A.J. Rice: Hi, everybody. Congratulations on the transaction as well. I wondered, since we had Mike on the call, the €“ obviously, this has played out a little bit in the public domain. So there is been speculation that someone might be up with Oak Street for a while. I wonder if he could comment on what kind of feedback he’s gotten from his doctors, how do they €“ how are they reacting to this. And I wonder, do they have to approve in any way this transaction? Is there anything in their agreements that require approval? And then lots of questions around the deal, but I might just ask, Shawn, Karen, you’re thinking you’re going to close this at the end of the year and/or sometime this year. I know the regulatory process is a little less certain than it was a few years ago, I guess, the way to describe it.
If it were to slip into some point in €˜24, would you €“ would that materially change your $9 and $10 target? Or are you €“ does that have some flexibility around the timing of the deal?
Karen Lynch: Hi, A.J., we do €“ we’re €“ we do expect to have this transaction close, I’ll let Shawn comment on the financials, but I don’t think that we have material changes in those numbers. I am going to turn it over to Mike. Mike, can you just respond to A.J.’s question around the clinicians?
Mike Pykosz: Yes, happy to. So, on the second point, no, we don’t require any separate approvals. We just need more of the standard shareholder approvals. On the first question you are asking, I think is the most important one. At Oak Street Health, our mission is to rebuild healthcare as it should be. And I think the physicians I have talked to and opinion leaders and team members across Oak Street that I have talked to so far. I think there is a huge amount of excitement that this is kind of the next stage of our journey. And we are really proud of what we have built over the first 10 years of Oak Street. But we really believe there is an order of magnitude of more growth out there for us. We can go to more communities and impact more older adults.
And I think that CVS Health brings just a huge amount of resources that we can partner with and leverage to help us provide higher quality care for patients, to help us provide a better patient experience and to help continue to make Oak Street the best place to work in healthcare. So, I think from our physicians and the rest of our team members’ perspective, I think this is a huge positive to continue to help us execute on our mission.
Shawn Guertin: And A.J., I am not sure if you had a question about more global kind of deal returns, but specifically to your question about the timing of close, the answer is no, it would not change those. And arguably, it actually adds a little bit of lift because, if you remember, there is an operating loss that’s going on for a little bit of time and you are picking that up a little bit deeper into the cycle of moving from kind of loss to breakeven to gain. So, it actually would not kind of change the $9 to $10 at all, certainly not in a negative way.
A.J. Rice: Okay. Great. That’s clear. Thanks Shawn.
Operator: Thank you. Our next question will come from Justin Lake with Wolfe Research. Your line is open.
Justin Lake: Thanks. Good morning. Wanted to shift back to health benefits for a minute. I wanted to ask you to walk us through your expectations on membership growth across the businesses in detail. So, where do you expect to grow in MA, shrinking tape, commercial and the exchanges. And then your MLR looks like it’s up about 100 basis points year-over-year, maybe a little less. Just hopeful you could frame how much of that comes from the PYD roll off that you are not assuming and what other drivers might be impacting that? Appreciate it.
Karen Lynch: Hi Justin, it’s Karen. Let me just comment on the growth. So, first of all, in our commercial book, we do expect to grow in our commercial book. And our value proposition is truly resonating in the marketplace. We announced last month that we closed the state of North Carolina, which will bring us about 570,000 members on 1/1/25. So, I think that’s a good demonstration of the strong value proposition that we have in our commercial business. I mentioned our significant growth in individual exchanges, 900,000 to 1 million members next year. And then in Medicare, as you know, Justin, we are disappointed in our individual Medicare Advantage growth, but we are growing our D-SNP business and our group MA business. So, I will let Dan specifically give you a little bit more details on growth, but I am going to turn it to Shawn to answer your MBR question.
Shawn Guertin: Yes. So, Justin, the MBR, I think the guidance midpoint is up about 70 basis points year-over-year. There is a number of pieces that are leading to that. The first, to the point of your question, is the removal of prior year favorable reserves development is about 20 basis points there. Second, the provision we are making for the exchange business and the provision for any adverse deviation there is also worth about 20 basis points. About 10 basis points is driven by Medicaid redeterminations and what we think the MBR impact will be there. The divestiture of our international business in 2022, that was lower MBR, so that’s adding about 10%. So, it’s three or four items that are building that up. I would say more broadly behind this that when you looked at the fourth quarter and you looked behind the impacts of flu and respiratory illness, utilization continued to perform very consistent with what we expected to see.
And we still feel the pricing environment is very sound and rational going into 2023.
Daniel Finke: Yes. And Karen, I would just add two comments to your remarks. I mean first on the Medicare front, a couple of bright spots during AEP, where our growth in the duals population as well as our group MA products, and so we expect continued growth in those products through the remainder of the year. And clearly, the team is also focused on our individual MA enrollment as it relates to OEP and our lock-in period. Some of the investments we made at the end of AEP showed some signs of growth that we are looking forward, let’s say for the remainder of the year. And then the last comment would just be on Medicaid. We do expect some modest growth in that book of business through the first quarter. But as anticipated, at the end of the first quarter, we do expect some of the re-determined members to fall off the roster. And so we are working closely with the states around our opportunities to regain that membership.
Operator: Thank you. Our next question will come from Eric Percher with Nephron Research. Your line is open.
Eric Percher: Thank you. Eric Percher and Josh Raskin here at Nephron. A question with respect to the approach to M&A, how important was geographic diversification in your process or as you are examining assets and making this decision? And then conversely, how important was how much you need the model that Oak Street has built? And maybe lastly, how do you think about how this and Signify come together with respect to physician enablement?
Shawn Guertin: I can have Karen talk about that as well at the end, but what I would say is, as we talked about our factors here, Eric. We have conducted a very thorough evaluation over the last 15 months and are confident this is the best asset in the space that really satisfied all of our criteria talented and capable leadership, a leading integrated technology platform, a clear ability, to the point of your question, to scale and reproduce the model and the results across both geography and for different payers. It also has, as Mike mentioned, the demonstrable capability to improve clinical outcomes and lower costs and I think a very clear path around the unit economics required for profitability. I would be remiss if I didn’t also mention that it has a fundamentally differentiated patient experience as evidenced by their 90 NPS and their exclusive AARP endorsement.
So, this asset, really, we have talked about the list of criteria, we really hit it. And I think to your point, the geography was important. We are a big company. We are going to need a big footprint over time, and being in 21 states was important in and of itself. But it’s actually, in my mind, the scalability element was the ability to demonstrate the model worked in different geographies. And to the point of your second question about having, I will call it, the homogeneity of the model, it was the ability to reproduce it and then make changes to it. I think that was very, very important, and frankly, very distinct and what we looked at in the market. I think the second part of your question, I think, is important, too, because there is a lot of interplay potentially down the road between these two assets.
One of, I think the benefits that we have, and I think we have built in a modest synergy when we talk about the ability to accelerate growth, is the ability of Signify when they are doing a home visit to recognize that here is a member that needs to be returned or connected to care. And that doesn’t have to be obviously through Oak, but it can be and can be our MinuteClinics as well. So, the interconnectivity of actually getting these members the care they need, when they need it and where they need it, and to Mike’s point, the way it should be provided, I think these two things over time, we will be able to work powerfully together.
Karen Lynch: Yes. And Eric, just to add to that, I think it’s really important to think about community and community-based care as we have talked a lot strategically being in the community and really having kind of all these assets work together. Shawn made a good example of Signify and Oak, but then you think about our MinuteClinics, and we can kind of leverage those MinuteClinics for additional capacity. We can leverage our nurse practitioners as well and then we can have wraparound services. So, we can have a very much of a holistic approach to care in the community. I would also add that it is really critically important for us to be a multi-payer agnostic provider and make sure that we are connecting care for all the patients that we are interacting within the community.
Eric Percher: Thank you.
