Q2 2020 Humana Inc Earnings Call
This time all participants are in listen only mode. After the speech your presentation, there will be acumen age section.
A question during the session you're going to press star one on the telephone if you're required to further just Kim Please press star zero.
I would now like to have the conference over to your speakers should be a new Smith Vice President Investor Relations. Please go ahead.
Thank you and good morning.
In a moment, Bruce Broussard, Humana's, President and Chief Executive Officer, and Brian Kane, Chief Financial Officer will discuss our second quarter Twentytwenty results and our updated financial outlook for Twentytwenty.
Following these prepared remarks, well open up the lines for question and answer session with industry analysts.
Our chief legal officer Jobin tariff will also be joining Brewster, Brian for acumen they session.
We encourage the investing public and media to listen to both management's prepared remarks.
And the related culinary with analysts.
This call is being recorded for replay purposes that replay will be available on the Investor Relations page of Humana's website Humana Dot com later today.
Before we begin aren't discussion I need to advise call participants of our cautionary statement.
Certain matters discussed in this conference call our forward looking and involve a number of risks and uncertainties.
Actual results could differ materially.
Investors are advised to meet the detailed risk factors discussed in our latest form 10-K, our other filings with the Securities and Exchange Commission.
Our second quarter 2020, <unk> earnings press release as they relate to forward looking statements into you know in particular, but these forward looking statements could be impacted by weather related to the spread in response to cope with 19 pandemic.
The potential impact to us actions taken by federal state local governments to mitigate the spread of cobot 19, and in turn relax those restrictions.
Actions taken by us to expand benefits from members and provide relief for the health care provider community in connection with cold at night.
Disruption, but our ability to operate our business effectively.
And negative pressure in economic employment in financial markets, among others, all of which creates additional uncertainties and risks for our business.
All forward looking statements should therefore be considered in light of these additional uncertainties in left.
Along with other rest discussed in our SVP filings.
Okay, no obligation to publicly address or update any forward looking statements in future filings or communications regarding our business or results.
Today's press release, our historical financial news releases and <unk> filings with the FCC are all also available on our Investor Relations site.
Call participants should note that today's discussion includes financial measures that are not in accordance with generally accepted accounting principles or GAAP.
Management's explanation for the use of these non-GAAP measures and reconciliations of GAAP to non-GAAP financial measures are included in today's press release.
Finally, any references to earnings per share or if he asked me. During this conference call with folks a diluted earnings per common share with that I'll turn the call over to Bruce Broussard.
Thank you Amy and good morning, everyone and thank you for joining us.
As we continue to navigate the global krona virus pandemic, our daily interactions with associates and members providers and government partners only served to underscore the strength of the Medicare advantage program and it's in daring public private partnerships that puts seniors and their holistic.
So at the forefront.
As you know over the last several months Humana together with industry peers. The administration and Congress quick we took a deliberate and sustained actions to remove financial barriers and it has access to care in response to the pandemic.
Easing some of the burden on our nation's most vulnerable population at a time when they need at most.
Supported in enabled by the structure of the Medicare advantage program, which incentivized as plans to look holistically at the health and wellbeing of seniors and those with disabilities.
Medicare advantage plans, where some of the first organizations to pro actively identifying and implement halcyon benefit changes at the outset of the pandemic.
These actions addressing a drug testing in treatment costs associated with requires identified in tackling social determinants names, such as food and security and ensure continuity of care for our members.
And Humana, we quickly announced we would cover crude good testing and treatment costs and pivoted to tell us how alternative for care due to physical distancing requirements, allowing in network providers. They use personal devices to connect with members Bobby being paid for an office visits.
For our members, we recognize that the access to preventative care medication adherence focus on social determinant and the continuation of our other chronic condition management programs during the pandemic reduce the likelihood that they will experience negative long term effects on their health.
I could result from a lack of access to care.
Accordingly in addition to hoping providers pivot to tell the health at the outset.
No matter, how quick we established a number of interventions, including a clinical outreach team to pro actively engage with our most vulnerable members.
Wave co pays for primary care, how patient behavioral health and Tele health services allowed parolee refills for prescriptions for members can feel confident and the amount of medication they had on hand.
Cared kids to members, including mass to help them feel like they could safely use the health care system and worked with food banks and other organizations to quickly get meals to those with an immediate need while also offering mail delivery to address the long term concerns as the pandemic persist.
Today, our clinical team has reached out to nearly 1.2 million members and we've delivered approximately 900000 meal, including 750000 meals on the second quarter.
Most recently, we announced the distribution of a million preventative care kits to our Medicare advantage and Medicaid members. These kids provide in home prevention screening for colorectal cancer diabetes in kidney disease, recognizing that early diagnosis and intervention it's critical that.
Yes.
From a provider perspective, the pandemic has reinforced the strength of our value based care models under which approximately one third of our individual Medicare members are cared for by providers and take volaris for their patients into in kidney care under Capitated payment models.
Providers in these arrangements focus on their patients holistic how was aligned incentives to drive improved clinical outcomes.
As a result, these providers experience steady cash flow despite declines in utilization and we're the first to reach out to patients ensure continuity of care.
In contrast providers in fee for service models were experienced cash flow concerns because of the dramatic decline in non essential services.
As previously announced to help address provider liquidity concerns tolerated $1 billion and payment to providers early in the second quarter.
Just as a pandemic has demonstrated the compelling value proposition, a Medicare advantage and value based care a growing number of individuals selecting Medicare advantage further underscores the value of the program for seniors with enrollment nearly doubling in the last decade.
The opportunity for Medicare advantage organizations in partnership with the government to meaningfully impact the health care system in the coming years is significant.
For the U.S. census Bureau, the number of U.S. residents over 65 or again double over the next four decades with one in five U.S. residents over the age of 65 by 23.
Our 2017 publication sponsored by CMS included 9.9 million beneficiaries from three states.
Found that Medicare advantage, how performed traditional Medicare on 16 of the 16 clinical quality measures and four of the six patient experience matters.
Data from CMS and the Kaiser family Foundation indicates that in Twentytwenty, approximately 94% a Medicare in the energy enrollees have access to at least one zero and our premium plan and 80% of all Medicare advantage plans offered vision.
Hearing wellness or dental with more than half of the I may plan offering all four.
With the expansion of additional flexibility is for supplement benefit Medicare advantage organizations have been highly innovative from efforts to lessen social isolation to mail delivery to respite care to simple home improvements to keep seniors safer at home.
Analysis, a beneficiary data shows Medicare advantage assays seniors.
1598 hours a year on an average relative to those in a traditional Medicare will see traditional Medicare, but seniors out of pocket cost for inpatient costs running seven times higher and traditional Medicare the Medicare advantage.
Data shows that Medicare advantage is continuing to grow as the preferred option for those who are low income and for racial and ethnic minorities.
The more than 22 million Medicare advantage beneficiaries, there is a growing diversity and enrollment with more than 28% beneficiaries being racial or a final minorities as compared to 21% and traditional Medicare.
Nearly 40% of individuals enrolled and I have annual income.
Less than 20000 hours a year.
This data demonstrates that as we think about disparities in health care for underserved populations. Medicare advantage plans are uniquely positioned to address the needs of these members.
Humana is committed to leverage our business platforms support local communities in their efforts to lower social and health disparities.
This includes taking a leadership role in social Germans and Medicaid as well.
Integrating our Medicare advantage in Medicaid business models, with our community efforts and enable us to be more holistic.
In our approach to improve health, both as an individual level and within the communities overall.
We will do this by leveraging our successful bold goal population health platform as another touch point for us to engage with our members and to support the underserved community.
We are committed to deepening our understanding of how to scale specific programs to address social determinants infect affecting younger populations as well.
In June we contributed an additional 150 million to the Humana Foundation. This in down that will allow the Humana foundation to continue to invest meaningfully in the communities we serve.
Including initiatives designed to address health care disparities.
Well, we have been engaged in responding to the public health crisis over the last several months. We've also continued to advance our strategy announcing investments in companies delivering value based care and higher acuity care in the home and entering into partnerships with several companies focus on innovative kidney care.
Their solutions.
These moves are part of humana's broader effort to create an ecosystem of homes centric care delivery models intended to provide holistic coordinated care for our members improving patient experience and outcomes, while reducing the total cost of care.
As I mentioned in my remarks on last quarter's call. We believe in omni channel approach to care that includes primary and higher acuity care in the home is critical to meeting minutes members, where they want to be and allows for more visibility into members' needs, particularly social determine.
Minutes of health.
We recently announced strategic partnerships with heal and this best health.
Well at the same time, we continue to invest in transforming kindred at home health hospice programs to drive improved patient outcomes.
We believe consumer demand for high quality home based care models will continue to increase and cobot has reinforced this belief as we see increased awareness.
End of interest in home based care models by consumers.
On based models consistently demonstrate higher pad patient satisfaction reporting net promoter scores have 95 for higher allow far more personalized care and often demonstrated superior clinical outcomes.
He'll will serve as our preferred home based primary care model, which is inherently more capital efficient scalable, allowing humana to offer high quality value based primary care to more members than a clinic based strategy.
The ability to deliver emergency room, a hospital level care in the home through partners like this past held highly complementary and allows patients to recover in the safety and comfort of their home reduces caregiver burden and avoids the risk of secondary infections and further health declines.
Often experience at the result of inpatient hospital stay.
Finally, we've been developing new clinical models and operational enhancements for kindred at home to improve outcomes for the most at risk patient population and enable more timely effective and coordinated care in the home enhancing the patient experience and preventing automated hospitalizations.
Over the last several months, we've begun designing integrated model the fully leveraged the collective capabilities of these offerings, which are currently being tested in various markets.
As an example, as kindred identifies members with complex needs. We do not have a primary care physician they will partner with hill to address the immediately and also support ongoing proactive primary care when appropriate and desired by the member.
We are dinner identifying humana members with higher emergency room utilization and leveraging humana at home clinicians to proactively outreach and educate them about this past health services and are pleased with the early reductions in emergency room and inpatient hospitalizations for these members.
These are only a few examples of how we see these solutions working together to improve member health and outcomes and we expect to continue to develop refine and scale additional clinical observations.
We have also further advanced start kidney care strategy, recognizing kidney diseases, the nation's nine leading cause of death.
We continue to support serving individuals with in stage renal disease, and Medicare advantage and 2021 and beyond and we believe we can positively impact their health care experience.
However, we acknowledge that can we can be most impactful if we can enable early detection and treatment of kidney disease for our members.
Our initiatives and partnerships our focus on how we can better serve both populations.
Over the last several months, we've announced agreements with multiple partners offering innovative enhanced clinical solutions to provide kidney disease care coordination services for Humana Medicare advantage in commercial members in certain markets.
The goal of these initiatives to help our members detect kidney disease early.
So disease progression and educate members about treatment options, which include home dialysis.
Before I turn the call over to Brian I'll briefly touch on our financial performance.
As I said last quarter, all our businesses started the year strong from both a strategic and financial perspective.
As we navigate these uncertain times, we believe that this underlying straight sets us up well for 2021 and beyond.
We believe our 2021 offerings are compelling and our employees that nearly all our members will have access to plans that provide stable or enhance benefits.
As Brian will discuss in a moment, while acknowledging the uncertainty as to the duration of the crisis the emergence of hot spots across the nation and the extent to with deferred procedures may resume we continue to maintain our initial full year twentytwenty adjusted EPS guidance range.
$18.25 to $18.75.
This reflects our expected continued investment to help our constituencies in communities that may be disproportionately affected by the crisis with many of these costs expected to occur in the back half of the year as we anticipate utilizations, a normalized and members to utilize the enhanced benefits offer.
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Well, we expect these benefit enhancements, including co pay waivers and other proactive actions were taken for our members in response to the pandemic to mitigate much of the impact from the reduced utilization we experienced in March and during the second quarter. The Medicare advantage program also includes safeguard.
Requiring that planned spend 85 cents of every dollar of premium on medical costs.
Well that threshold is not met plans must rebate premiums to the government.
This incentivize plans to provide robust benefits for members each year also protecting individuals with disabilities and the Medicare Trust fund the an unanticipated significant declines in utilization occur.
We currently do expect to pay some level of rebate to the government and Twentytwenty as result of the declines in utilization experience at the beginning of the pandemic.
In closing I want to thank the healthcare providers and especially those on the frontline who continue to be the heroes of the this pandemic.
I also want to express my Pride in our associates and my immense gratitude for their extraordinary efforts over the last several months.
Those to calm as we continue to work relentlessly during the pandemic to ease some of the burden on all stakeholders to this proactive and transparent engagement.
At Humana, we are dedicated to delivering human care health care experience that is easier more personalized and more caring for our members.
Our associates go above and beyond to take action to address the most important needs of our members into continuously create the best possible experience. So that they can achieve their best tell.
These efforts are recognized both inside and outside of the organization Humana Pharmacy has been named the best in mail order pharmacy customer satisfaction and the JD power Twentytwenty Us pharmacy study.
It is the third consecutive year that Humana has received this prestigious honor.
In addition, Humana ranked number one in Florida, and Texas and the Twentytwenty JD power ranking of 149 commercial member health plans.
I offer my congratulations and thanks to these teams.
With that I'll turn the call over to Brian.
Thank you Bruce and good morning, everyone.
I'd like to begin by echoing versus sanctioned praised for all of our associates and in particular for those serving on the front lines. They have not wavered since the pandemic began continuing to model, our human care mindset like going above and beyond for our members and communities day in day out for that we're very grateful.
At Humana, we're committed to continuing to take action to minimize the impact of this global crisis on our members provider partners employer groups and the communities we sure.
While advancing the long term sustainability of our company and the healthcare system as a whole.
Before I review these actions I will first discuss our results for the quarter.
Today, we reported second quarter, adjusted EPS of 12 hours and 56 cents.
These results were materially impacted by the significant deferral of care, resulting from stay at home orders.
Michael This is seeing measures and other restrictions on movement and economic activity implemented throughout the country to reduce the spread of cobot 19th.
The impact of the deferral care was partially offset by cobot 19 testing and treatment costs incurred in the quarter as well as our ongoing pandemic relief efforts.
Will describe later.
We anticipate the net favorability, resulting from the deferral of care in the second quarter will be offset in the latter half of 2020.
As demand for health care services, normalizes, and we incurred the financial impact of our ongoing pandemic relief efforts.
Which are heavily weighted to the second half of the year.
As previously communicated we anticipated that the significant deferral of care prompted by Cobot. My team would result in a disproportionate amount of our full year earnings being weighted to the first half the year and in particular the second quarter.
Well medical utilization increased significantly in June from trough levels in March and April.
It was a bit slower to rebound than we anticipated, resulting in second quarter. Adjusted EPS ahead of our previous expectations.
As we said last quarter during the last two weeks of March and continuing into April.
We experienced a meaningful decline in medical utilization of at least 30% depending on the service category.
In late April and throughout May utilization began to rebound as expected.
Although volumes did not recover to pre cope with levels.
In June while utilization continued to rebound on average it was approximately 10% below normal levels, excluding coal with utilization.
In July the non cobot inpatient utilization remained flat to June.
But cobot testing and treatment costs were bit higher than the modest cost we saw through June given the recent increase of cases in certain geographic hot spots.
We expect non cobot medical utilization should begin to approach normal levels as the year progresses and potentially run slightly above normal later in the year.
From a pharmacy standpoint script volume ran higher in late March and April as our members with our encouragement refilled their prescriptions early to ensure they had adequate supply during the crisis.
Not surprisingly we also saw an uptick in mail order use during this time.
Prescription fills peaked in late March in early April experienced a trough in May and then peaked again in June reflecting the impact of 90 day sales through both mail order and retail.
For the full year, we expect for me pharmacy utilization, so net out close to normal levels. Given these early refills represented more of a pull forward within the year, rather than rather than a run rate change.
However, the increased number of members utilizing humana's mail order pharmacy is expected to persist as those members continue to use the service.
Further as expected and previously discussed both our retail and group segments experienced small negative prior period medical claims reserve development in the second quarter.
Primarily due to the suspension of certain financial recovery activities for claims that should not have been paid.
We took this action to allow providers to focus on their patients and ease administrative burden in response to the pandemic.
While these activities have largely resumed we continue to suspend these operations along with broader utilization management activities in a few markets that we had that designated as cobot hot spots in which there are increasing incidences of positive cases of the corona virus and related hospitalizations.
It is important to note however that the suspension of financial recovery efforts only results in a delay of when we review charge and cheaper payments and therefore, we expect to collect a meaningful portion of these dollars over time as financial recovery efforts regime.
Turning to the full year as Bruce described in his remarks, we fully expect that any impact we experienced from lower utilization will be entirely offset by the support we provide for our members providers employer groups and the communities that we served as well as higher utilization in the back half of the year.
Consequently today, we have reiterated our 2020 EPS guidance of 18 25 to 875.
From a seasonality perspective, we expect adjusted EPS for the third quarter to represent approximately 15% of the full year guide at the midpoint largely offset by expected losses in the fourth quarter.
I would remind investors that historically, our fourth quarter EPS contribution is always the lowest and many of this year's investments will hit in the final three months of the year.
I will now provide a few more specifics on the amount and type of support that we are providing our various constituents.
Kicking in enterprise view of experience to date and considering our expectation of how utilization patterns will play out for the remainder of the year.
Including netting out the expected capitation payments to risk providers and the anticipated annual cobi cobot testing and treatment costs of approximately $600 million.
We estimate by the ended the year, such support will melt shop around $2 billion.
While we have already announced several significant support initiatives as I mentioned the financial impact of many of these investments is weighted towards the back half for the year.
For example, the costs associated with co pay waivers for primary care.
Outpatient behavioral health and telehealth visits designed to reduce financial buyers to our members engaging with their providers are expected to be among the largest smart investments to support members and will be incurred throughout the remainder of the year as members increasingly utilized to healthcare system.
In addition, we're increasing the availability of in home assessments for our members ensuring nurse practitioners.
And primary care physicians are able to engage with members in their homes or viatel health to identify and address gaps in care and social determinant needs.
We will also consider additional support initiatives for our members and providers as the year progresses.
Furthermore, we're making significant investments in our Medicare distribution channels.
Shipping and training brokers, so that they can interact with consumers telephonically and digitally in circumstances, where community events and face to face engagements are restricted given the pandemic.
This includes increasing the marketing dollars, we provide to brokers for the Pete.
As you know.
These marketing costs are heavily weighted to the back half of the year, primarily the fourth quarter.
These costs along with our contributions to the Humana Foundation and other cobot related costs associated with moving associates to work at home.
And reworking our facilities for an eventual state for churn to the office.
Our expected to increase the full year consolidated operating cost ratio approximately 100 basis points overall pre cobot expectations.
Additionally, the combination of back half weighted investment spending.
Meaningful portion of which will be classified as medical expenses.
Along with the expected continued increase in utilization and cobot treatment of testing costs will result in the second half medical expense ratio being elevated meaningfully above our pre cope with expectations.
Specifically, we expect our second half consolidated benefit ratio to be in the neighborhood of 250 to 300.
300 basis points higher than our pre.
That patients.
Finally, I'll provide a few brief operational comments each of our business segments.
In retail revenues have increased 20% year over year to $33.72 billion year to date.
Today, we increased our full year 2020 expected individual membership growth to a range of 330 to 360000 members from our previous range of 300 to 350000.
Our products continue to resonate with customers and brokerage alike.
Well cobot, a slightly impacted sales volumes member terminations are also down.
This strong membership growth includes compelling DCIP increases, where we've increased the great amount of effort and resources to broaden our platform and create a compelling product for our customers.
Specifically as of June 30 are decent membership had grown to approximately 365000 members and net increase of approximately 70 77100 lives or 27% from December 31st 2019.
With respect to Medicaid June Thirtyth membership of 689000 members increased 220000 or 47% from December 31st primarily reflecting the transition of the risk for the Kentucky contract from care source as of January one as well see additional enrollment, particularly in Florida.
I think from the current economic downturn driven by the covert 18 pandemic.
And our group and specialty segment medical membership declines on account of coded worse, so far less severe than we anticipate though we are closely watching how unemployment trends adult.
We're also continuing to execute on the first phase of bulk of a multiyear plans to sustainable growth.
Again strong new talent, increasing our local presence in certain key markets deepening our partnership and innovative companies such accolade to grow our commercial and specialty products.
Lastly, in our health care services segment, adjusted EBITDA increased 33% year to date, primarily driven by higher pharmacy earnings as a result of Medicare advantage membership growth, partially offset by the anticipated PDP membership declines.
EBITDA growth in the segment was also fueled by operational improvements in our can be the assets and overall utilization in our provider businesses as a result of cobot 19.
It is also important to note that we continue to invest to expand partners in primary care through our partnership with Welsh Carson.
Typically we'll be opening 15, new centers beginning in late summer with rolling scheduled openings throughout early next year.
This includes two new markets Las Vegas, Louisiana, as well as expanding our presence with additional clinics in Houston.
With that we will open the lines up your questions in fairness to those waiting in the queue. We ask that you limit yourself to one question also please note that Bruce and I are separate locations, but we will endeavor to make the Q and a smooth as possible operator, please introduce the first caller.
Yes, we have a first question from the line of Justin Lake with Wolfe Research. Your line is now open.
Thanks, Good morning.
Wanted to ask about the mortgage.
Specifically regarding the.
Lower tax rate your expected that next year from him.
Little bit mortgage $2 share.
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Benefits.
And how much do we end up stickier Brian.
Those.
That's the case at the bottom line next year.
And then.
Any color around where that like release.
Maybe margins next year would be helpful as well.
Good morning, Justin and I apologize if I have a crackle my line I know I have a challenge sharpening the same spot for for five months and I'm getting a crack will so I apologize.
We have not.
Yes really commented as we've said in the past on how we've reinvested the hip.
The other than to say that we've really tried to pick a balance between gross margin.
And investing in the sustainable business proposition that that's important that we do and so we'll give more specifics on the third quarter call with respect how much we've invested.
It is.
Routes you 50, a share as you've said the tax impact that is aman. So as I said, we'll give more color on the third quarter call.
With respect to margins again, I'd, rather not comment specifically Justin at this point.
We will give more more comment on on the third quarter call.
Other than to say that as you know when you get that geography changes a little bit with the taxes and not to get some back from the from the after tax portion of of the hits that could impact the pre tax margins, but but we'll see that commentary for the third quarter.
Hi, guys.
Your next question comes from mid line as David Lee with Jefferies. Your line is now open.
Hi, Good morning, it's Dave Styblo in for Dave Windley.
I Wonder if you could talk a little bit through your reserves and why your benefits payable increased 13% sequentially when when it seems like most of it appears in the group were flat to down just trying to get a better understanding of the 10 day jump in DCP from from the first quarter because.
I try to normalize what are the level of benefit expenses would have been and the second quarter. It only accounts for about half of that tend to increase so any color there would be great.
Sure and good morning.
Specifically I call it two things on our DCP.
One is as you said you know relates to our medical expense being lower for the quarter and because the way I be enormous shed June as the primary month for most of the reserve is accounted for because it's the most recent months and June saw the highest utilization in the quarter. So if you have overall average of lower medical expenses and higher June reserve.
You are going to get higher DCP.
The other thing and this is important is that our providers, 33% of our members on risk based relationships to our risk based providers are also benefiting from the lower medical expenses.
So therefore, we had humana are paying out higher compensation levels.
To our risk providers and when you divide that by the lower average medical expense for the quarter Youre going to get a higher DCP and so when you look at our thank you disclosure, you'll see that the amount of capitation is up pretty pretty materially from from last quarter again, not surprisingly given given the cobot impact year.
Got it thanks, Brian.
Got.
Your next question comes from the line of Kevin Fischbeck with Bank of America. Your line is now open.
Great I just wanted to ask about one bids just wanted to understand a little bit.
About how you're thinking about trends when you price for next year given this unusual year.
And what you get the coding.
To achieve whatever it is you price since you're you're going to anyone bids.
Yes, So we think we've taken a prudent approach to our trends obviously, we go through a very extensive process.
In terms of value and what that what a typical baseline would be and so we.
I went through a very rigorous process. There and then obviously you have to Kogan and what your expectations are I would just tell you that I think we've been prudent with how we price for the cobot impact. Obviously, there are lots of variables that we need to consider and I would just say I think we've been prudent in those trends. So I think we feel good about the trends.
It into our bids and we feel good about our pitch more broadly for for 2021.
Next question please.
Your next question comes from the line if Bob Jones with Goldman Sachs. Your line is now.
Great. Thanks for the question I guess, maybe just to add from the provides net membership growth in individual and they book I think encouraging signs there given the obvious difficulties in the current environment in getting new members that can you just maybe talk about what approaches you're leveraging and driving additional membership and then how confident does this make you as we think.
About managing through what I imagine would be a more difficult annual enrollment period than a normal year.
I'll start off and then let Brian.
Add to it.
As you probably know we have a number provider I mean, I'm, sorry distribution partners out there and we continue to see really strong results from them.
Specifically.
Over the phone.
To the telephonic than than in person. So we've we've leveraged that significantly.
Part of the other aspect as we have seen some our retention increased as a result of thus reducing our retention.
Improve during during this period of time and then the other area that the company has really.
Since I'm just wonderful results on as our de snap crowd, our new snap growth as you'll see is up significantly both year by year end, but also significantly just as a percentage.
Over the last number of years. So it's a combination of these steps at our value proposition there.
Obviously that that's allowed the Asian during that period of time, our ability to leverage our partners that are telephonic as the other area and then the retention.
As has increased.
Your next question comes from the line of Gary Taylor with JP Morgan. Your line is now open.
Hi, good morning.
I think this question probably for Brian as we think about the second half and what's baked into your estimates I. Appreciate some of the detailed comments you walk through but.
Are we.
Thinking about this right in terms of order of magnitude.
A presumed utilization rebound would be most material reduce cost sharing with the second.
Covert costs would be third and a minimum MLR rebate would be for just in terms of order of magnitude impacting.
The second half a immel our expectation.
Good morning, Gary and I appreciate the question I'm not going to comment too much on that I think the I didn't you cited our are all meaningful.
You know supporting our brokers.
The marketing efforts in the fourth quarter will also be important there.
And so there are a number of of initiatives that we've taken I think all really contribute to toward the back half.
Change in spending so I think that's a real combination, but broadly what you're saying is not not bonding nodding not.
Correct, I think it's directionally reasonable, but again I wouldn't necessarily wait one towards the other also see how things unfold as the is the quarters go on and where our spending.
Okay. Thanks.
Your next question comes from the line of Sarah James Its five first handler. Your line is now open.
Thank you.
So I want to understand the delay their view a recapture claims can you size.
Hi.
Cohort, it's out there that you're doing this compassionate delay for and then thinking about providers financial viability.
They have that.
Future claims review coming and then if they're under a value based contracting utilization rebounds in the second half they're kind of on the hook for more settlements.
So how are you walking them through their training them to appropriately reserved and handle their finances for the second half.
Well I think I think our providers are.
Well aware of the in the actions of initiatives that weve that we've taken on their behalf and so we've been in constant communication with them. We've worked very hard to get them significant amounts of cash flow. We've as we've said weighed the number of our utilization management programs and we've been.
Really not pursuing these financial recoveries.
They know and in our communications that ultimately we will.
Have discussions with them about about the far and so I think there they are fully aware of that.
Ultimately this will this will bounce back later in the year.
As such things settle down, but but we're not we're not we're showing it aggressively we wanted to be very thoughtful with our providers were trying to be is constructive as we can with them, which I think they appreciate.
But but I think they also understand that there are if there's been a financial overpayment for example.
We need to when you take two to reconcile back, but it's not sample accretion we aggressively right now, but they are aware of it.
And can you size that delayed from each Olivia.
Yes, yes, I'd, rather not give specifics on.
On the fr.
I mean, it's it's a meaningful part of our.
Your prior period development as you can imagine.
But again I wouldn't want to wouldn't want to size. It you can see that we've had a negative PPD for for the quarter and so normally it's it's positive also this pointed year. We would also typically have that far in the beginning parts of 2020.
It's a several months delay so there is sort of a combination of prior period and current period amounts that that would ultimately be collected.
Thanks, a center on your question on the value based payment aside I'm, just being able to manage the second half one other aspect. That's important to now is that we really don't settle up what the provider until the following year. So there is a receivable or a payable at happened so as as the year progressed as.
Their cash flow as part of us.
Table and then at the end of the Airwave will settle up to towards.
As their preferred to have.
The appropriate southern result of the first half of the year. They haven't received those dollars yet.
But in the second half though.
It could offset that or are improving.
Got it thank you.
Your next question comes from the line of Josh Raskin with Nathanson Research. Your line is now open.
Thanks, Good morning.
I see even directionally without necessarily a dollar amounts task to it but just how much of the actions that you're expecting to offset this lower utilization are required through minimum LR rebates et cetera versus voluntary actions around co pay wafers transformations to Humana Foundation et cetera, and then you know in light of the X., it's harder to give men.
For premium rebates in Medicare advantage is just Latam don't have premiums and some of them. It's a much smaller percentage of total cost so help us with some understanding of examples of benefits that you've been able to deliver you talked about the meals, but other things that you're delivering to members to again offset some of that lower utilization.
Well.
Yeah I guess.
I'll take that with respect to the MTR rebates I would say that it's really a balance Josh. There are there are some contracts that are closer to the MTR rebate threshold than others.
But what we're trying to do the right thing here and and give these dollars back back to our members and obviously that would minimize the MTR rebates, we have some NBR rebates accrued, but it's relatively small because of the actions that we're taking.
Do you, except we didn't take the actions and of course, the EMEA, our rebates will be higher and that's that's the natural bouncing mechanism in the program, which which which is a positive thing for for our membership and so we are taking these actions that will minimize the MTR rebates.
We hope they will be will be well received we talked about waving. The copays as you mentioned, we talked about the food, we're delivering safety kits and masks, which are which are pretty significant.
Yes, there's millions of green mass so roaming around the United States now without people, having them and we think Thats a positive importantly, also we've reached out to over a million of our of our members of 1.2 million members and the talk some about that their needs and some of the issues. They may be having encoded whether it's around there making sure.
Other prescription drugs, making sure they have food in the and the refrigerator.
Making sure they don't have significant medical needs that needs to be addressed and so there's also a significant ramp up in our care coordination efforts that I've been I think.
Meaningful for for our members in the crisis.
Hopefully give some color just add to that Brian I think.
It's probably less on the benefits themselves. The dollars that are encouraged and obviously, it's been calling the co pay area and I would also just.
Say on how we've traded tele health on the provider sides. Another important part of that but theres underlying goal that we have as to eliminate any financial barriers and also any clinical barriers that that are out there. So theres a lot of dollars that are being spent on the clinical side as all the way from the outreach program that.
I was just discussed to getting doctors in People's homes that traditionally haven't than the case, obviously getting nurses into the homes are important.
Aspects to that so you will see probably more dollars spent on the clinical side.
As to really help support the healthcare system.
Weighing on the circumstance of having capacity limitations there. So as you articulated the Medicare size, a little harder on the benefit side, but I think our role as relates to try to help with us the possible delayed care heavy much more proactive in that.
Perfect. Thanks.
Your next question comes from the line up for Chico's Asher with Morgan Stanley. Your line is now.
Yes, hi, good morning to turn to follow up on the Tele health common. So it was an executive order a floor HHS ternium continuing that.
Where possible.
Any thoughts on where telehealth, great pretty steep parity ripping off.
And for how long do think Standalone medical.
And you talked about the prepared remark in response to Josh question on.
When it integration between.
Uh huh.
Okay.
So what are the.
Peter.
The Q1.
And what specific what are the markets that you're right.
Yes.
What about that.
Mark.
We haven't disclosed in the markets just for competitive reasons. So let me try to go.
Just reversing or enter questioning here on the but on the primary care area. What we are seeing both then.
The primary care and home health side, both on the Kindred side, the hill side and this patch side as a continued reduction in downstream me our visits and hospital. So nation. So what we're saying as being much more proactive much more engaged in a member for saying out on the ability to to prevent the downstream.
Hospitalizations.
I also see I will just take time slowing the disease progression.
We've seen this everywhere or the last summer here is that as we are much more proactive and engaging with them. We're not only to prevent VR visit reduction, but we also see a slowdown in the disease progression, which has obviously positive.
By the end of edge all they can live a much more healthier life and then an addition from a cost point of view.
On your Tele health question and just on the payment side.
As we stated this morning, we are paying out equivalent writes the primary care office visits we feel that that's really important than this time, where people are concerned about leaving their homes and using the health care system and we wanted to ensure that are providers are completely oriented to providing a hotel.
Hello.
We are believe a lot and tele health, but I do believe that has this pandemic kits.
Hey, <unk> re enter a normal environment already addressed or look at the payment models to ensure that we are encouraging and omni channel approach, where it's appropriate to use the office one when needed to use tele health finance at our home or per for that and I think right now we're not.
Prepared to tell.
I'm, not particularly because it isn't that much more construct how did you encourage more of a holistic and and the proper channel for the proper condition for the proper preference of the customer.
Thank you and your question. Please yes. Your next question comes from the line of Stephen to knowledge. He asked if need be Leerink. Your line is now.
Good morning, guys. Thanks to the question I think the first I just wanted to follow up on the line a discussion around the back half obviously the guidance implies a 93% reduction adjusted EPS in the second half and talked about some of the levers on the MLL R side, but maybe ask you could just give us a sense for for what other levers you might have to to achieve that outcome if utilization.
It remains below normal in light of some of the comments you made around the ability to repay premiums to members and my actual question is just around the adjusted EBITDA in the services segment just wanted to understand.
Any sort of direct or indirect offsets to the upside from low utilization understanding that the regulatory minimum member large that apply to that business.
Maybe relatively grades and give us a sensor that proportion or percentage of the growth segment revenue that reflects global gravitated premium or some kind of a directional point on that would be really helpful.
Thank you.
Sure.
Well, let me go on order here.
Are we there are some flexibility around the marketing side on our AR I may products Theres also opportunities to think about how do we get additional dollars into our.
And to our members hands, but not necessarily changing premiums, but with certain things were picking through.
But there aren't there are ways to get additional dollars out to our constituents also working hard with our providers, how we could cuts you.
It's it's a work with them and help them with their cash flow needs and an income needs and so there are there are there's flexibility that we can have here as we go to the back half of the year, but obviously, we're monitoring this very closely it's an art not a science in terms of estimating what exactly the utilization bounced back will be but it's something that were.
We're very focused on and as a side, we're doing everything we can to stay within our initial guidance range and so we're going to continue to work to do that and try to get these dollars to our our various constituents who could benefit from it.
On this on the services side.
The amount of capitation, because because of the pharmacy revenue was so large that it's actually relatively smaller percentage basis, but for our for our capitated businesses and for our provider businesses. It's a very high percentage. So you could see we have several billion dollars a premium in our in our and our provider services businesses and most of that is.
Hi, good.
Fully capitated, so that they will see the benefits of that.
That being said I would I would say that we have seen a lot of sort of non Toby.
Important EBITDA progression in the business you've been coming into the year. There was a significant EBITDA increase sort of our initial guide versus last year and that's that's playing through and I think even doing a little bit better than than expectations. There were also seeing nice growth in our mail order penetration rates.
On our pharmacy side, which is which is helping that EBITDA growth.
And so we'll see what whether that whether that continues or not.
We're not too many offsets on the on the cobot side here I mean, largely script volume has held so you might think will would script volume be down in this in this environment and as we said in our remarks that script volume is largely held its converted to 90 day scripts, but.
But but it's largely largely held when you do it on a 30 day equivalent basis. So we're not seeing immaterial impact from cobot on on the segment other than the declining utilization in our provider services business.
It's helpful. Thank you.
Yes.
Your next question comes from your line is George Hill with Deutsche Bank. Your line is now open.
Hey.
Good morning, Thanks for taking the question there may be two quick questions. One as a follow on telemedicine first I guess could you guys talk about the growth in utilization, what you've seen telemedicine services give nicole the crisis and kind of does it change how do you think about any the primary care partnerships and then my quick follow up with the only increased mill utilization you got you guys. It seem I guess.
Adorable do you think that will thing will you maintained higher level of mail penetration in the book, where do you expect to see a lot of fall back to retail. Thank you.
Yes in terms of the volume, it's all medicine visits I mean, it's up.
15, 20 times just in terms of the number of tall. So fell off claims. We've we've received year to date versus versus last year again, not a surprise a lot of the a lot of the visits are happening telephonically.
Pardon me, what we've seen is that yes.
For our particularly for our providers, who are doing this directly with their own other own.
Tele health systems, if something like 70% of the visits or video or audio video I should say as opposed to audio only which is also important for our business as you know from a.
Documentation perspective, and and and revenue for 2021. So so we are seeing meaningful uptick whether that persist I think we'll see I certainly some element will persist.
What's interesting you've heard us discuss this before but in our own clinics, which we get real time data every day.
As the system opened up we did see a transfer back to in person visits and so where it was 80 or 90% Tele health during the peak of the crisis. It with went down to 20 or 30% Tele health.
I think particularly for seniors, there's a real desire to be social and meet with others and meet with their doctor and person. So we don't think that's going to change, but we do think tell health as a critical supplement to each of the general care care program that we think will will really take hold going forward and so it's going to be really.
Elements, how that exact waiting goes we'll have to see but it'll be a critical part going forward.
Maybe on the scripts.
And then on the mail order scrip.
We haven't given a lot of.
Visibility into that to the to the.
Public markets. So we continue to really work on our experience and we think that we'll continue to see increases in the mail order.
From a normal level, obviously, we got to.
Significant increase during the period of time as a result of the cobot side, we do see it coming down a little bit, but we continue to see mail order as being a channel that has shown itself for convenience and this time and we believe that especially the members that experienced at.
They are now more per it's a more preferable channel.
Okay.
Thanks.
Your next question comes from the line of seeds, we will find with Cleveland Research. Your line is not often.
Hi, Good morning, Thanks for taking my question I guess, just two quick things first.
You have any update or color you could provide as it relates to risk scoring.
Versus expectations, given that Pandemics and then is there anything you could provide in terms of additional color as it relates to the group and may selling season. This year. Thank you.
Steve I got the first part of your question I'm, sorry, I Didnt I didn't hear the second part, but all in the first part maybe you could repeat the second on the risk scoring side.
I would just say that we are on track for our operational plans in terms of getting to the results that that that we need for for 2021.
Mentioned in the prior prior question Telehealth visits are up dramatically.
Portion those your video and we've made a real deliberate effort really first and foremost will focus on the health of our members and getting practitioners and primary care doctors into the home.
Either in person or by itself will help to make sure that.
The matters are getting the care that they need that also has the ancillary a factor of ensuring that we're identifying documented these conditions. So so far so good it's still early there's there's a lot of work we have to do in the next four five months here to make sure we hit our our operational plans, but we.
We're on pace so far.
If you wouldn't mind repeating Brian maybe I apologize no problem, yeah, I might have been my headset.
Just any color you could provide as it relates to the group and they selling season going into next year at this point.
Yeah.
So in the group. So interesting 2021 is interesting year other number of large accounts up so I would say, we're still working through it but it's conceivable that we might be sort of slightly down the share from a membership growth perspective, we won some we've lost some and you just big numbers Big swing.
Overall.
I would tell you that being the very large jumbo accounts of which there were many 2021.
Yeah.
A number of accounts up this year and they're very competitive and.
Committed to.
Being price disciplined so.
So that that will carry through some of the membership I think we look at over several of your period, we've had mid double digit growth. The last few years, but again I think next year could be slightly just slightly down, but we're working through it and.
We'll see what we end up for the year, but but I would say the large groups. It's just become.
Extremely competitive with the big players you're pursuing obviously the large accounts here.
Thank you very much.
Your next question comes from your line is 80 arise with credit Suisse. Your line is now.
Hi, everybody.
Maybe.
I guess, the so called two parts or two questions whatever but.
When you're talking about the back half of the year being up 250 to 300 basis points in MSR relative to your original expectations.
You know there's all this discussion about how much above backlog of procedures deferrals. There are out there and I know some of that's probably not even related to utilization is related to what you're doing to give back is there any way to parse that out a little bit more and say how much order of magnitude is how much you're giving back to come.
Digital ends versus.
Would you really think utilization.
And.
Looking like and do you have any way to size the procedures backlog that may exist and my other part real quick would be just on your M&A enrollment you've had two really good years, they may roll, but last year and this year. There's a trend that you did the first year you don't have much margin in that business. Then the second year you have a step up.
Obviously, we've got a lot of dynamics going on do you think you're on sort of a normal path for those aging members or do you think for any reason would have accelerated here or not it not occurred as fast as it normally mine.
Good morning, AJ I would stay on your second question I think there on a similar pattern.
What we're seeing a really similar to the last question around making sure you hit your operational plans around the documentation side.
So.
So far so good that thats more at some more path, but it's something we're very focused on.
Documents on an extraordinary jobs to ensure that we get sport version.
I have engaged with them and so we continue to do that we're very focused there.
On the on the short parsing out 200, 5300 basis points. One thing I'd say is that we said, we're giving back about $2 billion of support I would say a portion of that happening in the back half and so not all that as we are fortunate that semi are but I would say.
Good amount of that's been going is going to be in the back half of the year and so that hopefully help helps you sizable but.
Good I'd just add some that are you looking at.
The normal utilization in the back half as opposed to.
Read rebound or surge and.
And utilization that was deferred worst half it sounds like you more.
Yeah, I would say and what we said in our remarks was was more more normalized bounce from normal we could you see that progression of getting back to normal there might be curious work was slightly above we've seen a few markets work goes above slightly because of all the baseline that could happen periodically throughout the year depending.
On the.
Page the virus in how how severe it is in a particular location and so I hope, but I'd say broadly right that will be close to normal.
Perhaps some above it and then we have the cobot koby testing costs and treatment cost as well that would would tick above it and so that's also sort of a drag on the back half earnings.
Okay. Thanks, a lot.
Sure. Yes next question comes from the line of math before [laughter] CMO. Your line is now open.
So I hope you can hear me very.
Very bad sell section this morning.
We are on the level competition seen in the retail.
Oh, that's supposed to group and what you're seeing more from non public company, if you're seeing more for companies start up and eight brands.
And any thoughts you have on that.
Yes, Walmart is going on.
Plans I don't know what that what's the story is there.
Yeah, Let me, let me take them.
At the on the on the competitive front, we do see some of the smaller plans.
They they grew.
On on a base, a very small base, but they grew substantially lash, there and some of the market's Aaron and some other ones that are oriented to more of a better experience.
No and I think that is probably in Florida, and what have been the northeast that we've experienced that but theres a few in Texas and so on that Weve same.
They I mean, there are always a concern to us, but we consider to continue to believe our brand as strong in the markets that we compete with them are obviously our value proposition a strong both with the our customers and with our our providers and in addition, we continue to see our experience level.
Sales through our technology investments some of our clinical investments that we're doing as being a real differentiator.
In the marketplace. So as they continue to to look as as being a competitor I think our value proposition continues to increase not only from a benefit point of view, but I think from an experience and clinical point of view that competes and I think actually gets that gets ahead of what there are doing.
And what was your second question.
Well I just I heard this cloud of Walmart might might be launched or yeah, I'm, sorry, yes, yes, I'm, sorry, I'm not when they're not really getting into the M. A business, they're getting into the M. A distribution business and they have been in that.
Business for for a long period of time, and so that they would distributor humana product, but also distributed other products that.
Competitor products, we have traditionally had a relationship with them at one time, we actually manage their salesforce had sold I've agnostic.
Products. So we don't see it as much of a change I think of it.
Hi wave for them to continue to get people to come into their store.
Provide another product set of speak on the shelf for for their customers, but we don't see at being anything in our territory and we frankly like it has a great complement to to us as they can continue to be a distributor for us.
Got it thank you.
Your next question comes from the line as Mike Newshel with Evercore ISI. Your line is now.
Thanks, I actually had a related question on competition and distribution.
Some good performance from here telephonic sales channel so far this year and if there is a bigger shift a phone and and digital this ATP do you see yourself as having any relative advantage in that channel versus competing plans would you expect any impacting your market share of the industry growth.
I'm not going to complement com comment any.
Specificity there I mean, we continue to have really strong relationships with those partners, we've seen it as being a channel that is.
Continuing to grow as a result of the.
Convenience I've ever.
We do.
Continue to see investments by our competitors in that and that market by so I don't think it's a proprietary channel.
That is.
That when we have something over somebody else. So we do said as being a.
Competitive channel in the marketplace and we would do believe that others will use that again I think we have proven that not only the channel is important but then also the ability to retain the customer and I think the retention side is something that we continue to to shine a no matter what channel we use.
Thank you.
Your next question comes in the line of seats allocate with Barclays. Your line is now open.
Hi, Good morning. This is Andrew Marr Congress the wanted to ask about yes, sorry, as we get closer to the fall open enrollment season do you have any updated views on the uptake for Medicare advantage among srd patients in 2021, and curious to hear your thoughts on the relaxed network adequately standards and how that impacts your network does.
Line or product offerings for 2021. Thanks.
Yeah, we we haven't had given any indication of what what we think the penetration rate would be within Medicare advantage.
I think will they will leave it to the industry experts to provide them.
On the network adequacy side, we do believe that the.
Ability to now offer a much broader network hasn't results of the competitive nature or lack of competitive nature in the industry.
Good.
Ability for us to deliver alternatives in them and the market price for our customers offer I believe a much more compelling product as a result of being able to bring innovation into the marketplace, whether it's in the home whether it's on the ability for part of help out and how from a telephonic point of view or tell.
So the I want to bring other care providers into the marketplace. So we like it has a very large positive for the industry and really allowing a much more cost effective many more choices in the marketplace and at the same time thing I want to deliver a much more cost effective solutions.
And for our customers and for the federal government.
Great. Thanks.
Your next question comes from the line of right now with the yes. Your line is now open.
Hey, Thanks, maybe just a follow up on my last question I think you guys announced a number of kidney care partnerships recently like to here a little bit more about that and I haven't thought about the the hospice carbon and some time in I think that's still in that mix for next year not really sure. So maybe just an update on your current thoughts would be great.
And Brian you want to take that.
Sure.
With respect to the.
The key partnerships really it's around how do we slowed disease progression from.
Chronic kidney conditions to yesterday and so.
We have some really good partners that were working with we're excited about shipset that we've struck its still obviously early days in working through this but we believe we can make.
Meaningful impact there. So we'll see we'll see where those go and how meaningful they are I'll just say that people are being you know constructive in trying to figure out how how especially in light the number.
Yesterday patients that May answer Medicare advantage, how do we how do we care for these individuals and so we've been very focused on that we spent a lot of time internally as well developing.
Care programs for Ferrari kidney patients and again that will be only enhanced by our partnership with respect to the hospice care.
Going through it we do anticipate participating in the pilot we think it potentially could have a lot of merit in terms of creating a much more seamless care coordination.
I care coronation for our members as they as they proceed through their various like phases.
We think there also could be.
There's some.
Savings as well to the system for able to.
Actually have hospice is part of the Medicare advantage system and create again, a much more seamless transition in the very at various stages of care and we think that will result in potentially better outcomes and lower cost, but it's still very very early days.
Something that our teams are working through and I think it'd be.
Start getting results of the pilot will have wallboard to say about the topic.
Okay. Thanks to that end Brian's comments on our partnerships.
I think the evident from the number of partnerships that we've established in the marketplace. Today is just are really good example of how the networked adequacy and expanding that has created a much more competitive market marketplace. Even early to set its early stages of this so I think it is a testimony to the power of the expansion of the of then.
Network.
Andy has no further questions at this time I will now turn the call back over to Bruce Broussard for closing remarks.
Well I appreciate everyone's time I know.
The so little longer than normal quarterly calls so I really appreciate all the engagement in our operating results and obviously the support that our shareholders have provided us over the last.
Many years.
And also I can't.
He leaves a call without thanking all our 50000.
Teammates that have done a wonderful job and being able to.
Transition to home be able to serve our members and then in addition, being able to provide our shareholders.
Financial performance that you saw this quarter. So thank you everyone and thank you again for your support.
This concludes today's conference call. Thank you for your participation you may now disconnect.
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