Q3 2021 Humana Inc Earnings Call
Yeah.
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Good day and thank you first funding by welcome did do you mind I incorporated Gore Jersey earnings Conference call. At this time, all participants are in a listen only mode. After the speaker presentation. There will be a question and answer session to ask the question during the session.
<unk> you will need to press far one on your telephone keypad. These be advice that today's conference is being recorded if you require any further assistance. Please spread far zero I would now like to hand, the conference over the years Stinker today, Miss Lisa <unk>, Vice President of Investor relation.
Go ahead.
Thank you and good morning, and a moment briefer, sorry, you made as president and Chief Executive Officer, and scuba diving Chief Financial Officer will discuss our third quarter of 2021 resolved and are updated financial outlook for 2021. Following these prepared remarks, we will open up the line for a question and answer session with.
Industry analysts.
Joseph Farah, our Chief legal officer will also be joining Bruce and Susan for the Q&A session.
The investing public and media to listen to both management prepared remarks and related Q&A with analysts. This call is being recorded for replay purposes that replay will be available on the Investor Relations page accumulates website Humana Dot com later today before.
Before we begin our discussion I need your advice call participants of our cautionary statement certain of the matters discussed in this conference call are forward looking and involve a number of risk and uncertainty actual results could differ materially investors are advised to read the detailed risk factors discussed in our latest form 10.
K and other filings with the Securities and Exchange Commission and of our third quarter of 2021 of earnings press release as they relate to forward looking statements and to note in particular that these forward looking statements could be impacted by risks related to the spread of in response to the COVID-19 pandemic are.
<unk> looking statements should therefore be considered in light of these additional uncertainties and risks along with other risks discussed in our SEC filings. We undertake no obligation to publicly address or update any forward looking statements and future filings or communications regarding our business or resolved.
Today's press release, our historical financial news releases and our filings with the SEC are all also available on our Investor Relations website.
Copper just to know that today's discussion includes financial measures that are not in accordance with generally accepted accounting principles or GAAP management explanation for the use of these non-GAAP measures and reconciliation of gas to non-GAAP financial measures are included in today's press release.
Really any references to earnings per share or EPS made during this conference call referred to diluted earnings for comments here with that I'll turn the call over to Bruce Broussard.
Thank you and good morning, and thank you for joining us.
Today, we reported adjusted earnings per share $4.83 for the third quarter of 2021 slightly above consensus estimates.
Our year today results reflect the strength of our core operations as we continue to see strong underlying fundamentals across all lines of business and have remained focused on ensuring our members received a rug care at the right time. Despite the continued disruption caused by the pandemic.
While our underlying fundamentals are strong 2021 financial results have been impacted by the ongoing pandemic.
Which is a result of an adjustment to our full year adjusted Cps guidance.
As detailed in our earnings press release, we have updated our guidance to approximately $20.50 from our previous guidance of 21 25 to 21 75.
As Susan will share in more detail this reduction of our approximately one dollar and adjusted Dts as a direct result of Covid and corresponds to our current expectation of the total Medicare advantage utilization.
Clues of Covid cost will run 1% below baseline in the fourth quarter, which is 150 basis points less than our previous assumption of 2.5% below baseline.
This update reflects a more conservative posture going into the final months of the year, then, notably 21 50 remains the baseline of which to grow for 2022.
As a reminder, prior to this guidance of two we had not recognize a COVID-19 headwind in our 21.
Guidance as many of our peers did are adjusted Vps guidance has been above our long term growth targets as the mid point throughout the year at 16% growth.
Update results in an expected suggested EPS growth at the lower end of our long term range and importantly is not reflective of.
Any concerns with our core operations.
I will now turn to our operational and strategic update.
Our Medicare advantage individual above market growth in 2021 of 11% can be in part attributed to our industry, leading quality and consumer satisfaction scores.
We are pleased to be recognized by CMS for having 97% of our members and four star or higher rated contracts for 2022.
We also increase the number of contracts that received a five star rating from one contract in 2021 to four contracts in 2022, the most in our history.
Okay.
Make adjustments to the.
Excuse me participants this is the operator your conference will begin momentarily.
Stay on hold until the conference begins.
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Alright.
Well welcome back and we started sorry for the technical glitch there uhm let.
Let me just.
Maybe just go back to our guidance update here in in re re and ensure that the investors understand the guidance and in addition, how it reflects symptoms.
As we looked at the future here.
First the guidance reflects a much more conservative posture going into the final months of the year, and notably 21, 50 remains the baseline of which to grow for 2022.
As a reminder, prior to the guidance update we had not recognize the COVID-19 headwind in our 2021 guidance as many of our peers did.
Are adjusted EPS guidance has been above our long term growth target at the mid point through the throughout the year at 16% grow.
This update results and expected adjusted EPS growth at the lower end of our long term range and as importantly does does not reflect any concern with our core operations.
I will now turn to our operational and strategic update.
Medicare advantage individual above market growth in 2021 of 11% can be in part attributed to our industry, leading quality and consumer satisfaction scores.
Scores, we are pleased to be recognized by CMS for having 97% of our members and four star or hire contract for.
For 2022.
We also have increased the number of contracts that received a five star rating from one contract in 2021 to four contracts in 2022, the most in our history and.
And while CMS did make adjustments to the 2022 star ratings due to the possible impact of the COVID-19 pandemic. These adjustments have minimal impact on our ratings. This further demonstrates our enterprise wide focus on quality clinical outcomes and best in class.
<unk> customer service, which has been recognized from notable organizations such as Forrester JD power than USA importantly, the stars bonus allows us to maintain a strong about that are you proposition for our members and provided value for supplemental benefits that address social deter.
Imminence of health and other barriers not addressed by fee for service Medicare.
Looking ahead to 2022, we are pleased to be able to provide stable or enhanced benefits for the majority of our Medicare advantage members operating plans that support members whole health needs, while continuing to deliver the human care. Our members have come to expect from us are strong clinical.
And quality programs drive improved clinical outcomes and cost savings that allow our Medicare advantage plans to continue to expand member benefits.
Those covered by fee for service Medicare.
Our plans include highly valuable extra benefits, including dental vision hearing an over the counter medication allowance transportation support business program memberships and home delivered meals founding following an inpatient hospital stay.
Over the last few years, we've made great progress in addressing social determinants of health and health equity by expanding our Medicare advantage benefits. Examples of those impactful areas include respite care distributing 1.5 million meals during COVID-19, sending fans to seniors with.
C O P D. During a heatwave and providing support for financial need impacting a seniors health and wellbeing.
Giving the increase in demand for health equity across America, we have aggressively expanded our efforts to address it.
We continue to advance or consumer segmentation efforts developing plans that are tailored to the unique needs a specific member populations.
This has allowed us to provide benefits that enhance and complement and individuals existing coverage through programs like Medicaid or entities, such as veterans Affairs.
This approach leads to disproportionate growth.
Have you seen that are decent plans designed for dual eligible members, where we have grown our membership approximately 40% and <unk> 2022, and 2021, we've expanded our D snip offerings for 2022 to cover nearly 65%.
Of the dual eligible population nationally.
To reduce food insecurity, 97% of our members enrolled in our decent plants and we will have a healthy foods card, which provides a monthly allowance to purchase approved food and beverages at various national chains.
New for 2022, many of our these sniff members will have reduced part the drug co pays as a result of the <unk> snip prescription drug savings benefit.
Which will help address the financial barrier some members space when assessing needed prescriptions, leading to better medication adherence an important driver of members Hell.
Overall health outcomes.
As previously shared we took a more conservative approach to our 2022 bids recognizing the continued uncertainty associated with COVID-19, and potential impacts to premium and claims assumption allows.
Allowing us to prioritize long term benefits stability for our members.
While it is early in the selling seasons, we believe we struck the right balance and are tentatively position for our continued growth in Medicare advantage, our brand promise to deliver human care resonates with seniors given our comprehensive set set of offerings and focused on providing take patience.
Centric experience based on their specific needs.
Susan will provide more detail 2022 commentary in our remarks, including high level EPS and membership guidance.
And now we would like to highlight the continued progress of our strategy through the build out of our healthcare service platform, starting with primary care business, and then moving to our growing whom solutions offerings.
We have the largest senior focus value based primary care organizations in the country.
Which by year end will include approximately 200 clinics, serving 300000 patients across 24 markets and nine states.
We are accelerating organic and inorganic growth nationally and plan to open a total of 30, the novo's senior focus centers in 2022.
I'm 24, and 2021. This will include launching into new major metropolitan areas.
Dallas and Phoenix next year.
This faster pace expansion comes as we continued to gain conviction and our Dinovo Center model with panel growth and centers launched in 20, 2021 exceeding plan and clinical performance and are more mature markets continuing to improve.
And are more mature centers hospitalizations and the ER visits are down 12% year to date versus 2019 pre kogut level.
With stars performance tracking to 4.5 stars and NPS score of 90.
We will also continue to expand through inorganic growth completing seven acquisitions through the third quarter of this year, bringing 21 newly wholly owned centers to our portfolio.
We plan to continue this pace of acquisitions focused on the markets, where we have established presence to provide more access and high quality care to our patients.
Turning to the home we completed the acquisition of Kindred at home in the third quarter and now the largest home health and hospice organization and the nation is.
As previously sure we will be migrating kindred at home to Humana's payer agnostic health care service brand Center well.
Our efforts to transform home health to a value base model come at a pivotal time for the industry.
As seniors increasingly choose Medicare advantage, there is a meaningful opportunity for home health organizations to engage differently with patients and Medicare advantage payors to more holistically address patient needs and improved health outcomes reduced the total cost of care for health plans.
And share appropriately and this value creation.
We've made substantial progress towards our goal of scaling a maturing a risk bearing value base model that manages the provision of home health.
Gerbil medical equipment and home infusion services.
With the acquisition of one home earlier in 2021, a delegated post acute management services organization for the home we have the capabilities to be a value based convenor, providing a risk based contracting and referral management and continue to develop technology, enabling us to call.
Ordination.
Other adjacent services.
These services include Gapping care closure primary are emergency care in the home as well as coordination of meals transportation and other services to positively support social determinants of health.
We currently care for approximately 270000 Humana members on your value based homecare models in South, Florida, and Southeast, Texas, where we have seen the improved outcomes comps, including emergency room usage being 100 basis points better than he.
Amanda's National average.
We now are focused on expanding to select markets in North Carolina, and Virginia, which we've show is based on multiple criteria, including market density opportunity to significantly reduce homecare expense and a robust kindred at home footprint.
We expect to begin the rollout in the second quarter of 2022 with the goal of covering nearly 50% of Humana Medicare advantage members under this value based home health model within the next five years.
We are excited about the continued progress of our strategy in the home, but consistent with our home health peers, we recognize that the national nursing labor shortage poses a significant risk to the industry.
And we are taking proactive steps to address it is part of our well developed integration process with kindred at home.
In some markets the nursing shortages, resulting in adequate capacity to meet demand negatively impacting our ability to grow the top line.
We believe the Humana center, well brand supported by our patient centric culture will bolster recruiting and retention efforts for nurses.
Have seen increased nurse satisfaction and engagement and pilot markets, where we have deployed value based concepts with voluntary nursing turnover improving nearly 10%.
Home health nurses in 2021.
In addition to unlock sufficient capacity to meet our growth goals, we are implementing broader operational improvements and benefit and has hansman, while also making targeted investments and capacity constrained areas to enhance nurse recruiting and retention.
With respect to hospice, our intent remains to ultimately diverse the majority interest in this portion of the asset as.
Our experience has demonstrated weaken delivered desired experiences and outcomes for patients transitioning from restorative care to hospice through partnership models.
As we close the transaction in August we have continued to explore alternatives for the long term ownership structure for the business and have initiated steps to reorganize the hospice business for Standalone operations.
Also ensuring business continuity and monitoring underlying trends.
We do not have a further update on the specific transaction structure or expect the transaction timing, but we will provide additional updates as appropriate moving forward.
Even the continued expansion of an interest in our health care service platform. We are committed to providing additional disclosure to give further transparency into the performance of these businesses beginning with our first quarter of 2022 reported.
Before closing I want to touch on the current regulatory and legislative landscape as.
As you know last week, the White House and congressional leaders released their plan known as build back better which includes several proposed changes to the Medicare program, including establishing a hearing benefits starting in calendar year 2024, which will be included in the Medicare advantage benchmark.
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Given that today more than 40% of Medicare beneficiaries over 27 million seniors and those with disabilities pardon enrolled in Medicare advantage. We were encouraged to see that the package did not include any payment reductions to the program.
As this legislation continues to advance and likely be modified and as we look for.
Look ahead to the annual CMS call letter and raised noticed period, we will continue to work with policymakers and the buying the administration to further improve Medicare advantage building on the programs innovation and significant progress in areas like value based care social determinant.
Of health affordability and financial protection for beneficiaries as well as reducing the total cost of care.
These atrophies, along with the deep consumer popularity of Medicare advantage or what have enabled it to have a strong bipartisan support with hundreds of members of Congress on record as supporting the program.
With Medicare advantage, serving as a leading example of a successful private public partnership I am often mistake. We can continue to lead an important healthcare issues facing both individuals and society, including addressing health in equities, improving health outcomes and expanding.
Value based care.
With that I'll turn the call over to Susan.
Thank you Breeze and good morning, everyone.
Today being recorded congested EPS of $4.83 for the third quarter and updated full year 2021, adjusted EPS guidance to approximately $20.50.
To reflect a net unmitigated COVID-19 headwind, resulting from our current view of utilization levels and the balance of the year.
Before beginning I would point you to a page for our earnings press release for detail of our previous assumptions for Medicare advantage utilization in the second half of the year.
Actual third quarter utilization resolved as well as current projections for the fourth quarter.
I will now walk you through this detail starting with the reminder of our previous commentary.
And our second quarter call full year guidance as being non candidates Medicare advantage utilization with ranch, 2.5%, a low baseline in the second half of the year with a further assumption of minimal COVID-19 testing and treatment costs for the same period.
In September of 2021, as a result of the third's in Cogan cases due to the Delta Maryanne, we update our commentary on full year guidance to indicate we expected noncombative Medicare advantage utilization can be five 5% below baseline in the back half of the year lobbying parsley.
3% of Kobe calm.
Therefore, again, assuming total utilization with between 5% Hello meantime in the back half of 2000 2021.
What we've seen develop for the third quarter and the total utilization is running 1% below may fine versus the previously anticipated 2.5%.
Kobe costs have been higher than initially anticipated as the Delta Marion resulted in hospitalization level on par with what we experienced in January of 2021 and were overwhelmingly driven 20% of our Medicare advantage members believed to be on Vaccinating.
The higher than expected coed costs were fully offset by depressed constantly utilization and a quarter.
As Kobe hospitalization increase or decrease we continue to see in approximately one to one offset and non Colgate hospitalization level.
We also continue to see significantly reduced non inpatient utilization when surgeons occur offsetting the higher average cost of a COVID-19 admission.
However for the third quarter and total we saw 1% incremental reduction and utilization beyond the level needed to offset kobe cost versus achieve 5% contemplated in our previous game.
As a result, we have adjusted our full year guide to now reflect the fourth quarter running similarly, with total Medicare advantage utilization running 1% below meantime, inclusive of estimated kind of a cough consistent with what we experienced in the third quarter.
We realized higher than expected positive current period claims development and Medicare advantage in the third quarter as well as other operating outperforming largely mitigating the lower than anticipated depressed Medicare advantage utilization allow us to report results that were slightly favorable to the street estimates are revised.
Guidance does not is saying that the higher levels and favorable current period developing scene in the third quarter will continue.
Taken together are updated full year 2021, adjusted EPS guidance taken more conservative posture going into the final months of 2021, and it's important to note and we've consistently shared throughout the year and midpoint of our original guidance range of $21.50.
Remains the correct baseline for 2022, given our approach to pricing.
I will now briefly touch on operating results across our segments before sharing early thoughts on 2020 performing.
Our Medicare maintenance grants remains on track and consistent with previous expectations. We have refined our full year individual Medicare advantage membership guidance to us approximately 450000 members consistent with the midpoint of our previous guidance for.
425000 to 475 founding members.
This outlet represents above market Grand with an increase in 11, 4% year over year.
Our Medicaid results continue to exceed initial expectations due to higher than anticipated membership increases.
Lee attributable to the extension on the public health emergencies.
We now expect to add 125000 to 150000 Medicaid members in 2021 up from our previous expectation of up 100000 to 125000 members.
Utilization trends continue to be favorable to initial expectations and the medical team is working diligently toward a successful implementation in Ohio, We still alive anticipated in July.
And our agreement specialty segment fully insured medical resolved were impacted by higher than expected currently costs in her quarter, while our specialty business results continue to exceed expectations and utilization, particularly for dental services remain lower than previously anticipated.
For a call that our guidance and in the second quarter did not contemplate significant currently costs and the back half of the year and the commercial business is not seeing the same level of utilization offset experiencing Medicare advantage.
From a membership perspective, we have increased our expected group medical membership losses from 100000 to 125000, reflecting the expectation of additional losses in the fourth quarter and the result of rating actions taken to account for the expected impact of Covid in 2022.
Finally, within our healthcare services operations that pharmacy and provider businesses continue to perform slightly better than expected with pharmacy benefiting from increased mail order penetration as a result of customer experience improvements and marketing campaigns and the provider business same continued operating improvement.
Are more mature centers, which are now lying under the same leadership and our dinovo centers.
As Bruce mentioned in his remarks were actively integrating the kindred how operations and results posted integration have largely been in line with expectations.
Similar to home health and hospice tears to visit as being impacted by Covid Emily labor shortages.
For the third quarter home health admissions grew low single digits year over year for a hospice experienced a low single digit decline year over year.
We will continue to closely monitor trends as you make targeted investments to sustainably improve and recruitment and retention of nurses.
Now, let me take a few moments to share in early outlook for 2022, starting with members yet.
As you are aware the overall PDP market continues to decline as more and more beneficiaries, including dual eligible to Medicare advantage.
In addition, as we've discussed previously PDP plan to become a commodity with the low price leader capturing disproportionate growth.
Consistent with 2021, the Walmart value plan will offer competitive benefits that will not be the low premium leader in 2022.
As a result, we expect a net decline MPTP membership of a few hundred thousand members in 2022, we continue to focus on creating enterprise value for our Pvp plans by deriving increase malodor penetration and conversions to Medicare maintenance.
With respect to grip advanced group Medicare advantage, we expect membership to be generally flat for 2022, and we do not anticipate any large accounts will be gained or lost as we continue to maintain pricing discipline in a highly competitive market.
Moving to individual Medicare advantage as previously shared we took a more conservative approach to our 2022 bids reflecting the continued uncertainty associated with the pandemic.
We expect to grow our individual Medicare advantage membership and a range of 325000 to 375000 members in 2022 or approximately 8% year over year reflective of our prudent approach, we took the pricing for 2022 and the competitive nature of the market.
His early in our ADP filing season, and the outlook, we are providing today could change depending on how sales and voluntary disenrollment ultimately come in.
And consistent with prior year, we have very little members enrollment data at this point any AEP cycle.
I will now turn to our expected 2022 financial performance.
As previously mentioned I want to reiterate that the 21 dollar and 50 cent midpoint of our original 2021 Guy continues to be the appropriate jumping off point for 2022, adjusted EPS growth given our approach to pricing.
In addition, we feel comfortable that the risk adjustment assumptions and our 2022 pricing are appropriate as providers have been actively engaging with our members to ensure their conditions are fully documented and that care plans are established to address gaps in care.
Provider interactions and documentation of clinical diagnoses and we anticipate will impact 2022 revenue are approximately 90% complete to date in line with both our expectations for 2021 as well as the estimated completion rate for the same time period in 2019.
We also assumed medical costs would return to baseline levels reflective of pre cogan historical trending.
From an earnings perspective, we believe the conservative approach to 2022 pricing certainly appropriate balance between membership and earnings growth.
Given the ongoing uncertainty surrounding the COVID-19 pandemic, we expect to enter the year within an appropriately conservative view of our initial 2022 financial outlook.
Accordingly, we anticipate that our initial EPS guidance will target the low end of our long term growth range of 11% to 15%.
We expect they cope it will be net neutral to the Medicare business in 2020, Q as we do not anticipate a risk adjustment headwind and expect COVID-19 utilization to be offset by a reduction in non toga utilization.
However, our initial guide will allow for an explicit COVID-19 related headwind that we can tolerate should emerge.
<unk> approach some of our peers have been 2021, we believe entering the year with a more conservative approach is prudent in the current environment and set the company and for success in 2022.
We look forward to providing more specific guidance on our third fourth quarter earnings call in early February.
With that we will open the lines for your questions and fairness to those waiting in the queue. We ask that you limit yourself to one question.
Operator, please introduce the first column.
Thank you and again participants if you would like to ask the question you will need depressed or one on your telephone keypad. Here first question comes from the line of Kevin Fischbeck from Bank of America Caroline is now open.
Alright, great. Thank you.
Shade all the color on the 2022 guidance I guess I think a lot of people are just.
Wondering the companies had a hard time forecasting where costs are going to be on the upcoming quarter over the last few quarters. Obviously some degree understandable during a pandemic but.
Wanted to see how you felt about.
Your visibility into cough and how good of a handle you feel like that that cost trend as you develop your pricing for next year.
Comment I guess I guess.
How do you think about that visibility into the.
And to the cost as you thought about next year.
Sure, Kevin having to take that one so pier point estimating the impact of Covid has proven to be more challenging, particularly given the environment that we were in in 2020 is quite different than what we're experiencing obviously in 2021 and 2020, knowing was vaccinated in various states that <unk>.
Down throughout the year, and we acknowledged and are keen to you call anticipating how behavior might emerge in an environment, where largely keyboard back to normal and a large percentage of our Medicare population were vaccinated. We just recognized that it was difficult to anticipate whether we see the same level of offset through this aries.
The good news is as we thought it serves emerge in the third quarter. Despite it man just as high as what we experienced the last time, we did continue to see a full offset the hospitalization offsets have been pretty consistent throughout 2000 2002 thousand 21 is on the non impatient side, where we tend to see more variation.
And as we explain in the second quarter that that claims service category is one where we don't have the same level of near term visibility, having said that we studied oliphant historical patterns based on what we saw in the third quarter and our estimates as the continued.
Fine and the kind of occurred in the fourth quarter, we feel very comfortable with the assumptions that are underlying are revised guide and feel like we have sufficient visibility to feel confident we can deliver against that.
Your question about 2022 is a good one as we decline in all of our calls and given this late surge in 2021 getting visibility to wear baseline trend is actually running obviously will be more challenging however, given how we approach the pricing for 2022.
Meaning that we started with pre COVID-19 and historical levels and it seemed historical trending factors not anticipating any ongoing depressed utilization into 2022, we feel confident that that's an appropriate baseline expectation. So we'll continue to watch it and certainly as we see something different emerge if any of the depression continues.
That would be positive for us, but we are not contemplating it which is what gives us confidence about our approach to 2022.
Okay. Thanks.
Your next question comes from the line of Madison Forest from BMO capital markets. Your line is now open.
Yes, I was hoping that you could.
Maybe comments on the.
Competition and Medicare damage I know you said, it's competitive but.
Just relatively speaking we've seen geographic expansions.
Mm bye really almost all of the major public companies over the last few years, a number of new entrants.
And yet it doesn't seem like it's had a noticeable impact and profit margins.
I guess I'm just wondering how you see the dynamic is the greater availability of products actually.
Yeah.
Handing the Medicare damage market more than you.
Necessarily leading to.
Competition that would push down margins.
Yeah.
Yes ma'am.
He'll take the the what we see as of a few things have been first reduce the more and more insensitive in the local markets.
Similar to two in the past, we see some players being more aggressive to try to gain market share while others are a little more aligned with the pricing.
A little more stability in the marketplace. So we do see a bell curve and and just how people are approaching it is their strategic plan is pushing him to make those decisions.
We are seeing more awareness in the marketplace as a result of the amount of.
Education, that's going on through marketing them through the pillow sales efforts that are going on and I think that is a positive for the industry because it really brings alive all the benefits.
Members receive that creates more competitive nature for that for those members, but it does create I think more growth industry wise for us as an organization. We were one of the early adopters of the Taylor.
Market <unk> sales effort area, we have benefited from that I think in multiple different ways benefited from it.
Way of.
Both are market growth and in addition, our ability to reach.
A population that we haven't been able to reach in the past. So I do think it's a benefit for us but to answer your question more competitive in the local market more awareness as in the industry that is a good thing in the industry and I feel that we have been a beneficiary of that.
And Matthew assets as well as I think our focus on is Bruce mentioned any comments or consumer segmentation effort by designing products that more specifically addressing consumer needs you've seen an arguable offerings as well as our veteran offerings that we can direct disproportionate growth and can you think that's a differentiator inconvenience fee is continuing.
Time.
Thank you.
Your next question comes from the line of Steve Baxter of Wells Fargo. Caroline is now open.
Yes, hi, thanks for the question.
Hoping to come back to the commentary on assuming based on utilization in 2022, just to clarify it seems pretty clear that there will be some level of ongoing Kobe call. In the 2022. So does that mean, you're continuing to assume non kobe cost below baseline of 2022, and then just any color contacts you can provide in the magnitude of this EPS hopes that you're taught.
About in relation to baseball can be appreciate it. Thanks.
Sure Great mentioned, so just to be clear as to what we right now and all of our experience. We would expect that to the degree we experienced additional colgate costs and 2022 that we would see an offsetting depression and onto the utilization, but but none of that would be neutral right. We're not expecting that favorability like be seeing this year.
Yeah that 1%, we're projecting for the fourth quarter consistent with Nissan third quarter. So what we would say we are expecting it and we have to have a cost will be offset that that we would still be at baseline, but as I mentioned in my comments, what we intend to do with our initial guys. How is despite the belief that that's a reasonable assumption we will allow for an explicit.
Kobe headwind extended emerge such that an ingenue, we would run actually above baseline levels should that emerge in our goggle contemplate and allow for some of that if it should emerge.
Not giving a specific amount obviously today when we do give specific guidance on our fourth protocol, we will be explicit about how much of a COVID-19 Penguin, we can tolerate within the guide so we will be explicit about that at that time.
Your next question.
Your next question comes from the line of Ricky Goldwasser of Morgan Stanley Here line is now open.
Hi, good morning.
So one for us.
In <unk>.
And then the longer term question just.
Just don't understand Susan let me think about 80% of your.
Members are fascinated based on your estimate.
To reconcile what you're saying versus with some of your peers are saying what do you think happened to grow COVID-19 as far as realization to the level of experience back in January was that sort of a specific geography.
Or or anything else that can explain it and then the longer term question is it really around.
Kind of.
Virtual many of your peers launch a virtual first offering in the commercial side for 2022.
See room for some sort of virtual first type offering in the Medicare population, especially when you consider sort of the kindred capabilities.
I think Greg.
Your question, so with respect to the high carbon levels in your right and honestly. This was something that was and it's surprising to us as well that we did see level on par with what we experienced in the last search despite the high vaccination rate and what we learned his pier point time that was a reflection of our geographic mix floor, it seemed like Florida, and Texas and Louisiana.
I did see higher levels than.
Even the previous <unk>. It represented a new all time high and we have a disproportionate share there. So that was part of it but the main driver is that as we looked at the hospitalization rate between vaccinated and unvaccinated. The unvaccinated fairly consistently saw hospitalization rates. It was 10 or more times, the vaccinated population and so that again as I.
Mentioned in my comments was the overwhelming driver and because of the spread of the delta variant through that vaccine copulation and that much higher hospitalization rate that is what drove the level of on par with what we saw historically.
To your second question about first of all first and Medicare We were pleased that kind of it and then I can see that primary care providers and specialists.
Really did take adopt telemedicine at a higher rate to ensure that they can continue to support their patients and their preventative needs I think as a result of that frankly providers africana better appreciation of the range of care and have quality of care that they can provide through virtual which frankly prepandemic. They really didn't appreciate it.
Adopting so I think we will see some continued use virtual technology to enhance the operating model and allows for more touch points with their patients. Then we decreased pandemic. Your question about home health is definitely a good one and something we are looking at particularly Wednesday, and a challenge as we have in terms of nursing labor.
Resorted virtual is one strategy, we're looking at to see how it can be leveraged to begin create more touch points with the patient and improve the efficiency. The operating model to just create more overall capacity and there will be testing the kindred.
Appropriate uses of that and where we can implement and still see the high quality outcomes that we would expect so we'll be testing that would be that you'll see expansion of that in the future. They're just a few other comments to that we did a walk launched a few years ago, a virtual first with doctors.
On demand.
Product and that was a was a success for us on the commercial side, but.
Medicare side, what we do find is that there is a great opportunity.
To see the patient both to understand efficient and a physical setting and unlike more episodic care versus a chronic care management that there is a good come there is of importance of being able to have a physical.
And encouraging a physical interaction receive the telehealth as being an opportunity to have a complimentary and more interaction, but I don't know if it would be a replacement for four we would want to motivate highway chronic members too to have a virtual one in Iraq.
Action for a whole host of reasons, both from a care point of view and from the ability for us to establish the proper care plan.
Okay next question.
Your next question comes from the line of Josh Raskin from New Front Research. Your line is now open.
Good morning.
Wanted to ask about sort of the shorter short term. So just the assumption that knob cope with utilization will be down in four Q. I am just curious are you seeing script trends preauthorizations or anything that would indicate sort of that level of decline just in light of what seems to be an abatement in Coca cases currently and then specifically are you.
Are you seeing any different trends with members that are in your centers or with other value based providers, where the underlying trends underneath that capitation any different.
Okay.
Excuse me participant businesses on the operator.
Also starting to music on four D speakers one moment.
[music].
There.
Okay.
Hi, Josh are you there.
Yeah can you guys hear me okay.
Alright. Your question must have been so insightful I would just dropped off the line I.
I thought it was so scary that you ran for it so.
So I'll ask my question again, sorry, so just in the very very short term. My question is why are you assuming that non coke utilization will be down as much as 4% in the fourth quarter, especially in light of what we're seeing in terms of the big reduction in Covid cost and Kobe direct Covid cases in the fourth quarter and is there a script trends as their preauthorization.
<unk> is there something that would indicate that level of decline that you're seeing today and then <unk> Jason to that are you seeing different trends with members that are in your centers or even with other value based providers sort of the underlying trends underneath the capitation.
Sure.
Your questions with respect to the fourth quarter.
He said before we have really analyzed all of the prior surges to understand the patterns coming out of a thirds and you might recall from a previous commentary where you typically see is a tale of depressed utilization anytime you come off a curve, which is what allows you to store as fully recapture the cost of that Kobe Pete.
And so we've with visitors in particular was kind of interesting is different states as I mentioned before or had seen different levels of utilization relative to premium service, Texas, Florida, where examples where we found very high peak at a very rapid decline. There are some other states like New York, and Michigan, where we're actually seeing a much more.
Moderate and sort of gradual increase.
Without missing seeing the same start peak and decline so.
As we've seen that in total that on a national basis, what we're saying is this slope of a downturn from coming off a key isn't quite as sharp as what we've seen historically, we've drilled into each of those states enter consistently seeing irrespective of that difference and peak level. We are still seeing that one to one offset regardless and so to some degree.
Do you think there is just an overall capacity constraint, particularly on the in patient silence that comes into play and the rise digits that behavior change in in terms of providers and patients as they manage through it so based on what we've seen emerge.
The third quarter with that 1% offset everything we've seen suggested that assuming the same level of off as we continue to come off that third quarter peak is reasonable.
To your point about early indicators, we view it as we've said before have very good real time information on inpatient activity that continues to hold where as the COVID-19 utilization comes down and we will see a bounce back on a one to one offset in the non COVID-19 hospitalization. So that has been very consistent and we will get.
<unk> to watch the non inpatient, but again based on everything we've seen below invented a reasonable assumption.
In terms of your question about value makes revised interestingly enough most of our both our own centered and some of them are hydroforming partners. They have indicated that they are not seeing the same sort of neutrality oriented benefit from a committed event that we view and the theory. There is that in general they managed to sort of be unnecessary.
Hospitalization events is lower value out of the system more routinely and so when you do see is there's there's not as much the utilization to manage to.
<unk> to be depressed because they have already managed it out on a run rate basis, and so we're still frankly trying to assess any some analytics on that I think they may take a little bit more time for their claims to fully develop and have a full view of that but their belief is that they don't see the same level of net benefit that we do on the health plans that generally.
Got it so they see the COVID-19 costs, but not be offset you're saying correct now on the flip side of that though they tend to do better on a revenue basis.
Are non risk bear then they were much better about making sure. They got their patients in in 2020 got their conditions documented on the revenue side, saying they would make some of that up but on the utilization side made a big typically you are saying, they're not seeing a benefit.
So our next question comes from the line of Kevin Caliendo of you May ask your line is now open.
Thanks, and thanks for taking my call.
I'm thinking about 20 to appreciate all the the color, but it was just wanted to know if there was any other sort of one time things, we should be thinking about any other headwinds or tailwind whether it comes through investments or or benefits that you might be making that could impact.
Sort of EPS growth for the year.
So I would say obviously as we mentioned covenant the main one that we continue to evaluate.