Jason Cassorla

Jason Cassorla sought confirmation on whether specialty and care AOI growth is still anticipated at the higher end of the 8%-12% target for 2026, and requested a breakdown of implied AOI growth excluding the Shields investment.

Answer

Ann Dennison confirmed that specialty and care earnings are expected to grow towards the high end of the 8-12% long-term growth rate, driven by strong fundamentals and the contribution from the Shields investment. She noted that specific details on Shields' contribution were not shared but it helps achieve the higher end of the range.

Jason Cassorla sought confirmation on whether Cigna anticipates Adjusted Income from Operations (AOI) growth for specialty and care services in 2026 to be at the higher end of its 8%-12% target. He also requested a breakdown of the implied AOI growth when excluding the income attribution from the Shields investment.

Answer

Brian Evanko, President and COO, confirmed that specialty and care earnings are expected to grow towards the high end of the long-term rate, driven by strong fundamentals and the contribution from the Shields investment. He stated that expectations for 2026 are consistent with Q3 but did not provide a specific breakdown excluding Shields.

Jason Cassorla asked for clarification on whether Cigna Healthcare's adjusted operating income (AOI) growth at the high end of its long-term target for next year is based on a baseline excluding non-recurring 2025 benefits, and inquired about expectations for further membership growth and key areas for strong growth.

Answer

Brian Evanko, President and COO, confirmed that the Cigna Healthcare income growth at the higher end of the long-term algorithm is off the full-year 2025 guide of at least $4.125 billion, with no adjustments. He outlined membership expectations: flat to slightly declining for national accounts, continued strong growth in the Select segment, and an expected decline in individual exchange membership in line with industry trends.

Jason Cassorla of Guggenheim Partners inquired about Evernorth's margin dynamics, particularly the drivers behind PBM margin pressure, and asked about the expected margin profile for the growing medical-side specialty business.

Answer

EVP and CFO Ann Dennison attributed the PBM margin pressure to client mix, as large clients grow faster at lower margins, and drug mix, with high-cost drugs boosting revenue more than earnings. President and COO Brian Evanko explained the medical specialty opportunity has a dual margin profile: the CuraScript distribution business is low-margin, while the associated fee-based enablement services are high-margin.

Jason Cassorla asked for a breakdown of Carelon Rx and Services revenue and margin impacts, distinguishing between those stemming from health benefits enrollment losses and those from growth and margin maturation with external clients.

Answer

Pete Haytaian, President of Carelon, Elevance Health, noted strong 2025 growth (almost 60% in services, over 20% in pharmacy), driven by a diversity of services and solutions, including CareBridge and upmarket sales for Rx. External sales were the best year ever for both services and Rx. These tailwinds are offset by affiliated membership attrition and one large external client shifting from a risk basis to a fee basis. Without the internal membership headwind, overall growth would have been high teens/low twenties for services and low double digits for Rx.

Jason Cassorla asked for a breakdown of Carelon Rx and Services revenue and margin impacts, specifically differentiating between the effects of health benefits enrollment losses and the growth and margin maturation from external clients.

Answer

Pete Haytaian, President of Carelon, highlighted strong 2025 performance with almost 60% growth on the services side and over 20% on the pharmacy side, driven by a diversity of services and external sales momentum, which was their best year ever for external growth. These tailwinds are offset by affiliated membership attrition and one large external client shifting from a risk to a fee basis in services. He estimated that without the internal membership headwind, services growth would have been in the high teens to low twenties, and Rx in the low double-digit range, with a mid-single-digit operating gain impact from affiliated membership. Gail Boudreaux, President and CEO, added a brief closing remark.

Jason Cassorla asked if the persistent rate disconnect in Medicaid is prompting the company to consider exiting states or reducing its footprint, and what might trigger such a decision.

Answer

CEO Gail Boudreaux stated that it is premature to consider such actions. She emphasized that the states within Elevance Health's footprint have been very responsive to data-driven discussions about rate adequacy. She views the current challenge as a timing issue related to catching data up to the rapid changes in population acuity, not a fundamental breakdown in state partnerships.

Jason Cassorla asked about HCA's 2026 guidance assumptions for overall bad debt and uncompensated care compared to 2025 levels, and whether there are external offsets like state uncompensated care pools that could be tapped.

Answer

CFO Mike Marks confirmed that HCA's guidance includes an anticipated increase in uninsured patients, leading to higher uncompensated care, as people lose exchange coverage. He noted that while a shift from silver to bronze metal tiers could increase patient-due balances, the impact on collectibility is expected to be relatively immaterial based on past experience. The primary impact is projected to be the growth in uninsured individuals rather than a significant change in patient balance collectibility for insured patients.

Jason Cassorla asked about HCA Healthcare's 2026 guidance assumptions for overall bad debt and uncompensated care compared to 2025 levels, and if there are external offsets like state uncompensated care pools.

Answer

CFO Mike Marks confirmed that guidance includes an anticipated increase in uninsured patients entering facilities in 2026, which immediately transitions into uncompensated care. He also discussed the potential impact of patients shifting from silver to bronze metal tiers on exchanges, noting that bronze enrollees have lower collection rates. However, based on past experience, the impact to patient balance collections from this shift is expected to be relatively immaterial, with the larger impact coming from the growth in the uninsured population.

Jason Cassorla asked about hurricane-impacted facilities, specifically the ability to recover the remaining headwind from 2024 into 2025 and 2026.

Answer

CFO Mike Marks explained that HCA initially expected 2025 EBITDA for hurricane markets to be flat with 2024's $250M hit, but now expects to recapture $100M in 2025. The lingering effects are mostly in North Carolina, impacting payer mix and requiring premium labor. All $100M improvement is anticipated in Q4.

Jason Cassorla from Guggenheim asked about the hurricane-impacted facilities, specifically the ability to recover the remaining $150 million headwind versus the $250 million total headwind from 2024, and growth expectations.

Answer

CFO Mike Marks explained that HCA expects to recapture $100 million of the $250 million 2024 hurricane impact in 2025, with the remaining impact primarily in North Carolina due to payer mix deterioration and premium labor. He noted that Q4 is expected to see the $100 million improvement.

Jason Cassorla inquired about early thoughts on 2026 cost trend developments relative to 2025 and sought to quantify the trend vendor and clinical excellence opportunity for next year.

Answer

Celeste Mellet, CFO, expects medical and Rx cost trends to continue at similar growth levels into 2026 (mid-to-higher end of mid-single digits for medical, low double digits for Rx). She noted that the clinical excellence and trend vendor opportunity is a significant lever, with progress expected next year and in 2027-2028, but it's too early to size.

Jason Cassorla sought further details on the implied Q4 guidance for USPI, noting a potential deceleration in year-over-year growth compared to earlier quarters, and questioned if this reflects conservatism or the timing of development.

Answer

Chairman and CEO Saum Sutaria clarified that the implied Q4 guidance for USPI is primarily a result of 'math' related to larger-scale assets and pricing elements from the prior year, rather than a change in business demand or organic performance. He reiterated the focus on the typical Q4 business ramp-up.

Jason Cassorla sought clarification on the implied Q4 guidance for USPI, which suggests year-over-year growth of just over 8%, a deceleration from earlier in the year, asking if this reflects conservatism or timing of development.

Answer

CEO Saum Sutaria clarified that the implied Q4 guidance for USPI is primarily due to 'math' related to larger scale assets and pricing elements lapping year-over-year, not a change in business demand or organic performance. He emphasized that the company views Q4 for USPI no differently than prior years, focusing on typical business ramp-up. CFO Sun Park had nothing further to add.

Jason Cassorla inquired about the bridge to the updated 2025 guidance, specifically the split between the DC DPP, malpractice reserve, legal settlement, and core outperformance, and what factors would drive performance towards the high or low end of the guidance range. He also asked about managed care activity and state budgets impacting the behavioral health business, including length of stay, pricing, and potential Medicaid rate reductions.

Answer

CFO Steve Filton explained the guidance increase includes $140 million in increased DPP (DC and other states), offset by a $35 million malpractice increase and an $18 million legal settlement. He noted core business trends are expected to continue, with the high end of guidance driven by 5-7% same-store revenue growth. Regarding behavioral health, he stated managed care remains aggressive on utilization management, but length of stay is stable. He mentioned Medicaid cuts only in North Carolina, which is not material to UHS, and is tracking other states.

Jason Cassorla inquired about the bridge to the updated 2025 guidance, detailing the split between the District of Columbia DPP, malpractice reserve increase, legal settlement, and core outperformance. He also asked about factors that would lead to trending towards the high or low end of the guidance range. In a follow-up, he asked about managed care activity and state budgets impacting the behavioral health business, specifically regarding length of stay, pricing, payer behavior, and potential state budget cuts for Medicaid in 2026.

Answer

CFO Steve Filton explained the guidance increase: $140 million from increased DPP (including $90 million from DC in Q3 and $25 million expected in Q4, plus $25 million miscellaneous increases), offset by a $35 million malpractice increase and an $18 million legal settlement. He noted that core business trends are assumed to continue, with the higher end of guidance achieved if same-store revenue increases land at the higher end of the 5%-7% range. Regarding behavioral health, Filton stated that managed care utilization management remains aggressive, but length of stay has remained constant due to effective documentation. He has not observed significant changes in payer behavior. He mentioned Medicaid cuts only in North Carolina (not material to UHS) and is tracking other states without current material impact.

Jason Cassorla of Guggenheim Partners asked about the strategy for growing outpatient behavioral market share, specifically regarding de novo build-outs versus other methods. He also inquired about acute care volume growth trends across different payer cohorts and the persistence of payer mix benefits.

Answer

Executive VP & CFO Steve Filton detailed a two-pronged outpatient strategy: improving 'step down' referrals from their inpatient facilities and expanding their 'step in' footprint with 10-15 new freestanding outpatient facilities per year. On the acute side, Filton noted that Q2 revenue growth was in line with expectations, with a favorable payer mix driven by lower Medicaid and higher commercial exchange volume, which contributed to stronger pricing.

Jason Cassorla asked about the net impact of the proposed Medicare IPPS and OPPS rates for 2026. He also inquired about Community Health Systems' ambulatory strategy, its current stage of building access points, and how this has affected market share.

Answer

Kevin Hammons, President and Interim CEO, indicated that the net effect of the proposed inpatient and outpatient rates for 2026 is expected to be a 'little net positive' compared to 2025. Regarding the ambulatory strategy, Mr. Hammons explained a shift in capital allocation from large inpatient construction projects (like new towers in Knoxville and Foley) to more access points, including urgent care, freestanding emergency departments, and ambulatory surgery centers, as inpatient capacity constraints ease. He noted opening 3-4 freestanding EDs annually, with 3 ASCs scheduled for Q4 2025 and a target of 6-8 ASCs for 2026, alongside clinic acquisitions and physician hiring.

Jason Cassorla asked about the anticipated net impact of the favorable Medicare IPPS and the proposed outpatient rule on Community Health Systems' 2026 financial outlook. He also requested an overview of the company's ambulatory strategy, including the current stage of building out access points and its effect on market share.

Answer

Kevin Hammons, President and Interim CEO, indicated that the net effect of the proposed inpatient and outpatient rules for 2026 is expected to be a slight net positive compared to 2025. Regarding ambulatory strategy, Mr. Hammons detailed a shift towards investing more capital in access points like urgent care, freestanding emergency departments, and ambulatory surgery centers, with plans for 6-8 ASC openings in 2026, alongside clinic acquisitions and physician recruitment.

Jason Cassorla of Guggenheim Partners asked about the company's leverage reduction strategy, plans for refinancing its 2027 notes, and the path to its sub-5.5x leverage target. He also inquired about other potential non-core asset sales or outsourcing opportunities similar to the LabCorp deal.

Answer

President & CFO Kevin Hammons identified the 2027 notes as the next refinancing priority. He highlighted ~$300M in cash proceeds expected in the second half from the LabCorp sale and a contingent payment, reaffirming the sub-5.5x leverage target by 2027. While no other specific deals are in flight, Hammons noted the company continuously evaluates its portfolio for optimization opportunities.

Jason Cassorla asked what needs to happen for states to take a deeper look at Medicaid benefit structures and pare back areas, and the mechanism or timing around when that could possibly occur, and if there's a greater onus for states to do so.

Answer

CEO Joseph Zubretsky noted that states do change programs (e.g., carving out/in pharmacy) but the main issue is whether the rate adjustment for reduced benefits is appropriate to maintain margin neutrality. He mentioned "value-added benefits" around the edges could be cut. He doesn't see pharmacy carve-outs as a new emerging phenomenon, and while states might look at benefit structures to save money, it should be margin neutral if rates are adjusted correctly.

Jason Cassorla asked a broader question about what would prompt states to take a deeper look at Medicaid benefit structures, beyond just rate discussions, and the potential mechanisms or timing for such changes.

Answer

CEO Joseph Zubretsky explained that states do periodically review benefit structures, such as carving pharmacy in or out. The main concern for Molina is ensuring that any rate reduction accurately matches the reduced benefit, making such changes margin-neutral. While there are 'value-added benefits' around the edges that states could cut to save money, he does not see this as a new, emerging phenomenon. He noted that some states that carved out pharmacy found it substantially increased costs, and he doesn't anticipate more states moving in that direction. Overall, benefit structure changes are expected to reduce revenue but should not affect margins if rates are adjusted correctly.

Jason Cassorla from Guggenheim Partners asked for clarity on how much of the $8.65 per share in embedded earnings could be realized in 2026. He also inquired if the recent spike in inpatient and outpatient utilization represents a new, accelerated trend and a higher cost baseline.

Answer

CFO Mark Keim reiterated that roughly one-third of the embedded earnings could be realized next year, with $1 per share being a guaranteed reversal of implementation costs, but the remainder is dependent on the rate cycle. CEO Joseph Zubretsky confirmed that core inpatient and outpatient utilization, which began trending up in Q1, spiked significantly in Q2, warranting a specific call-out as a key driver of the higher medical costs.

Jason Cassorla of Guggenheim Partners inquired about the managed care environment, specifically the timeline for lapping denial headwinds and the impact of terminating certain exchange contracts. He also asked for details on Ardent's ambulatory expansion strategy and its expected contribution to volume growth.

Answer

President & CEO Marty Bonick confirmed terminating one larger exchange plan due to unfavorable rates but did not quantify the percentage of admissions affected. CFO Alfred Lumsdaine added that year-over-year comparisons for payer denials should ease and noted the focus is on replacing this volume with better-paying sources. Regarding the ambulatory strategy, Bonick explained the goal is to grow the number of unique patients served in each market to drive downstream care, highlighting that a previous urgent care acquisition brought in 45% new patients to Ardent.

Jason Cassorla asked how to reconcile the increased bed addition guidance with a lower CapEx forecast and inquired about the appropriate 2025 EBITDA base to use for modeling 2026 growth.

Answer

CFO Heather Dixon explained the lower 2025 CapEx is due to pausing early-stage projects, while the bed addition increase reflects accelerating the opening of projects already underway. For 2026, she advised that the recurring run-rate benefit from the Tennessee program is $40-45 million and that startup costs are expected to step down significantly from the 2025 peak.

Jason Cassorla of Citigroup asked for clarity on the fiscal 2025 EBITDA progression, whether the fiscal 2024 EBITDA was a clean baseline, the margin ramp towards the 8-9% intermediate target, and the impact of an accounting change for bad debt on revenue.

Answer

CFO Ben Adams explained that the fiscal 2025 guidance builds on existing growth trends, factoring in state processing delays. He confirmed the $16.5 million fiscal 2024 EBITDA is a clean baseline for growth. Adams reiterated the company is on a linear path toward its 8-9% intermediate-term margin target. He also clarified the bad debt accounting change is a reclassification of about $6-7 million from an expense to a contra-revenue item, which does not impact profitability. CEO Patrick Blair added that visibility into the fiscal 2026 margin slope will increase as the year progresses.

Jason Cassorla questioned how the 2025 Medicare final rate increase of 4.2% would translate for PACS and inquired about the company's purchase option opportunities, including timing and potential EBITDA upside.

Answer

Executive Derick Apt clarified that PACS's Medicare rate growth consistently outpaces the headline CMS rate because their model focuses on capturing higher acuity patients under the PDPM system. Regarding real estate, he confirmed the company holds fixed-price purchase options which it intends to exercise over the next 3-4 years. Executing these options is expected to provide significant EBITDA upside by internalizing rent payments.

Jason Cassorla questioned how the 2025 Medicare rate increase would translate for PACS, considering factors like wage index changes, and also asked about the opportunity set and timing for exercising the company's real estate purchase options.

Answer

Executive Derick Apt clarified that PACS's realized Medicare rate growth often exceeds the headline CMS rate because their model focuses on capturing higher acuity patients under the PDPM system. Regarding real estate, he confirmed that the company holds fixed-price purchase options and intends to exercise them over the next 3-4 years to capture the rent spread as incremental EBITDA, a key part of their long-term strategy.

Jason Cassorla asked about the sustainability of the high occupancy rates in the mid-90s for Mature and Ramping facilities and the expected timeline for the 'New' cohort to reach its 90%+ target. He also inquired about the company's positioning regarding California's proposed healthcare spending cap.

Answer

President and COO Josh Jergensen expressed confidence in sustaining high occupancy, crediting the company's quality outcomes and nimble, localized leadership model. He noted that new facilities take time to improve staffing and care systems before occupancy can ramp. Regarding California, he stated that PACS's strong market density, leadership, and quality outcomes position it well to adapt to any potential regulatory or reimbursement changes in the state.

Jason Cassorla of Citigroup Inc. questioned the sustainability of the mid-90s occupancy levels in Mature and Ramping facilities and asked about the timeline for the New cohort to reach 90% occupancy. He also inquired about the company's positioning regarding a proposed healthcare spending cap in California.

Answer

President and COO Joshua Jergensen expressed confidence in maintaining high occupancy, driven by quality outcomes and a nimble local leadership model. He noted that new facilities take time to ramp up. Regarding California, he stated that PACS's density, quality, and strong provider relationships position it well to adapt to any potential reimbursement changes.