So, in my mind, ignoring them as we think about our growth year-to-year is not necessarily the correct way of doing it. But I’ll try to answer your question the way you asked it. What I would say is, I do believe that, after a couple of difficult years and difficult operating environments and elevated costs, again, in labor, physician costs, just general inflation sort of across the Board, we’ve been a little bit cautious about our ability to expand margins. I would say that if we’re able to achieve the revenue targets that we’ve set in our guidance, we’d be hopeful that we could do better than the margins that are embedded in guidance. But as we’ve faced over the last several years, some of these expense increases have been a bit unpredictable, physician subsidies in 2023 are a perfect example.
So I think we’ve been prudently cautious about how we look at the profitability growth in both businesses.
Justin Lake: That’s helpful. And then, Steve, as you mentioned on DPP, and I don’t disagree that it’s lumpy, but it should be part of the business. That said, it’s gone to a place I never imagined it going, these supplemental payments. And I’m just curious, like, you guys actually put out a great table in the 10-K where you actually showed us the estimated number for 2024. And I’m just sitting here looking over time, Steve, I think in 2019, it was $225 million of net benefit or 13% of EBITDA. Now it’s an $809 million benefit or 41% of your EBITDA guidance in 2024. And I’m just curious, like, do you think this continues, like, do you see any states that, could be the next Nevada or do you see the potential that, this starts to moderate at some point or kind of stabilize, because it’s obviously been a big part of growth over the last couple of years. Just curious how you think about it going forward. Thanks.
Steve Filton: Yeah. So, look, I think, you make a good point. I mean, I think, if you look, and I appreciate your commenting on our disclosures, because I think we’ve provided probably more expansive disclosures in this area of Medicaid supplemental payments than any of our public peers. But if you go back, however many years you want to track it, it has, as you’ve suggested, an upward trajectory and that’s not by accident. I mean, I think it’s an acknowledgment by the states and by CMS that Medicaid reimbursement, again, in specific states, has really been inadequate and — has really been inadequate over the last several years in an elevated inflationary environment with significant expense pressures, particularly in labor.
And the states are providing these monies, not as bonuses for hospital providers, but quite frankly, as necessary supplemental reimbursement to keep them in a position, to keep the providers in a position to be able to provide absolutely necessary services to a population that otherwise will not receive them. So, quite honestly, there are other states that do not have these programs that are talking about adopting them. We don’t really disclose them until they get further down the road and sort of are submitted for approval and that sort of thing. But we know that conversations are happening in a number of other states. CMS, to your point, has certainly talked about the impact of the growth in these programs and has talked about, I think, limiting the growth.
I don’t think they’re really talking about cutting back these programs, but they’re talking about capping the growth, maybe capping the growth so that Medicaid reimbursement can’t exceed commercial reimbursement. I don’t think we’re at risk of that in any of our states or just sort of capping the overall growth rate, et cetera. So I could see that happening where the rate of growth slows, but it strikes me that once these programs are implemented, the safety net hospitals that they are really designed to target become so reliant on them that it would be extremely difficult for the states and/or CMS to stop the programs or curtail them in a terribly material way.
Marc Miller: I think that’s the main point, that it’s going to be hard to go backwards because of these safety net not-for-profit hospitals that rely on this. And so the crux of your question as to whether or not you can bank on this in the future, we never know, but I think it’s going to be hard for them to reverse a lot of this. And in fact, to Steve’s point, we’re seeing a lot more activity in other states that we had never seen before. So we think it’s going to increase.
Justin Lake: Thanks, guys.
Operator: Thank you. One moment for our next question. Our next question comes from Joshua Raskin with Nephron Research. Please go ahead.
Joshua Raskin: Hi. Thanks. Good morning. Question just started, I’m looking at the longer term as you sort of think about capital deployment. I’d be interested in your updated views on the relative attractiveness of the behavioral health and the acute care segments and specifically thinking, whether you believe either one of those segments has either a different growth or return profile one more attractive than the other?
Steve Filton: Yeah. I mean, obviously, anyone who looks at our financials, you can see that we are in a higher margin in the behavioral business, I think, probably, higher returns. But I think we’ve always viewed our opportunities for capital deployment agnostically in the sense that we want to invest our next dollar of capital wherever we think it’s going to earn the highest return and that’s not just about which line of business, but it’s about the individual market opportunity. Las Vegas is a great example, we’ve invested a tremendous amount of capital, hundreds of millions of dollars of capital over the last decade or more in Las Vegas and I think for the most part, it has earned a significantly sort of outsized return.
We are not about to stop investing in that market and protecting our number one market share position in that market, et cetera. So our capital deployment decisions are, I think, made, as I said, market-by-market, in terms of the demographics of the market, the competitive environment. And obviously, as I think we commented in our remarks as well, a significant amount of capital has been devoted over the last five years or six years to share repurchase, because we think that that’s been a compelling return and opportunity for us, and we’ll continue to look at that as well.
