When I sit down with the founder of a company that sells care to employers on a PEPM price, the conversation usually starts with covered lives and run-rate revenue, because those are the numbers on the investor update, and I try to steer us toward one line that rarely makes the deck – how many visits per member per month the price assumed, against how many members actually make.
Here's how I'd walk a founder through it, using a working sample dashboard we built for a fictional company called Tarnwell Health. Every figure is invented, but the shape is real: a seven-year-old, venture-backed company running worksite musculoskeletal and occupational health programs for food processors, distribution centers, manufacturers and municipalities in the Mountain West, with on-site clinics, shared near-site hubs and virtual care. A switch at the top flips the next twelve months between utilization as priced and utilization as members use it, and that switch is most of the conversation.
On the investor update, Tarnwell looks like a growth story. It has $16.8M of run-rate revenue on 68,696 covered lives across 42 employers, up 31% in a year, and five more employers signed and waiting to go live.
Every one of those contracts was priced on 0.050 visits per member per month. Over the last twelve months members made 0.076, about 52% more care than the price assumed. A PEPM contract fixes revenue per member for the term, so every extra visit is clinician time nobody is paying for, and that's why gross margin slid from 33.9% two years ago to 32.1% while revenue nearly doubled.
My read: in this business utilization is the cost line, and it belongs on page one of the board pack next to lives and revenue.
A blended gross margin hides the spread underneath it. The employer table allocates each care site's clinician cost by visit load, plus hub rent, supplies, the virtual platform and clinical operations, and the contract costs add back up to the P&L every month.
Sort by margin instead of revenue and the picture changes. Eight of 42 contracts run under 25%, carrying $4.22M of revenue. Four of them are large on-site clinics, the logos on the sales deck, signed early at a discount with three-year price locks, at sites where members make 0.075 to 0.092 visits a month. They earn 13% to 16%.
My read: each of those four needs a renewal plan written now, with its own margin in it – the first one renews in November, and the last is locked until early 2028.
The scatter puts every mature contract on one chart, utilization against revenue per member, with the line where a contract earns 40%. At an on-site clinic an in-person visit costs about $137 of clinician time and supplies, so each extra 0.01 visits per member per month adds about $1.26 of cost per member, against a core price near $18.70. Price on 0.050, serve 0.076, and roughly $3.25 a member of planned margin is gone.
The dots that drift right are plants and distribution centers, where physical work means more strains and more visits. Utilization also climbs as a program matures and members learn to trust it, which is success clinically and a margin problem commercially.
My read: price by industry and delivery model, and write a utilization band into the contract, so a renewal can reprice on evidence instead of on a negotiation.
This is where the switch earns its place. The 2027 budget was built on the priced utilization – 50.8% gross margin, $3.60M of EBITDA, and four fewer clinicians than the 55 on staff today. Flip to utilization as members use it, and the same year is 36.1%, $0.61M of EBITDA, 73 clinicians and $3.0M less cash at year end.
The strip under the switch follows one change from end to end: visits per member, visits a month, clinicians needed, staffing cost per member, gross profit per member, gross margin and EBITDA, ending on whether the budget holds. Push utilization 10% higher than today's rate and EBITDA turns negative.
The staffing chart adds a second finding about density. Two of Tarnwell's four hubs each serve a single small employer, so a part-time clinician and the rent sit on a few hundred lives, and both contracts lose money.
My read: hire against the as-used line, because clinicians take months to recruit and credential, and don't open a hub until the region has the members to fill it.
Retention is fine and not great. Of the employers live a year ago, 90.9% are still live, and net revenue retention is 98.6%, so growth inside the book roughly replaces what leaves. In the next twelve months, 37 contracts carrying $12.5M of run-rate revenue come up for renewal, and three of the four underwater large clinics are among them.
The renewal table shows the price each one would need to reach 40% at its own utilization, which comes to 39% to 45% for the large clinics. The repricing switch in the rail caps the increase at 15% and adds an illustrative churn response. It moves gross margin from 36.1% to 37.1% and more than doubles the lives at risk.
My read: repricing alone won't close that gap. The real conversation is scope, a utilization band, and whether a clinic is the right delivery model for that site.
Median time from signed contract to go-live is four months: three for small employers, five for large. Five employers worth $2.36M of ARR are signed and not yet billing.
A large contract costs about $117K to win, takes five months to go live, then earns $3.16 a member a month after broker commission, against $10.84 for a small employer. So a large deal pays back in 14.1 months from signing and a small one in 6.6, and every month of implementation slip adds a month.
My read: report signed-not-live as its own number, and price large deals on what they cost to deliver rather than on the logo.
Over three years revenue per member rose from $19.41 to $20.40 a month, and gross profit per member only from $6.62 to $7.10, so about half of every added dollar of price went to clinician time. The add-ons aren't equal either. Virtual behavioral health earns about 55% because sessions are bought by the unit. The injury-prevention program earns about 15%, because it runs on the same clinicians who are already stretched.
My read: push behavioral health as the upsell, and price injury prevention on the clinician hours it really takes.
Founders in this category like ARR multiples. Buyers and growth investors in care delivery tend to look through the ARR to the gross profit, because every dollar of revenue carries a clinician behind it. At an illustrative 6.0x of run-rate gross profit, the budget implies $74.4M and utilization as members use it implies $52.7M, a $21.7M gap. If a sale or recapitalization is on the horizon, the exit readiness demo walks through the rest.
My read: a contract book where every employer's margin is known, and the underwater ones already have a plan, holds its value in diligence better than one that looks better and has to be re-cut.
Every card, chart and table has a + Deck button. Use the employer economics pack loads the set I'd bring to a board or investor meeting, ending on a next-steps slide, as an editable PowerPoint. The speaker notes record which utilization view and levers were active.
My read: walking into the board meeting with both budget lines already on the slide changes who's asking the questions.
We connect read-only to your accounting, eligibility and visit data, rebuild every contract's margin from your own lives, visits and staffing, and test the utilization each price assumed against what members actually do. Then we put the contract book in the form your board, your lender and your next investor read, and refresh it after every month-end close, so utilization drift shows up before the renewal and not after it.
That's CFOptimize – accelerate your growth, built for care companies that sell on a per-employee price. If you'd like to see it on your own contracts, grab time with me and we'll walk through your book together.
Mark
Tarnwell Health is a fictional company and every figure in the dashboard and in this post is invented for illustration. Nothing here is drawn from any client's books. The priced utilization, clinician capacity, churn response and multiples are illustrative assumptions, not quotes or market data, and nothing here is clinical, actuarial, tax, legal or investment advice.