Sam Hazen: This is Sam. We have been pretty consistent with our allocation over the years between inpatient, outpatient and technology, and I think 2024 will be somewhat consistent with that. I will tell you we do have a large development pipeline of new outpatient facilities that are connected to our capital project in 2024 and 2025. We’ll have quite a few come online, little bit more than we had in 2023 and 2022. We do have some new hospitals in a few markets that will come online, and we’re starting to invest in, in other markets. So I think when we look at the volume of beds and so forth coming on in 2024, it’s about the same as 2023, if I remember correctly. And then our ER capacity is growing consistently. So we’re pretty consistent in our allocation of capital.
It’s not disproportionately oriented to any one category of our business. And we think, again, that approach has yielded really strong returns. It’s allowed us to meet the demand expectations that exist in the market, and it’s also responded to our physicians in a way that created the capacity or allowed for the clinical technology that they need to practice their medicine. So we’re stepping it up because we have a growing occupancy on the inpatient side, and then we have opportunities in the outpatient side to expand our networks further in these fast growing communities. That’s pretty much the snapshot of it, but it’s generally consistent from an allocation standpoint to prior years.
Operator: Great. Thank you. And our next question comes from the line of Gary Taylor with TD Cowen. Gary, please go ahead.
Gary Taylor: Hi, good morning. One clarification and then I’ll ask my real question. I just want to make sure I understood what Bill said, and congrats to Bill, by the way.
Bill Rutherford: Thanks.
Gary Taylor: You were walking through the net Medicaid, DPP, EBITDA, outlook for 2024. And I think you said overall you’re expecting that dollars to come down $100 million to $200 million. I want to make sure I heard that correct. And then my real question was just, you talked about stemming the Valesco operating losses sequentially to more in line with what you originally thought, which I think means maybe brings that down to sort of breakeven in the quarter. And I was just hoping you’d share with us a little bit about how operationally you pulled that off.
Bill Rutherford: Yes. Gary, this is Bill. Thanks for those comments. Let’s start with DPP. You are correct in my comments. We are expecting overall, when we aggregate all the programs to potentially be a headwind, anywhere between $100 million and $200 million, largely due to settlements that we received this year, we don’t expect to reoccur. And then the Florida beginning accrual had an impact to that. So that’s what’s mostly driving that across our multiple programs. On Valesco, as we mentioned, it came in line with our expectations, which I think last quarter we sized just under $50 million or so a quarter. As we continue to work on multiple improvement initiatives, including further integrating that joint venture into HCA, we expect to see continued improvement going forward.
Next year I think Valesco for the full year will equate with about the same amount we recorded this year, but we had nine months this year versus 12 months, obviously in 2024. So we do believe over time there will be continued improvement, and we’re working diligently towards those efforts.
Operator: Thank you. And our next question comes from the line of Brian Tanquilut with Jefferies. Brian, please go ahead.
Brian Tanquilut: Hey, good morning, and Bill, congrats and very successful career at HCA. I guess my question to follow-up on Gary’s, maybe expanding it further to the broader labor outlook. How are you thinking about the opportunity to further reduce spending on both nursing and obviously at Valesco? Or maybe another way to ask it is how are you viewing inflation at the wage level? Thank you.
Bill Rutherford: Well, I think we’ve proven the teams have managed through that very well during the inflationary period we experienced. I think going forward we expect to move back into kind of the normal trends, which is generally 2.5% to 3% of wage inflation going for us. And then we believe there’s continued improvement in contract labor to be achieved, and we have plans to execute that throughout 2024. On the professional fees in Valesco, we have a number of initiatives with teams working on that to not only further integrate into our operations, but to continue to figure out adjustments to those programs. Our professional fees I’ve talked to, we have seen a decline in the sequential rate of growth. So we’re a bit encouraged with that as we go into 2024.
We would expect those sequential declines to continue. And we’re working hard through multiple initiatives, whether it would be revenue enhancements, program adjustments, or looking at opportunities to internalize some of those programs.
Operator: Thank you. And our next question comes from Ann Hynes with Mizuho. Ann, please go ahead.
Ann Hynes: Good morning. Thank you. And I also want to congratulate Bill on his retirement. I just have a couple of follow-ups just on the managed care pricing yield assumptions for 2024, which is up 2% to 3%, which looks a little conservative given the two-midnight rule. And when you look at Medicaid redeterminations, the growth in the health exchange in your states are very strong. So in your guidance, do you embed any benefit from the two-midnight rule or kind of the shift from Medicaid potentially to commercial? And then secondly, if you can just maybe give us some more detail about how the two-midnight rule could impact you, maybe a percent of emissions or maybe kind of a differential between revenue per emit would be great. Thanks.
