Susan M. Diamond
Chief Financial Officer at Humana
Thank you, Bruce, and good morning, everyone. We've continued our strong start to the year today reporting first quarter 2023 adjusted earnings per share of $9.38 above our internal and consensus estimates. Our performance to date shows solid execution across the enterprise and importantly reflects better-than-anticipated membership growth and favorable inpatient utilization trends for both our new and existing membership in our individual Medicare Advantage business, allowing us to raise our full-year adjusted EPS guidance by $0.25 to at least $28.25.
I will now provide additional details on our first-quarter performance and full-year outlook beginning with our Insurance segment. As a reminder, in late February, we increased our full-year individual Medicare Advantage membership growth estimates by 150,000 members to at least 775,000 but did not adjust our other detailed guidance points prior to issuing updated guidance today.
With that in mind, revenue for the quarter exceeded initial expectations driven by the better-than-expected membership growth. Individual Medicare Advantage PMPM were in-line with expectations, increasing 3.4% year-over-year, which is lower than our expected Mid-single-digit full-year yield due to the 2% sequestration relief impact during the first quarter of 2022.
Turning to claims trend. First, I would remind you that we assume normalized trend for 2023 and expected provider labor capacity to improve modestly throughout the year. In addition, our original guidance anticipated lower-fee levels for the first quarter of 2023, given cases peaked in December, which was offset by a same higher flu costs for the fourth quarter. During the first quarter, total medical costs and our Medicare Advantage business ranged slightly favorable to expectations. We experienced lower than anticipated inpatient utilization for both new and existing members. While non-inpatient claims are less complete early indicators suggest trends are in-line with expectations. All in we are pleased with the early performance of our Medicare Advantage business.
Our Medicaid business performed in line with expectations in the first quarter. So, Louisiana and Ohio contracts successfully went live on January 1st and February 1st respectively adding approximately 115,000 Medicaid members as of March 31st. Early indicators show performance tracking as anticipated in both markets. At this time, we continue to expect an increase of 25,000 to 100,000 Medicaid members for the full year as the membership gains in Louisiana and Ohio will be largely offset by membership losses resulting from redeterminations beginning in May.
Finally, our standalone PDP and Specialty Benefits businesses are also tracking in line with expectations to date. For the full year, we have updated our consolidated adjusted revenue expectations to a range of $100.7 billion to 102.7 billion while updating our Insurance segment adjusted revenue expectations to a range of $97.5 billion to $99 billion. These changes reflect the removal of the employer group commercial medical business results which are being adjusted out for GAAP reporting purposes, partially offset by the impact of our previously-announced increased individual Medicare Advantage membership growth estimates for the full year of at least 775,000 members.
From a benefit ratio perspective, we reaffirmed our full-year Insurance segment guidance range of 86.3% to 87.3%. As previously shared, we expect the additional 150,000 member growth to impact the benefit ratio by approximately 10 basis points. As a result, we continue to be comfortable with our previous guidance range but now anticipate the full-year benefit expense ratio to be biased towards the upper half of the range, which is consistent with the majority of analyst estimates today. As a reminder, the exit of the employer group commercial medical business is not expected to impact our full-year benefit ratio expectations.
Finally, with respect to operating cost ratio, we have provided consolidated adjusted operating cost ratio guidance of 11.3% to 12.3%. The 30 basis-point reduction from the GAAP ratio is reflective of the exit of the employer group commercial medical business, which carries a higher operating cost ratio. Before moving to CenterWell, I would like to take a moment to address the days in claims payable or DCP metric. While DCP is a metric that is often referenced as an indicator of reserve strength and earnings quality. It is important to keep in mind the DCPs can fluctuate in any given period due to items that are not reflective of claim reserve levels and may not have an impact on the current-period income statement. As an example, the seasonality of net pharmacy expense including reinsurance is impacted by the phasing of coverage responsibility under Part-D.
Net pharmacy expense varies by quarter and does not have a corresponding reserve impact as pharmacy claims are largely paid in real-time resulting in a disproportionate impact to the DCP metric. This dynamic is the primary driver of our sequential DCP change. Net pharmacy expenses increasing nearly $2 billion from the fourth quarter of 2022 to the first quarter of 2023 due to the coverage responsibility being more heavily weighted to the health plan at the start of the year without a corresponding increase in reserves. This is driving a 3.5-day decrease in our DCP sequentially.
Normal course changes in provider capitation payables and the timing of inventory claims processing also cause fluctuations in DCPs without impacting the current-period income statements and is the driver of the majority of the remaining 1.2 sequential decrease and the entirety of our 1.8-day year-over-year DCP define. Our concentration in Medicare products and growing number of members and value-based care arrangements can cause these items to have a disproportionate impact on our DCP level at any point in time.
We believe the trends in IBNR and membership serve as a better indicator of the consistency in our reserve methodology and relative strength of our claim reserves. As of March 31st, sequential growth in IBNR trends closely to our growth in total Medicare Advantage membership over the same period at approximately 10.5%. Finally, I would reiterate that we are comfortable with the utilization patterns seen in our Insurance segment and more specifically, our Medicare Advantage business to date, as reflected in our updated full-year adjusted EPS guidance.
Now turning to CenterWell. This segment had a solid start to the year performing modestly better than expected in the first quarter. Our primary care organization reported better-than-expected patient growth year-to-date, adding 7,300 patients or nearly 38% growth in our de novo centers and 8,800 patients in our more mature wholly-owned centers, representing 5% growth year-to-date. We now anticipate full-year patient panel growth of approximately 25,000 as compared to our previous estimate of 20,000 to 25,000 patients, representing a significant increase over patient growth of 13,000 in 2022.
In addition, we added 14 centers in the quarter, including seven net centers added through acquisition, expanding our center count to 249. We are also pleased to share that 67% of new patients and 87% of our total patient panel have completed a first visit in the first quarter compared to 58% and 83% respectively in the first quarter of last year. Patient engagement is a key driver of retention in improving clinical outcomes. Financial performance continues to be on track and we are pleased with the progress of our de novo centers as they mature through the J-curve.
In the Home, total new start care admissions and our core fee for service home health business were up 7.1% year-over-year for the first quarter, in line with our expectations of mid-single-digit growth. However, we continue to experience pressure on recertifications due to utilization management programs of Medicare Advantage payers. As anticipated, we have also seen a slight shift in payer mix, patient mix with a small decline in original Medicare admissions year-over-year, more than offset by strong growth in Medicare Advantage. And as expected, our cost per visit has increased more than a 2% year-over-year with continued nursing labor pressure.
Finally, we resumed tuck-in home health M&A activity in the quarter, completing an acquisition that added 11 branches with average daily census of 4,700 and approximately 25,000 admissions per year. We are committed to continuing to grow our agnostic CenterWell home health business and expand market share through organic growth and strategic M&A activity. As Bruce shared expansion of our value-based home model is tracking in line with expectations and is demonstrating favorable outcomes. We continue to expect to cover approximately 1.8 million members by year-end with further expansion to 40% of our Medicare Advantage membership by 2025.
Finally, our pharmacy business performed well in the quarter benefiting from higher-than-expected individual Medicare Advantage membership growth as well as favorable drug mix. As anticipated, we saw a 100 basis point reduction in mail-order penetration for our retained members as a result of retail pharmacy copays now largely being on par with mail-order benefits. We continue to invest to differentiate our order, delivery, and clinical experiences to encourage further use of mail-order and maintain our industry-leading results. Further, we remain focused on providing awareness and education of the benefits of mail-order for our large block of new members to drive increased penetration throughout the year.
From a capital deployment perspective, we continue to expect share repurchases of approximately $1 million in 2023. We will consider the use of accelerated share repurchase programs, as well as open-market repurchases, which we initiated in March under Rule 10b5-1 to ensure we maximize value from these programs.
Lastly, with respect to earnings seasonality, we expect the percentage of second quarter earnings to be in the low 30s. Before closing, I want to reiterate that we continue to be pleased with our operational and strategic progress and ability to raise our full-year guidance based on the positive fundamentals seen across our businesses to start the year. Our strong Medicare Advantage membership growth and updated 2023 outlook position us positively on our trajectory to our mid-term EPS target of $37 in 2025.
With that, we will open the lines up for your questions. In fairness to those waiting in the queue, we ask that you limit yourself to one question. Operator, please introduce the first caller.
