Kevin Hammons: I think we’re starting to see some normalization of seasonal patterns as we come back into the back half of this year. We did start to see a strong recovery in volumes in the fourth quarter of last year. So this year, we would have to obviously be stepping over that. I think the comps were much easier really this first quarter and second quarter due to some of the disruption from the pandemic in ‘22.
Operator: The next question comes from A.J. Rice with Credit Suisse.
A.J. Rice : First, maybe just to ask about your contract with managed care. I guess, 2 aspects to that, in particular, but any update generally would be helpful. But there was some — there’s been some discussion about seeing rates bump up a little bit to help with the labor challenges. I wonder if you’re still seeing that as you contract for the rest of this year in ’24? And then a subcategory of managed care contracting is the public exchanges. And I know that they’ve grown rapidly, may grow again in their enrollment with Medicaid reverifications. I wondered, can you just comment on the company’s positioning with respect to contracting for public exchanges? Or do you feel like you’re well covered in the markets you’re in? Any commentary there?
Kevin Hammons: Sure, A.J., I’ll start that one. So in terms of managed care contracting, we’re complete with 23 and you have some contracts that are resetting here or did reset on July 1 for the back half of this year. We’re probably approximately 50% complete with 2024 contracts as we’re working through those to renegotiate. In ’23, we saw about 100 basis point improvement in average rate as we — as you mentioned and as we push on the payers to help cover some of the increased cost of inflation, increased costs that we’re incurring did see a pickup in the rate we’re getting. And that seems to be continuing on into ’24. So I would expect that as we mentioned for ’23 in that 4% to 6% range. I would expect something similar at this point in ’24.
At least we don’t have anything that would tell us otherwise. In terms of the exchanges, you’re absolutely right. There’s been recent reports out that Texas and Florida have some of the highest exchange enrollment 2 of our biggest states and we are well covered with contracts in those exchanges.
A.J. Rice : Okay. And maybe just as a follow-up, you’ve got, obviously, a good rebound in volumes. It seems like and we’re sort of at least normalizing, if not a little better even. And you’re seeing some meaningful improvement on the labor front. And now you’ve got this Project Empower. I wonder if you put all that together, when you think about a goal for margins looking at EBITDA margin, looking out a couple of years or does it make you state that there’s x percentage points of potential margin improvement embedded in the system that you can now go after relative to the current run rate? Or Will this help you maintain the current run rate? Any way to think about that?
Kevin Hammons: Yes. So we have our medium-term goals out there to get to mid-teen margin run rate. And we certainly are working towards that and believe that these initiatives with like Project Empower, with the recovery of volume and the investments that we’re making on the capital side, both in inpatient and outpatient in the tweaks to the markets that we’ve made will all work towards getting us to those mid-teen margin kind of goals that we have.
Operator: The next question is from Jason Cassorla with Citigroup.
Jason Cassorla : Great. Just in the second quarter of last year, you flagged that 2 of your markets had a disproportion impact on results. Obviously, the 2Q ’23 results proved to be much stronger. But just curious how much of an EBITDA lift on a year-over-year basis was due to the improvements in those 2 markets against a better operating trend backdrop for the rest of your improvement? And then I have a follow-up.
