David Joyner: Yeah. Maybe I’ll start on the operational priorities and turn it over to Tom on the financials. The biggest thing for us is keep focusing on what we do best, which is keep our patients healthy out of the hospital. We know if we apply our care model, we’ll do that, and we have the proof points whether it’s the Medicare Shared Savings Program, a couple years ago, we were top 1% performer, whether it’s the ACO REACH program which has risk score caps, or whether it’s an MA that we can create a lot of value by keeping our patients healthy and then capturing that savings. And so, that’s the biggest focus at Oak Street is running our care model, running it well, running it every day, running at every center, and keeping that culture intact.
And if we do that, we’ll be in great shape. And I actually think that if you think about the medium or longer term, I think the changes in how they’re doing risk adjustment will be a tailwind for us, because it’s going to make sure that you’re doing the right things to care for patients. And that’s what’s driving your business and if it’s harder for others, I think that’ll just further differentiate the Oak Street platform. So, that’s our focus.
Tom Cowhey: Thanks, Dave. As you as you think about the financial impact, and I think you’re specifically referring to V28 on the risk model, which is something that we spent a tremendous amount of time thinking through and diligence, we think that there’s a lot of opportunity here over the long term as we think about the ability of Oak Street, their people, their process, their technology, to really adapt to a changing regulatory environment. And so, we have a lot of confidence in their model. We have a lot of confidence in their ability to execute this. The issue as you think about this is really going to be what’s the timing impact of this. They’ve eliminated a lot of more generic codes and they’ve added a lot of HCC indexes to more complicated codes where they think there is a higher correlation with costs.
And so, we’ve got to both set the systems up to ensure that we’re capturing the appropriate data to help not just think about what the gross impact is, but what the net impact is, and then we need to have the encounters happen to actually capture that data. And there’s lots of other mitigants. I think as we looked at Oak Street, we’re pretty comfortable that they’re in a better shape than a lot of other participants in the industry. But because of kind of the timing of the implementation of these changes, it is only a third phased in next year, but we think we’ll probably have about a 2% revenue impact. But we actually think that, that gap will shrink over time even as V28 is more fully implemented. And so — and all of that is captured within our preliminary guidance range.
Overall, we actually feel really good about Oak Street’s model, its ability to deliver exceptional care. I think the ACO REACH results is just another great example of how their model is differentiated versus what else is out in the marketplace. And so, we feel really great about the long-term prospects, which is why we’ve actually doubled down and we’re going to grow 50 to 60 centers next year and probably accelerate after that as we look to expand that footprint more aggressively. You asked also about capital in M&A. I think we’ve done a lot of acquisitions this year. I mean, our focus in the near term is really on execution, execution in growing those businesses which are well on track for ’23, and execution in continuing to drive synergies and growth.
Operator: The next question comes from Kevin Caliendo from UBS. Kevin, your line is open. Please go ahead.
Kevin Caliendo: Thanks. Thanks for taking my question. Just as — I go on to the retail segment a little bit. The pharmacy growth still remains elevated. Love to hear the competitive dynamics driving that, if there’s anything in particular? And then also exactly how much the increased vaccine is contributing to the change in retail this year and what you expect for next year? You called out a couple of the headwinds and tailwinds broadly, but specifically just for the retail segment, how should we think about any micro headwinds and tailwinds within that segment for ’24? Thanks.
Tom Cowhey: Sure. Why don’t I start and then Prem can give you a little bit more color on kind of the competitive environment. You asked specifically about some of the tailwinds in that segment. I think there’s two things that I’d call out. The first is just strengthen our immunization franchise and the second is I think that as you think — as you look at where the consensus was for that business, I don’t think that we’re getting enough credit there for some of the actions that we took to restructure quorum last year and some of the benefits that would provide some of the store closures, which continue to ramp and some of the benefits that you’re starting to see from that particularly as we’ve exceeded all of our goals on employee retention, but importantly, on script retention and also front store retention.
So we’ve done really well and kudos to that team on the execution there. But as you think maybe about the immunization franchise, we did just under 8 million vaccines in the quarter. Flu represented probably about half of that total with COVID probably about a quarter, and the remainder is a variety of different vaccines, but also included the new RSV vaccine, which we saw a strong growth in. Performance across that book was quite good, and a lot of that actually has to do with some of the efforts of our trade team, which helped to really drive some of the strength in the quarter. We project that vaccines are probably going to peak early in the fourth quarter before declining in 2024, and that’s primarily due to COVID softening versus part of the early part of ’23 when the public health emergency was still in effect.
As COVID moves into the endemic phase, our plan is that we’re going to talk about the vaccine franchise more holistically and but we do think that there’s going to be pressure there because COVID is going to wane. And I think as you think about next year, we’ve anticipated that the current level of performance is not going to persist partially because of COVID, partially because of the typical dynamics of just rate and reimbursement pressure but also about a little bit of a provision for consumer softness. Prem, maybe you could talk a little bit about — more about kind of the script growth and underlying dynamics in the market.
Prem Shah: Yeah, sure. Sure. Thanks. So our retail pharmacy business continues to be execute and deliver strong results across scripts service and our transformational initiatives. If you think about our same-store scripts, we grew 2.7%. And if you exclude COVID, we grew 3.5%. So continued strong momentum on script growth. On the service front, we continue to measure NPS, and our NPS year-to-date is about 40 basis points higher than prior year. So continue to have strong service. And we know that service is a primary reason to retain and grow scripts. And then lastly, I think the transformational initiatives that we’re focused on, first and foremost, how do we lower our cost of goods and then also continue to think about our engagement with consumers through our innovative omnichannel strategies.
