Release Date: February 27, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Q: The 2025 EBITDA guidance is up 5% to 11%, which is higher than typical growth rates despite state supplemental payments forecasted to be down year-over-year. What is driving the higher underlying growth in 2025? A: Steve Filton, CFO: The core EBITDA growth is driven by a return to historical norms, solid volume growth, robust pricing, and effective expense control. We don't have the pressures on operating expenses that were present during the COVID years. Additionally, we incurred significant malpractice expenses in 2024, which we hope will not recur in 2025. From an EPS perspective, we also expect a boost from a reduction in interest expense and a continued reduction in our share count.
Q: The guidance range is $127 million wide, which is higher than previous years despite better operations and visibility. Why is the range of outcomes wider than usual? A: Steve Filton, CFO: The wider range reflects caution and conservatism due to items beyond our control, such as government reimbursement changes. We acknowledge these uncertainties and have provided a wider range to account for potential variations.
Q: Can you discuss the slight decrease in DPP (Directed Payment Program) you foresee for next year? Is it due to conservatism or foreseeable changes in specific programs? A: Steve Filton, CFO: The main reason for the decline is that some DPP payments recognized in 2024 were related to prior periods. There may be small declines in some programs next year, but the primary driver is the recognition of prior period payments in 2024.
Q: Could you talk about behavioral same-store patient days and the expected acceleration in 2025? A: Steve Filton, CFO: We experienced a decline in patient day volumes in behavioral in the back half of December due to holidays. However, volumes rebounded in early January. We expect same-facility adjusted patient day growth in 2025 to be in the 2.5% to 3% range, driven by solid demand for behavioral services.
Q: What are your thoughts on the potential impact of provider taxes as an area of savings within Medicaid legislation? A: Marc Miller, CEO: There is wide support for provider tax programs across many states, including bipartisan support. We believe there is significant political support at the state level for these programs, and we are monitoring the situation closely.
Q: Can you remind us of the Medicaid rates in 2024 and what you expect in 2025 for behavioral services? A: Steve Filton, CFO: We expect same-store behavioral revenue growth in the 6% to 8% range for 2025, with 2.5% to 3% volume growth and 3% to 4% price growth. Our core pricing has been better than that over the last several years, and we will continue to press payors for better rates.
Q: What is your targeted leverage ratio, and would you consider borrowing to maintain leverage ratios for share repurchases? A: Steve Filton, CFO: We have historically operated at a leverage level in the high 2s, approaching 3. We are comfortable at that level and may consider leveraging up to increase share repurchases. Our guidance assumes share repurchase levels similar to previous years, around $600 million to $800 million.
Q: Can you discuss the strategy around the behavioral portfolio and areas for expansion? A: Steve Filton, CFO: We are building out our continuum of care, focusing on expanding outpatient services. This includes freestanding outpatient facilities and services for active and retired military. We are also establishing a presence in the opioid disorder space, integrating it with our broader continuum of care.
Q: What are your assumptions for acute revenue growth in 2025, in terms of volume versus pricing? A: Steve Filton, CFO: We expect mid-single-digit revenue growth in the acute division, around 5% to 6%, split evenly between price and volume. We anticipate 2.5% to 3% adjusted admission growth and 2.5% to 3% pricing growth. This should allow us to grow EBITDA and expand margins.
Q: Can you provide an update on the malpractice reserves and any trends that could increase the probability of another adjustment this year? A: Steve Filton, CFO: We use a third-party actuary to evaluate our claims history and industry trends. Historically, we've set reserves at the midpoint of the range provided by the actuary. Given volatility, we've moved towards the higher end of the range this year, hoping to avoid another uptick in 2025.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
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