Good morning, everyone, and welcome to Nutex Health Inc. First Quarter twenty twenty five Earnings Call. I'm Jennifer Rodriguez, and I'm pleased to moderate today's discussion. Thank you for joining us as we review our performance and outline our plans for the future. This call is being recorded for future reference. With me today are our key leaders, doctor Tom Bo, Chairman and CEO John Bates, chief financial officer doctor Warren Hosseinian, president and Josh Dutilio, chief operating officer. They will provide insights into our financial results, operational progress, and strategic direction, followed by a Q and A session. Before we begin, a few reminders. Today's discussion may include forward looking statements based on management's current expectations. These are subject to risks and uncertainties that could cause actual results to differ. For details, please refer to our press release and Form 10 Q filed yesterday and our other SEC filings. We'll also discuss non GAAP measures like adjusted EBITDA with reconciliations available in our press release and Form 10 Q. With that, I'm pleased to turn the call over to Doctor. Tom Vo, our Founder and CEO Doctor Vo, the floor is yours.

Thank you, Jennifer. And good morning, everyone. I am pleased to present Nutex Health results for the first quarter of twenty twenty five. Which reflects continued progress following a strong 2024. Our mission of delivering accessibility with high quality care and a patient first approach has driven consistent growth and operational stability. Operationally, Q1 twenty twenty five shows steady progress. With total patient visit reaching 48,269 patients. A 20.5% increase from forty thousand zero six eight in q one twenty twenty four. Mature hospitals achieved a 5.3% increase in visits, demonstrating sustained demand for our services. Financially, Q1 twenty twenty five delivered solid results. Total revenue reached 2 and $11,800,000 a 214% increase from $67,500,000 in Q1 twenty twenty four. Adjusted EBITDA was 72,800,000.0 up from a negative $400,000 from the same quarter last year. Net income attributable to Nutex Health Inc. Was $14,600,000 or 2.65¢ per basic share compared to a negative $400,000,000 loss or a negative 0.8¢ per basic share in q one twenty twenty four. Our balance sheet remains stable. With long term debt actually slightly reduced from I'm sorry, reduced to 20,700,000.0 from 22,500,000.0 at year end 2024. And cash in the bank at 87,700,000.0 up from $43,500,000 from year end 2024.

Our net cash flow from operating activities in the first quarter of twenty twenty five was 51,000,000 compared to just $3,100,000 in the same period in 2024. And surpassing the cash flow for the entire year of 2024. These impressive growth metrics reflect our company wide efforts enhance base and volume, increase inpatient admissions, cost streamlining and optimization, and improved revenue per patient through effective revenue cycle management, particularly via the arbitration process. Every month, we are gathering more data collections arbitration wins. Which help us refine our accruals and we believe we are getting closer to a steady state. While there's a lot of work that needs to be done, we are very encouraged by the positive progress. Let me take a few moments to discuss the arbitration process that we first implemented in July of twenty twenty four. Overall, it is a small but very important part of our operation. In the first quarter of twenty twenty five, we submitted between 60% to 70% of billable visits through the arbitration portal. We achieved an percent plus win rate of these submissions resulting in facility collections increasing by between 20 I'm sorry, increasing by between 200% to 300% compared to the initial insurance payments.

This means that an independent arbitrator has legally determined that the insurance companies are paying us initial payments that are much lower than fair and reasonable rates over 50% of the time. So far even with these winning percentages we have not seen any significant payer behavioral changes. We are constantly monitoring legislative and legal development at both CMS and in Congress. To make sure we are on top of any potential changes. However, from all our research and discussions with subject matter experts, it appears that the No Surprises Act and the associated arbitration process is here to stay. One main reason for this is the fact that very few of the charts that are eligible for arbitration actually get arbitrated. In fact, public data shows that only about 5% of eligible charts are actually arbitrated. The reason for this include lower the reasons for this low level of arbitration participation include the high monetary cost as well as the extended time extended length of time to get paid once HR goes through the arbitration process. In terms of the arbitration process itself, it is constantly getting more refined day by day. We are seeing some improvements to the arbitration process including more IDREs or arbitrators being added to the list of available arbitrators as well as new guidelines to provide Safeguard the integrity of the system.

In fact, one legislative development that may be germane to our industry will be built h r nine five seven two being introduced by representative Greg Murphy of North Carolina. That proposes a penalty of three times the difference between the insurer's initial payments and the IDR award amount. Less interest. If the insurers do not pay in thirty days as required by rules in the No Surprises Act. This bill will only help us get paid faster [indiscernible] in a more reasonable manner. Looking ahead, we are well positioned for 2025. We continue to expand our micro hospital model in high demand markets. There is no lack of demand for our innovative micro hospital model. As we still receive requests to build these hospitals monthly from all over the country. For 2025, we have plans to open three additional hospitals. Our pipeline currently extends from 2025 to 2028. And has 10 plus projects in various stages of development. Targeting markets where our high quality care is needed. Each facility is designed to reduce emergency wait room times increase accessibility and provide tailored medical services. Our company growth strategy emphasizes four priorities. Increasing patient volume, expanding services to provide care to more observation and inpatient admissions, optimizing revenue through efficient revenue cycle management and arbitration, maintaining disciplined cost, and aggressive debt management.

We feel that as long as we receive fair and reasonable payments, from either the arbitration process or from changes in in payer behavior, our lower cost model will be sustainable and repeatable. Because of our experience of having been through multiple cycles, and our ability to pivot, and adapt to any market conditions and with a balance sheet and a clear pipeline, Nutex is well positioned for continued sustained growth. So now I'll turn the call over to John Bates, our CFO. John? [indiscernible] financial performance for the first quarter of twenty twenty five. Which reflects another solid quarter with consistent growth. I'll compare some key financial metrics for Q1 of twenty twenty five versus the same period in 2024 highlighting percentage changes across areas such as revenue, adjusted adjusted EBITDA, net income, EPS and other indicators as detailed in our Form 10 Q filed yesterday.

Starting off with total revenues. So total revenue for February, as Tom indicated, did reach 211,800,000.0 a 214% increase from $67,500,000 in one of twenty twenty four. The hospital division drove most of this growth generating $203,900,000 is up 240% from $60,000,000 in the first quarter of twenty twenty four $105,000,000 tied to arbitration efforts through the independent dispute resolution process.

Of that $105,000,000 in arbitration revenue, dollars 60,000,000 related to dates of service for the first quarter of twenty twenty five, dollars 26,000,000 related to dates of service for the fourth quarter of 'twenty four and $12,000,000 related to dates of service for the third quarter of of 'twenty four following the remaining $7,000,000 relating periods prior to the third quarter. Of the total hospital division revenue, mature hospitals, which are hospitals operational before 12/31/2022, saw a 86.5% revenue increase for the first quarter of twenty twenty five versus the same period in 2024. For the hospital division visits, we did see growth as well during the quarter as they increased by 20.5% or 8,201 visits up to 48,269 visits in the first quarter of twenty five versus 40,068 visits in the same period in '24 with mature hospitals growing at 5.3% as Tom indicated before the first quarter of twenty five. Versus the same period in '24. Additionally, the population health division revenue did increase by roughly $400,000 or 5.4% up to $7,800,000 in the first quarter of twenty five from $7,400,000 in the same period 2024. Now let's discuss the overall facility and corporate costs the continued improvement in that area.

Total facility level operating costs and expenses increased $36,200,000 during the period but only represented 44.1% or 93,500,000.0 of total revenue for the first quarter of twenty twenty five. Versus 84.9% or $57,300,000 of total revenue for the same period of 2024. Of the $36,200,000 increase in these facility, operating costs in expenses dollars 26,300,000.0 related to arbitration costs for the for the additional arbitration revenue recorded during this period, which approximated 25% of that incremental addition of revenue I mentioned previously. As a result of the revenue and facility cost improvements, our twenty twenty five first quarter gross profit was 118,300,000.0 or 55.9% of total revenue. As compared to $10,220,000 or only 15.1% of total revenue in the same period of 2024 which represented 1065% improvement. From a corporate and other cost perspective, the general and administrative expenses as a percentage of total revenue for the first quarter were 25 decreased down to 4.7% compared to 12.8% for the first quarter of twenty four showing our continued focus on controlling costs while improving revenue. Additionally, on our first quarter twenty twenty five income statement, you will see a line a line item for stock based compensation expense and it's been there this year and last year and before.

But with the amount for the first quarter of twenty twenty five being 36,100,000.0 Most of that expense is explained in our first quarter twenty twenty five ten Q within Note 10. But within that note, we explain that under the terms of four separate contribution agreements for hospitals that were deemed to be under development hospitals when Nutex went public back in February at the point in which each of the hospitals have been open for two full years they're eligible to receive a one time additional issuance of common company common stock based upon the earnings of the hospital in the second year of their operations. And that second year is which we denote to be the period of what the earn out period is.

So with four of these hospitals, in the earn out period currently, we're accruing for the potential earn out for each. And in the first quarter of twenty twenty five, that accrual amounted to 36,000,000 that will be trued up each quarter until we get to the end of year two of each hospital. After opening. And at which time a final calculation will be done and payment will be made 100% in common stock and recorded as non cash stock compensation expense in our financials, which is how it's presented currently. In the first quarter of twenty twenty five, one of these four facilities did reach the end of the earn out period, leaving the other three to complete their earn out period by the early part of the third quarter of twenty twenty five. The good news is that after these limited number of legacy hospitals have matured, will not be a significant non cash earn outs in the future. Now let's talk about operating income. Operating income including the negative impact of this same $36,100,000 in non cash stock based compensation expense the first quarter of twenty twenty five was $72,200,000 compared to 1,500,000.0 in Q1 of twenty twenty four.

Representing a $70,700,000 improvement quarter over quarter. Net income attributable to Nutex Health was $14,600,000 for the first quarter of twenty five again also including the negative impact of that $36,100,000 non cash stock based compensation expense that we talked about previously. And the comparative net loss attributable to Nutex was $400,000 for the first quarter of 'twenty four showing a $15,000,000 improvement period over period. From an earnings per share perspective, our diluted EPS for the first quarter of twenty twenty five was $2.56 a share compared to a loss of $0.8 share in the first quarter of twenty four showing a 2.64 dollars per share price increase period over period. Now adjusted EBITDA attributable to Nutex increased $73,200,000 from a loss of $400,000 in the first quarter of twenty twenty four to $72,800,000 in the first quarter of twenty twenty five. One small change in our calculation of adjusted EBITDA this quarter which we will continue using as we go forward, was that we now include in our calculation the impact of cash rents paid that fall under our right of use asset financing accounting treatment. For our building leases for all periods presented. So in our previous treatment of these rent payments within our calculation, the rent paid the cash rent paid impact was not being reflected as a reduction in this calculation, so we felt it appropriate to include it.

Finally, our balance sheet remains very strong with cash and cash equivalents at 03/31/2025 at a record high of 87,700,000.0 up $44,100,000 or 101.1% from $43,600,000 as of as of December of twenty twenty four. Our continued success with the collection efforts related to the arbitration process is allowing us to get paid more fairly the services we provide and was obviously a big part of of this success.

With regard to the accounts receivable, our balance at 03/31/2025 was $295,000,000 an increase of just under 63,000,000 from $232,000,000 at the end of the year of 2024. To give you some perspective, of that $295,000,000 AR, 199,300,000.0 or roughly 68% relates to visits in the arbitration process was similar to our position at the end of 02/2024. And during the first quarter of twenty twenty five, the company collected around a hundred and $40,400,000 in cash of which 103,700,000.0 or approximately 45% of that related to AR as of 12/31/2024. And regarding cash flow, Tom mentioned this earlier, but net cash from operating activities is very strong this quarter at $51,000,000 which was an increase of $47,300,000 from the same period in '24. On the liability side, our total bank and equipment type debt increased by merely $1,800,000 to 43,200,000.0 at 03/31/2025 from 41,400,000.0 at 12/31/2024, with the majority of this debt as we talked about before, relating to equipment loans at our hospitals for such items as the MRIs, X rays, ultrasounds, [indiscernible] items like CT machines. Outside of this normal 40 plus million of bank equipment type debt, the only other items of materiality that look like debt on the balance sheet are the liabilities related to financing and operating lease liabilities.

Which are just the future lease payments due to our landlords on our hospitals. And we've discussed this in previous periods, but just wanted to walk through again so that we remind people how this and what this really means. These are reflected on the balance sheet because the accounting rules require us to aggregate all lease payments that we pay the landlord for the entirety of each lease term. Which might be fifteen to twenty years of payments. And then present value that total lease payment back for each all the way from inception of that lease and record both the right of use asset and a corresponding right of use liability on the balance sheet. For that result. As a result, on our balance sheet, at 03/31/2025, net asset balance for the operating and financial use assets amounted to 243,700,000.0 which is about 32% of our total assets. And the net liability balance the operating and financing right of use liabilities amounted to $288,700,000 which is 61.2% of total liabilities. Just wanted to provide some of perspective as most investors and analysts don't view these right of use asset liabilities as real operating debt. So I wanted to kind of clarify that for With all this said, our balance sheet remains very solid, and we continue to strengthen it with our positive operating performance.

Our current financial position is position has put us in a great position to execute on all of our initiatives our 2025 operating plan, including the opening of three new hospitals later this year, as Tom mentioned earlier.

With that, I'll now turn it over to Warren Husanian. Warren? Thank you, John, and good morning, everyone. Thank you all for joining us today. I'm pleased to provide an update on Nutex Health population health division, which supports our commitment to value based care. As a reminder, our overarching at Nutex Health is to build an integrated health care delivery system combining hospitals and medical groups also referred to as IPAs. Our ITAs are comprised of networks of primary care physicians, and specialists located around our facilities.

DIPAs enroll patients from different health plans, and are responsible for the total care of these patients. By combining hospitals and IPAs, we believe we will be able to deliver care that is more coordinated cost effective, and with better outcomes for our patients. Our IPAs send patients to our hospitals and our hospitals deliver more efficient and cost effective care reducing the medical loss ratios in our IPAs. This is a long term strategy that will take several years to bear fruit. But we are in this for the long run at Nutex Health. We are pleased to report a strong start to the year with first quarter results that reflect the continued momentum behind our strategy. We currently have over 40,000 patients enrolled in our IPAs in various risk based arrangements. Of note, I am happy to report that we now have almost 1,400 Medicare Advantage members in our Houston Physicians IPA. In Q1, our IPAs generated $7,800,000 in revenue a 5.4% increase from 7,400,000.0 in Q1 twenty twenty four. This is despite the fact that we divested two noncore assets in mid-twenty twenty four that were generating revenues but had operating losses. Operating income improved to $100,000 from a $300,000 loss in Q1 twenty twenty four.

Margins continue to be moderated by ongoing investments in new markets such as Houston, Phoenix and Dallas. With that, I will now turn it over to Josh D'Italia, our Chief Operating Officer.

Thank you, Warren, and good morning, everyone.

I'm pleased to share Nutex Health's operational results for Q1 twenty twenty five which demonstrate our ability to deliver high quality care while achieving steady growth and cost discipline. Our micro hospital model centered on patient needs continues to perform very well. I'll discuss some volume trends, cost management, patient acuity, and the advantages of our approach. Total patient visits, as Tom mentioned, reached forty eight thousand two hundred and sixty nine twenty point five percent increase from the forty thousand sixty eight in quarter one twenty twenty four, which reflects growth in both new and mature hospitals, Mature hospitals grew by 5.6% in the first quarter. This growth reflects our leadership team's efforts and community engagement, business development, and adding specialists to manage more complex cases, by increasing observation and inpatient stays to meet the community needs. Our capacity to provide observation and inpatient is a key strength Observation stays help avoid unnecessary admissions while inpatient services ensure comprehensive care for appropriate cases. This approach improves outcomes and patient satisfaction by offering efficient, high quality care. Our model reduces emergency room wait times and provides personalized services positioning Nutex as a trusted provider in the communities we serve. Cost discipline for us remains a priority.

Excluding arbitration costs, operating costs remain stable despite higher volumes and new hospitals this year. Labor costs increased 29% from $27,000,000 to 34,900,000.0 which was comprised of increased payroll and benefits for opening four new hospitals, our higher ER volumes and an increased volume of higher acuity observation and inpatients. Overall labor costs continue to be a much smaller percentage of net revenue than most hospital companies at 16.4% for the first quarter, which exemplifies our lean high quality model. Supply costs continue to be a very good story for us. Supply costs decreased 28% from $5,300,000 to $3,800,000 in the quarter. Due to our 2024 GPO and vendor realignments even while we are while we open four new hospitals in the year. We will continue to see supply cost savings throughout 2025, as stated in the third quarter twenty twenty four earnings call. We're continuing to explore technology investments including AI, for patient check ins, staffing optimization, provider note writing, coding accuracy to improve productivity and efficiency. These tools will help further streamline operations and enhance care delivery and productivity this year and going forward. We continue to believe our micro hospital model is the future of healthcare. Model provides efficient access, high quality concierge care, a lower cost structure in a more intimate and personalized setting versus the large general hospitals.

We believe the micro hospital model will continue to grow rapidly over the next few years and in the industry. As we've seen in our existing hospitals, when patients have a choice, they prefer fast, high quality, personalized care. With our model and profitability, we are well positioned to continue our growth and progress in the coming years. Back to you, Jen.

Thank you, Josh, and thank you to Tom, John and Warren for those updates. We'll now move to the Q and A. Operator, please provide instructions.

Thank you. One moment please while we poll for questions and that's star one. Thank you. And our first question comes from the line of Bill Sutherland with Benchmark Company. Please proceed with your questions.

Thanks, and hey, everybody, and congrats on all the progress. So I guess John, I wanted to think about you said you're getting a lot more clarity on the you know, the arbitration process as far as how the cash comes in [indiscernible] looks like your metrics are holding steady in terms of you know, the submissions and the success rate. So should we think about 1Q as something that is essentially repeatable in the following quarters this year? I mean, you do have a viewpoint here at the midpoint of 2Q. Thanks. Yeah. No, great question. Obviously, we're not we're still in the middle of the second quarter. We're not going to speak much to that. But what I can tell you is and I mentioned this at year end when we went through this first discussion around was going on with arbitration. It was sort of early stage. We felt like we had an understanding of the early on payments that were coming in, the realization of of what was happening because we had a little more time to hold off as we're going through year end going into the early March time period to see how the the true realization was happening.

And so that's when we created the the receivable we had at the end of the year. And I think what you can see from this while it is gonna take time to get to the point of normalizing, after one quarter we're starting to see a little more of what we would expect. I think I mentioned then that I think it's really going to two quarters till we're going to really prove this out. But if you if you look at the raw numbers at think about how we talked about at the end of last year, compared to now when we're looking at where the reimbursement rates were And you saw back then at the end of twenty four, if you looked at full year, it was in the $2,700 mark, but that was really only with six months of arbitration in it. So now we're moving forward and you can kind of continue and think about, okay, for the quarter of twenty twenty five where the reimbursement as you looked at it kind of per visit, was a little over $4,000 over $4,200 That's that's a guide, but I think you need to look back at more, I believe, let's say, last nine months from from July through the first quarter.

If you look at the nine month number, it's in the 3,800 area. So I think when you're talking about normalization of revenue, it's starting to work its way down. Based on assuming similar acuity certainly similar level of volume, which we've had some improvement there. So I think it's starting to work itself out, but to predict and say that this quarter is is representative of what would happen in the next four, know there's seasonality. And also, think that we're still kind of getting the information now that we're we've been in this. We started in July, but really we didn't see activity until middle the fourth quarter. So we've really only had about four, four point five months of cash coming in. So I think as we see the second quarter and add another quarter to it, I think we'll really define that. But generally, it's trending in that direction, but I still think we're I don't think we're at a at a at a steady state yet. So we're gonna have to watch that closely over the next Okay.

Quarter or so. Well, yeah. I I I was kinda thinking about it in terms of how it laid out with what you realized. On terms of claims that were actually in the first quarter and then what came in from fourth quarter and third quarter, etcetera.

And whether that sort of pattern feels like it's it's it's something that is gonna, you know, follow. In other words Beautiful. Yeah. Peter will. And and so and so you can't say, obviously, no one's looking for you know, we understand the vagaries of all this, but that's kind of the pattern to think about in terms of the trail, if you will. Yeah. Absolutely. That's all Bill, I mean, it's a good point. So the trending, as you mentioned, about the pattern, what we can say is we put out numbers at the end of the year just like we put out numbers here. I can tell you that the numbers at the end of the year, I feel like they were representative of of what what was happening and what is expected to happen. And we've continued that. Into the first quarter So barring major changes other than the other independent variables that affect revenue. I mean, I think the trending is solid. And I mean, this engine, the the process that we go through has been in place since know, even before when we went public, we set up just the regular accrual process of our revenue.

And all we did was add on this feature and the engine is is there, and we're feeding, as we talked about, 60% to 70% of our visits are rolling through this process, and it's on a consistent basis still happening.

And that fashion, and we're still seeing the same level of success over 80% or more so Based on that, the trending has been solid and we hope to watch that continue as we move forward. [indiscernible] And you did just to reaffirm something, I wanna make sure I understood. The three remaining under hospitals receiving income on their model That is gonna run through third quarter and then they'll be done? Correct. Yeah. So the remaining three are finished by the early part of the third quarter.

Okay. And then with the cash growing the way it is, I'm just curious as you guys think about your capital deployment plans, And how you may be prioritizing? Going forward? Yeah. That's a great question. I know Tom can speak more to that too as well. But I mean, has been strong. We actually have sort of an investment approach internally for in the short term as we look at the different opportunities that are out there, in particular, mean, certainly, we're always looking for continued growth in opening up facilities, which does take as he's talked about, he's got several in the pipeline. So that's a big piece of potentially opportunities for us. We could increase that rate if we wanted to. Also, I know as Warren mentioned on the population health side, there's opportunities to invest in that side of the business as well, as well as potentially even looking at other similar smaller hospitals that would fit our layout. To basically potentially add existing businesses that maybe aren't performing as well and then adding the features or functionality that we have to it and getting off the ground a little bit quicker. So there's opportunities in kind of those three areas.

Tom, you can talk more about others.

Yeah. No. Thank you, Bill. Thank you for for following us, and and you for covering us. But like John said, we're very fortunate to be in a position to have a lot of cash in the books. Obviously, we're going to be very conservative with that cash. And use it maximize shareholder value. And so we have a lot of options. The good news, is that opening one of these hospitals, as you know, is not that capital intensive. And so even if we open these three hospitals this year, we should still have a lot of cash left over. And so we're still discussing internally. On how to best deploy that cash and to maximize shareholder value. Great. I'll jump back in queue if that other people get in. A question. Thanks, guys. Thanks Bill.

Our next questions are from the line of Thomas McGovern with Maxim Group. Please proceed with your question.

Hey, guys. Congrats on the quarter. Another strong performance especially underscored by the collections and arbitration. So that's going to be my first question related to during the quarter, a little bit over 40% of the arbitration related revenue was related to dates of service. Prior to the first quarter, right? So if we look back between the fourth quarter and this quarter, you were recognized around 95,000,000 in 4Q. So what I'm getting at is how have you guys started to look at working through prior quarter dates of service revenue? Have you guys worked through most of what you'll recognize for the fourth quarter And can we expect the first quarter to be similar to the fourth quarter as of the end of the second quarter? So you guys recognized $60,000,000 sorry to kind of clarify You guys recognized $60,000,000 from 1Q. Would it be reasonable for us to assume you guys will be able to recognize somewhere around another 35,000,000 in the second quarter, kind of consistent with what you did in 4Q? Mean, it's a great question, Thomas. The reality is I say, we don't know as we watch the process. I can tell you that as I mentioned before, I think the ironing out of the realization piece assuming steady state is starting to become clearer and clearer, which allows us to in the period that we're in, improve kind of the accuracy of the revenue that we're recording.

Right? So we've done a really, really good job and quite frankly even prior as I mentioned before, prior to arbitration, is the way we've captured revenue to the best the best recent historical data assuming things remain consistent for similar acuity, similar insurance payers, similar location, right, we doing it down to the granular level. So what happens is as we see things like, maybe there was an additional amount in a current quarter or current month that may be related to a previous month or a previous quarter, what that does is it helps us update the model and it could be up or down. In this case, there's clearly it's a little bit higher. But think it's helping us to better align, better identify and and better predict really what's gonna happen. I think we've done a really good job up to this point. And we're continuing to get better and better. But a lot of it depends on the timing of cash coming in And each of the different payers, right, has we have different situations with each one. So Some might pay slightly quicker, some slower, and there's all sorts of individual, you know, situations one by one.

So but on a consistent trend basis, I think that previous period component should continue to work its way down, but that's always going to be there. Because you're you're taking someone's walking in the door today, And potentially, if it goes through the arbitration process, it could be five months. Before you ultimately get final payment. So you're anticipating well, you when you might get a piece of that in thirty to forty five days, which is how it works, then you go into the process, and then you gotta wait you know, four months after that to potentially get paid. So it'll it'll just be watching that and managing that and each of the different watching it closely with different different payers and the different you know, levels of acuity and also, you know, the different locations and different states that we're in. So, long answer to your short question is, I can't predict exactly what will be to expect, say, in the second second and third quarter. But I can tell you that I feel like we're getting tighter and tighter on the realization based on the more data that now we're getting that we've now had a solid, if you think about the first payment coming in on September, October of last year, now we've got six, seven months of payments.

And by the time we close out second quarter, it'll be up to close to nine months of payments on this process. So think we'll have a much better better feel for it. But I think you see the trending, and I think you have an idea of kind of where it's heading, and I think you're you're on target with with your thought process. Understood. I appreciate that color. And how should we be looking at the addition of new eligible arbitrators? Do you think this could accelerate the arbitration process or any way shift your strategy for submitting claims? Yeah. It's a great question. We believe, ultimately, that will only help us Right? Because I think one of the things that we've we've been made known, we've been to a couple different seminars speaking at some and listening to other groups, including a couple of these IDREs particular a couple of the larger ones, along with the government. And they all indicate that the most important thing that needs to happen is that they need to find some additional arbitrating groups that can can be certified and come in and help with some of the backlog because there's no doubt that the backlog is there and you can see it in industry data as well.

We see it too. So they have been picking that pace up a little bit. Several of them have done a great job. There's a couple that have lagged, and they're they're actually being communicated with to try to help them get resources and improve on that. Plus, then they've added potentially, as you mentioned, adding a couple more. I think adding a couple more will only help the situation. We'll have to watch their their impact and and their communication in the process as we start using them because each one is a little bit distinct and different. And so we have to kinda watch their their approach, how they handle the information that we provide them when it comes to their resolution of who you know, who wins or who loses. But we think will only be a positive as we move down the road as they add more and more of these and and they are getting better at it, which is good, and most of them are adding resources as we speak. Understood. Thanks for that. And then last question, then I'll hop back in queue. Just looking at the acuity mix, one of the largest drivers of mature hospital growth as well as the increased inpatient and observation visits, So you guys have added specialists to kind of facilitate this and continue to drive growth in that in that regard.

I'm just curious, do you think that you're now operating at kind of a steady run rate in terms of acuity mix? And inpatient volume? Or do you expect that to continue to ramp as we move through 2025? And if you do expect it to continue to ramp, maybe just touch on some of the key points that are going to that you expect to drive continued growth in acuity or in high level acuities and inpatient and observation visits? Thanks. Yeah. Hi, Thomas. This is Tom. First of all, thank you for for following us, and thank you for covering us So I'll elaborate a little bit on that question, and then I'll pass it over to Josh. But the way to think about this is that we still have a very high capacity. In our inpatient capacity. So in other words, as we ramp up these hospitals to be able to admit more patients, and that includes getting more specialists on, getting the the proper equipment, getting the proper software technology, so on and so forth. We feel that there's room to grow, not just on the volume side, on the ER side, but also on the inpatient side.

So Josh, do you have anything else to add from that standpoint?

No, not much. Well said. Would just add that as Tom said, we do have bed capacity, and we are increasing our reputation in the serve as being prepared to take care of most patients.

One But the specialist component is a big big component, adding cardiologists, adding neurologists, and other specialties has helped us take care of more patients, more observation and inpatient. So we expect that to grow We haven't put out guidance on that yet, that will continue to grow over the next coming quarters.

Understood. I appreciate that clarity. I'll hop back in queue.

Thank you.

Next question is from the line of Gene Mannheimer with Freedom Capital. Please proceed with your questions.

Oh, thanks. Good morning. Congratulations, guys. Another above average quarter. Appreciate it. Thank you. Thank you, Gene. You're welcome. The arbitration payments, right, that we've been discussing, when you get those in a successful, you know, dispute, is there a penalty payment that you are receiving in that that you would not otherwise receive if it was if if the bill was paid right the first time. And I guess where I'm going with that question is, over time, right, is arbitration revenue moderates and perhaps it's offset by higher base reimbursement, does that make year over year comps tougher right, when we get out to, say, 2026? Yep. So, Gene, great question. On the first piece, in in the arbitration concept and how that process works. Right? Right now, there is no quote unquote penalty for them to pay pay timely, not or not pay timely. I know Tom indicated one of the acts earlier, the Murphy Act, and one of the components of that listed and has in there is somewhat punitive penalty concept that I think is important and something that if if and when it get that that gets put in will significantly improve the timeliness of payments.

So first question or answer to your first question is it should not have in our numbers It's basically us providing the support for every that each component of the visit itself supporting the the value of the services that we're providing. And that's what's going on to the arbitrator. Now there is the ability you'll see in the in in the NSA, it specifically says this, you can include cost to collect when you're because you have to go through this process and you have potentially have to get lawyers or or just spend time and effort So you are able to include some type of cost component in addition to the services that you have, which a lot of cases, that is included in in the the ultimate argument that ultimately goes to that arbitrator and part of the 80 plus percent wins that we do get But there is no quote unquote penalty as you as you asked at this point for them not paying or not not paying timely. So I guess the answer based on that, then you asked about how that would affect 26. I don't think there would be any necessarily impact, say, in in future periods based on that changing other than certainly if they do put in place the action for a punitive measure to the for the payers if they don't pay timely, then they will that certainly will increase the ability to have additional revenue.

But at this point, that is not the case in the way we do our current process. Okay. Thank you, John, for that color. And my follow on is really more in the core business. You cited a 5.3% increase in mature hospital visits. Is strong. I'm just wondering if there was any element of outsized seasonality there. In other words, was was the flu season worse this Q1 than last Q1 and therefore maybe played a bigger factor? Yeah. Hi, Gene. I can answer that and maybe adjust could chime in. And by the way, Jean, thank you once again for following us and covering us. So this year's flu season was quite interesting. So what we saw was that the flu season started later. I would say mid December. And it progressed through February and maybe even early March. And and it was not just the flu, but there was r as There was, obviously, COVID also. And some GI bugs that was also involved. So the point is that, yes, this flu season was a little bit longer than last year, But but even then, if you compare it quarter to quarter, like year over year, not successive quarter, we still achieve a five percent And so I think that's basically to Josh's point that the communities are more aware of our services We still provide fantastic services to the community.

I mean, if you take a look at any of our, say, Google review, we consistent four and a half to five stars. Which is very unusual in health care. And so as the further we continue to operate in each community, the more the word gets out. Of how great our hospitals are so that more patients continue to come. Josh, any more color on that?

Yeah, Tom. Well said. Couple of things. Mean, mean, one, about one point years ago, we really I give credit to our teams really started a big business development effort which continues to bear fruit Our challenge really is getting the word out on our hospitals. We feel that we have the best service in the industry So once a patient comes in, they see how great it is, they get the concierge care, they're going to come back, they're going bring their family back. So we continue to try and get the word out to educate the community on all the services we provide I think that's why you're seeing the continued mature hospital growth.

As well as increased observation and inpatients.

Yes.

That's great. Congratulations on that progress. And if I could just squeeze one more in, the three new hospitals planned this year, can you just share maybe the timing of when you think those will open? Thanks.

Yeah. Hi, Gene. So I could elaborate on that. So all three hospitals this year will be third and fourth order? All three of them are going to be in Texas. One of them is gonna be in Houston. Where where our corporate office is. So it's essentially our backyard. The second hospital is gonna be in San Antonio. And the third hospital is going to be in Sherman, Texas. Which is located North of Dallas on the Texas and Oklahoma border. So all three are very fast growing. Areas with very good job growth. For each of the communities, and we think that we could could make a difference by bringing our brand of medicine. To all three of those areas this year. Oh, that's great.

Thanks everybody, and congrats again.

Thank you, Gene.

Our next question is from the line of Joshua Cohen with Westbury Capital. Please proceed with your questions.

Hi, good morning. Thanks for taking my questions and Going back to the discussion around the excess cash, could you talk through the options you guys are considering? And whether capital return could be in the cards?

Yep. Absolutely. In addition to the things we talked about earlier, thanks Josh for the question. We're always looking at whatever is going to make sense from a shareholder perspective to add value. So we have discussions about whether there be [indiscernible] Talked about things like dividends at some point down the road, whether that would happen anytime soon. But certainly, along with those, as we mentioned earlier, certainly the investments in our current hospitals and maybe growing that pipeline a little bit quicker the population health side, which I think is a great opportunity there. To take on some situations that will help us really add value quickly. So those are a couple different areas, Tom. You can add to that. Yeah. No. Thank you, Josh, for for following us. So to John's point, we have a lot of options. Obviously, we need to be very cautious with our cash and maximize shareholder value. But the way that I see it, I mean, we could talk about dividend, share buyback, and all those are on the table. But a more interesting way of looking at this is maybe to increase more in our development pipeline and increase growth. And so there's several levers for that.

I mean, the first lever is adding more de novo hospitals. But the problem with that is that it's all development and construction. So the the and by what what I mean is that even if you wanna grow faster, today, it still takes about two years to build these hospitals from ground up. Because these hospitals do not exist. We're the pioneer in the country in in building these hospitals. And so unless we want to build a hospital, we can't operate the hospital. And so you have to from the ground up. And so as you can tell, building these, developing these is challenging. Not that we can't do it. It's just that there's only a certain amount that you could do. Even if you wanna start now. And so the second question is, is there M and A activities or is there acquisition opportunities? Once again, from a hospital standpoint, there's just no hospitals out there to be bought. So even if we wanna buy a hospital, they don't exist. Unless you buy these very massive, big traditional hospitals. But then a lot of these hospitals may have failed for a certain reason, and they don't have the same sort of model that we do with the smaller and number of beds and more cost efficient.

And so that's that's a little bit of a of a limitation. And so the third lever is to maybe increase our number of IPAs as to what Warren was talking about.

But but and that is a possibility. And currently, we have four IPAs in Houston, Phoenix, Los Angeles, and Miami. And we have 24 hospitals. And so the idea is that if we could an IPA around each of the hospital, that may be doable. But but once again, we don't wanna we we need to be very prudent in our spending. And and only look at certain businesses that will have a good correlation. As well as benefit our our current hospital. So the point is we're looking at all options at this point.

Okay. Yeah. [indiscernible] And I appreciate that you guys are only halfway through the quarter here. But on the accounts receivable, curious if you could provide any additional color on both confidence for collection and then also the the expectations for pacing there?

Yeah. I mean, as I good question, Josh. As As I kind of talked about earlier on one of the previous questions, when I think about [indiscernible] and I think about where we were at the end of the year and doing based on early information on how realizability was happening through then. And then now watching it after first quarter, I'm pretty confident, much more confident in [indiscernible] what we what we had at the year end, which is fantastic. That is continuing into the first quarter because I think the trending has been pretty consistent. And as we watch it, of course, payers can change their behavior or situations can happen. But I think the timelines that it takes to collect in in the current environment that we're in is somewhere on average all in it's four months, but you get the piece that doesn't go through arbitration coming in just like it did before. And that normally would come in in the sixty to seventy day mark. If you remember back in the 2023 or even early twenty twenty four. Most of that's our collection time period for a lot of it was in that sixty to seventy five day, but that was pre arbitration.

And then now the arbitration clearly has extended that because it can take from date of walking in the door up to, you know, five plus months for the final payment to come in. Now you still get the first payment after that thirty to forty five days, and then you just have to wait from there. So long answer to your short question is, the average of that comes to somewhere in the one hundred and twenty day mark is what we're seeing overall blended and we'll watch it closely with some of that coming in and that normal sixty to seventy five day period and a larger chunk through arbitration coming on the back end between the four or five and sometimes slightly longer than five month process to get get paid from day one. So, hopefully, that helps. But I think what we were anticipating at the end of the year which we were sort of seeing that early on with limited numbers, continued into the first quarter. And I think that that's substantiated kind of where we had finished the year, and I feel you know, pretty confident that what we have sitting at the end of of March is, you know, continuing on that run rate and barring any major changes, that the the time period to collect all of this will you know, continue to stay on on the kind of period timeline that I described.

Got it. Thanks for that. And congrats again on the strong quarter. Thanks, Josh.

Thank you, Josh.

Thank you. This now concludes the question and answer session. I'd like to turn the floor back over to Jennifer Enriquez for closing comments.

Thank you all for those valuable questions and answers. For all those joining us today, if you have more questions, please email us at investors@nutexhealth.com, and we'll get back to you promptly. On behalf of the Nutex management team, thank you all for joining us for our first quarter twenty twenty five 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.

Ladies and gentlemen, thank you for your participation. This does conclude today's teleconference.