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spk03: the chronic disease management programs, utilizing real-time data and information that's actionable, that we partner with our community doctors and our IPA doctors, those capabilities that if we can control those fully, we get the outcome we get in North Carolina. And so we're working hard on ensuring that some of the IPAs that we're partnered with the California that I would emphasize have been good partners. We have to work with them in getting, the bottom line is more access and faster access for our members. That's really the bottom line on CAPS. And to do so in a kind of coordinated way. And in the California marketplace, a lot of the, just from a legacy perspective, there's a lot of delegation. And we got to be very, very vigilant in ensuring that if it's like a subcontract, if you subcontract something to somebody, they got to make sure they do a really good job, whether that's on, you know, the utilization, the, the, the, the, the, the access that influences caps, you know, compliant risk adjustment. I mean, just all these things that have to do a good job on. And, you know, some of the, the, the, the, the partners that we have, you know, can do a better job and we're going to help them get there. Perfect. Thank you guys.
spk06: Thank you. One moment for our next question. And our next question comes from the line of Jessica Tasson with Piper Sandler. Your line is open.
spk08: Hi. Thank you so much for taking the question. I'm just curious to know in markets like Nevada where maybe stars came in a little bit lower than average, how does your approach to local marketing change, if at all? do you kind of take a more passive approach or do you deploy additional resources to kind of help supplement in the market?
spk03: Hey, Jess. It's John. Great question. No, it's kind of consistent with my last response. You know, if you contract with a provider group, And we have no problem globally capping with folks if they perform. People have to just do what they say you're going to do. I think that we've got a good partner there. We're helping them with a lot of the gaps that I think, frankly, we're just not well executed on caps, on stars-related items. And so we're being very aggressive with that. They're working with us, so I'm happy about that. But it really just shows, you contrast that, you know, kind of a global cap market versus, say, North Carolina, where we're going in with kind of our model kind of end-to-end, where you can, like, drive and, you know, have more durability and consistency with kind of all aspects of what makes MA successful, starting with... And so, you know, our lesson learned is, you know, you can't just go in and there's no shortcut. You can't just globally cap somebody and just say, oh, you're going to save a few bucks going into a new market and have a new provider just kind of help you there. You got to make the investments up front, which is what we did in North Carolina, which we were doing in Texas, we're doing in Florida. And just, you know, work with the community to doctors and make them successful. And I think just systemically, kind of at a macro level, Jess, is like other folks are experiencing the same thing. Because if you delegate a lot of this stuff to folks, they have to deliver for you. And I think we're taking it one step further, and it's what we did in California. Yeah. None of these earlier, when we started the company, none of the earlier IPAs had the tools to be successful. We helped them become successful with real-time action, with workflows, with best practices. And they were receptive. And so in Nevada, the same thing. They're being receptive. So we're working together, and we'll get it fixed.
spk09: Jess, did I answer your question?
spk08: Sorry, I was on mute. Yes, thank you. That was helpful. I just had one follow-up. How are you seeing flu kind of evolve so far in the fourth quarter, and how do we think about flu just in terms of MCR impact in a normal flu season?
spk01: Hey, Jess, Thomas here. So in terms of what we're seeing, I would say so far we have not seen much of an uptick in flu. But having said that, we also recognize that the last two years have been atypical, and we've not really seen much of a flu season. And so as we thought about our fourth quarter guidance and sort of our utilization expectations for the fourth quarter, we approached our kind of baseline assumption that utilization for the inpatient setting would run in line with our historical experience. inclusive of a portion of which would be kind of flu-driven and potentially COVID-driven, particularly given what we saw with Omicron last year. Having said that, we're kind of one month in through October, and we're pleased to say that our utilization has remained, I'd say, kind of in line with where we left things in the third quarter. And so far, we're feeling pretty good about where things stand. So To the extent that I think some of the flu season does materialize this year or we do have a bit of a spike related to COVID, I think our guidance is kind of well positioned for that. And to the extent that we don't see some of that materialize, I think there could be some upside to our guidance. But too early to say at this point.
spk09: Okay, great. Thank you. Thank you. One moment for our next question.
spk06: And our next question comes from Kevin Fishbeck with Bank of America. Your line is open.
spk05: Hey, this is Nabil Gutierrez on for Kevin. Thanks for taking the question. Can you talk about how direct contracting has been trending for you? And can you remind us about the plans for 2023 and beyond? Thanks.
spk01: Happy to. This is Thomas here. So, you know, if I flash back to when we first began the direct contracting programs, that'd be the second quarter of 2021. I think what we shared out of the gate is that we didn't have a lot of visibility around our IBNR experience, but that we had booked our first quarter of the program right around 110% MBR kind of out of the gate and that it was a headwind to our consolidated MBR. I'd say flashing forward now, we've been in the program now for the better part of 18 months, and we continue to see some operational traction and momentum that we're pleased with. And so I think on a kind of cumulative basis, since when the program began, We're probably about even from an EBITDA standpoint. And I think we still have opportunity to continue to improve that given some of the traction we've seen. I think in terms of 2023, we are interested in continuing in the 2023 program with ACO REACH. I think how that plays out will be dependent upon the upcoming enrollment files from CMS. And so we're looking forward to getting that here in the next month or two. And I think we'll remain sort of cautious in terms of our views around the long-term sustainability of how that program evolves. But I think we've learned a lot from participating in the program. And I think we'll continue to focus on how we can leverage some of the capabilities we've built around Medicare Advantage and continue to look for ways to potentially export or monetize those in other ways in the future, such as with direct contracting or ACO REACH.
spk05: Thanks. And then how are you thinking about utilization next year?
spk01: So I think the big picture, we're continuing to be pleased with what we're seeing from an inpatient standpoint. And I give our clinical teams, the Care Anywhere folks, a lot of credit for continuing to be very proactive and really engaging those seniors who are most in need and at greatest risk. And so I think our view today is that things continue to trend well in spite of some of the ebb and flow we've seen with COVID in 2022. I think we're probably in a good place to see a lot of that trend continue in 2023. I think outside the inpatient setting, we've seen similar trends to what you might have heard others in the industry suggest. Outpatient seems to be fully back to normal. We've really seen that over the last couple of quarters. And there's been some pluses and minuses in other areas. We've seen probably lower ER utilization, but also seen a bit higher urgent care utilization. So I think in general, we feel like what we're seeing today is largely representative of what we'll probably continue to see next year. Having said that, you know, I think if we learn anything in the last two years during COVID is that these things do change pretty quickly. So I think we'll give you guys a more comprehensive update when we release our 2023 guidance here in a few months.
spk09: Thanks. Thank you. One moment for our next question.
spk06: And our next question comes from Nathan Rich of Goldman Sachs. Your line is open.
spk02: Great. Thank you. If I could just ask a follow-up to that previous question. As we think about cost trend next year, how are you thinking about – I wanted to ask on a few different – factors. First, kind of the normalization of inpatient volumes. And do you feel like there's kind of any notion of pent-up demand that might still be out in the system? And then how are you thinking about potentially paying for more of the COVID and vaccine treatments if that's kind of less footed by the government? And then just lastly, on the cost trend, contracting with providers and inflation, could you maybe just talk about what you're seeing there?
spk01: Great. Happy to, Nathan. This is Thomas here. So in terms of our inpatient results, you know, I think while we've seen continued performance this year, I would really emphasize the continued performance over the last five plus years. And really, we've run around 155 to 165 inpatient admissions per thousand, inclusive of some of the ebbs and flows we've seen around COVID for five years straight now. And so I think we feel really good about our kind of continued ability to kind of maintain those results in that trend heading into next year. And again, I would say that the reason we've been able to be so consistent with that while also maintaining the growth and really launching some of the markets we've launched over the last few years is a function of having a very active and hands-on care delivery mechanism, which is focused on those chronic, frail, and high-risk seniors. And so I think we feel pretty good about the inpatient trends and today don't see a lot of pent-up demand as something that concerns us I think in terms of your question around the COVID vaccines, your second one, I don't think we view that today as a material headwind. I think there's always pluses and minuses that go into our updating forecasting process. And so that will just be one of the several that we take into account as we think about next year's outlook. And lastly, from a contracting standpoint, I think we're all aware of some of the pressures that many of the hospitals and other institutions face from a labor standpoint. And as it relates to how that kind of impacts our contracting, the vast majority of our contracts are fee-per-service contracts. And so Medicare obviously releases those rates in advance. And so we're able to have pretty good visibility as to what type of rate increases we'll see on those contracts heading into next year. And those are typically multi-year contracts with an evergreen mechanism on the back end. I think we feel pretty good about where we stand from a just pure unit cost standpoint looking out into 2023, while also being respectful of the broader environmental trends that you're alluding to.
spk02: Great. Thanks, Thomas, for all those comments. I'll ask a shorter follow-up. I wanted to follow up on your comments on AEP. I'd be curious how traction in new markets like Texas and Florida is going relative to your expectations. I guess specifically in terms of both growing awareness, but just, you know, kind of aspects of kind of planned value where you feel like you might be differentiated versus competitors.
spk03: Yeah. Hey, Nathan, it's John. I think our product design is pretty good. But we kind of set the products with kind of a multi-year view of growth. I think it's trending slightly below, basically, from our budgets. But, again, I don't think they were material to begin with. And I think from a kind of an underwriting perspective, what we really needed was the engagement with the provider community and to get our staffing done. particularly on the clinical side, in place, start deepening the relationship with the brokers, all the basic fundamental stuff we wanted to get in place. And I think we're going to get traction like we had in Arizona and Nevada. It's just going to take a couple years.
spk09: Thank you. Thank you. One moment for our next question.
spk06: And our next question comes from Whit Mayo with SPB Security. Your line is open.
spk04: Hey, thanks. I've only got one question. Can you discuss any of the IT priorities that you have around AVA for 2023? I know you're going through the budgeting process right now, but are there any new modules in development, anything that you're particularly excited about or would care to share, you know, anything with Care Anywhere that's new? And that's it. Thanks.
spk03: Yeah, hey, Witt, it's John. I think, yeah, the answer is yes. And the, give me one second here. The investments in kind of the care coordination chassis is one of the reasons that we were kind of able to get the five stars and maintain the four stars in California. And so it's kind of an integrated approach, or you call it a health CRM system, if you will. That got put in this year, and we're going to make sure that that gets continued to be refined next year. I think the investments we've made in terms of automating some of the broker, online broker app submission processes, and how we get some of the The brokers paid faster, paid more real time. Apps reconciled. You're going to see us make investments in. And I think the kind of the stratification model is going to be incorporating more consumer data. I think it's kind of broadly speaking. So we start really understanding data. kind of social determinants and kind of how that plays into the entire experience for that consumer. And while 22 was, I would say, more focused on kind of clinical and clinical workflows, I think you're going to see more kind of consumer-facing modules in 23. And I would say including some of the broker investments that I talked about. Okay. Did I miss anything there, Thomas? Yes. I think that's what we're doing.
spk09: Okay. Thanks, guys.
spk03: You got it.
spk06: Thank you. One moment for our next question. Please stand by. And our next question comes from Sarah James with Barclays. Your line is open. Thank you.
spk07: Can you give us an idea of what the pacing of physician engagement adoption curve looks like for AVA in a new market? And as you see this timing become consistent and you iterate entering more and more markets, how does what you're seeing on that engagement adoption curve impact your long-term strategy on clinic partnership versus ownership?
spk03: Well, those are like two really big questions. We think about them all the time. To get a physician kind of educated, engaged, trained on using some of the tools that we have, I would say takes between three and six months. And it's a combination of our kind of on the ground clinical operational and kind of practice management kinds of resources. along with our Care Anywhere resources and a lot of his education, it really forms the basis of long-term strategy. And I think our kind of engagement model with providers is really born from a lot of years of experience, whether it be kind of globally cap delegated, whether it be staff model, whether it be brick and mortar. I mean, we've got experience in all of that. And where we kind of came out was really partner with the community doctors. You know, there's still really 40% of all the primary care doctors out there, if you take out the peds, is still kind of independent, you know, if not owned by a hospital system or owned by some of the consolidators. So there's a lot of physicians out there. And to work with them and enable them to be successful and to be efficient with our collective resources and to not have to reinvest in bricks and mortar in the markets, but to really have the existing physicians in a market that have the bricks and mortar already in place more successful. And the way to do that is to know who the 10 to 20% of that polychronic population are and then to extend that care team to support that practice. And so, as I mentioned before, a lot of the heavy lifting we do, and it's not on the entire population. We don't expect them to change all their workflows, change their EHRs, et cetera. We'll do a lot of the lifting. And then what happens is if we can bend the cost curve consistently, they make more money. And most of the physicians we see are not just in it for the money. They want to make sure that that patient gets the best possible care. And I think that dynamic is what, you know, separates us. We just think it's a more capital-efficient way to do this. And, you know, we share some of the, you know, gain shares with these folks, and everybody wins. That's kind of philosophically how we're thinking about it. You know, there may be some markets where we want to augment that with an acquisition of a practice here or there, but I would say that's very, you know, it's more tactical, it's more at a regional level. We've been, you know, and we've been successful in that in key markets, you know, without it being one of them.
spk07: And then just digging into what kind of details you can see as you start to have a new physician partner bend the cost curve and you're getting these very consistent inpatient trends, are you actually able to see actions taken by them that are care navigation and inpatient diversion and, you know, Reward them for that or what level of clarity do you have on that?
spk03: Yeah, it's yeah, it's it's why we like being at the plan level because we have Top of the food chain access to actionable data. There's no latency There's no 45 or 60 day latency to a global cap group. So we get that information to them kind of real time and our internal clinical teams are use that data real time. We know daily, if not hourly, you know, where our members that are in hospitals are and why they're there and, and, you know, who the referring doctor, we, we, we know all of that. It's, it's, you know, within our company, we talk a lot about a maniacal attention to detail and it's, it's not out of magic. I mean, we work at it and it's driven by the data and, but, but think about this. I mean, I'm going to really make sure you guys understand this is, the 80%, if not 90% of the population that costs 10 or 20%, you know, the actual engagement with those particular physicians, we think a member, you know, that sees that doctor, it works pretty well. It's really the 10 to 20% that really is where all the costs are. That's where we would deploy our clinical teams where we do a lot of the work with and for them. It's like we work for them and just support their practices. And the people that we care for at the home through our Care Anywhere program, they're not nine-minute office visits. They're like 45-minute office visits. So we really free up their capacity with their practice. That's how we do it. And there's full transparency. They have access to our P360 or Patient360 longitudinal patient records. They have just full access to it. Not sure if I answered your question there, Sarah, but that's how we think about it.
spk07: Okay. Thank you.
spk03: You got it.
spk06: Thank you. I'm showing no further questions at this time. This concludes today's conference. Thank you for participating. You may now disconnect.
spk09: The conference will begin shortly.
spk06: To raise your hand during Q&A, you can dial star 11.
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