P3 Health Partners: Turning the Tide in Population Health – Why the Pain Now Means Profit Later

Healthcare investors are no strangers to turbulence, but P3 Health Partners (NASDAQ: PIII) is proving that strategic discipline can turn headwinds into headroom. Despite mixed Q1 2025 results—marked by an 8% decline in average at-risk membership and widening losses—the company’s focus on operational turnaround, payment integrity, and market rationalization positions it as a contrarian buy at current valuations. Here’s why the near-term pain is a setup for outsized gains by 2026.

The Q1 Crossroads: Membership Decline vs. PMPM Growth

P3’s Q1 results highlight a deliberate trade-off: reducing membership to prioritize higher-margin markets while boosting per-member funding. Average at-risk membership fell to 115,900, an 8% drop from 2024’s full-year average, as the company slashed underperforming networks and payers. This “streamlining” isn’t a retreat—it’s a calculated move to focus on markets where its physician-led care model and payment integrity initiatives can shine.

The strategy is paying off in per-member-per-month (PMPM) revenue, which rose 8% year-over-year to $1,063. This growth reflects stronger payment structures and cost efficiencies from programs like enhanced complex care coordination. While total revenue dipped 4% to $373.2 million, the PMPM uplift proves P3 isn’t just chasing volume—it’s optimizing value.

The Hidden EBITDA Catalyst: Payment Integrity and Market Rationalization

P3’s Q1 losses widened—Adjusted EBITDA fell to a $22.2 million deficit—due to a $23 million hit from prior-year claims tied to a single payer. However, these are one-time drags, not recurring issues. Management is aggressively addressing legacy claims through payment integrity initiatives, which use data analytics to root out waste, fraud, and overpayments.

Meanwhile, the company’s network rationalization is bearing fruit: three of four markets now hit breakeven or better. This isn’t luck—it’s a sign that P3’s model works when paired with disciplined partner selection. By exiting unprofitable relationships, P3 is creating a leaner, higher-margin platform.

The Path to 2026: EBITDA Turnaround and Valuation Reset

P3’s 2025 guidance reaffirmed its confidence in long-term gains. Full-year Medical Margin is projected to rise to $174–210 million, implying a PMPM margin of $133–147—nearly triple Q1’s $49. Adjusted EBITDA could swing from a $22.2 million loss to a $5 million profit by year-end.

The key catalyst? Payment integrity and technology investments. By automating claims processing and deepening provider partnerships, P3 aims to slash medical margin volatility. The company also plans to leverage its $40.1 million cash balance (as of Q1) to fuel tech upgrades, further tightening cost controls.

Why Now is the Contrarian Buy Moment

P3’s shares trade at a discount to peers, reflecting fears over its $65 million debt due in 2025 and lingering losses. But this is precisely the contrarian opportunity: the company is executing a turnaround with razor-sharp focus, and the market isn’t pricing in the 2026 inflection point.

Consider this: If P3 meets its 2025 Medical Margin guidance ($210 million at the high end), and improves margins further in 2026, its stock could re-rate sharply. Even a modest EBITDA breakeven in 2026 would put P3 in a league with peers like Molina Healthcare (MOH) or Centene (CNC), which trade at much higher multiples.

Risks, but Manageable Ones

Risks remain. P3’s going-concern uncertainty is real, and payer relationships are fragile. However, its progress in three markets and the $23 million prior-year claims hit (a one-time item) suggest management is proactively mitigating these issues.

Final Verdict: Buy the Dip, Play the Turnaround

P3 Health Partners is in the thick of a brutal but necessary transformation. The Q1 results are messy, but the underlying story is clear: fewer members, higher margins, and a path to EBITDA breakeven by 2026. At current prices, investors are getting a population health innovator at a deep discount to its potential. This is a rare opportunity to buy pain and sell gains—positioning for 2026 and beyond.

Actionable Takeaway: PIII is a speculative play, but its operational discipline and underappreciated EBITDA catalysts make it a must-watch for contrarian investors. The stock’s current dip is a setup for a 2026 breakout—act now before the market catches on.