Welcome, everybody. Thank you for joining. My name is Scott Schoenhaus. I am the Healthcare Technology Analyst at KeyBanc. I have the privilege of having P3 Health in our fireside chat. Joining us from P3 is Sherif Abdou, CEO; Amir Bacchus, CMO; Bill Bettermann, COO; and Atul Kavthekar, CFO. Gentlemen, thank you all for joining and participating in our virtual healthcare conference. So team, I'd like maybe for each of you to introduce yourself, your background, your role at P3, and then maybe one of you provide sort of an overview of P3. I think we have a lot of new investors here on the platform to your story, so I'll pass it over to you guys.
Thank you very much, one of you, sir.
Well, thanks for having us, first of all. My name is Atul Kavthekar. I'm the CFO. Appreciate everybody's joining in and listening to the P3 story. I joined the company in December of 2022, looking forward to your questions.
Hi, good afternoon, everybody. My name is Bill Bettermann. I'm the Chief Operating Officer of P3. I've been with the organization for a little over one year, have spent the last 25 years in healthcare operations, and pleased to be with you.
Good afternoon, everyone. This is Dr. Amir Bacchus. I'm the co-founder and the Chief Medical Officer of P3. I'm an internist by training and been in value-based care, for a little greater than 25 years now. So this is, kind of a, you know, very similar to what we're used to from the HealthCare Partners days, and looking forward to talking more today.
Yeah, good afternoon. Scott, thanks for having us. Sherif Abdou, I'm a I'm also an internist by training, and I've practiced all my professional lives in value-based before it was known as a value-based, since the early 1990s. I'm very happy to be here, and I would love to share with you an overview of P3's stories.
Yeah.
P3, which we started by.
Sherif, why don't you just, yeah, kick off a general overview of what P3 does, your services. I'll leave it to you.
So we're a population health management organization or an enablement to the primary care physicians. We mainly our business model is mainly through an affiliation and contractual relationship with the providers and the payers. And that's mainly because of our mental model of respecting the relationship, the existing relationship between primary care providers and the patients as well. So our care model that we go and surround the existing patient-doctor relationship with team tools and technology, and that allow them and enable them to enhance the quality, reduce the medical cost, and improve the economics of all, and hence accrue that value-based to the patient, to the provider, and to the payers, as well.
We went into operation, and when we went in 2018, and we were in one county, one contract, and ended that year with 5,000 lives. Today we sit in about 18 counties. We're approaching 20 counties and nearing 130,000 lives, including some commercial, ACO, as well as shared savings, between Medicare and Medicare Advantage, as well. We guided the Street for 2024 for a range of revenue of $1.5 billion-$1.55 billion. Just to give you the extent of our growth, when we started in 2018, we were $83 million in revenue, and today we've gotten the Street to over $1.5 billion in revenue. We also guided the Street for 2024 to be a positive EBITDA of $20 million-$40 million, and we're very bullish and committed to achieve those results.
So 18 counties, 130,000 lives, $1.5 billion revenue being profitable and cash flow positive thereafter. So let me pause here and see if.
Yeah.
My colleagues want to add anything or if you have any questions?
Well, Sherif, I just wanted to follow up there for some people that are new to your story. We're, you know, you talked about the fact you're in five states now. Can you talk about where you're geographically exposed, where you started, and where you've expanded to?
So we started in Pima County, Tucson, Arizona, and then we grew to the surrounding counties. So we have about seven or eight, almost nine counties in around the Pima County in Arizona. Next, we went to Clark County in Nevada, and from there we expanded to Nye County in Nevada as well. And following that, we went to four counties or three counties in Oregon, in Marion, Polk, which is Salem area in the north, and Douglas County, which is Roseburg, in the south of Oregon. After that, we enter, or over the same year, we enter Central Florida. So we went to Tampa and the Orlando area. So we have about five counties that we serve patients there. And finally, through a merger, we enter California, Central San Joaquin Valley County.
And, so that you can tell the concentration is in the southwest: Oregon, Nevada, Arizona, and California. And then Florida across the country.
That's helpful. You you mentioned about your guidance on the top line. Does that include expanding into other states and other regions, or is that solely based on your current footprint?
It's our focus is growing in the counties that we're in, or maximizing to adjacent counties. That does not include any new state entries.
Great. Wanted to ask about some color on the normalized, seasonally adjusted medical cost levels. So, you know, everyone's commented on this. So far, year to date, we're seeing strong utilization levels. How did that contribute to your does that contribute to your increased confidence in your your guidance? What are you seeing on the sort of the adjusted medical cost levels, so far year to date?
Sure, Scott. So, you know, we, like many others, in December, in November, early December, saw an increase in costs, whether it being COVID, flu, those types of things. We saw those costs in that month. So, and we expected some of those costs to be there for those reasons I just described. We, because we've been doing this business for a long time, we look at the seasonality year-over-year. And so far in January, you know, from the preliminary information we have so far, it looks to be seasonal, like we've seen in past years. We don't have all the necessary information from the claims as of yet.
I mean, things look like we're on the trajectory that we would normally think of for that seasonality that we adjust for in the winter months as things start to drop in the latter spring into the summer, etc.
Got it. That makes sense. I guess my next question for you guys is, what do you think is the biggest driver of the strong membership growth that you've seen in early 2024?
Yeah, I think there's a couple of things, Scott. You know, if you look at the model that we have, it's really predicated on three key standout areas around our teams, tools, and technology. And so when providers are looking for an opportunity to grow into this space, we've become a very natural and high-priority organization to partner with many of our affiliate providers because of that. And so let me just expand a little bit. So from a technology standpoint, we have a proprietary data platform that we use across all of our counties, across really. I don't know if Sherif had mentioned, but we have almost 3,000 clinicians, right, that we're working with. And they take advantage and utilize all of that deep learning from that system. Two, we have teams.
Quite frankly, one of the reasons I came to P3 is because of the deep, deep understanding and experience in value-based care. As Dr. Abdou shared at the beginning, he's one of the pioneers in this space, along with Dr. Bacchus. Many of the team members that we have throughout this organization have been doing this for not just five years, but 10, 15, 20, 25 years of experience. There's very few other organizations that have the depth and understanding that this organization has. So I think those are a couple of things that really stand out. And then from a tools perspective, we actually have education that we can bring to providers, unlike that you may see in other organizations, where we can actually help with these changes.
Like you may have heard from version 24-28, we have a whole team that actually understands what those changes are, is able to go out and start educating our clinicians on some of those changes and how they need to adapt, as one example. So I think those three categories are really important and critical to the success of P3, as we, you know, over the last few years and as we go forward. But Dr. Bacchus, anything you'd add?
No, I think because of what you said earlier, the providers that know us, as well as new providers coming on, allow us a natural way to grow our membership. That's one. The other thing is the reputation that we have with our payers because of what we've done, whether from improvement in overall revenue or in quality, etc., that our relationships with our plans is very strong. So that's another good way for that we can grow. We actually have a team internally as well that works directly with both our providers and the health plans to ensure that we can continue to drive membership, as well as ACO. ACO has been a very big thing for us as well, starting in 2023, now going into 2024, for increasing membership growth.
All those things, Scott, lead to significant membership growth as we look at, and as Sherif said, in the counties we're already in or contiguous counties.
You're muted, Scott.
Thank you. Sorry about that. So you've kind of touched on this, but I wanted to address. We have an investor question that just came in. Can management walk through the sales process from initial conversation, contract being signed, to client onboarding and ramp? You kind of talked a little bit about this, but let's, I guess we'll talk about the timeline over the kind of the evolution and the timeframe of a contract.
Yeah. So it usually does not exceed 90-120 days from start talking to getting the contract. We might sign a contract to be effective next year or whatever it is. But, the cycle itself of conversation and negotiation is relatively 90-120 days. There are two ways of entry. One is go sign the doctors, and then go to the health plan and add the patient, or two, go sign the health plan, and then engage the doctor and the patient. So, it's, and we've done this. So for in Las Vegas, 100% of the market was based on in signing the network and signing the doctor, then going to the health plan and say, "We have that network. you know, sign a contract with us." In Oregon was the opposite.
We met the health plan, and they needed help. And so we signed a capitated risk agreement with them. Then we went to the doctor and says, "Good morning. My name is Dr. Abdou, and we'll sign a contract with ATRIO, and we're your partner now in managing the costs and the quality of care," and what have you. In Arizona, we've done both, where we enter through a contract with Blue Cross Blue Shield, and then we sign up a large network, Arizona Complete network. And then, we grew both. So when we added the Arizona Complete network, we started going to the physicians and says, "Now we have those 300 doctors. When you sign the patient with us," went to United, did the same thing, went to Aetna, did the same thing, and so forth. So.
Yeah.
That's really interesting that state by state, it was a different kind of approach to the deal. Is it more challenging one versus another, starting with the payer or starting with the provider?
It's always smoother when you start with the provider and the patient. That's always easier. However, from the business perspective, when you sign a county with the payers that has 15,000 lives, you get a volume immediately to manage and meaningful. When you sign one doctor at a time, you get 100 lives or 200 lives at a time. So while it's more efficient, effective, and friendly, to sign the doctors first, it's much more growth friendly to sign the payer of the entire county.
Yeah. That makes sense. You mentioned about the ACO REACH. What do you think about the opportunity for value-based care there? And how do you see it progressing? Do you think Medicare's goal for 100% of all beneficiaries in an ACO by 2030? Do you think that's realistic?
Well, I don't know if it's realistic, but it's also very ambitious, that's for sure. 2024, and we're almost—it seems like the year is going incredibly fast. But anyway, I think it sets the tone, though, for value-based care. Value-based care is here to stay, and it's something that the government knows and sees value in that creation. So, I really think companies, you know, like P3 that are, you know, in this business to improve overall care for patients, creating value for which multiple different entities can receive value, is the way to go and get away from fee-for-service, and the continuing increasing costs that we see in fee-for-service. So, it's definitely here to stay. We're very much, you know, all in this value-based care space.
We have been doing this for, as Sherif and I said, for a long period of time. It's been nice to see that transition, to push just to try to make the entire system more value-based overall.
And I think it is doable, Scott, especially if we start engaging the health system, the large health system. So, without calling specific names, the not-for-profit large health system, they see 2 million-3 million Medicare patients that we work with. And so they can if that system converted into ACO REACH, you got almost 10% of the fee-for-service Medicare population would be impacted. However, there was an article today in Modern Healthcare talk about the ACO. So the number of entities that have ACO REACH have dropped year-over-year for the first time. There are two or three. However, the number of patients and providers into the ACO REACH has increased 30% year-over-year.
So you saw patients that are engaged in adding themselves to the panel, and you saw doctors that are joining organization, in a value-based or ACO REACH program.
Yeah, that's super interesting. We've talked about kind of industry trends. I want to focus in more about your specific technology. How does it help physicians, enable, and engage with them to succeed in Value-Based Care? I think that's when we talk about Value-Based Care, it's always on the getting the physician and the provider comfortable with shifting from fee-for-service to Value-Based Care. How is your technology specifically helping them?
Yeah. So, Scott, you're absolutely right. You you need to have good data, and you need to have good data in a way that speaks to a physician and/or a clinician, in a way that they can understand it. I mean, for us, it's not necessarily just having the data and showing spreadsheets. It's really being able to work the other side, as Bill was talking about, the team to educate and enable them. Because if you do not have a relationship with that provider to teach them how to do these things, whether you throw out just parameters like the admits per 1,000, most of those numbers are foreign to a doctor as far as what that means, right?
So you have to educate them as you go through and deliver data that's pertinent to drive results, whether those results improve stars and/or reduce quality gaps, which it takes key information and how you look at it from a myriad of health plans, put it together so it drives into my practice, agnostic of payer. So I'm clear at, "Here's my 18 patients that need mammograms," as, for instance. In addition to that, I mean, we look at information as far as, are you documenting appropriately? Are you covering and making sure we understand the disease states of your patients?
And we have a whole team that educates and is and what we would say our technology, a whole opportunity to deliver to them all key diagnoses and things like that that that patient has been seen or potentially has, so that they can understand, from specialty to primary care, etc., those conditions. And then medical expense. Medical expense, you need a lot of really good information, comparison of how they perform from one provider to another, their referral utilization patterns, drug utilization patterns. All those types of things have to make sense to the clinician as they're thinking about how to derive care to that patient. So we've made it very simple in that way to educate providers versus just like some others, just go to a portal, pull up some information, and that guy should tell you how to do it.
That's not the real way and how it works for a physician. Most of them need some type of education, and therefore it's predicated on that relationship that Bill was talking about earlier.
Great. I want to move over to the claims visibility. How does that really work for you, both for delegated and non-delegated book? What data feeds do you have with MCOs, and how does that operationally work on, you know, any given reported quarter? What is the typical completeness percent from each month in the quarter? Just kind of want to work through your visibility there.
Yeah. So let's say let me divide it into a couple of things. Number one is the prior auth and utilization management visibility. And Number two is the claim visibility. So as far as the delegated service that we provide, which include utilization management and prior authorization, we get visibility to the surgeries and an elective procedure that is going to be scheduled next week and next month ahead of time. So we can predict the utilization of certain procedures and services that require the prior authorization that come through us. That's Number one. Number two, as far as the claims, unfortunately, when we pay about 30% or 40% of our population, the claims on, we get a daily report. So we know how many claims we processed.
We know how many claims are in the electronic drawer and the queue. So we can predict the cost and the IBNR a little bit more accurately. However, we're not in a very bad shape than the others. We still receive monthly claim process report. So, unfortunately, when people talk about visibility, it's really experience more than visibility, Scott, because no one has visibility to the claims that happened in March that were in March now. No one. That whether I pay claims or not, the claims are not here yet. But I can, from experience, have visibility to the actuarial IBNR and reserve triangle that can predict the seasonal effect, the conservative factor, the trend of the completion factor in the prior month, and so forth.
So I think that is more your ability to predict. And as I said in the JP Morgan conference earlier this year, if you don't know how to drive in the fog, you're not going to succeed in that business. Because like the utilization per 1,000, you only count it after it happened. So you got to manage it and predict and what have you. So the IBNR, the claims, after 90 days, you have a 70% completion factor. So no one can show you anything more better than 70% of the claims. Yet it's your ability to predict that 30% that allow you to manage ahead of the time, in addition to the prior authorization and the delegated services.
That's helpful. I guess my last question here, and then we'll pass it along to the audience. Again, if you have a question, audience, please submit it through the chat box below. I wanted to ask about specialist care. How do you think about specialist care being a part of Value-Based Care models? How do you do at-risk primary care or PCP interact with these specialists that are also looking to participate in taking risk? And then what are some of the challenges and opportunities on this front? Does everything shift to subcap? How does someone at the top think about approaching which risk pools to keep in-house and which ones they should ultimately pass on to others? I know that's a complex question, but kind of wanted to hear you.
Yeah, Scott, it is a complex question. And there is quite a wide range of what things you can do with specialists. Everything from subcaps, as you mentioned, because there are certain companies around the country today, whether it be in kidney disease or musculoskeletal disease, etc., that are looking into subcaps. And some of those things can make sense, right? Other things are making sure that you could just straightforwardly just capitate a specialty, right? So you can capitate a specialist, and then they could do well based on volume as you continue to grow within the market, etc., which again, for a lot of providers and specialists, we saw, especially through COVID, was very important. So because of the cash flow, as you know, when surgeries got stopped and things like that, you know, really dried up for a lot of specialists.
That created a lot of fear with certain specialties that led to more capitation, straightforward capitation. In addition to that, you can sit there and write just straightforward incentives because some specialists are a little bit nervous about coming from the fee-for-service world. What does that really look like? You could do things as far as incentivizing specialists for more shared savings opportunities if for, say, let me just say general surgery. If general surgery utilizes more surgery centers outside associated surgery centers versus in-hospital cost of care, well, you could save about 30% of the cost. In doing that and saving that cost, we can incentivize that specialist by paying more of that professional fee instead of 100% of Medicare. Let's say it's 120% of Medicare.
So they can get to make more on a professional fee from a shared service standpoint, but still aligns to them in their thinking from a fee-for-service standpoint. So there's a lot, a bit large array of which things you can do as you work with the specialist. One of the things that's just really good is because of this whole value-based care wave, more specialists are coming to the table to have those conversations so that we can make sure we engage with them in the right way to do the right thing. Because at the end of the day, and I think everybody probably knows this on the call, physicians themselves and what physicians charge as professional fees are very inexpensive to the overall cost of care if you think about it, right?
So rewarding a professional fee for a provider to do better is a simple thing to do, especially when you're looking at the cost of what hospital costs are, Part D costs, Part B pharmaceutical drug costs, all those types of things. As you get them engaged, it's not hard to show them a way to make more profitability for themselves.
Yeah. You know, I'll leave it at this. I think as we move towards more value-based care, there's more attention to it. And as you know, some of the players that are large, I think it just shifts this whole industry more to that model. And awareness is a big part of this. And getting physicians and providers comfortable and specialists comfortable with this model at least just takes a matter of time. But I think it's accelerating. So I'm excited for the opportunities ahead of you, your expansion opportunities. Thank you guys so much for participating at our virtual healthcare conference.
If investors, if you have any further questions that you didn't want to pose, but you want to connect to the management team, feel free to reach out to me, and I will connect you directly with P3 Health.