Sarah M. London
Chief Executive Officer at Centene
Thank you, Jen; and good morning. Thank you for joining us for Centene's Q2 earnings call. Our second quarter performance demonstrated Centene's ability to deliver solid results amid a dynamic healthcare landscape. We reported $2.10 of adjusted diluted EPS for the quarter and lifted our 2023 premium and service revenue forecast by another $1.8 billion. We now expect to deliver at least $6.45 of adjusted EPS for full-year 2023, a $0.05 increase compared to April guidance.
We are proud of the progress we are making with respect to the execution of our strategy; achieving operational milestones, while delivering on the financial commitments we've made to our shareholders. Importantly, our balanced portfolio of core businesses delivered strong second quarter financials with Marketplace growth and Medicaid performance both running slightly ahead of expectation.
Let me provide a few updates related to our progress in each business line and then share the latest on our value-creation work. Let's start with Medicaid. Since our Q1 call, Medicaid redeterminations have formally kicked off in every one of our 30 active states. The time our team spent over the last 18 months preparing for redeterminations has positioned us well to support our state partners, establishing timely information exchange and shared workflow, as well as reaching out directly to members to provide education around process and enrollment options.
Year-to-date, we have made 9 million outreach attempts with early indications of higher-than-normal member engagement. These outreach efforts, inclusive of more than 15,000 community events, also contribute to our ability to recapture members, even if initially disenrolled as part of redeterminations. We are actively tracking the number of members that we are recapturing post procedural disenrollment and expect the percentage to meaningfully advance as this process unfolds.
At an enterprise level, net Medicaid membership is consistent with expectations. We have seen ebbs and flows from month to month, as states continue to evolve and refine their processes. Given the recent news that CMS is requiring states -- certain states to pause redeterminations and reinstate members who were dropped for procedural reasons, we will be closely tracking any impact this may have on the membership slope over the next few months.
Much of the redeterminations journey remains ahead, and we continue to monitor the major levers, including rate, acuity and membership. Based on our most recent analysis and informed by member lists and acuity projections from our state partners, our expectation around member acuity for 2023 remains unchanged. As we assess who is staying versus leaving, we are tracking consistent with the acuity modeling we discussed on our first quarter call in April.
Medicaid rate conversations continue to be constructive. We are consistently seeing states take acuity adjustments into consideration in their rate updates. And at an enterprise level, we remain on track with our expectations for 2023. Overall, we are grateful for the partnership and trust placed with us by the states we serve and for the leadership CMS has shown in helping us to ensure that eligible Medicaid members do not experience unnecessary coverage gaps as states work through the unprecedented scale of this redeterminations process.
From a Medicaid business development standpoint, we talked an exciting new business win in June, as our team in Oklahoma was selected by the Oklahoma healthcare authority for state-wide contracts to provide managed care for the SoonerSelect and SoonerSelect Children's Specialty Plan programs. The team delivered a strong RFP response and was the sole source winner for the Children's Specialty Program designed to serve children and families involved in the child welfare and juvenile systems including foster care. This represents Centene's 31st state and our sixth sole source foster care contract.
Overall, Medicaid, our largest and longest running business delivered strong results in the second quarter, and our market teams continue to prove the value of the local approach, demonstrating innovative and comprehensive support for our members and state partners as we continue to execute against redeterminations in the coming months and quarters.
Turning to Medicare. Our quarter-end membership was 1.3 million, with approximately 47% of Medicare Advantage lives associated with value-based care arrangements. A 300 basis point increase from Investor Day as we've added key VBC partners to our network. Second quarter results reflect some slightly higher outpatient claims experience within Medicare during the month of May. Drew will provide more detail on this, as well as our bid posture for 2024, but it is worth noting that our increased 2023 adjusted EPS guidance incorporates our latest view of trend and pockets of slightly higher Medicare utilization in the back half of the year, should that occur.
Given our discussion in Q1 around stars, I'd like to provide an update on what we expect to see in October and what we are seeing year-to-date around stars improvement efforts that will inform future results. As a reminder, on our Q1 call in April, I shared that we expected minimal progress in 4-star plans, but that we anticipated solid overall contract improvement reflecting the operational investments we have made. With more complete program data, our projections show some more pressure on 4-star results, but we are still expecting solid overall contract progression, thanks to strong improvements in admin and ops, and pharmacy measures, which have been our focus in this first cycle.
With several contracts close to the bubble, variability and cut points means we could end the cycle with no 4-star contracts compared to our current single contract, representing 2.7% of members. While this is disappointing, we do expect to see meaningful movement in our three- and 3.5-star bands in October and roughly two-thirds of our members are in plans showing year-over-year improvement. Pulling up these underperforming contracts represents tangible progress in delivering economic value to Medicare as we look to 2025 and beyond.
As a reminder, in Q1, we reset our quality strategy to maximize contracts that reach the 3.5-star threshold, consistent with our renewed focus on serving complex and dual-eligible members beginning with our 2024 bids. Put simply, stars strategy is different when you're managing complex and duals populations. Strong performance at 3.5 stars with Centene's target member mix will give our Medicare business the economics necessary to serve these populations well and support our multi-year performance goals. With this in mind, we have set a revised target of reaching 85% of members in 3.5-star plans by October of 2025.
We are closely monitoring in-year star metrics and continue to see important markers of sustained improvement, consistent with our remarks on the Q1 call. A few examples include a 27% reduction in year-over-year call volumes, resulting from a redesigned member onboarding process that features digital outreach and member self-service. Consistent 4-star performance in our core admin and ops metrics, call center service levels for members, providers and brokers at or above target with first-call resolution in the mid-80s. Year-to-date member, provider and broker satisfaction scores in the mid-90s and the addition of 24,000 new physicians across our Medicare network year-to-date, as we look to ensure robust access options for our members. Medicare Advantage provides Centene with an important opportunity to serve low-income and medically complex seniors. It also represents a significant long-term earnings opportunity, as we strengthen the overall performance and trajectory of our program.
Moving to Marketplace. Our Ambetter Health franchise continues to outperform. This truly differentiated asset creates a unique growth opportunity for Centene both near and long term. We ended the quarter with 3.3 million Marketplace lives, exceeding our previous projections. Our strong membership results were driven by strategic product design, longstanding and differentiated broker relationships, and overall market growth.
Our large and growing Marketplace platform is well-positioned to provide coverage to beneficiaries losing Medicaid eligibility from redeterminations. And we are leveraging our networks and engagement tools to support members during this transition. Where states allow, we are educating our Medicaid members about Marketplace options and are working to proactively communicate with members, who we predict will likely be eligible for Marketplace in order to preserve continuity of coverage.
During just May and June Ambetter Health successfully outreached to potential members with more than 160,000 digital touch points via email or SMS as part of our redetermination efforts. We expect this dynamic will continue to fuel growth in Marketplace throughout the remainder of the year and into 2024.
Finally, our value-creation initiatives are advancing well. We continue to take a rigorous approach to streamlining core SG&A as we focus and fortify the organization for the future. This includes additional work to standardize our operating model, while maintaining the hyper-local care that differentiates Centene in the market.
The implementation of our new PBM contract remains on-track as we've achieved all first-half 2023 milestones and look forward to our first go-live dates in early-2024. Our portfolio review work also continues. And in June, we closed the divestiture of Apixio to New Mountain Capital. We structured the transaction to maintain an ownership position, as well as a long-term contract, because of our view that Apixio's proven artificial intelligence tools are uniquely positioned for this moment in healthcare technology.
We believe that partnering with New Mountain will allow Apixio to innovate rapidly through continued investment, while we continue as an influential customer and minority owner. This is a great example of our thoughtful efforts to maximize long-term value as we reposition non-core assets. In parallel, as our value-creation efforts create operating bandwidth, we continue to build our M&A pipeline and look forward to diversifying our capital deployment as strategic opportunities for inorganic growth emerge.
Overall, Centene delivered another quarter of solid financial results, while executing against a robust list of transformative initiatives to move our Company forward. With half of 2023 in the books, we are excited to leverage our positive momentum as we work to support our state partners throughout the duration of redeterminations, maintain our leadership position in Marketplace and strategically realign our Medicare Advantage business, building momentum around stars and positioning our products for long-term growth and profitability.
Centene's improved earnings power in 2023 is a direct result of the focus and hard work that our organization is demonstrating every single day across our markets. We remain confident in our ability to achieve greater than $6.60 of adjusted earnings per share in 2024, as we continue to execute against our strategic framework, creating value for members, customers and shareholders alike.
With that, I'd like to turn the call over to Drew to review the quarter and our financial outlook in more detail. Drew?
