Privia Health Group, Inc. (PRVA) Q1 2021 Earnings Report, Transcript and Summary

Good day ladies and gentlemen, and welcome to the Privia Health Quarterly Conference Call. At this time, all participants are in a listen-only mode. Later we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions] As a reminder, this call may be recorded. I would now like to introduce Robert Borchert, Privia's SVP of Investor and Corporate Communications.

Thank you, Jeff and good afternoon everyone. Joining me today on today's call 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 our company website at priviahealth.com. Today's press release highlighting our financial and operating performance as well as the slide presentation accompanying our formal remarks are posted on our IR website pages. Following Shawn and Parth's opening comments, we will open the line for questions. We ask that you please limit yourself to one question and one follow-up, so we can get through the full queue in a timely fashion. The financial results reported today and in the press release are preliminaries and are not final until our Form 10-Q for the first quarter ended March 31, 2021 is filed with the Securities and Exchange Commission. Some of the statements we will make today are forward-looking in nature, based on our current expectations and our view of our business as a May 27 2021. 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. With that, I'll now turn the call over to Shawn.

Thank you, Robert. Good afternoon, everyone. I'll provide a brief performance summary, including an overview of our investment thesis, growth strategy and our first quarter performance, as well as an update on where we are seeing momentum and continued success in our business. And Parth will cover more detailed review of our financial and operating performance and outlook for the year, before we take your questions. Engagement with physicians is absolutely key as reimbursement models in the US healthcare market shift the value-based care. Privia Health is purposely building a next generation physician organizations that engages with, and organizes physicians into large scale medical groups covering wide geographic areas in each state. Our model has proven to more providers in a thoughtful and successful manner to value-based care over time, generating over $430 million in savings since 2014. Our strategy is simple, but elegant and difficult for others to replicate as we work to achieve massive scale quickly. We have built a comprehensive technology solution directly for our providers to address the key thing and stay pace each and every day. And our solution directly aligns with providers financial success and facilitates physician autonomy, while preserving their current ownership structures. Our value is reflected in our high and provide retention rates and net promoter scores with both providers and patients. A differentiation of the Privia platform is our ability to support all providers, all patients and across all reimbursement models, both commercial to Medicare Shared space, Medicare Advantage and Medicaid. This differentiation aligns with our provider's health system and payer partners as they look to serve all healthcare consumers. We enter and expand in new and existing markets with our capital-light financial model. This does not preclude us in the future from acquiring a minority or majority stake in an anchor medical practice or even opening a de novo clinic. We will continue to be good stewards of capital, taking a smart and thoughtful approach in making financially sound business decisions. These decisions will be grounded in solid market dynamics and demographics and predicated on market density targets and profitable growth. We are well positioned to continue to monetize our platform and drive growth through five core strategies. Let me walk through each on the next slide. First, we organically grow our existing practices by increasing the number of providers, increasing their patient panels and helping our providers, be more productive. Number two, we look to move markets at scale to value-based care by participating a variety of risk based arrangements as they evolve in each of our geographic markets. Third, we expect to capitalize on the white space opportunities in our existing markets by adding new providers and monetizing the previous platform by adding and expanding ancillary services, such as labs, imaging, pharmacy and clinical research when and where it makes sense. We also plan to enter new states and geographic markets and then repeat the steps, one through three. And finally, we will be opportunistic in acquiring or investing in other service models and expand our platform. It's important to spend a couple of minutes reviewing our approach, to taking risk across many different value-based reimbursement models. First and foremost Privia Health already participates in multiple value-based care programs across commercial Medicare, Medicare Advantage as well as Medicaid. In fact, our medical practice has delivered care to more than 720,000 Attributed value-based lives and more than 70 risk based payer contracts today. We are already at scale. We will continue to grow Attributed Lives and move more of those lives into full risk arrangements overtime. Our financial instruments are closely aligned with our providers as we share upside and downside risk and we are executing on an intentional long-term plan to enable those providers to transition profitably to value-based care. One very important dynamic on our topline is that our Practice Collections and Revenue dollars only reflects fee-for-service collections, care management fees and shared savings. Under our current partial risk contracts, we are not recognizing the full per member per month premium for our Medicare Advantage lives. We certainly expect this to change as we move more of these lives from partial to full risk arrangements. The Privia Health leadership team has decades of experience in managing and underwriting risk. We will remain focused on profitably transitioned practice to partial and full risk models within both existing and new markets. Let's move on to performance, we started 2021 with a strong first quarter results that were at or above the high end of the estimated ranges we provided in April during our IPO process. On a year-over-year basis Practice Collections increased 5.1%, Care Margin was up 9.7% and we continue to drive operating leverage through our Privia platform, which helped to deliver Platform Contribution and adjusted EBITDA growth of 26% and 41% respectively. Our strong top line performance in Q1 was generated through both our fee-for-service to value-based care models, of which we expect value-based care to grow faster, as more lives move to partial and full risk. And as Parth will highlight, we continuing to add Attributed Lives across a number of value-based programs, while also continue to grow organically add providers in our existing markets. As we achieved same-store growth, we are also executing on a number of growth initiatives to enter new markets and leverage our operating structure to drive margin expansion. Now, I'll ask Parth to provide additional detail on our first quarter performance and outlook for the remainder of 2021. Parth?

Thanks, Shawn. Over the past seven years Privia Health has proven its operating model and has delivered strong organic growth with double-digit historical top line expansion. We expect that level of growth to continue in 2021, given the high forward visibility of our model. As you can see in the chart on the top row of the slide, growth in Implemented Providers and value-based Attributed Lives led to a 5.1% increase in Practice Collections in the first quarter from the same period a year ago. Of note in mid-2020, large medical practice in our Mid-Atlantic market decided to leave our platform and align with the local health system. In this case, we decided not to utilize our capital resources to retain that practice. Despite this departure, we experienced growth in Implemented Providers in Q1 2021 over Q1 2020 and that drove continued sequentially from year-end 2020 to the first quarter of 2021. Our Care Margin increased 9.7% from Q1 of last year. This is essentially the gross profit generated by Privia Health after cost of care delivery, which in our model includes patient care, physician and provider costs, medical claims, cost to build and operate care center locations and our provider's share of any shared savings in value-based contracts. We showed significant operating leverage with Platform Contribution increasing 25.9% year-over-year as we continue to scale our operations and leverage our technology platform. This operating leverage further translated into adjusted EBITDA growth, which was up 41% in the first quarter a year ago as we scale our sales and marketing, platform development and corporate G&A costs. Adjusted EBITDA margin as a percentage of Care Margin expanded 420 basis points year-over-year in the first quarter of 2021 to reach 18.9%. Our performance this quarter is a great reflection of the inherent operating leverage of our platform, as we move down the P&L. Turning to our full-year 2021 guidance, we are confident in our business momentum and outlook for the remainder of the year. We expect to increase the number of Implemented Providers by 11.8% to 13.7% over 2020 and value-based Attributed Lives by 7% to 10% as we continue to move providers and their patients to risk-based reimbursement programs. Practice Collections are expected to grow 11.1% to 12.6% year-over-year and reached $1.445 billion to $1.465 billion for 2021. As we stated in our IPO prospectus, in our model Practice Collections includes collections in both states with corporate practice of medicine laws and states with no corporate practice and medicine laws. So as our business grows in states where we don't own the medical groups due to Corporate Practice Laws, our Practice Collections will grow faster than GAAP revenue. Our Care Margin is expected to expand by 14.6% to 17.8% over full-year 2020 to reach $215 million to $221 million, and we expect the operating leverage in our model to drive adjusted EBITDA growth in 2021 of approximately 22.4% at the midpoint of our guidance range. There are few other assumptions I wanted to highlight with regard to our 2021 guidance. There were some modifications to our pre-IPO stock option program as well as some additional equity grants as part of our IPO as we previously disclosed in our IPO prospectus. We expect the fully diluted weighted average number of common shares outstanding to be $110 million to $120 million for full year 2021, which includes the pre-IPO period of about four months. Related to that, we expect our non-cash stock compensation expense to be in the range of $195 million to $205 million in Q2 and $245 million to $255 million for full year 2021 primarily related to our pre-IPO stock option program. Net cash proceeds from the IPO and from private placement was approximately $212 million. So our quarter end pro forma cash balance was approximately $294 million, and with about $34 million in debt outstanding at the end of Q1, our net cash position of about $216 million, gives us sufficient capital and liquidity to pursue our various growth drivers. Given our highly efficient growth and expansion model, we expect CapEx to be less than $1 million for all of 2021 and we continue to expect high free cash flow conversion. And finally, we expect our effective tax rate to be in the 25% to 27% range for the full year. We do have a deferred tax asset that will offset much of our cash tax payments this year. In closing since this is our first earnings call as a public company, all of us Privia are really excited to embark on this new chapter in the company's history post the IPO. We continue to transform healthcare delivery experience with our purpose-built platform and believe Privia is on the right side of history. We look forward to continuing to serve all our stakeholders, which include our physicians, providers and health system partners, our patients who entrust their care to our medical groups, our various private and public payer partners, all Privian's and care center staff and our investors who have entrusted us when their capital. We take our responsibility to serve all of you very seriously. With that operator, we're now ready for the first question.

[Operator Instructions] And our first question comes from the line of Lisa Gill of JP Morgan. Your line is open.

Thanks very much. Good afternoon Shawn and Parth, congratulations on your first quarter as a publicly traded company. I really just wanted to start with your comments around shifting to full risk. I know during the IPO process, you talked about several hundred, thousand Medicare Lives. So if we think about shifting under Medicare to full risk, can you maybe just walk us through a timeline of when your expectations are that you will have some full risk arrangements within Privia?

Yes, thanks for the question. Thank you for just congratulatory. We're excited as Parth said. This is Shawn; I'll touch on that and later Parth can weigh in also if he chooses to. We've structured -- we structured our contracts in a way, as we talked about through the IPO process on the Medicare Advantage side is kind of build attribution, kind of get to some form of partial risk and then move into a full risk over time. We think it's critically important to do that because we actually share upside and downside with our positions, and really at the same time, it's -- yes, we think we're just going to be disciplined and appropriately doing so, we've kind of looking forward to that and we'll see that over here over the -- over the next -- over the -- in the near future kind of coming quarters out there. But we really -- these are structured in a manner to do that, but more importantly, we will do that when we feel it's disciplined and appropriate time to do that with our positions. Parth, do you think you want to comment on?

Yes. Hey, Lisa. Two, other things to add, one is, I just want to make clear, we today do take downside risk in a lot of our contracts, both Medicare Advantage as well as MSSP with CMS. So while it's not full risk, there is downside risk over 100,000 lives with CMS already, they could potentially move over to direct contracting as we said during the IPO process, once we figure out the equivalency of the benchmarks and so forth. And then even in MA, we have taken some downside risk. The second comment, I wanted to make is, with respect to timing, as you know, we are highly incentivized, given our fee structure as we earn 3x or 4x on our value based book versus the fee-for-service book to profitably move and ensure that there are savings in those contracts. And so make no mistake, I mean we are incentivizing the Company and often our providers are looking to do the same.

Okay. And just to confirm that, there is no full risk at all in the 2021 guidance. So I believe this is kind of maybe 2022-2023 opportunities, just want to make sure that I have that correct?

That's correct. Yes, nothing in 2021 and then we'll obviously let you know when we get the '22 guidance.

Okay, great. Thank you.

Thank you, Lisa.

The next question is from the line of Jailendra Singh of Credit Suisse. Your line is open.

Yes, it's Jailendra speaking from Credit Suisse, I had that before as well. Hello everyone, congratulations on your first quarter, the public company, Shawn and Parth. This is your first call as a public company. So I think it's very important for you to spend some time on kind of educating the investment community -- investor community about how your model is differentiated? I mean over the past few months several PCP -- tech-enabled PCP companies have come public, some opening new clinics and centers, some following with partnership approach, some are payer-agnostic, some focus on Medicare. I understand the overall market opportunity is big enough for all of them to succeed. But just curious like if you can spend some time around your unique differentiation and your model versus others and how that impacts physicians willingness to work with Privia over others?

Jailendra, thanks for the question and thank you for -- from a -- just all the work we've done throughout this thing and build the long-term relationship with us. Yes, I would say, it's a great question. We talked a lot about it during the IPO process and I'll start, Parth, will have some things to add, I'm sure. But if you think about physicians out there, we've got upwards of 2,700 plus signed, over 2,500 on the platform itself, and we just think it's really critical on those physicians and those 650 care centers to -- I mean their desire is not to practice value-based care on one cohort. I mean, they see all kinds of patients from like we've mentioned from commercial to Medicare, traditional that's going to MSSP product through Medicare Advantage to Medicaid and they want to provide that high value, meaning cost-effective, high-quality, differentiated patient experiences to everybody that walks through the door, who they see virtually. So, I think it's -- we attract that position, they want to do that. They self-select in and it's just -- it's -- I think it's important. We believe you need to do that, the way the model, where we kind of -- land and expand model, where we move into a market, we maybe that's a city initially, we have no intentions of stay in that city. We build our medical groups at scale over states or multiple states, and we just believe you utilize all the patients that walk through the door because that's the way physicians want to practice to move markets at scale to value based scale. I think it's highly differentiated from the other ones. Our doctor share upside and downside with us. We're not -- we're not backstopping on risk when they get in. They know they need the tools, they know they need talent, they \know they need technology and they come to us desiring to move there, but they know we'll be very thoughtful and we'll be very disciplined and will move there together, but at the same time they are just as interested in moving to risk as we are and we know it can be rewarding, but at the same time the last thing you want to do with the with a group of doctors or anyone is fairly early [ph]. So we think it's critical that's do that. Parth, anything to add?

Yes. Thanks, Shawn. Jailendra, I would four things -- quick points. Number one is just to add to what Shawn said; we are agnostic to with geographic market we enter, given our diversity of how we partner with providers and payer. So if the market is not involved into a very heavy Medicare advantage market with a lot of seniors that's totally fine for us and so forth and we are willing to form these large medical groups and then play a long game. The second is, it also enables us to partner with very different types of provider groups. So while we are very primary care centric, we are also focused on other specialists, obese, pediatricians and so forth in building out these large medical groups and all of them play a role in value-based care as we know. The third thing I would say is our unique platform also allows us to partner with health systems, which is differentiated with their employed or affiliated practices, which opens up a big TAM for us as we know 50% or 60% of providers are employed or affiliated with health systems today in the US. And then, the last thing I would say is, with respect to payers, both CMS and the private payers, our ability to provide a solution across all lines of business, from commercial to MA is a key differentiation and we look forward to doing that.

Yes, thank you.

Thanks, Parth, great edge. Jailendra, the only thing I'd add, apologize for getting back in, but really -- when you think about as you guys know, we -- that all our providers still expect [ph] and highly differentiated, when a provider joins us as a partner by leaving their technology behind, they leave all our contracts behind, we form that single tech side e-medical groups. So having that type of -- I think having the technology is a really big advantage of scaling and distributing information to and from payers and -- and to and from patients from physicians.

Okay. My follow-up; I was wondering if you could share some throughs around your decision to not participate in the direct contracting program, especially given the Company's exposure in fee-for-service and its ability to generate savings on the platform and would you consider participating in the future if the program is opened up again?

Thanks, Jailendra. The -- direct contracting is an interesting. I think if you looked at Privia, if you looked at the management team's background, we are a big supporter in like government programs. We've got 90,000 Medicare Advantage Lives, as Parth said, we're taking risk on 100,000 MSSP lives. So we really -- we appreciate, understand and are very disciplined in the way about our understanding of government programs just that's new. As we talked a lot about, we are very successful in the programs we're in and to make a move because we are -- we share upside and downside risk with our providers, It's important for us to understand that program and move there and kind of a thoughtful and disciplined way and we will do that. So, I would anticipate us working in many government programs as they -- as their guidelines are more clear and what they're trying to accomplish. Anything you want to add their Parth?

No, I think you covered it, Shawn. The one thing Jailendra, is we have a pretty big MSSP book of business as we've talked about. So obviously as we work through with CMS and understand new programs like direct contracting and how the equivalency works from an economics perspective, that's a big factor into our calculus in the existing markets. But yes, these programs open up and we feel we can do better, we'll obviously look to move into them.

Great, thanks. Congrats, again.

Thank you, Jailendra.

Taking the next question from the line Sandy Draper of Truist Securities. Your line is open.

Thanks so much and good afternoon. I'll add my congratulations. I guess, a question but also incorporate in may be sort of the way I think about something, I want to make sure that I'm thinking about the business, right. As I think as Jailendra said, there are lots of different models out there, a lot of people use Care Margin, different type of terms out there. When I think about Care Margin, Platform Contribution for you guys, I think about Care Margin as how efficient the practices are in delivering care and generating savings. And then Platform Contribution is the next level down is, how efficient Privia is at a corporate level to deliver profitability? So one, am I thinking about that, right? And then two, because you're guiding to those, how do you think about the difference in visibility to guide to a Care Margin where some of that is maybe out of your control versus guiding to Platform Contribution where some of those elements, may be more in your control, because that you're spending, not necessarily the doctors care, so. I just want to hear your thoughts on that? Thanks.

Thanks, Sandy; a couple of questions in there. Parth, do you want to touch on?

Yes. Hey, Sandy, thanks for the question. Yes, so I'll move a step up Sandy, our Practice Collections has two components as you know, a fee-for-service book and a value-based care book. The one key difference as we outlined is in a partial risk value-based book, what we are recognizing in Practice Collections is essentially the shared savings. So that can equate to the medical margins in a full risk contract as some other companies state. So number one, I think it's important to know the differentiation where it's not apples to apples and our Practice Collections under state, the true extent of the total medical premium revenue on medical costs. Our Care Margin; just to make one minor correction in how you defined it is, all the dollars that come to Privia after we've made all payments to physicians, so that includes their portion of the shared savings, their portion of any of the fee-for-service or value-based payments. So nothing will at the Care Margin line or below those of the physicians in our model. So, we have very good visibility at both the Practice Collections level and the Care Margin level because we understand what our fees are for books of business and then below that is all our operating cost to support our practices, which is also in our control. So, I think we have good visibility in all three.

Okay, great. That was my question. Appreciate it.

Thank you. Next question from the line of Ryan Daniels of William Blair. Your line is open.

Yes, thanks for taking the questions guys and I'll add my congratulations on the quarter and the recent IPO. I want to talk a little bit about the provider pipeline. Obviously, a big part of your growth is additions to the platform and you've been very successful there. So, a two-part question, one, just getting update on the outlook for the remainder of the year and then into 2022? And then number two, I think another unique thing about your platform that you didn't discuss is the ability to work more with health systems to help them with provider alignment or enable their medical groups, there may be an alternative for groups that aren't functioning well under hospital ownership that could work well under your model. So, could you share a little bit on those two topics as well? Thanks guys.

Yes, Ryan. Thank you. Thank you for the congratulations. I'll start to solve kind of high level and let Parth can dive into those. I mean interesting it up, our pipeline, we feel really good about. Kind of going into, obviously this year as well as next year, starting also that you can see the quarter really well the strong quarter. And the -- it's -- that's a kind of, on the health system as Parth mentioned, earlier, I believe it was Lisa or Jailendra that asked about the question about differentiating, I mean it's a -- I don't know, I mean we just -- it's something our peers are not doing as working with the health system and we learned through COVID because we started this about three years ago with the health system down in Florida that we're trying to accomplish quite a bit of things around their group and having higher performance, especially on the value-based care side looking for high performing technology. But what we went through COVID, we had a lot of health systems reaching out, ones that were -- similar to the one we just want to work with from an IDN perspective. Others that kind of across the gamut of what they play or what they want to do with their employed group, but probably most importantly what they're -- what they see possible to do with the community positions that aren't employed today. Almost -- not 100%, but a lot of these health system that don't desire to employ additional physicians that really like the Privia light model. It's very attractive to them. And what type of relationship that we have with that health system, be that in a joint venture, be that in the multi different ways and we kind of -- the way we started that process is reversed off, we want to see if their vision aligns with ours around value-based care. What they're trying to solution for is in a full technology replacing on the ambulatory side, is it connecting back with something they already have, is it -- obviously, it's always you'll kind of how can their doctors perform better in value-based care. And then, it's always what can we do in the community together to try to kind of grow their physician alignment strategy without having to purchase doctors. And I think in some, these tend to be a little bit longer sales cycles as you can imagine. Health systems are going to be that way, but I just -- I believe we're on the front end of this kind of wave and I think it's a solution that is -- that a lot of health systems out there, depending on their strategy will actually desire to kind of think through and work through with us. Parth, do you want to add anything to that?

The only thing I would add, just so folks appreciate is the flexibility that we have in our model to pivot the strategy based on the needs of any particular health system. You could have a very large IDN, multiple states, that's very happy with the employed group, and then we are really working with them on the community physicians as Shawn said. On the opposite end of the spectrum, you could have regional health systems much smaller who might say, look, we really don't want to employ any physicians, especially primary care. And could you help us get them out of employment and stand up as an independent viable practice, while maintaining all the alignment that they have with us and I think across those spectrums our model can really work with them. And then most importantly, I think we are uniquely positioned to help them transition into value-based care, that model obviously is not naturally setup to succeed in the risk contracts and I think us working closely with physicians, their physicians and community physicians can really help them do it.

Yes. That's great, Parth. Ryan, I'd probably end, if you just think about sheer TAM, which are out there and available, we also kind of the recent, I guess, they may have puts things up the last couple of weeks, but -- I mean just sheer TAM, over half the physicians are affiliated with some type of system and there is less, but are just purely employed. So if you're dependent upon one or the other, you don't have access to the other TAM. So, we just think this opens us up to as long as of the strategies aligned to a much larger TAM. And we all know most systems -- it's rare to see a system that's not struggling or wanting to do better and move into value-based care.

Absolutely. Great, thank you so much guys.

Thank you, Ryan.

Thank you. Your next question from the line of Josh Raskin of Nephron Research. Your line is open.

Hi, thanks. Good evening guys. Here is Mr. Percher [ph] as well. So two questions, the first one, I hope just an easy one, just the S1 [ph], I think you alluded to this on in your prepared remarks has some estimates around GAAP revenues Care Margin, Platform Contribution EBITDA, etcetera. It seems like everything kind of came in at or above the high end of those ranges. So were there some specific areas of unexpected upside, something trends that got a little bit better in terms of overall utilization of system or was that just sort of appropriate levels of conservatism in light of the IPO?

Hey, Josh. Yes, I don't think there was any material kind of changes. Parth, any -- can you think of -- anything you think you would add there?

Yes, sure. Hey, Josh and Percher [ph]. Yes, thanks for the question. Two quick things, one is, I think we saw strength in both fee-for-service and value-based books. Obviously in the quarter, earlier by the January, February, we're still in the midst of COVID in many states and so there was some uncertainty around that and then you got the Texas freeze, which obviously impacted folks going into the physician's practice or even -- even conducting care virtually with the power outages. So I think despite all of that, it was much better than we expected. On the value-based book, and I want to tie it to a question Sandy asked, given in our Practice Collections, we are recognizing the shared savings. So even slight outperformance in value-based shared savings translates down the P&L into EBITDA. And I think that's very important model, given the operating leverage we see, where if we outperform on our value-based book, given medical margins effectively what we are recognizing in Practice Collections, you can see that outperformance on EBITDA, those dollars will flow -- a lot of those dollars will go down to P&L. So, I think that was a -- that was a good surprise for us on the upside.

That makes sense, I guess with -- in potentially some of the lower utilization, maybe that hit fee-for-service, but on the value based care side if there is low utilization that revenues almost are EBITDA, is that the right way to think about that?

Yes.

Yes, that's correct.

Okay. And then, can you just speak to the timing sort of setting up new entry in new markets and January 1, an important date, I think about contracts with Medicare Advantage and even commercial contracts tend to reset around that, but is this much more about finding the providers and signing the contracts. And then maybe any specific color on how we should be thinking about new market entry as we get closer to 2022?

Yes, Josh. I'll pick it off, and Parth can even -- in a way and maybe kind of speak to kind of what was in the model. But yes, our business is more around, if you think about it, that there is that anchor sale, we're putting an anchor out there. It seems to be a little bit longer term, then depending on the size of the practice and -- and who kind of who you're working with and did their vision align with us, the smaller one probably kind of facilitates a little bit quicker, I guess, for lack of a better word. Health systems are longer like I spoke to a while ago. Once you get -- once you kind of land in that market, what we refer to as our machinery kind of how we grow that is actually ramps up pretty well. And it's a lot of our physicians are kind of still in that final those ones we add on, that same-store growth in the market is at -- it's kind of that's below that kind five practices and by adoption of practice and below. So that ramps up and kind of runs at a more predictable pace. And then, the deal cut -- it is about kind of finding those providers, having those discussions as it's an ROI business solution, as you guys know, we're not -- we're not just selling the Medicare Advantage contractors we're selling the whole -- the technology, all the platform services, it's going to have to do that -- do well from fee-for-service to the value-based care, the wrap around kind of the ACO model that we run all of our value-based arrangements through and then the platform itself, where we're kind of where it makes sense from a value-based way of adding ancillaries that -- that work long-term in value-based care as well as clinical research. So it's -- it's an ROI solution sale, but it is about finding those markets. And then -- then the machinery kind of kicks in and over time. Parth, anything to handle what's kind of -- what are we thinking there?

Yes, Josh, just to answer your question on timing. So, in -- what's in the model is no new markets with 2021, so our guidance does not include anything, but we are actively -- obviously having multiple discussions. In finding an anchor partner and opening a market, January 1 is not important, we can do it in the middle of the year, it just depends on the timing. You saw in last year, we opened up Tennessee in Q4 in the middle of COVID, end of Q3. So that really doesn't matter. And if we do that, we'll obviously update the guidance and provide the -- the appropriate disclosure. And then obviously from a value-based contract mainly things reset in a new market or an existing market. So MA attribution etcetera, kind of with the AEP enrollment that were subject to the same timeline as others.

Perfect. All right, thanks, guys. Congrats.

Thanks, Josh.

Thank you. Question from the line of Richard Close of Canaccord Genuity. Your line is open.

Thank you. Congratulations. In order, just a question, I appreciate the comments on the pipeline. Can you talk a little bit about the competitive landscape, first you said you're having lots of discussions now, but are you guys the only game in town? Are the practices thinking about what they're doing now and choosing you guys or are there other players that you're essentially competing with in those discussions?

Richard, I'll start. This Shawn. Thanks for the congratulations. Doctors always have a choice in what they're going to do and it's not just in this -- in this space the physician enrollment space, it's just in light in general. Think about a doc, when they -- it looks to be where -- I guess in current time our physician graduates medical school, we can kind of guess at their age, maybe they've got a, maybe they've got a young family. Maybe they've got debt, they're thinking about kind of maybe a more of a job type, that could be with their health system, that could be in a downstream Privia Group, so that's kind of come out of school. They've got other things on their mind besides kind of hang in a shingle and get started, obviously, there is some to do that. As they kind of mature in age and I would even add confidence and care ability to kind of maybe kind of take care of more complex patients, some of them, they kind of come out, they want to join a group, maybe be a shareholder, hang a shingle, we have some -- obviously we had some models that allow them to do that. And then sometimes towards the end of life -- sorry -- at the end of their career, they want to sell their practice. So, we've got models that actually can transition docs and succession plan and so forth. The docs that we tend to attract, Richard are those docs that are going to be a little more entrepreneurial by nature. They're going to be -- they're looking for something much larger. They've come to the conclusion that they're kind of 10, 15, 20 years left in their practice, they're going to be doing this a while, they want to do it well, and they just don't want to do it in one cohort of patients and they don't want to be an employee. So, it's a -- it yields -- It's -- like I said, we've always talked about it as a solution sale and they come to us as a partner and we provide the services and kind of share that risk up and down with them and kind of works through this over a period of time and we're really thoughtful about that dynamic. Because I mean there -- that -- they are -- there can be an entrepreneur one, there can be entrepreneurs and [indiscernible]. So, you really were partners with them and we really kind of think through that. Parth, anything you'd add?

Yes. Hey, Richard. Just quickly on the competition piece. Look, I'm not going to comment on what other companies go after and are they are facing it. The type is the answer we gave to the question Jailendra asked, our TAM, I think is the broadest, given our solution set is also the broadest across all lines of business. And so I think we face competition from a wide variety of folks for different types of practices, there can be practices that obviously those who want to stay independent and want a full solution set across all lines, we're the natural choice. If folks are only focused on MA, then obviously we do face some competition from MA-only players. And then folks who want to sell, obviously, you can compete with health systems or other buyers or practices, private equity etcetera. I do think, even if folks are aligned with other models, they could participate in the Privia model given our flexibility across all lines of business. So, no specific answer unfortunately for you, but our broad solution set and TAM allows us to go after many different kinds of practices that we think other models have some sort of limitation on.

Okay. And as a follow-up, can you provide any additional details. You mentioned the Anthem and [indiscernible] some investment, just any more information in relationship to maybe the collaboration agreement going forward?

Yes, the Anthem agreement, you know they invested $92 million at IPO. It is a collaboration agreement. There is -- it's not exclusive. Obviously, they can work with any provider they want to. We can work with any payer we choose to. I think it's more of a -- I mean it's -- we contract with them in a couple of our states in a big way. I think it's a reflection of our performance with them and they're excited. If we could grow along with them and where they are and if we can perform and similar manners, it's -- that's the way they arrangement works. I don't think it's limited to -- to an Anthem type of relationship. I think there is other payers out there, obviously the desire for us to work in a very similar fashion. Parth, anything you would add?

No. Thank you.

Thank you.

Thank you, Rich.

Thank you. And our last question is from the line of Jessica Tassan of Piper Sandler. Your line is open.

Hi, congrats on the first quarter and thank you for taking the question. And so 2021 guidance kind of suggests that Practice Collections are going to grow at roughly 2 times the rate of revenue in 2021. So was hoping you guys might be able to just review in terms of market mix and maybe reimbursement mix, what would drive Practice Collections and Revenue growth rates to convert -- to diverge, sorry in a given year? And then also what might drive them to converge in a given year or in 2021?

Yes, thank you. Parth, do you want to -- you want to take that one?

Yes. Hey Jess, thanks for the question. So there were two drivers for that divergence. One is obviously as we grow faster in states with Corporate Practice Laws, Texas, Tennessee, Florida, obviously that's recognize and Practice Collections on GAAP revenue. And then secondly, we obviously have this anomaly of one practice that left us in Mid-Atlantic, which is a non-corporate state, so fully reflected in GAAP revenue and therefore, that cause some of the divergence. So, I think overtime, we'll guide you and [indiscernible] open a new market, whether it's corporate practice and not, so you can -- you can model that out. But it really depends on the mix going in as to how each book of business is performing in those mix of states.

Got it. And then, just as utilization comes back online, can you talk about the benefits to Privia, relative to the models that might focus exclusively on primary care, both in terms of fee-for-service and value-based care revenue?

Yes, absolutely. It's a great question. Obviously, on the fee-for-service book, we benefit directly as utilization comes up and so that's a direct benefit on -- in all our markets. It also helps us that we have some select specialists. So it's not primary care oriented, 100%, and so you can see some of those utilization rates will come up more so including the pediatricians as those visits have been, they got hit pretty hard with COVID. So I think that will benefit us tremendously relative to other and they focus only models. And then on the value-based side, look again, there is a reason we are have thoughtful about taking full risk, COVID depressed utilization, so MLR's were lower across the -- across the board and obviously that's a headwind. In our value-based book, we've -- hopefully appropriately so modeled the right amount of utilization going in and partial risk contracts protect you, if there is a spike in utilization. So, I think there'll be -- this -- this is how it progresses when utilization spikes up towards the second half, predominantly as vaccinations increase. It will be interesting to see how different companies perform across the space.

Got it. Thank you.

Thank you, Jess.

Thank you. And I'm not showing any quarter question. I would now like to turn the call back to Mr. Morris for any further remarks.

Thank you, operator. More [indiscernible]. We want to thank each one of you for joining us on our inaugural earnings call and we appreciate it. We're looking forward to building a long-term relationship with each one of you, and look forward to speaking to each of you soon. Thanks a lot. Have a good evening.

Ladies and gentlemen, thank you for participating in today's conference. This concludes today's event. You may all disconnect. And everyone, have a great day.