Privia Health nets $17.8M in profit in Q4 as it eyes national expansion of provider network

Physician enablement company Privia Health turned a profit in the fourth quarter of 2022 and is forecasting strong growth this year as it eyes geographic expansion.

The company, which went public in May 2021, brought in $17.8 million in net income in the fourth quarter, or 14 cents per diluted share, compared to a net loss of $12 million, or a loss of 11 cents per share, in the same quarter a year ago.

The company's fourth-quarter revenue jumped 32% to $364 million from $275 million a year ago.

The top- and bottom-line results exceeded Wall Street expectations. The average estimate of seven analysts surveyed by Zacks Investment Research was for a loss of 3 cents per share during the quarter. For revenue, six analysts surveyed by Zacks expected $337 million.

The company's stock was up 3.8% to $28.03 after the report Tuesday. As many digital health companies continue to see shares slide in a market downturn, Privia Health is one of the few health tech-enabled companies to buck the market trend.

"Privia Health delivered a tremendous year of financial and operating performance in 2022," CEO Shawn Morris told investors during an earnings call Tuesday.

"We expect to continue to increase our number of provider partners, expand attributed lives in at-risk value-based arrangements and grow our presence in the new markets we recently entered," he said.

Arlington, Virginia-based Privia Health was founded in 2007, saw its first practice go live in 2013 and popped during its spring 2021 IPO. It works with over 3,600 providers across more than 950 practice locations providing care to more than 4 million patients. The company expects to see its provider network grow to more than 4,100 in 2023, executives said Tuesday. 

Privia also works with an additional 1,400 providers through Privia Care Partners, which offers doctors a flexible partnership model to transition to value-based care without changing electronic health records.

The company collaborates with medical groups, health plans and health systems to optimize physician practices with a focus on value-based contracts and supports practices with a population health platform and other technologies.

The company now has approximately 1.1 million attributed lives covered by its value-based care arrangements with 40,000 capitated lives, which is up more than 38% from year-end 2022, Morris told investors Tuesday.

Privia Health raked in $1.36 billion in revenue in 2022, up 40% from $966 million in 2021. For the year, the company reported a loss of $8.6 million, or 8 cents per share. The company's practice collections increased more than 49% year over year to reach $2.42 billion in 2022. The company expects practice collections to grow to $2.7 billion or higher in 2023.

Total value-based care comprised 28% of total GAAP revenue in 2022 compared to 12% in the previous year, executives said during the earnings presentation.

Privia Health has $348 million of cash and cash equivalents on hand and no outstanding bank debt.

The company projects full-year revenue in the range of $1.55 billion to $1.65 billion, representing growth between 14% to 21%.

The company has a long-term target to grow practice collections 20% and adjusted EBITDA 30% per year on average, according to Chief Financial Officer. David Mountcastle.

Privia Health currently operates in 12 states and Washington, D.C., and has been rapidly expanding. Just in the past few months, Privia Health inked partnerships to push into Connecticut, Delaware, North Carolina and Ohio.

The state-by-state expansion is part of Privia Health's journey to build its national footprint, Parth Mehrotra, president and and chief operating officer, said in a recent interview.

"It just speaks to the flexibility of a platform where we can enter any state in a variety of ways, as you've seen us partner with a health system, a partnership with a big medical group, partnerships with smaller medical groups and with big clinically integrated networks," he said.

In Connecticut, the company is partnering with Community Medical Group to launch the largest Clinically Integrated Network in the state comprising more than 1,100 multispecialty providers across 450 locations. Privia Health will be the majority owner of the Clinically Integrated Network, which contracts with commercial and Medicare payers covering approximately 180,000 patient lives attributed to value-based care arrangements. 

During the earnings call, Morris said Privia Health's entry into those four new states validates the company's "growth algorithm, significantly expands its addressable market and organic growth opportunity, and are significant steps toward its long-term goal to build one of the largest care delivery networks in the nation."

The company also launched three new accountable care organizations in 2023, expanding the Privia-owned ACOs to 10, with each participating in the Medicare Shared Savings Program (MSSP). Its ACOs now include approximately 2,700 providers caring for about 198,000 Medicare beneficiaries participating in the MSSP.

Privia’s thoughtful move to risk and value-based arrangements is a key differentiator, Mehrotra told investors. "We believe our doctors get better results than their peers due to our physician-led governance, extensive clinical, performance and actuarial expertise, and clear incentives that keep us highly aligned," he said.

The company's strategy is to partner with providers by setting up a single tax ID entity that facilitates payer negotiations and clinical alignment while maintaining a provider’s legacy ownership structure. It also organizes ACOs for risk-bearing value-based contracts and provides its tech and services platform. 

Privia Health's strong growth comes as primary care enablement companies are now a hot market and major healthcare players are ramping up investments in value-based care. Earlier this month, CVS Health announced plans to buy Medicare-focused Oak Street Health in an all-cash deal valued at $10.6 billion. 

Other players in the market include Aledade, which added 450 providers to its network and recently acquired analytics company Curia. Vytalize Health raised $100 million in new funding, and Pearl Health picked up $75 million.

"The movement of value-based care is long overdue and primary care providers and community providers are on the forefront of that movement," he told Fierce Healthcare recently. "I am generally surprised that a lot of consolidation hasn't happened and people haven't caught up to UnitedHealth and what they've done with Optum. I think you're seeing a lot of that catch-up happening now from a strategy perspective," he said.

He added during the interview, "I think we're just building a very scarce asset, which is a large scale, multiple states, thousands of providers, millions of patients and value-based arrangements. Fundamentally, doctors have a choice. They can choose to be employed somewhere in a clinic, with a health system, by a payer or a private equity firm, or they can remain independent and autonomous if they choose to." 

Privia offers a unique alternative for community physicians across all specialties where doctors can remain in their legacy ownership structure, remain autonomous if they choose to and yet be part of a bigger organization, Mehrotra noted.