P3 Health Partners Inc. Q3 FY2024 earnings call

• Broader Medicare Advantage landscape: The sector is facing pent-up demand post-COVID, and value-based care is crucial for bending the cost curve. - Third quarter results: Capitated revenue $357.7M, total revenue $362.1M (+26% Y/Y), member base up 22% to over 128,900. - Initiatives: $130M+ of initiatives in contracts (enhancing payer/provider networks), operating model (elevating operational discipline), operating efficiency (saving costs), and data/analytics (advancing capabilities with Innovaccer). - Network and provider adjustments: Trimmed 63 provider TINs, 20% payer network rationalization. Focus on physician resources, palliative/hospice program with enrollment up from <1% in 2023 to 2.3% in 2024 with goal of 4% in 2025. - Data visibility: Partnership with Innovaccer on track for full implementation in 2025 to better serve payer partners.

In the third quarter, P3 Health Partners had a top line performance in line with expectations. Capitated revenue was $357.7 million, and total revenue was $362.1 million, representing a 26% year-over-year growth. This growth was driven by a 22% expansion in the member base, which exceeded 128,900 members, and a 6% year-over-year increase in funding. The medical margin was $540,000 or $1 on a PMPM basis, while adjusted operating expenses were flat year-over-year. The adjusted EBITDA loss for the quarter was $71 million or $184 on a PMPM basis. The medical margin and adjusted EBITDA results were impacted by an incremental $5 million to $10 million in medical claims costs and approximately $35 million of retroactive adjustments.

• No formal outlook today but directional comments. $130M+ improvement opportunities in 4 areas. Medicare Advantage repricing and benefit changes expected to drive profitability in 2025. Plan benefits less robust in 2025, expected to decrease utilization. - 2025 is poised to be transformative. Directionally, revenue may have a slight decrement due to network/payer changes, offset by operating improvements from chronic condition coding and documentation.

• Elevated medical utilization, particularly in Part B. - Retroactive adjustments totaling $35 million that impacted EBITDA. - CMS star rating changes elevating quality performance importance and adding pressure on medical practices. - Uncertainty in revenue from network and payer rationalization.

Q: Brooks O'Neil asked about capital availability.

A: Leif Pedersen responded that P3 ended the quarter with $63 million of cash, monitors cash burn rate, and is focused on optimizing working capital.

Q: Josh Raskin asked about 2025 revenues.

A: Aric Coffman said there would be a revenue decrement due to network and payer changes, with ballpark 20,000 members impacted. Amir Bacchus discussed chronic disease initiatives for bending the cost curve.

Q: Jenny Shen asked about the MCR spike.

A: Leif Pedersen explained it was due to delayed information from plans, with non-delegated lives having a larger increase.

Q: Jack Senft asked about payer/provider contracts and market exit.

A: Aric Coffman talked about changing Part D contracts, exiting small markets like Florida, and reducing subscale payer contracts.