All right, I guess it's good afternoon now. My name is Justin Lake. I cover healthcare services here at Wolfe Research. Thanks, everybody, for being here and on the web for our discussion on UHS. I've got the company's CFO, Steve Filton, here. Steve, appreciate you being here today, spending some time with us. Why don't we kick it off with a little recap update, right? So the third quarter environment looked pretty positive. Felt like behavioral volumes improving a bit. Acute volumes up against tougher comps starting to moderate, but pricing good across the Board, such that revenue growth was still pretty strong. As you've now seen October go into kind of half of November, you're halfway through the quarter. How anything to note relative to that that you'd want to update us on? Yeah, thanks, Justin. So I think that in both cases, or in both of our segments, the trends are continuing as we would have expected, as you suggested in your sort of recap. I think on the acute side, the expectation is the back half of the year would be challenging from a volume comparison, just because the volumes were so strong in the back half of last year, largely because I think in the back half of last year we were experiencing this catch-up or exhaustion, if you will, of procedures that had been deferred or postponed during the pandemic. So very high volumes in the back half of last year, although acuity was rather low because I think a lot of those procedures were kind of the more elective, more discretionary, and by definition, lower revenue procedures. So I think what you're seeing in the back half of the year, what you saw in Q3, and likely to see, I think, a continuation of in Q4 is more lower, more muted volumes, but higher pricing, higher acuity based on the comparison. On the behavioral side, we talked about the fact that even though behavioral patient day growth in the third quarter was only a little bit less than 2%, maybe dragged down a little bit by the Hurricane Helene impact in Q2, or Q3, rather, that we exited the quarter, and we exited September essentially at this sort of 3% patient day growth that had sort of been our target or has been our target for some time. Expressed confidence that in Q3 or Q4, rather, we'd be able to sustain that level of growth. Quite frankly, moving forward beyond that, having given precise 2025 guidance, but presumably 2025 guidance would be in that range as well. I think we're tracking along those lines as well. I think, much as expected here in Q4, lots of kind of exogenous news and disruption in the space, mostly surrounding the election, but I think in terms of the core business, very much as expected. Got it. So let's start on the behavioral side, right? You had some slower growth on volume. Some of that, if I remember correctly, was due to staffing. There were a couple of problem markets that were getting better. Give us an update on staffing and how those problem markets are going. How much of that is the improvement versus just what you're seeing at core? I think you've stated it accurately. I think the one thing I would add to that that we've talked about certainly in the last couple of quarters is the impact of Medicaid disenrollments, particularly on our child and adolescent population. I think that's been a bigger impact than we originally expected. All three items, the Medicaid disenrollment, the staffing, the handful of residential facilities that had their very discrete challenges, I think have all been improving. I think they've been improving, quite frankly, at a somewhat slower pace than we thought. We originally anticipated and guided for that 3% patient day growth for the full year of 2024. And I think we'll get it now in the last three or four months. But generally, those issues that we thought were relatively transient and would improve have been improving. Labor capacity constraints, our ability to hire all the people that we need in nursing and therapists and even non-clinical or non-professional positions has improved. The handful of facilities that were improving have continued to improve. I think Medicaid disenrollment impact is lessening as those people who have been disenrolled, either if they've sort of been disenrolled, what I would call administratively or for administrative reasons, are able to re-enroll in Medicaid, or many of them, or at least some of them, are being re-enrolled in commercial exchange products. Got it. On the pricing side for behavioral, the company's done a really nice job of taking the capacity you've had and making sure you find the highest yield for it, right? Whether it's going to Medicaid plans and saying, "Look, if you want us to stay in network, we need more," or moving to higher revenue per day payers like commercial. If you think about that as, let's just say, a nine-inning ballgame, right? I assume there's only so much juice you could squeeze out of something like that. How do you feel like how many innings have we played there? I think some of that dynamic is driven by the fact that there has been limited capacity, not only in our hospitals, but I think in the industry in general, so that if you're a payer and you have the prospect of X amount of subscribers or enrollees and with Y percentage of utilization, you've got to have this number of beds for them, etc, to the degree that there are not sufficient beds in a market, in a geography, and we're essentially looking for higher rates for you to remain in network and be sort of a for us to be a preferred provider of yours. That, I think, has helped us, as you sort of, I think, described in your question. So I think that to a degree, how much juice there is left, as you put it, is dependent on this scarcity issue. So I think we've always had the view that volumes and pricing will move somewhat in sort of conflict with each other or opposite with each other. As we're able to admit more patients, as our patient day volume grows, I think some of that operating leverage that we're able to exert over the payers will decline and our pricing will decline. Now, I think people who follow the company and follow the story know that honestly, we've been talking about behavioral pricing becoming more muted, mitigating some for quite some time, and it's really been slow to do that. And I think it will continue. It's not going to, I think, all of a sudden drop by 200 or 300 basis points in the course of a quarter or a few months. But I think over time, we're looking at behavioral pricing growing kind of in the 4%-5% range more than, let's say, the 6%, 7%, 8% that we've been growing during the pandemic. But I also think at that same time, and what we're already seeing and have talked about, is volumes will start to inch up as well. Got it. So then shifting over to acute, one of the big opportunities seems to be continued benefits from these state-directed programs, these Medicaid programs. You've got a bunch that are kind of pretty ripe in the pipeline. Maybe give us an update on some of those, specifically Tennessee, DC, Nevada, right? I think you were expecting some of those potentially to hit in the back half of the year. Looks like they might be pushed out, but still sound like they're on track. Maybe you can give us a quick update. Yeah. So the three programs that you enumerated are programs that we've been disclosing in our public filings in our 10-Qs and 10-Ks. These are plans that the states, or in the case of the District of Columbia, have submitted to CMS. They're pending. They're very specific plans with very specific impact numbers. We give those numbers in our Qs, but the total for the three jurisdictions that you mentioned are a little less than $200 million of annual benefit. We expect that the Tennessee and Nevada plans or plan revisions would be approved and retroactive to July 1 of this year, of July 1 of 2024, and that the DC plan would be retroactive to October 1 of 2024. But all three jurisdictions are waiting for CMS approval. The feedback I think they get and that they relay to us, or collectively to the hospitals in their states or whatever, is that CMS has not expressed any substantive sort of issues with their plans. They just sort of suggest that they've got a bunch of approvals on their desks collectively, and it may take some time. So again, no real read on whether this could happen later this year. Obviously, we're running out of time for later this year or at some point in the first half of next year. But the expectation by all these states and by the District is that approval is forthcoming and unlikely that it would not be forthcoming. There are some other states, California, Florida, probably foremost among those, that are in a kind of a more, I'll call it preliminary or kind of a gestative phase developing these programs or considering expansion of their programs. They've not actually filed yet a plan with CMS. So our policy and practice has been only to start disclosing these when there is an actual plan that's been submitted to CMS. So the California and Florida plans have been talked about elsewhere and by other analysts, etc. But I think in our minds, difficult to size those plans in any sort of precise way. They could have potentially significant benefit to us, but until we see an actual plan, an impact file, etc, very difficult for us to be precise about it. California in particular, I think the pool size has been better understood. And the question I think you've had is how it gets allocated. Any idea on when you might get some visibility there? Yeah. And the reason we raised the question of how allocations might change, etc, is because the state has raised that issue. They've said, "Yeah, we're interested in increasing the size of the DPP pool, but are considering changes in allocation, who's included, who's not included, etc," without offering any real details. So I think until the state is prepared to, again, submit a plan that everybody can read, see how the allocation works, these plans get submitted with, again, what I continue to refer to as an impact file showing what the impact is on every hospital in the state. Until California does that, I think it's hard for us to sort of quantify with any precision. Florida has been a little bit more straightforward. They just talk about increasing the size of the pool without necessarily changing any sort of the allocation formula, etc. Again, what we don't know is how much the pool size will be increased. So that's sort of, I think, the variable there that we're hesitant to sort of speculate about. Got it. Staying on the DC side, right, there's a lot of focus on the hospitals in terms of the exchanges and the potential that subsidies go away. I think you've identified exchange volumes, exchange revenues at around 5% on the acute side. Yeah, about 5% of our adjusted admissions on the acute side are people who have exchange coverage. Okay. And is that about the same as on the revenue side? Yes. Our exchange, our average reimbursement of an exchange on an exchange product is just about our average reimbursement. So yes, it's the same. It's true on the revenue side. Okay, and just in terms of thinking about a lot of people are trying to figure out the profitability there, first thing you need to understand is those are probably better than average reimbursement, right, from the perspective somewhere probably between Medicare and commercial. A lot of people like HCA says closer to commercial. Where do you think your exchange rates shake out there? Yeah, I think we would suggest that they're a little bit sort of more in the middle between Medicare and commercial, but certainly acknowledge that they're generally better than Medicare, but not as good as commercial, overall commercial rates. Got it. So have you sat down and tried to pencil out if we lose 1% of adjusted admissions and exchanges, what that means for acute care earnings, EBITDA? Yeah. So in going through a process, as I'm sure at least some of you have tried to do this, you have to go through and make certain assumptions. How many people would lose exchange coverage if the subsidies were removed? Not everybody who has an exchange product is benefiting from a subsidy. Some of the people who might lose exchange coverage might qualify for Medicaid or other county or similar programs. I want to be clear when I use the word guesstimate. I stress that word. We guesstimate that maybe 2.5% of our total admissions could lose coverage and not replace it with something else. We think the impact of that on the acute business would be somewhere in the $40 million-$50 million of EBITDA range annually. And obviously, you can sort of extrapolate that upward or downward depending on your assumptions. Conversely, I'll just make the point that I think we think it has a pretty minimal impact in the behavioral side of the business because we feel like the amount of exchange or the amount of patients we have with exchange coverage on the behavioral side has always been pretty de minimis, largely because so many of these exchange products come with these high copay and deductible structures. You've got a $10,000 deductible, as an example, in a behavioral business where very often the average bill is only $7,000, $8,000, $9,000. A lot of times when somebody's presenting that coverage to us, it's as if they have no insurance to begin with. So we're already treating those folks as if they're sort of essentially the equivalent of uninsured. Got it. So just to be clear, what you're saying here is if 5% of current adjusted admissions, if 2.5% of those went away, right, or went to something else, either and so you've assumed some of those might go to Medicaid and some of those might go to uninsured and some of those might go to employers, right? Correct. You would lose $40 million-$50 million net of EBITDA. So I think of that as 4%-5% of EBITDA, give or take. So it's a little bit more closer to 2x, right? The revenue contribution would be the EBITDA contribution. And to your point, I don't think any of us know. One of the reasons I haven't published anything on this is I don't know where to put these people yet, right? So is there a way to just think about if they to just worst-case scenario this, if it goes most of them go to uninsured, where do you think that number would? Do you have a ballpark of where that would shake out? Would it be closer to $100 million or something between $50 million and $100 million? Yeah. I mean, I think the easiest way to do it is to simply extrapolate and say, "We're making the assumption that half the people would lose their coverage." If all of the people lose their coverage, I think the impact would be close to 2x, something like that. Okay. Staying on this topic, if you're not going to get attacked by RFK, apparently in healthcare, you're going to get attacked by Elon Musk. So it's everybody loses, apparently. I think on the hospital side, the thought process is it's probably more the Elon Musk side than the RFK side. And there's been a thought process that maybe Medicaid state-directed payments would be a place they'd look at for hospitals and say, "Okay, has that gotten too far to the right-hand side of the curve or whatever?" So I know you have a great guy that runs all your DPP. It's Bob. Glad I remembered that name. I'm terrible with names. But so Bob, you've been kind enough to let me speak to him. He knows what he's doing. What has he kind of said here to you early on, right? I know it's tough to know anything at this point. Look, I think you've described it, I think, correctly to a point in the sense that, look, I think that DPP programs have grown pretty dramatically over the last several years. I think from the federal government's perspective, that's a concern of theirs. And so somebody in the incoming administration, whether it's Elon Musk or somebody else, can easily identify this as an area of potential savings for the federal government. But I think the overlooked sort of dynamic in that sort of brief overview of it is these are politically popular programs in the states themselves, and including in several very red states. It's worth noting that I think these programs really began to get traction originally in places like Texas and Florida, and originally, I think for the most part in the first Trump administration, without objection. I think one of the things that the hospital industry, and I think particularly the for-profit hospital industry, is sort of evolving to in terms of a way of thinking is that as some of these issues develop, and I think they'll develop politically, that the states themselves will be allies of the hospital industry on a lot of these issues. Because if the DPP programs are curtailed or reformed in some significant way, that's going to have a pretty negative reaction in these states that have come to rely on the programs and that like the programs. I think you would hear, I think, a level of objection from people like Governor Abbott in Texas and Governor DeSantis in Florida, and by the way, other governors and particularly red state governors throughout the country. But in addition to that, I think those states would look to bring their federal representatives, their congressmen, their senators on board with looking at this in a more reasonable sort of way. And I think that means I don't think the industry is suggesting necessarily that the programs go untouched or they're sort of sacred cows. But the idea that maybe there's a cap put on the growth of the programs, that there's some way to ring-fence the growth of these programs, which has been quite dramatic. So I think that the one potentially sort of overlooked kind of an issue with a lot of these programs is that changing them and changing them in any material way, I think, will be a significant uphill political fight. And it's hard to know how that's going to play out. I think it's worth noting that in the first Trump administration and in that administration, for the first two years, they controlled both houses of Congress, as they will in the first two years at least of this administration. There wasn't a great deal of significant healthcare policy that was created, reformed, etc. Medicaid reimbursement did not. There's a number of studies that show that Medicaid reimbursement around the country did not change dramatically during the whole Trump tenure, the term of four years. So again, I think it's a big leap to sort of suggest one thing I was talking about in some of my meetings earlier today is if you study the history, and I'm not a presidential historian by any stretch, but I think most people understand that the second term in most presidencies is much less effective, and they get much less done than the first term. Even though this is a non-consecutive term, I think some of the same dynamics apply. And obviously, there's a sort of a sense of movement and that a Trump presidency feels unfettered at the moment, etc. But these are still political issues that are going to have to be dealt with in both a political and a legal sense, too. I think some of the things that a Trump administration might want to do will likely also get challenged in the courts. Got it. That's helpful. Going back to the acute business, you were kind enough to host me and a bunch of investors down at the headquarters a few months ago. We met with your head of the acute business, Edward Sim, and one of the things we're asking him is, how are you thinking about a potential path to recapturing margins, right? Your margins are still, even with some significant DPP dollars, below where they were pre-COVID. He talked about that they were building a plan there, right? He hadn't been there very long, but they were building a plan for Marc to kind of lay out how they would do that potentially. Any kind of update there on levers you might be thinking about or a trajectory to get those margins back? Yeah. I mean, I think that one of the things that you saw in both our second and third quarter results was an extreme or measurable moderation in acute care spend or acute care operating expense, I think, particularly on the salary and wages line, but I think throughout, and I think it's a function of the fact that we've talked about this before, that some of the pressures that the pandemic had created sort of labor scarcity throughout the healthcare provider industry. Even though I think on the acute side of the business, we were generally able to fill all the positions that were open for the most part, we often had to do that at a very high price with premium labor, temporary traveling nurses, increased base salary increases that were well beyond sort of any level of inflation we had seen previously, incentive pay, sign-on bonuses, loan forgiveness, all these sort of things that I think for the most part have really either dissipated or completely gone away as a result of the pressures of the pandemic having eased or maybe completely disappeared. So I think you saw that. I think you see that whether you want to measure it. We find that the most effective or I think insightful metric of costs particularly are cost per adjusted admission. And if you measure our salaries per adjusted admission, Q2, Q3, they show a significant improvement over the prior year. And I think you'll continue to see that. And part of it, again, we talked about is beyond the sort of macro, I think, pressures that have eased. There's sort of this idea that I think we're able to do some of the more aggressive we describe it as largely blocking and tackling managed productivity, manage your hours more closely to your volumes and sync them up with your volumes more closely. We were, I think, hesitant to do that during the pandemic to reduce somebody's hours or cut back somebody's hours because we were so concerned that people were going to move and seek other alternatives, etc. I think, look, obviously, there's an opportunity for people to still move and change jobs. But I think the overall dynamic of the labor supply demand has really settled out, which allows us just to be more efficient and more effective, as I think we've historically been. But I think Eddie, as you alluded to, brings, I think, a particular. He's done this at other large integrated payers. And I think he's sort of replicating that exercise with us. And then on the behavioral side, one of your peers has gone through some difficulties on the, let's call it, investigator front. And then there's been all kinds of litigation out there. I know that's part, I think everyone in the room understands that's part of doing business, unfortunately, in the behavioral side, right? And that for the most part, you're doing God's work out there with people that are tough to deal with. But is there, as you guys are looking at the environment that you're living in today, is there any thought on boosting reserves for potential litigation? Or are you seeing any kind of green shoots of kind of a mania among plaintiff's lawyers to kind of gear up here? Yeah. So we talked a little bit in the third quarter. We disclosed the fact that we had recorded a $30 million increase to our malpractice reserves in the third quarter. Did so not so much in sort of reaction to some of the headline news that's been out there, but more to this idea that has been a trend for, I think, a while now. And that is not necessarily more or more frequent malpractice cases, but the value of individual cases, individual settlements, individual verdicts has been rising. I think a number of our peers have suggested, not just in the behavioral area, by the way, but in acute as well. And so we did increase, I think, in abundance of caution, our reserve in the quarter. I think in terms of some of the more high-profile verdicts that we've disclosed, I think we've talked about the fact that we have an expectation that those will be reduced as the legal process sort of continues to play itself out. There's certainly no guarantee of that. But I have a sense that these will be vigorously litigated, vigorously appealed, and there's an expectation that there's a reasonable chance that those verdicts will be reduced. I think to your point, Justin, it's a difficult business. It's a business that I think we find and continue to have found historically attractive and continue to find attractive. There's a lot of demand for it. The demand, I think, continues to grow. But it's a difficult business. It's a highly regulated business. It's one that sort of lends itself to kind of negative headlines, even if the amount of negative outcomes are still relatively small on a percentage basis. And I think a lot of the stories kind of tend to really focus on the small number of outcomes that are unfavorable. But yeah, I mean, I think that's, unfortunately, a cost of doing business. And this business will continue to do it because I think we feel like we provide a really good high level of care to a patient population that really needs it. And I think we also think it's just an economically very strong, robust business. Got it. Maybe we'll wrap up with just a quick discussion on capital deployment, right? So you've seen all of healthcare pull back a fair amount, right? Hospitals included. I know it's a period of uncertainty that's probably not going to go away anytime soon. But the company generates a lot of cash. And I know pretty much dollar for dollar, your free cash flow goes to share repurchases. And Alan and yourself and the board value consistency there. I've always kind of run a conservative balance sheet. But you have seen the company at times be a little bit. I don't want to say the word aggressive, but opportunistic, let's call it, right? Given the fact that you could be seeing multiple hundreds of millions of dollars of profit improvement, right? That doesn't appear to be in the stock price today. The balance sheet is a place where it seems pretty conservatively biased. Any thought process in terms of potentially, or maybe what would it take for you to kind of step things up like you have in the past? Yeah. Look, again, Justin, I think you've done a good job of kind of explaining kind of what our historical position is. For the last several years, at a minimum, we've been a pretty aggressive buyer of our own shares. We've largely devoted, as you suggested, virtually all of our free cash flow to share repurchase. And I think basically over the last 10 years, have repurchased about 30% of the company's outstanding stock. I think we're going to retain that approach. I think as your kind of early questioning suggested, or maybe my answers to your early questions, we like the sort of core business and the dynamics, the core metrics, the demand, the strong pricing in both segments, the fact that I think expenses and the expense structure has been much more predictable and not as stressed as it was during the pandemic. So I think all those things point to a lot of confidence. And again, I think we have a view that while some of these supplemental payments, etc, could come under some increased scrutiny and potentially be capped and things like that, I think we think that there's a high likelihood that they continue. I don't know if it's at the exact same level, but they continue at something approaching current levels. We continue to view the prospects of the company very favorably and as a consequence, are very bullish about repurchasing shares at a multiple of seven or eight times. We think that's a pretty compelling investment. We will continue to be an aggressive repurchase of shares at dedicating our free cash flow and potentially levels higher than that as well. Got it. All right. Let's wrap it up there, Steve. I really appreciate your time. Thanks, everybody, for being here. We'll be back in a few minutes, I'm sure. And I think we got Agilon in a couple of hours. And I'll be back. Thanks.