Hello, and welcome to the Privia Health Third Quarter 2025 Results Conference Call. Please note that this call is being recorded. [Operator Instructions] I'd like to hand the call over to Robert Borchert, SVP of Investor and Corporate Communications. Please go ahead.

Thank you, Chris, and good morning, everyone. Joining me are Parth Mehrotra, our Chief Executive Officer; and David Mountcastle, our Chief Financial Officer. This call is being webcast and can be accessed through the Investor Relations section of priviahealth.com, along with today's financial press release and slide presentation. Following our prepared comments, 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 are preliminary and are not final until our Form 10-Q for the third quarter and 9-month periods ended September 30, 2025, 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 view of our business as of November 6, 2025. 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 along 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. Reconciliation of these measures to comparable GAAP measures are included in our press release and the accompanying slide presentation posted on our website. Now I'd like to turn the call over to Parth Mehrotra, our CEO.

Thank you, Robert, and good morning, everyone. Privia Health continued to execute very well across all aspects of our business through the third quarter of 2025. This momentum positions us for continued success in 2026. Today, I'll summarize our business and financial highlights, and David will discuss our financial results and updated 2025 guidance before we take questions. Privia Health's consistent results, operational execution and differentiated business model have clearly demonstrated our ability to perform in all types of market environments. We delivered very strong results across our value-based care book, including the Medicare Shared Savings Program for 2024. New provider signings and implementations remain strong across all of our markets, which provides great visibility for 2026. Implemented Provider growth of 13.1% and value-based attribution growth of 12.8% year-over-year helped support practice collections growth of 27.1% in the third quarter. Adjusted EBITDA increased 61.6% with EBITDA margin as a percentage of care margin expanding 720 basis points to reach 30.5%. This outstanding performance gives us confidence to raise our 2025 outlook above the high end of our previous ranges. In September, Privia Health agreed to acquire an accountable care organization business from Evolent Health for $100 million in cash, plus an earn-out of up to $13 million based on 2025 MSSP performance. This business will add over 120,000 value-based care attributed lives across existing and new states in MSSP as well as various commercial and Medicare Advantage arrangements. The transaction offers a compelling synergy for Privia as the ACO participating providers will have an opportunity to join Privia's medical groups for a full technology and service platform. The transaction is expected to close by year-end 2025, pending regulatory approvals, and we expect it to positively contribute to adjusted EBITDA in 2026. Privia's national footprint now includes 5,250 Implemented Providers caring…

Thank you, Parth. We continue to see very strong performance across our value-based care book, especially in the Medicare Shared Savings Program. Across our 9 ACOs and MSSP in 2024, Privia managed over $2.5 billion in medical spend. Our aggregate savings rate of 9.4% was up from 8.2% in 2023. Total shared savings of $234.1 million increased 32.6% from a year earlier. This demonstrates our continued success in increasing savings and profitability while adding value-based and downside risk lives and contracts. After CMS' share, Privia's gross shared savings was $160.1 million, a 36% increase over 2023. This is the amount recognized in practice collections and GAAP revenue. In the Mid-Atlantic region, we operate one of the country's largest ACOs caring for about 60,000 patients. We delivered savings of 11%, which for the fifth year in a row was the highest savings rate of all ACOs with greater than 40,000 attributed lives. Privia Health's strong operational execution and growth continued through the third quarter. Implemented providers grew 125 sequentially from Q2 to reach 5,250 at September 30, an increase of 13.1% year-over-year. Implemented provider growth, along with strong value-based performance and solid ambulatory utilization trends, led to practice collections increasing 27.1% from Q3 a year ago to reach $940.4 million. Adjusted EBITDA, which is reconciled to GAAP net income in the appendix, increased 61.6% over the third quarter last year to reach $38.2 million, representing 30.5% of care margin. This is a 720 basis point margin improvement year-over-year as we posted better-than-expected results across our value-based care book, which helped generate significant operating leverage across both cost of platform and G&A. For the first 9 months of 2025, practice collections increased 19.6% to $2.6 billion. Care margin was up 16.7% and adjusted EBITDA grew 43.5% to reach $94.1 million. Our business…

[Operator Instructions] And your first question comes from the line of Joshua Raskin with Nephron Research.

This is actually Marco on for Josh. Actually, I had one on your MSSP performance. So given the very strong results for that program in 2024, I was just wondering how you plan to guide to that in the future. Does the outperformance in 2024 now just get factored into the baseline for future planning? Or are there any reasons why we should consider that year to be above the go-forward run rate?

Yes, I appreciate the question, Marc. So I think we're going to be pretty consistent with how we've done it over the past 7, 8 years. We take into account all the data we received from CMS, look at our attribution, see any changes to the program structure, fee rates, et cetera, just factor all that in. We look at the results and if we perform well relative to benchmarks, all that just does get factored into the next year. So every year when we report, we are updating for prior year and then also updating current estimates for the current year. So all that's factored into the guidance. So you can see with our outperformance, that includes both factoring in for '24 actual results as well as updated view on '25.

Your next question comes from the line of Elizabeth Anderson with Evercore ISI.

Congrats on the quarter and the good MSSP results. Could you talk to us about the one, the sort of go forward for the 4Q? I know you obviously had the outsized gains in the third quarter, but sort of how are you seeing the core business performing as we go into the fourth quarter? And on prior calls, you talked about over $130 million of EBITDA for 2026. I don't know if you could comment on sort of where you're seeing that number now.

Yes. Thanks, Elizabeth. Appreciate it. So look, I think we continue to see very strong trends. There's no reason to believe the momentum changes in Q4. We don't give quarterly guidance. We're just focused on annual results, given when value-based care results flow in into the year. There's a very specific reason we just avoid the quarterly guidance or implied outlook and so on and so forth. I think we're being our usual prudence in terms of implied guidance for Q4. So I think we'll just see how the year goes. We just didn't want to get ahead of ourselves given we've had a pretty outstanding year, year-to-date Q3. And then I think, look, I mean, the updated guidance, we are sitting close to $120 million for 2024. I think we're going to keep targeting 20% growth off of that where we closed this year into next year. We'll just see how we close the year, hopefully strong and then close the Evolent transaction like we noted, factor all that in, see updated results on the value-based book across all categories as we enter later this year, early next year, factor all that in and give guidance in February like we do. But there's no reason to believe. I mean, we've had one of our best years, and I think the momentum should help us take that forward like we noted in our prepared remarks, that positions us exceptionally well for a pretty strong '26.

Your next question comes from the line of Whit Mayo with Leerink Partners.

Okay. When I look at revenues or practice collections per provider, it's just up a ton this quarter. And I know it's just a metric, but can you just talk about the factors influencing the strong fee-for-service growth? I know you don't give same-store volumes, but just the revenues are growing so much faster than the implemented provider growth.

Yes. Thanks for the question, Whit. So I think it was pretty broad-based. We saw that across the fee-for-service book, utilization trends and then also value-based book where if the actual results come in ahead of accruals, all that gets factored in the practice collections. We added a couple of markets. Arizona is now fully factored in. When we give original guidance, we don't include BD like we noted. And once we close the transaction, all that gets factored in. Indiana has got implemented, that got ramped up. So I think you're seeing the momentum across the business, same-store new provider growth, new markets, good value-based book, and it just speaks to the momentum in the business. When all of these things hit, you get results like this and it flows down EBITDA free cash. So I think we're really pleased as to how it's played out.

Your next question comes from the line of Matt Gillmor with KeyBanc.

Parth, I wanted to ask about the synergy opportunities with the Evolent Health ACO. How are you thinking about the pathway to enhancing the savings rate from Evolent's ACO up to previous performance? And then also, can you provide a couple of comments about the physician base, which I think is relatively large, around 1,000 physicians. Just give us a sense for what those practices look like and the appetite to join the Privia Medical Group.

Yes. Thanks for the question, Matt, and kudos to calling the deal out like a year ago when we hadn't even started conversations. Look, I think you noted all of them. I mean our thesis is this is a core part of our business. We've done MSSP for 10 years. We think we can offer a lot more to these provider groups. Obviously, there's a synergy opportunity in our existing states where we have medical groups, we have a full infrastructure. We'll have a pretty tangible ROI for many of the practices that can join us. And so there's that cross-sell opportunity. I don't think it plays out just in the next quarter or 2. I think this thing takes a few years to play out as practices -- some of the larger practices make that fundamental decision to join our medical groups. It's an entirely different business value proposition. And then I think it gives us good opportunity to -- we're now going to enter 6 new states with a lighter model with just in the ACO, but then there's an opportunity for us to find anchor providers and others that we can actually establish our medical group and then implement our full suite and enter these states. And so I think we're going to focus on both of those. And then obviously, improving the performance of the ACO at hand is kind of job #1. So they are at a certain level of shared savings rate with CMS. You've seen our performance across our other ACOs as we've consistently improved that. We have 4 or 5 ACOs that are now close to double digit or higher than double-digit savings rate. So I don't think, again, that plays out in the near term. But over time, our hope is we can improve performance. So there are multiple levers to get synergies out of the business. We haven't closed the transaction yet. So we'll just go through that. And hopefully, that gives us good tailwinds over the next 2, 3 years as we play out that thesis.

Your next question comes from the line of Andrew Mok with Barclays.

This is Thomas Walsh on for Andrew. Hoping you could discuss some of the moving pieces in the capitated business this quarter, including the step-up in revenue, prior year claims development and any change in membership?

Yes. Thanks, Thomas. So I think we have a pretty small capitated book, about 20,000 to 22,000 lives. So I think that's just to note that. And then this was a small book that we retained on a capitated basis when we kind of restructured these contracts a couple of years ago, given our view on the broader MA environment. And our hope was that we would perform well in the book that we are keeping. So I think you're seeing that play out. I think it's effectively the factors that you would expect on the revenue side, given attribution, risk adjustment and then obviously, performance relative to that on the cost side with all our programs just performing a little bit better than what we expected, which was the hope. So you're seeing that play out. I don't think it fundamentally changes our view on capitation and how that plays out going forward. We continue to believe having shared risk model with payers, providers, Privia, like we've said on our previous calls. We just think that's the most optimal structure. All the pressures in MA continue to persist as most of the analysts on the call have written pretty extensively about V28 and star scores, utilization trends, none of that is changing fundamentally. So I think we're going to be pretty cautious on capitated MA, but we're really pleased with the book we have, and we'll continue to optimize it for profitability and continue to give that value to both our payer partners and our providers.

Yes. And just to add to that, for the quarter, there was a little bit of timing of data and a little bit of retroactivity back to 1/1. So I would say we're looking at probably Q3 is the high mark for the year and wouldn't expect that exact trend to continue into Q4.

Your next question comes from the line of Matthew Shea with Needham & Company.

Congrats on the nice quarter here. I wanted to ask about kind of the go-forward growth algorithm. Historically, you've stuck to a cadence of 1 to 2 markets per year. You demonstrated that this year. Evolent obviously adds more than 1 to 2 markets immediately. So curious, how does the acquisition change the cadence of new markets? Is it fair to expect you will pause for a bit while you process through integrating those assets? Or just how does the deal change the growth algorithm? And then you also commented on the flexibility, the cash position gives you at this point. So just curious what your appetite for incremental M&A is?

Yes. I appreciate the question, Matt. So I don't think anything changes fundamentally. We continue to have a pretty good business development pipeline. Evolent gives us access to 6 new states, but it's not with the full model as we just were talking about. So I think -- when we talk about a new state, it's implementing the full model with our medical groups, risk entities, full services platform. So I think that will be the cadence. I think we have a pretty strong cash balance, $400-plus million even at the end of the year despite spending $200 million this year. I think we're going to continue to take advantage of all the dislocation in the market. A lot of companies that got started public, private have struggled for different reasons. I don't think new money is chasing some of these models, which is great for us. A lot of TAM opens up as some of these models struggle, physicians come out. So I think we're going to continue to be pretty aggressive with BD and try to take advantage of this opportunity and window and keep growing our TAM, keep growing our business and compounding it. So again, but we're going to be disciplined on price, on the types of deal we do as we have been in the past. So I think we'll just continue with the cadence all across. So there's no fundamental change in how we think about our growth algorithm.

Your next question comes from the line of Jailendra Singh with Truist Securities.

Congrats on a strong quarter. I want to stay on the topic of MSSP, clearly, strong results there. But the landscape in general, I mean, we have come across multiple companies who were previously only focused on the ACO REACH program and now exploring ways to shift MSSP given all the uncertainties in the ACO REACH program. Is that -- how does that change the landscape for you guys? I mean, on the same topic of M&A, do you think that could be an opportunity for you to look at some of these entities who might have done okay on ACO REACH but now are uncertain about the future? Just give us a flavor about the landscape this might be having some impact on.

Yes. Thanks, Jailendra. I think it ties to the previous question. I think there's a lot of dislocation the barriers to entry to start a REACH or an MSSP ACO were pretty low. But then executing on it and scaling it and making it profitable is where I think all the secret sauce is. I mean there's no IP in health care services. So I think as new money does not flow in and people are not willing to put in good money behind bad money and some of these models struggle to get profitable or scale, I think all of those give us good opportunities. I mean, at the end of the day, if you look at Slide 12, like we are chasing 2 units that drive this business, providers, the patients they cover our lives and then how many of those are in some value-based arrangements. So as I think some of these entities struggle, the physicians come out or we have an opportunity to buy some of these entities at a reasonable price, I think we're going to look at all of those. The transaction we did with Evolent is an example of that. I mean they didn't do REACH, but I mean, there was a pretty big value-based care book available. And I think the transaction was good for both parties. We got it at a reasonable price. They had something that was noncore to them. So I think we're going to look for those kind of opportunities. But I think, like we said, we're going to be pretty aggressive across the Board in looking for opportunities to keep growing.

The next question comes from the line of Jeff Garro with Stephens.

I want to ask how we should be thinking about the evolution of your relationships with payers as we head into the next calendar year and you might be finalizing any of the negotiations or contractual arrangements with those counterparties towards year-end. Has your execution on value-based care from both the cost and quality perspective changed those conversations dramatically? Or should we continue to think about it as kind of incremental gains towards value-based care as you show the high level of service that your providers offer?

Yes, I appreciate the question, Jeff. I think it's a great question. Given the breadth of our relationship across commercial, MA, Medicaid, our -- these are ongoing discussions. It's not like we have contracting discussions at one point of the year because like we said, we have over 100 VBC contracts, they're close to 200 commercial contracts, including commercial value-based. So the discussions are really broad-based. And these happen at the state level, just given how the industry works. But then as we really perform well in one state, we have case studies, we have a history of performance. The payers understand what we've done for them in one state. And so as we enter a new state or we have some of the younger states, I think those conversations help us. So there's a local level discussion. There's a national level discussion. We include multiple aspects to contracting. So when we go and negotiate a fee-for-service contract, it includes a value-based element to it, even on the commercial book, the MA book, the Medicaid book. So I think it's a differentiated value proposition that very few companies in the space have at the scale and breadth that we do. And so I think we continue to work with the payers. They are seeing strong results. We offer them a very low-cost provider network, a delivery network, and that's the right side of history in terms of where -- what you have to do to reduce cost, improve outcomes, improve patient well-being, so on and so forth. So I think it's great to see that play out over 4, 5, 6, 7 years. So you have empirical tangible results to show. And I think that continues to differentiate us. And I think it's not only with the payers, it's with provider groups, it's with the government. So I think all of that bodes pretty well for us as we continue the momentum.

Your next question comes from the line of Ryan Langston with TD Cowen.

On the MA CAP performance, I think I heard you say there was some favorable retro pickup. I guess, could you maybe help us frame how much of that was sort of core performance versus onetime in nature? And then just on the current number of MA lives, 20,000 to 22,000, if you wanted to, is there an opportunity to increase the number of those lives in the current contracts that you have? Or would you sort of have to move outside of those and sign additional contracts to grow lives?

Yes, I appreciate the question. So I think it was a bit of both on the first part. It's also relative to our accruals, what the actual results are. I mean we've been very, very prudent and thoughtful on how we accrue just given the environment, given everything you heard from the payers. So we were fairly prudent in our assumptions. But then at the same time, we just don't take a step back on actually performing in those contracts and then we hope for the best. And I think what you saw was the team did a pretty good job. Now it's a pretty small book. It's like we said earlier, it's 20,000 to 22,000 lives, 1 or 2 states, a couple of payers. So we really focused on what we needed to do to reduce cost, improve outcomes and then have the results we did. So I think it was a bit of both in terms of great performance in the year. Now like we said, I don't think we're going to continue to assume that some of the headwinds in MA just go away. So I think we'll continue to be prudent in our accruals going forward. And if results are better, then you'll see the outperformance again, but I think that's the tactic we're just going to keep. And then I think in terms of increasing attribution, look, I think it's going to be both things. I mean we're looking to increase same-store attribution growth in existing states with existing contracts with existing doctors. We add new providers in the same state, so -- and in the same geography. So if we have an MA contract in a few ZIP codes, we add new providers there, that attribution adds to it. And then we're going to obviously try to enter into new MA contracts in existing and new states as well. So I think you'll see a combination of all of that. Our approach is to continue to increase lives across the value-based book, MA, MSSP, Medicaid, commercial and because that's the chassis for the business and the economic model. So I think you're going to continue to see us just increase lives as fast as we can.

Next question comes from the line of A.J. Rice with UBS.

You have a unique window on a bunch of different payer classes, coverage categories. And I wonder, there seems to still be quite a bit of disruption in underlying utilization trends. Is there anything you're seeing to call out there? There's also been speculation that as people base coverage changes going into the new year, there might be some acceleration on utilization during the fourth quarter. Are you seeing any of that in how people are approaching your primary care operations and so forth?

Yes. Thanks for the question, A.J. So as we've done previously, I think it's important to distinguish between ambulatory utilization, physician practice offices in the communities versus in the hospitals and post-acute and so forth. And so I think we continue to see elevated trends across the Board. I don't think there's any reason to believe that those trends reduce. We'll just see how Q4 plays out and whether all the changes in some of the programs and whether attribution might change with Medicaid or exchange population. It's not really big for us. But I think that impacts more of the post-acute and acute side of things versus ambulatory. But we'll see how that plays out. But I think our underlying assumption is going to be pretty elevated. And so we plan for that in the value-based book. It bodes well for us on the fee-for-service side. So I think that's our view.

Your next question comes from the line of Constantine Davides with Citizens.

Maybe just Parth changing gears a little bit here, but you've more than doubled the number of providers on the platform in the past 5 years. Can you maybe talk about Privia's ancillary capabilities and how they've evolved over this time frame as you've added new markets and particularly new specialties and increased density in more mature markets. So just again, how your ability to continue to scale the platform is maybe driving your thinking about some of the ancillary services you provide to your groups?

Yes, I appreciate the question, Constantine. So it's a really good point. I think, look, our strategy is enter a state, get density of providers and then run the entire playbook for the whole line of business, all patients, all payers, all lines. And as we develop that density, there's a lot of opportunity for us to get into things like labs, pharmacy benefits, ASCs potentially, clinical research, anything that goes through our practices because we are operating integrated medical groups, risk entities, full tech and services platform. We've got all the data. The medical groups make the decisions collectively with the Privia team. And so there's a lot of saving opportunities that we can offer to the payers, incremental revenue opportunities we can offer to our medical groups and our provider practices. And so you'll see us pursue all that. Now it varies by state depending on density. So it's not going to be homogenous. But across all of those lines, we look to monetize the platform and scale it. So -- and I think that leads to the great economic model where incremental revenue just flows down the P&L as we monetize the network. And I think that's one of the underappreciated parts of our business as to how we can -- how well we can do that. So you're seeing that play out in the thesis. Again, like Slide 12 speaks for itself. If you look at the provider growth, collections growth, care margin, EBITDA, free cash flow, and that's a fully expensed P&L for all sales, marketing, BD, software development, everything. And we are approaching close to target margins. Overall, as a company, we're at 26% EBITDA to care margin. When we went public 5 years ago, we said we're going to target 30% to 35%. I mean, we're pretty much there over the next few years. So I think you're seeing the whole thesis play out as a result.

Your next question comes from the line of Jessica Tassan with Piper Sandler.

This is Derek Gross on for Jess. I had one on Evolent Care Partners. We believe that they had a $220 million a year partial capitation contract with Blue Cross Blue Shield of North Carolina. Do they have any other contracts like this? And did the acquisition include management of this contract or just the MSSP business?

Yes, I appreciate the question. So like as we noted in our press release, when we did the deal, we bought the entire business, all contracts that included commercial and MA as well in addition to MSSP. And so yes, we assume that contract. We're not going to get into details of any specific contract and lives in it or revenue dollars and so forth, like we don't do it for the rest of our book. We'll include them as part of our whole entire platform and how we report it on Slide 6. But yes, we've inherited those contracts, and it's part of our core strategy to just add to lives in each of the circles that you have on Slide 6, and that will add to the MA lives there, and we'll continue to hope to perform as expected or better over time.

Your next question comes from the line of Daniel Grosslight with Citi.

Congrats on another strong one here. If I look at the implied guide for 4Q on a year-over-year basis, it seems like you're projecting limited profitability growth. It's about low single digits and some margin compression. Parth, I know you mentioned that just given where you are in the year, you do continue to guide conservative. But I'm just curious if there's any investments that you're making in 4Q that may be weighing on margin. And I also just wanted to confirm if IMS contributed anything to profitability this quarter? Or are you still expecting that to start contributing in 4Q?

Yes, I appreciate the questions. Yes. So there's no investments. There's nothing -- there's no anomaly. We're just being prudent. We don't want to get ahead of ourselves just given the strong results. If all that momentum continues, hopefully, we'll close the year pretty strong. And so IMS -- and to your second question, IMS will contribute in Q4 and going forward once they were implemented in September. So I think that hasn't contributed. So I think -- look, we expect Q4 to be strong. We'll see how it plays out. Hopefully, it's better than expected. We just had the magnitude of outperformance in the first 3 months -- first 3 quarters that -- like we said earlier, like we don't give implied guidance. We don't guide by quarter. I think we're just looking at the full year. On each of our operating metrics, we are well above the high end. So if it continues at the trend that we expect it to, hopefully, you'll see all that outperformance continue.

Your next question comes from the line of Jack Slevin with Jefferies.

Congrats on the quarter. Most of my questions have been asked already. So maybe just a tidying up one on the numbers. In previous years, when you've had significant outperformance or a strong lead in? I know you've had sort of higher variable comp or bonuses that have come through in either the fourth quarter or on a cash basis hitting early in the following year. Is there anything we should be looking out for on that front as we look at 4Q and 1Q coming up?

Yes, I appreciate it, Jack. So yes, that's all factored in the guidance. So as we look at our scorecard that you can see in the proxy every year based on the metrics, we accrue for that level of outperformance and bonus accruals and so forth. So that's all in the accrued bonus line on the balance sheet. That's reflected in the P&L. So that's all fully expensed already. And despite that, you're seeing the outperformance. So yes, that will lead to some increased cash outflow in Q1. So you'll expect that. But I mean, that's a result of great business. So the interests are pretty aligned with the shareholders here in terms of how much free cash and EBITDA we generate.

Your next question comes from the line of David Larsen with BTIG.

This is Jenny Shen on for David. Congrats on a great quarter. I just wanted to ask about the New Big Beautiful Bill Law. Any thoughts on impacts to Privia, any impact on your Medicaid book, even though it's small?

Yes. Thanks for the question, Jenny. So as you noted, I mean, the 2 main areas there were Medicaid and the exchange populations, and both of those are pretty small for us. We don't take any downside risk on Medicaid. It's a pretty small percentage of collections for our practices. We'll see how the patient mix changes, but we don't expect any big changes, any fundamental issues. Practices run at capacity, lives move. I don't think people give up their primary care. It's pretty essential to their well-being and getting back to work and things like that or kids going to school with pediatricians or women getting their care with our OB. So I don't think all of that changes much for us. We'll just see how the shifts happen, but it's happened in the past. But -- so we don't expect any meaningful impact to us given just our business model and mix.

Your next question comes from the line of Ryan Daniels with William Blair.

Congrats on the strong year-to-date performance. Parth, I wanted to go back to some of your comments on ancillary services. And I'm curious in particular, I know a few years ago, you signed a partnership with surgery center chain. We've got some potential changes to the inpatient-only list. I'm curious if that, in particular, would be a bigger growth opportunity in kind of managing referrals and point of care for the organization going forward.

Yes, I appreciate the question, Ryan. I think absolutely, as we build out, I mean, we're consciously focused to building a multi-specialty medical group for that reason. Downstream, 80% of the costs are downstream from the PCP, give or take, as you know. So I think as we continue to build out density in different states, that's a core focus for us. I think that comes with opportunities for outpatient surgeries, ASCs, managing more of the total cost of care and partnering with these physicians. So I think as we continue to build out our network in each state, get density, I think you'll expect us to continue to expand in that area. Again, I don't think we're going to be very surgical heavy just given the nature of our business. But I do think folks being taken chronically ill patients, whether it's cardiology, pulmonology, CKD, things like that, I think we're going to keep looking at it selectively. Ortho is another big area. So I do think you'll expect us to continue to do it. It's -- again, it's not going to be homogenous by state. But as we build out the medical groups, that's a big lever to control cost of total care.

And your last question comes from the line of Craig Jones, Bank of America.

This is [ Joaquin ] on for Craig. So you have astutely shifted down risk in MA during the first 2 years of V28. What are the odds you think we could see some kind of V29 in the next few years? And what would make you more comfortable taking more risk in MA?

Yes, I appreciate the question, [ Joaquin ]. I mean it's pretty much similar to what we've said earlier. I think we just have to see how it plays out. It's just tough to predict when V29 comes, it doesn't come, what are the specifics on it. We've continued to believe that a shared risk model between the payers, the providers, somebody like a Privia in the middle is the right approach. You have to be thoughtful. These are long-term contracts. The patients don't change their PCPs. You're trying to manage their total cost as they are growing older, they're growing sicker. I don't think any one entity can perform well at the expense of the other on a long-term sustainable basis. So I think you can get anomalies in the middle when somebody is trying to grow their business with some benefit design changes on the payer side or provider enablement entities throwing a lot of money to just get physicians in some risk contracts. And you then see blowups happen like we did in the last 2, 3 years. So we just think the best long-term sustainable model is alignment of interest and everybody having share in the game. And that's what we're going to focus on. I think everybody got too infatuated with this how capitation work and does it have to be 100% downstream at the provider entity level versus the payer. And we just believe in a different approach, and I think that's just more sustainable. So the job to be done is not going to change. You're going to have an aging population that is growing sicker, older and ultimately dying. I mean that's the truism of humanity, unfortunately. So I think if that's the problem at hand, you need doctors in the community to do the work on behalf of the payers. Like the payers, unless they have a care delivery arm, they're not taking care of people. So I just think you need interest aligned and you need to have contracts that reflect that. Physicians need to be paid to get that job done, and that's the lowest cost setting first point of contact. So I think for all those reasons, no matter what the changes are, once we get some equilibrium over the last 2, 3 years, excess has won down, benefit design is getting more normalized. And so we'll just continue to work with our payers to have a sustainable contract to do our job and get paid for it.

And there are no further questions. Please go ahead, sir.

Thank you for listening to our call today. We appreciate your continued interest and look forward to speaking with you again in the near future.

This concludes today's conference call. Thank you all for joining, and you may now disconnect.