Kevin Fischbeck

Kevin Fischbeck expressed surprise that the Medical Care Ratio (MCR) for 2026 is not expected to show more progress, given repricing actions in exchange and stop-loss businesses. He asked for an explanation and insight into the ideal future MCR based on the current business mix.

Answer

Ann Dennison, EVP and CFO, explained that the 2026 MCR outlook incorporates pricing actions but also an elevated cost trend environment. She cited MCR reductions from stop-loss pricing and individual business repricing, offset by one-time benefits in 2025 and mixed dynamics, emphasizing appropriate prudence given elevated costs.

Kevin Fischbeck expressed surprise that the 2026 Medical Care Ratio (MCR) is not expected to show more progress despite repricing in exchanges and stop-loss, asking for the reasons and the target MCR for a fully repriced business mix.

Answer

Ann Dennison explained that the 2026 MCR outlook incorporates pricing actions in stop-loss and individual exchange but also assumes an elevated cost trend environment. She noted that 2025 MCR benefited from one-time items, tempering year-over-year improvement, and that the outlook includes appropriate prudence given continued elevated costs.

Kevin Fischbeck sought clarity on the investment spending component of the pharmacy benefit management business pressure, specifically whether the drag in 2027 would be similar year-over-year or stable before a margin recovery in 2028.

Answer

Brian Evanko, President and COO, clarified that the investment spending is expected to continue into 2027 but is not anticipated to be a year-over-year headwind from 2026 to 2027. He explained that this spending, less than half of the 2026 headwind, involves substantial technology investments and recontracting work. David Cordani, Chairman and CEO, added that while investment carries into 2027, the enterprise expects to be back on its long-term growth algorithm by 2027.

Kevin Fischbeck from Bank of America asked about the competitive pricing environment in the commercial market and for color on performance differences between Cigna's various business sub-segments.

Answer

President and COO Brian Evanko described the current pricing environment as 'firm' and 'rational,' with expectations for 2026 price increases to exceed 2025 levels. EVP and CFO Ann Dennison noted that most businesses are performing within target margins, with the two exceptions being the exchange business (running below target) and the stop-loss business (on a path to margin recovery through 2026).

Kevin Fischbeck inquired about DaVita's confidence in achieving 2%+ volume growth, the timeline for realizing this target, the multi-year guidance timeframe, and the allocation of free cash flow, specifically regarding the $200 million Elara Caring investment and other potential capital uses.

Answer

Javier Rodriguez, CEO, explained that achieving 2%+ volume growth is a clinical story, with benefits expected in approximately two years and full effect by 2029. He clarified that the multi-year guidance refers to a three-year timeframe. Joel Ackerman, CFO and Treasurer, confirmed that the $1.125 billion free cash flow guidance is before the $200 million Elara investment, and further share repurchases would consider the company's leverage level.

Kevin Fischbeck with Bank of America inquired about DaVita's confidence in achieving 2%+ volume growth, focusing on the role of mortality reduction and other contributing factors, as well as the timeframe for multi-year guidance and the allocation of free cash flow.

Answer

CEO Javier Rodriguez clarified that reaching 2% volume growth is primarily a clinical story, with benefits expected to emerge in approximately two years and full effect by 2029. He also confirmed the multi-year guidance is based on a three-year timeframe. CFO Joel Ackerman confirmed that the $1.125 billion free cash flow is before the $200 million investment, suggesting it should be deducted for deployable capital, while also considering leverage levels. He noted no other obvious uses of capital after this investment.

Kevin Fischbeck inquired about the root cause of persistently elevated patient mortality rates post-COVID. He also asked about the expected timeline for new mitigation strategies to show results and whether current cost-saving initiatives are sustainable if volume growth returns.

Answer

CEO Javier J. Rodriguez and CFO Joel Ackerman explained that elevated mortality is a national trend across diseases, likely a holdover from COVID-related care delays. Rodriguez noted that the company's mitigation plans, including new technologies and protocols, are long-term initiatives expected to show gradual impact over years, not quarters. He also expressed confidence that operational discipline and technology would allow cost efficiencies to continue even with volume recovery.

Kevin Fischbeck asked if the lower-than-expected membership numbers across most products (commercial, Medicaid, Medicare) indicate any strategic or competitive shifts, and why the new business mix being forecasted differs from previous margin assumptions.

Answer

Gail Boudreaux, President and CEO, Elevance Health, stated that the membership changes reflect a very disciplined approach across all businesses. In commercial, decisions were made for ACA sustainability and conscious pricing in public sector accounts. Medicaid reflects redetermination impacts, while Medicare Advantage was deliberately positioned for improved margin and sustainability. She emphasized that the company is entering 2026 strongly positioned for future growth with a sustainable, strong margin position.

Kevin Fischbeck asked if the margin commentary and lower-than-expected membership across most products indicate strategic or competitive issues, and why the current business mix differs from previous margin assumptions.

Answer

Gail Boudreaux, President and CEO, clarified that the situation does not indicate strategic or competitive issues, but rather a very disciplined approach in each business. She highlighted specific decisions in the commercial business around ACA for sustainability, conscious pricing on unprofitable public sector accounts, and strong retention in other commercial segments. For Medicaid, declines are due to redetermination impacts, while Medicare Advantage positioning has improved margin and sustainability. She concluded that Elevance Health is strongly positioned for future sustainable growth. Gail Boudreaux, President and CEO, added a brief closing remark.

Kevin Fischbeck asked to quantify the risk pool shifts expected from the reconciliation bill in 2026 and sought clarification on what 'balanced growth' implies for 2027 earnings.

Answer

Mark Kaye (CFO and EVP, Elevance Health) indicated that the reduction in Medicaid margin expectations for 2025/2026 reflects a more balanced split between acuity and utilization. For 2027, 'balanced earnings growth profile' means returning to the historical growth algorithm with contributions from commercial, government, and Carelon, supported by operating leverage and capital deployment. He expects earnings drivers to be more evenly distributed, including improved Medicaid rate alignment, Medicare margin normalization, and sustained Carelon/commercial momentum. Gail Boudreaux (President and CEO, Elevance Health) clarified that the 2027 bill implementation impacts less than 20% of membership, making it manageable.

Kevin Fischbeck asked about the expected timing and magnitude of Medicaid risk pool shifts from the reconciliation bill in 2026, and whether 'returning to balanced growth in 2027' implies a return to the normal growth algorithm or a lesser rate.

Answer

Mark Kaye, CFO, indicated the 2026 Medicaid margin reduction reflects a balanced split between acuity and utilization. He clarified that 'balanced earnings growth profile' for 2027 means returning to the historical growth algorithm, with contributions from commercial, government, and Carelon, supported by operating leverage and capital deployment.

Kevin Fischbeck questioned the outlook for Medicaid margin improvement, given the current rate-setting lag and the potential for more unprecedented risk pool shifts from future legislation.

Answer

CEO Gail Boudreaux acknowledged the short-term dislocation but maintained that Medicaid is a positive long-term market. She emphasized that Elevance has strong state partnerships and capabilities to help states navigate policy changes like work requirements. She noted that states are now more aware of how enrollment shifts impact acuity, and that the company is seeing sequential improvement despite the challenges.

Kevin Fischbeck asked for clarification on collection rates for bronze versus silver exchange plans and inquired about HCA Healthcare's sustainable margin, given its consistent performance above 20% despite headwinds, asking if a margin north of 20% is sustainable.

Answer

CFO Mike Marks stated that HCA is pleased with the 2026 margin guidance, which is consistent with 2025, reflecting hard work on the resiliency plan, operating leverage from volume growth, and cost management, despite headwinds. He noted it's premature to discuss future margins beyond 2026 but pointed to HCA's comfort in maintaining its long-term plan over time, given market demand, resiliency programs, and digital transformation initiatives.

Kevin Fischbeck sought clarification on the collection rate difference between bronze and silver exchange plans. He also questioned HCA's sustainable margin outlook, given the company's consistent performance above 20% despite headwinds, asking if margins north of 20% are sustainable.

Answer

CFO Mike Marks did not provide specific collection rates for bronze versus silver plans. Regarding margins, he expressed satisfaction with the 2026 guidance, which projects margins consistent with 2025 despite headwinds, attributing this to the resiliency program, operating leverage, and cost management. Marks stated it's premature to discuss future margins but reiterated confidence in maintaining the long-term plan due to market demand, resiliency programs, and digital transformation initiatives.

Kevin Fischbeck of Bank of America asked for historical data on exchange revenue pre-subsidy and later sought confirmation that HCA's long-term 4-6% EBITDA growth guidance remains intact despite potential policy headwinds.

Answer

CFO Mike Marks deferred providing detailed historical exchange data until the Q4 call. Regarding long-term guidance, he reiterated that HCA believes it can manage the impacts of the new act without material harm to its long-term targets, aided by resiliency efforts and potential supplemental payment approvals. He noted they are working on offsets for any EPTC impact and will provide a full update in Q4.

Kevin Fishbeck questioned the 2027 Medicare Advantage (MA) rate update, specifically focusing on the coding components (normalization and charts) contributing to a 3.3% headwind. He asked if UnitedHealth Group, being proficient in coding, expects a disproportionately larger impact from these components and if the company remains confident in achieving a 5% margin in Value-Based Care Optum Health despite these rate cuts.

Answer

Tim Noel, CEO of UnitedHealthcare Medicare & Retirement, clarified that UnitedHealth Group does not expect a disproportionately different impact from the coding components compared to the rest of the industry. Kristen Gil, COO of Optum Health, reiterated that the long-term margin target of 6%-8% for Optum Health remains intact. She emphasized that achieving these margins is more about execution and internal performance improvements, citing existing high-performing markets and mature value-based care cohorts already operating within or above the target margin range, rather than solely depending on MA rates.

Kevin Fishbeck questioned the 2027 Medicare Advantage rate update, specifically focusing on the 3.3% headwind from coding components (normalization and charts). He asked if UnitedHealth Group expects a disproportionate impact given its coding proficiency and if the 6-8% long-term margin target for Optum Health remains achievable.

Answer

Tim Noel, CEO of UnitedHealthcare, stated that the company does not expect a different impact from coding components compared to the rest of the industry. Kristen Gil, COO of Optum Health, reaffirmed confidence in achieving the 6-8% long-term target margins for Optum Health, citing strong execution, high-performing markets, and mature value-based care cohorts already meeting or exceeding these targets.

Kevin Fischbeck asked for more details on Optum Health's retrenchment and refocus on specific plan types. He inquired about the total addressable market (TAM) for value-based care within Medicare Advantage, what percentage of MA lends itself to a successful VBC model, and current penetration levels.

Answer

Stephen Hemsley (Chairman and CEO, UnitedHealth Group) stated that the company remains very positive on value-based care (VBC) and believes Medicare Advantage should move more towards it. Krista Nelson (COO of Optum Health) affirmed deep commitment to VBC, highlighting its impact and the alignment of incentives. She emphasized Optum Health's assets for an integrated delivery system, stating the potential is limitless but the current focus is on operating discipline, deepening presence in markets, and optimizing network, providers, risk footprint, and product portfolio for long-term success.

Kevin Fischbeck asked for insights into Optum Health's retrenchment and refocus on specific plan types, inquiring about the total addressable market (TAM) for successful value-based care models in Medicare Advantage and its current penetration.

Answer

Stephen Hemsley, Chairman and CEO, affirmed a positive outlook for MA moving towards value-based care. Krista Nelson, COO of Optum Health, reiterated deep commitment to value-based care, highlighting its limitless potential. She explained that the current focus is on operating discipline, deepening presence in key markets, and optimizing networks, providers, and risk portfolios for long-term success and future expansion.

Asked for details on the 'portfolio actions' that were mentioned as being delayed across several businesses, inquiring what these actions were and whether they represented potential future savings or were related to gains from divestitures.

Answer

Stephen Hemsley clarified that the company had been considering divesting some businesses but that he has stopped that entire activity to focus on improving the performance of the existing portfolio. Any potential impact from these transactions that was previously considered in the outlook has been completely withdrawn. The focus is now on performance and optimization, not divestitures.

Kevin Fischbeck inquired about the MLR or margin differential across different channels (good/bad, plan-to-plan/new-to-plan, retention vs. new membership) and whether disenrollment rates are returning to normal or improving.

Answer

Jim Rechtin, President and CEO, explained that Humana evaluates channels based on attrition/retention rates, cost of acquisition, and engagement rates, without providing explicit margin data. He noted that reduced plan-to-plan sales, which are correlated with better retention, are being observed year-over-year. David Dintenfass, President of Enterprise Growth, added that complaint-to-Medicare Stars outcomes also vary by channel.

Kevin Fischbeck from Bank of America asked for an update on Part D performance and the company's perspective on the recently released CMS regulations for 2026.

Answer

CFO Celeste Mellet stated that Part D member mix and prescription drug trends are tracking in line with their expectations for low double-digit growth. George Renaudin, President of Insurance, added that the national average bid for 2026 came in slightly better than they had anticipated, which they view as a positive development.

Kevin Fischbeck asked if Centene expects 2026 to be a trough year for Medicaid margins, with improvement building into 2027. He also questioned if the risk pool shift from work requirements would be enough to offset the catch-up of prior rates, or if 2026 is clearly the low point.

Answer

CEO Sarah London stated that the goal is to drive back to more normalized Medicaid margins over the next couple of years. While 2026's 'flat profitability' is a prudent posture, she expects to do better. London sees 2027 and 2028 as when the real impacts of OB-3 and work requirements will be introduced, with much still to play out. Centene is preparing by leveraging lessons from redeterminations and engaging with states to ensure eligible members retain coverage, aiming for consistent margin improvement over the next couple of years to reach long-term Medicaid margins.

Kevin Fischbeck inquired if 2026 is expected to be a trough year for Medicaid margins, with expectations for improvement in 2027, and if the risk pool shift from 2027 work requirements would offset the catch-up of prior rates.

Answer

Sarah London, Chief Executive Officer, affirmed that Centene's goal is to drive back to more normalized Medicaid margins over the next couple of years. While 2026 is prudently guided as 'flat' profitability, she expressed a desire to do better. She explained that 2027 and 2028 are when the real impacts of OB-3 and work requirements within the expansion population are expected to manifest, and Centene is actively preparing for these shifts by leveraging lessons from redeterminations and engaging with states on rate setting and program design.

Kevin Fischbeck of Bank of America questioned the Medicaid margin recovery timeline, noting that a 'twelve to eighteen month' timeframe might imply not reaching target margins by 2027. He also asked about the impact of risk pool changes and future membership losses.

Answer

CEO Sarah London clarified that while Centene is confident in improving Medicaid margins over the next 4-6 quarters, the long-term trajectory must account for potential risk pool shifts from OB3 provisions in 2027-2028. She emphasized that states are increasingly open to using real-time data for rate setting, which supports the recovery, and the question is 'when, not if' they will improve margins.

Kevin Fischbeck from Bank of America questioned the recovery timeline for Medicaid, asking if the 12-to-18-month timeframe for progress implies that target margins won't be reached in 2027, and also asked about the role of risk pool changes versus cost trends.

Answer

CEO Sarah London affirmed that returning to target margins is a matter of 'when, not if,' citing progress in rate discussions with states. She acknowledged that policy changes like work requirements in 2027-2028 will need to be factored in, potentially shifting the risk pool. However, she stated that learnings from redeterminations will help manage this, and she expects to deliver meaningful margin improvement over the next 4-6 quarters and into 2027.

Kevin Fischbeck inquired about Tenet Healthcare's Q4 guidance regarding utilization, specifically if higher utilization before exchange subsidies expire is factored in, and USPI's capacity to accommodate this. He also asked about the pressure points USPI might face next year, given its insulation from headwinds, and its exchange exposure.

Answer

CEO Saum Sutaria stated that no rush to the office due to exchange subsidies is built into guidance, nor is their expiration expected, with intelligence suggesting a compromise. He confirmed USPI's capacity to handle typical Q4 demand, including potential increased demand from exchange changes. CFO Sun Park added that USPI's implied Q4 guidance reflects standard historical pacing and that exchange business represented 8.4% of total admissions and 7% of consolidated revenues in Q3 2025, showing continued strong performance without significant Q3 increases.

Kevin Fischbeck asked about Tenet's Q4 guidance regarding utilization expectations, particularly concerning potential exchange subsidy expiration, and USPI's capacity to accommodate demand, along with its exposure to exchange business.

Answer

Chairman and CEO Saum Sutaria stated that Tenet has not factored in a rush for utilization due to exchange subsidies and anticipates a compromise on their expiration. He confirmed USPI's robust capacity to manage typical Q4 demand and any potential increases. Executive Vice President and CFO Sun Park added that USPI's implied Q4 guidance aligns with historical trends, and in Q3 2025, exchange business represented 8.4% of total admissions and 7% of consolidated revenues.

Kevin Fischbeck of Bank of America asked to clarify how much of the payer mix improvement was driven by exchange growth and to understand the underlying demand growth in the quarter, separate from the high-acuity strategy.

Answer

Chairman & CEO Saum Sutaria confirmed that strong exchange growth was a definite contributor to the favorable payer mix, especially as a landing spot post-Medicaid redetermination. He asserted that underlying macro demand for services remains strong, and the high-acuity strategy builds on that base to drive margin expansion, cautioning against over-reading trends from a single quarter.

Kevin Fischbeck asked about the behavioral health supply-demand imbalance, considering a competitor's slowdown and whether there are broader market dynamics indicating faster growth than externally visible. In a follow-up, he inquired about the outpatient behavioral strategy, barriers to capitalization, successful market blueprints, and confidence in capturing volume despite ongoing hiring issues.

Answer

CFO Steve Filton cited managed care entities' reports of increased behavioral health utilization, particularly outpatient, as evidence of demand, noting care is delivered in fragmented, non-traditional settings. CEO Marc Miller added that staffing stabilization will unlock opportunities. Filton outlined two key changes for outpatient: increased focus through reorganized, dedicated personnel and expansion into 'step-in' business (freestanding outpatient settings like the Thousand Branches brand). He highlighted UHS's advantages, including existing referral relationships and managed care contracts, to establish a footprint faster than competitors.

Kevin Fischbeck revisited the behavioral health supply-demand imbalance, asking if competitor slowdowns or broader market dynamics are skewing growth, and what gives management confidence in increasing demand. He also followed up on the outpatient behavioral strategy, asking about historical barriers, successful blueprints, and confidence in capturing volume given ongoing hiring challenges.

Answer

CFO Steve Filton noted that managed care entities have cited behavioral healthcare as a significant driver of increased medical loss ratios, indicating broad utilization increases, particularly on the outpatient side in non-traditional settings. He believes UHS can capture incremental volume due to its clinical product and in-network position. CEO Marc Miller added that staffing stabilization will unlock opportunities. Steve Filton explained the outpatient strategy involves increased focus, reorganized personnel, and dedicated step-in programs like Thousand Branches Wellness, leveraging existing referral relationships and managed care contracts.

Kevin Fischbeck of BofA Securities asked for more detail on the root cause of the weakness in behavioral volumes, questioning whether it was driven more by competition or by ongoing staffing issues. He also asked what the company is doing differently to achieve its volume targets in 2026.

Answer

Executive VP & CFO Steve Filton attributed the volume weakness to a combination of factors. He noted that while UHS captures a good share of 'step down' patients, it faces broad competition in the 'step in' freestanding outpatient market, a space it hasn't historically competed in aggressively. He reiterated that the company is now focused on building new capacity, improving referral processes, and enhancing staff recruitment and retention to drive future growth.

Kevin Fischbeck inquired about potential downside risks to Molina's 2026 numbers, the confidence in rates exceeding trend given past experiences, and the trajectory for realizing embedded earnings, especially with current business underperformance.

Answer

CEO Joseph Zubretsky addressed downside risks by highlighting Molina's Medicaid MCR (91.5% full-year, 3.2% pre-tax margin) as strong relative to competitors, noting the buffer from risk corridors in late 2024. He reiterated confidence in 2026 Medicaid rates exceeding trend due to state responsiveness, a comprehensive cost baseline, discrete rating cells, and early positive 1/1 cycle views, acknowledging medical cost trend as the main variable. CFO Mark Keim explained that of the $8.65 embedded earnings, at least $0.60 is expected for 2026 (from $1 implementation costs going away, offset by $0.40 Virginia contract loss). Joseph Zubretsky clarified that embedded earnings are an "ultimate concept," and while timing might be longer, target margins remain unchanged.

Kevin Fischbeck questioned the potential downside risks to Molina Healthcare's numbers, the confidence in rates staying above trend given past experience, and the trajectory of embedded earnings, specifically if realization is being pushed out a year.

Answer

CEO Joseph Zubretsky and CFO Mark Keim explained that Medicaid's MCR (91.5% full-year, 3.2% pre-tax margin) represents a low point from a starting position of 4.5-5% margins. Confidence in rates is based on state responsiveness, a 2024-2025 baseline capturing cost inflection, discrete rating components, and early positive 1/1/2026 glimpses. The primary downside risk is medical cost trend (7% Medicaid, 5% Medicare, 15% Marketplace). Embedded earnings ($8.65 per share) is an 'ultimate concept,' and while the timing of emergence may take longer, $0.60 of it is expected next year from the cessation of implementation costs and the Virginia contract roll-off. A full update on 2026 guidance will be provided in February.

Kevin Fischbeck of Bank of America sought to understand the underlying reasons for the persistently elevated medical cost trends and whether they are expected to moderate. He also questioned if the company can ever fully catch up on margins given rate cycle lags and if the timeline for realizing embedded earnings is extending.

Answer

CEO Joseph Zubretsky explained that while the 'what' of the trend is understood (behavioral, pharmacy), the 'why' is complex, involving higher prevalence, reduced stigma, and supply-side factors. He emphasized that advocating for a recent baseline period in rate setting is key to catching up. CFO Mark Keim confirmed the $8.65 per share embedded earnings figure is unchanged as an ultimate target, though the near-term realization timeline is subject to the current rate environment.

Kevin Fischbeck of Bank of America asked for more color on when the business might bottom out and whether the recent firming in demand is seasonally adjusted. He also questioned if slowing patient volume growth was impacting clients' temporary staffing needs.

Answer

President & CEO Cary Grace noted that the Q2 utilization decrease was concentrated among a small group of clients, mainly academic medical centers, which are now showing stabilization. CFO & COO Brian Scott added that while Q2 order declines will impact Q3, stabilizing orders and rising extension rates suggest a new normal, with winter orders expected to drive improvement later in the year. Scott also stated that slowing patient volume growth is not a major driver of client behavior.

Kevin Fischbeck from Bank of America questioned how frequently Ardent's facilities operate at or near capacity and the feasibility of backfilling terminated exchange volume with more profitable commercial business. He also asked if the OBBA legislation has altered the company's M&A strategy or discussions with potential partners.

Answer

President & CEO Marty Bonick stated that tertiary hospitals are frequently full, making throughput and length-of-stay initiatives critical. He expressed confidence in backfilling volume via physician outreach and service line strategies targeting higher-acuity patients. On M&A, Bonick noted that outreach and discussions have increased since the bill's passage, and while Ardent remains disciplined, its appetite for growth is unchanged, though it will strategically hone its focus on markets with favorable state dynamics.

Kevin Fischbeck from Bank of America inquired about the travel nursing volume outlook, seeking more anecdotal evidence for the projected Q4 growth inflection after it was pushed back from the second half. He also asked for trends on a same-client basis to differentiate between market-wide declines and potential market share shifts.

Answer

CEO John Martins explained that demand has risen over 20% since the start of Q2, driven by broad-based specialty needs and rising hospital census, not seasonal winter demand. He also highlighted the ramp-up of recent MSP wins and two new contract awards totaling $70 million in annual spend. CFO William Burns added that the number of travelers on assignment has stabilized in Q3, a positive shift from declines in Q1 and Q2, and that weekly production is up. Regarding same-client trends, Burns noted that an internal 'net contract value' metric has been positive for several quarters, and their MSP capture rate, excluding a new vendor-neutral program, has improved.

Kevin Fischbeck asked for more color on the volume outlook, questioning the visibility that led to pushing the growth forecast from the second half to Q4, and inquired about same-client trends versus new contract wins.

Answer

CEO John Martins explained that optimism is fueled by a broad-based 20% rise in travel demand since Q2, increased hospital census, a high job-openings-to-hire ratio, and the ramp-up of recent MSP wins. CFO William Burns added that travelers on assignment are now stable through Q3, a shift from prior declines, and weekly production is up. Burns also confirmed that after attrition in 2023, Cross Country has seen positive net contract value for the last couple of quarters.