Privia Health Group, Inc. — FY2021 Form 10-K
Reporting period: Fiscal year ended December 31, 2021. This is an annual report, not a standalone fourth-quarter filing. Privia is a physician-enablement company that combines practice management, technology and value-based care (VBC) services. It reported results on a consolidated basis, including owned medical groups and certain friendly medical groups; non-owned medical groups’ collections are included in the company’s Practice Collections metric, but not consolidated revenue.
Financial performance and liquidity
| Metric | FY2021 | FY2020 | Change |
|---|---|---|---|
| Revenue | $966.2 million | $817.1 million | +18.3% |
| Operating income (loss) | $(217.4) million | $25.4 million | Down $242.8 million |
| Net income (loss) attributable to Privia | $(188.2) million | $31.2 million | Down $219.5 million |
| Adjusted EBITDA | $41.4 million | $29.4 million | +40.9% |
| Cash from operating activities | $55.1 million | $38.9 million | + $16.2 million |
| Cash and cash equivalents at year-end | $320.6 million | $84.6 million | + $235.9 million |
| Term loan principal outstanding | $33.3 million | $34.1 million | Down $0.9 million |
Revenue growth reflected higher fee-for-service (FFS) patient-care revenue, administrative-service revenue, shared savings and care-management fees. FFS patient care was $772.5 million (+19.3%); FFS administrative services were $68.8 million (+18.1%); shared savings were $83.0 million (+25.0%); and care-management fees were $36.5 million (+36.4%). Other revenue fell to $5.4 million from $18.3 million, primarily because Provider Relief Fund grants were lower.
GAAP results were heavily affected by $253.5 million of stock-based compensation, principally from IPO-related option modifications, including $195.1 million recognized in the second quarter. Adjusted EBITDA excludes stock-based compensation and other specified items; it is not a substitute for GAAP earnings or cash flow. Care Margin was $238.4 million, Platform Contribution was $107.6 million, and Platform Contribution Margin was 45.1%, versus 44.0% in 2020. Adjusted EBITDA Margin was 17.4%, calculated as a percentage of Care Margin. The filing does not provide a clear GAAP gross-margin measure.
Net cash provided by operations was $55.1 million; investing activities used $32.8 million, mainly for acquisitions; financing activities provided $213.7 million, primarily from the IPO and Anthem private placement. Year-end current assets were $446.7 million and current liabilities were $190.5 million. The $65 million revolving facility was undrawn at year-end; the company also had $33.3 million of term-loan principal outstanding, with substantially all real and personal property pledged as collateral. Management said available cash, expected operating cash flow and borrowing capacity should cover anticipated short- and long-term needs, while noting that additional financing might be required if assumptions prove wrong.
Business metrics and changes versus prior periods
- Implemented providers increased 30.1% to 3,317; Attributed Lives rose 15.2% to 786,000; and Practice Collections increased 25.0% to $1.626 billion.
- Practice Collections are a non-GAAP operating metric that includes collections from non-owned groups and therefore exceed reported revenue. VBC represented 12.4% of revenue, compared with 11.4% in 2020; FFS patient-care revenue represented 79.9%, versus 79.2%.
- Growth in patient-care and administrative FFS revenue was attributed mainly to higher visit volumes as some COVID-19 restrictions lifted and to provider additions. VBC growth reflected more attributed lives, contracts and shared-savings performance.
- The company entered West Texas and California in 2021. Acquisitions and market entries used $32.2 million of cash, net of cash acquired; acquired management-services, payer-contract and provider-network intangibles contributed to a sharp increase in intangible assets.
- Compared with 2020, revenue growth accelerated from 3.9% to 18.3%, while GAAP results shifted from profit to loss. The principal unusual driver was IPO-related stock compensation; excluding specified items, Adjusted EBITDA increased.
- The company completed its IPO in May 2021 and received approximately $211.0 million in net proceeds from the IPO and Anthem private placement. It reported no material change in the stated use of proceeds.
Outlook, commentary, risks and unusual items
No specific FY2022 revenue, earnings or cash-flow guidance is provided in the supplied filing text. Management described plans to add providers and patients, enter new markets, expand VBC participation and risk, and invest in technology, sales, marketing and clinical operations. Privia Care Partners launched January 1, 2022 with more than 300 providers and 25,000 attributed lives. Three new ACOs began participating in the Medicare Shared Savings Program in 2022. Florida and Mid-Atlantic ACOs also entered capitated arrangements covering approximately 23,000 Medicare Advantage beneficiaries effective January 1, 2022; these contracts transfer medical-cost risk to Privia.
- COVID-19: The pandemic affected volumes and service mix. Management cited ongoing uncertainty around patient demand, provider capacity and the duration of public-health measures. The company received $0.8 million of Provider Relief Fund grants in 2021, compared with $13.3 million in 2020; certain uses and reporting remain subject to potential review and recoupment.
- Regulatory and operating-model exposure: The business depends on compliance with complex healthcare, privacy, fraud-and-abuse, corporate-practice-of-medicine, fee-splitting, antitrust and risk-bearing rules. A challenge could require restructuring, repayment, penalties or exclusion from government programs.
- Provider and technology dependence: Growth relies on recruiting and retaining medical groups and providers, implementing them successfully, and maintaining the platform’s integration with athenahealth’s EMR. Provider retention was reported at 95% over the prior five years, but contracts and provider relationships remain material dependencies.
- Payer and VBC risks: Six payers accounted for approximately 75% of network collections and 68% of accounts receivable at year-end. Shared-savings revenue depends on estimates, attribution, quality results and payer reconciliation; newer capitated arrangements add exposure to medical costs and state risk-bearing regulation.
- Debt and financing: The term loan matures in 2026 and bears floating-rate interest. Springing financial covenants were not applicable at year-end; the credit agreement includes restrictive covenants and collateral provisions.
- Controls and audit: Management concluded disclosure controls were effective at December 31, 2021. The annual report did not include management’s internal-control effectiveness assessment or auditor attestation because of the transition period for newly public companies. The auditor issued an unqualified opinion on the consolidated financial statements.
Important facts for investors to verify
- Reconcile the $188.2 million attributable GAAP net loss with the $41.4 million Adjusted EBITDA, focusing on IPO-related stock compensation and the measure’s exclusions.
- Track provider implementation, attributed lives, collections and revenue conversion, including the distinction between Practice Collections and consolidated revenue.
- Assess the financial performance and downside exposure of the new capitated contracts and other arrangements that transfer medical-cost risk.
- Monitor payer concentration, shared-savings estimates and collections, including any changes in attribution, quality scores or reimbursement terms.
- Review acquisition integration and the final purchase-price allocation for 2021 transactions, as well as the return on the cash invested in new markets.
- Confirm compliance and reporting for Provider Relief Funds, healthcare regulations, privacy and security requirements, and debt covenants.