P3 Health Partners Inc. Q3 FY2024 earnings call

• Broader Medicare Advantage landscape: Sector facing pent-up demand post-COVID, value-based care in need.
• Third quarter 2024 results: Impacted by $35 million retroactive adjustments and $5M-$10M elevated medical claims costs.
• Initiatives: $130M+ of improvement opportunities in contracts, operating model, operating efficiency, and data/analytics. Trimmed 63 provider TINs and 20% of payer network. Focus on providing physicians resources, curbing utilization, expanded palliative/hospice programs (enrollment up from <1% in 2023 to 2.3% in 2024). Partnership with Innovaccer on track for full implementation in 2025 for better data visibility and serving payer partners.

P3 Health Partners' third quarter top line performance was in line with expectations, with capitated revenue of $357.7 million and total revenue of $362.1 million, representing a 26% year-over-year growth. The member base expanded significantly, growing by 22% compared to the previous year to exceed 128,900 members. Medical margin was $540,000 or $1 on a PMPM basis while adjusted operating expenses were flat year-over-year. Adjusted EBITDA loss for the quarter was $71 million or $184 on a PMPM basis. Revenue contribution is driven by member base expansion and increased funding.

• Directional comments on 2025: $130M+ improvement opportunities in 4 key areas. 2025 poised to be transformative. Revenue expected to have decrement due to network/payer rationalization, but offset by operating improvements in chronic condition coding/documentation. Cash burn rate being monitored and optimized.

• Elevated medical utilization, isolated in some parts like Part B and certain health plans.
• Significant retroactive adjustments impacting EBITDA.
• Benefit design changes in 2025 could impact utilization.
• Market competition and potential revenue decrements from network/payer rationalization.

Q: Brooks O'Neil asked about capital availability to execute initiatives, with P3 having $63M cash at quarter end and $20M cash flow deficit.

A: Leif Pedersen said $63M cash supports operations, monitoring cash burn rate and optimizing working capital.

Q: Josh Raskin asked about 2025 revenues and risk exposure.

A: Leif Pedersen said slight revenue reduction due to payer/provider rationalization, offset by operating improvements. Aric Coffman added expectation of revenue decrement from network/payer changes.

Q: Jenny Shen asked about MCR spike and 2025 MCR.

A: Leif Pedersen said MCR spike due to delayed info from plans, Aric Coffman said benefit design changes in Jan will have immediate effect.

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

A: Aric Coffman said working on Part D contract changes, exiting subscale and underperforming payer contracts, and example of exiting Florida market.