Hello, and welcome to the second day of the 43rd Annual J.P. Morgan Conference. My name is Sean Perkins. I'm an associate in the investment banking practice for healthcare, and I'm joined here today by P3 Health Partners, Aric Coffman, CEO, and Leif Pedersen, CFO. So with that, I'll pass it over to Aric.
Thank you so much, and good morning. It sure is a pleasure to be here at JPM, so I want to say thank you for the opportunity to talk about P3 Health Partners and talk about something I'm really passionate about, which is value-based care, and so we're going to give you an update on the business from the last time that we had an earnings release and hopefully let you know about our positive momentum. Standard disclaimers here for everyone to take a quick look at. As we get into the business, I wanted to open first by saying, look, it's been a really tough time in LA, and our hearts go out to all the families and communities that are impacted by what's happening in Southern California, and also want to recognize just the amount of turbulence we've had in the industry, and especially in this sector.
Clearly, there was a tragedy that happened in Manhattan just weeks and weeks ago. And in addition to that, there's been kind of an outpouring of public sentiment around the healthcare system that I think is reflective of some of the parts of the healthcare system that are broken. And what I'm here to tell you is that P3 is one of the companies that has a solution to some of the problems that are facing the American healthcare system, and it's using value-based care to do that. We had an unusual confluence of events that's happened over the past few years, post-pandemic utilization spikes. We've had regulatory changes that have put a lot of pressure on the business. A little bit of good news coming out yesterday with a preliminary rate notice on 2026, so that's a good tailwind.
But there's been just a slurry of bad news that's come our way in the sector, and we're really optimistic about 2025 as well as how things are going to move in 2026. As I think about the P3 business, just to give you an overview, we are a provider enablement business. We are located in four states and 24 counties. We care for about 124,000 senior lives, and we are senior-focused, so we take care of both Medicare Advantage lives as well as ACO REACH lives. We have roughly 3,100 PCPs that are in the network itself today, so we have a very broad PCP network, and I'm going to show you a little bit later about how that portends for our growth moving forward. And we have a diversified payer portfolio, which we'll talk about as well.
P3 has had great clinical outcomes, and we'll talk a bit about what we've seen in terms of trend over the last little while. And I want to say that we've made a lot of moves since the last earnings call, and we're going to talk you through where things sit today. This is a view of the counties that we're in state by state, just to give you a picture of where we're captured today. So Arizona, Nevada, and California, presence in San Joaquin County, and then in the state of Oregon. And in each one of these, we have a significant share of the PCPs as well as a significant share of the market, but there's still tons of room to grow.
The way we think about that when we look at our opportunity is we have lots of payer partners, some of the big ones you would expect with Aetna, Humana, United, as well as some regional plans like Atrio, and then we have a partnership also with Centene, Alignment, and then our partnership with ACO REACH and the federal government. You can see the distribution of our lives over to the far left of where those patients sit per state, and then you can see over to the right the number of PCPs that we have in each one of those. And the reason that's important is we're taking care of a small segment of the overall patient panels that these providers have. And the way that looks today is if we were to add up what the potential lives are in our existing geographies, it's around 2 million patients.
That number comes as an estimation from what you see in patient panels for most PCPs in terms of the lives that they typically care for. That means for us that we can grow considerably in the markets where we are with the PCPs that we have, and a lot of incremental growth potential in Arizona. As we think about the pressures that the system is facing, I want to give you a few sobering statistics. PCP burnout is well above 50%. The suicide rate for PCPs is the highest of any profession, and almost two times the odds ratio higher than the general population, and female physicians 400% higher than the general population. When you think about that, what that means is that leads to not great care. That leads to lower quality. That leads to disengagement from patients.
Some of the things that we're struggling with are how do we engage that workforce, and we'll talk a bit about how we're going to do that. We have poor access to primary care, and if you look at our costs as a healthcare system overall compared to our results, they don't match, and we have a lot of room for improvement. We know that we can attack this using data systems and alignment of payers, providers, and patients. When we think about our flywheel, the way that we make this work, I'm going to talk you through what I think are the key constituents of patients, providers, and payers and the benefit to each of them. For patients, what do patients get out of a model that brings value-based care to primary care? First, they get better data and access to their PCPs.
So we help them navigate to their PCPs or their specialist visits. We might help them arrange care in their home. And through care management and care navigators, we also give them a personalized care plan. So those are big benefits to the patients. And then ultimately, what we see is that the patients get better outcomes, which is what everyone really wants. When we think about the providers, we're giving them tools, systems, and resources to execute on value-based care. In many situations, they're getting paid better than what they were getting paid before. And if they generate savings, they get to share in that savings. And then when we think about how we help the payers, the payers are looking for ways to improve quality outcomes.
So because we're working with the PCPs and we're setting up models to ultimately help them perform in quality, we help the payers perform better in quality as well. We can help them grow by working with the PCPs and showing them the value proposition, having them get better economics, and then they can grow differentially with the payers for which we're contracted. So I arrived as CEO in May of this past year, so I've been in the seat for about eight months. And I just wanted to give a little picture of what the journey has been for P3 as it was founded in 2017 as a business. There was a lot of good top-line revenue growth. And at the time, that's exactly what the industry, the sector, and the market was looking for, grow membership. And they did really well.
If you look at that 35% CAGR for those years of 2020 to 2023, there were a lot of central functions that were built to support that growth. The profitability had been elusive in the way that the teams had been facing it. When I came in, we looked at the business holistically, looked at every role, every position from the ground up, and we identified opportunities to, one, improve operational execution, but two, there were real efficiencies that existed in the business. What we came up with was a plan for how we can move the business forward. We talked about this at our last earnings call, about a $130 million-plus turnaround plan for P3. When we look at this, it really broke into three buckets. Number one was around operational efficiencies.
We identified areas where we had redundancy in labor, where people were not necessarily being utilized to their full capacity. We identified contracts and some vendors that we were no longer using. And so we took out $20 million of costs, and I'll talk through some of the specifics of what we did there. We looked at our contracts and we said, you know, some of these contracts, when we had this rapid growth, were pretty healthy, and some of them were not. And it's time for us to do really what I would say is some hygiene on the business of saying, hey, these contracts may not work. And so as we did that, we identified about 63 tax ID numbers with the PCPs that were not performing and hadn't been performing, and we didn't have a path to get them performing. And so we canceled those contracts.
We had a few payer contracts that we canceled as well. In total, those contracts represented about 20,000 lives, but those lives were about a $35 million drag to the overall P&L. And so they weren't lives that were really accretive to the business, and so we moved on from those. And so that's a net $35 million improvement for us as we move into 2025. And then as we looked at operational execution, there were a lot of opportunities to take resources that were central, push them out into the field, and create some systems out in the field that would help us perform. And when I say perform, and I'll give you a stat, when we looked at the business when I first arrived, we had roughly 30% of the patients, these are elderly patients, had chronic conditions, were missing chronic conditions.
In a population for a company like ours, in which we're really following this tightly, I would expect that number to be closer to 10%-15%. And so we were double to triple the number of patients that had no chronic conditions, which would suggest that we had a really healthy population. It didn't match utilization, so we knew that that was off. But that's just one area as an example of where we're putting extra focus to ensure that every patient is seen every year. And if we needed to distribute out resources to the home or get transportation to get them into the PCP, that's a place where we have a real opportunity to improve. And then we have some things around med expense. And so one example is we've put some additional resources and partnerships together to address end-of-life care.
And so when we think of palliative care and hospice care, what we'd like to see is about 4% of the population enrolled in hospice. And in 2023, we're well below 2%. This year, we're tracking to 2.6%, and our goal for 2025 is going to be 4%. That's really important because the cost of patients in those last weeks and months of life are really high. And on average, it can be anywhere from $30,000-$50,000 of incremental cost to the system, and it may not actually benefit the patient. And they have resources available to them to help them navigate through and get additional resources to get care into a home, as well as ensure they don't get treatment that they don't want or that they don't need. So as we looked at the operational efficiencies, one, we looked at the market teams.
We identified areas where the market teams had some redundancy, and we were able to take cost out there. Centrally, we had some shared services where we had redundancies in the business, and then as we looked at our network claims and quality management teams, there were opportunities there to also scale down where we had some overlap between departments. An example would be utilization management and care management, where we had similar roles, and we found ways to have people cross those streams. On the corporate side, we also identified opportunities, and some of this is contracts, and in total, we talked about the $20 million of improvements that we got from making this move, so these have been executed.
So as we move forward, the thing to look at as we talk about the business is this is something that you'll be able to see beginning in Q1 of 2025, and this should feather out through the rest of the year. When we talked about the contract rationalization, I talked about both payers as well as providers, and I just wanted to quantify for you the impact of the cancellation of those contracts and pruning of the network to get down to the places where we could be the most effective. And we also had some good contract improvements that we've worked on, and I think we'll probably, as we get into 2025, we may see that $8 million number improve just based on the good work that our contracting team has been doing. So again, the total improvement here is about $35 million.
And then on operational execution, some of the tactics and some of the things that we've done to partner, I wanted to quantify as well. So in-home and care that we're doing in partnerships, both in Arizona, Nevada, as well as Oregon, where we get people out into the home to ensure that those patients get evaluated as well as get connected back to their PCPs, we expect that to draw an additional $25 million in 2025. And then we started using some new technology. And I'm not going to talk about AI today. I know there's probably been a lot of AI discussions over the course of the conference. It's a very hot topic. But what this allows is we had manual processes, and this gets back to some of the costs that we're able to take out too.
Using a suspecting engine, we were able to remove some of those manual processes and now actually provide more data at the point of care for the PCPs to be able to do their job in workflow. As we rolled some of that out in the back half of the year in 2024, we'll see some of the fruits of that labor in 2025, but it'll be back half of 2025. Then we're continuing to expand those programs now in 2025 for an impact this year on our delegated plans and then next year on our non-delegated plans. Then we have a few other buckets in terms of the operational execution. I spoke of the hospice end-of-life care.
We have some sub-caps that we're doing with oncology as an example, and that's a place where I think many of us saw bumps in cost in Q3 and Q4. So the total there is $75 million. And I use a plus there because we know that there's additional opportunity, but we also want to be sometimes realistic about exactly how we're going to get to that number. And so that's why we stuck with the 75. We do have some good news, and this is one that isn't fully quantified yet in the way we're thinking through 2025. But one of the things that happened in the confluence of things as the sector has taken on a lot of headwinds is that you had a lot of really inflated benefit designs across the country in MA.
And there were flex cards and debit cards that were given out, a lot of supplemental benefits. And what we're seeing from the industry now, and you all have heard the same, is you're seeing some tempering down of the benefit design, which will help overall in cost. And so as we look at CVS, Humana, and on, just a few examples of some of the Cos as they look at it. So we know that there's a quantification for us to look at what the actuarial value was of those benefit design changes. And as we get our full numbers back from AEP as well as from OEP in Q1, we'll have a tighter accumulation of exactly where those benefits are going to help us in 2025. And then the other tailwind that I'll bring up today is the rate notice.
Coming out with the preliminary notice for 2026 of better than 4% was a lot better than what people expected. It's kind of interesting when you look at the ACO REACH data, which would say that it's even higher than 4%. We'll see what happens with the Final Notice, but there are some in the industry that would say that we might expect a bump up in that Final Notice from the 4% to something higher. I think it's really good news for the industry. It's really good news for senior patients to be able to fund some of the programs that we're doing to help improve outcomes for those patients. I think it's an exciting time for 2025 and 2026 for our sector after a few years of turbulence. I wanted to speak a moment about the team.
I'm accompanied today by Leif Pedersen. He's our CFO. We brought him in officially in September of this year. Leif has a great background in value-based care at Optum, DaVita Medical Group prior to that. Then he was at DaVita prior. But I think it's important to have a team that has experience in doing this work, and Leif brings that to the table, and he'll be participating with us in the question-answer session. I wanted to also speak about Bill Bettermann, who's our Chief Operating Officer. Bill was my Chief Operating Officer in the Pacific Northwest when we were together at Optum. And so we have a good working relationship. He'd also worked with Leif. And so we're assembling the team that we know will be able to deliver not only in 2025, but 2026 and beyond. And of course, we have Dr.
Bacchus, who is a co-founder, our Chief Medical Officer, very steeped in value-based care. He's been doing this work since the early 2000s, all the way back to JSA and HealthCare Partners days, and then they built P3 in 2017. With that, I will turn it over to the audience for questions.
I'll open up the questions. Thanks so much. You quoted some pretty staggering statistics around physician burnout, pretty eye-opening stuff. It would be great to hear a little bit more about specifically what P3 Health is doing there and the value proposition that you've got.
Yeah, thank you for the question. I think there's a couple of things. One is, and I did a lot of work on this when I was at Optum and DaVita Medical Group with some of the groups that I ran and learned a lot from the PCPs. And so using that kind of as a backdrop for how I'm applying that here at P3, there's some very simple things to do to improve the experience of the clinicians. And I think first and foremost, foundationally, you have to get alignment with them about their work and the product of their work and their outcomes being the basis for how they get paid rather than just how much they do in volume.
It's very well known in the literature that churn of doing things and not getting the fulfillment of understanding how they're impacting populations has a big impact on their ability to take care of patients. And the scary thing about burnout is that doctors can't even hear you when you're in the room. They don't have the ability to empathize with you. They don't have any more capacity to really help. And we've all had that experience in an office where a doctor's overworked and they have five-minute visits and they're in and out. And so what this model brings and why the alignment is important is it gives them a structure by which they can spend more time with their patients. They can see what the outcomes are for those patients, and we can provide them additional resources that they so desperately need to care for those patients.
And that also helps. In 2025, we're also launching a program that we're calling P3 Restore. And we're working with a physician who's a coach who's doing work with individual clinicians in our network. And so we've identified one clinician in each network that will get an intensive coaching over a period of three months. In prior experience, this has shown to be sometimes very transformational. And what happens with these kinds of programs is it grows. And so once that clinician gets the opportunity to understand what their barriers are to their own professional fulfillment, you start getting others that want to do the same thing. You can cohort, and then it can expand quicker than when it starts. And so my experience with this has shown that we've been able to reduce physician turnover and burnout significantly by using these techniques.
We're excited about getting this program rolling.
Over here.
I just have a little follow-up question to that. Physician burnout and primary care is really tough.
Yeah.
Improved. I noticed in California, you're in the San Joaquin area, kind of more low rural, and it's really, we know that there's even greater challenges to recruit primary care physicians. What strategies or what are you using to overcome that? Because it's really hard to recruit doctors in that particular area.
Yeah, it's a great question. So the question for everyone is, in one of the geographies where we are, there's a lot of rural practices. It's hard to recruit into rural America in primary care. And so what are the things that we do to help kind of stem the tide? And if you look at the graphics on expectations of what I would say adequacy for physicians, PAs, and nurse practitioners in these geographies, California in that area does have the benefit of starting out a little bit higher than some of the other geographies. But I think that the techniques to make that happen, number one is you have to be able to give them a view of what their practice can be like, where they're actually getting remunerated for the things that they do in the right way. So they have better economics. So it's more sustainable.
I think that's really key to be able to attract people in. They have workflows that make sense, and the abrasion is lower. And so that's one of the things that we're doing with them on their senior populations is helping them navigate through that and providing those additional resources. And that can create an ecosystem where when they have help, when they have better pay, when they have what they see as a future to be able to do primary care sustainably, you can then recruit into that.
One other point that you raised during the presentation, it would be great to elaborate on further, was the advance rate outlook and the implications for your business. If you could provide any additional color on that, that'd be awesome.
Yeah, and I think we saw a pretty positive response in the markets yesterday and maybe even today from the Advance Rate Notice, and this past year, it was actually a small reduction, and so what these dollars will do and how this impacts us is most of our contracts are percentage-of-premium contracts, so the way I think about that, whatever that dollar value is, what comes back to our business, let's just call it 85%. It's not the exact number, but somewhere in that ballpark. That's the number of dollars that will be coming back to P3 through those increases.
Okay. Thank you so much.
You're welcome.
I guess switching tech to more of a financial question. With the changes in the macro environment, it can be difficult to establish forecasts, especially a long-term plan. Could you provide a little bit of an update on when we expect to provide a forecast for 2026?
Yeah. Yeah. Absolutely.
Or 2025 even.
Yeah.
Absolutely. Thanks for the question. We know it's important for the street to have transparency into our financial forecasts, and we at P3 are committed to providing that transparency. As we talk about internally, we want to increase our say-do ratio, and so we want to go through our internal processes, which we are still doing. I can't commit to the exact date, but we will be issuing our financial forecast within the next 30 days, and we just need to finish going through our internal processes and assessing the $130 million of opportunity that we outlined here, as well as some of the benefit changes that need to be taken into consideration, as well as some of our other strategic plans that we want to overlay over that forecast. I guess then, as a follow-up, could you provide some insight into how enrollment's looking like for 2025?
I'll just give you a couple of things. At the top, we talked about the network rationalization and the payer rationalization. That was about a 20,000-life takeout from where we were. If we look at the 124 and then we remove the 20, there's that reality. The point estimate range, probably in the 110-115 range, is what I would think overall. We had some growth in ACO REACH, which was intentional. We expect to have an additional 7,000 members in ACO REACH. The way we went about getting those lives is different than the way we did that previously, using a pretty nice underwriting model to be able to go and do that. On the MA side, we also expect to have some new lives.
We won't see and didn't expect to see and didn't really want to see 20%-25% growth year over year. This was the year that we needed to contract a little bit. We needed to rationalize the contracts that didn't work. The growth trajectory and the growth potential is still really high, not only in the markets where we are today, but in our adjacent geographies. We're excited about growth for 2026 and beyond and think that we're going to be at a nice spot in 2025.
Do we have any further questions in the audience? Otherwise, I'll keep on going. So it'd be interesting to hear about the plan benefit designs that you're expecting in 2025 as well, if you could provide an update on that.
Yeah. Do you want to hit on what we have so far?
Yeah. We've got good line of sight into about 60% of our population right now. And what we're seeing, and Aric alluded to it in his earlier comments, is plans are reducing their overall benefits. And we'll see a bigger impact across supplemental benefits as opposed to within medical expense. And so, as we said earlier in part of my guidance comments, we're factoring those considerations into the overall forecast for 2025. But we should be expecting a tailwind in 2025 related to those benefit plan changes. Thank you. Okay. So looking at where you operate, you operate in MA and Medicare ACO REACH. What would you say are the main benefits for P3 Health in participating in those programs?
Yeah. So I think the view that we have is that we want to be as dense as we can be with an individual clinician. Because the more reps that they get as they're learning value-based care, the quicker they learn and the more meaningful it is in their practice. So it's important for us that we have more patients per clinician. Having both Medicare Advantage as well as government programs allows us to have a bigger portion of their panel. So if you think roughly half the patients are Medicare Fee-For-Service and half the patients are MA, rough numbers, we get access to that second half by doing government programs. And that's really important for growth. The programmatics are very similar, but not the same between ACO REACH and MA.
And we do think that with the incoming administration and what they previously had done in that same administration, that's where ACO REACH essentially was born. It was DCE when it first came out, direct contracting entities. It morphed into ACO REACH. We're pretty bullish that this will be a long-term program and will be something that either has a look like an MSSP or continues on as we move forward. And what this allows us to do is the docs then can learn about their patients in a more streamlined way. So they can have multiple payers plus government programs, and then we can provide to them information on their performance and their financials for that entire sector of their business, which just makes it simpler for them overall.
Thank you very much.
You're welcome.
We have a question here.
So thank you for this great presentation. I came in a little bit. Oh, thank you. I came in a little bit late, so I may have missed this. So you just talked about Medicare and how that's part of your population. Are you also in the Medicaid space as well?
Today, the only place where we have Medicaid is we have patients that are D-SNP patients, dual eligible patients, and we have in total about 17,000 dual lives across all of our patients.
Okay. A lot of the issues that you're addressing would be really helpful in the Medicaid space.
Yeah.
I'd actually encourage you to look for ways to talk with states to really figure out maybe how you can work with these plans to really get at that population and address those health disparities a little bit better.
Thank you so much for the question.
Of course. Absolutely.
Yeah.