Tenet Healthcare Corporation

Hello, and welcome to the Tenant Healthcare Corporation first quarter 2021 earnings conference call and webcast. At this time, all participants are in listen-only mode. A question and answer session will follow the formal presentation. As a reminder, this conference is being recorded. It's now my pleasure to turn the call over to Regina Nethery, Vice President, Investor Relations. Please go ahead.

Thank you. We're pleased to have you join us. for a discussion of tenants first quarter 2020, pardon me, 2021 results, as well as the discussion of our updated financial guidance for the year. Tenant senior management participating in today's call will be Ron Rittenmeyer, Executive Chairman and Chief Executive Officer, Sam Sataria, President and Chief Operating Officer, and Dan Kinselemi, Executive Vice President and Chief Financial Officer. Our webcast this morning includes an accompanying slide presentation, which has been posted to the investor relations section of our website, tenanthealth.com. Listeners to this call are advised that certain statements made during our discussion today are forward-looking and represent tenant management's expectations based on currently available information. Actual results and plans could differ materially. Tenet is under no obligation to update any forward-looking statements based on subsequent information. Investors should take note of the cautionary statement slide included in today's presentation, as well as the risk factors discussed in our most recent Form 10-K and other filings with the Securities and Exchange Commission. With that, I'll turn the call over to Ron.

Thank you, Regina, and thank you all for joining us this morning. I have a few comments on the quarter, and we'll then turn over to Dan for more specifics on our performance and forward guidance. Reflecting on the first quarter, as happens many times, there were a series of events and issues that emerged. The issue is not whether these occurrences happen unexpectedly, but rather whether we can develop an organization that can adjust, flex, and importantly, make decisions that are immediately actionable. Our objectives over the past few years has been focused on transforming the entire business into an agile and responsive unit built on sustainable fundamentals which are improved by both experience and real learnings. This allows us to learn as we go forward and provides an action oriented mindset to solving not just reacting to issues that we face but cannot always anticipate. So let me touch on a few highlights of the quarter. First strong business fundamentals supporting the first quarter EBITDA that was above the high end of our outlook and above consensus, even excluding grant income. Outperformance in substantially all of our hospital markets and very solid results at USPI. Both admits continued COVID challenges and severe weather impacts created by winter storm Uri. The storm presented challenges across major parts of our system and our response was immediate, focused, and it resulted in a quick recovery. We are refining and bolstering our USPI portfolio to create a singular focus on surgical care, and there'll be more about that in a minute. Conifer continues to generate strong margins and made strategic moves to further evolve the revenue cycle capabilities, span client offerings, and build on our leadership ends. We successfully signed a new multi-year contract with UnitedHealthcare, four months earlier than the expiration of our current contract. We maintained ongoing discipline with respect to our balance sheet, delivered strong key cash flow, generation of 413 million, which builds on our progress from 2020. And although based on our expectations for the balance of the year, we're raising our outlook Altogether, I should say, were based on our expectations. We're raising our outlook for 2021, and Dan's going to get into those details. In our hospital segment, as I said, substantially all of our markets exceeded their EBITDA budget for the quarter. This positive budget variance was primarily due to high patient acuity, a favorable commercial mix, and a tight management control. The outperformance is also notable given the many obstacles we had to surmount in the first quarter. First, because of winter storm Uri, many markets experienced a significant impact as patients canceled and we had to manage through the related operational issues. As you know, we have a major presence in Texas and other southern states. Those areas were somewhat halted during the snow and the ice, which had a ripple effect on power and water supply. The effect was about two weeks long on operations. So it was not insignificant, especially for those of us who lived and worked in the impacted areas. The outperformance on hospital markets, EBITDA budgets excludes grant income, so that should help provide a truer sense of how we are driving improved performance across all of our businesses. Secondly, we continue to face challenges related to the pandemic. In general, COVID has ramped down, but the peaks, while smaller, remain a continued focus of our markets. We agree the vaccines are a critical component and have engaged wherever possible to speed the rollout. As of the beginning of the week, we had administered more than 327,000 vaccine doses, benefiting more than 147,000 people. We stood up countless vaccine clinics in our facilities and through partnerships with churches, educational institutions, city councils, state and local governments, We focused on enhancing accessibility and bridging the cultural disparity gaps, including helping families and underserved populations. Conifer has done an exceptional job once again with registration and scheduling processes, which are crucial components of our ability to vaccinate within those communities. The team has provided a high touch level of support, both together with tenant and with other clients. For now, COVID does remain a real and ongoing threat, and we have learned to address it as part of what we do versus the exception. Our knowledge of the virus and its unexpected turns has also improved sustainability. Our approach is truly centered on quality and access, everything from providing a safe access point, the establishment of COVID infrastructure, tele-ER services, allowing visitors to see their family members, maintaining constant lines of communication with our patients, physicians, and staff, and rescheduling canceled procedures at a very high rate. USPI had a very strong quarter. And by the way, it faced many challenges. Lingering impacts of COVID in certain geographies and winter storm URIs. USBI had the most significant impact related to the storm in parts of Texas and Oklahoma, with many centers having to shut down, some for up to a week. We experienced high rates of cancellations, but we recaptured over 90% of those cases, which is very consistent with the expectations given the circumstances, and also the case volume appears to continue the acuity levels that we've anticipated and experienced. As I mentioned earlier, we've made some changes to the operational scope of USPI. In addition to the sale of our urgent care platforms, which we expect to complete shortly, we're transitioning 25 imaging centers over to the hospital segment that were particularly managed by USPI because they were tightly linked to our integrated delivery system in those markets. Those two moves support critical elements of our 2021 strategic priorities, including establishing a singular focus on surgical care at USPI. We have already established USPI as the best elective specialty-based surgical platform in the country, which we will continue to scale. Our program focuses on care that is of the highest quality, provided by leading clinicians in their field, that is easily accessible, and that is delivered at a lower cost than the traditional hospital setting. And of course, you are all familiar with the SCD transaction. We completed it in December, which brought 45 quality centers to USPI, primarily in the high-acuity, musculoskeletal space. In Q1, we added three more SCD centers, thanks to our ongoing relationship with SCD and its partner physicians. The integration of the SCD portfolio is on track and is going very, very well. Our new employees appreciate the comprehensive onboarding process, along with the additional support and resources, and we've had positive feedback from our new physician partners. USPI continues developing and addressing a strong portfolio and a strong pipeline, including tuck-in acquisitions, de novos, and other deals in various stages to keep us on schedule with our stated plans. And in addition to the M&A activity in USPI, we also, in the first quarter, in USPI had 16 new service line starts covering a range of specialties, including total joints, spines, and robotic assisted surgeries. In addition, about 530 physicians joined our medical staff at USPI. These are both really clear indicators of demonstrable growth, both organically and by acquisition. By every measure, USPI had a great quarter. And Dan will explain the outlook and guidance for USPI clearly has upside. So let me move on now to Conifer. Conifer had delivered another solid quarter and continued strong margins. You know, last year was a banner year for Conifer in terms of cash and AR day improvement. Both continued to be strong in the first quarter. And we also increase clients' referenceability across all primary lines of business versus the prior year. We have early signs of progress with our, quote, new growth, end quote, initiative with contract extensions of existing clients like North Shore University Health Systems and LCMC Health. Our new business pipeline is also growing as we look at how we can further differentiate Conifer with point solution capabilities, which are essentially capturing opportunities on the front mid and back end of the cycle. When you think about the overall healthcare journey, there are roughly eight or nine points along that spectrum. While some clients may still seek the complete end-to-end solution, others can benefit from Conifer's best-in-class service and years of expertise at other point solutions throughout the revenue cycle. And finally, Conifer continues to grow its executive leadership team. adding a new CHRO transition from within Tenet, who led our GBC efforts to boost talent efforts as we prime for growth and enhance our global workforce and prepare for the spin. We also created the new position of Chief Technology Officer, who will join Conifer this week and will help accelerate our innovative MIRMAP patient experience and tech-enabled programs. The first quarter was another very vivid example. of how the business fundamentals properly adjusted for the situations we face results in sustainable performance. These are not a result of luck, but rather data-driven real-time analysis, properly executed and repeated. And with that, I'm now going to turn it over to Dan for discussion of the quarter and guidance. Dan?