Raj Kumar

Raj Kumar asked about new member engagement with Alignment Healthcare's Care Anywhere platform, specifically how it's trending compared to the previous year's new membership. He also inquired about any observed divergences in overall trends or consumer behavior in Alignment's maturing ex-California markets, and how this has led to operational nuances or tweaks to the AVA platform.

Answer

Founder and CEO John Kao stated that new member engagement with Care Anywhere is currently about the same as last year, at approximately 65%, with an internal target to reach 75%, driven by new investments in member service and experience. Regarding ex-California markets, Mr. Kao noted that current operational scaling efforts are focused on ensuring these markets receive the same service level as California. He highlighted strong performance in Stars and clinical replicability (ADK) outside California but acknowledged the need to further improve provider engagement in these maturing markets.

Raj Kumar inquired about new member engagement with the Care Anywhere platform during AEP and its year-over-year trend, and asked about any divergence in trends or consumer behavior in ex-California markets that led to operational nuances or AVA adjustments.

Answer

CEO John Kao stated that new member engagement with Care Anywhere is about the same year-over-year (around 65%), with an internal target to reach 75%, driven by improvements in member service. For ex-California markets, he emphasized ensuring the same service level as California, focusing on provider engagement, and noted strong performance in Stars and ADK replicability, with ongoing efforts to enhance provider satisfaction.

Raj Kumar asked about the underlying cost assumptions for senior living incremental margin improvement, the long-term occupancy trajectory needed to achieve mid-teens operating income margin, and sought goalposts for 2026 operating cash flow and CapEx, considering integration efforts.

Answer

CFO Lynette Walbom explained that a 1% occupancy increase in senior living allows approximately 30% of that revenue to flow to the bottom line after covering rent hurdles. CEO Brent Guerisoli added that a 100 basis point occupancy increase generates just under $1 million in value. Lynette provided 2026 operating cash flow guidance of $45 million-$55 million, factoring in potential 'noise' from cash collections during transitions. CapEx for 2026 is forecasted at roughly $15 million, partly due to necessary improvements in recently acquired buildings.

Raj Kumar asked about the underlying cost assumptions for senior living, focusing on incremental margin improvement and the long-term occupancy trajectory. He also requested goalposts for operating cash flow and CapEx for 2026, considering the ongoing integration efforts.

Answer

CFO Lynette Walbom explained that for every 1% increase in senior living occupancy, approximately 30% of that revenue can flow to the bottom line after covering rent hurdles. CEO Brent Guerisoli added that a 100 basis point occupancy increase translates to just under $1 million in value. For 2026, Lynette Walbom forecasted operating cash flow between $45 million and $55 million, acknowledging potential 'noise' from cash collections during the transition. CapEx is projected at roughly $15 million, partly due to increased spending on acquired properties.

Raj Kumar of Stephens Inc. requested details on the assumptions for senior living occupancy, revenue per room, and margins embedded in the updated guidance. He also asked if the large Amedisys acquisition would pause the company's typical M&A cadence for smaller, turnaround operations.

Answer

CFO Lynette Walbom clarified that the guidance includes a roughly 6% rate increase and 30-50 basis points of occupancy growth for senior living. President & COO John Gochnour and CEO Brent Guerisoli explained that while the primary focus will be on integrating the Amedisys assets, the company's decentralized portfolio model allows other leaders and portfolio companies to continue pursuing their own growth strategies, ensuring the 'flywheel' continues to turn.

Raj Kumar focused on Hospice length of stay, asking about underlying drivers for the sequential bump and commentary on CAP position, and then inquired about the labor environment and potential tailwinds from Medicaid work requirements, referencing Arkansas.

Answer

Heather Dixon, President and COO, attributed improved Hospice length of stay and patient mix to a focused strategy on diversifying referral sources, noting improvements in the overall CAP position in Q4. She stated no specific impact observed in Arkansas related to Medicaid work requirements on hiring, viewing them as a potential opportunity for Addus to attract flexible or part-time workers.

Raj Kumar focused on hospice length of stay, asking about the underlying drivers for the Q4 sequential bump and commentary on CAP space accountability. He also inquired about the labor environment and potential tailwinds from Medicaid work requirements, referencing Arkansas.

Answer

Heather Dixon, President and COO, Addus HomeCare, attributed the hospice length of stay trends to a deliberate focus on diversifying referral sources market-by-market, which also improved patient mix and admissions growth. She noted improvements in the Q4 CAP position due to these efforts. Regarding labor, she stated no specific impact from Arkansas's work requirements but views such requirements as a potential opportunity for Addus to attract individuals seeking flexible or part-time work.

Raj Kumar of Stephens Inc. asked about a Department of Labor proposal on companionship services and overtime, potential hospice cap issues, and the risk of increased sequestration due to the federal deficit.

Answer

President & COO Bradley Bickham noted the DOL proposal would have minimal impact due to service complexities and existing union contracts, and confirmed a manageable hospice cap accrual of just over $1 million. Chairman & CEO Dirk Allison addressed sequestration, stating that the company expects Congress to waive the automatic increase, consistent with past actions and the administration's stance against Medicare cuts.

Raj Kumar asked about the investment thesis for internal spend, particularly for oncology and neurology, and whether it focuses on building internal capabilities or payer/hospital education. He also inquired about the tangible benefits realized from AI initiatives in 2025, such as increased throughput or cost efficiencies.

Answer

President and CEO John Rademacher explained that investments in oncology and neurology involve a two-pronged approach: commercial team expansion to reach call points, and development of clinical protocols and programs, leveraging infusion suites, clinics, and home care. He highlighted AI benefits, noting that 40% of claims are processed without human intervention, leading to tangible results in cost of service and SG&A. EVP and CFO Meenal Sethna added that 2025 investments will annualize into 2026, with additional investments in commercial resources contributing to SG&A growth ahead of expected benefits.

Raj Kumar inquired about the nature of internal investment spend for 2026, particularly for oncology and neurology opportunities, asking if it's focused on building internal capabilities or site-of-care/payer education. He also asked for a quantification of the benefits realized from AI initiatives in 2025, such as increased throughput or cost efficiencies.

Answer

President and CEO John Rademacher described Option Care Health as a capital-light enterprise, with 2026 CapEx projected at $40 million-$50 million. He explained that investments in oncology and neurology are two-pronged, covering commercial teams, clinical protocols, and utilization of infusion sites and home transitions. Regarding AI, Rademacher highlighted that 40% of claims are processed without human intervention, demonstrating tangible benefits in cost of service and SG&A. EVP and CFO Meenal Sethna added that 2026 will see an annualization of 2025 investments and additional spending in areas like commercial resources, leading to some SG&A growth ahead of benefits.

Raj Kumar followed up on ICHRA, asking about the initial uptake from the Hy-Vee arrangement and whether the ICHRA population exhibits stickier membership compared to broader individual plans. He also inquired about new member engagement rates for 2026 compared to last year.

Answer

Mark Bertolini, Oscar Health Chief Executive Officer, stated that specific ICHRA numbers by segment are not yet meaningful enough to disclose, but efforts are successful. He believes ICHRA membership is stickier because individuals can maintain their chosen plan regardless of funding changes. He added that it's too early to tell about new member engagement rates for 2026, with more clarity expected after Q1.

Raj Kumar followed up on ICHRA commentary, asking about the initial uptake and membership associated with the Hy-Vee arrangement. He also inquired if the ICHRA population historically exhibits stickier membership compared to broader individual plans and asked about new member engagement rates for 2026 compared to last year.

Answer

Mark Bertolini, Oscar Health Chief Executive Officer, stated that specific ICHRA numbers by segment are not yet being disclosed. He believes ICHRA membership is stickier because members can maintain their chosen plan even if funding circumstances change, viewing it as a model for greater individual choice and lifetime value. He added that it is too early to tell about new member engagement rates for 2026, expecting a clearer picture after the first quarter.

Raj Kumar asked about any potential impacts from the winter storm in Q1 and if anything related to a facility slated for Q1 being pushed to Q2 was embedded in the guidance.

Answer

Doug Coltharp (EVP and CFO) stated there was no significant impact from the winter storm. He highlighted two other closures impacting Q1: a 75-bed SNF unit at Cardinal Hill in Lexington, Kentucky, which closed at the end of December (zero profitability, low ADC, included in IRF count), and a unit in Bridgeport, West Virginia, closing effective February 28 due to an expiring lease. He noted that unmitigated, these closures, along with the continued impact from Cincinnati and Sewickley, create about a 70 basis point headwind for 2026 discharge growth (all in same store), with an expectation to mitigate 35-40 basis points of that.

Raj Kumar of Stephens asked about potential impacts from the winter storm on Q1 performance and 2026 guidance, noting a facility opening pushed from Q1 to Q2.

Answer

EVP and CFO Doug Coltharp reported no significant impact from the winter storm. He highlighted two other unit closures impacting Q1 and 2026 guidance: a 75-bed SNF unit in Lexington, Kentucky, closed in December, and a unit in Bridgeport, West Virginia, closing in February due to a lease end. These closures are expected to create a 70 basis point headwind for 2026 discharge growth, with 35-40 basis points anticipated to be mitigated.

Raj Kumar asked about the embedded year-on-year growth headwind from satellite consolidations in Q4 2025 and whether recent negative headlines had impacted referral patterns. He also inquired about the pre-opening and startup costs, specifically how much of the Q4 spend relates to the three hospitals opening in Q4 and assumptions for 2026 spend given a back-half weighted pipeline.

Answer

President and CEO Mark Tarr confirmed no impact on referral patterns from negative headlines, citing proactive communication with partners and referral sources. CFO Doug Coltharp estimated the Q4 headwind from satellite closures to be slightly less than Q3, around 25 to 30 basis points, as volume consolidates. Regarding pre-opening and startup costs, Doug Coltharp stated the full-year estimate is $18 million to $22 million, with Q4 spend primarily related to Q4 openings and a portion applicable to early 2026 openings. He suggested that a good proxy for 2026 spend would be a similar range to the full-year 2025 estimate.

Raj Kumar asked about the estimated headwind from satellite consolidations in Q4 and whether negative headlines earlier in Q3 impacted referral patterns. He also inquired about the breakdown of pre-opening and startup costs, specifically how much of the Q4 spend relates to 2026 hospital openings.

Answer

President and CEO Mark Tarr confirmed no impact on referral patterns from negative headlines, citing proactive communication with partners and referral sources. CFO Doug Coltharp estimated the Q4 headwind from satellite closures at 25-30 basis points, down from 35 basis points in Q3, as volume consolidates. He stated that the full-year estimate for pre-opening and startup costs is $18 million-$22 million, with Q4 likely pegging the midpoint. A portion of Q4 spend will relate to early 2026 openings, and 2026 costs are expected to be in a similar range, including some expenses for 2027 openings.

Raj Kumar of Stephens Inc. inquired about the outlook for same-store growth given tough comparisons and asked about the drivers of the sequential increase in outpatient visits.

Answer

EVP & CFO Doug Coltharp acknowledged the tough comps but noted EHC's volumes don't correlate with acute care trends due to the non-discretionary nature of its patients. EVP & COO Pat Tuer clarified that the outpatient business is small and its performance is based on market-specific strategies, not a national push, with revenue benefiting from supplemental Medicaid payments.

Raj Kumar asked about any operational disruptions from the recent winter storm and any considerations for Q1 2026 relative to annual guidance.

Answer

CEO Sam Hazen acknowledged the impact of the winter storm in Nashville and other markets, stating it was too early to assess the full impact. He expressed confidence in the company's ability to recover from typical challenges associated with such storms, referencing past experiences.

Raj Kumar asked about any operational disruptions HCA Healthcare experienced due to the recent winter storm and any considerations for Q1 2026 relative to annual guidance.

Answer

CEO Sam Hazen acknowledged the severe winter storm in Nashville and other markets, stating it's too early to fully assess the impacts. He mentioned that HCA has navigated massive storms before and expects to have a better sense of the impact by the end of January, anticipating opportunities to recover from typical storm-related challenges.

Raj Kumar from Stephens Inc asked about the year-over-year trend in professional fees, Valesco's historical drag on EBITDA, and opportunities to achieve break-even in 2026.

Answer

CFO Mike Marks reported a 11% increase in same-facility professional fees year-over-year in Q3, primarily driven by anesthesia and radiology. CEO Sam Hazen added that HCA expects continued financial improvement for Valesco into 2026, noting favorable progression in its financial performance and strategic benefits.

Raj Kumar inquired about the year-over-year trend in professional fees, the expected trend for Valesco in Q4 and 2026, and opportunities to achieve break-even.

Answer

CFO Mike Marks noted that same-facility professional fees increased 11% year-over-year in Q3, running hotter than average inflation, primarily due to anesthesia and radiology. CEO Sam Hazen added that Valesco is expected to show continued financial improvement into 2026, along with clinical and patient engagement improvements.

Raj Kumar from Stephens Inc. inquired about the progress on the $600-800 million targeted savings plan from the Investor Day and whether new opportunities have been identified for HCA's financial resiliency initiatives.

Answer

CFO Mike Marks confirmed HCA is actively pursuing its resiliency program, which includes benchmarking, automation, digital transformation, and leveraging shared services. He stated that in light of potential policy challenges, these efforts have been 'both accelerated and enhanced' over the last 12-18 months. A more comprehensive update will be provided on the Q4 2025 earnings call.

Raj Kumar asked if Ensign's higher acuity and skilled mix uptrend indicates market share gains from other care settings, such as inpatient rehab facilities, or if it's primarily driven by demographic demand. He also questioned the market share potential in mature markets versus transitioning and newly acquired facilities.

Answer

Chairman and CEO Barry Port clarified that the trend is less about a major shift between care settings and more about increasing demand for higher acuity patients due to demographics and comorbidities, requiring Ensign to adapt services. He emphasized the massive upside in organic growth across key markets, noting that gains from managed care partnerships and new services evolve over many years. President and COO Spencer Burton added that payers' desire for high-acuity services in the lowest-cost setting positions Ensign well for long-term growth.

Raj Kumar with Stephens asked whether the uptrend in higher acuity and skilled mix was primarily driven by market share gains from other care settings, such as inpatient rehab facilities, or predominantly by demographic demand trends. He also inquired about the company's market share in mature markets and the potential for market share gains in transitioning and newly acquired facilities.

Answer

Chairman and CEO Barry Port clarified that there isn't a major shift between care settings, but rather increasing demand for higher acuity patients due to demographics, more chronic illnesses, and comorbidities, requiring adaptation and new services. He emphasized the massive organic upside in key markets, with gains happening over many years as managed care partnerships are established and services refined. President and COO Spencer Burton added that payers' desire for high-acuity services in lower-cost settings positions Ensign well, citing Beacon's participation in ACOs as an example.

Raj Kumar of Stephens Inc. asked about the contribution from California's Workforce and Quality Incentive Program, which is set to end, and discussions to maintain funding. He also inquired if Ensign's clusters are engaging with payers in value-based care models to close the reimbursement gap with fee-for-service.

Answer

CFO Suzanne Snapper clarified that funding from the California program is expected through 2026 and that Ensign is in discussions to have those funds rolled back into the base rate. She also confirmed Ensign actively partners with MCOs on value-based care models, creating unique programs for local markets, though the current volume from these programs is relatively small.

Raj Kumar, on for Scott Fidel, asked about expectations for quarterly EPS seasonality in 2025 and the outlook for cash flow from operations, including any unique factors for the upcoming year.

Answer

CFO Suzanne Snapper explained that Q1 and Q4 are historically the strongest quarters for occupancy and skilled mix, and this trend is expected to continue in 2025. She noted that Q4 2024's performance was strong, continuing momentum from an exceptional Q3. For cash flow, Suzanne highlighted that heavy acquisition activity is causing temporary delays in licensing and Medicaid certifications, which can stretch the cash conversion cycle. Executive Chad Keetch confirmed this is a short-term issue. Suzanne also reminded listeners of a previously disclosed settlement payment made in Q4 which impacted cash flow for that period.

Raj Kumar inquired about the behavioral health supply-demand dynamic, specifically how high single-digit SWB growth aligns with modest volume growth, and whether staffing increases are for future volume or maintaining current capacity. He also asked about the recent step-up in acquisition spend and future capital deployment on M&A for outpatient behavioral acceleration.

Answer

CFO Steve Filton attributed muted behavioral volumes to labor scarcity in some hospitals, noting hiring is incrementally increasing. He explained that increased outpatient utilization is fragmented, and UHS is staffing up to capture more of this activity through better focus and new outpatient facilities. He clarified that the acquisition spend was mostly for inpatient facilities in the UK, and US outpatient clinics require minimal capital ($1-2 million per clinic), with the main challenge being therapist availability.

Raj Kumar sought to understand the behavioral health supply-demand dynamics, specifically the high single-digit SWB growth versus slightly negative to positive volumes, and whether staffing increases are for better volume growth or maintaining capacity. In a follow-up, he asked about the step-up in acquisition spend, assuming it's for outpatient behavioral acceleration, and what to expect for future capital deployment on M&A in that area.

Answer

CFO Steve Filton explained that muted behavioral volumes are due to labor scarcity in a quarter to a third of hospitals and increased national outpatient utilization, which is delivered in fragmented settings. He stated that hiring numbers are increasing, and SWB growth is partly preparing for increased patient volume, especially in outpatient. Regarding acquisition spending, Filton clarified that the approximately $35 million-$40 million was mostly in the U.K. on the inpatient side. He noted that U.S. outpatient expansion requires less capital (around $1 million-$2 million per clinic), with the primary challenge being finding appropriate therapists.

Raj Kumar of Stephens Inc. asked about the potential puts and takes for UHS from the proposed elimination of the inpatient-only list, also known as site neutrality proposals, and its impact on admissions and rate growth.

Answer

Executive VP & CFO Steve Filton responded that it is difficult to project the impact without knowing the specific details of a final bill. He noted that the industry is lobbying hard against further cuts, but the ultimate effect depends on the final legislation, as the 'devil is always in the details' with such proposals.

Raj Kumar requested details on the recent Managed HealthCARE Pharmacy acquisition, the broader Pacific Northwest expansion strategy, and sought an update on penetration with large regional and national assisted living facility (ALF) accounts.

Answer

CFO David Morris characterized the recent Oregon acquisition as a 'typical deal' within their strategic sweet spot, noting it comes with a strong leadership team to help capitalize on national accounts in the Pacific Northwest. He reiterated that H2 organic growth is expected to align with high single-digit guidance, with the 11 newest locations being key future growth drivers.

Raj Kumar of Stephens inquired about observed drug mix trends during the fourth quarter and what pricing assumptions are embedded in the 2025 guidance. He also requested an update on the progress of pilot initiatives for clinical intervention services, such as fall risk and disease state management.

Answer

Executive David Morris stated that for 2025, no substantial changes are expected regarding drug mix or reimbursement, with trends remaining relatively steady. On the topic of clinical initiatives, Executive Fred Burke expressed pride in the data analytics and clinical teams, confirming they are making great progress on value-added services and that customers are enthusiastic about the developments.

Raj Kumar of Stephens Inc. asked for details on the Medical Solutions preferred payer strategy, including its revenue impact and margin outlook. He also inquired about the full-year free cash flow forecast and capital allocation priorities like debt paydown.

Answer

CFO Matt Buckhalter explained the Medical Solutions preferred payer strategy is expanding from 18 contracts and that gross margins, which were 45.6% in Q2, will normalize to the 42-44% range in the second half. He highlighted the strong $37 million in free cash flow year-to-date and expects to generate more. The current priority for cash is maintaining liquidity for future M&A opportunities rather than debt paydown.

Raj Kumar of Stephens Inc. sought Ardent's perspective on the proposed elimination of the inpatient-only list and its potential effect on inpatient volume growth. He also asked for clarification on the timeline for achieving the 100-200 basis points of margin expansion targeted by the IMPACT program.

Answer

President & CEO Marty Bonick stated that the shift from inpatient to outpatient has been steady and is driven by clinical acuity, so eliminating the list isn't expected to cause a sudden flood to outpatient settings. He noted it reinforces their strategy of growing their outpatient and ASC footprint. CFO Alfred Lumsdaine explained that the IMPACT program is an intentional acceleration of their margin goals, aiming to realize the bulk of the 100-200 bps improvement in the next 24 months to proactively mitigate regulatory headwinds that begin in 2028.

Raj Kumar asked for factors beyond Medicaid dynamics, such as labor or competition, that might explain the gap between strong macro demand and modest same-store metrics. He also requested an update on the penetration of PHP/IOP programs.

Answer

CEO Christopher Hunter acknowledged that healthcare is local and that factors like staffing can be headwinds in specific markets, but did not call out any broad competitive issues. He stated that expanding PHP/IOP step-down services remains a key growth opportunity to improve patient outcomes, and the company is focused on enhancing these referral patterns internally.

Raj Kumar of Stephens asked about the NEMT cost savings program, seeking details on 2024 results and the 2025 outlook. He also requested clarification on the transition to fee-for-service contracts and the expected NEMT margin progression for the year.

Answer

Executive L. Sampson explained that the $35 million in 2024 savings provides an $8-10 million run-rate benefit for 2025, with more cost savings expected. He confirmed 25% of revenue shifted to fee-for-service contracts in Q1. For NEMT margins, he advised modeling a relatively flat year-over-year performance in 2025, with an expected improvement to an 8-10% range entering 2026.