Bright Health Group, Inc.

Hello all and welcome to Bright Health Group's third quarter 2023 earnings call. My name is Lydia and I'll be your operator today. It's my pleasure to now hand you over to your host, Stephen Hagen, Investor Relations Director, to begin. Please go ahead when you're ready.

Good morning and welcome to Bright Health Group's third quarter 2023 earnings conference call. As a reminder, this call is being recorded. Leading the call today are Bright Health Group's President and CEO, Mike Mikan, and CFO Jay Matuszak. Before we begin, we want to remind you that this call may contain forward-looking statements under U.S. federal securities law. These statements are subject to risks and uncertainties that could cause actual results to differ materially from historical experience or present expectations. A description of some of the risks and uncertainties can be found in the reports that we filed with the Securities and Exchange Commission including the risk factors in our current and periodic reports we file with the SEC. Except as required by law, we undertake no obligation to revise or update any forward-looking statements or information. This call will also reference non-GAAP amounts and measures. A reconciliation of the non-GAAP to GAAP measures is available in the company's third quarter press release, available on the company's investor relations page at investors.brighthealthgroup.com. Information presented on this call is contained in the earnings release we issued this morning and in our form 8K dated November 7, 2023, which may be accessed from the investor relations page of the company's website. While we continue to work through the necessary regulatory approvals and other closing conditions for the sale of our California Medicare Advantage business, we are not going to be conducting a Q&A session on this call. I will now turn the conference over to Bright Health Group Chief Executive Officer Mike Mykin.

Thank you, Stephen, and good morning, everyone. In the third quarter, we continue to make significant progress across our key initiatives. Importantly, the consumer care business, our continuing operations performed well in the third quarter, with our second consecutive quarter of adjusted EBITDA profitability. We have focused the company on our value-driven consumer care business. New Health, where we are serving consumers through a differentiated integrated care model. We are aligned with our payer and provider partners clinically and financially to improve the quality and cost of care in both our care delivery and care solution segments. We believe we are well positioned for the future of healthcare as the industry continues to shift to value-based care. On the call today, I'll start with the discussion of our care delivery segment, provide an update on our care solution segment, including our ACO REACH business, and go over our progress on our discontinued operations. Then I'll turn it over to Jay to provide additional details on our financial performance. Our care delivery business had a solid quarter. Excluding the impact of a goodwill impairment recognized in the quarter, care delivery produced another quarter of positive operating income. and has shown strong year-to-date results. Across the ACA marketplace consumers served, our medical cost management and member engagement initiatives have been performing well. And in the third quarter, our performance metrics were strong, driving the care delivery upside in the quarter. The strong performance in Q3 gives us confidence in the potential for further upside in our care partner relationships. We have taken a conservative amount of risk in these contracts as we get to know the patient populations and care provider networks at our payer partners. But it is important to us that we have an aligned interest with our payer partners and that we are taking total cost of care risk. By successfully delivering on our aligned and integrated consumer care delivery model, we are lowering the cost of care for our payer partners and we are beginning to recognize the shared upside in these savings. Importantly, we are also seeing high levels of consumer satisfaction in our care delivery business as shown through our high NPS scores and Google ratings. Our care delivery business serving Medicare Advantage consumers also performed well in the third quarter. Medical costs on our fully capitated Medicare Advantage consumers were consistent with seasonal trends in the quarter and contributed to care delivery's gross profit performance in Q3. We believe our performance in our Medicare Advantage risk-bearing relationships, when measured by medical cost ratio, inpatient admissions, and NPS and STARS ratings, is among the best in the industry. Turning to our care solution segment, and in particular, the performance in our REACH ACOs, CMS recently released the final results for the 2022 ACO REACH program that showed solid performance for the two ACOs we operated in 2022. our ACOs had a combined growth savings of $30.3 million, a savings rate of 4.4% compared to the benchmark, which was more than 75 basis points better than the program average among all REACH ACOs. Please note that this growth margin is before the mandatory CMS savings rate deduction of 2% and any risk sharing arrangements with our downstream provider partners. Our New Health Pineapple ACO was one of the top performing ACOs in 2022 with a growth savings rate of 11%. Our Physicians Plus ACO also produced growth savings, but not sufficient to cover the 2% CMS mandatory savings requirements. The performance of the Physicians Plus ACO was weighed down by the deficit incurred by one of our provider partners, Babylon Medical Group. Jay will provide additional details on the impact of the Babylon relationship and their bankruptcy filing. Apart from the impact of the Babylon bankruptcy, our 2023 REACH ACOs are performing in line with our expectations. In 2024, Babylon will no longer participate in our ACO REACH program. Our Care Solutions team has secured additional provider partners to add to our REACH ACOs and is projecting some organic growth from our existing partners for 2024. Although we expect some pressure on top-line growth related to the ACO REACH business, we expect overall ACO REACH margins to improve as the terminated providers are projected to run deficits in 2023. The team continues to engage a number of new provider groups on the physician enablement part of the business across payer categories. We see growth opportunities with federally qualified health centers and other provider partners to serve Medicaid, as well as a strong pipeline to add to our REACH ACOs. Regarding the announced sale of our California Medicare Advantage business, the regulatory approval process for Molina's acquisition is proceeding as planned, and we expect to close the transaction by first quarter of 2024. Our MA business had a strong quarter. with 17% premium revenue growth compared to Q3 2022. We are performing in line with our expectations on medical costs with a year-to-date medical cost ratio of 89.9%, excluding prior period items. Solid performance on our book of business with a high concentration of underserved and special needs consumers. Our Medicare Advantage team has been working for some time now on initiatives to drive improved utilization metrics and lower medical costs. We have seen the benefits of these efforts with utilization down approximately 10% year over year across the book and operational improvements that have resulted in claims inventory down approximately 50%. In the third quarter, We also continue to make significant progress on the wind down of our ACA insurance business. Our claims inventory has continued to decline consistent with our expectations and we have clear visibility to the remaining obligations in the business. We were pleased to announce in September that we paid down 80% of our final risk adjustment obligations for the business and that our insurance subsidiaries entered into repayment agreements with CMS and four states to satisfy the remaining risk adjustment obligation. Jay will provide additional details on the repayment agreements, our current capital position, anticipated remaining costs, and expected net obligations for the business. I'll now hand it over to Jay to provide additional details on our third quarter performance and our updated outlook.