Ardent Health Partners Q1 2025 Earnings Report

Ardent Health Partners EPS Results

• Actual EPS: $0.29
• Consensus EPS: $0.21
• Beat/Miss: Beat by +$0.08
• One Year Ago EPS: N/A

Ardent Health Partners Revenue Results

• Actual Revenue: $1.50 billion
• Expected Revenue: $1.50 billion
• Beat/Miss: Missed by -$355.00 thousand
• YoY Revenue Growth: N/A

Ardent Health Partners Announcement Details

• Quarter: Q1 2025
• Date: 5/6/2025
• Time: After Market Closes
• Conference Call Date: Wednesday, May 7, 2025
• Conference Call Time: 10:00AM ET

Ardent Health Partners (NYSE:ARDT), Inc. owns and operates a network of hospitals and clinics that provides a range of healthcare services in the United States. It operates acute care hospitals, including rehabilitation hospitals and surgical hospitals. The company was founded in 2001 and is based in Brentwood, Tennessee. Ardent Health Partners, Inc. is a subsidiary of EGI-AM Investments, L.L.C.

Ardent Health Partners Q1 2025 Earnings Call Transcript

Key Takeaways

• Ardent delivered a solid Q1 with admissions up 7.6% and adjusted admissions up 2.7% (upper end of 2025 guidance), driving 4% revenue growth despite a 70 bp drag from last year’s oncology/infusion transfer.
• Adjusted EBITDA rose 2.5% to $98 million, aided by a 60 bp reduction in supply costs and a moderation in physician professional fee inflation to 6%, as the company targets an additional 100–200 bp of margin expansion over the next 3–4 years.
• With approximately $500 million of cash, a 3x lease-adjusted leverage, and reaffirmed full-year guidance, Ardent remains focused on three strategic priorities: expanding market share in existing markets, growing outpatient and acute care footprints, and driving operational margin improvements.
• Ardent bolstered its leadership team with the appointment of Dave Kaspers as COO and is finalizing a Chief Development Officer hire to accelerate execution and integrations across its growth initiatives.
• The company continues to expand ambulatory access, highlighted by the integration of 18 NexCare urgent care clinics, and sees a growing pipeline of M&A opportunities with non-profit and academic partners, leveraging its joint-venture model to pursue disciplined acquisitions.

Presentation

[Operator]

Ladies and gentlemen, thank you for standing by, and welcome to the Ardent Health Partners First Quarter twenty twenty five Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. As a reminder, today's call is being recorded. I will now hand today's call over to David Styblo, Senior Vice President of Investor Relations.

[Operator]

Please go ahead,

[David Styblo, SVP - Investor Relations at Ardent Health Partners]

Thank you, operator, and welcome to Ardent Health's first quarter twenty twenty five earnings conference call. Joining me today is Ardent President and Chief Executive Officer, Marty Bonnick and Chief Financial Officer, Alfred Lumpstein. Marty and Alfred will provide prepared remarks, and then we will open the line to questions. Before I turn the call over to Marty, I want to remind everyone that today's discussion contains forward looking statements about future business and financial expectations. Actual results may differ significantly from those projected in today's forward looking statements due to various risks and uncertainties, including the risks described in our periodic reports filed with the Securities and Exchange Commission.

[David Styblo, SVP - Investor Relations at Ardent Health Partners]

Except as required by law, we undertake no obligation to update our forward looking statements. Further, this call will include a discussion of certain non GAAP financial measures, including adjusted EBITDA and adjusted EBITDAR. Reconciliation of these measures to the closest GAAP financial measure is included in our quarterly earnings press release, which we issued yesterday evening after the market closed and is available at ardenthealth dot com. With that, I'll turn the call over to Marty.

[Marty Bonick, CEO at Ardent Health Partners]

Thank you, Dave, and good morning. We appreciate everyone joining on the call and the webcast. We are pleased to report another solid quarter financial and operating performance results as we build a track record of disciplined execution in support of our strategic growth initiatives. Before diving into the details, I want to step back to focus on the big picture and underscore that Ardent is well positioned for multifaceted long term growth with an emphasis on three key areas. First, we have ample opportunities to drive strong market share growth within our existing footprint, leveraging our strong physician platform and consumer first strategy.

[Marty Bonick, CEO at Ardent Health Partners]

Second, we are focused on expanding our outpatient and acute care hospital footprint and are well positioned to support this expansion with approximately $500,000,000 of cash and a favorable lease adjusted net leverage ratio of three times. Finally, we continue to drive margin expansion through operational initiatives, leveraging our scale, supply chain efficiencies and other cost saving strategies. In support of our focus on execution, I'm pleased to welcome Dave Kaspers as our Chief Operating Officer effective March 31. Dave's experience driving strategic growth at Walmart Health, Banner Health and Target Corporation's retail healthcare business will significantly complement our executive management team. Additionally, we are in the final stages of recruiting a Chief Development Officer to support our focus on M and A activities.

[Marty Bonick, CEO at Ardent Health Partners]

Turning to first quarter results, we continue to deliver against our strategic objectives. Volume growth was once again solid. Admissions grew 7.6% driven by strong underlying growth and heightened flu season. Inpatient surgery growth of 3.4% was strong and benefited from our efforts to optimize transfer center operations to capture additional demand. Adjusted admissions increased 2.7%, which is on the upper end of our full year 2025 outlook of 2% to 3%.

[Marty Bonick, CEO at Ardent Health Partners]

First quarter revenue increased 4% and net patient service revenue per adjusted admission grew 1.2%. Those growth rates were tempered by approximately 70 basis points due to the strategic transfer of certain oncology and infusion services to a health system partner in the middle of last year. Recall, we discussed this mechanical headwind during the third quarter twenty twenty four earnings call and we will lap that event after second quarter twenty twenty five results. These services produced roughly $10,000,000 of revenue, but were breakeven EBITDA. Additionally, I would note that our first quarter results exclude any benefit from the 2025 New Mexico DPP program that is awaiting final CMS approval.

[Marty Bonick, CEO at Ardent Health Partners]

First quarter twenty twenty five adjusted EBITDA grew 2.5% to $98,000,000 In pursuit of our strategic operational excellence initiatives, we made additional progress on our supply chain during the first quarter. Supply cost as a percent of revenue declined 60 basis points year over year. We have a number of projects in the pipeline that we expect will create additional efficiencies over the next several years and continue to see an opportunity to improve margins by 100 basis to 200 basis points over the next three to four years through scale, supply chain optimization and other operating cost initiatives. Also on the cost side, the growth rate of physician professional fees was 6% in the first quarter of twenty twenty five, down from 13% growth during the same period last year. While hospital based physician subsidies remain a headwind, we are beginning to see hopeful signs that the growth rates are moderating.

[Marty Bonick, CEO at Ardent Health Partners]

On the ambulatory front, we are pleased with the integration of the 18 Nex Care Urgent Care clinics that we acquired on 01/01/2025. As the year progresses, we expect this transaction to generate additional downstream volumes in our Tulsa and Albuquerque markets. Consistent with our focus on high growth midsize urban markets, we expect to continue to strategically expand ambulatory access points to meet consumer demand and drive growth. In terms of M and A, we are seeing more potential acquisition candidates as providers assess optionality in the marketplace in a more uncertain regulatory environment. We are seeing increased interest in our unique joint venture model from potential academic and non for profit partners that are in this exploratory phase.

[Marty Bonick, CEO at Ardent Health Partners]

We will continue to evaluate these potential opportunities in a disciplined manner and have the balance sheet to move forward when a stockholder value enhancing opportunity presents itself. In summary, we continue to successfully execute on our strategic growth priorities during the first quarter of twenty twenty five, creating strong momentum to start the year. This puts us firmly on track to meet our full year 2025 financial guidance, which we are reaffirming today. With that, I will turn over the call to Alfred.

[Alfred Lumsdaine, Chief Financial Officer at Ardent Health Partners]

Thanks, Marty, and good morning to everyone on the call today. As Marty indicated, Q1 of twenty twenty five represented a very solid start to the year, and we expect to maintain our operating momentum throughout 2025. At a high level, we continue to execute across numerous key strategic initiatives during the first quarter that help set the stage for attractive long term growth. We captured incremental supply chain cost savings, improved transfer center operations, and integrated the NextCare Urgent Care acquisition. Additionally, while our earnings exposure from tariffs is minimal for 2025, we're working proactively to mitigate potential future impacts.

[Alfred Lumsdaine, Chief Financial Officer at Ardent Health Partners]

Like many peers, we benefit from a strong relationship with our GPO partner HealthTrust and have fixed pricing for a large majority of our supplies this year. Recognizing that the tariff outlook is fluid, we estimate the 2025 EBITDA impact is no more than a mid single digit million dollar amount based on the current tariffs in place. That said, I'll move on to first quarter results, which excluded any financial benefit from the 2025 New Mexico DPP program. While CMS has not approved the renewal yet, we're encouraged by signs of a typical program approval process between the state and CMS. First quarter revenue increased 4% to $1,500,000,000 compared to the prior year driven by adjusted admissions growth of 2.7% and net patient service revenue per adjusted admission growth of 1.2%.

[Alfred Lumsdaine, Chief Financial Officer at Ardent Health Partners]

Excluding the infusion and oncology transfer that Marty mentioned, growth rates for revenue and net patient service revenue per adjusted admission were 4.71.9% respectively. From a volume standpoint, demand remains durable. Admissions growth was a very strong 7.6% and adjusted admissions increased 2.7% year over year, which we believe speaks to our strong market position and growth opportunities within our current markets. Inpatient surgery growth was a solid 3.4% in the first quarter, while outpatient surgeries declined 2.3%. Overall, we estimate year over year surgical volume was impacted by approximately 1.5% from the timing of leap year.

[Alfred Lumsdaine, Chief Financial Officer at Ardent Health Partners]

Adjusted EBITDA increased 2.5% in the first quarter to $98,000,000 which is consistent with our expectation towards achieving full year 2025 guidance. The growth rate was impacted by a notable increase in payer claim denials when compared to the first quarter of twenty twenty four. To be clear, we aren't seeing a significant increase in denials compared to the back half of twenty twenty four, but it does create a year over year headwind. That said, we expect underlying EBITDA growth to accelerate as we lap this dynamic in the back half of the year.

[Marty Bonick, CEO at Ardent Health Partners]

Turning to some specific line items, salaries and benefits expense as a percentage of revenue increased 70 basis points on a reported basis, but virtually all of

[Marty Bonick, CEO at Ardent Health Partners]

that increase was driven by post IPO stock compensation. We're pleased with our operational improvement around contract labor, which declined 60 basis points year over year to 3.8 as a percentage of total salaries and benefits. We continue to see strong nursing retention rates and a stable contract labor rate environment.

[Alfred Lumsdaine, Chief Financial Officer at Ardent Health Partners]

Marty already covered our improving trends in professional fees and supplies, so I won't rehash those. Moving on to cash flow and liquidity, we ended the first quarter with total cash of $495,000,000 and total debt outstanding of $1,100,000,000 Our total available liquidity at the end of the first quarter was $790,000,000 Cash used in operating activities during the first quarter was $25,000,000 compared to $15,000,000 used in the first quarter of twenty twenty four. As a reminder, Q1 is traditionally our weakest cash flow quarter largely due to payment timing related to year end accruals. Capital expenditures during the first quarter were $23,000,000 and we expect that to ramp throughout the year. Our total net leverage as calculated under our credit agreements was 1.4 times and our lease adjusted net leverage was three times.

[Alfred Lumsdaine, Chief Financial Officer at Ardent Health Partners]

On a related note, I'm pleased to share that late last month S and P upgraded our credit rating to B plus from B reflecting our improved net leverage and cash flow profile. This action affirms the results of our fiscal and operating strategies and will help strengthen any future financing opportunities. Overall, we remain firmly on track to achieve our 2025 financial outlook, which we are reaffirming today. With that, I'd like to turn the call back to Marty for a few final comments on the quarter before we open the call

[Alfred Lumsdaine, Chief Financial Officer at Ardent Health Partners]

to questions. Marty?

[Marty Bonick, CEO at Ardent Health Partners]

Thank you, Alfred. In summary, we continue to make substantial progress as we execute on our strategic growth initiatives and leverage the consumer focused platform we have built to create long term stockholder value. We are pleased with our solid start to 2025 underscored by strong demand trends.

[Marty Bonick, CEO at Ardent Health Partners]

We continue to sharpen our focus on market share growth, taking a disciplined approach to evaluating opportunities in both the ambulatory space as well as acute care hospitals. With leverage of three times and ample cash, we will continue to assess opportunities to execute on this strategy. Finally, we remain focused on operational excellence initiatives to drive margin expansion over the next several years. I want to close by thanking our 25,000 team members and more than 1,800 employed and affiliated providers who continue to deliver exceptional care to patients across the communities we serve. Together, we are focused on making health care better and advancing our purpose of caring for our patients, our communities, and one another.

[Marty Bonick, CEO at Ardent Health Partners]

With that, operator, please open the line for questions.

[Operator]

Your first question is from the line of Ann Hynes with Mizuho. Anna, your line is open. There's no response from that line. We'll go to the next question. Your next question is from Whit Mayo with Leerink Partners.

[Whit Mayo, Senior Managing Director at Leerink Partners]

Hey, thanks. I'm still trying to get a feel for the seasonality of this business. And when I exclude the supplemental payments from the fourth quarter of last year, it looks like EBITDA may have declined call it 20% or so. Is that a normal sequential decline? And you referenced stronger flu and the volumes look really good.

[Whit Mayo, Senior Managing Director at Leerink Partners]

So I would have expected to see better than normal sequential growth. So I'm trying to put this sort of in perspective with normal seasonal patterns to the way your earnings develop. Thanks.

[Alfred Lumsdaine, Chief Financial Officer at Ardent Health Partners]

Sure. Thanks for the question, Whit.

[Alfred Lumsdaine, Chief Financial Officer at Ardent Health Partners]

This is Alfred. Yes, I

[Alfred Lumsdaine, Chief Financial Officer at Ardent Health Partners]

would say it's not abnormal. There's obviously any number of puts and takes. From our perspective, the strength of the flu season is not a particular tailwind to the business. It certainly drives higher volumes, but also comes with some lower acuity and some incumbent higher cost premium pay as we care for those patients. So, yes, I would not put that into the tailwind or into the tailwind category.

[Alfred Lumsdaine, Chief Financial Officer at Ardent Health Partners]

Clearly, we mentioned payer denials, but again, on a sequential basis, we didn't really see that as a sequential it was more of a year over year impact than a sequential impact. So, again, with some amount of normal puts and takes, I think you can put that into, you know, the the bounce of a normal type of seasonality with the strength of year end and then the reset of deductibles and co pays, at the start of the year and then other kind of timing things like, reset of payroll taxes, etcetera. You have a little bit of a cost burden in q one that happens as well, and and our races go into effect in Q1. So again, there's just a little bit of a sequential dynamic there. But, yes, I would not call out anything outside of the balance of normal.

[Whit Mayo, Senior Managing Director at Leerink Partners]

Okay. And maybe just to follow-up on the elevated denials, I presume that that's MA. And what I'm hearing, I guess, is this is a continuation of what you saw from last year? Or are there new changes in payer behavior or dispute resolution, any changes with length of stay on MA? Just any additional color might be helpful.

[Alfred Lumsdaine, Chief Financial Officer at Ardent Health Partners]

I

[Alfred Lumsdaine, Chief Financial Officer at Ardent Health Partners]

think what you're hearing is very consistent with what we're experiencing. Yes, a continuation of last year. We really saw that step up happen in, you know, in the middle of the year. You know, a couple of things we would call out there. You know, I would say there has been a continuation of a slowdown in payments even on clean claims.

[Alfred Lumsdaine, Chief Financial Officer at Ardent Health Partners]

That's maybe, again, while denials have not accelerated, there's maybe been a bit of an acceleration from just, length of time to pay a clean claim, and that's certainly showing up, impacting our cash flow numbers. But, no, we're not, you're you're, again, how you frame the question with is consistent with what we're saying.

[Operator]

Your

[Operator]

next question is from the line of Anne Hines from Mizuho.

[Ann Hynes, Senior Healthcare Services Equity Analyst & Managing Director at Mizuho Financial Group]

Hi. Sorry about that. I had some technical difficulties. Maybe just on the supply chain initiatives. Can you tell us like why you actually have so much opportunity versus your peers?

[Ann Hynes, Senior Healthcare Services Equity Analyst & Managing Director at Mizuho Financial Group]

Are you involved in a GPO? And maybe if you really can dig into, like, the type of opportunities you have that will create that type of margin expansion, that would be very helpful.

[Marty Bonick, CEO at Ardent Health Partners]

Yeah. Anne, this is Marty. Thanks for the question. We do participate, with HealthTrust as our GPO partner and very similar to our peer group, and so that helps us with our day to day contracting. But the utilization within our service lines is where we still see opportunity for improvement.

[Marty Bonick, CEO at Ardent Health Partners]

This is an ongoing journey that we have and have continued to see improvement as we've gone through both certification as well as looking at physician preference items, and most notably, the action we took last summer by partnering with one of our academic institutions to move some of our oncology infusion services. The drug costs for those services have varying reimbursements based upon the geographies and markets that we're in, and so we continue to see opportunities to further address those drug costs in concert with our partners, as well as just general physician preference items that we're continuing to negotiate across key service lines as we're seeing volumes improve.

[Ann Hynes, Senior Healthcare Services Equity Analyst & Managing Director at Mizuho Financial Group]

Great. And then it sounds like the underlying admission growth was better than your expectations. Besides flu, are there any other areas that you would call out? Thanks.

[Marty Bonick, CEO at Ardent Health Partners]

Yeah. This is Marty again.

[Marty Bonick, CEO at Ardent Health Partners]

had

[Marty Bonick, CEO at Ardent Health Partners]

a big focus around our transfer centers and making sure, both from an internal efficiency, that we've got good bed turnover through, like, stay initiatives and optimizing the transfer centers that we have regionalized across the company. And so I think you are seeing the strong impact of the flu is the principal reason that we have coming through there. But, you know, as we've gone through service line rationalizations, that helped lead to an increase in our inpatient surgeries and, again, the focus on the transfer centers of bringing in cases from across our regions into our tertiary centers. Those the combination of those activities is what's driving that growth.

[Alfred Lumsdaine, Chief Financial Officer at Ardent Health Partners]

And this is Alfred. And I would just add that, you know, again, we believe it's also representative of the strength of the markets we're in and the underlying growth of those markets.

[Operator]

Your next question is from the line of Craig Hettenbach with Morgan Stanley.

[Craig Hettenbach, Executive Director at Morgan Stanley]

Thank you. Marty, can you just build on the commentary of just durability of demand? Any areas of care where you're seeing that most pronounced? And anything to note in terms of how broad based this is versus market specific?

[Marty Bonick, CEO at Ardent Health Partners]

Yes. Craig, this is Marty. So just as building on what Alfred said, we've referenced before the strength of our market's growing on average, you know, about 3% a year, and so we see that as very durable. We know that there's some commentary between the payers and the providers, in terms of whether there's pent up demand. We don't subscribe to that theory.

[Marty Bonick, CEO at Ardent Health Partners]

The strength of our markets, coupled with the strength of our performance, gives us strong conviction that we will continue to see strong volume growth. We accentuate that by the operational improvements we're making to be able to service that growth. But the strength of the markets that we're in gives us good conviction that these volumes are durable to from positive growth rate perspective.

[Craig Hettenbach, Executive Director at Morgan Stanley]

Got it. And then just as a follow-up on the COO hire, just any areas of strategic focus for him and and then also kind of experience he brings to your organization as you continue to look to scale the business?

[Marty Bonick, CEO at Ardent Health Partners]

Yeah. Dave Dave's about one month on the job with us and is doing a great job, really just helping to, again, complement the existing executive team that we've put together. We've got great subject matter expertise across our hospitals, our health services, and our corporate services. Dave's background with both the consumer and retail focus will accentuate our consumer growth strategies as we go through the markets. And just to focus on and continued focus on integration and optimization of the entire platform, we've talked about the centralized centralized services that we've created in the years leading up to the IPO last summer.

[Marty Bonick, CEO at Ardent Health Partners]

But we also said that we know that we've got 100 to 200 basis points of margin expansion to achieve over the next several years, and Dave will be a key focus in driving that performance improvement, coupled with the expected growth that we will see in new market or new hospital growth, complementing our existing markets. That integration activity will be paramount to making sure we can extract value from any transactions and making those accretive for the company. And so he'll have purview over, the execution of our ongoing initiatives as well as, that integration of new activity and growth into the system.

[Operator]

Your next question is from the line of Ben Hendrix with RBC Capital Markets.

[Ben Hendrix, Vice President at RBC Capital Markets]

Great. Thank you very much. Just wanted to get an update on the expansion initiatives or the strategic initiatives you called out, specifically expanding your outpatient and acute footprint. Just any update on how conversations are going with potential new market opportunities and sellers in those markets? How are they thinking about valuation in the amid the uncertainty on the Medicaid policy changes and kind of just what you're seeing in terms of seller appetite?

[Ben Hendrix, Vice President at RBC Capital Markets]

Thanks.

[Marty Bonick, CEO at Ardent Health Partners]

Ben, this is Marty again. Thanks for the question. We continue to focus on a multipart growth strategy. The first, we always said, was going to be inside of our markets. While we've got very strong inpatient market share, we know that there's still a lot of outpatient development work to be captured.

[Marty Bonick, CEO at Ardent Health Partners]

Again, the acquisition we did with the NextCare Urgent Care assets in our Albuquerque and Tulsa markets, the 18 urgent care centers we bought, is a great indicator of that continued focus that we're going to have of strengthening the access points in our markets, strengthening our positions in those markets, and building out a more robust footprint, first and foremost. On the second part, in terms of new markets or new hospital growth, I would say the pipeline continues to build. Since going public, our visibility, you know, has, taken a new stage, and we've got more inbound calls, coming from, academic partners in particular, that have taken note of the model that we have and have a desire to grow inside of their respective regions but may not have, the balance sheet or the integrating operating experience, to expand into new regions and see Ardent as a a good target partner. So I'll say the conversations in the pipeline are growing, which is the reason that we're focusing on bringing in a dedicated chief development officer into the company, to be able to capitalize on those opportunities. In terms of valuations, you know, you've certainly seen some headline valuations that are above, historic norms and averages.

[Marty Bonick, CEO at Ardent Health Partners]

I would characterize those as largely sort of one off strategic acquisitions for certain existing systems in a given geography. We believe that the overall valuations will continue to trade somewhere in the normal sense of where this industry has historically been. And any acquisition that we focus on is going to have to be something that we see as accretive to the company in the near term, call it, the first twenty four months, where we can see absent purchase price synergies that will help us to delever a transaction and make it accretive for shareholders.

[Ben Hendrix, Vice President at RBC Capital Markets]

Great. Thanks for the color.

[Operator]

Your next question is from the line of Joanna Gajuk with Bank of America.

[Joanna Gajuk, Equity Research Analyst at Bank of America]

Hi, good morning. Thanks so much for taking the question. So I guess a follow-up on that comment around, I guess, to the prior question. So you mentioned that there's interest to it sounds like, receiving from the nonprofits and academic centers to partner. So can you give us a sense of those preliminary preliminary, you know, are these, you know, systems waiting essentially to see what's gonna happen or they're kinda ready to kinda, you know, do something right now?

[Joanna Gajuk, Equity Research Analyst at Bank of America]

So, essentially, what I was asking is sort of what, you know, a close of getting something done. Should we expect something this year or just this more kinda like next year when the dust sells? Any kind of indication, I guess, would be helpful.

[Marty Bonick, CEO at Ardent Health Partners]

Yes.

[Marty Bonick, CEO at Ardent Health Partners]

Joanne, this is Marty. I'll offer to chime in if there's additional. But we've been pretty open that we went public with the expectation of growth. We believe we've got a strong operating model that would be valuable to enter into new markets where we could create a partnership and, you know, create something more valuable for that target seller than that they were able to achieve on their own. We don't have anything definitive to announce today, obviously, and we will appropriately message that when there is.

[Marty Bonick, CEO at Ardent Health Partners]

But I would say that there's a mix of conversations going on with potential near term opportunities as well as exploratory conversations about what future growth can look like in a in a given geography. You know, we are focusing on a mix of hospital acquisitions that would be both complementary to our existing markets or or state footprints we're in as well as new. And so, you know, we're just encouraged by that the the pipeline of growth and, again, the the reason why we're bringing on dedicated chief development officer to help nurture those relationships, conversations, and bring those to fruition. But we've been saying we've been hopeful that we will see some type of a transaction, whether that's a tuck in or a new market, know, still in this calendar year.

[Joanna Gajuk, Equity Research Analyst at Bank of America]

Okay. If I may, on the New Mexico DPP, like you said, you know, no approval yet, but there's some approvals coming out. So so any indication, like, would you assume to get this finalized by the end of q two? I mean, we're already in May. Thank you.

[Marty Bonick, CEO at Ardent Health Partners]

Yeah. This is Marty again. On the DPP programs, we are starting to see a number of analysts noting that renewals of other states happening. We remain convicted that these programs are durable, You know, from our conversations at Washington, D. C.

[Marty Bonick, CEO at Ardent Health Partners]

With elected officials, they know the importance of these programs to the states. Again, these DPPs were started under the first Trump administration, and I think the sense that we're seeing these new other state approvals come through are consistent with our conversations that we're having with the elected officials, both in the state and CMS, that it's just a matter of processing through these. And, you know, we are expecting approval. The the timing, we are hopeful for to see a q two approval, but, obviously, we can't control that.

[Alfred Lumsdaine, Chief Financial Officer at Ardent Health Partners]

And this is Alfred, Joanne.

[Alfred Lumsdaine, Chief Financial Officer at Ardent Health Partners]

The only thing I would add is that, you

[Alfred Lumsdaine, Chief Financial Officer at Ardent Health Partners]

know, we stay close to our contacts in New Mexico, and I think we've been clear that all of the indications are that, you know, things are progressing as you would expect, and a very normal tracking towards an approval.

[Operator]

Your next question is from the line of Matthew Gillmor with KeyBanc.

[Matthew Gillmor, Director & Equity Research Analyst at KeyBanc Capital Markets]

Hey, thanks. Wanted to ask about exchange volumes and payer mix. I think the presentation made reference to strength with exchange volumes. Can you provide some details in terms of the magnitude of the growth in the quarter and maybe update us in terms of the percent of revenue that's tied to exchanges versus, I think, the 3.6% you talked about for 'twenty four?

[Alfred Lumsdaine, Chief Financial Officer at Ardent Health Partners]

Sure, Matt. This is Alfred. You know, like, all of our peers, we are seeing very strong exchange growth. For example, admissions in the quarter grew 40, in q one. That's a combination of, improvement in our additional enrollment in exchanges as well as new plans that we have that are ramping.

[Alfred Lumsdaine, Chief Financial Officer at Ardent Health Partners]

So our exchange volume growth, was significant. And, you know, today, q one, we're operating in the mid single digits as a percent of revenue.

[Matthew Gillmor, Director & Equity Research Analyst at KeyBanc Capital Markets]

Got it. That's helpful. And then following up on the comment around the moderation in professional expenses, I was hoping you could sort of unpack that a little in terms of the hospital based physician expense. You know, where are you seeing improvement? And, you know, are are you confident and comfortable that that'll be sort of a durable moderation?

[Matthew Gillmor, Director & Equity Research Analyst at KeyBanc Capital Markets]

Any any additional details there would be great. Thanks.

[Marty Bonick, CEO at Ardent Health Partners]

Yeah, Matt. This is Marty. You know, we we have expected to see as we, you know, we could get guidance earlier in the year that, this was still gonna be an inflation that was north of, you know, sort of general inflation, and, you know, we've modeled that as such, and we are seeing that continue. And we are encouraged that it is moderating from the peak in 'twenty three. The rates came down a bit in 'twenty four.

[Marty Bonick, CEO at Ardent Health Partners]

The growth, I should say, came down a bit in 'twenty four. We expect that to continue to moderate 'twenty five, but still be above normal inflation levels. So while Q1 was slightly ahead of where we thought things might be, we know, which is given some of the uncertainty of certain specialties, radiology is one that has been a bigger growth area as well as continued pressures in anesthesiology that we expect to see some continuation of this trend going throughout the remainder of the year as we had forecasted and guided earlier in the year.

[Operator]

Your next question is from the line of Benjamin Rossi with JPMorgan.

[Benjamin Rossi, Equity Research Associate at JP Morgan]

Great. Thanks for the question. So with 1Q revenue per adjusted admission at about 1.2% on respiratory tract acuity and more challenging year over year comp.

[Benjamin Rossi, Equity Research Associate at JP Morgan]

To start there, is there anything else

[Benjamin Rossi, Equity Research Associate at JP Morgan]

from a payer mix or acuity perspective that we aren't seeing within there such as additional drag from your efforts or rationalizing your outpatient surgery offerings? And then in reaffirming your guide, what puts and takes are you factoring into reaching the lower end or upper end of your 2025 pricing guidance of 2.1% to 4.4% year over year?

[Alfred Lumsdaine, Chief Financial Officer at Ardent Health Partners]

Ben, it's Alfred. I'll start with the first part of your question on the NPR per AA growth of 1.2%. You touched on a piece of it, the service mix and acuity. Clearly, that was on a year over year basis a drag. We continue to see good the year over year commercial rate increases have been very consistent with our expectations.

[Alfred Lumsdaine, Chief Financial Officer at Ardent Health Partners]

The other items that were dragged on a year over year basis, we talked about the denials, you know, which we will lap in the middle of the year. So you'll get a more normalized, you know, growth rate on a year over year basis. And then the last thing is is that transfer, and Marty touched on it in his comments, the transfer of the oncology services. You know, that was about 70 basis points, as well. So, really, those three items, were the were the drag on a year over year basis.

[Benjamin Rossi, Equity Research Associate at JP Morgan]

Great. And then as a follow-up on the transfer center operations, you mentioned the improvements to your transfer center more broadly on a regional basis. Could you just walk us through those efforts and your approach more broadly to inpatient capacity and related patient throughput during this elevated patient utilization backdrop?

[Marty Bonick, CEO at Ardent Health Partners]

Yes, Evan, this is Marty. So we have regionalized our transfer center operations. And, as you all know, we have one instance of EPIC as our electronic health record and really our clinical operating system that helps us drive and have visibility in terms of where we have capacity opportunities. Know, taking that technology and the organization of those services has allowed us to have a very, you know, seamless process for outlying rural regional hospitals to be able to transfer patients into our networks and help us to drive that volume to the most appropriate setting. So not only are we trying to maximize volumes coming into our tertiary hospitals, but our secondary hospitals, which may not have gotten the original call, we're able to relocate those patients, where we've got the appropriate clinical mix of physicians and services to to service those patients and manage capacity and demand across the a broader network.

[Marty Bonick, CEO at Ardent Health Partners]

And so before that that was all happening, you know, on a one off basis, and if you called hospital x and they had availability, they'd accept it. Now you're calling the market, and the market is helping to distribute those patients more effectively across our footprint, which is helping us to see increased pull through in those transfers, getting placed in in one of our hospital beds.

[Alfred Lumsdaine, Chief Financial Officer at Ardent Health Partners]

And, Ben, this is Alfred. I wanna go back to the first part of your question because you asked about the, you know, kinda what are the range of outcome in terms of the items would it that would affect the range from the top end to the bottom end of our guidance. You know, obviously, we're very pleased with the start of the year and the solid Q1 that we had. I would just point you back to the things we've talked about, the pressure of professional fees, the payer behaviors and denials is their variance to those expectations. And then, of course, tariffs, we've touched on relatively minor in terms of the overall exposure, but certainly not something that we had anticipated in our guide.

[Operator]

At this time, there are no further questions. I will now hand the call back over to management for closing remarks.

[Marty Bonick, CEO at Ardent Health Partners]

Thank you, everybody, for your time and attention. We appreciate the support of Ardent and our performance. If there's any follow-up questions, please refer those to Dave Styblo, Head of Investor Relations for Ardent. Thank you, everybody.

[Operator]

This concludes today's call. Thank you for joining. You may now disconnect your lines.

Participants

Executives

• David Styblo, SVP - Investor Relations
• Marty Bonick, CEO
• Alfred Lumsdaine, Chief Financial Officer

Analysts

• Whit Mayo, Senior Managing Director at Leerink Partners
• Ann Hynes, Senior Healthcare Services Equity Analyst & Managing Director at Mizuho Financial Group
• Craig Hettenbach, Executive Director at Morgan Stanley
• Ben Hendrix, Vice President at RBC Capital Markets
• Joanna Gajuk, Equity Research Analyst at Bank of America
• Matthew Gillmor, Director & Equity Research Analyst at KeyBanc Capital Markets
• Benjamin Rossi, Equity Research Associate at JP Morgan