Ben Hendricks

Ben Hendrix asked for a comparison between the ramp-up of the Amedisys and UnitedHealth assets and the prior Signature acquisition, seeking insights into what might work better or lag, and the lessons learned. He also inquired if Columbia River Home Health was part of the Signature asset group.

Answer

CEO Brent Guerisoli noted similarities like strong leaders and existing Homecare Homebase usage, but highlighted differences such as the larger scale, multiple transition waves, and unique transition services agreement for the Amedisys/UnitedHealth deal. He emphasized that lessons from the Signature integration, which progressed faster than anticipated, provided confidence for this larger acquisition. President and COO John Gochnour clarified that Columbia River Home Health was an existing Pennant operation for seven years, not part of the Signature acquisition, showcasing the efficacy of their long-term local operating model.

Ben Hendrix asked for a comparison between the ramp-up of the Amedisys/UnitedHealth assets and the prior Signature acquisition, seeking insights into lessons learned and confidence in the integration timeline. He also inquired if Columbia River Home Health was part of the Signature acquisition.

Answer

CEO Brent Guerisoli noted similarities in leadership quality and system usage (Homecare Homebase) but highlighted the larger scale and unique elements like the Transition Services Agreement for the Amedisys/UnitedHealth deal. He emphasized lessons learned from Signature, which accelerated subsequent acquisitions, and expressed confidence in local leaders and support teams, anticipating optimization by late 2026. President and COO John Gochnour clarified that Columbia River Home Health was not part of Signature, having been operated by Pennant for seven years, serving as an example of their model's long-term efficacy. CEO Brent Guerisoli added that Columbia River's team supported Signature transitions, demonstrating their operational strength.

Ben Hendrix of RBC Capital Markets inquired about the broader Medicare cap risk for VITAS, reconciling Florida's improved position with industry trends of declining cushions and increased liability buckets, and the cap risk in other markets. He also asked for details on Roto-Rooter's conversion-adjusted dollars per lead for paid search.

Answer

CEO Kevin McNamara, COO Joel Wherley, and CFO Michael Witzeman confirmed Florida's Medicare cap issue is resolved with no billing limitation projected for 2026. They noted California is the primary remaining cap liability, which is manageable, and small programs may temporarily dip into cap without major dollar impact. Strategies from Florida are being applied to other markets. For Roto-Rooter, Kevin McNamara stated that paid leads cost roughly $90 each, with 1.5 to 2 leads converting to a paying job, resulting in a customer acquisition cost of $150-$180 per paying job. Paid leads currently constitute 60%-65% of total leads.

Ben Hendrix of RBC Capital Markets sought clarification on how VITAS's improved Florida Medicare cap position aligns with broader industry trends showing declining cap cushions and increased liability buckets. He also asked for details on cap risk in other markets and for a conversion-adjusted dollar per lead metric for Roto-Rooter's paid search.

Answer

Kevin McNamara, President and CEO, and Joel Wherley, COO of VITAS Healthcare Corporation, clarified that the $9.5 million estimated Medicare cap for 2026 is consistent with historical run rates (pre-2025), with no Florida limitation. The majority of the remaining cap liability is in California, which has seen improvement due to strategies learned in Florida. Small programs may temporarily dip into cap in Q1 due to calculation sensitivity, but there are no major concerns for other programs. For Roto-Rooter, Kevin McNamara stated that they pay roughly $90 per lead, and with a conversion rate of 1.5 to 2 leads per paying job, the customer acquisition cost for a paid lead job is approximately $150-$180.

Ben Hendrix asked about the demand for outpatient behavioral services, including specific service types offered in 2025 and expected for 2026, and the optimal long-term business mix between inpatient and outpatient care.

Answer

CEO Marc Miller stated that outpatient services currently represent about 10% of behavioral segment revenue and are expected to grow. The company operates nearly 120 outpatient locations offering both step-down services (e.g., partial hospitalization, intensive outpatient) and step-in services (e.g., IOP, counseling, virtual care) under the 'Thousand Branches Wellness' brand. He noted strong payer demand for in-network step-in services as an alternative to inpatient care, with plans to open at least 10 more Branches locations in 2026, anticipating continued expansion opportunities.

Ben Hendrix asked about the demand drivers for Universal Health Services' outpatient behavioral services, the types of services offered in 2025 and planned for 2026, and the long-term optimal mix between inpatient and outpatient behavioral business.

Answer

Marc Miller, President and Chief Executive Officer, stated that outpatient services currently represent about 10% of behavioral segment revenue and are expected to grow. He described 'step-down' services (partial hospitalization, intensive outpatient) for post-acute care and 'step-in' services (IOP, counseling, virtual care) for new patients, often branded as Thousand Branches Wellness. Steve Filton, Executive Vice President and Chief Financial Officer, added that outpatient margins are generally better, and growing this segment will help diversify payer mix.

Ben Hendrix asked for early observations on the ramp pacing of new facilities, specifically what factors are contributing to better traction or lagging performance. He also followed up on the Pennsylvania facilities impacted by the New York Medicaid decision, asking about the timing of a payer mix shift and potential for exit or strategic review.

Answer

CEO Debbie Osteen identified common themes for 2025's ramp issues, primarily related to regulatory approvals, licensure, and billing tie-ins, rather than patient demand. She stated that processes are being changed for 2026 to ensure timely openings. CFO Todd Young clarified that two Pennsylvania facilities were closed to consolidate operations. He stated that while a $25 million-$30 million EBITDA impact is expected for 2026, the company is actively seeking new referral sources, including New Jersey, to change the payer mix and improve results, with no current plans for further exits.

Ben Hendrix asked for early observations on the pacing and factors influencing the ramp-up of new facilities, specifically what might be working well or lagging. He also followed up on the Pennsylvania facilities, asking about the timing of their payer mix shift and if they might be considered for exit or strategic review.

Answer

CEO Debbie Osteen identified common themes in the 2025 ramp-up issues, primarily related to regulatory approvals, licensure, and billing tie-ins, rather than patient demand. She noted that processes are being changed for 2026 openings to ensure smoother transitions. CFO Todd Young clarified that two Pennsylvania facilities were closed for consolidation, and efforts are underway to source patients from new states like New Jersey and diversify the payer mix to mitigate the $25-$30 million EBITDA impact, with no current plans for further exits.

Ben Hendrix asked about the rate backdrop for Personal Care Services, specifically inquiring about rate conversations in states like New Mexico and Tennessee, outside of Texas and Illinois, given the OBBBA headwinds.

Answer

Brian Poff, EVP and CFO of Addus HomeCare, indicated a potential 4-5% rate increase in New Mexico, awaiting the governor's signature, expected to benefit the company in the latter half of the year. He also noted that while Illinois' initial budget doesn't include a rate increase, this is consistent with last year when one was eventually secured.

Ben Hendrix inquired about the current rate backdrop for personal care services, specifically asking for updates on rate conversations in states like New Mexico and Tennessee, given the OB3 headwinds.

Answer

Brian Poff, EVP and CFO, Addus HomeCare, responded that New Mexico is likely to see a 4-5% rate increase in the latter half of the year, pending the governor's signature. He noted that Illinois' initial budget does not include a rate increase, but this is consistent with previous years where increases were secured later.

Ben Hendrix asked about parsing income statement items, specifically the total amount of higher health costs and their impact on the Outpatient Rehab business margin (3.4%), differentiating between variable discounts, Medicare rate, mixed pressure, and health costs. He also asked about the puts and takes for future guidance, including continuing mixed pressure and base assumptions for other segments.

Answer

Michael Malatesta (EVP and CFO, Select Medical Holdings Corporation) stated that health insurance expense impacted the outpatient division by approximately $5 million and variable discounts by $6 million for the quarter, with the remainder due to payer mix shifts and market softness. He expressed confidence in the Inpatient Rehab division's robust pipeline, cautious optimism for Outpatient Rehab improvement (believing the $11 million impact was one-time), and cautious optimism for Critical Illness, noting its variability.

Ben Hendrix asked for a detailed breakdown of income statement items, specifically the higher health costs and their impact on the Outpatient Rehab Division's margin, variable discounts, Medicare rates, mixed pressure, and overall health costs. He also inquired about the forecasting assumptions for continuing mixed pressure and the base assumptions for other segments in the 2026 guidance.

Answer

Michael Malatesta, EVP and CFO, explained that health insurance expense impacted the outpatient division by approximately $5 million and variable discounts by $6 million for the quarter. He expressed confidence in the Inpatient Rehab Division's robust pipeline, cautious optimism for the Outpatient and Critical Illness divisions, and noted that outpatient expectations were tapered in the guidance. Thomas Mullin, CEO, added that some market softness in outpatient was due to rate evaluation and staffing challenges.

Ben Hendrix requested a detailed revenue bridge, specifically asking for the impact of divestitures, the pass-through provider tax, the one-time Tennessee SDP (State Directed Payment) item, and the profitability of divested assets on the revenue figures. He also asked about the projected pacing of core growth throughout 2026, considering the impact of consumer confidence issues and the early-year mix shift mentioned in prepared remarks.

Answer

CFO Jason Johnson provided a revenue bridge, detailing that 2025 divestitures reduced net revenue by $210M-$230M, and 2026 divestitures would reduce it by about $1B, noting that three Pennsylvania hospitals generated $500M annually but were break-even for EBITDA. The Tennessee SDP and opioid settlement added $60M in net revenue. CEO Kevin Hammons anticipated a soft start to the year due to a dip in consumer confidence and the reset of co-pays and deductibles, expecting the back half of 2026 to be stronger in terms of EBITDA production.

Ben Hendrix asked for a detailed breakdown of the revenue guidance bridge, focusing on elements like the pass-through provider tax, the one-time Tennessee DPP item, and the profitability impact of divestitures. He also questioned how the projected core growth accounts for consumer confidence issues and how this might affect the pacing of performance throughout the year.

Answer

Jason Johnson, EVP and CFO, provided a revenue bridge, noting a $210 million to $230 million reduction from 2025 divestitures and a $1 billion reduction from 2026 divestitures (including Pennsylvania hospitals which generated $500 million in revenue but were break-even on EBITDA), plus a $60 million impact from one-time items. Kevin Hammons, CEO, acknowledged a dip in consumer confidence and anticipated a softer start to the year due to deductible resets, but expects improvement, leading to a stronger back half of 2026 for EBITDA production.

Ben Hendrix focused on Brookdale Senior Living's occupancy bands, specifically the 70-80% range, and asked about the timing and considerations for moving these communities above 80%. He inquired about the profile of these communities regarding key leadership, geographical considerations, shifts in pricing strategy, and CapEx needs that might be gating items for achieving higher occupancy.

Answer

CEO Nick Stengle stated that the 70-80% occupancy band is a 'sweet spot' for their SWAT team efforts, as significant flow-through occurs once communities surpass 80% occupancy. He noted that while some communities below 70% are being disposed of, a lot of SWAT energy is directed at the 70-80% band to push them beyond the 80% benchmark. CFO Dawn Kussow added that a significant number of communities in the 70-80% band are already part of SWAT team groups, receiving focused attention on CapEx, pricing, and associate turnover to drive occupancy improvements, building on progress made in 2025.

Ben Hendricks focused on Brookdale's communities in the 70-80% occupancy band, asking about the timing and considerations for getting these communities above 80%. He also inquired about the profile of key leadership, geographical considerations, pricing strategy, and CapEx needs for this specific occupancy segment.

Answer

CEO Nick Stengle explained that the 70-80% occupancy band is a key focus for SWAT teams, as significant earnings flow-through occurs above 80%. He noted that once communities exceed 85-90% occupancy, they tend to maintain momentum. CFO Dawn L. Kussow added that some communities in this band are slated for disposition, and a large number are already targeted by SWAT teams for improvements in CapEx, pricing, and associate turnover, with expectations for continued progress in 2026.

Ben Hendricks asked about the same-store hospital volume performance in the fourth quarter of 2025, noting it appeared weaker than the trend, and sought clarification on the expected improvement in hospital volumes for 2026, considering factors like exchange marketplace changes and core performance.

Answer

EVP and CFO Sun Park attributed the Q4 2025 volume weakness primarily to a weaker respiratory season. CEO Saum Sutaria added that the anticipated improvement in 2026 hospital volumes is expected to result from significant growth capital investments made in 2025. Regarding the exchange marketplace, Mr. Park noted an assumed 20% decrease in enrollment, with the understanding that patients might seek alternative coverage or become uninsured, still impacting hospital operations.

Ben Hendrix sought more detail on the 1%-2% hospital admission growth guide, asking for a breakdown of the slowdown from the previous year, specifically regarding exchange exposure, investments in higher acuity, and general acute sector trends.

Answer

Saum Sutaria, Chairman and Chief Executive Officer, reiterated comments on Q4 admissions, while Sun Park, Executive Vice President and Chief Financial Officer, noted that 2026 volume momentum is expected from 2025 CapEx and technology investments. Ms. Park also discussed assumptions for exchange enrollment decreases and potential alternative coverage.

Ben Hendrix focused on the 140,000 new D-SNP members, asking how this 18% growth compared to expectations, the profile of these members (bounce-back, from exited communities), and the degree to which they are paneled to value-based partners.

Answer

George Renaudin (President of Medicare and Medicaid) explained that the absolute number of D-SNP members was higher than expected due to overall growth, but as a percentage, it was slightly lower. He reiterated that Humana did not gain its market share from competitor plan exits across the business, including D-SNP. Regarding value-based partners, he noted that new membership often starts with lower paneling rates than the existing block, but this increases over the year. However, duals (D-SNP members) tend to come in with a greater share paneled compared to the overall membership due to their HMO product type.

Ben Hendrix focused on the 140,000 new D-SNP members, asking how this 18% growth compared to expectations, their profile (bounce-back, from exited communities), and their degree of paneling to value-based partners.

Answer

President of Medicare and Medicaid George Renaudin explained that the absolute number of D-SNP members was higher than expected due to overall growth, but the percentage was slightly lower. He confirmed Humana did not gain market share from competitor plan exits. Duals tend to come in more paneled to value-based partners compared to core membership, and paneling increases over time.

Ben Hendrix asked if the softer MA advance rate notice and carriers' focus on margin enhancement create an opportunity for SelectQuote to gain marketing share due to its unique capabilities in promoting better fit and persistency. He also questioned if the new PBM contract includes cost-plus components, similar to emerging industry trends, and its potential to stabilize the SelectRx business.

Answer

CEO Tim Danker acknowledged the market's financial stress presents an opportunity for SelectQuote's efficient and high-quality model, citing 39% Senior EBITDA margins and strong retention/recapture rates as attractive to carriers seeking quality and efficiency. President Bob Grant confirmed the new PBM contract is similar to a cost-plus model with a guarantee, providing stability without MAC pricing risk, and noted the industry's movement towards such structures, which justifies SelectRx's high service levels.

Ben Hendrix from RBC Capital Markets asked about SelectQuote's positioning to gain market share and increased marketing spend from carriers, especially given the softer MA advance rate notice and the company's proven ability to drive better policy fit and persistency. He also inquired if SelectQuote's new PBM contract incorporates cost-plus components, similar to emerging industry trends, to stabilize the SelectRx business.

Answer

CEO Tim Danker acknowledged the challenging MA rate environment but highlighted SelectQuote's efficient and high-quality model, demonstrated by 39% Senior EBITDA margins and strong retention, as a key advantage for attracting carrier partners focused on quality and efficiency. President Bob Grant explained that the new PBM contract for SelectRx is structured similarly to a cost-plus model with a guarantee, providing stability and aligning with the industry's shift towards justifying service levels through dispensing fees.

Ben Hendrix asked about the new services under Carelon Services where Elevance is taking risk, and the extent to which this expansion could offset the shifting margin dynamics mentioned in CarelonRx.

Answer

Pete Haytaian, President of Carelon, Elevance Health, explained that Carelon takes on risk intentionally and disciplinedly, with a diverse set of services and a mix of fee-based and risk business (category of service or whole health risk). He noted that new offerings like Severe Mental Illness (SMI), oncology, and CareBridge are risk offerings that deploy value from a cost of care and quality perspective for the enterprise.

Ben Hendrix asked for clarification on the Carelon margin discussion, specifically regarding the expansion of risk-based solutions in Carelon Services through 2025, new services or product lines where risk is being taken, and the degree to which this expansion could offset shifting margin dynamics in CarelonRx.

Answer

Pete Haytaian, President of Carelon, explained that Carelon takes a very intentional and disciplined approach to risk, with a diverse mix of fee-based and risk business, including category-of-service and whole-health risk, with appropriate protections. He noted that risk is assumed in most product offerings, and new offerings like SMI, oncology, and CareBridge are risk offerings that deliver value. Gail Boudreaux, President and CEO, added that a strong external growth pipeline validates this approach, focusing on serving complex populations based on internal health plan experience. Gail Boudreaux, President and CEO, added a brief closing remark.

Ben Hendrix asked for HCA's thoughts on the potential transition to a Health Savings Account (HSA) construct for enhanced subsidies, assuming funds go directly to customer HSAs. He questioned how this would impact the current assessment of EPTC expiry headwinds and uncompensated care, especially if patients have access to funds but do not purchase insurance.

Answer

CFO Mike Marks stated it's too early to size the potential impacts from President Trump's recent healthcare plan announcement, which included themes of improving affordability, insurance plan accounts, pharmaceutical prices, price transparency, and potentially shifting to cash in HSAs. He noted that HCA is monitoring developments closely as they flow through Congress and will provide updates when more information is available.

Ben Hendrix asked for HCA Healthcare's initial thoughts on the potential transition to a health savings account (HSA) construct for enhanced subsidies, its impact on EPTC expiry headwinds, and uncompensated care, assuming funds go directly to customer HSAs.

Answer

CFO Mike Marks acknowledged President Trump's healthcare plan announcement, which included themes like improving affordability and potentially changing to cash in HSAs instead of exchange tax credits. However, he stated it's too early to size potential impacts as the plan's aspects and congressional reactions are still uncertain, and HCA is monitoring developments closely.

Ben Hendricks asked about the local market strategy, specifically how referral and payer relationships fared during the audit process and if any changes were necessary. He also inquired if the operational changes resulting from the audit have altered the company's M&A target selection, particularly the balance between deep turnaround opportunities and already well-performing facilities.

Answer

Jason Murray, CEO, emphasized that the locally led, centrally supported model allowed administrators to adapt to local market needs, which proved resilient during challenging times. He pointed to strong census numbers as evidence that PACS remains the provider of choice, confirming that relationships in their markets held up well. Regarding M&A targets, Mr. Murray stated that there has been no change in thinking. The company continues to use its disciplined investment committee structure to evaluate deals and will continue to pursue deep turnaround opportunities, as they are confident in their ability to transform struggling facilities clinically and financially.

Ben Hendricks asked how local market referral and payer relationships fared during the audit process, and if any changes were made with key sources. He also inquired if operational changes from the audit have altered M&A target selection, specifically balancing deep turnaround opportunities versus already well-performing facilities.

Answer

Jason Murray (CEO) explained that the locally led, centrally supported model allowed administrators to adapt to local market needs, and strong census numbers indicated PACS remained the provider of choice, demonstrating the model's resilience. He confirmed that relationships remained strong. Jason Murray stated that the company's disciplined M&A evaluation process, involving an investment committee, has not changed. He affirmed that PACS will continue to pursue deep turnaround opportunities, like the Colorado example, where their model can transform struggling facilities clinically and financially, deploying resources to improve quality metrics in a disciplined manner.