Molina Healthcare, Inc. (MOH) Q1 2016 Earnings Report, Transcript and Summary

Ladies and gentlemen, thank you for standing by. Welcome to the Molina Healthcare First Quarter 2016 Earnings Conference Call. During the presentation, all participants will be in a listen-only mode. Afterwards, we will conduct a question-and-answer session. As a reminder, this conference is being recorded Thursday, April 28, 2016. I would now like to turn the conference over to Mr. Juan José Orellana, Senior Vice President of Investors Relations. Please go ahead, sir. Juan José Orellana - Senior Vice President of Investor Relations & Marketing: Thank you, Pascal. Hello, everyone, and thank you for joining us. The purpose of this call is to discuss Molina Healthcare's financial results for the first quarter ended March 31, 2016. The company issued its earnings release reporting these results today after the market closed, and this release is now posted for viewing on our company website. On the call with me today are Dr. Mario Molina, our Chief Executive Officer; John Molina, our Chief Financial Officer; and Terry Bayer, our Chief Operating Officer; 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. 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 our 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 April 28, 2016, and we disclaim any obligation to update such statements except as required by 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. Joseph Mario Molina - Chairman, President & Chief Executive Officer: Thank you, Juan José, and thanks to everyone for joining us. As we announced today, Molina Healthcare reported adjusted net income of $29 million or $0.51 per diluted share. Coming off a very strong performance during 2015, we encountered a few challenges that contributed to a disappointing first quarter, and that have caused us to reassess our outlook for the year. We have identified those factors that affected our results. We are working diligently to address them, and we remain confident that we will reach our goal of 1.5% to 2% after-tax margin by the fourth quarter of 2017. John will be discussing our financials for the quarter in greater detail during his remarks. In the meantime, it is important to interpret these results within the context of our current business environment and not to lose sight of our long-term growth and margin goals. With that margin goal in mind, let's review the quarter. Enrollment and revenue growth continue to exceed expectations. Enrollment grew to 4.2 million members for this quarter. That is an increase of about 1.3 million members from the first quarter of last year. Over half of that increase, nearly 700,000 members, occurred in the first quarter of 2016 alone. This is the largest membership gain that we have experienced during sequential quarters in the 35 year history of our company. Our strong revenue growth is the result of a strategy that was well conceived and well executed. But I must acknowledge that two years of hyper growth across multiple geographies and multiple programs has created a bit of a strain this quarter. I'll speak more about that in a minute. Despite that strain due to growth, I am pleased to report that we were successful in decreasing our year-over-year medical costs on a per member per month basis by about 5%, from $306 per member per month to $291 per member per month. Lowering medical costs is what we're supposed to do. In fact, the only way to sustain the increases in health insurance coverage that we as a nation currently enjoy is to lower the cost of medical care. While we were pleased with these improvements, they simply did not offset reductions in per member per month revenue. During that same period, revenue per member per month actually decreased from $345 to $324 per member per month. Lower premium revenue per member per month resulted from much lower Medicaid expansion rates, updated risk adjustment estimates on marketplace and the general failure of Medicaid rates to keep pace with the growing medical care costs. Others in our space have also commented on these headwinds in recent reports. In the end, the decline in per member per month premium revenue outpaced the decline in per member per month medical costs, exerting pressure on our profit margins this quarter. So here is where we stand today. First, we believe that we've achieved the top line growth necessary to reach our 2017 net margin target. We've achieved this top line growth even more quickly than we anticipated. Second, the improvements in our care management systems and practices that are needed to support our future profitability, although not complete, are well underway. Next, we continue to develop new capabilities, while integrating acquired ones like Pathways into our organization. Nevertheless, we are experiencing some of the pains that often come with rapid growth and some symptoms that have to be addressed have emerged. For example, medical costs at our Ohio and Texas health plans were higher than we anticipated. And increased pharmacy costs across the business, but particularly in Puerto Rico, resulted in additional margin pressure. Let me take a minute to talk about each one of these issues. As I mentioned a few minutes ago, we anticipated enrollment growth, but our results exceeded even our own projections. Assimilating this membership stretched our operational resources. Accordingly, we've redoubled our efforts around member and provider services, care and utilization management, provider payment and information technology – all areas that felt the strain of rapid growth. When we remember that quality of care and compliance can't be compromised, it becomes clear that some short-term profitability may have to suffer. At our Ohio and Texas health plans, higher than anticipated costs were largely the result of utilization issues that we expect to resolve through a number of ongoing care management initiatives. We've spoken about these initiatives before, but I think it's worth our time to review them again today. In broad terms, these care management initiatives are comprised of a number of areas: First, the application of updated authorization standards and criteria. Second, a greater focus on the management of transitions of care. Third, the use of hospitalists to achieve cost-effective outcomes. Fourth, the use of interdisciplinary care teams to help those with combined physical, behavioral, and social challenges. And fifth, the early identification and effective treatment of those who require or may require complex and expensive care over long periods of time. Our performance in the first quarter requires that we revisit the timing and pace of these initiatives and that we adjust the focus of our efforts towards Ohio and Texas. The other area of concern is pharmacy costs. So far this year, pharmacy costs are above our expectations and rate increases do not seem to be offsetting the full impact. The effect on our business of high-cost specialty drugs is something that we have been combating for the past two years and this cost is still not fully recognized by the government's actuaries. Having addressed the cost drivers in the first quarter results, let me now turn to the future. What do all of the headlines about other insurers exiting the marketplace mean to Molina Healthcare? What is our strategy for the marketplace? Our plan is to stay the course. That is because our strategy and our goals for this product are different from those of many other insurers. Our objective is to provide an accessible extension of our Medicaid product to individuals whose eligibility for Medicaid fluctuates, and we believe that we are successfully doing so. As a reminder, the segment most likely to purchase an exchange project from Molina healthcare are individuals under 250% of the federal poverty level who receive significant government subsidies. Approximately 90% of our marketplace members receive a government subsidy for co-pays and premiums. We have never expected our marketplace product to perform better than our Medicaid business, nor operate at significantly better margins over the long term. After a period extremely rapid growth over the past two years, we expect the remainder of 2016 to be more stable. It should give us a chance to catch our breath as an organization while we continue to build on our current infrastructure. You may recall that back in 2013, in preparation for the anticipated growth in Medicaid expansion, the dual demonstration programs and marketplace we invested in operations and systems. Well, the growth exceeded even our optimistic expectations and we need to once again think about administrative capacity. There are a number of things that we need to do this year in preparation for 2017 and to help us achieve our long-term profit targets. First, we need to continue to supplement our management bench strength with additional talent. Our business continues to evolve by growing larger in scale, introducing new demands and becoming more complex as we add new products and services. Second, we need to continue to refine our expertise in medical management. We must continue to make progress in our provider contracts so that both providers and payers are working together to provide the best possible care for each member. This includes working with hospitals to actively reduce readmissions, while promoting patient safety and quality of care. It will also require us to choose our partners carefully and redefined the traditional relationships between health plans and hospitals. Third, we continue to manage our growth and integrate our newly acquired businesses. We completed a number of in-state acquisitions in 2015 that are being integrated in 2016. While the integration of these new members is relatively simple from an operations standpoint, because we have existing health plans in those states, addressing the financial impacts may not be so simple. For example, many of our new members, including those in marketplace, are coming to us from a fee-for-service environment. Short-term pent-up demand, new care management models and different methods of accessing healthcare services can result in higher costs in the short run. With that said, we believe these integration characteristics are transitory, and as a result, we remain optimistic when it comes to growing our business. We were very pleased to announce last week's acquisition of Total Care, a Medicaid health plan in the Syracuse area. Once approved, this transaction will mark our initial entry into the State of New York. Total Care serves approximately 39,000 members. The acquisition provides us with an established platform for future growth similar to what we experienced in states like Florida, Illinois and Michigan. Now, in light of some of the growing pains we've experienced this quarter, it is important to note that we expect this transition to close in the latter half of this year. By that time, we should have worked through the assimilation of our new members from other acquisitions. We plan to continue to respond to RFPs, as we have previously discussed, primarily to enter new states, especially as they relate to Medicaid long-term services and supports, or MLTSS. Now, let me switch topics and talk about a new healthcare threat in the United States, Zika. I use the term "new" with a touch of irony. Zika was first identified 70 years ago in Africa, and initially it was thought that it did not cause illness in humans. We have certainly learned otherwise as it is spread from Africa to South America and the Caribbean. It definitely causes a rare birth defect, called microcephaly that is associated with small head and abnormal brain development. While very few of the expectant mothers among our membership have contracted the virus, the full financial effects of Zika will not likely be known for several months. We continue to monitor the situation closely. Striving to deliver quality care for our members is our company's DNA. So I want to congratulate our 11 health plans that were awarded the Multicultural Health Care Distinction from the National Committee for Quality Assurance for Medicaid. The Multicultural Health Care Program evaluates how well an organization complies with standards in the following areas – collection of race and ethnicity and language data, provision of language assistance, cultural responsiveness, provision of culturally and linguistically appropriate services and the reduction of healthcare disparities. In keeping with our commitment to quality, all nine of our health plans that offer marketplace products also received the award. I want to personally thank each employee who made this award possible. Finally, neither our first quarter results nor anything else that has happened since we issued our 2016 outlook in February constitute a fundamental change to our business or to our long-term outlook. Enrollment growth this year is trending toward the high end of expectations. The care management and quality of care initiatives we discussed in February continue as planned, and appear to be having an impact as evidenced by the decrease in per member per month medical costs. Our diversification efforts, think of our recent New York acquisition, remain on track. As a result, we remain confident that we will reach our stated goal of an after-tax margin of 1.5% to 2% by the fourth quarter of 2017. I would now like to turn the call over to John. John C. Molina, JD - Chief Financial Officer & Director: Thank you, Mario. Today, we reported adjusted net income per diluted share of $0.51 for the first quarter of 2016 compared to $0.62 per diluted share on an adjusted basis for the same period last year. While we recognize that these results are disappointing, I want to reiterate what Mario just said, these results give us no reason to doubt our ability to reach our goal of a 1.5% to 2% after-tax margin by the end of 2017. We have executed very well on our initiatives to grow the business. Total revenue increased to $4.3 billion this quarter, an increase of more than $1 billion and more than 30% when compared to the first quarter of 2015. This increase was driven by the nearly 700,000 new members we added, a combination of closed transactions from 2015, and better-than-expected growth in our Marketplace product. Top line revenue growth has also had a positive impact on our administrative cost ratio. Our general and administrative ratio decreased by 30 basis points to 7.8% from both the first quarter of 2015 and the end of last year. We have now closed on all nine acquisitions that we announced during 2015. The last five transactions added more than 250,000 members, or more than $600 million in annualized revenues. That is all well and good, but we know that we need increased profits in addition to increased revenue. So, what made this quarter more challenging than expected? First, fee-for-service costs in Ohio and Texas were higher than we expected. For the most part, this is the result of higher-than-expected utilization. Mario has already outlined the care management initiatives that we expect will resolve this challenge. And second, we continued to see cost pressures relative to the level of our premium rates. Looking at the enterprise as a whole, these cost pressures are particularly acute for the pharmacy benefit. Margin pressure across our states as pharmacy costs have continued to increase this year. Despite high generic utilization, we are seeing pressure from new high cost specialty drugs. A good example of this is what we are experiencing at our Puerto Rico health plan. In Puerto Rico, we had a formulary change that added additional branded drugs to the Medicaid preferred drug list over the course of our contract, which resulted in increased costs and were not anticipated when we negotiated our rates back in the spring of 2015. To help mitigate these changes, we are actively engaged on this issue with the Medicaid agency as part of our annual rate discussions, and we continue to work with providers and make the case for actuarially sound rates to ensure the program remain sustainable. Looking at our operating results today when compared to the outlook we provided back in February, you can see that our consolidated medical care ratio of 89.8% was, for the most of our lines of business, in line and tracking along with that guidance. Our TANF and ABD lines of business are the exceptions. These two areas largely contributed to the sequential medical care ratio increase we saw between this quarter and the fourth quarter of 2015. We continue to believe that while our medical cost assumptions have changed, our revenue and administrative assumptions are in line with previous expectations. And as we look out over our mitigation efforts, we see short, medium, and long-term solutions. Weighing all of these factors, we think it is appropriate to reduce our 2016 earnings outlook. We now expect income before tax to be in the range of $350 million on the low-end to $400 million on the high end compared to our initial guidance of $460 million. Accordingly, we are reducing our 2016 outlook for adjusted earnings per share to $2.50 to $2.95 down from $3.86. Despite this revision to our 2016 outlook, I want to emphasize that we expect to exit 2016 with the trajectory that maintains the progress towards our stated goal of 1.5% to 2% after-tax margin by the fourth quarter of 2017. For the interim, so that you can better model and follow our progress, we anticipate slow progress through the second quarter, with increasing performance in the second half of the year, as the efforts we have outlined bear fruit. We estimate that approximately two-thirds of our earnings will be achieved during the second half of 2016. The key takeaways that despite the challenges we faced during the quarter, we have taken action to minimize the impact on our operations going forward, and we did not lose sight of our longer-term objectives, growth, and margin improvement. We have always maintained that one quarter does not define us. We are focused on the long-term. This concludes our prepared remarks. We are now ready to take questions.

Thank you. And our first question is from the line of Sarah James with Wedbush Securities. Please go ahead.

Hi. Thanks for the question. I wanted to clarify on Texas and Ohio, was there an increase in utilization or is it just that utilization is not declining as fast as you had previously expected, given the new medical management programs that were put in place? And how much did the Jan 1 rate update play into this? Because I think Ohio was down 7% on expansion and Texas down 1% overall. Thanks. Joseph Mario Molina - Chairman, President & Chief Executive Officer: Hi, Sarah. This is Mario. Let me comment first on the utilization. I think it's both. I think that we did see increased utilization and we had also expected a greater decrease in utilization from some of our medical cost initiatives. Especially in Texas, I think they've been a little slower to materialize. But they're still in progress and we anticipate that they will continue and will bear fruit throughout the year. I'll let John take the rate issues. John C. Molina, JD - Chief Financial Officer & Director: So, Sarah, the rate issues certainly magnified the lack of a decline in inpatient utilization especially in Ohio. So, we had two things happening: utilization went up and rates went down. That combined made Ohio a much more challenging market than we anticipated. I would note two other things, the first is, our prior-period development did not indicate that the cost issues in Ohio stretched back into 2015. These were things that happened starting Jan 1 and the second thing is we believe that we have some fixes in that should allow us to start seeing the utilization decline starting in the second quarter.

Were there program changes in Texas or Ohio that drove the utilization, or what was driving it if there was change to the contracts? Joseph Mario Molina - Chairman, President & Chief Executive Officer: Well, I think that part of it, we talked about the surge in enrollment that we experienced across the board in the company and I think it was a little bit overwhelming. In order to process all of the prior authorizations, we had relaxed our standards a little bit in the first quarter, but we've added additional bandwidth both in terms of the IT system and personnel. So, we think that, that has played out.

Thanks. And last clarification is just on the Puerto Rico rates, I think at Investor Day you guys had in your slides that those were going to update in April. So, are you expecting an imminent update on that rate? John C. Molina, JD - Chief Financial Officer & Director: Sarah, this is John. There is a rate meeting in the next couple of weeks and we expect that July 1, new rates to be implemented.

Great. Thank you.

Thank you. Our next question is from the line of A.J. Rice with UBS. Please go ahead.

Yes. So, just, maybe I'll ask about the public exchanges. Your membership there jumped by about 420,000 but your PMPM looks like it's down about 24%, when most people are talking about raising their PMPM – or trying to at least raise their rates 15%, 20%. I'm just trying to understand what's going on there and is that something that we just have to live with for this year or is there any way to correct that?

Hi, A.J. It's Joe speaking. The bulk of the decrease you see in revenue PMPM from Marketplace year-over-year is just driven by the fact we're getting better factoring in risk adjustments. Obviously, we talked about the fact, we have a comparably healthy population, which means we're going to have relative lower risk scores, which means we're going to be giving money back on risk adjustment. If you look at the MLR for Marketplace, for the first quarter of 2016, you'll see it's consistent with what we've guided to and pretty consistent with last year actually.

Okay. And then just looking at the TANF and CHIP business, you highlighted that TANF business is an issue but it looks like the actual MCR was down year-to-year at least. Maybe just a little bit more clarification on that? Joseph Mario Molina - Chairman, President & Chief Executive Officer: You're correct – this is Mario, you're correct that the MCRs have come down year-over-year. The problem is that it didn't come down as much as we had anticipated for 2016. And so, in our guidance, we had anticipated further decreases in MCR and utilization. And because of Puerto Rico, Texas, and Ohio, that didn't materialize in the first quarter as we anticipated.

And how much – how big issue was flu for you? Have you been able to quantify that? Joseph Mario Molina - Chairman, President & Chief Executive Officer: I don't think that the flu has been extraordinary this quarter.

Okay. All right. Thanks a lot John C. Molina, JD - Chief Financial Officer & Director: Yeah. A.J., this is John, the other thing to note about the TANF is that it's less of an impact this year than last. So, we had a greater percentage of TANF members last year, so the decrease in the MCR in 2016 was a bit muted.

Thank you. Our next question is from the line of Andy Schenker with Morgan Stanley. Please go ahead. Andy Schenker - Morgan Stanley & Co. LLC: Thanks. I was wondering if you could talk a little bit more about the changes in the ABD MCR. Right at your Analyst Day, you were guiding us down 300 basis points. Obviously, it's up year-over-year at this point. Anything worth highlighting there that's particular to that segment? Joseph Mario Molina - Chairman, President & Chief Executive Officer: Well, I think that in both the TANF and the ABD lines of business, the increased utilization was primarily on the inpatient side. Andy Schenker - Morgan Stanley & Co. LLC: Okay. So, was the higher MCR strictly or completely driven for the ABD just by the increased utilization or was there anything else in there? Joseph Mario Molina - Chairman, President & Chief Executive Officer: No, I think it's primarily increased inpatient utilization. Andy Schenker - Morgan Stanley & Co. LLC: Okay. Thanks. And then, going back to sort of pharmacy comments earlier. It sounds like – is it fair to characterize the pressures you saw really as changes driven by the formularies, or was there just a broader increase or anything HCV related or other changes that could have impacted or was it primarily related, as you highlighted, to the changes when drugs were put on your formulary outside your expectations? Joseph Mario Molina - Chairman, President & Chief Executive Officer: So, this is Mario again. I think with regard to the pharmacy costs, it's a combination of two things: increased costs coming from specialty drugs other than those used to treat hepatitis C; and some formulary changes primarily in Florida and in Puerto Rico, where we don't really control the preferred drug list. And they have shifted to include more brand-name drugs. So, we're going to have to with our providers, since we don't really control the formulary, to work on controlling utilization and encouraging the use of generic drugs. That said, our use of generic drugs as an entity, as the whole corporation, remains quite high. Andy Schenker - Morgan Stanley & Co. LLC: Thank you.

Thank you. Our next question is from the line of Josh Raskin with Barclays. Please go ahead.

Thanks. Good evening, guys. So, first question, just, Ohio is a strange one for me because it doesn't look like there's been much change in membership. So, I know you guys mentioned the rate, but what change in the environment, why all of a sudden is there this uptick in utilization? Joseph Mario Molina - Chairman, President & Chief Executive Officer: Josh, I think there were a number of things that affected Ohio. We've had some turnover in staff, we brought in a lot of new nurses that required a lot of training, and of course, when you're new on the job you're not as effective as you are when you've got more experience. There were some IT issues which we have corrected in terms of adding more bandwidth, so that we can process more authorizations. But as a result some of these things, the staff being less effective and some other issues, we did loosen our prior authorization requirements. And so, we probably authorized things that we might not have authorized in the past, but we felt that, that it was better to err on the side of the patient. And so, that accounts for some of the increased utilization you're seeing there.

But, Mario, what changed? I mean, it wasn't like there was more membership or more revenues necessarily. So, did you just have a lot of employees leave and you just couldn't fill those roles? Was that what it was? Joseph Mario Molina - Chairman, President & Chief Executive Officer: Well, we had some management changes. We have a new Chief Medical Officer, new Healthcare Services person, a lot of new nurses. I mentioned we had a tidal wave of membership that affected the systems, and so we had increased system downtime as a result. That's been corrected, but those things in combination created problems and it was especially a problem in Ohio.

Okay. And then, I guess, a similar question just for TANF, this is a population that runs in PMPM around $180; they seem to be less chronic, not as acute. And I guess it's not often that we see these spikes in costs for TANFs. So, I'm curious again was this market related or was the TANF population the one that you relaxed the authorization standards, or why would you see – I get it on the duals and ABD, I just – I'm surprised on the TANF. Joseph Mario Molina - Chairman, President & Chief Executive Officer: I think it's the same thing, Josh. I mean, we were really focused on the Medicare and I think we did a good job with that. I think we were a little overwhelmed with all the new membership and the growing pains strained our ability to manage a lot of our members and it affected the TANF and ABD members disproportionately.

Okay. And then, I guess, next question, just on – did you catch it, right, so day's claims payable is down two days. I know the cash flow was relatively strong. But when you sort of looked at your reserves, are you erring – my understanding is the actuaries give you a range, and are you erring more on the side of caution within that range, or it's just – there's nothing that sort of points to that. So, I'm curious how you feel about the established reserves now?

Hey, Josh, it's Joe speaking. I don't think we saw anything this quarter that led us to think that the reserves at March 31 needed to be particularly strengthened. If you look at the overall trend from 12-31 to 4-15, prior period development on a dollar is very consistent with where it was a year ago. Also, a lot of these issues with authorizations and everything we're talking about in various states that peaked in January and February. So, a lot of those claims have already made their way through the system; we pay very quickly. So, it's not as if there's some – in our opinion, it's not as if there are some issue out there with being aware of claims and their late development. This is almost like a real-time issue in terms of utilization.

Okay. And then, just last question, more I guess for Mario. When you're doing some of this M&A diligence sort of RFP expansion opportunities, is there a component of your process that looks at management time and effort? Do you guys sort of think, okay, if we end up winning this contract or expanding in the marketplace, or bidding on this acquisition, it's going to take X man-hours of management time and do you sort of have a process for that in place? Joseph Mario Molina - Chairman, President & Chief Executive Officer: Josh, I'm going to let John handle that because John is the one that handles most of the M&A work. John C. Molina, JD - Chief Financial Officer & Director: Josh, I don't think that we cut it as finely as what you have mentioned. We've done a lot of acquisitions in the past. I think that the first quarter, we got hit with two things: number one, we did have the integrations of a number of acquisitions, especially in Illinois, we brought on three plans in the first quarter in Illinois; but then on top of that, as someone else noted earlier, we increased our Marketplace membership by more than 200%, I believe. So if it had just been dealing with integrating the acquisitions, probably not an issue, but we had on top of that, a large increase in the marketplace that put an additional strain on the systems and on the people, because we had a lot of people who hadn't been covered before were calling in and looking for help. Joseph Mario Molina - Chairman, President & Chief Executive Officer: Yeah. Josh, this is Mario I just want to reemphasize that point. The Marketplace enrollment really exceeded our expectations.

Yeah. Yeah. Okay. Okay. All right will follow up with the rest. Thanks, guys.

Thank you. Our next question is from the line of Scott Fidel with Credit Suisse. Please go ahead. Scott Fidel - Credit Suisse Securities (USA) LLC (Broker): Thanks. First question is just following up on the comments you made about needing to increase your, sort of, capacity and some of the constraints you've had. Have you already work through sort of budgeting how much additional administrative cost you may need to allocate to that in 2016 and 2017? And just wondering if – as you sort of recommit to that long-term net margin target, whether an increased sort of administrative cost profile is contemplated within that? Joseph Mario Molina - Chairman, President & Chief Executive Officer: Yeah. This is Mario. I think that a big part of the issue is training. We have brought on additional people. I think that the real answer is we need to be more effective. And so, when you bring in new people, especially in UM, they're not comfortable with the systems, they're not comfortable with the guidelines, they're not as effective as they otherwise would be. So, we think that over time, over the course of the year, the staff will become more effective, the systems will become more effective. We're in the process of implementing some additional UM guidelines which should also help, but that I think is a big part of the issue. John C. Molina, JD - Chief Financial Officer & Director: Scott, this is John. We've also added to the IT infrastructure, so that now we've got the bandwidth or the pipes to allow us to maintain an increase in enrollment without having big glitches or stopgaps. Joseph Mario Molina - Chairman, President & Chief Executive Officer: Yeah. And let me just comment on that too as well. We tested the systems expecting a certain level of enrollment and we exceeded that, and I think that was part of the problem. The growth was just far more than we anticipated. Scott Fidel - Credit Suisse Securities (USA) LLC (Broker): Okay. Then I had a second question, and just as it relates to Zika and sort of how you're approaching that in your guidance. Obviously, it's still sort of early stage here, but have you built in an assumption that you'll have additional costs in Puerto Rico on that or reserved for that, or are you still sort of just waiting to see how this plays out and then will factor that in as you get more, I guess, some additional information? Joseph Mario Molina - Chairman, President & Chief Executive Officer: This is Mario. We have not factored that in at this point. I think we have one patient that we know of who's been infected. Of course, there may be others, but right now we're just watching. John C. Molina, JD - Chief Financial Officer & Director: And as we mentioned before, we're expecting to get new rates in Puerto Rico effective July 1. And I'm sure that this will have to be addressed in those new rates. Scott Fidel - Credit Suisse Securities (USA) LLC (Broker): Okay. And then just one last question. Just on the five health plans that you now recently closed on, how much visibility do you have into sort of the utilization trends in those books? And sort of any updates you can give us on how cost trends have been performing in the acquired businesses.

It's Joe speaking. We don't have huge visibility into that. We don't see anything to suggest that they are fundamentally different from our members, but that doesn't – our existing members, that doesn't rule out pent-up demand as we implement our care protocols. So, right now, we don't have huge visibility. Scott Fidel - Credit Suisse Securities (USA) LLC (Broker): Okay. Thank you.

Thank you. Our next question is from the line of Chris Rigg with Susquehanna Financial Group. Please go ahead.

Hey, guys. I just want to make sure I understand the comments in the press release about the Medicaid expansion premium rate headwind. That was just to illustrate the year-to-year decline that was not intended to be a surprise rate cut? Is that correct?

It's Joe speaking. That's absolutely correct. We knew that, if you – we knew about expansion rates just as we knew about the Ohio premium rate decrease. And you can see that, based on our guidance, the expansion number, MCR is coming in pretty much to what we guided to. So, it's purely a year-over-year comparison.

Okay. And then, just to flush out sort of what I would describe as infrastructure issues. It's not abundantly clear to me whether this was more like a human error problem, and they were just not – error may be the wrong word, but more of a people problem versus an actual systems problem in that where the systems adequate to handle the new members. Joseph Mario Molina - Chairman, President & Chief Executive Officer: Yeah. This is Mario. Let me say both. I think that additional personnel, new on the job, perhaps a little less effective than they'll be when they're a little bit more experienced, increased pressure on the system. The system was a little slower, again, slowing people's work down. So, I think it was a combination of both. The bandwidth in the IT system has been addressed. I think the experience will come with time for the personnel.

Okay. Great. Thanks a lot.

Thank you. Our next question is from the line of Brian Wright with Sterne Agee. Please go ahead.

Thanks. Good evening. A couple of questions here. No mention of leap day impact, so was curious about that.

Hey, Brian. This is Joe. Obviously, in the first quarter of a leap year, you're going to have higher medical costs, probably by about 1% since you have an extra day which would go straight to your bottom line. However, we are subject to the same calendar as everybody else in the business. We knew about that calendar when we set guidance. So, I don't think it's a factor in how the quarter played out versus what we thought.

Okay. And then do you have, like, on the exchange members, the – a lot of the new exchange members, do you have any sense of your exchange members how many were prior, kind of, Medicaid customers or anything like that for the new people that you're getting?

I don't think we had that information. That information would be very hard to develop. I'm not aware of anything that would tell us that. Joseph Mario Molina - Chairman, President & Chief Executive Officer: Yeah. The Medicaid agency doesn't share their information with us. We, obviously, aren't getting any kind of claims or history from our new members, so – I mean, the only way you could find that out would be to do some sort of a survey.

Okay. And then – sorry, I'm sorry I just have a longer list than usual today. Just wanted to be clear, the exchange MLR outlook for the year is still 85% or is that changed any at all? John C. Molina, JD - Chief Financial Officer & Director: Brian, this is John. It hasn't changed and we're looking back at what we gave February.

I think you're confusing that with expansion, Brian. We guided Marketplace at 79% to 80%, and that's not changing.

Oh, sorry, you are right. I looked at the wrong one. Sorry about that. So, you're assuming the same kind of – similar kind of seasonality where it goes down in the second quarter relative to the first quarter. Once you get some experience, you just kind of book it where you thought it would be and then kind of in the second quarter, you kind of really find out, is that a fair way to think about that?

Well, I think I would express it this way as far as recording the expansion MCR, Brian. We're going to book to our pricing until we – unless we see evidence that pricing is not adequate. When you look at both 2014 and 2015 in terms of pure periods, full-year run-outs, those years actually in total played out very close to our pricing. So, we're going to book to pricing this year, until or unless we see evidence that it is not running – it is running above pricing. So, I think what that means is, you'll actually see a slight increase in the MLR as the year develops as we get the special enrollment members and as new members become more familiar with how to access the system.

Okay. Okay. And then just lastly, on the – any of the – the PMPM issue on the exchange business, is any of that like retro risk adjustment, kind of, changes to 2015?

Yes. Well, a couple of points, I think was A.J. who had that question. I think the appropriate answer to A.J.'s question was, if you look at where we ended up fourth quarter of 2015 on Marketplace PMPM revenue, we're very close, we're little above that, $20 above that for the first quarter of this year. So, I think the appropriate comparison would be where we ended up last year after we pushed through all of the risk adjustment and all of that. And to your other question, yes, we continue to refine our estimates on things like – on items like risk adjustment, reinsurance, CSR reconciliation on the marketplace. I think the best way to express all of that, though, is if you look at this quarter in total, you don't see a big impact from out of period development. Just like I said about on claims, not – in total, much of an impact.

Okay. So, basically, it was at the levels that you thought it was going to be towards the end of last year, the PMPMs on the exchange business? There was no big – there was like no big risk adjustments getting that much lower relative to what you thought or anything of that nature?

No. I mean, you saw that happen second – third and fourth quarters last year and I think we've kind of figured it out by now.

Okay. Thank you. Thank you.

Yeah.

Thank you. Our next question is from the line of Ana Gupte with Leerink Partners. Please go ahead.

Yeah. Thanks. Good evening. So, just, again, to reiterate I think a question that came up earlier, the expansion rates were not the negative surprise, correct? You anticipated this and basically your negative surprise, as I'm understanding from the release, is the cost pressure in Ohio and Texas and then potentially on an increase basis in Puerto Rico? John C. Molina, JD - Chief Financial Officer & Director: That's right. The surprise was the increased cost in Ohio and Texas. We did note the higher MCR in the expansion as a way to explain the differences between Q1 of 2015 and Q1 of 2016, but we had anticipated that. And if you go back to the guidance, that we did talk about that and included that in the guidance deck from February.

And then on a go-forward basis as far as expansion rates, do you feel comfortable that there will be no more negative surprises going forward and which states are you then – if you could just recap, what states are expecting pressure going forward, if any?

So, let me try that one first. I think what we're seeing now with expansion, if you look at the MLR, it's starting to approach the TANF and ABD populations and we always said that would happen over time. So, I don't think the cost – the premium pressure I think ultimately – the big drops in premium I think are, for the most part, behind us looking at the MLRs.

Okay, so that's done. Then on a go-forward basis, to fix this and to get to this 1.5% or 2%, granted it's not happening until the end of next year, so what is the plan of action in Ohio and Texas there to get this... John C. Molina, JD - Chief Financial Officer & Director: Let me underscore something before Mario speaks. We do talk about the 1.5% to 2% at the end of 2017 and I just want to clarify that what we mean is the end. So, it will be the fourth quarter. Joseph Mario Molina - Chairman, President & Chief Executive Officer: All right. So, Ana, this is Mario. If you go back to our guidance slide from February, you'll see where we had projected the MLRs by product. And right now, where we're really off is on the Medicaid, TANF, and ADB. So, I mean, the first thing we need to do is, we need to address that issue. I think longer-term, we still think that there is room for improvement on things like LTSS and duals in Medicare, but that's more of a long-term thing. So we're going to continue to work to drive down medical costs. And as I mentioned in my remarks, the only way that this expansion of insurance to more people is going to work, is if health plans like ourselves can continue to drive down cost.

Okay. And you don't anticipate this issue on our cost to go to some other states? Do feel pretty confident just in these two states or we will be seeing more issues? In other words... Joseph Mario Molina - Chairman, President & Chief Executive Officer: No, right now we think we've worked through the major issues. And we would anticipate the cost to come down over time. And as a result, the profitability should increase towards the back half of the year.

And then, finally on the managed Medicaid regulation, is this anything at all to do, is it just a Molina-specific thing or would you be able to use the regulation to improve your rate outlook in any way? And then on Rico funding, the government is looking, I believe, the secretary of BOA just went to Puerto Rico and all that, are you in discussions on what the government might do to help the plans on future costs? Joseph Mario Molina - Chairman, President & Chief Executive Officer: Well, first of all, in terms of the regulations, you know they're extensive. They're almost 1,500 pages. So, we're still in the process of evaluating them. So, I don't really want to comment on what we think the regs mean until we've had a chance to really thoroughly review them. We did comment on the draft regulations and our comment letters are public, I believe. In terms of Puerto Rico, we are in discussions with them over the rates. So, again, there's really nothing that I can comment on there.

All right. Thank you.

Thank you. Our next question is from the line of Dave Windley with Jefferies. Please go ahead.

Hi, thanks for taking the questions. In thinking about the achievement of the 1.5% to 2% by the end of 2017, I guess, given the setback, your trajectory to that will obviously be steeper. I'm wondering if you have views about where you're now – are you now targeting, say, the low end of that range, where your aspirations might have been higher before. Or another way to come at that might be, at what point in 2016 do you need to see material progress in that direction to believe that those are still achievable? Joseph Mario Molina - Chairman, President & Chief Executive Officer: So, I think that we will see material progress in the third and fourth quarters. And it's a little bit difficult at this point for us to comment on whether we think we're going to be at the high end or the low end of that range. We want to be somewhere between 1.5% and 2% for our profit margin for the fourth quarter of 2017. That's management's commitment. That's what we're driving toward and we still believe that that's an achievable target.

Okay. And, Mario, you've talked about the issues and alleviation of a lot of those issues, be it systems or hiring of staff. Have most of the actions or all of the actions been taken at this point and it's a matter of feeling the benefit of the actions or do you still have, for example, management bench to fortify or things like that, that are still needing to be completed? Joseph Mario Molina - Chairman, President & Chief Executive Officer: I would say both. I think that a lot of these initiatives are in-flight. They're in various stages of development in the different states. We will prioritize the rollout of these things in the future depending upon issues like the size of the state or certain medical cost issues. But those things are all launched. There's really nothing that's new that has to be done. It's just a matter of rolling them out across the enterprise and seeing the benefits. In terms of management, I do think we mentioned, we probably need to add some bench strength. I think there are certain key issues around claims and processing of enrollment and premiums, reconciliation, and so forth where we could probably strengthen things a little bit. I don't think it's a matter of hiring a lot of people, I think it's a matter of hiring a few key people.

Okay. My last question, you have, over the course of the call, talked about wanting to continue to respond to RFPs as it relates to, I believe, you were speaking to acquisitions in that context. You've also said that the acquisitions and the number of them put strain on management. I guess I'm curious about your rationale on continuing to kind of pursue acquisitions, given your need to kind of batten down the hatches here. Joseph Mario Molina - Chairman, President & Chief Executive Officer: So, again, I'll refer you back to our guidance day. We were very clear about the RFPs that we intend to respond to, and I think that those are things that are really going to be 2017 events. As I mentioned in my remarks, we think that beyond the first quarter now, we're going to have a little time to digest and absorb all of this. We don't see a lot new coming on in 2016. In terms of acquisitions, again, the strategy hasn't changed. We're very disciplined about this. We're interested in acquisitions that are going to bring us into new states, and New York is a perfect example of that. That was a strategic acquisition. It gets us into the second largest Medicaid state in the country, and we've been trying to get into that state for many, many years. So, we're now all in five of the five largest Medicaid markets in the country. With regard to other acquisitions, I don't see anything that's going to come in, in 2016. But again, we've been pretty disciplined about our approach and we will continue to pursue the acquisitions as we outlined in February.

Okay. Thank you.

Thank you. Our next question is from the line of Kevin Fischbeck with Bank of America. Please go ahead.

Great. Just want to go back to the 2017 guidance and the confidence that you're going to get there. I mean, I'm still not 100% clear to me exactly what you mean by the investments in kind of the infrastructure, because I guess my initial thought would be you had that goal for 2017, you learned since then that there were investments that needed to be made with head count, with IT systems and that you're somehow still hitting that same margin target. It seems counterintuitive to me. So, how do you bridge that gap? Joseph Mario Molina - Chairman, President & Chief Executive Officer: Well, this is Mario. I think that the way we bridge that gap is through some system changes that we have made. And we are in the process of updating, for example, a lot of our UM guidelines, which we think will lead to lower utilization. But some of this is just allowing those things to mature. As I mentioned, we've hired new nurses. Some of them are inexperienced, and some of them are not very facile with the computer systems. So as those things mature, I think that they'll become more effective and we can do a better job. Part of this is just tincture of time. We do see the profit margins rising in the backend of the year, and our projection is that that will continue into 2017.

And so I guess, how much of your view about the margin mean reversion over the next couple years is predicated on getting above average rate increases over the next year working with the state departments (56:02) to do that versus having your medical management deliver cost savings? Joseph Mario Molina - Chairman, President & Chief Executive Officer: Well, we have never counted on above average rate increases to drive our progress. We've always felt that if we can do a more effective job of managing the members, there is opportunity. And as I mentioned at the outset, we have plenty of revenue and plenty of membership. We are at the high end of our enrollment projections. So I think we're well-positioned.

And, I guess, I also have a question about the growth dynamic. I mean, it sounds like you had a range of membership, you're at the high end of the range and that was enough to strain your systems. So I guess how do you think about your ability to grow? In 2016, it sounded like a little bit about rebase year, but you mentioned a lot of RFPs in 2017, thinking about doing deals again in 2017. I mean, is there growth target that you don't really want to get above as you think about that? Is there a right way to manage that number? Joseph Mario Molina - Chairman, President & Chief Executive Officer: No, I don't think so. I mean, I think that part of our strategy is to continue to grow. It's really more a matter of timing. And we'll continue to grow in the future. John C. Molina, JD - Chief Financial Officer & Director: Kevin, this is John. When we started this out, in I think it was 2012, with the idea that we were going to double the size of the company, we built our systems to double the size of the company and then a margin above that so that we wouldn't get caught too far ahead of ourselves. What we didn't realize is that we would then double the size of the company once again on top of that. So, I think that's where the constraint came in, in terms of some of the systems, which then flowed down into the people and processes. I think what we've done now is we have built a capacity that we need for the next several years, and we're confident that we're not going to have another strain like we just experienced in the first quarter of this year.

All right, great. Thanks.

Thank you. Our next question is from the line of Peter Costa with Wells Fargo. Please go ahead.

Thanks for the question. There's a lot of things going on here, and sometimes when we see that, it ends up just being that the explanation for overall cost trend going higher. But yet you seem fairly confident that you can get resolved toward the end of this year or the back half of this year. So if we were to sort of classify some of these problems of the industry versus sort of management distraction issues versus cost trend not performing, how much of the different things do you think are those items like Puerto Rico seems fairly industry-wide, Ohio maybe the rate is industry but then there's a local management distraction issue. The TANF and ABD business not performing, it seems like it's a management distraction issue, so maybe those things are management. But how much of the rest of it is just overall cost trend being a little bit faster? Joseph Mario Molina - Chairman, President & Chief Executive Officer: I think is two things. I think, first, we did trip. There's no question that fair amount of this was our own fault. And that's what's led to some of the problem. I think the sort of pricing issue really revolves more around pharmacy than anything else. So, some of these utilization issues we talked about in the first quarter are really growing pains on our part. But I think the more systematic problem is the long-term pharmacy cost trend and we've been talking about that for a couple of years. Pharmacy cost are going up. Insulin, for example, a very common drug that lot of our patients use, has gone up quite a bit in price. We're seeing a lot of new specialty pharmacy drugs and this is not a problem just for us. I think this is industry-wide.

So you would classify sort of the industry stuff is being pharmacy issues, but the other stuff being sort of more within your control to fix going forward, is that a fair way to classify it? Joseph Mario Molina - Chairman, President & Chief Executive Officer: Yes.

Okay. And then you threw out Zika there, but you really didn't sort of put the blame of any of the problems on Zika and it doesn't seem like a big deal yet. But is it driving more utilization in Puerto Rico? Are we seeing more doctor visits of pregnant moms or anything like that? Joseph Mario Molina - Chairman, President & Chief Executive Officer: Yes, I think we are seeing people are scared and we're probably seeing people that have illnesses that are worried that they might have Zika. So it probably is driving a little bit of utilization. But I don't think we're having catastrophic costs related to Zika at this point.

Okay. Have you tried to quantify that yet? Is Puerto Rico could be a test market for what's going to happen in the rest of country as it moves up here? Joseph Mario Molina - Chairman, President & Chief Executive Officer: Well, I think you're right about the fact that this could migrate to the Continental United States. But no, I don't think we have an answer on that one.

Okay. Thanks.

Thank you. Our next question is from the line of Gary Taylor with JPMorgan. Please go ahead.

Hi, good afternoon. Couple questions. One, obviously, you're anticipating better performance in the back half, have you seen any actual improvement or inflection in utilization in Texas or Ohio yet, or simply anticipating that you'll be able to affect that going forward? Joseph Mario Molina - Chairman, President & Chief Executive Officer: Well, it's pretty early for us to comment on that, but I do think we are seeing improvement. But remember this is only the end of April so we haven't even completed the first month of the quarter.

Right. Secondly I just wanted to clarify I mean, you show us your premium costs and MLR performance by population and then you also show it by state, but we don't get it by population by state. So when we just look at Texas for example, TANF was not an issue for you broadly, ABD and Duals were, so in Texas we're using increased cost across all three of those populations? Joseph Mario Molina - Chairman, President & Chief Executive Officer: I think the increase are across a number populations. But you know in reference to your first comment, we cut this data a lot of ways, and we report quite a bit of information. I think we are very transparent. I don't think it's practical for us to produce more.

No, that was intended to be a criticism. You definitely give more. I guess what I was trying to parse out was TANF, overall TANF costs broadly across your book looked inline and MLR was down and the issues that really seem to have growth, disproportionate growth in cost and MLRs were ABD and duals. So when we think about Texas and Ohio both, I just wonder if some of the cost issues were isolated in ABD and duals or if you'd say broadly in those states impacted TANF as well, that's what I was trying to get at. Joseph Mario Molina - Chairman, President & Chief Executive Officer: No. It's more an issue of ABD and TANF and it's more an issue around Ohio and Texas than the other states. I also think if you look at the numbers you'll also see that year-over-year, I think the medical costs are up, the MLRs are up in Illinois and Michigan. Both of those are areas where we have significant new populations because of the acquisitions. And then Ohio and Texas again, it was just general increases in utilization.

Okay. And then finally, just kind of going back to the Zika topic, a little bit. I think we have a slide from I think your last Investor Day that showed 3% of your fee-for-service costs were in maternity and neonatal, which just I guess struck me as a pretty small number particularly for Medicaid population. So I didn't know if that was TANF only or if this was across your entire book but obviously would have some populations that wouldn't have higher relative maternity costs? Joseph Mario Molina - Chairman, President & Chief Executive Officer: Yeah, I'm not really sure what slide you're talking about. I don't have those in front of me. So I can't really address that.

Okay. I'll follow up. Thank you.

Thank you. Our next question is from the line of Tom Carroll with Stifel. Please go ahead. Thomas Carroll - Stifel, Nicolaus & Co., Inc.: Hi, guys. Good afternoon. So two questions and first on the marketplace business and you've chatted a lot about being confident in the numbers and visible cap that you're seeing things visibly going forward, I mean, that's clear and the goal that you're setting out for yourselves. What is the chance that more near term, that on the strong marketplace enrollment growth that you guys are getting adversely selected and that experience catches up with you and we feel more pain on the second quarter? If you could talk a bit to that. You mentioned have an almost real-time data, maybe alleviate some of our fears versus with respect to adverse selection in the marketplace.

It's Joe speaking, Tom. What you're suggesting is always possible of course. What we see though generally is a low utilizing a population. Now, the trade-off of that again is we tend to give money back in risk adjustments for that. I guess, all that we can say is in the course of the two and a quarter years we've been doing it, we haven't seen that development. Yes, it could happen in the future, but based on the demographics of our members and what we're seeing, it doesn't look like that's happening. Now remember – and we talked about this in the script, we're not expecting this business to produce 5% or 10% margins. We're expecting it to produce margins consistent with Medicaid which are obviously much lower. So, our expectations are lower going into it which might be why we're less disappointed. But again, we don't see anything so far that indicates we are getting sicker numbers. Joseph Mario Molina - Chairman, President & Chief Executive Officer: And Tom, I'll also add that I think that our strategy has a lot to do with this. This is really an extension of our Medicaid product, using our Medicaid network. I think the patients that we're seeing are very similar to our Medicaid members generally, high degree of subsidy. And we never had a commercial product. So, there's no cannibalization of our commercial product into our exchange product. We really think that we're getting people who are low income and have either been on Medicaid in the past, or were uninsured in the past. Thomas Carroll - Stifel, Nicolaus & Co., Inc.: I guess what spooks me a little bit is just the growth that you saw this quarter, right, and Joe, I get that you've been there for a couple of years now. You haven't seen this experience so far. But a pretty sizable jump in the quarter. I guess that's what... Joseph Mario Molina - Chairman, President & Chief Executive Officer: You're right, Tom, and I would again get back to the network issues. I mean, this is our Medicaid network. And I think we're attracting patients that are similar to the demographics of our Medicaid patients. Thomas Carroll - Stifel, Nicolaus & Co., Inc.: Okay. Joseph Mario Molina - Chairman, President & Chief Executive Officer: We don't have any data. Thomas Carroll - Stifel, Nicolaus & Co., Inc.: Okay. Secondly, is the M&A you've done showing any kind of accretion at all given that most of these are in-market deals and plans that you bought? In the past, when we seen you do tuck-in deals like this, they tend to be accretive or they tend to work right from the start or at least pretty quickly. So, it sounds like the deals that have closed at least so far from when you started about a year ago, offered really no support against the challenges that you're highlighting, for example, like in Ohio and Texas. Is that there or are we off-base? Joseph Mario Molina - Chairman, President & Chief Executive Officer: Yes. So, Tom, there wasn't a lot of infrastructure buildout required in those states. But I think you can kind of break it into categories. So remember, that in Illinois and in Michigan, we are in new service areas. So, while the health plan staff for the most part are the same, we're dealing with new providers and we don't have a lot of claims experience in those areas. I mean clearly, you're right, we didn't get a big lift this quarter out of our acquisitions. That doesn't mean that we won't going forward. I think it's a little hard to sort out right now. John C. Molina, JD - Chief Financial Officer & Director: Tom, this is John. You have remember, when we bring in new populations, we tend to set our claims reserves on an MCR method for the first few months in the first quarter, and then there is a provision for adverse deviation that we put on top of that. So that tends to the first quarter or two inflate the medical costs and then it comes down over time. So while you didn't see it happen in Q1, that's part of the improvement we'll see in the back half of the year. Thomas Carroll - Stifel, Nicolaus & Co., Inc.: So does your guidance – it sounds like your guidance include some amount of accretion from the M&A that you've done? John C. Molina, JD - Chief Financial Officer & Director: Yes. Thomas Carroll - Stifel, Nicolaus & Co., Inc.: Is there any way to quantify that or give some of the magnitude or maybe I'll take it off-line. John C. Molina, JD - Chief Financial Officer & Director: That's probably best. Joseph Mario Molina - Chairman, President & Chief Executive Officer: It's very difficult to do that under embark, (01:10:01) Tom, but we can talk. Thomas Carroll - Stifel, Nicolaus & Co., Inc.: Okay. Thanks guys.

Thank you. And our last question is a follow-up from the line of Sarah James with Wedbush Securities. Please go ahead.

Thanks for fitting me back in. It looks like the dollars spend on G&A came down $100 million from the February guidance and I know you guys had strong enrollment growth, so there's more members and you talked about investing in staff and systems, can you speak to what's the positive offset driving the lower G&A spend? John C. Molina, JD - Chief Financial Officer & Director: Just give us a second.

Bear with me, Sarah. Sarah, I think to a degree there, we're victims of rounding, first of all, that's not $100 million. I'm sure that's probably closer to $50 million. It's just a matter of refining our estimates and looking at the degree to which we were are able to hire in the first quarter and fill positions and that kind of items.

Got it. And as we think about the moving pieces into 2017, are you expecting any benefit from the new accounting guidance related to employee share-based payments can you speak to how much that would be once implemented?

You put me on the spot there, Sarah. Honestly, I haven't researched that all lot. Our equity spend isn't particularly huge. We also lose the tax deductibility of that. I'll have to look into that and get back to you.

But it sounds like that's not part of getting to the 1.5% to 2% maybe that would just be upside.

No. But I'll take a look at it. Joseph Mario Molina - Chairman, President & Chief Executive Officer: So, Sarah, once again, we have saved the best for last. Thank you for your questions. So I want to thank everyone for joining us on the call today. That concludes our call and we look forward to talking to you next quarter.

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.