環球健康 (UHS) 2015 Q3 法說會逐字稿

Good morning. My name is Jennifer and I will be your conference operator today. At this time, I would like to welcome everyone to the third-quarter earnings conference call. (Operator Instructions). Thank you.

And Mr. Filton, you may begin your conference.

Good morning. Thank you. Alan Miller, our CEO, is also joining us this morning. Welcome to this review of Universal Health Services' results for the third quarter ended September 30, 2015.

During this conference call, Alan and 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 a 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, 2014, and our Form 10-Q for the quarter ended June 30, 2015.

We would like to highlight just a couple of developments and business trends before opening the call up the questions. As discussed in our press release last night, the Company reported net income attributable to UHS of $1.48 per diluted share for the third quarter of 2015. After adjusting each quarter's reported results for the incentive income and expenses recorded in connection with the implementation of electronic health record applications at our acute care hospitals, as well as the other items attributable to last year's third quarter, as disclosed on the supplemental schedule included with last night's earnings release, adjusted net income attributable to UHS increased approximately 13% to $155.3 million, or $1.53 per diluted share during the third quarter of 2015, as compared to $137.5 million or $1.36 per diluted share during the third quarter of last year.

On a same facility basis in our acute care division, revenues during the third quarter of 2015 increased 7.2% over last year's comparable quarter. The increase resulted primarily from a 5.1% increase in adjusted admissions to our hospitals owned for more than a year, and a 3% increase in revenue per adjusted admission. On a same facility basis, operating margins for our acute hospitals decreased to 15.4% during the third quarter of 2015 from 17.1% during the third quarter of 2014.

As expected, net revenue growth slowed in the third quarter from the unprecedented levels we had been experiencing in the first half of the year. Surgical volumes moderated a bit, and uncompensated care volumes ticked up as well. At the same time, there was a measurable increase in temporary nursing costs, all contributing to the margin decline.

On a same facility basis, net revenues in our behavioral health division increased 5% during the third quarter of 2015 as compared to the third quarter of 2014. During this year's third quarter, as compared to last year's adjusted admissions and adjusted patient days to our behavioral health facilities owned for more than a year, each increased 1.6%. Revenue per adjusted admission and adjusted patient day each rose 3.1% during the third quarter of 2015 over the comparable prior-year quarter.

Operating margins for our behavioral health hospitals owned for more than a year were 27.5% and 27.6% during the quarters ended September 30, 2015, and 2014, respectively.

For the nine months ended September 30, 2015, our net cash provided by operating activities increased approximately 16% to $796 million over the $690 million generated during the comparable nine-month period of 2014. Our accounts receivable days outstanding decreased slightly to 55 days during the third quarter of 2015 as compared to 56 days during the third quarter of 2014.

At September 30, 2015, our ratio of debt to total capitalization decreased to 42.8% as compared to 48.9% at September 30, 2014. We spent $99 million on capital expenditures during the third quarter of 2015, and $270 million during the first nine months of 2015.

In connection with our previously announced $400 million stock repurchase program, we repurchased 543,380 shares at an aggregate cost of approximately $72 million during the third quarter of this year. Since inception of the program through September 30, 2015, we have repurchased approximately 1.4 million shares at an aggregate cost of approximately $166 million, and had a remaining share repurchase authorization of approximately $234 million as of the end of the third quarter.

In August 2015, we acquired four behavioral health facilities with 305 beds located in the UK. This acquisition increases our behavioral health presence in the UK to 21 facilities, consisting of approximately 1,100 beds. In October 2015 we completed the acquisition of Foundations Recovery Network. Through this acquisition we have added four inpatient facilities consisting of 322 beds, as well as eight outpatient centers. In addition, there are over 140 expansion beds in progress for Foundation, as well. Foundations, one of the premier names in addiction treatment, is focused on treating adults with co-occurring addiction and mental health disorders through an evidence-based, integrated treatment model in residential and outpatient settings.

Based upon the operating trends and financial results experienced during the first nine months of 2015, we're revising our estimated range of adjusted net income attributable to UHS for the year ended December 31, 2015, to $6.75 to $7.05 per diluted share. This revised guidance, which excludes the expected electronic health records impact for the year, maintains the lower end of the previously provided range of $6.75 to $7.15 per diluted share, and decreases the upper end of the range by approximately 1%.

Alan and I are pleased to answer your questions at this time.

(Operator Instructions). Matthew Borsch, Goldman Sachs.

This is Tejus Ujjani on for Matthew Borsch. Thanks for taking the question. I was wondering if you could touch a little bit more on the growth in uninsured on the acute care side. I can see that the provision grew faster than the uninsured charges as a whole, and was just curious about that in terms of any differences in collection rates or why that would be the case.

Sure. So, we did see, as the data that you cited suggests, an increase in uncompensated care in the third quarter. While we saw it throughout the portfolio, I think it was most evident in our Texas and in -- specifically in our South Texas markets. And I think our estimate is that that increase in uncompensated care probably had an impact of maybe a 50 basis point reduction in our acute care margins during the quarter.

Great. Thanks very much.

Paula Torch, Avondale Partners.

Just wanted to touch on acute care margin again, and sticking with this conversation. So, 50 basis point impact to the uncompensated care. Wondering if you could tell us how much of an impact the temporary nursing costs were in the quarter, and what's going on there? Is there higher competition? Is it tightness? Do you think that's going to continue into the fourth quarter and into next year? Any more color there?

Sure, Paula. Just from an order of magnitude, I think that the impact of the increase in temporary nurse costs was similar to the uncompensated care impact that is in the neighborhood of 50 basis points. Obviously it is a trend that has been mentioned by a number of our peers as well, which is not necessarily something we were aware of during the quarter. I think from our perspective, we continue to have and generate a very substantial acute care demand as reflected in our growing admissions, very healthily growing admissions. And, as a result, that is contributing to a need for more employees, particularly nurses.

And, honestly, I think we're just not filling those positions as quickly and as efficiently and expeditiously as we would hope. To some degree, I think we probably underestimated the need for new nurses, as demand has remained as strong as it has. As we look forward and project solving this issue or solving the problem, I think we view it as definitely a fixable problem, and one that we will address in the fourth quarter; and begin to make progress in the fourth quarter, and certainly begin to really solve the issue by the beginning of next year as we fill those vacant positions.

The feedback that I get from our hospitals, when we talk to them, is that they can fill those positions. They are redoubling their efforts to do so. So we're fairly confident that we will address that issue in the near future.

Okay, great. And one more, if I may. Just turning to behavioral quickly, and the Foundations acquisition that you did, can you update us maybe on the thoughts on the expansion? I know you said 140 beds, I believe. When should we expect those to come online? And are the across all of the four facilities? How fast do you expect the addiction piece of your behavioral business to grow? And maybe if you can help us think about some of the future investments there.

Sure. In the grand scheme, the Foundations acquisition is relatively small, but we think strategically important acquisition. Obviously we're talking about 330 beds out of a total of 20,000. But I think we think that the Foundation acquisition very nicely complements our existing addiction businesses. We probably have eight or nine dedicated addiction facilities in our portfolio today, as well as the fact that we offer addiction services in many of our other behavioral facilities as well.

And we think that the Foundations model, as well as the -- the Foundations model in terms of patient treatment, as well as their model for patient capture, is one that will have relevance for us throughout our other addiction businesses, and, quite frankly, in some of our other lines of business as well, things like eating disorders, et cetera. So, the 140 beds that are in the Q4 Foundations are both additions to existing facilities, as well as some de novo development. I think they are all likely to be completed within the 12-month cycle. And we continue to look for other opportunities, as well, to expand that business, as well as other elements of our behavioral business.

Okay, great. Thank you.

Chris Rigg, Susquehanna Financial.

Hi, this is Frank Lee on for Chris Rigg. Thanks for taking my question. Acute care volumes continued to be strong in the quarter. I was just curious if there are any specific regions that are driving that growth that you could call out. And then does the revised guidance reflect a similar pace of volume growth in the fourth quarter?

Yes, Frank, so I think the acute care volume growth -- and we talked a little bit about this in general in the first half of the year, saying that the strongest performing markets were Las Vegas or Nevada, and then Southern California. And as I mentioned before, I think our Texas markets, in particular South Texas markets, have lagged a little bit over the last few quarters. I think all those same trends were present in Q3 as well.

In terms of the revised guidance and how that acute care growth fits into that, again, we revised that guidance at the end of the second quarter. We talked about the fact that the first half of the year, acute care revenue growth of 10% was unlikely to be sustainable. It was sort of unprecedented in the history not only of the Company, but of the acute care industry. And we thought that revenues in the back half of the year, and frankly going forward, would likely moderate to levels more like 6.5%, 7%. And that's certainly what happened in Q3.

And I think our revised guidance, taking off the very top end of the guidance, was simply an acknowledgment that those acute care revenues had moderated and would likely continue to do so. I think we had said that to get to the high end of that range, we would have to sustain those 10% or so revenue growth levels. And I think the revision at the top end of the range was just an acknowledgment that that was very unlikely.

Okay, thanks. And then it looks like share repurchases increased pretty meaningfully in the quarter, even with the Alpha transaction. Can you help us think about the pace of repurchases going forward and in the fourth quarter, given the Foundations acquisition? Thanks a lot.

Yes, I don't necessarily think that either of the two recent acquisitions -- Alpha in Q3, and Foundations in Q4 -- will materially affect the way we think about share repurchase. Obviously we have the view that our share price has seen a dramatic decline in the last month or two and is not necessarily, from our perspective, related to real, fundamental changes in the business, in our business trends, or in future prospects of the business.

So I think we view the current share price as an attractive investment. And we will continue to look at share repurchase in the same way that we have historically, with other capital deployment opportunities which we think also exist at this point in time.

I think we're ready for the next question.

Kevin Fishbeck, Bank of America.

This is actually Joanna Gajuk filling in for Kevin today. I just want to go back to the discussion around margins in the acute care segment. So first of all, in terms of the comments around the temporary staffing, you suggested you feel like you might be able to [review] these acquisitions in Q4 into beginning of next year. But does it feel like, to you, that there might be something that's more systemic going on around the industry, given that we are hearing a [clear point] from other providers talking about similar issues? So any color you might have in terms of whether you feel this is really fixable in the near term, or whether there is something systemic going on around, in terms of the labor costs our ability to staff nurses.

Joanna, the best that I can offer is that, given my tenure in the industry, I can remember some 10 years ago, when the industry was experiencing a really severe shortage of nurses and other clinical professionals. And I recall talking to our hospitals at the time. And when we talked at that time about hiring and filling vacancies, the feedback you'd get from the hospitals was simply, we just couldn't do it. There just weren't nurses out there. It didn't matter what we were willing to pay. There was enormous pressure on wages. I will tell you that the current environment just doesn't have the same feel to it.

Certainly this issue of an increased use of temporary nurses is not unique to us. Other companies have reported it as well, so it seems to be a bit more systemic issue. But it also, based on the feedback that we're getting from our hospitals, is one that remains fixable. They are hiring nurses; they are hiring nurses within our current wage scales, et cetera. So, we do have an impression and a feeling that this really is an addressable issue, and one that can be dealt with in relatively near-term.

Great, thanks. And then because also in the past on that same topic, there was a margin pressure, rather. In the past, I believe, you talk about there is ability in the acute care segment to show margin expansion if the revenue grows above 3%, I believe. But clearly it didn't happen this quarter, because margins were down 170 basis points year-over-year on a same-store basis. So you said 50 basis points from the temporary staffing, and then another 50 from the uncompensated care cost. So what else was driving -- or putting the margins to be under so much pressure, given that top-line growth was still strong?

Sure. I think it's worth putting the acute care comparison in context. We ran over 17% margins in the third quarter of 2014. And those margins and the EBITDA that the acute care business generated in the third quarter of 2014 was almost a doubling of what it had run in the previous year. And the 17% margin, I think, was probably the best margin we've ever run in the third quarter in that division. So the comparison was extremely difficult.

And even though I think your point is a valid one, and well taken, and that is that under normal circumstances, if we generate 7% revenue growth in the acute division, we would expect to have margin expansion. And I believe that that's what we will expect in the future. In the third quarter, there were a couple of extenuating circumstances which we've discussed already. But I think it is just that: it's extenuating circumstances, as opposed to fundamental changes in the model.

I think our general sense is that at these very healthy revenue levels -- and that's what I think we take away from the quarter as the most important message -- we believe that in the future we will be able to generate the margin expansion that we've come to expect at those levels.

So then you are suggesting that you don't expect the volume growth to remain in the 5% range. So, without giving guidance for next year, but what type of volume growth would you expect, over the near-term, or medium-term I guess of -- in the acute care segment?

Well, as you suggest, I'm not going to give 2016 guidance for -- and we are not going to give it for another several months. But I will just reiterate what we talked about at the end of the second quarter of this year, and that is that we thought that acute care revenue growth would moderate from the 10% unprecedented levels that we were experiencing to something closer to 6.5%, 7%. That is, in fact, what happened. We're very comfortable at those levels. Not prepared to say whether those levels are going to be sustainable completely into 2016, but certainly sustainable through the end of the year. And we're very comfortable that, over the long term, we will generate margin expansion at those revenue growth levels.

Great, thanks. That's all for me.

A.J. Rice, UBS.

Just a couple things, maybe. On the payer mix, drilling down a little bit more, do you have the details on either the year-to-year change in some of the key components of that, or the percentages, how they changed?

A.J., I think as we discussed in the first half of the year, we continue to see growth in both our Medicare and Medicaid utilization. And that's total Medicare and Medicaid, meaning both traditional and managed. What was a little bit different in the third quarter was we saw our commercial volume growth slow some. We had been, since the beginning of the ACA implementation and the economic recovery, seen commercial volumes increasing in the high-single and low-double-digit ranges. I think that the commercial volume increase in the third quarter was only like 3% or 4%. Still good, but a deceleration from where we've seen.

And I think we saw an uptick in uncompensated volumes as well, uninsured volumes. They have been declining, quite frankly, for a number of periods; and in the third quarter this year, uninsured volumes were up, let's call it 6% or 7%.

Okay. And when you -- I know you said that when you drill down, Texas was especially the -- I heard you say border communities or something, I guess -- where were you saw some of that pressure. When you ask your operators what they see, is there anything to call out there? I know we get questions all the time about energy patch, which I wouldn't necessarily associate with those types of hospitals. But is there any issue there, or anything more broadly? Or is this just the natural ebb and flow you see sometimes in a quarter-to-quarter swing?

Honestly, A.J., it's hard to say, is the best answer I can give you. You're right that the South Texas markets -- McAllen, Laredo -- are not markets that are heavily dependent on the oil and gas industry. They're not markets where the broader economic metrics like unemployment seem to be deteriorating in any meaningful way. So, the increase in uncompensated care is a bit of a head-scratcher in those markets. And I think a lot of times it's a mistake to draw broad conclusions from one quarter's worth the results in a particular market. So I think we'll wait and see, and try and evaluate it as it goes forward. But, no, it's not obvious to us what's driving that change.

Okay. And then just lastly on the capital deployment: I understand the enthusiasm for your stock, given it has pulled back like it has, and on the buybacks. Any commentary on what you are seeing on the acquisition front, either in acute or psych? Obviously, you did two small deals in the quarter. But it sounded like earlier in the year, you actually thought there might be some things on the acute side. Is there still some things out there, or where do we stand?

So again, in our second-quarter call, we had expressed the view that we thought that the pipeline for potential opportunities was busier than it had been in some time. Subsequent to that, as you suggest, we did two behavioral deals totaling $500 million in total investment. We continue to look at other behavioral opportunities. We continue to look at acute opportunities. I think we would continue to describe the pipeline, if you will, as more active than it's been in a while.

And so, as we always do, I think we look at that landscape. We look at our ability -- or opportunity to repurchase our own stock, as well. And we try and measure each of those opportunities against each other. And obviously we have an exceptionally strong balance sheet with very low leverage levels, which allows us to pursue multiple opportunities at once. And that's going to continue to be our plan.

A.J., I'd also point out that in addition to the $500 million we've spent, we are very excited about a hospital under construction in Las Vegas. We have built an acute care hospital a year. We're spending between $155 million and $185 million on those hospitals. So we are making investments in the acute business. And as opportunities present themselves, we are ready to take advantage of them.

Okay, great. Yes. I guess I called it a little psych deals; those weren't so little, actually.

I wasn't going to correct you, A.J.

Josh Raskin, Barclays.

Steve, I appreciate those comments around what we saw in the last nursing shortage, and I'm just curious on the overall labor pressures. Volumes sequentially are relatively similar, so what's causing that need for temporary labor? Has there just been more turnover, and you're not filling those roles? Any sense of where these nurses and clinicians are getting hired? Are they going to non-traditional channels at this point?

And then if you can also comment, any physician compensation or recruitment issues within that labor, or is this really all just nursing?

So let me address the first one. I think on the -- if we are seeing any pressure on physician staffing, I think it tends to be on the behavioral side. We've mentioned this, I think, once or twice before. At least in some specific markets, it's been difficult for us to hire the appropriate number of psychiatrists. And that's been a bit of a drag, both to the degree that we don't have a sufficient number of psychiatrist, and we will see our volumes pressured a little bit. Behavioral admissions were a little bit soft in Q3. And I think as I look around the portfolio, there are a market or two where I would attribute some of that softness to a shortage of physicians.

Also, to the degree that we are using temporary physicians, that pushes our operating expense up in the behavioral division, and you'll see that in the Q a little bit when you'll see the specific pressure on our operating expenses in behavioral; again, around the margins, at least.

On the acute side, it's a good question, exactly why this problem is bubbling up at the moment, Josh. My sense is that to some degree, there has been a bit of a skepticism out in the field that the really strong volumes that we've been generating, we're going to continue. And I think there's always a bit of a hesitancy to hire nurses when you're not sure if volume strength will continue.

So I think that may have been it. I think there may have been some unnecessary skepticism about the need for those nurses, but I think that has now become clear. Turnover hasn't increased for us. I know some of our peers have mentioned that. We're constantly trying to drive turnover rates down. And I'm not sure that we're terribly successful in driving them down, but I certainly think that they have been stable for us.

And then finally, this idea that there's a lot of these alternate care providers -- FED providers, et cetera -- I think in our markets, at least, the numbers of those sorts of providers and the amount of people they're hiring is relatively immaterial. So it doesn't seem, to me, to be the item that's really driving this.

Okay, that's very helpful. And then just one quick follow-up. Are you seeing any delays on Medicaid enrollment? Are you seeing anything different at the state level in terms of their ability to process and enroll some of these previously uninsured individuals?

Again, I know that was cited by one of our peers. I checked with our folks this morning, because I had not heard that. And they reiterated that it has not been an issue for us, so I don't think that's what's driving our uncompensated experience.

Okay. All right. Thanks, Steve.

Gary Lieberman, Wells Fargo.

I know you said it wasn't entirely clear what was causing the slowdown in commercial volumes, comparatively, anyway. Is there any indication that you are seeing individuals that were previously covered by exchange plans, coming off of those plans? Or do you think it's more just seasonal weakness in the third quarter that comes back in the fourth quarter? What are your thoughts there?

Yes, and again, I know that one of our peers cited that as a dynamic, as well. And it's an intellectually intuitively obvious argument. It seems logical that that could be happening. Other than a couple of anecdotal examples that we've been able to gather, we're really not able to generate any measurable data that would suggest we're seeing that in large volumes. We will continue to watch that.

Again, Gary, I'm going to repeat a comment I made a little bit ago: I think sometimes it can be a mistake to draw really broad conclusions about one quarter's worth of metrics. We tried. We're exploring. And we certainly dive into these numbers when we see them, but none of these other explanations, at least for us, seem to be terribly obvious, or explanations that we could really prove out.

Okay, great. And then could you give us an update on the UK behavioral market, the acquisition environment, and any update on pricing or reimbursement issues there?

The operational environment has been very good. We've said from the beginning, in the Cygnet acquisition -- as you know, just about a year old at this point -- that Cygnet pretty much every single quarter, and the third quarter was no exception, has exceeded our expectations. Their volumes and occupancy rates are extremely high. They continue to pursue opportunities that include building new beds at existing hospitals, doing some de novo development, doing some small acquisition work, and looking at acquisitions of various sizes. So we continue to be very positive about our entry into the UK behavioral market. And we're working very pointedly with our local management there to continue to grow that platform.

Great. Thanks very much.

Ana Gupte, Leerink Partners.

I wanted to again come back to the uncompensated care issue, Steve, if I may. You said it's in South Texas, and it's probably not the slow Medicaid application processing. Have you had any anecdotal data, your [ERD] departments or whatever, of whether these people have been in exchanges, and have now (technical difficulty)? Or is it they just lost their jobs and there is (technical difficulty) enrolled in Medicaid or exchanges, or whatever, that they're not insured right now. Just trying to get a sense for -- and despite those you were seeing, how structural is this for 2016, because it meaningfully changes forecast.

Yes, so, a couple of things. I just want to clarify a little bit. What I said was that the increase in uncompensated care was most evident in the South Texas market, and that's true. But I don't want to leave the impression that it was completely limited. We saw in uptick in uncompensated care in some other markets as well. Again, I think you're asking the question that Gary asked, maybe a little bit differently. We're not able to attribute that increase to -- specifically to commercial exchange patients, or subscribers not being able to make their premium payments.

We're not really able to ascribe the increase to anything in particular. And I think that our outlook on this is we'll wait and see. We'll try and gather more data as another month or two passes, and do a better job of trying to figure out what's going on. I realize that there is a lot of pressure on folks all over to try and figure this out immediately. I will say this: at the end of the day, even with the increase in bad debt and uncompensated care pressure, we generated 7.2% acute care revenue growth in the quarter.

And if somebody had asked me a year ago whether I would take that, I would have taken that offer in an instant. And I'll take it again next quarter, if presented to me. So, I appreciate the fact that there is a lot of focus on this increase in uncompensated care. But I think sometimes we're looking at the glass in the wrong way. This glass is half-full, in my mind, when acute care revenues are growing by 7.2% over the prior year.

Yes, fair enough. Your [growings] were great in the Q. And apologies, again, if this was asked before; I was on a different call. On Medicare in the second quarter, as well, you talked about very strong volumes. Now, how much is Medicaid contributing to your acute volume growth? (technical difficulty) two-midnight rule lapping, or is there something structural that we can carry forward in terms of the volumes [coming in]?

Yes, so the strength in Medicare volumes is something that we've now seen probably for at least three quarters. And I think, as you suggest, probably an explanation for the strength in Medicare volumes is the idea that some of the weakness that we saw a year ago as a result of this shift from inpatients to observation patients, has anniversaried a bit. We continue to see observation patients being coded with frequency, but I do think we are lapping some of that.

And that makes sense only because all the other explanations that you usually offer for increased volumes -- the ACA impact, or the economic impact -- are generally not relevant to the Medicare population. So I think this idea that we're starting to see some leveling off of some of this pressure on Medicare admissions that we had seen for a few years is a relevant explanation.

And any [decisions] in the managed Medicare, relative to traditional?

No, I think generally we find that when a population moves from traditional Medicare to managed, it's usually reflected in length-of-stay pressures rather than in actual admission rate pressures. So, no, I don't think we're seeing a big change between the two populations.

All right. And finally on the budget deal, any thoughts on that, assuming nobody else asked? If they did, then no need to go back into it.

No, I think that there's still some clarification that we, as an industry, are looking for. But I think with the major change being to alternate site payments and the idea that -- I think hospitals are not going to be able to use hospital rates for some alternate site payments. I think we may see a slowdown in the way hospitals in general approach some of those off-campus strategies. I would say that this has not been a huge part of the UHS model. And obviously whatever we have is grandfathered anyway, according to the deal as I understand it. So I don't view it as a real significant change to our operating outlook at the moment.

Got it. Thanks, Steve.

Ralph Giacobbe, Citi.

Apologies if this was asked; I hopped on a little bit late. But did you give the exchange volume in the quarter, Steve, and how that has tracked over the last couple of quarters?

Ralph, not specifically exchange volume. I talked a little bit about commercial volume in general. And I think we as a Company have said, with the beginning of this year that we really weren't -- we're no longer trying to separate out discretely the impact of the ACA or exchanges, et cetera, and really haven't done so all year, and certainly are not going to do so this quarter. But I did talk about the fact that commercial exchange volume growth slowed some in the third quarter. Not commercial exchange, just commercial volume in general, slowed some in the third quarter.

Okay. And then what about acuity mix in the quarter? Did you give that, and was that a favorable impact?

I didn't give it. I mentioned in my prepared remarks that surgical volumes slowed a little bit. One of the comments that I had made in the first two quarters of this year was that, for the first time in a long time, inpatient surgeries and the growth in inpatient surgeries were outpacing the growth in outpatient surgeries. In the third quarter, we sort of returned back to where we had been the last few years, where outpatient surgeries were growing faster than inpatient, although both continue to grow at a decent pace. But that's, I think, an indication of a small decline in acuity, and contributed a little bit to that, again, the slowdown in overall revenue growth.

Okay. And then just on the behavioral side with the regs out, the IMD exclusion: to the extent that it does hold, do you see this as an immediate benefit as we head into 2016? Or is there something you need to do in terms of outreach and education that would suggest that any benefit would be later in the year, as opposed to early in the year?

Well, I think there's a couple of issues. One is the rule has yet to be published in final form, and we certainly don't know exactly when that's going to happen. I'm actually told that CMS has a number of pending rules in their queue. And I think there's some speculation they may not get to this one until early in 2016, and we're not sure at that point when the effective date would be. So that's an issue right away. We just don't know when the rule and the effective date is going to be.

But when the rule is issued, there is some amount of work to be done. These patients are being treated, for the most part, in existing acute care facilities today. And we have work to do to, I think; communicate with those acute care facilities and see if there is an opportunity. And this is really a market-by-market effort to cooperate with them, and see if those patients can't be treated in a more efficient way, a mutually efficient way, for both the acute care hospital and for us.

We also have to work with the managed Medicaid companies to negotiate rates. I don't view that as a big hurdle, but something that has to be done. So there are a few steps that have to be taken once the rule does become effective. So at the moment, it's certainly impossible to predict what the impact on 2016 might be at this point.

Okay. All right. And then just the last one. I don't know if you have the stats with you, Steve, or not. But uninsured admissions, relative to uninsured adjusted admissions -- did one outpace the other? Is there any way to put some context around whether the admissions was growing at a faster pace than the adjusted admission, specifically for the uninsured?

Yes, uninsured admissions, I did say earlier, were probably up 6% or 7% in the quarter. I don't really know what the adjusted admission number is for uninsureds. I would say that generally the adjusted admission number for uninsureds doesn't vary greatly from the admission number, just because we don't have the large component of outpatient revenue that we have for our regular admissions. It's basically ER revenue is the bulk of the outpatient revenue that we have, so there's usually not a huge difference.

Okay. All right, that's fine. Thank you.

Whit Mayo, Robert W. Baird.

Steve, do you feel like the acute care business has just gotten to be much more seasonal over the years? For years, you've been earning less in the third quarter, more in the fourth quarter -- anything just about physician behavior, vacation, employment, benefit design? I just don't know why we should sit here and conclude that flat growth off of a year where your EBITDA expanded 85% is really a problem, especially with this volume. So I feel like a lot of this is an overreaction. But I don't know -- I'm just kind of curious.

As you scan the landscape and see what's going on, everyone is missing for different reasons right now. Just curious if you have any perspective on what you think is occurring.

Well, thanks for the question, Whit. I think that the traditional seasonality of the business has been distorted over the last couple of years, with the implementation of ACA, with Medicaid expansion in some of our big states, with commercial enrollment, commercial exchange enrollment, with the -- I think the dynamic in the fourth quarter of people exhausting co-pays and deductibles, and having elective procedures done in the fourth quarter; and that becoming more of an issue, as co-pays and deductibles become a bigger part of the overall landscape.

But I think the one constant in all that is the third quarter has traditionally been the weakest quarter. Honestly, when I saw our third-quarter results a few weeks ago, before anyone else had commented on theirs, I generally thought they were a slight miss that I attributed mostly to seasonality. I'm not actually sure that -- having seen what other people have said, I really feel like that's wholly different. Again, I think we're -- I'm back to the idea of feeling pretty good about a quarter in which lots of our surgeons and physicians are on vacation, lots of our patients are on vacation, elective procedures are usually down pretty significantly in the quarter, and we still grew our revenue by over 7%.

I'm still feeling pretty good about the fundamental performance of that acute division.

No, that's helpful. And just to be clear, there wasn't any change in your charity care policy within the quarter, correct?

That's correct.

And just one last one: just any update on the investigation.

No, not really. I think, as we've said at some point, we will begin probably a more serious conversation with the government, but that has not occurred yet.

Okay. Thanks a lot.

And we have no further questions in queue at this time.

Okay. Thanks to everybody, and we'll talk to everybody at the end of the year. Thank you.

Thank you for your participation. This does conclude today's conference call, and you may now disconnect.