Privia Health Group Inc.
02/27/2026 | Press release | Distributed by Public on 02/27/2026 07:13
Annual Report for Fiscal Year Ending December 31, 2025 (Form 10-K)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with our consolidated financial statements and accompanying notes included elsewhere in this Annual Report on Form 10-K. In addition, the following discussion and analysis and information contains forward-looking statements about the business, operations and financial performance of the Company based on our current expectations that involve risks, uncertainties and assumptions. Our actual results could differ materially from those anticipated by these forward-looking statements as a result of many factors. including, but not limited to, those identified below and those discussed in the sections titled "Risk Factors" and "Information Regarding Forward-Looking Statements" in this Annual Report on Form 10-K.
Overview
Privia Health is a technology-driven, national physician-enablement company that collaborates with physician practices, health plans, and health systems to achieve the quadruple aim of better outcomes, lower costs, improved patient experience, and happier and more engaged providers. We seek to accomplish the quadruple aim by entering markets and organizing existing physicians and non-physician clinicians into a unique practice model that combines the advantages of a partnership in a large regional Medical Group with significant provider autonomy for Privia Providers joining our Medical Groups.
Under our Privia Medical Group model, Privia Physicians join the Medical Group in their geographic market as an owner of the Medical Group. We own a majority interest in certain of our Medical Groups, with Privia Physicians collectively owning a minority interest, and we own no interest in certain other Non-Owned Medical Groups. In those markets in which state regulations do not allow us to own Medical Groups, the Non-Owned Medical Groups may be owned by the Privia Physicians or owned indirectly by a licensed physician holding a Privia leadership position, otherwise referred to as a Friendly Medical Group. Privia Physicians furnish healthcare services through our Medical Groups and continue to own their Affiliated Practices, which provide certain services to the Medical Groups, such as use of space, non-physician staffing, equipment and supplies.
We provide management services to the Medical Groups through a local MSO, which provides Medical Groups with access to VBC opportunities either directly or through Privia-owned ACOs. We have national committees that distribute quality guidance, and we employ Chief Medical Officers who provide clinical oversight and direction over the clinical affairs of the Owned Medical Groups. Additionally, we hold the provider contracts, maintain the patient records, set reimbursement rates, and negotiate payer contracts on behalf of the Owned Medical Groups.
In some instances, we also move into and expand in new and existing markets through our Privia Care Partners model, which offers an affiliation model to providers who are looking solely for VBC solutions. For those practices, we furnish population health services, reporting and analytics, along with certain management.
GAAP Financial Measures
• Revenue was $2.12 billion, $1.74 billion and $1.66 billion for the years ended December 31, 2025, 2024, and 2023, respectively.
• Operating income was $34.2 million, $17.0 million and $20.6 million for the years ended December 31, 2025, 2024, and 2023, respectively; and
• Net income attributable to Privia Health Group, Inc. was $22.9 million, $14.4 million and $23.1 million for the years ended December 31, 2025, 2024, and 2023, respectively.
Key Metrics and Non-GAAP Financial Measures
• Practice Collections were $3.47 billion, $2.97 billion and $2.84 billion for the years ended December 31, 2025, 2024, and 2023, respectively;
• Care Margin was $462.2 million, $403.9 million and $359.2 million for the years ended December 31, 2025, 2024, and 2023, respectively;
• Platform Contribution was $234.8 million, $195.6 million and $173.5 million for the years ended December 31, 2025, 2024, and 2023, respectively;
• Adjusted EBITDA was $125.5 million, $90.5 million and $72.2 million for the years ended December 31, 2025, 2024, and 2023, respectively.
See "Key Metrics" and "Non-GAAP Financial Measures" for more information as to how we define and calculate Implemented Providers, Attributed Lives, Practice Collections, Care Margin, Platform Contribution, Platform Contribution Margin, Adjusted EBITDA and Adjusted EBITDA Margin, and for a reconciliation of Gross Profit, the most comparable GAAP measure, to Care Margin, Gross Profit, the most comparable GAAP measure, to Platform Contribution, and net income, the most comparable GAAP measure, to Adjusted EBITDA.
Our Revenue
We recognize revenue from multiple stakeholders, including health care consumers, health insurers, employers, providers and health systems. Our revenue includes (i) FFS revenue generated from providing healthcare services to patients through Privia Providers of Owned Medical Groups or administrative fees collected for providing administrative services to Non-Owned Medical Groups, (ii) VBC revenue collected on behalf of our providers, primarily capitated revenue, shared savings (including surplus payments, shared savings, total cost of care budget payments and similar payments) and PMPM fees (including care management fees, management services fees, care coordination fees and all other similar administrative fees), and (iii) other revenue from additional services, such as concierge services, virtual visits, virtual scribes and coding.
FFS Revenue
We generate FFS-patient care revenue when we collect reimbursements for FFS medical services provided by Privia Providers. Our multi-year agreements with our providers have historically experienced a 96% provider retention rate, which leads to a highly predictable and recurring revenue model. Our FFS contracts with payer partners typically contain annual rate inflators and given our scale, enhanced commercial FFS rates in each of our markets. As a result of receiving these rate inflators and enhancements and if we continue to be successful in expanding our provider base, we expect revenue will grow year-over-year in absolute dollars. In addition, in our FFS-patient care revenue, we generate revenue from ancillary services such as clinical laboratory, imaging and pharmacy operations. Lastly, we also generate FFS-administrative services revenue by providing administration and management services to medical groups which are not owned or consolidated by us. FFS-patient care revenue represented 64.1%, 66.0% and 58.9% of total revenue for the years ended December 31, 2025, 2024, and 2023, respectively. FFS-administrative services revenue represented 6.5%, 7.2% and 6.8% of total revenue for the years ended December 31, 2025, 2024, and 2023, respectively.
VBC Revenue
Over time, we create incremental value for our provider partners by enabling them to succeed in VBC arrangements. We generate VBC revenue when our providers are reimbursed through traditional FFS Medicare, MSSP, Medicare Advantage, commercial payers and other existing and emerging direct payer and employer contracting programs. We monitor capitated and downside risk contracts and renegotiate or restructure as necessary as new information emerges. VBC revenue is primarily collected in the form of (i) Capitated revenue earned by providing healthcare service to Medicare Advantage attributed beneficiaries for a defined group of services including professional, institutional and pharmacy through a contract that is typically known as an "at-risk contract", (ii) Shared savings earned based on improved quality and lower cost of care for our attributed lives in VBC incentive arrangements and (iii) Care management fees to cover costs of services typically not reimbursed under traditional FFS payment models, including population management, care coordination, advanced technology and analytics. VBC revenue represented 29.0%, 26.3% and 33.8% of total revenue for the years ended December 31, 2025, 2024, and 2023, respectively.
Other Revenue
The remainder of our revenue is derived from leveraging our existing base of providers and patients to deliver value-oriented services such as virtual visits, virtual scribes and coding. Other revenue represented 0.4% of total revenue for the years ended December 31, 2025 and 0.5% for the years ended December 31, 2024, and 2023, respectively.
Key Factors Affecting Our Performance
Addition of New Providers
Our ability to increase our provider base enables us to deliver financial growth as our providers generate both our FFS and VBC revenue. Our existing provider relationships and market share provides us with significant opportunity to grow in both existing and new geographies, and we believe the number of providers joining Privia is a key indicator of the market's recognition of the attractiveness of our platform to our providers, patients and payers. We intend to increase our provider base in existing and new markets by adding new practices and assisting our existing practices with recruiting new providers, using our in-market and national sales and marketing teams. As we add providers to the Privia Platform, we expect them to contribute incremental economics as we leverage our existing brand and infrastructure, both at the corporate and in-market levels.
Addition of New Patients
Our ability to add new patients to our provider base in existing and new markets also enables us to deliver revenue growth in both our FFS and VBC contracts. We believe the number of attributed patient lives in VBC programs is a key driver of our VBC revenue growth. Our branding and marketing strategies to drive growth in our practices have continued to result in increased engagement with new and existing patients. We believe our continued success in growing the visibility of the Privia brand will result in increased patient panels per provider and contribute incremental revenue in both FFS and VBC for our practices.
Expansion to New Markets
Based upon our experience to date, we believe Privia can succeed in all reimbursement environments and payment models. The data we collected from older provider cohorts consistently suggest that we improve provider performance in both FFS and VBC metrics over time. It also informs our expectations for our new markets. We believe our in-market operating structure and ability to serve providers, wherever they are on their transition to VBC can benefit physicians and providers throughout the U.S. and that our solution is applicable across all 50 states. We enter a market with an asset-light operating model and employ a disciplined, uniform approach to market structure and development. We partner with market leading medical groups and health systems to form anchor relationships and align other independent, affiliated, or employed providers into a single-TIN medical group. Our business model also gives us flexibility for future, incremental growth through the acquisition of minority or majority stakes in our practices and opening de-novo, fully-owned sites of care focused on Medicare Advantage and direct contracting models.
During 2023, we entered four new markets through partnerships or affiliations with clinically integrated networks, health systems and independent group practices in Connecticut, Ohio, Washington state and South Carolina.
In November 2024, we announced it had entered into the Indiana market through the acquisition of an independent group practice, renamed Privia Medical Group Indiana, LLC ("PMG IN"), whereby Privia acquired majority ownership in PMG IN.
In April 2025, we announced a partnership with Integrated Medical Services, a multi-specialty practice, to launch Privia Medical Group Arizona ("PMG AZ"). Privia acquired a majority ownership in PMG AZ.
In December 2025, we acquired Evolent Health, Inc.'s accountable care business, adding over 120,000 attributed lives through the MSSP, as well as various commercial and Medicare Advantage programs.
Provider Satisfaction and Retention
Privia Providers have high satisfaction with their overall performance on our platform, and we strive to continuously improve provider well-being and patient satisfaction. Our percentage of collections model combined with high patient and provider satisfaction results in 90%+ Practice Collections predictability on a rolling twelve month forward basis. We believe these metrics demonstrate the stability of our provider base and the appeal to prospective providers and patients of our platform.
Payer Contracts and Ability to Move Markets to VBC
Our FFS and VBC revenue is dependent upon our contracts and relationships with payers. We partner with a large and varied set of payer groups nationally and in each of our markets to form provider networks and to lower the overall cost of care, and we structure bespoke contracts to help both providers and payers achieve their objectives in a mutually aligned manner. Maintaining, supporting and increasing the number of these contracts and relationships, particularly as we enter new markets, is important for our long-term success. We typically enter into multiyear contracts with our Medical Groups, Privia Physicians, health system or hospital partners, ACO participants and payer customers, which often have a stated initial term of three years with an automatic successive one-year renewal. From time to time, we may renegotiate or attempt to renegotiate our payer contracts in the ordinary course of business prior to the expiration of their stated terms. If the counterparties fail to renew their contracts, renew their contracts upon less favorable terms or at lower fee levels, fail to utilize additional products and services obtained from us, or if we fail to renegotiate contracts with our counterparties on favorable terms or at all, our revenue may decline and our future revenue growth may be constrained.
Our ability to work within each geographic market as it evolves in its shift towards VBC, with our experience working in all reimbursement environments, enables providers to accelerate and succeed in their transition. Our model is aligned with our payer partners, as we have demonstrated improved patient outcomes while driving incremental revenue growth. We intend to accelerate the move towards the adoption of VBC reimbursement in each market in current and emerging payer programs. To do so, we will need to continue enhancing our VBC capabilities and executing on initiatives to deliver next generation access, superior quality metrics and lower cost of care.
As of December 31, 2025, the total number of Privia-owned ACOs is ten.
During 2022 and 2023, we entered into capitated payer arrangements. Capitated revenue is generated through what is typically known as an "at-risk contract." At-risk capitation refers to a model in which we are entitled to fixed monthly fees from the third-party payer in exchange for providing healthcare services to attributed beneficiaries in Medicare Advantage plans. The fees are typically based on a percentage of the defined premium that payers receive from CMS. We are responsible for providing or paying for the cost of healthcare services required by those attributed beneficiaries. At-risk capitated fees are recorded gross in revenues because we are acting as a principal in arranging for, providing, and controlling the managed healthcare services provided to the attributed beneficiaries. Given recent regulatory and utilization headwinds in Medicare Advantage, during the first quarter of 2024, we renegotiated certain capitation agreements for more favorable contract structures.
Components of Revenue
Our FFS revenue is primarily dependent upon the size of our provider base, payer contracted rates and patient volume. Our ability to maintain or improve pricing levels in our contracts with payers and patient volume for our providers will impact our results of operations. In addition to increasing our provider base and contracted rates over time, we also seek to increase patient volume by
demonstrating the ability to provide a better patient experience that leads to higher retention rates and drives referrals to preferred, high quality and value-based providers. Our VBC revenue is primarily dependent upon the number of attributed patients in our VBC arrangements, risk levels of our payer contracts, and effective management of our patients' total cost of care. As we grow our provider base, we also expect to increase our total number of attributed patients in existing and new markets. In addition, we intend to increase the risk levels of our value-based programs as we seek a higher revenue opportunity on a per patient basis over time.
Investments in Growth
We expect to continue focusing on long-term growth through investments in our sales and marketing, our technology-enabled platform, and our operations. In addition, as we continue our efforts to move markets toward VBC, we expect to continue making additional investments in operations for an expanded suite of clinical capabilities to manage our patient population.
We launched Privia Care Partners on January 1, 2022 to offer a more flexible affiliation model for providers who do not desire to join one of our medical groups. This model aggregates providers in certain of our existing markets as well as new markets who are looking solely for VBC solutions without the necessity of changing EMR providers. We furnish population health services, reporting and analytics to such providers along with a menu of management services from which providers may choose. Since then, a number of Privia Care Partners' providers transitioned to our Privia Medical Group model, which demonstrates the flexibility of our operating model and technology platform, as well as the ability to support physicians wherever they are in their transition value-based care.
Key Metrics and Non-GAAP Financial Measures
We review a number of operating and financial metrics, including the following key metrics and non-GAAP financial measures, to evaluate our business, measure our performance, identify trends affecting our business, formulate our business plans, and make strategic decisions.
Key Metrics
(1) We define Practice Collections as the total collections from all practices in all markets and all sources of reimbursement (FFS, VBC and other) that we receive for delivering care and providing our platform and associated services. Practice Collections differ from revenue by including collections from Non-Owned Medical Groups.
| For the Years Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Implemented Providers (as of end of period) | 5,380 | 4,789 | 4,305 | ||||||||||||||
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Attributed Lives (in thousands) (as of end of period)
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1,541 | 1,256 | 1,120 | ||||||||||||||
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Practice Collections (1) ($ in millions)
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$ | 3,470.5 | $ | 2,968.0 | $ | 2,839.0 | |||||||||||
Implemented Providers
We define Implemented Providers as the total of all service professionals at the end of a given period who are credentialed and bill for medical services in both Owned and Non-Owned Medical Groups during that period. This includes, but is not limited to, physicians, physician assistants, and nurse practitioners. We believe that growth in the number of Implemented Providers is a key indicator of the performance of our business and expected revenue growth. This growth depends, in part, on our ability to successfully add new practices in existing markets and expand into new markets. The number of Implemented Providers increased 12.3% as of the year ended December 31, 2025, as compared to the year ended December 31, 2024, primarily due to organic growth in our healthcare delivery business as well as entrance into the Arizona market. Implemented Providers increased 11.2% as of the year ended December 31, 2024, compared to the year ended December 31, 2023, primarily due to organic growth in our healthcare delivery business as well as entrance into the Indiana market.
Attributed Lives
We define Attributed Lives as any patient that a payer deems attributed to Privia to deliver care as part of a value-based care arrangement through a provider of primary care services as of the end of a particular period. The number of Attributed Lives is an important measure that impacts the amount of VBC revenue we receive. Attributed Lives increased 22.7% as of December 31, 2025, compared to December 31, 2024 primarily due to acquisitions and organic growth. Attributed Lives increased 12.1% as of December 31, 2024, compared to December 31, 2023, primarily due to acquisitions and organic growth.
Practice Collections
We define Practice Collections as the total collections from all practices in all markets and all sources of reimbursement (FFS, VBC and other) that we receive for delivering care and providing our platform and associated services. Practice Collections differ from revenue by adding collections from Non-Owned Medical Groups both in FFS and VBC arrangements. FFS arrangements accounted for 81.6%, 83.2% and 76.5% of our Practice Collections for the years ended December 31, 2025, 2024, and 2023, respectively, while VBC accounted for 18.2%, 16.6% and 23.2% of Practice Collections for the years ended December 31, 2025, 2024, and 2023, respectively.
Practice Collections increased 16.9% for the year ended December 31, 2025 when compared with the same period in 2024 primarily due to organic growth of our healthcare delivery business and acquisitions. Practice Collections increased 4.5% for the year ended
December 31, 2024, compared with the same period in 2023, primarily due to organic growth of our healthcare delivery business and acquisitions.
Non-GAAP Financial Measures
In addition to our financial results determined in accordance with GAAP, we believe non-GAAP financial measures including Care Margin, Platform Contribution, Platform Contribution Margin, Adjusted EBITDA and Adjusted EBITDA Margin are useful measures to investors as these metrics are used by management in evaluating our operating performance and in assessing the health of our business. We use these non-GAAP measures to evaluate our ongoing operations and for internal planning and forecasting purposes. We believe that these non-GAAP financial measures, when taken together with the corresponding GAAP financial measures, provide meaningful supplemental information regarding our performance by excluding certain items that may not be indicative of our business, results of operations or outlook.
However, non-GAAP financial information is presented for supplemental informational purposes only, has limitations as an analytical tool and should not be considered in isolation or as a substitute for financial information presented in accordance with GAAP. In addition, other companies, including companies in our industry, may calculate similarly-titled non-GAAP measures differently or may use other measures to evaluate their performance, all of which could reduce the usefulness of our non-GAAP financial measure as a tool for comparison. Below is a reconciliation of our non-GAAP financial measures to the most directly comparable financial measure stated in accordance with GAAP. Investors are encouraged to review the related GAAP financial measures and the reconciliation of non-GAAP financial measures to their most directly comparable GAAP financial measures, and not to rely on any single financial measure to evaluate our business.
| For the Years Ended December 31, | |||||||||||||||||
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(Dollars in thousands, except for percentages)
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2025 | 2024 | 2023 | ||||||||||||||
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Care Margin 1($)
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$ | 462,162 | $ | 403,853 | $ | 359,164 | |||||||||||
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Platform Contribution 1($)
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$ | 234,821 | $ | 195,634 | $ | 173,481 | |||||||||||
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Platform Contribution Margin 1(%)
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50.8% | 48.4% | 48.3% | ||||||||||||||
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Adjusted EBITDA 1($)
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$ | 125,549 | $ | 90,455 | $ | 72,228 | |||||||||||
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Adjusted EBITDA Margin 1(%)
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27.2% | 22.4% | 20.1% | ||||||||||||||
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1.See below for more information as to how we define and calculate Care Margin, Platform Contribution, Platform Contribution Margin, Adjusted EBITDA and Adjusted EBITDA Margin and for a reconciliation of Gross Profit, the most comparable GAAP measure, to Care Margin, Gross Profit the most comparable GAAP measure, to Platform Contribution, and net income, the most comparable GAAP measure, to Adjusted EBITDA.
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Care Margin
Gross Profit is defined as total revenue less provider expenses and amortization of intangible assets. We define Care Margin as Gross Profit excluding amortization of intangible assets. Our Care Margin generated from FFS revenue is contractual and recurring in nature, and primarily based on an individually negotiated percentage of collections for each practice that joins Privia. Our Care Margin generated from VBC revenue is based on a percentage of care management fees and shared savings collected. We view Care Margin as all of the dollars available for us to manage our business, including providing administrative support to our practices, investing in sales and marketing to attract new providers to the Privia Platform, and supporting the organization through our corporate infrastructure. We expect Care Margin will grow year-over-year in absolute dollars as we continue to expand our provider base. We would also expect our care management and shared savings economics in our VBC arrangements to improve on a per patient basis as we manage towards lower total cost of care for our Attributed Lives and move towards higher risk VBC arrangements over time. Care Margin increased 14.4% for the year ended December 31, 2025 when compared to the same period in 2024 and increased 12.4% as of the year ended December 31, 2024, as compared to the same period in 2023, in each case due to organic growth of our medical practice business. As a percentage of revenue, Care Margin was 21.8% for the year ended December 31, 2025 a decrease from 23.3% for the same period in 2024. We continue to make strategic investments to increase services to both our patients and physicians. As a percentage of revenue, Care Margin was 23.3% in 2024 an increase from 21.7% in 2023, due to renegotiated certain at-risk capitation agreements for a more favorable contract structure which is reflected on a net basis under shared savings starting in 2024.
In addition to our financial results determined in accordance with GAAP, we believe Care Margin, a non-GAAP measure, is useful in evaluating our operating performance. We use Care Margin to evaluate our ongoing operations and for internal planning and forecasting purposes. We believe that this non-GAAP financial measure, when taken together with the corresponding GAAP financial measures, provides meaningful supplemental information regarding our performance by excluding certain items that may not be indicative of our business, results of operations or outlook. In particular, we believe that the use of Care Margin is helpful to our investors as it is a metric used by management in assessing the health of our business and our operating performance.
The following table provides a reconciliation of Gross Profit, exclusive of intangible asset amortization, the most closely comparable GAAP financial measure, to Care Margin:
| For the Years Ended December 31, | |||||||||||||||||
| (unaudited and amounts in thousands) | 2025 | 2024 | 2023 | ||||||||||||||
| Revenue | $ | 2,122,842 | $ | 1,736,390 | $ | 1,657,737 | |||||||||||
| Provider expense | (1,660,680) | (1,332,537) | (1,298,573) | ||||||||||||||
| Amortization of intangible assets | (9,168) | (6,164) | (5,359) | ||||||||||||||
| Gross Profit | $ | 452,994 | $ | 397,689 | $ | 353,805 | |||||||||||
| Amortization of intangible assets | 9,168 | 6,164 | 5,359 | ||||||||||||||
| Care Margin | $ | 462,162 | $ | 403,853 | $ | 359,164 | |||||||||||
Platform Contribution
We define Platform Contribution as Gross Profit, excluding amortization of intangible assets, less Cost of platform and excluding stock-based compensation expense included in Cost of platform. The following table provides a reconciliation of Gross Profit, the most closely comparable GAAP financial measure, to Platform Contribution. We consider Platform Contribution to be an important measure to monitor our performance, specific to pricing of our services, direct costs of delivering care, and cost of our platform and associated services. As a provider spends a longer time on the Privia Platform, we expect the Platform Contribution from that provider to increase both in terms of absolute dollars as well as a percent of Care Margin. We expect that this increase will be driven by improving per provider revenue economics over time as well as our ability to generate leverage on our in-market infrastructure costs. Platform Contribution increased 20.0% for the year ended December 31, 2025 when compared to the same period in 2024 and increased 12.8% between 2024 and 2023, in each case due to organic and inorganic growth of our medical practice business and a change in estimate related to our Shared Savings accrual.
The following table provides a reconciliation of Gross Profit, the most closely comparable GAAP financial measure, to Platform Contribution:
| For the Years Ended December 31, | |||||||||||||||||
| (unaudited and amounts in thousands) | 2025 | 2024 | 2023 | ||||||||||||||
| Revenue | $ | 2,122,842 | $ | 1,736,390 | $ | 1,657,737 | |||||||||||
| Provider expense | (1,660,680) | (1,332,537) | (1,298,573) | ||||||||||||||
| Amortization of intangible assets | (9,168) | (6,164) | (5,359) | ||||||||||||||
| Gross Profit | $ | 452,994 | $ | 397,689 | $ | 353,805 | |||||||||||
| Amortization of intangible assets | 9,168 | 6,164 | 5,359 | ||||||||||||||
| Cost of platform | (252,732) | (227,000) | (197,663) | ||||||||||||||
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Stock-based compensation(1)
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25,391 | 18,781 | 11,980 | ||||||||||||||
| Platform Contribution | $ | 234,821 | $ | 195,634 | $ | 173,481 | |||||||||||
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(1)Amount represents stock-based compensation expense included under Cost of platform.
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Platform Contribution Margin
We define Platform Contribution Margin as Platform Contribution as a percentage of Care Margin. We consider Platform Contribution Margin to be an important measure to monitor our performance, specific to pricing of our services, direct costs of delivering care, and cost of our platform and associated services. As a provider spends a longer time on the Privia Platform, we expect the Platform Contribution from that provider to increase both in terms of absolute dollars as well as a percent of Care Margin. We expect that this increase will be driven by improving per provider revenue economics over time as well as our ability to generate operating leverage on our in-market infrastructure costs. Platform Contribution Margin was 50.8% for the year ended December 31, 2025 compared with 48.4% during the same period in 2024 and 48.3% in 2023. We continue to make strategic investments intended to provide better service to both our patients and physicians at a pace slower than the increase in revenue.
In addition to our financial results determined in accordance with GAAP, we believe Platform Contribution and Platform Contribution Margin, each, a non-GAAP financial measure, are useful in evaluating our operating performance. We use Platform Contribution to evaluate our ongoing operations as well as for internal planning and forecasting purposes. We believe that these non-GAAP financial measures, when taken together with the corresponding GAAP financial measures, provide meaningful supplemental information regarding our performance by excluding certain items that may not be indicative of our business, results of operations or outlook. In particular, we believe that the use of Platform Contribution is helpful to our investors as they are metrics used by management in assessing the health of our business and our operating performance.
Adjusted EBITDA
We define Adjusted EBITDA as net income before interest income, net, provision for income taxes, net income (loss) attributable to non-controlling interests, depreciation and amortization, non-cash stock-based compensation, and other expenses including employer taxes on equity vesting and exercises and other certain non-recurring items such as severance, and other expenses. We include Adjusted EBITDA because it is an important measure by which we assess, and believe investors should assess, our operating performance. We consider Adjusted EBITDA to be an important measure because it helps illustrate underlying trends in our business and our historical operating performance on a more consistent basis. Adjusted EBITDA has limitations as an analytical tool as it: (i) does not reflect the impact of stock-based compensation expense, and (ii) does not reflect interest expense on our debt or the cash requirements necessary to service interest or principal payments, if any. Adjusted EBITDA increased 38.8% for the year ended December 31, 2025, as compared to the same period in 2024, and 25.2% for the year ended December 31, 2024, as compared to the same period in 2023, in each case due to organic and inorganic growth of our medical practice business and growth in Attributed Lives and a focus on managing the investment in new expenses.
Adjusted EBITDA Margin
We define Adjusted EBITDA Margin as Adjusted EBITDA as a percentage of Care Margin. We included Adjusted EBITDA Margin because it is an important measure on which we assess, and believe investors should assess, our operating performance. We consider Adjusted EBITDA Margin to be an important measure because it helps illustrate underlying trends in our business and our historical operating performance on a more consistent basis. Adjusted EBITDA Margin was 27.2%, 22.4%, and 20.1% for the years ended December 31, 2025, 2024, and 2023, respectively, in each case due to organic and inorganic growth of our medical practice business, growth in Attributed Lives and a focus on managing the investment in new expenses.
We believe that Adjusted EBITDA and Adjusted EBITDA Margin, when taken together with the corresponding GAAP financial measures, provide meaningful supplemental information regarding our performance by excluding certain items that may not be indicative of our business, results of operations or outlook. In particular, we believe that the use of Adjusted EBITDA and Adjusted EBITDA Margin is helpful to our investors as they are metrics used by management in assessing the health of our business and our operating performance.
The following table provides a reconciliation of net income attributable to the Company, the most closely comparable GAAP financial measure, to Adjusted EBITDA:
| For the Years Ended December 31, | |||||||||||||||||
| (unaudited and amounts in thousands) | 2025 | 2024 | 2023 | ||||||||||||||
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Net income attributable to Privia Health Group, Inc.
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$ | 22,919 | $ | 14,385 | $ | 23,079 | |||||||||||
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Net income (loss) attributable to non-controlling interests
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6,807 | 2,659 | (2,051) | ||||||||||||||
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Provision for income taxes
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14,212 | 10,826 | 7,993 | ||||||||||||||
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Interest income, net
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(9,703) | (10,888) | (8,372) | ||||||||||||||
| Depreciation and amortization | 9,907 | 7,268 | 6,533 | ||||||||||||||
| Stock-based compensation | 71,068 | 56,680 | 37,098 | ||||||||||||||
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Other expenses(1)
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10,339 | 9,525 | 7,948 | ||||||||||||||
| Adjusted EBITDA | $ | 125,549 | $ | 90,455 | $ | 72,228 | |||||||||||
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(1) Other expenses include employer taxes on equity vesting and exercises, severance and retention costs and certain other non-recurring costs.
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Components of Results of Operations
Revenue
As noted above under "Our Revenue," revenue is earned in three main categories: FFS revenue, VBC revenue and other revenue.
Operating Expenses
Provider expenses
Provider expenses are amounts accrued or payments made to physicians, hospitals and other service providers, including Privia physicians, their related physician practices, and providers we have contracted with through payer partners. Those costs include physician guaranteed payments and other required distributions pursuant to the service agreements as well as medical claims costs for services provided to attributed beneficiaries under at-risk Capitated revenue arrangements for which we are financially responsible whether paid directly by us or indirectly by payers with whom we have contracted. Provider expenses are recognized in the period in which services are provided.
Cost of platform
Third-party EMR and practice management software expenses are paid on a percentage of revenue basis, while we pay most of the costs of our platform on a variable basis related to the number of implemented physicians we service. In addition, expenses contain stock-based compensation related to employees that provide Cost of platform services, but exclude any depreciation and amortization expense. As we continue to grow, we expect the cost of platform to continue to grow at a rate slower than the revenue growth rate.
Sales and marketing
Sales and marketing expenses consist of employee-related expenses, including salaries, commissions, stock-based compensation, and employee benefits costs, for all of our employees engaged in marketing, sales, community outreach, and sales support. In addition, sales and marketing expenses also include central and community-based advertising to generate greater awareness, engagement, and retention among our current and prospective patients as well as the infrastructure required to support all of our marketing efforts.
General and administrative
Corporate, general and administrative expenses include employee-related expenses, including salaries and related costs and stock-based compensation, technology infrastructure, occupancy costs, operations, clinical and quality support, finance, legal, human resources, and development departments.
Depreciation and amortization expense
Depreciation and amortization expenses consists of definitive-lived intangible asset amortization and depreciation of our fixed assets. We do not allocate depreciation and amortization expenses to other operating expense categories within our financial statements.
Interest income, net
Interest income consists primarily of interest earned by the Company on bank balances, partially offset by interest expense (including deferred financing costs) in connection with our borrowings. See "Liquidity and Capital Resources."
Results of Operations
Year Ended December 31, 2025 Compared To Year Ended December 31, 2024
The following table sets forth our consolidated statements of operations data for the years ended December 31, 2025 and 2024. A detailed discussion of our 2023 financial condition and results of operations, and of 2024 year-over-year changes as compared to 2023, can be found in "Item 7-Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K for the year ended December 31, 2024, which was filed with the SEC on February 27, 2025.
| For the Years Ended December 31, | ||||||||||||||||||||||||||
| 2025 | 2024 | Change ($) | Change (%) | |||||||||||||||||||||||
| (in thousands) | ||||||||||||||||||||||||||
| Revenue | $ | 2,122,842 | $ | 1,736,390 | $ | 386,452 | 22.3 | % | ||||||||||||||||||
| Operating expenses: | ||||||||||||||||||||||||||
| Provider expense | 1,660,680 | 1,332,537 | 328,143 | 24.6 | % | |||||||||||||||||||||
| Cost of platform | 252,732 | 227,000 | 25,732 | 11.3 | % | |||||||||||||||||||||
| Sales and marketing | 27,136 | 26,446 | 690 | 2.6 | % | |||||||||||||||||||||
| General and administrative | 138,152 | 126,157 | 11,995 | 9.5 | % | |||||||||||||||||||||
| Depreciation and amortization | 9,907 | 7,268 | 2,639 | 36.3 | % | |||||||||||||||||||||
| Total operating expenses | 2,088,607 | 1,719,408 | 369,199 | 21.5 | % | |||||||||||||||||||||
|
Operating income
|
34,235 | 16,982 | 17,253 | 101.6 | % | |||||||||||||||||||||
| Interest income, net | 9,703 | 10,888 | (1,185) | (10.9) | % | |||||||||||||||||||||
|
Income before provision for income taxes
|
43,938 | 27,870 | 16,068 | 57.7 | % | |||||||||||||||||||||
|
Provision for income taxes
|
14,212 | 10,826 | 3,386 | 31.3 | % | |||||||||||||||||||||
|
Net income
|
29,726 | 17,044 | 12,682 | 74.4 | % | |||||||||||||||||||||
|
Less: Net income attributable to non-controlling interests
|
6,807 | 2,659 | 4,148 | 156.0 | % | |||||||||||||||||||||
|
Net income attributable to Privia Health Group, Inc.
|
$ | 22,919 | $ | 14,385 | $ | 8,534 | 59.3 | % | ||||||||||||||||||
Revenue
The following table presents our revenues disaggregated by source:
| For the Years Ended December 31, | |||||||||||||||||||||||
| (Dollars in Thousands) | 2025 | 2024 | Change ($) | Change (%) | |||||||||||||||||||
| FFS-patient care | $ | 1,360,235 | $ | 1,146,156 | $ | 214,079 | 18.7 | % | |||||||||||||||
| FFS-administrative services | 137,017 | 125,431 | 11,586 | 9.2 | % | ||||||||||||||||||
| Capitated revenue | 308,458 | 212,987 | 95,471 | 44.8 | % | ||||||||||||||||||
| Shared savings | 234,815 | 179,202 | 55,613 | 31.0 | % | ||||||||||||||||||
| Care management fees (PMPM) | 73,138 | 64,066 | 9,072 | 14.2 | % | ||||||||||||||||||
| Other revenue | 9,179 | 8,548 | 631 | 7.4 | % | ||||||||||||||||||
| Total Revenue | $ | 2,122,842 | $ | 1,736,390 | $ | 386,452 | 22.3 | % | |||||||||||||||
Revenue was $2.12 billion for the year ended December 31, 2025, an increase from $1.74 billion for the year ended December 31, 2024. Key drivers of this revenue growth include: FFS-patient care revenue and FFS-administrative services, which increased $214.1 million and $11.6 million, primarily attributable to the addition of new providers and an increase in visit volume; an increase in capitated revenue of $95.5 million primarily due to an increase in Attributed Lives related to capitated arrangements, improved contract terms and an increase in estimated per capita revenue; shared savings revenue, which increased $55.6 million primarily due to more Attributed Lives in Medicare programs as well as continued strong estimated performance in our value based care programs in the aggregate; and an increase in PMPM revenue of $9.1 million primarily due to increased Attributed Lives.
Operating Expenses
| For the Years Ended December 31, | |||||||||||||||||||||||
| (Dollars in Thousands) | 2025 | 2024 | Change ($) | Change (%) | |||||||||||||||||||
| Operating Expenses: | |||||||||||||||||||||||
| Provider expense | $ | 1,660,680 | $ | 1,332,537 | $ | 328,143 | 24.6 | % | |||||||||||||||
| Cost of platform | 252,732 | 227,000 | 25,732 | 11.3 | % | ||||||||||||||||||
| Sales and marketing | 27,136 | 26,446 | 690 | 2.6 | % | ||||||||||||||||||
| General and administrative | 138,152 | 126,157 | 11,995 | 9.5 | % | ||||||||||||||||||
| Depreciation and amortization expense | 9,907 | 7,268 | 2,639 | 36.3 | % | ||||||||||||||||||
| Total operating expenses | $ | 2,088,607 | $ | 1,719,408 | $ | 369,199 | 21.5 | % | |||||||||||||||
Provider expense
Provider expense was $1.66 billion for the year ended December 31, 2025, an increase from $1.33 billion during the same period in 2024. This increase was driven primarily by an increase in provider expenses associated with higher FFS-patient care revenue and growth in Implemented Providers.
Cost of platform
Cost of platform expense was $252.7 million for the year ended December 31, 2025, an increase from $227.0 million during the same period in 2024. The increase was driven by an increase in salaries and benefits of $11.4 million, an increase in stock-based compensation expense of $6.6 million, primarily related to an increase in stock-based awards granted in 2025 compared to 2024, and an increase of $6.1 million in professional services primarily due to continued growth in Implemented Providers and market expansion.
Sales and marketing
Sales and marketing expense was $27.1 million for the year ended December 31, 2025, an increase from $26.4 million during the same period in 2024. The increase was driven primarily by an increase in stock-based compensation expense of $1.3 million partially offset by immaterial cost reductions in other sales and marketing expenses.
General and administrative
General and administrative expenses were $138.2 million for the year ended December 31, 2025, an increase from $126.2 million during the same period in 2024. The increase was driven by the increase of $6.5 million in stock-based compensation expense, an increase in salaries and benefits of $3.6 million and an increase in professional services of $2.4 million related to additional consulting services.
Depreciation and amortization expense
Depreciation and amortization expenses were $9.9 million for the year ended December 31, 2025, compared to $7.3 million during the same period in 2024. This increase was primarily driven by definitive-lived intangible asset amortization associated with business combinations.
Interest income, net
Interest income, net was $9.7 million for the year ended December 31, 2025, compared to $10.9 million during the same period in 2024 primarily driven by lower cash and cash equivalents during the comparative periods. Interest income is primarily based on the cash balance held in interest bearing accounts.
Provision for income taxes
The provision for income taxes was $14.2 million for the year ended December 31, 2025, compared to $10.8 million during the comparative period in 2024. The provision for income taxes increased as a result of higher income before income taxes.
Net income attributable to non-controlling interests
Net income attributable to non-controlling interests was $6.8 million for the year ended December 31, 2025, an increase compared to $2.7 million during the comparative period in 2024. The change is primarily related to continued growth in existing markets.
Liquidity and Capital Resources
General
To date, we have financed our operations principally through sale of our equity, payments received from various payers and through borrowings under the Credit Facilities. As of December 31, 2025, we had cash and cash equivalents of $479.7 million. Our cash and cash equivalents primarily consist of highly liquid investments in money market funds and cash.
We believe that our cash and cash equivalents, together with cash flows from operations, will provide adequate resources to fund our short-term and long-term operating and capital needs. Our assessment of the period of time through which our financial resources will be adequate to support our operations is a forward-looking statement and involves risks and uncertainties. Our actual results could vary because of, and our future capital requirements will depend on many factors, including growth rate, and the timing and extent of spending to increase our sales and marketing activities. We may in the future enter into arrangements to acquire or invest in complementary businesses, services and technologies, including intellectual property rights. We have based this estimate on assumptions that may prove to be wrong, and we could use our available capital resources sooner than we currently expect. We may in the future seek funding for long-term capital structure flexibility, and may be required to seek additional equity or debt financing. In the event that additional financing is required from outside sources, we may not be able to raise it on terms acceptable to us or at all. If we are unable to raise additional capital when desired, or if we cannot expand our operations or otherwise capitalize on our business opportunities because we lack sufficient capital, our business, results of operations, and financial condition may be adversely affected.
Indebtedness
See Note 9. "Debt" for discussion on our Credit Facilities.
Cash Flows Overview
Our cash requirements within the next twelve months include provider liabilities, accounts payable and accrued liabilities, purchase commitments and other obligations. We expect the cash required to meet these obligations to be generated primarily through cash flows from current operations; cash available for general corporate use; and the realization of current assets, such as accounts receivable. Based on current and anticipated levels of operations, we believe that cash provided by operating activities, together with the available cash on hand at December 31, 2025, will be sufficient to meet anticipated cash requirements for both the short term (next 12 months) and long term (beyond 12 months).
The following table presents a summary of our consolidated cash flows from operating, investing and financing activities for the periods indicated:
| For the Years Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| (in thousands) | |||||||||||||||||
|
Consolidated Statements of Cash Flows Data:
|
|||||||||||||||||
| Net cash provided by operating activities | $ | 163,404 | $ | 109,282 | $ | 80,785 | |||||||||||
| Net cash used in investing activities | (181,570) | (11,978) | (42,971) | ||||||||||||||
| Net cash provided by financing activities | 6,702 | 4,334 | 3,705 | ||||||||||||||
| Net (decrease) increase in cash and cash equivalents | $ | (11,464) | $ | 101,638 | $ | 41,519 | |||||||||||
Operating Activities
Net cash provided by operating activities was $163.4 million for the year ended December 31, 2025 compared to $109.3 million for the comparative period in 2024 primarily as a result of:
•An increase in net income of $12.7 million compared to the same period in 2024. Net income was $29.7 million during the year ended December 31, 2025 compared to the income of $17.0 million during the year ended December 31, 2024.
•An increase of $65.6 million in Provider Liability during the year ended December 31, 2025 compared to an increase of $32.9 million during the same period in 2024, a difference of $32.7 million. The increase is primarily due to an increase in Implemented Providers and an increase in provider expenses related to the increase in FFS and VBC revenue.
•An increase of $38.3 million in accounts receivable and prepaid and other current assets for the year ended December 31, 2025 compared to the same period in 2024 of $28.8 million, a difference of $9.5 million. The change is primarily due to an increase in FFS and VBC revenue.
Investing Activities
Net cash used in investing activities was $181.6 million for the year ended December 31, 2025 compared to $12.0 million during the same period in 2024, primarily due to business acquisitions in 2025.
Financing Activities
Net cash provided by financing activities was $6.7 million for the year ended December 31, 2025, compared to $4.3 million for the same period in 2024. This increase is primarily due to an increase in proceeds from stock options exercised during the year ended December 31, 2025.
Comparison of Fiscal 2024 to Fiscal 2023
A detailed discussion of our 2023 to 2024 operations and liquidity and capital resources has been omitted from this Form 10-K, but may be found in "Item 7-Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K for the year ended December 31, 2024, which was filed with the SEC on February 27, 2025.
Contractual Obligations, Commitments and Contingencies
Operating Leases. We lease office space under various operating lease agreements. The initial terms of these leases range from 3 to 9 years and generally provide for periodic rent increases, renewal, and termination operations. Total rent expense under operating leases was $3.2 million for the year ended December 31, 2025, $2.8 million for the year ended December 31, 2024, and $2.7 million for the year ended December 31, 2023.
Off Balance Sheet Obligations. We do not have any off-balance sheet arrangements as of December 31, 2025.
Commitments and Contingencies. See Note 13. "Commitments and Contingencies" for further discussion on our commitments and contingencies.
Critical Accounting Policies and Estimates
Our consolidated financial statements have been prepared in accordance with U.S. GAAP. The preparation of these consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, expenses, and related disclosures. We base our estimates on historical experience and on various other factors that we believe are reasonable under the circumstances which we evaluate on an ongoing basis. Actual results may differ from these estimates. To the extent that there are material differences between these estimates and our actual results, our future financial statements will be affected.
While our significant accounting policies are described in greater detail in Note 1. "Organization and Summary of Significant Accounting Policies," to our consolidated financial statements included elsewhere in this Annual Report, we believe that the following accounting policies are those most critical to the judgments and estimates used in the preparation of our consolidated financial statements.
Business Combinations
Accounting for business combinations requires us to allocate the fair value of purchase considerations to the tangible assets acquired, liabilities assumed, and intangible assets acquired based on their estimated fair values, which were determined primarily using the income method. The excess of the fair value of purchase consideration over the fair values of these identified assets and liabilities is recorded as goodwill. Such valuations require us to make significant estimates and assumptions, especially at the acquisition date with respect to intangible assets. Significant estimates in valuing certain intangible assets include, but are not limited to, revenue growth and attrition rates, medical claims expense, cost of care expenses, operating expenses, discount rate, contract terms and useful life from acquired assets.
Our estimates of fair value are based upon assumptions believed to be reasonable, but which are inherently uncertain and unpredictable and, as a result, actual results may differ from estimates. Allocation of purchase consideration to identifiable assets and liabilities affects our amortization expense, as acquired finite-lived intangible assets are amortized over the useful life, whereas any indefinite lived intangible assets, including goodwill, are not amortized. During the measurement period, which is not to exceed one year from the acquisition date, we may record adjustments to the assets acquired and liabilities assumed, with the corresponding offset to goodwill. Upon the conclusion of the measurement period, any subsequent adjustments are recorded to earnings. For additional details, refer to Note 3. "Business Combinations."
Revenue Recognition
Revenue is recognized when a customer obtains control of promised goods or services, in an amount that reflects the consideration which the entity expects to receive in exchange for those goods or services. Revenue recognition is determined through the following five steps:
i.Identify the contract(s) with a customer;
ii.Identify the performance obligations in the contract;
iii.Determine the transaction price;
iv.Allocate the transaction price to the performance obligations in the contract; and
v.Recognize revenue as the entity satisfies a performance obligation.
FFS revenue
FFS-patient care
Our FFS-patient care revenue is generated primarily from providing healthcare services to patients. Providing medical services to patients represents our performance obligation under third-party payer agreements, and accordingly, the transaction price is allocated entirely to that one performance obligation. We recognize revenue as services are rendered and approved by the Privia Providers, which is typically a single day for each service. We receive payment for services from third-party payers, as well as from patients who have health insurance, but are also financially responsible for some or all of the service in the form of co-pays, coinsurance or deductibles. Patients who do not have health insurance are required to pay for their services in full.
FFS-patient care revenue is reported net of provisions for contractual allowances from third-party payers and patients. We have certain agreements with third-party payers that provide for reimbursement at amounts different from our standard billing rates. The differences between the estimated reimbursement rates and the standard billing rates are accounted for as contractual adjustments, which are deducted from gross revenue to arrive at FFS-patient care revenue. We determine our estimate of implicit price concessions based on our historical collection experience with classes of patients using a portfolio approach as a practical expedient to account for patient contracts as collective groups rather than individually. The financial statement effects of using this practical expedient are not materially different from an individual contract approach. Subsequent changes to the estimate of the transaction price (determined on a portfolio basis when applicable) are generally recorded as adjustments to revenue in the period of the change. For the years ended December 31, 2025, 2024, and 2023, changes in our estimates of implicit price concessions and contractual adjustments to expected payments for performance obligations satisfied in prior periods were not significant.
FFS-administrative services
The Company's FFS-administrative services business provides administration and management services pursuant to MSAs with Non-Owned Medical Groups.
The Company's MSAs with the Non-Owned Medical Groups range from 5 -20 years in duration and outline the terms and conditions of the administration and management services to be provided, which includes RCM services such as billings and collections, as well as other services, including, but not limited to, payer contracting, information technology services and accounting and treasury services.
In certain MSAs, the Company is paid administrative fees equal to the cost of supplying certain services as outlined in the MSAs, and if applicable, a margin is added to the cost of certain services. The margin, if applicable, is fixed based on the MSAs; however, the cost of supplying certain services can fluctuate during the life of the MSAs.
In certain MSAs, the Company is paid a percentage of net collections. The percentage is fixed per the MSAs; however, the net collections can fluctuate during the life of the contract.
Under each MSA, there is a single performance obligation to provide a series of administration and management services required for the contract period. The Company believes that each Non-Owned Medical Group receives the management and administrative services each day and has concluded that an output method is appropriate for recognizing administrative services revenue.
Administrative fees are reported at the amount that reflects the consideration to which the Company expects to be entitled in exchange for the provision of administration and management services to Non-Owned Medical Groups. In addition, certain of our MSAs include
rebates to the customers in the event that certain conditions occur. The Company estimates the transaction price using the most likely amount methodology and amounts are included in the net transaction price to the extent that it is probable that a significant reversal will not occur once any uncertainty associated with the variable consideration is subsequently resolved. Rebates of $3.5 million have been recorded for the years ended December 31, 2025, $1.8 million for the year ended December 31, 2024 and $2.7 million for the year ended December 31, 2023, respectively.
VBC revenue
The Company's VBC business consists of its clinically integrated networks and ACOs which bring together independent physician practices within our medical groups to focus on sharing data, improving care coordination, and collaborating on initiatives to improve outcomes and lower healthcare spending. The Company has contracts with the U.S. federal government and large payer organizations that are multi-year in nature typically ranging from three to five years and is earned as follows: (1) Capitated revenue (2) on a shared savings basis and (3) Care management fees on a per member per month basis.
Capitated Revenue
Capitated revenue consists of capitation fees earned under contracts with various Medicare Advantage payers ("Payers") in at-risk capitation arrangements. The Company is entitled to monthly fees to provide a defined range of healthcare services for Medicare Advantage health plan members ("attributed beneficiaries" or "attributed lives") attributed to the Company's contracted physicians (typically primary care). Monthly fees are determined as a percentage of the premium payers receive from CMS for these attributed beneficiaries. In at-risk arrangements, the Company generally accepts financial risk for beneficiaries attributed to its contracted physicians and, therefore, is responsible for the cost of contracted healthcare services required by those beneficiaries in accordance with the terms of each agreement. Fees are recorded gross in revenue because the Company is acting as a principal in coordinating and controlling the range of services provided (other than clinical decisions) under its Capitated revenue contracts with payers. Capitated revenue contracts with payers are generally multi-year arrangements and have a single monthly stand ready performance obligation, as defined by ASC Topic 606, Revenue from Contracts with Customers("ASC 606"), to provide all aspects of necessary medical care to members for the contracted period. The Company recognizes revenue in the month in which the eligible beneficiary is entitled to receive healthcare benefits during the contract term.
The transaction price for the Company's capitation contracts is a fixed percentage of premium per attributed life with periodic adjustment, as the monthly fees to which the Company are entitled are subject to periodic adjustments under CMS's risk adjustment payment methodology. CMS deploys a risk adjustment model that determines premiums paid to all payers according to each attributed life's health status and certain demographic factors. Under this risk adjustment methodology, CMS calculates the risk adjusted premium payment using diagnosis data from various settings. The Company and healthcare providers collect and submit diagnosis data to payers (and ultimately to CMS) to be utilized in the determination of risk adjustments and such data is used by the Company to estimate any adjustments to the Capitated revenue earned that may increase or decrease revenue in subsequent periods pursuant to contractual terms. Such adjustments are estimated using the most likely amount methodology and amounts are only included in revenue to the extent that it is probable that a significant reversal of cumulative revenue will not occur once any uncertainty is resolved. Capitated revenue fees are also subject to adjustment for incentives or penalties based on the achievement of certain quality metrics defined in the Company's contracts with payers. The Company recognizes incentive revenue as earned using the most likely amount methodology and only to the extent that it is probable that a significant reversal of cumulative revenue will not occur once any uncertainty is resolved.
Neither the Company nor any of its affiliates are a registered insurance company as state law in the states in which we operate do not require such registration for risk bearing providers.
Shared Savings
Under the shared savings basis, the Company may earn financial incentives for increasing accountability over the cost, quality and efficiency of the care provided to attributed members. Incentive payments are earned when, for a given twelve-month measurement period, the Company meets or exceeds quality and utilization standards established by the payer and achieves savings on medical costs for the population of attributed members. To determine the amount of shared savings payments, payers evaluate the Company's performance during the measurement period using the agreed-upon benchmarks, metrics and performance criteria.
The Company estimates the transaction price by analyzing performance during the relevant time period in connection with the contractually defined benchmarks, metrics, performance criteria, inflation trends, risk adjustment factors, attribution criteria and other factors. Revenue is recognized only when the price can be reasonably estimated and it is probable that a significant reversal will not occur once any uncertainty associated with the variable consideration is subsequently resolved. Shared savings revenue is recorded in the period under which when the underlying services are provided during the pre-set twelve-month measurement period.
Care Management Fees ("PMPM")
Under the PMPM basis, the Company is paid a PMPM rate for each covered individual who is attributed by the payer to the Company ("attributed members"). The Company records revenue in the month for which the PMPM rate applies and the member was attributed.
The PMPM rate is based on a predetermined monthly contractual rate for each attributed member regardless of the volume of care coordination services provided under the contracts with the payers. The PMPM rate varies based on payer and product.
Revenue is reported at the amount that reflects the consideration to which the Company expects to be entitled in exchange for the provision of care coordination services to its population of attributed members. The Company's contracts with payers have a single performance obligation that consists of a series of services for the provision of care coordination services for the population of attributed members for the duration of the contract. The transaction price for the contracts is entirely variable, as it is primarily based on a PMPM rate on monthly attributed membership, which can fluctuate during the life of the contract.
The majority of the Company's net PMPM transaction price relates specifically to its efforts to transfer the service for a distinct increment of the series and is recognized as revenue in the month in which attributed members are entitled to care coordination services.
Other Revenue
The remainder of our revenue is derived from leveraging our existing base of providers and patients to deliver value-oriented services such as concierge services, virtual visits, virtual scribes and coding, clinical trials, behavioral health management, and partnerships with self-insured employers to offer direct primary care to their employees.
Provider Liability
Provider Liability represents costs payable to physicians, hospitals and other ancillary providers, including both Privia Physicians, their related practices, and providers the Company has contracted with through payer partners. Those costs include amounts that have not yet been paid for physician guaranteed payments and other required distributions pursuant to the service agreements as well as medical claims costs for services provided to attributed beneficiaries for which the Company is financially responsible under at-risk capitated revenue arrangements whether paid directly by the Company or indirectly by payers with whom the Company has contracted.
Stock-Based Compensation
The Company accounts for share-based compensation in accordance with the expense recognition provisions of ASC 718, Compensation-Stock Compensation("ASC 718"), which requires the issuer to recognize compensation expense for all share-based payments made to employees based on the fair value of the share-based payment at the date of grant. Up until April 2021, the estimated fair value of share-based payments granted to the Company's employees was determined using the Monte-Carlo option pricing model, which requires inputs based on certain subjective assumptions, including expected term of the option, expected stock price volatility, the risk free interest rate for a period that approximates the expected term of the option and the Company's expected dividend yield (See Note 11. "Stockholders' Equity"). The share-based payments granted or modified prior to April 2021 to employees of the Company do not have quoted market prices, and changes in subjective input assumptions can materially affect the fair value estimate. Since April 2021, the Company has estimated the fair value of the options granted to Company's employees and contractors using the Black-Scholes option-pricing model. Option valuation models require several inputs, such as the expected stock price volatility, the fair value of the stock, the risk free rate, the expected term of the award and the dividend yield. The Company records share-based compensation forfeitures as a reversal of previously recognized compensation expense as the forfeitures occur. For additional details refer to Note 11. "Stockholders' Equity."
The Company issues certain performance stock units ("PSUs"). The awards will vest based on the satisfaction of certain service conditions, performance-based conditions, and market conditions. The Company has identified certain performance metrics associated with these awards that are measured on a cumulative basis over a three-year performance period. The targets for the first year of the PSU performance period are established at the time of grant. Targets for subsequent years' PSU performance periods are set annually concurrently with granting and establishing the targets for subsequent years' PSU grants. The Company has determined that the service inception date precedes the grant date for these awards as (a) the awards were authorized prior to establishing an accounting grant date, (b) the recipients began providing services prior to the grant date, and (c) there are performance conditions that, if not met by the accounting grant date, will result in the forfeiture of the awards. As the service inception date precedes the accounting grant date, the Company recognizes stock-based compensation expense over the requisite service period based on the estimated fair value at each reporting date.
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