Q3 2023 HCA Healthcare Inc Earnings Call

Speaker 1: Welcome to the HCA Healthcare Third Quarter 2023 Earnings Conference call. Today's call is being recorded.

Welcome to the HCA healthcare third quarter 2023 earnings conference call.

Today's call is being recorded.

Speaker 1: At this time for opening remarks and introductions, I would like to turn the call over to Vice President of Investor Relations, Mr. Frank Morgan. Please go ahead.

At this time for opening remarks, and introductions I would like to turn the call over to Vice President of Investor Relations. Mr. Frank Morgan. Please go ahead Sir.

Speaker 2: Good morning and welcome to everyone on today's call. With me this morning is our CEO Sam Hazen and CFO Bill Ruffford. Sam and Bill will provide some premier remarks and then we'll take questions. Before I turn the call over to Sam, let me remind everyone that should today's call can take any forward looking statements they're based on management's front expectations.

Good morning, and welcome to everyone on today's call with me. This morning is our CEO , Sam Hazen and CFO Bill Rutherford, Sam and Bill will provide.

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And then we will take questions.

Turn the call over to Sam Let me remind everyone that should today's call any forward looking statements. They are based on management's current expectations numerous risks uncertainties and other factors may cause actual results to differ materially from those.

Speaker 2: Numerous risks, uncertainties, and other factors may cause actual results to differ materially from those that might be for us today.

Each breast today or.

Speaker 2: More information on forward-looking statements and these factors are listed in today's press release and in our various SEC filings.

More information on forward looking statements. These factors are listed in today's press release and in our various SEC filings.

Speaker 2: On this morning's call, we will make reference measures such as adjusted EBITDA, which is a non- GAAP financial measure, a table providing supplemental information on adjusted EBITDA and a reconciling this income of trivial HGA health care, Inc. is included in today's release.

On this mornings call we will make.

Reference measures such as adjusted EBITDA, which is a non-GAAP financial measure a table, providing supplemental information on adjusted EBITDA and reconciling net income attributable to HCA Healthcare, Inc. Is included in today's release.

Speaker 2: This morning's call is being recorded and a replay of the call will be available later today. With that, I'll now turn the call over to Stan. All right, good morning. Thank you.

This mornings call is being recorded and a replay of the call will be available later today with that I'll now turn the call over to Sam.

Alright. Good morning, Thank you for joining the call.

Speaker 2: The business fundamentals for the company were solid in the quarter with broad base volume growth on a same facility basis across our footprint and various service lines. These results reflected continued strong demand for our services and healthy operating margins on a same facility base.

The business fundamentals for the company were solid in the quarter with broad based volume growth on a same facility basis across our footprint and various service lines. These results reflected continued strong demand for our services and healthy operating margins on a same facility basis.

Across most areas of our business, we maintained the operational momentum that we experienced over the past three quarters, including continued progress with our labor agenda.

Speaker 2: Across most areas of our business, we maintain the operational momentum that we experienced over the past three quarters, including continued progress with our labor agenda.

Speaker 2: Unfortunately, our results were unfavorably impacted by our Velesco Hospital-based physician venture. Then we'll give additional detail on this.

Unfortunately, our results were unfavorably impacted by Velazco Hospital based physician venture.

Bill will give additional detail on this impact in a moment.

Speaker 2: We are continuing our efforts to integrate this venture and anticipate implementing additional actions that should improve its operational results over the next few quarters, including less pressure for the company in the fourth quarter.

We are continuing our efforts to integrate this venture and anticipate implementing additional actions that should improve its operational results over the next few quarters, including less pressure for the company in the fourth quarter.

Speaker 2: Because of this issue primarily, we have lowered the top side of our earnings guidance for the year to reflect the effects of these losses.

Because of this issue primarily we have lowered the top side of our earnings guidance for the year to reflect the effects of these losses.

Speaker 3: It is important to understand that we believe the decisions consolidate Valesco was strategically imperative in maintaining the overall competitive positioning and capacity offerings of the company.

It is important to understand that we believe the decision to consolidate velazco, what strategically imperative and maintaining the overall competitive positioning and capacity offerings of the company.

As has been the case historically with our teams I am confident that we will find a pathway forward to mitigate the impact it has had on our results.

Speaker 3: As it's been the case historically with our teams, I am confident that we will find a pathway forward to mitigate the impact it has had on our results.

Speaker 3: For the third quarter, diluted earnings per share were $3.91.

For the third quarter diluted earnings per share were $3 91.

Same facility admissions grew three 4% year over year.

Speaker 3: Same facility admissions grew 3.4% year over year. Inpatient volumes were supported by continued strong locuity and a favorable pair of mix with same facility to commit commercial admissions, growing, and impressive 7%.

In patient volumes were supported by continued strong acuity and a favorable payer mix with same facility commit commercial admissions growing an impressive 7%.

Operator: Welcome to the HCA Healthcare Third Quarter 2023 earnings conference call. Today's call is being recorded.

Frank Morgan: At this time for opening remarks and introductions, I would like to turn the call over to Vice President of Investor Relations, Mr. Frank Morgan. Please go ahead, sir. Good morning and welcome to everyone on today's call.

Speaker 3: same facility equivalent admissions increase 4.1%. This growth was driven by emergency room visits, which grew 3.5%.

Same facility equivalent admissions increased four 1%.

This growth was driven by our emergency room visits which grew three 5%.

Speaker 3: We are encouraged by our ER revitalization program and the results it is producing for our patients.

We are encouraged by our ER revitalization program and the results it is producing for our patients.

Frank Morgan: With me this morning is our CEO Sam Hazen and CFO Bill Ruther. Sam and Bill will provide some premier remarks. And then we'll take questions.

Speaker 3: outpatient surgeries on the same facility basis grew approximately one point or one percent year over year.

Outpatient surgeries on a same facility basis grew approximately one point or 1% year over year.

Frank Morgan: Before I turn the call over to Sam, let me remind everyone that should today's call contain any forward-looking statements they're based on management's current expectations. Numerous risks, uncertainties, and other factors may cause actual toll to differ materially from those that might be expressed today. More information on forward-looking statements and these factors are listed in today's press release and in our various SEC violence.

Other outpatient categories also grew including outpatient cardiology procedures, which increased almost 5%.

Speaker 3: Other outpatient categories also grew, including outpatient cardiology procedures, which increased almost 5%.

Speaker 3: These factors contributed to an increase in same facility revenue of 7.9% as compared to the prior year.

These factors contributed to an increase in same facility revenue of seven 9% as compared to the prior year.

Speaker 3: In the quarter, we continue to invest significantly in our people with additional investment in orientation programs, Jalen College of Nursing and Clinical Education Facilities.

Frank Morgan: On this morning's call, we will make reference measures such as adjusted even though which is a non-gap financial measure, a table providing supplemental information on adjusted even though in a reconciling this income attributable to HCA Healthcare Inc, is included in today's release.

In the quarter, we continued to invest significantly in our people with additional investments in orientation programs <unk> College of nursing and clinical education facilities.

Speaker 3: Turnover was stable in the quarter and nurse hiring was the strongest it has been all year. These positive results help reduce contract labor costs 12.5% as compared to the third quarter last year and 11% sequential.

Turnover was stable in the quarter and nurse hiring was the strongest it has been all year. These.

Frank Morgan: This morning's call is being recorded in a replay of the call will be available later today.

These positive results helped reduced contract labor costs, 12, 5% as compared to the third quarter last year and 11% sequentially.

Sam Hazen: With that, I'll now turn the call over to Sam. All right. Good morning. Thank you for joining the call. The business fundamentals for the company were solid in the quarter with broad-based volume growth. On a same facility basis across our footprint and various service lines. These results reflected continued strong demand for our services and healthy operating margins on a same facility basis. Across most areas of our business, we maintained the operational momentum that we experienced over the past three quarters, including continued progress with our labor agenda.

Speaker 3: During the quirk we maintained available bed capacity.

During the quarter, we maintained available bed capacity.

Instances, where we could not accept patients from other hospitals, representing only <unk>, 9% of total admissions, which is consistent with the rate in the second quarter.

Speaker 3: instances where we could not accept patients from other hospitals represented only point 9% of total admissions which is consistent with the rate in the second quarter

Speaker 3: We believe the significant investments we are making in our networks, our people, and our technology agenda will provide us with the necessary resources to improve our service offerings and deliver higher quality care to our patients with greater accessibility.

We believe the significant investments we are making at our networks, our people and our technology agenda will provide us with the necessary resources to improve our service offerings and deliver higher quality care to our patients with greater accessibility.

Sam Hazen: Unfortunately, our results were unfavorably impacted by our let's go hospital-based physician venture. Then we'll give additional detail on this impact in a moment. We are continuing our efforts to integrate this venture and anticipate implementing additional actions that should improve its operational results over the next few quarters, including less pressure for the company in the fourth quarter. Because of this issue primarily, we have lowered the top side of our earnings guidance for the year to reflect the effects of these losses.

Okay.

Speaker 3: I'm proud of our people for what they do every day to deliver on our purpose. I want to thank them for their dedication and their overall great work.

I am proud of our people for what they do every day to deliver on our purpose I want to thank them for their dedication and their overall great work.

Speaker 3: HCA Healthcare has a disciplined operating culture that we will maintain into the future. This focused approach, which benefits all stakeholders, enhances our ability to execute clinically, strategically, and financially.

HCA healthcare has a disciplined operating culture that we will maintain into the future. This focused approach, which benefits all stakeholders enhances our ability to execute clinically strategically and financially.

Speaker 3: So let me close with this. We look forward to our upcoming Investor Day on November 9th, when we will provide more details about the company's approach to driving sustained, long-term growth and shareholder value. We will also provide some early perspectives on the upcoming year, as well as longer-term thinking on growth targets. With that, I will turn the call to Bill for more details on the quarter's results.

So let me close with this we look forward to our upcoming Investor day on November nine when we will provide more details about the company's approach to driving sustained long term growth and shareholder value. We will also provide some early perspective on the upcoming year as well as longer term thinking on growth targets with them.

Sam Hazen: It is important to understand that we believe the decisions to consolidate the let's go was strategically imperative in maintaining the overall competitive positioning and capacity offerings of the company. As has been the case historically with our teams, I am confident that we will find a pathway forward to mitigate the impact it has had on our results.

That I will turn the call to bill for more details on the quarter's results.

Great. Thank you Sam and good morning, everyone.

Speaker 4: Great, thank you, Sam, and good morning, everyone. I will provide some additional comments on our performance for the quarter. Consolidated net revenue increased 8.3% to 16.21 billion, from 14.97 billion in the prior year period. So it's driven by 4.5% growth in equivalent emissions, and 3.6% increase in revenue per equivalent emission. St. Cecilia Revenue has grew 7.9%.

We will provide some additional comments on our performance for the quarter consolidated.

Sam Hazen: For the third quarter, diluted earnings per share were $3.91. Same facility admissions grew 3.4% year over year. Inpatient volumes were supported by continued strong locuity and a favorable pair mix with same facility commit commercial admissions growing and impressive 7%. Same facility equivalent admissions increased 4.1%. This growth was driven by emergency room visits which grew 3.5%. We are encouraged by our ER revitalization program and the result it is producing for our patients.

Consolidated net revenue increased eight 3% to $16 two 1 billion from $14 97 billion in the prior year period was driven by four 5% growth the equivalent of emissions and three 6% increase in revenue per equivalent admission same facility revenues grew seven 9%.

Speaker 4: The fam mentioned those comments. The Valesco joint venture had a negative impact of approximately 100 million on the companies adjusted even out in the quarter as well on a year-to-date basis. A portion of the third quarter results was due to our advising or revenue estimates from the second quarter as we began to see claims being paid.

Sam mentioned in his comments the velazco joint venture had a negative impact of approximately $100 million on the company's adjusted EBITDA in the quarter as well on a year to date basis, a portion of the third quarter results was due to our revising our revenue estimates from the second quarter as we began to see claims being paid.

Sam Hazen: Outpatient surgeries on the same facility basis grew approximately 1.1% year over year. Other outpatient categories also grew, including outpatient cardiology procedures which increased almost 5%. These factors contributed to an increase in same facility revenue of 7.9% as compared to the prior year. In the quarter we continue to invest significantly in our people with additional investments in orientation programs, Jalen College of Nursing and clinical education facilities. Turnover was stable in the quarter and nurse hiring was the strongest it has been all year.

Speaker 4: This result was not what we were expecting, as we are experiencing revenue shortfalls compared to what we originally bought.

This result was not what we were expecting as we are experiencing revenue shortfalls compared to what we originally modeled.

Speaker 4: The Vlesco operating results had a negative impact on adjusted even all margins of approximately 80 basis points in the quarter and 40 basis points on a year-to-date basis.

The Velazco operating results had a negative impact on adjusted EBITDA margins of approximately 80 basis points in the quarter and 40 basis points on a year to date basis.

Speaker 4: Going forward, we anticipate the loss from this venture to approximate $50 million a quarter.

Going forward, we anticipate the loss from this venture to approximate $50 million a quarter.

Speaker 4: We are working diligently on multiple efforts to address these results, including making program adjustments where necessary, deploying efforts to reduce the cost structure, and working with payers for more appropriate reimbursement.

We are working diligently on multiple efforts to address these results, including making program adjustments where necessary.

<unk> efforts to reduce the cost structure and working with payers for more appropriate reimbursement.

As we have discussed previously we have seen subsidy request increase from contracted hospital based providers professional fee expense for contracted providers have grown approximately 20% on a year to date basis. Although we are encouraged the rate of growth of these payments slowed in the third quarter as compared to the <unk>.

Speaker 4: As we have discussed previously, we have seen subsidy requests increase from contracted hospital-based providers. Professional fee expense for contracted providers have grown approximately 20% on a year-to-date basis, although we are encouraged the rate of growth of these payments slowed in the third quarter as compared to the second quarter.

Sam Hazen: These positive results helped reduce contract labor costs 12.5% as compared to the third quarter last year and 11% sequentially. During the quarter we maintained available bed capacity instances where we could not accept patients from other hospitals representing only 0.9% of total admissions which is consistent with the rate in the second quarter. We believe that significant investments we are making in our networks, our people and our technology agenda will provide us with the necessary resources to improve our service offerings and deliver higher quality care to our patients with greater accessibility.

Second quarter.

Speaker 4: In addition to the mitigation strategies discussed above, we continue to assess other operational adjustments within our cost resiliency programs to help offset some of the impact from these issues.

In addition to the mitigation strategies discussed above we continue to assess other operational adjustments within our cost resiliency programs to help offset some of the impact from these issues.

Speaker 4: Let me speak to some cash flow and capital allocation metrics. Our cash flow from operations was $2.48 billion in the quarter. Capital spending was $1.15 billion. We paid about $160 million in dividends and repurchased $1.14 billion of our stock during the quarter.

Let me speak to some cash flow and capital allocation metrics, our cash flow from operations was $2 48 billion in the quarter capital spending was 1.15 billion, we paid about $160 million in dividends and repurchased 114 billion of our stock during the quarter.

Sam Hazen: I'm proud of our people for what they do every day to deliver on our purpose. I want to thank them for their dedication and their overall great work. HCA health care has a discipline to operating culture that we will maintain into the future. This focused approach which benefits all stakeholders, enhances our ability to execute clinically, strategically and financially.

Speaker 4: Our debt to adjusted EBITDA leverage ratio remains near the low end of our stated range of three to four times.

Our debt to adjusted EBITDA leverage ratio remains near the low end of our stated range of three to four times.

Speaker 4: As noted in our release this morning, we are updating our full year 2023 guidance as follows.

As noted in our release. This morning, we are updating our full year 2023 guidance as follows.

Speaker 4: We expect revenues to range between $63.5 billion and $64.5 billion.

We expect revenues to range between 63, 5 billion and $64 5 billion.

Speaker 4: We expect net income attributable to HCA Healthcare to range between $4.94 billion and $5.13 billion.

We expect net income attributable to HCA healthcare to range between $4 94 billion and $5, one 3 billion.

Speaker 4: We expect adjusted EBITDA to range between $12.3 and $12.6 billion and diluted earnings per share to range between $17.80 and $18.50.

We expect adjusted EBITDA to range between 12, 3% and $12 6 billion and diluted earnings per share to range between 17 and $18 50.

Speaker 4: We expect capital spending to approximately $4.7 billion for the year.

We expect capital spending to approximately $4 7 billion for the year.

Before we open it up for questions I'd like to provide some commentary on our year to date performance. We believe our core business metrics remained solid.

Speaker 4: Before we open it up for questions, I'd like to provide some commentary on our year-to-date performance.

Sam Hazen: Let me close with this.

Sam Hazen: We look forward to our upcoming investor day on November 9th when we will provide more details about the company's approach to driving sustained long term growth and shareholder value.

Speaker 4: We believe our core business metrics remain solid. Year-to-date, our same facility emissions have grown 3.3 percent. Equivalent emissions have grown 5.1 percent. Non-COVID admissions have grown 7.5 percent over prior year on a year-to-date basis.

Year to date, our same facility admissions have grown three 3%.

Equivalent admissions have grown five 1%.

Non COVID-19 admissions have grown seven 5% over prior year on a year to date basis.

Same facility ER visits have grown five 7%.

Speaker 4: Same facility, EOR visits have grown 5.7%.

Speaker 4: Inpatient surgeries have grown 2.3 percent and outpatient surgeries are up 3.1 percent all on a year-to-day basis.

Inpatient surgeries have grown two 3% and outpatient surgeries were up three 1% all on a year to date basis.

Speaker 4: These volume metrics have outpaced our original expectations going into the year.

These volume metrics have outpaced our original expectations going into the year.

Speaker 4: Our payer mix trends remain favorable. Same facility managed care admissions increasing 5.3%, and Medicare admissions increasing 4.3% on a year-to-date basis.

Our payer mix trends remained favorable same facility managed care admissions, increasing five 3% and Medicare admissions, increasing four 3% on a year to date basis.

Speaker 4: Medicaid and uninsured admissions are slightly down from the prior year on a year to date.

Medicaid and uninsured admissions are slightly down from the prior year on a year to date basis. Our case mix index has held and increased slightly over prior year and our same facility revenues increased six 4% on a year to date basis.

Speaker 4: Our case mix index has held and increased slightly over the prior year, and our same facility revenues have increased 6.4% on a year-to-date basis.

Speaker 4: Our same facility, labor cost and supply cost are below prior year as a percentage of revenue.

Our same facility labor costs and supply costs are below prior year as a percentage of revenue.

Speaker 4: Through a focused and diligent effort, our operating teams have done an incredible job of addressing the contract labor pressures we had last year.

Through a focused and diligent effort our operating teams have done an incredible job of addressing the contract labor pressures, we had last year on a year to date basis, our contract labor expense was down 18% or over $300 million from the prior year.

Speaker 4: On a year-to-date basis, our contract labor expense is down 18%, or over $300 million from the prior year.

Speaker 4: We have confidence that a similar focused and diligent effort will help address the current physician cost pressures over time.

We have confidence that a similar focused and diligent effort will help address the current physician cost pressures over time.

Speaker 4: Lastly, when we look at our current adjusted EBITDA guidance for 2023, we think there are several notable items to consider. We discussed in a year-end called in January COVID support payments, the audit period Texas waiver payment, and the 340 B impact from 2022, which all total of approximately 500 million.

Lastly, when we look at our current adjusted EBITDA guidance for 2023, we think there were several notable items to consider we.

We discussed in our year end call in January Covid support payments, the outer period, Texas waiver payment and the $3 40, BP impact from 2022, which all totaled approximately $500 million.

Speaker 4: And when you consider the 145 million payer settlement we recorded in the first quarter of this year, as we take all of that into account, we are pleased with the growth rate we've been able to achieve.

And when you consider the 145 million payer settlement, we recorded in the first quarter of this year as.

As we take all of that into account. We are pleased with the growth rate, we've been able to achieve in.

Speaker 4: In addition, our diluted earnings per share, excluding losses on sale of facilities and losses on retirement and debt, has grown 7.2% year-to-date.

In addition, our diluted earnings per share excluding losses on sale of facilities and losses on retirement of debt has grown seven 2% year to date.

Speaker 4: So I wanted to take a moment to put this quarter in some perspective.

So I wanted to take a moment to put this quarter in perspective.

Speaker 4: So with that, we look forward to your questions, and I'll turn the call over to Frank to open it up.

So with that we look forward to your questions and I'll turn the call over to Frank to open it up.

Speaker 2: Thank you, Bill. As a reminder, please limit yourself to one question so that we might get as many as possible in the queue an opportunity to ask a question. Brianna, you may now give instructions to those who would like to ask a question.

Thank you Bill as a reminder, please limit yourself to one question so that we might get as many as possible in the queue an opportunity to ask a question <unk> you may now give instructions to those who would like to ask a question.

Thank you as.

Speaker 1: Thank you. As a reminder, if you would like to ask a question at the time, please start, follow by the number one on your telephone key pass.

As a reminder, if you would like to ask a question at that time. Please star followed by the number one on your telephone keypad.

Our first question comes from Kevin Fischbeck with Bank of America. Your line is open.

Sam Hazen: We will also provide some early perspectives on the upcoming year as well as longer term thinking on growth targets.

Speaker 1: Our first question comes from Kevin Fischbeck with Bank of America. Your line is open.

Speaker 5: Great, thanks. Maybe just want to build on that last point there. The commentary about the UDATE performance being strong is...

Bill Rutherford: With that, I will turn the call to Bill for more details on the quarter's results. Great. Thank you, Sam.

Great. Thanks, So maybe just wanted to build on that last.

Point there.

Bill Rutherford: Good morning, everyone. I will provide some additional comments on our performance for the quarter. Consolidated net revenue increased 8.3% to 16.21 billion from 14.97 billion in the prior year period. So it's driven by 4.5% growth in equivalent emissions and 3.6% increase in revenue per equivalent emission. Same facility revenues grew 7.9%. The Sam mentioned those comments. The Valesco joint venture had a negative impact of approximately 100 million on the company's adjusted even out in the quarter as well on a year-to-date basis.

The commentary about the year to date performance being strong as well.

Well taken but I guess I had a lot of questions about whether there's anything unusual I guess in the performance. This year I think people are trying to figure out whether this is a good base to think about future growth or whether there's anything whether its in the volumes or the rate of the payer mix that really shouldn't be expecting to continue.

Speaker 5: to figure out whether this is a good base to think about future growth or whether there's anything, whether it's in the volumes or the rate or the payer mix that we really shouldn't be expecting to continue. So I guess is this a good base and should we think about normal growth off of this? Thanks.

So I guess, that's a good base and.

So we think about normal growth off of this thanks.

Kevin This is Sam.

Speaker 2: You know, it's our belief that demand for healthcare remains strong and will remain strong into the future. I just...

It's our belief that demand for healthcare remains strong and will remain strong into the future.

And just given the.

Speaker 3: population trends that we see in our market, the aging of the baby boomers, as well as chronic conditions.

The population trends that we see in our market the aging of the baby boomers as well as chronic conditions and though theres been a lot of concern about G. L. P. One and so forth. We think it's way too early for any of that to have an impact on demand in the near term or even the intermediate term and so from that standpoint, we're really incur.

Speaker 3: for any of that to have an impact on demand in the near term or even the intermediate term. And so from that standpoint, we're really encouraged by what we see from a demand standpoint. Our overall competitive positioning, we believe continues to be strong. It's indicated within our market share trends vis-a-vis where we were pre-pandemic. And so we're encouraged by that. We continue to have resources, we believe, to continue investing in our company appropriately in positioning our agenda with the necessary resources to accomplish our.

<unk> five what we see from a demand standpoint, our overall competitive positioning we believe continues to be strong.

It's indicated within our market share trends vis vis where we were pre pandemic.

And so we're encouraged by that we continue to have resources, we believe to continue investing in our company appropriately.

Speaker 3: in positioning our agenda with the necessary resources to accomplish our objectives. And so from our standpoint

In positioning our agenda with the necessary resources to accomplish our objectives and so from our standpoint.

Speaker 3: economies remain strong across our portfolio, and we believe that supports some of the payer mix trends that we've seen. So, we're reasonably optimistic here that the overall top line metrics that you're seeing have durability.

Economies are remained strong across our portfolio.

And we believe that supports some of the payer mix trends that we've seen so we're reasonably optimistic here that.

The overall topline metrics that youre seeing have.

Durability.

Our next question comes from a J rice with UBS. Your line is open.

Speaker 1: Our next question comes from A.J. Rice with UBS. Your line is open.

Hi, everybody.

Speaker 6: Obviously, as you went through, strong results. Obviously, the focus on this professional fee challenge.

Obviously as you went through strong results obviously the focus on this professional fee challenge I know coming out of the second quarter. You were I think taking it would step down in Q3, and Q4 and now it sounds like if anything I'm, probably stepped up a little bit.

Speaker 6: I know coming out of the second quarter, you were, I think.

Speaker 6: thinking it would step down in Q3 and Q4. Now it sounds like, if anything, it probably stepped up a little bit.

Speaker 6: I'm trying to understand what was the variance in the quarter relative to previous expectations? Was it 50 million? It sounds like even in the quarter there's some catch up from Q2, so maybe it's a.

I'm trying to understand what was the variance in the quarter relative to previous expectations was it 50 million it sounds like even in the quarter. There is some catch up from Q2, so maybe it's.

Speaker 6: a significantly bigger number as a negative. And then is the right way to think about Q4 and into next year, a $50 million quarterly run rate that you're assuming just continues. And therefore, you've got to pick up in 24, one more, 50 million adverse comparison. Hopefully, that makes sense. And if I could squeeze in just thinking about this quarter.

A significantly bigger number.

As a negative and then is the right way to think about Q4 and into next year of $50 million quarterly run rate that youre, assuming just continues and therefore, you've got a pickup in 'twenty four one more 50 million adverse comparison, hopefully that makes sense and if I could squeeze in just thinking about this quarter.

Speaker 6: the DPP payment from Florida, was that in line with what you thought or was the net benefit a little better?

The DPP payment from Florida was that in line with what you thought or was that a net benefit a little better.

Speaker 4: Yeah, AJ, this is Bill. Let me try to take those. So let's, you know, talk about Valesco first and isolate that from our pro fees. I would tell you our professional fee expense and on Valesco is coming in kind of what we expected. I mean, as I said, our rate of growth in the third quarter slowed from the rate of growth from the second quarter, although we continue to see subsidy requests and we've got efforts to mitigate those.

Yes, a J. This is bill let me try to take those so let's.

Talk about let's go first to isolate that from a pro fees I would tell you our professional fee expense. The non velazco is coming in kind of what we expected I mean as I said our rate of growth in the third quarter slowed from the rate of growth from the second quarter. Although we should continue to see subsidy requests and we've got efforts to mitigate those.

Speaker 4: You know, there's no doubt the issue for us in the quarter was the Valesco operations. As I mentioned, we're not clearing as much revenue that we anticipated.

There's no doubt the issue for us in the quarter was the velazco operations as I mentioned, we're not clearing as much revenue that we anticipated and I think it's best you have to look at that on a year to date basis, because we did make some revisions as we started to see claims being paid in.

Speaker 4: And I think it's best you have to look at that on a year-to-day basis.

Speaker 4: Because we did make some revisions as we started to see claims being paid.

Speaker 4: in the third quarter. And we believe, as I mentioned, it's probably about $50 million, a quarter run rate for Bolesco. We have a number of efforts underway.

In the third quarter.

And we believe as I mentioned, it's probably about $50 million a quarter run rate for <unk>, we have a number of efforts underway to mitigate this that I spoke of as well, but in the short run that sense, what we're sizing of that and you're right. When you look at next year, we'll have three quarters of this year versus for next year, but.

Speaker 4: to mitigate this that I spoke of as well. But in a short run, that's what we're sizing it at. And you're right, when you look at next year, we'll have three quarters of it this year versus four next year. But we'll give you more of our thinking when we talk about 24 later on. But you've sizes about.

We'll give you more of our state came when we talked about 24.

Later on but <unk> size is about right.

Speaker 2: The Florida DPP was slightly above what we expected, but we had other programs, AJ, that were less than we expected. So, you got to look at it in the overall context of the revenue mix of the company, and I don't think it's that discreet necessarily to just focus on one element of it, but it was slightly above.

Anything on the Florida more as a Florida DPP was slightly above what we expected, but we had other programs a J that were less than we expected. So you got to look at it in the overall context of the revenue mix of the company and I don't think its that discrete necessarily to just focus on one element of it so but it was slight.

Above.

Okay, alright, thanks, so much.

Okay.

Our next question comes from Ben <unk> with RBC capital markets. Your line is open.

Speaker 1: Our next question comes from Ben Hendrix with RBC Capital Markets. Your line is open.

Speaker 7: Thank you very much. Excluding Florida DPP from both quarters, the EBITDA margin appears to have declined by about 180 basis points year over year, suggesting close to $300 million total headwind. If Valesco is 100 of that, how would you characterize the remaining 200 million or so that brings us short of the 3Q2022 margin? You mentioned the higher subsidy requests and maybe DPP in other quarters.

Thank you very much excluding Florida DPP from both quarters EBITDA margin appears to have declined by about 180 basis points year over year, suggesting close to $300 million total headwind if a let's go with 100 of that how would you characterize the remaining $200 million or so that brings us short of the <unk> 2022 margin.

And you mentioned the higher subsidy request and may be DPP in other quarters.

Speaker 7: or in other regions other than Florida, but is there anything else to call out there that would weigh on margin? Thanks.

In other regions other than Florida, but is there anything else to call out there that would weigh on margin. Thanks.

Bill Rutherford: A portion of the third quarter results was due to revising our revenue estimates from the second quarter as we began to see claims being paid. This result was not what we were expecting as we are experiencing revenue shortfalls compared to what we originally bought. The Valesco operating results had a negative impact on adjusted EBITDA margins of approximately 80 basis points in the quarter, and 40 basis points on a year-to-day basis. Going forward, we anticipate the loss from this venture to approximate $50 million in quarter.

Speaker 4: Yeah, Ben, this is Bill, you know, isolate the margin really that other operating line is where you see we've lost some margin for on the as reported quarter.

Yes, Ben this is bill.

Isolate the margin really that other operating lines, where you're seeing we've lost some margin for on the as reported quarter Velazco was about 50 basis points of that when you adjust for velazco kind of the pro fee growth was about 40 basis points and the balance was really due to the increase of the supplemental expenses that we recorded in the quarter Rep.

Speaker 4: Valesco was about 50 basis points of that when you adjust for Valesco.

Speaker 4: kind of the pro-fee growth was about 40 basis points and the balance was really due to the the increase of the supplemental expenses that we recorded in the quarter relative to Florida DPP and other programs. So you know the way I think about it if you exclude Valesco, other operating was off about 120 basis points.

Two Florida, DTP and other programs. So the way I think about it if you exclude velazco other operating was off about 120 basis points.

Speaker 4: you know, 40 to 50 was the pro-fee effect, and the balance was just the increase of the supplemental expenses that we recognized in the quarter.

<unk> was the pro fee effects and the balance was just the increase of the supplemental expenses that we recognized in the quarter labor was strong when I talked about is supply also extreme so it's really isolated to those two issues the velazco.

Speaker 4: Labor was strong when I talked about it, supply costs looked strong, so it's really isolated to those two issues, the Bolesco and supplemental payment.

<unk> payments as much as anything I think bill just to add a point to that our same facility operating margins, which did include those elements Bill spoke to we are actually in line with our internal expectations.

Speaker 2: I think Bill, just to add a point to that, our same facility operating margin, which did include those elements Bill spoke to, were actually in line with our internal expectations. So I think from the standpoint of a little bit of pressure, we anticipated some pressure, but it was reflected again in the overall performance of our same facility. So the most of this lands on the Valesco challenge with respect to the revenue in the Yarnings associated So

So I think from the standpoint of a little bit of pressure, we anticipated some pressure.

Bill Rutherford: We are working diligently on multiple efforts to address these results, including making program adjustments for necessary, deploying efforts to reduce the cost structure, and working with tares for more appropriate reimbursement. As we have discussed previously, we have seen subsidy requests, increase from contracted hospital-based providers. Professional fee expense for contracted providers have grown approximately 20% on a year-to-day basis, although we are encouraged the rate of growth of these payments slowed in the third quarter as compared to the second quarter. In addition to the mitigation strategies discussed above, we continue to assess other operational adjustments within our cost resiliency programs to help offset some of the impact from these issues.

But it was reflected again in the overall performance of our same facility. So the most of this lands on the Velazco challenge with respect to the revenue and the earnings associated with that venture.

Bill Rutherford: Let me speak to some cash flow and capital allocation metrics. Our cash flow from operations was $2.48 billion in the quarter. Capital spending was $1.15 billion. We paid about 160 million of dividends and repurchased 1.14 billion of our stock during the quarter. Our debt to adjusted EBITDA leverage ratio remains near the low end of our state and range of three to four times.

Bill Rutherford: As noted in our release this morning, we are updating our full year 2023 guidance as follows. We expect revenues to range between $63.5 billion and $64.5 billion. We expect net income, the tribunal, the HCA health care to range between $4.94 billion and $5.13 billion. We expect adjusted EBITDA to range between $12.3 billion and $12.6 billion and diluted earnings per share to range between $17.80 and $18.50. We expect capital spending to approximately $4.7 billion for the year.

Thank you.

Bill Rutherford: Before we open it up for questions, I'd like to provide some commentary on our year-to-date performance. We believe our core business metrics remain solid. Year-to-date, our same facility emissions have grown 3.3%. Equivalent emissions have grown 5.1%. Non-COVID emissions have grown 7.5% over prior year on a year-to-day basis. Same facility ER visits have grown 5.7% in-patient surgeries have grown 2.3% and out-patient surgeries are up 3.1% all on a year-to-day basis. These volumetrics of the out-paced are original expectations going into the year.

Speaker 1: Our next question is from Gary Taylor with TD Cowliss.

Bill Rutherford: Our pair mixed trends remain favorable. Same facility managed care emissions increase 5.3% and Medicare emissions increase 4.3% on a year-to-day basis. Medicaid and uninsured emissions are slightly down in the prior year on a year-to-day basis. Our case mix index has held an increase slightly over prior year and our same facility revenues have increased 6.4% on a year-to-day basis. Cuffe, John Fischbeck, John Fischbeck, John Fischbeck, John Fischbeck, John Fischbeck, John Fischbeck, John Fischbeck, John Fischbeck, John Fischbeck, John Fischbeck, John Fischbeck, John Fischbeck,[inaudible] John Fischbeck, John Fischbeck, John Fischbeck, John Fischbeck, John Fischbeck, John Fischbeck, Economy remains strong across our portfolio, and we believe that supports some of the epidemics trends that we've seen. So we're reasonably optimistic here that the overall top-line metrics that you're seeing have durability.

Speaker 8: Hi, good morning. One question and one clarification. Just on a clarification, I think we'll see this in the queue, but I think professional fees were

Hi, good morning.

One question and one clarification just on the clarification I think I think we'll see this in the Q, but I think professional fees were.

A.J. Rice: Our next question comes from A.J. Rice with UBS. Your line is open. Hi, everybody. Obviously, as you went through, strong results. Obviously, the focus on this professional fee challenge. I know coming out of the second quarter, you were I think thinking it would step down in Q3 and Q4. Now it sounds like if anything, it probably stepped up a little bit. I'm trying to understand what was the variance in the quarter relative to previous expectations?

A.J. Rice: Was it 50 million? It sounds like even in the quarter, there's some catch-up from Q2. So maybe it's a significantly bigger number as a negative. And then is the right way to think about Q4 and into next year, a 50 million dollar quarterly run rate that you're assuming just continues. And therefore, you've got to pick up in 24, one more 50 million adverse comparison. Hopefully, that makes sense. And if I could squeeze in just thinking about this quarter, the DPP payment from Florida, was that in line with what you thought or was that the net benefit a little better? Yeah, A.J. This has been a long time to take those.

Speaker 8: 22% of other opX and the 1Q, 24% and the 2Q just wondering.

22% of other Opex and <unk>, 24% in the.

<unk> just wondering.

What that number was for the.

Speaker 8: Third quarter sounds like it maybe slowed a little bit or didn't change a lot and then my my real question is really was about

Third quarter it sounds it sounds like it may be slowing a little bit or didn't change a lot and then my real question really was about hitting.

Speaker 8: hitting into 24. I mean, we see a lot of volume strength. I mean, if we look at the stat comps, year-to-year admissions, adjusted admissions, ER, all accelerated.

Heading into 'twenty four.

I mean, I see a lot of volume strength I mean, if we look at the stack comps year to year admissions adjusted admissions ER all accelerated.

Speaker 8: you know, pretty nicely. I'm just wondering how you're thinking about carrying that volume strength into, you know, 24 and presumably the guy, and you'll give us in a few weeks at Jens.

Pretty nicely I'm, just wondering how youre thinking about carrying that that volume strength into 'twenty.

<unk> 24, and presumably the guidance Youll give us a few weeks at Investor day.

Well, Gary to Sam and Bill can jump in here.

Speaker 3: Well, Gary, Sam and Bill can jump in here. We believe again that our core business, our hospital centric core business is performing well. I mean, our volumes were broad based. Every division in our company had admission growth, had adjusted admission growth. Every service category in our

We believe again that our core business are hospital centric core business is performing well I mean, our volumes were broad based every division in our company had admission growth had adjusted admission growth every service category and arch business off.

Bill Rutherford: Talk about Valesco first and isolate that from a pro fees. I would tell you, our professional fee expense and on Valesco is coming in kind of what we expected. I mean, as I said, our rate of growth in the third quarter slowed from the rate of growth from the second quarter, although we continue to see subsidy requests and we've got efforts to mitigate those. There's no doubt the issue for us in the quarter was the Valesco operations as I mentioned.

Speaker 4: business offerings had growth except for OB or obstetrics volumes mainly births were down slightly Pediatric was down slightly and our behavioral was down because we made some capacity adjustments But not because demand is shrinking in behavioral just because we needed capacity that we felt might be more productive So across geography and across service lines

<unk> had growth except for Ob, our obstetrics volume, mainly births were down slightly pediatric was down slightly and our behavioral was down because we made some capacity adjustments not because demand is shrinking in behavioral just because we needed capacity that we felt might be more productive.

Bill Rutherford: We're not clearing as much revenue that we anticipated. And I think it's best you have to look at that on a year-to-day basis, because we did make some revisions as we started to see claims being paid in the third quarter. And we believe, as I mentioned, it's probably about a 50 million dollar, a quarter run rate for Valesco. We have a number of efforts underway to mitigate this that I spoke of as well.

Bill Rutherford: But in a short run, that's what we're sizing it at. And you're right, when you look at next year, we'll have three quarters of it this year versus four next year. But we'll give you more of our thinking when we talk about 24 later on, but you've sizing it about. Anything on the floor? The floor to DPP was slightly involved, what we expected, but we had other programs, AJ, that were left and we expected.

Bill Rutherford: So you got to look at it in the overall context of the revenue mix of the company. And I don't think it's that discrete necessarily to just focus on one element of it. But what's slightly above? Okay, all right. Thanks so much.

So across geography and across service lines really solid performance on the labor front, we were investing in the quarter in our labor agenda at the same time as making improvements and what I mean by that we have invested heavily in new graduate training programs we have.

Bill Rutherford: Our next question comes from Ben Hendrick with RBC Capital Markets. Your line is... Thank you very much. Excluding Florida DPP from both quarters, Eva Dow Margin appears to have declined by about 180 basis points here over the years, suggesting close to $300 million total headwind. If Filesco was a hundred of that, how would you characterize the remaining $200 million or so to bring this short of the 3Q22 Margin? You mentioned the higher subsidy requests and maybe DPP and other quarters or in other regions other than Florida, but is there anything else to call out?

Speaker 3: really solid performance on the labor front. We were investing in the quarter in our labor agenda at the same time as making improvements and what I mean by that. We have invested heavily in new graduate training programs. We've done that throughout the year. That actually created a little bit of a headwind in the quarter and throughout the year for us. We think that will help us as we push into.

Done that throughout the year that actually created a little bit of a headwind in the quarter and throughout the year for US we think that will help us as we push into the fourth quarter and on into 'twenty, four with making adjustments to our labor agenda, we've invested in our Galen college of nursing facilities as well as our other clinic.

Speaker 3: the fourth quarter and on into 24, with making adjustments to our labor agenda. We've invested in our gay one college of nursing facilities as well as our other clinical education. So we're investing in our agenda for the long term prospects that all of these initiatives represent.

Bill Rutherford: There that would weigh on Margin? Thanks. Yeah, Ben, this is Bill. You know, I salute the Margin really that other operating line is where you see we've lost a margin for on the us reported quarter. Valesco was about 50 basis points of that when you adjust for Valesco. Kind of the pro fee growth was about 40 basis points and the balance was really due to the increase of the supplemental expenses that we recorded in the quarter relative to the Florida DPP and other programs.

Bill Rutherford: So, you know, the way I think about it, if you exclude Valesco, other operating was off about 120 basis points, you know, 40 to 50 was the pro fee effect and the balance was just the increase of the supplemental expenses that we recognized in the quarter. Labor was strong when I talked about it, supply, fossil exchange. So, it's really isolated to those two issues of Valesco and supplemental payments as much as anything.

Well education, so we're investing in our agenda for the long term prospects that all of these initiatives represent bill spoke to the revenue yield I think the revenue yield from acuity payer mix and pricing is positive.

Speaker 3: Bill spoke to the revenue yield. I think the revenue yield from acuity, payer mix, and pricing is positive. So, I mentioned that our same store's results were in line with our expectation. I think the second thing that's important here, Gary, is that

Bill Rutherford: I think Bill, just to add a point to that, are same facility operating margin, which didn't include those elements Bill spoke to were actually in line with our internal expectations. So, I think from the standpoint of a little bit of pressure, we anticipated some pressure, but it was reflected again in the overall performance of our same facility.

So I mentioned that our same stores results were in line with our expectation I think the second thing that's important here Gary is that.

Bill Rutherford: So, the most of this lands on the Valesco challenge with respect to the revenue and the earnings associated with that venture.

Speaker 3: We pride ourselves on making adjustments if we have a variance, and I am confident in our teams, I'm confident in who we are as an organization, and we've proven it over time that we can make adjustments and find solutions to really complex problems.

We pride ourselves on making adjustments, if we have a variance and I am confident in our teams I am confident in who we are as an organization and we've proven it over time that we can make adjustments and find solutions to really complex problems and so we've got one it's not what we anticipated but.

Gary Taylor: Thank you. Our next question is from Gary Taylor with TD Cowan. Your line is open.

Speaker 3: And so we've got one, it's not what we anticipated.

Bill Rutherford: Thank you, morning. One question and one clarification. Just on a clarification, I think we'll see this in the queue, but I think professional fees were 22% of other OPEX and the one queue, 24% and the two queue, just wondering what that number was for the... Third quarter, sounds like it maybe slowed a little bit or didn't change a lot, and then my real question is really about hitting into 24. I mean, we see a lot of volume strength.

Speaker 3: But again, we had the necessary...

Again, we had.

Necessary.

Speaker 3: requirements to consolidate a business that was struggling and somewhat distressed, but very important to our offerings in the community.

Requirements to consolidate a business that was struggling and somewhat distressed, but very important to our offerings in the community. So I think as we work through it as we gain a better understanding of it we will be able to make adjustments and get the proper reimbursement we need from the payers for the services that we're now pre.

Speaker 3: So I think as we work through it as we gain a better understanding of it, we will be able to make adjustments and get the proper reimbursement we need from the payers for the services that we're now providing. And so, you know, fortunately, our balance sheet remains strong as Bill alluded to and our ability to invest in our agenda.

<unk> and so Fortunately our balance sheet remains strong as bill alluded to and our ability to invest in our agenda.

Bill Rutherford: I mean, if we look at the stat comps, year-to-year admissions, adjusted admissions, ER all accelerated pretty nicely. I'm just wondering how you're thinking about carrying that volume strength into 24 and presumably the guy until you'll give us in a few weeks at that investor day. Well, Gary the Sam and Bill, to jump in here, we believe again that our core business, our hospital centric core business is performing well. I mean, our volumes were broad-based.

Speaker 3: to maintain our positioning and execute on our agenda remains strong. So when I pull up and provide some context here, I'm encouraged by what I see in the quarter and for the year and what that pertains for the company as we push into the future.

To maintain.

Our positioning and execute on our agenda remains strong so when I pull up and provide some context here.

I'm encouraged by what I see in the quarter and for the year and what that portends for the company as we push into the future.

Speaker 4: And Gary, this is Bill on your clarification. Prophies as a percent of other operating was just other 24% in Q3, similar to what it was in Q2.

And Gary This is bill on your clarification CRO fees as a percent of other operating was just under 24% in Q3 similar to what it was in Q2.

Yeah.

Thank you.

Okay.

Okay.

Speaker 1: Our next question comes from Anne Hines with Mizzouo.

Our next question comes from Ann Hynes with Mizuho. Your line is open.

Bill Rutherford: Every division in our company had admission growth, had adjusted admission growth, every service category in our business offerings, had growth except for OB, our obstetrics volumes mainly births were down slightly. Pediatric was down slightly, and our behavioral was down because we made some capacity adjustments, not because demand is shrinking in behavioral, just because we needed capacity that we felt might be more productive. So across geography and across service lines, really solid performance.

Hi, good morning.

I know you don't want to provide 2020 guidance now but is there any major headwinds in tail winds that you want to call out before heading into the event.

And to that degree I know, Nevada is introducing the <unk> program do you have any sense on what that incremental benefit will be next year. Thanks.

Speaker 4: And this bill, yeah, the only one we'll call out, as I mentioned in my comments, is the payer settlement we recorded in the first quarter. Other than that, we'll give you our full commentary later on 2024. And on the bottom, it's still too early. We're waiting for the approval level. And when we discuss 2024, we'll update you on what our thinking is in the estimate.

And the spill.

One we will call out as I mentioned in my comments is the payer settlement, we recorded in the first quarter other than that we will give you our full commentary later on 2024.

And.

It's still too early we're waiting for the approval level and when we discuss 'twenty four we will update you on what we're thinking is in the and the estimated values.

Bill Rutherford: On the labor front, we were investing in the quarter in our labor agenda at the same time as making improvements, and what I mean by that, we have invested heavily in new graduate training programs. We've done that throughout the year, that actually created a little bit of a headwind in the quarter and throughout the year for us. We think that will help us as we push into the fourth quarter and on into 24 with making adjustments to our labor agenda.

Alright. Thanks.

Okay.

Our next question comes from Whit Mayo with Leerink partners. Your line is open.

Speaker 1: Our next question comes from Whit Mayo with Lerink Partners. Your line is open. Hey, thanks. Good morning.

Hey, Thanks, Good morning, Sam can you maybe just go back and elaborate on the E. R. Revitalization program, how <unk> plays into that and exactly.

Speaker 9: We are revitalization program, how the Lesko plays into that and exactly where you are in the evolution.

Bill Rutherford: We've invested in our gay one college of nursing facilities as well as our other clinical education, so we're investing in our agenda for the long-term prospects that all of these initiatives represent. Bill spoke to the revenue yield. I think the revenue yield from acuity, payermex, and pricing is positive, so I mentioned that our same stores results were in line with our expectation. I think the second thing that's important here, Gary, is that... We pride ourselves on making adjustments if we have a variance, and I am confident in our teams, I'm confident in who we are as an organization, and we've proven it over time that we can make adjustments and find solutions to really complex problems, and so we've got one, it's not what we anticipated, but again, we had the necessary requirements to consolidate a business that was struggling and somewhat distressed, but very important to our offerings in the community.

Where you are in the evolution of that program and any tangible progress you expect to see in 2024.

So our ER revitalization program was initiated maybe a year ago nine months ago, when remember the exact point.

Speaker 3: So our ER re-bautilization program was initiated maybe a year ago, nine months ago without remember the exact point. We determined...

We determined that a couple of things one demand for emergency room services continues to be.

Speaker 3: that a couple of things. One, demand for emergency room services continues to be

Speaker 3: robust. It was actually more resilient coming out of the pandemic than we had anticipated.

Robust it was actually more resilient coming out of the pandemic that we had anticipated.

Speaker 3: So we felt we needed to re-enter jobs, our operations, because we had had some turnover in our leadership, and we had a business opportunity associated with demand.

So we felt we needed to re energize our operations because we had had some turnover in our leadership and we had a business opportunity associated with demand. So our teams came together.

Speaker 3: So our teams came together and went about sort of revitalizing for lack of a better term, our basic operations with respect to our emergency rooms. We have proven standards and processes over time that we think create a really good experience and a positive outcome for our patients.

And went about disordered revitalizing for lack of a better term.

Our basic operations with respect to our emergency rooms, we have proven standards and processes over time that we think create a really good experience in a positive outcome for our patients.

Bill Rutherford: So I think as we work through it, as we gain a better understanding of it, we will be able to make adjustments and get the proper reimbursement we need from the payers for the services that we're now providing. And so, you know, fortunately our balance sheet remains strong as Bill alluded to, and our ability to invest in our agenda to maintain our positioning and execute on our agenda remains strong. So when I pull up and provide some context here, I'm encouraged by what I see in the quarter and for the year, and what that pertains for the company as we push into the future. And Gary, this is Bill on your clarification.

Speaker 3: And so we wanted to retrain a number of our new leaders, including some of our physician leaders, through Velletsco and others, into these standards and these processes. And the early results of our program are really positive. Our patient satisfaction is up four or five points from when we began the program. Our true foot continues to improve. I think we're seeing an ER patient within nine or 10 minutes with a clinician. As soon as they present to our door, our true foot times with respect to discharging, our patients has improved as well as those who get admitted. We're able to get them onto the floors more efficiently than we were before. We continue to believe we have opportunities to strengthen that program. And so we're expanding the reach of our training. Again, that will include our physician leadership both in Velletsco as well as other hospital providers. We look at all of these doctors that we have.

And so we wanted to retrain, a number of our new leaders, including some of our physician leaders through <unk> and others into the standards in these processes and the early results of our program are really positive our patient satisfaction is up four five points from when we began the program our throughput continues to.

Bill Rutherford: Prophees is a percent of other offerings, it was just under 24% in Q3, similar to what it was in Q2.

Unknown Attendee: Thank you.

<unk> I think we're seeing.

And ER patient within nine or 10 minutes with us with the clinician as soon as they present to our door our throughput times with respect to discharging our patients has improved as well as those who get admitted were able to get them onto the floors more efficiently than we were before we continue.

To believe we have opportunities to strengthen that program and so we're expanding the reach of our training again that will include our physician leadership, both in velazco as well as other a hospital provider contractors that we have and we think this will play and well a wet into our investments that we are.

Ann Hynes: Our next question comes from Anne Hines with Mizzou, your line is open. Hi, good morning. I know you don't want to provide 2024 grants now, but is there any major headwinds and tailwinds that you want to call out before heading into the event? And to that degree, I know Nevada is introducing a UPL program. Do you have any sense on what that increment of benefit will be next year? Thanks.

Speaker 3: And we think this will play in well with into our investments that we're making into our emergency room platform, both hospital based as well as our freestanding emergency room.

Making into our emergency room platform, both hospital based as well as our freestanding emergency rooms, which continue to perform at an even higher level. So all of that to say is it's yielded.

Speaker 3: which continue to perform at an even higher level. So all of that to say is it's yielded volume growth, it's yielded.

Bill Rutherford: And this bill, yeah, there's only one will pull out as a mission of my comments is the payers album that we recorded in the first quarter other than that. We'll give you our full commentary later on 2024. And on the bottom, it's still too early, we're waiting for the approval level, and when we discuss 24, we'll update you on what we're thinking is in the estimated eyes. All right, thanks.

Volume growth, it's yielded patient throughput improvement and most importantly, it's yielded patient satisfaction increases that we are encouraged by we will continue to hopefully achieve.

Speaker 3: patient throughput improvement, and most importantly, it's yielded patient satisfaction increases that we are encouraged by, and we will continue to hopefully achieve.

Thanks.

Our next question comes from Brian <unk> with Jefferies. Your line is open hey, good.

Speaker 1: Our next question comes from Brian Tancelit with Jeffries. Your line is open.

Speaker 2: Hey, good morning guys. Sam, it seems like you have an idea of what needs to be done in Filesco, but maybe going down to the nuts and bolts of it, as we think about the fact that you employ these docs now, it sounds like there's more of a revenue issue. So is that just a matter of tacking them onto the HCA contract or what needs to be done there? And maybe just her bill kind of related to this, if you can give us the contribution of Filesco to revenue per e CA, what has to be done, and maybe you have any other benefits for combination while assuring, also, we have a very serious

Good morning, guys.

Whit Mayo: Our next question comes from Whit Mayo with Learing Partners, your line is open. Hey, thanks.

Sam It seems like you have an idea of what needs to be done and for less COVID-19, maybe going down to the nuts and bolts of it as we think about the fact that you employ these docs now it sounds like there is more of a revenue issue. So is that just a matter of tacking them onto the HCA contract or.

Sam Hazen: Sam, can you maybe just go back and elaborate on the ER revitalization program, how the less go plays into that and exactly where you are in the evolution of that program and any tangible progress that you expect to see in 2024. Thanks. So our ER revitalization program was initiated maybe a year ago, nine months ago, without remember the exact point. We determined that a couple of things won demand for emergency brewing services continues to be robust.

What needs to be done there maybe just for bill it's kind of related to this if you can give us the contribution of the less co two revenue per same store admit thanks.

Okay.

Speaker 3: Let me speak to how we're approaching it. Again, we're learning as we go. I forgot to, I think it was like 5,000 physicians across how many programs, 200 different programs, a really large scale business that again, we felt we were at a point where we had to make a decision and I am.

Let me speak to how we're approaching it again, we're learning as we go.

I forgot data I think it was like 5000 physicians across how many 200 different program or <unk>.

Really large scale business that again, we felt we were.

Sam Hazen: It was actually more resilient coming out of the pandemic than we had anticipated. So we felt we needed to reenergize our operations because we had had some turnover in our leadership and we had business opportunity associated with demand. So our teams came together and went about sort of revitalizing for lack of a better term, our basic operations with respect to our emergency rooms. We have proven standards and processes over time that we think create a really good experience and a positive outcome for our patients, and so we wanted to retrain a number of our new leaders, including some of our physician leaders, through Bulletsco and others, into these standards and these processes.

At a point, where we had to make a decision and I'm comfortable that we made the right decision for the company long term so as we learn more and more about this business. We think there are going to be opportunities on how we allocate the staffing underneath this business, obviously, our emergency rooms, or 24 seven to $3 65.

Speaker 3: comfortable that we made the right decision for the company long term.

Speaker 3: So as we learn more and more about this business, we think there are going to be opportunities on how we allocate the staffing underneath this business.

Speaker 3: Obviously, our emergency rooms are 24, 7, 365 won't necessarily change the staffing per se, but there could be complimentary approaches to that. There are overhead opportunities. We think over time, we will be able to get to, but you're right. Ultimately, we, we will need to get paid for these services appropriately. We do have some contracts today. We feel like those will have to be adjusted in the future and we're.

We won't necessarily change that staffing per se, but there could be complementary approaches to that there are overhead opportunities. We think over time, we will be able to get to but you're right ultimately.

We will need to get paid for these services appropriately we do have some contracts today.

We feel like those will have to be adjusted in the future and we are <unk>.

Sam Hazen: And the early results of our program are really positive. Our patient satisfaction is up four or five points, not from when we began the program. Our throughput continues to improve. I think we're seeing an ER patient within nine or ten minutes with a clinician, as soon as they present to our door, our throughput times with respect to discharging, our patients has improved as well as those who get admitted, we're able to get them onto the floors more efficiently than we were before.

Speaker 3: confident that we can achieve appropriate reimbursement underneath these programs and get us to where it's an appropriate

Confident that we can achieve appropriate reimbursement underneath these programs and get us to where.

It's an appropriate.

Service, that's reimbursed reasonably as we get through it but.

Speaker 3: service that's reimbursed reasonably as we get through it. But you know, that's not happening immediately and that's part of the challenge. And again, you know, we need anesthesiologist, we need emergency room positions, we need hospitals and the ordinances to deliver the volume and maintain positioning. And so that rationale went into our decision making. And so now we have to

It's not happening immediately in that part of the challenge.

Again.

We need anesthesiologists, we need emergency room physicians, we need hospitals in order to deliver the volume and maintain positioning and so that rationale went into our decision, making and so now we have to.

Sam Hazen: We continue to believe we have opportunities to strengthen that program. And so we're expanding the reach of our training. Again, that will include our physician leadership, both in Bulletsco as well as other hospital provider contractors that we have. And we think this will play in, well, a wit into our investments that we're making into our emergency room, platform, both hospital-based as well as our freestanding emergency rooms, which continue to perform at an even higher level. So all of that to say is it's yielded volume growth, it's yielded patient throughput improvement, and most importantly, it's yielded patient satisfaction increases that we are encouraged by. We will continue to hopefully achieve. Thanks.

Speaker 3: you know rationalize the operations and I think those are the areas that we're going to focus on and we believe In a reasonable period of time we'll make progress

Rationalize the operations and I think those are the areas that we're going to focus on.

We believe.

In a reasonable period of time, we will make progress on that.

Brian to your revenue numbers Velazco revenue just under $400 million year to date about $3 80 on a year to date basis.

Speaker 4: Brian , to your revenue numbers, Valesco revenue just under 400 million a year today and about 380 on a year-to-day basis.

Yeah.

Our next question comes from Stephen Baxter with Wells Fargo. Your line is open.

Speaker 1: Our next question comes from Stephen Baxter with Wells Fargo. Your line is open.

Speaker 10: Yeah, hi, thanks. I appreciate all the commentary on the professional fees and the growth slowing in the third quarter some. It does still seem like a pretty challenging environment out there for those firms. And as we do some checks, hearing anesthesia in particular remains a pressure point. Is this something that you think you can manage closer to flat going forward? Or is this just becoming part of the new norm around something that you'll need to offset as you think about the puts and takes for 2025?

Yeah, Hi, Thanks, I appreciate all the commentary on the professional fees and the growth slowdown in the third quarter, some industrial seemed like a pretty challenging environment out there for those firms.

Some shacks hearing anesthesia in particular remains a pressure point is there something that you think you can manage closer to flat going forward or is it just becoming part of the new norm around something that youll need to offset as you think about the puts and takes for 2024. Thank you.

Sam Hazen: Our next question comes from Brian Tanklet with Jeffries. Your line is open. Hey, good morning, guys. Sam, it seems like you have an idea of what needs to be done in Bulletsco, but maybe going down to the nuts and bolts of it, as we think about, you know, the fact that you employ these docs now, it sounds like there's more of a revenue issue. So is that just a matter of tacking them onto the HCA contract or, you know, what needs to be done there? And maybe just for Bill, kind of related to this, if you can give us the contribution of the let's go to revenue per same-store admin. Thanks.

Speaker 4: Well, it's hard to call. We do believe the rate of growth too slow going forward compared to what we've seen this year. As I said, we're working diligently.

Well, it's hard to call. We do believe the rate of growth to slow going forward compared to what we've seen this year as I said, we're working diligently on multiple work efforts anomaly in the <unk>, but working with our contracted providers as well. So again I think we will see slowing growth.

Speaker 4: on multiple work efforts, and not only in the, in the last go, but working with our contracted providers as well. So again, I think we'll see slowing growth. We think we've dealt with some of the more acute issues out there, but the subsequent questions are still there, but remains to throw it, and we'll continue to do that as we continue to go on. We'll update you on our progress, but we're working diligently to affect and slow that rate of growth and its impact.

I think we've dealt with some of the more acute issues out there, but the subsidy requests are still there, but we're managing through it and we will continue that as we continue to go on we will update you on our progress, but we're working diligently to affect and slow that rate of growth and its impact on us.

Sam Hazen: Let me speak to how we're approaching it. Again, we're learning as we go. I forgot to say, I think it was like 5,000 physicians across how many programs? 200 different programs, a really large scale business that again, we felt we were at a point where we had to make a decision and I am comfortable that we made the right decision for the company long-term. So as we learn more and more about this business, we think there are going to be opportunities on how we allocate the staffing underneath this business.

Speaker 3: I think Bill alluded to this in his commentary earlier about, you know, the pressures we saw with contract labor, nurse shortages, capacity management.

I think bill alluded to this in his commentary earlier about the pressures we saw with contract labor nurse shortages capacity Management Award.

Speaker 3: And I would submit that we've worked our way through that reasonably well. And we still believe there are opportunities for us to make strides forward on that agenda.

And I would submit that we've worked our way through that reasonably well and we still believe there are opportunities for us to make strides forward on that agenda.

Sam Hazen: Obviously, our emergency rooms are 24, 7, 3, 65. We won't necessarily change the staffing per se, but there could be complimentary approaches to that. There are overhead opportunities we think over time, we will be able to get to, but you're right. Ultimately, we will need to get paid for these services appropriately. We do have some contracts today. We feel like those will have to be adjusted in the future and we are confident that we can achieve appropriate reimbursement underneath these programs and get us to where.., is an appropriate service that's reimbursed reasonably as we get through it.

Speaker 3: We're going to learn from that how we manage that timely, aggressively, and responsibly, and I think apply those same learnings to the situation we have here and get to an answer that makes sense for the company. And so, I'm confident, as I've said, that we have the mindset and the wherewithal to work through these and get us to a reasonable solution.

We're going to learn from that how we managed that.

Timely.

Brett Sibley and responsibly and I think apply those same learnings to the situation, we have here and get to an answer.

That makes sense for the company and so I'm confident as I've said that we have the mindset and the wherewithal to work through these and get us to a reasonable solution.

Speaker 9: Our next question comes from Peto Tickering with Deutsche Bank. Your line is open. Hey, good morning, guys. There are a lot of moving parts in the margin this quarter, but if you normalize for the Florida DTP and the 59

Our next question comes from Peter Chickering with Deutsche Bank. Your line is open.

Hey, good morning, guys. There are a lot of moving parts in the margin this quarter, but if we normalize for Florida, DTP and $50 million from prior periods of Wesco.

Sam Hazen: But you know, that's just not happening immediately. And that's part of the challenge. And again, you know, we, we, we need anesthesiologist, we need emergency room positions. We need hospitals, an order to deliver the volume and maintain positioning. And so that rationale went into our decision making. And so now we have to rationalize the operations. And I think those are the areas that were going to focus on. And we believe in a reasonable period of time, we'll, we'll make progress on that.

And look at the implied fourth quarter margin ramp.

Speaker 9: It looks higher than normal sequential margin. Proof and think fourth quarter, so we can just, or what are the key drivers to get to that? Why?

It looks higher than normal sequential margin improvement in the fourth quarter. Some help bridge us through what are the key drivers to get to that implied guidance for margins in <unk>.

Speaker 4: Yeah, you know, you know, historically our fourth quarter is our best margin performance quarter. On the obviously this quarter was impacted a little higher in the normal because of the less-goating basis points I talked about and the Florida DPP.

Yes.

Historically, our fourth quarter is our best margin performance quarter on there. Obviously this quarter was impacted a little higher than normal because of the belasco 80 basis points that I talked about in the Florida DPP. Our same facility margins were over 20%. So we think in our guidance.

Speaker 4: Our state facility margins were, you know, over 20%. So we think, you know, our guidance is reasonable based on our outlook right now. But I think it's a combination of maybe not having some of the immediate pressures we had this quarter and then the expectation that the fourth quarter tends to trend stronger than than our.

Bill Rutherford: Brian, to your revenue numbers, well, let's go revenue, just under 400 million a year today, about 380 on a year-to-day basis.

Is reasonable based on our outlook right now, but I think it's a combination of maybe not having some of the the immediate pressures. We had this quarter and then the expectation that the fourth quarter tends to trend.

Steven Baxter: Our next question comes from Steven Baxter with Wells Fargo. Your line is open. Yeah. Hi. Thanks. I appreciate all the commentary on the professional fees and the growths well in in the third quarter. Some, it does still seem like a pretty challenging environment out there for those firms. And, you know, as we do some checks hearing anesthesia in particular remains a pressure point.

Stronger than our average.

Okay.

Alright, Thanks, a lot.

No.

Our next question comes from Charles <unk> with J P. Morgan Your line is open.

Speaker 1: Our next question comes from Kyle Sternick with JP Morgan. Your line is open.

Bill Rutherford: Is this something that you think you can manage closer to flat going forward? Or is it just becoming part of the new norm around something that you'll need to offset as you think about the puts and takes for 2024? Thank you.

Thanks for the question I just wanted to go back to the West Coast for a second.

Speaker 10: Thanks for the question. I just wanted to go back to Valesco for a second. So is the expectation that the $50 million loss per quarter persists this level throughout next year, or would you expect to end the year at a slightly lower run rate? And then just on the mitigation levers, I mean, obviously it sounds like reimbursement is probably the bigger component here, but is there any way to give a sense for magnitude of the cost side? I'm just wondering if you could give some color on what those levers are and just, you know, how much of that $50 million do you think could offset purely just with cost

Is the expectation that the $50 million loss per quarter persist at this level throughout next year or would you expect to end the year at a slightly lower run rate.

Sam Hazen: Well, it's hard to call. We do believe the rate of growth to slow going forward compared to what we've seen this year. As I said, we're working diligently on multiple work efforts and only in the, in the last go, but working with our contracted providers as well. So, again, I think we'll see a slowing growth. We think we've dealt with some of the more acute issues out there, but the subsequent questions are still there, but remains in through it and we'll continue to do that as we continue to go on. We'll update you on our progress, but we're working diligently to affect and slow that rate of growth and its impact on us.

And then just on the mitigation levers I mean, obviously it sounds like reimbursement is probably the bigger component here, but is there any way to give a sense for magnitude of the cost side.

I was wondering if you give some color on what those levers are and just how much of that $50 million I think it offset purely just with cost reductions.

Yes.

Speaker 4: Yeah, I mean, so right now, as I said, probably 50 million a quarter, but we're working diligently to mitigate that. And as we go through

So right now as I said, it's probably $50 million quarter, but we're working diligently to mitigate that and as we go through the next couple of quarters and into 'twenty. Four we will continue to update on our progress on that.

Speaker 4: The next couple quarters and into 24 will continue to update on the progress on that.

Speaker 4: We view the primary issue as revenue shortfalls and that's what we're working through. You know, there may be some cost adjustments we can make, but I think it's primarily a revenue approach that we're gonna take to try to turn the results around. And I just have to put a 50 million in a quarter. And we...

We view the primary issue is revenue shortfalls and that's what we're working through.

Sam Hazen: I think Bill alluded to this in his commentary earlier about, you know, the pressures we saw with contract labor nurse shortages capacity management work. And I would submit that we've worked our way through that reasonably well. And we still believe there are opportunities for us to make strides forward on that agenda. We're going to learn from that how we managed that it timely, aggressively and responsibly, and I think apply those same learning to the situation we have here and get to an answer that makes sense for the company. And so, I'm confident, as I said, that we have the mindset in the wherewithal to work through these and get us to a reasonable solution.

There may be some cost adjustments, we can make but I think it's primarily a revenue approach that we're going to take to to try to turn turn the results around and I'll just have to put its $50 million a quarter.

Speaker 4: have confidence that we've dealt with similar issues in the past and we'll work through that.

We have confidence that we've dealt with similar issues in the past and we'll work through that book.

Speaker 4: It's primarily a revenue challenge that we'll get through, you know, and didn't mention earlier, but with our increased position, we now manage the revenue cycle all the way through. So I think that puts us in a much better position to assess and address some of these revenue trends. So we have the revenue cycle functions from contracting to coding to billing and collection.

It's primarily a revenue challenge that we'll get through.

Didn't mention earlier, but with our increased position we now may.

The revenue cycle, all the way through so I think that puts us in a much better position to assess and address some of these revenue trends.

So we have the revenue cycle functions from contracting to Cody to billing and collections and so we think we're in a reasonably good position to be able to at least assess those trends and then come up with with appropriate actions to respond to.

Speaker 4: And so we think we're in a reasonably good position to be able to at least assess those trends and then come up with appropriate actions to respond.

Okay.

Pito Chickering: Our next question comes from Pito Tiggering with Deutsche Bank. Your line is open. Hey, good morning, guys. There are a lot of moving parts in the margin this quarter, but if you normalize for Florida, DTP and $15 million for prior period bullets. Schoell, and look at the implied fourth quarter margin ramp. It looks higher than normal sequential margin improvement terms fourth quarter.

Speaker 1: Our next question comes from Jason Cazorla with Citigroup. Your line is open.

Our next question comes from Jason <unk> with Citigroup. Your line is open.

Great. Thanks.

Speaker 9: Great, thanks. I guess with surgeries up about 1% in the quarter, a little bit better on the inpatient side. Wanted to ask about trends within service lines, and the comp was a little bit difficult this quarter, but anything to call out there? And then Sam, it sounds like from your comments, you're not seeing any impact in GLP-1, so you don't expect much there, but just making sure we caught that right, and if you have any other thoughts on potential impacts to underlying demand or trends on the line, that would be helpful.

I guess, what's surgeries up about 1% in the quarter, a little bit better on the inpatient side wanted to ask about trends within service lines.

And the comp was a little bit difficult this quarter, but anything to call out there and then Sam it sounds like from your comments youre not seeing any impact in GOP ones. When you don't expect much there, but just making sure we caught that right and if you have any other thoughts on potential impacts underlying demand trends on the line would be helpful. Thanks, Yes, let me start with the <unk>.

Bill Rutherford: So he helped register what are the key drivers to get to that implied guidance for margin for 4Q. Yeah, you know, Pito, historically our fourth quarter is our best margin performance quarter on their obviously this quarter was impacted a little higher than normal because of the Blesco 80 basis points. I talked about in the Florida DPP. Our state facility margins were, you know, over 20%. So we think, you know, our guidance is reasonable based on our outlook right now, but I think it's a combination. I'm maybe not having some of the the immediate pressure if we had this quarter and then the expectation that the fourth quarter tends to trend stronger than our average. All right, thanks a lot. Yeah.

Speaker 2: Yeah, let me start with the GLP issue. We think it's way too early to make any judgment about the effects on our business generally. I think the second point.

The issue of we think it's way too early to make any judgments about the effects on our business.

Generally I think the second point that I would make related to <unk>. One is the fact that we have a very diversified mix of revenues.

Speaker 3: One is the fact that we have a very diversified mix of revenue as a company. I mean, obviously, we've gone through orthopedic total joints going from inpatient to outpatient. We've seen other drugs come into the mix, statins as an example with cardiology. We're actually doing more cardiology procedures in the company now than we've ever done in the history of the company. So, you know, I don't really know how to judge the implication.

As a company I mean, obviously, we've gone through orthopedic total joints going from inpatient to outpatient we've seen other drugs come into the mix status as an example, with cardiology and we're actually doing more cardiology procedures in the company now that we've ever done in the history of the company. So.

I don't really know how to judge the implications Barry Afric surgeries in our company. It's a really small program less than <unk>, 5% of overall revenue. Obviously, we have patients who do have diabetes, but some of those patients aren't going to lose it necessarily immediately either so.

Calvin Sternick: Our next question comes from Cal's, Dernick, with JP Morgan. Your line is open. Thanks for the question. Just wanted to go back to the last go for a second.

Speaker 3: very after surgeries in our company. It's a really small program less than 0.5% overall revenue. Obviously we have patients who do have diabetes.

Bill Rutherford: So is the expectation that the 50 million lost recorder persists this level throughout next year or would you expect to end the year to slightly lower run rate. And then just in the mitigation levers and obviously sounds like reimbursement is probably the bigger component here, but is there any way to give us sense for magnitude of the cost side. I'm just going to give some color on what those levers are and just, you know, how much of that 50 million you think it offset purely just with cost connections.

Speaker 3: but some of those patients aren't going to lose it necessarily immediately either. So it's way too early to make judgments. We believe around that. When you look at the mix of business again, as I said earlier, we had very...

Way too early to make judgments, we believe around that when you look at the mix of business again as I said earlier.

We had very broad based service line performance that was solid.

Speaker 3: service line performance that was solid. Very few service categories were down. We actually had a calendar headwind in the quarter with respect to surgical days and cardiology procedure days.

Very few service categories were down we actually had a calendar headwind.

Bill Rutherford: Yeah, I mean, so right now, as I said, it's probably 50 million in quarter, but we're working diligently to mitigate that. And as we go through the next couple quarters and into 24 will continue to update on our progress on that. We view the primary issue is revenue shortfalls, and that's what we're working through. You know, there may be some cost adjustments we can make, but I think it's primarily a revenue approach that we're going to take to try to turn.

In the quarter with respect to surgical days and cardiology procedure days, where we had one less surgical day in the quarter than we did last year.

Speaker 3: where we had one less surgical day in the quarter than we did last year so our performance in the face of that had one was strong as well

So our performance in the face of that headwind was strong as well.

Speaker 3: So, you know, that's what I would say it was similar on inpatient and outpatient as far as the mix.

So.

No.

That's what I would say it was it was similar on the inpatient and outpatient as far as the mix.

Speaker 2: of service volume growth and so forth, so very consistent, very broad-based, again, across our geography, and so we're pretty pleased with the outcome.

But service.

Bill Rutherford: The results around, and you know, I just have to put a 50 million in a quarter and we have confidence that we've dealt with similar issues in the past and what worked through that. It's primarily a revenue challenge that we'll get through, you know, and then mention earlier, but with our increased position, we now mean is the revenue cycle all the way through. So I think that puts us in a much better position to assess and address some of these revenue trends.

<unk> growth and so forth so very consistent.

Broad based again across our geography.

So we're pretty pleased with the the outputs.

Okay.

Our next question comes from Scott Sidell with Stephens. Your line is open.

Speaker 1: Our next question comes from Scott Sydow with Stevens. Your line is open.

Hi, Thanks, I was hoping you could maybe talk about some of these recent developments and the environment as it relates to the potential.

Speaker 9: Hi, thanks. I was hoping you could maybe talk about some of.

Bill Rutherford: So we have the revenue cycle functions from contracting to coding to billing and collections. And so we think we're in a reasonably good position to be able to at least assess those trends and then come up with appropriate actions to respond to.

Speaker 9: development in the environment as it relates to the potential.

Speaker 9: you know indicate indicators around you know future wage trends and and particularly thinking about

Indicate indicators around future wage trends and in particular thinking about some of the union actions that we've been seeing in some of these minimum wage laws that are getting passed at the state level such as in California.

Speaker 9: Some of the union actions that we've been seeing are in some of the minimum.

Speaker 9: wage laws that are getting past at the state level, such as in California, just curious on whether you see these in aggregate potentially creating some more pro-inflationary pressure on wages or...

Jason Cassorla: Our next question comes from Jason cassola with city groups. Your line is open. Great. Thanks. I guess with surgeries up about 1% in the quarter, a little bit better on the impatient side wanted to ask about trends within service lines. And the top was a little bit difficult this quarter, but anything to call out there. And then Sam, it sounds like from your comments, you're not seeing any impact on GLP ones. You don't expect much there, but to make sure we caught that right. And if you have any other thoughts on potential impacts to underlying demand or trends and allow me help.

Just curious on sort of whether you see these in aggregate potentially creating some more pro inflationary pressure on wages or do you think that there may be a bit over sort of focused on and won't affect the overall trajectory of the wage environment. Thanks.

Speaker 9: Do you think that there may be a bit over sort of, you know, focused on and won't affect the overall trajectory of the waste environment?

Yeah.

The.

Speaker 3: The market for labor has normalized in very material ways compared to where it was a year, a year and a half ago. And we're seeing it in our cost per hour as a company, which is really lined up with the expectations we had for the year. And we've seen stabilization across the elements of our compensation programs and so forth. There are some minimum wage laws out in California that has a very de minimis impact on our company. Most of our compensation was already in line with that. We have very few issues with that. A unionization across the country beyond the healthcare industry is an issue as everybody understands.

The market for labor has normalized and very material ways compared to where it was a year to year and a half ago and we're seeing it in our cost per hour as a company, which is really wind up with the expectations. We had for the year and we've seen stabilization.

Sam Hazen: Yeah, let me start with the GLP issue. We think it's way too early to make any judgment about the effects on our business generally. I think the second point that I would make related to GLP one is the fact that we have a very diversified mix of revenue as a company. I mean, obviously we've gone through orthopedic total joints going from inpatient to outpatient. We've seen other drugs come into the mix statins as an example.

Across the elements of our compensation programs and so forth. There are some minimum wage laws out in California that has a very de minimis impact on our company most of our compensation was already in line with that we have very few.

Issues with that.

Unionization across the country beyond the health care industry.

Sam Hazen: With cardiology, we're actually doing more cardiology procedures in the company now that we've ever done in the history of the company. So, you know, I don't really know how to judge the implications, very accurate surgeries in our company. It's a really small program less than 0.5% overall revenue. Obviously we have patients who do have diabetes, but some of those patients aren't going to lose it necessarily immediately either. So it's way too early to make judgments, we believe around that.

Is it is an issue as everybody understands.

Speaker 3: But we have been successful in pushing through those issues organizationally.

But we have been successful in pushing through those issues organizationally.

Speaker 2: and have landed in a spot that we think is.

And have landed in a spot that we take.

Is.

Speaker 2: not going to put too much pressure on our business in the near term. And so, you know, that's where we are. Obviously the markets change their dynamic and we have to adjust to those.

Not going to put too much pressure on our business in the near term.

And so that's where we are obviously the market's changed their dynamic and we have to adjust to those but we're seeing positive signs with respect to turnover with respect to hiring and even the number of new students who are populating, our Galen college of nursing programs is very incur.

Speaker 3: But we're seeing, you know, positive signs with respect.

Sam Hazen: When you look at the mix of business, again, as I said earlier, we had very broad based service line performance that was solid. Very few service categories were down. We actually had a calendar headwind in the quarter with respect to surgical days and cardiology procedure days where we had one less surgical day in the quarter than we did last year. So our performance in the face of that headwind was strong as well.

Speaker 2: to turn over with respect to hiring. And even the number of new students who are populating our Gail and College of Nursing programs is very encouraging, suggesting that there's a sufficient pipeline of new nurses who want to be educated and go into the workforce. So we're pretty encouraged by the macros that we're seeing. There are obviously issues that we have to pay attention to and we are, but we're reasonably encouraged with our overall agenda as it relates to our people and the efforts that we have in place.

<unk>, suggesting that there is a sufficient pipeline of new nurses, who want to be educated and go into the workforce. So we're pretty encouraged by the macros that we're seeing there are obviously issues that we have to pay attention to and.

And we are but we're reasonably encouraged with our overall agenda as it relates to our people and the efforts that we have in place.

Sam Hazen: So, you know, that's what I would say was it was similar on the inpatient and outpatient as far as the mix of service volume growth and so forth. So very consistent, very broad based again across our geography. And so we're pretty pleased with the outputs.

Yeah.

Speaker 1: Our next question comes from Jamie Purse with Goldman Sachs. Your line is open.

Our next question comes from Jamie <unk> with Goldman Sachs. Your line is open.

Speaker 11: Hey, thank you. Good morning. Just a bigger picture question for you guys. You've talked about longer term margins 19 to 20% being a fairly sustainable range for you. A lot of moving parts right now. So just at a high level, is there anything you see in the business right now that can take you off of that trajectory more permanently and just your your level of confidence in getting back to that margin rate and sustaining it going forward?

Hey, Thank you good morning, just a bit.

Bigger picture question for you guys, you've talked about longer term margin, 19% to 20% being a fairly sustainable range for you a lot of moving parts right now, but just at a high level is there anything you see in the business right now that can take you off of that trajectory more permanently and just your level of confidence in getting back to that margin rate and sustain it going forward.

Scott Sidel: Our next question comes from Scott Sidel with Stevens. Your line is open. Hi, thanks. Let's hope that you could maybe talk about some of these recent developments in the environment as relates to the potential, you know, indicate indicators around, you know, future wage trends. And in particular, thinking about some of the union actions that we've been seeing. And some of these minimum wage laws that are getting past at the state level, such as in California, you know, just serious on sort of whether you see these in aggregate, potentially creating some more pro inflationary pressure on wages or do you think that there may be a bit over sort of, you know, focused on and won't affect the overall trajectory of the wage environment. Thanks.

Thank you.

Speaker 4: Yeah, I mean, I think we have a reasonably long track record of producing margins that are in a pretty tight range.

Yes, I mean, I think we have a reasonably long track record of producing margins that are in a pretty tight range.

Speaker 4: even as we've dealt with periodic cost pressures, whether it be contract labor before, or maybe bad deaths in the previous cycle or physician costs now. So I think as a team, we have confidence, we can continue to operate the company at reasonably strong efficiency levels.

Even as we dealt with periodic cost pressures, whether it be contract labor before maybe bad debts in the previous cycle.

Our physician costs now so I think as a team we have confidence we can continue to operate the company at reasonably strong efficiency levels. We've.

Speaker 4: We've spoken in the past. We have a number of initiatives and around technology and innovation on resiliency programs.

We've spoken in the past, we have a number of initiatives around technology and innovation on our resiliency programs at.

Speaker 4: continue to target the opportunity stop rating.

We continue to target the opportunities to operate even more efficiently in the future. So.

Sam Hazen: The market for labor has normalized in very material ways compared to where it was a year to year and a half ago. And we're seeing it in our cost per hour as a company, which has really lined up with the expectations we had for the year and we've seen stabilization across the elements of our compensation programs. And so forth. There are some minimum wage laws out in California that has a very de minimized impact on our company. Most of our compensation was already in line with that. We have very few issues with that.

Speaker 4: more efficiently in the future. So, you know, I think our historical performance is a reasonable expectation for us and we've got opportunity to continue to drive efficiency through the organization.

I think our historical performance as a reasonable expectation for us in.

<unk> got opportunity to continue to drive efficiency through the organization.

Okay.

Okay.

Speaker 1: For next question, comes from John Ransom with Raymond James. Your line is open.

The next question comes from John Ransom with Raymond James Your line is open.

Speaker 12: Hey, good morning. Um, if I take your 380 million of the let's go, I think you did a little over to 20 and to

Hey, good morning.

If I take your $380 million of bullets go I think he did a little over two 'twenty into Q does.

Speaker 12: So that means the revenue drops sequentially by like $60 million. I know you're talking about this a revenue problem, but in your guidance going forward, maybe you could clarify kind of your revenue and cost out what to get you that minus 50. And again, why was it such a, I know it's a seasonality, but why was it such a steep ramp in 3Q or decline?

So that means the revenue dropped sequentially by like $60 million.

Sam Hazen: Unionization across the country beyond the healthcare industry is an issue as everybody understands. But we have been successful in pushing through those issues organizationally, and have landed in a spot that we think is not going to put too much pressure on our business in the near term. And so, you know, that's where we are. Obviously, the markets change, they're dynamic and we have to adjust to those. But we're seeing, you know, positive signs with respect to turnover with respect to hiring.

You're talking about the revenue problem, but.

And your guidance going forward, maybe you could clarify kind of your revenue and cost outlook to get to that minus 50, and again why was it such a I know there's.

Seasonality, but allow us for such a steep ramp in <unk> declining thinking on revenue.

Thanks.

Speaker 2: And John , it looted this in my comments. You know, we did make some revisions to our revenue estimates in the third quarter. And the second quarter, still new. We were putting providers on new contracts, building we had not received a lot of claims being paid. This claim started to be adjudicated on paid. So I think it's better to just look at that on a year-to-date basis.

Yes, John alluded this in my comments.

We did make some revisions to our revenue estimates in the third quarter and the second quarter. It's still new we were putting providers on new contracts. Phil we have not received a lot of claims being paid claims started to be adjudicated on PE. So I think it's better to look at that on a year to date.

Sam Hazen: And even the number of new students who are populating our Gail and College of Nursing programs, is very encouraging, suggesting that there's a sufficient pipeline of new nurses who want to be educated and go into the workforce. So, we're pretty encouraged by the macros that we're seeing. There are obviously issues that we have to pay attention to and we are. But we're reasonably encouraged with our overall agenda as it relates to our people and the efforts that we have in place.

Speaker 4: on their, you know, it's roughly, you know, $200 million of quarter somewhere around that neighborhood is kind of what we think the model will be going forward. And again, it may fall on either side of that. But I think it's best to look at the year and the day and we understand the third quarter drop, but it's really just because we had no history on there and it's kind of started to be paid. We were able to revise that. So that's why it's 100 million, even out for the year for the quarter. It was about the same year today that's kind of tied into our 50 million.

Basis on there.

It's roughly $200 million a quarter somewhere around that neighborhood is kind of what we think the model will be going forward.

Again, it may fall on either side of that but I think it's best to look at the year to date, we understand the third quarter drop, but it's really just because we have no history.

On their end as claims started to be pay we were able to revise that so that's why as the $100 million EBIT offered for the quarter was about the same year to date.

It kind of ties into our strategy going forward.

Jamie Perse: Our next question comes from Jamie Perth with Goldman Sachs. Your line is open. Hey, thank you. Good morning. Just a bigger picture question for you guys. You've talked about longer term margins 19 to 20% being a fairly sustainable range for you. A lot of moving parts right now. So, just at a high level, is there anything you see in the business right now that can take you off of that trajectory more permanently? And just your, your level of confidence in getting back to that margin rate and sustaining it going forward. Thank you.

Speaker 13: 200 audience of media's

So it's $200 million revenue $2 50 cost business, that's what's embedded in your guide going forward just to be clear, yes. If you want to say very broadly that would be pretty consistent.

Speaker 5: embedded in your guide going forward just to be clear yeah if you want if you want to think very broadly that

Alright, thank you.

Yes.

Okay.

Speaker 1: Our next question comes from Justin Lake with Wolf Research. Your line is open.

Our next question comes from Justin Lake with Wolfe Research. Your line is open.

Yes.

Speaker 14: Thanks. Good morning. I'm going to pile on with this position stuff. So just I've never seen a business kind of be off this far from like, you guys are obviously very, very good at what you do. I know this is a new business, but to be, you know, 50Million dollars of revenue on a 200 and let's say 50Million dollar baseline 20%.

Thanks, Good morning, I'm going to pile on with disposition stuff. So just I've never seen a business kind of be off this far problem. Like you guys are obviously very very good at what you do I know this is a new business, but to be fair.

Sam Hazen: Yeah, I mean, let's go. I think we have a, you know, a reasonably long track record of producing margins that are in a pretty tight range. Even as we've dealt with, you know, periodic cost pressures, whether it be contract labor before or maybe bad deaths in the previous cycle or physician costs now. So I think as a team, you know, we have confidence we can continue to operate the company at reasonably strong efficiency levels.

<unk> million dollars of revenue on a 200 and lets say $50 million baseline, 20%. So.

Speaker 14: So I just, like, did you triple click on that for me and just say, like, what did you think was going on versus what is?

I'd just like.

Can you triple click on that for me and just say like what did you think was going on versus what is and then the.

Speaker 14: And then when you gave your headwinds, tailwinds for next year, the only headwind you talked about was that payment, which makes sense.

For when you gave your headwind tailwind for next year. The only headwind you talked about was that payment which makes sense.

Sam Hazen: We've spoken in the past. We have a number of initiatives around technology and innovation on resiliency programs that continue to target the opportunity to operate even more efficiently in the future. So, you know, I think our historical performance is a reasonable expectation for us and we've got opportunity to continue to drive efficiency through the organization.

Speaker 14: But, you know, you've given some numbers around the subsidy costs, right? The position costs that run through other operating.

But you've given some numbers around the subsidy costs right to position cost up one through other operating and they do seem like they've been a pretty big drag on margins. My estimate is somewhere around 300 million box give or take year over year versus kind of revenue growth are you assuming that thats not going to grow at anywhere close to.

Speaker 14: And they do seem like they've been a pretty big drag on margins. My estimate is somewhere around $300 million, give or take, year over year, versus kind of revenue growth. Are you assuming that that's not going to, you know, grow at anywhere close to that pace next year, or do you think you could like, and therefore it's not a another $300 million headwind next year, or are you just assuming that we can offset it?

Of that pace next year or do you think you can draw and therefore, it's not a another $300 million headwind next year or are you just assuming that we can offset it.

Speaker 14: And so, you know, we kind of grow normally at the, you know, hundred and forty five. Thanks.

And so we kind of grow normally ex the 145.

John Ransom: Our next question comes from John Ransom with Raymond James. Your line is open. Hey, good morning. If I take your 380 million of, let's go. I think you did a little over 220 and 2, so that means the revenue drops sequentially by like 60 million dollars.

Speaker 4: All right, Justin. Well, a couple of things. One, literally talk about 24, we'll give you our 24 guidance assumptions, you know, some of that on the investor day and more details as we go through the planning on there. But as I said, we are expecting the pro fee growth rate trends to lower

Alright, just a couple of these one literally talk about 'twenty four and we'll give you our 24 guidance assumptions.

Some of that on the Investor day more details as we go through the planning on there, but as I said, we are expecting a pro fee growth rate trends to lower going forward.

Bill Rutherford: I know you're talking about this revenue problem, but in your guidance going forward, maybe you could clarify kind of your revenue and cost outlook to ditches that minus 50. And again, why was it such a, I know seasonality, but why such a steep ramp and three key or decline the tree key on revenue. Thanks.

Speaker 4: and we're working diligently to make that happen.

And we're working diligently to make that happen.

Speaker 4: You know, on your opening question around Valesco, you know, I'll just emphasize what Sam said. This was, you know, a very complex and large integration of 200 programs, 5,000 providers that happened very quickly.

On your.

Opening question around Velazco, just to emphasize what Sam said this was a very complex and large integration of 200 programs 5000 providers that happened very quickly.

Bill Rutherford: Yeah, John, I alluded this in my comments, you know, we did make some revisions to our revenue estimates in the third quarter. And the second quarter still knew we were putting providers on new contracts, building we had not received a lot of claims being paid as claims started to be attuticated on paid. So I think it's better to just look at that on a year to date basis on there, you know, it's roughly, you know, 200 million dollars a quarter somewhere around that neighborhood is kind of what we think the model will be going forward.

Speaker 4: And we were operating, you know, maybe on some incomplete historical data. And as we started to see claims being paid, the revenue was just clearing at lower rates than we anticipated. And again, I think we've got a number of initiatives to try to offset that. And so we're working on both of those.

We were operating maybe awesome incomplete historical data and as we started to see claims being paid the revenue is just clearing at lower rates than we anticipated and again I think we've got a number of initiatives to try to offset that.

And so we're working on both of those but so that's how I would address the velazco shortfall right now and we're continuing to work on the proceeds and do expect that growth rate to decline going forward.

Speaker 4: But so that's how I would address the Valesco shortfall right now. And then, you know, we're continuing to work on the pro fee and do expect that growth rate to decline.

Yes.

Okay.

Bill Rutherford: And again, it may fall on either side of that, but I think it's best to look at the year today and we understand the third quarter drop, but it's really just because we had no history on there. And as claims started to be paid, we were able to revise that. So that's why it's 100 million even out for a year for the quarter. It was about the same year to date.

Speaker 1: Our next question comes from Sarah James with Cantor Fitzgerald. Your line is open.

Our next question comes from Sarah James with Cantor Fitzgerald. Your line is open.

Thank you.

Speaker 15: Thank you. So when I look at the moving pieces and in the guidance revision and the change in the Valesco revenue, it looks like you guys are applying core is doing a little bit better, especially if I use midpoint. So can you give us an update on what you're seeing so far the first couple months into four Q volumes and how we should think about what 2023 guidance implies for the volume transition from three Q to four Q.

So when I when I look at the moving pieces in the guidance revision and the change in the Velazco revenue. It looks like you guys are implying core is doing a little bit better, especially if I use the midpoint. So can you give us an update on what youre seeing so far the first couple of months into four Q volumes and how we should think about.

Bill Rutherford: [inaudible] David David David David David David David David David David David David David David David David David David David David David David David David David David David David David David[inaudible] Yeah, so, you know, we don't comment on the current quarter. We've made, I think, several comments on the core business trends we're seeing with really strong volume, reasonable pricing, the core operating expenses of the company are doing well and labor and supplies. You know, I think, you know, as a broad brush, it would be our expectation of trends to only continue going forward. We don't see anything from a macro perspective change in that.

What 2023 guidance implies for the volume transition from Takeda for Q.

Yes, so as you know we don't comment on the current quarter.

Speaker 4: Yeah. So, you know, as you know, we don't comment on the current quarter. We've made, I think, several comments on the core business trends we're seeing with really strong volume, reasonable pricing, the core operating expenses of the company are doing well in labor and supplies. You know, I think, you know, as a broad brush, it would be our expectation those trends generally continue going forward. We don't see anything from a macro perspective changing that.

We've made I think several comments on the core business trends were seeing was really strong volume reasonable pricing. The core operating expenses as a company are doing well in labor and supplies.

Thank you.

Broadbrush it would be our expectation those trends generally continue going forward, we don't see anything from a macro perspective, changing that but again too early we're not commenting on kind of intra quarter early quarter activities.

Speaker 4: But again, too early, and we're not commenting on kind of inter-quarter, early-quarter activities, but...

Speaker 4: As I said, and Sam mentioned in his comments, we're pleased with the core fundamentals that we're seeing. Good demand in the market, we're positioned very well, and our same facility operations is going pretty well. Unfortunately, we are dealing with the Valesco integrations, and we'll overcome that.

As I said in Sam mentioned in his comments, we are pleased with the core fundamentals that we're seeing good demand in the market, we're positioned very well.

Our same facility operations is going pretty well. Unfortunately, we are dealing with the velazco integrations and we'll overcome.

<unk>.

Speaker 4: I think you could reasonably expect that our core trends that we've seen here today should, for the most part, continue at a reasonable pace.

I think you could reasonably expect that our core trends that we've seen year to date should for the most part continue at a reasonable price.

Thank you.

Speaker 1: Our next question comes from Joshua Raskin with Mefron Research. Your line is open.

Our next question comes from Joshua Raskin with Nephron Research Your line is open.

Speaker 9: Hi, thanks. I hate to beat this dead horse, but just on the reduction in revenues on Valesco, as the claims were getting processed, I'm just curious what was causing that reduction in revenue? Was that, you know, a lower rate issue? Was that payer mix? Was that reduction in codes submitted versus paid, or was that just less services? And then I know there's been some challenges to the No Surprise Act underway. I know the arbitration process just started back up again. Is any of that going to mitigate any of the impact there?

Hi, Thanks, and hate to beat this dead horse, but just on the reduction in revenues on velazco as the claims we're getting processed I'm just curious what was causing that reduction in revenue was that lower rate issue with that payer mix with that reduction in code submitted versus paid or was that just less services and then I know.

There has been some challenges in a no surprise that tend to weigh on that the arbitration process. Just started back up again is there any of that going to mitigate any of the impact there.

Yes, yes, so it's hard to attribute the shortfall in any one area.

Speaker 4: Yeah, yeah, so it's hard to attribute the shortfall at any one area. As I said, you know, we were operating on maybe some incomplete historical data as our model is.

As I said, we were operating on maybe some incomplete historical data as our model is probably an array of other issues.

Speaker 4: probably an array of other issues that you know, potential other hospital providers are experiencing. And so yeah, we've got a number of initiatives that we're going to try to address that we've talked about. We can continue to see.

Potential other hospital providers are experiencing and so yes, we've got a number of initiatives that we're going to try to address that we've talked about.

If we could continue to see.

We prefer to be in in network providers to avoid the out of.

Speaker 4: We prefer to be an in-network providers to avoid the out of the surprise billing and that IDR process and so we're working with our payers diligently to be in network and to get reasonable rates going forward and that's going to be part of our action.

The surprise billing and that ICR process, and so we're working with the payers diligently to be in that work and to get reasonable rates going forward and thats going to be part of our action plan.

Okay.

Speaker 1: Our next question comes from Brian Tancelit with Jeffries. Your line is open.

Our next question comes from Brian <unk> with Jefferies.

It is open.

And I think we've done if you want to.

Close acute.

Thank you seeing no further questions I will now turn the call back over to Frank Morgan for closing remarks.

Speaker 1: Thank you. Seeing no further questions, I will now turn the call back over to Frank Morgan for closing remarks.

Yes.

Speaker 2: Bruno, thank you so much for your help today and thanks to everyone for joining on the call. I'm around this afternoon. It's like an answering additional questions you might have. Have a great day.

Thank you so much for your help today and thanks to everyone for joining on the call I'm around this afternoon. If I can answer any additional questions you might have have a great day.

Speaker 15: This concludes today's conference call. Thank you for your participation. You may now disconnect.

This concludes today's conference call. Thank you for your participation you may now disconnect.

Yeah.

Thank you for your participation you may now disconnect.

Bill Rutherford: But again, too early, we're not commenting on kind of intro quarter, really quarter activities. But as I said, and Sam mentioned his comments, we're pleased with the core fundamentals that we're seeing because the man in the market, we're positioned very well. And our same facility operations is going pretty well. Unfortunately, we are dealing with the Bolesco integrations and local overcome that. But I think you could reasonably expect that our core trends that we've seen here today should, for the most part, continue at a reason.

Joshua Raskin: Thank you. Our next question comes from Joshua Raskin with nephron research. Your line is open. Hi, thanks. I hate to beat the set horse, but just on the reduction in revenues on Bolesco as the claims were getting processed. I'm just curious what was causing that reduction in revenue? Was that, you know, a lower rate issue? Was that pay or mix? Was that reduction in codes submitted versus paid or was that just less services?

Joshua Raskin: And then I know there's been some challenges and a no surprise act underway. I know the arbitration process just started back up again. Is any of that going to mitigate any of the impact there? Yeah, yeah. So it's hard to attribute the shortfall in any one area. As I said, you know, we were operating on maybe some incomplete historical data as our model is and probably an array of other issues that, you know, potential other hospital providers are experiencing.

Joshua Raskin: And so, yeah, we've got a number of initiatives that we're going to try to address that we've talked about. You know, if we continue to see we prefer to be an in network providers to avoid the out of the surprise billing and that IDR process. And so we're working with our payers diligently to be in network and to get reasonable rates going forward. And that's going to be part of our action plan. Our next question comes from Brian Tankle with Jeffries. Your line is open.

Brian Tankle: Brian, I think we've done if you want to close a few. Thank you.

Frank Morgan: Seeing no further questions, I will now turn the call back over to Frank Morgan for closing remarks. Brian, thank you so much for your help today and thanks to everyone for joining on the call. I'm around this afternoon. It's like an answering additional questions you might have. Have a great day.

Operator: This concludes today's conference call. Thank you for your participation. You may now. Cinex. Thank you for your participation.

Operator: You may now.