Privia Health (PRVA) - 2021 Q4 - Annual Report

Part I Business Privia Health enables medical groups to transition to value-based care across seven states and D.C - Privia Health operates a physician-enablement platform designed to transition medical practices from fee-for-service (FFS) to value-based care (VBC) models. The platform serves over 3,300 implemented providers in more than 870 locations across seven states and D.C., managing over 3 million patients[15][21] Key Company Metrics (as of December 31, 2021) | Metric | Value | | :--- | :--- | | Implemented Providers | > 3,300 | | Care Center Locations | > 870 | | States of Operation | 7 (+ D.C.) | | Total Patients | > 3 million | | Total Attributed Lives | ~786,000 | | 2021 Revenue | ~$966.2 million | | 2021 Practice Collections | ~$1.63 billion | - The company's revenue is primarily derived from three sources: FFS patient care and administrative services, VBC revenue (including shared savings and PMPM fees), and other services. The model is designed to be payer-agnostic and scalable across different geographies and reimbursement models[18][25] - A key part of Privia's model is organizing physicians into single Tax-ID Number (TIN) Medical Groups in each market, supported by local Management Services Organizations (MSOs) and Accountable Care Organizations (ACOs) to capture VBC opportunities[31][49][51] Market Opportunity and Growth Strategy The company targets a large market opportunity and outlines a multi-pronged strategy for growth - Privia targets a large and growing Total Addressable Market (TAM) for physician enablement, estimated at $1.9 trillion, with the potential to serve over 1 million providers in the U.S[19][39][42] - The company's growth strategy is centered on four key pillars: Organic Growth, Moving Markets to VBC, White Space Opportunities, and New Market Development[90][91][93] - In January 2022, the company launched Privia Care Partners, a more flexible affiliation model for providers seeking VBC solutions without changing their EMR platform, starting with over 25,000 attributed lives[21] The Privia Technology Solution Privia's proprietary cloud-based platform optimizes healthcare delivery for fee-for-service and value-based care models - The Privia Technology Solution is a proprietary, end-to-end, cloud-based platform that integrates Privia-developed and third-party applications to manage all aspects of healthcare delivery, optimizing provider workflow and patient engagement[16][50][58] - The platform streamlines workflows across the patient journey: pre-visit (data integration, huddle reports), during the visit (in-person or virtual, embedded quality/risk gap alerts), and between visits (automated outreach, care management)[62][63][64] - Privia's proprietary virtual visit platform is fully integrated into the EMR, facilitating over 1.7 million virtual visits conducted by over 2,800 providers as of December 31, 2021[50][67] Government Regulations The company's operations are subject to extensive federal and state healthcare regulations - The company's operations are subject to extensive federal, state, and local regulations, including laws related to the corporate practice of medicine, fee-splitting, the Stark Law, the Anti-Kickback Statute (AKS), the False Claims Act (FCA), and HIPAA[103][104] - To comply with state-specific corporate practice of medicine laws, Privia utilizes different ownership structures, including majority-owned "Owned Medical Groups" and "Non-Owned" or "Friendly Medical Group" models supported by Management Services Agreements (MSAs)[108][109][113] - The company is subject to HIPAA as both a covered entity (through its self-insured health benefits) and a business associate (through its MSOs serving medical groups), operating its medical groups as an Affiliated Covered Entity[144][324] - The ongoing shift in healthcare from FFS to VBC models, driven by legislation like the Affordable Care Act (ACA), presents both opportunities and regulatory complexities, with the company actively participating in programs like the Medicare Shared Savings Program (MSSP) through its ACOs[148][152] Human Capital Resources The company details its human capital strategy, focusing on talent development, wellness, and diversity initiatives - As of December 31, 2021, Privia Health had 810 employees across 34 states and the District of Columbia, none of whom are represented by labor unions[161] - The company focuses on talent development through programs like the Emerging Leaders Program and manager onboarding, emphasizing employee health and wellness with benefits such as virtual mental healthcare and an Employee Assistance Program (EAP)[162][163] - Privia is committed to diversity, equity, and inclusion (DEI) by scrutinizing job requirements to remove barriers, enhancing policies like parental leave, and fostering an inclusive work environment[164][165] Risk Factors The company faces significant risks from healthcare regulations, operational dependencies, financial performance, and cybersecurity - Regulatory Risks: The business operates in a heavily regulated industry, where failure to comply with healthcare laws (e.g., Stark Law, Anti-Kickback Statute, corporate practice of medicine) could lead to financial penalties, exclusion from government programs, and operational changes[173][174] - Business & Operational Risks: Key risks include dependence on its EMR vendor (athenahealth), competition from other healthcare providers, failure to retain or recruit physicians, and challenges in managing the transition from FFS to VBC reimbursement models[173][184][202] - Financial & Cybersecurity Risks: The company has a history of net losses and anticipates increasing expenses, while security breaches could compromise sensitive patient data (PHI), leading to liability and reputational harm, and the company is also dependent on reimbursement from third-party payers[173][203][205] - COVID-19 Pandemic Risks: The pandemic may continue to limit access to and demand for services, impact patient volumes, and affect the use of government relief funds (CARES Act), which are subject to audits and potential recoupment[310][315] - Corporate & Stock Risks: The lead sponsors (Goldman Sachs and Pamplona) have significant influence over the company, and as an "emerging growth company," Privia complies with reduced public company reporting requirements[352][356] Unresolved Staff Comments The company reports that it has no unresolved staff comments from the SEC - None Properties The company's corporate headquarters are located in approximately 37,000 square feet of leased space in Arlington, Virginia, with additional leased offices in other states - The company's headquarters are in a leased space of approximately 37,000 square feet in Arlington, Virginia[372] - Additional leased office space totals approximately 50,000 square feet across California, Maryland, Georgia, and Texas[372] Legal Proceedings Privia Health is involved in legal proceedings that arise in the ordinary course of business, with no expected material adverse effect - The company is involved in legal proceedings and claims in the ordinary course of business, but does not expect any current matters to have a material adverse effect on its financial results[373] Mine Safety Disclosures This item is not applicable to the company - Not applicable Part II Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities The company's common stock began trading on Nasdaq in May 2021, with no anticipated dividends, and details IPO proceeds - The company's common stock has been listed on the Nasdaq Global Select Market under the symbol "PRVA" since May 3, 2021[376] - The company has no current plans to pay cash dividends and intends to retain future earnings to fund business growth and repay debt[384] - The company received net proceeds of approximately $211.0 million from its IPO and a concurrent private placement with Anthem after deducting underwriting discounts, commissions, and expenses[387] Management's Discussion and Analysis of Financial Condition and Results of Operations The company's 2021 financial performance shows revenue growth but a net loss due to significant IPO-related stock-based compensation Key Financial and Operating Metrics (2019-2021) | Metric | 2021 | 2020 | 2019 | | :--- | :--- | :--- | :--- | | GAAP Measures ($M) | | | | | Revenue | $966.2 | $817.1 | $786.4 | | Operating (Loss) Income | $(217.4) | $25.4 | $16.1 | | Net (Loss) Income | $(188.2) | $31.2 | $8.2 | | Non-GAAP & Key Metrics | | | | | Implemented Providers | 3,317 | 2,550 | 2,482 | | Attributed Lives (thousands) | 786 | 682 | 704 | | Practice Collections ($M) | $1,626.1 | $1,301.1 | $1,135.7 | | Care Margin ($M) | $238.4 | $187.6 | $163.7 | | Platform Contribution ($M) | $107.6 | $82.6 | $68.5 | | Adjusted EBITDA ($M) | $41.4 | $29.4 | $18.1 | - The significant net loss in 2021 was primarily driven by a $253.5 million stock-based compensation expense, of which $195.1 million was related to the modification of outstanding options in connection with the IPO[427][429][452] - Revenue growth in 2021 was driven by a 19.3% increase in FFS-patient care revenue due to higher volumes and new providers, and a 25.0% increase in shared savings revenue from VBC programs[446][447] - The company expanded into new markets in late 2021, including West Texas and California, and launched Privia Care Partners in January 2022 to accelerate VBC adoption[405][406][415] - As of December 31, 2021, the company had cash and cash equivalents of $320.6 million, significantly bolstered by $211.0 million in net proceeds from its IPO and private placement[470] Quantitative and Qualitative Disclosures About Market Risk The company's primary market risk is interest rate exposure on its floating-rate debt, with no material impact from inflation to date - The company's main market risk is interest rate risk due to its floating-rate debt, where a 1% (100 basis point) change in interest rates would impact annual interest expense by approximately $0.3 million based on the $33.3 million debt outstanding at year-end 2021[516] - Management believes that inflation has not had a material effect on operating results for the periods presented[517] Financial Statements and Supplementary Data This section incorporates by reference the full financial statements and supplementary data, which are included in Item 15 of the Annual Report - All required financial statements and supplementary data are included in Item 15 of this Form 10-K[518] Changes in and Disagreements With Accountants on Accounting and Financial Disclosure The company reports no changes in or disagreements with its accountants on accounting and financial disclosures - None[519] Controls and Procedures Management concluded the company's disclosure controls were effective as of December 31, 2021, with no material changes to internal controls - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of December 31, 2021[520] - No material changes were made to the company's internal control over financial reporting during the year ended December 31, 2021[521] - A management assessment report on internal control over financial reporting is not included due to the transition period for newly public companies[524] Part III Directors, Executive Officers, Corporate Governance, Compensation, and Principal Accountant Fees The information for these items is incorporated by reference from the company's forthcoming 2022 Proxy Statement - Information for Items 10 through 14 is incorporated by reference from the registrant's 2022 proxy statement[529][530][531] Part IV Exhibits, Financial Statement Schedules This section contains the index to the consolidated financial statements and a list of all exhibits filed as part of the Annual Report on Form 10-K - This item provides an index to the Consolidated Financial Statements (page F-1) and lists all exhibits filed with the Form 10-K[535] Financial Statements and Notes Consolidated Financial Statements The 2021 consolidated financial statements present the company's financial position, operating results, and cash flows Consolidated Balance Sheet Data (in thousands) | | Dec 31, 2021 | Dec 31, 2020 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $320,577 | $84,633 | | Total current assets | $446,676 | $190,084 | | Goodwill | $127,938 | $118,663 | | Total assets | $686,373 | $328,969 | | Liabilities & Equity | | | | Total current liabilities | $190,461 | $146,938 | | Note payable, non-current | $31,688 | $32,784 | | Total liabilities | $236,192 | $185,317 | | Total stockholders' equity | $450,181 | $143,652 | Consolidated Statement of Operations Data (in thousands) | | Year Ended Dec 31, 2021 | Year Ended Dec 31, 2020 | Year Ended Dec 31, 2019 | | :--- | :--- | :--- | :--- | | Revenue | $966,220 | $817,075 | $786,360 | | Total operating expenses | $1,183,656 | $791,695 | $770,298 | | Operating (loss) income | $(217,436) | $25,380 | $16,062 | | Net (loss) income | $(190,649) | $30,904 | $7,945 | | Net (loss) income per share | $(1.83) | $0.33 | $0.09 | Consolidated Cash Flow Data (in thousands) | | Year Ended Dec 31, 2021 | Year Ended Dec 31, 2020 | Year Ended Dec 31, 2019 | | :--- | :--- | :--- | :--- | | Net cash provided by operating activities | $55,058 | $38,891 | $24,358 | | Net cash used in investing activities | $(32,775) | $(380) | $(5,709) | | Net cash provided by (used in) financing activities | $213,661 | $(767) | $(10,868) | | Net increase in cash | $235,944 | $37,744 | $7,781 | Notes to Consolidated Financial Statements The notes detail significant accounting policies, IPO proceeds, business combinations, debt, and stock-based compensation - IPO and Private Placement: On May 3, 2021, the company closed its IPO and a concurrent private placement with Anthem, generating combined net proceeds of $211.0 million[574] - Business Combinations: In Q4 2021, the company acquired a majority interest in BASS Management Services Organization in California and launched a Friendly Medical Group in West Texas, resulting in the recognition of $9.3 million in goodwill and $55.1 million in intangible assets[657][658][660] - Revenue Recognition: Revenue is disaggregated into FFS-patient care, FFS-administrative services, shared savings, care management fees (PMPM), and other revenue, with the company acting as the principal for FFS-patient care revenue in its Owned Medical Groups[607][609][651] - Debt: As of Dec 31, 2021, the company had $33.3 million outstanding under its Term Loan Facility, which matures in 2026, and its Revolving Loan Facility was increased to $65.0 million in August 2021 with no amount outstanding at year-end[668][670][671] - Stock-Based Compensation: Total stock-based compensation expense was $253.5 million in 2021, a sharp increase from $0.5 million in 2020, primarily due to a one-time charge of $195.1 million related to a modification of stock option vesting conditions contingent on the IPO[683][690][691]