Bright Health Group, Inc. (BHG) Q1 2022 Earnings Call Transcript

Bright Health Group, Inc. (BHG 5.04%)
Q1 2022 Earnings Call
May 04, 2022, 8:00 a.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Hello. Good morning and afternoon. Thank you very much for joining us today for Bright Health Group first quarter 2022 earnings call. My name is Gemma, and I'll be the operator for today.

[Operator instructions] I now have the pleasure of handing over to our host, Stephen Hagan. Please go ahead, Stephen. Thank you very much.

Stephen Hagan -- Director of Investor Relations

Good morning, and welcome to Bright Health Group's first quarter 2022 earnings conference call. A question-and-answer session will follow Bright Health Group's prepared remarks. As a reminder, this call is being recorded. Leading the call today are Bright Health Group's president and CEO, Mike Mikan, and CFO and chief administrative officer, Cathy Smith.

Before we begin, we want to remind you that this call may contain forward-looking statements under U.S. federal securities laws. These statements are subject to risks and uncertainties that could cause actual results to differ materially from historical experience or present expectations. A description of some of the risks and uncertainties can be found in the reports that we file with the Securities and Exchange Commission, including the risk factors in our current and periodic reports we file with the SEC.

Except as required by law, we undertake no obligation to revise or update any forward-looking statements or information. This call will also reference non-GAAP amounts and measures. A reconciliation of the non-GAAP to GAAP measures is available in the company's first quarter press release available in the company's investor relations page at investors.brighthealthgroup.com. Information presented on this call is contained in the earnings release we issued this morning and in our Form 8-K dated May 4, 2022, which may be accessed from the investor relations page of the company's website.

Before we begin the call, I would like to note that Bright Health Group will be participating in the Bank of America Healthcare Conference on May 10. With that, I will now turn the conference over to Bright Health Group chief executive officer, Mike Mikan.

Mike Mikan -- Vice Chairman, President, and Chief Executive Officer

Thank you, Stephen. Good morning, everyone, and thank you for joining Bright Health Group's first quarter 2022 earnings call. I'll open my remarks with an overview of the progress we've made on the strategic actions we discussed on our last earnings call and provide some commentary on our recent announcements. Then I'll turn the call over to Cathy to give additional details on our first quarter results and some technology and product updates.

We always start with our mission. At Bright Health Group, we are focused on making healthcare right together. Our motto is built on the belief that by connecting and aligning the best local resources in healthcare delivery with the financing of care, we can deliver better outcomes at a lower cost for all consumers. Bright Health Group had a strong start to the year, demonstrating solid performance in the first quarter while continuing to deliver substantial growth.

Now, that we have reached significant scale, Bright Health Group is maturing as a business with 2022 focused on optimizing the company and executing on our strategic initiatives. We've made the investments necessary to position Bright HealthCare as a differentiated competitor in states with significant addressable markets in both the commercial marketplace and in Medicare Advantage, as well as establishing our NeueHealth care delivery business. In the first quarter, our overall performance was in line with our expectations, and we continue to exceed our growth targets. We expect the next phase of growth for the company to be more capital-efficient as we focus on performance within our markets and expanding our NeueHealth business.

Our underlying capabilities are maturing and improving each day as we continue to drive down operating costs and leverage our technology investments to enhance our performance. Bright Health Group is well positioned in 2022 with key tailwinds and strategic actions supporting better performance. Bright HealthCare now serves over 1.1 million consumers, and NeueHealth has reached approximately 530,000 lives served under value-based contracts. We have scale in major markets, including Florida, Texas, North Carolina, and California.

A percentage of our commercial marketplace membership that was new to us in 2022 was consistent with our expectations at 56%, meaningfully lower than 2021 on strong renewal rates and lower overall impact from new market entries. Bright HealthCare's Medicare Advantage business produced solid year-over-year growth, now serving over 120,000 consumers. We are operationally in a much stronger position, significantly reducing our claims backlog, successfully implementing our new technology platforms and demonstrating NeueHealth's differentiation to our Bright HealthCare business while it is becoming a meaningful contributor to our overall results. On our fourth quarter 2021 earnings call, we detailed specific actions on which we've made meaningful progress on to drive improved year-over-year results.

Those actions included one, net pricing action in core markets. The pricing actions we took for the majority of our membership in legacy commercial markets in excess of our underlying medical cost trends have resulted in an improvement in our medical cost ratio when looked at on a comparable basis. Overall, we expect net pricing in both commercial and Medicare Advantage to remain an important lever in 2023 as we continue on our path to profitability. Two, unit cost reductions and medical management initiatives.

We have also made meaningful progress on the unit cost and medical management opportunities that we identified last year as areas for improvement. We are focused on specific initiatives in contracting, out-of-network rates, specialty provider networks and more closely managing high-cost cases. We have taken actions on these initiatives and have visibility to delivering on the medical cost management EBITDA contribution we included in the bridge to our 2022 forecast. Three, risk adjustment actions.

Our high-performing local care partner networks were better prepared this year for our strong growth, which allowed us to attribute members to owned and affiliated physicians much faster, including in Florida and new markets such as Texas. This has enabled our owned and affiliated physicians to engage with their members earlier in the year. That early engagement, combined with higher renewed membership and the significant investments we made in data and operational capabilities, helps ensure we are accurately capturing the risk of the population we serve. Four, claims and clinical platform stabilization.

We successfully launched all of our new market membership on our new claims administration platform on 1/1/2022. The new claims platform is performing well and covers nearly 1/3 of our commercial membership. We also added resources to our legacy outsourced claims platform, and we are seeing improvements in the performance of that system. Cathy will provide additional details on the progress we've made on our technology platforms and the impact so far this year.

We continue to expect that we will transition the remainder of our commercial members to the new claims management platform on 1/1/2023. Our proprietary clinical system, Panorama, is also delivering significant benefits to our performance this year with all of our legacy commercial markets on Panorama currently. And we expect to have all our commercial membership on Panorama by 2023. And five, we are addressing talent and cost structure.

We remain disciplined on our expenses as we continue to focus on productivity gains and operating expense leverage while also adding selectively to our team to support growth and enhance our operational performance. Bright Health Group has a unique model that is successful across multiple market structures. We will continue to lean into the markets where our fully aligned care model can deliver differentiated results, where we can get sufficient scale and where we can deliver on our financial targets. We are focusing our commercial business to offer individual and family plans in 10 states where we believe we can drive differentiated value through our fully aligned care model.

We believe these decisions place us in the best position to achieve long-term success for our members and care partners. These states have a substantial addressable market at approximately 50% of the commercial marketplace consumers. We have meaningful scale in Florida, Texas and North Carolina and growth opportunities with strong care partner relationships in the other seven states. Optimizing our footprint supports our strategy for profitable, capital-efficient growth on our path to improve performance in 2023 and our target for enterprise adjusted EBITDA breakeven in 2024.

Bright HealthCare will be exiting the commercial marketplace in six states for the 2023 plan year: Illinois, New Mexico, Oklahoma, South Carolina, Utah, and Virginia, as well as discontinuing our employer group business. The markets we are exiting represent approximately 8% of total Bright HealthCare membership, are forecast to contribute less than 5% of our 2022 enterprise revenue and will have an immaterial impact on revenue in 2023 and beyond. We expect modest 2022 cost savings associated with reduced spending in the markets we are exiting, which has been contemplated in the range of adjusted EBITDA guidance we provided for the year. And we also expect the benefit to our capital position as we will not need to add growth capital to the exit markets.

We forecast the total savings of approximately $100 million in reduced operating expenses and future capital needs. Over time, we also expect to have the opportunity to recover or redirect the statutory capital currently invested in these states after we resolve all medical claims. This is an example of an increased focus on capital-efficient growth. Bright Health Group will continue to grow as we deepen our presence in Bright HealthCare's 2023 commercial marketplace states and as we build on our 120,000-member Medicare Advantage business.

We will also continue to grow the NeueHealth care delivery and provider enablement business, including deeper penetration in the Bright HealthCare business and expanding NeueHealth external payer relationships. We have built a differentiated, fully aligned care model. And our market decisions for 2023 are focused on optimizing this model to deliver the best healthcare experience for consumers and for the long-term success of our business. I'll now hand it over to Cathy Smith, our CFO and Chief Administrative Officer, to go over our quarterly performance and provide some additional updates on the business.

Cathy Smith -- Chief Administrative and Financial Officer

Thank you, Mike, and good morning, everyone. I'll begin by walking you through our first quarter results, provide some details on the operational improvements we've made and then go over our 2022 outlook. Our first quarter top line results reflect solid member growth in our existing markets and a strong entrance to our new markets in the open enrollment period. We ended the quarter with 1.04 million commercial consumers and over 120,000 Medicare Advantage consumers.

And we are much better positioned operationally and in terms of visibility at this point in 2022 compared to the prior year. The membership growth we achieved this year, while ahead of our forecast, is manageable with our new systems and processes. Bright Health Group consolidated revenue increased 110% year over year to $1.8 billion in Q1. Bright HealthCare segment revenue grew 89% year over year to $1.6 billion, and NeueHealth segment revenue of $621 million compared to $49 million in the prior year.

Our first quarter gross margin was $255 million, and our adjusted EBITDA was a loss of $75 million. Starting in this first quarter of 2022, we have excluded the mark-to-market investment gains and losses from our adjusted EBITDA, which was a $41 million loss in this quarter. Our first quarter 2022 medical cost ratio at the enterprise level was 84.8%, up from 79.5% in the first quarter of 2021. Recall that in Q1 of 2021, our growth was meaningfully ahead of our expectations.

We did not have visibility to the future impact from COVID or SEP, and we haven't processed a lot of claims yet. Therefore, looking at Q1 last year, if restated for medical cost and risk adjustment forecast that subsequently transpired, we would have experienced a much higher MCR. We have applied the learnings from last year to our forecast, and this year is a very different business. Retained numbers represent a higher percentage of our membership.

We have attributed our members and are engaging them earlier. We are processing claims faster. We have taken a prudent approach to risk adjustment payable expectations, and our system infrastructure is more efficient and effective. In addition, our Q1 2022 MCR is also impacted by DCE revenue booked at 97% MCR.

Without DCE, enterprise MCR would be 130 basis points lower. Our membership growth, combined with the impact of the Omicron variant, led to higher-than-expected COVID costs early in the quarter. But costs have come down as cases have decreased through the quarter, and our full year COVID cost expectations are unchanged. On a per member basis and as a percent of revenue, COVID cost in the first quarter in our commercial population were down approximately 50% year over year.

And Medicare Advantage hospitalizations were down approximately 50% on a per member basis as well. Excluding the impact from the investment loss, the first quarter results were in line with our expectations. Member growth and premium revenue were modestly ahead of our expectations but offset by higher volume-related expenses in medical costs and broker commissions. Next, I'd like to cover some technology and product highlights.

Our team has made significant progress against our technology milestones across the board from clinical administration and management to claims processing to our consumer interface and administrative platform. Our technology team is focused on adding capabilities to support our fully aligned care model. As Mike mentioned, we have transitioned all legacy commercial markets to the Panorama utilization management platform, significantly improving automation and meaningfully reducing the time needed to handle cases. Importantly, our NeueHealth providers are able to leverage their data and workflows in Panorama to implement care management activities at the point of care.

We have also moved our legacy commercial markets to our new electronic provider authorization portal, resulting in significant increases in the percentage of authorizations submitted electronically. This has improved provider satisfaction metrics. In our Medicare business, our utilization management efforts have driven down the inpatient admit, excluding COVID, by mid-single digits per 1,000 members, as well as showing strong results in lowering skilled nursing facility and behavioral admits. For contracting and contract implementation, we have transitioned all of our activities to the Panorama system, including all legacy contracts.

We have implemented tools for faster identification of out-of-network utilization to support care management interventions. We are also leveraging predictive analytics to identify members that are more likely to utilize higher-cost services like the emergency department. And we have improved our business processes and technologies to reduce the time needed for critical functions like loading providers and members into our systems and attributing members to NeueHealth and care partner providers. We've reduced the time needed to complete these processes by 50% or more.

Additionally, we have made significant improvements to our legacy systems, particularly our legacy claims management system, where increased automation for handling non-par claims has allowed us to meaningfully improve our comp pay performance and decrease via average age of claims in our pending claims queue. We saw a further 13% improvement in our over 60-day claims during the first quarter, which was on top of the 90% reduction we achieved in the fourth quarter. On the core infrastructure side, we have transitioned over to our new financial system and increased the level of end-to-end data automation. Over time, this will support a faster financial close process and give us more timely insight into the business.

And finally, our DocSquad consumer-facing platform continues to gain traction with strong consumer ratings and significant growth in virtual visits since rolling out this platform more broadly to our members. Our NeueHealth business continued to build on the strong growth of 2021. Total value-based care patients as of the end of Q1 were approximately 530,000, including 410,000 from Bright HealthCare, 49,000 from direct contracting and the remainder from value-based external payer relationships. First quarter revenue for NeueHealth was $621 million with strong sequential growth and the contribution from our first quarter recognizing revenue for the direct contracting program.

The NeueHealth first quarter revenue was negatively impacted by $41 million due to an unrealized mark-to-market investment loss. Excluding investment income, NeueHealth revenue grew nearly 1,400% year over year. Our fully aligned care model continues to perform well, and our NeueHealth clinics are supporting our outreach to Bright HealthCare members in order to drive care management and accurate risk adjustment coding. We continue to add capabilities and resources across NeueHealth to support the aligned integrated model of care.

Our direct contracting business got off to a solid start in the first quarter with improvements on key clinical metrics relative to 2019 pre-COVID cohort level and compared to benchmarks. Financial results from direct contracting were in line with our expectations for the first quarter, and we continue to expect breakeven gross profit from direct contracting for the full year. Turning to our balance sheet. As of March 31, 2022, we had over $355 million in nonregulated liquidity, including $285 million in highly liquid cash and equivalents and $81 million in a passive equity investment caused by the short term.

We have about $2.6 billion of additional cash at short- or long-term investments held by our regulated insurance subsidiaries. Our business is at a different phase of capital needs than previous years when we were making big investments in new state entries. Additionally, we're taking actions to improve our capital position. We've reduced operating expenses by reducing headcount and renegotiating vendor contracts.

The market exits we have recently announced eliminate future statutory capital infusions in such markets. And over time, we expect to bring any remaining capital back to the parent company or to redirect it to other markets to support growth. We are seeking the most capital-efficient way to achieve our growth and financial targets in order to reduce the need for external capital. This includes balancing our growth plans with our capital needs, continuing our efforts to drive better medical cost and more accurately capture the risk of the population we serve, carefully managing expenses and potentially increasing our use of quota sharing.

We continue to evaluate our future capital needs, which will depend on the growth and performance of the business. In our earnings release this morning, we reaffirmed our full year 2022 outlook. Specifically, we continue to expect enterprise revenue to be in the range of $6.8 billion to $7.1 billion. We expect our enterprise medical cost ratio to be in the range of 90% to 94%.

And full year 2022 adjusted EBITDA to be in the range of a loss of $500 million to $800 million, which, consistent with the guidance we provided on our fourth quarter call, excludes any impact from mark-to-market investment gains and losses. We continue to expect our operating cost ratio below 22%. The exit markets will continue to contribute to our 2022 revenue while we support these members through the end of the year and are expected to have an immaterial contribution to our 2023 financials as we wind down operations in these markets. On a segment basis, we are maintaining our end-of-year Bright HealthCare member forecast for approximately 1 million members.

Full year 2022 NeueHealth revenue is expected to be approximately $2.3 billion with approximately 40% of NeueHealth revenue generated from external sources. Last month, we confirmed our participation in the 2022 direct contracting program with NeueHealth. We have approximately 50,000 lives under management in six states and expect a total revenue contribution of approximately $700 million. The membership is distributed across the market with Northern and Southern California and Florida being our largest DCE market.

We see direct contracting and ACO reach as a great long-term opportunity for addressing the Medicare fee-for-service population and believe NeueHealth is well positioned for success in the program. Our first quarter represented a strong start to the year and gives us confidence in our full year projections. Our 2022 adjusted EBITDA loss guidance reflects a strong improvement from 2021, going from approximately 27% of 2021 revenue to slightly over 9% of revenue in 2022 based on the midpoint of our guidance. The drivers of the reduced EBITDA losses are consistent with our expectations last quarter.

Our membership growth and the pricing actions we took for 2022 support our forecast for strong 2022 revenue growth and gross margin contribution. The investments we made in accurately capturing the risk of the member base gives us visibility into a smaller estimated risk adjustment impact in 2022. The actions we've taken to improve our unit cost, the process improvements we've made in medical cost management and the transition to our new medical claims and care management platforms are showing positive results in our medical costs. Additionally, we have taken actions on operating expenses and have visibility to further cost savings, including the benefit from the market exits.

We note there remains some risk to our forecast, and we have maintained the range on our guidance. The largest risk factors to our guidance are COVID, our ability to timely and accurately capture the risk of our consumers and the impact of our medical cost management initiatives. Before I turn the call back to Mike, I appreciate our amazing Bright Health team across the country. Working together, we are changing healthcare.

Additionally, I want to thank our shareholders for their continued support as we build a national integrated system of care. Now, here's Mike for some additional comments on the business.

Mike Mikan -- Vice Chairman, President, and Chief Executive Officer

Thank you, Cathy. As you've heard this morning, Bright Health Group is becoming a more mature company with greater scale and improving capabilities. We are confident in our strategy around the fully aligned integrated systems of care, the strategic actions we've taken to focus our business where we have differentiated offerings and the investments we are making to drive performance. We have competitive offerings in states with significant addressable markets in both the commercial marketplace and Medicare Advantage.

The market dynamics in these states are attractive and supportive of our path to building a strong and profitable business. We believe our differentiated business model will allow us to outperform in these markets over time. Looking forward, we expect to grow organically on the footprint we've established. We are targeting retention rates approaching 80%, consistent with what we're seeing in our more mature markets and at or above competitive levels as NeueHealth and our care partners drive long-term member relationships.

We expect the combination of more mature markets, strong member retention and longer care partner relationships to result in greater predictability for our medical costs and the ability to drive margin expansion. We also expect NeueHealth to contribute to our profitability targets, adding to the profit opportunity in states where we are building out our care delivery business. As we progress toward 2024, we expect to improve on our operating cost ratio as well, moving from the peak of inefficiency as we consolidate to fewer technology platforms and drive productivity gains. Overall, we're off to a solid start for 2022 and are taking the strategic and operational steps to drive toward our 2024 adjusted EBITDA target.

With that, I'd like to thank our team and our care partners. And now, operator, let's open it up to questions.

Questions & Answers:

Operator

Thank you very much. [Operator instructions] Our first question today comes from Nathan Rich of Goldman Sachs. Nathan, your line is open. Please go ahead.

Lindsay Golub -- Goldman Sachs -- Analyst

Hi. Thanks for the question. This is Lindsay on for Nate Rich. Can you provide any additional color on the non-COVID utilization patterns you've been seeing since the start of 1Q?

Mike Mikan -- Vice Chairman, President, and Chief Executive Officer

Sure. Thanks, Lindsay. It's Mike. So utilization for us, as you may recall, we anticipated that we would have a kind of baseline utilization pre-COVID levels for the year.

And we expected some potential uptick for whether you call it deferred care or endemic COVID, which we priced for. So far, we're seeing utilization favorable to that in both the commercial business, as well as Medicare. Medicare, as Cathy noted, we've seen utilization down mid-single digits from inpatient admissions. And we're seeing a slightly favorable utilization non-COVID in the commercial population as well.

Lindsay Golub -- Goldman Sachs -- Analyst

Thanks very much.

Operator

Our next question on the line comes from Calvin Sternick of J.P. Morgan. Calvin, your line is open. Please go ahead with your question.

Calvin Sternick -- J.P. Morgan -- Analyst

Hey, good morning. Thanks for the question.  If I could just follow up quickly on the utilization and just touch quickly on care deferrals. Is there anything significant that you saw in the quarter? And then just kind of how you see that evolving over the course of the year just because the MLR in the first quarter looks pretty good. And then, related on NeueHealth, the NeueHealth MLR also came in sort of differently than at least we were expecting.

Just curious if you could maybe give some color on NeueHealth MLR and seasonality and how we should think about that going forward?

Mike Mikan -- Vice Chairman, President, and Chief Executive Officer

Well, I don't know that I have much to add on utilization. In terms of the deferred kind of elective procedures and what, we saw an uptick in the fourth quarter last year of elective procedures. And so, we believe that a lot of the deferrals have worked their way through in terms of scheduling surgeries and what have you. I think the thing that we're paying attention to is the -- for those that weren't getting care -- wellness care for certain conditions like cancer diagnoses and things like that, will that emerge over time with a higher intensity of medical conditions for missing those diagnoses early on.

But in terms of utilization, utilization is favorable across our book of business compared to what we anticipated. With respect to NeueHealth, I think -- I'm not sure if you included DCE in NeueHealth, but DCE is obviously a high medical loss ratio just given the pricing of the relationship. And we also include -- because it's -- we've got capitated contracts, when you include Texas, which is a first-year market, they absorb the first-year impact of that market. So both of those would be included in the MLR.

And in terms of seasonality, they would have the same type impact as the IFP business and the risk that they take in Medicare since they're a risk-bearing contract.

Calvin Sternick -- J.P. Morgan -- Analyst

OK. And then, if I can just ask one more. I know the 530,000 NeueHealth value-based patients. Can you give us sense for what percentage of your IFP and MA members are attributed to NeueHealth doctors?

Mike Mikan -- Vice Chairman, President, and Chief Executive Officer

Sure. Right, about -- for IFP, it's about 40% of our IFP book of business, mostly in South Florida and Houston and Texas. And then, our Medicare business is mostly external and in NeueHealth. So it's external payers.

Calvin Sternick -- J.P. Morgan -- Analyst

OK, great. Thanks.

Operator

Thank you. [Operator instructions] Our next question comes in from Joshua Raskin of Nephron Research. Joshua, your line is open. Please go ahead.

Joshua Raskin -- Nephron Research -- Analyst

Hi. Thanks. Good morning. I wanted to talk about the seasonality on the IFP book and the MLR of 84.8% 1Q.

I assume, just based on benefit design, that that's going to be the low for the year. And so, is there some change in your mix, maybe more silver or some other factor? Or just something you're assuming that your medical management efforts are going to take larger effect through the rest of the year to kind of get you to that MLR guidance for the year?

Mike Mikan -- Vice Chairman, President, and Chief Executive Officer

So let me unpack it. And Josh, if I miss something, Cathy, you can correct me. But so the 84.8% is an enterprise medical cost ratio. The Bright HealthCare medical cost ratio was 83.1%, and I noticed that -- noted the difference previously as a result of DCE and the other NeueHealth relationships.

So I would think about it as the 83.1%. And of course, that's a blend of Medicare Advantage risk health plan members, as well as our IFP business. Of course, there is seasonality with the IFP business that as deductibles were off through the year. But there's also the inverse with Medicare Advantage as well.

And so, what gives us confidence in our medical loss ratio is if you compare -- and target, if you compare on a comparable basis year over year, Josh, our 83.1 compares to the reported number of around 80% last year in Q1. But remember, last year, as we got into the second half of the year, of course, we had our challenges related to our claims payment processes, as well as the risk adjustment factors that we took into consideration. When we started the year last year coming into the year, our big growth came from Florida. And as we looked at Florida, the book of business that we expected to get from -- with the market share gains, we expected a riskier population.

And so, we started the year with a risk adjustment factor that was much lower than where we ended. Of course, we trued that up throughout the year because we actually got a healthier population. SEP impacted that some. But then, as well as that, we got impacted by the fact that we didn't have claims data, and we couldn't get -- we couldn't engage fast enough with the population as a result of COVID and SEP.

And so, our coding accuracy was below what we had hoped for. So those impacted -- when you adjust those, the claim impact that we had plus risk adjustment, you've got about an 800-basis point difference between the reported number and what the restated number would be for Q1. So when you look at it comparable, the 83.1% is more comparable to 88%. And so, when you take that into consideration for the -- what impacted us in the last half of the year, we got impacted pretty significantly from COVID, as well as last year, we had prior period development.

When you exclude that, our loss ratio last year of roughly 101.3% or so is about 95%. So if you take the difference between what we reported in Q1 and compare it to last year on a comparable basis, we think we're well within our guidance range and feel that the actions that we continue to take with medical cost initiatives and managing high-cost cases and the things that we outlined in our prepared remarks, we feel really good about our expectations for the remainder of the year.

Joshua Raskin -- Nephron Research -- Analyst

All right. That makes a ton more sense. So the 800-basis-points improvement is kind of an apples to apples, which means your 1,000 basis points plus or so of improvement for the full year, or roughly 1,000, is more consistent with that number kind of apples to apples. That's super helpful.

And then, can I just ask a follow-up on Cathy's comments around capital? I just want to make sure I understood. Were you suggesting there was no need for a capital raise this year? Or were you just sort of outlining the track where you are from here and potential risk?

Cathy Smith -- Chief Administrative and Financial Officer

Yeah. Good morning, Josh. So as we said, first off, remember that we're at a very different phase in the company for our capital needs this year versus previous years, where we were moving into new states and, obviously, a much significant -- much more significant capital requirement. And we've been taking a lot of actions, as we detailed.

Obviously, the strategic decision to exit a few markets helped. We've taken significant action on our operating expenses as well. And so, that helps to reduce the capital need as well. And so, based on our growth and our performance, we do believe we have enough capital to support the business for the next year.

Obviously, we'll continue to evaluate our capital needs as we go forward.

Joshua Raskin -- Nephron Research -- Analyst

Perfect. Thank you.

Operator

And our next question on the line comes from Jason Cassorla of Citi. Jason, your line is open. Please go ahead.

Jason Cassorla -- Citi -- Analyst

Great. Thanks. Good morning, guys. Just on the operating expense front, costs came in much lower sequentially.

You targeted improvement on this front. You discussed ultimately pieces in your prepared comments. But '22 guidance, I had expectations for $200 million worth of operating expense reductions, I guess, can you help quantify how much of those savings was realized in 1Q specifically? And then how do you see those efficiencies and cost savings kind of developing throughout the year? I'm just thinking of all the moving pieces in the different areas you're looking to target. Thanks.

Cathy Smith -- Chief Administrative and Financial Officer

Yes. Thanks. Good morning, Jason. So first off, Q1 had -- we called it out, but we had a number of items that came through our operating expenses that are either noncash or onetime.

So you'll see in the adjusted EBITDA bridge, you can kind of identify them there, but there's some asset impairments for the exit markets, some restructuring costs that we took, etc. So when you adjust all of that, we're well below or we're below the 22%. The actions we've taken on cost structure are -- will come throughout the course of the year, pretty consistently throughout the year. So I think the biggest change is just reduced -- just remove the kind of onetime and/or noncash event out of the operating expenses, and we're on track for our guidance.

Mike Mikan -- Vice Chairman, President, and Chief Executive Officer

Jason, I'd just add -- this is Mike, that we're -- as we talked about our path to breakeven, adjusted EBITDA breakeven in 2024, the big opportunities come with scale and technology leverage, productivity gains. And as we've been talking about, as Cathy noted, all the technology implementation that we made this year and what we've got planned for 2023, there's a significant opportunity for us to achieve productivity gains and drive our operating cost ratio to our target of 15% or lower in 2024. And that's a major objective of ours and one that we're very focused on.

Jason Cassorla -- Citi -- Analyst

Great. Thanks.

Operator

The next question comes from Kevin Fischbeck of Bank of America. Kevin, your line is open. Please go ahead.

Kevin Fischbeck -- Bank of America Merrill Lynch -- Analyst

All right. Great. Thanks. I guess, your consolidated MLR guidance is higher than your Bright Health MLR guidance.

So, I guess, just looks like maybe you're looking for NeueHealth MLR close to 100%. I just wanted to understand. It seemed like most of the things that you were outlining as far as that margin progression for the next couple of years was really more related to Bright Health than to NeueHealth. I guess, some of the things might be applicable to both businesses.

I was wondering if you could just help more specifically direct kind of how you're going to get NeueHealth down from an MLR perspective. Thank you.

Mike Mikan -- Vice Chairman, President, and Chief Executive Officer

Thanks, Kevin. Well, first, I would start with, if you look at our non-related Bright HealthCare business that NeueHealth has its customers, we performed very well, well below the 100% level for sure. And so, we know we've got the capabilities implicit to achieve better results in NeueHealth. NeueHealth is absorbing some of the new market entries that we've had, Texas being a significant entry this year and last year, of course, with Florida.

The other impact that is a high loss ratio for NeueHealth that we've tried to break out separately at DCE just given the contractual relationship with the government of the high 90s or so, 97%, 98%. And so, we believe, over time, NeueHealth is going to contribute additional margin to the enterprise, both from our relationship with Bright HealthCare in the local markets and perform comparably to how we perform with our external customers. And that's how we're going to drive incremental margin on an enterprise basis.

Kevin Fischbeck -- Bank of America Merrill Lynch -- Analyst

But, I guess, are there things that you're saying, like the repricing, the micromanagement initiatives, are those things if you improve the health plan, does that then just flow through to NeueHealth as well? Or are there separate kind of NeueHealth actions that have to happen to improve the MLR in the internal business?

Mike Mikan -- Vice Chairman, President, and Chief Executive Officer

Yes. I mean, we're a risk-bearing provider, that we -- both sides of the business have medical cost initiatives, but they're working together, building out the affiliate network and getting better performance from our employee physicians, as well as affiliated physicians is an objective of both parts of the business. So to the degree NeueHealth improves, it obviously is going to improve both sides of the business.

Kevin Fischbeck -- Bank of America Merrill Lynch -- Analyst

OK, great. Thanks.

Operator

Ricky Goldwasser of Morgan Stanley, you have the next question. Please go ahead.

Kristin Long -- Morgan Stanley -- Analyst

Good morning. This is Kristin Long from Morgan Stanley on for Ricky Goldwasser. Curious about your anticipated cash borrowing rate for the rest of 2022 and kind of the sources of capital you are evaluating. I think you mentioned $365 million in unregulated cash, and then I know you have the $300 million in credit facility.

So that's $665 million of available cash as of the end of the quarter. Does that sound right in terms of available cash or there are other components we are missing such as tapping into your regulatory capital for the share arrangement or anything on those lines? Thanks.

Cathy Smith -- Chief Administrative and Financial Officer

Yes. So I'm happy to say that -- to take that, Kristin. So first off, I think at the highest level, think about cash as well. Let's set the stage first.

To your point, we noted $365 million of unregulated capital and short-term investments. So we have $365 million of cash available right now. And then, we have the credit facility other than the letter of credit as we noted. So the vast majority of that is available to us still.

In addition, we are, as we've noted, pursuing other things like quota sharing, which will help us to extend our capital position. Further, we're continuing to work on things like additional expense reductions, etc. So all of that goes into our thinking of the capital for the year, the cash for the year. I think the quickest way to think about cash burn, though, is just look to our EBITDA guidance, our adjusted EBITDA guidance.

So that's probably a good way to think about it. And our guidance, you remember, was minus $500 million to minus $800 million for the year.

Kristin Long -- Morgan Stanley -- Analyst

Thanks, Cathy. Makes sense. As a follow-up or a separate question. You guys recently exited six markets and saving $100 million in cash, which is great.

But also curious on the other side, how this might have impacted or will impact conversations you guys are having, the willingness of providers to contracts in the markets you are staying at and wondering if there's been anything on that front? Thanks.

Mike Mikan -- Vice Chairman, President, and Chief Executive Officer

I think our care partner relationships in the markets that we're staying in, we've got strong care partner relationships. And we continue to evolve our local market capabilities. In the core major markets, we're building around our differentiation, which is our fully aligned care model with NeueHealth, which includes our own centers, as well as our affiliated contract positions. And we continue to refine and make improvements in that regard.

So overall, our care partner networks in the local markets where we remain are strong.

Kristin Long -- Morgan Stanley -- Analyst

Great. Thank you.

Operator

Our next question comes from Jenna [Inaudible] of FactSet. Jenna, your line is open.

Jeff Garro -- Piper Sandler -- Analyst

Hello. This is Jeff Garro from Piper. Can you hear me?

Mike Mikan -- Vice Chairman, President, and Chief Executive Officer

Yes.

Jeff Garro -- Piper Sandler -- Analyst

Sorry about that. I wanted to ask about MCR and claims processing. Could you expand on your claims processing improvement and break that down between performance of your go-forward system and process improvements for legacy systems?

Mike Mikan -- Vice Chairman, President, and Chief Executive Officer

Sure. There's a lot of things that go into that. So I'll unpack it and try to answer it as succinct as I can. But our claims processing issues that really began last year in our legacy system, which we are migrating off of as Cathy mentioned, we're 30% on our new platform.

And we'll migrate the remaining membership by 1/1/23. One of the core issues that we have is getting contracts loaded accurately and timely. Last year in Florida, we anticipated a size that was much less than what we ended up with. And so, we had to remediate and add late in the fourth quarter of 2020 into the first quarter of 2021 a bunch of physicians and other providers, which we didn't get loaded well into the year.

And obviously, that created a significant backlog in our claims for the year. That's what impacted -- we had to play catch up the whole year into Q4, where, as we talked about in the fourth quarter call, where we processed around 50% of our claims for the year during that time period, which was a significant amount of work. While it did do -- bring down our claims backlog, we had numerous issues with that amount of payments going through in the fourth quarter. The good news is, starting off this year, I would know two things: one, we were much more prepared for the growth of our business, as well as each one of our markets in terms of having our care partner network and our affiliate physicians under contract and loaded into the system.

And so, that is -- and with that claim pay down that we had in the fourth quarter, while it was costly to us, it put us in a position where we're much more ahead of processing claims to date. As Cathy noted, a significant continued improvement in backlog. But also we're seeing today in our legacy system, our claims over 60 days is down below 3%. So we're pleased with the progress that we've made in that regard.

We've got -- on our new system, our metrics are even performing better than that. And so, we're encouraged with where we're moving to. While we still have challenges with our legacy system, the good news is we know where those challenges are today, and we continue to remediate those. And as we remediate them, we're going to see improvements again throughout the year.

So we're encouraged with the results but note the challenge until we get off our system entirely on 1/1/23.

Jeff Garro -- Piper Sandler -- Analyst

Great. Thanks for all those comments. A follow-up for me on special enrollment periods and broker relations. Just curious if changing incentives for brokers has impacted SEP enrollment to date, and then whether there's any concern about potential ramifications from brokers during open enrollment period in the future because of the current SEP approach.

Thanks.

Mike Mikan -- Vice Chairman, President, and Chief Executive Officer

Yes. So SEP, I'll give a little bit of color to it again, just to remind those of -- the impact that SEP had on us last year, of course, because of the administration opening up SEP. From about mid-March through September, we added about 30,000 lives on average per month last year. And so, that had a significant impact on not only the book of business that we were managing, but just the pent-up demand for services and other things that came along with that unusual SEP event.

This year, we anticipated a more normal, call it, midyear enrollment impact, and we're seeing that today. We're seeing typical attrition during the year. Obviously, redeterminations in Medicaid could impact that to some degree. But we think we'll be able to manage that within expectations as well.

So we're seeing normal attrition for SEP, and hence, why you'll note the end-of-year membership target that we put out there is below where we're at today and in line with what our expectations are.

Jeff Garro -- Piper Sandler -- Analyst

Great. Thanks again.

Operator

Thank you very much. We have no further questions on the line. So I'll hand back over to Mike Mikan for closing remarks. Thank you.

Mike Mikan -- Vice Chairman, President, and Chief Executive Officer

Great. Again, we want to thank you for your time, your interest in our company. We look forward to further updates in the future. Take care.

Operator

[Operator signoff]

Duration: 52 minutes

Call participants:

Stephen Hagan -- Director of Investor Relations

Mike Mikan -- Vice Chairman, President, and Chief Executive Officer

Cathy Smith -- Chief Administrative and Financial Officer

Lindsay Golub -- Goldman Sachs -- Analyst

Calvin Sternick -- J.P. Morgan -- Analyst

Joshua Raskin -- Nephron Research -- Analyst

Jason Cassorla -- Citi -- Analyst

Kevin Fischbeck -- Bank of America Merrill Lynch -- Analyst

Kristin Long -- Morgan Stanley -- Analyst

Jeff Garro -- Piper Sandler -- Analyst

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