Q4 2023 Community Health Systems Inc Earnings Call
Hello, and welcome to the community Health systems fourth quarter and full year 'twenty twenty-three earnings conference call. All participants will be in listen only mode should you need assistance. Please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions.
Operator: Hello and welcome to the Community Health Systems fourth quarter and full year 2023 earnings conference call. All participants will be in listen only mode.
Operator: Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on your telephone keypad, and to withdraw from the question queue, please press star, then two.
Did you ask a question you May press Star then one on your telephone keypad and to withdraw from the question queue. Please press Star then two I would now like to hand, the call to Anton Hie, Vice President of Investor Relations. Please go ahead.
Operator: I would now like to hand the call to Anton High, Vice President of Investor Relations. Please go ahead. Thank you, MJ. Good morning, and welcome to the Community Health Systems fourth quarter and year-end 2023 conference call. Joining me today on this call are Tim Hingtgen, Chief Executive Officer; Kevin Hammonds, President and Chief Financial Officer; and Dr. Miguel Diné, Executive Vice President of Clinical Operations. Before we begin, I must remind everyone that this conference call may contain certain forward-looking statements, including all statements that do not relate solely to historical or current facts. These forward-looking statements are subject to a number of known and unknown risks, which are described in headings such as risk factors in our annual report on Form 10-K and other reports filed with or furnished to the FDC. Consequently, actual results may differ significantly from those expressed in any forward-looking statements in today's discussion. We do not intend to update any of these forward-looking statements.
Anton Hie: Thank you Sanjay good morning, and welcome to the community Health systems fourth quarter and year end of 2023 conference call.
Anton Hie: Joining me today on this call are Tim mentioned, Chief Executive Officer, Kevin Hammons, President and Chief Financial Officer, and Dr. Miguel Today Executive Vice President of clinical operations before we begin I must remind everyone. This conference call may contain certain forward looking statements, including all statements that do not relate solely to historical.
Anton Hie: Our current facts. These forward looking statements are subject to a number of known and unknown risks, which are described in headings such as risk factors in our annual report on Form 10-K, and other reports other reports filed with or furnished to the SEC.
Anton Hie: Actual results may differ significantly from those expressed in any forward looking statements in today's discussion we do not intend to update any of these forward looking statements yesterday afternoon. We released we issued a press release with sharp with our financial statements and definitions and calculations of adjusted EBITDA and adjusted EPS. We've also posted a supplemental.
Anton High: Yesterday afternoon, we issued a press release with our financial statements and definitions and calculations of adjusted EBITDA and adjusted EPS. We've also posted a supplemental slide presentation to our website. All calculations we will discuss exclude gain or loss from early extinguishment of debt, impairment expense, as well as gains or losses on sales and subsidy came from the core trust transaction, expenses from government and other legal matters and related costs, expenses from business transformation costs, expenses related to employee termination benefits and other restructuring charges, and changes in estimates for professional claims liability related to the divestment location. With that said, I will turn the call over to Tim Hingt Thank you, Anton. Good morning.
Anton Hie: Slide presentation to our website.
All calculations, we will discuss exclude gain or loss from early extinguishment of debt.
Anton Hie: Impairment expense as well as gains or losses on sales of subsidies.
Anton Hie: Came from the core Crafts core trust transaction expense from government and other legal matters and related costs.
Anton Hie: Fences from business transformation costs.
Anton Hie: This is related to employee termination benefits and other restructuring charges and changes in estimates for professional claims liability related to divested locations with that said I will turn the call over to Jim Henson Chief Executive Officer. Thank you Anton and good morning. Thank you for joining our fourth quarter and year end conference call.
Tim L. Hingtgen: Thank you for joining us for our fourth quarter and your in-conference call. To kick things off, I first want to recognize the more than 60,000 dedicated employees, providers, and leaders across our healthcare systems for the excellent care delivered to patients in 2023 and always. I'd also like to acknowledge the tremendous team effort that enabled progress in every key priority established for 2023, which we have reviewed on these calls over the past several quarters. Throughout the year, we were purposely focused on advancing safe, quality health care, strengthening our workforce, accelerating growth, and controlling expenses. Major accomplishments in the year included volume gains across all key services as we continue to see broad-based strength and demand. New access points, strong capacity management, defined workforce initiatives, and investments to optimize our competitive position made this growth possible. Same store admissions increased 3.5% in 2023, and adjusted admissions were up 5.3%, driving same store net revenue growth of 4.8%.
Jim Henson: Things off I first want to recognize the more than 60000 dedicated employees providers and leaders across our health care systems for the excellent care delivered to patients in 2023, and always I'd always I'd also like to acknowledge the tremendous team effort that enabled progress in every key priorities established for 2000.
Jim Henson: 'twenty three which we have reviewed on these calls over the past several quarters.
Jim Henson: The year, we were purposely focused on advancing safe quality health care, strengthening our workforce accelerating growth and controlling expenses.
Jim Henson: Her accomplishments during the year included volume gains across all key services as we continue to see broad based strength in demand.
Jim Henson: New access points strong capacity management defined workforce initiatives and investments to optimize our competitive position made this girl possible.
Jim Henson: Same store admissions increased three 5% in 2023 and adjusted admissions were up five 3% driving same store net revenue growth of four 8%.
Tim L. Hingtgen: Thanks to our ER volume growing 1.1% while surgeries increased a solid 5.1%. Adjusted EBITDA for the full year increased 12.3%, and our margin expanded 100 basis points year over year when excluding the positive impact of pandemic relief funds in 2022. When you consider a more than $200 million unanticipated increase in medical specialist fees and medical malpractice expense with a 150 basis point impact margin, we view this performance as a clear sign of positive momentum. We continue to invest in our core markets to accelerate growth prospects and further capture market share. In Knoxville, Tennessee, the construction of our new tower is nearly complete, with the grand opening scheduled to take place in the next few months.
Jim Henson: Same store ER volume grew one 1% while surgeries increased a solid five 1%.
Jim Henson: Adjusted EBITDA for the full year increased 12, 3% and our margin expanded 100 basis points year over year, when excluding the positive impact of the pandemic really funds in 2022.
Jim Henson: When you consider a more than 200 million dollar unanticipated increase in medical specialist fees and medical malpractice expense with a 150 basis point impact to margin. We feel that this performance is a clear sign of positive momentum.
We continue to invest in our core markets to accelerate growth prospects and further capture market share and Knoxville, Tennessee construction of our new tower is nearly complete with the Grand opening scheduled to take place in the next few months. This project includes new inpatient beds and an expanded emergency department.
Tim L. Hingtgen: This project includes new inpatient beds and an expanded emergency department. On the Alabama coast, the major expansion of our Baldwin County campus should open before the end of the year and will also increase the number of acute care beds and the surgical capacity available within this very busy hospital. While we pursue bed additions where we are seeing strong demand and are growing market share, we also continue to invest in outpatient access points such as ambulatory surgery centers, freestanding emergency departments, urgent care centers, and provider clinics. As a result, CHS health systems are capturing patient care that is migrating out of the inpatient environment, with 54% of our net revenues now derived from outpatient care. This outpatient focus includes the deliberate broadening of our ASC footprint. During the fourth quarter, we completed the expansion of the Grand View GI ASC in Birmingham, Alabama, and completed an ASC acquisition in LaPorte, Indiana. And already this year, we opened a DeNovo ASC in Cedar Park, Texas.
Jim Henson: On the Alabama coast, the major expansion of our Baldwin County campus should open before the end of the year and will also increase the number of acute care beds and the surgical capacity available within this very busy hospital.
Jim Henson: While we pursue bed additions, where we are seeing strong demand and our growing market share. We also continue to invest in outpatient access points, such as ambulatory surgery centers freestanding emergency departments urgent care centers and provider clinics.
Jim Henson: As a result, DHS health systems are capturing patient care that is migrating out of the inpatient environment with 54% of our net revenues now are derived from outpatient care.
Jim Henson: This outpatient focus includes the deliberate broadening of our ASC footprint.
Jim Henson: During the fourth quarter, we completed the expansion of the Grand view Gi ASC in Birmingham, Alabama, and completed an ASC acquisition and the Port, Indiana and already this year, we opened a de Novo ASC in Cedar Park, Texas.
Tim L. Hingtgen: In addition to capital investments in our health systems, our transfer center is driving volume and higher-acuity admissions, most notably in cardiology, critical care, GI, and general surgery. The Transfer Center also gives us visibility to see where we have opportunities to invest in further service line development and physician recruitment. Work to sharpen our portfolio in 2023 included divestitures in West Virginia, Arkansas, Oklahoma, and Florida. As you may have seen, the FTC recently sued to block our planned sale of two hospitals in North Carolina to Novant Health. We are limited in what we can say at this point, but we believe this divestiture is appropriate and in the best interest of the community. The case will now move to federal court for final determination.
Jim Henson: In addition to capital investments in our health systems, Our transfer center is driving volume in higher acuity admissions, most notably in cardiology critical care Gi and general surgery.
Jim Henson: The transfer center also gives us visibility to see where we have opportunities to invest in further service line development and physician recruitment.
Jim Henson: Work to sharpen our portfolio in 2023 included divestitures in West, Virginia, Arkansas, Oklahoma and Florida.
Jim Henson: You may have seen the FTC recently sued to block our planned divestiture of two hospitals in North Carolina to Novatel.
Speaker Change: We are limited in what we can say at this point, but we believe this divestiture is appropriate and in the best interest of the community. The case will now move to federal Court for a final determination.
Tim L. Hingtgen: Proceeds from divestiture transactions enable a variety of positive activities such as targeted investments in core markets, funding potential future acquisitions, and increased flexibility in debt management. We are currently evaluating inbound interest for a handful of markets that could yield more than $1 billion in additional proceeds. We have modeled several attractive scenarios but will remain extremely disciplined in our decision making as it relates to divestitures, acquisitions, and ensuring that our core portfolio is strong and positioned for long-term success. In an effort to strengthen our workforce in 2023, our centralized clinical recruitment team continued to deliver strong results, and we finished the year with a net gain of more than 1,000 bedside nurses. We also expanded their activities to allied health, building 1,500 physicians in clinical support, technician, and other roles.
Speaker Change: Proceeds from divestiture transactions enable a variety of positive activities such as targeted investments in core markets funding potential future acquisitions and increased flexibility and debt management.
Speaker Change: We are currently evaluating inbound interest for a handful of markets that could yield more than $1 billion in additional proceeds.
Speaker Change: We have modeled several attractive scenarios.
Speaker Change: We will remain extremely disciplined in our decision, making as it relates to divestitures acquisitions and ensuring that our core portfolio is strong and positioned for long term success.
Speaker Change: In an effort to strengthen our workforce in 2023, our centralized clinical recruitment team continued to deliver strong results and we finished the year with a net gain of more than 1000 bedside nurses. We also expanded their activities to Allied health building 1500 positions in clinical support technician at other roles.
Speaker Change: Yes.
Tim L. Hingtgen: The impact was real, with a $260 million reduction in contract labor in 2023 compared to the prior year. Also, as you know, in 2023, we rapidly and successfully ensourced a large number of hospitalist and emergency medicine programs that were previously vendor outsourced. As a result, we now operate an internal infrastructure of resources that allows for further integration of hospital-based physician groups required by our market. Based upon the success of insourcing ED and hospitalist medicine, initiatives are underway to insource anesthesia services in select markets, and we believe we can scale these new capabilities effectively and as needed. Advancing safety and quality is an ongoing daily commitment. In 2023, we achieved a record 89% reduction in our serious safety event rate from the baseline established more than a decade ago.
Speaker Change: The impact was real with the 260 million dollar reduction in contract labor in 2023 compared to the prior year.
Speaker Change: Also as you know in 2023, we rapidly and successfully in sourced a large number of hospitalist and emergency medicine programs that were previously vendor outsourced.
Speaker Change: As a result, we now operate in internal infrastructure of resources that allows for further integration of hospital based physician groups required by our markets.
Speaker Change: Based upon the success of in sourcing E D and hospitalist medicine initiatives are underway to endorse anesthesia services in select markets and we believe we can scale these new capability as effectively and as needed.
Speaker Change: Advancing safety and quality is an ongoing daily commitment in 2023, we achieved a record 89% reduction in our serious safety event rate from the baseline established more than a decade ago.
Tim L. Hingtgen: We saw many other measures of quality care success, including a 25% reduction in the overall mortality rate and a 48% improvement in post-op respiratory failure rate. Looking to the future, our recently announced clinical data platform migration and partnership with Google Cloud opens the door for expanded use of AI and demonstrates how CHS is leveraging technology to drive administrative efficiencies and improve patient care. Dr. Binet is on the call with us today to comment about the ways we are and will be using AI and machine learning across our hospitals. Dr. Binet?
Speaker Change: We saw many other measures of quality care success, including a 25% reduction in the overall mortality rate and a 48% improvement in post op respiratory failure rates.
Looking to the future our recently announced clinical data platform migration in partnership with Google Cloud opens the door for expanded use of AI and demonstrates how CHS is leveraging technology to drive administrative efficiencies and to improve patient care. Dr. <unk> is on the call with us today to comment about.
Dr.: The ways, we are and will be using AI and machine learning across our hospitals Doctor burnout.
Dr.: Thank you Tim our partnership with Google Cloud enables us to unify our data into a single platform that facilitates greater transparency.
Dr. Miguel Diné: Thank you, Tim. Our partnership with Google Cloud enables us to unify our data into a single platform that facilitates greater transparency, and that will serve as the foundation for Community Health Care Center. Thank you, or you can call our platform the Tactical Health Engine for Intelligence.
Dr. Burn: Ingalls more real time decision, making and that will serve as the foundation for their future use of AI in their health care settings.
Dr.: We call our platform.
Dr.: For tactical health engine for intelligent analytics.
Dr. Miguel Diné: Working on this platform, we are developing tools that improve patient care and outcomes, and I support our clinicians and administrators. As we leverage AI, we expect to drive efficiencies that enable our healthcare professionals to focus even more of their time on high-value patient interactions. For example
Dr.: Working on this platform, we are developing tools that improve patient care and outcomes and a support our clinicians and administrative teams and their work.
Dr.: As we leverage.
Dr.: We expect to drive efficiencies that enable our health care professionals to focus even more of your time on high value patient interactions.
Dr.: For example.
Dr.: Can deploy this technology for continuous monitoring of patients in the acute care setting using algorithms and near real time data to identify the potential need for early intervention.
Dr. Miguel Diné: Please deploy this technology for continuous monitoring of patients and their two care providers. www.communityhealth.org www.cdc.gov, AI can be used to generate clinical summaries that physicians and nurses can edit for documentation. Since AI can distill and disseminate large amounts of complex data, we anticipate... Capture the Complexity of Care, Ana Gupte. Another example is our ability to provide www.communityhealth.org, Social Determinants of Health by using Google Maps capabilities to provide discharge with a list of nearby hospitals and Fairfax County, customized to their needs.
Dr.: It can be used to generate clinical summaries that physicians and nurses can edit for documentation decreasing administrative burden.
Dr.: Cynthia I, Kansas still and disseminate large amounts of complex data, we anticipate using it to help our clinical documentation specialists after the complexity of care and documentation.
Dr.: Another example is our ability to provide patients with concise contextualized information to improve social determinants of health by using Google maps capability to provide discharge patients with a list of nearby resources available in their communities and customized to their needs.
Dr.: We are already seeing notable benefits, including improvements in a variety of quality metrics and operational benchmarks such as reductions in Memphis there.
Dr.: There are endless possibilities and we are just beginning to see the power of artificial intelligence and health care.
Dr.: In all we are doing at CHS. We are following standards set in 2018 for ethical.
Dr.: And proper use of AI and are joining the coalition for health AI to help frame safe and responsible use of AI in health care into the future.
Speaker Change: I'll turn the call back to you. Thank you Dr. <unk>, our fourth overarching priority remains controlling expenses, which Kevin will address in his remarks, along with other comments about our financial performance in the fourth quarter and 2023 and our outlook for 2020 for Kevin.
Tim L. Hingtgen: We are already seeing notable benefits, and a variety of quality metrics and operational metrics, such as reduction. There are endless possibilities, and we are just beginning to see the power of artificial intelligence and health. In all we are doing at DHS, we are following standards set in 20- for the ethical, safe, and proper use of AI and have joined the Coalition for Health AI to help frame safe and responsible use of AI in healthcare. Thank you, Dr. Benet.
Kevin Hammons: Thank you, Tim and good morning, everyone.
Kevin Hammons: Overall, we were pleased to see continued solid demand in our markets and CHS is ongoing progress on our strategic priorities for.
Kevin Hammons: For the fourth quarter net operating revenues were $3 2 billion representing year over year growth of one 2% on a consolidated basis.
Kevin Hammonds: Our fourth overarching priority remains controlling expenses, which Kevin will address in his remarks along with other comments about our financial performance in the fourth quarter and 2023 and our outlook for 2024. Thank you, Tim, and good morning, everyone. Overall, we were pleased to see continued solid demand in our markets and CHS's ongoing progress on our strategic priorities. For the fourth quarter, net operating revenues were $3.2 billion, representing year-over-year growth of 1.2% on a consolidated basis. On a same store basis, net revenue was up 4.1% over the fourth quarter of 2022, driven primarily by a 3.6% increase in adjusted admissions and a 0.5% growth in net revenue per adjustment. Inpatient and outpatient volumes in the fourth quarter increased for both the commercial and Medicare books, reflecting the strong demand in our markets and targeted capital investment.
Kevin Hammons: On a same store basis net revenue was up four 1% over the fourth quarter of 2022.
Kevin Hammons: Driven primarily by three 6% increase in adjusted admissions and a 0.5% growth in net revenue per adjusted admission.
Kevin Hammons: Inpatient and outpatient volumes in the fourth quarter increased for both the commercial and Medicare books, reflecting the strong demand in our markets and targeted capital investments.
Kevin Hammons: However, the mix of that business with the disproportionate growth in Medicare advantage versus fee for service and from states, where our negotiated commercial rates are lower continued to affect our net revenue per adjusted admission growth similar to previous quarters.
Kevin Hammons: Adjusted EBITDA for the fourth quarter was $386 million, representing a margin of 12, 1%.
Kevin Hammons: During the quarter, we benefited from the recognition of approximately $40 million and increased EBITDA from the Mississippi Hospital access program.
Kevin Hammons: Of which approximately half related to prior periods.
Kevin Hammonds: However, the mix of that business, with the disproportionate growth in Medicare Advantage versus fee-for-service and from states where our negotiated commercial rates are lower, continues to affect our net revenue per adjusted admission growth, similar to previous quarters. Adjusted EBITDA for the fourth quarter was $386 million, representing a margin of 12.1%. During the quarter, we benefited from the recognition of approximately $40 million in increased EBITDA from the Mississippi Hospital Access Program, of which approximately half related to prior periods. However, not all this amount was factored into our guidance.
Kevin Hammons: While this amount was not factored into our guidance.
Kevin Hammons: We effectively offset offset this benefit by increasing our self insurance reserves for medical malpractice.
Kevin Hammons: Which was recognized as a change in estimate during the fourth quarter.
Kevin Hammons: We believe this adjustment was appropriate based on recent experience in claims activity across the hospital industry.
Kevin Hammons: Overall, we were pleased with our performance on labor cost <unk>.
Kevin Hammons: Average hourly rate wage rate for the quarter was up approximately 3% year over year, bringing the full year increased to approximately 4% versus our full year expectation for 5%.
Kevin Hammonds: We effectively offset this benefit by increasing our self-insurance reserves for medical malpractice, which was recognized as a change in estimate during the fourth quarter. We believe this adjustment was appropriate based on recent experience and claims activity across the hospital. Overall, we were pleased with our performance on labor costs. Average hourly rate, wage rate for the quarter was up approximately 3% year over year, bringing the full year increase to approximately 4% versus our full year expectation of five.
Kevin Hammons: We expect similar growth and average hourly rate in 2024 or approximately 4%.
Kevin Hammons: As Tim noted, our recruitment and retention strategies have helped stabilize our workforce, allowing us to drive significant reductions in contract labor expense.
Kevin Hammons: Which at $52 million represented an approximate $30 million decline over prior year and a modest decline sequentially.
Kevin Hammons: Recall that we typically see a material increase in contract labor utilization in the fourth quarter to help cover for seasonally higher patient demand.
Kevin Hammonds: We expect similar growth in the average hourly rate in 2024, or approximately 4%. As Tim noted, our recruitment and retention strategies have helped stabilize our workforce, allowing us to drive significant reductions in contract labor, which at $52 million represented an approximate $30 million decline over the prior year and a modest decline sequentially. Recall that we typically see a material increase in contract labor utilization in the fourth quarter to help cover for seasonally higher patient demand. Meanwhile, medical specialist fees, at approximately 5 percent of net revenue, remained elevated versus historical levels but generally consistent with the third quarter.
Kevin Hammons: Meanwhile, medical specialist fees at approximately 5% of net revenue remained elevated versus historical levels, but generally consistent with the third quarter.
Kevin Hammons: When comparing the gross up of expenses for physicians in sourced from the former ATP contract against the net revenue related to those physicians, we estimate that our results benefited by approximately $5 million during the quarter versus the subsidy payments previously paid to AEP.
Kevin Hammons: We expect further opportunities in the coming quarters, as we look to scale our in sourcing efforts.
Kevin Hammons: Believe there continues to be pressure, particularly in the area of anesthesia.
Kevin Hammons: Cash flows from operations were $90 million for the fourth quarter of 2023, compared with $9 million in the year ago period.
Kevin Hammonds: When comparing the growth of expenses for physicians insourced from the former APP contract against the net revenue related to those physicians, we estimate that our results benefited by approximately $5 million during the quarter versus the subsidy payments previously paid to APP. We expect further opportunities in the coming quarters as we look to scale our insourcing efforts but believe there continues to be pressure, particularly in the area of anesthesia. Cash flows from operations were $90 million for the fourth quarter of 2023, compared with $9 million in the year-ago period.
Kevin Hammons: We did not see the expected improvement sequentially in accounts receivable, primarily from the temporary billing delays that we discussed last quarter related to clinical system upgrades and our position in sourcing initiative.
Kevin Hammons: Additionally performance for the quarter was affected by growth in the Mississippi supplemental Medicaid program of approximately $40 million.
Kevin Hammons: The slowdown of receiving payments from Medicare advantage payers versus fee for service of approximately $10 million.
Kevin Hammons: And the acceleration of interest payments, resulting from our refinancing efforts of approximately $30 million.
Kevin Hammonds: We did not see the expected improvement sequentially in accounts receivable, primarily due to the temporary billing delays that we discussed last quarter related to clinical system upgrades in our physician in-source. Additionally, performance for the quarter was affected by growth in the Mississippi Supplemental Medicaid Program, AR, of approximately 40 million. The slowdown in receiving payments from Medicare Advantage payers versus fee-for-service of approximately $10 million, and the acceleration of interest payments resulting from our refinancing efforts of approximately $30 million. Note that we've begun receiving payments in the first quarter from the state of Mississippi for the expanded Medicaid funding program, and expect significant further improvement in cash flows relative to where we finish 2023. Capital expenditures for the quarter were $110 million, bringing the full year total to $467 million.
Note that we began receiving payments in the first quarter from the state of Mississippi for the expanded Medicaid funding program and expect significant further improvement in cash flows relative to where we finished 2023.
Kevin Hammons: Capital expenditures for the quarter were $110 million, bringing the full year total to $467 million consistent with our guidance of $450 million to $500 million.
Kevin Hammons: In December we completed a private offering of $1 billion of 10, and seven 8% senior secured notes due 2030 to.
Kevin Hammons: Using proceeds from the offering and from the completion of our <unk> divestiture to redeemed $985 million of our 8% notes due 2026, and two extinguished $402 million.
Kevin Hammons: <unk> amount of other debt.
Kevin Hammonds: Consistent with our guidance of $450 to $500 million. In December, we completed a private offering of $1 billion of 10 7 8 percent senior secured notes due 2032, using proceeds from the offering and from the completion of our Bervera divestiture to redeem $985 million of our 8% notes due 2026 and to extinguish $402 million of principal amount of other debt, which, by capturing discounts, resulted in a pre-tax gain from early extinguishment of debt of approximately $72 Net debt to trailing adjusted EBITDA at year-end was 7.88 times, slightly improved relative to the third quarter.
Kevin Hammons: Which by capturing discount resulted in a pre tax gain from early extinguishment of debt of approximately $72 million during the quarter.
Kevin Hammons: Net debt to trailing adjusted EBITDA at year end was $7 eight eight times slightly improved relative to the third quarter.
Kevin Hammons: We remain well positioned to meet our needs going forward with improved operations and $637 million of borrowing capacity under our ABL.
Kevin Hammons: As Tim noted in his remarks apart from the North Carolina transaction. We are currently evaluating opportunities for further divestitures across a handful of markets that could total more than $1 billion in additional proceeds.
Kevin Hammons: We anticipate that one or more of these transactions could close within the calendar year, providing substantial capital for the company to redeploy.
Kevin Hammonds: We remain well positioned to meet our needs going forward with improved operations and $637 million of borrowing capacity under our ABL. As Tim noted in his remarks, apart from the North Carolina transaction... We are currently evaluating opportunities for further divestitures across a handful of markets that could total more than $1 billion in additional proceeds. We anticipate that one or more of these transactions could close within the calendar year, providing substantial capital for the company to redeploy. Project Empower, our enterprise modernization initiative, launched October 1.
Kevin Hammons: Project empower our enterprise modernization initiative launched October one.
Kevin Hammons: And after standing up our shared services platform and new workflows at 15 of our facilities with no disruption in patient care, we are seeing improved visibility and insight as expected.
Kevin Hammons: After a pause during the year end closing process, we will begin further implementation throughout 2024.
Kevin Hammons: Moving on to our initial guidance for 2024, we.
Kevin Hammons: We anticipate net revenue of 12, three to $12 7 billion.
Kevin Hammons: Adjusted EBITDA of $1 billion $4 75 to $1 625.
Kevin Hammons: And cash flow from operations of $500 million to $650 million.
Kevin Hammonds: And after standing up our shared services platform and new workflows at 15 of our facilities with no disruption in patient care, we are seeing improved visibility and insight, as expected. After a pause during the year-end closing process, we will begin further implementation throughout 2024. Moving on to our initial guidance for 2024, we anticipate net revenue of $12.3 to $12.7 billion. Adjusted EBITDA of $1,475,000,000 to $1,625,000,000, and Cash Flow from Operations of $500 to 650 million.
Kevin Hammons: When normalizing for the divestitures completed in 2023, the midpoint of our net revenue outlook represents a year over year growth of approximately 4% and.
Kevin Hammons: And the midpoint of adjusted EBITDA represents a growth of approximately 9%.
Kevin Hammons: Note that our outlook does not include the impact of any future divestitures or major acquisitions.
Kevin Hammons: It does not include the impact of any debt refinancing transactions and excludes the potential benefit from a rollback of the 163 J limitation on interest deductibility for tax purposes, and the income tax refund that we've previously discussed.
Kevin Hammons: Additionally, our cash flow guidance includes approximately $60 million to $80 million of cash outflow related to project and power.
Kevin Hammonds: When normalizing for the divestitures completed in 2023, the midpoint of our net revenue output represents a year-over-year growth of approximately 4%, and the midpoint of adjusted EBITDA represents a growth of approximately 90%. Note that our outlook does not include the impact of any future divestitures or major acquisitions, does not include the impact of any debt refinancing transactions, and excludes the potential benefit from a rollback of the 163J limitation on interest deductibility for tax purposes and the income tax refund that we've previously discussed. Additionally, our cash flow guidance includes approximately $60 to $80 million of cash outflow related to Project EMPOWER.
Kevin Hammons: Is the ERP and workflow modernization rolled out to the markets throughout 2020 for these investments will wind down by year end and will become a cash flow tailwind into 2025.
Speaker Change: Now I'll provide context for the 2024, adjusted EBITDA guidance relative to 2023 and 2022.
Speaker Change: There are several puts and takes that we would like to highlight.
Specifically as we said initial guidance. This time last year for 2023, we had anticipated adjusted EBITDA growth of approximately 7% at the midpoint.
Speaker Change: At that time, the primary expected headwinds, where the $173 million reduction in pandemic relief fund.
Speaker Change: And a moderate increase in medical specialist fees, which we were able to offset through the benefits of our margin improvement program contract labor reductions and growth in patient volumes.
Kevin Hammonds: As the ERP and workflow modernization rolls out to the markets throughout 2024, these investments will wind down by year end and will become a cash flow tailwind into 2025. This helps provide context for the 2024 Adjusted EBITDA guidance relative to 2023 and 2022. There are several puts and takes that we would like to highlight. Specifically, as we set initial guidance this time last year for 2023. We had anticipated adjusted EBITDA growth of approximately 7% at the midpoint.
Speaker Change: What we had not anticipated as we started 2023.
Speaker Change: Was that medical specialist fees would spike as high as they did mid year prior to our ACP transaction and that we would face additional headwinds from higher medical malpractice expense.
Speaker Change: And from the outsized growth in Medicare advantage as we have discussed in quarterly call. Since then leading to the results you see today.
Speaker Change: Looking into 2024, we have much better visibility into these factors while at the same time, we anticipate tailwind from growth capital projects over the past two years further reductions in contract labor additional savings from cost control efforts and a full year's benefit from the recently expanded Mississippi Medicaid.
Kevin Hammonds: At that time, the primary expected headwinds were the $173 million reduction in pandemic relief funds and a moderate increase in medical specialist fees, which we were able to offset through the benefits of our Margin Improvement Program, contract labor reductions, and growth in patient volume. What we had not anticipated as we started 2023 was that medical specialist fees would spike as high as they did mid-year prior to our APP transaction and that we would face additional headwinds from higher medical malpractice and from the outsized growth in Medicare Advantage, as we have discussed in our quarterly call centers, leading to the results you see today. Looking into 2024, we have much better visibility into these factors, while at the same time, we anticipate tailwinds from growth capital projects over the past two years, further reductions in contract labor, additional savings from cost control efforts, and a full year's benefit from the recently expanded Mississippi Medicaid funding program. Based on these factors, as well as operating results through the first six weeks of the year, we have a high degree of confidence in our ability to deliver on the guidance we have provided and look forward to providing updates in the coming quarter. Tim.
Speaker Change: Funding program.
Speaker Change: Based on these factors as well as operating results through the first six weeks of the year, we have a high degree of confidence in our ability to deliver on the guidance we've provided.
Speaker Change: Look forward to providing updates in the coming quarters.
Speaker Change: Tim.
Speaker Change: Thank you Kevin I think now we're ready to open it up for Q&A.
Thank you we will now begin the question and answer session.
Speaker Change: To ask a question you May press Star then one on your telephone keypad, if youre using a speakerphone. Please pick up your handset before pressing the keys to withdraw your question. Please press Star then two please.
Please limit yourself to one question and one follow up at this time, we will pause momentarily to assemble our roster.
Speaker Change: Today's first question comes from Brian <unk> with Jefferies. Please go ahead.
Brian: Hey, good morning, guys.
Brian: Kevin Thanks for all the color that you gave us on the cash flow maybe just.
Brian: Just a little more detail just looking at the cash flow shortfall in Q4, and how you are thinking about guidance in 2024.
Brian: <unk>.
Brian: Seems to be a reduced capex spend for the year. So just any color you can share with us, yes, that'd be great.
Kevin Hammons: Sure. Thanks for the question, Brian So, yes, if I could just maybe kind of go back through some of the items that I believe called caused the shortfall in Q4, and then maybe talk a little bit about 24.
Kevin Hammons: We finished Q3 I believe our accounts receivable balance was about $2 billion $1 60, we expected that to come down in Q4, particularly as we clawed back some of the built up.
Operator: Thank you, Kevin. I think now we're ready to open it up for Q&A. Thank you. We will now begin the question and answer session. To ask a question, you may press star, then one on your telephone keypad.
Kevin Hammons: From our Cerner conversions.
Kevin Hammons: As we went throughout the quarter.
Operator: If you're using a speakerphone, please pick up your handset before pressing the key. To withdraw your question, please press star then 2. Please limit yourself to one question and one follow-up. At this time, we will pause momentarily to assemble our roster. Today's first question comes from Brian Tanquilut with Jeffreys. Please go ahead. Hey, good morning, guys. Kevin, thanks for all the color that you gave us on the cash flow, but maybe, you know, just in a little more detail, just looking at, you know, the cash flow shortfall in NQ4 and how you're thinking about guidance in 2024, including what seems to be a reduced capex spend for the year. So just any color you can share with us would be great.
Kevin Hammons: Although we clawed back maybe a third of that we did not claw back all of that we had some additional buildup.
Kevin Hammons: Particularly around some of the in source physicians.
Kevin Hammons: As well as timing of some commercial payments.
Kevin Hammons: The holiday fell on a weekday the last week of December.
We didn't really have complete insight into how.
Kevin Hammons: Some of the commercial payers may may pay at the end of the year. So really we look at that as just more of a timing issue than the Mississippi program came through which the cash or that that wasn't paid in December added to our <unk>.
Kevin Hammons: And at the end of the day the accounts receivable balance.
Kevin Hammons: Increase instead of decreasing as we expected hit increased at the end of the year So that was.
Kevin Hammons: All in call it roughly a $130 million headwind in cash flow.
Kevin Hammonds: Sure. Thanks for the question, Brian. So yeah, if I could just maybe kind of go back through some of the items that I believe caused the shortfall in Q4, and then maybe talk a little bit about 24. You know, we finished Q3. I believe our accounts receivable balance was about $2,160,000. We expected that to come down in Q4, particularly as we clawed back some of the built-up pay R from our Cerner conversions. However, as we went throughout the quarter, although we clawed back maybe a third of that, we did not claw back all of that. We had some additional buildup in AR, particularly around some of the in-source physicians, as well as the timing of some commercial payments. You know, the holiday fell on a weekday the last week of December, and we didn't really have complete insight into how some of the commercial payers might pay at the end of the year.
Kevin Hammons: In the fourth quarter.
Kevin Hammons: Then.
Kevin Hammons: We've talked about we did a refinancing in the fourth quarter, we had to accelerate.
Kevin Hammons: And the repayment of the bonds accelerate some of the interest payments that otherwise would have been paid in 24. So thats clearly a timing issue because now that interest is paid and we will not have that payment in 'twenty four.
Kevin Hammons: We also settled a legal case, the Mason case, which was about $30 million in the fourth quarter made that payment.
Kevin Hammons: Which was not anticipated or we just did not know the timing of when that payment was made we had accrued at the end of the quarter, but did not have the timing of when that payment would be made so those those are kind of led to and are again, primarily some timing related matters as we go into the 'twenty four.
Speaker Change: Couple of things I will just reiterate.
Kevin Hammonds: So really, you know, we looked at that as just more of a timing issue. Then the Mississippi program came through, but the cash for that wasn't paid in December, so it added to our AR. And at the end of the day, the accounts receivable balance increased, instead of decreasing as we expected, it increased at the end of the year. So that was, you know, all in, call it roughly $130 million headwind in cash flow in the fourth quarter. Then we talked about, we did a refinancing in the fourth quarter. We had to accelerate the repayment of the bonds, accelerate some of the interest payments that otherwise would have been paid in 24, so that's clearly a timing issue because now that interest is paid, and we will not have that payment in 24. We also settled a legal case, the Mason case, which was about $30 million in the fourth quarter and made that payment, which was not anticipated. We just did not know the timing of when that payment would be made. We had it accrued at the end of the quarter but did not know the timing of when that payment would be made.
Speaker Change: Around the 163 J interest deductibility.
Speaker Change: <unk> has passed the house.
Speaker Change: It is in the Senate, although we don't know when or if the Senate will pass that rolled back.
Speaker Change: So we've not anticipated we've not put that in our guidance this year.
Speaker Change: As well as the tax refund, which we still feel very comfortable that we're going to get but we were wrong I was wrong about anticipating the timing of that last year, So I'm not going to predict the timing of our government of proving that this year.
Speaker Change: If either of those come through they would be positive. Our current tax cash tax estimate is $150 million to $200 million and that could be reduced if either of those items come through.
Speaker Change: Got it Okay, and then maybe as I think about just the expense lines any comment or anything you can share with us as it relates to your views on nurse wage inflation contract labor utilization, what's baked into the guidance and also physician service.
Speaker Change: Physicians specialists spend both in house and outsourcing.
Kevin Hammonds: So those are kind of led to, and are again, primarily some timing-related matters. As we go into the 24, a couple of things I'll just reiterate around the 163J interest deductibility. That has passed the House. It is in the Senate, although we don't know when or if the Senate will pass that rollback.
Speaker Change: Yes, yes, so we're estimating kind of a wage inflation at 4% for 2024, that's right about where we were at in 2023. So I think we've baked in a conservative estimate.
Speaker Change: Into 'twenty four for wage inflation, and we will certainly work harder to keep it below that and we're actually exiting 24 at a rate below that it was about three 4% in Q4.
Kevin Hammonds: So we've not anticipated, we haven't put that in our guidance this year, as well as the tax refund, which we still feel very comfortable that we're going to get, but we were wrong about anticipating the timing of that last year, so I'm not going to predict the timing of our government approving that this year. So if either of those come through, it would be positive. Our current tax, cash tax estimate is $150 to $200 million, and that could be reduced if either of those items. Got it. Okay.
Speaker Change: On contract Labor again, as we kind of look out at the mid point of our guidance.
Speaker Change: Assumes the current run rate.
We're exiting 'twenty.
Speaker Change: <unk> 23 at if you think about $52 million fourth quarter contract labor.
Speaker Change: Expense.
Speaker Change: If we stay at that run rate throughout 24 that would represent about a $60 million reduction in contract labor year over year.
Kevin Hammonds: And then maybe as I think about just expense lines, any comment or anything you can share with us as it relates to your views on nurse wage inflation, contract labor utilization, what's baked into the guidance, and also physician services for physician specialists spend both in-house and outsourced. Yeah, so we're estimating kind of a wage inflation at 4% for 2024. That's right about where we were at in 2023. So I think we've baked in a conservative estimate of wage inflation into 2024 for wage inflation, and we'll certainly work harder to keep it below that. And we're actually exiting 2024 at a rate below that. It was about 3.4% in Q4.
Speaker Change: Half of that would flow through to EBITDA I do believe there is some opportunity that we can further reduce.
Speaker Change: Contract Labor, it's still running.
Speaker Change: Higher than pre pandemic levels, and we still may be able to to take a little bit more out.
Speaker Change: Of that and then I think there was one more.
Speaker Change: On Capex I think you had mentioned capex.
Speaker Change: <unk>.
Speaker Change: We're we've had some higher capex over the past couple of years. We've had some large projects that were winding down. These are in patient towers, where we're adding inpatient capacity in markets, where we need to add capacity and because we are full in those markets are growing.
Kevin Hammonds: On contract labor, again, as we kind of look out at the midpoint of our guidance, assumes the current run rate that we're exiting 2024. If you think about $52 million of fourth-quarter contract labor expense, if we stay at that run rate throughout 24, that would represent about a $60 million reduction in contract labor year over year, and about half of that would flow through to EBITDA. I do believe there's some opportunity that we can further reduce contract labor. It's still running, you know, significantly higher than pre-pandemic levels, and we still may be able to take a little bit more out of that.
Speaker Change: Those projects are winding down.
Speaker Change: So we will have a year.
Speaker Change: With a little less Capex also reflects that.
Speaker Change: The hospitals that we've divested.
Speaker Change: Over the past year. So we're still very comfortable with the amount of capital, we're spending as well as trying to manage our free cash flow.
Speaker Change: Kevin I'll tack onto that in terms of our philosophy and the management of our capital spending.
Kevin Hammons: We haven't really full pipeline, we've talked about that a lot over the last several quarters.
Speaker Change: Predominant amount to that is on the outpatient side of the business, which we know does not typically have as high of a spend to get those strategic access points put into operation.
Speaker Change: So that outpatient focus continues to be an area of growth and opportunity for us across the portfolio.
Kevin Hammonds: And then I think there was one more, oh, and CapEx. I think you mentioned CapEx. You know, we've had some higher CapEx over the past couple of years. We've had some large projects that we're winding down. These are inpatient towers where we're adding inpatient capacity in markets where we need to add capacity and because we're full and those markets are growing.
Speaker Change: We're also managing that pipeline relative to the gains in staffing so that when we are ready to activate the capital to bring it online we have a cost effective way to drive margin and payback on that capital investment. So we're really I think hyper focused on phasing. This in ways that are that are really going to be accretive to earnings in the long run on the other thing I would point out.
Speaker Change: Outside of Capex with just keeping some of our powder dry for opportunistic acquisitions. So we will keep an eye on that as things emerge in the upcoming quarters.
Tim L. Hingtgen: Those projects are winding down, so we'll have a year with a little less CapEx. It also reflects the hospitals that we've divested over the past year, so we're still very comfortable with the amount of capital we're spending as well as trying to manage, you know, just our free cash flow. Yeah, and Kevin, I'll tack on to that in terms of our philosophy and the management of our capital spending. You know, we have a really full pipeline.
Speaker Change: On the outpatient side of the business you heard me reference to outpatient ASC acquisitions later last year, we continue to scanner markets for those types of opportunities as well.
Speaker Change: Thank you. The next question comes from Jason Cazorla with Citi. Please go ahead.
Jason Cazorla: Jason Your line is open.
Jason Cazorla: Okay.
Jason Cazorla: Nathan I think we May have lost year Alright. The next question comes from Ben <unk> with RBC capital markets. Please go ahead.
Ben: Okay. Thank you very much I wanted to follow up on your the med Mal reserving.
Tim L. Hingtgen: We've talked about that a lot over the last several quarters. The predominant amount of that is on the outpatient side of the business, which we know does not typically have as high of a spend to get those strategic access points put into operation. You know, so that outpatient focus continues to be an area of growth and opportunity for us across the portfolio. We're also managing that pipeline relative to the gains and staffing so that when we are ready to activate the capital or bring it online, we have a cost-effective way to drive margin and pay back on that capital investment. So we're really, I think, hyper focused on phasing this in in ways that are really going to be accretive to earnings in the long run.
Ben: Specifically your decision not to adjust that.
Out of adjusted results and and also just your general comfort level with kind of reserves are where they are now is there anything out there specifically on the horizon that could continue to push those reserves up higher through the year, just any comment around around your thinking there. Thanks.
Speaker Change: Sure. Thanks for the question Ben.
Speaker Change: We debated whether or not it was appropriate to adjust that.
Speaker Change: Out of our adjusted EBITDA is certainly gave that to some consideration at the end of the day, we decided to leave it in.
Speaker Change: We also had with Mississippi.
Speaker Change: Coming in which was unexpected in the fourth quarter, we did not want to appear that we we're cherry picking and only adjusting out unfavorable items.
Tim L. Hingtgen: The other thing I would point out, outside of CapEx, is just keeping some of our powder dry for opportunistic acquisitions, so we'll keep an eye on that as things emerge in the upcoming quarters on the outpatient side of the business. You heard me reference two outpatient ASC acquisitions later last year. We continue to scan our markets for those types of opportunities as well. The next question comes from Jason Casorla with Citi. Please go ahead. Mason, your line is open. Jason, I think we may have lost you.
Speaker Change: There's reasons that Mississippi would stay in because it's an ongoing program and we did not want to create a situation where we pulled it out also in the fourth quarter and then put it back in next year and just to make consistency. So at the end of the day.
Operator: All right. The next question comes from Ben Hendricks with RBC Capital Markets. Please go ahead. Thank you very much.
Speaker Change: Just decided to leave them both in.
Speaker Change: Into the adjusted EBITDA calculation again, Mississippi program like other programs are ongoing and really represent reimbursement for services provided so I think that's also appropriate.
Kevin Hammonds: I wanted to follow up on the Med-Mal reserving, specifically your decision not to adjust out of adjusted results, and also just your general comfort level with the kind of reserves where they are now. Is there anything specifically on the horizon that could continue to push those reserves up higher through the year? Just any comment around your thinking there. Thanks.
Speaker Change: As we look ahead to 'twenty four.
Speaker Change: The malpractice environment overall, I think is getting more difficult. We are seeing some pretty large settlements jury awards in cases that are higher than we've ever seen historically and I think there is a little bit of pressure in the industry at large we are hearing that.
Kevin Hammonds: Sure. Thanks for the question, Ben. You know, we debated whether or not it was appropriate to adjust that out of our adjusted EBITDA. I certainly gave that some consideration. At the end of the day, we decided to leave it in.
Speaker Change: <unk> from our insurance carriers as well, we are self insured for malpractice with excess insurance coverage above certain levels, but so we do have insurance and here. There is some pressure there, but overall I would expect.
Kevin Hammonds: You know, we also had with Mississippi coming in, which was unexpected in the fourth quarter; we did not want to appear that we were cherry picking and only adjusting out unfavorable items. There are reasons that Mississippi would stay in because it's an ongoing program, and, you know, we did not want to create a situation where we pulled it out also in the fourth quarter and then put it back in next year, just some inconsistencies. So, at the end of the day, I just decided to leave them both in, you know, for the adjusted EBITDA calculation. Again, the Mississippi program, like other programs, is ongoing and really represents reimbursement for services provided. So, I think that's also appropriate.
Our malpractice expense to probably come back to something a little more normal in the future as we manage through I'd also point out that the work we've done on patient safety and quality over the years.
Speaker Change: And the 89% reduction in serious safety events that Tim called out as.
Speaker Change: Is very meaningful and there is such a long tail on malpractice, we're still settling a lot of old claims, but the rate at which new claims are coming in is significantly lower than it had been historically, so I feel good about the future of our ability to manage that cost.
Kevin Hammonds: You know, as we look ahead to 24, the malpractice environment overall, I think, is getting more difficult. We're seeing some pretty large settlements, and jury awards in cases that are higher than we've ever seen historically. And I think there is, you know, a little bit of pressure in the industry at large. We're hearing that from our insurance carriers as well. We are self-insured for malpractice with excess insurance coverage above certain levels, but we do have insurance.
Speaker Change: Thank you and if I may a quick follow up on your comments about round puts and takes on guidance.
Speaker Change: Wondering if we get some more detail on the kind of the key drivers of margin improvement.
Speaker Change: <unk> for 2024, it sounds like there will be some support from lower contract labor year over year, and you mentioned lower wage inflation than we saw also Mississippi Medicaid, but should we also expect some normalization of payer mix trends. This year any comments on how we bridge to the margin. Thanks.
Kevin Hammonds: And here, you know, there is some pressure there. But overall, I would expect our malpractice expense to probably come back to something a little more normal in the future as we manage through. I'd also point out that the work we've done on patient safety and quality over the years, the 89% reduction in serious safety events that Tim called out, is very meaningful. And there's such a long tail on malpractice.
Speaker Change: Yes, I did.
Speaker Change: You called out a couple of the items already mentioned I do think theres, some or we have some expectation of.
Speaker Change: Some normalization in payer mix trends.
Speaker Change: Our rates continue to be relatively favorable governmental right.
Speaker Change: Medicare lifts should be in the kind of two 5% to 3% range. This year versus 2023, it was one 9%.
Kevin Hammonds: We're still settling a lot of old claims, but the rate at which new claims are coming in is significantly lower than it has been historically. So, I feel good about the future and our ability to manage that cost. Thank you, and if I may, a quick follow-up on your comments about round puts and takes on guidance. We're wondering if we could get some more detail on the kind of key drivers of margin improvement implied for 2024. It sounds like there will be some support from lower contract labor year over year, and you mentioned lower wage inflation than we saw, also Mississippi Medicaid, but should we also expect some normalization of payer mix trends this year? Any comments on how we bridge to the margin? Thanks. Yeah, I do think so.
Speaker Change: I think Medicaid is about flat excluding some of the supplemental programs. It was a negative in 2023.
Speaker Change: So those are all marginally helpful to us commercial rates are still.
Speaker Change: That 4% to 6% range similar to 2023, but another year of those that should be helpful. As we continue to grow volume.
Speaker Change: And cover are able to cover our fixed costs.
Speaker Change: That has the benefit of increasing our margin.
Speaker Change: And as our markets continue to grow and we continue to see recovery.
Speaker Change: And higher volumes I think that's an important.
Speaker Change: Factor to point out we also have our margin improvement program.
Kevin Hammonds: You called out a couple of the items already mentioned. I do think there's some, we have some expectation of some normalization and payer mix trends. You know, rates continue to be relatively favorable. Governmental rates, Medicare Part D, should be in the kind of 2.5 to 3% range this year versus 2023. It was 1.9%.
Speaker Change: We're highly focused on and putting a lot of discipline around a number of initiatives.
Speaker Change: Some of those are baked into our guidance many of them are not baked into our guidance and give us the upside potential.
Speaker Change: But around the uncertainty of when.
Speaker Change: Those come through and to what degree.
Speaker Change: Did not want to get too far out ahead, and bake all of that but we have a number of initiatives. We're working on that should be favorable.
Kevin Hammonds: I think Medicaid is about flat, excluding, you know, some of the supplemental programs. It was negative in 2023. So those are all, you know, marginally helpful to us. Commercial rates are still in that 4 to 6% range, similar to 2023. But another year of those should be helpful.
Speaker Change: Thank you. The next question is from Jason <unk> with Citi. Please go ahead.
Jason Cazorla: Great. Thanks can you guys hear me.
Jason Cazorla: Sure Ken we hear you now Jason.
Jason Cazorla: Excellent. Thank you apologies for that.
Jason Cazorla: Wanted to talk about the MA book right in the past you've discussed how Youre MMA book has had a has.
Jason Cazorla: A lower effective pricing yield compared to fee for service Medicare.
Kevin Hammonds: As we continue to grow volume and cover, and are able to cover our fixed costs, that has the benefit of increasing our margin. And as our markets continue to grow and we continue to see recovery in higher volumes, I think that's an important factor to point out. We also have our margin improvement program that we're highly focused on and putting a lot of discipline around a number of initiatives. You know, some of those are baked into our guidance. Many of them are not baked into our guidance and give us, you know, the upside potential. But given the uncertainty of when, you know, those come through and to what degree, we did not want to get too far out ahead and assume all of that.
Jason Cazorla: And how that dynamic is in fact the results with your elevated.
Speaker Change: Volume growth in 'twenty, three but I guess stepping in the 24 are you anticipating any offsets to this yield differential whether that'd be from a contracting perspective, with MA payers or new rules like the two midnight rule I guess, just if you have any color on the levers in areas that can help narrow that pricing yield differential moving forward. Thanks.
Sure so.
Speaker Change: When you step back when we look at our contracts kind of on a a procedure by procedure basis. The rate of reimbursement is pretty similar to Medicare fee for service the realization is really.
Speaker Change: Where we lose money comparatively and that's what causes the discount that we talked about naphtha result of downgrades and denials of claims.
Kevin Hammonds: But we have a number of initiatives we're working on that should be favored. Thank you. The next question is from Jason Casorla with Citi. Please go ahead. Great, thanks. Can you guys hear me?
Speaker Change: Going into 'twenty four.
Kevin Hammonds: Yep, sure can. We hear you now, Chase. Excellent. Thank you. Apologies for that.
Speaker Change: There certainly should be some benefit from.
Speaker Change: From the new guidance put out by CMS around the two midnight rule.
Kevin Hammonds: I wanted to talk about the MA book, right? In the past, you've discussed how your MA book has a lower effective pricing yield compared to fee-for-service Medicare, and how that dynamic has impacted results with your elevated MA volume growth in 23. But I guess, you know, stepping into 24, are you anticipating any offsets to this yield differential, whether that be from a contracting perspective with MA payers or new rules like the two midnight rule? I guess just if you have any color on the levers and areas that can help narrow that pricing yield differential moving forward. Thanks.
Speaker Change: Around <unk>.
Speaker Change: Preauthorizations.
Speaker Change: We expect that those could be helpful to us its too early to tell.
Speaker Change: Not been able to quantify that yet.
Speaker Change: And too early in 'twenty four to really see that come through I know some of the payers have talked about already seeing an impact in Q4.
Speaker Change: Making more payments, we did not see any benefit in Q4.
From that coming through but but I think directionally it could be positive for us in 'twenty four Tim Yes, Jason I think we're investing in a lot of clinical resources to help us monitor the environment be more on the proactive side of this we've talked in the past about our centralized you are investment that was.
Kevin Hammonds: Sure. So, you know, when you step back, when we look at our contracts, kind of on a procedure by procedural basis, the rate of reimbursement is pretty similar to Medicare fee for service. The realization is really where we lose money comparatively, and that's what causes the discount that we talked about. And that's a result of downgrades and denials of claims.
Speaker Change: Largely a registered nurse organized function under the direction of Dr. <unk> <unk>.
Tim: Later last year, we stood up a physician adviser and source position advisor program to really be more active and proactive as much as we can be but also to counteract any downgrades in denials that the admitting position in the physician advisors belief is clinically appropriate for inpatient status. So we would expect to see some some tail effects posit.
Kevin Hammonds: You know, going into 24, there certainly should be some benefit from the new guidance put out by CMS around the two midnight rule and preauthorizations. We expect that those could be, you know, helpful to us. It's too early to tell.
Tim: Ive tail effects for that in 2024 as well.
Speaker Change: Okay got it thanks, and maybe just a follow up and apologies if I missed this before but I wanted to ask on that 4% revenue growth. Excluding divestitures can you just help on the building blocks of that 4% relative to year, 2% to 3% kind of target for volume and pricing and mix and then maybe just specifically on volumes 23.
Kevin Hammonds: We're not yet able to quantify that yet, and it's too early in 24 to really see that come through. I know some of the payers have talked about already seeing an impact in Q4 of making more payments. We did not see any benefit in Q4 from that coming through. But, you know, I think directionally, it could be positive for us in 24. Tim?
Speaker Change: For 2023, what I'll call. It 300 basis points ahead of your original expectations do you feel that the outsized growth last year kind of creates a comp issue for you in 24 kind of especially in the first half of the year or how would you frame the volume environment in 'twenty four.
Tim L. Hingtgen: Yeah, Jason, I think we're investing in a lot of clinical resources to help us, you know, monitor the environment, be more on the proactive side of this. We've talked in the past about our centralized UR investment. That was largely, you know, a registered nurse-organized function under the direction of Dr. Binet.
Speaker Change: Yes, I would say that the 4%.
Speaker Change: Growth, we're looking at roughly 2% to 3% volume growth in 'twenty four.
Tim L. Hingtgen: Later last year, we set up a physician advisor, in-source physician advisor program to really be more active and proactive as much as we can be, but also to counteract any downgrades and denials that the admitting physician and the physician advisors believe are clinically appropriate for inpatient status. So we would expect to see some tail effects, positive tail effects for that in 2024 as well. Okay.
Speaker Change: Which is lower than we experienced in 2003, but we still believe strongly that we can continue to grow those volumes in our markets and give something 2% to 3% volume growth and then rate overall as I mentioned, we're kind of 4% to 6%.
Kevin Hammonds: Thanks. So maybe just a follow up. And apologies; I missed this before.
Speaker Change: On commercial rate two 5% to 3% on Medicare, which is little higher than we had in 'twenty three and about flat on.
Kevin Hammonds: But I wanted to ask on that 4% revenue growth, excluding divestitures, can you just help on the building blocks of that 4% relative to your two to 3% kind of targets for volume, pricing, and mix? And then maybe just specifically on volumes, you know, 23, growth for 2023 was some, you know, called 300 basis points ahead of your original expectations. Do you feel that the outsized growth last year kind of creates a comp issue for you in 24, kind of, especially in the first half of the year? Or how would you frame the volume environment in 24?
Speaker Change: Medicaid.
Speaker Change: There probably is and we've factored in a little bit of a headwind on continued deterioration in payer mix, but when you throw all that in together, we get about a 4% same store kind of growth on net revenue.
Speaker Change: Thank you. The next question comes from AJ Rice with UBS. Please go ahead.
AJ Rice: Hi, everybody.
AJ Rice: Okay.
AJ Rice: Maybe to follow up a little bit more on that payer mix.
Kevin Hammonds: Thanks. Yes, I would say that, you know, the 4% growth; we're looking at roughly 2-3% volume growth in 2024, which is lower than we experienced in 2023, but we still believe strongly that we can continue to grow those volumes in our markets and get something like 2-3% volume growth. And then, you know, rates overall, as I mentioned, we're kind of 4-6% on the commercial rate, 2.5-3% on Medicare, which is a little higher than we had in 2023, and about flat on Medicaid. There probably is, and we factored in a little bit of a headwind on continued deterioration in payer mix. But when you throw all that in together, we get about a 4% same store kind of growth in net revenue. Thank you. The next question comes from AJ Rice with UBS. Please go ahead. Hi everybody.
AJ Rice: Question Theres been obviously debate in the marketplace about utilization rate.
AJ Rice: Are you seeing any difference in behavior among your utilization between your MA book and your fee for service book and frankly, the rest of the.
AJ Rice: Welcome as well is there anything you can tell in terms of rebound post pandemic and so forth that may.
AJ Rice: So different trends across those payer classes.
AJ Rice: I think kind of post pandemic, we certainly saw.
AJ Rice: Deterioration in.
The <unk>.
AJ Rice: Actions by the MA payers, where they were not downgrading or denying claims during the pandemic. They certainly began denying and downgrading significantly more claims, particularly in the MA book, Although it applies to commercial as well.
AJ Rice: But more so in the.
AJ Rice: MA space.
AJ Rice:
AJ Rice: We believe that kind of hit a peak.
Kevin Hammonds: Just maybe to follow up a little bit more on that pay-or-mix question, there's obviously been debate in the marketplace about utilization rates. Are you seeing any difference in behavior among your utilization between your MA book and your fee-for-service book, and frankly, the rest of the book as well? Is there anything you can tell in terms of rebound after a pandemic and so forth that may show different trends across those payer classes? You know, I think kind of post-pandemic, we certainly saw a deterioration and, The actions by the MA payers, you know, where they were not downgrading or denying claims during the pandemic, they certainly began denying and downgrading significantly more claims, particularly in the MA book, although it applies to commercial as well, but more so in the MA space.
AJ Rice: And I think thats gotten a lot more attention at the governmental levels.
We've certainly been active.
AJ Rice: With in our discussions with legislators with our lobbying efforts I know the.
AJ Rice: American Hospital Association Federation of American hospitals, they have all tried to to shine a light on some of the behavior of the payers.
AJ Rice: And I think Thats resulted in some movement by CMS to come out with some additional guidance around their expectations are likely.
Like the two midnight rule like some of the.
AJ Rice: Preauthorization requirements.
AJ Rice: We have yet to see any real change.
AJ Rice: That's meaningful measurable.
AJ Rice: But but having said that we do expect there to be.
Kevin Hammonds: We believe that kind of hit a peak, you know, and I think that's gotten a lot more attention at the governmental levels. You know, we've certainly been active in our discussions with legislators, with our lobbying efforts. I know the American Hospital Association, Federation of American Hospitals, they've all tried to shine a light on some of the behavior of the payers, and I think that's resulted in some movement by CMS to come out with some additional guidance around their expectations, you know, like the two-midnight rule, like some of the preauthorization requirements. We have yet to see any real change that's meaningful or measurable, but having said that, we Yeah, AJ, this is Jim.
AJ Rice: Some favorable movement into 2024 J.
Sam: Jay This is Sam.
Ill go back to my comment the reason, we set up the physician advisor program was to make sure that we're supporting the admitted admitting physician's decision with more collaboration with DMA plans, our commercial plans in general.
Sam: A strong compliance program across med.
Sam: Medicare and every other.
Sam: Payer source as well, but in general to try to counteract some of those adverse trends. We believe we are better positioned going forward to make sure that that admitting physician's decision is it's more strongly represented.
Speaker Change: Okay. Thanks, and maybe my follow up just asked about.
You're mentioning this divestiture activity that you plan to undertake is that in response.
Speaker Change: Steve will proactively coming to you is that.
Speaker Change: Our strategic decision, you're making and you talked about having a $1 billion for capital deployment I wondered whether you think it mainly about paying down debt further or is there some other.
Tim L. Hingtgen: I'll go back to my comment. The reason we set up the Physician Advisor Program was to make sure that we're supporting the admitting physician's decision through more collaboration with VMA plans or commercial plans, in general. We have a strong compliance program across, you know, Medicare and every other payer source as well, to try to counteract some of those adverse trends. We believe we're better positioned going forward to make sure that that admitting physician's decision is more strongly represented. Okay, thanks. And maybe my follow-up question, just to ask about the investment activity that you plan to undertake. Is that in response to people proactively coming to you?
Speaker Change: Use of that potential capital that you're thinking about.
So.
Speaker Change: Sure happy to take that one.
Speaker Change: So this is.
Almost entirely resolving from inbound interest.
Speaker Change: But having said that I still think we're taking an opportunistic look because we get inbound interest on a number of locations and facilities that if we don't act on.
Speaker Change: So we're not acting on every inbound interest that comes in.
Speaker Change: But we do happen to have some inbound interest in markets that we think may make strategic sense to transact.
Kevin Hammonds: Is it a strategic decision you're making? And you talked about having as much as a billion dollars for capital deployment. I wondered whether you're thinking mainly about paying down debt further, or is there some other use of that potential capital that you're thinking about? So, sure, happy to take that one, AJ.
Speaker Change: So we're pursuing those further.
Speaker Change: Further we don't know at this point, whether they will come to fruition.
Speaker Change: But there is some significant interest out there that we are going through the effort to.
Speaker Change: Have have conversations and look into deeper and evaluate that.
Kevin Hammonds: So this is almost entirely resulting from inbound interest. But having said that, I still think we're taking an opportunistic look because we get inbound interest in a number of locations and facilities that we don't act on. So we're not acting on every inbound interest that comes in, but we do happen to have some inbound interest in markets that we think may make strategic sense to transact in. So we're pursuing those further. We don't know at this point whether they'll come to fruition, but there is some significant interest out there that we are making the effort to have conversations and look into deeper and evaluate that may make sense. To the extent that we get proceeds in, I think we'll evaluate the markets at the time and the other opportunities at the time on what is the best way to delever the company. My focus is clearly on delevering and balancing our capital structure.
Speaker Change: It may make sense.
Speaker Change: To the extent that we get proceeds in.
Speaker Change: We will evaluate the markets at the time and the other opportunities at the time.
On what is the best way to Delever. The company My focus is clearly on Delevering.
Speaker Change: And balancing our capital structure and we can do that in two ways. We can pay down debt, we can grow EBITDA.
Speaker Change: And if we have the right opportunity for acquisition at the time, we have cash in hand, and we think that that could be more accretive that's something we would certainly take a look at if the markets are such the debt paydown.
Speaker Change: <unk> is the better play I think we'd take a look at that so I know I'm not giving you a specific answer here.
But we'll evaluate based on the timing that the cash comes in what we think the best way to Delever.
Speaker Change: Thank you. The next question comes from Stephen Baxter with Wells Fargo. Please go ahead.
Kevin Hammonds: And we can do that in two ways. We can pay down debt, and we can grow EBITDA. If we have the right opportunity for acquisition at the time we have cash in hand, and we think that that could be more accretive, that's something we would certainly take a look at. If the markets are such that debt paydown is the better play, I think we'd take a look at that.
Stephen C. Baxter: Hey, Thanks for the question just another one on payer mix I might have thought that with the growth of the exchanges or maybe potentially some catch up in the commercial demand that you were hoping to see in 2023 that there could potentially be upside risk the payer mix sounds like you're a bit more cautious there just to make sure. We really are capturing all of the dynamics that you want us to keep in mind and then just to come back.
Kevin Hammonds: So I know I'm not giving you a specific answer here, but we'll evaluate based on the timing that the cash comes in what we think is the best way to borrow. Thank you. The next question comes from Stephen Baxter with Wells Fargo. Please go ahead. Hey, thanks for the question. Just another one on payer mix. I might have thought that with the growth of the exchanges, or maybe potentially some catch-up in the commercial demand you were hoping to see in 2023, that there could potentially be an upside risk to payer mix. Sounds like you're a bit more cautious there.
Stephen C. Baxter: <unk> two.
Briefly just to manage our expectations.
Speaker Change: Would we expect to see progress as soon as the first quarter like are you actually CNR improve to date this year or should we be thinking about maybe a more gradual progression throughout the balance of the year. Thank you.
Speaker Change: Sure a couple of things I'll mentioned on payer mix and Tim feel free to jump in as well. So we did grow both commercial and.
Medicare age population payer mix in the fourth quarter. So.
Speaker Change: I want to be very clear we grew both.
Kevin Hammonds: Just want to make sure we really are capturing all the dynamics that you want us to keep in mind. And then just to come back to AR briefly, just to manage our expectations. You know, would we expect to see progress, you know, as soon as the first quarter? Like, are you actually seeing AR improve?
Speaker Change: But the MA business outpaced the commercial business by about two to one in the fourth quarter for the full year. It outpaced the commercial three to one so we did make improved.
Speaker Change: That proportional.
Speaker Change: Shouldn't change was better in the fourth quarter than for the full year.
Kevin Hammonds: To date this year? Or should we be thinking about maybe a more gradual progression throughout the balance of the year? Thank you.
Speaker Change: But MMA did outpace the growth so as we go into 'twenty four.
Speaker Change: We look for some moderation of that.
Kevin Hammonds: A couple things I'll mention on payer mix, and Tim, feel free to jump in as well. So we did grow both commercial and Medicare-age population payer mix in the fourth quarter. So I want to be very clear, we grew both.
Speaker Change: But we're still cognizant of keeping our eye on.
Speaker Change: That payer mix dynamic.
Speaker Change: There's one other.
Speaker Change: Alright, and forgot the second part of that question.
Kevin Hammonds: But the MA business outpaced the commercial business by about 2 to 1 in the fourth quarter. For the full year, it outpaced the commercial business 3 to 1. So we did make improvements, you know, that proportional was better in the fourth quarter than for the full year. But MA did outpace growth.
Speaker Change: Ah.
Speaker Change: We will see some early benefits.
Speaker Change: In 2004 as it relates to the buildup in AR from like the Mississippi.
Speaker Change: Supplemental program.
Kevin Hammonds: So as we go into 24, we look for some moderation of that, but we're still cognizant of keeping our eye on that pair mix dynamic. On AR, I think we'll see some early benefits in 24 as it relates to the buildup in AR from the Mississippi Supplemental Program that will largely be collected in Q1. Some of the other buildups will probably be more moderate throughout the year, but I do expect, over the course of the year, for us to make improvement and to recapture, you know, the remainder of the conversion AR plus the buildup on AR from...
Speaker Change: That will largely be collected in Q1.
Some of the other buildup.
Speaker Change: We'll probably be more moderate throughout the year, but I do expect over the course of the year for us to make improvement.
Speaker Change: And to recapture.
Speaker Change: The remainder of the conversion.
Plus the buildup on IR firms.
Speaker Change: Some of the movement to MAA or more commercial payers slowing down that should moderate.
Kevin Hammonds: Some of the movement, the MA, you know, more commercial players slowing down, that should moderate throughout 2024 and over the course of the year, I expect. Thank you. Today's last question comes from Josh Raskin with Nefrin Research. Please go ahead. Hey, good morning. This is actually Marco on for Josh.
Speaker Change: 2024, and over the course of the year expecting an improvement.
Speaker Change: Thank you today's last question comes from Josh Raskin with Nephron Research. Please go ahead.
Speaker Change: Hey, Good morning. This is actually Mark go on for Josh I appreciate you taking the questions.
Kevin Hammonds: Appreciate you taking the question. Just looking at the 2024 guidance, I was wondering if you could parse out some of the $350 to $400 million in CapEx for 2024. Is that mainly maintenance CapEx at this point, or do you have any other notable projects in the pipeline that are coming through this year? And do you have any ability to flex that lower in 2024 if you need to? Thanks. Sure, so, you know, we have been running approximately... 50% maintenance capital, 50% growth capital over the last several years if you go back and look at our CapEx. And I would say, proportionally, that's still very similar in 2020 and 2024. We'll be split about 50-50. As I mentioned, a couple of the large projects that are high-cost projects, the inpatient additions, you know, Patient Towers and Adding Beds are winding down in 2024, and then with fewer hospitals, as we actually sold eight hospitals in 2023, that lowers some of our maintenance capital as well related to those. So, you know, overall... You know, I don't think we are.
Mark: Just looking at the 2024 guidance I was wondering if you could parse out some of the $350 million to $400 million in Capex for 2024 is that mainly maintenance capex at this point or do you have any other notable projects in the pipeline that are coming through this year.
And do you have any ability to flex that lower in 2024, if you need to.
Speaker Change: Sure. So we have been running approximately.
Speaker Change: 50% maintenance capital, 50% growth capital over the last several years, if you go back and look at our Capex.
Speaker Change: And I would say proportionately that feel very similar in 'twenty.
Speaker Change: 2024.
Speaker Change: Will be split about 50 50, as I mentioned, a couple of the large projects.
Speaker Change: That are high cost projects the inpatient adding.
Speaker Change: Patient towers, and adding beds are winding down in 2024, and then with fewer hospitals as we actually sold eight hospitals in 2023 that lower some of our maintenance capital as well related to those.
Speaker Change: <unk>.
So overall.
Speaker Change: I don't think we are.
Speaker Change: Materially decreasing.
Speaker Change: The amount of maintenance or growth capital kind of comparatively.
Kevin Hammonds: The other thing is that we've had some capital related to Project Empower for the last year. The majority of what we'll be spending in 2024 will be more on the expense side, because now the systems and so forth for that project are built, and the costs going forward are going to be implementation and training and rollout costs, so there's some reduction there as well. The only thing I would add is, you know, to your question of, you know, could you throttle that back? Anything is certainly possible, but, you know, similar to what we did in 2023, we were very deliberate in our investments into the core business with the intention of, as Kevin said earlier, working on projects that will help us, you know, certainly drive stronger EBITDA performance, which is a benefit to the long-term value of the company and its So a similar equation obviously comes into play in 2024.
Speaker Change: Other thing is we've had some capital related to project in power over the last year. The majority of what we'll be spending in 2024.
Speaker Change: We'll be more on the expense side is now.
Speaker Change: The systems and so forth for that project or bill and the costs going forward are going to be implementation and.
Speaker Change: Training and rollout cost.
Speaker Change: So there is some reduction there as well.
Speaker Change: The only thing I would add is to your question is could you throttle that back.
Speaker Change: It's certainly possible, but similar to what we did in 2023.
Speaker Change: We were very deliberate in our investments into the core business with the intention of as Kevin said earlier.
Speaker Change: Working on projects that will help us certainly drive stronger EBIT performance, which is a benefit to the long term value of the company and its shareholders. So a similar equation. Obviously comes into play in 2024, we have a strong pipeline of projects as I said previously a lot of those are on the ambulatory side of the business not as many high dollar and patient.
Tim L. Hingtgen: We have a strong pipeline of projects. As I said previously, a lot of those are on the ambulatory side of the business, not as many high-dollar inpatient investments that we're making in 2024. So I think it just is a normal settlement of the capital spend, but we're very, very deliberate in how we're allocating our cash in that regard. Great, thanks for the color, and then if I could squeeze in one follow-up, you spoke to about 1 billion in potential proceeds from the divestiture opportunities that you now have identified. Can you help us understand a little bit more about the cadence of how that could ultimately be realized, especially in light of some of the FTC scrutiny that we've seen over some of these deals more recently?
Speaker Change: Investments that were making in 2024, so I think it's just as a normal settling of the capital spend but we're very very deliberate in how we're allocating our cash in that regard.
Speaker Change: Great. Thanks for the color and then if I could squeeze in one follow up.
Speaker Change: You spoke to about $1 billion in potential proceeds.
Speaker Change: The divestiture opportunities that you now have identified.
Speaker Change: Can you help us understand a little bit more about the cadence of how that could ultimately be realized especially in light of some of the FTC scrutiny that we've seen over some of these deals more recently.
Tim L. Hingtgen: And then, is there any financial detail you can provide around the revenue or EBITDA contribution of those assets? Thank you. Sure, I think it's probably too early to tell or to say much. We don't have any agreements signed at this point, but this is an inbound interest that we're evaluating. I would say, generally speaking, all of these deals would be in the 10 times plus multiple of EBITDA, of trailing EBITDA, if they are to come to fruition. Again, we've not made a decision, and we have not fully negotiated on any of these deals, but we do have inbound interest that's very reasonable to think that if we decide to move forward, we could get deals done. That said, deals... don't move very quickly.
Speaker Change: And then is there any financial detail you can provide around the revenue or EBITDA contribution of those assets. Thank you.
Speaker Change: Sure I think it's probably too early to tell or to say much.
Speaker Change: We don't have any agreements signed at this point, but this is inbound interest that we're evaluating.
Speaker Change: Waiting I would say Jenny.
Generally speaking all of these deals would be.
Speaker Change: And that 10 times plus multiple.
Speaker Change: Of EBITDA of trailing EBITDA.
Speaker Change: If they are to come to fruition again, we've not made a decision and we've not fully negotiated.
Speaker Change: On any of these deals, but we do have inbound interest.
Speaker Change: Very reasonable to think that if.
Speaker Change: If we decide to move forward, we can get deals done that said deals.
Speaker Change: Don't move very quickly as you are well aware.
Kevin Hammonds: As you are well aware, I would expect the earliest, you know, something to be completed probably mid-year and then the potential for, you know, others to be completed late in the year or early next year. Thank you. This concludes our question and answer session. I would now like to turn the call back over to Mr. Hingtgen for any closing remarks. Thank you, MJ, and thanks to all of you for joining our call today. We look forward to providing you with updates on our progress throughout 2024 and to demonstrating that our strategies and initiatives are producing positive momentum and results. As always, if you have additional questions, you can reach us at 615-465-7000. Thanks again, and have a great day! The conference is now concluded. Thank you for attending today's presentation. You may now disconnect. BF-WATCH TV 2021 BF-WATCH TV 2021
Speaker Change: I would expect the earliest.
Speaker Change: Something to be completed would be probably mid year and then the potential for others to be completed late in the year early next year.
Speaker Change: Thank you. This concludes our question and answer session I would now like to turn the call back over to Mr. Hansen for any closing remarks. Thank you Jay and thanks to all of you for joining our call today, we look forward to providing you with updates on our progress throughout 2024.
Hansen: And to demonstrating that our strategies and initiatives are producing positive momentum in results as always if you have additional questions. You can reach us at 615 465, 7000, Thanks, again and have a great day.
Speaker Change: The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
Speaker Change: Yeah.
Speaker Change: [music].