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CEO Patrick Blair clarified that new internal processes for identifying and disenrolling participants who lose Medicaid eligibility will create a headwind in the first half of fiscal year 2026, washing through by January. He emphasized that this strategic decision, while slowing top-line census growth, is expected to significantly boost EBITDA. Patrick Blair also confirmed that cost of care and G&A, driven by efficiencies in center-provided care and administrative scaling, are the primary areas for continued margin improvement in fiscal year 2026.

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CEO Patrick Blair explained that new internal processes for identifying and disenrolling participants who will not regain Medicaid eligibility will create a headwind in the first half of fiscal year 2026, expected to wash through by January. He noted that while this strategic decision impacts top-line census growth, gross enrollment trends remain consistent, and it provides a significant boost to EBITDA. Patrick and CFO Ben Adams indicated that cost of care (due to in-center efficiencies and administrative scaling) and G&A (from scaling down past compliance activities and investing in operations) are the primary areas for margin lift and continued improvement in fiscal year 2026.

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Patrick Blair (CEO, InnovAge) explained that new internal processes for Medicaid redeterminations allow for more efficient disenrollment of participants unlikely to regain eligibility, creating a slight headwind on net census and member months growth in the first half of FY2026. He clarified that gross enrollment trends remain the same, but this strategic repositioning boosts EBITDA. Michael Scarborough (President and COO, InnovAge) confirmed that cost of care (provided in centers) and G&A are the primary areas for margin lift, citing efficiencies from controlling in-center care, administrative scaling, and reductions in past compliance-related G&A.

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CEO Patrick Blair stated that de novo centers are tracking to expectations with good momentum, despite some cost variability. Regarding cost of care, both Blair and CFO Benjamin Adams explained the increase was driven by strategic investments in in-sourcing services like hospice, which shifts costs internally but lowers external expenses. Adams noted the core trend is in the low single digits. On guidance, Adams reiterated that potential variability in Q4 risk score true-ups makes the company comfortable reaffirming the current range.

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CEO Patrick Blair explained that the transformation focuses on reimagining core processes with a 'technology-first' mindset, leveraging their Epic system, and enhancing payer capabilities like network management. He detailed the approximate revenue mix as $3,000 from Medicare Part C, $1,000 from Part D, and $5,000 from Medicaid per member per month. Blair also expressed confidence in continued bipartisan support for PACE. CFO Ben Adams added that the precise revenue breakout is available in the company's 10-Q filing.

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CEO Patrick Blair acknowledged strong demand in all markets but noted enrollment processing bottlenecks are causing delays, though he sees early signs of improvement. CFO Ben Adams explained that any shift in the patient risk mix is gradual and its financial impact will take time to materialize. Regarding de novo centers, Adams stated that the Florida locations are tracking as expected, while CEO Patrick Blair added that current medical cost improvements are driven by clinical initiatives rather than a change in the risk mix.

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President & CFO Matthew DiCanio advised modeling the back half closer to the year-to-date average performance and confirmed guidance does not factor in a significant macro shift. He detailed that adjusted EBITDA was impacted by non-recurring Nova integration costs and not-yet-realized synergies from recent acquisitions, as well as new public company costs. DiCanio stated that excluding these items, the EBITDA margin would have been flat to higher year-over-year.

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Executive Matthew DiCanio acknowledged that core workers' compensation visit growth was slightly lighter than the prior quarter but remained positive and in line with expectations. Regarding margins, DiCanio noted that while there were many moving parts, including strong rates, positive volume, acquisition impacts, and a prior-year favorable item, the company's 20%+ adjusted EBITDA margin is sustainable with potential upside from M&A synergies. Executive William Newton added that the Nova acquisition had a minimal impact in Q1 but is expected to contribute more significantly going forward as synergies are realized.

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Executive William Newton attributed the positive outlook to improving trends in employer services seen early in 2025. Executive Matthew DiCanio addressed the P&L, stating that cost of services and G&A as a percentage of revenue are expected to remain stable. He noted Q4 G&A was elevated by transaction costs and compensation plan changes. DiCanio also clarified that the separation costs from Select Medical are on track, with roughly two-thirds of the impact expected in 2025 and the remainder in 2026.

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Executive Matthew DiCanio stated that while Q3 work comp visit growth was muted by one-time events, future growth is expected to align with the blended average of the first three quarters, driven by rising total employment. Executive William Newton added that while some improvement in the hiring environment would be beneficial, the company has other mitigation strategies and anticipates a more stable environment post-election.

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VP of IR Perry Gold stated that the agency partner program now includes over a dozen partners and has generated over $5 million in business. CFO Anna Bryson explained that the guidance reflects a planned "year of AI investments" in functionality, content, and usage costs, which tempers operating leverage. She noted that maintaining a 55% EBITDA margin during this investment phase underscores the business's efficiency.

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CEO Barb Jacobsmeyer explained the renegotiated contract will now be considered a 'payer innovation' contract and that similar opportunities will arise as other three-year contracts come up for renewal. On fee-for-service volumes, she cited a mix of market-level MA conversion and successful strategies to develop business from referral sources with a balanced payer blend. Regarding the pilot, Ms. Jacobsmeyer stated the goal is to be more aggressive in managing visits per episode without impacting quality. CFO Ryan Solomon quantified the potential value, estimating a $5-8 million benefit for every 0.5 VPE reduction.

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CFO Ryan McGroarty broke down the Q4 revenue ramp, attributing it to both clinician adds and productivity gains from new initiatives. CEO David Bourdon added that these initiatives align with clinician desires for fuller schedules. On cash flow, McGroarty noted Q2 was exceptionally strong but expects a seasonal dip in Q3, while highlighting the significant DSO improvement to 34 days as a key operational win.

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CEO Dave Bourdon explained that patient out-of-pocket costs are minimal and comparable to a primary care co-pay. He expressed confidence in the company's insured model during a recession. CFO Ryan McGroarty clarified that while leverage has been achieved, center costs are expected to step up in Q2 due to clinician compensation timing and a new cash incentive plan, which will pressure margins for the full year before expansion resumes in 2026.

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Incoming CEO Dave Bourdon explained that the 2024 cost-per-visit decline was a one-time event from real estate consolidation and that costs will likely rise in 2025 due to clinician pay increases. Regarding G&A, he confirmed a Q4 step-up of roughly $5 million from a mix of pulled-forward investments and one-time items. He noted Q1 2025 G&A will remain at a similar level due to recurring investments and a $4-5 million impact from payroll taxes, with spending expected to be relatively flat quarterly for the full year.

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CEO Ken Burdick described the recruiting environment as stable, noting LifeStance's model attracts entrepreneurial clinicians and recent graduates. CFO David Bourdon clarified that the 2025 de novo openings will be a meaningful step-up but not a return to the hyper-growth pace of the past. He also stated the virtual/in-person visit mix has remained stable at approximately 70%/30%.

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CFO James Lucania explained that custodial cash earns the disclosed yield (3.5%), while investment assets earn in the high-20s basis points, and these represent different member cohorts. Founder & Vice Chairman Dr. Stephen Neeleman added that older members with longer tenure tend to be aggressive savers, and the legislation would unlock significant potential for working seniors who currently must stop contributing upon Medicare enrollment.

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Executive Jon Rousseau confirmed the business has operating leverage and expects to see margin improvement as revenue grows, outside of mix impacts. He anticipates OpEx per script will decrease in the Infusion and Home & Community pharmacy businesses this year. Regarding capital allocation, Rousseau stated the base case includes about $100 million for M&A. He also noted that with the deleveraging from the Community Living divestiture, the company's long-term leverage target will shift to 2.0x-2.5x once it gets below 3.5x.

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CEO Jon Rousseau explained that the primary care business is growing organically with a focus on profitability, achieving 40-50% patient growth this year. He stated that near-term success will be measured by patient count, with a long-term target of over 100,000 patients. The goal is to reach a meaningful EBITDA contribution by 2026 through ACO contracts, the company's I-SNP, and future direct payer partnerships.

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Executive Steve Filton stated that the pricing environment for behavioral health remains strong, driven by a continued scarcity of supply. He characterized overall commercial payor behavior as a 'daily struggle,' noting that while UHS has invested heavily in claims management, he does not anticipate payors will ease their utilization review practices in the near term.

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Executive Steve Filton stated that strong behavioral pricing is sustainable due to the ongoing scarcity of supply, which gives UHS negotiating leverage. He noted that challenging payor behavior is a constant day-to-day struggle with no significant recent changes, and the company continues to invest heavily in resources to manage claims and appeals efficiently, as he does not expect payors to become more lax.

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Steve Filton reiterated that the 1.5% acute volume growth was against a difficult prior-year comparison fueled by a one-time catch-up of deferred procedures. He stated the year-to-date performance is more reflective of future expectations. Strategically, he highlighted focusing on physician alignment (e.g., ACOs, employment) and investing in the broader care continuum, including ASCs and freestanding EDs.

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Dr. Saum Sutaria, Chairman and CEO, responded that Tenet anticipates the strong volume environment will continue into 2025, with no significant changes observed at the start of the year. He cited a good coverage and employment environment, attractive demographics, and expanded capacity as reasons for the positive outlook reflected in the company's guidance.

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Chairman and CEO Dr. Saum Sutaria confirmed that Tenet continues to execute on buy-up opportunities within its unconsolidated portfolio, describing it as a "small, but...additive part of our ongoing work." He noted, however, that the opportunity is smaller than in the past because many such transactions have already been completed.

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CEO Sam Hazen stated that HCA's primary growth will continue to be organic through capital spending on network development. While the company will pursue smaller, complementary acquisitions, no material inorganic growth is anticipated. He did highlight an expected Q1 closing of a hospital acquisition in New Hampshire that will round out that network.

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CEO Sam Hazen reported that the Valesco integration is progressing well and is on or slightly ahead of its financial plan for the year. He stressed that the primary long-term objective is to develop Valesco into a strategic asset that improves clinical quality, operational efficiency, and growth, with this strategic value far exceeding its direct financial performance.

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CEO Parth Mehrotra responded that all markets are generally progressing as expected over their 5-10 year strategic horizon. He pointed to the company's financial data, noting that after muted EBITDA growth in '22-'23 while absorbing costs for four new states, EBITDA growth accelerated to 25% in 2024. He stated this demonstrates the proven unit economics and replicable strategy, and the results speak for themselves.

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CFO Michael Shapiro confirmed that antibiotic and parenteral nutrition therapies are primarily affected and that capitalizing on competitive exits depends on the supply chain normalizing. CEO John Rademacher detailed plans to offset headwinds through operating efficiencies, expanding infusion suite services, pursuing new therapy areas like Alzheimer's, and leveraging their platform for rare, orphan, and oncology drugs to 'reload' the portfolio.

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