Eric Evans: Sure. So we’re excited about our de novo capabilities growing, and you’ve seen that over the past couple of years. We expect to be — have double-digit in process at any given moment. Those facilities, there’s a lot of start-up kind of delays as we think through those. But in general, we spend the first several months getting them open, post syndication, getting contracted, getting started, obviously, highly accretive investments. So we could do all de novos. We would, although there’ll be a delay, obviously. So we like the investment profile. Typically, by the end of the first year, they’re cash flowing and have a positive EBITDA, but there is a ramp up, those first six months can be a little bit bumpy with just new contracts and getting doctors comfortable changing habits, all that stuff.
But by year — by the end of the year, the first year, we expect them to be contributing to our financial performance by year — end of year two, we would expect them to be close to run rate and then just getting into our organic profile. So again, from a capital investment standpoint, these are our best investments along with end market M&A, and so we’re really excited about how much is growing. Those opportunities continue actually to be at a higher level than we’ve ever seen. So we’re really pleased with the progress there.
Bill Sutherland: So you would — you mentioned the 11 fully syndicated under construction, that would be for next year’s P&L.
Eric Evans: Yes. So if you think about it, we said a portion of those will be opening later this year, another portion in early ’25. So again, probably not a huge contribution when you think about ’25 really start to hit us in ’26, but obviously, planting seeds for the future that give us increased confidence in that mid-teens growth we’ve committed to.
Operator: Our next question is from Jason Cassorla with Citi.
Jason Cassorla: Great, and congrats on the quarter. Just wanted to ask about the $2.7 million of unconsolidated minority earnings in the quarter. It’s not a major driver of EBITDA trend. It was down a little bit year-over-year. Obviously, you have a number of ramping unconsolidated facilities. Maybe can you just help bifurcate how that $2.7 million balance is between the newer investments on their maturity curve that could be a drag in that against the more mature assets with positive contribution included in that as well?
Dave Doherty: Yes. I’ll make this real simple. The number of de novos that Eric just talked about, including those that are opening up that may operate in a somewhat of a loss position, are considered to be the investments that we make in those, and we back those out of that number. And you can see this in our press release, there’s a footnote — sorry, there’s a tabular disclosure in the back there. It was around $800,000. You strip that out, you can see kind of the growth in the total contributions that come from those. The other part of our contributions, just as a reminder, Jason, is the management fees that are reflected in revenue associated with those transactions. So you can see that level of detail in our press release.
Jason Cassorla: Okay. And maybe just a follow-up. You’ve highlighted for a while now that the major driver of revenue per case growth has been the high acuity focus, certainly. But I guess, just curious on any updates on the managed care contracting side, how those conversations are going? There’s anything from a cycle perspective to highlight or areas where you see opportunity, including on the value-based care side to flag. Just any thoughts around that would be helpful.
Eric Evans: Yes. Thanks for the question, Jason. We continue to make progress in our managed care negotiations. I’d say the national payers are increasingly interested in the value, obviously, our facilities can provide it. So we look for a balanced approach there. You’ve heard us talk about this for quite some time, which is we want to make sure we’re paid fairly. We also really want steerage and we want to make sure our doctors are paid fairly. So there’s a balance in how we think about those negotiations. We continue to be pleased with our rate lift there. Now again, the majority of our rate lift is going to be still the acuity. But we are making progress in those conversations. And when it comes to value-based care, I’d say this, we always kind of start with we’re 50% cheaper on average than some of our peers.
And so we always say it’s a safe half before we take any risk, but we’re happy to enter into value-based care arrangements in the markets where they make sense. We do that periodically. And I expect that over time, that will become a bigger part of the story. But I think in the fee-for-service world, payers see us as a value care player, and they’re increasingly having conversations with us about how to take advantage of our independent portfolio.
Operator: Our next question is from Lisa Gill with JPMorgan Chase.
Cal Sternick: It’s Cal, on for Lisa. A couple of quick questions here. I guess on recruitment, it sounded like that was a little bit better than you guys expected. Can you talk about what drove the strength there in the quarter and how you’re thinking about that over the remainder of the year? And then, I guess, second, I know you don’t have much Medicaid exposure, but just wondering if you saw any impact from redeterminations on volumes in the quarter and how you think about that as you move into the back half?
Eric Evans: Cal, I appreciate the question. From the recruitment side, yes, we were really pleased with the first quarter. I think we have a veteran team that is very targeted based on data and very targeted on a few specific service lines. Now as you know, those service lines continue to expand every year with technology. So they’ve got a little brighter hunting ground. We’ve got new markets. But we feel really good about that trajectory. We expect that to remain a little — continue to be above where we’ve been the rest of the year. So we’ve got a really nice pipeline on recruitment. Again, just a veteran team that’s very focused on data and executing well. On the redeterminations, look, as I mentioned earlier, Medicaid is a very small part of our business. So I think even if there were an impact, we’d be unlikely to feel it, but we definitely have not seen an impact in that area at all.
Operator: Our final question is from Ben Hendrix with RBC Capital Markets.
Ben Hendrix: Yes. Just a quick follow-up on the redetermination issue. We’ve heard some of the hospitals talk about health exchange pickup post — after the — at the tail end of redeterminations and that there could potentially be some delay in that volume just because of higher co-pays and deductibles. Is there a potential for health exchange volume to kind of increase your typical 4Q seasonality and maybe some upside there…
