Financial Data and Key Metrics Changes - In Q2 2025, revenue increased by 11.9% to $1.65 billion, driven by adjusted admissions growth of 1.6% and net patient service revenue per adjusted admission growth of 10.2% [21] - Adjusted EBITDA grew 39% year over year to $170 million, with an adjusted EBITDA margin increase of 200 basis points to 10.3% [21] - Year-to-date adjusted EBITDA grew 23%, with margins expanding by 100 basis points compared to the prior year period [21] - Operating cash flow for Q2 was $117 million, with total cash at $541 million and total debt outstanding at $1.1 billion, resulting in a net leverage ratio of 2.7 times, improved from 3.0 times at the end of Q1 [22] Business Line Data and Key Metrics Changes - Admissions growth was strong at 6.6% year over year, with inpatient surgeries increasing by 9.2% in Q2, while outpatient surgeries declined by 3.8% [21][22] - Exchange admissions grew approximately 35% year over year, while commercial admissions (excluding exchange plans) and Medicaid admissions both increased by approximately 8% [21] Market Data and Key Metrics Changes - The company operates in eight growing mid-sized markets, which continue to drive demand due to an aging and increasingly complex patient population [5] - The company has seen nearly 40% growth in exchange admissions in 2025, although reimbursement rates for this population are less favorable compared to commercial rates [14] Company Strategy and Development Direction - The company is focused on expanding its outpatient services, with plans to open five urgent care centers and two imaging centers in 2025, complementing the 18 urgent care centers acquired earlier this year [9] - The IMPACT program aims to improve margins, performance, agility, and care transformation, with a focus on cost efficiency and operational agility [17][24] - The company is well-positioned to pursue strategic growth opportunities, particularly through joint ventures with academic partners in the acute care space [23] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in sustaining strong performance despite ongoing industry-wide payer denial headwinds, with a focus on operational workflow initiatives and strategic growth priorities [18][27] - The regulatory environment is being closely monitored, particularly regarding the Big Beautiful Bill (OBBA) and its potential impact on Medicaid funding [12][13] - Management anticipates a de minimis impact to earnings in 2026 and 2027, with the majority of financial effects occurring between 2028 and 2035 [14] Other Important Information - The company has reaffirmed its full-year 2025 financial guidance, indicating confidence in meeting its targets [18][25] - The company is now S-3 eligible following its one-year anniversary as a public company, allowing for potential capital raising opportunities in the future [25][26] Q&A Session Summary Question: Can you provide an update on managed care and the impact of terminated exchange contracts? - Management noted significant growth in exchange volume but mentioned that some plans were yielding poor rates, leading to the termination of one large plan [34] - Denial rates have increased, but the company remains focused on optimizing payer contracts to ensure appropriate compensation [35][36] Question: What is the outlook for the ambulatory strategy and its volume benefits? - The company is focused on growing the number of unique patients served in each market, with a current average of close to ten ambulatory access points per hospital [40] - Approximately 45% of patients from newly acquired urgent care centers were new to the company, indicating strong potential for follow-up care and additional services [42] Question: How is inpatient surgical growth performing and what categories are driving this? - Inpatient surgeries have been strong, particularly in orthopedics and cardiology, aligning with the company's service line rationalization strategy [47] Question: What are the expectations for capital expenditures moving forward? - The company expects capital expenditures to trend at or above 4% of revenues, with a focus on investing in ambulatory build-out [93] Question: How does the company view the impact of the recent Medicare OPPS and ASC rule changes? - Management believes that the shift from inpatient to outpatient care has been ongoing and does not expect a significant influx of patients moving from inpatient to outpatient settings due to clinical acuity needs [99] Question: Can you provide details on the Medicaid supplemental programs and their future? - Management expressed confidence that approved programs in New Mexico and Oklahoma will qualify for grandfathering provisions under the OBBA, ensuring their durability [90][91]