PRVA – Privia Health Group – July 28, 2022

U.S. families are burdened with the world’s most expensive healthcare with the prohibitive costs becoming a national crisis. Even with employer health coverage, families are forced to budget a significant portion of their income for health expenses including premiums and out-of-pocket costs. Shockingly, almost half of American adults fear that a major health event in their household could lead to bankruptcy.

However, a growing movement toward value-based healthcare is supplying a framework that incentivizes healthcare providers to focus on the quality of services rendered, as opposed to the quantity. Privia Health Group is one such provider aiming to transform healthcare delivery by providing tools, resources, and technology designed to help manage and improve the health of the communities it serves.

Privia operates as a national physician-enablement company, collaborating with medical groups, health plans, and health systems to optimize physician practices, enhance patient experiences, and reward doctors for delivering care in-person and in virtual settings. The company directly addresses several pressing issues facing physicians today including the transition to the value-based care reimbursement model, ever-increasing administrative requirements to operate a successful medical practice, and the need to engage patients using modern user-friendly technology.

Privia does this by organizing physicians and clinicians into a practice model that combines the advantages of a partnership in a large regional medical group with local autonomy for the physicians and clinicians.

Now managing over 870 practice locations, with 3,300 implemented physicians and providers that serve almost 4 million patients, Privia is now focused on growing its reach and share of the $2 trillion health care opportunity, as it expands its existing markets and enters new markets.

Founded in 2007, Privia was a former subsidiary of Brighton Health Group. In 2013, Privia Medical Group was launched with the first practice in Virginia, then in the proceeding years expanded across several geographic markets including the Mid-Atlantic region, Georgia, as well as Texas, Florida, and Tennessee markets.

New verticals were also added with the launch of its Women’s Health specialty in 2018 and a Privia Pediatrics vertical in 2020, along with a strategic alliance with a prominent children’s hospital in Texas. In 2021, Privia Health launched in the California market and also opened a third medical group in Texas.

The company began trading on the Nasdaq in 2021, as it continued to expand with an entry into California and Montana and an affiliation with BASS Medical Group. In the same year, Privia Care Partners launched, providing a flexible model and robust resources to advance value-based care.

Current chief executive officer, Shawn Morris, is a seasoned industry leader well-versed in driving initiatives to help providers on their transition to value-based services by building strategic partnerships with physicians, health plans, health systems, and employers. In addition, better aligning reimbursements to quality, affordability, patient satisfaction, and provider wellbeing.

Morris was previously the president and chief operating officer of Cigna-HealthSpring, where he was responsible for the financial and operational performance of its Medicare Advantage business, one of the largest private Medicare solutions, that served 1.5 million customers and over $8 billion in revenue.

Privia serves multiple stakeholders across the healthcare market, with its services catering to patients, providers, health systems, payers, and employers.

Currently assisting over 5 million patients across the continuum of care, Privia’s framework provides care regardless of whether the patient is healthy, early-stage chronic, high risk, or a complex case. The framework focuses on access to care through more than 870 center locations, as well as virtual services offering proactive referral management, chronic and complex care management, behavioral health, and palliative care. While its technology provides an improved patient experience and better outcomes through a MyPrivia app and patient portal, including automated reminders for health events, 24/7 virtual immediate care, and nurse care advice. Furthermore, to assist payers, localized provider networks leverage technology and care coordination to lower the risk of costly patient events.

For providers, Privia’s physician-led approach enables partners to practice medicine with comprehensive support while staying connected with their patients. Tools and technology ensure that providers are less burdened with administrative tasks and are rewarded for managing their patients’ cost of care effectively. As a result, the Privia Platform has grown significantly over the past few years, scaling from more than 250 implemented providers in 2014 to over 3,300 partners currently on the platform.

Thanks to physician expertise and complementary technology, Privia helps health systems navigate complex policies, competing priorities, and the changing healthcare landscape. Cloud-based technology unites physicians and integrates into health systems’ existing workflows. This seamless data delivery at the point of care increases connectivity, improves care coordination, and provides data to negotiate risk-based payer contracts.

Finally, by delivering high-performance and custom network designs, advanced telehealth capabilities, and patient engagement tools, Privia seeks to create significant benefits for employers. Innovative, customized medical benefits packages supported by cost-efficient, partner networks aim to provide simplicity of use and reduced friction in the healthcare system.

Privia’s revenue is broken down into three main categories: fee-for-service (FFS), value-based care (VBC), and other revenue. FFS revenue comes from patients in the form of co-pays, coinsurance or deductibles, as well as from administrative services including reimbursements for FFS medical services provided by both Privia Providers and medical groups which are not owned or consolidated by Privia. In addition, payments come from contracts with the U.S. federal government and payer organizations. VBC revenue is generated when Privia’s providers are reimbursed through traditional government reimbursement models, commercial payers, and other direct payer or employer contracting programs. The revenue is primarily collected in the form of per member per month care management fees to cover costs of services typically not reimbursed under traditional FFS payment models. While other revenue comes from services that Privia offers, including virtual visits, virtual scribes and coding, clinical trials, behavioral health management, and partnerships with self-insured employers that offer direct primary care to their employees.

Privia’s platform is purpose-built to help organize physicians into cost-efficient, value-based, and primary-care-centric networks bolstered by strong governance. It is powered by proprietary end-to-end, cloud-based technology that integrates both Privia-developed and third-party applications into a seamless interface and workflow that manages all aspects of the provision of healthcare services for partners. It is also designed to effectively service across demographic cohorts and reimbursement models, including traditional fee-for-service Medicare, the Medicare Shared Savings Program, Medicare Advantage, Medicaid, commercial insurance, and other existing and emerging direct contracting programs with payers and employers. This makes the model highly scalable while providing better outcomes, lower costs, improved patient experience, and more engaged providers. Furthermore, in line with industry trends, it allows Privia to both rapidly build density in new geographic markets and guide those markets from FFS to VBC by shifting the reimbursement model, while helping partners better manage the cost of care through a focus on quality and success-based reimbursement.

Core to this physician alignment approach is a focus on maximizing the potential of a physician’s medical practice across its entire patient panel. It achieves this with a highly flexible payer-agnostic approach to address the needs of multiple types of practices, from independently owned to hospital-employed or affiliated practices, while delivering a profitable model for both Privia and its partners, regardless of the reimbursement model, geographic environment, or specialty. Ultimately, this model is designed to enable significant growth, revenue visibility, low invested capital, and attractive margins.

Privia currently operates in seven states and the District of Columbia, covering over 100 target metropolitan statistical areas, including over 30 of the largest. Its existing provider penetration and market share provide a solid footprint and opportunity to grow, with the company’s growth strategy centered on capturing whitespace opportunities in existing markets and entering new markets nationally over the coming decades. To support this, the company recently began offering Privia Care Partners, a more flexible provider affiliation model to providers who are looking solely for VBC solutions without the necessity of changing their entire electronic medical record platform.

It is expected that organic growth in existing practices will be achieved through providing an enhanced patient experience and value-based clinical model, increasing retention, and driving new patient referrals. While new provider growth will focus on strategic expansion, succession planning, and the use of advanced practitioners. In addition, the expansion of practice services will include improvements such as more convenient virtual care and in-office ancillaries. Revenue optimization through enhanced payer contracting strategies is also expected to drive efficiency and higher revenue realization.

Privia intends to add primary care and specialist services in its existing markets to also enhance growth. A data-driven approach allows the company to efficiently identify primary care and specialist provider groups that would benefit from its platform. Recent initiatives have included the launch of Privia Women’s Health and Privia Pediatrics platforms. They also continue to pursue direct contracting opportunities, including primary care and onsite clinics to be fully integrated with Privia networks.

Privia has steadily grown in recent years and from 2015 to 2021, the company has averaged a 33% annual growth rate in providers joining its platform, which has resulted in a total attributed lives growth rate of 34%. Following its latest quarter, Privia took its trailing twelve months of revenue to in excess of $1 billion. It recorded $313.8 million for the period, blitzing the prior year’s first quarter by almost 47%, thanks to continuing to add provider partners, while increasing the number of attributed lives across 80+ at-risk, value-based payer agreements.

Practice collections increased 63.3%, care margin was up 36.4% and adjusted EBITDA grew 48.8% when compared to the prior year, while Privia continues investing across the enterprise to support this accelerated top-line growth.

Looking ahead, the current business momentum and solid forward visibility are reflected in Privia’s financial guidance for 2022, which has full-year revenue expected between $1.225 billion and $1.3 billion, in line with consensus estimates and representing growth of almost 35% at the higher end.

Privia faces competition in each geographic market from a variety of community-based healthcare provider organizations, including large physician practices, independent physician associations, hospitals and health systems, as well as emerging companies acquiring specialty physician practices.

However, the company believes its practice model and breadth of services offered to all patient types is unique and competes effectively across certain lines of business, particularly, dedicated brick-and-mortar and primary care locations, while having the ability to organize providers into accountable care organizations and partner with physicians’ groups to enable better care delivery.

These advantages have Privia well-placed against competitors such as Oak Street Health, One Medical, Adelaide, Agilon Health, and VillageMD, which are also benefiting from increasing focus as the value-based care industry has received headline news with the recent $4 billion buyout of One Medical by Amazon.

Privia Health is taking advantage of the growing trend toward value-based care to not only deliver better outcomes for patients, but provide a superior and sustainable operating model for both industry stakeholders and the company. Its model offers a tremendous market opportunity for growth in the physician enablement space as they scale nationally.

With a solid balance sheet and positive annual free cash flow, Privia is well-placed to continue executing on its multiple growth initiatives and funding all strategic opportunities in the foreseeable future without reliance on any external sources of capital.