Good day, and thank you for standing by. Welcome to the UHS Q3 2021 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during this session, you will need to press star one on your telephone. Please be advised that today's conference may be recorded. If you require any further assistance, please press star then zero. I would now like to hand the conference over to your host today, Steve Filton. Please go ahead. Thank you, Michelle. Good morning. Marc D. Miller is also joining us this morning. We both welcome you to this review of Universal Health Services results for the Q3 ended September 30, 2021. During the conference call, we'll be using words such as believes, expects, anticipates, estimates, and similar words that represent forecasts, projections, and forward-looking statements. For anyone not familiar with the risks and uncertainties inherent in these forward-looking statements, I recommend a careful reading of the section on risk factors and forward-looking statements and risk factors in our Form 10-K for the year ended December 31, 2020, and our Form 10-Q for the quarter ended June 30, 2021. We'd like to highlight just a couple of developments and business trends before opening the call up to questions. As discussed in our press release last night, the company reported net income attributable to UHS per diluted share of $2.60 for the Q3 of 2021. After adjusting for the impact of the items reflected on the supplemental schedule as included with the press release, our adjusted net income attributable to UHS per diluted share was $2.67 for the quarter ended September 30, 2021. For most of the Q3, we experienced an escalation in the number of COVID-19 patients being treated in our hospitals. In our acute segment, this COVID surge resulted in measurably increased revenues due to the higher acuity and incremental government reimbursement associated with COVID patients. Unlike previous surges, however, non-COVID volumes, including emergency room visits and elective and/or scheduled procedures, were not crowded out, and in fact, generally were running at or near pre-pandemic levels. As a result, acute care revenues in the quarter were higher and managed to offset the premium labor costs and increased supply expense associated with the COVID patients, leading to an acute care EBITDA result in the quarter that was above our internal forecast. At the same time, the most recent surge created significant challenges for our behavioral segment. Volumes were pressured throughout the quarter due to the capping of bed capacity, in some cases to properly isolate COVID patients, and in other cases because of a shortage of appropriate patient care personnel. Generally, behavioral patient days during the quarter ran 4%-6% below comparable pre-pandemic levels. The effect of the reduced volumes combined with higher labor costs led to a subpar EBITDA result in the quarter measurably below our internal forecasts. Our cash generated from operating activities was $442 million during the Q3 of 2021, as compared to $767 million during the same period in 2020. Included in our cash generated from operating activities during last year's Q3 was approximately $400 million of additional funds received in connection with various governmental stimulus programs, most notably the CARES Act. We spent $667 million on capital expenditures during the first nine months 2021. At September 30, 2021, our ratio of debt to total capitalization declined to 37.4% as compared to 37.7% at September 30, 2020. During the Q3 of 2021, we opened 157 new beds in our Las Vegas market, including 69 new beds at Henderson Hospital. We acquired 88 new beds through the acquisition of the Las Vegas Specialty Hospital, which will serve orthopedic and surgical patients. We acquired Elite Medical Center, a micro hospital offering emergency and inpatient care adjacent to the Las Vegas Strip. In addition, we continue to grow our freestanding emergency department footprint with 19 sites expected to be operational by the end of the year in 2021 and an additional five approved and under construction, which are expected to open in 2022. Construction also continues on Northern Nevada Sierra Medical Center, a 170-bed acute care hospital in Reno, Nevada, which is expected to open in March of 2022. Addit ionally, during the Q3 of 2021, we continued to be an active acquirer of our own shares based in large part on our view that the underlying patient demand for our services, and particularly in our behavioral segment, remains fundamentally strong, and that our ability to more fully to meet that demand will incrementally improve as COVID volumes continue to decline. During the Q3, we repurchased approximately 2.78 million shares at an aggregate cost of $419 million. Since the inception of the current share repurchase program in 2014, we have repurchased more than 20% of the company's outstanding shares. We'll be pleased to answer your questions at this time. Thank you. If you have a question at this time, please press star then one on your touch tone telephone. If your question has been answered or you wish to remove yourself from the queue, please press the pound key. Our first question comes from the line of Kevin Fischbeck with Bank of America. Your line is open. Please go ahead. Good morning. This is actually Joanna Gajuk filling in for Kevin. Thanks so much for taking the question here. I guess first, quickly, you just said that the acute care segment, the results were better than expected, offsetting psych, which came in lower than your internal expectations. How does the quarter, I guess, stack up versus your internal views overall, and also I'll ask you in the context of any comment on your full year guidance? The adjusted EPS of 267, which we reported last night, was very much in line with our internal forecast overall, obviously, as noted in my comments, with the acute care segment outperforming and behavioral underperforming and largely offsetting each other. As far as our full year guidance, our customary practice, which is true this quarter as well, is, with absent any comments to the contrary, we're just maintaining and reaffirming our guidance. Okay. Appreciate that comment. I guess just my question here in terms of the issues you're seeing in the psych segment, so obviously where you have you know a lot of COVID activity and the virus activity in the community, and you have to have hold on beds, but then I guess you also mentioned some of the labor shortages there. Can you talk about you know any actions you're taking to kind of try to you know so to speak fight that trend there? And also what happens to these patients if you cannot take them? Are they staying in acute care hospitals longer? Any color you might have on the labor shortage and whether there's any difference between different product lines or geographies? Thank you. Yeah. You asked multiple questions there. I'll try and answer them, but some of them I suspect will be clarified by other people as well. As far as the labor shortage in the behavioral segment goes, you know, to the degree that it is caused by the COVID surge itself, as you know, that's largely out of our control. On the other hand, we are extremely focused and have a great number of initiatives to increase the efficiency of both our recruitment and retention functions. We're actually hiring employees, nurses, as well as other personnel at record levels over the last several months. The challenge is that the churn or the turnover or the number of employees leaving at the same time, for us, as well as I believe most other hospitals, is also quite large and I think driven in large part by the COVID surge as well. Because, you know, many nurses in particular have the opportunity to work in a more acute setting, in an ICU, in an ER, et cetera, and earn, you know, 400% or 500% of their salary, if they're willing to travel or, you know, to work in a COVID environment. That challenge, I think, is difficult for us to overcome, although we're certainly, you know, trying. I think that it will naturally abate as COVID volumes decline and those opportunities for nurses to earn those premium sorts of dollars will decline. I think most nurses will ultimately return to their home, both literally and figuratively, you know, geographically, as well as back to their original jobs. Many, many of our nurses have told us that. You know, we continue to be extremely focused on those activities. To the degree I think that you had other questions, I'll wait and allow others to follow up. Thank you. Great. Thank you. Thank you. Our next question comes from the line of Joshua Raskin with Nephron Research. Your line is open. Please go ahead. Good morning. This is actually Marco on for Josh. Thanks for taking the question. Just a quick one. Was wondering if you had seen any impact from the vaccine mandates on the healthcare workforce in your markets. You talked a little bit about the trends in labor and behavioral care, but was wondering if you could provide a little more detail on the staffing and wages within the acute care segment. Thanks. Yeah. We had a number of geographies, the state of California, the state of Oregon, the city of Philadelphia, and there are others that have vaccine mandates. I think for the most part, we have found that those vaccine mandates have not had a material impact on the labor situation, in part because the mandates are pervasive. It's not like, if you know, an employee wants to continue working and, you know, doesn't wanna get vaccinated, they can work in somebody else's facility rather than ours. We have not on our own mandated the vaccine in any of our facilities where it is not mandated by a government authority, in part because, given the shortage of labor personnel, you know, we're not anxious to give people a reason to go elsewhere, although we certainly are encouraging our employees as strongly as we can to become vaccinated. So I don't think it's been a real significant factor. As far as staffing in the acute side, I mean, I think we're feeling these labor pressures that I alluded to, certainly in both business segments. I think what we have found, and I think this has been true throughout the pandemic, is that on the acute side, the labor shortage tends to manifest itself in higher premium hours and premium pay. In other words, we're able to fill most of our vacant, mostly nursing hours. But we fill it with premium pay that could either be overtime from our own employees, shift differential, temporary nurses, traveling nurses, et cetera. It's a very expensive alternative, but for the most part, we're able to fill most of our hours. The good news on the acute side is, as I indicated in my prepared remarks, the higher acuity, the higher revenue, the higher volumes has been effectively offsetting those higher labor costs. The challenge on the behavioral side is that we are unable to fill a lot of those vacant hours, even with premium dollars. We're certainly spending some premium dollars, but in some cases, we're just unable to fill the hours, and as a consequence, we're having to turn patients away, and therefore, we've got lower volumes, again, as I indicated in my prepared remarks, 4%-6% below pre-pandemic levels, and not enough revenue, you know, to offset the higher labor costs. Different manifestation of, I think, the same sorts of, you know, broad dynamics in the labor shortage in the two business segments. Great. Thank you. Thank you. Our next question comes from the line of Andrew Mok with UBS. Your line is open. Please go ahead. Hi. Good morning. Thanks for the question. Steve, hoping you could provide a bit more color on the revenue and volume trends in the behavioral business by geography. In geographies where COVID was present but not surging, can you give us a sense for revenue performance there? Yeah. I mean, I think what we have found, Andrew, is that the pressure on labor in particular, but therefore the pressure on volumes, is very much tied to the level of COVID. I mean, I actually have tried to sort of see if there's an absolute formula, and I don't know that there is, but I think there's a very close correlation. You know, we've got behavioral facilities in 37 states all around the country, et cetera. It would be difficult for me to, you know, sort of tick off, you know, literally geography by geography, where we've seen, you know, kind of above-average levels of COVID, et cetera. Where we see above-average levels of COVID, we tend to see the labor pressures and therefore softer volumes. In those markets where we don't, you know, we tend to see demand being manifested strongly. We're able to satisfy that demand, et cetera, which is why, you know, we remain pretty bullish about the idea that as COVID volumes overall recede, as they have started to do, I think, in the last, you know, four, five, six weeks, we'll start to see some easing of those labor pressures, maybe not immediately, because I do think there is a time lag associated with a lot of these commitments of traveling and temporary nurses. I think we saw that in Q1, where even as COVID volumes declined as early as mid-January 2021, it took a while for us to really sort of enjoy the benefits of that. We still struggled some in Q1, but then Q2 with lower COVID volumes saw, you know, upticks in volumes and not nearly as much pressure on the labor side. I think we're hoping that's sort of the same trend we're likely to see now. Got it. Thanks for the color. Just a quick follow-up. You know, we're now 20 months into the pandemic. Have you had an opportunity to formally assess market share shifts in the behavioral segment, whether it's geographical or by site of care? Thanks. Yeah. Market share data on the behavioral side is not, I think, as robust or precise as it is on the acute side. But our sense and both objectively to the degree that objective data is available and subjectively to the degree that, you know, we're able to talk with our competitors, and the nature of the hospital industry is that employees, particularly nurses and patient care employees, tend to move in many cases from one facility to another. It's relatively easy to keep track of what's happening in a market. I think what we find is that, you know, in markets where we're struggling for labor, it seems like all of our peers are struggling in the same way and vice versa. You know, while we're very focused on the things that we can do to improve and be more efficient from a recruitment and retention perspective, we acknowledge that these labor pressures, you know, are sort of more broad, and more comprehensive than we have control over. You know, certainly from a wage competitiveness issue, et cetera, we're always following, you know, what the market conditions are and, you know, literally changing and adjusting, you know, if not on a daily basis, on a weekly basis, so that, you know, we're being as competitive as we can possibly be. Great. Thanks for all. Thank you. Our next question comes from the line of Pito Chickering with Deutsche Bank. Your line is open. Please go ahead. Hey, good morning, guys. Quick guidance question for you. For Q4 guidance, can you tell us what needs to happen in order to hit the low versus the high end of guidance? Would you direct sort of the street models to sort of focus toward the mid-range for the Q4? As you think about 2022 guidance, any color on how much you believe you can grow in 2022 off of your 2019 EBITDA? Pito Chickering, I think that, you know, as the commentary has already indicated in today's call, the most difficult aspect of projecting future results is understanding the pace of COVID decline. Frankly, if in fact COVID continues to decline, we suspect that it will. It has that feel certainly at the moment. How quickly the COVID volumes recede and therefore how quickly the labor pressures ease. Again, with the notion that I think there is some delay of at least a couple of months, et cetera. My sense is it will be difficult to sort of have a full recovery in Q4 from the labor pressures. It would be difficult to sort of have an outperformance in both of our business segments in Q4. As a consequence, I think getting to the high end of our range would certainly be a little more challenging. But, you know, and I think the fact that we're reaffirming guidance is indicative of the fact that we feel like getting into the, you know, lower to mid-range of our guidance, you know, should be achievable as long as we continue to see the COVID trends and the labor trends that we've started to see at the very end of September and into October. As far as 2022 goes, even in what I would, you know, describe in quotes as a normal year, you know, we wouldn't be giving guidance for the following year as part of our Q3 call. In an environment that is as uncertain as today's is, we're certainly not going to do that either. I will say this, I mean, I think as we think about creating our 2022 guidance and think about, you know, what the business looks like next year, we tend to use 2019 as a base, 2019 being a, you know, a pandemic-free year. Even though we don't expect 2022 to be, you know, COVID-free, we just think that 2019 is kind of a more meaningful base. I think we, as we would in any normal year, we would expect to grow off that base. The question sort of becomes, you know, do we expect to experience sort of, you know, cumulative two or three years growth off of that base? Do we expect to get just one year's worth of growth? I think that's, you know, ultimately where we're gonna spend a lot of our focus when we do, you know, sit down and do our 2022 forecasting, you know, with more precision. My guess is it's somewhere in between. You know, we'll expect 2022 to grow more than just a year's worth over that 2019 base, but certainly not the full sort of three years' worth. I think that there has been some development activity and growth activity that we've just lost during the pandemic and, you know, won't be sort of recapturable. You know, I've seen some consensus numbers, which I don't look at, you know, in great detail, you know, that show us in the sort of the high single digits, 7, 8, 9% above 2019 levels. You know, at the moment, and this could certainly change, but that doesn't feel unreasonable. Okay, great. Just a quick follow-up one here on the labor side for both acute and behavioral. You know, how much of this pressure do you think is short term just from COVID or due to sort of long-term pressure? Do you believe it normalizes in 2022? And if you had to quantify what you think that inflation would be for nurses in 2022, you know, not your premium labor, but just your full-time employees, sort of what, you know, what type of inflation will you see versus your normal year? Thanks so much. I would make the point that I think on the underlying wage inflation is not what is mostly driving the wage pressure. It is the premium pay. It's, you know, the use of overtime. It's the payment of temporary nurses and traveling nurses and sign-on bonuses and that sort of thing. To your point about, look, is this temporary or structural, I think, you know, the honest answer is something in between. I do think there's no question that a lot of this demand, heightened demand has been created by the COVID surge itself. Again, if you can go online and look for nursing opportunities, not that anybody on this call is necessarily going to do that, but if you did, you'd see that those opportunities are working in COVID units, in ICUs, in ERs, et cetera. I think as the virus recedes and just become, you know, sort of settles in at, you know, what they described as endemic rather than pandemic levels, I just think a lot of those opportunities will naturally sort of fall away and nurses, again, will sort of retreat back to their original jobs, if you will. That part, I think is certainly temporary. I do think there is some structural changes that have been made. I think there are some nurses that have permanently left the workforce, either to take new jobs, and they've been, you know, retrained in, you know, different specialties, or they've just been burnt out, et cetera. I think it's incumbent upon us, and quite frankly, I think hospitals in general will come up with, as a result, new patient care models that rely less on RNs in particular and other caregivers, LPNs and techs and EMTs, et cetera, as well as, you know, relies more on technology that allows us to deliver the same level of patient care without necessarily the same number of particularly registered nurses. You know, part of, I think, you know, this issue is structural and we'll address that, and part of it is temporary that I think will naturally get better as the virus numbers recede. Great. Thank you. Thank you. Our next question comes from the line of Justin Lake with Wolfe Research. Your line is open. Please go ahead. Hi, this is Michelle Perry on for Justin Lake. Steve, I was wondering if you could give us a little bit more color on your thoughts around 2022. It seems like high single digits percentage isn't totally unreasonable. I was wondering if you can sort of break down what that growth will look like between behavioral and acute. Thanks. I don't think we're prepared to get into that level of detail on today's call. Again, I think a lot of it depends, you know, we won't give our formal 2022 guidance until the end of February in our year-end earnings announcement. You know, it's a good four months from now, and in this pandemic, you know, four months feels like a lifetime in the sense of how things can change, et cetera. I think how we think about the two business segments, how we think about overall growth is, again, going to very much depend on whether the cadence of virus frequency continues to recede as it has been doing over the last month or so, whether there are any new variants or upticks in the wintertime, et cetera, which some people expect there might be, and then how the labor shortage is really affected, sort of getting back to the previous question, you know, we'll have a better feel for how much of this labor pressure is really temporary and gets better, and how much we have to sort of address in a more structural way. You know, again, other than the comments that I've already made, as I said, you know, we wouldn't be giving precise guidance in a normal, predictable year, and this is far from that. I don't think we're gonna get into any more detail than we already have. Okay. Maybe just one more question. I think earlier this year, you had said during the height of the pandemic, contract nursing was about 12% of your total nursing hours. Can you give us an idea of what percentage that was this quarter? Thanks. Yeah. Again, you know, those numbers vary by business segment pretty dramatically. I would say on the acute side, the percentage of premium hours in this surge was probably in the high single digits, you know, 8, 9%, getting close to 10%. Not quite as high as it was back in the January 2021 period, because I think the COVID numbers themselves were not as high, but still pretty high. On the behavioral side, I think, you know, our premium hours, you know, only run about 2% of our overall hours. You know, hearkening back to comments I've already made, it's because we can't get enough of those premium hours to satisfy the need that we have. We wish we could, quite frankly, and that's why it's been more of a challenge on the behavioral side because filling those hours is more difficult. Keep in mind that, you know, employees in a behavioral setting, particularly nurses, are generally making less than they would otherwise make in an acute setting. I think that has always been true. When there's been a small differential, I think there's always been sufficient reasons why many nurses prefer to work in a behavioral setting. It's very different and, you know, every nurse has a sort of a different view of what they're looking for in a patient care experience. When a nurse has the opportunity to make 400%-500% of her base salary, all of a sudden, I think a lot of those other factors become less important and the financial dynamics just, you know, overwhelm everything else. I think that's what we're seeing in this current surge. I think the other thing that's worth noting is the current surge, you know, related to the Delta variant is the first surge we've seen during the pandemic in which many of the nurses are vaccinated. Pursuing these very lucrative financial opportunities, I think nurses view as a less risky proposition than they might have a year ago or 18 months ago before they were vaccinated. Great. Thanks. Thank you. Our next question comes from the line of Frank Morgan with RBC Capital Markets. Your line is open. Please go ahead. Good morning. Just on the topic of the COVID volumes as a percentage of total admissions in the acute side of the business, could you talk a little bit about how that affected the rest of your business in terms of inpatient and outpatient surgeries, your overall payer mix, ED volumes, those kind of things? That's my first question. Then the second one is, just with regard to all these issues, since the end of the quarter, have you seen you know, any incremental changes in anything, you know, like are you seeing COVID volumes going down? Are you starting to see the use of temporary labor start to change? And are you seeing any kind of changes in the overall mix of your patients from a payer standpoint? Thanks. Sure, Frank. The percentage of our acute care admissions that had a COVID diagnosis during the Q3 was around 14%. Keep in mind that because the length of stay is probably on average about twice for a COVID patient than a non-COVID patient, you know, that's something close to 30% of our patient days were represented by patients with a COVID diagnosis, so pretty significant impact. As I indicated in my, you know, earlier remarks, we didn't have that same crowding out dynamic for most of the quarter. For most of the quarter, you know, ER traffic, elective and scheduled procedures really have recovered and rebounded to pre-pandemic levels, maybe a little above, maybe a little below. September, we saw some surgical and elective deflections and postponements. It feels like, you know, I don't have all the data, but it feels like we've already recaptured a lot of that in October. You know, it doesn't feel like there's a real sort of permanent loss there. Again, the sense, as I've now said a few times, is COVID volumes have clearly been declining for the last four, five, six weeks. We're seeing some early indications of that leading to some also easing of the labor pressures. Although again, I'll repeat what I've also said a number of times, I think there is a time lag there. Because a lot of these commitments, both that we make to nurses, traveling nurses and temporary nurses, and that nurses make to other facilities, you know, have a you know, sort of time lapse associated with them, we don't feel the impact of those declining COVID volumes on the labor pressures immediately. We've certainly seen the first early signs of it, and I think they'll certainly continue during the quarter if the COVID volumes continue to decline. Anything you would call out on surgery, inpatient versus outpatient? Did you see any more impact on one versus the other? I'll hop off. Thank you. Yeah. I mean, when we talk about postponements and deferrals, they have tended to be in inpatient surgeries, because the concern has always been, you know, do we have enough beds if there is a kind of an unexpected surge in COVID patients? You know, I'm sure that anecdotally we canceled or postponed an outpatient surgery here or there. For the most part, to the degree that there were postponements and deferrals, and I don't think there was a material amount of them in Q3, but to the degree there were, I think they were mostly in the inpatient area. Thank you. Thank you. Our next question comes from the line of Matthew Borsch with BMO Capital Markets. Your line is open. Please go ahead. Good morning. Thanks for taking my question. You have Benjamin Rossi filling in for Matt here. Regarding payer mix, would you talk a little bit about utilization by payer across commercial Medicare and Medicaid, and whether you're seeing differences in acuity or utilization between them? Thanks. Yeah. I mean, the interesting thing I think is that payer mix has remained relatively stable during the pandemic. You know, obviously there's some, you know, government assistance there. This HRSA program pays hospitals for uncompensated patients or patients who have COVID but are uninsured, and that's been helpful to keep down, you know, uncompensated volumes and that expense. We've seen, I think as most hospitals have reported, a shift in COVID patients in this most recent surge to a bit of a younger cohort because I think such a large proportion of the Medicare age population has been vaccinated, and because so many of the COVID patients now are unvaccinated, they tend to be younger, more patients in their forties and fifties. They tend to be a little bit more commercial than Medicare. Again, honestly, I don't think the payer mix and I mean, the stability of the payer mix has been helpful, but, you know, the slight improvement in the payer mix is in my mind not what's driving the strong acute care result. It's the combination of the acuity, the reimbursement, et cetera, associated with the COVID patients, combined with the relative strength and recovery in the non-COVID volumes, I think has much more of an impact than actually, you know, a slightly improved payer mix. Gotcha. Thank you so much. Thank you. Our next question comes from the line of A.J. Rice with Credit Suisse. Your line is open. Please go ahead. Hi, everybody. Two quick questions here, I guess. First of all, the debt to EBITDA is down below 2x, which obviously stands out in this sector to see someone dropping that low in leverage. Can you comment? I know you guys were active on the share repurchase in the quarter. Is your, as you're articulating that you think this is an unusual situation that converged to depress results a little bit, especially on the behavioral side, and you see that turning around, any thought on doing anything even more aggressive in terms of share repurchase to take advantage of what sounds like, at least in your mind, hopefully a temporary pullback in the shares? Yeah. I think it's worth noting, A.J., that, you know, our original guidance for the year and then even our revised guidance, we presumed we'd be repurchasing about $750 million worth of our stock, pretty much ratably over Q3 and Q4. Through the end of Q3, we've already repurchased over $750 million of stock for, you know, the reasons that we articulated in our opening comments. You know, I suspect we'll continue to be an active acquirer, you know, particularly if there is, you know, any sort of weakness, any further weakness in the stock, etc. You know, we remain pretty bullish on the prospects of both of the business segments and, you know, are very comfortable investing in our own shares. I think we'll continue to do so unless, you know, the dynamics change in some measurable way. Okay. You know, there have been some discussion, obviously you have the firepower to do it, about the potential coming out of the pandemic that both on the acute and even potentially on the behavioral side, there might be increased deal opportunities as people look to maybe align with someone with deeper pockets on the acute side. Obviously not only acquisition, but JVs with acute care players on the behavioral side. Can you just comment on have you seen any pickup in discussions or dialogue around any of that? Is there any reason to think you'll see an accelerated pace coming out of the pandemic here? Yeah, I mean, on the acute side, I actually think, you know, in retrospect that, you know, the significant amount of infusion of government subsidies, reimbursement, you know, mainly in the form of the CARES Act funds, has helped support not-for-profit hospitals that might have otherwise felt more financial duress during the pandemic. I don't think you're seeing a real robust deal flow of, you know, not-for-profit hospitals looking for an exit strategy or partner, et cetera. There are deals that, you know, we're always looking at. I mean, I highlighted in, again, my opening comments, you know, we've done a couple of smaller deals. You know, buying a micro hospital and a specialty hospital in Las Vegas, you know, continuing to invest in our freestanding emergency room development. You know, I would add that those freestanding emergency rooms have really performed very well. I think they've performed very well from the outset, but I think they have done particularly well during the pandemic. There seems to be the willingness of patients to potentially get their care at a freestanding ED and feel somewhat safer or less threatened than they do in a large hospital emergency room. All that's good stuff. I think on the joint venture initiative side of behavioral, we didn't talk about it this quarter, but I think, you know, we mentioned last quarter that we've opened joint venture hospitals with acute care partners in Iowa, in Missouri this year. We're scheduled to open in the next few months in Michigan, in Wisconsin, our first behavioral hospital in Wisconsin. That deal flow of these joint venture opportunities continues, and I think it is a source of significant growth for us. We'll continue to pursue those. There are, you know, other deals out there in behavioral. I think we view it as an indication of the fundamental strength of the behavioral business that these deals attract a lot of interest, you know, both from strategic players as well as financial sponsors. You know, there can be pretty frothy auction processes. We look at a lot of those as well, and we'll continue to do that. All right. Thanks a lot. Thank you. Our next question comes from the line of Jamie Perse with Goldman Sachs. Your line is open. Please go ahead. Hey, good morning, Steve and Mark. I wanted to follow up on some of the comments on the acute care side. It sounds like you said in a number of categories you're at or near pre-pandemic levels, and there wasn't a big crowding out from COVID this quarter. I wanted to dig into that a little bit. You know, it does seem like adjusted admissions took a slight step back versus 2019 compared to Q3. Where are you seeing some of these at or near pre-pandemic levels, you know, by setting or by category versus where are things still lagging a bit? Yeah. I do think, Jamie, that the higher the COVID levels, the more challenging we are in sort of backfilling that non-COVID business. To your point, I think we had less issues with that in the Q2, which was probably our lowest COVID quarter, certainly, you know, in for several quarters than we did in the Q3, which I think is probably our highest COVID quarter. You know, that dynamic, and I mentioned it before that even though we mostly ran at pre-pandemic levels, we did have some deferrals and postponement in, you know, particularly in the September timeframe and particularly on the inpatient side. I think our point of view is that as COVID volumes decline, the demand for non-COVID activities, we'll be able to backfill, you know, the sort of loss of COVID with those non-COVID activities as long as the labor situation allows us to do that. I think, you know, again, in both of our business segments, I think we're more focused on our ability to meet the demand than whether the demand is really gonna be there. We have every indication that demand for both business segments remains quite strong. Okay. Thanks for that. Just switching over to the behavioral side, you talked about the capping of bed capacity and the clinical and other labor as two components driving the pressure in the quarter. Just wondering if you can tease apart those two. I mean, which was more impactful in the quarter? And more importantly, looking forward into Q4, is it fair to assume the first one, the bed capacity improves a little bit and the labor stays kind of where you're at? Just would love any thoughts on the progression of those two factors into the Q4. Sure. Well, Jamie, first I'd make the point that to a degree, although we sort of talk about these factors as being discrete and separate, they often sort of interplay on each other. When we have a COVID surge in a facility, we're likely to have more COVID patients, we're likely to have more of our employees who are either out with the virus or out because they've been exposed to the virus. Whenever there's a COVID surge, you know, we're gonna face, you know, incremental challenges. You know, sometimes we'll say that we've capped the beds because we've got COVID patients, and sometimes we say it's because we can't find enough staff. Often it's both in a combined way. Again, you know, as I think we've said, you know, multiple times, I think what we find and have found every time in the Q2, I think was reflective of this, that as the COVID volumes decline, both of those pressures tend to ease. If I had to say one was more prevalent than the other, I'd say that the labor shortage has been a more pervasive, impactful issue than the actual sort of isolation of the patients issue. All right. Thank you. Thank you. Our next question comes from the line of Whit Mayo with SVB Leerink. Your line is open. Please go ahead. Hey, thanks. You guys rarely talk about your health plan, which I think is in Reno, maybe I'm incorrect, or your ACO. Are there any trends or developments, any changes in network coverage that we should be aware of? I believe the performance of the MSSP ACO has been pretty strong in prior years. Just wondering if this is something that you guys think differently about strategically, maybe more broadly across the portfolio. Yeah. Thanks, Whit. It's a good question. I mean, I think the reason that we don't specifically address our ACO activity or the activity of our insurance plan is because I think we view it as integrated very closely with the overall strategies of our hospitals and their markets. So, you know, we don't operate the insurance plan anywhere where we don't have hospitals. We have, you know, some sort of accountable care organization in every acute care market in which we operate. In some cases, majority equity ownership, as in Las Vegas. In other cases, some, you know, equity ownership. But, you know, we view, you know, sort of an ACO strategy, sometimes the presence of a Medicare Advantage insurance product, as integral to those markets, and I think they've been very helpful. Again, we don't really talk about our insurance company sort of as a separate entity because at the end of the day, it largely exists as, you know, sort of an adjacency or a corollary to the strength of our kind of fully integrated, you know, delivery network in a market. We tend to talk about the markets themselves rather than, you know, the individual components. You know, same thing really with our freestanding EDs. You know, we mentioned them today because, you know, I think, it's worthwhile. But for the most part, we view them, again, as an integral component of a broader, integrated network. Okay. No, that's helpful. Steve, I think you recorded a few million dollars of the Kentucky Medicaid program in the quarter. Is that a prior period number? Just maybe refresh us on expectations for CMS approval and then maybe any comments around Texas DSRIP. Thanks. Yeah. Just to remind everyone, we recorded in the Q2 $55 million of special Kentucky Medicaid reimbursement that was approved during that quarter. As the state did its sort of, you know, final calculations, et cetera, we realized that there was an additional $7 million to be recorded as part of that program, which went from July of 2020 to June of 2021. We recorded that additional $7 million in Q3 that related to the previous state fiscal year program. We are expecting the state has applied for CMS approval for a similar program, which will cover the period from July of 2021 to June of 2022. You know, we're expecting that program to be approved by CMS. We're expecting the benefit for our Kentucky hospitals to be something comparable to what we recorded in the previous fiscal year. We'll wait to record that until the final CMS approval is granted. We're hoping and maybe expecting that that'll be before the end of the calendar year, but no guarantee of that. We'll record it when we get it. As far as DSRIP goes, I think the Texas DSRIP program it's either going to continue for a period of time or will be replaced by a comparable program, and therefore, I think the amount of DSRIP dollars should not really change significantly going forward. Okay, thanks. Thank you. Our next question comes from the line of Ralph Giacobbe with Citi. Your line is open. Please go ahead. Great. Thanks. Good morning. You know, excluding COVID, Steve, do you think underlying acuity is still up? I only ask because when I look at the absolute dollar of revenue per adjusted admission, it was up. You know, obviously there's a lot more COVID this quarter. You know, just interested in, I guess, your thoughts on sort of core acuity and how you think about the pricing stack going into next year. Yeah. I think it's a reasonable point, Ralph. I mean, I think what we've seen throughout the pandemic is that the lowest acuity procedures that, you know, we would tend to have as part of our emergency room traffic, et cetera, were those that fell away early on and to a degree, I think, you know, remain those that have not returned. While I think the increase in acuity is driven mostly by the COVID patients themselves, I do think that when you look at the non-COVID cohort of patients, that acuity has also increased slightly. I'm not sure it's because we're seeing more acute procedures as much as we're seeing sort of the absence of some of that really lower acuity stuff. Honestly, you know, I'm not sure we know exactly where that's gone. It seems to have, you know, fallen away from the hospital environment. Yep. Okay, fair enough. Just maybe can you talk about the pricing backdrop with payers? Maybe remind us of the average rate increases you've been getting, you know, I guess on the acute care side, and whether you think you can sort of price up more going forward, given sort of just the labor and inflation dynamics. I guess both for the acute and even behavioral, we don't talk about it a lot on the behavioral side, but you know, maybe if there is any leverage there given the current circumstances. Thanks. Yeah. I mean, I think that our contractual managed care or insurance contractual activity has sort of continued at around the same levels. I would say our average price increases on the acute care side are in that sort of 4%-6% range annually. On the behavioral side, you know, 2%-4%. We've, I think, specifically talked in previous quarters about having had some success on the behavioral side in getting some managed Medicaid contractual increases, in some cases on contracts where we have not seen increases in multiple years. You know, we continue to sort of work at that. But I don't envision that the managed care pricing dynamic has, you know, really changed a great deal during the pandemic or is likely to change significantly coming out of the pandemic. Got it. Okay. Thank you. Thank you. Our next question comes from the line of Sarah James with Barclays. Your line is open. Please go ahead. Thank you. I wanted to go back to paying premium in psych leading to record hiring. We saw that in our research tracking your shifts and bonus strategy. Are you saying that because of churn, the net headcount of psych nurses isn't higher, so we wouldn't see higher patients being served or bed openings in Q4 as a result of the strong Q hiring? Bigger picture-wise, when you think about recruiting new grads into psych as opposed to acute, do you think the hourly wage gap between those two segments has to shrink? Yeah. I mean, again, I'm gonna make the point that I've made before. I mean, I think that the COVID crisis has created an opportunity for nurses, both acute and behavioral nurses, to earn wage rates that are just beyond anything that has been previously comparable. Sounds like you've done a lot of research. You don't even have to do a ton, but if you go online and look for nursing opportunities, you can see that there are nursing opportunities in which nurses can easily earn $10,000 a week working in a COVID environment. These are nurses who, you know, maybe are earning $70,000-$80,000 a year, maybe, you know, $80,000-$90,000 a year, but now they're earning, you know, at a rate of $500,000 a year. When you have those sort of opportunities, there's no way we can close that gap. That gap will be closed by the elimination of those opportunities. You know, that I think is the issue. You know, again, I think, you know, the comment that we were making before, I was making before is, while we've hired a record number of, and not just nurses, by the way, this includes therapists and mental health techs, et cetera, you know, we're seeing quite a bit of churn. Again, as you know, I mean, I think, you know, the American labor force in general is seeing quite a bit of churn. Obviously, I think it's more exacerbated in healthcare and in hospitals, but you know, it is a bit of a dynamic that we're seeing across the labor landscape. You know, we continue in every market. We've always spent time making sure that our wages are competitive and performing compensation studies, et cetera. We're more attuned to that now and are doing it more frequently than we've ever had before. We certainly acknowledge that particularly, we've got to be competitive with our peers, with other behavioral hospitals, et cetera. You know, a behavioral nurse is always gonna be able to make more money in an ICU setting or an ER setting than in a behavioral setting. Again, I've talked to many, many nurses, both acute and behavioral over the years, and I think for the most part, they work where they work because they enjoy the patient care dynamics in the setting in which they work. Again, when there's a 10% or 20% pay differential, I think, you know, nurses can convince themselves that they wanna work where they're happier. You know, when there's a 400% or 500% differential, that becomes a tougher argument to make. Got it. Last question. Can you speak to how we should think about cadence for 2022? 'Cause some of your acute peers have been hinting at a back-end loading of 2022 with some of the labor pressure lightening or COVID pressure lightening in the back half of the year. How should we think about UHS seasonality first half versus H2 versus a normal year? You know, again, Sarah, you know, my apologies, but I think that's a level of detail and precision that we're not prepared to talk about today, not because we don't wanna talk about it and, you know, we know how we're thinking about it, but because, you know, we don't know how to think about it just yet. You know, again, I think a lot of this is dependent on how the next few months unfold in terms of COVID volumes and labor shortages. I think it's way too early to talk about a cadence for 2022, at least from our perspective. To the degree our peers are comfortable doing that, more power to them. Okay. Thank you very much. Operator, are there any more questions? I'm showing no further questions at this time. Okay. We'd like to thank everybody for their time and look forward to speaking to everybody on our year-end call. Thank you. This concludes today's conference call. Thank you for participating, and you may now disconnect. Everyone, have a great day.