Sarah London
Chief Executive Officer at Centene
Thank you, Jen, and thanks everyone for joining us. This morning, we reported very strong third quarter 2023 results, including adjusted EPS of $2, outperforming our internal expectations by approximately $0.20. Strong fundamentals and excellent Marketplace growth and performance contributed to the strength in the quarter, as well as our improved outlook for 2023. We now expect full year 2023 adjusted earnings per share of at least $6.60, representing over 14% year-over-year growth.
With my time this morning, I'll hit on key focus areas, including Medicaid redeterminations, upcoming RFPs, Marketplace performance, and recent Medicare Advantage Stars results, and then provide a brief update on the operational progress we have made over the last few months. Then I'll turn it over to Drew to provide details on the quarter and additional commentary relative to our increased financial guidance for 2023.
Let's start with Medicaid. We are now over 40% or approximately 1 million members through redeterminations and we continue to track in line with our expectations for membership and acuity changes, as well as our assumed sloping of overall timing. As we closely monitor Medicaid membership transitions, rejoiner data remains instructive as we think about the net membership impact of redeterminations and coverage continuity. We are now seeing April through August cohorts consistently experiencing rejoining rates in the mid-20% range. Importantly, the 90-day grace period in most states means that the majority of these members have no break in coverage as they return to the Medicaid program.
CMS has obviously been playing an important role with respect to the oversight of the Medicaid redeterminations process, including recent intervention to pause redeterminations in certain states, as well as the effort to reinstate children and individuals who are incorrectly dropped from coverage due to system issues. We are seeing some of the impact of these reinstatements come through in our rejoiner data and continue to monitor the impact these changes will have on the timing of expected membership shifts over the coming months.
That said, we have not changed our view that the ultimate impact of redeterminations would be 2.3 million to 2.4 million members. And based on our view of recent CMS actions and our ongoing conversations with state partners, we still expect the overwhelming majority of redeterminations to be completed by May of 2024. We continue to track in line with our expected 200,000 to 300,000 members moving from Medicaid into Marketplace as a result of the redeterminations process. We have partnered with an increasing number of states to make auto enrollment a more seamless path for Medicaid members losing eligibility and are pleased to be able to leverage our market-leading and better platform to maximize coverage continuity for members of the communities we serve.
Our rate discussions continue to be constructive as well. The consistent trend we saw in 7/1 and 10/1 rate cohorts has continued so far as the first wave of 1/1/24 draft rates have been released. We are working through an incomplete 4:1 retro rate as Drew will discuss further, but continue to have constructive discussions there as well. We appreciate the thoughtful and database collaboration with our state partners as they acknowledge the importance of matching rates to the acuity in order to maintain the strength and effectiveness of each Medicaid program. Overall, we are encouraged by the progress that states are making with respect to Medicaid redeterminations. I'm pleased to be moving through the process with operational stability and results that are consistent with our modeling.
Turning to growth. In North Carolina, we are preparing for Medicaid expansion that will go live in December. North Carolina is the 41st state to expand Medicaid. And by passing this legislation with the joint leadership of a Democratic Governor and a Republican supermajority legislature, they demonstrate the increasing bipartisan support for this program. We expect this trend to continue as states look to provide improved access to quality care for their citizens.
In RFP news, our Sunshine Health team officially submits our response to the Florida ITM this week. I want to give a nod to the Sunshine Health team to our exceptional business development team and the many Sun teamers [Phonetic] who contributed to this effort. I'm proud of the work they did to prepare this response and proud of the long-standing partnership we have established in serving the communities of Florida. In general, we are seeing an increase in RFP activity and momentum around states considering the addition of new populations into a managed care model.
Notably, the recently released Georgia RFP includes, for the first time, the state's aged, blind and disabled population. As we look ahead to our procurement pipeline, we feel good about the opportunity to leverage our incumbent position and our differentiated depth of expertise in managing complex populations to defend and grow our Medicaid footprint.
In support of this work, I'm happy to share that we have officially appointed Wade Rakes as Centene's Chief Growth Officer. Wade will take on this responsibility in addition to continuing to serve as the CEO of our Peach State Health Plan as he leads our incredibly strong Georgia team through their procurement, remaining at the helm through the conclusion of that process. Wade will bring valuable experience as both a local and enterprise leader for Centene as he helps to drive execution around our growth strategy.
Turning to Marketplace. Our Ambetter franchise continues to outperform this year, outpacing our growth expectations in the quarter and reaching just under 3.7 million members as of September 30. This means added earnings power for the remainder of 2023 as well as a potential earnings tailwind for 2024 as our retained special enrollment period, or SEP, members become more profitable in their sophomore year with Ambetter.
Ambetter's unique individual market density, consistent performance and market-leading brand recognition have enabled us to build attractive and efficient networks and to foster productive relationships with a vast array of distribution partners. This has driven our impressive growth in 2023 and positions us well to continue to serve this large and expanding addressable market. We'll have an opportunity to dive more deeply into the future growth drivers of this business during our Investor Day in December and remain excited by the growth and earnings potential of the individual market in both the short-term and the long-term.
Finally, Medicare. This is an important time of year for our Medicare Advantage business as 2024 enrollment begins to take shape through the annual enrollment period, which kicked off on October 15th. As you'll recall, the 2024 bid cycle represents a pivot point for our Medicare Advantage products as we reposition our offerings to better serve low-income and complex lives.
Touching on the important topic of Stars, we received the final Star rating results along with the rest of the industry two weeks ago. The final Stars results for this cycle were consistent with our July and September commentary, where we expected two-thirds of our membership associated with contracts showing year-over-year raw score improvement. That result was approximately 73%. We also said we are expecting roughly 90% of our membership to be associated with contracts rated three stars or higher, and that final result was 87%.
While we delivered Stars results in line with our Q2 expectations, these results certainly do not reflect the ambition of this organization. They do, however, represent an important step on our journey to improve quality scores and restored Medicare Advantage earnings power. Relative to our ongoing work to strengthen Medicare execution overall, we continue to see improvement in our operating metrics, which are important indicators for member experience and ultimately, Star scores.
Our first call resolution has improved year-over-year and quarter-over-quarter as have our customer satisfaction scores. We are still tracking a roughly 40% reduction in member complaints year-over-year and consistently delivering service levels in the high 90%, and we continue to build out our network, including adding 6,100 new providers in the quarter and moving more than 12,000 members into new value-based agreements. Medicare Advantage remains an integral part of our portfolio of businesses, strategically aligned with our Medicaid and Marketplace platforms and a long-term driver of both earnings and growth. We remain committed to and focused on the work necessary to improve overall performance and quality on behalf of our Medicare members.
Before I turn it over to Drew, let me touch briefly on our value creation work. We continue to make progress against the many initiatives that will focus and fortify our enterprise to support robust long-term growth. As our first wave of operational redesign work matures, we are evolving our focus for those initiatives to optimizing and automating workflows as we look to support more efficient and effective service for our members and providers. For the initial installations of our new telephony system, we are now layering on additional features that are driving month-over-month improvement in self-service. And over the last few months, within our now centralized utilization management teams, we have been focused on reducing provider abrasion by expanding the use of our proprietary tool, CATA, which automates the approval of authorizations for clinically appropriate procedures using AI technology we developed in collaboration with Apixio.
Speaking of technology, I'm particularly excited about the data work we have accelerated over the last few quarters as we look to aggressively build out an integrated data fabric across Centene to support our long-term technology strategy. One of the benefits of taking this work on now is that we can leverage the most modern technology and design our infrastructure to account for the ways in which we foresee both traditional AI and generative AI being deployed in our environments to automate administration, support more seamless provider collaboration and optimize clinical insights that will transform our members' health journeys across lines of business.
One quick milestone from this work. Over the last three quarters, we have significantly increased the number of digital clinical sources falling into our clinical data hub, where we hold a longitudinal health record for our members. The expansion of clinical data from digital sources is expected to reduce the overall cost and improve the accuracy and timeliness of information we can use to solve for gaps in care, understand member risk and acuity, and support predictive modeling for care management interventions.
There are a number of other operational and digital initiatives in flight across our value creation portfolio, and we look forward to providing updates and proof points for those as we move into and through 2024. But it is important to note that increasingly this work is carrying momentum not because of the value creation scorecard, but because it is simply part of the disciplined operating DNA we are building across the company.
From a portfolio review standpoint, we were pleased to reach a definitive agreement to divest Circle Health earlier this quarter. Circle is an excellent asset with a strong management team, and we took our time to find the right partner who will continue to support the good work Circle is doing to serve communities in the UK. We continue to expect this deal to close in Q1 of next year and to be $0.03 to $0.04 accretive to 2024. There are a few remaining assets we continue to evaluate and reposition, but we are now in the final innings of this work and expect that as we get to mid-2024, we will be focused on building around our solid strategic and streamlined core business.
Finally, I want to touch on our PBM migration. Given its importance to our 2024 financial targets, but more importantly, given the value we expect it will drive for our customers and members. The teams have put in an enormous amount of work over the last few months and continue to make great progress against our key milestones.
In fact, earlier this month, we got to see an early but important proof point of how well these teams are working together on behalf of our customers due to a 10/1 migration of one of our health plans from a legacy platform over to ESI. Thanks to thoughtful planning and testing ahead of time and strong collaboration and communication during the cutover, this was a very successful transition, and we believe it sends a great signal about the health of this project as we move into Q4.
Overall, Centene continues to generate positive momentum. We are making important strides operationally, fortifying the foundation of the business and increasingly leveraging our size and scale to better serve our customers. Strategically, as you've seen through our divestitures, we have sharpened the focus of the enterprise on our three core business lines and continue to work hard to preserve the unique innovation engine of our local health plans. These advancements, along with our 2023 outperformance, give us confidence that we will exceed our 2024 earnings floor of $6.60 and continue to demonstrate improved member and provider experiences.
With that, I'll turn it over to Drew.
