Q4 2021 Tenet Healthcare Corp Earnings Call

[music].

Good morning, welcome to Tenet Healthcare's fourth quarter 2021 earnings conference call.

Speaker 1: Good morning. Welcome to Tenant Health Care's fourth quarter 2021 earnings conference call.

After the Speakers' remarks, there'll be a question and answer session for industry analysts at that time, if you'd like to ask a question. Please press star one on your telephone keypad.

Tenant respectfully ask that analysts limit themselves to one question each.

Now I'll turn the call over to your host Mr. Dan can sell me executive Vice President and Chief Financial Officer for Tennant, Mr. Cancer, Amit you may begin.

Speaker 2: Thank you, operator. Good morning. We're pleased to have everyone join us this morning.

Thank you operator, good morning, we're pleased to have everyone join us this morning.

Speaker 2: Tenet Senior Management with me on today's call include Ron Rittenmeyer, our Executive Chairman and Dr. Sam Sattaria, our Chief Executive Officer.

Tenant senior management with me on today's call include Ron written by our Executive Chairman and Dr Songs, Vittorio <unk>, our Chief Executive Officer.

Speaker 2: Our webcast this morning includes a slide presentation which has been posted to the investor relations section of our website, tenanthealth.com.

Our webcast. This morning includes a slide presentation, which has been posted to the Investor Relations section of our website tenant health Dot com.

Speaker 2: Listeners to this call are advised that certain statements made during our discussion today are forward-looking and represent tenant management's expectations based on currently available information.spot Christian

Listeners to this call are advised that certain statements made during our discussion today are forward looking and represent tenet management's expectations based on currently available information.

Actual results and plans could differ materially.

Speaker 2: Tenant is under no obligation to update any forward-looking statements based on subsequent information.

Tenet is under no obligation to update any forward looking statements based on subsequent information.

Speaker 2: Investors should take note of the cautionary statement slide, included in today's presentation, as well as the risk factors discussed in our most recent Form 10K and other filings with the Securities and Exchange Commission. With that, I'll turn the...

Investors should take note of the cautionary statement slide included in today's presentation as well as the risk factors discussed in our most recent Form 10-K , and other filings with the Securities and Exchange Commission.

With that I'll turn the call over to Ron.

Speaker 3: Good morning. Thank you, Dan, and thank all of you for joining us today regarding our fourth quarter reigns and also all of 2021. Before I turn this over to Sam and Dan, briefly, I would like to touch on a few aspects of 2021. And highlight what we believe are fundamental and sustainable changes. We've made over the last several years that will continue to carry us forward.

Good morning, Thank you Dan and thank all of you for joining us today regarding our fourth quarter earnings and also 2021 before I turn this over to Tom and Dan briefly I would like to touch on a few aspects of 2021 and highlight what we believe are fundamental and sustainable changes we've made over the last several years it will.

We continue to carry us forward.

Speaker 3: As I stated in my comments in the earnings release, the fourth quarter delivered strong consistent results, with adjusted evidav approximately 1 billion for the quarter and very strong cash flows. Both ending 2021.

As I stated in my comments in the earnings release, the fourth quarter delivered strong consistent results with adjusted EBITDA of approximately 1 billion for the quarter and very strong cash flows both ending 2021 above guidance.

Speaker 3: We closed the significant SCD transaction on another 86 centers, established an exclusive development relationship with their team from the next five years, and acquired their ASC service group to further muscle build the USPI organization.

We closed the significant SCD transaction on another 86 centers.

Established an exclusive development relationship with their team for the next five years and acquired their AFC service group to further muscle build the USPI organization. Additionally.

Speaker 3: Additionally, our internal development team also added more than 20 centers.

Additionally, our internal development team also added more than 20 centers.

Speaker 3: This further solidifies USPI as the market leader.

This further solidifies USPI as the market leader.

Speaker 3: and we are projecting approximately 50% of our earnings to come from this sector of the business by the end of 2023.

And we are projecting approximately 50% of our earnings to come from this sector of the business by the end of 'twenty two 'twenty three.

Speaker 3: Hospital performance, except for Massachusetts due to the strike, which is now settled, performed above expectations across the board, while dealing with a continued COVID surge. Conifer continues a positive delivery of consistent results while expanding its offerings and gaining additional point solution opportunities in the marketplace.

Hospital performance.

Except for Massachusetts, due to the strike, which has now settled.

Formed above expectations across the board.

All dealing with a continued COVID-19 surge.

Conifer continues a positive delivery of consistent results, while expanding its offerings and gaining additional point solution opportunities in the marketplace.

When you reflect on the overall tenant business. It clearly has made a paradigm shift from the end of 2017.

Speaker 3: When you reflect on the overall tenant business, it clearly has made a paradigm shift from the end of 2017. The fundamentals built on an analytical

Fundamentals built on an analytical database approach coupled.

Speaker 3: Coupled with detailed and disciplined expense management in every aspect of our business. It has proven our ability to handle volatility effectively.

Coupling coupled with detailed and disciplined expense management in every aspect of our business.

We have proven our ability to handle volatility.

Effectively.

Every hospital group has now achieved positive contribution consistently.

Speaker 3: Every hospital group has now achieved positive contribution.

Speaker 3: USPI should, as we said, continue to represent a larger, more impactful portion of our earnings. A conifer has improved its margins by over 1000 basis points in the last four years. Couple of what's consistent.

USPI should as we said continue to represent a larger more in fact tactful portion of our earnings and Carnival has improved its margins by over 1000 basis points in the last four years.

Coupled with consistent strong core growth detailed an objective portfolio management as represented by the number of divestitures and ambulatory acquisitions, we successfully accomplished supported by a stronger and well designed balance sheet attended enterprises now position to be in organs.

Speaker 3: detailed and objective portfolio management as represented by the number of the vestitures and ambulatory acquisitions we successfully accomplished, supported by a stronger and well-designed balance sheet, a tenant enterprise is now positioned.

Speaker 3: to be an organization with multiple consistent sources of revenue, pre-cash flow, ebathog growth, quarter after quarter, looking forward and then year after year.

Asian with multiple consistent sources of revenue free cash flow EBITDA growth quarter after quarter looking forward and then year after year.

Having said this.

Speaker 3: I just have to comment, it is somewhat difficult to understand why TANET remains classified mostly as a hospital company. The recognition of USPI's growing contribution.

I just have to comment.

It is somewhat difficult to understand why tenant remains classified mostly as a hospital company.

The recognition of USPI is growing contribution economists cash flow generation for some reason it seemed lost and the broader question of tenant being recognized as more than a hospital company with corresponding dialogues.

Speaker 3: For some reason, seem lost in the broader question of tenant being recognized as more than a hospital company.

Speaker 3: with corresponding dialogues and our multiples remaining caught in this time lapse.

Our our multiples remaining caught in this time lapse.

Speaker 3: It appears that the transition of what TENAT has become and the deleveraging we've accomplished are not fully recognized in the valuation of the company. We believe it's a point of view worthy of consideration.

It appears that the transition of what tenant has become and the deleveraging. We have accomplished are not fully recognized in the valuation of the company. We believe it's a point of view worthy of consideration.

Speaker 4: So with those comments now, I'd like to start it over to some. Hey, thank you, Ron, and good morning, everybody. I'd like to start off with a personal thank you to our physicians, nurses, and staff. Their result to deliver high-quality care through the recent surge of Omicron has been nothing short of excellent.

So with those comments now let me turn it over to some alright.

Alright, Thank you Ron and good morning, everybody.

I'd like to start off with a personal thank you to our physicians nurses and staff their resolve to deliver high quality care through the recent surge of omicron has been nothing short of excellent.

Turning to our release as you saw in the report posted yesterday, we ended the year with strong results in Q4, we delivered adjusted EBITDA of more than $1 billion and $877 million, Excluding cares Act funds. This.

Speaker 4: Turning to our release, as you saw in the report posted yesterday, we ended the year with strong results. In Q4, we delivered adjusted EBITDA of more than $1 billion, and $877 million, excluding CARES Act funds.

Speaker 4: higher than the midpoint of our outlook and higher than consent.

This is higher than the midpoint of our outlook and higher than consensus. We also drove a strong companywide EBITDA margin of 18, 1% in the quarter.

Speaker 4: We also drove a strong company wide evitom margin of 18.1% in the quarter. We continue to make-

We continue to manage effectively through COVID-19 .

Speaker 4: In Q4, COVID admissions were approximately seven percent of the total. While the highly transmissible nature of Omicron had a greater impact on staffing, our operators continued to effectively balance resources and maintain strong COVID safety protocols.

In Q4, Covid admissions were approximately 7% of the total.

While the highly transmissible nature of Omicron had a greater impact on staffing our operators continue to effectively balanced resource resources and maintained strong COVID-19 safety protocols.

Speaker 4: In addition, we remain focused on quality and safety across the portfolio.

In addition, we remain focused on quality and safety across the portfolio.

Speaker 4: Serious safety events and hospital acquired infections declined in the fourth quarter despite the COVID-19.

Serious safety events in hospital acquired infections declined in the fourth quarter. Despite the COVID-19 surge.

Speaker 4: Avers' length of stay in our emergency departments was reduced, given our focus on better patient service and easier access.

Average length of stay in our emergency departments was reduced given our focus on better patient service and easier access and.

Speaker 4: And finally, USPI's surgical hospitals had zero hospital acquired infections in the fourth quarter.

And finally, Uspi's surgical hospitals had zero hospital acquired infections in the fourth quarter.

Yeah.

Speaker 4: our accomplishments in the quarter and the year reflect a commitment to executing our strategy and a continued positive trajectory for tennis

Our accomplishments in the quarter and the year reflect a commitment to executing our strategy.

In a continued positive trajectory for tenet.

Speaker 4: At USPI, we acquired interest in or opened approximately 160 facilities since December of 2020. This included the SCD acquisitions, the acquisition of Compass, Biops and Multiple Hospital in addition to tucking acquisitions in DeNovo.

At USPI, we acquired interest in or opened approximately 160 facilities. Since December of 2020. This included the STB acquisitions the acquisition of Compass.

Absent multiple surgical hospitals in addition to tuck in acquisitions and de Novo's.

Speaker 4: I want to reiterate a few points about the SCD acquisition.

I want to reiterate a few points about the CD acquisitions.

Speaker 4: We anticipate the portfolio of 135 centers from the two SCD transactions will have approximately $540 million in EBITDA and $360 million in EBITDA-Mines NCI at run rate.

We anticipate the portfolio of 135 centers from the two SCD transactions, we will have approximately $540 million in EBITDA and $360 million in EBITDA minus NCI at run rate.

Speaker 4: This is expected to deliver more earnings at a much stronger EBITDA margin as a small portion of the total USPI enterprise than other available surgery costs.

This is expected to deliver more earnings at a much stronger EBITDA margin.

A small portion of the total USPI enterprise than other available surgery comps.

Speaker 4: USPI operations continue to perform at a high level during the quarter.

USPI operations continued to perform at a high level during the quarter.

Speaker 4: Due to the continued COVID surges, patient scheduling, cancellations, and physician and staff availability, where all effects...

Due to the continued COVID-19 surges patient scheduling cancellations and physician and staff availability were all affected.

Speaker 4: Despite this, USPI delivered sequential month over month growth through the fourth quarter.

Despite this USPI delivered sequential month over month growth.

Through the fourth quarter.

Speaker 4: USPI had a 4.4% year-over-year increase in the same facility system-wide surgical cases, and a 3.2% net revenue increase per case.

USPI had a four 4% year over year increase in the same facility system wide surgical cases, and a three 2% net revenue increase per case.

Speaker 4: resulting in a strong 7.7% year-over-year net revenue growth.

Resulting in a strong seven 7% year over year net revenue growth.

Speaker 4: The segment ended the year with the quarterly EBITDA margin of 46%, excluding grants, up from 44.7% in the fourth quarter of 2020.

The segment ended the year with a quarterly EBITDA margin of 46% excluding grants up from 44, 7% in the fourth quarter of 2020.

Speaker 4: Our hospital segment outperformed again in Q4 with nearly all markets exceeding our expectation.

Our hospital segment outperformed again in Q4 with nearly all markets exceeding our expectations.

Speaker 4: This was supported by a high-patient acuity from continued investment in clinical technology and service line enhanced.

This was supported by high patient acuity from continued investment in clinical technology and service line enhancements.

Speaker 4: In Q4 as an example to demonstrate the resilience of our business, our non-COVID medical and surgical discharges increased 3% over prior year.

In Q4, as an example to demonstrate the resilience of our business, our non COVID-19 medical and surgical discharges increased 3% over prior year.

Speaker 4: Our operators maintained active cost management, making real-time adjustments using our analytics platform to optimize staffing, length of stay, and capacity utilization. This once again helped us maintain good performance in our labor costs while maintaining the high standards of quality I described before.

Our operators maintained active cost management, making real time adjustments using our analytics platform to optimize staffing length of stay and capacity utilization. This once again helped us maintain good performance in our labor costs, while maintaining the highest standards of quality I described before.

Okay.

Speaker 4: Conifer also had strong performance and another quarter of margin enhanced.

Conifer also had strong performance in another quarter of margin enhancement.

Speaker 4: We continue to modernize conifer's technology offering and globalize conifer's operating model to deliver results.

We continue to modernize conifer's technology, offering and globalized conifer's operating model to deliver results.

Speaker 4: We also assign new clients and renewals for Revenue Cycle Management and Value-Based Care Service.

We also signed new clients and renewals for revenue cycle management and value based care services.

Speaker 4: Our 2021 results reflect the commitment to continuous improvement developed over the past several years.

Our 2021 results reflect the commitment to continuous improvement developed over the past several years.

Speaker 4: We raise guidance three times and outperform the midpoint of our guidance and midpoint of consent.

We raised guidance three times and outperform the midpoint of our guidance and midpoint of consensus.

We have deployed over $2 5 billion in capital investment at USPI since December of 2020 scaling USPI to be the leading ambulatory surgery platform.

Speaker 4: We have deployed over $2.5 billion in capital investment at USPI since December of 2020, scaling USPI to be the leading ambulatory surgery plan.

Speaker 4: We also welcomed over 3,400 physicians to USPI's medical staff and started approximately 90 new high-acuity service lines.

We also welcomed over 3400 physicians to Uspi's medical staff and started approximately 90, new high acuity service lines we.

Speaker 4: We anticipate strong returns from the high caliber investments we've made.

We anticipate strong returns from the high caliber of investments we've made.

Speaker 4: We also increased investments to expand high-cute care in our hospital markets.

We also increased investments to expand high acuity care and our hospital markets, we're expanding capacity in Palm Beach in El Paso, and we remain on track to open our hospital in South Carolina in the summer of 2022.

Speaker 4: We are expanding capacity in Palm Beach and El Paso, and we remain on track to open our hospital in South Carolina in the summer of 2022.

Speaker 4: We also announced two exciting new developments in San Antonio and one in Phoenix to meet the growing healthcare needs of those communities.

We also announced two exciting new developments in San Antonio and one in Phoenix to meet the growing health care needs of those communities.

Additionally, we continue to foster an ecosystem of high quality physicians supporting advancements in neurosciences cardiovascular and surgical services.

Speaker 4: Additionally, we continue to foster an ecosystem of high quality physicians supporting advancements in neurosciences, cardiovascular and surgical service.

Looking ahead, we expect continued growth in 2022 with adjusted EBITDA outlook midpoint of $3 $4 $75 billion.

Speaker 4: Looking ahead, we expect continued growth in 2022 with adjusted EBITDA outlook midpoint of $3.475 billion.

Speaker 4: This represents a 6% increase from 2021 excluding grand income.

This represents a 6% increase from 2021, excluding grant income.

Speaker 4: Let me outline a few key priorities in our 2022 plan.

Let me outline a few key priorities and our 2022 plan.

Year over year core growth in USPI is adjusted EBITDA, Excluding grant income and excluding the STB acquisition is projected to be a healthy 11, 8%.

Speaker 4: Your year core growth in USPI's adjusted EBITDA, excluding grant income and excluding the SCD acquisition, is projected to be a healthy 11.8%. This reflects our optimism that is the Omicron wave subsides. We will be able to return to normal demand at USPI as we've demonstrated after previous COVID surgery.

This reflects our optimism that as the omicron wave subsides, we will be able to return to normal demand at USPI as we've demonstrated after previous Covid surges.

Speaker 4: We are continuing to integrate the SCD portfolio in complete physician biops. These are on track to proceed throughout 2022 and we guide to approximately $140 million in adjusted EBITDA for the year as an estimate on the current portfolio of 86 centers closed and the timing of biops for the portfolio acquired in December of 2021.

We are continuing to integrate the CD portfolio and complete physician buy ups. These are on track to proceed throughout 2022, and we guide to approximately $140 million and adjusted EBITDA for the year as an estimate on the current portfolio of 86 centers closed.

And the timing of buy ups for the portfolio acquired in December of 2021.

Speaker 4: There is no change in our run rate estimates despite the six centers excluded from what we provided at deal closing. These new centers are performing very well.

There is no change in our run rate estimates despite the six centers excluded from what we provided at deal closing these new centers are performing very well.

Speaker 4: We have integration management capabilities in place to successfully realize the anticipated center.

We have integration management capabilities in place to successfully realize the anticipated synergies.

Speaker 4: Year of year, core growth in the hospital segment, Adjusted EBITDA is projected to be 3.3%.

Year over year core growth in the hospital segment adjusted EBITDA is projected to be three 3%.

Speaker 4: As COVID subsides, we expect returning to a more normal, but not completely normal, operations in labor market.

As Covid subsides, we expect returning to a more normal but not completely normal operations and labor market.

Speaker 4: Our teams will remain focused on recapturing postponed care and continue to advance our high-acuity service lines.

Our teams will remain focused on recapturing postponed care and continuing to advance our high acuity service lines.

We will continue to deploy capital and execute strategic investments across our business segments.

Speaker 4: We will continue to deploy capital and execute strategic investments across our business segments. This is supported by a well-balanced offensive capital plan with a focus on accelerating clinical technology enhancements across our hospital mark.

This is supported by a well balanced offensive capital plan with a focus on accelerating clinical technology enhancements across our hospital markets.

We have a robust portfolio of external spend reduction initiatives that were that will improve our supply and purchase services spend over the next few years. While we also continue to actively focus on labor management.

Speaker 4: We have a robust portfolio of external spend reduction initiatives that will improve our supply and purchase services spend over the next few years, while we also continue to actively focus on labor management.

Conifer's adjusted EBITDA growth is projected to be two 8% for 2022, we plan to continue to automate and offshore activities to realize further efficiencies in our operations.

Speaker 4: Conifer suggested EBITDA growth is projected to be 2.8% for 2022. We plan to continue to automate and offshore activities to realize further efficiencies in our operations.

Speaker 4: As Ron discussed, Conifer's margins have improved over 1,000 basis points over the last four years and it continues to be a productive part of tenet.

As Ron discussed conifer's margins have improved over 1000 basis points over the last four years and it continues to be a productive part of tenet.

Speaker 4: We continue to evaluate market conditions, opportunities for growth, the impact of COVID on the business, and the interest rate environment, as it relates to conifer's overall positioning as a part of our total enterprise. It is a topic we review frequently with our board of directors.

We continue to evaluate market conditions and opportunities for growth the impact of Covid on the business and the interest rate environment as it relates to conifer's overall positioning as a part of our total enterprise. It is a topic, we review frequently with our board of directors.

Speaker 4: Finally, I will reiterate the resiliency we are building into tenants business. Our balance sheet is in better shape. Our secured debt capacity in line of credit insulate us from a somewhat more volatile high yield market.

Finally, I will reiterate the resiliency, we are building and the tenant's business our balance sheet is in better shape, our secured debt capacity and line of credit insulate us from a somewhat more volatile high yield market.

Speaker 4: And we continue to improve our free cash flow generation, which our diversification into the ambulatory surgery segment will continue to support over time.

And we continue to improve our free cash flow generation, which our diversification into the ambulatory surgery segment will continue to support over time.

Speaker 4: Under pinning this, we will continue to build an environment focused on motivated talent, analytic-spaced insights, and strong ethics and compliance.

Underpinning. This we will continue to build an environment focused on motivated talent analytics based insights and strong ethics and compliance with the goal of maintaining a positive trajectory for tennant.

Speaker 4: with the goal of maintaining a positive trajectory for tennis.

Speaker 4: I'll now turn it over to Dan for a more detailed look at our financial results and our 2022 outlook.

I'll now turn it over to Dan for a more detailed look at our financial results and our 2022 outlook.

Speaker 2: Thanks, Tom, and good morning, everyone. To echo Ron and Tom's comments, I'm very pleased with how we finished the year, with fourth quarter, just at EBITDA, coming in well above our expectations.

Thanks, Tom and good morning, everyone to Echo Ron and Sam's comments I'm very pleased with how we finished the year with fourth quarter adjusted EBITDA coming in well above our expectations. Our outperformance was particularly notable given the many challenges we face including the spike in Covid cases, due to the omicron variant and the.

Speaker 2: Our performance was particularly notable, given the many challenges we faced, including the spike in COVID cases due to the Omicron variant, and the continuing inflationary wage and labor availability pressures providers across the industry or face.

<unk> inflationary wage and labor availability pressures providers across the industry are facing.

Speaker 2: For the fourth quarter, we generated a consolidated adjustity of 1.017 billion, which was 183 million, or 22% better than the midpoint of our Q4 guidance. Even excluding the 140 million of grand income we earned in the quarter, our consolidated, justity with 877 million, or 43 million higher than the midpoint of our guidance.

For the fourth quarter, we generated consolidated adjusted EBITDA of $101, 7 billion, which was $183 million or 22% better than the midpoint of our Q4 guidance.

Even excluding the $140 million grant income we earned in the quarter, our consolidated adjusted EBITDA was $877 million or <unk> $43 million higher than the midpoint of our guidance.

Speaker 2: For the full year, 21, we produced consolidated just an EBITDA of 3.483 billion, an 11% increase over 2020, and a beat of 183 million compared to the midpoint of our most recent guidance.

For the full year 'twenty, one we produced consolidated adjusted EBITDA of $3 $4 3 billion, an 11% increase over 2020, and a beat of $183 million compared to the midpoint of our most recent guidance.

Speaker 2: As a reminder, we raised our guidance three times during 2021 based on our outperformance each quarter and we outperformed again in Q4.

As a reminder, we raised our guidance three times during 2021 based on our outperformance each quarter and we outperformed again in Q4.

Speaker 2: Our strong results for the year were driven by high patient acuity, a favorable pair mix, as well as very effective cost control.

Our strong results for the year were driven by high patient acuity, a favorable payer mix as well as very effective cost control.

Speaker 2: In fact, our consolidated SWMB costs in Q4.

In fact, our consolidated Swm's costs in Q4.

Speaker 2: as a percentage of revenue was lower than Q4 2020. About 45% in Q4 21 compared to 45.3% in Q4 2020.

As a percentage of revenue was lower than Q4, 2020 about 45% in Q4, 'twenty, one compared to 45, 3% in Q4 2020.

Speaker 2: Also, our consolidated EBITDA margin for 2021 with 17.9%, an improvement of 510 basis points compared to our 2017 margin of 12.8%.

Also our consolidated EBITDA margin for 2021 was 17, 9% an improvement of 510 basis points compared to our 2017 margin of 12, 8%.

I'd also like to highlight a few key items for each segment beginning with USPI.

Speaker 2: I'd also like to highlight a few key items for each segment beginning with uspi.

Speaker 2: The USBI delivered a solid 3.2% increase in surgical revenue per case in the quarter. And surgical cases were 4.4% higher than Q4 2020.

USPI delivered a solid three 2% increase in surgical revenue per case in the quarter and surgical cases were four 4% higher than Q4 2020.

Speaker 2: Q4 cases were 100% of pre-pandemic levels despite the impact of COVID.

Q4 cases, where 100% of pre pandemic levels, despite the impact of Covid.

Speaker 2: And USBI's Adjusted Ebit of Margin Excluding Grand Income continues to be very strong at 46.2% for the quarter, which was 150 basis points higher than Q4 2020.

And Uspi's adjusted EBITDA margin, excluding grant income continues to be very strong at 46, 2% for the quarter.

Which was 150 basis points higher than Q4 2020.

Speaker 2: Turning to our hospital business, our hospitals delivered another very good quarter. Our labor management continues to be extremely effective. Our case mix index remains strong as we continue our strategic focus on investments in higher acuity, higher margin service.

Turning to our hospital business are hospitals delivered another very good quarter. Our labor management continues to be extremely effective our case mix index remains strong as we continue our strategic focus on investments and higher acuity higher margin service lines.

Speaker 2: Our non-COVID emissions were up 1.7% compared to Q420, and our hospital adjusts the even to margin excluding grand income for Q4 improved about 200 basis points compared to full year 2019 before the pandemic.

Our non covered admissions were up one 7% compared to Q4, 'twenty and our hospital adjusted EBITDA margin. Excluding grant income for Q4 improved about 200 basis points compared to full year 2019 before the pandemic.

Speaker 2: It really was a great year of performance for hospitals is substantially all of our markets, significantly at-performed our expectation.

It really was a great year performance for our hospitals as substantially all of our markets significantly outperformed our expectations.

Turning to conifer. They also had another good quarter and produced $355 million of adjusted EBITDA for the full year and a strong margin of 28%.

Speaker 2: Turning to Conifer, they also had another good quarter and produced 355 million of adjustity but for the full year in a strong margin of 28%.

Moving to slide 11.

Speaker 2: Our cash flow, balance sheet, and capital structure position is very well to continue our growth momentum.

Our cash flow balance sheet and capital structure position us very well to continue our growth momentum.

Speaker 2: Their cash flow generation in 21 was strong, even as we began repaying Medicare cash advances and made the first installment payment of the deferred company payroll taxes from 2020.

Our cash flow generation in 'twenty, one was strong even as we began repaying Medicare cash advances and made the first installment payment of the deferred company payroll taxes from 2020.

Speaker 2: We generated free cashflow of 910 million in the year, or 1,550 million excluding the repayment of 640 million of Medicare advances and deferred payroll tax.

We generated free cash flow of $910 million in the year or $1.550 billion.

Excluding the repayment of $640 million of Medicare advances and deferred payroll taxes.

Speaker 2: We continue to maintain more than sufficient cash resources and available liquidity under our line of credit.

We continue to maintain more than sufficient cash resources and available liquidity under our line of credit.

Speaker 2: At year end, we had about 2.4 billion of cash on hand and no borrowings outstanding under our revolver.

At year end, we had about $2 4 billion of cash on hand, and no borrowings outstanding under our revolver.

Speaker 2: Also, our year-end leverage ratio was about four times EBITDA, compared to about six times EBITDA at the end of 2017. Let me know.

Also our year end leverage ratio was about four times EBITDA compared to about six times EBITDA at the end of 2017.

Let me now turn to our outlook for 2022.

Slide 14 in our presentation provides a walk forward of our adjusted EBITDA from 'twenty, one to our projections for 'twenty two on a consolidated basis and by business segment.

Speaker 2: Flight 14 in our presentation provides a walk forward of our Adjusted EBITDA from 21 to our projections for 22 on a consolidated basis and by business banks.

Speaker 2: two

Our projected consolidated adjusted EBITDA for.

'twenty two.

Speaker 2: is 3.475 billion at the midpoint of the range. This outlook represents year over year core consolidated growth of 6.2% as described.

Is three $4 75 billion at the midpoint of the range. This outlook represents year over year core consolidated growth of six 2% as described on the slide.

Speaker 2: including almost 12% core growth in our USBI Surgery Center.

Including almost 12% core growth in our USPI surgery Center business.

Let me mention a few other assumptions related to our 2022 outlook.

Speaker 2: Let me mention a few other assumptions related to our 2022 outlook.

Speaker 2: We are not assuming we earn any grand income this.

We are not assuming we earn any grant income this year.

Speaker 2: We expect to achieve future annual cash interest savings of approximately 53 million. Once we retire, our 7.5 percent, 700 million of senior secured notes in Q1 that we announce in our release.

We expect to achieve future annual cash interest savings of approximately $53 million. Once we retire our seven 5% $700 million of senior secured notes in Q1.

We announced in our release.

Speaker 2: Our 2022 Adjusted EPS is approximately $6.46 per share at the midpoint of the rain.

Our 2022 adjusted EPS is approximately $6 46 per share at the midpoint of the range.

Speaker 2: As we mentioned in our release, our EPS this year does include a headwind of about 50 cents per share related to a change in the IRS interest expense limitation regulation.

As we mentioned in our release our EPS. This year does include a headwind of about <unk> 50 per share related to a change in the IRS interest expense limitation regulations.

As many of you are aware certain Texas Medicaid supplemental funding has not yet been approved by CMS.

Speaker 2: As many of you are aware, certain Texas Medicaid supplemental funding has not yet been approved by CMS.

Speaker 2: The state is working with CMS to resolve this, and our outlook assumes the funding is approved this year. However, we have not included any of this funding revenue in the first quarter, as we're assuming it is approved in the second quarter or later in the year, which is when we would recognize the revenue.

The state is working with CMS to resolve this in our outlook assumes the funding is approved this year. However, we have not included any of this funding revenue in the first quarter as we're assuming it is approved in the second quarter or later in the year, which is when we would recognize the revenue.

Speaker 2: This funding for us is approximately 75 million annually.

This funding for us is approximately $75 million annually.

As Youll see on page 11 of our release compared to 2021, we're assuming that 2022 hospital admissions are flat to up 2%.

Speaker 2: As you'll see on page 11 of our release, compared to 2021, we're assuming that 2022 hospital admissions are flat to up to percent.

Speaker 2: Hospital adjusted admissions increased 2 to 4%.

Hospital, adjusted admissions increased 2% to 4%.

Speaker 2: And USPI's surgical case has increased 3 to 4 percent, and USPI net revenue per case increases 2.5 to 3.5 percent.

And USPI surgical cases increased 3% to 4% and USPI net revenue per case increases two five to three 5%.

Speaker 2: Again, those are growth increases compared to 2021, not 2020, as we received a few questions about that disclosure in the release last night.

Again, those are growth increases compared to 2021, not 2020 as we received a few questions about that disclosure in the release last night.

Speaker 2: I also want to mention our outlook for the first quarter of this year, assumes consolidated adjusted EBITDA will be 750 million at the midpoint of the range as disclosed in the release.

I also want to mention our outlook for the first quarter of this year assumes consolidated adjusted EBITDA will be $750 million at the midpoint of the range as disclosed in the release.

Speaker 2: This guidance reflects an assumption of the impact of the increase in COVID cases so far this year due to on the crown, and the unknown timing of when certain elective cases will be scheduled or rescheduled. Also, as I mentioned earlier, we are not assuming any of the Texas Medicaid supplemental funding is recorded in Q1.

This guidance reflects an assumption of the impact of the increase in Covid cases, so far this year due to omicron.

And the unknown timing of when certain elective cases will be scheduled or reschedule also as I mentioned earlier, we are not assuming any of the Texas Medicaid supplemental funding as recorded in Q1.

Speaker 2: From a cash flow perspective, we are targeting another strong year of free cash flow generation of $1,558 million at the midpoint, excluding the repayment of Medicare advances and the deferred payroll tax.

From a cash flow perspective, we are targeting another strong year of free cash flow generation of $1 $558 million at the midpoint.

Excluding the repayment of Medicare advances and the deferred payroll taxes.

I did want to point out that we anticipate our income tax payments. This year will be about $150 million higher than 2021 due in part to the change in interest expense limitation rules that I mentioned and the fact, we expect to fully utilize the remainder of our federal net operating loss carryforwards. This year.

Speaker 2: I did want to point out that we anticipate our income tax payments this year. We'll be about 150 million higher than 2021 due in part to the change in the interest expense limitation roles that I mentioned. And the fact we expect to fully utilize the remainder of our federal net operating loss carry forwards this year.

Speaker 2: Our casual generation has improved substantially over the past several years.

Our cash flow generation has improved substantially over the past several years and.

Speaker 2: And the final repayments of about one billion in aggregate for the Medicare advances and deferred payroll taxes will be made this year.

And the final repayments of about $1 billion in aggregate for the Medicare advances and deferred payroll taxes will be made this year.

Speaker 2: We're assuming about 1.5 billion of free cash flow as a foundation to build upon in 2023 and beyond. We believe this in our capital structure.

Assuming about $1 5 billion of free cash flow as a foundation to build upon in 2023 and beyond we believe this in our capital structure and.

Speaker 2: including about three billion of currently available secured debt capacity and no borrowings outstanding under our line provide us a lot of flexibility as we think about future capital deployment options.

Including about $3 billion of currently available secured debt capacity and no borrowings outstanding under our line provide us a lot of flexibility as we think about future capital deployment options.

Speaker 2: We plan to continue allocating capital to grow our surgery center business.

We plan to continue allocating capital to grow our surgery center business <unk>.

Speaker 2: Enhance our hospital growth opportunities, including the continued focus on higher-acute service offering.

Enhance our hospital growth opportunities.

Including the continued focus on higher acuity service offerings.

Speaker 2: evaluates opportunities to retire and refinance debt depending on market condition.

Evaluate opportunities to retire and refinance debt depending on market conditions.

And possibly in 2023 or beyond evaluating share repurchases, depending on market conditions and other investment opportunities.

Speaker 2: and possibly in 2023 or beyond evaluating share repurchases depending on market conditions and other investment opportunities.

Speaker 2: And with that, we're ready to begin the Q&A, operator. Thank you.

And with that we're ready to begin the Q&A operator.

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Our first question comes from Kevin Fischbeck with Bank of America. Please proceed with your question.

Speaker 5: Okay, great thanks. I wanted to go to the comment, I guess the song made about the outlook for labor. I think he talked about labor returning back towards normal, but not being normal as COVID received. He talked a little bit about where you expect, I guess what you're seeing right now as far as labor growth or wage growth and kind of where you expect that to shape up and stabilize. How should we think about that? You know, heading into 2022. I think we're starting to wait three.

Okay, great. Thanks, I wanted to go to a comment I guess, that's I made about the outlook for labor I.

I think you talked about labor returning back towards normal, but not being normal as Covid received can you talk a little about where you expect I guess like what Youre seeing right now as far as.

Labor growth or wage growth and kind of where you expect that to shape up and stabilize how should we think about that heading into 2022.

Sorry.

Yes.

Speaker 4: Thanks for the question. You know, I think that we're still in the in the throes of this current COVID surge. And so, you know, labor rates are higher than you otherwise like them to be.

Thanks for the question I think that we're still in the throes of this current COVID-19 surge and so labor rates are higher than you'd otherwise liked them to be.

Speaker 4: in particular for contract labor. And then the shortages of staff that Omicron has created because the staff...

In particular for contract labor.

Then the shortages of staff that omicron has created because the staff.

Speaker 4: have been you know affected by Omicron

Have been affected by omicron.

Speaker 4: just exacerbates that. And that's a pretty, I mean, that's unique relative to what we saw with Delta or other COVID.

Just exacerbates that and Thats, a pretty I mean, that's unique relative to what we saw with delta or other COVID-19 .

Speaker 4: you know waves and so I think the you know what what we anticipate is that by the end of the first quarter assuming that there are no more COVID surges that come up

Waves and so I think the what we anticipate is that by the end of the first quarter, assuming that there are no more COVID-19 surges that come up with new therapies available and other things that affect hospitals, so substantially we ought to see.

Speaker 4: with new therapies available and other things that affect hospitals so substantially. We ought to see

Speaker 4: the labor market start to normalize a bit and it's a combination of you know both the rates and uh... the stability of the staff that were really that were really looking for i mean during the surges the rates become the biggest issue uh... as the surge goes away and we refocus our energies on building the business back in

The labor market start to normalize a bit and it's a combination of both the rates and the stability of the staff that were really that we're really looking for I mean during the surge as the rates become the biggest issue.

As the surge goes away and we refocus our energies on building the business back in.

Speaker 4: managing to capture things that may have been deferred or delayed. Obviously, the availability of staff becomes the paramount issue at that point and being able to, you know, get that staff in and retain them at that point. So that's kind of how it looks. I think it'll be the end of the first quarter before we have a real read on what the impact will be for the rest of the year.

Managing to capture things that may have been deferred or delayed obviously the availability of staff becomes.

The Paramount issue at that point and being able to.

Get that staff in and retain them at that point. So that's kind of how it looks I think it'll be the end of the first quarter before we have a real read on what the impact will be for the rest of the year.

Yeah.

Our next question is from Peter Chickering with Deutsche Bank. Please proceed with your question.

Speaker 5: hey good morning guys such take my questions you could give us a bit more color on the first quarter guidance you know what are you seeing at this point on uh... surgery is re-bounding back as cover cases decline you know the guy you look at your or scheduling for February are we seeing a similar rebound what we saw during the first quarter

Hey, good morning, guys. Thanks for taking my questions.

Can you give us a bit more color on our first quarter guidance. What are you guys seeing at this point on.

Surgery is rebounding back as Covid cases decline and like as you look at your aura scheduling for February are we seeing a similar rebound to what we saw during the first quarter of 2021 .

Speaker 4: you know hey it's from again i think it's a little bit early to say uh... you know the COVID-19 surge you know declining in the new incidents of cases but it's still actually pretty high i mean you know relative to before this surge we're still sitting at four times the number of inpatients that we had so i i'm a little bit cautious about

Hey, its Tom again, I think it's a little bit early to say.

The COVID-19 surge.

Declining I mean, the new incidence of cases, but it's still actually pretty high I mean.

Relative to before the surge we're still sitting at four times the number of in patients that we had so I am a little bit cautious about.

Speaker 4: about projecting forward. We still have states like Massachusetts that have elective surgery bands or effectively elective surgery bands. So, you know, we've, you know, some have suggested we may be a little bit cautious in our Q1 guidance, but there's a lot, you know, a lot going on right now, both from a regulatory perspective and an Omicron perspective. Now, that being said, we have put a premium on making sure that we are allocating staff.

About projecting forward, we still have states like Massachusetts that have elective surgery bands are effectively elective surgery bands. So we've some.

Some have suggested we may be a little bit cautious in our Q1 guidance, but theres a lot a lot going on right now both from a regulatory perspective, and an omicron perspective, now that being said.

We have put a premium on making sure that we are allocating staff into the service areas that we think are most important to remain open from an access standpoint.

Speaker 4: into the service areas that we think are most important to remain open from an access standpoint. You know, it is...

Speaker 4: Obviously in a keep care hospital organization that's focused on higher acuity service lines, we're putting a premium on allocating staff to operating room ICU and other places that we think it would be important to maintain access. We feel very good about our outpatient surgery volumes in the hospitals, for example.

Obviously, an acute care hospital.

Organization, that's focused on higher acuity service lines, we're putting a premium on allocating staff to operating room ICU and in other places that that we think it would be important to maintain access.

We feel very good about our outpatient surgery volumes in the hospitals for example.

Speaker 4: uh... at this stage of the game and and it's just a result of how we're allocating staff let me as breath to come in a little bit further on u.s. on us p.i.

At this stage of the game and it is just a result of how we're allocating staff, let me ask Brett to comment a little bit further on U S on USPI.

Speaker 2: yeah thanks all no no no on the usb i said it things very consistent with what some shared obviously in jambore we did see uh... the impact of oma cron in terms of volume in terms of staffing uh... but we are starting to see that subside a little bit going into a fibrous and and starting to see this schedule at the end of February and going into mart

Yes, Thanks, Tom.

On the USPI side of things very consistent with what <unk> shared obviously in January we did see the.

The impact of Omicron in terms of volume in terms of staffing.

But we are starting to see that subside, a little bit going into February and starting to see the schedule look up at the end of February and going into March.

Speaker 5: okay and then a a follow-up question on the martin side uh... excluding sequestration regarding awesome art is to be to be increasing year-to-year despite a very strong comp from you know coven twenty one i guess besides

Okay, and then a follow up question on the margin side.

Excluding sequestration youre guiding hoarse Martin has to be increasing year over year. Despite a very strong comp from Covid 2021 I guess besides.

Speaker 5: the labor the labor dynamic how is we think about margins as relates to the you favorable commercial mix you've had with the high qt mix today as you know if the next terms of war into government and in the lower qt settings

The way we did.

The labor dynamic how should we think about margins as it relates to the favorable commercial mix you've had with the high acuity mix today.

As if the next reservoir into government and into lower acuity settings. Thanks, so much.

Speaker 2: Hey, Pete, I'll stand. Yeah, listen, we, you know, we still, obviously very good about our margin improvement in our hospitals over the past several years, as I mentioned in my remarks.

Hey, Peter It's Dan Yes.

Yes, listen we feel obviously very good about our margin improvement in our hospitals over the past several years as I mentioned in my remarks.

Speaker 2: 200 basis points improvement about and you know work that's what we're continuing to focus on Driving improved margins. Obviously this year You know the sequestration obviously does have an impact on a year-over-year basis But you know that we would continue to focus on growing, you know the higher acuity and higher margin services

200 basis points improvement.

And that's what we're continuing to focus on driving improved margins. Obviously this year.

The sequestration, obviously it does have an impact on a year over year basis, but.

We will continue to focus on growing the higher acuity and higher margin services.

Speaker 2: That's been an area of focus and it's going to continue to be an area where we allocate capital and we think that

It's been an area of focus and it's going to continue to be an area, where we allocate capital and we think that's beneficial.

Speaker 2: be beneficial. And that's in addition to all the other cost management initiatives that we've been focused on over the past several years, whether it's in the supply chain side or our other operating expense line where we've been going through renegotiating contracts, terminating contracts if we don't get the right terms. There's more to do there. As we've talked about, we've been transitioning roles to our global business center.

Beneficial that's in addition to all the other cost management initiatives.

Focused on over the past several years, whether it's in the supply chain side or in our other operating expense line where.

We've been going through renegotiating contracts terminating contracts, if we don't get the right terms there is more to do there as we've talked about we've been.

Transitioning roles to our global business Center in.

Speaker 2: in Manila that that's going well and there's there's more to do there and you know listen We think we're well positioned from a contracting perspective too whether it's supply chain or what's insurance plans Our next question comes in

In Manila.

Well and there's more to do there and listen we think we're well positioned.

Contracting perspective, too, whether it's supply chain or.

With the insurance plans.

Yes.

Yes.

Our next question comes from Sarah James with Barclays. Please proceed with your question.

Thank you.

So just kind of follow up on.

And the moving pieces you guys gave us the model.

Okay.

The branch from 'twenty to 'twenty two.

Yeah.

Yeah.

My first question.

And I'm sure that's.

That's what you guys are doing well.

Speaker 6: strategy on labor. So I'm wondering if you can give us an insight on how you think about it.

Your strategy on Monday, So I'm wondering if you can give us.

How do you think about the seasonality first half versus second half.

Normal year.

Yeah.

You see some of the moving pieces.

Under your control.

Speaker 2: they said it's a not my i think i thought it was sort of hard to hear but uh... i think your question relates to you know how we use seasonality uh... this year maybe versus uh... other years you know certainly uh... starting the year off obviously

Hey, sorry to stay and I think I caught sort of hard to hear but.

I think your question relates to how we view seasonality this year maybe versus other years.

Certainly starting the year off obviously as we mentioned we have seen an increase in in Covid cases.

Speaker 2: we mentioned, you know, we have seen an increase in...

Speaker 2: in COVID cases, you know, so far this year, it got come up even compared to the end of December . And there was, you know, elevated cases in December as well. So that's, we've taken that into consideration. I mean, there's some math, we've related to some items that we won't be able to recognize and all like we heard in Q1 that I pointed out that the Texas funding. But, you know, we're assuming that comes back.

So far this year.

Even compared to the end of December and there was.

Elevated.

Cases in December as well, so that's we've taken that into consideration.

There is some math to be related to some items that we won't be able to recognize in all likelihood in Q1 that I pointed out.

The Texas funding, but.

We're assuming that that comes back and it gets approved and we will recognize that later in the year, so that will impact the timing of and the the earnings as we move through the year, depending on when it ultimately gets approved but.

Speaker 2: and it gets approved and we'll recognize that later in the year. So that will impact the timing of, and the earnings as we move through the year, depending on when it ultimately gets approved.

Speaker 2: But you know, as COVID cases wane.

<unk>.

As covered cases Wayne.

Speaker 2: And assuming we don't have another big spike, we think as we move through the year, there will be growing earnings.

And assuming we don't have another big Spike, we think as we move through the year.

There will be growing earnings.

No.

Speaker 2: second third fourth quarter now you know third quarters typically um... seasonally uh... somewhat softer than than the other quarters they needed take that into consideration but also uh... that we fully expect the fourth quarter to be very robust that um... typically the strongest quarter for our ambulatory business um... and so...

Second third fourth quarter now third quarter is typically.

Seasonally.

Somewhat softer than the other quarters, so you needed to take that into consideration, but also.

Fully expect the fourth quarter to be very robust that's typically the strongest quarter for our ambulatory business.

So that's.

Speaker 2: That's how we're viewing this year from a sequential basis.

That's how that's how we're viewing this year from a just.

Sequential basis.

Great.

And your negotiations.

Are you seeing any.

Wilson.

Okay.

Come into play as people get that.

That's great.

Yes.

Speaker 2: We're, you know, I don't think we want to get into specific, you know, negotiations with payers. The only thing I would say is there hasn't been any, you know, material changes in terms of, you know, negotiations.

I.

I don't think we want to get into specific.

Negotiations with payers.

Anything I would say is there hasnt been any material changes in terms of.

Negotiations.

Yeah.

Our next question comes from Justin Lake with Wolfe Research. Please proceed with your question.

Speaker 7: Thanks, good morning. I wanted to follow up on a couple of the moving parts for 22, specifically you gave us a lot of detail on sequestration. I'm curious about the benefit you saw you had in 21 from the extra COVID bump that 20% plus HRSA payments and how you're thinking about those and what's built in for 2022 or something.

Thanks, Good morning wanted to follow up on a couple of the moving parts for 'twenty. Two specifically you gave us a lot of detail on sequestration.

It's about the the benefit you saw you had in 'twenty one.

The extra COVID-19 above that 20% plus HR RSA payments and how youre thinking about those and whats built in for 2022 assumptions.

Speaker 2: Hey Justin Stan, let me take that one. You know, for our assumptions in our guidance this year for COVID cases, let's start with that. You know, assumes COVID cases for the full year will be roughly 5% or less. You know.

Hey, Justin It's Dan Let me, let me let me.

Take that one.

For our assumptions in our guidance this year for for Covid cases, let's let's start with that.

<unk> assumes COVID-19 cases for the full year will be roughly 5% or less.

<unk>.

Speaker 2: First quarter could be a little bit north of that, depending on how this ultimately lands. But so we are assuming that there are a level of COVID case, is not at the same level as 2021 when it was about 8%, or certainly not 2020, but we are assuming, again, 5% or less of total admissions.

First quarter could be a little bit north of that depending warehouses ultimately lands.

So.

We're assuming that there are.

The level of Covid cases, not not at the same level as 2021, when there was about 8% or certainly not 2020, but we are assuming.

5% or less of.

Total admissions.

Speaker 2: uh... you know in terms of the funding as i'm pointed out in uh... the room uh... my remarks we are not assuming any grand income in our guidance uh... uh... we you know any of the uh... there's additional funding will will have to evaluate whether uh... we are it

In terms of the funding as I pointed out in my.

In my remarks, we are not assuming any grant income in our guidance.

If theres additional funding will have to evaluate whether we earn it.

Speaker 2: uh... but right now we're not assuming that you know in terms of your other point about you know that the medicare out on uh... the one thing i would say is that you know with that funding

But right now we're not assuming that in terms of your other point about the.

The Medicare add on that.

One thing I would say is that.

With that funding.

Speaker 2: comes a lot of incremental costs, not only for caring for those patients, they're the expenses associated in the length of stay is typically longer than the costs are higher.

It comes a lot of incremental cost not only for caring for those patients.

The expenses associated and the length of stay is typically longer than the costs are higher so.

Speaker 2: you know, if those cases start to come down, then presumably the expense is associated with those cases also.

If those cases start to come down then presumably the expenses associated with those cases also.

Speaker 2: you know come down so um... you know again i think it's sort of a high level you know how we're viewing the this year from that perspective

Come down so.

Again, I think it's sort of a high level.

Viewing this year from that perspective.

Speaker 7: Okay, and anything on ETHRSA dollars, how much did you get in 2021? And what do you expect in for 2022?

Okay and anything on HRS $8, how much did you get in 2021, and what do you expect that for 2022.

Speaker 2: Well, you know, that's the same thing there. You know, those that, you know, that reimbursement is for, you know, patients who have COVID and, you know, that funding, you know,

Well, it's the same thing there.

Those that that reimbursement is for.

Patients who have.

Covid in.

That funding.

Speaker 2: As that funding dissipates, they also, presumably those cases also would no longer be there. There is a question as to, you know, how long the funding will be there. You know, we've continued to receive funding, at least so far this year. And, you know, we'll see where that ultimately lands this year. Again, it'll be depending on available funding as well as, you know, the level of cases obviously.

Is that funding dissipates.

They also those presumably those cases also would no longer be there. There is a question as to how long the funding will be there. We've continued to receive funding. So at least so far this year and we'll see where that ultimately lands. This year again, it'll be depending on available funding.

As well as.

The level of cases, obviously.

Yes.

Okay. Thanks.

Our next question comes from Josh Raskin with Nephron Research. Please proceed with your question.

Speaker 8: Great, thanks. Good morning. Trying to figure out a long term sort of base for earnings and sort of within the 2022 guidance, how you're thinking about.

Great. Thanks, good morning, trying to figure out sort of long term.

A base for earnings and sort of within the 2022 guidance, how youre thinking about.

Speaker 8: the net impact of COVID, I've heard a couple of things, so I understand 5% of total volumes, etc. But I'm trying to weigh sort of those admissions and treatment again.

The net impact of Covid I've heard a couple of things so I understand 5% of total volumes et cetera, but I'm trying to weigh sort of those admissions and treatment against the typical pause that <unk> seen in utilization and sort of what the totality of the impact of Covid is on Canada overall and do you think.

Speaker 8: you know the typical pause that you've seen in utilization and sort of with the totality of the impact of COVID is

Speaker 8: on on tenet overall and and you think this you know

Speaker 8: the bet pause and utilization that you tend to see with surges will be less impactful in the future. As you know, tenant just continues to get better and better at managing through it.

The pet paws and utilization that you tend to see with searches will be less impactful in the future as tenant just continues to get better and better at managing through it.

Speaker 4: Hey, it's some, let me attempt to address that, which is projecting, I mean, I'm cautious because it projects forward an understanding of what types of variance may emerge. And that's...

Hey, it's Tom let me.

Attempt to address that.

Which is projecting I'm cautious because it projects forward and understanding of what types of variance may emerge and that's that's where omicron I think surprised us a bit relative to delta.

Speaker 4: that's where all macron i think surprised us a bit relative to delta uh... in terms of the nature of it uh... of its clinical course rate it's been more of uh... broad infection not as severe but based upon the number infected it drove hospitalizations up again in a way that we might not have expected so

In terms of the nature of its.

Of its clinical course, right, it's been more of a <unk>.

Broad infection, not as severe but based upon the number infected it drove hospitalizations up again in a way that we might not have expected. So.

Speaker 4: Here's a few things I would say. One is the therapies that have become available to treat COVID, even on an outpatient basis, if those.

Here are a few things I would say one is the therapies that have become available to treat COVID-19 , even on an outpatient basis. If those if those drugs are available from a supply chain standpoint that will probably reduce hospitalizations going forward in my view that's probably.

Speaker 4: Those drugs are available from a supply chain standpoint. That will probably reduce hospitalizations going forward. And in my view, that's probably, you know, among the primary things, other than the vaccinations, which have been by far the most impactful things in reducing COVID hospitalizations and mortality. The new drugs are probably the second, you know, most impactful things that will reduce the impact of COVID in the hospital environment.

Among the primary things other than the vaccinations, which have been by far the most impactful things and reducing COVID-19 hospitalizations and mortality the new drugs in probably the second most impactful things that will reduce the impact of Covid in the hospital environment.

Speaker 4: So, you know, at some point, I think we're gonna return to a world where COVID hospitalizations become like other respiratory illnesses that we end up seeing that affect the hospitals. Probably to some extent, becoming seasonal as well, just like the flu from that standpoint.

So.

At some point I think we're going to return to a world, where COVID-19 hospitalizations become like other respiratory illnesses.

We ended up seeing that affect the hospitals, probably probably to some extent, becoming seasonal as well just like the flu.

From from that standpoint.

Speaker 4: Dan the point that Dan makes is really important. The way we have set up ourselves and just kind of the hospital industry to take care of COVID has involved adding a lot of cost to do that, right?

The point that Dan makes us really important the way we have set up ourselves and just kind of the hospital industry to take care of Covid has involved adding a lot of cost to do that right.

Speaker 4: significant isolation expenses, et cetera, et cetera. And the question becomes, when this becomes, can you take care of COVID as a more regular respiratory virus infection that ends up in the hospital without all of those extra costs over time? And that'll probably help manage the ongoing impact of the COVID expenses on the hospitals. I mean, that's really where we have to get to.

Significant isolation expenses et cetera et cetera.

The question becomes when this becomes can you take care of Covid is a more regular respiratory virus infection that ends up in the hospital without all of those extra costs over time.

And that will probably help manage.

The ongoing impact of the Covid expenses on the hospitals.

I mean, that's really where we have to get to.

Speaker 4: The other big point I would make is COVID dissipates. There is an unknown about when utilization in the sector will return to normal, like pre-COVID levels. Is it gonna spring back immediately or is it gonna take some time?

The other big point I would make is COVID-19 dissipates. There is an unknown about when utilization in this sector will return to normal like pre COVID-19 levels is it going to spring back immediately or is it going to take some time for those cases to come back.

Speaker 4: for those cases to come back. You know, we obviously are making an assumption into 2022 that those other non-COVID cases will spring back. Partially as a result of utilization and demand and partially as a result of our strategy.

We obviously are making an assumption into 2020 to that.

Those other non Covid cases will spring back partially as a result of utilization and demand and partially as a result of our strategies.

Speaker 4: And that's why we're tracking those non-COVID volumes carefully as I described.

And that's why we're tracking those non COVID-19 volumes carefully as I described.

Okay.

Speaker 8: I understand it's an impossible question, I guess at this point, but just it doesn't sound like COVID is necessarily a big impact one way or the other. It sounds like you know, yes, you see the increase in volumes and revenues, but there seems to be a lot of cost against that. Am I reading your comments right, Tom, that net net COVID's not a big impact on the totality of 3.5 billion of people.

I understand it's an impossible question I guess at this point, but just.

It doesn't sound like Covid is.

Necessarily a big impact one way or the other it sounds like yes, you see the increase in volumes and revenues, but there seems to be a lot of cost against that am I reading your comments rights on that net net cove, its not a big impact on the totality of $3 5 billion of EBITDA.

Yeah.

For 2022.

Speaker 4: It's not, I mean, it's not. It's a, you know, the cases are declining. Dan's guided to, you know, less than 5% is what we're assuming. And, you know, a lot of what it will take to deliver on the 3.475 is our strategies in the hospital segment and the ASC segment, delivering the kind of growth that we've described and then, you know, the ongoing efficiency initiatives that we have at Conifer.

It's not I mean, it's not it's a it's the cases are declining dan's guided to less than 5% is what we're assuming.

A lot of what it will take to deliver on the $3 475 is our strategies in the hospital segment and the ASC segment.

Delivering the kind of growth that we've described and then the ongoing efficiency initiatives that we have at conifer.

Perfect. Thanks.

Okay.

Our next question is from a J rice with credit Suisse.

Also thank you.

Hey, Jay.

Okay.

Speaker 7: music

Hello.

Sounds like.

The base case is probably no longer a spin sometime this year.

Speaker 9: The base case is probably no longer a spin. Sometimes this year it sounds like it's an ongoing evaluation. I just wanted to see if you clarify that a little more and what you're thinking on maybe changing that direction slightly is. And then I'm sympathetic with Ron's comments in the very beginning that you've created a lot of values seemingly in the USPI operation, the Ampestor's business and the market has been.

It's an ongoing evaluation I just wanted to see if you could clarify that a little more and what you're thinking.

And maybe changing that direction slightly is and then.

I'm sympathetic with Ron's comments at the very beginning that you've created a lot of value seemingly in the USPI operation the ambulatory business and the market has been slow to give you credit for it I'm sure.

Speaker 9: to give you credit for it. I'm sure private equity guys and other guys are noticeable about the opportunity potentially at your current valuation with that. And also even your leverage gains. Is your view on that that you've just gone a lot of time past?

Private equity guys and other guys are notice a noticeable about the opportunities potentially at your current valuation with that and also even your leverage.

Gains.

Is is your view on that that you just let time pass.

Speaker 9: as you prove out the FED transaction upside and so forth that hopefully the market recognized it. Or do you have any sense of urgency that maybe we need to look and figure out ways to unlock the value that we believe would create it more near.

As you prove out the sdd transaction upside and so forth that hopefully the market recognizes or do you have any sense of urgency that.

Maybe we need to.

Look and figure out ways to unlock the value that we believe will create more near term.

Speaker 3: Well, this run I'll tell about Conifer, but separately.

Well this is Ron I'll tell about conifer, but separately.

[laughter].

Speaker 3: We think we've already unlocked value in terms of the performance and the returns with that. We're not out there looking for...

We think we've already unlocked value in terms of the performance.

And the returns we've had.

We're not out there looking for.

<unk>.

Speaker 3: other vehicles or other ideas at this stage. I mean, the company is performing well. We think there's still more for us to do, and we'll keep doing it. I think our focus is more on, how do you keep evaluation, Jack?

Other vehicles or other ideas at this stage I mean, the company is performing well, we think there's still more for us to do and we'll keep doing it I think our focus is more on <unk>.

How do you how do you keep evaluation deck.

Speaker 3: you know, dated when in fact, you've had consistent

David when in fact.

We've had consistent year.

Speaker 3: year over year, month over month, quarter over quarter performance, that would suggest that,

Year over year month over month quarter over quarter performance that would suggest that.

Speaker 3: You know, are not suggest approved that what we said is true. And all we're the only comment I was really trying to make was, you know, at some point the thought process has got to leap forward. And especially when you have other surgery centers valued it, unbelievable, these high numbers. And, you know, our numbers don't reflect any of that. It just makes no sense. So let me just stop there on that. I caught up for, look. Um.

Yeah.

That suggests that prove that what we said is true.

The only comment I was really trying to make was at some point. The thought process has got a leap forward and especially when you have other surgery centers valued at unbelievable. These high numbers.

Our numbers don't reflect any of that.

It just makes no sense. So let me just stop there on that.

Got it.

We're not going to answer the question, what's the plan today, we spend a lot of time on this and have spent a lot of time.

Speaker 3: We're not going to answer the question, what's the plan today? We spend a lot of time on this and have spent a lot of time. You know, I always go back to the same statement.

I always go back to the same statement.

Speaker 3: 2018 at JP Morgan, we agreed to do this because, you know, the

2018 at Jpmorgan, we agreed to do this because.

The.

Okay.

Speaker 3: The Army was at the door and, you know, our performance did not support Ignoring it. Today going ahead, we haven't ignored the kind of pressure it's by any means.

The army was at the door.

And.

Our performance did not support.

Ignoring it.

Today going ahead, we.

We haven't ignored the conifer asset by any means.

Speaker 3: Thousand basis points, I can't imagine a lot of companies that wouldn't feel good about that, especially given the size of counterfeit.

1000 basis points I can't imagine a lot of companies that we feel good about that especially given the size of conifer.

Speaker 3: But clearly, COVID has thrown us down in terms of the accomplishments we wanted to make with COVID.

Clearly COVID-19 has slowed us down in terms of the accomplishments we wanted to make with conifer.

Speaker 3: partially because you can't be out in the marketplace selling at the same level. We've really been working on the IT side of it and building that up, which we're making great progress on. And we've changed out management a couple times, looking for the right mix of leadership and down in the organization. We've also pinned out that organization. And we've moved the material amount of it off short, which should have been done earlier. But it wasn't.

Partially because you can't be out in the marketplace selling at the same level.

We really been working on the it side of it and building that up which we're making great progress on and we've changed out management a couple of times.

Looking for the right mix of leadership.

<unk> down in the organization. We've also send out that organization and we've moved a material amount of it offshore.

Should have been done earlier, but it wasn't so when I look at conifer as a business. It is a very good business now spinning it out yes, I mean, we've talked about doing that but at the same time it said balance between.

Speaker 3: So when I look at Conifer as a business, it is a very good business. Now, you know, spinning it out, yeah, I mean, we've talked about doing that, but at the same time, it said balance between.

Speaker 3: What does the spin give us as a company in our shareholders versus if there's more to do, will we have a greater value?

What does the spin give us as a company and our shareholders versus if there's more to do when we have a greater values.

Speaker 3: asset a few for the years out. So I mean that's the debate and that is the focus. Then you've got the market conditions. It just rates going up other types of things going on that you got to balance into this.

Asset.

Further years out so I mean, that's the debate and that is the focus then you've got the market conditions interest rates going up other types of things going on that you've got a balance into this.

Speaker 3: And look, this is in my decision on an earnings call to make a call. This is a board level decision. And, you know, we've got advisors and the board.

And look this isn't my decision on an earnings call to make a call. This is a board level decision.

We've got advisers and the board.

Speaker 3: Looking at this and we've been talking about it. We have a board meeting the end of the month. I mean, at some point soon we're gonna have to make a call what we really think is the best decision.

Looking at this and we've been talking about it we have a board meeting at the end of the month I mean at some point soon we're going to have to make a call. What we really think is the best decision.

Speaker 3: But I would tell you that decision is not final. And yeah, there's items in question that need to be resolved. And there's things that we need to fully debate and think about. And we have people working on that type of analytics. You also get everybody to go back four years. Our analytical strength was...

But.

I would tell you that decision is not final and yes, theres items in question that needs to be resolved and there is things that we need to fully debate and think about and we have people working on that type of analytics. You also guide remember AJ go back four years, our analytical strength was.

Speaker 3: I don't want to say it was not existing, it wasn't very good. Today we've got a very strong analytical group, coupled that with the advisors we're using, we feel very good that we will come out with the right answer, or at least the answer for X number of years going forward. Look, we're a public company, I've said this before, nothing is forever, right? I mean, ultimately everything's for sale and everything is what it is, and we're gonna continue to do this stuff we're doing. So...

I don't want to say is not existent wasn't very good today, we've got a very strong analytical group couple that with the advisors were using we feel very good that we will come out with the right answer or at least the answer for X number of years going forward.

Look we're a public company I've said this before nothing is forever right. I mean, ultimately everything is for sale and everything is what it is and we're going to continue to do this stuff we're doing.

So.

Speaker 3: It's a long way to try to answer your question, but I can't give you a definitive answer.

So long way to try to answer your question, but I just can't give you a definitive answer.

As a reminder, we ask that you please limit to one question or.

Our next.

Comes from case Soria with Citi. Please proceed with your question.

Oh, great. Thanks. Good morning, guys. Most of my questions have been asked already but maybe could you delve into trends around payer mix in the quarter and how sustainable those trends are going forward and maybe what the puts and takes out of payer mix as we think about 'twenty two.

Speaker 10: Great thanks, good morning guys. Most of my questions have been asked already, but maybe...

Speaker 10: Exelven to trends around paramix in the quarter, and how capable those trends are going forward, or maybe what the put and take start of paramix as we think about 22. Just to that point, this 22 guidance assume any consideration around the resumption of Medicaid retermination.

Just to that point is 'twenty two guidance assume any consideration around the resumption of Medicaid determinations at this point.

Thanks.

Speaker 2: Hey Jason Stan. Yeah, a prayer mix in the quarter was pretty consistent with what we've solved pretty much throughout the entire year. Commercial trends.

Hey, Jason it's Dan Yeah payer.

Payer mix.

In the quarter was pretty consistent with what we've solved pretty much throughout the entire year commercial trends.

Speaker 2: more favorable than our overall aggregate trends. And some of that makes sense given the concern of certain individuals to seek care unless it's absolutely necessary. So no major change in payer trends in the quarter compared to what we were seeing throughout the year and really the back half of 2020 as well. And that sort of...

More favorable than our overall aggregate trends in some of that.

Makes sense given the.

The concern of.

Certain.

Individuals' to seek care in unless it's absolutely necessary so no no major chain.

Change in payer trends.

In the quarter compared to what we were seeing throughout the year and really the back half of 2020 as well and then that's sort of.

Yeah.

Speaker 2: position, we took that into consideration when we were developing our guidance for this year, although we do anticipate some of the lower-acuity cases recover stronger than they have so far. So that'll have some impact on the mix, but the trends in the quarter, we're not surprising, and they were pretty much consistent with our expectations.

<unk>.

<unk>.

We took that into consideration when we were developing our guidance.

For this year, although we do anticipate some of the lower acuity cases.

Recover stronger than they have so far.

So that.

That will have some impact on the mix but.

The trends in the quarter.

We're not surprising and they were pretty much consistent with our expectations.

Yes.

Our next question is from Brian <unk> with Jefferies. Please proceed with your question.

Speaker 11: Jeff.

Speaker 9: Hey, good morning guys. I guess my question's for Brett, as I think about total joint performance across USPI, both in the legacy businesses and SCD assets, I should be thinking about the opportunity to embed the SCD skillsets, so to speak, into USPI's ASCs. You know, we've heard one of the commercial players flag.

Hey, Good morning, guys I guess my questions for Brett as I think about total joy performance across USPI, both in the legacy businesses and Seb assets, how should we think about the opportunity to embed the STD skill set so to speak in the USPI ASC.

One of the commercial payers to flag.

Speaker 12: 55% shift in a joy or replacement to outpatient. So just try to figure out how you can harness that opportunity and expand it across the portfolio and how you think, how much opportunity do you think it's the last six?

55% shift.

Draw your placements outpatient so just trying to figure out how you can.

Is that opportunity and expanded across the portfolio.

Do you think how much opportunity is left.

Thanks.

Speaker 12: Hey, Brian . Thanks for the question. This is Brad. And look, I mean, we have continued to experience a significant growth in our total joint business. I mean, you think about for the year and as well mentioned this, we added 89 new service funds across portfolio in 2021 and a significant number of those related to total joints. Just to put that in the context with the numbers, total joints in Q4 showed.

Hey, Bryan Thanks for the question this is Brad.

Look I mean, we we have continued to experience significant growth in our total joint business. I mean, you think about for the year and it's all mentioned this we added 89, new service lines across the portfolio in 2021 and.

And a significant number of those related to total joints.

Just to put that into context with the numbers total joints in Q4 showed significant improvement growing 146% over prior year.

Speaker 12: significant improvement growing 146% over prior year and 130% year of year growth for 2021. And so, you know.

And 130% year over year growth for 2021.

And so I.

I think in any context, those are pretty significant growth rates, obviously SCD does a great job has historically done a great job.

Speaker 12: In any context, those are pretty significant growth rates. Obviously, SCD does a great job, has historically done a great job.

Speaker 12: and expanding their total joint footprint. And of course, we're gonna continue to learn from them and vice versa in terms of how we expand. Not only total joint.

And expanding their total joint footprint and of course, we're going to continue to learn from them and vice versa in terms of how we expand not only total joints.

Speaker 12: expand across a wide variety of higher-curity specialties, including spine, including cardiac. So we'll continue to learn from one another as we integrate their business into ours. And obviously with our five-year partnership with SCD will continue to work together as they build out their portfolio and partner together on a go-forward basis with essentially everything they do from a development perspective over the next five years.

Spanned across.

A wide variety of higher acuity specialties, including spine, including cardiac so we'll continue to learn from one another as we integrate their business into ours, and obviously with our five year partnership with SCE will continue to work together as they build out their portfolio and partner together on a go forward basis with essentially ever.

Anything they do from a development perspective over the next five years.

Speaker 4: Hey, let me just add one other point to that, which is that just remember the strategy working with SCD and orthopedics was very deliberate. I mean, USPI's

Hey, Ken let me just add one other point to that which is that just remember the strategy working with SCD in orthopedics was very deliberate USPI.

Speaker 4: a horror platform in orthopedics was already the leader in the ambulatory surgery space. So our ability with Bretton team to build and grow in the orthopedics, bone and joint pain and other related spaces.

Core platform in orthopedics was already the leader in the ambulatory surgery space, So our ability.

With bratton team to build and grow in the orthopedics bone and joint pain and other related spaces.

Speaker 4: is not limited to the portfolio of centers that we've recently partnered with in SCD. It's the whole portfolio. And that's why we think this.

He is not limited to the portfolio of centers that we've recently partnered with an SCB, it's the whole portfolio and that's why we think this.

Speaker 4: you know, aspiration that we had of being, you know, the unquestionable leader in outpatient.

Aspiration that we had of being the unquestionable leader in in outpatient.

Speaker 4: or the ptics surgery including innovating and adding new procedures in the uspi environment has been very important strategically to where uspi is headed

Orthopedic surgery, including innovating and adding new procedures in the USPI environment has been very important strategically.

Where USPI is headed.

Yeah.

Our next question is from Ben Hendrix with RBC capital markets. Please proceed with your question.

Speaker 13: Hi, good morning. Thank you for taking my question. Just had a quick one to follow up on Justin's earlier question. Is it possible for you to quantify kind of what you had received in 2021 in total from the COVID related subsidies, 20% add-on, the sequester relief and HRSA, and then kind of what do you have into guidance, at least from a magnitude perspective and directionally for 20%.

Hi, Good morning. Thank you for taking my question just had a quick one to follow up on Justin's earlier question.

Is it possible for you to quantify kind of what you had received in 2021 in total from the Covid related subsidies, 20% add on the sequester relief in HR assay, and then kind of what do you have baked into guidance at least from a magnitude perspective and directionally for.

For 2022.

Speaker 2: Hey Ben, it's Dan. We haven't put a specific number out there for the Medicare add-on or HRSA. I would... Here's the thing. The funding, yes, it's been very helpful.

Hey, Ben it's Dan.

We haven't we haven't put a specific number out there for for the Medicare add on.

So I would here's the thing.

<unk>.

Funding, yes, it's been very helpful.

Speaker 2: Let's take HRSA, for example, very helpful for patients who otherwise would be uninsured. But it's Medicare reimbursement for patients that we're providing care for. And again, the cost profile.

Let's take Hersom for example, very helpful for patients, who otherwise would be uninsured.

But.

It's mid <unk> Medicare reimbursement for patients that were providing care for them.

And again.

The the cost profile.

Speaker 2: for caring for those type of patients is higher than a typical admission. And so...

For caring for those type of patients is higher than <unk>.

Typical admission and so yesterday the fundings there, but also the costs are there. So it's not necessarily a matter of all the funding goes away and then but the cases are still there we certainly hope thats not the case.

Speaker 2: yes the the funding's there but also the costs are there uh... so it's not necessarily a matter of all of the funding goes away and and and but the cases are still there we certainly hope that's not the case uh... but you know what will have to you know wait and see

But what <unk> have to wait and see.

Speaker 2: in terms of where the funding ultimately lands.

In terms of where the funding ultimately lands.

Speaker 2: So, you know, I would tell you that we get the question a lot. You know, the HRSA funding is, you know, approximately for 2021. It was approximately 75 million. But again, there's cost. You just, you can't assume that, okay, the revenue goes away. And, you know, that's a massive headwind. We certainly hope that's not the case. Our next question.

So.

I would tell you that we get the question a lot hurts the hearse of funding is approximately for.

2021 was approximately $75 million, but again theres costs or are you just you can't assume that okay. The revenue goes away.

And that's a massive headwind we would certainly hope that's not the case.

Our next question is from Whit Mayo with SBB Leerink. Please proceed with your question.

Oh, Hey.

Two really quick ones first just a clarification on the SCD disclosures, what's the difference in the old guidance of $1 75, and the 140 that you're guiding to now I wasn't clear and then if you could give us an update on the Baylor put call. Thanks.

Speaker 5: What's the difference in the old guidance of 175 and the 140 that you're you're getting to now, I wasn't clear.

Speaker 2: Hey, it's, it's, it's standing in terms of the, the difference between the 175 and the latest estimate of 140 million. Keep in mind when we announced the deal in, in November , we were targeting 92 centers.

Hey.

Standing in terms of the difference between the $1 75, and the latest estimate of $140 million keep in mind when we.

We announced the deal and in November we were targeting 92 centers.

Speaker 2: based on subsequent due diligence, we made a determination not to invest in six of those centers. So that's a fairly large portion of the difference. And the other thing too is based on, as we learned further information on timing of biops, that also was a factor in updating the estimate.

Based on subsequent due diligence we made the determination not to invest in six of those.

Centers so that's.

A fairly large portion of the difference and then the other thing too is based on.

As we learned to further information on timing of a buy ups that also was a factor in updating the estimate.

More importantly is the fact that our overall fully ramped <unk>.

Speaker 2: More importantly is the fact that our overall fully ramped consolidated EBITDA S

Consolidated EBITDA estimate from the portfolio, which is six centers smaller than originally planned at <unk> 86 versus <unk> 92, we still feel very comfortable with our overall fully ramped estimate of $275 million fully ramped so even though it's.

Speaker 2: The portfolio, which is six centers smaller than originally.

Speaker 2: plan, it's 86 versus 92. We still feel very comfortable with our overall fully ramped S.

Speaker 2: 275 million fully ramped. So even if six centers aren't there, we think long-term, you know, years three to four.

Six centers aren't there we think long term three to four we will still achieve $275 million.

Speaker 2: uh... we will still achieve two hundred seventy five million uh... you know in in in terms of the uh... your other question about the the the the the the bailer usb i call put

And in terms of your other question about the Baylor USPI call put.

Speaker 2: You know, we'll obviously when we get to the point of finalizing that, we will disclose that, say there's nothing really to add at this point. Our next question is from...

Well, obviously, when we get to the point of finalizing that.

We will disclose that I'd say theres nothing really to add at this point.

Our next question is from John Ransom with Raymond James. Please proceed with your question.

Hey, good morning.

How many ASC. Thank you Linda.

This year through buyout versus on consolidated.

A year.

Speaker 4: John , just to clarify, are you asking these to be the latest SCD transaction? Yes.

John just to clarify are you asking vis vis the latest LCD transaction.

Yes, how many how many centers you think youll buy up this year to get.

So a majority position.

Speaker 12: So John , we've accomplished well over, well about 16 year to date, and we expect to do another 30 this year. 30 plus this year.

So.

So John we've we've accomplished well over.

Well about 16 year to date.

And we expect to do another 30.

This year.

30, plus.

Does that get you to your angle or are there more to do after the end of this year.

Speaker 12: It gets us to our estimate, our expectations, I think over time. If you go past 2022, we'll end up consolidating more of the portfolio than that. As you know, there's a total of 86 facilities, but quite a few of those facilities that are part of the 86 are less than a year old, and some of them are still under development. So when you go into 2023, 2024, we'll consolidate. We'll end up consolidating more of the portfolio as those hunters mature.

It gets us to our our estimate our expectations I think over time.

You go past 2022 will end up consolidating more of the portfolio then than that as you know there is a total of 86 facilities, but quite a few of those facilities that are part of the 86 are yes less than a year old and some of them are still under development. So when you go into 2023 2024 will consolidate.

We will end up consolidating more of the portfolio as those centers mature.

Our next question is from Andrew Mok with UBS. Please proceed with your question.

Speaker 14: Hi, good morning. CapEx in the quarter accelerated meaningfully to 300 million. Can you help us understand where you allocated the growth CapEx in the quarter and how do you view the runway to expand higher-acuity service lines within your hospital portfolio?

Hi, good morning, Capex in the quarter accelerated meaningfully to $300 million can you help us understand where you allocated the growth capex in the quarter and how do you view the runway to expand higher acuity service lines within your hospital portfolio.

Okay.

Well I mean.

Speaker 4: The runway to continue making the, I mean, this is a longer term strategy for us, right? And it was one that we haven't stopped. So...

The the runway to continue making the I mean this is a longer term strategy for us right and it was one that we haven't stopped so.

Speaker 4: You know, it obviously has multiple prongs, capital, infrastructure expansion, but very thoughtful. Clinical technology is probably the heart of it, and getting the right complement of caregivers to be able to deliver, you know, essentially high-acuity services in a community hospital-based setting. That's really the foundation of what we're trying to do, and there's plenty of runway there. I mean, the cardiovascular, neurosciences, surgical,

It obviously has multiple prongs capital infrastructure expansion, but very thoughtful.

Clinical technology is probably the heart of it and getting the right complement of caregivers to be able to deliver.

Essentially high acuity services in a community hospital based setting that's really the foundation of what we're trying to do and there is plenty of runway there I mean, the cardiovascular neuroscience is surgical.

Speaker 4: of procedures are all growing and developing. And it's also true at USPI. I mean, you know, we stay on top of the number of things that are...

Sweet of procedures are all growing and developing and it's also true at USPI.

We stay on top of the number of things that are <unk>.

Speaker 4: being innovative in an ambulatory setting and then we work to create the right environment for that to happen safely. So we think there's a lot of room to continue along with this technology and service evolution that's going on in the high-acuity space.

Being innovated in an ambulatory setting and then we work to create the right environment for that to happen safely. So we think theres a lot of room.

To continue along with this.

Technology and service evolution, that's going on in the high acuity space the.

Speaker 4: The other thing about high acuity is, you know, you have to be focused on medical cases, not just surgical cases as well. And obviously that's more of a hospital-based priority.

The other thing about high acuity is you have to be focused on medical cases, not just surgical cases, as well and obviously that's more of a hospital based.

Hospital based priority.

Speaker 2: Okay, operator, we're going to have to end it now. Thanks. Thank you so much, everyone, for joining us today.

Okay operator.

We're going to have ended now thanks. Thank you so much everyone for joining us today.

This concludes today's conference you may disconnect your lines at this time and we thank you for your participation.