Financial Data and Key Metrics Changes - Net operating revenues were $3.1 billion, representing a 6.2% year-over-year growth on a consolidated basis [51] - Adjusted EBITDA was $373 million, with an adjusted EBITDA margin of 12% [14] - Cash flows from operations were $86 million compared to $53 million in the second quarter of 2022 [15] - Contract labor expense decreased 15% sequentially to $74 million in the second quarter of 2023, down from $190 million in the first quarter of 2022 [28] Business Line Data and Key Metrics Changes - Same-store admissions increased by 4.8% and adjusted admissions increased by 4.9% year-over-year [24] - Same-store surgeries increased by 6.2%, with strength across various specialties [24] - Physician recruitment was up 13.1% compared to last year, marking the best recruitment year in the past five years [11] Market Data and Key Metrics Changes - The company has added nearly 200 beds in key health systems over the past 18 months [3] - The average hourly wage rate increased only 2.8% compared to the prior year and was down 0.6% sequentially [28] - The payer mix improved, contributing to better revenue per adjusted admission [43][122] Company Strategy and Development Direction - The company announced the planned divestiture of Bravera Health to focus resources on markets with greater growth potential [7] - Project Empower was launched as a strategic initiative to modernize and standardize business functions, expected to yield significant cost savings and operational efficiencies [10][55] - The company aims to achieve mid-teen EBITDA margins through various initiatives, including Project Empower and capital investments in high-acuity services [73][107] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about increasing demand for healthcare services due to investments in key markets and strong physician recruitment [20] - The company expects further improvement in free cash flow performance and anticipates a strong cash flow period in the fourth quarter [29] - Management acknowledged challenges in the managed care contracting environment, including increased scrutiny and denials from payers [101] Other Important Information - The company plans to use proceeds from divestitures primarily to pay down debt, freeing up capital for higher return uses in core strategic markets [54] - The net debt to trailing EBITDA ratio was 7.7x at quarter end, with $118 million of cash and equivalents on hand [54] Q&A Session Summary Question: What is the outlook for contract labor utilization? - The company expects a 40% to 50% decrease year-over-year in contract labor, with $74 million in the current quarter down from $150 million last year [34] Question: How is the transition with American Physician Partners impacting operations? - The transition is going well, with no disruption to operations, and the company is confident in managing the in-sourced providers effectively [38] Question: What is the company's positioning regarding public exchanges? - The company saw about a 100 basis point improvement in average rates and expects this trend to continue into 2024 [43] Question: How does the company view margin improvement potential? - The company believes there is potential for margin improvement through various initiatives, including Project Empower and operational efficiencies [44][107] Question: What impact will divestitures have on revenue and EBITDA? - The divestiture of Bravera Health is expected to close in the fourth quarter and will not have a material impact on 2023 results [64]
munity Health Systems(CYH) - 2023 Q2 - Earnings Call Transcript