環球健康 (UHS) 2008 Q3 法說會逐字稿

Good morning. My name is Amber, and I will be your conference operator today. At this time, I would like to welcome everyone to the Universal Health Services third quarter 2008 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speakers remarks, there will be a question-and-answer session. (OPERATOR INSTRUCTIONS).

Thank you, Mr. Filton you may begin your conference.

Thank you, good morning. I'm Steve Filton. Alan Miller, our CEO is traveling this morning and due to some logistical difficulties, could not join us. Welcome to this review of Universal Health Services results for the third quarter ended September 30, 2008. As discussed in our press release last night, the company recorded net income per diluted share of $0.73 for the quarter, representing a 14% increase over the adjusted net income per diluted share earned during the third quarter of 2007 as calculated on the supplemental schedules included with last night's press release. We earned $3 per diluted share during the nine months ended September 30, 2008 representing a 29% increase over the adjusted net income per diluted share earned during the first nine months of 2007. During this conference call, I will be using words such as believes, expects, anticipates, estimates and similar words that represent forecasts, projections and forward-looking statements. For anyone not familiar with the risks and uncertainties inherent in these forward-looking statements, I recommend the careful reading of the section on risk factors and forward-looking statements and risk factors in our Form 10-K for the year ended December 31, 2007.

I would like to highlight just a couple of developments and business trends before opening the call up to questions. Revenues for the third quarter increased 7% over the prior year's quarter. Exclusive of the impact of new facilities, most notably Centennial Hills in Las Vegas and the revenues related to a construction management contract, revenues have increased by 5%. On a same facility basis in our acute care division, revenues increased 2.5% during the third quarter of 2008. The increase resulted primarily from a 3.7% increase in revenue per adjusted admission. Admissions to our hospitals owned for more than a year were down 0.8% for the quarter. In the Las Vegas, Nevada market, although the opening of the Centennial Hills has negatively impacted our same-store admissions comparisons to the extent it cannibalized some of its volume from our existing facilities, the better than expected operating results at Centennial Hills contributed to a greater than 10% increase in total admissions in the market during the third quarter of 2008 over the comparable quarter of 2007. In addition, as we have previously disclosed, newly constructed capacity at the physician owned hospital in McAllen, Texas opened during the fourth quarter of 2007, unfavorably impacting our admissions in that market.

We define operating margins as operating income or net revenue less salaries, wages and benefits, other operating expenses, supplies expenses and provision for doubtful accounts, divided by net revenues. On a same facility basis, operating margins for our acute care hospitals decreased to 11.8% during the third quarter of 2008 from 12.6% during the third quarter of 2007. The margin decline resulted primarily from the slightly negative admission growth and increases in uncompensated care expense. Our acute care hospitals provided charity care and uninsured discounts based on charges that establish rates amounting to $154 million and $148 million during the three month periods ended September 30, 2008 and 2007. Even adjusting for certain reclasses between charity care and other discounts, the percentage of net revenue, bad debts, charity expense and the uninsured discount in the third quarter were at levels higher than those we experienced for the third quarter of 2007. On a same facility basis, revenues in our behavioral health division increased 9.5% during the third quarter of 2008. This increase resulted from increased patient volumes and an increase in revenue per adjusted patient day. Admissions to our behavioral health facilities owned for more than a year increased 8.5% during the third quarter and patient days increased 3.9%. Revenue per adjusted day rose 5.3% during the third quarter of 2008 over the comparable prior year quarter. Operating margins for our behavioral health hospitals owned for more than a year increased to 23.7% during the quarter ended September 30, 2008 as compared to 22.3% during the comparable prior year period.

Our cash flow from operating activities was approximately $197 million during the third quarter of 2008 as compared to $164 million in the third quarter of 2007. At September 30, 2008, our ratio of debt to total capitalization was 38% and the ratio of debt to EBITDA was 1.69. We spent $84 million on capital expenditures during the third quarter. Included in our capital expenditures were the equipment costs related to the new 165 bed Centennial Hills Hospital in Las Vegas that opened in January and construction costs related to a new 171 bed hospital in Palmdale, California that is scheduled to be completed and opened in 2009. In Las Vegas, we are also underway with a major bed tower expansion of our Summerland Hospital and in California, we are in process with a major expansion of emergency room imagining and women's services to our Southwest Health Care campuses in Riverside County, California. I am pleased to answer questions at this time.

(OPERATOR INSTRUCTIONS). We will pause for just a moment to compile the Q&A roster. Your first question comes from Adam Feinstein.

Okay, thank you. Good morning, Steve. Just starting with Vegas. I want to make sure I heard the numbers that you highlighted before. With Centennial Hills led to a 10% increase in total volumes but on a same-store basis, I want to make sure I got the right number.

Sure. I didn't give a same-store number, but on a same-store basis, the Vegas admissions were up sort of modestly, better than our overall acute care performance, but obviously, still depressed somewhat by the Centennial cannibalization.

Okay. As we think about EBITA growth or EBIT growth for Vegas, just trying to figure out if margins moved higher in the quarter, so if admissions were up slightly, was EBITDA up slightly as well?

No, I think overall profitability was relatively flat, meaning that operating margins were down slightly. I think as you would expect with the opening of Centennial, clearly, our operating margins in Vegas prior to the opening of Centennial were better than our average acute care operating margins. Once Centennial opens even though Centennial was slightly EBITDA positive in the third quarter, it clearly drags the margins of the market down. Again, I think those are dynamics that we saw when we opened Spring Valley in late 2004 or 2003, I'm not remembering exactly. But I think what we saw is within four or five quarters of its opening its margins, and the margins of the market got back to sort of the normalized level and we would expect the same with Centennial early in 2009.

All right. And one more quick thing on Vegas, it is just clearly, it seems like you guys are holding up pretty well even with the economy being somewhat tough out there. So it seems like market share growth is really helping. What else are you you guys doing out there? Is there opportunities to cut costs? Is there still some pricing opportunities? So just curious as you guys are thinking about weathering the storm in terms of how we should think about that important market?

I mean in fairness, Adam, I don't know that we are doing -- our approach in Las Vegas is totally different than it is everywhere else. Our volumes, as we discussed with our opening comments and questions, are actually holding up fairly well. So it is difficult to cut expenses if a very significant way.

Sure.

We are seeing, again, as we have seen throughout the portfolio, a little bit in the third quarter, some incremental decline in payer mix quality. There's not a ton that we can do about that, beyond what we are already doing in terms of up front collections, et cetera. So, I mean the interesting dynamics in Vegas are you know all of the sort of negative statistics, it is leading the nation in foreclosure rates, unemployment is higher than the national average, but the amount of unemployed -- or excuse me, the amount, the absolute amount of employed people in the market has remained actually relatively steady which mean that is I think people continue to move into the market, perhaps not at the same rate as was happening a year ago, but there's definitely a positive population growth factor in the market, and I think that's helping us support overall volumes. As I said earlier, I mean I think we will benefit just as Centennial continues to ramp up, it will -- its margins will improve to sort of market wide margins as we experienced with, with Spring Valley, and I think that will all be helpful as that occurs.

Okay. Just my final question, just on the psychiatric side things, things were very strong on the quarter. Just curious to get your thoughts in terms of what was driving that and how much of a benefit you guys would have received in the quarter from new beds.

Actually, the amount of incremental new beds in the quarter was relatively small. We don't add beds radibly, so we had a fair amount, a couple hundred beds added in the first half of the year, not too many in the third quarter. We will add some more in the fourth quarter. We are still benefiting from beds that have been added over the last few years and again, we had 9.5% same-store revenue growth. We have talked about a sustainable number being in the 6% to 8%. So obviously, we are exceeding our own expectations there. At those levels, we would expect ,and we did, improve margins and I think if we continue to sustain that kind of growth for even a couple of quarters, we will continue to expand margins. Demand in that business continues to grow, pricing holds steady. Probably the single greatest risk in the behavioral business is the threat of Medicaid price reductions in various states. We have seen some already, but obviously, even to the degree that we have seen some, our pricing is holding up fairly well. So results in that business, I would say seem to be proving, if not recession proof, certainly fairly recession resistant.

Okay. Thank you, Steve. Appreciate the detail.

Thank you.

Our next question comes from Justin Lake.

Thanks, good morning. Just a couple of questions on the volumes first. Steve, can you kind of walk us through the trajectory of volume growth monthly for the third quarter and maybe give us an update on October?

I think as we had discussed in various conferences, et cetera during the quarter, before our quiet period, it was a little bit of a volatile quarter. It started off in a fairly normal way in July. August volumes were quite weak. I don't know if that was a function just of the calendar, but they (inaudible) volumes then rebounded in September, and finished as you can see, obviously sort of slightly down from where we were in the first half of the year, but not terribly off. October also started off a little bit soft, but seems to be strengthening as the month goes on and my sense is we will finish October with same-store volumes that are relatively as good as, if not a little better than the third quarter comparisons. Let me just make a couple of comments, I think we touched on this before. We've disclosed previously that we've seen a significant declines in volumes in the McAllen market, mostly OB related volumes since the fourth quarter of '07. We attribute somewhere between 100 and 150 basis points of overall volume decline to that change. That change will anniversary at the end of the third quarter, and so we will get back to same-store numbers in the McAllen market beginning in the fourth quarter. And then, the Centennial cannibalization we estimate is worth about 50 basis points. So our general sense is that rather than 0.8% decline that we report, actual admission growth throughout the portfolio is more like 1.5% or so for the quarter, which is still a little bit less than it was in the first half of year, but not too bad and I think once we anniversary McAllen next quarter and we anniversary Centennial in the first quarter of '09, we will start to get back to hopefully the 2% to 3% same-store admission growth that we have really kind of been basing our models on.

That's helpful. And can you walk us through the increase in volumes by payer type? I know that was a big help in the first half of the year and maybe moderate it a little bit. Can you give us those numbers volumes by commercial versus Medicare, Medicaid and uninsured.

Sure. We discussed I think in fairly great detail in the first two quarters that one of the things that drove our out size and better than expected performance if the first half of the year was the fact that our commercial volumes were rising faster than our overall volumes, and our uninsured volumes in the first half of the the year were rising a little slower than our overall volumes. I think what we saw in the third quarter was a bit more of a reversion of all volumes to the mean, if you will and all of our volumes seemed to track fairly consistently. So managed care volumes were going up at about the same rate as overall volumes, uninsured volumes were going up at about the same rate and as a result, you clearly see that in the decline in revenue per adjusted admission, down to 3.7% from a number that was in the 6% to 7% range in the first half of the year.

What does that mean for next year? Can you give us an idea of as we think about '09, I know it's a little early to give guidance, but with all of those -- with flu benefiting in the first quarter and then first half benefiting -- from what seems like a significant payer mix shift to the positive, can you give us an idea of what kind of headwind that will create as far as earnings growth for the first half of '09?

I mean I think that we have sort of thought about our acute care model for some time now, the sustainable model being same-store admission growth in the 2% to 3% range and same-store pricing growth in the 4 to 5% range and obviously, the $64,000 question for us and for the industry is to what degree those metrics might be impacted by a deepening recession, will we see lower commercial volumes, will we see more uncompensated care, will we see some greater pressure on elective or discretionary procedures. I think that we saw incremental effects of that in the third quarter, but not terribly significant and to be honest, part of why we don't normally give guidance during this quarter, we normally give it in our fourth quarter call, but partly why we wouldn't do it in this particular year is trying to get a better sense of really how confident we are in those metrics that I just outlined and how much we think it is likely that they will be affected by the overall and overarching economic conditions.

Okay. Last question on cash flow, looked like you bought back a lot -- or paid down, I should say, a lot debt in the quarter. Given where the stock is now versus where it was in the third quarter, can you give us an idea of what your capacity would be as far as share repurchases and what you are thinking there as far as how aggressive you want to be once -- and let us know when the window opens for you to start buying back again? Thanks.

Sure. I do -- I will make one point because somebody did ask me this question earlier today about why we were not more active acquirers of our own stock in the third quarter. I just reminded somebody when we entered our quiet period in mid September, our stock was trading in the mid-60s. So, over the last six weeks, as our stock valuation has declined considerably along with everybody else, we have been unable to buy shares because we have been in our quiet period. Our quiet period will end two days after the press release. We certainly have not made any commitments about how we are going to spend our free cash, but we do have slightly less than 4 million shares under previous buy back authorizations and with our stock trading, depending on how you want to look at it, but somewhere in the 4.5 to 5 times EBITDA range, I would say that it is hard to imagine we will find a lot of other opportunities to buy other earnings streams at more economic prices. So, certainly share buy backs are going to be something we are going to look at and consider very carefully in the fourth quarter and going forward.

Great. Thanks a lot, Steve.

Okay.

Your next question comes from Tom Gallucci.

Good morning. First, Steve, I guess -- I'm not sure if I missed it there, but did you comment on guidance at all?

No, we did not mention guidance in the press release. I thought that that made it clear that we were simply reiterating the guidance that we had given at the end of the second quarter, but I am glad you asked the question because clearly, some people were a little confused. We are simply reiterating the guidance we had given at the end of the second quarter, which was 3.80 to 3.90 for 2008.

You can never be too careful in this market. So obviously, relative to consensus, you were a little bit lower in the quarter. Can you comment at how you were versus your internal budget in the quarter and how you're thinking about the fourth quarter then as a matter of perspective?

Sure. Again, before our quiet period began in mid September and a couple of times that we spoke in the third quarter, we obviously noted we don't give quarterly guidance, but sort of intimated that our own internal projections were generally lower than the street in the third quarter and higher than the street in the fourth quarter. We actually met and frankly, exceeded our third quarter internal expectations by a couple or pennies. And again, to be perfectly honest with you, I have not checked recently given all of the volatility, but at least a month ago or so, our own internal expectations for the fourth quarter were a little higher than the streets.

Thanks. And then on Medicaid, you mentioned before,obviously there's some risk there given state economies. Can you talk about anything that's on the table right now in the states that are meaningful to you and maybe also remind us in order of magnitude what the couple of top states are in terms of your Medicaid exposure specifically.

Sure. Well, I think the good news is that our state with the number one Medicaid exposure is Texas. It is primarily acute care exposure in that state. And the good news is that amongst the 50 states, Texas generally ranked among the highest in terms of its economic performance and lowest in terms of budget pressures and budget short falls. Texas has talked little about needing to do any budget cut backs. In fact, while we haven't seen our Medicaid rates and disproportionate share dollars finalize for the fiscal year beginning -- that actually began in September of 2008, our general sense is that we are doing pretty well and will do pretty well from a Texas Medicaid perspective. The states that follow that in order of exposure are maybe, not necessarily exactly in this order, but California, Florida, Nevada, every one of those states has implemented Medicaid cuts, all I think in July of '08. We have commented before that each of those states have an impact -- or the cuts in each of those states have an impact of a couple of million dollars a year annually each. At least California and Nevada have talked about going back and having special legislative sessions and taking another crack at further budget cuts presuming that again, their order, same order of magnitude you can, you have a sense of how meaningful that is to us. Obviously, we have a lot of Medicaid exposure in a lot of other states, most of the other states are behavioral -- it is behavioral exposure. There have been a lot of states that is have looked at their Medicaid budgets. Some have already implemented cut backs. I don't think anywhere else that's either had Medicaid cutbacks or contemplating them will prove to be individually material. Obviously, from a cumulative perspective, if 25 states go back and cut Medicaid pricing, it is likely to have an impact on us, but not in the way that if Texas went and implemented a 10% Medicaid reduction.

Thanks a lot, Steve.

Your next question comes from Ralph Giacobbe.

Thanks, morning. So going back to pricing, you mentioned obviously, there's a big drop off on the acute care side of the business and you talked a little bit about payer mix contributing to that decline or that deceleration. Can you talk about acuity mix in the quarter and if there's anything there?

Ralph, I think our acuity mix has been pretty stable and as we looked at it in the third quarter, it seemed to be within about a 100th or 200ths of where it's been running in the first six months, so we are not sensing any significant change in acuity.

So I think for the first half of the year, it was up a couple of percentage points in terms of acuity mix, so that sustained in the third quarter.

Well, it is sort of my same comment about payer mix. You reverted back to the mean in the third quarter, maybe dropped down those couple of 100ths of a point that we saw rise in the first half dropped a little back down to where we have been running in the third quarter, but nothing terribly material.

Okay. Was there any material hurricane impact for the quarter?

No. We had a few hurricanes come by facilities in Florida and Texas. I don't think that, certainly in any one market, it was material, probably measured more the hundreds of thousands rather than millions of dollars and even cumulatively, I would have to say I don't think it was material.

Okay. Then just in terms of going back to the margins, same facility margins obviously saw a little bit of decline both sequentially and year-over-year. Is there something that we shall think about that maybe skewed that number or is this -- is that the type of sort of margin we should expect if volumes maintain in a flattish range?

I think it is absolutely the function of having same-store acute revenue rise by 2.5%. I think it is very difficult to have margin expansion at those levels. I think our hope as we move forward is that both volumes and payer mix could improve a little bit. Again, back to the metrics that I think I outlined when in answering Justin's question before. At a level of say, 2% to 3% same-store admission growth, which is a level we have sustained for most of the last four or five years, and 4% the 5% pricing growth which again, is a level we have sustained for most of the past four or five years, I think we ought to be able to have margin expansion or certainly keeping margins at least steady. I think the reason you didn't see it in the third quarter was we fell short of both those metrics by at least just a little bit.

Okay. Then just my last one, going back to use of cash, it sounds like share repurchase would be a top priority if the shares held in at these types of levels, but I think last quarter you talked about -- you were talking more about acquisitions and there was a fairly large number of players out there looking to acquire, my guess is that number is significantly down now. Can you maybe talk about if you have seen anything, maybe early, but in term of where valuations are out there in terms of acquisitions and how much that dried up just given the market?

Sure. I think you captured our mood correctly, Ralph. We were fairly active acquirer of our own shares in the first quarter of this year, and then after that we said we were going to take a breather and take look at the M&A market. We certainly were conscious of the fact that credit markets were tightening at that point. We thought that being as delevered as we are, we were in pretty good shape and that the tightening of the credit markets would cause not for profits to struggle a little more than they have been over the last few years, would cause them perhaps to think more about potential sale alternatives, and it would eliminate some of our more highly levered competitors from participating in that M&A process which has been fairly competitive the last few years. The reason I am a little less enthusiastic about those opportunities today is that obviously, public valuations of hospital companies have come down dramatically, and my experience in history shows that those sorts of changes in valuation don't necessarily percolate their way through not for profit sector quite as quickly. So I am just guessing, and it is purely a guess at this point, that there's going to be an expectation gap between what sellers think their EBITDA streams are worth as they go to sell them and what we or others might be willing to pay. So that's why I suggested in a response earlier that at 4.5 or 5 times EBITDA, at least in my own mind, it is going to be hard for us to find other opportunities, again, more attractive or more compelling than our own shares.

Okay. Great. Thank you.

We're certainly open to it, but that's just my gut reaction.

Our next question comes from is from Matthew Borsch.

Hi, thanks. This is Shelley Gnall on for Matt Borsch. Just a quick question, Steve, if I could, on Las Vegas. Can you confirm that you are actually taking market share from your competitors in Las Vegas or what is driving that 10% growth?

Yes, Shelley. I think clearly, there is publicly reported data out there, I am sure there is a number of sources we use, Intelemed data and I think the Intelemed data shows that for -- obviously, we took a significant amount of market share when Sierra terminated their contract with HCA back at the end of 2006, but I think even since then, we have really seen our market share continue to increase, obviously, a little more incrementally, but every quarter since then, we have continued to take additional market share, and now the gap which for many, many years was very small between our market share and HCA, is now probably a good 10 percentage points.

Do you see that opportunity continuing to -- can you see further market share from here?

Again, I think that the growth of Centennial and the continued ramp up of Centennial will help us. I mentioned in my prepared remarks that we are doing some major expansion, the third major expansion of our Summerland facility in its ten year history, and I think actually, volumes at Summerland at the moment are depressed a little bit because of all of the construction activity on the campus, but I think it will l be helpful. Essentially, we are really doing all of the capacity expansion in the market. I do think that will help us to at least try and increase our market share. Obviously, our competitors are certainly going to work hard to keep market share, but I think we are very well positioned in the market.

Okay. That's very helpful, thanks. Then just one follow up, as we think about margin expansion or pressure. If we do see an admissions slow down from here, can you talk a little bit about fixed versus variable cost, especially in the SG&A and the other operating expense line?

Yes. I mean again Shelley, I think that we run what is largely a fixed and semifixed cost business. And so like in the first half of the year we saw the positive leverage that one gains from that when you have same-store revenue growth in the acute division in the sort of 6%, 7% range and in the behavioral division at the 8% to 9% range. You saw how much operating leverage there is in the first half of the year with expanding margins, et cetera. In fairness, you have the same dynamic working the other way. If you can't have some modest same-store admission growth and some descent pricing growth, which has not generally been a challenge in the last few years, yes, you are going to have trouble. We certainly have efforts underway at every one of our hospitals that is facing some either volume or payer mix softening to look at any cost that we can to reduce or try and eliminate. But in fairness, it is not like we have a universe of variable costs that can easily be cut. There's a certain amount of supply costs that it is easily associated with every incremental patient and there's a small amount of salary expense that's clearly incremental, but after that, it becomes a lot more challenging.

Yes. Okay, appreciate it. Thank you.

Your next question comes from Erik Chiprich. Erik, your line is open.

Can you hear me?

Yes.

Oh thanks, Steve. Good morning. Just wanted to see, could you give a breakdown on the $154 million, how much was charity care and versus the uninsured discount.

I will find that. If you have other questions, why don't you go ahead.

I sure do, thanks. An I was curious on the pricing side, can you talk a little bit about managed care rate renegotiations? What percentage is done for 2009? When does 2010 start and what kind of rates are you seeing or would you expect to see?

Sure. Well, a couple of things. I think that the vast majority of our contracts for 2009 are fixed at this point. And I am guessing, I don't actually have the information in front of me, but I am guessing somewhere between one-quarter and one-third of our rates for 2010 are fixed. I think from a managed care pricing perspective, the environment remains very positive. We have talked about getting managed care pricing rates in the 6% to 8% range for some time now, and I think we have been on the high end of that range for a while now, and again, I don't necessarily see that changing as we move forward. I certainly think that managed care companies will attempt to control utilization and reduce medical costs in other ways, but I think pure contractual pricing is not likely to be a pressure point. Let me also just give you those numbers while I have them front of me, Erik. So charity care for the quarter was $123 million and the uninsured discount was $31 million.

Great, thanks. And then, could you talk a little bit on the supply expense as a percent of revenues? That looks like that was flat year-over-year and I think you guys had entered into a new group purchasing agreement. I wanted to see if there's still room it's savings there, or what was offsetting that in the quarter if acuity was holding steady?

We entered into a new group purchasing organization arrangement in April of 2008. I think we have benefited from that to the tune of probably a couple of million dollars in each of the second and third quarters. As I look at operating expenses broadly meaning salaries, supplies, other operating expenses in the third quarter exclusive of bad debt expense, they rose about 3.5% per day. And I think that's pretty good, and I don't know that we can do a whole lot better than that. So this gets back to Shelley's previous question. The reality is, the way you get operating leverage is with more volume a little bit better pricing, but in term of sort of absolute costs, 3.5% per day increase in cost is going be hard to better.

kay, that's helpful. Then if I could, just one last bigger picture question. I was wondering if you can discuss for us, what is different in this recession versus the last recession in your opinion that would make volumes fall greater or be more resilient?

Well, first of all, Erik, you are asking me to be smarter than most in terms of telling you exactly what this recession is going to be like, and I certainly am not sure that I am nearly that smart. I would say though that the one difference that I see between this and the recession in 2000-2001 is that in those intervening five or six years from a hospital provider perspective, we have seen a dramatic decline in the number of people who have health insurance through their employer. Either there are far less people who have it through their employer and those that have it certainly have responsibility for a much larger share of the hospital bill, meaning they have higher copays and deductibles. I do think it is possible that as we enter into this recession, that the amount of incremental impact from having people lose their health insurance from their employer or have less health insurance through their employer may be less than it was in the last recession, just because I think the underlying market infrastructure and benefit plan infrastructure has changed some. I know, and I think I have mentioned this to many people who I have talked to like in Las Vegas, where a lot of the weakness in that market, at least initially, was in the construction trades and the construction industry. Our own operating folks have said to me they don't necessarily view that as incrementally impactful to them only because these are people who, for the most part, didn't have health insurance through their employers anyway. So if they got laid off, the incremental impact on us was not going to be wholly different. Again I'm not smart enough, Erik to tell you how that dynamic translates into what we might expect happen on compensated care, what we might expect to happen to volumes, but I do see that as the one significant change from the last recession that we went through six or seven years ago.

Great. Thanks for the perspective.

Your next question comes from Gary Lieberman.

Thanks, good morning. Can you just -- it sounds like you would be out about 144 million of potential stock you could buy back, number of other capital projects. Can you just remind us on the credit lines that you have available, that you might, you would be willing to use to potentially repurchase the stock?

Well, again, Gary I'm not going to make any commitments about what we might repurchase or not, but at the end of the quarter, we had at least $0.5 billion, $500 million of unused credit facilities either under our revolver or under our commercial paper facility. We have approximately $1 billion under those facilities and only about half borrowed, maybe a little bit less than that at the end of the quarter.

To you think your likelihood -- or not likelihood, but your potential willingness to use it has changed at all in the tighter credit market?

We have talked about these sort of dynamics before. Certainly one of our overarching goals is to keep a close eye on our investment grade credit rating. We feel, frankly, more comfortable than ever that we have worked hard to keep that investment grade rating, and I think we would be reluctant to give it up in this environment because I think in this environment -- and this is the argument we have made all along, that the difference between investment grade credit and a non-investment grade credit is generally meaningful. It hasn't necessarily been meaningful over the last few years, but the long term it has been meaningful and I think in this market, has now become very meaningful again. So we are going to be anxious to watch that. Other than that, like I said, we will evaluate share buy back opportunities versus any other opportunities that come along both in terms of internal and external development. We feel good about the fact that because of our relatively delevered position, we have a lot of flexibility and this is why we have always kept that sort of delevered position to afford us this sort of flexibility, and we think it is going pay off now.

Any thoughts on how much of the revolver you would have to tap before you would risk the investment grade credit rating?

The problem, Gary, as I am sure you can appreciate, is in this market, what you thought sort of where your -- the operating metrics under your rating agency agreements or rating agency reviews, a week ago may be different than they are today. So it is a very fluid situation. So I would be reluctant to sit here today and say, we know we could borrow this much and not lose our investment grade rating. So it is something we will work closely with the rating agencies over, we'll watch the credit markets very closely. But again, I think at the end of the day, we will have a fair amount of flexibility and view that as a very positive thing.

A quick follow up. You have talked about a number of the pressures that potentially you can see because of the economy. On the flip side, could you talk about potential benefits you have either seen or might potentially see as your access to labor improved or have any commodity costs or anything else had any material benefit on you you so far?

Sure. Again, I'll go back to what I was saying to Erik was that our operating costs, even in a relatively soft volume environment, were only up about 3.5% per day. And I think as you, I think, sort of intimated in your question, that's probably a function of the fact that we have seen a little bit of pressure relieved from our labor costs, which I think the sort of typical of a recessionary environment. We have seen supply costs, really now for a couple of years after a few years of a lot of pressure on particularly our high end cardiology and orthopedic supplies, we have seen supply costs ease off even before we switched our GPOs. So I think we see that sort of thing. I think we will see as you often do, in a recessionary environment as well, some easing up of competition. We have seen huge amount of capital investment from our not for profit peers over the last few years, and I certainly believe that that level of spending will decline. I think we will see some of these niche providers, small physician-owned entities suffer some if we see pressure on volumes or payer mix. So, there are some advantages to being a strong, solid player in a difficult environment, and we certainly think we are positioned to enjoy those advantages as we go through what I'm sure will be a challenging at least next few quarters.

Thanks a lot.

Your next question comes from Darren Lehrich.

Thanks. Hey, good morning, Steve. A couple of questions here left. I just wanted to ask you a little bit more about your 2009 budgeting process and maybe just step back a little bit for us and give us a sense for where you are in that process, how you see it being different than prior years, just given the economic backdrop and just wanted to hear from you how you guys are approaching your budgets any differently.

Well, we have just started the process. Our budget cycle really starts at the end of October, goes through November and early December, almost through the holidays. t is interesting, Darren, what we ask our operating folks to do is obviously, to tell us what they're seeing in their markets in terms of economic conditions, how it is affecting physician practices, and what I was saying to Gary in terms of the competition and how they're being impacted by the weakening economy. But again, it is a lot to ask, I was saying Erik before, it is a lot to ask me to project what the impact of this recession is going to be on the company. I think it is a lot to ask an individual hospital CEO or CFO to really factor through what they think is going to happen to volumes and payer mix in their markets. We do ask the question, we try and get the best read that we can. Then we will sit down as we accumulate and consolidate and compile all of our budgets and try to make some judgments at a macro level in terms of how realistic and how accurate those projections are. It gets back to what I was saying though before, we would certainly love to have a couple of more months of operate results under our belt to have a better feel for it ourselves before we make those projections for next year.

And just to get inside your head and maybe senior management's as you hear what your local operators have to say and what they're seeing, I mean what kinds of things do you think you will be challenging differently in this cycle? I just want to get a sense for how you might be seeing the world differently than what your local folks might be seeing.

This is like the movie Being John Malcovich, I don't think you really want to get inside my head. (laughter) Again I think what you get from our local operators is sort of a lot of anecdotal stories about physicians talking about seeing some slowing down of activity in their offices. You obviously, in every market, will get stories of some amount of disruption in the market in term of layoffs, et cetera. And obviously, that varies market by market. We have talked about feeling that pinch now for a good three or four quarters in the Florida market, but not so much in Texas. We felt the payer mix decline a little more acutely in California in the third quarter than we have felt it before. But not so much from a volume perspective in those California markets. So again, every market has a little bit of a different narrative. Obviously, it is hard to find a market anywhere that is untouched by what is happening, and so we are try to take all of these separate and discrete data points and accumulate them in some meaningful way to come up with a more cohesive narrative and ultimately, a cohesive budget and financial model for next year. So this will be more challenging than it is in the normal year, but everybody is very focused on it and I think the good news from the third quarter is that despite all of the overarching disruption, our business continued along at a relatively steady pace. We saw a little bit of weakness in the acute business that we made up for in behavioral and lower capital costs or interest costs, but generally, the business remained pretty steady in the third quarter.

Right. Two more quick items, please. The other segment where we have these management contracts, I guess that was a little bit higher than what we were looking for. Can you just give us a sense for how long that new contract lasts if it is more than one, if you could identify that and then the pass through costs. We should see those going forward at the other OpEx line, is that correct?

Yes. So I think in the third quarter, there was about roughly $25 million or so of other revenues and $22 million of other operating expenses and $2 million or $3 million of EBITDA associated essentially with one construction management contract we had, maybe had a little bit of profit as we closed out the first contract that we had. Right now, that's all we have is this one on going contract, we continue to work to get some others, but nothing firm at the moment. The one contract we do have probably continues in a material way for another material meeting at the revenue and expense line for another two or three quarters. From an EBITDA perspective I'm not sure that it is enough to move the needle in any of those quarters.

Sure, great. Last for me here, your comment about Vegas was that the earnings were roughly flat. The minority interest line though was also, it was pretty flat, actually down year-over-year. Can you just comment on GW and how that may have impacted that line item and performance there?

I think actually, GW had a positive quarter, so I think that whatever weakness you see in that minority interest line, other than the flat Vegas results, is really just a function of the other miscellaneous minority interest. We have a small minority interest in a hospital in Texas and then a bunch of surgery center ventures that we have, probably a dozen or so, and that business was off a little bit.

Okay, very good. Thanks.

Your next question is from Kevin Fishbeck.

Thanks, good morning. Just wanted to follow up on a couple of things you said about Vegas. How much capacity are you adding to Summerland?

Ultimately 140 beds. What we've added right now, Kevin, is a new emergency room, doubling the capacity of our emergency room, but the bed tower itself won't be open until 2010, it is 140 beds.

Did you say that your competitors are not really building new capacity in the market right now?

To the best of my knowledge there's no other substantial capacity additions that are underway in the market.

Okay. You talked a little bit about a negative payer mix shift in Las Vegas in the quarter. Was that same as you're seeing in other markets, or was that better or worse than what you're seeing in other markets?

I think it was pretty comparable. It was -- again, I forget whose question I was answering when I said it, but I think we saw very strong commercial payer performance in Vegas in the first half of the year. Very good on compensated care performance. I think both of those metrics gravitated more towards the mean in the third quarter, meaning uncompensated care rose a little bit. Commercial business came down a little bit. I think our experience in Vegas was pretty comparable to what it was throughout the portfolio.

Okay. And then when you talk about Centennial being flat or slightly positive in the quarter operationally, is that net out the negative drag on the other hospitals, or is that just in isolation?

That's just on a stand alone basis.

And then Vegas has been a pretty big driver to the company historically, and I'm guessing 10% growth is a good number, but Centennial adds about 15%, 20% to your capacity in Vegas. At what point does the ramp up in Centennial get you to the kind of 15%, 20% increase in volumes? Is that end of the year, early next year? Give a sense on that ramp up.

I don't necessary -- I think that Centennial's volumes will continue to improve, but I think that the real impact of the ramp up is that as those volumes improve, you will start to see Centennial, just as Spring Valley did four years ago, start to gravitate towards the market operating margins. So I think the issue is, and I don't have Centennial's financial statements in front of me, but if they had 65 or 70 patients a day in the hospital in the third quarter, the point is that those 65 or 70 patients in Centennial were far less profitable than had those 65 or 70 patients been spread among the other facilities. Obviously, that is a short term dynamic and as Centennial grows volume and continues to achieve operating efficiencies, then I think they will get to the operating margins that the other facilities in the market have, but again, I remember having these exact same conversations when Spring Valley opened and our margins in the market came down, and everybody got very nervous. And we kept saying, just give us three or four quarters and you'll start to see this bounce back. I think it happened then and I believe it will happen again with Centennial.

Okay, great. Last question, if you look at bad debt at the company level, year-over-year it is up 80-90 basis points year-to-date. With the economy going the way it is, is there a reason to think you won't see a similar type increase going into 2009? Is there I reason to think it might be better than that or might be worse than that? Is anything unusual going on in 2008? Any reason to feel better about it in 2009?

Well, two things. First of all I think it is inappropriate -- inappropriate is probably the wrong word, but far more accurate to look at uncompensated care with all of the buckets together meaning bad debt, charity care, uninsured discount. And there's no question that when you look at all of those buckets together, we are probably 30-35 basis points higher than we would have expected in the third quarter in that led to some of the pressure on the acute care performance in the quarter. To your point, Kevin, again, it is naive to assume if we go through, as it appears we are going to, a relatively significant and somewhat prolonged recession that we won't continue to see those pressures. What I don't know, and this is what I was trying to say before, are those pressures going to be incrementally the same as they were the last time we went through a recession? That I'm not sure about, because I think that some of the very significant uncompensated care expense that we experienced in the last three or four years as did all of our peers, I think may mute the incremental affect of this recession, but as people lose their jobs, there clearly are people who lose their health insurance after they exhaust cobra benefits, et cetera, and I think that will prove to be somewhat of a challenge. I don't know that we are in a position, I don't know that anybody has been in a position to predict the precise impact of that.

Okay. I guess last question, on the site business, have you guys done any work about what mental health parity, as it has been outlined, might mean to you, I guess 2010 really start to kick in?

The reality, Kevin, is I think it is very difficult for us to do the work you talk about. I think frankly, the payers are in a much better position to know in essence if they redesign their benefit plans to make behavioral benefits comparable to acute care benefits, how many more behavioral occurrences or treatments will be covered that weren't covered before? It is really impossible for us to know in essence how many patients we didn't treat because they didn't have insurance. It's just not, it is really not a number that we can have. I have seen different sort of macro analysis. Some project a fairly significant impact of mental health parity, others are more muted. We are clearly taking a wait and see attitude. Obviously, demand for that business has been good without mental health parity. So mental health parity, I think, can only be a help, but it's just impossible for us to quantify that with any precision at this point.

Okay, makes sense. Thanks.

Your next question comes from Jason Gurda.

Hey, Steve. Most of my questions have been answered. I just wanted to see if you expected any change in CapEx trends for either the fourth quarter and also '09?

Well, I know you know Jason, we went into '08 with the expectation we'd spend $420 million, $425 million. We will spend considerably less than that. It certainly looks like we are on a pace to spend more like $325 million in 2008. I do think some of that shortfall if you will, or reduction, is a shift into 2009, but I also think given the economic environment, we have been more prudent about our spending as well. So, my guess is we will spend probably a little bit more in '09 than we did in '08, but not a significant amount more. Okay, great. Thank you, Steve. Take care.

Our next question comes from AJ Rice.

Thanks. Hi, Steve. Real quick, just a couple of quick questions. First of all, I wanted to make sure one thing you said I understand. You are down 80 basis points in the acute care on a same-store basis, you said Centennial Hills probably cost you 50 basis points on that admissions number, and Centennial and McAllen OB exiting you would have been at a 1.5. So is the McAllen costing you about 1% or even almost 1.5%? Is that right?

Yes, I think I said that before, but yes, that's correct. I think maybe, somewhere between 100 and 150 basis points. And the reason that we have identified that in the previous quarters and in this quarter too is that it is a lot of volume we have lost, but Frankly, very little profitability. It was not very profitable for us and as a result, and I think we've said this before, McAllen's profitability is actually up in the quarter and up for the year and performance has been a pleasant surprise in 2008. So we thought, we think it is appropriate to sort of adjust those volumes, because we don't think they're really reflective of a softening of our profitability.

Okay. As commented already, you're going to be in a position with your balance sheet right now, but you still have about $950 million in debt, anything you are doing strategy wise relative to fixed versus floating, any comments on where you stand with that?

So, of the $950 million approximately of debt that we have at the end of the third quarter, about $600 million of that are fixed rate bonds. Of the $350 million, that is essentially floating, another $150 million is hedged through interest rate swaps. So there's only about 20% of our debt is actually floating at the moment. We watch it everyday, we could clearly fix additional amounts of our debt at fixed rates. I think right now, the market sort of tells you that's -- may not be the most prudent course, but we will follow that pretty carefully. We certainly don't feel like we have a great deal of interest rate exposure at this point.

Okay. Then just finally, you mentioned that you're most likely inclined to use your free cash flow to buy back stock at the current price levels of your shares. I am just curious, on the nonprofit side, obviously you would be a go-to person to get the call if nonprofits are selling, given that you have got financial capacity right now. Are you seeing an increase in the number of inquiries you are getting regarding nonprofits, that maybe you're facing a credit squeeze?

No I wouldn't say we're seeing an increase. There are clearly a couple of deals out there we have looked at. Again, I think the challenge in the short term and again, I forget whose question I was answering before, but I think there's going to have to be some rationalization or management of expectations as the equity markets have contracted, not for profit sellers are going to have to narrow their expectations of what their business is and their EBITDA streams are worth, and my experience has been, that takes a while. They go into a process thinking their business is worth X and if there has been a 40% decline in valuations in the equity market, they're not adjusting for that. I am guessing it will take a while before buyers and sellers gravitate to what I would consider to be a more reasonable sort of market pricing mechanism. So, I am just thinking in the interim it is -- we are going to find our own stock to be a pretty compelling value.

Okay. Thanks a lot.

Your next question comes from Kemp Dolliver.

Hi, thanks. Steve, you are putting a lot of capital into Riverside over the next year, and I just wanted to get your perspective on how you're approaching that market given -- I think a lot of the economic statistics people look at in Las Vegas look almost as bad as Riverside. So are you in parts of Riverside that are say, better than the average or how are you evaluating your expansion in that market now?

Well Kemp, I think one of the overarching dynamics of the for profit business in general is that the companies are heavily invested in states like Florida, California, Nevada, states that is have been fast growing states and I think over the long term, will continue to be fast growing states. The challenge in those places, each one of them is that they're on the leading edge of the real estate weakness and the credit weakness. I think what we think about more is the Riverside rather than what the next few quarters look like is, the reason we like Riverside so much is we have a very strong franchise in that market, and -- I need to narrow that. I mean in the market that we are in. Riverside County is a huge market. There are dozens and dozens of hospitals in Riverside County, but in this Inland Empire market, which is where we are located, we have a very significant market share. We are expanding as I indicated in my prepared remarks, with significant service expansion and I think our view is that over time we are just very well positioned and the whole approach for UHS for the last 15, 20 years has been to really capitalize on those sort of franchise positions, high market share presence in growing markets, and I think we think that that Inland Empire market is exactly that kind of market. It may be challenging the next few quarters, but over the long term, we very much like our positioning in that market. All right. And Steve, how would the ramp up the new hospital there compare to say, Centennial Hills, and I acknowledge -- know that this is a hospital that is not going to open until the middle of next year, but in terms of say drag on EPS and the like, how would you compare it at this point? Just to clarify a little bit, our new hospital in California is in Palmdale which is in northern LA county, the opposite direction from Riverside. It is a replacement for our hospital in Lancaster, California. And just that. As a replacement facility, it doesn't have the same sort of start up drag that a brand new facility has. Certainly, we feel we will move all of our business from the existing Lancaster hospital over to Palmdale when it opens in probably the -- just about a year from now, but beyond that, I think we also think we take a significant market share, certainly over time if not immediately from our one competitor, not for profit competitor in the market. And then the other issue we have is that in that market currently, a lot of business migrates down to LA and the metro LA area, and we think with a brand new facility, state of the art facility, we keep a lot of that business in the Palmdale market. By the way, I think we are aided by increasing gas prices and things that are going to have people just naturally want to stay closer to home. So, I don't think it is as much a drag as a brand new start up, by any means. The real question is how quickly we can gain market share when we open.

That's great, thank you.

Your next question comes from David Bachman.

Good morning, Steve. Thanks for, as always, for all the color and detail. Can you just provide a little bit more color on the bad debt in regards to copays and deductibles or that patient responsibility after, insurances versus pure self pay, any changes there? Any kinds of developments worth highlighting?

I don't know that I have enough good detailed information to tell you exactly what happened in the third quarter, David, but clearly the trend there has been, we have seen over the last few years that insurance companies, and that includes the government payers as well, are responsible for less of the bill and individuals are responsible for more of it, meaning there are individuals who no longer have health insurance from the government or from a commercial insurer or they just have a bigger copay and deductible. We have seen those numbers increase fairly steadily over the last few years. We saw big increases in '05 and '06, less so -- the rate declined a little bit in '07 and '08. Again, I think that wild card at the moment is what is going to happen to that rate in '09. I think absent or without a recession, we would have seen that rate of patient responsibility increase less or at a rate that again, was relatively slowing in '09, but a recession may speed that up or accelerate it again. So that is one thing we are waiting to see and watching pretty carefully.

Okay, great. Then just on pricing, I think you mentioned a while ago, maybe it was in response to Erik about the contractual rates may not be the issue as much as other sorts of back door efforts and try to control costs or utilization with commercial payers and then we also have the recovery audits coming on line for everybody here soon. Can you just talk about, sort of absent the top line rate increase? So what is -- how many basis points potentially are -- can you quantify at all what's at risk from some of these other measures if payers are just really clamping down on utilization and so forth?

I think that's difficult to do in a precise way, David. I do think -- and now, let's put the economic pressures aside for a second. I think we were headed into an environment where the overarching them in our industry over the next few years is clearly going to be an effort by payers of all kinds, meaning government and private payers, to try and reduce their spending on health care costs. That will be done through all kinds of mechanisms, and I think the question is from a provider perspective, how well are you positioned to sort of weather that, how well are you positioned, I think in some cases, to partner with payers, to help them control their costs in exchange for seeing more of their business. I think that the acute care hospitals in general and our acute care hospital specifically are probably better positioned than most. And so we are very focused on that, we are very conscious that employers and payers and the government are all looking to spend less money on health care and are looking for providers who are providing the most cost efficient services and cooperating the most with them, and we are doing everything we can and it is probably a whole separate conversation of all of our efforts to position ourselves to be the most responsive to providers in the continuum to do that. But I think it is very difficult to sort of precisely say okay, managed care companies, I have heard managed care companies, a few of them say look, we are going to try to reduce length of stay. If you were to say to me, what sort of impact will that have? I don't know. It didn't have much of an impact in the third quarter. I think we saw our length of stay go down by 1% over last year, but I don't exactly know what it is going to be like in the future, but again, I think we are certainly focused on it, we are thinking about it and we are prepared to respond.

Okay. And just, as are you seeing those sorts of pressures or expect to see those sorts of pressures on both the behavioral and acute care side?

Sure. I mean I think that the reality is we saw probably 10, 12 years ago, an enormous initiative to, on the part of again, payers to reduce behavioral spending and I think they were quite successful. I think in terms of inpatient providers, the real you know, crux of those measures, reducing length of stay, reducing the rate of inpatient admissions, we fell years ago. Not to say that there's still not going to be some effort to do that, but I think that our growth in that business is reflective of the fact that those sort of savings are probably not available to the payers anymore in a very measurable way. So I think we may be a little bit more insulated on the behavioral side, but certainly -- and the behavioral spending piece of the pie is certainly less for all payers than it is for acute care side, so I think there's just some -- less pressure in that regard. But I think we will see that same at least order of magnitude pressure on the behavioral side.

Okay, great. That's it for me. Thanks.

Your next question comes from Jeff Englander.

Morning, Steve.

Morning.

Just a quick question. You talked a little bit about what's happening in Las Vegas and an inability with volumes there to do more in terms of prequalifying on the AR front. I was wondering if you could give any color in terms of some of the other states, particularly Florida and California. If you are doing anything differently and if you're seeing anything differently anecdotally there in terms of what you are doing.

No. Look, I think that the dynamics have been present for some time. As we have mentioned a few times in this call, as more of the responsibility for the ultimate bill shifts to the patient, we have shifted our focus to collecting those amounts in the patient. We do a lot more, as you indicate, to collect what we can up front, to understand the credit worthiness of the patient as they enter the hospital either in the emergency room or in an outpatient diagnostic setting, to get amounts out to effective collection agencies where -- as quickly as possible, where that is appropriate . We have been doing all of that, as by the way, I think most providers are in all of our markets and all of our states, and I think we will continue to do it. Look, I think that our collection experience in the third quarter was very positive. We had a very strong collection quarter and cash quarter, and I think that's a tribute to our operating folks, obviously in a difficult environment, but it is a reflection of all of these blocking and tackling things that is have been on going for

Are you seeing anything -- you mentioned people in Las Vegas who typically had not had insurance. Since this has been going on for a while, are you seeing any sense that even people with insurance -- without insurance, rather, who had put things off now are no longer at the point that some of these things can be put off and trying to find a way to get some things done or is it just none of that?

David again, as I responded to a previous question, it is difficult. That makes intuitive sense but when somebody comes to the hospital with gallbladder disease, we have no way of sort of going back and through some review of our own records saying, well, this is somebody who really should have been treated six months ago, but wasn't because of insurance issues, et cetera. So it all becomes anecdotal. We don't have any real objective way or quantitative way of saying this is the impact of people who have deferred care.

Right. Thanks, Steve. Appreciate it.

Sure.

Your next question comes from Dawn Brock.

Hi, Steve. Just two quick questions behavioral health care business. You went over the acquisition environment for the hospitals. Could you talk a little bit about the targets or the available targets out there and the pricing for the behavioral side of the business?

Yes. The behavioral business has been more fragmented. There are more small entreprenureal owners of individual facilities or very small multiple facility companies. With have obviously been more active in terms of M&A on the behavioral side in the last few years than on the acute side. My sense is that is going to continue although again, at the end of the day, some of the same dynamics exist, and that is, it's been a long time since we have been able to buy behavioral earning streams at 4.5 or 5 times and I'm not sure that sellers are going to be of that mind set, so we're just going to have to think hard about what's an appropriate valuation of any earning stream whether behavioral or acute, given the environment of the last month and a half or so.

Right, of course. Secondly, you no other chatter on the market about the impact of the anniversary of the four year PPS phase in the behavioral health care guys. Can you talk about your pricing outlook today with regard to that and the expected annual rate update from CMS?

Sure. We talked earlier in the call about sort of our underlying operating assumptions as we move forward in the acute business. On the behavioral side, I think we have thought about the next three to five year span or time horizon to realistically include 3% to 4% volume growth and 3% to 4% pricing growth. Obviously, we have been beating those volume metrics for some time now, and I suspect we may beat them for another few quarters, although again, as I look from a long term horizon, I think that 3% to 4% same store growth is realistic. Pricing wise, the 3% to 4% going forward presumes that we don't get that benefit that we've had for the last four years from a psych PPS, but it does assume we get 3% to 3.5% market basket increases for Medicare, it assumes we do a little bit better on the managed care side, and it assumes, quite frankly, that we don't get a whole lot of increases from our Medicaid payers, at least for the next couple of years. So, I think that 3% to 4% pricing on the behavioral side, again, which we clearly beat in the third quarter is certainly realistic.

Thanks, excellent. Thank you very much.

Your next question comes from Gary Taylor.

Hey, Steve. Good morning. Hope Alan didn't catch a cold at the Phillies game last night.

No, no.

Okay, good. Two quick questions. I don't think you gave the acute care bad debt number. Typically, we can get that on the conference call.

Yes, we will find it. Bad debt number. Do you have any other questions?

Yes. My second question is just on the -- also on the acute care side in terms of FTEs, how do you look sequentially and/or year-over-year ex-seasonality. Have you attempted to do anything with the FT count at all?

Yes. I mean, this is what I was saying before, I mean certainly, we have prepared ourselves for some economic weakness and softer volumes and a little bit less favorable payer mix. And believe me I am not I am not a hospital operator. So I am going to be a little bit soft on the details, but I know that our operators are working in a lot of cases, really reviewing processes et cetera to try and see how we can best increase efficiencies with a little bit softer volumes, a little bit less favorable payer mix, et cetera. I was just try to go be realistic in answering somebody's question before in saying that I do think what we can to is somewhat limited. At the end of the day, this is still largely a fixed and semifixed cost business, but I think that we can make some improvements around the edges. And then Gary, just our same-store acute care bad debt percentage was 12.5% for the quarter.

Is Centennial the only one that's not in there, then?

That's correct.

Okay. Thanks.

There are no further questions at this time.

Okay. We thank everybody for their time, and we look forward to speaking with everybody on our fourth quarter call.

This concludes today's conference call. You may now disconnect.