Privia Health Group, Inc. Q1 FY2023 Earnings Call

Good day, and thank you for standing by. Welcome to the Privia Health Q1 2023 Conference Call. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Robert Borchert. Robert, please go ahead.

Thank you, Kyle, and good morning, everyone. Joining me today are Shawn Morris, our Chief Executive Officer; Parth Mehrotra, President and Chief Operating Officer; and David Mountcastle, our Chief Financial Officer. This call is being webcast and can be accessed from the Investor Relations section of priviahealth.com. Today's press release highlighting our financial and operating performance and the slide presentation accompanying our formal remarks are posted on the Investor Relations pages of priviahealth.com. Following our prepared remarks, we will open the line for questions. Please limit yourself to one question only and return to the queue if you have a follow-up, so we can get to as many questions as possible. The financial results reported today and in the press release are preliminary and are not final until our Form 10-Q for the first quarter ended March 1, 2023 is filed with the Securities and Exchange Commission, which was filed earlier today. Some of the statements we will make today are forward-looking in nature based on our current expectations and view of our business as of May 4, 2023. Such statements, including those related to our future financial and operating performance and future business plans and objectives, are subject to risks and uncertainties that may cause actual results to differ materially. As a result, these statements should be considered in conjunction with the cautionary statements in today's press release and the risk factors described in our company's most recent SEC filings. Finally, we may refer to certain non-GAAP financial measures on the call, and reconciliations of these measures to comparable GAAP measures are included in our press release and the accompanying slide presentation posted on our website. Now I'll turn the call over to Shawn.

Thank you, Robert. Good morning, everyone. Privia Health delivered solid first-quarter results to start 2023 as we continue to execute in each of our markets. We remain focused on driving toward our long-term vision to build Privia Health into one of the largest ambulatory care delivery networks in the nation. Our market momentum and highly aligned partnership model continue to drive growth on multiple fronts and support our high-level confidence in our 2023 outlook. This morning, I'll review a few business highlights, Parth will offer a market and operational update, and then David will discuss our recent financial performance and our 2023 guidance outlook before we take your questions. During the first quarter, Privia Health continued to execute at a very high level with Practice Collections increasing more than 17% year-over-year. Adjusted EBITDA was up almost 14% as we continue to increase our number of provider partners and invest in our recent new market entries. This performance was again driven by continued same-store growth as well as our new provider additions in existing markets. In the last few months, we've entered four new states and have already signed new providers in our medical group platforms in Connecticut, North Carolina, and Ohio. We continue to see a very strong sales funnel with potential new providers across our markets and are maintaining a healthy business development pipeline as we look to enter additional states over the next few years. Separately, we are very excited and have launched and priced this morning a large secondary offering of the company's total diluted shares outstanding. This transaction substantially reduces or eliminates Goldman Sachs and Pamplona Capital's ownership. We are also very excited to welcome a number of new long-term oriented investors, including Durable Capital Partners and Rubicon Founders among others who purchased shares in this transaction. The entire Privia team looks forward to executing on our strategy and continuing to create value for our shareholders in the years to come. In other news, we recently announced that I plan to retire at the end of June and our Board of Directors named Parth Mehrotra to succeed me as Chief Executive Officer of Privia Health. I decided that now it was an opportune time to step away from my operating role to spend more time focused on my personal interests. I will remain on the Privia Board, and I look forward to continuing to track Privia's future success. Parth and I have worked very closely together over the last five years. As many of you know, Parth has been an integral part of establishing Privia's presence in many new states, taking our company public in 2021, and directing Privia's growth. We expect a very smooth transition, and it will be exciting to watch Parth and our leadership team drive Privia's next phase of growth. It's been a privilege to interact with many of you and more than 900 Privians dedicated to improving health. Now I ask Parth to provide a market and operational update.

Thank you, Shawn. It has been an absolute pleasure to work with you and our privilege to succeed you as CEO. We continue to expand Privia's national footprint, which now includes more than 3,700 implemented providers in our medical groups, caring for over 4.4 million patients in 970 locations. We believe our scale and diverse provider and payer partnerships offer a true differentiator as we build one of the largest multi-specialty medical groups and ambulatory care delivery networks in the country that can improve patient outcomes and reduce costs. We are ahead of our growth plan in each of our new markets and expect to add new implemented providers in Connecticut, North Carolina, and Ohio before the end of this calendar year. Privia's value-based care platform continues to be one of the broadest, most balanced, and diversified in the industry. We cover more than 1 million attributed lives across more than 100 at-risk payer contracts in commercial and government programs. Total attributed lives increased more than 22% from a year ago, driven by our new ACOs in 2023, including our partnerships with Community Medical Group in Connecticut and Beebe Healthcare in Delaware. Our quarter-end attributed lives include the impact of a joint decision with a health plan partner to pause one capitated MA risk arrangement for performance year 2023. The health plan terminated its relationship with the technology services provider earlier this year. And as a result, given the health plan's near-term operating challenges, we both decided to pause the capitated arrangement. We will continue to serve these MA patients as before with a focus on improving patient outcomes and reducing the total cost of care, and we'll jointly reevaluate the downside risk arrangement for performance year 2024. Overall, our value-based book of business performed very well in 2022 and in the first quarter of 2023. And there remains a significant embedded opportunity for us to thoughtfully move MA lives into capitated arrangements over the next few years. Now I'll ask David to review our recent financial results and 2023 outlook.

Thank you, Parth. Privia Health delivered another solid quarter of performance in the first three months of 2023. Our implemented provider count of 3,716 was up 10.3% year-over-year. Solid ambulatory utilization trends, new implemented providers, and additional attributed lives led to practice collections increasing 17.3% from Q1 a year ago to reach $658.9 million. We continue to generate operating leverage with adjusted EBITDA up 13.9% over Q1 last year to $16.9 million. Total value-based care comprised 33.8% of total GAAP revenue in the first quarter of 2023 compared to 27.1% in Q1 a year ago, which highlights our thoughtful move to at-risk contracts over time. The strength and resiliency of our operating model is highlighted by our solid Q1 performance, diversified book of business, and strong aggregate performance in our value-based and capitated arrangements. With this continued business momentum, we are reiterating our full-year 2023 guidance. We expect practice collections to grow 14.5% to more than $2.7 billion and adjusted EBITDA to increase 18.3%, both at the midpoint of our guidance. With four new states and three new ACOs in 2023, we plan to continue to invest across our business enterprise to support our significant expansion. Our balance sheet and capital position continue to be very strong with cash of more than $311 million and no debt. Our 2023 adjusted EBITDA guidance absorbs approximately $8 million to $10 million in new market entry and expansion investments. We expect our new markets to scale significantly in the coming years as we grow our provider base and attributed lives in these new states. Given our capital efficient partnership model with annual capital expenditures of less than $1 million, we expect 80% to 90% of our adjusted EBITDA to convert to free cash flow. We remain focused on growing and expanding our business for many years to come and investing to support this growth as we build our national footprint. We are now ready to take your questions.

Your first question comes from Lisa Gill from JPMorgan.

Great. First, congrats to you, Parth. And Shawn, it has been great working with you. I know you'll continue to be on the Board, but I think this is a great transition. I just really want to understand a little bit better the timing of physician implementation. As I look at your guidance, it appears to be fairly conservative to us as you move throughout the year and just want to understand kind of the timing of things. I heard you talk about the health plan pause, but any incremental color you can give into the new markets would be really helpful. And then just as a quick follow-up, Parth, I thought it was very interesting, your new compensation package. And we've had a number of questions just around who that peer group is. And maybe if you can talk about some of the metrics that you're going to be measured against over the next year?

Thank you, Lisa, I really appreciate it. Regarding the new states, we are currently ahead of our implementation plan for providers in Connecticut, North Carolina, and Ohio, and we anticipate adding some providers there before the year ends. Although this process typically takes 5 to 6 months, our sales pipeline gives us confidence in this timeline. From a guidance perspective, we are still aiming for Q1. We have good visibility and will provide updates throughout the year. It’s important to note that this does not include new states, as we are actively pursuing business development opportunities as we have in previous years. Whenever we have updates, we will communicate them. To address your follow-up questions, we are focused on aligning with our shareholders on value creation, which has been our approach since before going public. The details filed with the SEC reveal that my initial compensation grant request was tied to a relative total shareholder return metric based on the Health Care Services Index, and it will vest fully after four years. This aligns with our long-term goals and reflects our commitment to driving value for shareholders.

Lisa, thank you for the warm remarks. Obviously, I've enjoyed being here for over five years and have a lot of confidence in Parth and the team and I'm excited to stay on the Board of Directors. And as I noted in the prepared remarks, just see the company grow and hit this next phase.

Your next question comes from the line of A.J. Rice from Credit Suisse.

Best wishes, Shawn, and congratulations Parth as well. Maybe just because it's the topic du jour, the Medicare final rate notice has been out there. Obviously, the bids for next year get submitted in June. Can you just comment on your discussions? I know your model in taking on the risk in MA tends to be very specific to different relationships. But what kind of discussions are you having? Is it making people think they want to accelerate the path to risk on the physician's side? Is it saying, hey, we need to pause here? How do we think about the final rate notice and how that's changing the push to take on more risk in your MA book?

Yes. Thanks, A.J. It's Parth. I appreciate your comments. And then to your question directly, it kind of validates our model more so than jumping into full risk 100%. We've not really seen any change in our discussion with both our payer partners as well as provider groups. And this model that we have are thoughtfully moving up the risk spectrum. As and when the providers are ready, the payers are ready, I think in this kind of an environment where you really have to go geography by geography, look at the density, look at the panels, look at the health plan partner and make that decision and do it thoughtfully so that neither entity is burned in the process. So I think that's validating our strategy more so as folks are being much more thoughtful as to how they construct this. But we are seeing a lot of momentum across those discussions, both with payers and obviously, our medical groups.

Thanks, A.J.

Your next question comes from the line of Andrew Mok from UBS.

Looking at the equity alignment agreement with Novant, should we be thinking of this deal as a template for your strategy going forward when it comes to implementing providers alongside large health system partners? And can you explain the thought process and rationale for restructuring the deal in this way?

Yes. Thanks, Andrew. I appreciate the question. Look, I think when it comes to big large health systems, especially of that size, it's a very significant commitment on their part. We are talking about thousands of providers, and that significantly changes the dynamic of the relationship and the depth of the partnership, as you can imagine, and those decisions are never made lightly. And those are also very long term in nature. You cannot reverse them overnight, if you will. So I think we are very comfortable in having a structure that aligns our partnership and the depth of that relationship, if that includes a certain amount of equity if they make that kind of commitment. And again, the decision will be health system by health system. It just depends on the nature of the strategic objectives of that particular health system and our strategy in that particular geography. But it is an incentive arrangement and the reason for that is that sometime in the future, we can get that kind of book of business.

Your next question comes from the line of Sean Dodge from RBC Capital Markets.

This is Philip Keller on for Sean. And also congratulations to Shawn and Parth on the transition. So I wanted to check back in on the Surgery Partner's partnership. I mean, even more comfortable in the first year, can you give us an update maybe on the status of that implementation, Montana? And anything you can share in terms of performance metrics tied to that partnership? I guess more specifically, I'm looking to understand how you're measuring success there and what you need to see before potentially expanding that relationship to the other states?

Yes, thank you. The relationship is progressing very well. The Montana Group has been operational for several months, and everything is going smoothly. Both companies are assessing the partnership in other states, which is how this collaboration began. We have implemented various groups in other states, demonstrating success beyond just one location. Additionally, there is a broader strategic alignment with their value-oriented initiatives, which you might have noticed in their recent announcements, including a partnership with a health system in Ohio. We are excited about developing and enhancing these relationships as we work together to deliver a unique offering to our payer partners from a value perspective, especially in how we build these networks within a multi-specialty medical group that includes an outpatient facility. As you know, utilizing these strategies can significantly reduce total costs of care. We will continue to collaborate on this, and it will be a multiyear strategy. We look forward to executing it.

For our next question, it comes from the line of Gary Taylor from Cowen.

I wanted to ask about a couple of things. One, the $3.3 million of negative prior-year development, I think that's just new disclosure on the roll forward table. But given those contracts are obviously pretty new, was curious on what was driving that and how it's influenced your reserving this year, if at all? And then also, there were about $3.5 million of add-backs to EBITDA beyond just the stock comp add back. That amount is a little larger than we typically see from you. And I know you pride on not adding a lot of stuff back. So just wanted to see if there was any more detail on that $3.5 million?

Thanks, Gary. So on the first one, again, it's related to the capitated book. A large part of that was due to this one book that we highlighted in the prepared remarks around the pausing of the capitated arrangement with the health plan, in particular, given the operating challenges they faced as they went through that change. All of that is recognized in Q1, so we don't see any further downside from that. So I don't think you should expect that to continue through the rest of the course of this year. So that was pretty much it from that perspective. And then on the adjusted EBITDA add back, it was onetime costs, legal-related, some deal-related. Obviously, we've had very busy business development activity over the last few months. And so some of that is purely onetime in nature in addition to certain severance costs.

Appreciate it. Is there any management participation in the secondary offering that got priced?

No, it was totally secondary by pre-IPO investors, largely Goldman Sachs and Pamplona. There was no management participation.

And your next question comes from the line of Whit Mayo from SVB.

Just looking at AR days in the quarter, they were up a lot, and I recognize there's a lot that influences that. But maybe, Parth, if you could help us understand some of those factors influencing that number, maybe MSSP, maybe some of the capitated stuff. And maybe just comment broadly on MSSP performance versus expectations in the quarter?

Yes. Thanks, Whit. So the AR is mainly related to the capitated book as that's grown over the last 18 months or so as we've gone from zero to 30,000-plus lives. So obviously, they'll normalize year-over-year once that book becomes a little stabilized. It's not related to MSSP. That's been fairly normal as we get paid sometime in Q3, as you know. And overall, our value-based book, as we said in our prepared remarks, overall has performed really well. We're very pleased with the results from all the data we see. Our accruals are updated this quarter. So the results for the quarter and the guidance reflect where we are today. And obviously, we'll update those as we move forward. But so far, everything we've seen, we're very pleased with.

For the next question, it comes from the line of Jessica Tassan from Piper Sandler.

Congratulations to Parth and Shawn. It was great getting to know you and working with you. Can you guys just clarify when the capitated contract was terminated? And then just what the impact is on the 40,600 capitated lives as of 1/1/123? And I guess just kind of what is the headwind that the reiterated guidance is absorbing related to the pause of that capitated contract? And should we expect a sequential step down in capitated revenue in Q2?

Thank you, Jess. I'll address your questions in order, starting with the situation regarding our partner, which is another public company. We want to be respectful of their disclosures. Overall, this was a risk outside of our control, and it reinforces our choice to share the risk with the health plan partner in these initial arrangements. We're aiming for a high level of consistency. All prior impacts are included in our Q1 results, and there will be no additional negative effects for 2023, which is why we decided to pause. This situation highlights the strength and diversity of our portfolio and our solid performance in the rest of the value-based segment, especially considering our Q1 results and our outlook for the year. We do not foresee any further negative impacts from this portfolio. Looking forward, as we reconsider our decisions in upcoming years, there will be opportunities for upside. One notable change since our last report is that the percentage of downside risk lives has decreased to 23%. Currently, we have just over 31,000 lives in capitated arrangements, down from our previous report.

For your next question, it comes from the line of David Larsen from BTIG.

Congratulations on a strong quarter. Can you explain the difference in expected margins between MSSP deals and capitated deals? My understanding is that capitated deals can carry higher risks and leaner margins in the long term. Parth, I appreciate how you manage risk carefully. Additionally, over what timeframe should we expect to see EBITDA growth in new markets that you enter? Any insights on that would be appreciated.

Yes. Thanks, David. So broadly speaking, Privia's take rate on shared savings is effectively the same on the two books of business. We shared at 60-40 with our doctors; how we split the pie with the health plan varies. So for MSSP in the enhanced track, it's a 75-25 split with CMS. And then in a capitated arrangement, that can vary differently by geography, by health plan. So that's the first difference. But our take rate overall is the same. And then the way we like to think about margin is given the revenue recognition on the top line, just a percentage margin is really not an apples-to-apples comparison, MSSP versus MA given you start to recognize pretty significant top line in a fully capitated MA deal. But from a shared savings percentage basis, as you see in our largest ACO in the mid-Atlantic, we are saving close to 10% theoretically, and that's an open access kind of product with CMS theoretically in a GAAP book of business with MA; you should expect over time to go at or higher than that number from a savings percentage perspective because you're managing the lives much more closely, you're taking more risk. So from that perspective, hopefully, the opportunity is bigger, and that's how we like to characterize the difference.

And for your next question, it comes from the line of Richard Close from Canaccord.

Congratulations, Shawn and Parth on the changes there. Regarding the new markets you mentioned, Ohio, North Carolina, and Connecticut, can you provide insight on how they are performing against your previous expectations for their contribution in 2023?

Thank you, Richard. We initially planned to implement providers sometime next year, but that timeline has moved up a bit. This year, the impact on our top line, platform contribution, and EBITDA will still be fairly limited due to the timing of provider implementation later this year. However, it sets us up well for a strong start in 2024. We are aiming to develop our presence in each state over the next four to five years with a goal of reaching 400 to 500 providers, which remains our target. Each of these states has significant total addressable markets, and we have established a substantial partnership model in those three states, offering us opportunities to collaborate with many providers. This gives us confidence in building our medical groups to that scale over time. While the growth won't be linear, I believe we have made a solid start, and we will see how our execution unfolds.

And for your next question, it comes from the line of Jamie Perse from Goldman Sachs.

I just wanted to go back to the capitated arrangements you have. I think the contribution last year was just over 260,000. Can you give us a sense of what you're seeing so far this year and how you're accruing costs relative to collections on that book of business so far this year?

Yes. Thanks, Jamie. So obviously, we're not going to go contract by contract, but generally speaking, on the remaining book, we obviously paused one arrangement as we outlined. But on the remaining book, it's better than last year, that's how we would expect. So obviously, all the prior period stuff is flushed out. But for 2023, if you can look at our disclosure both on the revenue that is disaggregated and the medical margin, you'll see that we are performing pretty well. If you compare the capitated revenue number of $78.2 million relative to the in-year health care costs incurred on that book. So you'll see, obviously, we are accruing at a much better clip for the in-year performance on those deals.

And for your next question, it comes from the line of Joshua Raskin from Nephron Research.

I'll add my congrats to both Shawn and Parth as well. Just focus on the VBC lives that change sequentially. So is that all MSSP or were you seeing some growth in the MA contract? And then getting back to this health plan pause, I just wanted to better understand, it sounds like there was a technology partner that changed at the health plan side. It sounds like that must have impacted performance, right, because of the negative development, a couple of million bucks there. Is it fair to assume that you guys had been accruing last year, maybe even just very modestly positive savings or results or maybe nothing? And now in hindsight, it sounds like the performance on that contract in total was negative. Is that the right way to think about it?

Yes. Thanks, Josh. I'll take those in order. So #1, there's always movement at the beginning of the year on the overall attribution. It happens in commercial the most, if you will, as employers change sometimes their TPA or their health plan partners. So obviously, you see that, and then the lives get reattributed to us. So you'll see some movement in commercial in Q1, and as the year progresses, that normalizes. There could be some in MSSP as well if some of the beneficiaries used to go into MA. So we do see some of that movement, but we capture that back in the MA book because they're obviously not changing their PCP in most cases. But again, hopefully, that attribution normalizes in Q3, Q4, and that's what gives us confidence on our overall guidance range for that metric. And then on the health plan side, again, it was a pretty significant disruption that a health plan can face. Obviously, we were aware of this last year. We expect a lot of consistency in how we get the data, claims data and so forth. And when you have some kind of disruption like this, there can be substantial delays in getting the data. Our accruals reflect what we see at the end of each quarter when we close it, and that's what's reflected in what we accrue and the results. And so obviously, there was some prior period noise with that. And that was obviously part of the reason why we decided to pause the arrangement jointly with the health plan. They shared some of the risk, some of the downside risk in this particular contract, and that validates our strategy to have them have some skin in the game so that when some kind of disruption like this happens, you're making a much more thoughtful decision jointly. So I think hopefully, we'll reevaluate it for 2024.

Thank you. And for your next question, it comes from the line of Sandy Draper from Guggenheim.

This is Mitch on for Sandy. And actually, all of our questions have been asked and answered. So I just wanted to share my and Sandy's congrats to both Shawn and Parth.

Thank you.

Thank you.

And for the next question, it comes from the line of Brian Tanquilut from Jefferies.

Congrats again to both of you guys and hopefully, Shawn, I'll see you around here in the future. I guess just one question for Parth, as I think about the 100-plus stocks that you added during the quarter, maybe any color you can give in terms of the breakdown between organic recruitment and conversions from Privia Care Partners and what we're seeing in terms of the pipeline for both of those buckets of organic growth?

Yes, thanks, Brian. This quarter was largely driven by organic growth, along with some contributions from care partners. This is part of a long-term strategy that will involve significant developments. We are starting our operations in Connecticut with 1,100 providers, which forms the largest clinically integrated network. Our goal is to convert as many of these as possible, and this plays a crucial role in our strategy. Most of these were sold last year, as anticipated. Additionally, we have experienced strong organic same-store growth, which is becoming increasingly significant for us. We currently operate in 970 physical locations, complemented by a substantial installed base, leading to robust organic growth. We are very enthusiastic about this progress.

And for your next question, it comes from the line of Adam Ron from Bank of America.

So you did allude to the large embedded value-based opportunity within Privia's patient panels. But if you divide the number of attributed lives in the quarter by the number of patients across the patient panels that you report, I think it's like $4.4 million and you come up with that the percentage is around 130 basis points year-over-year for the penetration rate, and it's actually down versus 2021. So is this the kind of rate penetration expansion that you expect, or the penetration in value-based care should be relatively steady and that all new growth in value-based care lines have to come from new doctors? Or is there some expectation around increasing penetration? And if so, what is the timing of that? And what specifically are you looking for before you move more patients into risk?

Thank you, Adam, for the question. The unique aspect of our business is that we focus on value-based care across all of our segments, including commercial, MSSP, MA, and Medicaid. There is significant potential, particularly within the commercial segment and occasionally in Medicaid, where many of our existing patients could transition to value-based arrangements with specific payers in certain regions. The Medicare Advantage patients have a clearer pathway for participating in MSSP or Medicare Advantage programs. Therefore, we see a substantial opportunity to shift a large portion of our 4.4 million patients into various value-based arrangements. This process will take time, and we aim to make these transitions in large groups, which will be reflected across all our business segments. Another aspect of our strategy is to enhance performance and increase the level of risk, which should be aligned with improved performance, ultimately allowing us to generate shared savings for our health plan partners, physicians, and ourselves, with a take rate of 40%. The operating leverage from our existing book is quite significant. Furthermore, as illustrated by our recent deal in Connecticut, we have entered new markets and established a clinically integrated network, gaining nearly 200,000 lives and 1,100 providers in just the past two quarters. This demonstrates the potential we have in expanding into new regions with new physicians, as well as the opportunity to add new doctors and patients in our current areas. Thus, we are focusing on both enhancing our existing business and bringing in new providers and lives.

And for your next question, it comes from the line of Jailendra Singh from Truist.

Shawn and Parth, congrats and best wishes to both of you. Just a quick clarification, just going back to Jeff's question about what was the revenue impact of this 16,000 full-risk lives decline? I mean, I'm assuming that's captured in the guidance now and kind of incremental headwind. And then my main question, and I joined a little late, so apologies if you already covered this, it has seen that some strong utilization trends highlighted by some providers. I was wondering if you could talk about how were trends for you guys across the business line, anything meaningfully different to call out in terms of utilization between your payer class? And what are you assuming in terms of utilization for the rest of '23?

Yes. Thank you, Jailendra. So I'll just take them in order. So on the first one, as we noted, we recognized all prior period impact on that book in Q1. And despite that, our results are really strong. So that was largely more than offset by our good performance in the rest of the value-based book. On the top line side, again, both the fee-for-service and value-based book is performing very well. So there's a lot of offsetting. So we don't see any net impact, which gives us the confidence to maintain our guidance as we have. Obviously, if we eliminate capitated arrangements, you will add back the fee-for-service revenue because these lives are still with us. The doctors are still seeing these patients. And so the net impact is much lower from that perspective, again, that bodes well for us having the confidence to maintain the guidance. So both from a top line or a bottom line perspective, we should not see any further net impact. There's some movement, and there's some offsetting, and that's what gives us confidence at this point of the year to just maintain our guidance. And then we are seeing pretty good utilization trends. That has continued as we've gone through the stale end of the COVID period that is very consistent with last year. And again, our strategy is to be prudent when we plan for utilization and guide. And if there's a surprise, hopefully, it is to the upside. So you're seeing some of that strength play out in our book even now. Ambulatory utilization has been much more stable as we've talked about previously versus surgery-oriented or specialty utilization, which can be lumpy, but we are seeing pretty good strong trends to continue across our book.

And for your next question, it comes from the line of Jeff Garro from Stephens.

I'll echo the congrats to Shawn and Parth. Just a bookkeeping question from me. Maybe I missed it, I jumped on late, but I want to see if you gave the care partners, number of providers at the end of the period? And then my larger question is, seeing the cost of the platform showing good leverage in the quarter, I'm just curious if there are any investments that you think you need the rest of the year for the platform and how to think of the timing of any incremental spend there?

Yes, thank you for the question. I'll address them in order. We are not separating out care partners live specifically, but they are included in the over 1 million attribution. As we mentioned previously, roughly 200,000 lives in Connecticut are care partners, and Beebe Healthcare in Delaware consists entirely of care partners as we discussed last quarter. You can observe some of the numbers related to that. These figures will increase gradually as we complete these deals, and the growth has exceeded our expectations, which we're quite pleased about. From the perspective of platform contributions, the spending level has remained fairly consistent throughout the year as we establish new states with sales implementation leadership teams, and this expenditure is evenly distributed across the year. However, as top-line impacts are realized, you begin to see more operating leverage. Therefore, when modeling, we anticipate similar trends quarter-over-quarter compared to last year, especially considering that MSSP results and payments occur in the third quarter. So, you should observe comparable trends, although the spending remains steady.

And for the last question, it comes from the line of Ryan Daniels from William Blair.

I'll add my congrats to both Parth and Shawn, it's been great working with you guys. My question revolves around more of the Specialty Care business. I know you're involved with ASCs, you do a lot in pediatrics, but we're hearing a lot of buzz in the industry about things like nephrology and CKD, oncology, et cetera. So I'm curious what your purview is there? If you look at going out more aggressively with some of the specialty groups and participating in some of those accountable care type organizations or risk-based contracting?

Yes. Thanks, Ryan. I really appreciate it. Look, we are consciously from day one have been building multi-specialty groups for this particular reason. 80% of the cost is downstream from the PCP. We have 52 specialties today in our platform. And I think it's a great opportunity for us going forward. We already participate in some programs in a pretty minor way, bundles and so forth. But I think going forward, as we both organically internally as well as through partnerships, you should expect us to look at some of these specialty-specific strategies. It will be, again, very disease-specific or specialty-specific as you outlined, and then geography-specific where we have density in lives, and we can make a big impact. But I think it's a big part of our strategy going forward.

So if we have no further questions, Kyle, I'll ask Shawn Morris to just make a quick closing statement.

Sure. Thank you, everybody, for listening to our call today. I really have enjoyed getting to know you, and I look forward to talking to you more. We appreciate your continued interest and support for our company. Enjoy the rest of the day.

Thank you. And this concludes today's conference call. Thank you for participating. You may now disconnect.