The operator introduces the Elevance Health first quarter earnings conference call and reminds participants that the call is being recorded. The company's management team, including the CEO and CFO, will discuss the quarter's results and strategic initiatives. The call will also include non-GAAP measures and forward-looking statements, with a reminder to review risk factors. The call is then turned over to the CEO.

Elevance Health had a strong first quarter, with GAAP earnings per share of $9.59 and adjusted diluted earnings per share of $10.64, a 12.5% growth. They have increased their guidance for adjusted earnings per share and are making progress on their enterprise strategy to expand access to high-quality patient-centered care. They have entered into a strategic partnership with Clayton, Dubilier & Rice to form a payer-agnostic advanced primary care and physician-enablement business, serving nearly 1 million consumers. This partnership will bring together the strengths of three innovative care provider entities, including Carelon Health, to deliver value for their Medicare, Medicaid, and commercial health plan members and employers.

The company is excited to collaborate with CD&R and other care providers to accelerate innovation and improve healthcare experiences and outcomes for consumers. This collaboration will advance their enterprise strategy and establish them as a leading platform for value-based care delivery. In the first quarter, they made progress in their strategic initiatives, such as expanding their Carelon business and acquiring Paragon Healthcare and Kroger's Specialty Pharmacy. Carelon Services also received multiple new contracts, demonstrating its value.

Carelon Behavioral Health has been chosen by the Maryland Department of Health and the California public school system to provide behavioral health management services. This shows their commitment to improving mental health support in communities. The health benefits business is also doing well, with commercial margin recovering and membership growing. They have been selected to serve beneficiaries in Florida and Virginia, demonstrating the value Elevance Health delivers. The Medicaid business performed as expected in the first quarter with efforts to maximize access to care for members facing eligibility redetermination.

The company is proud of their efforts to reach out to Medicaid beneficiaries and has seen an increase in re-enrollment. They are also pleased with the recent updates to their Medicare Star scores, but are disappointed with the cuts in Medicare Advantage rates. The company remains committed to providing whole health for their consumers and has released a progress report showcasing their success in value-based care partnerships.

Elevance Health has recently been recognized for its innovative approach to improving quality and value in healthcare, specifically in the obstetrics specialty. This has led to significant improvements in health outcomes and costs. The company's success has also been reflected in its inclusion in multiple prestigious lists, and they credit their 100,000 associates for their tireless commitment. The first quarter results show solid performance, with 46.2 million members and strong growth in the commercial and individual ACA markets.

Medicare Advantage membership declined slightly as expected due to market exits and actions taken for long-term growth. Operating revenue was in line with expectations and the benefit expense ratio improved. The adjusted operating expense ratio was consistent with the previous quarter. Operating gain for both health benefits and Carelon segments led to over 7% growth in consolidated adjusted operating gains. Operating cash flow was $2 billion and the debt to capital ratio was in line with target range. The company repurchased shares and maintained a prudent approach to reserving. Days in claims payable increased by three days from the previous year.

In the first quarter, there was an increase in reserves due to a disruption in claims processing. The company has formed a strategic partnership with Clayton, Dubilier & Rice to create a top-notch care delivery platform. The company is pleased with their performance and expects to continue growing in the future. They will focus on executing their strategy, investing in growth opportunities, and optimizing their health benefits business. The call is now open for questions.

The speaker, Gail Boudreaux, is excited about their partnership with CD&R and sees it as the next step in bringing value-based care to more consumers. The partnership aligns with their strategy of working closely with care providers and increasing risk sharing in value-based arrangements. The approach is unique in that it enables value-based care across all lines of business and will serve nearly 1 million consumers across their commercial, Medicare, and Medicaid health plans.

The paragraph discusses the importance of a partnership in providing support and specialized services for complex and chronic patients. It highlights the alignment of goals between the partners and the focus on whole health, affordability, and a differentiated consumer experience. The partnership will offer integrated teams, personalized navigation, expanded digital assets, and specialized services, including a distinctive primary care model. This approach is seen as comprehensive and innovative, and will benefit not only Medicare and commercial patients, but also employers who have not had access to these capabilities before. The partnership is expected to accelerate innovation and improve healthcare outcomes and consumer experiences.

Gail Boudreaux, CEO of a healthcare company, responds to a question about the impact of a cyber-attack on the company's claims and operations. She commends her teams for their quick and effective response to protect members and providers. She also notes that the company was not significantly impacted and is back to normal operations. The CFO adds that they severed network connections with the affected provider to protect data and ensure responsible actions were taken.

The speaker discusses the impact of the recent partnership with CD&R and how it aligns with the company's strategy. They emphasize the importance of being payor-agnostic and serving all members across all business lines. The partnership fits into the company's longer term national approach and allows them to serve multiple memberships, not just Medicare Advantage.

The partnership with CD&R is payor-agnostic and will help continue the focus on advanced primary care, chronic patients, and complex patients. It will also help build specialty care enablement and focus on patient access and experience. The timing for the partnership was right because the company has been experimenting with multiple models and has a lot of experience in the space. The question was asked if the primary care platforms are currently taking risk and if that will develop with the digital enablement abilities from Carelon.

The speaker is responding to a question about the expected capitation on the platforms over a five-year period. They mention that currently, about a third of the membership is under risk arrangement and that they see opportunities for cross-pollination between the different assets and capabilities of the platforms. They highlight the strengths of each platform, including MPG's leadership in managing Medicare and commercial risk, apree's differentiating technology and navigation capabilities, and Carelon Health's expertise in managing complex and chronic conditions. They also mention potential growth opportunities through partnerships between the platforms.

The speaker reiterates the opportunity to combine existing Carelon services with the arrangement, creating value for all three assets. The consolidated entity is expected to have over $4 billion in annualized debt revenue. The next question is about Medicaid, and Felicia Norwood responds by stating that the redetermination enrollment process is on track and about 90% of members have been redetermined. She expects this to continue tapering off in the next few months as they wrap up the process by June. The decline in membership in the first quarter was also due to footprint changes. They will continue to reach out to Medicaid members.

The speaker discusses the membership loss in the health benefits business due to procedural reasons and the team's efforts to reach out to eligible individuals. They also mention the expected acuity and mix of membership and the actuarial soundness of rates. The next question asks about utilization trends by line of business, to which the speaker responds that it was in line with expectations and reflected in the reported benefit expense ratio.

The company's commercial business is in line with expectations and their internal trends remain unchanged. Medicare utilization was affected by the two midnight rule for inpatient stays and pockets of outpatient authorizations, which were planned for in their cost trend assumptions. There was an increase in Medicaid utilization due to redetermination and mix impacts, but the company remains confident in their projections for utilization and medical cost trends. The company increased their guidance for adjusted deleted EPS, citing strong visibility in claims and better than expected performance this quarter.

The company had a strong performance in the first quarter, with solid results in the health benefits and Carelon divisions. This was driven by disciplined execution of initiatives and a recovery from pandemic-era lows in commercial margins. The company remains cautious in its outlook but has increased its adjusted EPS guidance. There has also been strong external growth in Carelon Services, with several new wins in the portfolio, particularly in behavioral health. The company is on track to exceed its 2023 sales goals and has already exceeded its 2024 sales goals.

The speaker mentions various recent successes for the company, including winning a statewide account in Medicaid for Maryland and securing new innovative solutions with large employers. They also mention notable wins in the crisis and behavioral health spaces, as well as successes with the Blues and their insights business. The company is currently in a selling season and has a strong pipeline, with a focus on insights and behavioral health. The speaker also addresses the expected seasonality of adjusted diluted EPS in 2024. Another speaker adds to the momentum and traction seen within the company. A question is then asked by Nathan Rich from Goldman Sachs.

The speaker, Gail Boudreaux, discusses the Medicare business and the goal of balancing growth and margins. She mentions the tougher rate environment and the consecutive cuts to the program, which will result in increased premiums and reduced benefits for seniors with disabilities. Boudreaux emphasizes the company's disciplined approach and focus on building a sustainable, long-term business. She also mentions the importance of keeping members "Blue for life" and prioritizing the business in 14 Blue states and DSNP. The company is currently in the midst of the bid process and will have more information as it progresses. Another caller asks about the company's long-term expectations, and Boudreaux mentions an at least 12% EPS CAGR.

The company is committed to achieving a 12% to 15% EPS growth CAGR target through 2027. They have confidence in the earnings power of their health benefits and Carelon flywheel to sustain this growth over time. The integration of BioPlus is going well and they are on an accelerated timeline for the transition of specialty scripts. The infrastructure and team have been built and they have begun migrating scripts with plans to continue throughout 2024 and 2025. The company is live with one additional facility and two more are expected to go live this year.

The company is confident about its capacity and future business, including the recent acquisition of Kroger Specialty Pharmacy. The company is also optimistic about the alignment of Medicaid rates and acuity mix, with 75% of premiums having visibility. The company believes the Medicaid business is in a good position. The company is excited about the potential of Kroger Specialty Pharmacy and expects it to align well with its broader pharmacy business.

Kroger is excited about their recent deal with Kroger Specialty Pharmacy, which aligns with their pharmacy strategy and previous arrangements with BioPlus and Paragon. The pharmacy is the largest non-payer-owned specialty pharmacy and will add meaningful scale, increase access to limited distribution drugs, and strengthen relationships with manufacturers. The transition of scripts is expected to go smoothly and the arrangement is likely to close in Q3 or Q4. In the first quarter, Carelon Services saw a 90 basis point expansion in margins, which was stronger than the full-year guidance of flat to down 30 basis points. There are no updates on how Carelon Services margins will trend for the rest of the year.

Margins and revenue were better than expected in the first quarter due to new internal risk deals. The company is not updating their full year guidance at this time due to the evolving seasonality of the business and the timing of new product launches. They are launching significant risk arrangements throughout the year, which will impact margins. In 2025, there will be significant changes in the Part D space, but it is too early to provide specifics on the company's strategy for that year.

The company is pleased with their results in Florida and is expanding their footprint in the state. They are also focused on their upcoming go-live in Virginia and defending their procurement in Georgia. They are also bidding in new geographies and are optimistic about their chances.

The company is seeing growth opportunities in specialty populations and is focused on improving outcomes for Medicaid beneficiaries. The recent RFP wins demonstrate the value they bring to state partners. The commercial book is doing well and the lower Medicaid margins this year are primarily due to the loss of revenue and enrollment, not the MLR. The company expects to achieve their guidance for an increase in margins for the full year. They also expect days claims payable to eventually come down, which would result in increased earnings over time.

Mark Kaye, the speaker, is not commenting on a specific business' margin, but mentions that Medicaid margins are expected to normalize in the future. He also states that Medicaid is performing as expected and that the DCP for 2024 is anticipated to remain in the mid to upper 40s range. He clarifies that this is due to Medicaid membership declining and having a lower DCP compared to commercial. Over time, DCPs are expected to return to a more normalized range in the low 40s. The speaker also addresses a question about the reserve boost, stating that the 1.7 days increase in claims payable is primarily related to Change Healthcare. He adds that this did not have any discernible impact on the benefit expense ratio or P&L.

The speaker discusses the reserve and incurred claims for the quarter, reiterates their guidance for operating cash flow, and mentions the renewal dates for Medicaid states. The company is off to a solid start and is confident in their strategy and diverse businesses. A recording of the conference will be available for replay until May 17, 2024.

This summary was generated with AI and may contain some inaccuracies.