Good day and welcome to the Community Health Systems First Quarter 2024 earnings conference call. All participants will be in a listen-only mode. Should you need assistance, please signal the conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then star on your touch-tone phone, and to withdraw your question, please press star then two. Please note, this event is being recorded. I would now like to turn the conference over to Mr. Anton Hie, Vice President of Investor Relations. Please go ahead, sir. Thank you, John. Good morning, everyone, and welcome to Community Health Systems first quarter 2024 conference call. Joining me on today's call are Tim Hingtgen, Chief Executive Officer; Kevin Hammons, President and Chief Financial Officer; and Dr. Lynn Simon, President, Healthcare Innovation, and Chief Medical Officer. Before we begin, I must remind everyone that this conference call may contain certain forward-looking statements, including all statements that do not relate solely to historical or current facts. These forward-looking statements are subject to a number of known and unknown risks, which are described in headings such as Risk Factors in our annual report on Form 10-K and other reports filed with or furnished to the SEC. Actual results may differ significantly from those expressed in any forward-looking statements in today's discussion. We do not intend to update any of these forward-looking statements. Yesterday afternoon, we issued a press release with our financial statements and definitions and calculations of Adjusted EBITDA and Adjusted EPS. We've also posted a supplemental slide presentation on our website. All calculations we will discuss exclude impairment expense as well as gains or losses on the sale of businesses, expense from government and other legal matters and related costs, expense from business transformation costs, and expenses related to employee termination benefits and other restructuring charges. With that said, I'll turn the call over to Tim Hingtgen, Chief Executive Officer. Thanks, Anton. Good morning, and thank you for joining our First quarter conference call. At CHS, 2024 is off to a good start with the solid operating and financial results achieved in the first quarter. Same-store net revenue increased 5.7% compared to the first quarter of 2023. Same-store admissions increased 3.8%, and adjusted admissions were up 1.9%. The prior year comp was our most challenging of the year, with strong same-store admissions growth of 4.8% and adjusted admissions of 9.4%, so we were very pleased to see continued strong demand. Same-store ED visits increased 3.4% in the quarter, and surgery slightly increased. In the first quarters of both 2023 and 2024, surgical volume was well above the first quarter of 2019, beating our pre-COVID baseline by approximately 10%. Growth, coupled with strong expense management, led to 120 basis points of margin expansion year-over-year. Adjusted EBITDA came in at $378 million, up 12.8% from the prior period on a consolidated basis, with growth in our core portfolio outpacing the impact of prior-period divestitures. This first quarter performance puts us very much in line with the guidance provided in February, but our work is not yet done, and our leaders remain focused on the opportunities ahead of us. We continue to make steady progress in each of our near-term priorities, and we are especially pleased with investments that are accelerating growth. We opened our new tower in Knoxville, Tennessee, a few weeks ago, and our Baldwin County, Alabama campus expansion remains on schedule to open by the end of the year to address the strong demand for healthcare services in that fast-growing market. Investments continue into incremental access points to expand outpatient capacity in multiple markets, which included the opening of 2 new ASCs during the quarter in our Tucson, Arizona, and Cedar Park, Texas markets. Another high-impact initiative that we've been updating you on is our work to insource the management of certain hospital-based medical specialties. In a minute, Kevin will share details about how the financial impact from this initiative is tracking to our expectations, but I want to address the clinical and operational improvements we are seeing. We now manage 29 ED and hospitalist programs, and across the board, we are realizing better quality metrics, improved throughput, lower premium pay utilization, and greater patient satisfaction. These improvements are consistent with our enterprise goals, and it is gratifying to see so much progress, especially when you consider that we have been self-operating these programs for less than a year. We've expanded our efforts to insource select anesthesia programs with two sites already in place and additional opportunities expected to come online in the months ahead. We don't often take the opportunity to share our internal programs that are driving alignment across the organization, but today I want to mention that we recently hosted our 2024 Health Systems CEO and Medical Staff Leadership Conferences. We spent time reviewing our goals and the initiatives that will drive results over the next few years. It was energizing to see so much commitment from our local health system leaders who are absolutely focused on executing our strategies and leveraging the resources and support available across the CHS organization. I remain excited about the opportunities ahead this year and into the future. During the conferences, we also discussed our enthusiasm to be on the leading edge of innovation, leveraging our size and scale to discover new opportunities and to improve care design, delivery, and outcomes, utilizing technology, and joint venture partners that are focused on moving healthcare forward. Last quarter, Dr. Miguel Benet talked about our partnership with Google Cloud and worked to unify our data into a single platform that can enable the future use of AI in healthcare settings. This quarter, I've asked Dr. Lynn Simon, President of Healthcare Innovation and our CMO, to share more about innovation across CHS and, in particular, our new partnership with Mark Cuban Cost Plus Drug Company. Lynn? Thanks, Tim. Over the past several quarters, we have implemented a number of innovative programs at CHS, including remote monitoring for people with chronic conditions, virtual support for people living with depression, anxiety, and other behavioral health issues, an AI-informed early warning system that alerts caregivers to potentially concerning trends during childbirth, and a virtual tech-enabled telesitting initiative that is improving safety for hospitalized patients at high risk for falls. As we consider our approach to innovation, we also recognize there are opportunities to rethink and even disrupt the way we purchase products and services. As an example, our relationship with Mark Cuban Cost Plus Drug Company has the potential to generate significant advantages for our affiliated hospitals by addressing rising drug costs and drug shortages. We recently became the first healthcare system to purchase injectable drugs produced in the new Cost Plus Drugs manufacturing plant in Dallas. Specifically, we purchased epinephrine, a lifesaving drug on the FDA's list of current drug shortages, and norepinephrine for our hospitals in Texas and Pennsylvania. Through this strategic partnership, CHS will be advising and collaborating with Mark Cuban Cost Plus Drugs about additional ways we can address pharmaceutical costs, avoid drug shortages, reduce waste, and improve medication administration safety and patient care. We expect this work to benefit not only CHS but also other forward-looking healthcare organizations. Tim? Thanks, Lynn. Before I turn the call over to Kevin, I'd like to recognize CHS hospitals and providers for a proud accomplishment. A recent report from the company Reputation, a global online reputation management firm that specializes in industries such as healthcare, financial services, hospitality, and property management, recognized CHS as number one among the 50 largest healthcare systems for online reputation, and this is the third year in a row we've ranked number one. In 2023, our hospitals earned a cumulative average 4.5-star rating on review sites such as Google, and our providers earned 4.8 stars. This speaks to our commitment to safety, quality, and patient experience. We appreciate the confidence of our patients and thank our local health systems for all they do to make healthcare accessible, compassionate, and worthy of this very positive feedback. Now I'll turn the call over to Kevin to review financial results. Kevin? Thank you, Tim, and good morning, everyone. As Tim indicated, we were pleased with financial results delivered in the first quarter, which put us on track to achieve the guidance for 2024 that we provided in February. We are also pleased to see the momentum in volume growth that began last year continue into the first quarter of 2024 with 3.8% growth in admissions, 1.9% growth in adjusted admissions, and 0.4% growth in surgeries, stepping over a particularly difficult comp from prior year. Net operating revenues for the quarter were $3.14 billion, representing consolidated year-over-year growth of 1%. On a same-store basis, net revenues were up 5.7%, driven by 1.9% growth in adjusted admissions and a 3.7% increase in net revenue per adjusted admission, which was positively impacted by improved rates, incremental state Medicaid reimbursement, and strong inpatient growth. Although volume improvements continue to be led by increases in Medicare Advantage business, we did see a slightly more balanced growth profile in the first quarter of 2024, with improvements in commercial business as well. Adjusted EBITDA for the first quarter was $378 million, compared with $335 million in the prior year period and $386 million in the fourth quarter of 2023. Considering the sequential effect from the Bravera divestiture that closed late last year and lower recognition of Mississippi Medicaid expanded funding in the first quarter compared to the fourth quarter, we view our production of nearly flat sequential EBITDA as a sign of progress. Margin for the quarter was 12%, a modest decline sequentially despite the typical seasonal headwinds that affect first-quarter performance, such as higher unemployment taxes and annual resets of copays and deductibles in our commercial book. On a year-over-year basis, margin improved 120 basis points. We believe this is a strong start relative to our guidance for mid-12% Adjusted EBITDA margin for 2024, and we expect further margin expansion through strong cost controls, continued volume growth, and top-line leverage. We were again pleased with our performance on labor costs in the quarter. The average hourly wage rate increased approximately 3% year-over-year. Recall, we are anticipating an approximate 4% average hourly inflation rate for the full year 2024. Our progress on contract labor continued in the first quarter, with contract labor spend of approximately $48 million compared to $52 million in the fourth quarter and approximately $85 million in the first quarter of 2023. This performance was consistent with expectations and primarily reflects reduced utilization of contract nursing as a result of our retention and recruitment efforts, as well as a lower hourly contract labor rate. We were also pleased to see continued progress from our insourcing and other initiatives to address medical specialist fees that have surged over the past two years. Medical specialist fees were flat compared to the first quarter of 2023 and slightly down from the fourth quarter. As Tim noted, we have seen strong operational improvements in the 29 ED and hospitalist programs that we have brought in-house since last fall and two anesthesia programs brought in-house thus far. We believe we can continue to scale up these insourcing efforts and are well positioned to keep further increases under control despite ongoing pressure, including those in anesthesia. Cash flows from operations were $96 million for the first quarter of 2024 compared with $5 million in the year-ago period. This improvement was primarily the result of improved earnings, as well as the timing of collections from the buildup of certain accounts receivable at year-end, which resulted in the overall net decrease in accounts receivable of approximately $39 million from December 31, 2023. Capital expenditures for the quarter were $93 million, on track for our 2024 guidance range of $350 million-$400 million provided in February. As announced last week, we signed an agreement to divest Tennova Cleveland, located in Cleveland, Tennessee, for approximately $160 million, plus the potential for an additional contingent consideration payment, and we continue to evaluate opportunities for further divestitures across a handful of markets that could total more than $1 billion in total proceeds. The divestiture of Tennova Cleveland is anticipated to close in the third quarter, and we believe that one or more additional transactions could close within the calendar year, providing substantial capital for the company to redeploy. Net debt to trailing adjusted EBITDA was 7.7x, slightly improved from 7.88x at year-end 2023. With $618 million of borrowing capacity under the ABL, along with pending asset sale proceeds, we believe we have more than adequate liquidity to meet our needs going forward. Regarding Project EMPOWER, we are continuing to make progress, having now gone live with the second wave of hospitals on April 1st, without experiencing any disruption in care delivery. The progress we are making is right in line with our scheduled timeline, and we believe we are already experiencing the benefits of incorporating automation technologies to remove certain manual administrative tasks from our nurses' workflows, and improved insight into our business at the sites that are live. We believe these benefits will translate into realized cost savings beginning later this year and into future periods. At this time, we will turn the call back over to our operator for Q&A. Thank you. We will now begin the question-and-answer session. To ask a question, you may press star then one on your touch-tone phone. If you're using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then two. We also ask that you please limit yourself to one question and one follow-up, and if you have further questions, you may re-enter the question queue. At this time, we'll pause momentarily to assemble our roster. Our first question will come from Jason Cassorla with Citi. Please go ahead. Great. Good morning. Thanks. I was just hoping you could dig a bit deeper on the cash generation in the quarter. Obviously, there's seasonality considerations. You talked about that AR release. Was there any impact from the Change Healthcare cyber? I didn't hear that. And then, I guess, now that we're through the first quarter, how would you expect cash generation to play out for the rest of the year, just in context of your $500-$650 embedded in guidance? Thanks. Thanks, Jason. So in typical or historical fashion, cash flow in the first quarters typically our lowest cash flow quarter is a result of the reset of patient copays and deductibles and more of your receivables being patient responsibility. We did have the benefit in Q1 of getting some additional cash flow in as a result of the accounts receivable that built up in the fourth quarter, including that from the Mississippi Supplemental Medicaid program that was collected in the first quarter of this year. In terms of other kind of working capital items, they were all pretty much in line with our expectations. We always have a little bit of a headwind in Q1 with the payment of our annual bonuses, which occurs just once a year. Then throughout the remainder of the year, as bonuses are accrued, that kind of turns itself around. Similarly, we'll have that situation in the second quarter as we fund our 401(k) plan just once annually, and therefore that also has a negative impact on second quarter cash flows but turns around throughout the remainder of the year as we build our accruals back up. In terms of our guidance on cash flow, at this point of the year, I think we're right in line and are comfortable with where we're guiding at. Okay. Got it. Thanks. Maybe just as a follow-up, I wanted to ask on the Tennessee hospital sale agreement, can you give us a sense on what the revenue and EBITDA contribution of that asset is, and then what would the EBITDA multiple be implied if the Tennessee Supplemental Payment Program is approved? It sounds like, I guess, broadly on divestitures, it sounds like you're keeping that potential for $1 billion in proceeds. Just if there's any other incremental color you can offer around your divestiture plans, how they're tracking it, and what you're seeing out there would be helpful. Thanks. Sure will. And let me follow up the second part of your first question as well related to Change. We did not see any impact or nothing material as a result of any cash flow slowdown from Change Healthcare's breach. We did not use them for billing and collection purposes, so that did not have an impact on us. Relating to the divestitures, the base price of $160 million is essentially a 10x EBITDA multiple on trailing EBITDA for Cleveland. So then any contingent payment above that, we would anticipate putting the complete purchase price somewhere in the low teens multiple on a trailing basis. And then in terms of how Cleveland, their margin profile, they operate pretty similar to our kind of corporate average margins. So you can probably do the math in terms of giving a revenue contribution. The next question will come from Brian Tanquilut with Jefferies. Please go ahead. Hey. Good morning. Congrats on the quarter. Good morning. Hey, I guess my first question, there's a lot of discussion among investors on the monthly flow or monthly trend and volumes, obviously, with the calendar moves in Q1. Just curious what you can share with us in terms of what January, February, March looked like, and how is that translating to April in terms of, obviously, we're on a more normalized calendar this quarter. Sure. So probably like most people, we saw pretty strong January and February, some softness year over year in March. But I would really attribute that to how the calendar lined up with February having an additional business day this year with leap year. And then March's calendar had really two things going against it. One, it had one fewer business day with just how the calendar lined up. And then you also moved Good Friday and the Easter holiday into March. It was in April of last year. So that has some impact not only from it being a holiday but also around spring breaks in a number of markets that schools often schedule spring breaks around the holiday. So we think that that probably had some contribution to some of the volume trends that we saw in March. In terms of how we view that going forward, I think overall, strong volume quarter for us, and we see the momentum from that continuing on. And don't believe that the calendar, the volatility monthly in the first quarter really influences much about how we're thinking about future quarters. Got it. Okay. Then maybe, Kevin, just a quick cash flow question. The payout to the NCI during the quarter was probably higher than typical. Just curious what the moving pieces are there and how should we be thinking about NCI payments going forward? Yeah. We're still comfortable with where we kind of guided for the full year, which is about $150 million, I believe, on total NCI payments for the year. There was just some timing with some items accrued from the fourth quarter that carried forward into Q1 on NCI payments, but I would expect those to be on a more regular run rate beginning in Q2. Awesome. Sounds good. Thank you. Yep. Thank you. The next question will come from Ben Hendrix with RBC. Please go ahead. Yeah. Thank you very much. Good morning. Looks like SWB was a little favorable to our assumptions and perhaps to what you had guided to for the year. Just wondering how you're thinking about the rest of the year and if any outperformance in the first quarter kind of pads the year expectations or if there's any reason to think that we might see some added inflation later in later quarters? Thanks. Sure. So coming into the year, we anticipated about a 4% wage inflation on an average hourly rate basis for the year. If we think about the sequence last year of inflation, it was high early in the year, began to moderate in the back half of the year where we saw wage inflation in the third and fourth quarter in the low 3 range. That has carried over into the first quarter. Although we expect for the year, there could still be some pressure on wages and maybe some potential in individual markets, maybe not across the board, but in certain markets, we can see higher wage growth than other markets. We do believe there could be some pressure in the back half of the year. It is a nice start to the year, and we think that's very favorable in terms of our outlook and where it could ultimately end up for the full year. Yeah, Ben, I'll add on to that. This is Tim. I think the other item that we baked into our guidance was more of the insourcing of some of these hospital-based specialties and the higher average hourly rate on those professionals. So with anesthesia, more insourced ED and hospitalist programs in our pipeline, we anticipate that will have some increase or have some impact on the average hourly rate increase as well. We also have a good, strong pipeline of physician recruitment into our clinics, which also hits our SWB line as well. Maybe the last comment that I would make in terms of the mix is Tim mentioned the mix of employees coming in, many at a higher rate that could drive that up. We've also been very effective at bringing in some allied health workers and changing or making changes to our care delivery model that allows us to treat patients with more LPNs, nursing assistants, and making those adjustments that's had a favorable impact on our salaries, wages, and benefits. Great. Thank you very much. And if I could just follow up on the insourcing comment, clearly you guys have made some really good progress there. But I was just wondering if there are any risks of insourcing. Maybe could bringing in more ED and hospitalists impair your ability to flex staff to volume fluctuations in any way, or is that not a concern? Thanks. Sure, Ben. I'll start answering that one. I don't see any real risk in relation to that. We have a good mix of employed and contracted personnel. So some of the staffing mechanism is through a per diem or a per day rate type of arrangement. So that is pretty flexible in terms of how we run the model. Yeah. We've mentioned this before, and maybe it hasn't been completely clear, but even where we've insourced these programs, not all of those physicians become employees, although the majority do. A number of those physicians are still 1099 employees, and that 1099 expense is down in our other operating expenses still. So that gives us some of the flexibility, I think, to address what you're talking about. Makes sense. Thank you. The next question will come from A.J. Rice with UBS. Please go ahead. Hi, everybody. First, I was just going to ask, when I look at some of your volume metrics, same-store admissions up 3.8, Adjusted Admissions 1.9, and surgeries up 0.4, it's a little unusual to see the inpatient side growing faster than the outpatient side. Can you comment on any dynamics you're seeing there? And was that surgery mix? Was there a divergence between what you saw inpatient versus outpatient on the surgeries? Sure. I'll start off, and Tim, please feel free to jump in. We have done a lot of work around length of stay management. By doing that, we've opened up capacity by getting patients appropriately discharged and timely. That's helped open up capacity, allowing more admissions to be brought in. Our transfer center that we've talked about for some time contributed significantly, particularly in those markets where we were able to add that capacity through length of stay management. So I think that has been a big favorable mover and has allowed us to grow inpatient at the faster rate this past quarter. As we look out for the remainder of the year, we've also, as Tim mentioned, opened up the bed tower in Knoxville, Tennessee, on April 1st. So that's going to give us some additional capacity going into Q2. And then we have the bed tower in Foley, Alabama that's opening up in the fourth quarter. So we still see opportunities. We're growing both inpatient and outpatient but still being able to bring in additional inpatient throughout the remainder of the year. Yeah. I agree. And A.J., in terms of the surgery mix, we saw growth on both the inpatient and the outpatient side. So pleased to see that. On the outpatient side, I think we outpaced it on absolute numbers just with our ASC growth and our focus on driving some really strong outpatient surgical sites of care. So we're pleased to see that happen. Going back to the inpatient growth in the quarter, as Kevin said, the transfer center is performing as designed. We also added new specialties into markets where we had insights that we weren't able to accept those patients in prior periods. So it's good to see our service line and acuity agenda are really delivering better access to patients in the communities we serve and yielding the expected growth in acuity and revenues. That's great. And maybe my follow-up, just to ask you on the payer mix, it looks like managed Medicare was up about 90 basis points, and fee for services was the one that was down. Can you comment on are you seeing outsized volume growth in your managed Medicare, or is it rate, or what's driving that increase as a% of revenues? And any update on just general contracting with managed care? Sure. So the volume increases are still being led by Medicare Advantage, and substantially all of our Medicare business increases are all Medicare Advantage. What we did experience this quarter was a little more balanced growth between Medicare Advantage and commercial. I think we'd indicated in the fourth quarter that early part of 2023, MA was growing at about a 3-for-1 ratio to commercial. In In the fourth quarter, it improved to only a 2-for-1 ratio. And we continued on in the first quarter at approximately that 2-to-1 ratio growth, so some slowing in that Medicare Advantage growth business. In terms of contracting, it's still early in the year, but we're seeing early signs that would probably point to similar rate increases for 2025 that we are experiencing and looking to or already have locked in for 2024. Okay. Thanks a lot. The next question will come from Stephen Baxter with Wells Fargo. Please go ahead. Hi. Great. Thanks. This is Nick on for Steve. So I wanted to follow up a little bit on the payer mix question to start. So it looked like Medicaid mix was actually up a little bit year-over-year. So I wanted to see if that was more driven by an increase in Medicaid supplemental payments or actually a patient mix shift, and then maybe just an update on what you're seeing from Medicaid redeterminations. Thank you. Sure. The increase in Medicaid net revenue is primarily due to the Medicaid supplemental programs. So kind of in terms of dollars, Mississippi was the big change year-over-year. That program, which we'd recognized $40 million in Q4 for 6 months' worth, as that program just got approved and was retroactive to July 1st, one quarter's worth of that. That full program that was approved was about roughly $80 million on an annual basis. So we recognized the first quarter's portion of that in Q1. There was zero of that in last year's numbers. So that was the primary driver of Medicaid increase, although we did have a small increase in Medicaid volume too during the quarter. In terms of redetermination, we're not really seeing any substantial impacts. I mean, there's certainly patients who are losing Medicaid insurance. We're seeing a slight uptick in self-pay volume, but we're also seeing the uptick of commercial volume. So a portion of those patients who are losing Medicaid are picking up exchange business insurance or commercial insurance that's far offsetting any of the negative impacts. Great. Thank you. The next question will come from Andrew Mok with Barclays. Please go ahead. Hi. There's been a lot of discussion around the Two-Midnight Rule for MA plans and the impact that might have on acute hospitals. I'd love to hear your take on the rule and if and when you would expect to see any impact from that. Thanks. Yeah. We're continuing to evaluate. I know there's been some additional guidance put out there by CMS. At this point, I think it's still early and not sure that we can really quantify the impact. There's a number of kind of moving parts around that that include work that we're doing ourselves internally with a physician advisor program that we've stood up that allows us to ensure that we're getting better documentation or the appropriate documentation. It also we've kind of brought in-house the peer review process with the payers. Both of those things should be beneficial to us. Then this quarter, we also had the situation with Change Healthcare breach. It indicated that they were going to no longer require pre-authorization for certain services. So that weighs into the calculation in Q1 as well as then some of the regulation from CMS to the payers about two-midnight. Throw all those in. I'm not sure. It's very difficult to differentiate the impact of each individual one, but I would say at least on the margins, we saw a little bit of improvement in Q1. Overall, though, denials still continue to increase. So I think there's a little bit of continued pressure. We may see some benefit in one area, but there's continued pressure in other areas and even on the commercial side from denials. And so I'd just, again, say it's kind of difficult at this point to measure, but we're keeping a close eye on it and hope we see some more clarity later in the year. Great. Thank you. The next question will come from Josh Raskin with Nephron Research. Please go ahead. Hi. Thanks. Good morning. Looking at occupancy rates overall, they're up nicely from pre-pandemic. I'm curious how much of that is due to change in portfolio over the last couple of years versus an organic excuse me, organic or same-store improvement. And where does occupancy need to get to in your mind to get to that sort of 15% intermediate target on margins? Sure, Josh. This is Tim. I'll kick it off. In terms of the occupancy rate growth, we think that's driven through the items we mentioned previously, the growth of the transfer center, higher acuity services. There is some adjustment to the portfolio when we divest smaller, more rural hospitals with a higher bed count and a low occupancy rate. Obviously, that helps our stronger markets where we run higher occupancy rates to shine through. We don't necessarily have an internal target, if you will, because of the changes in the portfolio. The other part of the equation that makes it difficult for us to really track occupancy rates in an absolute basis is we also have outpatients in those beds, which are not factored into the occupancy rate calculation that you're seeing there. We have seen a growth of our outpatient observation business over the last several quarters, as you know, across this industry. In general, we are very, very focused on understanding the physical footprint of every one of our campuses to make sure that we're optimizing that footprint, decommissioning any spaces which may not be necessary so that we're not running any additional fixed costs that aren't necessary for whatever volumes we can bring into that healthcare system. Gotcha. Gotcha. That's helpful. And then just on supply expense, down about 80 basis points year-over-year despite sort of this shift to inpatient, continued increase in the acuity and things like that. So what's driving the supply expense improvements? I think there's a number of things driving some supply expense improvement. It's relatively flat on a per-Adjusted Admission basis, which would indicate that we are stepping over inflation and managing that well. We're doing that with a number of supply chain initiatives that we have in place to ensure we're getting best pricing, taking advantage of scale, and so forth. We are putting in our ERP, which we've talked about, Project EMPOWER. I can't say that we're realizing a lot of savings currently yet because we only have a handful of hospitals up and running, at least through the first quarter. It's still relatively new, but it's positioning us with significantly improved information that will allow us to manage that expense going forward. Back to the quarter, payer mix, I think had or I'm sorry, surgical mix had probably a significant impact on our ability to manage that supply expense with fewer high-dollar implant items during the quarter. And then with the growth in net revenue, the top-line growth, I think, had some dilutive impact on that calculation as a percent of net revenue, bringing in your Medicaid supplemental program revenue as well as the inpatient and growth in kind of medical cases, which can have a lower supply cost as a percent of net revenue. Okay. Perfect. Thanks. This concludes our question-and-answer session. I would like to turn the conference back over to Mr. Tim Hingtgen for any closing remarks. Please go ahead. Great. Thank you, Chuck, and thanks to all of you for joining our call today. We remain committed to achieving our goals for 2024 and look forward to updating you again at the midyear point. As always, if you have additional questions, you can reach us at 615-465-7000. Thanks again, and have a great day. The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.