Joshua Raskin

Joshua Raskin asked about the variance in Medicaid margins across states, whether Molina is contemplating exiting any state, and the specific drivers behind the negative retroactive adjustments in California, including if California was previously running higher than average margins.

Answer

President and CEO Joe Zubretsky stated that Medicaid rates are generally underfunded across Molina's portfolio, and no state's regulatory environment is so unfriendly as to warrant an exit. CFO Mark Keim and Joe Zubretsky explained that the California issues were situational and event-driven, totaling $135 million ($2 per share). These included a retroactive corridor for the undocumented population (due to state funding bypassing CMS restrictions) and a material risk adjustment update in L.A. County due to membership churn. Joe Zubretsky added that this California effect was conservatively pulled through to 2026 guidance.

Joshua Raskin inquired about the variance in Medicaid margins across states, potential state exits, and the specific drivers behind the unexpected negative retroactive adjustments in California Medicaid, questioning if California had previously higher-than-average margins.

Answer

President and CEO Joe Zubretsky clarified that no state exits are contemplated, as rates are generally underfunded across the portfolio. He explained the California adjustments were situational, involving a retroactive corridor for the undocumented population due to lower-than-priced service utilization and a material risk adjustment update in L.A. County due to membership churn. CFO Mark Keim added that these items totaled $135 million ($2 per share) and were unusual in nature, with the California impact conservatively pulled into 2026 guidance.

Joshua Raskin of Nephron Research LLC asked about the flexibility to adjust 2026 Marketplace pricing given the recently worsened trends and inquired about the root cause of the utilization spike, especially after prior comments about a more stable membership.

Answer

CFO Mark Keim explained that states are allowing more flexibility for rate refilings this year, with extended or rolling deadlines. CEO Joseph Zubretsky identified the root cause as a market-wide deterioration in the risk pool, citing an external Wakeley analysis that shows the national Marketplace risk pool's acuity increased by 8% year-over-year, which negates the expected benefits from risk adjustment.

Joshua Raskin asked about the Marketplace's strategic fit, its synergies with other segments, and whether the company might reconsider its approach to the segment's inherent annual volatility.

Answer

CEO Joseph Zubretsky affirmed the Marketplace is highly synergistic, allowing Molina to serve members across various government-sponsored programs as their life circumstances change. CFO Mark Keim added that while the segment is volatile, Molina's strategy is to price for margin and let volume follow, ensuring it remains a smaller but profitable part of the portfolio.

Joshua Raskin from Nephron Research questioned the drivers behind the higher-than-expected Marketplace MLR in Q4. He also sought specifics on Medicare Advantage cost pressures in the quarter, particularly in the acquired Bright Health book, and the changes made to 2025 bids to ensure confidence.

Answer

CFO Mark Keim attributed the Q4 Marketplace MCR of 83.3% to 'normal seasonality,' while CEO Joe Zubretsky highlighted the strong full-year MCR of 75.4%, which allowed for reinvestment in growth. For Medicare, Keim cited industry-wide utilization trends and a one-time downward adjustment to risk adjustment revenue. Zubretsky added that the Bright business would be slightly below breakeven in 2025, impacting margins, but affirmed confidence in the long-term accretion and overall Medicare growth strategy.

Joshua Raskin of Nephron Research asked about the implications of Molina's strong Marketplace performance on 2025 rebate positions and the strategy for balancing growth with margins. He also requested details on the specific drivers behind the elevated Medicaid MLR, particularly in LTSS, behavioral health, and pharmacy.

Answer

President and CEO Joe Zubretsky explained that Molina will reinvest the excess Marketplace margin into its 2025 bids to drive growth, a strategy consistent with the prior year. CFO Mark Keim added that the company is tracking below the rebate threshold and will prioritize growth over paying rebates. Regarding Medicaid, Zubretsky noted that cost trend is running at 6% versus the expected 3%, attributing it equally to redetermination acuity shifts and higher utilization among continuing members in LTSS, pharmacy (including GLP-1s), and behavioral health.

Joshua Raskin asked about HCA Healthcare's technology agenda, identifying the greatest opportunities, and specifically how AI can contribute to both administrative cost reduction and revenue enhancement.

Answer

CEO Sam Hazen detailed HCA's multi-component tech agenda, including an electronic health record transition to standardize data. He outlined three domains for AI application: administrative (revenue cycle, HR, IT, supply chain for efficiencies and better interactions), operational (throughput, asset productivity, scheduling, staffing, OR management for consistency and management tools), and clinical (supporting doctors with insights from HCA's proprietary database for better patient decisions, and nurses with tools for safer, more efficient patient environments). He emphasized HCA's commitment to AI to create value across quality, efficiency, and management effectiveness.

Joshua Raskin asked about the factors driving HCA's cash flow conversion (EBITDA to free cash flow) ratio from 30% to almost 50% and its sustainability over the next couple of years.

Answer

CFO Mike Marks attributed the strong cash flow from operations to solid adjusted EBITDA growth, robust revenue cycle operations (Parallon), and effective working capital management. He also noted a $1.3 billion deferral of federal income tax payments to Q4. He expressed confidence in the sustainability of strong cash flow management.

Joshua Raskin with Nephron Research questioned the increase in cash flow conversion (EBITDA to free cash flow) from 30% to nearly 50%, the driving factors, and its sustainability over the next couple of years.

Answer

CFO Mike Marks attributed the strong cash flow to solid adjusted EBITDA growth, robust revenue cycle operations (Parallon), and effective working capital management. He also noted a $1.3 billion deferral of federal income tax payments to Q4. He expressed confidence in continued strong cash flow management for the future.

Joshua Raskin from Nephron Research LLC asked for additional color on inpatient and outpatient surgery volumes and any notable shifts in site-of-care trends.

Answer

CFO Mike Marks reported that outpatient surgery cases were down slightly, driven by Medicaid and self-pay, but outpatient revenue grew a strong 8%. Inpatient surgeries were relatively flat, also impacted by a drop in Medicaid cases. He emphasized that payer mix was the primary driver of these volume trends, while revenue growth in outpatient settings remained robust.

Joshua Raskin inquired about HCA's technology agenda, asking for specific investments, including AI, that are aimed at differentiating the company's clinical care delivery.

Answer

CEO Sam Hazen detailed a broad technology initiative focused on three areas: administrative functions, facility operations, and clinical applications. He mentioned a new Digital Transformation and Innovation Group is leading these efforts. While HCA is implementing tools for administrative and operational efficiency, he described the clinical side as the 'Holy Grail,' where they are moving cautiously to deploy data-driven tools that add real value for physicians and caregivers, citing early progress in obstetrics.

Joshua Raskin asked for more specifics on ASC performance, including the rate versus volume breakdown of the 5-6% revenue growth, and inquired about markets where HCA has significant inpatient share but lacks a corresponding ASC presence.

Answer

CFO Mike Marks provided the numbers: ASC net revenue was up 5-6% while case volumes were down 1%. CEO Sam Hazen explained that HCA's ASC footprint is generally consistent with its hospital presence, with the main limitations being restrictive Certificate of Need (CON) laws in states like Georgia, Virginia, and North Carolina, rather than a strategic gap.

Joshua Raskin of Nephron Research asked if increased state supplemental payments have altered HCA's strategy for serving Medicaid patients, noting that the 8.5% decline in Medicaid admissions was less severe than the overall market decline in Medicaid enrollment.

Answer

CEO Sam Hazen stated that HCA's core strategy for serving Medicaid beneficiaries has not changed. He clarified that the volume decline was primarily due to the redetermination process, which will slow next year. He added that supplemental payment programs have, in some cases, made it easier to invest in services and capabilities that benefit Medicaid patients within their communities.

Joshua Raskin focused on Humana's emphasis on member lifetime value (LTV) and net present value (NPV), asking if this represents a strategic shift and if the company is willing to accept different margin levels in the insurance segment due to CenterWell's contributions.

Answer

George Renaudin, President of Insurance, described the LTV/NPV focus as an evolution, aiming for reasonable margins across all insurance products to avoid cycles of low-margin, high-growth plans. He emphasized evaluating customer value across the entire enterprise, including CenterWell. David Dintenfass, President of Enterprise Growth, added that this multi-year view enhances stability and long-term value. Celeste Mellet, CFO, clarified that they balance long-term value creation with short-term delivery.

Joshua Raskin asked if the focus on member lifetime value (LTV) and net present value (NPV) represents a strategic shift, potentially leading to different margin levels in the insurance segment due to CenterWell's contribution, and its impact on long-term margins.

Answer

George Renaudin, President of Insurance, described it as an evolution, aiming for reasonable margins across all insurance products to ensure sustainability. David Dintenfass, President of Enterprise Growth, emphasized a multi-year view for LTV, leading to better stability. Celeste Mellet, CFO, clarified that Humana balances long-term value creation with short-term delivery.

Joshua Raskin of Nephron Research asked for confirmation that the newly announced $100 million in investments was incremental to prior amounts and questioned why the company didn't invest more instead of raising guidance.

Answer

CFO Celeste Mellet confirmed the $100 million is an incremental investment focused on transformation, AI, and STARS. President and CEO James Rechtin added that while they are pulling some investments forward, there is a practical limit to how much change the organization can operationally absorb at one time.

Joshua Raskin asked for an overview of the integration strategies between Humana's Insurance segment and CenterWell, including performance trends for CenterWell cohorts and the success of value-based care arrangements.

Answer

CEO Jim Rechtin emphasized that all three CenterWell businesses positively contribute to the insurance plan's core metrics, including Stars ratings, accurate diagnosis, and member retention. George Renaudin, President of the Insurance Segment, added that this integration leads to better health outcomes, citing reduced ER visits and improved medication adherence as examples.

Joshua Raskin asked for details on the 'few hundred million' in 2025 investments, including the major buckets and whether they are one-time or ongoing. He also asked if 2025 EPS should be considered a floor, contingent on the Stars appeal outcome.

Answer

CFO Celeste Mellet clarified that these are incremental investments focused on improving operating performance in areas like Stars, clinical excellence, and membership strategies. She stated that more detail on their P&L impact would be shared as the year progresses. The question regarding the 2025 EPS floor was not directly addressed.

Joshua Raskin asked for Humana's view on 2025 MA market growth, the destination of members from exited plans, the margin profile of those lost lives, and the company's strategy for member retention.

Answer

George Renaudin, President of Insurance, projected 5-5.5% industry growth and detailed tools to aid retention. CFO Susan Diamond added that Medicaid redeterminations create an 80 bps headwind to industry growth. She confirmed that exited plans were unprofitable and that the company hopes attrition is concentrated in lower-performing plans across the rest of the book.

Joshua Raskin asked for an updated view on where margins might trend in the next few years, comparing pre-pandemic levels to post-pandemic progress, and identifying specific areas for margin expansion in each segment. In a follow-up, he inquired about the justification for above-average rate increases with managed care companies, given the 5% core acute revenue growth and lower cost increases.

Answer

CFO Steve Filton stated that if revenue targets (5%-6% acute, 6%-7% behavioral) are met and costs rise slower (around 4%), there should be opportunities for EBITDA growth and margin expansion in both businesses, given relatively stable operating costs, demand, and pricing. CEO Marc Miller explained that in managed care negotiations, UHS leverages better information to highlight that their pricing still lags competitors in certain markets, which helps justify positive rate increases.

Joshua Raskin asked for an updated view on where margins can trend in the next few years, comparing pre-pandemic levels to post-pandemic progress, and identifying specific opportunities for margin expansion in each segment. He also inquired about the conversation with managed care companies regarding above-average rate increases when revenue is growing faster than costs.

Answer

CFO Steve Filton stated that if revenue targets (5-6% acute, 6-7% behavioral) are achieved and costs rise slower (around 4%), there should be an opportunity for EBITDA growth and margin expansion in both businesses. CEO Marc Miller added that in managed care negotiations, UHS leverages better information to highlight instances where its pricing lags competitors in certain markets, enabling positive rate adjustments.

Joshua Raskin of Nephron Research LLC inquired about the use of internal investments versus external vendors for AI and technology in revenue cycle management (RCM) and its potential impact on pricing. He also asked for an updated view on the impact of tariffs.

Answer

Executive VP & CFO Steve Filton explained that the company uses a combination of approaches, including a public investment in Hippocratic AI, using outside vendors for tasks like ER coding, and developing some technology internally. He noted these efforts are focused more on efficiency than elevating coding. On tariffs, he stated there has been no material impact to date, and no significant supply cost increases are on the horizon.

Joshua Raskin asked about current trends regarding payer denials and underpayments, Community Health Systems' mitigation strategies (including internal vs. external RCM services), and an update on the flu season's impact on guidance and current trends into October.

Answer

Kevin Hammons, President and Interim CEO, noted that denials stabilized after a spike in Q3 2024, with CHS investing in physician advisor programs and AI tools for internal revenue cycle management, using a combination of third-party and internally developed products to efficiently overturn denials. He confirmed that the flu season's slow start is contemplated in guidance, with no significant pickup observed in facilities yet.

Joshua Raskin inquired about payer trends regarding denials and underpayments, Community Health Systems' mitigation strategies (including the use of external vendors versus internal RCM services), and any changes throughout the year. He also asked for an update on the flu season's start and trends into October.

Answer

Kevin Hammons, President and Interim CEO, noted a significant spike in denials in Q3 2024 that has since stabilized. He detailed investments in physician advisor programs and AI tools for denials, utilizing a combination of third-party vendors and internally developed products for the internal revenue cycle team. Mr. Hammons indicated that increased efficiency in overturning denials has helped maintain stability. Regarding the flu season, it is contemplated in guidance, and no significant pickup in flu cases has been observed in facilities as of October.

Joshua Raskin from Nephron Research LLC asked about the divergence in volume trends between CHS and its peers, questioning if factors like geography or technology adoption were at play. He also followed up on the LabCorp deal, asking if the divested labs were profitable and if the new arrangement could be EBITDA-accretive.

Answer

CEO Tim Hingtgen and President & CFO Kevin Hammons responded. Hingtgen highlighted CHS's success in managing claim denials and its investments in technology like robotics, refuting any strategic miss. Hammons added that payer cost pressures may stem from non-acute areas like pharma. Regarding LabCorp, Hammons stated the divested business was marginally profitable but not a core competency, and the new partnership is expected to be beneficial through improved service and pricing.

Joshua Raskin asked for more detail on the strong primary care and surgical specialist visits, seeking to understand the procedural pull-through and distinguish between market trends and company-specific initiatives. He also questioned if there were any geographic, line of business, or plan-specific variations in payer behavior regarding denials and pre-authorizations.

Answer

CEO Tim Hingtgen confirmed strong specialist visit growth, noting it translated to higher cath lab volumes in cardiology but that GI procedures saw a slowdown, potentially due to patient concerns over deductibles. CFO Kevin Hammons responded on payer behavior, stating that the increase in denials and downgrades is a broad trend seen across all regions, service lines, and payers, rather than being concentrated in any specific area.

Joshua Raskin from Nephron Research sought confirmation that potential state payment program benefits are excluded from Q4 guidance, asked about any operational impacts from IV fluid shortages, and inquired about the volume of patients coming from health insurance exchanges.

Answer

President and CFO Kevin Hammons confirmed that the potential DPP benefit is not in 2024 guidance. Dr. Miguel Benet, EVP of Clinical Operations, stated there have been no disruptions from IV shortages as their primary supplier is not impacted, though they are taking precautionary measures. Hammons noted that exchange business constitutes about 7% of admissions and has increased as a result of Medicaid redeterminations.

Joshua Raskin sought clarification on the breakdown of the 125 basis point Medicaid decline (trend vs. adverse selection vs. OBB impact) and an update on increased coding trends from providers, including whether it's still localized and progress with payment integrity tools.

Answer

Mark Kaye, CFO, deferred specific Medicaid breakdown to January but attributed the 125 bps decline to clearer 2025 experience (elevated acuity/utilization, lower acuity disenrollments) and sharpened state-level assumptions. On coding trends, he emphasized working with providers for accuracy and compliance, improving oversight. Gail Boudreaux, President and CEO, reinforced aggressive efforts to address higher coding intensity in pockets using significant tools.

Joshua Raskin sought clarification on the Medicaid 125 basis point decline for 2026, asking how much is due to trend, adverse selection, or OBB impact, and requested an update on increased coding trends from providers.

Answer

Mark Kaye (CFO and EVP, Elevance Health) explained that the 125 bps decline reflects a more balanced split between acuity and utilization, with 2025 experience showing elevated acuity and utilization not fully offset by rates. State-level updates also sharpened assumptions due to budget pressure and program changes. On coding trends, he reiterated focus on provider accuracy and compliance, taking steps to improve oversight for data capture, clinical documentation, and vendor oversight. Gail Boudreaux (President and CEO, Elevance Health) added that they are aggressively addressing higher coding intensity, seen in pockets, with significant tools.

Joshua Raskin asked what can be done differently to create more stability and predictability in the ACA and Medicaid businesses, given the known potential for future risk pool changes.

Answer

CFO Mark Kaye highlighted ongoing CMS efforts to promote stability, such as the marketplace integrity rule, as a positive factor. He reiterated that the company's 2026 rate filings are being set to capture both current acuity levels and the potential for further risk pool deterioration. He also noted the 2025 Medicaid trend is now seen as one-third acuity and two-thirds utilization and coding.

Joshua Raskin asked about Elevance Health's Medicare Advantage bid strategy, focusing on the importance of a member's lifetime value and the opportunity to penetrate that member with additional Carelon services. He also asked which specific Carelon services benefit most from MA growth.

Answer

Felicia Norwood, President of Government Health Benefits, affirmed the goal of being a lifetime trusted partner and stated the 2026 bid strategy will be thoughtful and disciplined, focused on stability and leveraging Carelon. Peter Haytaian, President of Carelon, added that the strategy is very targeted, focusing on areas of high cost and complexity. He cited post-acute care, in-home care via CareBridge, palliative care, and specialty pharmacy as key services being intentionally integrated to support the Medicare population and power the enterprise flywheel.

Joshua Raskin of Nephron Research inquired about expectations for 2025 commercial trends and pricing, and whether margin improvement is still anticipated. He also noted that CMS data suggested MA growth was already above the guidance midpoint and asked about actions taken to manage that growth.

Answer

CFO Mark Kaye confirmed that commercial cost trends are expected to remain above historical averages but have been accounted for in their disciplined pricing strategy, leading to robust margins. CEO Gail Boudreaux addressed the MA growth, explaining that they expect AEP data to settle and that their forecast for minimal growth for the rest of the year is based on their product positioning and the normal cadence of enrollment, similar to 2024.

Joshua Raskin of Nephron Research expressed confusion about why Medicaid cost trends are accelerating now, so late in the redetermination process, especially when previous commentary suggested utilization from departing members would have already peaked.

Answer

CFO Mark Kaye addressed this by highlighting two key points: first, the company has incorporated a prudent view of costs into its Q4 outlook, holding Medicaid trend approximately flat with September levels. Second, he noted that the third quarter included unfavorable prior period development related to the current year, which impacted results.

Joshua Raskin inquired about the key drivers for the second-half 2025 guidance, which implies revenue stabilization and improved EBITDA. He sought more details on the record lead growth and consultation volumes, and also asked about the new skin tightening offering, specifically its contribution to procedures and its inclusion in the current guidance.

Answer

CEO Yogi Jashnani explained that while consumer spending remains uncertain, strong interest in AirSculpt is evident from record-high leads and consultation growth. He stated that the company's five strategic priorities and disciplined cost management are expected to stabilize revenue and drive EBITDA margin improvement in the second half. Regarding the skin tightening pilot, Jashnani confirmed it is not yet included in guidance and that while early interest is strong, it is too soon to report definitive results.

Joshua Raskin inquired about the specifics and sustainability of Q1 cost savings, the potential EBITDA margin on current revenue guidance, and whether the case momentum seen late in the quarter was seasonal or a true improvement in same-store trends.

Answer

Executive Dennis Dean clarified that cost savings primarily stemmed from sustainable workforce reductions targeting about $3 million for the year. CEO Yogesh Jashnani stated that while the current guided EBITDA margin is appropriate, margins could approach 30% as same-store revenue returns to 2022-2023 levels. He also confirmed the late-quarter momentum was both seasonal and a sequential improvement, with the company still targeting a return to same-store sales growth by year-end.

Joshua Raskin asked for clarification on the company's outlook, specifically what 'sequential improvement' refers to, and questioned the strategy of pausing de novo openings while aiming for revenue growth, also inquiring about the recent revolver draw.

Answer

CEO Yogesh Jashnani clarified that 'sequential improvement' refers to the year-over-year same-store performance trend, not absolute EBITDA, and that typical seasonality is still expected. Executive Dennis Dean explained the revolver was drawn to ensure marketing could be maintained after significant capital was used for new centers in late 2024. Jashnani added that pausing de novo openings is a short-term move to focus on improving same-center performance, which will benefit future growth.

Joshua Raskin of Nephron Research inquired about the performance and expected Q4 contribution of the four new de novo centers, the impact of GLP-1 drugs on demand for body contouring, and the specifics of new consumer financing options.

Answer

Executive Dennis Dean explained that new centers are performing in line with expectations and will contribute more significantly in Q4 as they ramp up. Regarding GLP-1s, he noted they are a catalyst for body contouring, particularly skin tightening, an area AirSculpt plans to focus on more. For financing, Dean clarified the company is not taking on credit risk but is working with third-party vendors to offer longer payment terms (18-24 months) to qualified customers for larger procedures, aiming to boost revenue per case.

Joshua Raskin asked about Brookdale's local market strategy for differentiation beyond price and requested specific metrics on the level of discounting for new move-ins compared to the prior year.

Answer

EVP & CFO Dawn Kussow and EVP & General Counsel Chad White identified quality of care and the Brookdale Health Plus program as key differentiators. They highlighted how Health Plus reduces hospitalizations, which resonates with families. Kussow declined to provide specific discounting metrics, stating that while there is always some level of discounting, current incentives are more targeted at specific local markets and occupancy bands rather than being applied broadly.

Joshua Raskin of Nephron Research asked about the process for driving strategy during the CEO search and requested details on the magnitude of the new pricing promotions being piloted.

Answer

EVP & CFO Dawn Kussow stated that the Office of the CEO, including herself and Chad White, is actively managing day-to-day operations to maintain momentum. Interim CEO Denise Warren affirmed that she is deeply involved in pushing operational improvements and the CEO search will not slow these efforts. Regarding promotions, Dawn Kussow advised not to 'over-index' on them, describing them as a targeted tool used cautiously to protect overall RevPOR.

Joshua Raskin asked about the company's long-term EBITDA growth rate, the potential for sustained above-average growth, and whether the pre-pandemic occupancy rate of 84.5% is still a realistic target. He also requested a specific range for the 'meaningful' adjusted free cash flow guidance and asked for details on the 'Brookdale EngagementPlus' initiative.

Answer

President & CEO Lucinda Baier emphasized that the focus is on disciplined profitable growth rather than a specific occupancy target, highlighting that per-unit profitability is already 8% above pre-pandemic levels. EVP & CFO Dawn Kussow confirmed no specific range was provided for adjusted free cash flow. Baier described EngagementPlus as a proprietary program designed to combat loneliness by personalizing the resident experience and connecting residents with shared interests.

Joshua Raskin of Nephron Research probed for the underlying reasons for the referral slowdown from two key third-party sources, asking if it was an industry-wide issue. He also inquired about the current competitive discounting environment compared to the prior year.

Answer

Lucinda "Cindy" Baier, President & CEO, explained that a Google algorithm change that deprioritizes third-party content significantly impacted one referral partner's organic lead generation, while the other partner had reduced its own marketing spend. Regarding discounting, she observed it was heavier than expected in Q3, possibly due to prospect uncertainty surrounding the presidential election, and expressed optimism that post-election certainty would benefit the industry.

Joshua Raskin requested clarification on the 31% growth in Medicaid value-based care lives, which are upside-only, and asked how Privia is currently utilizing AI on its platform.

Answer

CEO Parth Mehrotra clarified that Medicaid lives grew organically and via the Arizona market entry, and they only take upside risk due to the program's volatility. Regarding AI, he described its use in revenue cycle management and new investments in clinical AI with partners like Navina for point-of-care diagnostics and AI-driven scribing to reduce physician burden.

Inquired about the specifics of the newly acquired Arizona practice (IMS), focusing on its provider mix (PCP vs. specialist), collections per physician, payer relationships, and how its value-based care component influenced the acquisition's attractiveness.

Answer

The executive stated that IMS is a multi-specialty practice slightly skewed towards specialists, resulting in higher collections per provider. The existing value-based care lives make the deal attractive from day one, and Privia sees a significant long-term opportunity to expand its presence and medical group in the strategic Arizona market.

Joshua Raskin of Nephron Research asked if the trend of competitors adopting a 'glide path to risk' helps or hurts Privia, and sought confirmation on whether Privia's Medicare Advantage risk contracts are still generating a positive contribution margin.

Answer

CEO Parth Mehrotra asserted that this trend validates Privia's long-held, disciplined approach, distinguishing between the willingness and ability to take risk. He believes it strengthens their market position. He also confirmed that the capitated MA book generated a positive gross margin of about 2%, as the objective of taking downside risk is to be profitable.

Joshua Raskin of Nephron Research asked for a breakdown of the drivers behind the Q2 revenue and EBITDA outperformance, including the impact of one-time items, and the rationale for the raised guidance. He also inquired about the current friction between payers and providers and any resulting opportunities for Claritev.

Answer

CFO Doug Garis attributed the strong performance to the stabilization of the core business, improved savings per claim through internal optimization, and disciplined cost management, while acknowledging a $5 million non-recurring revenue item. CEO Travis Dalton commented on payer-provider friction, stating that while it's a persistent issue, Claritev's transparency products are well-positioned to add value, and noted strong growth in the Payment and Revenue Integrity business.

On behalf of Joshua Raskin, Marco from Nephron Research asked for a breakdown of the Q2 revenue and EBITDA outperformance drivers, including one-timers, and inquired about incremental opportunities from the rising friction between payers and providers.

Answer

CFO Doug Garis attributed the outperformance to the stabilization of the core business, improved savings per claim, a nonrecurring revenue item from a P&C agreement, and disciplined cost control. CEO Travis Dalton added that while payer-provider friction exists, Claritev sees continued opportunity for its transparency products and has experienced strong growth in its Payment and Revenue Integrity business, which combats fraud, waste, and abuse.

Joshua Raskin of Nephron Research inquired about Oscar Health's 2025 free cash flow guidance, the composition of the risk adjustment payable on the balance sheet, and the status of its long-term 2027 targets, including the 5% margin and $2.25 EPS goals.

Answer

CFO Scott Blackley explained that Oscar Health has a strong capital position and expects most 2025 losses to be absorbed by excess capital at the insurance subsidiaries, though parent cash may decline. He noted a detailed risk adjustment table would be in the 10-Q. CEO Mark Bertolini stated that while the 5% margin target remains, they are not changing long-term forecasts at this moment and will re-evaluate after the current pricing season.

Joshua Raskin from Nephron Research asked about the quality of members acquired from exiting competitors, the impact on risk adjustment estimates, and sought an update on progress in the ICHRA market, including discussions with large employers for 2026.

Answer

CEO Mark Bertolini explained that the risk adjustment mechanism levels the playing field, making disciplined pricing more critical than the specific risk profile of incoming members from a failed competitor. On ICHRA, he reported growing momentum in the middle market and ongoing advocacy for favorable tax changes. He confirmed active discussions with large employers, reinforcing his long-term view of moving away from traditional employer-sponsored insurance.

Joshua Raskin questioned why the Medical Loss Ratio (MLR) exceeded guidance and asked for the drivers, and also inquired about the shift to 'earnings from operations' as a key metric and its impact on interest expense.

Answer

CEO Mark Bertolini stated that medical utilization was actually favorable and the MLR pressure came from risk adjustment settlements. CFO Scott Blackley elaborated that an updated risk report necessitated a higher risk transfer accrual. Regarding the new metric, Blackley explained the main difference between adjusted EBITDA and earnings from operations is stock compensation and D&A, not interest expense, which he expects to be consistent year-over-year. He quantified this difference at approximately $140 million for 2025 guidance.

Joshua Raskin of Nephron Research asked if Oscar's thinking has changed regarding its $2.25 EPS target, which assumed ACA subsidies would sunset. He also requested details on the new guided care HMO product and any membership estimates for the ICRA offering.

Answer

CEO Mark Bertolini stated the outlook is unchanged but expressed his belief that both political parties are incentivized to continue subsidies in some form. He confirmed they would revisit the EPS target favorably if subsidies are extended. He described the new HMO as a 'frictionless' product using tech to ease provider workflows and noted ICRA has 3,700 members so far, viewing it as an upside opportunity rather than a core growth driver.

Joshua Raskin of Nephron Research LLC asked for an update on the individual exchange business, specifically regarding risk adjustment accruals and the company's pricing strategy for 2026.

Answer

President and COO Brian Evanko explained that Cigna strategically prioritized margin over growth, reducing its exchange membership from nearly 1 million to under 400,000 since 2023, and plans further price increases for 2026. EVP and CFO Ann Dennison clarified that Q2 results included an expected 2023 RADV adjustment and a modest positive 2024 risk adjustment accrual, which helped offset utilization pressures.

Joshua Raskin asked for clarification on the mix of stop-loss versus full-risk plans in the 'Select' segment and for Cigna's perspective on the Medicare Advantage market and the 2026 rate notice, despite its recent divestiture.

Answer

President and COO Brian Evanko clarified that in the Select segment, the mix is slightly more than half fully insured and slightly less than half ASO, with virtually 100% of ASO clients purchasing stop-loss. Chairman and CEO David Cordani commented that the MA rate environment is strained, which is pressing health plans to seek more value and affordability, creating opportunities for Evernorth to serve them.

Josh Raskin from Nephron Research asked about the pending sale of the Medicare business to HCSC, inquiring about potential purchase price adjustments based on performance and the status of regulatory approvals.

Answer

CFO Brian Evanko reported that the divestiture is on track to close in Q1, with all federal and nearly all state approvals secured. He stated there are only typical financial adjustments to the price, with nothing material to note. He also highlighted that the Medicare business is on solid footing, with attractive membership growth for 2025 in targeted geographies and products ahead of the handoff to HCSC.

Joshua Raskin questioned the cadence of share buybacks, noting a pause in Q3 followed by a reacceleration, and asked about the drivers of the larger-than-usual favorable prior period development (PPD).

Answer

CEO David Cordani explained that the buyback cadence is driven purely by the timing of cash flow generation, which is not ratable, and that Q4 is a high cash flow quarter. CFO Brian Evanko addressed PPD, stating that while the gross figure was higher, the net P&L impact was not significant due to offsetting factors like client risk-sharing and MLR rebates.

Asked for an updated long-term EPS growth rate, which was previously cited at 13-16%, and for updated target margins for UnitedHealthcare as a whole and for the OptumInsight and OptumRx segments.

Answer

Stephen Hemsley stated that while it's early, he expects the company to steadily pace back to low double-digit growth, as the long-term growth framework remains intact. For margins, the UHC Medicare range was reframed to 2-4% due to IRA mechanics, but the underlying target is similar. The commercial target remains 7-9%. The company did not provide specific updated targets for OptumInsight and OptumRx but noted the full portfolio has yet to perform to its potential, which should be additive to growth.

Joshua Raskin asked for a connection between higher primary care visits and financial pressure at Optum Health, questioning why performance was weaker if Optum controls primary care, and requested a refresher on the value-based care (VBC) strategy.

Answer

A team of executives responded. Timothy Noel detailed increased preventative care and higher utilization in the group MA business. Dr. Amar Desai explained Optum Health's results were impacted by the profile of new, less-engaged patients from competitor plan exits and the V28 risk model transition. Heather Cianfrocco and Andrew Witty defended the VBC model, attributing current pressures to 'second order effects' of significant Medicare funding cuts, which they believe are temporary and do not undermine the long-term strategy.

Joshua Raskin from Nephron Research inquired about the reasons for the significant drop in consumer count and the decline in margins within the Optum Health segment during the quarter.

Answer

Executive John Rex explained the consumer count reduction resulted from strategic initiatives, such as de-emphasizing standalone urgent care. Dr. Amar Desai added that Q4 margin pressure was due to planned actions like restructuring legacy contracts and making investments in clinical quality and new member onboarding, expressing confidence for 2025.

Joshua Raskin of Nephron Research inquired about the significant drop in Optum Health's consumer count and the segment's noticeable margin decline, questioning if it was related to Medicare Advantage rebates.

Answer

Executive John Rex explained the consumer count drop was a strategic move to de-emphasize certain narrow offerings like standalone urgent care. Executive Dr. Amar Desai added that the margin decline was due to planned actions, including restructuring legacy contracts, membership mix changes, and investments in clinical quality and new member onboarding. He affirmed confidence in reaching long-term margin targets for 2025.

Joshua Raskin requested insight into UnitedHealth's multi-year strategy for Medicare Advantage (MA), its overall importance to the enterprise, and whether potential weakness from competitors influences its market approach.

Answer

CEO Andrew Witty positioned MA as a very important but single component of a diversified portfolio, emphasizing the company's five growth pillars. Timothy Noel, CEO of Medicare & Retirement, stressed a long-term, rational strategy focused on consumer benefit stability, such as preserving $0 PCP copays, and creating value through partnerships with value-based care providers. He noted this approach avoids deferred maintenance and positions them well in a dynamic environment.

Joshua Raskin of Nephron Research LLC inquired about Centene's capital position, including planned capital contributions to subsidiaries in the second half of 2025 and any potential need for additional debt or equity.

Answer

EVP & CFO Drew Asher, after a brief introduction by CEO Sarah London, stated that Centene plans a net contribution of $300 million to its subsidiaries in the latter half of the year. He emphasized the company's strong capital position, highlighting a new $4 billion credit facility with zero drawn and a debt-to-cap ratio of 39%, well below the 60% covenant, indicating significant financial flexibility.

Joshua Raskin of Nephron Research LLC inquired about Centene's capital position, including planned capital contributions to subsidiaries in the second half of 2025 and any potential need for additional debt or equity.

Answer

EVP & CFO Drew Asher stated that Centene plans a net contribution of $300 million to its subsidiaries in the second half of the year. He highlighted the company's strong capital position, noting a recently doubled $4 billion credit facility with zero drawn, and a debt-to-capital ratio of 39% against a 60% covenant, providing significant financial flexibility.

Joshua Raskin asked for details on the $130 million in flu-related costs, questioning if they were confined to Medicaid and not indicative of a broader trend. He also sought confirmation on the company's long-term embedded earnings outlook, particularly regarding the path to breakeven for Medicare Advantage.

Answer

CEO Sarah London confirmed the $130 million in excess flu costs were isolated to Medicaid in Q1 and not a broader trend, based on consistent tracking definitions. EVP and CFO Andrew Asher reaffirmed the long-term earnings power, noting opportunities in Medicaid margin expansion, Medicare Advantage breakeven potential, and PDP margin growth, all bolstered by the recent $6 billion revenue guidance increase.

Joshua Raskin inquired about Centene's expectations for total exchange market growth in 2025, the specifics of the subsidy verification process, and the mechanics of determining final membership totals.

Answer

CEO Sarah London explained that while CMS reported 13% enrollment growth, Centene focuses on effectuated membership, which is impacted by program integrity changes like the Failure to Report (FTR) process. She detailed that the FTR process has a longer tail, with checkpoints through April, but noted that current effectuation rates are in line with historical norms, positioning peak membership slightly above 5 million members. However, the company will wait a few more months to fully assess the net impact.

Joshua Raskin asked about core Medicaid utilization trends, particularly in behavioral health, and how the completion of the redetermination process impacts rate advocacy with state partners.

Answer

CEO Sarah London stated that underlying utilization trends remain consistent with prior commentary, with the primary pressure coming from the rate-acuity mismatch, not new trends. She explained that the end of the redetermination administrative process does not hinder rate advocacy, as negotiations are based on the aggregate data of the now-stable, higher-acuity member population.

Joshua Raskin from Nephron Research LLC asked for specifics on the core outperformance that led to the $70 million guidance increase for USPI, and whether new technologies like AI are improving claims documentation and patient categorization.

Answer

Chairman & CEO Saum Sutaria confirmed that Tenet's industry-leading revenue cycle capabilities, enhanced by technology and advanced analytics, have improved results. EVP & CFO Sun Park attributed the strong performance to high acuity, favorable case and payer mix, and robust growth in key service lines like orthopedics, which supported the guidance raise. She also noted M&A activity is expected to exceed the $250 million baseline.

Joshua Raskin took an optimistic view on hospital margins, asking if there is room for further expansion beyond the current strong levels, what kind of volumes would be needed, and where remaining operating leverage exists.

Answer

Saumya Sutaria, Chairman and CEO, affirmed that the company always operates with a mindset of margin expansion potential. He listed multiple drivers: hardwired operating discipline, data-driven controls, improved payer mix from exchanges and portfolio transformation, and future operating leverage from a better labor cost structure, supply standardization, and improved asset utilization. He reiterated that this potential is why the company's priority remains on growth.

Joshua Raskin inquired about the competitive landscape for ASC transactions and whether the focus on de novo growth signals a shift toward more organic expansion.

Answer

Dr. Saum Sutaria, Chairman and CEO, responded that the competitive landscape is unchanged and USPI's ability to scale demonstrates its strength. He positioned de novo development as a key part of their value strategy, creating lower-cost care settings. He also confirmed that de novo projects yield higher long-term returns on capital than acquisitions.

Joshua Raskin asked for clarification on USPI's Q4 EBITDA guidance, Q4 tax payment amounts, and any changes in managed care behavior, particularly regarding the 2-midnight rule and payment denials.

Answer

EVP and CFO Sun Park clarified that USPI's Q4 EBITDA guidance implies a seasonal upswing and provided the expected Q4 tax payment figure. Chairman and CEO Dr. Saum Sutaria stated that the adoption of the 2-midnight rule by Medicare Advantage plans is still "underway" and has contributed 50-100 basis points to admissions growth. He acknowledged that while administrative disputes with payers have risen, Tenet has mitigated the financial impact through its Conifer division.

Joshua Raskin of Nephron Research asked for more details on the single outlier payer, including its market concentration, revenue contribution, and the specific drivers of cost pressures. He also inquired about the performance of renegotiated contracts, particularly regarding supplemental benefit changes and the removal of Part D risk.

Answer

Executive Aric Coffman stated that no single payer represents more than 22% of top-line revenue and described the outlier payer as collaborative. Executive Leif Pedersen clarified that the associated costs were entirely from 2024, driven by inpatient services, and resulted from a claims migration issue at the payer, not a 2025 performance problem. Aric Coffman also confirmed that contract renegotiations, including changes to supplemental benefits, are performing as expected or better, highlighting strong payer collaboration.

Joshua Raskin from Nephron Research asked for clarification on Q4 results relative to the Q3 run-rate, the components of the 2025 EBITDA improvement beyond the stated $130 million plan, and the current status of exiting Part D risk.

Answer

Executive Leif Pedersen explained that Q4 EBITDA was negatively impacted by approximately $17 million in onetime, non-IBNR accounting cleanup items. Chief Medical Officer Amir Bacchus added that increased unit costs, seasonality, and issues with a single health plan also contributed. Executive Aric Coffman clarified the EBITDA plan is a '$130-plus million' opportunity, with an additional $25 million expected from payer partnerships and network actions. Coffman confirmed about half of the company's Part D risk has been eliminated, with a goal to remove the remainder by January 1, 2026.

Joshua Raskin asked if P3 Health is pursuing an immediate capital raise, questioned the 2025 revenue outlook given network rationalization, and requested specifics on the $130 million in improvement opportunities, particularly the 60% tied to chronic disease management.

Answer

CFO Leif Pedersen stated that an immediate capital raise is not being pursued. Regarding revenue, CEO Aric Coffman clarified that they expect a net revenue decrease due to network and payer changes impacting roughly 20,000 members. Dr. Amir Bacchus and Aric Coffman detailed the chronic disease initiatives, which include deploying more 'boots on the ground' support for providers and integrating new EMR tools to help clinicians close care gaps and improve documentation.

Joshua Raskin sought clarification on the 2025 PDR outlook, questioning if its absence implied profitability for MA and exchanges. He also asked about the updated distribution strategy for MA and PDP, particularly concerning external brokers.

Answer

CFO Tom Cowhey clarified that PDRs are calculated on a variable cost basis and their absence does not guarantee profitability after allocating substantial fixed costs. Regarding distribution, he stated that approximately 85% of sales come from external broker channels, where CVS has long-established relationships. He noted that early AEP sales are generally tracking in line with expectations.