Community Health Systems, Inc. (CYH) Q4 2022 Earnings Call Transcript

Community Health Systems, Inc. (NYSE:CYH) Q4 2022 Earnings Conference Call February 16, 2023 11:00 AM ET

Company Participants

Shelly Schussele - Senior Director, Investor Relations

Tim Hingtgen - Chief Executive Officer

Kevin Hammons - President and Chief Financial Officer

Lynn Simon - President of Clinical Operations and Chief Medical Officer

Conference Call Participants

Josh Raskin - Nephron Research

Kevin Fischbeck - Bank of America

Jason Cassorla - Citi

Stephen Baxter - Wells Fargo

Operator

Good day, and invited to nan Community Health Systems Fourth Quarter 2022 Earnings Conference Call. [Operator Instructions] Please statement that this arena is being recorded. I would now for illustration to move nan convention complete to Ms. Shelly Schussele, Senior Director of Investor Relations. Please spell ahead, ma'am.

Shelly Schussele

Thank you, Chuck. Good morning, and invited to Community Health Systems 4th fourth 2022 Conference Call. Joining maine connected today's telephone are Tim Hingtgen, Chief Executive Officer; Kevin Hammons, President and Chief Financial Officer; and Dr. Lynn Simon, President of Clinical Operations and Chief Medical Officer. Before we begin, I would for illustration to punctual everyone this convention telephone whitethorn incorporate definite forward-looking statements including each statements that do not subordinate solely to humanities aliases existent facts.

These forward-looking statements are taxable to a number of known and chartless risks, which are described successful headings specified arsenic Risk Factors successful our yearly study connected Form 10-K and different reports revenge pinch aliases furnished to nan Securities and Exchange Commission. As a consequence, existent results whitethorn disagree importantly from those expressed successful immoderate forward-looking statements successful today's discussion.

We do not intend to update immoderate of these forward-looking statements. Yesterday afternoon, we issued a property merchandise pinch our financial statements and definitions and calculations of adjusted EBITDA and adjusted EPS. We person besides posted a supplemental descent position connected our website.

We will mention to those slides during this call. All calculations we will talk exclude summation aliases nonaccomplishment from early extinguishment of debt, impairment expense, arsenic good arsenic gains aliases losses connected nan waste of businesses, disbursal from authorities and different ineligible matters and related costs, income aliases disbursal from nan colony of master liability claims for which nan third-party insurers responsibility to guarantee nan institution for nan underlying nonaccomplishment has been settled, disbursal related to worker termination benefits, and different restructuring charges, summation from CoreTrust transaction, a waste of equity liking successful Macon Healthcare LLC, and alteration successful estimate for master claims liability related to divested locations.

With that said, I will move nan telephone complete to Tim Hingtgen, Chief Executive Officer.

Tim Hingtgen

Thank you, Shelly. Good morning, and invited to our 4th fourth convention call. Before we begin, I would for illustration to return a infinitesimal to definitive our heartfelt sorrow for nan nonaccomplishment of our friend and colleague, Ross Comeaux. Ross served arsenic our Vice President of Investor Relations from 2016 until his passing past month. Many of you knew Ross personally and appreciated his activity to build beardown relationships pinch our shareholders and nan analysts who screen our company.

For those of america who activity intimately pinch Ross, this is simply a tremendous loss. He was a dedicated son, brother, husband, and father. Our deepest sympathy goes retired to his full family and each who called Ross, a friend.

Now, turning to our 4th fourth and year-end results. 2022 was challenging and successful galore ways, a pivotal twelvemonth for wellness attraction providers successful position of our activity to rebuild volumes arsenic nan pandemics is sided, stabilize our workforce, and offset inflationary pressures.

At CHS, we made sizeable advancement successful each of these areas, particularly during nan 2nd half of nan year. Let maine commencement pinch volume. We vanished nan 4th fourth pinch our strongest measurement capacity of nan twelvemonth and that was existent crossed each cardinal measurement categories. Same-store admissions accrued by 4.4% connected a year-over-year basis, 2.3% sequentially, and astatine 99% of our 2019 pre-COVID baseline.

COVID-related inpatient admissions were 3% of full admissions, compared to 8% successful nan 4th fourth of past year. Our attraction connected expanding outpatient access, arsenic good arsenic capturing room and procedural cases that person shifted from inpatient to outpatient classification resulted successful a same-store adjusted admissions summation of 8.2% year-over-year and exceeded nan 2019 baseline.

Same-store surgeries accrued 4.2% from nan anterior year. 2.5% sequentially and proceed to execute supra nan 2019 pre-COVID baseline. Same-store ED volumes were very beardown successful nan quarter, expanding 8.7% year-over-year, 3.6% sequentially, and vanished astatine 102% of 2019. In nan 4th quarter, same-store nett gross declined 1.3%, owed mostly to nan decreased measurement of COVID aesculapian admissions successful nan anterior twelvemonth quarter.

However, our attraction connected building higher acuity work lines continues arsenic demonstrated by further strengthening of our surgical lawsuit operation index. Compared to nan 2019 baseline, nan surgical CMI is now up 3%, contempt nan ample activity of orthopedic cases that person migrated to outpatient classification.

We proceed to put successful work statement improvement and supplier recruitment to further turn acuity crossed our markets. Inflationary unit continues to effect operating expenses and margins, but we made advancement reducing statement labour passim 2022. We person besides managed non-labor expenses beneath inflation. Excluding pandemic alleviation funds, EBITDA capacity was astatine its highest level successful nan 4th fourth of nan year, in-line pinch our expectations, arsenic good arsenic humanities trends.

In summation to nan improving operational trends, we extinguished astir $378 cardinal of notes outstanding during nan quarter. We proceed to prosecute opportunities to little wide indebtedness and leverage and to amended our superior structure. Kevin will talk astir that much successful his remarks.

Looking ahead, we stay focused connected our 4 privilege areas, which we judge stay basal to driving stronger results for our markets and nan company. The first is accelerated growth. Strategic superior investments successful entree points, outpatient services, and inpatient capacity are enabling near-term measurement gains and expanding our imaginable for semipermanent growth.

We person been consistently investing successful our portfolio. Over nan past 5 years, we person added much than 640 caller licensed beds, arsenic good arsenic 80 surgical and process suites to our existing wellness systems. Across galore markets, we proceed to grow our geographic footprint and to summation marketplace attraction pinch caller superior care, specialty care, urgent care, freestanding emergency centers, and ambulatory room locations. And supplier recruitment remains basal to continuous growth.

In 2022, we had our champion recruitment twelvemonth of nan past 5 years. Our transportation halfway received a grounds number of requests for placement past year, which is an important maturation driver for nan mostly of our wellness systems. Last year, inbound transfers accrued 14.5% complete nan anterior year.

As we proceed to enlistee further unit and further optimize capacity done our magnitude of enactment simplification efforts, we expect moreover much measurement from nan transportation center, including incremental higher acuity admissions. Our 2nd area of attraction includes circumstantial actions to fortify our workforce.

We made very important advancement reducing statement labour during nan twelvemonth and ended 2022 pinch beardown gains successful worker recruitment and retention. Contract labour totaled astir $80 cardinal successful Q4, compared to $140 cardinal successful nan anterior twelvemonth and $100 cardinal past quarter.

Through our company-wide centralized caregiver recruitment function, caregiver hiring is up 18% for 2022, compared to nan anterior year. And our retention rates person improved 500 ground points, resulting successful a beardown nett summation successful nursing FTEs for nan year. Our Jersey College Nursing School narration expanded pinch caller campuses successful Tucson, Arizona and Scranton, Pennsylvania successful early January.

We now person 7 progressive programs and expect 3 much to commence successful 2023. Our first cohort of students graduated past period successful Port Charlotte, Florida, which was a celebratory milestone for those caller nurses and for us. When nan Jersey College business is afloat deployed, we expect to postgraduate astir 1,000 caller nurses each year.

Next, our activity to power expenses includes our separator betterment program, proviso concatenation initiatives and productivity enhancements. During 2022, we made affirmative strides, including measures to consolidate work lines successful immoderate markets, creating greater efficiencies successful those wellness attraction systems. For 2023, we stay focused connected incremental statement labour simplification and different circumstantial strategies to mitigate nan inflationary pressures successful this operating environment.

Finally, our committedness to beforehand information and value is astatine nan bosom of everything we do. There are galore measures that show results successful this area, but today, I'll conscionable item one. In 2012, CHS hospitals embarked connected a travel to create inherently safe wellness attraction systems. And now we person a afloat decade worthy of information that shows really overmuch advancement we person made.

In 2022, we achieved an 87.9% diminution successful nan superior information arena complaint from nan baseline established 10 years ago. This equates to thousands of patients who knowledgeable amended outcomes arsenic a consequence of this focus. Our information programme is 1 of nan longest moving and astir successful successful nan industry. I want to congratulate and convey our clinicians, support teams, leadership, and everyone astatine CHS who makes information their apical privilege each day.

Kevin, astatine this point, fto maine move nan telephone complete to you.

Kevin Hammons

Thank you, Tim, and bully morning, everyone. As Tim mentioned, we saw meaningful measurement betterment and disbursal guidance successful nan 4th fourth and arsenic expected, achieved our highest measurement and net capacity of nan year. While little acuity of inpatient admissions and payer operation changes pressured our apical line, nan improvements we made successful magnitude of enactment and statement labour and our guidance of non-labor expenses beneath ostentation contributed frankincense having our champion EBITDA 4th of nan year, excluding pandemic alleviation funds.

Additionally, sequential improvements successful same-store nett revenue, cardinal measurement metrics and EBITDA bode good for america arsenic we statesman 2023. In nan quarter, we besides continued to return advantage of opportunities to amended our superior building by reducing our debt, while maintaining capable liquidity.

Moving to 4th fourth results. Net operating revenues came successful astatine $3.142 cardinal connected a consolidated basis. On a same-store basis, nett gross was down 1.3%, compared to nan 4th fourth of 2021. This was nan nett consequence of an 8.2% summation successful adjusted admissions and an 8.7% alteration successful nett gross per adjusted admission, which arsenic I mentioned, was pressured by little acuity inpatient admissions and changes successful payer mix, chiefly attributable to nan Delta activity of COVID knowledgeable during nan 4th fourth of 2021, during which we saw a proportionately higher percent of commercially insured COVID patients during that surge.

Adjusted EBITDA was $404 million. During nan 4th quarter, we recorded $2 cardinal of pandemic alleviation funds, compared to $46 cardinal recognized successful nan anterior twelvemonth period. Excluding pandemic alleviation funds, adjusted EBITDA was 402 million, pinch an adjusted EBITDA separator of 12.8%.

As a reminder, we did not see immoderate pandemic alleviation costs successful our 2022 adjusted EBITDA guidance. And going forward, we do not expect to person aliases admit a important magnitude of pandemic alleviation costs from nan government. With respect to expenses, connected nan labour disbursal side, mixed salaries, wages and benefits and statement labour disbursal improved connected a year-over-year ground by astir $40 cardinal and improved astir $13 cardinal sequentially.

Specifically related to worker costs, we knowledgeable an summation of 4.5% successful our mean hourly complaint for labor connected a year-over-year basis. On a sequential basis, guidelines salary ostentation grew astatine astir 1.5%. On statement labour expense, we continued our sequential improvement, arsenic good arsenic making important advancement complete nan anterior year.

During nan 4th fourth of 2022, statement labour was astir $80 million, compared to $140 cardinal successful nan anterior twelvemonth quarter. On a sequential basis, successful 2022, our statement labour was $190 cardinal successful nan first quarter, $150 cardinal successful nan 2nd quarter, $100 cardinal successful nan 3rd quarter, and $80 cardinal successful nan 4th quarter.

We expect continued advancement reducing our statement labour passim 2023, albeit astatine a slower pace. We person efficaciously executed respective costs simplification initiatives and thus, non-labor expenses proceed to inclination beneath inflation.

Overall, we knowledgeable a mean summation of astir 3% complete nan anterior year, contempt a $30 cardinal summation successful aesculapian master fees, a $40 cardinal summation successful malpractice insurance, and $8 cardinal related to Hurricane Ian. All different increases and decreases successful non-labor expenses netted to a simplification of astir $40 million.

We've been capable to support nan maturation of these costs good beneath inflationary levels owed to nan committedness and subject of our labor to execute connected our separator betterment program.

Turning to rate flows. Cash flows provided by operations were $300 cardinal for 2022, compared to rate utilized successful operations of $131 cardinal for 2021. Excluding nan repaid Medicare accelerated payments successful 2021, rate flows provided by operations were $950 cardinal for 2021.

The timing of definite rate payments anterior to year-end and a fewer expected rate receipts, which did not get anterior to year-end, impacted our rate flows from operations for nan twelvemonth ended 2022. We expect these rate inflows to now travel successful during 2023. Also, owed to nan timing of definite payments successful 2022 that normalize adjacent year, we expect our moving superior to amended successful 2023.

Moving connected to CapEx. Full-year 2022 CapEx was $415 million, compared to $469 cardinal successful nan anterior twelvemonth and was in-line pinch our expectations. As we mentioned connected past quarter's call, we efficaciously adjusted our gait of spending connected superior expenditures to bespeak nan operating situation without materially slowing our maturation opportunity. We proceed to amended our superior building done a operation of privately negotiated transactions and unfastened marketplace repurchases.

In nan 4th quarter, we repurchased $378 cardinal of indebtedness pinch $171 cardinal of cash, capturing $193 cardinal of discount. As we look to nan full-year of 2022, we took advantage of marketplace conditions successful nan early portion of nan year, while liking rates were favorable by refinancing and extending $1.5 cardinal of indebtedness maturities, lowering our liking complaint from [6.25% to 5.25%] [ph].

And successful nan 2nd half of nan year, we repurchased a full of $645 cardinal of indebtedness for an aggregate costs of $345 cardinal of cash, capturing $300 cardinal of discount. These transactions mixed little our rate liking connected an annualized ground by complete $58 million. The company's nett debt-to-EBITDA is presently 7.9x, owed mostly to nan little EBITDA attributed to nan existent operating environment. As we negociate done this environment, we stay focused connected our longer-term goals of lowering our leverage and expanding our free rate flow.

Although we usage much of our rate successful bid to repurchase indebtedness and we knowledgeable little free rate flows than we anticipated, we retained $118 cardinal of rate connected nan equilibrium expanse astatine nan extremity of nan 4th fourth and we still person nan readiness of substantially each of our ABL pinch $852 cardinal of borrowing guidelines capacity.

As a reminder, we person nary indebtedness maturities until 2026. As we antecedently mentioned, we proceed to person liking from extracurricular parties related to imaginable divestitures, and we are besides assessing opportunities to adhd to our portfolio. As these opportunities emerge, we analyse nan early maturation and net floor plan of circumstantial assets and measure nan effect imaginable transactions would person connected our early financial leverage and free rate travel generation.

During nan quarter, we received $85 cardinal of rate proceeds for nan waste of 1 installation successful West Virginia, which closed connected January 1, 2023. And we besides signed an statement to waste our past remaining installation successful West Virginia, which we expect to adjacent connected March 31, 2023. We stay engaged successful continuing discussions astir different imaginable transactions.

We judge these transactions, if they travel to fruition, will supply opportunities to further salary down debt, arsenic good arsenic let opportunities to reinvest resources to areas of our portfolio to beforehand their semipermanent maturation successful earnings.

Now, I will locomotion done our full-year 2023 guidance. Net operating revenues are anticipated to beryllium $12.2 cardinal to $12.6 billion. This represents a 4% to 6% maturation successful same-store nett revenue. Adjusted EBITDA is expected to beryllium $1.475 cardinal to $1.625 billion. Net nonaccomplishment per stock diluted is anticipated to beryllium a $0.65 nonaccomplishment to a $0.05 nonaccomplishment per stock based connected weighted mean diluted shares outstanding of 130 cardinal to 131 cardinal shares.

Cash travel from operations are anticipated to beryllium $675 cardinal to $825 million. CapEx is expected to beryllium $450 cardinal to $500 cardinal and rate liking is expected to beryllium $760 cardinal to $780 million.

In summary, we are optimistic astir 2023. We expect to accelerate our maturation initiatives, fortify our workforce successful precocious information and quality, while leveraging disbursal guidance to thrust affirmative financial results and free rate flow. We stay committed to our objectives, which are designed to position nan institution for semipermanent and sustainable occurrence and are focused connected nan opportunities, which dishonesty up for us.

Shelly, astatine this point, I'll move nan telephone backmost complete to you.

Shelly Schussele

Thank you, Kevin. At this point, Chuck, we're fresh to unfastened nan telephone for questions.

Question-and-Answer Session

Operator

Yes ma’am. [Operator Instructions] And nan first mobility will travel from Brian Tanquilut pinch Jefferies. Please spell ahead.

Unidentified Analyst

You person [Taji] [ph] connected for Brian. I conscionable want to opportunity congrats connected nan quarter. So, I deliberation I'll spell up and touch connected statement labor. Clearly, you're executing good connected this front. Just wanted to cognize what's driving nan sequential improvement? And tin you quantify really overmuch much abstraction do you deliberation you person to bring that down this year? Thanks.

Kevin Hammons

Sure. Thank you for nan question, and I tin commencement that off. And Tim, there's thing other I missed. Please consciousness free to jump in. Early successful 2022, we began our centralized recruiting efforts for nursing. And by April, we had each of our hospitals, benignant of rolled into that centralized recruiting effort.

Doing truthful has really allowed america to amended and grow our expertise to bring successful caller employed nurses, which yet has been nan hurdle of being capable to return retired statement labor. So, arsenic we've made progress, and I judge our caregiver recruiting is up 18% year-over-year successful 2022, that has allowed america to return retired statement labour and trim those costs, albeit astatine a importantly little costs to nan company.

As we spell guardant successful 2023, certainly, nan gait of simplification is going to travel down. If you deliberation astir 4th fourth – successful first 4th historically has been higher quarters for utilization and statement labor, peculiarly astir our markets successful Florida, wherever we person much seasonality, but I would expect this yet erstwhile things level retired to beryllium location successful nan $50 cardinal to $60 cardinal per 4th connected mean scope for statement labor. So, I deliberation we person immoderate room, though I deliberation it still takes a small clip for america to get down location successful nan existent environment.

Unidentified Analyst

Thanks.

Operator

The adjacent mobility will travel from Josh Raskin pinch Nephron Research. Please spell ahead.

Josh Raskin

Hi, thanks. Sort of a related topic, but a small spot bigger. Just nan midpoint of 2023 guidance connected a year-over-year basis, [indiscernible] grants, EBITDA separator betterment astir conscionable nether 200 ground points. So, possibly you could thief talk to nan circumstantial buckets of that betterment beryllium very willing successful nan SWB statement specifically. And past it sounded for illustration you deliberation statement labour whitethorn beryllium capable to get down to – that could beryllium down 150 cardinal to 200 cardinal conscionable my math. I'm conscionable funny if that's nan correct ballpark.

Kevin Hammons

Yes. I deliberation you're perfectly right. I deliberation statement labor, based connected full-year of 2022, we had astir $520 cardinal of statement labour successful our existent tally rate, moreover if we stayed level successful 2023, we would spot a $200 cardinal simplification successful statement labor.

I deliberation we'll make a small much advancement successful that passim 2023. So, I would conjecture it's $200 cardinal to $250 cardinal year-over-year reduction. Now, immoderate of that does travel backmost to america successful position of salaries and wages arsenic we switch immoderate of nan statement labour pinch employees. I would estimate location successful nan vicinity of 30% to 35% of that simplification successful statement labour comes backmost to arsenic worker cost.

In position of ostentation connected SWB, we're estimating for 2023, astir a 5% ostentation complaint connected nan mean hourly rate. So that, mixed pinch immoderate further labor arsenic we return retired statement labour would beryllium really you get to SWB estimate for adjacent year.

Josh Raskin

Got you. And past could you conscionable punctual america what was nan full EBITDA contribution, if it was affirmative for nan accommodation that were divested successful 2022 and maybe, including nan 1 that closed connected [2023]?

Kevin Hammons

Yes. Overall, for nan accommodation that were closed, divested and I would besides lump successful immoderate of nan consolidated services and work statement closures astir apt had a nett – a mini nett antagonistic publication during 2022. So, those should beryllium accretive going into 2023.

Josh Raskin

Okay. So, somewhat accretive. Okay. Thank you.

Operator

The adjacent mobility will travel from Kevin Fischbeck pinch Bank of America. Please spell ahead.

Kevin Fischbeck

Great. Thanks. So, it sounds for illustration you're making a batch of progress. But I conjecture erstwhile you updated your medium-term outlook, you changed nan separator target a small spot and nan EBITDA leverage numbers [have a turn] [ph] higher now. So, I was wondering if you could benignant of possibly breakdown for america precisely what possibly has changed successful your position astir wherever things are? I conjecture I deliberation astir things correct now that's successful nan shape of volumes, pricing, labour and different costs. Is location 1 of those 4 aliases immoderate of those operation of those 4 things whitethorn beryllium coming successful worse than you thought erstwhile you provided nan original guidance? Any measurement to deliberation astir that?

Kevin Hammons

Sure. If I spell backmost a twelvemonth agone erstwhile we initially started putting retired those medium-term targets and looked astatine wherever we are today, surely ostentation has had a overmuch bigger effect than we had antecedently anticipated, peculiarly astir labor. So, conscionable being realistic astir wherever we are a twelvemonth later and having endured, benignant of nan increases successful labour – statement labor, which nary 1 anticipated a twelvemonth agone to moreover beryllium wherever – what we knowledgeable during 2022 fto unsocial wherever we're still astatine today.

It's still a headwind for us, albeit improving, and we judge it will proceed to improve. And successful position of, benignant of connected nan nett gross line, I would opportunity there's continued pressure, peculiarly from authorities payers connected nett gross and connected rate.

Kevin Fischbeck

Is location immoderate logic to deliberation that nan complaint won't yet drawback up? I conjecture complete time, we ever thought astir it catching up connected a lag. Is it conscionable nan lag portion that you're updating this for aliases do you benignant of consciousness for illustration it's – there's a mismatch location permanently?

Kevin Hammons

Yes. No. I deliberation this is much of nan lag that we're just, benignant of factoring successful to nan equation here. And beyond medium-term, we're surely focused and judge we'll proceed to make improvements and yet get backmost to wherever we had primitively anticipated. It's conscionable a matter of timing and nan penetration we person coming arsenic we look retired complete nan adjacent 3 years to 5 years, arsenic things – nan person we get to that, nan much insights will springiness much clarity. But arsenic we beryllium present today, we conscionable thought it was reasonable to make a mini accommodation to those goals.

Kevin Fischbeck

Alright, great. Thank you.

Operator

The adjacent mobility will travel from Jason Cassorla pinch Citi. Please spell ahead.

Jason Cassorla

Great. Thanks. I was conscionable hoping you could unpack nan measurement outlook wrong that 4% to 6% same-facility gross guidance and possibly successful position of really you're expecting surgical volumes to create inpatient versus outpatient, nan trajectory of measurement maturation complete nan people of nan year? And past if you're considering immoderate measurement headwind from nan caller cybersecurity incident astatine each astatine this point? Thanks.

Kevin Hammons

Sure. Let maine commencement off. So, you're right, we person benignant of 4% to 6% nett gross growth. In position of volume, I would expect astir apt 2% to 3%. So, astir half of that nett gross maturation is volume, half is rate. And successful position of, benignant of wherever we're astatine successful our recovery, we deliberation we still person opportunities to summation our admissions.

We've made important investments complete nan past mates of years, and we're still experiencing immoderate betterment from COVID. Our outpatient peculiarly our session visits, we've seen awesome maturation complete these past mates of quarters and ultimately, those will construe into much procedures and much surgeries and inpatient missions down nan road. Tim, if there's thing you mightiness add?

Tim Hingtgen

Sure. In position of nan migration of inpatient cases to outpatient, that seems to person leveled off. So, we don't judge that's going to beryllium arsenic ample of a headwind. But conscionable to reiterate, for those cases, nan wide mostly of those cases that didn't ferment diligent to outpatient. We judge we've captured them wrong our existing wellness attraction transportation systems successful our hospitals aliases successful our ASC environment.

So, we consciousness really bully astir that publication going guardant into 2023 and beyond pinch a afloat pipeline of further entree points, ASCs, what person you, that we are adding to nan portfolio. In position of nan near-term maturation opportunities, we called retired accelerating maturation arsenic privilege number 1 for Community Health Systems. We judge we've invested really wisely for that successful immoderate of our highest maturation markets.

We person caller capacity that has conscionable precocious travel online aliases will beryllium coming online passim nan remainder of this year. So, adding incremental beds, leveraging our attraction connected strengthening nan workforce, recruiting much staff, truthful we tin open-up each 1 of those beds should beryllium a beardown catalyst for america for incremental measurement growth.

Jason Cassorla

Okay. And thing connected nan cybersecurity incident you want to add?

Kevin Hammons

Sure. Not a full batch to adhd there, but conscionable for clarity, we person a third-party that we had contracted pinch for unafraid record transfers, this third-party acquisition nan information breach. And successful nan process of that, nan – a mates of – our file, CHS files were capable to beryllium accessed. The breach did not hap nan champion of our knowledge wrong our system. There's nary – we person nary grounds that location was immoderate breach of nan CHS systems, and we've not knowledgeable immoderate type of disruption successful work nor do we expect immoderate disruption successful service.

Jason Cassorla

Great. Thank you.

Operator

Next mobility will travel from Stephen Baxter pinch Wells Fargo. Please spell ahead.

Stephen Baxter

Hi, thanks. And our condolences connected Ross, it's really sad to perceive astir that. So, conscionable wanted to inquire astir immoderate of nan drivers of nan operating rate travel betterment year-over-year. So, you talked a small spot astir this, it looks for illustration you're looking for, I think, a $450 cardinal pickup. Some of that is nan EBITDA maturation you're looking for and you talked a small spot astir the, benignant of nan one-time items possibly impacting 2022 that are now 2023 collections, emotion to get a consciousness of whether you tin possibly size immoderate of those for america and talk astir immoderate different factors we should beryllium considering successful nan year-over-year improvement?

And it does look for illustration your moving superior is already down a decent magnitude year-over-year successful 2022 and you're expecting to make much progress. So, immoderate penetration into benignant of really overmuch further you deliberation you tin negociate moving superior little would beryllium awesome to perceive about? Thanks.

Kevin Hammons

Sure. So, a mates of items I'd constituent to. One is nan repayment of deferred payroll taxes of $73 million. This was COVID-related benefits that allowed america to defer payroll taxes. Half of it was repaid successful 2021 and half of it was repaid successful 2022. So that's done that costs will not occur. Again, that deferral started backmost successful 2020. We did alteration our days successful AP during 2022.

Near nan extremity of nan year, we took advantage of immoderate discount opportunities and paid immoderate things early. We'll beryllium capable to move that astir successful 2023, benignant of prime that backmost up, which will beryllium a affirmative rate travel item.

Similarly, we mislaid a time successful AR during 2022, we would expect to beryllium capable to recapture that day. So, those items of moving superior I would say, would beryllium affirmative impacts successful 2023. The different point that I would constituent retired successful position of, benignant of affirmative effect connected free rate travel aliases rate travel from operations, would beryllium our liking payments arsenic we proceed to refinance immoderate of our indebtedness and salary down immoderate of our debt.

Our rate liking will beryllium importantly little successful 2023 than it was successful 2022. In addition, successful 2022 arsenic portion of nan refinancing and indebtedness payoff. We did person to accelerate immoderate of our rate liking payments, which resulted successful efficaciously connected a mates of those tranches paying much than 12 months of liking successful nan year. So, arsenic that goes distant and past pinch nan little liking complaint connected nan portion that we finance and a little indebtedness balance, we'll person astir $50 cardinal to $60 cardinal of little liking – rate liking successful 2023.

Operator

Our adjacent mobility will travel from Andrew Mok pinch UBS. Please spell ahead.

Unidentified Analyst

Hi, this is [Thomas] [ph] connected for Andrew. Could you locomotion america done nan inclination successful inpatient acuity passim nan year? And pinch your attraction connected finance successful higher acuity work lines, really do you expect acuity to inclination successful 2023? Thanks.

Tim Hingtgen

Sure. Sure, Thomas. This is Tim. I'll footwear it off, and Dr. Simon consciousness free to measurement in. In position of our acuity progression passim nan year, arsenic we pointed retired successful our earlier remarks, connected little to – subordinate to little aesculapian lawsuit operation index. And so, depending connected nan level of COVID successful nan anterior twelvemonth quarter, it surely impacted our year-over-year comps. But arsenic nan twelvemonth went connected and arsenic I mentioned, we grew immoderate of our inpatient surgeries saw immoderate of those volumes amended passim nan year.

We did spot our surgical lawsuit operation improve, which yielded a stronger summation by year-end and wide lawsuit operation index. On – versus 2019, I don't cognize if we pointed this retired earlier, but we did really turn our lawsuit operation scale versus 2019 crossed some aesculapian and surgical. So, we judge that's grounds of our investments successful nan work statement strategies, nan recruitment strategies, and nan transportation centers occurrence of bringing higher acuity patients into our wellness attraction systems. So, while we saw a dip successful past twelvemonth versus 2021, we're really pleased pinch what we saw versus 2019.

Lynn, thing to add?

Lynn Simon

I deliberation nan only point that I would adhd is, arsenic acold arsenic [indiscernible] we're seeing an summation successful higher acuity cardiovascular services and past besides immoderate neurology. So, we are focusing connected immoderate of those high-end procedures, arsenic good arsenic different work lines, putting effort into and we're saying immoderate of nan gains from that.

Unidentified Analyst

Thank you.

Operator

This concludes our question-and-answer session. I would for illustration to move nan convention backmost complete to Mr. Tim Hingtgen for immoderate closing remarks. Please spell ahead, sir.

Tim Hingtgen

Thanks, Chuck, and acknowledgment to everyone for spending clip pinch america today. Let maine extremity coming by thanking nan caregivers and support teams crossed our statement to supply patients pinch safe value wellness care. They do a singular job. I besides want to admit our section wellness strategy and CHS activity teams who’s sharing our committedness to execute nan champion results possible.

Working together, we look guardant to reaching our goals and providing worth for each of our stakeholders successful 2023. As always, if you person further questions, you tin ever scope america astatine 615-465-7000. Thank you.

Operator

The convention has now concluded. Thank you for attending today's presentation. You whitethorn now disconnect.