Good day, and thank you for standing by. Welcome to the Q2 2025 Universal Health Services 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 the session, you will need to press star one one on your telephone. You will then hear an automated message advising that your hand is raised. To withdraw your question, please press star one one again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Steve Filton, Executive Vice President and CFO. Please begin. Thank you, and good morning. Marc Miller is also joining us this morning. We both welcome you to this review of Universal Health Services results for the second quarter ended June 30, 2025. 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, 2024, and our Form 10-Q for the quarter ended March 31, 2025. We'd like to highlight just a couple of developments in 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 for a diluted share of $5.43 for the second quarter of 2025. After adjusting for the impact of the items reflected on the supplemental schedule included with the press release, our adjusted net income attributable to UHS for diluted share was $5.35 for the quarter ended June 30, 2025. During the second quarter of 2025, on a same-facility basis, Adjusted Admissions to our acute care hospitals increased 2.0% over the second quarter of the prior year, and surgical volumes were down slightly. Still, same-facility net revenues in our acute care hospital segment increased by 5.7% during the second quarter of 2025 as compared to last year's second quarter after excluding the impact of our insurance subsidiary. We note that West Henderson Hospital, which opened in late 2024, has had a certain cannibalization impact on the division's same-facility volumes and revenues. Meanwhile, operating expenses continued to be well-managed. Other operating expenses on the same-facility basis increased 3.1% over last year's second quarter, again after excluding the impact of our insurance subsidiary. For the second quarter of 2025, our solid acute care revenues combined with effective expense controls resulted in a 10% increase in same-facility EBITDA. During the second quarter of 2025, e xcluding the impact of the Tennessee Medicaid Directed Payment Program, same-facility net revenues at our behavioral health hospitals increased by 5.4%, driven by a 4.2% increase in revenue per adjusted day. Adjusted patient days were up 1.2% compared to the prior year's second quarter. Our cash generated from operating activities decreased by $167 million to $909 million during the first six months of 2025, as compared to $1.076 billion during the same period in 2024. We expect to collect the $58 million of Tennessee Directed Payment Program receivables in the third quarter. The new hospitals in Las Vegas and the District of Columbia contributed $35 million to the receivable increase. In the first half of 2025, we spent $505 million on capital expenditures, 25% of which related to the two new/replacement facilities in California and Florida, both set to open in the spring of 2026. During the first half of 2025, we also acquired 1.9 million of our own shares at a total cost of approximately $332 million. Since 2019, we have repurchased approximately 34% of the company's outstanding shares. As of June 30, 2025, we had approximately $1 billion of aggregate available borrowing capacity pursuant to our $1.3 billion revolving credit facility. The recently enacted One Beautiful Bill Act includes several significant changes in the Medicaid program, including changes to state-directed payment programs and provider taxes. Beginning with the 2028 state fiscal years and primarily phased in over a five-year period through 2032, these program changes will limit both the level of payment and the amount of provider tax assessment that states are permitted to utilize to finance the nonfederal share of their respective Medicaid Supplemental Payments. The legislation provides for different limits depending on whether states have previously expanded their Medicaid eligible population as permitted under the Affordable Care Act. We cannot predict, among other things, if this legislation will ultimately be implemented as enacted or if certain states may attempt to implement countermeasures to mitigate its impact. Our current projected 2025 full-year net benefit from previously approved state Medicaid supplemental programs is approximately $1.2 billion. At this time, assuming no changes to our Medicaid revenues or other changes to related state or federal programs, we estimate that commencing with the 2028 state fiscal years, our aggregate net benefit will be reduced on an annually increasing and relatively pro-rata basis by approximately $360 million-$400 million in 2032. Given the various uncertainties, including the evolving state-by-state interpretations and computations related to the legislation, our forecasted estimates are subject to change, potentially by material amounts. Our future operating results, potentially starting in 2026, may also be impacted by other factors which are more difficult to predict, such as the impact of Medicaid work requirements, which may decrease Medicaid enrollment, and factors that could unfavorably impact insurance exchange enrollment, such as the scheduled expiration of Insurance Exchange Subsidies. I'll now turn the call over to Marc Miller, President and CEO, for closing comments. Thanks, Steve. Based primarily on the increased DPP reimbursement, we are increasing our midpoint of our 2025 EPS guidance by 7% to $20.50 per diluted share, up from $19.20 per diluted share previously. Medicaid supplemental programs in Washington, D.C., and other potential programs that are not yet fully approved are not included in our revised guidance. We remain pleased with the performance of West Henderson Hospital, which produced a positive EBITDA in the second quarter. At the same time, we acknowledge the significant drag created by the recently opened Cedar Hill Regional Medical Center in Washington, D.C. Timing of hospital certification and other startup issues proved a bit more challenging than we anticipated, but demand, especially for emergency services, has been very encouraging. Although recovery to expected results will continue into the back half of this year, we remain confident in the positive long-term prospects for the facility that prompted our development partnership with the District of Columbia. De novo growth continues in our behavioral segment. We recently opened a 96-bed behavioral hospital in Grand Rapids, Michigan, which is a joint venture with Trinity Health Michigan, and a 41-bed substance use disorder and dual diagnosis treatment center in Mount Pleasant, South Carolina. In addition, we are developing a 144-bed behavioral health hospital in Bethlehem, Pennsylvania, which is a joint venture with the Lehigh Valley Health Network and is expected to open later this year, as well as a 120-bed behavioral health hospital in Independence, Missouri, which is expected to open in late 2026. In addition, we are also continuing to grow our Cygnet Behavioral Health Network in the U.K., which has added six new facilities and 137 beds so far this year. At this time, we're pleased to answer your questions. Certainly. As a reminder, to ask a question, please press star one one on your telephone and wait for your name to be announced. To withdraw your question, please press star one one again, and please stand by while we compile our Q&A roster. Our first question will be coming from Pito Chickering of Deutsche Bank. Your line is open. Hey, good morning, guys, and thanks for taking my questions. I just want to circle back on, I think you said $360 million-$400 million of net impact in 2032 with a current law in place. I just want to make sure that those numbers make sense. If we're talking about, if we're losing sort of [$300] million of sort of EBITDA over that time period, just curious what your views are to offset that with core ops and how you view that impacting your sort of core growth rate with those headwinds. Yeah. So, Pito, obviously, those reductions do not begin, as we know, materially until 2028. We certainly have time to think about strategically how we might alter our business approach, particularly in the behavioral business, where we can alter the structure of our programs, not necessarily cater to as many Medicaid-centric programs, etc. Additionally, obviously, there could be, as we noted in the remarks, new DPP programs approved during that time. Maybe not finally, but I think it is also possible, as we noted in our remarks, that some of the changes are not ultimately implemented. We believe, or some have speculated, that Congress particularly extended these cuts for a period of time to give it some room to come back and tweak if they had to. If the cuts remain in place and are enacted as the bill lays out, we certainly feel like there are things that we can do, both from shifting revenues, sort of sources of revenues, particularly in the behavioral division, cost-cutting initiatives, etc. I will remind you, I know some of our peers have made the same point. Five years ago when the pandemic hit and did so with very little notice, we specifically, and we as an industry, pivoted fairly quickly and fairly dramatically in terms of headcount reductions, capital spending reductions, etc., and a whole host of initiatives to react to what at the time was an extremely dramatic and largely unexpected reduction in revenues. I think we have great confidence in our ability to shift and be flexible, especially with several years of notice and preparation that we will have this time around. Let me just add on. Pito, let me add on to this as well. Steve laid out in his prepared remarks the worst-case scenario, which we obviously want to be transparent, and that's what the numbers are today. I don't expect that that's what will happen in a number of ways. Steve mentioned a couple of things that we'll pivot and we'll make moves that are necessary. In talking with all of the folks down in D.C., representatives from many of the states that we cover, they are starting to recognize even right now what they passed simply can't be left as is because the effect on some of the healthcare programs in their states, and not just at a place like UHS, but these not-for-profit hospitals in their states could be detrimental. They're already talking about what needs to be done to make sure that programs aren't closing, shifts aren't taken, things like that. I fully expect that this is a floor that is a, well, it is what it is today, but I expect this will get better. We anticipate that there will be changes made because we think they have to be. While I think this is a worst-case scenario, again, I'll point out, he mentioned 2028, Steve did, and 2032. We're going to do a lot to make sure that we don't hit these numbers that we just talked about. I just wanted to give a little context and perspective to that. Great. Thanks so much. Then sort of a follow-up here looking at the behavioral. Can you sort of talk about the split between the hospital patient days and behavioral versus outpatient, sort of what you saw this quarter, what you assumed the back half of the year, and kind of how you're going to be improving the outpatient side of behavioral? Thanks so much. Yeah. In the table towards the back of the press release, we disclosed year-over-year growth in ADC. In the body of the press release, we disclosed adjusted patient days. Adjusted patient days have grown faster in the second quarter than unadjusted patient days, indicating that outpatient is growing faster than inpatient, which was not the case in Q1. We talked about that at some length in the first quarter. We talked about our focus on outpatient growth. I think as we think about getting closer to the 2.5%-3% adjusted patient day target that we've been talking about for some time, I think we believe that growth in outpatient is a significant opportunity for us. A number of the insurance companies, as they've been talking about their increase in Medical Loss Ratios, have pointed to the increase in spending on behavioral care. While they do not provide this level of detail, we believe that a significant chunk of that increase is in outpatient. We are determined to get a larger share of that, I'll call it outpatient pie, as we go forward. Focus on outpatient, and we've talked about this, I think, in our last couple of conference calls, is a significant focus of ours. Made some progress in Q2 and anticipate making further progress in the back half of the year and, quite frankly, years to come after that. Thank you. One moment for our next question. Our next question will be coming from [Andrew Mafa Barkley]. Your line is open, Andrew. Hi, good morning. Question on Cedar Hill. You called out $25 million of startup losses in the quarter. Can you update us on the latest accreditation status of that hospital? What's baked into guidance for the back half of the year, and how are you thinking about the ramp to mature profitability now? Thanks. Yeah. Again, I think our mistake when it comes to Cedar Hill was we were too optimistic about how quickly we'd obtain Medicare certification. Just as a little bit of background for people who may not fully understand, until a hospital gets what's called deemed status or some Medicare certification, they're not able to bill for or collect from Medicare. A number of commercial payers generally follow that, and honestly, usually Medicaid follows that. In the case of Cedar Hill specifically, we've already gotten the District of Columbia to agree to pay us back to when they deemed us to be ready for the Joint Commission survey, which results in Medicare certification. We have been getting paid for Medicaid, rather, but awaiting the Joint Commission survey, we believe it is imminent. Could occur this week, could hopefully occur next week. Once we get that certification, then that becomes the effective date that we're able to bill. It'll take us, obviously, some time to get the bills out and collect, but that becomes the effective date. The delicate balance that a facility goes through sort of in these early times is we're not necessarily trying to promote all the surgical, elective, procedural business that we might otherwise because we're not necessarily getting paid for it. Most of the activity at the facility right now is emergency room activity, which, as I think Marc noted in his comments, has been quite busy and encouraging that there is great demand for the hospital in this location. Once we get our certification, we'll begin to build up more surgical and procedural volume and round out services that are being offered by the hospital. We have a $25 million loss or EBITDA drag in Q2 embedded in our guidance, and the back half of the year is another $25 million drag for the back half of the year. Some improvement, but recognizing that there'll be a ramp up once we get our certification. I think the general sense is that by the time we get to 2026, the facility will be back on a course of ramping up to kind of divisional-wide profitability after 12 or 18 months of additional operations. Great. Maybe just a quick follow-up on that. Outside of the discrete items related to state-directed payments in Cedar Hill, the EBITDA guidance looks largely unchanged. One, do I have that right? Two, what are the offsetting positives allowing you to keep the underlying EBITDA intact despite the soft behavioral quarter? Thanks. Yeah. I think if you go through the math, there's roughly $185 million of new DPP revenues in that $1.2 billion that I alluded to earlier from our last disclosure, last quarter. Offsetting that is roughly $50 million in the Cedar Hill drag, the $25 million in the second quarter and the $25 million in the back half of the year. And then a bit more of a drag in terms of scaling back our behavioral projections for the back half of the year, largely because we are falling short of that volume target that was originally embedded in our guidance. I mean, those are basically the significant pieces of the guidance revision. Great. Thank you. One moment for our next question. Our next question will be coming from Jason Cassorla of Guggenheim. Your line is open. Great. Thanks. Good morning. Maybe just a piggyback on the outpatient behavioral commentary. I mean, you were talking about getting a bigger share of the outpatient pie. I guess, how would you see that unfolding? Is this more de novo build-out? You've got less than two times leverage ratio currently. You've talked about a number of de novo builds and JVs in your prepared remarks. I guess I'm just hoping you can give us any color on a pathway to grabbing more outpatient share. Thanks. Yeah. We've talked about this, I think, in some detail in the last couple of calls, but happy to sort of revisit the issue. Generally, we generate outpatient revenues in behavioral in two very broad ways. One is step-down business, we refer to as step-down business. These are patients who are inpatients in our facilities, but when they are discharged, they require further, less intense care, and will go into programs that we either describe as Intensive Outpatient or Partial Hospitalization. Often, those programs are offered by us on our campus, etc. As you might expect, we control or are able to refer many of those patients to our own programs, although many of them also leave and go elsewhere. We're focused on keeping as many of those patients in our programs, both because we think clinically that's most effective for them. There's a lot of continuity with our medical professionals, etc. That's something that we can do immediately and just do a better job of controlling that patient flow. The other aspect of outpatient revenue in behavioral is what we describe as step-in business. These are patients who enter the behavioral system in an outpatient program. Very often, it's a freestanding outpatient program, not located on the campus of an acute behavioral hospital. We have found that there is a large number of patients who are often not comfortable with their first sort of experience in behavioral care being on the campus of an acute behavioral hospital. We are establishing a larger footprint in freestanding behavioral hospitals that are located generally not on the campuses of our existing hospitals. Those hospitals, the capital investment in those outpatient facilities is not great. They're generally leased facilities in a storefront or that sort of setting. Maybe there's $1 million of capital on average in each of those. The bigger issue is just really staffing them with the therapists and creating a flow of patients. We intend to open 10-15 of those new outpatient facilities a year over the next several years and increase our presence both in the step-in business and do a better job in the step-down business. Okay. Got it. Thanks. Helpful. Maybe just as a follow-up, for the acute care business, can you talk about volume growth trends across payer cohorts in the quarter? What type of volume growth you saw for commercial, Medicare, Medicaid, exchange? If payer mix was a benefit in the quarter, would you expect that where your payer mix kind of came in this quarter, would you expect that to persist at least through the remainder of this year, or are there puts and takes there? Just any color would be helpful. Thanks. Yeah. What I would first say is that we said in our, or I said in our prepared remarks, that acute care revenue exclusive of our insurance subsidiary grew by 5.7% year-over-year in the second quarter. That's pretty much spot on with what our guidance presumed. We talked about 5-7% acute care revenue growth, so 6% at the midpoint. We're kind of running right there. I think without the cannibalization of our same-facility revenues that we're getting from West Henderson, we'd be right there, maybe in the low 6s. We're, I think, kind of right where we thought. In the second quarter, I think we were skewed a little bit more to pricing than to volume, but generally spot on. To your point, I think the pricing benefit in Q2 was a bit payer mix driven. As I think a number of our peers have commented as well, we saw a little bit less Medicaid volume and a little bit more commercial exchange volume in particular, and I think that drove somewhat more favorable pricing. Again, I'll make the point that we probably were a little less bullish about how some of the, we considered sort of extraordinary acute care revenue growth numbers that we and others have been putting up over the last several years, would start to moderate. I think that's been true in the first half of this year. In our minds, the acute business is sort of growing very much in line with our expectations. Okay. Great. Thank you. Thank you. Our next question will be coming from Benjamin Rossi of JP Morgan. Your line is open. Hey. Good morning. Thanks for taking the question here. Behavioral pricing continued to outperform during the quarter and growing just under 7% for the first half of the year versus your original growth range that you previously outlined in the 4%-5% range. Is there any way to frame the breakdown here between rates, acuity, and contribution from incremental supplemental payments? What does your back half guidance contemplate regarding growth as you progress towards your now revised goals on the volume side? In our prepared remarks, I said that, excluding the Tennessee impact, and we exclude Tennessee because I think that's an incremental benefit in the quarter, we don't exclude the other $43 million of DPP in the quarter because if you go back to the second quarter of last year, there was a $35 million unexpected benefit in the states of Washington and Idaho, and so those two, in our minds, offset. Excluding the Tennessee directed payment, we say that revenues increased by 5.4%. That's basically broken down between a 4.2% increase in pricing and a 1.2% increase in adjusted patient days. As you know, I mean, we said in our guidance that pricing we assumed would be in that 4%-5% range. We've generally been outpacing that. The second quarter moderated a little bit. I would say that 4%-5% is what we believe the sustainable pricing growth in behavioral is, at least for the intermediate term. The 1.2% volume growth is what we think, or where we think, is the opportunity to improve, particularly, again, on the outpatient side of things. Great. Appreciate the color. Just as a follow-up, taking a look at your average length of stay in acute, seeing that down both annually and on a sequential basis, could you just walk us through some of the drivers of that deceleration and maybe where you see room to bring that down further? Are you seeing any variation in length of stay trends across your payer classes between Medicaid, Medicare, and commercial, particularly among your exchange populations? Yeah. I mean, obviously, length of stay peaked during the pandemic when it was driven much higher by the high acuity of COVID patients in particular, and it's been coming down steadily since then. I think we believe that there still is some room for length of stay to be further reduced. I think probably the biggest challenge we have in reducing length of stay further is placement of patients into subacute facilities. That could be skilled nursing facilities, nursing homes, home health programs. Often, there is sort of a scarcity or a lack of availability in those programs. I don't know that it really varies by payer. I think sometimes it's an obstacle for us because the payers don't have all of the subacute providers in a geography in their networks, and that can be challenging. Yeah, I mean, I think we continue to believe that length of stay has some room. I'm not going to say material amount, but some incremental room to improve from where it currently is. Great. Appreciate the comments. Our next question will be coming from Craig Hettenbach of Morgan Stanley. Your line is open, Craig. Yes. Thank you. Just following up on behavioral, and I know there's been kind of back and forth with the payers on kind of price and access. I'm just curious on just a longer term basis, do you think some of that normalizes in terms of the contribution between volume and price, or how are you thinking about that? Yeah. I think what we've consistently said is that the way we think about the long-term model of the behavioral business is that 6%, 7%, 8%, I'll call 7% at the midpoint, is the reasonably expected revenue growth rate. That would be made up of 4%-5% price and 2.5%, 3% volume. We've generally been hitting those price targets, and frankly, in most periods, exceeding the price targets. It's the volume that has been the bugaboo for us. We've improved, as I said, from the first quarter and expect improvement in the back half of the year. Again, I'll call it that 6.5%, 7% revenue growth, skewed a little bit more to pricing than to volume as sort of being the model that we're expecting in the behavioral business for, I'll call it, the intermediate future. Got it. I appreciate all the color and detail on the One Big B eautiful Bill in terms of impact. When I think about potential offsets, how are you thinking about just kind of leveraging technology and AI? Kind of where are things today, and how could that kind of ramp as a potential offset in the coming years? Sure. I mean, obviously, it is always our goal to be as efficient and productive as possible and to the degree that technology, whether that's AI or other kinds of technology, can help us do that. We're certainly open to that. The AI discussion, I think, could be a whole separate discussion in a separate call. I'll just briefly say that we're experimenting with uses of AI in things like revenue cycle, where certain tasks like denial management and denial appeals, etc., we know that the payers for some time have been using AI to generate things like denials and patient status changes, etc. I think we're developing sort of countermeasures to that using AI more productively, etc., than I think humans can actually do that. From a clinical perspective, one of the early experiments we've done is using AI to follow up with patients on their post-discharge instructions. An AI-generated entity will call a patient and make sure that they've followed up with the appropriate doctor appointments and they filled their prescriptions and they're following their diet, whatever the post-discharge instructions are. We have found in the early stages that that's been very well received and efficient. Again, it frees up a clinical person, generally a nurse, who would otherwise be making that call. Yeah, I mean, I think that AI and technology tools in general are certainly one way that we envision becoming more productive over the next several years. Helpful. Thank you. One moment for our next question. Our next question will be coming from A.J. Rice of UBS. Your line is open, A.J. Thanks. Hi, everybody. Maybe a couple of questions. First, obviously, the managed care space has been quite disrupted the last few years and culminating this year. Just wondering if you see that impacting discussions with the MCOs at all on either Medicare Advantage, commercial, whatever. I'd ask that both from the behavioral perspective and the commercial perspective, where are you at? Is rate updates consistent? Terms that you're seeing being asked for. The percent of business getting done for this year, next year, and the following year? A.J., I mean, I think our experience has been. I think it's been alluded to in some previous questions. On the behavioral side, we've gotten pretty strong managed care increases over the last several years, largely, I think, because the payers are struggling with access to behavioral facilities. I think there's a scarcity, particularly of inpatient behavioral beds that payers are challenged by. Where I think we probably feel the impact of the managed care industry's challenges the most is in sort of the day-to-day revenue cycle interactions we have with payers. I don't know that we've seen an enormous increase in the level of denials or patient status changes. If you talk to anybody who works in our revenue cycle, in either behavioral or acute, they'll just describe to you what is sort of a daily slog of having to counter aggressive behavior on the part of payers all the time and denials and denial appeals and appeals of patient status changes, that sort of thing. We've invested, I think, a lot. We've had some pretty significant third-party consulting reviews of our revenue cycle practices to allow us to improve people, process, technology so that we're trying to be able to counter the payers in sort of the aggressive behavior we have found in those areas. I don't know that it's incrementally more materially different than it has been, but it's certainly been this way for some time now. Okay. Maybe just also ask you about labor. Any updated thoughts on both lines of business with respect to things like wage rates, use of contract labor, turnover, etc.? I know, particularly with behavioral, your biggest challenge you talk about in trying to get back to your or get to your growth targets there has seemed to be getting the staffing. Any update or thought on that? Yeah. I mean, I think from a labor or wage inflation perspective, obviously, wage inflation has decelerated significantly from its peaks during the pandemic. Maybe decelerated is not the right choice of words, but it is accelerating at a much lower rate than it had been during the height of the pandemic. I think we find that in both of our segments. I think we find the use of temporary and traveling nurses to be lower again in both segments. You are correct that we continue in the behavioral business in certain geographies, in certain markets, to be hampered, or for at least our volumes to be hampered, by our inability to hire all the staff that we need. It is often nurses, but sometimes that could be therapists. Therapists, I mentioned earlier, could be, or hiring the therapists could be, an obstacle to building out outpatient. It also can even be the nonprofessional people, the people we call mental health technicians. We have done a great deal in the last several years to improve our recruiting, but also, and I think almost probably more importantly, to recruit our retention, to make sure that when we hire people, they feel properly trained, we feel that they are properly trained to maximize the safety and quality of care to our patients, but also for them to feel comfortable in delivering that care. So that they are wanting to stay at the facility for longer periods of time, etc., and result in longer-tenured employees. We continue to invest in that. It remains a challenge. It is still a tight labor market. I do think while it is not the pervasive issue that it was at the height of the pandemic, staffing scarcity continues to be an issue in some markets and some geographies. Okay. Maybe just if I can squeeze one more in there. On your DPP comments, you had. I know a lot of states, or there are some states scrambling to still get credit under the One Big Beautiful Bill Act before the window shut. Washington, D.C., was a big one for you that was still pending. Any update there? With respect to your long-term impact of the Big Beautiful Bill, you said $380 million exposure, any way to break that down between acute and behavioral exposure? Yeah. So the $380 million is about, or the midpoint of the range that we gave, which is $380 million, is about 60% behavioral and 40% acute. As far as your other question about other programs, the D.C. program has been pending approval for a number of months now. We do not necessarily have any inside information. We do get sort of periodic updates from the district itself, or the district provides it to the hospital association, and we get through them. They say they continue to have ongoing conversations with CMS, which I think is fairly typical, meaning CMS asks them questions, asks for data, they provide it. They sometimes reach out to us, the hospitals, for help in providing that data. We have provided data. The district continues to believe that the program that they have submitted meets the criteria of CMS in other programs that have been previously approved, and they continue to expect the program to be approved, although they do not really estimate a timeframe. There are other states that we understand have either submitted preprints or intend to. I think it is worth noting that the bill does not preclude new programs. It just suggests that any new programs after the passage of the bill are subject to the caps in the bill, whether they are the provider tax caps or the reimbursement caps. It is entirely possible that there are states who can still submit new programs even now that the bill has been passed. Okay. All right. Thanks so much. Our next question will be coming from Matthew Gillmor of KeyBanc. Your line is open, Matthew. Hey, thanks. Steve, you made a comment about West Henderson cannibalizing some of the same-store growth on the acute side. Are you able to quantify what that impact would be or just give us some sense for the drag on the same-store? Yeah. Hard to do in an absolutely precise way, Matthew. But I think the way we look at it is we look at the zip codes that West Henderson is getting patients from and sort of try and triangulate and say, "These are the likely zip codes that prior to West Henderson opening would have gone to either Henderson Hospital or one of our other hospitals." We think that that impact is maybe 50-60 basis points from an Adjusted Admission perspective and kind of a similar impact on revenues. Again, best guess, that's not a perfect or completely precise estimate, but that's our best guess. Following up on some of the expense management discussion, I wanted to see if there was anything to report with respect to professional fees and physician expenses. I think you had most recently said that you were expecting that to be up 5%, and it was stable. Just curious if there's any progress there or sort of incremental pressures with certain specialties. Yeah. I mean, I think that as you described it, in our guidance, we assume that after fairly dramatic increases in those physician expenses in the last couple of years, that our assumption in 2025 was that they would increase by roughly the overall inflation rate, 5% or 6%, something like that. I think that's been the case. We continue to feel pressure from different physician groups around the country. I think a number of our peers have suggested that after the initial pressures over the last several years have come from doctors and anesthesiologists, more recently, we're seeing more radiologists asking for increased subsidies, something that, quite frankly, we hadn't seen in years. We've seen that same dynamic, although we've been able to continue to operate within that sort of 5% growth dynamic. It has not really changed. Got it. Thank you. Our next question will be coming from Sarah James of Cantor Fitzgerald. Sarah, your line is open. Thank you. You've talked a lot about the opportunity for growth in outpatient behavioral. Given what that implies for mix, is 2.5%-3% Adjusted Admission for behavioral volume still the right long-term target or the right target for 2025, given year-to-date performance? Can you speak to how inpatient behavioral specifically has been doing year-to-date versus your expectations? Yeah. I mean, so I think. Obviously. What we're seeing, I think, in behavioral is payers trying to shift more patients from the inpatient setting to the outpatient setting. Obviously, that's a dynamic that we've—it's certainly not new. We've seen it in the acute space for a decade or two already. It's not new to the behavioral space either, but I think there's more of an emphasis on it. To be fair, I think our business has been an inpatient-centric business for most of its history. We have always had an outpatient presence, but I don't know that our focus has been as intense as it is currently, in part to take advantage of that shift. I think that one of the reasons why it has been difficult for us to reach that 2.5%-3% target that has been elusive, and we certainly acknowledge it's been elusive, is that there's been a shift to outpatient, and we've been not necessarily capturing what I would describe as our fair share of that outpatient business. Our focus has clearly changed. Like I said, we've seen sequential improvement from Q1 to Q2, both in overall adjusted patient days, but specifically in outpatient. I think we believe we'll continue to see improvement over the balance of the year and do believe that over the long term, that 2.5%-3% adjusted patient day growth target is a reasonable target for this business, that the demand is there. We just have to be able to service it in the right setting with the right staff, etc. Thank you. Our next question will be coming from Ryan Langston of TD Cowen. Your line is open, Ryan. Great. Thanks. Appreciate your commentary on the West Henderson Hospital, but maybe can you just more broadly give us an update on how Nevada and the Las Vegas markets are doing in terms of volume trends, payer mix, any other data you're able to share? Yeah. I mean, I think we've seen a little bit of slowdown in our Nevada volumes. There's been, I think, a great deal written in recent months about the overall Nevada economy and the Las Vegas economy slowing down a bit. We're seeing some impact from that. As I said, even if you exclude the cannibalization from West Henderson or just exclude West Henderson's volumes, our overall volumes are up slightly, not by a great deal. Yeah, I mean, Vegas's performance, while still very solid and while West Henderson's performance is extremely positive, we are seeing a little bit of pressure from some of the economic softness in the market. Okay. Great. Just one follow-up. Net leverage continues to come down even with the increases, at least year- over- year, in share repos and capital spending. I guess, can you remind us how we should think about capital deployment strategy and if we should maybe just expect this to continue to come down through the back half of the year? Thanks. Yeah. In our initial 2025 guidance, we guided to a share repurchase number in the $600 million-$700 million range. That was really the free cash flow that we were anticipating in that original guidance. Obviously, the revised guidance presumes a higher level of free cash flow, and I think it's reasonable to assume that that incremental free cash flow will likely be dedicated to an elevated level of share repurchase. It's possible that, as we evaluate what we think to be a pretty compelling share price at the moment, we'll decide to be even more aggressive from a share repurchase perspective. Again, at a minimum, I think it's at least safe to assume that as our free cash flow increases, that incremental amount will be dedicated to additional share repurchase. Thank you. One moment for our next question. Our next question comes from Michael Ha of Baird. Your line is open, Mike. Thank you. Sort of a follow-up to Pito's question. It sounds like you're very confident in finding the offsets to the DPP headwinds after 2032. I just wanted to fully clearly confirm that we should be thinking about behavioral health, long-term margin targets as unchanged. All that recent strength in behavioral margin pricing should remain resilient and durable even in the face of this gradual headwind. Basically, do you still believe over time you can get back to those sort of high 20s margins from a decade ago? I know there's no immediate rush, but curious if you have any early sense on timeline when you'll look to have the mitigation plan with all the offset leverage fully flushed out. Yeah. I mean, obviously, Michael, I think people are asking very specific questions about a period that doesn't begin for three years and doesn't end until eight years from now. Difficult to project. I think what we've tried to express in our commentary is that, particularly on the behavioral side, which is really, I think, the thrust of your question, we do have the ability to shift programming and to shift sort of targeted patient programs in certain places and certain geographies where maybe we're seeing the DPP impacts the greatest. But we have plenty of time to do that. And frankly, one of the challenges we have is to do the timing right. In other words, we're not seeing those reductions for several years. It doesn't make sense for us to all of a sudden exit Medicaid-centric programs when Medicaid reimbursement over the next several years will remain at current levels. We're going to have to time that out right, etc. Yeah, I mean, I think what we tried to express, and I think what our peers have tried to express, is that I think as for-profit providers especially, we have proven in a number of instances, I think most recently with the challenges of the pandemic, to be quite nimble and flexible and willing and able to adjust our business for some pretty significant challenges. We're confident with the time period that we have to prepare, that we'll be able to do that in this case as well. Got it. Thank you. Just a follow-up question. Sorry, another policy one. As it relates to work requirements in 2027, just given the outsized procedural disenrollment that we've seen from redeterminations. With work requirements, I know MCOs are very focused on it, but from a provider perspective, if lives were to drop off and they're ineligible for subsidized marketplace coverage that prevents an offsetting catch asmit, to the extent that actually ends up driving up the uninsured and provider bad debt over the coming years, I'm just curious high level how you're thinking about the potential ripple effects of Medicaid work requirements onto UHS. Are there any things that you guys can do as a provider to maybe even help sort of bridge that gap, proactively engage your own Medicaid patients to sort of improve member retention? Thank you. Yeah. So, again, I don't know that there's lots of different estimates about how many patients might be removed from the Medicaid rolls as a result of work requirements and, quite frankly, who those patients are. Obviously, the bill and the narrative around the bill was that they were largely eliminating young, healthy, particularly male patients. If that's really the group that—and I'm not enough of a Medicaid expert to speak to this fluently—but if that's really the group being eliminated, I don't know that that's a group that has utilized our services in great numbers. To be fair, on the acute side, most of our Medicaid business comes through the emergency rooms as most of our uninsured business does. There's not a great deal we can do. I mean, there are ways that we can effectively manage that business or manage that business more effectively, and we'll certainly focus on that. For the most part, we have to take the patients that come to us. Again, I'll make the point that on the behavioral side, we have more optionality in the patients that we're able to take. If patients generally don't have insurance, they usually find their way to other settings rather than our hospitals. You can just tell that from our uncompensated care load in the behavioral segment, which is dramatically less than it is in the acute segment. In terms of referral sources, in terms of the programs that we stress, etc., we have the ability to be flexible in terms of targeting patient groups, etc., that are more preferable from our perspective. Certainly, we'll do that as this plays out. As we look at it on a forward-looking basis, it's difficult to predict with precision how many of these patients there are going to be and what the characteristics of that patient population is going to look like. Okay. Our next question will be coming from Kevin Fischbeck of Bank of America. Kevin, your line is open. Great. Thanks. I just want to try to get a little more color on the weakness in the behavioral business. Because it sounds like you're saying you're not getting your fair share. Is there competition out there? Is that what's driving the weakness in volumes, or is it still more of the staffing and other issues that have historically kind of been the issue there? Yeah. What I tried to say earlier, Kevin, is in terms of the step-down patients, the patients that we discharge, we do capture a good share of those. There are still a good number of those patients who go elsewhere. We probably can be more effective in the control of those patients. In large part because I think we believe that the care they'll receive and the continuity of care that they'll receive at our facility is greater than they will elsewhere. Yeah, I mean, on what we describe as the step-in business, more of the freestanding business, yes, there are a lot of other entities out there of all sorts, large, small, etc., that offer those services. We just have not historically really competed aggressively in that space. We'll do so more in the future. We do have advantages. We have relationships with payers. We have relationships with referral sources, long-standing relationships that some of these newer and smaller providers just don't have. Staffing and therapists are an issue as well in these settings. A lot of therapists have been working more remotely in more recent years, etc., and competition for therapists is also intense. There's not a single reason that I think our outpatient has not grown as much as we think it should. I think most importantly, our focus on this is going to enable us to grow at a faster pace in the coming periods than we have in the last few periods. Yeah. I guess maybe if you could just expand on that because I guess staffing and things are things that you kind of should have had, I guess, had a view on as to where you would be at this point this year. If we think about the guidance reduction itself and kind of what you thought coming into the year and now what you think volumes will look like. Is it that it has incrementally been harder to staff or something's gone on there, or has it been the competition? Or maybe slower progress in some of the initiatives that you were thinking about doing? To that and whatever the answer is, what, if anything, are you doing differently for 2026 to try and get that back to two to three? Thanks. Sure. I feel like it's a little bit redundant. I think we've addressed this. Yeah, I think it's all those things. I think we're building and creating more capacity, which we didn't have. That's new capacity. We're focused on our sort of discharge and referral processes for patients who are being discharged from our facilities. We're trying to focus more on recruitment and retention effectiveness, doing all those things that are challenging, but did improve quarter over quarter, and we expect will improve further in the back half of the year. All right. Thanks. Our next question will be coming from Joshua Raskin of Nephron Research. Your line is open. Hi. Thanks. I know you talked about this a little bit, Steve, but I'm just curious on the sort of AI and the technology that you're using on the RCM side. Are those internal investments, or are you using external vendors more often now? Is that impacting sort of the coding and patient acuity, sort of like the—is that why we're seeing it on the pricing or the revenue per admit side? Yeah. I think it's a combination, Josh. I mean, we've publicly disclosed our investment in Hippocratic AI, which is a company dedicated to the development of AI applications in healthcare. We also have relied on some vendors you talked about. Coding, we've used AI. An AI vendor or a vendor that uses AI technology for coding in our emergency rooms. I don't know that that's resulted in necessarily increased or elevated coding, but I think it's resulted in increased efficiency. Taking a relatively routine task and allowing it to be taken care of in a more efficient way. It's a combination. I think we've used some outside vendors. We're also investing and working closely with a company that's developing new AI technology. We're doing some things on our own. I think it's a combination of us trying to take advantage. Quite frankly, some of the technology and some of the new technologies—and we've talked about this, I think, a little bit before—like patient rounding technology, which is not necessarily AI, but is sort of like an Apple Watch kind of technology where patients wear that sort of device and we're able to track them and their location more closely and how often they're checked on and those sort of things. All those things, I think, result in greater efficiency and also, honestly, greater patient safety and quality of care. Yeah. Perfect. And then just last quick one. I know we talked about this last quarter as well, but tariffs, any updated thoughts on potential impact from tariffs? Not really. We haven't seen any sort of material impact from tariffs and have not necessarily sort of been told by our GPO or even by any significant vendors that significant increases in supply expense are on the horizon. Obviously, the tariff negotiations at the highest levels continue, and we'll have to see how that all sorts out. It has had little impact on our business to date. Thank you. Operator, we're going to have to make this our last question. We have another commitment at the top of the hour. Certainly. Our last question will be coming from Raj Kumar of Stephens. Your line is open, Raj. Hey, thanks. Excuse me. Just one from the policy perspective, just kind of thinking about the proposed elimination of the inpatient- only list. Maybe kind of walk us through the puts and takes for UHS and then kind of maybe what your view is on the potential impacts from an inpatient admissions growth perspective and overall rate growth perspective over the next few years as that policy gets potentially phased in. Yeah. It's difficult to say. I mean, I think what you're referring to is sort of a number of the site neutrality proposals, and they differ. The devil is always in the details. The industry broadly, [audio distortion] is lobbying hard and making the point that it's been subject to some pretty significant cuts, many of which we've already discussed at some length. We'll see. I mean, I think it's difficult for us to sort of project what the impact is until we know what the details of a specific bill would be. All right. Thank you. I'd like to thank everybody for their time, and I look forward to speaking with everybody again next quarter. Okay. This concludes today's conference call. Thank you for participating. You may now disconnect.