美國醫院公司 (HCA) 2008 Q4 法說會逐字稿

Good day, everyone and welcome to the HCA fourth quarter 2008 earnings release conference call.

Today's call is being recorded.

And now, at this time for opening remarks and introductions, I'd like to turn our conference over to the Senior Vice President, Mr.

Vic Campbell.

Please go ahead, sir.

Amber, thank you.

Good morning to everyone on today's call and also to all of you listening on our Webcast.

On the call this morning, we have Richard Bracken our CEO; Milton Johnson, CFO; David Anderson, our Vice President of Finance.

They will be our presenters.

Also, with us Mark Kimbrough, our Investor Relations Officer; Jack Bovender, our Chairman and several other members of senior management are here today, as well.

I might say, Richard Bracken is an on outside line.

So, if you hear his voice sounds a little different, it's because he's on a different line but he is actively engaged on today's call.

Let me remind you, today's call will contain some forward-looking statements based on management's current expectations.

Numerous risk, uncertainties and other factors may cause actual results to differ materially from those expressed in any forward-looking statements.

Many of these factors are listed in our press release and our SEC filings.

Many of the factors that will determine the Company's future results are beyond the ability to control or predict.

In light of the significant uncertainties inherent in our forward-looking statements, you should not place undue reliance on these statements.

The Company undertakes no obligation to revise or update any forward-looking statements, whether whether as a result of new information or future events.

As a reminder, this call is being recorded and a replay of the conference call is available later today.

Now, I will turn the call over to Richard Bracken.

Thank you, Vic and good morning, everyone.

Before we get going, let me once again, and in this audience this morning, congratulate Jack on his retirement as CEO.

The very solid track record he leaves behind puts our organization in very good position to deal with a difficult economy in an uncertain future.

Now all of this -- on this end are looking forward to continuing to work with Jack in the Chairman role this year.

So this morning, of course, we'll spend the bulk of our time reviewing our fourth quarter performance but before I turn this over to Milton for specific comments on the quarter, let me share a few observations with you.

As an organization, generally, we performed somewhat better as the year progressed.

Our last two quarters, on many measures, were better than our first two.

It's a good to start into 2009 with some momentum.

Our volume growth throughout the year was consistent and generally stronger than recent annual trends.

Adjusted admissions for the year were up 1.9% and outpatient surgery volumes and emergency department visits posted solid gains.

We do believe that our significant capital investments, almost $5 billion over the last three years, and our market-by-market volume building strategies are paying some dividends.

As you'll hear in a minute from Milton, the quality of our revenues also improved somewhat over the course of the year.

Bad-debt levels actually declined in the fourth quarter, bringing the full year in at 12% of net revenue, only 30 basis points higher than 2007.

Additionally, our uninsured admissions growth slowed to 1.7% for 2008, down from the recent annual trends of approximately 9% to 10%.

Several key employee satisfaction ratio shows positive improvement in 2008.

Total employee turnover is down 13% and our employee engagement scores are at record highs.

Our cost structure now reflects a multi-year effort to conserve and to focus dollars where we can create the greater value.

Overhead costs were reduced, not only before the LBO transaction at the end of '06, but also in '07 and once again in the last half of '08.

While we can always do better, we are entering 2009 with a very efficient organization.

Now having said that, we continue to believe that focused investments in our growth strategies; our physician engagement strategies; programs to improve clinical outcomes; and promote patient and physician satisfaction; and our electronic health record initiatives; are fundamental to our future success and should be pursued.

Protecting our investments here and our resources at the bedside is a very high priority for this Company.

Incidentally, we also take great pride in announcing our fourth quarter CMS core measure results.

And while we really don't have other hospitals or systems' most recent quarter's performance data; HCA performance for the fourth quarter '08, compared with the most recently published clinical core measure data set on CMS Hospital Compare, would place approximately 68% of our performance measures across facilities in the top 10% nationally.

And about 88% in the top quartile nationally.

As we think about 2009, we know there are many questions.

How might the worsening economy affect demand for health care?

How might rising unemployment levels affect managed care volumes?

And in general and in our markets specifically, how could we benefit from S-CHIP expansion and the various healthcare provisions that may be included in the stimulus package?

And longer-term, what might healthcare reform efforts look like under the new Obama administration and how might this impact our uncompensated care and payment levels?

And we are avoiding speculating on these answers and giving you a false sense of precision.

We are, to some extent, in uncharted waters relative to these dynamics.

Instead, our approach has been to prepare the organization the best way we can for an uncertain future.

Our plan is to stay focused on growth; continue to tighten up the cost structure; reduce variations in both administrative and clinical processes; target our capital spend to only the most necessary investments; and protect our agendas designed to improve clinical care and patient satisfaction.

Having said that, we know '09 will bring many unforeseen challenges and we that our strategies must be flexible to adjust.

So with that, let me turn it over to Milton for some comments on the quarter.

And then we'll look forward to answering your questions.

Milt?

Great.

Thank you, Richard and good morning to all.

Each of you should have received a copy of our earnings release issued this morning.

I'll take a few minutes to provide several general observations, before highlighting some details of the quarters.

Overall volume trends in the quarter were good.

This is the fifth consecutive quarter we've experienced same facility equivalent admission growth over the prior year's quarter.

same facility admission growth was 0.5%.

While same facility equivalent admissions increased 1.8% over last year's fourth quarter.

Surgical volumes, especially outpatient surgeries, rebounded somewhat from the soft trends experienced during much of 2008.

Consistent with our recent trends in 2008, Medicare admissions contributed significantly to our overall volume growth during the quarter.

same facility Medicare admissions increased 2.6% over last year's fourth quarter.

Our same facility Medicare admissions include both traditional and managed Medicare.

Managed Medicare admissions on a same facility basis increased 19.5% and represented approximately 21% of our Medicare admissions.

Same facility Medicare equivalent admissions increased 3.8% in the fourth quarter compared to last year.

In the fourth quarter, same facility Medicaid admissions grew 1.9% over the prior year.

And same facility managed care admissions declined 2.4%.

For the year, same facility managed care admissions declined 2%, compared to 2007.

This is a slight improvement over the 2.7 % decline that we reported last year.

Uninsured volume trends continued to moderate in the fourth quarter.

Our same facility self-pay and charity admissions in the quarter declined 0.4% from the fourth quarter of 2007.

For 2008, same facility uninsured admissions increased 1.7%, compared to 9.4% in 2007.

Same facility uninsured emergency room visits increased 4.3% over the fourth quarter of 2007 and 4.5% over the year ended 2007.

Same facility total surgical -- surgeries increased 0.4% over last year's fourth quarter.

Same facility inpatient surgeries decreased 0.7% compared to last year's fourth quarter.

Same facility outpatient surgeries, both hospital-based and AFC cases, increased 1.1% in the quarter compared to the prior year.

Same facility emergency department visits increased 0.3% in the fourth quarter.

Turning to revenue, our same facility cash revenue per equivalent admission increased 5.7% in the fourth quarter over the prior year's fourth quarter.

As a reminder, cash revenue is net revenue, less bad debt expense.

Normalizing for our Texas upper payment limits or UPL revenues, same facility revenues per equivalent admission increased 4.9% in the fourth quarter.

We recognized $68 million in revenues related to Medicaid's supplemental payments pursuant to Texas UPL programs during the first quarter of 2008.

Same facility Medicare, traditional and managed, revenue per equivalent admission increased 3.1%, compared to the fourth quarter of 2007.

Same facility managed care revenue per equivalent admissions increased 7.8% in the fourth quarter.

For the year, our same facility managed care revenue per equivalent admission increased 6.7%.

Adjusted EBITDA in the fourth quarter totaled $1.237 billion, compared to $1.153 billion in 2007, an increase of 7.3%.

For 2008, adjusted EBITDA totaled $4.574 billion, compared to $4.592 billion in 2007.

As a reminder, adjusted EBITDA is a non-GAAP measure and is reconciled to net income in the Company's earnings release.

As to cost, cash expense per equivalent admission in the fourth quarter grew on a same facility basis 6.1%, as compared to the prior quarter.

For the full year, same facility cash expense per equivalent admission increased 5.8%.

Salaries and benefits were at 39.6% of revenues for the fourth quarter, compared to 39.4% in last year's fourth quarter.

We recorded approximately $22 million in severance related to expenses in this year's fourth quarter, attributable to overhead reductions.

Productivity performance, as measured by man hours per equivalent admission, was basically flat with the prior year's fourth quarter.

And wage rate growth was consistent with recent trends.

We continue to invest in additional labor to support our growth, quality and electronic health record initiatives.

Supply costs decreased 30 basis points to 15.9% of revenues in the fourth quarter, compared to 16.2% last year.

On a same facility equivalent admission basis, supply expense increased 3.8% in the fourth quarter.

Other operating expenses, as a percent of revenue, increased to 16%, compared to 15.2% last year, primarily due to insurance and non-income tax expenses.

Bad debts decreased to 12.2% of revenue, compared to 13.2% in last year's fourth quarter.

No material bad debt adjustments were made this quarter, compared to $58 million of hindsight adjustments in last year's fourth quarter.

We currently have 93.1% of our total self-pay receivables reserved.

Same facility charity care discounts increased by $86 million to $468 million in the fourth quarter of 2008.

Same facility uninsured discounts increased by $118 million to $517 million in the fourth quarter of 2008.

Bad debt, plus charity and uninsured discounts as a percentage of revenues, plus charity and uninsured discounts was 22.9%, compared to 22.4% last year's fourth quarter.

Net income totaled $276 million for the fourth quarter, compared to $278 million in the prior year's fourth quarter.

We had a gain of $7 million related to sale of assets this quarter, compared to $139 million last year.

The fourth quarter of 2008 also includes an $11 million impairment charge.

As noted in the release this morning, the provision for income taxes for the fourth quarter of 2008 was affected by a favorable revision to the proposed disallowance of a portion of prior period expense and related interest.

While the 2007 fourth quarter was reduced, due to the recognition of certain state tax benefit, both periods reflect a low effective tax rate due to these adjustments.

The Company experienced strong cash flow from operations during the fourth quarter, totaling $533 million, compared to $411 million last year.

Days in accounts receivable for the quarter at 48 days, an improvement of one day from the third quarter of 2008.

Capital expenditures totaled $485 million in the fourth quarter and for the year, totaled $1.6 billion.

David, now I'll turn it over to you to discuss cash flow and the balance sheet for the quarter.

Thank you, Milton.

And good morning to everybody.

I'll start with the balance sheet.

As you can see, cash at year end increased from year end '07 by $72 million.

HCI, our malpractice captive insurance company, saw its cash increase by $120 million over the year, offset by $40 million in reduced cash at corporate office and the facilities.

The balance of total debt at December '07, $27.308 billion, was reduced by $319 million during the year, to a total of $26.989 billion at December '08.

During the year, we increased debt by $758 million by drawing down $650 million on our ABL or asset-based loan facility, plus taking down $50 million on our cash flow revolver.

The remainder of the increase in debt was facility debt, miscellaneous debt out in our hospitals.

During the year, we also repaid $1.077 billion.

As you may recall, we did a tender offer for certain current maturities at -- for $500 million or maturities in '10 and '11, excuse me, That was $500 million.

We also had scheduled maturities, amortization of term loans and other open-market purchases of debt totaling $426 million during the year.

Translation adjustments were $117 million.

And then miscellaneous principal payments totaled $34 million during the year.

Debt to EBITDA improved slightly in '08 to 5.9 times from 5.95 in '07.

Our floating rate debt is at 18.7%, down from 20.8% at the end of '07.

In March of this year, we did a $1 billion, three year swap at LIBOR versus 2.98%.

Liquidity at 12/31 was $1.858 billion, $50 million was drawn under the revolver and then, the remainder represents letters of credit.

In terms of cash flow, net cash provided for the year improved by $401 million.

Some big drivers of that improvement would be, on a pre-tax basis, net income was up $165 million to $908 million.

Interest payments were reduced by $184 million during the year.

Working capital improved by around $300 million.

A big driver of that was an improvement in accounts receivable days.

And then, taxes paid were $295 million more in '08 than '07.

I should mention that in '07, we had a large refund early in that year, which made '07 relatively low in terms of tax payments versus this year.

Net cash provided was $1.797 billion.

If you subtract cash -- capital expenditures of $1.6 billion, you have $197 million in cash flow, plus the translation adjustment of $117 million accounts for basically the pay down in debt this year.

While the cash balance increase of $72 million was driven primarily by the $193 million disposition of assets, minus certain acquisitions, including Sun Coast, in Florida, and a couple of fairly large ASC acquisitions.

And that's --.

All right.

David, thank you, Milt and Richard.

Before we go to Q&A, let me just make one comment and try to save us a little time.

And that is, as in prior calls, HCA does not plan to provide any guidance with respect to projections for 2009 on line items, be it volumes, bad debt, CapEx, what have you.

So I might save you the time in asking those questions.

Obviously, we're going to talk about the business in general but don't expect specific guidance here today.

Also, Amber, if you'll help me, we try to keep each questioner to one question at a time.

Give everybody an opportunity to ask their questions.

So, with that, Amber, do you want to take over?

Thank you, Mr.

Campbell.

(Operator instructions).

And we'll first hear from Adam Feinstein, Barclays Capital.

Okay.

Thank you.

Good morning, everyone.

Good morning, Adam.

Just a few questions here.

And certainly, your volumes looked very good considering the challenging industry operating environment.

So I just wanted to get a little bit more clarity as you talk about the mix.

And I appreciate all of the detail between the different buckets.

But was just curious just in terms of your thoughts around the managed care volumes and just the impact from the decline there?

It's nothing new, because as you highlighted, the decline moderated but just wanted to get your thoughts in terms of managing through that.

And then, at the same time, just with the uninsured admission volume slowing, just wanted to get your thoughts in terms of why that is this the case, considering the economic backdrop?

So, once again, just wanted to get more details around some of the mix issues that you brought up.

All right.

Adam, thank you.

Milt, do you want to go first?

Yes, a couple of comments on just the managed care.

And when you're talking about the numbers for the year, where we were down 2.7% last year in managed care and other and down 2% this year.

Really, the improvement was in the second and third quarter of this year.

First quarter was down at a rate very similar to what we saw in 2007.

But the third quarter, we saw it moderate to a negative, I think, 1.8%.

And then the third quarter, if I'm memory is correct, was about negative 1.6%.

And of course, as I said the fourth quarter was negative 2.4%.

So really, our improvement was primarily in the second and third quarter, was where we saw the improvement in our manage care volumes, Adam.

Again, some improvement in the forth but not as much.

Uninsured, do you want to talk to that a little?

Well, that's a difficult one to analyze.

In this economy, Adam, you expect to see maybe just the opposite.

But what we've seen this year, our highest growth rate in uninsured volumes was the first quarter of this year and our lowest was the fourth quarter.

And it improved, slightly every quarter through the the year.

Where we saw some of our largest decreases in uninsured admissions, was in markets like Vegas, El Paso, the Valley in Texas, Dallas, to give you a few examples.

We did see uninsured admission growth in many of our Florida markets.

So, that's the geography of where we saw our major increases and decreases.

All right, Adam, thank you.

Vic, I might just add within comment on the managed care volume.

One other thought that we've come to believe is that these macros, of course, manifest themselves differently in each of the markets.

And depending upon the base of the economy of the local market or the position of our assets, or the strength of our networks, if the unemployment rates are -- might be up in general but they may not be exactly where our hospitals are located.

So there's a lot of moving parts when you think about translating macros in to a volume forecast.

And as we've gone through our thinking, we've had to build those literally, just almost hospital by hospital, market by market.

I might just add one last thing, we've talked about a little and it's so hard to put specific numbers but we have tried to sort out some of this into markets.

And we do think there's probably some out migration of workers in some of the markets that we're in.

Just because there are fewer jobs and some people that were there before working may not be there now.

Maybe that's part of it but it's really, really hard to put numbers on that.

All right, Next question?

That will come from Darren Lehrich, Deutsche Bank.

Thanks, it's Darren Lehrich from Deutsche.

Just wanted to ask about your CapEx plans.

And just in light of the backdrop, where we're seeing a lot of your not-for-profit competitors pulling back.

Can you just give us a sense for how you are adjusting your CapEx budget for '09 and what kinds of things are falling off in terms of your priorities?

Thanks.

All right.

Richard, do you want to go first?

Yes, let me take a shot at this.

Obviously, we have been tightening up on our capital spend now, really, for over the course of a year.

And we don't really think -- as I mentioned on the call last quarter, we certainly don't see '09 at the same level as '08.

We do see it coming down.

Our strategy is, again, to support the projects that are underway and under construction.

And try to leave an appropriate amount of money for the routine operations of the organization.

And then, carefully pace new projects or new investments as our performance will allow.

And so, the short answer is it's going to be south of where it was in '08 but we don't have a number for you.

All right.

Thanks, Richard.

Thanks, Darren.

We'll now hear from Miles Highsmith, Credit Suisse.

Hi, good morning, guys.

Just one numbers question and then a general.

Can you tell us if you did any bond repurchases during the fourth quarter or the first quarter?

And then just a general question around, looking at the volumes kind of over a longer time frame, kind of 25, 30 years, you guys have been in the business for a long time.

We've been through a lot of bad economic cycles.

But we look at history and you'd see only pretty modest declines in the tough times, absent some of the structural DRG related changes way back in the day.

So my question is, at this point, from what we know so far, are we seeing just another cycle?

Or can you cite maybe specific things that different this time that we may expect to produce more or less pressure than we saw historically?

Thanks.

All right, on the bond repurchase, David, do you have information in any of the fourth quarter?

Well, during the course of '08, besides the tender early in the year, in February, we also did approximately $90 million worth of open-market purchases during basically the third and fourth quarter.

Richard or anyone want to, Milt will talk a little bit about that volume?

Well, that's really -- I think as we said upfront, that's an unknown how this economy and the situation is going to play out in '09 with respect to our volumes.

In this business, we do see over 50%, probably around 53% to 55% of our admissions comes through the emergency room.

Of course, that would indicate that those are not elective sort of admissions.

And so, we've got a significant portion of our business that is driven by that.

But over the long term, as we've gone through these ups and downs our -- we have seen discretionary procedures fall off.

You look at our outpatient services, where we're seeing a drop this year, has been in our self-pay, which in outpatient is largely good paying business.

It's usually procedures that may not be covered by insurance but typically are very good.

And we do see a decrease this year in those sort of procedures.

And that's probably what we've seen in the past.

Any other thoughts?

Healthcare always does lag.

So it's just probably too early to know whether this is a new cycle or not.

Yes.

All right, thanks, Miles.

Walter Branson, Regiment Capital has our next question or comment.

Thanks.

Just wanted to follow up again on the uninsured admissions decrease of 0.4% in the fourth quarter.

I appreciate the geographic breakdown of that.

But on an overall basis, do you attribute that -- are there any particular strategies that you're pursuing there, bringing that down, in the face of increasing uninsured?

Or are you not sure whether that's a trend or whether there was any particular reason for it?

Milt?

Yes, we've been fighting uninsured issues, volume growth of 9% to 10%, for many years now.

So, we had a strategy, I think, that was affecting it.

We would have -- I wish it had been successful earlier.

So I don't think it's any strategy that we put in place to impact this.

I do want to point out that the uninsured book is a small book.

We're talking about a small number of admissions.

For example, we have roughly speaking about 25,000 or so uninsured admissions per quarter or about 100,000 a year, or slightly under that, is what we have.

So, just when you think about our total admissions during the course of a quarter, it's about 385,000 or so.

It's a relatively small number of our admissions and so it's really hard to track the change of a few thousand or a couple thousand admissions in a particular quarter.

Yes, let me just add to that.

There are no strategies to divert the uninsured.

Hospitals take all comers, of course.

Most of it comes through the emergency department.

We certainly triage if it's not an emergency.

But I think this more is just a reflection of what's going on in the marketplace.

Yes, and you're right, most of the uninsured admissions come through the emergency room.

And keep in mind that we have at HCA approximately 5 million plus emergency room visits a year.

And 23 to 24% of those visits will be from the uninsured.

So, we have a high volume of uninsured coming through the ED and that volume has not changed in total.

It's just the number of admissions from that volume is not increasing, at least not in the fourth quarter.

All right.

Thank you very much

We'll now hear from Rishi Sadarangani from Alliance Bernstein.

Yes, good morning.

Just a couple of quick follow-ups.

One, on the managed care side in light of corporations cutting back on healthcare benefits, are you starting to see some of the pressures flow through into your managed care contracting?

And second is that, in terms of the weakness in the economy, do you expect to see any benefit in terms of reduced salary and wage expenses?

Thank you.

All right.

Managed care contracting, Bev Wallace, who oversees that, do you want to address it?

Sure.

For '09, we've got approximately 88% of our managed care portfolio already contracted in the 6.5% to 7% range.

We do have WellPoint in several states coming up but that's the only large outstanding contract.

So, we're feeling pretty good about our '09 portfolio.

As we enter the '09 contracting for 2010, we may find a different attitude as we negotiate those.

But as in the past, it's never easy to negotiate a contract and we don't expect that to change much going forward.

All right, Milt, do you want to address any change of salary, wage area, as the result of the economy?

Sure and Richard you may want to join in here.

But one benefit of this economy is it should help us, I think, with turnover.

Maybe a second wage earner is coming back in to the work force.

That could help us as well with recruitment of certain labor.

Certainly, the economy also should provide some help with respect to wage rate increases in 2009, especially for management-level positions.

We will continue to protect the labor at the bedside, the clinical care.

The market will dictate the rates there but certainly with our management teams, we see this economy as a way to help moderate, I think, wage rate with respect to those salaries in the coming year.

All right.

Thank you.

Next question?

(Operator Instructions).

We'll now hear from Erin Blum, Goldman Sachs.

Hi, I think I'm going to ask the question everyone wants to ask.

But how are you thinking about your amortization in 2010 maturities in the face of, I think, a tough environment for selling assets and a bond market that's improving but not yet really good market conditions?

All right, David, 2010 maturities, what are the thinking about them?

I'm sorry, I missed it.

I didn't hear the question there for a minute.

We're obviously very well aware.

We have about $1 billion in maturities coming due.

We have $2 billion in capacity under the revolving credit that could certainly be used to fund those maturities.

I can assure you, we're very well aware of all of the maturities we have coming up between now and 2012.

Thanks, Erin.

We'll now hear from Sheryl Skolnick, CRT.

Thank you very much for allowing me to answer a question and for that very succinct answer to the question everybody wants to know.

I guess you'll leave us guessing.

That is not my questions.

Sheryl, you always cut to the chase.

Well, but what else are we going to expect you to say?

Are you going to map it out?

No, you're not going to do that.

Thank you.

You're going to tell us, when you tell us, through a press release and an 8-K.

Let me proceed to my question and I'll try to keep it to one that doesn't ask a million questions.

As I look at your Company, I note that you have done some restructuring, some layoffs, some consolidation of labor.

And you clearly reflected that in the quarter.

And as I look at the cash flows and I look at the balance sheet and what I'm trying to get at is, I'm not -- and I know that the Company has always been pretty tight in using its balance sheet very efficiently to create a dollar of revenue.

But I'll beginning to get a little bit concerned that perhaps there's more cost savings, there's more restructuring that needs to be done in order to really boost the cash generation.

So that we don't have to ask the question; where are you going to get the money from to pay off your near term maturities?

So, can you walk me through your thinking about where there are opportunities?

And how we should think about the Company in terms of being able to actually effect cost structures?

And I'm also particularly concerned that some of that might be offset by the propensity for increased union involvements in hospitals as a result of a, perhaps, more permissive Congress and administration in the White House.

Richard, that sounds like it's got your name all over it.

Yes.

Let me see if I can start on this and others can add in afterwards.

When you think about the cost structure of our Company, obviously, the greatest piece, of course, is salaries and wages and supplies right behind it.

And I think your question is really more around the salary and wage line.

And other operating.

And in other operating, I'll get to that in a second.

On the salary and wage line, we're looking at probable volume increases next year.

And so, we need to have a plan that allows us to process those volume increases relative to the amount of labor it takes to do that.

And pay the competitive wages to get it done.

On a productivity basis at the hospital level, we're very comfortable where we're at.

The amount of labor that we have at the bedside is very carefully managed.

It has always been in a very narrow range.

And we think that's what it takes to take care of patients.

Where we have more flexibility on labor is how fast we want to invest in new programs or new development and the like.

And as I mentioned in my comments, at this point in time, we still feel that we can get where we need to be with modest growth in our growth agendas, in our clinical agendas.

And these are all additional people that neutralize that flat productivity.

It's not necessarily in the hospital but it's in the support services for the hospital.

So at this point in time, we think we have the right balance of productivity and growth, given our markets and what we have to get done next year.

The earlier question about wage rates, obviously, we maybe get a little help in a tough economy in terms of turnover.

And the overall pricing of wages tends to moderate in difficult times.

But nonetheless, we need more nurses next year than we do this year to take care of an increasing volume level.

Relative to -- you mentioned restructuring, we're pretty flat and we've been taking the big overhead issues on, really, over the last couple or three years, as I mentioned.

So right now, we're reasonably comfortable, given the macros and how we're performing against those macros, in our specific markets, with our overall labor piece.

On the supply chain side, we think we have the best-in-practice in the industry.

We continue to keep that very close at around 16%.

We continue to pick up a lot through HPG and our -- and the buying programs there.

And we're feeling reasonably good there.

On the -- where the restructuring dollars need to come out, is what I mentioned, clinical and administrative variation and how we use clinical resources more efficiently.

And that's really what our focus is going forward, rather than just headcount at the bedside.

There is pressure in the other operating line, obviously in tough times, the physician community looks to the hospital systems for additional support.

The availability of certain specialties, the need to put hospice in hospitals is demanding and growing.

And so, I think we're still going to continue to have pressure on that line as we go forward as well.

But overall, where I see opportunity for squeezing out costs is in the overall delivery path.

All right, Richard, thanks.

And anything else, Milt?

One opportunity for come cost savings could be, as we continue to look at some shared services consolidations around health information management, for example.

As we're going through a possess of consolidating that, that will require some investment upfront that we're making this year.

But over the longer term, should help.

And there are some other areas, I think, with technology around work flow in our patient count service centers, that we can implement.

Again, probably in a year or two out.

That could help us also with some costs there and reduce FTE's.

Again, some of those things require up-front investment that we will probably make in the coming years.

So I think there's some opportunities in our cost structure, when you look out a couple of years, to further consolidate new shared services, as a way to reduce the number of FTE's as well.

All right, Sheryl, thank you very much.

Maybe a couple more questions.

Well take another question.

That will come from Duncan Brown, Wachovia.

Good morning.

Just wanted to actually go back to that last question.

Correct me, please, if I'm wrong.

But it sounded as if you're pretty comfortable that you're going to have volume growth next year.

And don't have particularly easy comps from 2008.

And I just wondered if you could talk about the reason for that expectation?

Is it market share, feeling the benefit from past CapEx spend, just given the butter economy and the potential for loss of some elective procedures?

Thanks.

All right.

It might be worthwhile to have the group guys comment on some of the markets they have in their areas, that -- where they're expecting growth and why.

All right.

And my eyes are on Sam Hazen.

Do you want to talk about your opportunities, Sam?

Sam runs the west.

Yes.

In the western markets, I think there's a couple of environmental factors that are generally favorable for our group that we haven't seen in the past.

First, is we have seen a slowdown in new competition with respect to either physician-owned entities, where we've seen a huge increase in supply beds over the past.

As well as some of our not-for-profit competitors absorbing some of their past investments, as opposed to making new investments.

So I think fundamentally across most of our group, from a competitive standpoint, we are seeing a different sort of environment from what we've experienced in the past.

And actually, in a couple of markets, particularly in California, we're seeing some competitive factors that are very, very favorable for our facilities that are well positioned in a few markets there.

The second factor that I think is critical for our group, is with the exception of California and Nevada, using sort of mid-fourth quarter data, most of our markets are still experiencing net job growth.

Even though there are significant changes in the overall unemployment ranks, we are still seeing a net positive job growth.

And just to give you some perspective on this.

I think in Las Vegas or in Clark County, Nevada, on a year-over-year basis, they were flat, in spite of the massive unemployment that has taken place.

The overall job numbers were flat.

So those two factors are significant in our belief that we could see some decent volume growth.

The third thing is is, we do have, as Richard mentioned in his comments earlier, some capital expenditures that are coming online at facilities that have opportunities for growth because of capacity or new program developments.

And that is going to yield, we think, some positives for us in spite of some of the larger macro trends that exist across the country.

And then finally, I would submit that we have some fairly effective physician engagement strategies.

Everything from a sales initiative, to an employment strategy, to recruitment, that we believe will drive some market share gains for us.

And as a combination of all of those factors, we think are reasonably positive for the western group.

Sam, good.

Paul Rutledge from the central.

Okay.

Two markets I would focus own.

One is Kansas City.

We've had a significant investment there since the past few years.

And that is beginning to -- since those investments have come online, we have seen significant growth there.

And then, also in Nashville.

We've had significant physician engagement activities there.

Specifically, moving some groups from competitors to our hospitals and we see growth there.

As Sam had mentioned, overall physician engagement strategies, such as employment have been enacted in our group divisions.

As well as a focus on OR opening up, block time, those sorts of strategies for growth opportunities.

We're also seeing a little bit the economy on some of the physician business development activities, where they also were concerned about their investments.

And we're beginning to, anecdotally, see some of those surgery centers, those volumes that we lost to physician-owned entities coming back, as some of those were struggling.

And then we also have, as in the Company, a focus is on our emergency room working closely with our EMS.

And then lastly, our hospice list.

We had a significant focus on putting hospice in our hospitals.

And that has been very helpful to the referring physicians, as they see an opportunity to be more efficient in their offices and send their patients to our hospitals.

So we see growth out of that.

All right, Paul, thank you.

Chuck, did they leave anything for you in the East?

Well, similar to Sam and Paul, we too have a number of construction projects coming online, one -- two major projects in Jacksonville, one in [Lamore] and Orange Park.

In the Tampa market, Brandon comes on -- just came on first quarter.

Port of St.

Lucie and the Treasure Coast, this year.

JFK, a big project there came on end of fourth quarter '08.

And additionally, we have a large project coming online midyear in Augusta.

Additionally, heavy focus on the ED process improvement OR throughput.

We've seen that yield tremendous results in '08 and we anticipate similar yields in '09.

And as well, as the maturity of our sales initiative.

This is something that we've been rolling out over the last couple of years.

And that's coupled with our physician engagement and our recruitment and performance strategy.

All right.

Good news, bad news.

Those were great answers, with a lot of good information.

The bad news is they were pretty long winded.

So we're going to call the call to a halt.

And we want to thank everybody for listening in.

We appreciate it.

And we will be here.

Mark is available, as am I.

Thank you very much.

Have a great day.

And that concludes today's conference.

We do appreciate your participation.

Everyone have a great day.