All right, good morning, everyone. We're going to go ahead and get started with our next presentation. Thank you all for coming to the P3 Health Partners P resentation. Very pleased to have the company's CFO, Atul Kavthekar, and Dr. Aric Coffman, who's the company's newly appointed Chief Executive Officer. So really excited to have the team here at our conference. For those of you whom I've not yet met, my name's Ryan Daniels. I'm the healthcare services and IT analyst that covers P3 for our firm and also the broader value-based care space. So really excited to have them here today to talk a little bit about the market in which they participate.
We think it's truly a great long-term opportunity, and it's really a great value proposition for the payer customers they work with, to the patients that they work with, and really driving an improved quality of care, and the providers that they partner with to enable them to do that. So really a triple-win situation, which we don't see a lot in healthcare, and that's why we think it's such a robust growth opportunity and a company really with a unique operating model to capitalize on that in the near and longer term. I'll leave the rest of the details for the team to discuss, but a few quick takeaways, before we do that. Number one, I'll remind everyone we'll go upstairs for the Q&A. We'll be in Burnham B immediately after this for your questions.
And then number two, just a reminder that our disclosure's at our website at williamblair.com. So with that, I will turn it over to Dr. Coffman for his, I think, first presentation.
Yeah
A s a CEO of the company.
Thank you very much. Great to be with you. Good morning, everyone. You know, I have one other doc in the room, at least one. I'm a general surgeon by training, and I was reminiscing a little bit this morning. We go through a lot of testing in school, whenever we go through medical school, then we do residency, and then post-residency, you even have more tests. And the last test that you do, the culmination of all of it, is what's called an oral board exam. And for oral boards, the way it used to be was you'd have everybody, all these surgeons, lined up. You've been in practice about a year, and inside the room, you have three examiners: one who's written a textbook, one who's local, and then one wild card. And everyone starts at the same time.
So you stand by the doors, and then everyone knocks on the door at the same time, all enters the room at the same time, and your entire future is resting on how you get through the next four hours of questions, and you go to about four different rooms. So it's a little bit different. We're in the rooms, and you know, we're meeting with investors, so a little lower pressure than that. But it did feel a little bit familiar in terms of taking me back to oral boards and answering some questions about the business. It really is a pleasure for me to be CEO of P3.
I couldn't be more thrilled about the potential, and when I think about the business, I think about what we're resting on in terms of that potential. And we're gonna go through some slides, and hopefully, this gives you a good overview of where we sit with the business today. Me, Atul, enough on that. So who we are at a glance? So I think what's important to know about this business is we're in five different states. We're in 27 counties. We have 126,000 senior patients. 92% of those patients are MA, 8% are ACO REACH. We're doing today about $1.5 billion in revenue. If you look at our 2024, that number for $1.3 billion is from 2023. So we're on track for $1.5 billion in revenue.
We had 23% membership growth year-over-year from 2023 to 2024, and 29% revenue growth, and on a good trajectory in terms of our medical margin. And when I think about the base of the business and the reason I came to this from what was a really good situation. So my last job before I came here, I was in a startup through Rubicon Founders. It was a senior-based startup. We're about two and a half years in, and most of our businesses were based in Michigan and New York, but doing similar work, a little heavier on ACO REACH than MA. But when I looked at the P3 business, the big difference was they've been at it a longer period of time. This business takes a long time to mature.
The second piece is they're at the cusp of profitability. The third piece is you have people on the team who really understand and know the business. And so I go back with the founders of this company some 12 years when they were HealthCare Partners, and I was with the business that HealthCare Partners bought. And so I know that at the base of the business, from the leadership team on down a couple of clicks, they have people that really understand how to move the needle in value-based care. And they also have some unique overall capability sets that I think are important for unlocking the potential of value-based care. One is utilization management delegation, and the second is claims delegation.
Those things, even though we're not doing 100% of the populations, we have about 45% of our patients are delegated for UM, and what that allows us to do in utilization management is when requests come in for services, we get two things. One, we get an early view into what people are asking for, and we can redirect and change some of that cost structure. The second is we get the opportunity to interact more with the clinicians, and ultimately, this is a relationship business in which you have to build those relationships with the clinicians and get those swings at the plate with them in order to change behavior. And that's what essentially we're trying to do, is transition behavior into value-based care.
What claims allows you to do, in addition, is start to unlock some possibilities with network contracting, and what that allows you to do is get better unit costs on your products. And so you have a couple of things that were potentials as I looked at this business that were really key. And at the base of this, we're sitting on a risk adjustment factor of a 1.03 at a business that's at the point of profitability. So when I asked the question of the team as to how many patients do we have that have HCCs equal to zero, meaning you have senior patients with no chronic conditions, and we had 30%, almost a third of our membership, had no chronic conditions that had been captured. And if you look at a mature value-based organization, that's usually around 10%.
And so I know then that I have 20% of my population that, for whatever reason, hasn't been accurately coded and documented. We can identify those patients, who they are, what geography they're in, who their PCP is, and we can create intervention plans around that. And so the potential business that we're sitting on today is a lot bigger than what it shows. And that, for me, was enough to make the jump to come to P3. This is just a view of the overall geographies where we sit, and just like as you're thinking about Medicare products, we really think about our business at the county level, because that's how you write the contracts. It's all done by county benchmarking. And so even though you see five states, we really think about our business as 27 counties that we're in today.
That's grown from 11 counties to 27 over the course of the last several years. Steady growth that we've had, and we have lots of payer relationships. We have over 20 contracts today with payers. Those contracts range from local plans, which I think you have to have because healthcare is hyperlocal, as well as the big nationals. We've been able to garner those contracts and have done pretty well with those. But it's important to know that, in any given geography, the thing that makes a difference in any given practice is how much repetition you get from those PCPs and how many contracts you have with them. I think that's really, really key, is density, and that's a real place for opportunity for us going forward as well.
We have a lot of opportunity to go deeper in the markets where we already are with the PCPs that we already have. So in value-based care, and I, I'm going to assume that some of this might be new for some of the people in the room, but there's really three things that you're trying to align here. You're trying to align patients, providers, and health plans to be on the same page with what they want to do. In a fee-for-service environment, the payers, they want the providers to do less, and the patients want more. In value-based care, you're aligning the incentives so that everyone's trying to achieve the same thing, which is to lower the total cost of care, get the right care, and get better outcomes.
So you're moving away from a model in which you get paid just for volume, and you're getting paid on outcomes, and those outcomes can be in quality, and those outcomes can be in utilization. Patients like that because they don't want to be in the hospital. They want to be at home. They want better access to their clinicians. They want different kinds of services that they're not getting today. And providers like the fact that they get paid for doing things where they get credit for doing good work. If you look across the country today, you've got over 60% of PCPs are in a state of burnout. They're really getting measured on things like RVUs, which is just how much do you do and how quick can you do it, and that's not a sustainable environment.
So the promise of value-based care for them is to have a different revenue stream in which they can monetize doing good work and do so in a way that they get credit for those outcomes on a go-forward basis. So what we're able to do writ large then is get the right payer contracts, that's the foundation, align the providers, and then help them take better care of those patients. That's in essence of what the model is. And what that creates is this flywheel. So when we think about the flywheel of value-based care, it's taking that membership, getting them into the right contracts. We have 97% physician retention in our network, so when we look at our network overall, we have 97% of those providers have stayed with us year-over-year.
Hidden within here that you don't see on that slide is we also have what we call 90% persistency rate, meaning that 90% of our patients stayed with us from 2023 to 2024, compared to 86% the year before that. The reason that's important is because the longer those patients are in the system, the better their outcomes are gonna be. The more reps you get with the patients, the better their outcomes are gonna be. And so the higher that number goes, the better. So 90% persistency is a pretty good rate of maintaining those patients over time, and prior to that, it was below 86, but that's important.
To allow physicians to be successful in value-based care, you have to take all this aggregate information, all this data stuff, and you have to be able to put it to a place where they can actually use it. And so taking a bunch of disparate information that's out there from claims feeds, from pharmacy data, from hospital admissions data, and ADT feeds, and getting that to a clinician in a way that it makes sense and they can use it, is the key to unlocking the potential in value-based care. And we've got the team that's experienced to do that work. And so I've had the good pleasure as I walk into this team, even though I'm new to P3, I'm not new to the team.
The chief operating officer at P3 was my chief operating officer in the Pacific Northwest, where we did very similar work, at The Everett Clinic on our wraparound network there over the course of many years, on this same endeavor of moving them quicker in the value-based care continuum and taking them from not profitable to quite profitable, in so doing. So having those reps with people allows us to really hit the ground running. So how does this work ultimately? So the first thing that we do is we take in all the information for the patients. That's where this really starts within value-based care.... And then you do risk stratification. So we're able to take that patient population, and then we can stratify them. You have some patients that need more, and you have some patients that need less.
One of the things that we have to be really good at is putting more resources where patients need that and less resources where it would be wasteful and inefficient, and not spending that money there. That's one of the keys to making this go. Within that stratification, that then sets off different work streams for our care managers and our utilization managers to then go after what those patients might need, whether it's additional services, transportation benefits, maybe they have pulmonary disease, and they need different kinds of monitoring, whatever that ultimately gets to. We also use that in our utilization management to understand what's the right site of service so we can maximize the cost benefit that we get for that patient population.
And then we use that information once we have it all together through a tech platform where we can send information to the PCPs. They know when their patients are admitted, they know when they're hitting the nursing home and the ER, coming out, so we can prepare for those transitions of care and help them be more successful. And then allow our care managers to interact with the patients using both Care Connect as well as P3 Engage. And underlying all that is analytics, and analytical management. So we did announce at the last earnings call a partnership with Innovaccer, and what that will allow us to do is accelerate some of the things that we were doing before and use their expertise into this new venture that you guys hear a ton about, I'm sure, with AI. We're not an AI company.
We're a healthcare company. We need people who do that work to help us unlock the potential of what it can be, and we trust that Innovaccer has the skill sets to do that for us. So that'll be about a 12-18-month implementation, but it is something that we think is gonna help us moving forward. So I'm gonna turn it over to Atul. I'm gonna have him go through some of our numbers and give you some more perspectives on some market specifics on the work that's been done so far in P3.
Thanks, Aric. So I'm going to present a few slides to give you a little bit of a picture of some of the economics, some things that we're very proud of. Arizona is one of the five markets in which we operate, and it's our, it's our first market, it's our most mature market, and the numbers, I think, tell a really compelling story of how we're able to transform a population. As you can see here in the top row of graphs, you're seeing, you know, some substantial and relatively consistent membership growth, provider growth, building out our network of providers, and these are affiliates, for the most part, and as well as the health plans. They're all consistently growing over several years.
The bottom row actually tells another interesting story around what is actually happening with revenues, and you'll see, the last item is only on a quarterly basis, but we're already tracking pretty nicely to surpass our amounts prior year for Arizona for the first quarter. But again, you're seeing about, you know, a 300% revenue growth as well as a PMPM growth, so that's the rate that we're receiving per member, almost 50%. So this is, this is Arizona. This is our most mature market. We have four other markets that are generally following, maybe not exactly in the same in the same picture, but generally following the same pattern, where it's a systematic improvement year-over-year.
And that's what we're so excited about, and I think Aric talked a little bit about one of the reasons he made this transition is that all of our markets are now trending and looking more and more every year like this. So that was just talking a little bit about an example of the revenue side. So talking about the medical expense side, again, something we're very proud of is our ability to manage proactively the expense level and the experience of our members. And so you see here three graphs that are showing three of the KPIs we follow most closely and that are very highly correlated to medical claims expense. And I'll just make a quick couple of quick references.
You're seeing inpatient admits per thousand, emergency room, and SNF admissions per thousand. So if you look at this middle row, this middle line, Aric made a reference to it. So this is hovering sort of around 150 IP admits per thousand. These are, for the most part, we're seeing and, and we're hearing from some of our competitors, that these are generally increasing quarter-over-quarter. Yet our care model has been effective, and it's, it's evidenced in these numbers that we're holding that steady, and in some cases, we're actually decreasing it. The fourth quar—the first quarter of the year, we talked a little bit about this on the earnings call. It's still forming. We're still getting some data.
It's not completely closed, but the early indications are that utilization has been on the more of a path towards normalization. We are not seeing any of the elevated utilization that you've heard about in the past. Talking about capital efficient, one of the things in our model that is unique about P3 is from the capital efficiency and the growth. So we posted nearly 30% revenue growth year-over-year in the first quarter. We have significant density. Dr. Coffman talked about that. Even within the footprint that we have, within the five markets we operate and within the, you know, roughly 3,000 physicians that are part of our affiliate group, we have sufficient critical mass.
That density is more than enough for us to grow handsomely over the next several years, just working through that base and taking care of those patients. New market entry, it's always an option. I'm not sure it's the easiest or lowest hanging fruit. Clearly, there's other more effective and faster ways to get to profitability for new members, profitable growth. Lower left, you see medical margin progression. We talked about some of the things that we're doing. We have a number of initiatives that are in flight this year, that are new for this year, that are also there to affect beyond what the trend has been, but affect beyond that, some reductions in medical costs. And they're simple blocking and tackling types of things that we just haven't done before. We're doing them now.
And then continuing operating leverage. We'd reduced our operating expense by 30% year-over-year in the first quarter. We did that without really impairing any kind of delivery of care for our members. So we're quite proud of that. We're gonna continue working on that. We'll continue refining and making sure that the operating expense investment that we make is effective, and doing nothing other than delivering care and providing the baseline of, of infrastructure needs for the company. So again, just sort of bringing it together, just looking at membership and revenue, we grew our members by 27%. This is on a consolidated basis, and it's just showing the first quarter for these years. You can see that our membership grew 27%, but our revenue grew 42%.
So our unit cost, our unit revenues are, are improving there. We're quite proud of that, but even despite that, there is tremendous potential just within the base that we have, and Dr. Coffman talked a little bit about that. Very excited about that opportunity. But you'll see, again, revenue growing 42%, and that culminates down into, again, medical margin growing from $62 million - $135 million from 2022 to 2023. 118% growth. Between the revenue potential, between the medical expense management potential, we see this growing quite some bit. We've given guidance this year we feel good about. And then, Dr. Coffman, if you'd like to just wrap it up.
Okay, thanks. So when I think about P3, and really, like, this business today, with the right operational discipline, is a $200 million EBITDA business. So if we're hitting our guidance at $20 million-$40 million, and you take all things being equal, and we are doing what we need to do each and every day from an operational discipline perspective, and accurately coding and documenting our patients, doing the things that we're doing on utilization already, it's a $200 million business. It's not reflective of that yet, because there is low-hanging fruit here, and there's things that we need to do internally, and we already are doing internally, to move that ship. And it comes down to a couple things. So number one is operational execution.
What I'm working on with the teams now, and again, I've been on five weeks, what I'm working on with the teams now is clear priorities and accountabilities. Sounds simple, but those are the things that actually drive results in business. Measure those outcomes. Gotta find the leading indicators that allow us to get to that data sooner, so that we know how to intervene quicker, so we don't have a lag in what's happening in the data. It's about finding the low-hanging fruit within utilization, and we believe right now that exists in areas where we've got opportunities with hospice and high-risk patients. We measure that with hospice days and % of patients that are in hospice, knowing that we have a certain percentage of our patients that are near end of life.
And so we can stratify that patient population and intervene. It comes down to team and ensuring that, you know, as we identify areas where we have gaps and opportunities, to fill that with the right talent. But at the end of the day, there's some really key, basic blocking and tackling opportunities that we have in this business that needs attention and discipline. And when we do that, then the base business will reflect the potential. Appreciate your attention, and I think we have a Q&A session that's coming up upstairs. Okay? Okay, great. Thank you all very much.