P3 Health Partners (NASDAQ:PIII) raised the low end of its 2026 adjusted EBITDA guidance after reporting a third consecutive quarter of positive adjusted earnings, though higher medical costs pressured its underlying third-quarter performance.
The company reported third-quarter adjusted EBITDA of $21 million, compared with an adjusted EBITDA loss of approximately $46 million a year earlier. Revenue rose 15% to approximately $396 million from $345 million, even as at-risk membership declined.
Chief Financial Officer Leif Pedersen said two items accounted for a meaningful part of the quarter’s adjusted earnings: approximately $7 million in favorable medical margin from a 2025 Centers for Medicare & Medicaid Services accountable care organization reconciliation and approximately $5 million in noncash income from a liability release tied to an ACO joint venture.
Excluding those and other prior-period and nonrecurring items, underlying third-quarter adjusted EBITDA was approximately $10 million, Pedersen said. For the first nine months of 2026, reported adjusted EBITDA was $101 million, compared with a loss of approximately $85 million in the same period of 2025. Underlying adjusted EBITDA was approximately $29 million after exclusions.
Medical Costs Rise in Third Quarter
Medical claims expense was approximately $322 million in the third quarter. Although normalized Medicare Advantage Part A and B medical expense for the first nine months remained approximately 0.7% below the full-year 2025 level, costs increased in the third quarter compared with the first half of 2026.
Chief Medical Officer Amir Bacchus said outpatient and professional services were the primary drivers of the increase, with cardiovascular procedures the largest contributor within outpatient care. Inpatient costs tracked in line with expectations, he said.
Asked about geographic trends, Bacchus said some costs appeared to increase more in Nevada than in other markets, particularly for outpatient utilization and professional services. The company is examining those trends.
P3 is using utilization management, care management, payment integrity and medical economics analysis to address the higher costs, executives said. Bacchus said the company’s high-utilizer model identifies members with repeated hospital, emergency and observation visits so clinicians and care managers can intervene earlier.
The company reported third-quarter medical margin of approximately $44 million, or $140 per member per month. Its medical loss ratio was approximately 90.6% after adjustment for favorable prior-period items.
Guidance Raised as Membership Declines
P3 raised the low end of its full-year adjusted EBITDA guidance to $90 million from $80 million, leaving the high end at $110 million. The change lifted the midpoint to $100 million from $95 million.
Pedersen said the outlook includes favorable prior-period items recognized during the year and incorporates the higher medical cost run rate experienced in the third quarter. It also assumes continued execution of the company’s clinical, utilization management, payment integrity and cost initiatives.
At-risk membership ended the quarter at approximately 105,000, down from approximately 116,000 a year earlier. Pedersen attributed the decline primarily to decisions in 2025 and early 2026 to exit or reduce exposure to arrangements that did not meet the company’s economic thresholds.
Capitated revenue per at-risk member rose approximately 18% year over year, reflecting rate progression, improved payer economics and continued maturation of the company’s burden-of-illness documentation performance, Pedersen said. P3 also managed approximately 28,000 lives under management-services arrangements, bringing total lives under management to approximately 133,000.
Adjusted operating expense was approximately $35 million, up from approximately $32 million in the prior quarter, reflecting investment in data and clinical capabilities and Nebraska infrastructure. The company ended the quarter with approximately $44 million in cash and cash equivalents.
Growth and Longer-Term Opportunities
Chief Executive Officer Aric Coffman said P3 is pursuing growth both in existing markets and in new geographies. Its approach to new markets begins with delegated operations for health-plan partners before expanding services and potentially moving to full-risk arrangements.
Coffman pointed to Nebraska, where the company launched in May, as an example. P3 has put utilization management, payment integrity, coding and quality programs in place there, along with clinical programs including Senior Wellness Centers.
The company has identified more than $200 million in potential value creation across clinical execution, payer economics and operating efficiency within its existing membership base, Coffman said. Pedersen cautioned that realization would occur over multiple years and depend on execution, with clinical initiatives representing the largest portion of the opportunity.
Coffman said P3 expects to provide more detail on the timing and earnings contribution of those opportunities early in 2027. He added that the company would have better visibility into next year’s membership after the current open enrollment period.
About P3 Health Partners (NASDAQ:PIII)
P3 Health Partners Inc is a physician-led healthcare company focused on value-based care for Medicare Advantage beneficiaries. The company works with primary care physicians, specialists, health plans and community organizations to coordinate care and improve health outcomes while addressing patients’ medical and social needs.
Its services include primary care support, care coordination, chronic-condition management, preventive care, medication management and patient navigation. P3’s model uses an integrated care team and data-driven clinical programs to help physicians manage the health of senior populations across the care continuum.
Founded in 2017, P3 Health Partners became a publicly traded company in 2021 through a business combination with Foresight Acquisition Corp.
