Good morning, everyone. I'm Edmund Kroll, Head of Investor Relations for Centene. Thank you for joining us for our June 2018 Investor Day. Momentarily, we will post slides from today's presentation on our website at centene.com at the Investors section. Those of you who are joining us by webcast today can follow along with the presentations in the room using those slides. Today, we'll have two question and answer sessions. We'll have microphones, as always, available here in the hotel, so those of you with us can ask a question. Just raise your hand. For those of you on the webcast, as we always do, that want to ask a question, you can email me, ekroll, K-R-O-L-L, @centene.com, and I'll get your question into the queue. Now, the obligatory forward-looking statements.
Please note that various remarks we make today regarding future expectations, plans, and prospects constitute forward-looking statements under U.S. securities laws. Actual results may differ materially from those indicated by these statements as a result of various important factors, including those discussed in the slide you see in front of you, which I will not read today, and risk factors noted in our most recently filed reports with the Securities and Exchange Commission. Centene disclaims any obligation to update this forward-looking financial information in the future. Additionally, during this presentation, we will be discussing certain non-GAAP, that is Generally Accepted Accounting Principles, financial measures. A reconciliation of those measures with the most directly comparable GAAP measures can be found in the slides you see in front of you, which are available, of course, on our website at centene.com, for those of you not here with us.
Please mark your calendars for our next Investor Day, which will be held right here at this hotel on December 14th of 2018. Finally, before I turn it over to our CEO and Chairman, Michael Neidorff, you'll find a gift at your place setting, a Centene international adapter and Charger. Hope you enjoy that, and think of us when you're traveling. With that, I will now turn the meeting over to our Chairman and Chief Executive Officer, Michael Neidorff. Michael?
Thank you, Ed. I was worried that he was looking for a bigger speaker part and was going to read the whole thing. I'd also suggest, if you like the gift, thank Cindy, because I charged it to her international budget. We want to welcome you all to this. I would like to start with a short video this morning. We'll pick it up from there.
I lost my job, and I got pregnant. Some friends that offered to help me out with my rent, and ended up not being helpful, and I was just about to lose everything, really. I couldn't really figure out what to do and how. I looked for help through the Nevada Health Centers, and they connected me with SilverSummit Healthplan. I needed to get checkups. I hadn't been to the doctor.
We contacted SilverSummit Healthplan. They helped us to pinpoint at least three providers in our area that we could choose.
Because I had lost my job in Texas, I was about a month and a half without income.
She was struggling with some of the issues with relocating, not knowing anybody in the area. She came through our behavioral health case management team, end up looking for some guidance on how to access services and just how to navigate the healthcare system. She got linked with one of our case managers, and after the case manager got our member a referral for behavioral health services, helped get her medication in order, things of that nature, they created a referral for this wraparound service.
I sat down, and I talked to him. I was like: "Look, I don't know what to do. I'm not from here.
She was having a hard time finding a job. She was having a hard time just kind of getting on her feet.
Initially, he wanted to help me get my resume in order. He helped me get a little bit more information about the transportation, the bus system.
After we created a resume, and we did the proofs and she liked it, we set her up with a job fair, and within two days of the job fair, she was hired. A week after that, she had gotten a job. Within the span of a month, she had kind of gotten a lot of her issues under control, and then she was fully employed, working 35-40 hours a week.
We had an outline of things that she needed to have help with, and each of those things, she asked SilverSummit Healthplan, and they provided those things for her.
I think overall, that's the general approach is to treat the person as a whole and not just the disease. We're looking at a person based on what's going on with them. Is it their housing that's an issue? Is it that they don't have clothes on the back? Is it the fact that they have some legal issues, and we got to work with the legal center? We don't just treat just the single disease. We treat the person as a whole, and that's a great part about it.
With SilverSummit Healthplan, I feel comfortable reaching out for resources if I need them.
Now that she's stable again, she's looking to go back to school. She started her online classes. She's really excited for all the things she's got in her future. We were able to do a whole bunch. It was nice to be able to help somebody and go the extra mile.
I didn't have a job or anything. I didn't know anybody. SilverSummit Healthplan was there to help me. I was able to get three job offers that I was able to accept. SilverSummit Healthplan is there to help no matter what.
Down this one light a little bit, please, so you see people. That's getting better. Thank you. I'll start this morning by saying Centene is in a very good place. Through a combination of organic growth and strategic acquisitions and investments, Centene has become a transformative leader in the government-sponsored healthcare sector. We are no longer just a Medicaid company, but an industry-leading, $60 billion multinational healthcare enterprise. We have maintained an industry-leading growth rate and still are very much a growth company, demonstrating our leadership within the industry. Our success continues to be driven by strong balance sheet results in each of our business segments and reflects the strength of our foundational diversification strategy. Just last month, we were ranked number 61 on the Fortune 500 list of America's largest companies by revenue, advancing our position by five spots over last year.
We were also ranked number one on Fortune's list of the fastest-growing companies based on growth in revenues over a 10-year period, and number four over a five-year period. As a matter of fact, our five-year compounded annual growth rate, using the midpoint of our 2018 guidance range, is 41% for total revenues and 36% for adjusted diluted earnings per share. The growth in our revenues and earnings has rewarded our shareholders with a five-year compounded return on our stock price of 38% as of June 12, 2018. Clearly, we continue to deliver value to our shareholders, and this has been recognized outside the sector as well, as we were also ranked number 18 on Fortune's list of best investments based on total shareholder return over a five-year period. Centene's success continues into 2018, with reported strong first quarter top and bottom-line growth.
On a year-over-year basis, revenues grew approximately 13%. The HBR improved 330 basis points, and adjusted diluted earnings per share increased 94%. Our enterprise is bringing approximately 300 solutions to 31 states, covering 12.8 million U.S. members and approximately 650,000 individuals in two international markets. We are proud also to be ranked number 19 on Fortune's Change the World list, joining companies recognized for innovative strategies that positively impact the world. Centene is the largest Medicaid managed care organization in the country. We continue to win Medicaid RFPs in new and existing states, as evidenced by our recent wins in Iowa, New Mexico, Arizona, Washington, and all 11 regions in Florida. Our five-year overall win rate in Medicaid RFPs is industry-leading at over 80%. The acquisition of Fidelis Care will put us in a leadership position in New York, the second-largest Medicaid program in the country.
Along with Texas, Florida, and California, this will position us as the leader in the country's four largest Medicaid states. Fidelis will also expand our reach into both Medicare Advantage and exchanges. I will share more on Fidelis in a few moments. Centene is the largest provider of managed long-term support services. Ambetter is a national leader in the Health Insurance Marketplace. This business continues to perform well, achieving its targeted margins. We successfully navigated a difficult enrollment environment, gaining market share and exceeding our growth targets. We ask Kevin Counihan to provide further updates later in the program. In January, we will begin offering Medicare Advantage and D-SNPs plans in 8 states, Centene Medicaid states specifically. These plans were launched under the Allwell brand and are still eligible for a premium bonus under the 4-star parent rating in 2018.
Going into the next decade, we expect this business to be a significant driver of our annual growth rate, therefore remain focused on building a successful Medicare business. Over the last 12 months, Centene's market cap has grown from $13 billion to just under $26 billion. Our evolution into an enterprise of this scale enhances our ability to maintain positive operating performance despite transitory issues that can occur in any business. Our scale improves our purchasing power. It permits investment in systems and increases earnings power and helps us to expand and protect margins. Be clear, ours is not a story of scale for scale's sake. Our growth has been made with deliberate intent and strategic execution.
We continue to add expertise and systems capability across the enterprise to better combine our assets, excuse me, improve quality and outcomes, and drive to our purpose of transforming the health of the community one person at a time. We speak often of our diversification strategy and have shared with you our portfolio approach. As standalone businesses, products, and service lines, these are performing well and continue to be a central part of our growth engine, as you will hear throughout the morning. I also point out that within that portfolio are 17 subsidiary companies that have over $1 billion in estimated 2018 annual revenue. Our portfolio is, and always has been, consumer-centric and built to support our local delivery model. From day one, we have been in our community side by side with the populations we serve, the providers who serve them, and the states who contract with us.
This local approach is a differentiating factor for Centene. We understand that not only the healthcare needs, but the psychosocial needs of the most vulnerable in our communities. Because of this, we are able to create and provide programs, often collaborating with others, to empower our members to get and stay healthy. Addressing social determinants of health is an inherent part of our business and has been a key factor in the ongoing success of Centene. Understanding our communities and applying our portfolio view has always enabled us to identify gaps and trends across the continuum of care and create pathways for whole health integration. For example, having access to a relationship with a provider is essential to our membership. Also, understanding that providers need to best manage a patient's health drives better collaboration and outcomes.
As such, we are making targeted investments to strengthen our providers' assets and services that are specific to our membership. One investment is MHM Services, a national provider of healthcare and staffing services to correctional systems and other government agencies. MHM serves over 250,000 patients in more than 300 correctional, juvenile, and other facilities across the country. This acquisition adds six new states and expands our existing seven-state correctional footprint to a total of 13. We plan to leverage this larger platform to pursue additional opportunities in both new and existing states. The second addition is our acquisition of Community Medical Group, a leading at-risk primary care provider in Florida. CMG is a nice strategic fit, as the company focuses on serving individuals enrolled in government-sponsored healthcare programs. The company covers approximately 70,000 Medicaid, Medicare Advantage, and Marketplace recipients and has a unique clinical care model.
In addition to primary care, it provides access to specialty care, transportation, and a suite of social and other support services. As you have heard me say before, the integrating thread accelerating growth and innovation throughout Centene enterprise is our tech and analytical capabilities. Mark Brooks, our CIO, will highlight this morning our three-pillar interoperability approach to technology. You will see we are strategically leveraging Centene's IT capabilities in partnership with our own technology assets such as Casenet, Interpreta, and now RxAdvance, to build cutting-edge next generation programs. Our recent equity investment in RxAdvance, a full-service PBM, it was made to complement Centene's internal PBM. RxAdvance's transitory and transparency disruptive technology PBM Cloud platform will enable us to drive change across the care continuum. In addition, we expect to realize savings by significantly reducing both administrative and drug-impacted medical costs.
I've asked John Sculley, Chairman and Chief Marketing Officer, and Ravi Ika, President and CEO of RxAdvance, to share more with you during our second panel. For both the short and longer term, our analytical capabilities and the resulting provider and clinical programs are ensuring we have the platforms and systems necessary to capture the best geometrics, excuse me, biologics, and other advances coming from medical science. Via Interpreta, the integrated nature and real-time speed at which our systems can interpret large volumes of data from multiple sources supports the rapid innovation and implementation of programs specifically designed to address immediate, high-cost health issues. Dr. Ahmed Ghouri, President and CEO of Interpreta, will speak to this later in the program. I'll highlight here one example of a program developed by leveraging big data, advanced analytics, and machine learning.
Through our methodology, a machine-built algorithm can predict which members are either at high risk to become addicted or those early in their dependency on opioids. With this information, we are able to target members to the most effective use of our various processes and our integrated care management process. I've asked Ken Yamaguchi, our Chief Medical Officer, to speak more on OpiEnd program later this morning. I'd also like to point out that we continue to see international opportunities and interest due not only to our public sector and population health expertise, but also our tech and analytical capabilities. You will hear more about international from Cindy Brinkley during our first panel. Centene continues to have a solid track record of partnering with states to provide budget predictability and measurable return on investment, and we're looking forward to bringing this to the State of New York.
In May, through an equity and debt offering, we raised $4.7 billion to finance the acquisition of Fidelis Care, pay down our revolving credit facility, and for general corporate purposes. This stock offering was the second-largest follow-on in history. With yesterday's approval from the Attorney General, State of N.Y., the path has been cleared for a July 1st close, and we are ready. Not surprisingly, Fidelis continues to demonstrate a strong operating performance, and we have been working closely during the approval process to ensure that we are able to hit the ground running upon the close of the deal. I'm extremely pleased with how the integration process is going. We are actually aware that Centene's entrepreneurial, innovative, and agile culture is a key competitive advantage.
As we have transformed into an industry-leading enterprise, we are undergoing efforts to ensure we preserve that entrepreneurial culture, capturing the best of our expanding capabilities and talent, streamlining for efficiencies with a view to protect quality and outcomes, and lastly, position ourselves for further growth, diversification, and increased profitability. We recently announced leadership rotation that added additional capabilities and better capitalizes on Centene's management depth and culture of excellence. This announcement is consistent with our previously shared policy of rotating executives and included members of the Office of the President, which I announced in December. This office includes Cindy Brinkley, Jeff Schwanecke, Jesse Hunter, Brent Layton, and now Brandy Burkhalter. I'd like to provide additional clarity regarding the position of President. We originally planned to rotate through this position. However, we found this approach does not allow for the full strategic collaboration of the role.
Because of this, we have made the position of President non-rotational, and it will remain vacant until filled in a permanent capacity. In closing, we have a lot to cover with you today. Centene continues to be a growth company with long-term expectations of double-digit growth in the top and bottom line. We have clear sight into our growth drivers, and M&A will continue to play an important part of our growth story. We have proven our ability to acquire and effectively integrate acquisitions of all sizes. We remain well-positioned to continue to capture larger shares of the almost $1.9 trillion addressable healthcare market, whether by organic growth or acquisition. Our targeted pipeline remains robust and the runway long.
As managed care penetration across the government-sponsored healthcare sector remains below 50%, we are positioning Centene for the future by continuing to invest in systems, people, and capabilities to ensure we can sustain our ability to provide the highest quality healthcare at the lowest cost. I thank you for your attention, and I will now turn the podium over to our CFO, Jeff Schwanecke.
Thank you, Michael, and good morning. We had a successful year in 2017 and carried that momentum into 2018. Total revenues for 2017 were $48.4 billion, representing growth of over 19%, and as Michael mentioned, we are now the 61st largest company by revenue in the U.S. as ranked by Fortune. Our adjusted diluted earnings per share grew 14% over 2016 to $5.03 per diluted share. Additionally, we saw improvement in our HBR primarily as a result of the changing membership mix, which we will discuss in a minute. Now on to 2018. We had a strong first quarter of 2018, adding approximately 700,000 members between years, primarily driven by growth in our health insurance marketplace business and product and market expansions in 2017 and 2018.
Revenues grew by 13% to $13.2 billion for the first quarter 2018, and our adjusted diluted EPS was $2.17, representing a 94% increase from the prior year. We are focused on improving margins through process efficiencies and lower medical costs and have improved our net income margins significantly since 2013. Our adjusted net income margins have increased almost 100 basis points since 2013 at a time period where our revenues increased from $11 billion to $60 billion. Going forward, we expect to continue to leverage our scale to drive further margin improvement. The execution of our growth and margin improvement strategy has led to a five-year compounded growth rate of over 36% for adjusted diluted earnings per share when including the midpoint of our 2018 guidance range of $6.75-$7.15. Not only do we have an industry-leading revenue growth rate, but our shareholder returns have also been strong.
We have outperformed our peer group and the S&P 500 Index over the last five years. Our five-year compounded annual growth rate on our stock price has been 38%. This has been driven by growth in revenue and earnings. To put some historical perspective on the revenue growth we have achieved, this slide shows the revenue growth over the last 10 years. In 2008, we operated in eight states and had almost $3.4 billion in total revenue. Today, our run rate by the end of this year will exceed $60 billion. This growth has been achieved in numerous ways, including M&A, new states, product expansions in existing states, and growth in coverage categories such as the exchange and correctional healthcare.
More recently, the growth in the last several years has been in two primary products, traditional Medicaid through product and market expansions, particularly in complex care membership, and growth in the commercial membership through the acquisition of Health Net and the strong performance in our marketplace offering, Ambetter. The growth has continued to diversify the business since 2015. At the end of the first quarter 2018, we served over 2 million commercial members in 16 states. We served over 1.6 million marketplace members at the end of the first quarter 2018. This growth was partially offset by the performance initiatives we executed on the Health Net large and small group business in 2016 and 2017. The result is a more diversified healthcare enterprise.
In 2015, our non-Medicaid products represented approximately 17% of our total revenues. In 2018, our non-Medicaid products represent approximately 34% of total revenues, an increase of over 1,700 basis points. As a result of our revenue diversification, our HBR and SG&A ratios have changed over time as well. Due to the higher mix of commercial and Medicare business, our HBR has decreased while our SG&A ratio has increased. This is due to the higher SG&A and lower HBR ratios typical of commercial and Medicare products. We continue to expect the largest drivers of our HBR and SG&A ratio will be the change in business mix going forward. However, what is also important is that while the HBR and SG&A ratios have changed, we have improved our adjusted net earnings margins over that same time period.
As I mentioned earlier, our adjusted net income margins have improved almost 100 basis points since 2013. Now for the balance sheet. We have always been balance sheet managers and have reduced our debt to capital ratio post the Health Net acquisition ahead of schedule. On a pro forma basis, our debt to capital ratio post the Fidelis financing transaction is 37.5%. This represents an over 500 basis point reduction since the Health Net transaction a little over two years ago. We expect to maintain the debt to capital ratio in the mid to upper 30% range on a long-term basis. In order to provide more detail, this slide highlights selected financial information at December 31st, 2017, March 31st, 2018, and the pro forma balance sheet reflecting the effect of the Fidelis financing.
As of March 31st, we had total assets over $25 billion, including cash and investments of almost $12 billion. Our debt-to-capital ratio was 40.3% at the end of the first quarter 2018. Additionally, as mentioned earlier, on a pro forma basis, taking into account the Fidelis financing transactions, our debt-to-capital ratio decreases to 37.5%. Note that the pro forma information is as of March 31st for the financing transaction and not the acquisition of Fidelis. This improved leverage profile has been recognized in a small way by both rating agencies, with Moody's upgrading our debt rating to Ba1 and S&P changing our outlook to positive. While we were pleased with the improvement in our ratings, we are not done. We will continue to manage the business to achieve an investment-grade rating in the near term. A quick update on debt.
We have over $6.4 billion of debt outstanding at a weighted average interest rate of 5.28%. As a reminder, as part of our balance sheet management strategy, we have swapped $2.7 billion of our fixed rate debt to a floating rate of interest at the one or three month LIBOR. This was done to match our asset and liability exposures to short term interest rates. As illustrated here, $5.7 billion of our investment portfolio at the end of the first quarter 2018 was invested in short term investments highly correlated to a LIBOR rate. Given our higher mix of short term investments versus our floating rate debt, we continue to benefit when interest rates rise. As this slide illustrates, if short term interest rates were to increase by an additional 100 basis points, it would benefit our pre-tax income by $30 million.
This is just the short-term cash and investments and does not reflect the increasing yields we would receive as interest rates reset on our long-term portfolio. We would expect to benefit over time as our long-term portfolio matures and is reinvested. The growth in revenue and increase in net earnings margins continues to drive adjusted EBITDA growth. For the full year 2018, we expect our adjusted EBITDA to be in the $2.3 billion-$2.5 billion range. Additionally, adjusted EBITDA represents approximately 4% of total revenue at the midpoint in 2018. Operating cash flow is expected to be in the range of 1.5-2 times net earnings on a long-term basis. As always, the timing of rebate and premium payments from our states any given quarter and year can impact our operating cash flow.
In May, the state of California began the process of collecting the payables for the rate overpayments and minimum MLR associated with the Medicaid expansion business. This payable in total is in excess of $1 billion and was accrued on the balance sheet. As a result, we expect our operating cash flow to be negatively impacted by the payment of the rebate over the remainder of this year. Note that this is regulated capital and has no effect on our total debt or earnings. Next, I would like to highlight the reporting change that Michael mentioned on our year-end earnings call. We are enhancing how we report revenues going forward. We will begin disclosing total revenue by Medicaid, commercial, and Medicare and MMP. These categories represent 94% of total revenues for the company. We have shown the first quarter 2018 as an example here.
With the increasing scale of the enterprise, we will discontinue the membership reporting by state. Next, I would like to highlight two potential retroactive changes in the California Medicaid expansion business. Last week, the state of California notified all of the health plans participating in the Medicaid expansion business that CMS did not approve the premium rates for the period from July 1, 2016 through June 30, 2017. It is the requirement of CMS that the rate period include a risk corridor similar to the risk corridor that was effective for periods prior to June 2016, which contained an 85% MLR minimum and a 95% MLR maximum. It is still early and the state is determining what actions to take with respect to the rates. The potential effect of a minimum MLR if it were to apply through 2018 would be a reduction to revenue and pre-tax earnings.
The state continues to refine the minimum MLR calculation for periods prior to June 30, 2016. The most recent revision reduces our liability under the program, resulting in an increase to revenue and pre-tax earnings. If you recall, this is the same calculation we recorded $195 million of pre-tax earnings in the fourth quarter of 2016. In the spirit of full transparency, we have provided the potential effect of both of these items on 2018 and prior periods. As illustrated here, the total effect of both items would reduce revenue and pre-tax earnings between $10 million and $40 million. Note that all the effect relates to periods prior to 2018. This is the result of rate decreases in each year since the minimum MLR ended. As a result, we don't expect the minimum MLR to have any effect on 2018 or future periods.
Any adjustment for prior periods would be recorded in 2018. This is early in the process and we are providing as much as we know. We will keep you updated as things progress. We are updating our annual guidance today excluding these two items as they have not been finalized. Lastly, we have revised our guidance for two items. First, to increase our total revenue guidance range to $59.2 billion-$60 billion to reflect additional pass-through payments we received in May. Second, to increase the shares outstanding to 198.7 million-199.7 million as a result of the upsized equity offering completed in May. We continue to expect adjusted diluted earnings per share of $6.75-$7.15.
This includes the Fidelis acquisition, which we expect to close on July 1st, 2018, and does not include any potential adjustments associated with the California Medicaid expansion items that I previously discussed. Thank you. Now I will turn it to Chris Bowers, who will provide an update on our markets.
Thank you, Jeff, and good morning. 2018 is on course for another year of membership growth, expansion into new states, and successful retention of our current health plan business. This morning, I'll update you on our experience so far this year. I'll also review two health plan case studies on membership and growth and quality improvement, and I'll finish with examples of how we leverage our analytical and physician assets to derive health plan improvement and quality. I want to start by highlighting Centene's leadership position across the country. Eight of Centene's health plans are rated number one in their states from a revenue standpoint. Once Fidelis closes, Centene will be the market leader in the four largest Medicaid states of California, Texas, Florida, and New York. I'll review this year's health plan growth through expansion.
Arizona Complete Health successfully re-procured its Medicaid business and was selected in the maximum allowable two out of three regions. This procurement integrated behavioral health and physical health into a single product. We estimate the membership at 170,000-220,000. While the state consolidated physical and behavioral health, we did retain some behavioral health members only. That membership will be reduced to an estimated 30,000. Our revenue will remain at current levels, and the program is scheduled to go live on October 1st, 2018. Sunshine Health, our Florida subsidiary, was recently selected to provide MMA and long-term care services in all 11 regions in the state. Previously, those two products were awarded and managed separately, we serve nine MMA regions and 10 long-term care regions. We will serve all populations across the state.
In addition, Sunshine Health will remain Florida's sole foster care specialty plan in all 11 regions. With some protests still ongoing, our early membership projections show an incremental 100,000 to 120,000 additional members and a total membership in a range of 600,000 to 700,000. The new contract is scheduled to be implemented next January. Centene will be entering two new states next year. First, New Mexico. Western Sky Community Care won a statewide contract effective January 2019. The program includes TANF, SSI, long-term care services and supports, and integrated behavioral health services. We estimate our membership between 100,000 and 150,000 out of approximately 700,000 eligibles in the state. Our new contract in Iowa is also starting next year. Iowa Total Care was tentatively awarded a statewide contract to provide services to all Medicaid populations beginning on July 1, 2019. Our current first-year membership projections are between 180,000 and 200,000 members.
Lastly, Coordinated Care of Washington was awarded five regional service areas to provide integrated physical and behavioral health and will continue to serve as the sole source statewide foster care provider. The implementation of the new program will be phased in by region over the next two years. Once fully implemented, we estimate our membership will be between 180,000 and 200,000, with a slight reduction from current levels. As you can tell, Centene continues to win procurements in our existing markets and in new markets. Once we are established in a market, we tend to see significant growth, and I have two health plan case studies to illustrate how this growth occurs. The first is the growth story of IlliniCare, our Illinois-based health plan. We have seen remarkable growth since we entered the market in 2011. In eight years, our membership has increased from 16,000 to over 400,000.
This expanding scale is a testament to the discipline and success of our all products in all markets strategy. Over the course of the eight-year period, we have worked in partnership with the State of Illinois to expand managed care to all Medicaid populations and to launch the dual demonstration program and the Marketplace product. Quality is also a driver of our growth. Delivering the best possible outcomes for our members is a top priority at Centene, as reflected in our comprehensive quality management program across the enterprise. Buckeye Health Plan has been particularly successful with their quality initiatives. We believe that every person in the organization plays a role in delivering high-quality care to our members. To that end, in Ohio, we have seen significant improvement in six key quality measures monitored by the state.
Buckeye is currently the top-ranked plan for state quality assignment, which means that we are assigned additional membership through the auto-assignment algorithm. Buckeye is also number one in the state at-risk payment ranking. These at-risk payments are tied to performance and selected HEDIS measures and other state quality-based measures. Over the past three years, the plan has seen these payments increase by $19.4 million or 400%. Lastly, Centene is leveraging our analytic and physician assets to drive quality and risk adjustment improvement in the health plans. These capabilities have the ability to differentiate us in the Marketplace. Sunshine was the first health plan to integrate with Interpreta, our data analytics company, to provide continuous real-time prioritization of clinical gaps to clinicians and providers. Every day, Interpreta refreshes the quality data on Sunshine's million members in order to provide current gap information to health plan employees and to providers.
Sunshine's concierge team saw a 16.25% improvement in the gap closure rate when members are engaged using the data coming from Interpreta. This project will have a meaningful impact on our quality scores, and we are currently in the process of rolling out Interpreta in eight additional states this year. Dr. Ahmed Ghouri will go into further depth on Interpreta's capabilities later in the program. The second example of driving value into the health plans is the integration of USMM. USMM has helped Sunshine Health in several ways. First, VPA providers serve as primary care providers to Sunshine's members who are typically homebound and who have four or more chronic conditions. These visits improve the health of these members and result in significant savings each year. The routine primary care visits result in a decrease in emergency room visits and inpatient stays.
Quality scores for these patients are typically high. USMM has also helped Sunshine with quality scores for the broader membership by launching products like Lab2U, where members can mail in kits to test their A1c and microalbumin. Finally, USMM now provides gap closure visits to members across the state. These visits help ensure that Sunshine's members have appropriate risk adjustment scores. The number of visits has steadily increased since that product was launched in 2016. Sunshine and Buckeye are just two examples of how we are improving outcomes for our members, saving monies for the states, and growing our business. No two markets are alike, but our diverse array of tools and approaches position us well for ongoing success. Now I'd like to turn it over to Kevin Counihan.
Thank you, Chris. Good morning, everybody. As Michael, Jeff, and Chris have mentioned, we're off to a very strong start in 2018 and very pleased with our results. We're also very pleased with the performance of our products and what they're doing in terms of crafting that support and performance. Many of these products you may be familiar with already. For example, Ambetter, of course, is our Marketplace product. Allwell is our Medicare Advantage product. Envolve is our suite of specialty products and services such as pharmacy, behavioral health, dental, and vision, and other kinds of services. Federal Services represents a core group of products we administer for the DoD and its TRICARE program, as well as for the VA and its Choice Program. Centurion is our suite of managed care products for the correctional services industry.
The purpose of my presentation this morning is to summarize the performance of two of those products, the Marketplace and Medicare, Ambetter and Allwell, as well as to provide a profile of Centurion. Let me begin first with our performance in the Marketplace. As Michael mentioned, we had an outstanding start in open enrollment in 2018 in the Marketplace. We enrolled over 1.6 million members, which represents a 35% growth over last year. That does not include 100,000 members that we'll be receiving as part of the Fidelis acquisition. Our total enrollment, obviously, in Ambetter is going to be 1.7 million. In addition to that, we're very pleased that we had 80% retention and a 90% effectuation rate. The effectuation rate is a key metric because that's a leading indicator with respect to future retention. Very pleased with how that performance is going.
We expanded into 4 new states in 2018. They were Kansas, Missouri, Nevada, and New York with the Fidelis acquisition, and we have plans to expand into other states in 2019, including both new states such as North Carolina and expansion into new markets in existing states. We now are present in over 50% of Centene markets, and as I said, with additional expansion plans for 2019. Please note that we were the lowest cost silver plan in 85% of the counties we serve. Our key demographics are very similar, irrespective of whether we're offered on a total replacement basis or on a slice basis. For example, our average age remains consistent at 43, and the relationship of females to males in our enrollment is also consistent at 55% and 45%, respectively. Again, this is consistent irrespective of whether we're offering on a total replacement or slice basis.
We did experience some slight increase in bronze enrollment and a slight decrease in silver enrollment, which we largely credit, as I think other industry experts do to the lack of funding of the CSRs and the corresponding increase in tax subsidies. Last February, I think as many of you know, President Trump signed several executive orders, and one of them was for the creation of short-term limited duration plans. These plans, as you know, represent a trade-off between lower premium and significantly reduced benefits. As you can see from this slide, there is tremendous value for our target market of individuals at or below 250% of the FPL in our marketplace products. That is in such things as comprehensive benefits, plan maximum, out-of-pocket costs, guarantee issue, community rating, and a lack of preexisting condition qualifications.
Our broad sense is that the creation of these and the introduction of the STLD products do not represent a material impact on our target enrollment. There is a provision, of course, in the introduction of this, and the fact that the DOJ is not supporting the statute, which we can talk about later, which does have some broader implications. For example, over 130 million Americans have a preexisting condition, which represents roughly 40% of the country. At the most recent NBC News/Wall Street Journal poll, which came out about a week or so ago, it showed that 63% of registered Republicans and 75% of registered Democrats supported the elimination of preexisting condition clauses. National polling is done, that percentage is even higher.
I think as you may recall, the elimination of preexisting conditions was always the most popular part of the ACA in national polling. This again has some broader implication that we'll see how things work through. As a result of these results, we believe that we're extremely well-positioned moving forward in our marketplace product for both future growth and profitability for many reasons. First is that we retain our focus on the uninsured and underinsured. The second is that we have products that are focused on consumers that promote consumer engagement. Thirdly is that we facilitate culturally sensitive delivery of care. Fourthly is that we have benefit designs and innovative networks which meet the needs of our markets. Fifthly, we are priced appropriately with the appropriate discipline. Let's talk about Medicare.
At present, we are projecting roughly 420,000 enrollees at the end of 2018, which includes enrollment from the Fidelis relationship. We've expanded into nine new markets in 2018, including New York as part of Fidelis, and our projected revenue this year is at $5 billion. We continue to offer a broad range of products, and we have a core group of D-SNP individuals that we believe can serve as a catalyst for future enrollment. Our projected 2018 membership is on track at 90,000, and the percentage enrollment by product remains essentially the same, with a higher percentage of D-SNP eligibles. Our Medicare strategy is in three parts. The first is to focus on existing markets with the best opportunity for growth. The second is continued attention to individuals below 400% of the FPL, with particular opportunity in that D-SNP category that I mentioned before.
The third is to continue to create benefit plans and have networks that meet the needs of that targeted population. Now, as many of you know, we've had STARS policy issues with CMS, and these have largely been corrected in the most current call letter. However, we've also had STARS performance issues of our own, and this is our responsibility to correct. We've corrected many of them, and we're in the process of correcting more. Our crosswalk application for 2019 has been deferred by CMS. While this decision will have de minimis impact on 2019, we are focused more broadly on correcting the systemic issues that impact the STARS ranking in the first place.
Now, as you guys all know, the timing of STARS and the sequencing of HEDIS and CAHPS results have a sequencing effect that ripple down through a year or two before they take effect. These actions that we've taken are going to take a couple of years to get resolved. However, Centene remains highly committed to Medicare Advantage, as Michael said, and its role in our future. Now, in February, we also announced the acquisition of MHM, as Michael said, and for which six new states were added for a total of 13. We now are in 13 states, and this has enhanced our relationship that we have already with our existing states. MHM has multiple products such as medical, dental, and behavioral health to correctional facilities, courts, state hospitals, juvenile facilities, and community clinics to more than 250,000 patients.
Our Centurion product now has approximately 400,000 patients, and we are confident in its role in our portfolio to fuel our growth. In summary, we feel that our core products are priced appropriately, are performing to plan, and are positioned to maintain our growth. Now I would like to introduce Brandy Burkhalter, our Executive Vice President of Operations. Brandy?
Good morning, thanks, Kevin. Over the past 5 years, we have seen significant growth in our operational transactions. As this slide shows, I am highlighting a few of these significant activity increases in our service centers with the number of calls we receive, the number of network providers we interact, and the volume of medical claims we are processing. Earlier this year, with the increased volume, increased membership, migrations from our recent acquisitions, and our desire to continue to grow, we knew it was time to enhance our processes and systems. As Michael had mentioned in his opening remarks, we are focusing on transformation through re-engineering of processes, building additional capabilities and capacity, all in an effort to improve our service and identify efficiencies to support our existing business and position us for further growth.
I wanted to share a few of these enhancements that are already in flight as we design and invest in next-generation capabilities that Mark will share with you later in the program. First, with robotics. We are implementing numerous robotic initiatives in our service centers to increase productivity and improve the member, consumer, and provider experience with our organization. For example, we will be utilizing robotics in our claims adjudication and also with our member and provider call centers. As it relates to provider data, we are using data analytics in conjunction with some of our partners and then backing that data up with an audit process to ensure we not only receive, but also consume, and then provide the most accurate provider data in the form of directories. We are working to further re-engineer our processes with both provider data and claims processing to drive additional efficiencies.
Finally, we have added incremental bilingual staff to eliminate some of the reliance on translation services, and we are utilizing multiple shifts to expand the processing at current service centers to slow the rate required to create new ones. We are excited to make these investments and others to better service our existing business and to take on new opportunities in the future. Now, I would like to introduce Cindy Brinkley.
Thank you, Brandy, good morning, everyone, and I hope you enjoy the Chargers as well. As the national leader of government-sponsored health solutions in the U.S., we have unique insights on transforming the health of the community one person at a time. Recently, our diversification strategy has been extended to investments outside the United States, where we have identified unique opportunities for us to apply our core competencies, such as public sector expertise, IT systems and technologies, and population health management capabilities. The logic for exploring international opportunities begins with the fact that the same health challenges that we see here in this country are also being experienced by individuals globally. For example, care around the world is increasingly complex as a third of the adults now live with more than one chronic condition. At the same time, societies are rapidly aging.
By 2040, 30% of the world's population will be 65 or older, compared with just 8.5% today. These trends are contributing to significant investments in the rebuild and the modernization of outdated medical infrastructure. For example, spending on new hospital facilities in India is expected to reach $200 billion by 2024, while China is going to add about 89,000 new hospital beds by 2020. Healthcare systems still remain highly fragmented and inefficient, with the World Economic Forum recently reaffirming that 30% of healthcare spending is wasted on unnecessary treatments. These factors are leading to unsustainable increases in the cost of healthcare and, as a result, heightening interest on the part of global policymakers in value-based, integrated models of care. This is where we see Centene fitting into the picture.
We're bringing to bear Centene's unique government experience in combination with our managed care expertise, our data analytics capabilities, and our local approach to markets to position our company as a strategic partner to governments in addressing the healthcare challenges that they face today. Now, our initial focus has been Europe, and there we've got Centene UK and our Ribera Salud affiliate advising local governments on care management and integrated healthcare, on working on coordinating care for services so that they are provided in the right clinical settings, and offering EMR solutions with predictive modeling and care management capabilities, and providing primary, acute, and specialty care services, as well as lab and imaging diagnostics, and managing healthcare services for regional governments on a full-risk, capitated basis. Let me give you a little bit more detail around what our efforts are. First, integrated healthcare.
Now, in the U.K., the current care model is fragmented. It's got limited integration between different categories of care. We're pursuing opportunities to leverage our U.S. expertise to provide advisory services on the design and the development of integrated care systems. In so doing, our objectives are really to align the interests of the regulators and the providers around the needs of the local citizens, to blend general practitioners, the community-based services, and hospital capabilities into a single risk-bearing entity which manages the entire continuum of care. Initiate a sustainable system transformation centered on the principle of value-based care. Second, coordinating care. Now in Spain, our Ribera Salud affiliate has developed a complex care plan integrating medical care and social services for elderly patients who suffer from more than two chronic diseases.
This is resulting in better health outcomes at lower cost by improving care for those who need specialized attention by integrating different lines of services, by improving support at the primary care centers with the shorter wait times and extended hours, and reducing emergency room utilization, as well as lowering hospital admissions and readmissions. Next, predictive modeling and care management. Now, Ribera Salud has implemented TruCare, and that's a tool developed by our Casenet subsidiary to create personalized care plans for its members and improve overall care coordination. This technology has been re-engineered to pull data from Ribera Salud's EMR system and automatically share care treatment plans with patients and clinical professionals, leading to meaningful reductions in in-person consultations.
In addition, the enhanced EMR system improves the coordination of care by multidisciplinary care teams, which has the very practical benefits of decreasing the time prior to intervention, improving member engagement, obviously leading to better outcomes, and increasing efficiency and reducing overall costs. Now, primary acute and specialty care services. Ribera Salud operates 83 primary care centers and three university hospitals covering 450,000 citizens in Valencia, Spain. In addition, Ribera is the leading lab provider in Madrid, serving 1.2 million citizens, and it's also a provider of radiology and nuclear medicine services in Slovakia. Its specialists are utilizing integrated healthcare processes and algorithms to aid in diagnostic and therapeutic decisions, thereby leading to early diagnosis for their patients. Finally, managing capitated healthcare services on a full-risk basis.
Now, as part of its public-private partnership arrangements, Ribera Salud receives a fixed capitation payment per person per year to cover all primary and hospital care services in a given geographic region. Governments, who own these treatment facilities, rely on Ribera to manage delivery of services, recruit and employ physicians, and maintain the property within the network. Integrated care models in Spain are truly about right care, right time, and our investment has resulted in reducing healthcare costs by 20%-30% versus the other operating models, and this is by the government's own analysis. These are the results that are driving the increased requests Ribera Salud is receiving from governments all over the world that are looking for proven models of improved outcomes at lower cost. In summary, we continue leveraging our unique government experience and expertise to position Centene as a trusted strategic partner around the world.
We view these early investments as a platform to launch into other markets around the world. With that, I'll turn it over to Michael for Q&A.
Thank you, everyone. I think you can see why I'm proud of the team. This is first class at every level. Open it up to any questions. Josh? Do you have a microphone?
Sorry, we're coming.
I have two questions. The first one, maybe starting, Kevin, with the individual market and some of the proposed changes. It sounded as though there was limited impact from your perspective, but just thinking longer term, if preexisting conditions is eliminated, and there's an ability to underwrite, do you think that attracts competition? Do you think other larger, maybe even national plans would start thinking more seriously about the exchanges?
Go ahead.
Is my mic on already? Do I have to turn this on? Okay. All right. I want to make sure that I'm responsive to the question, so if I didn't get it all, please just repeat it. First, with respect to the short-term limited duration plans, they're going to serve a niche market. The real issue for us is does it impact our market? The answer to that's going to be no. The reason for that is because those products are designed in a way that they don't provide the value that our product's designed. The other thing I would tell you, and I can base this on my CMS experience, is that consumers have become far more sophisticated about how to buy coverage. I'll just give you an example of this.
five years ago, during the first Open Enrollment period, there was a lot of time that needed to be spent to educate people on deductibles, co-insurance, networks, all those types of things. The second year, this is Open Enrollment 2, that type of question was not asked so much. People started asking the questions about, "How do I find a good doctor? What kind of online tools can you get me?" Between that, the prevalence of social media, people can understand how to buy. Consumers are far more savvy than they were 10 years ago. They're far more savvy than they were 5 years ago. If you look at our market which is 250 and below the FPL, we provide significantly more value. It's just not a good value prop to get into that.
Now, with respect to the pre-X issue you're raising, that's a really interesting question. As I said before, I think it's unclear how things are going to play out there. If the DOJ takes the position or the administration takes the position that they de facto support the reintroduction of pre-existing conditions, it feels both from a policy and political perspective to be a bit of a risky proposition.
I think also remember, 250% below, they have full subsidies. No, there's no price benefit they can give anybody except lower benefits and, I mean, 90% of our population is protected from that standpoint.
Some of the healthier folks that are not buying insurance, there's still a huge chunk of uninsured to come into the market and maybe it's above 250 and maybe it's even above 400.
Yeah
of FPL. I guess you guys just don't see a big impact there.
Let's address that, right? As you know, roughly 95% of our population is subsidized and 10% is not. The 10% that not is selecting in part because we've got narrow networks, they're selecting in part because of our value proposition and price. Our susceptibility to the impact, even in our own unsubsidized population, is very different than perhaps some others.
Got you. Then just a separate question, just Washington, I hate to sort of ask a question about Washington, it just kind of sticks out against all the other successes. It seems like there were some lawsuits and provider issues and things like that. Could you just give us a little bit more background on what happened in that re-procurement and how we should think about the fact of this whole event?
Sure.
Sure. I guess, Josh, what I'll do is I'll start with the situation that took place in Washington last December was unfortunate. We've been working very closely with the Office of the Insurance Commissioner in Washington to correct those issues over the course of the last six months. We continue to work very diligently to close out the corrective action plan that we have with the state. I would say right now that things are going really well at this point in time in terms of getting things cleared up with the state of Washington.
Also, those suits, Josh, they were I think three, four people sued, and it's just not a big issue.
Matt Morris.
Matt?
My question is for you, Michael. If you could just talk about the, in the context of the recent Virginia Medicaid expansion, what are your expectations for potential Medicaid expansion in other states?
I think it's going to vary by state, and I think it's going to become a very political issue in the states through conservatism or lack of it. An awful lot of where it goes going forward is going to be a function of the outcome of the November of 2018 election, and what happens in the House and the Senate. I see right now that there are some states, I think Virginia is talking about expanding as we speak. There are states we're talking to about expanding. There are some states that probably would like to expand, but they're concerned about where they are. I think of Texas, which is covering 50% of the federal poverty level to try and even up just to 100% is going to be material.
We have been working quietly and effectively with our Washington office with both sides of the aisle with some recommendations on how to improve the situation and create an ever more viable product.
Thank you. If I could just ask a follow-up. This is on a different topic. Looking at California and the former Health Net operations, correct me if I'm wrong, but it seems that you have deepened your commitment now to the group commercial business. If I got that right, and I'm just wondering how you see the strategy from here.
No, I think we said going into it, and in California, they had a group business, and we were committed to it. We were going to continue to build it, and we renewed a significant contract out there this year, which we were glad to see, and it speaks well, and it really gives them a position to continue to grow it. We worked very carefully with the commissioner and successfully with Dave Jones. He was very objective in going at it, working carefully with us to improve the PPO product and others, make it competitive. They were losing a lot of money, and now it's breaking even and making a little bit. Yes, we're committed to maintaining that business. It's been plateaued, it's been corrected, and now I want to see it continue to grow. Yes.
Thank you.
Peter Costa.
My question regards the Medicare star scores for 2019. You talked about not being able to crosswalk those members or that being deferred and also not having appeal approved. Can you quantify the revenue impact of that for us as well as talk about why you think it's only a minimal impact in 2019?
Yeah. There we go. Yeah, a couple things. I'm not going to quantify the exact revenue impact. We're not here talking about 2019. You'll see the total 2019 number in aggregate. One of the reasons why it's a sizing issue, right? How big our Medicare business is, and the other thing is we have delegated contracts, a lot of delegated contracts in California. Any revenue impact is substantially mitigated by that.
The other thing you have to remember from a margin perspective heading into 2019, you also have the removal of the Health Insurer Fee, which we had commented on in our December investor day was about a $0.20 issue. Coming back into play in 2018. For all those reasons, we don't see it having an impact in 2019.
I think what's important, what I've said at various conferences is that this is an important product to us. We've asked the team, Kevin and his team, and Chris and his health plans to say, "What is your plan to grow it?" Let's look at it at what cost, then we'll sit down with Steve and Jeff and the others, and we'll plan on how best to do it. We're not going to back off our commitment to growing the Medicare business. It's going to require some investments, so we're going to make the appropriate investments to keep it going. That's part of being this $60 billion company I talked about before, that you have the kind of resources you can do that.
Thanks.
Lance Wills.
Hi there. Question on the public exchange market, was interested in how much of your business right now is on provider contracts that are tied to Medicaid rates? With greater stability in that market, what do you see as any sort of risks associated with that?
Well, I'm not going to get into specific rates we pay providers, because there are competitive aspects to that, and there's antitrust and other aspects to it. We're paying rates that our providers continue to work effectively with us. I'm comfortable we'll be able to deal with any of those kinds of issues.
One question on the Medicaid side, what sort of price pressures, if at all, are you seeing in the low acuity markets? We're hearing some commentary from others that that was becoming a more competitive market in sort of the kids and adults or the kind of the traditional non-high acuity markets.
Are you talking about in the exchange products?
No, I was talking about in the traditional Medicaid products.
Yeah. Jeff, do you?
We're not. We haven't seen that. We give our annual, I guess, our expected rate adjustment for the year. Again, it's closer to 1% this year. We haven't seen any. You're aware that the states obviously price that. They look at historical experience and historical utilization, and that's what they're using to effectively trend that forward and price that business. That's not a bid type business. We haven't seen anything out of the ordinary there.
Our systems are such real time that the states have a lot of confidence in the information we give them when they look. I'm not taking something that's three, six months old and trending it forward. We're saying, "This is what we're seeing as yesterday.
Kevin Michael.
Kevin.
Great, thanks. Maybe just to build on that last question about trend. There was some questions after Q1 about how trend was coming strictly on acuity. What kind of visibility do you have into trend right now? I think you've talked about it being under control. Real-time data, how is that looking right now?
I'll start off, and others can add to it. We see no significant change or any real change, any change in our trend. We're calling it flat as we've seen it. Jeff, you add anything to it?
No, stable, consistent. That's what I would use.
Okay, just going back to the Medicare Advantage point, I guess I wanted to understand the messaging a little bit about STARS, because it seems like initially you were saying that the STARS issue was relatively fixed already, and you're well-positioned, even if you did see a drop in STARS in 2019 to get it back in 2020. It sounded today a little bit like, hey, there's investments we have to make that will actually take a few years to play out. How comfortable are you that 2020 will be back to where it was? Or is this really a multiple issue? I guess, Jeff, you mentioned that HIF going away was a positive for 2019. Obviously, it's coming back in 2020. If it's not coming back, how should we think about the trajectory?
I'll start off, and others can add to it, but we've taken all the steps to correct the issues that were there, and some of it was a retro adjustment that they had done, or they would not do, even though going forward, they've corrected some of the evaluations. Now, STARS are relative to other plans, and we also have some experience where CMS changes things with great frequency on how they go about it. Based on what we know now, we're cautiously optimistic. We'll continue to work through it, but it's something I'm not going to put my hand in fire and say it's guaranteed at this point until we see some more evidence. Anything you want to add, Kevin or Brandy?
I would just echo what Michael has said. We had policy issues. Those policy issues have been essentially corrected in the current call letter. More broadly, we've had performance issues that we're correcting now. We've made corrections, significant corrections and improvements, and we're continuing to refine those.
Dave Wendling.
Hi. Thank you. Earlier in the presentation, you gave a couple of case study examples of benefits from Interpreta and USMM in Sunshine Health and talked about scaling those. I'm curious, one, what investment and how long do you think it would take for those capabilities to be scaled? Then Michael, as it relates to some of the competitor plans have become increasingly interested in home health, is USMM Centene's solution for that, or do you think about that differently relative to home health and homebound service provision? Thanks.
There are two aspects to it. We're taking very targeted approaches when it comes to dealing with network needs and the whole health and how we go about it. It's going to vary in terms of ensuring that we have access. Relative to what you saw with USMM and the things that Chris talks about, he can add to it, but that's here and now. That's not futuristic. That's things we've been doing.
I'll comment particularly on the Interpreta integration. As I said earlier, we're rolling out into 8 additional states this year after Florida. In 2019, we should be fully implemented on the Interpreta side with all the states. On the U.S. Medical Management side, we continue to work a little more targeted and with that particular product to tailor to the states that we feel that we can have the greatest impact on. Both of those are moving along well.
It's not really a cost issue, it's a time and capacity. I can tell you, the biggest issue I think Chris is facing, as the plans have learned how this is working in Florida, they're all screaming, "Can I be next?
Can I be next?
When you have 31 plans, it's going to take a little time.
AJ, right here. Okay. I might just broaden that last question out, first of all, and just ask about interest in provider assets, obviously, with the focus on MA long term, D-SNP, LTSS more and more. Some of the other competitors are making a bigger push across the board in different types of provider, physician assets, et cetera. What are you guys thinking about that?
Well, I think what the medical group we bought, it gives us a capacity that where we need access, to be able to put a medical group in there. Now, we're not out there saying, "How many doctors can we buy? How many physician practices? How fast?" I've done staff models historically. That's in the category of doing some things once. We have the ability to go into a market, add a group, so that if our populations don't have the access or you have a SNF or something else where you need that capacity, they can do it for you very quickly. It's a very targeted approach. We have broad, capable networks. We pay our physicians fairly. We pay them quickly. The average claim is paid in 98.6% were paid in seven days or thereabout, or less, with 99.6% accuracy. We are getting that back up.
There are other factors that keep a network together. It's nice to be able, in the Valley of Texas or the Valley someplace, where you don't have enough pediatricians or enough obstetricians, to be able to open up a clinic quickly and get access. That's really the intent.
Okay. The other question was around, I guess, Jeff's comments about the California minimum MLR. Do we know anything about when you might hear a resolution on that? Is there any update on the Pennsylvania TANF situation, and what's going on there?
I can handle the MLR question. Literally, it just happened last week, so I think it's something that came up, late-breaking news. We've done our best here, I think, to quantify what the potential impact is for us. I think right now it's in the state's hands to figure out what their next steps are. We'll keep you up to date as soon as things obviously progress.
I think I know an answer. I've said this many times, that the nature of this business is if CMS or somebody can do something of that nature. This is retro. It's nothing going forward. It's not current. If there is some adjustment required, it's going to be a one-time thing. We're very careful to point it out because I think what important point Jeff made when it was what, close to $200 million of positive gain. We just called that out as a one-time thing and didn't attribute a whole lot to it. This business has those gives and. This one, I think, I don't know if many words are going to matter, but the state is not particularly happy, I guess, that CMS came back and started talking about 16, 18 hours. The state's sometimes late in getting fees in.
There's a combination, but as you saw, we don't anticipate it being a big number. When we see something, we have had a practice, as to always, for transparency purposes, say, "This is something we've learned about, and we'll let you know what happens." In fact, our whole compliance business, if we suspect that there's some fraud in the market, we'll call the state and say, "Look, we're not sure that there's anything here yet. We're investigating it. But we want you to know that we have this." You build up credibility that way. It's really nothing more than saying, "This is here. The state's working through it. There's nothing we can or can't do about it. We're supporting information they need." I'm comfortable it's not a big deal.
Okay. Is there any update on the Pennsylvania TANF situation?
Well, Pennsylvania hasn't told us what they're going to do yet. If they do an RFP, third time should be the charm.
Rob Ferranti.
Thanks. I just wanted to go back to the exchanges quickly. You talked a little bit about the short-term plan impact. With the individual mandate going away next year, again, the Department of Justice not defending, or seemingly not going to defend the ACA, does your approach change at all, or do your expectations change in terms of what you see as enrollment? Do you have any sort of target? Do you think overall exchange enrollment could still grow. Do you expect it to decline? One. Then two, I think you mentioned you yourselves are expanding in the exchanges. You mentioned North Carolina specifically. Are there more states or is it just North Carolina? If at all, you can give us a sense of how much more expansion there is in the territories you already are present in. Thanks very much.
I want to be as part of the first part, Kevin will pick up the rest. I want to emphasize again, loss of mandates, short-term for all these products do not impact at 250% of the federal poverty level and below. This is our population. The people are signing up because it's not costing them anything. That's built into the legislation. Premium subsidies are built into the legislation. When they took the CSRs away, all they did was increase governmental costs. The CSRs was costing them $7 billion, and the premium subsidies are now costing them $20 billion. Okay? It had an impact on us or the states, the government, because we were going to, I use Maricopa County as an example. We were going to drop rates 9% with the CSRs. When they changed it, we had to raise rates 2%.
My point is, mandates, short-term, association things, all that does not impact 95% of the population we attract. We offered to other states, Kevin, we can, we're not set up for comparative reasons, disclose to all of them.
Correct. No, that's right. We're prepared at this point to talk about the expansion or the going into North Carolina as a new state. There are other new states we're going to be going into. As Michael said, we're also going to be expanding our footprint in existing states. We remain very bullish on the exchange and with very good reason. Just to amplify what Michael said for a second. If one looks at all the tactics that were taken last year at open enrollment to discourage open enrollment, whether it was cutting back the outreach by 90%, $100 million on $10 million, whether it was shutting down the exchange for maintenance on Sunday, which is the most popular time for people to enroll, the impact on enrollment was 7%. This is a product people want. People want to have insurance.
They want to have protection for themselves and their families. We feel very good about where we are.
One more, if I could. Jeff, just want to understand sort of the California minimum MLR impact. If finalized, just to be clear, you'll have to sort of, or you'll approach it as including in the guidance, or you'll continue to sort of provide sort of adjustment without. I just want to understand on a go-forward basis, I understand it's retro, but on a go-forward basis, is the impact not going forward simply because you've made the adjustment for what's allowed? Or how do we think about that relative to kind of the baseline that the states put in? Thanks.
two things. We haven't finalized this yet, right? It's late-breaking news as of last week, but we'll probably treat it consistent with what we did at the end of 2016 when we had the $195 million good news. We'll probably carve that out of adjusted earnings, but it has to go into GAAP earnings, right? When we give guidance, we give two numbers. We give the GAAP and the adjusted. As that gets finalized, right now, that's our current thinking of how we would treat that. The second question is that there's been rate decreases since the minimum MLR ended back in 2016. At this point in time, we're running above what that minimum would be. That's why it doesn't have an impact on 2018 and going forward.
Thank you.
I can't emphasize enough. You can't plan for something that when they decide to go back two years and do something. This is, it's not a fundamental problem with the business. It's not something we've done wrong. It's not something where there's a miscalculation. It's the federal government talking to a state. Some people speculate that are they doing the same to red states as blue states? We don't get in the middle of all that. Stay far away from it. It's a fact, and when we deal with it, as Jeff said, it's not a big deal. It's a non-issue in my mind.
Dan Barrow.
Michael, following up on Jeff's comments regarding the rating agencies. The residual of all this tremendous hard work that you and your team have done over many years is a company that generates enormous free cash flow and has demonstrated an ability to allocate very efficiently with huge returns. What are the credit agencies missing, and what more can you do to get you to your goal of an investment-grade rating, and what will that allow you to do once you have that?
I think some of the agencies are here, I'll tell you what I've told them. We are a $60 billion enterprise, highly diversified. A debt to cap that's close to industry best at 37.5%. Growth, international businesses. It's balanced. Very strong balance sheet. Okay? You look at the kind of rates we got that, from my perspective, they become irrelevant in many investors' minds. Because when you have all the factors that dictate being investment grade and you're not When we were able to get that five and three-eighths interest rate on the bonds at a time when rates were going up, it told me all I needed to know. That it's irrelevant anymore. That they have their reasons, which I don't understand. We've discussed it with them.
I'm not saying to, if they aren't here, I think I saw one of them, that I haven't said to them.
Thank you.
Mike.
Yeah. Thanks. Jeff, maybe this one is for you. Since you guys increased the size of the debt and equity financing since the last guidance update, how should we think about what the offset is to that? Is there any implied operating upside, or is that the contribution of some of the smaller recent transactions you've done?
Yeah, a couple things. First thing, so you're right, we increased the share count because we upsized the equity offering. What we did with that is we paid down the revolver, so we have a little lower interest expense. The other thing was that both the debt and equity offering were assumed May 1st in our last guidance. I think those were May 4th and May 23rd. We've had increased investment income. You kind of push all that together, and we're comfortable keeping the guidance where it is.
Anna.
Can you give us an update on the Texas contract as far as retention and growth? There was something in the media about network adequacy and so on, and what sort of competitive dynamic are you seeing with community health plans, and whether they're likely to take share or lose share?
Chris, you want to take the Texas one?
Well, since we're in active procurements in Texas on both of the RFPs that are out there right now, it'd be inappropriate for us to make any comments around that.
They are moving ahead with
They are moving ahead.
They are moving ahead.
They are moving ahead with the two RFPs. The current STAR+PLUS RFP has been submitted. The STAR and CHIP RFP is going to go in July. Both of them are scheduled, or at least projected right now to be effective on January 1, 2020.
We could also say there was one.
Yeah. That's true. There was one that was canceled, the CHIP Rural Service area RFP was canceled, I think in March. That has been included as part of the STAR and CHIP RFP that is currently in process right now.
The second question, just I understand it's mostly all unsubsidized, I mean, subsidized membership. Any thoughts on the DOJ 25 pager around, to offset the mandate, taking out community rating and introducing medical underwriting? I mean, is that a positive for at least the unsubsidized membership for plans?
Well, obviously, this is a court case, right? Court cases take time. This is going to be working through for a period of time through the courts. Where that's headed is obviously we don't know. Except, I read the case last night. I'm not an attorney. It seemed to me, again, like the decision or the position to eliminate preexisting conditions is one that's got a lot of broad implications. Again, it impacts roughly 40% of the country. I have a preexisting condition, for example. Maybe some of the folks in this room may have one. It's one I would think that anyone would want to think about carefully.
By the way, I'm glad you're not an attorney. I think it's a fair question, Anna, but the biggest thing is the population in total did not want a preexisting conditions eliminated. I mean, that's a big issue in people's mind. I think we have, in the Medicaid side, have never really had preexisting conditions and have done very well with it. I think the only thing it's doing right now is just creating additional confusion, and I think what Kevin said, this is going to have a long way to play out.
Thanks.
Thank you.
Our last question from Steve Tanal in the back of the room.
Good morning, guys. Thanks. I just wanted to clarify a couple of numbers on the California items. It sounds like the $10 million revenue impact and $40 million pre-tax impact is the net of the minimum MLR reduction and favorable calculation. If you could just confirm that's the case, and if possible, maybe give us a sense of the impact of each separately. The other piece of this on California is just, if you wouldn't mind again, I think you gave a number and I may have missed it, just sizing the rebate payment drag to operating cash flow in 2018 and the timing of that.
Yeah, sure. We'll wait for this to pick up. Here we go. A couple of things. The $10 million-$40 million is kind of the range of the pre-tax. Okay? It's a revenue and pre-tax number. You're correct, it is the net. The reason why we're giving a range is because it's not done. It's not final. There's two things that aren't final. Number one, the state just received this information. They have to work through it with CMS. Number two, the actual mechanics of the calculation of the MLR for the prior period, and if the MLR is applicable for the current period, that calculation as well is all still subject to change.
What we've tried to do is give you our best estimate, if this were to apply and the calculation were to happen as it's currently drafted, of what the pre-tax impact would be, and that's between $10 million and $40 million. More to come on that. It's not final, and we'll let you know when things change. The second thing on the cash flow, it's about $1 billion. If you recall, most of this was generated prior to us buying Health Net. It was two things. Number one, the rates were the California, the state overpaid rates on the Medicaid expansion business. The other thing was there was a minimum MLR beginning in January 2014 when that business started. We inherited almost $1 billion of this, which was on the balance sheet as a payable back to the state.
The state has begun collecting that in May. I think they will probably start in May and finish it out by the end of this year. I would expect a $1 billion operating cash flow drag related to that this year.
Perfect. Thank you. Just on-
Arnie, back to California. I want you to say it one more time.
Sure.
We could have made a case for not saying anything, it's so much in doubt. I was really trying to save a lot of phone calls ahead if it was got out. It's $10 million, it could be $10 million, it could be $40 million. Once again, smaller plans is probably a bigger issue because we had some money booked for it, and so folks, it's a tempest in a teapot. It's really just something that's not even defined yet. We wanted to get it out, so you heard it from us, and it's transparency. Let's take a little break, and we'll come back afterwards.
Michael?
Yes.
I've got a couple.
Oh, go ahead
that came in online here. Following up on the investment grade discussion, someone asking, what would be the approximate impact on interest expense if we did go investment grade?
It would be pretty minimal, in my opinion. As I said, as Pete told us, we attracted rates that reflect that. Jeff, you want to comment on it?
Yeah. I think that changes daily, right? You can find that. That's market information. Investment grade trades is a spread to the treasury, typically. You can look at the high yield index. You can find that out there in the markets.
I've got a two-part question from Gary Taylor of JPMorgan. On the increase in revenue guidance, was the $1 billion boost to 2018 revenue guidance entirely related to California pass-through payments or something other?
A big piece of that is California. We've mentioned this before. California's pass-through payments are kind of lumpy. You don't really have a lot of visibility on them. The bulk of that was related to California, there are other states as well. Just to be clear, all of it is pass-through payment.
Finally, can you talk about your visibility at this point in the year on total marketplace risk adjustment payments? What is the risk of a material increase in required accruals?
Yeah. Obviously the business has grown. I think our risk adjustment projections for the year is somewhere around $700 million of a payable. Remember, we're on the payable side. That changes, obviously, as we continue to get risk information on our population. We've had a very good track record. I think if you look at how we've accounted for the risk adjustment payable, we've had a very good track record. I would just leave it to that.
Michael? Steven Valiquette just wanted a follow-up question, if that's all right?
Yeah.
Yeah. Sorry, just wanted to understand, just on the Medicare Advantage expansion, the eight new states, how different are those networks from Medicaid, how should we think about the investment required, if any, to stand up those plans?
Obviously, you're going to put some geriatrics in there. You're going to have probably more orthopedic surgeons, fewer obstetricians. It's fine-tuning of that nature.
They're generally pretty similar. Got it. Thank you.
Yeah. Thank you. Thank you. Let's take 15 minutes or so and get back together, warm up.
At 10:30?
10:30.
Good job, everybody.
Well, thank you. You as well.
Yeah.
You too. We're going to resume in two minutes. Centene's Investor Day, two minutes. Please head back to your seats now. Thank you. Everybody ready? Okay, we're going to resume now. This is our technology panel. Our CEO, Michael Neidorff, likes to say that we're a technology company that happens to be in the healthcare business, and hopefully after you hear these esteemed speakers, you'll agree with that. I'm going to introduce Mark Brooks, our Chief Information Officer. We're also very pleased to have two people from RxAdvance, the PBM that we now have an investment in and are collaborating with. John Sculley, that's a familiar name to many investors formerly of Apple and Pepsi. He's the Chief Marketing Officer and Chairman of the Board of RxAdvance. Ravi Ika is the President and CEO.
Finally, Dr. Ahmed Ghouri is the CEO of Interpreta, which is another company that we have an investment in. Without further ado, I'm going to turn it over to our Chief Information Officer, Mark Brooks.
Thank you, and good morning. Transforming the health of the community one person at a time is both the Centene purpose and the cornerstone by which we buy, build, and integrate technology. Our technology program has 3 distinct categories: day-to-day operations, incremental digital improvements, and next generation technologies. Day-to-day operations focuses on leveraging our scale to drive cost and quality in the right direction. Incremental improvements leverage digital technologies to drive efficiencies to existing processes by leveraging artificial intelligence, robotics, and big data analytics. Our next generation initiatives focus on partnering with our own technology companies to build differentiating member and provider solutions. This combination sets Centene apart from our competitors in truly driving better outcomes at lower costs. Regardless of how we develop our new technologies, we always focus on integrating them into our core competency model for all of our customers. This makes Centene's technology program truly unique.
It is our intention today to highlight examples of our capabilities and introduce our technology partners that help us bring our vision to reality. Our member-centric view starts with the capabilities embodied in our TrueCare product offered by Casenet. The Casenet organization continues to grow and thrive with over 32 million installed members in 33 states, and now a substantial international presence, winning the Best in KLAS award for care management systems in 2017 and 2018. Technology is the catalyst to a lot of day-to-day care. By leveraging our TrueCare solution, our care managers administer millions of assessments, authorizations, and care plans annually, resulting in whole member health. In terms of incremental improvements, we continue to build capabilities that differentiate with our customers.
As an example, we have the ability to enable mobile assessment tools that are catered to the specific needs of populations and more importantly, the specific needs of the individuals we serve. We call this product TrueCare Anywhere and have used it to improve assessments and care outcomes in most Centene states. Our next generation of TrueCare will further integrate parts of the care management process, such as EMRs, mobile apps, member and provider portals, and Internet of Things technologies for the purpose of home monitoring and pharmacy adherence. Our partnership with Interpreta gives us the ability to perform continual clinical interpretation of our members. This is a new capability implemented at Centene Health Plans today, which Dr. Ghouri will further explain in his remarks. Deep, fact-based relationships with our provider partners are a key part of our care delivery model.
On a day-to-day basis, we leverage data analytics to supply providers with performance dashboards via our Centelligence platform. Centelligence catalogs data from over 100 diverse internal and external data sources, processing it in excess of 100 million daily records. This enables thousands of users to access the data from a single tool, delivering actionable insights into member care, as well as incentives through pay-for-performance and shared risk value-based contracts. That day-to-day capability is important, but changes in our members' daily living circumstances have a direct impact on our providers' ability to deliver care. As Chris discussed earlier, we are actively making incremental improvements in our population health management capabilities, leveraging our data science teams and big data platforms to develop a predictive view of risks created by factors outside of our current care continuum.
These population health analytics tools are being leveraged by our clinical teams to address such societal issues as opioid abuse, which Dr. Yamaguchi will further expand on later. Our partnerships are taking us further in our next generation initiatives. With Interpreta, we have the ability to do what we call real-time clinical analytics, evaluating very large data sets and generating outputs such as care gaps in real time. Leveraging the partnership with Interpreta, we have built the channels to distribute those gaps to care managers and provider partners, even in a clinical setting. We believe this next generation initiative is a game changer because it allows for real-time, continuous interpretation of each patient's past, present, and future care needs. We further differentiate ourselves in our specialty areas, such as pharmacy.
With our owned pharmacy benefit management business, US Script, we process millions of pharmacy transactions and authorizations on a daily basis. Prior authorization management is a very labor-intensive process. By implementing artificial intelligence in our internal pharmacy authorization platform, we have been able to accommodate an 80% increase in transaction volume without increasing staff. Our partnership with RxAdvance is another next-generation opportunity. RxAdvance is a highly innovative organization with culture for building disruptive platforms. In our partnership with RxAdvance, we have begun next-generation programs that will realize significant synergies where all key functions of pharmacy benefit management operate on a single, flexible platform rather than a series of cobbled-together applications. The complex clinical rules for prior authorization determination can also be invoked within the RxAdvance claims adjudication process as part of their smart process automation approach.
As we engage staff beyond the PBM resources for clinical decisions, peer reviews, appeals, and benefits management, they will have access to the same functions as those within the PBM. This collaborative environment will enable better coordination and efficiencies across the management and care delivery for pharmaceuticals, providing true alternatives to health plans struggling to build and maintain their own PBM systems. Ravi Ika and John Sculley will further expand on these capabilities. The capabilities we have discussed today are just the beginning. Centene's focus on technology has helped us to become the partner of choice for upcoming entrepreneurial healthcare technology companies. That, combined with our focus on integration, gives us a unique value proposition to continually improve quality and reduce costs for all Centene customers.
I hope my remarks have been helpful in better understanding Centene's technology strategies and capabilities, and I will now hand it over to Dr. Ahmed Ghouri to further discuss Interpreta.
Thank you, everybody, and good morning. Thanks for the introduction, Mark. Interpreta is an example of one of Centene's advanced initiatives in technology in which we are intelligently synchronizing healthcare. Interpreta is the leader in clinical continuous interpretation. Latent analytics is not fast enough to be acted upon as healthcare unfolds. Member clinical events like new lab results can occur daily and need to be acted upon without waiting days to weeks for reports. In addition to the member data changing, scientific knowledge bases are growing rapidly, and guidelines are becoming deeply personalized. Episodic clinical reports on a weekly or monthly basis will not take us into the future. Interpreta is changing this paradigm with real-time data aggregation, real-time interpretation, and real-time syndication of results to multiple users across numerous systems. We refer to this as intelligently synchronizing healthcare.
Our powerful ability affords great benefits to members and providers by enabling information coordination combined with non-latent interpretation for the first time. We are very proud of this achievement. This slide shows the topology of our advanced ecosystem. As you can see, we are centralizing data as it unfolds in real time from disparate sources, including the insurer, the EMR using the latest protocols for interoperability such as FHIR, ambient sources, which include data from retailers, grocers, and wearable devices, and the whole genome from high-quality sequencing labs. Interpretation occurs in the cloud, where there's great computing power in real time, and the results are syndicated using single sign-on technology to reach all the key stakeholders you see at the bottom of the slide. These include the treating physician, the care manager, and the member, each of which may be using a different application for their daily workflow.
Member access To non-latent and a personalized future care calendar can also significantly improve the experience of care and member satisfaction. This slide shows what our real-time clinical navigator actually does. It is a multipurpose future view of the single member, which can course-correct just like a GPS system. For example, this enables doctors to plan ahead proactively to prevent gaps in care, such as HEDIS gaps in care, because there are no surprises that could've been reasonably anticipated. Contemporary analytical reports are a rearview mirror in comparison, whereas Interpreta is a forward guidance system. As new data arrives, the future plan recalibrates and adjusts to meet the needs of the member. This capability substantially improves the quality of care by anticipating needs and recommending clinical resources proactively rather than reactively. Our Interpreta is not limited to a single dimension of care. It is clinically comprehensive.
It combines historically disjointed knowledge bases in the practice of medicine, ranging from FDA molecular genomics to NCQA quality measures, all the way to AI-driven member prioritization. All of these knowledge bases are applied simultaneously and in real time. The ability to achieve this within a single engine is an industry first and is one of the reasons we believe Interpreta recently won the Gartner Cool Technology Award. This slide is an example of a precision medicine workflow we are piloting in pharmacogenomics. It is a continuous closed-loop system that optimizes drug-impactable clinical outcomes and addresses key problems in the clinical workflow of precision medicine. This ecosystem enables significant improvements in patient care. In our now operational system, we are identifying members who have a high safety risk in the physician portal or appear to be a treatment non-responder to an important drug.
We deploy a licensed physician to the member's home using the USMM network of doctors, who visit the member, educate the member, and obtain informed consent to perform gene sequencing. The clinician-gathered sample at home is processed in the USMM CLIA and CAP-compliant laboratory. The results are analyzed by Interpreta, and drug change, drug discontinuation, or dose adjustment recommendations are made in real time to the physician who's carrying a tablet-based EMR can take action. This system is holistic. It runs continuously. It is not specific to one drug, one gene, or one type of medical condition. Because birth DNA does not change, a once-obtained sequence can be reused repeatedly to test innumerable drug therapies over the lifetime of the member.
In summary, from genomics to condition management to risk prevention, our system is broadly generalizable to the comprehensive needs of the member and runs continuously to safeguard health using real-time speed. We are excited about being a pioneer in continuous clinical interpretation and look forward to sharing many new innovations with you in the future. Thank you. On that note, it is my great pleasure to introduce Mr. John Sculley. Thank you.
Thank you, Ahmed, and good morning, everybody. I would like to first tell you why I decided to get involved with RxAdvance. Since leaving Apple as CEO, I've been a serial mentor and investor in platform-based disruptive transformation companies, I believe that the business architecture of platforms is really the defining disruptive innovation model for the 21st century. I was a founding investor and on the board of MetroPCS, we grew MetroPCS to a $9 billion market value by the time we sold it to T-Mobile. I was also an Interlink founding board member, which was the first fintech B2B company, we grew that to a $1.4 billion market value when we took it public on the New York Stock Exchange.
I was a Rally Health founding board member, three years ago, we sold Rally Health to UnitedHealthcare, today, Rally is about a billion-dollar revenue and a very profitable part of UnitedHealthcare. Each of these examples is a successful cloud platform business model company. Each was led by a talented founder CEO, each was a success story in a highly regulated industry. RxAdvance is the most exciting company that I've been involved with since I left Apple, what we do is called smart process automation. It's not just automating millions of tasks that embrace thousands of regulatory rules. RxAdvance is a platform that completely reimagines how avoidable drug impact medical costs can be reduced with innovation, better outcomes, much lower costs, significantly improved patient experience. Ravi Ika, the founder and CEO of RxAdvance, has built a disruptive innovation platform-based PBM.
Ravi is a serial entrepreneur and is a very talented leader with 17 years of cloud platform experience in the healthcare industry. Ravi built and scaled his previous company, Ika Systems, to 34 million health plan members. When I first met Ravi Ika, RxAdvance was less than two years old. We were pre-revenue. Yet in 2018, RxAdvance platform is fully built and in the process of being broadly deployed. This year, we have $10 billion of contracted revenue. I'm really impressed with Ravi and what he has built at RxAdvance. That, in addition to investing in his company and serving as his board chairman, I also agreed to join Ravi's management team as Chief Marketing Officer. Ravi's recruited an extraordinary senior management team. Each one has deep healthcare domain expertise, and each is experienced in cloud platform technology.
PBMs are in the government spotlight, RxAdvance has solved the major criticisms that have been spotlighted on PBMs using their disruptive breakthrough technology. I really wanted to be a part of this. The second thing I'd like to tell you about is why did we believe at RxAdvance that Centene was the right strategic partner for us? Ravi and I were really impressed when Michael Neidorff, who had done a lot of background research on RxAdvance before he personally flew to meet Ravi and me at RxAdvance's headquarters, we're based in Southborough, Massachusetts, this was back in late August of 2017. It's very unusual in the payer industry to meet an entrepreneurial CEO who's actually built a company from $40 million of revenue and just 120 employees into a $60 billion revenue company with 35,000 employees.
Centene is a mission-driven company that has had great success providing affordable health insurance and other health services to a typically lower income population who depend upon government insurance. Now that we are in a deep relationship with Centene, we're in the onboarding phase of working with Centene. Ravi and I are really confident that Centene is an excellent strategic partner for RxAdvance. We're excited that Centene wants to adopt our cloud-based platform-driven PBM as a transformative and very differentiated solution for the future. In addition to our PBM work together with Centene, RxAdvance and Centene see many additional opportunities for strategic cooperation. Now I'd like to introduce my partner and good friend, the CEO and founder of RxAdvance, Ravi Ika.
Thank you, John. Good morning, everyone. There has been a lack of innovation in the PBM industry for decades. Existing PBMs today use decades-old platforms. Result, PBMs provide just commoditized transaction services with very little clinical value, resulting in avoidable medical costs, drug impact medical costs are comparable to overall pharmacy costs. We are really taking the PBM function beyond their current offering. What's our noble cause? It is well-established fact that there's about $900 billion wastage in the healthcare ecosystem. PBMs have optimal opportunity to control half of this waste. Reducing a portion of this wastage is more than enough to cover uninsured, underinsured, and reduced premium for all Americans. This is our noble cause. To reduce these avoidable costs, RxAdvance launched three solutions. RxAdvance Collaborative PBM Cloud, to reduce overall pharmacy costs.
Nirvana Specialty, to convert specialty from buy and bill to value-based and outcomes-driven model. Nirvana Accountable Care, to manage the unmanaged portion of managed care population. You'll hear more about these solutions in the later slides. Next slide, please. As you can see, the PBM's ecosystem, even in this simplified diagram, is very complex with many stakeholders and touchpoints. Next slide. RxAdvance has simplified this ecosystem to provide one single platform for all care stakeholders. A typical full-service PBM will have about 10 departments and over 500 function points. In legacy PBMs, these 500 function points are handled by a dozen systems cobbled together and lots of people. We have built one enterprise PBM platform from ground up.
Through the platform, we have integrated all these five departments and over 500 function points, and through a cloud-based robotic process automation, and have eliminated a human being wherever a personal touch is not adding any value. This leads to 50% reduction in touch points and substantial administrative cost reduction, as well as system-driven compliance is achieved through the platform. Next slide, please. Revenue distribution. Here is the revenue distribution in a typical health plan. If you apply RxAdvance transformative solutions to this business through Collaborative PBM Cloud, overall pharmacy spend can be reduced significantly. This includes unit cost reduction, enhanced rebates, admin cost reduction, increased generic substitution, duplicate therapy reduction, adverse drug event reduction, and others. Through Nirvana Specialty, health plans can convert their specialty utilization from buy and bill model to value-based outcomes-driven model through a nine-step process to reduce specialty drug spend.
Thirdly, as we all know, 5%-7% of the most chronic population currently cost close to 50% of overall medical spend. We have a comprehensive program to manage these chronic care patients at home through an integrated process and platform-driven solution, which replicates hospital-like care at home. At a very high level, this program eliminates ADEs, adverse drug events, at the point of care, streamlines prescription delivery through electronic disposable pill trays, improves adherence and vital sign monitoring through dynamic care plan using Nirvana Smart, a robotic smart patient coach, and provides a timely care coordination through physician, nurse calls, and address avoidable hospitalization. Additionally, this allows gaps in care, continuity of care, and diagnosis optimization. During the same house call, we address all these things. Next slide, please. How is this partnership, Centene and RxAdvance partnership is different when you compare with other mergers.
Recently, we have received many questions how RxAdvance and Centene's partnership are different from the rest of the mergers. I want to point out one thing here. In all these recent and past mergers, legacy players with old fragmented platforms have merged together. Vertical integration could bring improved quality and lower cost if at least one of the partners is very innovative and technologically savvy. Whereas in Centene and RxAdvance case, Centene is a proven high-quality and low-cost health plan, which has partnered with RxAdvance, a nimble, highly entrepreneurial, and proven technology player in the market. As we all know, optimal quality and financial results are possible if both parties in the merger should embrace transformation. This has been the ultimate commitment from both RxAdvance and Centene management. Additionally, Centene strongly believes that a substantial net income improvement opportunity exists organically through transformative enterprise platform and process reimagination.
This partnership not only sets a standard of excellence in the industry, but also provides a true alternative to other large health plans that are thinking of building their own PBMs. Next slide, please. RxAdvance and Centene partnership brings, a unique opportunity for those health plans who are struggling to build their own PBMs or internalize their PBMs. As we already talked about it, RxAdvance. I think you have a different slide. Yes. Okay. All right. Thank you. The difference here between legacy PBMs and RxAdvance is basically legacy PBMs bring about six to seven services, whereas RxAdvance brings about 13 core services. Legacy PBMs also spend about 2.5% of the total drug spend on operating costs, whereas RxAdvance spends less than 2% of it. As you can see, through RxAdvance, payers can capture 2%-3% of net income without building their own PBMs.
Additionally, RxAdvance brings full financial, operational, and compliance transparency to payers. So far, you have seen solutions to reduce pharmacy and pharmacy-related medical costs through RxAdvance. There is a significant opportunity for RxAdvance and Centene to expand breadth of their partnership to extend beyond the pharmacy space. Stay tuned for more to come in future. Now, I introduce Dr. Ken Yamaguchi, CMO of Centene. Thank you.
Thank you, Ravi, and good morning. I'm excited to follow up on that previous discussion and give a clinical example of how our unique systems and technology have been leveraged to improve our member health. At Centene, we've employed multiple proven strategies for addressing a wide range of healthcare concerns. All have the overall objective of reducing the burden of disease. These include thoughtful clinical policies based on the best clinical evidence, a care management program which has been revamped to employ population-based analytics, the innovation and application of Centene tools, and then predictive modeling, which employs the latest developments in artificial intelligence or machine learning. These have been employed with particular effectiveness in our targeted clinical programs, again, with the overarching goal of disease prevention or episode limitation, as the cost of avoidance is far less than the cost of disease treatment.
Our clinical programs are data-based and measured and award-winning, with the latest recognition being achieved by our OpiEnd program aimed at reducing new opioid addiction. It was the recipient of the 2018 Decision Health Platinum Award, which, in partnership with the Case Management Society of America, recognizes organizations for success in the overarching healthcare continuum. The importance of the opioid epidemic in the U.S. has been well-recognized. What may not be appreciated enough is that the issue is disproportionately more severe in the Medicaid population, with opioid-related inpatient and emergency room visits, as well as deaths being strongly correlated to the number of prescriptions dispensed. Accordingly, the healthcare industry shares a role in the development of the problem, and it needs to be part of the solution.
Centene thus initiated the OpiEnd program in 2016 to improve our members' health with the objective to help put an end to opioid misuse. The program employs four major arms of intervention. These include the targeting of high-risk members through our machine learning tools used to develop something we have termed the ORCA score, or Opioid Risk Classification Algorithm. It also includes thoughtful pharmacy policies, partnerships with the provider community in the form of education and other pilots, general community outreach, mostly in the form of awareness campaigns and booklets. First, the development of the ORCA score represents a novel, proprietary, and highly predictive method to help our members. Not surprisingly, opioid-dependent members are substantially more costly than otherwise similar cohorts. They are very difficult to treat once chronically affected. However, preventative or early treatment measures can be highly effective.
We thus employed machine learning to Centene big data to see if it could help focus early intervention and placement into care management. Our enterprise analytics team, in conjunction with IT, used multiple statistical inputs, including prior cost history, pharmaceutical history, demographics, social determinants, lab data, and clinical inputs, to test for statistical and correlative patterns. A highly predictive algorithm was developed to determine a risk score that would then help us to target and identify those members most at risk for becoming dependent on opioids or who may have become newly addicted and were still unidentified. The ORCA score is leveraged through incorporation into our integrated care management program. It is embedded into our TruCare software for use by our care managers on a daily basis. Using our comprehensive and extensive member database, our high ORCA score identifies members who can be most impacted.
They can then be appropriately guided into the right treatment pathway within our new analytic-based care management program. We can monitor the results for refinement of the protocol. In addition to ORCA, our pharmacy policies were placed to target most specifically those people who are opioid naive and thus vulnerable to becoming opioid dependent. The main emphasis of our policy was to focus on opioid misuse prevention in preference to treatment because the yield from this approach would be far more consequential and immediate. Accordingly, limits were placed on how much morphine could be dosed per day and how long members may have morphine without authorization. Any sustained use would be monitored for 28 days at a time, up to a 90-day period, and no more than two opioids would be able to be used concurrently. The early effects of the opioid program have been promising.
The percent of opioid prescriptions have dropped 20% in our population. The percent of opioid utilizers have dropped 20% also. Most importantly, people who have utilized opioids for greater than 30 days, in other words, those people who are at the highest risk of opioid misuse, have dropped almost 30%. People using multiple prescribers or pharmacies for opioids are at greater risk for addiction. As shown here, both of these populations have also decreased substantially. Finally, from a peak level in 2016, both emergency room visits and inpatient admissions from members with opioid diagnosis have dropped significantly. The effect is more dramatic when you consider that both ER visits and inpatient admissions had been increasing prior to 2016.
In addition to our direct intervention with members, our provider partnerships have included CME support for pain management programs, a push for buprenorphine waivers from training focused specifically to OB-GYNs treating neonatal abstinence syndrome, and then the monitoring of providers for outreach to deter excessive prescribing. The final point of our discussion of our OpiEnd program is regarding our community involvement. It consists of a multitude of public awareness initiatives, including two Centene-produced information booklets. The first, co-developed with the NCADA, focuses on educating adolescents about substance abuse. It received the Hermes Gold Award in 2018 for creative communication in print media. The second is a newly developed Centene publication for reading by both care managers and members, and is designed to support high ORCA individuals by reducing the stigma of early opioid dependence.
To date, the development of the OpiEnd clinical program has been a rewarding experience that illustrates how unique our system capabilities, coupled with multidimensional approach, can be to achieve a meaningful impact for our members. With OpiEnd, important early reductions in the burden of opioid dependency have been achieved by combining our ORCA algorithm with thoughtful pharmacy policies, provider engagement, and then finally, community outreach. Thank you. Now, Jesse Hunter will discuss our growth strategy.
Thank you, Ken. Good morning. Those of you who followed Centene for any period of time know the Centene story well. It's a purpose-centered story with an authentic commitment to transforming the health of the community one person at a time. Not only does Centene have the leading growth rate in the healthcare industry, we're also the fastest-growing company in the Fortune 500 over the last 10 years. This morning, I'll share our 2020 vision and help connect the dots between our purpose and the continued execution of our growth strategy. In previous Investor Day presentations, we've talked about Centene's leadership across specific government programs, Medicaid, Marketplace, LTSS, Foster Care, and others.
Our experience and expertise across these programs, as well as our understanding of the remaining opportunity, has helped us develop our 2020 vision, to be the leader in government healthcare. This vision represents our continued aspiration to grow across the government health programs that we know best, but also provides the opportunity to expand and diversify our portfolio into products like Medicare, federal services and correctional health, technology and tech-enabled services that support both internal and external customers, and selectively pursuing provider opportunities that are focused on government programs. The 2020 vision will leverage our deep understanding of how to help governments execute on their policy objectives by providing high-quality services at an affordable cost. As you heard from Cindy this morning, this applies to our international opportunities as well.
We also recognize that leadership isn't just about being the biggest, but also about being the best. We'll continue to differentiate Centene as an agile thought leader across government programs. You've already heard this morning about some of the key strategies that we are pursuing to achieve the 2020 vision. Chris and Kevin discussed the progress and continued focus of diversification of markets and products. Mark and the technology panel talked about the importance of enabling technology and integration of platforms across the Centene enterprise. I want to further discuss one of the key success factors Michael talked about this morning, our commitment to a strong local approach. This has been a hallmark of the company from the beginning. We put significant effort into preserving this important part of the culture.
We understand that there's a benefit to having local leadership with the autonomy and authority to make decisions that are in the best interest of our members, providers, and regulators. There's an additional benefit to our local approach, the opportunity to go above and beyond to meet the holistic needs of our members. The interest in addressing social determinants of health has reached a tipping point over the last 18 months. You can't go more than 24 hours without an article, anecdote, or direct encounter that highlights the complex and interrelated challenges faced by underserved populations across the country. Virtually every healthcare organization now has new programs to address the holistic needs of the consumer. There are a number of startup organizations that have been created to address these challenges as well. For Centene, we've had a commitment to addressing social determinants of health for over 30 years.
It's foundational to our care management model, our culture. We couldn't preserve our local approach without it. Every Centene market has some form of social determinant initiatives. You heard one of the success stories from Nevada earlier this morning. I'm pleased to say that there are countless stories like the one we heard from Patrice. We want to provide a broader perspective on the types of social determinant activities that we have in place across the country. The primary categories of focus for Centene are housing, food, education, employment, and transportation. What you see here is a representative subset of examples across Centene markets and products. These efforts typically include a Centene team and a consortium of local and national partners with a shared commitment to making a positive difference in the lives of those who need it most.
This is a good example of how we've become the leader in government healthcare. We will continue to innovate and expand our efforts in this important area. We know that these efforts make a difference for our members. Beyond being the right thing to do, it also has a positive business impact for Centene. You'll hear shortly from Brent Layton about the growth pipeline and our continued success on the RFP front. It's not a coincidence that we have both a strong commitment to our local approach and the industry-leading success rate for government health RFPs. Before I turn it over to Brent, I also want to provide an update on our recent M&A activity. Let's start with the slide I shared at our December Investor Day. This highlights areas of focus for our capital deployment strategy.
We've had an active start to 2018 and have executed on investments consistent with our 2020 vision and diversification strategy. The 2018 investments fall into 3 broad categories: core health plan, technology, and provider-related capabilities. I'll share comments on each of these categories. As you heard earlier from Michael, the Fidelis deal is on track for a July 1 closing. The Fidelis business continues to perform well across products, and the management team has been fully engaged on our integration efforts. We've taken advantage of the additional time ahead of closing to progress our integration plans and are ready to hit the ground running in July. You heard from Dr. Ghouri, as well as Ravi and John, about our recent technology investments.
Beyond the specific benefits of integrating advanced technologies and platforms into Centene, it's important to note that we have established Centene as a partner of choice for technology companies. We believe our track record and approach will create additional technology investment partnership opportunities into the future. On the provider front, we completed the Community Medical Group transaction in April and are enthusiastic about the additional capabilities to support value-based care for government programs and the enhanced ability to address potential access to care challenges. We also include the MHM transaction in this category. As Kevin mentioned earlier, MHM and Centurion provide a wide range of services to correctional and related programs, but they are in the delivery of care business. Through the combination of CMG, MHM, and our previous USMM investment, we've developed a meaningful portfolio of provider assets.
On a combined basis, we have over $1 billion in provider-based revenues, with nearly 6,000 clinicians delivering care in approximately 400 facilities across 21 states. When we include our international provider assets in Spain and the U.K., these numbers increase to over 9,000 clinicians delivering care in over 500 facilities. Importantly, each of these provider groups are specifically focused on government programs. We believe that this is an important capability, and we're actively pursuing opportunities to leverage our efforts across our provider portfolio. Consistent with the comments about technology, we believe there is significant opportunity for provider partnerships across Centene markets and products. As we have said on multiple occasions, we will be targeted in our pursuit of provider assets that support our focus on government programs.
We've successfully completed and integrated over 45 transactions over the last 15 years and will continue to include M&A as an important part of our growth strategy. As our business has grown and diversified, has our deal pipeline. We have more investment opportunities now than ever. We'll continue to pursue transactions across the government, technology, and provider categories that we have discussed. We will ensure that future transactions are aligned with our 2020 vision, and we'll consistently apply discipline to our M&A and integration processes. In conclusion, we're confident that Centene has a strong and diversified platform to drive continued growth and innovation with our portfolio of markets, products, service capabilities, and technology. We are uniquely positioned to achieve our 2020 vision of being the leader in government healthcare. Thank you, and I'll now turn it over to Brent to talk about our growth pipeline.
Quite the exit there. Thank you, Jesse. I am excited to have the opportunity to discuss Centene's growth prospects with you this morning. Let me begin with the overall growth opportunity. This slide continues to show tremendous opportunities for growth. There is a large ceiling and great ability for expansion within the healthcare arena. All of these areas combined address an addressable market of almost $2 trillion. As you would expect, Medicare and Medicaid constitute the majority of this market, combining to approximately $1.5 trillion. Yet international healthcare opportunities provide a long runway with an estimated $182 billion market for Centene. In federal services, the health insurance marketplace, and correctional health gives us strong product growth. Of that roughly $2 trillion healthcare space, we have a targeted pipeline which sits today at $270 billion. To better understand Centene's future, it is important to look at our past successes.
Between 2012 and 2018, we have targeted 52 Medicaid opportunities. We were fortunate to win 42 of these 52 targeted contracts, representing a win rate of over 80%. Let's talk about ways in which we can continue to grow at Centene. For many years, Centene's growth was led by entering new states and helping states transition fee-for-service programs to managed care. As these new states become existing markets, Centene continues to see opportunities for strong organic growth and expansion. Let's start with existing markets and their growth opportunities. How can we build upon this footprint, our footprint, of 31 states? In states in which we currently operate, we seek to continue to increase our membership and footprint through re-procurements, service expansions, and product expansions. So far in 2018, we have been awarded three contracts in existing markets: Arizona, Florida, and Washington.
In Arizona, we were awarded the Central and South regions for Arizona Complete Health re-procurement, integrating physical and behavioral. In Florida, we were awarded the statewide Medicaid managed care program in all 11 regions, as well as the remaining sole source provider for the child welfare program. In Washington, we were selected for five regional areas for Apple Health's integrated managed care program, which adds behavioral health to the current program. All three of these existing market wins represent Centene's strong track record with re-procurements, as well as the ability to adapt to program changes, such as integration of physical and behavioral health that can result in increased revenue. As we said earlier, we have a successful track record of RFP wins. We feel strong on the outstanding re-procurements. We are still waiting for the results for the Texas STAR+PLUS RFP and the Kansas KanCare 2.0 RFP.
We are currently working on the Texas statewide STAR and CHIP RFP, which rolls in all STAR and CHIP service areas, including those in the accounts of 2017 CHIP rural service RFP, and also the recently released Mississippi CHIP re-procurement. Looking ahead, our existing market pipeline continues to show opportunities such as the re-procurement of the Florida Healthy Kids program. We continue to look for opportunities to expand our service offerings in existing markets. As we discussed in December, we were awarded the Illinois statewide expansion. From 2017 to 2018, we have grown from servicing roughly 240,000 members in 12 counties to 400,000 statewide. This resulted in our revenue increasing to over $2 billion. Later this year, we will begin serving foster care members as the sole source provider. Another way in which we further our presence in existing markets is through product expansion.
As you heard earlier from Kevin, we continue to expand on our product portfolio through Ambetter, through our Medicare platform, Allwell, and correctional health through Centurion. For Ambetter, we'll build on our platform of 15 states by adding four new markets in 2019, including such states as North Carolina and expanding in current markets. For Allwell, we are looking to expand within our 19 markets, as well adding new Medicare Advantage states to our growing portfolio. Finally, through the acquisition of MHM Services announced in February, we've expanded on Centurion's state footprint. This expanded platform creates an opportunity for growth in state prisons and also county-based facilities, as we've seen in our recent award in Arizona for the comprehensive healthcare services for Pima County's adult and juvenile facilities. Now let's discuss our growth and expansion in new markets.
In December, we discussed our interest in opportunities in New Mexico and Iowa. We're pleased we were awarded contract in both of these new markets. In New Mexico for the Centennial Care 2.0 program. Currently, this program serves nearly 700,000 individuals. For the Iowa Health Link program, which currently serves approximately 600,000 individuals. Both of these contracts begin in 2019. We're excited to partner with these states and begin serving new members. As we mentioned before, in North Carolina, we continue to build and develop our provider-led health plan, Carolina Complete Health. This joint venture with the North Carolina Medical Society and the North Carolina Community Health Center Association or FQHCs, demonstrates Centene's ability to work closely with providers to meet the state's objectives for the upcoming RFP. Centene's entrepreneurial spirit never ends, which is why we're always looking at future growth opportunities.
When we look at the current Medicaid landscape, we view many opportunities for growth and diversification. Of the total Medicaid spend, nearly half still remains in fee-for-service, representing a $274 billion opportunity. Of that $274 billion fee-for-service bucket, nearly 70% lies in Centene's markets. Markets in which we can build off our existing health plan relationships as more populations become added to managed care. Finally, of the remaining $97 billion in fee-for-service in non-Centene Medicaid markets, 50% of that is in managed care states, while the other half is in states without traditional managed care. We feel there's an opportunity for growth in this space, given we've entered 16 managed care states as non-incumbents, and since 2006, we've been a part of 10 states transitioning from fee-for-service to managed care. Looking ahead in 2018, there are 36 gubernatorial elections across the country.
Of the 36 states with elections, Centene serves Medicaid members in 22 of those states, while nine of the remaining 14 are fee-for-service states. Elections and leadership matter in many ways, including how states decide to manage their Medicaid program. We'll watch closely as these states turn to new leaders and new approaches. Centene is experienced in state leadership transitions, and we believe this will lead to many new organic growth opportunities. After discussing the growth opportunities that exist in managed care domestically, I want to just briefly touch on our growth and diversification through international opportunities. As Cindy highlighted earlier, we have a growing presence in Spain and the U.K. With this international foundation, we believe we can pursue the numerous opportunities throughout the globe. Our approach will be local and regional as health systems look for expertise and technology solution to bring better outcomes and more efficiency.
Last December when we discussed our Medicaid pipeline, we delivered with awards for three re-procurements and two new markets so far. I hope when we meet again in December, I can show you similar successes internationally. Now, what kind of growth conference would this be if I didn't give you a revenue number for 2019? For 2018, the midpoint of our total revenue guidance is $59.6 billion. Based on what we have won, and know as of today, we have visibility into $69 billion plus in total revenue for 2019, which represents over 15% growth from our 2018 guidance midpoint. Now, this includes a full year of recognizing Fidelis revenue, a full year of revenue in 2019 for markets and product expansions that began in 2018, and finally, new contracts will begin in 2019.
In summary, we're a disciplined growth company focused on margin expansion, a robust pipeline, total revenue in excess of $69 billion, and a diversified growth strategy across all markets and all products. Thank you for your attention. We look forward to updating you later this year on our ambitious plan and the exciting growth initiatives happening across Centene.
Thank you, Brent. It's time for our second set of questions, if we have any.
We have Mike.
First question. Is this on? Is around the RxAdvance and how that relates to what you're already doing on the PBM side. Does RxAdvance provide potential data analytics on top of your own internal PBM operation, or is somehow you're going to move that business over time to RxAdvance? Give us some update on Centene's own PBM strategy.
RxAdvance becomes the PBM, and its capabilities go far beyond a traditional PBM. When you see what it can do and some of the things they talked about, it integrates the total healthcare environment and situation. It helps with the physician. It gives them choices, helps them understand it with electronic medical records. It significantly reduces back room costs. Ravi talk about that. At every level, it becomes our PBM, but at a far more transparent, far greater capabilities. Ravi, yeah.
Is there a transition period where you move your business to them somehow?
Right now, they're currently working with our, especially pharma companies and our PBM to integrate it and manage it.
Okay. Maybe just a question on the-
Jesse, you want to add something to that?
Yeah, I think you covered it for the most part. I think the way I would think about it, [inaudible], there are capabilities that Centene has on pharmacy management. We've got a lot of people, we've got a lot of experienced clinicians, including how that kind of pharmacy management is done at the market level. That's kind of the Centene platform. There are other functions, including administrative functions, where Ravi talked about prior authorizations, a number of other things, including network and rebate contracts and the like. I think what we're really talking about doing is optimizing the combination of those things over time, and there will be a transition. Each of these are complicated, kind of it's a complicated operating model. We have a market-by-market plan where we will roll out the integration in the future.
Okay. The other thing I was just going to ask about is on the data analytics platform, Interpreta. Is that capability rolled out to all of your members at this point? Is there a focus on sort of the higher acuity Medicare and DSNP type population? Or tell us a little bit about that.
Well, Brent, do you want to talk about how we're rolling it out and where you're headed?
Can you hear okay?
Yes. Can you repeat the question, please?
Just to understand, all that data analytical capability that you were talking about, is that available to all the members? Is it mainly focused at sort of a higher acuity Medicare Advantage type, where they're consuming a lot of care, and they're having a lot of touch points with the care management system? Give us some flavor for that.
Good question. Yes. We analyze every member continuously, regardless of product line or their prior clinical acuity because people weren't previously sick. You have to continuously analyze the whole population. We don't selectively analyze just one product line. The results of that analysis are made available to doctors through portals like Availity, to care managers on applications such as TruCare, and we have a partnership with a consumer company called Higi that makes it available on a consumer app. The important point being that you have to analyze every patient every day because you don't know who is about to get sick, not just the people that were historically sick or not just one product line. Additionally, one important point is that everyone's analysis is the same because it's non-latent. That means that people are not working on a different roadmap. Everybody's synchronized.
That's why we call it intelligently synchronizing healthcare. That eliminates rework, false positives, and redundancies, makes care much smoother with unified targets. Is that helpful?
Yeah. This is Jeff.
You look at how many files in one minute?
We're currently processing 12 million medical record transactions per minute on a continuous basis.
The second piece of that is the rollout schedule. I think Chris mentioned we have eight health plans that are coming, and I think that was the comment, they said the health plans are eager to get their hands on it, right?
It sounded like the focus was on things like gaps in care, I could see that it would also give you access to information about utilization much quicker than you would otherwise have. Is that true? What might that be as an opportunity?
The gaps in care, there's a large knowledge base in our engine that's not just gaps in care, it's drug safety, it's prescribing medications that do not adhere to the FDA recommendation for pharmacogenomics. It's medication adherence, it's prevention, duplicate therapies, gaps in risk adjustment, member prioritization. It's a very powerful suite. You can think of it as like a Microsoft Office for healthcare. It's not everything under the world, it's the core clinical needs that represent the vast majority of actionable opportunities.
The example I've used is it can pick up somebody's potassium going up from one period to another, which would be an indication, Dr. Yamaguchi, what kind of diseases?
A heart arrhythmia, as you emphasize, a potential.
If you can see that there's something looming there, notifies the doctor, and they can be proactive in dealing with it rather than waiting till the condition appears. If we're going to get ahead of the curve in cost and improve quality, you need that kind of capability. We believe those should be core competencies of our company.
Steve Tanal from Goldman.
Steve, just following up on that point. I get how the data's being made available. Can you give us an example of how it's actually being applied and how you're maybe enforcing or just making sure that it's being applied appropriately, at least with the doctors in network, and maybe some numbers around savings, if you have them? I understand it's probably early.
Well, as others can comment on, you can make them aware of it. The physician will attempt to work with the patient to take the necessary action. We've looked at programs that test drug compliance and that type of thing, you can go so far. We have to operate on the basis that most people, if they know they have a condition, and they know what can be done about it, will do it.
Okay.
Does that help, Steve?
A little bit. Yeah. That's helpful for now. Just one other question. I know it's early, maybe just any high-level commentary around puts and takes for margins into 2019. You guys have any thoughts on that?
Yeah, we're not going to get into the margin discussion. I think that's consistent with what we've done in the past. We give the revenue number now. We'll give you the full guidance in December.
All right. Thank you.
It's extremely short because that's the revenue we see. We have clear visibility to this point in time. It doesn't mean that we're done.
Understood.
Jesse, were you going to comment something earlier on an earlier point?
Yeah. Just to kind of connect the dots a little bit, Steve, on the question in terms of the provider integration. Part of what you heard today, hopefully, is that there's a whole ecosystem that we are a part of, but not all of. There's a consumer component, there's a provider component. I think the integration of information and the incentives, obviously things like value-based contracting, are all part of the picture here. I think this is an opportunity for us to actually put our physicians in a position to take better care of our members.
I was going to say, do you think the value-based contracting is in a place where those incentives are already adequate to have the physicians acting on the data, or does that still have some ways to come?
I would say the information that we're providing is in the next generation category. There's an opportunity for value-based contracts to catch up.
Perfect. Thanks.
Matt Morris .
I wanted to ask about the Fidelis acquisition, which obviously we're on the cusp of that closing, and your outlook for the integration process, which I know you put a lot of planning and work into already. I guess the context here is Fidelis is a large-scale acquisition. You have the backdrop of Health Net, and that was a very difficult integration in many ways. I'm sure you'd agree. Is Fidelis going to be, do you think, significantly more straightforward, and can you just talk about the synergy realization?
Cindy, you were
Yeah. Well, we have a lot of muscle memory left over from the Health Net acquisition and the integration planning process there. Our approach has always been very local. The local management team at Fidelis stays intact, and which are highly competent individuals and do very well. We are just doing a business as usual approach, and so we're well ahead on the integration and planning process in terms of the systems that we will bring in place and a lot around the cultural aspects of it, because that's a key component for us. That planning process is well in place, and so this should be an acquisition, I think, and the integration should go very smoothly.
Jeff, you might comment on the finance, because that's an important part.
I would echo Cindy's comments. I think it's a well-run health plan. On the finance side, specifically, we benefited from the fact that they're on the same general ledger that we're on. We're looking at a day one go live on the finance side after transaction. That's something that we could not have done possibly with Health Net. We're excited about that, and we'll get that information in our centralized general ledger day one. That's good news.
Josh, did you have a question? Okay.
Thank you. Follow-up to that and AJ's earlier question. You've made clear that your opportunity for cost synergy in Fidelis is more on the medical cost side, and we had in our notes that maybe that might even come from pharmacy, particularly in year one. Wondering what your views are on medical cost savings, how that interrelates with a lot of the Interpreta and RxAdvance discussion that we've had in the last hour or so.
Yeah, this is Jeff. I would say, the synergies that we put out there, we announced this transaction last year. The synergies we put out there do not contemplate, I would say, the full RxAdvance Interpreta that we're talking about today. I think that's more in the future category. First, what we're trying to do is obviously get our existing health plans and our existing business on that. I think that's future opportunity above and beyond the year two run rate synergies that we previously mentioned.
I think what's important on the medical, we said their MLR is high. We expect that our systems are going to help them manage their medical expense. Their G&A is very low. I've said at various conferences to expect the G&A to come up, but we expect a medical loss to come down more than the G&A goes up.
Is it right to think that the sequence of the medical cost improvement is pharmacy heavy early? If so, what types of steps does that entail?
I wouldn't just specifically call out pharmacy. I would say it's one component. We have a lot of contracts. We have national contracts in lab, radiology, things like that ultimately we would look to consolidate day one. I would say it's the total medical cost picture. There will be some administrative savings by combining insurance policies and corporate cards and things of that nature. I don't want to mean to say, like, they're zero. There are some that will hit day one. If you think about taking, I would say, contracts for other medical costs, combining those and getting the best of both worlds, that's really what's driving the early synergies with the medical management initiatives and rolling on our capabilities on analytics, risk adjustment, those things really driving the back half and the following year.
There's case management. There's a lot of system capability, case management, what have you, that will help them with their medical expense.
Steve.
Just one more quick one on the RxAdvance. I guess it wasn't crystal clear on the current revenue model, whether that's more of a SaaS subscription-based revenue model right now, and will that change? Will it become maybe some sort of percentage savings? Just curious if the revenue model, I need a little more color on what it has been and will that change, under Centene. Thanks.
Jesse, do you have anything?
Yeah. Without going into too much detail, the way I would describe it is there's a baseline administrative component with this notion of transparency kind of transcending into a shared savings model.
Josh, I guess the topic du jour, I've got an RxAdvance question as well. Just maybe help us understand a little bit more about, is there any exclusivity to Centene? I assume there's an effort to sell this externally. Then what are the benefits to Centene when and if RxAdvance does sign up other customers? Are there scale benefits where you get discounts, where your rebates go up? I assume there's a direct investment where you probably have some sort of economic value creation as well.
Yeah. I'm not going to discuss in full detail, Josh, the confidential arrangements we have with them. I would say that there are some external sales, that the priorities and how we go about it are something that we've agreed to with them, and it should be to everybody's mutual benefit.
That's helpful. Then, the second question, just on the medical management system and the Centelligence dashboards. You talk a lot about real-time data, and it sounds like that's really dependent on your relationships with the providers. I'm curious, what percentage of hospitals or institutions are you guys linked on electronically? What percentage of the docs? When you talk about sort of those processing real-time updates, are those just when the claims hit or are those actual patient encounters?
It's a combination. Ahmed?
Oh, thanks. When the new patient data element hits the engine, it recalibrates the risk assessment of the patient and regenerates the care plan in about less than 50 milliseconds. The rate-limiting step is how fast can the data source get data to the engine.
In some cases, for administrative convenience, it's done at midnight every day for a big insurer. With some of our other partners, it's actually real time. For example, blood pressure, biometric readings from the Higi station happen in less than a second. Transactions from a PBM or a lab can happen in real time if it's a national lab or a national PBM. Our engine's not the rate-limiting step, it's the data supplier. Okay?
Kevin.
Kevin?
Great. Wanted to ask maybe another question on Fidelis. Want to make sure that from your perspective, Fidelis, it's a well-run company, that it's actually operating as expected heading into the close.
Yeah.
They asked for a pretty big rate increase on the exchanges for next year, I wasn't sure if there's anything we should be reading into about their view about this year's performance on the exchanges being below average.
Jeff's been looking at the numbers regularly, he's a good source to answer that.
Yes. It's been running in line with our expectations.
Any color about the rate increase and why it seems so large?
No, I don't have anything to comment on that. Again, we're operating as separate companies, obviously, until the transaction closes, that was their rate filing. I know the New York program's designed a little differently than the exchange program in the majority of our states because they have an essential plan that covers up to 200% of the FPL, it's a little bit different design than what we have in other states.
Just a question on MA. I know, Jeff, you mentioned that you could use the HIF as a way to keep margins relatively stable for next year, everyone's benefiting from the HIF for next year. Does that mean that we should expect Centene to maybe grow below average because you are going to have this headwind from a STARS rating? Secondly, around STARS, you've been using the 4-STARS rating as this entrée into new states. You get that benefit from the corporate level STARS rating. If you drop below that, does that slow down how much you want to enter new states in the next couple of years?
I think I stated earlier that our commitment to the Medicare program, Kevin, is fixed. I've asked Kevin, I've asked the health plans and others to just go at it very methodically, come up with their growth plans. We'll then look at the cost and make the determination how best to do it. Kevin?
That's right. Just to amplify that just a bit, one of the things that I mentioned was that we've been working on the foundations of STARS and performance improvement. We've been making good progress in that. We've got a little bit more to do, and we've put measures in place to do it. From the results we're seeing so far for this year, which impact 2020, we're feeling like we're making very good progress. Lance, go ahead.
Yeah. A question on the several wins you had recently on the Medicaid space. I was just interested in understanding, as you do a postmortem on those wins, how much benefit are you getting from things like social determinants of health, from having such a broad range of capabilities that you're offering? Where I'm particularly interested in this is you're looking at like an Illinois or a Florida, and you're seeing a consolidation in the number of vendors. Is this something structural where you're seeing an advantage where perhaps only the largest players or particular capabilities are giving you some additional benefit there?
Brent, you go.
There is no doubt that social determinants and RFPs over the past 18 months have increased, we see it forward from that standpoint. Just as you saw in the presentations, we've been using that really in our approach to overall healthcare now ever since we've been a company. Absolutely. Being flexible, being in the community, being local, working those programs has been an advantage, we'll continue to build on it. I think we're going to see more and more of it in RFPs, I think you're going to see it more refined in how they ask for it and demand of it.
Do you have any sense or an anecdote you could share with us as far as perhaps the amount of weighting that some of those things are given, as well as is there increased emphasis or weighting on things like high acuity or complex population capabilities?
I would say the weighting, I think you'll see more in the RFPs. Right now it's more embedded into questions around quality and sometimes around service delivery. I do think it's the potential that ongoing RFPs, it might have its own section, its own points. So far, it has not been that. Clearly, just as Jesse said in his presentation, more and more states are wanting to know what you're doing about social determinants, so it's very possible.
Got you. The last thing on it is just, are you seeing incremental revenues associated with it as you're picking up transportation costs and things like that? Is it really embedded in the rate in order to drive down costs?
Well, things like non-emergency transportation, years ago, if we sat here five or six years, it was carved out, now it's carved in from that standpoint. What we're having to do is work with states. Some services that you've seen that might be a part of a waiver, whatever, is folding in. At the same time, we're having to find ways to deliver services that really helps us do social determinants. It's a little of both.
Great. Thanks.
I just want to add that when you were talking about RFPs, the capabilities we've been talking about, we have and continue to develop, don't hurt either when it comes to showing what you can do to improve quality.
Yeah. Just back on the RxAdvance, where you've been growing revenue, and it seems to be exponentially accelerating, you're competing against CVS, Optum, Express, I'm assuming, given that you say it's a full service PBM. Can you talk about the mix of your customer base right now, and then do you see the
These mergers as being kind of a disruptive change and any change in the value proposition of the competition, or it might not make a difference in any of you?
Thank you. RxAdvance is in its early stages, the revenue mix is something that Ravi should be talking about as opposed to myself. I'm going to kind of duck that one a little bit, Anna. From a standpoint of where it's going, I think it's so different that we're doing our thing with it. Of course, some of the other PBMs will have more captive customers. I mean, CVS and Aetna and Express Scripts and Cigna and some of the others. What happens though, we're seeing more and more of it internal. I'd like to believe that this has a lot of appeal external, where we have the capacity to use it. Jesse, you want to add?
Yeah, I would just say, there's obviously a lot of activity in the industry broadly. I would say from the conversations that are out there, kind of other health plans, other interested parties, there is, I'd say, significant appetite for new competition in the pharmacy space.
Thank you.
Yes.
Well, right now we are focusing heavily on the Centene implementation, there are a lot of other large players are doing due diligence on us. Once we have about, just to add one of the points, we have four health plans. We are Centene health plans. We are transitioning them from the current PBM, then we have another 12 or 13 plans next year, and 2020 we'll be completing. We are in the process of due diligence with other large health plans. You will hear those news in coming months.
I didn't see you, Brad. You asked a lot of questions your way.
Can I just make one observation to the earlier question?
Please.
One of the big differences between RxAdvance and any other PBM is that we all take the data, which is clinical claims and related lab data, for every script, and we adjudicate the reimbursement between the pharmaceutical companies, the health plans, and the pharmacies. All of us do that. Only RxAdvance, because we're the only cloud PBM, is able to take that data across the entire continuum of care. No one else can do that. What amazed me when I got involved with RxAdvance was that I saw that the same technology that every PBM is using, remember, they were all built 35 years ago, was the same technology that I saw when I showed up in Silicon Valley. It's green screens. It's mainframes, typically IBM AS/400s. It's all hardwired. They have no way to take that data across the entire care continuum.
One of the things that really interested Michael Neidorff was that we can take that data. As you know, 86% of the healthcare costs are chronic care patients. 5% of the population represents 50% of the $3.5 trillion spend. We're the only ones who can take that prescription data out to, let's say, the high comorbidity patients who have eight, nine chronic care diseases. We're the only ones who can drop automatically into every physician specialist practice management screens and be able to show every medication that that patient has. Where is the duplication? There's always high duplication, which is unnecessary costs. We automatically can show the side effects that come from prescriptions that are made by physicians who don't know what the other physicians are prescribing. It's not that the physicians aren't competent. They just don't have that information.
We have the ability to be able to track adherence. 50% of people don't actually adhere to their medications. The implication of cost savings are substantial at every level in terms of lowering the cost of people being over-medicated unintentionally, being able to track adherence, being able to track side effects, lowering cost of people going to the emergency department. The readmission of people back into the hospital 30 days after discharge. Those things can come down. McKinsey Global Institute estimated there's $350 billion of drug-impacted medical costs that are avoidable every year. RxAdvance is in the best position of being able to take literally billions and billions of dollars of cost out of the Rx ecosystem, and that's what makes it so differentiating. What's exciting to Ravi and me is that Michael Neidorff runs Centene as though it were still an entrepreneurial company.
It's got the culture that attracts people like Interpreta, us, there'll probably be others in the future. As we looked at joining up strategically with RxAdvance, we said, "Gee, we saw how UnitedHealthcare built Optum, but Optum's analog." Optum is very people-intensive. We said, "Wow.
Michael's talking about transforming the healthcare system that Centene can offer and being able to use digital platforms. It's all about platforms. Interpreta is a platform. We're a platform. It's all about taking platforms and being able to impact across the entire care continuum. That's what makes RxAdvance so different than any other PBM out there.
I want to add one more thing to what you said, John, that is, while you're reducing the cost, the way the doctors can look at drug interactions and the side effects, and that chart that shows where the doctor can look at it and make a determination, which is the best drug for that particular syndrome.
Absolutely, Michael.
Improves quality incredibly.
Yeah. Then when you look as Centene rolls out Interpreta and the things that Ahmed talked about, the things that we do are incredibly complementary. That Centene has the potential. Remember that the government health plan sector is growing much faster than the commercial sector. The ability to go into the government sector, particularly with the most vulnerable people, where Centene's already demonstrated that they can make money on exchanges. Nobody else can do that. Now you take Centene being able to get the leverage of platforms, doing types of things that Michael just described. It's going to revolutionize the healthcare industry in the U.S.
Fascinating. Thank you.
Good question. You got us really started with one question.
I think that's it. Oh, one second.
This one's on RxAdvance as well, from Gary Taylor of JPMorgan. Can you offer more details on timing, magnitude, and source of the substantial net income opportunity cited for RxAdvance?
Go ahead, Jeff.
No, it's a little early. A little early for that right now.
Anything else? Well, I want to thank everybody. It's fun for us to be able to share these things with you and talk about it. We're looking forward to December when we'll talk more politics, we'll talk the advances we're making, how it's coming together, and you'll get the full guidance for 2019. Thank you. Have a great summer.