business that would lead us to suggest otherwise. We've got it to the high end. Hopefully it'll be better. We'll see how it goes.
Speaker Change: Your next question comes from the line of David Larson with BTIG. Please go ahead.
David Larson: Hi, congratulations on another good quarter. Do you have any thoughts on the recent physician fee schedule rule that was published? I saw there were some comments in there around higher reimbursement for advanced primary care, which seems like it could be a good tailwind for you guys.
Speaker Change: And then just any thoughts on the impact, if any, on, like, no reimbursement within Medicare for members when they're at home for telehealth.
Speaker Change: And then just any comments on like home health, like I imagine a lot of these practices of yours have nurse practitioners, some home health capabilities, just any thoughts there that's obviously a direction the industry is moving in. Thanks a lot.
Yeah, I appreciate the question, so...
Speaker Change: You know, overall I think there are some headwinds, some tailwinds in fee schedule, MA cuts, so on and so forth.
Speaker Change: All of that is factored in our guidance. There's no one-time outlier that we we can highlight that would impact the results one way or the other Or change our long-term outlook. I mean these things have happened over the years
Speaker Change: So there's really nothing specific that we can point to. In our second part...
Speaker Change: We have some capabilities. We don't do home health or home care in a really big way. We do have care managers that follow up with patients based on specific disease, specific programs, chronic conditions management, so on and so forth.
Speaker Change: It's not a huge part of our business. We do have those capabilities as part of our value-based care book where we are trying to manage a certain set of the population.
Speaker Change: with high chronicity, but it's not like we're in the home a lot.
Speaker Change: with our business model. So, you know, over time as we continue to expand, take risk, take more downside risk, that's a capability we can expand to. It just depends by geography, by population, so on and so forth. So I think you're right in suggesting that that'll be a bigger part, but it's not for us today.
and others. Thank you.
Speaker Change: Your next question comes from the line of Jeff Garrow with Stevens. Please go ahead.
Jeff Garrow: Yeah, good morning. Thanks for taking the question. I was hoping you could give us some updated thoughts on market anchored by health system partners. I think there's been some variance in your experience across Florida, Ohio, and North Carolina. So, curious on the drivers there, as well as the overall outlook for that type of anchor partner in new markets. Thanks.
Speaker Change: Yeah, I appreciate the question, Jeff. So, you know, we have, as you noted, we have three health system partners.
Speaker Change: You know, it'll just be very specific to the partner, what the strategy is, how we choose to enter in a particular state, why we feel.
Speaker Change: A health system is a better anchor than our traditional approach. I think our model is very flexible to offer a very unique value proposition to health systems.
help with their aligned affiliated providers or their employed group.
Speaker Change: to land a home as they expand their presence across the state outside of the core MSAs that the health system has physical assets in.
Speaker Change: and you know most of our partnerships are very long-term, long data, pretty good about them. I don't think every partnership will go as we plan. There'll be some great ones over the years. There'll be some that you know won't pan out.
Speaker Change: And I don't think it's for everybody. So, but I think as part of a very diversified model where we can enter a state.
Speaker Change: by buying the tax ID of a medical group, an MSO entity, an ACO entity, or partner with health systems. It just gives us another angle to enter a state if we think that's the most optimal way. But so far, all the states are doing really well. We'll see how that goes over the next few years.
Speaker Change: Your next question comes from the line of Ryan Langston with TD Cullen. Please go ahead.
Ryan Langston: Maybe help those capitated contracts be more successful. Obviously, you renegotiated some contracts earlier this year. I guess just maybe some high-level thoughts. You see any more activity, more willingness to share more risk from your payer partners maybe into next year and even in your discussions maybe for beyond into 2026? Thanks.
Speaker Change: Yeah, I appreciate the question. So, you know, we've had a very differentiated view, been a little bit of a broken record, that if you want to do
Speaker Change: large-scale value-based care in MA, you need to have a flexible strategy.
full capitated, 100% downside risk.
Speaker Change: Works in certain geographies with certain populations if you can manage control that well We're trying to do it in every state. We operate in so our our strategy is to have
Speaker Change: a shared risk arrangement, you know, with our payer partners in as many places as we can.
Speaker Change: and then have appropriate contracts that reflect the reality on the ground from all the headwinds we articulated. Our view on the headwinds doesn't change. I think you've heard...
Speaker Change: Pretty much the same thing from all the payers that have reported recently
Speaker Change: So, you know, I don't think you should expect us to massively increase our capitated book or take full 100% downside risk.
Speaker Change: in the near term. I think we're going to be very thoughtful.
Speaker Change: We do think we would continue to increase our attributed lives in the MA program, like we've continued to do so this year. We think it's really differentiated where we can take...
Speaker Change: Upside only risk, we can take 50-50 risk, we can have corridors, our doctors are not going anywhere, the patients that they serve are not going anywhere, and we are looking to, you know, slowly steadily move towards
Speaker Change: a form of payment which optimizes care for the patients as well as rewards the doctors and our medical groups.
Speaker Change: And that doesn't necessarily need to be a 100% capitation. I think that's just been a false view of the world in the past few years that you have to do a 100% capitated deal to do.
Speaker Change: to do risk and MA and we just continue to differ from that view. So we'll continue to grow our MA book. It's a big part of the strategy where you convert a simple fee-for-service.
Speaker Change: payment for an episode into a care management fee, shared savings, quality payments, take better care of patients and reward the doctor. So I think our strategy is gonna be very consistent. I don't think you'll see us take 100% downside risk or capitation in a very big way, given all the headwinds.
Thank you.
Robert Borchert: Your next question comes from the line of Daniel Grossleit with City. Please go ahead.
Daniel Grossleit: Hi, thanks for taking the question. I'd love to get your thoughts on the election, now that it seems that the Republicans will control the Congress and the Presidency. Does that change your view on fee-for-service versus value-based care in 25 and beyond? And in particular, does it change your view around MSSP and how a Republican administration may change the MSSP program?
Speaker Change: Yeah, I appreciate the question. I mean, we said a little bit in our prepared remarks. I mean, we've gone through three administrations since I've been here, you know, two in the seven-year view that we showed on slide five from our performance.
Speaker Change: We've been in the MSSP program, you know, going on close to 10 years, nine years.
Speaker Change: You know, our business is on the right side of history. We are serving...
small community-based providers that are
that have the best relationship with family members.
across the patient age cohort.
Speaker Change: These are small practices, lowest cost of setting in health care.
best proximity to patients.
You saw that through COVID, post-COVID.
Speaker Change: These practices have diverse patient panels, they are able to do value-based care in the broadest possible way.
Speaker Change: We do that in commercial, we do that in MSSP, we've done that in MA, we're doing it in Medicaid.
Speaker Change: And I just think this platform, from that perspective, continues to be on the right side of the conversation. You know, CMS has been very consistent through administrations in trying to grow the MSSP program.
Speaker Change: They have a stated objective that I don't think will change in trying to get...
you know, all
Speaker Change: Medicare beneficiaries and some value-based arrangement by 2030. I think the MSSB program continues to do really well as you saw with the recent results. So I think we are pretty excited, you know, irrespective of the administration, to just continue with our strategy. So that doesn't change anything fundamentally for us.
Speaker Change: Your next question comes from the line of Michael Ha with Baird. Please go ahead.
Speaker Change: Good morning. This is Olivia Miles on for Michael Ha. Thank you for taking my question. I see you increased your Medicaid lives by about 14,000. Can you speak to what drove that? And overall, how do you view Medicaid value-based care? What do you believe is required to turn a profit there in terms of care delivery? And can you speak a little bit on the Medicaid model? Thank you.
Speaker Change: Yeah, I appreciate the question. So, as we stated in our prepared remarks, I mean the growth was driven by both
Speaker Change: provider signings and their attributed lives that come with it, as well as us entering, you know, some new Medicaid managed care contracts. If you look at the bullet under the Medicaid bubble on slide 7, you know, 100% of these lives are an upside only arrangement, so we're not taking any downside risk on Medicaid.
Speaker Change: redetermination factors in the past year, this year, going into next year. But it shows the flexibility of our model where we are able to enter into very thoughtful contracts with payers.
and additional care coordination fee.
Speaker Change: And obviously some upside only shared savings if we if we come under the benchmark, so
I think it's a it's a
It's a great way for us to...
Speaker Change: at value, help the taxpayers, help payers in MA save costs, and then if our doctors are doing all that good work, reward the doctors with additional compensation. So another great example of how you can do value-based care in Medicaid where population density isn't that high across the board. You can have, you know, zero to 15% Medicaid penetration depending on the location.
Speaker Change: but we are able to take those lives and move them into some value-based arrangements over time, so a good part of our strategy to continue to do that.
Speaker Change: Your next question comes from the line of Jax Levin with Jeffries. Please go ahead.
Jax Levin: Hey, thanks for taking the questions, and great job on the quarter. Most of mine have already been asked, so a couple maybe more niche-y ones. One, just to clean up.
Jax Levin: On the third quarter in shared savings, can you just confirm whether or not there was any sort of material impact from
Jax Levin: the changes CMS made to how they were treating the catheter codes related to the fraud scheme that took place in 2023. And then second one, you know, maybe a bit more
Jax Levin: high-level just looking at at the physician fee schedule and some of the changes on MSSP, that introduction of the APCM codes that are going to be passive now rather than some of the time-based care management codes.
Speaker Change: Does that change how you'll approach things at all, and do you think that changes market structure? I guess I'm thinking about some of the sort of call center-based care management companies that really just...
Speaker Change: hit those codes hard as a way to generate revenue for practices. I'm just wondering if there's any opportunity that opens up going forward. Thanks.
Speaker Change: Yeah, I appreciate the question. I mean the short answer is both of those don't have any material impact to how we approach MSSP or our results and so on so forth. So that's a short answer. I mean we don't you know we have
Speaker Change: CCM programs etc but you know it's not a it's not I mean that's part of just doing participating in the in the in the MSSB program broadly it's not like we are a call center company doing what you just articulated so you know both of those don't really impact us in a big way
Speaker Change: Your next question comes from the line of Jessica Tassin with Piper's Handler. Please go ahead.
Jessica Tassin: Hi guys, thanks for taking my question. I was hoping you could discuss the impact of benchmark rebasing on your MSSP performance, I think.
Speaker Change: and this may be incorrect, but I think your largest ACO is in a rebasing year in 2024. So, I guess just what is the impact of that on your shared savings? And really, we're just trying to understand what, if any, potential tailwind exists in 2025. Thanks.
Speaker Change: Yeah, I appreciate the question, Jess. So, you know, it's not the first time we're going to go through rebasement. You know, our largest ACO will be up, I think, next year.
Speaker Change: It's all factored in our guidance, like we don't comment specifically on specific ACOs and what the impact might be. Our value-based book is very diversified.
Speaker Change: You know, as we articulated, we're looking to grow EBITDA 20% that factors in all these things.
Speaker Change: They could be tailwinds, they could be headwinds based on how the benchmark gets set. So we'll just see how that plays out. I think it just speaks to our diversified strategy of having multiple ACOs, multiple states, multiple angles to do value-based care across all lines of business.
Speaker Change: It's very deliberate, very thoughtful to prevent, you know, exactly a stroke of the pen risk in one particular program or something idiosyncratic happening. It could happen and you know, we'll just see how that goes, but nothing fundamentally changes from how we've approached rebasing in past years.
Robert Borchert: Your next question comes from Sean Dodge with RBC Capital Markets. Please go ahead.
Speaker Change: Hey, good morning. This is Dr. Keller. I'm Prashant. Thanks for taking the question. So, could you talk a little bit about the margins in your capitated book, and if possible, share any observable utilization trends in Q4 and maybe into Q4? Thanks.
Speaker Change: Yeah, so, you know, as you saw, like, on the capitated book we did, we had a little positive margin, better than what we expected. On the small book that we kept under capitation, that was the hope that if we are continuing to do capitation that we...
Speaker Change: generate shared savings, make money for our providers, have savings for the payers, and then obviously have some positive contribution for the shareholders. So it's good to see that that that's played out as we as better than as we expected. You know all the factors whether it's utilization trends
Star Scores, V28
Robert Borchert: You know benefit design changes all those headwinds continue to remain. We're just navigating them the best with that we can You know if we have a small capitated book We're trying to manage that very carefully and hopefully we will end the year on the positive side We'll just see how it plays out in Q4, but our results so far reflect
Robert Borchert: All the data we've received up to the point of reporting, and we'll see how that plays out. But, you know, the headwinds are there, and we'll just continue to manage it very thoughtfully.
Speaker Change: Your last question comes from the line of Adam Ron with Bank of America. Please go ahead.
Speaker Change: Hey, thanks for the question. I think the number of attributed lives is growing just slightly above the number of implemented providers this year, but presumably there's a big backlog of doctors who could be doing more value-based care. So, is there an opportunity to accelerate that attribution next year or anywhere in the near term, or does it make sense to just continue doing it kind of steadily and in line with your implementer provider growth over time? Thanks.
Speaker Change: Thanks for the question, Adam. So, you know, over the long term, you know, I don't think it'll change materially. It follows implemented providers.
Speaker Change: typically, and the mix of those providers between primary care or gatekeeper providers, pediatricians, family medicine, internal medicine relative to specialists.
Speaker Change: We also add new programs so that can increase attributed lives like you saw in the Medicaid book.
Speaker Change: where you can have an existing patient panels and doctors and we just don't have a value-based program and then we enter into one.
Speaker Change: So that can lead to some acceleration. We've done business development in the past to accelerate them, so when we entered Connecticut...
Robert Borchert: with one of the largest ACO entities there. You saw a pretty good jump in attributed lives.
Robert Borchert: you know, in 23 as an example. So we're going to keep pulling all the levers. It's one of our two key units that drive the business. You have your providers, then you have lives.
Robert Borchert: and then that flows down the P&L so you know our strategy is to continue to be thoughtful.
Robert Borchert: and keep doing it. So, you know, it could accelerate in a year, it could be slower in a year. I think it just depends on how we see the environment, where we see opportunities. But over time, if we keep driving those two units, you know, it usually bodes well for the business.
That concludes our Q&A session.
And this concludes today's conference call. You may now disconnect.
Robert Borchert: Thank you for listening to our call today. We appreciate your continued interest and support of PREVIA and look forward to speaking with you again in the near future.
Speaker Change: Please wait, the conference will begin shortly. Please wait, the conference will begin shortly.
[inaudible]
[inaudible]
Camping with sharing More information in the video description
Robert Borchert: Please wait, the conference will begin shortly. Please wait, the conference will begin shortly.
The
The