Q4 2023 Universal Health Services Inc Earnings Call

Yeah.

Operator: Good day, and thank you for standing by. Welcome to the fourth quarter 2023 Universal Health Services earnings conference call. At this time, all participants are in a listen only mode.

Speaker Change: Good day and thank you for standing by welcome to the fourth quarter 2023, Universal Health Services earnings Conference call. At this time, all participants are in a listen only mode. After the speaker's presentation. There will be a question and answer session to ask a question. During the session you will need to press star one on your telephone you will then hear an automated mess.

Operator: After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Steve Filton, Executive Vice President and Chief Financial Officer. Please go ahead. Thank you, and good morning.

Speaker Change: Sizing your hand is raised to withdraw your question. Please press star one again.

Speaker Change: Be advised that today's conference is being recorded.

Speaker Change: I'd now like to hand, the conference over to your first speaker today, Steve Filton Executive Vice President and Chief Financial Officer. Please go ahead.

Speaker Change: Thank you and good morning, Mark Miller is also joining us this morning, and we welcome you to this review of Universal Health services results for the fourth quarter ended December 31 2023.

Steve G. Filton: Mark Miller is also joining us this morning, and we welcome you to this review of Universal Health Services' results for the fourth quarter and for December 31st, 2023. During the conference call, we'll be using words such as believes, expects, anticipates, estimates, and similar words that represent forecasts, projections, and forward-looking statements. For anyone not familiar with the risks and uncertainties inherent in these forward-looking statements, I recommend a careful reading of the section on risk factors and forward-looking statements and risk factors in our Form 10-K for the year ended December 31, 2022. We would like to highlight just a couple of developments and business trends before opening the call up to questions. As discussed in our press release last night, the company reported net income attributable to UHS per diluted share of $3.16 for the fourth quarter of 2023. After adjusting for the impact of the item reflected on the supplemental schedule as included with the press release, our adjusted net income attributable to UHS per diluted share was $3.13 for the quarter ended December 31, 2021.

Speaker Change: During the conference call will be using words, such as believes expects anticipates estimates and similar words that represent forecasts projections and forward looking statements for anyone not familiar with the risks and uncertainties inherent in these forward looking statements I recommend a careful reading of the section on risk factors and <unk>.

Speaker Change: <unk> looking statements and risk factors in our Form 10-K for the year ended December 31 2023.

Speaker Change: We would like to highlight just a couple of developments and business trends before opening the call up to questions.

Speaker Change: As Scott said in our press release last night. The company reported net income attributable to Uhf's per diluted share of $3 16 for the fourth quarter of 2023 after.

Speaker Change: After adjusting for the impact of the item reflected on the supplemental schedule included with the press release, our adjusted net income attributable to uhm per diluted share was $3 13 for the quarter ended December 31 2023.

Steve G. Filton: Our acute hospitals continued to experience strong demand for their services in the fourth quarter, with adjusted admissions increasing 5.6% year over year. Overall, surgical volumes were solid as well, increasing 4% year over year. Net revenue per adjusted admission, which has lagged for much of the year, increased by 3.7% as compared to the fourth quarter of 2022, as acuity trends and pressure from payers have started to stabilize. Meanwhile, the amount of premium pay in the quarter, which declined from a peak of $153 million in the first quarter of 2022, was $67 million in the fourth quarter of 2023, similar to what it was in the third quarter. For the full year 2023, our strong acute care revenues were largely offset by elevated expenses, especially physician subsidies, which resulted in flattish margins for the full year.

Speaker Change: Our acute hospitals continued to experience strong demand for their services in the fourth quarter.

Speaker Change: Adjusted admissions, increasing five 6% year over year.

Speaker Change: Overall surgical volumes were solid as well, increasing 4% year over year.

Speaker Change: Net revenue per adjusted admission, which has lagged for much of the year increased by three 7% as compared to the fourth quarter of 2022.

Speaker Change: As acuity trends and pressure from payers have started to stabilize.

Speaker Change: Meanwhile, the amount of premium pay in the quarter, which declined from a peak of $153 million in the first quarter of 2022 was $67 million in the fourth quarter of 2023 similar to what it was in the third quarter.

Speaker Change: For the full year 2023, our strong acute care revenues were largely offset by elevated expenses, especially physician subsidies.

Speaker Change: Which resulted in flattish margins for the full year.

Steve G. Filton: During the fourth quarter, same facility revenues at our behavioral health hospitals increased by 7.2%, driven primarily by a 6.1% increase in revenue per adjusted patient day. Patient gain growth in the quarter was greater at our acute behavioral hospital versus our lower acuity residential treatment, which tended to drive up revenue per day to relatively robust levels consistent with our year-to-date experience. Additionally, as we discussed last quarter, we continue to see a negative impact of Medicaid redeterminations in certain areas on Behavioral Health Volumes, although it appears that impact has also begun to stabilize. With 8% revenue growth, same facility EBITDA for our behavioral hospitals is expected to increase approximately 9% for the full year of 2023 compared to 2022. We also note that in the fourth quarter, we recorded approximately $18 million in connection with the recently approved Mississippi Hospital Access Program, covering the six-month period of July through December of 2023.

Speaker Change: During the fourth quarter same facility revenues at our behavioral health hospitals increased by seven 2% driven primarily by a six 1% increase in revenue per adjusted patient day.

Speaker Change: The patient day growth in the quarter was greater at our acute behavioral hospitals versus our lower acuity residential treatment centers, which tended to drive up the revenue per day to relatively robust levels consistent with our year to date experience.

Speaker Change: Additionally, as we discussed last quarter, we continue to see a negative impact of Medicaid redetermination in certain states and behavioral health volumes. Although it appears that impact has also begun to stabilize.

Speaker Change: With 8% revenue growth same facility EBITDA for our behavioral hospitals has increased approximately 9% for the full year of 2023 compared to 2022.

Speaker Change: We also note that in the fourth quarter, we recorded approximately $18 million in connection with the recently approved Mississippi Hospital access program covering the six month period of July through December of 2023.

Steve G. Filton: Our cash generated from operating activities was $452 million during the fourth quarter of 2023, as compared to $297 million during the same quarter in 2022, and $1.268 billion during the full year of 2023, as compared to $996 million during 2022. We spent $743 million on capital expenditures during 2023, which was consistent with our original forecast for the year. For the full year of 2023, we acquired $525 million of our own shares pursuant to our repurchase program.

Speaker Change: Cash generated from operating activities was $452 million during the fourth quarter of 2023 as compared to $297 million. During the same quarter in 2022, and $1 $2 $6 8 billion during the full year of 2023 as compared to $996 million.

Speaker Change: During 2022.

Speaker Change: We spent $743 million on capital expenditures during 2023, which was consistent with our original forecast for the year for.

Speaker Change: For the full year of 2023, we acquired $525 million of our own shares pursuant to our repurchase program since January one 2019.

Steve G. Filton: Since January 1, 2019, we have repurchased more than 26 million shares, representing almost 30% of our shares outstanding as of that date. As of December 31, 2023, we had $701 million of aggregate available borrowing capacity pursuant to our $1.2 billion revolving credit facility. Core Operating Assumptions Underlying Our 2024 Operating Results Forecast, which was provided in last night's release, largely reflect the historical pre-COVID trends in their respective businesses. We anticipate that volumes in our acute segment will moderate from the elevated 2023 levels, but conversely, acuity and pricing in our acute business will increase. And for the full year, both metrics will resemble the patterns we experienced before the pandemic, despite the continuing shift of services from inpatient to outpatient settings and pressure from payers to restrain reimbursement increases in a variety of ways.

Speaker Change: <unk> repurchased more than 26 million shares representing almost 30% of our shares outstanding as of that date.

Speaker Change: As of December 31, 2023, we had $701 million of aggregate available borrowing capacity pursuant to our $1 $2 billion revolving credit facility.

Speaker Change: The core operating assumptions underlying our 2024 operating results forecast, which was provided in last night's release, largely reflect the historical pre COVID-19 trends in their respective businesses.

Speaker Change: We anticipate that volumes in our acute segment.

Speaker Change: Will moderate from the elevated 2023 levels, but Conversely, acuity and pricing in our acute business will increase and for the full year, both metrics will resemble the patterns, we experienced before the pandemic.

Speaker Change: Might the continuing shift of services from inpatient to outpatient settings and pressure from payers to restrain reimbursement increases in a variety of ways.

Steve G. Filton: We expect continued improvement in premium pay, labor trends, and general cost trends that will remain largely stable in 2024. Specifically, physician expenses, which were a major headwind in 2023, are expected to grow at the overall inflation rate in 2024. As noted in our press release, our 2024 operating results forecast includes an additional $149 million of Nevada supplemental revenue, which was approved by CMS in late December and disclosed by us in an 8K filed in early January.

Speaker Change: We expect continued improvement in premium pay labor trends and general cost trends that will remain largely stable in 2024.

Speaker Change: Specifically physician expenses, which were a major headwind in 2023 are expected to grow by the overall inflation rate in 2024.

Speaker Change: As noted in our press release, our 2024 operating results forecast includes an additional $149 million of Nevada supplemental revenues, which were approved by CMS in late December and disclosed by US in an 8-K filed in early January.

Steve G. Filton: We believe demand for our behavioral services remains robust, and our same-store-adjusted patient-day growth in 2024 is forecasted to exceed the 2.1% growth we experienced in 2023. A significant driver of behavioral volume increases is due to our success in filling vacant positions. But we acknowledge that specialty workforce shortages in certain markets continue to be an obstacle to even more volume growth.

Speaker Change: We believe demand for our behavioral services remains robust and our same store adjusted patient day growth in 2024 is forecasted to exceed the two 1% growth we experienced in 2023.

Speaker Change: A significant driver of behavioral volume upside is due to our success in filling vacant positions, but we acknowledge that specialty workforce shortages in certain markets continue to be an obstacle to even more volume growth.

Operator: In both our business segments, we were pleased that measures of patient satisfaction and quality of care increased in 2023, and we are focusing on continued improvement of these metrics in 2024. We are pleased to answer questions at this time. Thank you. At this time, we will conduct a question and answer session. As a reminder, to ask a question, you will need to press star 11 on your telephone and wait for your name to be announced.

Speaker Change: In both our business segments, we were pleased that measures of patient satisfaction and quality of care increased in 2023, and we are focusing on continued improvement of these metrics in 2024.

Speaker Change: We are pleased to answer questions at this time.

Speaker Change: Thank you at this time, we will conduct a question and answer session. As a reminder to ask a question you will need to press star one on your telephone and wait for your name to be announced to withdraw. Your question. Please press star one again, please standby, while we compile the Q&A roster.

Operator: To withdraw your question, please press star 11 again. Please stand by while we compile the Q&A roster. Our first question comes from Ann Hynes with Mizzou Hill. Please go ahead. Hi, good morning.

Speaker Change: Our first question comes from Ann Hynes with Mizuho. Please go ahead.

Ann Hynes: I just want to ask you about the two midnight rule. I know that throughout the year, you had a lot of denials for these short stay, inpatient stays. Did that get better in Q4? And do you actually think one of the large national managed care plans is saying they actually think hospitals might have billed early and started benefiting in Q4? Do you actually think that happened?

Ann Hynes: Hi, Good morning, I just wanted to ask you about the two midnight rule.

Speaker Change: No.

Speaker Change: Throughout the year, you had a lot of denials for the short stay in patient days does that get better in Q4, and do you actually think one of the large national managed care plans, saying they actually I think.

Speaker Change: Might've build early in <unk>.

Speaker Change: <unk> benefit in Q4, do you actually think that happened.

Steve G. Filton: Did you actually receive a benefit in Q4 from kind of early billing for this regulatory change that's starting on January 1, 2024? And also, can you tell me what your guidance includes for any potential benefits for this change, for this, and also for Medicaid redetermination, considering there's a big growth in the health exchange market? And are you assuming any kind of positive pay or makeshift benefit in guidance? Thanks.

Speaker Change: The receiver.

Speaker Change: Actually a benefit in Q4 from kind of early billing.

Speaker Change: Latest sorry change that starting in January one 2024, and also can you tell me what your guidance includes for any potential benefit for that change.

Speaker Change: And also for our Medicaid Redetermination, considering it looks like a big growth in the health exchange market and.

Speaker Change: Are you, assuming any kind of positive payer mix shift benefit in guidance. Thanks.

Steve G. Filton: Yeah, so as Mark commented in his prepared remarks, I think what we saw in Q4 was improved revenue per admission, per adjusted admission in the acute business, which I think we can attribute to a combination of increasing acuity but also at least stabilizing pressure from payers. You know, again, I think we saw for much of 2024, excuse me, for 2023, payers being more aggressive as their medical loss ratios were rising, etc. in a variety of ways, including denials and patient status changes, which would include, you know, recasting patients from inpatient observation, etc.

Speaker Change: Yes, so as Mark commented in his prepared remarks, I think what the what we saw in Q4 was improved.

Speaker Change: Revenue per admission per adjusted admission in the acute business.

Speaker Change: Which I think we attribute to a combination.

Speaker Change: Increasing acuity, but also at least stabilizing pressure from payers.

Speaker Change: Again, I think we saw for much of 2024, excuse me for 2023 and payers being more aggressive as their medical loss ratios were rising et cetera in a variety of ways.

Speaker Change: Including denials and patient status changes, which would include.

Speaker Change: Recasting patients from inpatient to observation et cetera.

Steve G. Filton: I don't think we changed our billing practices during the quarter, but I think all you're seeing is that I think we're starting to anniversary some of that more aggressive behavior of the payers in the fourth quarter. As far as how we've guided, again, I think, as Mark said in his remarks, I think we're assuming that in the acute segment that volumes moderate a little bit in 2024 and that acuity pricing improves. So we returned to kind of what I would consider to be a more historically normative model of mid-single-digit growth in acute care, maybe 5%, 6% growth, split pretty evenly between price and volume. And I think what that really means is we're being a little conservative about volumes, which have sort of been running hotter than that, but we're being a little bit more aggressive about pricing, which has been running, you know, But you know, it's not like we have to.

Speaker Change: I don't I don't think we changed our billing practices during the quarter.

Speaker Change: But I think all you're seeing is effectively I think we're starting to anniversary some of that more aggressive behavior.

Speaker Change: The payers.

Speaker Change: In the fourth quarter.

Speaker Change: As far as sort of how we guided again I think as Mark said in his remarks, I think we're assuming that in the acute segment.

Speaker Change: That volume is moderate a little bit in 2024 and that acuity pricing improve so we return to kind of what I would consider to be a more historically normative model.

Speaker Change: Mid single digit growth in acute care may be five 6% growth split pretty evenly between price and volume.

Speaker Change: What that really means is we're being a little conservative about volumes, which have sort of been running hotter than that but we're being a little bit more aggressive about pricing, which has been running.

Speaker Change: Less than that.

Speaker Change: But it sounds like we have.

Steve G. Filton: Included in our guidance is a specific impact from sort of how payers will, you know, use the two midnight rule differently going forward, etc. We believe there may be an incremental opportunity there, but I don't think we necessarily feel it's material until we really see the behavior on the part of the payers. Okay, great.

Speaker Change: Included in our guidance a specific impact from sort of how payers will use the two midnight rule differently going forward et cetera.

Speaker Change: Believe there may be an incremental opportunity there, but I don't think we necessarily feel it's material until we really see the behavior on the part of the payers change.

Steve G. Filton: And just one follow-up. You talked about in your prepared remarks that the labor shortages are still impacting volume. Is this in both segments, or is it mainly behavioral, and maybe how much do you think your volume is being held back because of labor? Yeah, I mean, as we've said, I think throughout the last several years, it's been a very tight labor market, and I think it's affected the two businesses differently. On the acute side, we've generally been able to fill all of our necessary positions, but obviously, often at a higher cost using a temporary label and traveling nurses, etc. Although, you know, as we indicated in our prepared remarks, those numbers have declined significantly.

Speaker Change: Okay, Great and just one follow up.

Speaker Change: Talk about your prepared remarks to that.

Speaker Change: The labor shortage.

Speaker Change: No impact on volume in both segments or is it mainly behavioral and maybe how much do you think.

Speaker Change: Your line is being held back because of labor.

Speaker Change: Yes, I mean so.

Speaker Change: As we've said I think throughout the last several years.

Speaker Change: It's been a very tight labor market and I think it's affected the two businesses differently on the acute side, we've generally been able to fill all of our necessary positions, but obviously often at a higher cost using temporary labor and traveling nurses et cetera, although we.

Speaker Change: We indicated in our prepared remarks, those numbers have declined significantly on the acute side excuse me on the behavioral side.

Steve G. Filton: On the acute side, excuse me; on the behavioral side, in contrast, in a number of cases, we've simply been unable to fill our positions over the last several years, and it has curtailed our volume growth. Again, you know, I think our basic guidance for next year is mid-single-digit growth. Probably in the behavioral segment, that means, you know, 6, 7, 8 percent, again, split pretty evenly between price and volume

Speaker Change: In contrast in a number of cases, we simply unable to fill our positions over the last several years and it has curtailed our volume growth.

Speaker Change: Again.

Speaker Change: I think our base the guidance for next year is mid single digit growth probably in the behavioral segment that means 67, 8% again split pretty evenly between price and volume in the behavioral segment I think that means we're being a little bit more conservative about price, which has been running hot the last couple of.

Steve G. Filton: In the behavioral segment, I think that means we're being a little bit more conservative about price, which has been, you know, running hot the last couple of years, and a little bit more aggressive about volume, which has been relatively soft this year. I think Mark said our patient-day growth in 2023 was 2.1 percent, so our guidance assumes something greater than that. But we acknowledge that in some markets, in some hospitals, there are positions that we still have difficulty filling. You know, I don't know that we can say precisely, but we do think that we could run higher volumes if, in fact, we could fill all of our positions, but we know that's not a realistic outlook at the moment. Great, thank you.

Speaker Change: Years, and a little bit more aggressive about volume, which has been relatively soft. This year I think <unk> said, our patient day growth in 2023 was two 1%. So our guidance assumes something greater than that but we acknowledge that in some markets and some hospitals. There are positions that we still have difficulty filling.

Speaker Change: I don't know that we can say precisely, but we do think that.

Speaker Change: We could run higher volumes if in fact, we could fill all of our positions, but we know that's not a realistic.

Speaker Change: Outlook at the moment at least.

Speaker Change: Okay. Thank you.

Operator: Thank you. One moment for our next question. Our next question comes from Justin Lake with Wolf Research. Please go ahead. Thanks. Good morning.

Speaker Change: Thank you one moment for our next question.

Speaker Change: Okay.

Speaker Change: Our next question comes from Justin Lake with Wolfe Research. Please go ahead.

Justin Lake: I wanted to ask you first about the 2024 guide. Specifically, Nevada ends up at the high end of the range you gave before, obviously a great tailwind. X On that, it looks like Ibadaga at the midpoint in the 4% range, Dave. Just trying to understand, I think we're probably only splitting hairs a little bit, maybe expected 1%, 2% better than X Nevada. Just curious if there were any kind of one-timers in 23 where it's not really apples to apples that you want to point out, or anything within the guidance.

Justin Lake: Thanks, Good morning.

Justin Lake: Wanted to ask first about the 2024 guide.

Justin Lake: The specifically.

Justin Lake: The Nevada ends up at the high end of the range you gave before obviously a great tailwind.

Justin Lake: It looks like EBITDA growth at the midpoint in the 4% range. There just trying to understand I think.

Justin Lake: We're probably only we're splitting hairs, a little bit maybe expected, 1%, 2% better than X, Nevada, just curious if there were any kind of one timers in 'twenty, three where it's not really apples to apples that you want to point out or anything within the guidance for instance, as Mark mentioned.

Steve G. Filton: For instance, Mark mentioned in a top comp on inpatient. Maybe you can tell us what you think the Ibadaga by business is going to grow, and any thoughts on why that's maybe 1% or 2% shorter than typical. Yeah, so first of all, Justin, I mean, I think that there's a, There's a series of arguments being made that, Excluding the $150 million increase from Nevada, or quite frankly, excluding any of our Medicaid supplemental payments, it's really an appropriate way to look at the business because I think what we would argue quite strenuously is that one of the reasons, one of the significant reasons that our margins and earnings have lagged over the last several years is that Medicaid reimbursement in particular has not kept up with elevated costs, whether that's the labor costs across both businesses or the physician subsidy expense that Mark referenced in the acute business in his remarks.

Justin Lake: Tough comp on <unk>.

Justin Lake: On inpatient.

Justin Lake: Maybe you could tell us what you think the EBITDA by business is going to grow any any thoughts on why that may be one or 2% shorter than typical.

Speaker Change: Yeah. So first of all Jonathan I mean, I think that there is a.

Justin Lake: A.

Justin Lake: A series of argument to be made that excluding the $150 million increase in Nevada, or quite frankly, excluding any of our Medicaid supplemental payments.

Justin Lake: Really an appropriate way to look at the business because I think what we would argue quite strenuously is that one of the reasons one of the significant reasons that our margins and earnings have lagged over the last several years is that Medicaid reimbursement in particular has not kept up with elevated costs whether that.

Justin Lake: The labor costs across both businesses are the physician subsidy expense that mark referenced in the acute business in his remarks.

Steve G. Filton: So, you know, in our minds, the body increase specifically, like these Medicaid supplemental programs in general, are simply bringing us back to adequate rates that at least partially compensate us for some of these increased expenses. So, in my mind, ignoring them as we think about our growth year to year is not necessarily the correct way of doing it. But I'll try to answer your question, you know, the way you did.

Justin Lake: So in all our mines.

Justin Lake: <unk>.

Justin Lake: Nevada increase specifically, but these Medicaid supplemental programs in general are simply bringing us back to adequate rates that at least partially compensate us for some of these increased expenses and mining mine ignoring them as we think about our growth year to year.

Speaker Change: Not necessarily the correct way of doing it but I'll try to answer your questions.

Steve G. Filton: I'm, What I would say is, I do believe that, you know, after a couple of difficult years, difficult operating environments, and elevated costs, again, in labor, physician costs, you know, just general inflation sort of across the board, we've been a little bit cautious about our ability to expand margins. I would say that if we're able to achieve the revenue targets that we've set in our guidance, we'd be hopeful that we could do better than the margins that are embedded in the guidance. But, you know, as we've faced over the last several years, some of these expense increases have been a bit unpredictable. Physician subsidies in 2023 are a perfect example. So I think we've been prudently cautious in how we look at the profitability growth in both. That's helpful.

Justin Lake: The way you are.

Justin Lake: What I would say is I do believe that.

Justin Lake: After a couple of difficult years in difficult operating environments in elevated costs again in labor physician costs.

Justin Lake: Just general inflation sort of across the board.

Justin Lake: We've been a little bit cautious about our ability to expand margins.

Justin Lake: I would say that if we're able to achieve.

Justin Lake: The revenue targets that we've set in our guidance we'd be hopeful.

Justin Lake: That we could do better than the margins that are embedded in guidance, but as we faced over the last several years. Some of these expense increases have been a bit unpredictable physician subsidies in 2023 are a perfect example, so I think we have been prudently cautious about how we look at the profitability growth in both businesses.

Justin Lake: And then, Steve, as you mentioned on DPP, and I don't disagree that it's, you know, it's lumpy, but it should be part of the business. That said, it's gone, you know, to a place I never imagined it going, these supplemental payments. And I'm just curious, like, you guys actually put out a great table in the 10-K, where you actually showed us the estimated number for 2024. And I'm just sitting here looking ahead, Steve.

Speaker Change: That's helpful and then Steve as you mentioned <unk> I don't disagree that it.

Justin Lake: It's lumpy, but it should be part of the business that said it's gone.

Justin Lake: Two a place I never imagined to go in the supplemental payments.

Speaker Change: I'm just curious like you guys actually put out.

Justin Lake: Rate table in the 10-K.

Justin Lake: Where you actually showed up the estimated number for 2024 and I'm just sitting here looking at over time, David I think in 2019, it was $225 million of net benefit or a 13% of EBITDA now, it's an $809 million benefit or 41% of your EBITDA guidance in 2024 and I'm just.

Steve G. Filton: I think in 2019, it was $225 million of net benefit, or 13% of EBITDA. Now it's an $809 million benefit, or 41% of your EBITDA guidance in 2024. And I'm just curious, like, does this continue? Like, do you see any states that, you know, could be the next Nevada?

Justin Lake: Curious like do you think this continues like do you see any big that could be the next Nevada or do you see the potential that this starts to moderate at some point or kind of stabilized because it's obviously been a big part of growth over the last couple of years, just curious how you think about it going forward. Thanks.

Steve G. Filton: Or do you see the potential that, you know, this starts to moderate at some point or kind of stabilize? Because it's obviously been a big part of growth over the last couple of years. Just curious how you think about it going forward. Thanks.

Steve G. Filton: Yeah, so, look, I think you make a good point. I mean, I think if you look, and I appreciate your commenting on our disclosures, because I think we've provided probably more expansive disclosures in this area of Medicaid supplemental payments than any of our public peers. But if you go back, you know, whatever number of years you want to track it, you know, it has, as you've suggested, an upward trajectory. And, you know, that's not by accident.

Speaker Change: Yes, So look I think you make a good point I mean, I think if you look and I appreciate youre, commenting on our disclosures, but I think we've provided probably more expansive disclosures in this area of Medicaid supplemental payments than any of our public peers.

Justin Lake: But if you go back.

Justin Lake: Are there any years you want to track it.

Speaker Change: Hi, guys, you've suggested an upward trajectory.

Steve G. Filton: I mean, I think it's an acknowledgment by the states and by CMS that Medicaid reimbursement, again, in specific states, has really been inadequate and has really been inadequate over the last several years in, you know, an elevated inflationary environment with significant expense pressures, particularly in labor. And, you know, the states are providing these monies not, you know, as bonuses for hospital providers but, quite frankly, as necessary supplemental reimbursement to keep them in a position, to keep the providers in a position to be able to provide, you know, absolutely necessary services to a population that otherwise would not receive them. So, you know, quite honestly, there are other states that do not have these programs that are talking about adopting them. You know, we don't really disclose them until they get further down the road and are sort of submitted for approval and that sort of thing. But we know that discussions are happening in a number of other states.

Speaker Change: That's not by accident I mean, I think it's an acknowledgement by the states and by CMS that Medicaid reimbursement and again any specific state has really been inadequate and.

Speaker Change: Really been inadequate over the last several years in an elevated inflationary environment with significant expense pressures, particularly in labor.

Speaker Change: And the states are providing these monies Matt.

Speaker Change: Bonuses for hospital providers, but quite frankly as necessary supplemental reimbursement to keep them in a position to keep the provider is in a position to be able to provide.

Speaker Change: Absolutely necessary services to a population that otherwise will not receive them.

Speaker Change: So quite honestly there are other states that do not have these programs that are talking about adopting them, we don't really disclose them until they get further down the road and instead of our submitted for approval and that sort of thing, but we know the conversations that are happening in a number of other states.

Steve G. Filton: CMS, to your point, has certainly talked about the impact of the growth in these programs and has talked about, I think, limiting the growth. I don't think they're really talking about cutting back these programs, but they're talking about capping the growth, maybe capping the growth so that Medicaid reimbursement can't exceed commercial reimbursement. I don't think we're at risk of that in any of our states or, you know, just sort of capping the overall growth rate, et cetera.

Speaker Change: CMS to your point has certainly talked about the impact of the growth in these programs and has talked about I think limiting the growth I don't think they are really talking about cutting back these programs, but theyre talking about capping the growth maybe capping the growth at.

Speaker Change: So that Medicaid reimbursement can exceed commercial reimbursement I don't think were at risk of that in any of our states or just sort of capping the overall growth rate et cetera, So I could see that happening where the rate of growth slows, but it strikes me that once these programs are implemented the safety net hospitals that they are real.

Steve G. Filton: So I could see that happening where the rate of growth slows, but it strikes me that once these programs are implemented, the safety net hospitals that they are really designed, you know, to target become so reliant on them that it would be extremely difficult for the states and or CMS to stop the programs or curtail them in a, you know, terribly material way. I think that's the main point, that it's going to be hard to go backwards because of these safety net not-for-profit hospitals that rely on them. And so the crux of your question as to whether or not you can bank on this in the future, you know, we never know, but I think it's going to be hard for them to reverse a lot of this.

Speaker Change: Really designed to.

Speaker Change: To target becomes so reliant on them than it would be extremely difficult for the state and we're seeing see mass to stop the programs.

Speaker Change: Tell them.

Speaker Change: Terribly material way I think that's the main point that it is going to be hard to go backwards because of these safety net not for profit hospitals that rely on us and so the crux of your question as to whether or not you can bank on this in the future.

Speaker Change: We never know, but I think it's going to be hard for them in a reverse a lot of this and in fact to Steve's point, we're seeing a lot more activity in other states that we had never seen before so we think it's going to increase.

Steve G. Filton: And in fact, to Steve's point, we're seeing a lot more activity in other states that we haven't seen before. So we think it's going to work. Thanks, guys.

Speaker Change: Thanks Scott.

Operator: Thank you. One moment for our next question. Our next question comes from Joshua Raskin with Nefron Research. Please go ahead. Hi, thanks. Good morning.

Speaker Change: Thank you one moment for our next question.

Speaker Change: Our next question comes from Joshua Raskin with Nephron Research. Please go ahead.

Joshua Raskin: Question just started: looking at the longer term, as you sort of think about capital deployment, I'd be interested in your updated views on the relative attractiveness of the behavioral health and the acute care segments and specifically thinking, you know, whether you believe either one of those segments has a different growth or return profile, you know, one more attractive than the other. Yeah, I mean, obviously, anyone who looks at our financials can see that we are in a higher margin in the behavioral business, and I think probably higher returns, but I think we've always viewed our opportunities for capital deployment agnostically in the sense that we want to invest our next dollar of capital wherever we think it's going to earn the highest return. And that's not just about which line of business they do, but it's about the individual market opportunity. You know, Las Vegas is a great example.

Joshua Raskin: Hi, Thanks, and good morning.

Joshua Raskin: Question, just starting to look at the longer term as you sort of think about capital deployment I would be interested in your updated views on the relative attractiveness of behavioral health in the acute care segments and specifically thinking.

Joshua Raskin: Whether you believe either one of those segments has either a different growth and return profile.

Joshua Raskin: One more attractive than the other.

Joshua Raskin: Yes, I mean, obviously anyone who looks at our financials you can see that we earn a higher margin in the behavioral business I think probably higher returns, but I think we've always viewed our opportunities for capital deployment.

Joshua Raskin: Agnostic Lee in the sense that we want to invest our next dollar of capital wherever we think its going to earn the highest return and thats not just about which line of business, but it's about the individual market opportunity.

Joshua Raskin: Las Vegas is a great example, we've invested a tremendous amount of capital.

Steve G. Filton: We've invested a tremendous amount of capital, you know, hundreds of millions of dollars of capital over the last decade or more in Las Vegas, and I think for the most part, it has earned a significantly sort of outsized return. We are not about to stop investing in that market and protecting our number-one market share position in that market, et cetera. So our capital deployment decisions are, I think, made, as I said, market by market, you know, in terms of the demographics of the market, the competitive environment. And obviously, you know, as I think we commented in our remarks as well, a significant amount of capital has been devoted over the last, you know, five or six years to share repurchase because we think that that's been a compelling return and opportunity for us. And, you know, we'll continue to look at that as well. I'll just add one thing to what Steve said.

Joshua Raskin: Hundreds of millions of dollars of capital over the last decade or more in Las Vegas.

Joshua Raskin: And I think for the most part it is learned a.

Joshua Raskin: Significantly sort of outsized return.

Joshua Raskin: We are not about to stop investing in that market and protecting our number one market share position in that market et cetera. So our capital deployment decisions are I think made as I said.

Joshua Raskin: Market by market.

Joshua Raskin: In terms of the demographics of the market.

Joshua Raskin: The competitive environment and obviously.

Joshua Raskin: I think we commented in our remarks as well.

Joshua Raskin: A significant amount of capital has been devoted to over the last five or six years to share repurchase because we think that that's been a compelling return and opportunity for us and we will continue to look at that as well.

Steve G. Filton: We're looking, and I obviously agree with everything Steve said, but we're looking at more outpatient opportunities now than we probably have done in the past. And so I think more of them are being presented to us. And again, if we think that there are good returns there and that they make sense for increasing our success in our markets, we'll continue to look at those and deploy more capital to outpatient, maybe at a greater percentage than we did historically in both sectors. Right, so that makes sense.

Joshua Raskin: One thing to what Steve said, we're looking at.

Speaker Change: Obviously agree with everything Steve said, but we're looking at more outpatient opportunities now than we probably have done so done in the past and so I think more of them are being.

Speaker Change: Presented to us and again, if we think that there are good returns there and then it makes sense for.

Speaker Change: Increasing our success in our markets will continue to look at those and deploy more capital to outpatient maybe at a greater percentage than we did historically in both in both sectors.

Joshua Raskin: And so in theory, you know, those are margin accretive, those are certainly return accretive, but margin accretive, I guess, depending on, if there are more opportunities, maybe in the acute care segment, in the short term, maybe that's not the case. But I guess my follow-up question would be I'm curious about the current environment for additional supply; are you seeing any major capital deployed in your markets by competitors? And conversely, you know, sort of that Vegas example, what markets do you think are in need of more supply? Yeah, I mean, we, as you know, are opening a new hospital in Las Vegas late in 2024 in West Henderson.

Speaker Change: Right, so that makes sense and so CRE those are margin accretive lizard, certainly return accretive but margin accretive I guess, depending on nellix, there's more opportunities maybe in the acute care segment. The short term, maybe that's not the case, but I guess my follow up would be I am curious about the current environment for additional supply then are you seeing any major capital deployed in your markets.

Speaker Change: Competitors and I guess, Conversely, sort of add that Vegas example, what markets do you think are in need of more supply.

Speaker Change: Yes, I mean, so we as you know.

Speaker Change: We're opening a new hospital in Las Vegas late in 2024 and West Henderson.

Joshua Raskin: You know, that's on the heels of opening Henderson Hospital five years ago, if I'm getting my chronology correct. And that's been a, you know, a, you know, a very significant success. We've continued to, you know, expand our presence in South Texas and Riverside County, California, where we have significant market positions. We're building a new hospital in Palm Beach Gardens, Florida.

Speaker Change: On the heels of opening Henderson Hospital Hive years ago, if I'm getting my chronology, correct and Thats been.

Speaker Change: A very significant success.

Speaker Change: We've continued to expand our presence in south, Texas in Riverside County, California, where we have significant market positions. We're building a new hospital in Palm Beach Gardens, Florida.

Steve G. Filton: And, and, you know, one in the D.C. market where we've had a significant amount of historical success. So, and then, on the behavioral side, we continue to add beds and do joint ventures with non-hospital, non-profit hospital partners. So, you know, again, I think there are lots of opportunities. I think, you know, the challenge for us is to be judicious about where we do that. And to your point, Joshua, I think, you know, our competitors are also investing in markets. I think, you know, HCA is invested heavily in Las Vegas as well because it has been a very lucrative return market for both of us. So, you know, we see that it really varies by market; it would be difficult to characterize the sort of capital deployment of our competitors in a broad way. But yeah, we certainly see our competitors expanding as well. And again, our whole sort of view is we don't want to chase what our competitors are doing. We want to really take advantage of the strong franchise positions that we have and build on those, and, you know, earn greater returns by investing where we've had success. Very helpful, thanks.

Speaker Change: And one of the D C market, where we've had a significant amount of historical success. So.

Speaker Change: And then.

Speaker Change: The behavioral side, we continue to add beds into joint ventures with.

Speaker Change: Non hospital nonprofit hospital partners.

Speaker Change: So again I think there are lots of opportunities I think the.

Speaker Change: The challenge for us is to be judicious about where we do that and to your point, Josh I mean, I think our competitors are also investing in markets I think HCA has invested heavily in Las Vegas as well because it has been.

Speaker Change: A very lucrative return market for for.

Speaker Change: For both of Us so.

Speaker Change: We see that it really varies by market it would be difficult to characterize the sort of capital deployment of our competitors in a broad way, but yes, we certainly see.

Speaker Change: While our competitors expanding as well and again.

Speaker Change: Our whole sort of view is we don't want to chase what our competitors are doing we want to really take advantage of the strong franchise positions that we have and build on those and earn greater returns by investing where we've had success.

Speaker Change: Very helpful. Thank you.

Operator: Thank you. One moment for our next question. Our next question comes from Stephen Baxter with Wells Fargo. Please go ahead.

Speaker Change: Thank you one moment for our next question.

Speaker Change: Yeah.

Speaker Change: Our next question comes from Stephen Baxter with Wells Fargo. Please go ahead.

Stephen C. Baxter: Hi, thanks. Two quick ones on the acute business. I guess, you know, good to hear the physician fee expenses seem to be behind you there. I was wondering if you could comment a little bit on how or what level of contracting visibility you have for 2024 in particular, and then just a kind of step back on the acute business. You know, there's been a lot of focus on portfolio management at a couple of your peer companies, a couple examples of significant value creation. I was wondering how you think about the size of the acute care business, philosophically, and whether there could be examples, potentially, whether you've seen, you know, any increase in inbound interest on the acute side. I would love to just hear kind of how you guys are thinking about that as you contemplate capital across the company. Thanks.

Stephen C. Baxter: Alright, Thanks, Steve.

Stephen C. Baxter: Two quick ones on the acute business I guess good to hear that position fee expenses that you seem to think the worst of the insulation is behind you. There I was wondering if you could comment a little bit on how or what level of contract and visibility you have on 2024 in particular, and then just a kind of step back in the acute business, there's been a lot of focus.

Stephen C. Baxter: On portfolio management at a couple of your peer companies a couple of examples of significant value creation was wondering how you think about the size of the acute care business philosophically and whether there could be examples potentially.

Stephen C. Baxter: Potentially whether you've seen any increase in inbound interest on the acute side would love to just to your kind of how you guys are thinking about that as you contemplate capital across the company.

Steve G. Filton: Yeah, I think that the notion of contract visibility in terms of physician subsidy expense is a little bit flawed. The reality is, 18 months ago, if you had asked us and asked, frankly, any acute care hospital in the country, "Are your hospital-based physician contracts locked in? Do you have rates locked in?", the answer would have been yes.

Stephen C. Baxter: Okay.

Stephen C. Baxter: Yes, I think that the notion.

Stephen C. Baxter: <unk>.

Stephen C. Baxter: Contracting visibility in terms of the physician subsidy expense is a little bit flawed. The reality is 18 months ago. If you had asked and asked frankly any acute care hospital in the country.

Stephen C. Baxter: Our hospital based physician contracts locked and the AD rates locked in the answer would've been yes, and what we found were.

Steve G. Filton: And what we found was, because of changes in the operating environment, in particular the No Surprise Billing Act, et cetera, that made those businesses far less profitable, the providers of those businesses, the physician groups, the companies that were providing those services, simply were unable to do it. And they were coming to hospitals and saying, look, you either have to provide us with greater subsidies or we can't do this. There were a number of bankruptcies, you know, et cetera.

Stephen C. Baxter: Because of changes in the operating environment in particular, the no surprise billing act et cetera that made those business is far less profitable.

Stephen C. Baxter: The providers of those businesses the physician groups. The company that we are providing those services simply we're unable to do it and they were coming to hospitals and saying look you either have to provide us greater subsidies or we can do this there were a number of bankruptcies etcetera. So what I will say is I believe that over the.

Steve G. Filton: So, what I will say is that, over the last year and a half, most of our hospital-based physician arrangements have been recast, or they've been renegotiated with the incumbent providers. We've either, you know, gone out to RFPs and put in new providers, or we've employed, in some cases, the physicians ourselves. We did so, I think, really, beginning late in 22 and early in 23, such that the increased cost of doing all that is now largely reflected in our financial statements. And, you know, it shouldn't increase dramatically again in 2024. But I will say, again, back to the comments that I made in response to a question that Justin asked, I do think that the volatility in that area is one of the reasons why we've been a little more cautious in our overall guidance for 2024. Because I think, you know, all hospitals would say, you know, that was a cost that really surprised us in 2023. We think we have it under control.

Stephen C. Baxter: Last year and a half most of our hospital based physician arrangements have been recast they've either been renegotiating with.

Stephen C. Baxter: The incumbent providers, we've either gone out for Rfps and putting new providers are we employed in some cases the physicians ourselves.

Stephen C. Baxter: We've done so I think really beginning late in 'twenty, two and early in 'twenty three such that the increased cost of doing all of that is now largely reflected in our financial statements.

Stephen C. Baxter: And.

Stephen C. Baxter: Shouldnt increase again dramatically in 2020 for it but I will say again back to the comments that I made in response to a question that Jeff.

Stephen C. Baxter: I do think that the volatility in that area is one of the reasons why we've been a little more cautious in our overall guidance and 2024, because I think all hospitals would say that was a cost that really surprised us in 2023, we think we have it under control we think it's much.

Steve G. Filton: We think it's much more stable going into 2024, but we're certainly concerned about that, you know, popping up again or happening again in some other areas.

Stephen C. Baxter: More stable going into 2024.

Stephen C. Baxter: But we're certainly concerned about that.

Stephen C. Baxter: Hopping again or happening again in some other areas.

Steve G. Filton: You know, as to your second question about the portfolio and acute care opportunities, we track all the companies very carefully. We're familiar with what you're referring to as the question of portfolio rationalization for some of those other companies. We are most interested in what we can do in our current acute care markets. So, if there are opportunities to pick up other hospitals that are within markets that we are already present, we would certainly look to do that. But, in addition to that, we are familiar with the whole portfolios of these companies, and if there were opportunities to expand to new markets that we thought made sense, we would do that as well. Like Steve said earlier, we are kind of agnostic as to which side we deploy capital on, but if there are opportunities, we will certainly pursue them.

Stephen C. Baxter: Acute care development sure.

Stephen C. Baxter: To your second question about the portfolio in acute care opportunities.

Stephen C. Baxter: We track very carefully.

Stephen C. Baxter: All of the companies.

Speaker Change: Familiar with what Youre, referring to.

Speaker Change: To the question of portfolio rationalization for some of those other.

Speaker Change: Companies out there we are most interested in what we can do in our current acute care market. So if there are opportunities to pick up.

Stephen C. Baxter: Other hospitals that are within markets that we are already on our president we would certainly look to do that.

Stephen C. Baxter: But in addition to that we are familiar with the whole portfolios of these companies and if there were opportunities to expand into new markets that we thought made sense, we would do that as well.

Stephen C. Baxter: He said earlier, we're kind of agnostic as to which side.

Stephen C. Baxter: We deployed capital to.

Stephen C. Baxter: But if there are opportunities, we'll certainly pursue.

Steve G. Filton: And I know your question was not directed at the behavioral business, but I would make the point that we've done quite a bit of portfolio management in the behavioral business over the last 5 or 10 years. If somebody wants to, you know, take our 10K list of properties from 10 years ago and compare them to today, you can see that they're quite different.

Stephen C. Baxter: And I know your question was not directed at the behavioral business, but I would make the point that we've done quite a bit of portfolio management in the behavioral business over the last five or 10 years, if somebody wants to take our 10-K list of properties from 10 years ago behavioral properties and compare them to today you can see that they are quite different.

Steve G. Filton: We've closed facilities, we've sold facilities, we've merged facilities where they're underperforming and, you know, where we're looking to, you know, increase efficiencies. We tend not to disclose that, you know, because individual transactions are non-material, but there has been a fair amount of portfolio management on the behavioral side, and, again, we're open to that.

Stephen C. Baxter: Those facilities, we've sold facilities, we merge facilities.

Stephen C. Baxter: Where they are underperforming and where we're looking to increase efficiencies, we tend not to disclose that because individual transactions are not material.

Stephen C. Baxter: But there has been a fair amount of portfolio management on the behavioral side and then again, we're open to that.

Stephen C. Baxter: Okay.

Speaker Change: I think we're ready for next question. Thank.

Operator: One moment for our next question. Our next question comes from Kevin Fischbeck with Bank of America. Please go ahead.

Speaker Change: Thank you.

Speaker Change: One moment for our next question.

Speaker Change: Okay.

Speaker Change: Our next question comes from Kevin Fischbeck with Bank of America. Please go ahead.

Kevin Mark Fischbeck: Great. I was wondering if you could give us an update on where wage growth is across both the acute and the psych businesses today. And, you know, to the extent that, um, labor is still a gating factor on the psychological side of things, how do you think about the incremental return of just raising wages by a couple percent to potentially drive more volume back to the facility? Yeah, I would say that wage growth has moderated a little bit from its highs in both segments. I think we're probably in that four to 5% range of annual wage inflation. And obviously, we've made again, I think we send out prepared remarks, a fair amount of progress in reducing premium pay, which includes, you know, temporary traveling labor and overtime and shift differential net and that sort of thing. Um, and, you know, it's, I'm sorry, it's the same question.

Kevin Mark Fischbeck: Great I was wondering if you could give us an update on where.

Kevin Mark Fischbeck: Wage growth is across both the acute and the cycle businesses.

Kevin Mark Fischbeck: Today and to the extent that.

Kevin Mark Fischbeck: Labor is still a gating factor on the on the psych side of things.

Kevin Mark Fischbeck: How do you think about the incremental return of just raising wages a couple of percent to potentially drive more volume back to the facilities.

Kevin Mark Fischbeck: Yes, I would say that wage growth has moderated a little bit from its highs in both segments I think we're probably in that 4% to 5% range.

Kevin Mark Fischbeck: Annual wage inflation and obviously, we've we've made is again I think we said in our prepared remarks, a fair amount of progress in reducing premium pay which includes temporary traveling labor and overtime and shift differential that sort of thing.

Kevin Mark Fischbeck: And.

Kevin Mark Fischbeck: No, well, the question is, we look quite often as to whether or not it makes sense to raise wages as a way to increase capacity. And we have done that in certain areas. It's not as easy as, you know, one might think, but we definitely look at that, and we try to figure out if there are areas where that would make more sense.

Speaker Change: Im sorry.

Kevin Mark Fischbeck: The first question as we look.

Kevin Mark Fischbeck: Quite often as to whether or not it makes sense to raise wages as a way to increase capacity and we have done that in certain areas. It's not as easy as one might think but we definitely look at that and we try to figure out if there are areas where that would make more sense.

Steve G. Filton: The other factor for us is that we have high occupancy in a lot of these facilities. So we're constantly looking for and reviewing ways that we can add beds to the facilities to, you know, increase capacity. And one of the things that Steve talks about, the portfolio rationalization that we've done on the behavioral side in the last few years, what that also allows us to do is spend less time on facilities that are not growing and really spend more of our time figuring out how to do programmatic growth, not just beds, but changing program offerings at certain facilities and changes like that that we think will have a positive effect. So we're doing a lot of that as well But I would just add, I think, Kevin, to Thunder: you're asking, you know, the efficacy of paying, you know, increased wages to attract, you know, that last 1% or 2% of the workforce that would help us increase our volumes. And that's really the time and why we use temporary labor.

Kevin Mark Fischbeck: The other factor for us as we have high occupancy and a lot of these facilities. So we're constantly looking and reviewing ways that we cannot beds to the facilities to increase capacity and one of the things when Steve talks about the portfolio rationalization that we've done on the behavioral side in the last few years with that also allows.

Kevin Mark Fischbeck: US to do is spend less time on facilities that are not growing.

Kevin Mark Fischbeck: Really spend more of our time figuring out how to do programmatic growth not just beds, but just changing program offerings at certain facilities and changes like that that we think will have a positive effect. So we're doing a lot of that as well, but I would just add I think everyone to Thunder, you're asking do we think about.

Kevin Mark Fischbeck: The.

Kevin Mark Fischbeck: The efficacy of paying increased wages to attract that last 1% or 2% of the workforce that would help us increase our volumes and thats really the what where and why we use temporary labor, but just the challenges.

Steve G. Filton: Because the challenge is, you know, if we hire somebody for that last position, or the last two or three positions in the facility, and they're making $5 an hour more than everybody else in the facility, in short order, everybody in the facility will be making that same wage. So that's the consideration we have to use. We certainly acknowledge that we want to fill every position we can, but we understand that there are implications, you know, to paying people up to do that. Okay, great.

Kevin Mark Fischbeck: If we hire somebody for that last position over last two or three positions in the facility and theyre, making $5 an hour more than everybody else in the facility in short order everybody in the facility, we will be making that same way. So that's the consideration we have to use we certainly acknowledge that we want to fill every position we.

Kevin Mark Fischbeck: Can we understand the implications.

Kevin Mark Fischbeck: <unk>.

Kevin Mark Fischbeck: Paying up to do that.

Kevin Mark Fischbeck: And then I guess I just want to maybe push back a little bit on the guidance for acute care hospital volume growth, kind of just being more pre-pandemic growth rates of 2 or 3%. I guess when I look at your same store volume growth, you know, going back to 2019 and just trying to get forward, I think you're only about 4% above. In 2019, we might have thought your volumes would be 10 or 15% above those levels, so why is normal growth off of only 4% the right number? Shouldn't there be more pent-up demand or normalization of demand within your markets? Why only normal growth?

Speaker Change: Okay, Great and then I guess I just wanted to maybe push back a little bit on the on the.

Speaker Change: Guidance for acute care hospital volume growth.

Speaker Change: Just being more pre pandemic growth rates of <unk>.

Speaker Change: Two or 3% I guess when I look at your same store volume growth going back to 2019, and just trying to get forward I think youre only like about 4% above.

Speaker Change: Where you were in 2019 five years later, when you would normally be thinking you'd be growing 2% to 3%. So you are still.

Speaker Change: 2019, we might've thought your volumes would be 10 or 15% above those levels. So why as normal growth off of only 4% up like the right number and there'll be more.

Speaker Change: Pent up demand or normalization in demand within your markets filing normal growth.

Steve G. Filton: Yeah, I mean, and again, though, and particularly the comparison that you're talking about, Kevin, I think it's wholly inappropriate to exclude the $150 million of Nevada supplemental from a comparison to 2019, because I think what we would say in Nevada is we've had, you know, virtually no Medicaid increases for this period of time, and as a result, and we've been questioned about this, you know, our margins in Nevada have declined, et cetera. So to then say that, you know, we're going to exclude the $150 million from comparing where we were margin-wise to 2019, again, I think is a flawed approach, and again, that's not to say we believe that even with, you know, the supplemental payments, et cetera, there is still more growth to go in the acute division and more, you know, more recovery to be had to get closer to those pre-pandemic margins, but I think, you know, excluding the supplemental payments from that is a flawed way of looking at it.

Speaker Change: And again, though particularly the comparison youre talking about Kevin I think is wholly inappropriate to exclude the $150 million of Nevada supplement all from a comparison to 2019, because I think what we would say, Nevada as we've had.

Speaker Change: Virtually no Medicaid increases for this period of time and as a result, and we get questions about our margins and Nevada have declined et cetera. So to then say that we're going to exclude the $150 million from comparing where we where our margin wise to 2019 again I think is a flawed approach and again that's not just.

Speaker Change: We believe that even with.

Speaker Change: The supplemental payments etcetera, there is still more growth to go in the acute division and more we will.

Speaker Change: More recovery to be had to get closer to those pre pandemic margin, but I think excluding the supplemental payments and that is a flawed way of looking at it.

Steve G. Filton: I'm sorry, my question was kind of more around the volumes. It feels, to me, like your volume guide. You still seem like your volumes haven't really rebounded to the long-term trend line yet, so I'm still not sure why you're only growing normal. Wouldn't you still be trending back to the long-term growth rate in volume? Shouldn't you be growing faster than 2 to 3 for another couple of years?

Speaker Change: I'm sorry.

Speaker Change: I was kind of more around on volumes like it feels like to me like your volume guidance.

Speaker Change: You still think Youre always havent really rebounded to a long term trend line, yet so I'm still not sure why you're only growing normal wouldn't you still be trending back to the long term growth rate and volume sudden you'd be growing faster than two to three for another couple of years.

Kevin Mark Fischbeck: I mean, our adjusted admissions in 2023 grew by five, you know, or I think actually over 6% for the year. Obviously, I think those are historically high levels of admission growth. We're projecting that at some point, that starts to level off. All right, thanks.

Speaker Change: Our adjusted admissions in 2023 grew by five.

Speaker Change: And I think it will actually over 6% for the year.

Speaker Change: Honestly I think those are historically.

Speaker Change: Hi, a high level of admission growth.

Speaker Change: We're projecting that at some point that starts to moderate.

Speaker Change: Alright. Thanks.

Operator: Thank you. One moment for our next question. Our next question comes from Jason Casorla with Citi. Please go ahead. Great, thanks. Good morning.

Speaker Change: Thank you one moment for our next question.

Speaker Change: Our next question comes from Jason Cazorla with Citi. Please go ahead.

Jason Casorla: I just want to ask about behavioral, you know, you've talked in the past about the labor backdrop as the gating factor for bed growth. You know, you've discussed the portfolio rationalization efforts. I guess occupancy rates are still some, you know, 200 to 300 basis points below pre-pandemic levels. With labor improvement, I know you're expecting volume growth to accelerate in 2024. Can you just give us a sense of what you're contemplating on the behavioral bed growth side moving forward? And maybe just the opportunities a little bit more around that expansion at current facilities against, you know, maybe perhaps the pipeline of JVs or potential M&A for behavioral business as well? Thanks.

Jason Cazorla: Great. Thanks, Good morning, I, just wanted to ask on behavioral.

Jason Cazorla: In the past around the labor backdrop.

Jason Cazorla: Is the gating factor for bad growth.

Jason Cazorla: Discuss the portfolio rationalization efforts I guess occupancy rates are still some to 200 300 basis points below pre pandemic levels with labor improvement I know, you're expecting volume growth to accelerate in 'twenty. Four can you just give us a sense on what you are contemplating on the behavioral bed growth side moving forward and maybe just the opportunities a little bit more <unk>.

Jason Cazorla: <unk> bed expansion at current facilities again, maybe perhaps the pipeline of GBS or potential M&A for behavioral business as well.

Steve G. Filton: Yeah, I mean, I think we added somewhere around 250 new beds in behavioral this year. We will probably add a similar number, maybe a little bit more next year. But I think, you know, the comment that Mark made is, you know, I think we're seeing, you know, frankly, just as much opportunity on the outpatient side as well. You know, so we are expanding and expanding our existing outpatient services across all lines of service, including addiction treatment, etc. And, you know, I plan to continue to do that as well.

Speaker Change: Yes, so I think we added somewhere around 250, new beds in behavioral this year.

Speaker Change: We will probably add a like number so maybe a little bit more next year, but I think the <unk>.

Mark Me: Mark Me is I think we're seeing frankly, just as much opportunity on.

Mark Me: On the outpatient side.

Mark Me: Well, so we are expanding and extending our existing outpatient services.

Mark Me: Across all lines of service, including addiction treatment et cetera, and plan to continue to do that as well.

Steve G. Filton: You know, I think, as Josh Raskin mentioned, that's kind of a higher-returning, higher-margin business. So, you know, that's attracting, you know, more of our investment dollars there. Okay, fair enough.

Mark Me: I guess, Josh Raskin mentioned, you have that kind of a <unk>.

Mark Me: Higher returning a higher margin business. So that's.

Mark Me: That's attractive.

Mark Me: More of I think our investment dollars.

Steve G. Filton: And then, just following up on an earlier question a bit, just curious about your expectation around payer mixed dynamics for next year, you know, obviously, redeterminations, exchange growth, you've talked about this return of low-acuity Medicare volumes in 2023, just any kind of expectation around how that trends into next year or into 2024. And then, can you remind us what percentage of admissions are uninsured at this point? And if, you know, given the backdrop, if you're seeing any indication that those uninsured admissions could be picking up, just any color would be great. Thanks.

Speaker Change: Okay Fair enough and then just following up on an earlier question just curious on what your expectation around payer mix dynamics are for for acute next year, obviously, redetermination exchange growth and you've talked about this.

Jason Cazorla: Return of low acuity Medicare volumes in 'twenty three.

Jason Cazorla: Just any kind of expectation around how that trends into next year or in the 'twenty four and then can you remind us what percentage of admissions are uninsured at this point.

Jason Cazorla: Just given the backdrop, if youre seeing any indication that those uninsured admissions could be picking up.

Speaker Change: Any color there would be great. Thanks.

Steve G. Filton: Now, we haven't seen a significant change in uninsured admissions, which run in sort of the mid-single digits, you know, 5 or 6% of our overall admissions. You know, I think the big change in payer mix, which I think a number of both providers and payers have talked about in 2023, is that as we've emerged from the pandemic, I think we've seen more of those lower acuity, I think especially Medicare lower acuity procedures that patients had deferred or postponed during the pandemic taking place. And again, as our volumes moderate going forward, and they have been moderating, you know, not just for us but certainly for our peers as well in 2023, I think it's those lower acuity volumes that are especially moderating, which I think to a degree is what's driving the increase, let's say, in the fourth quarter in our acuity and pricing. Thank you. One moment for our next question. Our next question comes from A.J. Rice with UBS.

Jason Cazorla: No we haven't seen a significant change in uninsured admissions, which Ron and sort of the mid single digits, five or 6% of our overall emissions.

Jason Cazorla: I think what the big change in payer mix, which I think a number of both the providers and payers have talked about in 2023 is that as we've emerged from the pandemic I think we've seen more of those lower acuity, I think, especially Medicare lower acuity procedures that patients had deferred or postponed during the pandemic.

Jason Cazorla: Taking place and again as our volumes moderate going forward and they have been moderating not just for us.

Jason Cazorla: Peers as well in 2023.

Jason Cazorla: Those lower acuity volumes, especially of moderating, which I think to a degree of what's driving the.

Jason Cazorla: The increase let's say in the fourth quarter in our acuity and pricing dynamic.

Speaker Change: Thank you one moment our next question.

Speaker Change: Okay.

Speaker Change: Our next question comes from AJ Rice with UBS. Please go ahead.

A.J. Rice: Please go ahead. Hi everybody. Maybe just on the comment on premium pay first. I think you said you started the year at $153 million in the first quarter, and you were $67 million as you exited the year. The $67 million is a good run rate as a further opportunity, and putting it all together, how much of a tailwind do you have from reduced premium pay in 2024 versus 2023? Yeah, so just to clarify, A.J., the $153 million was in the first quarter of 2022, not 2023. So yeah, obviously that number has come down considerably. But I think we still think that there's, you know, we ultimately have talked about getting to, you know, a premium pay number in the sort of $50 million quarterly range. So, you know, there's still $50 or $60 million of opportunity. But a lot of that is dependent on what happens to volumes.

AJ Rice: Hi, everybody.

AJ Rice: Maybe just to the comment on premium pay first.

AJ Rice: I think you said you started the year at $153 million in the first quarter and you were $67 million as you exited the year do you think.

AJ Rice: The $67 million is a good run rate as a further opportunity.

AJ Rice: And altogether, how much of a tailwind do you have from reduced premium pay 24 versus 23.

Speaker Change: Yes, so just to clarify Jay the $153 million was the first quarter of 2022 not 2023.

Speaker Change: So yes.

Speaker Change: Obviously that number has come down considerably I think we still think that there is we are.

Jay: Ultimately have talked about getting to a premium pay number in the sort of $50 million a quarter range. So there's still $50 million to $60 million of opportunity a lot of that is dependent on what happens to volumes.

Steve G. Filton: I think that premium pay has remained a little bit higher than we originally anticipated because a few volumes have not been as strong as they've been. But yeah, I mean, you know, we certainly have the goal of further reducing premium pay. I'm not sure we're going to get back to the pre-pandemic levels where it ran about $35 million a quarter, but we should be able to get at least part of the way. And I don't have the full year number for premium pay, but how much of a tailwind would that create, 24 versus 23, do you have that number by any chance? Yeah, so I think that would probably be I'm doing this off the top of my head, AJ, but I think that would probably, on its own, be like a 30-40 million improvement because I think in the first half of the year, we were running about 85, of course.

AJ Rice: That premium has remained a little bit higher than we originally anticipated because of key volumes have been as strong as they've been.

AJ Rice: But yes, we certainly had the goal of further reducing our premium K I'm not sure we're going to get back to the pre pandemic levels, where it ran about $35 million a quarter, but we should be able to get at least part of the way there.

Speaker Change: It is.

AJ Rice: I don't have the full year number for premium pay but how much you would be just stayed at 67.

AJ Rice: Much of a tailwind would that create 24 versus 23 do you have that number by any chance.

Speaker Change: So I think that would probably again I'm doing this off the top of my head, but I think that would probably.

AJ Rice: On its own do you like $30 $40 million improvement because I think in the first half of the year, we were running about 85 a quarter.

Steve G. Filton: Okay, and then my follow-up question, just to ask a little bit more about Medicaid, both from the supplemental and the redeterminations. On the supplemental, I know we've talked about individual programs. When you put it all together, what you got in twenty-three versus what you're expecting in twenty-four, how much? I tempered my life when I drank, aw, my health worsened, as the generally nature of a change is.

AJ Rice: Okay.

Speaker Change: And then my follow up question I'll, just ask a little bit more.

Speaker Change: Medicaid both through the supplemental of the Redetermination on the supplemental I know we've talked about individual programs.

When you put it all together what you got in 'twenty three versus what you're expecting in 'twenty four.

Speaker Change: How much of a change is it.

Speaker Change: I guess it could be gross or net after provider taxes is trying to understand that and then and then you mentioned I think in the press release Jordan.

Steve G. Filton: I guess it could be gross or a provider tax. The Press Release saw Medicaid. Yeah, so as I think somebody earlier has suggested, I mean, we give some pretty robust disclosure about these Medicaid supplemental programs in the 10-K that we filed last night. I'd refer people to that. But we have a table that shows the supplemental increase from 23 to estimated 24, which is about a $200 million increase. Obviously, the 150 and a lot is the biggest piece of that. But you can see a lot of the details if you take a look at that schedule.

AJ Rice: Hey.

AJ Rice: Medicaid Redetermination as were a headwind for the behavioral business I'm, just wondering if you flesh that out a little bit more.

AJ Rice: Yes.

AJ Rice: I think somebody earlier had suggests that I mean, we gave some pretty robust disclosure that these medicaid supplemental programs in the 10-K that we filed last night I'd refer people to that but we have a table that shows the supplemental increased from 23 to estimating 24 is about $200 million increase obviously the 150 <unk>.

AJ Rice: The biggest piece of that but you can see a lot of it.

Steve G. Filton: And, you know, as far as Medicaid redeterminations are concerned, I think what we've said, A.J., is that in the states, which probably are most notably Texas on the acute side and some other southern states like Louisiana, Arkansas on the behavioral side, it's largely affected the child and adolescent population from our perspective, and that's had a relatively minimal effect on the acute business, a bigger effect on We've seen some softness, I think, in the last six months of 2023 in our child and adolescent business, in the behavioral business, that we attribute to a large extent to these redeterminations. We think we're sort of out of the works with that.

AJ Rice: If you take a look at that schedule.

AJ Rice: And as far as Medicaid Redetermination I think what we've said a J is that in the state.

AJ Rice: Which probably most notably Texas on the acute side and some other taxes and some other southern states like Louisiana, Arkansas on the behavioral side.

Steve G. Filton: It's largely affected the child and adolescent population from our perspective and that had a relatively minimal effect on the acute business a bigger effect on the behavioral business we've seen a.

AJ Rice: Softness I think in the last six months of 2023, and our child that license business in the behavioral business that we attribute to a large extent to these redetermination. We think we're we're sort of out of the worst of that the redetermination for the most part of the dis enrollment has taken place we're already starting to see some of these some of this.

Steve G. Filton: The redeterminations, for the most part, or the disenrollments that have taken place, we're already starting to see some of these, some of this population reenrolled either in Medicaid or alternative programs like CHIP or in commercial exchange programs. So I think that we imagine that the impact of redeterminations in 2024 will be limited. Okay. All right. Thanks a lot.

AJ Rice: Population, we enrolled either Medicaid or alternative for Atlantic careful and promotional change program. So I think that we're imagining that the impact of Redetermination during 2024 will be limited.

Speaker Change: Okay, alright, thanks, a lot.

Operator: Thank you. One moment for our next question. Our next question comes from Pito Chickering with Deutsche Bank. Please go ahead.

Speaker Change: Thank you one moment for our next question.

Speaker Change: Our next question comes from Peter Chickering with Deutsche Bank. Please go ahead.

Pito Chickering: Yeah, good morning, guys. On behavioral, the good thing for 24 guidance, I think half of the revenue guidance is coming from pricing. Pricing for behavioral health has been very robust for the last few years. If you talk about the sustainability of that strong pricing you've seen, looking at the exit rate in the fourth quarter, how we should think about a step down in 24, and then any color on sort of what you're seeing between the different payer mixes, you know, Medicare rate increases versus Medicaid and Medicare. Sure, Pito.

Pito Chickering: Good morning, guys on behavioral.

Pito Chickering: 424 guidance half of the revenue guidance is coming from pricing pricing for behavioral has been very robust for the last few years can you talk about the sustainability of that strong pricing you've seen looking at the exit rate in fourth quarter. How we should think about a step down in 'twenty four and then any color on sort of what youre seeing between the different payer mixes.

Speaker Change: Managed care rate increases versus Medicaid and Medicare that would be great.

Steve G. Filton: So again, you know, I think, as we've commented, the strong behavioral pricing, I think, has really been driven in 2023 by two things. One is an actual sort of softness in our residential, and that's where a lot of the child and adolescent business is. And so a higher weighting of acute patient days to residential patient days. And that, by definition, sort of increases what, you know, we would describe as pricing the revenue per adjusted day.

Pito Chickering: Sure So again.

Steve G. Filton: As we commented the strong behavioral pricing I think has really been driven in 2023 by two things one is actual sort of softness in our residential and that's where a lot of the child and adolescent businesses.

Steve G. Filton: And so a higher weighting of acute patient days to residential patient days and that by definition sort of increases.

Speaker Change: We would describe as pricing or revenue per adjusted day.

Steve G. Filton: As we emerge from the disenrollment challenge, as we emerge from the handful of residential facilities that have particular regulatory challenges in 2023, I think we'll see, you know, residential growth starting to outpace acute growth, and that will have a kind of a muting effect on pricing. The other issue that we have talked about pretty consistently for the last 12 or 18 months is a pretty aggressive effort on our part to go back to payers, particularly in markets and in facilities where we are already capacity constrained, and negotiate higher rates. And that's, I think, particularly managed Medicaid payers who have been giving us, I think, historically, less than adequate increases. We've had a lot of success doing that, but to some degree, we're starting to see that impact.

Steve G. Filton: As we emerge from this enrollment challenge as we emerge from the handful of residential facilities that had particular regulatory challenges.

Speaker Change: In 2023, I think we will see residential growth starting to outpace acute growth and that will have a kind of a muting effect on pricing. The other issue that we have talked about pretty consistently for the last 12 or 18 months.

Speaker Change: It's a pretty aggressive effort on our part to go back to payers, particularly in markets and in facilities, where we are already capacity constrained and negotiate higher rates and that's I think particularly managed Medicaid payers, who have been giving us I think historically less than adequate increases.

Steve G. Filton: We've had a lot of success doing that but to some degree we're starting to anniversary that impact. So again, while we are certainly going to continue to strive for.

Steve G. Filton: So, again, while we are certainly going to continue to strive for, you know, the maximum increases we can get from our payers, our general sense of our 2024 budget is that pricing and acuity will decline a little bit on the behavioral side, but that will be offset by increased costs. Okay, great. And then on acute margin guidance for 2024, it sounds like physician reimbursement is now just slightly over inflation. Full-time labor is normal.

Steve G. Filton: The maximum increases we can get from our payers our general sense of our 2020 for Biogen is that.

Speaker Change: Pricing and acuity will decline a little bit on the behavioral side of the offset by increased volumes.

Steve G. Filton: Okay, Great and then on acute margin guidance for 2024, it sounds like.

Steve Filton: Physician reimbursement is now slightly over inflation full time labor is normal.

Pito Chickering: Contract labor is a $30-$40 million savings, guiding to flat margins despite revenues growing 5-6%. Are there any known headwinds for 2024 to offset all these tailwinds, or is this simply just pure conservatism at this point? Yeah, again, as I think I tried to frame it before, Pito, I think it is kind of a broad caution and conservatism that we've taken, but informed by, you know, the pressures of the last couple of years, you know, and when we were sitting here, a good example is physician expenses. You know, when we were on this exact call a year ago, we were projecting a pretty big increase in physician expenses, a $50, $60 million increase. It turned out to be twice that.

Steve G. Filton: Labor or is it $30 million to $40 million savings guiding to flat margins. Despite revenues growing 5%, 6% are there any known headwinds for 2024 to offset all of these tailwind or is it simply just pure conservatism at this point.

Speaker Change: Yes again.

Pito Chickering: I think I tried to frame it before I think it is.

Pito Chickering: Kind of a broad caution and conservatism that we've taken.

Pito Chickering: But informed by the pressures over the last couple of years.

Pito Chickering: When we were in when we were sitting here in a good example is the physician expands when we were on this exact call a year ago, we were projecting a pretty big increase in provision expense of $50 million to $60 million increase.

Steve G. Filton: So even when we're aware of issues, et cetera, the last couple of years have created a little bit more volatility than we're accustomed to. So I think we're trying to account for some of that in what I, you know, view as a fairly, you know, cautious approach to guidance. So let me ask that differently, you know, ignoring the $30, $40 million contract savings and assuming nothing, you know, normal labor, et cetera, et cetera, on a five to six percent revenue growth, what would be the normal margin expansion coming from that? Yeah, I think that's a hard question to answer, Pito, because, you know, it's sort of, you know, how do you define normal when we're in a high inflationary environment, etc.

Pito Chickering: You got to be twice that.

Speaker Change: So even when we're aware of issues et cetera last couple of years.

Steve G. Filton: It created a little bit more volatility than we're accustomed to so I think where we were trying to account for some of that in U S.

Steve G. Filton: A fairly cautious approach to guidance.

Steve G. Filton: So let me ask it differently, ignoring the $30 million to $40 million contract savings.

Speaker Change: Assuming nothing.

Steve Filton: Normal labor et cetera, et cetera on a 5% to 6% revenue growth what would be the normal margin expansion coming from that.

Speaker Change: Yes, I think Thats a hard question to answer.

Steve G. Filton: Because it sort of how do you define normal.

Steve G. Filton: We're in a highly inflationary environment et cetera.

Pito Chickering: You know, I'll just repeat what I said before. I believe that our view is if we can achieve the revenue targets that are embedded in our guidance, we'd be hopeful to, you know, bring out more efficiencies and, therefore, higher margins from the business, which are currently reflected in the, Great, thanks so much. Thank you. One moment for our next question. Our next question comes from Whit Mayo with Lyrinc Partners. Please

Steve G. Filton: I'll just repeat what I said before I believe.

Speaker Change: Our view is if we can achieve the revenue targets that are embedded in our guidance we'd be hopeful to.

Speaker Change: We got more efficiencies and therefore higher margin from the business that are currently reflected in the guidance.

Whit Mayo: Great. Thanks, so much.

Whit Mayo: Thank you one moment for our next question.

Speaker Change: Our next question comes from Whit Mayo with Leerink partners. Please go ahead.

Operator: Hey, thanks. First, Steve, I just wanted to point out that you have also considerably exceeded those initial Medicaid supplemental payment disclosures in your 10-K every year, if I recall correctly. So I just wanted to mention that for the record. But my question really on Medicaid is, there's been a theme for years now where many states have gotten workaround solutions to the IMD where Medicaid is now covering adults that actually have substance use disorders through 1115 waivers. I'm just wondering if there's any evidence that you see that those policy actions are now manifesting into any volume growth for you. Yeah, I mean, there are a couple of individual facilities and markets that I think have been affected by IMD waivers. I would say that, broadly, it has probably not had a material effect on this segment, but there are specific examples I could point to. But yeah, no, I wouldn't say it's had a broadly material impact.

Whit Mayo: Hey, Thanks first Steve I, just wanted to point out that you have also considerably exceeded those initial Medicaid supplemental payment disclosures in your 10-K every year I can recall, so I just wanted to mention that for the record, but my my question really on Medicaid as there has been a theme for for years now where many states have gotten work around solutions too.

Operator: The IMD, where Medicaid is now covering adults that actually have substance use disorders through 11, 15 waivers I'm just wondering if there's any evidence that you see that those policy actions are now manifesting into.

Operator: Any volume growth for you.

Operator: Yes, I mean, there are a couple of individual facilities in markets that I think has been affected by IMD waivers.

Operator: Say that broadly it has had.

Operator: Not a material effect on the segment, but there are specific examples I can point to.

Operator: But yes, no I wouldn't say in fixed broadband materially.

Whit Mayo: Okay, and back to your comments on outpatient now elevating itself as a higher priority now that Medicare is reimbursed for IOP and partial hospitalization programs. Just wondering if that opens up obvious opportunities for you, if that's what you're referencing when you talk about outpatient for behavioral. Yeah, I mean, it really, I think, you know, is the full continuum. We have always had what we call intensive outpatient programs in our behavioral facilities or partial hospitalization programs, which are sort of a means of stepping down from, you know, the inpatient facility. But I think, you know, what we're focusing now on, besides those programs, which we continue to maintain, is more sort of pure outpatient, in many cases And, you know, to your point, it's Medicare Advantage, it's the Medicare Opportunity. But, you know, again, we're finding the need for behavioral care to be growing across all segments of the population and across all diagnoses, including addiction and Alzheimer's.

Operator: Okay.

Whit Mayo: And back to your comments on outpatient now elevating itself is higher.

Whit Mayo: Higher priority now that Medicare is reimbursing for IOP in partial hospitalization programs. Just wondering if that opens up obvious opportunities for you. If that's what you're referencing when you talk about outpatient for behavioral.

Whit Mayo: Yes, I mean, it really I think.

Whit Mayo: For the full continuum.

Whit Mayo: We have always had.

Whit Mayo: What we call intensive outpatient programs.

Whit Mayo: So as a partial hospitalization programs, which is sort of a means that stepped down from the inpatient facility, but I think what we're focusing now on.

Whit Mayo: Besides those programs, which we continue to maintain its more sort of pure outpatient in many cases not necessarily even.

Whit Mayo: <unk> with an existing facility et cetera, but standalone outpatient.

Whit Mayo: To your point, it's the Medicare advantage Medicare opportunity, but it's also again.

Whit Mayo: <unk> the need for behavioral care can be growing across all segments of the population.

Whit Mayo: And across all diagnoses, including addiction.

Steve G. Filton: Thanks. Thank you. One moment for our next question. Our next question comes from Sarah James with Cantor Fitzgerald. Please go ahead.

Speaker Change: Okay. Thanks.

Sarah James: Thank you one moment for our next question.

Steve G. Filton: Our next question comes from Sarah James with Cantor Fitzgerald. Please go ahead.

Operator: Thank you. So earlier, your comments on pricing about being a little bit below the halfway point of the five to six percent, I'm assuming that were blended products. Could you speak to what you're seeing on the commercial rate increase side? Because some of your peers are talking about kind of mid-single digits on that and seeing a little bit of traction in being able to work in physician fees. So I'm wondering what that looks like for you guys on the acute side. Yeah, I think those characterizations are fair, you know, so if we're talking about an overall pricing assumption in our guidance, two and a half to 3%, you know, we're probably getting twice that on our commercial business, you know, so, you know, five, 6%. And, you know, in terms of specifics about whether we're able to cover increases in, you know, our physician subsidies, etc., that really varies, you know, contract by contract, etc.

Speaker Change: Thank you.

Operator: So early in your comments on pricing about being a little bit below the halfway point of the 5% to 6%.

Operator: I'm, assuming that was blended products could you speak to what youre seeing on the commercial rate increases I guess some of your peers are talking about kind of mid single digits on that and seeing a little bit attraction of being able to work in.

Operator: The physician fees. So I'm wondering what that's looking like for you guys on that Keith.

Operator: Yes, I think those characterizations are fair. So if we're talking about overall and overall pricing assumption in our guidance to 3%, we're probably getting twice that on our commercial business.

Operator: <unk>, 5%, 6% and in terms of specifics of that whether we're able to cover increases in acquisition subsidies et cetera that really varies contract by contract et cetera, but the mid single digit commercial increases that you are saying look here's an exciting seems to be consistent with our experience.

Sarah James: But the mid single-digit commercial increases that you're saying, or peers are citing, seems to be consistent with ours. Great. And one more on what you guys are doing on technology investments on the acute and behavioral side. Are you implementing any sort of virtual bed checks in either of those segments, or where would you focus your technology investments?

Sarah James: Great and one more just on what you guys are doing on technology investments on the acute and behavioral side are you implementing any sort of.

Sarah James: Virtual bed checks.

Sarah James: Either of those segments or where would you focus your technology investment.

Steve G. Filton: Yeah, I would highlight, I mean, we have a lot of technology investment, but I think specifically in behavioral health, and we've talked about this before, we are implementing an electronic medical record in our behavioral facilities. That project is already underway. We are experimenting with and testing a number of technological solutions for more efficient patient grounding in our behavioral facilities, where patients will wear something like an Apple Watch kind of device, and we're able to track their location, and we're able to track when we lay eyes on those patients, etc. So that's improving the efficiency of our patient grounding in our behavioral facilities.

Sarah James: Yeah. So I would highlight I mean, we have a lot of technology investment, but I think specifically.

Steve G. Filton: In behavioral and we've talked about this before we are implementing an electronic medical record.

Steve G. Filton: In our behavioral disorders that project is already underway.

Speaker Change: We are.

Steve G. Filton: Experimenting with and testing a number of technological solutions to more efficient paper patient rounding in our behavioral facilities, where patients will aware something like that.

Steve G. Filton: I'll watch kind of device and we're able to track their location and we're able to track.

Steve G. Filton: When we lay eyes on those patients et cetera.

Steve G. Filton: That's improving the efficiency of our patient rounding in order to able to save as well.

Steve G. Filton: Thank you. Thank you. I'm showing no further questions at this time. I'd now like to turn it back to Steve Filton for closing remarks. Yeah, we'd just like to thank everybody for their time this morning and look forward to speaking to everybody in a couple months after the first quarter. Thank you. Thank you for your participation in today's conference. This concludes the program. You may now disconnect. Thanks for watching!

Speaker Change: Thank you.

Steve G. Filton: Thank you I'm showing no further questions at this time I'd now like to turn it back to Steve Filton for closing remarks.

Steve G. Filton: We just like to thank everybody for their time. This morning, and look forward to speaking to everybody in a couple of months after the first quarter. Thank you.

Steve G. Filton: Thank you for your participation in today's conference. This concludes the program you may now disconnect.

Steve G. Filton: Okay.

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