Good afternoon and welcome to the Alignment Healthcare Second Quarter 2023 Earnings Conference Call and Webcast. All participants will be in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions]. As a reminder this conference is being recorded. Leading today's call are John Kao, Founder and CEO, and Thomas Freeman, Chief Financial Officer. Before we begin, we would like to remind you that certain statements made during this call will be forward-looking statements as defined by the Private Securities Litigation Reform Act. These forward-looking statements are subject to various risk uncertainties and reflect our current expectations based on our beliefs, assumptions, and information currently available to us. Descriptions of some of the factors that could cause actual results to differ materially from these forward-looking statements are discussed in more detail in our filings with the SEC, including the risk factors section of our annual report on Form 10-K for the fiscal year ended December 31, 2022. Although we believe our expectations are reasonable, we undertake no obligation to revise any statements to reflect changes that occur after this call. In addition, please note that the company will be discussing certain non-GAAP financial measures and that they believe are important in evaluating performance. Details on the relationship between these non-GAAP measures to the most comparable GAAP measures and reconciliation of historical non-GAAP financial measures can be found in the press release that is posted on the company's website and in our form 10-Q for the fiscal year ended, June 30, 2023.

Hello and thank you for joining us. We are pleased to deliver another strong quarter in which we met or exceeded each of our key performance indicators for the 10th consecutive quarter since our IPO. For the second quarter, 2023, our total revenue of 462.4 million represented 26% growth year-over-year. We ended the quarter with health plan members of 112,200 members growing 17% year-over-year. This gross profit of $53.6 million, producing a consolidated MBR of 88.4%, better than our implied outlook range of 88.6% to 89.1%. Importantly, we delivered an MBR of 87.1%, excluding our ACO REACH business. Meanwhile, our adjusted EBITDA was negative 2.1 million, well ahead of our outlook range. As I reflect on our year-to-date results and pleased with the progress we have made across the organization, we continue to improve upon our care model each year and in the second quarter, inpatient admissions per thousand ran at 151, an improvement from 163 in the first quarter and one of our best Q2 results in the history of the company. This brings our year-to-date inpatient admissions per thousand to 157, which is in line with the prior year and consistent with our expectations, all while growing well above the industry. While Thomas will drill into more detail during his remarks, I'd like to emphasize that we feel confident in our ability to drive our MBR lower in the second half and achieve our adjusted gross profit guidance for the full year. Our confidence is underpinned by our successful utilization outcomes driven by care anywhere and AVA in the second quarter. We also see further upside as we continue to improve our care anywhere engagement rates and execute against our network performance management initiatives. Together with regular Part D seasonality, we believe these factors will deliver our anticipated…

Thanks John. For the quarter ending June 2023, our health plan membership of 112,200 increased 17% compared to a year ago. Our second quarter revenue of 462.4 million represented 26% growth year-over-year. The strong result was driven by Medicare Advantage membership that exceeded our outlook combined with favorability and our revenue PMPM due to the timing of the annual CMS sweep cycle. Our adjusted gross profit in the quarter was 53.6 million reflecting an MBR of 88.4% or 87.1% excluding our ACO REACH book of business. The outperformance in the second quarter was a direct result of our actions to drive higher engagement with our care anywhere eligible population, including targeted efforts towards our [indiscernible] and skilled nursing facility members. In the first half, MBR excluding ACO REACH was 88.2% compared to 84.9% a year ago. As we previously noted, the year-over-year comparison is distorted by atypically favorable prior period items last year due to COVID related dynamics, including higher sweep payments. This dynamic comprises roughly two thirds of the year-over-year difference in MBR. While revenue in the quarter benefited from some positive sweep payments this year, the gross profit impact was meaningfully lower due to contract mix. The remaining approximately one third relates to other factors we discussed in the past, including sequestration and member mix by product and network, specifically as it relates to the 2023 look-alike transition. We see this as an additional MBR opportunity which we took into consideration for our 2024 bids. On outpatient utilization, our paid claims PMPM for all outpatient elective procedures in the first quarter remain roughly in line year-over-year, including hip and knee replacements which were within $3 PMPM of the prior year. While we have partial second quarter outpatient paid claims data, we are able to track outpatient authorization data…

Thank you. [Operator Instructions] Our first question will come from the line of Michael Ha with Morgan Stanley. Your line is open.

Hi. Thank you. Yes. Very solid earnings outperforming so far year-to-date. About $20 million better than expectations, but you're keeping full year EBITDA guide unchanged. Thomas, I think you might have explained it, but wondering should we view it as more prudent conservatism or unanticipated cost expectations in the back half of the year, or I think you mentioned possibly accelerated investments. Just any color there would be helpful, and also could you help us quantify mid-year suite payment benefits, MLR?

Yes. Happy to start with the first question in terms of the back half outlook and how we see things evolve over the next six months. I think a lot is moving in our favor, and some of the things we outline include the favorable mix of the duly eligible membership we've achieved year-to-date. As a reminder, those are members who tend to be most engaged with our care and your work programs, and therefore we often see the highest returns from a financial standpoint as we continue to grow that book of business. Second, I think in spite of some of the concerns across the industry, we still feel really confident in how our utilization trends are evolving, and we delivered one of our best second quarters we've had in the history of the company in terms of our inpatient utilization metric, which as is one of our major KPIs we track in terms of monitoring overall claim spend. And then lastly, we do have some tailwinds from the first half heading into the second half with part D, where the fourth quarter in particular tends to be most profitable in terms of quarterly seasonality, just as it relates to the catastrophic protections that come into play over the course of the year, as members incur more drug costs. I think additionally, you mentioned a couple of investment items, and what we're talking about there is really a lot of our clinical efforts, both with our employee resources, as well as our external provider partners, to ensure that we're seen as many members as possible this year to put care plans in place as it relates to 2024, both in terms of our AEP growth coming up, as well as the impact of V28 on overall risk model changes. And so we're continuing to invest an extra few million dollars in the back half of the year, given our year-to-date outperformance, and that's also reflected in our overall MBR updated outlook. And I think the last thing, as you've seen our cohorts before, our new members typically come in around 90% MBR and then trend down into the low 80s and even the high 70s over time. And so just given that year-to-date sales outperformance, we are absorbing a bit of higher MBR related to that new membership. But we're holding the line on SG&A to ensure that we offset that from an SG&A as a percentage of revenue standpoint to show flat, if not improving, overall EBITDA margin in '23.

Great. Thank you. Appreciate that. So while the focus has been basically breakeven target next year, given the rate environment, just how unique 2024 is with it possibly being, I mean, quite arguably the biggest year for plan shopping and the relative strength of your star ratings, I think John mentioned, you're actually maintaining or increasing product riches next year, which is quite powerful since I think most plans are reducing benefits. So, golden opportunity to grab market share. The average member retention is quite high. The lifetime value is extremely attractive. So with that said, two questions. One, what level of membership growth in excess of your 20% target next year, do you believe could begin to place some pressure on your '24 breakeven target? And two, how much incremental long-term earnings value does outside membership growth provide to alignment in your multi-year story? For example, let's say every 100 bits of excess member growth above 20%. Is there a way to quantify or articulate just how beneficial it is for your long-term earnings trajectory? Thank you.

Yes, so in terms of the overall AEP outlook, as John described, we're really excited and we're really, comfortable with the way we've tried to find that balance between growth and profitability. And as we think about, I think your question was, is there a certain, level of growth that would cause us concern about achieving our breakeven target next year on an EBITDA basis? And I think the answer is no. And the reason we say that is, yes, new members do tend to come on with a bit higher MBR than a kind of more tenured members that's been with us for a few years. However, any MBR pressure we might see from significantly outside growth, we also would expect to see an offset on SG&A. Part of our SG&A is, of course, variable that we have to continue to grow to support our membership. But we have a lot of fixed costs, particularly those we've incurred establishing ourselves as a public company over the last few years, that we anticipate seeing economies of scale on as we continue to grow overall membership. So we don't look at it as a tradeoff where if you get a certain amount of growth, it's a problem to our EBITDA breakeven target, we actually think it would be neutral, if not additive to that objective. And then to your point, the compounding benefit is that growth in '24 really starts to pay dividends in the form of life-typing value into years two, three, and four. And so the way I would think about it in terms of our previous cohort analysis we've shared, as I mentioned earlier, is you can see about at least a 10, if not 15 percentage point improvement in MBR from year one through year five as we manage the membership, engage them clinically, and continue to deploy all of our care anywhere efforts. And so that's sort of the way we think about it is the investments we make today drive the short-term membership growth, but really pay long-term dividends in the form of MLR improvements.

Perfect. Thank you, guys.

And thank you. One moment for our next question. That will come from the line of John Ransom with Raymond Jain. Your line is open.

Hey, good morning. We have the stars coming up in September, and I know that your big plan is on a raw basis, kind of close to some of the cut points, the three-five. Just wondering how you're thinking about that dynamic as we head into the fall. Thanks.

Hey, John. It's John.

Hey, John.

I feel a lot better, actually, right now than I did 90 days ago. I think a lot of the execution around all of the measures is coming in better, and on the better side on, I don't say, four or five specific measures than we had originally thought. It's still early, obviously. We're still waiting for the overall cut points. I had shared earlier in the year it was pretty close for comfort. It's too close for comfort, but right now I feel really very positive, certainly in the California maintaining the four. I think there's opportunity in some of the other states to even get better, and so we'll see. I think industry-wide, and we're not an exception, I think caps is challenging for everybody, but I think we're so good on some of the HEDIS admin and Part D measures that we're going to be okay. That's my latest thinking. Again, it's subject to the final cut points that we'll know in the next couple of months.

When you mentioned four or five things, what four or five things? There's so many different measures, but which four or five do you focus on today?

There were TTY was one example. Disaroma was another example. CTMs is another example. In a lot of our analysis, we were kind of on the bubble on some of these different measures, and as we've gotten more and more data, we're starting to edge toward the good side of those different measures, whether it was kind of we're right sitting in the middle between a three and a four or four and a five, etc. We're kind of getting more data to get us more comfortable. We're rolling on the good guy's side of that.

Just lastly, I know I'm keep asking about Stars, but do you agree with the general thesis that they're just raising the bar, and so the overall number of, if you had 100 people on MA across the country, you're going to have fewer and four star plans under the new measures than you did this year. Do you think they're just trying to shrink that and raise the bar? That's what it looks like, but do you agree with that general?

I think so. I mean, I think the whole thesis of MA was to encourage high quality at a lower cost, thereby increasing value to that beneficiary. I think over the last two to three years, there have been a variety of reasons and loopholes and whatnot that I think different players have used different loopholes to get around that original thesis, and I think CMS is getting back to that original thesis, and I think it's going to be good for all the companies that provide higher quality at a low cost, and I think at the end of the day, it's going to be better for the beneficiary, and I think those two concepts form a lot of the foundational comments we've made around we being very disciplined around growth versus margin the last couple of years, and why we are so optimistic about the 2024 AEP, because I think we've held the line, not chasing growth at the expense of margin, and I think this year we're going to turn the jets on a little bit. I think it's a good thing for the industry overall, John. Now, having said that, I'll have a slight oh, which is I think the shift of the weighting of caps next year, I think is a really good thing for the industry. I think having that be a four-weighted measure for a fraction of the membership on surveys is not indicative of the overall quality of all the players, so I think that's going to be a healthy thing, and then when you put that in context to some of where we sit with these measures, I think we're super good on quality on HEDIS, super good on part D, and super good on admin, and so I think net-net that's going to be very advantageous for us in the short and long term.

Right. Thank you, sir. I'll jump back in queue.

You got it.

Thank you. One moment for our next question. That will come from the line of Kevin Fischbeck with Bank of America. Your line is open.

Hey, this is Adam [indiscernible] on for Kevin. Yes, I guess my question would just be around utilization. Obviously we cover the larger health plans in the United Kingdom, and CVS, and I'll talk about higher utilization, and I appreciate your saying the data you have doesn't support, being higher utilization trends, but just wondering, in the outlook, you kind of maintained the gross profit you expected. Is there anything you have that could, like, absorb potential, bikes and utilization, if that were to materialize, like, are you boosting reserves, or just, what are you seeing, and how, what gives you the confidence that, you won't see that kind of pressure materialize?

Yes. Hey, Adam. This is Thomas. So I think a lot of the commentary across the industry, depending upon the plan, has been probably centered around the outpatient setting in general, and I guess just to expand upon some of the comments we made in our prepared remarks, we started to see some outpatient increases coming out of COVID back in the, I'd say kind of summer months, two, three, two of 2022, so about a year ago, and we saw that continue into the fourth quarter in the early part of this year. And so what I would say is that it's not that we haven't seen some of the outpatient spend come back from the depressed levels we saw during COVID. I would just say that what we've seen so far this year is very much in line with our expectations, and it's not that different than what we experienced in 2022. In other words, I think we did a nice job of trying to take into account all the moving pieces when we put together our 23 bids as well as our 2023 guidance. And as we sit here today, obviously we continue to see some ebb and flow across the different individual categories of spend. But big picture, I think based on our off data on the outpatient side through the second quarter, we continue to feel like the utilization trends are trending pretty stably and in line with expectations as we think about our second half outlook.

And then, soundably, we just got off the phone with Agilent during his call and they made it sound like they got some positive data from CMS on like a positive retro trend adjustment and that they meaningfully increased their outlook in terms of, what they're expecting for DCE contribution. And I'm just wondering if you're seeing similar things or if you've noticed any changes in ACO REACH this year that makes you feel more confident in the program.

I can't comment on their specific messaging. I would say in terms of what we've seen so far, I know CMS has put out a data point on the first quarter growth perspective, the retro trend benchmark. And that number, you're right, was, I want to say in the 3% to 4% range, lower than the 5% to 6% we ultimately saw in '21 and '22. That being said, what I would suggest is that if we were to go back in '21 and '22 and look at it on a quarterly basis, that number does move around from quarter-to-quarter. And so I think we're anticipating getting the next update from CMS over the next 30 days on the second quarter and it will continue to see how the third and fourth quarter evolves. And so big picture, I would say probably too early for us to call that an outright win. But relative to our expectations, I would agree that we are running pretty in line with how we set the year to begin with in terms of guidance. I think big picture, we continue to view ACO REACH as a strategic sort of extension of what we're trying to do on our health plan networks. In other words, we view it as a way to more deeply align with our provider partners and to apply some of our best practices around care anywhere in AVA across a broader portion of their panels. We think that has a benefit both to the senior and to us as the plan. But what we said in the past is that we also think that the ACO REACH program will continue to run at much higher MBRs than the MA Book of Business. And while it has much lower SG&A, it's probably comparative profitability long term. And for us, it's not something you're going to see us go crazy on in terms of growth. I don't think you'll see us expand into new states or new markets just to pursue ACO REACH growth, but rather something that is accretive to what we're otherwise trying to accomplish from a health plan growth standpoint.

Awesome. Thank you so much.

Thank you. One moment for our next question. That will come from the line of Jared [indiscernible] with William Blair.

Yes. Good afternoon, Jared, on for Ryan Daniels. Thanks for taking our questions. John, you talked a little bit about some of the progress you're seeing in regards to retention goals. And I think you called out some improvements on the sort of internal CRM application. I guess I'd be curious if there's any more color around, I guess, specific updates or innovations that you think are really driving retention. And then I guess to ask a little bit more broadly, are there any other technology investments that you think could enhance engagement with seniors?

Yes, hey there. Yes, absolutely. It's been, I would say, an absolute focal point operationally for us to be lasered in on improving retention. And so we're kind of like four things we've done is apply the technology across all the touch points of that consumer. And also make sure that the vendors that we subcontract to, particularly on some of the supplemental vendors that we've used, that we've actually really improved the, I'd call it the vendor management and the quality and the service level expectations across the board. And I think there was so much just emphasis and focus on supplemental benefits being incorporated into the '23 benefits. A lot of the vendors were stressed, frankly. And I think that caused some abrasion for us as of the plan. And so we've really focused on that and done a really good job on frankly replacing some of them. The second thing we've done is we've decided to insource a lot of the member call functions from also vendors. And we're just taking more control over that member experience end to end. I think our story is so differentiated, so to speak, with care anywhere, a care model, transparency with providers, et cetera. Anyway, so a lot of that we've taken control of. And then you combine that with the implementation of the CRM. And if you just look at the Google results, it's really, really encouraging. I mean, all the feedback and the service levels are getting us back to really what got us here to begin with, which is focusing on serving that senior. And it's really a testament to just the hard work of the member experience team across the board. So really, it's a shout out to that whole group of people. I think as we kind of related to your question is, I think the market and the way we've approached the '24 bids, it's just making sure you give the senior what you commit to. So it's, obviously aggressive benefits. We're very comfortable with being opportunistic about that. But if you say you're going to do something, do it. And as simple as that, both to members that are generally healthy, so make sure that the benefit delivery is just consistent and reliable. And then also for the higher acuity patients, make sure that we take care of them reliably, with care anywhere. And so both of those, I think they're going to not only improve the stars, it's going to improve retention, it's going to improve the risk adjustment of the people that we retain. And I think it's going to improve MPS. So it's all, all roads lead to just service delivery to the consumer.

Absolutely. Yes, appreciate all of the color there. I guess just one quick follow up that that we had in Thomas, I think you mentioned the sort of year-over-year SG&A leverage that's implied in the guidance. I'm curious, like how sustainable do you think that level of operating leverage is going forward, especially as we think about the sort of break even target in 2024. Obviously, there's some moving parts with some of these investment areas that you guys have outlined this year. So I guess just kind of how sustainable should we think about that level of operating leverage going forward.

Yes, so I would absolutely expect SG&A as a percentage of revenue improvement from '23 heading into '24. I'm not sure we're going to kind of provide specific guidance today in terms of what that looks like. Though the one thing I would probably say is that when you think about what drove the improvement in '23 relative '22, there was sort of two pieces. One was the kind of economies of scale associated with our MA Book of Business, where though we're growing membership in that sort of, high teens range this year, we're still able to deliver a pretty considerable SG&A improvement relative to the revenue growth associated with that membership. And then we also saw a benefit from the ACO REACH growth in 2023, which as we mentioned on our prior call, has been a headwind to MBR on a consolidated basis this year, but has also contributed to the SG&A improvement year-over-year. And so as I think about our 2024 outlook, what I would say is, while I would absolutely expect SG&A as a percentage of revenue to continue to decline next year, I think given that we don't anticipate ACO REACH growth in '24 to be quite as significant as it was in '23, you might not see the same 180, 190 basis points of improvement in '24 that you saw in '23. But again, I would take that into consideration with how that ACO REACH growth impacts both SG&A and MBR. In other words, it should also be less of a head when on MBR, as we think about year-over-year '24 versus '23.

Okay, that's perfect. That makes sense. I'll hop back in the queue. Thanks.

Thank you. One moment for our next question. That will come from the line of Whit Mayo with Learing Partners. Your line is open.

Hey, thanks. Just two quick ones. John would love to hear just an update on the broker strategy. I know that's been a big focus and sort of evolving in terms of your thinking, so I'd love to hear some color there. And then secondly, can you remind us just the percentage of your members today in shared risk networks and where you think that could perhaps go next year and maybe just remind us kind of the difference on MLR and those shared risk arrangements versus the ones that aren't. Thanks.

Hey, Whit. And congrats on Learing Partners. That's awesome.

Thank you.

Yes, no, we are going to do a couple of things. One is double down on the good FML partners that we have that we've had great retention with and growth with. So overall, I think the standards are going to be just increased across the board in both existing markets and new markets. We are being intentional about, I would say, more direct, kind of 1099 relationships with agents in certain markets where we don't have the kind of strength that we want with some of the FMOs. I think the direct employed captive strategy is going to be used in select markets. It's already starting to pay off and I think we alluded to it where we're about going to 24% kind of controlled and captive. And so I'm happy about that. I think the, I'd say the economic impact is going to be really felt, I think, in retention. More so than, like, G&A. I think the control and reliability of the, and we alluded to this also, kind of the lead gen and the lead gen conversion and the Salesforce automation initiatives. And I think that we've got some new leaders in here that augment the existing leaders that we currently have that I think are just giving us more bench strength across the board, particularly in some of the newer markets. And so we've been intentional about that. And I think we said this and I'll link this to Texas and Florida. I think in particularly some of these newer markets, that has been a challenge for us, building and establishing those relationships. This year I feel pretty good about it. And I've been out to some of these markets. We've looked and worked with these brokers. And I think we're giving them something that they want, that they haven't had, which is, I would call it, durable relationships that they can rely on. Because there's been a lot of people going in and out of markets on the plant side. So I feel good about some of the newer markets and the relationships that we have there. At the California, I think we're always strong. I feel good about that. We're tightening the belt there with just performance. There's no disenrollments. Five star brokers, we're going to work with you. So on the second, Thomas, you want to take the second one?

I'd be happy to. So we shared in the past with that just over a third, about 35% of our business today is a global cap. And the way we sort of think about that is a couple of things. First is some of those organizations, really that created the global cap model, grew up in California. So in certain markets, those are some of the best provider partners to work with in terms of quality. And in terms of sort of overall service delivery. Our overall strategic objective is to continue to grow our shared risk book of business faster than our global cap book of business, both inside of California, but particularly outside of California. And the reason we think about it that way is because as you've seen with our cohort data, we tend to not only provide the best clinical experience for members, but we also provide the best financial returns in terms of lifetime value when we manage the risk ourselves as opposed to passing it on to someone else. I think you would ask about the global cap MLRs. What I would say is while we don't break out our MLRs by contract type or by county or anything of that nature, the California global cap MLRs are probably slightly higher than global cap MLRs across the rest of the country just because they tend to get paid a bit extra for certain services like paying claims and doing U.M. But generally speaking, we view it as one of our kind of key long term goals to drive that shared risk or at risk book of business to a higher percentage of the total membership over the next five years as we continue to march towards that long term MBR target.

Okay, thanks.

Thank you. One moment for our next question. That will come from the line of Jessica Tassan from Piper Sandler. Your line is open.

Thanks for taking the question. I'm curious to know given that next year's growth is going to be confined to new geographies in existing states, would you expect new members to come online that may be slightly lower or more favorable MBR relative to the historical experience or even despite the planned benefit design enhancements?

Maybe I'll take that one Jess. It depends on the market on the product and the provider that's contracted for that membership. And so to put it in perspective, you've seen kind of our average year one at risk MBR is kind of in the high 80s if not 90%. But to your point there is variability where some of those new members come on in the kind of low to mid 90s and on other cases come kind of closer to the mid 80s, very occasionally low 80s, but I'd say that's more rare. And so it just kind of depends on the nature of where that growth is coming from. One of the things that we've taken into consideration in our '24 bid is less about whether we get to growth in a brand new market or not, but it's how do we continue to invest in the product benefit value in the geographies and with the provider partners that we think are going to be the greatest tailwinds towards that MBR goal in '24 and beyond. And so that was really a part of our bid planning process this year I think in a really strategic fashion and hope we will see that continue to pay dividends next year.

Got it. And then just my quick follow up would be as you think about growing the percent of membership in shared risk networks I guess what is the preferred structure of your shared risk contract and then I was hoping you could quantify the MBR benefit in the second half from the Part D seasonality as members move into the catastrophic phase of coverage. And that's it for me. Thank you.

Yes, so I think one of the things we pride ourselves on in terms of our non-global cap contracting is really flexibility. And what I mean by that is we have contracts today that include fee for service to the PCP with quality incentives and some type of upside only arrangement layered on top of that, whether it be an MLR share or a gross profit or net income share. We have PCP capitation contracts that also have the same thing in terms of quality incentives and some form of risk share or profit share. And we have professional capitation where we're essentially paying both PCP and specialist capitation. And then again we have an aligned incentive on the institutional costs to MLR share or profit share. And so it depends on the market what the provider really wants and we try to tailor our approach using the same consistent toolkit but to do it in a contracting that meets their suits and preferences or suits of preferences. In terms of Part D, that is probably a two to three point tailwind in the second half as compared to the first half with a little bit more of that concentrated in the fourth quarter versus the third quarter.

Great, thank you again.

Thank you. One moment for our next question. And that will come from the line of Nathan Rich with Goldman Sachs. Your line is open.

Great, good afternoon. Thanks for the questions. I wanted to maybe start by going back, excuse me, to utilization. I think, Thomas, you said outpatient PMPMs were relatively consistent year-over-year and you mentioned you kind of called out hips and knees. I'd just be curious some of the other categories that we've heard called out during the second quarter, cardio, behavioral, dental, maybe outside of the outpatient ortho surgeries, what you're seeing from a utilization standpoint.

Yes, so I take a couple of things in that list. I mean we are continuing to shift, see a shift on things like hips and knees but outpatient surgeries to ASC settings were appropriate and we think that's really a win-win from the consumer standpoint as well as from the plan standpoint. So that's something we're continuing to see year to date. We have not seen, I think, some of the comments you've heard from others about their dental benefits and that's really more of a supplemental benefit but that's something we have not necessarily seen to the same degree as I think some others may have. And I think the bigger picture, we're continuing to see lower ER utilization maybe than we used to in the past, a bit more urgent care as opposed to ER. And so, there's a few things like that but I guess big picture, , in any given year if I went back, even before some of the recent commentary of some of the larger players out there on utilization there's sort of always pluses and minuses in a given year and so at the end of the day I think big picture we feel good about the overall trends. So those pluses and minuses taken into consideration.

Great, I appreciate that. And maybe John, be curious to get your thoughts, in markets like Southern California that, tend to be competitive and have been competitive in the past, how are you positioning in those markets specifically and kind of where do you see the biggest opportunity to differentiate yourself next year as you look to capitalize on seniors that may be looking to switch plans?

Yes, hey Nate. What I would say is looking at our product strategy in a way that is consistent with our care delivery models. And what I mean by that is really identifying the individuals that are really in that 10% to 20% that cost 80% to 90% of the spend and the designing specific products around that and the kind of the high acuity and the low income. But what we did this year was also really look at the 80% to 90% of the population. They're generally healthy and the design products for them that they're going to be very confident and reliable in receiving. And so it's a little bit different than what we've done in the past. I think the degree of, I would call it competitive analysis is, just much more rigorous factoring in not only the actuarial benefit values within each market, but looking at network, looking at distribution realities, looking at our trend analysis. All of that got factored into the bid process this year at, I would say, just a more rigorous level. And I think what we will expect from that is something that's going to be very attractive to beneficiaries. And again, part of that competitive analysis is looking at where some of our competitors stack up and change from star ratings year to year. And I think that's very public as well as the impact on V28. And so we're thinking about all of that. And we also know a lot of our competitors are lowering and at best maintaining benefits. I think that's been a common thing we've heard. And I think we're yet again taking a bit of a contrarian view in terms of increasing in a lot of the markets. So in Southern California, it's a tough market, but I think with that product strategy, and you combine that with our network strategy, what we've seen in the past is seniors are going to be very, very loyal to their doctors. We all know that. Except for situations where the benefit design is materially better. They will shop. And I think this is the year that they're going to do it. So we'll see. But when you add that with retention focus, when you add that with kind of deeper provider engagement, when you add that with new sales, operation, kind of distribution capabilities and leadership, I feel pretty optimistic.

Great. Appreciate the details.

You got it.

Thank you. As I'm showing no further questions in this queue at this time, this concludes today's program. Thank you for participating. You may now disconnect.