P3 Health (PIII) Q3 2025: $100M EBITDA Improvement Anchors Path to 2026 Profitability

November 14, 2025 | By EarningsIQ Research

P3 Health’s disciplined operational overhaul yielded a $100 million normalized EBITDA improvement year over year, despite persistent headwinds from settlements and non-core markets. Stabilized medical cost trends and tighter provider alignment are now embedded, establishing a credible baseline for targeted 2026 profitability and margin expansion. With strategic focus on high-performing “Tier 1” providers and a maturing care enablement model, P3 enters next year with improved visibility, though guidance reset signals continued execution risk.

Summary

• Margin Expansion Playbook: Normalized EBITDA improved by $100 million, underpinned by cost control and provider rationalization.
• Care Enablement Model Maturation: Stable medical cost trend and deepening Tier 1 provider alignment drive operational predictability.
• 2026 Profitability Target: Management’s $120-170 million EBITDA opportunity hinges on execution against identified levers.

Performance Analysis

P3 Health’s Q3 2025 results reinforce a business in operational transition, with normalized adjusted EBITDA loss narrowing to approximately $70 million year to date, a significant improvement from the prior year’s $191 million loss. This turnaround reflects rigorous cost discipline, a 33% reduction in operating expenses, and embedded process enhancements that have stabilized core financial metrics. Capitated revenue per member per month (PMPM) grew 6.4% over the 2024 average, supported by improved documentation and contract renegotiations, though headline results were marred by a $24 million unfavorable settlement adjustment that impacted quarterly reported revenue and margin.

Medical margin, a core barometer of care model efficacy, reached $4.4 million for the quarter—up sharply from $0.5 million last year— but this was partially offset by the prior-year settlement drag. Importantly, the normalized medical cost trend remained essentially flat year over year, a notable achievement given broader industry inflation. Membership held steady at 116,000, with the mix shifting toward higher-performing providers. The company’s revised full-year adjusted EBITDA guidance of negative $110 million to negative $95 million reflects both the reset baseline and the embedded operational controls.

• Settlement Volatility: A $24 million unfavorable mid-year settlement adjustment clouded headline revenue, but process fixes are now in place to reduce future volatility.
• Cost Structure Realignment: Operating expenses fell by $10.4 million year over year, with resources redeployed to care management and provider support roles.
• Provider Network Rationalization: Exiting underperforming groups and concentrating on Tier 1 providers is elevating both quality and margin.

Despite the reset, the underlying operating model is now more predictable and scalable, positioning P3 to capitalize on macro tailwinds and internal execution levers in 2026.

Executive Commentary

Strategic Positioning

1. Care Enablement Model as Core Differentiator

P3’s care enablement model, which integrates clinical support and analytics directly into provider workflows, is now driving measurable improvements in documentation, quality, and utilization management. This model has enabled flat medical cost trends despite industry-wide inflation, underpinning the company’s improving margin profile.

2. Tier 1 Provider Focus and Network Rationalization

Deepening alignment with “Tier 1” providers—those consistently outperforming on quality and cost— is central to P3’s strategy. Tier 1 providers delivered 17.4% higher STARS gap closure rates, and the company is actively exiting lower-performing groups. This rationalization is expected to yield a more stable and profitable membership base.

3. Contract Hygiene and Payment Integrity

Contract renegotiation and payment integrity initiatives are underway to align terms with delivered value, including targeted payer negotiations and standardization efforts. These actions are designed to reduce future settlement risk and enhance revenue visibility, especially as new joint venture and pipeline members are onboarded.

4. Operational Platform Scalability

With normalized financials and refined processes, P3 is laying the groundwork for scalable growth, targeting $120-170 million in EBITDA improvement through 2026 via a combination of clinical, contractual, and operational levers.

Key Considerations

This quarter marks a clear inflection in P3’s operational maturity, with the business model now showing evidence of both cost discipline and clinical execution. However, the guidance reset and persistent settlement noise highlight the ongoing need for process rigor and risk management as the company scales.

Key Considerations:

• Normalization of Results: Adjusted EBITDA and medical margin figures now exclude prior-year noise, providing a cleaner baseline for future performance assessment.
• Settlement and Data Lag Risk: Recent unfavorable settlements underscore the importance of improved payer data flows and contract terms.
• Provider Mix Stability: Ongoing network rationalization is critical to sustaining margin gains and reducing operational drag from non-core assets.
• Pipeline Visibility: Addition of 13,000 ACO members via joint venture and 25,000 Medicare Advantage lives in 2026 pipeline offer potential for profitable scale, contingent on integration and execution.

Risks

Settlement volatility, payer data lags, and non-core market drag remain material execution risks, as evidenced by recent guidance resets and unfavorable mid-year adjustments. Contract renegotiation outcomes and the pace of provider network rationalization will determine whether margin expansion targets are met. Macro headwinds, such as changes in Medicare Advantage rates or regulatory shifts, could further impact revenue visibility and cost containment efforts.

Forward Outlook

For Q4 2025, P3 guided to:

• Adjusted EBITDA loss in the range of $110 million to $95 million for the full year
• Stable medical cost trend and continued provider alignment improvements

For full-year 2026, management highlighted:

• Targeted $120-170 million in EBITDA expansion opportunities
• Profitability driven by care model maturation, contract improvements, and favorable macro rate environment

Leadership emphasized that process improvements and network discipline are now embedded, positioning the company for meaningful margin expansion if execution remains on track.

• Benefit design and rate tailwinds from CMS are expected to support baseline revenue growth
• Integration of new members and continued cost control are key to hitting 2026 targets

Takeaways

P3 Health’s Q3 results mark a pivotal shift from stabilization to execution-driven growth, with cost discipline and provider alignment at the forefront. The company’s ability to deliver a $100 million normalized EBITDA improvement year over year, despite settlement headwinds, establishes a credible baseline for 2026 profitability ambitions.

• Margin Foundation Set: Normalized results provide a more accurate view of operational progress, with cost and provider levers now institutionalized.
• Execution Still Critical: Settlement volatility and non-core asset drag highlight the importance of ongoing process rigor and network rationalization.
• 2026 as Proof Point: Investors should watch for sustained medical cost control, successful integration of new members, and further contract improvements as key drivers of next year’s profitability inflection.

Conclusion

P3 Health enters 2026 with its most stable foundation to date, anchored by operational discipline and a maturing care enablement model. While risks remain from settlement timing and non-core exposures, the company’s strategic focus on high-performing providers and cost control positions it for a credible run at profitability next year.

Industry Read-Through

P3’s experience underscores the importance of operational discipline and provider network optimization in value-based care. The company’s ability to flatten medical cost trends and embed process rigor offers a template for peers facing similar margin pressures from settlement volatility and payer complexity. As Medicare Advantage rate environments improve, success will hinge on execution against contract, data, and provider levers, with industry participants needing to prioritize scalable, predictable care models to capture emerging profitability opportunities.

PIII Healthcare Managed Care Value-based Care Provider Networks Medical Margin EBITDA Medicare Advantage