Good day and thank you for being here. Welcome to the Universal Health Services Earnings Call for the Fourth Quarter and full year of 2021. Currently, all participants are in listen-only mode. After the presentation, there will be a question-and-answer session. I will now hand the conference over to Steve Filton. Please proceed.

Thank you, good morning. Marc Miller is also joining us this morning, and we welcome you to this review of Universal Health Services results for the fourth quarter ended December 31, 2021. During the conference call, we will be using words such as believes, expects, anticipates, estimates, and similar words that represent forecasts, projections, and forward-looking statements. For anyone not familiar with the risks and uncertainties inherent in these forward-looking statements, I recommend a careful reading of the section on risk factors and forward-looking statements in our Form 10-K for the year ended December 31, 2021. We'd like to highlight just a couple of developments and business trends before opening the call up to questions. As discussed in our press release last night, the Company reported net income attributable to UHS per diluted share of $3 for the fourth quarter of 2021. After adjusting for the impact of the items reflected on the supplemental schedule included with the press release, our adjusted net income attributable to UHS per diluted share was $2.95 for the quarter ended December 31, 2021. During the fourth quarter of 2021, our operations continued to be significantly impacted by the COVID-19 pandemic. Specifically, we experienced an increased wave of COVID patients in December 2021, which peaked in January of 2022; the negative impact resulting from this elevated level of COVID volumes was primarily a function of increased labor scarcity issues, exacerbated by the large number of employees sidelined by the virus itself or quarantined due to exposure to the virus. In what was already a very tight labor market, these incremental labor challenges, in addition to pressuring our salary and wage expenses, also suppressed patient volumes in our acute care and behavioral health facilities while causing postponement of certain elective scheduled procedures at our acute care hospitals. Our net cash generated from operating activities was $884 million during the full year of 2021, which includes the unfavorable impact of $695 million of Medicare accelerated payments that were received during 2020 and repaid to the government during 2021. We spent $856 million on capital expenditures during the full year of 2021, which includes the construction costs related to a new 170-bed acute care hospital in Reno, Nevada, that is scheduled to be completed and open next month. Our accounts receivable days outstanding decreased to 50 days during the year ended December 31, 2021, as compared to 55 days during 2020. At December 31, 2021, our ratio of debt-to-total capitalization increased to 40.8% as compared to 37.9% at December 31, 2020. As of December 31, 2021, we had $854 million of aggregate available borrowing capacity, pursuant to our $1.2 billion revolving credit line. In our acute care segment, our ambulatory care development continued in 2021. We currently have 18 operational freestanding emergency departments and partnerships with national third-party entities for further development of ambulatory surgery centers and home health operations in our existing markets. These initiatives are meant to create a more comprehensive care delivery system in each of our markets. Our new hospital in Reno, scheduled to open soon, will enhance our statewide presence in Nevada. Bed tower projects, adding new capacities to hospitals in important markets, are underway at Edinburg Regional Medical Center in south Texas, Henderson Hospital in Las Vegas, and Inland Valley Medical Center in California. Planning is also underway on new acute care hospitals in West Henderson, Nevada, and Palm Beach Gardens in Florida. In our behavioral segment, two new De Novo joint venture hospitals opened in 2021 in Clive, Iowa and Cape Girardeau, Missouri.

Two more new hospitals have opened already in 2022 in Michigan, which is a partnership with Beaumont Health and Wisconsin. And another is scheduled to open later in the year in Arizona in partnership with HonorHealth. These De Novo developments, along with an increased focus on outpatient development in telemedicine in our existing markets, are meant to also build out a more comprehensive continuum of care in the behavioral segment as well.

In anticipation of a continued downward trajectory of COVID volumes from those experienced during recent surges, and relief from the accompanying pressures on our operations and financial results, our Board of Directors authorized a $1.4 billion increase to our stock repurchase program. After the resumption of our share repurchase activity in the second quarter of 2021, we repurchased approximately $1.2 billion of our shares during 2021, and close to $300 million more thus far in 2022. We currently have approximately $1.46 billion authorized for stock repurchases, after giving effect to the recent increase approved by our Board of Directors. Our 2022 operating results forecast, which was provided in last night's release, assumes that the negative impact of the COVID virus will diminish in 2022. While the decline in actual COVID cases appears to be occurring rapidly, we believe the process of backfilling non-COVID cases and most importantly, the easing of workforce shortages, which dominated the healthcare landscape in 2021, will take place more gradually over the course of 2022. We have a host of active initiatives in place to increase the efficiency of recruitment and retention of our clinical staff and also implement innovative care models in recognition that certain changes to the healthcare staff dynamic may last well beyond the decline in COVID cases. While the pace of recovery is difficult to predict, we remain confident in the fundamental underlying demand in both of our business segments, the early signs of which have already been emerging in the last few weeks. Marc and I will be pleased to answer your questions at this time.

Our first question comes from Kevin Fischbeck with Bank of America.

Great, thanks. I guess your guidance for this year looks like it has a margin degradation fee. Can you talk a little bit about how you're looking for the margin outlook in both segments?

I think Kevin, as my opening remarks indicated, that's premised on the idea that the stabilization of the labor markets will be a more elongated process than the volume recovery. So, we have a notion that while our volumes and revenues will increase at a pretty decent pace in 2022, so too will salary expenses, both the continued use of premium pay in the short run and then the underlying wage rate inflation.

Are both segments seeing the same type of pressure or would you say one is seeing more of it and would you expect one division to kind of come out of this margin pressure earlier than the other?

I think we have made the point throughout the pandemic that while both business segments see the impact of the labor shortage, it manifests itself in different ways. So, on the acute side, for the most part, we are able to fill most of our vacancies, but we have done so through the use of premium pay. As an example, I think we incurred about $120 million of premium pay in the acute division in Q4. Alternatively, on the behavioral side, I think we've only incurred about $25 or $30 million of premium pay expense for the full year. The bigger issue on the behavioral side has been just an absolute inability to fill some of those vacancies. As a consequence, the labor shortage on the behavioral side really manifests itself on the volume side more than in salary expense. We expect that both dynamics will continue into 2022, although they will begin to recede as COVID volumes also begin to recede.

Okay, great. Thanks.

Your next question comes from the line of Andrew Mok with UBS.

Hi, good morning. Steve, can you walk us through the different growth outlooks between the segments for 2022 with respect to volume and price, and how much new store revenue is contemplated in the guidance?

Yeah. I think, Andrew, that the same-store growth in both segments is anticipated to be in the mid-single digits in that sort of 5% to 6% range, which quite frankly in a normal year would be relatively unremarkable. I think on the acute side, that's kind of a mix shift away from higher acuity COVID volumes, and more towards a backfilling of all this non-COVID activity, which has lagged somewhat. We've been running at levels that are 95% to 100% of pre-COVID levels of emergency room visits, and elective and scheduled procedures, etc. We presume that those percentages will increase in 2022 as COVID volumes decline. But overall, the impact on revenue will be mid-single digits.

Great. As a follow-up, you achieved about $320 million in EBITDA in the business, but there were some out-of-period payments beyond Kentucky, possibly including some from Florida. How did the core behavioral business perform during the quarter, and is this a good run rate to consider for 2022? Thanks.

We called out the Kentucky Medicaid reimbursement, which was a little over $30 million in the quarter, because I think we thought that was an extraordinary item in the quarter. There were other one-time adjustments, but I think they largely offset each other. I will say this about Kentucky. We recorded about $30 million of Kentucky reimbursement in the fourth quarter. That represented two quarters of earned activity. In 2022, that reimbursement has already been approved for the full year. So, there will be a much more ratable recognition of being roughly $55 million or $60 million of that Kentucky reimbursement in '22. And that's included in our guidance.

Great. Thanks for all the color.

Your next question comes from the line of A.J. Rice with Credit Suisse.

Hi, thanks everyone. First of all, regarding the pace of the share repurchase activity, which is around $1.2 billion to $1.4 billion, you are generating good cash flow, especially as you move past the repayments to the government. However, this pace may be faster than the free cash flow you are generating. Can you comment on whether you plan to maintain this pace? Also, I assume if you do, the leverage will increase over the course of this year. You ended at 2.2 times debt to EBITDA, so how much are you open to letting leverage rise to support the repurchase?

Sure, A.J. So, as you indicated, we repurchased about $1.2 billion of shares in 2021. That was over the course of just three quarters, since we didn't resume our share repurchase activity until April. If we continue with that pace, we will be repurchasing somewhere in the neighborhood of $1.4 billion, which is the amount of share repurchase authorization increase that our Board granted yesterday. And that's our plan, and that, quite frankly, is what's in our guidance. Obviously, we're doing this on an opportunistic basis, as we have historically done. So, we are leaving ourselves the flexibility to respond to market conditions and other capital deployment opportunities, etc. But our current plan is pretty much as the Board authorization increase would indicate over the course of the next year, and to your point, it would certainly mean we'd be buying back shares at a pace above our free cash flow generation.

I'll just make the point, I mean, we're very comfortable with that if the stock remains undervalued, and that's the calculation that we've made. So, depending on where the stock is, we believe this is the right amount at this time, certainly at this level of our share price.

No, that's great. I think Gerald is obviously, I appreciate that. Maybe my follow-up question. We all see about geography. Were there any differences? And I will ask you that again about the acute business where we usually asked. But I would also ask in the dynamics you're seeing in the behavioral business, is the labor challenges particularly acute in specific geographies where for some reason you have a little more of a challenge than in other geographies. So, anything about the geography disparities across regions for both sides of the business.

The way I would answer the question, A.J., is first by saying that I think what we have experienced, certainly in the most recent, I'll call it six to eight months, is that the most significant labor pressures are closely correlated to the level of COVID frequency in the market. Markets that are hard hit by COVID clearly feel greater labor pressures for a variety of reasons. Particularly with Omicron, more of our own employees out sick, etc., and on the sideline. But also, employees are leaving, particularly in the behavioral space, to work for premium rates in more acute settings, all those sorts of things. I think what we have found in the last few surges again, at least with the back half of '21 and into '22, is that those surges have been pretty widespread geographically. Obviously, at any point in time, we may be getting hit in one market worse than another. But I would say broadly, the performance is pretty geographically diffused. Although from a timing perspective, one market may be under pressure one month and not so much in the next month. But it's really much more COVID-related than any other sort of underlying geographic issues.

Alright, thanks a lot.

Your next question comes from the line of Matthew Borsch with BMO Capital Markets.

Good morning. Thanks for taking my question. You have Ben Rossi filling in for Matt here. Regarding patient acuity on a same facility basis, you reported some good numbers for adjusted admissions, revenue per adjusted admission while also showing some sequential decreases in overall occupancy rates and length of stay in both acute and behavioral. Just curious if that is a reflection of the type of acuity caseload you saw this quarter and whether that trend is continuing in 1Q? Thanks.

Look, acuity is really an issue in the acute care segment, not in the behavioral segment in the sense that reimbursement doesn't change on an acuity basis. In the acute segment, what we have largely experienced during the COVID surge in 2021 is that as COVID has surged, acuity goes up, the COVID patients are sicker. But for the most part, we've been able to maintain a reasonable level of non-COVID business as well, which has really led to these high acuity and revenue rates in the acute business, which for the most part have overwhelmed or offset the higher salary costs, which we alluded to earlier. That became more challenging; I indicated in the fourth quarter, we had about $120 million of premium pay in the acute business. That's the highest we've experienced to date compared to just sequentially, I think we had around $83 million in the third quarter of this year, and I think we had about a little over $50 million in the fourth quarter of last year. So, that gives you an indication of how much that premium pay has really pressured the margins in the acute business. I think the other dynamic that we've noticed or has been noticeable in the acute space is that the Omicron patients, as has been reported, I think we are more broadly, are less acutely ill than the Delta patients before them. The problem is, I don't know that we've been really able to take advantage of that. You make the point that I would like to stay is remaining pretty stable. I think in theory, we should have been able to discharge some of those Omicron patients more quickly. The challenges as we try to discharge those patients, the sites to which we would normally discharge them - long-term care, skilled nursing homes, home health - are struggling with their own labor challenges and as a consequence, we haven't really seen the benefit of being able to discharge the less acutely ill patients faster. Again, I think all of that will tend to work itself out as COVID volumes decline; we'll return to a more stable referral network and discharge pattern that's more reflective of what we have historically been used to.

Got it. Thank you.

Your next question comes from the line of Jason Cassorla with Citi.

Great. Thanks. Good morning. So, you talked about volume and labor backdrop largely improving throughout the year. But is there any way to help frame the cadence for an EBITDA perspective? I mean, if you look back, you did about $425 million of EBITDA in 1Q '21. Is that the right metric to think about for 1Q, or maybe how you would frame that? Thanks.

So, look, UHS intentionally has never given quarterly guidance, and we're certainly not about to begin that this year when there's greater uncertainty, as has historically been the case. We're looking at a cadence that is certainly not what it has been as a historical norm. Normally, the first quarter is our strongest quarter; we come out of the gate really strong in both business segments, etc. This year we come out with our highest COVID volumes to date in the pandemic. Now, they decline pretty quickly and have been declining, and continue to decline and that's encouraging. But as I've alluded to in some previous comments, the labor pressures are diminishing more slowly, etc. I think broadly, we've tried to indicate that I think we think the first half of 2022 will certainly be more challenging, as labor pressures diminish more slowly than COVID volumes decline. I think the second half of 2022 will begin to look a lot more like pre-pandemic years, like the back-half of 2019 might have looked.

Got it. Okay. Fair enough. And maybe just go to your CapEx guidance, so CapEx at the midpoint just calls for like a 20% increase over '21, and where you ended up spending there. You made some comments in your prepared remarks about new towers, acute facilities and the like, but maybe could you just help flush out your CapEx priorities for both segments and where you're looking to invest that for '22? Thanks.

As Marc commented on in his remarks, and I think also as we can see in a response earlier, what really informs our whole approach in terms of what we're dedicating to share repurchase and what we're dedicating to CapEx, etc., is our view that the underlying demand fundamentally in our two business segments remains strong. So, from a CapEx perspective, we're going to invest in projects that we think make sense and are economically compelling. Marc alluded to our De Novo development in Reno. We have a small community hospital in Reno, but this really, I think, will position us as a much more competitive player in the Reno market, but even more broadly as the preeminent statewide player in the state of Nevada. The same thing in South Texas is an important market to us, Riverside County, California. We've invested both in physical capital, we acquired a significant physician practice in the Southern California market. So, we like our franchises in both our acute and behavioral segments, and we're continuing to reinvest in those. Again, as Marc pointed out, we have a view that we think, and we understand why, but those investments and that underlying strength of the underlying demand is somewhat unappreciated in the market. While that's the case, we also intend to be an active acquirer of our shares, which we think are really well valued at this point in time.

Alright, thanks for all the color.

Your next question comes from the line of Pito Chickering with Deutsche Bank.

Hey, good morning, guys. Thanks for taking my questions. On the acute side, in the script, you quantified, referring to Kevin's question, you quantified about a $120 million of premium pay in the fourth quarter. How did that track versus Q3 and sort of for all of 2021? And if we think about converting that to a more normalized level, how much was premium pay costing versus normal full-time employee in the fourth quarter?

Yes. I think I actually mentioned, Pito, that $120 million in Q4 compared to that $80 million in the previous quarter in Q3. And a little over $50 million in the fourth quarter of last year. The point that you raised is a good one; honestly, the rise in that expense is I think driven more by rate than by volume, meaning we're not necessarily using more nurses or more hours. We're using some greater number, but the rates are just going crazy as I think has been reported broadly across the country. Normally, I would say to you that we'd replace premium pay temporary travel nurses with our own employed nurses who would make 50% less or something like that. But in some cases, we're paying three times more for a temporary travel nurse compared to what a base pay would be, or if we can replace that nurse with an employee, we'll be paying a third, the difference is quite significant.

Have you noticed any changes in the premium pay? Can you provide details on the stakes and fees, specifically regarding the hourly wage rates and the hours you are utilizing?

I want to point out that the decrease in COVID-related volumes has happened very quickly. It was only in the latter half of January that we started noticing these declines, and we are now four to five weeks into this trend. As the surge intensified, hospitals began making longer-term commitments to nurses, and we followed suit. Additionally, nurses themselves were committing to longer-term positions, possibly with other employers. Another point is that many nurses have earned significant amounts of money by seeking premium pay over the past six to eight months, which gives them more flexibility. As a result, some nurses are taking breaks before returning to work, which they are completely entitled to do. All these factors contribute to the time it takes for the situation to stabilize. However, I want to emphasize that we have observed positive signs of volume recovery across both business segments in the last four to five weeks. We've seen early indications that labor pressures are starting to ease, but we still have a considerable journey ahead in terms of labor challenges.

Okay. Great. And then one quick follow-up there on the behavioral side: look at 2021. How much were revenues impacted by the lack of staffing? And how do you think that evolves in 2022? Do you think you can recapture those lost behavioral revenues in 2022 from staffing? Thanks so much.

As we've indicated, I think on a number of occasions, we think the single biggest reason that behavioral volumes and therefore behavioral revenues have lagged pre-pandemic levels is the labor shortage. A lot of it has been exacerbated by the COVID volumes, and again, the idea that some subset of our employee population have been seeking these premium rates in a more acute setting. And by the way, as that's desired compel, and talking to colleagues in other service industries, etc., it's a pretty standard and widespread phenomenon in any sub-acute setting - nursing homes, home health agencies, skilled nursing, long-term care facilities are all saying the same thing. As I indicated in the previous response, we're finding that on the acute side to be true because as we're trying to discharge patients, we're being told by all these sorts of facilities that they simply don't have the capacity because of a lack of staff. So, the question about how do you quantify what the lost revenue is, it's difficult to do. What we have said before is that every indication we have of underlying demand continues to grow. I would say the last several quarters, our inbound activity - incoming phone calls, incoming internet inquiries, etc., are up 15% to 20%. I don't think we've taken the position that we could satisfy all that demand, but there is certainly a significant amount of demand out there to be satisfied. And again, I think our guidance presumes sort of mid-single-digit revenue growth, which gets us back to sort of three or 4% volume growth just over the prior year. We certainly don't think that's the top end of the potential growth in volume, but we'd be pleased if so, we can get there if the labor situation resolves as soon as we get there.

Great, thanks so much.

Your next question comes from the line of Jamie Perse with Goldman Sachs.

Hey, good morning, guys. I just wanted to start with the Revenue per Adjusted Admission. If you can give any color on assumptions for 2022, and we're obviously way above the 2019 trended growth line. What's sustainable about that versus as things start to normalize in terms of payer mix and acuity that's starting to come back down?

So, Jamie, I think the answer again is different in the two business segments. I think in the acute care segment, there certainly is an expectation that revenue per adjusted admission will come down from the very high levels, as there has been running particularly during the high COVID surges. But we believe that that will be replaced in large part by non-COVID, more traditional non-COVID surgical and other procedural admissions that have lagged during the pandemic. I'll also make the point that as that business mix shifts occurs, some of the cost pressures will alleviate as well because while the COVID patients had very robust revenue, they also had very high expenses generally - more ICU utilization, more supply utilization, all that sort of stuff. On the behavioral side, there isn't nearly as big a shift or change in acuity. I will make the point just because I had this question last night. It looks like our revenue per adjusted day in the fourth quarter is quite high in the behavioral segment. But if you would adjust for the Kentucky reimbursement that we talked about earlier, I think you get to a much more historically reasonable number. Again, I think on the behavioral side, the general sense is that as the labor situation eases, we'll simply be able to admit more patients. Patient days will grow over the previous year instead of flat patient days, for instance, that we saw in Q4.

Okay. That's helpful. And then just one follow-up on longer-term margin expectations. It seems like there might be a lot of temporary costs in your cost structure for '22, in terms of premium pay and things like that. How should we think about the longer-term margin expectations? Can you get back to 2019 levels in a couple of years or as things start to normalize, or just any thoughts you can share on where things go after this transition?

And again, I think we've said a number of times. I don't believe we feel like the fundamental economic model in either of our business segments has changed. What the historical model has been is that if you can achieve revenue growth in the mid-single digits, generally, you're going to see EBITDA growth and margin expansion over time. As you characterize it, I think we're viewing 2022 as a bit of a transition year, particularly the first half of 2022, that as volumes recover, those labor pressures are not going to ease as quickly, and therefore we're going to see some margin compression at least in the first half of 2022. But I think over time we have an expectation that the models will work as they have worked in the past. If we can achieve mid-single-digit growth, maybe inflation, particularly wage inflation, has increased by 100 to 125 basis points post-pandemic. But the model hasn't been turned upside down. As a consequence, if that underlying demand is out there - and there's been a significant amount of on-net postponed deferred demand in both of the business segments over the last several years which we firmly believe, then I think revenue growth, beginning again towards the end of 2022, should be relatively robust. We should see EBITDA growth, and we should see margin expansion after we get over these labor pressures, and it'll look like the way it was. Can we get back to 2019 margins? The answer, I think, is yes - the question is how quickly. We're certainly not going to get back there in a year, but we certainly believe that we can get back there and go beyond that quite frankly.

Okay. Thanks for the detail.

Your next question comes from the line of Josh Raskin with Nephron Research.

Hi, thanks. Good morning. I wanted to follow up on the comments you both made on the outpatient development. I'm curious what types of facilities do you think are most useful to UHS in the next couple of years? I'm thinking more specifically in the acute care segment. And maybe how does that outpatient development work in the broader segment strategy for the acute care segment?

We are exploring various opportunities, particularly in freestanding emergency departments, where we've seen considerable success and continue to identify promising prospects that will be beneficial as standalone businesses and for referrals to our acute care hospitals. Additionally, we are increasing our efforts with physician clinics, which will help drive business to our hospitals. There are numerous opportunities in multiple markets, including a significant acquisition of a large physician group in California that enhances our synergies. We are actively seeking more opportunities there. Moreover, we are assessing traditional outpatient radiology services and surgical hospitals. However, it has been somewhat challenging to secure deals in the ASC area, but we are currently evaluating options across almost all our acute care markets. We have partnered with a major surgery center company for the past couple of years, and I believe we will see more progress in that area in the next three to four quarters.

And just to follow up on that, Marc, then the ASCs. I'm curious how you think about that shift from inpatient to outpatient care and how important you think that versus what sounds like maybe not the most rational market, I don't want to put words in your mouth, but it sounds like it's more of a pricing issue than a strategy issue; is that right?

Yes. I mean, as far as I look at it - look, it's definitely a trend. It's definitely something that we're very cognizant of. We are very aware of the desire to move certain business out of the inpatient setting to outpatient. That’s driven by the insurers and for a number of reasons. I'm not sure I'd categorize it the way you said, but I do think we have great opportunities to not only partner and create new outpatient surgery-centered businesses that are advantageous on their own, but also to shift some of the business that is taking up space in our inpatient settings and then have higher acuity, higher-paying business replace that lower-end outpatient business.

Got you. That's perfect. Thanks.

Your next question comes from the line of Justin Lake with Wolfe Research.

Hey, good morning. It's Austin on for Justin here. Steve, I was just curious on the full year, if you can maybe emphasize or give some color on the impact of the direct COVID reimbursement programs, the benefit from sequestration, that 20% bump in HRSA. And then, what is embedded in the assumption for '22 related to those programs? Thanks.

We have outlined the effects of the sequestration waiver, the HRSA reimbursement, and the 20% add-on. Historically, we've seen these factors contributing around $30 million, give or take, in recent quarters. Our projections for 2022 take into account that the Medicare waiver ends in the first half of the year, while the public health emergency that provides the 20% add-on is expected to conclude early in the second quarter. Additionally, the HRSA funding appears to be running out. We have factored these elements into our guidance, anticipating that reimbursement will decline as COVID volumes decrease. A month or two ago, we were worried about facing high COVID volumes alongside reduced reimbursement. However, it now seems that these two factors will align more closely. Overall, we expect these issues to lessen significantly in the first half of the year, and our guidance reflects the expectation that our COVID volumes and the associated high costs will decrease, minimizing their impact on our earnings.

Awesome. And maybe just a quick follow-up there, just curious maybe on a percent basis where COVID admissions that trended early in Omicron, where they're settling out here. And then maybe for the full year, is there a given range that you guys are assuming COVID volumes to continue to run out?

Yes. During the COVID surges, I think at the height of the COVID surges, on the acute side, I would say somewhere in the 15% of our admissions were COVID-related during the Delta surge and the Omicron surge, etc. Because the length of stay of the COVID patients is about twice as long as our average length of stay, our COVID patients were taking off one-third of our beds across the portfolio during the surges. It was a significant number. I think the assumptions that we've made for particularly the back half of 2022 is that we will be in what has been described as an endemic environment in which something like 3% to 5% of our acute admissions will be COVID-related and probably less acutely ill than we've seen in some of the earlier surges.

Great, thanks.

Your next question comes from the line of Whit Mayo with SVB Leerink.

Hey, thanks. Good morning. I haven't heard about Cygnet or your U.K. operations in some time, so was hoping maybe to get an update. And I think that the broader question, and maybe this is framed more for Marc, just thinking about a broader portfolio review for behavioral. I mean, at some point does it make sense to get smaller, to get bigger? And maybe making some decisions during the pandemic is ill-advised, but just any update strategically, operationally, anything that you guys are deploying internally, that's different this year that gets you excited and that we should be paying more attention to.

I mean, I will start with the portfolio review. We do that all the time. I will tell you, we've really done that during the last few years during COVID. To your point, we have scaled down a few places - some operations, a couple of leased facilities, and a couple of others where we just saw those changes in those markets. They weren't big players in the portfolio and we've jettisoned them. We should continue to look to pare down if possible while at the same time, we're doing a lot to grow the division as well. So, we're trying to always improve the assets. One of the comments I'll make is our JV opportunities on the behavioral side continue to be robust. I wanted to just make the point on that - all JV opportunities and all JV partners are not created equal. So, there are a lot of JV opportunities, situations that we look at, that we pass on, that others do because we just don't see the merit of it long-term. If you notice the ones that we do for the most part are recognizable nationally, no names, or they're very strong regional players, and that's purposely done. So, we're very excited when you say what could we offer as far as getting you all excited. We - and Steve's already mentioned this but, with the demand being where it is, we're very excited that when we get the staffing stabilized, and it is stabilizing, and it will continue to stabilize throughout this year, we should be able to pop because we know we track. Every week, we're talking very specifically about which beds are closed due to staffing, due to COVID. As we see that start to turn, and it's already starting to turn, that's all upside for us. In regards to Cygnet, Cygnet's really been a terrific hedge for us. They are growing. Our team over there is very strong; they are competing quite well against historical. In fact, larger players in that market are having some hiccups, so we're very excited. The list of opportunities just in the U.K. is incredibly impressive. Along with that, we will look at things outside the U.K. that present and we think make sense, but right now, we have a number of areas just within the U.K. that we think we can add beds to either existing facilities or some new facilities. Our relationship with the NHS has never been stronger, so we're quite positive about that business and where it's going to go going forward.

Great. That's helpful. Maybe just one quick follow-up for Steve. Could you provide an update on what you're considering for Texas UCC, since this program is expected to continue and your 10-K states that you anticipate $391 million from state supplemental payments, a figure that historically hasn't been very reliable? I'm just trying to ensure that we're considering all the significant variables related to the state supplemental programs this year. Thanks.

Yeah. So first of all, I'll make a few broad comments. You alluded to in 10-K, which was filed last May. I do think UHS has a rather expansive disclosure on these state programs. So, people who are really interested in the details, I would suggest that they spend some time reading our 10-K disclosure on this subject because I think it is rather informative. Broadly as it regards Texas, there are a couple of different programs in Texas. I think the one that is sort of most uncertain at the moment is the directed payment program, which the state and CMS are sort of skewed over. We had about $12 million or $13 million of reimbursement related to that program, which we did not recognize in the last four months of 2021, although we remain hopeful that it will be approved and we'll wind up getting recognized retroactively in 2022. The uncompensated care program, which people have expressed some concerns over, looks like it is moving forward. The next starting payment is actually scheduled to occur within the next week or two. I just saw communications in that regard from the HHS of the Health Department in Texas. So, it seems like that's moving forward. I'll finally make one last comment. Look, there is some choppiness associated with these state reimbursement programs. We tend to be conservative about how we account for them, tending to wait until they're approved either at the state and/or the federal levels, and sometimes that means that we're not recording the income or revenues rapidly. But if you look at the trends over time, the trajectory of those programs tends to be increasing. I think they are because the hospitals really rely on these programs, and a lot of the hospitals that rely on these programs are safety net hospitals within each of the states. The programs really become an important part of both state and federal funding. So yeah, there is some uncertainty and some volatility in how these things get recorded, but I think our general sense is that the programs will remain at or equal to historical levels.

Okay. Great. Thanks, guys. Appreciate it.

Our final question comes from the line of Sarah James with Barclays.

Thank you for squeezing me on. When you talked earlier about getting back to the pre-2019 margins, how much of that is cost control versus more of a change in the rate environment?

Honestly, Sarah, I think that the real driver, as I think Marc and I both alluded to, is volume recovery. Look, we're certainly looking at cost controls, and I think cost controls focused on the elimination of this really expensive labor component that we've been incurring during the pandemic. Again, I don't think we anticipate sort of ringing efficiencies out of the business in order to get back to those margins. What I was saying before is, we're going to get back to this model of mid-single-digit revenue growth. If you combine that with efficient operations, which we have historically always had, then I think you sort of get back to that model, but no, I don't think we're either cost cutting our way back to 2019 margins, nor getting there for some extraordinary rate increase. Although, we would hope that both from our government and commercial payers, over the next year or two, there's more and more recognition of the inflationary pressures on labor and other costs.

That's helpful. As you consider the recognition among your various payer types, what are your thoughts on the timing of that? Which payer do you think will act first—Medicare, Medicaid, or the private payers—and when do you believe their recognition could begin?

It's a great question, Sarah. Obviously, from a Medicare and Medicaid perspective, that's largely out of our control, meaning, there are bigger forces, bigger lobbying groups, both at the federal and state level. We're active participants in those groups, so we're not driving that. But again, I think the inflationary pressures put not-for-profit hospitals in particular at a disadvantage. There will be great pressure on that. As far as the commercial payers, we have a much more active role there, and I think we're playing that active role and pressing more and more of our payers for what we believe to be reasonable rate adjustments. If we don't get them, I think we're more willing today than we have been in some time to terminate contracts and walk away from business that doesn't have a reasonable reimbursement rate.

That's helpful. Thank you.

I will now turn the conference back over for any closing remarks.

We'd just like to thank everybody for their participation and look forward to talking again at the end of the first quarter. Thank you.

Thank you all for joining today's meeting. You may now disconnect.