Q1 2022 Bright Health Group Inc Earnings Call
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Hello, Good morning, and afternoon. Thank you very much for joining us today for Brighthouse, great first quarter 2022 earnings call. My name is Jennifer and I'll be your operator for today. If you would like to ask a question. It staff Philip I wanted to kind of thank you Pat and if you change your mind is thoughtful led by Jay I now have the pleasure of handing over to our host.
Evan Hagen. Please go ahead, Stephen Thank you very much good morning, and welcome to Brian .
First quarter 2022 earnings conference call a question and answer session will follow bright health group's prepared remarks as a reminder, this call is being recorded.
Leading the call today are Brian group's president and CEO , Mike Mike.
CFO and Chief administrative officer, Cathy Smith.
Before we begin we want to remind you that this call may contain forward looking statements under U S Federal Securities laws.
These statements are subject to risks and uncertainties that could cause actual results to differ materially from historical experience or present expectations.
<unk> of some of the risks and uncertainties can be found in the reports that we file with Securities and Exchange Commission, including the risk factors in our current and periodic reports, we file with the SEC, except as required by law, we undertake no obligation to revise or update any forward looking statements or information.
This call will also reference non-GAAP amounts and measures a reconciliation of the non-GAAP to GAAP measures.
Available in the company's first quarter press release available on the company's Investor Relations page at investors that bright health group Dot Com information presented on this call is contained in the earnings release, we issued this morning and they are a form 8-K dated may four 2022, which may be accessed from the Investor Relations page of.
The company's website before we begin the call.
Note that bright health group will be participating in the bank of America Healthcare conference on May Tuck.
With that I will now turn the conference over to Bright Health Group, Chief Executive Officer, Mike Mike.
Thank you Steven.
Morning, everyone and thank you for joining bright health groups first quarter 2022 earnings call.
I will open my remarks with an overview of the progress we've made on the strategic actions, we discussed on our last earnings call and provide some commentary on our recent announcements.
I will turn the call over to Kathy to give additional details on our first quarter results and some technology and product updates.
We always start with our mission at Great Health Group, we are focused on making health care REIT together.
Our model is built on the belief that by connecting and aligning the best local resources in health care delivery with the financing of care, we can deliver better outcomes.
At a lower cost for all consumers.
Great Health group had a strong start to the year demonstrating solid performance in the first quarter.
While continuing to deliver substantial growth.
Now that we have reached significant scale.
<unk> group is maturing as a business with 2022 focused on optimizing the company and executing on our strategic initiatives.
We've made the investments necessary to position bright healthcare.
Differentiated competitor in states with significant addressable markets in both the commercial marketplace.
And in Medicare advantage.
As well as establishing our new health care delivery business.
In the first quarter. Our overall performance was in line with our expectations and we continued to exceed our growth targets.
We expect the next phase of growth for the company to be more capital efficient as we focus on performance within our market.
And expanding our new health business.
Our underlying capabilities are maturing and improving each day.
As we continue to drive down operating costs and leverage our technology investments to enhance our performance.
<unk> group is well positioned in 2022 with key tailwind and strategic actions supporting better performance.
Great healthcare now serves over $1 1 million consumers.
And new Health has reached approximately 530000 lives served under value based contracts.
We have scale in major markets, including Florida, Texas, North Carolina and California.
Our percentage of our commercial marketplace membership that was new to us in 2022 was consistent with our expectations at 56% mean.
Meaningfully lower than 2021 on strong renewal rates and lower overall impact from new market entries.
Great Health care is Medicare advantage business produced solid year over year growth now serving over 120000 consumers.
We are operationally and a much stronger position.
<unk>, reducing our claims backlog.
Separately implementing our new technology platforms.
And demonstrating new how differentiation to our bright health care business, while it is becoming a meaningful contributor to our overall results.
On our fourth quarter 2021 earnings call, we detailed specific actions on which we've made meaningful progress on to drive improved year over year results.
Those actions included.
One net pricing action in core markets.
The pricing actions, we took for the majority of our membership in legacy commercial markets in excess of our underlying medical cost trends have resulted in an improvement in our medical cost ratio when looked at on a comparable basis.
Overall, we expect net pricing in both commercial and Medicare advantage to remain an important lever in 2023 as we continue on our path to profitability.
To unit cost reductions and medical management initiatives.
We have also made meaningful progress on the unit costs and medical management opportunities that we identified last year as areas for improvement.
We are focused on specific initiatives and contracting out of network rates specialty provider networks and more closely managing high cost cases.
We have taken actions on these initiatives and have visibility to delivering on the medical cost management EBIT EBITDA contribution we included in the bridge to our 2022 forecast.
Three risk adjustment actions.
Our high performing local care partner networks, we're better prepared this year for our strong growth.
Which allowed us to attribute members to owned and affiliated physicians much faster.
Putting in Florida, and new markets, such as Texas.
This has enabled our owned and affiliated physicians to engage with their members earlier in the year.
That early engagement combined with higher renewed membership and the significant investments we've made in data and operational capabilities.
I'm sure we're accurately capturing the risks of the populations we serve.
For claims and clinical platform stabilization.
We successfully launched all of our new market membership on our new claims administration platform on 112022.
The new claims platform is performing well and covers nearly one third of our commercial membership.
We also added resources to our legacy outsource claims platform and we are seeing improvement in the performance of that system.
Kathy will provide additional details on the progress we've made on our technology platforms and the impact so far this year.
We continue to expect that we will transition the remainder of our commercial members to the new claims management platform on 112023.
Our proprietary clinical system Panorama.
Also delivering significant benefits to our performance this year.
With all of our legacy commercial markets on Panorama currently.
And we expect to have all our commercial membership on Panorama by 2023.
And five we.
We're addressing talent and cost structure.
We remain disciplined on our expenses as we continue to focus on productivity gains.
Operating expense leverage.
While also adding selectively to our team to support growth and enhance our operational performance.
Great Health group has a unique model that a successful across multiple market structures.
We will continue to lean in to the markets, where our fully align care model can deliver differentiated results.
Where we can get sufficient scale and where we can deliver on our financial targets.
We are focusing our commercial business to offer individual and family plans in 10 States, where we believe we can drive differentiated value through our fully aligned care model.
We believe these decisions places us in the best position to achieve long term success for our members and care partners.
These states have a substantial addressable market at approximately 50% of the commercial marketplace consumers.
We have meaningful scale in Florida, Texas, and North Carolina.
And growth opportunities with strong care partner relationships and the other seven states.
Optimizing our footprint supports our strategy for profitable capital efficient growth.
On our path to improved performance in 2023, and our target for enterprise adjusted EBITDA breakeven in 2024.
Great Health care will be exiting the commercial marketplace in six states for the 2023 <unk>.
Illinois, New Mexico, Oklahoma, South Carolina, Utah, and Virginia, as well as discontinuing our employer group business.
The markets, we are exiting represent approximately 8% of total brand health care membership are forecast to contribute less than 5% of our 2022 enterprise revenue.
We will have an immaterial impact on revenue in 2023 and beyond.
We expect modest 2022 cost savings associated with reduced spending in the markets. We are exiting which has been contemplated in the range of adjusted EBITDA guidance, we provided for the year.
And we also expect the benefit to our capital position as we will not need to add growth capital to be exit markets.
We forecast the total savings of approximately $100 million and.
<unk> operating expenses and future capital needs.
Over time, we also expect to have the opportunity to recover or redirect.
<unk> capital currently invested in these states after we resolve all medical claims this.
<unk> is an example of an increased focus on capital efficient growth.
Great Health group will continue to grow as we deepen our presence and bright healthcare's 2023 commercial marketplace dates.
And as we build on our 120000 member Medicare advantage business.
We will also continue to grow the new health care delivery and provider enablement business, including deeper penetration in the bright health care business.
And expanding new health external payer relationships.
We have built a differentiated fully align care model and our market decisions for 2023 are focused on optimizing this model to deliver the best health care experience for consumers and for the long term success of our business.
I'll now hand, it over to Cathy Smith, our CFO and Chief administrative officer to go over our quarterly performance and provide some additional updates on the business.
Thank you, Mike and good morning, everyone.
Again by walking you through our first quarter results provide some details on the operational improvements we've made and then go over our 2022 outlook.
Our first quarter top line results reflect solid member growth in our existing markets and a strong entrance to our new market in the open enrollment period.
We ended the quarter with 1.04 million commercial consumers and over 120000 Medicare advantage consumers.
And we are much better positioned operationally and in terms of visibility at this point in 2022 compared to the prior year.
The membership growth we achieved this year well ahead of our forecast.
Is manageable with our new systems and processes.
Brand Health group consolidated revenue increased 10% year over year to $1 8 billion in Q1 right.
Healthcare segment revenue grew 89% year over year to $1 6 billion.
And new health segment revenue of $621 million compared with a $49 million in the prior year.
Our first quarter gross margin, but $255 million and our adjusted EBITDA was a loss of $75 million.
Starting in this first quarter of 2022, we have escalated the mark to market investment gains and losses, primarily adjusted EBITDA, which was a $41 million loss in this quarter.
Our first quarter 2022 medical cost ratio at the enterprise level was 84, 8%.
79, 5% in the first quarter of 2021.
Recall that in Q1 of 2021, our growth was meaningfully ahead of our expectations. We did not have visibility to the future impact from COVID-19 oriented team.
And we hadn't process a lot of clean tech.
Therefore, looking at Q1 last year is restated for medical cost and risk adjusted forecast.
Subsequently transpired, we would've experienced a much higher MTR.
We have applied the learnings from last year to our forecast and this year is a very different business retained members represent a higher percentage of our membership we have attributed our members and are engaging them earlier.
We are processing claims basket.
We have taken a prudent approach to risk adjustment payable expectation and our system infrastructure is more efficient and effective.
In addition, our <unk>.
Q1, 2022, MCR is also impacted by BCE revenue book at 97% MTR.
Without DC enterprise MCR would be 130 basis points lower.
Our membership growth combined with the impact of the Amazon variant led to higher than expected COVID-19 costs early in the quarter.
Costs have come down with cases have decreased through the quarter and our full year COVID-19 cost expectations are unchanged.
On a per member basis, and as a percent of revenue Kobe comps in the first quarter in our commercial population were down approximately 50% year over year.
And Medicare advantage hospitalizations were down approximately 50% on a per member basis as well.
Excluding the impact from the investment loss for first quarter results were in line with our expectations member growth and premium revenue were modestly ahead of our expectations, but offset by higher volume related expenses and medical costs and broker commissions.
Next I'd like to cover some technology and product highlights.
Our team has made significant progress against our technology milestones across the board.
Clinical administration management to claims processing.
Consumer interface and administrative platform.
Our technology team is focused on adding capabilities to support our fully align care model.
As Mike mentioned, we have transitioned all legacy commercial markets to the Panorama like utilization management platform.
Significantly improving automation and meaningfully reducing the time needed to handle cases.
Importantly, our new health providers are able to leverage that data and workflows and panorama to implement care management activities at the point of care.
Have also moved our legacy commercial market.
New electronic provider authorization, Florida.
Hosting and significant increases in the percentage of authorizations submitted electronically.
This has improved provider satisfaction metrics.
In our Medicare business, our utilization management effort.
Moving down the inpatient ethnic excluding COVID-19 by mid single digit per thousand members.
As well as showing strong results in lowering skilled nursing facility and behavioral cabinet.
For contracting and contract implementation, we have transitioned all of our activities to the panorama system, including all legacy contract.
Have implemented tools for faster identification of out of network utilization to support care management intervention.
We are also leveraging predictive analytics to identify a number that are more likely to utilize higher cost services like theme or can see department.
We have improved our business processes and technologies to reduce the time needed for critical functions like loading providers and members into our system and distributing members communal health and care partner providers.
We've reduced the time needed to complete these properties by 50% or more.
Additionally, we have made significant improvements to our legacy systems, particularly our legacy claims management system, where increased automation for handling non parkland has allowed us to meaningfully improve our prompt pay performance and decrease the average age of claims and are pending claims Q.
We saw a further 13% improvement in our over 60 day claims during the first quarter, which was on top of the 90% reduction we achieved in the fourth quarter.
On the core infrastructure side, we have transitioned over to our new financial system and increase the level of end to end data automation overtime. This will support a faster financial close process and give us more timely insight into the business.
And finally, our dock squad consumer facing platform continues to gain traction with strong consumer ratings and significant growth in virtual visits since rolling out this platform more broadly to our members.
Our new health business continued to build on the strong growth of 2021 total value based care patients.
The end of Q1 were approximately 530000, including 410000 from breakout care 49 from direct contracting and the remainder from value based external payer relationships.
First quarter revenue or new house with $621 million with strong sequential growth and the contribution from our first quarter recognizing revenue for the direct contracting program.
New health first quarter revenue was negatively impacted by $41 million due to an unrealized mark to market investment loss.
Excluding investment income new health revenue grew nearly 4800% year over year.
We are fully aligned care model continues to perform well and our new health clinics are supporting tower outreach temporary health care members in order to drive care management and accurate risk adjustment coding.
We continue to add capabilities and resources across new house.
Support the airlines integrated model of care.
Our direct contracting business got off to a solid start in the first quarter with improvements on key clinical metrics relative to 2019, pre COVID-19 cohort levels and compared to benchmark.
Financial results from direct contracting were in line with our expectations for the first quarter.
And we continue to expect to breakeven gross profit from direct contracting for the full year.
Turning to our balance sheet as of March 31, 2022, we had over $355 million and nonregulated.
<unk> liquidity, including $285 million, and highly liquid cash and equivalents and $81 million and a passive equity investment cost by the short term.
We have about $2 6 billion of additional cash it short or long term investments held by our regulated insurance subsidiaries our.
Our business is at a different phase of capital in the previous year, when we were making big investments in new state entry.
We're taking actions to improve our capital position, we have reduced operating expenses by reducing head count and renegotiating vendor contracts.
The market exits, we a recently announced eliminate future statutory capital infusions in such market and over time, we expect to bring any remaining capital back to the parent company or to redirect it to other markets to support growth.
We are seeking the most capital efficiently to achieve our growth and financial targets in order to reduce the need for external capital. This includes balancing our growth plans with our capital needs continuing our efforts to drive better medical cost and more accurately capture the risks of the population, we serve carefully managing expenses and potentially increasing.
Use of quota sharing.
We continue to evaluate our future capital needs, which will depend on the growth and performance of the business.
In our earnings release. This morning, we reaffirmed our full year 2022 outlet specifically, we continue to expect enterprise revenues to be in the range of $6 eight $7 1 billion.
We expect our enterprise medical cost ratio to be in the range of 90% to 94%.
Full year 2022, adjusted EBITDA to be in the range of a loss of $500 million to $800 million.
Consistent with the guidance, we provided on our fourth quarter call.
Any impact from mark to market investment gains and losses.
We continue to expect our operating cost ratio below 22% the exit markets. We will continue to contribute to our 2020 revenue while we support these members through the end of the year and are expected to have an immaterial contribution to our 2023 financials as we wind down operations in these markets on a segment basis.
We are maintaining our end of year bright health care member forecast for approximately 1 million members.
Full year 2022, new health revenue is expected to be approximately $2 3 billion.
With approximately 40% of new health revenue generated from external sources.
Last month, we confirmed our participation in the 2022 direct contracting program with new health.
We have approximately 50000 lives under management in 16, and expect a total revenue contribution of approximately $700 million.
The membership is distributed across the market with northern and Southern California, and Florida, being our largest TCE market.
Please see direct contracting and ACO reach as a great long term opportunity for addressing the Medicare fee for service population and believe new health is well positioned for success in the program.
Our first quarter represented a strong start to the year and gives us confidence in our full year projections.
Our 2022, adjusted EBITDA loss guidance reflect a strong improvement from 2021 going from approximately 27% of 2021 revenue to slightly over 9% of revenue in 2022 based on the midpoint of our guidance.
The drivers of the reduced EBITDA losses are consistent with our expectations last quarter.
Our membership growth and the pricing actions, we took for 2020 to support our forecast for strong 2022 revenue growth and gross margin contribution.
The investments we made in accurately capturing the risks of the member base gives us visibility into a smaller estimated risk adjustment impact in 2022.
The actions, we've taken to improve our unit cost the process improvements we've made in medical cost management and the transition to our new medical claims and care management platform are showing positive results in our medical costs.
Additionally, we have taken actions on operating expenses and have visibility to further cost savings, including the benefit from the market exits.
We note there remain some risk to our forecast and we have maintained the range on our guidance.
The largest risk factors to our guidance, our COVID-19, our ability to timely and accurately capture the risk of our consumers and the impact of our medical cost management initiatives.
Before I turn the call back to Mike I appreciate our amazing breakouts team across the country working together, we are changing healthcare. Additionally, I want to thank our shareholders for their continued support as we build a national integrated system of care now here is Mike for some additional comments on the business.
Thank you Kathy.
As you've heard this morning Bright health group is becoming a more mature company with greater scale.
And improving capabilities.
We are confident in our strategy around the fully aligned integrated systems of care.
Strategic actions, we've taken to focus our business, where we have differentiated offerings and.
And the investments we are making to drive performance.
We have competitive offerings in states with significant addressable markets in both the commercial marketplace.
Medicare advantage.
The market dynamics in these states are attractive.
And supportive of our path to building, a strong and profitable business we.
We believe our differentiated business model will allow us to outperform in these markets over time.
Looking forward, we expect to grow organically and the footprint we've established.
We are targeting retention rates approaching 80%.
Consistent with what we're seeing in our more mature markets.
At or above competitive levels, as new health and our care partners drive long term member relationships.
We expect the combination of more mature markets.
<unk> member retention.
And longer care partner relationships to result in greater predictability for our medical costs and the ability to drive margin expansion.
We also expect new help to contribute to our profitability targets, adding to the profit opportunity in states, where we are building out our care delivery business as we progress towards 2024.
Expect to improve on our operating cost ratio as well.
Moving from the peak of inefficiency as we consolidate to fewer technology platforms and drive productivity gains.
Overall, we're off to a solid start for 2022 and are taking the strategic and operational steps to drive toward our 2024 adjusted EBITDA target.
With that I'd like to thank our team and our care partners.
And now operator, let's open it up for questions.
Thank you very much if you would like to ask a question itself on the pipeline and I kind of think keypad and if you do change your mind staff by chain.
Our first question today comes from from Nathan Rich of Goldman Sachs. Thank you Dan. Your line is open. Please go ahead.
Hi, Thanks for the question. This is lindsey on for Nate Rich can you provide any additional color on the non COVID-19 utilization patterns, you've been seeing from PCI to <unk>.
Sure. Thanks, Lindsay it's Mike.
So utilization for us as you may recall, we anticipated that we would have kind of baseline utilization pre.
Pre COVID-19 levels.
For the year.
We expected some potential uptick for whether you call it deferred care or endemic Covid, which we price for.
So far we're seeing utilization favorable to that in both the commercial business as well as Medicare Medicare as Kathy noted, we've seen utilization down mid single digits.
Inpatient admissions and we are seeing.
Slightly favorable utilization non COVID-19 in the commercial population as well.
Thank you very much.
Yeah.
Thank you. Our next question online comes from <unk> <unk> of Jpmorgan.
Kevin Your line is open. Please go ahead with your question.
Hey, good morning, Thanks for the question.
If I could just follow up quickly on the utilization and just touch quickly on care deferrals.
Is there anything significant that you saw in the quarter and then just kind of how you see that evolving over the course of the year just because the MLR in the first quarter it looks pretty good.
And then.
Related on new health, the New health MLR also came in sort of differently than at least we were expecting.
Just curious if you could maybe give some color on new health MLR seasonality and how we should think about that going forward.
Well I don't know that I have much to add on utilization.
We are.
In terms of the.
The deferred kind of electric procedures and what are we saw an uptick in the fourth quarter last year of elective procedures and so we believe that.
Lot of the deferrals have worked their way through in terms of.
Scheduling surgeries and what have you I think the thing that we're paying attention to is is the <unk>.
For those that.
But werent getting care.
Wellness care for certain conditions like cancer diagnoses and things like that will that emerge over time with a higher intensity.
Medical conditions for missing those diagnoses early on but in terms of utilization utilization.
Utilization is favorable and across our book of business compared to what we had anticipated.
With respect to new health I think I'm not sure. If you included DCE and new held but GCE is obviously a high medical loss ratio just given the pricing of the of the relationship and.
We also include because it's we've got capitation contracts. When you include Texas, which was a first year market they absorb.
The first year impact of that market. So that both of those would be included in and the MLR and in terms of seasonality.
In terms of seasonality that they would have the same type of impact is as the IOP business and the risk that they've taken Medicare since they're a risk bearing.
Contract.
Okay, and then if I could just ask one more I.
I know the 530000, new health value base stations.
Can you give us a sense for what percentage of your ISP.
<unk> are attributed to new health doctors.
Sure right about for IOP is about 40% of our Iot book of business, mostly in South, Florida, and Houston in Texas, and then our Medicare business is mostly external and new health. So it's external payors.
Okay, great. Thanks.
Thank you and as a reminder to ask a question to staff led by one in Tennessee.
Thank you Pat would you ask politely to only one question is on the line with one final question.
Our next question comes in from Joshua Raskin of Nephron Research Joshua Your line is open. Please go ahead.
Hi, Thanks, good morning.
Wanted to talk about the seasonality on the ISP book, an MLR of 84, eight <unk> I assume just based on benefit design, but thats going to be the low for the year and so is there some change in your mix, maybe more silver or some other factor or just something you're assuming.
Was that your medical management efforts youre going to take larger effect through the rest of the year to kind of get you to that MLR guidance for the year.
Well, so let me unpack it and Josh if I, Miss something Kathy and Dan Correct me, but so the 84 eight as an enterprise medical cost ratio. So bright healthcare medical cost ratio was $83, one and I noticed that noted the difference previously as a result of DCE and the other new help relations.
<unk> sold.
I would think about it is the $83 one and of course, that's a blend of Medicare advantage.
Risk.
Health plan members as well as our ISP business of course, there is seasonality with the Iot business that is deductibles were off through the year, but theres also the inverse with Medicare advantage as well.
So what gives us confidence in our medical loss ratio is if you compare to a target if you compare on a comparable basis year over year Josh.
Our 83, one compares to the reported number of around 80% that last year in Q1, but remember last year as we got into the second half of the year of course, we had our challenges related to.
Our claims payment processes as well as the risk adjustment factors that we took into consideration when we started the year last year coming into the year, our big growth came from Florida and as we looked at.
Florida, the book of business that we expected to get from them, but with the market share gains.
We expected a riskier population and so we started the year with a risk adjustment factor that was much lower than where we ended of course, we true that up throughout the year, because we actually got a healthier population.
SDP impacted that some but then as well is that we got impacted by the fact that we didn't have claims data and.
And we Couldnt get it we couldn't engage fast enough with the population as a result of Covid and FCB.
And so our coding accuracy was below what we had hoped for so those impacted when you adjust those.
The claim.
<unk> that we had plus risk adjustment.
Yet about an 800 basis point difference between the reported number and what the restated number would be for Q1. So when you look at a comparable the 83, one is more comparable to.
80%, 88% and so when you take that into consideration for the what impacted us in the last half of the year, we got impacted pretty significantly from Covid as well as last year. We had prior period development. When you exclude that our loss ratio last year of roughly 101, 3% or so.
It's about 95%. So if you take the difference between what we reported in Q1 and compare it to last year on a comparable basis, we think were well within our guidance range and feel feel that.
Actions that we continue to take with medical cost initiatives.
And managing high cost cases, and the things that we outlined in our prepared remarks, we feel really good about our our expectations for the remainder of the year.
Alright that makes a ton of more sense of the 800 basis points improvement is kind of an apples to apples, which means your thousand basis points, plus or so of improvement for the full year or roughly $1000.
Is more consistent with that number kind of an apples to apples. That's super helpful. And then can I just just a follow up on kathy's comments around capital I, just want to make sure I understood. It.
Are you, suggesting there was no need for a capital raise this year or were you just sort of outlining the.
Track, where you are from here and potential risks.
Yes, good morning, Josh So as we said first off remember that we are at a very different phase in the company for our capital needs. This year versus previous years, where we were moving into new states and obviously much significant much more significant capital requirement and we've been taking a lot of actions as we detailed obviously the strategic decision to ask.
Got a few market helps.
Any significant action on our operating expenses as well and so that helps to reduce the capital need as well.
So.
On our growth and our performance we do believe we have enough capital to support the business for the next year.
They will continue to evaluate our capital needs as we go forward.
Perfect.
Thank you and our next question from the line comes from Jason Cashola.
Jason Your line is open. Please go ahead.
Great. Thanks, Good morning, guys just on the operating expense front cost came in much lower sequentially you've targeted improvement on this front you've discussed all of the moving pieces in your prepared comments.
But 'twenty two guidance expectations for $200 million worth of operating expense reductions I guess can you help quantify how much of those savings was realized in <unk>, specifically and then how do you see those efficiencies and cost savings kind of developing throughout the year.
I'm just thinking of all the moving pieces in a different era.
As you are looking to target. Thanks.
Yeah. Thanks, Good morning, Jason.
So first off.
Q1 had we called it out.
A number of items that came through our operating expenses that are either non cash or one time. So you'll see in the adjusted EBITDA Bridge, you can kind of identify in there, but there is.
Asset impairments for the asset market some restructuring costs that we took et cetera. So when you adjust all of that where we're well below or below the 22%.
The actions, we've taken on cost structure or will come throughout the course of the year pretty consistently throughout the year. So I think the biggest change is just reduced just remove the kind of one timer and are noncash events out of the operating expenses.
On track for our guidance as Jason and I would just add this is Mike.
We're as we've talked about our path to breakeven adjusted EBITDA breakeven in 2024, the big opportunities come with scale.
And technology leverage productivity gains and as we've been talking about as Kathy noted all the technology implementation that we've made this year and what we've got planned for 2023, there is a significant opportunity for us to achieve productivity gains and drive our operating cost ratio to our target of 15% or low or lower.
2024, and Thats, a major objective of ours and one that we're very focused on.
Great. Thanks.
The next question comes from Kevin Fischbeck of Bank of America. Kevin. Your line is open. Please go ahead.
Alright, great. Thanks.
I guess Youre consolidated MLR guidance is higher than you are.
Health.
MLR guidance I guess.
Just it looks like maybe you are looking for new health MLR close to 100%. So just wanted to understand it seems like most of the things that you were outlining as far as that margin progression.
For the next couple of years was really more related to bright health than to new health I guess some of the things might be applicable to both businesses I was wonder if you can just help more specifically direct kind of how youre going to get new health down from an MLR perspective. Thanks.
Hey, Thanks, Kevin well first I would start with if you look at our non related break healthcare business that new health hazards customers, we performed very well.
Well below the 100% level for sure and so we know we've got the capabilities implicit to achieve better results and new health New health is absorbing.
Yes.
Some of the new market entries that we've had Texas being a significant entry this year and last year of course with Florida. The other impact that is a high loss ratio for new health that we've tried to break out separately as DCE just given the the contractual relationship with the government.
The high <unk> or so 90, 798% and so we believe over time, new health is going to contribute additional margin to the enterprise both from our relationship with bright healthcare in the local markets and performed comparably to how we perform with our external customers and Thats, how we are going to drive incremental margin on an enterprise.
<unk> basis.
But I guess are the things that you are saying like a repricing the medical measured and initiatives, but those things if you improve improve the health plan does that then just flow.
Flow through to new health as well or are there separate kind of new health actions that has to happen to improve the MLR in internal business.
Well, yes, I mean, we.
Our risk bearing providers, while both sides of the business have medical cost initiatives, but they are working together.
Building out the affiliate network and getting better performance from our employed physicians as well as affiliated physicians is an objective of both parts of the business. So to the degree new health improves. It obviously is going to improve both sides of the business.
Okay, great. Thanks.
So heiko roster of Morgan Stanley you have the next question. Please go ahead.
Good morning, Kristine lung from Morgan Stanley on for Ricky Goldwasser.
Curious about your anticipated cash burn rate for the rest of 2022 and kind of the sources of capital.
Evaluating.
You mentioned going to $65 million.
Cash and then you have the $300 million and kind of facility for that.
Mr Sebastian available cash.
It does.
Does that sound right in terms of our cash are there other components there.
<unk> such as tapping into here.
Capital quota share arrangement or anything else on the line. Thanks.
Yes, so I'm, having to say that I can take that Kristine. Good morning. So first off I think at the highest level think about cash as well.
Stage, one to your point, we noted $365 million of unregulated cash capital and short term investments.
So we have chances to $5 million of cash available right now and then we have the credit facility other than the letter of credit as we noted the vast majority of that is available to us.
In addition, we are as we've noted pursuing other things like quota sharing which will help us to extend our capital position are there. We're continuing to work on things like additional expense reductions et cetera. So all of that goes into our thinking for the capital for the cash burn now is just look to our EBITDA.
Our adjusted EBITDA guidance, so that's probably a good way to think about it and our guys.
Thanks Kathy.
Thanks.
As a follow up.
Question.
Got it thanks markets.
And maybe like a 190 <unk> cash.
Also curious on the other side how that might have.
<unk> or will impact in terms of the conversations you have to have it.
And the markets are saying.
Yeah.
And then on that thanks.
So I think our partner relationships in the markets that we're staying in and we've got strong.
Unsecured partner relationships.
And we continue to evolve our local market capabilities.
Yeah.
Which includes our own centers.
As well as our affiliated contract positions and we continue to refine and make improve.
Movements in that regard so overall, our care partner networks in the local markets, where we remain our strong.
Okay. Thank you.
Our next question comes from Jim on the Saga of Fox that Shannon Your line is open.
Sorry, we're not hey, this is Justin.
Okay.
Hello, Hey, this is Jennifer from paper can you hear me.
Yes, we can.
Sorry about that.
Ask about MCR and claims processing could you expand on your claims processing improvements and break that down between performance of your go forward system and process improvements for legacy system.
Well sure.
Answered as distinct as I can but our claims processing issues that really began.
Last year in our legacy system, which we are migrating off of as Kathy mentioned, we are 30% on our new platform and we will migrate the remaining membership by one 123, one of the core issues that we have is kind of is getting contracts loaded accurately and timely.
Last year in Florida, we anticipated.
Our size that was much less than what we ended up with and so we have the we meet remediate and add late in the fourth quarter of 2020 into the first quarter of 2021, a bunch of physicians and other providers, which we didn't get loaded well into the year.
And obviously that created a significant backlog.
In our claims.
For the year, that's what impacted we had to play catch up the whole year into Q4, where as we talked about in the fourth quarter call, where we process around 50% of our claims for the year during that time period, which was a significant amount of work while it didn't do bring down our claims backlog we had numerous.
Issues with that amount of payments going through in the fourth quarter. The good news is starting off this year I would note two things one we were much more prepared for the growth of our business as well as each one of our markets in terms of having our care partner network and our affiliated physicians under contract and loaded into the system.
And so that has been with that claim paydowns that we had in the fourth quarter, while it was costly to us it put us in a position where we are.
We're much more ahead of processing claims today as Kathy noted the significant continued improvement in backlog.
But also we're seeing today in our legacy.
System.
Our claims over 60 days is down below 3%. So we're we're pleased with the progress that we've made in that regard.
We've got on our new system or metrics or even performing better than that and so we're encouraged with where we're moving to while we still have challenges with our legacy system. The good news is we know where those challenges are today and we continue to remediate those in as we remediate them, we're going to see improvements again throughout the year. So.
We're encouraged with the results, but note the challenge until we get off our system entirely on 123.
Great. Thanks for all those talents and.
A follow up from me special enrollment periods and broker relations just curious if it's changing incentives for brokers has impacted S&P enrollment to date and then whether there's any concern about potential ramifications from brokers during open enrollment periods in the future because of the current SVP approach.
Yes, so I'll give a little bit of color to it again just to remind those of.
The impact that SVP head on us last year of course, because of the administration opening up SVP.
From about mid March through September we added about 30000 alive on average per month last year, and so that had a significant impact on not only the book of business that.
We were we were managing but just the pent up demand for services and other things that came along with that that unusual.
Event. This year, we anticipated a more normal call it midyear enrollment impact and we're seeing that today, we're seeing typical attrition during the year, obviously, redetermination and Medicaid could impact that to some degree, but we think.
We'll be able to manage that within expectations as well so we're seeing normal attrition for SAP.
And hence why Youll note the end of your membership target that we've put out there is below where we're at today and in line with what our expectations are.
Great. Thanks again.
Yes.
Thank you very much we have no further questions on the line so I'll hand back over to Mike for closing remarks. Thank you.
Great again, we want to thank you for your time your interest in our company and we look forward to further updates in the future take care.
Goodbye.
Thank you very much that concludes today's call you may now disconnect your lines have a wonderful afternoon.
Okay.
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