How does Privia Health make money?

Steven Loeb · September 23, 2021 · Short URL:

It makes most of its money from reimbursements for healthcare services rendered by its providers

A number of forces have come together to make the public market more appealing for healthtech companies, including the pandemic and the rise of SPACs. This has led to nearly double the number of companies entering the market so far in 2021 compared to 2020, and we still have a whole quarter of the year left to go. 

Yet, so far, many of them aren't doing so well, trading at prices way down from where they started.

One of the exceptions to this is Privia Health, a physician-focused platform which aims to "reduce unnecessary costs, achieve better outcomes, and improve patient health and provider well-being."

"Privia Health is a technology-driven, national physician-enablement company that collaborates with medical groups, health plans, and health systems to optimize physician practices, improve patient experiences, and reward doctors for delivering high-value care in both in-person and virtual care settings," the company wrote in its S-1 filing with the SEC

"We directly address three of the most pressing issues facing physicians today: the transition to the value-based care reimbursement model, the ever-increasing administrative requirements to operate a successful medical practice and the need to engage patients using modern user-friendly technology."

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

"Our Medical Groups are designated as in-network by all major health insurance plans in all of our markets, and all Privia Providers are credentialed with such health insurance plans."

The company has five core services: 

  • Technology and Population Health: these are tools designed to enhance physician input and provider workflows. They include a tool for patients to find a provider online and receive appointment reminders; insights embeded into its EHR so providers can assess patients’ health and practice performance; Risk Adjustment Factor and care-gap reminders; and a patient education tool. 
  • Single-TIN Medical Group: in each of its markets, the company builds a primary care centric single-TIN Medical Group that facilitates payer negotiation, clinical integration and alignment of financial incentives. The Group allows providers in its medical groups to collaborate in physician-organized delivery meetings to review analytics, share best practices, create accountability, and advance evidence-based medicine. Providers can also reduce expenses by using ancillary services and access group purchasing discounts.
  • Management Services Organization: Privia’s MSO helps reduce administrative work, increase efficiency, and lower direct costs for providers through revenue cycle management, performance management, analytics and reporting, clinical IT, IT support, and marketing. 
  • Accountable Care Organization: Privia’s physician-led accountable care organization are meant to lower costs, engage patients, reduce utilization, and improve coordination and patient quality metrics. It facilitates this with a cloud-based technology platform that identifies quality gaps, sends patient satisfaction surveys, automates patient outreach and education, and generates reports and alerts to improve care coordination.
  • Network for Purchasers and Payers: Privia’s networks allow providers to connect with new patient populations, create custom contracts, and integrate with their community. Tools include contracting services that use data and physician input so that providers can grow their patient base and influence how care is delivered.

In 2020, Privia generated total revenue of $817 million, which it breaks down into three main categories: fee-for-service (FFS) revenue, value-based care (VBC) revenue, and "other revenue."

FFS revenue comes from patients, as well as from administrative services. FFS-patient care revenue comes from reimbursements for FFS medical services provided by Privia Providers, including payments from contracts with the U.S. federal government and large and small payer organizations, as well as payments from patients in the form of co-pays, coinsurance or deductibles. FFS-administrative services revenue comes from providing administration and management services to medical groups which are not owned or consolidated by Privia. 

In 2020, 79.2% of Privia's revenue came from FFS-patient, while 7.1% came from FFS-administrative services.

VBC revenue is generated when Privia's providers are reimbursed through traditional FFS Medicare, MSSP, Medicare Advantage, commercial payers and other existing and emerging direct payer and 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, including population management, care coordination, advanced technology and analytics. It also comes from shared savings earned based on improved quality and lower cost of care for the company's attributed patients in VBC arrangements.

In 2020, 11.4% of revenue came from value-based care.

Finally, 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 to offer direct primary care to their employees. This stream accounted for 2.3% of revenue in 2020, up from just 0.4% the previous two years. 

Privia now has over 3 million patients on its platform, and over 2,700 provider with more than 700 practice locations. The company went public in April, raising $778.4 million in its IPO. It is now trading at $26.91, 17% above its IPO price, with a $2.8 billion market cap.

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