美國醫院公司 (HCA) 2013 Q1 法說會逐字稿

Welcome to the HCA first-quarter 2013 earnings release conference call.

Today's call is being recorded.

At this time, for opening remarks and introductions, I would like to turn the call over to Senior Vice President, Mr. Vic Campbell.

Please go ahead, sir.

Thank you, Jessica, and good morning to everyone.

Mark Kimbrough, our Chief Investor Relations Officer, and I would like to welcome all of you on today's call, including those listening to our webcast.

With us here this morning is our Chairman and CEO, Richard Bracken; our President and CFO, Milton Johnson; and Sam Hazen, President of Operations.

Several other members of the senior management team are here as well to assist during the Q&A session.

Before I turn the call over to Richard, let me remind everyone that should today's call contain any forward-looking statements, they are based on management's current expectations.

Numerous risks, uncertainties, and other factors may cause actual results to differ materially from those that might be expressed today.

Many of these factors are listed in today's press release and in our various SEC filings.

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

In light of the significant uncertainties inherent in any 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 as a result of new information or future events.

This morning's call is being recorded.

A replay of the call will be available later today.

With that, I'll turn the call over to Richard.

Thanks, Vic, and good morning to all, and thank you for joining our call.

Today the Company reported first-quarter earnings which are in line with our previous expectations provided in our April 15 preview.

Summary information concerning our first-quarter performance was provided in our release this morning, and in just a moment we'll provide a more detailed review of our first-quarter performance.

However, before we proceed to these analyses, let me provide a few general observations about the quarter.

As we identified in our releases, one of the most significant observations for the quarter was the slowing of patient volume growth from our recent trends.

Growth in same-facility inpatient admissions for the quarter was up only slightly at 0.1%, well below our historical trends.

And of course for a more meaningful comparison, this rate needs to be adjusted for the leap year effect -- that is one less day as compared to last year's first quarter.

Doing so, same-facility inpatient admissions for the quarter grew by 1.3%.

Even though this rate is improved from the as-reported number, clearly it was less than our recent trends.

It should be noted that this is a slowdown in rate of growth also occurred in our outpatient volumes as reflected in our adjusted admissions performance.

Our analysis of first-quarter volume-related metrics has led us to the following general conclusions.

The slowdown in inpatient volumes began mid quarter, with January's as-reported same-facility admissions up 4.7%; February's down 3.6%; and March's down 0.9%.

Regardless of day alignment issues, performance clearly was challenged most in the month of February, and we did see some modest improvement sequentially in March.

The slower volume growth was felt across our portfolio of hospitals.

However, it is interesting to note that roughly the same number of facilities did experience admissions growth in the quarter as compared to recent trends, but the growth that they did experience was generally less.

And finally, the slowdown in volumes was experienced across all payer classes and service lines.

Sam will provide more analysis of our Q1 volume metrics in just a moment.

Please note that we feel we are not in a position at this time to state definitively if the slowdown of volumes we saw in the second half of the first quarter is an anomaly, or if it is just the start of a new trend.

Additional time must pass to make this determination.

Also, while typically we don't comment on current-quarter metrics, given the volume issues in the first quarter, we thought it important to point out today that April's inpatient volumes, with the benefit of an additional business day, increased approximately 4% over prior year.

This is more consistent with our expectations.

While our operating teams managed expense levels with the reduced volumes during the quarter, we maintained our investments in our service line strategies, technology, and clinical improvement agendas, and we feel these investments are necessary for sustained growth over time.

And finally, as expected, this was a quarter with a significant amount of contracting activity for health exchange products.

During the quarter, we have been in conversation with most every major payer in most every market.

Our approach to exchange contracting has factored in assumptions such as anticipated participation by individuals and exchange products, Medicaid expansion activities, uninsured market share, and hospital occupancy rates, to mention just a few.

Our results to date are as follows.

Generally, we negotiate with health plans across roughly 37 markets.

To date, in 27 of those markets we have 36 contracts with our major payers and expect to be in active negotiations for additional contracts over the next several months.

Currently, 85% of our hospitals are contracted with at least one exchange product.

We have 17 -- we have contracts in 17 of our 20 largest uninsured markets, and in 9 markets we will participate in multiple exchange products.

Of the 36 contracts, 16 include some form of network configuration.

Although we are not going to comment on the specific rates associated with executed contracts, they generally can be characterized as closer to commercial pricing than Medicare.

And in some cases, exchange contracts had been coupled with term extensions of other managed care agreements that we might have with any given payer.

As I stated on our last quarter's call, we believe this will be a process that evolves over time.

Although we are still in early stages of America's reform agenda, the exchange contracting results to date have been within our expectations.

We are encouraged by the dialogue we have had with the payer community and believe the exchange products over time will create value for our organization.

And finally, yesterday HCA signed an asset purchase agreement with Carondelet Health to purchase their two hospitals, St.

Joseph and St.

Mary's Medical Centers in Kansas City.

We are pleased with the execution of this agreement and are looking forward to adding these organizations to our Company.

And with that, let me turn the call over to Milton.

Thank you and good morning.

I hope most of you have had a chance to review our first-quarter earnings release issued this morning.

Sam and I will provide some additional information regarding the first-quarter results, and then we will take your questions.

As Richard mentioned, our first-quarter results fell short of our internal expectations, primarily due to lower patient volumes, especially outpatient volumes.

Cash expenses also came in well below plan, due to less volume and management actions taken in the quarter.

However, we were not able to fully offset the revenue impact of the volume softness with expense management.

Following my comments, Sam will provide additional observations on patient volume and management's actions.

Revenues in the first quarter increased to $8.44 billion, up 0.4% compared to the prior year's first quarter.

Excluding the net favorable Medicare settlements in the first quarter of 2012 of $188 million, revenues increased 2.7% over the prior year's first quarter.

Adjusted EBITDA totaled $1.568 billion compared to $1.823 billion in the first quarter of 2012, which included a net favorable impact from the Medicare settlements of $170 million.

Net income attributable to the HCA Holdings Inc.

totaled $344 million or $0.74 per diluted share, compared to $540 million or $1.18 per diluted share in the first quarter of 2012.

First quarter of 2013 results include pretax losses on the sales of facilities of $16 million or $0.02 per diluted share.

The first quarter also includes a pretax loss of $17 million or $0.03 per diluted share on the retirement of the $201 million principal amount of our 9.875% senior secured second lien notes due in 2017.

Volume trends in the quarter moderated from recent growth rates, with same-facility admissions increasing 0.1% and same-facility equivalent admissions declining 0.7% as compared to last year's first quarter.

Our same-facility medical admissions increased 1.2%, while same-facility surgical admissions declined 3.2% compared to the prior year.

Excluding the extra business day due to leap year in 2012, our same-facility admissions increased 1.3% and same-facility equivalent admissions increased 0.4%.

During the first quarter, same-facility Medicare admissions and equivalent admissions increased 1.5% and 1%, respectively.

Same-facility Medicare admissions include both traditional and managed Medicare; managed Medicare admissions increased 12.5% on a same-facility basis and represent 28.9% of our total Medicare admissions.

Same-facility Medicaid admissions were flat with prior year, while same-facility equivalent admissions increased 1.2% compared to the prior year.

Same-facility managed care and other admissions declined 3.2% in the first quarter, while same-facility managed care and other equivalent admissions declined 4.6% compared to the prior year's first quarter.

In the first quarter, uninsured admissions increased 5.4% on a same-facility basis compared to the prior year.

Same-facility uninsured admissions represents 7.4% of total admissions in the quarter compared to 7% in last year's first quarter.

Same-facility emergency room visits increased 3.8% in the quarter.

Excluding the leap year effect, same-facility emergency visits increased 4.9%.

Same-facility surgeries declined 3.6% in the quarter, reflecting a decline of 2.6% in our same-facility inpatient surgeries and a 4.3% decline in our same-facility outpatient surgeries.

Adjusting for leap year, same-facility inpatient surgeries declined 1.5% and outpatient surgeries declined 3.2% compared to the prior year's first quarter.

During the quarter, revenue rate growth per equivalent admission improved compared to recent trends.

Same-facility revenue per equivalent admission increased 0.8% in the first quarter.

However, excluding the impact of the net favorable Medicare settlement in 2012, revenue per equivalent admission increased 3.5%.

This is partially due to an increase in our average length of stay and our case mix, a measure of inpatient acuity, which increased 2.4% and 1.5%, respectively, compared to the prior-year period.

For the first quarter, same-facility Medicare revenue per equivalent admission declined 3.7%.

However, after excluding the Medicare settlement revenue from the prior period 2012, Medicare revenue per equivalent admission increased 3.6%.

Same-facility Medicaid revenue per equivalent admission, excluding the Medicaid waiver programs, increased 0.4%.

Managed care and other revenue per equivalent admission increased 5.5% over the prior-year period, the highest quarterly growth rate yield on our managed-care revenue in several quarters.

Same-facility charity care and uninsured discounts increased $418 million in the first quarter compared to the prior year.

During the first quarter, same-facility charity care discounts totaled $905 million, an increase of $108 million from the prior-year period, while same-facility uninsured discounts totaled $1.947 billion, an increase of $310 million from the prior-year period.

Now moving to expenses, as I mentioned earlier, cash expenses came in well below plan.

But on a volume-adjusted basis, growth rates were greater than recent trends, primarily due to the moderation in volume growth.

Same-facility operating expense per equivalent admission increased 4.3% compared to the prior year.

Same-facility operating expense, excluding high-tech expenses and Medicaid waiver program expenses, increased 4.8% in the first quarter of 2013 compared to the prior year.

As I referenced earlier in my comments regarding our revenue rate growth, higher case mix and average length of stay also contributed to the growth in operating expense per equivalent admissions.

Salaries per equivalent admission increased 4.1% on a same-facility basis.

Same-facility productivity performance as measured by man hours per equivalent admission deteriorated 1.8% over the prior-year period, and same-facility wage growth was 2% in the first quarter.

Personnel costs associated with physician employment increased by $9 million or 3.3% from the previous year's first quarter.

Non-cash share-based compensation expense associated with the Company's management equity plan increased $14 million in the quarter over last year's first quarter.

Same-facility supply expense per equivalent admission increased 4.6% from the prior period, primarily reflecting the reclassification of nonequity administrative fees from a reduction in supply expense to revenues.

The amount reclassified was approximately $41 million and contributed 290 basis points to the growth of supply expense per equivalent admission in the first quarter.

The reclassification had no impact on adjusted EBITDA for the quarter.

Same-facility other operating expense per equivalent admission increased 4.6% from the prior-year period.

We recognized $39 million in electronic health record incentive income in the first quarter compared to $55 million in the first quarter of last year.

This is consistent with our expectations.

The Company also incurred approximately $26 million and $17 million in EHR-related expense in the first quarters of 2013 and 2012, respectively.

Cash flows from operating activities totaled $740 million in the quarter compared to $797 million last year.

The decline was primarily due to the net impact of the $201 million less in net income, being partially offset by a $50 million benefit from changes in working capital items and $50 million benefit from income taxes in the first quarter of 2013 compared to the first quarter of 2012.

Days in accounts receivable at the end of the first quarter were 52 days compared to 53 days for the same period last year.

At March 31, 2013, the Company's debt to adjusted EBITDA ratio was 4.56 times compared to 4.43 times at December 31, 2012.

And at the end of the quarter, we had $2.575 billion of borrowing capacity under our senior secured credit facilities.

We are in the process of repricing certain of our bank term loans.

We recently closed on the repricing of our $2.373 billion term loan B3, which has a maturity of May 1, 2018, and reduced the credit spread on that loan from 325 basis points to 275 basis points.

This will reduce our interest expense by $11.9 million annually over the life of the loan.

Additionally, we are currently in the process of repricing our $2 billion term loan B2, which has a maturity of March 31, 2017, and expect to reduce the credit spread on that loan from 325 basis points to 275 points as well.

This repricing, if successfully completed, will reduce our interest expense by $10 million annually over the life of the loan.

I do want to spend just a moment addressing the Medicare IPPS proposed rule, which was issued by CMS last Friday afternoon.

As you recall on our fourth-quarter call, we had sized a potential reduction in our Medicare disproportionate share of payments under the Affordable Care Act starting in October of 2013 of approximately $50 million for the fourth quarter of 2013, or $200 million annually.

The proposed rule issued last week utilized what we believe is a more appropriate DSH reallocation formula, which will result in Medicare DSH payments at approximately the same level as this year.

Also, the proposed rule reduces inpatient payments for the government's fiscal year beginning October 1, 2013, by 0.8% related to a documentation and coding recoupment adjustment in accordance with the American Taxpayer Relief Act, which was passed on New Year's Eve.

During our prior call, we estimated this payment reduction at approximately $25 million for the fourth quarter of 2013, or $100 million on an annual basis.

Under the proposed rule, our documentation and coding recoupment cut would be approximately $13 million in the fourth quarter of 2013 or approximately $52 million on an annual basis.

I do want to remind everyone that this is still a proposed rule, not a final rule, which we anticipate would be published sometime in August.

Before turning to call over to Sam, I want to mention that Parallon exceeded first-quarter expectations, and the implementation of LifePoint Hospitals for both supply chain and revenue cycle services is proceeding according to plan.

Now, let me turn the call over to Sam.

Good morning.

I am going to focus my comments this morning on the analysis we conducted on our first-quarter volumes and the observations we are able to make at this point in time.

Before I get into this, I want to give you a short summary of the 2012 third-quarter market share performance for HCA.

This is summary is for 12 months ended September 30, 2012, which is the most recent market share data available.

For this period, inpatient market share for HCA increased to 23.5%, an improvement of 58 basis points over the previous year.

Overall, inpatient demand in our markets was flat on a year-over-year basis.

We had share gains in 14 out of 17 service lines.

The Company gained share in 29 out of 37 markets, with gains in 8 of its top 10 markets.

In the commercial segment, market share grew by 38 basis points.

And finally, within the end migration segment of our business, market share improved by 53 basis points.

During this 12-month period, the gains in the third quarter of 2012 accelerated as compared to the other quarters in the study.

Now let me move to the first-quarter volumes.

We conducted a thorough analysis of the five major factors that drive our volumes to see if we could identify any significant issues that would indicate an adverse change in market share performance.

In short, we could not.

As is typical, there were situations in a few markets where we believe our market share declined in the quarter, but there were also situations in other markets where we are confident that we gained share.

The factors that we evaluated were as follows.

First, we evaluated our managed care network contracts.

There were no changes in our managed care contracts that reduced our access to commercial or governmental business, nor do we believe managed care companies are steering their business away from HCA facilities.

To date, HCA has contracted for approximately 60% of 2014 managed-care revenue and 40% of 2015 managed-care revenue at rates consistent with the past few years.

The second factor that we analyzed was the number of physicians on our active medical staff.

In the first quarter, the number grew by almost 1% as compared to the end of last year.

This is consistent with past periods.

The Company continues to invest significantly in its physician integration initiatives and in its clinical improvement initiatives.

The third factor we assessed with our core operations and organizational efforts that support our growth agenda.

For example, we studied the average wait times in HCA emergency rooms.

They were essentially identical to those in the fourth quarter.

Our outreach, resources, and efforts were as planned, so there were no indications of problems in these areas of our evaluation.

The fourth factor we reviewed was a portfolio performance analysis for our domestic operations, which we adjusted to reflect the effects of leap year.

In 2012, 69% of our hospitals had growth in inpatient admissions.

In the first quarter of 2013, 62% of our hospitals had growth.

There was a slight weakening overall, but it was not material, nor was it concentrated in a particular market.

To give you some perspective on the trends across the Company's markets, the only state among our top 15 volume states that had a positive relationship between first-quarter growth rates and 2012 growth rates in inpatient admissions was California.

The growth rates in both Florida and Texas decelerated at a comparable level.

When we conducted the same portfolio analysis for adjusted admissions, it is clear that the trends in outpatient volumes changed the most.

In 2012 77% of our hospitals had growth in adjusted admissions.

In the first quarter of 2013, only 56% of our hospitals had growth in adjusted admissions.

The final factor we analyzed was our competitors' actions.

In general, there were no changes identified that would have caused an overall trend change for the Company.

There were a few specific markets where certain investments by our competition related to new hospitals had an adverse impact on our volumes.

But these situations were limited and not broad-based.

As a result of this analysis, we believe the first-quarter calendar changes related to leap year, Easter, and New Year's had a pronounced effect on our volumes and explain much of the deceleration in growth.

In particular, outpatient surgery volumes; outpatient diagnostic volumes; and to a lesser degree, commercial admissions were most affected by this calendar change.

Most of these volumes are generated on weekdays.

Also, our behavioral and rehab businesses tend to be more weekdays-oriented.

The growth rate in these service lines slowed in the first quarter also.

With respect to expense management, the Company started responding to soft volume trends in late February.

These efforts were accelerated in early March when it became apparent that trends were not improving.

Our actions included appropriate flexing of variable staffing and reductions in the use of premium labor.

In certain situations, we reduced our workforce with more permanent measures.

And finally, the Company has redoubled its efforts to limit overhead additions, postpone certain initiatives, and restrict discretionary spending.

Our management teams have been very effective in the past with implementing these type of measures, and we are confident in their ability to execute.

And with that, I'll turn the call back to Vic.

All right.

And thank you.

And if we can move to Q&A -- Jessica, you want to come back on?

(Operator Instructions).

Justin Lake, JPMorgan.

Question on exchange contracting.

Can you talk specifically about Blue Cross Blue Shield contracting, given the expectation they are likely to have significant market share on exchanges.

And then you also said your rates look more like commercial than Medicare.

As a level set, can you tell us how your current commercial rates compare to Medicare on average?

Milton, do you want to lead, and then Juan?

Sure.

Generally, probably half of our contracts would be with Blue Cross entities.

And with respect to the pricing, our revenue per equivalent admission averages with commercial probably around $18,500 to $19,000, and Medicare is usually around $10,000 to $10,500 per equivalent admission.

Thank you, Justin.

Juan, anything to add?

No, I'm good.

All right.

Thanks, Justin.

Ralph Giacobbe, Credit Suisse.

I guess just on the exchange topic, can you maybe help us talk about what happens in the event that you aren't included in the narrow network product on exchange?

Would you just bill at the out-of-network rate for anyone that comes to you, I guess?

And then secondly, are there provisions in your existing contracts that would allow you to exit an existing managed-care relationship if you weren't included in an exchange product, or would you have to wait for that contract to end?

Juan, do you want to take that?

Ralph, good questions on both.

On the out-of-network, we would get out-of-network payments and we would bill charges, if we are not in the network.

And to answer the second question, we would have to wait.

We would have to issue our notice -- whether it's 180 days, whatever the contract allows for.

A.J. Rice, UBS.

I guess I will ask the more mundane, immediate question and leave the 2014 questions to others.

The cost initiative that you put in place, can you expand on that a little bit more in terms of what it might mean?

I know you guys had a big cost reduction program back in the second quarter of 2011 after a tough quarter.

Is what we're talking about that you implemented something similar to that, maybe use that as a way to gauge it?

Sam?

Well, I think there are similar elements to what we've done this year versus what we did in the past, A.J. I think the thing that we dealt with in the quarter is -- typically, you have seasonal labor related to certain traveler contracts and so forth to deal with expected volume levels.

And you have to make commitments to those contracts in advance, and you tend to have a runoff on those contracts.

So we had to work our way out of those contracts first and foremost as quickly as we possibly can to get rid of the premium labor that was there to take care of the volume that didn't, in fact, show up as expected.

From there, we approach it as we typically do.

We make sure our head count is consistent with where our expectations are related to volumes as we see them over the remaining portion of the year.

Again, that required some adjustments both in our variable staffing as well as some fixed staffing in certain situations, where we made some judgments that the volumes had trended down more than we anticipated.

And we're going to take a conservative view on that.

And we have been able to significantly impact our headcount per patient over the last 45 to 60 days as compared to where we were in January.

And it's important to understand, we had record census in January at many of our hospitals.

And as the flu burned off, we had dramatic drops in census, 10%, 12% in inpatient census for some of our facilities.

And it's not easy to adjust downward that quickly when we see that kind of migration out of our hospitals because of one particular condition.

With respect to our other cost initiatives, they continued to be productive for the Company, and we think they will continue to produce some incremental benefit as we move through the year.

Those involve supply-chain initiatives, as you know.

There are certain clinical initiatives that we think will enhance our cost structure.

And so we anticipate similar transitions between quarter-over-quarter performance as we've seen in the past to line up with the volume expectations for the remaining portion of the year.

This is Richard.

The only thing I would add to that, A.J., is that in addition to the real-time actions that Sam described, we have made some significant structural changes in our approach to expense management that tries to move our best practices across the enterprise.

You might recall, we have referred to this as our performance improvement program.

We have started this almost 5 years ago.

We have now 60 dedicated employees that are on the road to targeted hospitals throughout the year.

We typically get to -- oh, not quite 20 -- around 15 to 20 hospitals.

These teams stay at the facility sometimes three months.

They monitor on a detailed basis any number of variables -- labor, staffing, best practices, supplies, and even our clinical agenda and improvements in our clinical variation are also included in these reviews.

So in addition to the daily work that our management teams do that adjusts variable expenses, we have a system in place that tries to deal with pulling out more structural costs, and it has been very successful for us.

A.J., thank you for your question, and more importantly, congratulations on your daughter's wedding.

And we appreciate you holding it in Nashville to benefit our economy last weekend.

Andrew Schenker, Morgan Stanley.

So the acquisitions in Kansas City have been in the works for a while here, but can you just kind of remind us of your views on use of the capital going forward, maybe how the acquisition pipeline is looking?

Let me just comment on acquisitions -- this is Richard, again -- for just a second.

Milton might want to add some more on our other uses of capital.

But relative to acquisitions, we of course remain very interested in pursuing strategic acquisitions.

And as we have mentioned many times in the past, following reinvestment in our existing assets, strategic acquisitions are considered a priority use of our capital.

We continue to consider these opportunities as they present themselves, and as you know, this is an unpredictable process.

They mature in the marketplace at different rates and in different markets, and we have to consider them all independently.

We prefer acquisitions or even partnership opportunities that are complementary to our existing strategy -- large urban markets, for example.

We like acquisitions that can maximize benefit from our existing infrastructure -- for example, domestic versus international.

And we really are looking towards acquisitions in markets where over time, we believe that we could achieve a meaningful share of presence.

So having said all that, and those are sort of our desires, we are aware of most all material opportunities that might present themselves in the marketplace.

And as such, we are able really to take a look at most everything.

Just to close on growth through development, our primary strategy, as you know, has been based on the organic capacity within our markets and investing in those markets.

We are pleased that we are in markets that tend to grow faster and have a lot of population concentration.

We now have four hospitals under construction in Salt Lake City area, Orlando, Houston, and Fort Worth.

And typically, and including these kinds of developments, we add somewhere between 400 and 500 beds a year of capacity.

So this in combination with a robust operating strategy that Sam mentioned has really resulted in positive share gain.

But we think about acquisitions.

We have tuned up our acquisition development department.

We are looking at everything that's out there.

And we proceed as we think we can make sense out of them.

Milt, do you want to talk more on -- okay.

I think that's a good description.

Josh Raskin, Barclays.

The volumes -- I just wanted to clarify, when you gave the monthlies, those were not adjusted for leap year, right?

So that February comp of down 3.6%, would that be closer to flat with leap year?

None of those were adjusted.

Those were as reported.

So you have to go through and apply your leap year.

Everybody sort of does it a little bit differently, so we will let you have the actuals that we've given you for those months.

But clearly, there were moving parts in all of them.

Got you.

And then the five factors that Sam went through -- you mentioned the managed care contract, and the no changes, etc.

But are you seeing any changes in benefit design, or deductibles, or things like that that you think may be impacting the consumer as opposed to the actual managed-care contract itself?

Sam, do you want to lead?

I think there are some indications that there are more co-pay and deductible responsibilities out there with our patients than in the previous year.

Is it materially different on a year-over-year basis?

We are not seeing that in a material way in our Accounts Receivable activity.

Milton, I think we had some increase in the amount of co-pay and deductible per account.

But it wasn't so significant that it would suggest that it's the primary reason around deceleration in the market.

There are reasons to believe that the outpatient volumes are more under pressure with respect to deductible and co-pay changes than inpatient volumes.

But it's not so material in our look inside of our receivables that would suggest that that's a primary reason for any deceleration.

Yes, and maybe I can just give you a few numbers on what Sam is referencing.

So I'll just give you some of the collection numbers as well.

So in the first quarter of this year versus last year, we actually collected 2.9% more inpatient cash collections than we did in the first quarter of 2012.

As far as upfront collections, we were up 1.1% over last year.

When you look at the upfront collections rate -- in other words, the average payment per account -- it did go up, but Sam is referencing 7.9%.

So the average is about $257 versus $238 a year ago.

But generally, our collection efforts are going well.

Again, patient cash collection is up almost 3%; upfront collection is still up.

So it's really the volume of upfront collections did decline a little bit, about 6%, in accordance with some of the volume changes.

Tom Gallucci, Lazard Capital Markets.

Thanks for all the insight on the volumes in particular.

I guess just two quick ones.

One, can you remind us of some of the nuances to consider and difference in the characteristics as you shift from traditional Medicare and you see those patients more and more in managed Medicare?

And then just on the exchanges, to the degree you are in networks, are you exclusive with payer, or can you sign up other payers and be in their networks, as well?

Juan, do you want to take those?

We are not exclusive to any payer.

So let's put that one aside.

In the shift from Medicare to Medicare Advantage, the payment schemes are usually the same.

So it's really medical management as a plan may or may not place on that patient.

But from our perspective, there is very little difference.

So from a volume standpoint very little difference, or do you see some sort of an impact, typically?

It's hard to judge that with 28% of the total population.

And in some markets it's even significantly less than that.

In other markets, it's a little bit higher, especially in South Florida, that the overall demand for Medicare business changes.

Hard to see it on that small piece of the overall equation.

I think it's reasonable to believe that there are some impact on demand when it moves from a traditional book of business to a managed book of business.

But it's hard for us to quantify that and see that, given the influx of new patients into the Medicare population.

So it's very hard to discern that.

Typically the managed Medicare population is the younger Medicare population, which may just have less demand by the nature of their age.

Chris Rigg, Susquehanna Financial Group.

Just a follow-up on Josh's question earlier.

One of your peers commented on this earlier this week with regard to the high-deductible plans.

Can you talk bigger picture, maybe if you've seen any change in the seasonal pattern of earnings over the last couple years, not just as it relates to this year?

Because of the adoption rate on the high-deductible side?

Okay, thanks, Chris.

Sam, do you want to address that first?

I do think we have seen over the past three or four years a slight movement into the latter half of the year, especially on outpatient volumes.

We have seen our outpatient activity -- in the fourth quarter in particular, third quarter a little bit less, but some -- a lot of activity in those areas.

More on the commercial side.

We tend to see a lot of commercial activity in our outpatient business to begin with.

Our outpatient surgery as a whole runs about 50% commercial business.

Our emergency rooms run about 30%, and our outpatient imaging tends to have a pretty good payer mix as well.

So as you look at the trends over the past few years, you do see more of a shift toward the latter half of the year on the commercial book of business in the outpatient segment.

So can you attribute all that to deductibles and co-pay?

Possibly.

It's hard to really know.

But we have seen some movement.

I don't know that I can sit here and quantify for you exactly, but I think it's fair to say that there has been a shift.

Sheryl Skolnick, CRT Capital Group.

On the heels of a difficult quarter, you all have put together a really terrific set of prepared remarks across everyone who spoke.

You answered a lot of questions and addressed a lot of issues, and I thank you for that.

It makes it a lot easier.

Thank you.

You're welcome.

Good job.

So my question is this.

We've not talked about your guidance, which you've reiterated.

Can you walk through with us how you get from the weakness in the first quarter to guidance being maintained?

And specifically if you wouldn't mind commenting on whether or not you're still including -- or guiding us to include -- the same level of DSH cut affecting fourth quarter, given your commentary about the proposed rule?

And yes, I get it that it's proposed and not final.

All right, Cheryl, thank you.

And Milton, I think, is prepared for that comment.

Sure.

Sure, I'll be happy to bridge our February 2013 guidance that we gave on the fourth-quarter call to how we see it today.

Of course, we are not revising our range of EBITDA guidance for the year.

But we may get there on a slightly different pathway.

For example, we gave guidance that our adjusted admission growth in 2013 would be 2% to 3%.

I would say now we believe -- our belief is that we will most likely come in at the low end of that range.

With respect to our revenue rate, we gave guidance that we thought we would have growth in 2013 between 1% to 2%.

I would say now we think that that number would be more in the 2% and 3% zone.

So when you look at our revenue growth overall, I think we are still looking at the same level of revenue growth, just a little less volume, but little more rate.

And then with respect to expenses, we had, I think, given guidance that we thought we would come in -- all in, around 2.5% growth.

I would say now, based on the first-quarter performance, adjusting for high-tech, we reported 4.8%.

I think now we are looking more at, even after the cuts and action plans that we've put in place, somewhere probably around 3% to 3.5% would be an expectation.

We gave guidance that our overall Medicare rate for 2013, including sequestration, including what we thought the DSH cuts would be, including what we thought the productivity and coding adjustments would be, we said we thought it would be down in 2013 1.2%.

We now believe that would be closer to being down 0.6% all in.

And so with all those, there's some movements with the details; that still puts us within our EBITDA range for the year.

Thank you, Cheryl.

Kevin Fischbeck, Bank of America Merrill Lynch.

Okay, great.

Thanks.

So I guess when we think about the cost initiatives, I'm just trying to think about how -- it was helpful, that last comment about bridging the gap.

But is there a thought that you kind of hit in Q2 here on that run rate, or should we expect an acceleration of the cost saves as the year goes on?

Sam or Milt?

Most of our actions were accomplished by the end of March.

We had some residual actions that would affect us in the second quarter because of certain timing of events and so forth.

The majority of our efforts to adjust our costs to line up with what we thought our volumes were going to do for the rest of the year were accomplished by the end of March.

And so you should see a full benefit of that as we move through the second quarter, assuming we get the volume we are anticipating.

Obviously our per-unit metrics are very dependent upon the volume because of the fixed-cost nature of our business.

Therefore, if we are a little better, we should see better cost per unit, obviously.

And obviously a little worse if we don't get the volumes.

So the actions that we've taken were 80% implemented by the end of the quarter, and there's maybe 20% or 25% that wasn't implemented that most likely will be implemented sometime in April.

And we'll get the benefit of that going forward.

Darren Lehrich, Deutsche Bank.

Just was hoping you might be able to update us on your process to evaluate the CA impact.

I know you've said that will come later in the year.

I guess given all the uncertainties that still remain uncertainties, I'm curious about how that process is coming along, and if you've got any updates for us in terms of timing and format of that.

Milton, do you --

Sure, Ralph.

Well --

No, it's Darren.

Darren -- I'm sorry, Darren.

We are not going to set a date for that information just yet.

You referenced still a lot of uncertainties.

Quite frankly, earlier in this year, late last year, we thought there might be more certainty.

Take, for example, expansion of Medicaid.

Still, I think, a lot of uncertainty around that.

And so as we are making progress on our exchange contracting, that's been helpful.

But we are going to remain, I guess, uncommitted with respect to a date.

But as we continue to get more clarity, we do expect either later this year, certainly no later than probably the time that we would issue 2014 guidance, that we would be giving a multiyear view.

But not going to set an expectation for a certain date today.

And I will just add, as we go, we are trying to -- each quarter we are trying to update with the relevant information, as we did this morning.

So as it unfolds for us over each quarter, we will try to update you on key points.

Frank Morgan, RBC Capital Markets.

I will follow up on the question related to Medicaid expansion in Texas.

Let's just say for now Texas doesn't opt in.

I'm wondering if you have had a chance to really look at the opportunity in Texas in this subsidized part of the market.

My understanding is that 139% up to about 250% of the federal poverty level would actually qualify for essentially full subsidized coverage.

So I wonder what -- have you looked at that for you in Texas?

Like if we don't get Medicaid expansion, does that -- is that a big opportunity?

For what segment of the market would that be for you?

And then how would you go about the process of outreach to sign that market up?

I think, Milton, you win that one again.

Okay, yes.

If you don't see Medicaid expansion -- and this is true for Texas, but also other states -- we do expect you'll see more uptake from that population, especially at the lower wage rates and poverty level.

And they would come into the exchange a certain amount.

So -- and that, I think, would be a positive for us, to help offset having fewer lives covered in a market.

So I do agree with that, and that's how we're thinking about it from a modeling standpoint, if in fact you don't see expansion.

And on that last piece of your question, where you said, you know what -- about enrollment in the marketplace -- let me just give you a more general comment about how we're thinking about that.

Of course, enrolling in these plans is important.

And we have thought a lot about how we should proceed in this.

To that end, we engaged an outside group that has been working with us, doing a lot of focus groups in key markets, understanding what activities might be in the given markets.

We don't want to duplicate anything, make sure that any efforts would we take would be complementary in nature.

We are infusing that logic with all the quantitative research that we've done about the uninsured.

And so we have a pretty robust set of analysis going on to figure out how we should participate in this effort.

But we have not obviously put anything out yet, and we are continuing to fine tune that effort.

So more on that as we work through our process.

Matt Borsch, Goldman Sachs.

Just not to beat the volume topic to death, but let me just try one more.

Have you looked at the pattern of prior serious flu seasons?

And I guess looking back, I guess you have to go back 10 years ago, maybe that 2003/2004 season.

Did volumes drop off as the flu abated there?

Just wondering if there is some precedent on that front.

Sam, we are going to test your memory here.

I can't give you any specifics on the flu from 10 years ago.

I will tell you this.

For the quarter, our inpatient activity was positive by 0.5 point related to the flu.

Our emergency room activity was down 0.5 point because of flu activity on a year-over-year basis.

It's important to understand for HCA -- I was telling the team this before the call -- our admission activity, our average daily census, and our ER volumes in the first quarter of 2013 was the highest volume the Company has had in 17 consecutive quarters.

And probably if I had data in front of me beyond that, it would be even more.

It's probably the highest we've had since the Columbia HCA days, when there was over 300 hospitals in the portfolio.

So our overall volume was at a peak.

It wasn't on outpatient activity that are dependent on calendar days and/or surgical activity, which depend on calendar days, but our overall volume was very strong in aggregate.

And so how the flu reacts -- I mean, December in the fourth quarter for HCA of 2012 was a record year-over-year kind of growth on both inpatient activities and adjusted admission activity, a lot of which was written by the flu we were seeing early in December in a lot of our states.

So there was that kind of dynamic going on, too, where it straddled both 2012 and 2013.

So it's really hard for me to give you any sense of it, but the flu does affect our business, and it comes and goes.

And it can be very short.

It can be protracted.

It's hard to say exactly how it's going to change from one period to the other.

That's great perspective.

Thank you.

Thank you.

I am debating with myself right here -- we've had 12 questions.

We do number 13 or not?

I'm going to take a chance.

We are going to take one last question; just don't throw me a curveball.

Gary Lieberman, Wells Fargo.

I guess 13 is my lucky number today.

I hope this isn't too much of a curveball.

Maybe going back to the Medicaid expansion -- would be interested in your observations and maybe your thoughts on how you see the politics or the process playing out in Florida and Texas, and how they decide on what they're going to do?

Boy, so you did throw the curveball; it came to me.

So you know what?

We are all reading the same press.

We obviously have folks in both places.

I think clearly, if you look at Florida and Texas, there's probably greater odds for something to happen in Florida.

But it's getting down to the wire, and they've got, I guess, until the end of the week for this session to end.

And so again, it's a moving part, and I don't want to place any bets one way or the other there.

Clearly we are supportive and would like to see it go in that direction.

But we will just see that play out.

There's always the opportunity for a special session.

Whether or not that would happen or not, again, is anyone's best guess.

Texas is probably a little -- maybe a little more political at this point.

There are folks down there that would like to see it move forward.

You also have the situation where that session -- they meet every other year.

So if they don't get something done here pretty quick, we are not going to likely see a special session until the year after next.

So I would say coin toss is maybe a two-headed coin in one state.

With that, I want to thank everybody for their participation.

I know Mark is excited to take all your calls this afternoon, and I will be here as well.

Thank you for participating.

This does conclude today's conference.

Thank you for your participation.