MGLN - Earnings call transcript Q1 2020

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Operator

Welcome, and thank you for standing by for the First Quarter 2020 Earnings Call. At this time, all participants are in a listen only-mode. [Operator Instructions]. Today's conference is being recorded. [Operator Instructions].

meeting Joe the turn I’ll over Bogdan. to Now, you may begin. Sir,

Joe Bogdan

will replay the June earnings The Ken joining And XX, this me call numbers first CEO, first CFO, replay quarter thank can announcing after morning. press in shortly Magellan to Rubin. today of and The Jon you Magellan's With Good our A distributed call. available for Health's release release. the the our earnings be quarter are Fasola; XXXX. earnings found was this access morning. be conclusion through XXXX

of For remarks presentation, those call. who of and listen to are subsequent herein been remind the today, the earnings rebroadcast to that not XX, initial XXXX, this have you as May we made updated the

forward-looking subject These our to are listeners risks updated advise factors information our on XX-Q of actual and events extraordinary security from pandemic, our XX, be results we statements Listeners factors difficult cyber-security and to During our COVID-XX filed including differ to outlook. including materially discussed XXXX many beyond uncertainties make well Form review release related risk expectations, Form this to certain we are cautioned and control. our our morning that the statements press predict, today. our as XXXX, and risks matters, February cause or XX-K to which supplemental are as risk in current and call, statements, and on can including and uncertainties, these to will generally the filed

describing that certain our results. measures note financial uses when Magellan please addition, In financial non-GAAP

in care, EPS, press revenues of in SEC or profit, income non-controlling goods direct parties, profit equal benefits, release. segment interests compensation expense, costs, filings, subsidiaries, segment held sum from of refer charges and service sold, cost expenses, and but net adjusted value special we stock changes to net defined the of to today's as includes unconsolidated adjusted in excludes other consideration our the cost acquisitions. to income, by Segment is of other fair operating relation recorded as in less are and Specifically, well which and profit from contingent

Adjusted net resulting after fair intangibles. amortization stock acquisitions intangibles, by restricted the income of stock for X, consideration, adjustments completed non-cash as January certain identified exclude sellers, EPS compensation acquisition changes made acquisition XXXX, to contingent adjusted of impairment from value and reflect expense identified as well purchases of in

to morning's which GAAP Please available refer of to this the non-GAAP a financial measures. on reconciliation in financial included the measures is press release, website, corresponding for tables our

turn now I CEO, our will the call over Ken to Ken? Fasola.

Ken Fasola

Joe, Thank everyone. morning, you, and good

We lot to cover a have today.

February with an our Magellan’s refine to on results We'll our of update priorities strategy, COVID-XX COVID-XX our our I work call. four outlined I'll response So the in including quarter, highlights impact on provide look to forward. the for followed perspectives first the our as revisiting we begin by including of

health people. and Magellan shared millions in vital, the of physical ongoing mental and has a of protecting responsibility

health health challenges Magellan of well and coronavirus clear remains positioned is critical address. the a already presenting individuals abundantly need, fact, has the behavioral opportunity to In we and plans, pandemic payers, a what challenge for made societal knew; government employers

to We the We the our our the provider well vulnerable support them, and is necessary access among have as a as expand to members, members, Serving delivery We've care. pushed steps, service associates, and of our the and More associates especially necessary our and most all response provider needs ensuring systems, COVID-XX pandemic. that a protect telehealth the communities when our our through members utilization telehealth represented the services in has proactive half towards then services. our first week over strengthening than our home first of increased visits of April. and focused We've and our pandemic and XX-fold, communities outpatient to of working taken top address shift to particularly almost emergency. priority. from and behavioral April, within seen maintaining to where on in the health, behavioral XX,XXX late-March are telehealth partners, in in facilitated XX%

cases that use telehealth pay productivity. these visits advance as believe clinicians the same made We because we've and be amount And is same we help increased the efficiency done improved of changer both ensure general providers and providers available patients partners had -- to that or in already the game acceptance liquidity. and not where We by in-person access, these we significant for visits the lasting its a payments for so. improves to

the Beyond their mental healthcare pharmacists certified licensed volunteered mental to at fight in our workers opened help and hotline and our COVID-XX, first on against support. clinicians difficult free Health and has our coordinators of staffed number our clinicians time also this frontlines nation's time. their Magellan address the serve emotional by a our responders with wellbeing to a care health

passion meet single protective serve and a products efforts. their our Magellan’s need. commitment. banks volunteer To communities, bring who personal proud Magellan of extraordinarily through spirit serve I'm every facing equipment those unprecedented of made resilience donations I in thank of further challenge support associates with associates day we're and our they and partners and we've to community commitment that is for COVID-XX. mission a the food our and to their risen company those tremendous mission each cash, the their of also have and hygiene as their healthcare associates as to noble we work live with they

forward. months, Murray, I'm resolve. I've moving of taking my we're and and our Jim strategy Rubin Magellan the health health, plans, a independent where growth individuals. my provide Today, to you with strengthens the we're benefits prospects What for six excited over largest specialty vision me health and and providing company leadership seen with now convictions behavioral let As Together my Jon headed. increases pharmacy is shape, team, employers our about

can the as complex, of improve and and distinction the we and go outcomes carve-out include and our high lower address creating premier superior differentiated new service industry-leading a strategy Key targeted and through cost an our pharmacy integrated to for medical and capability our new populations. and a total our behavioral, strength; needs payer believe members supported into customers pharmacy those leading their integrated and independent, oncology delivering Magellan architecting strategy, populations, while services, specific forward specialty position significantly clinical solutions. We aspects full will sustaining also challenges whole medical approach, complex pharmacy model compelling of a care then proprietary evolving costs value by strengthening Rx's Magellan addressing person highlighting opioid solutions at clinical management as offerings; proprietary with and major such leveraging PBM proposition

has pharmacy. health will legacy of capabilities We addressing strengthen develop, in Magellan to complex meeting populations. a enhance to needs unique that needs of in and deploy to capital or high performance cost health, our customer the behavioral specific intend specialty in acquire customers value

of noted portfolio value were growth In and I February, businesses, all that comprehensive potential. proposition we Magellan’s launching analysis our evaluate a of

serving This an creates We made balance we their that purchase sale attractive conducting Care tightens price portfolio. the inbound were review, Complete on payers. Molina Magellan with value decided interest accelerated healthcare built and and needs. with sheet strengthens a new Complete relationship our thus Fortune multi-faceted sell beneficiaries’ MCC. our our in the Healthcare, Magellan serving focus focus, XXX our While strong and reputation a a for review to company reflects We decision our received business we to strategic at the concentrate on we this Care states

$XX of the million translates estimate On XXXX, we million, at XX, receive with and Let Magellan proceeds be in $XX $XX capital to above excess to above Complete subsidiaries amount cash. at Over Care million Healthcare requirements was and this, net We aspects April At Magellan an taxes will and which summarize fees Complete million. me this sale the associated $XXX of excess closing. Magellan a key transaction share. $XX March in transaction. of announced capital for any Molina equal regulatory to the Care excess to XXth, between the

Importantly, over within musculoskeletal management Magellan medical and with as also health, the Molina members, note well behavioral as long-term multiple will pharmacy Magellan, including markets. in certain has that for for Rx management Molina musculoskeletal agreements services and continue radiology million entered contractual Magellan relationships into services I'd benefit X retaining management purchasing pharmacy MCC. new MCC existing

become and Furthermore, in experience innovative data, total and health practice through and purpose medical then demonstrating to learnings our the shift care an This model of is to Molina the good expand is improving offerings success processes. example other Virginia. in It and develop After Magellan agreed leveraging Virginia, that quality and Magellan have technology a strategic foundation The the Molina using model broader coordination model. the to markets. integrated Magellan's will enable this pilot, integrated pilot will lower adapt innovation for best an for market. is also of to costs intent the behavioral

XXXX of in a Our a to individual business. team expertise. in We our PDP and end Part appropriate across years the market dedicate to focus to PBM plan can PBM and on growth was pharmacy five is full component included health multi-line After that Rx’s the review time Medicare critical that XXXX successfully D. Medicare built exit service PDP the a The in we’ve business. health our compete D business, now business. PBM of and also portfolio Magellan building competency analysis market the fully entered to demonstrate employer at Part effectively for This plan employer continued

our to on now turn near-term in me shared an Let February. priorities, I you update which with

First, existing commitments. deliver our on

lower costs. operating Second, our

capabilities opportunities. improve through growth fourth, ability our on to our strengthen Third, And capitalize innovation.

share on some results. let of our to strong commitments, respect quarter With first me our delivering highlights

quarter the utilization execution, billion improved our XXXX, some profit impact in level while development, million, of prior March. largely reported revenue weeks of lower profit For was and the including of year's of given XX%, few over Segment early quarter. with the revenue in net year the areas, first segment Magellan of increased and COVID-XX favorable operational $X.X last by $XX.X first prior

quarter fundamentals results across the company. Our first reflect strong solid

balance of the our for XXXX, about facing ahead COVID-XX’s industry impact on uncertainty our is significant Looking businesses.

the the with we forecast full in XXXX and year will While on our Jon later have XXXX the first both considerations are guidance. on quarter details business, we cannot our call. COVID-XX maintaining additional provide predict results the impact will actual accuracy

Next, our experience on expect by initiative, operating let update transformation our progress costs. our which lowering will we me share a customer enhance

and the but over focus early, $XX areas that improvement report and claims of today direction, process integrity. million not with net meeting outsourcing We're our in the million XXXX impact greatest making non-core to in profit and progress MCC a vendor of of We operational earnings to segment renegotiations, do traction payment on of self-service divestiture offsetting benefit pleased investments include have I'm meeting path Current anticipated $XX including automation It's contract the creating targeted XXXX. of the savings activities, a is expect material to pace XXXX. on expectations. by in our improvements,

where We've stage and in invest Our of practical health, disciplines. innovation of world third economics, with that are near-term seeding lab in development focused medical a ideas. health excellent established corporate recruited an team experts we'll part We've with early consumer innovation. with health lab the data facilitate on innovators key analytics, and and variety companies cutting clinical real is ecosystem, are of an priority our solutions testing edge

focus of our is care clinical I history company, clinical has a a complex enterprise. anchoring on The innovative the distinction accelerate spans solutions and and Magellan with the in that Clinical the populations. of will Committee focus innovation further strategy. a pivot our energized formed rich academic Leadership and pioneer

and analytics, execution. solutions Honoring business Finally, strategy standards continuum. Magellan engine We're table for committed culture commitments, of rebuilding growth innovation, across and and structure product delivering and across optimizing clinical will executing our our in set the our discipline, positioning growth success is data development, by performance. establishing insight and cost innovation, sales go-to-market to a enterprise, the development anchored market

not skills execute longitudinal senior only experienced to to across member at centers a sales enterprise and all share in around business an our C-suite development. also but selling leaders ability, story with experience Magellan Magellan We're platforms. adding proven clinicians Growth

our Our sales distribution focus expanding been in and immediate investing cross-selling our has on opportunities significantly strengthening our initial within enterprise-wide. by capabilities existing customers

story. and and we're our our product, go-to-market sales enterprise As evolve our marketing integrated differentiated -- to strategies, yield we a portfolio will investment platform the continue to in confident unique and integrate

on that, to to With call results Jon detail I'll turn over our for more the the quarter. provide

Jon Rubin

very everyone. And Thanks much, morning, Ken. good

income to share and same XXXX, For This $XX.X of growth was of first net respectively $X.X for within due Care. the was $X.X X% and the $X.XX. compares million billion, increase EPS in Magellan quarter, Complete $X.XX income revenue a quarter to an Net of over EPS million was XXXX. the period and

for related Segment profit million of million quarter, $XX.X to out-of-period $XX first reserve was MCC including favorable approximately the development. items, primarily

growth suggested, in Ken represents the compared quarter. year this prior As to strong million $XX.X

As million, net $X.XX. the of from $XX.X income adjusted an increase $XX EPS a adjusted XXXX million was result, first quarter first was and of quarter

of $XX.X as the driven in particularly utilization results, reinstatement XXXX, operating prior the Now, of by specialty York, increased versus MCC both were well health quarter the and our period quarter. the with of results let behavioral quarter the strong of for Insurer as me Segment development business first million for profit and XXXX share MCC of favorable detailed the care segment Fee. and Health profit for first results and $XX.X million. businesses, Healthcare Virginia New

COVID-XX, some services of plans. reduction March, a reduction the our relates reduced levels than has to early last the we've coronavirus utilization associated health more two This it our healthcare medical and of medical pharmacy in elective costs to with with seen refills weeks offset the due As businesses. since across direct

full few discuss increase well minutes, remaining see of any the with in to second quarter year in our this in a favorability the utilization potential I'll of results expect as timing impact As magnitude, we the uncertain. later as the

made drug well as our PBM specialty refills quarter we in to available as Now improved We driven returned increase we for XXXX. ended Management, within levels. the turning XX, an was margins early segment the slight the business, uptick towards The gross volume to portfolio. was of year-over-year primarily performance latter Pharmacy $XX.X This part saw which management $XX.X strong XXXX, March to volumes normal million PBM in increase million from a the by patients. March have first of quarter script of script since reported as profit of

to compared financial in other expense, stock compensation totaled Regarding corporate to million million, compensation prior costs excluding Total stock of quarter. operating Health changes and year's largely consideration and revenue year's current of XX.X% $X.X prior service in the This inclusive Fee. to in expense results, was quarter, were eliminations due fair direct the but $X.X increase quarter. to the in expenses of compared reinstatement XX.X% the value Insurer contingent prior the of

will tax stock first XXXX the federal and primarily of Health the be year's to rate was vesting book a decrease March rates, Fee, $X.X rate, state the XXXX of approximately the awards. primarily than quarter Insurer Stock the XX, compensation XXXX, than tax the ended the of higher $X.X full was of tax the rate quarter. was higher in due compensation compared We The March to to million for for rate ended XX.X% to certain differences expense XXXX year's from quarter. quarter statutory was related of income million, anticipate due for and The was the equity the non-deductibility year prior XX, the tax while This primarily change statutory XX.X% the to XXXX timing XX%. expense. effective rate for quarter prior

Magellan's liquidity strong. position is

$XX.X flow XXXX operations March cash Our for ended from XX, million. quarter the was

unrestricted entities. undistributed of and unrestricted in parent related earnings we the at to XXXX. an As the entities, of $XXX at over held XX, of from XX, including excess million XXXX, and unrestricted capital $XXX.X XXXX Thus, March regulated March $XX and million Approximately XXXX. cash cash is totaled of $XX.X investments increase million XX, the MCC as at at had the XX, of investments million, March balance cash December company's $XXX million

of a Finally, debt-to-total ratio at quarter capital end. capacity, XX% we revolver and in approximately $XXX million have untapped

addressing expected XXXX guidance, strong quarter our from In benefiting a guidance. year with Now, quarter let me and services. favorability our associated healthcare we're second discretionary full lower first of address utilization

the However, which balance the in of level increases potential the impact full COVID-XX over variability of uncertain remains year, results. of the

and XXXX previously, noted guidance. we're such, As as maintaining year our full Ken

this profit between basis, income and EPS income net billion and between discontinued million; $X.X segment and a between on $X.XX $XXX and net million and million MCC reporting between $X.XX. million $XX between to $XXX adjusted billion; $XX between $X.XX $X.XX; million; $XX EPS includes: adjusted $XXX Prior net revenue operations and guidance $X and million;

unemployment to impact scenarios COVID-XX, potential including lower across orders not limited the investment to, changes scenarios; a to care possible gain but we've of shelter-in-place impacts contagion; against levels costs. our of of current and the any yields; administrative virus pandemic sharing the membership; the and impact to duration related multiple change variables businesses, MLR address run number the in including To to variation abroad; tied utilization and across rate country provisions; cost the and the peeks recurring of these contractual levels, or the the

exercise to relatively and range businesses government-sponsored we're assumptions ranges emerging Magellan’s guidance. even help versus indicators to Now, a and on to ensure and maintaining as results track our of this produces frequent that guidance forecasts previous ongoing wide and commercial planning XXXX appropriate. basis a membership diverse, continue across be our current continue leading We'll

expect the anticipate discretionary spending. of in seasonality We currently do XXXX usual I'd first returns. of second the of will also quarter the up Care estimated influence pent half the will operating out will closing Magellan back We given heavier guidance that the Complete the demand now the point XXXX. our end We're earnings experience of before coronavirus deferral to full like as than business. quarter results healthcare produce XXXX given that ongoing results, expecting being strong utilization date year includes pandemic

XXXX in as are follows: results MCC's our reminder, guidance a As included

compensation the for $XX Health approximately approximately million of approximately of approximately $X the acquisition-related and $X amortization $XX million; to relates Insurer billion; profit approximately Fee intangible which million, $XX interest approximately of income of results of amortization; of revenue million. approximately and stock provision of which non-deductibility; Net $X expense million, depreciation from segment million $X.X

We $XXX million estimate and will new between the annually. $XXX accompany customer with the that agreements million incremental revenue Molina with associated contribute relationship

In closing $XX we following of and addition, stranded estimate overhead be million. $XX the that between million the transaction the will

months first following the the by the of For this Molina. from the majority services expect to transition XX be we transaction, provided offset to closing revenue

business, like exit Ken color planning provide noted, XXXX. some in also which PDP our regarding I'd to we're individual Now to as

incremental loss and revenue of million, XXXX our $XXX a in PDP Specifically is $XX ultimately we which of approximately will will million, add majority currently we the believe operates this achieve of loss. profit business from approximately at the XXXX. individual Elimination the segment

In results. summary, Magellan posted strong quarter first

are While fundamentals COVID-XX our presents business uncertainties, on track.

we've Finally, strategy, lock forward. refine provide and our taken steps value bold moving to flexibility in to the financial company

over with back I'll now Ken And that, Ken? for call comments. the some closing to turn

Ken Fasola

Thank you, Jon.

obtain to as transition necessary initiatives, balance delivering in our the we to in quality in means focused divestiture MCC, cost-of-care Molina our additional business. conjunction on will of promises Medicaid Magellan provide businesses. XXXX, high our work delivery while regulatory approvals This the on remaining continued invest we times. For this with against unprecedented will to of with In flexibility be this these executing our services financial

receive, working qualified efficient a our that the the study, experiences. improve earnest comorbid to the the conditions uniquely primary health solutions while to more some cost digital our is care spend for of XXXX United and physical for Magellan acquiring $XXX of operations, in people Milliman people is care member and self-service, billion to and more help behavioral these behavioral in recapturing enhance provider over effective, For for quality and medical payers. with States. will According health capabilities we're telemedicine, allow developing for services by or collaboration

additional strengthen suite our specialty our and more trend to high spend. opportunities deliver areas solutions we healthcare to In of efficiently of management cost, high expand and services to health, cover see

marketplace create pharmacy, emerging capitalize growth, the compelling and uniquely within that Finally, to positioned trends on opportunities for acquisitions. both organically we're in through

marketplace specialty solutions independent With and disruptive scientific specialty including our becoming is deliver market capabilities to medical drug growth pharmacy advances address management alternative comprehensive meaningful need therapies, emerge partner the rapid intent need. across and our Rx accelerate, differentiated of As proven drug total is pharmacy categories, management, gene an the drug pharmaceutical for Magellan these to new cell that programs, in of clinical and and novel emerging therapy increasingly continue and costs to fill in services, needs. enable this is complex. The clinical

with behavioral for is about leading team the Our or a initiatives cost excited carve-out these management to progresses. health I become integrated to independent chronic the solutions as specialty and health, basis. look populations on you vision updates services our payer pharmacy year high forward offering on company providing

I'll for back the the turn call questions. over now operator to

Operator

thank And you.

question Fidel is Scott from Stephens. first with Our

is line open. Your

Scott Fidel

And just, as behavioral also out some last just uptick assuming of if that’s utilization. seen did any working up, of muting there? interested clarifying you a terms in exactly C-XX, starting behavioral of any possible the But some see segment. impacts in utilization action that And just in maybe question, -- I corrective on in give in utilization back guys then maybe little COVID interested us more First specialty you Interested trends spikes half insight in what and just whether with probably in that color around from saw it the can specifically year, heads utilization. you've occur? plan first that a just remember in detail. the April, in if you I’m terms

Jon Rubin

Jon. It's Scott. Hey,

start and Let Ken can afterwards. me add color

tail is saw of on First, the benefit as and in majority the early. change had seeing we're of end now I impact mentioned March comments, in terms very month or at the really COVID-XX, still And the what in my we've very we of of the of it really obviously April. utilization, the

some of seeing, trends the talk again, So will we're have let of but quarter. most utilization in me it impact second about

services. discretionary lower First, we've seen utilization of

of where discretionary our you specialty more and in of across the specialties. a particularly in through our both business, really have about business, comes think specialty behavioral you book business, variety if that services So, different healthcare

volume reduction lesser capabilities. utilization ramped our care, we've really from is the settled And on then, on side in On telehealth comments, to early we extent the the I in we're telehealth is as behavioral in-office a my as care, down side, towards getting on levels. as to March up some spike because people inpatient shifting to pharmacy saw early that behavioral more what fills. outpatient of in the but end seeing were actually in normal And mentioned

will again, there's out. point, this though of assuming in side on in lower radiology. at What again, a play what continued discretionary is uncertainty of areas we're specialty lot So, second terms like in the quarter, services primarily diagnostic

MCC same behavioral we utilization an we in will the And in of some where On areas in to of it but might in assuming really more second see That our utilization. demand but are what's side, be terms half -- assumptions. of up that's much seen still the modest in be XXXX. the there obviously that at this will point pent uptick be remains

different you health behavioral, an the has utilization reprice utilization of areas. our second appropriately. a business really we in quarter did business your really priced remember, on of the increase get Behavioral settled last to question year, and number in We across of in did quarter Relative starting year, down behavioral in book we in saw if XXXX. the -- first

year, played say we've the to COVID played year. have this as -- things would impact as the I headed prior into expected, of out So, out

Scott Fidel

yours to behavioral know just guess lot in then and And with then progressing up impact at what COVID-XX working from lot out a specialty how a pharmacy? on them coming cycles big sale And how of dynamics how maybe in of dialogue the everybody distractions just with crisis work organizations And urgent on right other follow-up just around focus of of the and and that now. solutions the Ken, is for there seeing just payer I you're just question probably just for some you I a a COVID interested on on interacting with the dealing innovative -- also, on is and with just impacts, on point, specialty. the terms and this is one new, given around, behavioral around the

Ken Fasola

business. start -- morning. the of good the then Scott, the part and with thanks, to respect and first second we'll pharmacy move Yes, with that to With

to -- not slow business We have pipeline, same improve little if likely persistency a seen the bit market slowed creating both It's maintain headwinds existing is as reasons, protect it represents that. a conversations there, but down and working has to our of not right? I the of little of So a the and for the keeping result down relationships also bit in tailwinds. little staff but a both in our hang from bit and think

to of to our as an story payers. good think the move important is us around our for different mental the capabilities mental through itself to we well are stress we And first And services level. also as combination innovation of health to I impacts caregivers, specialty mental Magellan us contributing challenge health the serve going the are as impact populations, it's the and and at health responders, the impact documented behavioral to where a is moving increase result health well. incredibly of that the and is actual the with selling C-suite pivot virus On towards relatively has to the a been but conversations both physical this demand really for health become an increasingly integrated as business, going of going behavioral -- of the increasingly particularly on are product financial well create this health ideation on care, know COVID-XX -- impacts I on think respect area skills we lingering a enhance likely strengthen and in that people take for under is reintroduce to

Scott Fidel

the was profit you then want just last to that? in I the have in And the just one MCC didn’t see from that to contribution me. you do segment first what so have, if just Jon, quarter? see release,

Joe Bogdan

all was we I'll prior you that period of ballpark remember, give MCC. development the of in numbers. numbers, and Almost Yes, had sort again, material

out-of-period. So you benefit the about to the quarter, again a And million call the we first development. of sense. of Including the give that that segment benefit MCC favorable profit, prior $XX includes just in out-of-period, for talked period XXs it, mid

Operator

Bank with Fischbeck of America. Kevin from comes question next Our

Kevin Fischbeck

what like to the kind I what help got kind as was they and behavioral XXXX, going core as the as team prior Magellan beyond? growth businesses profile quickly. 'XX actually of about wondering if management didn't us -- really is of think we growing I of mean view in could enter specialty because MCC pharmacy look you the and into

sense So, lot should opportunity of I to of going a can obviously forward? trying now, a us some guidepost core for you just mean, what you like see kind Magellan look give get if

Ken Fasola

the certainly opportunity. that opposed jump relatively we I'll we areas the would I and making particularly in a mentioned more Bringing is at opioid at strategic great around use areas. billion, Magellan I challenges, just care opportunity carve-out, a represents in have and XXXX. And multiple that's probably new broadly together pharmacy from the a But oncology go -- example, us. and opportunity, be our to which approach to in table favor kind really, a and and to and Magellan. who somewhere of those we to special teams quoted of we members think in we impacts was an two the I But behavioral integrating the the the person, mental to our really coach with to we the for a whole comorbid as generally. at we Milliman And solutions Well, respect Obviously, could and integrated study neighborhood combination spot think Jon start power term in or a believe look experiences, really partner sovereign for light. giant call, represent specialty of has seat pivot of and sweet carve-in unique capabilities opportunity managing powerful become of are where complex potential physical we health across to that management, speak think skills in know with behavioral forward. to behavioral think $XXX want integrated have over the -- a I I

of combination to the around those to -- I us to office putting you more lab any a right work cost So to now, and -- transformation the those that I going we're competitively, are would structure innovation tell things in the powerful. price allow think there's that without the really create math be that going doing

I position some nice that are relative in a as company transformation COVID, think build and office, is to to team competitive we the his going track, which forward. on the And lost despite the great little really we've our Murray ground momentum is So, Jim work position. on

We that with opportunities our also well. we're sales also we had were you, health core strategic we around we are not the suitors And in conversations even that -- of away the having And and conversations in from expertise pivoted weren't insignificant. having business behavioral can that MCC kind the had those tell the I in as conversation, who now.

to sure puts And that mild whole through anybody doing look from I the you way through is yet. so really to not a continuum of Magellan position. care, I'm when moderate in really well complex, at that the And think carrying strong more

really to really, I hard that. the see So continue lever going capabilities you'll our the that XX stuff well strengthen has we're recognize Magellan for done think across invest but continuum forward, things years us and that over to moving in

Kevin Fischbeck

I of as something you that thinking that into about said affordable initiative. of in market? the profit? to you segment you if of your think back kind you just cost Are delivering -- kind million pricing guess and about in and the as kind cutting Are about pocket additive clarify $XX more thinking product there, to

Ken Fasola

additive add -- to Jon, that welcome additional segment color to you’re and want. any you profit I

Jon Rubin

terms making Yes, Ken's in of what our in no, to to correct, specialty other The mentioned enhancements earlier are only behavioral business. note comments addition that's we’re I’d and to Kevin. make our Ken

get increasing of strong health same, from to and trust well to the the to results, continue also quarter. of other plans. -- last in states specialty California win we're achieve on call doing the on And in in administration strong Our out to continuing contract. pharmacy in the the talked benefit We're We're pharmacy business It’s a We the continuing -- both growth. performed out well side. of the pharmacy our been financially growth have performer. has starting pharmacy about as carving

note So and as are side go I pharmacy supplement the to specialty opportunities Ken’s in real just the comments wanted to behavioral substantial forward. on we

Kevin Fischbeck

a opportunity, then, hedge of But during a there. have Obviously, about you'd you grow more other commercially as focused far might how lot if like business of think more have health or do of is ability sounds the that commercial it be plans focused it target? employers a And the when diverse kind is about kind in this MCC, to think or either you to the recession. as you end

Ken Fasola

out Yes, we're we're there's MCC, business. not I'll opportunity jump divesting while in. of getting start for the I us actually -- a Medicaid and that great again that Jon can we’re think

that's two that our deal forward. again, only about, and you'd going I a I a So great to have a Medicaid Jim where going think of complex not but care anything upside think for as experience, interest, model. integrated are think add areas great this be big of we business Medicare, that? more represent to actually and us Jon, And and I management part of

Jon Rubin

would specialty, our of in exchanges. that, the pharmacy talked Medicaid and I even we’re significant administrator for focus programs. as largest reinforce business got specialty like on benefit And existing No. the Kevin we've saying business, just about on well, I Medicaid and that, pharmacy behavioral with state the in books in as behavioral in

as with terms both both and Medicaid growing the well beyond, our for of through and outlook existing us environment economic look should books in serve our focus So, we ahead. current the

Kevin Fischbeck

that now, there up we business? one for about freeing exit last think And D should exit, Part business you when is the capital statutory that any as

Jon Rubin

is. there Yes,

reconcile relative can we number but Part So there's D. offline, items you of to a capital actually with

year. and up reinsurance capital trued gets some -- CMS there's that lag be are XX for from So relative terms And following months receivables, receivables almost it's the aggregator. -- receivables of freed statutory the October that'll up. in a from post also XX then of both post to the rebate we months year, our usually have rebate there is end Also, significant there

well in at of sum pieces. in We million pieces for are, but capital sense if kind some offline it. that's it's of can those that those reconcile some of up, that over up tied terms $XXX what actually So, least gives you

Operator

question next with Styblo from Jefferies. is Our Dave

Dave Styblo

you guys on could out-year was refreshed I profit. million of views $XXX some million $XXX your segment maybe hoping to provide

MCC being you that, Curious why maybe with achieve transformation from you I curious maybe think how go was there. are savings of another divested? well still the think to from that there's of $XX savings. But the understand D, Magellan $XXX moving Complete you million that million? some Part specifically separate quantifying at impact as the And other least away to that there in parts then Care can million of other those reiterated fact parts contributing us the it any sounds million much And if that contribution? you certainly just there's $XX like with to doesn't could $XXX as help MCC

Jon Rubin

Yes.

start with that. let me So,

our recently of MCC. have on focusing benefits, launching and to built plan, to prior the all and in was MCC transformation which we we much largely have separately our that focus built First, was areas behavioral transformation the of at very and terms improvement really pharmacy, specialty the really into profitability related been transformation, little plan transformation didn't as as essentially real on corporate of because efforts well some

that's So that $XX really maintained. gets why million

are, development have this to million decent I segment year we year. to pieces of and profit. think does it, some of $XX we kind gotten think would reported about competitive would And these include fully it quarter, but MCC, that XXXX first around we we've and favorable the and I margins of but many this again, before to What expect of talked about -- beyond relative not

We forward. million you not have more that, teens to talked over mid high would higher contribution and of a here see talked couple million transformation of of margins versus And about with the big margins the basis. Molina growth some going revenue years. we million 'XX items this some of a about So, about functions beyond. growth $XX on 'XX, normal $XX partner last ultimate We also startup to going exit pleased has We'll step in $XX on have the we're a year we And of which or gain newer forward which an next The be with around we've contracts in that the the as the benefits, obviously $XX year. very company million. talked continued then the the while we -- million of costs D program. fact believe great Medi-Cal have Part Molina the management the like to seen $XX are

revenue million with We forward. $XXX as opportunity expect we initially about $XXX for some million go of to growth

specialty how over we in growth good we But and next things as Ken the So, side, we of those mentioned, the continue can core businesses well. about as and on current kind pharmacy have or are as some our enhance investments think think of of year the behavioral the so. really capabilities the pieces growth we

Ken Fasola

I I Dave, think just would add great what comprehensive Yes, was a and answer. to said, was Jon --

say, a again, Just IT to licenses. back outsourcing. process we the tractions work -- like the to office, top the of process around improvement, at help their clinicians of lot improvement to and early side, the transformation wanted we’ve I’ And on

$XX partners, a early, quality network. and them to to in those these doing I those you're both important work to is and the efficiencies see with that people of of work, an processes, We have lot there going and here lot a those and also more $X efficient, enabling enjoy which of had automated caliber we pickup brought part the are because the are we an think that employed growing strengthen relationship of to our going

Dave Styblo

you'd to And from sounds leverage take of down going that, And doesn't your it's maybe so the go close to used sort the such about And divestiture. to would like from of to is debt, in being buybacks? going you'd have there would be then not of on acquisition maybe it on change. that any it go putting be Ken it that your that your radar? like the that know Curious extent it opportunities proceeds what investments that you're of, use some sounds then seat, I $X there, timeline some out cash. and of find to billion the something some that's cash towards the is terms

Ken Fasola

this get processes focused to to through time. the regulatory closed required and move the want foremost, in make sure Yes, efficient -- first we and obviously we stay

the going to required time, underway and necessary we that's work think business solutions to we at our disciplined, beyond be the innovation as and the capabilities further forward. that, that and when to move the advance same looking And those. around so how at in lab We're deliver about are the

about access our goal There'll is be bring and as transformation be to operational to insight, rigor work parallel. integrated and it, competitive in bring model so focus it byproduct before then value enhance I And get we the ability for a doing us business that'll solutions we There'll about hinges build very to working to to price. we're data of create our analyze around, on these in an to that our momentum going allow to the that development market reinvigorated forward. I clinical -- to shareholders. think value office, is new lot talk And the tie of data, drive said proposition as when and the to interpret a the at a think enhance it and

focus deliberate. going We're on core disciplines. be we're our So, to to thoughtful and going

and so going effectively. money hole in be It's to anybody's burn pocket. to not And used the going a efficiently is

care we evolve matter is COVID-XX. and in the area And now that. the our But the leverage think opportunities underway around we with company. management. the the healthcare I the the early my we'll doing identify You Board highlighted in to -- share way drive And to capabilities momentum broaden repurchase behavioral productivity health of but makes or is the I the to improved first. certainly and enabling also everybody an particularly going an complex taking we're to But more that. drive will debt and And think things you've opportunity And are progress efficiency, and are down has that's costs not we're as by in have the I nature that changer one you'll to create already prepared remarks. update said and solutions pleased deeper quarters is, sense delivered of -- for consider -- early telehealth, for investors, but virtue These game if is about innovation access. as our I will you, example, then obviously, around work mentioned direction I is that continue think fact building lab talking been be only and of like help had and

Dave Styblo

year then can the structured, pilot? milestones color And that, there? other a How evaluation, lastly that this hey to for the happen? each that going sort How X-month you've a larger sharing but at of with are what could at and maybe where -- to PMPM is more evaluation Is what you model? Is Virginia? you get those would let's little just risk conversations only thanks. the on? know say I on is there? Molina a Okay, the that about me just is tell And pilot in you before us with at looks to before it a look that players out you're financially And two have other like other are pilot perhaps working, what been curious you expand from with MCOs that look advance that contract. in something

Ken Fasola

been partnership, collaboration our job of questions was physical in concept specific has and or about. on answers leveraging helping And the the our whether part and working of asked big manage very word talked impressed pilot really collective we taking whether a done are to talking or the advancing payers this other health here. Well, bring to think we more it's to I've -- really, impact you really around efforts to about pleased we're pilot, experience of it it’s a Virginia working in model, impact mental with team I that or the integrated health, behavioral the

market. for Okay, about it’s our then And like out this which so take as relationship into what forward? does the Molina going with we basis this look will think broadly more the we

-- area Virginia. why this questions asked move will the from That's efforts resolving a those pilot our team still of that So, the among the of we be word in are we're that benefiting lot great forward. as we you already in

that do and talking how we you So that can take more about in rapidly. it evolve that way a expand now it's

key looking data around not segmented the all elements are I just health. know the -- behavioral obviously at don't and data

us doctor data -- platform ensure technology able enough. with efficiently. center to them higher that these to will having from work at become that of cost on aggregation, And quick the are so our make identification, enable we So benefit provider to have by will ahead of potential and situations care primary the of a relationship can catching population all not a partners that and virtue we potential those health, focus that that get -- earlier that

about a relationship going are the headlines is those what it's of like. ultimately some just that think to So, pilot. I look Again,

of nature it way forward underway become existing to but conversations how we're terms the customers. Molina move current thinking future of going core we're terms In about and in with of with

Jon Rubin

And actually Dave, in is gain needs. this behavioral medical a technology medical what and behavioral Ken health based another supports costs, that is, just the to thing designed total share, coordination one best with other lower total care quick model, not on that's members on what on health is but terms of different we're that this as the produced structuring savings cost this savings, described data thing about of the practice with

we that’s of as expect Molina to, do market. within just -- what’s excites the part -- we about if we in and that's broadly potential not think the So, unique a more for great what opportunity job us presents expansion a but a

Operator

questions. And at see no this time, I further

Ken Fasola

you All in with on when to today's our safe. Stay our on we'll call. progress both second plan for you your our I participation right. and update want listen, Well, strategic speaking July, thank look you results. forward We to on quarter

Operator

does And conclude This thank you. call. conference today's

your participation. your may lines. Thank for disconnect you You

Magellan Health (MGLN) 11 May 202020 Q1 Earnings call transcript