Q2 2024 Universal Health Services Inc Earnings Call
Good day, and thank you for standing by. Welcome to the Q2 2024 Universal Health Services Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session.
Operator: Learning's conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask the question during the session, you will need to press star 1-1 on your telephone. You will then hear an automated message advising that your hand is raised. To withdraw your question, please press star 1-1 again. Please be advised that today's conference is being recorded.
Unknown Executive: At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press star-one-one on your telephone. You will then hear an automated message advising that your hand is raised.
To ask a question during the session, you will need to press star 11 on your telephone.
Steve G. Filton: You will then hear an automated message advising that your hand is raised. To withdraw your question, please press star 1 1 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today. Steve Filton, Executive Vice President and CFO , please go ahead.
Unknown Executive: To withdraw your question, please press star-one-one again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today. Steve Filton, Executive Vice President and CFO, please go ahead. Good morning.
Operator: I would now like to hand the conference over to your speaker today.
Steve Filton: Steve Filton, Executive Vice President and CFO, please go ahead. Good morning. Marc Miller is also joining us this morning.
Steve G. Filton: Marc Miller is also joining us this morning. We welcome you to this review of Universal Health Services' results for the second quarter ended June 30, 2024. During the conference call, we'll be using words such as believes, expects, anticipates, estimates, and similar words that represent forecast projections and forward-looking statements. For anyone not familiar with the risks and uncertainties inherent in these forward-looking statements, I recommend a careful reading of the section on risk factors and forward-looking statements and risk factors in our Form 10-K for the year ended December 31, 2023, and our Form 10-Q for the quarter ended March 31, We'd like to highlight just a couple of developments and business trends before opening the call to questions.
Steve Filton: We welcome you to this review of Universal Health Services' results for the second quarter and the June 30, 2024. During the conference call, we'll be using words such as beliefs, expects, anticipates, estimates, and similar words that represent forecast projections and forward-looking statements.
Steve G. Filton: Good morning.
Steve G. Filton: As discussed in our press release last night, the company reported net income attributable to UHS per diluted share of $4.26 for the second quarter of 2024. After adjusting for the impact of the items reflected on the supplemental schedule as included with the press release, our adjusted net income attributable to UHS per diluted share was $4.31 for the quarter ended June 30, 2021. Our acute hospitals experienced a moderation of demand for their services in the second quarter, with adjusted admissions increasing 3.4% year over year and surgical growth flattening out. However, overall, revenue growth was still a solid 6.6%. Meanwhile, expenses were well controlled.
Marc D. Miller: Marc Miller is also joining us this morning. We welcome you to this review of Universal Health Services results for the second quarter ended June 30, 2024.
Speaker Change: During the conference call, we'll be using words such as believes, expects, anticipates, estimates, and similar words that represent forecasts, projections, and forward-looking statements.
Steve Filton: For anyone not familiar with the risks and uncertainties inherent in these forward-looking statements, I recommend the careful reading of the section on risk factors and forward-looking statements and risk factors in our Form 10-K for the year ended December 31, 2023, and our Form 10-Q for the quarter ended March 31, 2024.
Speaker Change: For anyone not familiar with the risks and uncertainties inherent in these forward looking statements, I recommend a careful reading of the section on risk factors,
Speaker Change: and Forward-Looking Statements and Risk Factors in our Form 10-K for the year ended December 31, 2023 and our Form 10-Q for the quarter ended March 31, 2024.
Steve Filton: We'd like to highlight just a couple of developments and business trends before opening the call up to questions. As discussed in our press release last night, the company reported net income attributable to UHS per diluted share of $4.26 for the second quarter of 2024. After adjusting for the impact of the items reflected on the supplemental schedule is included with the press release, our adjusted net income attributable to UHS per diluted share was $4.31 for the quarter-ended June 30, 2024. Our acute hospital experienced a moderation of the demand for their services in the second quarter, with adjusted admissions increasing 3.4% over year and surgical growth flattening out.
Steve G. Filton: Specifically, the amount of premium pay in the second quarter was $61 million, reflecting a 15 to 20 percent decline from the prior year quarter. On a same facility basis, EBITDA at our acute care hospitals increased 37% during the second quarter of 2024 as compared to the comparable prior year quarter, and the increase was 20% if you exclude the impact of the incremental Medicaid supplemental payments in the bond. During the second quarter, same facility revenues in our behavioral health hospitals increased by 11%, primarily driven by a 9.3% increase in revenue per adjusted patient day.
Speaker Change: We'd like to highlight just a couple of developments and business trends before opening the call up to questions.
Speaker Change: As discussed in our press release last night, the company reported net income attributable to UHS per diluted share of $4.26 for the second quarter of 2024.
Speaker Change: After adjusting for the impact of the items reflected on the Supplemental Schedule as included with the press release, our adjusted net income attributable to UHS per diluted share was $4.31 for the quarter ended June 30, 2024.
Speaker Change: Our acute hospitals experienced a moderation of the demand for their services in the second quarter with adjusted admissions increasing 3.4% year-over-year and surgical growth flattening out.
Steve Filton: Overall, revenue growth was still a solid 6.6%. Meanwhile, expenses were well controlled. Specifically, the amount of premium pay in the second quarter was $61 million, reflecting a 15 to 20% decline from the prior year quarter. On the same facility basis, EBITDA at our acute care hospitals increased 37% during the second quarter of 2024 as compared to the comparable prior year quarter. And the increase was 20% if you exclude the impact of the incremental Medicaid supplemental payments in the bottom. During the second quarter, same facility revenues in our behavioral health hospitals increased by 11%, primarily driven by a 9.3% increase in revenue per adjusted day.
Speaker Change: Overall, revenue growth was still a solid 6.6 percent.
Speaker Change: Meanwhile, expenses were well controlled. Specifically, the amount of premium pay in the second quarter was $61 million, reflecting a 15-20% decline from the prior year quarter.
Speaker Change: On a same facility basis, EBITDA at our acute care hospitals increased 37% during the second quarter of 2024 as compared to the comparable prior year quarter.
Speaker Change: And the increase was 20% if you exclude the impact of the incremental Medicaid supplemental payments in Nevada.
Speaker Change: During the second quarter, same facility revenues in our behavioral health hospitals increased by 11%, primarily driven by a 9.3% increase in revenue per adjusted patient day.
Steve Filton: Even after adjusting for Medicaid supplemental payments not included in our original 2024 guidance, same facility revenues increased by 7.2%, and same facility EBITDA for our behavioral health hospitals increased 13% in the second quarter. As compared to the comparable prior year period.
Steve G. Filton: Even after adjusting for Medicaid supplemental payments not included in our original 2024 guide, same facility revenues increased by 7.2%, and same facility EBITDA for our behavioral health hospitals increased 13% in the second quarter as compared to the comparable prior year period. Our cash generated from operating activities increased by $422 million to $1.1 billion during the first six months of 2024, as compared to $654 million during the same period in 2023. In the first half of 2024, we spent $450 million on capital expenditures and acquired 1.1 million of our own shares at a total cost of approximately $195 million.
Speaker Change: Even after adjusting for Medicaid supplemental payments not included in our original 2024 guidance,
Speaker Change: Same facility revenues increased by 7.2% and same facility EBITDA for our behavioral health hospitals increased 13% in the second quarter as compared to the comparable prior year period.
Steve Filton: Our cash generated from operating activities increased by $422 million to $1.1 billion during the first 6 months of 2024 as compared to $654 million during the same period in 2023.
Speaker Change: Our cash generated from operating activities increased by $422 million to $1.1 billion during the first six months of 2024, as compared to $654 million during the same period in 2023.
Steve Filton: Committee. In the first half of 2024, we spent $450 million on capital expenditures and acquired 1.1 million of our own shares at a total cost of approximately $195 million. Since 2019, we have repurchased approximately 30% of the company's outstanding shares. As of June 30, 2024, we had $1 billion of aggregate available borrowing capacity pursuant to our $1.2 billion revolving credit facility.
Speaker Change: In the first half of 2024, we spent $450 million on capital expenditures and acquired 1.1 million of our own shares at a total cost of approximately $195 million.
Steve G. Filton: Since 2019, we have repurchased approximately 30% of the company's outstanding shares. As of June 30, 2024, we had $1 billion of aggregate available borrowing capacity pursuant to our $1.2 billion revolving credit. In our acute care segment, we continue to develop additional inpatient and ambulatory care capacities. We currently have 27 operational freestanding emergency departments, as well as 12 more which have been approved and are in various stages of development. Also, construction continues on our DeNovo Acute Care Hospitals, consisting of the 150-bed West Henderson Hospital in Las Vegas, Nevada, which is expected to open late this year, the 136-bed Cedar Hill Regional Medical Center in Washington, D.C., which is expected to open in the spring of 2025, and the 150-bed Allen B. Miller Medical Center in Palm Beach Gardens, Florida, which is expected to open in the spring of 2026.
Speaker Change: Since 2019, we have repurchased approximately 30% of the company's outstanding shares.
Speaker Change: As of June 30, 2024, we had $1 billion of aggregate available borrowing capacity pursuant to our $1.2 billion revolving credit facility.
Steve Filton: In our acute care segment, we continue to develop additional inpatient and ambulatory care capacity. We currently have 27 operational free standing emergency departments, as well as 12 more which have been approved and are in various stages of development. Also, construction continues on our Denogo acute care hospitals consisting of the 150-bed Left Henderson Hospital in Las Vegas, Nevada, which is expected to open late this year. The 136-bed Cedar Hill Regional Medical Center in Washington, D.C., which is expected to open in the spring of 2025. And the 150-bed Allen B. Miller Medical Center in Palm Beach Gardens, Florida, which is expected to open in the spring of 2026.
Speaker Change: In our acute care segment, we continue to develop additional inpatient and ambulatory care capacity.
Speaker Change: We currently have 27 operational freestanding emergency departments, as well as 12 more which have been approved and are in various stages of development.
Speaker Change: Also, construction continues on our DeNovo Acute Care Hospitals, consisting of the 150-bed West Henderson Hospital in Las Vegas, Nevada, which is expected to open late this year.
Speaker Change: The 136-bed Cedar Hill Regional Medical Center in Washington, D.C., which is expected to open in the spring of 2025, and the 150-bed Allen B. Miller Medical Center in Palm Beach Gardens, Florida, which is expected to open in the spring of 2026.
Steve Filton: In our behavioral health segment, we recently opened the 128-bed River Vista Behavioral Hospital in Madera, California, and we are developing the 96-bed Southridge Behavioral Hospital in West Michigan, a joint venture with Trinity Health Michigan, which is expected to open later this year.
Steve G. Filton: In our behavioral health segment, we recently opened the 128-bed River Vista Behavioral Hospital in Madera, California, and we are developing the 96-bed Southridge Behavioral Hospital in West Michigan, a joint venture with Trinity Health Michigan, which is expected to open later this year. Now, I turn the call over to Marc Miller, President and CEO, for closing.
Speaker Change: In our behavioral health segment, we recently opened the 128-bed River Vista Behavioral Hospital in Madera, California.
Speaker Change: and we are developing the 96-bed Southridge.
Speaker Change: Behavioral Hospital in West Michigan, a joint venture with Trinity Health Michigan, which is expected to open later this year.
Marc Miller: I'll now turn the call over to Mark Miller, President and CEO, for the closing comments. Thank you. We're pleased with our second quarter results, as both our business segments continue to make operational improvements. As we anticipate, acute care volumes have moderated somewhat, and I'd gradually be going to resemble the patterns we experienced prior to the pandemic. The increase in operating income in comparison to last year's second quarter for acute care hospitals is a further step towards a more extended margin recovery. We hope to sustain for the next several periods. In our acute segment, Physician Expense, which was a significant headwind in 2023, has stabilized at approximately 7.5 percent of revenues.
Speaker Change: I'll now turn the call over to Marc Miller, President and CEO , for closing comments.
Marc D. Miller: We're pleased with our second quarter results, as both our business segments continue to make operational improvements. As we anticipate, acute care volumes have moderated somewhat and have gradually begun to resemble the patterns we experienced prior to the pandemic. The increase in operating income, in comparison to last year's second quarter for acute care hospitals, is a further step towards a more extended margin recovery. We hope to sustain for the next several periods. Based on the generally favorable operating trend in the first half of the year, we are increasing the midpoint of our 2024 EPS guidance by 17% to $15.80 per diluted share.
Marc D. Miller: Thanks Steve.
Marc D. Miller: We're pleased with our second quarter results.
Marc D. Miller: as both our business segments continue to make operational improvements.
Marc D. Miller: As we anticipated, acute care volumes have moderated somewhat and are gradually going to resemble the patterns we experienced prior to the pandemic.
Marc D. Miller: The increase in operating income in comparison to last year's second quarter for acute care hospitals.
Marc Miller: Based on the generally favorable operating trends in the first half of the year, we are increasing the midpoint of our 2024 EPS guidance by 17 percent to $15.80 per diluted share, from $13.05 per diluted share previously. New supplemental programs being developed in Tennessee and Washington, D.C., which are not yet fully approved, are not included in our revised guidance.
Marc D. Miller: from $13.50 per diluted share previously.
Marc D. Miller: In Washington, D C, which are not yet fully curves are not included in our revised guidance.
Marc Miller: Lastly, as announced in yesterday's Uninjuries, our board of directors has authorized a $1 billion increase to our stock repurchase program, thereby increasing recurrent aggregate purchase, repurchase. Authorization, to $1.228 billion.
Marc D. Miller: Lastly, as announced in yesterday's earnings release, our board of Directors has authorized $1 billion increase to our stock repurchase program, thereby increasing reclaim aggregate purchase repurchase authorization.
Marc D. Miller: $1 million to $2 million.
Operator: We're happy to answer questions at this time. As a reminder, to ask a question, please press star 1-1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1-1 again.
Speaker Change: Happy to answer questions at this time.
Unknown Executive: As a reminder, to ask a question, please press star one on your telephone and wait for your name to be announced. To withdraw your question, please press star one one again. Please stand by while we compile the Q&A roster. One moment for our first question, which comes from Ann Hynes of Mizzou Health Securities. Your line is open.
Speaker Change: As a reminder to ask a question. Please press star one on your telephone and wait for your name to be announced to withdraw. Your question. Please press star one again, please standby, while we compile the Q&A roster one moment for your first question, which comes from Ann Hynes.
Operator: Please stand by while we compile the Q&A roster. One moment for our first question, which comes from Ann Hynes of Mizzouho Securities.
Ann Hynes: Your line is open. Great. Thanks.
Speaker Change: Mizuho Securities Your line is open.
Ann Kathleen Hynes: Great, thanks. I just want to focus my question on the supplemental payments. I'm just trying to figure out what ending you are in both the acute care and behavioral for maybe new programs like, so you mentioned DC. That sounds like it might be a new program in acute care and on the behavioral side going forward. That'd be great, thanks.
Ann Hynes: I just want to focus my question on the supplemental payments. I'm just trying to figure out what N&U are in both your QKR and behavioral for maybe new programs. So you mentioned D.C.; that sounds like it might be a new program in a QKR. And on the behavioral side going forward, that'd be great. Thanks.
Ann Kathleen Hynes: Great. Thanks, I just wanted to focus my question on the supplemental payments I'm just trying to figure out what inning you are in both the acute care and behavioral so maybe new programs like so you mentioned D. C that sounds like it might be a new program in acute care.
Speaker Change: And on the behavioral side going forward.
Speaker Change: That'd be great. Thanks.
Steve Filton: Yeah, and so I think we had mentioned before that I think from our perspective, while we may understand that individual states are contemplating either new programs or expansion of existing programs, we tend to really not discuss them until there is some formal submission of a program to CMS and sort of pending approvals from CMS within the state. And then both the Tennessee and Washington D.C. Programs sort of fall into that category. As you suggest, Tennessee is a state in which we have exclusively behavioral business. Washington, D.C. is a geography where we have both acute and behavioral business, although the Medicaid supplemental program would be primarily beneficial to the acute business.
Steve G. Filton: Yeah, and so I think we had mentioned before that, from our perspective, while we may understand that individual states are contemplating either new programs or expansion of existing programs, we tend not to really discuss them until there is some formal submission of a program to CMS and sort of pending approvals from CMS within the state. And both the Tennessee and Washington, D.C. programs sort of fall into that category. As you suggest, Tennessee is a state in which we have an exclusively behavioral business.
Speaker Change: Yes, and so I think we had mentioned before that I think from our perspective, while we may understand that individual states are contemplating either new programs or expansion of existing programs. We tend to really not discussed them until there is some.
Speaker Change: Formal submission of a program to CMS.
Speaker Change: And sort of pending approvals.
Speaker Change: From CMS or within the state and then both the Tennessee, and Washington D C programs.
Speaker Change: Sort of fall into that category as you suggest Tennessee.
Speaker Change: As a state in which we have exclusively behavioral business.
Steve G. Filton: Washington, D.C., is a geography where we have both acute and behavioral business, although the Medicaid supplemental program would be primarily beneficial to the acute business. For both programs, we have been told that the expectation from either the state or the district is that the programs are likely to be approved either later this year or early next year. Both programs would be retroactive. We believe Tennessee would be retroactive most likely to July of 2024 and that D.C. would be retroactive to October of 2024 this year.
Speaker Change: Washington D C.
Speaker Change: A geography, where we have both acute and.
Speaker Change: And behavioral business, although the Medicaid supplemental program would be primarily beneficial to the acute business.
Steve Filton: Both programs we have been told that the expectation from the state of the district is that the programs are likely to be accrued either later this year or early next year. Both programs would be retroactively believed; Tennessee would be retroactive, most likely to July of 2024. And that D.C. would be retroactive to October of 2024 this year.
Speaker Change: Both programs, we have been told.
Speaker Change: That the expectation from.
Speaker Change: Even state of the district is that the programs are likely to be approved either later this year or early next year. Both programs would be retroactive, we believe Tennessee would be retroactive most likely to July of 2024 and that D. C would be retroactive to October of 2024 of this year and again none of these things.
Steve G. Filton: Again, none of these things are guaranteed, and they all depend on CMS approval. Those are the two, I'll call them incremental or additional programs we would disclose, but we certainly are aware of other states where expansion of programs or new programs are at least being considered.
Steve Filton: And again, none of these things are guaranteed, and they all depend on CMS approval.
Speaker Change: Our guaranteed and they all depend on CMS approval. Those are the two I'll call them incremental or additional programs, we would disclose but we certainly are aware of other states and.
Steve Filton: Those are the two; I'll call them incremental or additional programs we would disclose, but we certainly are aware of other states and where expansion of programs or new programs are at least being considered.
Speaker Change: Where expansion of programs.
Speaker Change: Our new programs or at least being considered.
Ann Hynes: I just want to follow up.
Speaker Change: Great and just one follow up I know that you've provided the potential benefit for Tennessee, but have you can you could provide what you think D C would be thanks.
Steve Filton: I know that you've provided the potential benefit for Tennessee, but can you provide what you think D.C. would be? Thanks. Yeah, so we disclosed our 10 key that we think the potential benefit of prior 10 key to potential benefit in Tennessee would be between 42 and 56 million dollars annually. The potential benefit in Washington, D.C. is probably 80 to 90 million dollars range annually.
Speaker Change: Yes, so we disclosed in our 10-Q that we think the potential damage.
Speaker Change: Your 10-Q, the potential benefit in Tennessee would be between 42% and $56 million annually.
Speaker Change: The potential benefit in Washington D. C is probably in the $80 million to $90 million range annually.
Operator: Great, thank you. In one moment for our next question.
Speaker Change: Alright, thank you.
Speaker Change: One moment for our next question.
Operator: And our next question will be coming from Steven Baxter of Wells Fargo.
Speaker Change: And our next question will be coming from Stephen Baxter of Wells Fargo. Your line is open Steven.
Steven Baxter: Your line is open, Steven. Hi, yeah, thanks. I was hoping you could elaborate a little bit on behavioral qualifying programs in the quarter. I think you had expectations, maybe.
Unknown Executive: One moment for our next question. Hi, yeah, thanks. I was hoping you could elaborate a little bit on
Stephen C. Baxter: Hi, Yeah. Thanks, I was hoping you could elaborate a little bit on behavioral volume performance in the quarter I think you had expectations maybe.
Steven Baxter: The last earnings called this curve a little bit in the second quarter, so I just wonder if you could talk about some of the drivers' performance in the quarter and then also how you're thinking about behavioral demand growth in the back end of the year. Thank you.
Stephen C. Baxter: Last earnings call disconnect a little bit in the second quarter. So I was wondering if you could talk about some of the drivers of performance in the quarter and then also how youre thinking about behavioral demand growth in the back half of the year. Thank you.
Steve Filton: Yeah, I think that the dynamics surrounding behavioral volumes have remained pretty much the same. You are correct in your description. You know, we behavioral patient days on the same storage at the base as well. I think about 2% in Q1. We expected to equal and maybe better than slightly in Q2. We did not.
Unknown Executive: Yeah, I think that the dynamics surrounding behavioral volumes have remained pretty much the same. You are correct in your description.
Speaker Change: Yes, I think that the dynamics surrounding behavioral volumes have remained pretty much the same.
Steve G. Filton: You know, we behavioral patient days, on the same store adjusted basis, we're up, I think, about 2% in Q1. We expect it to be equal to and maybe better than slightly better in Q2. We did not. I think the issues are, you know, very familiar to what we've been talking about for some time. While we've made, I think, a lot of progress on filling our labor vacancies around the country, we still find in very specific markets and geographies that certain labor positions, sometimes nurses, sometimes therapists, and counselors, sometimes non-professionals, or mental health technicians, are difficult to place and can sometimes limit capacity or our ability to admit patients.
Speaker Change: You are correct in your description.
Speaker Change: Behavioral patient days.
Speaker Change: Same store adjusted basis, we're up I think about 2% in Q1, we expect it to equal and maybe better than slightly in Q2, we did not I think the issues are very familiar with what we've been talking about for some time.
Steve Filton: I think the issues are very familiar to what we've been talking about for some time, while we've made, I think, a lot of progress on filling our labor vacancies around the country. We still find in very specific markets and geographies that certain labor positions, sometimes nurses, sometimes therapists and counselors, sometimes non-professionals on mental health technicians, are difficult to place and can sometimes winded capacity or our ability to admit patients.
Speaker Change: While we've made I think a lot of progress on filling our labor vacancies around the country, we still find in very specific markets and geographies that certain labor position, sometimes nurses, sometimes therapists and counselors, sometimes nonprofessionals on mental health technicians are difficult to place and can.
Speaker Change: Sometimes when the capacity of our ability to admit patients.
Steve Filton: I think we've discussed in the last few quarters the fact that Medicaid disenrollments, particularly in the Southern states, Texas and Mississippi, Louisiana, I can saw, have had more of an impact on our business as people got disenrolled from Medicaid and it was taken them some time to get either reenrolled and Medicaid or into a commercial exchange program. If they get into a commercial exchange program, they often have high co-pays and deductibles, which make, you know, that meeting their financial requirements difficult, you know, behavioral hospitals.
Speaker Change: I think we've discussed in the last few quarters. The fact that Medicaid this enrollments, particularly in the Southern States, Texas, and Mississippi, Louisiana, Arkansas have had more of an impact on our business.
Speaker Change: As people get this enrolled for Medicaid and it's taken them some time to get either re enrolled in Medicaid or into a commercial exchange program. If they get into a commercial exchange program. They often have high co pays and deductibles, which make.
Speaker Change: Then meeting their financial requirements difficult.
Steve Filton: And finally, we have a handful of behavioral facilities that struggled with very specific issues in 2023. I believe they've all improved, but are doing so at a somewhat slower pace than we originally imagined they would.
Speaker Change: Behavioral hospitals, and finally, we have a handful of behavioral facilities that struggled with very specific issues in 2023, I believe they have all improved but are doing so.
Speaker Change: Somewhat slower pace than we originally imagined they would I think ultimately we still believe that that 3%.
Steve Filton: I think ultimately, we still believe that that three percent patient-day growth target that we embedded in our original 2024 guidance is an achievable target, probably not in terms of full year growth, but I think we believe that by the end of 2024, we should be growing at that rate and view that as a sustainable rate of growth going forward.
Speaker Change: Patient day growth target that we embedded in our original 2024 guidance is an achievable target probably not in terms of full year growth, but I think we believe that by the end of 2024, we should be growing at that rate and view that as a sustainable rate of growth going forward.
Operator: And one moment for our next question. And our next question will be coming from Ben Hendrix. Your line is open of RBC Capital Market. Thank you very much. Just wanted to see if you could elaborate a little bit on the moderation and acute demand and your surgery's flattening out with trending towards pre-COVID levels.
Unknown Executive: And one moment for our next question, and our next question will be coming from Ben Hendrix, your line is open, from RBC Capital Markets.
Speaker Change: And one moment for our next question.
Speaker Change: And our next question will be coming from Ben Hendrix.
Benjamin Hendrix: Your line is open of RBC capital markets.
Benjamin Hendrix: Thank you very much I just wanted to see if you could elaborate a little bit on the moderation in acute demand in your surgeries flattening out.
Speaker Change: With trending towards pre COVID-19 levels.
Ben Hendrix: Any trends you can cause specifically in specific categories and any pair of mixed implications there and, you know, how you're seeing that develop. Thank you.
Speaker Change: Any trends you can cost specifically in specific categories and any payer mix implications, there and how youre seeing that develop thank you.
Steve Filton: Yeah, I mean, so one comment that I'd make about the 3.4% adjusted admission growth in acute care is that that comparable number in the second quarter of last year was 7.7%. And surgical growth in the second quarter of last year was in the 5 to 6% range. So those were both very difficult comparisons. I think we had a view that 3.4% adjusted admission growth, the relatively flat surgical growth was relatively close to our expectations given the very difficult comparison.
Speaker Change: Yeah. So the one comment that I'd make about the three 4% adjusted admission growth in acute care is that that comparable number in the second quarter of last year.
Speaker Change: Was seven 7% and surgical growth in the second quarter of last year was in the 5% to 6% range. So those were both very difficult comparisons I think we had a view that three 4% adjusted admission growth relatively flat surgical growth was.
Speaker Change: Relatively close to our expectations given the very difficult comparison.
Steve Filton: We've been talking, I think, for some time about the expectation that acute care volumes, both overall admissions and surgical growth, would return to sort of pre-pandemic patterns. I don't know that that's absolutely where we are right today. But, you know, certainly, I think we've been preparing for that.
Speaker Change: We've been talking I think for some time about the expectation that acute care.
Speaker Change: Volume.
Speaker Change: <unk> overall admissions and surgical growth would return to sort of pre pandemic patterns I don't know that thats, absolutely, where we are right today.
Speaker Change: But certainly I think.
Steve Filton: And I think a lot of the cost management that you saw during the quarter was an expectation and preparing for that so that as we return to sort of those pre-pandemic levels of revenue and volume growth, we could generate the sort of increased EBITDA and margin expansion and remain on that trajectory for. And at least several more periods.
Speaker Change: We've been preparing for that and I think a lot of the <unk>.
Speaker Change: Cost management that you saw during the quarter was an expectation and preparing for that so that as we return to some of those pre pandemic levels of revenue and volume growth.
Speaker Change: We could generate.
Speaker Change: The sort of increased EBITDA and margin expansion.
Speaker Change: And we remain on that trajectory for at least several more periods.
Steve Filton: Thank you.
Speaker Change: Thank you.
Operator: One moment for our next question.
Speaker Change: One moment for our next question.
AJ Rice: And our next question will be coming from AJ Rice of UBS.
Speaker Change: And our next question will be coming from a J rice of UBS. Your line is open.
AJ Rice: Your line is open.
Steve Filton: Hi everybody. Maybe just first question, then I'll follow up. First question on the updated guidance. I know you didn't raise the full-year guidance after the first quarter, and there was some outperformance. Then you've had some out performance in the second quarter. And then there's also the supplemental payments. Maybe that we're in the original guidance. Can you just sort of parse out how much is just capturing year-to-day trends? How much is an adjustment for supplemental payment information? And then, have you made any adjustment to your second half expectations in this updated guidance? Yeah, so from a high level perspective, the approach that we took to the revised guidance was obviously to increase the guidance by the amount of the first half beat, which was substantial, to include in the revised guidance for the back half of the year, any supplemental programs and payments that we knew would continue and be present in the second half.
Speaker Change: Hi, everybody.
Albert J. William Rice: Maybe just first question and then I'll follow up first question on the updated guidance.
Speaker Change: I know you didn't raise the full year guidance. After the first quarter. There were some outperformance and then you've had some outperformance in the second quarter and then there's also the supplemental payments maybe that weren't in the original guidance can you just sort of parse out how much is just.
Speaker Change: Capturing year to date trends, how much is an adjustment for supplemental payment information and then have you made any adjustment to your second half expectations.
Speaker Change: And this updated guidance.
Speaker Change: Yeah.
Speaker Change: Yes, so from a high level perspective, the approach that we took to the revised guidance was.
Speaker Change: <unk> to increase the guidance by the amount of the first half beat which was substantial.
Speaker Change: To include in the revised guidance for the back half of the year any supplemental programs and payments that we knew would.
Speaker Change: <unk> and be present in the second half we did not as Mark indicated in his comments include tenant anything for Tennessee.
Steve Filton: We did not, as more indicated in his comments, include anything for Tennessee for Washington DC. And then we included some of the cost management improvements that we've made, which we believe are certainly sustainable.
Speaker Change: Our Washington D C and then we included.
Speaker Change: Some of the cost management improvements that we've made which we believe are certainly sustainable but for the most part.
Steve Filton: But, for the most part, particularly from I think the revenue and the volume perspective, just generally retained our original guidance for the second half of the year.
Speaker Change: Particularly from I think a revenue and a volume perspective, just generally retained our original guidance for the second half of the year.
Speaker Change: Okay.
Steve Filton: Okay, there's been a lot of discussion in this quarter about the impact of the two midnight rule, Medicaid redeterminations, and so forth. Can you just maybe make some comment about what you're seeing there and how I know two midnight rule wouldn't affect the behavioral business, but the redeterminations maybe it has some impact on both sides. Any updated thoughts on what you're seeing in those two areas? Yeah, I mean, as far as two midnight goes, and we've commented on this before, and I acknowledge that our comments may be a little bit different than what some of our peers have said, but it's we've been unable to validate or I think precisely identify any real benefit that we're getting from the two midnight rule change.
Speaker Change: <unk>.
Speaker Change: There's been a lot of discussion this quarter about impact of two midnight rule.
Speaker Change: Medicaid Redetermination and so forth can you.
Speaker Change: Just maybe make some comment about what youre seeing there and how I know two midnight rule wouldn't affect the behavioral business, but the redetermination as maybe it has some impact on both sides any updated thoughts on what youre seeing in those two areas.
Speaker Change: Yes, I mean as far as two midnight goes and we've commented on this before and I acknowledge that our comments may be a little bit different than what some of our peers of SaaS, but it's we've been unable to.
Speaker Change: Validate or I think precisely identify any real benefit that we're getting from the two midnight rule change, we don't see any dramatic change in metrics like.
Steve Filton: We don't see any dramatic change in metrics like, you know, amount of denial, or patient status changes, et cetera, nor anecdotally do we hear from our personnel who deal with this issue, you know, on a daily basis that they've seen real behavior changes on the part of powers. Again, I know some of our peers have suggested otherwise, but we're just unable to really parse out any significant impact from the change in the two midnight rule. Medicaid re-determinations, I think, on the acute side have resulted in an increase in commercial exchange patients. Again, I think compared to some of our peers, probably not as big an increase.
Speaker Change: Now the denials of patient status changes et cetera, nor anecdotally do we hear from our personnel who deal with this issue on a daily basis that they've seen real behavior changes on the part of payers.
Speaker Change: I know some of our peers.
Speaker Change: But otherwise, but we're just unable to really.
Lars: Lars out any significant impact from the change of the two midnight rule.
Speaker Change: Medicaid Redetermination I think on the acute side.
Speaker Change: It resulted in an increase in commercial exchange patients again, I think compared to some of our peers, probably not as big an increase we've gone we had.
Steve Filton: We've gone; we had commercial exchange patients as a percentage of our overall adjusted admissions. Pre the end of the PHE was about 4%; I think that number has climbed to about 5% currently, and I know in some of our peers have suggested that number has climbed to 6% or 7%. We haven't gotten that eye. On the behavioral side, I alluded to this in an earlier response. I do think we're being affected by the Medicaid re-determinations, particularly in the adolescent population. You know, we've definitely seen some weakness in that population in the last, I'm going to say, 2-3 quarters.
Speaker Change: <unk> exchange patients as a percentage of our overall adjusted admissions.
Speaker Change: Pre the end of the Pag was about 4% I think that number has declined to about 5% currently I know in some of our peers that suggest that that number has climbed to six or 7%, we haven't gotten that high.
Speaker Change: On the behavioral side I alluded to this in an earlier response.
Speaker Change: Do think we're being affected by the Medicaid Redetermination is particularly in the adolescent population.
Speaker Change: We definitely have seen some weakness in that population and the last I'm going to say two to three quarters.
Steve Filton: And it's, you know, I think it's been a slow process for those adolescents to either re-enroll in Medicaid or to get onto a commercial exchange program. And if they get onto a commercial exchange program to exhaust the sometimes large copays and deductibles that those plans have. So, I think Medicaid re-determination could probably have a bigger negative impact on the behavioral business. The shift to commercial exchanges on the acute side has probably been a slight nap. Positive.
Speaker Change: And.
Speaker Change: I think it's been a slow process for those adolescence to either re enroll in Medicaid or to get onto a commercial exchange program. If they get onto a commercial exchange program to exhaust the sometimes large copays and deductibles that those plans have so I.
Speaker Change: I think Medicaid Redetermination took probably a bigger negative impact on the behavioral business the shift to commercial exchanges on the acute side has probably been a slight net positive.
Benjamin Hendrix: Okay, thanks a lot.
AJ Rice: Okay, thanks a lot.
Speaker Change: Okay. Thanks, a lot.
Operator: A moment for our next question.
Speaker Change: One moment for our next question.
Justin Lake: And our next question will be coming from Justin Lake of Wolf Research.
Speaker Change: And our next question will be coming from Justin Lake of Wolfe Research. Your line is open.
Justin Lake: Your line is open. Thanks.
Benjamin Hendrix: Thanks, good morning. Steve, first on the guidance in terms of just kind of isolating that DPP bucket.
Steve Filton: Good morning. Steve, first on the guidance, in terms of just kind of isolating that DPP bucket. I think you started the year about 810 million in the 10K that you expected to get this year. You updated it to 860 with the one with the 10-Q. Just curious what that number is right now that you expect to get this year. So let's just do that. My first question that I got one from Mark. Thanks. Yeah, so we're still working on that disclosure, which we'll have in our 10-K, you know, 8 or 10 days. But, you know, I think there'll be a significant step up from the 860, obviously, including the Washington and Ohio I know numbers that we include in the price release, etc.
Justin Lake: Thanks, Good morning, Steve first on the guidance.
Speaker Change: In terms of just kind of isolating that D. P P bucket.
Justin Lake: I think you started the year at about $810 million in the 10-K that you expected to get this year you updated that to $8 60 with the one with the 10-Q just curious what that number is right now that you expect to get this year.
Speaker Change: So, let's just do that my first question that I got one for Mark.
Speaker Change: Yes so.
Speaker Change: We're still working on that disclosure, which will have in our 10-K eight or 10 days.
Speaker Change: But.
Speaker Change: I think there'll be a significant step up from the 60, obviously, including the Washington, Ohio, Idaho numbers that we included in the press release etcetera.
Steve Filton: But, you know, there'll be a more precise picture that we file our queue in a week or so.
Speaker Change: But there'll be a more precise picture that when we file our Q.
Speaker Change: Week or so.
Steve G. Filton: Okay, do you have a round number you could share with us? Like, does it go to, you know, do you think it goes much higher than 900? Or if I add those two numbers in there? Yeah, I think so.
Steve Filton: Okay. Do you have a brown number you could share with us? Like, does it go to, you know, do you think it goes much higher than 900, or quite add those two numbers in there? Yeah, I think it'll go into the load of mid 900. Okay. So, if we look at your guidance raised of 215 million, you started the year in around 810. If it goes to load in mid 900, is it maybe fair to say that maybe half, give or take, of that guidance raised is coming from from these supplemental payments? That a reasonable way to think about the rest because of I think that's fair.
Speaker Change: Okay do you have a brown number you could share with us like does it go.
Speaker Change: Do you think it goes much higher than 900 or might you add those two numbers in there, yes, I think I think it will go into the low to mid nine hundreds.
Speaker Change: Yes.
Speaker Change: Okay. So if we look at your guidance raise of $215 million.
Speaker Change: You started the year at around a Ted if it goes too low to mid nine hundreds.
Speaker Change: Is it maybe fair to say that maybe half.
Speaker Change: Give or take up that guidance raise the scrubbing problem from the supplemental payments that a reasonable way to think about the.
Speaker Change: I.
Speaker Change: I think Thats fair.
Steve Filton: Okay.
Marc Miller: And then, Mark, you talked about the improvement in the hospital business in terms of the margins. Curious if there's still a potential way to go to get back to pre-COVID levels. What do you think a reasonable target is when you sit down with your hospital operators?
Mark: Okay, and then mark.
Mark: You talked about the improvement in the hospital business in terms of the margins.
Mark: Curious if the you know there is still a potential ways to go to get back to pre COVID-19 levels. What do you think a reasonable target is when you sit down with your hospital operators do you have a you know.
Marc Miller: And do you have a, you know, a trajectory or a plan at which you've kind of time to timeline probably the best way to put it in terms of when you expect to get there, maybe you could share a couple of the steps you expect to take to get that. Thanks. Yeah, I mean, we have a lot of plans, and there's a lot of discussions on how we're going to continue to incremental improvement.
Speaker Change: Trajectory or a play out of which you kind of talk.
Speaker Change: Hi, timeline, probably the best way to put it in terms of when do you expect to get there or maybe you could share a couple of it would be this.
Speaker Change: Steps do you expect to take to get there. Thanks.
Steve G. Filton: Yeah, I mean, we have a lot.
Speaker Change: Yes, I mean, we have a lot of plans and there's a lot of discussions on how we're going to continue to incrementally improve them up on I'll give you a number or a time period right now.
Marc Miller: I'm going to give you a number or a time period right now. But, you know, every market's a little bit different, obviously. We've been very pleased with the work of the operators and don't especially less 12 months in addressing not only the volume issues, but really getting better handle on expenses. As things, if we just continue with that trajectory, you know, we'll get to what we need to be fairly shame, but we saw a little ways to go. Great.
Speaker Change: Alright.
Speaker Change: Every market is a little bit different obviously.
Speaker Change: <unk> been very clean.
Speaker Change: The work of the operators have done, especially in the last 12 months.
Speaker Change: And not only the volume it seems but really getting a better handle on expenses.
Speaker Change: We just continue that trajectory.
Speaker Change: To where we need to be fairly.
Speaker Change: Fairly soon but we still have a little ways to go.
Operator: Thanks. And one moment for our next question.
Speaker Change: Great. Thanks.
Unknown Executive: And one moment for our next question, and our next question will be coming from Jason Kasseria of Citi. Your line is open, Jason.
Speaker Change: And one moment for our next question.
Jason Cassaria: And our next question will be coming from Jason Cassaria, a city.
Speaker Change: And our next question will be coming from Jason <unk> of Citi. Your line is open Jason.
Jason Cassaria: Your line has opened, Jason. Great. Thanks. Good morning.
Jason Paul Cassorla: Great, thanks. Good morning.
Jason: Great. Thanks, Good morning, maybe just.
Steve Filton: Maybe just to ask on the acute pricing and mixing the quarter up three and a half or so, but kind of normalizing for the supplemental payment dollars this year, maybe only up kind of slightly year over year. Is that just simply a function of that lower acuity volume?
Jason: On the acute pricing and mix in the quarter up three five or so but kind of normalizing for the supplemental payment dollars. This year, maybe only up.
Jason: Slightly year over year is that just simply a function of that lower acuity volume continue return I know you've made comments around the surgical volume dynamic in the quarter.
Steve Filton: Can you return? I know you made comments around the surgical volume dynamic in the quarter. Or just maybe anything you give on, you know, acuity and pair mix trends within a cute kind of outside of these supplemental payment programs will be helpful. Yeah, I think it's a variety of things, Jason. You know, again, I think we had a pretty difficult comparison. We were comparing two, you know, something close to 10% revenue growth last quarter, high surgical and last year's quarter rather high surgical growth, et cetera. You know, I think we're seeing some settling down, some exhaustion of some of those bone and deferred procedures that have been postponed and deferred during the pandemic.
Speaker Change: And just maybe anything you can give on acuity and payer mix trends within acute kind of outside of these supplemental payment programs would be helpful.
Steve G. Filton: Maybe just to ask on the acute pricing and mix in the quarter up three and a half or so, but kind of normalizing for the supplemental payment dollars this year, maybe only up kind of slightly year over year. Is that just simply a function of that lower acuity volume continuing to return? I know you made comments around the surgical volume dynamic in the quarter, but maybe anything you can give on, you know, acuity and payer mix trends within acute care kind of outside of these supplemental payment programs would be helpful. Yeah.
Speaker Change: Yes, I think it's a variety of things Jason.
Speaker Change: Again, I think we had a pretty difficult comparison, we're comparing to something close to 10% revenue growth last quarter high surgical from last year's quarter rather.
Speaker Change: Hi, surgical growth etcetera.
Speaker Change: I think we're seeing some settling down some exhaustion of some of those postponed and deferred procedures that have been postponed and deferred during the pandemic.
Steve Filton: You know, I think that, you know, even exclusive of the supplementary pedal payments, you know, our expectation in the acute business is, you know, we'll get to, as we have historically, same store revenue growth, so the trajectory of five, six percent split pretty evenly between price and volume. And again, I think with our, with the progress that we've made as both Marc and I alluded to on the cost management side, that should allow us, you know, continue to even down growth and margin expansion until, you know, we get either completely back to or something close to pre-pandemic, you know, margin levels in that segment.
Speaker Change: I think that even exclusive.
Speaker Change: The supplemental payments our expectation in the acute business is we'll get to.
Speaker Change: As we have historically.
Jason: Same store revenue growth trajectory.
Speaker Change: Five 6% split pretty evenly between price and volume.
Jason: And again I think with our.
Jason:
Jason: With the progress that we've made as both Mark and I have alluded to on the cost management side that should allow us.
Speaker Change: Continued EBITDA growth and margin expansion until we get either completely back to or something close to pre pandemic margin levels in that segment.
Steve Filton: Okay, great.
Jason: Yeah.
Steve Filton: Thanks. And then maybe just a follow up, you know, with the billion dollar increase the share repo program. I know you celebrated a little bit in terms of share repo activity in the quarter, maybe with the Illinois lawsuit kind of dynamics going on, but, you know, with the increase there and the repo program, is the expectation that you're still aiming to spend around, you know, 500, 600 million in share repo for this year, or how should we think about the share we purchased dynamics?
Speaker Change: Okay, great. Thanks, and then maybe just as a follow up with the $1 billion increase the share repo program I know you've accelerated a little bit in terms of share repo activity in the quarter, maybe what the Illinois lawsuit kind of dynamics going on but with the increase there and the repo program is the expectation that you are still aiming to spend around 500 600.
Speaker Change: And on share repo this year or how should we think about the share repurchase dynamics. Thanks.
Steve Filton: Thanks. Yeah, so I think your suggestion is largely on point. You know, our original guidance suggested that we would spend the bulk of our free cash flow, which would be five or six hundred million, on share repurchase. And I think that is still on intent. And I think the, you know, frankly, the main point of including that announcement in this quarter's release was to just reinforce that idea. And you know, we believe we're still on track and obviously would need at the reauthorization to be able to accomplish that.
Steve G. Filton: Yep, so
Jason: Yes so.
Speaker Change: I think your suggestion is largely on point our.
Speaker Change: Our original guidance suggested that we would spend the bulk of our free cash flow, which would be 5% or 600 million on share repurchase and I think that is still our intent and I think the.
Speaker Change: Frankly, the main point of including that announcement in this quarters release was to just reinforce that idea.
Speaker Change: We believe we're still on track and obviously, we needed the the reauthorization to be able to accomplish that.
Operator: Great.
Sarah James: Thank you. In one moment for our next question.
Speaker Change: Great. Thank you.
Speaker Change: And one moment for our next question.
Sarah James: Our next question will be coming from Sarah James of Canter Fitzgerald.
Speaker Change: Our next question will be coming from Sarah James of Cantor Fitzgerald. Your line is open.
Steve Filton: Your line is open. Thank you.
Steve Filton: I was hoping you could talk a little bit about the embedded adjusted missions growth, baked into your guidance for the second half. Are you assuming that first half level stay flat or decelerate, and could you talk a little bit about what the drivers are for that assumption? Yeah, so our volume assumptions, I think in the back after the year, are not terribly different than our original guidance on the acute side. I think it suggested admission growth in the three to four percent range, just sort of continuing, you know, kind of how we're exiting the second quarter.
Sarah Elizabeth James: Thank you I was hoping you could talk a little bit about the impact on adjusted admissions growth.
Speaker Change: What's your guidance for the second half are you assuming that first half level being flat or.
Speaker Change: Decelerate and could you talk a little bit about what the drivers are for that assumption.
Speaker Change: Yes, so our volume assumptions I think in the back half of the year are not terribly different than our original guidance on that on the acute side I think its adjusted admission growth in the 3% to 4% range just sort of continuing kind of how we are exiting.
Steve Filton: I think on the behavioral side, practically, it will be a tall order to get to three percent patient day growth for the full year.
Speaker Change: The second quarter, and I think on the behavioral side practically.
Speaker Change: It will be a tall order to get to 3% patient day growth for the full year.
Steve Filton: But I do think that we still believe that we'll get to that three percent by the end of the year and that that will be a sustainable level or a level of growth that we can sustain for the foreseeable future. to that.
Speaker Change: But I do think that we still believe that we'll get to that 3% by the end of the year.
Speaker Change: That will be a sustainable level or a level of growth that we can sustain for the foreseeable future after that.
Steve Filton: Got it, and on the behavioral side, do you think about getting to that 3% as mostly capacity-driven, and do you have any updates on how your hiring practices are going? Thanks. Yeah, I mean, I think it's a combination of things, you know, I ticked off. I think the things that have been progressing a little more slowly than we expected. I think we believe they'll accelerate. We believe we'll continue to have more success in hiring, particularly in pockets that have been somewhat troublesome. I think that the impact of the Medicaid disenrollments, which I do think has weighed in our volumes in the last, you know, three or four quarters, will get better as more of these people get either re-enrolled in Medicaid or in commercial exchange products or domestic companies and the deductibles.
Speaker Change: Got it and on the behavioral side do you think about getting.
Speaker Change: So that 2% mostly capacity.
Speaker Change: <unk> driven.
Speaker Change: And do you have any updates on how you're hiring practices.
Speaker Change: Yeah, I mean, I think it's a combination of things.
Speaker Change: Kicked off I think the things that have been progressing a little more slowly than we expected I think we believe they'll accelerating we believe we will continue to have more success in hiring particularly in pockets that have been somewhat troublesome I think that the impact of the Medicaid dis enrollments, which I do think it's weighed down our volumes in the last three or four.
Speaker Change: Quarters will get better as more of these people get either re enrolled in Medicaid or in commercial exchange products and exhaustive copays and deductibles and I believe the progress on the handful of residential facilities that had been a drag which had been progressing but at a somewhat slower rate than we expect we will continue and all of that will help.
Steve Filton: And I believe the progress on the handful of residential facilities that have been a drag, which have been progressing, but at a somewhat slower rate than we expect, will continue, and all that will help and allow us to get back to the 3%, which I think, again, with our original plan, it's just, you know, happening a little bit more slowly than we originally anticipated.
Speaker Change: And allow us to get back over 3%.
Speaker Change: Which I think again what was our original plan, it's just happening a little bit more slowly than we originally anticipated.
Operator: Thank you. And one moment for our next question.
Speaker Change: Thank you.
Speaker Change: And one moment for our next question.
Andrew Mock: And our next question will be coming from Andrew Mock of Barclays. Andrew, you're not as open.
Speaker Change: And our next question will be coming from Andrew Mok of Barclays. Andrew Your line is open.
Andrew Mock: Hi, good morning. Just wanted to follow up on the Medicaid supplement goal payment programs. First, can you give us a sense where these programs stand relative to average commercial rates in second? How does the higher Medicaid reimbursement change the relative attractiveness of patients in that payer class?
Andrew Mok: Hi, Good morning, just wanted to follow up on the Medicaid supplemental payment programs first can you give us a sense, where these programs stand relative to the average commercial rates and second how does the higher Medicaid reimbursement change the relative attractiveness of patients and that aircraft is this a category that you would lean into from a referral and service line perspective.
Steve Filton: Is this a category that you would lean into from a referral and service line perspective thing? Yeah, so, and I think, you know, at least one of my, you know, acute care company peers made this point. And even though there have been these substantial increases in Medicaid supplemental payments around the country, that's the most important. I think this is particularly true on the acute side. Our Medicaid reimbursement remains well below commercial rates, mostly well below Medicare rates, and quite frankly, in most cases still below our costs. So, you know, we've made the point before, and I'll reinforce again because it's an important one that these Medicaid increases are really intended to make up for the inadequate reimbursement of the last several years, particularly the cost pressures that accelerated during the pandemic, just broadly, you know, inflation pressures, but also the particular wage pressures that were exacerbated during the pandemic.
Speaker Change: Thanks.
Speaker Change #102: Yeah, So and I think at least.
Speaker Change: One of my acute care company peers made this point that even though there have been these substantial increases in Medicaid supplemental payments around the country that for the most part and I think this is particularly true on the acute side, our Medicaid reimbursement remains well below commercial rates.
Speaker Change: Mostly well below Medicare rates.
Speaker Change: Quite frankly in most cases, it's still below our cost. So we've made the point before and I'll reinforce it again because its an important one that these medicaid increases are really.
Speaker Change: Intended to.
Speaker Change: I think make up for the inadequate reimbursement over the last several years, particularly the cost pressures that accelerated during the pandemic just broadly.
Speaker Change: Placing pressures, but also the particular wage pressures that were exacerbated during the pandemic I think on the behavioral side at least in some of the states.
Steve Filton: I think, on the behavioral side, at least in some of the states, the Medicaid supplemental payments do, in some cases, approach Medicare reimbursement. In some cases, sort of probably between Medicare and commercial. I think in those states and in those facilities, it does sort of change our approach, and it I think encourages us to focus on those referral sources and on those community resources that tend to produce Medicaid patients. You know, and I think, you know, we, it doesn't form our approach in those markets, and we are, I think, the phrase you used was leaning into that.
Speaker Change: The Medicaid supplemental payments.
Speaker Change:
Speaker Change: Dues in some cases approach Medicare reimbursement in some cases sort of probably between Medicare and commercial I think in those states and in those facilities.
Speaker Change: It does sort of change our approach and I.
Speaker Change: I think encourages us too.
Speaker Change: Focus on those referral sources in those community resources that tend to produce Medicaid patients.
Speaker Change: And I think we it does inform our approach in those in those markets and we are I think the phrase you used was leaning into that I think on the acute side. The vast majority of our Medicaid business comes to our emergency room, So theres not a whole lot of.
Steve Filton: I think on the acute side, the vast majority of our Medicaid business comes to our emergency room, so there's not a whole lot of... and proactive actions that we take to seek that business out. We get to business, we get, and we're just being reimbursed for that at a more adequate rate. But yes, on the behavioral side, I do think that we're in those states where these programs increase the Medicaid reimbursement to a level that makes it more attractive. We are using your phrase, leaning into that business and trying to work with referral sources to get more of it.
Speaker Change: <unk>.
Speaker Change #105: Proactive actions that we take to seek that business and we get the business, we get and we're just being reimbursed for it at a more adequate rate, but yes on the behavioral side I do think that we're in those states, where these programs increase the Medicaid reimbursement to a level that makes them more attractive we are using your phrase leaning.
Speaker Change #105: Into that business and trying to.
Speaker Change: New work with referral sources to get more of it.
Andrew Mock: Great. Thank you.
Speaker Change #101: Great. Thank you.
Operator: And one moment for our next question.
Unknown Executive: And one moment for our next question.
Speaker Change #106: And one moment for our next question.
Philip Chickering: And our next question will be coming from a Pido Chickering of Deutsche Bank.
Steve G. Filton: Yeah, I mean, I think it's a combination of things. You know, I checked off, I think, the things that have been progressing a little more slowly than we expected. I think we believe they'll accelerate. We believe we'll continue to have more success in hiring, particularly in pockets that have been somewhat troublesome. I think that the impact of the Medicaid disenrollments, which I do think has weighed down our volumes in the last, you know, three or four quarters, will get better as more of these people get either re-enrolled in Medicaid or in commercial exchange products with lower copays and deductibles.
Tito chicory: And our next question will be coming from Tito chicory.
Philip Chickering: Your line is open, pido. Hey, good morning, guys. So, on the cute labor side, can you talk about what turnover is today?
Tito chicory: Deutsche Bank.
Speaker Change #104: Your line is open.
Tito chicory: Hey, good morning, guys. So on the acute labor side can you talk about where turnover is today, we're not hiring is and how to think about those the back half of the year as well as contract labor and also as length of stay comes down due to better staffing how does the length of stay reductions help your EBITDA growth.
Steve Filton: We're not hiring is an out of thing about those in that half a year as well as contract labor.
Steve Filton: And also as length of state comes down, due to better staffing, how does like the say reductions help your your epetach growth? Yeah, so as far as acute care turnover. Pido, I think that you know, we're down into the low and mid 20s, which is kind of where we were in, in sort of the pre-pandemic period. Obviously, we still view that turnover rate as high, but to be fair, that's, you know, the hospital and acute care industry has had turnover rates in the high 20s and low 30s nationally for a long time. And while we view those as still very inefficient and, you know, not necessarily ideal, and we continue to work to lower than part of that, it's just the nature of the business.
Tito chicory: Yes.
Speaker Change #107: Yes, so as far as acute care turnover.
Tito chicory: Tito I think that.
Tito chicory: We're down into the low and mid <unk>, which is kind of where we were in.
Tito chicory: Instead of the pre pandemic period.
Tito chicory: Obviously, we still view that turnover rate is high.
Tito chicory: But to be fair that's in.
Tito chicory: The hospital and acute care industry has had turnover rates in the high <unk> low 30, even nationally for a long time and while we view those as.
Tito chicory: Still very inefficient and not necessarily ideal and we continue to work to lower then part of that is it's just the nature of the business, but obviously as I indicated in my prepared comments, our ability to reduce premium pay.
Steve Filton: But obviously, you know, as I indicated in my prepared comments, our ability to reduce premium pay, which has been reduced, you know, almost probably by two thirds from its height at the very high to the pandemic, you know, indicates more success in hiring and filling these permanent decisions. And I think you also see it in our, you know, you know, in just our deceleration and reduction of the rate of acceleration and wage inflation in the acute business, the reduction in incentive payments, recruitment incentive payments, et cetera, all indicate, I think, a settling out of the labor supply-demand dynamic and just greater success on our part in, you know, and filling our open vacancies.
Tito chicory: <unk> has been reduced almost probably by two thirds from its height at the very height of the pandemic indicates more success in hiring and filling these permanent positions.
Tito chicory: You also see it in or.
Tito chicory:
Tito chicory: And just a deceleration in order.
Tito chicory: The rate of acceleration in wage inflation in the acute business the reduction in incentive payments recruitment incentive payments et cetera, all indicate.
Steve G. Filton: I think a settling out of the labor supply demand dynamic and just greater success on our part.
Tito chicory: In.
Tito chicory: And filling our open vacancies as far as the length of stay dynamic.
Steve Filton: As far as the length of state dynamic, because the vast majority of our payments are made on a per discharge basis, the lower our length of state, the more efficient we are in being able to treat patients and, you know, fully, you know, fully treat them and discharge them to the appropriate setting, whether that's home or to some sort of subacute facility. So there's a great that we reduce length of state. We're really reducing our cost per discharge or cost per admission. And then again, I think that, you know, we've lowered our length of stay dramatically from the height of the pandemic, but even continue to do so incrementally.
Tito chicory: Because the vast majority of our payments are made on a per discharge basis.
Tito chicory: The lower our length of stay the more efficient we are in being able to treat patients and fully.
Tito chicory: Yeah.
Tito chicory: Fully treat them and discharge them to the appropriate setting whether that's home or to some sort of sub acute facility to the degree that we reduced length of stay we're really reducing our cost per discharge your cost per admission and then again I think that you know.
We've lowered our length of stay dramatically from the height of the pandemic, but even continue to do so incrementally and again I think that's partly reflected in our.
Steve Filton: And again, I think that's partly reflected in our, you know, in our very successful cost management and cost reduction initiatives that, you know, you can see on our income.
Tito chicory: In our very successful cost management and cost reduction initiatives that you can see on our income statement.
Steve Filton: David. Okay, there's been some negative press, you know, recently, including the CFS committee on Resist Care. Are you seeing that impact to your referrals at all? Yeah, you know, honestly, Peter, we really have seen virtually no impact from the Senate hearing and report. You know, I think the greatest impact we would expect perhaps to have seen would be from referral sources, but I think, you know, what we kind of believe is the lesson from this is that referral sources understand the business very well. They understand this is a very difficult patient population. They understand that our hospitals, I think, do overall a very admirable job.
Tito chicory: Okay.
Speaker Change #108: And then some negative press recently, including the Santa Ana Committee on resident care are you seeing that impact your referrals at all.
Tito chicory: Yeah.
Tito chicory: Honestly.
Tito chicory: Peter we really have seen virtually no impact from the Senate hearing and report.
Steve G. Filton: I think the greatest impact we would expect perhaps to have seen would be from referral sources, but I think.
Steve G. Filton: What we.
Speaker Change: I kind of believe is the lesson from this is that referral sources understand the business very well. They understand this is a very difficult patient population they understand that.
Tito chicory: Our hospitals.
Speaker Change: Overall, a very admirable job and I think the outcomes and the patient satisfaction results suggest that patients are generally satisfied.
Steve Filton: And I think, you know, the outcomes and the patient satisfaction results suggest that patients are, you know, generally satisfied and highly satisfied with their care in these facilities. And I think referral sources recognize that. So no, we really seen no impact on our volumes, no impact from referral sources, you know, not necessarily any additional incremental regulatory oversight. So, you know, we're pleased with that.
Steve G. Filton: And highly satisfied with their care in these facilities and I think referral sources recognize that so no we've really seen no.
Tito chicory: No impact on our volumes no impact from referral sources.
Speaker Change: Not necessarily any additional incremental regulatory oversight.
Tito chicory: So.
Tito chicory: We're pleased with that.
Steve Filton: Perfect.
Operator: Great.
Michael Ha: Thanks for watching, guys. One moment for our next question.
Speaker Change #110: Perfect great. Thanks, so much guys.
Tito chicory: Yeah.
Speaker Change #109: One moment for our next question.
Michael Ha: And our next question comes from Michael Ha, a beard.
Speaker Change: And our next question comes from Michael Hall of Baird. Your line is open.
Steve Filton: Your line is open. Thank you. So on behavioral volumes, yes, it's fully rebound. Pricing remains powerful.
Speaker Change: Thank you so on behavioral volumes. So you have to totally rebound pricing remains powerful I was wondering if you could help us break out roughly how much of the volume headwind as Medicaid redetermination versus labor related constraints.
Steve Filton: I was wondering if you could help us break out roughly. How much of the volume headwind is Medicaid redeterminations versus labor-related constraints is a 50 50. Many more redetermination related and would it be fair to say as redetermination impact tails off into the back half this year that it creates a positive backdrop and against easier second half volume comp. That should help the bounce back naturally in behavioral volumes.
Speaker Change: Maybe more of a redetermination related and would it be fair to say at Redetermination impact tailed off into the back half of this year that it creates a positive backdrop and against easier second half volume comps that should help the bounce back naturally and behavioral volumes and then if you could discuss the choice drug behavioral pricing strength I think you said seven.
Steve Filton: And then if you could discuss the source of behavioral pricing strength, I think you said 7.2% extra supplemental payment. So if you could discuss some of the dynamics, there is that what's happening in pair pricing, that would be helpful. Thank you. Yeah. I mean, again, I would just make the point that the shortfall from where our behavioral volumes are, the 1.4% patient aid rope in the quarter versus where we thought we would be, which would be continuation of Q1 at around 2% or maybe a little bit higher than that. It's not an enormous shortfall. And it's 60, 70, 80 basis points, and therefore it's like the parts with great precision between the 2 or 3 issues that I elaborated on: the staffing, Medicaid redeterminations, the handful of residential facilities.
Speaker Change: 2% ex the supplemental payments. So if you have to test some of the dynamics there that that's happening impair pricing that'd be helpful. Thank you.
Steve G. Filton: Yeah, I mean again I would just make the point that the shortfall from our.
Steve G. Filton: Our behavioral volumes are the one 4% patient day growth in the quarter versus where we thought we would be which would be a continuation of Q1 at around 2% or maybe a little bit higher than that.
Steve G. Filton: It's not it's not an enormous shortfall.
And.
60, 70, 80 basis points and therefore, it's hard to parse with great precision between the two or three.
Steve G. Filton: <unk>.
Steve G. Filton: And I elaborated on the staffing the Medicaid redetermination.
Steve Filton: So that's difficult to do. I think broadly, as your question suggests, we do believe redeterminations get where the impact from redeterminations get better in the back half of the year, as we do believe these other issues. The staffing and residential facilities will get better in the back half of the year and allow us to reach that 3% target.
Speaker Change: Handful of residential facilities. So that's difficult to do I think broadly as your question suggests we do believe Redetermination get.
Speaker Change: The impact from Redetermination would get better in the back half of the year as we do believe these other issues with staffing and the residential facilities will get better in the back half of the year and allow us to reach that 3% target.
Operator: And one moment for our next question.
Speaker Change: And one moment for our next question.
Kevin Fischbeck: Now, our next question will be coming from Kevin Fischbeck of Bank of America. Your line is open.
Speaker Change: Our next question will be coming from Kevin Fischbeck of Bank of America. Your line is open.
Kevin Fischbeck: Yes, I'm on that comment there about the site volume improvement.
Steve G. Filton: Okay.
Speaker Change: On that comment there about the site.
Steve G. Filton: <unk> improvement.
Steve Filton: You know, I guess two questions. First one is, you know, is there any sign? I guess, maybe outside of the Medicaid population that demand in any way, shape, or form is being impacted. Or is this really just about kind of, you know, capacity, and then we determine nations.
Speaker Change: I guess two questions first one is.
Speaker Change: Is there any sign I guess, maybe outside of the Medicaid population that demand in any way shape or form is.
Speaker Change: Being impacted.
Speaker Change: Or is this really just about kind of capacity and then and then re determinations.
Steve Filton: And then second, we think about that labor dynamic. To get back to 3% by the end of the year, and to, you know, consistently be growing 3%. I mean, you're going to have to be adding staff at that pace. Are you currently adding staff at that pace generally? You know, that would support that. It sounds like you're not quite there yet. So just understand. What you're doing between now and year end that should be getting you to kind of standardly end that type of capacity. Thanks.
Steve G. Filton: And I believe the progress on the handful of residential facilities that have been a drag, which have been progressing, but at a somewhat slower rate than we expect, will continue. And all that will help and allow us to get back to the 3%, which I think, again, was our original plan. It's just, you know, happening a little bit more slowly than we originally anticipated.
Speaker Change: And then second when you think about that labor dynamic.
Speaker Change: To get back to 3% by the end of the year and to consistently be growing 3% I mean, youre going to have to be adding staff at that pace.
Speaker Change: Are you currently adding staff.
Steve G. Filton: At that pace generally.
Speaker Change: That would support that it sounds like you're not quite there yet so just trying understand.
Speaker Change: What youre doing between now and year end and that should be getting you to kind of sustainable you have that type of capacity.
Steve Filton: Yeah, Kevin. So, you know, I think, and part of the reason that I think we have been. Confident that behavioral volumes should and could increase to more historically normative levels, is that we believe the underlying demand is strong. And we measure that in a couple of different ways. We measure it sort of from a macro basis. There's a lot of sources of incidence of behavioral illness and the need for treatment in a whole variety of diagnoses. You know, including opioid illness and many others. And again, we believe that, you know, virtually across the board, demand for behavioral treatment continues to increase.
Steve G. Filton: Yeah, Kevin So I think and part of the reason that I think we have been.
Steve G. Filton: Confident that behavioral volumes should and could increase.
Steve G. Filton: Two sort of more historically normative levels is that we believe the underlying demand.
Speaker Change: <unk> is strong and we measure that in a couple of different ways, we measure it sort of from a macro basis. So theres a lot of sources of.
Steve G. Filton: The incidence of behavioral illness, and the need for treatment in a whole variety of diagnoses.
Steve G. Filton: Including opioid illness, and many others.
Steve G. Filton: And again, we believe that virtually across the board demand for behavioral treatment continues to increase.
Steve Filton: And so this really becomes an issue of, can we say, what do we have to do to satisfy that demand? And that sort of plays into the labor dynamic. Yeah, we are, you know, our net, how we continue to have net hires. I would say our, we have had positive net hires for between the last 18 and 24 months. Again, it's been incremental, and then a little slower than we thought, but we continue to add that.
Steve G. Filton: And so this really becomes an issue of can we said what do we have to do to satisfy that demand and that sort of plays into the labor dynamics.
Speaker Change: Yes, we are.
Steve G. Filton: Our net high we continue to have net hires I would say our we have had positive net hires.
Steve G. Filton: For between eight in the last 18 to 24 months.
Steve G. Filton: Again, it's been incremental and a little slower than we thought but we continue to add that I think one of the major areas of focus more recently is.
Steve Filton: I think one of the major areas of focus more recently is, you know, that we had a question earlier, I think, repeat all about acute care turnover. Behavioral turnover tends to be probably twice what acute care is. And that creates a lot of inefficiency. So even though we're hiring a lot of people, you know, they're leaving. And again, I think this is not just a UHS issue. I think it's an industry-wide issue. But we are very focused on the things that we can do and want to do to reduce that turnover rate, which includes, you know, mentorship programs and, you know, educational opportunities.
Speaker Change: We had a question earlier I think from Pedro about acute care turnover behavioral turnover tends to be probably twice what acute care is.
Steve G. Filton: And that creates a lot of inefficiency, so even though we're hiring a lot of people.
Steve G. Filton: <unk>.
Speaker Change: They are leaving and again I think this is not just the uhm issue I think it's an industry wide issue, but we are very focused on the things that we can do and want to do to reduce that turnover rate.
Steve G. Filton: Each includes mentorship programs and educational opportunities and career development opportunities. So that when we hire people. They really have an incentive to want to stay with the organization to staying with the facility and I do believe if we can we can we can reduce our turnover rate, which I think is a.
Steve Filton: And career development opportunities so that when we hire people, they really have an incentive to want to stay with the organization, to stay with the facility. And I do believe that we can, we can, we can reduce our turnover rate, which I think is a practical objective. That'll be one way in which we'll be able to satisfy some of that outstanding labor demand that we've really been unable to satisfy as much as we'd like to in recent years. Experience.
Steve G. Filton: Practical objective that'll be one way in which we'll be able to satisfy some of that outstanding vehicle demand that we've really been unable to satisfy.
Steve G. Filton: As much as wed like to in recent periods.
Steve Filton: All right, great.
Steve Filton: Is there an actual physical capacity dynamic too that you need to be adding beds, or is there enough bed capacity? It's really just the labor that's the constraint. Yeah, so I think it's sort of a catch-22. You know, I think we dramatically reduce the pace of which we were adding beds during the pandemic because we had a view that will look to the point of adding new beds if we can't staff the beds that we already have. I think as we make more and more progress. And again, this is an individual facility, individual market kind of calculation in each case, but as we increase our ability to fill those vacancies, et cetera, and today see a path and a ramp to being able to fill those vacancies.
Speaker Change: Alright, great.
Speaker Change: Actual physical capacity dynamic too that you'd need to be adding beds are there enough debt capacity, it's really just the.
Steve G. Filton: Yeah, so, at least one of my, you know, acute care company peers made this point that even though there have been substantial increases in Medicaid supplemental payments around the country, that for the most part, and I think this is particularly true on the acute side, our Medicaid reimbursement remains well below commercial rates, mostly well below Medicare rates, and quite, quite frankly, in most cases still below our costs. So, you know, we've made the point before and I'll reinforce it again, because it's an important one that these Medicaid increases are really intended to, I think, make up for the inadequate reimbursement of the last several years, particularly the cost pressures that accelerated during the pandemic, just broadly inflation pressures, but also the particular wage pressures that were exacerbated during the pandemic.
Speaker Change: The labor that's the constraint yeah. So I think it's sort of a catch 22, I think we dramatically reduced the pace at which we're adding beds. During the pandemic because we had a view that well what's the point of adding new vantage. If we can staff the beds that we already have I think as we may make.
Steve G. Filton: More and more progress and again this is an individual facility individual market kind of calculation in each case, but as we increase our ability to fill those vacancies et cetera, and sort of see a path on a ramp to being able to fill those vacancies I think we're going to be more willing to resume the pace of bed additions that we were running at.
Steve Filton: I think we're going to be more willing to resume the pace of bed additions that we were running at, you know, before the pandemic.
Steve Filton: All right, thanks.
Steve G. Filton: Before the pandemic.
Steve G. Filton: Alright. Thanks.
Operator: One moment for our next question.
Speaker Change: And one moment for our next question.
Whit Mayo: And our next question will be coming from Whit Mayo of LeanRink Partners. Whit, your line is open.
Speaker Change: And our next question will be coming from Whit Mayo of Leerink partners. Your line is open.
Whit Mayo: Hey Steve, I have one more labor dynamic question. What's interesting is this is a fourth consecutive quarter where your SWB per patient day has moderated. I'm just really trying to square this against the comments on the challenges and filling positions. You said you're hiring maybe a little bit slower than you thought, but it's not pressuring the salary line at all. And I guess I would have thought intuitively the opposite would happen, but maybe there's something optical with the mix of RTC versus acute or something.
Steve G. Filton: Hey, Steve I, just have one more labor dynamic question. What's interesting is this is the fourth consecutive quarter, where your SWT per patient day has moderated.
Speaker Change: We're really trying to square that against the comments on the challenges in filling positions you said youre hiring maybe a little bit slower than you thought.
Steve G. Filton: But it's not pressuring the salary line at all and I guess I would have thought intuitively the opposite would happen, but maybe there's something optical what the mix of RTC versus acute or something how do I don't make sense of this.
Steve Filton: How do I make sense of this? Yeah, I mean, I think what you saw during the pandemic was people leaving subacute industries, and that obviously included behavioral, but it included, I think, lots of other subacute industries like nursing homes and skilled nursing facilities and home health. And they were leaving those industries to work in the acute care settings where they were able to make a significant, you know, premium to their existing salaries. And I think there's always been, for sure, a gap in that acute care compensation rates were always higher than subacute care compensation rates, but that gap widened dramatically during the pandemic.
Steve G. Filton: Yes, I mean, I think what you saw during the pandemic.
Steve G. Filton: Was people, leaving sub acute industries and that obviously included behavioral but it included I think lots of other subacute industries like nursing homes, and skilled nursing facilities and home health and they were leaving those industries to work in acute care settings, where they were able to make a significant.
Steve G. Filton: <unk> premium to their existing salaries, and I think theres always better for sure a gap in that acute care compensation rates were always higher than sub acute care compensation rate, but that gap widen dramatically during the pandemic I do think it has since narrowed and so it really.
Steve Filton: I do think it has since mattered. And so you really, you know, and that's I'm trying to answer questions in the sense of, so it really got to be an issue. It didn't matter, you know, when a nurse told us the behavioral nurse told us that she was leaving to make, you know, three times for salary in acute care setting, you know, raising her, you know, salary by $2 an hour, et cetera, was not going to have any impact, which is why I don't think you saw, you know, dramatic pressure. On our behavioral rates during the pandemic, and which is why, as you're suggesting, I think you're seeing, you know, moderation actually in our salaries and wages per patient day.
Speaker Change: I'm trying to answer your question in the sense of so it really got to be an issue it didn't matter.
Speaker Change: Nurse told us a behavioral nurse told us that she was leaving to make three times for salary and acute care setting.
Speaker Change: Raising her.
Steve G. Filton: Salary by $2, an hour et cetera was not going to have.
Steve G. Filton: Had any impact which is why I don't think you saw dramatic pressure on our behavioral rates during the pandemic and which is why as you're suggesting I think youre seeing.
Steve G. Filton: Moderation actually in our salaries and wages per patient day.
Steve Filton: Because the way we're solving this problem is not necessarily through, you know, higher premium payments and incentive payments, although we certainly did that during the pandemic, and we do it in markets where we still think it's necessary. But I think, you know, our real focus is on how do we make people feel that working into the behavioral setting is rewarding, is creating career opportunities for them, is a place that they're going to be valued, et cetera. And I think that's our focus. You know, look, you know, certainly, and particularly with the availability of some of these Medicaid supplemental payments, et cetera, in some markets.
Speaker Change: Because the way we are solving this problem is not necessarily through higher premium payments and incentive payments. Although we certainly did that during the pandemic and we do it in markets, where we still think it's necessary, but I think our real focus is on how do we make people feel that working into behavioral setting.
Steve G. Filton: It is rewarding as creating career opportunities for them is a place that they're going to be valued etcetera, and I think that's our focus.
Steve G. Filton: Certainly and particularly with the availability of some of these Medicaid supplemental payments et cetera in some markets.
Steve Filton: If we believe that paying higher compensation and, you know, could be an answer, you know, we'll pursue that. But again, I'm going to suggest that I think, in most cases, you know, this is not a problem that throwing money at it just automatically solves; it, but we'll invest more money where we're thinking.
Steve G. Filton: If we believe that paying higher compensation and.
Steve G. Filton: It could be an answer.
Steve G. Filton: We'll pursue that but again I'm going to suggest that I think in most cases.
Steve G. Filton: This is not a product throwing money at it just automatically solves it but we'll invest more money, where we think it makes sense.
Steve G. Filton: And.
Steve Filton: I haven't heard you talk about the health plan business in some time, wondering how that's performing versus expectations and how you guys think of that as a core business for UHS or do you think differently at all about it?
Speaker Change: My follow up I haven't heard you talk about the health plan business and some time I'm wondering how that's performing versus expectations and how you guys think of that as a core business for EHS or do you think differently at all about it. Thanks.
Steve Filton: Thanks. Yeah, we've talked about the health plan from time to time. I think like any provider-sponsored health plan, and this is really an acute care dynamic. We only operate the health plan in markets in which we have acute care hospitals, and it is a way for us to create narrow networks in which our hospitals participate. It's a way for us to create further alignment with Medicare positions, particularly in plans that are focused on Medicare Advantage patients.
Unknown Executive: And one moment for our next question, and our next question will be coming from Peto Chickering of Deutsche Bank.
Michael Ha: And our next question comes from Michael Ha of Baird. Your line is open.
Philip Chickering: Tito, I think that, you know, we're down into the low and mid-20s, which is kind of where we were in sort of the pre-pandemic period. Obviously, we still view that turnover rate as high, but to be fair, that's, you know, the hospital and acute care industry has had turnover rates in the high-20s and low-30s and nationally for a long time. And while we view those as still very inefficient and, you know, not necessarily ideal, and we continue to work to lower them, part of that is it's just the nature of the business.
Michael Ha: Thank you. So on behavioral, volume is still yet to fully rebound, and pricing remains powerful. I was wondering if you could help us break out roughly how much of the volume headwind is Medicaid redeterminations versus labor-related constraints. Is it 50-50, maybe more redetermination-related? And would it be fair to say as the redetermination impact tails off into the back half this year, it creates a positive backdrop and against easier second half volume comps that should help to bounce back naturally in behavioral volumes?
Steve G. Filton: I mean, we've talked about the health plans from time to time, I think like any provider sponsored health plan and this is really an acute care dynamic.
Philip Chickering: But obviously, you know, as I indicated in my prepared comments, our ability to reduce premium pay, which has been reduced almost probably by two-thirds from its height at the very height of the pandemic, indicates more success in hiring and filling these permanent positions. I think you also see it in our [inaudible]
Michael Ha: And then, if you could discuss the source of the behavioral pricing strength, I think you said 7.2% after the supplemental payments. So if you could assess some of the dynamics there, what's happening in payer pricing, that would be helpful. Thank you.
Speaker Change: We only operate the health plan in markets in which we have acute care hospitals and it is a way for us to create.
Speaker Change: Create narrow networks, and which are hospitals participate it's a way for us to create further alignment with Medicare physicians, particularly where implants that are focused on Medicare advantage patients.
Steve Filton: And we think ultimately, even though the plan operates largely at a break-even level currently, that it's still less expensive and greater return investment than some other options, like position employment or other similar options. Although we certainly do those things as well. And so the health plan continues to do that. It continues to provide us, again, I think, a narrower network and a funnel of patients in certain markets, and we'll continue to operate it with that name.
Speaker Change: And we think ultimately even though the plan operates largely at a breakeven level currently that it's.
Speaker Change: It's still less expensive than.
Michael Ha: <unk>.
Speaker Change: Greater risk return investment than some other options like physician employment or or are there similar options. Although we certainly do those things as well and so.
Unknown Executive: And one moment for our next question.
Unknown Executive: Are they being impacted? Or is this really just about kind of, you know, capacity and then and then redetermination? And the second thing we think about that labor dynamic to get back to 3% by the end of the year and to consistently be growing 3%. I mean, you're going to have to be adding staff at that pace. Are you currently adding staff?
Unknown Executive: All right, great. Is there an actual physical capacity dynamic to that you need to be adding beds, or is there enough bed capacity? It's really just the labor that's the constraint. Yeah, so I think it's sort of a
Speaker Change: The health plan continues to do that it continues to.
Unknown Executive: And we've talked about health.
Speaker Change: Provide us again I think.
Speaker Change: A narrower network and our funnel of patients in certain markets.
Speaker Change: And we will continue to operate it with that.
Unknown Executive: Thanks.
Operator: Hi, last question.
Unknown Executive: Alright.
Joshua Raskin: We'll be coming from Joshua Raskin of Neffron Research.
Unknown Executive: Our last question will be coming from Joshua Raskin of Nephron Research Joshua Your line is open.
Joshua Raskin: Joshua, thanks. Just one more, Steve. I heard the 5% of patients are coming with exchange-based insurance, but what percentage of revenue is coming from those individual exchange patients? I'm curious across both segments, and if you could comment on the margins of those patients' relatives, your other segments. And then why do you think that 5% is lower than peers? Is that network strategy and contracting, or do you think that's geographic-based?
Speaker Change: Hi, Thanks, just one more Steve I guess I heard the 5% of patients are coming with exchange based insurance, but what percentage of revenue is coming from those individual exchange patients and be curious across both segments and if you could comment on the margins of those patients relative to your other segments and then why do you think that 5% is lower than peers is that.
Speaker Change: Network strategy in contracting or do you think that's geographic based.
Steve Filton: As far as the second question goes, I don't really know the answer to that, Josh. As far as the first one goes, because I think commercial exchange reimbursement tends to be somewhere between Medicare and commercial, probably a little close in the Medicare, I would say, I don't have this data right in front of me, but my estimate would be the 5% of admissions would be something pretty close to what percentage of revenue it would be, because I would think that sort of midpoint between commercial and Medicare is probably about the midpoint of our reimbursement. Okay, and margins, you think similar to somewhere between Medicare and commercial then?
Speaker Change: As far as the second question, because I don't really know.
Unknown Executive: <unk>.
Speaker Change: The answer to that.
Unknown Executive: Josh.
Speaker Change: As far as the first one goes because I think commercial exchange reimbursement tends to be somewhere between Medicare and commercial probably a little closer to Medicare I would say I don't have the data right in front of me, but my guesstimate would be the 5% of admissions would be something pretty close to what.
Speaker Change: Percentage of revenue would be because I would think that sort of midpoint between commercial and Medicare is probably about the midpoint of our reimbursement.
Speaker Change: Okay and margins do you think similar to somewhere between Medicare and commercial then yeah, yeah, I'm, sorry, but yes.
Steve G. Filton: Yeah, I mean, we've talked about the health plan from time to time. I think like any provider-sponsored health plan, and this is really an acute care dynamic. You know, we only operate the health plan in markets in which we have acute care hospitals. And it is a way for us to create narrow networks in which our hospitals participate. It's a way for us to create further alignment with Medicare physicians, particularly in plans that are focused on Medicare Advantage patients.
Steve Filton: Yeah, yeah, I'm sorry, but yes. Okay, thanks.
Steve G. Filton: And we think ultimately, even though the plan operates largely at a breakeven level currently, that it's still less expensive and a higher return investment than some other options like physician employment or other similar options, although we certainly do those things as well. And so, yeah, the health plan continues to do that; it continues to provide us with, again, I think, a narrower network and a funnel of patients in certain markets, and we'll continue to operate it with that aim.
Unknown Executive: Yeah, yeah, I'm sorry, but yes. Okay.
Speaker Change: Okay. Thanks.
Ryan Langston: We did get an additional question from Ryan Langston, and that's Ryan Langston of TD Cohen.
Ryan M. Langston: We did get an additional question from Ryan Langston.
Unknown Executive: We did get an additional question from Ryan Langston.
Speaker Change: And Thats Ryan Langston of TD Cowen Your line is open Ryan.
Ryan Langston: Your line has opened, Ryan. Thanks. Good morning. Thanks for squeezing me in.
Steve Filton: Just real quick, on the new facilities that are coming online, both I guess in the acute and behavioral, can you just remind us generally how long it takes those facilities to get to break even and do the geographies or any other dynamics in those markets have any changes to that maybe faster slower. Thanks. Yeah, I would say generally the ramp of the disability to break even is probably in six to 12 month range and then what I would consider to be divisional averages, probably 18 to 24 month range. In markets like Las Vegas, that time print tends to be compressed.
Ryan M. Langston: Good morning, Thanks for squeezing me in just real quick on the new facilities that are coming online both I guess in the acute and behavioral can you just remind us generally how long it takes those facilities to get to breakeven and do the geographies or any other dynamics in.
Speaker Change: In those in those markets have any changes to that may be faster or slower.
Speaker Change: Yes, I would say generally the ramp of the facility to breakeven is probably in the <unk>.
Speaker Change: Six to 12 month range and then what I would consider to be divisional averages probably 18 to 24 month range.
Speaker Change: In markets like Las Vegas that timeframe tends to be compressed.
Steve Filton: You know, again, I think there's little impact this year in 2024 because the facility we're opening in Las Vegas will be very late in the year, so I don't think it's going to have much of an impact on earnings this year, and we'll get more precise feedback on the impact of both less Henderson and the Washington DC facility when we give our 25 guidance.
Speaker Change: Again, I think there's little impact this year in 2024, because the facility that we're opening in Las Vegas will be very late in the year. So I don't think it's going to have much of an impact on.
Speaker Change: Earnings this year, and we'll give more precise.
Speaker Change: Feedback on the impact of both less Henderson in the Washington D. C facility, when we give our 25 guidance.
Steve Filton: You know, early next year.
Speaker Change: Early next year.
Operator: Thanks.
Steve Filton: And I'm showing no further questions.
Ryan M. Langston: Okay.
Steve Filton: I would now like to turn the conference back to Steve Filton for closing remarks.
Speaker Change: And I'm showing no further questions I would now like to turn the conference back to Steve Filton for closing remarks.
Unknown Executive: And we would just like to thank everybody for their time this morning and look forward to speaking with everybody again next quarter. Thank you.
Operator: We would just like to thank everybody for their time this morning and look forward to speaking with everybody again next quarter. Thank you.
Speaker Change: And we would just like to thank everybody for their time. This morning, and look forward to speaking with everybody again next quarter. Thank you.
And this concludes today's conference call. Thank you for your participation. You may now disconnect. Thank you.
Speaker Change: And this concludes today's conference call. Thank you for your participation you may now disconnect.
Unknown Executive: Okay.
Unknown Executive: [music].