Centene Corporation (CNC) Q1 2014 Earnings Report, Transcript and Summary

Edmund E. Kroll - Senior Vice President of Finance & Investor Relations Michael F. Neidorff - Chairman, Chief Executive Officer and President William N. Scheffel - Chief Financial Officer, Executive Vice President and Treasurer K. Rone Baldwin - Executive Vice President of Insurance Group Business Unit Mary V. Mason - Chief Medical Officer and Senior Vice President

Joshua R. Raskin - Barclays Capital, Research Division Peter Heinz Costa - Wells Fargo Securities, LLC, Research Division Kevin M. Fischbeck - BofA Merrill Lynch, Research Division Christian Rigg - Susquehanna Financial Group, LLLP, Research Division Christopher R. Carter - Credit Suisse (Deutschland) Aktiengesellschaft Albert J. Rice - UBS Investment Bank, Research Division Sarah James - Wedbush Securities Inc., Research Division Andrew Schenker - Morgan Stanley, Research Division Michael A. Newshel - JP Morgan Chase & Co, Research Division Scott J. Fidel - Deutsche Bank AG, Research Division Matthew Borsch - Goldman Sachs Group Inc., Research Division Ana Gupte - Leerink Swann LLC, Research Division David A. Styblo - Jefferies LLC, Research Division Michael J. Baker - Raymond James & Associates, Inc., Research Division Carl R. McDonald - Citigroup Inc, Research Division Thomas A. Carroll - Stifel, Nicolaus & Company, Incorporated, Research Division

Good morning, and welcome to the Centene Corporation First Quarter 2014 Financial Results Conference Call. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Ed Kroll, Senior Vice President, Investor Relations. Please go ahead.

Thank you, operator, and good morning, everyone. Thank you for joining us on our first quarter earnings call. Michael Neidorff, Chairman and CEO; and Bill Scheffel, Executive Vice President and Chief Financial Officer of Centene, will host this morning's call. The call should last approximately 45 minutes and may also be accessed through our website at centene.com. A replay will be available shortly after the call's completion, also at centene.com, or by dialing (877) 344-7529 in the U.S. and Canada, or in other countries by dialing (412) 317-0088. The access code for the playback is 10041412. Any remarks that Centene may make about future expectations, plans and prospects constitute forward-looking statements for purposes of the Safe Harbor provision under the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those indicated by these forward-looking statements as a result of various important factors, including those discussed in Centene's most recently filed Form 10-Q dated today, April 22, 2014, and other public SEC filings. Centene anticipates that subsequent events and developments will cause its estimates to change. While the company may elect to update these forward-looking statements at some point in the future, we specifically disclaim any obligation to do so. As a reminder, our next Investor Day is Friday, June 13, 2014, in New York City. Please mark your calendars. With that, I'd like turn the call over to our Chairman and CEO, Michael Neidorff. Michael?

Thank you, Ed. Good morning, everyone, and thank you for joining Centene's first quarter 2014 earnings call. During the course of today's call, we will discuss our strong first quarter results, market and product updates, and bring you up to date on how we are dealing with issues associated with the ACA and hepatitis C in the normal course of our business. I will begin with highlights of our first quarter financial results. We reported first quarter diluted earnings per share of $0.57 or $0.79 when excluding $0.06 of USMM transaction costs and $0.16 of net costs for the ACA health insurer fee. We expect to recoup the $0.16 during the course of this year. First quarter membership increased 13% year-over-year to 2.9 million covered lives. Premium and Service revenues grew 38% year-over-year to $3.4 billion. The faster premium growth relative to membership growth was driven by the continued growth in higher acuity beneficiaries. Our average premium per member per month increased 17% year-over-year to $355. The HBR improved 90 basis points year-over-year to 89.3%. This reflects a lower level of flu costs compared to the first quarter of 2013, as well as reduced utilization associated with the severe weather. We continue to see underlying 2014 medical cost trends as consistent with our expectations, similar to 2013. Now on to market and product updates. First, we'll discuss recent Medicaid activity. Florida. We completed the rollout of the long-term care program during Q1. The phase-in of this program was successfully orchestrated by the state, resulting in a smooth transition of our expanded membership. Centene is now the largest long-term care MCO in Florida. We ended the quarter with 29,700 long-term care lives. Separately, we continue to expect the MMA program to begin phasing in by region during the second quarter of 2014. We anticipate an equally smooth transition for this program [ph]. California. In November of 2013, we commenced operations in California under 2 separate contracts. Both contracts are performing in line with our expectations. Membership at March 31 was 118,100 lives. This represents a 22% sequential increase. We continue to see future growth opportunities in that state. New Hampshire. We launched our health plan in December of 2013. Thus far, the performance is consistent with expectations. Membership at quarter end was 37,100 lives. Massachusetts. In January, we began operating under Massachusetts -- or MassHealth CarePlus program in all 5 regions. Membership at March 31 was 33,400, which excludes our Centurion and exchange membership in the state. Moving into dual eligibles. We continue to view dual eligibles as a significant growth opportunity. We have successfully completed readiness reviews in Illinois and Ohio, and expect a ramp-up of members during the remainder of 2014. South Carolina and Michigan are expected to go live in late 2014 or early 2015. Next some comments on Centurion. We successfully launched our third state correctional contract in January in Minnesota. Our joint venture with MHM provides a compelling alternative for state governments to address their correctional health needs. At March 31, we covered 41,000 inmates. Shifting gears to the M&A front. We closed on our 68% investment in U.S. Medical Management in early January. This allows Centene to move from influencing health care costs to managing them. USMM is a critical tool in serving the complex needs and costs of Centene's high-acuity populations. Next, I will discuss our proposed investment in Ribera Salud. We recently signed a definitive agreement to purchase a noncontrolling interest in Ribera Salud S.A., a Spanish health management group located in Valencia. Ribera Salud is highly regarded for its ACO-like, public-private partnership health care model known as the Alzira Model. This transaction is a good strategic fit as it closely aligns with our core competencies, including systems and medical management through Spain's government-sponsored health care programs. Diversification has always been a key element of Centene's growth strategy. This transaction represents an opportunistic entry into Europe. Our initial investment for the 50% interest is less than $20 million. This excludes letters of credit that will be issued at closing. We clearly have the bandwidth to deal with this opportunity. It will not impede our ability to continue to pursue the ample growth opportunities in the U.S. The management team of Ribera Salud is extremely capable, and our equity partner, Banco Sabadell, is a financially strong and well-respected institution. We expect this transaction to close in the second quarter. I will now comment on the ACA. First, the ACA health insurer. As of March 31, Centene has received signed agreements from 13 of our applicable states, which provide for the reimbursement of the ACA health insurance fee on a grossed-up basis. This represents 60% of the total. Ongoing discussions with our 4 remaining states are positive, and we continue to believe that the fee will be covered in a similar manner. CMS has been supportive in working with states on this matter. We remain confident that we will receive 100% grossed-up reimbursement for the ACA health insurer fee in 2014. This is fully reflected in our guidance. Bill will go into further detail on this topic. Next, Health Insurance Marketplaces. We continue to expect the Health Insurance Marketplaces to have a minimal impact on our 2014 financial performance. In January, we began operating in a subset of counties in 9 states. We have approximately 39,700 enrolled and paid exchange members at March 31. We continue to expect marketplace enrollment to be in the vicinity of 70,000 lives by the end of the second quarter. The demographics of our enrollees are generally in line with our pricing expectations. The average age is 43 years. Members are predominantly lower income, over 80% are eligible for premium subsidies. It is still too early to comment on the acuity levels of our marketplace membership. While we continue to take a measured approach towards our participation in exchanges, we believe our early participation will give us valuable experience for longer-term marketplace opportunities. Now Medicaid expansion. We ended the quarter with approximately 100,000 expansion lives in 4 states, which was above our 65,000 expectation. As we have previously noted, the majority of our states are not participating in Medicaid expansion in 2014. Longer term, we view this as a growth opportunity as more states adopt expansion. Now I will comment on the new hepatitis C drugs. We are pleased that new curative therapies have been approved for the treatment of hepatitis C. We will manage the utilization of these drugs in a responsible way on behalf of our state customers. The high cost of these drugs has raised investor concerns about a potential adverse effect on our HBR. Let's look at factors that determine when drugs are appropriate, as well as the benefit of our specialty pharma capabilities, which is part of our integrated strategy. Acaria has experienced that we have leverage to develop guidelines for patient compliance. Some states, including Texas, do not yet have new drugs on their preferred drug list. It is anticipated that when the new drugs are added, we will be compensated for the additional cost. Additionally, Centene has limited risk in our correctional business through contractual protections. The oral medications are FDA-approved for 16% of the total hep C population, represented by genotypes 2 and 3. They are also recommended in cases where progressive cirrhosis and advanced liver disease are factors, as suggested by the World Health Organization. We have implemented medical management practices to ensure compliance with appropriate and recognized guidelines. The cost impact to Centene in the first quarter of 2014 is $7.3 million. This compares to $4.7 million in the first quarter of 2013. The incremental $2.6 million is on a higher membership base. As with all cost categories, our guidance includes an updated estimate of the incremental cost of the new hep C drugs. Our experience to date has been consistent with our estimates. We're working with our states on an ongoing basis to ensure the cost of new therapies is properly reflected in our reimbursement. It is important to note these new therapies are curative, thus it is possible that longer-term savings will be realized from reducing other medical costs associated with hepatitis C. It is still too early to quantify these possible savings. A quick comment on rates. We continue to expect a composite rate adjustment of 0 to 2% in 2014. This is exclusive of any appropriate reimbursement for the ACA health insurer fee and hepatitis C, which are being negotiated separately. In conclusion, our solid first quarter results have 2014 off to a strong start. When evaluating our progress on a year-over-year basis, one can really see the impact of our growth and diversification strategies. Centene became the health plan with the largest long-term care membership in Florida. In addition, we won 9 out of 11 regions in Florida's MMA program. We added 2 important specialty companies: Acaria and U.S. Medical Management. We added 2 new states: California and New Hampshire. We now manage medical costs in correctional facilities in 3 states: Tennessee, Massachusetts and Minnesota. Centene began operating in Health Insurance Marketplaces in 9 states, and we have multiple dual-eligible contracts. We remain confident in our strategic approach and look forward to the remainder of 2014 and beyond. I'll now turn the call over to Bill.

Thank you, Michael, and good morning. As a recap of our first quarter results released this morning, we reported significant increases in both revenues and earnings. Premium and Service revenues increased 38% over last year's first quarter, and diluted earnings per share was $0.57; $0.79 if you add back $0.06 in U.S. Medical Management transaction costs and $0.16 impact from the ACA health insurer fee for the first quarter, which we expect to recoup later in the year. At a more detailed level, our Premium and Service revenues were $3.4 billion this quarter compared to $2.4 billion in the first quarter last year. The 38% increase between years is a result of new operations for California, New Hampshire, Centurion and Health Insurer Marketplace; expansions in Florida and Ohio; and the addition of AcariaHealth and U.S. Medical Management. Service revenue increased by $248 million year-over-year to $281 million. This primarily reflects the addition of the AcariaHealth business acquired on April 1, 2013. The consolidated health benefits ratio for 2014 was 89.3% compared to 90.2% in the first quarter of 2013 and 88.1% in the fourth quarter of 2013. Compared to last year's first quarter, this -- the first quarter this year benefited from lower flu costs and lower utilization due to the effect of the inclement weather in many of our markets. In addition, the effect of the ACA parity payments increased our HBR by 20 basis points this quarter, due to recording approximately $68 million of revenue and medical expense for amounts received from the states. Sequentially, our HBR rose by 120 basis points, primarily due to the impact of recording a higher HBR in the initial periods of operations for California and New Hampshire, the Medicaid expansion membership in 4 states and the Florida long-term care business. For the first quarter, approximately 20% of our revenues were from new business compared to 37% in last year's first quarter. The HBR for new business was 93.1% compared to 88.3% for existing business. For last year's first quarter, the HBR for new business was 93.7% and 88.2% for existing business. Our general and administrative expense ratio was 8.8% this year compared to 8.4% in last year's fourth quarter -- first quarter, I'm sorry, and 8.9% in the fourth quarter of 2013. Business expansion costs in the first quarter were approximately $0.13 a share this year, including the $0.06 of U.S. Medical Management transaction costs compared to $0.09 last year. The additional business expansion cost had the impact of raising our G&A ratio in the first quarter by approximately 20 basis points compared to the first quarter of 2013. In the first quarter this year, we recorded approximately $30 million of revenue related to the reimbursement of the ACA health insurer fee. We received signed agreements from 13 of 17 applicable states covering the reimbursements on a grossed-up basis for income taxes, and we recorded revenue representing approximately 60% of the total expected reimbursement amount. The 60% is slightly higher than we disclosed in our Form 8-K earlier this month as a result of additional clarification received from certain states regarding the amount of Premium revenue defined as long-term care revenue. Long-term care revenue is excluded from the calculation of the health insurer fee. And of the remaining amount of revenue to be recognized, the Texas operations represent approximately 38% of the 40%. As we previously indicated, we believe that we will receive reimbursement for the full year from our ongoing state customers for the ACA health insurer fee on a grossed-up basis. Importantly, during the first quarter, CMS has been providing assistance to the states in structuring appropriate reimbursement arrangements. Moving on. Investment income increased from $4.3 million last year to $4.7 million this year, reflecting higher investment balances. Interest expense increased from $6.6 million to $7 million between years. The increase in interest expense is due to higher balances on our revolving credit line during the first quarter. Our effective income tax rate was 50.5%, excluding the effects of noncontrolling interest. Without the impact of the ACA health insurer fee, our tax rate would have been 40.9% compared to 39.4% in the first quarter of 2013. And our diluted earnings per share for the first quarter this year was $0.57 compared to $0.41 last year. Diluted shares outstanding were 59.4 million shares for the first quarter compared to 57.1 million shares for the fourth quarter of 2013. The increase is primarily due to the 2.2 million shares issued for the U.S. Medical Management investment in January. On March 31, we had cash, investments and restricted deposits of $2.2 billion, including $49 million held by unregulated entities. Our risk-based capital continues to be in excess of 350% of the authorized control level, excluding any temporary statutory impact related to the ACA health insurer fee during the year. Our total debt was $817 million at March 31 this year, including $295 million of borrowings under our revolving credit agreement. Our debt-to-capital ratio, excluding our $72 million nonrecourse mortgage note, was 34.4% compared to 32.4% at December 31. Medical claims liability totaled $1.3 billion at quarter end and represented 42.6 days in claims payable compared to 42.4 days at December 31. Cash flow from operations was $252 million for the first quarter, which is almost 8x net earnings for the quarter. We continue to expect cash flow from operations to be in the 1.5x to 2x net earnings range for all of 2014. In early January, we closed on our investment of a 68% interest in U.S. Medical Management. U.S. Medical Management's operations are included in the consolidated financial statements since January 6. The cost of the investment was $215 million, which was financed through the issuance of 2.2 million shares of Centene stock and $82 million of cash. Our 2014 guidance numbers have been updated to reflect our first quarter results. We expect Premium and Service revenues, $14.2 billion to $14.8 billion; diluted earnings per share, $3.60 to $3.90; consolidated health benefits ratio, 88.7% to 89.2%; general and administrative expense ratio, 8.5% to 9%; effective income tax rate, 50% to 51%; and diluted shares outstanding, 59.7 million to 60.2 million shares. We have increased our revenue guidance by $400 million as a result of additional revenue from dual-eligible membership, Medicaid expansion membership and AcariaHealth. Our EPS guidance has increased by $0.10, reflecting our favorable first quarter performance. Our guidance numbers are GAAP numbers and include the $0.06 of U.S. Medical Management transaction costs. Retroactive to January 1, we expect to be reimbursed on a grossed-up basis for the impact of the ACA health insurer fee for all of our ongoing states. We've also included an updated amount for hepatitis C-related costs for the remainder of the year in the 2014 guidance. Lastly, our business expansion costs for 2014 are estimated to be $0.55 to $0.60, including the U.S. Medical Management transaction costs. Operator, you may now open up the line for questions.

[Operator Instructions] And our first question comes from Josh Raskin of Barclays.

Just first, clarification on the hepatitis C cost. So what do you do in a state like Texas, where it's theoretically not on the formulary and you're not getting paid for it at this point?

When the state doesn't include it in the formulary, it's not a covered expense, Josh. Now in discussions, the states know that, and at the same time, we're having discussions that when they do decide to exclude it, if they have their own guidelines for use of something, they're paying the cost.

So if a patient -- if a Centene member is -- has hepatitis C and is prescribed Sovaldi and incurs $84,000 in costs and then you receive the claim, what happens there?

One, it's just not paid. It's a denied benefit. It's not a covered benefit in the state of Texas. The state of Texas knows it's not on the formulary and we are obligated to follow state guidelines.

Right, okay, that's fair. And then the doctor has to figure it out from there? Is that the idea?

Yes, I mean, they work it out. And they -- I'm sure the state is working through it. We'll follow the state guidelines and then we'll manage it consistent with appropriate guidelines, as we've done everywhere else. I think we also have to keep in mind that if you think about the number of requests they probably get, take the 16% of the total population of all hepatitis may be qualified. But it's exclusive to those that are severely ill. And then you take those at a level where they need it, so the numbers may not be quite as large as it might seem in our population. That's to be proven.

Second question. State of Washington, obviously, the growth was way above what we were looking for. I know it's an expansion state. I know you guys have done well there historically. But I'm just curious, is there anything specific to Washington that -- just from a sequential membership perspective?

We're doing our normal process, and Rone, would you like to add something?

I think Washington is one state where the impact of Medicaid expansion has been very significant. But also, it is -- I would say, broadly, if you look at our membership statistics, we can't see broadly the impact of the woodwork effect that's been talked about. But I do think that in Washington, there is some clear signs that the woodwork effect has had an impact there as well. And the third piece of it is that there has been some meaningful enrollment in the exchange product in Washington also. So all 3 of those have contributed to the sequential increase of membership in Washington.

Okay. So there's sustainable growth there. And then just a last question, I guess, if you take a step back, your net margin was just under 1%, maybe 1.25% if you exclude the impact of the fee. As we think about sort of longer term, getting into that 1.5% to 2% or maybe even 2% to 2.5% range on a net margin basis, how should we think about the timing of that? I mean, I understand when you're growing the top line at 30% plus, it's going to be difficult to see that. But is that -- is 2015 a possibility? Or do we think this is 2016 and beyond once the growth normalizes?

Well, I think we'll see more normalization this year. But Bill, you may want to comment on that.

Yes, I think the first quarter is usually a little tighter quarter on the margins. And I think as the year goes on, we'll see continued expansion of the margins and -- because we've got a lot of new business in areas like long-term care and we're recording at higher levels of HBR in the initial period of operation. So as the year progresses, I think that -- we'll put some of that behind us.

It's about 2% pretax this quarter, and we're looking for -- to move it to a 3% level and that's still our goal, to continue to improve margin. As Bill said, Q1 tends to be an unusual quarter.

Yes.

Our next question is from Peter Costa of Wells Fargo.

A couple of questions. First, on the ACA fee, you talked about that being $150 million, and a little less than that this quarter on the run rate. So do you expect that to continue to grow through the year? That's the first question.

Okay, so the health insurer fee, as what we've said, is we recorded approximately $30 million of revenue related to the reimbursement for the health insurer fee and we also expensed about $30 million. Right now, what we said is we've -- originally, I think I had said we expected the year to be around $135 million of total cost for 2014. And I think based on some of the refinement of the -- splitting out the long-term care revenue in a couple of our markets, that number has come down to a little below $130 million for the year. And so again, we continue to feel that we're required to expense the fee on a quarterly basis and record the revenue. We have the signed agreements, and we expect this is a timing issue within the year when this will take care of itself.

And the Service revenues look considerably higher than I expected them to be, some of that is USMM, but what else is driving that?

No, I said that was primarily AcariaHealth that was driving that.

So it's primarily AcariaHealth in that number? Okay.

Correct, year-over-year.

And then the Sovaldi cost, when you said that, that would be in line with expectations -- with your expectations, but Texas, you're not paying any scripts there, so it's like 40% of your revenues where you're not paying for those scripts. So are you saying in line overall or you're saying in line even with that being excluded?

I think we are forecasting what we expect we'll see from Texas and all our states throughout the course of the year. And in case of Texas, for example, we're in discussions now on the coverage of it and the reimbursement of it. So all the things that we know today to be factors in it, we've put in our revised guidance.

Our next question is from Kevin Fischbeck of Bank of America Merrill Lynch.

Okay, great. I just want to go back, I guess, to the -- one of the prior questions there about the Service revenue. You said Acaria had a year-over-year increase, but sequentially it was up pretty dramatically and I think that the U.S. Medical was only supposed to do about $240 million annually, so that doesn't seem to explain the sequential increase.

No. I mean, Acaria, of course, is one of the largest providers of the hepatitis C drug and other specialty pharmas and so we're seeing some of the benefit of that. But it's a mix of specialty pharma. You may recall that when we entered that business as a strategic entry, we saw, with specialty pharma, it would be moving to 40% of the pharmacy spend and growing from there. So Kevin, it's really all a case of just anticipating that and seeing it come through across a mix, including the hepatitis C drugs.

Okay. And then I guess, when you mentioned the revenue increase, you mentioned the Services revenue, you mentioned duals, I forget there was one more. Is it Medicaid expansion? Was that the third reason?

Yes.

The increase in our guidance on revenue was due to all of those factors.

And I think you mentioned the duals first. Is that, from order of magnitude, the biggest driver?

I think that's probably true. I think what we said -- remember, when we started the year in our early discussions in December, we didn't have a lot in there for duals. And as we've got further into 2014, those start dates have crystallized a little better and so we've been adding that revenue in, particularly in the second half of the year.

In long-term care, we've talked around Florida expansion. There's been a lot of appropriately positive results.

And we have more Medicaid expansion membership than we originally anticipated. A few things like that, that have driven the increase in the revenue guidance for the year.

Okay. And then the last question, the MLR, I guess, first, our model anyway, it was definitely better and you mentioned that you got a benefit from weather disruption, flu being down year-over-year, but the guidance for MLR didn't change for the year. Do you -- are you forecasting either the ACV costs go up or that weather pushes volume into Q2? It sounded like you thought you might start to see some improvement on some of the new business as the year goes on, so it doesn't feel like that's going to be the pressure.

Well, I think there is improvement in stuff that's already on. But we have -- in Florida, we have a pretty significant expansion coming in, in the Medicaid business. And so again, we'll probably have additional reserves in the initial period of operation for that as one of the drivers in the next couple of quarters.

Okay. So a better Q1, it just wasn't big enough to impact the annual guidance?

Right.

There's nothing to offset?

Well, no. And I think also the new revenue we're talking about putting on, the increase in our revenue guidance, on the duals, we're pretty conservative on what the HBR is going to be on that in the initial period also.

I think, we -- Kevin, we've used the words abundance of conservatism. We want to be reasonably conservative as you look at some of these new businesses.

Our next question is from Chris Rigg of Susquehanna.

Just to clarify on the hep C again. So if the drug is not on the formulary or approved drug list, one would assume if it gets on the list, then you would be remunerated for that. So is there essentially very little risk here? Or am I thinking about that incorrectly?

No, I think what we've said is that we expect that if Texas includes it, the discussions we're in, we expect that there'll be some incremental compensation to cover it, and that's based on discussions we're having. And in other states, is the business starts to grow, we're watching it, we're talking to them, but we're also taking a very responsible approach to it because as we also alluded to, there are some savings we think that can occur because the hep C patient does accrue medical costs, inpatient and others, throughout the course of the year. So we're working very carefully with the medical management people, the health economics, to look at the total effect, and we're talking with the states about it in a very responsible way. And we're really taking advantage of the data warehouse and information we have real-time to show them the overall impact, and so we expect that to be compensated appropriately. Historically, it always has.

Understood. And then on the new ACA expansion membership, the 100,000 or so, is there anything to highlight on the utilization front? I guess people have been concerned there would be some pent-up demand from these types of new members. Anything that you could talk about there? Or is it pretty much relatively in line with what you see today?

I think there's 2 factors. One, we said that some of the acuity is kind of hard with the limited amount of time to say absolutely, but this population is -- 80% is subsidized population and so we have to look at it -- I'm sorry. I was confusing the Medicaid...

Yes, the Medicaid expansion population is still early, but those rates were generally separately calculated and so -- and usually higher than the normal rates that we receive. So there's nothing that we've seen at this point in time on Medicaid expansion membership, the 100,000 members, to say that those -- the HBR there would be out of line at this point.

So I was mixing it with the exchange members. Thank you, Bill.

Our next question is from Chris Carter of Crédit Suisse. Christopher R. Carter - Credit Suisse (Deutschland) Aktiengesellschaft: I guess, just the first one, can you just give us some color update on the progress in Texas and your discussions there on getting reimbursed for the industry fee?

We have had the ongoing -- we've had the ongoing discussions with them and they're engaged, their actuaries are engaged with our actuaries. Everybody is looking at it. We've stated historically that one of the things they're looking at is a reimbursement of what that tax is, once it's known at the end of their fiscal year, which is September 30. September 1, the new year starts, obviously. And so we're working with them on that alternative, and we have no reason to believe that it'll be anything but approved. If you think about it, when you have the number of states that have already done it because it's logical, appropriate and necessary to maintain actuarially sound rates, it would be pretty difficult for any one state at this point to say, "No, our state can do it and still be actuarially sound." We're working with them in a very responsible way. Texas has always, as we talked about historically, always worked with us based on the kind of data we've had and we're not -- we see no reason to think it will be different this time. Christopher R. Carter - Credit Suisse (Deutschland) Aktiengesellschaft: Okay. And then just -- I know we talked about the Service revenue a few times, but is the $280 million number in the quarter, is that a good run rate for the rest of the year?

I think that that's a good run rate for the year at this point in time. I think it includes both the acquisition of Acaria and U.S. Medical Management in that line item now, and a few other things. But I think, if anything, it probably will increase over the rest of the year.

Our next question is from A.J. Rice of UBS.

Maybe a couple of quick things here. On the public exchange commentary, so you have 39,700, which you think you could be at 70,000 members by the end of the second quarter. I guess, is that 39,700 not as of March 31? And why would you have that incremental growth like that? And then second, as you start to think about 2015 on the public exchanges, any early read? I know you've got to put -- you don't have that long to think about your bids, but do you think you'll be more active on the exchanges as a result of what you're seeing this year and so forth?

Rone?

Just to comment on the exchange membership growth. The 39,700 as of March 31, again, that's paid membership, just to clarify on it. But basically, to be effectuated by that date, you had to select a plan by February 15. So -- the way the deadlines work. We, along with a number of others, I think you saw a fairly significant surge of enrollment ahead of the March 15 date and then that continued up to the April 1, and then there's been some kind of people that have been in line that have continued to enroll after that April 1 date as well. So basically, the view on the second quarter reflects that significant surge of enrollment that we've seen since the February 15 date, which is the cutoff date to have effectuated membership for the March 31 number. And we've seen that already with respect to our April 1 membership, and we expect to see that with the May 1 numbers, and we think that we'll be reporting something in that vicinity when it comes time for the second quarter earnings call that we have. In terms of the 2015, we are looking to continue to be in the states and the service areas that we're in today, and we're looking for -- looking at what I would characterize as a modest level of expansion in some of the states that we're in today. And we may or may not expand the number of states that we're in, but it would be -- if we do it, it's going to be very modest in terms of what we look to expand in at this point.

Our next question is from Sarah James of Wedbush.

I appreciate all the detail on Texas, especially because it's your largest market, but I wanted to take a more holistic view. So could you tell us what percentage of your book is in states where Sovaldi is not currently on the PDL?

Mary?

We have, right now, Texas and Kansas. However, most states have placed this on the PDLs. There's others that are in the process through state P&T committees that are reviewing these agents for their ultimate positioning.

So for the states that are on the PDL, have you had any conversations with them where there's an indication that you will get reimbursed retroactively for the states where it currently is on the PDL?

Well, I think those conversations are ongoing in all of our states, so obviously we're not the only ones impacted by this. And when you have high-cost items, there's always going to be discussions on how to include that in the rates for actuarial soundness purposes or whether it's going to be carved out and covered separately by the state. So each state looks at their own program to figure out how to handle that and those discussions are ongoing, and I think everybody recognizes that this is a little different situation in terms of the magnitude of the cost, and so I think it will be worked out. I think over the long run, it will be included in the rates. How it goes through 2014 is still to be determined on some of these, but as we indicated, Michael's comments gave you the amount of the hep C drug costs for Q1 this year and last year, and I think you got to remember that we had hep C costs in the past, too, so it's incremental impact that has to be considered.

Right. And we have the right for prior authorization, working with the states. And you can see now how, especially the states of California, Ohio, Indiana, now are putting in initiation of therapy for only -- for advanced liver disease. So -- and we continue to have very active discussions with the state on the development of those PA policies.

And I think it's very important to get it right because, I mean, this is not the last time we're going to be looking at hep C and other drugs where this principle may apply. So you work very hard establishing the database with the state that you use, doing it in a responsible way, and it really will smooth the way for future negotiations as well. So we're taking a very kind of a holistic -- we're taking not only a holistic, we're taking a very long-term look, Sarah.

Got it. And just to clarify, did you say that California was only going to pay for advanced liver disease? Or that's what their hurdle was?

Yes, actually, if you start looking through the prior authorizations, many states now are now following the new World Health Organization guidelines that really calls for the initiation of treatment-only members with advanced liver disease such as cirrhosis, end-stage liver disease.

And then last question here, if you could just update us on California, some of the new membership coming online, if there's been any woodwork effect. Just any update on that market would be great.

Bill?

I think in California, it's going well. We've been -- we're in 2 areas of the state, in Imperial County in the south and 17 counties, I think, in the north. We've gotten just good membership growth since we've come in there. It's been a good state for us. Nothing, I think, of any consequence that -- nothing out of line with our expectations.

And Imperial has been very strong.

Our next question is from Andy Schenker of Morgan Stanley.

You raised expansion cost estimates back up again by $0.05 there. Maybe you could just walk us through the kind of quarterly progression on the $0.55 to $0.60, and also how we should think about maybe some of the leverage in the system as duals and others enter the market and how that's going to maybe be an offsetting pressure on SG&A as the year progress.

Sure. I think, right now, the business expansion costs tend to go up a little bit in the second quarter as we add Florida in, and then a little lesser in the second half. But still, because we're adding duals in other places, it will continue to be there. I think the increase, the $0.05 increase that we added is primarily due to the additional revenue that we've added coming on. We expect the duals to have an impact in the second half and so we've added some expansion costs, start-up costs related to that.

Okay. And then is there any offsetting benefit from the leverage of the extra revenue earnings as the year progresses that we should be contemplating in the ratio?

Well, I think over the year, I think we will continue to have a lower G&A ratio as we get some of the start-up costs behind us and we -- once the revenue starts, it obviously helps us quite a bit. So I think we've seen quite a bit of leverage on our G&A ratio over the last couple of years based on our revenue growth. So we expect that to continue although, obviously, the larger it gets, the harder it is to make those dramatic increases, but we continue to see that benefit coming forward in 2014.

Okay. And then switching gears here to the HBR CRC, you included the exchanges in your kind of TANF HBR there of 86.9%. Is there any way you can maybe break out the exchange impact in there? Is it still your assumption throughout the year that it's going to be lower than the historical Medicaid ratio?

Yes, I think that's true. Right now, we don't have a lot of experience to really zero in on what the run rate's going to be for that, as we're adding a lot of membership in the months of March, April and May, as Rone went over. So we're still probably in the mid-80s in terms of our estimate for the exchange HBR.

Okay, great. And then just lastly, specialty services HBR, is that 87.7% a good run rate for that business, similar with the kind of increased revenue there?

I think some of that differential comes from adding in the additional service lines in the correctional business.

Okay. But that's a good run rate going forward or...

Yes, it may be a little lower for the whole year, but it's close.

Our next question is from Justin Lake of JPMorgan. Michael A. Newshel - JP Morgan Chase & Co, Research Division: This is Mike Newshel in for Justin. My first question, I just wanted to clarify on what's in Sovaldi for your guidance. Is there -- are there any states where the drug is on the formulary, you're currently covering it, that you're assuming that you're going to get some retroactive rate adjustments or carve-out?

Our numbers and guidance numbers, we have not presumed any retroactive adjustment at this point in time. As we indicated, the incremental cost in the first quarter of that was $2.5 million on a $3-plus billion of revenue in the first quarter, so it wasn't particularly significant. That can grow as additional members are added to this drug, but I think that, as we talked about, the discussions with the state are to be able to include that in the rates in some fashion going forward. Michael A. Newshel - JP Morgan Chase & Co, Research Division: Okay. And my next question is just on the MLR seasonality. So the full year range is below the first quarter. You talked about all the duals business coming on. What is the duals' MLR relative to the combined business, what you are assuming?

Well, I think -- yes, in the duals, I think we're in the high 90s right now in terms of our estimates for the initial periods of operations, usually the first 6 months, and so...

It's in the new business category. So we bifurcated new business, and now which we've had on the books for the year, so it will fall into the new business, and that tends to be in the 90s, high 90s in some cases. But -- then it starts to normalize over the course of the year and by the time we consider that, they're no longer new. Michael A. Newshel - JP Morgan Chase & Co, Research Division: So the improvement in the consolidated MLR in guidance in the remaining 3 quarters, is that just seasonality or improvement in the underlying same-store business?

I would say it's primarily seasonality. It's not unusual for us to have a higher HBR in the first quarter and then lower in particularly the second and third quarters due to the seasonality. Michael A. Newshel - JP Morgan Chase & Co, Research Division: And my last question is on pricing for exchanges for 2015. Given the new policy on risk corridors and CMS wanting to hold it budget neutral, I mean, how are you thinking about it in terms of the impact of 3Rs and how you're accounting for that and how you're going to price 2015?

Rone?

Well, we're certainly going to reflect what the changes are in the reinsurance program, what we think about the scenarios for the risk corridor program in terms of how we price for 2015, and we're in the thick of that kind of right now leading up to the filing dates, which are basically pretty much around the end of May. So we'll have to see how all that plays out in terms of looking at how our rates land for 2015. It's really kind of too early for me to judge at this point. Michael A. Newshel - JP Morgan Chase & Co, Research Division: And for 2014, for exchanges, are you accruing any benefit from either risk adjustment or risk corridors in exchanges?

I think what we're doing is not accruing anything on risk adjustment because that's still unknown, but we're applying the other 2Ps -- the other 2Rs in terms of the reinsurance and the risk corridor to follow those guidelines. But again, it's very early in Q1 to have any idea on where the overall HBR is going to end up for the year because we're still going to add this membership.

It's important, we're gaining experience from it. We had experience in the original Celtic business, where we -- the priority [ph] here, we're gaining more experience. But I'll remind you it's under 40,000 lives of a business that has close to 3 million lives in it, so it would take a lot to move the needle.

Our next question is from Scott Fidel of Deutsche Bank.

Just wanted to follow up to clarify the question before on which states don't have hep C Sovaldi on the PDL yet. I think you mentioned Texas and Kansas that did not have it, but there were a few other states that are in process of adding it, but that sounds like it wouldn't have been there yet in the first quarter. So can you just update us on which of those states are in process, didn't have it in the 1Q, but are adding it now?

I mean, as I said, Texas is probably the one that everybody is focused on. All the states are looking at this and everybody's in different stages of looking at this. I think the key thing, too, is just working with the states on the prior authorization, making sure that it's strong clinical policy when we are evaluating this drug.

Okay. So it sounds like the majority of states were actually still in process, right? That there are only a few states that had finalized...

No, no, no.

Oh, no, we're paying for these. Texas is the only one where it's not on the PDL where we're not paying claims. There's other states that are still having them go through it. It's not on the PDL, and I think Kansas is a good thing. We are paying claims, but it's really the prior authorization piece that we're working with that state on.

Right.

Okay, that's what I want to clarify. Second question, just on -- any -- can you give us an update on any states where you still have to have your rate updates for 2014 established? It looks like in the Q, you mentioned that the composite rates were down around 0.1% in 1Q. You're guiding for 0 to plus 2%. So it sounds like you're expecting in some of the remaining states that you might see some rate increases?

We have Texas that comes due end of the year. We have Georgia, I think, this July. We have Florida in October....

September 1, I think.

September 1. Florida, it is a big portion of our membership, comes due in...

Second half.

Second half of the year.

Okay. Then just had a question just on...

I might also add, these are all states that have good actuaries, that work with our actuaries, so it's not an unknown negotiation to us.

Okay. Then just had a question just on the specialty earnings relative to the Medicaid earnings, the segment earnings. Looks like the Medicaid earnings were up quite substantially year-over-year, but the Q showed the specialty earnings were down year-over-year and cited lower margins in the pharmacy business. Is that a function of the changes in mix as all the revenues from the hep -- the specialty drugs ramp up? Or is that essentially a lower-margin business? Or just talk a little bit about the pharmacy margins year-over-year.

I think it's all of the above. I think what we've done is we've tightened our margins with some of our internal business. And we've added in the AcariaHealth specialty pharmacy business, which has a lower margin in general. It's just the higher volume that we have, quite frankly, given this lower margin.

Okay. If I can just sneak one last question into -- just on the exchanges. I know that the claims data is still very limited, but we've had a couple of the PBMs have put out some releases, highlighting some of the initial claims, the activity they're seeing and seeing much higher specialty drug utilization amongst the public exchange members. I'm just interested if that's what you're seeing as well in your exchange business or if you're seeing different type of pharmacy claims trends.

We have that here.

Well, on -- as Bill mentioned, I mean, it's still early to give kind of an overall judgment about what we're seeing in terms of claims on the exchange members. But on the pharmacy claims data, we're not seeing anything unduly concerning at this point in time.

But it's real time.

It is more real time.

We're seeing basically below the level of costs for pharmacy than we might have originally anticipated from this membership. Again, a lot of this membership is just coming on so...

Just one thing I will point out. I think that some of the comparisons have been against a commercial population that you've seen. I mean, we did not anticipate that the acuity of this population would be in line with commercial populations. We priced for something that was a higher morbidity than that. So in some ways, what we're seeing is not out of line with what our expectations are or -- and certainly not -- nothing concerning at this point.

Our next question is from Matthew Borsch of Goldman Sachs.

Not to beat a dead horse here, but just on -- back on Sovaldi for a second. Can you quantify how much that benefited your specialty pharma operations in some way and maybe give us a sense, to the extent Acaria has visibility on where the drug is being used, is it turning out to be more of a -- more usage on the commercial side of the business as opposed to Medicaid from what you're seeing?

I think -- I want to be very careful. I understand the question, but I think it's up to Acaria and its client companies to talk about that utilization versus us. Notably, I want to be respectful of that because we have a very strong Chinese wall between the specialty companies and our health plans.

Right. Okay, got it. Maybe if I could ask this -- 2 questions. One, can you give us, and I know you have in the past, give us an update on how many members you have taking that drug regimen and maybe some have already completed it, so how many since the beginning of this year? And just overall, do you expect that hep C will impact -- is it impacting the guidance in any material way for the whole year?

I think we said -- as we said in the comments, that our anticipated utilization of those drugs has been updated and built into our guidance, so we have taken a look at what we expect. We gave you the numbers on the beginning and we've moved away from the number of patients as opposed to the dollar cost because of the shifts and how states are going at it. And I want to be very careful, we want to be careful because one could easily start to mislead if we're not careful, and so we've been careful on that. But it's not a material issue.

And maybe last one, if I could slip this in. There was some attrition in the Medicaid enrollment in a couple of states, Louisiana and Texas. Can you just talk to that?

Sure. I mean, particularly in Texas, I think we've seen an overall decline in the market, but our market share has stayed the same. So each state goes through their own enrollment process, and sometimes, the employment levels -- increases in unemployment and decreases in unemployment could have an impact on the overall statewide membership. And so in Texas at this point in time, we don't see anything unusual because, as I said, we kept our same market share. In Louisiana, I think it's a question of just going through some open enrollment processes and members have shifted a little bit to some shared risk plans.

Our next question is from Ana Gupte of Leerink.

Wanted to follow up on the Spanish acquisition that you just did. You said that it doesn't impact your ability to invest elsewhere and it's $20 million up -- for the 50% interest. I'm just trying to get a sense for, is this purely about diversification? Is it something around capabilities as well? And as you go forward and you have a framework for how you evaluate various opportunities, how are you thinking about it?

We're only thinking about it that, one, as we said, it has a very strong management, well respected in that marketplace. It's giving us some early experience in working in an international market, using our capabilities to supplement their capabilities from a system standpoint, and it is an ACO-type product. They have a fully integrated system. So it's really a case of gaining some of that experience. And as it grows, there may be opportunities to expand it there. But that's going to be really managed at the local level, and we're in a joint venture with a very valuable partner, a strong partner and well respected. So it just was the right opportunity to gain experience in that particular market. In my own background in prior lives, I was in international with Alka-Seltzer, One A Day, [indiscernible], so a lot of consumer products, and knew Spain to be a strong, responsible market. They have not had the same issues as others with sovereign debt. It's been more an overbuilding in the construction area. So it just was the right opportunity, Ana.

So Mike, is this more about that you're looking to build out a presence in Spain? Or is this kind of a one-off thing and you're primarily going to be focused domestically?

I don't -- our focus domestically does not change. I mean, this is a large market. There is no absence of opportunities, which we continue to take advantage of. It has opportunities to continue to build on Spain and start to develop some of that, I think that's important. I've come to the conclusion that I think it's important, if you're going to be a leader in your field, to have some kind of global perspective. And we, as a management team, have come together on that and said, that's essential to really developing a true leadership role in anything you do in the world we're in today. Rone, anything you want to add? No? Okay.

Okay. So switching gears on to exchanges. From my understanding, I think from a question that was asked earlier, you're expecting mid-80s MLR. So that would translate to assuming you're not changing your outlook for the rest of the year on exchange margins just given where you're guiding on your HBR and you haven't changed that. Does that now mean that you're looking at this as a, given where you've priced, sort of a low-positive single-digit margin opportunity? It sounded like at your Investor Day and 4Q '13, you were guiding to something more of breakeven to negative, if I wasn't mistaken.

I don't think that's changed. I think we're saying that the HBR is the mid-80s for this population right now. And with the -- the G&A costs are higher for the managing the exchange population and different aspects of it. So we haven't changed our overall view on the exchange results for the year at this point and continue to believe it would be breakeven to a small loss.

So the SG&A would be substantially higher then, given the mid-80s MLR projection?

It's much larger than our overall G&A ratio.

Got it. And then finally, on the -- not again beating a dead horse, on Sovaldi, is it about 54 cases or so still? I think you had mentioned a number like that in March and is it the same? And in correctional care, is that excluding or including correctional care? You did say you have contractual protection on that.

Yes, in the correctional care, obviously, there's the feeling that there's a higher propensity for hep C in that environment. But we are protected on that. We saw that kind of thing and that's going in the rates. Regards to the total numbers, obviously, as the population grows, the numbers grow up, but our ability to manage has been changed and improving so I'm just getting away from the numbers. What we've given you I think is important, this $2.6 million increase year-over-year on a larger membership base. So that said, it's well within our guidance and is being well managed.

That is helpful. It's impressive because when I've done the estimate, I came up with something like 300 cases for you, assuming IMS script data was right, just allocating. With United, it was exactly in line roughly with their $100 million, so you're definitely doing a tighter job of managing the treatment, that looks like it.

Our next question is from Dave Windley of Jefferies.

Sure. It's Dave Styblo filling in. A couple of questions. First one is let's come back to the rates for this year. How much of this year's premium do you already know for rates?

About 40% or less.

I think we're probably in excess of 70% at this point in time. I don't know if we have that particular calculation at our fingertips, but the second-half rate increases are the ones that are still open and, obviously, Texas is large. For the 4 months of the year, that's still to be determined. Florida, the rates -- I think the initial rates are known for the Medicaid expansion, so not as much of an issue.

Okay. On SG&A, you guys are already at your -- basically at your midpoint of your full year guidance, and I think the way we think about this is probably expecting that to improve over time as you gain some scale. I know you flagged out a couple of items that may make it be a little bit higher as you have some new business rollouts. But is it fair to think about your SG&A guidance actually biased at the lower end of that range?

I think what's important is, it's a range. The new business has cost us money. What Bill said earlier I think is critical. We have seen significant improvement over the last couple of years as we've had the revenue growth. And of course now, when you're pushing for -- to between, call it, $14 billion up from $10 billion, it's harder to leverage. You continue to leverage it, but it doesn't -- you don't realize the same kind of percentage improvement. So we're going to continue to leverage where we can, but the kind of -- 1 year from year-to-year, we had a percent-plus improvement. However, we'll not look for that kind of improvement. It's a range. It's going to be a function of start-up time. If things start up on schedule, we know that states do delay these things, it's a history of it, that's all going to impact it. Bill, do you have anything to add?

No, I think what we expect to see is as we gain scale and add revenues, that our G&A ratio will continue to come down. We expect it to come down quarter-by-quarter throughout 2014, and we'll update every quarter as to where we think our guidance is for the year as we learn more.

Okay, understood. And the last one here was just if you can help us understand what's happening in the new and existing business HBRs, more specifically as we look sequentially. I know there's some seasonality there. But the new business HBR, improved over 200 basis points as you added revenue. And then your existing business HBR was actually up 170 basis points. And so I'm just struggling to understand and reconcile what's going on in those 2 lines as we split those apart?

I think the primary shift is that Kansas, which started January '13, moved into the existing business for the first quarter of this year. And so when you add in the ratios, the HBR for Kansas, that's what the primary change is between the 2.

Our next question is from Michael Baker of Raymond James. Michael J. Baker - Raymond James & Associates, Inc., Research Division: Just on the incremental cost that you saw on the hep C side, does that factor in any potential Acaria benefit?

No.

Acaria is a separate... Michael J. Baker - Raymond James & Associates, Inc., Research Division: Okay. And then on Acaria, as we think about the margin profile of that business, which you kind of spoke to, generally speaking, as we see more hep C flow through that business, should we expect the margin to stay steady or be pressured?

It's going to -- I would say, Bill, actually it's fairly steady at this point.

Yes, I think that that's -- we're not sure if there's major changes coming from anything.

I think what's really important and I think the differentiator is that having Acaria gives us a clear insight and understanding as any of their clients would get, the impact of some of the specialty drugs and what's happened, what the appropriate use is, working with the clinical people. It's a nice place to be.

Our next question is from Carl McDonald of Citigroup.

So was wondering if you could quantify the benefit that you saw from weather in the first quarter and also give us a sense of how much visibility you have into the underlying claims data for the quarter at this point.

I don't think we can quantify the impact -- any dollar impact to the weather. Obviously, there were quite a few markets that were impacted. In Georgia, there was almost a week at one point where they were shut down to a great extent, and so you have lower utilization during those periods. Some of that will come back later on, but not all of it. And so we're net ahead in that regard. And then I think that the second part was -- of the Q1, it's the same as every other quarter. We've got our methodologies applying for the HBR, which have stayed the same. You could see the amount of development we recorded for the first quarter of last year and our roll forward in the press release, and I'd say it's normal. Clearly, what we have is we have real-time pharmacy data, so we know those numbers. We have an inventory method for in-patient claims or we keep track of who's been authorized and who's been admitted, an estimate of what the cost of that's going to be, and then there's more of a lag then in the other categories, physicians, specialists, things like that, outpatient.

Our next question is from Tom Carroll of Stifel. Thomas A. Carroll - Stifel, Nicolaus & Company, Incorporated, Research Division: Just one last quick one here. What -- if you could just tell us the number of Sovaldi claims you received in the quarter and then the total number that you actually paid as clinically appropriate? Just to get a sense of the -- what demand may look like as claims mature throughout the rest of the year.

I really don't have those numbers at hand, Tom, and the numbers that -- we really moved to disclosing dollars because the next thing some of you -- you get so detailed that then -- by state, how many -- and it's just cumbersome to try and get into that level of detail. Thomas A. Carroll - Stifel, Nicolaus & Company, Incorporated, Research Division: I'm trying to get a sense of what the demand is like from the Medicaid population earlier on. Is it...

I said we told -- I think we've said that it moved on the -- some of you might say it's almost relatively flat year-over-year, the expense, because of the increased membership. Now we said we're up $2.6 million and that's a -- I think that's an important number because you have $2.6 million to $7.3 million, was it? Okay. So I think that says something. I think you start looking what the increased membership was. It says it's really relatively flat, and we'll just continue to manage it. What we have emphasized -- everybody is worried about Sovaldi. It's 16% of the total hep C population that -- we're talking about that's appropriate for genotype 2 and 3. There are some in genotype 1 that have some very severe cirrhosis, where the World Health Organization might say it's appropriate with interferon and a lot of other things. But our job is that -- my job is not to become a medical expert, when it's done and when it's not, but just look at the overall criteria. We're glad the drug exists for those people that need it. We see it as a curative thing. We see it having some real long-term benefit. We've talked to our states, the states understand the cost. We're sharing with them the data that we need, not just the cost of the drug, but what we think over time as we get the data will be the savings because hep C patients are expensive to begin with. You had a hospitalization, it becomes very expensive. So if you're now cured in 3 months' period of time versus -- that's a nice offset because there's so much data out there that we could be misleading. We say it's this number, the next time it's down. Was it something you denied more? No, it just means we have a different population applied. Thomas A. Carroll - Stifel, Nicolaus & Company, Incorporated, Research Division: So it's fair to say you didn't see a huge demand for the drug in the first quarter that you then whittled down based on your clinical guidelines?

I would say that we saw a reasonable demand. We saw a demand that we relatively expected to see based on responsible outside guidelines and not just our guidelines, World Health Organization, other groups, the FDA, other guidelines that are out there that we use. These are not just internally developed guidelines. We're using national and internationally recognized guidelines. And that's really what the states expect us to do.

And this concludes our question-and-answer session. I'd like to turn the conference back over to Mr. Neidorff for any closing remarks.

Well, I think this has been a strong quarter. We thank you for the insightful questions that you ask. I hope we would answer them. We look forward to seeing you on June 13 for our next Investor Day. And I'm sure we'll have more information and more things to share with you. Thank you, everyone. Take care.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.