Q3 2020 Universal Health Services Inc Earnings Call
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It is now my pleasure to hand, the conference over to Mr., Steve Filton. Please go ahead Sir.
Thank you and good morning, Alan Miller, and Mark Miller, all for joining US. This morning, and we welcome you to our view of Universal Health services results for the third quarter ended September 32020.
During this conference call will be using words, such as believes expects anticipates estimates and similar words that represent forecasts 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 so.
Payments and risk factors in our form 10-K for the year ended December 31, 2019, and our form 10-Q for the quarter ended June 32020, we.
We'd like to highlight a couple of developments and business trends before opening the call up to questions.
As discussed in our press release last night. The company reported net income attributable to you Hs per diluted share $2.82 for the quarter.
After adjusting for the impact of the items reflected on the supplemental schedule as included with the press release, our adjusted net income attributable to you Hs per diluted share was $2.88 for the quarter ended September 32020.
As of September 32020, we have received approximately $396 million of funds from various governmental stimulus programs. Most notably the care is that included in our reported income for the nine months in three months, respectively. It's approximately 213 million and negative 5 million.
Net revenues recorded in connection with these stimulus programs for the nine months approximately 161 million up. These revenues were attributable to our acute care facilities and $52 million were attributed to our behavioral health facilities.
In addition during 2020, we received approximately 695 million Medicare accelerated payments, which had no impact on our earnings during the first nine months.
As previously discussed in our first quarter conference call beginning in mid March the incidence of Coke at 19, and suspected koby cases increased in our acute facilities and correspondingly the volume of Noncovered patients declined significantly.
These declines in patient volumes generally continued into the first half of April beginning with the second half of April our admission and patient day metrics began to rebound by the first half of May local authorities had lifted restrictions on elective surgeries and other procedures and those volumes began to rebound sharply as well.
Well.
He our business, while also gradually improving had been a volume units slowest to recover but the increased acuity of our patient population suggests at least in part that the more acutely ill patients tended to return to the ours and the last acute patients were the ones continuing to avoid that care.
In late June and continuing throughout the third quarter most of our hospitals experienced the second wave of cobot cases, although to date. This second wave has not been accompanied by the same magnitude of non cobot case declines that we experienced in the first way then that March April timeframe.
Generally our hospitals were able to better prepare for this second wave with greater I see you and isolation room capacity as well as more ample inventories of PPV.
The behavioral health segment experienced a similar pattern of volume changes the patient day metrics eating a trial hitting a trough in early April and incrementally recovering for the rest of the quarter. Despite a number of headwinds, including a decline in referrals from acute care emergency rooms from schools, which have not fully.
Returned in person learning and from travel restrictions on potential patients patient days at our behavioral health facilities improved during this year's third quarter to approximately 97% of the volume realized during last years third quarter.
As we noted in the first quarter, our Paramount concern throughout the cobot crisis has been taking all the necessary steps to keep our patients and employees as safe as possible. We did however, also recognize the severe financial stresses created by the cold the crisis we are.
Undertook a series of steps to mitigate the dramatic revenue declines and to protect our capital structure, including cost reduction initiatives across all of our expense categories. Our approach in this regard, especially as it relates to labor expenses. There has been a balanced one reflecting our expectation that the dramatic decline in volumes would it not.
Any instances be temporary in nature and also recognizing the severe strains that the crisis has created on our employee caregivers.
As the crisis has continued it has increased the pressure on our ability to staff are hospitals that competitive wage rates and to meet current demand levels.
We've also implemented a suspension of our share repurchases and quarterly dividend program.
As a result of these actions as well as the funds received in connection with the governmental stimulus programs and Medicare accelerated payments. The company had close to $1.45 billion of the aggregate available available borrowing capacity as of September 32020, along with approximately $1.1 billion.
Cash and cash equivalents.
While we are strongly encouraged by the mostly stable volume trends in the quarter, we acknowledge the potential material impact of cold at night that Coca 19 could have on our future operations and financial results and since the nature of these kogut developments are largely beyond our ability to control. We have continued to withhold any further.
Guidance earnings guidance for the balance of 2020.
We would be pleased to answer your questions at this time.
Ladies and gentlemen, just as a reminder, if you'd like to ask a question. Please press star and then the number one on your telephone keypad.
Your first question comes from the line of Andrew <unk> with Barclays.
Hi, Good morning, I wanted to follow up on the strong pricing in both segments. This quarter on the acute side can you give us the surgery statistics for the quarter and give us a sense for how acuity trended on a comparable basis, excluding cobot patients.
Sure Andrew So I would suggest that the driver is the really strong acuity on the acute side are number one the acuity of the cobot patients themselves.
Cobot patients I think on average have a case mix that is about 50% higher than non coated patients.
So so that's a that's a driver.
Our non cobot case mix is also up and one of the things I think that we note and hear from our hospitals is that.
At least a portion of the patients who come to our hospitals have delayed or deferred their care during the pandemic and so when they come to the hospitals they tend to be more acutely ill then they would have been had they come.
You know sort of had them on a more timely basis and then finally in <unk>, yes, consistent with what I said in my prepared remarks, I think that.
The absence of the.
The decline in emergency room visits.
We believe is largely concentrated in the lower acuity patients. So the mix of patients we havent by nature, a higher acuity mix because so many of those lower acuity patients are absent from the emergency room.
Great and on the behavioral side the length of stay moderated on a sequential basis, but revenue per adjusted admission remains strong what supported the strong pricing there and how should we think about the sustainability of that in Q4 and into 2021. Thanks.
Sure because the behavioral revenue per adjusted patient day was as high as it was we certainly did.
A deeper dive ourselves to try and understand I don't know that there's one particular element of explanation I think we've found that we are getting the benefit of some higher contractual rate increases we're seeing the impact of a little bit more leniency on the part of managed care companies and.
Terms of things like denials and current concurrently utilization management.
There were small amounts of positive real.
Reimbursement adjustments in this quarter and also some negative.
Adjustments in last year's third quarter again, none of these were material my job Andrew is that that number that 5% to 6% revenue per day growth will moderate some next quarter and probably more into that three 4% range.
Got it thanks for the color.
Your next question comes from the line of Matthew Borsch with BMO capital markets.
I realize that God, you, you're not wanting to give guidance here, but.
Would you be willing just yet.
Tell us what are maybe some of the headwinds and tailwinds that you're thinking about as we contemplate 2021.
Yes, I mean, the way that I think we're thinking about the business and I think our results in this quarter are emblematic is that on the acute side broadly and I think our peers have seen very similar trends we.
We are seeing some.
More moderated volumes than we were seeing pretty pandemic.
But those lower volumes have largely been offset by higher acuity.
The reason I think we'd be reluctant to give any further guidance is we don't know how the cobot trajectory is likely to play out over the course of the fourth quarter and into next year and until I think some of those trends are more stabilized it would be difficult to say, but I think that again, what we were.
Well the demonstrated in the third quarter is that we could.
Produce acute care bottom line growth with lower volumes and higher acuity I think our sense is that as the coping crisis stabilizes.
Volumes will increase and acuity will decline and will start to approach metrics that book, a little bit more like what they looked like pretty pandemic, but but the cadence of that and the trajectory of that is what I think we find challenging to project on the behavioral side I think what we have found is that.
There are a number of obstacles several of which I tried to enumerate in my prepared remarks that are preventing our behavioral hospitals from getting back to pre pandemic volume levels are a little bit short of that but they've largely made up for it through again higher.
Revenue per day, as well as a strong cost cutting initiatives.
Again, I think we have a perspective that has the cobot crisis stabilizers.
Behavioral volumes will increase the timing and cadence of that what's difficult to predict.
If I just one follow up on.
On the behavioral volumes.
Do you agree with the characterization that Covidien has perhaps created a larger bolus of people needing mental health services or is it just too.
Too much of a mix of things to make that call.
Yeah. So I think you don't want to get what what I tried to say in my prepared remarks, Matt is that having covance has created some.
Practical headwinds for the behavioral business.
The decline in emergency room visits has clearly affected our referrals from emergency rooms, which are significant.
Source of April patients.
The.
Intermittent sort of.
Return to schools has certainly affected our adolescent referrals from school systems.
Some of our hospitals rely.
Reasonably heavily on travel patients, who are traveling and obviously thats been diminished so.
Actually encouraged by the fact that our.
Our behavioral volumes are as high as they are given these other dynamics because as your question suggests we do believe that the covert crisis has created a significant amount of incremental stress on the entire population and obviously, particularly on those who are predisposed to her.
Behavioral issues. So again I think we have a view that as the country returns to sort of more normalized patterns of work and school and travel and I'm not exactly sure when that will be but when that occurs I think we believe that there is a reservoir of behavioral volumes still to be satisfied.
Thank you.
Your next question comes from the line of Kevin Fischbeck with Bank of America.
Great. Thanks.
Wanted to ask if you could give a little color on the Las Vegas market.
I wanted to see if you're seeing anything substantially different and the trends. There you know as far as the economy goes or or volumes and payer mix.
Sure Kevin I mean, I think that it's fair to say that almost all of our acute care hospitals, certainly all of our larger acute care hospitals, whether they're in the district of Columbia, South, Florida Vegas, Texas, Riverside County, California were.
And geography is that were considered cold and hot spots in the third quarter. So.
Dynamic up more covert patients, we clearly saw an acceleration of covert patients in the third quarter and virtually all of our markets we saw.
Hey, I.
An increase in acuity that we've already discussed that again I think that was largely all across the board.
Many of the markets that I enumerated are also experiencing higher levels of unemployment than the national averages.
I don't think that at least at the current moment.
We've seen a really significant impact of that yet and.
In these geographies.
I think in part because and I think that our peers have mentioned a similar dynamic.
A lot of the decline you are volumes seems to reside with those poor paying or lower patients with a with a lesser ability to pay so.
So we have seen our payer mix remained relatively stable. Despite the fact that we're in markets, including Las Vegas that are experiencing some higher unemployment, obviously, specifically to Las Vegas, you know how that economy rebounds, and how quickly it recoveries I think is.
Dependent in large part on top.
Travel patterns, and particularly airline travel patterns.
I think that the Vegas market reports for instance that casino volumes amongst the local population people in Las Vegas, and Nevada, and California, and Arizona are pretty strong you know not all that far off from pre cope with levels, but these are for the most part people who are driving to Las Vegas.
I think those those tourists who are coming by airline to Las Vegas or down much more significant marine and how quickly that leap out et cetera will be I think determinant of how quickly the economy recovers recoveries in base, but again at the moment I think that's a little too hard for us to speculate on.
Okay, Great and then I guess.
When we think about the acuity improvement.
Are you actually seeing year over year growth in high acuity non cobot patients or is the acuity really given by cobot and then just the lack of low acuity pay that low acuity is dropping faster than high acuity is dropping but high acuity is also still dropping.
Yes, so as I said in an earlier response I mean, I really think it's three things that he would numerated to attend the cobot patients themselves are much sicker and more acutely felt in the non coke occasions.
Absence of the lower acuity patients sort of Mccann met mathematically drives up acuity, but we're also finding that non cove and patients are coming in generally more acutely ill and we attribute that dynamic to the idea that many patients are delaying and deferring care so that when they do come to the hospital.
Maybe a month or two after they've started to experience whatever symptoms that they're having.
Well these sicker than had they come on a more timely basis.
So you would say that your actual.
The high acuity patients are actually up.
Year over year, despite total volumes being down.
Yes.
Okay, all right great. Thanks.
Our next question will come from the line of AJ Rice with credit Suisse.
Thanks, Hi, everybody.
Yes.
Best wishes down more is a a transition roles there.
Maybe.
Good you.
<unk> cost management, which looks like a meaningfully as well.
Sales of their I guess, the rate increase or the relative rate increases pricing helps on that but it looks like labor and other operating expense.
Did show a nice year to year trend is was that also a function of some of the cost initiatives can you tell us where that sales and I noticed that was true for both okay.
Cute and.
Behavioral that you saw similar where you saw improvements in labor and other operating expense.
No I think that's accurate AJ I think you have to put all this in context. So you know in mid March when the coal that crisis really first began in earnest and.
We saw this dramatic decline and.
On coal business and ERP in elective and schedule procedures on the acute side and behavioral patient days.
Almost sort of complete sort of locked down across the country.
It was very difficult to predict where the business was going what.
You know, what we wouldn't be dealing with et cetera. So both are busy.
Business segments at our operators I think talk.
Dramatic and prudent steps to.
Try and rightsize, the labor force and rightsize our hours in response to the demand declines.
And obviously, we've been fortunate at both businesses have recovered relatively quickly and demand has come back.
But I think again both.
Operating matter just in both segments have been.
Prudent and restoring the labor that had been sort of you know rightsized and so I think we benefited that front clearly.
In Q3, you know I think as the demand continues to increase.
I think labor will continue to to also increase and be rightsized, but one of the dynamics are it's difficult to make dramatic capex to labor in the hospital business because.
After you adjust for the immediate demand now you're cutting into fixed and semi fixed costs and overhead costs et cetera, and that's difficult to do but once it's done I also think that their sustainability kind of aspect to it and we saw this during the recession. The great recession 10 years ago, where there were some pretty drew.
Added cuts made at the beginning of the recession and they were relatively.
Slow to be restored and I think you're seeing some of that same dynamic here.
Okay and then.
Follow up what will be around your ear volumes I guess oh.
Down 26.
6% above that right.
You know.
Two things I guess on that is as you say, it's mainly the low acuity. So the percentage of those IAR business that end up on the inpatient side are you seeing that increase and sort of validates. The box is the people that are showing up or sicker.
But it would be in a normal environment and then on your outpatient volume in general is that also still lagging substantially in terms of coming back or is that doing better than what you're seeing with the r.
So in response to your first question, we are clearly seeing what we describe as you know a higher conversion rate of VR business that is a much higher percentage of people who are coming to the AR are being admitted to the hospital and I think thats a function of exactly what we've been talking about which is.
The lower acuity patients.
The scrapes and bruises and your attractions and strep throat or not necessarily coming but the cardiac patients and stroke patients are coming in so they're being administered at a greater frequency.
As as far as.
The second question Govies.
I think a big you know at least on the acute side.
The decline in the yard visit fees is what's driving a lot of the outpatient decline you know obviously.
There is a lot of attendance at a revenue that goes along with the New York as it could be a pharmacy it could be radiology it could be lab and so to the degree that you are visits are down 25% to 30%, we're going to see outpatient revenues in that other in.
In those other areas down as well.
Outpatient surgeries scheduled elective surgeries has remained.
Pretty strong you know, they're not a pre coated levels, but but they are pretty close and stronger than than New York volume certainly.
Okay. Thanks, a lot.
The next question comes from the line of Sarah James with Piper Stanley.
Hi, Thank you thanks.
I was hoping that you could update us on where you are on catching up on delay procedures and it would be really helpful. If you could break that up into.
Procedures that were delayed from the first half versus second quarter.
So Sarah what we said last quarter was.
Collective and scheduled procedures that come back by the middle of June to something pretty close to pretty cobot levels.
And then with that second wave that began in late June and certainly carried into into July and for most of the third quarter, we saw us more moderate step back into those.
Elected and scheduled procedures and it has varied by market because in the markets that go through.
Particularly significant covert way you see more pressure on those sorts of things.
But but generally I would say that.
For the third quarter across the portfolio elective unscheduled procedures have been in that sort of 90% to 95% range and pre cobot levels. Although it does vary by market and it does vary by the markets that are experiencing cold surges.
Does that mean that the delayed procedures have been reports I am just trying to parse between.
You know decisions that were up for specific quarter going through versus the catch up team completed.
Yeah. So I think it's difficult and I know some of our peers have given some pretty precise numbers about that I.
I think it's difficult to say when we schedule a surgery or we schedule a procedure, it's difficult for us to know sort of when that patient was originally seen by their doctor whether they were sort of in the pipeline, whether they were deferred et cetera. We don't really we don't really become aware of the patient until they are at their their hospital.
Procedure schedule, so I would say our experience in large part has been that.
In that sort of mid April to mid May timeframe as physicians return to sort of more normal practice patterns.
That they did just that they returned to their more normal practice patterns. If they did surgeries two days a week in office hours two days a week, that's largely what they did some physician certainly be more of an effort to catch up and get through the backlog than others, but I think we have a feeling just generally that.
We haven't really seen a bolus of catch up and that the the rate of surgical procedures that were experiencing is certainly sustainable it's not like I think we have a sense that there has been a bolus and now we're going to see a real debt.
Just because we work through that.
That's helpful. Thank you.
The next question will come from the line of Sidoti clean with Deutsche Bank.
Hi, Good morning, guys. It's taking my questions going back on behavioral demand can you give us a little more color onto what segments you saw the strengths and weaknesses during the quarter any geographic areas affected weaknesses and any color on where you exited the quarter on on behavioral to mean anything you can tell us about October would be great.
It's a little hard to answer the question Pete I left out the behavioral division only because the the geographic dispersion of our behavioral facilities is so much more diffused than it is on the acute side, what I will say just sort of generally is.
Our behavioral hospitals in markets, where there was a cold it's serge.
Tended to be impacted more than in markets, where there weren't so and again through some of the reasons that I enumerated earlier you our volumes would go down in a market where there was a co it's serge piece.
People were staying at home or they want to necessarily again go to what we would consider to be the normal access points. A hospital, we are a mental health center private psychiatry softness.
And so we were challenged there were also challenged in our behavioral division when we get.
Cobot patient were cobot patients because.
We're not as prepared necessarily.
As we are in acute care hospitals. So we will create an isolate a unit a 10 bed unit or 15 that unit to covert patients, but if we only have one or two cobot patients it's more.
Inefficient quite frankly that is that it tends to be on the acute side. So.
Other than making the point that I think you know probably the most variable sort of element that we're seeing in our April volumes is the incident, the cobot patients in a market and in particular facilities.
Good that that's sort of the one overarching observation.
Hi, it's Steve.
She is welcome.
Agreed to that.
Covert has had a.
Very detrimental effect on general mental health.
Number of suicides.
Number of depression alcohol.
Alcoholism has all gone up and.
As the COVID-19 gets better treatment.
We'll see you in the future I think we're going to see a volume of these patients come to the hospitals.
They have been avoiding now because of the.
Colvin 19th.
Okay and actually to give it up again next question was we defer morale in a.
Relative to peers that balance sheet is definitely you know running under Levered universes, everyone else I understand there are a lot of issues going on with Kobe, and and Medicare funds and grant in grant funds going around.
But in general how should we think about leverage ratios going forward are there any minimum levels.
We can see the excess free cash because the share repurchases I'm trying to understand how far short of de leveraging can go before it finds a floor.
Pete Let me respond quickly and then certainly out embark and can you know add there their perspective we.
We certainly acknowledge that we're in a very.
Favorable capital structure position and leverage position at the moment and we feel comfortable with that.
We still feel like there's a significant amount of uncertainty.
The business.
Obviously, not just for you a chest, but broadly for the country and the hospital business in general.
There's lots of speculation that things and things could get worse from a covert perspective.
As the winter progressive and.
The holidays come around and people are less strict about their social distancing et cetera, and I'm not smart enough to tell you how that's all going to play it out, but I think from our perspective we.
We'd like to probably get to the other side of the new year at at least and then sort of take a step back and.
Recalibrate, where we are a touch of appeal certainly at the moment that we're in a really strong position and if that continues.
I think that we would at every intention to resume.
Share repurchase and dividend programs.
Early next year, but certainly down at Marquette further thought they can they can wait.
Okay.
So that means that we have a relatively consensus view of things. So I think that by the way.
Well, we have always been conservative.
We've never had.
Or short to have a problem.
With regard to funding and if that's the case at the moment, so Uh huh.
Oh.
I don't continue that'll I will always be universal I mean, we will be prudent with regard to.
Our cash and cash expenditure.
Great great. Thanks, much guys.
The next question comes from the line of roster Kevin with Citi.
Thanks, Good morning, and see if you can give us a sense of cobot admissions in the quarter and maybe revenue contribution and then just give us a sense maybe more broadly of the month to month volume trend in any early indications for October within the acute segment.
Yeah, Ralph I mean.
Covert admissions in the third quarter were about 12% of our total acute care admissions.
That was a significant increase over the second quarter, where I think it was probably a 5% was the equivalent number.
The trajectory added was that July was clearly the peak.
And then we saw the cobot cases come down in August and then come down again, a little bit and in September.
Data for October is a little bit hard.
Hard to give you with precision because we've got the complication of the cyber attack that occurred in late September.
And you know our recovery was ER.
Ongoing for a good chunk of October and we continue to Backload some of our data et cetera. So we don't have is sort.
Good information as we would at this point in a month as we might otherwise have but I think our general sense is that cobot volumes are relatively stable in October with.
With the exception of a couple of hospitals and seeing.
Pretty significant surges.
Okay, all right fair enough. Thank you.
And then I think about the Red [laughter], it's just not yet Rob you asked about the revenue contribution I think I've mentioned before in a previous response that.
The case mix index of covert patients was about 50% higher than non coated patients I don't have the exact revenue.
Sort of becomes the commensurate revenue information, but I think order of magnitude you would expect revenue.
To be to be similar.
Okay. All right. That's helpful. And then I wanted to go to the just general sort of rate backdrop first on the Medicaid side, obviously, some fairly hefty cuts in Nevada, I believe so I guess, what's the outlook for rates in Medicaid next year and then if you could just touch on the commercial rate backdrop as well just give us a sense, maybe how much your block.
In for 21, and 22, and you know maybe a rough range of what those those rates are and if they are still generally three years and in like thanks.
Yeah, I think the percentage of long term contracts is not as great as it was a few years ago.
I mean, I think were largely locked into our 2021 rates. Although you know its fair to say that you know we're always.
Working with our payers, where we think our rates might be under market or you know there has been a long time since we've gotten what.
What we believe to be reasonable rate increases.
Particularly on the government side of things I think you know on the commercial side that process tends to be a more sort of regular and scheduled process.
And when I said I got the tide turns on that managed Medicare Medicaid.
Typically Medicaid.
Look I think we have a point of view that the managed care companies across the board.
Are doing quite well and they're doing quite well in large part because of a reduction in provider payments during the pandemic and so.
Where we think that.
Our rates are not to the competitive.
To use that particular data point.
As as yet another way of.
Working with the payers.
You know get what we think are fair rates.
And obviously that's a.
That's a you know a.
Two way process. So we will push for it they push back and hopefully the end result is one that's fair to both parties.
Okay. Thank.
Thank you.
The next question comes from the line of Josh Raskin with NEP on research.
Hi, Thanks, I think you've talked to a couple of points here that may be part of the answer but the basic question is do you make money Steve on low acuity patients. So it just seems like the low acuity is disappearing I understand there's a little bit more high acuity patient mix EBITDA doesn't appear to be impacted by this or is it just significant cost cutting.
It's kind of hiding the Empaque and you do make money on those low acuity patients.
Yes look I think it's a pretty broad question, Josh and and.
Maybe difficult to answer in a pervasive way, but I think we've always made the point that.
Lower acuity patients and VTR.
I'll, probably not very profitable and you know again I cited.
The bumps and bruises and strep throat, some new York sections before but.
I think we've always had the view that.
Those patients for a variety of reasons are probably more effectively treated somewhere else in the system.
In large part because the overhead in the hospital and the overhead in a hospital yard is much more significant than it would be.
Lower acuity setting like an urgent care center retail pharmacy clinic that sort of thing.
At the end of the day I think we have a point of view however that.
We.
Our probably able to earn a reasonable profit on any patient that is insured whether they have Medicaid Medicare commercial insurance you know the real challenge with hospitals on with her in acute care hospitals and emergency rooms. In particular is that I'm compensated burden and again one of the interesting things out.
In this sort of pandemic environment seems to be that.
Those lower acuity patients, who are not coming to hospital emergency rooms.
To the also the lower paying Medicaid and non insured patients.
I think thats, partly why that decline in volume has not been as costly to hospitals.
You might have otherwise expect.
That's perfect.
And then just taking a step back you know the pandemic made you think differently about your geographic concentration specifically into acute care segment is there sort of an opportunity to juxtapose that with the balance sheet conversation to help struggling systems throughout the urban areas is this a time, where you should be thinking about your financial strength being able to help others.
So I'll take this this is mark you know our development activities have continued throughout the year.
Almost at the same clip if they had pre close it that said a lot of deals aren't closing right now there's a lot of conversations you.
You read a lot of articles about systems all over the country that are struggling.
But most or many of them are not at the point, where they're making determinations to change.
The current situation for something new.
That said I do think we're laying groundwork for the future.
Near and longer term, where something like that could happen either.
Either within current acute care markets, which were most familiar with or other markets either markets, where we have behavioral presents but not yet acute care or markets that we don't play right now, but we track forget reasons, mostly because there's operator opportunities there are possible future.
Opportunities, so I do think that that might happen, but.
But we're not seeing that.
Happened right at this time.
Sounds like it's more on there and then your it sounds like you guys monitor are well prepared and sort of waiting for those systems to figure out where they are.
Yeah, and it gets back to that cash you know issue in the balance sheet we were.
We always take a conservative approach I think we're in a great financial position to move when there's an opportunity. So we want to remain.
Good afternoon financial position, so that when that does happen.
We can make decisions quickly so yeah I would agree with you, though that a lot of those things that are on the other side and when they those health systems to make their determination will be ready to act.
Thank you.
[laughter].
The next question will come from the line of Jerry Taylor with JP Morgan.
Hi, good morning, most of my questions.
Answered, but just wanted to go back for a moment, Steve just on the acuity again.
And I missed the first couple of minutes, but did you actually breakout on that net revenue per adjusted.
Admission the acuity versus the payer mix contribution and you talked about.
The cobot see am I being higher do you have the actual change in your your overall, you're not until they see a mine in the quarter.
Yeah. So so I think that the cfive for cobot patients in the quarter was something like 2.4 and for Noncovered patients was 1.6, and I talked about it being about 50% higher but those actual numbers.
As far as the payer mix acuity, hoping we touched on that other than I know that some of our peers have talked about they are higher revenue in the quarter being driven by sort of a combination of higher acuity and improved payer mix I think for us it is more of acuity issue.
Issue that better payer mix issue I did say in an earlier response I forget exactly what context that our payer mix was sort of stable in the quarter.
Ken I think as best as I can speculate the reason that we didn't see some of the improvement that our peers saw is because of our elevated level of cobot patients, who I think tend to be more Medicare and less commercial so.
With a higher percentage of covert patients we didn't necessarily see that same improved payer mix at some of our peers.
Got it and is there anything and I'm sorry, if I missed this and just move on if we did but on the.
The 18 sort of system attack that you had is there anything you know contemplated where you feel like there's some additional spend that since I T infrastructure.
Going forward.
Yes, I mean I think at this point, we're still going through a forensic audit to make sure we understand exactly what happened here.
We have a robust.
Security apparatus here and even with that you know we we we did get hit we.
We are reviewing everything having to do with our cyber security.
We've got a very strong internal cyber team.
Then we work with various external partners.
Some of which are nationally known names.
That others work with as well so we're reviewing all aspects at this point and we have not made any determinations as of yet.
As to how we might want to spend dollars either differently or enhance our spend but.
But we will be continuing to review this to make sure that we are you know as secure as possible going forward.
Okay. Thank you.
The next question will come from the line of Nicholas with PMC.
Good morning, Thank you for the call.
Given the increase in unemployment Hunter.
And your insurance and Noninsurance have you made any changes to your provisions on collectability or allowances.
[laughter] guidance, so we have and I think as most hospitals have over the last several years.
Enhanced our revenue recognition or Conversely, our bad debt or charity care recognition to make.
Make it.
More precise more accurate so that in real time as patients are presenting to our hospitals were identifying their ability to pay their insurance or lack of same et cetera.
So those have been in place for quite some time.
I think that.
Therefore, if payer mix deteriorates, a as a result of higher unemployment.
As we move forward into continued levels of higher unemployment, we're in a position to recognize that from an accounting and financial reporting.
Standpoint in real time, and we'll do that.
I was saying earlier is I don't think we are seeing that yet and I think Uh huh.
There is a variety of reasons for that I think while you know some employees are being furloughed, but they are keeping their health benefits. Some employees, who are being laid off are able to access Cobra. Some employees, who are laid off deferred their their procedures. If that's possible if they're not emergent.
Well, we have seen if you go back and you look at the experience in the great recession or 10 years ago. For instance is that unemployment increased pretty dramatically, but the impact on hospitals in terms of elevated levels of uncompensated care increased more incrementally over over a two or three year period.
Good.
Now obviously, the unemployment created by the pandemic occurred probably faster and more and more accelerated manner than it did back in the great recession, but to some degree I think you're seeing that same to weighted effect.
So I wouldn't be surprised if we see more uncompensated care in the future, but it will probably be a more gradual incremental sort of the impact, but I, but I believe our reporting systems are well established to be able to.
To do that properly.
Any other questions operator.
The next question will come from the line of Scott Fidel with Stephens.
Hi, Thanks.
First question just interested in your thoughts on the latest caris guidance that came from Hs in October I know that the guidance from HHS has really been a moving target, but just Steve interested in in terms of first which is the guidance you were using in terms of.
Accounting for the third quarter, and then whether directionally that did seem to become a little bit more accommodating as it relates to booking loss revenues relative to the prior September guidance.
Yes, Scott you raise a good point so first of all I think we took the position along with our outside accountants that the way that we recorded the carriers grant revenues in the third quarter was based on the HHS guidance that was effective as of September thirtyth.
Good.
And as you pointed out and I thought you had a note out this morning about one of our peers.
HHS has made a couple of changes to that guidance. Subsequent to September 30, I think there are still things that.
We'd like to clarify with HHS.
Or have a better understanding with HHS before.
And any firm decisions, but I think we have a point of view that there is a reasonable chance that when we.
So take into account the revised HHS guidance and clarify some of the things that we think are not absolutely clear today.
We'll be able to and we'll be able to properly record more carats revenue and incremental care revenue in Q4.
Okay got it that's helpful. And then just had a follow up question and would be interested in your just your perspectives on the labor dynamics right now in the acute care hospital side.
Just as it relates to there have been some headlines more relating to some of the peers around the unions and some some contentious situation said that the resident relating to demands there and just interested in your perspective on whether you see this is just the typical noise or pandemic is continues to drag on.
Whether or when did those types of situations could ultimately drive increased wage pressure over time.
Yes, I mean, we're certainly watching what's happening with our colleagues I think at our hospitals.
We try to pride ourselves on having open lines of communication and making sure that our employees understand what our thought.
What our thinking is credit decisions that we're making so as far as we're concerned I think we're winning a good position right now I do think that there are some cost pressures on the labor side, where some systems that are that are struggling or throwing dollars. It this and so.
So you do see.
Anecdotally in certain specific areas, where you have some people jumping for for a couple of Bucks here and there but.
As far as labor strife and so many other things.
We've been fortunate that I think that because of the way, we manage and communicate with our employees. Thus far we've been able to avoid some of the things that we see happening at some of our competitor facilities.
Okay, great. Thank you.
[laughter].
The next question comes from the line of Justin Lake with Wolfe Research.
Okay.
Thanks, Good morning.
All right take more of assets that members patients very true Steve I think.
Yourself as well as most of you peers during the third quarter to five year I'd have to do things like that we're talking about maybe looking actually kind of mid single digit declines in PC missing.
Except to the patients about sorry, yes, like single digit just curious how inpatient admissions overall kind of trended through the quarter and it that say the dependent tickets that Dan whenever calling that out the Brooklyn.
Yes, so just I have little trouble hearing you. So if I don't answer your question on point, you can clarify, but I think you're asking about our overall.
Absolutely admission numbers, we do disclose for the quarter in our selected statistics table overall admission decline, which I think on the acute side was about 9.5% versus the 17% on the adjusted side and obviously the difference is the decline in outpatient volume, which I think again based on earlier questions was.
Driven by.
That emergency room.
Declined more than anything else.
As far as sort of the trajectory or cadence during.
The quarter I talked about a little in the context of Kobe co, but definitely peaked in July.
And then decline for us in August and September and I think our Noncovered volumes Inc. sort of had the opposite trajectory I think our overall volumes were relatively consistent during the quarter.
Okay and into October you're seeing some more.
And again I'm going to have to take a little bit of a pass on that as I sort of indicated in an earlier question.
You know because of the cyber attack our information on on October is still not perfect.
But.
Mike My guidance that we saw a bit of an interruption in our volumes and our and maybe early part of October so an ambulance diversions and some cancelled surgeries.
But I think by the end of October things, where largely back to normal but it is difficult to be a whole lot more precise than that at the moment.
Alright, thanks in advance.
Thank you.
Our final question will come from the line of let me end with DBS.
Hey, Thanks, just one question on the cyber security development and I appreciate the comments on the road.
Robust IP infrastructure I'm more curious what this really means sort of out in the field with your operators I presume that you've got.
Contingency plans that you put into place to periodically take hospitals.
Off line, you know work on paper and so your clinicians and operators are probably well prepared for this but just any color on the contingency plans and thoughts about just the field level disruption that perhaps this may have or may not have thanks.
Well, you actually said it right there I mean, when we go off line.
Often for different maintenance updates and things like that so our plans are.
I have been put into practice many times.
That said when you're in a regular downtime and you know it's going to be for a period of time I don't think theres the level of stress that you get when something like this happens where you don't know how long, it's going to it's going to last for but saying that.
We've all been incredibly impressed not just with the leadership for MRI T. folks, but from all of the leaders on both sides both divisions.
Right down to the to the folks.
On the patient care level right at that site, how they've handled this.
They really work.
Diligently to.
Key perspective make sure that we were able to treat patients in a in a safe and efficient manner. If we were worried at all that that was not the case, then we slowed things down we delayed procedures where necessary.
But I do think that our preparations for things like this.
Really paid off for us because.
Most of our hospitals were able to act in a fashion that we would have hoped.
Would have happened, but you never really know until something like this happens and I think that was another reason why we saw you know just the ability to get back up and running so quickly.
Because we did things in a very organized efficient manner.
So I do think that all of those policies and procedures played out well and.
All that said I hope it never happens to US again, but we will continue to enhance those protocols just in case, we have to deal with it again.
Okay. Thanks, Good luck on the new role Mark.
Thank you [laughter], we show no further audio questions I'll hand, the conference back for closing remarks.
Okay. Thank you we thank everybody for their time and look forward to our call early next year.
This does conclude today's conference call. We thank you for your participation and ask that you. Please disconnect your lines.
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