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Privia emerges as health tech standout

Sarah Pringle
Aug 12, 2022
Illustration of a single golden cross tipping a scale with a few red crosses on the other side.
Illustration: Gabriella Turrisi/Axios

On the heels of its Q2 earnings beat, value-based care enabler Privia is sitting with "a lot of control of [its] destiny", COO Parth Mehrotra tells Sarah.

Why it matters: Value-based care is red hot, with major players like Amazon and CVS claiming their share of the market — and profitable public companies like Privia could be in the crosshairs.

Driving the news: While the performance of most other digital health stocks remains bleak, Privia shares added to momentum Thursday (hitting a 52-week high midday) after raising guidance and topping earnings expectations.

  • Sitting on a $300m cash pile and no debt, Privia is hyper-focused on operational execution and entering new markets organically, Mehrotra tells Sarah.
  • Privia is in its "goldilocks phase," Mehrotra says. "We're in eight states and 42 to go."

What they're saying: Mehrotra is wary of private market valuations (and expectations). However, he hints that Privia is well-positioned but under no pressure to consider various types of M&A — if and when it so wishes.

  • “I think you’ll see some transformative public company-to-public company combinations,” Mehrotra says. “We’re not looking at anything now, but over time if we are to be independent and grow into the next $15-20 billion dollar publicly-traded business, it’s tough to do it organically in healthcare services.”
  • While it waits for the public-private valuation spread to narrow, Privia expects to seek $5m to $20m tuck-ins for service entities of medical groups/ independent physician associations to enter new states.
  • And, if Privia ultimately decides it wants go run IPAs like Agilon, or go build out clinics like Oak Street, "nothing precludes us", Mehrotra says.

Context: While many tech-enabled healthcare players are hyper-focused — for example, solely on primary care Medicare Advantage — Privia is taking the opposite approach.

  • Privia partners with and helps physicians of all specialties move towards value-based care, serving all types of patients in all settings, participating in all types of reimbursement.
  • That has translated to ~900 locations, ~4M patients, 850K of which are in value-based arrangements today.
  • It’s a model that’s replicable and adaptable in any state, Mehrotra says.

Yes, and: "Since PRVA's model actually increases cash collections for practices, it makes sense to us that PRVA continues to grow," BTIG's David Larsen writes in a report.

Between the lines: Privia offers an alternative to doctors that don't want to join a health system, a PE roll-up, or United-Optum.

  • Mehrotra "marvels" at what United-Optum has built but believes Privia has something it doesn’t have.
  • “We can partner with independent providers and health system-related providers who are vehemently opposed to joining United and Optum,” Mehrotra says, explaining that many physicians prefer the financial and clinical autonomy it enables.

Yes, but: The executive credits former United CEO Stephen Hemsley for recognizing 15 years ago the need to own provider assets and create a care delivery network.

State of play: In matters of post-IPO and post-SPAC share performance for those entering the digital health universe over the last couple of years, Privia is clear outlier.

  • Privia shares have climbed more than 40% this year so far, including Thursday's gains. In contrast...
  • Caremax is down 3%; Agilon is down 7%+; Oak Street is down 16%+; Oscar Health is down 19%+; P3 Health is down 23%+; Clover is down 23%+; Bright Health is down 52%+; Cano is down 58%+; Babylon is down 87%+... and so on.

Editor's note: This story has been corrected to reference former United CEO Stephen Hemsley, not Steve Nelson.

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