We really view the ability to continue to drive the membership growth in the total value of what we offer, and that’s around our brand, our quality and in addition the relationships that we have with value-based providers and feel that that will carry the day for the foreseeable future.
George Hill: Bruce, maybe just a real quick…
Bruce Broussard: Go ahead.
George Hill: Susan, just maybe then the really quick follow up would be just, how do you guys think about enterprise margin? And how should investors think about enterprise margin versus plan level margin?
Susan Diamond: Yes, and so just real quick on your specific question on the 2024, Justin, made the comment earlier about the implied margin in 2024, which you said is directionally correct. So, you can assume that the majority of the EPS improvement we’ve committed to next year is going to be driven by individual MA. And so you can sort of do that math and get a sense for where we’ll end up after 2024. The other things I would say too is, with the targets, that growth targets across the industry, I would argue that in order to achieve those in the size and scale of these books, you’re going to have to expect both progression on the health plan and the services side of the business versus completely bringing down the health plan for the sake of all of the other ancillary benefits.
So, I think that you’ll see progression on both. The other thing I would point out is, as we think about 2025 and the benefit adjustments we’re going to have to make, we are being very intentional around, which markets do have further integration opportunity and where we have CenterWell assets, particularly primary care. And I think you will see us prioritize those markets to ensure that we can drive disproportionate growth in those markets to a greater degree going forward and support that enterprise integration and margin expansion that we’ve been talking about. We don’t intend to set a specific target in terms of enterprise margin, but rather commit to the long-term sort of EPS growth rate and certainly we’ll provide more clarity on that going forward, recognizing we’re approaching 2025, after which we’ll have to give you some updated commentary on what you can expect going forward, which we would expect to do later this year.
George Hill: Thank you.
Operator: Our next question comes from the line of Joshua Raskin with Nephron Research.
Joshua Raskin: Hi, thanks. Good morning. I just want to get back to the 2025 range of $22 to $26 per share, and if you view that as a reasonable baseline for what Humana can earn on the current book of business with your current assets, or are you suggesting that there are additional years of growth in EPS above your long-term target behind that? And then I guess more importantly, if that is the baseline that you guys are working on, has the management team and the board thought more about the benefits of even larger scale, of being part of a larger, more diversified entity, and maybe you could talk about what you think the benefits of that would be?
James Rechtin: Josh, I would say that we don’t look at the baseline for — we don’t look at 2025 to be the baseline. We look at that there needs to be continued more improvement in that as a result of what we believe as a profitable — the appropriate profitability for the organization. And as Susan mentioned, we do want to get back to the earnings growth that the organization deserves as a result of the industry we’re in and in addition, as a result of the total addressable market and the expansion of that. In regards to size and scale, we constantly are asking questions like that strategically. And today, and we feel continuously that our ability to be best-in-class in the industry that we compete in is really where we drive towards.
And I think you’ve seen that in multiple different levels. As mentioned, quality to our relationships with our providers, to just the ability to have an integrated model that serves one population, and we feel that that’s a large advantage. We also feel, especially through our productivity efforts that we’ve had over the last number of years, that our cost structure continues to prove itself out relative to the ability to improve our cost structure through a sustainable model. But I do want to reemphasize the board and the management team constantly has looked at what is in the best interest of the shareholders, and we will continuously do that. And if at some point in time that question becomes a question that we need to take action on, we’ll definitely take it, or if it ever comes and is presented to us.
But we do believe today being a specialty player in the fastest growing part of the industry is the best value for the shareholders.
Operator: Our next question comes from the line of Lance Wilkes with Bernstein.
Lance Wilkes: Yes. Can you talk a little bit about two aspects of the forward looking pricing adjustment? One would be for the pricing assumptions for 2024 and the 200 basis points of increase in MLR. Is that also a 50/50 inpatient driven variance to your prior expectations and half of it not related to that, or is there something different there? And then from the inpatient experience you saw in November, December, can you talk a little bit about for those short stays, are there particular types of members that you’re seeing that disproportionately on, and a little bit of why you weren’t able to identify this a bit earlier? Is this something that wouldn’t naturally have some sort of upfront insights from prior auths or things like that? Thanks.
Susan Diamond: Hi. Yes, sure. So in terms of the MLR increase in 2024, I would say given the recency and the magnitude of the inpatient trends, which were really – more unexpected in the fourth quarter, if you think about the revision to our forward outlook, I would say it’s probably disproportionately inpatient driven, and Lisa and I can certainly follow up and if we will go verify that and then get back to you if there’s anything different. But I would say probably more disproportionately inpatient driven, given it was really the last two months of the year, and then have to carry that forward through the entirety, versus the non-inpatient, which we were seeing upticks over the course of the year anyway. And anyway so that’s my thinking there.
On the November and December, I would say on the inpatient side, again, seeing it more broadly, as we said in the commentary, we are seeing less of that, though, in our Florida HMO market in particular, and we are seeing some differences in the results of our utilization management against this higher trend in different geographies. So that’s something we are certainly looking at to see what we can learn from and if there’s any additional opportunity more broadly, based on the outcomes we’re seeing in the Florida market. In terms of your question of why maybe could we have predicted it, I would say on the inpatient side, as Bruce said earlier, these are really unprecedented levels of trend increase, and I would say the pace at which they changed as well.
We do leverage authorization data on the inpatient side. We are actually using that to actually book reserves. Each month we get authorization data for over 99% of the inpatient events that occur. So it is very accurate in predicting and we do receive it in more real time. The non-inpatient is where we are relying on claims and generally relying on at least a 60 day lag to view those claims as credible. So with the December paid claims, much greater visibility to October and prior dates of service. And based on that, I have to make some estimation for November and December, which again, we’ve assumed those higher trends that we’ve seen will continue for the duration of the fourth quarter. But we do leverage all the information you can get in real time.
