Tenet Health(THC) - 2023 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - In Q3 2023, the company generated net operating revenues of $5.1 billion and consolidated adjusted EBITDA of$ 854 million, resulting in an attractive margin of almost 17% [6][28] - Adjusted EBITDA for USPI grew 16% compared to Q3 2022, with adjusted EBITDA margins remaining strong at 39.3% [29][30] - Consolidated SW&B costs as a percentage of revenue were 45.2%, down from 46.4% in Q3 2022 [37] Business Line Data and Key Metrics Changes - USPI reported $370 million of adjusted EBITDA, a 16% increase year-over-year, with same-facility revenues growing by 7.9% [7][29] - The Hospital segment generated$ 401 million of adjusted EBITDA, with revenue per adjusted admission increasing by 3.2% compared to Q3 2022 [11] - Conifer's third-quarter adjusted EBITDA was $83 million, with a strong margin of 26.3% [39] Market Data and Key Metrics Changes - Same-store inpatient admissions increased by 4.5% on a non-COVID basis, while same-hospital inpatient admissions rose by 0.6% compared to the previous year [36] - Year-to-date, non-COVID admissions are up 7.6% over last year [36] Company Strategy and Development Direction - The company remains focused on attracting high-quality physicians and expanding its portfolio, adding six new centers during the quarter, primarily in higher-acuity orthopedic services [9][10] - The strategic focus is on higher-acuity services, which are expected to provide better margins and stronger cost management capabilities [38] - The company is committed to scaling its USPI business and has a robust acquisition pipeline with attractive opportunities [9][10] Management's Comments on Operating Environment and Future Outlook - Management raised the full-year 2023 adjusted EBITDA guidance to a range of$ 3.365 billion to $3.465 billion, reflecting strong performance [25] - The company anticipates some increases in costs due to rising patient demand but remains disciplined in managing contract labor and overall expenses [15][17] - Management expressed confidence in the ongoing recovery of healthcare services and the ability to deliver on increased guidance for 2023 [48] Other Important Information - The company has over$ 1 billion in cash on hand and no significant debt maturities until 2026, providing financial flexibility [32][27] - The company has successfully settled over 30 labor union contract negotiations in the past two years, balancing employee needs with cost structure [18] Q&A Session Summary Question: Clarification on earnings growth for 2024 - Management confirmed that they are assuming EBITDA growth in 2024 compared to 2023, despite headwinds from reduced government funding and new regulations [52][54] Question: ASC segment growth and pricing - Management noted that while there may be moderation in growth rates, the ASC segment continues to perform well above long-term projections [55] Question: Revised guidance and fourth-quarter performance - Management indicated that they are not seeing anything different in Q4 performance at this stage, but are cautious due to potential COVID spikes [60][62] Question: Managed care contracting for 2024 and 2025 - Management expects mid-single-digit commercial rate increases, reflecting the current inflationary environment [87] Question: Labor environment and minimum wage impacts - Management acknowledged the challenges posed by the California minimum wage increase but believes it will be manageable [91] Question: Capacity additions and growth opportunities - Management stated that they have maintained or slightly increased capacity this year, focusing on high-demand service lines [95] Question: Professional fee expenses for 2023 - Medical fee costs are up around 15% compared to last year, consistent with expectations [106] Question: Growth in USPI specialties - Management reported that hips and knees surgeries grew in the mid-teens year-over-year, with strong performance in other specialties like GI and ENT [110]