P3 Health Partners Q4 2023 Earnings Call Transcript

Quartr
Provided by Quartr
March 28, 2024

There are 10 speakers on the call.

Operator

Good day, and welcome to the P3 Health Partners 4th Quarter 2023 Earnings Conference Call. All participants will be in listen only mode. Please note, today's event is being recorded. I would now like to turn the conference over to Ryan Halstead. Please go ahead, sir.

Speaker 1

Thank you, operator, and thank you for joining us today. Before we proceed with the call, I would like to remind everyone that certain statements being made during this call are forward looking statements under the U. S. Federal Security Laws, including statements regarding our financial outlook and long term target. 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 1

These statements are subject to risks and uncertainties that could cause actual results to differ materially from historical experience or present expectations. Additional information concerning factors that could cause actual results to differ from statements made on this call is contained in our periodic reports filed with the SEC. The forward looking statements made during this call speak only as of the date hereof, and the company undertakes no obligation to update or revise the forward looking statements. We will refer to certain non GAAP financial measures on this call, including adjusted operating expense, adjusted EBITDA, adjusted EBITDA per member per month, medical margin, medical margin per member per month, medical margin per member per month for persistent lives and cash burn. These non GAAP financial measures are in addition to and not a substitute or superior to the measures of financial performance prepared in accordance with GAAP.

Speaker 1

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. Information presented on this call is contained in the press release that we issued today and in our SEC filings, which may be accessed from the Investors page of the P3 Health Partners website. I will now turn the call over to Doctor.

Speaker 1

Abdu, CEO and Co Founder of P3.

Speaker 2

Thanks, Ryan, and welcome, everyone, to our year end 2023 conference call. We would like to update you on our Q4 and full year 2023 financial results as well as provide further thoughts in 2024. Our momentum remains robust. We are reaffirming 2024 guidance based on several key observations in the early part of the year. Number 1, starting with our membership, the annual enrollment period was a success and our membership increased by approximately 11% from December to account of approximately 121,000 Medicare Advantage and Medicare ACO reach lives.

Speaker 2

Number 2, consistent with our stated objective of discipline and purposeful growth, we have broadened our service area by expanding into 2 adjacent counties in Arizona and 6 contiguous counties in Oregon, bringing us to a total of 23 counties at the start of 2024. Number 3, our revenue in 2023 grew approximately 21% year over year. Our per member per month funding was up approximately 16% year over year. And despite the challenges, others in our sector have voiced around V24 to V28 and declines in reimbursement. As we indicated in earlier commentary, we are realizing an increase in our funding.

Speaker 2

Number 4, medical margin improved by 118% from 2022 to 2023. You will hear from Atul that the increase in utilization is in part attributed to the EBITDA mess, but what gives me further confidence in 2024 is that medical claim expense decreased by 26% in January from December, returning to a normalized level. Number 5, the initiatives we put in place to enhance operational efficiency continue to materialize as platform expense came down by 32% year over year to be a high single digit percentage of revenue for the year as previously indicated. Our 4th quarter trend is even more impressive and we believe it will establish the baseline for 2024. Number 6, considering the adjustment to EBITDA were mostly non cash items, our net cash used in operations significantly improved over the first half of the year.

Speaker 2

Number 7, we continue towards our inflection point and we expect to become EBITDA positive in 2024 consistent with our previous guidance of positive $20,000,000 to positive $40,000,000 by end of year. Number 8, we continue to advance a robust pipeline of growth opportunities and expect positive development across multiple strategic partnership in the coming quarters. And finally, number 9, the team remains highly motivated to deliver in 2024 and combined with our early data points, we are confirming and reaffirming our previous 2024 guidance. In conclusion, we believe the demand for P3 model is as high as ever and we believe that our demonstrated ability to manage the medical margin, improve funding and grow membership are driving this demand. We remain confident in 2024 results based on the utilization trend we are seeing early in the year despite the increase in December 2023.

Speaker 2

Our payer, provider and health system discussions are ongoing, including potential joint venture and strategic partnership opportunities, I am encouraged by the tremendous strides the P3 team continue to make on the clinical and operational side. I am confident in our ability to achieve profitability this year and scale in the coming years. With that, I would like to turn it over to Atul Caldecar, our Chief Financial Officer.

Speaker 3

Thanks, Sharif. Sharif hit the highlights, but I want to provide a bit more detail on the Q4 and the full year 2023 results, which brought us below our full year EBITDA guidance we confirmed in early January 2024. I will discuss in some detail some of the new information we received in February of 2024 that caused these changes to Q4, but we'll also speak about the encouraging factors around our 2020 4 expectations and the reason we are so excited about P3's future. First, let me walk you through the 4th quarter full year 2023 numbers. Top line results in 2023 were strong as the team executed and delivered revenue of $1,266,000,000 representing 21% growth and above our guidance range.

Speaker 3

On a PMPM basis, revenues grew by approximately 15% over 2022. In the Q4, we had revenue of $347,000,000 a 34% increase over the Q4 of 2022. As we've discussed on previous calls, we developed a model to estimate the amounts we expect to receive related to our 2023 wrap paid in June or July of 2024. Going forward, we expect to be able to accrue our estimated final sweep amounts for 20 20 In 2023, as Sherif mentioned, our medical margin, which represents the amounts earned from capitation revenue after medical claims expense, improved 118% over the prior year to $135,000,000 or $108 on a PMPM basis. We believe that despite the large adjustments to our reserve taken in the quarter, and which I'll discuss in more detail, the positive trend in this critical metric is continued proof that our model works and is only improving.

Speaker 3

To that end, we continue to optimize our provider and payer networks to enhance medical margins going forward. Our platform support costs are another demonstration of our commitment to driving operating leverage and shareholder value and have continued to decrease as a percentage of revenue. In fact, we decreased our platform costs as a percentage of revenues from around 15% in 2021 11% in 2022 to approximately 8 percent for the full year 2023, consistent with the guidance of high single digits we've provided in the past. Adjusted EBITDA loss was $86,000,000 in 2023 compared to an adjusted EBITDA loss of $128,000,000 in the prior year. On a per member per month basis, adjusted EBITDA loss was $68 an improvement of $39 PMPM compared to the prior year as we successfully improved margins and lowered costs on a per member basis.

Speaker 3

For the quarter, adjusted EBITDA loss was $44,000,000 or approximately $138 on a PMPM basis. Now I'd like to provide more details around the 2 main items that made up roughly $40,000,000 of Q4 2023 adjustments that drove our miss relative to our EBITDA guidance. The single biggest factor accounting for approximately $30,000,000 is the combined impact of increased utilization in December among some of our health plans, along with an increase in our claims reserve at the end of 2023. In the past few weeks, we determined that it would be prudent and appropriate to increase our reserves by approximately $23,000,000 to reflect greater conservatism in our allowances for claims, which have not yet been presented. In addition to this, we recognized incremental medical claims expense of approximately $7,000,000 for higher than expected utilization by some of our health plans for December of 2023 and which were presented to us in February of 2024.

Speaker 3

Although our own estimates of future claims related to those dates of service were lower, we chose to maintain our recent protocol of booking to the estimates of our independent actuary. Over the next several quarters, we will work with our actuaries to observe the actual claims experience and reevaluate our reserve estimates. It is worth noting that medical margins and adjusted EBITDA would benefit in the future to the extent that trends on actual claims are favorable when compared to the estimates reflected on the balance sheet in the 4th quarter. The other significant factor reflected in the quarter's results relates to the write down of approximately $10,000,000 of settlement receivables, which are open and subject to continuing dialogue. We are engaged in a review process with our payer partners regarding the resolution of these amounts.

Speaker 3

However, because the resolution of those discussions is subject to an ongoing review, we've taken a conservative approach consistent with GAAP and have deferred recognition of that revenue until such time as the final disposition is reached. Shifting to our 2024 outlook. Early 2024 data from our health plans suggest a strong start to the year. A few specific examples. On the membership front, early indicators for our annual enrollment period were strong.

Speaker 3

And by the end of January, we already recognized about 121 1,000 Medicare at risk members. This is already approaching the lower end of our full year guidance of 125,000 to 135,000 members by the end of 2024. With our plans for expanding our network over the course of the calendar year, we believe we are well positioned to meet and potentially exceed our guidance. Our early indicators of funding also showed strong improvement over the prior year and are proving to line up well with our initial guidance assumptions. This has been verified by reports received to date by our health plan partners and are another point of validation of our expectations.

Speaker 3

Our California market, which is 100 percent delegated, showed particularly strong growth in funding as evidenced by our cash receipts. With regards to medical expense and Doctor. Amir Bachus, our Chief Medical Officer and Bill Betterment, our Chief Operations Officer will go through this in more detail. We observed a clear return to normalized seasonally adjusted metrics for 2 of our KPIs, admits per 1,000 and emergency department visits per 1,000. This is a clear indicator of recovery for both of these metrics from elevated levels in December.

Speaker 3

So to summarize, our full year fiscal 2024 guidance included Medicare Advantage members ranging between $125,000 $135,000 total revenues ranging between 1.45 $1,550,000,000 medical margin ranging between $230,000,000 250,000,000 dollars medical margin on a PMPM basis ranging between $165 $175 And finally, adjusted EBITDA ranging from plus $20,000,000 to plus $40,000,000 Our practice is not to provide quarterly financial guidance. However, I would encourage our analysts and investors to consider the timing of some of the bigger factors in the quarterly cadence of our EBITDA in 2024. As a reminder, our Q1 with the regular seasonal cold and flu patterns tends to be an under contributor towards our annual EBITDA. Some additional points to consider are first, the IBNR refresh will continue on a quarterly basis in 2024 and as mentioned before, actual claims run out will impact the reserve amount through any potential adjustments over the next few quarters. 2nd, the 2024 RAAF accrual will likely take place primarily in the Q4 as it did in 2023 and not smoothly across the calendar year as previously believed.

Speaker 3

Finally, the benefits of the medical cost reductions that are new for this year will be mostly visible in the latter half of the year, although potentially some in the second quarter. I want to finish by mentioning that our cash flow used in operations in the 4th quarter was approximately negative 16,000,000 dollars substantially better than that at the start of the year. I'm very pleased with the recent close of the $25,000,000 in notes that on a pro form a basis should leave us with over approximately $55,000,000 in cash at the end of the quarter. And with that, I'd like to thank you all again for taking the time to hear about the P3 story, and we'll hand off to Doctor. Bachus for more detail around early 2024 observations.

Speaker 4

Thank you, Atul. Like many of our peers in the value based care space, P3 also has experienced increased 4th quarter costs, but specifically in December of 2023. This was due to COVID and flu exacerbations and Part B costs. However, beginning in January, we saw a return to seasonally adjusted normalization, including more normalized inpatient and outpatient utilization. In fact, in January, we saw a 6.7% reduction in hospital admissions and a 6.6% decrease in emergency department visits since December and a 26% decrease in med expense from December of 2023 through January of 2024.

Speaker 4

Another way that P3 has been able to generate medical cost savings is through the tight utilization management of our delegated lives, which makes up approximately 30% of our total lives. Prior authorization and concurrent review activities on procedures like diagnostic imaging, high cost Part B medications, steerage to appropriate sites of care for high cost procedures such as orthopedics and managing emissions have all have shown improved savings month over month, a 9.5% improvement in Part B cost avoidance from December to January. It is because of P3's philosophy to not only manage our primary care physicians with our teams tools and technology, but to also manage our entire network of specialists and pharmaceutical costs that allow us to drive deeper relations in all of our markets. We believe that if you are managing care for patients, you must manage the entire continuum of care to drive the best outcome at the lowest potential cost. Now, I would like to turn the call over to Bill Betterment, our Chief Operating Officer.

Speaker 5

Thank you, Amir. I'll begin by reviewing operation activities for 2023 related to ACO reach across all markets, the California and the Oregon markets. Our Oregon market saw $171 PMPM capitated revenue increase from 2022 to 2023, which was a $67,000,000 increase year over year, as well as a $108 PMPM improvement in medical margin year over year. The work done to reduce medical costs and improve revenue resulted in $21,000,000 of EBITDA improvement year over year, demonstrating the effectiveness of our tools, significant value in a short period of time and anticipate continued performance in medical expense reduction and in accurate coding and documentation for our patients with chronic health conditions ensuring the Oregon market reaches profitability in 2024, while simultaneously improving quality scores. We continue to see significant member growth in Oregon.

Speaker 5

From 2023 to early 2024, we expanded from 5 counties to 11 counties, growing from 21,858 members to 33,229 members, which is a 52% increase in membership year over year. We attribute this growth to our strong partnerships with key health plans across the state and our proven delivery model. In 2023, our California market had a $9.31 PMPM medical expense compared to a $10.14 PMPM medical expense in 2022, representing an 8.1% improvement year over year. California's medical margin in 2022 was a $57 PMPM loss compared to a positive $2.15 PMPM in 2023, which is a staggering $272 PMPM improvement, leading to a $32,000,000 improvement in medical $13,000,000 EBITDA in 2022, which is a $22,000,000 EBITDA improvement year over year. We achieved these results by optimizing our plan mix, reducing medical expense and accurately coding conditions of our patients allowing us to grow profitably.

Speaker 5

We expect to add several new health plans in 2024, continuing to build on our 2023 profitable growth. Through our ACO Reach program, we continue to cement our value based care programs with PCPs. In January 2024, we recorded 10,505 lives, up from 7,510 lives in 2023. These lives are expected to increase substantially over the coming years since we began expanding into ACO reach during 2023. We have grown to 32 provider groups.

Speaker 5

That's a 15% increase year over year. We are able to improve engagement across patient panels for our affiliates within the Medicare ACO REACH program and improve the overall cost of care. We view the increasing engagement as a promising signal for the adoption of value based care models and for the future of our clinical, financial and operational performance. Thank you all once again for your interest in the P3 story. And with that, I'm going to turn it back to the operator to open the floor to questions.

Speaker 5

Operator?

Operator

Thank you. We will now begin the question and answer session. And today's first question comes from Brooks O'Neil with Lake Street Capital Partners. Please go ahead.

Speaker 6

Thank you very much. We appreciate all the color. I might have missed it, but I don't think I heard any discussion about the element talked about in the 8 ks a few weeks ago about going concern language. Would you say we should expect to read that in the 10 ks or are you in better shape today based on your and your auditors assessment?

Speaker 3

Yes. Brooks, just a quick this is Atul speaking. A quick word on that. The guidance we had received from external counsel suggested that we include that language in the filing and did so as we believe that, that was the appropriate protocol. But the going concern language is not new.

Speaker 3

That was in prior filings as well. So this is not a new development for the company at all. And that will be a decision that's made by the auditors, not necessarily by us. The expectation is that there will need to be a period and that's a bit unclear as to how many quarters of profitability or at least some calculus around medical margin positivity. And as you know, we posted some meaningful medical margin, dollars 135,000,000 this year.

Speaker 3

So that will need to continue for some period of time until they feel comfortable in removing that. Unfortunately, that's not something that we can actually just remove on our own will.

Speaker 6

That's how auditors think, I guess, right guys?

Speaker 3

It's part of their requirements. So I'm not suggesting it's appropriate. The company has made losses, and that's the reason for the disclosure.

Speaker 6

Sure. Let me ask 2 more quick ones, hopefully. First one is, obviously, the December increase in medical expense is probably more seasonally related and episodic than it is related to some of the factors that you attempt to control in the P3 model. Would you say there are elements in your model that can protect you or minimize the impact of these seasonal factors? Or should we expect that to be a possible recurring factor depending on what cold and flu season is like in any particular year?

Speaker 4

Hi, Brooks. This is Amir. So I'll answer that question. So yes, you will definitely see the seasonality that happens through basically in the Q4 and part of Q1 of every year in regards to increasing exacerbations of flu, etcetera. Obviously, this year we had a combination of a mild or moderate COVID spike with the flu that led to increasing overall care, increasing admissions.

Speaker 4

So we did see that. P3, obviously, we work collectively not only with our plans and our providers to make sure we improve access during that period of time, because that engagement is always important with our providers to improve access, which is something we can do to help decrease the potential risk of increasing costs that we see in those seasonality months. But in addition to that, as we've talked about before, it's making sure that we can look at more delegation as we move forward into 2025. So we can have more control with all the overall medical costs and not necessarily just spikes or just increased medical illness.

Speaker 6

Sure. That makes sense. Thank you for that color. Let me ask one more quick one. Do you guys anticipate a substantial change in your business relative to the changes in the CMS risk methodology expected in or implemented in 2024?

Speaker 6

Do you expect any further substantial changes in 2025? I know it's early, but what are you hearing? What do you see?

Speaker 5

Yes. Hi, Brooks. This is Bill Betterment. So as we

Speaker 4

stated in the hi, Brooks.

Speaker 5

As we stated in the past, the changes from version 24 to 28, we do expect some slight headwinds, not nearly as impactful as we're seeing with some of our competitors or others in the sector and industry. So we will continue to monitor that closely. But

Speaker 3

there's a couple

Speaker 5

of things that we've talked with you and others about that we think really differentiates us. So one of these factors that helps us is the education work that we do with our providers and affiliates. So we have a very robust program that's ongoing. And obviously, there's cost and people associated with that. And that's why we said there's still some headwind to this as we have to prepare for additional work around this area throughout the rest of this year and into 2025.

Speaker 5

But we do anticipate it will be continue as a slight headwind for the foreseeable future.

Operator

And our next question today comes from Josh Raskin of Nephron Research.

Speaker 7

Hi, thanks. Good afternoon. Just trying to dig into the medical expense here, obviously, way above what we were looking for. So the MLR was reported at 107%. I know there was that $30,000,000 in the $10,000,000 maybe $40,000,000 of what you guys deemed to be sort of unusual or out of period expenses.

Speaker 7

But even without that, the MLR is still in the sort of mid high 90s. And so I understand a couple of the metrics you talked about for January, but what gives you confidence that you've got medical expense that's going to trend more in line with expectations? And how are you doing that, especially with some of the change outage that impacted claims for February March? What data are you getting from the plans? And are you doing anything differently from a member perspective around inpatient utilization or ER visits to monitor your membership?

Speaker 4

Yes. Hey, Josh, it's Zameer again. So a couple of things. First of all, when you look at our MLR and things like that, part of the MLR increase what we've seen year over year came a lot from the ACO REACH as well. So our ACO REACH population has a much higher MET expense overall than what we've seen in MA, which has driven up the overall cost, even though our funding actually has been able to offset that, from what we've seen from what we're getting in ACO versus MA.

Speaker 4

So it's still for us still very good business for us to continue to take on even with the higher cost that we see in that cohort or in that population. But in addition to that, as we look forward to the things that we're doing collectively and working with our plans and the communication with our plans is to do those very things that we've talked about before and getting in front of that Med expense, particularly in the things we have visibility to from whether it's people are asking in our 30% are delegated lives for extra procedures, the Part B cost expenditures, etcetera. And as you heard me say, the Part B expenditures have been significantly higher, I think, throughout all the markets, not necessarily just P3, but everybody. So these things will require more control and management. And we work and look forward to working with our plans to do that very thing besides just what we're delegated.

Speaker 6

Hey, Josh,

Speaker 5

this is Bill Betterment. I just want to add to what Doctor. Bachus had shared. One of the things from an operational perspective is this year, we've really doubled down and focused on some things around Medex reduction that we not that we weren't looking at last year, but we've got some new cohorts of patients of how we're looking at and addressing early in the year. Not that again, not that we weren't looking at these folks last year, but we have new programs that are available to our patients that weren't available beginning of 2023.

Speaker 5

So we're excited about some of our opportunities that we didn't have in front of us to reduce that cost that we saw last year.

Speaker 7

Got you. And how much I'm trying to figure out how much was December? So what was the MLR, I guess, in October November versus what December was?

Speaker 8

Atul?

Speaker 3

November, I'm going to go and give you some general guidance. I don't have the numbers exactly in front of me, but they were generally consistent with what we saw in the Q3. And then the balance obviously was in December and that blended out for the entire quarter.

Speaker 7

And when you said med claims expense was down 26% in January versus December, Is that including all the extra of the $40,000,000 of items in December? Or is that sort of a more normalized number?

Speaker 4

That was straightforward medical expense that we saw in from December to the drop that we saw in January, since we were able to get completion or more completion on the January numbers. And obviously, February March are still we're still waiting for all the numbers to come back in. But definitely from December, it was that 26% drop that we saw in utilization into January.

Speaker 7

And the December include the write down, the $10,000,000 write down of reserves?

Speaker 4

No, it did not.

Speaker 7

Okay. So just to make sense. And then just last one, I heard the

Speaker 1

$55,000,000 of expected cash at the end of the quarter. Do you

Speaker 7

have an expectation of year?

Speaker 3

We don't. And we've talked about it in the past. It's rather difficult to get the timing right when you're forecasting cash to that level of precision. So we haven't really put out any specific guidance at end of your cash for that reason. But as I said earlier, I think that the addition of the cash from this note offering, it provides us with a nice cushion.

Speaker 3

It gives us some protection from unforeseen and unexpected things that are happening in the year. But all in all, we feel pretty good about where we are.

Speaker 7

All right. Thanks.

Operator

Thank you. And our next question today comes from David Larsen with BTIG. Please go ahead.

Speaker 8

Hi. Can you talk about the medical trend like when we last spoke, I think you had mentioned medical trend was actually minus 1 percent for members that have been on the platform for a year or more. Do you have did you highlight what the medical trend was in the quarter or what it's trending at?

Speaker 4

Hey, Dave, this is Amir. I do not have the medical trend right in front of me right now because of the December blip. But we can get that to you. So we can have a call offline and we can show you what that

Speaker 8

was. Okay. And then I'm sorry, how much revenue pushed I think from 4Q into 2024?

Speaker 3

None really pushed. Dave, are you asking about how much did we accrue in the 4th quarter for our sweeps revenue? Yes. Yes. So the amount we booked in the 4th quarter relatively consistent with the numbers that we've been talking about.

Speaker 8

So you got the

Speaker 3

$20,000,000 Roughly that number in that zip code. In the Q4, we recognize that revenue.

Speaker 8

Okay. And then can you talk about the nature of the claims expense? What was it? Were they hips? Were they knees?

Speaker 8

Was it Medicare Advantage? Was it cough, cold, flu? Because I mean, we had a call with an expert this afternoon and he specializes in this space and he's saying that these medical expenses are going to trend higher for the next year. Just any color on what were the costs?

Speaker 4

Yes. So David, it's Amir again. So a number of things. As I said upfront, obviously COVID and flu, that's one of them. The Part B cost, which is a large bag, right?

Speaker 4

And the Part B cost deal with everything from what you see from whether it's electric procedures and or Part B drug utilization, all of those together led to elevated Part B costs that we saw towards the end of the year in December. So we can sit there and try to wrestle out as far as how many actual procedures versus better admissions and things like that. We absolutely know we're elevated due to some of those things. But for us, it's making sure that we can continue to evaluate under the changes that we see within health plans and what we can do, especially from the delegated standpoint, to have more control versus just somehow some plans having more open referrals to specialists without being able to do that prior authorization and evaluation. So it is kind of a mixed bag.

Speaker 4

So you kind of see it's not just one thing was Part B drugs or just outpatient or elective procedures. We definitely do know it was to some degree from the COVID and flu combination that led to those things in December.

Speaker 8

Okay. And then what are your expectations for revenue in 20 24 on a PMPM basis like in terms of health plans raising premiums, most of them are, I think, are saying that they had to raise premium significantly to account for the utilization and the RASK scores, like just thoughts there and then as well as the impact of coding and then perhaps your ability to capture more of the premium. Are there clauses in your contracts that say, hey, if medical claims expenses are higher than expected, you can get more of the premium? Just any thoughts there would be great.

Speaker 2

Hi, David. It's Sharief here. So we definitely are able to renegotiate a contract anytime. I mean, no one can stop us from doing that and most health plans under stand the situation. But the example that I would like to share with you and the rest of the analysts here that we were able to do any year in this past year and the prior year is to look at certain benefits and then limit our liability or exposure to the downside risk.

Speaker 2

For example, we noticed like most of other health plans that the dental benefits usage has been on the rise and increase. And we it's part of our DOFA or division of financial responsibility to take risk on these ancillary services or benefits. So we went to the 2 largest health plan that we contract with and we showed them the trend and we showed them the cost and we were able to flatten the liability and the cost to the prior year per member per month cost and anything above that was removed from our percentage of premium to the health plan percentage of premium. Same thing with the Flex cards, some health plans that increase the margin or the size of the benefits of the Flex card, we were able to go to the health plan and says, we're going to pay up until it was last year, whatever you increase this year, it was yours and health plan agreed to that because they knew that they went there to acquire market share. So they were able to absorb it.

Speaker 2

Does that answer your question?

Speaker 8

It does. Thank you very much. And then just one final one and I'll hop back in the queue. Thank you for being so patient with me here. I guess in the last 2 weeks of February and in the 1st 2 weeks of March, did you receive I mean, I guess you must have received additional data on December utilization and that's what drove the spike relative to expectations.

Speaker 8

Is that correct?

Speaker 4

That's correct.

Speaker 8

Okay. All right. So it takes at least, we'll call it, 2.5 months or 90 days to get all the data. So if we're thinking about January, like do you have all the data for January or are there still a couple of files you're waiting for?

Speaker 2

So we have a lot of data for January and you understand that it was never going to be complete till like 6 or 9 months down the road. However, we have enough indication to calculate the liability and IBNR and overall medical cost.

Operator

And our next question today comes from Ryan Daniels of William Blair. Please go ahead.

Speaker 9

This is Jack Sump down for Ryan Most of my questions have been answered already, but just wanted to go back to the medical margin. I mean, it is expected to increase pretty substantially this year. So just kind of curious what the largest driver is here? Is it more of the mature lives just starting to shine through versus like less new lives coming on? Or is it really majority coming from ACO region that could be additional upside?

Speaker 9

Just kind of curious if you can double click on that again. Thanks.

Speaker 4

Yes, certainly. This is Amir again. So a couple of things. You're absolutely right as far as the ACRE reach with the higher revenue, which is great. And we appreciate seeing that.

Speaker 4

However, as far as our number of lives that are persistent, yes, through this AEP, we actually had an even improved number of persistent lives even than previous years. So we're actually looking at probably a 92% persistency, which gives us or I should say makes us more excited to achieve that medical margin because of that persistency. So because it's been better than last year, gives us much more opportunity to continue to work with those patients to improve not only the documentation and understand their diagnosis burden, but at the same time get them more plugged in especially with their providers in the care model. And as we do that, we will see that margin increase to that margin that was that we described to the you know, the 230 to the 250 range.

Speaker 9

Okay, understood. Thanks. And just a quick follow-up. Can you guys just talk about the demand you're seeing from health systems and kind of how those partnerships have progressed? I think that's a pretty good opportunity.

Speaker 9

So just kind of curious how those are shaping up for this year and if you're still generally seeing demand

Speaker 4

from health systems?

Speaker 2

Thanks. Yes. Thanks, Jeff. Sharief here. Yes, we continue to see demand from health system.

Speaker 2

And as you all may or may not know that 61 percent of primary care are employed or staff through health systems in this country. So that's why we were focusing on the joint venture and strategic partnership opportunities with health system overall because of the access to that large pool of providers and physicians that looking for improved working condition workflow and returning to the joyous practice in the medicine as well. And we believe that our model provide and support that.

Operator

All right. Thank you. Well, that appears to end our question and answer session. So I'd like to turn the conference back over to the management team for any closing remarks.

Speaker 2

Great. Thank you very much, operator. So for everybody, I really wanted to thank you for attending our 4th quarter and end of year 2023 and I want to cap what we discussed today with the group, which is we had a very strong growth year in 2023 with 21% increase in the top line revenue and we're reaffirming and confirming 2024 full guidance of positive EBITDA of 20 $1,000,000 to $40,000,000 Thank you very much and have a great afternoon.

Operator

Thank you, sir. This concludes today's conference call. We thank you all for attending today's presentation. You may now disconnect your lines and have a wonderful day.

Remove Ads
Powered by Quartr
Earnings Conference Call
P3 Health Partners Q4 2023
00:00 / 00:00
Remove Ads