What changed in this filing

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Item 7. Management’s Discussion and Analysis

2023-03-01 compared with 2022-03-25 · 182 added, 205 removed, 425 unchanged (48% of the section changed)

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We seek to accomplish these objectives by entering markets and organizing existing physicians and non-physician clinicians into a unique practice model that combines the advantages of a partnership in a large regional Medical Group with significant local autonomy for Privia Providers joining our Medical Groups.

Other than Tennessee, where our Friendly Medical Group is actively negotiating with major health insurance plans after recently starting to operate under the “friendly PC” model, 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.

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

Under our standard model, Privia Physicians join the Medical Group in their geographic market as an owner of the Medical Group.

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We have national committees that distribute quality guidance, and we employ Chief Medical Officers who provide clinical oversight and direction over the clinical affairs of the Owned Medical Groups.

Additionally, we hold the provider contracts, maintain the patient records, set reimbursement rates, and negotiate payer contracts on behalf of the Owned Medical Groups.

Additionally, we hold the provider contracts, maintain the patient records, set reimbursement rates, and negotiate payer contracts on behalf of the Owned Medical Groups and the owned ACOs.

GAAP Financial Measures

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• Adjusted EBITDA was $60.9 million, $41.4 million and $29.4 million for the years ended December 31, 2022, 2021 and 2020, respectively.

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Care Margin, income from operations, the most comparable GAAP measure, to Platform Contribution, and net (loss) income, the most comparable GAAP measure, to Adjusted EBITDA.

See “Key Metrics and Non-GAAP Financial Measures” for more information as to how we define and calculate Implemented Providers, Attributed lives, Practice Collections, Care Margin, Platform Contribution, Platform Contribution Margin, Adjusted EBITDA and Adjusted EBITDA Margin, and for a reconciliation of income from operations, the most comparable GAAP measure, to Care Margin, income from operations, the most comparable GAAP measure, to Platform Contribution, and net (loss) income, the most comparable GAAP measure, to Adjusted EBITDA.

The COVID-19 Pandemic and the Coronavirus Aid, Relief and Economic Stimulus Act (“CARES Act”)

The current COVID-19 pandemic had an impact on our results of operations, cash flow and financial position for the years ended and as of December 31, 2021 and 2020, as we experienced lower volumes than anticipated and shifts in the mix of services provided after the onset of the pandemic in the United States.

We are closely monitoring the impact of the pandemic on all aspects of our business including impacts to employees, customers, patients, suppliers and vendors.

As the COVID-19 pandemic evolves, disruptions caused by the pandemic and recurring COVID-19 outbreaks, including outbreaks caused by different virus variants, could potentially impact the Company and its future results of operations, cash flows and financial position.

On March 27, 2020, the CARES Act was passed.

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It also contains provisions related to healthcare providers’ operations and the issues caused by the coronavirus pandemic.

The following are significant economic impacts for the Company and its subsidiaries as a result of specific provisions of the CARES Act for the years ended month periods ended December 31, 2021:

• The Company elected to defer its portion of Social Security taxes in 2020, which may be repaid over two years as follows:

50% by the end of 2021 and 50% by the end of 2022.

Approximately $0.8 million is recorded in accrued expenses on the balance sheet as of December 31, 2021 related to this deferral and the Company intends to remit payment by the end of 2022;

• The Company received $0.8 million and $13.3 million in grant funds from the Provider Relief Fund under the CARES Act during the years ended December 31, 2021 and 2020, respectively.

The following are significant economic impacts for the Company and its subsidiaries as a result of specific provisions of the CARES Act for the years ended December 31, 2022 and 2021:

• The Company elected to defer its portion of Social Security taxes in 2020, which was repaid over two years as follows:

50% at the end of 2021 and 50% at the end of 2022;

• The Company received $0.8 million and $13.3 million in grant funds from the Provider Relief Fund under the CARES Act during the year ended December 31, 2021 and 2020.

The Company did not receive Provider Relief Fund under the CARES Act during the year ended December 31, 2022.

We recognize revenue from multiple stakeholders, including health care consumers, health insurers, federal and state governments, employers, providers and health systems.

Our revenue includes (i) FFS revenue generated from providing healthcare services to patients through Privia Providers of Owned Medical Groups or administrative fees collected for providing administrative services to Non-Owned Medical Groups, (ii) VBC revenue collected on behalf of our providers, primarily shared savings (including surplus payments, shared savings, total cost of care budget payments and similar payments) and per member per month (PMPM) fees (including care management fees, management services fees, care coordination fees and all other similar administrative fees), and (iii) other revenue from additional services, such as concierge services, virtual visits, virtual scribes and coding.

Our revenue includes (i) FFS revenue generated from providing healthcare services to patients through Privia Providers of Owned Medical Groups or administrative fees collected for providing administrative services to Non-Owned Medical Groups, (ii) VBC revenue collected on behalf of our providers, primarily capitated revenue, shared savings (including surplus payments, shared savings, total cost of care budget payments and similar payments) and per member per month (PMPM) fees (including care management fees, management services fees, care coordination fees and all other similar administrative fees), and (iii) other revenue from additional services, such as concierge services, virtual visits, virtual scribes and coding.

We generate FFS-patient care revenue when we collect reimbursements for FFS medical services provided by Privia Providers.

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We generate VBC revenue when our 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 collected in the form of (i) shared savings earned based on improved quality and lower cost of care for our attributed patients in VBC arrangements earned primarily through Privia-owned ACOs, and (ii) PMPM 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.

The revenue is collected in the form of (i) capitated revenue, (ii) shared savings earned based on improved quality and lower cost of care for our attributed patients in VBC arrangements earned primarily through Privia-owned ACOs and (iii) PMPM 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.

VBC revenue represented 28.5%, 12.4% and 11.4% for the years ended December 31, 2022, 2021 and 2020, respectively.

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Provider Relief Funds under the CARES Act have been recorded within other revenue on the statement of operation for the years ended December 31, 2021 and 2020.

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Key Factors Affecting Our Performance

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Our business model also gives us flexibility for future, incremental growth through the acquisition of minority or majority stakes in our practices and opening de-novo, fully-owned sites of care focused on Medicare Advantage and direct contracting models.

On October 1, 2021, we launched Privia Medical Group West Texas in partnership with Abilene Diagnostic Clinic, an independent multi-specialty group practice with more than 30 providers and five care center locations.

This complements our established and expanding provider practice locations in North Texas (Dallas-Fort Worth) and the Gulf Coast region of the state.

On October 13, 2021, we entered the California market through an affiliation with BASS Medical Group, one of the Greater San Francisco Bay Area’s leading healthcare multi-specialty groups with more than 400 providers spanning 42 specialties caring for patients at over 125 locations.

Privia acquired a majority interest in BASS Management Services Organization, LLC, which is the exclusive provider of management services to BASS Medical Group.

In February 2022, the Company announced a partnership with Surgery Partners, Inc.

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Privia Health will also provide performance operations services and technology capabilities to Great Falls Clinic as well as to new providers in Montana who join the Privia Platform.

In November 2022, the Company announced a joint venture and strategic partnership with Novant Health Enterprises, a division of Novant Health, to launch Privia Medical Group – North Carolina in order to offer community physicians and provider groups throughout North Carolina with resources to reduce administrative burden and enable care insights and collaboration, as well as to support their transition to value-based care.

In January 2023, we announced a partnership with Beebe Healthcare, a not-for-profit community healthcare system located in Sussex County, Delaware, to launch an ACO in that state.

In February 2023, we announced a partnership with Community Medical Group, the largest Clinically Integrated Network (“CIN”) in Connecticut with approximately 1,100 multi-specialty providers, to launch Privia Quality Network of Connecticut.

Provider Satisfaction and Retention

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Maintaining, supporting and increasing the number of these contracts and relationships, particularly as we enter new markets, is important for our long-term success.

We typically enter into multiyear contracts with our Medical Groups, Privia Physicians, health system or hospital partners, ACO participants and payer customers, which often have a stated initial term of three years and automatically renew for successive one-year terms.

From time to time, we may renegotiate or attempt to renegotiate our payer contracts in the ordinary course of business prior to the expiration of their stated terms.

If the counterparties fail to renew their contracts, renew their contracts upon less favorable

terms or at lower fee levels or fail to utilize additional products and services obtained from us, or if we fail to renegotiate contracts with our counterparties on favorable terms or at all, our revenue may decline and our future revenue growth may be constrained.

Our ability to work within each geographic market as it evolves in its shift towards VBC, with our experience working in all reimbursement environments, enables providers to accelerate and succeed in their transition.

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We intend to accelerate the move towards the adoption of VBC reimbursement in each market in current and emerging payer programs.

To do so, we will need to

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continue enhancing our VBC capabilities and executing on initiatives to deliver next generation access, superior quality metrics and lower cost of care.

At the beginning of 2022, Privia Health launched three new Accountable Care Organizations (ACOs) in Maryland, Florida and Tennessee, with each participating in the Medicare Shared Savings Program (MSSP).

This expands the Privia-owned ACOs to seven, including ACOs in Georgia, Gulf Coast Texas, North Texas and Virginia.

On January 5, 2022 the Company announced that its Florida and the Mid-Atlantic ACOs entered into capitated payer arrangements.

These agreements cover healthcare services provided to approximately 23,000 Medicare Advantage beneficiaries effective January 1, 2022.

To do so, we will need to continue enhancing our VBC capabilities and executing on initiatives to deliver next generation access, superior quality metrics and lower cost of care.

Privia Health launched three new Accountable Care Organizations (ACOs) at the beginning of 2022 and three new ACOs in the first two months of 2023, expanding the total number of Privia-owned ACOs to ten, serving beneficiaries across the District of Columbia and eleven states, including California, Connecticut, Delaware, Florida, Georgia, Maryland, Montana, North Carolina, Tennessee, Texas, and Virginia.

Out of the ten ACOs, five are now participating in the MSSP Enhanced Track with potential upside and downside financial risk.

During 2022, we entered into capitated payer arrangements.

As of January 1, 2023, our capitated agreements cover healthcare services provided to approximately 40,600 Medicare Advantage beneficiaries.

Capitated revenue is generated through what is typically known as an “at-risk contract.” At-risk capitation refers to a model in which the Company is entitled to fixed monthly fees from the third-party payer in exchange for providing healthcare services to attributed beneficiaries in Medicare Advantage plans.

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In addition, as we continue our efforts to move markets toward VBC, we expect to continue making additional investments in operations for an expanded suite of clinical capabilities to manage our patient population.

We recently began offering Privia Care Partners, a more flexible provider affiliation model, to providers who do not desire to join one of our medical groups.

This model will initially aggregate providers in certain of our existing markets as well as new markets who are looking solely for VBC solutions without the necessity of changing EHR providers.

We will furnish population health services, reporting and analytics to such providers along with a menu of management services from which providers may choose.

We launched Privia Care Partners on January 1, 2022 with over 25,000 attributed lives in partnership with more than 300 providers in approximately 100 care center locations

We launched Privia Care Partners on January 1, 2022 to offer a more flexible affiliation model for providers who do not desire to join one of our medical groups.

This model aggregates providers in certain of our existing markets as well as new markets who are looking solely for VBC solutions without the necessity of changing EHR providers.

We furnish population health services, reporting and analytics to such providers along with a menu of management services from which providers may choose.

As of January 1, 2023, approximately 350 providers with more than 42,000 attributed lives are participating in the Privia Care Partners model.

During 2022, several Privia Care Partners’ providers transitioned to our Privia Medical Group model, which demonstrates the flexibility of our operating model and technology platform, as well as the ability to support physicians wherever they are in their transition value-based care.

Key Metrics and Non-GAAP Financial Measures

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This growth depends, in part, on our ability to successfully add new practices in existing markets and expand into new markets.

The number of Implemented Providers increased 30.1% between December 31, 2021 and 2020 mainly due to organic growth as well as the entrance into the West

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Texas and California markets.

Implemented Providers increased 2.7% between 2020 and 2019, due to organic growth in our healthcare delivery business.

The number of Implemented Providers increased 8.7% between December 31, 2021 and 2022 mainly due to due to organic growth in our healthcare delivery business as well as entrance into the Montana market and a full year of operations in the West Texas and California markets.

Implemented Providers increased 30.1% between 2020 and 2021, organic growth as well as the entrance into the West Texas and California markets.

Attributed Lives

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The number of Attributed Lives is an important measure that impacts the amount of VBC revenue we receive.

Attributed Lives increased 15.2% between December 31, 2021 and 2020 due to organic growth.

While overall Attributed Lives decreased 3.1% between 2020 and 2019, attributed lives in government value-based programs increased by 20.3% and commercial value-based programs decreased by 13.7%.

Attributed Lives increased 8.9% between December 31, 2021 and 2022 due to the launch of Privia Care Partners on January 1, 2022, as well as organic growth in all markets.

Attributed Lives increased 15.2% between 2020 and 2021, due to organic growth.

Practice Collections

We define Practice Collections as the total collections from all practices in all markets and all sources of reimbursement (FFS, VBC and other) that we receive for delivering care and providing our platform and associated services.

Practice Collections differ from revenue by adding collections from Non-Owned Medical Groups.

Practice Collections increased 25.0% for the years ended December 31, 2021 when compared to the same period in 2020 and increased 14.6% between 2020 and 2019 due to organic growth of our healthcare delivery business.

Practice Collections differ from revenue by adding collections from Non-Owned Medical Groups both in FFS and VBC arrangements.

FFS arrangements accounted for 79.1%, 91.2% and 89.7% of our practice collections for the years ended December 31, 2022, 2021 and 2020, respectively, while VBC accounted for 20.6%, 8.5% and 8.6% of practice collections for the years ended December 31, 2022, 2021 and 2020, respectively.

Practice Collections increased 49.1% for the year ended December 31, 2022 when compared to the same period in 2021 due mainly to organic growth of our healthcare delivery business, our new at-risk Capitated revenue contracts, as well as a full year of operation in the West Texas and California markets and entrance into the Montana markets and increased 25.0% between 2020 and 2021 due to organic growth of our healthcare delivery business.

Non-GAAP Financial Measures

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Investors are encouraged to review the related GAAP financial measures and the reconciliation of non-GAAP financial measures to their most directly comparable GAAP financial measures, and not to rely on any single financial measure to evaluate our business .

In the third quarter of 2022, we changed the definition of Adjusted EBITDA to exclude employer taxes on equity vesting/exercise.

In prior periods, this amount was considered de minimis and the Adjusted EBITDA amounts were not adjusted.

Employer payroll tax expense related to employee stock transactions are tied to the vesting or exercise of underlying equity awards and the price of our common stock at the time of vesting, which varies in amount from period to period and is dependent on market forces that are often beyond our control.

As a result, management excludes this item from our internal operating forecasts and models.

Management believes that non-GAAP measures adjusted for employer payroll taxes on employee stock transactions provide investors with a basis to measure our core performance against the performance of other companies without the variability created by employer payroll taxes on employee stock transactions as a result of the stock price at the time of employee exercise.

For the Years Ended December 31,

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See below for more information as to how we define and calculate Care Margin, Platform Contribution, Platform Contribution Margin, Adjusted EBITDA and Adjusted EBITDA Margin and for a reconciliation of income from operations, the most comparable GAAP measure, to Care Margin, income from operations, the most comparable GAAP measure, to Platform Contribution, and net income, the most comparable GAAP measure, to Adjusted EBITDA.

We define Care Margin as total revenue less the sum of physician and practice expense.

We define Care Margin as total revenue less the sum of provider expense.

Our Care Margin generated from FFS revenue is contractual and recurring in nature, and primarily based on an individually negotiated percentage of collections for each practice that joins Privia.

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We would also expect our care management and shared savings economics in our VBC arrangements to improve on a per patient basis as we manage towards lower total cost of care for our Attributed Lives and move towards higher risk VBC arrangements over time.

Care Margin increased 27.1% for the year ended December 31, 2021 when compared to the same period in 2020 and increased 14.6% between 2020 and 2019, due to organic growth of our medical practice business.

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Care Margin increased 28.2% for the year ended December 31, 2022 when compared to the same period in 2021 due to organic growth of our medical practice business and increased 27.1% between 2021 and 2020, due to organic growth of our medical practice business.

As a percentage of revenue, Care Margin decreased to 22.5% for the year ended December 31, 2022 from 24.7% and 23.0% for the same periods in 2021 and 2020, respectively, due to the addition of the at-risk capitation arrangements during 2022.

In addition to our financial results determined in accordance with GAAP, we believe Care Margin, a non-GAAP measure, is useful in evaluating our operating performance.

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The following table provides a reconciliation of operating (loss) income, the most closely comparable GAAP financial measure, to Care Margin.

For the year ended December 31, 2022, Cost of platform included $13.8 million of stock-based compensation expense, Sales and marketing included $2.7 million of stock-based compensation expense, and general and administrative included $50.9 million of stock-based compensation expense.

For the year ended December 31, 2021, Cost of platform included $43.9 million of stock-based compensation expense, Sales and marketing included $8.9 million of stock-based compensation expense, and general and administrative included $200.7 million of stock-based compensation expense primarily related to the modification of outstanding options in connection with our IPO.

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Platform Contribution

We define Platform Contribution as total revenue less the sum of (i) physician and practice expense, (ii) cost of platform and (iii) stock-based compensation expense included in Cost of platform.

We define Platform Contribution as total revenue less the sum of provider expense and cost of platform excluding stock-based compensation expense included in Cost of platform.

The following table provides a reconciliation of operating income, the most closely comparable GAAP financial measure, to Platform Contribution.

For the year ended December 31, 2021, $195.1 million of this stock-based compensation expense was recognized for the modification of outstanding options in connection with our IPO.

For the year ended December 31, 2022, cost of platform included $13.8 million of stock-based compensation expense, sales and marketing included $2.7 million of stock-based compensation expense, and general and administrative included $50.9 million of stock-based compensation expense.

primarily related to the modification of outstanding options in connection with our IPO.

We consider platform contribution to be an important measure to monitor our performance, specific to pricing of our services, direct costs of delivering care, and cost of our platform and associated services.

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We expect that this increase will be driven by improving per provider revenue economics over time as well as our ability to generate operating leverage on our in-market infrastructure costs.

Platform Contribution increased 30.2% for the year ended December 31, 2021 when compared to the same period in 2020 and increased 26.5% between 2020 and 2019, due to organic growth of our medical practice business.

Platform Contribution increased 38.1% for the year ended December 31, 2022 when compared to the same period in 2021 due to organic growth of our medical practice business and new market entry and increased 30.2% between 2021 and 2020, due to organic growth of our medical practice business.

Platform Contribution Margin

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In particular, we believe that the use of Platform Contribution is helpful to our investors as it is a metric used by management in assessing the health of our business and our operating performance.

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The following table provides a reconciliation of operating income, the most closely comparable GAAP financial measure, to platform contribution:

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Stock-based compensation (1)

13,758 43,888 —

Platform contribution $ 148,540 $ 107,550 $ 82,582

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Adjusted EBITDA

We define Adjusted EBITDA as net (loss) income excluding interest income, interest expense, minority interest expense / income, depreciation and amortization, stock-based compensation, severance, other one time or non-recurring expenses and the benefit from income taxes.

We define Adjusted EBITDA as net (loss) income excluding interest income, interest expense, non-controlling interest expense / income, depreciation and amortization, stock-based compensation, severance, other one time or non-recurring expenses, employer taxes on equity vesting/exercises and the (benefit from) provision for income taxes.

We include Adjusted EBITDA because it is an important measure on which our management assesses and believes investors should assess our operating performance.

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Adjusted EBITDA has limitations as an analytical tool including:

(i) Adjusted EBITDA does not reflect the impact of stock-based compensation expense or the impact of withholding shares of outstanding common stock upon vesting, and (ii) Adjusted EBITDA does not reflect interest expense on our debt or the cash requirements necessary to service interest or principal payments.

Adjusted EBITDA increased 40.9% for the year ended December 31, 2021, when compared to the same period in 2020 and increased 62.0% between 2020 and 2019 due to organic growth of our medical practice business.

(i) Adjusted EBITDA does not reflect the impact of stock-based compensation expense, and (ii) Adjusted EBITDA does not reflect interest expense on our debt or the cash requirements necessary to service interest or principal payments.

Adjusted EBITDA increased 47.1% for the year ended December 31, 2022, when compared to the same period in 2021 due to organic growth of our medical practice business, new market entry and a focus on managing the investment in new expenses and increased 40.9% between 2020 and 2021 due to organic growth of our medical practice business.

Adjusted EBITDA Margin

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We consider Adjusted EBITDA Margin to be an important measure because it helps illustrate underlying trends in our business and our historical operating performance on a more consistent basis.

Adjusted EBITDA Margin was 17.4% for the year ended December 31, 2021 an increase from 15.7% for the same period in 2020 and an increase from 11.1% in 2019, due to organic growth of our medical practice business.

Adjusted EBITDA Margin was 19.9% for the year ended December 31, 2022 an increase from 17.4% for the same period in 2021 due to organic growth of our medical practice business,

new market entry and a focus on managing the investment in new expenses and an increase from 15.7% in 2020, due to organic growth of our medical practice business.

We believe that Adjusted EBITDA, when taken together with the corresponding GAAP financial measures, provides meaningful supplemental information regarding our performance by excluding certain items that may not be indicative of our business, results of operations or outlook.

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Net loss attributable to non-controlling interests (3,479) (2,419) (340)

(Benefit from) provision for income taxes (27,857) (7,441) 1,207

Interest expense 1,070 1,917 6,910

Benefit from income taxes (6,516) (27,857) (7,441)

Interest (income) expense, net (542) 1,070 1,917

Depreciation and amortization 4,571 2,464 1,843

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Adjusted EBITDA $ 60,852 $ 41,377 $ 29,372

(1) Other expenses include certain non-cash or non-recurring costs and severance costs related to employee-related expenses for certain former Company executives that were due severance based on their agreements when they left the Company

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(1) Other expenses include employer taxes on equity vesting/exercises, legal, severance and certain non-recurring costs.

Employer taxes on equity vesting/exercises of $3.2 million for the year ended December 31, 2022.

Components of Results of Operations

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Operating Expenses

Physician and practice expenses

Physician payments are set payments made to physicians associated with Owned Medical Groups.

These payments are set and adjusted as necessary, pursuant to the Owned Medical Groups’ Board of Directors’ approved guidelines with variances specifically approved by the Owned Medical Groups’ Board of Directors.

Practice related payments are used to cover an Affiliated Practice’s staff salary and benefits, medical supplies, rent and other occupancy costs, insurance and office supplies.

Affiliated Practices are not owned by the Company and the Company bears no responsibility for any losses incurred by Affiliated Practices.

Affiliated Practices are paid a variable amount based on collections and the services provided.

Provider expenses

Provider expense, previously referred to as “Physician and Practice expense”, are amounts accrued or payments made to physicians, hospitals and other service providers, including Privia physicians, their related physician practices, and providers the Company has contracted with through payer partners.

Those costs include physician guaranteed payments and other required distributions pursuant to the service agreements as well as medical claims costs for services provided to attributed beneficiaries under at-risk Capitated revenue arrangements for which the Company is financially responsible whether paid directly by the Company or indirectly by payers with whom the Company has contracted.

Provider expenses are recognized in the period in which services are provided.

Cost of platform

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See “Liquidity and Capital Resources—General and Note Payable.”

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Results of Operations

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Operating expenses:

Provider expense 1,051,040 727,827 323,213 44.4 %

Cost of platform 170,838 174,731 (3,893) (2.2) %

Sales and marketing 19,741 22,750 (3,009) (13.2) %

General and administrative 129,592 255,884 (126,292) (49.4) %

Depreciation and amortization 4,571 2,464 2,107 85.5 %

Total operating expenses 1,375,782 1,183,656 192,126 16.2 %

Operating loss (19,122) (217,436) 198,314 (91.2) %

Interest (income) expense, net (542) 1,070 (1,612) (150.7) %

Loss before benefit from income taxes (18,580) (218,506) 199,926 (91.5) %

Benefit from income taxes (6,516) (27,857) 21,341 (76.6) %

Net loss (12,064) (190,649) 178,585 (93.7) %

Loss attributable to non-controlling interests (3,479) (2,419) (1,060) 43.8 %

Net loss attributable to Privia Health Group, Inc.

$ (8,585) $ (188,230) $ 179,645 (95.4) %

The following table presents our revenues disaggregated by source:

For the Years Ended December 31,

(Dollars in Thousands) 2022 2021 Change ($) Change (%)

FFS-patient care $ 869,165 $ 772,482 $ 96,683 12.5 %

FFS-administrative services 94,929 68,805 26,124 38.0 %

Capitated revenue 218,463 — 218,463 — %

Shared savings 132,615 83,016 49,599 59.7 %

Care management fees (PMPM) 35,541 36,503 (962) (2.6) %

Other revenue 5,947 5,414 533 9.8 %

Total Revenue $ 1,356,660 $ 966,220 $ 390,440 40.4 %

Revenue was $1.36 billion for the year ended December 31, 2022, an increase from $966.2 million for the year ended December 31, 2021.

Key drivers of this revenue growth were the addition of capitated revenue in 2022 of $218.5 million, FFS–patient care revenue, which increased $96.7 million, shared savings revenue, which increased $49.6 million and FFS-administrative services which increased $26.1 million.

Revenue increases were partially offset by a decrease in care management fee, which decreased $1.0 million as some care management fee revenue was replaced by capitated revenue.

Growth in FFS-patient care revenue and FFS-administrative services was primarily attributed to an increase in visit volumes as COVID-19 restrictions were lifted in certain states as well as the addition of new providers and the new markets of California and West Texas, which were part of Privia for the full year in 2022.

Capitated revenue growth is due to the commencement of at-risk capitation arrangements during the first quarter of 2022 resulting in an increase in revenue of $218.5 million.

Shared savings growth was primarily due to more Attributed Lives in Medicare programs as well as continued strong estimated performance in our value based care programs.

Operating Expenses

For the Years Ended December 31,

(Dollars in Thousands) 2022 2021 Change ($) Change (%)

Operating Expenses:

Provider expense $ 1,051,040 $ 727,827 $ 323,213 44.4 %

Cost of platform 170,838 174,731 (3,893) (2.2) %

Sales and marketing 19,741 22,750 (3,009) (13.2) %

General and administrative 129,592 255,884 (126,292) (49.4) %

Depreciation and amortization expense 4,571 2,464 2,107 85.5 %

Total operating expenses $ 1,375,782 $ 1,183,656 $ 192,126 16.2 %

Provider expenses

Provider expenses were $1.05 billion for the year ended December 31, 2022, an increase from $727.8 million during the same period in 2021.

This increase was driven primarily by the commencement of at-risk capitation arrangements during the first quarter of 2022 and higher FFS-patient care revenue and growth in Implemented Providers.

Cost of platform

Cost of platform expenses were $170.8 million for the year ended December 31, 2022, a decrease from $174.7 million during the same period in 2021.

The decrease was primarily driven by the reduction of $30.1 million in stock-based compensation expense primarily related to the modification of vesting terms of options in connection with the Company’s IPO during the year ended December 31, 2021, partially offset by an increase in salaries and benefits of $16.4 million related to continued growth, and an increase in EMR and platform technology costs of $6.2 million driven by an increase in FFS claims and an increase in consulting costs of $1.8 million due to continued growth and market expansion, and various other immaterial expenses related to growth and market expansion.

Sales and marketing

Sales and marketing expenses were $19.7 million for the year ended December 31, 2022, a decrease from $22.7 million during the same period in 2021.

The decrease was driven by the reduction of $6.2 million in stock-based compensation primarily related to the modification of vesting terms of options in connection with the Company’s IPO during the year ended December 31, 2021, partially offset by an increase in salaries and benefits of $2.1 million.

General and administrative

General and administrative expenses were $129.6 million for the year ended December 31, 2022, a decrease from $255.9 million during the same period in 2021.

This decrease was primarily driven by the reduction of $149.8 million in stock-based compensation expense primarily related to the modification of vesting terms of options in connection with the Company’s IPO during the year ended December 31, 2021, partially offset by an increase in compensation and benefits of $11.3 million, which includes $2.4 million of employer taxes on equity vesting/exercises, an increase in professional services of $5.1 million related to additional consulting services for audit, tax and SOX compliance and various other immaterial expenses.

Depreciation and amortization expense

Depreciation and amortization expenses were $4.6 million for the year ended December 31, 2022, an increase from $2.5 million during the same period in 2021.

This increase was primarily driven by amortization of intangible assets related to the acquisition of BASS Privia Management Company of California, LLC (“BPMC”) and Privia Medical Group West Texas, PLLC, formerly known as Abilene Diagnostic Clinic, PLLC (“PMG West Texas” or “WTX Friendly Medical Group”) during the fourth quarter of 2021.

Interest (income) expense, net

Interest income was $0.5 million for the year ended December 31, 2022, compared to interest expense of $1.1 million during the same period in 2021.

This change was primarily the result of the repayment of the Term Loan Facility at the end of June 2022 and the increase in the rate of interest earned on cash in our bank accounts in 2022.

Benefit from income taxes

The benefit from income taxes of $6.5 million for the year ended December 31, 2022 decreased from $27.9 million during the same period in 2021.

The benefit for the year ended December 31, 2022 is primarily the result of the pre-tax loss and windfall tax deductions related to the exercise of the stock options and vesting of RSUs partially offset by the non-deductible stock-based compensation expense..

Net loss attributable to non-controlling interests

Net loss attributable to non-controlling interests was $3.5 million for the year ended December 31, 2022, an increase from $2.4 million during the same period in 2021.

This change was primarily related to investments in new joint venture markets.

Comparison of the Years Ended December 31, 2021 and 2020

The following table sets forth our consolidated statements of operations data for the years ended December 31, 2021 and 2020.

For the Years Ended December 31,

2021 2020 Change ($) Change (%)

(in thousands)

Revenue $ 966,220 $ 817,075 $ 149,145 18.3 %

Operating expenses:

Physician and practice expense 727,827 629,487 98,340 15.6 %

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The decrease in other revenue was primarily driven by a decrease in grant funds received as part of the CARES Act Provider Relief Fund.

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Operating Expenses

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Net loss attributable to non-controlling interests was $2.4 million for the year ended December 31, 2021, an increase from $0.3 million during the same period in 2020 and is primarily due to an increase in net loss before non-controlling interest.

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Comparison of the Years Ended December 31, 2020 and 2019

The following table sets forth our consolidated statements of operations data for the years ended December 31, 2020 and 2019.

For the Years Ended December 31,

(in thousands) 2020 2019 Change ($) Change (%)

Revenue $ 817,075 $ 786,360 $ 30,715 3.9 %

Operating Expenses:

Physician and practice expense 629,487 622,632 6,855 1.1 %

Cost of platform 105,006 95,256 9,750 10.2 %

Sale and marketing 11,343 9,156 2,187 23.9 %

General and administrative 44,016 41,827 2,189 5.2 %

Depreciation and amortization expense 1,843 1,427 416 29.2 %

Total operating expenses 791,695 770,298 21,397 2.8 %

Operating Income 25,380 16,062 9,318 58.0 %

Interest expense 1,917 6,910 (4,993) (72.3) %

Income (loss) before provision for (benefit from) income taxes 23,463 9,152 14,311 156.4 %

Provision for (benefit from) income taxes (7,441) 1,207 (8,648) (716.5) %

Net income (loss) 30,904 7,945 22,959 289.0 %

Net loss attributable to non-controlling interests (340) (299) (41) 13.7 %

Net income (loss) attributable to Privia Health Group, Inc $ 31,244 $ 8,244 $ 23,000 279.0 %

Revenue was $817.1 million for the year ended December 31, 2020, an increase from $786.4 million for the year ended December 31, 2019.

Key drivers of this revenue growth were FFS – administrative services revenue, which increased $9.8 million or 20.1%, and care management fees (PMPM), which increased $8.2 million or 44.3%, shared savings revenue which increased $26.6 million or 66.6%, and other revenue which increased $15.0 million or 456.0%, partially offset by a decrease in FFS–patient care revenue of $28.8 million or 4.3%.

Growth in FFS–administrative services revenue was due mainly to the addition of a new market for a full year in 2020 (Florida).

Care management fees (PMPM) growth was due mainly to an increase in the total number of VBC contracts that include the payment of care management fees.

Shared savings growth was mainly due to a move to a higher risk track in two of our markets for MSSP, which provided a larger opportunity to earn incentive amounts, as well as the addition of a new shared savings contract in Florida in 2020.

The increase in other revenue was driven by the grant funds received as part of the Cares Act Provider Relief Fund.

The decrease in FFS – patient care revenue was mainly attributed to certain state and local initiatives imposed as a result of COVID-19, such as social distancing guidelines and temporary lockdowns, partially offset by the addition of new providers.

The following table presents our revenues disaggregated by source:

For the Years Ended December 31,

(in thousands) 2020 2019 Change ($) Change (%)

FFS-patient care $ 647,314 $ 676,157 $ (28,843) (4.3) %

FFS-administrative services 58,278 48,510 9,768 20.1 %

Shared savings 66,414 39,854 26,560 66.6 %

Care management (PMPM) 26,766 18,547 8,219 44.3 %

Other revenue 18,303 3,292 15,011 456.0 %

Total Revenue $ 817,075 $ 786,360 $ 30,715 3.9 %

Operating Expenses

For the Years Ended December 31,

(in thousands) 2020 2019 Change ($) Change (%)

Operating Expenses:

Physician and practice expense $ 629,487 $ 622,632 $ 6,855 1.1 %

Cost of platform 105,006 95,256 9,750 10.2 %

Sale and marketing 11,343 9,156 2,187 23.9 %

General and administrative 44,016 41,827 2,189 5.2 %

Depreciation and amortization expense 1,843 1,427 416 29.2 %

Total operating expenses $ 791,695 $ 770,298 $ 21,397 2.8 %

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Physician and practice expenses

Physician expenses were $629.5 million for the year ended December 31, 2020, an increase from $622.6 million for the year ended December 31, 2019.

This increase was driven primarily the growth in implemented providers offset by some decreases in expenses related to lower FFS-patient care revenue.

Cost of platform

Cost of platform expenses were $105.0 million for the year ended December 31, 2020, an increase from $95.2 million for the year ended December 31, 2019.

This increase was driven primarily by an increase in third-party EMR and practice management software expenses of $2.1 million, and an increase in salaries and benefits of $12.5 million to support the growth of our business, partially offset by a decrease in consulting costs of $1.3 million, and a decrease in travel of $2.3 million.

Sales and marketing

Sales and marketing expenses were $11.3 million for the year ended December 31, 2020, an increase from $9.2 million for the year ended December 31, 2019.

This increase was driven primarily by an increase in salaries and benefits of $2.0 million related to opening a new market in Tennessee as well as an increase in variable compensation related to the number of physicians joining our platform during 2020.

General and administrative

General and administrative expense was $44.0 million for the year ended December 31, 2020, an increase from $41.8 million for the year ended December 31, 2019.

We recorded $0.2 million in stock based compensation in 2019 as compared to $0.5 million in 2020.

In addition, there was a $2.0 million increase in consulting services due primarily to additional audit and other services performed in 2020 related to preparing to be a public company.

Depreciation and amortization expense

Depreciation and amortization expense was $1.8 million for the year ended December 31, 2020, an increase from to $1.4 million for the year ended December 31, 2019.

This increase was driven primarily by an increase in leasehold improvements related to the office space build out that consolidated our corporate offices.

Interest expense

Interest expense was $1.9 million for the year ended December 31, 2020, a decrease from $6.9 million for the year ended December 31, 2019.

The decrease was primarily driven by the refinance of the Company’s debt in November 2019, combined with the repayment of a note payable to related parties.

(Benefit from) provision for income taxes

Benefit from income taxes increased $8.6 million for the year ended December 31, 2020 when compared to the same period in 2019 primarily due to the release of the valuation allowance.

Net loss attributable to non-controlling interest

Net loss attributable to non-controlling interest remained relatively consistent for the year ended December 31, 2020 when compared to the same period in 2019.

Liquidity and Capital Resources

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In the event that additional financing is required from outside sources, we may not be able to raise it on terms acceptable to us or at all.

If we are unable to raise additional capital when desired, or if we cannot expand our operations or

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otherwise capitalize on our business opportunities because we lack sufficient capital, our business, results of operations, and financial condition would be adversely affected.

If we are unable to raise additional capital when desired, or if we cannot expand our operations or otherwise capitalize on our business opportunities because we lack sufficient capital, our business, results of operations, and financial condition would be adversely affected.

See Note 9 “Note Payable” for discussion on our Credit Facilities.

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Net cash used in investing activities (104) (32,775) (380)

Net cash provided by (used in) financing activities 213,661 (767) (10,868)

Net cash (used in) provided by financing activities (19,677) 213,661 (767)

Net increase in cash and cash equivalents $ 27,415 $ 235,944 $ 37,744

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Significant changes impacting net cash provided by operating activities for the year ended December 31, 2022 compared to the same period in 2021 were as follows:

• Decrease in loss of $178.5 million from a loss of $(12.1) million during the year ended December 31, 2022 compared to loss of $(190.6) million during the year ended December 31, 2021, primarily driven by the recognition of stock-based compensation expense related to the modification of vesting terms of options in connection with the Company’s IPO during the year ended December 31, 2021 when compared to the recognition of stock-based compensation for the same period in 2022.

• An increase of $(72.2) million in accounts receivable, net, for the year ended December 31, 2022 compared to the same period in 2021 of $(14.6) million, an increase of $(57.6) million.

The increase is primarily driven by the commencement of at-risk capitation arrangements during the year ended December 31, 2022 and an increase in FFS and VBC revenue.

• An increase of $67.7 million in provider liability for the year ended December 31, 2022 compared to an increase of $33.9 million during the same period in 2021, an increase of $33.8 million.

The increase is primarily due to an increase

in shared savings and the commencement of at-risk capitation arrangements during the year ended December 31, 2022, accounting for $28.6 million of the increase.

Net cash provided by operating activities was $55.1 million for the year ended December 31, 2021 compared to $38.9 million for the same period in 2020.

Significant changes impacting net cash provided by operating activities for the year ended December 31, 2021 compared to the same period in 2020 were as follows:

• Increase in loss of $221.5 million from income of $30.9 million of net income during the year ended December 31, 2020 to $190.6 million of net loss during the same period in 2021, primarily driven by the recognition of $253.5 million of non-cash stock-based compensation expense related to the modification of vesting terms of options in connection with the Company’s IPO.

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A portion of the expense is not currently deductible for tax purposes.

Net cash provided by operating activities was $38.9 million for the year ended December 31, 2020, an increase of $14.5 million, compared to $24.4 million for the year ended December 31, 2019.

Significant changes impacting net cash used in operating activities for the year ended December 31, 2020 as compared to the year ended December 31, 2019 were as follows:

• Increase of $23.0 million related to an increase in net income for the year ended December 31, 2020 of $30.9 million compared to net income for the year ended December 31, 2019 of $7.9 million.

• Increase of $8.9 million due to liability owed by medical practices and providers, which was an increase for the year ended December 31, 2020 of $24.5 million compared to an increase for the year ended December 31, 2019 of $15.6 million.

This change is primarily driven by the increase in implemented providers and additional physician and practice expenses associated with the increase in shared savings revenue.

• Increase of $7.6 million in accounts payable and accrued expenses, which was an increase for the year ended December 31, 2020 of $9.7 million compared to a decrease for the year ended December 31, 2019 of $2.1 million.

This increase was mainly driven by an increase in unearned revenue.

• Offset by a $15.6 million increase in the decrease of accounts receivable, net, which was a decrease for the year ended December 31, 2020 of $21.8 million compared to a decrease for the year ended December 31, 2019 of $6.2 million,

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primarily driven by the increase in implemented providers and an increase in the receivable related to shared savings revenue.

• Further offset by a decrease in the increase of $4.1 million in other long-term liabilities, which was an increase for the year ended December 31, 2019 of $0.7 million compared to an increase for the year ended December 31, 2018 of $4.8 million.

This change is primarily driven by a tenant improvement allowance provided by the landlord for the office space consolidation.

Investing Activities

Net cash used in investing activities was $0.1 million for the year ended December 31, 2022 compared to $32.8 million during the same period in 2021, primarily due to Privia investing in two new markets during the fourth quarter of 2021.

Net cash used in investing activities was $0.4 million for the year ended December 31, 2020 compared to $5.7 million for the year ended December 31, 2019.

This decrease was driven primarily by leasehold improvements related to the office space buildout that consolidated our corporate offices during 2019.

Net cash used in investing activities was $32.8 million for the year ended December 31, 2021 compared to $0.4 million during the same period in 2020, primarily due to Privia investing in two new markets during the fourth quarter of 2021.

Financing Activities

Net cash used in financing activities was $19.7 million for the year ended December 31, 2022 compared to net cash provided by financing activities of $213.7 million.

This decrease primarily related to the receipt of the net proceeds from the Company’s IPO of $211.0 million during year ended December 31, 2021, and the use of cash to repay the Company’s Term Loan Facility during the year ended December 31, 2022, partially offset by the receipt of proceeds from stock options exercised of $13.4 million.

Net cash provided by financing activities was $213.7 million for the year ended December 31, 2021 compared to $0.8 million used for financing activities for the same period in 2020.

This increase primarily related net proceeds from the Company’s IPO of $211.0 million during year ended December 31, 2021, and net proceeds from stock options exercised of $3.8 million.

Net cash used in financing activities was $0.8 million for the year ended December 31, 2020, compared to $10.9 million for the year ended December 31, 2019.

This decrease primarily relates to repayments made in 2019 for note payable to related parties that did not take place in 2020 of $15.3 million, offset by the net $5.0 million increase in note payable in 2019.

Contractual Obligations, Commitments and Contingencies

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Emerging Growth Company Status

We are an emerging growth company, as defined in the JOBS Act.

The JOBS Act provides that an emerging growth company can take advantage of an extended transition period for complying with new or revised accounting standards.

This provision allows an emerging growth company to delay the adoption of some accounting standards until those standards would otherwise apply to private companies.

We have elected to use the extended transition period under the JOBS Act until the earlier of the date we (1) are no longer an emerging growth company or (2) affirmatively and irrevocably opt out of the extended transition period provided in the JOBS Act.

As a result, our financial statements may not be comparable to companies that comply with new or revised accounting pronouncements as of public company effective dates.

Based on the aggregate worldwide market value of our shares of common stock held by our non-affiliate stockholders on June 30, 2022, as of December 31, 2022, we have become a “large-accelerated filer” and have lost emerging growth status for the year ended December 31, 2022.

We are no longer exempt from the auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley Act of 2002, as amended, and our independent registered public accounting firm will evaluate and report on the effectiveness of internal control over financial reporting.

Critical Accounting Policies and Estimates

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Such valuations require us to make significant estimates and assumptions, especially at the acquisition date with respect to intangible assets.

Significant estimates in valuing certain intangible assets include, but are not limited to, revenue growth

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rates, medical claims expense, cost of care expenses, operating expenses, discount rate, contract terms and useful life from acquired assets.

Significant estimates in valuing certain intangible assets include, but are not limited to, revenue growth rates, medical claims expense, cost of care expenses, operating expenses, discount rate, contract terms and useful life from acquired assets.

Our estimates of fair value are based upon assumptions believed to be reasonable, but which are inherently uncertain and unpredictable and, as a result, actual results may differ from estimates.

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Recognize revenue as the entity satisfies a performance obligation.

The cumulative effect of initially adopting ASC 606 was limited to reclassification of bad debt expense, from a general and administrative expense in 2018 to a contra revenue account in 2019 in the amount of $1.5 million for 2019.

Bad debt expense had historically been reported within general and administrative expenses, separately from patient service revenue.

Under ASC 606, the Company estimates implicit price concessions related to self-pay balances as part of estimating the original transaction price and reports such estimates as reduction of transaction price.

The key judgments applicable to revenue recognition under ASC 605 and ASC 606 are similar and are described below.

FFS-patient care

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The Company’s FFS-administrative services business provides administration and management services pursuant to MSAs with Non-Owned Medical Groups.

The Company’s MSAs with the Non-Owned Medical Groups range from 5 –20 years in duration and outline the terms and conditions of the administration and management services to be provided, which includes RCM services such as billings and collections, as well as other services, including, but not limited to, payer contracting, information technology services and accounting and treasury services.

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as other services, including, but not limited to, payer contracting, information technology services and accounting and treasury services.

In certain MSAs, the Company is paid administrative fees equal to the cost of supplying certain services as outlined in the MSAs, and if applicable, a margin is added to the cost of certain services.

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The Company estimates the transaction price using the most likely amount methodology and amounts are included in the net transaction price to the extent that it is probable that a significant reversal will not occur once any uncertainty associated with the variable consideration is subsequently resolved.

No rebates have been earned as of December 31, 2021 or 2020.

Rebates in the amount of $2.8 million have been recorded as of December 31, 2022.

No rebates were recorded for years ended December 31, 2021 and 2020.

The Company’s VBC business consists of its clinically integrated network and Accountable Care Organizations which bring together independent physician practices within our medical groups to focus on sharing data, improving care coordination, and collaborating on initiatives to improve outcomes and lower healthcare spending.

The Company has contracts with the U.S.

federal government and large payer organizations that are multi-year in nature typically ranging from three to five years and is paid as follows:

(1) Care management fees on a per member per month (PMPM) basis and (2) on a shared savings basis.

federal government and large payer organizations that are multi-year in nature typically ranging from three to five years and is earned as follows:

(1) Capitated revenue (2) on a shared savings basis and (3) Care management fees on a per member per month basis.

Capitated Revenue

Capitated revenue consists of capitation fees earned under contracts with various Medicare Advantage payers (“Payers”) in at-risk capitation arrangements.

The Company is entitled to monthly fees to provide a defined range of healthcare services for Medicare Advantage health plan members (“attributed beneficiaries” or “attributed lives”) attributed to the Company’s contracted physicians (typically primary care).

Monthly fees are determined as a percentage of the premium payers receive from the Centers for Medicare & Medicaid Services (“CMS”) for these attributed beneficiaries.

In at-risk arrangements, the Company generally accepts financial risk for beneficiaries attributed to its contracted physicians and, therefore, is responsible for the cost of contracted healthcare services required by those beneficiaries in accordance with the terms of each agreement.

Fees are recorded gross in revenue because the Company is acting as a principal in coordinating and controlling the range of services provided (other than clinical decisions) under its Capitated revenue contracts with payers.

Capitated revenue contracts with payers are generally multi-year arrangements and have a single monthly stand ready performance obligation, as defined by ASC Topic 606, Revenue from Contracts with Customers (“ASC 606”), to provide all aspects of necessary medical care to members for the contracted period.

The Company recognizes revenue in the month in which the eligible beneficiary is entitled to receive healthcare benefits during the contract term.

The transaction price for the Company’s capitation contracts is a fixed percentage of premium per attributed life with periodic adjustment, as the monthly fees to which the Company are entitled are subject to periodic adjustments under CMS’s risk adjustment payment methodology.

CMS deploys a risk adjustment model that determines premiums paid to all payers according to each attributed life’s health status and certain demographic factors.

Under this risk adjustment methodology, CMS calculates the risk adjusted premium payment using diagnosis data from various settings.

The Company and healthcare providers collect and submit diagnosis data to payers (and ultimately to CMS) to be utilized in the determination of risk adjustments and such data is used by the Company to estimate any adjustments to the Capitated revenue earned that may increase or decrease revenue in subsequent periods pursuant to contractual terms.

Such adjustments are estimated using the most likely amount methodology and amounts are only included in revenue to the extent that it is probable that a significant reversal of cumulative revenue will not occur once any uncertainty is resolved.

Capitated revenue fees are also subject to adjustment for incentives or penalties based on the achievement of certain quality metrics defined in the Company’s contracts with payers.

The Company recognizes incentive revenue as earned using the most likely amount methodology and only to the extent that it is probable that a significant reversal of cumulative revenue will not occur once any uncertainty is resolved.

Neither the Company nor any of its affiliates are a registered insurance company as state law in the states in which we operate do not require such registration for risk bearing providers.

Shared Savings

Under the shared savings basis, the Company is offered financial incentives to increase its accountability for the cost, quality and efficiency of the care provided to the population of attributed members.

The Company is paid the financial incentives when, for a given twelve-month measurement period, its performance on quality of care and utilization meets or exceeds the standards set by the

payers as outlined in the contracts and when savings are achieved for medical costs associated with the population of attributed members.

The payers analyze the activities during the measurement period using the agreed upon benchmarks, metrics and performance criteria to determine the appropriate payments to the Company.

The Company estimates the transaction price by analyzing the activities during the relevant time period in contemplation of the agreed upon benchmarks, metrics, performance criteria, and attribution criteria based on those and any other contractually defined factors.

Revenue is not recorded until the price can be estimated by the Company and to the extent that it is probable that a significant reversal will not occur once any uncertainty associated with the variable consideration is subsequently resolved.

Revenue is recorded during the period when the services were provided during a pre-set twelve-month annual measurement period.

Care Management Fees (PMPM)

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The majority of the Company’s net PMPM transaction price relates specifically to its efforts to transfer the service for a distinct increment of the series and is recognized as revenue in the month in which attributed members are entitled to care coordination services.

Shared Savings

The Company is paid the financial incentives when, for a given twelve-month measurement period, its performance on quality of care and utilization meets or exceeds the standards set by the payers as outlined in the contracts and when savings are achieved for medical costs associated with the population of attributed members.

The payers analyze the activities during the measurement period using the agreed upon benchmarks, metrics and performance criteria to determine the appropriate payments to the Company.

Revenue is recorded during the period when the services were provided during a pre-set twelve-month annual measurement period.

Other Revenue

The remainder of our revenue is derived from leveraging our existing base of providers and patients to deliver value-oriented services such as concierge services, 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.

CARES Act funds received have been recorded within other revenue on the statement of operation through December 31, 2021.

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Variable Interest Entities

Management evaluates the Company’s ownership, contractual, and other interests in entities to determine if it has any variable interest in a variable interest entity (“VIE”).

These evaluations are complex, involve judgment, and the use of estimates and assumptions based on available historical information, among other factors.

If the Company determines that an entity in which it holds a contractual, or ownership, interest is a VIE and that the Company is the primary beneficiary, the Company consolidates such entity in its consolidated financial statements.

The primary beneficiary of a VIE is the party that meets both of the following criteria:

(i) has the power to make decisions that most significantly affect the economic performance of the VIE;

and (ii) has the obligation to absorb losses or the right to receive benefits that in either case could potentially be significant to the VIE.

Management performs ongoing reassessments of whether changes in the facts and circumstances regarding the Company’s involvement with a VIE will cause the consolidation conclusion to change.

Changes in consolidation status are applied prospectively.

The Company evaluated its relationship with (a) Non-Owned Medical Groups and their Affiliated Practices, (b) Friendly Medical Groups and their Affiliated Practices, and (c) Affiliated Practices associated with Owned Medical Groups to determine if any of these entities should be subject to consolidation.

The Company does not have ownership interest in any Affiliated Practices (whether those of Owned Medical Groups, Non-Owned Medical Groups or Friendly Medical Groups);

nor does the Company have an ownership in Non-Owned Medical Groups or Friendly Medical Groups.

The PMSA and support services agreement (“SSA”) entered by Non-Owned Medical Groups and Friendly Medical Groups with their Privia Physician members and the Affiliated Practices are not contractual relationships within Privia’s legal structure.

The only contractual relationship between Privia and Non-Owned Medical Groups is established through the MSA.

For Friendly Medical Groups, in addition to the MSA, the Company has a contractual relationship, evidenced by a restriction agreement (each a “Restriction Agreement”) with its Nominee Physicians and their respective Nominee PCs.

Management has determined, based on the provisions of the MSAs between the Company and Non-Owned Medical Groups, and after considering the requirements of Accounting Standards Codification (“ASC”) Topic 810, Consolidation (“ASC 810”), the Company is not required to consolidate the financial position or results of operations of the Affiliated Practices associated with Owned Medical Groups;

nor is it required to consolidate the financial position or results of operations of Non-Owned Medical Groups (and, therefore, the Company is not required to consolidate the Affiliated Practices of the Non-Owned Medical Groups).

However, management has determined, based on the provisions of the Restriction Agreement by and among the Company, the Nominee Physicians and their respective Nominee PCs, the governing documents of the Friendly Medical Groups, and after considering the requirements of ASC 810, that the Company should consolidate the financial position or results of operations of the Friendly Medical Groups and the Nominee PCs, but not the Affiliated Practices of the Friendly Medical Groups.

ASC 810 requires the Company to consolidate the financial position, results of operations and cash flows of a Non-Owned Medical Group affiliated by means of a service agreement if the Non-Owned Medical Group is a VIE and the Company is its primary beneficiary.

A Non-Owned Medical Group would be considered a VIE if (a) it is thinly capitalized (i.e., the equity is not sufficient to fund the Non-Owned Medical Group’s activities without additional subordinated financial support) or (b) the equity holders of the Non-Owned Medical Group as a group have one of the following four characteristics:

(i) lack the power to direct the activities that most significantly affect the Non-Owned Medical Group’s economic performance, (ii) possess non-substantive voting rights, (iii) lack the obligation to absorb the Non-Owned Medical Group’s expected losses, or (iv) lack the right to receive the Non-Owned Medical Group’s expected residual returns.

The characteristics of both (a) and (b) do not exist and as such the Non-Owned Medical Groups do not represent VIEs.

Accordingly, the Company has not consolidated the financial position, results of operations or cash flows of the Non-Owned Medical Groups that are affiliated with the Company by means of a service agreement for the years ended December 31, 2021, 2020 and 2019.

Each time that it enters into a new service agreement or enters into a material amendment to an existing service agreement, the Company considers whether the terms of that agreement or amendment would change the elements it considers in accordance with the VIE guidance.

The same analysis was performed for the Affiliated Practices of Owned Medical Groups, which have contractual relationships with Privia through the SSA, and the Company determined they do not represent VIEs as they do not meet the criteria in ASC 810 for similar reasons outlined above.

The Company, however, does meet the criteria for consolidation of the Nominee PCs and the Friendly Medical Groups based on the discussion above.

CARES Act funds received have been recorded within other revenue on the statement of operations through December 31, 2021.

No funds were received from the CARES Act for the year ended December 31, 2022.

Goodwill represents the excess of the purchase price, plus the fair value of any non-controlling interests in the acquiree, over the fair value of identifiable net assets acquired.

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The Company completes a single assessment of Goodwill as it has one reporting unit.

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Stock-Based Compensation

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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 7. Management’s Discussion and Analysis