Elevance reports 12.2% increase in earnings for Q1

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Elevance Health on Thursday reported net income of $2.25 billion in the first quarter of 2024, a 12.2% from the $2 billion reported in the same quarter for 2023.

The insurance giant formerly known as Anthem reported no significant impacts to operations and cash flow from the February 21 Change Healthcare cyberattack that continues to affect the revenue of hospitals and physician practices.

Elevance CEO and President Gail Boudreaux said during Thursday’s earnings call, “Now, I want to say first and foremost, I’m really proud of our teams and how they responded to this issue that occurred with Change quickly and effectively, first to protect our members and their data, and also help our care providers maintain their operations and cash flow. 

“Importantly, I think it’s important to note that from a perspective, we were not as significantly impacted by this and we are back to normal operations in terms of claims flow,” Boudreaux said. “Importantly, another thing that’s really important to understand is our prior authorization provider payments and pharmacy claims were not materially impacted as well because they don’t go through Change. We don’t use Change significantly for those.”

Elevance initially observed a 15% to 20% reduction in the daily volume of electronic data receipts from providers, most of which were claims related, said CFO Mark Kaye.

In recent weeks, Elevance has caught up on outstanding claim volumes, Kaye said. 

“And for the quarter, we are effectively caught up on claims receipts and are now working to complete all necessary claims adjudication and processing activities,” he said. 

 FINANCIALS

Elevance’s stock price was $532.07 on Friday, reflecting an increase of 1.31%, according to Seeking Alpha.

Operating revenue was $42.3 billion in the first quarter of 2024, an increase of $0.4 billion, or approximately 1% compared to the prior year quarter. This increase was driven by higher premium yields to reflect medical cost trend, and growth in Carelon, including a full quarter of revenue from BioPlus, which closed in February of 2023, partially offset by attrition in Medicaid membership, the company said.

Strategic growth is expected from Elevance’s recent partnership with Clayton, Dubilier & Rice to build a payer-agnostic advanced primary care and physician-enablement business, serving consumers across commercial, Medicare and Medicaid health plans, Elevance said.

Upon formation, the combined company will serve nearly 1 million consumers. 

At the onset, Elevance Health will hold a significant minority position in the combined business with a clear path to first majority and then full ownership in approximately five years, according to Kaye.

Carelon Rx, which closed its acquisition of Paragon Healthcare, a provider of infusion services, will be expanding its geographic reach.

Elevance recently entered into an agreement to acquire Kroger’s Specialty Pharmacy business to bolster the growth of its existing pharmacy and infusion businesses while increasing Carelon Rx’s access to limited distribution drugs, according to the earnings call.

Commercial margin continues to recover from pandemic era lows, the company said.

Elevance was selected in Florida and Virginia to serve Medicaid beneficiaries across traditional and complex populations statewide, including those with serious mental illness in Florida and sole source foster care in Virginia. 

“These awards and their pull-through opportunities for Carelon services underscore the distinct value Elevance Health delivers,” according to the earnings call.

Elevance estimates that nearly 90% of its members have had their eligibility redetermined since redeterminations began in April prior to the end of the public health emergency in May.

MEDICARE ADVANTAGE AND STAR RATINGS

While insurers that are heavily in the Medicare Advantage market are taking margin hits due to the Centers for Medicare and Medicaid Services keeping payment rates to a 3.7% increase and decreasing benchmarks, Elevance has not been as affected. Fewer of its members are in MA plans compared to other large insurers Humana, CVS Health or UnitedHealth Group.

Of its 47 million medical plan members only an estimated two million are in Medicare Advantage plans, according to Seeking Alpha.

Last month CMS updated the star scores for four Elevance contracts, which increased the percentage of members in four star or higher-rated contracts to nearly 50%, up from 34%, the company said. 

“While this will improve our star quality bonus revenue in 2025, our goal is to have our star quality ratings at the high end of all plans in our local markets, which will be a multi-year journey,” the company said. “Funding for Medicare in 2025 will be challenging for the entire industry. We are disappointed that CMS has decided to cut Medicare Advantage rates for the second consecutive year, which will negatively impact seniors, notably those at the lower end of the income spectrum who rely on the program for their health and wellbeing. While we remain committed to serving seniors through plan offerings that focus on their unique needs, we will also continue to demonstrate discipline in our Medicare Advantage bids seeking to balance growth and margin while continuing to deliver exceptional value for seniors.”

THE LARGER TREND

The House Subcommittee on Health and witnesses slammed insurers Tuesday for continuing to make money during the Change cyberattack crisis, while hospitals and health systems suffer revenue losses and some physician practices are on the brink of bankruptcy.

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