Ladies and gentlemen, thank you for standing by. Welcome to the Molina Healthcare Second Quarter 2017 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 on today's date, Wednesday, August 2, 2017. It is now my pleasure to turn the conference over to Juan José Orellana, Senior Vice President of Investors Relations. Please go ahead, sir. Juan José Orellana - Molina Healthcare, Inc.: Thank you, Donnie. Hello, everyone, and thank you for joining us. The purpose of this call is to discuss Molina Healthcare's financial results for the second quarter ended June 30, 2017. 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 Joseph White, our Chief Financial Officer and Interim Chief Executive Officer; and Terry Bayer, our Chief Operating 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 website or on the SEC's website. All forward-looking statements made during today's call represent our judgment as of August 2, 2017, 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 the Chief Financial Officer and Interim CEO, Joseph White.

Thank you, Juan José, and thanks to all of you for joining us this afternoon. The last few months have been an exceptionally busy time at Molina Healthcare, and I will do my best to bring you up to speed on everything that has happened since we last spoke. But first, let me be clear, the results reported today are disappointing and unacceptable. We must and we will do much better. And we are taking aggressive, urgent and determined actions to improve our financial performance. Those actions, which include a comprehensive restructuring plan and 2018 Marketplace exits in Utah and Wisconsin, will put Molina on secure financial footing and allow us to continue the Molina mission. My remarks today are going to touch upon four general areas. First, I will review our quarterly financial performance and our immediate financial outlook. After that, I am going to speak to how we reached the place where we are at today. Then I will discuss our path forward and our plans for restoring and reinvigorating our great company. Finally, I will conclude with some personal remarks about how I regard our current challenges at Molina Healthcare. So, taking these topics in order, I will turn first to our financial performance. Today, we reported a net loss per diluted share of $4.10 for the second quarter of 2017. This compares to net income per diluted share of $0.58 for the same period last year. High medical costs were a key contributor to our poor performance in the second quarter and our medical care ratio was nearly 95%. This high medical care ratio was the result of several issues. First, we adjusted our medical cost estimates for 2016 dates of service. As a result, we recognized in the second quarter about $85 million worth of…

Certainly. Thank you. It appears our first question comes from the line of A.J. Rice with UBS. Please go ahead.

Thanks. Hello, everybody. I guess I want to ask about the restructuring a little bit. Is there any need to put more capital into any of the subsidiaries as a result of today's announcement and the things you're doing? And then also, can you give us some flavor on the restructuring and the layoffs you're taking? Is it sort of reducing head count 10% across the board or is it concentrated in certain areas? And do you have to communicate what you're doing in any way to the states' Medicaid programs?

A.J. – and I think, Juan José, did you want to make a clarification? Juan José Orellana - Molina Healthcare, Inc.: Yeah. I just wanted to make a really brief clarification. We are exiting the ACA Marketplaces in Utah and Wisconsin. We had said Utah and Washington. It's Utah and Wisconsin.

Oh, I'm sorry for that. So A.J., I think your question had been – was your first question about capital requirements that's tied to the Restructuring Plan?

Yeah. And the earnings release today, and where you're at, does it require you to – is there any need for incremental capital?

No. The restructuring plan in itself does not pose capital demands for the health plans. The financial performance of some of the health plans, particularly as they relate to Marketplace performance, do indeed create capital demands for the health plans, which we are funding. But the restructuring plan itself does not touch on the capital needs of the health plans. It's funded through the parent. To the second point – I think your second point is, is we believe we're in compliance with all notice requirements in regards to any actions we are taking under the restructuring plan. And we are very closely engaged in discussions with our state partners and letting them what happens. Your third question, I think, was about the nature of staffing reductions we've implemented. I don't think you can say they reach into any specific areas more than others, with a general caveat that most of these reductions are reflecting managers and affect people leaders, individuals higher up in the organization. As part of this effort, we are trying to expand spans of control for managers, which unfortunately is resulting in the exit of a large number of our management personnel.

Okay. Okay. And I guess all of this – just maybe clarifying one last thing. I assume this is all the result of the strategic review you talked about in the last quarter. Are you pretty much done with the strategic review, or is that ongoing?

The strategic review initiated very early this year, back in February. I think we're done with the outlines of the plan and the path forward and the setting of savings targets. Of course, there's going to be modifications as we go along. And many of these activities, such as provider re-contracting, vendor re-contracting, will continue well into 2018. But I am confident in saying the plan is fleshed out and is built and is complete in terms of planning and design. Now, again, the operation and the roll-out of the plan will continue through 2018.

Okay. Thanks a lot.

Sure. Thank you.

Thank you for your question. Our next question comes from the line of Scott Fidel with Credit Suisse. Please go ahead. Scott Fidel - Credit Suisse Securities (USA) LLC: Thanks. The first question, just, Joe, can you talk about how you're thinking about some of these RFPs that are ongoing or upcoming, just in the context of the financial pressures that you've seen in some of the markets? And just in particular, I was hoping just to drill in a little bit into Illinois and then into Florida, saw that the MLRs did spike there pretty materially, and those are markets where there are pretty active RFP processes in place right now.

Right. Sure. I think the most important thing to grasp, Scott, is that the savings we are deriving from the restructuring plan are not going to interfere with our ability to capture or retain any of our Medicaid managed care business. We are not retrenching from Medicaid managed care. We think these savings actually better position us to compete for contracts and better position us to compete particularly as a low-cost provider. I think everything we've seen out of Washington lately, while the developments in Washington are very murky, I think what is becoming crystal clear to everyone is that the open-ended nature of the Medicaid entitlement is coming to a close. And we are going to see more and more efforts by the federal government and the states to reign in Medicaid growth. That can be growth in spending. That can be very good for Molina. There is no doubt that managed care is a documented cost effective way for states and, by extension, the federal government to manage growth in Medicaid spending. We are taking efforts to make sure that we are indeed a low-cost provider and we are there to serve states as a low-cost Medicaid provider. So, in a nutshell, this restructuring effort is a huge benefit to that effort. I'll take your states in order. In regards to Illinois, there's no doubt that the path for the company in Illinois has been a rocky path. We are gratified that the state budget crisis is resolved. We actually received a payment on premium, I think, probably two weeks ago now. So it's good to see the premium money starting to flow. There is no doubt that we've had our challenges from a cost management area there, but we've installed a very capable new management team in…

Sure. Sure. We beat the bushes pretty hard on claims reserves this quarter. We looked very closely at certain states, Illinois being one of them, that were having provider settlement issues. And we've really pushed the staff, the local staff and the corporate staff, to come forward with their best estimates. We emphasized that this constant drip-drip, I think it was probably more than a drip-drip, of old claims coming through and settlements coming through is simply not acceptable. And I think the staff has stepped up and I'm very confident we've got reserves appropriately set. Scott Fidel - Credit Suisse Securities (USA) LLC: Okay. Thanks, Joe.

Sure.

Thank you for your question. Our next question comes from the line of Chris Rigg with Deutsche Bank. Your line is open. Please proceed.

Good afternoon.

Hey, Chris.

Just want to try to connect the dots a little bit on your sort of historical commentary about the exchange performance versus sort of what you're, call it, spiking out now. I guess, my understanding in the past was that the core medical cost trends were sort of running reasonably well and most, if not all, of the problems were related to the risk adjustment monies. Now it seems like you're actually seeing some real issues in the business. I guess, was the 2016 performance maybe – was your view of it maybe a little off-base or has there been sort of a fairly remarkable shift in the utilization on the exchange population for you guys?

Well, there's no doubt, Chris, that our experience has been – certainly we saw this in the second quarter. Our experience has been some pretty dramatic increases in pharmacy utilization among the Marketplace membership. If you look at the population as a whole compared to other membership groups, they are lower utilizers, particularly on the inpatient side. But, certainly, pharmacy trends have been much higher than we expected this year.

Okay. And then just when I think about how you're evaluating the participation next year, I guess are there certain indicators that you're looking for in the other states that would make you more likely to exit at this point? Like, just trying to figure out, like, where your mindset really is in terms of the level of participation in 2018 outside the two states you're calling out already.

Well, the first thing we're looking at is strategic fit. Looking back on our involvement in Wisconsin and Utah, the populations in those states were probably not significant enough to move the needle for the company in a positive way. The cost experience certainly moved it in a negative way. But, frankly, I think the markets there were just so small as to just not offer a lot of upside. So, as we look at other states, we're looking very closely at the degree to which Marketplace can support or is, in some way, advantageous to the Medicaid line of business. I think that would be most critical. But, again, we've got a little more time to decide on this. And as I said in my prepared remarks, we're prepared to make hard decisions. There's no doubt performance in Texas has been very nice. Performance in some of the smaller states, Michigan and New Mexico, has been nice. California has been okay. Florida, though, has not been a good market for us. We're going to have to look closely at it.

Great. I'll leave it there. Thanks a lot.

Thank you.

Thank you for your question. Our next question comes from Sarah James with Piper Jaffray. Your line is open. Please proceed. Sarah E. James - Piper Jaffray & Co.: Thank you. Maybe I could go at medical costs a little bit of a different way. If I look at it by product, it looks like there's more headwinds than just on the exchange book. It was kind of up across all products but Medicare. So I'm wondering if this is the PYD. Because if I run the math, I feel like there's more than exchanges and PYD. Maybe you can talk through some of the other things that are driving up medical costs across, like, the CHIP, TANF, ABD book?

Sure. And I think you're correct. I think you're correct, Sarah. We called out specifically inpatient issues in the four states that are most problematic, higher inpatient costs than we anticipated. We're seeing it in places like neonatal ICU. Pharmacy, while it is most pronounced in trend on the Marketplace product, is also an issue in certain states. So I think, in general, yes, you're correct. We are seeing cost pressure. I would say it is more outside of Marketplace, it is more inpatient than anything else, and there are specific pockets: neonatology, radiology, things like that. Sarah E. James - Piper Jaffray & Co.: Got it. And on the restructuring plan, I understand the staff reduction portion, but I'm wondering if there's also any additions being made to key areas like medical management or the actuarial team? And just big picture-wise, post-restructuring, should we still think about fixed cost leverage as about 10 to 20 basis points SG&A reduction per $1 billion in revenue added, or is the fixed cost leverage changed now?

To your first question, there are pockets of the company where we will see additional resources directed. So, for example, contract procurement, business development, RFP team, we'll see more resources directed in that area. There may be some aspects of medical management that we will indeed direct more resources to. But I think that will be a reshuffling of resources more than the assignment of new resources. We'll probably beef up our contacting capabilities, both in terms of provider contracting and just basic vendor administrative costs, vendor contracting; we think there's some opportunities there. So there are places in the company where we will see increased resources directed. To your other question, I have not gone back and looked at that scaling lately of $1 billion of revenue to what it compares to G&A lift. I think that got a little bit skewed when we went so deeply into Marketplace, which obviously has a very different administrative cost structure. I will say this though, the savings we anticipate from the restructuring plan, which at the high end are split about 50%-50% between medical and admin; and at the low end, they're probably 65% admin. The restructuring plan has the potential to lower our administrative cost ratio by as much as 100 bps. Sarah E. James - Piper Jaffray & Co.: Great. Thank you.

Sure.

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

Hey, Ana.

Yeah. Hi. Thanks. Hi. How are you, Joe?

Good.

Good evening. I wanted to check in. So it's kind of a follow-up again on some of Sarah's questions. Just doing rough math, and pardon me if this is all very quick, obviously, you just reported. Like, $1.50 or so of your EPS loss seems to be coming from continuing ops. And we've had a string of hospital reports where fallings (35:03) are clearly seeing pressure and insurers are talking about how, I mean, the MLR, at least they attribute it in part to value-based care and all of that. So, operationally, it seems like there are a lot of challenges and you're going through all these layoffs. And I understand the 50% rate increase and even 30% with CSRs and all that. But aren't you taking on a lot with everything you've got going right now? And how do you see yourself coming out of this?

Well, I'm not sure where your $1.50 from continuing operations, how you derived that, Ana. And it's probably not that. We can probably go into that in a separate call. Pre-tax, our loss was $314 million for the second quarter. The items we called out, which included the Marketplace premium deficiency reserve, were about $330 million. To me, that suggests more or less running at break-even for the quarter at least. But I think what we're essentially finding, and I come back to what I said in my prepared remarks, a lot of the build we've done in this company in 2012, in 2013, into 2014, when we were talking to you all about the way we were spending more money on admin, honestly, I think we placed it in the wrong direction. And I think we were doubling down on existing processes, existing methods of doing things, when we actually needed to just essentially strip down to the fundamentals and rebuild the chassis of the business. That's something we've been spending a lot of time among ourselves and the leadership team and with our consultants over the last six months or so. And I really think there is enough spend in this company to – more than enough spend in this company to manage it very well. I think we simply have to redirect people's energies and redirect people's focus to more productive activities. For example, to be revisiting...

Okay. So you...

Yeah. Go ahead.

No. So I'm happy to know that I might be wrong and...

Yeah.

...at least on the Medicaid you're saying the dollar amount that I came up with was – and I'll have to refine my math but...

Yeah. But we'll talk about it.

(37:29). You were saying?

Yeah. I mean, well, there is a lot of out-of-period activity, which I think we've closed the door on this quarter. And you look at the impairment, you look at the PDR, which is forward-looking, I think we're running at about break-even for the quarter pure period. But others may have a different opinion.

Okay. Now, with these losses and with this report, in terms of your capital adequacy, and how do you think your conversations would go with the ratings agencies? And because one cannot say that for sure, especially with the Marketplaces performing the way they are, that even this year, leave alone next year, despite the (38:09) things won't be bad.

Yeah. And we've been engaging, obviously, with the rating agencies over the last couple of days. They are appropriately asking hard questions. I think they welcome the Restructuring Plan. I think as we've walked representatives of the rating agencies, both of them, through that Restructuring Plan, they understand that the Restructuring Plan has real teeth. There was $55 million of cost take-out last Thursday and that is, obviously, not reflected in these numbers because it was a July event. So we're already $55 million down the path to that $200 million we've committed to for the full year. But, again, the rating agencies see the numbers you see, and they're asking hard questions and we're engaged with them. And we'll have to see how that plays out.

Okay. Thanks so much. I appreciate the color.

Sure. Thank you.

Thank you for your question. Our next question comes from the line of Peter Costa with Wells Fargo Securities. Please go ahead.

Hi, Peter.

Hi, guys. How are you?

Great.

I'd like to dig a little bit more into your cash position and capital position at this point.

Sure.

Cash at the parent was $270 million at the end of the first quarter. Where is that today? You did the bond offering. So can you kind of go through with what you have today at the end of the second quarter? What you know you've already funded down to the sub level? What you're planning to fund down to the sub level? And then whatever you think has happened with the convert?

Sure. Okay. So to take that in order, just to be clear, the notes we issued back in early May are, in effect, set aside for payment of the 2044 converts that become potentially put-able to us next year. So that is down in a segregated cash account. So that is outside of any discussions, the rest of anything else I'm going to talk about. So that's set aside, again, to protect us in the event the notes that could be put to us in 2018 are, indeed, put to us. So at the parent company, at the end of June, we had about $165 million of cash. We're going to do some further funding of our subsidiaries in the next day or so that's probably going to take perhaps another – probably bring that down to $100 million. We are also going to take a draw upon our revolver. We've spoken to our bank syndicate. They're very supportive. We're going to take about $300 million draw on our revolver, either tomorrow or the next day. With that, we should be fine. What's going to happen, obviously, is we'll incur some pretty hefty cost, as you can see, on the Restructuring Plan for the latter half of the year, but only about two-thirds of those are cash. Some of the items we have as cost for the Restructuring Plan that we talk about in the 10-Q are going to be lease terminations and all of that. And then, by the time we roll around into January of next year, in five months, we're going to have the benefit of about $200 million of run rate reduction off of where we're at right now. So I think we're in a decent position in terms of liquidity.

So, where do you think your cash will be at the end of the year, cash at the parent?

My bet would be $200 million or $300 million.

Okay. And then, I just have to ask. In Ohio, you signed this agreement with the Cleveland Clinic. Don't you think that's going to bring less healthy people to you in your Medicaid book. And at this point in time, signing up with a premier facility like that makes you concerned that you're going to get an adverse selection. Why would you do something like that at this point in time, given all the other things going on?

I'll let Terry Bayer answer that question.

Yeah. This is Terry. We were successful in negotiating a very competitive rate with the Clinic, and we're confident that our commitment to that market will assist us in managing those patients.

Do you think you're going to get an adverse selection from having that in your network?

We'll know after we're in business. The Cleveland Clinic also is attractive in terms of drawing the broader population. They've been in the Medicaid network in Ohio, and that'll come into our rating as we go forward with the state agency.

Okay. And my last question, just on the Medicaid rate increase in Puerto Rico, you didn't mention that. What did you get for rate increase in Puerto Rico?

I think it's in the neighborhood of 5%, 5.5%, effective July 1.

And what do you think that will do to your operating performance there?

It will certainly help. We'll have to see how trends roll out in terms of medical costs, but it's a nice increase.

Okay. Thanks.

Sure.

Thank you for your question. Our next question comes from the line of Kevin Fischbeck with Merrill Lynch. Please go ahead.

Great. Thanks. I guess, first, the $400 million number of savings that you're talking about, how much of that is in G&A versus in medical cost? Because it sounds like you are doing some things around networking and contracting and things like that, so I just wondered if you could break out...

Oh, absolutely. Kevin, at the lower end of the $300 million end, it's probably 60% to 65% admin. Bear in mind that probably 3% of our MLR is administrative-related medical costs. So as we reduce staff, we reduce not just the admin, but we reduce medical costs. But again, at the lower end of $300 million is probably 60% to 65% admin. By the time you get to that higher end, it's probably 50%/50%.

Okay. And so when you talk about that 3% MLR, that's kind of admin costs. Are you including that in the 65% admin, or are you just kind of saying G&A is admin for this purpose?

Oh, no.

Everything else is MLR?

No. No. No, we're assigning them to the right cost category, either medical or admin.

Okay. So in the $300 million number, 65% comes out of G&A and 35% comes out of MLR.

Yeah. I would assume so, yeah.

Okay. And you kind of gave the numbers – I'm sure we can back into it from what you gave us. It'd be just easier if we get that exclusive number. What does the guidance assume for Wisconsin and Utah exchange losses this year in absolute dollars?

We certainly haven't shared that, and I don't have that handy right now. Sorry.

Okay. And I guess these numbers – it sounds to me like you're not really looking to invest a lot of money. So when we think about $300 million to $400 million, these are both a gross and basically a net number. There's not going to be $50 million of investment somewhere else that comes up later on. This is both a gross and a net number. Is that right?

Yeah. Well, I think you're looking at it correctly. Just remember, though, that as it is disclosed in our 10-Q that we filed and also in the AR, there's about $150 million – I think it's maybe around a $150 million cost to the plan in the second half of this year and maybe another $40 million or $50 million in 2018. But beyond that...

These are the kind of the one-time severance costs?

Yeah. Exactly. Exactly. And again, as I said, they are purely gross and net numbers. There is increased spending to support RFP and business development efforts. There is some increased spending in terms of contracting. But most of it is – to the extent we are putting more money into places, we're redeploying existing spend.

Yeah. I guess I think certainly the impression of Molina from the outside is not necessarily that the company was fat from a G&A perspective. I mean, obviously, there's always room to cut in any organization. But I guess the perception had always been that you guys needed to do more work around the medical management side of things. And I look at the quarter, this quarter, it seems like medical costs are the problem, not that G&A somehow exploded in the quarter and that created a problem. It's really that medical costs were out of control. So I guess I just want to understand why the solution here is about cutting G&A, when I think most people would expect you to be saying, no, we should be putting more money into systems and medical management initiatives and things like that. That's usually the gameplay and we always hear from other companies is we're going to spend $100 million more on XYZ to deliver twice as much or three times as much savings in years two and three. This is just unusual to me to hear it this way.

And I'll be honest with you, as the last four or five months have unfolded, I have been surprised too. I was not alone as you thinking that at Molina we were essentially lean from an admin perspective. What I don't think that assumption recognized was that over the last four or five years we have become probably the pure-play Medicaid, outside of Marketplace/HMO. And the reality of it is, is that with such a focus on Medicaid, we can and should run much lower than the competition. So, that's been something, frankly, of a learning process for me because I think I would have had your point of view six months ago. But as we've dived into the numbers, and we've done a deep dive, there's clearly spend we can take out of Medicaid – out of admin without harming the business. And, again, there is going to be, as I said, by the time we get to $400 million in savings, there's considerable medical cost savings tied to better provider contracting. Essentially, the restructure of our direct delivery organization is going to bring some money to the bottom line. So there are medical savings there.

Okay. And I guess maybe last question. When you talk about the provider contracting process that you're fixing, what exactly is it that was wrong with the process as it was historically? How are you fixing it? Is it just a matter of going back and taking out high-cost providers in the network or is there something else in that process?

There is no doubt, bluntly, in terms of how we've engaged particularly certain inpatient facilities, certain hospitals, over the years. There is no doubt, frankly, that we've left some money on the table. We've come across, for example, at our New Mexico health plan. We've come across it and a few other health plans. We've had to make some tough decisions. I mentioned the fact that we've replaced leadership teams at three health plans in the last eight months. Honestly, we've just left some money on the table when it comes to engagement with providers.

And then I guess what is leading you to think that you've left money on table? Is it that you've kind of benchmarked against what Centene or Anthem are getting?

Exactly. The benchmarks tell the story. The speed with which clients become outliers, things like that, tell a story that we could've been more efficient in how we contracted.

Okay. Well, now I like it. I think I've got one more question. So I guess to the extent that...

Sure.

...a third to half of these savings are going to be medical management in nature, I guess it's always easier for us to model in G&A savings. I think we did some pretty good visibility and you're achieving what you're talking about really when you talk about G&A savings. Medical management is always a little more difficult to kind of rely on. To what extent do you believe that the medical management savings are kind of high-visibility things, I guess, just getting a better price and your ability to get a better price versus what you've gotten historically, versus something else that may be a little bit more nebulous as far as, like, provider engagement to change outcomes and shift volumes to lower cost settings, et cetera?

Yeah. Well, there's no doubt that it's going to be – there's no doubt that it's a little harder – because we're modeling this out for that exact purpose you've spoken to, there's no doubt that it's going to be harder to track and firmly identify savings on the medical side. But we can certainly see changes in unit costs per contract. It gets a little bit murkier when you talk about trying to encourage members to see more effective what we would call preferred networks. That becomes a little bit harder. But I think we're going to be able to measure that too. And frankly, I also think we're going to be able to measure some of our utilization improvements, as we have more time and more resources to direct to patients we can influence, to the complex patients. And I think we'll be able to see that on the utilization side too. But you're correct, it will be harder to measure.

Okay. Great. Thanks.

Sure.

Thank you for your question. The next question comes from Gary Taylor with JPMorgan. Please go ahead.

Hey. Good evening.

Hi, Gary.

A couple of questions. So, going back to that $300 million to $400 million savings figure, and you've provided some context, like, comparing it to 2016 pre-tax income, I guess the question is do you have confidence that that level of savings makes its way down to the pre-tax line by 2019? Is there any reason why that level of savings, if you achieve it, doesn't find its way to the pre-tax line, ultimately?

I have very high confidence we can do that. Again, we've already got visibility into a lot of the stuff we're going to do. We've already done this summer. We're going to do this fall. Now, certainly as part of this process, we're going to have be disciplined to make sure that cost doesn't creep back in. I think everybody who's been through one of these restructuring exercises understands you've got to make sure the rubber band doesn't snap back. But we have – it's a very detailed process we're going into. We're basically developing staffing ratios. We're developing spans of control. And we're going to be looking very closely at this going forward. So I certainly feel very good about the low end of that range, the $300 million. Obviously, as you move more up toward $400 million, I think it becomes more speculative. But to answer your question succinctly, yes, I'm confident we can do that.

Okay. And in terms of – you had responded to an earlier question about, obviously, remaining committed to the Medicaid market, et cetera. What about the RFPs for new populations? It seems like it'd be reasonable to think, in the rest of this year and probably even in 2018, you may not be participating in RFPs for new chronic populations, et cetera. So is that fair or unfair?

You're talking about Medicaid populations?

Correct.

We're all in. And that's not a correct statement. We are all in.

On assuming and entering into new populations over the...

Yes.

Even in the near term?

Yes. We're all in.

Okay. And then my last question is, when you talked about direct delivery network not being competitive, I presume you're talking about owned physician practices and clinics. Is that fair?

Correct. And I would say owned at – managed in the way we've managed direct delivery heretofore. Correct.

And so the question was just why? Is there a little more color? I'm not sure I understand why, upon review, those weren't being managed how you think they should be or can be.

I think there are a few points. First of all, there's a matter of where our expertise is at, as part of our direct delivery strategy with our captive professional corporation. For example, we felt the need to retain our own in-house management service organization, our own in-house MSO. The MSO is the entity that does all the administrative processes for the medical group. Well, as a practical matter, we simply do not have the expertise to provide efficiently administrative services for a medical group. Secondly, it is probably just by recent definition of scale, it is impossible to build an MSO out to provide administrative services to a single medical group that's only seeing Molina members. So, right off the bat, we've really struggled with the maintaining of a full direct delivery administrative infrastructure. This is everything from setting up appointments to providing office space, to providing equipment, to providing office help. We just haven't been able to do that efficiently. Part of it is a question of expertise but part of it, frankly, is a question of scale. So, from a direct delivery perspective, I think entities that look outside to leverage third-party MSOs are going to be more effective. The second issue we've struggled with is with an in-house medical group, or what's called a friendly professional corporation. We've struggled to incentivize physicians to manage care appropriately. A third-party IPA simply has every incentive to manage care in the most effective manner. When the individual physician doesn't have a profit incentive, you're going to get a different outcome. So I would point to those two things as being the key catalysts for that decision.

Last quick one from me. I apologize, we're all digesting a lot, so I can't remember...

Sure.

...if you said this or if I read this. But I know there was a comment somewhere along the way that the permanent CEO search was underway and you were encouraged by the responses or something to that effect. Do you have kind of a – or when should we expect to see that announcement made? Is this by the end of the year thing for sure, or by the end of the year hopeful? Or any tighter framework for us?

I mean, I can't commit to a timeframe. I will say that the search is narrowing. There have been a number of very qualified candidates, a number of whom remain in the pool, and it's proceeding very well. I hesitate to give a timeframe. But, boy, I would be surprised if it took me to the end of the year. I'd be very surprised if it took that long.

Thank you.

Sure.

Thank you for your question. Our next question comes from the line of Justin Lake with Wolfe Research. Please go ahead.

Hi. This is Steve Baxter on for Justin.

Hey, Steve.

I just want to ask a couple of questions. Hey, how are you?

Sure.

Want to ask a couple of questions about the business as it kind of is today and underlying trends there.

Sure.

So I was hoping that you could maybe provide an update on the outlook for rates in the Medicaid Expansion business and what the profitability of that business is currently running at today. I mean, our understanding is that plans are looking at a pretty meaningful rate reduction in California. So we were hoping you could share what you're expecting to see there in terms of rates that you guys have.

Yeah. There was a pretty hefty rate reduction on Medicaid Expansion in California July 1. I don't have that handy. With that said, though, there was also activity in the other direction in terms of the other Medicaid products. We had guided back in January to an overall fully-blended 4% rate decrease in California, which would include all lines of business. It looks like what we've seen of a July rate's effective, it's come in closer to 2% decrease. So that's actually been a bright spot for us right now. In general, we continue to see Expansion rates move more towards the other Medicaid, the TANF and ABD rates, as we see margins move in that direction too. But I think, in general, the outlook for Medicaid Expansion is still pretty good. So I guess I would say, Steve, that and slightly (01:00:48) just to be a little more concise, even with the drop in California July 1, we've got pretty good relief on other product lines.

Okay. Thanks. And then thinking just about the exchanges and sort of the volatility that's ongoing with CSRs at the moment, can you give us I guess an estimate, assuming that CSRs are paid for the balance of the year, how much will you have been reimbursed by the Federal Government in total for the 2017 plan year?

CSRs, for the full – all of 2017, we expect that to run around $400 million. We expect to give back – right now, we expect probably to give back half of that. We're always in a...

In terms of giving it back, sorry, what do you mean by giving it back?

Excuse me. My voice is breaking. We're always in a position, at least have always been in the past on CSRs in most of our states, where the amount funded by the Feds is in excess of what our members utilize. So at that point, we have to repay the Feds the amount that the member in effect doesn't utilize. It's a process of repricing claims and seeing what the members' co-pays and deductibles would have been. So basically, we think it's going to be about $400 million for all of 2017, and we think we'll probably give about $200 million of that back.

Okay. So then about $200 million net. All right. Thank you.

Sure.

Thanks for your question. Our next question comes from Patrick Barrett with TCW. Your line is open. Please go ahead.

Hey. Thank you for taking my question. Just wanted to ask about the way that you all report EBITDA. So when you came to market with the note, it was $544 million on an LTM basis. Would be curious to know if you have the number as of this quarter and if you'd be willing to share with us which of the items you've identified that are sort of non-recurring in nature that are permissible to be added to that EBITDA number. Thank you.

Actually, Patrick, I don't have that indenture information handy. We can certainly have a call on that. The EBITDA we share is a non-GAAP measure. It is a traditional EBITDA. I would imagine the notes probably adjust for stock compensation and items like that. So I don't really have that. I really don't have that number. I think it might be running around $470 million LTM. But we should probably have a talk with you about that, Patrick. Let's have a call afterwards and we can track that down.

Perfect. Thank you.

Sure.

Thank you for your question. Our next question comes from Michael Baker with Raymond James. Please go ahead. Michael J. Baker - Raymond James & Associates, Inc.: Yes. Thanks a lot. Joe, I was wondering if you could give some color on the shortfall on Pathways relative to what you were expecting. And is that another kind of delivery area where you may look to do some outsourcing as well?

Certainly. Pathways is a very interesting business. I want to be clear, it is a functioning business and it is – the fact that we took an impairment on Pathways, bear in mind, we did not impair the full amount of the Pathways goodwill for this exercise. So I want to be clear. We wrote off about 40% of their goodwill. So it's still a functioning business. From an operational point of view, we've had several challenges with that business. One challenge has been simply the retention of staff. Without the front-line client-facing psychologists and counselors, you can't build the revenue. So it's very much a business that's tied to your ability to retain individuals who can do the work to get you billed. The second issue we've run into in terms of Pathways related to that is we've had to increase various employee incentives, compensation related benefits, to retain staff for that very reason. And I think the third issue we're running in at Pathways, frankly, is some of the payors are becoming more demanding in terms of their reimbursement. The business has moved a little bit away from fee-for-service Medicaid, a little bit more to third-party payors, other insurance companies. And we've had a little bit of an issue adjusting to what they require in order for us to get reimbursed. So again, it's a good business. But those three issues I think, retaining staff, the admin costs in retaining the staff, and again, a shift of movement in terms of payor behavior have been a little bit challenging. Michael J. Baker - Raymond James & Associates, Inc.: Thanks for the update.

Sure.

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

Hi. Thanks for taking my question, squeezing me in here.

Sure, Dave.

Joe, I think before the Aetna-Humana deal break, the company had added some Medicare resources in anticipation of the divesture. And I wondered if Medicare was an area, one, of continued commitment, relative to earlier questions about Medicaid. And, second is that an area where maybe, because of those added costs prior, that might be a disproportionate area of cost reduction in your restructuring?

Yeah. We're still very enthusiastic about what I call the Medicaid adjacent Medicare space. The SNPs, the MMPs, those are just parts of the business where we continue to want to play. I don't have the full list in front of me, but we are moving into a few new geographies coming in 2018. The Medicare spend, while we're talking about ramping it up, it hasn't been astronomical by any stretch of the imagination. We'll weigh decisions like how much advertising we do and stuff like that. Let's see where we are in November and December. But I would say, in general, we remain enthusiastic about anything related to Medicare that in any way abuts the Medicaid space, and there's a lot of that.

Okay.

So I think overall it'll be positive.

Okay. And then just one more on – you talk in the Restructuring about consolidation of regional support services. Not sure how significant that is, but I guess I would think that you would have to be running kind of the regional services in parallel with what, say, new centralized group you might build out. Could you talk about how you manage that in a non-disruptive fashion and what the cost implications are of that?

That's a great question. When you talk about these kind of transitions, whether physically from one location to another, or just in terms of individuals assuming new duties, it has to be managed very carefully. What we're trying to do as we look at that is we're trying to look at health plans with similar characteristics. Initially, looking at this very simplistically, what I had in my head was you'd group everything geographically. And that's the way I looked at it. And the operations team spent some time with me and I think clearly demonstrated that it isn't about the geography. It's about the characteristics of the health plan. So, for example, a smaller health plan with essentially a TANF-type membership base, you want to group those together. The health plans with the more complex members, you probably want to group those together. You need to consider things like just management stability in a health plan, management capabilities. You need to consider where they are in their re-procurement cycle. So there's a lot of stuff to be considered as you create these regional capabilities. You also just want to make sure that your staff, again, have the right knowledge mix and capabilities mix. And that's a big part of what we're trying to do with our restructuring is make sure we attract and retain capable, highly motivated, highly talented people. So it needs to be done very carefully, but I think the key to it is look for the similarities that are not just obvious, like geography. And we've been very thoughtful about that.

Okay. Thank you.

Thank you.

All right. Thanks, Joe. Good luck.

Sure. Thank you.

Thank you for your question. And our last question is a follow-up from the line of Ana Gupte with Leerink Partners. Please go ahead.

Hey. Thanks for accommodating me. I didn't want to hog my time earlier.

Sure, Ana.

So, on the CEO search, it sounds like it'll be pretty quick. Do you think there's any chance that you might still consider exiting exchanges? And might that not mitigate your risk of having to raise equity or whatever? But the ratings agencies, it'll certainly kind of improve sentiment on the Street?

Well, I certainly think we are – we said in the call – or in the prepared remarks, Ana, all of the exchange participation is up in the air right now. As I like to say, with the company right now where we're at, we have to do what the numbers suggest to us. The numbers kind of tell us what to do. There is no doubt we do have a strategic advantage in the Marketplace with our Medicaid network. But I understand investor concern about the volatility of the Marketplace. We understand the frustration there. And essentially, we've exited two of our markets, and it's up in the air on the rest. We're going to look very closely at developments, particularly in the political area, over the next month or so. We've got until September 27, and we're taking a very hard look at that. So it would not surprise me if we had further exits. We'll just have to wait and see.

Okay. One final one or just to follow up on that. When the state insurance commissioners are talking to you about all this, and they're equally concerned it sounds like on CSRs and everything, are they more focused on just your synergies and adjacencies, as you say, the Medicaid HMO? Does it put your Florida RFP or Illinois or anything else at risk? Or are they saying, hey, it's okay, 55% is so big that even under a stressed capital situation everything's going to be fine?

Well, I don't think anybody is going to explicitly link the retention of a Medicaid contract to staying in the Marketplace. Certainly we know that the departments of insurance we deal with, who do not control the Medicaid contracts by the way, nevertheless have an interest in the stable insurance market. They have a very difficult situation and that stable market, number one, is a balancing act of having insurers in the market, but also making sure those insurers have financial stability. In general, we have found the regulators very supportive of our situation. They, like us, though are sometimes caught between a rock and a hard place. And it's a case-by-case basis. We made the decision to exit Utah and Wisconsin. There may be more states. And again, we'll have to be guided, right now, by what is best for the company.

Thanks so much. I really appreciate the color so late in the day. Juan José Orellana - Molina Healthcare, Inc.: Well, thanks, everyone, for joining. That concludes our call for today, and we'll talk to you next quarter.

Thanks, everyone.

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