Nutex Health Q3 2026 Earnings Call Transcript

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Provided by Quartr
November 6, 2026

Key Takeaways

  • Neutral Sentiment: Revenue and adjusted EBITDA declined year over year in the first nine months, to $644.9 million and $211.4 million, respectively, while net income attributable to Nutex rose to $152.9 million. Management attributed much of the revenue comparison to unusually favorable revenue adjustments in 2025 as IDR collection estimates were updated.
  • Positive Sentiment: Patient volumes grew strongly: third-quarter hospital visits increased 18.1%, including 12.4% same-hospital growth, and nine-month visits rose 10.2%. Management cited business development and expanded services as contributors to the gains.
  • Positive Sentiment: Cash flow and liquidity remained robust. Cash reached $249.9 million, operating cash flow was $188.1 million for the first nine months, and total bank and equipment debt was about $42.7 million.
  • Neutral Sentiment: IDR developments offered both support and risk. Management pointed to provider-favorable court decisions and continued collections, but said it opposes a proposed bill that would eliminate the IDR process beginning in 2028; it also noted physician-fee collections were slightly softer than hospital collections.
  • Positive Sentiment: Expansion plans advanced: Nutex expects to open hospitals in San Antonio and Jacksonville in the fourth quarter, with four more projects under construction for late 2027 or early 2028.
AI Generated. May Contain Errors.
Earnings Conference Call
Nutex Health Q3 2026
00:00 / 00:00

There are 12 speakers on the call.

Operator

Greetings, and welcome to the Nutex Health 2026 third quarter earnings call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note this conference is being recorded. I will now turn the conference over to your host, Vivian Sanders. Please go ahead.

Speaker 1

Good morning, everyone, and welcome to Nutex Health Inc.'s third quarter 2026 earnings call. My name is Vivian Sanders, and I'm happy to serve as your moderator today. We're truly grateful for your participation and your continued interest in our company as we share the highlights of another exceptional quarter. Please note that this call is being recorded for future reference. Joining me this morning are some of our key leaders driving Nutex Health forward. Our Chairman and CEO, Dr. Tom Vo, our Chief Financial Officer, Jon Bates, our President, Dr. Warren Hosseinion, and our Chief Operating Officer, Wes Bamburg. Together, they'll provide prepared remarks to give you a comprehensive view of our performance, strategies, and vision, after which we'll open the floor for your questions. Before I turn things over to Dr. Vo, I'd like to take a moment to address a few important points.

Speaker 1

Today's discussion may include forward-looking statements which reflect management's current expectations about our future performance. These statements are based on what we know today, but they're subject to risks, uncertainties, and other factors that could cause our actual results to differ from what we'll share. For a deeper dive into these forward-looking statements and the factors that might influence them, I encourage you to review the press release and Form 10-Q filed earlier this week, as well as our various SEC filings. You'll find all the details there. Additionally, we may reference non-GAAP financial measures such as Adjusted EBITDA during the call. For those interested in how these metrics were compiled to GAAP standards, please refer to the press release and the Form 10-Q, where we've included that information.

Speaker 1

With those housekeeping items out of the way, it's my pleasure to hand the call over to Dr. Tom Vo, our Founder and Chief Executive Officer. Dr. Vo, the floor is yours.

Speaker 2

Thank you, Vivian, and good morning, everyone. I am pleased to join you today to review Nutex Health's third quarter 2026 results. It was another strong quarter with solid financial results, steady collections, important reimbursement developments, and continued growth in hospital volumes. I will start with our financial and operational performance in the first nine months. For the first three quarters of 2026, total revenue reached $644.9 million, an 11% decrease from $723.6 million for the same period in 2025. Adjusted EBITDA decreased 13% from $243 million to $211.4 million for the first three quarters of 2026. Net income attributable to Nutex increased to $152.9 million for the first three quarters of 2026, a 159% increase from $59 million for the same period in 2025.

Speaker 2

On the volume side, for the first three quarters of 2026, our hospitals recorded 154.3 thousand total patient visits, up 10.2% from 140.1 thousand during the same period in 2025. Same-hospital growth was 6.3% in the first nine months of 2026. On the balance sheet, net long-term debt went from $29.2 million at December 31, 2025, to $34.2 million at the end of Q3 2026. Still very low relative to our revenue and our expansion pace. Cash on hand grew to $249.9 million as of September 30, 2026, up from $185.6 million at year-end 2025. Net cash from operating activities was $188.1 million for the first three quarters of 2026, compared to $177.7 million in 2025, a 6% increase. Several factors supported our strong performance over the first nine months. Patient volume and acuity continued to rise, supported by renewed internal initiatives and investments.

Speaker 2

In particular, same-hospital growth is significant for us, as it means our growth strategy is not wholly reliant on the opening of new hospitals. Earnout expenses declined as most legacy facilities under development as of 2022 completed investing, boosting net income. Arbitration-related costs decreased following the renegotiation of the HaloMD contract in the second quarter of 2026. Collections remained strong through the third quarter of 2026. Investors may have noticed a decline in both revenue and Adjusted EBITDA year-over-year through the first three quarters of 2026. The declines are not necessarily due to weaker collections in 2026, but rather due to an uneven revenue recognition for the first nine months in 2025, primarily reflected by two factors. First, additional collection data available in 2025 supported higher collection estimates for 2024 services that was recognized in 2025.

Speaker 2

Second, ineligible charts were included from mid-2024 through the first three quarters of 2025, and adjusted in the fourth quarter of 2025. We are also starting to see slight differences between collections for hospital versus collections for the physician entity. Physician fee collections are slightly down compared to hospital collection in the third quarter. This may account for some of the decreases in revenue in addition to the factors that I mentioned above. As a reminder, physician revenue are consolidated in the revenue, but eliminated down at the net income level. We are continuing to follow this trend closely. In addition, we are seeing more stabilization of revenue this year compared to this time last year. Lastly, as more internal hospital development commences, the long-term debt would increase accordingly in future quarters. Jon will discuss these details in his report.

Speaker 2

Turning to reimbursement, the quarter includes several developments that positively reinforce our long-term view of the No Surprises Act, NSA, and the independent dispute resolution, IDR process. First, as discussed on our last earnings call, federal courts in California, Florida, Pennsylvania, Texas, Connecticut, and Georgia issued decisions during the first half of 2026, reinforcing the finality of the IDR award and limiting insurers' ability to challenge arbitration outcomes in court. In the third quarter, the District Court in Virginia reached a similar conclusion in a case involving Blue Cross Blue Shield of Virginia, bringing the number of states with provider-favorable ruling on key IDR issues to at least seven. We believe these rulings support our view that the laws, payment, and arbitration requirements should be enforced as written.

Speaker 2

Second, recent antitrust and consumer protection against insurers by the Kansas and Michigan attorney generals highlight intensifying regulatory challenges to the activities of insurers, focusing on plan administrative practices, in particular fiduciary management, hidden fee structures, and the lack of transparency of out-of-network pricing mechanism. Among other things, the Kansas lawsuit alleges that insurers inflate the revenue by making below-market initial out-of-network offer in the IDR process, creating an artificial cost savings to maximize the percentage-based administrative fee payable to the insurer, which is tied directly to these suppressed payment benchmarks. Third, as disclosed in our August press release, the U.S. Court of Appeals for the Fifth Circuit issued an en banc decision addressing calculation of the qualifying payment amount, or QPA, under the NSA.

Speaker 2

The court ruled in favor of the Texas Medical Association and other plaintiffs on two of the three issues presented, invalidating the use of ghost rates in federal QPA calculations. The QPA is an important benchmark in the IDR process. We have consistently maintained that the use of ghost rates and other flawed methodologies can distort QPA calculations, contributing to substantial provider underpayment, and result in an increase in the volume of IDR disputes. We view the court's decision as a meaningful progress toward a more transparent and balanced reimbursement framework. Over time, more accurate upfront payments without the use of ghost rates should reduce the rate for costly and time-consuming arbitration. Fourth, earlier this month, CMS released the results of two latest formal audits, including CareSource of Indiana and the School Employees Retirement System of Ohio.

Speaker 2

In the CareSource audit, CMS identified deficiencies involving required NSA disclosures, timely delivery of QPA-related information, and calculation of the QPA under applicable regulations. The School Employees Retirement System audit similarly identified deficiencies involving the lack of appropriate QPA disclosures and IDR-related notification requirements. These findings provide further evidence of inconsistent insurer compliance and payment practices, including continued non-compliance with federal guidelines. We believe stronger oversight and enforcement can help providers receive more timely and accurate reimbursement. Fifth, we are closely monitoring the legislative developments in Washington, D.C., including two recent proposals that take materially different approaches to the future of the IDR framework. The Murphy bill would preserve independent arbitration while strengthening enforcement mechanisms and adding penalties for payers that do not timely satisfy IDR awards. We strongly support the Murphy bill and are advocating for its passage.

Speaker 2

The Pallone bill, by contrast, would eliminate the IDR process beginning in 2028 and generally make the payer-calculated QPA the final reimbursement amount for out-of-network services, with limited review of the methodology used to calculate those rates. We firmly oppose the Pallone proposal. We believe the independent review through the current IDR process is essential when insurer MAC reimbursement rates fail to reflect the fair market values, as they currently do most of the time. We also expect strong opposition from other provider organizations should the legislation advance. We are also aware of other non-emergency specialties, physician specialties, including anesthesiology, surgery, radiology, and medical transportation companies that also use the IDR to seek fair reimbursement, though we are unfamiliar with their outcomes or eligibility. While the Pallone proposal's intended target is the overall IDR process, it is unclear to us which specialty he is targeting.

Speaker 2

We suspect that the Pallone bill may aim to limit other non-emergency providers' access to the IDR. Federal and state EMTALA requirements obligate our hospitals to evaluate every single patient that enters our emergency rooms. We expect, similarly, insurers to meet their federal obligations under the Prudent Layperson Act by paying fair and reasonable reimbursement to EMTALA-participating hospitals and emergency medicine providers. We also have no control over other providers that provide non-emergency services. Nutex's goal is very simple. We seek fair, market-based reimbursement for medically necessary care in our communities, with comparable payment for comparable services in comparable settings. Federal laws enacted to achieve this result should be enforced and median in-network rates calculated accurately without ghost rates distortions. Turning to growth, we remain confident in our hospitals' development pipeline and the opportunities ahead.

Speaker 2

For the remainder of 2026, our active development pipeline includes projects in San Antonio, Texas, and Jacksonville, Florida, both of which are expected to open in the fourth quarter. Looking ahead, we have four additional projects under active construction, with expected completion in late 2027 and early 2028. These facilities represent the next phase of our long-term expansion strategy. Operationally, our priorities remain increasing patient volumes, expanding service lines, and appropriately growing observation and inpatient care across the network. We continue to invest in technology, diagnostics, artificial intelligence, and differentiated patient service to enhance clinical quality, improve efficiency, and scale the Nutex model. As new technologies become available, our hospitals will be able to offer a broader range of care than ever before. Patient satisfaction remains a core strength.

Speaker 2

As highlighted in recent press release, our hospitals continue to earn recognition for quality and service, reinforcing our position as a trusted provider for physicians, healthcare professionals, and their families in the communities we serve. Wes will provide additional report in his report. Bottom line is that we continue to operate a profitable business with strong cash flow and robust internal and external growth. With that, I'll turn the call over to our Chief Financial Officer, Jon Bates, for a detailed review of our financial results. Jon?

Speaker 3

Hey, thanks, Tom, and good morning, everybody. I am going to provide some additional details on the financials for Nutex Health's third quarter and first nine months of 2026, another solid period where our earnings are strong and our cash flow continues to build as we plan for two future openings later this year, as Tom indicated, and continue to prove out our growth model year-over-year. Tom provided a little bit of the bigger picture, let me provide a little more of the detail. Starting with the three months ended September 30 of 2026 compared to the same period in 2025, as you can see, total revenue for Q3 of 2026 was $217.6 million compared to $267.8 million for the same period in 2025. Hospital division revenue was $209.1 million for the third quarter of 2026 compared to $260.2 million in the prior year period.

Speaker 3

It was a decrease of 19.7%. Revenue at same hospitals, which are hospitals that were opened by December 31 of 2024, decreased by 20.1% for the third quarter of 2026 compared to the same period in 2025. But the main reason, so everyone's aware, for the revenue decrease period over period was due to the larger positive increase in revenue in the 2025 period as the IDR process began showing stronger realization of revenue in the first nine months of 2025, with us experienced the early success with the IDR process. We discussed some of this in the quarter call, but it is a very similar discussion here.

Speaker 3

If you recall, the revenue per visit, which does include both ER and inpatient services, back during the third quarter of 2025 was approximately $5,600 a visit, while cumulative revenue per visit from when we started the IDR process back in July of 2024, carrying that through the end of 2025, was closer to $4,200, which is more in line with what we have continued to see since then as we came into 2026. So revenue per visit in the Q3 of 2025, again, was positively impacted by adjustments to our collection percentage. If you recall, it was closer to 65% at the end of December 31 of 2024, which is based on what we knew at that point, and increased pretty incrementally to 80% by the end of the third quarter of September of 2025.

Speaker 3

This positive adjustment was a result of additional historical collection history that we saw realized through those first three quarters of 2025. As historical collection percentage leveled out to the current average of just over about 80% by the end of 2025, the revenue per visit reflected has been much more consistent from then through 2026. This helps explain why current revenue per visit is more in line with the historical average measured from the start of the IDR process. If there are no significant fluctuations in our collection percentages and other key metrics used to record revenue moving forward, we would expect the revenue visit metric to remain within this similar range.

Speaker 3

Just regarding the arbitration-related revenue, of the company billable visits, similar to what we discussed in the second quarter, approximately 50%-60% are submitted through the IDR process, with 40%-50% of all billable visits resulting in an award determination. When an award determination is made, Nutex has prevailed in over 80% of those determinations over the last nine months and collects, on average, over 80% of the award amounts as calculated on awards from inception through March of 2026. Hospital division visits did increase by 18.1%, or 8,390 visits, to 54,622 visits in Q3 of 2026, versus 46,232 visits in the same period in 2025, with same hospital visits growing at 12.4% over the same period. Talking about our population health division, revenue grew approximately 13% to $8.5 million for Q3 of 2026, versus $7.6 million for the same period in 2025.

Speaker 3

Warren will talk a little bit more about that in a minute. Total facility-level operating costs and expenses represented 53.3%, or $116.1 million, of the total revenue for Q3 2026, versus the 42.2%, or $112.9 million, for the same period in 2025. With regard to stock compensation expense for the three months ended September 30th of 2026, it was $7.4 million compared to a $13.2 million expense for the same period in 2025, which was a $5.8 million decrease in Q3 of 2026. Currently, there are only two facilities that are part of this major expense that goes into this line item, with both of them completing their earnout period in the fourth quarter of 2026.

Speaker 3

The gross profit for the three months ended September 30th, 2026, is $101.5 million, or 46.7% of total revenue, as compared to $54.9 million, or 57.8% of total revenue in the same period in 2025, an 11.2 decrease for the three months ended September 30 of 2026 versus 2025. From a corporate and other cost perspective, the general and administrative expenses as a percentage of total revenue for the three months ended September of 2026 was 7.8%, or $17 million, compared to 4.2%, or $11.3 million, for the same period in 2025. Operating income for the three months ended September of 2026 was $77.1 million compared to $130 million for the same period in 2025, which is a decrease of $53.3 million. Net income attributable to Nutex was $40.2 million for 2026 period versus $55.4 million for 2025, a decrease of $15.2 million.

Speaker 3

Adjusted EBITDA attributable to Nutex went from $98.5 million in Q3 of 2025 to $63.9 million in Q3 of 2026. Now we will move on to the nine months ended September of 2026 compared to the same period in 2025. Total revenue for the first nine months of 2026 was $64.9 million compared to $723.6 million for the same period in 2025. Hospital division revenue was $618.5 million for the first nine months of 2026 compared to $700.5 million in the prior period, a decrease of 11.7%. Same hospital revenue decreased corresponding 11.2% for the first nine months of 2026 compared to the same period in 2025.

Speaker 3

As discussed during the third quarter explanation, for the decrease in revenue for this period, the main reason for the change period-over-period was due to the larger positive increase in revenue in the 2025 period as the IDR process began, showing stronger realization of revenue in the first nine months of 2025, with us experiencing early success with the IDR process. On the hospital division visits for the nine-month period increased by 10.2%, or 14,252 visits, to 154,326 visits for the first nine months of 2026, versus 140,074 visits in the same period in 2025, with same hospital visits growing at 6.3% over the same period. Regarding population health division, revenue grew approximately 14% to $26.3 million for the first nine months of 2026 versus $23.1 million for the same period in 2025.

Speaker 3

Now, in addition to the visit growth noted above, facility and corporate costs also showed improvement for the first nine months of 2026 relative to 2025. Total facility-level operating costs and expenses decreased $15.1 million during the period, representing 48.1%, or $310.3 million of total revenue for the first nine months of 2026, versus 45%, or $325 million for the same period in 2025. The main reason for most of the overall increase in this line was due to the contract services decrease during the period, primarily resulting from the reduction in the CMS fee and the impact from the amendment to the HaloMD contract that was signed in the second quarter of 2026 and was discussed back in the second quarter earnings call.

Speaker 3

Total stock compensation expense for the nine months ended September 30th was $6.4 million compared to $119.6 million for the same period in 2025, which was a $113.2 million decrease in 2026. So we finalized one hospital earnout at March 31st of 2026, and as discussed previously, have two more facilities currently in their measurement periods, with both of them completing their measurement period in the fourth quarter of 2026. The gross profit for the nine months ended September 30th, 2026 was $334.5 million, or 51.9% of total revenue, as compared to $398.1 million, or 55% of total revenue in the same period in 2025. From a corporate and other cost perspective, the general administrative expenses as a percentage of total revenue for the nine months ended September 30th of 2026 was 7.5%, or $48.1 million, as compared to 4.7%, or $33.8 million for the same period in 2025.

Speaker 3

Operating income for the nine months ended September 30th of 2026 was $280 million, compared to $244.7 million for the same period in 2025, an increase of $35.4 million. Net income attributable to Nutex was $152.9 million for 2026, compared to $59 million for 2025, an increase of $93.8 million. Adjusted EBITDA attributable to Nutex was $211 million for the nine months ended September 30th of 2026, compared to $243 million for the same period in 2025, a decrease of $31.5 million, or 13%. Now, looking at our balance sheet, and Tom referenced this earlier, at September 30th of 2026, it remains extremely strong, with total assets at just above $1 billion, and of that, it includes just under $250 million of cash, as compared to $918 million in total assets and $185.6 million in cash and cash equivalents as of December 31st of 2025.

Speaker 3

Additionally, accounts receivable, it increased by $36.6 million to $356.1 million in September, or at September 30, 2026, from $319.4 million at the end of 2025. We had another strong collection quarter, which provides us continued confidence in this increase. Regarding cash flow, net cash from operating activities increased by $10.3 million for the nine months ended September 30, 2026 to $188.1 million, as compared to $177.7 million for the same period in 2025. As Tom alluded to earlier on the liabilities side, we really don't have much real debt. Our total bank equipment-type debt decreased by less than $1 million to about $42.7 million at September 30, 2026 from $43.5 million at the end of the year 2025. Again, with the majority of those items being equipment loans at our hospitals for such items as our MRIs, X-rays, ultrasounds, and CT machines.

Speaker 3

With all that said, our balance sheet remains very solid, and we provided our company the flexibility to execute on our growth plan in 2026 and beyond. Now, on to Warren Hosseinion, our President, for the population health update. Warren?

Speaker 4

Thank you, Jon, and good morning, everyone. It's great to be with you today to discuss how Nutex Health is advancing population health management. In the third quarter of 2026, we continued to make strides in this area. This morning, I would like to again focus on our strategy and our upcoming goals. Let's start with where we are today. Our population health management division now oversees a diverse group of almost 40,000 members across our platform, including a mix of Medicare Advantage, commercial, and Medicaid managed care members. We currently have independent physician associations, or IPAs, in Southern California, Houston, Phoenix, and South Florida. We have also set up two more in Dallas and San Antonio, where we plan on enrolling patients in 2027.

Speaker 4

Revenue for the division was $26.3 million for the nine months ended September 30, 2026, up from $23.1 million for the same period in 2025. The healthcare industry is undergoing significant transformation. Healthcare expenditures continue to place substantial pressure on employers, government programs, insurers, and patients. At the same time, the population is aging, chronic conditions are becoming increasingly prevalent, and the demand for accessible, high-quality medical services continues to grow. The traditional fee-for-service model, which generally rewards the volume of services delivered, is increasingly being supplemented by value-based care arrangements that emphasize quality, efficiency, and patient outcomes. We believe this transition represents a substantial long-term opportunity for organizations that can successfully manage patient populations, coordinate care, and demonstrate measurable improvements in healthcare delivery. We believe our population health management division is strategically positioned to participate in this transformation.

Speaker 4

Our approach is centered on the integration of physicians, facilities, technology, and data analytics. By working collaboratively with providers and other healthcare partners, we seek to improve the coordination of care across the patient journey. Our core strategy revolves around physician networks. Our IPAs are comprised of networks of contracted and credentialed primary care physicians and specialists located around our facilities. Building strong partnerships with local doctors is critical. By forming these IPAs, we are building awareness of our hospitals among the local community doctors and their patients. We believe that over time, these relationships will not only increase the volume of IPA and non-IPA patients to our hospitals, but also create a web of care that is seamless for patients. Our vision is that our hospitals and IPAs will work hand-in-hand to amplify our reach and effectiveness.

Speaker 4

We are fostering collaboration, sharing best practices, and ensuring every provider is aligned with our patient-first culture. Going forward, our goal is to build one to two new IPAs around our hospitals every year. With that, I will turn it over to Wes Bamburg, our Chief Operating Officer.

Speaker 5

Thank you, Warren, and good morning, everyone. As Tom and Jon discussed, patient demand remained strong during the third quarter. I will focus my comments this morning on how our hospitals are supporting that growth through clinical execution, business development, and workforce stability. We saw that demand clearly in our patient volumes. Hospital visits increased 18.1% compared to the prior year, while same-hospital visits increased 12.4%. This growth reflects strong demand across our markets and continued execution at both newer and more established facilities. As our facilities mature, we continue to expand the range of care they can provide. We are investing in technology and clinical capabilities, from advanced diagnostic imaging and specialty services that improve how we deliver care. That includes the thoughtful use of AI and automation to support our clinical teams, streamline workflows, and help physicians spend more time with patients.

Speaker 5

Together, these investments broaden the services available in each community, allowing us to serve more patients locally, strengthening continuity of care, and appropriately grow observation and inpatient services across the network. The physician relationships that Warren just discussed are also important to this strategy. Stronger alignment with local primary care physicians and specialists can improve care coordination, increase awareness of our hospitals' capabilities, and help patients receive appropriate care closer to home. We are also leveraging business development more systematically across the organization. Each of our facilities has local business development leadership focused on its markets. We are offering support through a corporate structure that coordinates strategy and shares best practices. Through community events, outreach, sponsorships, physician engagement, and other local initiatives, we are strengthening community relationships and increasing awareness of the services our hospitals provide. On to workforce. Workforce stability remains another important component of our performance.

Speaker 5

Employee turnover was 9.6% through the first nine months of 2026. Maintaining an experienced workforce supports clinical continuity, operational consistency, and our ability to respond as patient volumes increase. This has a direct impact on our patient experience, which remains a key priority for us. Our hospitals maintained an average Google rating of 4.76 stars during the period, reflecting the daily work of our physicians, nurses, and hospital teams to deliver high-quality, patient-centered care every day. From an operational perspective, our priorities remain straightforward: align staffing with demand, improve productivity and resource utilization, standardize effective practices that drive volume growth, and prepare our infrastructure to support future hospital openings. Overall, the third quarter demonstrated that our existing hospitals can support meaningful volume growth while maintaining workforce stability, patient experience, and operating discipline. We remain focused on translating that momentum into consistent execution and sustainable growth across the enterprise.

Speaker 5

Thank you, everyone, and I'll turn the call back over to Vivian.

Speaker 1

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

Operator

Thank you. We will now be conducting a question-and-answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Our first question will come from Jeffrey Cohen with Ladenburg Thalmann.

Speaker 6

Hello, gentlemen. Congratulations on the quarter, and thank you for taking our questions. Just a couple from us. I think, Tom, you spoke about new facilities and new openings. It sounds like, and please clarify for me, two in the fourth quarter, and then for 2027, it sounds like four, of which will all open in the back half of 2027?

Speaker 2

Yes. Hi, Jeff. How are you? Thanks for working with. Yes, we have two opening this year, hopefully before the end of the year, and that is San Antonio and Jacksonville. We have four that are under construction right now, about to go vertical, that we are hoping to open by the end of 2027, and worst-case scenario, beginning of 2028, depending on construction time.

Speaker 6

Okay, perfect. Jon, can you talk about contract services? The Q3 contract services number was, I guess, in line with what we expected. Could you give us a sense or flavor of what that may look like directionally for the fourth quarter or anything beyond?

Speaker 3

Yeah. No, great question, Jeff. I mean, we haven't given any specific guidance, but I know in previous calls, second quarter and discussing, we will discuss it here. I mean, the contract services line, one of the nice things about that was our impact from not only the CMS cost reduction, but of course, the renegotiation of the contract with our service provider, HaloMD. I think the impact from that you saw, we described it, we thought it would come to be around the same range as where it ended up in the third quarter. I would think moving forward, as you look at that, I think it should be somewhere in that same type of range in relation to revenue, assuming everything else stays the same.

Speaker 3

But I think that reduction that you would see even from, if you look back at the first quarter of 2026, it was upwards close to $60 million or so. So, I think the reduction down to a number somewhere in this range is probably what I would expect consistently. Certainly, as we grow and we get more visits and more revenue, that number might nominally go up. But as a percentage of where it's at, I think ultimately it would stay pretty consistent. But it's a great question, and that's kind of what we thought would happen, and so far it happened in the third quarter, and I would expect that to continue as we move forward, barring any major changes.

Speaker 6

Okay. And then finally for us, could you talk a little bit about the net income to non-controlling interest? I think we modeled in about $20 million on a quarterly basis. You came in lighter. What would you expect that to look like in the fourth quarter and beyond?

Speaker 3

Yeah, I mean, I think you sort of look at it in relation to, or we do, sort of, I mean, mathematically, it's in relation to the gross profit line that you would see. And it's been consistently up in the higher teens to potentially low 20%, right? And so, I think that's kind of the range that we would expect and subject to other things changing. But remember, there's the two components that roll into that are the physician side, the physician revenue and profit, which of course is 100% coming out through the NCI piece, and then you have the operations of the hospital, which we own on average a little over 80% of each of the hospitals. So, the combination of the profit of those two has been somewhat consistent, somewhere in that high teens to maybe low 20% in relation to gross profit.

Speaker 3

And I think that's probably, I think, a good number to be looking at as we move forward.

Speaker 6

Perfect. Thanks for taking our questions. Congrats on the quarter.

Speaker 3

Yeah. Thank you, Jeff.

Speaker 2

Thanks, Jeff.

Operator

Our next question will come from Bill Sutherland with StoneX.

Speaker 7

Thank you. Morning, everybody. Noticed, Jon Bates, the revenue per visit slipped under $4,000, about $3,800. Should we think about kind of where you are now, a good range for that number would be down at this level up to $4,200 or so each quarter?

Speaker 3

Yeah, I mean, that's a great question. As we look through the process, I think we talked about even at the end of last quarter. I mean, if you look at the revenue per visit, really since July of 2024 when we really started the IDR process, it has remained pretty consistent cumulatively all the way through the latter part of last year, and even at the end of last year, it was in the, what, low $4,000 range. It's been in the, for this year, it's right around $4,000 for the first nine months of this year.

Speaker 3

Whether that ends up slightly on the lower end or potentially even trending up as we continue to work with acuity and realization, it could go either way. I think that range is certainly fair as we move forward, and it's been pretty consistent for many quarters if you look at it cumulatively from when we started this process. I think that's a fair analysis as you look at it.

Speaker 7

Yeah. No, that's good. I just hadn't seen it slip under four in a while. You've got quite a bit of cash. What's the board kind of discussing these days as far as capital deployment? Are there any external plans? Certainly your internal growth doesn't require quite that level of cash.

Speaker 3

Yeah, I'm more than happy to start that, and then Tom can jump in as well. I mean, similar to what we've described before, it's a great issue to have. We love it, and it's helping us really do a lot behind the scenes infrastructure-wise and just growing our business. Certainly, our money, first and foremost, is best spent, we believe, on opening up facilities and hospitals, because they've done a phenomenal job, and we feel like the return makes the most sense there. We're definitely focusing on that and even looking for more opportunities as they come up. We're doing a lot of infrastructure behind the scenes system-wise expenses, but certainly, we've talked about in the past, and we've done buybacks, which we did some early part of this year, and that's sort of finished out.

Speaker 3

We're always talking about things like potentially dividends and looking for other areas to invest. That's sort of the order of events, but at this point, we're still discussing each. Tom, you might want to add to it.

Speaker 2

Yeah, it's a great problem to have, like Jon said. But obviously, we're focusing on growth, both internal and external. External growth, we're still targeting three to five hospitals per year. Internal growth, we're looking at everything that could help our patients once they get into our four walls, and that includes business development. We did announce that we did invest quite a bit into the business development side, which, in my opinion, directly led to a great year-over-year hospital growth, as you can see. The point is growth's number one, but then after that, everything's on the table. But we're actively debating on the board level from that standpoint.

Speaker 7

Okay. Priorities haven't changed at this point.

Speaker 2

Still growth.

Speaker 7

Mm-hmm. All right. Thanks, gentlemen. Appreciate it.

Speaker 2

Thank you, Bill Sutherland, for working with us.

Speaker 3

Yeah. Thanks, Bill Sutherland.

Operator

We'll go next to Yuan Zhi with B. Riley Securities.

Speaker 8

Thank you for taking our questions. Maybe the first one is related to the behavior change from payers. I saw a recent New York Times article listed some payers that do not pay in as high as 80% of the cases. After the Fifth Circuit ruling, have those payers changed their behavior whether they would pay those arbitration awards?

Speaker 2

Yeah. Hi, Yuan. I could start with that. By the way, thanks for working with us and covering us. The good news is that, so far, as you can see, payers are still paying. Jon stated that they've been paying roughly 80% of the time after an arbitration determination. They are paying, but we are watching it very, very closely. I also mentioned earlier that there is a slight difference between payer on the hospital side versus the professional side. The professional side is dropping a little bit, whereas the hospital side is pretty steady. Outside of that, obviously, there are other specialties that also use the IDR service in order to get more fair and reasonable rate. Outside of emergency medicine, we're not as acutely knowledgeable about their percentages, winning percentages, or eligibility.

Speaker 2

But at least from an emergency facility standpoint, an emergency physician standpoint, it looks like we're still collecting well. Jon, do you have anything else to add from that standpoint?

Speaker 3

No, I think you are right on, and it is a great question. It has continued to remain pretty strong. We have had a good, solid nine months of cash collections, as you can tell from looking at our cash flow with the 180-some million in operating cash. That has been consistent, and it certainly stayed pretty solid even in the third quarter on that too. Outside of watching the different areas around the hospital reimbursement versus the physician reimbursement, that is what we are focusing on right now. Remember, all we are trying to get is a reasonable and fair payment similar to what we would say a median in-network rate is. If we get that, we are perfectly fine, and that is fair in the middle. As long as that continues, the win rates still have been good.

Speaker 3

The 80% collection rate is solid, but I mean, ultimately, we feel like we should still get 100. I mean, we realize that might not happen, but it is a legal determination, and we feel like we should get it only to try to get up to our, what we believe to be fair and reasonable rates. That is kind of how we look at it, and that is how the quarter has gone.

Speaker 8

Got it. Then you mentioned there are a couple of proposed bills with now the Democrats are in control of Congress. Do you anticipate any near-term policy change that would impact your business or this arbitration process?

Speaker 2

Yeah. I think the answer is we do not know, but anybody could propose any bill, obviously, as you know, Yuan. There is a big difference between a bill proposal, taking it through committee, taking it through passage in both the House and the Senate, and then ultimately get the sign-off by the executive office. We are still a long ways away from any of that happening. Obviously, insurance company will do everything they can to maximize their profit, and the way they maximize their profit is to underpay providers. It is a yin and yang that has been happening since the beginning of time. We expect to see this sort of like cat and mouse game being played in Congress. But so far, even though we see it does not mean that it is going to happen.

Speaker 8

Thank you for taking our questions.

Speaker 2

Thank you, Yuan.

Operator

We'll hear next from Thomas McGovern with Maxim Group.

Speaker 9

Hey, guys. Thanks for taking my question. We just talked about shifting payer behavior, but I'm curious to understand the shift in provider behavior as well. As the CMS reduced the federal IDR administration fee down to $15 back in June, I'm just curious, obviously, that was intended to get more providers involved. Do you know that on a system-wide, have they seen higher engagement from providers? Just trying to understand how engagement's trending within IDR.

Speaker 3

Yeah, it's a great question. It's early in that process. I think generally, it has slightly increased. Outside of that, I think we need a couple more quarters to sort of watch the process. As we've talked about before, I mean, it's nice to lower it from $115 to $15. $100 is great, but that's $100. A question is that enough to change people's decision if they feel like they're not being paid fairly on the front end? I think in some cases it does.

Speaker 3

In other cases, I don't know that it has that much of a difference outside of I think the other positives of what the CMS has done is the portal is opening up, so the information being able to go from the outside in through it, and for the whole process of the IDR, it just becomes more efficient. I think in the end, it's going to really help with just the cleanliness of the data going in. I think the timeliness of things happening, I think will be quicker as well. I think that might be as much or bigger of a positive from some of those changes that we talked about in the second quarter. I think we are seeing some of it now, but I think it's going to be another quarter or two until we really see it realize itself.

Speaker 3

But really good question.

Speaker 2

Yeah, but Thomas, remember that there are other factors besides for the CMS fees. Obviously, to Jon's point, CMS has made it much easier for providers to initiate IDR and arbitration. However, there are other factors. For example, the IDR arbitration process is still between four to six months. For any group that wants to initiate this process, they have to have cash flow to last them four to six months, right, without getting payments. On top of that, you have the IDRE fees, which is a lot more expensive than $15.

Speaker 2

The point is that this is why only 5% of providers like us actually do arbitration, simply because they either don't have the cash to initiate it, nor do they have the cash flow to wait the four to six months before a determination occurs, nor do they may not have the expertise or the willingness to do that. So there's a lot more factors that are out there limiting the provider's ability to do IDR process. Then with some new guidelines that recently came out, the windows to do IDR is actually tightened, so that you really have to be very diligent in sticking with the process so that you get an IDR win. So it's not as easy as what people think.

Speaker 9

Understood. I appreciate that color. Then looking at Nutex's utilization of the IDR process, you guys always provide us these metrics, your submission rate, your win rate, cash collection. One of the new I mean, you might have touched on it in a one-off conversation in the past, but the 40%-50% of billable visits resulting in award determination is something new that we're seeing in the press release. Can you contextualize this for us? Can you let us know, how does this compare to averages you've seen in other quarters?

Speaker 3

Yeah, that's a good one. Actually, it's been very consistent. As we're looking at it behind the scenes, thinking we want to kind of get as close to explaining ultimately what turns into revenue, we wanted to talk more about that. All that's saying is, as it describes, is the visit that ultimately gets to the end and has a determination win or loss. So it's been very consistent for some time period. So that part hasn't changed. We just added that just for some clarity, and as we move forward, I think maybe speak more to that, because I think it has more relevance ultimately in what ultimately turns into realized revenue.

Speaker 9

Understood. I appreciate that, gentlemen. I'll hop back in with you. Thanks.

Speaker 3

Thanks, Thomas.

Speaker 2

Thanks, Thomas.

Operator

Moving on to Ben Haynor with Lake Street Capital Markets.

Speaker 10

Good day, gentlemen. Thanks for taking the questions.

Speaker 2

Hi, Ben.

Speaker 10

Hey, how are you doing, Tom?

Speaker 2

Good, thanks.

Speaker 10

First off for me, just on the strategy of these IPAs in the backyard of your micro-hospitals, doing one or two of these a year. Is this kind of based on the experience that you have had where you have these things coinciding currently, or any more you can share on kind of, well, the experience and the thought process behind that?

Speaker 2

Yeah, I could start, and then maybe Warren, our President, could chime in. The answer is that having an IPA or a group of primary care doctors out in the community that is surrounding your hospital is a great business development strategy, because these doctors have patients that need to go to the hospital sometimes. The idea is, why not have those doctors send their patients to a Nutex hospital in which they are a part of, rather than a third-party hospital in which the doctors are not a part of or a member in. It just makes perfect sense. The other really big goal is patient care, because once you have these doctors in the community send the patients to our hospital, the doctors actually communicate with each other, and so the care is coordinated and it's much better.

Speaker 2

Whereas when the doctor has to send a patient to, once again, a big box hospital, there is no communication, and so sometimes the patient get lost, and ultimately the care is worse when you don't have that relationship. Warren, do you want to add into that?

Speaker 4

Yeah. Thanks for your question. Just echoing what Tom said, we're not trying to be the largest IPA in the locations where we are. We're trying to essentially have primary care physician and specialist partners that are near our facilities. They are loyal to essentially our organization, and they can send their, not just their IPA patients, but especially their commercial patients to our ERs, and we can communicate back quickly to them. We're close to their practices, and as Tom mentioned, it increases care coordination. So yeah, it's both good for patient care, it's good for the providers, we're close to them, and also brings more volume to our ERs. At the same time, on the IPA patients in those locations where we see Medicare patients, we can evaluate those patients and reduce unnecessary utilization as well. I hope that answers your question.

Speaker 10

No, that makes sense, and it seems like a great strategy. Secondly for me, you mentioned the kind of the difference that's developing between hospital and physician collections. Is there anything identifiable that you can point to on that, or is it just kind of luck of the draw or random?

Speaker 3

You talking about the reduction in reimbursement for the physician side versus the hospital side? Is that what your question was?

Speaker 10

Yeah. Sorry if I wasn't clear there, Jon Bates.

Speaker 3

No, that's okay. No, I mean, I don't think there's anything specific other than I think it's been a general slight trend down, so we're just watching it. Nothing material, but something that we're seeing while the hospital side seems to be remaining pretty consistent. We'll watch it and let you know if we find anything.

Speaker 10

Fair enough.

Speaker 2

No, we definitely keep track of it internally. I'm sorry, Ben. I was just going to say, we definitely keep track of it internally, but we haven't broken it out yet in our Q.

Speaker 10

Okay. Got it. The visit growth seems obviously like it's picking up, the four new hospitals added quite a bit. What's behind it? Is it new services, business development, just more time with the community realizing that you're there? What do you guys think is driving that?

Speaker 2

Yeah. Wes, do you want to take this on? But we believe it's a combination of factors. Obviously, we did mention that we have invested heavily into business development and hospital growth, same hospital growth, so that obviously the numbers look like it's working. But there are other factors that are involved, including changing the mindset of our local leaders, changing the mindset of our local business development directors, more targeted differentiated marketing through our Google and internet, SEO, things along that line. So it's multi-discipline approach. Wes, do you want to clarify on that?

Speaker 5

No, Tom, I think you summarized it well. I would categorize it largely in two buckets. It's the organization that we have around business development, as I shared earlier, taking those best practices and scaling that across the enterprise as we're seeing success in one location versus another, and then systematically expanding the services that we offer, whether that be through outpatient imaging or through some of the other new services that we're providing. So, more organized on how we're approaching business development and marketing, and then continue to expand the services we provide.

Speaker 10

Got it. Well, thanks for taking the questions, gentlemen, and congrats on the progress.

Speaker 3

Thanks, Ben.

Speaker 2

Thank you, Ben.

Operator

We'll go next to Gene Mannheimer with Freedom Capital Markets.

Speaker 11

Thanks. Good morning. Congrats on the great numbers. Just asking here, so of your portfolio of 28 hospitals, how many of them of the mature sites, say, that have been open more than 18 months are profitable today?

Speaker 5

Say that one more time. What was your ask? Of the ones that are in the same hospital, you want to know about profitability? Is that what you said?

Speaker 11

Yeah, the mature hospitals. Yeah, because I know the newer ones are ramping, so may not be profitable. But those that have been, had open doors for 18 months or more, how many of those are profitable today?

Speaker 3

Almost all of them.

Speaker 2

Yeah, I think all of them are. The three that we opened last year are Archview, St. Louis, Red River in Sherman, Texas, and Humble in Houston. Two of those three are profitable already. The ones that are mature, yeah, I think all of them are profitable.

Speaker 3

Yeah.

Speaker 11

Good to hear that. Okay. You mentioned the percent of claims or visits going to IDR. It seems like that percent is on the decline relative to a year ago, and I'm just curious if that's a function of payers paying more appropriately on first pass, or are open negotiations resulting in better outcomes, thereby preempting the need to dispute? I'm just trying to understand that.

Speaker 3

Yeah. It's an interesting dynamic, and I think we're definitely seeing a little bit more on the front end, not material, but a little bit more of paying slightly better on the front end. You also do see a little bit more in open negotiations, but not a lot in open negotiations. So, I would say it's more that they're paying slightly better on the front end, and as a result, we're not having to submit as many. The goal is, as we move forward, to submit less and less if we can get paid fairly from the start.

Speaker 3

We do think that the whole change in the legality of making sure they can't use the ghost rates in the calculations, as we watch that closely, the more and more that they do that the right way, that will minimize our need in a lot of cases to have to go through arbitration, which is a win-win. So, we're hoping that will be the case, and we'll watch it closely, and hopefully that number will continue to go down.

Speaker 11

Got it. Okay, thanks. Finally, real helpful to provide those numbers around billable visits that go through the IDR. Under what circumstances would an award determination not be made because it sounds like it's not made 100% of the time?

Speaker 3

Well, when you're talking about, you have a combination of things. If it's not getting, it's a time period. Sometimes they're slower to get to the determinations. That's gotten better. I know late last year, we had the scenario where they got caught up on a lot of their determinations and cleared a lot of those out. Other items that potentially don't ultimately get to a determination could be a situation which we think is driven more off of the data we're getting in EOBs from payers, which they've consistently not put accurate and complete data. You could have situations where they submit an EOB, don't have enough information on the plan. We can't tell which plan it is. Ultimately, it's the IDRE that makes the determination, is it legitimate or not legitimate to be submitted to the process.

Speaker 3

Some of those, when they get in there, we get clarification at that point that it's not a plan that can go through the process of the IDR process. We have some of that happening. That's one of the ones that we watch. We also have situations where, and we're getting better at this too, where we have a lot of doctors working in our facilities. If a doctor in some of our states work at other facilities and maybe are under contract at that other facility that we're not aware of, and so when it comes in, payment happens, we're like, "Well, you're at our facility. You're working with us. We're not aware." We didn't know potentially that they had a contract with one of these that was in-network.

Speaker 3

It goes mistakenly through the IDR process, and then we get notified that, oh yeah, this individual doctor might have a plan somewhere else or be in-network with somewhere else. That would be an example. Those are several of the examples that make that up.

Speaker 2

But the example that Jon gave, that was on the professional physician side, and not on the hospital side.

Speaker 11

Okay.

Speaker 3

Correct.

Speaker 11

All right. No, that's helpful.

Speaker 3

And you also, one last thing. It happens, and I think it's less and less too. If we get good information, it's hard for this to happen, but we don't get good information sometimes to determine whether it's, say, a federal versus a state one. In the states where we do have the bifurcated process, it's possible it might go to one and should go to the other. It doesn't mean we can't then resubmit to the other, but at the moment it's gone through that process, it would get kicked back, and we have to reanalyze and then decide.

Speaker 3

So, there's a myriad of items, but those are kind of the major ones, and we believe that with this portal improvement and some of the regulatory work that's happening and making them have to be cleaner on what they provide as payers, I think hopefully that will shrink that down so the difference will actually be less and less as we move forward.

Speaker 11

Okay, great. Thank you. My final one here, you obviously have now a lot more visibility into your volumes and revenue per visit. Do you think you might be at a juncture where you can provide some guidance around 2027, whether that is directional or volume-driven? Thank you.

Speaker 3

Yeah, absolutely. I think that we talked about before that now that we are getting to what I believe to be a much better cadence, consistent cadence, and everything is starting to become a lot easier actually to understand, hopefully not only for us, but hopefully for the shareholder, anyone looking at it. I think there is a healthy discussion as we finish out the year to potentially start providing a little more detail on that future look. So, hold on tight, but I think there is a good chance that will happen.

Speaker 11

All right. Thank you. Congrats.

Speaker 3

Thank you, Gene.

Speaker 2

Thanks.

Operator

Thank you. This now concludes our question and answer session. I would like to turn the floor back over to Vivian Sanders for closing comments.

Speaker 1

Thank you all for those valuable questions and answers. For all of those joining us today, if you have more questions, email us at investors@nutexhealth.com, and we'll get back to you promptly. On behalf of Nutex Health management team, thank you all for joining us for our third quarter 2026 earnings call. We've covered a lot, growth, strategy, challenges, and our vision, and we appreciate your time and interest. A recording of this call will be available on our website for a limited time, so feel free to revisit it. Take care, everyone, and we look forward to keeping you updated on our journey.

Operator

Ladies and gentlemen, thank you for your participation. This does conclude today's teleconference. You may disconnect your lines, and have a wonderful day.

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