Q1 2025 P3 Health Partners Inc Earnings Call
Operator: Good day and welcome to the P3 Health Prtnrs first quarter 2025 earnings conference call. All participants will be in listen-only mode. For lead assistance, please signal a conference specialist by pressing the star key followed by zero.
Good day and welcome to the P. Three health partners first quarter 2025 earnings Conference call.
All participants will be in listen only mode should you need assistance. Please signal a conference specialist by pressing the star key followed by zero.
Operator: After today's presentation, there will be an opportunity to ask Ask a question, you may press star then 1 on your telephone keypad. To withdraw your question, please press star 3.
Speaker Change: After today's presentation there'll be an opportunity to ask questions to ask a question you May Press Star then one on your telephone keypad to withdraw your question. Please press Star then two please note. This event is being recorded I would now like to turn the conference over to Brian Hall said. Please go ahead.
Ryan Halsted: Please note this event is being I would now like to turn the conference over to Brian Halsted, please go ahead. Thank you, operator. And thank you for joining us today.
Speaker Change: 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 target.
Unknown Executive: 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 US federal securities laws, including statements regarding our financial outlook and long term target. 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. 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: 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: 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.
Unknown Executive: The forward-looking statements made during this call speak only as of the date hereof, and the company undertakes no obligation to update or revise these forward-looking statements.
Speaker Change: Forward looking statements made during this call speak only as of.
Speaker Change: The date hereof, and the company undertakes no obligation to update or revise these forward looking statements.
Unknown Executive: 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, and cash flow. 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. 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.
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 in cash flow. These non-GAAP financial measures are in addition to and not a substitute for or superior to.
Speaker Change: The measures of financial performance prepared in accordance with GAAP. There are a number of limitations related to the use of these non-GAAP financial measures. For example, other companies may calculate similarly, titled non-GAAP financial measures differently.
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 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 P. Three health partners website I will now.
Unknown Executive: 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.
Aric Coffman: I will now turn the call over to Aric Coffman, CEO of P3 Health Prtnrs. Thank you, Ryan. And thank you all for joining us today. The quarter was in line with our expectations.
Speaker Change: Turn the call over to Eric Kauffman CEO of P. Three health partners.
Eric Kauffman: Thank you Ryan and thank you all for joining US today the quarter was in line with our expectations I'm going to cover the following topics in my remarks first our 2025 guidance second an update on our strategic initiatives that we announced on our Q3 2024 call and third a high level view of our quarter.
Aric Coffman: I'm going to cover the following topics in my remarks. First, our 2025 guidance. Second, an update on our strategic initiatives that we announced on our Q3 2024 call. And third, a high level view of our quarter. Leif will go into more financial detail shortly. First, we are reiterating our guidance for 2025 based on the following facts. Three of our four markets are breakeven or better in Q1, and we expect operating metrics from our most recent initiatives to hit in Q2 and grow sequentially throughout the rest of the year. We have one payer that is an outlier on performance.
Eric Kauffman: Leif will go into more financial detail shortly.
Eric Kauffman: First we are reiterating our guidance for 2025 based on the following facts.
Eric Kauffman: Three of our four markets are breakeven or better in Q1, and we expect operating metrics from our most recent initiatives to hit in Q2 and grow sequentially throughout the rest of the year.
Eric Kauffman: We have one payer that is an outlier and performance they had been a collaborative partner helping to contractual resolve the performance issues in 2025 with more improvements ahead in 2026.
Aric Coffman: They've been a collaborative partner helping to contractually resolve the performance issues in 2025 with more improvements ahead in 2026. Given some of the 2025 insurance benefit design changes, we are seeing that start to flow through into better financial performance across our market. Additionally, we saw increased funding across our markets by 8% on a PMPM basis, indicating more accurate capture of disease burden even with V28 changes. As we outlined in our prior remarks, we began implementing our programs in the back half of 2024 and are rapidly scaling in 2025, making future performance even brighter.
Eric Kauffman: Given some of the 2025 insurance benefit design changes, we are seeing that start to flow through into better financial performance across our markets.
Eric Kauffman: Additionally, we saw increased funding across our markets by 8% on a P. M. P M basis, indicating more accurate capture of disease burden, even with V 28 changes as we outlined in our prior remarks, we began implementing our programs in the back half of 'twenty 'twenty, four and our rapidly scaling in 2025.
Eric Kauffman: Five making future performance even brighter.
Aric Coffman: Now on to execution. We are executing our programmatic initiatives ahead of schedule, representing over $130 million of adjusted EBIT improvements across our three buckets, operating efficiency, contracting, and operational execution. On operating efficiency, we have achieved the goal of a $20 million year-over-year improvement and have identified additional efficiencies that we are executing against in Q2 and throughout the remainder of the year. Operating expenses, 1Q25, declined 18% sequentially and 11% year-over-year. This improvement reflects streamlining corporate overhead functions and driving efficiencies in delegated services. At the same time, we've strategically reinvested dollars into our market operating teams to support frontline execution and drive long-term growth.
Eric Kauffman: Now on to execution, we are executing our programmatic initiatives ahead of schedule representing over $130 million of adjusted EBITDA improvements across our three buckets operating efficiency contracting and operational execution.
Eric Kauffman: On operating efficiency, we have achieved the goal of a $20 million year over year improvement and have identified additional efficiencies that we are executing against in Q2 and throughout the remainder of the year.
Eric Kauffman: Operating expenses, <unk> twenty-five declined 18% sequentially and 11% year over year.
Eric Kauffman: This improvement reflects streamlining corporate overhead functions and driving efficiencies in delegated services.
Eric Kauffman: At the same time, we strategically reinvest the dollars into our market operating teams to support frontline execution and drive long term growth.
Aric Coffman: For contracting, we are ahead of schedule on the $35 million in incremental EBITDA improvements and are now working on realizing additional opportunities in our remaining contracts that will impact 2025 and 2026. We have already renegotiated payer contracts to reduce part of the exposure, improve funding, and are continuing to work with our one outlier payer partner on additional opportunities for improvements after addressing some of the issues we saw in 2024 and 2025. In network contracting, we had 20 TINs that we disclosed that were on our watch list, and 18 of the 20 have made significant improvements, while two contracts were eliminated based on a comprehensive performance analysis.
Eric Kauffman: For contracting we are ahead of schedule on the $35 million in incremental EBITDA improvements and are now working on realizing additional opportunities in our remaining contract that will impact 'twenty 'twenty, five and 'twenty 'twenty six.
Eric Kauffman: We have already renegotiated payer contracts to reduce part D exposure improved funding and are continuing to work with our one outlier payer partner on additional opportunities for improvements after addressing some of the issues. We saw in 2024 and 2025.
Eric Kauffman: In network contracting we had 20 turns that we disclosed there were on our watch list and 18 of the 20 have made significant improvements while two contracts were eliminated based on a comprehensive performance analysis.
Aric Coffman: Demand from payers and primary care providers for strong value-based care partners is high. Growth remains a lever we can control thanks to our consistent track record of achieving utilization rates better than local fee-for-service benchmarks and quality scores nearing or exceeding.
Eric Kauffman: Demand from payers and primary care providers were strong value based care partners as high growth remains a lever we can control. Thanks to our consistent track record of achieving utilization rates better than local fee for service benchmarks and quality scores nearing or exceeding.
Aric Coffman: On operational execution, the care enablement model is bearing fruit and gaining momentum in reducing medical expense and improving outcomes. The model encompasses enhanced data sharing, improved point-of-care decision-making, and real-time tools supporting more comprehensive evaluation. The highest level of engagement with the deepest deployment of people and tools are what we refer to as Tier 1 providers, and we refer to the percentage based on the number of members in that tier. There has been a steady ramp of converting groups into our Tier 1 category, indicating the highest level of collaboration and engagement. Beginning this year, Oregon lagged the rest of the markets with a percentage of Tier 1 at 20% and now we are on track to have 60% enrolled by the beginning of Q3.
Eric Kauffman: On operational execution, the care enablement model is bearing fruit and gaining momentum and reducing medical expense and improving outcomes. The.
Eric Kauffman: The model encompasses enhanced data sharing improved point of care decision, making and real time tool supporting more comprehensive evaluations.
Eric Kauffman: The highest level of engagement with the deepest deployment of people and tools are what's referred to as tier one providers and we refer to as a percentage based on the number of members in that tier.
Eric Kauffman: There has been a steady ramp of converting groups into our tier one category, indicating the highest level of collaboration and engagement.
Eric Kauffman: Beginning this year, Oregon lagged the rest of the markets with the percentage of tier one at 20% and now we are on track to have 60% enrolled by the beginning of Q3.
Aric Coffman: On the medical expense side of the equation, our complex care program, which includes palliative care and hospice care, is on track to deliver over $30 million of savings for 2025 through three primary value creation levels. Increasing Clinically Appropriate Referrals, Reducing Hospital Referring Site of Care Mix, and Increasing the 90-100 Day Non-Hospital Referring Site of Care Mix. We expect these numbers to begin to show in Q2 and continue through the second half of the year.
Eric Kauffman: On the medical expense side of the equation are complex care program, which includes palliative care and hospice care is on track to deliver over $30 million of savings for 2025 through three primary value creation levers, increasing clinically appropriate referrals, reducing hospital, referring site of care mix.
Eric Kauffman: <unk> and increasing the 90 to 100 day non hospital, referring site of care mix.
Eric Kauffman: We expect these numbers to begin to show in Q2 and continue through the second half of the year.
Aric Coffman: Next, our quality performance, which is trending positively, saw a nearly 30% improvement in Part C measures when comparing April 2024 to March 2025.
Speaker Change: Next our quality performance, which is trending positively saw nearly 30% improvement in part C measures when comparing April 2024 to March 2025, Amir will comment further on his section on the impacts across our metrics.
Amir Bacchus: Amir will comment further on his section on the impacts across our metric.
Speaker Change: Yeah.
Aric Coffman: For Q1 results, we reported membership and revenue in line with expectation. Total revenue is $373 million, a 4% decrease from the prior year, reflecting our intentional network and payer rationalization. Our Q1 membership decreased by 8% year-over-year, consistent with our prior commentary and guidance range.
Speaker Change: For Q1 results, we reported membership and revenue in line with expectation total revenue is 373 million% to 4% decrease from the prior year, reflecting our intentional network and payer rationalization.
Speaker Change: Our Q1 membership decreased by 8% year over year consistent with our prior commentary and guidance range. Our per member funding increased by 8% to $1063 on a P. M. P M basis compared to full year 2024, reflecting both improved capture of disease burden and favorable impact of our <unk>.
Aric Coffman: Our per-member funding increased by 8% to $1,063 on a PM-PM basis compared to full year 2024, reflecting both improved capture of disease burden and favorable impact of our strategic contract renegotiation. We continue to enhance our ability to more thoroughly and accurately address our members' health conditions, ensuring appropriate care planning and gap closing. In doing so, we are generating more value from our existing membership base even as we've strategically exited certain partnerships and payer plans to optimize our network.
Speaker Change: T J contract renegotiations, we continue to enhance our ability to more thoroughly and accurately address our members' health conditions, ensuring appropriate care planning and gap closure.
Speaker Change: In doing so we are generating more value from our existing membership base, even as we've strategically exited certain partnerships and payer plans to optimize our network.
Aric Coffman: I'll add a few comments on ACO Reef. as well. Over the past year, our ACO membership has increased by 60% and is now growing profitably.
Speaker Change: I'll add a few comments on ACO reach as well over the past year. Our ACO membership has increased by 60% and is now growing profitably. We are confident in our ACO operations contributing $8 million of EBITDA as reflected in our full year guidance.
Aric Coffman: We are confident in our ACO operations contributing $8 million of EBITDA as reflected in our full year guidance.
Leif Pedersen: With that, I'll hand it over to Leif to walk through our financial results in more detail. Thanks, Eric. I'll start by providing context for our first quarter financial results and then turn to our 2025 guidance in liquidity position. Average membership for Q1 2025 was approximately 116,000 compared to 126,000 in Q1 2024. This 8% year-over-year decline was intentional and aligned with our strategy to exit unprofitable plans and remove non-buyable providers from our network ahead of 2025. Notably, our ACO reach population now accounts for approximately 15% of our total membership at the end of Q1. For the first quarter of 2025, capitated revenue totaled $370 million, and total revenue reached $373 million, both in line with expectations.
Speaker Change: With that I'll hand, it over to Leif to walk through our financial results in more detail.
Leif: Thanks, Eric I'll start by providing context for our first quarter financial results, and then turn to our 2025 guidance and liquidity position.
Leif: Average membership for Q1 2025 was approximately a 116000 compared to 126000 in Q1 2020 for this 8% year over year decline was intentional and aligned with our strategy to exit unprofitable plans and remove nonviable providers from our network ahead of 2020.
Leif: Five notably our ACO reach population now accounts for approximately 15% of our total membership at the end of Q1.
Leif: For the first quarter of 2025 catheter <unk> revenue totaled $370 million and total revenue reached $373 million. Both in line with expectations. This represents a 4% decrease year over year, primarily driven by membership to decrease noted above on a per.
Leif Pedersen: This represents a 4% decrease year-over-year, primarily driven by membership decrease noted above. On a per-member basis, funding increased by 8% compared to full year 2024, reflecting enhanced burden of illness documentation accuracy and improved contract terms. Medical margin for Q1 2025 was approximately $17 million, or $49 PMPM, compared to $37 million, or $96 PMPM in Q1 2024. Q1 2025 included a $23 million negative impact from prior claims related to a single regional payer partner. After normalizing Q1 2025 medical loss ratio was approximately 89%, compared to a full year normalized 2024 MLR of 96%. Adjusted operating expenses decreased by $3 million compared to the first quarter of 2024, representing an 11% year over year improvement.
Leif: Member basis funding increased by 8% compared to full year 2024, reflecting enhanced burden of illness documentation of accuracy and improved contract terms.
Leif: Medical margin for Q1, 2025 was approximately $17 million or $49 P. M. P M.
Leif: Compared to $37 million or $96 P. M. P. M. In Q1 2020 for.
Leif: Q1, 2025 included a $23 million negative impact from prior claims related to a single regional Payor partner. After normalizing. This Q1 2025 medical loss ratio was approximately 89% compared to our full year normalized 2024 MLR of 90.
Leif: 6%.
Leif: Adjusted operating expenses decreased by $3 million compared to the first quarter of 2024, representing an 11% year over year improvement.
Leif Pedersen: The full impact of our planned cost reductions will materialize over the coming quarter. We remain diligent in reviewing our operating costs to drive efficiency across delegated services and eliminate waste within corporate overhead, while continuing to seek opportunities to enhance our effectiveness in provider and payer partners. Adjusted EBITDA for the quarter was a loss of $22 million or $64 PMPN. The majority of this loss is attributable to a single underperforming contract with $9 million net coming from a prior period adjustment. The breakout of the $9 million is $23 million in claims, as noted previously, offset by a positive $14 million in retro-adjustment to supplemental benefits.
Leif: The full impact of our planned cost reductions will materialize over the coming quarters, we remain diligent in reviewing our operating cost to drive efficiency across delegated services and eliminate waste within corporate overhead, while continuing to seek opportunities to enhance our effectiveness and provider and payer partnership.
Leif: <unk>.
Leif: Adjusted EBITDA for the quarter was a loss of $22 million or $64 P. M. P M.
The majority of this loss is attributed attributable to a single underperforming contract with $9 million net coming from a prior period adjustment.
Leif: The breakout of the $9 million is $23 million in claims as noted previously offset by a positive $14 million in retro adjustment to supplemental benefits.
Leif Pedersen: When normalizing for this, adjusted EBITDA would have been a loss of $13,000. The $13 million loss was wholly attributable to a single-payer performance. which is being actively remediated. The rest of the business is operating at or near breakeven.
Leif: When normalizing for this adjusted EBITDA would have been a loss of $13 million.
Leif: The $13 million loss was wholly attributable to a single payer performance, which is being actively remediated. The rest of the business is operating at or near breakeven.
Leif Pedersen: ACO REACH contributed $2 million of positive EBITDA in Q1 2025, representing a $5 million sequential improvement and a $2 million year over year in Looking ahead to the remainder of 2025, I want to reiterate our full year guidance. We remain confident in our ability to meet our full-year targets for the year for the following primary reasons. Excluding a single payer partner who we are actively collaborating with to resolve performance issues, our markets are performing at break even or better in the first quarter. 2. As Aric noted, P3 is on schedule in executing the $130 million Operating Improvement Plan and has identified additional opportunities.
Leif: ACR rates contributed $2 million of positive EBITDA in Q1, 2025, representing a 5 million sequential improvement and a $2 million year over year increase.
Leif: Looking ahead to the remainder of 2025 I want to reiterate our full year guidance.
Leif: We remain confident in our ability to meet our full year target for the year for the following primary reasons, excluding that single payer partner, who are actively collaborating with to resolve performance issues. Our markets are performing at breakeven or better in the first quarter.
Leif: Two as Eric noted <unk> is on schedule and executing the 130 million operating improvement plan and has identified additional opportunities across payment integrity initiatives end of life care management and.
Leif Pedersen: across Payment Integrity Initiatives, End of Life Care Management, and Payor Reconciliation. The timing around when these additional items will materialize within our P&L is still being refined. As Amir will discuss, we're seeing positive results from our clinical initiatives in improving utilization, including admit per thousand and ED per thousand, and higher provider engagement with our care enablement model. Turning to the balance sheet, we ended the quarter with approximately $40 million in cash. We are actively managing our liquidity and have multiple levers available to ensure adequate cash flow in 2025 and continue to receive strong support from our investors for our strategic initiatives.
Leif: A reconciliation the timing around when these additional items will materialize within our P&L is still being refined.
Speaker Change: As a mirror will discuss we're seeing positive results from our clinical initiatives and improving utilization, including avnet per thousand and E D per thousand.
Leif: And higher provider engagement with our care enablement model.
Leif: Turning to the balance sheet, we ended the quarter with approximately $40 million in cash we are actively managing our liquidity and have multiple levers available to ensure adequate cash flow in 2025 and continue to receive strong support from our investors for our strategic initiatives.
Amir Bacchus: With that, I'll turn the call over to Amir to discuss our clinical performance. Thanks, Leif. I'd like to focus on the clinical initiatives that are driving our performance improvement and early positive trends we're seeing across our market. In comparing Q125 to FY24, our utilization metrics have trended positively for acute admissions, emergency department utilization, and post-acute care admissions, with observation usage remaining the same due to the increased focus of the 2 midnight rule by the hospital. Using current census data, admits per thousand decreased 3.2%. The Emergency Department per thousand, a 21% decrease. And SNF per thousand admits decreased 22%.
Omer: With that I'll turn the call over to Omer to discuss our clinical performance.
Omer: Okay.
Omer: Thanks, Lee I'd like to focus on the clinical initiatives that are driving our performance improvement and early positive trends, we're seeing across our markets.
Leif: And comparing Q1 'twenty five to fiscal year 'twenty four our utilization metrics have trended positively for acute admissions emergency department utilization and post acute care admissions with the observation usage for meeting the same due to the increased focus of the two midnight rule by the hospitals.
Leif: Using current census data amidst per thousand decreased three 2%.
Leif: Emergency Department per thousand a 21% decrease and sniff per thousand admits decreased 22%.
Amir Bacchus: Observation rates remain flat. Furthermore, we've seen a 1% decrease in readmissions despite seasonality, and our SNF average length of stay for our delegated lives have decreased from 19 to 14, a greater than 25% drop. High-cost claims greater than $20,000 have decreased by 11% in January-February of 2024 versus January-February of 2025. Overall, as Leif stated above, our medical loss ratio decreased from 96% in physical year 24 to 89% in quarter one of 25, with more opportunities to come. Our clinical programs are showing initial positive results, particularly in oncology cost management and targeted initiatives for high-cost disease states.
Leif: Observation rates remained flat fares.
Leif: Furthermore, we have seen a 1% decrease in readmission, despite seasonality and our sniff average length of stay for our delegated lives have decreased from 19% to 14, a greater than 25% drop.
Leif: High cost claims greater than $20000 have decreased by 11% in January February of 'twenty four versus January February of 'twenty five.
Leif: Overall as late stated above our medical loss ratio decrease from 96% in fiscal year 'twenty, 489% in quarter, one of 25 with more opportunities to come.
Leif: Our clinical programs are showing initial positive results, particularly in oncology cost management and targeted and targeted initiatives for high cost disease state and our delegated market, we decreased high cost of electric procedures through better care coordination and appropriate side of care management, our PCP education program velocity has.
Amir Bacchus: In our delegated markets, we decrease high-cost elective procedures through better care coordination and appropriate site-of-care management. Our PCP education program velocity has significantly increased with the number of education sessions up 235% year-over-year, the number of educated providers up 141% year-over-year, and the number of unique educated providers up 65% year-over-year. Our Care Enablement Model is producing more frequent interactions with our providers and driving more patient visits and improved engagement. This engagement led to the adoption of a new point-of-care tool by our clinicians, which notably improves work-life balance.
Typically increased with a number of education sessions up 235% year over year. The number of educated providers up 141% year over year and the number of unique educated providers up 65% year over year.
Leif: Our care enablement model is producing more frequent interactions with our providers and driving more patient visits and imprudent engagement. This engagement led to the adoption of a new point of care tool by our clinicians, which notably improves workflow.
Amir Bacchus: This is fundamental to our clinical strategy. To date, we are already seeing a 6%-plus improvement in the burden of illness capture. Moreover, we've increased our quality gap closures that would become evident in Q2-25. Our Complex Illness Program is exceeding budgeted targets, with January performance above our projections and showing even more momentum as we progress into quarter two. In fact, 36% of our selected members are now enrolled, putting us ahead of our goal to achieve the $30 million plus as Eric and Leif described. We continue to expand our disease specific programs. Our COPD pulmonary management program is showing positive results in reducing hospital admissions and emergency department visits for these patients.
Leif: This is fundamental to our clinical strategy to.
Leif: To date, we are already seeing a 6% plus improvement in the burden burden of illness capture.
Leif: Moreover, we have increased our quality gap closures that will become evident in quarter two of 25.
Leif: Our complex illness program is exceeding budgeted targets with January performance above our projections and showing even more momentum as we progress into quarter two.
Speaker Change: That 36% of our selected members are now enrolled putting US ahead of our goal to achieve the $30 million plus as Eric and Leif described.
Speaker Change: We continued to expand our disease specific programs or COPD pulmonary management program is showing positive results and reducing hospital admissions and emergency department visits for these patients.
Amir Bacchus: Additionally, we've launched a polypharmacy management initiative to address medication issues in our complex patients and improve medication adherence. Our P3 Restore Program, which provides personalized one-on-one sessions with a physician coach aimed at reducing physician burnout, continues to receive positive feedback from our provider network. This program is a crucial part of our strategy to transform healthcare and improve engagement, yielding better patient outcomes and longer clinician tenure. Our innovator implementation is now fully operational in Nevada, with strong adoption across our provider partners. The system continues to track on schedule for complete deployment across our entire population by mid-summer, enabling us to standardize our data infrastructure and analytics capabilities across all markets.
Speaker Change: <unk>, we launched a polypharmacy management initiative to address medication issues in our complex patients and improve medication adherence.
Speaker Change: R. P. Three restore program, which provides personalized one on one sessions with a position coach aimed at reducing physician burnout continues to receive positive feedback from our provider network. This program is a crucial part of our strategy to transform health care and improve engagement, yielding better patient outcomes and longer clinician.
Speaker Change: Tenure.
Speaker Change: Our innovation implementation is now fully operational in Nevada with strong adoption across our provider partners. The system continues to track on schedule for complete deployment across our entire population by mid summer, enabling us to standardize our data infrastructure and analytics capabilities across all markets bring.
Amir Bacchus: bring AI capabilities into our toolbox and allow us to more efficiently provide needed information to our physician partners. The fundamental clinical metrics driving our business forward are trending in the right direction. We remain confident in our ability to achieve our 2025 targets.
Speaker Change: Bring AI capabilities into our toolbox and allow us to more efficiently provide needed information to our physician partners.
Speaker Change: The fundamental clinical metrics driving our business forward are trending in the right direction, we remain confident in our ability to achieve our 2025 targets with that let me turn the call back to Eric for closing remarks, Eric.
Aric Coffman: With that, let me turn the call back to Aric for closing remarks, Aric. Thanks, Amir. I want to emphasize several key points to demonstrate our momentum in 2025. While there are still some headwinds facing the overall industry, we are reaffirming our guidance across all metrics based on the positive progress we are seeing as a result of the many aforementioned initiatives. Three of our four markets have already achieved break even or better in Q1 with our operational initiatives expected to deliver increasing benefits starting in Q2 and building throughout the year. While we do have one payer partner performing below our targets, they have been collaborative in addressing these challenges for 2025, with additional improvements on the horizon for 2026.
Speaker Change: Thanks, Amir I want to emphasize several key points to demonstrate our momentum in 2025.
Speaker Change: While there are still some headwinds facing the overall industry, we are reaffirming our guidance across all metrics based on the positive progress. We are seeing as a result of the many acre mentioned initiatives.
Speaker Change: Three of our four markets have already achieved a breakeven or better in Q1 with our operational initiatives expected to deliver increasing benefits starting in Q2 and building throughout the year.
Speaker Change: While we do have one payer partner performing below our targets they have been collaborative and addressing these challenges for 2025 with additional improvements on the horizon for 2026.
Aric Coffman: It's particularly encouraging to see the positive impact of benefit design changes flowing through our financials across the markets as we expect. Despite the V28 changes, we're experiencing an approximately 8% increase in PMPM funding, reflecting our improved burden of illness capture. This is especially promising considering we are still scaling these initiatives. And as we complete this rollout in 2025, our performance trajectory looks even stronger.
Speaker Change: It's particularly encouraging to see the positive impact of benefit design changes flowing through our financials across the markets as we expected.
Speaker Change: Despite the V 28 changes, we're experiencing in approximately 8% increase in P. M. P. M funding, reflecting our improved burden of illness capture this is especially promising considering we are still scaling these initiatives and as we complete this rollout in 2025, our performance trajectory looks even stronger.
Aric Coffman: Looking ahead to 2026, we are encouraged by the approximately 5% increase in the final rate notice from CMS, marking a significant step forward in addressing the rising costs and utilization trend.
Speaker Change: Looking ahead to 2026, we are encouraged by the approximately 5% increase in the final rate notice from CMS, marking a significant step forward in addressing the rising cost and utilization trends.
Operator: Operator, I'll now turn it back to you for questions.
Speaker Change: Operator, I'll now turn it back to you for questions.
Operator: We will now begin the question and answer session. To ask a question, you may press star, then 1 on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the button.
Speaker Change: We will now begin the question maybe I'll answer session to ask a question you May Press Star then one on your telephone keypad.
Speaker Change: You are using a speakerphone, please pick up the handset before pressing the keys.
Operator: If at any time your question has been addressed and you would like to withdraw your question Press Star that.
Speaker Change: If at any time your questions and interest and he would like to withdraw your question. Please press Star then two.
Operator: At this time, we'll pause momentarily to assemble our.
Speaker Change: At this time, we will pause momentarily to assemble our roster.
Okay.
Speaker Change: Our first question comes from Brooks O'neil with Lake Street Capital markets. Please go ahead.
Aaron: Brooks O'Neill with Lake Street Capital Markets, please go ahead. Hey, good afternoon, guys. This is Aaron. I'm on the line for Brooks. Are you able to hear me okay? Yeah, we hear you great. Awesome. So I really appreciate all the color on the call and congrats on the progress so far. I'm just curious on a couple things, Mara. And so I guess in relation to the $130 million in EBITDA initiative, it sounds like you've made some pretty tangible progress there. I'm curious how much of that materialized in Q1 versus what you expected and maybe what we can expect to be layered in throughout the rest of the year here.
Hey, Good afternoon, guys. This is Aaron on the line for blocks are you able to hear me okay.
Speaker Change: Yes, we hear you great.
Speaker Change: Yes.
Speaker Change: Awesome. So I really appreciate all the color all the color on the call and congrats on the progress so far.
Speaker Change: Curious on a couple of things tomorrow, and so I guess in relation to the $130 million in EBITDA initiatives. It sounds like you've made some pretty tangible progress there I'm curious how much of that materialized in Q1 versus what you expected and maybe what we can expect to be layered in throughout.
Leif Pedersen: Maybe just some of the key puts and takes there would be great.
Speaker Change: Throughout the rest of the year here, maybe just some of the key puts and takes there would be great.
Leif Pedersen: Yeah, Aaron, hey, it's Leif here. I appreciate the appreciate the question. And as it relates to the 130 million of improvement from an EBITDA perspective, and actually what's been layered into the P&L or achieved thus far, I would I would think about it this way, from a top level perspective, we do have some of the improvements, back end weighted in 2025. So you will see a heavier benefit in the back half of the year than you see in the front half of the year. But if you broke down some of those individual components, and thinking about OPEX, we achieved roughly about maybe a fifth of our OPEX savings in Q1.
Speaker Change: Yes, Eric Eric if life here I appreciate the I appreciate the question and as it relates to the $130 million of improvement from an EBITDA perspective, and actually what's been layered into the P&L are achieved thus far.
Speaker Change: I would I would think about it this way from a top level perspective, we do have some of the improvements back.
Speaker Change: Back end weighted in 2025, so you will see a heavier benefit in the back half of the year than you see in the front half of the year.
Speaker Change: But if you broke down some of those individual components.
Speaker Change: And thinking about Opex, we achieved roughly about maybe a fifth of our opex savings in Q1, and why I say that is some of the activities that we did exercise to drive our opex savings were initiated or have a.
Leif Pedersen: And why I say that is some of the activities that we did exercise to drive our OPEX savings were initiated or have a impact in Q1, and the full run rate will come back in Q2 through Q4. And then from a contract rationalization perspective, most of those are relatively going to be seen as an impact to the P&L across equally across the quarters. So you'll see one one fourth approximately come through the P&L from that standpoint. Really, the back end weighting of from a material perspective on our EBITDA goals are really going to be around those operational execution items. And those are going to be on the back end side where we will see a disproportionate benefit to the P&L than what you saw in Q1.
Speaker Change: Impact in Q1, and the full run rate will come back in Q2 through Q4 Q4.
Speaker Change: And then from a contract rationalization perspective, most of those are ratably going to be seen as an impact to the P&L across equally across the quarters. So you'll see one one fourth approximately come through the P&L from that standpoint, really the backend weighting of from a material perspective on our EBITDA.
Speaker Change: Our goals are really going to be around those operational execution.
Speaker Change: Execution items and those are going to be on the back end side, where we will see a disproportionate.
Speaker Change: Benefit to the P&L than what you saw in Q1.
Leif Pedersen: Absolutely. Okay, thanks for that, Leif. That makes sense.
Speaker Change: Absolutely okay. Thanks for that way, if that makes sense and I know Amir mentioned this briefly on the call, but I guess I'm curious about.
Amir Bacchus: And I know Amir mentioned this briefly on the call, but I guess I'm curious about, you know, engagement and satisfaction trends with the with the Restore program. You know, curious if you can share any metrics there, just anything you've heard in general that's worth mentioning. Yeah, so just overall for the whole care enablement model, the whole engagement strategy that we've been doing with the increased investment with boots on the ground with our providers has been working quite well. This has given us that opportunity to do the point of care tool in the offices that drive better performance on basically everything that we do, which is great.
Speaker Change: Engagement and satisfaction trends with the restore program you know curious if you can share any metrics there just.
Speaker Change: Anything you've heard in general that's that's worth mentioning.
Speaker Change: Yeah. So just overall for the whole and care enablement model the whole engagement strategy, we've been doing that with the increased investment with boots on the ground with our providers has been working.
Speaker Change: Well this is giving us that opportunity to do the point of care tool in the offices that drive better performance on basically everything that we do which is great. So that's very very good for us.
Amir Bacchus: So that's very, very good for us.
Amir Bacchus: As far as the P3 Restore program, we are actively electing key providers within each market to go through the program. And as they go through that three-month program and graduate, they become people that actually become ambassadors for other providers. So that is actually working well also. So currently, we have probably nine or so physicians that have already gone through and have been enriched by the understanding of what the program can deliver. So we're expecting a lot more to come from that as we disseminate what that program looks like to other physicians when we have our global physician meetings.
Speaker Change: As far as the Pizza restore program, we are actually actively electing.
Speaker Change: Key providers within each market to go through the program and as they go through that three month program and graduate they become people that actually become embassador for other providers. So that is actually working well is also so currently we have probably nine or so physicians that have already gone through.
Speaker Change: And have been enriched by the understanding what the program can deliver so we're expecting a lot more to come from that as we disseminate what that program looks like the other physicians when we have our global physician meetings, but as far as actual numbers as far as all of our performance from those will be tracking that from those physicians.
Aaron: But as far as actual numbers, as far as overall performance from those, we'll be tracking that from those physicians that have gone through to the performances in their practice. Got it. Yep. That makes sense. Okay. Appreciate it, guys. Thanks for taking our questions. Thanks, Aaron.
Speaker Change: I've gone through to their performances in their practices.
Speaker Change: Got it got it yeah that makes sense. Okay. I appreciate it guys. Thanks for taking my questions.
Eric Kauffman: Thanks Erin.
Josh Raskin: The next question comes from Josh Raskin with Nefron Research.
Speaker Change: The next question comes from Josh Raskin with Nephron Research. Please go ahead.
Josh Raskin: Please go ahead. Hi, thanks. Good evening.
Josh Raskin: Hi, Thanks, and good evening, I guess I'd like to drill down a little bit on this one specific outlier payer that's giving you. Some issues maybe just some color or is that multiple markets may be what percentage of <unk> revenues are coming from that one and then more specifically, what's driving the actual cost pressures from that payer.
Eric: I guess I'd like to drill down a little bit on this one specific outlier payer that's giving you some issues, maybe just some colors at multiple markets, maybe what percentage of capitated revenues are coming from that one, and then more specifically, what's driving the actual cost pressures from that payer. Hey, Josh, this is Eric. Thanks for the question. So in terms of, you know, overall markets, you know, we don't call out any individual payers by name in the way that we think about reporting out. I would say that, you know, we don't have any single payer that is more than, you know, about 22% of our overall overall top line revenue across any of our payers.
Eric Kauffman: Hey, Josh this is Eric Thanks for the question.
Josh Raskin: In terms of.
Josh Raskin: Overall markets, we don't call out any individual payors.
Josh Raskin: By name.
Josh Raskin: And the way, we think about reporting out.
Josh Raskin: I would say that we don't have any single payer that is more than about 22% of our overall overall top line revenue.
Eric: And I would also say that they are being very collaborative in how we rectify some of the things that float into 2025 from 2024 as well as 2025 corrections and being really collaborative and how we're working together to look at 2026 including a lot of things in the benefit design.
Josh Raskin: Across any of our payers.
Josh Raskin: And I would also say that.
Josh Raskin: They are being very collaborative and how we rectify some of the things that flowed into 2025 from 2024 as well as 2025 corrections and being really collaborative and how we're working together to look at 2026.
Josh Raskin: Including a lot of things in the benefit design.
Leif Pedersen: So I guess maybe, just like, what are the actual costs? Is it more are you seeing inpatient, are you seeing utilization of sub-benefits, or what exactly is driving those costs? What's the surprise?
Josh Raskin: So I guess, maybe Eric Eric just like what are the actual cost is it more are you seeing inpatient or you're saying utilization of sop benefits or what exactly is driving this cost with whats the surprise.
Leif Pedersen: Hey Josh, it's Leif. Those costs that came in were, just to be very clear, were all truly related to 2024, and they were all mostly inpatient or disproportionately weighted to inpatient as opposed to professional services. Okay, so it's not like the 2025. It's not like the first quarter was running terribly wrong. It's just you don't catch up from. Okay, so what is in line with that? Yeah, 23 is completely isolated. The 2024. Yeah, 2024.
Josh Raskin: Hey, Josh it's led those costs that came in were just to be very clear. We're all truly related to 2024 and they were all mostly inpatient or are disproportionately weighted to inpatient as opposed to professionals.
Josh Raskin: Professional services.
Josh Raskin: Okay. So it sounds like the 2025, it's not like the first quarter was running terribly wrong. It's just you've known them to catch up from okay. So one is yes exactly in line with that.
Josh Raskin: Three is completely isolated the 'twenty 'twenty four 'twenty 'twenty four okay, maybe just to add to that Josh in addition.
Leif Pedersen: Okay, maybe just just to add to that, Josh. In addition, when we look at that overall book of business, it was distributed throughout that geography, relatively equally, and that particular payer had some claims migration difficulties is what turned out, which is what caused the delay in getting that information to All right, so they had a systems issue. And then obviously, it came in late. Gotcha. Okay.
Josh Raskin: When we look at that overall book of business. It was distributed throughout that geography.
Josh Raskin: Relatively equally and that particular payor had some claims migration.
Josh Raskin: Difficulties as what turned out which is what caused the delay in getting that information to us.
Alright, so they had a systems issue and then obviously it came in like got you got you okay.
Leif Pedersen: And then you guys mentioned, and I heard it today as well, but on the last call, you were talking about these sort of payer contracts that you've been working on in terms of, you know, getting more efficiencies. And I guess I'm specifically interested in the supplemental benefit changes and maybe some of the impacts, you know, not having the Part D risk. Is everything, is that working as expected? And maybe some of the highlights there? Yeah, I would say it's working as expected, and maybe even a little bit ahead of schedule. And I think where we had given guidance around those renegotiations is that we would have, you know, we did 25% of the contracts last year.
Speaker Change: And then you guys mentioned, it and I and I heard it today as well, but on the last call you were talking a lot about these sort of payer.
Josh Raskin: Contracts that you've been working on in terms of you know.
Josh Raskin: Getting more efficiencies and I guess I'm, specifically interested in the supplemental benefit changes and maybe some of the impacts you know not having the part D risk because everything is that working as expected and maybe some of the highlights there.
Josh Raskin: Yeah, I would say, it's working as expected and maybe even a little bit ahead of schedule and I think where we had.
Josh Raskin: Given guidance around those renegotiations is that we would have we did 25% of the contracts last year and it was a combination of things who would increase and overall percent of premium that was coming through.
Leif Pedersen: And it was a combination of things, it was increase in overall percent of premium that was coming through. It was also on rationalizing some of the supplemental benefits that were going out from a cost perspective. And then as we look into, you know, 2026, again, there's going to be additional things that happen around 2026 benefit design. But the level of engagement has been really high. And even where, you know, in one example that we have with one of the payers, you know, our network contracts and the network that we hold is a significant improvement over the network that they hold.
Josh Raskin: It was also on rationalizing some of the supplemental benefits that we're going out from a cost perspective.
Josh Raskin: And then as we look into 2026 again theres going to be additional things that happen around 2026 benefit design.
Josh Raskin: But the level of engagement has been really high and even where in one example that we have with one of the payers.
Josh Raskin: Our network contracts.
Josh Raskin: And the network that we hold.
Is a significant improvement over the network that they hold and if a plan we're not delegated for network, but in that particular situation. They are taking our network as a proxy to say hey, how can we get this design even in 2025 back into what our programmatic. So that we can see the same results that youre seeing in your network.
Leif Pedersen: And it's a plan we're not delegated for network. But in that particular situation, they're taking our network as a proxy to say, hey, how can we get this design, even in 2025, back into what our programmatics so that we can see the same results that you're seeing in your network.
Leif Pedersen: And just across the board, the level of collaboration from our payer partners has been fantastic.
Josh Raskin: And just across the board the level of collaboration from our payer partners has been fantastic.
Josh Raskin: Okay, gotcha, gotcha, I'll leave. Thanks, guys.
Josh Raskin: Okay got you got you I'll leave it there.
Okay.
Speaker Change: Thanks, Josh.
Ryan Langston: Our next question comes from Ryan Langston with TD Cohen. Please go ahead. Hey, thanks. I'm sorry if I missed this, but there's been some kind of high profile public commentary out in the market about accelerating trends in Medicare Advantage. I just wanted to see, you know, if that's what you're seeing, if you're not seeing that, just kind of any maybe early reads on 2Q or just just anything related to that would be helpful.
Speaker Change: Our next question comes from Ryan Langston with T. D. Cohen. Please go ahead.
Ryan Langston: Hey, Thanks, I'm, sorry, if I missed this but there's been some kind of high profile public commentary out in the market about accelerating trends in Medicare advantage I just wanted to see.
Speaker Change: That's what youre seeing if youre not seeing that.
Speaker Change: Just kind of any maybe early reads on <unk> or just anything related to that would be helpful.
Amir Bacchus: Hey Ryan, can you help me out a little bit? I just want to make sure I'm a little more clear as far as what you mean as far as the accelerated things that you're seeing in Medicare Advantage. Does whoever is speaking the same language. Well, there was a very large public payer this week who has really talked about how trends are starting to get worse than they were even say a month ago, and they reported. So just wondering if you're seeing, you know, sort of a similar trajectory, or if you're not. Actually, we're not. We're actually seeing things that, you know, from the comments that Eric made, as well as Leif, things are actually improving from the benefit structures and what we've been paying or seeing as with the start of 25, much better as far as utilization, from what we see from, I would tell you, from just the actual census volumes that are actually on the decrease.
Ryan Langston: Hey, Ryan can.
Ryan Langston: Can you help me out a little bit I, just want to make sure I am a little more clear as far as what you mean as far as the accelerated things that youre seeing in Medicare advantage.
Ryan Langston: <unk> speaking the same language.
Ryan Langston: Well there was a.
Ryan Langston: A very large public payer this week, who has really talked about how trends are starting to get worse than they were even say a month ago. When they reported so just wondering if youre seeing sort of a similar trajectory or if youre not.
Speaker Change: Actually we're not we're actually seeing things from the comment that Eric made as.
Ryan Langston: As well as Leif.
Speaker Change: Things are actually improving from the benefit structures and what we've been paying.
Speaker Change: Seeing is with the start of 'twenty five much better as far as utilization from what we see from I would tell you from.
Speaker Change: Just the actual census volumes that are coming into the hospital et cetera things like that are actually on the decrease so those things are actually showing us good signs that things are getting better right. Now we do know costs are relatively high on a per unit basis.
Amir Bacchus: So those things are actually showing us good signs that things are getting better right now. We do know costs are relatively high on a per unit basis, but we do see the overall volume utilization coming down, which is a good moniker going forward. And then maybe one thing to add on that if we're Ryan, we're seeing the same trend for what it's worth on ACO reach. Yeah, when we compare first quarter over first quarter for our members. Okay, great point. That's helpful. And then, I think Josh asked about kind of that one payer you called out.
Speaker Change: But we do see the overall volume utility utilization coming down which is a good monitor going forward.
Speaker Change: And then maybe one thing to add on that.
Ryan Langston: Ryan we're seeing the same trend for what it's worth on ACO reach when we compare first quarter over first quarter.
Speaker Change: For our membership.
Speaker Change: Okay.
Speaker Change: Okay, Great that's helpful.
Speaker Change: And then I think Josh asked about kind of that one pay or you called out maybe I'll ask about the one market. You said three out of four are breakeven thats pretty good progress, but maybe just give us some details on kind of what's going on in that one market is that where that payers located or anything else kind of going on there you would call out. Thanks.
Ryan Langston: Maybe I'll ask about the one market. You said three out of four break even, that's pretty good progress. But maybe just give us some details on kind of what's going on in that one market. Is that where that payer is located or anything else kind of going on there you'd call out? Thanks.
Leif Pedersen: Hey, Ryan, it's Leif. You kind of hit the nail on the head, leading the horse to water there, right? That one pair is in one market, and that one market is the market that is underperforming currently today. And as we noted, all of our other markets are operating at or near breakeven. And then I would say, this is Eric and within that market, we have more than one payer partner in that market. And we're not seeing the same kind of trend with those other payers in that same market. Okay, that's helpful. Thanks, guys. You're welcome.
Ryan Langston: Hey, Ryan its life.
Ryan Langston: You you kind of hit the nail on the head leading the horse to water there right that one players in one market and that one market is the market that is underperforming currently today and as we noted all of our other markets are operating at or near breakeven.
Ryan Langston: And then I would say this is erik and within that market, we have more than one payer partner in that market and we're not seeing the same kind of trend with those other payers in that same market.
Ryan Langston: Okay. That's helpful. Thanks, guys.
You're welcome.
Operator: This is the end of the question and answer session.
Ryan Langston: This is the end of the question and answer session. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
Operator: The conference is now concluded. Thank you for attending today's presentation.
Operator: You may now disconnect. Yeah. Two-fifty.
Ryan Langston: Okay.
Ryan Langston: So.
Josh first.
Ryan Langston: Yeah.
Ryan Langston: Yeah.