Greetings, and welcome to the Tenet Healthcare Corporation First Quarter 2022 Earnings Conference Call. At this time, all participants are on a listen-only mode. A brief question- and- answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Will McDowell. Thank you, Will. You may begin. Good morning, everyone, and thank you for joining today's call. I am Will McDowell, Vice President of Investor Relations. We're pleased to have you join us for a discussion of Tenet's first quarter 2022 results, as well as a discussion of our financial outlook. Tenet senior management participating in today's call will be Ron Rittenmeyer, Executive Chairman, Dr. Saum Sutaria, Chief Executive Officer, and Dan Cancelmi, Executive Vice President and Chief Financial Officer. Our webcast this morning includes a slide presentation which has been posted to the investor relations section of our website, tenethealth.com. Listeners to this call are advised that certain statements made during our discussion today are forward-looking and represent management's expectations based on currently available information. Actual results and plans could differ materially. Tenet is under no obligation to update any forward-looking statements based on subsequent information. Investors should take note of the cautionary statement slide included in today's presentation, as well as the risk factors discussed in our most recent Form 10-K and other filings with the Securities and Exchange Commission. With that, I'll turn the call over to Saum. Thank you, and good morning, everyone. We had a strong quarter and exited Q1 with significant momentum for the year. Our operators effectively managed through Omicron and accelerated in their recovery month by month after the last surge. We are, of course, pleased that COVID cases have decreased significantly and overall community health should improve as a result. We delivered enterprise net operating revenues of $4.7 billion and $888 million of Adjusted EBITDA in the quarter. This is a 14% increase in Adjusted EBITDA from prior year. Even after normalizing for a gain on sale, Texas Medicaid supplemental revenues, and a little bit of incremental grant income, which were not assumed in our Q1 guidance, we delivered $756 million in Adjusted EBITDA, which exceeded the midpoint of our Q1 guidance. In a quarter marked with speculation about the sector's performance, our core operations performed and delivered ahead of our expectations. The additional items adding to the earnings are attractive upside in the quarter. Let's turn to the business units. We had a great quarter at USPI with $282 million in Adjusted EBITDA. Same-facility system-wide cases grew 8% and Adjusted EBITDA grew 15%, excluding grant income, both from prior year. January was challenging given the high transmissibility of Omicron that drove higher cancellation rates. Despite that, there was a substantial rebound in February and March, with volumes exceeding 2019 on a same-store basis. USPI has increased its portfolio by roughly 50% in the last 18 months. Integration of our newly acquired SCD and Compass facilities is on track, and these centers are performing well. Physicians' receptivity to our buy-up offers has been very good. Additionally, the progress under our new partnership and new center development agreement with SCD is ahead of our expectations. We are truly energized by the level of development activity we continue to have. In Q1, USPI added six new facilities. We have over 20 de novos under construction or in syndication and are executing against a robust M&A pipeline. This reinforces the long-term investment thesis behind Tenet. Turning to our hospitals, the hospitals maintain their track record of strong, consistent performance, delivering $514 million in Adjusted EBITDA. Our operators effectively balanced resources during the Omicron surge, maintained their cost management, and drove a strong recovery despite the staffing challenges the industry is facing. This was enabled by our disciplined operating processes and real-time analytics. Although our Q1 same-store hospital adjusted admissions were 1.4% below last year, by early February, we saw the COVID case trend line dropping and adjusted our operating platform to quickly match supply of resources and demand for services. We kept our focus on acuity and ensured convenient access to our emergency services for all those who needed it. We were very pleased with our performance in hospital-based surgeries. In March, we had less than 10% of the COVID admissions that we had in January. Our operators reduced length of stay by over 10%, reduced premium pay by over 20%, and as I indicated, our surgical volumes were strong, and in March, were about 25% higher than they were in January. Nearly all of our markets outpaced our internal expectations in March. Our continued investments in specialty programs enabled sustained higher acuity. Case Mix Index was 1.77 in Q1, which is roughly 16% higher than pre-COVID, and revenue per adjusted admission was 4% higher than prior year. We continue to enhance high acuity services across our hospitals, including cardiovascular, neurosciences, surgical services, trauma, and women's health. For example, in Q1, this included an expanded women's tower in San Antonio, a new cath lab and biplane capabilities in El Paso, expanded procedural capacity in Palm Beach, and an enhanced atrial fibrillation care access protocol in South Carolina. Our healthcare campus developments in San Antonio, Phoenix, and South Carolina are on track. This includes our new hospital in Fort Mill, South Carolina, which is slated to open in the third quarter of this year. We were also very pleased to see ongoing improvement in clinical quality with a 46% year-over-year reduction in serious safety events and a continued decline in hospital-acquired infections. Turning to Conifer had a good quarter with a return to top-line growth. Conifer's commercial capabilities have translated into a stronger sales pipeline. Of note, we had a new client win in Birmingham. Conifer will soon begin to serve four Baptist Health System hospitals that are part of the Brookwood Baptist Health joint venture. The five-year contract for end-to-end hospital revenue cycle services will start in May, next month of this year. Conifer delivered $92 million in Adjusted EBITDA, which is approximately 7% growth over prior year and maintained a strong margin at 28.4%. We continue to enrich automation capabilities while expanding our global footprint. We quickly scaled offshore capabilities during the quarter and now have roughly 3,500 team members providing service to our clients from global delivery centers. In addition, with Conifer remaining part of Tenet, we have begun to integrate certain functions within the broader Tenet enterprise as part of an ongoing commitment to efficiency and effectiveness. In terms of our ongoing initiatives in the foundation of the business of Tenet, I will also briefly comment on our managed care relationships and enterprise liquidity position, both of which continue to meaningfully improve. We are pleased to announce an extension of our nationwide relationship with Aetna through 2026 and a new four-year contract with Blue Cross Blue Shield of Texas. I'm pleased with both of these as they ensure access for patients in our markets, and importantly, continue to support value-based care initiatives, especially in site of care optimization. Our operational performance during the quarter and prior years has led to significant increases in cash flow generation, as well as effective balance sheet management. This was recognized during the quarter with the upgrade of our corporate credit rating by all three rating agencies. We also sold certain of our medical office buildings in Birmingham, resulting in cash proceeds of $147 million at an EBITDA multiple of approximately 19x. These items have allowed us to proactively reduce almost $825 million of debt so far this year using balance sheet cash, which will save us $61 million in annual cash interest payments. We are pleased with our start to the year and our performance and are reiterating our outlook for 2022. In a quarter with significant Omicron impact, USPI delivered substantial volume growth and month-over-month improvements. The hospitals executed and flexed extraordinarily well, as well as performing very well in hospital-based surgeries. Conifer tackled the quarter with both top-line growth and margin expansion. We do have a ±$100 million range on the midpoint of our guidance for the year. Let's reflect on where we were a year ago. A year ago, at this time, we were coming off a very large COVID surge in the early part of 2021. With vaccines in place, many assumed COVID would melt away. Some of you probably remember those conversations. Then the rest of 2021 was consumed with Delta and Omicron. At this point, given we are already seeing new variants, we are simply being prudent about our priorities to keep our heads down, recognize our outperformance in Q1, and operate and execute in Q2 in order to better update guidance later and better informed in 2022. In summary, our first quarter performance demonstrates our ability to consistently perform despite ongoing challenges due to the pandemic. We remain committed to volume recovery and executing against our strategic plan. We plan to continue to scale USPI's leading position, enhance high acuity care in our hospital segment, and grow Conifer's client base. This is supported by a committed team with a high level of operational discipline and a commitment to real-time analytics. I'll now turn it over to Dan for a more detailed look at our financial results. Thanks, Saum, and good morning, everyone. Let's start on slide three. Our financial results in the first quarter were significantly above our expectations. Despite a strong COVID surge early in the quarter and the continuing inflationary wage and labor availability pressure providers across the industry are facing. As Saum mentioned, all three of our businesses performed well. In the quarter, we generated consolidated Adjusted EBITDA of $888 million. Our strong results were driven by continued high patient acuity and effective cost control in a challenging environment. Also, our results included $69 million gain from the sale of certain medical office buildings for net cash proceeds of $147 million at a very attractive multiple, as Saum mentioned. In addition, we were able to recognize $57 million of revenue in the quarter as a result of CMS's approval of the Texas Medicaid supplemental funding programs that we assumed in our 2022 guidance would be approved in the second quarter or later. We were pleased that Texas and CMS were able to resolve this and that CMS approved the programs earlier than we anticipated. Even if you exclude the gain on sale and the Texas Medicaid revenue, as well as the $6 million of grant income we earned in the quarter, we produced consolidated Adjusted EBITDA $756 million, which exceeded the midpoint of our guidance. Now I'd like to highlight a few key items for each of our segments, beginning with USPI. USPI continues to deliver strong growth and provide high-quality clinical care to our patients. In the quarter, USPI produced a strong 8% increase in surgical cases compared to last year, demonstrating continuing volume recovery from the pandemic, particularly orthopedic and GI cases, and their volumes improved as we moved through the quarter. Surgical cases were 100% of pre-pandemic levels despite the surge in COVID early in the quarter due to Omicron. USPI's Adjusted EBITDA, excluding grant income, grew 15% compared to Q1 last year, and its Adjusted EBITDA margin, excluding grant income, continues to be very strong at 37.9%. Turning to our hospital business. Our hospitals delivered another very good quarter, despite the continuing challenging environment. Our labor management continues to be extremely effective despite the cost pressures, especially temporary contract nurse staffing costs. As you can see in our numbers, our consolidated salary, wages, and benefit costs as a percentage of revenue in the quarter were flat compared to last year's first quarter, despite increasing labor pressures over the past year. Our Case Mix Index and revenue yield remain strong as we continue our strategic focus on investments in higher acuity, higher margin service lines. Our hospital performance was especially impressive given the impact from the surge of Omicron, which contributed to a 1.4% decline in our adjusted admissions. As Saum mentioned, we're also pleased to announce we recently signed a new multiyear national contract with Aetna and a multiyear statewide contract with Blue Cross of Texas. Both contracts cover all of our hospitals, ambulatory facilities, physicians, and other providers. Let's now turn to Conifer, which also delivered a nice quarter. Conifer resumed top-line revenue growth of 5%. Their Adjusted EBITDA of $92 million represented 7% growth over the first quarter last year, and Conifer continued to produce strong EBITDA margin of 28.4%. Overall, we're off to a good start to the year in each of our businesses. Moving to slide 10, let's review our cash flows, balance sheet, and capital structure. We generated $267 million of Free Cash Flow in the quarter before the repayment of pandemic-related Medicare advances that we received in 2020. As a reminder, the first quarter is oftentimes our softest cash flow generating quarter due to certain annual working capital requirements, such as our annual 401(k) matching contributions for our employees. We continued to maintain more than sufficient cash resources and available liquidity under our $1.5 billion line of credit facilities. As of the end of the quarter, we had approximately $1.4 billion of cash on hand and no borrowings outstanding under our line. As previously announced, in the quarter, we retired $700 million of our 7.5% secured notes due in 2025. Additionally, so far this year, we've purchased $124 million of our 6.75% unsecured notes due in 2023 in the open market. Together, these actions will save us $61 million annually in future cash interest payments. As a result of our continued growth and focus on deleveraging, our March 31, 2022 leverage ratio was 3.9x Adjusted EBITDA, compared to 4.1x EBITDA at December 31. As a reminder, if you look back to 2017, our leverage ratio was about 6x EBITDA. Also, our secured debt borrowing capacity is currently approximately $4 billion. Let me now turn to our outlook for this year. As Saum mentioned, we are reiterating our Adjusted EBITDA outlook for 2022 of $3.475 billion at the midpoint of our range. We are pleased with our start to the year, but it's early, and there are uncertainties related to the impact of the pandemic. We'll continue to reevaluate our guidance as we move through the year. From a cash flow perspective, we continue to target another strong year of Free Cash Flow generation of $1.558 billion at the midpoint of our guidance, excluding the repayment, Medicare advances, and deferred payroll taxes. Our cash flow generation has improved substantially over the past several years, and we expect our business to continue to drive strong cash flows, even as we continue to reinvest to support growth and innovation. As we've mentioned previously, these cash flows provide us with significant financial flexibility to effectively deploy capital for the benefit of shareholders. We plan to continue allocating capital to grow our surgery center business, enhance our hospital growth opportunities, evaluate further opportunities to retire and refinance debt, and possibly in 2023 or beyond, evaluating share repurchases depending on market conditions and other investment opportunities. With that, we're ready to begin the Q&A. Operator? Thank you. We will now be conducting a question-and-answer session. If you'd like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. As a reminder, we ask that you please limit to one question so that we may respond to all the questions in the queue. One moment, please, while we poll for questions. Our first question comes from Josh Raskin with Nephron Research. Please proceed with your question. Hey, thanks. Good morning. I heard some of the commentary around value-based care, and so, I know Tenet and more so Legacy Vanguard had some risk-based entities, even health insurers, I think, in the past. As Tenet's really focused on its acute care footprint and, you know, the market continues to look for more and more value-based care, is there a strategy in place, you know, at Tenet broadly now to test more ACO-like arrangements to use all of your assets in sort of these targeted markets or other sort of risk-based ideas? Hey, Josh, it's Saum. Yeah, I did refer to value-based care in my comments related to managed care in particular. Let me first explain what I was referring to. A primary strategy for us in value-based care, of course, is site of care optimization. Not surprisingly, we embrace the utilization of the most efficient site of care. In many cases, that's outpatient care, not only in our hospitals, but of course, you know, the entirety of USPI is an enormous value-based care opportunity because of the cost, the lower costs that are incurred in performing surgeries and procedures in a very high service, outpatient-based, lower cost environment. That is a primary value-based care strategy for us nationwide. In addition to that, you know, we are active in the Medicare Advantage space. We do have certain markets, larger, more integrated markets, that have risk-based arrangements with payers, accountable care organizations, that exist. We participate in those selectively where the risk is balanced, and it's not a transfer of risk entirely from one entity onto us. Perfect. Thank you. Our next question comes from Justin Lake with Wolfe Research. Please proceed with your question. Thanks. Good morning. I wanted to ask about the labor and inflation environment, specifically. What did you see as you went through the quarter, especially as COVID started to moderate? You know, you mentioned a couple of new managed care contracts. One of the big questions, you know, we've gotten out there is around managed care contracting and how your rates might start to increase to reflect some of the inflationary pressures that are out in the market today. Maybe you could tell us how those newer contracts might have changed versus what you've been signing over the last few years to reflect that. Thanks. Hey, Justin, thanks for the questions. Let me address labor, and then I'll pass to Dan on the managed care question. You know, the primary driver of our performance in labor costs during the quarter was really our you know continued focus on day-to-day operating discipline, length of stay management, productivity management, and a month to month you know a goal of improving the utilization of premium labor costs. The contract labor market, in particular, didn't moderate that much, a little bit, as the Omicron cases dropped pretty precipitously after the end of January. Again, our performance was really more driven by the operating platform that we've described over the past few quarters that we're utilizing to keep our total SWB costs in check as the volume recovery occurs. Justin, this is Dan. You know, we were obviously very satisfied that we were able to enter into new contracts with Blue Cross of Texas and Aetna. It was, I would describe it as a very collaborative process negotiations. Your point about inflation, we always take inflation expectations into consideration when we're negotiating contracts. These are multiyear contracts across the country and covers all of our facilities and providers and for a number of years, as Saum mentioned in his remarks. We're obviously very pleased to have concluded that and signed the new agreements with both of those parties. All right. Thanks. Our next question comes from A.J. Rice with Credit Suisse. Please proceed with your question. Hi, everybody. I might just try to understand some of the comments you're making about how you saw trends develop in the quarter, and it sounds like you perceive there's, at least in the surgery area, some backlog of volumes. I know in some of your slides you show that admissions and outpatient visits stepped back in the first quarter versus what you saw in the fourth quarter. Alternatively, in your prepared remarks, you're talking about surgery volumes being strong and overall volumes in February and March being better than pre-pandemic. I guess, can you give us a sense of what the trajectory is toward the end of the quarter, how once COVID dynamics of January eased off, what the business looks like, both from a surgical perspective and then overall volumes? I mean, do you need a further step up to hit your volume targets for the rest of the year? Or are you on a glide path to get there given what you saw as you exited the quarter? Hey, A.J. Thanks for the question, and I'll reiterate in both the Hospital segment and the USPI segment, you know, we were pleased to see month-over-month improvement in our performance. Our focus on surgeries is consistent with our long-term strategy related to acuity and high acuity procedure-based care. We were pleased to see both emergent and elective surgeries, and obviously mostly elective surgeries in the USPI environment, continue to grow and improve each month in that environment. We feel good about the way we're exiting the quarter. I'm particularly pleased at how rapidly USPI recovered in their surgical case volume. I would say it's been the fastest of prior COVID surges in terms of the ability to really recover those cases and continue to move forward. We also, you know, from a volume standpoint, I would highlight that emergency department visits were in particular where we saw the environment lagging in terms of recovery through the quarter as opposed to our high acuity strategic service lines. That was correlated once again, less to the Omicron cases disappearing, but more to the states which were more locked down rather than those which were less locked down. As the state lockdowns have continued to abate, the recovery has improved. Hey, A.J., this is Brett. Just to- Go ahead, Brett. Oh, I'm sorry, AJ. Just real quick, a little bit more color on USPI. As Saum and Dan mentioned, we are obviously very pleased to see 8% year-over-year growth in our cases, especially considering we had one of the highest cancellation rates we've ever seen at 22.8% in January, and overall cancellation rate at 19.3% in the quarter, compared to 17.8% in Q1 of 2021. Our volume levels have returned to pre-pandemic levels at 100% of 2019 volume levels with the acuity normalizing. When we think about volumes going forward, we think we'll continue to increase our volumes compared to pre-pandemic levels, just really because of the addition of 1,500 new physicians across our portfolio this year. Of course, we continue to focus on service line expansion activities across the portfolio as well. That said, we believe the volume growth will be consistent with our full year guidance at 3%-4% for the year. A.J., the only other thing I'd add is, in addition to volumes improving as we move through the quarter, earnings improved as we moved through the quarter. Right. That was the point I was gonna ask, is that your commercial percentage improved in the quarter year-over-year. Was that more the January COVID volume, or is that more the volume you're talking about here with the surgeries coming back that's helping the commercial mix? It's a little bit of both, as well as, you know, that line item also does include that Texas money does get routed to managed Medicaid based on the structure of the program. Yeah, you know, the commercial volumes have been solid, I'd say. We're not back to pre-pandemic levels, but those trends have recovered stronger really throughout the pandemic. Medicare volumes are beginning to continue to strengthen, so that's nice to see as well. Okay. Thanks so much. Thanks. Our next question comes from Jamie Perse with Goldman Sachs. Please proceed with your question. Hey, good morning, guys. Some of you touched on your approach to guidance and just being prudent given all the factors that are going on. I just wanted to get a sense if there's any particular areas that you're leaving yourself some more room, whether that's more persistent labor pressures, you know, that's lasting for a bit longer than previously anticipated, recovery dynamics maybe being a little bit behind where you might have thought you were at this point, or just the comment on having more information before you update guidance. I mean, what are you looking for to have a little bit more confidence in the trajectory? Yeah. Thanks, Jamie, and I appreciate the question. Look, the approach here is to be as transparent and straightforward as possible. We recognize the outperformance in the quarter, and we recognize that we will need to update guidance at some point. Again, I would tell you the primary driver is goes back to what I said around the best approach to making assumptions around that guidance. You know, exactly a year ago, we all sat around talking about how COVID with the vaccines in place and the surge disappearing from the holidays, this could be the end of the COVID environment. 2021 was dominated by Delta and then surprisingly after that, Omicron. You know, I think this is just more about prudence and transparency around what may lie ahead, given that there are other variants that seem to be circulating the globe already. The only area which we have noted that we are obviously watching carefully is we would have expected contract labor rates and the labor market to have you know, to have normalized a bit more by the end of this quarter relative to where we are today. Again, our response to that, of course, is operating discipline which we have you know, demonstrated in this first quarter. I think, you know, until we see that materially improving, you know, as I said, keep our heads down, operate with the same discipline in Q2, and update the guidance, you know, coming out of the second quarter. Our next question comes from Pito Chickering with Deutsche Bank. Please proceed with your question. Hey, good morning, guys. Thanks for taking my questions. A few ones on the ASC side of the business. I guess looking at the first quarter of 2021, how much revenue and EBITDA came from the urgent care business and the diagnostic imaging business, just so we can understand the baseline growth? How did SurgCenter do in the first quarter versus your expectations? And then just digging on A.J.'s questions on volumes, can you remind us what you're assuming for ASC volumes for 2022, and what was the actual rate versus those assumptions? Hey, Pito, it's Dan. In the first quarter last year, as a reminder, the USPI urgent care business was in the numbers. In terms of the revenues associated with the urgent care business that we ultimately sold in the second quarter, as well as the imaging centers of ours were under the USPI umbrella last year in the first quarter as well. We subsequently transferred those to the hospital business in the second quarter last year. In total, those two businesses in the first quarter last year had over $50 million of revenue associated with them. That's in, you know, Q1 2021's numbers last year that obviously aren't in this year's first quarter. On SurgCenter, I guess, how'd that do in the first quarter versus expectations? Sort of to A.J.'s question on volumes, you know, what were you assuming in your guidance for 2022 for ASC volumes, and kind of where did you exit the quarter with that? Thanks so much. Yeah. Hey, Pito. Related to the SCD facilities, look, the portfolio is performing as planned, and the physician interest, as Saum mentioned, the buy-ups within the portfolio is strong. We already completed a significant number of buy-ups, and we have a large pipeline of buy-ups to complete in Q2. As importantly, we remain confident about achieving the year-three multiples we communicated when we announced the transaction. Pito, the surgical case growth that we're assuming for this year, the entire year, is 3%-4%. Obviously, we did a lot better in the first quarter. Thanks, guys. Our next question comes from Kevin Fischbeck with Bank of America. Please proceed with your question. Great, thanks. Just wanted to follow up on that labor point that you were making with contract labor, I guess. I think you said it was down 20% by March, but not down as much as you thought. Why do you think that it hasn't come down as much as you thought so far, and are you still confident in that trajectory as far as year-end? I guess what has to happen between now and year-end for that to get to where you originally thought it would go? Yeah. Hey, it's Saum. Then I'll start, and I'll pass to Dan. It's hard to speculate exactly why the contract labor market isn't normalizing more quickly. I mean, you know, one reason that we've thought about is that, over the past four or five months, some of the contract labor terms have involved, you know, 12- to 13-week contracts, and, you know, we may be just on a cycle of coming off of those assignments before we start to see even more moderation in the contract labor rates. Yeah, again, I think this is a situation where we would've hoped that the contract labor rates would've come down faster. The thing about it is when the contract labor rates come down, that will reduce the incentive for nurses to travel, which will then help to settle down local market nursing supply relative to demand, which will allow more hiring and more permanent nurse placements into the markets. These things are linked together in the way that it seems to be working. Kevin, it's Dan. Just a couple numbers so you have them. You know, before the pandemic, our contract labor as a percent of our SWB was typically in the 2%-3% range. Last year, for most of the year, you know, it was running, you know, around 5%, 5%-6%. In the first quarter, due to the surge from Omicron, what we saw for the entire quarter was about, you know, 6%-7% contract labor costs as a percent of consolidated SWB. You know, listen, we did see some moderation. It's just, you know, we'd like to see, you know, more of it obviously, as we move through the rest of the year. I just wanna confirm, you guys haven't changed your view about where labor ultimately settles out. This isn't a sign in your view that labor might end up settling out at a higher rate. It's just a delay in getting there. No, not at this point. No. All right. Great. Thanks. Our next question comes from Jason Cassorla with Citi. Please proceed with your question. Great. Thanks. Good morning, guys. There's a number of moving pieces between the contract labor that you're discussing now and the inflationary cost backdrop and the continued cost management performance. I guess I was hoping you could help with maybe just the margin progression expectation for the hospital segment as we move through the rest of 2022. Then just to follow up on that, as we lap many of these cost pressures in 2022, how should we think about the longer term margin opportunity for the hospital segment, specifically in 2023 and beyond? If you have any commentary there, that'd be very helpful. Thanks. Hey, Jason, it's Dan. Obviously, we were very pleased with how we managed costs in the quarter in all three of our business units. As I mentioned in my remarks, our SWB costs as a percentage of our revenue were flat year-over-year, despite, I think it's fair to say, a much more difficult labor environment this year. You know, that's a tribute to Saum Sutaria and the operators in very effectively managing labor spend, as well as Brett and his team and our Conifer team. You know, listen, margins have improved significantly, and even if you exclude the $69 million gain on the sale of the medical office buildings. You know, obviously, we're optimistic about our ability to drive margin improvement. As volumes continue to recover, and our focus on higher acuity service lines, whether that's in the hospital business or the ambulatory business, and our ability to effectively manage costs, you know, we're obviously optimistic that, you know, there's opportunities there for further margin improvement. Great. Thanks. Our next question comes from Whit Mayo with SVB Securities. Please proceed with your question. Hey, thanks. Dan, just looking at the composite pricing in the quarter 4% growth and the hospital revenue per adjusted admission, it's a good number, but I think that's a little bit distorted based off the timing of some of these Medicaid supplemental programs. Is there a good way to kind of wrap our head around a clean number to have a better understanding of sort of like a normalized underlying, you know, pricing revenue per adjusted admission number? Hey, Whit. Certainly, the Medicaid monies coming through had somewhat of an impact on, you know, our net revenue per adjusted admission. But one thing to keep in mind, we did have some of that money in last year's first quarter as well. How I would think about it is, you know, probably what we've been talking about in terms of our revenue growth on a per adjusted admission basis is, you know, probably 3% type of area, and driven by our managed care contracting strategy as well as our focus on higher acuity service lines. Okay. No, that's helpful. Okay. If I can just squeeze one quick one. I'm just curious, like, looking at the return in the ED visits, can you just maybe comment on, you know, level one, two, three, four, five, you know, what sort of happened within the quarter where you're seeing pockets of strength or weakness? Thanks. Hey, Whit, it's Saum. I mean, obviously, you know, higher acuity ER volume is less "elastic," right? So that's the case. I mean, we track that. Obviously, you know, through hospital admissions that go through the emergency department and surgeries. But even those were slow, a little bit slower, you know, in the quarter, in particular when there was that—mostly, you know, kind of as you came out of the Omicron surge. I think consistent with what we've seen over the past year and a half, markets which opened up quickly, and I mean opened up, you know, kind of the overall economy, not the healthcare economy, recovered more quickly, even in emergency department volume. Those that were more locked down are recovering more slowly, including in lower acuity ER volume. As a reminder, we ask that you please limit to one question so that we may respond to all the questions in the queue. Our next question comes from John Ransom with Raymond James. Please proceed with your question. Hey there. The Texas Medicaid payments, September to now, was that just basically accrued on a level basis per month? Then what's the go forward accrual of that for the rest of the year? Thank you. Hey, John. It's Dan. The Texas Medicaid monies, in our guidance, we assume the programs will be approved, but we did not assume it. It was in Q1. As I mentioned on our last earnings call, the previous program funding for us was, you know, roughly $75 million. As we thought about our guidance for this year, we did assume that the program would be approved retroactive back to September 1. Our guidance did include the four months of revenue that we were not able to recognize in 2021. I mean, if you look at $57 million, it covered a, you know, seven-month period. It's, you know, the annual funding on a go-forward basis is, you know, roughly a little less than $100 million. Our next question comes from Brian Tanquilut with Jefferies. Please proceed with your question. Hey, good morning, guys. Hey, Brett, just a quick question just on the ASC side, right? Any color you can give us in terms of where you're seeing the most growth and then what the backlog looks like per specialty maybe? I guess, kind of follow up just to the SCD questions. You know, now that you've had it, you know, the full asset for a few months, you know, what are you seeing in terms of the synergy opportunities that remain, whether it's purchasing or on the labor side or just any color you can give us on the progress you're seeing with SCD? Thanks. Hey, Brian. So, just a little bit on some of the recovery in cases. You know, we continue to see strong recovery in cases around musculoskeletal, MSK, ortho spine. I think a particular interest was recovery in some of the lower complexity cases in Q1, specifically ENT, for example, the cases increased 34% year-over-year, and our GI cases increased 14% year-over-year. We also saw a pretty significant similar increase in our ophthalmology and retina cases in Q1 as well. When we think about the 8% growth we saw in Q1, a lot of that was driven by some of those lower complexity cases coming back, compared to Q1 of 2021 when we really saw some of the more complex cases come back, and the lower acuity cases just took a little bit more time to recover. What was your second question, Brian? Oh, and third as well. Oh, just the SCD side. I mean, obviously there's a lot of focus on that. You know, you put up a good same-store number, and people are looking at, you know, kinda like top-line performance and margin performance as a whole. Maybe any color you can give on what you're seeing at SCD and then the synergy opportunities. You know, are you finding more, whether it's supply chain or, you know, other operational items? Hey, Brian, in terms of synergies, you know, based on our experience so far, we're very comfortable with our synergy estimates that we talked about when we announced the transaction. There's been no negative surprises there at all. Yeah. The only other thing I'd add, Brian, is just related to the integration more broadly. You know, the integration of the first, you know, tranche of SCD facilities that was completed at the end of 2020 is essentially complete, and they're operating in the same fashion as the legacy USPI facilities. The integration of the tranche completed at the end of 2021 is going very smoothly. We continue to hit key milestones and really overall, as [inaudible] pleased with how the facilities are operating. The good news is, you know, there hasn't been any significant surprises, and I think that's largely a result of the due diligence that was done on the portfolio prior to both transactions being completed. Our next question comes from Stephen Baxter with Wells Fargo. Please proceed with your question. Hi, thanks. I wanted to ask your initial thoughts on the proposed Medicare inpatient rule. You know, I guess thoughts on the initial update itself, and then obviously there's a number of moving parts. You know, one of these, there does seem to be some confusion about whether the publicly traded hospital companies are actually seeing a benefit from the higher outlier payments in 2022 that CMS is describing. So I guess any color on that would be helpful. Then in general, you know, how are you thinking about the prospects for maybe potential approval as we get to the final? Thank you. Hey, Stephen, it's Dan. In terms of the Medicare update, as you saw, the market basket adjustment that was announced was, you know, roughly 3.2% for hospitals. However, there are two other items somewhat offset that, namely the outlier threshold was increased quite a bit, which was surprising, as well as the disproportionate share estimated funding levels. All in, we're projecting for us is roughly about a 2.3% net increase under the existing proposal that would go into effect October 1. However, we and others will be, you know, working with the appropriate parties to see if there can be any further improvements to that, given the environment that we're operating in. Our next question comes from Ben Hendrix with RBC Capital Markets. Please proceed with your question. Thanks. Just wondering if you could give just a little bit more detail on specific labor cost management measures that have helped you keep SWB flat in this increasingly difficult backdrop in Omicron, and also the extent to which those measures could present a run rate tailwind going forward in a more normalized labor or baseline labor backdrop? Thanks. Yeah. Hey, it's Saum Sutaria. I'll comment on that briefly and then pass it to Dan for anything he may wanna add. You know, obviously it was our intention a few years ago as we redeveloped our operating strategies in the company, including deployment of you know hospital by hospital, floor by floor analytics for our cost structure, including labor, that we were building a foundation to utilize for the long term. I mean, this is not a platform that is somehow COVID specific. Utilization of the platform during COVID has been very, very helpful because, as you know, the labor environment became more complex very quickly with the utilization of contract labor with high rates, and then a lot of other premium pay and retention strategies that were required, as well as active decisions about which capacity to staff and which to take down, when the volume may not have been available. You know, look, I appreciate the question because it is very much our intent to continue to operate with this kind of discipline and utilization of the analytics platform that's been built in order to manage a complex SWB line in the hospital segment. In the short term, until the contract labor rates begin to normalize, you know, we will continue to employ the strategies that we have around productivity, length of stay management, and ultimately, you know, some proactive decisions not to bring capacity back online yet, when the marginal cost of that labor is incredibly high. Our next question is from Sarah James with Barclays. Please proceed with your question. Thank you. Your guidance implies a little bit more front-end loaded EBITDA than consensus was expecting, and I wanna make sure I understand some of the assumptions transitioning 1Q - 2Q. You talked about a month-over-month improvement in surgical volume in February and again in March. Do you expect that to continue to trend up monthly through second quarter? And then on the temp labor utilization being the 7%-8%, are you assuming any kind of improvement on that in your 2Q guide, and what are you assuming for supply cost pressure? Hey, Sarah, it's Dan. Let me try to address that. Yes, we are assuming further moderation in contract labor as we move through the year. The question ultimately becomes the timing of that. Assuming there's no other significant COVID surges, then we would expect that there would be moderation as we move through the year. It's just, in our minds, it's a question of timing. Will we get back to pre-pandemic levels by the end of the year? We haven't said that, and we're not assuming that. We do expect some moderation as we move through the year. And in- In terms of- Supply costs. Go ahead. Surgical volume. Well, when, you know, obviously, we're off to a good start from a surgical volume perspective, particularly on the USPI side. As I mentioned, we're assuming 3%-4% growth this year. We outperformed that in the first quarter. We'll obviously keep evaluating that. You know, once we close the second quarter, we'll certainly reevaluate our guidance at that point. in China? Operator, next question. Is there anyone have a question? Our next question comes from Andrew Mok with UBS. Please proceed with your question. Hi, good morning. Maybe just a follow-up to the SCD question. Can you quantify the inorganic revenue contribution from the second SCD deal in the quarter? And how should we think about the timing and progression of SCD revenue synergies for the balance of the year? Thanks. Hey, Andrew, it's Dan. We're not gonna get into specific numbers related to each one of our centers or group of centers. As we, you know, mentioned at the beginning of the year that, you know, we're estimating approximately $140 million this year of EBITDA related to the SCD centers. As Brett and Sam have mentioned, integration's going well, and we remain very optimistic about, you know, the synergies. Ultimately, those centers once they're fully ramped, we're sticking with our estimate that it'll be roughly $275 million of EBITDA once the centers are fully ramped by, you know, year three to four. Well, very pleased with a great transaction. This five-year partnership and development agreement is also very optimistic as well. Yeah. Dan, towards that point, we said at the beginning of the year or when the transaction was done, that we expected to do probably 10 centers, de novo centers a year in partnership with SCD. Without getting into specifics, we're already ahead of plan at the end of Q1 as it relates to those 10. Very pleased with not only the number of facilities, but the quality of facilities that SCD is bringing to us as potential partnership opportunities. Great. Thank you. We have reached the end of the question- and- answer session. This concludes today's teleconference. You may disconnect your lines at this time, and we thank you for your participation. Thank you, everyone. Thanks. Bye-bye. Thanks. Bye-bye. Have a nice day.