Molina Healthcare Inc (MOH) 2013 Q4 法說會逐字稿

Ladies and gentlemen, thank you for standing by. Welcome to the Molina Healthcare fourth-quarter and year-end 2013 earnings conference call. During the presentation, all participants will be in a listen-only mode. Afterwards, we will conduct a question-and-answer session. (Operator Instructions) As a reminder, this conference is being recorded Monday, February 10, 2014. And now, I would like to turn the conference over to Mr. Juan Jose Orellana, Senior Vice President, Investor Relations. Please go ahead.

Thank you, Jason. Hello, everyone, and thank you for joining us. The purpose of this call is to discuss Molina Healthcare's financial results for the fourth quarter and fiscal year ended December 31, 2013. The company's earnings release reporting its results was issued today after the market closed and is now posted for viewing on our Company website. On the call with me today are Dr. Mario Molina, our CEO; John Molina, our CFO; Terry Bayer, our COO; and Joseph White, our Chief Accounting Officer.

After the completion of our prepared remarks, we will open the call to take your questions. If you have multiple questions, we ask that you get back in the queue so that others can have an opportunity to ask their questions.

As a reminder, given our investor day presentation this coming Thursday where we will discuss guidance, today we will only be taking questions related to our earnings release.

Our comments today will contain forward-looking statements under the Safe Harbor provisions of the Private Securities Litigation Reform Act. All of our forward-looking statements are based on our current expectations and assumptions, which are subject to numerous risk factors that could cause our actual results to differ materially. A description of such risk factors can be found in our earnings release and in our reports filed with the Securities and Exchange Commission, including our Form 10-K annual report, our Form 10-Q quarterly reports, and Form 8-K current reports.

These reports can be accessed under the investor relations tab of our Company's website or on the SEC's website. All forward-looking statements made during today's call represent our judgment as of February 10, 2014, and we disclaim any obligation to update such statements except as required by the securities laws.

This call is being recorded, and a 30-day replay of the conference call will be available at our Company's website, MolinaHealthcare.com. I would now like to turn the call over to Dr. Mario Molina.

Thank you, Juan Jose. Hello, everyone, and thanks for joining our discussion. First, I want to say that John and I will be brief in our remarks today. We will have a full afternoon with many of you at Thursday's investor day in New York City. There is too much happening at Molina to cover it in a single phone call, so today we will focus briefly on 2013.

On Thursday, we will share our thoughts on 2014 and beyond. I look forward to seeing you there.

For Molina Healthcare, 2013 was another successful year of continuity, growth, and opportunity. The results that we are reporting today conclude a year in which we strengthened the foundation of our existing business, expanded into new markets, added new products, and prepared for the opportunities in front of us. Profitability of its core operations is essential to any business. This is why we have made such great efforts to stabilize medical costs in 2013. During 2013, I'm pleased to report that eight of our nine legacy health plans reported increases in medical margin.

2013 was also a year of growth. Our total revenues reached $6.6 billion, a record for our Company. And we expanded our national footprint by entering two additional key states, Illinois and South Carolina. Our entry to Illinois came by way of startup, while South Carolina was achieved through an acquisition.

In our existing states, we nearly doubled the size of the New Mexico health plan by assuming another health plan's Medicaid contract. We were awarded a long-term care contract in Florida. We expanded statewide in Ohio, and we secured five dual eligible contracts -- more than any other health plan in the country. In addition, last week the California Health and Human Services agency notified us that Molina Healthcare will be offered a direct contract in Los Angeles County for the dual demonstration pilot. This is an exciting development as it represents a new service area to complement our participation in Riverside, San Bernardino, and San Diego counties where the dual demonstration pilots.

We accomplished all of this while preparing our organization for the implementation of the Affordable Care Act, requiring us to scale and build the infrastructure required to accommodate Medicaid expansion and the new marketplace products.

I would like to take a moment to thank all of our employees for their hard work and their contributions during 2013 in transforming our collective aspirations into reality. Of course, all of these accomplishments have not come easily, and much work remains to be done. Pressure on premium rates, increased spending on administration in preparation for the new enrollment, and temporary delays in some programs continue to create a challenge for anyone involved in the Medicaid business.

Since 1980 when my father found this Company, our success has been rooted in our ability to respond to and overcome the challenges in our industry, never losing the focus on serving those most in need and least able to afford care. Today, we arrange care for over 2.1 million persons in 11 states. Building upon our leadership in serving the underserved, we believe the coming years will take us much, much further. We are very excited about the future. And now, I would like to turn the call over to John.

Thank you, Mario, and hello, everyone. As Mario noted, we accomplished a lot this year, even while we were establishing a solid foundation for our future growth. Today we reported full-year earnings of $0.96 per diluted share on a GAAP basis, or $3.13 per diluted share on an adjusted basis, a substantial improvement over the earnings of $0.27 per diluted share on a GAAP basis, or $1.72 per diluted share on an adjusted basis, reported for the comparable period for 2012.

These results are consistent with our preannouncement on January 22. Total revenues grew by 11% when compared to 2012, reaching a record $6.6 billion. The revenue growth was driven primarily by increased enrollment and, to a lesser extent, to an increase in revenue per member per month.

Enrollment in 2013 grew to 1.9 million, increasing by approximately 134,000 members when compared to 2012. The enrollment gains came primarily from four states: California, Ohio, New Mexico, and Wisconsin. In California and Ohio, we added new members as we expanded into new service areas. In New Mexico, as Mario discussed, we assumed the membership associated with another health plan's Medicaid contract. And in Wisconsin, we benefited from the exit of a local competitor.

Growth in our aged, blind, and disabled enrollment coupled with growth in our Medicare advantage plans, both of which come with higher premiums, contributed to our growth in revenue per member per month.

While clearly a first quarter 2014 event and the only piece of news associated with 2014 that we will discuss this afternoon, our consolidated enrollment in January through grew to 2.1 million members, an increase of nearly 200,000 members in just one month. A large part of that enrollment gain is result of our South Carolina health plan, which started serving members on January 1. The remainder is new enrollment resulting from the expansion of the Medicaid program. The additional revenue associated with these members will help us leverage the administrative infrastructure we have been investing in.

As Mario noted, we made substantial improvements to the margins of base business in 2013. Other than in Illinois where operations commenced in September of 2013, medical margins improved in eight of our nine health plans last year. Consolidated medical margin increased by approximately 45% year over year. Consistent with the increase in medical margin, our medical care ratio declined to 87.1% in 2013, compared with 90% for the full year of 2012.

As we have discussed before, the improvement in medical margins was partially offset by higher general and administrative expense. The need to prepare for enrollment growth associated with our South Carolina and New Mexico acquisitions, Florida and New Mexico long-term care programs, Medicaid expansion in six states, duals demonstration in five states, and the entry into the marketplace in nine states required us to spend about $135 million during 2013 in G&A expenses, above and beyond G&A expenses associated with our base business. There was very little revenue in 2013 to offset this additional G&A spend.

As a result of this necessary growth in expenses, general and administrative expenses grew to 10.1% of total revenue in 2013 from 8.8% in 2012. This higher G&A spend was the main reason why we guided to a breakeven fourth quarter when we announced third-quarter results at the end of October. Absent the unfavorable premium adjustment in Washington that Mario announced that our appearance at the J.P. Morgan conference on January 13, fourth-quarter results came in as we told you they would.

As of December 31, 2013, the Company had cash and investments of around $1.7 billion, including approximately $365 million at the parent. If you recall, in February 2013 we raised $550 million by issuing convertible debt. As we have discussed in the past, accounting for this type of debt requires the recording of non-cash charges. In 2013, non-cash charges associated with the amortization of convertible senior notes and lease financings were $0.31 per diluted share. This further validates our decision to present the adjusted EPS metric, which we believe better reflects how we manage our business.

Finally, as Mario emphasized, we will be hosting our investor day conference in New York City this Thursday, February 13 at 12:30 PM. At that time, we will be discussing our 2014 guidance as well as other business topics. This concludes our prepared remarks. We are now ready to take questions.

(Operator Instructions) Justin Lake, JPMorgan.

First question, at our conference you mentioned that as you leave out the states where you feel like you are going to get full reimbursement for the industry tax delayed on some states like California and Ohio and Texas where you expect to get the tax itself but you are not sure about the [gross up]. Just curious if you can give an update there.

Justin, we absolutely can give you an update. And when you come on Thursday, we've got a nice schedule that we will be going through the details where we stand on a state-by-state basis.

Okay. Also, any numbers in terms of your expectations for [hep C] spending in 2014, or is that another one you are going to give at the investor day?

That is another Thursday answer.

Okay. Then just, this $120 million of spending, that is a number I hadn't heard before. Did you discuss that before?

The number is $135 million, Justin. And we have discussed it before, but it didn't include the fourth quarter spend because we hadn't done that yet.

Okay. So those are dollars where you feel like essentially there is $135 million earnings for that this year?

That's right.

Then how much starts to reoccur next year?

We will be going through that on Thursday.

Okay. Last question, then. There has been a little bit of a discussion on a pickup in cost trends throughout both the Medicare Advantage and commercial sectors. We have heard less on the Medicaid side. Can you talk a little bit about what you saw in the fourth quarter on cost trend and any pockets where you might have seen an increase there?

No. In fact for the full year, talked about medical margin increase and the MCR went down. So there was nothing unexpected for the fourth quarter.

Okay. I know before you responded, nothing in the fourth quarter. The MLRs were a little bit higher than we expected. Nothing there that we would -- they were in line with your expectations is what you are saying even for the fourth quarter.

It is Joe speaking. I think in line with our expectations, ex the impact of that Washington issue Mario discussed at JPM.

Great. Thanks for all the color, guys.

Josh Raskin, Barclays.

I will stick with 2013, I guess. So the MLR, I guess in a couple of states, New Mexico, Utah, Florida -- I know it doesn't necessarily count in a couple of months -- but Illinois as well came in a little bit higher than we were looking for. Would you say any of the states were out of the ordinary? I know they move -- a lot of the state fluctuations on a quarterly basis et cetera. But no change in trend or nothing that you saw in any of those specific states?

Josh, are you talking about quarter or full year?

Quarter, 4Q.

4Q for New Mexico I think part of it had to do with just the influx of the new membership. Florida, I don't know if Joe can speak to that. I don't think there was anything really out of line in Florida.

We have had some inpatient cost pressure in Florida we think may be tied to an unusual amount of high dollar cases. Nothing exceptional, though.

And when you say you have that, how long has that been lasting?

I think it is a trend in Florida we have probably seen since early fall.

Okay. Is that higher dollars per claim, or are you seeing more high dollar claims?

I think we are seeing higher dollars per claim. It is a pretty small population, so obviously that can be move pretty easily. But I think it is fair to say more intensive cases, not more intensity to the cases, so to speak.

Okay. And then the MMIS business, do you guys have an EBITDA number for the quarter?

We have got an operating income number which we share. If you give me a minute, I will dig that up for you.

It is very consistent with what we have been running.

Okay. Maybe while you are looking for that, did you guys give us South Carolina enrollment number? I know that it was a driver of your -- I think you said the January enrollment was up for that in expansion. Did you say, John, how much was South Carolina?

We didn't give that, Josh. We will give it to you Thursday.

Thursday. Big day Thursday. The operating income for MMIS and then I am all set.

That was running about -- that was about $12 million for the quarter, Josh. A little higher than normal. They have had a pretty good year as a result of upsells and that kind of volume.

Okay. That is a bit much for -- all right. Got it. Okay, thanks guys.

Sarah James, Wedbush Securities.

I wanted to circle back to New Mexico. I know that you guys took over some members in August, and this quarter you have three months versus two months of having them on the books. I am just wondering if that was the sole drivers for the sequential uptick is just having them one more month in the quarter. And then if so, what kind of MOR is that no new book running at to cause such an impact?

I will just speak to certainly -- it is Joe speaking, Sarah. I speak to certainly there are always some degree of cost pressure bringing on a new population. We've also gone a couple of years there with some not only small rate increases but actually a few negative rate increases -- decreases, I guess that would be. So, I think we're definitely feeling -- compared in the past -- I think we're feeling a little bit more cost pressure than we have in New Mexico in the past.

Can you remind us when rates are reset there? When you have a chance to renegotiate that?

They have been moving around a lot there, but there was a -- generally, they have traditionally been set July 1. I think there was a further adjustment 12/1 of 2012 as matter of fact. But I think the last two July 1 have been slight decreases.

And my last question was just on California. There was a sequential improvement there. I believe the settlement doesn't kick in until January 1. You have some possibly headwinds from bringing on some of the new members that entered. Should we think about that change mainly as a rate update or was there any improvements in medical management going on sequentially that help that business?

The answer to your question is both, Sarah. We did get a ratings increase in a couple of counties effective October 1. And then the California team has been doing a lot to bring down inpatient utilization. I think it is beginning to flow through now to the financials.

Thank you.

Tom Carroll, Stifel Nicolaus.

Good afternoon. A few things -- first, John, you said $0.31 of non-cash charges in full year 2013 related to your convert. How much of that was in fourth quarter?

That is a Joe question.

Ask your next question, Tom, while I look that up.

Second question, I think I know the answer but just a reminder, in Texas MLR was up quite a bit. I think that was because last year was influenced by the reversal of some reserving; is that correct?

That's correct.

So this year's more normalized?

Yes.

And then lastly, somewhat of a conceptual question. Is there a desire on your part to put as much expense into 2013 as possible given all of the growth opportunities and moving parts in 2014? Like maybe more so than other years.

Tom, I wouldn't put it that way. I think so that the converse is true. There was a lot of money spent building infrastructure in preparation for all these contracts and expansion. It had to be done in 2013. In part it was driven by these readiness reviews where the states once to see that we were fully staffed for the new patients, and then we were hurt by the fact that some of the things got delayed. So really it wasn't a matter of our desire to put the cost into 2013; it just worked out that way.

Tom, it is Joe again. Just let me say something speaking as chief accounting officer. We put the expense at the end of revenues, where they belong, not where we like them to be. So let me just clarify that. Your question about the convert -- it's your $0.09 for the three months ended 12/31. Remember, we did that deal in February, so your full year is going to be -- your fourth-quarter run rate is going to be a little different than your full year.

All right. Great. And then lastly maybe give us a little hint about EPS in 2014?

On Thursday.

Got it. See you.

Chris Carter, Credit Suisse.

Realizing it's early, can you just give us any color on how the Illinois ABD is tracking versus your expectations. I know that MLR was 97%, but just any thoughts there in terms of rates and MLR?

It is Joe speaking. I just think it is too early. We received our first membership in September, and that was only I think less than 100 members. It has been ramping up very slowly. I think if anything we have been a little disappointed at the rate at which the membership has come on. But right now, the population is just too small to speak to that.

And then the -- probably the same answer, but any thoughts on the Florida long-term care? Can you just tell us what you are kind of booking that MLR at?

You know, we brought on 3000 lives effective December, and we are booking that around the low 90s.

Low 90s you said.

Low 90s.

Okay. Thank you.

Carl McDonald, Citigroup.

If you adjust for the 135,000 lives that you brought on in South Carolina, it only looks like the enrollment grew about 65,000, or 3%. I would have expected that number to be bigger given the markets with Medicaid expansion. Any color on why the growth hasn't been as big?

Carl, this is Mario. I think that one of the things we are seeing is that the government is reporting huge numbers of people that are qualifying for Medicaid. The problem is getting them over to the Medicaid agency and enrolled. And in many cases, that means they have to go to a state or accounting office. There's not been good electronic transfer of files from the marketplace to the state agencies, and I think that what we are seeing is a delay on the expansion. I expect that we are going to see growth for Medicaid expansion throughout the first half of 2014. I think that is the real issue here.

Appreciate it. Thank you.

Kevin Fischbeck, Bank of America, Merrill Lynch.

I wanted to go back to the California question. It sounds like, obviously, the rate increase, we saw that, and then the medical management. Was there anything unusual in the Q4 MLR? Or is this kind of a good way to think about the run rate?

I don't think that there is anything unusual in the MLR for Q4. We will be discussing our expectations for the business on Thursday. I would just note that when we talk about run rates, remember we are getting all kinds of new products in all kinds of the populations. So, it may be more challenging just to draw a straight trend line that way.

Okay. That is still helpful to know that it's not -- nothing unusual. There are a couple of line items in your payables that looked a little bit unusual as far the -- what was the $150 million non-risk provider payable number in the quarter? And then the direct delivery costs grew dramatically. Can you go through what those were?

Sure. It's Joe. I will speak to that. First of all, the non-risk payable is essentially the payments when stakes are beginning to forward to us for disbursement to providers based on what is called the Affordable Care Act PCP parity requirements. You will recall that the Affordable Care Act requires that physicians be paid at Medicaid -- physicians performing Medicaid services be paid at Medicare rates for certain services. For the most part, states are handling that via a discrete payment to us which we then forward on to our own providers. So, what you are seeing are passed-through dollars.

That don't impact MLR?

Correct. It is purely a non-risk relationship. We are just a conduit for how the states are reimbursing providers at Medicare PCP rates. The second issue was direct delivery. We have had a ramp up throughout this year in direct delivery activity. And Mario and John and Terry can speak more to that. Essentially, it's just part of our strategy to get closer to the patient and provide the specific care our members needed. We've also entered into some other provider arrangements following that the direct delivery area which are driving that cost higher.

Was that also skewed by the Medicaid parity?

No, it was not.

And then just finally, with the Washington, [expected to charge a little bit], how much of the impact in Q4 is outside the period, if you will? If you were to kind of normalize the numbers of Washington, just to have the current period impact, what would the MLR be?

I don't have that MLR handy, but the impact with the about $7.5 million to the med margin line.

To the net margin line? Okay.

Med margin. Medical margin line. (multiple speakers) Correct.

All right. Perfect. Thank you.

Chris Rigg, Susquehanna.

Just wanted to come back to the $135 million of increased admin cost. How much of that was in the fourth quarter?

I think that fourth quarter number was about $45 million.

Okay. Just to remind us, when we think about that $135 million, is that investment spending that you wouldn't expect to repeat? Or is that just baseline costs for people, buildings, et cetera, that will be ongoing in the future and will be covered by revenue?

So Chris, I think we talked about this, I think, at the last investor day. There are really two components of it. One is sort of the one-time fixed cost, buying the additional servers, getting the configuration of the systems, those types of things. Then there was also for many states the hiring of personnel that the state agencies wanted to see in place before we got enrollment. Unfortunately, in places like New Mexico and especially South Carolina and Illinois, things got delayed. So we had these bodies and programs get delayed. California was another one were the programs kept getting delayed. But rather than let go a very valuable employees, we hung on and took the expense. So there are two components to that spend.

Any way to frame out which falls into which bucket?

You know, we did a pretty long and detailed review of that at our last investor day. I would suggest you go back and take a look at that presentation.

Okay. And then one last one -- I don't know if this is a 2014 question or not but with the dual rates, how do they compare to your expectations in California?

We are going to go through that again in New York when we get there on Thursday.

Okay. Thanks a lot.

Ana Gupte, Leerink Partners.

I will try to stick to 2013, if I can. The first one is on Washington. Is there any read across to other states in terms of the retrospective rate adjustment that you had there?

I don't think there is any read across. I think that was --

Idiosyncratic.

Yes. Thank you.

Okay. The second one is even through 2013, any color on Medicaid and exchange enrollment? You talked about the welcome mat effect. It seems like one of your peers is not as optimistic on it. Is that still something you look forward to?

We've talked about the welcome mat effect being somewhat somewhere between 5% and 10%, I think is what we said. Until we see something otherwise, that is what we are going to stay with.

5% to 10% growth off of what you have right now?

That's right.

So 5% to 10% of that population that is eligible?

I would say we have talked about is absent the welcome mat effect, enrollment would be 5% to 10% less than what it is with the welcome mat effect.

Got it. The last question is I think when we looked at your statutory filings, it seemed like -- you certainly normalized your medical margins. But in a couple of states like Florida and Texas when I just look at the time to margin normalization, it seems like you were slower than some of the other players. Any thoughts on that? Is it just population health management that is slower to take effect? Or is it nothing we should be reading into that?

I always caution folks from trying to read anything from statutory filings.

So I shouldn't then is what you're saying? It is just as a quarterly progression, it seems like it was slower.

I'm sorry. It's Joe. Could you phrase the question again? You were talking about Florida and Texas, I got that far. Could you phrase the question again, please?

Just in terms of normalizing the medical margin, say, in some of the states it felt like in terms of the speed to normalization, Molina was slower. And I guess the rate adjustments are probably occurring at the same time. I am just wondering if I should read anything into that, or is it just the way of reporting because these stat filings can be misleading sometimes?

You know, Ana, you are asking us to compare us to our competitors and draw some inferences. We can't do that. All we can say is how our own business is stacking up in Texas and Florida. I think that frankly, Joe, one of the reasons that Florida MCR went up in the fourth quarter is because we didn't get the big book of business -- the long-term care business which we booked at about 90% MCR. A small population with very large premiums. And I think Texas had a pretty good quarter. So again, it's just hard for us to compare in terms of speed normalization against anyone else.

Okay. You know what? Just off-line, I'll just share it with Joe and see if I can get some feedback.

Terrific. He is looking forward to that.

Can't wait.

Dave Windley, Jefferies.

On the $135 million question and the $45 million to $50 million in the fourth quarter, did you spend all that you intended to spend? Was that on your target for the quarter?

It is Joe speaking. In general, yes.

Was all that booked, Joe, in G&A, or was some of that of a medical nature?

No. That is specifically G&A. I think we talked last time about some substantial advertising expenditures we were going to make in the fourth quarter. We made those. It is a variety of items. But, Dave, I would say the increase we are talking about is all expense for which we haven't seen the revenue yet.

Okay. And so then coming back, if I make the adjustment for your answer to the earlier question about the Washington impact, if I make that adjustment, your MCR I think was up year-over-year and up sequentially by maybe 20 or 30 basis points. Is that a (technical difficulty) several ways, but --

Dave, you broke up there for a second. I got the point. I think you were looking at Washington and adjusting for $7.5 million in revenue. I lost you after that. Sorry.

So after adjusting for that, MCR is still up year over year and sequentially. You have highlighted some inpatient costs in Florida. Other than that, is there anything we need to be aware of that influenced MCR in the fourth quarter?

I think if you are comparing over the fourth quarter of 2014, 2012 you have to look to about $30 million of favorable prior period development in the fourth quarter that we called out in Texas. Again, if you are comparing to fourth quarter 2012 there was $30 million of favorable [PVD] in Texas. I think beyond that, I think what we're seeing in the fourth quarter is essentially seasonality, and that is about it, along with a growing slight impact from Illinois and Florida.

This is Mario. When you talk about Washington, the thing that strikes me is if you look at PMP and medical costs for the quarter, it was about $203 in 2012, and it's about $204 in 2013. So the medical costs haven't changed that much. The real story, I think, in Washington was the revenue difference. The PMPM revenues were down. So that, I think, is the issue with Washington.

Okay. Thank you.

(Operator Instructions). Peter Costa, Wells Fargo.

You became a new competitor for duals in LA County where you were previously a subcontractor. Do you expect new competitors in your counties where you use subcontractors for duals?

This is Mario. No, we don't expect any change to the mix of contractors in Riverside, San Bernardino, or San Diego counties. Three plans were added in Los Angeles -- CareMore, Care 1st, and Molina. But we don't expect any other changes.

Looking at your list of Safe Harbor's risk factors, you changed a couple of them. One of which was, you changed the wording around the fully grossed up reimbursement of the premium tax to highlight the fully grossed up component. Should I take that as a positive that you now have most of the premium taxes itself taken care of? Or should I take that as a negative that there is more risk in getting the gross up than there was before?

This is Mario. You should take that as a change by Jeff Barlow who wanted clarity. And I think we are trying to be more clear about what the risk is.

Okay. And you added another one, which is the efforts by states to recoup previously paid amounts, including, I think, the topic in Washington as well. But you talked about other states potentially. Is there some other state that you are worried about a similar retroactive disbursement the way it happened in Washington?

No, we are not, but I think we wanted to make that a general risk factor because it could happen in other states. We don't have that on the horizon right now, but given that it has happened in Washington, we just want to make people aware that from time to time states might do something like this.

And Washington thing is what you are talking about in here with the psychotropic drugs; is that correct?

Yes.

And then lastly you added a risk factor about hep C. Is that just because we are closer to 2014, or was there some change in terms of your expectations for what is going on one with hep C and the new drugs that are coming out there?

No. I think that really reflects the fact that there are new drugs available that were not available in the past. Also, the recommendations for increased screening. We really don't know what the prevalence is of hepatitis C in the population. There have not been very effective treatments in the past. So this is an area that is evolving.

Okay. So it is nothing new other than the complete factor that there are new drugs coming out, but there is not a change to your view of how those drugs are coming out.

I think it is that plus the fact that the new screening recommendations -- the prevalence of hepatitis C is really unknown. The CDC estimated it was about 3 million. It was a study from a UCLA that came out and said it is closer to 6 million. And until we get more testing, we won't really know. But we will discuss that more on Thursday.

Okay. And the last question on Illinois -- the $1200 PMPM. Is that a good PMPM rate to look at that business going forward and then perhaps for all duals? Or is that something unique about this quarter because it is just starting up?

We don't have duals there yet. I think it is probably a little bit early to extrapolate, especially given the small numbers that we have, and we don't yet have duals folded in.

Peter, that is just for the ABD in Illinois, not for the duals.

Got it.

Michael Baker, Raymond James.

Thanks a lot. I was wondering if you guys could more specifically address hep C, whether or not you have seen anything meaningful on the cost side there, first off.

Thursday.

Okay. And then secondly, as you are dealing with these newer populations, any challenges on the continuity of care provisions relative to your implementation of your medical management protocols?

I don't think there is anything in terms of the continuity of care that is not something we haven't already encountered in previous rollouts.

Okay. Thanks for the update. Look forward to Thursday.

I am assuming there are no further questions, and I just wanted to remind you all that we will be discussing guidance for 2014 and a number of other factors which have been alluded to today. And we hope to see you at the investor day, Thursday afternoon.

Ladies and gentlemen, that does conclude the conference call for today. We thank you for your participation and ask that you please disconnect your line.