Operator: Thank you. Our next question comes from the line of Jess Tassan with Piper Sandler. Your line is now open.
Jessica Tassan: Hi, guys. Thank you for taking the question and congrats on the quarter and the guide. So I just wanted to kind of clarify, where are you experiencing new market entry costs in 2024 and then just maybe if you could articulate when you expect to lap those headwinds, I know you said 10 million to 12 million, but can you remind us which states those headwinds are attributable to? And then is the Delaware exit effectively a tailwind to EBITDA on 2024 because you won’t have those new market entry costs associated, assuming you wind down the ACO? Thanks.
Parth Mehrotra: Thanks for the question, Jess. So on the first piece, as we’ve stated consistently, when we enter a new state we first start with the spend at the sales and marketing line. So a lot of the spend in 2023 was building out our sales team and the infrastructure to go add providers in those new states. That continues to be there in 2024. However, once we start implementing providers, some of the spend also increases in the cost of platform. So you’re seeing a majority of the 10 million to 12 million spend is now incremental in the platform cost to support implementing and working with these providers as we ramp them up. So that shift happens and these are the recent new markets, as you would expect, between Connecticut, North and South Carolina, as well as Ohio.
Some of those are still EBITDA negative, and we would expect to breakeven over the next couple of years. Obviously, it depends on the provider growth, but that’s our trajectory. From a Delaware perspective, we did not have any implemented providers. As you recall, this was a care partners deal with a health system. So those providers were not on our platform. So there were not substantial sales and marketing or implementation costs in that market. However, we’ve exited the ACO, and that prevents a negative care margin and EBITDA impact that we would have faced had we not shut down the ACO.
Jessica Tassan: Got it. Thanks.
Operator: Thank you. Our next question comes from the line of Gary Taylor with Cowen. Your line is now open.
Gary Taylor: Hi. Good morning. Most of my question has been answered. Just a couple maybe follow-up. Just following up on Delaware and BB, which when you announced with a couple hundred physicians, is there still some commercial shared savings, risk-taking activity happening in that market or was MSSP the only thing that you were doing with that group?
Parth Mehrotra: Hi, Gary. It was only MSSP. So they were not on our platform. There was no fee-for-service work that we were doing, and there was no other line of business, so only MSSP.
Gary Taylor: Got it. And my other quick one was on the capitated book, prior development swung to a positive $3.3 million in the fourth quarter. First half of the year you had some headwinds from negative development, and I’m just trying to intuitively understand that, is there a quick explanation for that?
David Mountcastle: Yeah. Hey, Gary. This is David Mountcastle. Thanks for the question. Yeah, it’s — the payers go back and sort of reassess the attributive lives from time to time, and that was just some reassessment from one of our payer groups. The overall impact was de minimis when you got the care margin. It essentially took out the same amount of revenue and costs, so no real impact overall. It’s just sort of an attributive life audit from one of our payers.
Gary Taylor: Okay. Thank you.
Operator: Thank you. Our next question comes from the line of Richard Close with Canaccord Genuity. Your line is now open.
Richard Close: Yeah, thanks for the question. I realize that you don’t have new markets in the 2024 guidance, but Parth you mentioned something about disruption in the provider market, and just curious what specifically you’re meaning by that and what that means for Privia as a potential opportunity?
Parth Mehrotra: Yeah, I appreciate the question, Richard. Look, I’ll just keep my comments generic. You’re obviously seeing some Chapter 11 filings. You’re seeing significant earnings revisions and business models that are single-line focused, facing some headwinds in this market environment, both public companies as well as privately held companies. We think there was a lot of capital that chased this pace in the past four or five years, and as things normalize we think there will be opportunities both organically for us, where provider groups may have partnered with an entity that may not be optimal, and they get out of those arrangements and can join the Privia model, which is well-proven and established. And there will be some opportunities from a business development perspective where we could see entities that may be struggling, where there’s opportunity for us to both increase our density in existing states or enter new markets.
At the end of the day, we’re looking to add to our two units, add implemented providers, add attributed lives. And so if we can go get some lives in an arrangement where they may be struggling in the current structure that they might have in the current environment, I think given our strong balance sheet and capital position, we’ll be willing to go at that pretty aggressively to grow.
