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All right, great, welcome everyone. My name is Michael Ha, the Managed Care and Healthcare Facilities Analyst at Baird. Our next session is with Universal Health Services, an operator of acute and behavioral healthcare facilities. I'm very pleased to have with us today, Chief Financial Officer Steve Filton, and Head of Investor Relations, Darren Lyric. Thank you for being here. And with that said, Steve, Darren, would you like to make any introductory comments? Yeah, I'll make just a couple of quick things. maybe a recap a bit of Q2, which I know seems like a long time ago, but, you know, we were pleased in Q2 with the rebounded volumes in both of our business segments, the continued, we think, effective cost control in both segments. We had the benefit of the Florida Directed Payment Program monies that related to calendar year 2025. Offsetting those, you favorable items or some unfavorable exogenous items, which I'm guessing we'll get into in a little bit more detail. As a result of all those items, we did revise our guidance in Q2, our full year guidance for 2026, from the midpoint of an EBITDA less NCI perspective down about 3% at that midpoint, leading us to a projection for the year of EBITda growth of about 3%, and an EPS growth of about 6%. Subsequent to the second quarter, probably the two most significant items are we closed the Talkspace transaction, which I'm sure we'll talk a little bit more about, and we completed a bond issuance of $1.1 billion setting us up for the next several years. Very excited about the TalkSpace acquisition, really an opportunity for us to accelerate our outpatient growth and behavioral access to the 6,000 therapists that Talkspace has on their panel. Again, I'm sure we'll get into all that. So yeah, I am happy to answer your questions, Michael. Perfect, thank you. I think we'll start with acute, then go sort of coverage policy, then end off with behavioral. So on acute, same facility acute adjusted admissions rose up 1.4% in the first half, including pretty strong second quarter 2.9% growth, while you did revise your full-year target 1.5 to 2.5 percent. So my question is, is how are volumes tracking in third quarter and what will determine whether this year finishes toward the upper or the lower end of that range? And should we interpret this as sort of a new long-term target or more of a like a target applicable for next year and more medium term? Yeah, so the slight downward revision in our projected acute adjusted admissions for the year was really, I think, just an acknowledgement of the real soft first quarter admissions. I think, you know, our original guidance where the midpoint was about two and a half would be difficult to achieve given the softer first quarter volume. So the 2% midpoint for the year seems just more reasonable and achievable. And I put that in the context of, if you look at our last 10 years of experience, I think acute care adjusted admissions have you know basically traded in a sort of two to two and a half percent range so the two percent that we've got for this year is you know well within that range it's I think reflective of the fact that we think that overall volumes are relatively solid as far as your sort of question about you know what would sort of drive kind of it to be you know on the upside or the downside I think it's to some degree the continued ramp of the de novo facilities facilities, particularly Cedar Hill, it's, you know, how quickly the 177 beds that we added in the second quarter to our existing facilities ramp up, and we think that'll happen relatively quickly, but, you, know, generally view the demand environment in the acute to be relatively stable and fairly consistent with historical norms. Great. So on that topic of Cedar hill, emergency department activity has been encouraging, But elective volumes have ramped more slowly because, as you talked about, limited primary care, specialist base, and that surrounding market. What concrete physician recruitment and referral milestones are really required at Cedar Hill to move from expected fourth quarter break even toward more, call it, mature profitability? And how should your new ownership of that affiliated physician group accelerate that process? Yeah, so I think it's worth just providing just a tad bit of perspective. The impetus to build that Cedar Hill facility really came from the District of Columbia government itself. They viewed that part of the district, which is Ward 7 and 8, as a historically underserved part of the district from a health care perspective, and they were extremely anxious to build a state-of-the-art facility operated by an experienced mature operator. We have a long history with the district at GW Hospital. And so the district undertook the capital commitment. They put up the funds to build the hospital, several hundred million dollars worth of investment. We had a long-term operating and management agreement with them. When we opened the facility back about a year and a half ago in April of 2025, what we found was almost immediately, and you alluded to this in your question, Michael, emergency room volumes were quite strong, which I think was reflective of the fact that, in fact, the residents of that part of the district really were, you know, hungering for this opportunity to have their own facility, one that, you know, they could go to for quality care, etc. You know, and honestly, I would say we were almost overwhelmed by the emergency room volumes at the outset. What we were lacking, and again, you I know your question addressed this, was a balance of more elective procedures. And I think the reason for that is that because historically most people in Ward 7 and 8 were leaving that part of the city to get their health care elsewhere, there really was a lack of what I would describe as physician infrastructure. Primary care physician specialists, they just didn't have their offices in Ward seven and eight. And that's what really needs to happen. We need to have more physicians based in and around the hospital. We're recruiting physicians. We are doing our best, not just necessarily recruiting new physicians, but getting physicians who have a presence elsewhere in the district to open offices in Ward 7 and 8, et cetera. And that's what I think will happen. It's taking some time, maybe a little bit longer than we expected. I think we normally view the ramp up of a de novo hospital to take about 18 or 36 months before it reaches divisional averages. In the case of Cedar Hill, it's taking somewhat longer than that. We do project and have said that we expect to get to break even in Q4. The one nuance that I'd highlight, however, is that because we didn't provide the capital to build the hospital, to get to our target rate of returns for this particular project, we'll be able to do so without getting to necessarily average margins or average absolute levels of profitability. Your last question or the last part of your question was, how does the migration of the medical faculty group that was owned and run by George Washington University for many years and that we took over for that in early in the third quarter, rather, how does that affect the Cedar Hill ramp up? I think we'll have some of those physicians helping us in Cedar hill, but the reality is most of those positions will practice at GW. They have practiced at GW historically and will continue to. So I don't think that's gonna have a big impact. I think it'll be mostly non-GW or non-medical faculty or we call it capital medical group physicians that'll staff the Cedar Hill facility. Got it. And Nevada remains one of your most important markets with West Henderson adding capacity as you anticipate a recovery in Vegas tourist demand. How would you disaggregate West Henderson's growth between improving market demand, share gains from competitors, and volume shifting from your legacy facilities? Yeah, so if you go back to just the previous question and the comment that I made about it, it usually takes 18 to 36 months for a facility to ramp up and get to divisional averages. West Henderson, and we've commented on this before, became profitable in its first full quarter of operation. It opened in December 24, and it was profitable by the first quarter of 2025. Not necessarily divisional averages, but even that accelerated ramp up is sort of really extraordinary, and honestly, we've only experienced that in hospitals in Las Vegas. And to your point, there was demand. Henderson and now West Henderson are located in the southeast part of the market. That's a market that was really owned by a competitor for the longest time. Nobody else competed there. And you know, Henderson opened and was very busy and then the population continued to move west and we saw the need to open yet another hospital. We opened West Henderson. West Henderson to some degree capitalized a little bit of our own hospital business. We sort of estimated that in its first few quarters of operation to be a 40, 50 basis point impact on our adjusted admission growth, same store. But just to show how strong the market itself is, the 177 beds that we talked about adding to our acute facilities in Q2, some of those beds, 35 or 40 of those bed were added at Henderson Hospital, which is our closest hospital to West Henderson, and it's just a demonstrated, I think, or it's reflective of the demonstrated need for healthcare in that space. So broadly, our Vegas hospitals, I think, are doing well. 25 was a bit of a softer year. There was sort of a software flu season. Your question kind of alluded to, I think, tourism and conferences and meetings were down a little bit, but seemed to have rebounded. And I think the Vegas market is kind of back to fairly robust growth that is helping to propel the overall divisional performance. And the only thing I'd add to that, Michael, is, you know, when you think about the Las Vegas economy, it really has broadened beyond gaming, and Wes Henderson, that Henderson area that we're talking about, I think is a great example of how the economy in Clark County has really changed. A lot more, you now, sports teams are there, our hospital is actually very close to the Raiders facility, a lot more technology businesses coming into Nevada, especially in the northern part where we have hospitals in Reno. And so I think a little bit more balance to the broader economy is starting to really unfold in Las Vegas. Great. And switching over to exchanges now, your estimated 26 exchange headwind is now up from 75 million to 85 million, approximately 35 million of that's in the first half, 50 in the back half. So our checks in recent weeks and we published on it, they don't appear to be great when it comes to uninsured volumes and it seems like the pressure continues to mount into July and August. That said, is the 50 million second half assumptions still intact and what visibility do you have given the lag between members stopping premium payments and what appears in your hospital data? Yeah, so again, I think it's worth kind of just reminding people that original $75 million impact estimate that we had made with our original 2026 guidance was based on a couple of critical assumptions. One, that there would be about a 25 to 30 percent decline in people who had exchange coverage. Two, was that a small percentage of those people, maybe 10 to 20% would lose their exchange coverage but would be able to replace it with other commercial coverage potentially through their employers or others. And three was that there would be a shift in those people who kept their exchange coverage of metal tiers, mostly from silver to bronze. I think for the most part those assumptions have played out in the first half as we expected they would. Probably the single biggest divergence from what we originally projected, and I think you kind of alluded to this in your question, Michael, was that we've seen an almost one-for-one swap or trade, if you will, from the number of people who have lost their exchange coverage to an increase in uncompensated care, meaning that virtually everyone who lost their exchange coverage turned into an uncompenseated patient. And that was something that we really didn't anticipate fully, and that's really what drove the $10 million increase in our estimate. I think what we've said is, as you point out, we had a $35 million impact in Q in the first half of the year, with 15 in the 1st half of year, or excuse me, 15 in 1st quarter, 20 in the 2nd quarter, and now projecting 50 in the back half. And I think that's reflective again of how this has played out in actuality, meaning not everybody stopped paying their premiums on January 1. Some people may have paid their premium for a month or two months or three months before stopping, et cetera. So some of that impact is back-end loaded, but some of it is also reflective of exactly when we become aware of somebody not making their premium payments. We really only become aware of that through the managed care companies. So when a patient comes in with exchange coverage and exchange card, we'll verify the insurance. If the managed-care company verifies the insurance, we assume that it's good, premiums are paid, et cetera. We may then go to bill that bill a month later, two months later, and we'll then get feedback from the insurance company that premiums haven't been paid and then they're not gonna cover the care, et cetera. So there is a delay in sort of our awareness, there is delay I think in some cases with people actually paying their premiums. And I think that's what's reflected in sort the build up as the year goes on. We're not really commenting on sort of our intra quarter commentary about exchange volumes or payer mix or volumes in general. but I would say that we're still comfortable that that revised estimate should be fairly accurate for the balance of the year. Got it, and when we think about, I believe your preliminary 27 outlook appears to assume the second half exchange headwind carries forward approximately the same exit rate, which would annualize 50 million into 100 for a 27. I mean, given another year of material premium increases in the marketplace, more potential metal-tiered migration. If exchange enrollment does decline incrementally, call it five, 10%, or more in 27, why wouldn't the total headwind rise uniquely above? It could, Michael, to be fair. I think our point of view, at least at the moment, is we just don't have any real insight into that. There's also been speculation that there could be some level of re-enrollment as people realize that going uninsured has been problematic. Maybe they can get, some of these people are working people who maybe will be able to get insurance through their employers, et cetera. We just don't know. So you're right. I mean, I think the way you framed it is our presumption at the moment is that the run rate for the exchange impact in the second half of the year will be the run for next year. As we get closer to giving our actual 2027 guidance several months. If there's more visibility, if there's more clarity, we'll update those estimates, but we just don't have nearly enough information or precision to do that at the moment. And on Medicaid, managed Medicaid volumes have declined modestly during the first half, and several Medicaid plans have recently reported greater than expected eligibility-related attrition, especially with work requirements creating more uncertainty into 27. How should we think about and size the incremental risk to UHS's payer mix and uncompensated care after considering medical frailty exemptions, which I believe you've mentioned in the past may affect most of your behavioral lives, and basically in your ability to help those eligible patients document those exceptions? So, yeah, just sort of the level set in terms of our payer mix experience to date in 2026 through the first half of the year, we haven't really seen significant changes in our mix, putting the exchange dynamics aside, which we've already talked about, doing that, we've seen slight increases in Medicare and managed Medicare. We've seen slightly decreases, which your question, I think, alludes to in Medicaid and managed Medicaid. Our commercial volumes, again, outside of the exchanges have remained fairly stable. As we think about going into next year and potential headwinds into next year. The biggest one is the one you highlighted, Michael, which is the Medicaid work requirements, which were part of OB-3, will take effect in 2027. We have not tried to precisely size that impact. I'm not aware of any provider who has chosen to do that. I think in large part because collectively, I think as hospital providers, we're waiting for greater clarity on how the Medicaid work requirements are going to be implemented by the states, how quickly, how aggressively the states have an option as part of OB-3 to ask for a six-month waiver and implementation. We don't know how many states will do so. We do know that there are states that are actually suing in the courts to challenge some of the requirements of the Medicaid work requirement. There is, again, you alluded to this in your question, there's an exception in the Medicaid work requirements in OB-3 for patients who are described as suffering from medical frailty. There's not a lot of definition in the bill for that. We've always understood it to cover potentially a significant amount of our behavioral diagnoses, but again, that's going to be up to the states to promulgate the regulations and define them in each of the states. And so we'll see how that plays out. And again, maybe in several months when we're ready to give our 2027 guides, there'll be greater clarity. CMS, really probably one of the few organizations that's really tried to size this issue, they've projected that Medicaid work requirements could result in a disenrollment of up to 4% of the Medicaid population. But even CMS has not tried to tackle which of the, which of Medicaid participants likely to lose coverage, be disenrolled, is it the higher utilizers? I think the speculation has tended to be it will be the lower utilizers. But again, we have to see that. In terms of how we're prepared for that, Michael, which, again, was part of your question, you know, when any time a patient comes into one of our facilities, I'm going to say generally through the emergency room, you know, they will interact with a registrar, with an intake person, and if they don't have insurance coverage, if they do not have Medicare, they do have Medicaid, they don have commercial, our intake folks are trained to work with people to determine, look, are you eligible for some coverage that you do not currently have? Could you qualify for Medicaid? We have, in most of our hospitals, work with third-party companies that we'll turn those folks over to who work, quite frankly, on a contingent basis and go through the exercise of helping those people fill out Medicaid applications. You know, literally, they'll accompany them to the Medicaid office, et cetera. We're prepared to do that. We'll search for other options as well. Sometimes there are county programs. Sometimes, you know, a patient can qualify for COBRA if they've been employed, et cetera. So, you Know, our folks are trained to do that. They've always been trained to doing that. It's part of what they do. They'll do that with the work requirements. Again, they'll need to have better understanding of exactly how the requirements are going to play out. But, you Now, those of you who've kind of studied or read the bill, you Know, people can qualify for work requirements if they're in school, if they have volunteer jobs, et cetera. So we'll go through all those processes to understand whether people qualify for the Medicaid work requirements. Got it. A couple of quick ones on policy, and then we'll move on. The statutory SDP limits begin with state fiscal year 28, which starts during calendar 27 for several of your important states, while some payment pools even they fluctuate with Medicaid utilization. So how should we phase in the potential SDP headwind across calendar years 27 and 28, including any earlier pressure caused by Medicaid disenrollment? And maybe on the follow-up is, you know, some of our policy checks seem to think if Congress flips, there could be a chance that SDP gets delayed or are rolled back post midterms. We'd love to hear your thoughts on that. Yeah, so I think you have a number of sort of questions embedded in there. Number one, I think, is we believe that the impact from those DPP reductions in calendar year 27 will be relatively minimal. And so our projections really presume that the bulk of the cuts start to impact us in 2028. We provide a lot of detail on that in our public filings. of the $1.5 billion worth of Medicaid supplementals that we project today or in our second quarter 10Q that we'll receive this year, we believe that the cuts beginning in 2028 and playing out over the next five years would amount to about $500 million of that 1.5 million and incurred fairly ratably, about $100 million a year. Your kind of second or maybe follow-up question about how might the outcome of the elections affect some level of modification or retraction of some of the requirements of those cuts, hard to know. We're not counting on that. I think that it's entirely possible that, particularly if there is some sort of blue wave and the Democrats take control of the House or maybe the House and the Senate, that there could be some movement towards delaying or elongating those cuts or the impact of those costs. I think the other, quite frankly, political impetus may be just simply the passage of time. The OB-3 cuts were sort of controversial when they were first passed, and there were even Republicans who objected, mostly on the grounds that they would unfavorably impact rural facilities, and that objection came from senators from different backgrounds, including Senator Collins from Maine and Senator Hawley from Missouri, very different sort of political, different parts of the political spectrum. But as a consequence, they did include in the bill the rural fund to help that. But the reality is, as these cuts, both the Medicaid work requirement cuts and then the DPP cuts, as they start to take effect in 27 and 28, the truth is they're gonna affect hospitals well beyond just the rural hospitals. They're gonna effect urban hospitals. They're going to effect safety net hospitals. They're are going to affect children's hospitals. And as I think those cuts become a lot closer to reality and perhaps start to be implemented, I do think there's a good chance that political pressure might grow to sort of relieve some of that. But as I said, to be fair in terms of both the way we've projected, both the we're approaching this, we're not assuming there are changes. If there are, we'll welcome them. But if not, we're gonna be prepared for the cuts that are on the books at the moment. Got it. In a similar vein, the proposed 2027 OPPS rule would reduce reimbursement for 340B-acquired drugs, which has been a hot topic today, and redirect savings into higher non-drug components, which UHS has limited direct exposure to 340b. If finalized, how could this rule affect your net reimbursement and also your competitive position given a lot of these non-for-profit systems have been benefiting a ton from 340B. So we disclose, again, in our public filings that if the proposed rule stands in its current form, that we, as many of our for-profit peers, would benefit because we've never benefited from the 340D favorable implications. Our outpatient Medicare reimbursement would increase by about 8%. Outpatient Medicare for us, it's not a huge part of our revenue stream. It's single digits of our total revenue, five, 6% or so. But honestly, this is one of those things where we're definitely sort of waiting on the sideline to see, we imagine that there will be significant or has been significant pressure from the not-for-profit industry about the rule and its implications for them. So we'll see how it plays out, but it would have an incremental effect, an incremental positive effect on us if it were to stand. Got it. And now we have a few minutes left, and we haven't touched on behavioral, but all right. So with Talkspace, you know, a thousand branches, UHS is now uniquely positioned as the only scaled provider with end-to-end continuum of behavioral health care. So I'm trying to think, how does that breadth of service create, you know, tangible value, commercial value through stronger rate negotiations, preferred network status, you know, greater directed volume relative to this fragmented local provider landscape. Over time, could it help enable UHS to assume greater accountability for outcomes, total costs, episode-based shared savings? Could there be capitated arrangements? I mean, how should we think about the evolution of this model, given how uniquely positioned you are? Yeah, I almost feel like I should be asking the questions. This is like Jeopardy. I think you've answered the questions, and I think it's worth noting, you know, we've talked a lot about a shift in focus over the last several years in our behavioral segment to more of an emphasis on outpatient revenue growth. We have been for our 40 plus years of behavioral history, really an inpatient centric provider. And quite frankly, we think that the inpatient business is a solid business that will continue to grow incrementally. But the real growth and the real accelerated growth we believe in behavioral demand will take place on the outpatient side for a variety of reasons. That's where patients would prefer to be treated if that's the clinically appropriate space. Payers and employers would prefer that I think their subscribers and their employees be treated on an outpatient basis. It tends to be cheaper, etc. And we have been focused on playing a bigger part in delivering that outpatient continuum of care. And, you know, your question alluded to the various ways that we've done it. Today, most of our outpatient revenues are generated by patients who we describe as step-down patients. So these are patients who are discharged from our inpatient facilities, but who require some level of continuing care. And it's a level of generally relatively high acuity continuing care, meaning not just an hour's worth of therapy a week or a couple of hours of therapy week, but things that we call partial hospitalization or intensive outpatient where they're receiving outpatient therapy three four or five days a week three four five hours a day depending on their clinical needs. Today we only capture a very small percentage of those patients in the mid single digits tops three four four five percent of those patient. We think that the ultimate ability to capture that could be you know in in the double digits etc and that which would be a significant an opportunity for us. And we've developed our own sort of, you know, focus is to get there, paying more attention to the discharge planning for patients, building out our thousand branches, freestanding facilities. But the talk space acquisition is really the one that really, you know exponentially increases our ability to provide an alternative to patients because is by being able to provide a virtual alternative to patients, we're not limited by proximate geography. They don't need to live near our hospitals to get that care. We're not limit by the therapists that we can offer and the schedules that we offer. Let's say we do our intensive outpatient three days a week in the mornings and a patient wants to have their therapy in the afternoons or in the evenings or on the weekends, much more likely that we'll be able to accommodate that need with Talkspace. So again, the ability to really be, as your question suggests, the only viable end-to-end continuum provider from the lowest acuity, hour-long therapy that is sort of in the bread and butter of what Talkspace has done, to the intensive inpatient care that we've provided on both an acute and residential basis for our whole history, really positions us, I I think uniquely and what makes us so excited about the opportunities with Talkspace. Beautiful, that's all the time we have. Thank you, Steve, thank you, Darren, and everyone enjoy the rest of your day. Thanks for your day, thank-you.