Q3 2022 Universal Health Services Inc Earnings Call
The conference.
Vince will begin shortly to raise your hand during Q&A you can dial star one one.
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The conference will begin shortly to raise your hand during Q&A you can dial star one one.
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Good day and thank you for standing by welcome to <unk> third quarter 2020 to Universal Health Services earnings Conference call. At this time, all participants are in a listen only mode. After the speaker's presentation. There will be a question and answer session to ask a question. During this session you will need to press star one.
<unk> on your telephone please be advised that today's conference maybe recorded.
Like to hand, the conference over to your speakers today, Steve Filton Executive Vice President and CFO and Mark Miller, President and CEO . Please go ahead.
Thank you Michelle Good morning, we welcome you to this review of Universal Health services results for the third quarter ended September 32022.
During the conference call, we will be using words, such as believes expects anticipates estimates.
And similar words that represent forecasts projections and statements.
Statements.
For anyone not familiar with the risks and uncertainties inherent in these forward looking statements I recommend a careful reading of the section on risk factors and forward looking statements and risk factors in our Form 10-K for the year ended December 31, 2021, and our Form 10-Q for the quarter ended June 32022.
We'd like to highlight just a couple of developments and business trends before opening the call up to questions.
As discussed in our press release last night. The company reported net income attributable to UHF per diluted share of $2 50 for the third quarter of 2022.
After adjusting for the impact of the items reflected on the supplemental schedule is included is included with the press release, our adjusted net income attributable to <unk> per diluted share was $2.54 for the quarter ended September 32022.
During the third quarter, we experienced a decrease in the number of patients with a COVID-19 diagnosis treated in our hospitals as compared to the prior year quarter.
As a percentage of total admissions corporate diagnose patients made up 16% of our admissions in the third quarter of 2021, but only 6% of our admissions in the third quarter of 2022.
And our acute segment this decline in COVID-19 patients, resulting in reduced revenues due to the lower acuity and less of the incremental government reimbursement associated with COVID-19 patients, while overall surgical volumes tended to recover to pre pandemic levels. There was.
Measureable shift from inpatient to outpatient resulting in further overall revenue softness.
And while we were able to continue to reduce the amount of premium in the quarter, which declined from $117 million in the second quarter to $81 million in the third quarter. There was insufficient revenue growth to offset the accelerated rate of wage increases and other.
<unk> pressures.
The $25 million, we received in quality incentive payments in Texas helped to narrow the gap leading to an acute EBITDA result in the third in the quarter only slightly below our internal forecasts.
Yeah.
At the same time this decline in Covid activity allowed our behavioral hospitals to continue to reduce their labor vacancies, resulting in a reduction of the capping of the bed capacity.
The effect of increased volumes combined with solid pricing increases largely offset higher labor costs.
Leading to a behavioral EBITDA result in the quarter slightly below our internal forecasts.
We also note that the third quarter included approximately $8 million of losses related to startup facilities and $4 million to $5 million of losses related to the impact of hurricane in late September .
For the nine months ended September 32022, we've incurred approximately $45 million of losses in connection with the startup facilities.
Our cash generated from operating activities was $221 million during the third quarter of 2022 as compared to $442 million. During the same quarter in 2021. The decline was largely due to the timing of payroll disbursements, the opening of new facilities and the timing of certain receipt or the receipt of certain supplement.
Reimbursements.
We spent $570 million on capital expenditures during the first nine months of 2022 and reaction to the earnings softness experienced this year, we reduced the pace of our capital expenditures by about 22% to $165 million for the first nine months of the year.
Similarly, although we understand the true.
Although we moderated the trajectory of our share repurchases. We plan to continue to be an active acquirer of our own shares for the full year of 2022, we estimate that we will acquire approximately 80% of the number of shares projected in our original guidance during the third quarter of 2022, we repurchased approximately one 6 million.
<unk> shares at an aggregate cost of approximately $158 million. During the first nine months of 2022, we repurchased approximately 585 million shares at an aggregate cost of approximately $704 million.
Yesterday morning, we announced the appointment of Eddie Sim to executive Vice President and President of acute care division, succeeding Marvin timber who has announced his intention to retire.
Eddie who brings nearly 30 years of health care and leadership experience. Most recently served as Chief operating officer, as insurer health and Denver, Colorado, where he led the system's three operating groups clinical delivery and shared services with annual revenues of approximately $5 billion.
In this role he was responsible for supporting improved care coordination operational and clinical excellence and alignment across insurers ecosystem of 19 facilities and more than 250 clinics.
Prior to joining central Centura health Eddie served in senior leadership roles of increasing responsibility for 11 years at Baptist Health in Jacksonville, Florida.
As president of physician integration there. He was responsible for an employee physician network of 380 physicians at a clinically integrated network with more than 900 physicians as.
As we look forward to Eddie joining the company in early December we think Marvin for his 11 years of service to UHF under Marvin's leadership, our acute care division has experienced robust growth and expansion in key markets as well has achieved a significant number of industry accolades and public recognition for <unk>.
Quality and service.
Marvin will remain with the organization for a transition period following Edie start with us on December five.
We are pleased to answer questions at this time.
Okay.
Thank you.
Again, if you would like to ask a question at this time. Please press star one on your Touchtone telephone one moment, while we compile the Q&A roster.
And our first question comes from the line of Kevin Fischbeck with B B Bank of America. Your line is open. Please go ahead.
Great. Thanks.
I guess.
Everyone's starting to look towards 2023, I don't know if your divisions. It provide any comment in that direction that would be fantastic. If not most of your peers have kind of given us just kind of one time items in 2022 to kind of level set the base, we should be thinking about when thinking about 2023 can you help us on on either side of that.
This.
Sure Kevin.
It has never been uhm his practice to give guidance for the following year until our fourth quarter earnings announcement in February .
We're not going to depart from that this year.
I think we've been pretty clear about nonrecurring items in our financials for the year I'm, just sort of comment on the third quarter.
With Q IAF.
Reimbursement that we received in Texas for $25 million that Mark mentioned in.
His opening remarks.
We believe this should be a recurring.
Reimbursement item, which is why we did not sort of suggest tossing it out of the third quarter consideration.
And that we've identified.
Startup losses, we identified the impact of the hurricane.
In theory, they should not reoccur next year and then finally I know at least.
One of our peers described this DPP reimbursement in Florida, another sort of special Medicaid program, we did not record any of those funds in Q3.
This year, although we expect to record something in the neighborhood of about $30 million of those.
Neck next quarter in the fourth quarter and a similar amount next year.
Okay. That's helpful are you thinking about like the government Phe money is kind of a headwind next year or is that tied to COVID-19 volumes and therefore not really necessarily.
Something we should be backing out of this year's numbers.
I think it's the latter Kevin I mean those government.
Programs that were meant to subsidize hospitals, whether it was harris over the 20% add on or the.
The sequestration waiver all were designed to help hospitals.
The deal with the higher acuity and higher expense of Covid patients as there are fewer COVID-19 patients I think there is less of a need for that I think the real.
Variable as we think about the acute business is particularly in 2022 as COVID-19 volumes have declined.
Im COVID-19 volumes electives and other procedures have been a little bit slower to recover and snapback than they were in 2021, I think we see them slowly coming back and I think we think that will continue into 2023.
In my mind, the pace of that recovery is probably the most important variable as we think about.
The performance of the acute division in addition to the other.
Prevalent item, which of course is just the labor tightness in the labor market.
Alright, great. Thank you.
Thank you.
And our next question comes from the line of Ann Hynes with Mizuho Group. Your line is open. Please go ahead.
Hi, good morning.
Maybe on 2022 guidance you.
Jim mentioned in the press release is that still a good gauge for this year and Directionally would you will surfaces as estimates to go to a low to mid range given the first three months, how should we think about that for Q4.
Yes, and so I think consistent with our prior practice we.
Don mentioned guidance in the press release.
Affirming our previous issued guidance, which is what we're doing I think during the third quarter.
Some public appearances at conferences et cetera.
I think I can see it at that.
The top end of the guidance was practically not a reasonable target.
Right.
I think we feel like as long as the trends that we saw in Q3 continue to a reasonable degree in Q4.
Someplace in the lower half of guidance it should be very achievable, especially with some of the.
Nonrecurring items, particularly the DPP monies in Florida that I mentioned in my previous response.
Alright, and just one follow up question I think you said in your prepared presentation that youre, reducing your expectations for share repurchase.
20% is that can you just talk about the drivers of that.
You had said next era and also capex.
For next year, I mean, I know you've reduced.
You reduced your budget by 32% is that.
It just a wait and see.
Do you think that will continue into next year.
Yes, so just to clarify.
What I said in the prepared remarks wise.
Our original.
Guidance for the year presumed about a $1 4 billion in share repurchases, obviously at a higher price than we are.
We've been currently trading at what I said is that we'd likely repurchase about 80% of the <unk>.
Original number of shares.
Probably from a dollar standpoint, that's more like 60%, new 800 $850 million.
The original $1 4 billion. Similarly, I think we've trimmed our capex forecast from $1 billion originally to something again more than might be $800 million range.
They are both in both cases, we've done that I think.
Out of an abundance of caution.
Obviously in an environment of rising interest rates.
And just uncertain operating trends.
We want to be appropriately cautious.
We continue to believe that investing in our own EBITDA growth in our own earnings stream is still one of the most prudent investments. We can make so I think we will continue to be an active acquirer of shares into next year.
We will be much more specific about what our.
Precise assumptions are when we give our guidance in February .
But I would suggest that as people think about their models today, you think about capex and share repurchase in those sort of ranges of 2020 to 800, some odd million for Capex and $808 50 per share repurchase.
Great. Thanks.
Yes.
Thank you and one moment for our next question.
And our next question comes from the line of Noah <unk> with Factset. Your line is open. Please go ahead.
Noah your line may be on mute.
Okay. We'll go ahead and move to our next question.
And our next question will come from the line of Austin <unk> with Wolfe Research. Your line is open. Please go ahead.
Hi, This is Justin Lake at Wall thoughts. Thanks couple of questions here first on.
On wages, Steve Obviously, you guys did a great job of improving contract labor in the quarter you already kind of at your fourth quarter targets of one do you expect that to continue moderating or does it stabilize here and then to your point a lot of its peers to be offset by by higher wage growth can you give us any color on.
We use growth is doing for your permanent employees. Just so we can get an idea of how thats kind of running into next year.
Yes, Jeff and so I think.
The first question, Yes, I think we intend and plan to further reduce.
Premium pay.
Premium pay was running about $35 million a quarter in the acute segment pre pandemic I don't think it's realistic to get down to those levels, but I think it's not.
Stretch to say that we should still be able to get down maybe another $15 million to $20 million at least in the next quarter to your second point, yes.
Not all of that reduction sort of falls to the bottom line because.
Some of the cost of <unk>.
Reducing that premium pay is.
Increased wages that we're having to pay to recruit and retain talent.
I think we've said a number of times over the last several quarters that probably.
Base wage rate inflation in both segments has been running I'm going to say 175 to 200 basis points higher than <unk>.
Pre pandemic levels. So I think Q2 is three three and a quarter pre pandemic, it's closer to 5% now and maybe even if it was two two and a half pre pandemic.
Closer to four four and a quarter now.
Sure.
I think one of the reasons that were not.
Prepare to talk about specific 2023 guidance is we'd like to see how those trends sort out over the next several months I think we have a perspective that given some of the inflationary and other economic pressures out there.
That it may actually contribute to somewhat of a lessening of the pressure on <unk>.
Wages, and maybe we will see that number probably not return to pre pandemic levels.
<unk> inflation number maybe somewhere between where we are today and pre pandemic levels, but I think that's to be seen over the next several months.
Got it and you kind of already went into my second question on just inflation one of your peers talked about inflation and it seemed like they were talking beyond labor.
Just curious when you think about supply cost per insurance professional fees.
Things outside of labor.
Could be impacted by inflation are you seeing any kind of pivots, there any anything that.
Trending that we should think about into 2023.
Yes, I mean, if you look at our income statement and clearly.
The biggest pressure is on the salary and wage line.
Certainly we're experiencing.
<unk> on an overall basis throughout our portfolio as an example utility costs, although it's a very small percentage of our overall costs, but they are clearly risen.
By significant numbers.
Many of our facilities.
But again the key driver I think is wages.
Our.
Our focus is on again, reducing premium pay billing as many permanent vacancies as we can and I think if we can do that number one that will drive higher volume growth.
Which will help us offset some of this inflationary pressure.
Thank you and we'll move on to our next question.
Okay.
And our next question comes from the line of Jason <unk> with Citi. Your line is open. Please go ahead.
Okay.
Great. Thanks. Good morning, just start just on your prepared remarks around the measureable shift in surgical volume sweet outpatient setting in the quarter do you believe this move is a sustained construct moving forward or would you call. This is more of a onetime consideration and you would expect a reversion back to Mark <unk>.
<unk> will shift over time.
Jason obviously sort of the broader context of the industry. This shift from inpatient settings to outpatient settings has been going on for at.
An extended period of time, certainly well over a decade I think it accelerated during the pandemic.
From a behavioral.
The perspective people I think were in some cases more comfortable.
Receiving care in setting the outside of hospitals and hospital emergency rooms.
We've seen that just yet.
One example, our freestanding emergency departments, we have about 25 of those today.
Around the country have been extremely busy.
During the pandemic and especially I would say over the last six to 12 months.
I think again for a variety of reasons people are just more comfortable receiving their care there.
I think to a degree.
We'll have sort of a normalization back a bit of a mean.
People will return to the hospitals as we move further and further away from.
The concerns about Covid and Covid surges, but obviously.
There are other reasons why.
Certainly the payers are taking advantage of this opportunity to continue to.
Pressure more business, the move to outpatient and part of that.
Quite frankly, we acknowledge all of that and we've been investing in outpatient development in both of our business segments for that region.
I think it's the trend accelerated somewhat during the pandemic.
But I think more broadly it's just a continuation of a trend thats been in place for some time and I think our business strategy in both of our businesses. It takes that into account and we're very cognizant cognizant of that.
Got it okay. Thanks, and then.
Just as a follow up here just as we think about the potential wind down of the public health emergency early next year, you've talked in the past about some of the considerations on Medicaid redetermination volumes, but I guess, what the incremental asmat dollars that are also rolled in the states also coming to an end.
I know, it's early but I was wondering what your outlook is for Medicaid rates next year for both sides of the business and if you think there could be pressure there just given the ending of the Aetna.
Yes, I mean, I think sort of mechanically the ending of that map probably creates some.
Incremental headwind, although I don't think we think it is necessarily material.
Again.
Thank you.
Of 20000 foot level.
It's going to be difficult for our reimbursement, especially from the government at the Medicare and Medicaid levels to fully offset inflation I think the way we're presuming that the biggest offset to these inflationary increases will be a return to.
Pre pandemic volumes and quite frankly values above and beyond pre pandemic levels.
Because.
To be perfectly Frank I don't think that pricing can account or can offset all of the inflationary pressures that we are going to face.
Got it okay. Thanks for all the color.
Thank you and one moment for our next question.
And our next question comes from the line of a J Rice with credit Suisse. Your line is open. Please go ahead.
Thanks, Hi, everybody.
First maybe just to ask you about the behavioral trends in the quarter, obviously that bounced back very nicely.
<unk> revenue up 8% and good margin leverage.
I assume some of that is because COVID-19 crowded out.
Some side cases last year and Youre, just against an easy comp, but any updated thoughts on <unk>.
Where we're at in terms of getting back to a normal growth.
<unk> mid single digits or a little better even in.
In the Psych hospital businesses and the mix between.
Revenue and volumes I know historically sort of described that as about equal to 2% to 3% and age, but any updated thoughts on that given the strong quarter.
I think we have said a number of times during the pandemic a J that our experience has been that during periods of.
The higher Covid utilization the behavioral business has clearly struggled more than the acute business theres really no benefit to the behavioral business Theres no increased acuity Theres no increase reimbursement there is just the challenge of.
Having to isolate COVID-19 patients from the rest of the patient population often resulting in some clothes pads etcetera and then there is the pressure on labor.
There's a COVID-19 surge we have more employees out.
Sick, where even if it's only for a week or two.
And it just creates more pressure in an already tight labor environment. So I think what we experienced in Q3 is what we've experienced previously like in the second quarter of 2021, and a period of relatively low code utilization, which is.
Not.
Nearly as many sort of patient matching problems and the ability to fill more labor vacancies and when we're able to do that we're able to admit more patients.
And we've talked about being able in a sort of post COVID-19 environment or at least an endemic environment being able to achieve that mid single digit to upper single digit revenue growth.
We've been able to historically achieved pre pandemic in the behavioral business.
Third quarter, I think was reflective of our ability to do that.
The challenge is.
I don't know that we will have a sort of straight line or that we may see another COVID-19 surge in the in the winter here.
But I think as we have.
You said many times, we think the underlying demand for behavioral services remains quite strong and as long as we can.
Continue to address and make progress on the labor issue I think we're going to continue to see revenue growth that's more.
Mostly related to our.
Oracle trends.
Okay, and maybe just a question on the acute side, if I look at.
Some of the metrics length of stay showed a meaningful improvement that obviously has a favorable benefit for you.
Any comment on what was going on there and then.
Some of the companies are talking about EBIT, if not year over year, because last year had a lot of COVID-19 sequentially. They are starting to see stabilization in metrics like payer mix.
And then.
Revenue per adjusted admission, particularly on the commercial side with some a little bit of optimism around rate updates for next year any comment on any of those metrics that you would.
On a GAAP.
Yes, I mean I think.
The length of stay question is directly related to the metrics that mark discussed in his opening remarks.
Last year's quarter had 16% of our acute patients as COVID-19 diagnosed this year at 6%.
The reduction in the number of those high acuity Covid patients I think is sort of directly related to the length of stay decline I would add that I think we believe that further reductions in length of stay are possible and are actually maybe one of the most if not the most significant.
We have to be more efficient and control costs.
For many of our patients certainly for almost all of our government patients in for E. Cigs.
A significant chunk of our commercial patients were paid on a per admission basis. So to the degree that there is an extra day or two of length of stay that is really unnecessary. We're just incurring additional cost without additional reimbursement and we've struggled during the pandemic for a number of reasons a lot of it has to do with.
And the inability to refer patients to traditional.
Sub acute venues because they are struggling with some of the same capacity issues. We have in other regions, but we're very focused on the continued reduction in length of stay as far as your other question I don't think we've had a lot of volatility in payer mix during the pandemic. So.
I would say, it's probably a stable and continues to be stable.
Again, I would say the same thing I've said, a number of times I think what we look forward to.
As more and more people just get accustomed to living and working in getting their healthcare in a COVID-19 environment or an endemic environment that more people will be comfortable.
Seeing their physicians.
Getting primary and specialty care that they've historically gotten and getting that care in hospital settings and hospital outpatient settings in.
We think that that trend is starting to manifest itself and we will continue.
Okay. Thanks, a lot.
Okay.
Thank you and one moment for our next question.
And our next question comes from the line of Andrew Mok with UBS. Your line is open. Please go ahead.
Hi, Good morning, I wanted to follow up on Justin's labor.
Steve I think you mentioned, another $15 million to $20 million in potential improvement in the fourth quarter.
Do you have visibility into that level of improvement today based on the current trend and anything else you would point to that statement drive sequential EBITDA improvement in the fourth quarter. Thanks.
All I would say.
Andrew as we've obviously had a significant amount of success in the acute division in reducing premium pay it peaked at about $150 million in Q1. It was $117 million in Q2, as Marc said and then $81 million in this third quarter.
So we've seen that trending down and believe that we can.
Continue to propel that further reduction obviously, there is some sort of level.
Sure.
Fixed amount of premium pay that is appropriate I was saying it was $35 million pre pandemic I don't think thats a realistic target at this point.
But that's the basis on which we believe that.
We can continue to reduce that number is it's clearly a trend.
And it has not yet flattened out and I don't think it will.
Got it okay.
Follow up I think Steve you mentioned earlier this year that you are starting to enhance your footprint in the Medicaid.
Treatment line could you update us on your progress there and how would you characterize the broader that opportunity over the next 18 months.
Yes.
It's a at the moment, it's a relatively sort of fragmented.
The process in the sense that we're really doing it kind of boots on the ground developing.
Facilities and they're doing we're pursuing some kind of small 123 off acquisition pipe.
Areas.
As I've mentioned before we don't know.
Necessarily see this as a.
Huge driver of growth in the future as much as we see it as really enhancing our very fulsome continuum of care in the behavioral space.
We treat virtually all diagnoses.
<unk> inpatient and outpatient settings, and NTT was just sort of a gap in that so we're going to continue to pursue the opportunity to do that at least in some of our markets.
<unk>.
But it's really much much part of a much broader strategy being.
One of the more comprehensive providers or may be the most comprehensive provider behavioral services in the country.
Great. Thanks for the color.
Thank you and one moment for our next question.
And our next question comes from the line of Stephen Baxter with Wells Fargo. Your line is open. Please go ahead.
Yes, hi, Thanks for the question I wanted to ask a follow up on the pricing discussion earlier I think you suggested that it might be challenging for your pricing yield to keep up with inflationary pressures, but I just wanted to clarify that was that commentary specific to your government yield or your overall pricing yield and I guess my actual question would have been.
Just wanted to get an update on your commercial rate negotiations for 2023, I guess what percentage of your commercial book will be in the first year of a new contract in 2023, and then what do you think the incremental yield would be compared to a typical update thank you.
Yes, so I think my previous comments.
Clearly called out the fact that because half of our.
Revenue comes from government sources and.
And we know that there are simply not at the moment keeping up with inflation. Although I think we believe that will continue to get.
Incremental increases from those government sources over the next couple of years.
That was probably the bigger challenge I think on the commercial side of things, we continue to see higher rates and more acknowledgement from our commercial payers that we.
We need.
Greater reimbursement to operate in this sort of inflationary environment.
On the behavioral side that.
Overall pricing has been strong it was strong in the quarter, we've talked in previous calls about our relatively aggressive stance that we've been taking with a number of payers.
In part because that's a business in which we've been capacity constrained so.
It makes sense to us or for us to go to our lowest paying payers in.
Either require them to come up to market levels of reimbursement or terminate those contracts because we are going to turn patients away. It makes sense to terminate those that are sort of the.
Most inadequate if you will payers.
On the acute side and again, if the idea of sort of how many of our contracts have been renewed et cetera, I think is a little bit outdated in defense that virtually all of our <unk>.
Managed care contracts have short term outs. They most of them have 90 or 120 day out. So we're renegotiating contracts in both our acute and behavioral spaces, where we think there is an opportunity where we think that our payer maybe under market, where we think that we might have an appropriate amount of leverage.
To press for greater rates et cetera, So, yes, we will definitely get more relief.
On the pricing side clearly on our commercial side of the business and were aggressively seeking that.
And again, I would sort of describing the shortfall clearly as being more on the government side.
Thank you and we'll go to our next question.
And our next question comes from the line of Whit Mayo with SBB Securities. Your line is open. Please go ahead.
Thanks, I just wanted to follow up on contract labor for just.
One second Steve how much of the improvement.
In the third quarter was utilization versus.
Bill rates and do you have an idea of what your what your exit rate was in the quarter I've got you pegged at around 10% of acute SWT in the quarter, but just wondering if that.
Trended, maybe a little bit more favorably towards the end of the quarter. Thanks.
Yes, I mean I think in my mind. This is sort of intuitive that the improvement in premium pay is a combination.
Of both rate and utilization, obviously added the demand for those temporary and traveling nurses comes down the rates that are required are being demanded for them comes down as well. So I would say, it's it's a pretty even mix of rate and volume coming down.
Don't have the specific month by month premium pay numbers in front of me with but obviously youre referring to in my.
In a previous response I mean, what we I think have seen is a steady incremental decline in premium pay since the beginning of the year when koby volumes peaked.
And so.
I think our exit rate in the quarter was certainly higher.
How are we going to view at a lower a lower amount of premium pay.
Greater reduction than it was at the beginning of the quarter.
And do you have a number for the contract labor spend in the behavioral segment.
And recognize that it is not as significant of a pain point, but just wanted to see if you had.
I think historically, it's been about a third of what it is in the acute side, but I don't have the specific number in front of us.
One last one just corporate overhead and I know this number bounces around but came in lower than sort of where we thought it might shake out just any.
Any developments or anything to call out would be helpful. Thanks.
Yes, I don't think anything terribly specific I will say that the decline in corporate overhead in Q3 of this year was pretty consistent with what we experienced last year.
But as we analyze those numbers there is nothing terribly.
Material driving that.
Okay. Thanks, guys.
Yes.
Thank you and one moment for our next question.
And our next question comes from the line of.
Gary Taylor with Cowen. Your line is open. Please go ahead.
Hey, Good morning, just a couple quick ones for me.
Doesn't sound like.
The hurricane.
Any material impact expected to continue into the.
Into the fourth quarter that was just disruption, but nothing damaging that would be continuing.
That's correct, Gary we didn't suffer fortunately any significant physical damage in any of our facilities. So I think all the impacts were temporary and most should be recovered in the fourth quarter.
And then on the Florida DPP four for Q I know you had mentioned that earlier in the year.
I just want to make sure I understand the $30 million.
Is that the EBITDA impact or is there.
The other companies have had like a gross revenue number provider tax number associated with it and then and then the net sort of EBITDA contribution.
Yes, so that $30 million is the EBITDA impact.
Okay.
And then last one.
When I when I look at modeling the acute segment. The line that really is most challenging for me and I'm just struggling to.
Stay up with it or and perhaps understand is that other operating expense line thats up almost a $100 million.
Year over year.
I don't think Theres any contract labor in there I think it's.
Professional fees in utilities and insurance are always like the most largest items cited in that bucket could you just.
Maybe confirm that and when you think and maybe just help us think about that up $100 million year over year, what the two or three largest drivers of that are.
Sure So clearly in.
Talked about this on previous calls the most significant driver and I think the biggest distortion is the insurance subsidiary, where we record our medical loss ratio in that in that line and because of the medical loss ratio for our insurance subsidiary <unk> insurance subsidiaries, 85%, 90% of revenues and.
Otherwise that other operating expense line for our hospitals is more something like 20% of revenues to the degree that there isn't a revenue increase in the.
In the insurance subsidiary it sort of historic deadlines. So in the third quarter, there is about $30 million to $40 million in $30 million to $40 million increase in insurance subsidiary revenues and expenses. If you adjust that out of other operating expenses I think rather than like a 15% increase quarter over quarter, it's sort of like 10%.
And I think Thats probably.
A reasonable go forward I don't have the year to date numbers in front of me, but we can certainly provide those.
We will make a point I think.
Guidance for 2023.
Trying to separate out the impact of the insurance subsidiary in those numbers. So it's easier for people to follow I understand.
The difficulty that create yes.
Do I have the three largest buckets of spend on the acute other opex correct.
When you think about.
Sure Yeah.
I would say after.
After the <unk>.
At the insurance there is a bunch of miscellaneous things probably the other most volatile item in the last.
Most recent path has been physician payments, so art payments to physicians, including in our Locums physicians and increase subsidies for hospital based physicians et cetera would be recorded on that line.
So youre seeing some impact of that and then just the impact of broad general inflation.
Thanks.
Thank you and one moment for our next question.
And our next question comes from the line of Peter Chickering with Deutsche Bank. Your line is open. Please go ahead.
Yes, good morning, guys. Thanks for taking my questions.
All questions Jay Jays focus on behavioral December one how do behavioral admissions track in September October or is it fair to think about <unk> admission growth continuing into fourth quarter and number two is <unk> margins behavioral the rate.
Run rate for the fourth quarter.
And number three does it.
That sort of 2023 behavioral pricing is at 45% range and wages are in the low 4% range is there any reason, we should not think about margin improvement in behavioral in 'twenty 'twenty three thanks, so much.
Yes.
Yeah.
Look I think we've made these comments broadly and I think most hospitals that made these comments broadly.
July volumes in both behavioral and acute we're really rather soft.
August track better.
And I think September was sort of.
A reflection of the two months of the two earlier months combined so I think the trend is upward, but I think what we've learned during the pandemic as the trends are a bit more volatile than they have been historically, but again I think the thing that we say with some confidence is that in periods of low lower covered utilization.
Behavioral volumes will tend to trend upward.
That's been our experience and as far as the sort of question about if we continue to have.
Mid single digit and upper single digit revenue growth as we did in Q3.
Should that be enough to.
Allow for margin improvement I think the answer is yes, I mean, I think we saw that in the quarter.
I don't think Theres any reason why we shouldnt continue to see that going forward.
One quick follow up on the acute wages are you seeing your competitors or raise fulltime employee wages mobile times during 2022 like it did in 2021 or are we just generally all coming at the same levels and hence why you think the wage inflation and acute should be less than 23% and 22.
Yes.
Yes, I mean, we definitely saw.
Our acute care peers.
Raising wage rates often multiple times during 2022 and again, particularly during COVID-19 surges.
Okay.
As I said I mean, I think that our hope is that with Colgate volumes more stable.
Hopefully without another really significant surge like we saw in January 'twenty in January of 'twenty one.
<unk>.
Wage rates will be.
More reasonable and wage rate increases will be more reasonable in 2023 look the other issue is.
I think as most people know I mean, I think most of our not for profit peers are struggling financially and that may be an understatement. So.
I think again the hope is that their willingness to give what we believe what we characterize as outsized pay increases and theyre going to have much less of an appetite for that in 2023.
Okay.
Great. Thanks, so much.
Thank you and one moment for our next question.
And our next question comes from the line of Sarah James with Barclays. Your line is open. Please go ahead.
Thank you you said in your prepared remarks that you were able to lower the previous admission cap and behavioral data filling the vacant positions can you give any color on what percentage of admissions you had to turn away and three Q and what that looked like pre pandemic.
Yes Sara.
Generally don't give those metrics because I think they are.
They are hard to measure across the portfolio consistently not every hospital tracks at the same way et cetera, we do try and track it internally, but I have been reluctant to give us those.
Those metrics out publicly what I will say is what we do know during the pandemic is that the percentage of inbound call volume or.
We call it call volume, but it could be over the internet et cetera that we were able to satisfy was significantly lower than it was pre pandemic and the main reason for that was because of again I'm going to describe it as cap beds in the bedroom could've been cap either because we're.
We're isolating COVID-19 patients in certain units or because we didn't have enough staff.
And again, what we have manifested many times when COVID-19 volumes decline as we know that the number of on GAAP debt.
The increase is COVID-19 volumes come down.
It's difficult to give a precise impact of that but again I think you can see it in.
The 8% same store revenue growth in Q3.
Got it.
And given the roughly $200 million reduction in Capex guide in conjunction with your commentary in Q that youre leaning on de Novo openings. This year related to staffing shortages what impact does that have.
On openings going forward.
Influencing your thoughts around what might happen in 'twenty three.
I think it's mostly a timing issue.
Sure.
I think that we have a view that.
Capex investments that make economic sense that pencil out to a reasonable return et cetera makes sense.
They may not make sense from a timing perspective to add capacity.
In an environment in which we're already having difficulty staffing the existing capacity, we have but ultimately.
They'll get built so.
Sure.
I don't know that there is any 2020, because the reality is 2023 large expansion projects that would be adding capacity.
Scheduled capacity are probably already well committed too.
I think that our deferral or delay in Capex, no probably pushes out some 24 projects to 25%, 25% to 20, <unk> that sort of thing rather than I think an immediate impact in 'twenty three.
That makes sense. Thank you.
Okay.
Thank you one moment for your next question.
Okay.
And our next question comes from the line of Noah Pindan with Saks at your line is open. Please go ahead.
Noah your phone may be on mute.
Alright, I am showing no further questions at this time I would like to turn the conference back over to Steve Filton for any further remarks.
We just like to thank everybody for their time. This morning, and look forward to speaking again early next year. Thank you.
This does conclude today's conference call. Thank you for participating you may all disconnect everyone have a great day.
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Okay.