Good day, and thank you for standing by. Welcome to the Universal Health Services Q4 and full year 2021 earnings call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. To ask a question during the session, you'll need to press star 1 on your telephone. I would now like to hand the conference over to Steve G. Filton. Please go ahead. Thank you. Good morning. Marc Miller is also joining us this morning. We welcome you to this review of Universal Health Services results for the Q4 ended December 31, 2021. During the conference call, we will 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, 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 $3 for the Q4 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 $2.95 for the quarter ended December 31, 2021. During the Q4 of 2021, our operations continued to be significantly impacted by the COVID-19 pandemic. Specifically, we experienced an increased wave of COVID patients in December 2021, which peaked in January 2022. The negative impact resulting from this elevated level of COVID volumes was primarily a function of increased labor scarcity issues, exacerbated by the large number of employees sidelined by the virus itself or quarantined due to exposure to the virus. In what was already a very tight labor market, these incremental labor challenges, in addition to pressuring our salaries and wages expenses, also suppressed patient volumes at our acute care and behavioral health facilities while causing postponement of certain elective scheduled procedures at our acute care hospitals. Our net cash generated from operating activities was $884 million during the full year of 2021, which includes the unfavorable impact of $695 million of Medicare accelerated payments that were received during 2020 and repaid to the government during 2021. We spent $856 million on capital expenditures during the full year of 2021, which includes the construction costs related to a new 170-bed acute care hospital in Reno, Nevada, that is scheduled to be completed and open next month. Our accounts receivable days outstanding decreased to 50 days during the year ended December 31, 2021, as compared to 55 days during 2020. At December 31, 2021, our ratio of debt to total capitalization increased to 40.8% as compared to 37.9% at December 31, 2020. As of December 31, 2021, we had $854 million of aggregate available borrowing capacity pursuant to our $1.2 billion revolving credit facility. In our Acute Care segment, our ambulatory care development continued in 2021. We currently have 18 operational freestanding emergency departments and partnerships with national third-party entities for further development of ambulatory surgery centers and home health operations in our existing markets. In conjunction with our ongoing development of primary care physician networks, these initiatives are meant to create a more fulsome care delivery system in each of our markets. Our new hospital in Reno, scheduled to open soon, will enhance our statewide presence in Nevada. Bed tower projects adding new capacities to hospitals in important markets are underway at Edinburg Regional Medical Center in South Texas, Henderson Hospital in Las Vegas, and Inland Valley Medical Center in California. Planning is also underway on new acute care hospitals in West Henderson, Nevada, and Palm Beach Gardens in Florida. In our behavioral segment, 2 new de novo joint venture hospitals opened in 2021 in Clive, Iowa, and Cape Girardeau, Missouri. 2 more new hospitals have opened already in 2022 in Michigan, which is a partnership with Beaumont Health, and Wisconsin, and another is scheduled to open later in the year in Arizona in partnership with HonorHealth. These de novo developments, along with an increased focus on outpatient development and telemedicine in our existing markets, is meant to also build out a more fulsome continuum of care in the behavioral segment as well. In anticipation of a continued downward trajectory of COVID volumes from those experienced during recent surges and relief from the accompanying pressures on our operations and financial results, our board of directors authorized a $1.4 billion increase to our stock repurchase program. After the resumption of our share repurchase activity in the second quarter of 2021, we repurchased approximately $1.2 billion of our shares during 2021 and close to $300 million more thus far in 2022. We currently have approximately $1.46 billion authorized for stock repurchases after giving effect to the recent increase approved by our board of directors. Our 2022 operating results forecast, which was provided in last night's release, assumes that the negative impact of the COVID virus will diminish in 2022. While the decline in actual COVID cases appears to be occurring rapidly, we believe the process of backfilling non-COVID cases, and most importantly, the easing of workforce shortages, which dominated the healthcare landscape in 2021, will take place more gradually over the course of 2022. We have a host of active initiatives in place to increase the efficiency of recruitment and retention of our clinical staff, and also implementing innovative care models in recognition that certain changes to the healthcare staffing dynamic may last well beyond the decline in COVID cases. While the pace of recovery is difficult to predict, we remain confident in the fundamental underlying demand in both of our business segments, the early signs of which have already been emerging in the last few weeks. Marc and I will be pleased to answer your questions at this time. Ask a Question Simply press star 1 on your telephone keypad again star 1 Our first question comes from the line of Kevin Fischbeck with Bank of America. Great. Thanks. I guess your guidance for this year looks like it has margin degradation. Can you talk a little bit about how you're looking for the margin outlook in both segments? Yeah. I think, Kevin, as my opening remarks indicated, I think that's premised on the idea that the stabilization of the labor markets will be a more elongated process than the volume recovery. I think, you know, we have a notion that while our volumes and revenues will increase at a pretty decent pace in 2022, so will salary expense, both the continued use of premium pay in the short run and then the underlying, you know, wage rate inflation. I think it's a bit of a trade-off. Obviously, we have hopes that we can do better and make more progress on the salary front than more quickly than, you know, our guidance has presumed. I think at the moment, that seems to be the most prudent sort of outlook. Well, I guess, are both segments seeing the same type of pressure, or would you say one is seeing more of it, and would you expect one division to kind of come out of this margin pressure earlier than the other? You know, I think we have made the point throughout the pandemic that while both business segments see the impact of the labor shortage, it gets manifested in different ways. On the Acute side, for the most part, we're able to fill most of our vacancies, but we have done so through the use of premium pay, significant amounts of premium pay. As an example, I think we incurred about $120 million of premium pay in the Acute division in Q4. Alternatively, on the Behavioral side, I think we've only incurred about $25 million or $30 million of premium pay expense for the full year. The bigger issue on the Behavioral side has been just an absolute inability to fill some of those vacancies. As a consequence, the labor shortage on the behavioral side really manifests itself on the volume side more so than in actual salary expense. You know, we expect that those, you know, both those dynamics continue into 2022, although they begin to recede as COVID volumes begin to recede. Okay, great. Thanks. Your next question comes from the line of Andrew Mok with UBS. Hi, good morning. Steve, can you walk us through the different growth outlooks between the segments for 2022 with respect to volume and price, and how much new store revenue is contemplated in the guide? I think, Andrew, that the same store growth in both segments is sort of anticipated to be in the sort of mid-single digits, you know, in that sort of 5-6% range, which quite frankly, you know, in a normal year would be relatively unremarkable. I think on the Acute side, that's a kind of mixed shift away from higher acuity COVID volumes and more towards again, a backfilling of all this non-COVID activity, which has lagged somewhat. You know, we've been running at levels that are sort of 95%-100% of pre-COVID levels of emergency room visits and elective and scheduled procedures, et cetera. We presume that those percentages will increase in 2022 as the COVID volumes decline. Overall, the impact on revenue, kind of mid-single digits, and again, sort of hearkening back to Kevin's first question, the increase in salary costs outpacing that a little bit. On the behavioral side, our volumes have been sort of, you know, flatter. You know, in Q4, our patient days, I think, were relatively flat compared to the previous year's Q4. I think we're assuming, again, that same sort of mid-single-digit revenue growth, but more of it coming from an actual increase in patient days rather than any sort of patient shift mix. As far as the, you know, the amount of revenue growth that's coming from non-same store, I think it's a couple of percentage points. You know, Marc ticked off, I think, a lot of the major additions in the 2 business segments that are driving that. Great. Then as a follow-up, you did about $320 million of EBITDA on the behavioral business, but there were a few out-of-period payments even beyond Kentucky. I think there might have been some dollars from Florida there. How did the core behavioral business perform in the quarter? And is that a good run rate to think about for 2022? Thanks. Yeah. We called out the Kentucky Medicaid reimbursement, which is a little over $30 million in the quarter, because I think we thought that was one really extraordinary item in the quarter. There were other sort of, kind of one-timers, but I think they largely offset each other. I will say this about Kentucky, we recorded roughly $30 million of Kentucky reimbursement in the Q4. That represented 2 quarters of earned activity. In 2022, that reimbursement has already been approved for the full year, so there'll be a much more ratable recognition of, you know, roughly $55 million or $60 million of that Kentucky reimbursement in 2022, and that's included in our guidance. Other than the Kentucky item, I think we purposely did not highlight anything else in the quarter because we generally felt like they were offsetting puts and takes. Great. Thanks for all the color. Your next question comes from the line of A.J. Rice with Credit Suisse. Hi. Thanks, everyone. First of all, just maybe looking at the pace of the share repurchase activity, you know, running $1.2 billion-$1.4 billion, you're generating good cash flow, particularly as now you get past the repayments to the feds, but that still is probably a faster pace than you're generating free cash flow. Can you just comment, do you think you'll continue at that pace? Then, also, I assume if you do, that the leverage will tick up over the course of this year. I mean, you ended at 2.2 times debt to EBITDA. How much are you willing to let leverage sort of creep back up to fund the repurchase? Sure, A.J. As you indicated, we repurchased about $1.2 billion of shares in 2021. That was over the course of just 3 quarters since we didn't resume our share repurchase activity until April. If we continue at that pace, you know, we'll be repurchasing, you know, somewhere in the neighborhood of $1.4 billion, which is the amount of, you know, share repurchase authorization increase that our board granted yesterday. That's our plan, and that, quite frankly, is what's in our guidance. Obviously, we're doing this on an opportunistic basis as we have historically done. You know, we are leaving ourselves the flexibility to respond to market conditions and other deployment, capital deployment opportunities, et cetera. You know, our current plan is pretty much as the board authorization increase would indicate over the course of the next year. To your point, it would certainly, we'd be buying back shares at a pace above our free cash flow generation. Our leverage would go from approximately the low 2s, you know, 2.1-2.2 at the end of 2021, to the high 2s, 2.7-2.8 at the end of 2022. I'll just make the point. I mean, we're very comfortable with that if the stock remains undervalued. You know, that's the calculation that we've made. Depending on where the stock is, you know, this, we believe, is the right amount at this time, certainly at this level of our share price. No, that's great. I think shareholders has obviously appreciated that. Maybe my follow-up question, you know, we often ask you about geography and if there were any differences, and I'll ask you that again about the Acute business, where we usually ask. I would also ask, in the dynamics you're seeing in the Behavioral business, is the labor challenges particularly acute in specific geographies where for some reason you have a little more of a challenge than in other geographies? Anything about the geography, disparity, differences across regions for both sides of the business. The way that I would answer the question, A.J., is first by saying that I think what we've experienced, certainly in, you know, the most recent, I'll call it 6-8 months, is that the most significant labor pressures are closely correlated to the level of COVID frequency in the market. Markets that are hard hit by COVID, you know, clearly feel greater labor pressures for a variety of reasons, particularly with Omicron, you know, more of our own employees out sick, et cetera, and on the sidelines, but also employees leaving in, particularly in the behavioral space to, you know, work for premium rates in more acute settings, all that sort of thing. I think what we have found in the last few surges, you know, again, at least with the back half of 2021 and into 2022, is that those surges have been pretty widespread geographically. You know, obviously, at any point in time, we may be getting hit in one market worse than another. But I would say broadly, the performance is pretty geographically diffuse. Although from a timing perspective, you know, one market may be under pressure one month and not so much the next month. But it's really much more COVID-related than any other sort of underlying geographic issues. Okay. All right. Thanks a lot. Your next question comes from the line of Matthew Borsch with BMO Capital Markets. Hi. Good morning. Thanks for taking my question. You have Ben Rossi filling in for Matt here. Regarding patient acuity, on a same facility basis, you reported some good numbers for adjusted admissions and revenue per adjusted admission, while also showing some sequential decreases in overall occupancy rates and length of stay in both Acute and Behavioral. Just curious if that is a reflection of the type of acuity caseload you saw this quarter, and whether that trend is continuing in 1Q. Thanks. Look, acuity is really an issue in the Acute care segment, not in the Behavioral segment, in the sense that reimbursement doesn't change on an acuity basis for the most part in the Behavioral segment. I think in the Acute segment, what we have largely experienced during the COVID surges in 2021 is that as COVID has surged, acuity goes up, the COVID patients are sicker. But for the most part, we've been able to maintain a reasonable level of non-COVID business as well, which has really sort of led to, you know, these really high acuity and revenue rates in the Acute business, which for the most part have overwhelmed or offset the higher salary costs, which we alluded to earlier. That became more challenging. You know, I indicated in the Q4, we had about $120 million of premium pay in the acute business. That's the highest we've experienced to date. I mean, compared to just sequentially, I think we had around $80 million in the third quarter of this year, and I think we had about a little over $50 million in the Q4 of last year. Gives you an indication of how much that premium pay has really pressured the margins in the acute business. I think the other dynamic that we've noticed or has been noticeable in the acute space is that the Omicron patients, as has been reported, I think, you know, more broadly, are less acutely ill than the Delta patients before them. The problem is, I don't know that we've been really able to take advantage of that. You make the point that our length of stay has remained pretty stable. I think in theory, we should have been able to discharge some of those Omicron patients more quickly. The challenge is, as we try and discharge those patients, the sites to which we would normally discharge them, long-term care, skilled nursing homes, home health, are struggling with their own labor challenges. As a consequence, we haven't really seen the benefit of being able to discharge the less acutely ill patients faster. Again, I think all that will tend to work itself out as COVID volumes decline. We'll return to kind of a more stable referral network and a discharge pattern that's, you know, more reflective of what we've historically been used to. Got it. Thank you. Your next question comes from the line of Jason Cassorla with Citi. Great. Thanks. Good morning. You talked about volume and labor backdrop largely improving throughout the year, but, you know, is there any way to help frame the cadence from an EBITDA perspective? I mean, if you look back, you did about $425 million of EBITDA in 1Q 2021. Is that the right bogey to think about 1Q or maybe how you'd frame that? Thanks. You know, look, UHS intentionally, you know, has never given quarterly guidance, and we're certainly not about to begin that this year when I think, you know, there's greater uncertainty than is historically the case. You know, look, we're looking at a cadence that is, you know, certainly not what has been the historic norm. Normally, the first quarter is our strongest quarter. We come out of the gate really strong in both business segments, et cetera. This year, we come out of the gate with, you know, our highest COVID volumes to date in the pandemic. Now they decline pretty quickly, and have been declining and continue to decline, and that's encouraging. You know, as I've alluded to in some previous comments, you know, the labor pressures are declining more slowly, et cetera. I think broadly, you know, we've tried to indicate that I think we think the first half of 2022 will certainly be more challenging, as labor pressures diminish more slowly than COVID volumes decline. I think the second half of 2022 will begin to look a lot more like a pre-pandemic year, like the back half of 2019 might have looked. Got it. Okay, fair enough. Maybe just go to your CapEx guidance. You know, CapEx at the midpoint is just called like a 20% increase over 2021 and where you ended up spending there. You made some comments in your prepared remarks around some new towers or key facilities and the like, but maybe could you just help flesh out your CapEx priorities for both segments and where you're looking to invest those dollars for 2022? Thanks. Yeah. You know, as Mark commented on in his remarks, and I think, you know, also as he alluded to a response earlier, I think what really informs our whole approach, you know, in terms of what we're dedicating to share repurchase and what we're dedicating to CapEx, et cetera, is our view that the underlying demand fundamentally in our 2 business segments remains strong. From a CapEx perspective, we're going to invest in projects that we think, you know, make sense and are economically compelling. Mark alluded to, you know, our de novo development in Reno. We had a small community hospital in Reno, but this really, I think, will position us as a much more competitive player in the Reno market, but even more broadly as the preeminent statewide player in the state of Nevada. Same thing, you know, South Texas is an important market to us, Riverside County, California. We've invested both in physical capital. We acquired a significant physician practice in the Southern California market. So we like our franchises in both our Acute and Behavioral segments, and we're continuing to reinvest in those. Then again, as I think Mark pointed out, we have a view that we think, you know, and we understand why, but, you know, those investments and the strength of the underlying demand is somewhat unappreciated in the market. While that's the case, we also intend to be an active acquirer of our shares, which we think are really well valued at this point in time. Got it. All right. Thanks for all the color. Your next question comes from the line of Pito Chickering with Deutsche Bank. Hey, good morning, guys. Thanks for taking my questions. On the Acute side, on the script you quantified, or I think to Kevin's question, you quantified about $120 million of premium pay in Q4. How did that track versus Q3 and sort of for all of 2021? And if you think about converting that to a sort of more of a normalized level, how much was premium pay costing versus normal full-time employee in the Q4? Yeah. I think I actually mentioned, Pito, that the $120 million in Q4 compared to about $80 million in the previous quarter in Q3, and a little over $50 million in the Q4 of last year. The point that you raise is a good one. You know, honestly, the rise in that expense is, I think, driven more by rate than by volume. Meaning, you know, we're not necessarily using more nurses more hours. We're using some, you know, greater number, but, you know, the rates are just, you know, going crazy, as I think has been written about, and sort of reported on, you know, broadly across the country. You know, normally I would say to you that we would replace premium pay temporary traveling nurses with our own employed nurses who would make 50% less or something like that. I think in some cases, we're able, however you wanna look at it, either we're paying 3 times more for a temporary or traveling nurse than we would for a base pay, or if we can replace that nurse with an employee, we'll be paying a third. You know, the difference is quite significant. Have you seen the premium pay begin to inflect at all? I know it's still early in the year, but you know, any color in terms of nurse vacancies, what you're seeing on the hourly wage rates for those are now, as well as the hours you guys are using? Yeah. I mean, look, I've made the point that the decline in COVID volumes has really been occurring over a really short period of time at this point. I mean, you know, it was only in the latter half of January that we started to see those declines, so we're into this for 4 or 5 weeks. I think, you know, as the surge really worsened, hospitals were making longer term commitments to these nurses. You know, we were making some longer term commitments, but I think the other piece of this is the nurses themselves were making longer term commitments. You know, even if we weren't, they might have been making longer term commitments with others. The other issue is that, look, nurses have made a lot of money, those who have sort of sought these premium rates in the last, you know, 6 or 8 months. As a consequence, I think they have some greater flexibility. What we're seeing is that some nurses are taking some time off, et cetera, before they return to work, and, you know, they're thoroughly entitled to that. That's, I think, you know, all those reasons are why I think it takes some time. I would say to you that I think we've seen, again, as my remarks have indicated, we've definitely seen encouraging signs of volume recovery in both business segments in the last 4 or 5 weeks. I would say we've seen the earliest signs of labor pressures easing, but I think we've got a long way to go on the labor side. Okay, great. One quick follow-up there. On the behavioral side, as you look at 2021, how much were revenues impacted by the lack of staffing, and how do you think that evolves in 2022? Do you think you can recapture sort of those lost behavioral revenues in 2022 from staffing? Thanks so much. You know, as we've indicated, I think on a number of occasions, we think the single biggest reason that behavioral volumes and therefore behavioral revenues have lagged pre-pandemic levels is the labor shortage. A lot of it has been exacerbated by the COVID volumes. Again, the idea that some subset of our employee population has been seeking these premium rates in a more acute setting. By the way, as best as I can tell, and you know, talking to colleagues in other service industries, et cetera, it's a pretty standard and widespread phenomena in any subacute setting. You know, nursing homes, home health agencies, skilled nursing, long-term care facilities are all saying the same thing. As I indicated in a previous response, you know, we're finding that on the Acute side to be true because as we're trying to discharge patients, we're being told by all these sorts of facilities that they simply don't have the capacity because of a lack of staff. The question about, you know, how do you quantify what the lost revenue is difficult to do. What we have said before is that every indication we have of underlying demand is that it has continued to grow. I would say for the last several quarters, our inbound activity, incoming phone calls, incoming internet inquiries, et cetera, are up 15% or 20%. You know, I don't think we've taken the position that if we, you know, we could satisfy all that demand, but there's certainly a significant amount of demand out there to be satisfied. Again, I think our guidance presumes, you know, sort of, you know, mid-single digit revenue growth, which gets us back to sort of 3%-4% volume growth just over the prior year. We certainly don't think that's the top end of the potential growth in volume, but we, you know, we'd be pleased if we can get there and if the labor situation resolves itself so we can get there. Great. Thanks so much. Your next question comes from the line of Jamie Perse with Goldman Sachs. Hey, good morning, guys. I just wanted to start with the revenue per adjusted admission, if you can give any color on assumptions for 2022, and we're obviously way above the 2019, you know, trended growth line. What's sustainable about that versus, you know, as things start to normalize in terms of payer mix and acuity that's starting to come back down? Jamie, I think the answer again is different in the 2 business segments. I think in the Acute care segment, there certainly is an expectation that revenue per adjusted admission will come down from the very high levels that it has been running during, particularly during these high COVID surges. We believe that'll be replaced in large part by non-COVID more traditional non-COVID surgical and other procedural admissions that have lagged some during the pandemic. I'll also make the point that, as that business mix shift occurs, some of the cost pressures will alleviate as well because, while the COVID patients had very robust revenue, they also had very high expenses, generally more ICU utilization, more supply utilization, all that sort of stuff. On the behavioral side, you know, there's not nearly, I think, as big a, you know, shift or change in acuity. I'll make the point just 'cause I had this question last night. You know, it looks like our revenue per adjusted day in the Q4 is quite high in the behavioral segment. If you adjust for the Kentucky reimbursement that we talked about earlier, I think you get to a much more historically looking reasonable number. Again, I think on the behavioral side, you know, just the general sense is that as the labor situation eases, we'll simply be able to admit more patients, patient days will grow over the previous year instead of the flat patient days, for instance, that we saw in Q4. Okay. That's helpful. Just one follow-up on kind of longer term margin expectations. It seems like there might be a lot of temporary costs in your cost structure for 2022 in terms of premium pay and things like that. How should we think about the longer term margin expectations? Can you get back to, you know, 2019 levels in, you know, a couple of years or as things start to normalize? Or just any thoughts you can share on where things go after this maybe transition year? Yeah. You know, and again, I think we've said a number of times, I don't believe we feel like the fundamental economic model in either of our business segments has changed. Meaning, you know, what the historical model has been is that if you can achieve revenue growth in sort of the mid-single digits, you know, generally you're gonna see EBITDA growth and margin expansion over time. As you characterize it, I think we're viewing 2022 as a bit of a transition year, particularly the first half of 2022, that, you know, as volumes recover, those labor pressures are not gonna ease as quickly, and therefore, we're gonna see some margin compression, at least in the first half of 2022. I think over time, we have an expectation that the models will work as they have worked in the past. If we can achieve mid-single digit growth, you know, maybe inflation, it's particularly wage inflation, has increased by 100 or 125 basis points post-pandemic. But the model hasn't been turned upside down. As a consequence, if that underlying demand is out there and there's been a significant amount of unmet, postponed, deferred demand in both of the business segments over the last several years, which we firmly believe, then, you know, I think, you know, revenue growth, I think beginning again towards the end of 2022 should be relatively robust. We should see EBITDA growth. We should see margin expansion after we get over these labor pressures, and, you know, it'll look like the way it was. Can we get back to 2019 margins? The answer, I think is yes. The question is how quickly? You know, we're certainly not gonna get back there in a year, but we certainly believe that we can get back there and go beyond that, quite frankly. Okay. Thanks for the detail. Your next question comes from the line of Joshua Raskin with Nephron Research. Hi. Thanks. Good morning. I wanted to follow up on the comments that both you and Mark made on the outpatient development. I'm curious, what types of facilities do you think are most useful to UHS in the next couple of years? I'm thinking more specifically in the Acute care segment. Maybe how does that outpatient development work in the broader segment strategy for the Acute care segment? Well, I think it's, I mean, there's a lot of areas that we're looking at, specifically freestanding emergency departments. We have had a lot of success with that, and we continue to evaluate a number of opportunities on the FEDs that I think are gonna be very positive as a standalone business as well as what they can refer into the acute care hospitals. On top of that, you know, we're doing a lot more work with physician clinics and, again, being able to open and drive business from those clinics, in some part to the hospitals. We see a lot of opportunity in a number of our markets. We had a significant acquisition in California earlier, I guess a few months ago, with a large physician group, which we had been working with for many years. Acquiring them now, and just increasing the synergies and the things that we're able to do with them, as an owner of the practice, that's been a little bit enlightening to us, and so we're looking for more opportunities there. In addition to that, I would say the traditional outpatient radiology services as well as surgical hospitals. You know, it's been a little bit tougher for us to get deals that we like on the ASC front, we are currently evaluating probably in all or just about all of our acute care markets right now. We've partnered with a large surgery center company to do that, for the last couple years, and so I think we're gonna gain more traction with that as we go forward in the next, you know, 3-4 quarters certainly. Got you. Just to follow up on that, Mark, then the ASCs, I'm curious how you think about that shift from inpatient to outpatient care and how important you think that versus the, what sounds like maybe not the most rational market. I don't wanna put words in your mouth, but it sounds like it's more of a pricing issue than a strategy issue. Is that right? Yeah. I mean, as far as I look at it's definitely a trend. It's definitely something that we're very cognizant of as far as the desire to move certain business out of the inpatient setting to outpatient, and that's driven by the insurers and for a number of reasons. I'm not sure I'd categorize it the way you said, but I do think we have great opportunities to not only partner and create new outpatient surgery center businesses that are advantageous on their own, but also to decamp some of the business that is taking up space in our inpatient settings and then have higher acuity, higher paying business replace that lower end outpatient business. Gotcha. That's perfect. Thanks. Your next question comes from the line of Justin Lake with Wolfe Research. Hey, good morning. It's Austin on for Justin here. Steve, I was just kinda curious on the full year if you can maybe help us size or give some color on the impact of kind of the direct COVID reimbursement programs, sort of the benefit from sequestration, that 20% bump and HRSA. Kind of what is embedded in the assumption for 2022 related to those programs. Thanks. Yeah. We've disclosed, you know, the impact of the sequestration waiver and the HRSA reimbursement and the 20% add-on. I think historically, the last few quarters, it's been running in the sorta $30 million, you know, plus or minus a bit, range. You know, the way we've incorporated that in our projections or guidance for 2022 is based on the current knowledge, the Medicare waiver, you know, lapses in the first half of the year, the public health emergency, which drives the 20% add-on. I think, you know, it lapses early in the second quarter. The HRSA money seems to be running out, so we've assumed all that. Again, the tricky part of this is, you know, it looks like this will be, you know, the thing. I mean, that reimbursement will largely tail off as the COVID volumes tail off. You know, a month or 2 ago, we were concerned that, you know, maybe we'd be facing significant COVID volumes and the loss of that extra reimbursement. It appears that the 2 will sync up, you know, more naturally. Yeah, we've assumed those things go away, you know, relatively, you know, for the most part in the first half of the year. Again, that syncs up with guidance, which presumes that our overall COVID volumes go down in the first half of the year, that the expenses associated, the really high expenses with those COVID patients go down, et cetera, so that it's really not a significant, you know, drag on our earnings. Awesome. Thanks, Steve. Maybe as just a quick follow-up there, just kinda curious maybe on a percent basis where COVID admissions had kinda trended early in Omicron and kinda where they're settling out here. Then maybe for the full year, you know, is there kind of a given range that you guys are assuming COVID volumes to continue to run at? Yeah. You know, as during the COVID surges, I think at the height of the COVID surges on the acute side, I would say somewhere in the 15% of our admissions were COVID related, you know, during the Delta surge, during the Omicron surge, et cetera. Because the length of stay of the COVID patients is about twice what our average length of stay is, you know, COVID patients were taking up a third of our beds across the portfolio, again, during the surges. You know, it was a significant number. I think, you know, the assumptions that we've made for particularly the back half of 2022 is that we'll be in this kind of, you know, as has been described, endemic environment in which something like 3%-5% of our acute admissions will be COVID related and probably less acutely ill than we've seen in some of the earlier surges. Great. Thanks. Your next question comes from the line of Whit Mayo with SVB Leerink Partners. Hey, thanks. Good morning. I haven't heard about, Cygnet or your U.K. operations in some time, so was hoping maybe to get an update. I think the broader question, and maybe this is framed more for Mark, is just thinking about a broader portfolio review for behavioral. I mean, at some point, does it make sense to get smaller to get bigger? Maybe making some decisions during a pandemic is ill-advised. Just any update strategically, operationally, anything that you guys are deploying internally that's different this year that, you know, gets you excited that we should be probably paying more attention to? Yeah, I mean, I'll start with the portfolio review. I mean, we do that all the time, and I'll tell you, we've really done that during the last 2 years during COVID. To your point, you know, we have scaled down a few places, some operations, a couple of leased facilities and a couple of others where we just saw the changes in those markets. They weren't big players in the portfolio and we've jettisoned them. So we continue to look to pare down if possible, while at the same time, you know, we're doing a lot to grow the division as well. So we're trying to always improve the assets. One of the comments I'll make is, you know, our JV opportunities on the behavioral side continue to be robust. I wanted to just make the point on that all JV opportunities and all JV partners are not created equal. There are a lot of JV opportunities, situations that we look at, that we pass on, that others do because we just don't see the merit long term. If you notice the ones that we do for the most part are recognizable, nationally known names, or they're very strong regional players, and that's purposely done. We're very excited when you say, you know, what could we offer as far as getting you all excited? We, and Steve's already mentioned this, but with the demand being where it is, we're very excited that when we get the staffing stabilized, and it is stabilizing, and it will continue to stabilize throughout this year, we should be able to pop because we know we track every week. We're talking very specifically about which beds are closed due to staffing, due to COVID. As we see that start to turn, and it's already starting to turn, that's all upside for us. In regards to Cygnet's really been a terrific hedge for us. They are growing. I speak with them very often, weekly, in fact. Our team over there is very strong. They're competing quite well against historically, in fact, you know, larger players in that market. We're competing much better than we have in the past. Others are having some hiccups. We're very excited. The list of opportunities just in the U.K. is incredibly impressive. You know, along with that, we will look at things outside the U.K. if they present and we think they make sense. Right now we have a number of areas just within the U.K. that we think we can add beds either to existing facilities or some new facilities. Our relationship with the NHS has never been stronger. We're quite positive about, you know, that business and where it's gonna go going forward. Great. That's helpful. Maybe just one quick follow-up for Steve. If you could maybe give an update on what you're contemplating for Texas DSRIP UCC. As this program presumably will continue now. Your 10-K has an update that there's, I guess, you guys expect $391 million from state supplemental payments, and that number hasn't historically been that reliable. I guess I'm just trying to make sure that we're thinking about any of the major puts and takes with some of the state supplemental programs this year. Thanks. Yeah. First of all, I'll make a few broad comments. You alluded to the 10-K, which was filed last night. I do think UHS has a rather expansive disclosure on these state programs. If people are really interested in the details, I would suggest that they spend some time reading the you know our 10-K disclosure on the subject because I think it is rather informative. You know, broadly, you know, as it regards Texas, there are a couple of different programs in Texas. I think the one that is sort of most uncertain at the moment is the directed payment program, which the state and CMS are sort of in dispute over. We had about $12 million-$13 million of reimbursement related to that program, which we did not recognize in the last 4 months of 2021, although we remain hopeful that it will be approved and will wind up getting recognized retroactively in 2022. The Uncompensated Care Program, which people have expressed some concerns over, et cetera, you know, looks like it is moving forward. You know, the next, I think, payment is actually scheduled to occur within the next week or 2. I just saw a communication in that regard from the HHS or the health department in Texas. It seems like that's moving forward. I mean, I'll finally, you know, make one last comment. Look, there is some choppiness associated with these state reimbursement programs. We tend to be conservative about how we account for them, tending to wait until they're approved either at the state and/or the federal levels. Sometimes that means that we're not recording the income or revenues ratably. If you look at the trends over time, you know, the trajectory of those programs tends to be increased. I think they are because the hospitals really rely on these programs, and a lot of the hospitals that rely on these programs are safety net hospitals within each of the states, et cetera. The programs really become an important part of both state and federal funding. Yeah, there's some uncertainty and some volatility in how these things get recorded. I think our general sense is that the programs will remain at or equal to historical levels. Again, with the one exception that I would note, and we didn't really get into it in detail, but we recorded on the Kentucky reimbursement, essentially 18 months worth of reimbursement in 2021. In other words, 6 months of the reimbursement that we recorded really related to the last half of 2020. That's a bit of a headwind going into 2022, because we'll only record 12 months of Kentucky reimbursement in 2022. That's clearly baked into our guidance. Okay, great. Thanks, guys. Appreciate it. Our final question comes from the line of Sarah James with Barclays. Thank you for squeezing me in. When you talked earlier about getting back to the pre-19 margins, how much of that is cost control versus more of a change in the rate environment? Honestly, Sarah, I think that the real driver, as I think Mark and I have both alluded to, is volume recovery. You know, look, we're certainly looking at cost controls, and I think cost controls focused on the elimination of this really expensive labor component that we've been incurring for the last, you know, during the pandemic. But again, I mean, I don't think we anticipate sort of, you know, wringing efficiencies out of the business in order to get back to those margins. You know, what I was saying before is we're gonna get back to this model of mid-single-digit revenue growth. And, you know, if you combine that with efficient operations, which we have historically always had, then I think you sort of get back to that model. No, I don't think we're either cost cutting our way back to 2019 margins nor getting there from extraordinary rate increases. Although we would hope that both from our government and commercial payers over the next year or 2, you know, there's more and more recognition of the inflationary pressures on labor and other costs. Got it. That's helpful. As you think about that recognition across your different types of payers, how do you think about the timing of that? Like, which would Medicare act first or, you know, when you think about Medicare, Medicaid, and the private payers, where do you think the recognition could start? It's a great question, Sarah, and obviously, you know, from a Medicare and Medicaid perspective, that's largely out of our control. Meaning, you know, I mean, yeah, there are bigger forces, bigger lobbying groups, both at the federal and state level. We're active participants in those groups, so we're sort of not driving that. But again, I think the inflationary pressures put the not-for-profit hospitals in particular at a disadvantage. There will be great pressure on that. As far as the commercial payers, you know, we have a much more active role there, and I think, you know, we're playing that active role and pressing more and more of our payers for what we believe to be reasonable rate increases. If we don't get them, I think, you know, we're more willing today than we have been in some time to terminate contracts, to walk away from business that doesn't have a reasonable reimbursement rate. That's helpful. Thank you. I'll now turn the conference back over for any closing remarks. We'd just like to thank everybody for their participation and look forward to talking again at the end of the first quarter. Thank you. Thank you all for joining today's meeting. You may now disconnect.