Q4 2019 Earnings Call

February 27, 2020

Ladies and gentlemen, this the operator today's conference call is scheduled to begin momentarily until that time your lines will again be placed a music cold they keep your patience.

[music].

Ladies and gentlemen, thank you for standing by and welcome to the fourth quarter and full year 2019 earnings conference call. At this time, all participants are in a listen only mode.

Operator: Ladies and gentlemen, thank you for standing by, and welcome to the fourth quarter and full year 2019 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press star one on your telephone.

The speakers presentation, there will be a question and answer session to ask a question. During this session. You want me to press Star one on your telephone. Please be advised to today's conference is being recorded if you acquire any further assistance. Please press star Zero I would now like to hand, the conference over to your speaker today, Steve Filton CFO. Please go.

Operator: Please be advised that today's conference is being recorded. If you require any further assistance, please press star zero. I would now like to hand the conference over to your speaker today, Steve Filton, CFO. Please go ahead, sir.

I had sir.

Operator: Good morning. Alan Miller, our CEO, is also joining us this morning. We both welcome you to this review of Universal Health Services' results for the full year and fourth quarter ended 31 December 2019. During this conference call, Alan and I will be using words such as believes, expects, anticipates, estimates, and similar words that represent forecast projections and forward-looking statements.

Good morning.

Well below our CEO is also joining us. This morning, we both welcome you to this review of Universal Health Services' results for the full year and fourth quarter ended December 31 2019.

Operator: We both welcome you to this review of Universal Health Services' results for the full year and fourth quarter ended 31 December 2019. During this conference call, Alan and I will be using words such as believes, expects, anticipates, estimates, and similar words that represent forecast projections and forward-looking statements. For anyone not familiar with the risks and uncertainties inherent in these forward-looking statements, I recommend a careful reading of the section on risk factors and forward-looking statements and risk factors in our Form 10-K for the year ended 31 December 2019. We would like to highlight just a couple of developments and business trends before opening the call up to questions. As discussed in our press release last night, the company recorded net income attributable to UHS per diluted share of $9.13 for the full year of 2019 and $2.79 for the fourth quarter.

During this conference call, Alan and I will be using words, such as believes expects anticipates estimates and similar words that represent forecasts projections and forward looking statement.

Operator: For anyone not familiar with the risks and uncertainties inherent in these forward-looking statements, I recommend a careful reading of the section on risk factors and forward-looking statements and risk factors in our Form 10-K for the year ended 31 December 2019. We would like to highlight just a couple of developments and business trends before opening the call up to questions. As discussed in our press release last night, the company recorded net income attributable to UHS per diluted share of $9.13 for the full year of 2019 and $2.79 for the fourth quarter.

For anyone not familiar with the risks and uncertainties inherent in these forward looking statements I recommend a careful reading of the section on risk factors and forward looking statements on risk factors in our form 10-K for the year ended December 31 2019.

He would like to highlight just a couple of developments in business trends before opening the call up to question.

As discussed in our press release last night. The company recorded net income attributable to you right chats per diluted share of $9 and 13 fans for the full year of 2019 and $2.79 for the fourth quarter.

As reflected on the supplemental schedule included with last nights earnings release, there were no significant adjustments made to our reported net income attributable to you Hs during the fourth quarter of 2019.

Operator: As reflected on the supplemental schedule included with last night's earnings release, there were no significant adjustments made to our reported net income attributable to UHS during Q4 2019. After adjusting the 12-month period ended 31 December 2019, as indicated on the supplemental schedule, adjusted net income attributable to UHS increased to $891.8 million, or $9.99 per diluted share as compared to $894.4 million, or $9.53 per diluted share during the full year of 2018. Included in our reported and our adjusted net income attributable to UHS during Q4 2019 is a pre-tax unrealized gain of $16.7 million, or $0.15 per diluted share resulting from an increase in the market share of shares of certain marketable securities held for investment and classified as available for sale.

After adjusting the 12 month period ended December 31, 2019 as indicated on the supplemental schedule. Adjusted net income attributable to your age has increased to 891.8 million or $9, a 99 cents per diluted share.

As compared to 894.4 billion or $9.53 per diluted share during the full year 2018.

Operator: Included in our reported and our adjusted net income attributable to UHS during Q4 2019 is a pre-tax unrealized gain of $16.7 million, or $0.15 per diluted share resulting from an increase in the market share of shares of certain marketable securities held for investment and classified as available for sale. Our financial results for the year ended December 31, 2019, included a pre-tax unrealized gain of $4.1 million, or $0.04, per diluted share recorded in connection with these marketable securities.

Included in our reported and our adjusted net income attributable to you HF. During the fourth quarter 2019 is a pretax unrealized gain of 16.7 million or 15 cents per diluted share.

Resulting from an increase in the market share of shares of certain marketable securities held for investment and classified as available for sale.

Operator: Our financial results for the year ended December 31, 2019, included a pre-tax unrealized gain of $4.1 million, or $0.04, per diluted share recorded in connection with these marketable securities. For the year ended December 31, 2019, as reflected on the supplemental schedule, our adjusted net income attributable to UHS excluded an unfavorable after-tax impact of $14.6 million resulting from an increase in the DOJ reserve and related income taxes, the unfavorable impact of an after-tax $74.6 million provision for asset impairment, which reduced the carrying value of a trade name and tangible asset and certain real property assets recorded in connection with Foundations Recovery Network, and a favorable after-tax impact of $12.2 million resulting from our adoption of ASU 2016-09. On a same-facility basis in our acute care division, net revenues increased 7.9% during the fourth quarter of 2019.

Our financial results for the year ended December 31, 2019 included a pretax unrealized gain of 4.1 million or four cents per diluted share recorded in connection with these marketable securities.

For the year ended December 31, 2019 as reflected on the supplemental schedule. Our adjusted net income attributable to you HX you ejaz, excluding an unfavorable after tax impact of 14 point Sixmillion, resulting from an increase in the D.O.J. reserve and related income taxes, the unfavorable impact.

Operator: For the year ended December 31, 2019, as reflected on the supplemental schedule, our adjusted net income attributable to UHS excluded an unfavorable after-tax impact of $14.6 million resulting from an increase in the DOJ reserve and related income taxes, the unfavorable impact of an after-tax $74.6 million provision for asset impairment, which reduced the carrying value of a trade name and tangible asset and certain real property assets recorded in connection with Foundations Recovery Network, and a favorable after-tax impact of $12.2 million resulting from our adoption of ASU 2016-09.

On an after tax 74.6 million provision for asset impairment, which reduced the carrying value of a trade name intangible asset and certain real property assets [laughter] recorded in connection with foundations recovery network.

And a favorable after tax impact of 12.2 million, maybe resulting from our adoption I've asked you 2016 dash nine.

On a same facility basis in our acute care division net revenues increased 7.9% during the fourth quarter of 2019, excluding our health plan same store revenues increased 7.5% as compared to the fourth quarter of 2018.

Operator: On a same-facility basis in our acute care division, net revenues increased 7.9% during the fourth quarter of 2019. Excluding our health plan, same-facility revenues increased 7.5% as compared to the fourth quarter of 2018. The increased revenues resulted primarily from a 2.1% increase in adjusted admissions and a 5.3% increase in revenue per adjusted admission.

Operator: Excluding our health plan, same-facility revenues increased 7.5% as compared to the fourth quarter of 2018. The increased revenues resulted primarily from a 2.1% increase in adjusted admissions and a 5.3% increase in revenue per adjusted admission. On a same-facility basis, net revenues in our behavioral health division increased 4.5% during the fourth quarter of 2019. Adjusted admissions to our behavioral health facilities owned for more than a year increased 0.8% while adjusted patient days increased 0.9% during the fourth quarter of 2019 as compared to the fourth quarter of 2018. Revenue per adjusted patient day rose 3.9% during the fourth quarter of 2019 over the comparable prior year quarter.

The increased revenues resulted primarily from a 2.1% increasing adjusted admissions and a 5.3% increase in revenue per adjusted admission.

Operator: On a same-facility basis, net revenues in our behavioral health division increased 4.5% during the fourth quarter of 2019. Adjusted admissions to our behavioral health facilities owned for more than a year increased 0.8% while adjusted patient days increased 0.9% during the fourth quarter of 2019 as compared to the fourth quarter of 2018.

On a same facility basis net revenues in our behavioral health Division increased 4.5% during the fourth quarter of 2019, adjusted admissions to our behavioral health facilities on for more than a year increased 0.8%, while adjusted patient days increased 49% during the fourth quarter of 2019 task.

Impaired during the fourth quarter 2018.

Operator: Revenue per adjusted patient day rose 3.9% during the fourth quarter of 2019 over the comparable prior year quarter. Included in our behavioral health division's operating results during the fourth quarter of 2019 was approximately $8 million of pre-tax insurance proceeds recorded in connection with business interruption losses incurred and property damages sustained at one of our facilities located in Florida. This facility, which sustained substantial damage during the fourth quarter of 2018 in connection with Hurricane Michael, has been repaired and reopened.

Revenue per adjusted patient day rose, 3.9% during the fourth quarter of 2019.

Comparable prior year for.

Operator: Included in our behavioral health division's operating results during the fourth quarter of 2019 was approximately $8 million of pre-tax insurance proceeds recorded in connection with business interruption losses incurred and property damages sustained at one of our facilities located in Florida. This facility, which sustained substantial damage during the fourth quarter of 2018 in connection with Hurricane Michael, has been repaired and reopened. Our cash generated from operating activities was $1.438 billion during the full year of 2019 as compared to $1.75 billion during 2018. We spent $634 million on capital expenditures during the full year of 2019 as compared to $665 million during 2018. Our accounts receivable days outstanding declined to 50 days during the year ended 31 December 2019 as compared to 51 days during 2018.

Included in our behavioral health division's operating results during the fourth quarter of 2019 was approximately $8 million a pre tax insurance proceeds recorded in connection with business interruption losses incurred and property damage is sustained at one of our facility is located in Florida.

This facility, which sustained substantial damage during the fourth quarter 2018 in connection with Hurricane Michael has been repaired and reopened.

Operator: Our cash generated from operating activities was $1.438 billion during the full year of 2019 as compared to $1.75 billion during 2018. We spent $634 million on capital expenditures during the full year of 2019 as compared to $665 million during 2018. Our accounts receivable days outstanding declined to 50 days during the year ended 31 December 2019 as compared to 51 days during 2018. At 31 December 2019, our ratio of debt to total capitalization declined to 42.0% as compared to 42.6% at 31 December 2018.

Our cash generated from operating activities was 1.438 billion during the full year of 2019.

And 1.75 billion during 2018.

Spend 634 million on capital expenditures during the full year 2019, as compared to 665 million. During 2018, our accounts receivable days outstanding declined to 50 days during the year ended December 31, 2019, that's compared to 51 days during 2018.

Operator: At 31 December 2019, our ratio of debt to total capitalization declined to 42.0% as compared to 42.6% at 31 December 2018. During 2019, we completed and opened approximately 250 new beds in our existing acute and behavioral hospitals. We also developed four new freestanding emergency departments and acquired two more in 2019 to bring our total number of FEDs to 14. There are three more FEDs under construction, which are expected to open in 2020. We also continue to grow our behavioral health joint venture portfolio with three new facilities already operational, seven under construction or announced, which are expected to open in 2020 and 2021, and over 40 opportunities in the pipeline. During 2020, we expect to spend approximately $775 million to 825 million on capital expenditures, which includes expenditures for capital equipment, renovation, new projects at existing hospitals, and construction of new facilities.

At December 31, 2019, our ratio of debt to total capitalization declined to 42.0% as compared to 42.6% at December 31 2018.

Operator: During 2019, we completed and opened approximately 250 new beds in our existing acute and behavioral hospitals. We also developed four new freestanding emergency departments and acquired two more in 2019 to bring our total number of FEDs to 14. There are three more FEDs under construction, which are expected to open in 2020. We also continue to grow our behavioral health joint venture portfolio with three new facilities already operational, seven under construction or announced, which are expected to open in 2020 and 2021, and over 40 opportunities in the pipeline.

During 2019, we completed and opened approximately 250, new beds in our existing acute behavioral hospitals. We also developed for new freestanding emergency departments and acquired two more in 2019 to bring our total number of EFI deed to 14.

There are three more happy days under construction, which are expected to open in 2020.

We also continue to grow our behavioral health joint venture portfolio with three new facilities already operational seven under construction or announced which are expected to open in 2020 in 2021 and over 40 opportunities in the pipeline.

Operator: During 2020, we expect to spend approximately $775 million to 825 million on capital expenditures, which includes expenditures for capital equipment, renovation, new projects at existing hospitals, and construction of new facilities. In conjunction with our share repurchase program during the fourth quarter of 2019, we purchased approximately 1.29 million shares of our stock at a cost of approximately $181 million, or $141 per share.

During 2020, we expect to spend approximately 775 million to 825 million on capital expenditures, which includes expenditures for capital equipment renovation, new projects, new projects that existing hospitals and construction of new facilities.

Operator: In conjunction with our share repurchase program during the fourth quarter of 2019, we purchased approximately 1.29 million shares of our stock at a cost of approximately $181 million, or $141 per share. During the 12 months ended 31 December 2019, we have repurchased approximately 5.4 million shares at an aggregate cost of approximately $706 million, or $131 per share. We believe share repurchase is a prudent use of our financial capital, and we plan to continue to return value to our shareholders in 2020. Consequently, our 2020 operating results forecast assumes approximately $800 million of share repurchases. Last night's press release included our 2020 operating results forecast. For the year ended 31 December 2020, our estimated range of adjusted earnings before interest, taxes, depreciation, and amortization net of controlling interest is $1.823 billion to $1.902 billion.

In conjunction with our share repurchase program during the fourth quarter 2019, we purchased approximately 1.2 minutes to 9 million share.

Our stock at a cost of approximately 181 million were $141 per share. During the 12 month ended December 31, 2019, we have repurchased approximately 5.4 million shares at an aggregate cost of approximately 706 million over $131 per share weve.

Operator: During the 12 months ended 31 December 2019, we have repurchased approximately 5.4 million shares at an aggregate cost of approximately $706 million, or $131 per share. We believe share repurchase is a prudent use of our financial capital, and we plan to continue to return value to our shareholders in 2020. Consequently, our 2020 operating results forecast assumes approximately $800 million of share repurchases.

Leaves share repurchase is a prudent use of our financial capital and we plan to continue to return value to our share today.

Consequently, our 2020 operating results forecast assumes approximately $800 million or share repurchases.

Operator: Last night's press release included our 2020 operating results forecast. For the year ended 31 December 2020, our estimated range of adjusted earnings before interest, taxes, depreciation, and amortization net of controlling interest is $1.823 billion to $1.902 billion.

Last Night's press release included our 2020 operating results forecast for the year ended December 31, 2020, our estimated range of adjusted earnings before interest taxes, depreciation and amortization net of controlling interest is 1.8 to 3 billion to 1.902 billion.

Operator: Our estimated range of adjusted net income attributable to UHS for the year ended 31 December 2020, is $10.30 to $11 per diluted share. This adjusted EPS guidance range represents an increase of approximately 3 to 10% over the adjusted net income attributable to UHS of $9.99 per diluted share for the year ended 31 December 2019, as calculated on the supplemental schedule. During 2020, our net revenues are estimated to be approximately $11.96 billion to $12.12 billion, representing an increase of 5.1 to 6.5% over our 2019 net revenues. We are pleased to answer questions at this time. Thank you. As a reminder to ask a question, you will need to press star one on your telephone. To withdraw your question, press the pound key. Please stand by while we compile the Q&A roster. Your first question comes from the line of Steven Valiquette with Barclays.

Our estimated range of adjusted net income attributable you H. asked for the year ended December 31, 2020 is 10030 cents to $11 per diluted share [laughter]. Its adjusted EPS guidance range represents an increase of approximately 3% to 10% over the adjusted net income attributable to you a chance of $9 in 99.

Tons per diluted share for the year ended December 31, 2019 as calculated on the supplemental schedule.

During 2020, our net revenues are estimated to be approximately 11.96 billion to 12 point 12 billion, representing an increase of 5.16, 0.5% overarching thousand 19 net revenue.

We are pleased to answer questions at this time.

Operator: Thank you. As a reminder to ask a question, you will need to press star one on your telephone. To withdraw your question, press the pound key. Please stand by while we compile the Q&A roster. Your first question comes from the line of Steven Valiquette with Barclays.

Thank you as a reminder to ask a question you will need to press star one on your telephone to withdraw your question press the pound key please standby we compile the king many roster.

Your first question comes from the line of Steve Valiquette with Mark Barclays.

Thanks. Good morning. This is Andrew Mark on for Steve. So first question on 2020 guidance at the midpoint revenue guide is up almost 6% and EBITDA growth is closer to 3.5% can you provide some color on the underlying underlying components embedded in the guide between the segments.

[Analyst] (Aiera): Thanks. Good morning. This is Andrew Mok for Steve. So, first question on 2020 guidance. At the midpoint, revenue guide is up almost 6%, and EBITDA growth is closer to 3.5%. Can you provide some color on the underlying components embedded in the guide between the segments? Is there any meaningful change in the behavioral volume outlook for 2020 that you would highlight?

Is there any meaningful change in the behavioral volume outlook for 2020 that you would highlight.

Andrew I think that.

Steve Filton: Andrew, I think that the elements that underlie the 2020 guidance are not terribly different than those that underlie the 2019 guidance, as well as, quite frankly, our 2019 results. And that is, in the acute division, I think revenue growth in the mid to upper single-digit range and commensurate EBITDA growth. And on the behavioral side, revenue growth in the sort of 3% to 4% range with EBITDA growth in sort of a 1% to 2% range. And then, obviously, we make some adjustments to that based on non-recurring reimbursement items, etc., that we expect in 2019 2020, rather.

Elements that underlie the 2020 guides are not terribly different than those that under like the 2019 got guidance as well as quite frankly, our 2019 results and that is in the acute division I think revenue growth in that mid mid to upper single digit range yeah.

And he <unk> commensurate EBITDA growth and on the behavioral side revenue growth and they've got it sort of 3% to 4% range with EBITDA growth and spent about 1% to 2% range and then obviously, we make some adjustments to that based on nonrecurring reimbursement items et cetera that we expect in 2019 2020 route.

[music].

Thanks, that's helpful on the quarter, you're acute volumes decelerated from the exceptionally high volumes in Threeq. You is there anything you would call out driving that volume number lower can you speak to the challenges in managing labor expenses, both temporary labor and position volume commitments in this type of choppy volume environment.

[Analyst] (Aiera): Thanks. That's helpful. On the quarter, your acute volume is decelerated from the exceptionally high volumes in Q3. Is there anything you would call out driving that volume number lower? Can you speak to the challenges in managing labor expenses, both temporary labor and position volume commitments, in this type of choppy volume environment?

Sure and then what we should move onto our next question the job.

Steve Filton: Sure. And then we should move on to our next question. You know, not only did our acute results decelerate in Q3, but we've really had industry-leading and what I would describe as historically extraordinary acute care volume growth for several years now. And I think we've been preparing ourselves and investors as well for the notion that at some point, our volumes would moderate to sort of more historically normative levels. And I think you saw some of that in Q4 2019. The only sort of specific market or hospital that I would point to is Henderson Hospital in Las Vegas. We've talked any number of times over the last few years about the explosive growth and the extraordinarily fast ramp-up at Henderson. That hospital is now operating at pretty much full capacity around the clock.

Not only did our acute resolved.

Right, but we we've really had industry, leading and what I would describe as historically extraordinary acute care volume growth for several years now and I think we've been preparing ourselves and investors as well for the notion that at some point.

Our volumes would moderate to sort of more historically normative level. Then I think you saw some of that in the fourth quarter of 2019.

Steve Filton: The only sort of specific market or hospital that I would point to is Henderson Hospital in Las Vegas. We've talked any number of times over the last few years about the explosive growth and the extraordinarily fast ramp-up at Henderson. That hospital is now operating at pretty much full capacity around the clock.

Only sort of specific Marketo hospital that I would point to.

His Henderson Hospital Las Vegas, we've talked any number of times over the last few years about the explosive growth and the extraordinarily fast ramp up at Henderson.

That hospital is now operating at pretty much full capacity around the clock. So.

Steve Filton: So, growth there has slowed, and on an overall basis, that has muted the overall growth of the acute care division a little bit. Otherwise, I think we just saw kind of a normal step down in the quarter. As far as the labor pressures, I think, again, nothing new there. We continue to see labor pressure in both of our business segments. I don't think it's a surprising development, and it's not a new development given the extremely, you know, robust and low unemployment rates in the country. The challenges have seemingly sort of reflected themselves differently in the two divisions. In the acute division, it continues to press on both our salary and benefit expense and our other operating expense where we record some of our contract physician labor, as we replace or fill the vacancies with temporary hours of overtime or premium pay or locums positions, etc.

Growth there has slowed and on an overall basis that has muted the overall growth of the acute care division a little dad, otherwise I think we just saw cost enormity of step down in the quarter.

As far as the labor pressures I think again nothing new there we continue to see labor pressure in both of our business segments I don't think it's a surprising.

Development inside and not a new development, given the extremely robust and low unemployment rates in the country. The challenge is seemingly sort of reflected themselves differently in the two divisions and me acute division. It continues to press on both our salary.

Steve Filton: The challenges have seemingly sort of reflected themselves differently in the two divisions. In the acute division, it continues to press on both our salary and benefit expense and our other operating expense where we record some of our contract physician labor, as we replace or fill the vacancies with temporary hours of overtime or premium pay or locums positions, etc.

And benefit expense in our other operating expense will be recorded some of our contract position labor.

As we replace or still the the vacancies with temporary hours of overtime or premium pay or locums positions and Patrick and on the behavioral side, we were challenged because a lot of the labor vacancies are resolved and.

Steve Filton: And on the behavioral side, we're challenged because a lot of the labor vacancies result in our having to cap beds or turn away patients. Again, nothing new in either of those instances, but it continues to be a challenge that our operators are very much focused on.

Our having to cap adds or turn away patients.

Again, nothing new in either of those instances, but but it continues to be a challenge that our operators are very much focused on.

Great appreciate the color question.

[Analyst] (Aiera): Great. Appreciate the callback.

Steve Filton: Next question? Thank you.

Thank you.

Operator: Your next question comes from the line of Matthew Borsch with BMO Capital Markets.

Your next question comes from the line as Matthew Borsch with BMO capital markets.

I was hoping maybe you could you talk a little bit about the near term outlook.

[Analyst] (BMO Capital Markets): I was hoping maybe you could just talk a little bit about the near-term outlook, you know, for the Q1 given, obviously, I don't need to tell you there's a calendar shift to utilization. And the backdrop, maybe it's important to the flu season. It's been a little bit strange in its pattern. And then finally, if there's anything you can say or want to say on coronavirus. Thank you.

For the first quarter, given obviously you don't need to tell uses a calendar.

To be a little bit of a calendar wait to our utilization in the backdrop, maybe it's on important to the flu season is down a little bit strange in its plotting and then finally, just anything you can say or want to say I'm trying to virus. Thank you.

Sure Matt.

Steve Filton: Sure, Matt. You know, I think 2019 was a year in which we experienced a fair amount, particularly in the acute business, of quarter-to-quarter volatility that was, I think, somewhat unexpected, in some cases difficult to explain, and different than sort of traditional seasonal patterns. Now, I think at the end of the year and for the full year, the results of the division played out not terribly differently than our overall expectations. But I think as we go into 2020, and even though we don't give quarterly guidance and don't intend to, I think our expectation would be, absent any information to the contrary, that the annual progression, the cadence of the quarters, is sort of more traditional. You know, last year, we had a very soft first quarter in acute and then a much stronger second.

I think 2019 was a year and which.

We experienced a fair amount, particularly in the acute business quarter to quarter volatility.

That was I think somewhat unexpected in some cases difficult to explain.

And different than then sort of traditional seasonal patterns no I think at the end of the year and for the full year. The the result of the division played out not terribly differently than our overall expectations.

Steve Filton: But I think as we go into 2020, and even though we don't give quarterly guidance and don't intend to, I think our expectation would be, absent any information to the contrary, that the annual progression, the cadence of the quarters, is sort of more traditional. You know, last year, we had a very soft first quarter in acute and then a much stronger second. I think this year, we'd expect a cadence that's a bit more radical. But it's hard to predict, and quite frankly, it's part of the reason we don't give quarterly guidance.

But I think as we go into 2020, and even though we don't give quarterly guidance and don't intend to.

I think our expectation would be absent any information to the contrary that the.

Annual progression the cadence of the quarters is sort of more traditional your last year, we had a very soft first quarter and acute and then a much stronger second I think this year we'd expect.

Steve Filton: I think this year, we'd expect a cadence that's a bit more radical. But it's hard to predict, and quite frankly, it's part of the reason we don't give quarterly guidance. As far as the coronavirus, you know, like everybody else, I think, you know, any commentary that I would give at this point would be purely speculative. You know, it's impossible to know what the impact will be, you know, specifically in the first quarter. But we're certainly prepared. Our hospitals are prepared as best as they can be, if the coronavirus becomes more widespread. But, you know, I think it's virtually impossible to predict the financial impact.

Okay, that's a bit more ratable, but hard to predict and and quite frankly as part of the reason, we don't give quarterly guidance.

Steve Filton: As far as the coronavirus, you know, like everybody else, I think, you know, any commentary that I would give at this point would be purely speculative. You know, it's impossible to know what the impact will be, you know, specifically in the first quarter. But we're certainly prepared. Our hospitals are prepared as best as they can be, if the coronavirus becomes more widespread. But, you know, I think it's virtually impossible to predict the financial impact.

As far as the Corona virus.

Like everybody else I think you know any.

Commentary that I would give at this point would be purely speculative.

You know, it's impossible to know what what the impact will be specifically in the first quarter, but we're certainly prepared or hospitals are prepared as best as they can be if the corona virus becomes more widespread but you know I think virtually impossible to predict the financial impact.

[Analyst] (BMO Capital Markets): Sorry. Let me just follow up quick on that, which is, I realize it's speculative, but in a certain scenario where there is a lot of travel disruption, disruption in general because people are afraid of the spread, you know, versus necessarily having, you know, lots and lots of patients that are being hospitalized, you know, do you think that that actually could be a retarding effect on volumes as you get cancellation of elective procedures and so forth?

Do you just sorry, let me just follow up quick on the on that which is.

I realize speculative, but in a certain scenario, where there is a lot of travel disruption disruption in general because people are afraid of the spread.

Yes versus necessarily having lots and lots of patients that are being hospitalized <unk>.

Do you think your dad actually could be a retarding effect on volumes as you get cancellation of electric elective procedures and so forth.

I mean again, you know I would repeat the you know.

Steve Filton: I mean, again, you know, I would repeat, you know, Matt, that it would be speculative on my part. I think, you know, the only thing we can sort of fall back on is, you know, respiratory ailments that we've experienced before, either very busy flu seasons or, you know, SARS or whatever it was. And, I think, you know, generally, we have found that, our elective procedures have really not been impacted by a busy respiratory ailment season, etc. Now, you know, again, if this is extraordinary, I think all bets are off the table. But that has not been the historic experience.

Matt that it would be speculative on my part I think you know the only thing you can sort of fall back on is.

You know respiratory elements that we've experienced before either a very busy flu seasons, or you know sars or whatever it was and I.

I think generally we have found that.

Our elective procedures have really not been impacted by a busy respiratory ellman season that you had your now you know again. This is extraordinary like all bets are off the table, but that's showing up in the historical experience. Okay. Alright. Thank you.

[Analyst] (BMO Capital Markets): Okay. All right. Thank you.

Your next question comes from the line of Justin Lake went from Wolfe Research.

Operator: Your next question comes from the line of Justin Lake from Wolfe Research.

Good morning, this Eugene on for Justin I'm, just not the fall off to Andrus earlier question. The pure it appears a temp staffing costs remain high in Q4, despite a moderate volume or how should we think about these costs in 2020, if volumes remain more normal.

[Analyst] (Wolfe Research): Good morning. This is Eugene Sulina for Justin. Just as a follow-up to Andrew's earlier question, it appears that temp staffing costs remain high in Q4 despite the moderate volume. How should we think about these costs in 2020 if volumes remain more normal? And also, can you comment on the, you know, meaningful improvement in the behavioral pricing in the quarter? Thank you.

And also can you comment on them and you know meaning for improvement rehab behavioral pricing the can the quarter. Thank you.

Sure. So I think in terms of temp staffing and the acute business is.

Steve Filton: Sure. So I think in terms of temp staffing in the acute business, one of the reasons why I think it was more of a drag even than it has been in the fourth quarter is that as our volumes, as I alluded to before, have been so strong for such a long period of time, I think that our hospitals and our hospital operators have been making longer-term commitments for temporary staffing, both for nurses and for physicians. You know, so not just for a day or a couple of days in advance, but sometimes for weeks and months in advance. As a consequence of that, when the volumes softened a little bit in the fourth quarter, it was a little more difficult to adjust as quickly as we'd like to those sort of lower volumes.

One of the reasons why I think it was more of a drag even a that it has been in the fourth quarter is that as our volumes as I alluded to before I've been so strong for such a long period of time I think that.

Our hospitals and hospital operators have been making longer term commitments for temporary staffing both for nurses and for physicians.

Steve Filton: You know, so not just for a day or a couple of days in advance, but sometimes for weeks and months in advance. As a consequence of that, when the volumes softened a little bit in the fourth quarter, it was a little more difficult to adjust as quickly as we'd like to those sort of lower volumes.

So not just for a day or or a couple of days and advance, but sometimes for weeks and months in advance and as a consequence of that when the volume softened a little bit in the fourth quarter.

It was a little more difficult to adjust as quickly as we'd like to those sort of lower volumes I do believe that at the lower volumes persist into 2020 and I'm not certain that they will.

Steve Filton: I do believe that if the lower volumes persist into 2020, and I'm not certain that they will, but I believe that we'll be able to respond, and you'll see those labor expenses, which get recorded in the case of nurses mostly on our salary line, in the case of doctors in many cases on that other operating expense line. I think you'll see us get better control over those. As far as the pricing on the behavioral business, obviously, it's helped by the insurance proceeds recovery that I mentioned in my remarks. But also, I think and I think pricing has not really been a terribly challenging element for the behavioral division. But the improvement, I think, in Q4 is reflective of a little bit better payer mix, better control over our denials from payers, etc.

But I believe that we'll be able to respond.

And you'll see those.

Labor expenses, which got recorded in the case of nurses, mostly on our salary line in the case of doctors in many cases.

On that other operating expense line, I think you'll see us get better control over those.

As far as the pricing on the behavioral business, obviously, it's helped by that.

The insurance proceeds recovery that I mentioned in my remarks, but also I think and I think pricing is not really been a terribly challenging element for the behavioral division, but the improvement I think in Q4 is reflective of a little bit better payer mix.

Steve Filton: But also, I think and I think pricing has not really been a terribly challenging element for the behavioral division. But the improvement, I think, in Q4 is reflective of a little bit better payer mix, better control over our denials from payers, etc. So, you know, I think some incremental improvement on those fronts helped a stronger net revenue in the quarter.

Better control over our denials from payers.

Et cetera. So you know I think some incremental improvement on those fronts helped us stronger net revenue in the quarter.

Steve Filton: So, you know, I think some incremental improvement on those fronts helped a stronger net revenue in the quarter.

[noise]. Your next question comes from the line, if Kevin Fischbeck with Bank of America.

Operator: Your next question comes from the line of Kevin Fishbeck with Bank of America.

Great. Thanks.

[Analyst] (Aiera): Great. Thanks. Wanted to see what you were thinking about. It looks like length of stay in the behavioral side, you know, has been kind of firming up, I guess, versus some of the pressures that we've seen the last few years. So wanted to get your outlook for what was driving that and how you're thinking about that into next year. And then maybe just a follow-up on that last point about pricing being relatively solid. You are looking for next year's growth to be below Q4. So I don't know if there's anything in there that you would highlight besides the insurance recovery. Thanks.

I wanted to see what you were thinking about it looks like length of stay in the ban real side.

Yes, it has been kind of firming up I guess versus some of the pressures that we see in last few years. So wanted to get your outlook for what was driving that and how you're thinking about that into next year and then maybe just a follow up on that last point about pricing being relatively solid you are looking for next year's growth to be below Q4. So I don't know if there's anything in there that you would would highlight.

Besides the insurance recovery. Thanks.

Yeah. So I think you know your comments about length of stay Kevin or certainly accurate length of stay in that April division has been pretty flat in 2019.

Steve Filton: Yeah. So I think, you know, your comments about length of stay, Kevin, are certainly accurate. Length of stay in the behavioral division has been pretty flat in 2019 after a couple of years of fairly consistent decline. We've identified the reason for that decline many times as almost primarily a shift from traditional Medicaid patients to managed Medicaid patients where the managed Medicaid payers are more aggressive in managing length of stay. I think the reason, the main reason for the stabilization in 2019 was we just saw a slowing of that shift. We still believe there's a chunk of patients in some states that will ultimately move from traditional Medicaid programs to managed Medicaid programs. It's difficult for us to predict the timing, but we have an expectation that that will occur at some point.

A couple of years of a fairly consistent the decline.

We.

Identified the reason for that decline many times as almost primarily a shift.

From.

Traditional Medicaid patients through managed Medicaid patients, where the managed Medicaid payers on more aggressive in managing length of stay I think the reason the main reason for that stabilization. In 2019 was we just saw a slowing of that shift.

Steve Filton: We still believe there's a chunk of patients in some states that will ultimately move from traditional Medicaid programs to managed Medicaid programs. It's difficult for us to predict the timing, but we have an expectation that that will occur at some point.

We still believe there's a chunk of patients in some states that will ultimately move from traditional Medicaid programs to managed Medicaid programs, it's difficult for us to predict the timing.

But but but we have an expectation that that will occur at some point.

In terms of the how our 2020 behavioral guidance, particularly from a revenue per admission or from a pricing span perspective relates to the fourth quarter performance I think that we were basing or.

Steve Filton: In terms of how our 2020 behavioral guidance, particularly from a revenue per admission or from a pricing perspective, relates to the fourth quarter performance, I think that we were basing our 2020 guidance more on the full-year performance of pricing. And, you know, when I talked about sort of 3% to 4% revenue growth in behavioral, it was really based on, you know, something like 1% volume and 2% to 3% pricing, which I think is more in line with what we ran for the full year. And that was the basis of our 2020 guidance.

2020 guidance more on the full year performance of pricing.

And you know when I talked about sort of 3% to 4%.

Revenue growth in behavioral it was really based on you know something like 1% volume in 2% to 3% pricing, which I think is more in line with what we ran for the full year and that's that was the basis of our 2020 guidance.

[Analyst] (Aiera): Great. Thanks.

Hey, thanks.

Your next question comes from the line of AJ Rice with credit Suisse.

Operator: Your next question comes from the line of A.J. Rice with Credit Suisse.

Thanks, Hi, everybody, maybe just to go back to behavioral other focus obviously and just the last question drives that home has been on stabilizing length of stay in volumes overall in the behavioral side, but I know you've got a new Oh.

[Analyst] (Credit Suisse): Thanks. Hi, everybody. Maybe just to go back to behavioral, a lot of the focus, obviously, just the last question drives that home, has been on stabilizing length of stay and volumes overall on the behavioral side. But I know you've got a new president of that division coming in and looking at some different initiatives. Can you just sort of update us on where the focus is? It doesn't look like any of that, any change in trend is really in your 2020 forecast at this point. But when could some of those initiatives really have an impact?

President of that division and a coming in and looking at some different initiatives can you just sort of update us on where the focus is it doesn't look like any.

Of that any change in trend is really in your 2020 forecast at this point, but.

When could some of those initiatives really.

Having impact.

Yeah, So I think there's a.

Steve Filton: Yeah. So I think there's a bunch of different sort of questions wrapped up in what you're asking, A.J. I mean, what I would say in as brief a way as possible, in terms of the impact and the approach that our new behavioral president, Matt Peterson, is taking is, I think as most people know, Matt comes from a strong managed care background, spending the last decade or so with United Optum. And I think that he, as a consequence, has a perspective that there are real opportunities for us to partner with some of our managed care payers and create arrangements that are mutually beneficial to both the payer and the provider, you know, in other words, help the payer control their utilization but create a structure whereby when there is utilization, you know, we are the beneficiary of that in a primary way.

A bunch of different sort of questions a wrapped up in what you're asking AJ I mean, what I would say.

And as brief away as possible.

In terms of.

The impact and the approach that our new behavioral President Matt Peterson is taking is.

I think as most people know that comes from a strong managed care background spending last decade, or so with United Optum and I think that he as a consequence has a perspective is that there are real opportunities for us to partner.

Steve Filton: And I think that he, as a consequence, has a perspective that there are real opportunities for us to partner with some of our managed care payers and create arrangements that are mutually beneficial to both the payer and the provider, you know, in other words, help the payer control their utilization but create a structure whereby when there is utilization, you know, we are the beneficiary of that in a primary way.

With some of our managed care payers and.

Create arrangements that are mutually beneficial to both the payer on the provider.

You know in other words helped the the payer control their utilization but create.

A structure whereby when there is utilization.

We are the beneficiary of that in a primary way. So those conversations I think are underway there not necessarily ones that that you know can be affected it immediately but I think over time will yield.

Steve Filton: So those conversations, I think, are underway. They're not necessarily ones that, you know, can be affected immediately. But I think over time, we'll yield kind of a more collaborative sort of relationship with payers that should, again, be mutually beneficial and a win-win for both. I think the other thing that Matt brings to the table is a rigor and a discipline around process, based on his experience both in the managed care world as well as in the military. He's had a lifelong career in the Air Force Reserves. And in that sense, I don't think he's identified, you know, terribly new issues or different issues. A lot of things that we've talked about before, things like denial management, the process of how we intake and evaluate patients, etc.

Kind of a more collaborative sort of relationship with payers that that should again be mutually beneficial in a win win for both I think the other thing that Matt brings to the table is rigor and discipline around process.

Based on his experience both in and the managed care world as well as as in the military you've got a lifelong career in the Air Force reserves.

Steve Filton: And in that sense, I don't think he's identified, you know, terribly new issues or different issues. A lot of things that we've talked about before, things like denial management, the process of how we intake and evaluate patients, etc. But I think, you know, Matt's bringing some, again, level of rigor and discipline to those processes that we haven't necessarily had before. And I think ultimately, that will certainly be helpful. In terms of how that translates to the guidance, I think we took the position a couple of years ago that it was difficult for us to predict when the behavioral business would inflect or when it would turn.

And.

In that sense I don't think he's identified.

Terribly new issues are different issues, a lot of things that we've talked about before things like denial management the process of how we intake and evaluate patients et cetera, but I think you know, Matt, bringing some again level and rigor and discipline to those processes that we haven't necessarily had before and I think ultimately that will certainly be helpful.

Steve Filton: But I think, you know, Matt's bringing some, again, level of rigor and discipline to those processes that we haven't necessarily had before. And I think ultimately, that will certainly be helpful. In terms of how that translates to the guidance, I think we took the position a couple of years ago that it was difficult for us to predict when the behavioral business would inflect or when it would turn. We have firmly believed for some time that it will. We continue to believe that. We continue to believe that the underlying demand will support an increase in our same-store admission growth at some point. But I think we've been committed over the last certainly year or two to the idea that we're not going to try and get out in front and predict when that's going to happen.

In terms of how that translates to the guidance I think we took the position a couple of years ago that.

It was difficult for us to predict when the behavioral business, what inflect or when it would turn we have firmly believe for sometime that it will we continue to believe that we continue to believe that the underlying demand will support an increase in our same store admission growth at some point, but I think where we've been coming.

Steve Filton: We have firmly believed for some time that it will. We continue to believe that. We continue to believe that the underlying demand will support an increase in our same-store admission growth at some point. But I think we've been committed over the last certainly year or two to the idea that we're not going to try and get out in front and predict when that's going to happen. When it does, we'll alter our projections and our guidance at that time.

It over the last certainly year or two to the idea that we're not going to try and get out in front and predict when that's going to happen when it does a will alter our projections in our guidance at that time.

Steve Filton: When it does, we'll alter our projections and our guidance at that time.

Okay, maybe just one follow up then Oh, there's a lot of focuses on the re contracting that's going on in your biggest acute market Las Vegas, you had a view that as that contract with the biggest payer opens up and.

[Analyst] (Credit Suisse): Okay. Maybe just one follow-up then. There's a lot of focus on the recontracting that's gone on in your biggest acute market, Las Vegas. You had a view that as that contract with the biggest payer opens up, then you get better pricing. It might be offset with volume. Can you maybe flesh out a little bit? What has that played out as you expected so far in the first quarter? And what have you assumed in guidance sort of there in terms of the year-to-year impact on that?

You get better pricing it might be offset with volume.

Can you maybe flush out a little bit which is that played out as you expected so far in the first quarter and.

And what have you assumed in guidance order there in terms of the year to year impact on that.

So the assumption that we've made in guidance well first of all of you know the the the way. This has played out is that.

Steve Filton: So the assumption that we've made in guidance, well, first of all, you know, the way this has played out is that we're talking about the commercial Sierra, you know, United contract in Las Vegas in which HCA has been out of network for over a decade. Beginning and effective with 1 January 2020, they are back in network. The nature of our contract is such that we had an opportunity once that occurred to renegotiate our rates with Sierra, which we have done. We've now signed a new contract with Sierra, which is also effective 1 January of this year. Our expectation is that there will be, obviously, a decline in volume as some of the Sierra patients that have historically come to our Las Vegas hospitals will now go to HCA hospitals.

Yeah, we're talking about the commercial Sierra you know United contract in Las Vegas, and with J.C.A. is going out of network for over a decade.

Beginning and effective with January one of 2020, they're back in that work.

The nature of our contractor such that we had an opportunity once that occurred to renegotiate our rates with the air which we have done and have weeks now signed new contract with the era, which is also effective January one of this year.

Steve Filton: Our expectation is that there will be, obviously, a decline in volume as some of the Sierra patients that have historically come to our Las Vegas hospitals will now go to HCA hospitals. But we believe that, over the course of a longer term, that negative impact will largely be offset by increased pricing that's effective both January 1. And there are other scheduled increases that we are to get over the next year and a half or so.

Our expectation is that there will be obviously a decline in volume as some of the.

Our patients that have historically come to our Las Vegas hospitals will now go to 88 hospitals.

Steve Filton: But we believe that, over the course of a longer term, that negative impact will largely be offset by increased pricing that's effective both January 1. And there are other scheduled increases that we are to get over the next year and a half or so. As far as, you know, the very early signs of it, not surprisingly, A.J., the shift of patients at the very outset of 2020 has been relatively slow, which is a good thing, obviously, from our perspective. But we certainly are not naive. And we understand that, there's a real effort on HCA to promote the change in the contract. And they're new in network status. There are billboards and commercials in the market. So over time, we assume that, that shift of patients will accelerate.

But we believe that over the course of a longer term.

That negative impact will largely be offset by increased pricing. That's effective January one and there are other scheduled increases that we already got over the next year and a half or so.

As far as you know the very early signs of it not surprisingly A.J. This.

Steve Filton: As far as, you know, the very early signs of it, not surprisingly, A.J., the shift of patients at the very outset of 2020 has been relatively slow, which is a good thing, obviously, from our perspective. But we certainly are not naive. And we understand that, there's a real effort on HCA to promote the change in the contract. And they're new in network status. There are billboards and commercials in the market. So over time, we assume that, that shift of patients will accelerate. But again, I think, in over an extended period of time and over the year, we assume the result will largely be a push.

The shift of patients at the very outside of 2020 has been relatively slow which is a good thing obviously from our perspective, but we certainly are not naive and we understand that there's a real effort on HCP to promote the change in the contract in there now they're new in network status, there billboards and commercials in the March.

Good I'm, so overtime, we assume that that shifted patients will accelerate.

But again I think in over over an extended period of time it over the year. We assume the result will largely be a push.

Steve Filton: But again, I think, in over an extended period of time and over the year, we assume the result will largely be a push.

Thanks, Greg.

[Analyst] (Credit Suisse): Thanks. Great.

Your next question comes from the line of Peto, CIT Green with Deutsche Bank.

Operator: Your next question comes from the line of Pito Chickering with Deutsche Bank.

Good morning, guys. Thanks for taking my questions I'm on the acute guidance for 2020 center realities roughly consistent for the past couple of years, we mentioned that there is some headwinds in the fourth quarter due to the slowing impact from Henderson. So I guess, how much is henderson.

[Analyst] (Various Firms): Good morning, guys. Thanks for taking my questions. On the acute guidance for 2020, it's been relatively consistent for the past couple of years. But you mentioned that there's some headwinds in the fourth quarter due to the slowing impact from Henderson. So I guess, how much does Henderson affect 2020 revenue growth? And what are you doing in Vegas to expand the market, to build towers, new hospitals? Kind of what's your plan for Vegas at this point?

2020 revenue growth and what are you doing too in Vegas to expand the market to Bill towers, New hospitals have what's your plan for Vegas at this point.

Sure so.

Steve Filton: Sure. So, again, as I think I noted when I made the Henderson commentary earlier, that's certainly not the single driver of the slowdown in volumes. It's probably got about a 40-50 basis point impact on the volume slowdown. But I think the remaining components of it are spread pretty evenly throughout the rest of the portfolio. The biggest problem of facilities running at capacity is a good problem to have and one which, you know, we've been addressing. We've, I think, commented on any number of occasions in 2019 that we have had expansion projects at virtually all of our 6 major Las Vegas facilities: new towers, new beds, expansions, surgical expansions, etc. We've got, at Henderson specifically, a whole brand new tower that's being developed, and that project is underway. But it will be some time before that new capacity is open.

Again as I think I noted when I made the Henderson commentary earlier that that's certainly not the single driver of the slowdown in volumes, it's probably got about a 40 50 basis point impact.

On on on the volume slow down, but I think because their remaining components out other spread pretty evenly throughout the rest of the portfolio.

Steve Filton: The biggest problem of facilities running at capacity is a good problem to have and one which, you know, we've been addressing. We've, I think, commented on any number of occasions in 2019 that we have had expansion projects at virtually all of our 6 major Las Vegas facilities: new towers, new beds, expansions, surgical expansions, etc. We've got, at Henderson specifically, a whole brand new tower that's being developed, and that project is underway. But it will be some time before that new capacity is open.

The biggest problem facilities running at capacity is a good problem to have and one which we've been addressing we've I think commented on any number of occasioned in 2019 that we have had expansion projects.

Virtually all of our.

Six major Las Vegas facilities, New towers, new beds. He our expansions the surgical expansions et cetera, we've got at Henderson, specifically, a whole brand new tower, that's being developed.

And that that project is underway, but at some time before that new capacity is open.

Okay got it and then on the acute margins I what percentage of your SMB costs come from temp labor, maybe I missed that I can you break it up by nurses versus physicians and actually getting that's for them that LIBOR pressure in 2020%.

[Analyst] (Various Firms): Okay. Got it. And then, on the acute margins, what percent of your SMB costs come from temp labor? Maybe I missed that. And can you break that out by nurses versus physicians? And how should we be thinking about sort of that labor pressure in 2020 versus 2019? Thanks so much.

So much.

Yeah, So I'm not sure I have all that sort of precise information Peter I will say, there's I mean, I think well we wide.

Steve Filton: Yeah. So I'm not sure I have all that sort of precise information. Pito, I will say this. I mean, I think what we would, you know, sort of strive for, if you will, is something around 2% of our nursing hours to be premium pay. I think if you have 0% of your nursing hours as premium pay, you probably would argue that you're somewhat overstaffed. But 2% is sort of probably kind of close to maximum efficiency. I think over the last several years, you know, we've been running more in kind of the mid-single digits, given the labor shortages, etc. From a physician perspective, I think, you know, our general target is not to really have any temporary physician costs. It's much more efficient to have permanent physicians in both contract and specialty services, etc. So, I don't exactly know what the numbers are.

You know sort of strive for if you will is something around 2% of our nursing hours to be.

Premium pay.

I think if you have zero percent of nursing hours is premium pay you probably would argue that you're somewhat overstaffed.

About 2% in a sort of probably kind of close to maximum efficiency I think over the last several years you know we've been running more in kind of the mid single digits.

Given the labor shortages et cetera from a physician perspective, I think you know our general target is not really haven't any temporary physician costs as much.

Steve Filton: From a physician perspective, I think, you know, our general target is not to really have any temporary physician costs. It's much more efficient to have permanent physicians in both contract and specialty services, etc. So, I don't exactly know what the numbers are. But clearly,

More efficient permanent positions in both contract and specialty services et cetera. So.

I don't exactly know what the numbers are but clearly.

Steve Filton: But clearly, the contract labor both in nursing and in physicians is probably the single biggest operating challenge that the acute division is faced. I just want to go back and add one thing onto my comments about Las Vegas and really just add on, you know, one other major expansion that we have is we are building a new hospital in Reno, that should open in 2021. Obviously, it will enhance our statewide presence in Nevada significantly. So, I think that's very much related to the expansions that we have in the southern part of Nevada as well.

Steve Filton: the contract labor both in nursing and in physicians is probably the single biggest operating challenge that the acute division is faced. I just want to go back and add one thing onto my comments about Las Vegas and really just add on, you know, one other major expansion that we have is we are building a new hospital in Reno, that should open in 2021. Obviously, it will enhance our statewide presence in Nevada significantly. So, I think that's very much related to the expansions that we have in the southern part of Nevada as well.

The.

The contract labor, both in nursing and and physicians is probably the single biggest operating challenge that.

The acute division in space and I, just want to go back and they had one thing onto my comments about how Las Vegas, and really just add on one other major expansion that we have as we are building a new hospital in Reno.

That should open in 2021 and obviously.

It will enhance our statewide presence in Nevada significantly so I.

I think thats, that's very much related to the expansions that we have in the southern part in Nevada as well.

[Analyst] (Various Firms): Great. Thanks so much.

Great. Thanks, so much [noise].

Your next question comes from the line of Sarit change with Piper Sandler.

Operator: Your next question comes from the line of Sarah James with Piper Sandler.

Thank you I was hoping that you could update us on.

[Analyst] (Piper Sandler): Thank you. I was hoping that you could update us on the talks on expanding your JV with Baylor, Memorial Hermann, and then just more broadly how discussions are going on behavioral JVs. Thank you.

The talks on expanding your JV, but.

Either memorial Hermann and then just more broadly how discussions are going.

Behavioral JP. Thank you.

Sure there so as I noted in my comments.

Steve Filton: Sure, Sarah. So, as I noted in my comments, we have a number of projects that are under development. One of them is with Baylor in Temple, Texas. That's a facility that will open, or is scheduled to open at least in late 2020. As far as any of the other projects that are in our pipeline, I'm not going to comment on any of those conversations specifically. Again, as I commented in my opening remarks, we've got, I think, up to eight projects underway that will open either in 2020 or 2021. Those are obviously completed negotiations, etc. And then another 40 in the pipeline. Obviously, I think it reflects a very active pipeline. It reflects real interest on the part of a large number of geographically dispersed not-for-profit acute care hospitals who are interested in these joint ventures.

Have a number of.

Projects that are under development, one of his with Baylor and Central Texas, That's a facility that will open.

There is scheduled to open at least in late 2020.

As far as any of the other projects that are in our pipeline.

I'm not going to comment on any of those conversations specifically.

Again as as I commented in my opening remarks, we've got I think up to eight projects underway that will open either in 2020 or 2021.

Steve Filton: Those are obviously completed negotiations, etc. And then another 40 in the pipeline. Obviously, I think it reflects a very active pipeline. It reflects real interest on the part of a large number of geographically dispersed not-for-profit acute care hospitals who are interested in these joint ventures. But you know, we're really not going to comment on any of those discussions until they are executed.

Those are obviously completed negotiations et cetera, and then another 40 in the pipeline.

Obviously I think it reflects a very active pipeline it reflects.

Real interest on the part of a large number geographically.

Not for profit acute care hospitals, who are interested in these joint ventures, but we're really not going to comment on any of those discussions until they are executed.

Steve Filton: But you know, we're really not going to comment on any of those discussions until they are executed.

Okay and acute supply cost.

[Analyst] (Piper Sandler): Okay. And acute supply costs came down this quarter as a percent of revenue. Can you talk about any efforts that are going on there for negotiating pricing and how you think about that trending forward? Thank you.

Came down this quarter as a percent of revenue can you talk about any efforts that are going on there's four negotiating pricing and how you think about that trending for me. Thank you.

[noise], Yeah, I mean, I think that that's a so the answer first of all is.

Steve Filton: Yeah. I mean, I think that that's so the answer, first of all, is, you know, the effort to manage our supply costs, find the most effective suppliers from both a quality and pricing standpoint is ongoing. There are initiatives all the time. You know, there's none that I would highlight specifically, but can assure you it's a main focus of our operators. I think part of the reason for the supply costs coming down is just some of the strong revenue. Revenue's up because the surgical mix is up because denials are down because uncompensated care is down some. And I think the supply costs, particularly in relation to our other labor costs on which I think there is greater pressure, you know, appear to be controlled better. And I think they are. So that's, I think, what's happening.

The effort to manage our supply costs fine the most effective suppliers from a both the quality and pricing standpoint is ongoing.

Our our initiatives the all the time.

Yeah, there's there's none that I would highlight specifically.

But ah, but but can assure you. It's a main focus of our of our operators.

Steve Filton: I think part of the reason for the supply costs coming down is just some of the strong revenue. Revenue's up because the surgical mix is up because denials are down because uncompensated care is down some. And I think the supply costs, particularly in relation to our other labor costs on which I think there is greater pressure, you know, appear to be controlled better. And I think they are. So that's, I think, what's happening.

I think part of the reason for the supply.

Costs coming down.

It is just some of the the strong revenue revenues out because.

The surgical mixes out because denials are down because uncompensated care is down some of that and I think the supply costs, particularly in relation to our other labor costs on which I think there's greater pressure you know appear to be.

Control better and I think that they are so that's I think what's happening.

Thank you.

[Analyst] (Piper Sandler): Thank you.

As a reminder to ask your question. Please press Star one if your question has been answered. Please press the pound key. Your next question comes from the line of Josh Raskin with Nephron research.

Operator: As a reminder to ask a question, please press star 1. If your question has been answered, please press the pound key. Your next question comes from the line of Josh Raskin with Nephron Research.

Hi, Thanks, Good morning, Steve just a question on sort of outpatient development and maybe tying into Capex. I know you guys been pretty active on the freestanding need de side, but any other facilities or ore types. You know, whether that's urgent care all the way to surgery centers any anything else that you see more and more investment going into <unk>.

[Analyst] (Nephron Research): Hi. Thanks. Good morning. Steve, just a question on sort of outpatient development and maybe tying into CapEx. I know you guys have been pretty active on the freestanding ED side. But any other facilities or types, you know, whether that's urgent care all the way to surgery centers, anything else that, you know, you see more and more investment going into, you know, as part of that $700 million-ish of CapEx?

Part of that 700 million issuance capex.

Yeah, I mean, I think it's sort of really Josh the full continuum I think we are committed to the idea as an acute care provider that successful acute care providers really need to be.

Steve Filton: Yeah. I mean, I think it's sort of really, Josh, the full continuum. I think we are committed to the idea as an acute care provider that successful acute care providers really need to be, kind of, have a presence across the full continuum. And I think, you know, so on the front end, that includes, as you describe, urgent care centers, which we have a few, the FEDs, which we have several. And I highlighted in my comments primary care physician offices, which we have a great many of, etc. And then I think on the back end, obviously, then, you know, in the hospital, we've got, you know, extensive outpatient facilities both in and out of the hospital. We do own ASCs in our markets as well. And then on the back end, things like home health, long-term care, and rehab, etc.

A kind of had a presence across the full continuum and I think you know so up on the front ended that includes as usage as you describe.

Urgent care centers, which we have a few DFI d. is which we have several it I highlighted in my comments primary care physician offices, which we have a great many of.

Steve Filton: primary care physician offices, which we have a great many of, etc. And then I think on the back end, obviously, then, you know, in the hospital, we've got, you know, extensive outpatient facilities both in and out of the hospital. We do own ASCs in our markets as well. And then on the back end, things like home health, long-term care, and rehab, etc.

Thats right and then I think on the bat and obviously then you know in the hospital a we've got you know extensive outpatient.

Facilities, both in and out of the hospital, we have we do own a season, our markets as well and then on the back end things like.

Home health.

And long term care and rehab et cetera. So.

Steve Filton: So, in all of our markets, we sort of take a different approach to these things. And we are either buying or building or partnering those capacities and those services. But, you know, we could talk about any single one of our markets. And I think, you know, we would be able to describe a narrative to you that reflects a much greater presence along the full continuum. And some of that, obviously, is reflected in our CapEx as well. Some of it's reflected in joint venture arrangements, etc. But in some form or fashion, we are, you know, building that presence along the continuum in all of our markets.

In all of our markets, we sort of take a different approach to these things and we are either buying or building or partnering those capacities and those services but.

You know we can talk about any single one of our markets than I think we would be able to describe a narrative to you that reflects.

A much greater presence along the full continuum and and some of that obviously is reflected in our capex as well some of it's reflected in joint venture arrangements.

Et cetera, but it button in some form or fashion. We are we are building that presents along the continuum in all of our markets.

Gotcha and it just quick clarification on Vegas would be a contract change did I read into it right that you're assuming vegas as a market in totality from a 2020 guidance perspective is it sounds like it's kind of a non event in terms of the pluses and minuses.

[Analyst] (Nephron Research): Gotcha. And then just quick clarification on Vegas with the HCA contract change. Did I read into it right that you're assuming Vegas as a market in totality from a 2020 guidance perspective? Does it sound like it's kind of a non-event in terms of the pluses and the minuses?

Well I would say and not have Dan in terms of the bottom line impact I think cosmetically you know what you would expect or what we would expect in Vegas was is to see our admissions go down some but our revenue per admission to go up but I think our EBITDA as a result of this change in the Sierra network.

Steve Filton: Well, I would say a non-event in terms of the bottom line impact. I think cosmetically, you know, what you would expect or what we would expect in Vegas is to see our admissions go down some but our revenue per admission to go up. But I think our EBITDA as a result of this change in the Sierra network, to be relatively unchanged.

To be relatively unchanged.

Perfect. Thanks.

[Analyst] (Nephron Research): Perfect. Thanks.

Your next question comes from the line of Matthew Gilmore with Baird.

Operator: Your next question comes from the line of Matthew Gilmore with Baird.

Hey, Thanks for the question I wanted to ask a bit more specifically on the acute pricing Steven I think you mentioned that the surgical mix was better this quarter and that and that helped what did you see from a payer mix perspective, Vern acuity perspective.

[Analyst] (Various Firms): Hey. Thanks for the question. I wanted to ask a bit more specifically on the acute pricing. Steve, I think you mentioned that the surgical mix was better this quarter. And that helped. What did you see from a payer mix perspective or an acuity perspective?

Yes, so one of the things I think that we have.

Steve Filton: Yeah. So one of the things I think that we have really experienced all year is sort of an inverse on the acute side, an inverse relationship between volumes and pricing. So earlier in the year, when volumes were extremely high and, in particular, volumes were particularly high, that generally suggested that our medical/surgical mix was a little bit more skewed to medical, that our uncompensated burden was a little bit higher because of the volumes, etc. In Q4, as volumes came down a little bit, I think we saw the opposite of that phenomenon. We saw a little better surgical-to-medical mix. We saw a slightly lower uncompensated care burden. And that helped to drive the extremely stronger revenue per admission or pricing in the quarter, whereas, you know, volumes were a little bit lower than they've been.

Really experienced all year and sort of an inverse real on the acute side and inverse relationship between volumes and pricing. So earlier in the year when volumes were extremely high and in particular, he our volumes were particularly high that generally suggested that our medical surgical mix was a little bit more.

Skewed to medical that our uncompensated burden was a little bit higher because of the our volumes et cetera in the fourth quarter as volumes came down a little bit I think we saw the opposite of that phenomena. We saw a little better surgical the medical mix, we saw a slightly lower uncompensated care burden and that helped to drive.

Steve Filton: In Q4, as volumes came down a little bit, I think we saw the opposite of that phenomenon. We saw a little better surgical-to-medical mix. We saw a slightly lower uncompensated care burden. And that helped to drive the extremely stronger revenue per admission or pricing in the quarter, whereas, you know, volumes were a little bit lower than they've been.

Extremely stronger.

Revenue per admission or pricing in the quarter, whereas you know volumes were a little bit lower than they've been.

Got it and then one follow up on Corona virus I know, it's really hard for you to predict any volume impact I was curious if you're seeing any supply issue, especially with respect to surgical masks that could impact your other operations.

[Analyst] (Various Firms): Got it. And then one follow-up on coronavirus. I know it's really hard for you to predict any, you know, volume impact. I was curious if you're seeing any supply issue, especially with respect to surgical masks that could impact your other operations.

Yeah, I mean, I think sad and this has been broadly reporting and I don't think is that as have anything specifically to do with you a chat.

Steve Filton: Yeah. I mean, I think that, and this has been broadly reported. I don't think it has anything specifically to do with UHS. I think that in the early phases of this process, the issues have been it's been a little bit difficult to get testing done on patients who are suspected to have the virus. I think originally, the testing was only being done by the CDC. Now, there are more places. But I think testing, at least so far, has been a little bit cumbersome. My presumption is that as the country gears up for this, that will become a more effective process. And then I think, as has been widely reported, things like gloves and masks are in short supply. We're doing everything we can to make sure that we have an adequate supply of those things as well as an adequate pipeline.

I think that in the early phases of this process.

The issues have been it's been a little bit difficult to get testing done on patients or suspected that have the virus.

I think originally they were the testing was only being done by the CDC now there are more places, but I think testing at least so far has been a little bit cumbersome. My presumption is is that the as the country gears up for this that will become a more effective process and then I think as has been widely reported things like loves and and masks are.

Steve Filton: And then I think, as has been widely reported, things like gloves and masks are in short supply. We're doing everything we can to make sure that we have an adequate supply of those things as well as an adequate pipeline. But as you might imagine, I suspect most hospitals in the country are doing similar things. So, you know, that's something, I think, to be seen. But certainly, we are making every effort to be as prepared as we can.

In short supply we're doing everything we can.

To make sure that we have an adequate supply of those things as well as an adequate pipeline, but as you might imagine I suspect most hospitals in the country are doing similar things so.

Steve Filton: But as you might imagine, I suspect most hospitals in the country are doing similar things. So, you know, that's something, I think, to be seen. But certainly, we are making every effort to be as prepared as we can.

That's that's something I think to be seen but certainly we are making every effort to be has prepared as we can.

[Analyst] (Various Firms): Got it. Thank you.

Got it thank you.

As a reminder to ask a question. Please press Star One. Your next question comes your line of Gary Taylor with JP Morgan.

Operator: As a reminder to ask a question, please press star 1. Your next question comes from the line of Gary Taylor with J.P. Morgan.

Hi, Good morning, Steve a two part question. The first one I apologize I just heard the tailwind of UBS here as.

[Analyst] (Various Firms): Hey. Good morning, Steve. A 2-part question. The first one, I apologize. I just heard the tail end of Sarah's question. So just stop me if I'm overlapping here. But on the JV behavioral facilities that you've got underway, the 7 projects or 8 projects, do you have a total, you know, ballpark bed count that you think that adds over the next couple of years? And can you just refresh us on UHS sort of typical ownership position is what, like an 80%? Or help us think about that.

Question. So just stop me, if if I'm overlapping here, but on the the JV behavioral facilities that you've got underway a the seven projects or a projects do you have a total ballpark bed count that you think that adds over the next couple of years and have you can you just refreshing.

On.

You Hs sort of typical ownership position is is what like an 80% or help us think about that.

Yeah. So I mean I don't have the they you know the precise data in front of me, Gary but generally all of these new hospitals are in 100 to 120 bed range size.

Steve Filton: Yeah. So, I mean, I don't have the precise data in front of me, Gary. But generally, all of these new hospitals are in the 100- to 120-bed range size. And then in terms of structure, I think most of them are probably in that 80/20 range. There certainly are a couple that are a little closer to 50/50. We would not enter into, I think, it would be highly unlikely that we would enter into a joint venture in which we had less than a 51% share and basically the management control of the facility. But, you know, each deal is negotiated separately. But I think the 80/20 model is probably normative.

And then in terms of structure I think most of them or probably in that 80 20 range. There certainly are a couple that are a little closer to 50 50.

We would not enter into over I think it would be highly unlikely that we would enter into a joint venture in which we had less than a 51% share and and basically the management control of the facility, but you know each each deals negotiate exactly but I think the 80 20 model is probably normative.

Gotcha and then just my one follow up on the headwind you're contemplating next year on the Medicaid dish. If Congress doesn't do anything and then another sort of 10 to 15, a supplemental payments.

[Analyst] (Various Firms): Gotcha. And then just my one follow-up on the headwind you're contemplating next year on the Medicaid DSH, if Congress doesn't do anything, and another sort of 10 to 15 of supplemental payments, even those supplemental payments, that would all be impacting your acute EBITDA projection, I think. Is there anything material at all with respect to that on the behavioral side?

Even though supplemental payments that would all be impacting your acute EBITDA projection I think is there anything material at all with respect to that on the behavioral science.

Yeah. So so the a the eighth fee a dish that Congress has deferred those cuts through may.

Steve Filton: Yeah. So the ACA DSH that Congress has deferred, those cuts through May, in our guidance, we presume that Congress will not defer them after May. And that's about a $10 million headwind in 2020. I think what you're otherwise referring to is, in our broader supplemental payments, that includes DSH and uncompensated care and provider taxes, etc. And frankly, it does cross both divisions. We get that reimbursement in both our divisions. We're expecting a $10 or 15 million decline next year. And I don't have the specific breakout in front of me. But I think that's actually split between the two divisions.

Our guidance, we presume that Congress will not differ them after may and that's about a 10 million dollar headwind in 2020, I think what youre otherwise referring to is.

In our broader supplemental payments that that includes dish and uncompensated care and provider taxes et cetera.

And frankly that it does it does across both divisions, we get that reimbursement in both our division, we're expecting a 10 or $15 million decline next year and I don't have the specific break out in front of me, but I think thats actually split between the two divisions. Okay helpful. Thank you.

[Analyst] (Various Firms): Okay. Helpful. Thank you.

I can't ask your question. Please press Star One. Your next question comes on line of Whit Mayo with UBI S.

Operator: Again, to ask a question, please press star 1. Your next question comes from the line of Whit Mayo with UBS.

Hi, Thanks, Good morning, Steve we're seeing there's a number of states that are pursuing you know a weapon 15 waivers to provide behavioral treatment for adult fee for service patients with substance abuse disorder, or something probably 30 states since last fall and looked at the state plan options. Just wondering you know do you have any thought.

[Analyst] (UBS): Hey. Thanks. Good morning, Steve. We're seeing there's a number of states that are pursuing 1115 waivers to provide behavioral treatment for adult fee-for-service patients with substance use disorders. I think probably 30 states since last fall have looked at these state plan options. Just wondering, do you have any thoughts on this? Presumably, this opens up some market for you. But who really knows? Just curious if you have any insight.

That's all that's presumably the sorts itself.

Some market for you, but you know who really knows just curious if you have any insight.

Yeah, I mean, I think it's hard to predict them and you know obviously.

Steve Filton: Yeah. I mean, I think it's hard to predict. And obviously, it's not exactly analogous. But the IMD exclusion being lifted was something that we thought would have a more immediate impact. And when I say we, I really am making sort of an overall industry comment. I think the freestanding industry felt like we would see more of those adult Medicaid patients just shifting relatively quickly from the acute care setting to the freestanding setting. I think you might expect sort of something similar from the 1115 waiver. But what we saw, I think, from the IMD exclusion is that the acute hospitals were not necessarily all that anxious to part with those patients. And as a consequence, I think we see those JV conversations being much more active and much more robust. But the actual shift of patients, not as quick.

You know it's not exactly.

[music].

Analogous, but you know the I and the exclusion being lifted was something that.

We thought would have a more immediate impact than when I say, we I really am I, making sort of an l. and overall industry comment I think that freestanding industry felt like we would see more of those adult Medicaid patients just shifting.

Relatively quickly from the acute care setting to the freestanding setting I think you know you might expect sort of something similar from the 11 15 waiver, but what we saw I think from the IB exclusion is that.

Steve Filton: But what we saw, I think, from the IMD exclusion is that the acute hospitals were not necessarily all that anxious to part with those patients. And as a consequence, I think we see those JV conversations being much more active and much more robust. But the actual shift of patients, not as quick.And so I would wait and see how these 1115 waivers really result or what the result is in terms of potentially more patients.

The acute hospitals were not necessarily all that anxious to part with those patients.

And as a consequence, I think we see those JV conversations being much more active and much more robust, but the actual shifted patients you are not as not as quick and so I I would wait and see the how these 11 15 waivers really result, or what the result is in terms of potentially more pain.

Steve Filton: And so I would wait and see how these 1115 waivers really result or what the result is in terms of potentially more patients.

And.

Is there any chance if you could see this develop ends up as a headwind I guess I'm trying to think is there any negative.

[Analyst] (UBS): Is there any chance that you could see this develop as a headwind? I guess I'm trying to think, is there any negative consequences as a result of this?

Consequence, as a result to this.

We haven't seen it yet so I think you know I think it's a little too early to tell.

Steve Filton: We haven't seen it yet. So, you know, I think it's a little too early to tell.

[Analyst] (UBS): Yeah. Okay. And I haven't looked at your 10-K yet. But maybe if you could just comment on your malpractice experience in 2019 and any comments around professional fees, any pressure building on contract management subsidies as you think about 2020. Thanks.

And I haven't looked at your 10-K, yet, but maybe if you could just comment on your malpractice experience and in 2019, and you know any comments around professional fees any pressure building on contract management subsidies as you think about 2020. Thanks.

Yeah. So our malpractice experience has not really changed a much over the last several years, it's been pretty stable.

Steve Filton: Yeah. So our malpractice experience has not really changed much over the last several years. It's been pretty stable. As far as contract fees, I would say pretty much the same thing. Again, I think the bigger pressure for us has been on vacancies in some of our contract physician services as well as other specialties where we're having to either pay a vendor for some of those vacancies or we're having to pay locums costs, etc. But in terms of our kind of regular contract service arrangements for things like doctors and hospitalists, etc., I think those costs have remained fairly stable.

As far as contract fees I would say pretty much. The same thing again I think the bigger pressure for us has been on.

Vacancies in some of our contract physician services as well as you know other specialties, where we're having to either pay a vendor for.

Some of those vacancies or having to pay locums costs et cetera, but in terms of or kind of regular contract service arrangements for things like E. R doctors and hospitals et cetera, I think those costs of remain fairly stable.

[Analyst] (UBS): Perfect. Thanks.

Perfect. Thanks.

Your next question comes from the line of Frank Morgan with RBC capital markets.

Operator: Your next question comes from the line of Frank Morgan with RBC Capital Markets.

Hey, their intent on high on for Frank I know, we had the recovery insurance recovery, there, but I'm not sure I heard in actual update on.

[Analyst] (Various Firms): Hey, there. It's Anton Hie for Frank. I know we had the insurance recovery there. But I'm not sure I heard an actual update on kind of how Panama City is trending back. I believe that's been reopened. Can you just refresh us on that?

To help Panama City is is trending back I believe that's been reopened can you just refresh than that.

Yeah, So Emerald coast, which is the name of the facility in a in Panama City has reopened I believe in September.

Steve Filton: Yeah. So Emerald Coast, which is the name of the facility in Panama City, has reopened, I believe, in September and has ramped back up to, I think, a pretty sort of normal pre-hurricane level. So I think for 2020, the operating recovery in that facility should provide a bit of a tailwind maybe in the neighborhood of $5 to 10 million for the behavioral division in 2020.

And as ramp back up to I think a pretty put a normal pretty hurricane level. So I think for 2020.

The the operating recovery in that facility should provide a bit of a tailwind maybe in the neighborhood of $5 million to $10 million for the behavioral division in 2020.

Okay, and then the drag on a addiction treatment he is nothing <unk>.

[Analyst] (Various Firms): Okay. Then the drag on addiction treatment, can you give us an update on that?

[noise] no I don't think there's a real significant change I mean, we've seen some incremental improvement in that standalone addiction treatment business, but oh. It remains one where we're trying you know any number of initiatives to you know improve the reason.

Steve Filton: No. I don't think there's a real significant change. I mean, we've seen some incremental improvement in that standalone addiction treatment business. But it remains one where we're trying any number of initiatives to improve the results there and making some progress, but it's incremental.

I'll spare and making some progress, but it's incremental.

[noise] [noise] once again to ask your question. Please press Star One. Your next question comes from a line of Ralph <unk> Cope with Citi.

[Analyst] (Various Firms): Thank you.

Operator: Once again, to ask a question, please press star 1. Your next question comes from the line of Ralph Giacobbe with Citi.

Thanks. Good morning, just wanted to go back to Delever quickly you know certainly understand the the temp staffing and contract labor pressures in the context of what's been obviously really strong volume backdrop, what about underlying wage growth in your markets. Steve you know, what's that running is there sort of incremental competitive nasser rate pressure there for bulk nursing.

[Analyst] (Citi): Thanks. Good morning. Just wanted to go back to labor quickly. I certainly understand the temp staffing and contract labor pressures in the context of what's been, obviously, a really strong volume backdrop. What about underlying wage growth in your market, Steve? What's that running? Is there sort of incremental competitiveness or rate pressure there for both nursing? And we are starting to hear a little bit more around sort of non-clinical staff. So any help in framing that?

We are starting here a little bit more around sort of non clinical staff, so any help and frame in that.

Look I think that wage inflation I certainly picked up over the last several years and we've probably gone from.

Steve Filton: Look, I think that wage inflation has certainly ticked up over the last several years. And we've probably gone from 2.5% to 3.5% annual wage increases a few years ago, I think a little lower in the behavioral division, a little higher in acute, to probably 3.5% to 4.5% or at least 3.5% to 4% in today's environment. But again, I still think that the biggest pressure really has come on the two businesses, not so much on the hourly wage pressure itself but on the premium pay in the acute division and in our inability to serve all the patients that we'd like to on the behavioral side.

To an after three and half percent no annual wage increases a few years ago, I think a little lower in the behavioral divisional hired acute to probably three NAFTA, four and a half or or at least three and after four in today's environment.

But again I I still think that the the biggest pressure really has come on the two businesses not so much on the on the hourly wage pressure itself, but on the premium pay in the acute division and in our inability to serve all the patients that we'd like to on the behavioral side.

Okay fair enough.

[Analyst] (Citi): Okay. Fair enough. And then just.

Steve Filton: I think I should be asking.

Yes.

Go ahead.

[Analyst] (Citi): Go ahead, Ralph. Yeah. No, just one quick sort of follow-up. I apologize if I missed this. I know you noted better acuity and, I think, payer mix. I was just hoping you can give us a little more of a sense of the CMI increase and maybe commercial versus Medicare versus Medicaid, just the volume trends there. Thanks.

Yeah, you know just quantum dot one quick sort of for follow up and I apologize if I missed that I know you noted better acuity and I think payer mix I was just hoping you can give us a little more of a sense of the semi increase and maybe commercial Hearst Medicare versus Medicaid just the volume trends there. Thanks.

[noise], yeah. So I mean, I think that the acuity really manifested itself in surgical volumes I think inpatient surgical volumes were up two or 3% in the quarter, which is by the.

Steve Filton: Yeah. So, I mean, I think that the acuity really manifested itself in surgical volumes. I think inpatient surgical volumes were up 2% or 3% in the quarter, which is probably one of the better increases we've had in the last several years. And I don't have the exact uncompensated care numbers in front of me. But I know that the number of uncompensated patients, as a percentage, ticked down somewhat in Q4.

One of the better increases we've had in the last several years and.

I don't have the exact uncompensated care numbers in front of me, but I know that the number of uncompensated patients as a percentage tick down a you know somewhat in Q4.

[noise] and then and then payer mix.

[Analyst] (Citi): And then payer mix?

Yeah, I mean that to me was the uncompensated care I mean, I'm I think most of our other pay or.

Steve Filton: Yeah. I mean, that, to me, was the uncompensated care. I mean, I think most of our other payer percentages remain similar.

Percentages remain similar.

Okay. Thank you.

[Analyst] (Citi): Okay. Thank you.

[noise] there no further questions.

Operator: There are no further questions.

Okay, we thank everybody for their time and.

Steve Filton: Okay. We thank everybody for their time and look forward to talking with everybody again in a couple of months at the end of Q1.

For two or so talking with everybody again in a couple of months at the end of the first quarter.

Thank you ladies and gentlemen. This concludes today's conference call. Thank you for participating you may now disconnect.

Operator: Thank you, ladies and gentlemen. This concludes today's conference call. Thank you for participating. You may now disconnect.

[noise] [noise].

[music] [noise].

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