Marc Miller: I’ll just add one thing to what Steve said. We’re looking, and I obviously agree with everything Steve said, but we’re looking at more outpatient opportunities now than we probably have done in the past. And so I think more of them are being presented to us, and again, if we think that there are good returns there and that they make sense for increasing our success in our markets, we’ll continue to look at those and deploy more capital to outpatient, maybe at a greater percentage than we did historically.
Steve Filton: In both things.
Marc Miller: In both things. Sorry.
Joshua Raskin: Right. So that makes sense, and so in theory, those are margin accretive. Those are certainly return accretive, but margin accretive, I guess, depending on though if there’s more opportunities maybe in the acute care segment in the short-term, maybe that’s not the case. But I guess my follow up would be, I’m curious about the current environment for additional supply then. Are you seeing any major capital deployed in your markets by competitors and I guess, conversely, you know, sort of that Vegas example, what markets do you think are in need of more supply?
Steve Filton: Yeah. I mean, so we — as you know, we’re opening a new hospital in Las Vegas late in 2024 in West Henderson. That’s on the heels of opening Henderson Hospital five years ago, if I’m getting my chronology correct and that’s been a very significant success. We’ve continued to expand our presence in South Texas and Riverside County, California, where we have significant market positions. We’re building a new hospital in Palm Beach Gardens, Florida. And one in the DC market where we’ve had a significant amount of historical success. So, and then, on the behavioral side, we continue to add beds and do joint ventures with non-hospital — non-profit hospital partners. So, again, I think, there are lots of opportunities.
I think, the challenge for us is to be judicious about where we do that. And to your point, Joshua, I mean, I think, our competitors are also investing in markets. I think HCA has invested heavily in Las Vegas as well, because it has been a very lucrative return market for both of us. So, we see that, it really varies by market, it would be difficult to characterize the sort of capital deployment of our competitors in a broad way. But yeah, we certainly see our competitors expanding as well, and again, our whole sort of view is we don’t want to chase what our competitors are doing, we want to really take advantage of the strong franchise positions that we have and build on those and earn greater returns by investing where we’ve had success.
Joshua Raskin: Very helpful. Thank you.
Operator: Thank you. One moment for our next question. Our next question comes from Stephen Baxter with Wells Fargo. Please go ahead.
Stephen Baxter: Hi. Thanks. Two quick ones on the acute business. I guess, good to hear the physician fee expenses that you seem to think the worst of the inflation is behind you there. I was wondering if you could comment a little bit on how or what level of contracting visibility you have on 2024 in particular. And then just a kind of step back on the acute business, there’s been a lot of focus on portfolio management at a couple of your peer companies, a couple of examples of significant value creation. I was wondering how you think about the size of the acute care business philosophically and whether there could be examples potentially, whether you’ve seen any increase in inbound interest on the acute side. Would love to just hear kind of how you guys are thinking about that as you contemplate capital across the company? Thanks.
Steve Filton: Yeah. I think that the notion of contracting visibility in terms of the physician subsidy expense is a little bit flawed. The reality is 18 months ago, if you had asked us and asked, frankly, any acute care hospital in the country, you know, are your hospital based physician contracts locked in, do you have rates locked in? The answer would have been yes. And what we found were because of changes in the operating environment, in particular, the No Surprise Billing Act, et cetera, that made those businesses far less profitable. The providers of those businesses, the physician groups, the companies that were providing those services simply were unable to do it and they were coming to hospitals and saying, look, you either have to provide us greater subsidies or we can’t do this.
There were a number of bankruptcies, et cetera. So what I will say is, I believe that over the last year and a half, most of our hospital-based physician arrangements have been recast. They’ve either been renegotiating with the incumbent providers. We’ve either gone out for RFPs and put in new providers or we’ve employed in some cases the physicians ourselves. We’ve done so, I think, really beginning late in 2022 and early in 2023, such that the increased costs of doing all that is now largely reflected in our financial statements and shouldn’t increase again dramatically in 2024. But I will say again, back to the comments that I made in response to a question that Justin asked, I do think that the volatility in that area is one of the reasons why we’ve been a little more cautious in our overall guidance in 2024, because I think, all hospitals would say, that was a cost that really surprised us in 2023.
We think we have it under control. We think it’s much more stable going into 2024. But we’re certainly concerned about that popping again or happening again in some other areas.
Marc Miller: I’ll do the acute care development.
Steve Filton: Sure.
Marc Miller: As to your second question about the portfolio and acute care opportunities, we track very carefully all the companies familiar with what you’re referring to, to the question of portfolio rationalization for some of those other companies out there. We are most interested in what we can do in our current acute care markets. So if there are opportunities to pick up other hospitals within markets that we are already present, we would certainly look to do that. But in addition to that, we are familiar with the whole portfolios of these companies and if there were opportunities to expand to new markets that we thought made sense, we would do that as well. Like Steve said earlier, we’re kind of agnostic as to which side we deploy capital to. But if there are opportunities, we’ll certainly pursue them.
