Community Health Systems Inc (CYH) 2004 Q1 法說會逐字稿

Good day, everyone, and welcome to the Triad Hospitals Inc. first quarter 2004 earnings release. This call is being recorded. The discussion today may contain so-called forward-looking statements. These are statements that do not relate solely to the historicals or current facts. These forward looking statements are based on current trends and expectations of the Company and are subject to a number of uncertainties and risks which can significantly affect such current plans and expectations as well as the future financial condition of the Company. Such uncertainties and risks include the competitive nature of the healthcare business, the efforts of various public and private payors to reduce reimbursement to providers, possible changers to the government programs to further limit reimbursement, the enactment of various federal and state healthcare reform legislation, and changes in general economic conditions.

As a consequence of these and other risks and uncertainties, current plans, anticipated actions in future financial conditions and results may differ significantly from those expressed in any forward-looking statements made by or on behalf of the Company. You are accordingly cautioned not to unduly rely on such forward-looking statements when evaluating the information here or in the Company's press release. This call and webcast are the property of Triad Hospitals Inc. Any redistribution, retransmission, or rebroadcast of this call and webcast in any form without the express written consent of Triad Hospitals Inc. is strictly prohibited.

At this time, for opening comments and introductions I would like to turn the call over to Miss Laura Baldwin, the Director of Finance and Investor Relations. Please go ahead.

Good morning, everyone, and thank you for joining us this morning. With me today are Denny Shelton, our Chairman, and CEO, Burke Whitman, our CFO, Mike Parsons, COO, Don Saye (ph), our General Counsel, Dan Mowen (ph), Executive Vice President of Development, Bill Huston, our Senior Vice President of Finance and Steve Love, our Senior VP and Controller. Before we start this morning I want to mention a couple of things. This morning we will be limiting this call to one hour, just to allow our team members to travel to our annual leadership conference which will begin this evening and we would also like to ask you to limit yourself to one question since we're on a little bit of a time schedule this morning. And with that, I'll turn the call over to Burke.

Good morning and thank you all for joining us, especially from the West Coast a little bit earlier than we normally do this. I'm going to give you some key performance highlights from the quarter and then give you some detail about our bad debt expense.

In our earnings press release last night, we reported first quarter earnings per share or EPS from continuing operations of 66 cents per share. We also had EPS from discontinued operations of 63 cents per share and a net EPS of $1.29 per share -- the net EPS $1.29 just combined the continuing and discontinued operations.

Our discontinued operations included results from four major assets that we've either sold or committed to sell. They also included a significant gain of about 84 million pretax on the sale of one of those assets, a group of facilities that we owned in the Kansas City area. Our continuing operations comprised those assets that we expect to continue to be part of the Company for the foreseeable future. Note, however, that our results from continuing operations did include a $1 million gain on the sale of our reference lab by one of our hospitals and that small gain contributed about 1 cent to that 66 cents of EPS from continuing operations.

I want to address some selected highlights from the financial statement starting with income statement and really just starting with the top line of the income statement. We were particularly pleased this quarter with our volume trends. On the same facility basis which comprises those facilities that we've owned at least one year our inpatient admissions increased 5.9 percent over the prior year three-month period and our adjusted admissions increased 7.1 percent. This was stronger growth than we had expected and probably stronger than what we will likely have for the rest of the year this year.

The rest of the year might be somewhat more modest than that.

Revenues per adjusted admission increased 4.5 percent which was consistent with our expectations and our revenues increased more than 11 percent. Total net revenue for the quarter reached $1.13 billion.

Our adjusted EBITDA or interest -- earnings for interest, taxes, depreciation, amortization and certain other items was $161.7 (ph) million (ph), EBITDA margin or EBITDA percent of revenue was 14.4 percent. Now I want to point out here that EBITDA margin in the past was enhanced by about 40 basis points or .4 percent by our former Kansas City assets which we used to receive $18 million a year in lease payments that went straight to the EBITDA line and contributed about 40 basis points to the margin.

Having sold those assets this quarter we obviously no longer receive those lease payments. But that's not a bad thing since we were paid $136 million for the assets. The margin simply reinforces our belief that we may have room to expand the margins gradually over time in future periods.

We continue not to consider margin expansion as a goal in itself but as an outcome of our cash flow and earnings objectives. Mike Parsons, our COO, is going to provide some color on most of our operating expenses so I don't plan to discuss most of those in my opening comments but I do want to spend a moment on our bad debt expense since bad debt expense generally has been a topic of great interest in the industry over the last several quarters.

Our provision for (indiscernible) accounts or bad debt expense was 10.2 percent of net revenue. This was up from 7.9 percent in last year's first quarter but consistent with our expectation of approximately 10 percent range for the full year 2004. As we had hoped, we've seemed to experience some degree of stabilization in this number during the first quarter at least relative to the 2003 year when we felt the effects of the significant increase in uninsured patients and a concurrent deterioration of collectibility of the receivables from those uninsured patients. To the extent that things seemed possibly to have stabilized we were pleased.

However bad debt expense continues to be in our view the number one greatest risk to earnings and cash flow for Triad in 2004. We've said that for several quarters and continue to believe it to be the case.

For that reason we've left in place in our allowance for doubtful accounts an amount that is beyond what our historical experience would require in order to reflect the growth in uninsured patient receivables and potential further deterioration in the collectibility of those receivables. It's important to remember that bad debt expense for us or any hospital company who gets paid largely after services have been provided is an estimate. The bad debt expense and the income statements as estimate and the related allowance for doubtful accounts on our balance sheet or estimates. We like our method of estimation and we believe it gives us a true and current picture to the extent that anything can. I want to tell you briefly about it.

Now before I give you some of the details let me just note here in our view really only two fundamental approaches to estimating the allowance for doubtful accounts. The first would be to simply record an expense that is a certain percent of revenues or record expense whenever a receivable ages to a certain predetermined age. Both of those without regard to actual historical experience in collections or write offs. The second fundamental approach is to consider historical experience as one indicator, future collection performance. Both approaches, ultimately, will get you to the right answer but during a period in which real economics are changing, such as the deterioration we believe we experienced last year.

The first approach might not pick those up until several periods after the change in actual economics. The second approach which takes into account historical experience, including recent historical experience, allows us potentially to capture a trend earlier and potentially to better manage our expense with the revenues in the appropriate period. So we do consider historical experience in our estimation. It is not the answer but it's a key element to the answer.

Let me describe fairly briefly here how the sausage actually gets made at Triad with regard to bad debt expense estimation. Our estimation for doubtful accounts begins with a quantitatively rigorous regression analysis of our historical write off experience by facility, by paratype (ph) up through the current period. We and some other analysts sometimes call that a look back or hindsight analysis. We don't stop there. We reinforce that look back with several other components of analysis. These include a detailed analysis of our receivables aging trends by pair and by aging bucket with the particular focus on historical write offs from uninsured self pay patients as well as cash collections as a percent of revenue. If and than appropriate we then also apply our business judgment.

For example if a facility's historical experience through today's date is at one level but we know that that facility's community has experienced a recent significant change in employment we might adjust our allowance to take that into account. Or as happened last year if we see a trend toward more self-made patients or poor collections from those patients we may increase the allowance.

We do consider other methods on an ongoing basis, all of them in some fashion or another include some take into account in some way the historical and current experience.

Because bad debt expense is such a significant estimate in any period, we always engage several smart people we're lucky enough to have on our team, in the making of the sausage in what are really five stages of review. We conduct this work on all the facilities every quarter. First our corporate accounting team calculates the estimate. Second, our internal audit team performs the same calculations to confirm. Third, we incorporate any matters of judgment that our executive management team considers worthy of consideration. Then we present the conclusion to our external auditor who conducts an overall review and tests those results. And, finally, we review the conclusion with the audit committee of our board of directors, together with a discussion by our external auditors of the comfort they have with the estimate.

This is what we do every quarter. In this quarter that we just reported, our look back analysis as usual is our starting place. In addition we did the other things I talked about in particular this quarter in order to reflect growth in uninsured patient receivables and potential further deterioration of the collectibility of those we left in place in our allowance for doubtful accounts, an amount that is beyond what our (indiscernible) experience would require.

We're confident of our estimate and results for this quarter. Examples of items that give us additional comfort beyond any analysis we performed, one is that our increase in emergency room visits from self-paid patients was 6 percent for the quarter and our increase in inpatient admissions from self-paid patients was 4 percent for the quarter, roughly consistent with our overall increase in admissions. Now, secondly, our increase in self-paid receivables was matched by an equal increase in allowance for doubtful accounts.

It could well be that some of the operating initiatives we've taken this year, really, even since last year has started making some difference in holding the line. I think it's too early to know that but that could be happening. For example, we continue working to reinforce what we believe is an already robust process in place at the local hospitals for patient registration, billing, and collection.

But the stabilization we've experienced this quarter does not preclude the possibility that we might see deterioration in the future periods, it's just too early to call the end of it. One quarter does not a trend make, we are just not ready to declare "victory, mission accomplished" just yet.

One of the reasons for our caution on this is that the cause is particular -- the precise effect of those causes remain somewhat unclear. We believe that macro economic factors have been the primary cause of the increase in bad debt expense over the past year but we've not been able to prove that quantifiably. We've not seen anyone else be able to prove it quantifiably. We've spent a lot of time for example trying to identify one more quantifiable predictors of bad debt expense. For example for every ex percent change in payroll data, perhaps that results in wide percent change and bad debt expense.

But we don't see any meaningful regression patterns in our own experience in that matter nor have we seen fulfilling data from other analysts or economists used as a predictor.

So we say simply that we do believe that macroeconomic factors such as increased uninsured and job market are largely to blame. That it appears deterioration may stabilize somewhat in the last few months and we see no reason for it to get worse. In the meantime we hope that it remains stable and we have no reason to believe otherwise at this point.

On a related point, we do continue to work on a structured accruals companywide share to share policy. We hope to begin implementing it later this year, we still estimate it would result in a significant impact to cash flow earnings or EPS but would be reflected in our income statement form of marginally less revenue offset by lower bad debt expenses as a percent of our revenue and we will keep you informed obviously as we begin to implement this in future periods.

Our effective tax rate in this period was somewhat lower. Our effective tax rate was lower because it reflected a somewhat lower marginal tax rate. We now have a blended marginal tax rate of a little over 37 1/2 percent. That marginal blended rate should hold for at least the next several periods in the foreseeable future. I'll point out that the effective tax rate -- that is, the tax rate that you see in our income statement -- is slightly higher than that north of 37.5 percent in each period simply due to the fact that taxable pretax income for us is about 10 million more per year than our reported pretax income.

We reiterated our earnings guidance for this year of $2.28 to $2.36 and we were pleased with this first quarter and we realized we exceeded Wall Street expectations for the quarter and certainly there's potential we may move this guidance upwards in the future. But for now we are leaving it where it is to reflect among other things possible increase in bad debt expense, possible volumes, possibly volumes being a little less robust than they were in this quarter and possibly some impact from developing projects that we expect to open later this year.

Finally, I want to point out that we also announced last night that we've launched a tender offer and consensus solicitation for our $600 million of outstanding 83 quarters percent senior notes, the execution of which is going to be subject to refinancing through issuance of new bonds, either new senior notes and or subordinated senior notes on terms we deem attractive.

This concludes my opening comments and I'll turn it over now to Mike Parsons, our Chief Operating Officer.

I will just take you through the income statement relatively quickly, starting with the revenue line. Burke mentioned that our patient revenues were up 11.9 percent. That breaks down from the volume 7.1 percent adjusted admission and rates 4 1/2 percent revenue per adjusted admissions. Breaking down the volume starting with inpatients, admissions up 5.9 percent. Inpatient surgeries were up 6.9 percent so really strong indicators there and I think the interesting thing in looking at that is there was really no one area, was pretty broad-based increase in various markets so wasn't just one market phenomenon. It was a pretty broad base.

On the outpatient side, really, the highlight of the strong outpatient surgeries, 8.3 percent. And when you look at our outpatient visits, outpatient visits were only 3.1 percent. So that high surgery to outpatient visit ratio was one of the reasons why our adjusted admissions were 1 1/2 or so higher than our regular admissions due to the outpatient intensity that showed up there.

On the rate front really nothing new to report there. Boringly, I will give you the same response that we've been giving you as managed care is still in there, that 5 and 7 percent increase range that 4 1/2 percent is pretty much what we expected for this first quarter on the blend between managed care, Medicaid, and all others.

So on track with what we expect on our rate front. Salary, wage and benefits -- another improvement area for the quarter. We dropped year-over-year from 41.2 percent revenue to net revenue to 40.6 percent. That breaks down salaries and wages drop from 33.2 percent last year's quarter to 33 percent and our benefit cost dropped from 8 percent of net revenue down to 7.6 percent.

A couple of updates on things we've been tracking for you. Contract labor once again decreased as a percent of salaries, wages, and benefits. 3.7 percent for the quarter last year and came in at around 3.1 percent for this quarter. That's about where we expect that to stabilize a little bit. There's always going to be some contract labor usage for shortages here and there and taking care of particular spikes in volume.

So we expect to see that contract labor somewhere in the 2 1/2, 3 1/2 percent range kind of a go forward basis.

Productivity, when you take into account the new acquisitions that we brought on board, actually decreased a little bit by about 2 percent because some of these new acquisitions at this point are a little higher than our same-store productivity levels. But when you exclude the new acquisitions our productivity improved a little over 1 percent. And as you can tell from our previous comments, our benefit cost is stabilized over what we saw 2 years ago so that was a good trend for us for the quarter.

Supply cost was a big increase year-over-year, not as big of an increase quarter over quarter but year-over-year was really two things going on there. The first, the biggest thing -- the new acquisitions, the set of new hospitals we brought on in the fourth quarter last year do carry with them a higher supply cost and percent of net revenues. In fact as a group they're running at this point a little over 20 percent. So that did in fact skew the numbers up a little bit. We expect that to come down as we start converging over to our contracts but that was a big year-over-year change. And then the second factor impact in supply cost this quarter was higher surgical caseload, both inpatient and outpatient.

On the all other fronts decreased year-over-year from 18.1 percent to 17.8 percent, really just a couple of things there. First, it was good to see our malpractice and insurance cost stabilize while that didn't go down as a percentage of net it at least stayed the same. So we are seeing that coming in line with normal increases and the other -- the rest of the increases really just from the economy and all other categories being higher end fixed costs, detail in those kind of things vs. our volume and net revenue growth. So that pretty much takes us through except the bad debts which Burke did the heavy lifting on that, so with that I'll turn it over to Denny.

Just a couple of brief things this morning and then we'll go to questions. One, Burke's reiterated our confirmation of guidance for the year. Just a couple of things on that. We feel pretty good about the guidance that we've given. One of the things that kind of mitigates I guess more robust feeling about going -- wandering too far off that number is that we have quite a few inventory (ph) surgery centers that will come online -- I think six -- during the next several months through the remainder of the year and in almost every case those are cannibalized to some extent some of our existing business but it's really through the working relationships with physicians in markets and in many of our markets they have chosen to work with us in the development and now the operation of those centers could be a lot worse, could have lost all that business because I think as many of you know that's a very viable threat nationally to community-based hospitals is losing that very significant piece of the business which is outpatient surgery.

So we feel blessed about it on the one hand but on the other hand we recognize too that there is some cannibalization that will occur. Also, too, there's still a number of states that Medicaid funding is a significant issue and legislative groups around the rear (ph) states are meeting at this time and we're monitoring that fairly closely and anticipate that there will be some funding pressures on Medicaid and in certain states that we work in. Let me just give you some flavor for that and for those reasons that coming off this quarter and some of the trends that we're seeing and I wanted to tell you that as Burke said we might feel pressured to push up our earnings guidance but because of some of these things we know are inevitable i.e., the AFC, we are cautious in trying to -- in pushing that number further than where the guidance that we've given.

On the development front, we are feeling real good about where we are on the development front. Dan Mowen and his team are doing a great job for us. We have almost weekly been adding discussions with many nonprofit systems and facilities nationally. Talking about ways to, that we could work with many of these organizations in the development or expansion of services in a particular market. And that has grown dramatically over the last four to six weeks. We had a number of inquiries and as we have come further and we've reached some, maybe some decisions about how we develop those into real projects, real programs we will be public with those, but our objective is to stay on that pace kind of three to five projects a year. We've indicated and still believe that the majority of those will be in some relationship with nonprofit system. We'll either strategically are doing something together or there's a capital need by the nonprofit system and we're helping them reach their strategic objectives by being a good capital partner with them on selected projects.

At the same time, we're going to continue to rationalize our portfolio. You saw a lot of movement in the first quarter in that regard to sales of some facilities. The decision not to renew some leases in certain circumstances, and I think you're going to continue to say that. Our thought is that over the next year or two we will continue to add facilities, we will continue to subtract facilities, based upon their strategic fit. And quite frankly, while economics is a big part of that driver, a bigger part of it is relationships with the medical community. Being able to be in a community where we see eye to eye with the physicians about how we can work together to meet the healthcare needs of that community. And at the same time ensure that the long-term success of both the physicians and the hospitals working together make this a very stable environment for us to work in. So you're going to see us continue to do that.

There's more to come this year in that regard. We are looking out a couple of further divestitures and, at the same time, we're seeing a significant increase in nonprofit interest in working with us on selected projects around the country.

So we feel real good about both the short-term and long-term future of our abilities to grow the Company.

Would say in closing that we've got several projects that -- I talked about the ASC, we've got the only project that will come online looks like this year will be the Mesquite hospital out in Mesquite, Nevada, and I was out there last week and had a chance to see the hospital. We're looking at a June, late June dedication of the hospital and probably seeing first patients there sometime in the early third quarter. So that's probably the only one that will come online this year. We have a new hospital in Cora Valley out in Tucson and also the Denton facility that we're doing in partnership with Texas Health Resources, a large nonprofit system here in the Dallas-Fort Worth area. Both those hospitals should finish construction by the end of the year. And we should be looking at taking patients sometime early first quarter of next year.

But those will come online during probably the heavy time of the season and both those projects are just really outstanding, we saw the Ore (ph) Valley facility last week as well and it's really coming along, it'll be a very nice hospital. It looks like we have cleared the way on property and working with the communities of Palmer and Lucilla (ph) , Alaska, we're making great progress there in being able to break ground on the new hospital up in Alaska and expect that will happen sometime late this quarter. So we will get under construction there. We're real excited about that project. That facility is doing very well and the abilities to get that construction started is going to be significant for some of our growth out in 2006.

We also continue to work on trying to identify sites for the replacement of the hospital that we joint ventured with a nonprofit partner in Eugene, Oregon. That has been a much more difficult process as we try to find out land that's not only appropriate to us from what we think are competitive issues, but also working with the communities there. The city, to make sure that we select the right site and that we have the best interest of the city in terms of access for people to get good health care. And so we're working on that. That's been a lot more difficult than what we originally anticipated but that we hope that during this quarter or early third quarter that we can get the land identified week and made on getting back replacement hospital under construction. So we got a lot of things going on that's exciting. As I say, Dan and his team are doing a good job. We are proud of Mike and the operation team, we had a good quarter. We're pleased with it and with that going to stop and see if we can queue up questions.

(OPERATOR INSTRUCTIONS) A. J. Rice, Merrill Lynch.

Just quickly maybe get Burke or whoever to expand a little bit on the cash flow from operations trend. I know you were flat year-to-year but there's some comments about the build up in receivables and incentive comp payments and retirement payments. I guess those last two, I would think they would be there every year. Was there something unusual about this year's? And maybe could you just comment on the debt? What you're doing with the debt and what the opportunity with that is?

On the first question I'm going to answer it in part and then turn it over to Bill Huston to answer the rest of it. Cash flow from operations reported 56 million or 69 million if you exclude cash interest and cash tax of 13 million. There were three items that we identified in the release. Annual retirement planned contribution of 23 million for expenses accrued in '03; annual incentive compensation of 21 million for expenses accrued in '03; and investment working capital of 23 million related to the four facilities that we purchased from Tenet in Arkansas last year, for which we elected not to acquire the sellers' account receivables. So we've had to build our own accounts receivable. All three of those were expected. What I will tell you is the first two of those do occur each year and they roughly match what the expenses are in each year. So that that cash outflow for the retirement plan and incentive compensation this is companywide compensation through all the facilities at all levels of the Company. It relates to last year's expenses, it typically is a similar number year-to-year and the retirement plan contribution same thing. The Arkansas facility piece unusual, but very much expected that -- those facilities had about $35 million of working capital on them that Tenet retained when we bought the facility so reasonable assumption is that we might ultimately invest a similar amount in working capital ourselves.

There's a fourth element as well that relates to some additional investment working capital. I'll let Bill Huston address that.

Yes A. J., a couple of things, really. One $3 or $4 million (indiscernible) cost report adjustments we made where we got some receivables due from Medicare we know we'll get paid on that. But the majority of that is we looked at our census increase and the majority actually happened in February and March. And so we look at our actual revenue per day that we incurred, the majority of it was in those last 60 days. And if you look basically at the payor, the biggest increases were in the nonsell (indiscernible) so the biggest increase was in the insurance. So we feel very comfortable that it's just the investment of working capital due to the center's increase we're going to collect it in the second quarter and I think you'll see that what we have is a result in the second quarter.

A. J. your question about the tender consent and the fact that that is contingent on a refinancing. I probably have to refrain from speaking about that too much. That's the constraint put on the by the lawyers, despite you say, we will do this assuming we're able to refinance on terms including interest rates and other terms that we deem in the best interest of the Company.

I guess I was just thinking of it -- is the concept to term out debt further or is the concept that there might be some interest saving down the road you could pick up?

One of the reasons that this will be appealing and there are several that we would talk about later if this goes through and we actually do launch a transaction, one of the reasons would certainly be that a lower cost of capital going forward.

Lori Price with J.P. Morgan.

Okay. Can you tell us how responsibility and accountability is divided between corporate and the local facilities in terms of collecting on self pay AR and getting uninsured folks qualified for Medicaid and so forth. What I'm getting at is are CEOs and CFOs at the facility level (indiscernible) compensation structure to improve collections indeed you expect they're able to on the dollars billed? And then also can you tell us what you're collecting on uninsured patients in copayments and deductibles as a percentage of each dollar billed today and how that's changed over the last quarter and last year?

Yes that is something that is up to the local level. We do not have as opposed to some in terms of having business offices we've got a couple that are really more geographically for few facilities but other than that it is something that's done at the local level. All eligibility analysis and that is done at the local level and is part of the incentive plan with each one of those facilities. So they are, when we do give them tools at the facility level and allow them to where we have contracts we consolidate and those kinds of things but it's all done at the local level.

In terms of our collections that we do right now we get on average about 11 percent on just pure self pay, we get somewhere in the 40 percent 45 percent range on selfpay for insurance. Overall we get about somewhere in the 25 percent range of overall collections on total self pay.

Has that changed meaningfully in the last quarter or two?

No I can't -- that's one of those things where you are always collecting so as it times out and as we look at it I mean, I (indiscernible) same ranges.

Lori one of the things that we've done and we just philosophically -- this team, we've never really been big supporters or believers of central business office just from our experiences. And the others may have had different experiences. But our experiences have never been -- that has not been very effective. So we've tried to push more of the -- not only the process but the accountability for that process to the local facilities.

Jim Lane with Argus Partners.

I just had a question on your outpatient strategy. Was wondering if you could help us characterize it? Is it more expensive (ph) because you're seeing other entities come into the market and try to partner with those physicians and, therefore, you're stopping that before it starts? Or is it more offensive because you're seeing so much growth in outpatient surgery opportunities? Overall?

It depends, Jim. In the case of the six that I mention those are predominantly defensive. We had pressure either from selected physicians that were organizing or outside organizations that was occurring and as I said the positive thing about it was, the physicians came to us and said "hey, listen, we've got this opportunity -- we would rather do with you than these guys but we want to do something. And so in that sense it's been defensive but there are other cases where it has been offensive. I mean we do have some markets where we have some significant demographic population changes where the population is either growing dramatically or shifts in the population and we have and will continue to take advantage of putting facilities or services into those markets where it's deemed appropriate. Where we're finding ourselves is a lot of the nonprofit relationships that are involving, working with many of these nonprofit organizations are really built around inpatient and outpatient service expansion because of shifts and shifts in populations.

Have you been negatively impacted by any of those not for profit, for profit relationships out there? And would you anticipate your -- and if so would you anticipate your initiatives to take some of that back?

Well I think we're probably the only company out there, only organization that is really working with a number... we're working with a number of those nonprofit systems. I don't know that we've seen a situation where we've been adversely affected or going to be adversely affected by some partnership. Denny, do you have a comment on that?

The only people we see out there doing anything is in Vanguard (inaudible) San Antonio and Chicago.

We haven't come across any strategic or competitive threats that, because of that and in most cases it's been that nonprofit's coming to us and talking about "would you guys be interested in looking at this with us?" and in many of those cases we're doing that.

Gary Lieberman Morgan Stanley.

Could you guys talk a little bit about your trend on self payment in the quarter? One of the things that HGA talked about was seeing a spike in selfpaid patients in March and then also if you have any data on the amount of charity care that you booked this quarter and even year ago quarter would be very helpful?

Yes Gary let me answer that as I mentioned in my opening comments we had about a 4 percent increase in the quarter in selfpaid admissions and about a 6 percent increase in the quarter end self pay mercy room visits. There was a little bit of a spike upward to those numbers in March but again consistent with what you heard Bill Huston saying earlier which is we got a little bit of a spike upwards in March admissions across the board. That was our best month of the three months. So that's one of those factors that ancillary factors that gave us some additional comfort to our best month of bad debt expense and allowance for debt accounts. We have not disclosed before our actual charity care numbers. What I would tell you do is is comparable to what you would see other companies sometimes you have to be careful with getting an apple to apple comparison because of the way people treat growth revenues and net revenues and how high their growth charges are relative to you know, other organizations grow charges but I think the overall net combination of charity care and bad debt for us is probably comparable to what you would see the others have in the industry. We may give more details on that at some future date.

Darren Lehrich with Piper Jaffray.

Just want to get your comments on the supply cost trend and specifically with the acquisitions, if you could just give us maybe a time frame for when you think you'll have that all converted to your GPO and maybe just give us a sense for order of magnitude in terms of the savings that you might see as you do that? And then a housekeeping item, if I could. There's been a lot of moving pieces to the fixed assets. Could you give us a good D&A run rate, if you could? Thanks.

Okay on the supply -- this is Bill Huston we as you probably know probably on average got about 60 to 70 days worth of inventory. So it typically takes us anywhere from to three months to kind of run out kind of their current contracts they have. So we're starting to now move most of these and so as we get into the second quarter we should start seeing some improvement there. However I will say that certain of these facilities also are high-intensity facilities so it's not like we're going to be able to take them from the current 20 percent and move them at or below the Triad run rate because they differ from a surgery volume and some of those kinds of things, certain cases they tend to be at a little higher intensity level but I do think we're going to see improvement. And we'll see a drop below current level. I think in terms of what the final impact will be but I think we will see some savings as we get into the second and third quarter.

And Dan, this is Burke, on depreciation amortization expense, you should expect to see it gradually ramp up over the course of this year as we continue to invest in these projects. One of the things we talked about before, we are often not able to actually dictate the timing of when these things go into service. If anything they have tended to slip just due to regulatory hurdles we have to get through slip relative --we would like to have them open, then you can generally expect them to presently ramp up over the year. We're talking about spending somewhere in the upper $400 million range on capital this year, spread out over the year. As that gets into place and some of the things roll off, you know, increasing could be a million or so a quarter but the point is, it really does depend on when these things hit. What we've said before is that one of the reasons we've given in the last couple of years earnings guidance and not so much EBITDA guidance is that the EBITDA and appreciation tend to move somewhat with each other as these projects kick in or not, to the extent some of these things get delayed as they did last year we might have a little less EBITDA but a little less depreciation. If some of them get done faster or -- then we currently anticipate and that's happened a couple of times in the past then we might see more EBITDA but more depreciation and we'll sort of hold your hand through that as we go through the year.

Adam Feinstein, Lehman Brothers.

Just a quick question here. The equity and earnings line item was much higher, relative to the fourth quarter and I remember back in the fourth quarter you guys were saying that with the new Universal Hospital in Vegas that maybe that number would be a little bit lower than where it had been so just wanted to get your sense whether something's specifically causing this to go up here and what you think is a good run rate for the rest of the year? Thank you.

It was primarily in the Vegas market. As you know, their year end is 12/31 and so at 12/31 we took into account any and all adjustments they had for the year and in the first quarter it did improve and so the Vegas market improved. As far as a run rate for the year, we have no reason to think that the run rate in Vegas would not continue.

That debt continues to be the biggest contributor to that line item. The other things that are significant items that are in there are the interest that we have in HCA's Macon market and then a 50-50 joint venture that we have in a hospital that we've run in South Arkansas.

Robin Russell with Amarand (ph) Advisors.

I wonder if you could just sort of give us a sense in terms of your capital structure. What your desire senior vs. sub debt would be or are you happy with the amount of bank debt that you have outstanding there, is that something that you look to either increase or decrease?

Robin, good question, unfortunately, we're going to have to sort of hold on that for now just given the fact that we just launched this tender and consent. I got shackles on my hands unfortunately. It's a good question. We will provide some more clarity on that going forward. Obviously what we're working toward is optimizing our capital structure. Things we have said in the past that I can address is that we would like gradually to continue to reduce our overall leverage. But the exact capital structure of the layers of debt within that I probably need to hold off on for now.

When do you think you're going to come to market with the new deal?

I -- yes I really can't (MULTIPLE SPEAKERS) address that one either. I wish I could. (MULTIPLE SPEAKERS) being held to a strict standard I'm afraid.

Robert Haynes with Advest.

Question on the outpatient surgery situation. Obviously the numbers were up pretty nicely in the quarter. Have you got any meaningful attrition of surgery centers where doctors have left and joined other surgery centers and also can you comment on your outpatient (inaudible)?

Yes, Rob, we have seen some deterioration in the last quarter the deterioration in our surgery centers in the Phoenix market. That's a very highly competitive environment. Nothing really significant outside of that in terms of losing it to other surgery centers. As Denny said, most of that we been able to work with our groups and nothing too much on that. Our case mix actually was relatively flat for the quarter. It's kind of, I guess, the average is two extremes -- I think we had good surgery, obviously, but on the other hand OB was up pretty good and medical admissions I think we probably still saw some of the flu in that. So, really, just a little bit surprising. That case mix was about flat year-over-year.

We feel fortunate so far and we feel it's because of our strategy that we have not generally seen ourselves actually lose volume to inventory surgical centers. We simply have shared with the physicians in opening those and so, and those are still consolidated for financial reporting. And they still end up the volumes flow through our numbers so we feel good about the fact that we've retained the business but have not seen what some of the other hospitals around the country have saying which is an actual out migration of business completely away from the hospital.

David Dempsey with Avondale Partners.

Arkansas. Can you give us a little flavor for how the new Tenet hospitals are ramping up in your expectations for them? And then I guess also, Denny, is that one of the states that you are concerned about in terms of Medicaid? You know, possible budget impact on the business there?

Yes, on Medicaid it is and that's something that we're watching carefully. I'll tell you right now we feel pretty good about the Tenet facilities. Feel like during this first two or three months of working with these communities, we're making some progress. We -- I think I mentioned I think one of the things that we've been able to do, we've been able to stabilize was kind of a tough physician relationship issue. In Russellville. And that's really, that's calmed down and I think we are on the same page with the doctors there now that I think Tenet was having a very difficult time with and so that's been real positive. The other facilities, and including Russellville, we're working and trying to determine now strategically how we go forward from here. And we've talked a lot about it just in the last couple of days. We got several projects going on. One thing that we look at is we go into a market is first and foremost is try to get the physicians engaged and to control the environment that they work in and getting them in the decision making loop and reconstituting the board trustees to make sure that we have at least 50 percent of the board members or physicians. We start the physician leadership groups and start getting a dialogue going with the doctors and then so we have board trustees, we have the physician leadership groups. And we have kind of a capital assessment of where we've been needing to put money and resources to get the facility on track to meeting the needs of the community, with a strong input from community leaders and physicians and so we're right in the middle of that now. I would tell you it's going well. We expect this to have been a really good transaction for us and from a purely financial sense. But I would tell you on the relationship side the relationship pieces coming together pretty much as it has in most of the markets we've entered and we feel real good about it.

Let me just mention here, we had talked about having this call just last an hour. We still do have several callers with questions, apparently, so we're going to go ahead and keep going for a while longer. We still think we can still all make our flights to our leadership conference. So we will try to get all the questions in of those who were holding at this point.

Charlie Lynch, CIBC World Market.

Just a quick question on the supply expense line. I am wondering, you did mention that you saw some upward pressure on acquisitions and on just overall surgical volumes but are you seeing any kind of pricing trends we've heard elsewhere about some pricing inflation on orthopedic implants? And just the combination of those and drug eluding stents. Are you seeing anything there that's in that supply line change?

Yeah, we're seeing some of that, Charlie. It's not the -- that was a material piece of the quarter but, yes, some of the drug eluding stents and orthopedic -- orthopedics we haven't seen it as acutely as some of our cardiology increases in the quarter but yes we have seen it, but it's not -- that wasn't the material piece of the quarter but it is there.

Kemp Dolliver with S. G. Cowan Securities.

Quickly. How's malpractice insurance expense behaving? Are you making any changes in assumptions, given some of the malpractice reforms that have been passed in various states?

We've seen a positive trend, downward trend in our total malpractice expense. And we feel that the meetings that we've had especially with the underwriters associated with the general and professional liability that we had -- bound coverage January 1 was extremely positive. We still have more risks that we take from a self-insured point of view and we did increase that amount this year. And so, as a result, we've seen a nice decrease in the rate of increase so to speak in our insurance year-over-year and we feel good about it. And we also hope that this will carry over to some of the other insurance product lines. As far as specific states we monitor what's happening on a malpractice state-by-state and in some states there has been some tort reform, like in Texas that was passed last year, and in other states we are working within the communities. And with some of the physicians as different states pass different legislations.

Kemp, I will tell you, this is Mike Parsons, it's still while it's stabilizing for the Company and the hospitals, there are still pockets of real problems out there for our physicians to get malpractice particularly in OB and emergency room. And this quarter we did -- I didn't mention that in my beginning remarks but year-over-year we had 127 new physicians that we brought on board. And it was predominantly because of this issue. Some of them practicing primary-care physicians; some of them hospital-based physicians such as anesthesia emergency room so we are still fighting the malpractice front but it's more from working with our physicians so that they can get coverage and stay in the market and that's bottom line. Some of these are just to keep access in the community, we're having to step up and to do some of these things so they don't leave the area.

One thing I'll point out, this is Burke, is that we analyze our self insurance portion of this through actuarial analysis that we perform periodically to ensure that we're comfortable with this, so it's experience-based looking at national trends and also all of our trends, all of the different things you'd expect an actuarial study to do.

Gary Taylor with Banc of America Securities.

Couple of questions. One for Denny, one for Burke. Denny, a year ago the industry was really struggling with patient volumes and to your credit you are very early in identifying that and I guess really believing at that time it was a rebound was predicated on a turn in the job market, yet, you've seen over the last couple of quarters the best patient volumes in the sector, nearly in advance of sustained economic change. So is there something you can clearly attribute that to or is it fair to say you yourself are surprised at the strengthening of your patient volume?

Well Gary, I will tell you. I think the credit goes to really these physician leadership group initiatives that we have. It's basically the markets that we are in, the vast number of the markets, the majority of the markets are we're usually head up against a strong competitor. Most physicians have privileges at both hospitals you know count and say 200,000 which is what our typical market looks like both hospitals or full-service. Doctors have the abilities to go to either facility, insurance is not an issue, because the carriers covers at both hospitals so it's really about creating that environment. And that environment is created by the physicians. And I think that's -- I think we've had some pretty good progress.

We've added another physician in our medical affairs department. And we've got three full-time doctors now working with those physician leadership groups but that initiative is being driven by the doctors in the local markets. And I said I think since the beginning I think that that's unique. A lot of people can talk about being physician friendly and a lot of people can add doctors and employ them and say they're going to look out for quality and they're going to oversee what's going on. In my experience it's always been that when the physicians, local practicing doctors are engaged and truly have say so in what goes on and they feel like they are in control of it you're going to get more business. And so I think that's -- it's been unique for us and I think that's the big driver of it.

And then Burke on the medical malpractice I just want to make sure I understand. Historically you've had pretty low deductibles that have been almost a full premium payor to HCI (ph) and so what exactly happened on January 1? Did that change?

What Steve Love was talking about is that we have in fact I'll give you sort of a history of us over the five years. We have gradually become ever increasingly more self-insured. We started out in '99 for example being almost entirely premium pay-oriented in our insurance and that was the right thing to do at that time. First of all, the market was available for that. Now it's really not but, secondly, we were so new and we wanted to make sure we were appropriately covering our risks. We are significantly more self-insured now. We have, each year we do buy a piece of premium paid. We're sort of exposed for self-assurance up to it's 1 level and then we have a premium paid portion up to one level and then a little bit of self-insurance and then several layers of insurance with that. A piece of that we have purchased at our election each year from HCI which is HCA's insurance premiums. They have given us competitive bids each of these years. There were a couple of years in which it looked as though we wouldn't do that but they have continued to be very competitive and have provided great service support to that layer of our coverage. So they are still, they still have a strong rating. So we're comfortable with that. The other insurers from whom we buy premiums are, they are all A rated type folks that -- that's one of the criteria we use. We always big with A rated folks and it's a January 1 renewal. So each year when we -- if we make a shift toward more self-insured and away from premium pay that, typically, is going to occur on January 1st of each year for the medical malpractice. Some of our other insurance lines roll at other times during the year but the big one obviously is the medical malpractice.

Sebastian, do we have anybody else?

Jason Gurda with Bear Stearns.

Two quick questions. Burke, in your opening comments you mentioned that you expected volumes to moderate throughout the year from the first quarter. I guess sort of building on what Gary asked, was there anything in particular that caused volumes to spike in the first quarter?

You know Denny (indiscernible) it's just not that we're expecting to get less, we actually exceeded a little bit of our own expectations in this first quarter, we were delighted with that and we just point out that we don't know for sure if we will keep humming along at that robust a level.

I think that's right, if we settled into that kind of 2 to 3 percent of what we kind of anticipated and that's really the way we built a lot of it into our projections. I think Burke hit it on the head. We just probably did better in the fourth and first quarter than we'd expected from ourselves and we just don't want to be overzealous and mislead people about what the volumes would be. We're happy if they are but, realistically, I think if we concentrate for the year to average out somewhere in that 2 to 3 percent we probably would be where we expect to end up. I hope we're wrong.

The other question I had was do you have approximate annual revenue from all of your facilities that are included in discontinued ops?

We have not, we certainly can -- why don't, Laura Baldwin can get back with you on that. The guidance, we gave some guidance early in the year when we initially gave our $2.28 to $2.36 cents earning guidance we talked about the fact that's from continuing operations and that the revenues from continuing operations would be in the $4.3 to $4.5 billion range. That's still the case. So that's the amount from continuing. We'll have to get back with you on the revenues. I will tell you if the numbers look a little odd, revenues per hospital look a little odd because the revenues that we got from the two big hospitals and three service centers in Kansas City were just $18 million a year. All we got was a lease payment on those but we can get back with you on that.

And say discontinuing ops won't have that kind of quarter again (MULTIPLE SPEAKERS) quarter.

Andrew Bhak with Goldman Sachs.

Denny if I could tap into your tenure in the industry. If I can just get a perspective or sort of a gut call on the self pay and bad debt issue and wondered if you can go back in time sort of compare and contrast situations with past economic downturns? And what it feels like from a hospital standpoint either on an underlying basis or whether this is more of a problem than it has been in the past and ultimately what broke the last cycle? I think I know the answer but it'd just be great to get your perspective.

I don't know if I, first of all, not seen anything like this so we've not seen this kind of of spike that I can recall in the last 28 years even with downturns and back in the late '80s and all, mid-80s to late '80s we saw a lot of business coalition pressures where businesses and especially metropolitan markets were getting together and trying to buy together and put pressure in terms of pricing. And we saw pressure on the pricing side. We have seen pricing pressures on the managed care front at various times over the years but I don't know that I've had any experience where we've seen the out-of-pocket or the individual's ability to pay whether for services in total or for co-insurance and the deductible piece to be as dramatic as it's been over the last 18 months.

So I think this is kind of a new phenomenon. I think part of it is driven by -- for years and years we saw the especially in the private sector we saw employers willing to take in a fairly competitive market willing to take more of the expense. As the markets become more global and they're competing with industries and businesses around the world and pricing their products, they can't add any additional costs. We've seen more go to the individual and their family. And so I think for one of the first times in at least in my tenure it's been -- we've seen the pressure's being pushed to the individual, away from the employer and the company not that they don't still face pressures but they are willing to forego some of the competitive issues and push more back to the individual. So I think it's a new phenomenon for us and we're trying to understand it and, obviously, there's a lot of discussion out there. We've had a number of meetings with various groups around the country, advocacy groups. And we're working -- a big part for us now is driving others out there doing and some are ahead of us in terms of charitable care are and how we treat it and dealing with this uninsured and this growing underinsured issue is relatively new, so I don't know that we have a lot to learn from history. This is kind of we're making history now in terms of how we deal with this but we have been having a hard time quantifying it, being able to really tie it to some indicators and we're still not there.

Frank Morgan with Jefferies & Co..

I had a question. I think it was mentioned at one point. 127 new doctors came on board. Did that mean nearly recruited or is that people you're bringing on staff to your own hospitals in terms of being employed and if it is, what is kind of... give us an update on the total number of employee positions that you have and also do have a program in place to take them off of out of employment once this medical liability issue improves?

Answer to your question. On the first part -- this is Mike Parsons -- that number that I used is the employee physicians that we brought on board. And for the most part that is a temporary phenomenon we hope until the medical malpractice situation gets more stable for them to be able to move back into the private practice that's really what they want to do. A lot of this is a stopgap measure. In terms of our overall employee depositions now I know Laura -- you have that number Lara?

Yes we've got 560 employee positions over 130 (indiscernible)

A majority of those came with the form acquisitions where we had a couple of markets where they were really heavy into that. But we have added over the last couple of years and that is a defensive strategy for us. That's not something that we go out and back to the kind of the same AFC (ph) discussion. That's not a proactive strategy for us. Our main strategy of growing volumes is to recruit physicians into independent practice but this is really a strategy of necessity based on some of our markets particularly in certain states. Mississippi is very tough on this, Ohio's a tough market. And so a couple of isolated... Texas got a lot of relief through the tort reform. We don't feel as much pressure there as we did last year.

Ken Weakly with UBS.

Burke, you mentioned some of the regression analysis you've done in terms of looking at your hindsight analysis, did you bring any of the output with you so maybe you could share some observations on which variables appear to be more statistically relative or anything like that?

Ken, we just haven't found anything that it matches very well. We've seen external reports and seen evidence of ourselves of some soft relationship between payroll data and volumes. And that seems consistent with our experience, it's a pretty loose fuzzy connection but there is something there. I think the two different extremes of those studies that I've seen anyway, one suggested that there was about a two- or three-quarter lag. One suggested there was about a three-year lag. Our experience on the volumes would suggest something in between that. We really have just not found it yet, what the right macroeconomic predictors would be for bad debt expense. I've joked a couple of times with our own -- we have an economist on our board -- I've joked that I would nominate him for Nobel prize in economics if he could create that connection in some reliable way. Because we'd love to know it. We just have not done it and it would be great to see if you could do it or someone out there. We just have not been able to find anything.

Just to be clear. Have you looked at individual city by city unemployment and payroll data and tried to co-vary that with your experience in hospitals and still not found the relationship or have you just looked at the macroenvironment in terms of the national payroll data and not on the relationship? I just want to understand what sort of studies you've actually done.

We have not done rigorous look at every market. What we have seen is anecdotally in some of our markets. We had a market last year that had several layoffs and had -- you know had a hit to volume because of that. They had a bad debt increase. It's hard to separate out the causes of that and really directly relate it to the unemployment because that was a market in which most of those people kept their health insurance even though they were laid off. And so it's been difficult. I would welcome help from you or anyone on this. I've been saying that for about a year now, be an interesting thing to do but we have not -- we have looked at it by market and by facility, not out across all of them but on the ones we have we have seen a good consistent predictor.

(MULTIPLE SPEAKERS) company trying to track very carefully the changes to the payroll structure unemployment rate on a city by city basis for the Company or is that not part of the active operating strategy of the information flow of the Company?

We do look at those situations. I think what we're saying is that in certain cases where we've seen and in certain markets that the bad debt's may have (indiscernible) not significantly again for us it's for a statewide basis where we got a lot of hospitals in Texas and where we do have spend down problems where that was cut out by the state of Texas and eligibility issues and we've seen it, that the relations been somewhat gone (indiscernible) Medicaid pressures but that still doesn't always explain it so we can't find one central indicator that we can say 'it's true cause and effect'.

Probably some linear program equation that would actually get all this stuff, Ken, we just haven't nailed it down. I mean, Bill talked about a big one there, we know in Texas, one reason we seem to nail down is in Texas where we've suffered some pretty severe cuts in Medicaid really more restricted access to it and that has created an issue with us, not as extreme as we've seen with other providers. That's clearly a big factor here.

Not to beat a dead horse on this thing I think what we're looking at, too, and a lot of what Denny talked about in some of the shifting sands of what we're saying, it's not just the unemployment figures, it's the relationship between employee and employee with insurance and we're seeing all those factors right now. Some of our markets where the unemployment might be higher but the ones that are employed all have good insurance versus other markets where unemployment might be low but the uninsured is high. That's kind of some of that give and take between employer and employee going on as well.

We would welcome anybody's input into this and to the extent it would be appropriate even collaborative effort. We are always reluctant to give out buying name data on our individual markets just for competitive reasons local competitive reasons but some collaborative effort we be welcome.

Andy Rodinski with Jefferies & Company.

Good morning. Thanks for sticking around you. Have you looked at percentage of admissions that is classified or do not pay their appropriate contractual bills as opposed to just looking at the provision for doubtful account as a percentage of revenue?

Say that one more time. We're not sure we understood the question.

Do you have a percentage of admissions or adjusted admissions for patients that do not that do not pay their full bill? On -- whether it's contractual basis or whatever? (MULTIPLE SPEAKERS)

The numbers that we have are on a percentage of revenue update basis. You know where they are but what percentage of admissions, of actual patients, in order to get to that number is that 30 percent of patients that some of them obviously are paying some of their bill but they're not going to pay all of them or HMO will pay the bill however they are not going to pay the co-pay. Is that number changed at all?

Yes I don't think that is changed all that dramatically. I can understand, I think I understand your question. I am not sure we necessarily tracked it, we can get that for you but again having talked about it before, when you look at this we mainly talked about what our self pay, the pure self pay, pays us about 11 percent of what total charges are. And from a contractual standpoint wherever that patients copay deductible is we're getting about 45 percent of what their deductible.

(MULTIPLE SPEAKERS)

That's not a percentage of revenue as opposed to an absolute number of patients that are (MULTIPLE SPEAKERS)

I see what you're asking. We certainly have that information. I don't think we have it at our fingertips here on Alice, we'll have to get back and see what we can get you and Laura Baldwin will get back with you.

That will be helpful. On a year-over-year basis, the second thing, has there been any change in the HMO denial rates and what is the current HMO denial rate for you?

It's not ... I would call it a very significant number. I mean, again, I've not seen, when we've looked at we obviously get challenged a lot but we work through that but I've not seen any significant increases. It's not a material number. (MULTIPLE SPEAKERS)

This was a real area of focus for us in '99 and 2000 (indiscernible) you may recall. We actually took a number of pretty aggressive steps with the number of payors to correct that including a couple of big ones. We've not had any of those problems since then. We actually reined in our DSOs pretty considerably and dropped the denial rate significantly. This is not -- during those couple of years, this was an issue that frequently rose to kind of a top 10 in our executive discussions here. It hasn't been discussion point at that level for at least three years.

Is it fair to say that's below one percent?

I hate to guess. (MULTIPLE SPEAKERS) One thing to remember, too, we tend to be more -- our contracts tend to be more PPO than HMO, the markets we're in so as Bill said, we haven't noticed that being an issue in recent quarters.

Miles Highsmith (ph) with Wachovia Security.

You gave us the pre-tax gain of 84 on the Kansas City. Could you give us an after-tax number for all of your asset sales in the quarter?

I am going to refrain from doing that only because it's fairly complicated. We actually -- we had several acquisitions in several divestitures that all occurred in a fairly close period of time. And a lot of that, we were fortunate because of the timing to be able to net some of these and, potentially, treat some elements of some of these as like kind exchanges, which affects the overall tax rate. As the year goes on, we might be able to give you a little bit more visibility on that aspect of it as we kind of get through the course of this full cash here (ph).

Fair enough and I guess related to that I think I know the answer to that but going to give it a shot anyway. Can you give us EBITDA from discontinued ops?

We really can't right now and I'm trying to decide whether we probably would have to be a little careful with that because these are asset sales. We are under confidentiality agreements on all of these. The biggest EBITDA contributor, as you probably would imagine, is the one that I can disclose which is the Kansas City at 18 million because it was just a lease prompt payment. I believe, am I right? I think all three of the others under confidentiality agreements so we won't be able to give you those.

David Common with J.P. Morgan.

Good morning all, I am sorry I are earlier in the queue because I have umpteen questions here on building blocks but could you tell us the percent of admissions that are fully self pa? And I have a couple of others if I can tick them off? The percent of reported revenue that is self pay, a rough handle on your gross to net for net to gross charges relationship and, then, I believe you said that your charity policy is roughly in sync with other hospital companies. Just what do you assess that to be in terms of a writing off, say, of a quarter of your gross self play charges or half or just how are you framing that? Thank you.

I missed -- I got your first and last questions. Maybe somebody else got the other ones. Let me address the last one first on the charity (indiscernible) what we have is a charity care policy that is at each hospital's local level that has remained unchanged what we're talking and implementing is a companywide charity care policy. I did not mean to leave with the question earlier that our charity care policy is the same. What we were saying is the overall outcome of the combination of bad debt expense and charity, if you adjust different organizations or different hospitals, different competitors, gross charges ends up being roughly roundly the same.

On the first question what we talked about is that the -- our uninsured self pay revenue, as a percent of our net revenue, has tended to be in the 11-ish percent range, 11 to 12 percent range. We haven't broken out the volumes of that before. We might do that at some future time but that's one of the numbers that has gradually moved up. Although it seems again to have stabilized, largely, as we discussed earlier over the last quarter and a half and we're I'll just used the overused term cautiously optimistic at this point given that fact. And the middle questions, I missed.

One of them was gross net per (indiscernible) gross relationship charges.

We have not been giving that. We might at some future date but we have not been giving that out.

If I were to be using an estimate sort of three gross or three times net (indiscernible) do you think?

Let us think about whether and how to give that out at some future date.

Okay and not meaning to sound like I am challenging you on this but since HDA very directly gave us a collection rate declining on self pay from 7 down to 5 percent quite recently may I ask if there is some reason you can point to why your experience is still sort of 11 cents on the dollar? Just want to make sure there's not another shoe to drop. Thank you.

You know again, we have worked very hard on improving our upfront cash collection program. We saw another record month in the first quarter. Again, that's still a small part of the overall collections, but it's a mindset in terms of improving upfront fees in terms of continuing to upgrade the level of staff and their competency levels at the hospital level and a commitment level, I think the facilities are now realizing and seeing what the bad debt expense as we have been allocating these expenses more aggressively to them and they are starting to see that then I think also they put more committed as well. I mean, it's hard for me to obviously talk about (indiscernible) I don't know what they're doing but I will say here we've got a strong commitment from the executive management team all the way through the hospitals that this is a core culture that we have and we continue to see improvement there. But, again, one quarter a trend doesn't make so we have to continue to keep seeing how this plays out over the next three quarters.

As you put it to others here, all he can say is another shoe didn't drop this quarter. It could in the future. We don't see anything telling us that's going to happen but it clearly is some risk. And I think we probably better get one more.

Michael Song (ph) with Berkeley Capital.

Could you talk a little bit about March and spike that happened there? Any kind of drivers or type of illness or treatment that was a little more significant?

No, I think as Mike described it, we saw a lot of surgery, we saw a lot of cardiology at service levels, OB was also very strong. So I don't think there's any particular service level that stood out as being more of an increase than any other.

Probably also one of the positives for this quarter was we weren't overrun in the emergency room. That was a positive too. We like to see in the volumes the significant increase in volumes and those volumes not necessarily be driven by our emergency rooms. So that's probably as much a say so about the quarter as anything. Good volumes off of the admissions coming from physicians, not necessarily coming through the emergency room.

You say self paid admissions to emergency room was 6 percent increase. Can you give me overall emergency room?

(MULTIPLE SPEAKERS)

You got the overall?

It was lower than that, it was a low single digit number.

Let me just mention as we close here, this is Burke speaking. We -- Laura mentioned several of us are going to be flying out this morning to our annual leadership conference visits with all of our facility leaders, physician leaders, local trustees, leaders from around the country. We do this every year. That means for questions that you all may have today I actually am going to be traveling today, Laura Baldwin will be here so she can answer any questions you may have and I will be able to call back some calls later today once I land, but also particularly tomorrow so look forward to your calls. Laura can take some today and I can take possibly some toward the end of the day and tomorrow. We appreciate you guys, I know the commute in the East and early hours in the West this was probably a tough call for many of you to get on, we appreciate you doing it. We are pleased with the performance of the Company during the first quarter and I think we've got some exciting things going forward.

And the big thing is hopefully we are seeing some stabilization in the bad debt, that's probably one of the big stories of the quarter but as Burke (ph) said one quarter does not make a trend and it's something we will have to continue to monitor here over the next few months and -- but we hope we're getting our arms around it. Certainly think that we are reserved appropriately as Burke mentioned in his opening comments so feel free to (indiscernible). Appreciate you guys participating and look forward to catching up with you over the next several days. Thank you.

This does conclude today's conference call. At this time, you may disconnect.