Benjamin Rossi

Benjamin Rossi inquired about the 2026 outlook for cash flow from operations, considering the 2025 drag from increased accounts receivable related to Medicaid supplemental payments, and asked about current supply dynamics and potential for cost offsets in 2026.

Answer

CFO Steve Filton stated that historically, cash flow from operations equals 75-80% of operating income (less NCI), which is their expectation for 2026, with no other discrete considerations beyond typical timing issues. Regarding supply trends, Steve Filton noted that supply costs were the most effectively controlled expense category in 2025. He does not anticipate significant pressure in 2026 and sees opportunities for further efficiency by working with clinicians on supply preferences, particularly for high-cost items.

Benjamin Rossi inquired about the outlook for cash flow from operations in 2026, considering past drags from Medicaid supplemental payment programs, and Universal Health Services' characterization of current and projected supply dynamics.

Answer

Steve Filton, Executive Vice President and Chief Financial Officer, projected 2026 cash flow from operations to be consistent with historical levels, approximately 75%-80% of operating income. Regarding supply trends, Mr. Filton noted that supply costs were the most effectively controlled expense category in 2025, and Universal Health Services does not anticipate significant pressure in 2026, with ongoing opportunities for efficiency through collaboration with clinicians.

Benjamin Rossi asked about operating cash flow development, specifically the drag from unfavorable changes in accounts receivable (AR), and the drivers behind this trend, including potential attribution to broader payer utilization management. In a follow-up, he inquired about self-pay acute volumes in Q3 and year-to-date relative to expectations.

Answer

CFO Steve Filton attributed the increase in AR almost exclusively to the $90 million District of Columbia DPP expected in Q4, new receivables from Cedar Hill (post-September billing), and growing business at West Henderson. He confirmed that days in receivables are consistent with historical levels. Filton noted the main payer mix change was an increase in exchange volumes (6%-6.5% of acute admissions) at the expense of Medicaid, with Medicare, commercial, and self-pay volumes showing no major changes.

Benjamin Rossi asked about operating cash flow development, specifically the drag from unfavorable changes in AR, whether it's due to broader payer utilization management, and the expected collection of the DC approval. He also inquired about self-pay volume trends in Q3 and year-to-date relative to expectations.

Answer

CFO Steve Filton clarified that the increase in AR is almost exclusively due to the $90 million DC DPP expected in Q4, along with new receivables from Cedar Hill and West Henderson. He stated that days in receivables are consistent with historical levels, not broader payer utilization management. He noted that exchange volumes are up (a shift from Medicaid), but Medicare, commercial, and self-pay volumes have not seen major changes.

Benjamin Rossi of JPMorgan Chase & Co. requested a breakdown of the drivers behind behavioral pricing outperformance and the outlook for the second half. He also asked about the factors contributing to the decline in acute care average length of stay and any variations by payer.

Answer

Executive VP & CFO Steve Filton clarified that excluding the Tennessee directed payment, behavioral revenue per day increased 4.2%, in line with the sustainable 4-5% pricing growth expectation. Regarding acute care, Filton stated that length of stay has been steadily declining since its pandemic peak and still has some room for further reduction, with the primary challenge being the placement of patients into subacute facilities.

Asked about Q1 acute care utilization trends, specifically the growth in ACA exchange volumes versus traditional managed care, and sought clarification on the accounting for Nevada's Medicaid taxes.

Answer

ACA exchange volumes grew about 20% in Q1, now comprising ~6% of acute admissions, but this shift has not significantly impacted profitability. The company confirmed that the Nevada provider tax expense was correctly recorded in Q1 expenses, along with the accrued revenue, even though the cash was received in Q2.

Benjamin Rossi asked why premium pay remained at $60 million per quarter instead of declining to the $50 million target and inquired about the potential impact of tariffs on 2025 supply spending.

Answer

Executive Steve Filton explained that a structural shift in the nursing workforce, with more preferring flexible temporary work, has made further reductions in premium pay challenging. Regarding tariffs, he stated that many multi-year supply contracts provide pricing protection, and no significant impact from tariffs is currently factored into the 2025 guidance.

Benjamin Rossi of JPMorgan Chase & Co. asked why premium pay stabilized at $60 million per quarter instead of the previous $50 million target and its outlook for 2025. He also inquired about the potential impact of tariffs on supply chain costs.

Answer

Executive Steve Filton explained that premium pay has leveled off around $60 million per quarter due to a structural shift in the nursing workforce towards flexible, temporary roles, and he does not anticipate significant further reductions. Regarding tariffs, he noted that multi-year contracts with pricing protection mitigate near-term risk, and no significant impact is factored into 2025 guidance.

Benjamin Rossi asked about the $30 million EBITDA headwinds for the ambulatory segment from the expiration of Enhanced Premium Tax Credits (EAPTCs), specifically inquiring about the proportion of USPI's payer mix from ACA exchanges in 2024 and 2025, and if any pull-forward was observed in Q4 2025.

Answer

CEO Saum Sutaria stated that Tenet Healthcare does not disclose segment-specific HIX information but confirmed that USPI's exposure to HIX is significantly less than the hospital segment. He also noted that no significant pull-forward of volumes was observed in Q4 2025, despite looking for it.

Benjamin Rossi followed up on the ambulatory side, asking about the payer mix from ACA exchanges in 2024 and 2025, given the $30 million EBITDA headwinds from EAPTCs expiring, and if any pull-forward was observed in Q4.

Answer

Saum Sutaria, Chairman and Chief Executive Officer, stated that the company does not disclose segment-specific HIX information but confirmed that USPI's HIX exposure is significantly less than the hospital segment. He also noted that no significant pull-forward of volumes was observed in Q4.

Benjamin Rossi inquired about Conifer's contribution to hospital operations in Q3 and its potential utility in identifying patients eligible for coverage elsewhere if ACA exchange subsidies expire, similar to its role in Medicaid redeterminations.

Answer

CEO Saum Sutaria acknowledged the insight, stating that Conifer's capabilities could help with enrollment in other products if exchange subsidies expire, and also with potential dislocated enrollment timelines if a compromise is delayed. He confirmed investments in staffing and field deployment for this. Conifer is performing well within the segment and for clients, particularly in cash collections.

Benjamin Rossi inquired about Conifer's contribution within the hospital operations segment in Q3 and its potential utility in identifying patients for alternative coverage if ACA exchange subsidies expire, similar to its role in Medicaid redeterminations.

Answer

Chairman and CEO Saum Sutaria acknowledged Conifer's capabilities in enrollment and stated that Tenet is investing in capacity to support potential dislocated enrollment timelines on exchanges. He confirmed Conifer's strong performance within the segment and its effectiveness in cash collections.

Benjamin Rossi from JPMorgan Chase & Co. followed up on ACA exchange volumes, asking for more detail on the procedural mix or length of stay for this population, especially in light of recent payer commentary on elevated trends.

Answer

Chairman & CEO Saum Sutaria responded that there was nothing unusual about the nature of exchange volumes in the quarter. He reiterated that this business tends to be more emergency department-driven, similar to Medicaid, which explains its larger impact on the hospital segment. EVP & CFO Sun Park concurred, stating the mix was consistent with prior periods.

Benjamin Rossi asked about Tenet's exposure to potential tariffs on finished goods supply spend and whether there are differences in procurement strategies between the ambulatory and hospital segments.

Answer

Saumya Sutaria, Chairman and CEO, explained that Tenet is an active member of the HealthTrust GPO for both its hospital and ambulatory businesses, with USPI being an anchor client on the ambulatory side. He stated there is no separation in their engagement with HealthTrust and that the exposure numbers cited by peers regarding supply spend base and location are applicable to Tenet as well, with no additional commentary to add.

Benjamin Rossi asked about the increase in supplies as a percentage of revenue, questioning the dynamics and where that metric might settle in 2025.

Answer

Dr. Saum Sutaria, Chairman and CEO, confirmed that the increase is a direct result of the company's strategic push into higher-acuity services. He noted that while the metric was up in Q4, it was balanced over the full year, and they expect it to remain balanced in 2025.

Benjamin Rossi inquired about InnovAge's back-half EBITDA progression and margin expectations, particularly given year-to-date Adjusted EBITDA margins exceeding 8% and projected mid-7% margins for the latter half. He also asked about the impact of the V28 shift on raw risk scores and subsequent RAF scoring, and how these changes are factored into the back-half guidance, considering the phased-in implementation and the frailty adjuster.

Answer

CFO Ben Adams explained that the third quarter is typically softer due to slower enrollment gains post-open enrollment and potential pressures from flu season, which was particularly bad this year. CEO Patrick Blair added that continued work on Medicaid redeterminations, despite significant progress, still presents ongoing efforts and caution. Regarding V28, Patrick Blair noted that only about 45% of total per member month premium is Medicare, making InnovAge less exposed than other MA plans, and highlighted the unique frailty adjuster which captures disability and functional status. Ben Adams confirmed that the reforecast for the business factored in the latest thinking on V28's impact for the remainder of the fiscal year.

Benjamin Rossi asked about the expected EBITDA progression for the second half of fiscal year 2026, given the raised guidance and year-to-date margins, and sought clarification on variables influencing margin expectations. He also inquired about the anticipated impact of the V28 risk adjustment model on raw risk scores and subsequent RAF scoring for members, considering the phased implementation and frailty adjuster.

Answer

CFO Ben Adams explained that the third quarter is typically softer due to slower enrollment gains post-open enrollment and potential pressure from the flu season, leading to a return to normalized Q4 growth. CEO Patrick Blair added that ongoing Medicaid redetermination efforts also factor into the guidance. Regarding V28, CEO Patrick Blair highlighted that only about 45% of total per member month premium is Medicare, making InnovAge less exposed than other MA plans, and emphasized the significance of the frailty adjustment in capturing functional status. CFO Ben Adams confirmed that the reforecast for the business appropriately captured the anticipated impact of V28 in the guidance for the remaining fiscal year.

Benjamin Rossi inquired about initial fiscal 2026 guidance, focusing on the development of Medicare and Medicaid rates, and asked about any observed changes in pharmacy utilization trends following the reduction in the Part D out-of-pocket maximum.

Answer

CFO Benjamin Adams addressed the guidance question, stating it was early for 2026 but that he expects reasonable Medicare rates. He noted that while some state Medicaid rates look 'okay,' there is significant uncertainty for key states like California. CEO Patrick Blair responded to the pharmacy question, clarifying that the Part D out-of-pocket changes do not impact InnovAge's model, as their participants have zero out-of-pocket costs due to a different reimbursement structure.

Benjamin Rossi from JPMorgan Chase & Co. questioned the expected adjusted EBITDA progression for the second half of fiscal 2025, given the implied ramp-up. He also asked about the potential impact of the reduced Medicare Part D out-of-pocket maximum on pharmacy costs.

Answer

CFO Ben Adams stated that EBITDA progression is generally linear, though Q3 can see seasonal softness from slower enrollment and higher flu-related utilization. He confirmed that clinical and operational value initiatives have a greater impact in the second half of the year. Regarding the Part D cap, CEO Patrick Blair and Chief Medical Officer Dr. Rich Feifer noted that as a fully capitated provider, the direct impact is different, and while they are focused on finding cost-effective medication solutions with their new integrated pharmacy, they would follow up with a specific answer.

Benjamin Rossi asked about the long-term growth algorithm for revenue and EBITDA, given the 2025 outlook, and whether the previous framing of low double-digit growth remains applicable. He also sought clarification on the embedded EBITDA opportunity across new and ramping cohorts, as well as for the 100-plus facilities acquired since last year. Lastly, he inquired about Medicaid rate development, modeling growth relative to historical trends, assumptions for supplemental programs, and updates on policy changes from state counterparts.

Answer

Josh Jergensen, President and COO, confirmed that current growth models align with performance, excluding the restatement, and that the 30% top-line guidance is consistent with previous models. He reiterated the historical average of 20 facility acquisitions per year as guidance, noting that while 2024 exceeded this, the company remains opportunistic. Regarding embedded EBITDA, Mr. Jergensen explained that margins vary by cohort: new facilities typically see 2-3%, ramping 6-8%, and mature facilities low double digits to low teens, with historical averages remaining consistent. For Medicaid, Mr. Jergensen detailed the company's strategy of evaluating states for favorable reimbursement models that reward higher acuity patients, citing quality incentive programs in states like Oregon, Washington, California, and Texas, and case-mix components in Kentucky and Ohio, expressing confidence in the Medicaid programs of newly entered states.

Benjamin Rossi asked if the previous low double-digit revenue and EBITDA growth algorithm remains applicable for long-term growth, and if 20 facility acquisitions per year is still the inorganic growth target. He also inquired about the embedded EBITDA opportunity across new and ramping cohorts, and for the 100+ facilities acquired since last year. Finally, he asked about Medicaid rate development, modeling growth, supplemental program assumptions, and state updates on OBBBA policy changes.

Answer

Josh Jergensen (President and COO) confirmed that current performance aligns with previous growth models, excluding the 2024 restatement. He stated that while the company has exceeded 20 acquisitions in some years, they are not changing that guidance and will remain opportunistic. He outlined typical margin ranges for new (2-3%), ramping (6-8%), and mature (low double-digits to low teens) facilities, noting consistency with historical averages. Regarding Medicaid, Josh Jergensen explained that PACS targets states with reimbursement models rewarding higher acuity patients, citing quality incentive programs in states like Oregon, Washington, California, and Texas, and case-mix components in Kentucky and Ohio, expressing confidence in their ability to impact these programs.

Benjamin Rossi from JPMorgan Chase & Co. inquired about the drivers behind the 2025 guidance update, specifically the contribution from M&A versus core business improvements. He also asked about back-half cadence considerations and sought clarification on the post-acquisition on-site clinic count.

Answer

President & CFO Matthew DiCanio clarified that the guidance increase reflects strong year-to-date performance with M&A already factored in, anticipating a consistent run-rate for the rest of the year. He confirmed a prior-year weather event in July will be a Q3 comp, but no other major events are expected. Regarding the on-site clinics, DiCanio explained the count was updated to 240 acquired Pivot sites due to different counting methodologies, but the previously stated revenue contribution remains accurate.

Benjamin Rossi asked about the drivers behind the organic turnaround in employer services visit volume and how Concentra's recent acquisitions position the company to achieve its long-term growth objectives.

Answer

Executive William Newton explained that the employer services volume inflection follows a post-COVID normalization and is driven by sustained sales and marketing efforts. He expressed cautious optimism given the economic climate. Newton outlined a long-term strategy built on three pillars: traditional centers, employer onsites, and telemedicine. He highlighted the Pivot acquisition as a key move that doubles the onsite segment's revenue and creates a strong foundation for future growth, particularly in advanced primary care. Executive Matthew DiCanio added that the strategy aims to provide a comprehensive solution set for employers through multiple access points.

Benjamin Rossi from JPMorgan Chase & Co. questioned if the Industrial Injury Prevention (IIP) segment was outperforming initial expectations for the year, especially heading into its seasonally strong third quarter. He also asked for an update on federal-level conversations regarding a long-term fix for Medicare physician fee schedule cuts beyond the proposed one-time 2026 adjustment.

Answer

CEO Christopher Reading confirmed the IIP segment is ahead of budget and remains a key focus for development and capital deployment. Regarding Medicare, he explained that while lawmakers agree a multi-year fix is needed, its high cost is a barrier. He noted that USPH, through industry groups, is advocating for physical therapists to act as primary care gatekeepers for musculoskeletal issues, using data from a successful Maryland pilot to demonstrate system-wide savings that could fund a permanent rate solution.

Benjamin Rossi asked about the key drivers behind the strong performance in the Industrial Injury Prevention (IIP) segment, seeking details on growth vectors like volumes and rates, and the potential market runway. He also followed up on whether IIP contracts include automatic inflation-based rate escalators.

Answer

CEO Christopher Reading attributed the IIP segment's nearly 30% revenue and profit growth to both organic expansion with existing clients and successful acquisitions. He described the market as a "greenfield opportunity" because many companies have yet to adopt such services. Regarding rates, Reading and President Eric Williams clarified that while some contracts have percentage-based escalators, they are not typically indexed to inflation and are often renegotiated at renewal, with service line expansions providing further opportunities for price adjustments.

Benjamin Rossi of JPMorgan Chase & Co. inquired about the drivers behind the $53 million increase in 2025 EBITDA guidance, the impact of one-time items, and the core spread rate in the Private Duty Services segment excluding those items.

Answer

CEO Jeff Shaner attributed the guidance increase to strong rate visibility from legislative wins, increased PDS volume, and the inclusion of the Thrive acquisition. CFO Matt Buckhalter clarified that the Q2 results included a $9 million timing-related benefit and a separate $6 million legal settlement reversal that did not impact adjusted EBITDA. He noted the PDS spread rate will normalize as the company completes its wage pass-throughs by year-end.

Benjamin Rossi of JPMorgan Chase & Co. questioned the rationale for the sizable Thrive acquisition given the previous focus on tuck-ins, its expected contribution, and sought updates on federal Medicaid policy advocacy efforts.

Answer

CEO Jeff Shaner described the Thrive acquisition as a 'perfect fit' that is culturally aligned, adds density in key states like Texas and Georgia, and is both accretive and deleveraging. Regarding Medicaid, Shaner reported positive, bipartisan dialogue around program integrity, expressing confidence in Aveanna's position as a cost-saving solution for government partners. CFO Matt Buckhalter noted Thrive's impact is not yet in guidance pending the closing date.

Benjamin Rossi of JPMorgan Chase & Co. requested details on the Medical Solutions payer strategy, including negotiations and contract conversions, and asked about the company's approach to potential Medicaid regulatory changes.

Answer

CEO Jeff Shaner explained the Medical Solutions strategy mirrors past efforts in other segments: aligning with preferred payers (17 identified) to improve margins, outcomes, and cash collections, which will temporarily mute volume growth. Regarding Medicaid, Shaner expressed confidence that Aveanna is a "net winner" as its model saves federal and state governments money by shifting care from expensive institutional settings to the home, aligning them with policymakers' goals.

Benjamin Rossi from JPMorgan Chase & Co. asked about the company's confidence that its New Mexico and Oklahoma supplemental payment programs will qualify for the OBBA's grandfathering provisions, exempting them from rate caps through 2028. He also inquired about forward capital expenditure priorities.

Answer

President & CEO Marty Bonick and CFO Alfred Lumsdaine expressed high confidence that the New Mexico and Oklahoma programs will qualify for grandfathering provisions, as they are approved programs with no changes pushed through concurrent with the OBBA's passage. Lumsdaine stated there is no reason to think they wouldn't fully qualify. Regarding CapEx, Lumsdaine reaffirmed that priorities are unchanged, with spending expected to ramp in the second half of the year, consistent with historical patterns, and trend towards ~4% of revenue to support ambulatory growth.

Benjamin Rossi of JPMorgan Chase & Co. asked about the drivers of the 1.2% growth in revenue per adjusted admission and the factors influencing the full-year pricing guidance. He also requested more detail on improvements to transfer center operations.

Answer

CFO Alfred Lumsdaine cited drags from service mix, year-over-year payer denials, and a 70 bps impact from an oncology service transfer as reasons for the modest growth. CEO Martin Bonick explained that regionalizing transfer centers and leveraging their single Epic EHR system allows for better capacity management and patient distribution across their network, increasing patient capture. Alfred Lumsdaine noted guidance depends on professional fees, payer behavior, and tariffs.

Benjamin Rossi asked for the key factors influencing the wide range for 2025 net patient service revenue per adjusted admission guidance and questioned the expected volume contribution from recent ACA exchange enrollment growth.

Answer

CFO Alfred Lumsdaine explained the guidance range reflects the variables in the top-line revenue and admissions outlook, but highlighted that commercial rate renewals are strong, trending above 4%. He noted that despite high ACA enrollment growth, Ardent's small exposure (3.6% of revenue) means the impact on overall volume growth is not material, and reimbursement is closer to Medicare than commercial rates.

Benjamin Rossi from JPMorgan Chase & Co. asked about the strategic rationale for transferring an oncology service to a partner and sought clarity on Ardent's operational autonomy within its joint venture (JV) models.

Answer

CEO Marty Bonick explained the transfer was a strategic decision based on unfavorable reimbursement rates for infusion services, as Ardent doesn't qualify for 340B drug pricing. CFO Alfred Lumsdaine emphasized that Ardent retains full operational control in its JVs, allowing for such strategic, market-specific decisions that create a 'win-win' for both partners.

Benjamin Rossi of JPMorgan Chase & Co. asked if the previously stated $150 billion total addressable market (TAM) is still a reasonable estimate given the potential phase-out of the inpatient-only list. He also inquired about the benefits of robotics investments in terms of rates versus volumes.

Answer

CEO Eric Evans affirmed the $150 billion TAM remains a valid target, driven by both market share shifts from hospitals and the addition of new procedures. He cautioned against over-emphasizing the initial list of 270+ procedures, viewing it as part of a broader positive trend. Regarding robotics, he described them as critical 'enablers' that allow physicians to bring their higher-acuity, higher-value cases into the ASC setting.

Benjamin Rossi of JPMorgan Chase & Co. questioned the drivers behind professional fees, current labor dynamics for specialties like anesthesia, and the composition of the new physician recruiting class.

Answer

CFO David Doherty clarified that higher professional fees were in line with expectations and driven by costs associated with physician practices from two large 2024 acquisitions, not widespread anesthesia pressure. CEO J. Evans highlighted that the Q1 recruiting class of 150 physicians is strong and skews toward higher revenue per doctor compared to the 2024 cohort, emphasizing the compounding growth from these new recruits.

Benjamin Rossi inquired if the public offer from Bain Capital has altered the company's M&A approach for 2025 and asked about the progress of de novo facilities, including ramp-up acceleration and start-up costs.

Answer

CEO J. Evans stated that the Bain Capital proposal has not impacted their M&A strategy, highlighting the strong pipeline and $53 million already deployed in Q1. On de novos, Evans noted the pipeline is very strong and accretive, with a commitment to 10 per year. CFO David Doherty added that upfront de novo costs are marginal, with facilities typically reaching breakeven within 6-12 months, and expects costs to normalize by 2026.

Benjamin Rossi of JPMorgan Chase & Co. asked about the company's approach to M&A and capital deployment, particularly following the Chicago deal, and whether they are in a more opportunistic position. He also inquired about the opportunity for physician buy-ups within the current portfolio.

Answer

CEO J. Evans characterized M&A as inherently unpredictable but expressed satisfaction with the year's acquisitions, which align with their high-acuity strategy. He affirmed they remain opportunistic. On buy-ups, Evans explained the opportunity is not huge in the current portfolio as they already consolidate most facilities, but it will grow as the de novo pipeline matures. CFO David Doherty added that maintaining a healthy physician ownership mix is prioritized over achieving consolidation.

Ben Rossi asked about a recent executive order targeting hospital costs for outpatient drugs administered in hospital outpatient departments (HOPDs) and its potential initial impact on HCA.

Answer

CFO Mike Marks acknowledged awareness of the executive order but stated that HCA needs to see the specific draft rules that will emerge from the directive. He explained that until there is more specificity, the company cannot comment on the potential financial impact it could have on its operations.

Ben Rossi asked if the 2025 CapEx guidance of ~$5.1 billion would maintain the historical 50/50 split between maintenance and growth, or if hurricane recovery efforts would shift this prioritization.

Answer

CEO Sam Hazen confirmed that the 50/50 split is still a fair assumption. He explained that the hurricane impact did not significantly affect capital spending plans, as the issues in North Carolina were community-related, not physical plant destruction, and the Largo situation involved repair costs, not major capital projects.

Benjamin Rossi, on behalf of Matthew Borsch at BMO Capital Markets, asked for clarification on the potential volume impact of the new Medicare Advantage contracts, which were said to cover 60% of per-visit business.

Answer

President and CEO Chris Gerard clarified that per-visit arrangements currently constitute 20% of Home Health revenue. The new contracts under negotiation would cover 60% of that specific business segment. He anticipates this shift will unlock clinical capacity and lead to significant growth in MA volumes, which currently stand at about 600,000 visits per quarter.