Ryan Langston • TD Cowen

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President & CEO Brandon Sim stated the company is not breaking out trend by geography but noted that ex-California markets are tracking toward profitability goals. He clarified the 1.02 RAF score was for the legacy Astrana business but that Prospect's scores are in line, and the company is not baking in future RAF increases.

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President & CEO Brandon Sim stated that the company is not breaking out cost trends by geography but noted that non-California markets like Nevada and Texas are tracking toward their profitability goals. He clarified that the 1.02 RAF score was for the legacy Astrana business but that Prospect's RAF scores are in line. Sim added that they are not baking in future RAF increases and expect their lead to widen over competitors.

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CEO Parth Mehrotra reported that the IMS integration is proceeding well, with the group expected to be implemented on Privia's platform in Q3. He confirmed there should be no change to typical seasonality. EVP & CFO David Mountcastle added that they still expect IMS to contribute positive EBITDA in Q4, making it accretive for the year.

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CEO Parth Mehrotra pointed out that the 7.5% lives growth is the midpoint of a wide guidance range (1.3M to 1.4M lives), with the high end representing 11.5% growth. He also cited the law of large numbers and the influence of provider mix—specifically the ratio of primary care to specialists—as factors influencing the relationship between provider and lives growth.

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CEO Parth Mehrotra reiterated Privia's differentiated and flexible strategy, stating they will not massively increase their fully capitated, 100% downside risk book given that MA headwinds will likely persist through 2026. He called the idea that full capitation is necessary for VBC a 'false view,' and said Privia will continue to grow its MA lives through a variety of thoughtful shared-risk arrangements.

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CEO Christopher Hunter detailed the strategy for engaging referral sources, which includes facility tours and sharing data on quality investments, patient safety, and strong clinical outcomes. He clarified that the 'local market pressure' at the one specific facility was related to problematic local media coverage that has persisted for years.

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CEO Javier J. Rodriguez attributed the cost outperformance primarily to improved labor productivity, stemming from better teammate retention and more effective training. Regarding the cyber attack, he characterized any incremental long-term spending on security as a 'marginal cost,' stating that while prudent investments have been made, they are not material as the company must constantly innovate against evolving threats.

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CFO Joel Ackerman explained that the guidance is maintained because two headwinds (lower volume and cyber costs) are offset by two tailwinds (strong Q1 performance and increased profitability from phosphate binders). He clarified that the professional fee decrease and the gain within G&A were minimal, single-digit million-dollar items and not significant drivers.

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CFO Joel Ackerman outlined typical seasonality, with Q1 being the low point for operating income (around 20% of full-year) due to RPT resets, and IKC results being back-half loaded. CEO Javier Rodriguez reaffirmed the company's expectation for the IKC business to reach breakeven in 2026, noting 2025 OI will be flattish to 2024 due to a timing pull-forward of revenue.

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CEO Javier Rodriguez attributed the rise in advocacy costs to initiatives in California, efforts in Washington D.C., and activities related to the inclusion of oral-only drugs in the Medicare bundle. CFO Joel Ackerman explained that mistreatment rates remain elevated versus pre-COVID levels and would be expected to increase seasonally in Q4, even without further storm activity.

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President & COO Bradley Bickham clarified that the primary driver of the challenge in clinical hiring is a systemic shortage of nurses, which creates a more competitive labor market. He characterized it as a long-term dynamic but stressed that it is not currently constraining the company's ability to accept patients or impacting volumes.

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W. Bickham, President and COO, stated that Personal Care turnover is currently between 50-55%, a significant improvement from the COVID era. He reported that Journey Care has performed better than expectations, and Tennessee Quality Care has seen strong traction from implementing the home health-to-hospice bridge program, with admission conversions improving significantly.

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President and COO W. Bickham acknowledged a negative impact from January storms but did not quantify it, stating he felt good about the quarter overall. He noted no major impact from the flu season. He reported the legacy Addus turnover rate is around 50-55% and expects Gentiva's to be consistent, potentially lower due to its high concentration of preferred (family) caregivers.

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CFO Brian Poff noted that while some rate increases are now aimed at improving access, the company's high-level expectation is for the overall rate environment to moderate back toward a historical norm, supporting a 3-5% total growth rate. He also confirmed there is no unusual seasonality in the Gentiva business and that Addus plans to quickly deploy its payroll system and caregiver support apps well ahead of the full EMR conversion.

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Executive Chairman Ron Williams detailed that the ideal CEO will have experience in multi-market management, strong relationships with primary care physicians, and a focus on operational rigor. CFO Jeff Schwaneke added that while there are no immediate plans for market exits, the company continuously evaluates the profitability of all its partnerships.

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CEO Steven Sell stated that Part D risk could be managed through other means like risk corridors or higher premium percentages, so it would not necessarily cause membership reductions. He confirmed group MA penetration is about 18%, in line with the national average, and that trends within this population are consistent with the individual MA book.

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CFO Jeffrey Schwaneke stated the exiting MSSP partnership was unprofitable but did not quantify the loss. CEO Steven Sell clarified the 100 bps cost trend reduction from 6.3% to 5.3% is not cohort-specific but reflects the net impact of 2025 payor bid changes, which are expected to lower both revenue and medical expenses.

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CEO Steven Sell explained that the decision was based on the 'magnitude of loss' and the 'time frame' to achieve profitability. The two partnerships being exited faced a much longer and more challenging path back to profitability. In contrast, the other three unprofitable partnerships are much closer to breakeven, with several expected to become profitable in 2025.

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CEO John Kao reiterated confidence in achieving at least 20% growth, viewing it as an opportunity in both California and ex-California markets, not an either/or choice. He emphasized the company's focus on balancing growth with margin expansion. Kao confirmed that following the successful appeal of their Arizona Star Rating, they were permitted by CMS to modify their 2026 bids to reflect the improved rating.

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CFO Robert Freeman explained the difference in PYD figures is due to a standard margin pad (~7%) applied to IBNR reserves for compliance, which is not expected to be used. The key figure was a $6 million favorable release, a portion of which is shared with providers. He also stated that Alignment's weighted average effective growth rate for 2026 is approximately 8%, compared to about 5% for 2025.

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Executive VP & CFO Steve Filton noted a slight slowdown in Nevada volumes, reflecting some economic softness in the Las Vegas market, but described performance as still very solid. Regarding capital deployment, Filton indicated that the incremental free cash flow from the revised guidance would likely be dedicated to an elevated level of share repurchases beyond the initial $600-$700 million guidance.

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Executive Steve Filton attributed the strong behavioral labor performance to improved productivity, moderated wage inflation, and lower use of premium pay as the labor environment has improved post-pandemic. Regarding share repurchases, he stated that while the market is a consideration, UHS's approach is typically more programmatic and ratable throughout the year rather than attempting to time the market.

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Executive Steve Filton attributed the strong behavioral labor cost performance to a combination of improved productivity and moderation in both premium pay and wage inflation. Regarding share repurchases, he indicated that while market conditions are a consideration, UHS's approach is typically programmatic and ratable throughout the year rather than attempting to time the market.

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Steve Filton confirmed the new D.C. hospital will participate in the supplemental program, but the estimated benefit is based on the existing hospital's history, so the new facility represents potential upside. Regarding legal headlines, he noted that while UHS is increasing malpractice reserves due to rising severity, the two large disclosed verdicts are considered extraordinary and are subject to significant appeal activity.

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CEO Sam Hazen reported that HCA is ~80% contracted for 2026 and about one-third for 2027, meeting its targets. On capital expenditures, he noted high occupancy rates and a $5.5 billion project pipeline. While HCA continually evaluates opportunities to accelerate investment, he does not foresee a rapid acceleration of spending at this time but will proceed in the normal course.

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CEO Sam Hazen stated that HCA does not aggregate forward-looking surgical scheduling data at the corporate level. However, he expressed confidence that the underlying demand for healthcare services remains robust. He expects surgical volumes to align with the company's market share gain expectations, supported by ongoing investments in medical staff, facilities, and technology, and sees no material impact from consumer behavior at this time.

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CEO Sam Hazen confirmed that inpatient surgical growth was broad-based, with strong performance in neurosciences, orthopedics, general surgery, and vascular. He also affirmed that the outpatient surgery volume decline was driven by a 10% drop in Medicaid cases, while commercial and exchange volumes were up slightly. Consequently, revenue and profitability in outpatient surgery grew due to the favorable payer mix.

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CEO Sam Hazen responded with a definitive 'no,' stating that the company's portfolio is well-positioned for long-term growth. He provided examples of previously storm-damaged hospitals in Florida and Texas that have since recovered and are performing at higher levels than before the hurricanes, demonstrating the effectiveness of HCA's enterprise disaster response capabilities and investment strategy.

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CEO Joseph Zubretsky noted that, unusually, there was very little distinction in performance between member cohorts this year; all segments ran hotter than expected. He reaffirmed the 'small, silver, stable' strategy for the exchanges. CFO Mark Keim added that despite the pressures, the Marketplace business is still expected to achieve low single-digit pretax margins for the year.

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CEO Joseph Zubretsky stated that the challenging environment is actually increasing M&A deal flow, as smaller, single-state plans are struggling. He described the pipeline as "replete with opportunities" and noted the political uncertainty is not a deterrent but may even be a catalyst for consolidation. He expressed high confidence in meeting growth targets via M&A.

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CEO Joe Zubretsky stated that all factors, including potential policy changes, were incorporated into their membership forecast, which assumes a net 4% membership reduction over the course of the year. CFO Mark Keim added that they have high confidence in the quality and stability of their membership due to a high 70% renewal rate and improved program integrity from the agent of record lock, which should mitigate volatility.

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President and CEO Joe Zubretsky explained that the higher behavioral health trend is indeed a national phenomenon, driven by reduced stigma and pent-up demand, though it was more pronounced in Kentucky due to a specific program change. CFO Mark Keim stated that while there are unique stories in each of their 21 states, he would not cite any specific service lines as having a 'good guy' trend on a national basis.

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Chairman & CEO Saum Sutaria explained that the strong performance is the result of sustainable strategies, including effective labor management, improved recruiting, strong nursing school partnerships, and better retention rates. He noted that real investments in nursing and hospital management have created a stable and effective workforce, driving these efficiencies.

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Saumya Sutaria, Chairman and CEO, clarified that further decreasing contract labor isn't necessarily an 'improvement,' as it can be used strategically to open capacity. He emphasized the long-term strategy has been to reduce reliance on contract labor by focusing on recruiting and retaining full-time staff, leveraging nursing school relationships, and returning to a focus on overall SWB inflation rather than just contract labor expense.

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CEO Sarah London explained that states have budget savings from post-redetermination membership declines and are legally required to set actuarially sound rates. She added that state budget pressure has historically been a tailwind for managed care, as states look to move more populations into predictable, cost-saving models, creating growth opportunities for Centene, particularly in complex populations.

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George Renaudin, President of the Insurance Segment, explained that the Group MA market is less mature and has been impacted by multi-year rate guarantees. While this is changing, it will take time to flow through financials. He stated that margin pressure in 2025 is built into guidance, with improvement expected in 2026 as long-term contracts come up for renewal.

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Evernorth CEO Eric Palmer and CEO David Cordani explained that the growth is driven by intense client interest in managing the affordability of GLP-1s. Cordani added that the program's value proposition resonates because it provides clinical and behavioral support wrappers to address the 'start and stop' dynamic often seen with these medications, aiming for more sustained and effective patient outcomes.

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