Sarah M. London
Chief Executive Officer at Centene
Thank you, Jen, and thanks everyone for joining us this morning as we discuss our third quarter results. During our time today, I'll review the highlights of our financial and operational performance for Q3 and address some of the more recent developments shaping our view of 2023 and beyond. Then Brent will offer comments around the core businesses and share updates on our strong positioning relative to 2023, Medicare and Marketplace enrollment. Finally, Drew will provide details of our overall financial performance and update our full year 2022 outlook.
First, the quarter. We reported third quarter adjusted EPS of $1.30 slightly ahead of our expectations. Our strong results were driven by continued organic growth in Medicaid and Medicare, the continued impact of marketplace bid discipline, as well as strategic capital deployment in the form of share and bond repurchases. We now expect Centene's full year 2022 adjusted EPS to be within a range of $5.65 to $5.75, as we've raised the bottom-end of the guidance range by $0.05 to reflect strong third quarter results and taking into account continued investments to yield future returns.
Since our initial issuance of the 2022 adjusted EPS guidance, we have now raised the midpoint 5.5% or $0.30 driven by government program growth and the successful execution of several key value-creation initiatives. Drew will cover the quarter and our financial outlook in more detail shortly. Our strong year-to-date performance provides positive momentum as we prepare the organization for 2023 and beyond. With successful Medicaid re-procurements in Mississippi, Nebraska and Texas this quarter, our business development team continues to execute well, demonstrating their powerful market knowledge and delivering solid results.
While we were disappointed with the results in the California RFP process, we remain confident in the quality of our RFP response and in the merits of our protest there, which we'll talk more about shortly. In our other core business lines, we are enthusiastic about the opportunities we see to strategically balance growth with margin expansion. In marketplace, we have demonstrated strong margin improvement this year, and see the recent developments in the marketplace competitive landscape as an opportunity for new organic growth in 2023 and beyond.
In Medicare, we are confident, we have positioned our bids to achieve expanded margin performance next year while still delivering low-to-mid single-digit growth. Together, Medicare and Marketplace are well positioned to offer tailwinds in support of our 2023 earnings goals. Behind the scenes our transformation work continues with a number of value-creation initiatives achieving key milestones during the quarter. As you know, we are redesigning key shared service functions to reflect the size and scale of the organization and we're supporting these teams with modern, flexible technology that will streamline workflows and make it easier to serve both members and providers.
This quarter, we completed the first wave of call center regionalization and successfully installed new call center technology to support the marketplace team in the upcoming open enrollment period. We also launched our Provider 360 application that will allow us to more seamlessly manage our provider relationships across the country. Each of these enhancements position Centene for improvement in both quality and efficiency as we move into 2023. At the same time, we continue to advance our portfolio review work, we closed PANTHERx this quarter and are in the closing process on both Magellan Rx and Ribera. We will share additional updates as we position our non-health plan assets for mask some strategic value.
Finally and importantly, we are pleased to share that a major cornerstone of our value creation plan was achieved this month when we concluded our PBM RFP process ahead of schedule. As many of you know, we expected the RFP process to drive significant value for Centene, our members and our state and federal partners. Beginning January 1, 2024, Evernorth's Express Scripts will provide Centene's pharmacy benefit management services. This new partnership will allow us to innovate and redesign the way our pharmacy benefits are administered, as we deliver improved value to our customers and shareholders. As a result of this new contract, we anticipate delivering savings that exceed our previous expectations in 2024 and throughout the duration of the multi-year agreements.
Now turning to two recent challenges. Given the development around both STARS and our California contract, I'd like to spend a few minutes providing additional perspective on each of these issues. As we've shared before, the year-over-year deterioration of our Medicare Advantage Star ratings was driven in-part by the sunsetting of disaster-relief provisions related to COVID. We were additionally impacted by a decline in specific metrics related to ops and admin, a result of our own operational challenges during late 2020 and 2021. While the final results were slightly worse than our internal expectations, the vast majority of the revenue headwind was known to us months in advance, as we've shared transparently with the investment community.
This knowledge allowed us to position 2023 products with an emphasis on benefits stability and create a glide path to better mitigate the member impact from the STARS revenue headwind in 2024. As we called out during our June Investor Day since learning of the magnitude of the STARS impact, we've taken aggressive action to change our approach to the STARS program. From an organizational perspective, we hired an experienced Chief Quality Officer and assigned strong operational leaders to manage key ops and admin programs beginning in Q1. We centralized oversight of the quality program and moved the entire organization under Jim Murray our Chief Transformation Officer to directly connect quality to our value creation office and take advantage of Jim's long experience driving Medicare quality outcomes.
In addition, we launched a focused effort to standardize and streamline our quality processes, and we implemented real-time operational dashboards to track key performance metrics. Earlier this year, we invested in new technology to enhance our access to clinical data around gaps in care, and we committed to integrating the company's numerous quality platforms into a single unified workflow.
Finally, we made significant investments to improve our Medicare members onboarding journey, including the redesign of our approach to those mission critical survey questions that impact caps and other metrics. But addressing the STARS challenge didn't stop with operational transformations. In late Q1, this newly installed management team cracked open our 2022 performance plan. And added quality improvement as a key compensation metrics for every single employee at Centene across the enterprise. When I say quality is a priority, I mean it. Over the next three cycles, our goal is to achieve at least 60% of members in 4-star plans, and I promise you this Senior Management team is aggressively tracking STARS improvement toward that goal on a real-time basis.
Now turning to California. The California RFP also carries implications for earnings power in 2024. Shortly after the August Medical award announcement and after closely reviewing the results, Centene along with many other RFP participants filed protest with the State of California. As this audience will appreciate, we are limited in our ability to comment too much during an active protest, but I will say this, Centene takes the matter of filing protest seriously. When we do so, it is not a matter of reflex, but done only when we see serious errors in the decision-making process resulting in negative impacts on our beneficiaries. Because of our historic discipline around these decisions, Centene has a proven track-record of success in the protests we've undertaken and given our strong view of the merits of our California protest, we intend to exhaust all available avenues of appeal.
Drew will talk more specifically about the financial impact of the STARS issue and the California results in a moment, but it is important to note that we are actively managing both situations and feel confident in our current strategies. As a reminder, Centene is on a journey of transformation in service of value-creation, between now and 2024, our work is to focus and fortify the organization, creating a strong foundation from which to drive profitable growth over the long-term. From the time our value-creation plans were initially laid in June of 2021, this team went in eyes wide open to the level of change we were determined to enact.
As we reflect on 2022 and the two full quarters since this management team has taken the helm, I am pleased with the amount of progress we have made and confident in our delivery of future milestones. We've assembled the right talent with proven executive leadership skills, created a sharpened focus through our value creation office and made deliberate investments to accelerate change. There is a lot more work ahead, but delivering this year's foundational milestones creates important momentum that will carry us into 2023 and 2024.
The upcoming December Investor Day presents us with an important opportunity to give investors clarity around the long-term strategy that will underpin the trajectory of Centene's business. We'll use Investor Day as a platform to share important areas of operational focus, as well as to lay out the market opportunities upon which we'll build our future growth. And importantly, we'll commit to long-term growth targets, so that our investors are clear on management's expectations for our enterprise.
Before I turn it over to Brent, I'd like to take a brief moment to express my gratitude to our Centene team members in Florida for their efforts in the face of the destruction brought by Hurricane Ian last month. Once again, our local teams activated quickly, harnessing the power of our local partnerships to support our members and employees and their communities in a time of need. Sunshine employees contacted more than 22,000 high risk members ahead of the storm to ensure they had a plan, and in the storm's wake to confirm their safety and assess their needs. We partnered with state and local government entities to strategically deploy resources, provide community support and offer distribution and staging sites for relief efforts.
More than 500 Sunshine Health employees, some of whom were impacted themselves. Nonetheless, volunteered their time at disaster relief sites, including those sites we set up inside our health plan community centers. At the height of operations, our community center in Fort Myers was serving more than 2,100 families each day, providing needed items like food, water, diapers, baby formula and basic hygiene products. Mission-driven employees are Centene's most powerful asset. Thank you to Sunshine Health employees and employees nationwide for your steadfast support of the communities impacted by Hurricane Ian.
Throughout 2022 from Buffalo to [Indecipherable] to Fort Myers, your acts of selflessness and service demonstrate the extraordinary impact of our mission-driven workforce. I cannot express to you how proud I am to call you colleagues and friends.
With that, I'll turn it over to Brent for an update on the business.