Q2 2025 Tenet Healthcare Corp Earnings Call
Good morning. Welcome to tenet Healthcare. Second quarter 2025 earnings conference call.
After the speakers remarks, there'll be a question and answer session for industry analysts.
Speaker Change: Can it respectfully? Ask the analyst limit themselves to 1? Question each. I'll now turn the call over to your host. Mr. Will McDow vice president of investor relations Mr. McDow you may begin.
Good morning everyone and thank you for joining today's call. I am will McDow vice president of investor relations. We're pleased to have you join us for a discussion of tenants second quarter 2025 results as well as the discussion of our financial Outlook.
Dr. Satora: Tenant Senior Management participating in today's call will be Dr. Satora chairman and chief executive officer and Son Park, Executive Vice, President and Chief Financial Officer.
Dr. Satora: our webcast this morning includes a slide presentation which has been posted to the investor relations section of our website, tenant, health.com
Listeners to this call are advised that certain statements made during our discussion. Today are forward-looking and represent Management's expectations based on currently available information.
Dr. Satora: Actual results and plans could differ materially.
Dr. Satora: Tenant is under no obligation to update. Any forward-looking statements based on subsequent information.
Dr. Satora: Investors should take note of the cautionary, statements slide included in today's presentation as well as the risk factors discussed in our most recent form, 10K and other filings with the Securities and Exchange Commission. And with that, I'll turn the call over to Psalm.
Psalm: Thank you. Well, and good morning everyone.
Psalm: The second quarter continues, our track record of strong out performance in each of our businesses, we reported second quarter 2025 net, operating revenues of 5.3 billion and Consolidated adjusted, Evita of 1.121 billion dollars which represents growth of 19% over 2024.
Psalm: Second quarter, 20125 adjusted, Evita margin of 21.3% represents a 280 basis, point improvement over the prior year driven by strong same store growth and very efficient operating performance.
Psalm: Uspi continues to deliver. We generated 498 million in adjusted ibitta, which represents 11% growth over second quarter 2024,
Psalm: Same facility, revenues grew 7.7% in the second quarter, highlighted by a 12.6% growth in total joint Replacements in the asc's, over the prior year.
Psalm: We added 8, new centers in the quarter, including facilities, specializing in high Acuity procedures, such as spine, Orthopedics and Neurosurgery.
Psalm: We continue to see a robust pipeline for m&a opportunities, and expect to exceed. Our Baseline intention for 250 million of m&a spend in 2025
Turning to our Hospital segment. Adjusted ebit dog. Grew 25% to 623 million in the second quarter of 2025.
Psalm: Same store Hospital admissions were up 1.6% in the quarter.
Psalm: Second quarter, 2025 Revenue per adjusted admission was up, 5.2% over the prior year as payer mix and Acuity, remain strong.
Psalm: We are making significant Investments to expand our Network to support growth in our markets and have confidence that the demographic. Trends are high Acuity service line priorities and our efficient operating platform can generate ongoing returns in this segment.
We have also reduced overhead given we downsized our Hospital portfolio.
Psalm: Our results in both segments, exceeded our expectations and extend our track record of consistently strong, fundamental execution.
Psalm: We continue to capitalize on our compelling valuation and have deployed 1.1 billion dollars to repurchase 7.2 million shares in the first half of 2025.
As we noted in our release, the board of directors has authorized a 1.5 billion, increase to our share repurchase program.
Turning to our full year guidance. At this point in the year, we are raising our full year 2025 adjusted Eva. Guidance to a range of 4.4 to 4.54 billion dollars, which represents an increase of 395 million or 10% roughly at the midpoint of the range of our prior guidance.
Psalm: The guidance increased is supported by fundamental strength in our businesses and expectations for continued growth.
Psalm: In summary, we continue to deliver on our commitments to a strong balance sheet and significantly improved free cash flow generation.
Psalm: Finally, in closing.
We are committed to a culture of quality transparency and compliance this culture permeates our business, and is reflected in the dedication of our colleagues and caregivers that go to work. Each day to care for our patients and communities. That we serve.
Psalm: Have instilled into our organization which continue to drive results and outperformance.
Speaker Change: And with that sun will provide a more detailed review of our financial results, son turning it over to you.
Thank you, Sam. And good morning, everyone.
Speaker Change: We delivered strong results in second quarter of 2025 with adjusted ebit da well, above the high end of our guidance range driven by strong fundamentals, including same store, Revenue, growth continued High patient Acuity. Favorable pay mix and effective cost controls
Speaker Change: We generated a total net operating revenues of 5.3 billion and Consolidated adjusted ebit da of 1.121 billion. A 19% increase over our second quarter 2024
second quarter adjusted ebit, Dom margin was 21.3%, a 280 basis, point improvement over prior year.
I would now like to highlight some key items for each of our segments, beginning with uspi, which again delivered, strong, operating results.
Speaker Change: In the second quarter, uspi is adjusted ibida. Grew 11% over last year with adjusted ebit da margin at 39.2%.
Speaker Change: Uspi delivered a 7.7% increase in same facility. Systemwide revenues.
Speaker Change: With net revenue per case up 8.3% in case volumes down 0.6% reflecting our continued. Discipline shift towards higher Acuity services.
Speaker Change: Turning now to our Hospital segment.
Speaker Change: Second quarter, adjusted ebit da was 623 million with margins up. 300 basis points over last year at 15.6%
Speaker Change: Same hospital, inpatient admissions, increased 1.6% and revenue per adjusted admissions. Grew 5.2%
Speaker Change: Our Consolidated salary wages and benefits was 41% of net revenues, a 140 basis point improvement from the prior year.
Speaker Change: And our contract labor expense was 1.9% of Consolidated swb expense.
Speaker Change: This Improvement has been driven by our data driven approach to capacity and Labor Management and disciplined operating expense controls.
Finally, we recognized a 79 million, favorable pre-tax impact for additional Medicaid supplemental, revenues related to Prior periods in the second quarter of 2025.
Speaker Change: This includes the recently approved program in Tennessee.
Speaker Change: As a reminder, our second quarter 2024 results. Included a $30 million, favorable pre-tax impact for additional Medicaid supplemental, revenues related to Prior year.
Speaker Change: Next, we will discuss our cash flow balance sheet and capital structures.
Speaker Change: We generated 743 million of free cash flow in the second quarter. And as of June 30th 2025, we had 2.6 billion dollars of cash on hand with no borrowing outstanding under our 1.5 billion line of credit facility.
Additionally, we have no significant debt maturities until 2027.
Speaker Change: And finally, during the second quarter, we repurchased 4.6 million shares of our stock for 747 million.
Speaker Change: and year to date through June 30th, we have repurchased, 7.2 million shares or 1.1 billion dollars,
Our leverage ratio as of June 30th 2025 was 2 point 2.45 times Eva or 3.11 times. Ebita less NCI driven by our outstanding operational, performance and continued focus on financial discipline.
Speaker Change: We are very pleased with our ongoing cash flow. Generation capabilities and remain committed to a de-lever balance sheet.
Speaker Change: We believe we have significant financial flexibility to support our Capital, allocation priorities, and drive shareholder value.
Speaker Change: Let me now turn to our outlook for 2025.
Speaker Change: For 2025, we now expect Consolidated net operating revenues in the range of 20.95 to 21.25 billion, an increase of 300 million over prior expectations.
As Sam mentioned, we are raising our 2025 adjusted ebita Outlook by 395 million. At the midpoint,
Speaker Change: To 4.4 to 4.54 billion reflecting, the strong fundamental performance of our business.
At the midpoint of our range. We now expect our full year 2025 adjusted IBA to grow 12% or 2024.
Speaker Change: At uspi, we are now expecting 2025 adjusted ebit da of 1.99 to 2.05 billion dollars a 70 millimeter.
Speaker Change: Revenue growth by 100 basis points to 4 to 7 percent for 2025.
Speaker Change: And hospitals, we are raising our 25 adjusted ebitda Outlook range by 325 million at the midpoint to 2.41, to 2.49 billion dollars.
Speaker Change: Additionally, we are lowering our assumption for same Hospital, adjusted admissions growth by 50 basis points to 1.5 to 2.5% for 2025.
Finally, we expect third quarter, 25 Consolidated adjusted ebit da to be in the range of 22.5 to 23.5% of our full year Consolidated, adjusted IBA at the midpoint,
Speaker Change: we expect a third quarter, 2025 USPA to be in the range of 23.5 to, 24.5% of our full year, uspi adjusted IBA de at the midpoint
Speaker Change: Turning to our cash flows for 2025. We now expect free cash flows in the range of 2.025 to 2.275 billion.
Speaker Change: Distributions to non-controlling interest and the range of 780 to 830 million.
Resulting in free cash flow after NCI, in the range of 1.245 to 1.445 billion an increase of 195 million at the midpoint of our range from prior Outlook.
Speaker Change: Turning now to our Capital deployment priorities. We are well positioned to create value for shareholders through the effective deployment of free, cash flow, and our priorities have not changed.
Speaker Change: First, we will continue to prioritize Capital Investments to grow. Uspi through m&a.
Speaker Change: Second, we expect to continue investing in CHI Hospital growth opportunities, to fuel organic growth, including our focus on higher Acuity service offerings.
Speaker Change: Third, we will evaluate opportunities to retire and or refinance debt.
Speaker Change: And finally, we'll continue to have a balanced approach to share repurchases, depending on market conditions and other investment opportunities.
As some noted.
Speaker Change: Our board of directors has recently authorized a 1.5 billion increase to our share repurchase program.
We continue to deliver consistent growth and have disciplined operations which has translated into outstanding Financial results.
Speaker Change: We are confident in our ability to deliver on our increased outlook for 2025. As we continue to provide high-quality care for those in the communities, we serve
Speaker Change: And with that, we're now ready to begin the Q&A operator.
Speaker Change: Thank you at this time, we'll be conducting a question and answer session. If you'd like to ask a question, please press star 1 on your telephone keypad,
As a reminder tenant respectfully, ask the analyst limit themselves to 1 question each.
Speaker Change: A confirmation tone. Will indicate your line is in the question queue? You may press star 2. If you like to remove your question from the queue,
Speaker Change: for a participant using speaker equipment, it may be necessary to pick up the handset before pressing the star Keys 1 moment, please while we Poll for questions.
Speaker Change: Our first question comes from AJ rice with UBS, please. Proceed with your question.
Speaker Change: Um, hi everybody. I might just um, ask about to aspects of, uh, the backdrop in Washington. Uh, the proposed rule on outpatient, um, hospital care has the elimination of potentially of the inpatient only role. Can you just comment on what you think that might mean for your hospital and ASC business. If that were to go through and then just any updated figures on the uh, public exchange volumes how that contributed to the quarter which you see in year to year and do you have any updated thoughts on, uh, what the outlook for next year? Might be, if the enhanced subsidies, go go away.
Jade: Hey, Jade. It's um, uh, so thanks for the thanks for the questions. The first 1, um,
Jade: You know, obviously, enabling additional innovation in the asc's, uh, is is positive for the, for the uspi business. Um,
you know, I think, I think about it this way, which is 1, 1 is the reimbursement, um, allowable reimbursement and, um, and certainly
Jade: You know, this move is positive at the same time, you know, it it takes work and experience in higher acuity.
Jade: I think it represents an opportunity for the future.
Jade: Uh for sure and I also think it gives us a platform to work with Physicians to build the right protocols. For many of these things to move into that uh more freestanding setting with the right patient selection.
Jade: Uh, son, do you want to comment on the update on our exchange volumes? I, I would say just as a summary statement, there ha obviously the efforts, uh, to lobby for their extension. And importantly, the the critical role they play in supporting small businesses and employees of small businesses in America is, is an added benefit of the exchanges that is obviously part of the discussion today.
Speaker Change: Yeah, thank you, Tom. And just to add, um, you know, obviously Healthcare exchange remains an important part of our business. Um, for second quarter of 25, we saw about a 23% increase in admissions year-over-year.
Speaker Change: And we saw about a 28% increase in uh revenues from Exchange year-over-year.
Speaker Change: In second quarter in our exchange volume. Now represents about 8% of our total emissions.
Speaker Change: And about 7% of total Consolidated tenant revenues.
Okay, thanks a lot.
Speaker Change: Our next question comes from, Josh, Raskin with nephron research, please proceed with your question.
Josh Raskin: Hi, thanks, good morning. I was wondering if you just give some more specifics on the outperformance in the core results, and I'm specifically, uh, looking at the incremental 70 million, on the uspi side, uh, the increase in guidance, and then within that, is there. Anything tenant has done specifically to improve your ability to sort of document categorize patients, as you submit claims or their new systems. New technologies, new vendors, or partners and obviously anything relating to AI. I'd be curious if there's new things that you're doing within their
Hey Josh um well going you know kind of going backwards. Um
Speaker Change: We have their, their uspi has its own significant revenue cycle capability. Um, we think it's an industry-leading capability. It's a, it's an environment that mostly serves our own, uh, asc's. But certainly serves asc's beyond that. Um, we're pretty busy, in advancing a lot of those capabilities. I mean, it it is,
Speaker Change: not difficult for me to say that some of the improvement in our results, over the last few years has been
Related to real standardization technology deployment uh better reporting and uh, certain Advanced Analytical tools that we have deployed into the ASC environment, not surprising, uh, given our focus in revenue cycle as a company that we have done that and it's certainly paying dividends in terms of how we work in that environment both on the retail collection side. As you can imagine these are elective procedures.
Speaker Change: But also on the wholesale collection side, all the way from authorization, uh, back through document accurate, documentation and um, more efficient management of the are, uh, you know, through technology and offshore offshore capabilities. So we're really pleased with the platform that's being built for ASC revenue cycle within within uspi. Um, son, do you want to comment on the nature of the guide?
Son: Yeah, sure. Um, you know, Josh in the first half and the second quarter. Uh, I think both consistent themes. Um, you know, we've seen high high Acuity, good case. Mix good payer mix. Um, good growth in some of our key, uh, uh, case lines service lines, including Ortho and total joints. So, all the trends that we've discussed previously, uh, I think continue in, um, uspf or second quarter, um,
Son: um, you know, that's why you saw um, the Strong, net revenue, uh, overall growth of 7.7%, um, as well as a strong, uh, net revenue per case,
So and then I think good uh operating expense management. Um so we demonstrated uh 39.2% uh ebaum margins in second quarter as well. So I think all those Trends um you know apply for both q1 and Q2 which resulted in about a 50 million. Um
Son: Opening statement, uh, we expect to exceed our 250 million, um, you know, Baseline assumption for USB m&a. So I think all those things contribute to the uh to the guidance race.
Son: Thank you.
Speaker Change: Our next question comes from Andrew mock with Barclays. Please proceed with your question.
Andrew Mock: Hi, good morning. Uh just wanted to ask about the volumes, there's a little bit of a deceleration there. In both the inpatient and adjusted admissions in the quarter, he took down the guidance by. I think 50 basis points where volumes impacted by any discrete items in the quarter or anything else to kind of call out driving some of the deceleration for the quarter and the full year thanks.
Hey, uh, well, first of all, I think the, the guidance is just simply reflecting the math that would play out for the rest of of the year. Now, I was a strong quarter. I mean, we had, we had, uh, strong volumes the right, right, Acuity and mix. Um, and and very much reflects the focus on our service lines, uh, as we have as we have prioritized them. So I don't, I don't think there was anything particularly unusual other than seasonality.
Andrew Mock: All right. Thank you.
Speaker Change: Our next question comes from Matthew Gilmour. With keybanc capital markets, please proceed with your question.
Hey, thanks for the question. Wanted to ask about payer Contracting. There's a lot of different Dynamics creating pressure on payers. Has there been any discernible shift in terms of your negotiations with payers? Are you still getting the normal updates you'd expect? And is there anything to report with respect to denial activity?
Speaker Change: Yeah. Well a couple things, first of all uh you know obviously um different parts of the sector.
Uh, at various times, certainly go through their ups and downs. Um, and you know, I think our philosophy most importantly, with the health plans, uh, both the national plans and state-based plans.
Speaker Change: Is to work, consistently to create value in what we do in our level of, uh, our level of pricing and our negotiations.
Speaker Change: And also to create predictability for both sides over.
Uh, a multi-year period. I mean, I think that's
Speaker Change: You know ultimately what's probably most important on both sides so that each party can then manage their own operations and we have extended that philosophy uh over the last few years into the next wave of contracts. I think most people were aware that there are a number of contracts that are coming up and we're not seeing anything unusual and and certainly no change in our Guidance with respect to the way that we have been negotiating our contracts. But again I think that's because
Speaker Change: You know, we're we're committed to the value that we provide their both from the standpoint of uh, our highly efficient ambulatory business. But also
Speaker Change: Uh, working in an environment with reasonable and predictable uh rate increases so that we can focus on managing our own operations, look the denials activity, and it's really not just denial. It's, it's kind of the dispute documentation request denials Etc have ramped up over the past few years postco to levels that are, I would argue not acceptable, uh, in some cases and we have adapted. Obviously, this is part of Conifer job is to adapt and learn to respond to those things in the early days, the responses, you know, were driving up expenditures. You know, today as we have evolved and realized this is a new normal. We have, of course, deployed more technology.
Speaker Change: More automation, uh, trained up more offshore staff and other things to be able to respond to those types of requests and and activities.
Speaker Change: Uh, in a more efficient and and I would argue more effective manner. We track things, uh, like our yield relative to the volume or dollars that were disputed or denied and, you know, I think Conifer is doing well, there for both ourselves. And for our clients relative to the overall industry, you can see it in our results and I think that translates across the board. And so, you know, this is a constant
Speaker Change: Battle with respect to what's appropriate there and obviously we welcome you know both regulation and other things that would support a reduction of some of that. What we consider inappropriate activity
Speaker Change: Got it. Thank you.
Be with your question.
Speaker Change: Thanks, good morning. Uh, first. I just wanted to follow up on AJ's question, you know? I do understand that the industry is lobbying for an extension of these subsidies and how important that could be to a lot of folks. But, uh, is there a framework that the company, uh, can share with us in terms of how to think about the potential impact to, uh, 2026 earnings. If those subsidies do go away and then sticking with that DC stuff, maybe you can give us an update on uh, the provider tax run rate you're seeing in 2025 versus, I think the previous guidance was about 1.1 billion and have you analyzed and have anything to share with us in terms of uh, the impact of if that uh, you know, the bill that just passed? Uh it does get rolled out.
Speaker Change: What the uh what the impact to uh DPP could be over time you know the provider taxes. Thanks.
Yeah, hey Justin. So we don't have any comments about 2026 at this stage and certainly all of the work and effort uh, is focused on
Speaker Change: uh, helping stakeholders realize again how important the exchanges are for
Speaker Change: for families who uh utilize them including you know, those that came off of Medicaid from a Medicaid, redetermination standpoint over the last few years it's very much my belief that
Speaker Change: because of the existence of the exchanges and the subsidies for the people, uh, who don't have very high income levels as Medicaid, redetermination proceeded,
Speaker Change: The exchanges were a critical safety. Net for the individuals who needed help care insurance to have a landing spot and it it created what, I consider a pretty smooth Medicaid. Redetermination process. Um,
Because of the availability of those Insurance options for individuals and families that needed it. And so that in addition to the fact that, you know, the exchanges represent critical support for small businesses that are unable to provide
Uh, broad-based insurance coverage options to their employees which supports obviously a very large part of the economy represents 2 of the most important prongs of the conversation around. Why it's important to extend these subsidies. Not the least of which is that it affects red States more than blue States. Given the nature of the
Speaker Change: Administration and Congress today. That's also an important fact. So look, I think the work is ongoing in that area, I think it's important and I think it's important to more than just our industry. It affects other parts of uh our sector. But it also affects the macroeconomy through the support for small businesses which helps to make them more competitive in the US economy at Large.
Speaker Change: The.
Speaker Change: uh,
Speaker Change: The current, uh, situation in bill that passed.
Speaker Change: A lot of the impacts as you know, have been pushed out pretty far, you know, in into the uh very very end of 27 or really 28 uh from that standpoint. And we really don't have any insight into how this will be implemented.
Speaker Change: again, as I said, out to 2028,
Speaker Change: Son, do you want to cover? There was a question in there about the DPP.
Speaker Change: Programs.
Yeah, let me just uh clarify that Justin. Um so for Q2 of 25, we we recorded about 350 million dollars of total Medicare, supplemental payments.
Speaker Change: So, for the first half of this year, um, we're at about 675 million range.
Now we we have pointed out some some 1 time. So once you normalize for that, um, in in the first half of the Year, our run rate for the full year is right around the 1.1. 1.2 billion range that we uh previously discussed
thanks.
Our next question comes from Sarah James with Cantor Fitzgerald, please proceed with your question.
Sarah James: Thank you. I just wanted to Circle back to what went on with the volume guide down. I I understand.
Sarah James: Seasonality and and just the math of the quarter impact on the year. But
Sarah James: Um, what actually changed in in this quarter, or in your view of the year? Are there certain, uh, segments or any kind of detail that you?
Sarah James: well, the most important thing that, you know, we would be focused on that happened in the second quarter was as I said, earlier, the strength
And success.
Sarah James: Of our high Acuity strategy.
Sarah James: That has been in place for multiple years, continuing to demonstrate in this market.
Sarah James: The ability to generate revenue and earnings.
Across our Hospital portfolio. I mean that's that's really at the end of the day, that's the most notable and important Trend in the second quarter, which is that that strategy continues to deliver results.
Thank you.
Speaker Change: Our next question comes from Stephen Baxter with Wells Fargo. Please proceed with your question.
Speaker Change: Um, just to follow up on uh, on Justin's question. Just wanted to ask about the the jump off point for you. But uh, this year, um, is it as simple? As you know, removing the add a period of Medicaid, supplemental ibida. I think it's 70 million or 79 million, this quarter and 40 million with the first quarter or are there any other meaningful areas to consider whether they're, um, you know, Medicaid, supplemental payments or or other sort of 1-time contributors to the year that you should think about as we're reaching to 2026? Thank you. So we're not making any comments about 2026. Nor are we commenting on headwind?
Speaker Change: And Tailwind yet for the following year.
Speaker Change: Our next question comes from Ben Hendricks, with RBC Capital markets, please proceed with your question.
Ben Hendricks: Thank you very much. Uh, just a quick follow-up on the Acuity trends that you're seeing, appreciate that, uh, the revenue per shows, strong Acuity Trends there and that's consistent with your strategy. But also just wanted to square that with a hospital. Inpatient surgery is being down just a little more detail on where you're seeing that stronger case mix and how that's kind of translated into uh into the stronger rates on the hospital side. Thanks.
Speaker Change: yeah, I mean our our uh,
Speaker Change: you know, our strengths in cardiovascular Orthopedics, spine neurosurgery, um, broad-based general surgery, uh, robotics, I mean, those are all the areas that, uh, you know, we continue to focus on
Speaker Change: in terms of our work. Now, I would add to that, emergency driven trauma and trauma surgery. Uh, as you know, we have a lot of very large Urban, uh, emergency departments that have built.
Speaker Change: Trauma capabilities.
In order to service.
Speaker Change: Uh patients in need of trauma. And finally you know as as we have indicated over the past few years our transfer strategy, always being willing to accept any patient uh from any outlying Hospital. Uh you know as long as we have the services available uh to help them, we have been committed to providing that help and obviously many of those patients,
Speaker Change: Tend to be sicker and may require more complex surgery. So all of those things, uh, have have been contributors to the
Speaker Change: uh,
Speaker Change: you know, results from what we describe as the high Acuity strategy.
Speaker Change: Thank you.
Speaker Change: Of course.
Speaker Change: Please proceed with your question.
Speaker Change: Uh yeah, thanks just 1, quick. Clarification was wondering if you could comment briefly on how much your medical case mix um did increase in the quarter and if it changed much from uh prior Trends. But my real question is looking at the the EB ebit dog growth at USB ice any way to quantify the contribution that you may still be seeing from continued synergies whether from said Covenant just wondering if those are uh contributing to any of the the growth still. Thanks.
Speaker Change: Um, well, the case mix.
Speaker Change: Case makes the community was up. I'm not sure exactly what you're asking, son. You may want to comment more specifically.
Speaker Change: On on that question. I mean, but but consistent with what we're saying about Acuity case, mix index was up, uh, that's referring to the hospital segment. Um, on the, on the US Pi side,
um,
Speaker Change: you know, the revenue growth that we see obviously in a very Dynamic business comes from all sorts of
Speaker Change: Things, uh, including same store growth, volume growth, uh, our payer contract annual escalators.
Speaker Change: um, rostering of new facilities onto
Speaker Change: Our Managed Care contracts as part of our Network strategy of having an alliance of high-quality reliable centers.
Speaker Change: All of that contributes to the revenue growth, but that's why we provide the total revenue growth and also the same store, Revenue growth. So, that 1 can differentiate, uh, between those. And I think all of that data is consistent with, um,
Speaker Change: you know, both with success of the high Acuity strategy, but also, you know, we're consistently performing in Revenue growth above our long-term Trend, which
Speaker Change: has been very positive for uspi.
Speaker Change: Yeah. And so I'm just your um I'm sorry which your question on the case mix. We're up about 1% year-over-year in Q2 and obviously if you look at a longer period of time, um that that growth would be uh more significant based on acuity.
Speaker Change: Okay, thanks.
Speaker Change: All right, next question. Comes from pedo Chickering with Deutsche Bank, please proceed with your question.
Pedro Chickering: Taking my questions. Uh nice quarter here uh DSO is trended down nicely and I think the lowest that I've ever seen with you guys can you can talk about cash Collections and what have you done differently or are the pairs, doing some differently and from a cash flow perspective, we continue to model for the bulk of your cash, will go in to repo with some
Speaker Change: M&a in there?
Speaker Change: So you can buy back around 10 plus percent of your market cap each year while still delivering is that the way the right way to think about it.
Speaker Change: Yes. Well, okay.
Speaker Change: Just 2 separate things, son. Do you want to start with the second 1 and then we'll back into the revenue cycle question?
Speaker Change: Yeah, sure. Um, so yeah, we we obviously um
Speaker Change: Have very strong free cash flow performance. Um, have increased our guidance for free cash flow after NCI, you know, uh, up 100%. You know, I would say the other notable piece obviously is the amount of share. We purchases, we completed in the second quarter of this, uh, of this year was the essential increase, uh, from our normal Trends. You know, I would say looking forward, our Capital allocation, uh, priorities haven't changed, right? Uh, uspi m&a.
Speaker Change: Hospital capex or high Acuity strategy. And then, um, maintaining our D leverage, balance sheet and a balance sheet purchase, um, approach. It's hard to predict what our run rate share purchase activity will be, uh, in the next quarter. The second half of this year into 26. I think that'll depend on, you know, facts and circumstances. But, um, you know, I do believe our free cash flow and financial uh, performance and and balance sheet. Flexibility will uh, afford US to make the right decisions as as those things come
Speaker Change: Uh, yeah. Look in in, in summary, on the first part of the question as the industry has trended up overall um, in terms of uh, denials and also
Speaker Change: Uh, the times to collect, given some of the dispute and back and forth, on documentation requests and other things, we've we've remained very focused on trying to keep that as tight as possible using technology automation. I mean, you know, 1 of the advantages that Conifer has
Is an incredibly standardized workflow that is really critical to.
Speaker Change: Capabilities that we have today that used to be manual with AI enabled technologies. That allow us to produce more rapid automated responses to various types of disputes.
Based upon pattern recognition that you would see from, uh, various sources that allow us to do that more effectively. And, and you know, that makes that makes in the end, um, what we're doing more, uh, more reliable. But also, as you're pointing out sort of faster, the other thing I would say about this environment in which, you know, we, we talked a lot about
Speaker Change: The dispute denial activity. And as, as I said earlier, I think some of its highly inappropriate but it's also important that we spend our time being committed to very accurate.
Speaker Change: Documentation and coding. And I think 1 of the things that Conifer does well is produce accurate documentation and coding and that has a tendency to also reduce
Speaker Change: The.
Dispute activity to some extent from the health plans, right? I mean, it is a 2-way street in the end, uh, and and both parties have to perform in that direction and that speeds up collections, to some extent. So, anyway, I I said this earlier and I'll, I'll let it be.
Speaker Change: Adapting to the current environment. Uh from a collection standpoint is a critical capability that we have developed and that capability has moved from being manual. When it first started to increase to much more technology-driven and workflow automation driven,
Speaker Change: our next question comes from Benjamin Rossi with JP Morgan Chase please proceed with your questions.
Benjamin Rossi: Good morning, thanks for question here. This is a follow-up on your ACA exchange volumes with your reported Hospital link to stay down call like 3%, year-over-year and ACA exchange signs up 28%, during 2 Q. Is there any additional detail? You can provide on procedural mix or length of stay across those exchange based volumes. We've just been getting some comments from prominent payers in recent weeks regarding the elevated Trend there across that group. So just curious if there are any particular areas that were contributors to that 22 growth figure, or if there was more broad-based across all Specialties for your AC exchange book, thanks
Benjamin Rossi: Yeah, I don't I don't think there's been anything unusual in this quarter versus prior quarters with respect to the exchange volumes. I mean, remember the 1 1 thing I would say is the exchange
Benjamin Rossi: Business.
Benjamin Rossi: Uh, tends to behave.
Similar to, um, the Medicaid business, more than the commercial business in the sense that a disproportionately larger amount of it is emergency department driven. Um, may still come with higher Acuity but it it tends to be more emergency department driven. That's why, you know, the impact of the exchanges on our business is higher in the hospital segment versus the USB I segment. Even though it's present in both,
Benjamin Rossi: but I don't, I don't think that I noticed anything unusual about the
Benjamin Rossi: Nature of the exchange volumes this year. Uh, this quarter sun, is there anything? You would point out there?
Not, I think you're right. It's um it's pretty consistent with uh, prior mix overall.
Benjamin Rossi: Okay.
Got it. Thanks for calling.
Speaker Change: Our next question comes from Ryan Langston with TD Cowen, please proceed with your question.
Ryan Langston: Thanks, good morning. Uh, swb continues to run pretty favorably. I I mean I assume as you achieve these levels, this becomes kind of the new Baseline expectation to your operators, but I guess the, the question is how how much more opportunity do you see on swb? And I guess what types of initiatives can you execute on to keep up, uh, sort of this level of performance?
Ryan Langston: Well, obviously effective Labor Management has been a strength of our uh organization. Not just recently, but over the last few years. Um, you know, we we we stay focused on the various parameters that drive, demand, obviously, length of stay the Acuity, the the day-to-day product productivity and and accurate. Uh,
Ryan Langston: Staffing needs that we have in our hospitals but at the same time from a supply standpoint. You know, we we've really I think benefited from
Ryan Langston: To work in our environments. Uh, and and also uh, improving our retention rates, uh, as a result of what we've done, we found that making Investments and we have made, uh, real Investments. Um,
In our nursing and and overall Hospital management uh director and other supervisor levels with, um, special recognitions and other things that have been ongoing for multiple years because we see the value that they provide in terms of creating a stable and effective.
Ryan Langston: Workforce for patient care. That has been an important part of what we have done, uh, over the last few years and and recognizing their efforts. So, I mean, I think look, all of those things are sustainable strategies and all of them contribute to the improvements that we've made both in our efficiencies and Effectiveness there.
Ryan Langston: Thanks.
Speaker Change: Our next question comes from John Ransom. With Raymond James, please receive with your question.
Hey, good morning. Um I'm gonna ask Tom a question. He's not gonna answer when he got an answer and I will ask him another question. Um, do you think that, um, now that we've gotten the bill behind us and we know the known, uh, is the environment. If, if you are able to look to sell any more hospitals does the environment stabilize such that, that's more possible. Now,
Speaker Change: um,
Speaker Change: I I, you know, John, I'm not sure how to answer that question. We don't comment on asset sales, um, and anything that we may be looking at their, we're pretty happy with the portfolio. It's obviously performing. Um, based upon, you know, the last couple couple of years and and and the post transaction environment. Um, I don't know how to comment on
Speaker Change: I don't know how to comment on, um,
Speaker Change: Whether the broader industry has fully understood the implications for them.
Speaker Change: of the
Speaker Change: of the, uh, obb or anything else that may come.
Speaker Change: You know, I would, I would take this opportunity to reiterate that our view from what we've seen so far in the external landscape.
Speaker Change: Uh, related to legislation regulation, Etc, Washington, essentially, uh it. You know, we think about this pretty carefully. It has not changed our commitment to our core strategy.
As it stands right now. Um and so I I feel good about that.
Speaker Change: Looking forward.
Speaker Change: Yeah, so you let me write to my other question. What now that this bill is behind this? What are your current like legislative and lobbying priorities in DC? And then where are you going to spend your time this
the most important area right now.
Speaker Change: Um, as I said, both for the healthcare industry for the insurance industry. Uh, and importantly we think, um, now that we have an understanding of
Speaker Change: How important these?
Speaker Change: exchanges are for small businesses and keeping and remaining a competitive Workforce for small businesses in in America is uh,
Speaker Change: Engaging in dialogue about mechanisms to exchange extend the exchange uh subsidies.
Speaker Change: Our final question comes from Kevin fishbach with Bank of America. Please proceed with your question.
All right, great, thanks. Um, I guess uh wanted to understand a little bit more of the the commentary on on Hospital volumes and and the payer mix, I guess how much of the payer mix Improvement that you're seeing is because of the exchange growth if we took exchanges out, would you still be talking about improved payer mix um, to the same degree and then um, when we think about the volume um Outlook the volume Outlook being lower you guys have always had different view on on volume. So it's hard to kind of
Speaker Change: Tell what how much is this High Acuity strategy versus underlying demand? Do you have a sense of what underlying demand growth was in the quarter? Was it consistent with where q1 was or did, or did it decelerate kind of similar to how your overall volumes decelerated from from q1 to Q2? Thanks.
Yeah. Um a couple things 1 is you know commercial commercial, mix with strong. And as I indicated earlier, maybe another way of of describing that I mean the obviously the growth that son described in the exchanges uh indicates that
Definitely coming from the exchanges. And this is again, going back to the importance of the exchanges.
Speaker Change: As a landing spot as Medicaid redetermination has worked, its way through the uh, through the overall system.
Speaker Change: um,
Speaker Change: It's it's been, it's been an important landing spot and then and then finally um no. I mean I think look
Speaker Change: Underlying demand in this environment is still strong on a macro basis. I mean it it wouldn't be the case.
Uh, that we would be able to uh lose significant amounts of underlying, what you would call General, medsurge emergency department, Etc, demand and and exists solely on a high Acuity strategy. Right. The high Acuity strategy is meant to support the types of
Speaker Change: Margin expansion. And and growth that we have seen on an efficient basis in the hospital segment and the margin expansion in the hospital segments over the last 12, and we were just looking over the last 12 months or even over the last 3, to 4 years has been significant.
Speaker Change: And that's really what the strategy has helped support, but I don't I don't think it's worth making anything of, you know, 1 single quarter. Uh especially when you have seasonal Trends and quarter to quarter Trends and you know, ramp on and ramp off of respiratory illness and other things. You know, I think this will play itself out over time, the underlying demand environment
Speaker Change: Meant uh, you know, when you compare it to a multi-year basis, still seems strong to me.
Speaker Change: Okay, great. Thanks.
Speaker Change: We have reached the end of the question and answer session, and this concludes today's conference, you may disconnect your lines at this time and we thank you for your participation.