Q1 2024 HCA Healthcare Inc Earnings Call

Operator: Welcome to the HCA Healthcare first quarter 2024 earnings conference call. Today's call is being recorded. At this time, for opening remarks and introductions, I would like to turn the call over to Vice President of Investor Relations, Mr. Frank Morgan. Please go ahead, sir. Good morning and welcome.

Welcome to the HCA healthcare first quarter 'twenty to 'twenty four earnings conference call.

This call is being recorded.

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

Frank Morgan: Good morning, and welcome to everyone on today's call. With me this morning is our CEO Sam Hazen and CFO Bill Rutherford. Sam and Bill will provide some prepared remarks, and then we'll take questions.

Frank Morgan: Good morning, and welcome to everyone on today's call with me. This morning is our CEO, Sam Hazen and CFO Bill Rutherford, Sam and Bill will provide some prepared remarks, and then we'll take questions before I turn the call over to Sam Let me remind everyone that during today's call.

Frank Morgan: Before I turn the call over to Sam, let me remind everyone that should today's call contain any forward-looking statements that are based on management's current expectations, you must risk uncertainty that other factors may cause actual results to differ materially from those that might be expressed today. More information on forward-looking statements and these factors is listed in today's press release and in our various SEC files. On this morning's call, we may reference measures such as adjusted EBITDA, which is a non-GAAP financial measure.

Frank Morgan: These statements are based.

Frank Morgan: Just on management's current expectations.

Frank Morgan: Uncertainties and other factors may cause actual results to differ materially from those that might be expressed today more information on forward looking statements and these factors are listed in today's press release and in our various SEC filings.

Frank Morgan: On this morning's call we may reference measures such as adjusted EBITDA, which is a non-GAAP financial measures a table, providing supplemental information on adjusted EBITDA and reconciling net income attributable to HCA healthcare is included in today's release. This mornings call is being recorded and a replay of the call will be available later today with that I'll now.

Frank Morgan: The table providing supplemental information on Adjusted EBITDA and reconciling mid-income attributable to HCA Healthcare is included in today's release. This morning's call is being recorded, and a replay of the call will be available later. With that, I'll now turn the call over to Sam. All right, Frank, thank you.

Turn the call over to say alright, great. Thank you and good morning to everybody and thank you for joining the call.

Samuel N. Hazen: Good morning to everybody, and thank you for joining the call. The positive fundamentals we saw in our business this past year have continued into the first quarter of 2024. This momentum generated strong financial results that were driven by broad-based volume growth, improved payer mix, and solid operating margins. As we look to the rest of the year, we remain encouraged by our performance, the overall backdrop of growing demand for our services, and our enhanced ability across our networks to serve our community.

Speaker Change: The fundamentals we saw in our business. This past year continued into the first quarter of 2020 for.

This momentum generated strong financial results that were driven by broad based volume growth improved payer mix and solid operating margins as we look to the rest of the year. We remain encouraged by our performance. The overall backdrop of growing demand for our services and our enhanced ability across our net.

Speaker Change: Works to serve our communities.

Samuel N. Hazen: The people of HCA Healthcare continue to deliver for our patients with improvements in key non-financial metrics, including improved quality outcomes, more efficient process measures in emergency room services, which have accelerated time to discharge and increased satisfaction, and finally, better inpatient capacity management with reduced length of stay and increased acceptance of patients who need to be transferred to our hospital. As compared to the prior year, diluted earnings per share, as adjusted, increased almost 9% in the first quarter to $5.36.

Speaker Change: The people of HCA healthcare continued to deliver for our patients with improvements in key non financial metrics, including improved quality outcomes more efficient process measures and emergency room services, which have accelerated time to discharge and increased satisfaction and finally better in <unk>.

Speaker Change: <unk> capacity management with reduced length of stay and increased acceptance of patients who needed to be transferred to our hospitals.

Speaker Change: As compared to the prior year diluted earnings per share as adjusted increased almost 9% in the first quarter to $5 36.

Samuel N. Hazen: Same facility volumes were favorable across the company, and inpatient admissions grew 6% year over year. Inpatient surgeries were up almost 2%, and equivalent admissions grew 5%. And emergency room visits increased 7%. Most of our other volume categories, including cardiac procedures and rehab admissions, also had solid growth metrics in the quarter. While outpatient surgery revenue increased year-over-year due primarily to favorable payer mix, total cases declined 2 percent. We attribute most of this decrease to the effect of the calendar and the redetermination process, which drove a considerable decline in Medicaid volume.

Speaker Change: Same facility volumes were favorable across the company inpatient admissions grew 6% year over year inpatient surgeries were up almost 2% equivalent admissions grew 5% and emergency room visits increased 7%.

Speaker Change: Most of our other volume categories, including cardiac procedures and rehab admissions also had solid growth metrics in the quarter.

Speaker Change: While outpatient surgery revenue increased year over year, due primarily to favorable payer mix total cases declined 2%.

Speaker Change: We attribute most of this decrease to the effects of the calendar and the Redetermination process, which drove a considerable decline in Medicaid volume.

Samuel N. Hazen: All domestic divisions had growth in inpatient admissions and equivalent admissions. And finally, payer mix and acuity levels improved as compared to the prior year. Commercial volumes represented approximately 36% of equivalent admissions. Last year, they were 34% of the total.

Speaker Change: All domestic divisions had growth in inpatient admissions and equivalent admissions.

Speaker Change: And finally payer mix and acuity levels improved as compared to the prior year.

Speaker Change: Commercial volumes represented approximately 36% of equivalent admission last year. They were 34% of the total the case mix for our inpatient business increased slightly continuing the upward trend we have seen over the past few years.

Samuel N. Hazen: The case mix for our inpatient business increased slightly, continuing the upward trend we have seen over the past few years. The same facility's revenue grew almost 9% as a result of these volume metrics, coupled with 3.5% higher reimbursement per equivalent admission. We continue to make progress on our cost agenda; operating costs across most categories were in line with our expectations. As part of our capital spending plan, the number of facilities or sites for care increased by almost 5% to around 2,600, and we added approximately 2% to our inpatient bed capacity.

Speaker Change: Same facility revenue grew almost 9% as a result of these volumetric coupled with three 5% higher reimbursement per equivalent admission.

Speaker Change: We continue to make progress on our cost agenda operating costs across most categories were in line with our expectations.

Speaker Change: As part of our capital spending plan the number of facilities or sites for care increased by almost 5% to around 2600, and we added approximately 2% of our inpatient bed capacity.

Samuel N. Hazen: As we move through the remainder of the year, we will maintain a disciplined approach to our operations while continuing to invest appropriately in our strategic agenda, which we believe should position the company favorably to meet our long-term objectives. With that, I will turn the call over to Bill for his last earnings call. I want to congratulate him again on his tremendous career with the company. It's been my privilege to work with him over these years. I want to thank him for a job well done.

Speaker Change: As we move through the remainder of the year, we will maintain a disciplined approach to our operations, while continuing to invest appropriately in our strategic agenda, which we believe should position the company favorably to meet our long term objectives with that I will turn the call to bill for his last earnings call I want to congratulate.

Relating again on his tremendous career with the company. It's been my privilege to work with him over these years I want to thank them for a job well done.

William B. Rutherford: Great. Good morning, everyone.

William B. Rutherford: Great. Good morning, everyone and thank you. So you appreciate that.

William B. Rutherford: Thank you, Sam. I appreciate that. We believe our first quarter performance represents a strong start to the year, and we continue to combine solid operational performance with a disciplined and balanced allocation of capital to generate value over time. We had strong top-line growth, with revenues growing 11.2% over the prior year and a quarter. Sam highlighted the St. Facility volume, acuity, and mix metrics that drove our almost 9% St. Facility revenue growth in the quarter. So let me highlight a few points on our operating.

William B. Rutherford: We believe our first quarter performance represents a strong start to the year.

Speaker Change: And we continue to combine solid operational performance with a disciplined and balanced allocation of capital to generate value over time.

Speaker Change: We had strong topline growth with revenues growing 11, 2% over the prior year quarter.

Speaker Change: Sam highlighted the same facility volume acuity mixed metrics that drove our almost 9% same facility revenue growth in the quarter. So let me highlight a few points on our operating costs overall.

William B. Rutherford: Overall, operating costs were mean as well. The adjusted EBITDA margin was 19.3% in the quarter. Labor results were solid, with as-reported labor costs as a percent of revenue improving 100 basis points from the prior year. We continue to see good trends on contract labor, which improved 21.7% from the prior year and represented 5.1% of total labor costs. Supply costs and percent of revenues improved 10 basis points from the prior year. While other operating costs and percent of revenue have grown compared to the prior year, they have remained relatively consistent for the past three quarters.

Speaker Change: Overall operating costs were managed well adjusted EBITDA margin was 19, 3% in the quarter.

Speaker Change: Labour results were solid with as reported labor cost as a percent of revenue improving 100 basis points from the prior year.

We continue to see good trends on contract labor, which improved 21, 7% from the prior year and represented five 1% of total labor costs <unk>.

Supply cost as a percent of revenues improved 10 basis points from the prior year.

Speaker Change: While other operating cost as a percent of revenue has grown compared to the prior year and has remained relatively consistent for the past three quarters.

William B. Rutherford: The sequential growth of professional fee expense contributed will continue to moderate and perform in line with our expectations. In addition, the Valesco operations performed better than our expectations in the quarter. Adjusted EBITDA was $3.35 billion in the quarter, which represented a 5.7% increase over prior years. As a reminder, we recorded a $145 million favorable settlement in the first quarter of last year. So we are pleased with the operational performance of the company during the first quarter.

Speaker Change: The sequential growth of professional fee expense contributed.

Speaker Change: <unk> continued to moderate and performed in line with our expectations. In addition, the Glasgow operations performed better than our expectations in the quarter.

Speaker Change: Adjusted EBITDA was 335 billion in the quarter, which represented a five 7% increase over prior year.

Speaker Change: I will mention as a reminder, we recorded a $145 million favorable settlement in the first quarter of last year.

Speaker Change: So we are pleased with the operational performance for the company during the first quarter.

William B. Rutherford: Next, let me speak to capital allocation as we continue to employ a balanced allocation of capital. Cash flow from operations was just under $2.5 billion in the quarter. Capital expenditures totaled $1.1 billion, and we repurchased just under $1.2 billion of our outstanding shares during the quarter. Our debt to Adjusted Evenol Leverage remains near the low end of our stated guidance, and we believe we are well positioned for a balance sheet. Finally, in our release this morning, we are reaffirming our full year 2024 guidance. So with that, I'll turn the call over to Frank and open it up for Q&A, and we look forward to your questions.

Speaker Change: Next let me speak to capital outlook allocation as we continue to employ a balanced allocation of capital.

Speaker Change: Cash flow from operations was just under $2 5 billion in the quarter.

Speaker Change: Capital expenditures totaled $1 1 billion and we purchased just under $1 2 billion of our outstanding shares during the quarter.

Speaker Change: Our debt to adjusted EBITDA leverage remains near the low end of our stated guidance range and we believe we are well positioned from a balance sheet perspective.

Speaker Change: Finally in our release. This morning, we are reaffirming our full year 2024 guidance range.

Speaker Change: So with that I'll turn the call over to Frank and open it up for Q&A.

Frank Morgan: Look forward to your questions.

Frank Morgan: Thank you, Bill. As a reminder, please limit yourself to one question so we might give as many people in the queue as possible an opportunity to ask questions. Operator, you may now give instructions to those who'd like to ask a question.

Frank Morgan: Thank you Bill as a reminder, please limit yourself to one question. So we might get as many possible as of Q an opportunity to ask questions.

Speaker Change: Operator, you may now give instructions for those who would like to ask a question.

Operator: Thank you, and if you do wish to ask a question and join the queue, please press star 1 on your phone keypad. Again, if you are wanting to join the queue and ask a question, please press star 1 on your phone keypad. And your first question comes from the line of AJ Rice from Credit Suisse. Please go ahead.

Frank Morgan: Thank you and if you do wish to ask a question and joined the queue. Please press star one on your funding keypads.

Frank Morgan: Again, if you are wanting to join the queue and ask a question. Please press star one on Youll find keypad and your first question comes from the line of a J Rice from credit Suisse. Please go ahead.

Albert Rice: Hi. Thanks, everyone.

Frank Morgan: Okay.

Thanks, everyone.

Samuel N. Hazen: Obviously, the inpatient side of the business was quite strong. I wondered if there were service areas that were particularly strong, or was there anything else that you could highlight? I know at one point, as you talked about laying out the year, you thought maybe the first half comparisons would be stronger than the back half. I don't know if that's still your view. Any comment along those lines would be interesting as well.

Albert Rice: Obviously, the inpatient side of the business was quite strong I wondered if there were service areas that.

Albert Rice: We are particularly strong or was there anything else that you can highlight I know at one point as you talked about laying out the year you thought.

Albert Rice: Maybe the first half comparisons would be stronger than the back half I don't know if thats still your view any comment along those lines would be interesting as well.

Albert Rice: Okay.

Samuel N. Hazen: A. J. S. Sam. As I mentioned, we had a broad-based coalition. Volume growth across the company. Every division had growth in inpatient admissions. Actually, we had the best portfolio performance I think I've seen in my experience in the company, with 56 of our hospitals growing by greater than 10%. So almost a third of our portfolio grew by more than 10%. We had another one quarter of our portfolio grow greater than 5%. So really strong volume across the company broadly when you look not only at the divisions in the aggregate, but when you disaggregate the divisions within our hospital portfolio, you can see. Similar performance metrics

Albert Rice: A J this is Sam.

Samuel N. Hazen: As I mentioned, we had broad based <unk>.

Samuel N. Hazen: Volume growth across the company every division had growth in inpatient admissions actually we had the best portfolio of performance I think I've seen in my experience in the company with.

Samuel N. Hazen: 56 of our hospitals growing greater than 10% so almost a third of our portfolio grew by greater than 10%. We had another one quarter of our portfolio grow greater than 5%, So really strong volume across the company.

Samuel N. Hazen: Broadly when you look not only at the divisions in the aggregate, but when you disaggregate the divisions within our hospital portfolio you see.

Samuel N. Hazen: <unk> performance.

Samuel N. Hazen: Performance metrics as far as services the service line.

Samuel N. Hazen: As far as services go, the service line volume growth on the inpatient side was strong across the board. Even in obstetrics, we saw births grow on a year-over-year basis, and that's been down a little bit. So, very broad base from a service line standpoint as well.

Samuel N. Hazen: Volume growth on the inpatient side was strong across the board EBIT in obstetrics we saw birth.

Births grow on a year over year basis, and that's been down a little bit so very broad based from a service line standpoint, as well and then on the outpatient side with the exception of outpatient surgery, and it's known to everybody that the calendar effects were not necessarily favorable that.

Samuel N. Hazen: And then on the outpatient side, with the exception of outpatient surgery, and it's known to everybody that the calendar effects were not necessarily favorable, that influenced the outcomes for outpatient surgery. But underneath our volumes for outpatient surgery, as I mentioned, it was mostly Medicaid volume, which we lost, and we think, again, that's due to the redetermination process. A working theory that we have is that some of those patients have migrated to [inaudible] Challenge.

Samuel N. Hazen: Influence the outcomes on the outpatient surgery, but underneath our volumes on the outpatient surgery as I mentioned, it was mostly Medicaid volume, which we lost and we think again, that's due to the redetermination process. A working theory that we have is that some of those patients have migrated to.

Samuel N. Hazen: The exchange or to an employer and with Copays and deductibles.

Samuel N. Hazen: Maybe those cases are actually.

Samuel N. Hazen: Deferred because of that for some period of time, we just don't know at this point, but our overall profitability and revenue within our outpatient surgery business was up so at the end of the day the metric may look.

Samuel N. Hazen: Challenge, but the result was positive so I would I would say that as far as volumes as we look for the rest of the year, we do anticipate that the volume comparisons will be.

Samuel N. Hazen: But the result was positive. So I would say that as far as volumes are concerned for the rest of the year, we do anticipate that the volume comparisons will be, you know, slightly more difficult, but we expect, as I mentioned in my comments, that the demand for healthcare over the course of the year will continue to be strong, and we will be able to sustain growth. It may not be at this particular level, but we're pretty encouraged by where we are from an overall competitive positioning standpoint, as well as what we see as the backdrop of demand.

Samuel N. Hazen: Slightly.

Samuel N. Hazen: More difficult, but we expect as I mentioned in my comments that the demand for health care over the course of the year will continue to be strong and we will be able to sustain growth. It may not be at this particular level, but we're pretty encouraged by where we are from a overall competitive positioning.

Samuel N. Hazen: Standpoint, as well as what we see as the backdrop of demand.

Ann Kathleen Hynes: Okay, thanks a lot. Your next question comes from the line of Ann Hynes from Midswell. Your line is open. Great, thank you so much.

Speaker Change: Okay. Thanks, a lot.

Speaker Change: Your next question comes from the line of Ann Hynes from Mitsui <unk> Co. Your line is open.

Ann Kathleen Hynes: Great. Thank you so much so I know I think it is.

Ann Kathleen Hynes: Your prepared remarks, you talked about how many catering terminations was having a negative impact on volumes can you just quantify what you think the impact was and then secondly, do you think you had a revenue benefit from the two midnight rule in the quarter. Thanks.

Ann Kathleen Hynes: Your next question comes from the line of Ann Hynes from Midswell. Your line is open.

William B. Rutherford: Yeah, and this is hard to quantify, regarding Medicaid redeterminations, you know; we are doing our best to track that. We're seeing, you know, just as we saw towards the end of last year, a large percentage of those people maintaining coverage, which I think is positive, perhaps 20% of those we previously saw are not. And we're seeing, you know, a large portion of those end up in either HICS or employer-sponsored coverage.

Speaker Change: Yes, and this is hard to quantify regarding Medicaid Redetermination as you know we are doing our best to track that we're seeing.

Speaker Change: Just as we saw towards the end of last year, a large percentage of those people maintaining coverage, which I think is positive perhaps 20% of those we previously solar or not and we are seeing.

Speaker Change: A large portion of those end up in either Hicks for employer sponsored.

Speaker Change: Coverage. So we believe there is a small positive benefit here and we're going to continue to monitor that over time on Medicaid re determinations.

William B. Rutherford: So we believe there's a small positive benefit here, and we're going to continue to monitor that over time on Medicaid redeterminations. On the two midnight rule, you know, I'd say it's still early.

On the two midnight rule I would say it's still early.

William B. Rutherford: We are starting to see some encouraging signs. We do believe it's providing a modest benefit. We're seeing some of our two midnight inpatient volume grow, and we think that's due to statusing in accordance with the new rules. But I'll emphasize it's still early, and not all claims have completed the adjudication process. But at this point, we still believe there's going to be a modest benefit from the two nights. Great, thank you. The next question comes from the line of Pito Chickering from Deutsche Bank. Please go ahead. Yeah, good morning. Talk about

Speaker Change: We are starting to see some encouraging signs we do believe this providing a modest benefit.

Speaker Change: We are seeing.

Speaker Change: Some of our two midnight inpatient volume grow.

Speaker Change: And we think thats due to status seen in accordance with the new rules, but I'll emphasize is still early and not all claims are completed the adjudication process, but at this point, we still believe theres going to be a modest benefit from the two designs.

Speaker Change: Great. Thanks.

Speaker Change: Next question comes from the line of Peter Chickering from Deutsche Bank. Please go ahead.

Philip Chickering: Hey, good morning can you talk about the Opex pressure that youre seeing is there any else. Besides obviously expenses are going in there and how should we think about opex of incentive revenues using the first quarter as a launch pad does that continue to see pressure into Q does it level off the back half of the year and then any qualification of how wesco is tracking better.

Pito Chickering: The next question comes from the line of Pito Chickering from Deutsche Bank. Please go ahead. Yeah, good morning.

William B. Rutherford: Yeah, if you notice, Bill, let me start. So, you know, I think there are two primary factors that are affecting the year-over-year comparisons and other operating costs. I'll emphasize it's been very consistent over the past three quarters, though, and I think first, as you know and recall for others, that we began to see the pro-fee pressures mostly in the second quarter of last year. So, we're still looking at some year-over-year effect of that.

Speaker Change: And expectations. Thanks.

Speaker Change: Yes, So let me start so I think there's two primary factors that are influencing the year over year comparisons and other operating costs I'll emphasize we it's been very consistent over the past three quarters, though and I think first as you know.

Speaker Change: And recall for others, we began to see the fee pressures, mostly in the second quarter of last year. So we're still looking at some year over year effect of that and we're pleased that we're at least seeing the.

William B. Rutherford: We're pleased that we're at least seeing the sequential growth in pro-fees begin to moderate, as we have for the past several quarters, and I think the second contributor is just the expected increase in provider taxes related to the supplemental payment programs that we participate in. So, those are really the two primary year-over-year contributors, and I think it was mostly in line with our expectations. As we go forward, you know, again, I think for the past three quarters, the operating-ex percent of revenue has stayed relatively consistent, and hopefully that will continue through the balance sheet.

Speaker Change: Sequential growth in pro fees begin to moderate as we have for the past several quarters and I think the second contributor is just the expected increase in provider taxes related to the supplemental payment programs that we participate in so those are really the two primary year over year contributors.

Speaker Change: I think mostly it was in line with our expectations as we go forward.

Speaker Change: I think for the past three quarters, the opex percent of revenue stay relatively consistent and hopefully that will continue through the balance of the year.

Whitmayo: Thank you. Your next question comes from the line of Whitmayo from Lee Rink Partners. Your line is open.

Speaker Change: Thank you.

Speaker Change: Your question comes from the line of Whit Mayo from Leerink Partners. Your line is open.

Whitmayo: Hey, thanks. Good morning.

Benjamin Whitman Mayo: Hey, Thanks, good morning, it looks like there is about almost $500 million of revenue that is not in the same store segment. This quarter, you did modest M&A this quarter less than $100 million ish.

William B. Rutherford: And it looks like there's about almost $500 million of revenue that's not in the same store segment this quarter. You did modest M&A this quarter, less than $100 million you spent. I mean, it's the entirety of the almost 500 campuses that you acquired last quarter. Anything I'm missing? I'm just trying to figure out maybe the impact on margins, because those don't really have any earnings that could be maybe like a 60, 70 basis point drag. So if you could help me out there, Bill, that'd be helpful. Yeah, well, I think there are probably two.

Benjamin Whitman Mayo: <unk> of the almost 500 the campuses that you acquired last quarter or anything I'm missing I'm, just trying to figure out maybe the impact on margins because if those don't really have any earnings that could be maybe like a 60 70 basis point drag. So if you could help me out there bill that would be helpful. Yes, I think there's probably two wonder velazco operations would be in the north.

William B. Rutherford: Yeah, well, I think there are probably two. One, the Valesco operations would be in the non-same store, and then we did acquire the Wise Health System in the last year, and that would probably be the other entity that's the difference between the same store and the consolidated.

Speaker Change: Non same store and then we did acquire.

Speaker Change: <unk> system.

Speaker Change: Last year and that would be probably the other entities that.

William B. Rutherford: Sweet same store and consolidated.

Brian Gil Tanquilut: Okay, thanks. Your next question comes from the line of Brian Tanquilut from Jeffreys; please go ahead. Hey, good morning.

Speaker Change: Okay. Thanks.

Speaker Change: Your next question comes from the line of Brian <unk> from Jefferies. Please go ahead.

Brian: Hey, good morning, Bill Thanks for all the help over the years.

Brian Gil Tanquilut: Your next question comes from the line of Brian Tanquilut from Jeffreys. Please go ahead. Hey, good morning.

Brian: Regarding the retirement of yen.

Brian: Yes, I think just my question on Labor you touched on the left here a little bit.

William B. Rutherford: Let me start with Valesco. So, as we said in our year-end call, we anticipate the Valesco operations to kind of generate the same amount that we had in 2023, but in 2023, we have them for three quarters. Obviously, we'll have them for four quarters in 2024. So, again, I think that's resulting in some sequential improvement, but I think that's still good guidance for us to basically be flat on a full-year basis.

Brian: Any quantification you can share with us or expectation for further improvement both in <unk> and nurse staffing temp.

Brian: Labor.

Speaker Change: Let me start with Velazco, so as we said in our year end call. We anticipate the velazco operations to kind of generate the same amount that we had in 'twenty three 'twenty three we had them for three quarters, obviously will happen for four quarters in 2004. So again I think thats resulted in some sequential improvement but.

Speaker Change: I think that's still good guidance for us is to basically be flat full year basis on the labor cost. We continue to be pleased with the trends in contract labor teams have a number of initiatives as we've seen turnover stabilized recruiting and hiring still as I mentioned our contract labor is down still 20.

William B. Rutherford: On the labor cost, we continue to be pleased with the trends in contract labor, and teams have a number of initiatives as we've seen, you know, turnover, stabilize, recruiting, and hiring still up. As I mentioned, our contract labor is still down 20% year over year. We think there's still more room to go as we go forward. So again, I think we're pleased and we're in a good position in overall labor.

<unk> percent year over year.

Speaker Change: We think there's still more room to go as we go forward. So.

Speaker Change: So again I think we're pleased and we're going to get good position overall labor trends.

Speaker Change: Alright, thank you.

Speaker Change: Yes.

Benjamin Hendrix: Your next question is from the line of Ben Hendrix from RBC Capital Markets. Please go ahead.

Speaker Change: Your next question is from the line of Ben Hendrix from RBC capital markets. Please go ahead.

William B. Rutherford: Thank you very much, and congratulations, Bill. I wanted to follow up on some of the mixed commentary. You said you had some really strong commercial mix, and I wanted to see kind of more details on how exchange volume fits into that. I know you've talked about redetermination and Medicaid losses being offset. One pickup on exchange could offset three Medicaid losses. I'm just wondering kind of where we are on that recapture, and are we still in a lull, or are we seeing enough exchange volume to kind of offset that? Thanks. Yeah, let me, let me start with that.

Benjamin Hendrix: Thank you very much and congratulations bill.

Benjamin Hendrix: Wanted to follow up on.

Benjamin Hendrix: Some of the mixed commentary I think you had some really strong commercial mix I wanted to see kind of a more deep.

Benjamin Hendrix: Exchange volume.

Benjamin Hendrix: Fits into that and I know you've talked about redetermination.

Benjamin Hendrix: We terminated.

Benjamin Hendrix: And Medicaid.

Benjamin Hendrix: Losses being offset.

Benjamin Hendrix: We had a three 1% pickup on exchange could offset three Medicaid.

Benjamin Hendrix: Losses, and I'm, just wondering kind of where we are on that on that recapture and are we still in a lull or are we seeing that exchange volume to kind of offset that thanks.

Speaker Change: Yes, let me let me start with that one we are.

William B. Rutherford: Yeah, let me start with that one. We are, you know, very pleased with the result. We're seeing our overall managed care increase, you know, in the 12-13% range that is fueled by health insurance exchanges. Our exchange volume was up close to 50% in the first quarter. Remind you, it's still roughly 6% or so of our volume, but we have seen really good growth in that, and so we're pleased with that. It's hard to tell where we are in that cycle.

Speaker Change: Very pleased with the mix, we're seeing our overall managed care increase you know in the 12% to 13% range that this fueled by health insurance exchanges. Our exchange volume was up close to 50% in the first quarter. The data we see perhaps enrollment in our markets is up a little north of 30%. So our volumes are low.

Speaker Change: Higher than that and I think that is probably attributable to re determinations at least a big chunk of that Delta as we are seeing some people who are re determined off Medicaid lane of both employer sponsored coverage as well as the Hix boy remind you still roughly 6% or so of our borrowing but we.

We are seeing really good.

William B. Rutherford: I think we may be nearing the end, at least, of the state's redetermination process, but, you know, we're very pleased with the trends we're seeing so far. On the Medicaid redeterminations, as I said before, I think it is providing some benefit for us. We continue to track individuals that are presenting and what their previous coverage was. And we're seeing, you know, the people who are being redetermined off the land are either employer-sponsored or HITS-COVID.

Speaker Change: Good growth in that and so we're pleased with that.

Speaker Change: Hard to tell where we are in that cycle I think we may be nearing the end at least of the state's redetermination process, but you know.

Speaker Change: We're very pleased with the trends, we're seeing so far on the Medicaid Redetermination as I said before I think it is providing some some benefit for US we continue to track individuals that are presenting on what the previous coverage with was and we're seeing the people who are being re determined off land either.

Employer sponsored or mortgage coverage.

Gary Paul Taylor: Your next question is from the line of Gary Taylor from TD Cowan. Please go ahead.

Speaker Change: Thank you.

Speaker Change: Yes.

Speaker Change: Your next question is from the line of Gary Taylor from TD Cowen. Please go ahead.

Gary Paul Taylor: Hi, good morning. Bill, you'll be missed.

Gary Paul Taylor: Hi, Good morning, Bill Youll be missed so.

Gary Paul Taylor: So congrats. For my two, there were two numbers that really jumped out at me. So I just want to get your comment on those.

Gary Paul Taylor: Thanks Congrats.

Gary Paul Taylor: My two there were two numbers that really jumped out at me. So I just wanted to get your comment on those the first is I think the occupancy numbers all time high.

Samuel N. Hazen: The first is I think the occupancy number is at an all-time high, you've reported, or at least in the last decade. And I just want to think through, does that mean, I mean, we're peaking in terms of operating leverage on labor and other operating expenses, you know, outside of professional fees? Could there still be more? Unknown Speaker, It seems to me our visit's a 7 versus a plus 10 comp. And we had a similar phenomenon last year, where we were up huge against a very tough comp in the first quarter, and then that kind of moderated, and I'm just trying to think through if there's anything around ER seasonality that's new with redeterminations or ACA, SEPs, or anything that seeing numbers like Oh, Gary and Sam.

Gary Paul Taylor: You have reported or at least in the last decade and I just wanted to think through I mean does that mean.

Gary Paul Taylor: I mean, we're peaking in terms of operating leverage on labor and other operating.

Gary Paul Taylor: Expense.

Gary Paul Taylor: Outside of professional fees could there still be more.

Gary Paul Taylor: Room on leverage and then the other would just be.

Gary Paul Taylor: Same store your visits up seven versus a plus 10 com.

Gary Paul Taylor: We had a similar phenomenon last year were up huge against a very tough comp in the first quarter and then that kind of moderate as I'm just trying to think through if there's anything around.

Ah seasonality, that's that's new with Redetermination, our HCA sep's or anything that thing.

Gary Paul Taylor: Seeing numbers like that.

Gary Paul Taylor: <unk> brings to mind for you.

Samuel N. Hazen: Gary This is Sam.

Samuel N. Hazen: I think we.

Samuel N. Hazen: Garrett Sam I think we are actually pretty pleased with the occupancy level. When you look at our operating agenda, our operating agenda is making sure, number one, that we have the staffing supply necessary in order to accommodate what we believe to be, again, a positive demand backdrop. And we've made solid improvements over the last 18 months in recruitment and retention, and enhanced care models that really create a better environment for our patients. The second aspect of our capacity management and meeting the demand in the market is around our case management efforts, and our teams again have executed as normal inside our company around whatever our imperatives are at a really high level. We actually had acuity grow, as we mentioned, but length of stay went down.

Samuel N. Hazen: We're actually.

Samuel N. Hazen: Pretty pleased with the occupancy levels.

Samuel N. Hazen: When you look at our operating agenda, our operating agenda is making sure number one that we have the staffing supply necessary in order to accommodate what we believe to be again, a positive demand backdrop, and we made solid improvements over the last 18 months.

Samuel N. Hazen: Two recruitment rich.

Samuel N. Hazen: Retention.

Samuel N. Hazen: Enhanced care models that really create a better environment for our patients the second aspect to our capacity management and meeting the demand in the market is around our case management efforts and our teams again have executed.

As normal inside of our company around whatever our imperatives are at a really high level and we actually had acuity grow as we mentioned, but length of stay with down that allowed us to open up more beds received more patients in through our transfer centers and our emergency room, and so forth and thats not.

Samuel N. Hazen: That allowed us to open up more beds, receive more patients through our transfer centers and our emergency rooms, and so forth. That's not necessarily compromising our operating leverage. One quarter over one quarter is never a perfect proxy for the business.

Samuel N. Hazen: Necessarily compromising our operating leverage.

Samuel N. Hazen: One quarter over one quarter is never a perfect proxy for the business and so we're looking at the business sort of over a longer run and with the exception of proceeds which we believe will moderate over time.

Samuel N. Hazen: We're looking at the business over the longer run. With the exception of pro feed, which we believe will moderate over time, we will continue to see operating leverage in most scenarios when we have incremental volume because we have fixed costs in our labor platform. We have other fixed costs inside of our other operating expenses.

Samuel N. Hazen: We'll continue to see operating leverage in most scenarios when we have incremental volume because we have fixed costs at our labor platform, we have other fixed costs inside of our.

Samuel N. Hazen: Other operating expenses.

Samuel N. Hazen: We are investing to add inpatient bed capacity. We had, I think, a little over 2% come online this year versus last year. We have a significant pipeline of capital that will help deliver more inpatient capacity over the next two to two and a half years. So that's that question.

Samuel N. Hazen: So we are investing.

Samuel N. Hazen: To add inpatient bed capacity, we had I think a little over 2% come online this year versus last year, we have a significant pipeline of capital that will help deliver more inpatient capacity over the next two to two.

Samuel N. Hazen: Two to two and a half years.

So thats that question on the emergency room, when you look at the emergency room and look underneath the emergency room or commercial emergency room visits were up 20% on a year over year basis debt.

Samuel N. Hazen: On the emergency room, when you look at the emergency room and look underneath the emergency room, our commercial emergency room visits were up 20% on a year over year basis, which is a really strong metric. We're down 10% in Medicaid, up slightly in self-pay, which speaks to the point Bill was making around redeterminations, finding a different level within the mix of our business. And so our emergency room business, obviously, we had one extra day. So we see the same level of emergency room business inside of the leap year dynamic this year. So that would pull it back in normal quarters.

Samuel N. Hazen: Is a really strong metric were down 10% and Medicaid up.

Samuel N. Hazen: Slightly in self pay which speaks to the point bill was making around redetermination, finding a different level within the mix of our business.

Samuel N. Hazen: So our emergency room business, obviously, we had one extra day, so we see.

Samuel N. Hazen: At the same level of emergency room business.

Samuel N. Hazen: Side of the leap year dynamic this year, so that would.

Samuel N. Hazen: Pull it back in.

Samuel N. Hazen: In normal quarters, but we're encouraged by what's going on in our emergency rooms, we have.

Samuel N. Hazen: But we're encouraged by what's going on in our emergency rooms. We have a robust agenda there to revitalize service levels because we've had a lot of dynamics coming out of COVID. And as I mentioned in my prepared comments, our service levels have improved. The process time for a patient to be seen as well as the process time for a patient to be discharged or admitted to the floor has improved markedly.

Samuel N. Hazen: Robust agenda, there to revitalize the service levels, because we've had a lot of dynamics coming out of Covid and as I mentioned in my prepared comments our service levels have improved.

Samuel N. Hazen: Process time for a patient to be seen as well as the process time for a patient to be discharged or admitted to the floor has improved markedly.

Samuel N. Hazen: Our patient satisfaction continues to improve on a year over year basis, and our emergency rooms also on a sequential basis. Additionally, we're investing in our emergency room platform both on campus and off campus, and those efforts are proving to be important to that particular service line as well. So the emergency room and our urgent care platform play a huge role in our overall network model, and we continue to be encouraged by what's going on in both areas.

Samuel N. Hazen: Patient satisfaction continues to improve on a year over year basis in our emergency rooms.

Samuel N. Hazen: And also on a sequential basis. Additionally, we're investing in our emergency room platform, both on campus and off campus and those efforts are proving to be important to that particular service line as well so the emergency room and our urgent care platform play a huge role in our overall <unk>.

Samuel N. Hazen: Work model and we continue to be encouraged by what's going on in both areas.

Justin Lake: Your next question comes from the line of Justin Lake from Wolf Research. Please go ahead.

Samuel N. Hazen: Your next question comes from the line of Justin Lake from Wolfe Research. Please go ahead.

Samuel N. Hazen: Yeah.

Justin Lake: Thanks. Good morning.

Justin Lake: Thanks, Good morning.

William B. Rutherford: Let me add my congratulations to Bill on his retirement. I really appreciate all your help over the years, bud. So my question was trying to get an update on your expectations for Medicaid, DPP, and DISH. You reported the benefit here at $3.9 billion in 2023. I should say benefit. That's a gross number, I believe. Appreciate the increased transparency. Was hoping you could give us an update on what you're expecting for 2024 on this metric relative to 2023.

Justin Lake: Add my congrats to bill on his retirement really appreciate all your help over the years, but.

Justin Lake: So by my question.

Justin Lake: Trying to get an update on your expectations for Medicaid DPP dish.

Justin Lake: You reported the bed if this year at $3 9 billion in 2023, I should say benefit that's a gross number I believe.

Justin Lake: Appreciate the increased transparency was hoping you could give us an update on what you're expecting for 2024 on this metric.

Justin Lake: Relative to 2023, maybe how much of that that's a gross number again, how much should we think of as kind of the net benefit there and then can you go back if you have the number handy to 2019 pre COVID-19 <unk> kind of the big increase in some of these programs that tell us what that number looked like back then.

William B. Rutherford: Maybe how much of that, you know, that's a gross number again. How much should we think of as kind of the net benefit there? And then can you go back, if you have the number handy, to 2019, pre-COVID, pre-kind of the big increase in some of these programs, and tell us what the number looked like back then? Thanks.

William B. Rutherford: Yeah, Justin, let me try. And I think we have to get back to you on the 19. I don't have that front. But, you know, if I reflect back on our year-end discussion, you know, that's still our belief today. You know, first, you know, level set: these DPP programs are really just fundamentally part of our Medicaid reimbursement. There are a lot of them. We have 18 or 19 states have these programs, but a lot of them have some complexity with a lot of variables associated. So use that as a backdrop.

Speaker Change: Yes, So let me try and I think we have to get back to you with my team I don't have that front, but.

Speaker Change: If I reflect back to your year end discussion.

Speaker Change: That's still our belief today.

Speaker Change: First as you know.

Speaker Change: Level set these DPP programs are really just fundamentally part of our Medicaid reimbursement. There's a lot of them. We have 18 or 19 states have these programs with a lot of them have some complexity with a lot of variables associated so use that as a backdrop, but we still believe when we look at the full year, there is going to be a modest headwind in the <unk>.

William B. Rutherford: But we still believe, when we look at the full year, there's going to be a modest headwind in revenue for these programs, 24 versus 23, largely because of some settlements that we realized in 23, but we do not expect to reoccur going forward. And so that's still our belief. And any one quarter, you know, there may be factors that influence quarter by quarterly trends. But for the full year, we think there's still going to be a modest headwind on the revenue component that we have.

Speaker Change: Avenue to these programs 24 versus 23, largely because of some settlements.

Speaker Change: We realized in 2003, we do not expect to reoccur going forward and so that's still our belief in any one quarter. There may be factors that influence quarter by quarterly trends, but for the full year, we think theres still going to be a modest headwind on the revenue component that we have.

William B. Rutherford: You know, each state is a little bit different in terms of whether they're tax based or contribution based. So there are clearly operating expenses associated with the revenue number that you quoted that we disclosed within our 10-K. But the ratios have remained relative. And we'll have to maybe get back with you on the 19 levels. I don't have that handy.

Speaker Change: Each state has a little bit different in terms of whether they're tax space or contribution base. So they are clearly operating expenses associated with the revenue number that you quoted that we disclosed within our 10-K.

Speaker Change: But the ratios have remained relatively consistent.

Speaker Change: Okay.

Speaker Change: And we'll have to maybe get back with you on the 19 levels I don't have that.

Speaker Change: Sandy.

Speaker Change: Okay.

Frank Morgan: Before we continue to the next question, a reminder, if you would like to join the Qute, please press star 1 on your telephone keypad, and your next question comes from the line of Andrew Mok from Barclays. Please go ahead.

Speaker Change: So we continue to the next question as a reminder, if you would like to join the queue to please press star one on your telephone keypad and your next question comes from the line of Andrew Mok from Barclays. Please go ahead.

Andrew Mok: Hi, good morning. Thanks for the question. I just wanted to echo congratulations to Bill. I just wanted to follow up on the comments you made on other OPEX. I think the year-over-year comparisons all make sense, given the timing of Valesco, but I'm still confused on the sequential progression from Q4, because it sounds like Valesco performed better, physician fees moderated, and it was my understanding that supplemental payments would actually step down a bit from elevated Q4 levels.

Andrew Mok: Hi, Good morning. Thanks for the question I, just wanted to echo congratulations to bill.

Andrew Mok: I just wanted to follow up on the comments you made on other Opex I think the year over year comparison involved makes sense given the timing of the wesco, but I'm still confused on the sequential progression from Q4, because it sounds like velazco performance better physician fees moderated and it was my understanding that supplemental payments would actually stepped down a bit from elevated Q4 levels.

Andrew Mok: So I'm just trying to understand why we didn't see a larger decrease or more leverage on the other OPEX line, given those trends. Is there something that we don't understand or some other unexpected kind of item in that other OPEX line? Thanks.

Andrew Mok: So I'm just trying to understand why we didn't see a larger decrease or more leverage on the other opex line given those trends is there something that we don't understand or some other unexpected kind of item in that other opex line.

William B. Rutherford: No, I'd say we...

Speaker Change: No I would say we did have growth in our state supplemental payment expense quarter by quarter as I said and Justice response.

William B. Rutherford: No, I'd say we did have growth in our state supplemental payment expense quarter by quarter. As I said in Justin's response, you know, there are certain variables that come with the timing of those. So, sequentially, that was up. And the pro fees were up sequentially; it just was up small on there. So, those are the two main factors to call out in the other operating. It's pro fees and the state supplemental payment. And I think when you look at it sequentially, it makes sense, pretty much the trends were in line with our expectations, but nothing else there that I'm not.

Speaker Change: Certain variables that come of the timing of those so sequentially that was up and the pro fees were up sequentially. It was up small on there. So those are the two main factors to call out in the other operating this pro fees and the state supplemental payment.

Speaker Change: And I think when you look at sequentially. It makes sense pretty much the trends were in line with our expectations, but but nothing else there on highway.

Speaker Change: Got it thank you.

Speaker Change: Sure.

Kevin Mark Fischbeck: Your next question comes from the line of Kevin Fischbeck, Bank of America. Please go ahead.

Speaker Change: Your next question comes from the line of Kevin Fischbeck Bank of America. Please go ahead.

Kevin Mark Fischbeck: Hey, thanks. So maybe, maybe two questions, I guess. One question, I guess, just about the guidance. I guess there's been a lot of talk about how you guys are thinking about providing guidance, and you reaffirm guidance at the court. I wasn't sure if that was trying to move away from providing an update every Q1, or whether that was you're actually reaffirming guidance because everything is exactly in line. So you're changing your communication around that without the need to get an update on that.

Kevin Mark Fischbeck: Hey, Thanks, So maybe maybe two questions I guess one question I guess just about the guidance I guess, it's been a lot of talk about how you guys are thinking about providing guidance.

And you reaffirmed guidance for the quarter I wasn't sure if that was trying to move away from providing an update every Q1 or whether that was youre actually reaffirming guidance because everything is exactly in line. So.

Speaker Change: Tangent here.

The case around that would love to get an update on that but then second just really about the volumes.

William B. Rutherford: But then second, just really about the volumes. You know, obviously, three to 4% volume for the year; you're above 5% to start. So does that imply that you're going to end the year more like two, and is what we're seeing this year three to four? You know, how do you think about where volume will be in 2024 relative to that long-term trend line of the demand that you see in your markets?

Speaker Change: Obviously.

Speaker Change: 3% to 4% volume for the year Youre above 5% start so.

Speaker Change: Does that imply that youre going to end the year more like two and is what we're seeing this year is three to four.

How do you think about where volume will be in 2024 relative to that long term trend line with the demand that you're seeing in your markets.

William B. Rutherford: Are we going to be more or less back to that long-term trend line in 2024? Or is there still some, some, you know, room for that to kind of move up towards a longer-term trend line? [inaudible] Yeah. Hey, Kevin, this is Phil. Let me start on that same bit.

Speaker Change: It would be more or less back to that long term trend line in 2024 or is there still some some room for that to kind of move up towards a longer term trend line. Thanks.

Speaker Change: Hey, Kevin This is bill, let me start and I seem to add on the guidance.

William B. Rutherford: Yeah, hey Kevin, this is Bill. Let me start on that same one to add in. On the guidance, you know, we typically would not adjust guidance in Q1 in normal years, but we, as we talked in our year-end call and as we tried to set the guidance ranges, believe the ranges are wide enough to accommodate, you know, a range of outcomes. And so, we want to get out of the trend, if you will, of trying to reset guidance every quarter by quarter. I think the long-term business trends that we've highlighted over the years, that we highlighted, you know, in our investor day last year, we believe are solid. They're kind of durable.

William B. Rutherford: We typically would not adjust guidance in Q1 in normal years, but we as we talked in our year end call. As we've tried to set the guidance ranges believe the range is wide enough to accommodate.

Speaker Change: A range of outcomes and so we wanted to get out of it.

Speaker Change: The trend if you will trying to reset guidance every quarter by quarter I think the long term business trends that we've highlighted over the years that we've highlighted.

Our Investor Day last year, we believe are solid they are kind of a durable.

William B. Rutherford: They've been pretty predictable over time, and our overall guidance is based on that. So, we're not planning to adjust quarter by quarter unless there's, you know, material circumstances to warrant on either side of that. And on the volume trends, again, Sam can comment on that. As we've said, we're very pleased. Very strong volume, very strong demand, and perhaps we do end up on the high side of our overall annual guidance. We'll remind you, as we get into kind of the second half year-over-year comparisons, we started to see some positive volume trends in the third and fourth quarter last year. So, the year-over-year comps will adjust a little bit. But, you know, we're very pleased with the volume trends. And, you know, with these efforts, hopefully, we will.

Speaker Change: Been pretty predictable over time and our overall guidance is based on that so we're not planning to adjust quarter by quarter lessors.

Speaker Change: Cereal circumstance to warrant on either side of that and on the volume trends again same comment on here as we've said, we're very pleased very strong volume very strong demands and perhaps we do end up on the high side.

Speaker Change: Overall annual guidance, we will remind us we'll get into kind of the second half year over year comparisons we started to see some volume positive volume trends in the third and fourth quarter last year. So the year over year comps will will adjust a little bit, but we're very pleased with the volume trends are in that and.

Speaker Change: These offers hopefully we will end up on the high side.

Speaker Change: Okay. Thank.

Speaker Change: Thank you.

Speaker Change: Okay.

Stephen C. Baxter: Your next question comes from the line of Stephen Baxter, Wells Fargo. Please go ahead.

Speaker Change: The next question comes from the line of Stephen Baxter Wells Fargo. Please go ahead.

Stephen C. Baxter: Yeah, hi, thanks. Just to hopefully put a bow on the Medicaid state directed payment question, can you just remind us, are we at the point now that you're accruing these evenly each quarter in 2024? Is there any lumpiness to kind of keep in mind about the first quarter or the rest of the year? And then, just to tie in to that, you know, the final rule that got published earlier this week around this issue, do you feel optimistic that maybe more of your states, you know, kind of have more to do here? Or do you think maybe your states are doing a better job of proactively seeking these programs out? Yeah, let me, let me make this clear: there is some...

Stephen C. Baxter: Yeah, Hi, Thanks, just to hopefully put a bow on the Medicaid state directed payments question can you just remind us are we at the point now that you're accruing. These evenly each quarter. In 2024 is there any lumpiness kind of keep in mind about the first quarter or the rest of the year and then just to tie on to the final rule that got published earlier this year.

Stephen C. Baxter: Week around this issue.

Stephen C. Baxter: Do you feel optimistic that maybe more of your states kind of have more to do here or do you think maybe youre states better job of proactively seeking those programs up thank you.

Stephen C. Baxter: Yes.

William B. Rutherford: Yeah, there is some variability in the timing of when we recognize these. For the most part, programs we've had under a while, we're on a daily basis. You know, with new programs, we typically wait until we get some established history and actually funds start to flow. So it's a little bit of a mix, but there is some variability that we see as we go year by year. You know, previous to this year, we would recognize Florida on an annual lump sum basis.

Stephen C. Baxter: There is some variability of the timing of when we recognize these for the most part programs we've had under while we're on the accrual basis.

Stephen C. Baxter: With new programs.

Stephen C. Baxter: Typically wait until we get some established history.

Stephen C. Baxter: And actually fund starting to flow so it's a little bit of mix, but there is some variability that we see as we go year by year remind people.

Stephen C. Baxter: Previous to this year, we were recognized Florida on an annual lump sum basis, we started accruing it sounded a little bit, but but we tried to accrue those as much as we can as we've got some historical practices relative to the rule that was released earlier. This week is still early we're working our way through the assessment, but.

William B. Rutherford: We started accruing. It's only a little bit, but we try to accrue those as much as we can as we've got some historical practice. Relative to the rule that was released earlier this week and is still early, we're working our way through the assessment, but generally, we review it as positive. It removes the potential for some capped add-on payments, and there's a potential for changes in terms of how providers receive payments. It'll take a little bit of time for states to work through these and implement them, but generally, we view that as a positive development. Next question comes from the line of Jason Cassorla from Citi, please go ahead. Great, thank you.

Stephen C. Baxter: Generally we review it is positive.

Stephen C. Baxter: The potential for some coffee and add on payments.

Stephen C. Baxter: And there is a potential for changes.

Stephen C. Baxter: In terms of how providers receive payments it will take a little bit of time for states to work through those and implemented.

Stephen C. Baxter: Generally we view that as a positive development for us.

Jason Tisell: Next question comes from the line of Jason to solo from Citi. Please go ahead.

Jason Tisell: Great. Thanks, Good morning, I, just wanted to follow up on labor I know youre benefiting from reduced contract labor spend and alike.

Jason Tisell: When you think about the first quarter SBB for just the patient day up about 3% can you give us a sense of how wage growth trended in the quarter and then offset on the productivity front that you're seeing and if there's anything within the first quarter that gives you confidence on your labor and that kind of for the balance of the year.

Jason Paul Cassorla: The next question comes from the line of Jason Cassorla from Citi. Please go ahead.

William B. Rutherford: Yeah, I mean, obviously, as we've talked about over the past year, we've got a lot of initiatives in the labor market, and our teams are executing very well, from turnover reductions to recruitment and retirement, recruitment and retention efforts there. And our core labor trends are in line with our expectations. We said we anticipated wage inflation at that two and a half to 3% level, and we're starting to, and we are seeing that. And that's, you know, helping to upset the applecart, you know, and we'll continue to be pleased with the contrary labor trends. So I would say the core labor trends that we are seeing this year are right in line with our expectations. And the initiatives that we have are continuing to be implemented.

Speaker Change: Yes, I mean, obviously as we've talked about over the past year, we've got a lot of initiatives on flavor and our teams are executing very well.

Speaker Change: Turnover reductions to recruitment and retire retrenchment recruitment and retention efforts on there and our core labor trends are in line with our expectations. We said, we anticipate wage inflations in that tune out to 3% level and we're starting to see and we are seeing that and that's helping to offset.

Speaker Change: And we'll continue to be pleased with the contract labor trends. So I would say the core labor trends that we're seeing this year are right in line with our expectations and the initiatives that we have are continue to be underway.

Lance Arthur Wilkes: Your next question comes from the line of Lance Wilkes. Bernstein, your line is open.

Speaker Change: Your next question comes from the line of Lance Wilkes Bernstein. Your line is open.

Speaker Change: Great. Thanks, Tom.

Lance Arthur Wilkes: Great, thanks. One follow-up on the labor question, and that's just if you could give any comment on the iRing pipeline and if there are any categories where you're seeing either more appetite out there or any sort of constraints. And then my real question was about your comment on folks getting shifted over due to redeterminations and maybe that impacting outpatient surgeries. I was wondering if you're seeing any impacts of that sort of stuff on bad debt or any other things where perhaps the overall backdrop is impacting consumers.

Speaker Change: One follow up on the labor question.

Speaker Change: Give any comment on hiring pipeline and if there are any categories, where youre seeing either.

Speaker Change: More appetite out there or any sort of constraints and then my real question was on your comment on fluke scheme getting shifted over.

Speaker Change: Due to the Redetermination and maybe that impacting outpatient surgeries I was wondering if youre seeing any impact of that sort of stuff on bad debt or any other things were perhaps the overall backdrop is impacting consumers here.

William B. Rutherford: Yeah, I'm a bit of a bitch.

Speaker Change: Yes.

William B. Rutherford: Yeah, let me attempt that. Relative to the pipeline of labor, I don't know if there's any specific things I should call out. I mean, obviously, we have diversity of geography, diversity of different employees, and employer cohorts, and I think our teams are doing a great job. Our nurse hiring is up, and so I don't think there's anything unique I would call on that, and Sam or others can add to that. On relative to the redeterminations and perhaps that influencing their outpatient surgery, both the combination of the tick-spotting growth that we spoke about earlier, some of that due to the Medicaid redetermination, it is just a working hypothesis that perhaps there's a little bit more sensitivity on some of those elective procedures early in the year relative to deductibles and co-pays.

Speaker Change: Tim on that relative to the pipeline of labor I don't know if there's any specific things I call out I mean, obviously, we have diversity of geography diversity of different employers employer cohorts I think are two team for doing a great job our nurse hiring is up.

Speaker Change: And so I don't think Theres anything unique I would call on that same where others can add in on that on relative to the re determinations.

Speaker Change: Perhaps that influencing their outpatient surgery I think both the combination of the hix volume growth that we spoke about earlier some of that due to the Medicaid redetermination.

Speaker Change: It is just the working thesis that perhaps theres, a little bit more sensitivity on some of those elected procedures early in the year relative to deductible and co pays.

William B. Rutherford: As Sam mentioned in his comments, almost all of our drop in outpatient surgeries was at Medicaid and self-pay levels, so we'll need a little bit more time to see how that plays out, and perhaps there'll be some rebound on that as that begins to kind of normalize throughout the year. And on your question relative to the impact of that on bad debts, we're saying, no, I can't say we've seen any impact on that right now.

Speaker Change: As Sam mentioned in his comments almost all of our drop in outpatient surgeries was in Medicaid and self pay levels. So we'll need a little bit more time to see how that plays out and perhaps will be some rebound on that and as that begins to kind of normalize throughout the year.

Speaker Change: And on your question relative to impact of that on bad debts were saying no I can't say, we've seen any any impact on that right now there is still.

William B. Rutherford: There's still some of our self-pay growth or individuals that are in what we call a pending Medicaid status as we're pursuing eligibility efforts on there, but it has not yet resulted in any material change in our collectability or bad debts.

Speaker Change: Some of our self pay growth or individuals that are in what we call a pending Medicaid status as we're pursuing eligibility efforts on there, but it has not yet resulted in any material change in our collectability or bad debts at this stage.

Speaker Change: Yeah.

Joshua Raskin: Your next question is from the line of Joshua Raskin from Nefron Research. Please go ahead.

Speaker Change: Great. Thanks.

Speaker Change: Your next question is from the line of Joshua Raskin from Nephron Research. Please go ahead.

Joshua Raskin: Hi, thanks. Good morning. And Bill, I'll also add my congratulations and thanks for all the help.

Joshua Raskin: Hi, Thanks, Good morning, and Bill I'll also add my congrats and thanks for from a health.

Samuel N. Hazen: My question is just on CapEx. Could you speak to the CapEx and sort of the deployment in the quarter? It was down a tiny bit, so let's call it a flat issue every year, but generally, it has been trending higher in recent years. I guess maybe there's obviously a lot of timing. And then any new capacity specifically to call out in the next 12 months? I know you've got a bunch of projects over the next sort of two, two and a half years as well.

Joshua Raskin: My question just on Capex could you speak to the Capex deployment.

Joshua Raskin: The deployment in the quarter it was down a tiny bit so let's call it flattish year over year, but generally been trending higher in recent years I guess, maybe there's obviously a lot of timing and then any any new capacity specifically to call out in the next 12 months I know you've got a bunch of projects over the next sort of two two and a half years as well.

Samuel N. Hazen: This is Sam. The amount for the quarter is flat, to your point, and it is timing. We haven't slowed anything down. Some of our construction projects move at different paces than we anticipate at some level. But we expect the year to be somewhere close to the number that we got it to last quarter, which is somewhere around 5.2 billion or so. So we're investing more in the business than we ever have because of the capacity that we need and the network development that we want.

This is Sam.

Samuel N. Hazen: The amount for the quarter.

Samuel N. Hazen: <unk> is flattish to your point and it is timing, we haven't slowed anything down some of our construction projects move at different paces than we anticipate at some level, but we expect for the year would be somewhere close to the number that we guided to.

Samuel N. Hazen: Last quarter, which is somewhere around $5 2 billion or so so we're investing more in the business than we've ever invested because of the capacity that we need in the network development.

Samuel N. Hazen: And so those efforts will continue as we go through the course of this year. As far as any particular capacity that I would call out, I would tell you we have a new hospital in San Antonio, Texas, that will open later this year on the west side of that community. We're excited about that.

Samuel N. Hazen: One.

Samuel N. Hazen: And so those efforts continue.

As we go through the course of this year as far as 80 particular capacity that I would call out I would tell you we have a new hospital in San Antonio, Texas that will open up later this year on the west side of that community. We're excited about that.

Samuel N. Hazen: We have other major projects on a host of campuses that will come online over the year. I think our bed capacity when we conclude the year will be somewhere similar to the growth that we experienced this year, which is maybe another 2 percent or so. As I mentioned previously, our emergency room capacity is also growing as we invest in new units or as we expand existing units. I don't have the number in front of me as to exactly how much we're anticipating there, but we're investing consistently as far as areas of our business are concerned.

Samuel N. Hazen: Have other major projects on a host of campuses that will come online over the year I think our bed capacity. When we conclude the year will be somewhere similar to the growth that we experienced this year, which is maybe another 2% or so.

Samuel N. Hazen: I mentioned previously our emergency room capacity is also growing.

Samuel N. Hazen: We invest in new units or as we expand existing units I don't have the number in front of me as to exactly how much rich anticipating there, but we're investing.

Samuel N. Hazen: Consistently.

Samuel N. Hazen: As far as in the areas of our business, but we're investing more inside of those as a reflection of our.

Samuel N. Hazen: But we're investing more inside of those as a reflection of our overall spending. We also continue to invest in basic infrastructure in our facilities, whether it's capabilities and technology for our nurses or surgical equipment and so forth. Those investments continue again at an elevated level to improve the offerings for our physicians and patients. And so we have some increases embedded in that as well. So we're really excited about what we're spending our money on, and our patterns have proven that we can generate very positive returns. And we continue to believe that's the case.

Samuel N. Hazen: Overall spending we also continued to invest in basic infrastructure and our facilities whether it's.

Samuel N. Hazen: Capabilities and technology for our nurses or surgical equipment, and so forth those investments continue again as elevated levels to improve.

The offerings for our physicians and patients.

Samuel N. Hazen: And so we have some increases embedded in that as well. So we're really excited about what we're spending our money on and our patterns have proven that we can generate very positive returns and we continue to believe that's the case.

Sarah Elizabeth James: Your next question is from the line of Sarah James, Canter Fitzgerald. Please go ahead.

Perfect. Thanks.

Speaker Change: Your next question is from the line of Sarah James Cantor Fitzgerald. Please go ahead.

Samuel N. Hazen: Thank you. I was wondering if you could give us an idea of what the commercial outpatient surgeries were like with the moving pieces. I think we're all just trying to understand if that piece was where you expected it to be. I know it's coming off of a tough comp last year, but was it still positive like it was in the last few quarters? And then Galen, I think you guys are within a few weeks of your first graduating class. So, just wondering strategically, how's that panned out? Did you get your share or better of the work commitments of the graduating class?

Sarah Elizabeth James: Thank you.

Sarah Elizabeth James: If you could give us what the commercial.

Sarah Elizabeth James: Outpatient surgeries were just with the moving pieces I think we're all just trying to understand if that piece with where you expected it to be I know its coming off of a tough comp last year, but was it positive like it was the last few quarters and then.

Sarah Elizabeth James: Lynn I think you guys are within a few weeks of your first graduating class.

Sarah Elizabeth James: So just wondering strategically has that panned out did you get your share or better of the.

Sarah Elizabeth James: What commitments graduating class.

Samuel N. Hazen: This is Sam. On the commercial side of outpatient surgery, I would say it's generally flat, so it performed better than the aggregate as a whole. Again, the calendar affected outpatient surgery in general. Specifically, it had a more dramatic effect on Medicaid, as we mentioned, but we aren't anticipating or seeing anything that's structural in our outpatient surgery business. As I just mentioned, our capital spending includes investments in our outpatient surgery platform, as well.

Sarah Elizabeth James: This is Sam on the commercial side of outpatient surgery, I would say generally flat. So it performed better than the aggregate as a whole again the calendar effects.

Samuel N. Hazen: Affected outpatient surgery in general specifically it had a more dramatic effect on Medicaid as we mentioned.

Samuel N. Hazen: But we aren't anticipating or seeing anything thats structural.

Samuel N. Hazen: With our outpatient surgery business and as I just mentioned our capital spending has investments in our our outpatient surgery platform.

Samuel N. Hazen: As well with respect to gateway, we have had graduating classes in the past we continue to have larger ones as we expand that component of our organization and one of our priorities within our our facilities and within our nursing agenda is to integrate the Galen.

Samuel N. Hazen: With respect to Galen, we have had graduating classes in the past, and we continue to have larger ones as we expand that component of our organization. And one of our priorities within our facilities and within our nursing agenda is to integrate the Galen campuses into sort of the organization more effectively. And we are seeing incremental improvement in retaining those graduates in our company. And we continue to see opportunities for improvement there. It's really early to say that that's completely solidified.

Samuel N. Hazen: Campuses into the organization more effectively and we are seeing incremental improvement in.

Samuel N. Hazen: Retaining those graduates in our company and we continue to see opportunities for improvement there. It's really early to say that it's completely solidified.

Samuel N. Hazen: We have numerous campuses that are in the early stages of development. We will have, again, somewhere around 30 campuses by the end of 2027 with roughly 30,000 students across those campuses graduating, somewhere between 7,000 or 8,000 per year, allowing us to pipeline and hopefully create a really good student experience, integrate them into the system through clinical integration, and retain them when they graduate. So that's our strategy, and we're still early in seeing the effects of that. But we're encouraged by the effort.

Samuel N. Hazen: We have numerous campuses that are in early stages of development.

Samuel N. Hazen: We will have again somewhere around 30 campuses by the end of 2027 with roughly 30000 students across those campuses, graduating somewhere between seven or 8000 per year, allowing us to pipeline and hopefully create a really good students.

Variance integrate them into the system through clinical integration and retain them when they graduate.

Samuel N. Hazen: So thats our strategy and we are still early and seeing the effects of that but we're encouraged by the efforts.

Speaker Change: Thank you.

Calvin Alexander Sternick: Your next question is from the line of Cal Sternick. J.P. Morgan, please go ahead.

Speaker Change: Your next question is from the line of <unk> J P. Morgan. Please go ahead.

Calvin Alexander Sternick: Thanks for the question. We've heard commentary from some others that January and February were strong from a volume perspective with some softening of demand. Can you talk about what you saw in the quarter and then if you're seeing the expected rebound of volumes into April? And if I could also just ask one clarification on the Medicaid supplemental payments. Do you have any visibility right now of any retro programs that could come through in the second quarter?

Frank Morgan: Thanks for the question, we've heard commentary from some others that January and February were strong from a volume perspective, but some softening of demand March can you talk about what you saw in the quarter and then if you are seeing the expected rebound volumes into April.

Speaker Change: I can also just ask one clarification on the Medicaid supplemental payments do you have any visibility right now into any retro programs that could come through in the second quarter.

William B. Rutherford: This bill, actually, the last one, no, we don't have specific visibility, you know, there's always timing differences. Certain aspects, but no specific visibility. As far as

Speaker Change: This is bill actually last one no. We don't have specific visibility, there's always timing differences of certain aspects, but no specific visibility.

Speaker Change: As far as the volumes.

Samuel N. Hazen: As far as the volumes of... every quarter has calendar effects. And again, as I mentioned previously, we judge the business over a longer period of time to really understand what's working and what's not working. March was a difficult calendar for purposes of elective outpatient business and elective inpatient business simply because we had fewer working days, business days, and we had the Easter holidays during that time period. So it was clearly softer.

Speaker Change: Every quarter.

Speaker Change: Has calendar effects and again as I mentioned previously we judge the business over a longer period of time to really understand what's working and what's not working.

Speaker Change: March was a difficult calendar.

For purposes of elective outpatient business in elective inpatient business simply because we had less working days business days that we had the Easter holidays during that time period. So it was clearly softer we actually grew our inpatient admissions however in March but our outpatient.

Samuel N. Hazen: We actually grew our inpatient admissions, however, in March, but our outpatient activity was soft, and Influence for the aggregate for the quarter. We don't give guidance with respect to one month and into the next quarter. But I will tell you, as I mentioned in my prepared comments, that we're encouraged by the overall backdrop of demand in our market.

Speaker Change: <unk> was soft.

Speaker Change: The influence towards the aggregate for the quarter.

Speaker Change: We don't give guidance with respect to one month.

Speaker Change: Into the next quarter I will tell you as I mentioned in my prepared comments that we are encouraged by the overall backdrop of demand in our markets.

Speaker Change: Yeah.

Frank Morgan: And this concludes our Q&A session for today, and I would like to turn the call back over to Frank Morgan for closing remarks. All right, thank you.

Speaker Change: And this concludes our Q&A session for today and I would like to turn the call back over to Frank Morgan for closing remarks.

Frank Morgan: Alright. Thank you for your help today and thanks for everyone for joining our call. We hope you have a nice weekend around this afternoon if additional questions.

Frank Morgan: Pauli, thank you for your help today and thanks to everyone for joining our call. We hope you have a nice weekend. I'm around this afternoon if you have additional questions.

Speaker Change: A call have a good day.

Operator: This concludes today's conference call. Enjoy the rest of your day. You may now disconnect.

Speaker Change: This concludes today's conference call to enjoy the rest of your day you may now disconnect.

Speaker Change: Yeah.

Speaker Change: Can you give us a call have a good day.

Speaker Change: Thanks.