HCA Healthcare, Inc. (HCA) Earnings Call Transcript & Summary

Again at this third annual healthcare conference, very excited to have the team from HCA. We've got Bill Rutherford, the company's CFO. We got VP of IR and much more, Mark Kimbrough, doing his kind of victory lap here as he heads towards retirement with the fourth quarter call. So always happy to see Mark. Look, guys, I really appreciate you being here. As always, send me an e-mail if you got a question for the team, try to get that into the mix before we let them go for the day. So Bill, why don't we start off, maybe just give us a 2-minute kind of state of the union post the third quarter, what you've been hearing from investors, what you're kind of focused on going into '22?

Well, good morning, Justin, and everyone, it's great to see you. So obviously, we went through the third quarter where we saw a pretty significant COVID surge, and we covered all the details of that in our call. We indicated that we're concluding our planning process for '22, trying to give you a little bit of an insight to our early thinking for '22. As Sam mentioned during our call, we really only had a couple of normal months during '21. So we're trying to get an assessment of what life does look like in a post-COVID surge environment. I think as I look back on this past 20 months or so that we've been in the COVID, there's obviously been a lot of things we've identified. One of the big takeaways for me is just that continued resiliency of HCA Healthcare that we're able to navigate and operate in a variety of different environments that we've had. We've been through 4 COVID surges. We've been through a couple of post-COVID like the second quarter of this year. And almost in every one of those periods, we've been able to perform relatively well and make the necessary adjustments based on the environment that we have. So we continue to have confidence in the organization's ability to do that. We're looking at what are the key metrics that we focus on, what will demand be in a post-COVID environment. We still think there's growing demand for health care in the markets that we operate. And as you know, we operate in very attractive markets, trying to get a view of kind of the mix and the acuity of that demand because that's going to be a factor. We've obviously enjoyed high acuity and favorable payer mix that's benefited for us. And then obviously, deal with the inflationary pressures that I think every industry is facing across the United States, including the labor pressures. And trying to take all of those variables and to formulate those into our thinking for '22. And we'll share that in more detail with you as we give our year-end call. And really before the Q&A, one of the positive things and I really think the differentiating things of HCA, we're in an incredibly strong balance sheet position. As you know, we've got the leverage ratio of one of the lowest rates it's been in 15 years. We generate, I think, a good amount of cash flow. We're looking at how to continue to execute a capital allocation to deliver the best value, what's the right capital investment to meet that growing demand, what's the right acquisition position that we have as we continue to believe there'll be strategic acquisitions present themselves. And then what's the best return to shareholders. We've executed on an enhanced share repurchase program this year, looking at what the right level of the dividend. So that gives us a lot of optionality as we go into '22 and as we think about reading the environment that we're operating in. So anyway, that's kind of where we are right now and look forward to further questions you have.

I appreciate it, Bill. Thanks for the context. I mean look, you talked about the '22 planning. I haven't been doing this as long as you have, but in 20 years, I've never seen an environment like this, right? And one of the -- I've got a million questions. But from a very high level to simplify it, I think the easy -- kind of the easiest way to put it is your company is maybe not quarter-to-quarter, right, there's always volatility, but over any reasonable time period, you've delivered a lot of value and pretty consistent growth, right? And so if I look back to the pre-COVID level of 2019, right, where your EBITDA was just under $10 billion. And if I were to just say normal growth, call it, 5%, right, would put you around $11.5 billion in 2023. It's looking more like you're thinking about $13 billion, give or take, right, which modest growth off of the '22 levels. So there's an incremental $1.5 billion of EBITDA that the company has been able to generate. And so when I think about it, there are so many moving parts when think about payer mix improving and some of that's coverage expansion and changes in volume, right? You've got COVID out there, you've got acuity in general. Then the company did an incredible job of responding to COVID initially, right, when you look at the abyss, so to speak, in the second quarter of '20, right, when volumes were down 30%, you cut costs. So if you had to think about that $1.5 billion, how would you bucket it? How would you think about kind of telling us, here's what drove it, and here's why we think it's sustainable.

Yes, it's a great question. I actually had that question not too long ago, and I went back to attempt to deconstruct it to put a little math to it. And it's hard to really attribute to specific things. But I'll start with the top line. Our revenue per adjusted admission has outpaced our historical trend. I will say pre-COVID, we were seeing momentum as we talked about them. We were seeing some 8% to 10% year-over-year growth versus our long term. So we felt we had momentum going into COVID. And obviously, March '20 hit. But we have benefited and we have, I think, to your point, on a CAGR or cumulative basis delivered higher performance than our trend rate. When I think about mix, acuity and margin, the easiest way I could describe it is roughly about 1/3 each. If you look at -- we're always trying to manage our cost per unit below the revenue per unit to drive efficiencies and drive margin enhancements associated with it. We've been able to do that. If you look at margin levels in '19 versus the current margin levels, roughly 250, almost 300 basis points increase. So there is some cost efficiencies we've been able to execute on during the COVID period. But we're also getting the benefit of the favorable rate and the flow-through of margin on there. When I look at the top line, the revenue per unit has really been a driver for it. It is roughly equal between the acuity. We clearly have talked about we're seeing a higher acuity patient, a combination of the lower acuity, maybe finding other settings of care, maybe slower to return to the health care setting and the patients that are returning are those more medically intense and medically necessary procedures on there. So our case mix as the proxy for that has grown roughly 7% from '19, call it, 3% to 4% a year, where historically, we were 1% to 2%. So we've seen some outpaced acuity. But the payer mix probably leans a little bit heavier on there as we've talked about. We've seen strong growth in the commercial marketplace. We're in a full employment environment in virtually all of our markets. The health insurance exchanges have been a factor in that. As we know, we've seen good enrollment or access to contracts. Our health insurance exchange volume is roughly -- was up 30% to 40%, still a relatively small component of that. And then the Medicare population has been slower to return. So that has yielded a favorable mix going forward on there. So when I think about that, to your point, the earnings growth in excess of our historical trend, the best way I can kind of describe it is roughly 1/3 from the acuity, roughly 1/3 from the favorable mix and roughly 1/3 through the margin and efficiency we have, maybe a little weighted towards mix going forward. The relevant question, I think, it leads to what do we think those trends will be going forward. And that's what we're trying to assess right now. We think that generally speaking, acuity still should remain favorable for us. It may not see the same year-over-year growth, but we think we can maintain the acuity growth. And as you know, many of our growth strategies are centered on growing and investing in higher acuity service lines. So I think we have a belief that we'll continue to see reasonable acuity levels going forward in place. The mix side is a little bit harder to call. I think we're going to need some more period of time to assess. But I think our lean is because of the employment market, because of the exchange, we still expect to see favorable payer mix trends going forward. Now we may see the Medicare population return to the health care setting and that will be fine. I don't think that's at the expense of the commercial market. So I still think that our broader assumptions right now still should see favorable mix trends on there. And then on the margin side, again, I think the resiliency of HCA plays forward. We have a lot of efforts to drive margins. But it's no secret that we're continuing to see inflationary pressures. The labor marketplace is disrupted, and we're going to have to see how the labor marketplace settles out. But we have confidence that we can deliver reasonable margins going forward as well.

Got it. So in the -- we're going to get to labor. I know that's a very interesting one to everybody. And I think I feel like it takes up 30% of every conversation I have with a hospital investor. But let's talk about something that I don't think has gotten as much discussion that you mentioned there, which is coverage expansion, specifically on the exchanges, right? To your point, payer mix has always been one of those things that kind of -- it's a bit of white noise, right? It will bounce around. You have less control of in the short term. And it's been a big benefit here. And I was wondering if you could try to delineate that one for me. Because as I look at the exchange growth that's been out there, right, it's been pretty significant. You mentioned as well, I think you said, maybe it was on the second quarter call that your commercial was up 8%, and 3% of that was just exchange volume alone. So what do you think -- like if I put some numbers around that, I could think of just the exchange benefit alone, right, of coverage expansion being almost the entire payer mix, 1/3 -- hundreds of millions of dollars, right, call it, $300 million to $500 million. Is that a number that you think is out of line? And if not, it also will start -- will annualize through next year, right, because you didn't get the full benefit this year.

That's right. Yes, obviously, I haven't attributed an earnings number to it. But when I look at the volume piece of that and the impact on the revenue per unit pace, I think your point is right. It's a significant contributor. It is a significant contributor of our commercial growth on there. And I think it will continue to be. The enrollments there, I think clearly, the current administration is looking for ways to enhance enrollment and utilize the exchange structure for new core. I think that's a positive thing. Our access to exchange contracts continues to be a very strong position for us as well. So we do expect that to continue into '22. I haven't sized it yet, and I haven't really assigned an earnings value to that. But it's an important contributor to that commercial book that we are experiencing today.

And you don't really start seeing that benefit, if I'm correct, until closer to the second quarter, right?

Yes, you're right. But our quarters have had a lot of noise. Our second quarter was really our only relatively normal quarter. First quarter, we were in a January surge. It was hard to assess with the COVID surge pushing out some volume and what was recovering. But yes, we saw very favorable trends in the second quarter. Third quarter, we had another surge in July and August. And so we're really kind of hoping that we'll see another period of time here as we close the year to get a fairly stabilized COVID environment, and that will give us better assessment. But I think overall, your point -- we agree with your point that we anticipate that to continue to be a contributor into '22, and we'll just have to do some math and see what the ultimate impact of that will be.

Got it. So the contributors that we got to be, like you said, acuity we'll have to see and part of that's Medicare volume coming in or out in terms of how that returns. But the cost cutting should stick, right, with the caveat of inflation on the salary line. And that benefit from the exchanges not only should stick, but theoretically annualize to a bigger number. So let's flip over then to that headwind on the cost side from salaries. What's kind of the latest that you're seeing there?

Well, I mean, I think we -- and I've [indiscernible] every hospital system had to really incur the labor cost to meet the COVID surge. And if you look at what is the third quarter, and we talked about this in our call, we had an imperative to treat patients. And so any time we were in a COVID surge and we were -- our hospitals were the busiest they've probably ever been during that period of time. We had to incur an elevated level of labor costs. And there were a couple of dynamics that are occurring on there. There were people leaving the workforce either because of the COVID surge and the environment or because they had opportunities to really seize some incredible cost per hour, moving into these contract labor pools. And so we need to be a purchaser of those labor pools to meet that growing demand. And we had to deploy some strategies and tactics to encourage our existing workforce to take shifts. So we did bonus shifts and differentials on thing like that in a COVID environment. So we had to have incurred some premium labor costs to meet with the surge. And so our strategy and our goal has been, as a surge has dissipated, how can we jettison a lot of that premium pay that we had to have during the COVID. But we also recognize there are some structural elements that we have to make. You do have to be competitive. And so we have to make some market wage adjustments to deal with the competitiveness. And so our whole labor environment, we have a multipronged strategy, if you will, to try to address. It's enhancing our recruitment efforts so that we can attract more workers into the HCA fold. So we've really beefed up our talent acquisition and recruitment. We're really focusing on retention and how do we retain nurses in this post environment. Clearly, there's fatigue going on. So how do we provide relief mechanisms for them? And then how do we think about new models and care redesign so that we can support our nurses. So can we hire patient care techs? And can we hire ancillary support to take some of the burden off the clinical nurses, give them a working environment. And lastly, I think maybe long term, our nursing school, our Galen College of Nursing will be and a poor strategy for us to feed into that as we have our own pipeline of nurses on there. So I think wage inflation will be there at a higher level than we historically have seen. But we think overall, within the context of HCA, we can manage through that. Our strategy really now is how do we jettison some of the premium layer we had to incur during the COVID surges and really settle that out in a normalized COVID environment. So we're working our way through that as we speak.

So maybe you could share some numbers with us. I mean first of all, on the third quarter, your salary and wage numbers were pretty elevated. Obviously, like you said, you had both COVID and non-COVID strong But was there anything special about 3Q in terms of maybe any accruals for salaries and wages, future or different timing on increases [indiscernible] that is typical?

Nothing to add. I'd say it was -- as I go back, if I look at the cost per FTE is kind of a relative metric. It was up 6.5% or so where historically, we were running 2% to 3%. So it was elevated, and we acknowledge that. I'd say all of -- that elevation was due to that premium labor component, the contract labor in particular, that we had to bring in to meet these COVID surges. And I really highlight the cost per contract labor was really elevated because of just the supply and demand dynamics on there. So not only was the utilization of ours at a little bit have an elevated pace. But what we really saw through these agencies is the cost per hour really escalated dramatically in the third quarter. So those are the things we're trying to affect as we go post third quarter, reducing the number of hours that we are utilizing to stabilization of our existing workforce and then really working on that cost per hour because we're no longer in just a crazy chaotic COVID surge environment. So those are the things that we're going to work navigate or driving down during a post-COVID environment. Not in other structure. We did have to make some wage adjustments, as I talked about before, to kind of deal with the stabilization of our existing workforce. But that component, I think, is manageable inside of our portfolio. So it's really around those premium pay offers that we had in the COVID area that we're working our way through as we speak.

Got it. So that's -- we had heard from another hospital that presented today that the premium pay is usually 50% to 75% more than normal, and it's up to as high as 150% more than normal. Is that kind of what you're seeing out there as well?

Yes. I think that's directionally in the zone, yes. And I really highlight that cost per hour was escalated. I mean there was pricing through these agencies because everybody was in a bind, we have an imperative to serve those patients. So that really was a key driver. Not only the utilization, the hours that you had to utilize, but it was at cost per hour. Now to your point, more than doubled on us in some cases, on there. So now that we're not in such of that environment, that's what we've been able to work down post surge.

So -- and is that something that's going to kind of leak into the fourth quarter where maybe you don't have the same benefits from COVID in terms of higher acuity net revenue, but you're still paying the higher wage because of the contract claims that you had to sign? Or is that something that anticipates with COVID?

A little early -- we're confident over time, we'll work our way through that. So we'll just have to see how that plays out.

Okay. And so I assume within your '22 kind of framework, right, I know there's a lot of moving parts, the assumption is that, that's going to normalize back to that 50% to 75% premium rather than the 150%, right?

Yes. We do expect some normalization from what we saw in the third quarter in that. So obviously, as you mentioned, a lot of variables, as we talk about '22, little early as we're going to conclude our planning process here. But directionally, like we talked about on the call, we do believe there's going to be demand. We do believe some of the acuity will remain generally favorable in payer mix. And we can manage the cost structure appropriately to deliver a reasonable margin on top of that. so there'll be a lot of variables in there. But I do think that the uniqueness of what we saw on the surge, we don't expect to continue going forward.

And remind me -- I know typically, you're always going to have some premium labor, a couple of percent, 2% to 3% probably is the company target. Where were you kind of remind me in the third quarter?

Well, I look at it in terms of hours. And if you look at the nursing hours, we would typically be in the mid- to high-teens of hours that we use in a contract -- or excuse me, mid- to high-single digits, call it, 6% to 7%, 8%. It was almost double that in the third quarter. So it was mid-teens. So that gives us opportunity to not only drop that, the hours utilization, but the cost per hour.

Got it. And when you're -- you kind of talked about, I think, a 4% to 5% kind of COVID volume for this kind of a framework, right? It's like total guess, I know, but that's the framework to work out there?

Yes, I think that's right.

And in that world, you get back to normal-ish kind of nursing hours in terms of [indiscernible]

I think so. I mean I think that's what we anticipate having to serve COVID going forward. And we think when it's in a stabilized environment of 3% to 5% of our admissions, yes, we can -- we'll manage through that and can kind of get into a normal environment. But we can't judge yet just what will be the overall labor market, the supply and demand forces at play and managing through that, that every organization is going to have to manage through. And so we don't have a full read on that yet. We'll need more time and see how that plays out and when does it normalize to pre-COVID. I don't know if we see that in '22. I think we'll still see challenges. And so our strategy is part of HCA is how do we utilize our scale to support the nurses better and our clinical teams. That clinical design process is aimed at doing that. Can we bring in ancillary support so we may not -- as you look at your nursing needs or your high clinical workforce need, we can support those, beef it up our recruiting area, trying to have retention efforts underway. So we've got a multi-multipronged effort to try to move us through that environment.

Got it. Got it. And last kind of question there. The follow-up would always be, if your costs go up and you're dealing with higher labor costs, you're going to try to pass that along to some of your customers, right? How has the commercial contracting dynamics look? Have you been able to kind of build that into at least those renewals for '22? Or do you think that's something going forward? And how have the payers responded?

Well, I think that's ongoing as we speak. I mean, clearly, we believe that we see elevated costs because of inflation that comes into the discussion with our payers. And so our contracting team is working through strategies with that. Obviously, that's dealt with a response from the payers as well on there. So you have to work through those efforts. We do believe it's reasonable to expect that as -- if we see inflationary beyond historical that we enter into a discussion with the payers to try to look at how to be compensated for that, but we're early in that discussion right now.

And kind of lastly, on that, is this typical? I know most of your contracts are kind of multiyear, call it, 3-year deals. That's kind of evergreen, right? So somebody can always step in. But is it going to be one of those things where it's going to take 3 years to kind of get through whatever inflation we're seeing? Or is there anything you can do in the meantime?

Yes. I don't think it's that long. I mean we, over the past couple of years, have tried to short cycle some of those contracts to give us the opening to be able to have those discussions. So I don't think it's out long at all. I mean it will continue to flow as we think about not only natural contract renewals that come up. But also to the extent that during periods, we can have discussions with our payers to look at what is the appropriate consideration that needs to be considered.

Got it. So then let's move over. I mean the company feels like, to your point before, on the balance sheet, much more dynamic in the last couple, let's call it, 12 to 24 months from a capital deployment perspective. We started off with mission. And that sounds like it's gone very well. And then you sold some facilities in Georgia, bought some in Utah, bought a nursing business. How should we think about -- before we talk about share repurchase, how should we think about your kind of M&A pipeline and what your kind of view is over the next 3 to 5 years of the opportunities in front of the company?

Well, as you mentioned, we will be opportunistic in the M&A side. I see -- we will continue to be very active in the M&A to support our existing networks. That may be around outpatient settings, urgent care, surgery centers where we have the opportunity, other diagnostic, home health. Our Brookdale acquisitions was an example of that. We could expand our network through an acquisition. I believe we will continue to see opportunities to build out that network and really a post-COVID environment as many of those outpatient settings want and need to be attached to a larger system. So I believe we'll continue to see opportunity. Those are relatively small dollar-wise from a capital perspective so will add to our existing network. And to the extent we have a hospital to round out a geographic portion of an existing network, we'll seed those and we've been able to execute on them. In terms of the larger new market acquisitions, I think it will take a little bit of time to just understand that marketplace looks like. We will be interested in looking at new market acquisitions if we believe that's an attractive market, and it's a capable institution. And we have the capacity from a balance sheet and capital perspective to execute on this. But we'll be -- I'll be disciplined on there. I don't know exactly what that will -- marketplace will show itself. Generally, in my history, anytime you get through a disruption effort, and if COVID was a disruption, over the next couple of years, some of those opportunities present themselves. And so we'll just have to see how that plays out. And we'll be prepared to execute on those. But first, we want to make sure it's a long-term strategic asset and market to HCA. In the meantime, our M&A will be largely concentrated on building out our existing networks and rounding that out, and then we'll see to the extent what new markets present themselves.

Got it. And then you mentioned surgery centers in particular. One of your peers doing is doing a ton there in terms of kind of changing their business profile. And it does seem like a bit of a different strategy. My understanding is, and correct me if I'm wrong, in HCA, do you have any surgery centers that aren't in market to where you are?

No. There may be one or two that are in adjacent markets. But you're right, our strategy heretofore has been to build out the surgery centers in our existing network as part of the overall network. We see system value through all of our ancillary areas, surgery centers, physicians, freestanding EDs and the like. So to your point, our focus has been developing our surgery center footprint within our existing markets. We're pushing 150 surgery centers right now. I think we have 12 to 15 in the pipeline either through de novo or acquisitions. So it's been on a growth trajectory for us, and we continue to see growth in there. But heretofore, we haven't yet chosen to go into surgery centers outside where we have an existing presence in there. That is a question we continue to ask ourselves, especially if there are adjacent markets to us, a market that may be -- that did 100 miles away from our core market. And so we will continue to evaluate that. But we see enough growth opportunities in our existing markets. We haven't yet had to really think about taking on new markets with a single asset or a couple of single assets. We do believe the value in our model is built on network strategy and being able to serve that patient's needs in a variety offsetting care. And so that has been our major focus over these past couple of years.

Got it. So from the perspective of the -- adding your surgery center footprint, getting into adjacent markets, but there's some -- some of these larger assets that have 100 -- 50 or 100 surgery centers at a time that are more wider footprints, you certainly have the scale, right, and the contracting leverage, and there certainly seems to be synergies from that to be able to buy them and get an attractive return. Why not step in and look at something like that and deploy $1 billion, $2 billion, right? If one company -- you're the biggest system in the country. One would think you'd have the most synergies regardless, why not take a look at that?

Well, I would tell you we have looked at that. And that we will continue to evaluate whether we think that's the highest and best use of where our investments should be versus the growth in our existing marketplaces along there. So that continues to be an option for us as we look at future growth expansion. But as I mentioned, we still see the value in building out our existing networks, and we think that's delivered strong value to all of our stakeholders going forward. So we will continue to look at and evaluate that, and we'll make what we think is the appropriate judgments going forward.

Got it. And then you -- almost a year ago, you announced a very, very opportunistic share capital deployment program, care repurchase. You've got after it aggressively, right? I think you're kind of ahead of your target. So of course, I'm going to ask you what's next, right? You're -- I think you had $8 billion plus of capital to deploy. You're already through $6 billion of right, it? It looks like you're going to get there on time, if not ahead of schedule. How -- when -- how would we think about kind of positioning the next kind of communication? When do you think we'll get an update there?

You'll get an update on the year-end call. In our January call, we'll tell you what our plans are. The fortunate side is our cash -- our capital capacity gives us a lot of flexibility. We anticipate $8.5 billion to $9 billion of cash flow from operations. We'll evaluate our internal capital program and deploying capital in our core markets to meet growth. That's been an important part of the HCA story, and I think has delivered value on it. The balance sheet is positioned well below the low end of our target on there. So that gives us flexibility and gives us capital capacity. The dividend, I think will likely show some growth, but it's a fairly nominal dividend. And so we've been executing on an enhanced share repurchase program, as you mentioned, $8 billion this year. The share repurchase program, we anticipate will continue to be an important element of our overall capital strategy. And I think our view is there continues to be intrinsic value in HCA. And it's been able to deliver value over the long run. So we'll, in our year-end call, talk to you more specifically about what our plans would be. But I do believe the share repurchase program will be an important element of our overall capital. If you look historically, when you take our cash flow, less our capital, less a little bit of dividend, we've dedicated well over 100% of our free cash flow towards a share repurchase program. We'll see whether that model continues going forward. But it will be an important part of our overall value growth and value delivery capability.

Got it. I do have a couple of questions from investors. One is how is the company thinking about the impact of the Pfizer pill, right? It's supposed to be available in Q1. They anticipate materially impacts the number of COVID admissions and/or possibly relieve the pressure on elective procedures. Is this an important piece of the puzzle to kind of figure out your assessment?

I'll be honest with you, Justin, I haven't heard a lot of discussion by our clinical teams or operating teams on that specific point on there. We have been trying to project what COVID volumes are going to be, trying to use this period of a post surge to try to zero in on what COVID assumptions are for next year. We're in the middle of that. So I don't know yet what the impact of a Pfizer pill would be on those COVID volumes. As we conclude the year, maybe that will come into the discussions. But honestly, I haven't heard a lot of discussion in terms of that impact right now. So my answer is, I don't know. We'll try to get a better read on our COVID volume pluses and minuses based on that. And maybe having a COVID pill will be a factor into that, but I haven't heard a lot of discussion on that point as of yet.

Got it. Maybe another way to ask the question is relative -- again, I'm just going to pick a number that you kind of have in your range. Let's say, 5% of admissions, right, are COVID related. How does that become a swing factor? If it's -- if I said to you, Bill, it's going to be 0% or it's going to be 10%, how do you think about your EBITDA just to kind of try to isolate that variable and when I know [indiscernible] equation.

No, it's a good question, and we're trying to assess that, too. I start with if COVID volume moves at a different level than we anticipated, the question is, does it get backfilled with other services? So we try to assess that first. Let's say, COVID goes from 8% to 5% or it goes from 5% to 2% or 0%, the first question we tried to ask or the question we ask after that is, do we believe that there's other demand that will compensate for that lower COVID volume? And we have to make that assessment first. We do believe there's demand out in the marketplace that can make up some portion of that COVID decline. So that mitigates the impact of if you lose COVID. Does it mitigate if it goes to 0? I don't know yet. So there'll be an equation there we'll have to think about. I don't see it going to 0 just by all things I report. So it's really a degree issue. But to your point, there could be a position where if it drops materially greater than we anticipated and there's not yet the backfill of that demand to backfill, it could have an impact on us that we'd have to manage through. Right now, our view is that any change in COVID volumes going forward, there's enough demand in the marketplace that's either, call it, pent-up demand or backfill demand, that we can absorb the impact of that COVID decline.

Got it. Got it. And then the other question I got from an investor was around elective surgeries and COVID plus the impact of labor. So in the third quarter, it looked like you had been pretty aggressive in terms of making sure you can take on the patient volume that was there. So less price-sensitive on labor and try to fill every need. So do you think labor could have an impact as you're going through the fourth quarter into next year on volumes where you might have to start trading off, like volume would be lower because you just can't get your hands on enough nurses?

It's a good question. So far, I don't see it materially doing it. There may be pockets of some facilities here or there. But I don't think it yet has risen to be a material deferral of volume at this standpoint. As you did mention, during COVID, it was. We had to have labor. So you go on tranche -- you're close to transfers. You're managing surgery schedules and the like. When you're not in that environment, then appropriately bringing on that capacity is there. I have not heard discussions yet where the lack of labor has been a volume deterrent for us yet. We'll just have to continue to keep forward on there. There may be some pockets here or there. It generally manifests itself around transfers, are you able to take income and transfers and managing through that. In terms of managing down surgical schedules and the like, I haven't heard it in any material way yet. But we'll continue to evaluate that as we go through the quarter. And just again, as I mentioned earlier, we haven't had too many normal months. And so we're waiting for some normal periods to try to make some longer-term assessments of that. And so we'll just have to see.

Okay. Just let me get a squeeze a follow-up and we'll let you get on your way. The -- on the surgery side, we know in some places in Florida and Texas, where you've got a big footprint, there were changes in -- at least in the third quarter in terms of surgical schedules, right? So as you've seen -- have you seen those start to return? In any specialties, in particular, are you seeing kind of grow a little faster or slower? So basically, what I'm asking is, are you seeing surgeries return to normal or maybe above normal in any kind of surgical specialties that you point out?

Yes. Without giving specifics, obviously, mid-quarter [indiscernible], the directional answer is yes. We have seen business begin to return to normal as we've dissipated the COVID surge and gotten to what I hope is a stabilized COVID level on there. There's ebb and flows as it occurs on there. But I would tell you, directionally, the answer is there, yes. I can't really answer as it gotten back to normal or pre-COVID levels. But directionally, we have seen the business normalize and return to kind of normalized environment outside of a COVID surge. But we'll just have to see exactly how that sells that one.

All right. Well, guys, I really appreciate you being here. Thanks for the time. Thanks, everybody, for joining. Everybody have a great Thanksgiving, and I look forward to seeing you soon.

All right. Thanks, Justin. Take care.

Thanks, all.