Bill Rutherford: Yes. Hey Kevin, this is Bill. Let me start and I’ll ask Sam to add in. On the guidance, we typically would not adjust guidance in Q1 in normal years. But we — as we talked in our year-end call and as we’ve tried to set the guidance ranges, I believe the ranges are wide enough to accommodate a range of outcomes. And so we want to get out of the trend, if you will. I’m trying to reset guidance every quarter by quarter. I think the long-term business trends that we’ve highlighted over the years and we highlighted in our Investor Day last year, we believe, are solid. They’re kind of durable. They’ve been pretty predictable over time. And our overall guidance is based on that. So we’re not planning to adjust quarter-by-quarter unless there’s material circumstances to warrant on either side of that.
And on the volume trends, again, Sam can comment on here. As we’ve said, we’re very pleased, very strong volume, very strong demand. And perhaps we do end up on the high side of our overall annual guidance. We’ll remind you as we get into kind of the second half year-over-year comparisons; we started to see some volume — positive volume trends in the third and fourth quarter last year. So the year-over-year comps will adjust a little bit. But we’re very pleased where the volume trends are. And with these efforts, hopefully, we will end up on the high side.
Sam Hazen: Nothing else to add. Thank you.
Operator: Your next question comes from the line of Stephen Baxter, Wells Fargo. Please go ahead.
Stephen Baxter: Yes. Hi, thanks. Just to hopefully put a bow on the Medicaid state-directed payment question. Can you just remind us; are we at the point now that you’re accruing these evenly each quarter in 2024? Is there any lumpiness to kind of keep in mind about the first quarter or the rest of the year? And then just to tie on to that, the final rule that got published earlier this week around this issue. Do you feel optimistic that maybe more of your states kind of have more to do here? Or do you think maybe your state is doing a better job of proactively seeking these programs out? Thank you.
Bill Rutherford: Yes, let me. There is some variability in the timing of when we recognize these. For the most part, programs we’ve had under while we’re on an accrual basis. With new programs, we would typically wait until we get some established history and actually funds starting to flow. So it’s a little bit of a mix, but there is some variability that we see as we go year by year. Remind people, previous to this year, we were recognized Florida on an annual lump sum basis. We started accruing a little bit, but we try to accrue those as much as we can as we’ve got some historical practices. Relative to the rule that was released earlier this week, it’s still early. We’re working our way through the assessment. But generally, we review it as positive.
It removes the potential for some capping add-on payments, and there’s a potential for changes to — in terms of how providers receive payments. It will take a little bit of time for states to work through those and implement them. But generally, we view that as a positive development for us.
Operator: Next question comes from the line of Jason Cassorla from Citi. Please go ahead.
Jason Cassorla: Hi, great. Thanks. Good morning. I just want to follow-up on labor. I know you’re benefiting from reduced contract labor spend and the like. When we think about the first quarter SWB per just a patient day of about 3%, can you give us a sense of how wage growth trended in the quarter and then offset on the productivity front that you’re seeing? And if there’s anything within the first quarter that gives you confidence on your labor agenda kind of for the balance of the year? Thanks.
Bill Rutherford: Yes. I mean, obviously, as we’ve talked about over the past year, we’ve got a lot of initiatives on the labor, and our teams are executing very well from turnover reductions to recruitment and retention efforts on there. And our core labor trends are in line with our expectations. We said we anticipate wage inflations in that 2.5% to 3% level, and we’re starting to — and we are seeing that. And that’s helping to offset, and we continue to be pleased with the contract labor trends. So I would say the core labor trends that we are seeing this year are right in line with our expectations and the initiatives that we have are continue to be underway.
Operator: Your next question comes from the line of Lance Wilkes, Bernstein. Your line is open.
Lance Wilkes: Great. Thanks. One follow-up on the labor question. And just if you could give any comment on hiring pipeline and if there are any categories where you’re seeing either more appetite out there or any sort of constraints? And then my real question was on your comment on folks getting shifted over due to redeterminations and maybe that impacting outpatient surgeries. I was wondering if you’re seeing any impacts of that sort of stuff on bad debt or any other things where perhaps the overall backdrop is impacting consumers here.
Bill Rutherford: Yes, let me attempt on that. Relative to the pipeline of labor, I don’t know if there’s any specific things I’d call out. I mean, obviously, we have diversity of geography, diversity of different employer cohorts. And labor teams are doing a great job. Our nurse hiring is up. And so I don’t think there’s anything unique I would call on that and Sam or others can add in on that. And relative to the redeterminations and perhaps that influencing our outpatient surgery, I think both the combination of the HICS volume growth that we spoke about earlier, some of that due to the Medicaid redetermination, it is just a working thesis that perhaps there’s a little bit more sensitivity on some of those elective procedures early in the year relative to deductible and co-pays.
As Sam mentioned in his comments, almost all of our drop in outpatient surgeries was in Medicaid and self-pay levels. So we’ll need a little bit more time to see how that plays out, and perhaps it will be some rebound on that as that begins to kind of normalize throughout the year. And on your question relative to the impact of that on bad debts, we’re saying, no, I can’t say we’ve seen any impact on that right now. There’s still some of our self-pay growth or individuals that are in what we call a pending Medicaid status as we’re pursuing eligibility efforts on there. But it has not yet resulted in any material change in our collectibility or bad debts at this stage.
Operator: Your next question is from the line of Joshua Raskin from Nephron Research. Please go ahead.
Joshua Raskin: Hi, thanks. Good morning. And Bill, I’ll also add my congrats, and thanks for all the help.
Bill Rutherford: Thanks, Josh.
Joshua Raskin: My question is just on CapEx. Could you speak to the CapEx and sort of the deployment in the quarter? It was down a tiny bit so let’s call it flattish year-over-year, but generally been trending higher in recent years. I guess maybe there’s obviously a lot of timing. And then any new capacity specifically to call out in the next 12 months? I know you’ve got a bunch of projects over the next sort of 2 to 2.5 years as well.
Sam Hazen: This is Sam. The amount for the quarter is flattish, to your point, and it is timing. We haven’t slowed anything down. Some of our construction projects move at different paces than we anticipate at some level, but we expect for the year to be somewhere close to the number that we guided to last quarter, which is somewhere around $5.2 billion or so. So we’re investing more in the business than we’ve ever invested because of the capacity that we need in the network development that we want. And so those efforts continue as we go through the course of this year. As far as any particular capacity that I would call out, I would tell you, we have a new hospital in San Antonio, Texas, that will open up later this year on the west side of that community.
We’re excited about that. We have other major projects on a host of campuses that will come online over the year. I think our bed capacity when we conclude the year will be somewhere similar to the growth that we experienced this year, which is maybe another 2% or so. As I mentioned previously, our emergency room capacity is also growing as we invest in new units or as we expand existing units. I don’t have the number in front of me as to exactly how much we’re anticipating there. But we’re investing consistently as far as in the areas of our business, but we’re investing more inside of those as a reflection of our overall spending. We also continue to invest in basic infrastructure in our facilities, whether it’s capabilities and technology for our nurses or surgical equipment and so forth.
Those investments continue, again, at elevated levels to improve the offerings for our physicians and patients. And so we have some increases embedded in that as well. So we’re really excited about what we’re spending our money on. And our patterns have proven that we can generate very positive returns, and we continue to believe that’s the case.
Operator: Your next question is from the line of Sarah James, Cantor Fitzgerald. Please go ahead.
Sarah James: Thank you. I was wondering if you could give us what the commercial outpatient surgeries were. Just with the moving pieces, I think we’re all just trying to understand if that piece was where you expected it to be. I know it’s coming off of a tough comp last year, but was it still positive like it was the last few quarters? And then, Galen, I think you guys are within a few weeks of your first graduating class. So just wondering, strategically, how has that panned out? Did you get your share or better of the work commitments of the graduating class?
Sam Hazen: This is Sam. On the commercial side of outpatient surgery, I would say it’s generally flat, so it performed better than the aggregate as a whole. Again, the calendar effects affected outpatient surgery in general. Specifically, it had a more dramatic effect on Medicaid, as we mentioned. But we aren’t anticipating or seeing anything that’s structural with our outpatient surgery business. And as I just mentioned, our capital spending has investments in our outpatient surgery platform as well. With respect to Galen, we have had graduating classes in the past. We continue to have larger ones as we expand that component of our organization. And one of our priorities within our facilities and within our nursing agenda is to integrate the Galen campuses into sort of the organization more effectively.
And we are seeing incremental improvement in retaining those grads within our company, and we continue to see opportunities for improvement there. It’s really early to say that, that has completely solidified. We have numerous campuses that are in early stages of development. We will have, again, somewhere around 30 campuses by the end of 2027 with roughly 30,000 students across those campuses, graduating somewhere between 7,000 or 8,000 per year, allowing us to pipeline and hopefully create a really good student experience, integrate them into the system through clinical integration and retain them when they graduate. So that’s our strategy, and we’re still early in seeing the effects of that, but we’re encouraged by the efforts.
Operator: Your next question is from the line of Cal Sternick from J.P. Morgan. Please go ahead.
Cal Sternick: Thanks for the question. We’ve heard commentary from some others that January and February were strong from a volume perspective, with some softening of demand in March. Can you talk about what you saw in the quarter? And then if you’re seeing the expected rebound volumes into April? And if I could also just ask one clarification on the Medicaid supplemental payments. Do you have any visibility right now into any retro programs that could come through in the second quarter?
Bill Rutherford: This is Bill. I’ll answer the last one. No. We don’t have specific visibility. There’s always timing differences of certain aspects but no specific visibility now.
Sam Hazen: As far as the volumes, every quarter has calendar effects. And again, as I mentioned previously, we judge the business over a longer period of time to really understand what’s working and what’s not working. March was a difficult calendar for purposes of elective outpatient business and elective inpatient business simply because we had less working days, business days, and we had the Easter holidays during that time period. So it was clearly softer. We actually grew our inpatient admissions, however, in March, but our outpatient activity was soft and influenced sort of the aggregate for the quarter. We don’t give guidance with respect to one month into the next quarter. I will tell you, as I mentioned in my prepared comments, that we’re encouraged by the overall backdrop of demand in our markets.
Operator: And this concludes our Q&A session for today, and I would like to turn the call back over to Frank Morgan for closing remarks.
Frank Morgan: Wally, thank you for your help today, and thanks, everyone, for joining our call. We hope you have a nice weekend. I’m around this afternoon if you have additional questions, give us a call. Have a good day.
Operator: This concludes today’s conference call. Enjoy the rest of your day. You may now disconnect.
