Privia Health Group, Inc. (PRVA) Earnings Call Transcript & Summary

Good afternoon. My name is Lisa Gill, and I'm the health care services analyst here at JPMorgan. I am incredibly happy to have with us this afternoon Privia Health. Privia Health is a physician enablement company. We're going to kick off the presentation with Shawn Morris, who then will introduce some of his other management team. Shawn, do you want to kick things off? Thanks so much for coming this afternoon.

Thanks, Lisa. it's always a pleasure. We've been doing this, I guess, goodness, I don't know, 3, 4 years now. We enjoy it. I have Parth Mehrotra, with me. Parth, the President and COO. And I'd also like to introduce Jeff Sherman. We announced Jeff last week, and I'm going to turn it over to him. I want him to introduce himself here for a minute or so, and then I'll jump back in. Thanks, Jeff. Go ahead.

Thanks, Shawn. Really excited to join Privia. I've been in health care finance for over 30 years with the exception of 1 of those years with public companies. I've worked in hospitals for 25 years as a hospital CFO, divisional CFO, treasurer, and company CFO for companies like Humana, Tenet and LifePoint. I spent a year in the post-acute industry, and I spent the last 6 years with HMS, a publicly traded company that was focused on eligibility, payment integrity and population health management. I helped lead the sales process of HMS, Veritas Capital in 2021. So very excited to join the team with Shawn and Parth, and excited to be here today. Thanks.

Thanks, Jeff. As you can imagine, we're excited for Jeff have to be on board. We've got a lot of momentum. We're growing, and he's going to really bring and add value. I'm going to go to Slide 2 for those following along. It's our disclaimer slide. I'm definitely not going to read this as Robert typically does in a speedy -- you've all seen these and just protecting ourselves for the disclaimer. Moving on to Slide 3. A little bit -- I'm going to -- just kind of the way we'll progress as I'm going to -- I'll do this slide to you a little bit about Privia and a lot of you folks know who we are. We presented at the conference for years now, and will turn it over to Parth and he'll run through the remainder and then, as Lisa mentioned, we'll do some frequently asked questions. But at Privia, we're really, I think, the good thing about what we're trying to accomplish here. And as this slide says, building the next generation, what we would say, delivery system out there. And really we had the luxury of almost 8 years ago now, doing this in a manner and we've all been around for a while as Parth like to remind Jeff and I -- he and I are a little bit longer than he has, but we allow him to do that to us. But really, the key there is where I'm headed is to kind of not to make the same misalignment struggles that I think what the history would has done so in the past. And we're really trying to avoid those misalignments. Really, we know that physicians like autonomy, and I don't just mean independent -- fiercely independent doctors, we all know that. But just generally speaking, whether employed or fiercely independent, doctors want autonomy. They want to see their patients. But they want a partner that can help them be successful, and not just in a niche products such as Medicare Advantage. We all know the importance of that. We have a lot of that business, and Parth will kind of get into our dashboards and so forth. It's really important to Privia. It's -- that sector of patients is at least more deserving, if not than anyone else to have great health care, but really across the board. It's commercial, Medicaid, traditional Medicare as well as Medicare Advantage. Kind of the differentiating model, our business model is what we've been able to do is take that single tax ID medical group that we can -- that we've built in every one of our markets really from -- literally from 4 physicians 8 years ago to over 3,200 now at single tax ID, wrap that with a risk-bearing entity in our model, we call that an ACO. And then enable that with the clinical and performance platform, which part of me and Parth will touch on pretty significantly throughout the presentation. I think the other differentiating things is -- I've touched on it already before, it's across all provider types. It's regardless if they're employed or if they're fiercely independent, all reimbursement models. We've got over 70 value-based care arrangements. Today, we take care of over 3 million patients. In those value-based arrangements over 750,000 attributed lives, and they cover, like I said earlier, from commercial to an upside all the way to a fully capped Medicare Advantage, which we announced last week. But it's a proven model. It's -- I think -- we've been able to do -- prove that across the -- over the last 7 years, grow the business tremendously. We've got a lot of momentum. And we're very pleased with where we are, and we come to work every day, work for our physicians, partner with them in order for them to have a sustainable model long term. And again, we partner upstream with our payers. So with that, I'll be back when we get to the Q&A, and Lisa has got several of those on tap. And I'm going to turn it over to Parth. Parth?

Thanks, Shawn. So on Slide 4, this is our national footprint. Two quick points here. First is to what Shawn said, the fact that Privia is able to partner with all kinds of providers, single specialty, multi-specialty health system, employed, affiliated, all kinds of specialties in every setting and all kinds of reimbursement models allow us to access what we believe is one of the largest TAMs in this physician enablement space. So our model is applicable in every single state in the country. We are agnostic to where we enter. We usually go with areas of high population and physician density. But other than that, the whole country is pretty much open to us. The second point I'd like to make is if you look at our stats on the right side of the page, whether it's number of providers, number of patients at 3 million, lives at 760,000, 850 locations in 7 states, we are already one of the largest provider groups in the country in aggregate with the scale and density, which is very proven across very disparate markets. And I think that differentiates us, and we're looking forward to entering many new markets over the next few years. On next slide, Slide 5, just as a macro strategy perspective, we think we have a pretty simple, elegant and repeatable model where we enter a market, which is typically a state, we established these big medical groups, grow them over time, organically, establish our risk-bearing entities and increase attributed lives on those. We help organize these providers into high-performing groups and drive improvements across their entire book of business. And then we are moving -- helping them move to value-based care in a very unique and differentiated manner across all lines of business. Value-based care in the U.S. can happen in commercial, in MSSP with the CMS, obviously, in Medicare Advantage. And again, I think we are one of the unique models that can do all of them. And we are agnostic to where a state or a geography might be in its evolution. And this gives us a very sustainable model that is applicable in every single geography in the country. Slide 6, just to build on that shows our value-based book. Again, with about 760,000 lives across commercial, MSSP, MA and Medicaid, we think we have one of the broadest platforms that you can play this theme across these different lines of business in 70-plus at-risk payer contracts. We work with all the major national payers with CMS, and it speaks to the sophistication of the platform. We are increasingly moving towards taking a more downside risk in each bucket. We recently announced a couple of days ago in taking about 23,000 of our MA lives into capitation arrangements. We take significant risk with CMS in the MSSP book in the ENHANCED track, one of the largest, most successful ACOs. And I think our model is really proven and underappreciated from that perspective. On Slide 7, ultimately, Privia is predicated to the value we provide to our physician partners. And we can demonstrate this value across their entire book of business. Fee-for-service, expense savings, better throughput, productivity and then obviously, moving to value-based care and increasing their revenue. And over time, a Privia physician is expected to increase the top line from 30% to 100% over time. And then obviously have some expense savings and all that leads to higher physician pay productivity and better satisfaction. Slide 8. The key to our model is Privia is very capital efficient in how we've built this. We are not building practices or clinics. We're not buying medical groups. We fundamentally believe by aligning physician practices in this unique model where they get the best of both worlds, they retain their independence and autonomy while being part of a bigger entity, a bigger medical group allows us to influence outcomes without the ownership of the underlying practice and allows us to scale and be present in, as you saw, 850 locations with 3,200 providers already, with very minimal CapEx. Our CapEx is less than $1 million. But more importantly, what it allows us to do is establish medical groups where physicians are part of a common risk-bearing entity. It's physician led. They influence the best clinical practices. We are integrating them on our technology and clinical operations platform. And then fundamentally, more importantly, we are financially aligning our interest with them. We do well when they do well. In our value-based book, we share the shared savings, 60-40. And it allows us to have a level of alignment that we arguably think is more powerful than even employing or building our own 4 walls and employing the doctor. On Slide 9, shows the progression that we go with our different medical groups where we start with practice fundamentals, improve the experience, get the practice to be high-performing medical groups and physician practices. And then over time, depending on the level of risk we are taking in value-based arrangements, increase the level of focus we have at different aspects of the clinical operations to increase -- to get the outcomes that we are desiring in advanced clinical models, all the way through capitation on the far right. We think we have a unique platform that's been built over the last 7, 8 years to have a level of efficiency at very large scale across all lines of business. And our operating platform, coupled with our technology stack that I'll just go through is a unique aspect of our business that allows us to do that with all kinds of physician practices in the country. Slide 10 shows our proprietary tech stack. A unique aspect of this is, again, the ability to work with all types of provider groups across all lines of business, helping them succeed in fee-for-service, in value-based care. Our technology stack allows us to integrate more than 30 different point solutions in this entire workflow in a very unique manner that allows the physicians to have a single interface and succeed in whatever -- with whatever patient they are seeing in whatever reimbursement environment. We think it's fairly unique and allows us to scale pretty rapidly and manage very large pools of populations and value-based arrangements with the data that we can control. Slide 11 shows different aspects with which we can grow our business. A unique aspect of the Privia model is there are multiple drivers to grow this business very sustainably over long periods of time. Starting on the left, we have a very large installed base of about 3,250 providers already in 850 locations. They're all going same-store, increasing their patient panels, having better contracts, moving a lot of those lives into different value-based arrangements in the yellow bucket. And then increasing the level of risk we take over time. And then obviously, with the white space that we have in the existing geographies, we are adding new physicians to our existing medical groups at a pretty rapid clip. And then we can enter, as we said, any -- multiple new states, we're just being in 7 today. And then effectively repeat green, yellow and blue here with our strategy of building these big routes and moving to value-based care. And then over time, we'll use some of our capital to work and grow the business through acquisitions and so forth. All of that leads to -- you can see the progression of the business in this first year of being public. Over the last year, we increased our guidance from May through Q3. We are reiterating that guidance given the high visibility we have in the business. And then obviously, a lot of momentum, as we've said, with entering new markets, entering into capitation that gives us a lot of comfort in this guidance and then hopefully closing out the year strong and going into 2022 with acceleration of growth. With that, just to summarize again, really proven, scalable platform, focused on all provider types. As I said, one of the largest TAMs and accessible to us within the health care ecosystem. A great set of technology and operations capability with a great leadership team, and we look forward to creating value for our shareholders. With that, Lisa, we're open to questions.

Okay. Great. Thank you for that rundown. And I feel like part of my first question, it's really been hovered between you and Shawn. And that's really describing the difference from a competitive standpoint, right? And so you talked about low capital. You talked about the common tax identification number. You talked about the number of physicians that you had. But maybe if you or Shawn can start with, why does a physician select to be part of Privia rather than one of the other physician enablement companies that are out there today?

Yes, definitely, I'll start. Shawn will add. Obviously, a unique aspect of what we provide is a holistic solution for the entire medical group. We're not going in with one particular contract with one particular population segment in mind. If you take a multi-specialty group that could comprise of a couple of PCPs, some OBs, some pediatricians, some specialists, we are one of the unique platforms that can offer a very holistic solution to all of them in its entirety. So we are focused on the commercial book of business as well as the value-based book, which is applicable to adjust the PCP. So we're not going in and saying, here's an MA contract with full capitation, and that's only applicable to the 2 PCPs for a subset of their lives. We are going in and transforming the whole practice from a technology standpoint, from a system standpoint, processes and enabling ultimately for that practice to succeed and grow and the doctors to benefit financially and then holistically from a lifestyle point of view. And I think that's very unique to us. The last thing I would say is twofold. One is health systems are a unique element in the health care ecosystem where there's new year consensus, they are the losing entity as the world moves to value-based care. And we think Privia is one of the unique platforms that can partner with them in a physician alignment strategy that is, again, pretty holistic and unique versus a lot of the other companies. And then finally, it's a capital-light model. We are very conscious of not building or buying and misaligning interest. It allows us to scale very rapidly, and it's a very self-selecting model. So I think physician practices joining us are self-selecting into the Privia model, and it shows in our high retention.

Yes, thank you. Lisa, I think what we're trying to do and of all the things we just touched on is physicians are realizing that -- everybody understands the lure of being able to manage Medicare Advantage and what the advantages are when they do that. But I think what they're looking for is a solution that covers every patient in their practice, whether they see them virtually. They don't want to be opting out and using some tool that's not their workflow, whether to see them face-to-face, whether it's commercial, it's fully cap. They want a solution and a partner that's really inside their workflow and also helping them when their patient's not even in the office. So regardless of the type of patient it is as we've touched on.

Yes. And that kind of leads to my next question, which is really around the single tax ID for a medical group. Not every state allows that. But for many states that do, I understand the financial reporting benefits. But what's the benefit to the practitioner themselves and being under that single tax identification?

Yes, definitely. So just a minor correction. So we established a single tax ID in every state. Whether we own it as a corporation or not is determined by state laws. But in every single market we are in or state, we established the medical group, we established the risk-bearing entity. And look, the benefits are as follows. So number one, Privia is the delivery organization and us establishing the medical group and the entity where physicians join is a key aspect of the business. So we are not at arm's length with the medical group. We are establishing that entity in the first place. So I think that's an important underlying factor. The second is we touched upon that page -- on that page where we are able to influence outcomes without owning the practice. I think it's a very unique model where physicians joining one entity where they are contracting as one, where they are governing themselves from a clinical perspective as one, is very important to achieve the outcomes in our view. It gives a sense of ownership. It aligns them financially, economically and holistically from a clinical practice perspective. And then we are treated as one from a payers and other constituents in the ecosystem as one single entity. This is not a business where thousands of physicians are joining disparate fashion, and we are, again, enabling or servicing them in an ad hoc manner and just getting our fees. It is one medical group, one risk-bearing entity that is treated as one by different constituents in the health care ecosystem. And that's important from a scale perspective, depending -- just given how the ecosystems evolve over time with managed care, with health systems and so forth.

And Parth, if I think about especially your background, how do we think about comparing the actual technology platform for Privia versus some of the others that are out in the marketplace? And what do you think are really some of the key differentiators for Privia?

Yes. Great question. So given my experience at athena, unique insight into what worked or not. So I'll hit on 2 or 3 key points. One is, just given the breadth of our offering, which is holistic to all provider types, all reimbursement models, all specialties, the platform's much, much more broader, we feel relative to, I think, most other enablement companies that may be just focused on 1 particular aspect of the business. So we have 55-plus specialties today within Privia, 3,200 providers, everything from a solo doc to a health system medical group. And just the breadth of the nature of the number of providers and the types we are servicing, and 70-plus at-risk contracts, by their very nature, require that our tech stack scales across all of it, and we are able to service and perform -- ultimately help them perform well in fee-for-service and value-based care across that breadth. So that's one. Second is I think what's unique about us is we are very agnostic to building, buying or partnering. We didn't want to go reinvent another EMR and spend millions of shareholder dollars doing that. I did that in my previous life and experienced that. I think what we were trying to solve for at Privia is there's really no ERP for a doctor's office. And there is 100-plus different point solutions, really cool, great SaaS companies that solve one particular aspect of the whole encounter with the patient. Every -- from the time a patient starts to look for a doctor, takes an appointment, visits the doctor, all the data comes in from different parts of the ecosystem to what happens at home. And if you're wearing a wearable device and there's that data go back to your doctor, if something happens on the weekend. I think we are agnostic to building, buying partnering. We are trying to give one unique platform to all our providers. But on the back end, we are partnering with multiple different companies to give the best possible solution in a single instance way. So we are partnering with 20 or 30 plus different point solutions. But for the physician that joins Privia, they don't need to worry about any of that or the integration. And I think our open architecture allows us to, again, be very capital efficient. You can spend a lot of R&D dollars on technology for little to show for. And I think we're very mindful of that. But ultimately, look, the proof is in the pudding. We eat our own cooking. We don't sell the tech stack separately. We don't charge for it separately. This is our medical group and our risk-bearing entities using this at scale to get the results. And I think the proof lies in there.

Yes, I know. I've asked you this question. You've heard this so many times from investors around moving towards a full risk capitated Medicare Advantage contract. You announced it last week, 23,000 lives. Can you or Jeff talk about the impact? We understand the top line impact, but what should we expect around care margins? EBITDA contribution? How much do you know about these members that you're now taking risk on?

Yes, I'll start. Jeff just got here, so I don't want to put him on the spot. This is -- if anything goes wrong, you can blame me for a year, hopefully. But look, consistent with what we've said before, we take a very thoughtful approach and you've heard us say it's called risk for a reason. I think the markets are getting there and understanding that. We are very focused on EBITDA and free cash flow as we are on top line. We understand the whole revenue recognition that comes with capitation. And you can see, overnight, we're recognizing multiple hundreds of millions more on the same book of business. And we kept saying apples-to-apples, our fee for -- current top line massively understates our value-based book. And you're seeing that with the MA book. We've demonstrated that in Q3 on a Q3 call with the MSSP book, where we don't even recognize close to $1.1 billion in spend, just given how GAAP accounting works. Keeping that aside, we'll be thoughtful. Look, we hope that when we take capitation and dial up risk, the worst-case outcome is that we are breakeven. And that's the worst-case outcome. You can make some money. But why would you take more risk if you can't make money? That's our view. And in our model where we are aligning our interest with our physicians, and they are sharing that risk 60-40 with us upside and downside. We don't want our doctor to lose money. So our hope is, as we've done this, that even in the first year, if there is, at best, a breakeven scenario that the operating leverage shows up in years 2, 3, 4. We like to be conservative. We'll give our guidance in a couple of months here. So I'm not going to be specific, but you should expect us to be conservative in year 1, make a little bit of money. And then years 2, 3, 4, obviously, get that operating leverage as we manage these lives better. What we are hoping to do hopefully in a differentiated manner is not have any J-curves. We've not talked about cohorts and show you all kinds of data that show you in this geography with this cohort, with this group that we started 5 years ago, we're doing better or worse. EBITDA is EBITDA, it's at the corporate level. Free cash flow is free cash flow, we're managing a pretty diversified book of business. And our hope is when we take risk, you should expect us to get some return for that risk for our shareholders.

And as we think about that risk and we think about the time line of potentially taking that risk, is this going to be just a January 1 kind of time frame where each year we're looking at January 1? Or are there other opportunities to take risk at other times during the year? Shawn, I don't know if you have specific thoughts on that.

Yes. I think just typically speaking, Lisa, these are going to be January 1. Now with that ever preclude us from kind of coming in midyear, as you know, we add a lot of providers year around. And so those can -- depending on kind of their experience and our experience when we get to know them when they should -- maybe they're joining an existing arrangement, I think that will be provider by provider, market by market. But from a Medicare Advantage perspective, most of these things are going to be kind of tend to be year -- at the beginning of the year.

And we know that you've had very impressive savings in value-based programs like Medicare shared savings programs. How would you compare your ability to manage costs in those programs versus these now full-risk arrangements like the global capitation that we're talking about here? And do you think that it's indicative of the potential results you could see and enforce? Is there really comparability, I guess, is the question between the two.

Yes. I'll start on this. Parth will have I'm sure his thoughts on it. No doubt. I mean we talk a lot about starting and migrating across that value-based continuum. If you think about what we did, and we've been in the MSSP program for going on 6 years. And we started with in A and B, we migrated to E. And you'll see that -- you'll hear in the coming -- when we do our earnings, we'll talk about how we're migrating the rest of our ACOs. But no doubt, it's -- we feel it's a good partnership, live incentives, and we'll continue to do that with our providers. And really, it should show us progression and do well. I think as we've always said, we would kind of juggling in saying, hey, it's risk for a reason. But we're confident that we've got the tools, the talent that's necessary and especially even as we're growing physicians and really establishing physician leadership that we're creating the right platform to perform well over a period of time.

Yes. Look, generically, just to add to that, just holistically, Lisa, a Medicare-eligible patient or a person is a Medicare-eligible person, whether the payers is CMS or a national payer or a health first, that's just a payer taking -- financing that care. We're in the business of managing the total cost of care on a particular life over a life cycle. And I think from a capability standpoint, our proven results in MSSP should give a lot of comfort that the system works, technology works, processes work, clinical operations capabilities. I mean those things are very common as to how you manage the cost of -- the total cost of care for a 65-, 70-, 80-year old with multiple conditions. So I think that those are common threads that are very scalable in our platform that we can apply market to market.

Parth, we had this conversation a little earlier. I think you just kind of put in there when you think about you versus competitors and think about practice collection instead of GAAP revenue. And again, that kind of goes back to the medical identification number. Is it simply that it's comparing it more apples-to-apples to competitors when we think about practice collections versus GAAP revenue? Or is there another reason why, one, do you think we should be focused on that? And then secondly, a majority of your practice collections are driven by fee-for-service today. We saw with the Medicare capitated arrangement, right, that changes your revenue a little bit. But how do you see that mix changing over time as well?

Yes. Great question, and we get this one off. And I think, hopefully, investors and sell side and you're all understanding it better. Look, I'll make 2 or 3 points that hopefully clarify it further. One is we have this anomaly of corporate practice and medicine law. So that's medical groups that we can own as a corporation or not, that leads to the difference between GAAP revenue and practice collections. If we are to simply define what we collect across all our medical groups in every single state, irrespective of that state law across all lines of business, it leads you to practice collection being the number that we manage. That's how we manage the business. We charge a management fee on that practice collections number, whether it's fee-for-service or value-based, pay the physicians, and that's what translates to care margin in our model. So there's no direct correlation to the reported GAAP revenue and care margin from that perspective. So that's why practice collection is the right top line that we've guided to. And we mentioned both obviously from our guidance. The other anomaly is -- what you alluded to, is the value and the value-based book revenue recognition rules prevent you from recognizing the medical spend unless the provider entity is taking a certain level of risk and is responsible for a certain level of the total cost of care. The way it's defined, and we showed this with MSSP, we're managing $1.1 billion of spend, we are taking very significant risk. It's an open access product and the way the rules are written, we're not able to recognize the full $1.1 billion. So what's in practice collection and GAAP revenue is just the $50 million, $56 million of shared savings. So that significantly understates our top line, whichever way you want to define it. So if you just look at the financial statement disclosure, you'll say, well, it's largely fee-for-service, but here's a $1.1 billion of spend on which we are saving in aggregate, 7.7%, best ACO in Mid-Atlantic, it's 9.4%, it's massively understated. And now you're seeing the same thing in the MA book where you saw what happened with 23,000 lives in our press release said that they'll have a $230 million impact on a gross basis. Net basis will be a little bit lower given the fee-for-service takeout. But we have 70,000-plus other lives that could -- if you just did the same math, would be another $750 million of collection. So our top line apples-to-apples, you could just do a simple math and say, well, it's understated by $1.7 billion. And then we leave you to whatever multiple you want to apply to anything like that. But I think that's the anomaly, and that's what's been tripping investors and analysts on. And I think it's, again, an education process. Look, there were -- a lot of these companies were not public, or didn't have perfect comps. Ultimately, we're focused on EBITDA and earnings, and that's what matters. And that's why, again, from a perspective of taking full capitation or more risk or less risk, it's all about can we manage that book to generate the level of earnings for our shareholders.

And cash flow EBITDA, that's where we're going to be at the end of the day, right? Which leads me to -- let's bring Jeff in on the conversation here for just a minute. Jeff, you recently joined the company. Just give us some additional thoughts on -- your thoughts on Privia and why join Privia at this point?

Sure. Thanks, Lisa. So I mean, it's a pretty active marketplace. I looked at a lot of opportunities. Privia really stood out for me for several reasons. First, just at a macro level, the significant total addressable market with multiple avenues for growth in the marketplace that Privia operates in, the market's continuing to move to value-based care. And health plans, health systems and physicians are all looking for help in navigating that transition. And Privia is well positioned to help meet that demand. So I think the macro level sets up very well. On a company-specific basis, I think the management has a great leadership team with Shawn and Parth. The Board has deep health care experience. And they put together a model that's really focused on helping physicians practice in their current reality, as they've said today across all payer types, aligning incentives, providing flexibility for physicians and autonomy. And a technology solution that's integrated and works to ease the administrative burden on physicians as well is helping improve quality, I think all are key factors. The ability to scale at a national level, and as Parth just noted, a balanced approach to both revenue growth and earnings growth. And then finally, I would just say all that, coupled with a very strong financial position, a balance sheet with a net cash position, profitable and producing positive free cash flow. And lastly, just a very capital-efficient model. I think all those things, great macro, great company-specific opportunities and I think great momentum were all kind of factors that led me to conclude, when it was offered, that this was the best opportunity for me to join.

Right. Well, I look forward to working with you. Welcome to the conference. And let's come back to the discussion here. One of the things that stood out to me, Shawn, is that you talked a little bit about solutions for health systems. And that's not an area that a lot of your competitors are really talking about today. So maybe can you spend a couple of minutes talking about why health systems are attractive? And are you competing in that market against players like an Evolent that kind of lays out a blueprint or a road map for some of those hospital system providers?

Yes. Lisa, it's interesting. The health system environment or the environment for health systems now is -- most of us would say, as value-based care, gets more of a kind of embedded and takes some kind of more cap, all those different things. As we go across that continuum, the kind of the -- I think most people tend to say the health system is the real loser. I think we're on the front end of this wave. Who we're competing with and who are not, I mean, there's -- I don't think all health systems are created equal. We tend not to be speaking with the health systems that are kind of that big behemoth, big fee-for-service, the largest one in the market. But it's the transition of employed physicians attracting -- the attraction of what we can help a system do is what -- why they're calling. If you think about the difference, 50% of the doctors are out there in the health system today. Arguably, some even seeing some statistics as much as 60%. The health systems, I mentioned, aren't really created equal, but they're all struggling. And the top 5 when you ask them the question of, hey, once you get past this issue of your employees and kind of the -- how you will handle nursing and all those things, almost second to that is I need a physician alignment strategy. I've been buying doctors. I've been -- that's not for whatever reasons, be it balance sheet, board, I'd prefer not to continue to do that. And that -- is there a lower cost entry strategy to having relationships with community doctors. They've been out there. We've got a relationship with Health First. It's working really well. People are paying attention to that. So it's an efficient model, capital efficient. They would like to not buy as many doctors when you sit down and talk to a lot of them in private. And the second bullet is their CINs don't perform well. All of them have them. They're not performing. They're kind of an aggregation. And payers are asking them to take risk in those or even just move a little bit down that value perspective continuum. And that's not working. So they're looking to those CINs, another answer there. And then the other -- the last one is even where these health systems are more sophisticated, have gotten to risk, maybe didn't have their own insurance product, all kinds of things are going on with that. They're employed doctors they need help with. There are the doctors that are out there with the membership in that 1 solo practice to 10. They need some structure around those. And they're really -- if you look at Privia and say, here's a company, the doctors, very low attrition, people -- the doctors aren't leaving at all. They're providing a lot of value to them. They're not having to purchase them. And they're managing this book of business over 70-plus contracts that range from upside all the way now to fully capitated risk. And I think the really -- the ones that are really looking at -- they're looking at 5 and 10 years down the road and said, I need a model like that in order to grow and have different relationships with my physicians.

And the one thing -- sorry, the one thing I would add, which I think is important is we are not approaching this as providing a point solution to a health system. We're not going with just the tech stack or just a help to their ACO. We are the medical group and the risk-bearing entity that is going to form in partnership with them for that particular geography. So we are -- when we go into a partnership with Health First, it is one medical group that we, and now partnership with Health First, are managing for the entire State of Florida. That's the fundamental difference. And I think you have to do it in that level of integration with them. where you and them effectively become one. It's a JV entity or a joint venture or a partnership type of approach where it's not an ad hoc solution provider that is -- that doesn't have skin in the game. And it's a very long-term relationship, and you're effectively doing it to establish presence in that market for many decades to come from that perspective.

Yes, Parth, As I think about that, you announced the expansion to California, West Texas, those 2 physician groups. You got into risk, risk fall, there's a lot of things that you guys have been doing. As we think about things like, for example, on the health system side, are those incremental opportunities that can happen in 2022? I mean, we talked about the fact that capitated risk generally is going to happen each January 1. You talked about only entering 1 incremental market in 2022. You're now entering 2. Is it that there's incremental opportunity within health systems? Or is it, hey, at least a we've got a lot on our plate, and we need to really manage this in 2022?

No. We're going full steam ahead. Look, we like to under-promise, over-deliver.

We like that, too.

We have Jeff on board for a reason. We are investing in leadership, processes system, business development sales. I mean, the momentum that we have is truly remarkable. I think going public has helped us with the public profile of the business, a lot of inbound. And so our -- we keep up at night just to execute day in, day out. The model is proven. We make money. We operate in very unique different health care geographies between Mid-Atlantic, Florida, Texas, California now. It's -- this is not a one-trick pony, and I think it's proven out and people are seeking us out. And I think we like to keep executing and entering into as many states as we can as fast as we can and keep executing for our shareholders, and that's our focus. But there's no stopping us. I mean there's no limit to the business. Execution is key, and we're focused on just grinding it out. And -- but again, if we can open 3 new markets this year, we will, there's no limit to what we can do or not.

Well, I look forward to seeing what 2022 brings. I'm obviously very disappointed we're not together in person, but I'll reach out to Robert. I would love to come and actually spend some time with you guys face-to-face. That's my goal for 2022, to see everybody in-person. So thanks again to everyone that tuned in this afternoon. If you have any questions, by all means, reach out to me or to Robert on the IR team. Thank you so much, Shawn, Parth and Jeff, for your participation. I appreciate it.

Thank you, Lisa.

Thank you.