P3 Health Partners (NASDAQ:PIII) reported a stronger-than-expected first quarter and raised its full-year 2026 adjusted EBITDA outlook, as executives said contract restructuring, medical cost controls and a more focused market strategy are beginning to translate into improved profitability.
Chief Executive Officer Aric Coffman said the quarter represented “an inflection point for the business” after two years of efforts to reposition the company through contract restructuring, market optimization, operational redesign and tighter alignment between clinical and financial operations.
Company Raises 2026 Outlook
P3 revised its full-year 2026 adjusted EBITDA guidance to a range of $20 million to $60 million, with a midpoint of $40 million. Pedersen said the updated outlook reflects both the favorable prior-year development and payer settlements recognized in the first quarter, as well as management’s confidence in the company’s operating trajectory for the remainder of the year.
Pedersen said the width of the guidance range reflects normal variability in claims development and full-year cost expectations. He added that results within the range will depend on cost trend development and execution against medical cost initiatives.
Coffman said P3’s improved performance is not being driven by temporary factors, but by operational and strategic actions that are now embedded in the business model. He pointed to three primary drivers: improved payer contract structures, better operational execution and a more favorable Medicare Advantage environment.
Revenue Rises Despite Lower Membership
First-quarter revenue was $386 million, compared with $373 million in the prior-year period. Total at-risk membership at the end of the quarter was approximately 106,000, down from 118,000 in the first quarter of 2025. Pedersen said the decline reflected deliberate portfolio actions taken during 2025, including exits from arrangements that did not meet the company’s economic thresholds.
In addition to at-risk membership, P3 said it manages approximately 29,000 lives under management service arrangements, bringing total lives under management to approximately 135,000. Pedersen said the company plans to provide total managed lives as an additional operating metric going forward.
Per-member funding for the company’s Medicare Advantage population improved approximately 15% year over year, which executives attributed to rate progression, contract restructuring and maturation of burden-of-illness documentation across its networks.
Medical claims expense was $306 million in the quarter. Medical margin was $74 million, and the medical loss ratio was 85.2% when adjusted for the favorable prior-year development and payer settlement items. Adjusted operating expense was $25 million, which Pedersen said was consistent with the cost structure established over the prior 18 months.
Medical Cost Trend Remains a Focus
Coffman said P3’s Medicare Advantage medical expense trend in the first quarter was roughly flat compared with the full-year 2025 medical expense trend. He contrasted that with what he described as broader payer and peer guidance of 7% or higher medical cost trend.
He said the performance reflected tier 1 provider concentration, delegated utilization management, payment integrity and care management. Coffman also noted that the company’s full-year 2025 medical expense trend was under 2% across both Medicare Advantage and ACO populations.
In prepared remarks on clinical performance, the company said Stars performance is tracking ahead of its internal glide path for gap closures across all markets. It also said total members seen across all markets through the first quarter were ahead of plan by about 5%.
The company reported that the share of members attributed to tier 1 providers increased to 62% in 2026 from 56% in the first quarter of 2025. It also highlighted its high-risk program, which includes a 24/7 clinical call center intended to help members access lower-acuity care options before seeking higher-cost care.
Delegation and Payer Contracts Remain Central
Coffman said payer contract restructuring has been a major focus over the past 18 months. He said the company has redesigned how risk, funding and cost accountability are structured across payer and network relationships, including revised risk-sharing structures, improved funding mechanisms and a path to delegation in go-forward contracts.
Delegated functions expanded across 63% of membership in 2026, according to Coffman. He said P3’s model performs best when operational accountability and economic accountability are aligned through delegation, particularly for claims payment, utilization management and care management.
Coffman also discussed P3’s Nebraska partnership, which added 28,600 lives under management. He said implementation remains on track and described the arrangement as an example of disciplined expansion through a structured, delegation-oriented growth pathway.
Balance Sheet Actions Improve Flexibility
P3 ended the quarter with $25 million in cash and equivalents. Pedersen said the company recently completed capital structure transactions intended to improve financial flexibility and address Nasdaq’s minimum stockholders’ equity requirement.
On April 28, approximately $250 million of debt was converted to preferred equity, which Pedersen said materially improved stockholders’ equity, though the transaction was not reflected on the March 31 balance sheet. The company also has an agreement to issue up to $70 million in additional preferred equity, of which $30 million has been issued to date.
During the question-and-answer portion of the call, TD Cowen analyst Ryan Langston asked about utilization trends and Part D exposure. Coffman said P3 has significantly reduced its Part D exposure and is continuing to reduce it in contracts beyond 2026. Pedersen said the company saw a larger reduction across Part B in its book of business when comparing in-year 2025 with in-year 2026, while Part A was predominantly flat.
Langston also asked about the $17 million of favorable prior-year development and payer settlements. Pedersen said about 65% related to favorable prior-year development of reserves and about 35% related to payer settlements. He added that the company remained consistent with its reserve methodology and did not reduce its estimates from an incurred-but-not-reported reserve process perspective.
Coffman closed the call by saying the company’s structural work is producing results, its clinical model and payment integrity processes are differentiators, and the setup for the remainder of 2026 is strong.
About P3 Health Partners (NASDAQ:PIII)
P3 Health Partners is a healthcare technology and services company that delivers data-driven solutions to support health plans in improving quality measures, risk adjustment accuracy and operational efficiency. The company’s platform integrates advanced analytics, reporting capabilities and workflow automation to help clients optimize performance across value-based care programs and regulatory requirements.
The company’s core offerings include quality measurement and reporting for HEDIS, STAR and other performance frameworks, risk adjustment coding and audit services, and population health analytics.
