Operator: Thank you. Next question is coming from A.J. Rice from Credit Suisse. Your line is now live.
A.J. Rice: Hi, everybody. I wanted to just ask about two other areas that haven’t been touched on. As you’ve done your analysis on redeterminations, we’re getting sort of different views as to as people roll off of Medicaid, get picked up on public exchanges, or hopefully on the commercial rolls, whether that’s a neutral event for you guys or a positive. However, you factored that into guidance, and then any update generally on your managed care contracting, I know this year you got a little help. It seemed like from labor rates and labor pressures rather. Is that following through in your discussions for 2024? Do you think you’ll get some help on the labor side there in rates for 2024?
Daniel Cancelmi: Hey, A.J. It’s Dan. Let me try to address those in terms of the Medicaid redetermination, I would say, at this point we haven’t seen anything, any substantive impact from the redeterminations, which really just began. But I would tell you that we have Conifer in our hospitals, we have dedicated resources to address this as the redeterminations occur state by state. We have communications across the enterprise through all levels of Conifer in the hospitals. We’re doing other types of communications like webpage banners with links to state enrollment websites. We’ve been going through and revising our screening scripts and reenrollment questions, updating various resource documents, messaging at registration point of entry and in broader messaging campaigns across our facilities.
And also working with community members, non-Tenet community members on the community and working with them and tracking some of those statistics. So far, nothing significant, but we think we’re on top of it and we’re monitoring it closely. In terms of your question, in terms of the guidance for the year, as we said in February, we haven’t assumed any significant upside or downside from the redeterminations. We think it’s premature at this point. Obviously, the exchange enrollment statistics were very encouraging in terms of the growth. So some of the individuals who may transition off of Medicaid rolls, you would expect that many of those would potentially reach out and try to obtain exchange coverage. But again, we haven’t factored anything significant into our guidance this year.
In terms of the commercial contracting, I would say consistent with our previous messages on this. We think we’re very well positioned from a contracting perspective. We’re essentially 95% contracted this year, and around 85% next year and even 25 fair amount of our business is already contracted. Listen, the terms been clear, it’s not like we’ve been getting CPI type of increases in every contract negotiations, but what we have seen, obviously, the levels of inflation are top of mind, they always have been, but certainly more pronounced now. And the conversations obviously are being held with the plans. And I would say some of our more recent negotiations, it’s a little bit better than what maybe we historically would have negotiated.
A.J. Rice: Okay. Thanks a lot.
Operator: Thank you. Next question is coming from Josh Raskin from Nephron Research. Your line is now live.
Joshua Raskin: Hi, thanks. Good morning. I just wanted to get back to USPI and that 9% plus same-store revenue growth number. I was wondering if you give us some more color on maybe perhaps geographies and whether these were legacy centers or some of the newer ones that are ramping up. And then did you give a number for the buy-ups for the second SCD transaction? And then lastly, I hate to keep harping on this guidance, but the guidance for USPI specifically, sort of implies a lower growth rate for EBITDA over the next three quarters than what you saw in the first quarter. Any changes to seasonality, anything about that, or just sort of consistent with the overall message on guidance?
Daniel Cancelmi: Hey, Josh, it’s Dan. Let me start. Now, in terms of the guidance, obviously, USPI is off to a great start to the year. We increased the guidance $20 million for EBITDA. Strong volumes – we also increased our volume guidance assumptions from 2% to 3% to 3% to 4%. So we’re obviously encouraged. Again, as I mentioned, another question, there’s nothing to read into this. It’s early in the year and we like what we’re seeing and we’ll continue to obviously reevaluate where things stand at the end of the second quarter and make any guidance changes if appropriate. At that point in time, the USPI business continues to generate incredible margins, so we’re very pleased with the start to the year.
Operator: Thank you. Next question is coming from Ann Hynes from Mizuho Securities. Your line is now live.
Ann Hynes: Hi, thanks. I just want to talk about the no surprise billing act. Is that having a negative impact on surgery volume at USPI? Some data that I’ve seen and check suggests that maybe anesthesiologists aren’t making as much money, so they’re gravitating more towards inpatient or outpatient departments given the reimbursements higher. So I guess is this having an impact? And if so, what do you think it is on the dragon volumes?
Saum Sutaria: Just a couple of comments there. I’m not sure I could credibly answer that question with data. It’s an interesting question and something that we’ll look into to see if we can identify any trends there. But what I would say is that the pressures that we’ve talked about before in the staffing arena for hospital-based or ASC-based physicians, in particular, in anesthesia is certainly an area that’s requiring a lot of work. Your commentary about the activity and revenue intensity for anesthesiologists in hospitals versus ASCs is certainly true. But again, remember, our payer mix in the ASCs is significantly better, and that creates a draw to the ASC environment, in particular in RASCs , the way they’re set up.
So while there’s some pressure there, we’re managing through it. And again, I would have to say that we’d have to take a look at the data more carefully to answer your question in any kind of statistically relevant manner, but it hasn’t bubbled up as a major driver of the volume issues that we saw in particular last year in the third quarter.
Ann Hynes: All right, perfect. And then, Dan, I know you up free cash flow guidance, which is good. And can you remind us, do you have any share repurchase or incremental debt repayment and guidance at this point?
Daniel Cancelmi: No additional share repurchases are assumed in the guidance, and that was consistent with how we started the year with our guidance.
Ann Hynes: Okay, great. Thank you.
Daniel Cancelmi: Sure.
Operator: Thank you. Next question is coming from John Ransom from Raymond James. Your line is now live.
John Ransom: Hey, there. Kind of an end of the weeds question because all the good ones have been asked. If we look at the rest of the year on USPI and you look specifically at revenue per procedure, what’s going on there in terms of rate versus just mix? I mean, we assume there’s some natural lift as you get more ortho and less pain, but if you could kind of help us understand what’s going on in that line item? That’d be great. Thank you.
Saum Sutaria: Yeah. No, John, I appreciate it. And that is still a good question, so appreciate it. Listen, I think there’s a couple of things, as I indicated, and I think we’ve talked about this a bit before, but maybe not as specifically. There are certain areas of healthcare services that were deferred or more actively deferred and I think in our ASC business in particular, we saw a dampened utilization of procedures that might have preventative value and in particular in the Medicare population. For us in general, that’s a good sign that it’s coming back, even if there’s some impact on the net revenue per case. Because ultimately as the ASCs become fuller, we’ll get benefit from capacity utilization. And we had prepared for this a bit, we weren’t sure when it was going to come back, to be honest, but we had prepared for this a bit by looking like we would in an acute care hospital environment for efficiencies within our ASCs that would help to maintain our margins.
So we’ve been focused on knowing that this business is going to come back, knowing that some of the mix would be a little bit more challenging and doing the preparatory work to ensure that we maintain our margins by finding efficiencies in advance of it coming back. And it happened to come back a bit this quarter and, again, I think that’s a good sign. Our independent physician partners’ offices running at full throughput, similar to what we’re seeing with our employed physician practices, if that happens across the board, I think, that’ll be a nice tailwind. It’ll give them the confidence sometime this year to maybe recruit new partners to their practice and continue to grow their own businesses, which again will represent some long-term tailwind in our partnerships with them at USPI.
So I think this is a good cycle to be in, even if some of the mix and other things in the short-term will be a bit more challenging. We’ll stay focused on the margin performance.
John Ransom: I take from that as a big colonoscopy quarter, is what I’m hearing from you. Is that what you think about it?
Operator: Thank you. Next question is coming from Sarah James from Cantor Fitzgerald. Your line is now live.
Sarah James: Thank you. I was hoping you could walk us through how you think about margin evolving as we start to come out off of the peak of labor shortage. So how much margin leverage can you really get from scale as you’re able to staff up? And then how do you think about some of the payer rate increases possibly flowing through to margins?
Daniel Cancelmi: Hey, Sarah, it’s Dan. Good morning. Listen, obviously, we’ve strengthened our margin significantly over the past several years, not only through USPI, but the hospital margins as well. And we’re very mindful of that and as additional volumes are treated and cared for given the efficiency of our hospital platform, we think there’s opportunities for margin expansion. And, obviously, the USPI’s margins are phenomenal anywhere depending on the quarter from the territory. But yeah, certainly, adding additional volumes can help in terms of given at least on the hospital side, there are certain fixed costs and so we can take on additional volumes and be profitable with it and have a nice margin associated with it.
The operators, they’ve done really just a phenomenal job during the past several years in driving efficiencies and incredibly highly inflationary and challenging environment. And you see it in our cost statistics clearly. In terms of commercial pricing, as I mentioned earlier, we feel very good where we’re at from a contracting perspective and more recent negotiations, we’ve been able to negotiate rates with annual escalators that are a little bit higher than historically we may have negotiated. So we feel good about where we’re at from a contracting perspective.
Sarah James: Thank you.
