Molina Healthcare, Inc. (MOH) Earnings Call Transcript & Summary

Good morning. Thanks for joining us in our healthcare services track. It's my pleasure to introduce Molina Healthcare. Molina provides managed care health services under the Medicaid and Medicare programs through the state insurance marketplaces. Through its locally operated health plans, Molina serves 3.7 million members and expected to generate approximately $19 billion of revenue in 2020. And walking us through a presentation today, the CEO, Joe Zubretsky, who we like to call managed care -- Mr. Managed Care 101, but I'm going to over to Joe, and I'll come back on about halfway through to moderate the Q&A. Joe?

Thanks, Gary. Good morning, everyone. It's great to be back. We distributed a deck to guide the conversation today, which you all have, I'll call up the slide numbers as we move through it. Obviously, on Page 2, there's the obligatory cautionary statement, which you're all familiar with, and I won't read. You can read it at your convenience. On Page 3, we outline our agenda. Given how deep we are into the fourth quarter closing process, we're going to give you a glimpse of our fourth quarter results and some emerging developments that will affect those results. We'll then frame the full year. It's important to frame the full year and the quality of earnings to assess the jump-off point by which we will all measure. The management team and you, the jump-off point for 2021 as we move to develop our full guidance picture for the ensuing year. With respect to 2021, we plan to update you and give you a refined and refreshed outlook on the revenue line for 2021. But with respect to earnings, we'll certainly talk about the catalysts that will harvest, the challenges that will be encountered, but we will give you a full view of earnings and earnings per share with respect to 2021, 4 weeks from today on our fourth quarter earnings call. Moving to Page 4. I want to provide some framing comments to the entire discussion today. It was 3 years ago. It seems like yesterday when I was at this conference, 8 weeks into the job, outlining a blueprint that outlined a path to convert this collection of 3.5 million members and $18 billion of revenue and 10,000 very well-meaning skillful people, but to mold it and shape it into an enterprise that could deliver superior results, turn it around and deliver superior results. We outlined a plan that was supposed to take about 3 years. Well by hiring an expert management team by diligently working at that giant rock pile of the managed care fundamentals that we got to very quickly. We are not only able to turn it around in record time, but we're able to achieve, attain and sustain industry-leading margins in the products that we deliver. We also inherited a rather expensive capital structure, one that included a tremendous amount of volatility. And with the excess cash flow we generated, not only were we able to solve a portfolio of very expensive debt securities but generate enough cash flow to do acquisitions that today have already accounted for $6 billion of additional revenue. But quickly, we had to recognize that investors said, okay, you're in growth businesses. Now you have to start growing. So we developed what we called our pivot to growth strategy. Now having produced revenue growth in the first 2 years of pivot to growth of 13% and 25%, respectively. I guess we can say it's something more than a pivot, but in our first 2 years of growing. It demonstrates that these are high growth businesses, M&A opportunities abound. It's still a hugely underpenetrated business, especially when it relates to high acuity populations. So what we did in a matter of months, we retooled our entire business development engine and proposal writing team. We energized our government affairs ground game and we developed a small but expert acquisition team that knew how to develop proprietary opportunities, secure them, close them and integrate them, which we have done to date. So we're really happy and very pleased with our first 3 years of turning the company around, sustaining an industry-leading margin position and not only pivoting to growth, but activating a very, very aggressive and successful growth strategy. Those are the things you can control, and that's what management worries about. We only worry about things you can control. But let's face it. In the past couple of years, there's been a lot of exogenous factors, environmental trends, that haven't been favorable to managed care, too much uncertainty in the political, regulatory and judicial environment. We finally have clarity. We finally have clarity. The election is over, the Democrats control Congress and the White House. And we all know what can be done through executive order, what can be done with a slim majority in the Senate. And it all bodes very, very well for continued support, expansion and adequate funding for Medicaid in the marketplace business. And if you weren't moved by the favorability of the rhetoric from the bench in November on the ACA scores case, which we all were, a lot of good indications that it would be struck on the constitutionality itself and if not at least on severability, we now have the backstop of a legislative solution if in the very remote event, it is ruled in the wrong direction. Focus on the things you can control. We have achieved best-in-class operating metrics. We're growing the top line. And finally, some wind in the sales of managed Medicaid through the regulatory and political environment. Moving to Page 5. Who would have thought that 3 short years into this, we'd be talking about where do we go next, looking at a map, sort of the Molina version of manifest destiny, taking what was a very good portfolio and we started expanding it. More states by new contract wins, preserving the contracts that we already had in flight, winning a new state in Kentucky. We actually won it twice. And worked hard, very hard to be the favored bidder for the Passport asset that will enhance the membership in our new contract state. So we've executed on meaningful and accretive acquisitions. We've retained all our contracts, won 1 new state, and we're going to more. We're taking that ground game and potentially going to Nevada. Georgia, Tennessee. We did submit a bid on Oklahoma, which is in the pipeline and should be announced very soon. So the Molina footprint is now expanded. We are less reliant on the marketplace business as a source of profit. We are less concentrated. We still have some very large states. But diversification is the best risk management strategy one can execute. And this portfolio is now diverse. It has now become expanded. It still presents a lot of white space in the United States of America on which to grow. Let's move to Page 7, where we give you a glimpse of the fourth quarter. When we closed the third quarter, we had indicated that for each of the first 3, we had comfortably produced about $3 of operating earnings per share, both pre-pandemic in the first quarter and right in the middle of pandemic in the second and third. When you normalize your results, remove all the distortions and artifacts related to the pandemic, any onetime items, we were routinely, comfortably cruising to a momentum of $3 of earnings per share a quarter. We said we thought we could deliver that in the fourth, and we will. Our normalized performance, excluding the impact of COVID and any onetime items in the fourth quarter will be approximately $3 a share. However, 2 items of note that will impact our reported results for the quarter. The first has to do with the net impact of COVID itself. Now when we've reported the net impact of COVID to you previously, we combine the positive effects of utilization suppression related to COVID, we include the effects of the direct cost of care of taking care of COVID patients. And then we've included the impact of some of these artificial and arbitrary risk-sharing corridors, which represented the state's attempt to recoup the amount of money paid to managed care that was not spent on benefits. If you recall in the second quarter, the sum of all of that was a positive impact to earnings of about $1.50 a share. In the third quarter, those effects neutralized which meant the impact was negligible to the quarter. But in the fourth quarter, the net impact of all of those considerations and impacts from COVID will net to a cost to earnings, a charge, if you will, of $3.50 a share, pretty much consuming and offsetting the strong core performance that we deliver. Now the reason the number is so large is as follows: while we certainly knew that the risk-sharing corridors that existed at the end in the third quarter, would continue on into the fourth. We knew that other states were considering introducing and enacting risk-sharing quarters, but we weren't sure. But in the fourth quarter, 3 states, California, Michigan and Ohio, enacted and finalized formulaic approaches to recouping some of that benefit that they believe managed care harnessed due to the pandemic. As we said many, many times, the later in the year, a retroactive rate refund is enacted and the longer period it extends to, the more material it will be for the quarter. California reached back to July of '19, Michigan reached back to October of '19. So they reached back farther than the pandemic even began. And recouped, in our view, aggressively overreached in terms of how much rate it was flying back to cover itself for the pandemic. So 3 very material and significant retroactive rate refunds will be recorded in the fourth quarter. And combined with the other effects of COVID, will serve to offset the very strong core performance that we delivered. Next item is actually a favorable item. As you know, the industry, one, its lawsuit with the federal government on the legacy argument about the ACA risk quarters, years and years ago. And our share of that was booked in the fourth quarter, was received in the fourth quarter, and net of some other items will yield benefit of about $1 a share. Strong core performance, again, producing $3 per share of core normalized performance, offset by a combined COVID impact of $3.50 in the quarter and benefited by $1 per share, a onetime event, on the recoupment of this legacy lawsuit with the federal government related to the ACA. That's a glimpse of the fourth quarter. Now naturally, the question is, so as you combine that with the first 3, how does the year work? The year looks very strong. As I said, we routinely produced $3 of core earnings per share, normalized earnings per share in each of our 4 quarters. So on a normalized basis, excluding the impacts of COVID, excluding any impacts from onetime items, we've comfortably exceeded our full year guidance, which, again, was developed on that same basis. Obviously, our $11.20 to $11.70 a share was developed long before COVID was a phenomenon and certainly didn't anticipate any windfall legal settlements. So $12 of normalized performance projected to exceed our full year GAAP guidance of $11.20 to $11.70 a share, which means we have a good jumping off point, a very solid baseline off of which to project 2021. Let's move to 2021 and talk about some of the environmental factors that one needs to consider as one shapes its view of the upcoming year. There's been a lot of talk about Medicaid rates, understandably so. But let's take it in 2 component parts. First, I would say that the overarching statement is, rates continue to be actuarially sound. There's a process in place. The actuarial resources hired by the states face off with the actual resources of the marketplace, the managed care participants in the marketplace. And you debate managed care savings, you debate the acuity rates, you debate all these things. But at the end of the day, rates settle into a nice pattern of being commensurate with the cost trends you're observing in the market. That has been tried and true for years. It continues to be true through the COVID period, and we believe will continue to be true beyond the COVID period. So today, given the pattern of our contract renewals, we know rates on 85% of our revenue for 2021. So rates and their development really isn't an item of conjecture or estimation or forecasting. We know it. Our average rate increase of just under 2%, in our view, kept pace with pre-COVID trends and many of our states used a pre-COVID baseline off of which to project, which means the distortions and disruption, positive or negative, caused by COVID, weren't really a consideration and the development of those rates. And as I said, our view is rates continue to be actuarially sound and reflect the cost trends we're observing in the market. But now let's talk about these risk-sharing quarters. There's really no mystery to these. They're very simple to understand. Many of these will be extended into 2021 as they relate to COVID and the pandemic itself is extending into 2021. So that shouldn't be a surprise to any of us. We believe these are temporary. They've been presented to us as temporary, and we believe they will be. In fact, CMS, which has ultimate approval rights over these corridors has issued guidance. That says that the corridors must be related to a COVID-related period that's impacted by COVID. They can no longer be retroactive, they have to be prospective. And by the way, if you want to share in the upside, you also have to agree to symmetrically share on the downside. So when COVID abates, when the pandemic is solved by time and the vaccination, we believe these will disappear, but they're here, and they will continue on into 2021. The best way to think about it, in my opinion, the way we think about it is last year, these corridors were enacted retrospectively in with hindsight because rates were developed without any knowledge of the COVID pandemic. In 2021, they're being enacted prospectively, providing greater visibility. But again, our belief is they are temporary constructs. They're somewhat arbitrary. In some cases, they do overreach, but they're here. We'll deal with them. And post pandemic, we'll revert to that normal and traditional rate setting process that I described a few moments ago. Moving to Page 11. Great time of the year to give you a marketplace update because open enrollment has been completed. So here's an initial view. As you know, our performance for 2020 was disappointing. We had some -- we were hit heavily by COVID, particularly in Texas, but we also had some execution issues, particularly on risk adjustment capture and utilization review. Those are confined and correctable, and we have a corrective action plan in place to make sure that we get back on the path of operating in an excellent way. We targeted price increases for 2021. They were targeted. We got price where we needed it, let's say, in Texas, but we eased on price where we didn't need it to make sure we grew membership. So the increases were targeted and our prices, our products were competitive, our benefits were competitive, and we're going to do well in the membership line. We believe we will start the year with over 500,000 members. We will end the year 2020 with slightly over 300,000 members. So there'll be good membership growth. Our metallic mix is strong. We believe our mix of new members and continuing members is strong, and that will produce revenue growth of approximately 25% year-over-year, which will again be a nice contributor to our growth rate in 2021. We are targeting the achievement of mid-single-digit pretax margins for 2021. I know we said that long term, we think the business can do mid-single-digit after tax margins, and we have not wavered from that aspiration but one step at a time. We have significant growth this year, but disciplined growth, measured growth and focusing intensely on those operating fixes to make sure the business produces a margin that we're content with and happy with. So the marketplace for 2021 is off to a very, very good start. Move to Page 12. The last time we updated you on our premium revenue outlook for 2021, we said that was approximately $21.5 billion, which would be a 20% growth rate over 2020. We have now updated that, refined our estimate to $23 billion of premium revenue, a 25% increase over 2020. So now that the Magellan acquisition is done, we closed on it on New Year's eve. We'll own it for the full year. $2.8 billion goes into the portfolio. Our Kentucky operation, enabled by the Passport acquisition starts the year with 320,000 members. And of course, we'll enjoy the ownership of YourCare in upstate New York for the full year. We're going to organically grow in marketplace as I recently said, and we have really good organic growth opportunities in Medicare. Our DSNP product, we launched 160 new counties last year, and now it's about growing market share in those new counties to provide growth in the Medicare line of business. Benefits get carved in and carved out all the time. That's going to be actually a net positive in our revenue outlook for next year because Washington is carving in pharmacy, New York and California may carve it out for partial -- for part of the year. But net-net, that should actually provide some revenue growth into next year. Now we all talk about the resumption of the membership redetermination. The Federal emergency period has been extended, as you all know, we have all types of models and assumptions as to how fast that membership will attrit once the membership pause is turned off. But that could actually provide some upside. We've been very conservative in our approach to estimating how fast that membership will roll off the books. But we think states are going to look at that and make sure that members don't fall off the system without a safety net. I think they're going to be pretty measured in their approach to how fast they want members to move off of managed Medicaid. Of course, we exited Puerto Rico, and our outlook does not yet include Affinity. We still hope to close it in the second quarter of this year. And by the way, we do have Federal Antitrust approval on the Affinity acquisition. We're now just waiting for state approval. 2021, $23 billion of premium revenue, 25% increase over 2020, and the beauty of it, it is a really good balance of all the types of growth initiatives that we embarked upon. Whether it's organic growth, bolt-on acquisitions, benefit carbon -- organic growth in our geographies, more penetration of our ancillary products into our Medicaid footprint, ala, Medicare, a very, very good balance of all the different types of initiatives that we embarked upon as we executed our pivot to growth strategy. Move to Page 13. Again, we will deliver to you a very detailed outline of our earnings and earnings per share guidance 4 weeks from today on our earnings call. But let's talk about some of the catalysts and opportunities that will harvest and some of the challenges that we face. And some of these shouldn't be a surprise to you because many of these are industry wide. The overarching statement that we made with respect to this, that is really important is that many of the catalysts that drive our earnings growth are durable and sustainable, while many of the challenges are temporary and fleeting. We're going to continue to drive performance in Medicaid and Medicare, particularly with the new portfolio, and particularly with the accretion of Magellan, which we purchased, as you know, at very low single-digit margins with the -- not only the hope, but the plan to move it to our target margins over time. We just talked about the marketplace margin recovery growth, the 25% top line growth and moving margins into the mid-single digits, you can see that, that's a significant growth opportunity for '21 over '20. When you look at the left side of the page and the right side of the page, you piece together all the COVID items. On the catalyst side, you have continued suppression. We do not think suppression in 2021 will be as great as it was in 2020, for a very specific reason. One, we think the infection rate declines over time. But more importantly, in 2020, both the demand and the supply side of the equation were shut down, if you wanted a discretionary or elective procedure, you couldn't get it. Now the supply side is open for business, but we think the demand will still be suppressed going into 2021, but at a reduced level. These COVID risk-sharing quarters still do exist for 2021, but again, at a reduced level. California has not implemented one for 2021, which grades a year-over-year decrease in the amount of recruitment that the states will be extracting due to these reshared corridors. And of course, with respect to COVID medical costs, your guess is as good as mine. We follow the epidemiological trends. Those trends are -- the COVID medical cost will follow those infection rates. Our COVID medical costs increased in the month of December. They'll probably be high in the month of January, but how fast those would trail off due to the solutions provided by the vaccine and social distancing are very hard to call right now. So where the COVID impact on 2020 earnings was a net $2 of earnings per share negative. We believe it will still have a small impact on 2021, but at a much reduced level. In closing, on Page 14, despite the pandemic, the business is resilient, and our strategy is unchanged. Our strategy is continue to drive at operating excellence, continue to drive superior results. The growth characteristics of these businesses, whether it's new states, market share in existing states, increased penetration of high acuity or actioning proprietary M&A, both -- all of these are available to us in terms of driving at best-in-class operating metrics, driving at top line growth and do not let the distraction, the distortions, the near-term and temporary distortions caused by the pandemic distract you from a long-term mission to produce value. When I look at this and I look at how much change has occurred, and governments go from red to blue. Economies go from boom to bust, the world is filled with danger and becomes safe again. The one constant through all this is our managing team. Our management team, when given a mandate, delivers, and whether that mandate is a turnaround, best-in-class margins, a double-digit growth rate or sending 10,000 people home and delivering $12 of core earnings per share in the middle of a pandemic, they have proven that with their determination, their fortitude, that they can deliver. And that gives me a great deal of confidence in our very, very bright future. So Gary, thanks, and thank you all for listening to me this morning, and we have some time to take your questions. Thank you.

Great. Thank you, Joe. A couple -- appreciate the presentation. Always very detailed at this time of year as usual. I have 4 quick questions. I just want to make sure I have attacked down, and then we'll go to some investor questions. The first is, you're quantifying for the fourth quarter, $3.50 of the state board or recoupment. You had already anticipated coming into the fourth quarter, that was going to be a pretty sizable amount. You had discussed that in your guidance, talked to investors about it. But end of the day, did that amount come in higher than you had anticipated?

Yes. Yes, it did. And for this reason, and actually, the numbers work out in a very convenient way, easy to understand. Had the corridors that were already in-flight merely continued into the fourth quarter, the net COVID impact in the quarter would have again been negligible. Utilization suppression, net of COVID direct would have been nearly dollar-for-dollar offset with the continuation of the corridors that were already in flight, which again, we had visibility into and could forecast. What the new item was, was 3 states, California, Michigan and Ohio, which enacted corridors. We knew they were deliberating on them. We knew they were considering them. There are all types of different formulaic approaches. They haven't filed them for approval yet. So really what put the estimate for COVID, the impact of COVID from being negligible to nearly 0 to $3.50 at a cost were the 3 new risk corridors that were enacted in the fourth quarter. We certainly knew that they were potentially to be enacted. But here they are, these states barely met the deadline for filing them with CMS, which was mid-December, but they did. And our view is CMS is giving a fair amount of latitude to the states during the pandemic and we'll likely approve them. So that was sort of the difference between what we might have thought at the end of the third quarter and what actually happened in the fourth. 3 new states, 3 new constructs, late in the game and reaching back to periods far before the pandemic, which made them more material and significant to the quarter.

And then when you talk about for the full year of '20, the impact of COVID being a $2 negative what are you including in that? Is that the direct cost offset by deferrals, plus all the recruitments now plus enrollment impact? Or how do we think about how you're sizing the $2 number?

The $2 number is primarily suppression. And again, that's probably your most subject to estimation. Because you're starting with what did you expect pre-pandemic and what in your experience post the difference is assumed presumed to be pandemic related. The direct cost of COVID care aren't really an estimate. We've got the procedure codes. We've got the diagnostic codes to make a good estimate. So those 2 items for the medical cost line. Then again, how much of your earnings will be subjected to these artificial and arbitrary rate quarter constructs, and that would be the third item. We do have estimates of what membership growth will provide, but it's really hard to attribute that to the pandemic. So we generally keep that out. Now having said that, we grew another 100,000 members in Medicaid in the fourth quarter. So I mean, suspension of redetermination is a real catalyst for membership growth. Now that was offset by the exit from Puerto Rico. But yet, another $100,000 of core Medicaid membership organically in the quarter. So as that federal emergency period extends, and if the states are really smart, and we think they will be by making sure members attrit off at a very measured pace, there's probably some uplift and some upside to our fourth quarter estimates, our '21 estimates on how much medical margin will be produced by additional membership.

Got you. And I'm getting this -- I had this question, I see this from an investor as well. I know we're not giving '21 guidance today. That's fine. But when we think about normalized sort of jumping off point, I mean, obviously, this dollar of additional items in the fourth quarter would probably come out of the normal jumping off of the main. But I have a quick -- I've actually had to go through the other 3 quarters to think about other things. Do you have a number for us to think about?

Well, as I said, if you look at our earnings for 2020, normalized for COVID without the onetime items was about $12 a share. Now that's without the marketplace actually performing very well. The marketplace will probably earn a slight profit this year, but not much more than breakeven. And again, we'll return to single mid-single digits next year. So the $12 is real. It's our best calculation of what the core earnings per share were for the 2020 year. And as I said, COVID, in our estimation, cost us $2 a share in 2020. Then you have to make some estimates that will provide to you on the catalysts and challenges that we've outlined in order to get to the 2021 picture, which would point to -- we're going to pause and not go down that path during this meeting, but in 4 weeks, you'll hear the full story.

Yes. And then on the at least $23 billion of revenue, I want to make sure correctly. So every -- all of your deals are in there except Affinity, right? So Magellan, Passport, YourCare, those are all included and only Affinity is not yet in that revenue guidance?

That is correct. And Affinity is roughly $1.2 billion, $1.3 billion of annualized revenue. We hope to close by the end of the second quarter, hopefully, in the second quarter, which means there could be $600 million to $650 million of upside if, in fact, we are successful getting New York approval by the end of the second quarter.

And can I just square one other thing. So 500,000 exchange lives starting the year, that's up 51% from first quarter of '20, but you're saying 25% revenue growth in the exchanges. So am I mixing organic or is it...

No, we've pretty much out of conservatism and possibly reality, we move back to what we consider to be a pre-pandemic attrition rate. During the pandemic, we're only losing 0.5% a month, maybe up to 1% a month. Pre-pandemic, you were losing 2%, 2.5% a month. We just moved back to a more conservative attrition rate. Toward the end of the year, we're probably just south of 400,000 members. But if you do all the member month math, you can easily get to a 25% growth rate.

Got you. Appreciate that. I have a question about Kentucky. Can you talk about retention of the Passport lives? I know that -- and just how things are going in Kentucky in general, I know there's a state allocation methodology for that sixth plan that we were sort of waiting on. I don't know if that's resolved yet. Can you comment on that yet or not?

Well, we're not going to comment all on the legal maneuvering that takes place. But we did -- but it's public information. There is a court ruling that instead of a 5-plan model, it'd be a 6-plan model. In our assumptions in developing our revenue, we assume there would be 6 plans. We also assume that if there's 6 plans, the membership is probably hived off of every market participant. And so while we're starting the year with 320,000 members in our revenue forecast, we assume that some of that would be contributed towards the 6 player. We own the business. The contract was novated to us. We're operating under the new contract. Continuity of care is really important for the state. It was first and foremost, on the administration's mind. It was even first and performance on the judge's mind. So if continuity of care is very important to the state, then we have every reason to believe that we'll keep most of the Passport members. We'll have to let all of the legal maneuvering play out.

Can you talk about -- in your revenue guidance, you obviously have a redetermination assumption sort of built in there. So maybe just as much as you can or in general, sort of talk about that. But then I also want to move from that assumption just into what you think could happen from a Biden administration, another stimulus bill, some additional FMAP. I think the industry is laughing that the redeterminations are -- become sort of a date certain to give states more budget planning, flexibility, et cetera. So sort of what do you have in there? And what are the moving parts you think that could move that as the year progresses?

We generally did not assume that the -- and since this was just recently enacted, we haven't had time to react to it. We didn't assume that there'd be any more membership growth, the peak wouldn't be higher due to the extension of the federal emergency period. That could be some upside. But we did assume that there is a protracted and measured approach to the states rolling the membership off their books. Now if the earliest they can do that is May 1 instead of March 1, and they do it in a very measured way. As I said, that could be a temporary phenomenon that could increase the outlook for 2021. They generally improve the acuity of the membership base. The people that otherwise would have gone back to work and didn't, so they're healthier. So it's -- it would be a nice catalyst to 2021 earnings. And we are encouraging the governmental officials to actually put a stake in the ground and make some decisions on how they're going to do it. I mean we've got people answering phones and managing care, and we've really bulked up in terms of our FTE footprint to handle all this. It would be very nice to understand how long we need to hold those resources to make sure we're adequately serving members and making sure they get the proper care and how quickly we can attrit. So we're encouraging the government officials to make some decisions to give managed care some visibility into that.

Thanks...

I'm sorry, with respect to FMAP. Look, we also hope that FMAP gets to 12% and not 6%. If it does, that, obviously, if there is rate pressure in the states, which generally there is, obviously, that will alleviate some of that pressure. The industry is encouraging and lobbying for that, whether it happens or not who knows, but with the Democratic-controlled Senate, at least now there's a possibility that it gets done through the budget reconciliation process, whereas with a Republican-controlled Senate, the likelihood of that happening was quite small.

We're less than a minute to go, it's a little unfair. It didn't mean to wait this long. I have a client asking about it, too. The Illinois committee votes to basically to move away from managed care. The question is, why isn't the value proposition resonating so visibly in Illinois that this shouldn't even be in the ballpark. So I think you probably will attribute some of this to politics, but -- and you get the 30 seconds to respond to the question. Apologies.

Well, that's okay. I'm not going to make political speeches here, but I think one needs to look at the context of legislation. Legislation is proposed for many different reasons. And many of us believe that the center pin, the linchpin of this legislation was really to make a statement about providing adequate funding for some of the safety net hospitals and some of the sort of forgotten providers in that environment. None of us really believe that the state can afford to and nor will eliminate managed care. So I don't want to completely dismiss legislation is proposed routinely. I don't want to completely dismiss it. But we think the reasoning behind it was more to make statements about provider funding and provider support than it was about dissing the benefits of managed care.

Great. Joe, thanks very much for spending time with us this morning, and everybody, have a great day. Thank you.

Thanks, Gary. Thanks, everyone. Thank you.