Q2 2021 Bright Health Group Inc Earnings Call
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Yeah.
Good morning, and welcome to the bright health groups second quarter 2021 earnings conference call and webcast. A question and answer session will follow a bright health group's prepared remarks as a reminder, this call is being recorded.
Leading the call today is bright health group, President and CEO, Mike, Mike and <unk>, and Chief financial and administrative officer Cathy Smith.
Before we begin and we want to remind you that this call may contain forward looking statements under U S Federal security laws.
These statements are subject to risks and uncertainties that could cause actual results to differ materially from historical experience or present expectations. A description of some of the risks and uncertainties can be found and the reports that we file with the Securities and Exchange Commission, including the risk factors included in our current and periodic filings.
This call will also reference non-GAAP and non <unk> measures a reconciliation of the non-GAAP to GAAP measures are available on the Companys second quarter press release information presented on this call is contained and the earnings release issued this morning and in our form 8-K dated August 3.2021, which can be accessed from the Investor relations page on the comp.
And he's website.
I will now turn the conference over to the Chief Executive Officer of Bright Health Group My Mic on.
Good morning.
And thank you for joining bright help group inaugural earnings call.
I couldn't be more excited to share details on our business our year to date performance and our continued growth and momentum at bright house.
After a few remarks I will pass it to Kathy who will cover a more detailed review of our performance as well as our outlook for the year.
Before we take your questions.
I wanted to start by touching on our mission and vision.
We are a healthcare company at our core and because of that our mission is central to what we do at bright health each day.
Making health care REIT together.
Built on the belief that by connecting and aligning the best local resources and health care delivery with the financing of care.
And we can deliver better outcomes and a lower cost for all consumers.
Bright health group is well on its way for building the national integrated system of care needed to change healthcare and the United States.
Bold bright health care, and new health are demonstrating significant growth and diversification.
And at a great Health group level, we are forecasting 2021 revenue of greater than $4 billion.
As we entered the second half of 2020.1 bright.
Bright healthcare has seen tremendous growth and currently serves a diverse customer base with nearly 663000 total consumers across our commercial and Medicare advantage lines of business.
Our new health business is also seeing remarkable growth with 131 total owned and affiliated primary care clinics and nearly a 170000 patients served under value based arrangements through our owned clinics.
As we discuss the current state of our business.
I'd like you all to keep 5 key themes in mind.
1 we have demonstrated unmatched growth.
Bright healthcare ended 2020 with 207000 members served.
Approximately 145000 commercial members and.
62000, Medicare advantage members.
As of the end of the second quarter 2021, bright health care serve nearly 663000 consumers and increase of 220%.
2 we have delivered consistent performance Chris.
Critical to our model is our ability to price to our underlying capabilities and cost structure in each market.
Even with our explosive growth, we have been able to demonstrate and and adjusted medical cost ratio below 80% across our enterprise during the first half of 2020.1.
Critical for this measure is our model's ability to drive in network utilization within our integrated systems of care.
3.
We are driving differentiation through new health.
We have been building, our new health business since the beginning of bright health.
However, we are now starting to see it come to life.
Focused on serving all populations new help builds and operates local <unk>.
Integrated systems of care that clinically financially and with data and technology align all stakeholders and our local market.
Today, New helped directly managers care for approximately 170000 value based patients through our 40 for owned primary care clinics.
This represents over 700% growth from the 19400 patients we managed at the end of Q2.2020.
For we are building 1 technology platform.
Core to our model is a single technology platform purpose built for the aligned model of care.
This platform, which leverages, our provider and consumer facing tools branded as Doc squad connect our consumers and patients to their personalized care teams.
We are also moving to a single operating system that spans our care financing and care delivery businesses, which will enable us to continue demonstrating differentiated performance and outcomes.
And finally.
5 continued future growth.
Bright health group has significant near and long term growth prospects as we plan to offer bright health care products and for new states. During the 2022 open enrollment period and expand our new health integrated care delivery footprint, and Texas, North Carolina and beyond.
With that I will turn to a brief business update to guide everyone on how these themes and connect to our day to day operations.
The bright help your business model is centered around aligning the financing of care with the delivery of care.
Healthcare is not 1 size fits all and neither is the way we approach it.
Our business is purpose built to meet the needs of each local market.
That is why we have created 2 interdependent and market facing businesses new.
New health for.
On personalized care delivery and.
And bright health care focused on financing and distribution.
Working in tandem leveraging technology to.
And to optimize the health care experience for all.
What drives empowers our company is the bright health intelligent operating system or buyouts, and its proprietary <unk> provider and consumer facing tools that connect consumers payers and providers, while delivering real time insights to support better clinical and financial outcomes.
Across bright health group, we have been able to demonstrate growth across all measures.
Bright health care business has seen 220% year over year membership growth, while our new health business continued to add to its capabilities.
Driving over 775% growth and the number of patients served under value based contracts.
This tremendous growth was primarily the result of for drivers.
First strong AEP OUP organic performance, especially in Florida, and North Carolina.
With organic growth contributing and 84% of our year over year membership growth.
Additionally, that organic growth included a 29% organic growth rate and our Medicare advantage business.
Second.
Strategic acquisition activity provided additional debt capabilities and geographies.
Third special enrollment period growth and all but 1 state and which we offer ISP plan.
With 47000 net new consumers since March 1.
And for Us.
Both organic and inorganic investment and our new health business, including strategic acquisitions in key markets.
Equally important this growth did not come at the expense of performance.
Critical to the bright health model is our ability to price to the underlying capabilities and cost structure and each market and manage membership within our integrated systems of care.
Our consistent performance starts with effective pricing that is built on both our unit cost advantage gained through our care partner networks and our integrated systems of care that allow us to effectively manage medical costs by driving improved in network utilization and accurately capture.
During membership risk.
Our most recent data indicates that even with our growth our population is consistent with our target and pricing expectations.
We are seeing consistent membership demographics between our new 2021 membership and our broader book of business.
With age and gender mix in line with our mature markets.
Also non COVID-19 utilization trends are tracking at or below expectations year to date across both commercial and Medicare advantage.
And our ISP metal mix favors silver plans across our markets consistent with our underlying capabilities and pricing strategy.
I'd like to spend a minute discussing our Medicare advantage business, which we built into a significant contributor with over 110000 consumers and euro.
<unk>, $1.4 billion and run rate revenue today.
Over the past 18 months, we've developed the infrastructure for future Medicare advantage growth through key investments to develop capabilities internally and acquired strategic accelerators.
Our foundation is built upon 3 key factors for us.
And we capitalized on the relationships, we've developed and local markets from our proven IFC market expansion model.
We've built valuable care partner relationships and brand awareness that allow us to add new products to existing markets.
And the 14 states and which we currently operate there are nearly 13 million Medicare advantage members for.
Providing a multi year growth opportunity.
Additionally, over 11% of our IFC membership.
Between the ages on 60 and 65 <unk>.
Representing a key age and growth opportunity.
Second.
We leveraged differentiated capabilities and acquired assets.
Brand New day helped us become the third largest provider of C. SNP plans in the country.
A growing market driven by increases and life expectancy and better treatment options for seniors with chronic conditions.
We've managed to drive organic growth and <unk> membership of 35% since we acquired it in April 2020.
Similarly, Central Health plan provided us a model of culturally relevant and care with plans tailored to the needs of specific ethnic populations.
And third we partner with new help to accelerate growth.
Our integrated systems of care include a comprehensive model of senior care through our own clinics, which we currently serve 17000 non bright health care related Medicare patients through value based arrangements.
This foundation has set us up for growth of our offerings in 2022 and beyond.
We plan to capitalize on the ISP AG and opportunity.
Our differentiated special needs plan platform.
And our go deep strategy tailored to specific populations.
We are deploying this approach by increasing the market depth of our offering and 5 key States, California, Florida, Colorado, Arizona and New York.
And we believe our MA business will continue to be a core driver of bright health care performance.
New health operates local integrated systems of care and every market we serve.
We know every market is different.
With the need to match the system of care to the population and capabilities of that specific market.
That is why we have a model that leverages different market approaches.
Built on 3 core delivery vehicles with a common set of principles.
First and all markets, we assemble and align with high performing care partners to improve health care delivery.
Second we enable providers to succeed under value based arrangements.
And third our most aligned and integrated value based care delivery.
Comes from our owned medical centers.
Each market Leverages, these new health capabilities in different ways.
They are all built upon a set of common alignment principles clinical alignment financial alignment and data and technology alignment powered.
Powered by our dock squad tools and capabilities.
This approach of delivering local integrated systems of care has enabled us to be the national leader and delivering value based care to the IOP population.
To date, our integrated care delivery footprint has been focus and south and central Florida.
Serving approximately 170000 patients under value based contracts and.
In Florida, we built a hub and spoke model.
And with larger centralized clinics operating multi specialty care lab pharmacy and dental services.
And as well as wellness centers and urgent care.
We are surrounded these hubs with smaller clinics and the community, which enabled convenient access to core primary care services.
We have also developed and infrastructure around our core clinical capabilities with bilingual call centers non emergency medical transportation and other ancillary service offerings.
Additionally, our own clinics are tailored to the markets they serve and central Florida. Our clinics served the largest retirement community and the U S with a comprehensive model for senior care.
Creating an opportunity to partner with bright health care on Medicare advantage offerings.
And South Florida, our clinics are designed for multiple populations.
We are 1 of the only providers in the country, taking risk on the IOP population at scale, while also managing Medicare and Medicaid patients under value based contracts.
These own care delivery assets are supported by our affiliated providers and our high performing care partner network.
This model allows us to serve all consumers across their entire life journey and and effective way not just for single population.
Through our growth and Florida, we have established a replicable differentiated integrated care delivery model, which we plan to leverage as we expand into new states and.
2022, we are deploying this model in both Texas and North Carolina with over 20 de Novo clinic launches planned during the year.
In addition, we continue to evaluate additional organic market entries as well as strategic inorganic opportunities to deploy capital to enhance our capability set.
Expanding our integrated care offering will allow us to serve all populations, while enhancing the level of alignment of the local care delivery infrastructure, improving patient outcomes and driving performance for bold bright health care and other payers.
Core to our model is our technology platform that enables our differentiated market performance.
Purpose built for the line model of care, we have made strides and its development and are excited for where we're going.
Vials are intelligent operating system is focused on 2 key areas, creating a single administrative platform.
And developing our external consumer and provider facing platform dark spot.
We are developing a single administrative platform built around the consumer.
We operate with a 360 degree view of the consumer and have rolled out a differentiated integrated payer provider workflow panorama to our clinical teams.
We're also migrating our health plan offerings, including acquired assets to a common platform with 2022, new markets launching on our desired and state solution and with existing markets transitioning in 2023 and 2024.
We are also rolling out <unk>, 1 our consumer and provider facing solution that connects individuals to their personalized care team.
With an active rollout underway across new health on clinics.
Year to date, we have delivered over a quarter million virtual visits through this platform.
As we look to the future.
Bright health group is positioned to continue driving measured growth with a value proposition that resonates with both consumers and care partners.
Our 2022 plans and existing state called for robust product diversification across ISP, Medicare advantage and employer offerings.
We will be entering our first county, and ISP and California, the second largest IFC market and the country after Florida with an addressable statewide market of approximately $1.6 million lives and.
The first new IFC carrier to enter the state and 5 years.
Just as we are bringing our Iot capabilities for California, We're also leveraging the experience and capabilities from our California, and Medicare advantage business to grow and other states. We are expanding our market GAAP and 5 existing states with opportunities across both traditional Medicare advantage products.
Well as and special needs plans.
We're also entering new states and 2022.
The new state, Texas is a core priority with a similar market opportunity and provider dynamics as Florida currently our largest state in terms of membership.
We expect to use our integrated delivery approach, which I mentioned previously to effectively managed care and create a unique consumer value proposition.
And finally, we're expanding our new health integrated care delivery model into Texas, and North Carolina.
Building upon the successful platform, we have put together in Florida.
We expect future new health growth to come from both de Novo builds as well as continued investments and strategic opportunities as we enter new markets.
I'd like to thank our team our care partners and all the frontline workers across the country.
And now I'll hand, it over to Cathy Smith, our chief administrative officer, and CFO to take us through the numbers.
Thank you, Mike and good morning, everyone.
I'll begin by walking you through our Q2 and year to date results and then we'll provide guidance for our 2021 full year outlook.
We are pleased with our second quarter results and the momentum we're seeing across the business.
At the bright house group level after adjusting for intercompany eliminations.
Revenue increased 275% year over year to $1.1 billion in Q2.
We saw robust growth and our gross margin as well with year over year growth of 229%, resulting in total gross margin of $209 million.
Of note our gross margin was positively impacted by a $58.5 million mark to market gain on a path of investment.
On a non-GAAP basis, our adjusted EBITDA declined year over year to $35.3 million, primarily due to increases and operating costs for our new market entry and unplanned marketing and selling expenses related to the special enrollment period and our commercial business.
Managing medical costs as efficiently and effectively as possible for the members we serve is critical.
Internally, we look at our underlying operational performance without prior period adjustments and unusual items like the impact of Covid related expenses.
Given the newness of our book of business and variability of scale across our market.
We thought it would be useful to share our view of operational performance.
Time as our business matures.
We try to stick to a reported performance well, noting unusual items.
In Q2, our adjusted medical cost ratio at the enterprise level with 82% in line with the prior year.
On a reported basis.
Q2, 'twenty, 1 MCR was 86, 8% with the adjustments, primarily driven by Covid impact and prior period development.
I will provide additional color on the bridge between reported and adjusted MTR and my comments on year to date performance in a moment.
And our bright health care business second quarter membership came in at 663000.
220% year over year increase.
The increase was driven primarily by organic growth and our ISP business, including the special enrollment period.
As well as both organic and inorganic growth and our Medicare advantage business.
Our new health business also continues to experience significant growth.
With the acquisition of Central and medical Holdings, which closed on July 1st we now serve approximately 170000 patients under value based arrangements across our 44, new health owned clinics.
In addition, our affiliate strategy continues to gain traction with new House supporting 87 additional clinics.
1 key metric I'd like to highlight which demonstrates progress to the most comprehensive vertical integration of the financing and delivery of care.
Is that 132000 and of the 170000 total value based patients served by new House.
And our through and integrated relationship with bright health care.
As we step back and look at year to date 2021 compared to the first half of 2020, our gross and performance is truly remarkable.
Our first half revenue has more than quadrupled since last year, all while maintaining a consistent adjusted medical cost ratio below 80%.
This is in large part due to our lines model, which focuses on driving and network key dates to our integrated systems of care.
Year to day 2021, we're currently at and in network key day rate of 87% across our business and have been able to demonstrate an ability to accelerate the improvement of this metric as we refine our market entry model.
In North Carolina for example, we were able to drive and $18.5 percentage point increase and our in network keeping year over year.
As promised I will now walk you through the bridge between our adjusted and reported MCR.
For reference the appendix of our earnings release and Investor presentation. Both include the detailed bridge.
So for 1.4 percentage points difference between our reported and adjusted MCR for the first half of 2020..1 is comprised of direct COVID-19 cost impacts to our NCR, a 360 basis points and non COVID-19 prior period development, representing an unfavorable impact of the MTR of 90 basis points.
With respect to the non Covid prior period development.
This was impacted largely by 1 time items and our Medicare advantage business, a significant portion of which are from brand new day and related to time periods prior to our acquisition.
The total net non COVID-19 prior period gross margin impact of Emmy was unfavorable by $19.1 million.
ISP prior period impact was minimal as for.
Performance was broadly in line with expectations with offsetting favorable and unfavorable development.
The total net non COVID-19 prior period gross margin impact to ISP was unfavorable by $2.8 million and was comprised primarily of 2 items.
First we experienced favorable non COVID-19 ISP medical costs prior period development of $21.7 million driven by a population that was slightly healthier than our expectations.
And second just healthier than expected population resulted in an offsetting unfavorable risk adjustment impact to revenue of $22.3 million.
We expect the impact of MTR adjustments to decline and the future as our contribution from existing membership increases and as a percentage of our overall book of business.
The final point I'd like to make on year to date results relate to our operating costs.
While we recognize we have a long way to go to achieve our target operating cost structure, we have been able to demonstrate a 940 basis points improvement and our operating cost ratio across the enterprise.
The year over year improvement is the result of operating leverage from the additional scale of our business combined with efficiencies from critical vendor in sourcing and improved contracting.
As we look at our membership growth I want to highlight 5 key themes.
1 we continue to operate a diversified business with consistent growth across both our commercial and Medicare advantage business.
2 over the past year, we saw 63% of our total growth coming from new markets with the remainder coming from existing markets and our 2021 acquisition.
3 overall as Mike mentioned earlier, 84% of our total growth came from organic activity driven by for State, Florida, California, North Carolina and Colorado.
Total on Medicare advantage grew to 30% of our bright healthcare premium revenue in the first half of 2021 and is currently and approximately $1.4 billion dollar revenue business based on the Q2 'twenty 1 run rate.
And by losses. This explosive growth the overall composition of our new 2021 membership is consistent with our broader book of business and is in line with our pricing expectations.
Within our new health business, we have seen rapid growth and expansion compared to the first half of 2020 driven both by inorganic growth and central Florida, and the expansion of our integrated care delivery offering and South Florida.
During the first half of 2021, we generated approximately $163 million of new health revenue and more than 800% year over year gross rate from the prior period.
This includes approximately $63 million and investment income because of the mark to market gain on the passive investment I referred to previously.
Excluding that mark to market gain our year over year growth would have been and 459%.
With the closing of Central Medical Holdings, and their 17 clinics along with the continued organic growth we are expecting approximately $425 million of full year 2021 revenue from this segment.
Now I'd like to speak for a moment about our balance sheet and operating cash flow.
And the successful completion of our initial public offering resulted in net proceeds of $887 million.
We had approximately $528 million and nonregulated cash and cash equivalents on our balance sheet as of June 32021.
After adjusting for the acquisition of Central which we completed on July 1.
And this figure does not include $746 million of additional cash and equivalents held by our regulated insurance subsidiaries.
Which will be sufficiently capitalized at levels above regulatory minimums to allow for continued growth.
In addition, during the first half of the year, we generated nearly $500 million and operating cash flow, which strengthened our balance sheet.
Given our strong balance sheet robust operating cash flow and $350 million Undrawn credit facility, we are confident and our ability to meet near term liquidity needs and support the continued growth of the business.
I'll wrap up my comments today by discussing our outlook for the full year, we expect enterprise revenues to be 4 for $4.2 billion, depending on risk adjustment factors.
And anticipate on enterprise medical cost ratio of 86% plus or -200 basis points.
Well there are a variety of items that can impact MTR, both positively and negatively we have demonstrated we can manage within reasonable range of outcomes, considering the maturity of our business and of our membership population.
Within our segments, we expect bright health care and of your membership of approximately 650000.
And are forecasting continued growth at new health to drive 2021 revenue of approximately $425 million.
To bridge, our enterprise revenue, we are also providing and expectation of intercompany revenue, which we expect to be approximately $275 million.
Before I turn the call back to Mike I want to appreciate our amazing bright health team across the country working together, we are changing health care.
And I want to thank our shareholders for their continued support as we build a national integrated system of care.
Thank you for sharing our mission of making health care REIT together now.
Now here's Mike for some closing remarks.
In summary, we are very pleased with our second quarter results and think this is a strong start to our journey as a public company.
I'd like to think that 2500, plus bright health employees, who are executing on our strategic priorities and working to make health care REIT together.
I believe we are well positioned to capitalize on disk era of consumer choice and health care and look forward to keeping you all updated as we progress through the year.
Before we open it up to questions I wanted to introduce 2 additional and colleagues that will join Kathy and me for the question and answer session.
Samsung Baqouba CEO of our new health business, and semi and gentleman CEO of our bright health care business.
Operator, let's open it up to questions and please limit to 1 per caller.
Thanks, very much Mike if you would like to register a question. Please press star followed by 1 on your telephone keypad.
If you would like Twitter draw. Your question. Please press star followed by T and preparing to ask a question. Please ensure you're on mute you likely I'm pleased of mindset I may ask 1 question.
As a reminder, that store fleet by 1 on a telephone keypads to ask a question.
Our first question comes from Terence Flynn from Goldman Sachs Touch your lines open. Please go ahead.
Great. Thanks, so much for for taking the question maybe a 2 part for me.
Mike Thanks for all the color on the geographic expansion plans just wondering if you can share any more insights on how you selected those for new states for next year, and how you're expecting growth to progress. There should we think about you know what we've seen so far and some of your current states and then for Kathy on the guidance just any more context, you can provide for 'twenty.
'twenty 1 EBITDA. Thank you.
Okay.
Yes, Thank you for Eric its Mike.
And I appreciate the questions with respect and geographic expansion and it is very consistent with the way we've approached the market over the years.
And we've stated many times, we seek to provide cash.
<unk> and services and broad.
Highly dense populations, we're seeking the biggest counties and Americas, So you've seen where we've grown of late and Florida, obviously entering and California is important for us and Texas is a core so.
And the 4 new states with.
On Texas, and Georgia, and Virginia being being low.
A component of those.
We see a lot of opportunity there and we've got great care partner relationships that we fostered for years.
And working on the on the <unk>.
Texas expansion for for now well over 2 years. So we expect that there'll be a strong growth contribution from those markets, but we also believe parents that debt.
Existing markets, we will continue to grow market share so between the new state expansion as well as our existing states. We see significant opportunities I mean would you like to add anything to that Mike that are a couple a couple of comments that might add to a unit and 1 is in California. We're also building on a very strong.
Existing base of customer relationships provider relationships.
And also.
General and reputation in the market, that's very supportive of our entry and <unk>.
In Texas, we happen to have broker distribution relationships that have already been very strong for us and performed extraordinarily well and Florida.
That themselves.
And operate and the state of Texas, and we believe that's going to help us.
Be successful there.
And in Virginia, we're roughly adjacent to a very successful North Carolina business and the regional presence and we'll have and the mid Atlantic is going to be powerful the company for the company over the long term. So each of these states has an element of building on the business that we already have and also they also represent a terrific opt.
<unk> on the road.
And Cathy Yeah. So good morning, Karen Thank you with regards to guidance.
What we think are the most important drivers for the business for all of you right now, which our topline we gave guidance there and gross margin or MTR and.
Our operating expenses will continue to leverage we are on a multiyear journey there as we've talked about we're kind of at the height of inefficiency right now as we think about all of our vintage solutions moving to and a proprietary solution that Mike described previously so that'll take us a couple of years, but we'll continue to.
Improved the leverage around operating expenses. So I think you can get to a reasonable range of EBITDA from the from that guidance Karen.
Yes.
Yes.
Operator can we have the next caller for the next question.
Of course on next question comes from Kevin Fischbeck from Bank of America. Kevin. Your line is open. Please go ahead.
Alright, great. Thanks, I guess I just wanted to.
Dig into your view about your visibility into kind of your cost trend here and your ability to price for next year. It sounds like youre not quite seeing the same exchange.
All our issues that maybe your peers have but I just wanted to get your sense of for what your visibility into the cost trend is giving all the moving parts of this year and then on the MA side.
And this negative development that youre seeing again, its something that.
You might think might impact your ability to price.
And they correctly for next year.
Thanks, Kevin and so with respect to underlying cost structure and capabilities, let's start with the population that we that we serve.
We obviously target a specific population as we enter a market and we price to our underlying capabilities and cost structure in that market and so when we look across our overall book of business to date.
So about what we expected maybe slightly healthier than we anticipated going into the year and thats, playing out and utilization trends, we're seeing that non COVID-19 trends, if you take out COVID-19 within ISP.
That is slightly.
Down from B.
From the called the baseline period normal utilization and and so as we think about going forward for the remainder of the year with utilization. We do believe that we're going to see continued.
Utilization for Covid as we saw on the second quarter interestingly over the period, we saw over the first quarter. We saw our senior population impacted by Covid that is starting to subside and we saw an uptick and the IOP population and the second quarter, albeit in a different way, we're seeing more professional and outpatient services we believe.
And thats going to continue and that's embedded in our underlying forecast.
As Kathy had mentioned so as we go into next year, where SP, but generally assuming going back to the base underlying baseline of our cost structure, so normal call it utilization.
We might see continue to see a slight uptick with respect to COVID-19, but we're really not anticipating that going well into next year. So we think we've got good visibility into our pricing on a year over year basis as well as the way, we just generally price to the marketplace and our cost structure as we enter new.
And so we feel we've got good visibility with respect to that.
And then Medicare advantage with respect to the.
And the unfavorable development and the unfavorable development and really is related to.
And 1 time or unusual items that team from brand New day prior to this.
And prior to our acquisition of them and it's really related to some provider true ups and things like that so we don't think that has an impact on our underlying cost structure and will not impact our pricing for next year.
Next question.
Yes.
Our next question comes from Josh Raskin from Nephron Research Josh. Your line is open. Please go ahead.
Thanks, Good morning.
So first question just if you could just give us the fully diluted share count post the IPO or kind of what to expect and <unk> and then my real question is just on the new market expansions.
It's more likely to come through finding a new health partner, you know through M&A or contracting and then adding the insurance products behind that or do you think it's going to be more capturing market share with bright health care, and then developing new health underneath maybe a Texas and North Carolina example.
So Josh I'll start with the cash.
For the Tactical question, you asked and Michael will handle the day, everyone. So diluted fully diluted share count you'll see a table and the Q that we'll file next week.
For full balance of common shares will be $625 million, but the average for the quarter will be $1.60, or 116, and I have a 42, youll see and because of the timing of debt.
And the preferred converting to common for the quarter.
And then Mike.
I'm, sorry that you had ask Josh the question about how do we think about expanding.
And thanks for taking part of that question. Yeah. It was just a new market expansions is that going to be more it's kind of a chicken and the egg question right is it new health partner and then layer on top of it insurance products with a preferential cost structure or is it capture.
Membership through bright health care, and then develop the new health opportunities underneath once providers see a relevance et cetera.
Yeah. Thanks, Joe So I'll start and I'll, let Cindy and her Sam add.
And afterwards, but every market is different we do believe that we've got differentiation and entering new markets with new health.
We think the opportunity to not only partner with large with care partner systems as well as large medical groups is obviously a core strategy of ours. It's been part of our care partner model from the beginning of bright health, but we also believe there is opportunities to and entered de novo and maybe through inorganic opportunities as they present themselves and new markets.
Leveraging our integrated care delivery model like we are doing as we enter Texas. We think that's a great model to go deep into the market and then have a highly concentrated call. It care management program, where we can continue to.
Steer in network keep edge to our care partner network. So every market is different as we've talked about over time, but we do think that there is opportunities to enter the market through new health and then partner with bright healthcare to drive volume 1 thing we've talked about Josh as you know that the advantage to us.
As we really can build our clinics based on unexpected demand.
So we get the capacity relatively quick so theres, a high ROI for investing and and owning operating clinics and the market semi and do you want to add anything first.
Well, what we've seen is that it can happen simultaneously and I think that's a very important element here is not necessarily new health versus not necessarily bright health care first in fact, and Florida. This past year the value of the simultaneous moves of establishing clinical relationships and also building a bright health care.
For set of.
Benefit plan offerings distribution capability and pairing those up and built a very strong business for us very quickly and we're able to deliver the volume into clinics and build the overall clinical relationships that also support bright health care. So we what we've already also demonstrated is the simultaneous approach can be very powerful as Mike mentioned that.
We're using and Texas and.
I'll just add that as we think about building localized integrated systems of care. We're always entering in with new helped building high performing care partner networks that are value based and within that if there's opportunities for simultaneously enter with a bright health care product alongside more deeper affiliate arrangement, where we're looking at.
Taxes were aligning on risk on more deeply owning clinics that are de novo built it allows for.
Higher level of performance for high level of certainty wrapped around on what the cost structure looks like as well as the overall access quality and outcomes and so that allows us to kind of enter and penetrate the market more effectively move.
Moving forward and that's not just for health care, but also from a new health perspective on and I'll pay. It later and then I would just add Josh.
This is Mike again is.
Core to our strategy is connecting patients with their doctor and so we seek to attribute 100% of our population served whether it's our members our patients to a doctor within our care network, we have a strong ability to do that when we own and operate the medical centers or where.
Affiliated where we're aligned through value based contracts and Thats core to our model So and we think it's differentiated.
Next question.
Our next question comes from Justin Lake from Wolfe Research Justin Your line is open. Please go ahead.
Thanks, Good morning.
A couple of numbers questions and then.
Bigger picture first on the numbers, Kathy maybe you could share with us the.
Cash at the parent or the unregulated cash at the end of the quarter as well as any details on that.
The unrealized gain of 58 million and then Mike in terms of your 2020.2 market Rollouts, you know theres been a bunch of questions here, but specifically I wanted to find out I mean, you've had huge success and markets, where you have had the partnership model or even 1 centers.
And South Florida can you tell us and these new market do you have anything you could have doubts in terms of do you have affiliations with local provider groups.
All system affiliations and those for market that are going to help jumpstart.
The growth there that you could tell us about.
Yeah.
So all adjusted and good morning, I'll start with the cash question on the balance sheet, you would see unregulated unrestricted at a little over 500 million EBIT restricted a little over $700 million and then when you combine that with <unk>.
Strong cash flow generation, we generated almost $500 million of cash this last quarter.
And then obviously, our full access to our credit facility.
Got great liquidity.
And then the mark to market gain as a strategic investment with a care partner of ours and <unk>.
Obviously, it's a we've got a market to the fair value fair market value at each quarter.
And with respect to.
Market rose and the additional markets Justin.
We're not getting and we were not going to get into a relationship today, we'll lay that out as we get into our Investor Day Conference and the fall and we talk about 2022 and beyond So we'll go deeper and then that but it's fair to say that we feel really good about these markets we've selected them.
As we've talked about before and we've.
Got a strong pipeline across the country of care partner will potential partner relationships that we're fostering and building were building and new markets today.
That arent necessarily expansion markets in and 2022, but in these markets. We've got strong relationships and we've been building on for some time and we.
We feel really good about the opportunities in 2022 and beyond.
Next question please.
Our next question is from Jeff <unk> from Piper Sandler Jeff. Your line is open. Please go ahead.
Yeah. Good morning, Congrats on the first quarter as a public company and thanks for taking the questions. So a bigger picture 1 for me and like to dive deeper into what makes your care partner relationships are a win win and more specific and addition to those and network keep which metrics you had mentioned in the prepared remarks, I think it would be helpful and he described.
The level of market share or the risk sharing opportunity that you can offer to take care of partners that you can deliver for them to make it attractive for them to contract with bright health at favorable levels.
Well thanks, Jeff.
And our care partner model was was part of our foundation and it was really built on the idea that if we collaborate and align.
Clinically financially and leverage technology and integrated data, we can build a better experience for the consumer.
We all know the consumer era is here and consumer health care more consumers are making decisions about purchasing their health care and that really frankly, they've been left out of since World War, 2 or earlier and so with that in mind. Our model is designed to align our interest.
And bed capabilities that maybe they have developed our care partners or we can enable them to essentially manage the care and if we align that interest.
And we just get better performance. So the relationship by design is they are care partners, making investment and us.
With strong economic and unit economics, and our job is to aggregate and consumers and connect them to our care partner through and network <unk> and attribution. So.
So we increase our market share, but also by increasing in network <unk>, which is a core measure of ours, they get greater share of wallet.
Their services are per per patient goes up as a result of that so it's truly and Scott and alignment model, it's not value based care and the sense of capitation, but it is value based care and the sense of alignment and as we've talked about clinically financially and through data and technology. So truly it is a win.
When proposition.
Great. Thank you.
Next question on that.
Next question comes from Lisa Gill from Jpmorgan. Your line is open. Please go ahead.
Thanks, very much good morning, Mike I'm, just curious on we think about new health versus other providers and I know, it's pretty early on but can you talk about the cost trend for a bright house.
Members and that go to a new health clinic persons going to another provider and the opportunity you see there and then just secondly, as you think about dock squad can you talk about utilization of the consumer you know I agree with you that that can see price should be front and center.
I'm curious, what you're seeing right now for utilization there.
And then a cost trend that you were able to band because of that that interaction with the patient.
Great. Thanks for the question Lisa with respect to our owned and operated medical centers and <unk>.
Kathy mentioned, that's where we get our optimal performance because we can fully deploy all our tools, we've got full alignment clinic.
Clinically.
<unk> incentives, so we're both share and the opportunity both upside and downside as we perform so everyone's incentive to perform and where we really see and.
Improved cost trends is we really engaged with that consumer early on we mentioned we've mentioned before that this year, we rolled out our rewards program and all of those that who enrolled in our rewards program on the ISP population, 96% of them took a health risk assessment of those 96%.
And 92% of those selected a primary care provider.
And so and.
And South Florida as an example are core to our model is we partnered with for large medical groups and mind, you with multiple different medical centers and <unk>.
And 2 of which we own and 2 of which were aligned with and 1 of our core to our strategy is getting them connected.
2.1 of those primary care providers, so by having them engaged with their primary care provider, we see significant benefits from that because now you've got <unk>.
Referral.
Coming from and our comfort level and a trust with the primary care physician as a first form of access and we want to <unk> to the primary care provider, whether it's their doctor their nurse first as opposed to going to and ER, whether in network for out of network and so we do that significantly and we also mentioned in our.
Our model and South, Florida, which we.
<unk> is very favorable and we also provide non urgent and transportation services. So we will go to the patients as they incur.
Medical need air medical services of need and and we think thats. Another advantage. So by having a highly concentrated population managed within our core primary care providers, that's where we get our best our best performance.
And with respect to that spot.
<unk> is a key strategy of ours and it is what we talk about in terms of consumer engagement it starts with.
Getting them engaged through our rewards program, which is really rolled out across the country.
But it's also providing them direct connection to their personalized care team. We believe that not only every patient and should have access to high quality care and we believe that every patient should have a relationship with their doctor and the doctor with their specialists included and so we really want to emphasize the personalized care team and ease of access to them.
Other is through virtual technology asynchronous or through some form of virtual mechanism. As we mentioned we've done over 250000 virtual visits on that platform to date.
For again, we will connect them to 1 of their providers real time schedule. There Paul appointment and then we have the data to make sure that there is a closed loop system that the primary care physician understands what services were provided so we're really excited about the integrated technology and dock squad as we continue to roll it out and think AUM.
For the long run and will be on key differentiation for us.
Yes.
Let's go to the next point on <unk> question.
Question.
Our next question comes from Ricky Goldwasser from Morgan Stanley Ricky Your line is open. Please go ahead.
Oh, yes. Thank you this is Craig head back in for Ricky.
When looking at some of the new members that you're on boarding this year versus older member cohorts can you just talk about any differences that you are any notable differences you're seeing on utilization patterns and level of acuity and how you expect that to trend.
Going forward.
Yes, sure Craig and thanks for the question yes.
As I mentioned, our risk demographics across our population and the new lives that have come to us. This year is very consistent with our overall population with respect to age and sex mix. If you will and so and that's translated to underlying utilization non COVID-19, we've seen slightly favorable utilization across.
The book of business, we're seeing that and really across all categories and so overall, we believe that that will continue to play out the remainder of the year. The 1 notable on.
None is how COVID-19 will continue to.
Transpire in future periods, as we've mentioned our shift of impact.
Impact of Covid from the senior population, who have a much higher.
Penetration on vaccinations to the ISP population, which is a much more broader population with less vaccinations and we are seeing that whether it's the delta variant or else, we are seeing an uptick and that.
We believe it will continue to be exist, we just can't predict as to how.
How much impact and will have on the business overall, but non COVID-19 related utilization.
It is very consistent across our mature markets as well as our new <unk>.
New markets with our new book of business.
Operator can we have our last question. Please.
Of course, our last question comes from Steven Valiquette from Barclays. Steven Your line is open. Please go ahead.
Great. Thanks, and good morning, everyone and thanks for taking the question.
Just a few additional questions on the medical loss ratio first just to confirm for the 86% MLR guidance for the full year.
Does that guidance is that relating to the reported MLR for all the periods and 'twenty, 1 or the adjusted MLR metric that you're calculating.
And then you just touched on this a qualitatively earlier and the call but quantitatively.
What are you expecting that delta to be between the reported MLR versus the adjusted MLR and the back half of 'twenty, 1 and so I think it might be something maybe less and the 400 basis points that you saw on the first half for the year, but I just wanted to see if you could probably a little more color quantitatively around that based on what you know right now thanks, Yeah. Good morning, gentlemen.
Good morning, Steve.
86%, plus or -200 basis points for the year is reported obviously as Mike just said, we've got some and assumption of of Covid impact a little bit, but if we saw something really severe of course that we don't have a crystal ball it couldn't contemplate that and then to your question about reported to adjusted.
And again I don't know, we know what's happened and the first half for the year, but we think we contemplated that in our guidance range that we're giving for the full of rest of the year.
So we don't plan for differences, obviously it'll be noteworthy if COVID-19 continues to exist, but outside of that we don't plan for any adjustments between reported and adjusted number.
Just real quick on the debt.
So with that.
Sorry go ahead and Steven.
So with that that will end the call for our first inaugural earnings call. We thank everyone for their time this morning, and your interest and our company have a great day.
Goodbye.
Thank you.
Ladies and gentlemen, thank you for joining today's call you may now disconnect your lines.
Uh huh.
And.
Okay.
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Yes.
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