A.J. Rice

A.J. Rice asked for an update on the company's value creation review, which was not mentioned in the prepared remarks, and whether it is still ongoing or on hold. He also inquired if the historical growth algorithm for the industry (low to mid-single digit organic volume growth, pricing gains, and de novo margin improvement) remains relevant given recent market noise.

Answer

CEO Debbie Osteen confirmed the value creation review is not on hold, with an ongoing focus on short-term 2026 performance and long-term value creation, including evaluating service lines. She affirmed that the underlying growth algorithm for the industry remains unchanged, citing strong demand. CFO Todd Young added that despite recent noise, the company expects to return to a more normal growth trajectory.

A.J. Rice inquired about the status of Acadia Healthcare's value creation review, asking if it was still ongoing or on hold following the CEO's return, and then followed up on whether the company's long-term growth algorithm (organic volume, pricing, de novos) remains consistent despite recent market noise.

Answer

CEO Debbie Osteen confirmed the value creation review is not on hold, emphasizing a focus on 2026 performance and ongoing long-term value creation, including a review of service lines. She also stated that the growth algorithm remains unchanged, citing strong demand. CFO Todd Young added that despite recent noise, the company expects to return to normal growth with stability and bed additions.

A.J. Rice asked about the acquisition pipeline for tuck-ins and larger transactions, and then inquired about the Home Health business, specifically the impact of the more favorable 2026 final rule and whether it makes Addus more open to Home Health acquisitions.

Answer

Brian Poff, EVP and CFO, noted an optimistic pipeline for deals similar to 2025 acquisitions, with potential larger personal care assets expected mid-to-late year. Dirk Allison, Chairman and CEO, expressed encouragement regarding the Home Health final rule and confirmed they would continue to evaluate Home Health acquisition opportunities that align with strategy and valuation.

A.J. Rice asked about the acquisition pipeline, focusing on prospects for tuck-in deals and larger transactions. He also questioned the company's stance on home health acquisitions following the more favorable 2026 final rule.

Answer

Brian Poff, EVP and CFO, Addus HomeCare, indicated optimism for more opportunities in 2026, with a pipeline of deals comparable to 2025's tuck-ins, and potential larger personal care assets expected mid-to-late year. Dirk Allison, Chairman and CEO, Addus HomeCare, expressed encouragement regarding the home health final rule and confirmed the company would continue to evaluate home health acquisition opportunities that align with strategy and valuation, while still seeking more clarity on potential future payment adjustments.

A.J. Rice asked about the High Cost Outlier threshold movement in the LTAC business for 2026 and its potential impact. He also inquired about the CMS TEAM demo and its effect on Select Medical's business, capital deployment priorities for 2026, including share repurchases and CapEx, and any applications of AI the company finds useful.

Answer

Thomas Mullin (CEO, Select Medical Holdings Corporation) stated the High Cost Outlier threshold increased by only $1,888, expecting no major shifts like the prior year, and noted efforts to move patients timely into IRFs to reduce outlier percentages. He mentioned a minor impact from the CMS TEAM demo, primarily on spinal fusion surgeries in a small proportion of rehab hospitals. Michael Malatesta (EVP and CFO, Select Medical Holdings Corporation) clarified that the take-private review puts share repurchases on hold. He reiterated that capital deployment is business as usual, with a primary focus on growing the Inpatient Rehab division. Thomas Mullin added that this includes new rehab units and neuro transitional centers. Michael Malatesta mentioned evaluating AI for back-end billing processes. Thomas Mullin added they are piloting AI for outpatient collections and exploring clinical initiatives like virtual sitters and telemetry monitoring.

A.J. Rice asked about potential volatility in the LTACH business due to high-cost outlier threshold movements in 2026 and the anticipated impact of the CMS TEAM demo on the company's business, particularly IRFs. He also inquired about Q4 2025 share repurchase activity, 2026 capital deployment priorities, and any applications for AI the company is focusing on.

Answer

Thomas Mullin, CEO, stated that the high-cost outlier threshold increase for 2026 was flat, expecting no major shifts, and noted efforts to reduce high-cost outlier percentages. He indicated a minor impact from the CMS TEAM demo, primarily on spinal fusion surgeries in a small proportion of rehab hospitals. Michael Malatesta, EVP and CFO, confirmed that share repurchases are on hold due to the ongoing take-private proposal review, and CapEx remains focused on inpatient rehab growth. Both executives mentioned evaluating AI for back-end billing processes, outpatient collections, virtual sitters, and telemetry monitoring.

A.J. Rice inquired about the source of nurses for labor disruption events, whether they are known or new, and if they become part of the future talent pipeline. He also asked for an update on the Kaiser contract and the implications of the recent March Visa Bulletin on the international staffing business outlook for 2026.

Answer

CEO Cary Grace stated that the supply for labor disruption events is a mix of known crisis workers, new recruits, and engaged suppliers, with high fill rates. She views this as an opportunity for these clinicians to continue working with AMN. Regarding Kaiser, she confirmed the contract runs through year-end 2025, with an expected RFP process this year. On the Visa Bulletin, Cary Grace noted the more significant progression than expected, which is positive for mid-teen growth in international staffing in 2026, particularly impacting late 2026 into 2027. CFO Brian Scott added it counterbalances other country restrictions.

A.J. Rice of UBS asked about the origin of nurses filling labor disruption assignments, whether they are new or existing talent, and how this impacts the future talent pipeline. He also inquired about the status of the Kaiser contract and the implications of the March Visa Bulletin's advancement of retrogression dates for the international staffing business in 2026.

Answer

Cary Grace, President and CEO, stated that labor disruption supply includes crisis workers known to AMN, new recruits, and engaged suppliers, viewing these experiences as opportunities for future assignments. She confirmed the Kaiser contract runs through year-end 2025, with an expected RFP. Ms. Grace and Brian Scott, Chief Financial and Operating Officer, noted the Visa Bulletin's more significant progression than expected, particularly for the Philippines, which is positive for international staffing growth in late 2026 and 2027, counterbalancing other country restrictions.

A.J. Rice asked about performance differences within Community Health Systems' diverse portfolio, specifically between mid-sized city markets and small community properties, and any notable geographical variations. He also inquired about the impact of achieving positive free cash flow on capital spending and the company's investments in AI.

Answer

Kevin Hammons, CEO, noted a wide range of performance but emphasized that most smaller hospitals are integrated into networks, serving as access points for higher acuity services. He confirmed that capital spending levels remain consistent in absolute dollars but are increasing per hospital, enabling investments in growth opportunities. He detailed AI applications in administrative areas like revenue cycle, appeals, coding, and prior authorization, as well as clinical uses such as virtual patient sitters and maternal-fetal early warning systems.

A.J. Rice inquired about Community Health Systems' projected free cash flow positive status for full year 2025 and how this might influence capital deployment, CapEx, and tuck-in deals. He also asked about potential headwinds and tailwinds for 2026 budgeting.

Answer

Kevin Hammons, President and Interim CEO, stated that achieving positive free cash flow provides optionality for further deleveraging or strategic capital deployment, including tuck-in deals and growth investments. For 2026, Mr. Hammons highlighted factors such as completed 2025 divestitures, prior year state-directed payments from Tennessee, strong Medicare rate increases, and potential new state-directed payment programs in Georgia, Florida, and Indiana. Jason Johnson, Interim CFO, added that the $28 million legal settlement from Q3 2025 should be excluded when considering the 2025 jump-off point for 2026.

A.J. Rice inquired about Community Health Systems' projected free cash flow positive status for full-year 2025 and how this might influence capital deployment, CapEx, and potential tuck-in deals. He also asked about anticipated headwinds and tailwinds for 2026.

Answer

Kevin Hammons, President and Interim CEO, confirmed that positive free cash flow provides optionality for further deleveraging or strategic capital deployment, including tuck-in deals. For 2026, he highlighted tailwinds such as strong Medicare rate increases and potential state-directed payment programs, while Jason Johnson, Interim CFO, reminded to exclude the $28 million legal settlement from 2025's jump-off point.

A.J. Rice asked for more detail on the cost and expense side of the 2026 guidance, specifically regarding the projected $14 million year-over-year EBITDA growth and the anticipated G&A cost reduction. He also questioned the expected share repurchase amount in the guidance and the types of M&A opportunities being considered, including potential larger, chunkier deals.

Answer

CEO Mark Ordan indicated that the EBITDA growth primarily reflects small-scale expense reductions and overall similar results to 2025, with no specific call-outs at this time. He stated that the guidance assumes a much smaller, opportunistic stock buyback compared to 2025. Mr. Ordan highlighted growth opportunities in physical practices, telemedicine, and OB hospitalist services, and expressed openness to larger M&A deals, including private equity-owned companies, while prioritizing core strength.

A.J. Rice asked for more details on the cost and expense assumptions embedded in the 2026 guidance, specifically regarding the projected $14 million year-over-year EBITDA growth and the anticipated G&A cost reduction. He also inquired about the expected scale of share repurchases in 2026 guidance and the types of M&A opportunities, including larger, chunkier deals, that Pediatrix Medical Group might consider beyond organic growth in core areas.

Answer

CEO Mark Ordan confirmed that the guidance includes small-scale expense reductions, with overall forecasts mirroring 2025 results due to normal operational changes. He noted that 2026 guidance assumes a much smaller, opportunistic stock buyback compared to 2025. Mr. Ordan highlighted diverse growth opportunities, from physical practices and telemedicine to OB hospitalist programs leveraging existing hospital relationships. He also mentioned inbound interest from private equity-owned companies seeking a new home, emphasizing a balanced approach to M&A that strengthens the core business.

A.J. Rice asked for clarification on the lower-than-expected corporate G&A expense in Q4 2025. He also questioned the implications of the shift to insurance-funded pre-need sales, specifically regarding commission normalization and the future trends for SCI Direct. Additionally, he sought more details on the observed improvement in cemetery production velocity.

Answer

Eric Tanzberger, CFO, attributed the lower Q4 2025 G&A to volatility in long-term incentive plan (LTIP) accruals, which are tied to S&P MidCap 400 performance, and occasionally to self-insured accruals. He guided for $40-$42 million per quarter going forward. Tom Ryan, Chairman and CEO, confirmed SCI Direct is fully implemented with the insurance product, expecting positive year-over-year trends. He explained that increased pre-need sales production and a shift to more fixed compensation (reducing deferrals for trust products) contributed to higher selling costs. Ryan linked improved cemetery production velocity to strategic focus on people retention, quality lead generation, effective lead-to-sale conversion training, and a higher rate of cremation consumers opting for cemetery services.

A.J. Rice asked for clarification on the lower-than-expected Corporate G&A expense in Q4 2025. He also questioned the implications of the shift to insurance-funded products, specifically regarding commission normalization and the completion of SCI Direct's restructuring. Finally, he sought more details on the improved velocity in the cemetery production area.

Answer

CFO Eric Tanzberger attributed the lower G&A to fluctuations in long-term incentive plan (LTIP) accruals, which can vary based on S&P MidCap 400 performance, and some minor impacts from self-insured insurance accruals. He guided for G&A to average $40-$42 million per quarter going forward. Chairman and CEO Tom Ryan confirmed that SCI Direct is 100% implemented with the insurance product, expecting over 90% of sales to be insurance-funded, leading to a positive trend year-over-year. He noted that increased pre-need sales production and a shift to more fixed compensation for trust products contributed to higher recognized selling costs. Mr. Ryan explained that cemetery velocity improvements are due to a focus on people retention, quality lead generation, and enhanced lead-to-sale conversion training, alongside a higher rate of cremation consumers choosing cemetery options.

A.J. Rice asked for comments on Tenet Healthcare's managed care contracting environment, specifically if there were any changes in the pace of new contracts or renegotiations, terms, or general rate updates, given pressures in the payer sector.

Answer

EVP and CFO Sun Park stated there was no real change in commentary, noting positive and successful conversations with payers due to Tenet's comprehensive service lines, including USPI. He confirmed consistent rate increases in the 3%-5% range. Mr. Park added that Tenet is virtually contracted for 2026 (high 90s) and approximately 80% contracted for 2027, indicating a strong position.

A.J. Rice sought comments on managed care contracting, specifically any changes in discussions regarding the pace of new contracts, renegotiations, terms, or general rate updates, given pressures in the sector.

Answer

Sun Park, Executive Vice President and Chief Financial Officer, reported no real change in commentary, noting positive and successful conversations with payers. She stated that rates are consistent, in the 3%-5% range, and the company is highly contracted for 2026 (high 90s) and 2027 (about 80%).

A.J. Rice inquired about specific expense management opportunities for 2026, including labor, supplies, and other areas, and whether AI deployment is a focus for achieving incremental savings.

Answer

Chairman and CEO Saum Sutaria detailed an ongoing business transformation initiative designed to identify short- and long-term opportunities across labor costs, leveraging advanced analytics, automation, and the global business center. He also mentioned continued investments in Conifer Health Solutions for more efficient collections and noted that supply management efforts were previously discussed.

A.J. Rice inquired about specific expense management opportunities for 2026, including labor, supplies, and the potential deployment of AI initiatives.

Answer

CEO Saum Sutaria stated that an ongoing business transformation initiative is looking for short- and long-term opportunities across all aspects of labor costs, including right-sizing corporate structure, leveraging advanced analytics, automation, and scaling the global business center. He also mentioned continued active investment in Conifer for more efficient collections and comprehensive review of supply costs.

A.J. Rice (represented by James) inquired about Healthcare Services Group's revenue upside potential, considering the mid-single-digit growth target, strong nursing home sector fundamentals, cross-sell opportunities, and campus division growth.

Answer

President and CEO Ted Wahl explained that HCSG's growth is execution-based, driven by developing management candidates, converting sales pipeline opportunities, and retaining existing business. He identified the ability to hire, develop, and retain management candidates as the primary growth-limiting factor for the next 12-18 months. Additionally, A.J. Rice asked about segment margin expansion, to which Chief Communications Officer Matthew McKee attributed the strong Q4 performance to service execution, workers' compensation and general liability efficiencies, and lower bad debt expense, targeting an 86% cost of services for 2026.

A.J. Rice questioned why Centene's Medicaid outlook differs from some national peers, asking if geographic footprint explains the variance. He also inquired about the impact of Centene's PBM contract renegotiation, which its vendor indicated as a drag, suggesting a benefit to Centene.

Answer

CEO Sarah London explained Centene's outlook stems from an elevated 2025 baseline (94.9% HBR in Q2), favorable 2025 rate maturation, and aggressive H2 2025 execution leading to sequential HBR improvement to 93.0%. She highlighted momentum from 1/1/2026 effective actions in rates, network, clinical programs, and payment integrity. CFO Drew Asher stated Centene benefits from a tailored, transparent, and flexible PBM contract for over a decade, leveraging $60 billion in pharmacy spend without owning a PBM, which provides immense flexibility and contributes to product cost structure and margin targets.

A.J. Rice asked why Centene's Medicaid outlook differs from peers, inquiring if geographic footprint or the PBM contract renegotiation (benefiting Centene) might explain the discrepancy.

Answer

CEO Sarah London highlighted Centene's elevated 2025 baseline (94.9% HBR in Q2), favorable 2025 rate maturation, and aggressive H2 2025 execution (93.0% HBR) as key differentiators. CFO Drew Asher described Centene's PBM contract as tailored, transparent, and flexible for over a decade, benefiting from $60B pharmacy spend without owning a PBM, allowing immense flexibility in market collaboration and cost structure.

A.J. Rice asked about states allowing adjustments to benefit design in Medicaid, the confidence in Medicaid margin recovery in 2026, and how future legislative changes like OB3 work rules might impact margin improvement in 2027 and beyond.

Answer

President and CEO Joe Zubretsky stated that even in a trough environment, Molina's Medicaid margins are low single-digit, while the market is 300-400 basis points underfunded. He cited mid-cycle rate updates, future use of 2025 cost baselines, and discrete rating factors for LTSS, pharmacy, and behavioral health as drivers for rate improvement. CFO Mark Keim noted that OB3's annual impact is estimated at 2-4% over three years, with no meaningful impact on membership or acuity. Joe Zubretsky also mentioned some marginal benefit design changes, like tighter utilization controls for behavioral health and diabetes diagnosis requirements for GLP-1s.

A.J. Rice inquired about states allowing adjustments to benefit design in Medicaid and Molina's confidence in Medicaid margins bottoming in 2026 and recovering, particularly in light of the 'One Big, Beautiful Bill' work rules set to kick in during 2027.

Answer

President and CEO Joe Zubretsky expressed confidence in Medicaid recovery, citing market underfunding (300-400 basis points), potential for mid-cycle updates (like the 150 basis points received in 2025), stronger rates when 2025 cost baselines are used, and transparent discrete rating factors for high-trending services. He also noted the 250 basis point redetermination-related acuity shift will not recur in 2026. CFO Mark Keim added that the impact of OB3 on membership decline and acuity is expected to be small and manageable over the next three years. Joe Zubretsky also mentioned some marginal and sporadic benefit design changes, such as tighter utilization controls for behavioral health and diabetes diagnosis requirements for GLP-1s.

A.J. Rice asked about the assumed cost trend across Elevance Health's major lines of business for 2026, specifically inquiring if it's similar to 2025 or if any segments are expected to worsen or improve.

Answer

Mark Kaye, CFO, explained that Q4 medical cost performance was generally in line or slightly better than expected. For 2026, commercial large group is expected to see elevated but stable trends, ACA anticipates accelerating trends due to healthier members exiting, Medicaid expects continued pressure with mid-single-digit trend (moderation vs. 2025), and Medicare anticipates higher reported trends driven by membership mix, particularly D-SNPs. Gail Boudreaux, President and CEO, added a brief closing remark.

A.J. Rice asked about the assumed cost trend across major lines of business (commercial, Medicaid, Medicare, and exchanges) for 2026, specifically whether it's similar to 2025 or if there are expectations for it to worsen or improve.

Answer

Mark Kaye, CFO, Elevance Health, stated that Q4 medical cost performance was generally in line or slightly better than expected. For 2026, commercial large group cost patterns and margins are expected to be consistent with 2025 (elevated but stable trend). ACA is expected to see accelerating cost trends due to expiring subsidies and a more acute risk pool. Medicaid cost pressure will remain, reflecting elevated utilization and rate misalignment, but with some moderation versus 2025, moving into the mid-single-digit range. Medicare anticipates higher reported cost trends driven by membership mix, particularly D-SNPs.

A.J. Rice asked about Elevance Health's Medicaid outlook, specifically the projected 125 basis point margin decline for 2026, inquiring if states acknowledge this trend, the unique position of Elevance, and the impact of cost trends versus rate updates and potential benefit design changes.

Answer

Mark Kaye, CFO, explained the 2026 outlook is anchored to expected Q4 exit rates and preliminary 2025 Medicaid operating margin of approximately negative 50 basis points, with rates expected to modestly exceed historical levels but still trail trend. Felicia Norwood, President of Government Health Benefits, highlighted constructive state dialogues, states' receptivity to cost reduction levers like ABA and GLP-1s, and a shared focus on program sustainability. Gail Boudreaux, President and CEO, reinforced the prudent approach.

A.J. Rice asked about the Medicaid segment, specifically the projected 125 basis point margin decline for 2026, inquiring if states acknowledge these trends, the nature of cost pressures (cost trend vs. rate updates), and if contemplated benefit design changes could offer upside.

Answer

Mark Kaye (CFO and EVP, Elevance Health) explained that the 2026 Medicaid trend assumption is anchored to the expected Q4 exit rate, with the full-year 2025 Medicaid operating margin expected to be modestly below breakeven (-50 bps). He noted that state rate updates are expected to be modestly above historical levels but will still trail trend, positioning 2026 as the trough. Felicia Norwood (President of Government Health Benefits, Elevance Health) added that conversations with states are constructive, with states recognizing affordability challenges and being receptive to program changes to reduce overall costs and utilization, such as in ABA and GLP-1s. Gail Boudreaux (President and CEO, Elevance Health) reinforced the prudent approach, assuming entry into 2026 at the 2025 exit rate.

A.J. Rice asked about HCA Healthcare's underlying assumptions for expense items like SWB, supplies, other operating expenses, and professional fees embedded in the 2026 guidance, inquiring about potential margin improvement opportunities and the stability of contract and general labor costs.

Answer

CFO Mike Marks stated that the midpoint of revenue and Adjusted EBITDA guidance suggests stable margins for 2026, with mostly stable operating cost trends, but noted expected high single-digit growth in physician cost pressures. He confirmed that contract labor as a percentage of SWB is expected to remain around 4.2% and highlighted the resiliency plan's role in offsetting exchange headwinds through strong cost and operating leverage.

A.J. Rice asked about UnitedHealth Group's long-term growth trajectory, specifically if the company still expects to achieve low double-digit earnings growth in 2027 and traditional growth rates in 2028, considering the impact of the recent MA rate notice and the underlying assumptions for gradual margin improvement across businesses.

Answer

Stephen Hemsley, Chairman and CEO of UnitedHealth Group, stated that while it's too early to discuss 2027 specifics, the business is significantly stronger than a few months prior, with a clear agenda to strengthen further in 2026. He expressed strong confidence in operating within the long-term growth rate margins of 13%-16%. Hemsley highlighted the enormous potential of AI-driven productivity, innovation, value-based care, thoughtful capital stewardship, and expansion into value-added markets as compelling drivers for the enterprise's long-term growth, contingent on strong execution.

A.J. Rice inquired about Optum Insight's competitive position, the necessary investment areas, and the expected timeframe for re-accelerating growth.

Answer

Stephen Hemsley (Chairman and CEO, UnitedHealth Group) affirmed Optum Insight's strong competitive position and greater potential. Sandeep Dadlani (CEO of Optum Insight) highlighted new AI-first products like Optum Real (real-time claims/reimbursements), Optum Integrity One (AI auto-coding with significant productivity gains), and Crimson AI (clinical analytics with high ROI). He emphasized the need to evolve traditional services to AI-first, products, and platforms, along with investing in an AI-first workforce, expressing excitement for future possibilities.

A.J. Rice inquired about Optum Insight's competitive position, the specific areas requiring investment, and the expected timeframe for a re-acceleration of growth within the segment.

Answer

Stephen Hemsley, Chairman and CEO, stated that Optum Insight's competitive position is strong with significant growth potential. Sandeep Dadlani, CEO of Optum Insight, highlighted new AI-first products like Optum Real and Optum Integrity One, showcasing their impact on claims processing and coding productivity. He emphasized the evolution to AI-first services and platforms, and investment in an AI-first workforce, expressing excitement for future growth.

Asked for clarification on OptumHealth's margin outlook, specifically whether the repricing on the UnitedHealthcare side would flow through as a benefit to OptumHealth's capitation rates, and if they are seeing similar pricing discipline from other health plans they contract with.

Answer

Patrick Conway confirmed that pricing adjustments from UHC and other payers will flow into OptumHealth's capitation rates, acting as a tailwind. This, combined with benefit reductions and better payer dialogue, is expected to mitigate about 50% of the V'28 headwind in 2026. The other 50% will be addressed through operating cost reductions and improved patient cohort management. They expect to maintain the 1% margin level in 2026.

A.J. Rice asked about the pipeline for de novo development, specifically the 6-10 hospitals per year trajectory, and if there's pressure from partners to move faster or competition from other players. He also sought an update on expanding prefab construction capabilities and its potential impact on geography and efficiency.

Answer

CFO Doug Coltharp stated that 14 projects were announced and underway at the end of Q3, with an active pipeline of over 40 projects, supporting the 6-10 de novo target. He noted that Encompass Health typically moves faster than partners due to experience and streamlined processes, and high barriers to entry limit competition. President and CEO Mark Tarr highlighted strong alignment with partners like Piedmont. Doug Coltharp also discussed evaluating changes to module configuration for rail transport or a second manufacturing site to expand prefab geography, noting that the cost differential between prefab and hybrid conventional construction is decreasing.

A.J. Rice asked about Encompass Health's development pipeline, specifically if there's pressure from potential partners to accelerate new hospital openings and how the competitive landscape for joint ventures compares in terms of development timelines. He also sought an update on the company's efforts to expand its prefabrication capabilities and the potential geographic and cost benefits.

Answer

CFO Doug Coltharp noted 14 announced projects and an active pipeline of over 40, confirming the ability to meet the 6-10 de novo target. He stated that partners typically move slower than Encompass Health due to its experience and streamlined processes, and that high barriers to entry limit competition despite other players' stated expansion plans. Doug Coltharp also explained that the company is evaluating changes to module configuration for rail transport or a second manufacturing site to expand prefab geography, while noting that the cost advantage of full prefab is diminishing as componentized prefab becomes standard in conventional construction.

A.J. Rice inquired about the pacing of BrightSpring's new drug launches, specifically if the 16-18 launches over 12-18 months indicate an acceleration or a consistent robust pipeline, and sought clarification on the Amedisys and LHC Branch acquisitions, including any changes in scope and expected accretion for 2026.

Answer

CEO Jon Rousseau confirmed the pipeline remains robust and unchanged, with a strong year for brand wins slightly ahead of expectations, but without affecting future pacing. He clarified that the Amedisys and LHC Branch acquisition universe increased slightly due to FTC agreements, with the transaction expected to close this quarter, and confirmed it would be accretive in 2026.

A.J. Rice asked about the pacing of new drug launches, specifically if the 16-18 launches over 18 months guidance has changed, if the pace is accelerating, and the robustness of the pipeline. He also inquired about any changes or increased size in the Amedisys and LHC Home Health Branch acquisitions and their expected accretion for 2026.

Answer

CEO Jon Rousseau confirmed the pipeline remains robust and unchanged in magnitude, with a strong year for brand wins and some therapies launching sooner, but without affecting future pace. He still expects 15-18 launches over the next 12-18 months. Regarding acquisitions, Mr. Rousseau clarified that while Amedisys represents the significant majority, the universe of divested LHC branches increased slightly due to FTC agreements, and the transaction is expected to close this quarter. He affirmed that accretion for 2026 is a fair comment.

Asked for the assumptions behind the estimated $50 million headwind if ACA exchange subsidies expire, and inquired about the impact of increased insurance revenue and new hospital openings on the 2025 guidance.

Answer

The $50M headwind is a 'guesstimate' based on losing coverage for about half of their exchange patients. The guidance includes a ~$200M increase in insurance revenue, which is a top-line item with minimal EBITDA impact. The two new hospitals are expected to be EBITDA positive in 2025 but will slightly depress same-store metrics due to some cannibalization.

Asked for comments on labor trends, the pace of new bed additions and JV pipeline in behavioral, and whether future free cash flow would be directed towards M&A or buybacks.

Answer

The executive noted that labor trends have stabilized, with lower wage inflation and diminished premium pay contributing to margin recovery. The company has restarted adding beds to its behavioral business in high-occupancy markets. Regarding capital deployment, the focus will likely remain on capital expenditures and share repurchases, as M&A opportunities have not been compelling.