New Gold Q1 2023 Earnings Call Transcript

There are 16 speakers on the call.

Operator

Welcome to the HCA Healthcare First Quarter 2023 Earnings Conference Call. Today's call is being recorded. At this time, for opening remarks and introductions, I would like to turn the call over to Vice President of Investor Relations, Mr. Frank Morgan. Please go ahead, sir.

Speaker 1

Good morning, and welcome to everyone on today's call. With me this morning is our CEO, Sam Hazen and CFO, Bill Rutherford. Sam and Bill will provide some prepared remarks, and then we will take questions. Before I turn the call over to Sam, Let me remind everyone that should today's call contain any forward looking statements, they are based on management's current expectations. Numerous risks and uncertainties and other factors may cause actual results to differ materially from those that might be expressed today.

Speaker 1

More information on forward looking statements and these factors are listed in today's press release and in our various SEC filings. On this morning's call, we may reference measures such as adjusted EBITDA, which is a non GAAP financial measure, a table providing supplemental information On adjusted EBITDA and reconciling net income attributable to HCA Healthcare, Inc. Is included in today's press release. This morning's call is being recorded and a replay of the call will be available later today. With that, I'll now turn the call over to Sam.

Speaker 1

Thank you, Frank, and good morning. Thank you for joining our call. The operational momentum we had at the end of

Speaker 2

the last year continued into the Q1 of 2023. The company produced solid earnings that reflected strong demand for our services and improvements in our operating costs, In particular, contract labor expenses. For the quarter, diluted earnings per share, excluding losses on sales of facilities, Grew by almost 20% to $4.93 Adjusted EBITDA grew close to 8%. Same facility volumes across the company were strong in the Q1. Admissions grew 4.4% year over year.

Speaker 2

Non COVID admissions were up 12%. Our inpatient business continued to be supported by strong acuity and a favorable payer mix. Inpatient surgeries increased 3.6%. Same facility equivalent admissions increased 7.5%. This was driven by emergency room visits, which grew 10% and outpatient surgeries, which grew 5%.

Speaker 2

Other outpatient categories also grew, including outpatient cardiology procedures, which increased 7%. The demand increase was broad based across most of the company's footprint and service lines, contributing the same facility revenue growth of 5% as compared to the prior year. With respect to our people agenda, we saw continued improvements across virtually all metrics. The improvement in turnover rates accelerated from the 4th quarter and we ended the quarter close to pre pandemic levels. Registered Nurse hiring also improved in the quarter.

Speaker 2

Hiring increased almost 19% compared to the previous 4 quarter average. These positive results helped reduce contract labor costs 21% compared to last year. We continue to invest in our people through compensation programs, increased training and innovative care models. We believe these programs advanced our capabilities to provide high quality care to our patients. Once Again, our colleagues demonstrated a remarkable ability to adapt and deliver value across all stakeholder groups.

Speaker 2

I want to thank them for their dedication, their hard work and their overall effectiveness. During the quarter, we continued to experience periodic Capacity constraints that prevented us from fully operating our capacity as compared to the 4th quarter, Instances where we could not accept patients from other hospitals declined 25% and represented 1.5% of Total admissions in the quarter, which was down from 2% in the 4th quarter. While we are pleased with this improved trend, It still remains above pre pandemic levels. I'll close with this, we remain encouraged by the backdrop of strong demand That we saw in our markets. We intend to maintain our disciplined approach to executing our strategic and capital allocation plans as we push through the rest of this year.

Speaker 2

And lastly, we believe the investments we are making in our network, our people and our technology Will provide us with the necessary resources to improve our services and provide high quality care to our patients. Given the strong results in the quarter and the favorable factors we expect with demand, you will see that we have increased our guidance for the year. With that, I'll turn the call to Bill for more details.

Speaker 3

Great. Thank you, Sam, and good morning, everyone. I will provide some additional comments on our performance for the quarter. Adjusted EBITDA for the quarter was $3,170,000,000 as compared to $2,940,000,000 in the prior year. As noted in our release, in the Q1 of this year, we recorded an increase in revenues of 145,000,000 related to resolving certain disputed claims with a commercial payer that covered a 6 year period.

Speaker 3

In the prior year quarter, we recorded an additional $244,000,000 of revenues $90,000,000 of expenses That related to the Texas Directed Payment Program for an earlier period. I will also note as it relates to prior year comparisons, We still were experiencing high level of COVID volumes in the Q1 of 2022. COVID admissions accounted for 9 point 7% of admissions last year compared to about 3% this year. In addition, In the prior year quarter, we recognized approximately $190,000,000 of COVID related support payments Versus about $30,000,000 in this year's Q1. Sam highlighted our positive volume metrics in the quarter And this was coupled with good payer mix and case mix trends.

Speaker 3

Same facility managed care and other admissions grew 4.2% During the quarter when compared to the prior year and non COVID managed care admissions that grew 11.3% versus the prior year. Non COVID case mix improved just under 1% as compared to both prior year and sequentially from the 4th quarter. This contributed to our non COVID inpatient revenue per admission increasing 2.2% as compared to the Q1 of last year. We remain pleased with our team's management of operating costs Even with the backdrop of higher inflation, our consolidated adjusted EBITDA margin was 20.3% in the quarter. Labor costs as a percentage of revenue improved both sequentially and when compared to the prior year, and our supply costs continue to trend favorably as well.

Speaker 3

We have discussed previously other operating expenses have been subject to some inflationary cost pressures and increased approximately 20 basis points as a percentage of revenue when compared to the prior year. So let me speak to some cash flow and capital allocation metrics as they remain a key part of our long term growth and value creation strategies. Our cash flow from operations increased $458,000,000 in the quarter from $1,350,000,000 in the prior year to $1,800,000,000 this year. Capital spending was just under $1,200,000,000 We paid $175,000,000 in dividends and repurchased just Under $850,000,000 of our stock during the quarter. Our debt to adjusted EBITDA leverage ratio remains near the low end of our stated leverage range of 3 to 4 times.

Speaker 3

As noted in our release this morning, we are updating our full year 2023 guidance as follows. We expect revenues to range between $62,500,000,000 $64,500,000,000 We expect net income attributable to HCA Healthcare to range between $4,750,000,000 $5,160,000,000

Speaker 4

We

Speaker 3

And lastly, we expect capital spending to approximate $4,600,000,000 during the year. I will mention that our updated capital spending guidance is based on opportunities We believe exists to continue to invest growth agenda and then also consider some land acquisitions we are planning for future development. In addition, we are seeing some inflationary increases in construction costs that we have factored into our guidance as well. Finally, I will mention in early April, we closed on a transaction to increase our ownership interest in the Velasco joint venture with Envision. We will consolidate this venture beginning in the second quarter and expect that you will generate approximately $1,000,000,000 of annual revenues with no material impact to adjusted EBITDA.

Speaker 3

So with that, I'll turn the call over to Frank and we'll open it up for Q and A. We look forward to your questions.

Speaker 1

Thank you, Bill.

Operator

And your first question comes from the line of A. J. Rice from Credit Suisse. Your line is open.

Speaker 5

Hi, everybody. Maybe, obviously, there's a lot of positive trends this quarter, both on the volume side as well as what you're seeing, particularly Spences with labor. When you sit here and look at the rest of the year, I know you updated guidance and updated it a little further than just the beat in the quarter. What are the variables that you see could swing either more positive or negative? Are there Open questions with respect to how labor trends the rest of the year, how volume trends the rest of the year or maybe some other metric that I'm not highlighting That you see as putting you at different points within the range or offering variability.

Speaker 5

Can you maybe flesh that out a little further?

Speaker 3

Yes. A. J, this is Bill. I'll start and then Sam can add in. I think as we said in our comments, we believe there's momentum That we're seeing in the market, we saw that late 2022, but we were fortunate that continued into the Q1.

Speaker 3

We continue to see good volume expectations in the market. You saw our same store admissions, our non COVID volume was pretty robust. Emergency room Activity remains busy. So we feel reasonably positive on our volume outlook that we've given. Our revenue per unit, we're pleased with.

Speaker 3

We're pleased with the payer mix trends and the acuity and case mix. They're stable and maintaining the levels that we And then on the cost side, we believe the teams have managed cost very well. We knew that labor improved throughout 22. Obviously, Q1 of last year was a high mark high watermark for us in labor. So we're pleased with where it is today.

Speaker 3

We hope there's continued improvement to be made, especially around the utilization of contract labor. And so generally, we're feeling pretty good about the cost metrics. There are some Inflationary cost trends we're seeing, as I mentioned, in other operating that tends to show itself around our professional fees and some of those Fixed cost items that we don't have as much input over. But generally speaking, we think our revised guidance and our outlook reflects our

Operator

And your next question comes from the line of Whit Mayo from SVB Securities. Your line

Speaker 2

is open. Hey, thanks.

Speaker 6

I was just wondering if you guys could unpack some of the growth that you're seeing in outpatient Surgeries between the ASCs and HOPD and maybe comment on any particular pockets of strength or weakness across some of those surgical service lines. And it's Kind of a corollary to this question too is just the supply cost look very good even with the surgical growth. So if you could maybe elaborate on that dynamic, Bill, that would be helpful. Thanks.

Speaker 2

Whit, this is Sam. Thank you for the question. We had strong activity In both settings, our surgical volumes in our hospital outpatient units were up actually slightly more than what was Inside of our ambulatory surgery centers, across all service categories within both Settings, we saw really solid volume growth. So it was broad based, as I mentioned in my comments. We continue to invest in both.

Speaker 2

We have a more significant investment in our ambulatory surgery center development pipeline with a number of New developments as well as some possible acquisitions that are complementary to the networks that we have across the company. We're really pleased with our surgical activity. We're also very pleased with our inpatient surgical activity as we've seen growth in both Our emergency surgeries as a result of our emergency room activity as well as elective surgeries across different disciplines. The only category that was down Actually, our C sections where we didn't have as much obstetric volume as we did in other parts of our business. And so if you normalize for that dynamic, we were actually up more significantly in the more acute categories of our service lines.

Speaker 2

So a very solid result for us from a surgical volume standpoint. Our supply costs have continued to perform Incredibly well. We have a great supply chain capability in our company and we utilize it to leverage best practices, Contracting, logistics, inventory management and so forth, and we continue to maintain even with

Operator

And your next question comes from the line of Justin Lake from Wolfe Research. Your line is open.

Speaker 4

Thanks. Good morning. I wanted to follow-up on the labor side. I think you said temp labor costs were down 21% Can you confirm that for me? And then just give us a little color in terms of the percentage of hours, Nursing hours that came from temp labor, temp labor as a percentage of SW or temp labor as a percentage of SWD dollars And anything else kind of in terms of trends that you're expecting in temp labor through the year That's implied in guidance.

Speaker 4

Where do you expect to come out of the year on some of those metrics? Thanks.

Speaker 3

Yes. Thanks, Justin. This is Bill. So yes, I'll confirm our contract labor was And again, we're continuing to be pleased with the trends in there. It's really rooted in Our recruitment is up and turnover is down, so a lot of effort in that front.

Speaker 3

For the quarter, our contract labor was about 7.1% of our SWB. WB, that compares to about 9.5% last year, and we were running mid-7s through the last half of twenty twenty two. So good trends. As contract labor as a percent of hours was about 10.3%, We're at this time last year, we were 11.5%, almost 11.6%. So again, continued improvement in that area, really just rooted by A lot of efforts we have in the recruitment and retention.

Speaker 3

As we go through the year, we hope we'll continue to see favorable trends in that, Hoping we can get in that 6.5% to 7% by the time we finish this year. So a lot of effort continues by the teams to focus on that.

Operator

Your next question comes from the line of Ben Hendricks from RBC Capital Markets. Your line is open.

Speaker 7

Thank you. Could you comment a little further on the same facility revenue per admission and equivalent admission comps? It looks like maybe Lower year over year rates in the outpatient volume offset inpatient rate growth. Perhaps you could flesh out the dynamics there for the Q1 and how that

Speaker 3

Yes, I'll make first step. And I think first, you have to recognize on the year over year comparisons, the COVID activity Has a significant influence on the year over year comparisons when our COVID admissions went from 9.7% last year to 3 And COVID revenue per admission runs much higher than our non COVID is really influencing the as reported. So why in my prepared remarks, I talked about Our non COVID revenue per admission was 2.2% growth. We've seen sequential improvement in case mix. I think overall, I'd say we're pleased with where the performance is on our acuity, in our payer mix and the revenue yield we have when we look sequentially, especially on that.

Speaker 3

So that was the main thing affecting the as reported was the COVID volume. When we exclude COVID, We're really pleased with the revenue per unit trends. Outpatient growth was heavy during the quarter, driven as we've talked about With the emergency room, so that is influencing the per equivalent admission statistics, while we broke down the per admission as well. But again, very pleased with the outpatient growth Demand that we're seeing as well as the inpatient. So we're pleased with the top line metrics that we're seeing.

Operator

Just as a quick follow-up, can you parse out the degree

Speaker 7

to which your acuity that you're seeing is Kind of normalization in terms of admission patterns versus kind of some of the investments you've made to expand your network capabilities? Thanks.

Speaker 3

It's hard to parse it out. I mean, it's all inclusive. I mean, obviously, with a good surgical volume that we had that helped fuel that We do continue to see recovery of demand in the marketplace, but we continue to invest in growing Our service offerings and our higher acuity services. So it's hard to parse out and attribute that from 1 or the other, but Both I think are factors in the trends we're seeing.

Speaker 2

Yes. Bill, I think it's important to understand that our Acuity or our case mix index, the composite view of that is holding strong and actually up over 2019 When you consider we've lost a really high case mix component in total joint surgery. So I think that speaks to the underlying acuity mix within our remaining inpatient Portfolio, we also had total joint surgery growth when you look at inpatient and outpatient again in the quarter. But nonetheless, those cases are now in the outpatient setting and out of our inpatient mix, but yet we've been able to sustain Really strong acuity mix in total and that's due to again program development as Bill alluded to Specific efforts in certain markets and certain facilities to advance their clinical capabilities, and it's yielding what we hoped.

Operator

Next question. Your next question comes from the line of Gary Taylor from Cowen. Your line is

Speaker 8

open. Hi, good morning. One of my favorite expressions is when Sam So I was disappointed not to hear that catchphrase this morning, but otherwise really solid quarter. My question is about commercial rate cycle. I think with all the moving parts With COVID, even when we see the Q, it's going to be hard to sort of tease out what's happening there.

Speaker 8

So just wanted to see if you could just update us on How are you doing on your commercial rate renewals? Is there any material activity on off cycle renewals? Does this $145,000,000 settlement say anything about the environment in terms of how you're positioned with the payers? Or is it just

Speaker 2

So Gary, not to disappoint, our EBITDA clearance in the quarter was 36 So that's a really good metric for us recognizing operating leverage in the face of really inflation. So It sort of proves the model when we can drive activity into our facilities where we have embedded fixed Calls were able to turn that into earnings in a very productive way. Again, it speaks to our management team's ability to manage their operations effectively. We're pleased with what's going on in our payer contracting cycles. As we said, We're targeting mid single digit increases and we are achieving that in most circumstances.

Speaker 2

And I think the payers recognize again the pressures in the marketplace for providers and are Allowing sort of responsible increases. So we are roughly contracted for 2023. We're 93% of the way there. We're about 2 thirds of the way through 2024 and about a quarter of the way through 2025. And at this particular point in time, We're able to maintain the trend that we feel is necessary and appropriate for today's circumstances.

Speaker 2

The one payer settlement that we talked about, we have processes in place in our Paralon organization, which we believe is the best in class Revenue cycle capability and through their efforts and through our support efforts of other Components of our business, we were able to resolve some claims that we felt were underpaid in previous years And those payments were recognized in this particular quarter. I don't know that it's reflective of anything in the marketplace other than the Specifics around that particular circumstance. I will say that we are focused on making sure That we have the right controls in place, the right relationships in place and the right procedures around Ensuring that we get the reimbursement that we have earned and if there are underpayments or denials that we think are Not appropriate, then we will make sure that we work our way through those disputes to get to the answer that we think is appropriate for the company. And I wouldn't say that's anything new necessarily, but it continues to be an ongoing opportunity.

Operator

Your next question comes from the line of Pito Chickering from Deutsche Bank. Your line is open.

Speaker 2

Hey, good morning guys and thanks for taking my questions. Any color on how full time nurse wage inflation is tracking so far this year versus your expectations? And are you seeing any competitors increase their wages again in 2023 or is it pretty stable at this point? And on the non nursing staff, where is that tracking? And can you refresh us on what you assume for nursing and non nursing wage inflation for 2023 in your guidance?

Speaker 2

Pito, this is Sam. I think our overall compensation Per hour across all aspects of our workforce are trending where we expected them to trend this year. And we're pleased with the progress and that's in the phase of us making some fairly significant increases Over the latter part of 2022 and we should continue to make modest increases in certain market circumstances in 2023 Responding to new data or new understandings around what's happening from one market to the other. As I mentioned on our call, our turnover was down. Our nursing turnover was approaching pre pandemic levels.

Speaker 2

We were running about 15% 14.5% to 15% In 2018 2019, we're running about 17% when you look at the last 6 months annualized. So a very good trend Happening and we think it's again a factor of some macro trends, some of our specific actions Around compensation programs, efforts to really increase resourcing and capabilities for our nurses and other caregivers. So we're really encouraged by the efforts of our teams, the recruitment metrics that we're seeing and where we are competitively in the Will there be a market here or there that we have to adjust to as we move through the year? Yes. We believe that's factored into our guidance And we should be able to manage through those changes as the year progresses.

Operator

Your next question comes from the line of Joshua Raskin from NewFront Research. Your line is open.

Speaker 9

Hi, thanks. I appreciate taking the question. Could you speak to the increase in CapEx guidance for the year? And I'm curious if you accelerated anything Specifically in 1Q as that came in a little bit above where we were thinking. I'm specifically interested in the types of projects that are getting funded and especially the ones that have been that weren't contemplated maybe 3 months ago.

Speaker 9

And then lastly, I heard real estate purchases. I'm Assuming those are for new inpatient hospital facilities over time? Yes.

Speaker 2

So this is Sam. Thank you for the question. We have a number of communities that we serve where we believe over time we're going to need to add to our hospital network. We're obviously adding significantly to our outpatient network. We have approximately 2,500 outpatient facilities That support our 180 or so hospitals across our communities.

Speaker 2

But we believe that over time as our communities continue to grow, We believe that's one of the differentiating attributes of HCA that are we're in great markets that have great growth prospects in and of themselves Before we get to share gain possibilities in those markets that it's going to require us to build out some new hospital Facilities, we do have a new hospital opening in or under construction in San Antonio, actually 2 in San Antonio As we speak, but San Antonio is one of those markets where we have uniquely high occupancy. That market, for example, we run approximately 90% occupancy And we think it's better for us to open up new hospitals as opposed to keep adding on in every circumstance in that particular community. But we do own land in Austin, Texas for new hospitals. We own land in Dallas for new hospitals. We just recently purchased in the Q1 Land for new hospitals in Las Vegas and Salt Lake City.

Speaker 2

We have land for new hospitals in a number of Florida markets. So that's part of what you're seeing in our capital Spending is that we are acquiring land for future network development. In addition to that, we have Significantly advanced our outpatient facility development. That doesn't put too much pressure on our capital spending, But there are some elements of it that are in the increased guidance. And then finally, I think it's important for everybody to understand, We are still in a situation where we have a lot of facilities that have high levels of occupancy.

Speaker 2

In the Q1, the company ran approximately 73% to 74% occupancy in its inpatient facilities. And we need to have sufficient capacity as we build up our staffing over time. We need physical capacity to accommodate what we believe to be the demand for healthcare. So the projects are really mixed among those three things, Land acquisitions for future hospital development, outpatient network development and then relieving capacity constraints On the existing platform of facilities that we have today.

Speaker 3

And Josh, this is Bill. I'll add, we obviously can accommodate that increase in capital Within the resources we're generating and within our overall capital allocation philosophies that we have. And we also continue to see really strong terms on invested capital. So we have confidence that these investments will continue to generate growth for us into the future.

Operator

Your next question comes from the line of Brian Tanquilut from Jefferies. Your line is open.

Speaker 2

Hey, good morning. Bill, maybe just a question on how we should be thinking about the moving pieces or considerations for the Q2. I know you called out the Envision contribution The revenue and then maybe the New Orleans Hospital, but anything that we should be thinking about just sequentially and

Speaker 10

year over year? Thank you.

Speaker 3

Yes. Brian, nothing material. I mean, once we kind of anniversary the high COVID volume, which is principally Q1, Q2 of last year, we began to see the start of normalization. Obviously, we're coming off some continued high labor costs in the Q1. Saw some improvement in the Q2 and obviously improvement as we went through the balance of the year.

Speaker 3

So I can't say there's anything material I Call out, especially 1 quarter the next week, typically wouldn't do that. But for the balance of the year, now that we've got the majority of the High COVID behind us in terms of the year over year comparisons, things should begin to normalize for the most part.

Operator

Your next question comes from the line of Andrew Mok from UBS. Your line is open.

Speaker 11

Hi, good morning. You provided some breakeven metrics on Medicaid redeterminations in the past. Hoping you could provide an updated view on how you expect that play out over the next 18 to 24 months and what sort of impact that could have on near and intermediate term operating results? Thanks.

Speaker 3

Yes, thanks. I mean, obviously, this is an area we continue to pay attention to. We've got a fairly formalized approach Inside of the company, we haven't seen any impact yet as those redeterminations are just beginning to occur, Well, we are keeping very close to state plans. We've also made outreach to our Medicaid patients to Help them look at alternative coverage in the event they find themselves displaced to Medicaid. We continue to be encouraged with some of the 3rd Hardee studies that we read that a relatively high percentage of those individuals potentially qualify for employer sponsored coverage or through enhanced subsidies coverage within the health insurance marketplace.

Speaker 3

So we are staying very close to that. We are Increasing our efforts to help people identify coverage that are available to them, trying to work with states and other community agencies where necessary to help people Land coverage. So too early to be able to quantify what the impact of that may be. But ultimately, I believe that people can find coverage in the Changes or through their employer, we wouldn't really anticipate any material downside. And hopefully, there could be some upside benefit to that over the long run.

Operator

Your next question comes from the line of Scott Fidel from Stephens. Your line is open.

Speaker 9

Hi, thanks. Interested if you could talk about how you're thinking about the sustainability of the surgical growth trends over the balance The year both in inpatient and outpatient and interested if, was there any catch up just as COVID really diminished in the Q1? Or do you see these those types of growth trends as sustainable over the course of the year? Thanks.

Speaker 3

We're looking at 1, we're pleased with the trends. It's hard to Horace, exactly the contribution of that, I think, overall, we're pleased with the demand and the activity we see in the market. We continue to see believe that we're going to return to normal historical volume patterns. And if that does Show us up, we should see continued growth in both inpatient and outpatient surgical volume. We continue to invest in our outpatient footprint that should help drive Reasonable outpatient surgical growth, our program development in the inpatient side should help continue to show Good inpatient surgical growth as well.

Speaker 3

So we'll just have to see that. I think typically we would see 1% to 2% type of surgical growth and As the year goes on, hopefully, we'll continue to see that.

Speaker 2

Yes. And just to add to that, Bill, I think as we continue to increase our staffing Capacity, it also affects our surgical capacity because we do have instances where we're not able to open all of our operating rooms as sufficiently as we would prefer also. And so as our labor situation continues to get better, We think that will allow us to open up more surgical capacity and we believe the demand in the market is still there. So we're encouraged by where we are with our surgical volumes and we think we have some things that should Profit up, if you will, as we move through the year with our staffing agenda and our human resource strategies.

Operator

Your next question comes from the line of Lance Wilkes from Bernstein. Your line is open.

Speaker 4

Actually, that's a perfect lead in to my question. Could Could you talk a little bit about your outlook for staff growth? And in particular, obviously, you've had the shift from temporary to permanent, which has been great. Can you talk about how your staff has grown or Maybe registered nurse staff or something like that over the last year. And then as you're looking forward, are there any particular impediments to continued levels of growth?

Speaker 2

Well, our total headcount was up around 2% when you look at this Q1 against Last Q1 and let me make sure that actually it's more like 3% when you factor out Sure. So we're up 3% quarter over quarter, which is obviously solid improvement in the market. As we've mentioned in the Q3 and the Q4 of last year, we were starting to see some momentum with our hiring, Some momentum with our retention programs and so forth, and that's carried through into the Q1 really well. I think our overall hiring was up 13% or something like that. But in the quarter compared to the running average, it was up And that's mostly in nursing.

Speaker 2

I don't know that it will run that hot as we move through the rest of the year, nor will we need it to run that hot As we move through the rest of the year. So our efforts with our recruitment, our efforts with retention will continue. We're encouraged by other programs that we have to support Our people and put them in the best position to succeed and deliver high quality care. We have a significant investment We're making in clinical education, our Galen School of Nursing continues to grow and we're really encouraged about what those programs will do For our facilities and our people over time, so those things are all part and parcel to a very comprehensive effort To make sure we have the right amount of staff, they're supplied with the right technology and resources To deliver high quality care and they can be successful in growing our company. So we're pretty encouraged by where we are.

Operator

Your next question comes from the line of Calvin Sturniak from JPMorgan. Your line is open.

Speaker 12

Thanks for the question. I Wanted to ask about capacity. I know you said 1.5% for the quarter, but still above pre pandemic levels and labor improving. So What are some of the other key variables for getting the declination rate back down to historical levels? And where do you think you can get to by year end?

Speaker 12

Thanks.

Speaker 2

Well, hopefully, if we get back to pre pandemic levels, we benchmark a lot of our metrics against where we were in 2019, so that we can have a comparison of sort of more normalized environment. But Obviously, our labor agenda, as I just mentioned, is very important to our abilities to open up all of our bed capacity and surgical capacity and so forth. Even our emergency room capacity sometimes can be constrained because of staffing levels and such. I think it will continue to get better as we went through the Q1. March was better than January, as an example.

Speaker 2

So that's a positive trend within the quarter. We're hopeful that that will sustain itself as we move through the balance of the year. And as we look at some of our hiring and the timing of that hiring, That should line up with some continued improvements as we sequentially move through the year. So those are the main things. We have capital that will come online over the course of the year as we always do.

Speaker 2

That will help in certain circumstances. But I think the most important variable is staff and getting sufficient staff into our facilities, allowing us to open up our beds and so forth appropriately.

Operator

Your next question comes from the line of Steven Valiquette from Barclays. Your line is open.

Speaker 10

Great. Thanks. Good morning, everybody. So really one main question here. When looking at some of the hospital related volume commentary from medical device Over the past week or 2, at least one of them suggested from their view that hospital volumes were the strongest in January February, then normalized in March.

Speaker 10

I know no one really likes questions on the monthly performance. So really just my more high level question is, if you could just comment on whether or not the momentum in your overall operations was Generally pretty consistent throughout the quarter. And then also is the full year 2023 guidance increase meant to reflect mainly just the upside witnessed in 1Q And the rest of the year outlook is generally unchanged from your prior view? Or should we all expect strong momentum from the Q1 to continue into 2Q? Just kind of Any helpful thoughts around all that for just the overall operations would be helpful.

Speaker 10

Thanks.

Speaker 3

Well, again, I think we've seen momentum on there. So yes, the guidance is, I think it's referenced by a few others principally the performance in the Q1 that we saw. But as we look to volume through the quarter, I think it was pretty consistent on there. We're feeling positive with some of the trends we're seeing. It's hard to call exactly what may happen And exactly what period they will, but we continue to see good demand in the markets.

Speaker 3

We continue to add our capacity, And you'll be able to serve that. So we think we've incorporated all reasonable assumptions into the guidance going forward. And that's where we're staying right now. We'll continue to monitor as the year goes on.

Operator

Your next question comes from the line of Jason Casola from Citigroup. Your line is open.

Speaker 13

Great. Thanks. You noted favorable payer mix in the quarter. Was hoping you can give us a sense on commercial core commercial volume growth split out between exchange related volumes and then just pure commercial. And perhaps if you saw in 1Q or are currently seeing any commercial volume pull forward perhaps ahead of potential coverage changes later this year Or do you think that commercial volume trend is just more broad based?

Speaker 13

Any color on that would be very helpful. Thanks.

Speaker 3

Yes. I mean, as I mentioned in my comments, our non COVID Commercial volume was up a little over 11%. So obviously, that's a stat we're very pleased. We're very pleased with the exchange enrollment. We saw Really good enrollment across our states.

Speaker 3

Some of the publicly released data that you've seen, we've seen exchange enrollment in Florida up 18%, Texas up Close to 30%. And that generally is pretty well with where we would expect exchange volume to be. Our exchange volume just year over year Was what 19% or so for the quarter. It's hard to make some of those comparisons pure on the non exchanges because COVID Has such an impact on that. But if I back up and look at the non COVID growth of managed care at 11, it's still pretty strong.

Speaker 3

And even overall, we were up 4%. So again, we're thinking that there's good payer mix will continue, Good demand. We still see basically full employment in most of our markets. So we'll see where that plays out. But we are pleased with the Health insurance exchange activity that we're seeing across the markets.

Operator

Your next question comes from the line of Sarah Gaines from Cantor Fitzgerald. Your line is open.

Speaker 14

Thank you. I'm trying to piece together a few of the comments that you made on contract labor. So you talked about getting down to About 6.5% to 7% exiting the year. Is that in line with what you've been thinking before? I thought you guys were a little bit lower.

Speaker 14

And then how do you think about reinvesting the savings of that? So how much is going to wage inflation versus actually increasing headcount? Or is any of it falling to the bottom line as sort of a margin relief?

Speaker 3

Well, I mean, there's a lot of moving parts in our labor And obviously, our focus has been reducing the utilization of our premium labor and that has allowed us to continue to invest In our employee workforce and we continue to invest in our existing employees, both through wage rates as well as Irene, that was spoken about earlier on the call. And so when we roll it all out, we kind of look at the overall impact. And yes, We are fortunate that as we've been able to reduce contract labor that's allowed us to make the investments into our employed workforce. I think that will continue. I think our commentary around our expectations has been reasonably consistent.

Speaker 3

If you looked at where we ran kind of pre COVID, it was probably In that 6 range, we think we can continue to make progress on that. So it's fairly consistent. But Again, we are investing much of the benefit of contract labor back into our existing employees.

Operator

Your next question comes from the line of Stephen Baxter from Wells Fargo. Your line is open.

Speaker 11

Hi, thanks. I just wanted to follow-up on an earlier question. You mentioned having A pretty decent amount of visibility on 2024 contracting at this point. I mean, can you just remind us how the 2 thirds compared to where you might have been in a more typical Pre COVID environment, I think you also alluded that the commercial rate dynamics continuing to be acknowledged by payers of that same general magnitude. Just want to confirm if that was what you meant by those comments.

Speaker 11

Thanks.

Speaker 2

I'm not sure I understood the second part of that question. But the first part of the question, We're, like I said, running mid single digits on our renewed contracts. We were running Contracting, so it is up a little bit. Again, it's reflective of, I think, the overall inflationary environment that most organizations find themselves. But we think it's a responsible ask and it's been received reasonably well by the payers that we've renewed.

Speaker 2

What was the second question? Well, I think the

Speaker 3

other one was around the percentage of our contracts that are completed for 2024. Is it consistent with where Yes, it is. And it is consistent with where we would have historically been.

Operator

Your next question comes from the line of Jamie Perce from Goldman Sachs. Your line is open.

Speaker 15

Hey, thank you. Good morning. I wanted to ask a Question about the procedure shift to outpatient. First, can you help us quantify what the headwind from that shift has been to revenue and EBITDA over the last couple of years? And then 2, categories like knees and hips, so a little bit more homogeneous, how do we think about The shift of categories like cardiology, you mentioned that was up 7% in the outpatient setting in the quarter.

Speaker 15

Are there big categories in cardiology that are analogous to total joints that you think are A big category that is too amenable to that shift to outpatient that we should be thinking about impacting the transition in the near term? Thank you.

Speaker 2

We don't see any particular procedural category Facing the same type of pressure as total joints did. I think our company is somewhere around 80% of our total joints today Are done as an outpatient with 20% done as an inpatient. That was reversed pre pandemic. So we've absorbed all of that and It was a headwind with respect to a P and L impact over this time period. The rest of the categories are not as discrete as total joints.

Speaker 2

And in cardiac particularly, A large piece of our cardiac volumes today are already in the outpatient setting. And so we don't anticipate anything In that particular category shifting like total joints have shifted. We've seen some shifts over time In spine, and that's more incremental than it is holistic like total joints. We've seen some in cardiac over the years. We've seen some with our robotics platform.

Speaker 2

Those continue sort of on the margin. They're not structurally Repositioning like Total Joints did. And so our company has effectively navigated that transition. Again, we have a Multifaceted offering for patients and physicians both in our facilities, outpatient within our facilities, ambulatory surgery centers and so forth. And that's one of those settings is the right setting for just about every patient.

Speaker 2

And I think our organization has been able to grow As a result of that multifaceted offering and our total joints like I said earlier are actually up Year over year and they were up last year compared to the previous year. So we've seen good growth in our orthopedic programs and we continue to work with our surgeons And our service line leaders to advance our capabilities as well.

Operator

And there are no further questions at this time. Mr. Frank Morgan, I turn the call back over to you for some final closing remarks.

Speaker 1

Rob, thank you for your help today and thanks for everyone for joining the call. We hope you have a great weekend. I'm around this afternoon. If we can answer any additional questions

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Earnings Conference Call
New Gold Q1 2023
00:00 / 00:00
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