Tenet Healthcare Corporation

Good morning and welcome to Tennant Healthcare's second quarter earnings conference call. All participants are in a listen-only mode until the Q&A session begins. If you would like to ask a question, please press star 1 on your telephone keypad. You will hear a tone acknowledging your request. Tennant asks that callers limit themselves to one question to allow for as many people to get through the queue as possible. I'll now turn the call over to Tenant's Vice President of Investor Relations, Regina Netherly.

Thank you. We're pleased to have you join us for a discussion of Tenant's second quarter 2021 results, as well as a discussion of our updated financial guidance for the year. Tenant's senior management participating in today's call will be Ron Rittenmeyer, Executive Chairman and Chief Executive Officer, Dr. Sam Sattaria, 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. Tenant 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, subsequent Form 10Q filings, 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 to discuss our second quarter. To start with, as we take a look at our results, I wanted to offer somewhat of a look back on where we are, particularly in the context of what we set out to do as part of our transformation a few years back and even how that transformation has pivoted considering COVID, other challenges we have managed through, and the opportunities we've captured as recently as second quarter. The cornerstone of our strategy remains our commitment to our four pillars of compliance, quality, service, and safety, which drives consistent improvements resulting in the performance trajectory we have noted for the last several quarters. The results thus far have provided a solid first half of this year. and you can see how we are building a truly unique and diversified operation following the strategy we discussed the last few years. The results are in line with the strategy, which we have closely followed, which have resulted in greater diversified EBITDA streams, targeted inflection points for growth, top quality environments for our patients, and the addition of highly skilled physicians covering important and high demand specialties. The output is greater financial strength with greater cash flow generation and a more agile setting overall at every level of the enterprise. And importantly, we have incorporated community-based programs which have bolstered our ESG commitments, ensuring our sustainability has broad and a strong base going forward. The second quarter and the first half of 2021 have been better than expected on many fronts. This was largely driven by the continued commitment of our strategy, our extensive use of data and analysis, which have allowed us to trace deviations quickly, take action as needed, and thus ensured a focus on execution at every level. We've created an environment as COVID cases decreased in which doctors and patients are comfortable coming back to our hospitals and ASCs, and we continue to invest in our service lines and community relationships which helped ensure a very accessible health system over the last year. We certainly believe in the results support that this approach has been successful. We also believe we have more to accomplish to ensure the approach remains a solid part of our foundation going forward. Please realize we're not claiming any victory and we're not relaxing other than to recognize the trends remain strong and importantly consistent and underscore our commitment to continuing this development and ensure deeper routes are generated system-wide. I would like to take a moment to comment from our perspective on the current COVID situation. Clearly, the variants coupled with the unvaccinated individuals has resulted in an uptick in certain parts of the country. Our COVID inpatient numbers remain low, roughly 4% of our total cases as of now. And while we've seen increases in selected markets, given our experience, we're really able to manage through this like we did when we were hit with other waves earlier last year. We have sufficient PPE on hand. We have sufficient capacity across every market and facility, and we remain vigilant to any changes that occur, taking appropriate action to continue to process cases effectively based on current and anticipated conditions. Vaccinations continue to play a crucial role in bringing down the number of COVID inpatients and the number of patients once infected who become seriously ill. We continue to support the vaccination rollout on our own employees and the public at large, advocating for and communicating the significant benefits of vaccinations and other necessary precautions to everyone in our communities. In addition, all of our COVID safety protocols remain in place in our field locations and have been highly effective in continuing to ensure staff infection rates remain low. Focusing back now on the second quarter performance, there are several strategic and financial highlights which deserve some discussion. As you can see in the numbers, we are delivering a much stronger growth trajectory on the hospital side in terms of admissions, outpatient visits, ER volumes, and surgeries. In particular, the higher acuity work that we have been focused on with general surgery, cardiovascular, ortho, neuro, et cetera, have been steadily progressing in key markets across the country. For example, last week in El Paso, we announced the expansion effort to increase capacity and serving growing needs along the eastern regions of the city. The new project, to be carried out over the next year and a half, will include the addition of 30 telemetry units, a third cath lab equipped to provide a higher level of care for patients with stroke symptoms, enhanced capacity to the NICU, and continued efforts to expand trauma services and robotics. San Antonio. We will soon move forward on our plans to build a new medical campus as the city continues to expand. This multi-phase project is slated to begin later this year and will include medical office buildings and ASC and acute care hospital with the potential for additional medical and retail entities in the future development phases. We plan to invest in critical services including cardiovascular, maternity, and surgical care at a scale that is commensurate with the needs of that area. Oncology is another area of focus, as we recently announced a new affiliation between Memphis-based St. Francis Healthcare and world-class West Cancer Center and Research Institute, which is an independent, comprehensive cancer center. The project will include a new cancer urgent care center at St. Francis, the first of its kind in the area, as well as a specialized hospital within a hospital with dedicated oncology beds and an investment in the latest treatments. all staffed by professionals trained in cancer care. In addition, St. Francis has the largest number of surgical robots in one location in the Mid-South, which the surgeons of West Cancer will use to perform minimally invasive surgeries that can lead to shorter hospital stays and faster recoveries. Our commitment to attracting and retaining quality physicians remains a critical element of our growth strategy. That effort spans multiple service lines across our hospital portfolio and especially in USPI. For example, in Palm Beach, we're completing the build-out of a large physician group focused on general surgery with specialization of care and a team environment to best serve the larger community. In Phoenix, we have a highly talented group of physicians in our Build More Cardiology group, and we've been working to significantly expand their in-market presence. In Palm Springs, We're building a top-quality, multidisciplinary orthopedics, hand-foot surgery, spine, and trauma group. And with USPI, we've added more than 570 physicians joining our medical staffs during this quarter, bringing the number now that have joined to 1,100 year-to-date. These are only a couple examples, and there's more to come. Together with the investments I mentioned earlier on expansions, these activities are actively supporting our current performance and we see a long runway in front of us. Finally, focusing on our hospital portfolio, as you know, we recently announced the sale of our Miami-based hospitals, which is compelling for several reasons. We received an attractive multiple for the transaction from a credible and experienced buyer who will support the continued development of these facilities. Conifer remains the revenue cycle provider post-sale. Florida remains a very important part of our portfolio. as our five Palm Beach hospitals, which continue to grow and improve, coupled with more than 40 Florida ambulatory assets, ensures a very strong viable network in this continually growing area. This is supported by our successful physician recruitment efforts in the state, and specifically in the greater Palm Beach market, as we focus investments on procedural care modernization, programmatic service line development, market branding, and overall expansion to meet current and future community needs. Strategically, the Miami transaction also continues the objective of diversifying our EBITDA further to our ambulatory segment, which we project to be approximately 43% or so by the end of the year. Our hospital portfolio is now positioned as the number one or two in 70% of our markets, and with the Miami sale, that number will edge higher. Now let's take a minute and move to USPI. USPI had a very good quarter in line with our expectations, and the mix of business continues to be weighted towards higher acuity cases in comparison to 2019. The integration of SCD facilities has been going well, and in terms of other development activity, we added four facilities to USPI in Q2. We continue to pursue the same type of opportunities we've spoken about previously, and we have a healthy and strong pipeline that we're working to deploy. That includes USPI's traditional three-way model, as well as a greater two-way opportunities, both of which foster direct collaboration between USPI and local physicians. And we are continuing our historical strong efforts on developing dominoes in which we handle all aspects from syndication to first patient. Organic growth opportunities continue to remain substantial. throughout the balance of the year and beyond at USPI. USPI has, in-house, a very advanced service line and development team. And in the second quarter, for example, we added 25 new starts for service lines across a range of specialties, bringing that total to 45 year-to-date. We also remain a leader in musculoskeletal surgery, and the depth of our platform across other types of procedures keeps expanding, allowing our facilities to continue continue to hit important milestones servicing the needs of their respective communities. Quality remains a cornerstone of Tenant's overall mission as a company, and USPI, given its more intimate patient experience, continues to set a high bar in this area. USPI's patient experience results have again earned important recognition in the last year. For example, all but one of our eligible surgical hospitals earned a four- or five-star rating in the most recent HCAHPS Let's take a minute and talk about Conifer. Conifer continues to deliver strong margins, remain on track with our growth plans, and we've made some opportunistic hires at all levels as our pipeline has begun to expand. We are in the middle of a more targeted and efficient tech transformation at Conifer, as well as the Global Business Center, both defining and accelerating our innovation roadmap. Technology as an offering has moved to the forefront and become one of our main strategic pillars. And we recently hired a new chief technology officer at Conifer who will advance these efforts significantly. Operationally, we continue to deliver strong cash collections on behalf of our clients at Conifer over the last year, and we remain very pleased with that performance. So in closing my remarks, the second quarter was a very tangible example of how clear and direct business fundamentals properly adjusted for the situations we face, result in sustainable performance. We are a data-driven, real-time analysis company who properly executes on a consistent trajectory. And when you reflect on the last years, our results have been consistent and directionally aligned with our strategy and, above all, transparent. So with those comments, let me now turn it over to Dan for discussion of the quarter in greater depth and discuss our guidance. Dan?