Earnings Call Transcript - NUTX Q4 2025

Operator, Operator

Greetings. Welcome to Nutex Health's Fourth Quarter and Full Year 2025 10-K Earnings Call. Please note this conference is being recorded. At this time, I'll now turn the conference over to Jennifer Rodriguez, Investor Relations Manager. Thank you, Jennifer. You may now begin.

Jennifer Rodriguez, Investor Relations Manager

Good morning, everyone, and welcome to Nutex Health, Inc. Fourth Quarter and Full Year 2025 Earnings Call. My name is Jennifer Rodriguez, and I'm happy to serve as your moderator today. We're truly grateful for your participation and your continued interest in our company as we share the highlights of another exceptional year. Please note that this call is being recorded for future reference. Joining me this morning are some of the key leaders driving Nutex Health forward: our Chairman and CEO, Dr. Tom Vo; our Chief Financial Officer, Jon Bates; our President, Dr. Warren Hosseinion; and our Chief Operating Officer, Wes Bamburg. Together, they'll provide prepared remarks to give you a comprehensive view of our performance, strategies and vision, after which we'll open the floor for your questions. Before I turn this over to Dr. Vo, I'd like to take a moment to address a few important points. Today's discussion may include forward-looking statements, which reflect management's current expectations about our future performance. These statements are based on what we know today but are subject to risks, uncertainties and other factors that could cause our actual results to differ from those anticipated. For a deeper dive into these forward-looking statements and the factors that might influence them, I encourage you to review the press release and Form 10-K filed earlier this week, as well as our various SEC filings. You'll find all the details there. Additionally, we may reference non-GAAP financial measures such as adjusted EBITDA during the call. For those interested in how these metrics reconcile to GAAP standards, please refer to the press release and Form 10-K, where we've included that information. With those housekeeping items out of the way, it's my pleasure to hand the call over to Dr. Tom Vo, our Founder and Chief Executive Officer. Dr. Vo, the floor is yours.

Thomas Vo, CEO

Thank you, Jennifer, and good morning, everyone. Thank you for joining us today. It's a pleasure to meet with you as we review Nutex Health's fourth quarter and full year 2025 results. This past year has been one of exceptional growth, operational discipline and continued innovation as we advance our mission of delivering high-quality, concierge-level accessible healthcare to the communities we serve. Our organization remains deeply committed to a patient-first culture and I'm really excited to walk you through the accomplishments, strategies, and opportunities that shape our year. First, let's discuss the full year 2025 financial and operational performance. Total revenue reached $875.3 million, an 82% increase from $479.9 million in 2024. Net income increased from $7.8 million to $52.1 million during '24. Note that this includes a noncash expense of $117 million for stock-based compensation for 2025 in the form of a one-time obligations of earnout shares issuable to qualifying under construction and ramping hospitals. This expense would decrease drastically in future years as most of the under construction facilities from 2022 have already vested. Adjusted EBITDA, which includes the add-back of the stock-based compensation, rose to $259.6 million, up 152.6% from $102.8 million in the prior year. On the volume side, our hospitals recorded a total of 188,300 patient visits, up 11.8% from 168,400 in 2024. 1.3% of that growth came from mature facilities, demonstrating their resilience and continued relevance in their markets. On the balance sheet, even with three new hospitals opening in 2025 and early 2026, the current portion of long-term debt decreased slightly from $14.4 million to $13.2 million. Net long-term debt increased from $22.5 million to $29.2 million, still very low relative to our revenue and expansion pace. Net cash from operating activities was $248.1 million for the 12 months ended December 31, 2025. Cash on hand grew dramatically to $186 million as of 12/31 2025, up from $41 million a year earlier. Next, I'd like to touch on the fourth quarter financials. During the fourth quarter, we recognized a one-time $55 million revenue reduction related to the cumulative true-up of 18,950 arbitration claims that were deemed ineligible by our traders under the IDR process. The periods involved were from July 2024, when we first started through arbitration and IDR, through the end of December 2025. This reconciliation resulted from a mid-2025 CMS directive instructing IDRs to resolve and clear the existing backlog of disputes. Unfortunately, this process was very slow on the inefficient side and involved many other providers, including ourselves. This catch-up period reduced the number of active disputes compared to the same period last year, consequently lowering reported net revenue for the quarter. It's important to emphasize that this was a one-time reconciliation driven by the CMS mandate. To put this number into perspective, approximately 18,950 claims deemed ineligible equate to an average of roughly 1,050 claims per month. According to Halo MD, our IDR consultant, the ineligible rate for Nutex Health is roughly 8%, significantly better than the national average of approximately 19%, indicating that our processes are performing well above industry norms. Additionally, Halo MD is continuing to challenge the ineligibility determinations for a portion of these claims. Should any of these disputes be resolved in our favor, associated revenues will be added to future monthly and quarterly financial results. Excluding the impact of this adjustment, our Q4 2025 adjusted revenue would be approximately $206.7 million, consistent and in line with revenue levels from previous quarters. Even with a slight decrease in accrued revenue, operating cash flow remained very strong. Net cash provided by operating activities was $70.4 million in the fourth quarter compared to only $100,000 in the same quarter last year, demonstrating that cash collection continues to perform very well. We encourage investors seeking a deeper financial understanding of our business to focus on the full period from 2024 to December 2026. Quarterly results can appear lumpy due to the natural rate constraints of accrual-based accounting, which can shift the timing of revenue and expense recognition. Jon will provide additional insights into these dynamics later in the presentation. In terms of arbitration and IDR process performance, we continue to perform well within the IDR framework. It is now a normal part of our revenue cycle process, with 50% to 60% of our claims submitted through the IDR process. When a determination is issued, we prevail in over 85% of those cases, demonstrating that insurers are still underpaying in 85% of the cases that we sent to arbitration. We are also realizing an average cash collection rate of more than 85% in our legal determination wins. We are actively monitoring the forthcoming IDR final rules from the Office of Management and Budget and other federal agencies. At this time, we do not expect any material changes to the current process and remain optimistic that the final rule will further strengthen and streamline the IDR process with additional end dates for insurers to comply. An example of a more efficient IDR system would be one that avoids the 18-month true-up that we just experienced for the fourth quarter. On the regulatory and legislative outlook front, we are closely watching the progress of the No Surprises Enforcement Act, also known as the Murphy Act. It is designated as HR 4710 in the House and S-2420 in the Senate. These bills are currently under review in the House Committees on Energy and Commerce, Education and Workforce, and Ways and Means. In the Senate, it is currently being reviewed in the Health, Education, Labor, and Pension Committee. Our 2025 financial and operational results demonstrate the strength of our model, the scalability of our platform, and our focus on three core metrics: ER visit growth, inpatient volume growth, and revenue per patient. Many of you know, Nutex Health has operated since 2010 more than a decade as a private company. Our micro hospital model, built on concierge-level, high-accessible care, delivers consistent and respectable profitability. After going public in 2022, we faced challenges primarily driven by the faulty implementation of the No Surprises Act, which materially reduced reimbursement across our industry. The authors of the No Surprises Act correctly anticipated that insurers might use the payment process to underpay smaller providers like us. For that reason, Congress included the independent dispute resolution (IDR) process as an essential safeguard, giving providers a meaningful avenue to challenge unfair reimbursement. This mechanism ensures that insurers do not have the unchecked ability to dictate payments unilaterally, effectively determining winners and losers in the marketplace and undermining fair competition, resulting in an imbalance that distorts the healthcare ecosystem. In many ways, this is truly a David and Goliath struggle. As we enter the next phase of our growth, we are fortunate to have strong liquidity and adequate cash on hand. This financial position allows us to remain disciplined and highly return-focused. Our capital allocation strategy continues to center on four priority areas: first, share repurchases. Share repurchase activity underscores our conviction in the intrinsic value of Nutex Health. We launched a $25 million repurchase program in late 2025 and completed it in early 2026. Earlier, we authorized an additional $25 million for further repurchases. These programs reflect our commitment to delivering shareholder value through prudent, accretive capital deployment. Second, growth at existing hospitals. Our existing micro hospital footprint remains a powerful engine for organic growth. We are heavily investing in both the ER and inpatient volume initiatives to expand capacity on service lines and enhance revenue quality. In terms of the ER volume initiative, we are strengthening community engagement, expanding referral pathways, and diversifying service offerings. Targeted investments, including services such as medical detox programs, behavioral health services, outpatient imaging, and patient procedures, are in addition to our normal ER volume and will help expand patient access and improve the overall revenue mix. Regarding the inpatient volume initiative, we are enhancing specialized equipment to capture more high-acuity cases and reduce unnecessary transfers. We are excited because, with advancements such as AI, medical devices, and biopharma, there are more cases that we could treat at our micro hospitals than ever before. We have also expanded inpatient nursing and ancillary capacity and are adding tele-specialist coverage for all of our hospitals in the coming year. These upgrades allow us to manage high-acuity patients within our facilities, increase retention, and strengthen contributions in our markets. Wes, our COO, will discuss more on this operational aspect later. Third, we are expanding our Independent Physician Association (IPA) and hospital division. Our IPA currently operates in Los Angeles, Phoenix, Houston, and South Florida and continues to be a strategic advantage. It strengthens our relationships with primary care physicians, enhances care coordination, and supports bidirectional referrals. This expansion positions us more effectively within risk-based and value-based reimbursement models, and our goal will be to operate as many IPAs around our existing hospitals as possible. Warren will discuss this more in detail when he speaks later. Finally, our real estate development strategy involves evaluating opportunities to develop micro hospitals using a capital-efficient real estate model. We plan to develop and own the facilities during the stabilization period, building both operational and real estate value, and possibly eventually executing sale-leaseback transactions to recycle capital into future projects. This approach preserves strategic control of early-stage operations while enabling accelerated expansion without over-leveraging the balance sheet. Today, Nutex Health operates 27 hospital facilities across 12 states. In 2025 and early 2026, we opened new hospitals in Sherman, Texas, St. Louis, Missouri, and Amble, Texas. We are actively building a pipeline of new hospitals for later in 2026, 2027, and 2028, starting in 2029. Each facility is designed around the same principles—concierge-level care, little to no emergency wait times, and tailored inpatient and outpatient services that meet the needs of the local community. It remains strong. Physicians and community leaders across the country continue to approach us weekly about opening new facilities in their markets, and we are trying to keep up with demand. Additionally, we are in ongoing communication with payers and continuously reviewing their in-network contracts to evaluate whether the terms offered are fair and reasonable. The good news is that we are now receiving better offers than we have in the past. In closing, it has taken approximately 2.5 years to recalibrate our operational and reimbursement strategies. I am very pleased to share that in 2025, we returned to the level of profitability that our model has historically produced. Over the years, we have operated under four different administrations, navigated the complexities of the Affordable Care Act, driven through COVID, overcoming the challenges of the No Surprises Act, and are now actively optimizing our approaches to the IDR process. While no one can predict the future, our longevity and experience across multiple healthcare cycles gives me confidence that Nutex can continue to pivot effectively against any geopolitical or regulatory headwinds. We are very excited about the trajectory of Nutex Health as we enter 2026. We are carrying significant momentum, and we believe we are very well positioned to continue our disciplined, profitable growth. So with that, I'll turn it over to Jon Bates, our CFO, to walk through the financials in more detail. Jon?

Jon Bates, CFO

Thanks, Tom. I appreciate that, and good morning, everyone. I'm very excited to break down the financials for Nutex Health's fourth quarter and full year 2025, a year where we didn't just grow, but we continued to improve our business model while delivering on a record year for the company. Tom has given you some of the big picture, and I will zoom in to a little more detail, beginning with the full year of 2025 results, and then we'll discuss the fourth quarter of '25 as well. So starting with the 12 months ended December 31, '25 compared to the same period in 2024. I wanted to start by highlighting the fact that the company worked very hard in 2025 to continue to improve our overall controls environment, and that effort enabled us to remediate all previously disclosed material weaknesses in internal controls over financial reporting in 2025. It's a huge accomplishment that shows our commitment to having a solid control environment that can be relied upon by our shareholder base and the investment community. Now on to some of the numbers. Total revenue for the full year of 2025, as Tom indicated earlier, increased by 82.4% or $39.5 million, up to $875.3 million versus $479.9 million for the full year of 2024. Hospital division revenue was $844.2 million in 2025. Of this, $7.8 million or approximately 63% was related to a combination of both higher acuity claims as well as success through the IDR process. For some perspective, we reduced this by 7% from the third quarter of 2025 when we were closer to 70%. Regarding arbitration-related revenue, we submitted between 50% to 60% of our claims through the IDR process, which came down approximately 10% from the third quarter as well. When an award determination is made, we currently prevail in over 85% of those determinations, and we have an average collection rate of over 85% of those determination wins. From an arbitration cost perspective, it's approximately 26% of that arbitration-related revenue. Of the total revenue increase, mature hospitals increased their revenue by 73.4% for the year 2025 versus the same period in 2024. Hospital visits, as Tom indicated earlier, increased by 11.8% or 19,891 visits to 188,279 visits in 2025, compared to 168,388 visits in the same period in 2024, with those mature hospitals growing at 1.3% over the same period. Additionally, the Population Health division had slight revenue growth of 0.7% to $31 million for the year 2025 versus $30.9 million for the same period in 2024. In addition to the revenue and visit growth noted above, facility and corporate costs also showed improvement for the year of 2025 relative to 2024. Total facility-level operating costs and expenses increased $147.3 million during the period but only represented 49.2% or $431 million of total revenues for 2025 versus 59.1% or $283.7 million for the same period in 2024, an effective decrease of just under 10%. Of the $147 million increase for the period, $138.3 million related to the arbitration costs for the additional arbitration revenue booked during this period. Total stock compensation expense for the 12 months ended December 31, 2025, was $117 million compared to only $16.6 million in the same period of 2024, which is a $100.4 million increase in '25, and almost all of this increase was related to the three hospitals that completed their earn-out periods during the third quarter of '25. Now we do have three more facilities currently in the earn-out period, with one of them completing the earn-out period in the first quarter of '26 and the remaining two facilities completing their earn-out periods in the fourth quarter of '26. The gross profit for the 12 months in 2025 was $444.3 million or 50.8% of total revenue, compared to $196.3 million or only 40.9% of total revenue in the same period in 2024, marking just under a 10% increase for the 12-month period ended December '24 versus 2025. From a corporate and other cost perspective, general and administrative expenses as a percentage of total revenue for the 12 months ended '25 decreased to 5.9% or $51.7 million from 8.7% or $41.9 million for the same period in 2024. Operating income for the 12 months ended December 2025 was $275.6 million compared to $130.7 million for the 12 months ended 2024, which is an increase of $144.9 million. Net income attributable to Nutex was $70.8 million for 2025 compared to net income of $52.1 million for the 2024 period, an increase of $18.7 million. Adjusted EBITDA attributable to Nutex increased $156.8 million or 152.6% from $102.8 million in 2024 to $259.6 million in 2025. Now let's move on to discussing the fourth quarter of December 2025 and compare those results to the fourth quarter in December 31, 2024. Tom indicated some of this in his earlier discussion. For the fourth quarter of 2025, our total revenue did technically decrease by 41.1% or $105.9 million to $151.7 million versus $257.6 million for the fourth quarter of 2024. With a little more context, the company attributes this $105 million decrease primarily to two items that we disclosed in our press release. The first was the one-time $55 million cumulative true-up of 18,950 arbitration claims that arbitrators determined to be ineligible in the fourth quarter of 2025 under the independent dispute resolution process. These claims were submitted for the period from July '24 through December '25. It seems that this cumulative arbitration true-up resulted from a mid-2025 CMS directive directing certified independent dispute resolution entities to address and clear any backlog they had of their disputes. We believe the backlog has been materially addressed but will continue to watch the process very closely. The second item was arbitration revenues of $69 million from the previous year 2024 that related to submissions that were in that related to the third quarter of 2024 and recorded as revenue in the fourth quarter of 2024. After considering the impact of the adjustments above, including the $69 million, our 2025 fourth quarter revenue would be $206.7 million, while the 2024 fourth quarter revenue would be $188.6 million, resulting in a revenue increase of $18.1 million period-to-period, primarily driven by higher patient business in the fourth quarter of 2025 compared to the fourth quarter of 2024. I want to take a step back and explain how we accrue revenue for the company for those not as familiar with it. If you look at it, the company has been predominantly out of network for over a decade in its billing processes. Therefore, we have to negotiate most of the claims that are sent to payers based on what we believe we should be paid using market industry payment data. In our accrual process, three key items are considered: payments by each specific payer, by each specific location of the visit, and by the specific acuity level of that visit. We take averages of those results over the recent past—let's say, one to two years of activity—and then we attach those averages to a current period visit with similar characteristics, which then sets our accrual of realizable accounts receivable and revenue in the month of the visit. As payments come in, we adjust the accruals up or down based on the results, with the net impact being recorded to revenue in the period when the payment is ultimately received. This is how we've been doing it since inception. In the case of the arbitration activity, we added a layer to our standard revenue accrual process. Due to the nature of the new arbitration process, we continued to build this additional layer as we have more and more data. In the case of the ineligible claim write-down in the fourth quarter of 2025, there had been a nominal number of items that we had seen and accounted for in our normal accruals up through the third quarter of 2025. But certainly, there was nothing material in there. We were not aware of any material indications in this area that ultimately led to the one-time true-up of outstanding disputes in the fourth quarter of 2025 that arose in the fourth quarter. The fourth quarter 2025 total facility level operating costs and expenses increased $10.5 million to $105 million compared to $116 million for the same period in 2024. Total stock-based compensation for the three months ended December 31, 2025, was a credit of $2.6 million compared to an expense of $14.6 million for the same period in 2024. Operating income for the fourth quarter of 2025 was $30.9 million compared to $114 million in the fourth quarter of 2024, representing a decrease of $83.4 million quarter-to-quarter. Net income attributable to Nutex was $11.8 million in the fourth quarter of 2025; in comparison, the comparable net income was $61.6 million for the fourth quarter of 2024, showing a $49.6 million decrease quarter-to-quarter. Adjusted EBITDA attributable to Nutex decreased $70.1 million from $86.7 million in the fourth quarter of 2024 to $16.6 million in the fourth quarter of 2025. We believe that the fourth quarter numbers aren't necessarily representative of a typical quarter due to the effect of that one-time cumulative arbitration true-up discussed previously. We believe that looking at the year-to-date numbers represents a much better picture of the company's strength as we continue to grow in visits and volume, and our cash flow continues to be extremely strong, with over $207 million in hospital receipts collected in the fourth quarter of 2025 alone. Looking at our balance sheet, it remains very strong with cash and cash equivalents at December 31, 2025, at $185.6 million, up $144.9 million or 356.6% from just $40 million at the end of December 2024. Additionally, the accounts receivable balance was $319.4 million compared to $232.4 million at the end of 2024, and our consistent strong collections throughout the year provides us continued confidence in this increase. Regarding cash flow, net cash from operating activities increased by $225 million for the 12 months ended December 2025 to $248.1 million, compared to only $23.2 million for the same period in 2024. On the liability side, as Tom indicated, our total bank debt increased by $2.1 million to $43.5 million at December 2025 from $41.4 million at December 2024, with the majority of this debt relating to equipment loans for items such as MRIs, x-rays, ultrasound, and CTs—the main equipment that supports our facilities. This represents a very slight increase in debt for a company of our size, especially with opening two new facilities in 2025 and another in early 2026. With all this said, our balance sheet remains very solid, providing ourselves with the flexibility to execute on our growth plan in 2026 and beyond. Now on to Warren Hosseinion, our President, for a population health update. Warren?

Warren Hosseinion, President

Thank you, Jon, and good morning, everyone. It's great to be with you today to discuss how Nutex Health is advancing population health management, an important piece of our mission to deliver sustainable, impactful healthcare. In 2025, we made strides in this area, and I'm excited to share our progress, the strategies driving it, and our plans to keep pushing forward. Let's start with where we are today. Our Population Health Management division now oversees a diverse group of approximately 40,000 members across our platform, including a mix of Medicare Advantage, commercial, and Medicaid managed care members. That's a broad reach, and it's growing because of the trust we've built through our Independent Physician Associations (IPA). I am happy to report that each of our four operational IPAs was profitable in 2025. Our strategy revolves around physician networks; our IPAs are comprised of networks of contracted and credentialed primary care physicians and specialists located around our facilities. Building strong partnerships with local doctors is critical. By forming these IPAs, we are increasing awareness of our hospitals among the local community, doctors, and their patients. Why do the physicians join our IPA? We offer these physicians ownership in our IPAs, opportunities to participate in our Board and committees of the IPA, and the chance to get on the staff of our hospitals so they can admit and follow patients. We also incentivize the physicians to achieve high-quality metrics. We believe that over time, these relationships will not only increase the volume of patients to our hospitals but also create a web of care that is seamless for patients. Our vision is that our hospitals and IPAs will work hand-in-hand to amplify our reach and effectiveness. We are fostering collaboration, sharing best practices, and ensuring every provider is aligned with our patient-first culture. We are growing our IP strategically, focusing on areas near our hospitals to leverage existing relationships and infrastructure. In 2025, we launched a new IPA in Phoenix. In 2026, we plan on launching two IPAs, one in Dallas and one in San Antonio. Going forward, our strategy focuses on three areas: provider network expansion by partnering with physicians in high-value markets, value-based contract growth by increasing the number of covered lives under management, and technology scaling by enhancing our analytics and care management platform. With that, I'll turn it over to Wes Bamburg, our Chief Operating Officer.

Wesley Bamburg, COO

Thank you, Warren, and good morning, everyone. As mentioned earlier, volume is up. For the year 2025, total patient visits were up 11.8% from 2024, with mature hospital visits growing at 1.3% over the same period. This performance highlights solid demand and the disciplined execution behind our ER and inpatient initiatives. From an operational standpoint, our focus throughout the year has been ensuring that our investments translate into consistent execution across every facility. As we broaden our service offerings, ranging from medical detox and behavioral health to advanced outpatient imaging and procedures, we have been building the operational infrastructure required to support higher throughput and a more diversified patient mix. This includes standardizing workflows, strengthening our intake and triage processes, and enhancing staffing models to seamlessly accommodate increased ER demand while protecting the patient experience. On the inpatient side, the expansion of specialized equipment and tele-specialist capabilities has allowed us to manage more complex patients safely and effectively within our hospitals. Operationally, we've paired these enhancements with stronger clinical governance, upgraded care pathways, and expanded training to ensure that higher acuity care is delivered consistently and with quality across the enterprise. These efforts are already improving patient retention, reducing avoidable transfers, and supporting stronger contribution margins. From a cost management perspective, 2025 was a transformative year, driven largely by the ongoing advancement of our corporate purchasing and supply chain teams. Excluding arbitration expenses, operational costs were 33.4% of total revenue for 2025, down from 47.1% in 2024. Over the past year, this function has become centralized, disciplined, and data-driven, giving us greater ability to engage more effectively with key vendors. As a result, we secured significantly better pricing on major imaging equipment, including MRI and CT scanners, as well as improved rates on lab instruments and reagents, which have historically been among our highest cost items, so the impact on margins is meaningful. Lastly, during 2025, Nutex received more than 8,700 patient reviews, averaging an enterprise rating of 4.8 out of 5, a level of satisfaction that continues to set us apart in the healthcare industry. This performance reflects the strength of our model and mission, which are built around delivering concierge-level service, little to no ER wait times, and a highly personalized patient experience. As we scale, we are advancing system-wide standardization, both in how we engage with patients and in the care we deliver, ensuring that every Nutex facility delivers consistent outcomes, service, and a best-in-class experience. These foundational elements continue to differentiate Nutex in a sector where patient satisfaction and reliability are critical drivers of long-term value. Across the organization, our teams remain deeply focused on reliability, scalability, and disciplined execution. As we grow, we are firmly committed to ensuring that every new Nutex facility delivers the same high-quality patient-centered care that defines our brand and supports our long-term growth. Thank you, everyone, for your time, and back to you, Jen.

Jennifer Rodriguez, Investor Relations Manager

Thank you, Wes and team for those updates. I will now turn it over to our operator, Rob, who will begin the Q&A portion of the call.

Operator, Operator

Our first question will be coming from the line of Thomas McGovern from Maxim Group.

Thomas McGovern, Analyst

I want to start with some IDR-related questions, right? Historically, and on today's call, you've discussed IDR submission rates in the range of 60% to 70%, with historical collection rates hovering around 80%. If we look at the press release, it actually says that the submission rates were 50% to 60% with improved collections of around 85%. So I just wanted to see if you guys could help us reconcile this shift. Is this a reflection of maybe higher quality, fewer submissions but higher quality, and that's leading to improved collections? And how should we look at this dynamic moving forward?

Jon Bates, CFO

No, I was just going to say—yes, you're right, Thomas. Obviously, we've seen—and the goal here in the independent dispute resolution is, ultimately, if we can get to a situation where we're able to get these claims resolved prior to arbitration, that's a win. So of course, up through now to the third quarter, we were submitting a higher percentage, and historically, it was around that 60% to 70%. But what we've seen in the last quarter, now cumulatively, is that the impact is a little bit less, which we hope will be the trend moving forward, with a higher resolution rate without arbitration. So I think it's partly some of that going on for sure, and it's something we're going to watch closely as we continue to monitor reimbursement rates, which have stayed very strong throughout the year. As you know, even if we are able to settle some of these earlier in the process through open negotiations, even if slightly less than what we feel is being paid at fair and reasonable rates, once you consider the cost component and net perspective, it can end up being more positive. So we don't view it as negative at all; we see it as an opportunity moving forward.

Thomas McGovern, Analyst

It sounds like solid improvement with open negotiations. And obviously, you don't have to do a whole drawn-out arbitration process. That's great for you guys. Great. So next question from me. You guys recently reopened a hospital in Texas back in January. What led to that decision? What are you seeing in that market now that leads you to believe this is the right time to do so? And a follow-up to that: Do you believe that you're on track to open the five to six facilities you've discussed in the past in 2026? And maybe if you could—Tom, you mentioned a new real estate strategy that you might touch on that and how that might impact your planned openings in the year.

Thomas Vo, CEO

Yes, thank you, Thomas. So the first question about our Amble Hospital: we did have to close it when we were going through the No Surprises Act issue. After we established the IDR process, reimbursements got better. When that happened, it became the right move to reopen, simply because we knew there was volume there. The volume we saw prior to the IDR may not have been enough to make it a profitable operation, but with the IDR process and better collections, it made sense. On top of that, we have become much better at the inpatient side since then. So now that we're much better at handling more inpatient care, opening a slightly bigger hospital with more inpatient beds made better business sense with a better projection. Does that answer the first question, Thomas?

Thomas McGovern, Analyst

Yes, yes. And then just a reminder, the second part of that question is: do you believe you remain on track for the five to six openings in '26 that we've discussed in the past? And just how your new real estate strategy might influence the timing or scope of these openings?

Thomas Vo, CEO

Yes. So the five to six locations are both for '26 and '27. In 2026, the three locations that are on track to be opened are Jacksonville, West Little Rock, and San Antonio. Those are the three for sure this year that are essentially being finished with construction by the third quarter. On top of that, we are already working on '27 and '28, and we project probably another four hospitals to open in '27 and probably another four after that in '28. Regarding the real estate strategy, now that we're fortunate to have some cash in the bank, the idea is to explore ways where Nutex could essentially start the development on new hospitals. Once a hospital has stabilized, we could convert it to a REIT or sell it to a real estate investor, take that cash out, and reinvest in the three to four new projects moving forward. The idea is to recycle that capital. While the initial investment may have some costs associated, we hope to make a small profit on it once we do a sale-leaseback, which would allow us to continue with the pipeline. We have not formalized anything yet, but this is under discussion as an additional way to maximize our cash and deliver maximal shareholder returns.

Operator, Operator

The next question is from the line of Gene Mannheimer with Freedom Capital.

Eugene Mannheimer, Analyst

So Tom, Jon, when did you—when exactly did you learn about the true-up adjustments? And have you given any thought to pre-announcing?

Jon Bates, CFO

Yes, I can talk to that.

Thomas Vo, CEO

Go ahead, Jon.

Jon Bates, CFO

Yes. The earliest indication we were getting was in the middle part of the fourth quarter, and it was very, very new to us trying to understand it. In fact, a lot of it came to us, and we looked at it and said there might even be some instances where we disagree with the ineligibility findings. But long story short, we were getting information in the middle part of the quarter, and it was new to us. It took us a couple of months to go through and analyze it to fully understand the impact derived from these findings. That's the reason we held off on reporting any information sooner as we were finishing out the year.

Eugene Mannheimer, Analyst

Got you. That makes sense, Jon. And when we think about those 19,000 or so claims that were deemed ineligible, I think it's about $2,900 a claim. So is it safe to say these were mostly confined to ER visits and not any inpatient volumes?

Jon Bates, CFO

Yes, that's good insight. A majority of those would be more on the lower acuity side, so yes, most were related to standard ER-type visits, with a blend into maybe one step forward into observation or couple of cases into inpatient admissions, but the majority were indeed ER-related.

Eugene Mannheimer, Analyst

Got you. And one more for me. In terms of any future true-ups that might happen, should there be any—would those also likely to be reserved in the fourth quarter like what you experienced this time? Or could they be trued up at any time?

Jon Bates, CFO

Absolutely. We don't control that process, but I can say that if we see any activity indicating another ineligibility, we will address that as soon as we are aware. We now believe that the backlog issue is materially addressed, there may still be smaller ineligibility cases, but we will monitor and account for them as we see fit, matching our accrual-based approach in real time.

Operator, Operator

At this time, I'll hand the floor back to Jennifer Rodriguez for closing comments.

Jennifer Rodriguez, Investor Relations Manager

Thank you all for those valuable questions and answers. For all those joining us today, if you have more questions, please email us at investors@nutexhealth.com, and we'll get back to you promptly. On behalf of the Nutex management team, thank you all for joining us for our fourth quarter and full year 2025 earnings call. We've covered a lot—growth, strategy, challenges, and our vision—and we appreciate your time and interest. A recording of this call will be available on our website for a limited time, so feel free to revisit it. Take care, everyone, and we look forward to keeping you updated on our journey.

Operator, Operator

Thank you. You may now disconnect your lines at this time, and have a wonderful day.