Q1 2021 Centene Corp Earnings Call
Good day and welcome to the Centene Corporation first quarter 2021 earnings Conference call, all participants will be in listen only mode.
You need assistance. Please first of all conference specialist by pressing the star key followed by zero.
After todays presentation, there will be the opportunity to ask questions.
The question everybody part of stars of the water only touched on as well.
So it's all of your question. Please press Star then two please.
Please note today's event is being recorded.
I would now like to turn the conference over to Jennifer Gilligan Senior Vice President of the finances of Investor Relations. Please go ahead Matt.
Thank you Rocco and good morning, everyone.
Thank you for joining us on our first quarter 2021 earnings results Conference call.
Michael <unk>, Chairman, President and Chief Executive Officer, and Jeff <unk> Executive Vice President and Chief Financial Officer of Centene will host this morning's call, which also can be accessed through our website at Centene Dot com.
Any remarks that Centene may make about the future expectations plans and prospects constitute forward looking statements for the purpose of the safe Harbor provision under the private Securities Litigation Reform Act of 1990 Bucks.
Actual results may differ materially from those indicated by those forward looking statements as a result of various important factors.
Including those discussed in Centene. Its most recent form 10-Q filed today and the form 10-K dated February 22nd 2021.
All the other public SEC filings.
The risks and uncertainties described with respect to the potential impacts of COVID-19 on our business and results of operations.
Centene anticipates that subsequent events and.
Oh, what minutes may cause its estimates to change while the company may elect to update these forward looking statements at some point in the future, we specifically disclaim any obligation to do so the.
Call will also refer to certain non-GAAP measures of <unk>.
Reconciliation of these measures with the most directly comparable GAAP measures can be found in our first quarter 2021 press release, which is available on the company's website under the investors section of.
Additionally, please mark your calendars for our upcoming Investor day to be held virtually on June 16 2021.
With that I would like to turn the call over to our chairman President and CEO, Michael <unk>, Michael Great. Thank you.
Jennifer Good morning, and thank you for joining Centene as first quarter earnings call.
On today's on the call today I will review, our first quarter performance provide an update on our markets from products and discuss how we are positioned to sustain our momentum in the <unk>.
And growing pandemic environment.
While we have made great progress and working our way out of the spin gently nationally as we have seen recently it is not yet over.
We are off to a strong start in 2021 with solid revenue and earnings growth. It was a good quarter.
Our teams continue to execute well generating revenue of $30 billion, an increase of 15% compared to the first quarter of 2020.
Membership was $25 1 million at the quarter.
This represents an increase of $1 3 million compared to the year ago quarter.
Adjusted diluted earnings per share of the dollars 63 compared to 86 cents in the prior to you the quota representing an increase of 90%.
Overall, we are pleased with our first quarter performance and the trajectory of the basis and today, we are updating our full year guidance.
This is primarily driven by several tailwind of these.
These include.
First continued Medicaid membership growth amid suspended eligibility re determinations.
Our current guidance anticipates.
We anticipate the suspension of continuing to at least August one day.
Just on the fact that it is renewed 90 days at the time.
Second the marketplace, especially the enrollment of good which I will discuss in more detail shortly.
And the the hold on the Medicare sequestration.
Our results to date I'll share with.
Like a decrease in normal utilization offset by COVID-19 expenses and safely coupland of premiums.
Which Jeff will provide additional detail on shortly.
As we have done throughout the pandemic, we continue to monitor the headwinds and tailwind, we anticipate will impact operating landscapes for the remainder of the year and possibly into 2022.
Consistent with past quarters.
I'll provide you with updates based on the facts as we know them today.
Taken together, we believe the essence of these factors to be positive.
And tend to pay the tail wins include <unk>.
Continued lower than normal utilization.
Overall, the first quarter was lower compared to the prior of the quota.
We saw an increase in non COVID-19 utilization.
The police business.
All of the trajectory of utilization depends on the pandemic remains uncertain. We continue to expect utilization did come in below historical averages during the second quarter.
With the potential for some normalization starting the two.
In the second half of the year.
How does the key possible tailwind. We see include potential of with continued growth, resulting in higher than anticipated membership in our marketplace business from the special enrollment period.
And a probable the extension of the Medicaid eligibility redetermination suspension beyond August.
Through the end of the year, possibly into the beginning of 2022.
Has the potential headwind.
We continue to monitor the additional state weighted Joseph.
2020, one we anticipate a 550 million dollar of revenue impact of state revenue of that.
Great.
Jeff will provide some additional color on the shortly but.
I will share the we have seen truly one action in the first quarter of the year.
We are not currently aware of any additional planned adjustment of school of quarters. In fact, some corridors made we believe may be allowed to expire.
To reiterate overall as we see them today, we believe these factors.
In our favor.
As we conclude the first quarter of 2021, we are pleased with our ability to drive significant growth and our updated guidance reflects the strength of our business through the year.
We also remain vigilant that this is the year with unique drivers, including the suspension of Medicaid eligibility redetermination in the market place special enrollment good which we cannot be certain will continue throughout all of the 'twenty 'twenty two.
Consistent with prior to us and how the June Investor Day, we will provide an update on these factors and 2022, we recognize the while the factors as we see them today balanced to the positive the outlook remains fluid and dependent on the public policy landscape.
Yeah.
The strength of our diversified business is apparent across our product portfolio.
Our Medicaid business, we continue to participate in an active RFP pipeline.
We successfully renewed our contract is of why at the end of March and North Carolina, and Oklahoma of both remain on track to go live later this year.
For the 2021 we continue to expect the composite rate adjustment of 1.7% consistent with our initial guidance.
Our Medicare business deliberate continued group Medicare grew by over $1 billion year over year in the first quarter, representing growth of 41 per cent and demonstrating the strength of the platform and our ability to leverage our national scale going forward.
In our marketplace business.
Pleased to be operating in a supportive environment. The administration continues to invest in the part of it and just last week announced an additional $80 million from navigators to boost enrollment.
Based on data released by CMS Centene as a clear leader today in new enrollments on.
From the federal exchange.
And since the beginning of the year, we have enrolled over.
320000, new members and a market case product.
We believe these results demonstrate the strength of our strategy to provide consistent quality care and not to participate in a price with a race of the bottom with no net worth coverage.
I will remind you that now networks often in coast out of network utilization, which tends to be uncontrolled inexpensive.
We see opportunity to further grow with the enhanced the advanced premium tax credits that took effect April one of the.
The impact of which we believe will encourage consumers to prioritize quality consistency consistency and experience of the premium alone.
Moving ahead, we intend to maintain and considerate of building additional plants around the strategy.
On the technology front, we're making meaningful progress to advance our capabilities Super Bright high quality integrated care for our members. We look forward to move out of you more details on our unique technology strategy.
That is true then in June.
We continue to advance towards the completion of the Magellan.
Magellan health acquisition and remain on track to close the transaction early in the second half of 2021.
The Hart Scott Rodino waiting period expired in mid March and we're working diligently towards obtaining the necessary state approvals.
Our integration planning efforts are in full swing and we are enthusiastic about the combination which will enable us to expand access to the special care and no true <unk>.
Specialty care and nurture a fully integrated model conquest of behavioral and physical health.
I will remind you that Magellan will be part of a health care enterprise portfolio with the.
Allow them to maintain independence and sort of third party customers.
I would like to take a moment to comment on the situation in Ohio.
It's still an active RFP process, where we finished second out of the 11 bidders. According to a scoring some of the released by the Ohio Department of Medicaid.
Regarding the legal and regulatory landscape Centene has been clear that we maintain the claims to be unfounded.
The additional information Cabana of position on the slide I want to ask you to our website for links to our core funding.
We look forward to answering any questions from a governmental partners regarding this issue and we remain committed to the highest levels of quality and transparency and how we sort of our state partners.
Before I close.
Nice to talk about Centene will and COVID-19 vaccine distribution.
Over the past few months current data.
Care management teams.
Have worked tirelessly to identify members at the highest risk for the COVID-19, and provide those individuals with personalized and culturally sensitive outreach.
In addition, we have partnered with Lyft to support individuals with transportation to the vaccine appointments.
And with the old assets of the Pro Football Hall of Fame with whom we have had an ongoing partnership.
We created a PSA is focused on increasing awareness about the safety and efficacy of COVID-19 vaccine.
This type of innovative work is happening across the organization and I want to recognize and thank our employees for their unwavering commitment and dedication.
In closing we started the year of strong and look forward to carrying this positive momentum through the remainder of 2021.
As we experience a supportive environment of expanding access to share.
We continue to see long term opportunities to drive growth.
The top and bottom line.
Hence more actions.
As we provide the highest level of care to our members at the lowest cost.
Look forward to seeing all of you, albeit virtually out of and that's true.
Then on June 16th.
Thank you for your continued interest in Centene I'll now hand, the call over to Jeff.
Thank you Michael and good morning, everyone. This morning, we reported first quarter 2021 results from what was a good start to the year first quarter revenues were $30 billion, an increase of <unk> 15 per cent compared to the first quarter of 2020 and.
And adjusted diluted earnings per share was $1 63, compared to 86 last year.
As a result of the strong first quarter performance, we increased our full year 2021, adjusted EPS guidance by <unk> <unk> per share to a range of $5 five to $5 of 35 cents I.
I will provide further comments related to our updated financial guidance shortly.
First let me provide additional details for the first quarter total revenues grew by $4 billion over the first quarter of 2020 due to a full quarter of contribution from Wellcare and the ongoing suspension of Medicaid eligibility redetermination.
Partially offset by an overall decrease in marketplace membership state rate and the risk sharing actions and the repeal of the health insurer fee in 2021.
Our marketplace membership decline in the quarter was less significant than previously expected as a result of membership gains achieved during the special enrollment period.
Membership increased to $25 1 million in the quarter up 5% compared to a year ago. Since the pandemic began in March of 2020, we have added a total of 2 million Medicaid members.
Our <unk> was 86, 8% in the first quarter compared to 88% in the first quarter of 2020.
The H B R benefited from lower overall medical utilization trends due to COVID-19 pandemic and lower costs associated with the flu. This was partially offset by COVID-19 related costs state risk sharing mechanisms and higher COVID-19 and traditional utilization in the marketplace business.
Our adjusted selling general and administrative expense ratio was eight 1% in the first quarter. This year compared to eight 6% last year and nine 7% in the fourth quarter of 2020 the.
The adjusted SG&A expense ratio benefited from the ongoing suspension of Medicaid eligibility redetermination and the leveraging of expenses over higher revenues due to recent acquisitions.
Cash flow provided by operations was $43 million in the first quarter.
The lower operating cash flow for the quarter was primarily driven by a delay in premium payments of $910 million from the state of New York due to the end of their fiscal year, which was collected in April.
We continue to maintain a strong liquidity position of $369 million of unregulated cash in our balance sheet at quarter end debt at quarter end was $16 8 billion, which includes $152 million of borrowings on our revolving credit facility.
Our debt to capital ratio was 38, 5%, excluding our non recourse debt compared to 39% in the fourth quarter of 2020.
Our debt to capital ratio was 38% when netting our unregulated cash with our debt at quarter end, which represents a 90 basis point decrease since March of 2020.
Our medical claims liabilities totaled $12 8 billion at quarter end and represents 49 days in claims payable compared to 51 days in the fourth quarter of 2020.
DCP was impacted by the timing of medical and pharmacy claim payments.
We're making excellent progress towards the closure of Magellan and we remain comfortable with our previously communicated accretion targets.
Over the last several months, we have gained increased visibility into a number of important factors and have included those items and our updated 2021 financial guidance.
These factors specifically include the ongoing suspension of Medicaid eligibility redetermination through August 1st.
The delay in the California pharmacy carve out until July one and the delay in the New York Pharmacy carve out through year end 2022 the.
The new business win in Oklahoma with an assumed go live date of October one expected marketplace membership gains through the special enrollment period, Medicare membership fee schedule increase and sequestration delay and updated expectations of the state rate and risk sharing mechanisms.
These changes increased our total revenue guidance for the year by $4 billion at the midpoint to be within a range of 121 and $122 1 billion.
Our <unk> guidance increased by 50 basis points at the midpoint due to the mix of items such as the Medicare fee schedule increased state risk sharing mechanisms and Medicaid growth, which all carry a higher H B R. T.
Taken altogether. This has an overall neutral effect to earnings and the dynamics are consistent with the headwinds until wins, we provided on our fourth quarter earnings call.
Additionally, as I highlighted earlier, we have increased our adjusted diluted EPS guidance for the full year at the midpoint by <unk> <unk>.
Reflecting our strong first quarter performance.
Let me highlight some more details on some of these items, we now expect Medicare advantage enrollment growth to exceed 20% in 2021 the.
The strong growth demonstrates the value of the Wellcare acquisition provides positive momentum for the organization to build off of as we formulate our bids for Medicare advantage in 2022.
As Michael mentioned marketplace enrollment expectations for 2021 of our better than our previous estimates.
As the special enrollment period provides centene with an opportunity to reach many more eligible consumers. This strong growth demonstrates our organizational commitments of leadership in this product. We continue to view marketplaces of long term growth opportunity for Centene.
We have increased our estimate for state rate and risk sharing mechanisms from our previous guidance to $550 million for 2021.
In the first quarter the state of New York implemented a risk corridor of retroactive to April one 2020 that increased our payback by $40 million.
At this time, we are not aware of any new corridors of retroactive rates and the increase in our full year estimate reflects the performance of risk mitigation programs enacted last year.
As Michael noted, we continue to monitor utilization during the first quarter. We saw overall utilization that continues to be below the historical baseline and also slightly lower than the fourth quarter of 2020, COVID-19 inpatient admissions and cost peaked in January and decreased throughout the quarter. We continued to see of diverging pattern of COVID-19 and non COVID-19.
But the utilization.
The updated financial guidance reflects typical utilization that remains below the historical baseline during the first half of 2021.
Continuing the trend in normalized levels by the end of the year.
COVID-19 utilization, including testing of treatment costs are expected to partially offset the impact of lower traditional utilization the duration and intensity of higher COVID-19 costs will be impacted by the trajectory of the pandemic and vaccination rates.
Finally, as Michael discussed we continue to monitor some additional factors that are not in our updated guidance today.
They include the potential for the additional membership gains in marketplace above our expectations driven by the enhanced advanced premium tax credits.
The potential for Medicaid redetermination to be extended beyond August 1st.
Any additional state rate and risk sharing actions.
And the uncertainty associated with both COVID-19 and traditional medical utilization for the remainder of the year.
We believe these additional factors represent a net tailwind to the company for the remainder of 2021, the seasonality of our earnings remains unchanged with approximately 60% in the first half of the year.
I'll close by reiterating our confidence in the strength of our business our balance sheet remains strong and we believe we have ample liquidity to meet our operational and strategic needs. We remain focused on executing against our strategic plans and are committed to delivering shareholder value that.
That concludes my remarks, and operator, you may now open the line for questions.
Thank you we will now begin the question and answer session you.
Youre asking the question you May Press Star then one of the Touchtone phone.
Using the speaker phone, we ask that you. Please pickup your handset before pressing the keys.
All of your question. Please press Star then two.
The first question comes from Josh Raskin Nephron Research. Please go ahead.
Thanks, Matt good morning.
I think I'm still kind of the morning, Michael still trying to process, an investor day on Wednesday and out of Friday, So some of it along.
Yes.
My real question is Medicare revenues.
41 per cent of the quarter I know some of that was the anniversarying of of Wellcare, but my life were up 19% sequentially. It sounds like the outlook for the years.
Closer to 20%, so thats up from from previous expectations. So can you break out how much of that revenue growth was organic in the quarter, maybe a sense of what revenues of due this year and where are you seeing that success in terms of geographies and products and whether it's coming from competitors or fee per service.
Outside of the.
But I think the growth is really balance across our various markets. There's no one market contributing we've been expanding into new markets very successfully and as we have as we said when we went into the the Wellcare deal.
He felt that they had some competencies in this area that we could build on.
Also have a national presence as the as a total of Centene Corporation and so we just from building organically basically it is the sum.
Obviously, you take some from <unk>.
Competition and just some of it is just from the fee for service.
But it's it's really balanced across all of the potential elements of growth there's no one contributing more than another.
And just as a follow up I know the stars and it's been a big focus.
You guys are looking to the core improvement should we think about 2022 with an improvement year and Matt.
Necessarily looking for another 20% growth year, but just in terms of positioning and margin et cetera, do you feel like.
Sort of.
Better results better competitive positioning going forward as well.
I think well first of all I'm more of and put a number on the growth until June but of Iowa.
I like significant gross I think people know it so well.
We'll be working against that relative to the size, we were within a few basis points last year would be in it.
Thanks.
Boy stores, and we have very aggressive programs and as you know it takes time to to achieve that day.
One of the two year look back.
So on the side of SUNS weakens, we believe we will continue to make progress on it and.
We tell the Medicare of people, it's not just force size with four and a half from beyond so.
We're reaching for the stars so to speak and so.
So its really balancing that Josh.
Perfect. Thanks.
And the next question today comes from Kevin Fischbeck with Bank of America. Please go ahead.
Great. Thanks.
Just wanted to see how to think about.
You know the guidance.
And how much we should be thinking about as being a good day.
The thinking about future growth it sounds like most of the revenue.
The guide is onetime in nature of that fair I guess youre raising for the Oklahoma.
The contract, but most of the other things, whether it's the sequestration or re determination's or maybe even the first of all the period might be things of that we wouldn't necessarily flow through to the for the future year and I guess similar question, but on the MLR of it sounds like some of the MLR guidance is on <unk>.
Items that are happening this year, but maybe you wouldn't expect it to be.
In the baseline for next year, just how do we think about those two dynamics and Kevin I'll start I.
Well, we'll give you more guidance in.
June at our Investor Day, which is our practice of particularly on the top line.
This these are the unusual years.
We think that the Oh.
The determination will continue throughout the balance of the year, but we'll report a quota at 90 days at a time as the federal government does it.
And that's in the interest of being reasonably conservative so we're being cautious.
Of course, you Sir.
The marketplace.
We've demonstrated this past.
Quarter with the growth that we've had that we.
We are the leader in the field.
The strong position to continue that growth and we're going to continue its true.
The balance of this year as we see it and we see some upside there I think what's also important as it relates to the Redetermination if they do drop off to lead the termination of people, who maybe lose Medicaid coverage could kicked up the marketplace because of <unk>.
Once again, the cost structure of such with the.
Tax allowances, because they can do that without any costs.
And so.
I think I think we're gonna it seems.
I'm hearing of bird somewhere in the background here.
Uh huh.
So I think.
I think we will see growth continue.
But.
As we said governmental policies do have something to play with and it is a fluid situation and we went very well both sides. Yeah as we've talked about in the past and we're working with them now and various policies and approaches and the.
Uh huh.
As that unfolds I think between now and June I hope to have more insight.
We do as to what it will mean for the balance of this year and going into <unk>.
2022.
At the end of this as part of the the essence is positive.
As a quick follow up there you mentioned that some great corridors may expire.
When would you get visibility on that.
If I may.
We were just in terms of the states of just.
Not talking about adding two of them and we have talks about the.
The.
They do attitude is things seem to be stabilizing and so I'm trying to give you a sense of where we are today.
What we're seeing and I'm, not saying which specific ones.
It's it's moving around we only had one adjustment this past quarter, which is a very positive sign. So once again I'm trying to give you. The just saved some insight as we see each other.
Alright, great. Thanks.
And the next question today comes from Justin Lake with Wolfe Research.
Thanks, Good morning a.
Couple of questions on the.
The quarter first the.
The P Y D look pretty strong relative.
Relative to last year I was wondering if you can kind of parse out the impact that had on the quarter and then you talked about the.
A little bit higher cost on the marketplace business any more color. There you can give us in terms of what youre seeing there and he kind of geographies and bad where margins kind of end up.
For this year given the cost pressure.
Good afternoon, let's say it goes yes sure Justin.
As we look at development, we obviously track this from quarter to quarter, we're looking for consistency in our view, it's very consistent with what we've seen in the past now you have to obviously account for the acquisition.
Of Wellcare, but.
Roughly around that one one per cent range of the prior year medical costs. So I would say nothing unusual on the development front.
From our perspective, which is I think we've had a consistent practice over a long number of years.
On the marketplace business on the cost side, what we did see was just a little bit higher.
Inpatient authorizations on COVID-19 specifically in January.
And then a little higher non and patient really just compared to our expectations. So it doesn't really change the margin profile for the year.
I would just say a tad higher than versus what we had modeled in Q1, there could have the president Mr. Joseph Force that's right. The other thing we're tracking is the acuity of our membership so.
And obviously the S&P members as well so that's all kind of factor into the risk adjustment calculation and that's relative to your competition in the data on that doesn't come out until really the end of Q2, so more to come on that.
Alright, thanks for the color.
The next question today comes from a J Rice of credit Suisse. Please go ahead.
Hi, everybody.
In Michaels comments about the marketplace or the public exchanges.
And the narrow network competition I think when you guys.
Obviously been a big leader there the last few years one of the secret sauce, you had was to approach it with a more limited network approach relative to some of the guys that came out of the institutional commercial products and now it sounds like maybe some other competitors are leapfrogging of doing even more in that area I'm wonder.
If you think about the membership and what's happening with the membership I know it's the.
Membership is prone to switch, but it's not driven.
By premiums because theres a lot of subsidies is it mainly networks that are driving people to pick and choose on the exchanges in your view at this point or are there other things that are bad.
Factors in driving how people choose.
The strategy involves the.
I think what's important is we did see some significant pricing.
And the end of last year.
Cost of the membership.
As we said and that's because they had it now network and we're able to do that.
We opted not to join that race to the bottom and keep maintain a provider of next one but I'm going to ask Brent who oversees this business to pick it up right.
During the special enrollment period, you know what we are seeing is really a focus on strong provider networks and not narrow networks.
We're also seeing the a commitment to customer service from our royalties for here in the so everywhere.
At the end of the day of people that left us in 2020 today in 2021, what they're finding is true commitment to a strong provider network and really focus on the customer and that's really fueling our growth. When you have the supportive of administration you have of special enrollment period, that's now going from 180 days.
The enhanced tax credits being applied on April one.
And really at the same time of <unk>, we really have a commitment to a strong distribution strategy. This is leading to our growth.
Okay alright. Thanks.
Maybe just Jeff the 90 day public health.
The emergency if that were to get extended the year and what would that mean for you guys.
I'll give you a little flavor on the membership I think we expect our membership to peak roughly $2. Two members of $2 2 million members since of the pandemic began roughly in July.
And if it got the extended we think they'd go up to 2.4 suite top out at 2.4 before the end of the year.
Okay Alright.
What that really means is we recouped.
We have incurred to date plus from what we lost in the last quarter of last year, we see of continuing to grow significantly.
Thanks.
And our next question today comes from Matt Borsch with BMO capital markets.
But.
Yes, good morning.
Maybe I can.
Maybe I could ask you to talk about the.
What youre seeing in terms of your profitability in Medicare advantage I I'm asking the question just in the context of the <unk>.
The gross debt that you've shown there, but wondering yes.
Some of that is coming from the expense of margin and maybe that was planned.
While we have not gotten the specifics by product line.
I wanted to assure you Matt that everything we do.
This will be driven by profit and.
With it with a view to expanding margins and I think we have a clear cut.
Approach of it.
Yeah, Matt. This is Matt This is Jeff a couple of things obviously as Michael mentioned its unique year well you know we had the Medicare fee schedule cut so that's not helping and then obviously we have a lot of room for margin expansion in the future years based on stars performance. So I think as you look at this year in isolation.
I would say margin expansion opportunities going forward, primarily from eliminating the cut and then obviously.
Performing better on Starz, which is one of the important task that we're focused on.
If I could ask a different question on the Medicaid Redetermination if.
If we get into that whether it's later this year or the beginning of 'twenty 'twenty two.
Has your thinking in terms of the impact changed at all versus <unk>.
Maybe what we had discussed I'm thinking back at the December Investor Day.
Well I think.
Sort of I think it's important to say, we're going to have a better view of that come.
The June Investor Day, and that's typical of what we talk about a day I did comment though that.
Our position in the marketplace that if there is with the termination of people lose Medicaid coverage. We believe that we will be in the position to where they will flip into her.
Marketplace, so as the.
It's the same network and things of that nature.
That would be of good instead of in the cost of a subsea.
It is.
I think that.
It's a matter of where that membership goes.
Got it thank you.
And our next question today comes from Scott the dull.
Stevens. Please go ahead.
Hi, Thanks, good morning.
First question just would.
Would be interested if you have any clarity for us on what Youre learning just about the New York rates being updated if at all just obviously a lot of.
Developments there in the New York budget more broadly after the Ark Bill was passed and so interested if I know you guys called out that the.
The risk corridor. The retroactive one that was put in place, but any updates to like because I know there had been of 3% assumed previously in the budget.
If you got an update on that and then also just on the quality payments in New York as well, which I know it's been a dynamic for you guys, just where things are trending there as well.
Yes, Scott this is Jeff I mean, I think it's just too early to tell.
The other unnecessarily when these things arent finalized they have a tendency to move late in the game as we've seen in the past and so I guess from from my perspective, I would say, it's just too early to tell where it's going to land, but we're comfortable obviously with what we have in the in the numbers for this year.
Okay.
And then just the follow up question.
So all of that you've got to have your updated view on the revenue guidance on the.
That's sort of the start date of the carve out of the Metical P. B M contract.
I know the state had announced that they were going to be conducting a review of just around the Magellan acquisition and looking at some things just interested at this point of add backs to review concluded and you've now gotten visibility from the state or is that still ongoing and if and if there has been any feedback so far on.
In the.
Any changes that the state would be requiring as part of the Magellan acquisition. Thanks.
I made the comment on it the worker yeah happy to.
Gen. One is working very closely with them with the HCS in California.
The apartment leadership on the conflict avoidance plan that is still in process, but progressing well, we don't yet have clarity from the department on when the program would.
Would be would be kicked off but we're hoping to have a sense within the next month or so of the resolution of that conflict the plants plant.
Okay. So that starts with the do you have in the updated revenue guidance that is just that sort of an estimate at this point.
Sure.
Yeah, Okay. Thanks.
And the next question today comes from Ricky Goldwasser with Morgan Stanley. Please go ahead.
Yeah, Hi, good morning.
John.
On the utilization.
The acuity level. So Michael you said that you are tracking acuity.
What are you see two day.
Automation is coming back what's the acuity levels.
On the core ex COVID-19 and then when we think about the same utilization is below baseline.
I assume the debt.
Relates to core utilization as well, but maybe you could give us a little bit more.
Color on how it's trending per market.
Do you think the because you're now seeing sort of the mix towards more of an MAA population of that that's impacting some of the utilization trends that youre seeing versus.
The Medicaid.
In the market.
Also I think Jeff's just Jeff commented that in the marketplace. We saw some incremental increase in utilization, but that's offset some of the medication that the Jeff why don't you take the suite of the numbers on the on the utilization for a lot packed into that question. So I'm not sure I heard the final piece of that but we really haven't.
<unk> seen a change in the acuity outside of our expectations.
Specifically just take the marketplace business, we knew our acuity was going to change based on the open enrollment and that's why we commented that we think are risk adjustment.
Payable will go down substantially this year.
So so far I would say, we haven't seen any acuity change.
In our base membership other than what we've expected.
So I hope that answers part of your question and.
If that doesn't what's the what was the second part.
Yeah. So to your point of no change of acuity versus your expectation so to add in that.
What is embedded into guidance by year end are you assuming unchanged the QD or higher acuity and then the search.
And part of the question was on the utilization.
You said.
No change I've, just got the trying to understand what or how does it look from the Medicare population versus Medicaid.
Yeah, Yeah, two things I guess, what I would say is we know the acuity of the members we have right and we have projected that in our in our guidance and if you go to our prepared remarks.
We have said is we expect utilization to stay below the historical baseline for the first half trending towards the normal by the ended the year.
So I hope that helps and yes. There is a difference in behavior between I would say Medicaid marketplace.
Ken Medicare.
The demographics of those members are extremely different.
From an age perspective, so there are different utilization patterns, but we obviously incorporate that into our guidance.
Okay. Thank you.
And our next question today comes from Lance Wilkes with Bernstein. Please go ahead.
Yeah, Good morning, Chris.
So Michael.
Could you talk a little bit about.
Your long term strategic growth outlook at this point and in particular was interested in how do you look at your major priorities beyond the Medicaid and marketplace and how much of the growth longer term do you think youre going to come from those areas like Medicare health care enterprise or value based care.
I appreciate the question I think we will get into more detail on 2022 gross who can give you some sense of where it's coming from in June which is a practice.
We still see ourselves very much as we grow the company, we see balanced growth of plus all of the product lines, we've demonstrated growth in Medicare and we've talked about that being a growth engine for us within the marketplace. We will continue to be a growth engine as well as Medicaid I mean, we have.
A government in place now that believes that people should be insured and so well.
We're working on now is the come up with the numbers for you.
Reasonable, but we'll give you in June, but we see it's growing across all of our products and and growing responsibly with the expanding margins and containing costs and improving the quality. So it's the it's a balance of was trying to strike and we have a couple of new products that we're working on the I'm not going to talk about the confidentiality leased.
And just to clarify on the like the health care enterprise and some of the things with the value based care delivery that maybe you're doing in Florida or places like that.
Material are they to gross prospects over the next year.
123 years.
Well I think.
I think there's gonna see that those things are put in place for long term growth and now we have a we have some technology youre going to ease the wanting to hear about at the.
June Investor day that we'll.
We will drive growth.
And that will drive demand for our products because of what it can do for.
The quality and as a system utilizing the talk about the provider and.
Recipients the light.
Yeah.
Gotcha, and just to be clearer to the.
Technology of those mainly drivers of the managed care business or do you think those are standalone of enablement business is like you know kind of in line with Magellan supporting other health plans.
So I think what we're doing the CNS systems as is.
It's going to drive improvement in quality.
And reduce costs.
So it's.
Well, you'll have higher performance in the pool.
The quality standpoint, improve quality, but it's going to significantly reduce our kind of core.
Ross.
Okay. Thanks.
Okay.
And our next question today comes from Robert Jones with Goldman Sachs. Please go ahead.
Great. Thanks for the questions actually just wanted to go back the Ajs question about the competitive landscape Michael in the marketplace, you've mentioned a few times obviously.
End of last year that you saw some more competitive pricing behaviors from some.
Some of the players there was wondering if maybe during the special enrollment period, you've seen any of those competitors change behavior or continue with a more aggressive pricing strategy and I think within that just curious you know how how widespread is the spin as it is it really kind of contained to a state or two or are you seeing it more broadly.
Thank God, it's not decided but I think what we want.
One we're focused on ourselves and how we do things.
We said at the time were not going to join that race to the bottom and we know that that's not.
Some of you Gotta do any couldnt be sustained in my opinion. So what we've done is we've maintained our network.
We have the subsidies that are necessary to have really taken price off the table in my opinion, where people would look at the quality of the service of Brent talked about and that's where we're seeing the the growth and return of the membership to us.
As well as the incremental new membership and so I think what really.
The Sun is.
How how to continue to grow it and the ear.
I learned a long time ago, and rising consumer packaged goods when when you're trying to go in against somebody that's a clearer the leader in the marketplace, which we work.
Or the category the only way you can hope to try and come in as on price.
And Oh.
We had a strategic positioning of the people ever thinks of the membership the way on pricing of the COVID-19 environment as we come out of it.
We've demonstrated in the first quarter of this year, we've recouped orderly lost and then some and we'll be giving you guidance in June the shows continued growth.
Got it that's helpful and I guess, maybe just one quick follow up Jeff I know the analyst day, you talked about the cadence of earnings maybe being.
A little bit more front half weighted I think it's like 65% of any any updated thoughts you know as you've got one quarter under the belt now as far as how you're seeing earnings play out for the year.
Yeah, Yeah, I think in a $60 60 per cent front half would be where I would direct you to and again. If you just think about the utilization you know kind of assumptions that we have that that gives you. The the reason why there's more earnings in the front half of the year.
Okay, great. Thank you.
And our next question today comes from George Hill with Deutsche Bank. Please go ahead.
Yes, good morning, guys and thanks for taking the questions Jeff.
Jeff I might just kind of a simple and can you talk about the vaccine initiatives and the uptake that you're seeing in the managed Medicaid population and then my quick follow up would be is I know that we've seen a continued suspension of the redetermination, but we continue to see smattering of press releases as it relates to raising barriers to act accidents like.
Increased use of prior offs and step edits coming out of various states I'm wondering if you're seeing this and is it having impact on utilization or might it be too early to tell.
So your first one was on the vaccine take up rate of.
Obviously, you know part of what some of the initiatives that Michael had mentioned, where we're trying to stratify. Our membership population for those that are most of the risk and trying to get the vaccination to them I think some of the challenges we've had on the data side as the potential members could get vaccinations from alternative sites. So that's not within our ecosystem.
So, but we are tracking that data as best we can and trying to obviously get our high risk members to get vaccinated. So and the second question again I didn't catch that last part.
So just you know we subscribed to like all of the state Medicaid Agency press.
Press release distribution lists and we're starting to see the smattering of data flow around state agencies wanting to raise.
Barriers to access so re instituting prior authorizations with care delivery reinstituting step edits I'm just wondering if youre seeing any of this if you expect it to impact utilization will it be meaningful not seeing it.
The commentary around that.
It's early I, we haven't seen I'm not aware of we've seen anything at this point in time and you know that's something that we'll obviously be continuing to watch it.
I wanted to add one thing about the does.
The vaccine that well our focus has really been with the the gold jackets from that.
The the hall of Fame and others is to help people that in our population that may be hesitant.
It's for the various historic reasons to not take the vaccine to say, it's OK and having people that are well respected and sports and other areas. We had Bob Costas wave that Glenn do a public service announcement of wearing of masks.
So it's a matter of getting people that are respected.
Current gene and providing the incentive.
And what we're trying to really focus on is they're not doing the just for themselves, but they're doing it for their loved ones. The do it for the parents of children of their spouses. Other members of the family. So what's really important is just encouraging so that's where we spent a lot of time of energy and work with government officials.
Try and demonstrated with the.
They are responsible of that area.
Thank you ladies and gentlemen, this concludes our question and answer session I would like to turn the conference back over some of the management team for any final remarks.
We thank you and we look forward to our Investor day in the second quarter and as I said earlier I believe we have the momentum to continue the.
The the positive impact we're having in the marketplace. So.
Stay safe everybody. Thank you.
Thank you Sir This concludes today's conference call. We thank you all for attending today's presentation. You may now disconnect your lines and have a wonderful day.