Q1 2025 Universal Health Services Inc Earnings Call
Okay.
Good day, Thank you for standing by and welcome to the UHF 2025.
Conference call.
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Speaker Change: Executive Vice President and Chief Financial Officer.
Please go ahead.
Mark Miller: Good morning. Thank you Mark Miller, who is also joining us this morning.
Speaker Change: Welcome you to this review of Universal Health services results. The first quarter ended March 31 2025.
Speaker Change: During the conference call will be using words, such as believes expects anticipates estimates and similar words that represent forecasts projections and forward looking statements.
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 and forward looking statements and risk factors in our Form 10-K for the year ended December 31 2024.
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 <unk> per diluted share of $4 80 for the first quarter of 2025 after adjusting for the impact of the items reflected on the supplemental schedule included with the press release, our adjusted net income attributable to uhm per diluted share.
Speaker Change: This $4 84 for the quarter ended March 31 2025.
Speaker Change: During the first quarter of 2025 on a same facility basis adjusted admissions to our acute care hospitals increased two 4% over the first quarter of the prior year St.
Speaker Change: Same facility net revenues in our acute care hospital segment increased by 5% during the first quarter of 2025 as compared to last year's first quarter. After excluding the impact of our insurance subsidiary.
Speaker Change: Meanwhile, operating expenses continued to be well managed other operating expenses on a same facility basis increased by two 6% over last year's first quarter.
Speaker Change: After excluding the impact of our insurance subsidiary.
Speaker Change: For the first quarter of 2025 are solid acute care revenues combined with effective expense controls resulted in a 21% increase in EBITDA after excluding the impact of Medicaid supplemental payments.
Speaker Change: During the first quarter of 2025 same facility net revenues at our behavioral health hospitals increased by five 5% driven by a five 8% increase in revenue per adjusted day adjusted patient days were relatively flat compared to the prior year quarter the year over year patient day growth.
Speaker Change: Parison was negatively impacted by the extra leap day in 2024 and challenging winter weather conditions experienced this year early in the first quarter in certain markets.
Speaker Change: We did experience a reacceleration of patient day growth in March.
Speaker Change: Our cash generated from operating activities decreased from $396 million during the first quarter of 2000 $24 million to $360 million. This year due in part to delays in receipt of funds in connection with certain Medicaid supplemental payments in various states, we did receive $82 million of payments related to the <unk>.
Speaker Change: Nevada supplemental program in April that were related to revenues recorded in the first quarter.
Speaker Change: In the first quarter of 2025, we spent $239 million on capital expenditures.
Speaker Change: Wired $1 million of our own shares at a cost of approximately $181 million. Since January 2019, we have repurchased approximately 33 million shares representing 33% of our shares outstanding as of that date.
Speaker Change: As of March 31, 2025, we had $1 <unk> 2 billion of aggregate available borrowing capacity pursuant to our one 3 billion revolving credit facility.
Speaker Change: I will now turn the call over to Mark Miller, President and CEO for closing comments. Thank you Steve.
Mark Miller: We are pleased with our first quarter operating results, which on a consolidated basis exceeded our internal expectations.
Mark Miller: We were particularly encouraged by the control of our operating expenses in both business segments.
Mark Miller: Our first quarter operating results exclude any supplemental Medicaid revenues in Tennessee, and the district of Columbia.
Mark Miller: Lending CMS approval of these new programs for.
Mark Miller: For programs that were originally approved in previous years, we have continued to record those revenues under the assumption that programs will be reapproved.
Mark Miller: As these programs have been a recent focal point I believe it is worth reminding people that these are federally authorized and state approved programs in place for many years and they were designed to allow providers, who have been historically underpaid by Medicaid should provide quality care to over 70 million Medicare.
Mark Miller: Recipients nationally.
Mark Miller: Even where these programs exist our net Medicaid reimbursement generally remains below both average commercial and Medicare reimbursement.
Mark Miller: West Henderson Hospital in Las Vegas opened in late 2024, and posted a modestly positive EBITDA in the first quarter.
Mark Miller: Cedar Hill Regional Medical Center in Washington, DC opened recently and has experienced strong demand for its emergency room services from the outset.
Mark Miller: While we acknowledge a great deal of uncertainty in our external operating environment, we feel confident in our underlying businesses.
Mark Miller: And based on current reimbursement and operating cost levels reiterate our full year earnings guidance. We're pleased to answer questions at this time.
Mark Miller: Thank you at this time, we will conduct a question and answer session.
Mark Miller: Reminder, to ask a question that you just need to press star one on your telephone and wait for your name to be announced.
Mark Miller: To withdraw your question. Please press star one again.
Mark Miller: Standby, while we compile the Q&A roster.
Mark Miller: Alright.
Mark Miller: First question comes from the line of Justin Lake.
Speaker Change: Wolfe Research. Please go ahead. Your line is now open.
Justin Lake: Thanks, Good morning, I appreciate all the details wanted to focus on the behavioral side Steve.
Justin Lake: I know you talked about leap year, you talked about weather.
Justin Lake: Especially earlier in the year, maybe you could give us an idea of what you what you saw in March.
Justin Lake: Weather would have been past due to leap year impact would've been passed is there how did March volume, maybe even early April volume look and any update on the full year guidance in terms of your thoughts around.
Justin Lake: Behavioral volume, we should be assuming for the year.
Justin Lake: Yeah, So our full year guidance that we presented in late February presumed behavioral patient day revenue growth.
Justin Lake: Two 5% to 3%.
Justin Lake: And we believe that is still a reasonable target and that remains our embedded target for our guidance.
Justin Lake: We accelerated from our more muted flattish level, maybe even negative levels in January and February I didn't quite get to the two and half 3% targeted more widespread.
Justin Lake: Alike.
Justin Lake: It was indicative of the fact that weather had.
Justin Lake: Kind of muted our volumes and it for five or six weeks in January and February.
Justin Lake: April is a little bit hard to say, because we had Easter and spring break in April.
Justin Lake: But it feels like recent volumes again gives us confidence that.
Justin Lake: Thank you and have a 3% should be achievable for the full year.
Justin Lake: Got it and then.
Justin Lake: Maybe mark you can just on the DPP side. It was good to hear that the things kind of start it up again in Nevada, any any other states that you're kind of focused on in terms of where youre expecting to hear soon in any kind of updates beyond Nevada.
Justin Lake: Yes, I just think its Washington, DC and then you can say in both cases.
Speaker Change: The state of Tennessee, and Additionally, Columbia advisors, not just ours, but their hospital community that they continue to expect an approval.
Justin Lake: The approval of <unk>.
Justin Lake: The message they get from folks a deal with at CMS, obviously timing is still somewhat up in the air but again kind of answer your question alludes to Jonathan we're encouraged that after a while it seemed like a full pause in any new approvals of re approvals by the Trump administration. After they took office.
Justin Lake: Number of our programs have been reapproved and Theyre, even have been a couple of new programs, none that affect us, but some new programs have been approved so.
Justin Lake: It feels to us like that.
Justin Lake: <unk> has sort of been resurrected our restarted and we view that as a hopeful sign and again, most importantly for us than Nevada program was reapproved and as I noted in my remarks, we were actually paid for.
Justin Lake: For the first quarter revenues in April.
Justin Lake: Appreciate it thanks guys.
Justin Lake: Thank you.
Speaker Change: Our next question Tom is from the line of Sarah James with Cantor Fitzgerald. Your line is now open.
Speaker Change: Thank you Crystal.
Speaker Change: To follow up on Justin's question, a little bit.
Speaker Change: You're still at two and a half.
Speaker Change: Two 3%.
Speaker Change: On behavioral volumes for the year I think that implies a step up for the rest of the year that is above the guided range or above the high end of the guide range is that the right way to think about it.
Speaker Change: Yes, mathematically I think Thats correct Sir.
Speaker Change: Okay got it and then Greg Nevada, GPP that came out from the quarter. How many months was that related to I think it was approved in April.
Speaker Change: We think about that as four months and if so why.
Speaker Change: A little bit ahead on Euro DTD guide for the year.
Speaker Change: So now that it was just the first quarter payment that $82 million I'll remind people is the growth.
Speaker Change: Payment that we get from the state.
Speaker Change: Net of our provider taxes, we've continued to pay the taxes on a regular basis. So we paid our taxes in Nevada in the first quarter that growth math that we received the $82 million.
Speaker Change: In April related to the first quarter, but I think the Europe confusion as you were thinking.
Speaker Change: If you annualize that 82 with a lot more than the net benefit that we described and it's because it doesn't include the provider tax element.
Speaker Change: Got it that's helpful. Thank you.
Speaker Change: Thank you. Our next question comes from the line of Andrew Mok of Barclays. Your line is now open.
Andrew Mok: Hi, Good morning question on tariffs can you help us understand what actions you are taking now to prepare for potential tariffs and what your GPO as communicated to you thus far thanks.
Speaker Change: Yes, so first of all.
Andrew Mok: To reiterate I think what.
Speaker Change: One of our peer companies.
Andrew Mok: Talked about from a tariff perspective, just sort of framing the issue.
Andrew Mok: I think they said that they estimate about 60% of their supply chain purchases are sourced in the U S and Canada and Mexico.
Andrew Mok: So at the moment are not subject to tax another 15% or pharmaceuticals, which are also at the moment not subject to tariffs. So at the moment and I would say our numbers. We estimate are roughly the same about three quarters of all our supply chain purchases are insulated from tariffs.
Andrew Mok: The way, we're protecting ourselves or.
Andrew Mok: Actively sort of dealing with the issue is we do find some vendors who had fixed contractual prices with us have started to include things like fees are stagnant.
Andrew Mok: <unk> I'm not even sure how to describe them on their invoices, we've been sort of ignoring those.
Andrew Mok: Because I think we believe theyre not part of the contract.
Andrew Mok: We continue to monitor any vendors, who would tell us that.
Andrew Mok: They are considering cancellation of contracts or theyre, finding availability of product problematic, we're not really getting any of that feedback yet, but certainly preparing if we do four alternatives.
Andrew Mok: Other.
Andrew Mok: Other sourcing alternatives, the other pricing alternatives et cetera, but at the moment it feels like there is not.
Andrew Mok: A great deal of pressure again in large part because I think a good chunk of water supplies are insulated from tariff impact at the moment.
Andrew Mok: Yes.
Speaker Change: Got it and maybe just a follow up on the behavioral side, maybe weather. Aside are you seeing any changes in Europe, behavioral referral patterns or willingness of JV partners to work with UHF.
Andrew Mok: Okay.
Andrew Mok: No I don't think so.
Andrew Mok: I know you said weather aside, but I would just make the comment about weather and we talked about this I think on the yearend earnings call.
Andrew Mok: Yes, the weather that we are talking about winter weather was in places that I think doesn't don't normally experienced winter weather.
Andrew Mok: And more in the central part of the country, Virginia, Kentucky, Tennessee, Arkansas.
Andrew Mok: And the challenge I think is twofold for us from a winter weather perspective in those places number one schools are closed.
Andrew Mok: I think I remember that I believe in February and a number of our Virginia facilities.
Andrew Mok: Schools are supposed to be open I think for 19 days that month, a new oral only opened for Aladdin.
Andrew Mok: And so that has a big impact on the lifestyle and adolescent population and admissions and our child and adolescent population and the other thing that the weather impacts us.
Andrew Mok: Outpatient programs, obviously from an inpatient perspective, we may lose admissions over two or three or four day period, if the weather's bad, but we obviously continue to treat the patients that we have but our outpatient program is pretty much closed down during those days, where it's difficult for people to travel and they can't cleared the road et cetera. So we really see an outsized impact on our <unk>.
Andrew Mok: Outpatient and our child and adolescent business when when we experienced those winter conditions other than that.
Speaker Change: Question about are we seeing really any sort of structural changes in our referral patterns or willingness of.
Speaker Change: Referral sources to send those patients and the answer to that is no which is really why I think ultimately where we are.
Speaker Change: <unk> confident that we should be able to reach that 253% target that we set originally.
Speaker Change: Great. Thanks for the color.
Alright. Thank you. So our next question comes from the line of Ben Hendrix of RBC capital markets. Your line is now open.
Speaker Change: Great. Thank you very much just following up on that last question moving to the right side the strong seven 2%.
Speaker Change: Rate growth there just wanted to I imagine there is some.
Speaker Change: Our payer mix dynamics, there with re determination and then I just wanted to also get any other observations you have on payer mix change it.
Speaker Change: Sure.
Speaker Change: Smith developments in the behavioral side Theyre grabbing that rate growth and also when do you expect that I guess normalize out to for more long term steady state growth rate. Thanks.
Speaker Change: Yes, so our revenue per adjusted day on a same store basis, I think as we've disclosed on that.
Speaker Change: In our opening comments was five 8% I think again our guidance for the year was in the 4% to 5% range. So we continue to and that 4% to 5% certainly would be a moderation of the rates that we've been getting over the last several years and I think most of that is not necessarily kind of payer mix our redetermination.
Speaker Change: Things that you mentioned, but just generally.
Better contractual pricing that we've been getting particularly from our managed Medicaid payers.
Speaker Change: That number has been moderating some.
Speaker Change: For the last several years.
Speaker Change: I think partly because as we get those prices and we start to anniversary the impact.
Speaker Change: It's not as significant.
Speaker Change: I also think that as capacity.
Speaker Change: <unk> increases in the vehicle industry in general.
Speaker Change: <unk> is a little bit of our leverage over the payers, who I think right now have to deal with a scarcity of capacity, particularly invasion capacity, where they can send their patients.
Speaker Change: So again I think the pattern that we're seeing in terms of strong behavioral pricing is one that we've been seeing for some time. It has moderated a little bit is moderating more slowly than maybe we originally anticipated and that our guidance presumed.
Speaker Change: I think we would we would presume that that would continue to be the case, so as volumes recover any of the year goes on and hopefully we can if we are short of the two 5% to 3% target.
Speaker Change: For any period of time hopefully.
Speaker Change: Our pricing will offset that.
Speaker Change: Great. Thank you.
Speaker Change: Thank you.
Speaker Change: Our next question comes from the line of Stephen Baxter of Wells Fargo. Your line is now open.
Speaker Change: Hi, Thanks, just wanted to ask more of a philosophical question on the Medicaid supplemental payment programs. Obviously, we don't know what the ultimate outcome is going to be from a legislative and regulatory point of view here, but it does seem like you know we could be living in a world, where there's a significant restriction at a minimum and your ability to grow this economic.
Speaker Change: In our earnings stream going forward I know that this is only sir.
Speaker Change: Improve your Medicaid reimbursement to maybe more sustainable levels versus actually make money, but as you think about your P&L leverage to supplemental programs I mean, how should we think about a world where maybe that is a more extreme going forward. Your ability of the company is still kind of deliver the type of same store revenue and adjusted EBITDA growth rates that you've targeted historically.
Speaker Change: <unk>. Thank you.
Speaker Change: Yes, I mean look I think honestly, we're already in that world.
Speaker Change: As you know.
Speaker Change: In our 10-K, we presented a very detailed disclosure on Medicaid supplemental payments and our projected Medicaid supplemental payments through 2025, we're already generally flattish with what they were in 2024. So we certainly are not counting on growth in those programs.
Speaker Change: Possible.
Speaker Change: We will see some deceleration in our supplemental payments Orient their Medicaid reimbursement.
Speaker Change: And I think what that really means ultimately is the way we're going to grow the behavioral business in the intermediate and long term is with more volume growth.
Speaker Change: And Thats why it is.
Speaker Change: We acknowledge it's important that we get to that two 5% to 3% target.
Speaker Change: Patient day target.
Speaker Change: Because ultimately we think going forward all our Medicaid rates in particular there.
Speaker Change: And likely to be impacted by legislative action.
Travis: Travis I think we can go to the next question.
Speaker Change: Alright, thank you.
Speaker Change: Our next question comes from the line of Benjamin Rafi.
Speaker Change: Hey, Morgan your line is now open.
Speaker Change: Hey, good morning, Thanks for taking my question.
Speaker Change: How would you describe I guess patient utilization activity during <unk> across Q and then when parsing those volumes up by payer how would you frame growth between maybe your traditional managed care book versus your ACA exchange related volumes. Just curious have you seen any variation at the regional level for states, where enrollments and faster like Texas or Florida versus the.
Speaker Change: Like Nevada, where it might be less pronounced.
Speaker Change: <unk>.
Speaker Change: Yes.
Speaker Change: So I think specifically your question about exchange utilization again, I think one of our peers talked about the fact that their exchange volumes were up.
Speaker Change: 20% or so in the first quarter over last year's first quarter I think we saw a similar increase again. These are relatively small numbers on an absolute basis.
Speaker Change: Think about for <unk>.
Speaker Change: At least.
Speaker Change: Exchange or patients with exchange coverage represent about 6% of our adjusted admissions in our acute care space.
Speaker Change: It's a little bit of an increase over what we were running.
Speaker Change: And.
Speaker Change: If that utilization is coming from anywhere I think it's probably you know our Medicaid utilization is probably not growing as fast and thats, probably whats generating most of that exchange increase but overall I don't think that that patient mix is affecting our our pricing or our profitability in any significant way.
Speaker Change: Got it thanks, and then just as a clarification on the Medicaid taxes.
Speaker Change: The payments in April.
Speaker Change: <unk> other operating expenses contain those related Nevada, Medicaid taxes or is that a <unk> item.
Speaker Change: No the point that I was trying to make the third before was we continued to pay the the provider taxes on a regular basis. So.
Speaker Change: First quarter provider taxes were in our numbers, even though again the revenue within there as well, it's just that the cash was not.
Speaker Change: Got it thanks for the clarification.
Speaker Change: Alright, thank you.
Operator: So our next question comes from the line of Joshua Raskin of Nephron Research. Your line is now open.
Joshua Raskin: Yes. Thanks, good morning, just back on the behavioral I am curious on demand trends outside of weather and some of these other temporal effects are you seeing any differences in demand.
Joshua Raskin: By acuity sort of demand for specific services and then just a quick follow up on West Henderson I know, it's very early there, but I'm just curious how you're seeing competitive dynamics impacted in the market and maybe just a comment on your other facilities there as well.
Joshua Raskin: Yes so.
Joshua Raskin: For the West Henderson question first and come back to behavioral.
Joshua Raskin: Yes.
Joshua Raskin: Yes.
Joshua Raskin: Very encouraged by our West Henderson results for a hospital basically in its first full quarter.
Joshua Raskin: Being open to have positive EBITDA really is extraordinary.
Joshua Raskin: There is a little bit of cannibalization from our existing hospitals and we talked about this in our year end call. So I would suggest that a little bit of our same store adjusted admission metrics a little bit of our same store profitability.
Joshua Raskin: Is it a muted by the fact that there has been.
Joshua Raskin: A bit of cannibalization, although I don't think its terribly significant.
Joshua Raskin: But just generally pleased.
Joshua Raskin: And honestly I think it's better than we even expected and the whole reason, we built less Henderson that invested in this project as we think that it's a growing part of the Las Vegas market. It would the demand would be there.
Joshua Raskin: Has been and.
Joshua Raskin: I think we think.
Joshua Raskin: So we will continue to grow at a brisk pace, we're very encouraged by the early results.
Joshua Raskin: As far as your behavioral questions and really sort of if demand has changed.
Joshua Raskin: No and again I think we have said the same thing really for the last several years, which is.
Joshua Raskin: Measured both by sort of macro kind of data that industry wide data that tracks.
April demand across a variety of diagnoses in services.
Joshua Raskin: Generally that has been strong and our own sort of micro data, which is our inbound activity of calls and internet inquiries et cetera continues.
Joshua Raskin: Continues to be quite strong and so the challenge is.
Joshua Raskin: Do we have the physical capacity to meet those demands that we have the labor force to meet those demands I think those situations have improved in the last several years that can still be challenging.
Joshua Raskin: Some markets. We also acknowledge there is more competition in some markets.
Joshua Raskin: But again I'll sort of go back to what I said before.
Joshua Raskin: And I think because of the demand.
Joshua Raskin: <unk> strong.
Joshua Raskin: Because the labor market has stabilized et cetera, I do think we have the view that that two 5% to 3% patient day growth target is still not it's still a very achievable target.
Joshua Raskin: Alright, thank you.
Joshua Raskin: Okay.
Speaker Change: Thank you. So our next question comes from the line of Craig hitting Buck excuse me.
Speaker Change: From Morgan Stanley. Your line is now open.
Speaker Change: Great. Thank you Nick.
Speaker Change: <unk> business can you talk about any trends that sit out just from an acuity perspective.
Speaker Change: Then outside of volume growth any levers there that you're looking at potentially pull to continue to improve margins in that segment.
Speaker Change: Yes so.
Speaker Change: From an acuity perspective, I would say acuity was muted a little bit in Q1 by the busier flu season.
Speaker Change: So we had an honest a relative percentage basis, more medical patients and surgical and procedural patients in Q1 because of the busy flu season.
Speaker Change: I think that will normalize as the year goes on but our acuity as measured by our CMI actually was still relatively strong in Q1, which I think suggests that the procedural business that we did have.
Speaker Change: Was was still pretty solid.
Speaker Change: A relatively high acuity business.
Speaker Change: And obviously I think after the first quarter even in March we saw flu volume has declined dramatically as you would expect and so I think as the year goes on.
Speaker Change: I think it's fair to expect acuity will grow a little bit.
Speaker Change: Got it and then just as a follow up on just capital deployment updated thoughts on just kind of Capex plans for this year versus buybacks and how you're approaching that.
Speaker Change: Yes, I mean, our original guidance was for.
Speaker Change: 800 to a $1 billion of Capex, we have 240 in Q1.
Speaker Change: A little bit high in Q1, because we still have some costs falling over from West Henderson.
As a mother.
Speaker Change: Whole hospital projects ongoing.
Speaker Change: So yes, I mean, I think we are on track to be in that range. As we suggested I think our share repurchase guidance for the year was in the $600 million range and we had 180 in the first quarter. So we're tracking a little bit above that.
Speaker Change: We will see but I think as long as there continues to be.
Speaker Change: Some level of uncertainty and softness in the market and our share price I suspect will continue to be an active acquirer of our shares.
Speaker Change: Thank you.
Speaker Change: Alright. Thank you very much. Our next question comes from the line of Matthew Gilmore Keybanc capital markets. Your line is now open.
Matthew Gilmore: Hey, Thanks for the question I wanted to ask about the expense management topic.
Matthew Gilmore: Any areas of particular outperformance to call out and sort of how youre feeling about the sustainability of that and I was particularly interested in premium labor costs, I think they've been running $60 million per quarter, just kind of curious where that's running through the early part of 'twenty five.
Speaker Change: Yes, so as to premium pay premium to end the quarter was I think $63 million, which I think as you suggest Matthew as we've been running in the low 60, so pretty consistent.
Matthew Gilmore: Yes, I think the operating expense controls.
Matthew Gilmore: It's really been present now for several quarters.
Matthew Gilmore: A reflection of a few different things I think as the labor markets have settled out.
Matthew Gilmore: Premium pay use of temporary labor has declined and we just kind of a steadier level I think wage inflation is certainly decelerated from the highest that it had reached during the pandemic. That's certainly helpful. It limits the amount of.
Matthew Gilmore: Sign on bonuses and recruitment bonuses and things that we have to pay in order to attract talent.
Matthew Gilmore: I also think and we've talked about this on previous calls.
Matthew Gilmore: <unk>.
Matthew Gilmore: <unk> been more actively.
Matthew Gilmore: Managing productivity and appropriate staffing levels et cetera post pandemic.
Matthew Gilmore: <unk>.
Matthew Gilmore: Because there isn't nearly as much competition for labor, it's still a pretty tight labor market, but not nearly as tight as it was at the height of the pandemic. So it's allowed us to go back to some of the blocking and tackling mechanisms that I think we paused during the pandemic.
Matthew Gilmore: Because it was such a lack of staff.
Matthew Gilmore: So I think again, our operating expenses.
Matthew Gilmore: In both business segments really look positive.
Matthew Gilmore: And I think they should remain so obviously, we've talked about some of the exogenous pressures, mainly tariffs and obviously that's difficult for us to predict but I think in terms of things. We can control. We think that these expense levels and expense controls are certainly sustainable.
Matthew Gilmore: Yes.
Matthew Gilmore: And then Steve a quick follow up on the Medicaid supplemental we all appreciate the level of disclosure you provide in terms of the expectation for 2025 are you still expecting $997 million from the last disclosure or has that number changed at all.
Matthew Gilmore: Yes.
Matthew Gilmore: We're still compiling that for where our first quarter 10-Q, but I would suggest that that number has not changed in any material way.
Matthew Gilmore: Got it thank you.
Matthew Gilmore: Okay.
Speaker Change: Thank you. So our next question comes from the line of Michael <unk> of Baird.
Matthew Gilmore: Line is now open.
Matthew Gilmore: Thank you.
Matthew Gilmore: To follow up on Sharon's question on behavioral health volume cadence for the rest of the year. It is a pretty big implied step ups. I was wondering if you could elaborate more on cadence quarterly cadence or we're talking an immediate large step up in <unk> or something more modest and then larger step ups in <unk> and maybe specifically.
Matthew Gilmore: As it relates to the three big headwinds that impacted volumes last year, how much of that is still a redetermination labor constraints those handful of sites. What's the latest update on the I presume maybe labor is still ongoing but having now fully stepped over the other two headwinds just trying to get a better sunshine to falling recovery over the balance of the year.
Matthew Gilmore: Thanks.
Matthew Gilmore: Yes, so Michael honestly I think that answered your own question I mean, I think of the three that we have talked about historically the only one that is persistent I think he is labor.
Matthew Gilmore: Labor scarcity has certainly improved from again when it was really really.
Matthew Gilmore: Extreme during the height of the pandemic, but it's still a tight labor market and we still compete in various markets or find the competition for a variety of.
Matthew Gilmore: Kind of staff levels, whether that's nurses or a therapist or mental health technicians to be problematic in certain markets and in certain markets I do think it.
Matthew Gilmore: It creates.
Matthew Gilmore: Kind of a cap on our volumes.
Matthew Gilmore: But I don't think Thats getting worse and I think we continue to make progress there.
Matthew Gilmore: I'll make the point that you know.
Matthew Gilmore: I think the big.
Matthew Gilmore: Muting factor in Q1 is typically the leap day comparison, there probably has about 100, a little over 100 basis point impact obviously, that's something that we know over the year will.
Matthew Gilmore: The impact will diminish and I think we always assume that the two 5% to 3% for the year took into account the one leap day for the year, so that will get.
Matthew Gilmore: That comparison will not be as difficult as the year goes on.
Matthew Gilmore: Yes, I'm not going to make comment on exactly where we're likely to wind up in Q2 again just to repeat what.
Matthew Gilmore: What I've said now a number of times, which is the original guidance of two 5% to 3% for the year is something we think we can achieve we acknowledged that it requires a step up from where we were in Q1.
Speaker Change: Okay. Thank you and just one more question about California, and Florida proposal.
Matthew Gilmore: Submitted file.
Matthew Gilmore: <unk> estimated the TTP payments to average commercial rates, but any update there I know historically I think about six months for approval, but they might have been a bit of a mark or I am just given the new administration, but Steve you mentioned a lot of DTC programs that were paused.
Matthew Gilmore: Now being resurrected so curious on those two and also maybe more broadly given this administration's perfectly time budget Medicaid provider taxes, whether you think future proposals to raise GBP to average commercial rates might have maybe less likelihood of being passed over the next few years.
Matthew Gilmore: Yes.
Matthew Gilmore: And so it feels Michael like this is really kind of a two track process at the moment in that.
Matthew Gilmore: Our new program is being submitted there are new programs that have been submitted and arcade Tennessee.
Matthew Gilmore: <unk>, Tennessee and in D. C that are being considered by CMS and the impression that we have again as your question alluded to is that there was sort of a pause.
Matthew Gilmore: As the administration change and the policymakers in CMS change, but it feels like the administrative process of reviewing and approving these programs.
Matthew Gilmore: <unk> has sort of been restarted and again.
Matthew Gilmore: Forget about what we're saying I think what the states who have submitted these programs.
Matthew Gilmore: Programs are saying is that they expect that they are going to go through the normal process be approved in the normal course, etc.
Matthew Gilmore: Separate and apart from any legislative action that the house and Senate may take two.
Matthew Gilmore: Limit these programs in the future etcetera, so again.
Matthew Gilmore: I think I think we are viewing this separately, we think that the Tennessee NBC programs based on the feedback we get from those respective governments are likely to be approved at some point I think it's difficult to predict California, and Florida have just been submitted I think it's even more difficult to predict what the timing of that would be.
Matthew Gilmore: But that I think is separate and apart from whatever legislative action may impact may impact those supplemental programs going forward.
Matthew Gilmore: Thank you.
Speaker Change: So our next question comes from the line of Peter Chickering Deutsche Bank wire.
Speaker Change: Your line is now open.
Peter Chickering: Hey, good morning, guys.
Speaker Change: My question is I guess the first one here is can you sort of talk about the settlement of the Brazilian case and remind us how much commercial insurance you have.
Speaker Change: For the lawsuits and what is the timing of the Cumberland case.
Speaker Change: Yes, so as we disclosed in the press release, we have a tentative settlement in the pavilion case.
Speaker Change: It is.
Speaker Change: Ltd.
Speaker Change: Disclosure is limited by confidentiality. It also requires approval of the court.
Speaker Change: Which we think probably is not coming until next month.
Speaker Change: And when we get that approval.
Speaker Change: And our next filing will disclose.
Speaker Change: How much insurance is still.
Speaker Change: But I will say at this point there is still substantial.
Speaker Change: If this settlement is approved there will still be substantial commercial insurance for the 2020 year remaining and that's important because the Cumberland cases that you also referenced.
Speaker Change: Our 2020 cases.
Speaker Change: But we will give those details once the settlement is approved by the court as far as the timing of the combo cases.
Speaker Change: Cases, they've moved there the three cases the advantage you indicated are moving slowly we have not gotten ruling them even on the post trial motions, let alone any appeals et cetera, none of the other cases have been tried so it's moving quite slowly.
Speaker Change: From the perspective of those cases.
Speaker Change: Alright, great and then a follow up here the acute hospital segment saw a 110 basis point improvement in supply costs, how much of that leverages due to just the flu and lowest surgical volumes.
Speaker Change: How much is just due to better supply managed span and how should we be thinking that supply leverage in 2025.
Speaker Change: Surgical volumes come back.
Speaker Change: Yes.
Speaker Change: Our original guidance for the year presumed relatively modest inflation rate for supply expense increases.
Speaker Change: 2533, 5% range.
Speaker Change: Did obviously better than that in Q1, I think some of that as your question suggests.
Speaker Change: Is that mix of patients more medical more respiratory last procedural.
Speaker Change: So that by its nature medical cases tend to have less of a supply component then procedural cases.
Speaker Change: I would think for the year.
Speaker Change: Again, something in that sort of your modest inflationary expense is the way that I would think that that supply expense, although it would be fair to both our operators and our supply chain professionals I think we're doing a good job from a contractual pricing standpoint.
Speaker Change: Product replacements to cheaper products et cetera, so some of that.
Speaker Change: <unk>.
Speaker Change: Positive supply results are from active management on our part.
Speaker Change: Great. Thanks, so much.
Speaker Change: Thank you.
Speaker Change: Our next question comes from the line of Ryan Lyngstad.
Speaker Change: TD Cowen Your line is now open.
Speaker Change: Thanks, Good morning.
Speaker Change: Can you tell a physician fee expense growth ended up in the first quarter, both from a year over year perspective and versus your internal expectations.
Speaker Change: Okay. So.
Said in.
In our original guidance that professional fees broadly in the physician expenses I know you are talking about would simply increase Si again.
Speaker Change: I would expect that inflation rate, 5% something like that and that is certainly the way that we're tracking.
Speaker Change: We see some amount of pressure, meaning requests from physicians for.
Speaker Change: Either accelerated or increased or new fees.
Speaker Change: But I think we're dealing with that and our general expectation is that we should be able to control those professional fees and commission expense to limit it to just some overall inflationary increase.
Speaker Change: Got it and then just lastly, I am sorry, if I missed it but can you parse out the impact from the higher flu and respiratory season, we saw in the first quarter. Thanks.
Speaker Change: Yeah. So the easy part is I think we would suggest that there was probably.
Speaker Change: Something less than $10 million, maybe seven or $8 million of incremental profits from the what we would describe as sort of excess fleet cases.
Speaker Change: <unk> cases this year.
Speaker Change: Excess of last year, what's hard to do is.
Speaker Change: You can kind of calculate any sort of kind of crowd out effect procedural cases, I think we're somewhat software is I think a number of our peers that suggests that as well whether that was due directly to the flu season or not hard to say.
Speaker Change: But I think we have always had a position that the flu tends to have a relatively immaterial impact on results.
Speaker Change: Both positive and negative meaning during a busy flu season, which this was or not busy flu season, and I think this quarter was any different than the one other item I'd add just to clarify is while the flu was I think they are these maps that show flu activity around the country and while generally flu activity was much higher just.
Speaker Change: Not everywhere in Nevada was one of the few states that had a very light flu season, so and our biggest acute care market I don't think we have much of an impact from the flu season.
Speaker Change: Okay. Thank you.
Okay.
Speaker Change: Thank you very much. Our next question comes from the line of Joanne.
Speaker Change: Bank of America Securities. Your line is now open.
Speaker Change: Okay.
Hey, good morning. Thanks, so much for taking our question. So maybe just switching gears a little bit too.
Speaker Change: Pricing. So first can you talk about the commercial rate updates you've seen I guess this year for future.
Speaker Change: Noticed any change in managed care contracting firms and maybe any chance from plants in terms of just you know.
Speaker Change: Hello question, they are or how long.
Speaker Change: They are to respond to your request Steven.
Speaker Change: Hi.
Speaker Change: Thank you.
Speaker Change: Yes, so first of all again I'll, just remind everybody that our overall guidance for our acute care segment. This year was 5% to 6% same store revenue growth split pretty evenly between price and volume. So two 5% to 3% price doing after 3% volume that you would add to threep.
Speaker Change: Does that imply for assumption include.
Speaker Change: Our commercial price assumption, probably the 4% to 5% range again, I think we're tracking those numbers.
Speaker Change: I would describe the.
Speaker Change: Relationship with the managed care companies is always difficult and a slog, whether thats contractual pricing negotiations or the day to day processing of claims and then denials and denials Appeals et cetera, we're very focused on that I think we've improved.
Speaker Change: A number of our own internal revenue cycle functions to deal with some of the more aggressive behavior on the part of payers.
Speaker Change: But again I think our first quarter results would suggest that we're not seeing any meaningful impact from any more aggressive behavior on the part of the payers.
Speaker Change: Thank you Annie.
Speaker Change: Thanks, Bob can we talk about pricing there too. So you alluded to the idea that you do think there could be some changes to Medicaid.
Speaker Change: Funding coming from Congress.
Speaker Change: That uncertainty or states behave differently when it comes to the <unk>.
Speaker Change: Budgeting process when it comes to rates of course, Mike.
Speaker Change: Yes, I don't think so I think the reality is providers payers government entities are all in this sort of uncertain environment and I think you know.
Speaker Change: The way most of US are behaving as we whether it's negotiated contracts this agent, indicating rates et cetera are doing so based on the best information we have available if that changes their behavior may change, but I think it's very difficult for any player in the space to anticipate exactly what the changes are going to be into the REIT.
Speaker Change: <unk> currently so I think we all for the most part are.
Speaker Change: Dealing with the information at hand.
Speaker Change: When and if it changes we'll.
Speaker Change: Adapt our behavior to that.
Speaker Change: Thanks have a nice create that very last one sorry, if I missed that just to confirm.
Speaker Change: In your guidance you still did not assume.
Speaker Change: Tennessee, and DC DPP approval correct.
Speaker Change: So our guidance did not assume anything for Tennessee, or DC and our results do not include anything for D C or Tennessee.
Speaker Change: Great. Thanks.
Speaker Change: Alright. Thank you. Our next question comes from the line of a J rice of UBS. Your line is now open.
Speaker Change: Hi, everybody.
Speaker Change: Maybe just to go back to I know I've got to ask a lot about supplemental payments, but.
Speaker Change: One thing that one of your peers raise the other day that was sort of interesting is they were saying that they saw some states.
Speaker Change: Maybe tweaking down payment rates under the traditional Medicaid formula because they had supplemental payment programs there were.
Speaker Change: Offsetting as an aggregate the industry was doing okay. They felt are you seeing.
Speaker Change: Any of the states that you're in and tweak.
Speaker Change: The base payment rate, which probably would.
Some support to the discussion in the industry is making about.
Speaker Change: You got to look at the total picture, but I was wondering if youre seeing any of that.
Speaker Change: Yeah, Hey, Jay I don't know that we've seen that in any sort of material way. It certainly could be on the horizon, but we have not seen that.
Speaker Change: Any really impactful way.
Speaker Change: Okay.
Speaker Change: Your guys helped out a lot by making some comments about.
Speaker Change: What it might look like if you lost the enhanced subsidies on the exchange.
Speaker Change: Your number was $40 million to $50 million for that.
Speaker Change: I assume there is no update on that because there's really not any new information I don't think but I wonder because theres a lot of discussion obviously around the supplemental payments.
Speaker Change: About the possibility of moving the provider tax limit from 6% to 5%.
Speaker Change: Have you guys looked at that do you have a sense of what that might.
Speaker Change: Mean or how to think about that.
Speaker Change: Yes, we certainly have looked at it a J I don't know that any of the companies as far as I know have really estimated that impact because in part it's a very detailed calculation the states are not.
Speaker Change: Always forthcoming in terms of all the data that we would need to make the calculation.
Speaker Change: So again I think everybody is kind of reserving.
Speaker Change: Estimates until we see what the actual move might be.
Speaker Change: But yes, I mean, we're suddenly going through those calculations and doing a lot of that is to try and understand what the impacts could be.
Speaker Change: Do you think most of Us states.
Speaker Change: You get meaningful supplemental payments, where they add relative to 4% of provider tax.
Speaker Change: There.
Speaker Change: We're getting relative to revenues of hospitals, yes. So.
Speaker Change: Several of the largest states or states that are most impactful to us are certainly under 6% that would include Texas and Florida.
Speaker Change: No.
Speaker Change: The impact.
Speaker Change: If.
Speaker Change: The legislation would go from a 6% cap to a 5% cap the impact would be limited in those states.
Speaker Change: But again those calculations can be pretty complicated.
Speaker Change: Okay, Alright, I will leave it at that thanks a lot.
Speaker Change: So I am showing no further questions at this time I would like to now turn it back to Steve for closing remarks.
Speaker Change: So I have just one quick housekeeping item.
Speaker Change: We omitted our gross revenue disclosure in the press release last night I think we were under the impression that nobody was really using that metric.
Speaker Change: I have been disabused of that notion.
Speaker Change: We have 12 hours the number of people have asked for it so.
Speaker Change: We filed an 8-K this morning as we normally do normally it would just be a duplicate of the press release, but we've included in that gross revenue information. So people who are seeking that growth data can find it in the 8-K that we filed today.
Speaker Change: Other than that we just like to thank everybody for their time and look forward to speaking to everybody next quarter.
Speaker Change: Thank you for your participation in today's conference. This does conclude the program you may now disconnect.
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