The paragraph outlines the opening of the Third Quarter 2024 Universal Health Services Earnings Conference Call, led by Steve Filton, the Executive Vice President and CFO. Filton discusses forward-looking statements, emphasizing the importance of understanding associated risks detailed in the company's Form 10-K and Form 10-Q reports. He highlights key financial results: a net income of $3.80 per diluted share for the third quarter, and an adjusted net income of $3.71 per share. The company observed a moderation in acute care volumes, with adjusted admissions to acute hospitals rising by 1.5% year-over-year. Despite slower surgical growth, overall revenue growth remained strong at 8.6%, excluding the impact from the insurance subsidiary.

In the third quarter of 2024, expenses were well managed, with a notable 12% decrease in premium pay compared to the previous year. The company received $20 million in net incremental reimbursements from state supplemental Medicaid programs, surpassing earnings guidance projections. Acute care hospitals saw a 36% increase in EBITDA, partly due to Medicaid payments, while revenues at behavioral health hospitals grew by 10.5%. Physician expenses stabilized at 7.2% of revenues, and despite liability claims reserves increasing by $30 million, the company is seeing progress in margin recovery.

In the first nine months of 2024, the company generated $1.4 billion from operating activities, significantly up from $815 million in 2023. They spent $698 million on capital expenditures and repurchased 1.7 million shares for $350 million, with 31% of shares repurchased since 2019. As of September 30, 2024, they had $1.01 billion in available borrowing capacity from a $1.3 billion credit facility. The company is expanding its acute care segment with new hospitals in Las Vegas, Washington, D.C., and Florida. In behavioral health, a new hospital opened in California, and another is being developed in Michigan with Trinity Health Michigan. Approvals are pending for Medicaid programs in Tennessee, Washington, D.C., and Nevada, with a Tennessee program potentially offering significant financial benefits if approved by 2025.

The paragraph discusses a program expected to generate an estimated annual net benefit of $85 million, effective October 1, 2024, and a funding increase to an existing Nevada program with an estimated annual net benefit of $56 million, effective July 1, 2024. These benefits were not included in the company's revised earning guidance for 2024 as of July 24, 2024. During a Q&A session, Marco Criscuolo inquired about changes in behavior among managed care plans, particularly regarding patient denials or downgrades in acute and behavioral segments, and differences between commercial and Medicare Advantage plans, focusing on areas such as the two-midnight rule. Steve Filton responded, explaining that since late 2022 and early 2023, there has been a noticeable increase in aggressive behavior by managed care payers. This is in contrast to the early pandemic years (2020-2022), when payers were less aggressive due to decreased utilization.

The paragraph discusses the payer behavior becoming more aggressive regarding denials and patient management since late 2022 or early 2023, with no dramatic changes noted in the current quarter. The focus is on the application of the two-midnight rule, where a third-party firm assists in coding admissions and handling denial appeals. Despite recent clarifications from CMS, the organization has not seen significant differences in how their two-midnight claims are managed compared to peers. Additionally, an inquiry about physician recruitment and turnover trends in the acute behavioral segment is raised, with a particular interest in competition and capacity expansion. Steve Filton acknowledges ongoing discussions about hospital-based physicians.

The paragraph discusses the recent increase in expenses for hospital-based physicians, particularly emergency room physicians and anesthesiologists, attributing it primarily to billing changes related to the no surprise billing act rather than a shortage of these physicians. The speaker, Marco Criscuolo, then thanks the previous speaker, and Ann Hynes from Mizuho asks about potential challenges and opportunities for 2025. Steve Filton responds, mentioning the opening of two new facilities in 2025, one in Las Vegas and another in the District of Columbia, noting that they do not expect these to significantly impact EBITDA, with more precise guidance to be provided in February.

The paragraph discusses anticipated financial impacts and growth in a business context. It mentions that despite some initial expenses and ramp-up costs, two businesses are expected to experience continued margin recovery and benefit from several tailwinds in the Medicaid supplemental area, specifically mentioning new or expanded programs in Tennessee, District of Columbia, Nevada, California, and Florida. While some of these developments are in early stages, they are seen as potential opportunities for 2025. Additionally, the conversation shifts to acute care volumes, with expectations of growth returning to pre-COVID levels, with revenue increasing 6% to 7%, evenly split between price and volume.

The paragraph discusses metrics in acute care, noting a 3% increase in adjusted admissions and a 5% rise in revenue per adjusted admission, leading to a 6% to 7% growth in revenue when accounting for the Nevada Medicaid supplemental. The author expresses skepticism about anticipated structural changes leading to significant volume growth in acute care, contrary to peers' optimistic views. They also mention that the two-midnight rule change might not bring additional benefits to their hospitals as they have been addressing this issue for years. It is suggested that recent elevated growth figures were largely due to the catch-up of procedures postponed during the pandemic, and such growth is not expected to continue at the same rate.

The paragraph is a Q&A exchange from a financial earnings call. Steve Filton explains that corporate expenses were higher due to a $5 million loss from debt refinancing and $5 million in settlements from smaller lawsuits, labeling these costs as non-recurring. In a following question, Dylan, on behalf of Justin Lake from Wolfe Research, asks about the trends in volumes and pricing in the behavioral business. Filton responds that while their original projection was 3% same-store patient day growth in behavioral health for 2024, the growth has been slower, but they met the 3% target by the third quarter, even with setbacks from a hurricane. He expresses confidence in maintaining that growth rate through the fourth quarter.

The paragraph discusses the strong state of behavioral pricing in the healthcare industry, which has been bolstered during the pandemic, partly due to better pricing strategies with lower-paying entities like managed Medicaid payers. Although behavioral pricing is currently very strong, there is an expectation that it will eventually moderate, potentially staying around a 4% to 5% growth range in the foreseeable future. In a conversation with an analyst, Steve Filton notes that recent acute care revenue increases were partly due to an extra day in the quarter, but more importantly, they faced a tough comparison with the previous year's third quarter when admissions were up nearly 7%.

The article discusses the impact of deferred and postponed medical procedures during the pandemic, noting that last year's third-quarter volumes were high for lower acuity, more discretionary procedures that people could defer. In contrast, the current year's volumes appear less favorable because those earlier figures were inflated by these procedures. As a result, while overall admissions and surgical volumes have decreased, the acuity has increased. An analyst asks about inpatient surgical trends, and Steve Filton explains that the surgeries were slightly down due to last year's atypical spike from catch-up procedures. A.J. Rice from UBS then inquires about labor costs, particularly premium pay, which has decreased by 12% to $60 million year-over-year. He asks if labor and SWB ratio stability is expected to continue, or if there are further opportunities for improvement.

In the paragraph, the speaker discusses the stabilization of wage inflation in the post-pandemic environment, noting that premium pay use has significantly decreased and is stabilizing. This stabilization benefits revenue growth and margin recovery for the business. Although salaries as a percentage of revenue increased from Q2 to Q3, this is attributed to a hurricane impacting facilities in Georgia and South Carolina, leading to reduced volumes and increased overtime expenses. Outside of this event, labor trends are considered stable. A.J. Rice inquires about future capital deployment, JV pipeline, and the use of free cash flow, questioning whether it will be directed towards stock buybacks or M&A opportunities. Steve Filton responds affirming that they maintain an aggressive capital expenditure program.

The speaker discusses the company's strategy regarding expansion and capital deployment in the behavioral health sector. They paused expansion during the pandemic due to staffing challenges but are now considering adding beds in some facilities where occupancy is high, as the labor market has stabilized. Despite a low overall occupancy rate in the low 70s, they see potential for volume increases in certain areas without adding beds. They frequently encounter M&A opportunities but find few compelling, so they plan to focus on capital expenditures and share repurchases. The conversation then shifts to Pito Chickering from Deutsche Bank, who refers to same-store occupancy metrics that may underestimate busy weekdays.

The paragraph discusses hospital occupancy metrics in both acute care and behavioral segments. For acute care, hospital occupancy (measured by inpatient beds) is less relevant as an efficiency metric due to other factors like emergency room and operating room activity. Most acute care hospitals are not at max capacity, and any issues are being addressed through expansions. In contrast, in behavioral hospitals, inpatient bed occupancy remains more relevant due to fewer ancillary procedures, though outpatient activities also need consideration. Overall, hospital capacity management is being handled through capital improvements and expansions as needed.

The paragraph discusses the financial and operational aspects of a behavioral business, highlighting that while overall there are no major physical capacity constraints, certain facilities and geographies require debt expansions. Additionally, physician expenses are a significant concern, with stable expenses at 70% of revenue. Despite this, there are specific areas such as the emergency room and anesthesiology where there's been significant financial pressure. Other specialties, like radiology and NICU, have also experienced some pressure, though to a lesser extent. The situation, particularly challenging in 2023, seems to have stabilized according to Steve Filton's comments. The conversation ends as they prepare for the next question.

In the discussion, Steve Filton addresses anticipated growth in their behavioral business segment, projecting revenue growth in the mid-to-upper single digits (6% to 8%), with pricing contributing 4% to 5% and volume 3% to 3.5%. He clarifies that these are not definitive figures for 2025, as precise guidance will be provided in February. Joanna Gajuk asks about current market conditions, specifically regarding mental health parity and state benefits, and whether demand is increasing and if they are equipped to meet it, including staffing requirements and potential rate increases. Steve acknowledges some difficulty in hearing the question but attempts to address it.

The paragraph discusses the challenges and recovery efforts in the behavioral health sector, highlighting issues such as labor scarcity, specific facility struggles, and the impact of Medicaid disenrollments. Despite these challenges, there is optimism about sustained recovery in the fourth quarter due to improvements in staffing, facility performance, and diminishing Medicaid impacts. Additionally, the paragraph touches on the potential benefits of the Biden administration's enforcement of mental health parity rules, which were initially expected to be advantageous.

In the paragraph, the speakers discuss challenges with getting payers to comply with mental health parity, noting that while strengthened government regulations help in appealing denials, they don't significantly increase behavioral volumes. Joanna Gajuk confirms with Steve Filton that there's no change to their 2024 financial guidance, considering adjustments for supplemental income and debt costs. Jamie Perse then asks about the unexpected weakness in acute care volumes during the quarter, seeking details on any changes by payer class and whether this reflects a new normal or specific circumstances in the third quarter. Steve Filton responds that there is no change to the revised 2024 guidance.

In the paragraph, the speaker acknowledges the challenging comparison to the previous year due to the exhaustion of deferred and postponed procedures, which was considered a one-time event. Despite this, the year-to-date performance of the acute business showed 3% growth in adjusted admissions and 5% growth in revenue per adjusted admission. Excluding the impact of the Nevada supplementals, they see their acute care model aligning with historical and future expectations of mid-single-digit revenue growth, evenly split between price and volume. Jamie Perse then asks about long-term strategy considering recent structural dynamics like ASC utilization, payer tactics, and growth in Medicare Advantage and HICS. Steve Filton responds that it's a broad question worth a lengthy discussion about these evolving dynamics.

The paragraph discusses the expansion of the healthcare care continuum to include more cost-effective treatment settings like ambulatory surgery centers, freestanding imaging facilities, and emergency departments. The speaker highlights their success in expanding freestanding emergency departments and emphasizes the importance of aligning with physicians through accountable care organizations and employing physicians in every market. The focus over the next five years will be on physician alignment and care continuum expansion in a challenging environment where utilization is scrutinized. Jamie Perse and Ryan Langston then ask questions, with Steve Filton confirming that the SDP program benefits include a new facility in DC.

The paragraph discusses the challenges in predicting the impact of a new facility due to the lack of historical utilization data, with financial projections based on past performance. The new hospital will benefit from any approved Medicaid supplemental programs, providing potential modest financial upside. The conversation shifts to an increase in legal issues, particularly in the behavioral healthcare sector, with notable verdicts that are currently subject to appeals. Despite these cases, it's unclear if they signify a broader trend. The organization is increasing reserves for malpractice expenses in response to these legal challenges.

The paragraph involves a discussion between Matthew Gillmor and Steve Filton about Medicaid supplemental payments and the impact of a hurricane on business operations. Steve Filton notes that Tennessee, DC, and now Nevada have seen increases in Medicaid supplemental payments, with Nevada's increase arising from updated Medicaid utilization data submitted to CMS. Matthew also inquires about the hurricane's impact on business, to which Steve responds that the hurricane likely reduced patient day volume in their behavioral business by 25 to 30 basis points, implying a minimal overall effect on EBITDA.

The paragraph involves a discussion between Steve Filton and Whit Mayo about updates on Electronic Medical Record (EMR) investments in the behavioral segment. Steve mentions that by early next year, around 25 to 30 facilities will likely be using EMR, which is expected to enhance efficiency and the quality of care by making patient records more accessible to clinicians. Additionally, Steve highlights a technological development related to patient observation or rounding in behavioral health, which is crucial for maintaining patient safety and well-being. Despite some salary expenses, the overall impact of recent events like a hurricane was deemed not significant enough to be separately highlighted.

The paragraph discusses advancements in patient monitoring in the healthcare setting. Traditionally, patients require physical observation every 15 minutes, but the integration of technology, such as wearable devices resembling an Apple Watch and tablets for clinicians, could enhance this process by efficiently tracking patient locations and observations. This technological shift is expected to significantly improve patient care and risk management in behavioral health care. The conversation then shifts to a Q&A session with Michael Ha from Baird asking Steve Filton about cost management in acute care in preparation for a return to pre-pandemic volumes. Steve responds that traditional productivity strategies were temporarily paused during the pandemic, and they are working on resuming these efforts to maintain EBITDA and margin expansion as volumes moderate and acuity increases.

The paragraph discusses the challenges faced in workforce management during the pandemic and how the situation has improved as the company adapts to changing conditions. Salaries as a percentage of revenues have decreased, aiding margin recovery. The speaker, Michael Ha, inquires about the potential impact of supplemental payments in California and New Mexico for 2025. Steve Filton responds that while New Mexico is not significant for them, California is important due to their substantial presence in both acute and behavioral care sectors. The discussion also touches on state proposals and the impact of CMS's payment adjustments to average commercial rates.

The paragraph discusses the uncertainty around the potential benefits of state programs in California due to the lack of a formal plan or allocation methodology. It is difficult to determine the impact on specific hospitals until the state issues a plan, expected early next year. The broader question of whether more states will adopt or expand such programs to increase funding to average commercial rates depends on state-specific factors. The speaker notes that they only disclose plans once submitted to CMS for approval, although other states are considering such programs. The potential benefits are believed to be significant, but difficult to quantify until plans are formalized. The speaker then transitions to addressing a question from Ben Hendrix of RBC Capital Markets about strategic initiatives in psychiatric care, particularly in residential settings, and queries about any changes in strategy due to liability reserves and issues at some facilities.

The paragraph is part of a conference call discussion featuring Steve Filton, who addresses a question about potential consolidation opportunities in residential services. He indicates that the focus is more on expanding outpatient care, telehealth, and services for military members, as well as the growing addiction treatment sector. While there isn't specific attention on residential services, these other areas are seen as growth opportunities. Filton concludes the call by thanking participants and expressing anticipation for future discussions. The operator then closes the conference.

This summary was generated with AI and may contain some inaccuracies.