■ 2H Views and Expectations: With respect to the back half of the year, the hospital companies continue to expect volumes to return and has not yet experienced anything material with respect to Covid-19. The companies largely expressed confidence that if Covid-19 were to surge, they would be able to manage overall volumes. As it relates to labor trends, the public hospital group indicated that the labor market remains tight with HCA/THC indicating that temporary/premium labor in 2Q was similar to levels seen in 1Q, while CYH noted improvement in their labor utilization. UHS noted that, while the use of temporary/premium labor has continued to come down since January, the company is using more temporary labor in July. Admittedly, Covid-19 could create greater headwinds with respect to labor if the Delta variant picks up.

■ Group Reported 2Q21 Results Above Expectations: In 2Q21, each of the major Hospital companies exceeded CS/consensus expectations for revenue and EBITDA as volumes rebounded and the healthcare system re-opened. Margins continued to expand with EBITDA margins expanding 120 bps sequentially when excluding grant funds (a factor for CYH/THC). Despite concerns regarding labor trends, the quarter saw the average labor expense ratio decline 110 bps, although the group did note that the labor market remains tight but the use of temp/premium labor was either flat or improved from 1Q. On the supply expense side, the average expense ratio increased 10 bps sequentially. With respect to the pandemic, Covid-19 cases in the second quarter declined into the mid-single digit range of total vols, but each company noted increasing Covid-19 cases in the early part of July. More specifically, UHS noted that Covid-19 volumes are now in the low double-digit range as a percent of total vols at the time the company provided their 2Q earnings.

■ Hospital Group Raises 2021 EBITDA Outlook: The public hospital companies raised their EBITDA outlooks for the year following the 2Q21 outperformance with CYH raising its EBITDA outlook by 1.4%, HCA by 10.8%, THC by 3.2%, and UHS by 7.2%. Generally, the guidance raises reflect the 2Q outperformance while largely maintaining the original 2H outlooks each company expected with respect to their original outlooks. With respect to the back half outlook, CYH, HCA, and THC expect a return to traditional seasonality trends with 3Q experiencing softness in volumes before rebounding in 4Q. Comparatively, UHS expects 4Q to see softness due to the holiday period.

■ Price Performance: Hospital stock performance has continued to be strong this year, with CYH up 64%, THC up 75%, HCA up 48%, and UHS up 9%, as valuations have generally improved from the beginning of the year and estimates have been raised across the board. Hospital stock performance compares with a YTD S&P 500 advance of 19% and a S&P Healthcare index gain of 18% (all as of August 13 close).