P3 Health Partners Q2 2024 Earnings Call Transcript

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Provided by Quartr
August 7, 2024

Key Takeaways

  • The CEO emphasized P3’s capital-light, full-risk platform of 2,900 PCPs covering 128,100 lives and a total addressable market approaching $1 trillion, driven by a CMS push toward value-based care in Medicare Advantage.
  • P3 launched strategic initiatives including intensifying focus on star ratings, realigning risk contracts, elevating or exiting underperforming providers, increasing member density per PCP, and enhancing operational efficiency for profitable growth.
  • In Q2, P3 delivered 15% year-over-year revenue growth to $379 M, achieved a 6% sequential reduction in medical costs PMPM, and improved its adjusted EBITDA loss by 50% to $9 M, alongside 96% PCP retention and 90% patient persistency.
  • The company bolstered its balance sheet with a $42 M capital raise, finished the quarter with $78 M in cash, cut net cash used in operations to $10 M, and reiterated full-year guidance of 125k–135k members, $1.45–1.55 B revenue, $230–250 M medical margin, and $20–40 M adjusted EBITDA.
  • Clinical operations drove improved utilization metrics with lower admissions, ER visits, and a 22% sequential drop in observation stays, aided by proactive delegated care management and strict adherence to the two-midnight rule.
AI Generated. May Contain Errors.
Earnings Conference Call
P3 Health Partners Q2 2024
00:00 / 00:00

There are 11 speakers on the call.

Operator

Good day, and welcome to the P3 Health Partners Second Quarter 20 24 Earnings Call. All participants will be in listen only mode. After today's presentation, Please note this event is being recorded. I would now like to turn the conference over to Ryan Halstead, Jr, Investor Relations, Gilmartin Group. Please go ahead.

Speaker 1

Thank you, operator, and thank you for joining us today. Before we proceed with the call, I would like to remind everyone that certain statements made during this call are forward looking statements under the U. S. Federal securities laws, including statements regarding our financial outlook and long term target. These forward looking statements are only predictions and are based largely on our current expectations and projections about future events and financial trends that we believe may affect our business, financial condition and results of operations.

Speaker 1

These statements are subject to risks and uncertainties that could cause actual results to differ materially from historical experience or present expectations. Additional information concerning factors that could cause actual results to differ from statements made on this call is contained in our periodic reports filed with the SEC. The forward looking statements made during this call speak only as of the date hereof, and the company undertakes no obligation to update or revise these forward looking statements. We will refer to certain non GAAP financial measures on this call, including adjusted operating expense, adjusted EBITDA, adjusted EBITDA per member per month, medical margin, medical margin per member per month, medical margin per member per month for persistent lives and cash used. These non GAAP financial measures are in addition to and not a substitute for or superior to the measures of financial performance prepared in accordance with GAAP.

Speaker 1

There are a number of limitations related to the use of these non GAAP financial measures. For example, other companies may calculate similarly titled non GAAP financial measures differently. Please refer to the appendix of our earnings release for a reconciliation of these non GAAP financial measures to the most directly comparable GAAP measures. Information presented on this call is contained in the press release that we issued today and in our SEC filings, which may be accessed from the Investors page of the P3 Health Partners website. I will now turn the call over to Eric Kaufman, CEO of P3 Health Partners.

Speaker 2

Good afternoon, everyone. Let me start by expressing how thrilled I am to be at the helm of P3 as CEO from our Q1. P3 Health Partners is a scaled capital light platform comprising 2,900 PCPs in 5 states across 27 counties. And we are taking full risk at scale on 128,100 lives. I would first like to emphasize some key aspects of P3 that give me confidence that we're in a great position to deliver value to our patients, providers, payers, along with our investors over a multi year time horizon.

Speaker 2

First, we are operating in a large and rapidly growing market with our total addressable market approaching $1,000,000,000,000 further accelerated by CMS's goal to have 100% of Medicare fee for service beneficiaries in value based care arrangements by 2,030. Our core focus is the Medicare of which Medicare Advantage represents approximately 51% of the overall market or nearly 31,000,000 Medicare eligible lives in 2023. Less than 15% of contracts in the Medicare space are full risk today, which means we have tremendous opportunity to expand our reach through new contracts and geographies over time. Our unique business model is built on a fully delegated risk strategy, which offers 3 key advantages. 1st, it directly links our company into the daily operations of our health plans, creating avenues for collaboration and building strong partnerships.

Speaker 2

Secondly, it facilitates meaningful interactions with clinicians, essential for success in value based care. Lastly, it provides early upstream insights into requested services, ensuring consistent and best practice protocols are followed for a superior patient experience. Next, our diversified payer mix puts us in a position of strength. Today, no one payer makes up greater than 20% of our revenue. We're partnered across local, regional and national health plans and we're seeing a clear trend in this volatile MA market.

Speaker 2

Health plans are turning to P3. They value our expertise in managing senior populations and our proven ability to help primary care physicians succeed in value based care. This positions us as a key partner to their continued success. Similar to our strong position with the top health plans in our markets, we enjoy excellent relationships with many of the leading independent primary care groups that serve our patients. One of the key aspects I've identified early on is the dedication among the clinicians in our network.

Speaker 2

We partner with 2,900 primary care physicians, but our reach goes well beyond that with thousands of additional clinicians, such as specialty physicians to round out the entire patient care continuum. And all are motivated by their own independence and ability to provide excellent value based care to their patients. Building on these key strengths, I have identified several initiatives during my 1st 90 days as CEO that will further enhance our capabilities and drive sustainable profitability. 1st, we are intensifying our focus on star ratings performance. We are targeting care quality gaps such as improving medication adherence, increasing preventative screenings and enhancing chronic disease management.

Speaker 2

At the same time, we are ensuring patients with chronic conditions are being linked back to their primary care physician to ensure that they get the care that they need. We know what the unique needs of our patients are, their geographical nuances that allow us to develop targeted interventions to address needs and get them the care that they need. Next, upon evaluating our existing risk contract portfolio, I've identified substantial opportunities to better align our agreements with payers. Our goal is to ensure these contracts accurately reflect our enhanced value proposition, which has significantly evolved over the past 2 years. In doing so, we are ensuring better care for our members while improving the financial prospects of our business.

Speaker 2

Transitioning to our provider network performance. While our provider network is an incredible asset we enjoy, we have identified opportunities to elevate our provider partners to an even higher level of differentiated patient outcomes. We've always focused on our efforts on those provider groups that show the most potential for improvement and we will continue to put energy and effort behind our partners. However, going forward, when those best efforts don't lead to improved performance, we will adjust these network relationships with underperforming provider groups accordingly. We've already begun addressing these provider groups and will be further scrutinizing our partnerships in the coming quarters.

Speaker 2

Next, we're pursuing smart growth strategies with a particular focus on increasing member density within our existing PCPs. For example, in ACO Reach, we are enhancing the depth of our existing practices by adding Medicare ACO Reach membership to capture more mind share of the providers we serve. This quarter, we recorded 1700 new voluntarily aligned ACO lives, bringing our total ACO lives to 12,700, up from 7,400 at the end of last year. Additionally, we submitted 200 PCPs into ACO reach in this last cycle for January of 2025 start date. 1 of the first principles of my management team is to deliver the highest level of service to our partners, providers and patients and to do so profitably.

Speaker 2

The company has worked hard over the past quarters to make our operations more efficient and I expect a continued evolution of our business. We are seeing an increasing amount of momentum with medical cost reduction initiatives. I'm looking at every part of our operations across people, process and technology for opportunities to improve efficiency. We will employ an even higher level of rigor, accountability and focus on return on invested capital in the future. Turning to our Q2 financial performance, we reported strong Q2 results, which were in line with our expectations.

Speaker 2

Starting with the top line, our revenue for the Q2 2024 grew approximately 15% year over year, supported by a strong pipeline, an increased retention rate of our PCPs of 96% and an improving persistency rate at 90% of patients. Turning next to our medical cost ratio. Medical costs per member per month were $8.69 a decrease of 6% sequentially, supporting our view of a normalizing utilization trend and reflecting strong execution. Moving on to adjusted EBITDA, we continue to show improvement on a quarter over quarter basis, improving our adjusted EBITDA loss by approximately 50%. For the Q2, our adjusted EBITDA loss was $9,000,000 The improvement in our medical cost ratio was offset by conservative reserve approach.

Speaker 2

Atul will expand on this in this section. Overall, we are on track the initiative set forth and acknowledge the work that needs to be done to be able to drive us towards sustained profitability. Accordingly, we are reiterating our previous full year guidance of adjusted EBITDA in the range of positive $20,000,000 to positive $40,000,000 With that, I would like to turn it over to our CFO, Atul Kapikar.

Speaker 3

Thank you, Eric. I'll begin today by reviewing our recent quarter and our progress towards achieving our full year guidance. Following that, I'll share updates on our liquidity position as of the end of the quarter. 2nd quarter top line results were in line with our expectations with capitated revenue of $374,000,000 and total revenue of $379,000,000 reflecting a growth rate of 15% compared to the previous year. The 2 key drivers of our revenue growth include our member growth, which increased approximately 23% year over year to over 128,000 members, along with our funding, which was up approximately 2% year over year.

Speaker 3

A few notes around this. First, that level of membership already exceeds the low end of our guidance range for the full year. And second, the Q2 of 2023 included the benefit of a recognition of suites revenue in that quarter, which impacts our year over year comparison. Our medical margin was $41,000,000 or $107 on a PMPM basis. This reflects a 6% sequential improvement to our medical cost ratio.

Speaker 3

We consider this a clear demonstration of the impact expense initiatives and a precursor of continued improvement in our profitability this year and going forward. For added context, this includes a modest increase to our reserves in the quarter, reflecting our continued prudence in accruing for potential anticipated claims. We will continue to work with our actuaries and auditors to ensure our reserves are adequately aligned with actual claims paid over the rest of the year. Regarding our operating expense trends, these decreased 14% year over year to be 6% of revenue in the current quarter. This is a continued demonstration of our ongoing focus on expense management.

Speaker 3

We continue to investigate new opportunities to harvest cost efficiencies, including leveraging technology where appropriate and are confident in our ability to deliver on smart efficiencies that still support our profitable growth. Adjusted EBITDA loss for the quarter was $9,000,000 or $23 PMPM. Again, this illustrates strong momentum from the Q1 with a 56% sequential improvement. During the quarter, successfully completed a capital raise of approximately $42,000,000 in gross proceeds. This infusion of capital significantly strengthens our balance sheet, providing us with additional financial flexibility to support our path to cash flow positivity and sustainable growth.

Speaker 3

We ended the quarter with $78,000,000 in cash, while cutting our net cash used in operating activities to approximately $10,000,000 which represents a roughly fifty percent reduction from Q1. Turning to the full year, we are reiterating our full year 2024 guidance. We expect membership to range between 125,000 and 135,000 members with revenue projected between $1,450,000,000 $1,550,000,000 Our anticipated medical margin will be between 2 $30,000,000 $250,000,000 or $165 to $175 on a per member per month basis. And our adjusted EBITDA guidance is $20,000,000 to $40,000,000 in 2024. We are confident in reiterating our guidance for several reasons.

Speaker 3

First, as you know, our revenue recognition policy enables us to recognize revenues related to final once we've received appropriate documentation from our health plan partners and from CMS. At this time, we have received documentation for most of our health plans and are currently working with them to determine these final revenue amounts. We anticipate completion of this work in the second half of the year and expect to recognize this revenue as each plan is finalized. 2nd, we've talked about our efforts around medical cost management and recorded a nearly 6% sequential reduction in our medical claims expense PMPM between the 1st and second quarter of the year. We continue to see traction in important operating metrics as Doctor.

Speaker 3

Bachus will elaborate on in a moment and anticipate further already underway. These efficiencies are under the principle of reducing waste without any adverse impact to our members. While this is not an exhaustive list, we see these as major factors driving our optimism for the second half and look forward to reporting our initiatives as they progress through the year. Thank you again for your time, and I'd like to turn it over to Doctor. Bakkes to provide some important updates on our clinical operations.

Speaker 4

Thanks, Atul. Let me start by addressing the macro environment that investors follow closely and how P3 operations are different. We haven't experienced the same level of medical cost inflation as some payers have been reporting. As Eric mentioned earlier, our diversified payer prevents us from having any meaningful overexposure to a single payer. Turning to some metrics, our overall admits per 1,000 decreased sequentially as did our emergency room visits per 1,000.

Speaker 4

Admits per 1,000 decreased to 11.7% and emergency department visits decreased 10.3%. In addition, we continue to improve on observation rates, demonstrating our ability to execute around the 2 Midnight Rule. Observations for 1,000 sequentially decreased by over 22%, and readmission rates for the company also decreased by 4% to 5% sequentially. Additionally, we continue to see decreasing utilization in our delegated plans for Part B costs around unnecessary procedures, oncological drug utilization and using appropriate places of service. Our care programs are consistently enhancing the health of our most critically ill patients and contributing to a reduction in our overall medical expenses, including through the use of hospice care where appropriate.

Speaker 4

Furthermore, our ability to connect and touch more patients is allowing us to improve in both our quality gap closures and in the understanding of our acuity of our patient mix, thus leading to better knowledge of their conditions and hence better management. As we look forward into the second half of the year in 2025, our strategy will center on collaborating with our highly committed medical groups and directing patients toward providers with more extensive experience. We plan to complement this approach by integrating enhanced clinical awareness tools directly into providers' EMRs and partnering with enablement specialists. This comprehensive strategy will allow us a greater scope to achieve our goals. With that, I'll pass it back to Eric for closing remarks.

Speaker 4

Eric?

Speaker 2

Thanks, Sameer. In closing, I'm confident in the future of our sector in the healthcare industry, the compelling P3 business model, our clear path to profitability and our experienced team. We have a growing TAM, a push by CMS to move all seniors into value based care by 2,030 in a market that reflects the opportunities of value based care with less than 15% of contracts for seniors in a full risk model. As you heard from Amir, P3 is showing improvement across key metrics in Q2 and I believe at my core we are on sound footing and positioned for success. We're not just participating in the healthcare transformation, we're leading it.

Speaker 2

Thank you for your time and I look forward to sharing more about our progress in the near future.

Operator

We will now begin the question and answer session. The first question comes from Brooks O'Neil with Lake Street Capital Markets. Please go ahead.

Speaker 5

Thank you very much and good afternoon everyone. Thanks for your comments and prepared remarks. I have a couple of questions. I'd like to first start by asking Aarek if you could give us a quick sense for how affiliated providers have responded to the change at the CEO level?

Speaker 2

Hey, Brooks, Eric here. Thanks so much for the question. And I've had the chance to get out into the markets and meet with partners. I would say generally very positive and it hasn't really created waves at all. I think Sharif as my successor was a great partner during this transition over the last 90 days and continues to be.

Speaker 5

Great. Let me ask you a different question. So when you and I had dinner together a couple weeks ago, we talked at some length about the opportunity you have to go deeper in terms of getting access to more Medicare Advantage members per doctor and how that might have a profound impact on your results. Could you just refresh my memory exactly what you said and why you view that as a significant opportunity for P3?

Speaker 2

Yes, Brooks. Appreciate the question. It's a really important part of how we think about value care transformation. And so as we discussed that night, whenever we had the chance to meet, the more repetition each clinician gets, the better they're going to be able to practice the new things they're learning and perform on those things. And so as we look at our network today, we already have efforts underway even though it's only been 90 days in of adding additional density within providers and doing so in a way that it's smart growth.

Speaker 2

And I think that you'll see that over time as we continue to evaluate both the network as well as the payer contracts where we have opportunities to expand more deeply on a per provider basis. So that panel density is really important for us.

Speaker 5

And Eric, refresh my memory, I think you told me that with many of your affiliated providers, you only essentially are touching or have control over a small percentage of the providers total Medicare Advantage enrollment base. Refresh my memory roughly what is that number today? What might you think it could go to down the road?

Speaker 2

Yes, Brooks. What I'll say is that we have lots of opportunity for growth in our

Speaker 4

existing networks

Speaker 2

with our primary care providers

Speaker 5

to

Speaker 2

add additional seniors into their panels. And that includes a combination of both Medicare Advantage as well as programs like ACO Reach. And the density that we'd like to get to with each one of our clinicians is as many patients as they can handle within their panels. And we help them manage that with the same processes that we're using with the existing patients that they have today. Great.

Speaker 5

And then let me just ask Atul one quick one. Atul, I think I heard you mention something about sweep timing, but I confess it's been a busy day and my brains are a little bit scattered. So could you just rephrase that or say again whether you thought the impact of sweep timing had an impact on the year over year comparison here in Q2?

Speaker 6

Yes. So, Brooks, a couple of things. So the nature of sweeps in our business, and this is just the reality of it, the timing can be a bit unpredictable whether it fall into one quarter or another. In last year, as you may recall, we had accrued sweeps for calendar 'twenty two final payment in the Q2, which made that Q2 and therefore the year over year comparison a little bit higher. That's all I was alluding

Speaker 5

to.

Operator

The next question comes from Josh Raskin with Nephron Research. Please go ahead.

Speaker 7

Hi, thanks. Good evening. Just want to start with, I want to make sure I got this right. Did you say observation stays were down 22% sequentially on a per 1,000 lives? And then I'm just curious, how are you like, I guess, maybe year over year an impact of 2 midnight rule just seems incongruous with what we're hearing from plans and what we're seeing at the provider level?

Speaker 4

Yes. Hi, Josh. This is Amir. Good to see you. Good to hear you again.

Speaker 4

Yes, actually, we were surprised too as we looked at the data and said, okay, and for us, as you know, we like to be delegated on as many plans or as many lives as we can. So as we do that, we directly work through a concurrent review and monitor that 2 midnight rule. It doesn't just come through the plan and we just accept it. We're actively working with the hospitals and seeing if those patients meet the 2 to midnight rule or deny the admission and or deny the observation stay. In doing that, we have the opportunity to reduce it.

Speaker 4

So for us, yes, after having what we saw in the Q4 of 2023, which is significant increase, we were able to see that bend to 22% sequentially from quarter 1 to quarter 2 of 2024.

Speaker 7

All right. So you reacted to 4Q, but and I assume 1Q, like you may still be running up year over year if possible, right?

Speaker 4

Say that again,

Speaker 7

Josh? Your observation stays in terms of like the decrease there like on a year over year, the 22% is versus 1Q. I was curious if it was down year over year?

Speaker 4

I can get back to you on that for sure and tell

Speaker 2

you

Speaker 4

what it is year over year and we

Speaker 2

can probably have that chat

Speaker 4

a little bit later or possibly tomorrow.

Speaker 7

All right. No worries. On the 2025 strategy, you're talking about this increased density within the physician. I'm curious how you compare that against other growth opportunities even for increasing density and say local markets by adding local physicians or even potentially new markets and maybe adjacent markets. How are you sort of weighing the pros and cons of those growth avenues?

Speaker 2

Hey, Josh, this is Eric. Good to hear from you. So thanks for the question. And I think in terms of the strategy that we have, it's really around smart growth. And when we say smart growth is we want to bring in growth that's going to be both profitable as well as cash flow accretive to the business.

Speaker 2

And as we look at the underwriting for some of the opportunities that we have in front of us, what that means is we're going to try to go deeper in the markets where we are today rather than have something like a big geographic expansion into a new area because we know those opportunities exist.

Speaker 7

And then just last one, can you maybe an update on working with health plans and sort of where did you get to before they submitted their bids for MA for 2025? And maybe any contractual changes that you were keen on getting?

Speaker 2

Yes, another great question, Josh. Thank you for that one too. And the team's been working hard. There's a lot of work and a lot of wood left to chop in the rest of the year to get to our 2025 endpoint. We have several discussions that are currently ongoing.

Speaker 2

In terms of what we're hearing from the bid process and the bid cycle, very consistent is we're hearing a lot of discussion around rationalizing benefits to match the funding and the trends that people are seeing in the marketplace. And as soon as we have full visibility into what those benefit changes are, we'll have a little better sense of exactly what we think the impact will be across multiple fronts, whether that's AP growth or whether that's overall product performance.

Speaker 7

Okay, thanks.

Operator

The next question comes from David Larsen with BTIG. Please go ahead.

Speaker 8

Hi, this is Jenny Shen on for Dave. Thanks for taking my question. I just wanted to touch on, you mentioned some of your conversations that you're having with your auditors. I know that in Q1 of 2024, they were asking you guys to reserve about 9% of your claims cost, which was up from the 3% to 5% historically.

Speaker 6

Just one finer point. The conversations are really with our actuaries. So the actuaries are the 3rd parties that are reviewing claims triangles, establishing risk levels and pad factors and then assessing what they think our reserves ought to be. So to answer your question, those conversations are going very well. We have been working with them since our last call and we continue to work with them and we'll continue going forward working with them, helping them understand some of the nuances with each of our contracts.

Speaker 6

Each one of our contracts is just a little bit different in terms of the risk profile and the nature of some of the information. One of the things that we're going to be stressing with them going forward are some of the really excellent operational characteristics and KPIs that we are seeing and having them factored into their calculus. In fact, we had a few of the plans where the actuaries determined that it was appropriate at the time in the quarter for us to actually reduce some of that pad factor, that safety factor that they apply. And we'll continue working with them as we go forward. So hopefully, that answers your question.

Speaker 8

Yes. Is the 9% pretty similar to what it was in Q2? Or has it gone down from there?

Speaker 6

It has gone down. We'd like to see that go down further, but we will continue to work with it on a plan by plan basis. It's not an aggregated percentage factor. It is at a specific plan by plan level. Some of them have been reduced, absolutely.

Speaker 8

Okay. That sounds great. And just for a quick follow-up, just wanting to ask about V-twenty eight, any updates there? One of your peers recently said that they expected to have 2% impact on 2024. I was wondering if you could help quantify what you think the impact will be for P3?

Speaker 8

Thanks.

Speaker 4

So thanks, Jenny. This is Amir. Again, as we've had this conversation before with version 24 adapting to 28, obviously, going into our last year of it. We with our baseline RASF for us at basically around 1.0 overall for the company. We knew and we have always felt that we can continue to improve the RAF despite version 28, and we've done that.

Speaker 4

I don't have an exact number or percent that I can give you right now today. However, we could tell you, as we just described in the call, that we had an actual overall revenue lift based on what we saw from our RAS. And I think as Atul described early on, we had about a 2% increase in overall revenue, which bodes well as we look at our current and continued MRA or Medicare Risk Adjustment activities. So we're confident as we continue to move not only from what we've seen in the past, but where we're going towards in the future. We're continuing to improve that as we stand today.

Speaker 8

Got it. Thanks for the question.

Operator

The next question comes from Ryan Langston with TD Cowen. Please go ahead.

Speaker 9

Cowen. Please go ahead. Hi, good afternoon. Thanks for the question. We've heard some of the insurers talk about simplifying contracts, maybe reevaluating footprints into 2025.

Speaker 9

Have you had any of those discussions with your payer partners or any, I guess, anticipated changes that you know of in '25 that you'd be willing to call out?

Speaker 2

Hey, Brian. Thanks for the question. This is Eric Kaufmann. I'll give it a shot and then have the team answer anything additionally. But absolutely, we've had these conversations with our payer partners.

Speaker 2

And I think that a lot of folks in this space on the payer side are taking a hard look at what counties work. And we think about the business a lot the same way. This is a county by county view of how the bids are built up and what their products look like and the success that they have or hadn't had. That will be a continuing process. And as I mentioned a little bit earlier, we're in the early stages of getting to our completion for what 2025 will look like.

Speaker 2

So all that's still in discussion. I think it will be a little bit premature for us until we get visibility into everything around benefit design and how that shaking out for the plans as to exactly what that will look like heading into 2025. But it's a big priority for us and we've got our attention on it.

Speaker 4

Yes. And Ryan, this is Bill Betterment. I would just add that in at the level that we would expect? And so we were evaluating not just our payers, but as well as the providers that we're working with.

Speaker 9

Got it. And then just one quick one for me. How should we think about maybe free cash flow for the rest of the year? I don't think I heard anything in the prepared remarks, but it looks like the loss narrowed a bit. Actually, I shouldn't say a bit, pretty decent amount at least from the first half of this year to last year.

Speaker 9

But just curious anything on cadence of that or maybe where we might end the year on free cash?

Speaker 6

Thanks. Yes, Ryan, this is Atul Kapiger. First, welcome. I'm glad you're part of the team here. But yes, we are expecting really the second half of the year probably to look a lot like

Speaker 3

the first half of the year

Speaker 6

in terms of cash burn. One of the things that I think will be a potential uptick factor is with regards to the time lag that some

Speaker 3

of the cost reductions that we are expecting in

Speaker 6

the 3rd Q4 to actually show up kind of through the claims lag and surface themselves within the delegated plans that we have. So that's a direct reduction in the cash out flow for paying claims that we hope to see in the year, but it's really a factor of timing. There's a lot of other factors that go into it as well. I don't want to oversimplify it, but I think the takeaway should be something along the lines of the second half will be very similar to the first half.

Speaker 2

Okay. No, that's very helpful. Thank you very much.

Operator

The next question comes from Ryan Daniels with William Blair. Please go ahead.

Speaker 10

Hey, guys. This is Jack Zumt on for Ryan Daniels. Thanks for taking the questions. The first half medical margin totaled around $78,000,000 So your full year guide implies a pretty solid improvement in the back half of this year. Can you just talk about the visibility you have here in achieving that?

Speaker 10

And just your confidence level of hitting this metric, like really should we kind of think about this as a function of the expected revenue coming in that you mentioned in your prepared remarks against the General Medical margin improvement? Thanks.

Speaker 6

Yes. No, thanks for the question. Let me start off and then I'm sure some of my colleagues may want to add on to it. But I wouldn't put it all on the expectation on revenue improvement. One of the things that we talked about is the expectation.

Speaker 6

And again, it's a matter of timing when we settle with the health plans on an any adjustments related to the sweeps accrual will be and when they show up. But we expect those in the second half of the year. So those are things that we have increasing visibility into. And the other part that we that is going to be a big factor here is the medical cost reduction. We saw a pretty significant movement from Q1 to Q2.

Speaker 6

Our expectation, given everything that we see and here in the field and seeing the data, suggests that we should be able to get at least that much of an improvement going into the back half of the year. And so that those are really the two things that factor together that give us increased confidence in our ability to hit.

Speaker 10

Okay. If I can ask another quick second question. In your prepared remarks too, I think you noted that you guys identified provider groups that could be elevated, which I'm assuming those are just some that are underperforming on average. So comes to kind of like elevating those providers, what does the process typically look like? Is it fairly easy to encourage them to kind of perform more efficiently?

Speaker 10

Or just kind of what are the puts and takes here before exiting the relationship?

Speaker 4

Yes, thanks for the question. So as Eric described earlier in the conversation in the prepared remarks, getting density into those practices is very important. And the more you get into their mind share

Speaker 3

of what they need to be doing, then you

Speaker 4

can get them practicing more efficiently. So for us, even in our large practices that we have, we're having conversations with them to sit there and say, can we concentrate some of the patients into even more experienced providers? In doing so, you can create better results, right. So those are some of the things in the conversations we're starting to have with some of our large groups in the different markets, to actually have them improve even better than where they stand today. The incentives that we align with them as well as the share in the surplus savings align to that very thing, as well as our back end care management programs, etcetera, that work directly with those practices to achieve those results, all work hand in hand.

Speaker 4

So we are confident, especially with the enthusiasm we have with our providers to be able to move more in that accord versus some of the practices that may have very, very minimal lives that are not used to and want to do Medicare Advantage risk. So those types of conversations are the ones that we're having today. And I'll add, this is Eric,

Speaker 7

a couple

Speaker 2

of finer points here too. Agree with everything Amir said. We additionally have made specific investments in the network and in our capability set that will enhance their ability to perform. And then we've stratified groups to understand because it's not just about people that are performing, it's also about people that might be in the middle and moving the middle up a bit as well. And so those are some of the tactics that we've deployed that will give them better access and quicker access to more information on their performance and allow us to in more real time address anything that comes up or maybe there's a misunderstanding or maybe they need more education.

Speaker 2

And this is a one of the things that we emphasize, this is a relationship heavy business. And so it's those relationships then in the market with a 96% persistent providers and a 90% persistent patients. That's the other place where we get a lot of efficiencies in the way we think about our provider panels and network.

Speaker 10

Okay, perfect. Understood. Thanks again, guys.

Operator

This concludes our question and answer session and the P3 Health Partners' 2nd quarter 2024 earnings call. Thank you for attending today's presentation. You may now disconnect.

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