George Hill

George Hill asked for clarification on the 'ending baseline' for the 12% growth target, given the front-end loaded 2026 earnings, and visibility into any one-time items in 2026 and their inclusion or exclusion from the baseline.

Answer

Mark Kaye, CFO, Elevance Health, summarized the 2026 EPS guidance of at least $25.50 as anchored in prudent, achievable assumptions. Key building blocks include stable commercial fully insured and strong fee-based performance, continued progress in ACA, Medicaid margins compressing to approximately -1.75%, over 100 basis points of operating margin improvement in Medicare Advantage to at least 2%, and low single-digit operating gain growth in Carelon. Below the line, there's a meaningful step down reflecting the non-recurrence of 2025 investment income and a return to a more normalized tax rate.

George Hill asked for clarification on the 'ending baseline' for the 12%+ EPS growth target, inquiring if the front-end loaded 2026 earnings mean the last period's run rate is the baseline, and about visibility to any one-time items in 2026 and their inclusion or exclusion from the baseline.

Answer

Mark Kaye, CFO, reiterated the 2026 EPS guidance of at least $25.50, anchored in prudent assumptions and actions. He outlined the key building blocks for this guidance, including stable commercial performance, progress in ACA, Medicaid margins compressing to -1.75% (trough year), over 100 basis points of Medicare Advantage margin improvement, low single-digit operating gain growth in Carelon, and a meaningful step down below the line due to non-recurrence of 2025 investment income and a normalized tax rate. He did not explicitly define 'ending baseline' or detail 2026 one-time items for the 2027 baseline calculation. Gail Boudreaux, President and CEO, added a brief closing remark.

George Hill asked if a bottom goalpost could be provided for Medicaid expectations for 2026 beyond the 'down about 125 basis points' guidance, and if a delayed Medicaid margin recovery would impact 2027 earnings growth.

Answer

Mark Kaye (CFO and EVP, Elevance Health) stated it's more responsible to wait for clearer visibility (January Medicaid rates, Medicare AEP, enhanced subsidies status, cost trends) before setting formal guidance or a floor for 2026 Medicaid margins. Gail Boudreaux (President and CEO, Elevance Health) emphasized that Elevance Health is not solely waiting on rate cycles and is actively engaged in constructive discussions with states, providing a prudent planning assumption for 2026.

George Hill asked for a bottom goalpost for Elevance Health's Medicaid expectations for 2026, beyond the 'down about 125 basis points' guidance. He also questioned if a delayed Medicaid margin recovery would impact 2027 earnings growth.

Answer

Mark Kaye, CFO, stated it's more responsible to await clear visibility (January Medicaid rate updates, Medicare AEP outcomes, enhanced subsidies status, cost trends) before setting formal guidance. Gail Boudreaux, President and CEO, emphasized proactive management and constructive state discussions, while providing a prudent planning assumption for 2026.

George Hill asked for quantification of the expected Q4 ACA utilization surge and inquired about any other one-time items in the back-half guidance that explain the implied earnings decline.

Answer

CFO Mark Kaye explained that the Q4 earnings step-down is expected to be less severe than it might appear. This is due to two key factors: a discrete non-operating tax benefit anticipated at year-end, and the fact that savings from current cost management initiatives will have their greatest impact in Q4, partially offsetting the higher modeled trend.

George Hill asked about the V28 risk model change, seeking to understand if its impact in 2025 is a 'lapping effect' relative to the initial implementation or a 'stacking effect,' and if it's too early to consider the implications for 2026.

Answer

Mark Kaye, CFO, responded that the changes from the V28 risk adjustment model were anticipated and incorporated into the company's 2025 planning and pricing. He emphasized that Elevance Health will continue its disciplined approach to benefit design, member engagement, and care coordination. He expressed confidence that the company's operational execution and diversified portfolio position it well to navigate the transition over time.

George Hill from Deutsche Bank asked about the ACA exchange business, inquiring about expectations for the enhanced subsidies amid the political cycle and what percentage of members have paid January premiums compared to last year, given the return of income verification.

Answer

Morgan Kendrick, President of Commercial Health Benefits, expressed satisfaction with the ACA business performance and noted that while a reduction in subsidies could shrink the market, he views it as a solid, long-term business. CFO Mark Kaye stated that premium effectuation rates have been consistent with prior years and are factored into guidance. CEO Gail Boudreaux added that Congress has flexibility, and subsidy extension is not an all-or-nothing decision.

George Hill of Deutsche Bank asked for more color on the drivers of the prior period development (PYD) in the quarter and whether the rate-to-acuity discrepancy is broad-based or concentrated in specific states.

Answer

CEO Gail Boudreaux responded that while they do not comment on specific states, the issue is industry-wide and not unique to Elevance Health. She noted that each state is different based on its population and programs. The specific driver of the prior period development was not detailed in the response.

George Hill from Deutsche Bank inquired about HealthEquity's updated perspective on the HSA market slowdown, specifically asking if employer sponsors are accelerating the shift towards HSAs for 2026 due to benefit buy-down, and whether the company is exploring new large custodial opportunities in emerging markets.

Answer

CEO Scott Cutler stated that rising healthcare costs are driving C-suite conversations, and HealthEquity's "analyzer product" demonstrates significant per-employee savings for clients adopting high-deductible plans, anticipating greater HSA adoption this year. Both CEO Scott Cutler and Founder and Vice Chairman Dr. Steve Neeleman highlighted the triple tax advantage of HSAs and the company's advocacy in Washington to expand HSA access as a solution to the healthcare affordability crisis, viewing it as a significant opportunity.

George Hill inquired about an updated perspective on any slowdown in the HSA market, whether employer sponsors are accelerating the shift to HSAs for fiscal 2026 due to benefit buy-down, and if HealthEquity is considering new large custodial opportunities in developing markets.

Answer

CEO Scott Cutler affirmed that rising healthcare costs are driving C-suite conversations, with HealthEquity's analyzer product helping clients compare HSA adoption to industry best practices, expecting greater adoption in the current open enrollment. He also linked new custodial opportunities to the significant need for HSAs due to their triple tax advantage and the broader healthcare affordability crisis, noting active engagement in Washington. Founder and Vice Chairman Steve Neeleman concurred.

George Hill asked about the apparent disconnect between slower employment growth in the employer market and HealthEquity's outperformance and raised guidance, seeking to understand the magnitude of the slower market growth and the drivers of the company's strong results.

Answer

Scott Cutler, President and CEO, acknowledged the tough macro environment with employment growth down 40% year-to-date but attributed HealthEquity's performance to strong sales pipeline, client/partner relationships, and delivering a great product and service experience, positioning the company as a market leader.

George Hill from Deutsche Bank inquired about the slowdown in HSA selling conditions, questioning if it was due to a tough comparison to the prior year or broader macroeconomic factors, and asked for the duration of the recently hedged interest rates.

Answer

President and CEO Scott Cutler explained that while new HSA sales were lighter than a record Q1 last year, they were historically strong and the enterprise pipeline remains robust. He noted that economic downturns have historically been strong selling seasons. CFO James Lucania clarified that the company entered into forward contracts locking in a five-year treasury base rate to de-risk future maturities.

George Hill from Deutsche Bank sought clarification on the $8 million financial impact from fraud and card migration costs. He also asked if a potential Medicare expansion would target traditional Medicare or MA plans and how it would integrate with existing benefits.

Answer

An executive, likely CFO James Lucania, confirmed the $8 million in excess service costs was fully absorbed in the quarter's results. CEO Jon Kessler explained that the company's upgraded card infrastructure provides the flexibility to offer products, like a HOPE account, alongside both Medicare Advantage and conventional Medicare plans, creating integrated and enhanced value propositions for seniors.

George Hill of Deutsche Bank asked what the initiation of a share repurchase program signals about the M&A environment and requested an update on the integration of digital wallets and retail partnerships.

Answer

President and CEO Jon Kessler stated the share repurchase does not signal a change in M&A strategy or pricing, emphasizing their disciplined approach and ample capacity for accretive portfolio acquisitions. Regarding digital integration, he noted the company is actively creating partnerships with provider payment firms and online retailers to make using account funds easier, which helps reduce service costs and adds to service revenue.

George Hill inquired about the operating impact of the Drug Supply Chain Security Act (DSCSA) implementation, specifically whether it has led to increased customer stickiness or created barriers to competition for McKesson.

Answer

Brian Tyler, Chief Executive Officer, commended the team for the smooth and successful DSCSA implementation, noting terrific service quality and minimal disruptions. He acknowledged it was a significant industry investment that adds to the value of McKesson's services, but did not anticipate it being a material driver of market structure changes. The primary focus was on ensuring a reliable, safe, and compliant supply chain.

George Hill asked about the operating impact of the Drug Supply Chain Security Act (DSCSA) implementation, specifically if it leads to increased customer stickiness or creates barriers to competition for second and third-tier market players.

Answer

Brian Tyler, CEO, commended the team for a very smooth and complicated technology implementation with excellent service quality and minimal disruptions. He acknowledged it was a significant industry investment, adding a component to McKesson's services that new entrants would need to replicate, but did not anticipate it being a material driver of market structure changes, emphasizing the focus on reliable, safe, and compliant supply chain operations.

George Hill from Deutsche Bank AG asked for a more detailed breakdown of the updated full-year guidance, questioning if the modest raise implied that the RxTS or Medical segments might perform at the lower end of their guided ranges.

Answer

EVP & CFO Britt Vitalone clarified that the $0.20 guidance increase was specifically due to the held-for-sale accounting treatment of the Norway business. He confirmed that a prior guidance raise reflected operational strength and that the company has not changed its outlook for the RxTS or Medical segments. The commentary on U.S. Pharma performing at the high end of its range reflects its continued strong operational performance.

George Hill of Deutsche Bank asked two brief questions: whether the Q4 portion of the Medical-Surgical cost savings could be annualized, and for another opportunity to discuss potential headwinds for fiscal 2026.

Answer

CFO Britt Vitalone stated that the cost savings are expected to be 'more than temporary' but did not provide specific guidance for fiscal 2026. Regarding headwinds, he identified public policy as a wildcard and reiterated that slower volumes in the primary care channel could continue to be a challenge, which the company is actively managing.

George Hill asked a series of questions covering the monetization of the oncology business, the M&A outlook given the low leverage ratio, product exposure in the Med-Surg segment, the potential impact of the IRA on Part B oncology drugs, GLP-1 effects on customer compliance, the profit mix of the RxTS segment, and the drivers of accretion from the Florida Cancer Specialists acquisition.

Answer

CFO Britt Vitalone explained that distribution forms the foundation of the oncology business but growth is coming from clinical trials. He noted that while share repurchases will continue, the company's top priority is strategic growth through M&A, like the Florida Cancer acquisition, if it meets financial return criteria. He also detailed the variability in RxTS, the drivers of the FCS accretion (primarily distribution synergies), and addressed the complexities of GLP-1s and the IRA.

George Hill asked if the U.S. business has reached an inflection point where margin expansion, indicated by operating earnings growing faster than revenue, is sustainable on an ongoing basis, given the strategic shift towards MSO segments and specialty.

Answer

CFO Jim Cleary emphasized that Cencora focuses on return on invested capital, noting that even lower-margin core distribution businesses can yield good ROIC. He explained that specialty's wraparound services, including GPO and the MSO strategy, are accretive to margins and represent a natural evolution of the highly successful specialty business.

George Hill asked if the U.S. business has reached an inflection point where margin expansion, with operating earnings growing faster than revenue, is sustainable, given the shift towards higher-margin specialty and MSO segments, and if investors should expect this trend to continue.

Answer

EVP and CFO Jim Cleary emphasized that return on invested capital is a key metric, noting that even lower-margin core distribution businesses can yield good returns due to working capital management. He explained that specialty's wraparound services, like GPO, and the MSO strategy are accretive to margins, representing a natural evolution of the successful specialty business.

George Hill of Deutsche Bank AG inquired about the competitive environment in specialty distribution, particularly within the Part B space, and asked about Cencora's strategy for market segmentation and areas of focus.

Answer

President & CEO Robert Mauch stated that the company's focus remains on its areas of strategic strength, particularly its leadership positions in retina and oncology, and he did not see a fundamental change in the market dynamics. He emphasized Cencora's satisfaction with its positioning and its investments in RCA, OneOncology, and internal digital and physical infrastructure, which he believes will support continued growth and meet the evolving needs of both manufacturer and provider customers.

George Hill asked a two-part question regarding the impact of the RCA acquisition on gross margin and for a quantitative breakdown of the U.S. drug business between Part B and Part D.

Answer

CFO Jim Cleary explained that RCA boosts gross margin percentage because it is a higher-margin business and because intercompany sales are eliminated in consolidation. He also clarified that an accounting change for RCA's non-owned equity contributed approximately $0.14 to the EPS guidance increase, with the remainder coming from core business strength. The Part B/D split was not addressed.

George Hill of Deutsche Bank asked for a rank-ordering of the key value drivers, such as GPO services and clinical trials, that Cencora's MSO platforms provide to their physician partners.

Answer

CEO Robert Mauch explained that it is not possible to rank the value drivers because the mix of what is most valuable differs by specialty and practice. He stressed that the MSO platform's strength is its dynamic infrastructure, which allows Cencora to work closely with providers to innovate and meet their evolving needs.

George Hill asked for a long-term perspective on how Cencora plans to support specialty practices given potential future headwinds from IRA changes affecting Part B drug costs and practice profitability.

Answer

CEO Bob Mauch responded that the company is proactively modeling various IRA impact scenarios and feels confident that any changes will be manageable for both providers and Cencora. He stressed that long-term pharmaceutical innovation will continue to be a positive force for these practices.

George Hill questioned the implied core growth rate for the year, suggesting a deceleration in the balance of the year, and asked about the sustainability of the strong Q1 performance. He also requested a distinction between Part B (provider-facing specialty) and Part D (retail pharmacy) growth.

Answer

CFO Aaron Alt reiterated the business's strong execution, demand strength, and upcoming M&A activities (Solaris closing, GIA/ION lapsing), expressing confidence in the provided guidance and momentum. CEO Jason Hollar stated that while strength was seen across all aspects, the company is not prepared to provide a further breakdown of Part B versus Part D growth.

George Hill questioned the sustainability of the strong Q1 performance, noting an implied deceleration in the core growth rate for the balance of the year, and asked for a breakdown of Part B versus Part D growth within the provider-facing specialty business compared to the traditional YRX business.

Answer

CFO Aaron Alt expressed confidence in the business's momentum and guidance, citing demand strength, upcoming Solaris Health acquisition, and the lapping of GIA and ION acquisitions in the second half. CEO Jason Hollar stated that while broad strength was observed, the company was not prepared to provide a further breakdown of Part B versus Part D growth.

George Hill of Deutsche Bank followed up on the NCI accounting, asking about potential future marks to the liability on the income statement and whether the value of assets contributed from Specialty Networks to the new JV could be quantified.

Answer

CEO Jason Hollar clarified that Specialty Networks is not being contributed to the JV; rather, its capabilities are being brought to the partnership. CFO Aaron Alt directed the analyst to the upcoming 10-K filing for further details on the liability accounting.

George Hill requested a rank-ordering of the key drivers contributing to the margin expansion observed in the Pharmaceutical segment.

Answer

CFO Aaron Alt attributed the margin improvement to an intentional strategy of growing higher-margin specialty businesses and adding new MSO revenue streams. He also highlighted disciplined SG&A control as a critical factor, noting that core SG&A actually decreased year-over-year when normalizing for acquisitions.

George Hill asked for a more detailed ranking of the drivers of the Pharma segment's outperformance, specifically the contribution from vaccines versus generics, and for commentary on the current generic drug market dynamics.

Answer

CEO Jason Hollar ranked brand and specialty products as the greatest drivers of the outperformance. He noted that generics performance was also a notable contributor, though not as large, while reiterating that vaccines were only a slight year-over-year positive. Executive Aaron Alt added that the generics program benefited from good volumes amid 'consistent market dynamics,' implying no extraordinary pricing benefits.

George Hill asked about the assumptions underpinning Medicaid margin stability for 2026, specifically regarding the Florida retro and New York changes. He also inquired about the contribution of benefit cuts or design changes, such as high-cost drug carve-outs, to 2026 margin stability.

Answer

CFO Drew Asher clarified that the Florida retro was for Q1 and Q2 2025. He reiterated the 2025 full-year forecast of 93.7% HBR and the goal of stability for 2026, with an expectation to improve upon that. Asher mentioned levers like high-cost drug carve-outs in one large state, kick payment pools in another, and consideration of reinsurance pools for lumpiness of high-cost drugs. These, along with private duty nursing management and behavioral health task force efforts, contribute to managing care and creating affordability, underpinning the ability to maintain HBR stability into 2026.

George Hill asked about the assumptions underpinning Medicaid margin stability for 2026, specifically if it includes the Florida retro and New York changes, and the contribution of benefit cuts, design changes, and high-cost drug carve-outs.

Answer

Drew Asher, Executive Vice President and Chief Financial Officer, clarified that the Florida retro was for Q1 and Q2 2025, and the 2026 goal of HBR stability around 93.7% incorporates ongoing levers. He cited examples such as high-cost drug carve-outs in certain states, the formation of kick payment pools for high-cost drug encounters, and well-run reinsurance pools as key initiatives contributing to managing care and creating affordability for state partners and members.

George Hill sought clarification on whether the pressure in PDP was from 'pharma pricing' or 'pharmacy pricing'. He also asked if the PDP target margin for the 2026 bid process should be considered flat and what initiatives could expand margins outside of bidding.

Answer

EVP and CFO Andrew Asher clarified the pressure is from higher utilization of specialty drugs, some of which were previously covered by pharmacy assistance programs, not from pharmacy costs. He reiterated the long-term goal from the Investor Day to expand PDP margins from the 1% zone to 3%+, but stated it was too early to give a specific target for 2026.

George Hill sought clarification on the exchange effectuation rate, asking whether the current strength could create upside in Q1 or if there was still potential downside risk to the membership outlook.

Answer

CFO Andrew Asher responded that while the company is enthusiastic about the strong start, it is too early to adjust the $34 billion commercial revenue guidance. He stated they are sticking with the current forecast for now and will monitor membership trends over the next few months, reiterating that starting from a position of strength is a positive.

An analyst on behalf of George Hill asked why Centene's Medicaid PMPM grew faster than peers, how much was due to rate adjustments, and if the growth is sustainable.

Answer

CFO Andrew Asher explained that a significant driver of the PMPM increase was a higher level of state-directed payments in the quarter, which impacts the calculated yield. He also confirmed that the composite rate increase of high 4s to 5% for the back half of the year was another contributing factor.

George Hill asked about the retail pharmacy business, specifically how close CVS Health is to moving beyond its long-term guide of a 5% decline, given that PBMs are increasing payments to pharmacies and "cost advantage" initiatives are taking root, potentially aligning earnings growth more closely with script growth.

Answer

David Joyner, President and CEO, stated that the long-term goal of "cost advantage" is to align the largest purchaser's cost of goods with payer benefits, with 2026 providing more clarity. Prem Shah, EVP, Chief Pharmacy Officer, and President, Pharmacy and Consumer Wellness, explained that "cost advantage" aims to balance reimbursement erosion with cost of goods improvement, noting good progress with all commercial and third-party discount card programs transitioned and over 60% of Medicare transitioning to cost-based processing, targeting 100% by early 2026.

George Hill of Deutsche Bank questioned the pharmacy segment's outlook for the second half of the year, asking about the vaccine outlook, reimbursement stabilization, the impact of Rite Aid file buys, and the sustainability of recent performance.

Answer

EVP & Group President, Prem Shah, attributed strong performance to service levels and the successful rollout of CVS CostVantage for commercial clients. CFO Brian Newman noted that the updated guidance remains cautious regarding consumer spending and immunization demand. CEO David Joyner emphasized that the results stem from a multiyear investment in technology and operations.

George Hill asked for quantification of the step-up in discretionary investments incurred in Q3, distinguishing between run-rate and one-time investments, and their expected leverage going forward.

Answer

Wayne DeVeydt (CFO, UnitedHealth Group) explained that of the over $450 million in investments, about one-third was a commitment to the UnitedHealth Foundation, which is not necessarily run-rate for the next year but is a core, multi-year activity. The remaining portion represents investments in people, particularly in Optum Insight, aligning incentives around execution. He views much of this as recurring, part of the core business, and supporting expansion in Optum Health and AI.

George Hill questioned the significant step-up in discretionary expenses in Q3 compared to Q2, asking for quantification of these investments and whether they are run-rate or one-time in nature.

Answer

Wayne DeVeydt, CFO, explained that of the over $450 million in discretionary expenses, about one-third was a commitment to the UnitedHealth Foundation, which is not necessarily run-rate for the next year but part of a multi-year commitment. The remaining portion represents investments in people, including aligning incentives for Optum Insight resources, which he views as largely recurring and part of core business investments in Optum Health and AI.

George Hill questioned the magnitude of the Medicare MCR miss, given Molina Healthcare's high duals and sick book of business, and asked about the variable consumption and drivers of marginal cost of care in Medicare.

Answer

CFO Mark Keim and CEO Joseph Zubretsky explained that LTSS (Long-Term Services and Supports) is a significant driver in the high-acuity population. High-cost drugs, including certain cancer treatments and other therapies, continue to be a major factor across all businesses, with Rx trends at 16% overall and 36% in the top 10 therapeutic categories. They noted that even in highly chronic populations like ABD Medicaid and duals, utilization is up, contributing to the cost pressure in Medicare.

George Hill of Deutsche Bank asked for management's view on whether underlying earnings can grow in 2026. He also requested commentary on the potential disruption from a future biannual redetermination process, including beneficiary response rates.

Answer

CEO Joseph Zubretsky stated that it is too early to provide a 2026 earnings outlook, as it depends on key building blocks like the Medicaid rate cycle, Marketplace pricing, and the realization of embedded earnings. Regarding biannual redeterminations, he acknowledged it would create faster membership churn but said the effect is contemplated in their models and is expected to be manageable.

George Hill posed a big-picture question on how states with budget deficits can afford the high single-digit Medicaid rate increases that seem necessary for plans to reach program equilibrium.

Answer

CEO Joseph Zubretsky acknowledged the concern over state budgets but argued that historically, there is little correlation between a state's fiscal health and its adherence to actuarially sound rates. He expressed confidence that the actuarial process will prevail over the intermediate term, allowing the market to receive the rates it needs, which would in turn benefit Molina's performance.

George Hill of Deutsche Bank sought clarification on the risk corridor usage, asking how much is expected to be used in the back half of the year. He also asked how many states have corridors and what percentage of lives are on multi-year versus annual repricing cycles.

Answer

CFO Mark Keim clarified that on a full-year basis, he expects to use about half of the initial 200 basis point corridor cushion, leaving about 100 basis points of corridor expense within the reported MLR for the full year. He also stated that nearly every state has some form of a corridor or minimum MLR and that every state contract reprices on an annual basis, with some having provisions for semi-annual reviews if necessary.

George Hill from Deutsche Bank asked for clarification on the relationship between the decline in enterprise customers and revenue, specifically regarding logo retention versus net dollar retention, and inquired if the company feels it is appropriately sized for a market recovery.

Answer

CFO Casey Heller explained the enterprise client decline is partly due to down-sells in Life Sciences, not just churn, and noted 12 new enterprise clients were added. She expects gross dollar retention to improve year-over-year but net dollar retention to decline due to upsell pressures. CEO Kevin Coop added that the company is focused on being efficient stewards of capital.

George Hill from Deutsche Bank asked about the relationship between the decline in enterprise customers versus revenue, focusing on logo retention versus dollar retention, and whether the company feels it is appropriately sized for a potential market rebound.

Answer

CFO Casey Heller clarified that the enterprise client count decline is partly driven by a 'down-sell dynamic' in Life Sciences, not just churn. She expects gross dollar retention to improve due to operational actions but net dollar retention to face pressure from upsells. CEO Kevin Coop added that the company is focused on efficiency and has the operational flexibility to reinvest for growth when the market rebounds.

George Hill asked about the most in-demand cross-sell modules and which solutions are best positioned to help provider clients navigate macro uncertainties, later clarifying he was asking specifically about solutions to help customers manage tariff impacts.

Answer

CEO Kevin Coop responded that demand is broad across all segments for the company's core differentiated data, rather than being concentrated in specific modules. He emphasized that the primary focus is on data quality to mitigate down-sell pressure. After the clarification, Coop explained that while Definitive Healthcare does not offer a specific tool to analyze tariff impacts, its data suite helps clients with downstream commercialization strategies for drugs and devices that could be indirectly affected by such tariffs.

George Hill asked about the company's visibility into achieving growth in the second half of 2025, the key assumptions driving that forecast, and for an update on the current state of the sales pipeline and demand environment.

Answer

CEO Kevin Coop stated that the company is being cautious with predictions until more empirical data on operational improvements is available. CFO Rick Booth clarified that while they are not formally guiding for 2025, they expect a full-year revenue decline but anticipate a return to sequential growth in the second half of the year, driven partly by seasonal strength in Q4 bookings.

Speaking on behalf of George Hill from Deutsche Bank, Liz Lee asked about the expected impact of Medicare Advantage benefit changes on market growth and churn in 2026. She also inquired about the potential effects of expiring ACA subsidies and how heightened regulatory oversight has influenced membership participation.

Answer

CEO Francis Soistman responded that he expects the 2026 AEP to be similar to last year's, with service area reductions and benefit changes, but noted that carriers will still pursue balanced growth, creating an opportunity for eHealth. Regarding the ACA market, he clarified that the plans are not disappearing but the level of subsidization is uncertain, expressing confidence that Congress will address the issue. He emphasized that market volatility and disruption in both Medicare and ACA play to eHealth's strengths by increasing consumer shopping and the need for guidance.

George Hill from Deutsche Bank asked about the impact of carriers suppressing commissions on certain products and sought commentary on how the broader Medicare Advantage rate environment affects eHealth's business.

Answer

CEO Fran Soistman explained that eHealth navigated the commission suppressions well due to its broad, carrier-agnostic choice model with over 40 carrier relationships, a key advantage over smaller brokers. Regarding the rate environment, he noted that both very good and very bad environments can spur shopping activity—a bad environment creates disruption and plan exits, while a good one improves the MA value proposition, attracting new shoppers from original Medicare.

George Hill from Deutsche Bank asked if the risk adjustment impact seen in 72% of the membership could be extrapolated to the remainder, and whether it was too early to quantify the potential earnings improvement in 2026.

Answer

CFO Jeff Schwaneke advised against extrapolation due to significant payer-specific variability. While declining to quantify 2026 improvement, he listed several positive drivers, including the 2026 rate notice, enhanced risk adjustment programs, improved payer contracts, and cost discipline, with medical cost trends remaining the largest variable.

George Hill asked about the appetite for risk among providers, given a peer's recent move to convert some business back to fee-for-service, and inquired about strategies to mitigate Part B drug risk.

Answer

CEO Steven Sell affirmed that strong provider demand for value-based care persists, although discussions are now more detailed. He noted the favorable 2026 rate notice has made these conversations easier. Regarding Part B drug risk, which is largely oncology-driven, he acknowledged the challenge but mentioned early, unannounced initiatives are underway to improve PCP-oncologist collaboration.

George Hill asked about the interplay of carving out Part D risk while repricing contracts and sought to confirm an $8M positive prior-year development (PYD).

Answer

CFO Jeffrey Schwaneke clarified that Part D is recorded net within revenue, so carving it out does not cause a major revenue line change. He also corrected the PYD figure, stating it was a favorable $3 million for the quarter after adjusting for retroactively assigned membership, not $8 million.

George Hill questioned if the $325 million medical margin 'jumping off point' represents the baseline for 2025 and asked for the major puts and takes influencing the 2025 outlook from that starting point.

Answer

CFO Jeffrey Schwaneke clarified that the $325 million figure is the 2024 incurred run-rate medical margin after excluding approximately $100 million of unfavorable prior period development, and it serves as a baseline before accounting for strategic actions. CEO Steven Sell then detailed the key factors for 2025, including the positive impact from exiting unprofitable partnerships, payer contract repricing, Part D risk mitigation, favorable payer bids, and opportunities for improved burden-of-illness assessment.

George Hill from Deutsche Bank asked for confirmation on the quality of semaglutide API sourcing (FDA inspected, cGMP) and any associated tariff risks. He also inquired about the best way to conceptualize the company's 503A compounding capacity.

Answer

CEO Andrew Dudum confirmed that all API suppliers, both domestic and overseas, are FDA-registered, cGMP facilities and undergo rigorous third-party testing. CFO Yemi Okupe added that the company's outlook does not assume any meaningful pressure from tariffs and that CapEx investments and other measures provide confidence in their capacity to meet customer needs for years to come.

George Hill followed up on the Novo Nordisk relationship, asking if dispensing ratios were discussed and if there's a risk Novo would end the partnership if personalized sales are too high.

Answer

CEO Andrew Dudum firmly stated that imposing dispensing ratios would improperly influence independent clinical decision-making, which is a line the company will not cross. He explained the agreement with Novo is philosophical, based on regulatory allowances for personalization when clinically necessary. He believes partners value Hims & Hers' large patient base and will continue to work with them as long as care remains independent and high-quality.

George Hill asked a two-part question: first, whether complaints from MCOs about RCM tools are driving client demand for Waystar, and second, which revenue line is expected to decline in the second half to align with guidance.

Answer

CEO Matt Hawkins responded by emphasizing Waystar's AI leadership, including preventing $6 billion in denied claims, and connected this to the iodine acquisition's goal of creating the 'perfect undeniable claim.' CFO Steve Oreskovich clarified that the second-half guidance dynamic is primarily driven by expected seasonality in volume-based patient payment revenue due to high-deductible health plans.

George Hill questioned why the company mentioned 'recession risk' despite strong results, asking if they are seeing any signs of lengthening sales cycles or if the macro environment has shifted client demand toward specific products.

Answer

CEO Matt Hawkins explained that the commentary reflects prudence as a young public company and empathy for providers facing potential macroeconomic headwinds like tariffs. He clarified that they are not necessarily seeing changes in decision-making timeframes but are observing providers prioritizing the most essential, mission-critical solutions that drive cash flow and efficiency. Hawkins reiterated his belief that Waystar will be a 'net winner' during this cycle due to the critical nature of its software.

George Hill requested a breakdown of the 2025 revenue growth guidance into new footprint, wallet share, and core volume/price growth, and also asked about trends in patient credit quality.

Answer

CFO Steve Oreskovich stated that the company does not provide that specific breakdown but reiterated the components of Net Revenue Retention (NRR): gross retention, price, volume, and cross-sell. He emphasized that the drivers of NRR can shift, with Q4 being driven by higher volumes. CEO Matt Hawkins declined to comment on patient credit quality.

George Hill from Deutsche Bank asked for more color on the drivers behind the 'bounce back' members who are returning to Humana after initially leaving for other plans.

Answer

President and CEO James Rechtin explained that these members often leave, are surprised by the benefit package or service level of their new plan, and then return to the familiar and trusted experience at Humana. George Renaudin, President of Insurance, added that Humana's reputation for service contributes significantly to this dynamic.

George Hill requested an update on visibility into core medical cost trends and asked for macro comments on how the acuity of the individual MA book has changed after exiting a large number of dual members.

Answer

CFO Celeste Mellet stated that comprehensive data through April shows no trends outside of guidance. George Renaudin, President of the Insurance Segment, added that the membership mix has shifted to higher lifetime value segments, with strong performance in key markets and better-than-expected member 'bounce back' rates during OEP.

George Hill asked if early Part D data was changing the margin outlook for 2025 and whether Humana was pursuing more aggressive strategies to manage the Part B drug benefit, such as shifting financial responsibility.

Answer

George Renaudin, President of the Insurance Segment, confirmed that early Part D claims data aligns with their utilization and pricing expectations, and they feel good about their position. He declined to provide specific details on Part B to Part D management strategies but affirmed the company's continued focus on its MAPD and PDP products.

George Hill asked about the trend in inpatient claims denial rates over the past year and whether changes in these rates have had a meaningful impact on the medical loss ratio (MLR).

Answer

CFO Susan Diamond explained that following the 2-midnight rule implementation, they saw higher-than-expected appeal and uphold rates, a trend they incorporated into estimates early in the year and which has remained consistent. CEO Jim Rechtin added that overall inpatient trends have been relatively stable since the second quarter, giving them confidence in their ability to project costs.

George Hill asked about the potential impact from Medicare Part D benefit changes on GoodRx's user base and the effectiveness of the company's biosimilar strategy for drugs like Humira, considering PBM restrictions.

Answer

CEO Wendy Barnes and CFO Chris McGinnis explained the Medicare changes have a minimal impact, estimated at less than 1% of the business, as a small fraction of their Medicare-eligible users reach the maximum out-of-pocket threshold and many drugs remain non-covered anyway. Regarding biosimilars, Wendy Barnes stated they align with GoodRx's affordability mission and the company will continue to pursue favorable pricing, noting that the overall market uptake of biosimilars has been increasing.

George Hill asked about the potential impact of Medicare Part D benefit changes on GoodRx's business and questioned the effectiveness of the company's biosimilar strategy, particularly for drugs like Humira.

Answer

CEO Wendy Barnes explained that they do not see a headwind from Medicare changes, as less than 30% of users are Medicare-eligible and very few reach the maximum out-of-pocket, leaving a large opportunity in non-covered drugs. CFO Chris McGinnis quantified the potential impact at less than 1% of the business. Regarding biosimilars, Wendy Barnes stated that they have seen reasonable uptake and that these products align with GoodRx's affordability mission, so they will continue to pursue favorable pricing on them.

George Hill from Deutsche Bank asked about plans for the independent pharmacy channel and what volume increase from the renewed Kroger partnership is specifically included in the 2025 guidance.

Answer

CEO Wendy Barnes confirmed they are open to working with independents, primarily through their Scriptcycle offering, and are in dialogue with the NCPA. CFO Chris McGinnis stated they do not break out volume by retailer but expect Kroger to contribute to volume growth. He reiterated that despite some headwinds to script counts, they expect overall prescription transaction revenue to increase in 2025 due to a favorable mix.

George Hill of Deutsche Bank asked for an update on the Humira biosimilar strategy with Boehringer Ingelheim and how GoodRx can close the gap between its results and strong macro drug utilization trends.

Answer

Interim CEO Scott Wagner positioned the Boehringer Ingelheim partnership as one of 72 successful point-of-sale cash programs, calling it an "awesome proof point" for meeting affordability needs. He emphasized the large opportunity in the 80-100 million brand scripts left at the counter annually due to cost.

George Hill asked two housekeeping questions: whether the 100 basis point MCR impact from the delayed Medicare divestiture was a net drag on earnings, and if the full-year guidance still contains a recession assumption.

Answer

CFO Ann Dennison clarified the earnings impact from the delayed divestiture was marginal (less than $20 million) and that the quarter's favorability came from the ongoing businesses. Chairman and CEO David Cordani added that while the economy held up in Q1, the full-year outlook remains prudent and contemplates market dynamism, so planning assumptions are being maintained.

George Hill of Deutsche Bank asked two follow-up questions on stop-loss: whether there are other recovery levers besides price, such as benefit design changes, and whether the high-acuity surgical activity was elective or non-elective.

Answer

CFO Brian Evanko confirmed that recovery levers include more than just price. Renewal conversations are holistic, and clients often adjust attachment points to manage costs. Regarding surgical activity, he specified it was tilted toward inpatient procedures, primarily cancer and cardiac-related, which are not considered elective. He stated the 2025 outlook assumes this is a structural trend, not a temporary one.

George Hill asked for a reconciliation between past comments calling Medicare Advantage (MA) strategically important and current remarks describing it as a 'challenged market,' and whether the challenges are cyclical or structural.

Answer

CEO David Cordani clarified that his comments on the market being 'challenged' are a statement of fact about the current environment, citing elevated medical costs, significant Star Ratings resets, and risk adjustment changes. He affirmed that MA remains an important offering societally and for Evernorth's services business. He characterized the current challenges as 'transitional' for the marketplace.

George Hill from Deutsche Bank asked about the BetterHelp segment, questioning where discretionary costs would be cut to meet EBITDA targets and inquiring about the key drivers for the gap between the 2025 EBITDA and free cash flow guidance.

Answer

CFO Mala Murthy explained that BetterHelp is a lean, variable-margin business, and the primary lever for managing profitability is advertising and marketing spend, which will be managed judiciously. She attributed the stronger free cash flow guidance to lower cash-based compensation in 2025 and a focus on working capital improvements like collections.

George Hill asked how the pharmacy re-contracting might impact Walgreens' own pharmacy costs as a large employer and what feedback payer partners are providing about the downstream cost impact for their clients.

Answer

CEO Tim Wentworth clarified that changing the reimbursement model is about realigning risk and how pharmacies are paid, not inherently a cost increase. He stated that the negotiation of underlying rates determines the ultimate cost. He noted that Walgreens, as an employer, has not seen a cost increase from these model shifts. He added that the primary cost driver for payers remains the rising expense of specialty drugs, and there is strong interest in Walgreens' independent specialty pharmacy services to help manage those costs through transparency and adherence programs.

George Hill asked for the specific financial impact of the planned store closures on the U.S. pharmacy business in fiscal 2025 and for color on the expected earnings cadence for the segment throughout the year.

Answer

Global CFO Manmohan Mahajan stated that the footprint optimization program is expected to contribute approximately $100 million to AOI in fiscal 2025, with benefits scaling in subsequent years. He noted the program will be cash-flow accretive in-year. Regarding cadence, he indicated it would follow a similar pattern to the last couple of years, with no significant changes expected between the first and second half.

George Hill from Deutsche Bank asked for the discrete financial impact of the planned store closures on the U.S. pharmacy business in fiscal 2025, both in-year and on a run-rate basis. He also sought more color on the expected earnings cadence for the U.S. Pharmacy segment throughout the year.

Answer

CFO Manmohan Mahajan specified that the footprint optimization program is expected to contribute approximately $100 million to AOI in fiscal 2025, with benefits scaling in subsequent years. He noted the program would be cash-accretive in-year due to working capital benefits and sales of owned locations. Regarding cadence, he stated it would be broadly in line with the patterns observed over the last couple of years.

George Hill of Deutsche Bank sought clarification on the fiscal 2025 earnings outlook, noting that the projected $0.75 headwind combined with current challenges implies an EPS in the low $2 range, and asked about other cash flow considerations for FY25.

Answer

CFO Manmohan Mahajan confirmed the key factors for the FY25 bridge without providing specific guidance. He highlighted the ~$0.75 headwind from the sale-leaseback wind-down, Cencora share sales, and a normalized tax rate. He also noted that while retail comparisons will ease, the consumer environment will remain challenging, and some pharmacy headwinds will persist, offset by expected profit growth in U.S. Healthcare and International.

George Hill sought to clarify if the combination of current guidance and the identified $0.75 headwind implies a fiscal 2025 EPS in the low $2 range and asked about other major cash flow considerations for FY25.

Answer

Global CFO Manmohan Mahajan reiterated that WBA is not providing FY25 guidance but offered key considerations: Q4 is seasonally the lowest quarter, U.S. Healthcare and International segments are expected to grow profitability, and the ~$0.75 headwind from the sale-leaseback wind-down, Cencora sales, and a normalized tax rate is a significant factor. He also noted the consumer environment will remain challenging.

Asked about the dynamics of reimbursement model discussions, the expected earnings cadence between Q3 and Q4, and for an update on the portfolio strategy review, particularly how the company plans to unlock value given the market's low valuation of the core U.S. business.

Answer

On reimbursement, the company is working with PBMs to offer various models to see what gains traction with payers. The earnings cadence between Q3 and Q4 is expected to be 'fairly balanced'. Regarding portfolio strategy, the CEO confirmed a deep review of all assets is underway to ensure strategic fit and growth potential, with findings to be presented to the board in April, but emphasized it will be a series of actions rather than a single 'big bang' event.

George Hill asked for an update on discussions with lenders regarding the 2025 debt maturities, the potential script volume exposure from exiting the PDP business, the primary drivers of the higher Medical Loss Ratio (MLR) at Elixir, and the full-year COVID-19 vaccine assumption in guidance.

Answer

Matt Schroeder, Executive VP and CFO, stated that while the company is evaluating several pathways to address its capital structure, there was no specific update to provide. He characterized the script overlap with the PDP business as 'relatively minor.' Chris DuPaul, COO of Elixir, clarified that the high MLR was primarily due to a shift in the membership base and adverse selection, not a specific drug class. Matt Schroeder confirmed the full-year guidance assumes approximately 3 million COVID-19 vaccines.