What changed in this filing

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Item 1. Business

2024-03-28 compared with 2023-03-31 · 78 added, 58 removed, 370 unchanged (27% of the section changed)

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Business Combinations

The Business Combinations were effected pursuant to (1) an agreement and plan of merger, dated as of May 25, 2021 (as amended, the “Merger Agreement”), by and among Foresight, P3 Health Group Holdings and Merger Sub, and (2) the transaction and combination agreement, dated as of May 25, 2021 (as amended, the “Transaction and Combination Agreement”), by and among Foresight, FAC-A Merger Sub Corp., a Delaware corporation and a wholly owned subsidiary of Foresight, FAC-B Merger Sub Corp., a Delaware corporation and a wholly owned subsidiary of Foresight (together with FAC-A Merger Sub Corp., the “Merger Corps”), CPF P3 Blocker-A, LLC, a Delaware limited liability company, CPF P3 Blocker-B, LLC, a Delaware limited liability company (together with CPF P3 Blocker-A, LLC, the “Blockers”), CPF P3 Splitter, LLC, a Delaware limited liability company, Chicago Pacific Founders Fund-A, L.P., a Delaware limited partnership, and Chicago Pacific Founders Fund-B, L.P., a Delaware limited partnership (together with Chicago Pacific Founders Fund-A, L.P., the “Blocker Sellers”), pursuant to which, among other things, P3 Health Group Holdings merged with and into Merger Sub (the “P3 Merger”), with Merger Sub as the surviving company, which was renamed P3 LLC, and the Merger Corps merged with and into the Blockers, with the Blockers as the surviving entities and wholly owned subsidiaries of Foresight (collectively, the “Business Combinations”).

The Business Combinations resulted in the presentation of the Company’s consolidated financial statements on different bases for the year ended December 31, 2022, the period December 3, 2021 through December 31, 2021 (the “Successor Period”), and the period January 1, 2021 through December 2, 2021 (the “Predecessor Period”).

The Company has not provided pro forma statements of operations and cash flows for the years ended December 31, 2022 and 2021.

Accordingly, references to certain financial results in 2022 and 2021 may not be comparable.

P3 is a patient-centered and physician-led population health management company.

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We augment these affiliate partnerships with employed Primary Care Physicians (“PCPs,”), P3 operated clinics, and wellness centers.

Furthermore, unlike our peers, we offer a broad delegated care model

in which we take on the responsibility to reshape the local healthcare market to provide high quality care for patients throughout the care continuum.

We operate in the $829 billion Medicare market, which covers approximately 65 million eligible lives as of 2021.

This segment is supported by numerous tailwinds.

Approximately 60% of Americans suffer from a chronic disease with 40% suffering from two or more.

Additionally, over 10,000 individuals age into Medicare each day, with 48% choosing Medicare Advantage plans.

Our core focus is the Medicare Advantage (“MA”) market, specifically counties where there are over 10,000 MA eligible lives.

MA spending is expected to grow an average of 7.2% annually and MA plan penetration of the Medicare beneficiary population is projected to increase from 48% of the overall Medicare market in 2022 to 61% of the overall Medicare market by 2031.

Furthermore, unlike our peers, we offer a broad delegated care model in which we take on the responsibility to reshape the local healthcare market to provide high quality care for patients throughout the care continuum.

We operate in the $944 billion Medicare market, which covers approximately 66 million eligible lives as of October 2023.

Our core focus is the MA market, which makes up approximately 51% of the overall Medicare market, or nearly 31 million Medicare eligible lives in 2023.

Medicare beneficiaries may enroll in an MA plan, under which payors contract with the CMS to provide a defined range of healthcare services that are comparable to Medicare fee-for-service (“FFS”), which is also referred to as “traditional Medicare.”

In MA, the Centers for Medicare & Medicaid Services (“CMS”) pays health plans a monthly sum per member to manage all health expenses of a participating member.

Our platform focuses exclusively on Medicare Advantage and manages the needs of our members through subscription-like per-member-per-month (“PMPM”) arrangements with health plans or payors.

From there, the economics of our care model are further impacted by our ability to drive total cost of care savings and bend the cost curve.

Our model allows us to “do well” while also “doing good.”

Our platform focuses on Medicare Advantage and manages the needs of our members through subscription-like per-member-per-month (“PMPM”) arrangements with health plans or payors.

From there, the economics of our care model are further impacted by our ability to drive total cost of care savings

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and bend the cost curve.

Our model allows us to “do well” while also “doing good.” We contract with health plans to provide capitated care services with respect to certain of their MA members.

Our contracts with four health plans to provide capitated care services for their members collectively accounted for approximately 60% and 67% of our capitated revenue for the years ended December 31, 2023 and 2022, respectively.

healthcare system is ripe for change and disruption, and we believe that the P3 Care Model is distinctly situated to address several pain points, including:

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Healthcare expenditures are particularly concentrated in this age group in large part due to the high rate of chronic conditions.

Rising healthcare costs disproportionally impact low- and middle-income seniors, who often embrace Medicare Advantage plans.

Rising healthcare costs disproportionately impact low- and middle-income seniors, who often embrace Medicare Advantage plans.

This is our area of focus given we believe we can have the greatest clinical and financial impact on this population.

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• Inadequate access to primary care and PCP shortages.

The current fee-for-service (“FFS”) reimbursement model leads to relatively lower pay for PCPs as well as fewer quality touchpoints with patients.

We believe that factors like these directly contribute to fewer physicians considering, or staying, in the field of primary care.

The current FFS reimbursement model leads to relatively lower pay for PCPs as well as fewer quality touchpoints with patients.

We believe that factors like these directly contribute to fewer physicians considering entering, or staying in, the field of primary care.

• Sub-optimal quality of care and sub-optimal clinical outcomes .

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Small physician practices deliver the majority of care in the U.S.—with 51.8% of physicians working in practices with 10 or fewer physicians, per a 2023 American Medical Association report.

That report also found that 2020 was the first year in which a minority (49.1%) of PCPs worked in a practice that was wholly owned by physicians (e.g., private practice).

This represented a decrease of approximately 5% from 2018 (54.0%).

That report also found that 46.7% of PCPs worked in a practice that was wholly owned by physicians (e.g., private practice) representing a continued decline since 2020 (49.1%), the first year in which the share of physicians in private practice became a minority.

In our experience, physicians who have chosen to work at smaller practices throughout their careers tend to do so because they value their independence.

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Payors have attempted to increase their proximity to primary care physicians through acquisitions and investments in care delivery services and technologies.

However, a payor’s ability to

impact physician workflows continues to be structurally limited by the multi-payor nature of most physician practices.

However, a payor’s ability to impact physician workflows continues to be structurally limited by the multi-payor nature of most physician practices.

This makes it challenging for any single payor to achieve the level of integration we believe is needed to improve clinical engagement and effectively manage healthcare costs.

We believe this creates significant opportunity for a platform to partner directly and create alignment between payors and physicians.

We overcome these hurdles with a differentiated model that we believe is an attractive option for patients, physicians and payors.

We aim to overcome these hurdles with a differentiated model that we believe is an attractive option for patients, physicians and payors.

P3 honors the existing social and moral contract between patients and their PCPs, partnering with local physicians using an affiliate model.

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We have made significant investments in technology to customize patient care management plans.

Taken as a whole, our P3 Care Model helps facilitate enhanced clinical outcomes for our key stakeholders, resulting in a 98% physician retention rate from 2018 through December 31, 2022, 96% patient satisfaction rate, a hospitalization rate 34% lower than the MA FFS benchmark, and an emergency department visit rate 50% lower than the MA FFS benchmark.

Taken as a whole, our P3 Care Model helps facilitate enhanced

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clinical outcomes for our key stakeholders, resulting in a 98% physician retention rate from 2018 through December 31, 2023.

We are led by one of the most experienced management teams in population health.

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We believe there is significant white space opportunity.

As of December 31, 2022, we have contracted with 2,800 primary care physicians, an increase of 33% from 2,100 at December 31, 2021.

As of December 31, 2023, we have contracted with 2,750 primary care physicians.

This represents less than 1% of the total number of PCPs in the U.S.

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We believe our total addressable market is represented by the approximately 66 million Americans (approximately 17% of the total population) who were enrolled in either traditional Medicare or Medicare Advantage nationally in 2023, which represented $944 billion of annual spend.

Within this, we believe our core addressable market to be the Medicare Advantage market, specifically

within moderate-to-highly populated Medicare Advantage eligible dense counties, which we define as having greater than 10,000 Medicare eligible lives.

By multiplying these approximately 28 million Medicare Advantage members by an average $1,000 per member per month spend, we estimate this represents a core addressable market size of approximately $300 billion.

Within this, we believe our core addressable market to be the Medicare Advantage market, specifically within moderate-to-highly populated Medicare Advantage eligible dense counties, which we define as having greater than 10,000 Medicare eligible lives.

By multiplying these approximately 31 million Medicare Advantage members by an average $1,000 per member per month spend, we estimate this represents a core addressable market size of over $300 billion.

The P3 Care Model

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We work with our physician partners to develop a holistic view of a patient’s health over time to understand the most effective methods to empower their patients to actively participate in and better manage their health (e.g., medication adherence, complete understanding of potential impediments to receiving care).

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Robust care teams.

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Aligned incentives.

Our model properly aligns physicians’ incentives with clinical outcomes, ensuring patients receive the optimal care they deserve.

Our model properly aligns physicians’ incentives with clinical outcomes, designed so that patients receive the optimal care they deserve.

To do this, we offer several types of incentive-based payments to our affiliated physicians.

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To help with care delivery effectiveness, we perform concurrent reviews to manage acute and post-acute hospitals for length of stay and appropriateness.

Finally, by taking on responsibility for processing and paying claims, we are able to ensure the appropriate payment for the appropriate care.

Finally, by taking on

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responsibility for processing and paying claims, we are able to ensure the appropriate payment for the appropriate care.

Ownership over claims creates value and helps to accelerate the reduction of unnecessary medical costs.

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This tool combines data management with data analysis to evaluate and transform complex data sets into meaningful, actionable information used to support effective strategic, tactical and operational insights.

It also provides comprehensive information that drives performance to improve clinical outcomes and quality of care and creates physician profiles and cost analysis to improve healthcare management.

It also provides

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comprehensive information that drives performance to improve clinical outcomes and quality of care and creates physician profiles and cost analysis to improve healthcare management.

With an embedded Risk Adjustment engine, it allows the organization to determine the burden of illness for our patients while providing stratification clinical data to physicians.

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Our P3 Care Model of partnering with local physicians allows patients to maintain their relationship with their existing physicians.

We believe this is key to delivering stronger clinical outcomes and support for our patients, as evidenced by our patient satisfaction rate of 96%.

We believe this is key to delivering stronger clinical outcomes and support for our patients.

Our model deploys care teams for each individual patient to assist in the continuity and coordination of care.

This support allows for seamless interactions across multiple physicians and various care settings.

Connectivity minimizes unnecessary progression of disease or downstream care, which is evident in our results.

Connectivity reduces the risk of unnecessary progression of disease or downstream care, which is evident in our results.

We believe our model supports and empowers physicians, care teams, and practices in their transition from a traditional FFS model to a VBC model.

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Additionally, our P3 Care Model leverages an innovative technology suite that provides physicians with the tools to drive better clinical outcomes.

Enabling physicians to own much of this process also allows for improved personal satisfaction on their journey to VBC, resulting in our 98% physician retention rate from 2018 through December 31, 2022 on our network of approximately 2,800 physicians at December 31, 2022.

Enabling physicians to own much of this process also allows for improved personal satisfaction on their journey to VBC, resulting in our 98% physician retention rate from 2018 through December 31, 2023 on our network of approximately 2,750 physicians as of December 31, 2023.

Our model is differentiated in our ability to also partner directly with payors.

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Rapidly scalable, capital efficient model

We have demonstrated the rapid scalability of our model with organic revenue growth of 99% from 2018 to 2022.

We have demonstrated the rapid scalability of our model with organic average annual revenue growth of 84% from 2018 to 2023.

This is in part due to the capital efficiency of our affiliate model and in part due to our ability to grow through multiple channels.

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Our management team has extensive experience in population health management, the MA space, and leading the transition to VBC throughout the United States.

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Our executive team has worked hard to build cultural alignment around our vision to transform healthcare.

This vision and values permeate throughout our organization and are embraced by our employees and partners.

Our vision and values are designed to permeate throughout our organization and to be embraced by our employees and partners.

Furthermore, our executive team has been thoughtful and strategic about fostering a culture of mentorship to pass on their extensive industry knowledge to future P3 leaders.

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Our primary competitors in the population health management space include Oak Street Health, Cano Health and agilon health, in addition to numerous local provider networks, hospitals and health systems.

Moreover, large, well-financed payors have in some cases developed their own managed care services tools and may provide these services to their physicians and patients at discounted prices or may seek to expand their relationships with additional competing physicians or physician networks.

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Other organizations may also seek to apply specialized services or programs, including providing data analytics or disease-based programs, designed to enable physicians or payors to operate successfully under VBC arrangements.

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Our growth strategy and our business could be adversely affected if we are not able to continue to access existing geographies, successfully expand into new geographies or maintain or establish new relationships with payors and physician partners.

See “ Risk Factors—Risks Related to Our Business and Industry—We operate in a competitive industry, and if we are not able to compete effectively, our business, financial condition and results of operations will be harmed .”

See the section titled “ Risk Factors—Risks Related to Our Business and Industry—We operate in a competitive industry, and if we are not able to compete effectively, our business, financial condition and results of operations will be harmed .”

The principal competitive factors in our business include the nature and caliber of relationships with physicians;

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Human Capital

As of December 31, 2022, we had approximately 600 employees.

As of December 31, 2023, we had approximately 400 full-time employees.

We consider our relationship with our employees to be good.

None of our employees are represented by a labor union or party to a collective bargaining agreement.

None of our employees are currently represented by a labor union or party to a collective bargaining agreement.

Our human capital resources objectives include sourcing, recruiting, developing, retaining, rewarding, recognizing and integrating our existing and prospective employees.

We recognize that attracting, motivating and retaining diverse, skilled and purpose-driven talent at all levels is vital to continuing our success.

We recognize that attracting, motivating and retaining skilled and purpose-driven talent from all backgrounds at all levels is vital to continuing our success.

By improving employee retention and engagement, we also improve our ability to protect the long-term interests of our stakeholders and stockholders.

We invest in our employees through high-quality benefits, various health and wellness initiatives, and social events that bring our employees together to support the communities in which we live and work.

We offer competitive compensation packages, ensuring fairness in internal compensation practices.

We invest in our employees through what we consider to be high-quality benefits, various health and wellness initiatives, and

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social events that bring our employees together to support the communities in which we live and work.

We believe we offer competitive compensation packages and work to ensure fairness in internal compensation practices.

People join P3 because of our mission:

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This team supports the business in identifying and recruiting top talent, supporting the onboarding of new hires through an employee orientation program, providing a structured approach to performance management that allows leaders and employees to collaborate to set organizational goals, chart plans, and assign targets such that it becomes a systematic process to achieving goals and objectives and having productive conversations about performance outcomes and career development.

Our talent management framework enables us to meet the human capital and business needs within the organization.

From identification of critical roles to succession planning and retention management practices, the team provides resources and tools, and leads the processes and experiences that enable us to make sure that we have everything in place to successfully execute on our talent management strategy.

Our efforts to promote a positive employee experience and build a diverse and inclusive culture are further supported and enhanced by local and national in-person and virtual events, including town halls, in-office celebrations and employee activity committees.

We have also developed a taskforce that seeks to drive focused and targeted diversity and inclusion efforts, including employee focus groups and participation up and down the organization to ensure all voices are heard.

Our talent management framework is designed to help us meet the human capital and business needs within the organization.

From identification of critical roles to succession planning and retention management practices, the team provides resources and tools, and leads the processes and experiences to help us successfully execute on our talent management strategy.

Our efforts to promote a positive employee experience and foster an inclusive culture are further supported and enhanced by local and national in-person and virtual events, including town halls, in-office celebrations and employee activity committees.

We have also developed a taskforce that seeks to drive diversity and inclusion efforts, including employee focus groups to encourage participation across the organization.

Government Regulation

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P3’s credentialing committee is comprised of a group of multispecialty providers with responsibilities for thoroughly reviewing each P3 provider’s qualifications and credentials.

Providers are generally recredentialed every three years or more often if necessary, which is consistent with industry guidelines.

Providers are generally recredentialed every three years or more often if necessary, which is

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consistent with industry guidelines.

In addition, network providers are required under their participating provider agreements with P3 to have established an ongoing quality assurance program.

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Additionally, all clinical decisions and certain business or management decisions that result in control over a physician’s practice of medicine or a licensed professional’s clinical decisions must be made by a physician or licensed professional and not by an unlicensed person or entity.

California also prohibits professional fee splitting arrangements, but management fees based on a percentage of gross

revenue or similar arrangement that is commensurate with fair market value of services provided by the management company are generally permissible.

California also prohibits professional fee splitting arrangements, but management fees based on a percentage of gross revenue or similar arrangement that is commensurate with fair market value of services provided by the management company are generally permissible.

We believe we have structured our management services agreements with the our affiliated professional entities to comply with the corporate practice of medicine and fee-splitting laws of Nevada, and we expect to enter into similar agreements with affiliated professional entities in California and other states where we may operate in the future, where all clinical decisions and other business and management decisions that result in control over a physician’s practice of medicine or a licensed professional’s clinical decisions remain exclusively with the affiliated professional entities, their physician shareholders and the physicians and licensed professionals employed and contracted by such entities.

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Several courts have interpreted the AKS’s intent requirement to mean that if any one purpose of an arrangement involving remuneration is to induce referrals of federal healthcare covered business, the AKS has been violated.

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The AKS includes statutory exceptions and regulatory safe harbors that protect certain arrangements.

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Violation of any of these laws or any other governmental regulations that apply may result in significant penalties, including, without limitation, administrative civil and criminal penalties, damages, disgorgement, fines, additional reporting requirements and compliance oversight obligations, in the event that a corporate integrity agreement or other agreement is required to resolve allegations of noncompliance with these laws, the curtailment or restructuring of operations, exclusion from participation in governmental healthcare programs and/or individual imprisonment.

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Healthcare Reform

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In addition, other legislative changes have been proposed and adopted since the ACA was enacted.

These changes included aggregate reductions to Medicare payments to providers, which went into effect on April 1, 2013 and, due to subsequent legislative amendments to the statute, will remain in effect through 2032, with the exception of a temporary suspension from May 1, 2020 through March 31, 2022, unless additional Congressional action is taken.

These changes included aggregate reductions to Medicare payments to providers, which went into effect on April 1, 2013 and, due to subsequent legislative amendments to the statute, will remain in effect through the first six months of fiscal year 2032, with the exception of a temporary suspension from May 1, 2020 through March 31, 2022, unless additional Congressional action is taken.

In addition, on January 2, 2013, the American Taxpayer Relief Act of 2012 was signed into law, which, among other things, reduced Medicare payments to several providers, including hospitals, and increased the statute of limitations period for the government to recover overpayments to providers from three to five years.

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It is unclear at this time what the costs of compliance with the new rules will be and what additional risks there may be to our business.

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Data Privacy and Security Laws

We are subject to a number of federal and state laws and regulations that govern the collection, use, disclosure, and protection of health-related and other personal information, including health information privacy and security laws, data breach notification laws, and consumer protection laws and regulations (e.g., Section 5 of the Federal Trade Commission Act).

For example, HIPAA imposes obligations on “covered entities,” including certain healthcare providers, such as the affiliated professional entities, health plans, and healthcare clearinghouses, and their respective “business associates” that create, receive, maintain or transmit individually identifiable health information for or on behalf of a covered entity, such as P3, as well as their covered subcontractors with respect to safeguarding the privacy, security and transmission of individually identifiable health information.

Entities that are found to be in violation of HIPAA, whether as the result of a breach of unsecured protected health information (“PHI”), a complaint about privacy practices, or an audit by HHS, may be subject to significant civil, criminal, and administrative fines and penalties and/or additional reporting and oversight obligations if required to enter into a resolution agreement and corrective action plan with HHS to settle allegations of HIPAA non-compliance.

In addition, certain state laws, such as the Confidentiality of Medical Information Act, the California Consumer Privacy Act, and the California Privacy Rights Act, govern the privacy and security of personal information, including health-related information in certain circumstances, some of which are more stringent than HIPAA and many of which differ from each other in significant ways and may not have the same effect, thus complicating compliance efforts.

Failure to comply with these laws, where applicable, can result in the imposition of significant civil and/or criminal penalties and private litigation.

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We therefore expect to see higher levels of per member medical costs in the first and fourth quarters.

Additional Information

Available Information

We were incorporated under the laws of the State of Delaware on August 20, 2020 under the name Foresight Acquisition Corp.

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Our principal executive offices are located at 2370 Corporate Circle, Suite 300, Henderson, NV 89074 and our telephone number is (702) 910-3950.

Our website is www.p3hp.com.

Under the investor relations page of the Company’s website, ir.p3hp.org, we make available free of charge a variety of information for investors, including our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, Proxy Statements on Schedule 14A and any amendments to those materials filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, as soon as reasonably practicable after we electronically file that material with or furnish it to the Securities and Exchange Commission (“SEC”).

Our website is www.p3hp.org.

Under the investor relations page of the Company’s website,

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ir.p3hp.org, we make available free of charge a variety of information for investors, including our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, Proxy Statements on Schedule 14A and any amendments to those materials filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act, as soon as reasonably practicable after we electronically file that material with or furnish it to the Securities and Exchange Commission (“SEC”).

The information found on our website is not part of this or any other report we file with, or furnish to, the SEC.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business