Lisa Gill: Hi, thanks very much. Good morning. Susan, I was wondering if you could just maybe discuss your expectations around the number of patients that will be in capitated relationships for 2023. And maybe just overall, the number that will be in any type of risk relationships as we think about 2023?
Susan Diamond: Sure. Hi, Lisa. I would say that €“ we would probably expect relatively stable percentages and as we’ve disclosed historically, you consider about a third of our membership in full capitated arrangements another third in some form of value-based arrangement, and then the final third in more fee-for-service type arrangements. And just given the strong growth, our goal every year is to a minimum maintain that penetration and ensure that the new members who are enrolling with us get to that penetration level. So given the strong growth this year, you’ll certainly have to evaluate that. But as Bruce said, we saw very strong growth in highly penetrated markets. So hopefully, that may be a bit of a tailwind as respect to those ratios. But generally, you can €“ given the high penetration already, the goal is to maintain that as we continue to grow at or above the market rate.
Lisa Gill: And if you see better penetration, can you just remind us, will that help to improve the initial guidance that you’ve given here around medical cost trend for 2023?
Susan Diamond: I would say, we’ve evaluated the 2023 membership growth and the quality of that. And as we’ve said earlier in the commentary, net-net, you can think of that all in as net positive relative to what we would have previously expected, but immaterial really to our overall estimates for 2023. And certainly, we’ll evaluate the claims trend as we do every year. And if we do see some positivity, we’ll certainly keep you apprised. But I would say from the growth itself, while positive, would not be considered material to our overall estimate.
Lisa Gill: Great. Thank you.
Susan Diamond: Next question.
Operator: Thank you. And our next question will come from Michael Ha of Morgan Stanley. Your line is open.
Michael Ha: Hi, thank you. Just a quick follow-up on Susan’s response to Gary’s question and then the quick one value creation plan. So at least Susan mentioned existing MA members switching to a plan with a higher Part B rebate had a meaningful impact MLR. Just wondering how many approximate members is related to larger impact MLR? And then quickly on the value creation plan. I understand it’s tracking very well. I think on track to exceed $1 billion in savings. So that’s great. And just a couple of questions, like how much in excess of $1 billion are you now targeting to save for 2023? And then now the AEP is over, you think about that $1 billion in relation to strong membership growth, increased planned investments and sales margin? And how does it compare to your original expectation? Are the investments tracking in line with the $1 billion? Thank you.
Susan Diamond: Hi, Mike. Yes. And just to clarify, the enrollment in Part B plans was a broad comment. We saw a strong sort of choice within that product from new members. And I’m sure some of our existing members may have switched to those plans as well. But I would say the majority of the outperformance in that product was more related to new members than switching. But certainly, provides a different alternative in terms of the way the benefits, the guarantee Part B giveback on the premium side, and there is a trade-off for the relative richness of the benefits relative to other plans. So again, just based on, I would say, more of the acuity of the membership that we expect those plans to attract being lower is why I would say that, that would sort of all other things being equal, negatively impact the MLR that you would expect.
The plan to plan change broadly is just recognizing that typically when a member changes plans, it’s usually because they’ve identified a plan that has richer benefits that they will move to. And so year-over-year, their contribution, while positive, will just be less than it was in the previous plans. In terms of the value creation plan, yes, as you said, we did outperform our initial goal of $1 billion. I would say you can think of that as sort of a 10% to 15% outperformance. As we mentioned, though in 2023, we did plan for the intent to reinvest some of those savings into other admin categories and investments, particularly marketing and distribution with the intent of continuing to take progress on shifting some of our external call center market share back to our proprietary channels, which we’ve described historically is requiring some upfront investment, given that we fully fund the marketing for our proprietary channels.
We’ll see lower commissions over time, but relative to the external channel, those costs are a little bit more front-loaded. And so our 2023 plan does continue to contemplate that, increased investment in 2023, so that we can make further progress. Having said that, we will certainly evaluate the stronger-than-expected results that we’ve seen so far in 2023 overall, but also by channel and the team is currently evaluating all of the marketing metrics and developing sort of a point of view of how we will think about our go-forward plan, particularly for 2024 AEP and whether there’s opportunity to optimize what we might have initially expected. So more to come on that, but our claim does contemplate the same level of increased investment that we planned for at the time of our bids last year and the planned use of some of those value creation savings to fund that investment.
Operator: Thank you. And our next question will come from Steven Valiquette of Barclays. Steven, your line is open.
Steven Valiquette: Yep. Great, thanks. Yes. Good morning everybody. Thanks. Yes, we talked about the MLR guidance for 2023 a lot on this call so far. Just one other question around that sort of a clarification. But you mentioned that you expect the provider labor capacity to improve modestly throughout the year. Just wanted to get some quick clarification around that in terms of €“ do you consider that to be a pent-up demand when you’re referring to that? And maybe just the other question would just be at the midpoint of the MLR guidance, are you assuming any sort of pent-up demand related to elective procedures or any other pent-up non-COVID care coming out of 2022 that may have to be absorbed in 2023 at the guidance midpoint. Thanks.
Susan Diamond: Hi Steven, so as we thought about the MLR and specifically the mention of provider labor capacity, I would say that is more a broad belief that over time, we will see improved clinician labor capacity which, as we all know, has been impacted throughout COVID, and we believe still at lower levels than we would have exchanged in the absence of COVID. So our belief is that over time, it won’t be an immediate correction, but over time that we will see clinician labor capacity increase and that when we do additional utilization will also follow. And I think as we’ve commented before, one of the spaces that we continue to see lower than historical utilization is in the observation space within the hospital systems. Today, what we’ve seen throughout COVID is ER utilization in inpatient stays, observation stays, which you can think of as the sort of shorter duration stays are materially lower, which makes sense as the hospitals would certainly look to maximize sort of the revenue within their beds for any given patient.
So we would expect as labor capacity increases. That will be one area where I imagine we will start to see some return to pre-COVID levels as there is sufficient capacity to support those additional patients in the facilities. So I would say it’s not explicitly pent-up demand. And based on all the analysis we’ve done, we don’t believe there’s a large amount of pent-up demand sort of that needs to work its way through the system. Historically, we have seen some evidence of that, but it’s typically after a very large COVID spike where there’s significant depressed non-COVID utilization, which fortunately we haven’t seen for some time, and we are not forecasting that type of event to occur again in 2023. So our guide does not have an explicit assumption around pent-up demand, but rather just taking the resulting sort of baseline trend we experienced in 2022.
Increasing that for normal course trend as well as the expectation of some higher utilization is labor capacity returns. And as I mentioned in the commentary and expectation that flu will also see higher costs than we saw in 2022 as well.
Steven Valiquette: Okay. All right. That’s helpful. Thanks.
Operator: Thank you. Our next question will come from George Hill of Deutsche Bank. Your line is open.
George Hill: Hey, good morning guys, and thanks for taking the question. Susan, I hopped on a couple of minutes late. I was wondering if you could just spend another minute talking about, what drove the increased cost in 340B and the duration after this year. And I guess I would just know €“ I’m sure you guys thought it was a court ruling on Monday that looks like it’s going to give the manufacturers more flexibility with which pharmacies they want to participate with and which drugs they kind of want to provide discounts around. So just kind of would love more color on kind of what happened in 340B and what you guys see going forward?
