Ben Hendricks

Ben Hendrix asked if the softer MA advance rate notice and carriers' focus on margin enhancement create an opportunity for SelectQuote to gain marketing share due to its unique capabilities in promoting better fit and persistency. He also questioned if the new PBM contract includes cost-plus components, similar to emerging industry trends, and its potential to stabilize the SelectRx business.

Answer

CEO Tim Danker acknowledged the market's financial stress presents an opportunity for SelectQuote's efficient and high-quality model, citing 39% Senior EBITDA margins and strong retention/recapture rates as attractive to carriers seeking quality and efficiency. President Bob Grant confirmed the new PBM contract is similar to a cost-plus model with a guarantee, providing stability without MAC pricing risk, and noted the industry's movement towards such structures, which justifies SelectRx's high service levels.

Ben Hendrix from RBC Capital Markets asked about SelectQuote's positioning to gain market share and increased marketing spend from carriers, especially given the softer MA advance rate notice and the company's proven ability to drive better policy fit and persistency. He also inquired if SelectQuote's new PBM contract incorporates cost-plus components, similar to emerging industry trends, to stabilize the SelectRx business.

Answer

CEO Tim Danker acknowledged the challenging MA rate environment but highlighted SelectQuote's efficient and high-quality model, demonstrated by 39% Senior EBITDA margins and strong retention, as a key advantage for attracting carrier partners focused on quality and efficiency. President Bob Grant explained that the new PBM contract for SelectRx is structured similarly to a cost-plus model with a guarantee, providing stability and aligning with the industry's shift towards justifying service levels through dispensing fees.

Ben Hendrix asked for clarification on the Carelon margin discussion, specifically regarding the expansion of risk-based solutions in Carelon Services through 2025, new services or product lines where risk is being taken, and the degree to which this expansion could offset shifting margin dynamics in CarelonRx.

Answer

Pete Haytaian, President of Carelon, explained that Carelon takes a very intentional and disciplined approach to risk, with a diverse mix of fee-based and risk business, including category-of-service and whole-health risk, with appropriate protections. He noted that risk is assumed in most product offerings, and new offerings like SMI, oncology, and CareBridge are risk offerings that deliver value. Gail Boudreaux, President and CEO, added that a strong external growth pipeline validates this approach, focusing on serving complex populations based on internal health plan experience. Gail Boudreaux, President and CEO, added a brief closing remark.

Ben Hendrix asked about the new services under Carelon Services where Elevance is taking risk, and the extent to which this expansion could offset the shifting margin dynamics mentioned in CarelonRx.

Answer

Pete Haytaian, President of Carelon, Elevance Health, explained that Carelon takes on risk intentionally and disciplinedly, with a diverse set of services and a mix of fee-based and risk business (category of service or whole health risk). He noted that new offerings like Severe Mental Illness (SMI), oncology, and CareBridge are risk offerings that deploy value from a cost of care and quality perspective for the enterprise.

Ben Hendrix asked for HCA Healthcare's initial thoughts on the potential transition to a health savings account (HSA) construct for enhanced subsidies, its impact on EPTC expiry headwinds, and uncompensated care, assuming funds go directly to customer HSAs.

Answer

CFO Mike Marks acknowledged President Trump's healthcare plan announcement, which included themes like improving affordability and potentially changing to cash in HSAs instead of exchange tax credits. However, he stated it's too early to size potential impacts as the plan's aspects and congressional reactions are still uncertain, and HCA is monitoring developments closely.

Ben Hendrix asked for HCA's thoughts on the potential transition to a Health Savings Account (HSA) construct for enhanced subsidies, assuming funds go directly to customer HSAs. He questioned how this would impact the current assessment of EPTC expiry headwinds and uncompensated care, especially if patients have access to funds but do not purchase insurance.

Answer

CFO Mike Marks stated it's too early to size the potential impacts from President Trump's recent healthcare plan announcement, which included themes of improving affordability, insurance plan accounts, pharmaceutical prices, price transparency, and potentially shifting to cash in HSAs. He noted that HCA is monitoring developments closely as they flow through Congress and will provide updates when more information is available.

Ben Hendricks asked about the local market strategy, specifically how referral and payer relationships fared during the audit process and if any changes were necessary. He also inquired if the operational changes resulting from the audit have altered the company's M&A target selection, particularly the balance between deep turnaround opportunities and already well-performing facilities.

Answer

Jason Murray, CEO, emphasized that the locally led, centrally supported model allowed administrators to adapt to local market needs, which proved resilient during challenging times. He pointed to strong census numbers as evidence that PACS remains the provider of choice, confirming that relationships in their markets held up well. Regarding M&A targets, Mr. Murray stated that there has been no change in thinking. The company continues to use its disciplined investment committee structure to evaluate deals and will continue to pursue deep turnaround opportunities, as they are confident in their ability to transform struggling facilities clinically and financially.

Ben Hendricks asked how local market referral and payer relationships fared during the audit process, and if any changes were made with key sources. He also inquired if operational changes from the audit have altered M&A target selection, specifically balancing deep turnaround opportunities versus already well-performing facilities.

Answer

Jason Murray (CEO) explained that the locally led, centrally supported model allowed administrators to adapt to local market needs, and strong census numbers indicated PACS remained the provider of choice, demonstrating the model's resilience. He confirmed that relationships remained strong. Jason Murray stated that the company's disciplined M&A evaluation process, involving an investment committee, has not changed. He affirmed that PACS will continue to pursue deep turnaround opportunities, like the Colorado example, where their model can transform struggling facilities clinically and financially, deploying resources to improve quality metrics in a disciplined manner.