Thank you, Mary. Good morning. Marc Miller is also with us this morning. We appreciate your presence for this review of Universal Health Services' results for the first quarter that ended on March 31, 2022. During this call, we will use terms like believes, expects, anticipates, estimates, and similar phrases that indicate forecasts and forward-looking statements. For those who may not be familiar with the risks and uncertainties involved in these statements, I encourage a careful reading of the section on Risk Factors and Forward-looking Statements in our Form 10-K for the year ending December 31, 2021. We would like to point out a few developments and business trends before we open the call for questions. As mentioned in our press release last night, the company reported net income attributable to UHS per diluted share of $2.02 for the first quarter of 2022. After adjustments reflected in the Supplemental Schedule included with the press release, our adjusted net income attributable to UHS per diluted share was $2.15 for the quarter ending March 31, 2022. During the first quarter of 2022, our operations continued to be affected by the COVID-19 pandemic, along with staffing and wage pressures. Specifically, a surge in patients with the Omicron variant of the virus, which began in December 2021, peaked in most of our regions in January 2022. In our acute segment, it is worth noting that the Omicron patients were generally less acutely ill than COVID patients treated during earlier surges, resulting in lower acuity. Meanwhile, the number of contract nursing hours used, and more importantly, the rates we had to pay for those hours, rose significantly in the first quarter, both sequentially and in comparison to the previous year. Although the increase in contract nursing costs in our behavioral segment was not as pronounced, our inability to fill all of our labor vacancies significantly limited our patient volumes and related revenues. We also observed that our results benefited in the first quarter from about $12 million in revenues, net of related provider taxes, from special Texas Medicaid reimbursements connected to the last four months of 2021. The recognition of those revenues was deferred until we received formal government approval. Our first quarter also included around $15 million in startup losses from newly opened de novo acute and behavioral health facilities and $6 million in losses linked to temporarily closed beds at two behavioral health facilities affected by natural disasters. Those beds have since reopened. As disclosed in our press release last night, our operating results for the first quarter of 2022 were negatively affected by higher-than-expected labor costs and lower-than-expected patient volumes in our behavioral health facilities due to ongoing uncertainties related to the COVID-19 pandemic and cost increases associated with the nationwide shortage of nurses and other clinical staff. Although we are not altering our previously released 2022 operating results forecast at this time, we may consider reducing our forecast in the future if the unfavorable operating trends we encountered during the first quarter of 2022 do not show improvement. Our cash generated from operating activities was $445 million in the first quarter of 2022, compared to $72 million in the same period in 2021. It is important to note that the cash generation in the first quarter of 2021 reflected the repayment of Medicare accelerated payments. We spent $200 million on capital expenditures in the first quarter of 2022, and our accounts receivable days outstanding decreased to 48 days in the first quarter of 2022, down from 50 days in the first quarter of 2021. Due mainly to the ongoing repurchase of our shares as of March 31, 2022, our ratio of debt to total capitalization increased to 42.3%, compared to 35.7% as of March 31, 2021.

Our first quarter 2022 operating results were behind our internal forecasts, and our internal forecasts were below the consensus estimates. The primary driver of the shortfall was the fact that the labor scarcity has not moderated as quickly as we were expecting. We believe, in part, this is because at the height of the Omicron surge, providers were entering into longer-term commitments for temporary or traveling nurses, not necessarily predicting that COVID volumes would decline as rapidly as they ultimately did. We do believe that the demand for this premium-priced labor will continue to gradually decline. In the meantime, we continue to invest heavily in recruitment and retention initiatives and have substantially increased the pace of our hiring. Where appropriate, we are also developing alternative patient care models that allow us to use a wider variety of available caregivers to render the most efficient and highest quality of care that we can. While the pace of the recovery from the current labor scarcity is still uncertain, we're comfortable that it will occur over time and combined with our confidence in the long-term baseline demand in both of our business segments, our bullish view of the underlying strength of our core businesses remains intact. Reflective of that sentiment, we remained an active acquirer of our own shares in the first quarter, repurchasing $350 million of those shares. At the same time, we continue to reinvest organically opening a new acute care hospital in the Reno market and behavioral de novo and/or joint venture hospitals in Arizona, Michigan and Wisconsin. At this time, we're pleased to answer your questions.

Yes, we've discussed this extensively before. We believe the solution will take time, but we expect gradual improvement. The current market dynamics indicate that we have faced nursing shortages in the past, though this one seems more severe. However, the system will produce more nurses and clinical personnel due to increasing wages, making it a more attractive profession. This influx of new nurses will be beneficial. Additionally, we've significantly increased our investment in recruitment and hiring practices, ensuring our wage structures are competitive in every market. We're now reviewing competitive wage rates multiple times a year instead of just annually. We're also modifying patient care models, which has started to show positive signs. Specifically regarding behavioral health, we have been hiring nurses and clinicians at record rates for over six to eight months. The real issue lies in the increased turnover rates, which is a challenge for providers nationwide. Nevertheless, it is encouraging that our net hires have been positive in recent periods. While I don't want to suggest the problem is resolved, we believe it will continue to improve. With net positive hires, we should be able to treat more patients, and the number of patient days, which was slightly negative in Q1 compared to last year, should turn positive soon and continue to enhance from there, as we believe the underlying demand remains strong and has not changed significantly in recent quarters. Yes. So as you suggest, there are a number of moving parts in the release. When we do the calculation for the best of our ability, we think that the net blended increase for UHS hospitals will be about 2.5%. That is pretty much the number that we included in our guidance for the year, beginning in October, which is the beginning of the federal fiscal year. I think, along with the rest of the hospital industry, we were disappointed that Medicare and CMS did not seem to acknowledge the inflationary pressures and particularly the labor inflation the hospitals across the country are experiencing. I suspect that in this period between the preliminary and final rates, Medicare will come under significant pressure from lobbying groups across the country, representing hospitals of all stripes and sizes. Now to your question, what impact will that have on CMS this year or next year? It's hard to know. But we certainly had feedback both I think formally and informally from peers, both for-profit and not-for-profit peers, both in our markets and in other markets across the country that hospitals are struggling, again, particularly on the labor side. And certainly, they will be making Medicare and CMS aware of that as acutely as they can over the course of the next week to few weeks and months. Yes. So the cadence of the year so far, Andrew, obviously, January still had very high Omicron volumes in many of our geographies. In some of those geographies, the Omicron volumes really didn't recede until the end of January, in some cases, even early February. And so labor was definitely an overarching issue on the first, I'll call it, 4 to 6 weeks of the quarter. I think what was disappointing in terms of our expectations was that the labor scarcity, again, I think we said this in our prepared remarks, did not recede or ease as much as we thought in the final 6 to 8 weeks of the quarter as COVID volumes receded relatively rapidly. And again, I think as Marc alluded to in his comments, we think some of that was that hospitals were making longer-term commitments. I know a number of our commitments to temporary or traveling nurses instead of being for 1 week or 4 weeks where in many cases, for 8 or even 13 weeks, and we've certainly heard of other hospitals making commitments for even longer than that. And so to some degree, I think we found labor issues to be kind of stickier and more difficult to navigate in the back half of the quarter than we were expecting. I also think it's complicated when you have a tight labor situation in March and April, going through Spring break and the Easter and Passover holidays and people, I think, resuming their normal kind of vacation plans and this and that for the first time in a few years, it made, again, sort of backfilling and getting back to sort of a normal labor supply and demand dynamic a little more challenging. I think in both of our business segments, the hope is that in May, as the calendar sort of settles down, as we have more success in hiring more success in sort of trimming that turnover rate, become a little bit more aggressive and not entering into nearly as many longer-term commitments on the temporary and traveling side of things, rejecting the highest rates that those temporary and traveling companies are demanding, we'll see some relief, some measurable relief we will be getting in the May time. Yes. I mean, again, the first quarter was a quarter of escalating, I'll say dollars especially. On the acute side, we talked about our premium pay in Q4 as being $120 million, that increased in Q1 to $150 million and compares to Q1 of '21 when it was $70 million. So the overall dollars premium pay certainly increased in Q1. We are seeing a reduction in rates at the very end of Q1 and into April, and we presume that will continue into Q2. But it's difficult to say the exact pace at which they're decelerating, but certainly, we're seeing decelerating rates. Yes. So Justin, I think our commentary has been pretty consistent really beginning with our third quarter call in October of last year into our year-end call in February. And that commentary has sort of suggested that the labor recovery was happening slower than we expected. First of all, it was clearly set back by the Omicron surge in December of '21 and then January of '22. That definitely set things back from where our expectations were in the fall of last year. But even, as I said, even from our commentary that we made just 2 months ago when we issued our guidance and did our year-end announcement, I think the recovery is clearly slower than we expected. And obviously, I think that's been true at least for 2 of our acute care peers, who I think have made similar comments in the last week or so. Our original guidance always presumed that it was certainly a different cadence than has been the historically normative cadence for our company that earnings would improve as the year went on. And then the fundamental driver of that sort of cadence in that trajectory is the idea that labor pressures would ease as the year went on. I think it's worth noting in terms of the labor pressures being greater than we expected in Q1, we certainly acknowledge that our earnings missed our own internal forecast. Again, Marc suggested, we were off of our forecast. We were about 5% or 6% off of our forecast in Q1, we know that we were probably 11% or 12% off of consensus. But I think we have a sense that we may be able to recover that as the year goes on. Now again, as our press release indicated, if the labor recovery does not occur as fast as we think that it will, we may have to revise that guidance later in the year, but we're at the moment still hopeful that, that improving cadence will occur as the year goes on. Yes. I think what I would say is that none of us can predict exactly where things are headed. Our guidance suggests that by the end of the year, we would return to at least last year's performance. As I mentioned, in the fourth quarter of last year, the premium pay was around $70 million. It’s important to note that the additional $50 million in premium pay directly impacts our profits since we are not increasing the number of nurses; for the most part, we have the same number of nurses but are paying them premium rates. As those rates decline, we can benefit similarly. You will be replacing a temporary nurse with a regular employee nurse who earns about one-third of what the temporary nurse was paid. Yes. As I mentioned earlier, the question of whether wages are competitive is not static, and we are conducting competitive market reviews across all of our markets, sometimes as frequently as quarterly due to rapid changes in supply and demand dynamics. However, it’s important to note that the wage pressure we’re experiencing, particularly in the acute business, is not primarily due to the wage increases we’re implementing but rather the cost of premium pay. As that premium pay decreases, even if we raise our base wages by 100 or 150 basis points, we stand to benefit significantly. For instance, if our premium pay drops from $150 million in Q1 to $70 million compared to a year ago, that benefit will directly impact our bottom line. It won't happen immediately, as some of that will be offset by base wage increases, but there is substantial leverage in reducing that premium pay. The challenge for hospitals has been that this number has been on the rise, but we currently believe we are nearing or at the peak, and our focus now is on how quickly we can reduce it. We do not anticipate that number will increase significantly moving forward. Yes. I believe that like both businesses and individual consumers, we are experiencing the impact of inflation on our spending. However, I wouldn't strictly categorize this as inflation. Instead, I see it as a significant reliance on premium pay, which is a major factor in the industry. If those premium rates decrease, we will directly benefit from that. Additionally, a reduction in premium rates should also improve our hiring, especially in behavioral roles, which will enable us to increase our volumes and provide a substantial offset against inflation rates. While inflation is certainly a consideration, I believe that addressing the labor shortage will outweigh the challenges posed by rising inflation. Yes. Sorry, and we talked I think about it, just a little bit, in the Q4 call. I mean I think if pre-pandemic our wage inflation was, let's say, on the acute side 3%, 3.5%; on the behavioral side, it was probably 2%, 2.5%, I think post pandemic, we're thinking those rates are up 100, 150, maybe even 200 basis points. I think we think those rates ease some in 2023 for a number of reasons that we've already talked about. But again, I think when we do that math, if we're replacing nurses who were making $65 or $70 an hour with temporary or traveling nurses who are making $225 an hour, that's really the drag on our earnings in the current period. If we ultimately replace those nursing hours that we were paying $225 for $75, even though that's a reasonable increase from what we had been paying pre-pandemic, it's still an enormous improvement over where we're sitting right now. Yes. As we've previously discussed, the most challenging role to fill during the pandemic has been that of registered nurses, both in acute and behavioral settings. We are implementing new patient care models that rely less on RNs and more on LPNs, LVNs, paramedics, and other professionals who provide care. I want to emphasize that we are not having people work beyond their licensed capabilities. Our goal is to free our RNs from clerical and administrative tasks that others can handle, allowing them to focus on their primary responsibilities, such as psychological assessments, behavioral care, and medication administration. This is a key focus for us. However, these changes in patient care models take time as we hire and train non-RN staff and get them oriented. We believe we are making gradual progress in these areas and will continue to do so. Regarding portfolio rationalization, we're not shutting down capacity indefinitely; we may temporarily reduce capacity when we lack sufficient clinical staff to treat patients. As we have mentioned in previous calls, we are rationalizing our capacity while negotiating managed care contracts. If our managed care payers are not providing adequate increases to cover the elevated labor costs, we are canceling some contracts and adjusting our payer mix. We are also rejecting excessively high temporary and travel nursing rates, as it doesn’t make sense to pay significantly higher wages for nurses than what we receive from payers. Unlike some providers, we are not willing to pay whatever is necessary for a nurse. In some instances, we believe it’s prudent to temporarily reduce our capacity and operate at a lower volume until rates normalize. Yes. The reality is that in many cases, patients are going untreated. In several of our markets, we feel that we are unable to serve a certain number of patients due to a lack of sufficient clinical staff. It's not as if we think our competitors are managing to do something we cannot. As a result, some patients are not receiving the necessary care. To your point, we've consistently highlighted throughout the pandemic that we measure underlying demand in various ways, one being inbound activity, which includes phone calls to our 800 numbers and inquiries through our website. The volume of these inbound inquiries has consistently increased during the pandemic. However, the conversion rate—the percentage of those inquiries that lead to admissions—has significantly decreased, mainly due to the labor shortage we've discussed. To answer your initial question, as Marc mentioned earlier in a broader context, we remain confident that the fundamental demand for both of our business segments has not changed. Yes. I think the reality is, obviously, having multiple facilities in a market, which we do in a number of markets you mentioned, Boston, Philadelphia, Atlanta, are all markets in which we have a pretty significant market share and a multiple facility presence. And obviously, that affords you some luxuries of being able to move employees amongst facilities that allows you to centralize some of the recruiting and HR functions and be more efficient in that regard, et cetera. So there is some benefit to that. But the real issue is that some geographies are just more challenging than others in terms of the labor scarcity. And I think what we find is that when a market is challenging, all the providers in the market are challenged, and that's just the way it is. Now again, I will tell you, we have certain facilities that are fully staffed, that are not struggling. We have other facilities that struggle to hire RNs. We have other facilities that have sufficient number of RNs but struggle to hire mental health technicians to unlicensed professionals. So it really varies. And I wouldn't say that having multiple facilities is even more or less difficult. I think it just really depends on the geography. Yes. So our first quarter also included approximately $15 million of startup losses incurred by recently opened de novo acute and behavioral health facilities and $6 million of losses related to temporarily closed beds at 2 behavioral health facilities, which were impacted by natural disasters. Those beds have since been reopened. So again, I think the detail that I offer around that is if you look at our first quarter behavioral results, our revenue per adjusted day is up more than 5 percent. I think that's reflective of the fact that we're doing a careful job of negotiating increased payer rates and managing our payer mix, ensuring that we are not engaging with payers who are unwilling to provide the necessary annual rate increases. I believe we are being very successful in this regard, and we are pleased with the more than 5 percent revenue growth per adjusted day in the behavioral segment of our business. Now, the real challenge for us is to improve from a negative 1 percent patient day growth to the historical norm of 3 to 4 percent or even higher. Yes. As I mentioned earlier, the question of whether wages are competitive is not static, and we are conducting competitive market reviews across all our markets. In some instances, these reviews occur as often as quarterly due to the rapidly changing supply and demand dynamics. However, I want to emphasize that the labor or wage pressure we are experiencing, particularly in the acute business, is not primarily due to the wage increases we are implementing but rather from premium pay. As that premium pay decreases, even with our base wages increasing by 100 or 150 basis points, we will see significant benefits. For example, if our premium pay reduces from the $150 million we spent in Q1 to the $70 million we spent a year ago, that improvement will directly impact our bottom line. While this won't happen instantly and may be somewhat offset by wage increases, there is still significant leverage in reducing that premium. The challenge faced by hospitals has been that this premium has been rising, but it appears we are nearing a peak, if we aren't there already. Our focus now is on how quickly we can bring it down, and I don't anticipate that figure will increase significantly anymore. Yes. So I'm not exactly sure what you're asking. I mean we've discussed on many occasions, Pito, we don't give quarterly guidance and that's an intentional decision on our part. As I said, we were 6% short of our own internal forecast in Q1. And I think part of the reason that we particularly enumerated some of those startup losses and nonrecurring losses in our prepared remarks was we were potentially suggesting a reason why I think we budgeted for those things probably more accurately than other entities. I don't know that for a fact. I don't know that that's the main difference between our internal forecast in Q1 versus the consensus, but I think it's a possible explanation. Yes. So as you suggest, there are a number of moving parts in the release. When we do the calculation for the best of our ability, we think that the net blended increase for UHS hospitals will be about 2.5%. That is pretty much the number that we included in our guidance for the year, beginning in October, which is the beginning of the federal fiscal year. I think, along with the rest of the hospital industry, we were disappointed that Medicare and CMS did not seem to acknowledge the inflationary pressures and particularly the labor inflation the hospitals across the country are experiencing. I suspect that in this period between the preliminary and final rates, Medicare will come under significant pressure from lobbying groups across the country, representing hospitals of all stripes and sizes. Now to your question, what impact will that have on CMS this year or next year? It's hard to know. But we certainly had feedback both I think formally and informally from peers, both for-profit and not-for-profit peers, both in our markets and in other markets across the country that hospitals are struggling, again, particularly on the labor side. And certainly, they will be making Medicare and CMS aware of that as acutely as they can over the course of the next week to few weeks and months. So what I would say is, we certainly have to take that into account on an episodic basis. Each project we look at and try to make a determination on market factors. So for capital equipment, things like that, probably no change. But for the larger projects, in general, we look at them specifically and taking into account each factor or all the factors in a particular market that might affect that project. And in some cases, we'll choose to hold at least for a period of time until we feel better about what's happening in a particular market.

You have Ben Rossi here filling in for Matt. Just regarding the recent release of the Medicare IPPS proposal contract for 2023, I can appreciate that there are still some moving pieces, but I was curious if you could provide us with the projection for your rates from that proposal. And then more broadly, how you feel about CMS factoring this inflationary pressure? And whether you think that CMS will start to factor that in more accurately as we look out to 2024 and beyond?

Yes. So as you suggest, there are a number of moving parts in the release. When we do the calculation for the best of our ability, we think that the net blended increase for UHS hospitals will be about 2.5%. That is pretty much the number that we included in our guidance for the year, beginning in October, which is the beginning of the federal fiscal year. I think, along with the rest of the hospital industry, we were disappointed that Medicare and CMS did not seem to acknowledge the inflationary pressures and particularly the labor inflation the hospitals across the country are experiencing. I suspect that in this period between the preliminary and final rates, Medicare will come under significant pressure from lobbying groups across the country, representing hospitals of all stripes and sizes. Yes, I believe I should highlight that in our Q1 behavioral results, we've seen revenue per adjusted day increase by over 5 percent. This indicates that we are effectively negotiating higher payer rates and strategically managing our payer mix to avoid situations where payers are unwilling to provide the annual rate increases we require. We are pleased with this 5 percent increase in revenue per adjusted day for the behavioral segment. However, our main challenge now is to shift from a negative 1 percent growth in patient days to the historical average of 3 to 4 percent or even higher. Yes. We've previously discussed that the registered nurse position has been the most challenging to fill during the pandemic, both in acute care and behavioral health. We are implementing innovative patient care models that depend less on registered nurses and more on licensed practical nurses, licensed vocational nurses, paramedics, and various other professionals providing care. Yes. So again, I think the detail that I offer around that is if you look at our Q1 behavioral results, our revenue per adjusted day is up 5-plus percent. I think that's reflective of the fact that we're doing a pretty judicious job of negotiating increased payer rates and choosing and trying to engineer payer mix. So to answer your initial question, which again, I think Marc addressed in a broader way in his comments earlier is, we have a lot of confidence that the underlying demand for both of our business segments has not changed in any fundamental way. Yes. So I'll take that one. We believe the patient volume will continue to increase going forward given the market demand, and we've been seeing some positive trends in that aspect.