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spk11: Ladies and gentlemen, and welcome to the Preview Health quarterly conference call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session, and instruction will follow at that time. If anyone should require operator assistance, please press star then the number zero key on your touch-down telephone. As a reminder, this call may be recorded. I would now like to introduce Robert Klocher, previous SVP of Investor and Corporate Communications.
spk02: Thank you, Jeff, and good afternoon, everyone. Joining me today on today's call are Sean Morris, our Chief Executive Officer, Parth Mehrotra, President and Chief Operating Officer, and David Mountcastle, our Chief Financial Officer. This call is being webcast and can be accessed from the Investor Relations section of our company website at privyahealth.com. Today's press release, highlighting our financial and operating performance, as well as the slide presentation accompanying our formal remarks, are posted on our IR website pages. Following Sean and Parth's opening comments, we will open the line for questions. We ask that you please limit yourself to one question and one follow-up so we can get through the full queue in a timely fashion. The financial results reported today and in the press release are preliminary, and are not final until our Form 10Q for the first quarter ended March 31, 2021 is filed with the Securities and Exchange Commission. Some of the statements we will make today are forward-looking in nature, based on our current expectations and our view of our business as of May 27, 2021. Such statements, including those related to our future financial and operating performance and future business plans and objectives, are subject to risks and uncertainties that may cause actual results to differ materially. As a result, these statements should be considered in conjunction with the cautionary statements in today's press release and the risk factors described in our company's most recent SEC filings. Finally, we may refer to certain non-GAAP financial measures on the call, and reconciliations of these measures to comparable GAAP measures are included in our press release and the accompanying slide presentation posted on our website. With that, I'll now turn the call over to Sean.
spk01: Sean Esterly Thank you, Robert. Good afternoon, everyone. I'll provide a brief performance summary, including an overview of our investment thesis, growth strategy, and our first quarter performance, as well as an update on where we are seeing momentum and continued success in our business. Then Park will cover a more detailed review of our financial and operating performance and outlook for the year before we take your questions. Engagement with physicians is absolutely key as reimbursement models in the U.S. healthcare market shift to value-based care. Previa Health is purposely building a next-generation physician organization that engages with and organizes physicians into large-scale medical groups covering wide geographic areas in each state. Our model has proven to move providers in a thoughtful and successful manner to value-based care over time, generating over $430 million in savings since 2014. Our strategy is simple but elegant and difficult for others to replicate as we work to achieve massive scale quickly. We have built a comprehensive technology solution directly for our providers to address the key payments they face each and every day. And our solution directly aligns with providers' financial success and facilitates physician autonomy while preserving their current ownership structures. Our value is reflected in our high provider retention rates and net promoter scores from both providers and patients. A differentiation of the Previa platform is our ability to support all providers, all patients, and across all reimbursement models, from commercial to Medicare shade savings, Medicare Advantage, and Medicaid. This differentiation aligns with our provider, health system, and payer partners as they look to serve all healthcare consumers. We enter and expand in new and existing markets with our capital light financial model. This does not preclude us in the future from acquiring a minority or majority stake in an anchor medical practice or even opening a de novo clinic. We will continue to be good stewards of capital, taking a smart and thoughtful approach in making financially sound business decisions. These decisions will be grounded in solid market dynamics and demographics and predicated on market density targets and profitable growth. We are well positioned to continue to monetize our platform and drive growth through five core strategies, Let me walk through each on the next slide. First, we organically grow our existing practices by increasing the number of providers, increasing their patient panels, and helping our providers be more productive. Number two, we look to move markets at scale to value-based care by participating in a variety of risk-based arrangements as they evolve in each of our geographic markets. Third, we expect to capitalize on the white space opportunities in our existing markets by adding new providers and monetizing the premium platform by adding and expanding ancillary services such as labs, imaging, pharmacy, and clinical research when and where it makes sense. We also plan to enter new states or geographic markets and then repeat steps one through three. And finally, we will be opportunistic in acquiring or investing in other service models that expand our platforms. It's important to spend a couple of minutes reviewing our approach to taking risk across many different value-based reimbursement models. First and foremost, Previa Health already participates in multiple value-based care programs across commercial, Medicare, Medicare Advantage, as well as Medicaid. In fact, our medical practices deliver care to more than 720,000 attributed value-based lives and more than 70 risk-based payer contracts today. We are already at scale. We will continue to grow attributed lives and move more of those lives into full risk arrangements over time. Our financial investments are closely aligned with our providers as we share upside and downside risk and we are executing on an intentional long-term plan to enable those providers to transition profitably to value-based care. One very important dynamic on our top line is that our practice collections and revenue dollars only reflect fee-for-service collections care management fees, and shared savings. Under our current partial risk contracts, we are not recognizing the full per member per month premium for our Medicare Advantage lives. We certainly expect this to change as we move more of these lives from partial to full risk arrangements. The Previa Health leadership team has decades of experience in managing and underwriting risk. We will remain focused on profitably transitioning practice to partial and full risk models within both existing and new markets. Let's move on to performance. We started 2021 with strong first quarter results that were at or above the high end of the estimated ranges we provided in April during our IPO process. On a year-over-year basis, practice collections increased 5.1%. Care margin was up 9.7%. and we continue to drive operating leverage through our Privia platform, which helped to deliver platform contribution and adjusted EBITDA growth of 26% and 41%, respectively. Our strong top-line performance in Q1 was generated through both our fee-for-service and value-based care models, of which we expect value-based care to grow faster as more lives move to partial and full risk. And as Parth will highlight, we are continuing to add attributed lives across a number of value-based programs while also continuing to grow organically and providers in our existing markets. As we achieve same-store growth, we are also executing on a number of growth initiatives to enter new markets and leverage our operating structure to drive margin expansion. Now I'll ask Parth to provide additional detail on our first quarter performance and outlook for the remainder of 2021. Parth?
spk07: Thanks, Sean. Over the past seven years, Previa Health has proven its operating model and has delivered strong organic growth with double-digit historical top-line expansion. We expect that level of growth to continue in 2021, given the high forward visibility of our model. As you will see in the charts on the top row of this slide, growth in implemented providers and value-based attributed lives led to a 5.1% increase in practice collections in the first quarter from the same period a year ago. Of note in mid-2020, One large medical practice in our middle class market decided to leave our platform and align with the local health system. In this case, we decided not to utilize our capital resources to retain that practice. Despite this departure, we experienced growth in implemented providers in Q1 2021 over Q1 2020, and that growth continued sequentially from year end 2020 to the first quarter of 2021. Our care margin increased 9.7% from Q1 of last year, This is essentially the gross profit generated by Trivia Health after cost of care delivery, which in our model includes patient care, physician and provider costs, medical claims, cost to build and operate care center locations, and our provider's share of any shared savings in value-based contracts. We showed significant operating leverage with platform contribution increasing 25.9% year over year as we continue to scale our operations and leverage our technology platform. This operating leverage further translated into adjusted EBITDA growth, which was up 41% from the first quarter a year ago, as we scaled our sales and marketing, platform development, and corporate G&A costs. Adjusted EBITDA margin as a percentage of care margin expanded 420 basis points year-over-year in the first quarter of 2021 to reach 18.9%. Our performance this quarter is a great reflection of the inherent operating leverage of our platform as we move down to P&L. Turning to our full year 2021 guidance, we are confident in our business momentum and outlook for the remainder of the year. We expect to increase the number of implemented providers by 11.8 to 13.7% over 2020, and value-based attributed lives by 7 to 10% as we continue to move providers and their patients to risk-based reimbursement programs. Practice collections are expected to grow 11.1 to 12.6% year over year, can reach $1.445 to $1.465 billion for 2021. As we stated in our IPO prospectus, in our model, practice collection includes collections in both states with corporate practice of medicine laws and states with no corporate practice of medicine laws. So as our business grows in states where we don't own the medical groups due to corporate practice laws, our practice collections will grow faster than GAAP revenue. Our care margin is expected to expand by 14.6% to 17.8% over full year 2020 to reach $215 to $221 million, and we expect the operating leverage in our model to drive adjusted EBITDA growth in 2021 of approximately 22.4% at the midpoint of our guidance range. There are a few other assumptions I wanted to highlight with regard to our 2021 guidance. There were some modifications to our pre-IPO stock option program, as well as some additional equity grants as part of our IPO, as we previously disclosed in our IPO prospectus. We expect the fully diluted weighted average number of common shares outstanding to be 110 to 120 million for full year 2021, which includes the pre-IPO period of about four months. Related to that, we expect our non-cash stock compensation expense to be in the range of 195 to 205 million in Q2, and 245 to 255 million for full year 2021, primarily related to our pre-IPO stock option program. Net cash proceeds from the IPO and from private placement were approximately 212 million. So our quarter end pro forma cash balance was approximately 294 million. And with about 34 million in debt outstanding at the end of Q1, Our net cash position of about $216 million gives us sufficient capital and liquidity to pursue our various growth drivers. Given our highly efficient growth and expansion model, we expect CapEx to be less than $1 million for all of 2021, and we continue to expect high free cash flow conversion. And finally, we expect our expected tax rate to be in the 25% to 27% range for the full year. We do have a deferred tax asset that will offset much of our cash tax payments this year. In closing, since this is our first earnings call as a public company, all of us at Privia are really excited to embark on this new chapter in the company's history post the IPO. We continue to transform healthcare delivery experience with our purposeful platform and believe Privia is on the right side of history. We look forward to continuing to serve all our stakeholders, which include our physicians, providers, and health system partners, our patients who entrust their care to our medical groups, our various private and public payer partners, all Privyens and Care Center staff, and our investors who have entrusted us with their capital. We take our responsibility to serve all of you very seriously. With that operator, we're now ready for the first question.
spk11: Thank you. Ladies and gentlemen, if you have a question at this time, please press star, then the number one key on your touch-tone telephone. If your question has been answered or you wish to remove yourself from the queue, please press the pound key. One moment for our question. Okay. Our first question comes from the line of Lisa Hill of JP Morgan. Your line is open.
spk09: Thanks very much. Good afternoon, Sean and Parth. Congratulations on your first quarter as a publicly traded company. I really just wanted to start with your comments around shifting to full risk. I know during the IPO process, you talked about several hundred thousand Medicare lives. So if we think about shifting under Medicare to full risk, can you maybe just walk us through a timeline of when your expectations are that you will have some full risk arrangements? within Privia?
spk01: Yeah, thank you for the question, and thank you for, you know, just the congratulatory. We're excited, as Parth said. This is Sean. I'll touch on that, and even Parth can weigh in also if he chooses to. You know, we've structured, you know, we've structured our contracts in a way, as we talked about through the IPO process on the Medicare Advantage side is kind of build attribution, kind of get to some form of, you know, partial risk and then move into full risk over time. We think it's critically important to do that because, you know, we actually share upside and downside with our positions. And really, at the same time, it's, yeah, we think we're just going to be disciplined and appropriately doing so. We're kind of looking forward to that. We'll see that over here over the next, you know, in the near future, kind of coming up. quarters out there, but we really, these are structured in a manner to do that, but more importantly, we'll do that when we feel it's disciplined and an appropriate time to do that with our physicians. Clark, anything you want to comment on? Yeah, hey, Lisa.
spk07: You know, two other things to add. One is I just want to make clear, you know, we today do take downside risk in a lot of our contracts, both Medicaid Advantage as well as MSSP with CMS. So while it's not full risk, there is downside risk in over 100,000 lives with CMS already. They could potentially move over to direct contracting, as we said, during the IPO process once we figure out the equivalency of the benchmarks and so forth. And then even in MA, we are taking some downside risk. The second comment I wanted to make is – With respect to timing, as you know, we are highly incentivized given our fee structure as we earn three or four X on our value-based book versus the fee-for-service book to profitably move and ensure that they are shared savings in those contracts. And so make no mistake, I mean, we are incentivized as a company and our providers are looking to do the same.
spk09: Okay, and just to confirm, though, that there's no full risk at all in the 2021 guidance, so I should view this as kind of maybe 2022, 2023 opportunities? I just want to make sure that I have that correct.
spk07: That's correct. Nothing in 2021, and then we'll obviously let you know when we get the 2022 guidance.
spk09: Okay, great. Thank you.
spk07: Thank you, Lisa.
spk11: Take the next question from the line of Hylendra Tsai. Credit Suisse, your line is open.
spk06: Yes, actually, Jalen Rasing from Credit Suisse. I had that before as well. Hello, everyone. Congratulations on your first call to the public company, Sean and Paul. You know, this is your first call as a public company, so I think it's very important for you to spend some time on kind of educating the investment community about how your model is differentiated. I mean, over the past few months, several tech-enabled PCP companies have come public, some opening new clinics and centers, some following more partnership approach, some are pair agnostic, some focus on Medicare. I understand the overall market opportunity is big enough for all of them to succeed, but just curious if you can spend some time around your unique differentiation in your model versus others and how that impacts physicians' willingness to work with Previa over others.
spk01: Jalinda, thanks for the question and thank you for You know, just all the work we've done throughout this thing and, you know, building a long-term relationship with us. Yeah, it's a great question. We talked a lot about it, you know, during the IPO process. And I'll start. Park will have some things to add, I'm sure. But if you think about positions out there, we've got upwards of 2,700-plus signed over 2,500, you know, on the platform itself. And we just think it's really critical of those physicians in those 650 care centers to, I mean, their desire is not to practice value-based care on one cohort. I mean, they see all kinds of patients from, like we've mentioned, from commercial to Medicare, you know, traditional that's going through an MSSP product, through Medicare Advantage to Medicaid, and they want to provide that high value, meaning, you know, you know, cost effective. high-quality, differentiated patient experience to everybody that walks through their door and who they see virtually. So I think we attract a physician that wants to do that. They self-select in. And it's just, you know, I think it's important. We believe you need to do that the way the model, you know, where we kind of our land and expand model, where we move into a market. You know, maybe that's a city initially. We have no intentions of staying in that city. We build our medical groups there. at scale over states or multiple states. And we just believe you utilize all the patients that walk through the door, because that's the way physicians want to practice, to move markets at scale to value-based care. I think it's highly differentiated, some of the other ones. And, you know, our doctors share upside and downside with us. We're not, you know, we're not backstopping on risk when they get in it. They know they need the tools. They know they need talent. They know they need the technology. And, They come to us desiring to move there, but they know we'll be very thoughtful and we'll be very disciplined and we'll move there together. But at the same time, they're just as interested in moving to risk as we are, and they know it can be rewarding. But at the same time, the last thing you want to do with a group of doctors or anyone is fail early. So we think it's critical to do that. Parth, anything to add?
spk07: Yeah, thanks, Sean. Jillian, I would have four quick things, quick points. You know, number one is, just to add to what Sean said, you know, we are agnostic to which geographic market we enter, given our diversity of how we partner with providers and payers. So if a market is not involved into a very heavy Medicaid Advantage market with a lot of seniors, that's totally fine for us and so forth, and we are willing to form these large medical groups and then play the long game. The second is it also enables us to partner with very different types of provider groups. So while we are very primary care-centric, we are also focused on other specialists, OBs, pediatricians, and so forth, and building out these large medical groups, and all of them play a role in value-based care, as we know. The third thing I would say is our unique platform also allows us to partner with health systems, which is differentiated, with their employed or affiliated practices, which opens up a big dam for us. As we know, 50% or 60% of providers are employed or affiliated with health systems today in the U.S. And then the last thing I would say is with respect to payers, both CMS and the private payers, our ability to provide a solution across all lines of business, from commercial to MA, is a key differentiation, and we look forward to doing that.
spk01: Yeah, thanks, Mark. Great edge. That's the only thing I'd add. Apologize for. getting back in. But really, you think about as you guys know, we, the all our providers sit on a tech stack, and highly differentiated when a provider joins us as a partner, they leave their technology behind, they leave all their contracts behind, we form that single tax ID medical group. So having that type of I think having the technology is a really big advantage of scaling and distributing information, you know, to and from payers and, and to and from patients from physicians.
spk06: Okay. My follow-up, I was wondering if you could share some thoughts around your decision to not participate in the direct contracting program, especially given the company's exposure and fee-for-service and its ability to generate savings on the platform. And would you consider participating in the future if the program is opened up again?
spk01: Thanks, Jalinder. The direct contracting is an interesting – I think if you looked at Privia, you looked at the management team's background. We are a big supporter and like government programs. We've got 90,000 Medicare Advantage lives as far as they were taking risk on 100,000 MSSP lives. So we really – We appreciate, understand, and are very disciplined in the way about our understanding of government programs. It's new. As we talked a lot about, we're very successful in the programs we're in. And to make a move, because we share upside and downside risk with our providers, it's important for us to understand that program and move there in kind of a thoughtful and disciplined way. And we will do that. So I would anticipate, you know, us, you know, working in many government programs as they, as they're, you know, the guidelines are more clear and what they're trying to accomplish. And anything you want to add there, Park?
spk07: No, I think you covered it, Sean. You know, the one thing, Jen, Andrew, is we have a pretty big MSSP book of business, as we've talked about. So obviously, you know, as we work through with CMS and understand new programs like direct contracting and, how the equivalency works from an economics perspective. You know, that's a big factor into our calculus in the existing markets. But yes, as these programs open up and we feel we can do better, we'll obviously look to move into them.
spk06: Great. Thanks. Congrats again. Thank you, Julian.
spk11: Thank you. Next question from the line is Sandy Draper of Truva Securities. Your line is open.
spk03: Thanks so much, and good afternoon, and I'll add my congratulations. I guess a question but also incorporated in maybe sort of the way I think about something and want to make sure that I'm thinking about the business right. I think as Jalinder said, there are lots of different models out there. A lot of people use care margin, different types of terms out there. When I think about care margin and platform contribution for you guys, I think about care margin as how efficient, the practices are in delivering care and generating savings. And then platform contribution is the next level down is how efficient Privia is at a corporate level to deliver profitability. So one, am I thinking about that right? And then two, because you're guiding to both, how do you think about the difference in visibility to guide to a care margin where some of that is maybe out of your control versus guiding to platform contribution where some of those elements may be more in your control because it's your spending, not necessarily the doctor's care. So thanks a lot to just hear your thoughts on that. Thanks.
spk01: Thanks, Sandy. A couple of questions in there. Park, do you want to touch on them?
spk07: Yeah. Hey, Sandy, thanks for the question. Yeah, so, you know, I'll move a step up, Sandy. You know, our practice collections has two components, as you know, a fee-for-service book and a value-based care book. The one key difference, as we outlined, is in a partial risk value-based book, what we are recognizing in practice collections is essentially the shared savings. So that can equate to the medical margins in a full risk contract, as some other companies state. So number one, I think it's important to know the differentiation where it's not apples to apples and our practice collections understate the true extent of the total medical premium revenue or medical costs. Our care margin, just to make one minor correction in how you defined it, is all the dollars that come to Privia after we've made all payments to physicians. So that includes their portion of the shared savings, their portion of any of the fee-for-service or value-based payments. So nothing at the care margin line or below goes to the physicians in our model. You know, we have very good visibility at both the practice collections level and the care margin level because we understand what our fees are in both books of business. And then below that is all our operating costs to support our practices, which is also in our control. So I think we have good visibility in all three.
spk03: Okay, great. That was my question. Appreciate it.
spk11: Thank you. Next question from the line of Brian Daniels of William Blair. Your line is open.
spk04: Yeah, thanks for taking the questions, guys, and I'll add my congratulations on the quarter and the recent IPO. I want to talk a little bit about the provider pipeline. Obviously, a big part of your growth is additions to the platform, and you've been very successful there. So a two-part question, one, just getting an update on the outlook for the remainder of the year and then into 2022, and then number two, I think another unique thing about your platform that you didn't discuss is the ability to work more with health systems to help them with provider alignment or enable their medical groups or maybe an alternative for groups that aren't functioning well under hospital ownership that could work well under your model. So could you share a little bit on those two topics as well? Thanks, guys.
spk01: Yeah, Ryan, thank you. Thank you for the congratulations. I'll start us off kind of high level and let Parth kind of dive into those. I mean, interesting enough, our pipeline we feel really good about, kind of going into, you know, obviously this year as well as next year. Started off, as you can see, the quarter really, you know, year really well with a strong quarter. And it's, I'd say, kind of on the health system, as Park mentioned earlier, I believe it was Lisa or Jalinda that asked about the question about differentiating health. I mean, it's something our peers are not doing is working with a health system. And we learned through COVID, because we'd started this about three years ago with a health system down in Florida that we're trying to accomplish quite a bit of things around their group and having higher performance, especially on the value-based care side and looking for high-performing technology. But what we went through with COVID, we had a lot of – health systems reaching out, you know, ones that were, you know, similar to the ones we work with from an IDN perspective, but others that kind of cross the gamut of what they want to do with their employed group, but probably most importantly, what they see possible to do with the community physicians that aren't employed today. Almost, you know, not 100%, but a lot of these health systems don't desire to employ additional physicians. They like the Privia Light model. It's very attractive to them. And what type of relationship can we have with that health system, be that in a joint venture, be that in a bunch of different ways? And we kind of, you know, the way we start that process is we first off, we want to see if their vision aligns with ours around value-based care. what they're you know what they're trying to solution for is it a full technology replacement on the ambulatory side is it connecting back with something they already have is it you know obviously it's always you know kind of how can their doctors perform better in value-based care and then it's always what can we do in the community together to kind of grow their with what you know grow their physician alignment strategy without having to purchase doctors and um I think these tend to be a little bit longer sales cycles, as you can imagine. Health systems are going to be that way. But I believe we're on the front end of this kind of wave, and I think it's a solution that a lot of health systems out there, depending on their strategy, will actually desire to kind of think through and work through with us. Mark, do you want to add anything to that?
spk07: The only thing I would add, just so folks appreciate, is the flexibility that we have in our model to pivot the strategy based on the needs of any particular health system. You could have a very large IDN, multiple states, that's very happy with the employed group, and then we are really working with them on the community physicians, as Sean said. On the opposite end of the spectrum, you could have regional health systems, much smaller, who might say, look, we really don't want to employ any physicians, especially primary care, and could you help us get them out of employment and stand up as an independent viable practice while maintaining all the alignment that they have with us? And I think across those spectrums, our model can really work with them. And then most importantly, I think we are uniquely positioned to help them transition into value-based care. You know, that model obviously is not naturally set up to succeed and to risk contracts. And I think us working closely with physicians, their physicians and community physicians can really help them do it.
spk01: Yeah. Brian, I'd probably end them. If you just think about sheer TAM that's out there and available, and we all saw kind of the recent, I think it was the AMA that put some things out the last couple of weeks, but I mean, just sheer TAM that, you know, if it's over half the physicians are affiliated with some type of system and there's less, that are just purely employed. So if you're dependent upon one or the other, you don't have access to the other TAM. So we just think this opens us up to, you know, as long as the strategies align to a much larger TAM. And we all know most systems, you know, it's rare to see a system that's not struggling or wanting to do better kind of moving to value-based care.
spk04: Absolutely. Great. Thank you so much, guys.
spk11: Thank you, Ryan. Thank you. Next question from the line of Josh Raskin of National Research. Your line is open.
spk10: Hi, thanks. Good evening, guys. Here with Mr. Percher as well. So two questions. The first one, hopefully just an easy one. Just the S1, I think you alluded to this, Sean, in your prepared remarks, had some estimates around gap revenues, care margin, platform contribution, EBITDA, et cetera. It seems like everything kind of came in at or above the high end of those ranges. So Were there some specific areas of unexpected upside, something, you know, trends that got a little bit better in terms of, you know, overall utilization of the system, or was that just sort of appropriate levels of conservatism in light of the IPO?
spk01: Hey, Josh, tell Eric hello. You know, I don't think there was any material kind of changes, Parth. Anything you think you had there?
spk07: Yeah, sure. Hey, Josh, Eric. Yeah, thanks for the question. You know, two quick things. One is, I think we saw strength in both fee-for-service and value-based books. Obviously, you know, in the quarter, early part of January, February, we were still in the midst of COVID in many states. And so there was some uncertainty around that. And then you got the Texas freeze, which obviously impacted folks going into the physician's practice or even conducting care virtually with the power outages. So I think despite all of that, it was much better than we expected. On the value-based book, and I want to tie it to a question Sandy asked, given in our precious collections, we are recognizing the shared savings. So even slight outperformance in value-based shared savings translates down the P&L into EBITDA. And I think that's very important in our model, given the operating leverage we see, where if we outperform on a value-based book, given medical margins effectively, what we are recognizing in practice collections, you can see that outperformance on EBITDA as those dollars flow, a lot of those dollars flow down to P&L. So, you know, I think that was a good surprise for us on the upside.
spk10: That makes sense. I guess with potentially some of the lower utilization, maybe that hits fee-per-service, but on the value-based care side, if there's lower utilization, that, you know, revenues almost are EBITDA. Is that the right way to think about that? Yep. Yeah. Okay. And then can you just speak to the timing of sort of setting up new entry in new markets? And is January 1 an important date, right? You know, I think about contracts with Medicare Advantage and even commercial contracts tend to reset around that. But is this much more about finding the providers and signing the contracts and then, you know, maybe any specific color on how we should be thinking about new market entry as we get closer to 2022?
spk01: Yeah, Josh, I'll kick it off and Park can even, he'll weigh in and maybe kind of speak to kind of what was in the bottle. But yeah, our business is more around, you know, think about it that there's that anchor sale, you know, that we're recruiting an anchor out there. It seems to be a little bit longer term than depending on the size of the practice and, you know, kind of who you're working with and, you know, did their visions align with us? You know, a smaller one probably, you know, kind of facilitates a little bit a little bit, you know, quicker, you know, I guess for lack of a better word, health systems are longer, like I spoke to a while ago. The, you know, once you get, once you kind of landed that market, you know, what we refer to as our machinery and kind of how we grow that is, is actually ramps up pretty well. And it's, you know, the, you know, a lot of our physicians are kind of still in that, you know, final, those ones we add on that same store growth in the market is in that, you know, it's kind of that below the, you know, kind of five practices and five docs in a practice and below. So that ramps up and kind of runs at a more predictable pace. And then, you know, kind of, but it is about kind of finding those providers, having those discussions. It's an ROI business solution. As you guys know, we're not, we're not just selling a Medicare advantage contract or something. We're selling, you know, the whole, the technology, the, all the platform services it's going to have do that from do well from fee for service to, the value-based care, the wraparound kind of ACO model that we run all of our value-based arrangements through, and then the platform itself where it makes sense in a value-based way or adding ancillaries that work long-term in value-based care as well as clinical research. So it's an ROI solution sale, but it is about finding those markets and then the machinery kind of kicks in over time. Park, anything to add on what's kind of What are we thinking there?
spk07: Yeah, Josh, just to answer your question on timing. So what's in the model is no new markets for 2021. So our guidance does not include anything, but we are actively obviously having multiple discussions. In finding an anchor partner and opening a market, January 1 is not important. We can do it in the middle of the year. It just depends on the timing. You saw it last year. We opened up Tennessee in Q4 in the middle of COVID-19. end of Q3. So that really doesn't matter. And if we do that, we'll obviously update the guidance and provide the appropriate disclosure. And then obviously from a value-based contract perspective, mainly things reset 1-1 in a new market or an existing market. So, you know, MA attribution, et cetera, kind of with the AEP enrollment, that we're subject to the same timeline as others.
spk10: Perfect. All right. Thanks, guys. Thanks, Josh.
spk11: Thank you. Next question from the line of Richard Close of Tenacord Trinity. Do you want this open?
spk05: Thank you. Congratulations. In order, just a question. I appreciate the comments on the pipeline. Can you talk a little bit about the competitive landscape? You said you're having lots of discussions now, but Are you guys the only game in town? You know, are the practices, you know, thinking about, you know, what they're doing now and choosing you guys, or are there other players that, you know, you're essentially competing with in those discussions?
spk01: Richard, I'll start. Sean, thanks for the congratulations. Congratulations. You know, doctors always have a choice in what they're going to do, and it's not just in this, you know, in this space of the physician enablement space. It's just in life in general. Think about a doc when they, you know, let's be kind of aware, I guess, in current time, a physician graduates medical school. You know, we can kind of guess at their age. Maybe they've got a Maybe they've got a young family. Maybe they've got debt. They're thinking about kind of maybe more of a job type. That could be with our health system. That could be in a downstream trivia group. So they kind of come out of school. They've got other things on their mind besides kind of hanging a shingle and getting started. Obviously, there's something to do that. As they, you know, kind of mature in age, and I would even add confidence in their ability to kind of, maybe kind of take care of more complex patients. Some of them, they kind of come out, they want to join a group, maybe be a shareholder, hang a shingle. We obviously have some models that allow them to do that. And then sometimes towards the end of life, I'm sorry, the end of their career, they want to sell their practice. So we've got models that actually can transition docs and succession plan and so forth. The docs that we tend to attract, Richard, are those docs that are They're going to be a little more entrepreneurial by nature. They're going to be, they're looking for something much larger. They've come to the conclusion that, you know, they're kind of 10, 15, 20 years left in their practice. They're going to be doing this a while. They want to do it well. And they just don't want to do it in one cohort of patients. And they don't want to be an employee. So it's a, you know, it's a, like I said, we've always talked about it's a solution cell. And they come to us as a partner and, and we provide the services and, and kind of share that risk up and down and, and, you know, with them and kind of work them through this over a period of time. And we're really thoughtful about that dynamic because I mean, they're, you know, that they're, they're, you know, there can be an entrepreneur of one or they could be entrepreneurs of a practice of 400. So you, you really were partners with them and we really kind of think through that. Park, anything to do that?
spk07: Yeah. Hey, Richard, just quickly on the competition piece. Look, uh, I'm not going to comment on what other companies go after and how they're facing it. To tie to the answer we gave to the question Jalinder asked, our TAM, I think, is the broadest, given our solution set is also the broadest across all lines of business. And so I think we face competition from a wide variety of folks for different types of practices. There could be practices that You know, obviously those who want to stay independent and want a full solution set across all lines, you know, we're the natural choice. If folks are only focused on MA, then obviously we do face some competition from MA-only players. And then folks who want to sell, obviously, you know, you can compete with health systems or, you know, other buyers of practices, private equity or opt-in, etc., I do think, you know, even if folks are aligned with other models, they could participate in the Privia model given our flexibility across all lines of business. So, you know, no specific answer, unfortunately, for you, but, you know, our broad solution set and TAM allows us to go after many different kinds of practices that, you know, we think other models have some sort of limitation on.
spk05: Okay. And as a follow-up, can you – provide any additional details? You mentioned the Anthem investment. Just any more information in relationship to maybe the collaboration agreement going forward?
spk01: Yes. Richard, the Anthem agreement, they invested $92 million at IPO. it is a collaboration agreement. There's, um, it's, it's not exclusive. Obviously they can work with any provider they want to. We can work with any, um, payer we choose to. I think it's more of a, I mean, it's, we, you know, we contract with them in a couple of our States in a big way. You know, I think it's a reflection of our performance with them and, you know, they're excited if we can grow along with them and where they are and if we can perform in similar manners, it's, um, You know, that's the way the arrangement works. I don't think it's limited to an anthem type of relationship. I think there's other payers out there that obviously would desire for us to work in a very similar fashion. Park, anything you'd add? No, thank you. Thank you. Thank you, Richard.
spk11: Thank you. And our last question is from the line of Jessica Tassant of Pfeiffer Sandler. Your line is open.
spk08: Hi, congrats on the first quarter and thank you for taking the question. So 2021 guidance kind of suggests that practice collections are going to grow at roughly two times the rate of revenue in 2021. So I was hoping you guys might be able to just review in terms of market mix and maybe reimbursement mix what would drive practice collections and revenue growth rates to diverge in a given year. And then also what might drive them to converge in a given year or in 2021.
spk01: Yeah, thank you. Parth, do you want to take that one?
spk07: Yeah. Hey, Jess. Thanks for the question. So there were two drivers for that divergence. One is obviously as we grow faster in states with corporate practice laws, Texas, Tennessee, Florida, obviously that's recognized in practice collections and on GAAP revenue. And then secondly, we obviously have this anomaly of this one practice that left us in mid-Atlantic, which is a non-corporate practice state, so fully reflected in GAAP revenue, and therefore, you know, that caused some of the divergence. So I think over time, you know, we'll guide you on mix if you open a new market, whether it's corporate practice or not, so you can model that out. But it really depends on the mix going in, you know, as to how each book of business is performing in those mixed states. Okay.
spk08: Got it. And then just as utilization kind of comes back online, can you talk about the benefits to Privia relative to some models that might focus exclusively on primary care, both in terms of fee-for-service and value-based care revenue?
spk07: Yeah, absolutely. That's a great question. Obviously, on the fee-for-service book, we benefit directly as utilization comes up. And so that's a direct benefit in all our markets. It also helps us that, you know, we have some select specialists. So it's not primary care oriented 100%. And so you can see some of those utilization rates will come up more so, including the pediatricians as those visits have been, you know, they got hit pretty hard with COVID. So I think that would benefit us tremendously relative to other and focused only models. And then on the value-based side, look again, you know, there's a reason we are thoughtful about taking full risk. COVID depressed utilization, so MLRs were lower across the board, and obviously that's a headwind. In our value-based book, we've hopefully appropriately so modeled the right amount of utilization going in, and partial risk contracts protect you if there's a spike in utilization. So I think there'll be, this year as how it progresses and utilization spikes up towards the second half predominantly as vaccinations increase, you know, it'll be interesting to see how different companies perform across the space.
spk08: Got it.
spk07: Thank you.
spk11: Thank you. And I'm not showing any further question. I would now like to turn the call back to Mr. Morris for any further remarks.
spk01: Thank you, operator, and more employee guys. We want to thank each one of you for joining us on our inaugural earnings call, and we appreciate it. We're looking forward to building a long-term relationship with each one of you and look forward to speaking to each of you soon. Thanks a lot. Have a good evening.
spk11: Ladies and gentlemen, thank you for participating in today's conference. This concludes today's event. You may all disconnect. And everyone, have a great day.
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