Centene Corporation (CNC) Earnings Call Transcript & Summary

Hi, everybody, and welcome to our Operational Decision Conference. I'm Lance Wilkes, I am the health care services analyst for Bernstein, and really excited to have Sarah London. Vice Chairman of Centene here today. I'm just going to do a couple of housekeeping items and then turn it over to Sarah for an introduction, and then we'll to go through a fireside chat. The housekeeping items really are for question submission. [Operator Instructions] And so with that, Sarah, I wanted to welcome you, and thank you for attending today. As I think most people on the phone or on the Zoom know. Centene has been our top pick for a while. We've really are excited about the long-term opportunities with the safety net provider, safety net program growth and then the margin expansion discussion.

But I thought to kind of kick things off, maybe, given some of the recent management changes, your role. Sarah, if you could give us an introduction of yourself and your role and then maybe we can lead that into a broader discussion of Centene, especially for those people on the call that might be portfolio managers or other generalists who might not be as familiar with Centene?

Yes, absolutely. Well, first of all, thanks for having me. I'm thrilled to be here. So I am the Vice Chairman of Centene. By way of background, I spent the last year within the organization in various senior operating roles, touched a lot of different parts of the business. Prior to that, I spent 2 years with Optum Ventures, which is the venture arm of UnitedHealth Group, where I was investing in the health care start-up landscape but also took on senior operating roles within a number of our portfolio companies. So was looking at the areas of everything from behavioral health to home-based care, innovative models, precision medicine, digital therapeutics. And prior to that, spent 7 years with the Optum Division of UnitedHealth working with payer, provider and life sciences markets, predominantly around emerging value-based care models, population health initiatives as well as some of the kind of innovative partnerships that are starting to emerge between pharmaceutical companies and both providers and payers. And actually, you mentioned VillageMD in our earlier conversation, my -- I started my career in health care in an operating role with the team in R1 as they were launching an early approach to value-based care and provider risk under Tim Barry. So I'm very familiar with them and absolutely where I got my start.

That's great. So obviously, for anybody who wasn't on the VillageMD call right before this, I just was with Tim Barry, who's our #1 rank disruptor for this year and amongst private companies, and we've obviously done a lot with them over the last 3, 4 years as we've been exploring that value-based care space. So with that, could you maybe just talk a little bit and give a foundational understanding of Centene? What it is? And I think importantly, kind of the go-forward strategy that you guys are laying out there and eventually then we will transition over to talking about your value creation plan?

Yes, absolutely. So for those who are newer to Centene, we are a Fortune 24 managed care organization. So we provide health insurance and services to almost -- no, more than now 25 million underserved Americans. We are the largest Medicaid managed care organization in the country, and we are the #1 marketplace carrier. And with the acquisition of WellCare recently, have also expanded into Medicare Advantage and shown significant growth over the last 2 years in that space. And so I think the focus of the organization, we've talked a lot over the last couple of months about the fact that we have been growing very quickly over the last couple of years, made a number of acquisitions. And as we came into 2021, I think it's -- we sort of turned the corner and realized that we're now at a size and scale where we really can leverage that and unlock additional value for our shareholders. And so we announced in June at our Investor Day a value creation plan with the goal of driving margin expansion and shareholder value. And that is not just sort of cost-cutting, although I think there are lots of opportunities for efficiency as part of that program, but really positioning the company for long-term strategic and profitable growth. So that's really the focus we have right now is that value creation plan. And I can give you a little bit more detail into how we're thinking about sort of the 3 major buckets there. So we have initiatives around SG&A, medical management and capital deployment. And that was, again, a framework that we set out earlier in -- or end of Q2. And then we spent Q3 really putting the structure in place and starting to work on a number of initiatives that fall into those buckets. And so we announced actually this morning the partial divestiture of USMM, which was one of our assets that was sitting in health care enterprises, which is a group I've been managing since I started at Centene, is a sort of diversified operating unit for us where we have a number of assets that serve both Centene and third-party customers. And so as part of the value creation plan, we've been doing a portfolio review and asking ourselves the question of outside of the core business, the assets that we have, how do they line up against the principles of that value creation plan. So do they fit the margin profile in a world where we're targeting that 3.3% margin in 2024? Are we the best owner of this asset? And then how does the assets fit with either near term or a long-term strategy? And then what does that mean in terms of the best positioning of the assets? So USMM actually fit kind of beautifully into that value creation process and we kicked that evaluation off much earlier in the year leading up to the June announcement of the overall plan. And for folks who are not as familiar with USMM, they are actually -- so it's home-based health care services. They're in 12 states. They have 90 offices, and they are the largest physician house-call business in the U.S. And so when we looked at that business, it's definitely part of our both near- and long-term strategy to have a portfolio approach relative to home-based care and making sure that we are meeting -- increasingly meeting our members where they are and increasingly leaning in on convenience. The USMM model is very, very strong in managed, the homebound and the frail, the chronic elderly, which is obviously a big part of our -- both Medicare and Medicaid population. But we felt like the asset as it was positioned today within health care enterprises was not necessarily fitting the growth and margin targets that we felt like it could. And so we had an opportunity to partner with Adam Boehler, who is arguably the foremost leader in this space and take the asset and move it into a position where we could really supercharge its growth in an independent disposition and thereby expand the margin that we would still be able to leverage the capabilities of the asset, both because we retain a minority position and because we increased our commercial relationship with USMM as part of the transaction. But it allows Adam, and that team to really drive sort of the next phase of both growth and innovation for the asset. And then for us, it allows us to redeploy the capital from the divestiture to things like a stock buyback plan and other capital deployment principles that we've articulated as part of that value creation plan. So it sort of hits all the pieces, right? It helps relative to margin and profitable growth. It is going to be a critical program for us in terms of managing the HBR of those elderly and frail populations. And then it also gives us flexibility relative to capital deployment against nearer-term priorities.

Sorry about that. Yes, I think that talking about the 3 buckets, and 1 of the things that jumped out at me, you guys said obviously, mentioned noncore divestiture analysis as something on your earnings call. And the thought that this could be something that starts to drive buybacks, which historically has not been a big component of capital deployment at Centene, is something I imagine the market ought to really be positive and react to also just kind of showing the sort of discipline of that shift to like an intense margin focus. Putting it in context and thinking about the value creation plan overall, the SG&A saves, the medical management, the capital deployment. Maybe if you could just talk for a moment about how much of a contribution each of those things roughly is to where you want to go? And I think part of that is, you've done a number of acquisitions over time, Health Net, Fidelis, WellCare. How much of this is things that are already sitting there and you really kind of teed up and just now need to execute and it's just the right time? And how much of it in those different areas are new initiatives, new things you've had to identify that you're going to now kind of identify and then deliver?

Yes. It's actually -- I would tell you, it's a solid balance between the 2. So if you think about -- we have obviously stayed on track, we're on track with our WellCare synergies and have executed against past deal synergies. But if you think about the fact that those synergy models were built on a pre value-based program strategy. The ability to go back and look at some of the work that was done there and say, okay, if we are taking a new approach to operating model standardization, for example, then how do we think about incremental value that we can drive through some of the synergy initiatives that are already in flight. And I would say our -- I think there is significant opportunity that is sitting in the organization today. And it's funny when you start down the path of a major enterprise initiative like this and you think about sort of the work that it's going to take and some of the barriers you might face. One of the first questions people ask is how much of this is a cultural shift, right? Because there's just the change management process, but then there's also what resistance are you going to hit within the organization? And it's been remarkable to see how energized the enterprise is around this program. We actually had all of the plan presidents come into town in waves over the last month as part of our budget planning process and sort of strategic planning process. And I got to spend time with all of them. And there is just a huge appetite for this. And I think a lot of folks who've been thinking about opportunities to drive to standardization and be more aggressive about platform consolidation and really good innovation coming out of different markets, clinical initiatives, right, and creating the opportunity for elevating those and cross-pollinating those across the markets are going to be really important. And so it is that kind of, as you said, it is both things that are already there that I think people have been thinking about for a while and even designing around for a while, and it's just a question of executing and having the room and the focus to do so. But also, it is absolutely spurring new thinking about kind of what else can we do. And you and I have talked a lot over time about technology, and you know I am a data geek, and automation. But the idea that we can drive to a different level of operating model standardization completely opens the playing field relative to what you can then automate. So we talk about sort of the value of this milestones in late '21 and '22 and then sort of the material P&L impact in '23 and beyond. But part of that is because we are going to and are already creating sort of a flywheel. Like, okay, if we do this, now we can do this next piece, right? If we move to a standard approach to prior authorizations across all of our health plans then we can actually automate that and we can pull our clinicians to be focused on the more complex cases rather than doing paper reviews of cases we're going to approve anyway. So long-winded way of saying it is both of those things, but there is -- we sort of talk about everyone's rowing in the same direction, but I would say in most of my conversations with the folks in the organization, I think people are sort of trying to figure out how to strap jet engines to the boat. Everyone just wants to go faster.

That's really helpful. Well, I'm sure you've seen this. I'm getting a number of questions that are coming in. It looks like there's Bloomberg reports that are just out within the hour about activist taking a stake in the company. Just wanted to kind of tee it up and obviously, the stock's moved up 7% today. So I just wanted to tee it up, see if you guys, Jen is also on the line, have any sort of comments about that or want to address that in any sort of way?

Yes. I think we're in the process of issuing a statement that has not already gone out. And I think it will address our commitment to refreshing the Board, which is something we have already been working on. But also as we've been talking about, and we'll keep talking about for the next little while, together, the fact that the value creation plan is our #1 priority. And so that is already very much in flight, and we're taking a very aggressive approach to that.

Okay. That's great. I appreciate that. So kind of going down a couple of the other elements related to value creation. Obviously, within the SG&A medical management and capital deployment, those are nicely identified. It seems like based on some of the prior conversations and your earnings call and what not, that there's some areas like public exchange that are performing below target margin. And so just interested in, probably, first, as you're looking at both contracts on the Medicaid side and then how you continue your growth in the public exchange and the M&A space? Just how you're balancing that sort of membership versus margin debate? And how much disparity you guys are aware of as far as profitability of different sorts of contracts? So is this -- are these businesses that lend themselves to being able to say, "Okay, I'm going to get read of some lower profitability contracts rather than waiting to turn those around and get a quicker bump" Or is the profitability more comparable amongst a number of these business lines and contracts?

Yes. It's a great question. And I think Drew called out back in September, the fact that bid discipline is going to be an important part of value creation and exactly, as you said, finding the right balance as we continue to grow, making sure it's profitable growth and being willing to make that trade-off between membership and margin. And I think you will see that -- that was part of the logic in the bids that we have put in, and certainly, we'll continue to refine as we go into 2022 and 2023. And I do think it goes back to having been very focused on growth because you get to a certain scale in all of these lines of business and scale gives you degrees of freedom and flexibility in the long term, but being willing to have a mindset that is very focused on profitable growth. And like I said, we had all of the lines of business and the plan presidents in town over the last month. And that was a big part of the conversation. It was really understanding what are our customer acquisition costs? How do we think about the most profitable segments? Where do we want to play? Where do we want to win? And the interesting thing about both Medicaid and Marketplace is that they are very local in their dynamics, right? So when you think about how you want the entire book for marketplace to play out, -- It is literally a buildup market by market, and every single market is different, both in terms of local dynamics, local competitors and then how the populations play out, that we fit best with those that we are able to support and serve. And so it is, for us, that discipline of making sure we understand in every single market and the buildup where we want to make those choices. So that in the aggregate, we can start to get the book to a place where we're hitting our overall margin targets. The other thing that I would say that is obviously underpinning all of this is the degree to which we are efficient in our operations and expert in our medical management allows for a lot more flexibility in terms of potentially staying in markets in the short term that might be margin compressed because we think they're really important places to be in the long term, right? So if you think about like the dynamics that are going to play out here eventually with redeterminations and wanting to line up our Medicaid presence with a marketplace presence, right, that those are trade-offs you might make in the short term if there -- if you have sort of margin compression in the marketplace side of that because you want to be able to have coverage continuity for members and really create sort of a long-term relationship with our members.

That's actually a great lead into one of the questions that I had, which was, as you're looking at redeterminations as kind of the market risk or the consensus risk that's out there, but thinking about this maybe a little more broadly as far as how do you see the likely policy environment rolling forward. Obviously, there's near-term policy reconciliation, there's the way that states may implement reverification. And then sort of your catchment strategy of -- how do you keep as much of that membership as possible or potentially all that membership? So just interested in the kind of policy outlook? And then with respect to that really large growth in Medicaid, what's the strategy for retention and -- across products?

Yes, absolutely. So I think we're obviously tracking the legislation as it's evolving daily. And you heard from Jon Dinesman, who leads our Government Relations team. He and his team are phenomenal and are on the ground kind of tracking how those conversations are playing out and helping kind of advocate for what we see as policy that is best for the industry. And I think we largely see the legislation as it is starting to codify as positive in terms of expanding coverage and access to critical services. So the idea that we're extending marketplace, APTCs for 3 years, enrolling the consumers who are in that gap into a stable marketplace program, expanding access to home-based services, 12 months post partum coverage, those are all things that are really positive from our perspective. And then to your question about redeterminations, the -- there are a couple of interesting dynamics there, right? So 1 is the idea that each state is going to play out the timing of that very differently. And Brent Layton will always point out the fact that California and Georgia are probably going to take different approaches to that timing. And the new language suggests that it would kind of click in 1/12 at a time, which I think is a positive relative to kind of easing the administrative burden and making sure that everybody has the right time kind of wrap our arms around that population that may no longer qualify for Medicaid and figure out how best to get them sort of maximum coverage continuity. So we -- one of the things that I would say going back to the benefit of Centene's local approach, which has always been a differentiating -- differentiator for us strategically is that is the way we think, right? So the way I talked about how we build up to an overall marketplace margin geography by geography is we look at a dynamic like this. How are we going to help create coverage continuity as based in an understanding in each local market of how the state is going to roll out that program and then how can we partner with the state to kind of maximize or smooth the transition for the members. So we have just kind of hit the high points of the strategy. We have only 4 states where we have Medicaid contracts and no marketplace business. And at least 2 of those have state programs. And so it's really about -- there's a very, very small number of states where we don't have a natural alignment and those states are on track for a 2023 expansion. We have designed our network between Medicaid and Marketplace to foster smooth transition. So we're trying to identify where our members have providers and ensure that those providers are in the Ambetter products, right, so that we can leverage the provider relationships to make that transition. Obviously, very focused on having good contact info and dialogue with the members so that as they're going through that decision-making process, we can help them understand that we have an Ambetter product. And given where we are with the APTCs, that it won't have a material financial impact for them. So we have a whole program and team in place that's focused on that. But again, they're looking across the entirety of the geography and the tactical kind of strategy for each state is going to be a little different because of the timing, because of the regulations. And in some states, they've -- they are sort of forward thinking on this and saying, well, we're going to roll members direct. If there is a Marketplace product that is held by the same provider of the Medicaid product, we're just going to roll you directly over, right? So I think there are some really interesting models out there, and we're trying to help create the right dialogue to expand those as policy.

Yes. That's really interesting. Maybe if you could talk just a little bit about and just sort of the deeper operational dive on the public exchange the Health Marketplace products? And I'm really interested in kind of product design, how do you go to market? Obviously, I know that the population you're looking for is lower income and vulnerable populations. But interested in understanding a little more about who you are in the marketplace? How you're going to market? And then that probably is a good lead into what steps can be taken to kind of improve profitability in that? But first, trying to understand it a little better.

Yes. Well, we've made some really, I think, interesting and important improvements over the last 6 to 12 months, particularly in our Marketplace products. And we launched 4 new products into the market for this enrollment period that were meant to improve access and affordability. And largely, our population with the Marketplace is really the working poor. And so these are folks who don't really have time to go to the doctor. They are getting coverage because they want that security they may not need it. And so the idea that they're going to go and check the box on a physical with their new provider is actually harder than you think, right. Because they just don't have time to engage unless they need it. And so that was part of the logic of significantly increasing the virtual access and in some cases, doing a virtual first product. But then also really thinking about where are our members and how do we sort of tailor the product and the network to really map where they are and where they want to go and deliver care. And so a great example of that is we have a provider group that is part of health care enterprises community Medical Group that's down in Florida. And we work -- they have a really innovative model. So they take risk across all 3 lines of business. They started in Medicaid, 1 of the few provider groups that have really accelerated taking risk in Medicaid. And part of it is that they really partner on the enrollment to the focus on social determinants itself, right? And so they sort of set up the primary care doc as the quarter back. They bring in the specialist sort of on an as-needed basis. And then they really focus on what are the available social services that we can connect these members to. And so they have taken that model, which was really robust in Medicaid and started to expand it out into the other lines of business. And then when we went through the pandemic, they flipped very quickly as many provider groups did to starting to think about a digital forward or a virtual forward approach to managing those members. So we actually codesigned a product with them and have done that with other partners in order to, again, kind of acknowledge that a lot of the members in that marketplace cohort want easy access, they want to be able to kind of digitally communicate and then they want to be able to get to where they need to when they need to. So that has been a really interesting model for us also because we're doing it in an at-risk disposition. But to answer your question a little bit about kind of the go-to-market approach. So we launched a new marketing campaign for Ambetter earlier this year and obviously are taking a multichannel approach. So digital communications, leveraging relationships with brokers in different geographies, thinking about that direct-to-consumer marketing. And then as we thought about the products figuring out where there are provider partnerships and other community partnerships that can help, again, those create a more robust offering for the members, but also be a way of creating kind of brand recognition for Ambetter. So that all has kicked off at the beginning of this year and has played through really nicely in terms of the membership numbers that we're seeing in Marketplace in a sense that particularly as we go through back to your point about sort of the redeterminations toggle that we have built additional brand recognition and affinity for the Ambetter members or the Ambetter plans at the local level through those different marketing channels.

Got you. So actually, the discussion of Community Medical Group is a great lead into the next type of question I wanted to ask, which was related to kind of value-based care delivery. And you and I have talked about this before. But can you just talk a little bit about 2 things. What's the philosophy and the strategy with respect to how you may or may not get into the value-based care delivery for your populations? And then just also interested in what sort of assets you have currently as far as capabilities in that space?

Yes. So the strategy is yes and more. We're big believers in value-based models. And it's -- we talk a lot about how the pandemic accelerated telehealth. And I think there are other sort of key initiatives in health care that the pandemic pushed forward in a material way. So obviously, telehealth won digital data, right? The idea we're not going to be sending humans into the basement of hospitals to fax pieces of paper anymore, hopefully. And then value-based care was the other because I think a lot of provider groups understood that when you are in kind of a highly variable or unpredictable environment that if you can manage risk in a standard environment, that the upside in a pandemic environment is material. And so we have seen a huge increase in the appetite for conversations that we have transparently been moving forward for a number of years. And so we are in a number of I would say, value-based arrangements, right? So that -- some of that is upside only, some of that's upside/downside. We have sort of a portfolio of risk approaches, certainly on the Medicare side, like our peers, but we are the market leader in terms of risk arrangements in Medicaid. And again, back to CMG, that was sort of an early proof point that we can work with partners and go at risk on the Medicaid side. Earlier in terms of doing that in marketplace, I think sort of figuring out the risk dynamic there is still something is as that product settles down, we will move in that direction. But we have really anchored on a proprietary Model One platform relative to administering the risk arrangements with providers. And so again, as we talk a lot about being really fluent with data, internally, and therefore, being able to arm our provider groups with the information they need, not just to sort of manage performance throughout the year, but also see the impact of taking risk and performing against that risk. So that internal capability of kind of the data structure and the Model One platform is something we have developed here. And then we have a number of other capabilities that we can leverage, some of which sit in health care enterprises. So we obviously talked a lot about Apixio and Interpreta. But being able to do really precise AI-driven risk adjustment, being able to look at how gaps in care change overnight. Those are capabilities that we drive out to our provider partners through our provider portals. And even if you think about sort of some of the cross-pollination here, we had the Apixio team and the CMG team get together and leverage the risk adjustment capability for -- from Apixio into CMG. So that becomes a model that we can now recreate with other provider partners sponsoring that capability so that we know that our providers have the easiest and most effective way to do accurate risk adjustment. And then we also have within healthcare enterprises Collaborative Health Systems, which is an ACO, Medicare ACO enablement platform that operates in about 23 states, works with 3,000 providers. They've delivered almost $0.5 billion in savings over the last 7 or 8 years. So that's another asset that we are sort of strategically positioning relative to driving providers' ability and appetite to take risk with us in different markets. And I would just say, overall, it probably sounds like a portfolio and that is intentional. And that is in part because our footprint is so broad. And because each of those markets is a little bit different that we sort of have built a toolkit that we can then deploy market by market. Is there a place where we need to own something? Is there a place where we want to kind of sponsor technology in to our provider partners? What's the right risk model for the group that we're talking to? And we've tried to create that flexibility.

That's great. And I think that's a great lead into maybe just talking a little bit about which are your populations and thinking about like the different types of Medicaid populations, if there are different segments within public exchange as well or MA. But which of the types of populations maybe lend themselves to particular types of value-based care models, so whether it's owned clinics, whether it's home-based care model or a practice model? As you're looking at this, are there any that pop up as higher priority and more logical that there'll be particular models for any of those populations?

Yes. It's interesting. I think of it -- so I'll come out with the answer in a slightly different way, but then get to, I think, the framework you laid out, which is the right one. Some of it is not to be the dead horse. But some of it is market by market, right. So there are geographies where the provider network is so strong. That the idea that we would try to go -- and strong and capable of operating in a value-based disposition and we understand that network and we have a really strong partnership with them. But the idea that we would go and try to insert an owned provider practice doesn't make any sense. And so in that case, the question is, okay, what's the right risk model with this group? And then are there any value-added services that we can put into the mix that make it easier for them to manage the different populations. And I think to your point, it's -- the risk arrangements, I think, are less specific to the population. I think it's a question of what the management approach is, right? So different populations are going to have a different appetite and aptitude relative to virtual or digital or things like that. And then the -- conversely, there are markets where really trying -- this is where USMM came in and will continue to come in as an important partner is we have members who are in rural geographies or our homebound and not affiliated with primary care model that has figured out how they get out to them in the home, right? So they may literally not be engaging those members at all because it's just not a capability. So how do we drop in an intensivist service there, right? That is an add-on to the primary care. And then there are other geographies like CMG where we felt like it was really important to have an own clinical partner with that had a strong presence across all 3 lines of business. And they, in some ways, have become as probably self-evident from my comments today, a bit of a petri dish for us because they do hit all 3 lines of business and have figured out how to take risk on them. So again, it is sort of geography by geography and then saying, okay, what's the right certainly kind of contract risk model, but also what's the right engagement model that our members are going to need and who do we think is best positioned to provide that. The one thing I will say, as we think about future and provider strategy. I think there are a lot of very interesting value-based provider models that are very focused on Medicare. And I don't think that there are that many that have figured out how to make the economics work in Medicaid or to think about how to tailor themselves for a marketplace population. And so that is a place where we feel like we can lean in and help differentiate and fill a gap. And whether that's through partnerships or investments or creating things on our own. That is something that we're actively engaged in through HCE actually as a pillar of long-term growth is what is our provider strategy.

Yes. I couldn't agree with you more just as a -- looking at an industry level, and I think I've mentioned this to you before, as I'm doing my annual disruptor list and things like that. The biggest opportunity and gap that I've typically cited has been that intersection of value-based care and safety net programs because value-based care more typically is either a Medicare-focused population or it's kind of an existing practice. But again, existing practice is going to be really an employer with a bunch of Medicare people. And then maybe we're focused on Medicaid. And there are some interesting -- obviously, you have one of the interesting assets in that space and you have probably relationships with the [indiscernible] and people who do different aspects of things out there in the related areas. Well, I only have about 10 minutes left here with you. So I'm going to try and rattle through a couple more of these kind of tactical strategic questions. So next one is really, as you've talked about sort of virtual first, I noticed you used the term kind of digital forward or virtual forward, which is I think, a better term than some of the terms I use. Can you talk a little bit about what your strategy is there? In particular, I'm interested in how you might be leveraging whether it's a digital or a virtual set of capabilities in order to kind of create a gatekeeper like but frictionless sort of product on the one hand? And then if you're also looking at that as maybe lead into value-based care sorts of arrangements?

Yes. Yes, absolutely. And I think -- so -- the -- in the context of gatekeeper, we can talk a little bit about that. I do think about digital forward. And I sort of say digital forward -- well, we'll get into, but it is sort of -- there are places where health care is not digital first. I would love it to be. And so I keep saying let's be digital forward in the hope that we can just like trip over ourselves into an actual digital disposition in some of these places. But I say that because I think there are -- as you think about and we think about the member journey, there are a whole bunch of different touch points where we ask the question in addition to when a member actually is seeking care, how do we think about what that looks like and how to make that digital first or digital forward. But then what are all the other things that members seek from us? And how do we think about where to make those more kind of digitally amenable if that is, in fact, how they want to consume things, right? For as much as my mother-in-law is attached to her iPad, she still will not pay a single bill other than like writing out a check and putting it in the mail. So we have generational issues still to kind of work through on things like payments, right? And like I just want to call the call center because I love calling call centers, and I don't actually want to figure this out online. But back to your first question, So I -- and again, we -- I think we all have lived this now this early in the last 1.5 years, there is -- we used to -- at Optum Ventures before the pandemic, right? We used to say, if you look at all of the major procedure codes that take place in primary care over the course of a year, 40% of those don't need to happen. I mean a big chunk don't need to happen at all, right? But a big chunk of those don't need to happen in person, right? They can happen in a totally different execution disposition, whether that is through me going and picking up a lab test on a wall at a retailer and a taking my own lab and sending it in and getting the result or getting on the phone with the doctor, I mean, massive PHI violation, but like my husband was on the phone with his rheumatologists in the middle of COVID and managed to [ tackle ] disease all verbally, right? And USMM who's literally doing in-home care with providers went with frail patients had to completely flip their model in the early weeks of the pandemic and figure out how to manage, frail six-plus chronic condition members entirely over the phone, but it turns out that a big part of the secret sauce is just that connection and the conveyance of the information, right? What is going on? Has anything changed? And so all that is to say, I think we all experienced the fact that you can manage a whole bunch of care and actually avoid a lot of unnecessary perhaps more acute consumption of care through a through a digital framework. And so we absolutely are leaning into that in our benefit design and leaning into that in our product design, if you think about Ambetter. But I wouldn't say that there is any -- I don't personally believe for better or for worse, that video conferencing, sorry, to the Zoom folks, if you're listening in, is anything on the commodity. And so -- and like providers have -- like all the provider EMRs have figured out how to do telehealth, right? And so if I have a provider that's sitting at Barnes-Jewish here and St. Louis, what they can use their telehealth platform to talk to me, I don't really care. I just want to be able to talk to my doctor in that way. So I think we have to be in a sort of take all-comers mode in terms of offering the broadest possible options to our members. And then the thing I think we can do that is differentiated is find the right way to provide back to both the member and the provider, the fullest picture from a data perspective of that member, so you have the richest conversation, right? And so if your provider is having -- if my doctor is talking to me about what's going on in St. Louis, I moved here 9 months ago, my entire clinical history is sitting in Boston. But if my payer can go and pull that out of the provider ecosystem, wrap it all together and deliver it to me or to my provider, then that telehealth experience is that much better. So I would say that's where we're a little bit more focused and then also creating the right digital ecosystem so that our members can kind of take all comers in terms of being able to leverage telehealth as a benefit because it's certainly proven to drive down costs and can resolve issues before they become acute in a very effective, very convenient way.

Great. Let's see, last 2 questions I've got for you here. And we then -- one more question that came across, it's very overlapping with 1 of these. So the core question is in your specialty businesses, which obviously you had responsibility for a bunch of those. Can you just talk a little bit about how you look at -- what it is that you need to own as contrasted with ones that you evaluate, maybe the criteria you use there? And then the investor question that came across is more related back to the earlier comments on USMM. And this one is more particularly just asking like, I guess, relative to the size of proceeds and the size of buyback as referred to, I think, in the press release or they're quoting a meaningful buyback. And so they're just trying to understand like what is it you're talking about, given that Historically, Centene isn't a big buyback company? So any buyback is a big step up there. But trying to understand like how big of an impact is that? And then thinking of your overall portfolio, what sort of types of businesses could fall into that sort of noncore category?

Yes. It's a good question. So I'll address actually the second question first, which is to say that -- and I think we framed this in the press release, but we obviously haven't defined material, but I think the USMM proceeds are an initial step. And the plan is that as we get closer to December on our Investor Day, where we're really going to go a lot deeper on a whole bunch of different use cases with the value-based -- I'm sorry, value -- the value creation office that we'll be able to give additional color there. And I think there may be additional data points that come up between now and then. So we'll be able to kind of wrap it together in a bigger picture. But this is step 1 in a bigger plan for sure. And as you correctly pointed out, part of the portfolio review that we've talked about doing and have been doing and that USMM was sort of the first stumble out of the tank on is -- it has been an opportunity for us to accelerate what had previously been a commitment to start doing those buybacks in 2022. And so we said that to the degree that we can unlock capital and assets to do that, that we could pull that plan forward. But broadly speaking, I think looking at -- and I mentioned this a little bit, but the big criteria as we look at the noncore assets that we have are, first, does it fit the margin profile? Is it going to contribute overall? Whether it does immediately or whether there's a very clear path? Is it going to be contributive to our margin target by the time we get into 2022 and 2023? The second is how does it fit with us strategically? Does it make sense with what we're doing? Does it create additive benefit relative to our government-sponsored business or not? Does it -- with some of these programs, does it offer the kind of critical ancillary support for medical management programs or other things? So how does it fit strategically? And then the third one is are we the best owner of it? And I think there is -- there are certain businesses where the ability for them to have an impact and have access to capital and have the ability to innovate [indiscernible] need to be sitting in an independent disposition. And so again, I think USMM fit perfectly into that model. But that is the criteria that we're taking every single one of the specialty companies through. And I would say I have a little bit of a bias, but we've talked about both of these themes pretty significantly today that as we think about our provider strategy and our ability to differentiate both in value-based care and just in general, in support of our health plans in a market, I think provider assets are very interesting to us in the longer term. And then technology is one where I have found you don't you don't need to worry about the independents necessarily relative to the rest of the market, right, like Apixio serves third-party customers because of the fact that, that can all be constructed in a way that they only get benefit if -- Apixio only gets benefit if they prove value to the customer. So it's a lot easier to kind of do the math on some of those assets. And I think for the technology, in particular, where we feel like the overall enterprise value calculus is more significant to Centene, we're obviously going to want to hold on to those and continue to build on them.

Great. So the last question, I'd mentioned this just before we got on is this conference question we're asking every industry, just what's the single biggest execution challenge your company is facing right now?

Well, I mean I don't know if it's -- I guess it's a challenge, but it's also an opportunity, right, is this value creation plan. It is an enterprise-wide change management exercise and there are a whole bunch of different pieces to it. And so it's really catalyzing the full organization around different operating models, different approaches to decision-making, different approaches to sort of overall bets in terms of long-term growth. And like I said, I think a lot of us are incredibly excited about it and came here for that kind of challenge. And so again, it's turning a challenge into an opportunity.

That's great. Well, Sarah, I really appreciate you taking the time with us today, and thanks so much, and thanks a lot as well.

Thank you. This is great.

Yes. And so everybody, thanks for joining us. And if you have any follow-up questions, please just send them into me, I'll reach out to Sarah and the team at Centene try to get answers on those. But I appreciate everybody's time, and have a great day.

All right. Take care.

Thanks.