Steve Filton: No, I think it would be premature, then. Again, as I commented earlier, think that there still is a great deal of uncertainty surrounding this particular case and verdict that we had. I’m certainly not an expert and wouldn’t comment in any great detail on the case that Acadia had other than to comment that it was a different state, it was the case with multiple plaintiffs. There were multiple cases. Our case was in a different jurisdiction, a single plane of a single incident, et cetera. So, yes, I think broadly in response to your question, no, I don’t think our approach to the business is being changed at the moment as a result of this verdict. We are very focused on the things we need to do to work through this verdict and to challenge it and appeal it if necessary, at several different levels of the judicial system. But at the moment, I don’t think it’s having an impact on way we think about the business.
Ben Hendrix: Thank you.
Operator: Thank you. Our next line ion comes from of Kevin Fischbeck of Bank of America. Your line is now open.
Kevin Fischbeck: Great. Thanks. I was wondering if you can talk a little bit about margins. I guess both segments saw some nice margin improvement in the quarter. You’ve talked about a significant margin opportunity in both segments of time. Just want to get a little more color update about how you think about build to an opportunity for margins, the pace of that margin improvement? And it does feel like — and I don’t know if this was in your original assumption, but it does feel like the supplemental payments are coming in maybe better than one might have thought a year or two ago. So, I want to get your thoughts about how that might impact your view on where margins ultimately can be? And then I guess if you think about where we are versus where it could be, what the main levers in each segment to kind of get from here there? Thanks.
Steve Filton: Yes. So, Kevin, we have said for some time that we that we felt like the margin deterioration saw during the pandemic could and would largely be recovered in both business segments as we return to sort of more normal levels of growth and I think you specifically have pointed out that acute care volumes broadly, not just ours, still haven’t necessarily returned to pre-pandemic levels. So, we still think there is a decent amount of runway there for continued Acute Care volume growth as well as Behavioral volume growth, which I addressed in a previous question. I think the benefit there is that we continue to have this strong revenue performance. I do think expenses are being better controlled, both by us in terms of our own — actions and things that we control, productivity, et cetera, but I also think broadly, wage inflation is becoming more manageable.
Physician expense, which was a huge drag of the increase in physician expense in 2023, I think it’s not going to be a drag for the full year 2024. And so I think that’s — all those are opportunities for margin improvement. Obviously, as your question suggests, the increase in Medicaid supplemental payments are a significant opportunity as well. I think as Marc’s comments reflected in our prepared remarks, we largely feel that those increased Medicaid reimbursements are making up for an adequate reimbursement over the last several years, but if you put it in the context of margin improvement, they should be very helpful because at least at the current moment, there’s not new or incremental expense associated with most of those Medicaid supplemental payments.
So, it’s a big help in recovering those margins that deteriorated over the past few years because they were inadequately reimbursing us for our cost increases. We’ll see. I mean, obviously, the first quarter was a significant improvement, as I alluded to in an earlier question, over our expectations. We’ll see how the rest of the year plays out. But hopefully, we’ll recover more of that margin deterioration than we originally anticipated in our guidance, but we’ll see how the rest of the year plays out before making that judgment.
Kevin Fischbeck: Great. Thanks.
Operator: Thank you. Our next question comes from the line of Jason Cassorla of Citi.
Jason Cassorla: I wanted to follow up on the supplemental payments and the acceleration there. Clearly, you guys are benefiting. But I guess your local market competitors with by design benefiting as well. So, I guess I’m just curious if you’re seeing any changes from a competitive standpoint either competitors accelerating build-out of the outpatient or anything along those lines? And then if I could follow up quickly just on the Illinois litigation. I know there’s a number of unknowns there on how that could play out. But does that change how you’re thinking from a share repo argument or capital deployment in the near-term as you wait to see how that all evolves? Any help there would be great. Thanks.
Steve Filton: Yes. So, in terms of your first question, Jason, I mean don’t know that in any of our markets, we’ve detected or recognized a significant change in our competitive behavior as a result of the increase in supplemental payments. I’ll make the point that, obviously, the supplemental payments tend to benefit as they’re intended to providers who are providing more service to Medicaid patients have higher Medicaid utilization. I think that’s why we struggled a little bit more during the pandemic. I think we tend to have a slightly higher Medicaid utilization than some of our public peers. So, I think we’re benefiting from that now. But in terms of our local market now, I don’t know that, again, the Medicaid supplemental payments are specifically affecting competitive behavior.
Just like I don’t know that it’s specifically affecting our strategic sort of moves or actions in a specific market. As far as the Illinois impact on capital deployment or specifically share repurchase, I’ll sort of reiterate the same comment that I made before. I think it’s too early for us to really make any sort of — or have any sort of specific reaction until we see a further diminution of the uncertainty surrounding how this verdict and case will ultimately be adjudicated. At some point, it could have an impact but I think at the moment, we’re waiting at a minimum until we at least see the outcome from post-trial motions at the trial judge and trial court level. And so at a minimum, I think we’ll wait and see what happens there before deciding what our next steps are.
Jason Cassorla: Great. Thank you.
Operator: Thank you. Our next question comes from the line of Whit Mayo of Leerink Partners. Your line is now open.
Whit Mayo: Hey thanks. Good morning Steve. Maybe just comment on the Medicaid rule that was released this week on state-based programs. Maybe too early to have much insight, but it seems like some positives and some less positive things. Just curious how your team and legal advisers are looking at this?
