Susan M. Diamond
Chief Financial Officer at Humana
Thank you, Bruce. And good morning, everyone. I will start by echoing Bruce's confidence in our current year performance, the steps we have taken to improve membership growth in 2023, and our ability to drive compelling returns for our shareholders.
Our second quarter 2022 adjusted earnings per share of $8.67 represents 26% growth over second quarter 2021 and is approximately $1 higher than our previous expectations. The favorable results in the quarter were supported by strong performance across many of our lines of business, and were driven primarily by lower-than-anticipated medical cost trends and our individual Medicare Advantage and Medicaid businesses, partially offset by higher-than-expected non-inpatient costs in group Medicare Advantage. We also experienced lower-than-anticipated administrative costs, some of which was timing in nature.
Importantly, I want to reiterate that utilization in our core individual Medicare Advantage business is running favorable to expectations. The lower utilization trends and lack of COVID headwind seen to date give us confidence in raising our full year adjusted EPS guide by $0.25 to approximately $24.75, while still maintaining a $0.50 EPS COVID headwind for the back half of the year. In addition, the revised guide contemplates an investment of approximately $0.75 of EPS in additional marketing and distribution in the back half of the year to further support our improved 2023 Medicare Advantage product offerings. Finally, the revised guide cover $0.65 EPS dilution related to the pending Hospice divestiture versus the $0.50 contemplated in our previous guide, which is expected to close in the third quarter.
Our updated full-year guidance reflects a compelling 20% growth in adjusted earnings for 2022, while funding additional investments to support our long-term growth. If we see additional favorability emerge in the back half of the year, including the remaining $0.50 in embedded COVID headwind, we'll be prudent and balancing further investments in support of long-term growth and additional shareholder returns in 2022. We are focused on maximizing long-term value, and we'll be transparent in our approach. With respect to quarterly earnings seasonality, at this time, we expect third quarter earnings to be approximately 25% of our full-year estimate.
Finally, as Bruce shared, we have made significant progress toward our $1 billion value creation plan. Actions during the quarter resulted in certain one-time costs of $203 million, which has been adjusted for non-GAAP purposes. These expenses were primarily driven by consolidation and retirement of technology assets during the quarter, resulting in more efficient operations and lower investment requirements going forward. As we continue to advance the value creation plan, we expect to incur additional one-time costs in the back half of the year, which will also be adjusted for non-GAAP purposes.
With that, I will now provide additional details on our second quarter performance by segment, beginning with Retail.
Medicare Advantage membership growth in revenue are trending in line with expectations. As previously mentioned, total medical costs in our individual Medicare Advantage business ran favorable to expectations in the second quarter. We continued to see lower-than-anticipated inpatient utilization, partially offset by higher inpatient unit costs, while non-inpatient costs were slightly favorable to expectations. With respect to intra-year development, you will recall that our first quarter estimates considered the higher unit costs experienced in the fourth quarter of 2021. We were encouraged to see the first quarter restate favorably and have seen some moderation in inpatient unit costs relative to our previous estimates, while non-inpatient costs also restated slightly lower.
With respect to COVID, we have seen an uptick in cases in recent weeks, but hospitalization rates remain lower than we have seen in previous surges. While we are not concerned with the utilization patterns observed to-date, we acknowledge the continued uncertainty related to the pandemic and therefore maintained $0.50 of COVID contingency in our revised EPS guidance.
We are pleased with the performance of our individual Medicare Advantage business to-date and remain on track to deliver at least 50 basis points of improvement and pretax margin in 2022.
Group Medicare Advantage non-inpatient costs were higher in the quarter than our initial expectations, in part due to higher surgical volumes, which we have assumed will continue for the remainder of the year. In 2021, we saw more significant depressed utilization in group Medicare than individual Medicare and expected some normalization in 2020. While group Medicare inpatient costs are consistent with our expectations year-to-date, non-inpatient costs have been higher in recent months, some of which may be reflective of pent-up demand post the Omicron surge. We will continue to monitor emerging group Medicare trends to determine if the higher than initially expected utilization continues, as currently contemplated in our full year guide, or if we ultimately see the trends moderate.
Our Medicaid has performed well in the quarter, experiencing lower-than-expected medical costs. We updated our full-year Medicaid membership guidance from a range of down 25,000 to 50,000 to a range of up 75,000 to 100,000 to reflect the extension of the public health emergency to mid-October.
We increased our Retail segment revenue guidance by $350 million at the midpoint from a range of $81.2 billion to $82.2 billion to a range of $81.7 billion to $82.4 billion, primarily reflecting the increase in Medicaid membership expectations for the year. Despite the increase in expected Medicaid membership for the year, which carries a higher benefit ratio, as well as the higher-than-anticipated non inpatient costs in group Medicare, we have maintained our original full year retail benefit ratio guidance as outperformance in our individual Medicare Advantage business is providing an offset in the segment.
Group and Specialty segment results were slightly favorable for the quarter, largely driven by the specialty business and lower dental utilization trends in particular. As previously shared, we are focused on margin stability in the employer group medical business near term. And as a result of rating actions taken in the back half of 2021 to incorporate expected ongoing COVID costs, we are experiencing higher attrition in our fully insured group medical business than originally anticipated. We are updating our full-year commercial Medicare medical membership guidance from down 125,000, to 165,000 to down approximately 200,000. In addition, we are reducing our revenue guidance for this segment by $200 million midpoint, reflective of lower membership expectations. Full-year pre-tax earnings for this segment remain on track, aided by the specialty outperformance.
I will now discuss our Healthcare Services businesses. Recall that this segment had a strong start to the year with pharmacy meaningfully outperforming in the first quarter, which we expected to persist throughout the year, although with some moderation. Pharmacy results in the second quarter tracked in line with our increased expectations. Mail order penetration was 38.5% year-to-date for our individual Medicare Advantage members and 90 basis point increase year-over-year.
Primary care organization results were slightly favorable to expectations for the quarter, driven by ongoing operational improvements, combined with administrative expense favorability. We added four de novo centers and 10 wholly-owned centers through acquisition in the second quarter, bringing our total center count to 222 after center consolidations. We are on pace with our targets for the year and continue to expect to operate approximately 250 centers by year-end.
Turning to the Home. Home health episodic admissions are up 3.1% year-over-year, while total admissions are up 4.9% year-over-year, consistent with expectations. For the full year, we continue to expect total home health admissions to be up mid single digits.
The Hospice business performed well in the quarter with total admissions up approximately 5% year-over-year, during by increased access to facility-based referral sources and incremental investments in the business to expand clinical capacity.
The Kindred hospice divestiture is on pace to close in the third quarter. We have updated our full year guidance ranges to reflect this anticipated transaction, resulting in a reduction in Healthcare Services segment revenue of approximately $400 million at the midpoint, which reflects the hospice divestiture, partially offset by the increased pharmacy expectations discussed in the first quarter.
In addition, we have reduced our full year consolidated adjusted operating cost ratio guidance from a range of 13.2% to 14.2% to a range of 13% to 13.5% as the hospice business carries a higher operating cost ratio than the company's consolidated operating cost ratio. From a capital deployment perspective, we anticipate a customary level of share repurchases in 2022 and expect our debt to capitalization ratio to be in the low 40s at the end of the year, as we utilize proceeds from the Kindred hospice divestiture to deleverage.
Before closing, I would again reiterate that we are pleased with our performance to-date, fueled by broad-based strength across the enterprise, supporting our full year guidance raised and providing capacity to make additional investments in marketing and distribution in the back half of 2022 to further support our improved 2023 Medicare Advantage product offering. We are well positioned to achieve our $1 billion value creation goal, which has allowed further investment in our Medicare Advantage offerings for 2023 and expansion of our Healthcare Services capabilities, while remaining on track to generate earnings growth in 2023 within our long-term target range.
With that, we will open the lines up for your questions. [Operator Instructions]
Operator, please introduce the first caller.