Q4 2020 Universal Health Services Inc Earnings Call
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Ladies and gentlemen, please standby. This is the operator todays conference is scheduled to begin momentarily until that time your lines will be again placed on a music hold and thank you for your patience.
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Ladies and gentlemen, thank you for standing by and welcome to the fourth quarter and full year 2020 U H S Conference call I'll.
All lines have been placed on mute to prevent any background noise and after the Speakers' remarks, there will be a question and answer session to ask a question during the session you'll need to press star one on your telephone keypad.
If you require operator assistance during the call. Please press star zero and I'd now like to turn the call over to your speaker today CFO, Steve Filton. Thank.
Thank you. Please go ahead Sir.
Good morning, Thank you James and Mark Miller is also joining us this morning, and we welcome you to this review of Universal Health services results for the fourth quarter ended December 31 2020.
During the conference call, we will be using words, such as believes expects anticipates estimates and similar words that represent and 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 statements and risk factors and our form 10-K for the year ended December 31 and 2020.
We'd 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 reported net income attributable to uhm per diluted share of $3 60 for the fourth quarter of 2020 after.
After adjusting for the impact of the items reflected in our supplemental schedule is included with the press release, our adjusted net income attributable to UHF per diluted share was $3 59 times for the quarter ended December 31 2020.
As of December 31, 2020, we have received approximately $417 million of funds from various governmental stimulus programs most notably the cares Act include.
Included in our reported and adjusted income for the three and 12 months ended December 31 and 2020.
Approximately $20 million.
$200 million, excuse me and $413 million, respectively, and net revenues recorded in connection with these stimulus programs for the full year of 2020, approximately $316 million of those revenues were attributable to our acute facilities and 97 million were attributable to our behavior.
Ill health facilities.
In addition, during 2020, we received approximately $695 million of Medicare accelerated payments, which had no impact.
On our earnings during the year, we have commenced the repayment and process and anticipate the $695 million of funds will be repaid to the government and March or April of 2021.
As previously disclosed on September 27, 2020, we experienced and information technology and to that which resulted in the suspension of user access to our information technology applications in the United States.
And our information technology applications were substantially restored and our acute and behavioral hospitals at various times and October 2020 on a rolling and or staggered basis, and our facilities generally resume standard operating procedures at that time.
We estimate that this incident and had an unfavorable pretax impact of approximately $67 million. During the year ended December 31, and 2020 as a result of lost revenues incremental recovery expenses and delayed coding and billing.
We estimate that approximately $12 million and be unfavorable pretax income.
Impact was experienced during the third quarter of 2020, and approximately $55 million was experienced during the fourth quarter of 2020.
During the fourth quarter of 2020, we also continue to experience a material unfavorable impact on our operations and financial results from the COVID-19 pandemic before giving effect to the revenues recorded in connection with the cares Act and other governmental grants.
Specifically, we experienced and increased wave of Covid patients in December 2020, which peaked in the first half of January of 2021.
The negative impact, resulting from this elevated level of Covid volumes was primarily a function of accompanying declines and elective and scheduled procedures declines and both acute and behavioral patient days and along with increased <unk>.
Expense pressures, particularly on salaries and wages.
Yes.
Our cash generated from operating activities was $2 $36 billion during the full year of 2020 as compared to 143 8 billion during 2019.
Included in our 2020 cash provided by operating activities was 695 million and Medicare accelerated payments, which we plan to repay to the government very soon and.
We spent $731 million on capital expenditures during the full year of 2020 as compared to $634 million during 2019.
Our accounts receivable days outstanding increased to 55 days during the year ended December 31, 2020, as compared to 50 days. During 2019. The increase was due in part to the coding and billing delays caused by the information technology and systems.
At December 31, 2020, our ratio of debt to total capitalization declined to 37, 9% as compared to 42% at December 31 and 2019.
During 2020, we opened 439, new beds, and our existing acute and behavioral health hospitals and opened Canyon Creek behavioral Health Hospital, a new 102 bed Hospital in Temple, Texas.
We also opened three new freestanding emergency departments or <unk> and expect to open five more than.
2022 to bring our total number of <unk> to 'twenty two.
We continue to grow our behavioral health joint venture portfolio, and recently announced the opening of two more de novo facilities. The 102 bed southeast behavioral hospital joint venture with Southeast health located in southeast, Missouri, and the 134 bed Clive behavioral Health Hospital.
Joint venture with Mercy, one located and Clive Honeywell.
During 2021, we expect to spend approximately $850 million to $1 billion on capital expenditures, which includes construction of a new 170 bed acute care hospital in Reno, Nevada, which is expected to open and the first quarter of 2022.
As of December 31, 2020, we had a little over $1 2 billion of aggregate available borrowing capacity pursuant to our $1 billion revolving credit facility and our $450 million accounts receivable securitization program.
In addition, as of December 31, 2020, we had approximately $1 $2 billion of cash and cash equivalents.
In light of our expectation that the COVID-19 volumes are likely to continue a downward trajectory in 2021 as more vaccines become available and the accompanying pressures on our operations and financial results is our board of directors have approved the resumption of our regular quarterly dividend with the first quarterly payment of <unk> 20.
Per share to be made on March 31.
We also plan to resume our share repurchase program and the second quarter of 2021 pending board of director approval.
Similarly, our 2021 operating results forecasts, which are provided in last night's release assumes that the negative impact of the Covid virus will diminish and 2021.
Pace of that recovery from the pandemic is still difficult to predict with precision, but we assume the COVID-19 impact will generally ease and increasing cadence throughout 2021.
Mark and I are pleased to answer your questions at this time.
Yes.
At this time I would like to remind everyone in order to ask a question. Please press star followed by the number one on your telephone keypad and we'll pause for just a moment, while we compile the Q&A roster.
And our first question comes from the line of Andrew Mok with Barclays. Go ahead. Please your line is open.
Hi, good morning, when I compare that 2021 guide and the pre Covid plan for 2020 revenue was tracking ahead, but EBITDA is tracking behind resulting and margin compression of about 80 basis points I would think that margin should be more resilient and given our cost structure, that's been and rebates lower so can you walk us through the drivers of that lower margin.
File and how do you expect margins to evolve that's COVID-19 abate.
Yeah, I think obviously it can be a more nuanced answer, but I think at the 20000 foot level, but that's the explanation is that we presume that demand will recover faster than some of the accelerated pressures, we've been feeling and our expenses, particularly salaries and wages.
We do believe that as the Covid the volume of Covid patients declines.
And as labor pressures will ease, but I think we have a point of view that day.
And then they may take longer to ease and then demand growth to recover and that's I think why youre seeing that margin compression, which I think will likely occur more in the first half of the year and the second.
Yeah.
Got it that's helpful and I have a follow up Capex is expected to meaningfully accelerate to a range of it under $50 million to $1 billion. This year, how should we think about the capex spend across the segments are there specific service lines or geographies targeted for 2021.
Yeah, sorry, I tried and my prepared remarks to highlight some of the significant increases we are.
Our building and.
Hospital in Reno, Nevada, where we have and existing hospital.
But obviously this will expand our presence and that market as well as from the statewide market and Nevada, that's probably $150 million of capital spend in 2021 by itself.
Also highlighted join.
Joint venture activity, we have building a number of new de Novo behavioral hospitals with mostly non for profit joint venture partners.
And that's consuming and I think some incremental capital and then.
And I think more broadly investment and ambulatory services on the acute side.
And are also.
Consuming some incremental capital those are those I think are sort of the big areas, where there is increased spending.
Great. Thanks for the color.
Our next question comes from the line of Kevin Fischbeck with Bank of America Go ahead. Please your line is open.
Great. Thanks.
Maybe wanted to follow back up with.
The other question about kind of margin.
As we think about 'twenty and 'twenty, obviously volumes were depressed, but pricing was quite strong.
And as the volume comes back.
Would be lower acuity volumes.
And.
It seems like maybe Medicare volumes, and somebody and Medicaid volumes have been more depressed and commercial so I might think that the volume that comes back and also what happened maybe a negative payer mix coming with it. So I guess, we'd like to kind of hear about how you think about incremental margins on that volume return, giving given that potential and whether you think maybe thats not the way it will play out.
So Kevin and I think broadly.
<unk>.
Really unfavorable pressure from the Covid dynamic.
Has been the idea that and both of our business segments. The presence of Covid patients and crowded out other non COVID-19 patients.
And as a consequence.
Margin serum volumes are down and.
And elective and scheduled procedures are down from pre pandemic levels and patient days, and both acute and behavioral or down from pre pandemic levels and.
And the business that is missing.
And our apps and if you will from the hospital is essentially I think the higher margin business and the Covid business is lower margin business that has temporarily replaced and in 2020 I think as the.
And as the Covid volumes ease and 2021 as we expect they will and and I think as they have started to do so.
Youll see more of a return to kind of a normal medical surgical mix on the acute side and more of a return or a rebound and behavioral patient days on the behavioral side and.
And revenues will begin to increase and margins will begin to increase but as I noted in my previous comment.
What we have experienced particularly later in 2020 years really accelerated pressure on our labor force.
And that pressure I think slowly in 2021, but I think the revenue mix of patients will clearly be better in 2021, and as the labor supply sort of equalize areas.
And I think our margins will also improve as the year continues.
So I guess, yes.
Historically, I think of higher acuity equal and higher profitability, but your point is that.
Debt norm that might be the case normally but surgical versus medical.
Our weighted that.
And really drove the higher acuity and and the acute segment and 2020 was COVID-19 patients and to your point historical thinking about higher acuity doesn't really apply to COVID-19 patients and their medical patients. They are sick, they're often older their length of stay is quite a bit longer and they're just simply.
Not as profitable as surgical or procedural patients.
Okay, and then just on the.
Behavioral side.
Obviously I understand.
The dynamics of Covid, putting pressure on that but obviously your peers showing much stronger volume growth and you. So.
How do you think about.
Your market share I guess over the last year or do you feel like you've been able to sustain market share or have there been market share losses across your businesses.
Yes, so market share data is not as widely available and the behavioral space as it is and the acute space, but I think to the degree that it is available we believe for the most part that we have maintained our market share I think the other important metric that we look at internally Kevin is the amount.
Sort of expressed demand and we measure that and a number of ways, but we.
We measure it and the primary way.
Net of incoming inquiries telephone calls internet inquiries et cetera, and.
And what we have.
Generally noted in 2020 is that the level.
Intake or inquiries has remained rather strong and.
And what has really occurred, particularly I think later in the year is more challenges for us to meet that demand either because.
Covid patients and our behavioral facilities that preclude us from admitting non COVID-19 patients.
And for them on their units and.
On their floors, whatever or because we've got a.
A significant chunk of our labor force that either and it's been exposed to the virus or has the virus or is out for some other I'll call virus related reason and.
And we simply can't sort of operate all of our beds and a particular hospital or a particular geography at a point and time.
And.
So your sort of question about comparing to our public peer difficult for me to do that because I just don't know what their experience has been.
With <unk>.
Covid patients and their markets what their protocol is for.
Trading and isolating and keeping their COVID-19 patients and employees and say if I just don't know so.
And really all we can do for the most part is look at whats impacting us internally and I think we have a strong belief that.
The biggest impact on our behavioral volumes in 2020 has been COVID-19 and COVID-19 related dynamics and when those dynamics ease and 2021.
Behavioral volume should resume to prepay and then it clouds and quite frankly, we believe.
Potentially higher than pre pandemic levels, because we think that the underlying demand for behavioral care has been increasing.
And that's helpful. Thank you.
Our next question comes from the line of Ralph Giacobbe with Citibank Go ahead. Please your line is open.
Thanks, Good morning, Steve maybe you can give a little bit more on sort of that line last part of that question can you help us maybe guidance or how youre thinking about it between the segments, maybe just volume and pricing assumptions and bedding.
Embedded in for sort of bolted and maybe any differences on the margin side in terms of greater improvement or degradation, one one versus the other.
Yes.
Honestly, Ralph I think when we commenced the process of developing our 2021 and budget or forecast.
We did so with the sort of.
Basic underlying presumption that 2020 was kind of a last year that.
We were mostly focused on dealing with debt.
Pandemic.
Keeping our patients safe getting them, well, keeping our employee base safe and well those were all extraordinary challenges and.
And many ways I think 2020 was otherwise last year in terms of business development.
Really taking advantage of capacity expansion service line expansion and that sort of thing and so when we began to think about 'twenty 'twenty, one forecast and we're really kind of started with our original 2020 budget and what our forecast had been for 2020.
And I think that's really largely true for both business segments. So.
I think we have a point of view that in both business segments will sort of grow off of.
Our 2019 pre pandemic base.
And kind of mid single digit levels et cetera, although it will be and a trajectory that I think is different from what the normal or historical trajectory. So that historically Q1 is our biggest earnings quarter and we are and.
More and the first half of the year than we do and the second half of the year I think we have a point of view that 2021 will look differently because of this dynamic COVID-19 volume is declining as the year goes on and.
And revenue increasing and.
Labor pressures easing and margins increasing as the year goes on so.
I think the two business segments sort of grow and that historical mid single digit rate range, although instead of a different cadence and a different trajectory than we would normally expect.
Okay, Alright fair enough and any any early read on the first couple months of the year I know, obviously limited data but.
And we're tracking similar to <unk>.
And then maybe anything specific to some of the storms and impact of weather more recently, particularly for you and Texas.
Yeah. So.
The first point and as I.
And my prepared remarks, and we saw a significant surge and COVID-19 volumes and December on a percentage basis, we had more COVID-19 patients and December of 2020 than any other month of the year and that surge continued and almost all of our hospitals and into the first half of January and I think COVID-19 volume has tended to peak.
<unk> share for virtually all of our hospitals and the first half of January and.
And have been declining and declining rather rapidly and I think we view that as an encouraging sign since then.
But again one of the things that we've noted several times during the year and during the ebbs and flows.
And panic is as Covid volume surge and that pressures and crowds out other business when the volumes drop that other business returns, but it's not an immediate and instantaneous sort of thing so.
And I think it takes depending on the hospital and the service line et cetera weeks, maybe a month or two for that to happen and that's the expectation and again I think we're encouraged by the fact that the Covid volume seemed to have peaked.
And the first half of January and the hope is that obviously, there's a vaccine becomes more widely available and distributed those trends will continue as to your question on the storms and I would make the point that I think the storms affected abroad, a broad swath of the country, not just Texas, but you know and arcades, Texas and.
Oklahoma and leaves.
Xena, Mississippi, Tennessee.
And I think the.
Good news is that because.
These storms were sort of widespread unlike things like the cyber incident, where we face the risk and face the actual dynamic of <unk>.
<unk>.
And a relatively short period of time business went elsewhere, because we were struggling with our systems during the weather event, everybody and our geographies was struggling and much the same way and so I don't think we lost business to anybody else I think because it occurred in the middle of a quarter the likelihood that the business sort of recovers.
Or two or three weeks later is more likely and.
And my guess and it's currently I guess at this point is that when we get to the end of the first quarter the weather event.
Other than some incremental expenses and things which and.
Many of which will be covered by insurance.
Shouldnt have a big impact.
Okay alright, thank you.
Our next question comes from the line of a J Rice with credit Suisse. Go ahead. Please your line is open.
Oh, hi, everybody maybe.
And maybe first just thinking about some of the negotiations with managed care coming out the other end of the pandemic.
I think on the behavioral side, you said that some of the pressures you're feeling from managed Medicaid and length of stay and all.
And the other issues on the Baber said they may be eased up.
Have you seen any of that reverse itself, but what are your discussions like with managed care and really on both sides of the business in terms of any changes you've seen.
Yes, so I think the dynamic that you're alluding to is to and as it relates to the behavioral business. A J is that really since the pandemic began our revenue per adjusted day has been up and that kind of 5%, 6% range, where as compare to sort of maybe two 3%.
Increases pre pandemic and we've attributed that to at least to some degree or to a change in behavior on the part of some of our insurers.
And managed care companies.
Clearly and.
And this trend certainly continued into the fourth quarter, we see the level of charity care and the level of denials down about 10% from prior year comparisons and.
And there may be a number of reasons for that but I think to some degree. It certainly is attributable to less aggressive utilization management behavior on the part of some of our insurers at least.
We also have negotiated during the year some.
Measurable contractual price increases, particularly in our managed Medicaid portfolio.
These are not big increases, but I think they come on top of a number of years of relatively suppressed price increases in that space. So that's been helpful as well and I think by the way much needed.
Again, we've gone and at least with some payers for a number of years without increases that can be a difficult population to treat with some incremental expenses et cetera. So so I think they are there and those increases are justified, but that's been helpful. As well I would say on the acute side.
Not as much change during the pandemic and terms of our manners.
Managed care or insurance behavior, one way or the other.
And.
Not in terms of renegotiating prices or in terms of utilization management behavior et cetera, and I would say, it's mostly business as usual.
Okay, and maybe a follow up question around the choice.
And when one guidance, there's obviously some debate about things like the public.
Public health emergency and how long debt was standing in place and I know that the 20%.
DRG add on from Medicare relates to that timeframe there some match funding.
And one thing as well and then.
There's some debate about the Medicare sequestration timeframe, which I guess now would expire at the end of March.
You have you factored that into your guidance or what are you assuming on those two issues or any other variables like that.
So as to the Medicare sequestration as you noted we've assumed that it's waived through the first quarter, but then our guidance presumes that it is.
Restored for the balance of the year as far as the.
And the public health emergency timing, but more so there is sort of the 20% DRG add on and I'll make the point that.
And so we've benefited from the DRG add on but only to a degree that it's covering increased cost. So I think we have not made and explicit assumption about it and our 2021 budget, but what we really assume is that as COVID-19 volumes declined COVID-19 expenses will decline.
And we assume that.
And as that occurs and the government at some point will lift the.
And the 20% add on.
We haven't really again made and explicit assumption about that its really more built into our broader assumption that as the year progresses.
And revenue per adjusted admission will come down, but so will expenses.
Okay, alright, thanks, a lot.
Our next question comes from the line of <unk> Chickering with Deutsche Bank and go ahead. Please your line is open.
Good morning, guys. Thanks for taking my questions. A question for you on guidance again.
And that margin pressure should ease and the back half of the year looking at past years as you referenced about 52% 50 books and their EBITDA comes and the first half of the year can you help us quantify what that should be for 2021.
So I guess the short answer is now.
And I think we have.
Storage <unk>, not given quarterly guidance and if I start throwing out percentages, it's effectively giving quarterly guidance and I think given our historical reluctance to do it two.
2021 will certainly not be the year that we would choose to.
Say that we had a much better much better visibility and are prepared to do it so.
I think I tried and an earlier question to certainly talk about the fact that we would expect the cadence and the trajectory of 2021 to look differently and not to have that front half weighting that you alluded to but.
We're not prepared to give specific percentages because as I said in my opening remarks. What this is really all premise on for the most part is the pace at which the Covid.
<unk> eases and how that affects our labor force et cetera, and those things are just very difficult to predict.
Okay Fair enough I had to give it try it anyway, and then to follow up on the behavioral admissions and still be a 10% delta versus D and fourth quarter versus your largest public peer can you quantify as you defined it the express demand from your referral sources like <unk> and other sources and can you remind us what percentage of those emissions come from those referrals.
Horses.
Yeah. So.
And again.
I'm referencing what we would describe as sort of call volume, which is kind of inbound inquiry volume, which is again telephone calls and the internet inquiries et cetera, and those really havent declined during the pandemic.
And our conversion rate or the rate at which those inquiries are inbound calls turn into admissions has fallen and I think we attribute that in large part.
Two our inability to.
And literally put the patient and a bad either because the debt itself as an available because it's proximate to a COVID-19 patient from multiple COVID-19 patients or.
Because we don't have enough qualified clinical staff to staff those beds.
So.
We have not historically given out our call volume et cetera, I don't know that any of our.
It appears to do anything like that but I will say.
And again the notion that the call volume itself has not declined and that and that's what leads us to believe that the underlying demand hasn't really changed our biggest challenge in 2012 2020 has been meeting that demand.
And I think we will just be and a much better positioned to do that in 2021.
And we become less and less focused on the Covid virus itself.
Alright, and then one more quick follow up here on the average length of stay.
Follow up on <unk> question, when you talk to managed care about you and.
And for health and the denials are doing today do you think that the focus and mental health post COVID-19 means that these level of denials will stay at these current levels.
For 'twenty, one and beyond or you can sort of revert back to normal as the world returns to more normal utilization rates.
Yes, I mean thats a difficult question, obviously for us to answer Pete out because I think it's really the behavior of the managed care companies that have changed.
And it's difficult for us to ascribe rash.
Rationale to that I mean, obviously I think broadly.
The managed care companies have done quite well and.
Prosper and financially during the pandemic because of the lower utilization and lower volumes that we've been discussing as providers.
I guess my gut reaction is that as utilization and volumes returned to something.
Approaching peak pre pandemic levels, while we would hope that their behavior remains more reasonable and rational.
It certainly would.
And it will be and make intuitive sense that they've returned to a more aggressive posture.
I really think that question is better posed and that great.
Great. Thanks, so much.
And.
Our next question comes from the line of Justin Lake with Wolfe Research go ahead. Please your line is open.
Thanks, Good morning.
First just Steve I apologize if I missed this but you know I'd love to hear some more detail on the on the cost side, specifically around labor and anything you could share with us in terms of specifics between the acute care business versus behavioral specific markets.
And those thing that you have and that's good money on.
And why do you think it's transitory.
Sure.
Again, and I think this has been true for some time I think we have talked for the last several years about the fact that labor shortages have impacted the two divisions somewhat differently.
And acute side the impact has been what I would describe as more traditional debt is elevated labor costs, we're spending more money on over time for our own employees, we're spending more money on temporary and traveling nurses.
And those sorts of things and paying.
Shift differentials and sign on bonuses and all that sort of thing and I think it's really been exacerbated during last year because.
The Covid Covid has created all sorts of different and new dynamics and pressures.
First of all it has created.
Number of instances, where employees nurses and other clinicians are out sick.
They have the virus and they have been exposed to the virus, although thats often they are often being exposed and contracting the virus outside of the hospital, but either way there on the sidelines for a period of time or they don't have the virus, but they've been exposed and quarantining.
Or theres certainly been some element of burn out that we've all read about it it's been a very trying and difficult environment for clinicians to work in and some have just I think decided to either step aside or try and work and less risky less stressful environments and.
And then sort of at the other end of the spectrum. We know that there are significant numbers of employees who have.
<unk> been chasing premium work dollars nurses, who want to and are willing to relocate and willing to work six shifts a week or whatever can make four or five times their regular salary and some nurses have certainly taken advantage of that opportunity. So all of those expenses are reflected I think and our increased.
And.
Salary and wage expense on the acute side on the behavioral side as I've mentioned I think a number of times already on the call the impact manifests itself somewhat differently and we do a somewhat elevated level of labor expense.
Real impact is just the sheer inability to find sufficient numbers of clinicians and especially nurses and therefore and inability to access to as many qualified pace.
Patients as we could either wise and so its reflected in kind of lower volume is rather than an elevated expense and the notion is that obviously as the COVID-19 virus frequency eases in 2021.
Dynamics that I talked about.
All start to reverse themselves.
And we don't have nearly as many nurses out and any of our nurses and other employees are being vaccinated and <unk>.
Real time, so that should be helpful.
The the level of burn out should ease.
<unk> of nurses to chase premium dollars and elsewhere will diminish and all those things should get better as Covid volume decline and that's why we believe that the current labor pressure is somewhat transitory, although again as I noted, particularly about our first half 'twenty and 'twenty one guidance. It will take some time for that to develop.
And occur.
Thanks for all the detail and just a quick follow up on capital deployment, and you talked about getting back to share repurchase and the second quarter.
Did the dividend and it doesn't look like you put it.
And really Didnt look like the share count was down much from them.
Quarterly and the guide maybe you could talk about the timing and magnitude of that share repo and just give us some kind of reset and I'm kind of where you ended the year in terms of deployable capital.
Yes, so we.
Again as I said.
We have referenced before and with different context, and then we went into 2020.
With a guide towards and elevated level of share repurchase prior to 2020, we have been repurchasing about $400 million a year and shares.
A couple of years before that we went into 2020 with a guide towards doubling that and said, we would repurchase $800 million worth of shares in 2020.
And in fact, we repurchased $200 million and the first quarter before we suspended.
And the share repurchase as the pandemic broke down in mid March.
Much like our operating forecast, we're sort of going back to those assumptions in 2021, and assuming that share repurchase again will be at that sort of elevated seven and $800 million level.
Alright.
And again as a reminder, if you would like to ask a question. Please press star followed by the number one on your telephone keypad. Our next question comes from the line of Josh Raskin with Nephron go ahead. Please your line is open.
Hi, Thanks. Good morning, just first one just a clarification.
Clarification of our guest confirmation on your guidance 2021 excludes any potential impact from cares act, but is there a rough range in terms of potential pain.
Payments that you guys think you could collect and 2021.
So.
We did disclose in our 10-K that we have received subsequent to December 31, and another close to $200 million of cares Act funds that we have made no estimation of.
And whether any of that or any portion of that could or would be taken into income and I'm not prepared to do that but we did disclose and we've received and other.
<unk> and $200 million.
Okay. So that's <unk>.
Starting point for that and to your point, Jon just to be clear. There is no. There are no cares funds and our operating income forecast for 2021.
Right right right. Okay and then the second question is just I'm curious on your views on sort of physician and provider connectivity and I'm thinking more specifically and behavioral health side.
Do you think this movement towards sort of virtual visits downstream and in the behavioral health segment is that having any impact on inpatient trends are you seeing anything there or do you feel a need to.
And sort of think more strategically around some of those changes.
Well I think what the expansion of telehealth capabilities and behavioral.
It reflects.
And as I think the expansion of health capabilities more broadly reflects is that during the pandemic.
People were reluctant to access the system to seek assessment to seek alternatives of care kind of through the traditional means EUR of office visits went down.
Visits to private psychiatrist we're down.
Referrals from school systems were down and large part because in person schooling was down significantly.
And telehealth and helps I think to augment some of those other activities I think at the end of the day.
The fundamental services that we provide however are not competitive with telehealth.
Somebody calls a tele health line and speaks with the clinician and expresses suicidal ideation or homicidal thoughts or.
And just sort of a lack of function functionality and daily life Theyre going to EBIT.
The person on the other and the commissioners and any way of responsible clinician and theyre going to refer a person to more intensive care, whether that's inpatient care or partial hospitalization or outpatient care, but something more intensive than a telephone visit.
And so we've spent a lot of the past year standing up our capabilities and building out our capabilities and telehealth. So that we ourselves can offer those services, but also partnering with others, who do and and I don't think we have any objections and the fact that others are doing it.
But really trying to make sure that patients who are identified as needing further intensive care.
Got it and the appropriate place and obviously, we feel like our facilities both in and outpatient are.
Clinically appropriate and most telehealth providers, just or not and are positioned to really provide a significant amount of care beyond that initial assessment or.
Kind of a traditional.
50 minutes therapy session that you get and a private psychiatrist or therapists office and those things are obviously going to continue and they've existed before the pandemic and and they'll exists appropriately afterwards.
Okay. Yeah, that's helpful I wasn't insinuating that its health.
Health.
Plant and patient care or anything like that it was really again more on that debt provider connectivity is there is there a chance you are missing out on the sort of.
New.
Path for patients.
Move from downstream to potentially upstream, but it sounds like you've got some plants and there yes.
Yes look I think it's a fair statement I mean, and we said it and at the beginning.
I think it is definitely had an impact that acute care emergency room visits are down across the country by.
And somewhere between 20, and 30% routinely during the pandemic and we do get.
A measurable number of referrals from the acute care hospital emergency room, So I think thats and.
And the issue now again, I think telehealth to a degree has replaced some of that activity.
And we've got a lot to reach out to our communities to make sure that if people are reluctant to go to and emergency room or community mental health centers that they will reach out and some other way that they feel more comfortable again with a telephone call et cetera, but again I don't think which I think was the crust of your question I don't think we believe.
Debt.
And the increased presence of telehealth.
And is really put a damper on and on that overall demand again I'll go back to what I was saying before we think the demand is there our biggest challenge and we think it will ease. Some in 2021 is meeting that demand and having sufficient debt and sufficient personnel to meet debt.
And it's perfect. Thanks, Steve.
Our next question comes from the line of Jamie <unk> with Goldman Sachs. Go ahead. Please your line is open.
Hey, Good morning, guys I'd Love your thoughts just real quick on and how you're thinking about deferred Kennedy stage, just how much is out there how much of that might come back over and in next few years and just within within guidance for.
For impact from deferred care on volume this year.
Yes, Jamie and it's a great question, we have said throughout the <unk>.
Pandemic that we do believe.
Sort of both anecdotally, we hear this from lots of physicians, but also objectively as we look at our service line volumes that there are people who are who.
And we have deferred care during the pandemic and there is also evidence and we've talked about this before that there are people who when they come to the hospital.
Our sicker and more acutely ill and they would have been had they come on and more timely basis.
We're also hearing anecdotally from a lot of physicians and the current time that they've got patients and their practice, who are sort of queued up for elective sorts of procedures, who are just waiting to get vaccinated and as soon as they get vaccinated. They are willing to have that hip implant annuity and plan or.
Are there other surgery that they may have delayed NAV.
Perfectly fair, Jamie, we're unable to quantify that and any sort of specific way. It is.
Not that I can tell you that.
X amount.
Kind of surgery queued up for 2021, but what our 2021 guidance broadly assumes is that again as COVID-19 volume decline in 2021 non COVID-19 volumes.
Kris and elective and scheduled procedures get to pre pandemic levels by the back half of the year.
And maybe theres, even some catch up and behavioral and acute patient days get to pre pandemic levels as the year goes on.
I think implicit in that assumption is that some of this deferred demand from 2020.
Resurfaces and and satisfied.
Okay. Thanks for that and then just touching on Vegas for a minute.
And I know you don't guide to markets or anything like that but curious, how you're thinking about that market and indicating potential recovery relative to other markets.
Factors that slower and just any thoughts on how.
And how that market might impact your business over the next year would be great. Thank you.
Yes, I mean look obviously.
The Las Vegas market has been particularly hard hit by the pandemic and because the gaming industry has been particularly hard hit by independent and I think particularly hard hit by the decline and airline travel both domestically and internationally.
And encouraged when there.
The gaming properties reopened I think and the June timeframe, mostly to local business meeting people, and Nevada, and Arizona, and California, who would drive to the properties and.
And I think they've reopened at 50% and capacity and non.
And there were many days when they were reaching those those limits and.
And I think more recently and a number of the gaming properties I've read have expanded their capacity and our.
Opening more days and then opening more services restaurant shows or whatever so I think there is again.
And I think all the comments that I made about our business and the gradual improvement in 2021 line.
We apply to the broader gaming and travel and leisure industry and Las Vegas.
I'll make the same comments, however that I've made before that that precise pace of recovery is difficult for us to predict I think broadly we would say that we're still incredibly bullish on the Las Vegas market, we continue to invest in new capacity and that market we opened.
At our centers and new tower at our Centennial Hills Hospital this past year.
And we continue to expand our capacity and Henderson infection of the Las Vegas market, which has been.
It's significant.
Boom for us so.
So we're very bullish on the long term.
Aspects and Las Vegas, whether the next three months are difficult for six or nine months, that's more and more.
I think difficult to say, but.
Every confidence that that market will fully recover and that our investment and that market will will fully recover.
Alright, Thats great I appreciate the kind of thing.
Our next question comes from the line of Whit Mayo with UBS go ahead. Please your line is open.
Hey, Thanks, Steve I know, we've talked about this and the past, but looking at the non same store segment. If you will for behavioral you've got roughly.
And roughly 20 facilities sitting there burning $20 million a year now and whats just remind us what's in that bucket, what's happening it's kind of a moving target can we get these back to breakeven.
You need to shut facilities down and sell them just feels like there is this persistent cluster of assets that are just kind of dragging you down so just wanted to get a little bit better perspective.
I think the dynamic where it is as we you know most of these new facilities are these joint ventures.
When they open.
And most new openings there is a period of ramp up and usually sort of diluted earnings it does vary by market.
But as it sort of becomes a rolling program I think the good news is very good.
And the comparison will not be as negative because we will have just a number of facilities that are opening at any time, but I think more importantly.
We're starting to see the first of those facilities and mature.
And really get up to.
Division wider segment wide margins and in some cases, even better than that and I think.
Over the next few years those projects will be a bit less of a drag and a bit more of a driver of growth, but youre right and the early stages of the openings of these.
And then a drag and again there is just some element of that ramp up that we do everything we can to get started.
And get these projects started as quickly as possible, but there is some ramp up that you saw and avoidable.
Yes, but I mean, Theres 22, I think hospitals you have that arent in the same store category and I don't think Theyre 22, new hospitals that you've opened so as theyre not.
And we group of hospitals that had been in the non same store category for some time that has either been underperforming or I.
It just feels to me like there were some underperforming hospitals here that you could probably do something with.
No I think that is true and I think part of the reason there and the non same store has been closed.
And so there isn't and so there has been an ongoing effort over the last several years to evaluate the portfolio and improving those underperforming hospitals as we go through the price and the closing them. They get put into same store. So you're right. There are some hospitals that are either and the process of being closed or are close but still.
And incurring some expenses there were some run out better and those members as well.
So we've got at the minus $20 million of EBITDA and 2000, and 2020 does that number does it breakeven this year does it does.
Is it downturn I'm just trying to think over the next maybe year or two what's the right way to think about those losses turning into earnings.
Yes.
Think.
That overall number will come down and I apologize I don't have that detail in front of me from my answer by definition is going to be a little bit broader.
I think it will come down and I think some of those.
That was newer openings as well as the closures.
They are a drag was exacerbated by the pandemic. So I believe that those numbers will come down in 2021.
So again I'm going to say from $20 million run rate.
Net.
But I'll take I'll take a more detailed look after the call and.
Try and provide more color.
We can talk later on it but my my last one is just still sticking just with behavioral and I mean, we've been you guys have been whacking at this for some time now you've got some new leadership.
And then are there any new investments that need to be made and theres not a lot of technology theres, new EMR around behavioral and as you approach just the overall strategy has anything evolved that you would care to share or anything that we should look to.
Hear about over the next year I don't know if mark has any views on this.
Yes, I can tell you I mean, there's a lot I'm not sure how much I want to share on this call right now, but we're changing up.
A lot of the way that we look at especially our behavioral.
And then.
And we're doing a lot more on the project management side trying to ramp up some of our current and existing programs and then really get into some new areas that we think will provide greater revenue opportunities going forward. So I'm not going to go into detail on this call but.
So there's a lot happening, especially on the behavioral side.
We're excited about right now.
Okay, Great reported here and more thanks, guys and we'll just we'll just say, we're I mean and I think we touched on this before I mean, I think some of that investment is on the ambulatory side I think much like on the acute side.
There is a notion that payers in particular are looking to see if services can be delivered and more efficient lower cost settings, and so I.
I think we're focused on providing.
Providing we're providing at least the alternative or the optionality for more ambulatory care on the behavioral side.
And there are no further questions in queue at this time I'd like to turn the call back over to Mr. Filton.
Okay, well, we thank everybody for and their presence and look forward to speaking again next quarter.
Ladies and gentlemen, this does conclude today's conference call you may now disconnect.
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Okay.
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