WCG
#Well there's dozens and dozens of factors that go into the construction of the bid, not the least of which is your trailing performance, and more importantly, how you expect to perform prospectively.
So that's one of many inputs into a pretty complex bidding process and strategy, which we'll be wrapping up in the next month or so.
Yes, that is the gross number.
That's the actual development from prior year.
And so let me put this in historical context.
In 2013 the Company had $3 million positive, 2014 minus $48 million.
Then, as we started to perform better and execute better, $78 million for the full year of 2015 of prior-year development.
So the $65 million in the quarter ---+ in a steady state, you really should get the majority of the prior-year development early in the year, so in the first quarter.
So, that is the gross number.
And you're right, there is ---+ I can't tell you until three or four quarters from now what the actual net would be, but the same processes and approach that we use to set reserves at the end of 2014, at the end of 2015, were in place at Q1 2016.
Well the guidance changer would have been Medicaid performance, including the pharmacy cost structure, so that was an important element.
In the PDP business, the improvement in that MBR in the guidance was driven by rebates, separate from the cost structure, but still pharmacy related.
Then the offset would be the 5 bps of SG&A, and a little bit better tax rate, which is really just the math of the blend between your core operating earnings and the ACA fee.
Well, <UNK>, there's a lot to worry about in this chair in terms of ---+ and forward trend being one of the most significant drivers of the Company's performance.
So we're not satisfied and we're not complacent with respect to the trends, which is why we've got some pretty significant initiatives that we've been after for the last year and a half.
There's still a pipeline of those.
So it's our job to manage and bend that trend.
But with respect to the first quarter specifically, relatively stable in terms of what we're seeing when we look at drivers on a rolling basis historically.
I was just going to say that's right.
Yes, certainly given our footprint with full duals versus partial duals, as you would expect when CMS sets the revenue more precisely, that would track with our membership.
Having said that, you'll recall that the Advance Notice we had calculated at a slight decrease year over year in terms of revenue, largely driven by the fee-for-service normalization factor.
When the Final Notice came out, there were some corrections made, especially to that mechanic, which improved it, but didn't put that all the way to a positive with respect to the fee-for-service normalization factor.
So we went from slightly negative up 130 basis points to that 0% to 1% positive range, with respect to the pure rate change.
Now that excludes typical coding trends and that excludes the impact of the ACA holiday.
Well, <UNK>, the ---+ Nebraska, there was one particular section of the scoring that looked like it was ---+ there was an anomaly.
So that was the significant area of protest, and one that the state agreed with.
They went back, rescored using the instructions that had originally been provided.
That resulted in a win for us, and we were able to supplant two of the incumbents.
As a relates to Iowa, we've talked about that at a fair amount of length.
There were certainly some lessons learned in terms of responding to the spirit of the question as opposed to a more literal interpretation of the question.
We have done an awful lot to strengthen our business development team.
And when you hear me talk about people, processes, and tools, I actually think all three of those investments apply quite nicely to the new business development team.
So we've strengthened the team.
We have some new processes in place where we can better mine our experience and our data and our proof points.
And we've provided better tools for them to work with so that we can quickly turn around some of that best practice and build that into our bids going forward.
So I think we are well-positioned.
We have no illusion that these are highly competitive bids, but we are confident in where we stand right now.
Yes, you won't be surprised to know that we have done exactly that.
We've modeled these changes.
If I break it up into two buckets, there's the change that's relative to the HCC risk scoring, and those have some real tangible benefit going forward.
While we are pleased with the recognition of the health disparities as it relates to Star scores, when we did that modeling, it had a fairly minimal impact on the Star Ratings.
Which is why in my prepared remarks I said, it is a victory that there is an acknowledgment of the reality of the socioeconomic disparities.
But the solution, while a appreciated first step, we've got more work to do so that it fully and adequately reflects the difference in serving this population.
Sure, let me see if I can give you some insight into the process.
We are looking to build a robust pipeline.
We want to be proactive in pursuing potential opportunities.
But let me be clear, we're going to be very disciplined about only ultimately acquiring those assets that we think can be complementary, where we can be profitable, and fit our strategic blueprint.
So there are many many more that we will look at than that we will actually move forward with a purchase.
I'm not going to get too specific about the opportunities.
From our perspective, we took a forced hiatus from this activity as we built out our infrastructure, as we developed some real momentum around our margin progression.
So it wasn't until we had that in hand that we even started to embark on growth opportunities, specifically acquisitions.
So we're relatively new, newly back in that space starting with the back part of 2015.
We like the level of activity that we're starting to see.
But it's a long-term proposition, and we believe there will be both Medicaid and Medicare M&A opportunities in the years to come.
Yes, we're already looking now at expansion because of the lead time that's necessary for filings, for network development, is more than six months, obviously.
So we've already got a team looking on expansion for the future.
We're going to be ---+ start out cautious and then we're going to ramp that up.
And then also depending on what assets are available for acquisition, that will play into our calculus in terms of expansion opportunities as well.
But you're right, we will ---+ it's more of a 2018 and beyond discussion in terms of executing on new markets, but we're looking at that already.
Well it's noticeable.
Right.
The good news is we knew it was coming, so we were able to plan for it.
And so yes, you can trace it back just factually.
If you look at a calendar, there's an extra Wednesday in Q1 2016 versus Q1 2015.
You'll notice that it was noticeably absent from our comments because it was planned for.
Well it's a range that depends on the mix of our business, and so we think a 1% range is sort of the right way to frame that for investors.
Yes, consistent with our multi-year plan, we would expect continued progression.
I mentioned that in my remarks.
We absolutely are planning on continued improvement in Medicare Advantage, until we get to a reasonable and sustainable for the long run margin for that business.
<UNK>, that might be a bit of an overstatement.
There were minimal changes in just a couple of plans.
So there was a tiny bit of movement, but didn't really move the dial much.
Which is why we've characterized as a step in the right direction, but much more work needs to be done in collaboration with CMS and others to more fully reflect the disparity due to socioeconomic status.
Yes, good question.
This Q1 will be the last quarter for both the PBM transition costs being outside of adjusted earnings as well as Iowa.
And so what we're left with is any remaining tweak of the Sterling transaction item, which would likely be pretty immaterial.
Then ongoing amortization of acquisitions consistent with the industry, and then the investigation legal costs, which are continuing until that's resolved.
