Morning, everyone. Thank you so much for being here. Excited to talk to you about P3 Health Partners, the journey we've been on, and how we see things evolving into the future a little bit. All the standard disclaimers. Give you a second to look at that. Okay. Enough of that one. I'm Aric Coffman. I'm the CEO for P3 Health Partners, and I've been at the business for about two and a half years. When I arrived two and a half years ago, we laid out a plan on how we'd get to where we are today. Happy to show you that journey, what's happened for us as a business. We serve senior patients. We have about 105,000 senior patients that we serve across five states today.
Most of that is Medicare Advantage, but we also have ACO patients and ACO REACH today that will be moving into LEAD next year. About 2,100 physicians are in our network across those five states. This year, we're going to hit between $1.5 billion and $1.6 billion in top line revenue. You'll see in the story how even though our membership we've contracted on purpose, the revenue has gone slightly up from where we were a couple of years ago. This year, we've guided the street to a $95 million midpoint in terms of our adjusted EBITDA number, and we'll talk through the components of that in just a moment as well.
As we think about the core business underneath there, it's better than $30 million positive this year in terms of our EBITDA positivity, and a lot of great work by the teams to bring that to life. You'll see some of the things that we're most excited about and the outcomes that we get with some of our patient populations and how that's making an impact. As it stands today, I think we're one of the few companies that can report a negative medical margin through the front half of the year. We had a negative 1.8% medical trend. You look at peers in the public sector, and you're not going to find anybody below 5%. We know that some of our programmatics are working, and it's a combination of the platforms that we have and how we're working with the clinicians.
We did some work on the balance sheet as well that you'll see in our public documents. Our CFO, Leif Pedersen, who's here with me this morning, did a great job in helping the balance sheet and moving some of that debt over into the equity side of the table so we could stay in compliance with Nasdaq rules. I'm going to talk through the five levers of the business that we use in order to make the results happen. This is the team. I think the important part to understand is that most of this team is new. We kind of started around the same time. I started mid 2024. Leif was my first hire, and we've added some additional people. Dr. Amir Bacchus is one of the co-founders as the Chief Medical Officer. Aside from that, everyone here has been new.
A lot of good experience in value-based care, and I think that's really important as you think about these kinds of businesses. This is the journey we've been on. If you go back to 2023, negative EBITDA got quite a bit worse in 2024. That little dotted line in the middle you see there is when we started, and then we laid out our plan for how we were going to go about fixing the business. 2025, you didn't see a ton of improvement. There were a lot of structural things that were happening underneath there. The putting in a care model, rolling out new technology, refining processes operationally, establishing new relationships, getting new contracts, and redoing the contracts that we had. There was a lot of work to get done, and you can see the fruits of that labor now as we sit in 2026.
Over that period of time, it's better than a quarter billion dollars improvement in our EBITDA profitability. I would just say that the front half of the year, about $18 million of that was in core business, and then the remainder of the $80 that we've reported in the front half of the year was from settlements that we had with payers, where we had deficits and we were able to negotiate those down. That happened across multiple payers. It wasn't just one. What that really speaks to is that the payers want us to be successful. They didn't want to see us not be successful. They know that we're providing value to them, especially around quality, which is getting more and more important for the plans in terms of their revenues.
They're shifting in 2027 for quality, where the metrics that we help the clinicians with actually take on a much higher percentage of the overall star score. It's going from 34% to 48% of the entire star score. The difference between a three and a half star plan and a four star plan is about five points a premium. It's pretty significant across a large population. How do we do it? We get money from the plans to manage the entire budget for that population. That's the premium dollar. There are two things that move the premium dollar, how sick the patients are, the burden of illness, or the risk adjustment score, and what your quality scores are. Those are two of the main things that drive the premium number.
When we think about then managing the total cost of care, it's really about identifying the patients that need the most help through a risk stratification model when we put the patients in, so we know who the top 5% are within that top 5%, who's the top 2%, and then we go down from there in terms of our programmatics. Dedicated programs for the sickest patients where we do proactive outreach, and if their primary care clinician can't see them, then we pull them into one of our senior wellness centers in the geographies where we have those. As we move through that, and as long as we have higher premium than we have cost, then there's medical margin.
You can see what's happened to the medical margin over the course of the last three years, going from 57, 25 was down to 17, and so far this year, we're sitting at the midpoint range of guidance at $210 million to $240 million medical margin across the population. The work that Leif and team did was really important, regarding changing the balance sheet and moving over about $250 million of debt over into the equity side of the table. We resolved about $100 million total of payer liabilities through that work as well to come off the balance sheet. The way I think about P3, just what is it that we actually do and how does it relate. You have the funding source, the payers, and we serve as a bridge between the payers and the providers.
We help them with the contracts, we help them understand the data that they get, we help train them on the things that they can do to be more successful. We set up incentives with the providers as well. Then if they do really well, they can share in some of the savings whenever we have savings, and it's generated through their work. We also serve as a bridge between the docs and their patients. A lot of the docs don't have the opportunity or time to get out into the world and go see their patients in the home, as an example, or see the patients in the hospital, or have a care management team that can go do that work. So, we provide those additional services at no cost to the primary care provider, but just to help them have better outcomes with the patient populations.
The other thing that we do that I think is really important, and not all of our peers do this, are what's called delegated functions. Meaning there are things that the payer does on a typical basis. They pay claims, they have utilization management, they have care management programs, quality, et cetera, payment integrity, those kinds of things. We're delegated for about two-thirds of our population today, just a little bit under. What that allows us to do is have more reps with the clinicians, as well as ensure that we're not paying for things that we shouldn't be paying for. An example would be readmissions into the hospital. There's a lot of times where the payers just pay readmissions, and there are a lot of clinical reasons why those readmissions shouldn't happen. In fact, it's actually a quality measure.
CMS doesn't pay for a lot of these readmissions either, and that doesn't always translate into the Medicare Advantage space. So, having programs where you can do it better than the payer brings more margin into the business, and I'll show you how some of those numbers work with one of our new programs that we have. The medical management piece is important. So, the medical economics function will identify as claims come through, as prior auths come through, what patterns are we seeing in the population, and how do we need to go attack some of those high costs. Sometimes when clinicians are practicing, they don't recognize the cost of some of the things that they do, and if they did, they can make different choices.
Informing them on alternative choices for sites of care, for kinds of medications that they use, for the kinds of people that they want to refer to and what their outcomes are, makes a big difference in the overall outcomes financially, not just for the patient population, but oftentimes for the patient, because sometimes patients have big out-of-pocket costs too. When you can reduce that, you actually get a lot of patient satisfaction from managing that better as well. Then in terms of provider engagement, as we talk about changing care through value-based care and transforming the healthcare system, I'm a huge proponent of the Quadruple Aim, and this is a really important part of this. What that means is lowering the total cost of care, improving quality, improving patient satisfaction, but also improving the provider experience.
Because if you don't have a workforce, it doesn't work. The highest suicide rate of any profession in the United States is physicians, and they also have one of the highest burnout rates. When you think about that, the people that are set there to care for us have the highest suicide rate, and in the room, they're not able to empathize with the patient. You don't get very good outcomes with those patients. You don't get a connection. As a result, patients may not take their meds, or they may not go for their follow-up visit, or they may not go see the behavioral health provider.
Addressing that, we have a program where we actually provide coaching to physicians in the network to help them understand how to deal with their crazy practice, to help them deal with if they're a physician leader, to help them understand what value-based care is so they can really be a participant in the overall process. Then they have ownership of it. Very important program. This is a little bit of bringing to life what the care model does, and as we've installed these things, and this is one of our markets in California, what we're able to show putting these things in place, and what the graphic shows, is how many admissions per 1,000 patients. It was 199, through Q2, it's down to 109 over that period of time. Just inpatient admissions alone, if we go back to last year, were average about 163.
It's about a 30% reduction so far in inpatient admissions. Every admission to the hospital, rough, $15,000-$16,000. If you're a doc and you're seeing patients one-on-one, you're getting paid about $200 for every visit that you see. If you prevent an admission as a doc in a typical model, you don't get any credit for that. But if you save an admission, that's $16,000 of savings that you generated as a clinician. Right now, that goes to someone else. When they're in these models, we can share in some of that savings with them in the aggregate population. That's how you get adoption from the clinicians. We're also able to reduce readmissions significantly. Part of that is holding the hospitals accountable for not paying for that work, having them set up programs for better discharges. Part of that is managing the patients a lot better.
Because you know the people who are at the sickest of the sick, they oftentimes, instead of that 199 number, you may have patient populations that are admitted like 2,000 per thousand. They are going into the hospital a lot. If you focus the attention on the right patients, you can save a lot of dollars and help the patients in a dramatic way. We also do work in the skilled nursing facilities to lower the length of stay. That has been shown to improve outcomes for patients, and there are a lot of times where patients do not even need to be in the SNF if you have the right home health program and you have the right feedback to the primary care office to get the patients in post-discharge. In cases where they cannot get in, we can see them in the senior wellness centers.
How we execute and what was the operating playbook, I talked briefly about some ways that we improve the performance in the business. Let us talk first about contracts. We renegotiated all of our contracts. Some of those were with the payers, and some of those were with the clinicians as well. What that really meant for us was we had to prune the network. There were people that were not going to participate. Docs in large health systems that are driven to do more RVUs and see more things and churn patients through, that is not the model that works for doing this. They have to take a pause from that kind of activity.
You can still do some things in parallel, but you have to have the ability to understand that this is a different mechanism for managing the patient population. Documentation and quality, we rolled out new technology as well, where we have a point of care tool for the clinicians in the network that is an overlay into their EMR and allows them to see at the ready what are the conditions that that patient had last year, what are some things that they might have that you have not found, and then linking that to documentation where they can see where you are getting that information using AI, in order for them to be able to be comfortable with making that kind of a diagnosis. That is one of the main things that we use in terms of understanding the stratification for the patient population.
If the clinicians do not put the right codes in and the patient has the disease, they may not get the benefit of a program that we can offer them. This actually helps the patients get more services, which is really the intent, because if they have more services, we can lower the total cost. Network, we talked about what we did there in terms of pruning some of the network, and we also created what is called a tiering system with our provider groups. We started installing people into the clinics to help offload some of the administrative work that the clinicians have to do, where they can do outreach, they can help manage the sickest patients, they can mine for data in the EMR, they can do chart prep. It is kind of like a medical assistant in a way.
We call it a practice operations coordinator. Very well received by the network, and we now have pretty close to two-thirds of our population in those practices. That's new to P3. That didn't happen before. We talked a bit about clinical programs, including UM, and then we've done a really good job of eliminating the things that weren't working in the business, investing in the parts of the business that needed additional help, and overall reducing the OpEx that we have as a business. When we think about the maturity of the business, and so sitting today with $95 million EBITDA as a midpoint and about 30 to 35 in year, there's still a lot of unlock in the business. Part of that's on documentation and coding. There's still things that we can do around network, and we look at the levels of maturity.
The way this graphic is meant to show out is the relative size of the opportunity on a go-forward basis, and then how mature are we today. You can see within those levers, whether it's burden of illness, stars performance, clinical programs, or smart growth, which we're going to talk about in just a second, those things are still developing quite a bit, which is exciting because we have turned the business around, become profitable, and we still have a lot of work left to do within the same existing population. One of the things that we designed this year was a new growth model. The way that we looked at this was we found a plan that was looking for a solution to take over their MA book of business.
They had been vending out different parts of this to different types of vendors, and it's really hard to manage multiple vendors if you're a payer. We gave them a one-stop shop where not only are we doing the enablement model, but we're also providing the administrative services for the plan holistically across their entire population. That includes things like utilization management that we talked about, care management that we talked about, but also things like core administrative work in the back end. We embarked on this model where the first two years we work in this model with them, they pay us dollars to do the services. We have a little bit of fees at risk with that model if we don't perform in the way that they want.
But we don't take full global risk until we get two years in, which gives us time to lay the foundation in the community, get to know how things work within that community, hire up our clinical staff, understand the population better, and it's a very important unlock. One of the things that you see is that when you're designing health plans for seniors, the bid and benefit design is really important. If you look over the market over the last five years, what's happened in this sector? You've had just massive losses from companies. You've had bankruptcies and everything else. A big portion of that was the plans made really rich benefits that may not have helped the patients. We know they didn't help patients because the quality didn't get better.
But at the end of the day, they spent a ton of money, and it cost people a ton of money, and it did not benefit anybody. Having control of that is really important, up to 5%-10% of premium if you do it right, and the patients can still get great care. The other elements is claims, UM, care management, payment integrity. That is another 5%-10% if you can control that. The traditional model, we still can make money in. The new model, smart. We make money out of the gate, and we have more levers within the business to do that well. These are our guidance numbers. We came out this year, and we were able to raise guidance twice. We started with a $10 million midpoint. After our first quarter, we raised that to 40.
After second quarter, we raised that to 95 midpoint. We are excited about the rest of this year. All in all, we are on schedule. Another way to look at this across the business and what we have been able to do, you have got total revenue. Even though our patient population has shrunk from 126 down to 105, our revenue is actually higher, and that is because we are doing a better job of capturing the chronic diseases that those patients have, and we have grown in the right places. Medical margin has improved significantly, and then you can see the end result, which is the business is now profitable. Three takeaways. Turnaround is delivered. There is a lot of embedded upside in this business, even if we did not grow. But we now have a smart growth plan.
That growth plan, there are like 63 plans that sit like the plan that we worked with in Nebraska. Independent Blues, also independent health plans that are out there, only five of them made money in 2025, and they are all looking for solutions. We know that there is a market for this, about 6 million total patients within that market. This is a place where we think we can offer a really differential value in the marketplace. Any questions?
You mentioned the plans, the 60-plus plans.
Yes.
That are on your program. What's the dominant plan that kind of out there every year?
No. Let me go back to that slide. So, there's 63 plans, and we call these mid-market plans, so they have membership from about 20,000 to about 200,000. The bigs have millions of patients. They have their own systems. These middle plans, MA is an add-on to what they do as their bread and butter, commercial or Medicaid or other things. And they're trying to run their MA business off of a commercial chassis, and that's where those lives sit. So, they are plans that would be regional local. So, you might have a State Blue, you might have a regional health plan. And we've got a top 10 list of our potential partners to go after next.
Is there a revenue per patient model or per physician model that is a basic statistic that you trend towards your growth process?
The revenue per patient model, it's really set by two things. It's the county in which the patient is in, because that gets set every year by CMS at the county level, and then it's the burden of illness of that patient. So if they have a lot of chronic conditions, they get more funding to take care of those chronic conditions. So, our preference is actually to take care of sicker patients. So, within our models, we have about a quarter of our patients are dual-eligible patients, meaning they qualify for both Medicaid as well as Medicare. And in those situations, there are additional revenues that come in, and depending on the state Medicaid program, you have ways to pay for things that Medicare Advantage doesn't pay for, but Medicaid will. So, it helps that population achieve more. Yes.
What does it take for one of these plans to want to take on your service and/or redo the service? What are they looking for?
They're looking for a one-stop shop. When they have to manage 15- 20 different vendors to do the services that we talked about, it gets really cumbersome to get people aligned across these various systems. One of the keys is because we're doing them all together, it's really a one plus one equals three, because our claim system sees our UM system, sees our care management system, then sees our enablement program. It's a big unlock. It's almost like having a virtual integrated delivery system that they didn't have to build the providers to do. What they need is, one, they need to be in a position where they want to stay in a product, and two, they have to give some things up.
There's a lot of things within the plan itself where they're going to give away some of those services that their teams aren't going to do anymore. That's part of the bridge in getting them there. Any other questions? Well, thank you very much for being here. Appreciate it.