Hi, good morning. I'm Cal Sternick. Thank you all for joining us for the J.P. Morgan Healthcare Conference. I'm pleased to have with me here this morning from Centene, CEO, Sarah London, and CFO, Drew Asher. Before we get to Q&A, I'm gonna turn it over to Sarah and Drew for some brief introductory remarks.
All right. Thanks, Cal. Good morning. Can you all hear me okay? All right. Good morning. We're excited to be here with everyone in person and to kick off the conference. For those of you who are newer to the Centene story, I thought I might provide a little bit of background. For those of you who've been following us, this may be repeat. Centene is one of the largest managed care organizations in the country, serving more than 26 million Americans. We focus on government programs and have a deep expertise in serving lower income and medically complex populations. Today, we are number one in Medicaid, with more than 15 million members in 30 states across the country. We are also the number one carrier on the Health Insurance Marketplace, having been in that product line since its inception.
Over the last couple of years, we have significantly grown our Medicare footprint and now operate in 36 states and have a unique concentration of dual-eligible members. For the last year or so, Centene has been on a value creation journey, the goal of that is really to leverage the size and scale of the organization that I just described to operate more efficiently, to improve quality across our business lines, and ultimately to deliver enhanced value to our members, to our government partners, and to our shareholders. We had our Investor Day in December and talked about the fact that this value creation journey is really the bedrock of our long-term strategy.
We believe that by focusing on our core business and investing to be easy to work with, as well as leveraging the unique local approach that Centene takes, and building on trusted partnerships to drive innovation, that we will be able to deliver on our short-term EPS targets between now and 2024, and then deliver 12%-15% EPS growth over the long term. We just finished out the first year of that value creation agenda. 2022 was a very busy and successful year. We had strong earnings performance. We delivered on all of our major operational milestones. We had a successful procurement year. We also divested a number of our non-core assets as part of focusing on our core business. We deployed capital in a strategic fashion against that value creation framework, including material share buybacks.
And at the very end of the year, we installed a new leadership team at the top of the organization to reflect the depth of managed care experience that we have within Centene. Very excited about 2022. Coming into 2023 with solid momentum, and as you can imagine, given our footprint, we've been very focused on the Marketplace and Medicare enrollment periods. Still a little too early to know exactly how those are gonna play out, but we are seeing soft membership in Medicare as a result of our decision to focus on proprietary distribution channels, which is consistent with our strategy in Medicare this year and setting up for the long term, focusing on margin product stability and overall quality.
We're also seeing very strong performance in Marketplace, consistent with our belief that the market stabilized coming into this enrollment period and created a positive environment for profitable growth. Our earnings guidance for 2023 remains $6.25- $6.40. We have a few more weeks to shake out, and then we'll revisit revenue guidance if needed, which will likely skew to an increase, net of divestitures. More to come on all of that, and I will turn it over to you, Cal, for questions.
Thanks, Sarah. Maybe just to touch on guidance in a minute, I think the first thing I wanted to ask is, you know, you've been in the CEO role for now almost a year. Can you talk about what surprised you the most so far?
Yeah. I think, I knew this having been part of the organization, but what is most interesting and surprising is just how mission-driven Centene is. From the top of the organization all the way through to our frontline employees, we have 70,000 people, more than 70,000 people who show up every single day, deeply committed to the mission of transforming health of our members and communities. While that is and sounds like a feel-good, it's also, in many ways, a superpower. When you are asking an organization to go through tremendous change, fundamentally changing our operating model and starting to transform for the future, the fact that our employee base is so committed to doing the right thing for our members means that they can absorb that change and get enthusiastic about it.
I think that has been part of why we were so successful in 2022 and created sort of an engine for transformation and impact going forward.
Great. You mentioned that, you know, soft MA membership, very strong Marketplace, you know, I think that was reflected in the guidance you gave at your Investor Day last month. Has anything come in a little bit differently than when you expected? When we look for the guidance increase, I think probably with fourth quarter, right? Will that also include the impact of Medicaid redeterminations and the timing shift there?
Yeah. Do you wanna cover that?
When we talk about soft MA membership, it is relative to what we said at Investor Day. Also, strong Marketplace membership relative to the high teens that we laid out at Investor Day. It's, you know, meaningfully stronger than that already strong result. That'll shake out likely in a revenue increase. We've gotta get through the enrollment period for Marketplace, which ends January 15th, or for some state exchanges, it actually goes to January 31st. Look at the data, and then, at the earliest, on the fourth quarter call in early February, be able to give an update there, just how the open enrollment's shook out.
Got it. Maybe just to start on redeterminations. I mean, we now have some clarity there. It's looking that, you know, April 1st is when things are gonna start. The states have 12 months to complete the redetermination process. You know, I think even prior to the spending bill coming out and them shortening the timeline there, you know, there were questions about whether or not states could realistically get this done within the 14-month timeframe. Can you give some color just on state readiness to complete redeterminations and, you know, in your view, is 12 months an achievable or realistic timeline here?
One of the benefits of the fact that we were all preparing for redeterminations at this time last year, is that it has allowed the entire industry more than a year to think about what is the right administrative approach, what is the right collaboration structure in order to maximize coverage continuity and minimize member abrasion, which is in every state that we talk to, regardless of budget, state, or political leaning, that is a priority. 12 months does feel very realistic to get that done. Certainly more realistic than, I think, where some states started in the six-month range. What we saw over the course of last year was that most states started to move into that 10 + month zone.
Across our membership base, we have 88% that were in states that were signaling at least 10 months to get the work done, and I think there are a number of different operational approaches, if you think about just, you know, going through the eligibility check on the anniversary, that make it logical to run through in a 12-month period. There were definitely some positives for us that came out of the legislation, in terms of, you know, making sure that we could help the states in reaching out to members. They loosened some of the structures around direct member communication, which I think is important for the industry going forward.
Also the public reporting of data so that we can all monitor what progress the states are making and ensure that they aren't going too fast, and in fact, creating a suboptimal experience for members.
I mean, I think you said, if I heard you correctly, 88% of your states are sort of in that 10-month time zone?
10 months or more, yeah.
10 months or more. Okay. Are there any, like, particular states that you would highlight that are, you know, suggesting they could move faster or slower?
It's hard to say, given the current legislation, where the thinking has changed. I think there was probably only one major state that was in the sub 10-month timeframe. Again, I think as the states have gotten their heads around the work it's gonna take to do this, they are all leaning later in the timeline process.
Got it.
You probably saw the bulletin that came out Friday, which actually enables. It clarified for states that, hey, you can take 14 months if you want to or need to.
Mm-hmm.
That was a good clarification.
I mean, is there any impact to managed care plans if redeterminations take longer than expected? I mean, does CMS have any sort of recourse against the states?
It's a good question. I think they'll all try to comply. You know, obviously, they get the enhanced FMAP, which steps down over the four quarters in 2023, if they took longer than 14 months, it would go that would be well into 2024. TBD. We're just gonna work with our states to make sure that we've got the ability to reach out to members. There's been a lot more leniency. Some of it that has been promulgated in the regulations. For the first time, leniency in contacting and the modes of contacting members so that we can make sure there's continuity of care. States, regardless of how conservative or aggressive they plan on being with the timing of redeterminations, they all want continuity of care for their members.
We can help there with the Marketplace products, where, like Sarah said, we've been, you know, we've been sitting here waiting and preparing and glad that we had all of this time to prepare for redeterminations. Now it's gonna be here for one. It'll be really interesting to see, just from a personnel and execution standpoint, the preparedness of states. But we're there to help them. They're our partners. You guys know the numbers. It's still about $8 billion of revenue that we expect to give back. That's out of growing $13 billion, so net's been good for the company even as we exit redeterminations. We're focused, obviously, on the mix of membership.
We weren't asked at Investor Day, and some of you were like, "Oh, we didn't get any fresh data on," you know, the data that we look at to look at the mix of a business. Zero utilizers has been a question over the past six months. An update there was, if you recall what we said previously, TANF was actually up relative to a pre-pandemic period. That's now about flat relative to pre-pandemic. The expansion population, curiously was down in a, you know, in recent periods relative to pre-pandemic. That's actually now up, which is a little bit logical. It's up a little bit. CHIP previously was flat. CHIP is Children's Programs. That's actually now down relative to pre-pandemic, and these are zero utilizers.
Once again, none of these metrics is a panacea to predict what's gonna happen in the future, but we sort of weigh these things, as we look at the, you know, what rate increases we may need in certain places and not in others. There was a lot of talk before the break on other insurance coverage, so duplicative coverage, that's always in the baseline. If we look at those that we absolutely know had duplicative coverage, so therefore there was a COB, coordination of benefits event, in the baseline pre-pandemic, about 2.7% of our members. Think about that's always in the baseline, and rates sort of reflect that mix. That happens in insurance.
You've got a distribution of those who use a lot of services and those who use very few, some of which have double coverage. That 2.7's up to 3.4, modestly up, but not alarming. These are some of the things we're looking at and presenting to our states, even in advance of redeterminations, so that to the extent we do need rate relief, if risk pools shift, and you're right, the longer it takes, the more steady and measured it is, the more we can balance getting into the state with data and getting rate changes, if necessary. Probably won't be necessary everywhere. That's what we're prepared for, and we've been preparing for that for a year, and we're ready to roll.
Is the way to think about it, I guess, I know you have a portfolio of states here, right? Is it sort of ratable the way redeterminations are gonna roll off, or do you think it'll be, you know, more back-end loaded?
Well, before the extension our assumption had been February first. At Investor Day, admittedly, we said it's likely to get pushed. I think others had predicted May 1st. I'm glad we didn't set our guidance on May first. But, the extra two months will modify the revenue reduction in 2023, which you may recall the waterfall we showed at Investor Day was -4.5 billion of that eight. A little bit less in 2023. Some of that will push into 2024 as that two months gets shifted.
Great. Maybe switching gears a little bit, you know, California, that's a big state for you guys, and that outcome, I think, was a little bit better than you guys had anticipated or, you know, certainly than we had anticipated. Can you talk about the subcontractor relationship with Molina? Because, you know, that's a little unique, and I think the state's original goal was to only have one commercial plan serving Los Angeles. I guess, you know, looking forward to the next RFP cycle, how do you think the state sort of evaluates each of your performances given this unique relationship?
Sure. We were very pleased with where California ended up and believe that the way that the department made decisions was consistent with our view of prioritizing the best interests of Medi-Cal members. We remain the prime commercial contract holder in L.A. County, as we are today. It's actually important to point out that this is not really a unique or different arrangement. We are the prime carrier in L.A. County today, and we will remain the prime carrier. We subcontract to Molina today, and we will continue to subcontract to Molina going forward. That means that we are responsible for ensuring that the quality of the programming that gets delivered to Medi-Cal members across that entire member base, including those members that are subcontracted to Molina, is as high as possible.
It's not really a different relationship for us with the state. I think it actually provides wonderful continuity in terms of a tremendous amount of work that Health Net has done to advance the Medi-Cal programming and really sort of bring forward the next generation of Medicaid care in California and allows us to continue that momentum very much as we have been.
Great. You know, going back to MA here, I know you said a little bit softer than you had initially guided for. Can you talk about, you know, in retrospect, how you think Centene's benefit offerings compared to, you know, what was in the Marketplace? What were some areas where you guys were maybe a bit more competitive than you anticipated, and where you guys were perhaps a little bit less competitive?
Yeah. I mean, at a high level, again, just to go back in time and level set, right? Over the last two years coming into this year, Centene grew our Medicare Advantage book by 50%. Our goal coming into this year was really to focus on overall product stability because we know that we have a Stars headwind next year. We constructed the benefit design in order to avoid whipsawing members between this year and next year, as well as focusing on margin expansion, which had not been the focus previously, and making operational decisions that we felt were important to drive quality outcomes, because obviously, that's a major focus for us coming out of 2024 and into 2025.
The benefit design was really, again, with that eye to stability between this year and next year. Then one of the things that we did was to rebalance our distribution channels and really focus more on proprietary channels, which we think are gonna be important for us in the long term, have a positive impact for us in terms of quality, and also important relative to our stated focus, pushing into the duals population.
As we think about that growth rate going forward, how should we think about growth going into 2024 with the Stars headwinds and then into 2025 as you start to make some improvements and, you know, progress towards that 60%+ goal?
Yeah. All things equal, and there are a bunch of things we don't know yet, right? We still haven't seen the initial or final rates. The goal is to really hold serve through 2024 on the population. Again, that's part of why we designed the benefits the way that we did and started to rebalance the distribution channel, so we felt solid carrying through 2024 and then turning back into growth mode in 2025 and beyond.
Any thoughts on, you know, what the initial rate environment could look like for 2024?
I don't-
I mean, don't wanna speculate. It's obviously been healthy the last couple of years. We'll just have to wait and see. You know, the industry will calibrate the attractiveness of benefits around the edges with respect to the rate.
Mm-hmm.
Okay. You know, I think the other big issue for Medicare right now is, you know, obviously RADV. We're all expecting that to come out next month. Can you talk about what you're expecting when the final rule drops?
Well, there could be a range of outcomes. Obviously, there's three big issues that the industry has, and we're pretty aligned and sort of going way back, so retro, far back, in some cases, being asked to find charts on claims that were submitted, not supplemental files, but claims that were submitted by providers a decade ago, and often the provider office doesn't exist anymore. You know, that's one issue the industry has, extrapolation and the statistical soundness around that. Then probably the most meaningful factor is, you know, making sure it's calibrated properly with fee-for-service. We'll see where those things come out. I think the industry stands to respond if it's not a fair and equitable approach.
Mm-hmm.
At least for us, the processes that we employ, you know, the rigor on double-checking and looking in both directions is pretty strong relative to, let's say, I remember four companies ago, 15 years ago, where we were scrambling just to make sure the vendors were actually, you know, storing our charts. I think the industry has really done a good job in vendor management. I know we have, you know, compared to 15 years ago.
Just mechanically, I mean, how does it work if CMS finalizes the rule? You know, I'm assuming everybody is gonna come out and sort of protest against this. Is it something that we'll implement, or is it something that, you know, we'll have sort of a stay put on it until all of the appeals are finalized?
Well, it depends. Really, it depends on the all the open audits from 2011 to 2013. There are open audits even beyond that. There are non-statistically sound audits, where they were looking at specific diagnoses codes. It really depends on what comes out. You're right, it's gonna be reasonably complex on what it impacts and where, or is it going forward, what the process is gonna be. Like I said, I think the industry is probably, you know, at least the large participants in the industry have done a good job making sure we've got sound processes.
I guess, you know, how have MA coding practices changed over the years? Is there anything you've noticed or observed in the industry? Because RADV, the headlines around that have gotten larger and larger over time. You know, I think there are concerns about the growth of Medicare Advantage relative to fee-for-service. Have you seen coding practices in the industry change at all, or pretty much just status quo?
I think it's the rigor and the documentation, knowing that there could be scrutiny and the alignment with providers. That's really what's changed to the good in the last, call it 15 years, and making sure that provider, advanced provider, partnerships, value-based contracting, that there's alignment and data sharing between the payer and the provider, which is actually good for the member ultimately.
Mm-hmm.
That's probably one area that's gotten a lot more sophisticated, which only helps you in the documentation that's necessary regardless of what rules come out.
Mm.
I would just add related to that, I think the advent of digital data, right? Getting digital clinical files, and then there's been a huge uptick in the technology to be able to process that data. Apixio is an example, right? Being able to harvest out of the unstructured data. I think we've also observed that those vendors have applied increasing rigor around, for example, looking not just at codes that can be added, but also making sure that all of that machine learning and AI is going back and checking for deletes as well.
Mm-hmm.
Right? The pace of the technology innovation, I think has stayed aligned with the regulation, and I think that's a positive signal going forward.
I mean, as we think about sort of the headwind, I guess, that could come out of this for the industry, I mean, a lot of the reports that we see coming out of from, like, OIG, they're all obviously older data. I mean, do you think, I mean, I know the MA program has grown substantially since then, but in terms of the headwind, I mean, is it fair to say that, you know, with some of the advances in technology, that maybe some of the clawbacks may not necessarily be indicative of what could happen going forward?
Yeah. I mean, I think it's hard to say until we know where everything lands, but relative to future state, and if we just think about our practices, and again, the application of technology that keeps really tight guardrails on the regulatory boundaries, you know, I think that we should be able to be more and more precise on that on a go-forward basis.
Okay. Maybe if we switch a little bit to the exchanges. I know, you know, we have redeterminations, and that should benefit the overall Marketplace. You talked about a very strong OEP. If we think about the way that redeterminations will impact the book, I mean, in general, how long have Medicaid members who have been disenrolled gone without coverage before signing up for the exchanges?
Let me sort of get at where you're headed, which is there are pockets, for instance, when a Special Enrollment Period was created during 2022. That didn't require some status change in the member.
Mm-hmm.
There is heavier utilization up front, as we look at the data, I mean, those are members we want. Perfectly glad to, you know, get 'em in, get what they need immediately, and they become, you know, good profitable members in the long run. There are pockets that come in where there's a little bit of pent-up demand or maybe deferred services that they're seeking. Because these special enrollment periods now have been open and it continues for those in the 100%- 150% of FPL, because they've been consistent, I don't expect sort of any big push in terms of pent-up demand.
Mm-hmm.
like we saw in 2021 relative to the COVID shutdowns.
Well, the enhanced APTCs also help, right?
Mm-hmm.
They make the decisioning process around signing up a lot easier.
Mm-hmm.
There's no cost barrier.
Yep.
To Drew's point, making that shift sooner-
Mm-hmm.
That you're not carrying pent-up utilization into the Marketplace enrollment should help.
Perfect. That's what I was gonna ask next. I mean, can you talk about some of the, I guess, the impact of the EAPTCs and maybe some of the coordination efforts that states are making to sort of ensure that the transition is smooth and that there really isn't a lot of time for people to stay uninsured?
Yeah. I think we saw enhanced EAPTCs expand the market, inherently, and then I think the fact that they got extended created another tailwind to stability overall in the Marketplace. It's interesting 'cause I think there was a fairly long-held belief that there was this pocket of uninsured members who would just never come to the Marketplace, and I think that the subsidies have actually taught the industry where to go find those members who do actually want coverage and do wanna be part of the Marketplace product. All of that is positive.
In terms of coordination, again, the fact that we've had a year to think about this, and to work closely with the states, where often you have the Medicaid office not really thinking about the idea that some of these members, they're focused, right, on determining eligibility and re-enrolling. They're not used to necessarily reaching across to work with other state agencies and the federal government to think about, okay, how do we bring another option to these members? That's where our ability to, because of our local approach, to be in the Medicaid offices, talking to them about the Marketplace products, and helping to design sort of hand off processes that are seamless and also obviously stay within regulation.
Drew mentioned this as well, the loosening of the ability to do direct outreach to members is a nontrivial thing, and in fact, is really the way the industry should be moving in general, right? The fact that we have to mail letters to Medicaid members when none of us even open the mail anymore is just not modern. I think this is a really great opportunity to prove that we can help ease this transition for members and create a better process overall for our government partners through that seamless communication.
Got it.
Let me stick on Marketplace.
Yep.
Just as I said at Investor Day, really pleased with the performance in our commercial book. We dropped the HBR, at least through the first three quarters of 2022, 450 basis points. If you look at our bridge that we provided at Investor Day 2022 going to 2023, over another 100 basis points. That coupled with excellent growth and growth beyond what we guided to at Investor Day, and just the execution and the clinical initiatives, feel really good about our positioning in the marketplace.
On the members that you added, I know you talked about adding a lot potentially in Florida, has there been anything notable that you've been able to tell about the members who you've added, either in terms of the plan selections, metal tier, anything to call out there?
Yeah. We need to get some data, right? Some of these are still getting effectuated, and the open enrollment goes through January fifteenth, so next week sometime. For some state exchanges, through the end of the month. The good news is that member, so from our competitors that are, you know, exiting markets, some of the smaller participants, that membership comes in with our product design and our pricing. Even though there have been some warm transfers regulatorily of pockets of membership from those parties, no one's stepping into the shoes of the prior decisions on pricing or benefits. It's sort of open market, some of that business has been ushered to us in a couple of places, but in our underwriting.
We'll have to see, you know, once we get into the first quarter and get some run rate. Those members have had services or access to services. They're not new to the Marketplace.
Mm-hmm. I know some others in Florida have kind of, you know, told regulators you need to put a pause on how much membership they could add. I mean, I'm assuming no issues operationally for you guys?
No. I mean, we love the fact that we've been in the Marketplace since the inception a decade or so ago, and have been committed to it, hands down, never faltered. I think the distribution, the distribution and brokers, they recognize that as well. I think members, like Sarah said, along with the enhanced EAPTCs getting, you know, re-up for three years, the confidence in sort of the durability of the Marketplace has grown quite a bit, which is why we think the market has grown beyond what we expected.
Mm-hmm.
going into 2023, which is also good when the pie is growing.
Maybe switching to the regulatory side for Marketplace, you know, we had a proposed rule come out recently, you know, I think one of the items in there was limiting the number of non-standard plan options per county, per metal level. Do you think this, one, will be finalized? Two, you know, how does that impact competition in the Marketplace?
I mean, I think it's, the idea that there is standardization in order to. Well, let's take a step back. I think the goal, right, is to make the consumer process easier. The issue is if you limit consumer choice, right? Those two ends are at odds. You know, the idea that we can simplify and make it easier for members to understand the trade-offs that they're making in product design, I think we're very supportive of. You know, we've had a number of members who you know, we introduced four new products last year, and it was very clear from member selection that, not surprisingly, as is true in every other industry, different consumers want different products, right?
I think the idea of limiting product design to something that is hyper standardized is not good for the consumers in the long term.
Got it. You know, if we think about capital deployment, you know, at the Investor Day, you talked about 4%-5% growth coming from capital deployment, and you talked about some opportunistic M&A in there as well. You know, just given your Centene scale, you know, can you give a sense for the number of opportunities or, I guess, the size of the M&A market for you guys that would be, I guess, maybe a real needle mover here?
I mean, I think as we said multiple times, our focus is on acquisitions that would be directly in line with our core business.
Mm-hmm.
Or would somehow support the core business, and obviously have a pretty high hurdle in terms of accretion. There are fewer elephants out there. I think there are still really interesting opportunities that can be accretive to different business lines, whether that's geographic expansion, expanding market share in different geographies. I think there's a pretty robust pipeline of interesting opportunities. Obviously, we've been very focused on divestitures for the last year and a half and making sure that we've got, you know, our focus squarely on Medicare, Marketplace, and Medicaid. That doesn't mean we've turned off the M&A pipeline. There continues to be interesting activity there.
Is there any bias towards, I guess, the characteristics you look for in a health plan deal? I mean, is it new states, existing states? Is it Medicaid, Medicare, Marketplace?
Yes.
All the above. You're right, Cal, to point out. At this size and scale and at our long-term cash flow generation capability, we'll be able to deploy capital, I think, in multiple fronts. It won't all be consumed by acquisition. We've been heavy share, you know, buyers ourselves over the last year, including late December and early January, as we sort of look to the next closing of a divestiture coming up. We've been glad to buy ourselves, especially at these valuations, so we welcome you guys to buy alongside with us. I think in the long run, it'll be balanced deployment, including some acquisitions.
Okay. You know, if we think about where the industry is heading overall, you know, obviously, value-based care is one of the major overarching trends here, and you talked about that a little bit at the Investor Day as well. Do you have a target for what percentage of members you want to have in some sort of value-based arrangement over time?
More. No, in all honesty, I mean. We have seen. Obviously, value-based care has started to really pick up. We are seeing the results of that, and we are seeing really nice results, not just in Medicare Advantage, where I think it is more proven more broadly in the industry. We have the highest percentage of members in Medicaid in value-based arrangements, and we are seeing real interest and aptitude among providers in the Medicaid space to take that on. Marketplace is still a little bit harder because of churn, although it'll be interesting to see how the stability of the market, for example, coming into this year, makes it easier to have conversations with providers about managing that panel. In general, I think providers are getting more sophisticated at being able to manage value-based populations.
Mm-hmm.
For us, that is really positive in many areas because I think influencing those sort of critical moments on a member's care journey in partnership with providers ultimately leads to the best outcome.
How do you get providers to enter into full risk models for Medicaid? I mean, like, it's pretty obvious for Medicare, just given the economics of the program, but, you know, Medicaid, I'm just curious how those discussions go. Are these providers who have a lot of experience in MA first and then move into Medicaid?
No, I would say it's actually, if you sort of extract the core principles of what made providers, early providers in the wave of value-based management capable of doing so, the first thing is panel concentration. Because the cognitive dissonance of trying to treat different members different ways is part of why I think you've seen the specialization of MA and provider assets, you know, sort of some of these innovative provider assets.
Mm-hmm.
With sole focus on MA, you know exactly how to treat every single member the same way. It creates efficiency in clinical workflow. They understand the economics, they can design around that. Our focus in going out to Medicaid providers are providers who are predominantly Medicaid. Think about the Federally Qualified Health Centers, where their predominant member base is either Medicaid or essentially Medicaid lookalike Marketplace members. You're dealing with a similar demographic, similar clinical acuity. You can create consistency in terms of the clinical workflow. It's really just sitting down and explaining the economic model and what the goals are in terms of gaps in care and measurement.
I think the pandemic actually helped illustrate because there was a suppression of utilization, how those members could be managed in a very similar way to an MA book and ultimately be profitable for the provider, but drive better impact, most importantly for the member.
I know you said owning providers isn't off the table long term, but, you know, I guess what are some of the criteria that you'd wanna see before, you know, moving towards vertical integration on a larger scale?
Yeah. We've said a couple of times our bias is not to own providers. It's not totally off the table. But we think that partnership is the better model. As you pointed out, we do have providers that we own today, CMG in Florida. I think part of the reason that that asset has been important is because it meets the criteria of supporting the core business. They have been a really important partner in a really important market around a product strategy. We, we put our narrow network product in Florida in place in partnership with CMG. Because we own them, we've been able to start to test marketplace risk arrangements. It becomes sort of an innovation lab for us.
The confluence of that criteria makes that an asset that has stayed in the portfolio, and you'd have to see multiple vectors hit around a provider asset in a market, probably, you know, more likely from a defensive posture, or where we feel like there's a real need for enablement and a gap. It's more the exception than the rule, for sure.
Got it. You know, if we think about the trend in the industry towards whole person or holistic health, you know, states have been carving out pharmacy. I think that's something you guys would call that as a potential headwind. I think that just generally seems to be at odds with this shift. You know, how do you sort of see value-based care evolving in Medicaid over the medium to longer term?
I'll weigh in at a high level, but Drew should talk about this 'cause of the what you see on, you know, when you live through the waves in and out of the carve in, carve out in pharmacy. In general, if you look at pharmacy, if you look at behavioral health, the math doesn't make sense when you do it separately, right? The management of a member doesn't make sense if you can't do it holistically. Our view is absolutely that you wanna be able to understand, treat, manage, and then quantify the impact for a member across all of those domains, and it's far more efficient to do it together.
Yeah. We have seen the pendulum swing back and forth in carve in, carve out of pharmacy. There are white papers. I mean, it's been proven that on a holistic basis it is less efficient for the state as a customer to do that. Certain states have different motivations on maybe what they wanna do with rebates or other motivations, but, you know, ultimately it will be proven out in some of the states that recently carved out. That's just not as good of an outcome, not certainly economically, that's a fact, but likely also in, you know, sort of the effectiveness of serving the population as a single member and not as pieces.
Great. We've got a few seconds left here. Sarah, if I could ask you one more. What do you think when we're back here next year, what do you think investors will appreciate about Centene that they don't today?
Well, I think we will have, you know. Last year for us was really about making promises and keeping them, and that is going to be a trend going forward for us. I think just the increasing sophistication around how we strategically position Centene in each one of our three core markets, so that we're not only performing really well in the operational underpinnings, but we're starting to push the needle in terms of where we think the market is going in each one of those product lines.
Perfect. Brings us right as time. Thank you everyone for joining us. I wanna give thank you to Sarah and Drew as well.
Thank you.
Thank you.
Thank you.