Universal Health Services (UHS) 26 Oct 182018 Q3 Earnings call transcript

Company Profile

Participants

Steve Filton	Executive Vice President and Chief Financial Officer
Alan Miller	Chairman and Chief Executive Officer
Matthew Borsch	BMO Capital Markets
Stephen Tanal	Goldman Sachs
A.J. Rice	Credit Suisse
Frank Morgan	RBC Capital Markets
Kevin Fischbeck	Bank of America Merrill Lynch
Ralph Giacobbe	Citigroup
Josh Raskin	Nephron
Ann Hynes	Mizuho Securities
Sarah James	Piper Jaffray
Steven Valiquette	Barclays
Ana Gupte	Leerink Partners
Justin Lake	Wolfe Research
Gary Taylor	JP Morgan

Call transcript

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Operator

Good morning. My name is Jessa and I will be your conference operator today. At this time, I would like to welcome everyone to the UHS Third Quarter 2018 Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. you. Thank Instructions] [Operator Mr. may conference. you begin Filton, your Steve

Steve Filton

results Thank is We also Good XXXX. morning. Health welcome September quarter our CEO, Alan Miller, Services' Universal joining of to this you, the XX, walk third ended Jessa. you review for us this morning.

as that conference this represent and statements. such forecast, and anticipates, estimates, be using I projections, During expects, will and Alan words call, believes, similar words forward-looking

and a familiar with Statements forward-looking the risks reading inherent on uncertainties section year these ended recommend the call in trends to quarter and would the XXXX. before our Forward-Looking not questions. December for and up statements, Form the We in Risk I XX-K XX, developments XXXX anyone careful like Factors to Form and a business the XX-Q of June just for For Factors XX, Risk our opening ended highlight and of couple

last to $XXX.X third reported our $XXX.X As our third net per night, million in $X.XX or or million of attributable income as quarter during XXXX. diluted $X.XX per press compared discussed quarter the share share to the during XXXX release diluted UHS of was

the of in third a release. last recorded quarter ongoing the an increased our over in the million adjusted attributable related share Justice UHS of $XXX.X increase the third quarter. net during of division, million net of adjusted as income during in diluted during our substantially year's On reserve XXXX Department or Schedule, with calculated per to share per quarter Supplemental was last million discussed $XX.X the quarter unfavorable our of revenues all to XXXX quarter diluted after-tax our the as income third or during XXXX basis, an $XXX.X compared from per to comparable As with was of was year. discussions $X.XX connection on share our same-facility the diluted third X.X% Acute which impact in $X.XX or press Excluded $X.XX of

resulted On primarily admissions X.X% during net a Excluding revenues the to the division admission. health Health quarter X.X% X.X% quarter adjusted the same-facility increase Behavioral compared plan, a a per of third from The increased XXXX, our of in adjusted increased revenue same-facility basis, third increase revenues in revenues in increased as XXXX. X.X%. and

established remains lower the with government’s the the unchanged. facilities in Behavioral range December range $X.XX our During admission days quarter, previously of provides prior impact the ASU day patient for nine during range compared quarter of impact ended patient diluted increased third year $X.XX of of of this than the to year's year upper increased the established the in XXXX third facilities civil the narrowing compared year year's, of Behavioral and per of the per which also excludes income Revenue are approximately owned end to and admissions reserve the decreased last X.X% connection the adjusted XX, of XXXX-XX the the range X.X%. This aspects investigation per unfavorable by financial XXXX excludes the favorable of adjusted end a from of the to Health reserve to certain net to to and adjusted share. diluted previously our provided $X.XX as adjusted UHS upon X.X% estimated while estimated operating revenue X% we X.X% for more adjusted attributable months the experienced per share results the during to first as impact comparable and XXXX, quarter. guidance our decreases of trends of increased provided $X.XX Based range

nine-month period $XXX For by cash operating $XXX from increased the activities XXXX. provided million million net XXXX, our of to comparable the ended months nine generated September XX, during

XXXX. spent the accounts XX.X% to busiest days declined third September on the during outstanding XX, XXX our million beds to we quarter slightly during quarter $XXX XXXX Year-to-date, capital beds of to hospitals. XX.X% have care XX XX days receivable of of nine third and XX, as during September Health compared to as XXXX. at months third capitalization compared of days of first We acute added expenditures new XXXX. Our to $XXX debt-to-total the during At XX million XXXX quarter new the our and increased Behavioral XXXX, ratio

week the Health in Hospital this next opened In the Health Palm XXX Florida. in earlier Hospital Washington to Provident Inland month, a Behavioral Spokane, bed we open Titusville, XX Northwest with bed Health addition, plan and venture Behavioral joint Point

over Our stock XX, at our of integrations, we’ve with behavioral XXXX, million health cost an robust of the $XXX at share. shares with X.XX repurchase In $XXX program per aggregate of third billion is of repurchased the approximately discussions. of shares $X.XX share. aggregate XXXX, approximately XX an repurchased and very or conjunction or pipeline approximately $XXX Since we our strong stock quarter program, active XXX,XXX joint approximately per cost September during approximately million through venture inception

to We at this are your time. questions pleased answer

Operator

Your Capital Instructions] comes Borsch first question BMO from the [Operator Matthew Markets. Please of ahead. go line from

Matthew Borsch

the on Hi, yes, to I side want just of behavioral business. ask the

to modeled. at the there pressure rate getting or than what had are bit could was about that it little mix the rate talk like a maybe we If a over looks that least little the due was you you rate a rates little

Steve Filton

in But metrics of down Matt, is to length than a I stay of of pressure. rate think the what function not admission you revenue on I conclusion. sure so, at reduced are Yes, arrive rather focusing that exactly sort that, was our adjusted quarter. Obviously any am X% per

Matthew Borsch

Okay.

Steve Filton

is about day per at of of our and honestly Yes, higher adjusted up revenue kind expectation. our patient that’s X% range the

largely overall function X% our and same-store revenue and quite think any were because But Medicare that is prevented that admission, which on on was that additional now length adjusted of I and us of pressure [Inaudible] of adjusted programs continued discussing robust, admissions by the I Behavioral the length – that the QX Medicaid almost pretty number quarters for So, stay lot been what mitigated of shift benefit number. think in I is to we that encouraged a per related we’ve the Medicaid stay – were and was that mostly honestly from programs the unfortunately, of for again, Medicare by to pressure is dynamics patients the side. Medicaid of quarter think from managed side and

Matthew Borsch

that? be do What about to I Okay. mean, continuing do dynamic it, a obviously? that’s going you does is

Steve Filton

much processes, of non-Medicaid have clinical patients that’s much we observation. have appropriate about place that are documentation our shift a that’s our think is I we can for outside and as working to I is are overall do Yes, impact. to fair Obviously, the clinically business that, can patients. doing sort and trying think hard to of stay and been taking getting payer groups the develop we’ve we as also, of of, of doing, that appropriate appropriate all as is, What not we all there within of so justified our length ability

Matthew Borsch

you. Okay. Thank

Operator

Please of question next go the comes line Steve Your ahead. Goldman Sachs. from Tanal from

Stephen Tanal

guess, were in segment X% and But type I to for occur. about segment, of little Good the will the mean thinking algorithm a guys. of didn’t the revenue know picture, the question. we you in framed on or guess, growth for the get past? hoping morning that same-store number easier are Behavioral sort for now I sort have did a QX. to following bigger it guys I’d that revenue the that, how just just obviously, taking Thanks would target But like obviously EBITDA you up as what compare the algorithm you thinking about back and guys

Steve Filton

I I we’ve same-store from perspective, over couple our and on that sort also last now a times that the X% to several target discussed understand, look quarters. think acknowledge ways and it, at revenue and created sort growth disappointed way we internal working internally externally. in of sure terribly am as you But, we’ve dynamic of I improving I mean, of this behavioral disciplined Sure, that we both focused the continue all Steve, mean,

I flattish at QX largely growth how repeat So, terms considerable our the quarter QX. thought And give in for what thinking guidance a think behavioral will is February, of business. to relatively in revenue we we the fourth of end XXXX guidance that about have EBITDA assumed when our we behavioral give and in of are I of the think we trajectory

long-term at has of not all. our think I point view changed

X% a that goal. is reasonable we think think I

that I the demand underlying believe think robust. remains we

I think back period in going and think going able same-store about world. targets to the believe we X% to we the and what moment, those admission what QX how a get establish over that how to step support view I that and time growth is, are forward. quickly take the trajectory we the of of But metrics think are at that we

Stephen Tanal

Understood. the And takes one the I am puts it. side for surprise to well. as Xx the in The Got just I admission different same-store capture. acute and about jump was per certainly a think trying us biggest adjusted would revenue think on all limelight and that

just don’t One could much have Was I anymore, helped? that seeing are What and to bad see debt ask, of materially as in that we you wanted now. better it’s front possibly year-on-year the ones there? the

Steve Filton

are kind the hurricane I a easy of particularly had and do last So, a Florida of acute The of are and takes pretty for I upward because large in QX was that to facilities. honestly year, mean, part pushing quarter that to third year’s number in your last point, our think QX. in comparison in impact segment there we dynamics puts number

year-over-year So $XX recorded third XXXX. California have hospital we so helpful we had Vegas, in we of was and ramp newer the probably, appropriately have first then related had we UPL, strong QX, the continued was could Las over quarter we million And the everything that XXXX helpful. quite of QX million knew of facility in three in that the up more Henderson The that comparison. all and ratably quarters would $XX that to was in recorded know our in to

quarters the made, softer little third look a two a the little that first quarter look stronger. and So

of I after were uninsured of impact. the and don’t the that’s for very question sort amount you acute specifically those debt and about care we patients. you think a pleased of quarter was big sort having a account I all it even strong think dynamics, ask bad that still

mix found of uninsured we stable. pretty several quarters amount over think that the remained has last our the I payer patients including

that’s revenue way know on So, having I a other. the that or material the don’t impact growth one

Stephen Tanal

that high year, kind bit that saw of carry think Do doing and maybe follow-up little XXXX? at level I’d you – a then were and we trend here say that sure numbers. strong one the correctly about you How sustainability pretty on a that, three your in when you the peers of type obviously there and should and just ranges, started are remember Perfect, the is I sort into was like could that feel that we sustainable or it looked similar better now? weren’t you

Steve Filton

am business. Yes, are asking guessing and you Steve, acute about I the that

Stephen Tanal

Yes.

Steve Filton

of we growth EBITDA and X% time and sustainable some is, X% for model our or segment reasonable business said a post-economic we’ve or that care X% So, and think kind post-ACA acute revenue growth. recovery, benefit for X%

you was our I months more results acute can expectation the the numbers I volatile. time, XXXX, care nine hitting month little of if real think and think going those we instance and that’s think QX kinds for for But that look are largely think find I solid we I quarter. bit a forward. our nine be results that a over for choppier at

very bit I in stay forward just sort think we are pleased of that going the a We unrealistic. that with think I But, idea can is it. growth

Stephen Tanal

Got it.

Okay, you. thank

Operator

go A.J. Your Credit the line Suisse. next comes question from ahead. Please of Rice from

A.J. Rice

questions. Hello everyone. Couple

First is UPL. about on the comment that a California follow-up

you third the quarter you to it if was that first first related million just quarter, and that way that fair you on that, your of related the two million $XX that some Is to So about roughly quarters, to I assuming the in two clear to it? about guess your is would which say had was quarters. thinking to in. in come it the $XX original second, million accrued $XX guidance then think that wasn’t I and am And

Steve Filton

amount basically think I the you I year. to And mean, that’s fair, of related of are I A.J. first Yes, the the yes, half right, two-thirds think

A.J. Rice

Okay.

with sort but decide to in managed summer Behavioral. Of to seemed bit go the now people in some that me you first of of year to assuming know Medicaid, driven of at care exclusions the bit on anniversary wonder a point us the but pressure accepted impact rolled that’s effective opinion. a start this of there I a same stay year, went couple would stay you be to managed next length that add length then some the to a you the are we might to question, Any might year-to-year the that Let managed at you away. Medicaid, drill it that every little of more having here. you even not I down ought at state, that care that few the Behavioral the and But a that’s a include this is on going maybe are out. two into walk plans it last think an Medicaid seems was year and XXXX, can helpful. color Obviously, I related what’s think were that those easing back like on how not stay, be, three stable if more that’s the managed of where really of buckets, And And have third affected timeframe There didn’t on going have part IMD lag through quarters. I same length or least plan am here. factors that’s of little thing number states in like basis. on on last your Behavioral, would then than you that because some, Then to a include care I

Steve Filton

various the population, than traditional you utilization exclusion have just population well I a than your more what Medicaid IMD aggressively would continued with is also length that said the is managed we traditional think, programs. increase managed to to as the programs did. think and said floor manage And bolus Medicare in of Medicaid in stay managed of states I payers sort listing would tends honestly shift from patients. just to shorter natural consistently that, the particularly an naturally I length The the and of of as created agree to stay tend IMD, comment I of or the a have of simply, managed of A.J., And, surprisingly our our it’s XX% a patients traditional agree at we corresponding think result of length kind equally reasons, the those of one that But XX% as true a Medicaid is around issues this two Medicaid with. argue our and of somewhere managed there most a stay point and of programs we not for side, majority in are because, our on managed Medicaid would patients already programs. incremental there

at But, not is point it that that anniversary max point, shift. may no will some not ultimately shift. to what XXX%, I think a at are has and results at will Obviously, before there it max or So, reflect be we current patients further our may all yet.

sort that strong there of we in no stay statement our so, really to just have to somewhat But relatively that’s still stay our within may payer managed object, I that, Within a seeing fixed, are payer further that within not one and say classes, commercial, remains that – had shift. changes and and within We probably you Medicare length The length Medicare word. of patients stable. dramatic within within traditional is traditional too managed are stable of would are mix. our relatively Medicaid, Medicaid, remains correct

that’s really we creating this the pressure. stay changes. shifting of It’s are So, seeing length population not

A.J. Rice

consistent some then and are solid did some you update flow. projects got still you development this your – is get that your you cash what will pipeline, be you my and development capital Any having almost, leverage, in around priorities? what the on room obviously quarter. again you’ve take looks got flow on got deployment share to even off you last which quick the And Okay. you cash the Good repurchase quarter. thinking Are just final with real

Steve Filton

would probably the I what again, past. I said say and No, think we’ve echo in

of in have the new of I development Point venture internal integration efforts. developments in building our we feel both behavioral that novo Spokane kind beds in of Palm think like organic opportunities mentioned like, we a my remarks or reflective de lot segment our the I joint project

our with we’ve capacity we’ve On almost in but extremely Vegas of capacity other built Henderson number surgical, the all acute beds in Vegas, new and New and Las expansion, successful side, York our been only not Las which the Hospital in just in new facilities of markets. new a the

some identify continue opportunities. predict. been probably solid at number has bit up yielding Those up other as that returns. we’ll little and to I a to are projects ramping look harder we So, our are ramp CapEx to continue We these think inorganic

the believe be decent bought We in I to number stock continue we a that third also as to compelling our moment a activity and well. value own find at the we and will what think quarter of shares be

of the are the So, they sense same the thing like going and potential I of a yield it’s we as think in on. think that returns good view are more good all and I more that, we a for these that opportunities to same us

A.J. Rice

a great. Okay, Thanks lot.

Operator

next Please Markets. from go RBC the Frank question Capital of from ahead. Your line Morgan comes

Frank Morgan

morning. Good

from capacity your competitors of development de and are new On out local Behavioral? environment novo you market developments? competitive in seeing terms development niches the of activity, the topic curious, in just more assessment What’s activity of in the for

Steve Filton

capacity, the Behavioral we over end I like definitely we to seen I still our the last clinicians, fact of again, we psychiatrists, is new the in overall that. et Frank, going our many diminished was know facilities, think think in in have don’t the beds, markets, ask look, of new underlying few to feel non-professionals, it’s cetera. affects outpatient quarters nurses, building we new quarter But, I At day, response cetera. that the new admission said Yes, demand that, facilities growth in questions, et that strong. so, Okay, I reflective think similar that I the the is we’ve the definitely demand. of qualified And it and recruit experienced said have

of environment certainly the to of there. in is out demand. with is the really diminished think more there. competitive underlying underlying it a capacity it out minds, more I sort ability our level or our So more has definitely But changed capacity or traditional there don’t create

Frank Morgan

will and more Got queue. you. hop back One the I in now,

Just the think noticed on the Thanks. that here if obviously and could in any DOJ come the charge DOJ, for you charge us you – you up curious might be we number color the quarter? did may with took we how do this – incremental how investigation, the on give close just that more we

Steve Filton

think, That fairly again most I we’ve of mean, recent consistently the that government. I remains case. to offer is reserve said, our the our reflective

I are who it good are to bigger more I chunks think as and then many carefully, frequently coming view thing. reserves obviously, this those in and increases a know following the are and our

think pace narrowed reach – difficult this end that optimistic because gap our we government the where has government of with that to settlement that government and them up. it’s I is that with The quarter and at the a do has fact offers resolution we between this that negotiations and every are game are relatively I soon. pace predict But that or said. we the picked largely think the as can reflective demands our proceed precision it’s of we’ve the that hopeful said, means of meaningful are

when difficult and be least up of would But a hopeful how by has are pace that that So, encouraged picked I at with think predict and moment. that and the at the for to exactly precision amount and are soon. resolution we

Frank Morgan

you. thank Okay,

Operator

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

Kevin Fischbeck

pricing kind to bad an Want below this X% is four X.X% going the earlier forward, a care But it patient been you when thanks. the number X% right go on not of forward there? is I number. Okay, to back pricing. the about question number guess, about to or So, quarters think last if guess, I think so? a guess in X.X% to basis you’ve your going I seeing about

Steve Filton

Yes, it, price. Kevin. if mean, and X% we imagine think X% gave it’s X% guidance to and we actually about and growth, X% original X% would volume a when I that our that that for to consist year you revenue the fair of question,

You that closer if accurately pricing and on high X.X%. been of over made we’ve maybe the high-end not end point the the the frankly or range to

our beds we of of little getting revenue to and discussed that, our small. have is result I we that have to don’t transitioning think a acute a impact that we’ve residential of cap beds beds higher relatively because a view will that a many some level residential that or bit that, a is moderate is as number of have of to there percentage be point

as that I are am X.X% yes, that we think to about X.X% to probably as X% So, think, of now, but like we ultimate I revenue going and ultimate model of sort we think say model is about more X.X% when going volume now to it, to not price. that growth think there, to X.X% going get we and again

Kevin Fischbeck

bit you do the same-store sound the larger kind as similar revenue EBITDA it that that growth best from a being behavioral over And was you business you some that’s growth far you’ve the as the of sounds relatively expect of was margin with Okay, of flat a last perspective. then, actually sense same-store But relatively like did year. saw a revenue which surprised and X.X%, performance seen that performance I in in little decelerating kind you QX then helpful.

if even are anything revenue only there to is X%. the side X.X% margins able coming on that to relatively achieve cost same-store So growing you in you flat now

to in margins. past, a same-store you’ve you maintain you, revenue needed talked that number think, higher about the I growth

Steve Filton

It’s so, couple question. of Yes, think a Kevin. good it’s things, I a

pressure for as you to think several we’ve labor some and years degree, been I know, talking wage now. about

to of maybe seeing many think sooner a to more out anniversary I That’s more a start acutely. are piece out it. of think I of feel that we where some peers. our a And degree just and that bit others and level than impact think are to starting frequently maybe I

other in are I on not comment much credit as a as would revenue just we think and environment, have operators would I The tough thing previous is, I growing calls, have certainly liked our have made have revenues and this it’s to a where maybe expected. think,

think growth have generally business and results and managed that, great the is our EBITDA I of that. and I operators very reflective the the with efficiently EBITDA care think

So I think it’s a combination of those two items.

Kevin Fischbeck

Is that whatever something do that’s sustainable and where some $XX of compare identified or is savings, number growing? at but is you be the need to $XX that that kind of you something million, million point when you’ll then, you anniversary

Steve Filton

The is perfect. model not

margin X%, that we say So, growth Behavioral there side, EBITDA think than revenue the you do a and see little start that little above on growth rather. again, quarters same-store EBITDA and I And – would where better some be we that will bit as I should do I flattish. and think be get to where that, some some we a then expansion at than quarters worse around EBITDA X.X%

best don’t going think we now level can we sustain is to But don’t we we are the are I growth producing, So, where that that’s we that dramatically know are know about from I revenue the producing I vary levels right again, correlated do. to today. that the of that. can the

Kevin Fischbeck

to the of might is better business? is it new How control? that you headwind getting documentation your Behavioral that to labor, you about Okay. point last beds, getting to doing recruiting more how And When guess described. be within structural the much much or the side, stuff anniversary of just kind tying as of some number of where think X% Whether the then you it on I a question.

Steve Filton

impact So, of have of bunch sort build of reconfigure through I where I Medicare and programs can states a that of we managed that. alter our XX% and Medicaid think being other the with there within and it’s you picked is We shift work of of those mix. sort all we et than managed. patient are that Those we I stay new the both a both and can is patients number them by payers. said of elements is That the is made No natural medically our cases, of past to the as mark. patients. of of noted Medicare there to one as XXX% the are more are point some of continued lengths traditional I is we again, few really cases are you and more clinically the justify We Medicaid capacity But dynamics. patients most and be no patients our think more a can on hard things. out to of of And traditional appropriate programs. out into in And Medicare control decisions our patient our cetera dynamic I are that of back raise that patients obviously acute little think mean, our will Medicaid the the that new do or Having think psychiatrically in do XXX% managed, sort patients thing well limit before, I a programs. control our sort be that one. try continue of to the can explore we to tide hold mix, a We accepting these managed valid than can find can longer although who programs moving sources can well. can a that, from

Kevin Fischbeck

of you allowing And operationally to at headwinds. structural that’s growing when X% them is overcome rate they we kind Do part why look above if obviously some some remain Do at comp? items. I guess can��t point just achieve reason is where doing are Acadia guess, that the a better no they in or who these something in are X% time of it these you look we of to headwinds the there getting U.S. at even is

Steve Filton

some the little detail the division, guess, couple specific. last answer of our in talk little for of of have the we it’s with have have thing and same challenges the we that We into then a the labor faced. states hard the those some I challenges they Acadia that been in our us markets the since a faced see greatest, have little Behavioral some not am comparisons about and real we very at specific map, shortage where of those nearly know most problematic markets. footprint been we necessarily cases have a their one when an we about perspective a asked I that reaction has been the does no years issues in detail. And have significant geographically significant labor a for insight of that peers, in question challenges we my with presence is locations. I Yes, our talked sort managed presence from over that or as several And to obviously, haven’t Acadia when Medicaid look

that’s think aspect of an I So, it.

hospitals our So, really because, all again, spend markets do a think the our we others one analyzing and ton location again, are is don’t are can’t can time our thing change is I we in what – hospital. focused and what of really on we the in of doing what

those are geographically centric, issues degree just issues have So to are to we with deal we going try and that where the them.

Kevin Fischbeck

thanks. Great,

Operator

the Citi. Please comes Your ahead. next go from Giacobbe Ralph from question line of

Ralph Giacobbe

anything behavioral back be you opioid IMD staffing alleviation is go good accelerate, channel, challenges. point can of it admission The there the number the to morning. did I Thanks, epidemic the full to Steve. wanted whether side, to

challenge the then traditional sense I go better The quarter, much I think the hard shift other of Just back to it, trying of this length to side do the sort stay, new. sort a of there pick in that’s manage, the get up grasp. deeper to deceleration is, want to isn’t anything to of and of from

So, would are there that’s states the for by as sort we’ve than anything sort any what you if the seeing pressure. to disproportionate been out third a continued maybe pressure in just Thanks. that of can make quarter call worse impact it callout already stay, of

Steve Filton

new. mean, terribly I managed first to agree traditional second the to am answer Yes, nothing programs the of we’ve would geographies where seen question that I about talked sort the to pace Yes, among maybe been and we pick we’ve in a think up, operate, of going shift ask And that Florida, come concern. of I that’s then Kentucky those is do from states patients the which Illinois, back in of more repeat we of that first. the question. some being

repeat So, part question? first and just apologize, you Ralph. the I your can But of

Ralph Giacobbe

Yes, side was positive number The actually the of accelerate. sort equation. it admission the did of

So…

Steve Filton

knew the third this into the in our I be and behavioral it, quarter fair, compared Yes, it. a think quarter third quarter. things. to of number in I two Got a relatively We mean, facilities last we to going the got were last comparisons hurricane I of year’s easy year. so, had impact

piece as units But a many nearly cap the think qualified I We labor closed front. lack we’ve as quarters, lot think progress built-in So, we of of I have we made there. describe staff. on – do talking – of there a been number what think the improvement don’t for big bit of little because piece edge the is or and a the is, other other of that of any I

think in that’s shortage I underlying improvement the is area. labor So, we’ve made the strides the real

Ralph Giacobbe

And Okay. Maybe I us low implied there. a suggests The to just the probably guidance decline EBITDA then, down XQ think help mid-single-digits. follow-up. with

sort flat. you mentioned the side behavioral of think I

of sort a within would steeper acute it decline and of obviously a off So, strong acute come imply front.

you that the us XXXX? just, to then fiscal question And XXXX could Thanks. shook compares it last piece for how your just and there? rate, what of is anything that Medicare So remind all-in out

Steve Filton

Yes, of view our of guidance and what’s EBITDA. fourth flattish in the I that, view our relatively think is quarter embedded a so,

where called that’s behavioral quarter UPL very of million sort quarter of just of side, year. think acute the of a items, to strong. I And the year, we out kind the – been strong a a number extremely and on non-recurring of or from I we’ve flu California continuation on of on is flu out a that $XX called was the season side, call year it last fourth fourth of in idea last million So called impact think we it premised we the $X $X the million out million last $XX

in eliminate items million if think we those or the out, it QX $XX So, in $XX I million call started I’ll you whole.

X% our presumptions without think But think will I presume, QX of EBITDA. it I core cosmetically, of business acute about even or and growth is items. will EBITDA and I was care think sort be the probably in I pretty the business flattish we kind the guidance. comparison the of we those and in in acute make that our that’s Behavioral Because that tough still X% up think

Ralph Giacobbe

you. Thank Okay.

Operator

Josh from Your go the Nephron. comes Please next of question Raskin ahead. line from

Josh Raskin

Steve. hi, good morning, Thanks,

acute give the perspective from care’s on I on competitive that are both maybe an any from I this guess, am impact if well. the as and well question guys year? acute you can First the having side, if projects just on sort facility UHS of strength but that’s and the is, as perspective growth. outpatient curious care you us on update working

Steve Filton

the Yes, knows the has over really look, alternative our site competitors we’ve in our and in that I markets accelerated responded that see last think several follows industry kind. outpatient acute anybody care who of doing and the years. trend delivery We

have So I like a board. probably on which dozen of and think calls, drawing emergency open amount are on the talked sort previous we rooms of we’ve another developed most sort that freestanding of probably we’ve are about

We have care of centers. a smaller number urgent

frankly and to centers needs every a tailored bunch quite in We have competition. to specialist locations our our be and is strategy of in imaging specific the meant care physician locations really and primary market market markets,

see and in ways So, all different manifested we I results. they those our reflected think dynamics or are in

visit admission care emergency, decline emergency acute, and honestly, I a is, clinics activity years. those room last seen less our retail increase that pharmacy belongs. It’s or clinics of are emergency out everybody. emergency these where which traditional we’ve clearly development the instance, et a the and cetera. migrating into less fact location And intensive to as decline care the reflects have room visits quite our acute room But it centers be care that and or of over the strong effectively for positive urgent seen emergency think better several view we for our happening what’s from continue numbers room we So think the I

are a in our So, we that rigorous markets participating outpatient but in in way. development very

Josh Raskin

or are is contributing this specifically, view? in is that keeping in more strong acute the up sort I with we of to guess, growth your more the dealing markets

Steve Filton

kind do a to think, I I number in that strong one, competitive the markets County don’t we we Riverside I put California, I sort numbers. have have it to growth a hadn’t care to like answer of like some that we up mean, degree in look, establish us we’ve response Vegas, allows numbers sorts outpatient the think to is for But acute and growth care that the keep this strategy. I numbers the believe growth to Yes, I revenue we out I put last aggressive if fairly Las could of of single that have do think, also the don’t that, developed that really Josh. a know up. care years acute alternative several volume the delivery continuum

market we’d think business, we share I losing weren’t doing I that. be if losing am

Josh Raskin

price are focus come what question, a and a topic. – some a sort is you companies from perspective, your and Gotcha, B on more think of a to and manufacturing yesterday that together hearing what’s lot potential that of best perspective accelerating second method your combat pricing the generic I for for growth? then, just of drugs gotcha. from am about cetera. Part et we Obviously, curious, separate how – drug news hospital drug just and And do are changes you

Steve Filton

for best part, organization us. rely for significant But think group a we negotiate certainly, – the efficient within our maybe. best I – our a to side the use of the the to focus perspective formulary that the pricing it So, we on whether had the high to oncology cost purchasing most of and from they pricing contracts and operational whatever efficient and managing or are drugs pharmacies most most on drugs

we risen of a it that certainly that drug meaning generally big I impact consistently believe hospital is that our pricing deal. focus and So, care sort results something a think our don’t point on kind big think it ours. chunk our obviously big I has overall focus of other the we with a cost on of is way inflation. we of have a of that cost view But know one the a great or it’s overall I acute

Josh Raskin

perfect. Okay, Thanks.

Operator

from ahead. from go Mizuho Your next Please question Ann Securities. Hynes comes the line of

Ann Hynes

Hi, thanks.

in about the business, exposure state now on or you it got maybe consider Thanks. are XXXX, the the exposure. are you state a XXXX care And in going an guidance. I XXXX? any example, that state know, there and is and have I know talked tailwinds on any managed either maybe the in that Behavioral, when you will giving that length should lot So, out I there what pressures that call Medicaid stay hasn’t get that’s benefit. your of But outlook. your this radar? is about like – headwinds know think on ordinary for not we we remind Can acute for us should the IPPS But you for you in be to of

Steve Filton

I not think takes kind sure certainly of and far this of a going as for again, to prepared I XXXX year. had am I and we So, to puts degree the give items thinking comprehensive people forward. of the obviously but am that that are list, Ann, as any a sort about non-recurring sort

I I I point the think – made You it I answered I we asked before. think fully don’t have Ralph and question this who mean, think was

dish throw I rate We people for payments sort into X.X% range have to as in an rate think X% increase. well dish our some year, the as sort next the the which Medicare more makes of Medicare of I X.X% think payments, increase our in underlying X%, increase Medicare it

a million million benefits the $XX to dish want to benefit. separately, of at $XX you look it’s If think kind I

previously the that, in the that’s nothing XXXX. that quarter about. I our Other out tailwind that we the would highlights. But at of starts fourth than moment, So there we call I talked XXXX think think is haven’t actually into

to of deal a of great doesn’t for time stay a us have visibility moves it to than medical the tough necessarily different is mean, call something timing lot is out carve separate As times of of it business. whether lot managed pressure it’s on, takes is far Behavioral is traditional the rest because or managed, that I or goes, it a state – for as Medicaid, book is place it Medicare when of of sort I’ll and the the the from of a length

concerned that efforts little specifically were at we to call guidance out give that the have when mean, say. moment, particularly I of it’s or will best our for I our make I would identify. states So, don’t on, about bit focused a XXXX but hard we any have to

Ann Hynes

Thanks. right. All

Operator

ahead. comes question of from the go Please line next James Piper Jaffray. from Sarah Your

Sarah James

on wanted you. pressure. back go Thank I to wage the comments to

XQ, the up ideal moving along balancing the pressure on the in process ratio So, wages targeted you behavioral goals. the Thanks. How XXX salary benefits staffing margin you think is increases of the a the that reach XXX and wages revenue to about and opportunity having How of do or staff from more about with in XXXX. far psych wages points how higher of rate is much year-over-year basis to are side?

Steve Filton

it’s process. a finite think Yes, I’d say, I don’t

like have or there. of XX% a point of XX% the think it’s not we of way where way there, I that the view So,

reevaluating base kinds are approach monitoring bonuses, markets. think and frankly what a incentives, reevaluating constantly have where wages to all may wages this nuance competitive and all vary always The we so, are evaluating the result I of and changing are a and of a it view sign-on that recruitment tension retention others we we the regarding market point evaluating of always are that is doing dynamic by a ways labor quite bonuses, time. in market

years is why we for that was is, that and changed. today that has can which say higher our acute that’s we wage business our model four business it ago certainly behavioral one inflation see you raised that our both is than point and the before underlying three business or So, certainly

again, four years I main might or would suggest EBITDA growth this is yield or and have we sort inflation. there I think So, it’s the behavioral would But, wage idea X% EBITDA today growth it think of that X% growth the X% variable or there, looking X% at in of that X% way going yield be and because the of the linear of ago of where the we I think said or X% of XX% an there, ever wrong it’s sort particularly XX% tight way a of at is the of way I think it, issue way to the or XXX% looking very kind that at dynamic. this there environment, it labor changing reason

Sarah James

us Memorial expand update that’s the you with side psych for opportunity behavioral Herman the Okay, hospitals on units merger not could also for Baylor the non-UHS manage the and speak helpful. Can that Baylor you any JV have the to you where on or JV? you to present whether

Steve Filton

I Yes, hospital with a active we serious big of acute for my three I so, number big and fairly think systems somewhere prepared in remarks, have markets Dallas ongoing I two markets have am and conversations opportunity. bigger not we and conversations ongoing. care as in think going to are any between in some dozen our both us – of acute honestly and Houston and most hospitals But, care we mentioned specific comment on

a think with I relationship very good Baylor. have, we So,

mere you joint Memorial in for our projects I with know profits makes something from systems, thing But positive I successful is think source we cetera the as very and Washington we’ve a joint respected with well Baylor sense fact in Herman perspective, already large our for do real very us. ventures positive not around country that been to acute The State. view a fact these that of with able favorable. sort other Providence care hospital Same sort we’ve et us Houston, that for know. towards some Baylor if of view So, whether referral as that don’t would had kind of ventures think, I the is

Sarah James

you just of how on can those And JVs remind the work? economics us again

Steve Filton

care these of sort Gulfport in different. hospitals instances and we acute agrees et in way. acquisition want the Every a their cetera. those. a sell us conversation one have few generic blanket described, their is They again, We’ve or where Yes, year answer have acute is I with done difficult facility. really example of of venture to our sort don’t last some an a conversations from care of hospital, to behavioral a system joint question just

We a have others where we’ve just leased unit.

greater Providence from or just a acute each in where cases, The natural care are venture of of capacity. unit from We’ve Pennsylvania Some entered We’ve them we’ve percentage is unit leased other varies that Philadelphia that our Baylor takes a we’ve hospital market. JVs done one. ownership in built our a of And just leased in the then. with the the couple University new joint that Providence. one JVs with here into done

the is difficult is I very expect the than run development moment that in here The years the from opportunity hospitals. is margin a here business because U.S. to from next perspective beds think our XX% perspective. the at earn the more of are acute it’s or what by So, bottom-line But and over behavioral model, would to the EBITDA for say, opportunity is revenue care growth us. significant several quite we

Sarah James

Thank you.

Operator

line from of Barclays. Steven comes go question Valiquette next from ahead. Please Your the

Steven Valiquette

Great, thanks. Good morning.

And So my little the large-scale marketplace. question heated is bit on again behavioral a side. up seemingly in it chatter also is the seems M&A the like

side, deals. provide the given you’ve are been larger high-level So, current completing if successful any on to color some your just just that guess, larger-scale you am for I behavioral able on appetite I historically Thanks. curious M&A

Steve Filton

opportunity comment to flow. specific or on not going look, Yes, any news or are so, we specific deal

that whether we and for look I earlier, think us. we we we explore going do and capital at an M&A, from are question the or said, evaluate it’s organic will of we investment, time as response it’s going or all pursue is least And share those think I it inorganic true to to the perspective. that I say in presented we whether are A.J.’s to that are highest we say it’s pretty to think evaluation we compelling repurchase opportunities which because whether to opportunities all any and opportunities returns it’s think have lot a

Steven Valiquette

there your a perhaps quick lot in was and of quickly growth same-store within this acceleration some revenue Maybe acute acuity around obviously setting. greater just on confirmation industry strong XQ this on the Okay. in-patient earlier of one discussion this just year question, real discussion trend

be case far have guys ordinary might year of as that for it You yourselves that XQ out somewhat anything the and notion dismissed again. for the like XXXX, sounds earlier this

just any one give or quick of So other. topic and can one confirm way Thanks. that just color you that on the

Steve Filton

naturally to question generally. sense of that – care Yes, business. I are dismissed I past sense makes said seems I don’t to be care site acute rise business seeing before therefore back and that hospital acuity the it rising acuity in what we industry a notion. that Getting I to is know seems the we be it the more make and the of business actually it have in in the alternative that competition, acute mean, acuity in seeing would just ambulatory in that think level what remains higher acute that the sort is, intellectual the that care is

that. sign we think on to I So,

we think care clinical been clinical, has also itself. hospitals general improve specifically of years that, documentation, I hospital physicians disciplined acute focused UHS in several the part last to more on on believe in the in and documentation efforts

impact an as having that’s think I So, well.

are is to to acuity. I contributing So, increase element where think those that elements the in there

know don’t And so, I discount that that. we

Steven Valiquette

Okay.

that’s Okay, helpful, thanks.

Operator

comes Your Please Gupte of from Leerink ahead. line next from Ana Partners. go question the

Ana Gupte

Hello, Hey, thanks Steve. in. for me squeezing

seems as markets, a and basis, offer guess, as what you volumes are trends. be their and you labor macro on various out. across tailwinds side, you same-store the seeing and be hospitals on are like can point little of certain it’s more portfolio acute and market-specific look a unpredictable, the can kind you on read looking if what look cyclical on out, are I your you some top seeing at ACA the least the choppy. So, us of across at beginning yours? And trends to markets markets at to Any color from

Steve Filton

sort the is, think like trends the County varied of I have the One what look Vegas, and the two guess, geographically, markets answer geographic side Riverside several been of Dallas, The much about not for Well, those several years. markets and have Columbia. South been strongest strongest our in the ways Las performing acute Texas pretty trends markets, District on the Again, now really we’ve North it. weaker question last consistent I’d I that years have been Amarillo. and in on California

really cyclical I or solid a very over seeing were would XXXX, we bit from a just I little to our who some really bit ticked think were. Medicaid the have experienced and up likely their little think But expansion and think say those behind in I our care as some curve maybe But they very more those benefited think several think in broadly, continue might some of a years, sort saw are acute segment. ACA I our in of growth sort that, And I I from think markets are those markets in strong are in two numbers strength performing we I we I in growth. where off. some from again markets extraordinary markets, acute economic extraordinary perspective experiencing we that the of UHS improvement now see our put of what a that moderation year really care performance, terms we peers we from to which saw perspective, last

Ana Gupte

helpful. Yes, that’s super

a bit it a look what that machines, time point seem a on to and looking lot in build that Medicare then, On again B pushback now us see mix acceleration right cetera? any et acute, next and managed a in the to growth more the the commercial? more of is like might source little on huge what to be like is one three plans we privatization was advantage payer and where as whole Medicare there years the MA And of

Steve Filton

is of so, payer grows payer population. think side. And last have don’t fastest described Commercial more those consistent our again, the slower than Medicaid our for probably penetration sort think stable. largely has managed Medicare the that over at several and the mix a has least than penetration probably years is I been bit overall. is Medicare Uninsured I again I mature Yes, that, pretty think, the remained the us acute I growing trends trends we’ve that on of behavioral the industry little fairly think that continued. advantage

acute the much more some don’t on on going long for as go So, It’s we as so do the the has this behavioral that just side. much been we on it as in impactful I acute more we are side. engrained – view just our side nearly business. on I think so

Ana Gupte

Got it.

Okay, that’s helpful too.

managed just suggested So, on follow-up managed others this of Medicaid earlier you it, kind with had you I more Medicaid, think to Pennsylvania saw one maybe the asked, the one Magellan have player Florida, is pressure. and

it of here? widespread stay pressure length player So, it one source the kind of or is of that’s is being the

Steve Filton

what find, think we really varies by is that, I it Ana, Yes, geography.

we I who on behavioral of of payer. more characterize as a sort may particular is what every So most nationally. be than aggressive national there is part payer any more who me market, really localized a find no to single would In payer is the it there aggressive. But seems

Ana Gupte

Great. you like One the acute you’ve activity at sounds final It pipeline for one side. deal then and talk the of about on here. the inorganic on side table the can some the been

strength it. certainly sheet You do to have balance the

Steve Filton

mean, to relatively are and encouraged, fair, I they’ve looking I opportunities we be for not Yes, years care look we’ve scarce. acute profit been attractive for now for think many been

ACA said hopeful probably those they what predict. They’ve it arise. last announced, uptick those area. couple first as has to I in go to of are an or that I’ll are that in months done over before, them. the XX new That We will They don’t time evaluate sort that’s it’s the of deals in I deals. I relatively that think – to six know, But encouraged back to of just opportunities a we reflective maybe activity difficult are decade. we that are And but

not obligated for of grow are to sort don’t growth We we - feel sake.

just So, inorganic continue sense. we we they opportunities those to make And repurchase, will that. arise invest et share as do organic, they will cetera in as and

Ana Gupte

Thanks so much, Steve. Okay.

Operator

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

Justin Lake

in keep in say, it quarter you Steve. say how some the Can should Right. in I’ll had to was, or Rico. it specifically, just year impact Behavioral the quarter one I was negative Good question. Puerto last business morning, you fourth hurricane last

just So, impact negative there one fourth hurricanes that? whether any would you think see in that – this from would be the in an was you comp. offsets the us quarter can easier Can tell that already you year

Steve Filton

Sure.

because, So, probably and mentioned that for thanks bringing should that I up, Justin, before. have

impact, our had strong year’s a So, the last that year performance think hurricane earlier question response say did some to – behavioral where strong the comparison a a But about in from in I we call not think in Rico. think was I by Harvey then, an admissions Hurricane we Florence of the and good safe news we closed be to $X million, this Hurricane And on that which QX. I will to $X in QX, minimal. hard track Irma the drag the unfortunately Panama was Michael Hurricane is the We impact QX, that nobody it and in But because a is, had had closed of was keep of I in I probably just think for most bit but Puerto remain Houston million the little this probably do way damage it – year, Southeast. had months. injured, in all of in did Michael, were now all six and to Florida, will to City, Hurricane for The but we significant which names. had million and facility employees fairly part, patients $X four

So, fourth made we talking up, where pick the the as we we’d have that, I Panama comparable the thought about because had a guidance should that where we of I quarter, QX drag a for have originally relatively was have of facility. in QX a probably last in year this last QX City will year drag or year rather – of point our from

Justin Lake

think pretty into Is million that QX that about as so And million, big must expect a QX drag? drag. $X well, – and Steve, in that have you we been should facility that $X a similar big a

Steve Filton

of facility that mean, of sort the offline things, going it’s is a of of to tweaks reason that period in that put time. for I between you Yes, magnitude, these one of, becomes be a Justin sort that is drag it

are We our are payroll to on essentially going to cost the effectively continue while revenue. and everybody generating maintain structure keep we no

it’s drag even timing that’s creates say of not the a a in may that have issue cetera. largest et will we facility a So bit the I facility that. be in what

insurance, I for insurance proceeds covered of a will basis. loss think, most cash ultimately, we but this our to by be account tend on

it So will QX. a be drag in

we drag a early most of think much QX. I say will I too sometime recover next loss year. of little will it a the think to in be Ultimately, it’s how

Justin Lake

much. you Got it. very Thank

Operator

Taylor last go JP comes Your Gary ahead. line the question Morgan. from from of Please

Gary Taylor

Hi, good morning.

couple a Just ones. quick

and topic going – And day, the the seeing guess, of behavioral side, between split of pressure on can or either IPF length bed of the RTC? the primarily stay is or updated also are On kind that back it IPF latest the on you RTC? give the revenue I us

Steve Filton

outpatient doing And et better business. what or So, I of maybe from think XX% addiction mostly from which the perspective, has pressure of is later, specialty clearly acute of or from from stay some acute and am length the stay our business revenue behavioral which can think I provide and think couple head, We of this but, I facilities XX% XX% length the of most I residential see we about from of off a residential remaining would I now management Gary, as a experienced it’s revenues, contract come But my think describe the issue. include services, would top acute clarity an pressure. I cetera. revenues

Gary Taylor

mean, I Great. of bill B Part My on third total Part a around under administration's drugs. the do about OPPS yesterday, B announcement separately the question, hospitals last

the to X% of about would that equate I revenue. think hospital industry's

So the and that announcement site-neutral any impact measurable the contemplate do policies from just yesterday you impact from impact the question measurable the is, contemplate proposal? other any

Steve Filton

of me. front have so. don’t believe in and them think, I don’t I I And

of of et I would are think doing sort have, again, really guess, I So, are Gary. industry’s most have for instance much not I part revenue outpatient than am the I the my But participated that inflated those really for oncology outpatient this that I head, percentages hospitals by that top mean, that in. or the lower that UHS’s off programs, think we big cetera standards

us is is sense the on my impact that, So, relatively minimal.

Gary Taylor

very Okay, thank much. you

Operator

over more for no the turn are remarks. closing There the questions. call I presenters At to this time, back

Steve Filton

just everybody everybody and forward like their time with next to quarter. speaking to for look thank We

Operator

conference This concludes call. today's

now may You disconnect.

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