Looks like we might be ready here. Hi, everyone. I'm A.J. Rice, the Healthcare Services Analyst at UBS. Next up, we're very pleased to have Community Health Systems, and representing the company is Kevin Hammons, the Chief Financial Officer. Kevin, thanks for doing this again. I think I'll start off just saying, look, we're 11 months into the year. What have been some of the positives and where some, if any, challenges been for the year? Sure. And thanks, A.J. Thanks for hosting us, and thanks, everyone, for joining us this afternoon. A couple of positives I'd really point out for this year is maybe even a little bit of a surprise has been contract labor. So it's been a headwind for us. We've made really good progress in 2023, particularly coming out of 2023, but expected to be more in the $50 million a quarter range throughout the year. We've made progress beyond that. This last quarter, we were about $41 million of contract labor during the quarter. So continuing to make some progress beyond what we had expected to see as we further stabilize the workforce and continue to make really good progress on nurse retention and recruiting and bringing in full-time nurses to staff, what is volume kind of at the higher end of the range of what we had expected. So that's been a big positive, as has our progress on Project Empower, our ERP implementation. So we are getting close to actually winding down the implementation phase of that project. Expect to be completed with that at the end of the year, pivoting towards optimizing and really utilizing it in 2025. But we've been able to get through implementation of all the supply chain system across our entire portfolio without having to cancel a single clinical procedure. And that's been a big win for the company. Oh, that's great. I may just leverage off of the comment on labor. So where are you at relative to pre-pandemic, or do you have updated thoughts on where you can take that and what the opportunity might be? Sure. We are about, in terms of utilization of contract labor, right about where we were pre-pandemic and getting very close to approaching that pre-pandemic level of contract staffing. Of course, the cost is still a little bit higher than it was pre-pandemic now that we're out a few years, not surprising. I think that we'll be able to continue to make a little more progress in that, but approaching kind of the very stable range of where we would expect. We'll always continue to use contract labor around seasonality in some of our markets, particularly the Florida Panhandle markets in Arizona that see more seasonal business. Right. This time of year, we're always thinking in terms of Florida and the snowbird phenomenon. There's so many different dynamics going on between storms and everything else. Are you seeing the normal influx that you usually get in Florida this time of year? I would say it's probably a little bit slower starting for a couple of reasons. One, you had the hurricanes, so you had some disruption in early October, not only disruption from the people who are living there full time, but also from the snowbirds coming down, but it's also an election year, and oftentimes during an election year, you'll see people stay at their primary home and residence until after election day before they go to their secondary home for the season, so we didn't see that, obviously, in 2020. It was disrupted because of the pandemic. It was an odd election year, but if you go back to 2016, 2012, certainly experienced a little bit of delay in the start of some of the seasonality. Okay. Just to put a fine point on the labor comment, are you in your permanent labor? Are you back to normal there, or are you still a little elevated? And where do you think that could go as you look ahead? Yeah. We are on the permanent labor kind of back to where we were continuing to work very hard on bringing more labor in to support our growth. But we had moved our nurse recruiting and really all recruiting now, taken it out of the hospitals, moved it into a centralized environment, which has been very favorable for us. We have added, beginning in 2023, I think some improved benefits. We've changed our nurse or clinical care process to more of a team nursing strategy that allows the RNs and LPNs really to work at the top of their license. We've added some career development opportunities for the nursing. And now, as we complete our ERP rollout, there's some functionality in the human capital and workforce management components of our ERP that I think will be very well received by our employees, particularly our nurses. It'll allow them to do scheduling on their handheld devices, potentially schedule partial shifts versus only having availability for full shift scheduling, and that should be a big satisfier and also help us reduce some of the overtime and shift premiums that we were probably paying in the past. Do a lot of shifts get filled by partial shifts? I hadn't really focused on that before. In the past, they haven't, but yet our new technology will allow us. It will open the door that we'll be able to offer that in some cases. Now, not in every situation, every department, but in some areas, we'll be able to open up partial shifts, so if a nurse is a caregiver, maybe has other responsibilities either in the morning, afternoon, and can't work a normal 12-hour shift, they can pick up a partial shift, and it allows us. The technology really allows us to manage through that and offer it to others, which can be a big satisfier to the staff and also allow us to manage some of the premium pay. Interesting. That's interesting. On the other area that's been a topic has been professional fees and what's happening there. You guys have made some moves to try to bring some of that in-house. Why don't you give us an update on where you're at with that, and has that helped? Is there some more potential for that next year? So it really started back in the third quarter of last year with APP. Upon their bankruptcy, we had an opportunity, and we brought the physicians that previously worked for APP in-house. We employed them, took their contracts, which was about 20% of our hospitalist program, an ED program. That process has worked extremely well. We've been very satisfied. The physicians have been very satisfied with it. And it's actually contributed, I think, to improved quality of care as those physicians now are being trained on our protocols and actually more integrated within our system. We've been able to expand that in the ED space and the hospital space by adding a number of new programs. We're not chasing a full insource model by any means, but where it makes sense and in states that allow hospitals to employ ED doctors, we've rolled that out further to some other programs. Anesthesiology has been the big headwind for us currently. We've insourced one small anesthesiology program early in the year. The fourth quarter of this year, we're rolling our first big market anesthesiology to an in-house program. So we've added some expertise at the corporate level to run anesthesiology and are looking for opportunities to do that. Overall, it does add to your salaries and wages cost by bringing these physicians in-house, but you're offsetting that with being able to build a revenue. It still probably is not accretive to EBITDA on its own, but if those programs break even, that's a net benefit versus just paying subsidies, which are decreasing EBITDA. So it is kind of net-net. It is accretive to us where we've been able to do that. Is it that you're running this through the APP as a separate professional services entity, or is each market sort of handling that themselves? Each market, so we're bringing those on to employees in the local market. Okay. Volume's been strong for the industry this year. Maybe comment a little bit on what you've seen, which some are sort of starting to express that they think some of that strength can continue next year. What's your thought on all that? I do think that it can continue. We've had good volume throughout the year. We're still seeing, I think, some folks return into the healthcare system that may have been out of the healthcare system for some time. We've seen a pretty balanced improvement between government-insured patients and commercially insured patients this year, as opposed to 2023, where primarily most of our improvement was just in government-insured patients, so more of the commercially insured patients coming back, I think, as we see some further improvement in the economy, some inflation reduction going forward, if that moderates more household income or more discretionary spending available to people who have commercial insurance, should lead to more of them coming back, and just the passage of time. Eventually, you can't stay out of the system if you need care. Right. Lots of discussion with the election about the public exchanges and how beneficial that's been for the industry, and then we can talk about what happens if there are changes, but comment a little bit on how much of a tailwind the public exchange growth has been for you. It certainly benefits us. We have roughly 6% of our business is exchange business. I think that's pretty close to national average. In terms of enrollment, I think national average is around 7%. So I think we've benefited, particularly this year. Two of the three states that had the highest increase in exchange enrollment in 2023, leading into 2024, were Texas and Florida, states that we have big presence in. So it's certainly been a benefit for us from that standpoint. And I think that as we have seen some lowering of enrollment in Medicaid and a reduction in Medicaid business, we're seeing a little pickup on the exchange business. So those folks are likely to have picked up exchange coverage, and we are not seeing increases in the uninsured, so I think it's been kind of a net positive for us. Right, and so the question everybody has: we had a Republican sweep. We didn't know if we'd be able to talk about that because we thought there'd still be some uncertainty, but looks like it's all called at this point, so there is the possibility that some of these enhanced subsidies on the exchanges expire. A lot of debate about, is that people that are really consuming a lot of care? Is it people that are more young healthies? I don't know if you guys have the ability to really sort of dissect and get in behind that, but what do you think about what the implications might be in 2026 and beyond, yeah, if we do see the subsidies expire? We probably don't have the insight to really be intelligent about much of what population and their utilization of care of those that are signed up for the exchange business, but I guess I would say from my point of view, I think it's unlikely the exchanges have survived this administration's previous four years. They've been around now for some time. I think we're likely to see maybe some rebranding and some movement on the margins around the programs, but I don't anticipate us seeing any big changes, and the fact that not only Republican president coming in, but we've seen seats picked up in the Senate, now the House, or at least retaining control of the House, I'd be hard-pressed to believe that they come in and take a lot of benefits away from the folks that just put them into office. Right. One of the technical questions, and we're all trying to become experts again on the exchanges after leaving it behind for a couple of years. When you think about the metal tiers, so one theory is if they cut the enhanced benefits, that some will move down from silver, which predominantly people choose today, to bronze to try to protect themselves. From your perspective, you're getting paid if you've got a Centene, Molina, Elevance, Marketplace, public exchange product, you're getting paid the same amount, your contracts, regardless of what of those tiers they're in? It's maybe more of how broad or narrow the network is. Is that the right way to think about it? I think that's the right way to think about it. Yeah. Yeah. Okay. All right. Okay. Obviously, with the election, there's other things. I do get asked this. I'm not even sure how to think about it too much, but I'll ask you, and maybe you can help me think about it, which is what about tariffs on supply chain? I don't know how much of your supply chain gets ultimately sourced from overseas, from China, whatever, but do you have any initial thoughts on that? I do. My initial thought, less than 10% of our supplies are sourced. Supplies are about 15% of revenues. You're talking about 10% of 15% just to put it in perspective. Yeah. So pretty small number. Now, downstream, could some of our domestic suppliers be sourcing raw materials from overseas? That's a possibility. But by and large, and we look like, including pharmaceuticals, it's less than 10%. So I think there's limited exposure there for us. Okay. I mean, Medicare, Medicaid, broad things. Anything else that you would say, "Hey, given the political environment we seem to be going into, we should keep in mind," or pay it positive, negative? Still a lot of questions around the supplemental programs and maybe how this administration thinks about the supplemental programs. Again, I'd point out they survived President Trump's last administration. There has been bipartisan support for these supplemental programs. And as I think about some of the big utilizers right now in states that have not expanded Medicaid, states like Texas and Florida, more recently, Mississippi adopted a program, and Tennessee's applying for a supplemental program. I think there's real, again, unlikely that there's a lot of risk. There's some risk, obviously, that they could take a different position, but I think it's unlikely that they would take a different position that would take a lot of benefit away from these states. Right. So I was going to ask you about the supplemental payment programs. I was hoping you might come in and tell us that you'd heard word that Tennessee has indeed been approved by the CMS. Any update on that? I wish I could tell you. I would have liked to have come here and told you that, but no, no word out of CMS yet, so still waiting. No indication that it's not going to get approved. It's similar with New Mexico. No indication it's not going to be approved. But we're able to have pretty good dialogue directly with the states around these programs, but seems that once it gets to CMS, kind of goes silent on us. So we don't get much word until we get the approval. So we're just waiting along with everyone else, whether it's hopefully it'll be before the end of the year. If past history is worth anything, we've previously, these programs are approved within 90-120 days. I go back to Mississippi just as an example. It was submitted in early September, approved in late December. Now, Tennessee was submitted in June. So it seems like they've had enough time. We would have hoped. And maybe with the election cycle, I actually thought that we might hear before the election so the administration could take credit for getting these programs across the finish line. I still believe that it's highly likely that the current administration would still want credit for it, and they would approve it while they're still there, but they would have till January 20th to do that. But hopefully, before the end of the year, we'll hear something. Community Health Systems stands out as one that has, over the next 12 months, a number of large states for you that are potentially looking at adding or expanding those programs. I would mention Indiana and Arkansas. Like Alabama. Alabama, yeah, and Arkansas. So any update on any of that? When might we hear that the states have moved forward? Is it their early first half next year legislative cycle? Is that the way to think about it? I think that's the earliest we would hear with the legislative cycle in the early part of 2025. We may begin to hear more word out of the states. We're working closely with all three individuals on my team, either through the hospital associations, even with the governor's offices that we've been in contact with to advocate for moving these programs through and being helpful where we can be in terms of offering design, and we work very closely with the state of Mississippi in their program, so we have some experience in doing that. Any way to sort of put some early sizing on those programs and what they could mean for you based on what we've seen from the other markets? Probably too early to tell because until the programs really get designed and we can go through some calculations, it's a little early to tell. Okay. Any other states that you're watching? I mean, there's talk about expanding Florida and so forth. Yeah. Florida and Texas, despite already being big utilizers and have been for some time of the availability of funds from the federal government on these supplemental programs, we understand are looking at ways to further optimize those programs. Don't have a good feel yet for what that means quantitatively, but we do know that the states are going through and scrubbing their programs and looking for ways to optimize them, which anything they get would obviously be of benefit to us. Okay. And we did talk about labor, and we talked about professional fees. Just to circle back on supply expense, any priority areas there, areas of opportunity as you think about next 12 months? I think we have some big opportunity, and not so much in a particular area in supplies, but just how we're managing it. As we think about it, I mentioned Project Empower, putting in our new ERP and the technology, not partly technology-driven. We're adding the technology, but standardizing all of our supply chain systems across the entire organization. We're standardizing the data across our entire organization, and that's going to give us more insight into what we're purchasing, how we're purchasing it. The workflows around that should allow us to really, again, optimize and take advantage of our scale and also make sure we're buying the right items that have the best value and we're getting the best price. I think there's some real opportunities for us in the supply area as we go into 2025 and really even into 2026. I mean, we'll be just starting 2025 with a lot of this information available for the entire enterprise. So as we work through that, get familiar with it and work through different opportunities, probably we'll have an opportunity to do some recontracting as a result of what we find. And there's a little tail on that and getting new contracts in place, but certainly savings beginning in 2025, continuing on into 2026 in the supply area. When you talk to your vendor, your ERP vendor, are they in a position to tell you, "Hey, other people have been able to realize these type of things," and that's driving your comments here or maybe? Absolutely. Yeah. Not only the ERP vendor, but in speaking with other systems, particularly the not-for-profit side, there's been a number of large systems a little bit ahead of us in rolling out ERPs and talking with them and what they've been able to experience and leverage out of having done this, I think is very favorable. So it gives us some level of confidence that we'll be able to do the same. Just because some of us are less technology-savvy than others, is there some way to make it tangible, the kind of thing we're potentially talking about that they might have or that you might have on the drawing board? It can be as simple as having an item that you're purchasing across a number of different hospitals, but currently, if those hospitals have their own supply chain system, that item would have an identification number in the system that would be different at every hospital. So aggregating that information either takes a lot of manual effort or it doesn't get aggregated. We might be contracting locally at each hospital for that item. Once it's standardized across the entire platform, in an instant, you can have full visibility on how many of those items are being purchased across our entire network of hospitals, allows us to then. Go back to the vendor. To go back to the vendor and say, "Hey, we're buying more of these than we previously knew." It may be buying the same item, but from different suppliers, allow us to aggregate. Leverage. Again, leverage. We may be buying the right item, but maybe not getting the best price because we're not always buying it from the same supplier. So there's a number of different opportunities. Just to make sure I understand, so you're within the HealthTrust purchasing network still? Yes. You have a lot of flexibility on some of the stuff you're talking about. Within that context, still realize some savings. We do. do. Yeah. Even within the HealthTrust GPO, you can have different contracts or the HealthTrust catalog may have multiple of similar items at different price points. Now we get better visibility. We've had some visibility, but again, because of the data structure, it was somewhat limited. Now we'll have better visibility across that. Is there any initiatives coming through that GPO that are in addition to what your company is specifically doing as we think about 2025 and beyond? There are. So even within the GPO, they're investing in some of their own technologies, adding some AI and automation that we can leverage, that we can link into our ERP. So I think it's a combination of both working through the GPO as well as then just improving the data we have at our fingertips and making decisions. It's really improving kind of a decision support function. Okay. Okay. And I also understood that HealthTrust, that they have a contract labor entity. They do. That's mostly targeted at helping their own facilities, but if they come to you, and are you working with them in any markets? Absolutely. So we're utilizing the contract labor staffing company that's stood up by HealthTrust. So we're an equity owner in HealthTrust as well. So yeah, we have access to that. Is that a relatively new development? It is. Yes. Interesting. Can I ask how big that? I mean, is that a big thing, or are you sort of putting your toe in the water with that? We're increasing our use of it. Interesting. Okay. Company sold about a dozen hospitals over the past year or so, and you've got a $1 billion divestiture plan you've talked about. Give us an update on what you're thinking about there and what the opportunities are? So, good opportunity to kind of meet our objectives here for this year. We have a couple of deals in flight that we still expect to be able to announce before the end of the year and get those closed likely in the first quarter, but we should have them announced and asset purchase agreements signed by the end of the year. That should get us up to our goal that we've currently been public with. We still have some inbound interest coming in, and we continue to evaluate that as our EBITDA improves, as our margin improves, as we continue to give ourselves some runway on our debt. I think it gives us the opportunity to be more selective in terms of divestitures and opportunistic around what we divest and what we don't. I think there's likely to be some continued divestiture activity in the future, but we're also probably pivot to looking at some acquisition opportunities as well. We recently announced the acquisition of some urgent care centers in our Tucson market. That deal will be closing here in the fourth quarter. It's 10 urgent cares. Pretty small deal, but yet it's still back and being a little more offensive in nature. And I would hope that at some point we're looking at acquiring some acute care facilities as well. So some of your public company peers have, maybe because of their capital structure, been able to use urgent care, ASC, whatever, to be a funnel into some of their inpatient business and broaden their catchment area. Do you think that's been something that you've been under a little constraint? Now there's an opportunity for more of that, or you'll just be opportunistic and see what happens basically? We've made a fair number of investments where it makes sense in what we would call access points. And I don't think we've really been overly constrained in our markets. Take Tucson, for instance. We have seven urgent care already in Tucson. This acquisition adds 10 more, but it wasn't that we were without. We have ASCs in about 85% of our markets. We're continuing to expand that ASC footprint, probably four to eight a year where it makes sense. At this point, it really becomes about making sure that we're aligned with the right physician, the right physician group. And I think in our markets, not being maybe a little less urban than some of our peers, I think we still have the right footprint, but still being opportunistic where it makes sense to either add physician clinics, add ambulatory surgery centers. We've added a number of freestanding EDs and looked for opportunities. We are still probably looking at maybe expanding our networks and looking around the perimeters of our networks, and can we expand our reach with some of those access points? And I think that's the opportunity for us going forward. One of the opportunities with your divestitures and what we've seen with a couple of the other companies is the nonprofits have been seemingly willing to pay top dollar for those assets. Are you seeing any diminishment on that, or are they still actively out there looking? And what's driving that, do you think? It's been unique over the past four years. The FTC environment's been difficult, and the traditional buyer that if I go back and think about who we were selling to back from 2016 to 2020 versus over the last four years is a very different group of buyers. We've all seen deals where nonprofits out of Florida are buying assets now in Alabama, or North Carolina nonprofits are buying assets in South Carolina. We sold our hospital in Cleveland, Tennessee, to a nonprofit out of Georgia. Those are not traditional markets that those buyers used to look at. I think going forward under new administration, kind of circle back to that, I think the FTC environment changes and probably makes getting deals done a little bit easier. Having said that, there hasn't really been a shortage of buyers over the past couple of years. It's just been a different group. For people to get deals done, they've been, because I think people had been on the sidelines for a while because of the pandemic, those that were financially stable and had money sitting on the sidelines were willing to pay some good prices. We have still been getting in the kind of average 10-12 times EBITDA valuations on our divestitures. I think the $1 billion that we announced for this year, we're looking right about an average of a 10 multiple. Yep. You've been running past recently just north of 12% on an EBITDA margin. I think the long-term goal is still mid-teens. It is. What's the building block between where we're at here and how you get to that? A couple of things. Rates, I think, are going to continue to outpace expense growth here. There's been a lag on some of the inflationary costs getting built into the rates. So we're seeing even Medicare inpatient rate for 2025 is pretty favorable, about 2.8%. I think we've got another year or so left even on the commercial rates, which have been better the last year or two. And as inflation starts to moderate and those rates still come in, I think we'll get some leverage on that. I think that Project Empower is going to allow us to take some additional expenses out and manage our expenses down probably below inflation on average. As we grow and leverage some of our fixed cost, more of that top-line growth should flow through to EBITDA margin. And then the supplemental programs are going to be very helpful for us and add to the margin as well. That's great. Well, Kevin, thanks so much, and thanks to Community Health for presenting this year at the conference. Next up in this room is InMode, I believe, and appreciate everyone for participating. Thank you very much, A.J. Thank you.