I do think the Medicaid piece in Florida would be a potential interesting opportunity for other Medicaid plans in the state for that arrangement beyond Molina. So there’s a couple of different reasons we’re excited about that announcement.
David Larsen: Okay, great. Thanks. Congrats on a good quarter.
Seth Blackley: Thanks David.
Operator: The next question comes from Sandy Draper with Guggenheim. Please go ahead.
Sandy Draper: Thanks very much. I think most of the failing operational questions have already been asked. So maybe, John, a financial one, thinking about a couple of my other companies have recently started talking about refinancing, which is kind of interesting because Feds just raised rates but it’s because their financial conditions were getting better, their leverage is coming down. And their comment was the debt markets are actually playing a little better. I’m not a certainly a debt analyst or a debt banker, but would love to hear your thoughts about the potential to refinance. Are there certain either leverage metrics that hit triggers were like, okay, if we get to this leverage ratio, we could do it, rates start to tick down. I’m just trying to think about that opportunity and how we would think about tracking what the timing might be on that opportunity? Thanks.
John Johnson: Yes. It’s a good question, Sandy. We really seek to balance and optimize three things as we’re contemplating potentially refinancing cash interest, total leverage and dilution of the common, right. And so as we sit and look at it today, if you pro forma in the acquired – the rest of the acquired EBITDA, we’re sitting at about 2.7x net levered. And we are committed to maximizing and optimizing those three things. So we see an opportunity to refinance into something that is cheaper than absolutely would contemplate doing that. If it was the right thing to do for those other two metrics, leverage and dilution of the common.
Sandy Draper: Got it. That’s helpful. And that was my only question. Congrats on the good quarter.
John Johnson: Thanks Sandy. Appreciate it.
Operator: The next question comes from Jessica Tassan with Piper Sandler. Please go ahead.
Jessica Tassan: Hi, guys. Thanks for taking my questions. So first, I wanted to just come back to your comment around Humana starting to generate adjusted EBITDA in the second half of 2024. Can you just help us understand kind of the margin trajectory of Performance Suite deals maybe in their first six months and then their second six months post launch?
John Johnson: Yes. You got it. So what we’ve typically indicated right is an expectation that at go-live and for the first couple of quarters, as you look at your claims expense and watching the claims complete, your claims expense has a lot of IBNR in it. And so you’re building for those first couple of quarters, the IBNR stack, and on a reported basis, you’re not generating a lot of earnings. As those claims complete, the IBNR comes down, then you would have a natural release of that initial actuarial conservatism that then translates into what we’ve typically indicated for the first full year of a Performance Suite arrangement between 4% and 6% of the total profits down to the bottom line. So that’s how I think about it.
Quite little in the first couple of quarters and then ramping up, and is that three quarters , is it five quarters, that’s going to spend a lot on the specific partnership with specific geography and so forth. But that is the way that we see it playing out.
Jessica Tassan: Got it. That’s fair. And then that’s really helpful. And then I was just hoping maybe you could describe any changes you’ve seen lately in the competitive landscape for the tech-enabled solutions, specifically, mostly interested to understand if some recent controversy around the competitors’ prior authorization algorithm that’s created an opportunity for you guys into 2024?
