Steve Sell: So to-date we’re relatively early in that. We have had some success across some very key markets, across a couple of payers. We’ve got it going with many payers right now, Ryan. I would say, the value that we provide is very evident to these payers, particularly in this utilization environment. And they want to have a strong primary care supply chain. And our groups represent the largest and sort of most prestigious groups within their communities. And so it’s very important. So that is factored into our discussion and we’ll give you an update on the next call in terms of how that’s progressing. But I think we’re pretty optimistic.
Ryan Daniels: Okay. Thank you for the comments.
Operator: Thank you. We now have Jailendra Singh of Truist Securities. Your line is open.
Eduardo Ron: Hey guys, how are you doing? This is Eduardo on for Jailendra. Thanks for the question. Just on the bridge. It looks like the Class of 2024 medical margin declined more than the total medical margin relative to your January expectations. Is there anything that you’re seeing which makes, I guess, you more cautious on the Class of 2024 versus the rest of the book?
Steve Sell: So the Class of ‘24 assumption reflects the full step up in the utilization trend that we talked about across the entire book. I think it drops from $76 PMPM to $52 PMPM is the math on that change. So that is what’s driving the change that you see there.
Eduardo Ron: And then just on the, I guess, the gross medical cost trend impact being 7.9% versus the net being 6.6%. That rough math sort of points to the clinical programs having a roughly $50 million impact on your year two plus lives in ‘24? I guess first, does that sound right? And can you discuss, I guess, which programs you see being the largest contributors to this trend benefit?
Tim Bensley: Yeah, the math is right on. We think that there’s a little bit of supplemental benefit headwind in those numbers as well. But the overall value of those clinical programs for us should be about 140 basis points in 2024.
Steve Sell: And Eduardo, what I would say is, all of our clinical programs, palliative, renal, high risk management, are focused on reducing unnecessary ER and in-patient visits. We had really good success in ‘23 with those with – at in-patient medical down 2%, which is far better than sort of what we’ve seen nationally. And I think we’re expanding those two more markets and enrolling more patients in those programs based on a more accurate assessment. So, those are the things that are giving us the confidence around the numbers you just laid out.
Eduardo Ron: Thanks.
Operator: Thank you. We now have Whit Mayo of Leerink Partners.
Whit Mayo: Hey. Just one clarification about numbers. What was the actual cost trend for the full year in 2023? I hear 7.7% for the fourth quarter and close to 8% for the gross trend this year. But how does it compare yet to the full year?
Tim Bensley: For 2023, Whit?
Whit Mayo: Yeah, yeah.
Tim Bensley: Yeah, absolutely. So our base claims trend, so this is without supplemental benefits, all-in for the full year we’re now with the – incremental reserves that we booked will be 7%. So our 2023 full year trend was 7% and then the fourth quarter accelerated to 7.7%.
Steve Sell: And if you include the supplemental benefit effect, the non-medical that 7.0% that Tim talked about, Whit, goes up to 8.2% for 2023.
Whit Mayo: Okay. Perfect. And just remind me the percent of your claims that you’ve completely settled at this point for ‘23?
Tim Bensley: Yeah. So right now, but it’s a great question, because one of the things that we did when we went in and went through all those process to make sure that we’re adequately reserved for the full year is, we compared what our assumption is right now for full year completion rate to what it would have been for the same group of markets. So year two plus markets back, knowing now we know for our full final costs in 2022, what it should have been in 2022. Last year, at this point, our completion rate with December paid and final full year incurred, what the real costs were, would have been at a completion rate of about 76.5%. We’re assuming a completion rate right now on an apples-to-apples basis of about 75%. So we would have assumed that we’re about 150 basis points more conservative.
But in the meantime, now between then and now actually closing, we’ve been able to see our January paid as well. So a whole another month of data, which is actually two more months of data than we had when we guided in early January, and we’re just up over 80% complete.
Whit Mayo: Okay –
Steve Sell: And Whit – sorry, go ahead.
Whit Mayo: One last question –
Steve Sell: Sorry, go ahead.
Whit Mayo: No, good ahead, Steve.
Steve Sell: I just was going to give the context of, in the assessment we talked about receiving in February and doing the analysis from some of our largest national payers that are more complete than the composite that Tim talked about, but also in that, were updated seasonality factors and census data, because the world is moving for everyone. And so, that was all incorporated into the scenarios that we talked about. And ultimately where we landed on that most conservative scenario.
Whit Mayo: And, sorry, one last quick one. Just the change in the geographical entry costs this year, I thought that was largely a set rate for physician compensation ahead of the future implementing. What really changed there?
Tim Bensley: Yeah, so it’s really one of the largest parts of our geographic entry costs are the incentives that we pay to physicians in year zero to complete their annual wellness visits. And the higher completion rate we get, obviously, the better that is for us, because it allows us to have a positive impact on the next year’s revenue, as well as do a better job of getting our members enrolled in all of these clinical programs we’re talking about. We actually finished the year at a much stronger rate than we had been projecting, particularly in a couple of large markets and that drove our 2023 number up. Of course, in 2024, that number will be lower because the Class of 2025 – because of the size of the Class of 2025 compared to 2024.
Whit Mayo: Okay, thanks.
Operator: Thank you. Our next question comes from Elizabeth Anderson of Evercore ISI.
