Q2 2023 Tenet Healthcare Corp Earnings Call

Speaker 1: Greetings, and welcome to the Tenant Health Care Second Quarter 2023 Earnings Conference Call-In Webcast. After the speaker remarks, there will be a question and answer session for industry analysts. You may press star 1 at any time to be placed into question queue.

Speaker 1: Tenant respectfully asked that analysts limit themselves to one question each.

Speaker 1: I'll now turn the call over to your host, Mr. Will McDowell, Vice President of Investor Relations. Mr. McDowell, you may begin.

Speaker 2: Good afternoon, everyone, and thank you for joining today's call. I am Will McDowell, Vice President of Investor Relations.

Speaker 2: We're pleased to have you join us for a discussion of Tenant's second quarter 2023 results, as well as a discussion of our financial outlook.

Speaker 2: Tenant Senior Management participating in today's call will be Dr. Sam Satoria, Chief Executive Officer and Dan Conselmi, Executive Vice President and Chief Financial Officer.

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

Speaker 2: Listeners to this call are advised that certain statements made during our discussion today are forward-looking and represent management's expectations based on currently available information. The results and plans could differ materially.

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

Speaker 3: Thank you, Will, and good afternoon, everyone. Before we get into this quarter's results, I'd like to start by extending a warm welcome to Sun Park, who has joined us for this phone call.

Speaker 3: Sun will become our Chief Financial Officer following Dan's retirement. He has more than 25 years of finance experience and an impressive track record of delivering positive results in the healthcare industry.

Speaker 3: Most recently, he was responsible for the commercial and operational finance for all of Amerisource Bergen's business units.

Speaker 3: The CFO transition at Tenet is actively underway, supported by our broader leadership team.

Speaker 3: I look forward to the impact of SUN's leadership as we continue to execute on our strategic priorities.

Speaker 3: Now let's turn our attention to the results that I am pleased to present for the second quarter. I am pleased to present the results that I am pleased to present for the second quarter.

Speaker 3: In the second quarter, we reported net operating revenues of $5.1 billion and consolidated adjusted EBITDA of $843 million, which translates into an attractive 16.6% margin.

Speaker 3: Robust volumes and effective cost control drove attractive results and strong free cash flows and our adjusted EBITDA is about 53 million or 6.7% better than the midpoint of our guidance range.

Speaker 3: We produced another very strong quarter in USPI with 370 million of adjusted EBITDA, which represents 16% growth over second quarter 2022.

Speaker 3: Same facility cases grew 6.6% and adjusted EBITDA margins remained robust.

Speaker 3: Orthopedics volumes were strong with total joint replacements in the ASCs up over 12%.

Speaker 3: over second quarter 2022, coupled with ongoing strength in GI, urology, and ENT.

Speaker 3: Net revenue per case improved nearly 3%.

Speaker 3: Looking ahead, the tailwinds that support ambulatory surgery demand recovery and growth are evident in the current environment.

Speaker 3: These tailwinds include an active but aging population, patients proactively seeking more convenient access to procedural care, a recovering healthcare ecosystem looking for lower sites of care, and ongoing innovation in ambulatory surgery care delivery.

Speaker 3: These factors collectively create a strong foundation for continued growth.

Speaker 3: As the leader in this space, USPI is well positioned to capitalize on these opportunities.

Speaker 3: We continue to attract and retain high quality physicians, which is translated into growth in overall physicians performing procedural care in a USPI facility. We continue to expand high acuity service lines while delivering high patient and physician satisfaction through operational excellence.

Speaker 3: This has enabled strong volume growth from servicing new positions as well as deferred demand.

Speaker 3: It is worth noting that GI case growth has been particularly strong so far this year.

Speaker 3: We see evidence of both deferred care and also expansion of care for the under 50 year old patient population from recent guideline changes, which we believe should be a source of ongoing and expanding demand over time.

Speaker 4: Thank you.

Speaker 3: During the quarter,

Speaker 3: We've successfully expanded our reach by adding 12 new centers.

Speaker 3: Among this impressive new portfolio are three single specialty GI centers in Ohio, bringing our total to 12 in the state.

Speaker 3: Additionally, two of our new facility openings were focused on orthopedics and de novos in Michigan and Florida.

Speaker 3: We are also encouraged by the high level of de novo activity in our pipeline.

Speaker 3: with more than 30 centers currently in the syndication stages or under construction.

Speaker 3: This demonstrates momentum in our expansion efforts and further strengthens our growth prospects.

Speaker 3: USPIs future is bright and our capital deployment into this business will continue to grow and develop this portfolio.

Speaker 3: Turning to our hospital segment, we generated 388 million of adjusted EBITDA in second quarter 2023.

Speaker 3: Acuity remains strong.

Speaker 3: With revenue per adjusted admission up 4% over second quarter 2022.

Speaker 3: On a non-COVID basis, same store admissions were up 5%.

Speaker 3: Our workforce continues to grow and stabilize.

Speaker 3: We've successfully reduced turnover and nurse hiring has accelerated and shown improvement.

Speaker 3: As a result, we reduced contract labor costs during the second quarter of 2023 to about 4.3% of SW&B.

Speaker 3: With the improving labor environment, we find ourselves in a favorable position to capitalize on our strategic approach to prioritize high-acuity specialty services.

Speaker 3: We feel comfortable with this level of contract labor and will look to prioritize placement of new hires for targeted capacity expansion aligned with our strategy.

Speaker 3: It is important to note that our SW&B as a percent of net revenue was 47.3% for the first half of 2019 and is now running 45% year to date in 2023.

Speaker 3: We see this as a validation of our analytics driven labor management capabilities, continued portfolio transformation, and the higher acuity top line strategy as we recover from the pandemic. It gives us more room to invest and at the right time, market by market.

Speaker 3: add capacity as we feel comfortable bringing it online. Our business processes utilize real-time analytics to equip staff, managers, and senior leadership to make data-driven decisions to optimize their areas. This includes workforce productivity, contract labor utilization, inpatient throughput,

Speaker 3: procedural room utilization, transfer acceptance, and more. The analytics are easily digestible and highly accessible with dashboards and insights integrated into key workflows and care team huddles.

Speaker 3: We believe that this data-driven operating discipline coupled with our focus on high-acuity service line development will enable our hospital segment to continue to deliver strong results.

Speaker 3: Conifer continues to perform well for his clients and also delivered strong margins.

Speaker 3: Ongoing technology automation and offshoring initiatives support that performance.

Speaker 3: Second quarter EBITDA margins were 26.3%.

Speaker 3: Conifer continues to focus on commercial activities, especially in patient eligibility services, given the need from the Medicaid redeterminations.

Speaker 3: Stepping back, I indicated last quarter that our confidence in the ability to turn the various styles on the business and generate predictable results is growing. I like the operating environment right now because it is evolving such that higher acuity for focus, effective capacity management, and more.

Speaker 3: and nimble cost control, all strengths of ours support improving results in our business.

Speaker 3: As a result, we are, again, raising our full year 2023 Adjusted Ebit that guidance by $75 million at the midpoint to a range of 3.31 to 3.46 billion.

Speaker 3: This range represents a $125 million increase over our initial full year guide.

Speaker 3: In short, we are optimistic about our ability to continue to differentiate our unique business mix and deleverage through strong earnings growth.

Speaker 3: Free cash flow continues to improve, which provides us flexibility to make necessary investments to enhance our future growth prospects and improve our capital structure.

Speaker 3: And with that, Dan will now provide a more detailed review of our financial results. Dan. Dan.

Speaker 5: Thanks, Omen. Hello, everyone. Our financial results in the second quarter were strong, with the USPI and the hospitals adjusted EBITDA, same store volumes, and revenues above our expectations.

Speaker 5: In the quarter, we generated consolidated adjusted EBITDA of $843 million above the high end of our second quarter guidance range.

Speaker 5: Our results were driven by strong same store revenues and volumes, high patient acuity, and effective cost control.

Speaker 5: Now I'd like to highlight a few key items for each of our segments. Let's start with USBI, which delivered strong growth and continues to provide high quality care to our patients. Right now, you'll notice that.

Speaker 5: In the quarter, USPI produced a 9.8% increase in same facility net operating revenues compared to last year, with case volumes up 6.6% and net revenue per case up 2.9%.

Speaker 5: We saw strong growth in GI, Urology, ENT, and Orthopedic cases.

Speaker 5: The USVI's adjusted EBITDA excluding grant income grew 16.4% compared to the second quarter of last year and its margin continues to be very strong.

Speaker 5: It's 39.2%.

We're pleased with continued strength of USVI's performance, which is a testament to the attractiveness of the portfolio and the value we provide to our stakeholders. We're pleased with continued strength of our stakeholders.

Please continue to strengthen the USVI's performance, which is a testament to the attractiveness of the portfolio and the value we provide to our stakeholders. Turning to our acute care hospital business.

Second quarter same hospital adjusted admissions increased 3.2% compared to the second quarter last year and total same hospital inpatient admissions increased 3% while non-COVID admissions increased 5%.

In fact, year to date non-COVID admissions are up 9.2% over last year.

Our labor management continues to be very effective despite the cost pressures, especially contract nurse staffing costs.

On a consolidated basis, contract labor costs were 4.3% of SW&B in the second quarter, a significant decline from 6% in the first quarter of this year, 7.3% in the fourth quarter last year, and 6.2% in the second quarter last year.

Our consolidated SW&B costs as a percent of revenue were 45% in the quarter compared to 45.8% in the second quarter last year.

And our case mix and revenue yield remains strong as we continue our strategic focus on investments in higher acuity, higher margin service lines.

and our case mix index in a quarter.

has grown at a 3% keg or since 2019 before the pandemic.

Let's now turn to Conifer, which again delivered a solid quarter.

Conifer produced second quarter of just the but of 85 million and a strong margin of approximately 26%.

Let's now review our casulas, balance sheet, and capital structure.

At the end of the quarter we had 934 million of cash on hand and no borrowings outstanding under our line of credit.

We generated 466 million of free cash loan in the quarter and 680 million so far this year holstered by Conifer's strong cash collection performance. As previously announced in the second quarter, we issued 1.35 billion of secured notes that mature

outstanding secure notes that we'll do next year.

We now have no significant debt maturities until 2026.

and we have approximately 1.6 billion of secured debt borrowing capacity available if needed.

Our June 30th leverage ratio was 4.14 times EBITDA compared to 4.1 times at year end 2022.

Also, during the quarter, we repurchased approximately 580,000 shares of our stock for 40 million as part of our 1 billion share repurchase program.

Since the inception of the program last year, we have repurchased approximately 7.4 million shares.

or about 7% of our then outstanding shares for $340 million at an average price of about $46 per share.

We believe our strong free cash flow generation and capital deployment actions will continue to provide us ample financial flexibility to support our growth initiatives.

Let me now turn to our outlook for this year. As some mentioned, we are raising our 2023 Adjusted E-Bit to Outlook by $75 million to $3 billion, $385 million at the midpoint of our range, reflecting our continued strong performance. Thank you.

This 75 million increase includes a 45 million raise for USPI and a 30 million raise for our hospitals.

Additionally, we now expect net operating revenues to be in a range of 20.1 billion to 20.5 billion, an increase of 300 million.

We've increased our assumptions for growth in hospital and patient admissions and adjusted admission. We've increased our assumptions for growth in hospital and patient admissions and adjusted admission.

Additionally, at USBI, we have increased our assumption for same facility surgical case growth to five to six percent for 2023. A 200 basis point increase over our prior expectations.

I increased four-year EBITDA guidance absorbed an approximately $15 million headwind from recently passed legislation in Florida, which among other things reduced workers' compensation and personal injury reimbursements.

Regarding our third quarter outlook, we expect consolidated adjusted EBITDA to be in the range of 775 million to 825 million or 800 million at the midpoint.

And we anticipate the USBI's EBITDA on the third quarter at the midpoint will be approximately 23% to 24% of our full year, 2023 USBI EBITDA guidance of 1 billion, 510 million at the midpoint of our range.

Turning to our cash flows for 2023. From a cash flow perspective, we expect net cash from operating activities to increase 50 million over our prior expectations and are reinvesting this amount back into our business in the form of higher capital expenditures to fuel future growth.

As a result, we continue to expect free cash flow to be in the range of 1.1 billion to 1.35 billion for this year.

Our free cash flow generation has improved substantially over the past several years, and we expect our business to continue to drive strong cash flows while executing on our growth plans.

Our improved cash flow provided us with significant financial flexibility to effectively deploy capital for the benefit of shareholders. As a reminder, our capital deployment priorities have not changed.

First, we plan to continue allocating approximately 250 million of capital annually to grow our USPI surgery center business.

Second, enhancing our hospital growth opportunities.

including the continued focus on higher acuity service offerings.

Third, evaluating further opportunities to retire and or refining instead.

and sharey purchases depending on market conditions and other investment opportunities.

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

Thank you. Now the conducting a question and answer session. As a reminder, we ask you, please ask one question then return to the queue. If you'd like to be placed into question queue, that's star one under telephone keypad. To be removed from the queue, please press star two.

Hey guys, Wilmingman on for Steve. Congrats on the roughly seven percent of USPI. Just kind of a quick question on the 45 million full-year guidance raise there. In the past, you've kind of told us what portion to expect. So what do you think it for that for 3Q and then kind of on the back of it? You know, pretty sizable increase for the full year against the normalized growth rate for EBITDA. Can you just give us a little more color on which drive in the outlook and maybe anything on pay or max specifically in the outpatient setting to call out thanks?

You know, this is Dan. In terms of USPI's guidance for the rest of the year, as I mentioned in my remarks, you may not have heard that.

We're anticipating that USBI's Q3

He but would be roughly 23 to 24.

percent of the full year EBITDA guide of 1.510 billion. So that's how we're looking at Q3 and obviously it pushes into Q4, Q4 is typically usually stronger and we're still anticipating that. The business has performed incredibly well.

so far this year with very strong volume growth. The expense management has also been very tight, combating a lot of the inflationary pressures that are out there. So we're pleased with the results so far.

Resulted in us increasing their guide by 45 million The only thing I would add to that because you specifically asked about the mix we feel very good about both the case mix and the and the pair mix

in the recovery and growth this year. The next question is coming from Jimmy Prase from Goldman Sachs, the line of their lives. The next question is coming from the recovery and growth this year.

Oh, thank you, good afternoon. I was hoping we could spend a few minutes on just the surgical volumes in the quarter for the hospital segment. They were obviously very strong for USPI, but I've been a little bit surprised with the trends in the hospital segment. I think you guys were.

Down about 10 basis points and outpatient actually looked a little bit weaker than inpatient there. So can you just, you know, maybe give us a little bit of color on what you're seeing there and more importantly how we should think about the outlook for surgical growth. Just given some of the comments you made around backlog recovery. I know those were probably a little more tied to us.

Yeah, my comments on the backlog and recovery were really meant to address a more fundamental examination we did of the GI.

service line recovery and growth at USPI and we're actually happy to be able to report that while some of it appears to be deferred care, a substantial amount of it appears to be new demand.

stimulation that we're seeing both in terms of positions that are ramping up and the ability to expand the service line into the new

you know the new population

supported by the guidelines that's younger and obviously with most of them, if not all of them, being commercially insured.

just curious what's going on there. Maybe you can give us a ballpark estimate of what, that position outsourcing costs or position costs are, but then that other operating is a percentage. And then just lastly, on your pay or mix on the hospital side, given you include managed Medicaid and Medicare in there, loved to hear just a pure commercial number and how that looked year-to-year. Thanks. How I'll take the first one, Dan. You want to take the second one. So, just a few thoughts on the position outsourcing and hospital-based position staffing.

We're selectively able to insource where needed seamlessly in order to manage our expense space there. So, I do think this is an important area, but it's not, you know, at least my reflection is, it's not new and we've been managing it for some time. Yeah, and Justin, on the, you know, from a Pyramix perspective, the Pyramix in the quarter, you're really consistent with the first quarter. It continues to remain, you know, attractive from a commercial perspective, within and outpatient volumes, tracking.

Great, thanks. I wanted to go into your point about temp labor now being at a point where you can kind of invest in growth. Is there some way to quantify kind of where admissions or volumes might be if you had full staff just to kind of frame how much volume is deferred volume and then when we think about it sounds like there's a staffing aspect to it, which might be shorter term and there's a cap-ex aspect to it which may be longer term. So let's just kind of think about it.

how to think about that volume recovery and whether it's right to think that volumes could be above average if you're able to staff and grow out the catbacks you're talking about. Thanks.

Yeah Kevin I think a couple of thoughts. I mean I think the capex and infrastructure constraints are really minimal. There may be certain service lines where our current physician capacity or particular areas of the hospital in services we've invested in are a bit full. But in general...

I would not say that we have physical capacity constraints.

you know, to be able to grow. It's more about the service lines that we want to be in. From a labor standpoint, you know, I mean 4.3% is a blended number across our portfolio obviously, and it's a little bit different market to market in terms of what we're doing. What we really, and therefore the ability to take market.

and the pair mix that we service in those.

in those markets. So in some of our markets, we're already investing in adding capacity and feel pretty good about the results. In other markets, we're a bit more cautious based upon the underlying mix or case mix that we tend to see in that area. But in all cases,

As time goes on, if contract labor costs and premium labor costs continue on the path of normalizing, we think we'll have additional room for volume growth as we look forward. Finally, you asked the question about how much is really deferred. My general view...

than maybe what others are seeing, I'm not really sure. But at least for us, I have not really...

seen or viewed patterns that suggest to me a large fraction of what we're seeing right now in the acute care side is deferred and somehow going to be one and done.

Thanks for the question. Last question, geographic mix, were there any that stood out as particularly strong in the corridor and you're seeing a rebound in maybe some of the markets that were slower to recover initially? Then just on USPI, can you give an update on the M&A pipeline and some of the position buy-ups from SED2? Just wondering if there's any sort of impact on how positions are thinking about potential buy-ups just given the strong volume environment. Yeah, just taking them in reverse. I'll take the first one Dan if you want to take the first, the second one if you want to take the first one. Look, nothing to report. Well, no worries.

we're at it just the de novos that we're going to open that were delayed are all on track this year as well and obviously you know that's been a contributor to an overall very very strong first half of the year for USPI

And these volume trends are not because, you know, there's one or two markets that just reopen slower, and that's what's driving all this growth. That is not the case. Thank you. Next question is coming from Whit Mayo from Leering Partners. Your line is now live. Hey, thanks. Good afternoon. Just back on the physician staffing point or the question, are you seeing any changes in anesthesia coverage at USPI, meaning are we seeing groups ask for increased subsidies? Are you seeing any disruption on volumes in any markets from the dislocation with these groups? I know you said it's manageable, Saul, but I just...

Hi, everybody. Just maybe talk about two other areas you haven't mentioned. Some are saying they're seeing some of the benefit from all the growth we've seen on the public exchanges or marketplaces, whatever you want to call them. I've heard you talk about what your strategy has been with respect to marketplace for a while. Do you feel like you're in most contracts there and how much is that? I assume that's being booked in the managed care line, and I just want to confirm that and how much of a tailwind is that provided year to year for you.

On the same lines, obviously there's the question of Medicaid redeterminations. You've got a couple markets that tend to be a little heavier Medicaid. Are you, what do you see in early days there? Are you actively involved in getting people re-verified? And is there an upside because some of those people may end up on the exchanges for you there? Hospital of ingestion

And I'm glad you raised that because I'll reinforce, Conifer has a best in class eligibility and enrollment service and it benefits us, it benefits our clients and now as I've indicated we're expanding that as a point solution. So we feel very, very good about our ability to catch and capture eligible patients, whether they're moving from one form of insurance to another, Medicaid to exchange or other, or even from the standpoint of those that may enter the system apparently uninsured but actually do qualify for coverage.

By the way, that includes even in this environment a lot of new enrollments in Medicaid that we achieve. Our exchange strategy has been very consistent for many years. We took the approach early on of contracting broadly in the exchanges and doing that on a commercial minus.

rather than a Medicare Plus basis. So we're pleased with the rates and we're pleased with the network access. As narrow networks have opened up, including some ultra narrow networks, there may be some or a handful that we're not in, but they really don't have a lot of lives in them.

And so for the networks that are gaining a lot of lives or have a lot of lives, we tend to be very well contracted. It has been a long-standing strategy of the company.

to be broadly inclusive of exchange patients.

And AJ, the exchange volumes that we care for and the revenues, they are included in that managed care line that you see that we disclose. And I would tell you the exchange volumes and revenues are trending very nicely.

with these and it's part of our you know commercial when we think about our commercial mix. Trends are good.

Next question is coming from Andrew Mark from UBS. Your line is now live. Hi. Good afternoon. You've done about $90 million of share repurchase to date and have $660 million of authorization remaining through 2024. You increased the CapEx guide by about $50 million, but curious to hear whether your thoughts around share repurchase have changed and with a better cash flow profile this year. Thanks. Andrew, this is Dan. No, there's absolutely no change in our views and how we're thinking about share repurchases. We obviously repurchased some additional shares in the quarter.

you know, pursue share repurchases. So no change whatsoever from our thinking on share repurchases. We increase our our our guidance, you know, additional investments to drive additional growth substantially in you know in the hospital side.

Hey, good afternoon, guys. Congratulations. Sam, as I think about the revenue for adjusted admission in the hospital, you know, up 4%, pretty strong. How should you be thinking about your ability to sustain that healthy level, both from an acuity perspective and maybe some of the contract negotiations with the payers as we look at obviously higher than average inflation rates? Thanks.

we ought to be able to sustain. On a non-COVID basis, our case mix index has been growing at a 3% CAGR since 2019, which in the CMI world is a very, very strong result. I mean, this has been a strategy pre-pandemic, as you know, that we undertook when some of us joined the company to really reposition Tenet's acute care hospital portfolio. And we've been working at that for a long time, and we continue to work at it and think that there will be upside there. And then from a contracting perspective,

Part of strengthening the attractiveness of our portfolio has been upgrading the reputation and quality of physicians that choose to work in our hospitals, which create a lot of pull among consumers, employers, and other things. That has definitely been the case. It's been the case pre-

the networks in the cities in which we operate so this can be a virtuous cycle, you know I believe that will continue for some time Thank you next question is coming from Jason Casola from city your line is now live Great thanks for taking a question. I'm just wanting to ask why your cash flow on CapEx guy You know, it sounds like you up both in context for better even a generation this year just on free cash flow You know done for 66 million you to date you've up your updated free cash flow guide of 1.35 billion You know, there's an operationally strong fourth quarter instead there. I'm just wondering if there's any

Yeah, this is Dan Jason. In terms of free casual generation, obviously we're pleased with how our performance has been so far this year. Conifer has done a really good job and is outperforming our expectations.

That's very encouraging. You know, your point about the timing, I would say, you know, there's, we still have some tax payments to make in the fourth quarter. That, you know, wouldn't necessarily maybe see it in the third quarter, but, you know, really no substantive, you know, change from our thinking other than...

or 50 million. Thank you. Next question is coming from Stephen Baxter from Wells Fargo. Your line is now live. I'm Stephen Baxter.

Hi, thanks. This is Nick on for Steve. I was hoping you could provide an update on the performance of the SCD businesses so far this year and where you are in terms of progression to the effective multiples you target for those assets. Thank you.

Yeah, I did that earlier. We're very pleased with the ongoing buy-ups according to plan this year and the opening of the de novos. And –

It's been a contributor to the entirety of USPI's performance this year, which has been strong on both acuity and growth. And as Dan mentioned, also a lot of the work we've done on operations management.

that has improved margins and strengthened margins as well. Thank you. Next question is coming from Ben Hendricks from RBC Capital Markets. Your line is now live.

Thank you very much. I appreciate all the color on the growth across USP case categories, but I don't know if I heard you mention cardio growth. Just want some comments on your degree of focus there and what you're seeing in that area. Thanks!

Yeah, no, of course we're very attuned to the cardiovascular market in the ASC setting. We perform peripheral and device-based work there today and very selectively other types of vascular, coronary vascular work.

Yeah, this is an area in which I have consistently voiced caution about how rapidly it will expand. One because of patient safety and selection issues that still have to be worked out. So we're in the midst of...

a number of different pilots to work out appropriate safe clinical protocols. I mean, ASCs are small businesses and a single patient error and associated liability can really do a lot of damage there. So we're very careful and cautious about developing the right set of protocols in that environment if we're going to expand into cardiovascular.

much much more heavily Medicare than commercial even if you compare it to orthopedics which has a lot of commercial activity and that is going to impact the types of margins that those types of facilities can generate. Now look I recognize USPIs got best in class margins.

for the ASC business by far. But part of what you gotta work out is how to do this, build the scale and do it with margins that are healthy so that the partnership of physicians stays engaged in building that. So my view here is that will things move into the outpatient setting in that field? Sure, but I think it's gonna be.

slower and more more cautious all around because of the things I mentioned than what some people discuss.

all around because of the things I mentioned than what some people discuss. Thank you.

Thank you. We reach the end of our question and answer session. That does conclude today's teleconference and webcast. You may disconnect your lines at this time and have a wonderful day. We thank you for your participation today.

Thank you. We reach out to our question and answer session, and that does conclude today's teleconference and webcast. You may disconnect your lines at this time and have a wonderful day. We thank you for your participation today.