Benjamin Hendrix • RBC Capital Markets

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CEO J. Evans characterized cardiology as a long-term opportunity that is currently ramping slowly from a small base, partly due to state-level regulatory hurdles. However, he noted progress, with facilities adding CRM procedures and the recent opening of their first cardiac cath lab ASC. He framed it as a major future growth driver with significant cost-saving potential, similar to the trajectory of orthopedics.

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CEO Jeff Shaner clarified that new government rate wins are expected to be in the single-digit percentage range, not at the material levels seen previously, and that part of the Q1 benefit was from retroactive rate catch-ups. He confirmed that preferred payer agreements now account for 54% of PDS MCO volume. CEO Jeff Shaner projected this percentage would reach the mid-to-high 50s by year-end as they work toward their goal of 30 total agreements.

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CEO Jeff Shaner described the preferred payer strategy in Home Health as being in its later stages, aiming for a 70-75% episodic mix and a 3%+ organic growth rate. While expressing disappointment with CMS's failure to address the PGM clawback in the final rule, Shaner affirmed that Aveanna's business model is structured to be successful and thrive under the current reimbursement rates, which were slightly positive for the company.

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Executive William Newton explained that workers' compensation fee schedules historically incorporate inflationary adjustments, typically using metrics like CPI or MEI, with most updates occurring in the first quarter, making them fairly reflective of recent inflation. Executive Matthew DiCanio attributed the cost of service improvements to strong revenue and rate gains, as well as operational efficiencies from better staffing management, more stable visit volumes, and technology initiatives that have improved key metrics like patient satisfaction and turnaround times.

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Executive Matthew DiCanio clarified that Hurricane Milton's impact was not material and is included in the full-year 2024 guidance. Executive William Newton asserted that weather events have not slowed M&A or development efforts in Florida and noted that post-hurricane rebuilding activities could potentially create a positive impact on future visit volumes.

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CEO Martin Bonick reported a growing M&A pipeline with increased inbound interest, particularly from academic partners. He believes that while some headline valuations are high, most deals will trade in a normal historical range. He emphasized that any acquisition must be accretive within 24 months and noted the company is hiring a Chief Development Officer to capitalize on these opportunities.

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CFO Alfred Lumsdaine indicated the professional fee headwind in 2025 is expected to be similar in magnitude to 2024's growth. CEO Marty Bonick confirmed a continued focus on urgent care expansion through M&A and de novo builds, while also expanding focus to include ambulatory surgery centers, imaging centers, and freestanding EDs.

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CEO Marty Bonick explained that the rationalization of lower-margin surgeries is ongoing but its impact is beginning to lessen. He stated this aligns with the broader industry shift from inpatient to outpatient care, which directly informs Ardent's strategy to grow its Ambulatory Surgery Center (ASC) footprint in partnership with physicians.

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EVP & CFO Dawn Kussow explained that pricing discipline is strong, with same-store RevPOR growth of 2.8% outpacing ExPOR growth of 1.6%. She clarified that new promotions are targeted pilots to boost occupancy in specific communities, particularly those at or above the 80% threshold, to maximize flow-through. EVP & General Counsel Chad White added that the 'first impressions' program is primarily aimed at accelerating occupancy growth to remain competitive, rather than directly driving immediate rate increases.

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President & CEO Lucinda Baier explained that the lower acuity mix is a strategic result of programs like Brookdale HealthPlus and memory care pricing unbundling, which attract residents who may have a longer length of stay, rather than a change in referral sources. Regarding the Ventas portfolio, she noted that a CCRC with a higher government pay mix is being transitioned but did not provide a detailed Medicaid mix comparison for the entire group of exited assets.

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CEO Fran Soistman explained that eHealth's strategy of offering significant choice with nearly 50 carrier relationships mitigates the impact of any single carrier's decision. He characterized the move as unusual for this time of year and expects the carrier to revisit its strategy before the next Annual Enrollment Period (AEP), given that Q2 and Q3 are seasonally low-volume quarters.

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CEO Fran Soistman confirmed that the potential for increased D-SNP volume in Q4 is factored into their guidance. Regarding the Amplify platform, Soistman expressed confidence due to its early stage of evolution, strong performance on carrier partner metrics like conversion and quality, and its strategic value in diversifying revenue with lower capital investment. He stated that scaling the business by adding new partners will drive margin improvement over time.

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W. Bickham, President and COO, stated that Medicare Cap limitations have not been a material issue for Addus. He attributed this to maintaining a balanced referral mix in each market, an effort bolstered by new sales leadership. Bickham also confirmed that high wage index regions have not negatively impacted the company from a cap standpoint.

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Executive Jason Clemens called the M&A question 'astute,' confirming the company has some deals under LOI in markets where it could improve, but reiterated that the capital allocation priority remains modest tuck-in activity. On the tariff question, he stated that from a supply perspective, it is 'business as usual' with no preemptive inventory building.

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CEO Suzanne Foster confirmed a strong pipeline for new capitated deals and a positive, data-driven relationship with Humana. CFO Jason Clemens added that smaller capitated deals have been signed and the multi-year Humana extension signals success. Clemens also detailed working capital progress, expecting stable DSOs and continued inventory/CapEx discipline, while noting that 2024's significant payables improvements are unlikely to repeat at the same scale.

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CFO Jason Clemens stated that there have been no material shifts back to the DME channel since the last quarter, aside from a minor advantageous policy change in two states' Medicaid programs. He noted that the company will have a clearer picture of the landscape for the upcoming year after the open enrollment season concludes and will provide updates in the next earnings call.

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Executive Martin Jackson explained that high-cost outlier impacts are typically highest in Q1 due to patient acuity and should decrease through the year. Executive Robert Ortenzio added that the company is actively engaging with the new CMS administration and legislators to propose policy changes that could mitigate the severe impacts of these rules.

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Executive Martin Jackson stated that leverage is expected to remain in the 3.0x to 3.1x range for 2025 due to high development activity, with a target of well below that in 2026. Executive Robert Ortenzio added that the inpatient rehab margin compression was caused by start-up losses from new facilities, integration costs from an acquisition, and a temporary, hurricane-related drop in referrals from a key partner, which has since normalized.

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Martin Jackson, an executive at Select Medical, clarified that the Q3 LTAC occupancy rate was influenced by typical seasonality rather than staffing challenges, noting performance was better than the prior year's quarter. Jackson also stated that the company's operators have been effectively managing the high-cost outlier thresholds, minimizing their financial impact.

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Executive Steven Yi characterized the move as a normal profitability adjustment in a challenging environment and stated it was too early to know the impact on the next AEP. He reiterated his long-term conviction in the MA market's growth and shift online. Executive Patrick Thompson added that while some carriers are pulling back, the company's relationships with broker partners in the Medicare space remain strong and are generally performing well.

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CFO Patrick Thompson attributed the guided mid-single-digit decline in the Health vertical to well-documented headwinds for Medicare payers, such as higher service utilization and lower star ratings, which have tightened marketing budgets. He noted that while pricing trends are weak, consumer shopping volume remains strong, and the long-term outlook for Medicare Advantage is still bullish.

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Suzanne Snapper, EVP and Chief Financial Officer, explained that Ensign has a long history of embracing managed care through local leadership partnerships with MCOs, focusing on clinical outcomes to drive financial success. CEO Barry Port added that a sophisticated back-office providing real-time metrics is crucial to these partnerships. Regarding policy, Mr. Port detailed their active advocacy efforts to educate Congress, noting that recent discussions seem focused on the Medicaid expansion population, which has a lesser impact on Ensign. Ms. Snapper confirmed that Ensign was not a major beneficiary of the expansion population, which positions them well if that remains the focus.

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CEO Barry Port stated that while it's hard to predict legislative priorities, the company is prepared through its industry associations to educate Congress. He noted the Trump administration's public commitment to Medicaid and senior care. CFO Suzanne Snapper added that Republican control often brings lighter regulation, providing operational flexibility, and highlighted the company's deep involvement at the state level. Regarding Tennessee, Suzanne explained that the supplemental payment program is approved through July 1, 2025, and efforts are underway to extend it. She also emphasized that their long-standing local relationships are key to building preferred provider networks.

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Executive Chad Keetch attributed the M&A pace to smaller operator exhaustion, post-COVID stability creating a good selling environment, and distressed opportunities from over-leveraged real estate. He stated the acquisition profile remains consistent, focusing on skilled nursing, with acuity enhancements occurring post-acquisition. He also noted that Ensign's capacity to acquire grows as the company scales.

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President and CEO Jim Rechtin stated that the company remains focused on achieving a 3% margin, but affirmed that the exact timing is contingent on the outcome of the Stars litigation. He emphasized that there has been no significant change to the company's previously communicated strategy or outlook on this matter.

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George Renaudin, President of the Insurance Segment, acknowledged lower-than-expected D-SNP retention but emphasized the overall AEP strategy was successful in shifting the member mix toward long-term value. CFO Celeste Mellet added that while the D-SNP losses help the margin, the primary driver of MLR improvement was the intentional exit of other unprofitable plans. She also noted that 30,000 of the D-SNP losses were due to Medicaid redeterminations.

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CFO Susan Diamond clarified that the higher oncology costs were primarily due to new treatments and label expansions, not a pull-forward related to the IRA. However, she confirmed that Humana does anticipate an uptick in 2025 from IRA changes (e.g., lower out-of-pocket maximums) and has incorporated 'induced utilization' assumptions into its 2025 pricing.

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Saumya Sutaria, Chairman and CEO, acknowledged that guidance has been conservative compared to actual results. He attributed the strong rate growth to a combination of growing higher acuity services, actively creating capacity by moving out lower acuity business, and successful contracting strategies that leverage the ASC's lower-cost setting. He agreed that momentum on net revenue per case should continue for some time.

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Chairman and CEO Dr. Saum Sutaria affirmed that Tenet continues to see a strong demand environment, which he believes is partly a sustained recovery from the early mortality impacts of COVID. He stated that the company is not forecasting a slowdown and is actively expanding capacity in a cost-efficient manner, supported by successful nurse recruiting, to meet this robust demand.

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CEO Sam Hazen acknowledged that recessions can ease labor markets but noted the recent environment was uniquely intense. He stated that while wage inflation has moderated significantly from its peak, it is too early to forecast any further impact from a potential recession. He confirmed that HCA's guidance for 2025 wage trends remains unchanged at this time.

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CEO Sam Hazen acknowledged the strong exchange enrollment growth and expressed a belief that the positive outcomes for families present a political opportunity for the new administration to sustain the program. He confirmed HCA is actively engaged in advocacy efforts. CFO Mike Marks added that exchanges now represent 7.5% of equivalent admissions and 9% of revenues.

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CFO Mike Marks stated that while payer denial intensity is high, HCA's mitigation strategies have moderated the impact. He noted the two-midnight rule contributed about 2 percentage points to the 11% Medicare Advantage admission growth. However, he highlighted that a few large MA payers remain significant outliers in denials and creating discharge delays, and HCA is pursuing these issues through a lengthy dispute resolution process.

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CEO Kevin McNamara, VITAS CEO Nick Westfall, and CFO Mike Witzeman collectively addressed the questions. On the Medicare cap, they explained it is a normal and deliberate part of business management, designed to balance growth with regulatory limits. Nick Westfall noted that the strategy involves increasing shorter-stay hospital admissions to create cap cushion, which moderates revenue and margin growth but ensures long-term sustainability. Mike Witzeman added that the growth seen in 2023-2024 was higher than sustainable long-term due to the cap, and 2025's metrics represent a more normalized trajectory. Regarding cash flow, Mike Witzeman clarified that the Q1 accounts receivable increase was due to two timing issues: the reclassification of a $48 million refund received on April 1 and a delayed $57 million Periodic Interim Payment (PIP) that also arrived after the quarter closed. He confirmed these were not indicative of collection issues.

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Nicholas Westfall, CEO of VITAS, stated that long-term volume growth will exceed the historical 4-6% pre-pandemic range, driven by strong demand and a continued focus on all referral sources, including hospitals. He confirmed that Medicare Cap management remains effective. Regarding Roto-Rooter, CEO Kevin McNamara and CFO Michael Witzeman explained that they don't expect immediate breakthroughs but are focused on improving call volume, which they identified as the key success metric. They noted that while conversion rates are strong, the new marketing agency is tasked with regaining dominance in a competitive online environment, with near-term improvements more likely on the commercial side.

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Krista Nelson, CEO of UnitedHealthcare Community & State, confirmed that they saw progress on rates in late 2024 and early 2025, and the rate-acuity gap is narrowing with each cycle. While it is too early to call the July 1 renewal cycle, which affects 35% of revenue, she expressed optimism that collaborative state relationships will ensure the gap continues to close throughout the year.

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CEO Chris Hunter responded that the company's proactive outreach to referral sources to correct misunderstandings and highlight investments in quality and safety has been resonating well. He stated the referral issue is now less of a challenge across the portfolio. CFO Heather Dixon added that the headwinds are now concentrated in a small group of underperforming facilities and are not considered a widespread issue for the business.

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CFO Heather Dixon responded that the volume pressure was consistent across both acute and specialty lines. She noted that RTCs typically operate near capacity, which can mask underlying trends. For revenue per patient day, she clarified that excluding the CTC business, growth was a stronger 4.9%, compared to the reported 3.6%.

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CEO Brent Guerisoli described the company as being in the "early stages" of its revenue quality and rate optimization efforts. He noted that while this focus slightly plateaued occupancy growth in 2024, it has positioned the segment for continued occupancy ramp-up in 2025, supported by investments in facilities and technology. He expressed confidence, citing that many operations already achieve occupancy in the high 80s or low 90s.

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John Gochnour, President and COO, responded that while the company remains politically agnostic, they observed a significant increase in regulatory enforcement recently compared to the previous Trump administration. He also noted that reimbursement patterns were more favorable and aligned with inflation during that prior term. Mr. Gochnour emphasized that the company's core strategy is to focus on controllable factors like patient care, operational excellence, and strategic growth regardless of the political climate.

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Executive Steve Filton explained the DPP revenue decline is primarily due to the non-recurrence of prior-period payments received in 2024. Regarding malpractice reserves, Filton stated that UHS has prudently set reserves at the higher end of their actuary's recommended range to build in a cushion for 2025.

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Executive Steve Filton explained that the primary reason for the DPP revenue decline is the non-recurrence of prior-period payments that were recognized in 2024. Regarding malpractice reserves, Filton stated that the company has moved towards the higher end of its third-party actuary's recommended range to build in conservatism, hoping to avoid another significant increase in 2025.

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Steve Filton explained that the behavioral strategy focuses on an expanding care continuum, with a greater role for outpatient services and telehealth. He also highlighted growth in services for military members and addiction treatment. He did not frame the strategy as a shift between acute and residential but rather as an expansion into growing service lines.

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Executive Patrick Thompson confirmed the Q1 guidance for the health vertical is a high-teens year-over-year decline. He specified that while Medicare Advantage headwinds are continuing from Q4 into Q1 at a similar rate, the primary driver of the slowdown has been a softening in the under-65 health business, which began in Q4 and has continued into Q1. Despite near-term pressures, he reiterated the long-term opportunity in Medicare Advantage.

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CEO Tim Danker and CFO Ryan Clement explained that while proud of the strong AEP results, they remain mindful of the unique season and have planned investments in the Healthcare Services segment for the second half of the year. Clement projected Senior segment margins in the low-to-mid 20s for the back half. Regarding the new capital, an executive noted the structure provides stability and strengthens the company's position to pursue further deleveraging actions, making continued securitization of MA receivables a 'very viable option.'

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CEO Tim Danker and President Robert Grant explained that while calls are longer, higher close rates from tenured agents are actually increasing overall efficiency. Grant clarified that the SelectRx sale is a separate, post-MA sale process that does not add time for sales agents. CFO Ryan Clement noted that while the first securitization was successful, the market typically slows in late Q4, and they see a path for a subsequent transaction in the first half of calendar 2025.

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CFO Douglas Coltharp reported a stable contracting environment with rate updates in the mid-to-high 2% range and no new pressures from payers. CEO Mark Tarr explained that educating discharge planners is a key priority that begins up to six months before a new hospital opens, involving extensive outreach by clinical and administrative staff to differentiate their intensive hospital-level care from SNF services.

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CFO Brian Evanko explained that the Q4 2024 earnings were skewed because the full-year stop-loss pressure was identified and trued-up late in the year. For 2025, the earnings pattern is expected to normalize and resemble 2023, with a more level cadence for the stop-loss MCR throughout the year. Typical seasonality, with a lower MCR in the first half, is expected to be the primary driver of the 2025 earnings cadence.

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Executive Derick Apt stated there are no current plans to alter the ownership structure of the JV, noting they evaluate maximizing returns once facilities stabilize. President and COO Joshua Jergensen explained that in the new states, they will leverage and build upon some beneficial, pre-existing hospital relationships. Their strategy involves investing in people, systems, and the physical plants to build community confidence and drive quality care, which is their standard approach for new market integration.

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Executive Derick Apt stated there are no immediate plans to alter the ownership of the real estate JV, noting they will evaluate options once the underlying properties stabilize. President and COO Josh Jergensen explained that in the new states, they are leveraging some beneficial, pre-existing hospital relationships from the acquired operator. He emphasized their strategy of building community confidence through investment in people, systems, and physical plants to establish themselves as a preferred provider.

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President and COO Joshua Jergensen attributed the revenue growth to the company's model of caring for higher acuity patients, which improves skilled mix and leads to better contracts and rates. Executive Derick Apt identified the primary swing factor for guidance as the performance of the 10 newly acquired facilities; faster maturation would push results to the high end of the range.

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President and COO Josh Jergensen attributed the revenue growth to the company's model, which excels at caring for higher acuity patients, supported by quality improvements that lead to better contracts and rates. Executive Derick Apt explained that the main variable in the EBITDA guidance is the performance of the 10 newest acquisitions. If they mature faster than average, the company will trend toward the high end of the range.

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