Hello everyone, welcome to this next presentation slot at the Needham Virtual Healthcare Conference. I'm Ryan MacDonald, and I lead Needham's digital health research efforts here at the firm. In this session, I'm pleased to be joined by P3 Health Partners. We have co-founder and CEO Sherif Abdou and co-founder and CMO Amir Bacchus joining us. This is going to be a presentation format with management presenting for about 30 minutes, and then we'll open up the opportunity for the audience to ask some Q&A for about the last 10 minutes or so. If you have a question for management, please submit those questions in the chat box, and we'll make sure to get those asked and answered at the end. With that, I'll hand it over to Sherif and Amir. Gentlemen, thanks for joining us today.
Thanks, Ryan, and thanks everyone for joining us today. My name is Sherif Abdou. I'm one of the co-founders, and I'm a physician by training. So quickly, I'm going to give you at a glance what P3 is. P3 is a patient-centric physician-led population health management focus on the Medicare and the Medicare Advantage populations. We were founded in 2018. So just to give you a glance, in 2018, we started with 10,000 lives in one county, Pima County in Arizona. Today, we sit at about 200, I'm sorry, 128,000 Medicare Advantage lives and Medicare ACO REACH. We were in one county. Today, we are in 23 counties. In 2018, we had about 300 primary care physicians in our platform. And today, we have 3,000 primary care physicians in our platform with 98% retention rate. More importantly, what I'd like to also point out is the team experience.
We have over 30+ years' experience in actually doing population health management, value-based, Medicare Advantage risk since the early to mid-1990s. Also, the revenue when we started was $83 million the first year. When we went public, it was $452 million. We guided the street in 2024 to $1.45 billion-$1.5 billion in revenue. We also guided the street in 2024 for an EBITDA of $20 million-$40 million in this year. So as you can see, a significant amount of growth, significant amount of expansion, and look forward to continuing to serve the population that we have today. Next slide. So let me talk about our growth profile.
Consistent with our stated objective of disciplined, 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, as I said, 23 counties at the start of 2024. While our focus is primarily on profitability, expanding into additional contiguous counties represents an opportunity for substantial expansion. We're confident in our membership growth. Our annual enrollment period was successful this year, and our January membership increased by approximately 11% from December to account of approximately 128,000 Medicare ACO REACH and Medicare Advantage lives at risk and in shared savings. Also, like you've seen at the bottom of the screen, is the growth in revenue since we went public from the $480 million up to $1.5 billion is the midpoint that we're guiding the street on this year. Next slide.
So quickly, I'll go over before I turn it over to Dr. Bacchus to walk you through the model and the economics. We always consider ourselves in the right space. The senior care is expanding and it's promising and it's mission-driven and a significant white space, especially when recently CMS announced their goal and their intention is to convert all Medicare beneficiaries into value-based contracting by 2030. We also talk about being the right model. The affiliate model that we have, the delegated affiliate model that we operate, is capital-efficient and easy to deploy, but also scalable to a significant degree as well. And as I mentioned in the opening, we have the right team.
It's physician-led, it's patient-centric, it's well-experienced in the Medicare and Medicare Advantage and the senior care overall in the value-based contracting and into aligning the social, moral, and economic incentive for the patient providers and the system overall as well. Finally, I think we believe we are in the right time with the continuous growth and then Medicare Advantage and Medicare ACO REACH, persistent l ives maturation that we, as Dr. Bacchus will talk about, about 92%-95% of the lives that we had in December stayed with us in January or at least some part of last year. And we're seeing for the first time that we had a significant almost 80,000 or more of our lives have been with us for over a year. And also what we're seeing in 2024 is a clear path to profitability. So it's the right time because of the growth opportunity.
It's the right time because of the maturation of the population. It's the right time because of the clear visibility and path and insight into profitability in 2024 and beyond. Finally, it is the right investment. With the current pricing and valuation, we think there is a huge potential for investors and stakeholders in P3. Thanks. So I'm going to review with you the guidance again. Just to be clear, we're expecting a revenue of $1.45-$1.55 billion in revenue in 2024. And that corresponds to approximately 14%-19% growth over 2023 revenue. And we guided the street of 125,000-135,000 Medicare at-r isk lives by end of year. And as I mentioned, we're going to end up the first quarter with approximately 126,000-128,000 of these lives. 2024 medical margin guidance and medical margin was $230-$250 per member.
I'm sorry, it's $230 million-$250 million medical margin by the end of the year, which is $165-$175 per member per month. And if my memory serves me correctly, we ended the year at about $132-$135 PM medical margin. You can see that's not a huge increase or goal to achieve to get to these numbers. Finally, the EBITDA guidance expected $20 million-$40 million positive EBITDA in 2024 corresponded to an increase of $105.5 million-$125.5 million over the 2023 EBITDA, driven by momentum improvement in medical margin and strong cost management and reduced operation expenses as well. With that, I'm going to turn it over to Amir to kind of walk through the rest of the presentation. Thanks.
Great. Thanks, Sherif. So let's dive a little bit more into that medical margin because I know it's an important topic to all the viewers as well as to a number of our investors today. So we were able to definitely increase our medical margin by greater than 50% in 2023, as you can see here from this graphic. In addition to that, we've had some impacts, as we've talked about earlier in our December medical costs. And it also created a more conservative IBNR reserves. But in our 2024, our target is to grow our medical margin by another 50+% because for us, we can see, number one, the maturation of our lives, which is 80+% of P3's lives, will be persistent. Now, let's understand what that means.
Persistent lives means those live patients that have been with us for a significant period of time, one, two, or more years, that allow us to continue to manage those patients to drive better outcomes, whether from a revenue perspective and/or a medical expense perspective. Each year that we have a patient on the platform with our clinicians on that platform, we're able to drive down those med expenses because of the learnings of how to manage that population better. So because of that persistency of our lives, we are expecting a significant improvement in medical margin, equating to the $240 million of medical margin on those persistent lives, as Dr. Abdou described earlier. Our MA medical cost trends remain significantly below the industry average, including the reported elevation that we saw in quarter four.
Number 3, our ACO REACH lives are contributing to some of the higher medical expense trend in quarter four of 2023, but we have seen a significant improvement as we moved into January of 2024. As maturation persists in our lives, we're really at an inflection point. We're on the verge of turning profitable and sustaining profitable growth. Despite the large adjustments to our reserves made in the quarter, the positive trend in this critical metric is continuing to be proof that our model works and is only improving. So how do we get there? Well, this is a bridge to the profitability. So in 2022, we reported a loss of $128 million. And by year-end 2023, we reported a $42 million improvement.
Now, in 2024, we expect a $116 million profitability improvement by the end of 2024, with a Medical Margin contributing $105 million and operating expense contributing $11 million. Again, the maturity of our lives is what allows us to drive this opportunity in improvement in Medical Margin. In terms of our Adjusted EBITDA that we saw in 2023, because we've had many questions on the 2023 end, the single biggest factor for this is what we saw from our accounting principles, which led to approximately $30 million changes from our expectations. This was due to, number one, the impact increased utilization we saw in December, along with an increase in our claims reserve at the end of 2023. We determined it appropriate to increase our reserve by approximately $23 million to reflect greater conservatism.
In addition to this, we recognize incremental medical claims expense of approximately $7 million for the higher-than-expected utilization by some of our health plans at the end of the year from the end of November, but definitely through December of 2023. We were working with our actuaries over the next several quarters to observe the actual claims expense and reevaluate our reserve estimates. Because of these things, we're very encouraged by the progress the P3 team has continued to make on both the clinical and operational sides. I'm confident in our ability to achieve profitability this year and scale in the coming years. With that, I know there must be a number of questions with the P3 model and how it is different from others in the marketplace. We'd be more than willing to listen to questions as we move forward. Thank you.
Excellent. Thank you, Amir. Thank you, Sherif, for that presentation. As a reminder for those listening in, if you do have a question for the P3 team, please put it into the chat box, and then we'll make sure to get those asked and answered. Maybe just to start, what do you think is the biggest driver of the strong membership growth that you've seen early in 2024?
So the model and the team, Ryan, continue to be the driver. The retention rate of the providers that join us, 98%. Our attrition has significantly improved year-over-year in the membership that we have. So we almost cut the attrition into half year-over-year over the last 24 months so that the base remained the persistent lives, like I said in my presentation. 92%-95% of the population that were with us in December remained with us after the annual enrollment period. The significant support that Dr. Bacchus and the operation team provide to the providers in the field. They come to us and say, "Can you take more lives in my practice?"
And the same thing with improving quality, improving in funding, improvement in medical cost management, and the growth make the health plans come to us and say, "Can you help us in this county? Can you help us in that county?" So the experience, the delivery, the trusting relationship continue to be the source of our growth.
That's interesting. As you think about maybe just within the existing practices that you work with today, you mentioned the opportunity for maybe having more patients within those practices onto your platform. How penetrated are you within your existing group of practices from a patient perspective? How much room is there to grow just within the practices you're already working with?
So it varies. If you want to go to the top, that does not work in the lifetime average. Actually, there are more concentrated population with, so there are practices at the top, say, 20% or 30%, we constitute a significant percentage of their practice, up to half of it. The rest of it is probably in the 10% range. We strive to cross the 50% within the practice population.
That's helpful. And Ryan, we do that in a couple of ways because of our relationships with multiple payers. When you have a provider, whether they're taking United or Humana or Aetna patients, etc., because of our relationships and our contracts with those payers, we can go deep into that practice because of those multi-payers. It's not just a one-trick pony. We only have Humana. So that's one thing. The other thing is, as you've heard us say before, we entered into the ACO REACH space in 2023, and it's been very good for us. For those providers, primary care physicians, of course, that have a number of Medicare Fee-for-Service lives, we're able to change those patients and enroll them into the ACO REACH.
Because of that, virtually in a physician's practice, they may have commercial and senior, we could virtually be 100% of their senior population, even if they continue to manage commercial populations within their office.
That's a really interesting point on ACO REACH. How do you think you see that program progressing? Do you think Medicare's goal for 100% of all beneficiaries in value-based care by 2030 is a realistic target?
Well, we definitely know that they for sure want to do that because they do see the value in value-based care throughout the entire continuum, and it's been proven over all the years with Medicare Advantage. So having Medicare Fee-for-Service truly compete with the Uniteds and the Humanas and the Aetnas of the world is a good thing for us, right? So we will see continued growth in that value-based care space. Will it reach 100% by 2030? Well, we'll see. But I'm sure they're going to have quite a few number of that 60+ million people into a value-based care arena.
Yeah. Makes sense. Can you talk about the benefit of delegation and why you like the fully delegated model and how you see the business growing this model?
Sure. So we very much like the delegated opportunity in the model because it allows us to work through the continuum of care. A lot of our peers have worked from the primary care base without having true opportunity to have conversations with the other providers that are key in medical expense, being all the specialists, whether you're from allergy to urology, everything in between, which is what we like to do. So we like to manage the entire network of all of our physicians to bring the best outcome for our patients. So we, through delegation, can do things like paying the claim so we have the information faster than waiting till the plan gives it to us. Number two, credentialing. We know who the providers are within the markets that we're in because we credential them.
Number 3, building the entire network and having them on our paper so the contractual relationships are stronger with us and our specialists and primary care physicians. Number 4, the utilization management things that we can do from a prior authorization of key studies, concurrent review so we can look at patients when they're in the hospital to see if they do need to be admitted or they should be in observation status versus an admission status, reducing significant costs doing it that way, as well as being able to look at even Part B medical expense because the Part B drug costs that we see, as everybody knows, is significantly getting worse and worse, meaning more expensive.
So we are able to help manage that Part B expense by converting it into a Part D expense and therefore saving money because of the way the government works with low-income subsidy, rebate dollars, and things like that. So all of those levers create significant more value on the med expense side, for sure, as well as, and I'll say it this way, it gives us the ability to communicate well with our specialists, etc., and putting the patients first in regards to the care. That's why we really enjoy it.
Makes sense. As you think about continued expansion of the business and maybe looking at new counties or maybe new states, how do you maybe prioritize those areas, and how much are you sort of letting your payer relationships dictate where to expand next as you think about 2024 and 2025?
So we look at the concentration of primary care. We look at the availability of Medicare Advantage member and Medicare beneficiary overall in the counties that we're in. And we are not being dictated by the health plans. We've had, as a matter of fact, just yesterday a plan where we sat down and plans, looked at multiple counties over the next 3-5 years, and we were picking and choosing based on the relationship that we have developed and the concentration of primary care and availability of primary care to do that. So it's a very collaborative relationship, Ryan. And it's because of the success of the delivery and the results that Dr. Bacchus and the operation team continue to deliver from the quality to improve funding, to improve medical cost and medical cost management, to availability and retention rate and growth.
What we're looking at is a very scientific focus, purposeful discipline growth and not dictated by one health.
Helpful. All right. For those who are listening in, just a reminder, if you have questions for management, you can put it in the chat box. We'll make sure to get those asked and answered before we wrap up here. Maybe let's talk about, obviously, one of the hottest topics in healthcare, which is obviously security and the Change Healthcare breach. What impact, if any, has that had on P3?
We did not have any direct or indirect relationship with Change. It was mainly what we read in article and paper and what we heard from our friends in the hospitals and the communities. However, because of that, we expect some rules and regulation and maybe even laws to ensure more of the security and the cybersecurity and the protection of the information that we have. So mainly, the impact is it's going to be the pressure and the concern in the patient and providers in our network about the availability of fund and the ability to process claim regularly. But we did not have any direct or clearinghouse using their clearinghouse or their data warehouse.
It's been suggested by maybe some industry participants that this could have an impact on utilization at some point or maybe a slowing of utilization. Have you seen any of that level of impact within the practices you're working with?
We have not. We have not seen anything as of yet. Again, we continue to have our relationship through the plan, obviously being United, etc., for further conversations on med expense and how they're seeing things. But I don't have any visibility today on any of that opportunity or change.
Excellent. Got one from the audience just asking, as you think about expansion and entering new counties, what impact does that have on your medical margin or your blended medical margins for the business, and how do you balance that sort of growth versus margin expansion strategy?
Yeah. So that's an excellent question. Entering new counties definitely going to have a little bit pressure on the margin because it's a new provider and a new patient. But that's why we like the contiguous counties and what have you because a lot of the states like Oregon, for example, when you say different county, it's literally right across the street that the providers cross back and forth. So we have provider groups in multiple counties that cross the so it will always have a little bit of a squeeze as you add new members and you add new providers. But that's why we prefer contiguous and next-door reduce that impact significantly. Yeah.
In addition to that, Ryan, the only thing I would add is that now that the number or the size of patient population that we have, we know there's always going to be a significant higher percentage of mature patients on the platform than new patients coming in. So as we look at those contiguous counties and we look at our growth, it is to grow responsibly, as Sherif said. Maintaining 75% or more persistency is something that the company is very focused on that drives the profitability, right? Because as Sherif said, you do get that pressure on new patients coming in from contiguous counties, even though it may be not as bad as going to another state or that risk that goes with that.
But for us, having that persistency greater than 75%, working with physicians that already have our reputation in mind by county by county, those things align for us to drive that profitability that we're looking for.
Excellent. Then one more question we have coming in. How will delegation impact P3's cash cycle?
All right. So when you're delegated, you receive the premium in the beginning of every month. When you're not delegated, you settle your surplus about 18 months later. The difference, it will infuse the cash flow used in operation in real time. When you have a surplus and now that we are positive medical margin across all health plans, that cash will remain in your bank account rather than sitting in the health plan bank account for them to settle with you 18 months later. It will have a positive impact on the cash flow and the availability of operating capital.
Excellent. Always good to have better visibility there. Looks like that's all we have in terms of questions from the audience. So we'll wrap there. But Sherif, Amir, thanks so much for taking the time and educating us and the investors listening in on the P3 story. Thanks, everyone, for joining us today.
Thank you so much. We appreciate it.