Okay, hello, everyone. Welcome to the 42nd annual J.P. Morgan Healthcare Conference. Today, we'll start with a presentation, and we'll leave some time at the end for Q&A. I'm Cameron Wang with the Healthcare Investment Banking group at J.P. Morgan, and it is my pleasure to introduce you, to you today the CEO and CFO of P3 Health Partners, Sherif Abdou and Atul Kavthekar. So without further ado, we'll turn it to both of you.
Thank you. Thank you, Cameron, and thanks to J.P. Morgan team, and thanks for having us in the 42nd annual conference of J.P. Morgan Healthcare. Today, I'm gonna give you a little bit overview, just so whoever is familiar with P3, just increase the familiarity, or who does not, I'll give you an overview of P3. Then we'll talk about what we are or not seeing, the topic of the day, utilization and medical cost. So we'll get in details, and we'll leave room for questions and answer about that as well. Then I'll tell you about our significant robust pipeline that we're looking at, and then Atul will come and talk to you about the guidance that we've gave for 2023 and guidance that we just released on 2024.
So, where P3 is a patient-centered population health management focus in Medicare Advantage, physician-led, and mainly an affiliate model organization that went public in 2021, started operation in 2018. We started in 2018 in 1 county. Today, we sits in about 18 counties. We started in 1 state. Today, we are in 5 states. And started in 2018 with 10,000 lives. We guided the street this year and next year to 135,000 lives, 125,000-135,000 Medicare risk lives. We started with 300 primary care physician in our platform. Today, we're nearing 3,000 primary care physician with a 98% retention throughout the counties that we're in. And our revenue was almost $83 million in 2018.
We guided the street for next year of $1.45 billion-$1.55 billion in revenue. And we're gonna talk about the medical margin and what drives to profitability next year. So, you probably have seen this before. The most important piece that the Medicare Advantage risk value-based model is one of the best value creation in. And, don't take my word for it. CMS just recently announced that they're gonna take their entire traditional Medicare, turn it into an ACO REACH. So they targeted by 2030, the entire Medicare book of business will be in value-based contracting. So, that's why we believe it's the right space to invest in.
The models, we believe in our affiliate models as, as you can track, it's working much better than bricks and mortar, working much better than acquisition, and sometimes, and sometimes not with, with the joint venture as well. The most important thing is we have a team that has done this for 30+ years. We have a history in HealthCare Partners, and we have a history in building a population physician-led, patient-centered, population health management company. The time for overall the space and for definitely for P3 is the right time. It's an inflection point where we see that there is a significant upside. We're turning into profitability.
We're turning into a steady state of growth, and that's why we believe it's the right investment with the robust potential value creation for all shareholders and stakeholders as well. So, the purpose of this is to share with you our per-member per month medical margin over the years. So in 2021, it was $16. 2022, we had to double it or triple it to get to $52. From 2022- 2023, we had to double it plus from 53- 125. The reason that I'm tracking this, help me out here, next year, I don't have to do doubling. All what I have to improve is 30%-40%, from $125- $170, what we guided on, is to put us into profitability.
So the buildup of profitability, it didn't happen all of a sudden. It built over the year, maturation, persistent lives, consistent operation, execution, and now we are in an inflection point and the verge of turning profitable and sustaining profitability and maybe grow it even further. And Atul will talk about the embedded EBITDA in our mature, persistent population as well. So keep asking myself, "How do I address?" Because everybody's stopping us. We're here in a conference, everybody's stopping us. "Are you seeing the same trend as like the other people in the utilization, the medical cost, and can you and why is it that you don't, you're not seeing the same thing?" So I'm gonna answer this two ways. Number one, we're not seeing this across the industry.
I called my friends in ChenMed and called my friends in Apollo, and I called my friends in Heritage, and they're not seeing the trend that was reported in multiple articles about increased medical utilization. So it's important for us to look at it. It's just happening in certain peers, but not across the industry. That's number one. Number two, we're not seeing that internally. And let me address the question because I know some of you is gonna ask you: What make you immune to this if it's happened? The experience of the team is one thing. The knowledge of our people that calculate in finance and accounting, that calculate our IBNR, is significant.
The model of delegation, where we do a prior authorization, we do utilization management, and we do claim processing ourselves, our ability to see it faster, better, more efficiently than a lot of others is what makes the difference, is what reduces this trend that you're seeing here in medical costs year-over-year. The utilization, you can look at it and say, "Sherif, this is flat." Well, keeping utilization flat in the middle of pandemics and post-pandemic is an impressive, keeping utilization flat and keeping medical costs flat, it while it's everybody's reporting seven or industry, Medicare had reported 7%-9% increase in the healthcare expenditure year-over-year, yet you're seeing P3 group and MSO and lives flat year-over-year. So let's look at this in detail. Hospital inpatient, down 6%.
Hospital outpatient and ambulatory surgery is up 8% because we shifted them intentionally outside of the hospital to reduce complication, to reduce cost, and to have a much better utilization trend. Part B infusion drugs minimally increased because we manage it. Dr. Bacchus and his teams and Bill Bettermann as well, spending time day in, day out, managing the Part B drugs and infusion costs. Skilled nursing is down 2%. ER visits and ER costs is down 2%. That results in some sort of like you saw at the end, flat trend in the medical cost year- over- year. $790, $789.
Yeah, it's a, it's a dollar less, but really, it's flat. It. That is the power of P3 care model. That's the power of P3 experience. That's the power of P3 teams. That's the power of the delegation model that is consistent and buck the trend of 5%-6% in the industry in medical cost expenditure year-over-year to keep it flat. So you ask about the quality. We sampled and across the board by specific category of HEDIS, the follow-up after admissions or ER visits, hemoglobin A1C control, and medication adherence, and medication adherence for hypertension. As you can see in the preliminary results in our 2023 is five stars. So, very, very impressive to our medical team.
Kudos to our physician leaders, Dr. Bacchus and his team, that they continue to flatten the medical cost curve while improving and maintaining a high grade of quality as well. So, finally, before I turn it over to Atul to talk about the guidance of 2023 and 2024, I'm gonna tell you about the exciting news where we're going from here. We have in a very advanced conversation looking at a strategic partnership in multiple cities with different health system for us to advance the relationship and conversion of their population from fee-for-service into value-based contracting.
One of those city, that transaction or that partnership will be a transformative into this city because one of the cities that we're working on, it will be the first time in this large metropolitan area that you will see a clinically integrated system of care. So, I can't wait till we're ready to publish this and take and talk about the details of it. Finally, we are in advanced conversation with a leading industry-leading technology platform to add the power of generative AI and the predictive modeling to our tech stack. That will enable and empower our provider and patient alike to be able to manage the medical costs better, to be able to document better, and to be able to maintain the quality and close the quality gaps better.
So, again, thank you very much, and let me turn it over to Atul to talk about the guidance. All right. Thank you.
Good afternoon, everybody. My name is Atul Kavthekar, I'm the CFO. So I wanted to very quickly go over guidance, as hopefully some of you have seen earlier today, we issued a press release and reaffirmed our 2023 guidance. So in summary, revenue, we, we have guided to $1.2 billion-$1.25 billion of revenue. We have also reaffirmed our medical margin guidance, between $155 million-$175 million, which is, implies a PMPM of between $120-$130. We have reaffirmed our adjusted EBITDA loss from between $50 million-$30 million this year.
And just, because I know there's some questions, just a quick reference, we, we started the year with a strong cash position, just over about $40 million in the bank. But I wanna talk a little bit about 2024 guidance. Again, this is all also summarized in detail. We're very excited about the future. We, we think we're making some great strides, and as we promised, we wanted to give a little bit more color on the twenty-four guidance. So we are guiding to revenue between $1.45 billion and $1.55 billion. And so this, just to give some sense of scale and relative to the midpoint of 2023 guidance, is roughly about 18%-27%.
So we view that as very, very strong and robust growth. Very excited about that. And that implies, roughly ending the year at around 125,000-135,000 Medicare at-risk lives. So again, I think we are feeling pretty strong, feeling pretty good about the strength of the business as it sits. Medical margin, again, reflecting some of the comments that Dr. Abdou made around medical margin and some of the success we've had, we expect that to continue. We are guiding to overall medical margin of between $230-$250 million, and medical margin on a PMPM basis of between $165-$175.
Again, very strong results that we're anticipating, but at the same time, not something that is terribly outside of the trend that we've seen. Finally, down to EBITDA, we're expecting between a profit, as we'd stated earlier, between $20 million- $40 million next year. So we're at a very important inflection point for the company. We feel that we are in a great place to make that cut over from a loss-making to a profitable entity in this year, as we've expected and as we've been talking about for a while. So this is a substantial improvement. And that range, that's just to remind everybody, that's a $60 million-$80 million improvement on a year-over-year basis.
I'm gonna double-click on that in a second, but it's really driven by a couple of things around medical margin and around, cost management. So for my last slide, I just wanna cap off and just give a little bit of context to this. So there's a journey. We've been following and making tremendous strides. If you look here at the left side of the graph, in 2022, we reported a loss of $128 million. And so improving over that over this year, we are now at the midpoint of our guidance, which we just reaffirmed as at a negative $40 million, shows an $88 million improvement. What we're talking about for next year is a $70 million improvement.
So we're not even trying to accelerate, we're actually thinking this is just in line with the trend and maybe even hopefully something conservative, but guiding to a midpoint of $30 million. That's broken out into two components. So medical margin improvement, about $57 million out of that $70 million. So that really comes down to a couple of different pieces. It involves our reimbursement. We've been working very hard to make sure that we are seeing our patients on a regular basis, identifying their conditions, and making sure that reimbursement is appropriate for those patients. We have substantial membership growth, but nothing out of the ordinary, again, as well as a management and a continued expectation around being able to maintain medical costs. And that's something I think that's also very important.
Again, just consistent with what we've been observing historically. The second component, a little, little smaller component, about 13 out of that increase year-over-year, is related to operating expenses. Admittedly, it's not the most exciting thing, but we've done a lot of work this year to become more efficient, to be smarter in how we are working and bring down those costs, and that is reflective of just the year-over-year decrease. So we're at a run rate I think that is going to be, manageable for us for the, for the next year, and that's about $13 million. Again, so getting to, to a midpoint of $30 million, which we believe is not necessarily, relying on any sort of Herculean effort. We think that this is just consistency and execution and the momentum that we've seen so far.
So that's all the comments I have for the prepared slides. So maybe we'll turn it over to Cameron for questions.
Yeah. Thank you so much, Sherif and Atul, for that wonderful presentation. We'll now open the floor to Q&A. Just a reminder that if you're submitting questions online, we can receive them up here and read them out as well. So first question: Can you provide more color on why your medical costs aren't trending the same as others in the space?
Like I said, the answer to this is twofold. Number one, th ere is a unique set of companies that reported this, but also there are a lot of other companies that reported that there is no significant trend. The companies that paid attention to the details, medical management, and utilization. Number two, the companies that have delegation models, and number three, the companies that has been doing this for a long time, like ChenMed, Heritage, and ourselves, that are able to predict and calculate IBNR much more accurate, more closely. But more importantly is if you look at it in the last three or four years, our medical cost, despite the significant growth, if you look between 2021- 2022, we almost doubled the size of the company, yet the medical costs, as I shared with you, remained flat in the most part.
It doesn't mean that you left it alone and stayed flat. That means that you bucked the trend in the industry of mid- to high-single digits and kept the medical cost, medical claim expense flat to that extent. Even if you extend it into four years, and we'll be more than happy to provide prior to us going public, it's about 2.2% average or over the four years. That's 0.5%-0.7% increase every year.
Can you talk about the V28 impact on your business? Your guidance implies high single-digit growth revenue in PMPM, which appears to be a lot better than some others that have negative reimbursement rates.
We don't guide to a certain specific increase, but you're right to conclude that there is a single digits improvement, high single digits improvement in the funding year-over-year. In part because, again, the... We've been methodically and diligently and appropriately coding and documenting over the last three to four years. We've never got out into the right side of the bell curve, where a RAF of 1.5, 1.6, and that had to be corrected with the V28.
We actually—and again, we don't guide on that, so it's been right above one, barely, and it's gonna be increased with some percentage next year because of the hard work of the operating team and the leadership on the field, and Dr. Bacchus and his team, to accurately, methodically, appropriately have that documentation of disease burden as a part of the care rather than as an independent operating tool. But it's integrating into the care and documenting the disease burden in order for us to improve the health of the population that we serve.
One of the issues that we've been hearing about is access to data. It's delayed, imperfect, and can also impact medical spend negatively. Can you talk about the benefit of delegation versus non-delegation in that regard?
Certainly. I mean, that's, it's, it's, it's a great question. So I remember sitting in 2018 and 2019 with our leadership team, and we were thinking about the model is. And we were building the thought as driving in the fog. At some point in your life, you're gonna have to figure out how to drive in the fog. At some point in your life, you're gonna have to learn how to drive in a snowstorm. It just, it's, it's, it's part of life. I've done it. So we actually built the company in saying: How do you create a sense of prediction when it's not clear, when the sun is not shining, when the data is not timely, when the data is not perfect?
You resort to a consistent behavior that results into what we started developing is KAI. Instead of KPI, we started developing KAI. So there is set of actions that will result into performance, and the experience matter in this, that saying, "If you improve access to primary care to the patients, the AD emergency room and inpatient will go down." If you do that, I'll give you a number, exactly. six times or more exposure to the primary care office, whether being the care manager or the MA or the doctor himself or herself will results into about double digits, 18%-20% improvement in the quality gaps closure, 18%-20% improvement in the documentations.
But here's the thing, 30% or more improvement in the medical cost, because I developed the trust and the knowledge, and I know that I can call my primary care gets. So my point is, our experience and our knowledge of that allow us to—there are a set of action that will improve, regardless if, if you give me the data that you're, you, you'll have that much, admits per thousand or whatever, great, I know it. But what do I do about it? That's exactly what we decided to do. Start with the KAI, KPI would follow. Follow these two, and then the medical cost would would, resonate. So it's very important to, to rely on this. However, the delegation model allow us more visibility into model.
So we were talking about, because we do prior authorization in a significant portion of, and utilization management in our population that we serve. We're able to tell you what is outpatient surgery next month, not only this month or what happened last month. I can tell you, we authorized for 20, whatever the number of surgeries or procedures that need prior authorization, that I have line of sight to it, that's gonna happen next month. So the power of the experience, the power of knowing what actions that improve KPI, and the power of the delegation model, that would help us navigate the data challenges across the board.
If I, if I could just add one point, Sherif? I think that those are all excellent points. One, one thing I would also add is that depending on how you measure it, roughly a third of our business is, falls under this delegated model. So we have a very, very direct line of intelligence as to what is happening, our, our finger on the pulse. But, but it's also very important to think about it. It's a sample size of 30% of the population. So the—for the, for the balance of the, seventy percent, two-thirds of the business that is not under the delegated, we have, we have very good intel on what's happening there. It's generally a large sample size.
So it gives us a broad overall perspective that I think really finds itself into the way that we account for the business, we record our P&L, and it just generally brings down some of the variability that you might otherwise have.
Got it. So you are guiding towards double-digit growth next year. Could you talk about a little bit of what's in the growth strategy?
Yeah, that's a great question. As we shared with you before, we're gonna continue disciplined growth, we're gonna continue purposeful growth, and we're gonna focus on profitable growth. So these are the guiding principles to our growth. How do you do that? Almost 100% of what we're looking at is organic. There is no acquisition. There is a couple of opportunity of joint venture and strategic partnership, but mainly it's an organic growth. It's mainly in the counties that we're already in. Even if we extend it, it's the contiguous county, one county over, so we can leverage our operating expense, our operating leadership into the new. So similar, we've never deviated from our strategy. We just turned it up and down.
If you remember, when we presented first time that we went public, first earnings call, we had a six or seven spigot that can turn into our new contract, into existing county, new county with existing contract, new providers in existing county, new provider and new contract. So that's the similar strategy that we're going. We've never deviated from our strategy. It's mainly affiliate model, it's mainly organic growth, and it's mainly in or in contiguous counties that we're in. Anything to add, Atul?
No. Thank you.
Okay, next question. So positive $20 million-$40 million in EBITDA in 2024 is quite impressive. How were you able to move to profitability so quickly?
So, I don't know if the slides were showed, but let me walk you through. So membership growth, steadily, purposeful, discipline, picked ACO versus a MA, picked SCAN, that has a 4.5-star versus other that has 3 stars. So all these discipline and purposeful growth are important piece of our growth success in moving to profitability. Number two, managing the quality so it doesn't impact our funding. It's a very important piece. Number three, in that elements, appropriate, steady, documentation of codes that allow us to pass the RADV audit almost every year, allow us to be confident that there is no clawback or a retro adjustment to our funding that will impact our moving forward.
The second layer of this comes into a medical cost. Bill Bettermann, Dr. Bacchus, their leadership team, their operating team, so laser focused on the medical cost. As I shared with you, maintaining the medical cost year-over-year does not mean that they're not working hard. It means that they're bucking trend of mid- to high-single-digits increase. As you saw, Medicare in a healthcare expenditure projection, or some people call it benchmark, it, they showed 7%-9% increase year-over-year. We don't. We don't. So good funding, steady medical expense. Atul and his team has done a great job into managing the operating expense and bucking the trend of the increase in OpEx.
Between these three elements, good, steady membership growth, good, steady funding growth, good, steady, stable medical cost, trending down medical expense between these three, that will result into profitability. So we're very comfortable and confident that the, these, what we shared with you in guidance, continue to be the guiding principle and, and the numbers that we're gonna achieve, and confident in the team and their performance as well.
Are there any other questions on the floor at this time? Okay, well, I think with that, we can conclude our presentation today. Thank you so much for your time, and let's get another round of applause.
Thank you. Thank you.