Whit Mayo

Whit Mayo asked about Encompass Health's leverage target, anticipating it would soon drift below 1.5 times, and sought updated views on capital allocation, including potentially increasing the dividend, stepping up buybacks, or buying up leases. He also inquired about malpractice activity in 2025, thoughts on 2026, and any impact from new reasonable care standard changes.

Answer

Doug Coltharp (EVP and CFO) used 2026 guidance to illustrate capital capacity, projecting $828 million in free cash flow, $725 million in growth CapEx, and $77 million for dividends, leaving approximately $25 million in cash and a leverage ratio of 1.83 times by year-end 2026. He indicated capacity for an additional $230-$250 million in buybacks or other distributions, noting no significant opportunities to buy back leases, making share repurchases and dividend increases the most likely uses of excess cash. Regarding malpractice, Doug Coltharp stated there was no significant change in general professional liability (GPL) activity from 2024 to 2025.

Whit Mayo of Leerink Partners asked about Encompass Health's target leverage ratio, anticipating it might soon fall below 1.5x. He sought management's views on potential capital allocation strategies, including increasing dividends, stepping up share buybacks, or buying out leases. He also inquired about malpractice trends in 2025 and 2026, specifically asking if a new reasonable care standard change impacts their outlook.

Answer

EVP and CFO Doug Coltharp outlined that based on 2026 guidance, Encompass Health expects to end 2026 with a leverage ratio of 1.83x, leaving capacity for an additional $230-$250 million in share repurchases or dividend increases, as there are no significant lease buyback opportunities. Regarding malpractice, Mr. Coltharp stated there was no significant change in General and Professional Liability activity from 2024 to 2025.

Whit Mayo asked for a quantification of the impact from satellite consolidations, timing of beds, and calendar factors on same-store discharges in Q3 2025. He also requested an update on the Reviewed Choice Demonstration (RCD) and how Encompass Health's experience has evolved this year.

Answer

CFO Doug Coltharp quantified the satellite consolidation impact at 35 basis points on Q3 total and same-store discharge growth, noting that other calendar factors are difficult to quantify precisely. He emphasized that the company's 2023-2027 discharge CAGR target of 6% to 8% remains on track at 7.5%. Regarding RCD, Doug Coltharp stated that all seven Alabama hospitals have maintained affirmation rates north of 90% since Cycle 4 began on July 1, indicating improved program performance despite ongoing administrative resource needs.

Whit Mayo asked for quantification of the impact of satellite consolidations, timing of beds, and calendar effects on same-store discharges in Q3. He also sought an update on Encompass Health's experience with the reviewed choice demonstration program.

Answer

CFO Doug Coltharp quantified the satellite consolidation impact at 35 basis points on Q3 total and same-store discharge growth, noting that other factors like calendar timing are difficult to quantify precisely. He emphasized the company's long-term 6%-8% discharge CAGR target, currently at 7.5% over three years. Mark Tarr added that program mix, including stroke and other neuro cases, remained strong. Doug Coltharp also reported that all seven Alabama hospitals in the reviewed choice demo achieved affirmation rates north of 90% since Cycle 4 began in July, despite ongoing administrative resource needs.

Whit Mayo from Leerink Partners inquired about the physiatrist recruitment market and questioned if the company's low leverage ratio should prompt larger share buybacks.

Answer

EVP & COO Pat Tuer described the physiatrist market as stable, supported by a dedicated recruitment team and residency partnerships. EVP & CFO Doug Coltharp agreed that with leverage below two times, and after funding capacity expansions, increased share repurchase activity is a likely use of capital, aided by favorable cash flow from bonus depreciation.

Whit Mayo asked about HCA Healthcare's recent digital efforts with payers concerning data and disputes, and how these initiatives are impacting revenue cycle, yield collections, pricing, or reducing payer friction.

Answer

CFO Mike Marks stated that HCA has launched engagements with major payers focused on digital integration, electronic data exchange, administrative simplification, and dispute resolution. He noted good progress, improving relationships, and positive impacts on the revenue cycle through more timely claims payments and mitigation of denials. CEO Sam Hazen added that these efforts contributed to working capital improvements and strong cash flow, emphasizing that resiliency is a cultural dynamic within HCA, leveraging scale and best practices with new tools for greater consistency and efficiency.

Whit Mayo inquired about HCA Healthcare's recent digital efforts with payers, focusing on data and disputes, and how these initiatives are impacting revenue cycle, yield collections, pricing, or reducing payer friction.

Answer

CFO Mike Marks explained that HCA has launched engagements with major payers focusing on digital integration, electronic data exchange, and dispute resolution to achieve administrative simplification. He noted these efforts have led to good progress in relationships and contributed to a nice reduction in net days in AR in Q4, improving claims payment timeliness and mitigating denials. CEO Sam Hazen added that resiliency is a cultural dynamic at HCA, leveraging scale and best practices with new tools like AI to create more consistency and efficiencies.

Whit Mayo from Leerink Partners asked about HCA's preliminary thoughts on capital deployment for 2026, including capacity for buybacks, dividends, and potential shifts in spending priorities.

Answer

CEO Sam Hazen stated that HCA is not yet ready to provide the 2026 financial plan, but capital allocation will remain consistent with past methodologies, focusing on productive investments for networks, patients, and shareholders. He emphasized the need to finalize planning and assess federal policies.

Whit Mayo inquired about HCA's preliminary thoughts on capital deployment for 2026, specifically how spending might differ from prior years.

Answer

CEO Sam Hazen stated that HCA is not ready to provide its 2026 financial plan, but it's reasonable to assume consistency with past methodologies. He emphasized that the capital allocation plan will be refined after the planning process and federal policy clarity, maintaining a culture of productive allocation.

Whit Mayo from Leerink Partners asked about any changes in Medicare Advantage payer behavior, such as denials, and inquired about HCA's investments in documentation and revenue cycle management.

Answer

CFO Mike Marks reported no significant impact from denial activities, attributing this to substantial investments in their revenue cycle operations. He highlighted new partnership activities with key managed care payers focused on digital integration, administrative simplification, and dispute management to improve collaboration and efficiency.

Whit Mayo from SVB Securities asked for an update on any new learnings or efficiencies gained from HCA's investments in AI and technology, particularly in areas like labor management.

Answer

CEO Sam Hazen described the company's digital agenda as being at an 'inflection point.' He highlighted promising, though not yet material, results from using AI in scheduling tools for better demand forecasting and workforce allocation, as well as in the revenue cycle to mitigate denials. He confirmed HCA is increasing resources for these initiatives for incremental gains in the coming years.

Whit Mayo asked for Humana's views on the changes to the reward factor for EHO (Equity in Healthcare Outcomes) and its implications for STARS or the broader industry, particularly regarding duals, low-income, or disabled populations.

Answer

David Dintenfass, President of Enterprise Growth, stated they are seeing great progress on social risk factors, tracking weekly improvements, and feel on track for a positive factor. He noted a good mix of low-income members, including duals, and progress with group members on H5216, expecting to be in good shape with social risk factor members. Jim Rechtin, President and CEO, added that operationally they feel good, but thresholds are difficult to forecast.

Whit Mayo inquired about Humana's views on the changes to the reward factor (EHO for all/social risk factors) for next year and its implications for Stars and the industry.

Answer

David Dintenfass, President of Enterprise Growth, reported great progress on social risk factors, with weekly tracking and week-over-week improvement, positioning Humana for a positive factor. He noted a good mix of low-income members. Jim Rechtin, President and CEO, added that while operations feel good, forecasting exact thresholds remains difficult.

Whit Mayo from Leerink Partners asked for any updated thoughts on the RADV rule and whether Humana is making assumptions in its bids regarding potential future CMS clawbacks.

Answer

President and CEO James Rechtin stated there was little new color to provide on the topic, citing ongoing litigation and numerous unknowns. George Renaudin, President of Insurance, added that Humana supports auditing contracts, provided it properly accounts for the actuarial equivalence between MA and fee-for-service.

Whit Mayo asked for specifics on the Stars rating appeal, questioning if both Part C and D call center measures needed to be overturned for a key contract to regain a 4-Star rating and how many calls were in dispute.

Answer

CEO Jim Rechtin confirmed that a total of three calls across both metrics would need to be overturned in the appeal. George Renaudin, President of Insurance, added that beyond the appeal, Humana is also advocating for greater transparency from CMS on how rating thresholds are calculated.

Whit Mayo asked about the potential impact of CMS's new WISeR model in fee-for-service Medicare, particularly on prior authorization and administrative work for USPI, given Texas is one of the six states involved and its focus on knee arthroscopy and certain implants.

Answer

CEO Saum Sutaria acknowledged the movement in pre-authorization for fee-for-service Medicare and the WISeR program's uncertainty. He stated that USPI is preparing by understanding documentation requirements, ensuring consistent compliance, and managing scheduling around pre-authorization. He also noted that physicians might adjust their mix to increase commercial business in response to such changes.

Whit Mayo asked about the potential impact of CMS's new WISER model in fee-for-service Medicare on prior authorization or administrative work for USPI, particularly in states like Texas and for specific procedures.

Answer

Chairman and CEO Saum Sutaria acknowledged the movement in pre-authorization for fee-for-service Medicare and stated that Tenet is preparing for documentation requirements, compliance, and operational management of scheduling. He also noted that physicians might adjust their mix to increase commercial patients in response to such changes.

Whit Mayo of Leerink Partners requested clarification on the magnitude of the medical case mix increase and asked if it was possible to quantify the contribution from ongoing synergies to USPI's EBITDA growth.

Answer

Chairman & CEO Saum Sutaria noted that case mix was up, consistent with the high-acuity strategy. EVP & CFO Sun Park specified the case mix index increased about 1% year-over-year. Regarding USPI, Mr. Sutaria explained that revenue growth is dynamic, driven by same-store growth, payer contracts, and new facility additions, rather than singling out a specific synergy contribution.

Whit Mayo asked about any new health system partnerships for USPI and whether the planned de novo center development is with new or existing partners.

Answer

Dr. Saum Sutaria, Chairman and CEO, stated they have not provided specific updates on new health system partners. He emphasized that the USPI platform is effective with or without partners. He described de novo development as a multi-pronged strategy that includes expansion in existing and new markets, and with various types of partners, not just one vector.

Whit Mayo asked how Tenet is thinking about its corporate cost structure with a smaller hospital portfolio and why the accretion to Conifer from hospital sales wasn't mentioned as a specific offset for 2025 headwinds.

Answer

Chairman and CEO Dr. Saum Sutaria explained that while costs are adjusted, the company has ongoing obligations through transition service agreements. EVP and CFO Sun Park clarified that long-term Conifer relationships with divested hospitals are expected to be a benefit in 2025, and this is part of their overall expectations, with more detail to come with formal guidance.

Whit Mayo asked about the performance of West Henderson Hospital, including any cannibalization effects on overall volumes, and sought an update on Cedar Hill Regional Medical Center, specifically if its expected improvement could offset the $50 million drag from startup losses and contribute to growth in 2026, potentially offsetting new facility startup losses.

Answer

CFO Steve Filton confirmed West Henderson Hospital is performing well with positive EBITDA since opening, estimating a 50-60 basis point impact on same-store adjusted admissions due to cannibalization. For Cedar Hill, he stated it lost $25 million in Q2 and Q3, is expected to break even in Q4, and be profitable in 2026. He added that incremental improvement over breakeven would largely offset startup losses from the Alan D. Miller Medical Center in Florida.

Whit Mayo asked about the performance of West Henderson Hospital and any cannibalization effects on overall volumes within the quarter. He also inquired about Cedar Hill Regional Medical Center's potential to offset its estimated $50 million drag from startup losses in 2025 and its projected growth for 2026.

Answer

CFO Steve Filton confirmed West Henderson Hospital is performing well with positive EBITDA since opening. He estimated a 50-60 basis point impact on same-store adjusted admissions due to cannibalization from existing hospitals. For Cedar Hill, Filton stated it lost $25 million in Q2 and $25 million in Q3, but is expected to break even in Q4 and be profitable in 2026. He noted the $50 million loss in 2025 should be a tailwind for 2026, but any incremental improvement over break-even will largely offset startup losses from the new Alan D. Miller Medical Center in Florida.

Whit Mayo asked Tim Noel to comment further on provider coding practices, observations on the independent dispute resolution (IDR) process, and their impact on trend.

Answer

Tim Noel (CEO of UnitedHealthcare) explained that a meaningful portion of the trend is related to higher service intensity billed by health systems and providers, including higher cost sites of service, more services attached to visits, increased specialist rounding for inpatient stays, and a bias towards higher DRGs. He noted this is consistent nationally but with significant outliers. UnitedHealthcare is addressing these outliers through network actions, increased use of AI in payment integrity, and enhanced payment policy and clinical affordability programs. He stated that the IDR process is not a material trend driver but is being closely monitored.

Whit Mayo requested further comments on provider coding practices, including pushback from health systems, and observations regarding the independent dispute resolution (IDR) process and its impact on medical cost trends.

Answer

Tim Noel, CEO of UnitedHealthcare, acknowledged that a significant portion of the trend relates to increased service intensity billed by providers, including higher-cost sites of service, more services per visit, increased specialist rounding, and a bias towards higher DRGs. He stated that UnitedHealthcare is addressing outliers through network actions, increased use of AI in payment integrity, and enhanced payment policy and clinical affordability programs. He noted that the IDR process is not a material trend driver but is being closely monitored.

Whit Mayo of Leerink Partners asked for the core revenue per adjusted admission growth rate when normalized for the New Mexico DPP program's impact. He also requested any specific figures on the increase in case mix during the quarter.

Answer

CFO Alfred Lumsdaine estimated that of the 10.2% growth in net revenue per adjusted admission, the New Mexico program contributed about 6.5 percentage points. He stated that the core rate increase was around 4%, consistent with historical trends. He did not provide a specific number for the case mix index increase but noted acuity was good.

Whit Mayo questioned the specific impact of underperforming facilities on same-store patient days and asked for a detailed bridge for the updated full-year EBITDA guidance, focusing on second-half drivers.

Answer

CEO Christopher Hunter and CFO Heather Dixon quantified the drag from underperforming facilities at about 80 basis points on same-facility volume growth, with the expected full-year EBITDA headwind now slightly worse at ~$23 million. Dixon provided a guidance bridge, citing a ~$30M drag from softer volumes and a $10M increase in startup costs, partially offset by a $25-30M increase in expected net supplemental payments.

Whit Mayo asked for elaboration on the company's share buyback strategy and potential pace, and also requested an update on the Independent Dispute Resolution (IDR) process with payers, including whether the company is successfully receiving payments.

Answer

CEO Mark Ordan explained that the company's strong cash position provides flexibility for debt reduction, strategic opportunities, or share repurchases, emphasizing they will not simply hoard cash. He also confirmed that the IDR process has been favorable for Pediatrix and that the company remains overwhelmingly in-network with its hospital partners.

Whit Mayo from Leerink Partners inquired about any changes in physician recruiting focus and the contribution of recent recruits to same-store case growth. He also asked for an update on payer behavior, particularly with MA plans, and the progress of revenue cycle initiatives.

Answer

CEO Eric Evans confirmed no change in recruiting strategy, which remains focused on orthopedics and other key service lines, and highlighted the compounding multi-year return from new physicians. CFO Dave Doherty reported that the company is now ahead of the payer authorization pressures discussed in the prior year and is midway through a three-year revenue cycle standardization project, which contributed to a three-day sequential improvement in DSO.

Whit Mayo of Leerink Partners asked if the five year-to-date acquisitions were consolidated, sought a reminder of the de novo development targets, and inquired about future portfolio refresh activity.

Answer

CFO David Doherty confirmed all five acquisitions were consolidating ASCs and that the company maintains a target of having 10 de novos under development annually. CEO J. Evans added that most de novos start as unconsolidated. Regarding portfolio management, Evans stated that after significant divestitures last year, no similar large-scale activity is expected in 2025, though minor, ongoing optimization will continue.

Whit Mayo sought clarification that the 'less than 5% of revenue' figure includes all state-based funding, not just Medicaid. He also asked for an update on the progress and remaining opportunity in revenue cycle and procurement initiatives.

Answer

CEO J. Evans confirmed the 'less than 5%' figure is inclusive of all Medicaid and associated state-based programs. Regarding operational initiatives, Evans stated they are still in the 'early innings' on revenue cycle with a long way to run. CFO David Doherty added that these initiatives are not drying up, citing a 3-day DSO improvement in the quarter and successful navigation of tariff threats by the procurement team. He affirmed these will be an ongoing source of margin enhancement.

Whit Mayo of Leerink Partners inquired about the performance and growth outlook for the infusion business, particularly following recent leadership changes and the strategy for the acute market. He also asked for clarification on the drivers behind the significant increase in gross profit per script.

Answer

CEO Jon Rousseau expressed confidence in the infusion business, citing new leadership and operational progress as drivers for its double-digit EBITDA growth, which he expects to continue. He emphasized a strategy that includes focusing on the large acute therapy market. CFO Jennifer Phipps explained that the higher gross profit per script was driven by a 38% year-over-year increase in specialty scripts, which carry higher margins.

Whit Mayo of Leerink Partners asked for updated metrics on new member engagement with the Care Anywhere program and for an outlook on industry-wide Star Ratings for the current year.

Answer

CEO John Kao stated that new member engagement is incrementally better, moving from the 50s to around the 60th percentile, but he aims for 70-75% engagement. He sees upside opportunity through deeper integration with IPAs. Regarding Star Ratings, Kao expressed confidence in Alignment's own performance, expecting it to be 'distinctly better' than last year and at least 4-stars in all markets, but he did not have visibility into the broader industry's results.

Whit Mayo from Leerink Partners questioned Alignment's visibility on the Risk Adjustment Factor (RAF) for new members, given recent industry challenges. He also asked about any new initiatives for 2025 aimed at improving CAHPS scores or other Stars measures.

Answer

CFO Robert Freeman explained that as a health plan, they have direct visibility into the paid revenue PMPM for new members in January, allowing them to book revenue conservatively until midyear sweeps. CEO John Kao added that their Stars strategy is an 'across the board emphasis' on core operations, including performance-managing IPAs on CAHPS and stepping in directly when needed, rather than relying solely on regulatory changes.

Whit Mayo questioned the reasons for persistently challenged CAHPS scores and asked why Alignment did not significantly raise its Part D deductible for 2025 like many national peers.

Answer

CEO John Kao explained that fixing CAHPS scores requires a foundational change in how they handle utilization management, shifting from simple approvals to active care navigation to improve member access. Executive Robert Freeman noted that their Part D deductible strategy is competitive within their specific local markets, where Part D benefits are a key differentiator, even if it appears as an outlier nationally.

Whit Mayo requested an update on commercial margins, the timeline for returning to targets, and commentary on midyear renewals for the fully insured business.

Answer

CFO Mark Kaye reported continued satisfaction with the large group commercial margin recovery, which is performing consistently with expectations. Morgan Kendrick, President of Commercial Health Benefits, added that the fully insured market is rationalizing and hardening. He expressed comfort with July renewals and noted that when risk-based business is lost, it often converts to a self-funded arrangement with Elevance.

Whit Mayo of Leerink Partners asked for an update on the 'One Adapt' strategy and any operational improvements expected from it in 2025. He also requested commentary on how the Humana relationship is tracking and sought more detail on the growing pipeline of new payer relationships.

Answer

Executive Suzanne Foster explained that the 'One Adapt' initiative is focused on leveraging the company's scale, which includes brand consolidation, entity simplification, and creating a unified commercial team that presents the full portfolio to large accounts. She confirmed the Humana relationship continues to be a 'bright spot' and that the pipeline for new capitated arrangements is not only growing but advancing, with optimism for future announcements.

Whit Mayo from Leerink Partners inquired about the performance of the Humana national contract relative to expectations and whether AdaptHealth intends to expand this model with other payers.

Answer

CEO Suzanne Foster stated that the Humana partnership is performing "incredibly" well and is a model for future business. She confirmed that the newly expanded enterprise sales and managed care teams are actively exploring similar large-scale opportunities with other payers.

Whit Mayo asked for color on the elevated turnover among tenured business development (BD) representatives in the hospice segment, as mentioned in the slide deck, and inquired about the company's correction plan.

Answer

President and CEO Chris Gerard acknowledged the issue arose in Q3, explaining it was a self-inflicted problem where clinical staffing shortages led to slowed admissions, which in turn negatively impacted the compensation of high-performing BD reps. He stated that management was initially slow to react but now has a plan in place to better support these reps and expects turnover to decline starting in Q4.

Whit Mayo from SVB Securities asked about the company's field-level strategies to prepare for the end of the PHE and the reinstatement of the physical face-to-face requirement, and what percentage of starts of care are currently initiated virtually.

Answer

President and CEO Chris Gerard reported that approximately 10% of starts of care are currently initiated via a virtual face-to-face. He outlined the company's strategy, which relies on its 1,300 sales representatives to proactively educate referral sources on the upcoming policy change and encourage a return to physical assessments to ensure a smooth transition.