Sarah London: Yes, I mean, I certainly prefer our narrative, and I think about it really specific to Centene, so I appreciate the need to try to harmonize what different companies are seeing, but we remain focused on what we’re seeing in our population, the idea that we saw some of this trend in Q2, that we accounted for it in our 2024 bids, we feel sufficiently–we had a second bite at the apple at the end of the year with the benefit of the full year’s visibility of utilization. The assumptions that we’ve made in 2024, how we feel about our ability to apply clinical initiatives, leverage our value-based relationships and manage through the trend that we’re seeing, that’s really our focus, less so worrying about what others are saying.
Operator: Thank you. Our next question today comes from Dave Windley with Jefferies. Please go ahead.
Dave Windley: Hi, thanks for taking my question. I wanted to clarify and then ask a question. Drew, you mentioned–you’ve actually both mentioned a second bite at the apple a couple of times. I wanted to make sure I understood that that was a second bite opportunity kind of up to the end of the year, or does that mean if things develop in a way that causes you to have a different view of 2024 currently, that you could go back and revise your estimate for PDR, so wanted to clarify that. Then my question, rotating over to SG&A, is where are you related to head count rationalization, real estate rationalization, other things kind of on the basic cost cutting, value creation plan list to take out SG&A, where do you stand in that evolution? Thank you.
Drew Asher: Yes, so good questions around the PDR. Look – we don’t love being in the PDR position, but–you know, we’ve got work to do on Medicare, but it did give us an opportunity to re-evaluate the ’24 forecast as we got into January and closed the December books. What will happen mechanically throughout 2024 is that PDR will largely be released–forecasted to be released in Q4, because of the mechanics of the seasonality of earnings in Medicare throughout the year, but every quarter, we re-evaluate the sufficiency of that PDR relative to the ’24 policy and calendar year, and if we have to tweak it, we will, but that would be within the confines of 2024. On SG&A, still plenty of opportunity ahead. I mentioned at investor day that we’ve got at least a couple hundred basis points more in Medicare we’ve got to go after over the next few years.
On real estate, largely through that, probably some tweaks here and there but largely through, for instance, the charges around real estate, we’re through the bolus of that, and then we’ve got our slate of initiatives that we continue to tackle and plenty of efficiency opportunities.
Sarah London: Yes, I would echo that and just say that a lot of great execution in the first two years, we’re going to realize that in 2024, but we haven’t stopped. You’ve heard us talk about building the pipeline for 2025 and beyond in terms of additional opportunities. Obviously our long term algorithm has 1% to 2% of margin expansion built in, and we do see additional opportunities to drive efficiency in the business as we standardize our workflows, the ability to then automate that with technology, so really pleased not just with the execution thus far and the discipline to get us here. We’re really thinking about how we do work going forward. We do see opportunity for continued efficiency in the future.
Operator: Thank you. Our next question today comes from Sarah James at Cantor. Please go ahead.
Sarah James: Thank you. Could you remind us what the margin progression looks like on exchanges, like how many quarters it takes for you to get to run rate? Then just a mechanics clarification on the PDR – are you guys booking that as the delta between where you view costs and target margin, where it would roll over kind of flat at target margin from ’24 to ’25, or is that you’re booking at as the view of costs to break even? Just if you can give us the context of that, thanks.
Drew Asher: Yes, on your second question, it’s really neither of those. It’s sort of the accounting principal on the marginal loss, so it excludes things like marketing costs and certain investments, so think of it as the marginal loss that we’re pulling into the year in which we set the bids, so certainly it’s not booked–you know, it’s nowhere near target margins. We’ve got a lot of work to do to go from essentially a minus-3.5% expectation in 2024 to that 4% to 5% pre-tax zone as we look at later in the decade. Stars will probably two-thirds of that progression, and like I said, we still have SG&A and clinical initiatives. Isn’t it interesting we’re spending so much time on 12% of our revenue? $16 billion, an important lever, but we actually have some other pretty good businesses, like marketplace that you just asked about.
The margin progression, we expect–you know, it’s a sophomore year in which we pick up the benefit of the SEP – special enrolment period, members that come in for a couple of reasons. One is they’re typically utilizing some degree of services and they get out of the way and become more normalized in the following calendar year, and then also the risk adjustment, the mechanics are punitive to some degree if you’re only picking up a partial year, and then when you get a full calendar year, you have sort of the numerator and denominator matching up, so we expect to benefit members if we continue to grow SEP, which that’s not baked into our guidance yet, we’re just at 4.3 million members. But if we continue to grow during 2024, that will be an expected tailwind for 2025.
