CYH - Earnings call transcript Q3 2018 | Community Health Systems, Inc.

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Operator

Good morning. My name is Mike, and I will be your conference operator today. At this time, I would like to welcome everyone to the Community Health Systems 2018 Q3 Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there'll be a question-and-answer session. the to turn now will call Mr. over I Comeaux. Ross

You may conference. your begin

Ross W. Comeaux

welcome Good Health Mike. you, to morning call. Thank conference and Community quarter Systems third

following or including all the Form to headings that do call our known begin Exchange a I'd unknown solely statements These contain risk, disclosure to forward-looking the relate the on are historical in may number statements, Annual described in we Factors of conference facts. statement. to forward-looking Before and certain not This and current call, filed read such to Commission. like reports Risk subject are as furnished other with XX-K Report which statements or and Securities

in any consequence, intend may and As actual statements today's adjusted EPS. release these those of of differ We results and expressed financial our EBITDA do press statements. and issued to a from definitions we not calculations Yesterday forward-looking with afternoon, update a significantly discussion. forward-looking statements in any adjusted

For supplemental slide to those a website. been to posted conference has the of our this of live presentation call, broadcast you listening

Mr. Mr. With Executive Chairman related restructuring refer expense, the to that benefits gains losses calculations expenses. Smith, to loss and other exclude the incurred termination to expenses on Chief charges, expenses to from early and liability legal expenses earnings costs, sale divestitures, Smith? adjustments or related call. and debt, operations, Officer. over slides will as government discuss other We the will also employee during call we like and proceedings I'd discontinued of related HMA extinguishment fair businesses, to of and from on as to turn settlement gain expense related those Wayne well impairment this All the CVR said, or agreement related legal related legal and value to settlements

Wayne T. Smith

progress President President and and and Executive and With call Aaron, Tom is Chief who call. more our combination have our over third Good we color to provide us our quarter Financial I'll the competitive these the last Operations to and results. Dr. Then our welcome execution the during on for will investments Tim, third operational Chief the as the from Operating our reinforcing sustainable during Vice company comments quarter. company Ross. today All Overall, the Simon, have will well future is operations, markets, focused positioning strategic Clinical of performance from across on Officer; divesture our and you, on Tom our Tim discuss Medical few the call financial a on the our morning past improvements, company and our Officer; program. Hingtgen, the imperatives growth. Thank are core Lynn turn our our core position quarters, of well earnings to I President same-store general quarter conference Chief as within strengthened some call, Officer. Similar which

opened expanded and centralized built with XXXX, early physician patient practices, of a Event new we time, points Serious in service online in scheduling here margin in of later growth more future. on leveraged call. Tim help will our And detail lost hospitals, analytics development pipeline, from moving view across meaningful along early our to ACO rates, and in the and in some this program line these invested while progress quality number connect our reduction the Tennessee, seen with through the have of in have During our see care, more and Franklin, Safety forward. capabilities manage out success, we to our our initiatives implemented Transfer expect across benefits safety we improved to of access additional provide the our organization. data Center of a across the and our expenses drivers investments We across the technology, improvement, engagement as patients other continuum

our performance. discuss earnings highlights like to some I'd from third Now, quarter

Our same performance store revenue net was up X.X%.

the during quarter. third adjusted pricing, net was admission the On up revenue X% per

came year-over-year. Our our adjusted was up adjusted and of in $XXX margin at XXX basis EBITDA XX.X% million EBITDA points

In flow, continued to quarter. with are forward. are well-positioned our we're And growth from million believe this and $XXX to the our operations third performance Adding terms progress working strategic initiatives of year. last moving and cash third million the together, quarter drive cash we in was of compared flow during financial pleased additional $XXX we all our

resources with Our our and and shift strategy to market profitability. markets networks to better portfolio higher rationalization is allowing and position, potential, focus improved on more sustainable hospitals of us growth

end On options, early the Medical divesture At of the Morristown, announced System, quarter of side, City, have AllianceHealth agreements we completed that closure Sparks close the we System in to for the divestiture planned the quarter, strategic additional Regional both previously of two to Oklahoma in we the we announced to we in and Physicians certain the time Deaconess and hospitals: definitive divestiture Mary hospitals. include in Tennessee. and Knoxville, considering Tennessee; XXXX, and Health From Hospital time decided Regional other of fourth complete two Black Health expect of Center fourth after hospitals. Lakeway which

market's our East strengthen growth the lines CHS Importantly, Tennessee, into network and will existing in be position integrated which competitive service potential. will these further hospitals hospitals

four third the improved performance, basis adjusted positive. store surgeries our would have would XX surgeries closures, been adjusted from same-store hospitals XXXX two same and our and currently year-to-date improve admissions completion points, agreement, points basis of definitive these excluding And XX improve our XX points. the hospitals the would admissions these quarter would our Deaconess admissions divestiture Excluding hospitals under basis have and the

provide expect additional benefits divestitures to Moving to forward, our core we our portfolio. remaining

$X XXXX the for EBITDA hospitals accounted of of Our current year plan net revenue least mid-single-digit calls divestiture in billion the of that for full and at margin. divesture

retention of expect net working the $X.X include generate proceeds, approximately We these to not of which capital. gross divestitures billion does

And of our and will we improve We in to forward, move the as expect remainder to our strengthen and close and these optimize we XXXX. operations continue XXXX divestitures portfolio.

our on in some We quarters, strengthening past be already portfolio in are And hospitals further these drive number benefits So, moving implemented and come and operational the of with core believe strategies rollout. in a continue forward. help to early of executed more initiatives which continue invested expect these respective their these fortified. are company to as to over we same-store will the strategies strategies, summary, several we've growth

to Tim an Now, update. I'll operational over turn for

Tim L. Hingtgen

you, Thank Wayne.

great a number additional for pave mentioned, with As made have we the will moving forward. Wayne believe way of we help deal a which operational initiatives, progress of growth

quarter, performance. Wayne the seven the we that fourth year as mentioned, in on quarter the a of this expect exit hospitals been to our terms the have volume In for same-store drag portfolio volume of

quarter, from the operational Medicare mentioned, knee national childbirths, deliveries, XX% from from service expect was Wayne closures, trend admissions Overall, volumes sorry, cases During toe seven outpatient length portfolio lower shifting our strategies. (X:XX) mirroring but and approximately to decline the line of to of same-store select inpatient and of we these fewer status. due rationalization hospitals. not core short stay, the The from our improve the replacement third decline only stemmed the and balance select that I'm also – of our to

XX and I our coupled to continued next we drive quarter, that EBIT X on over to Switching results. help delivered these the management, months. the expense expect net focus growth improved third good will strategies, back We revenue believe with same-store

performance net same-store was Our X.X%, quarter. our which growth similar was revenue second up to the during

service of in stable third to It's contrast select Our higher-intensity payer services from also to and we closure and worth per we in moving increased lines, expect as the lines, typically during and and, physician at point, procedural environment admission minimal year and remain this Medicaid XXXX, acuity from class environment across surgical into lower the were continue adjusted these net full XXXX. noting our some benefit specialties, in quarter. our been revenue that was Along to the had investments has X% Medicare markets recruitment stable XXXX CMI each into dilutive. that up volume margin and more

of initiatives. our operational few Now, I'll provide from a highlights some

to continue our First, on networks. high-opportunity we focus

As past, factors. increased EBITDA improved growth focus a in are Through various resources generally program slower managerial the that top-line by been dedicated high-priority we've combined XXXX XX showing targeted with hospitals performance. of this and outlined due past these few to five over and a in networks combination the had networks impacted quarters,

are Looking at closed five we year-to-date across these up XX% the during for surgeries EBITDA the is results, admissions the excluding are up X%. and markets. positive hospitals quarter, remaining group fourth And

with moving forward. So, this these in been anticipate networks pleased we improvement momentum further we have and

partner to coordinating we us our more to these in providers been in that ACO XXX,XXX initiative. CHS-affiliated integrate hospitals XXXX allowed strategy XX or Care for our care our start Organization, enrolled care is of the our approximately patients. our all of capabilities. to X,XXX Medicare ACOs, one community. than better of traditional care value-based has allowing physicians coordinate This with Nearly, Through initiative ACOs, Accountable we've us and align are advance and better at Another launched with

this As the achieved have in on retention independent we independent new prepare for ACOs care with rate program care joined who providers physicians XX% more primary for physicians And upcoming for of XXXX, XXXX. have signed we a primary XXX year. over XXXX year initially our

coordination. ACO which hospital a readmission points better of benefits year-to-date, number of and the from care our to including are seeing ACOs, quality We the for lowering rate patients

our In access terms this end center toward effort XXXX. transfer and in-sourcing of back began we program, of the

markets, roll to as operational a and greater out visibility as lines. strengthen this growth of continue service we in opportunities, specific function number well into gaining ways to we As are

and added transfer of will seven implemented the combined markets adding XX% a a supporting We quarter be plan quarter. now three XXXX. markets since this second More have and markets, center approximately hospitals into our

aligning better development Outreach to in or employees DPOs markets, enhanced outreach Center also with staff helping And many growth. have are EMS with is also coordinators align and our demand We Access hiring. patient team. This of drive program medical us and Directors we Provider

surgical recruitment. as successful For instance, to have specialties expanded physician cardiology such date, capabilities our through and in areas we

on outpatient deploy technology our open connect and locations of to with investment navigation ongoing area is care continuum. Another across as we the the patients side, and programs care new

improved hospital of and basis, we In industry acuity in growth patient across ASCs, our locations quarter, and our the performance during our And solid the with am settings. we quarters during care across primary year. EDs, the we experienced the urgent made outpatient hospital the strategies outpatient our pleased our points, have care on engagement. in added urgent and top setting, markets. On progress a we our and driving also care Overall, portfolio. across first strategies development we we recently implementing growth where growth key terms care we and the and we are have visit we facilities access our are of summary, care ED three human walk-in talent providers. teams while of new our intensify capital initiatives, our our out and seen I the providers, lower X% on shift strengthening core seen of some have are In and as And third focused higher-performing care clinics, primary focus XX% leadership operational have physician-employee year-over-year invested walk-in investments retaining in and continued attracting of core other freestanding

So, improvement we we across me With quarters. call drive that company important turn on further the confident over to coming the number the strengthened let focused opportunities the we of remain overall, have our that, while to are Tom. over areas,

Thomas J. Aaron

Tim. you, Thank

third the quarter a on discuss basis. quarter-over-quarter I'll Now,

X% this admissions. on net discussed This X.X%. calculations third in revenues the On basis items quarter, same-store comparative mentioned net and a admissions we revenues reminder, note quarter X.X% increased On a the exclude increase versus comprised basis, a XXXX is following: earlier. call for Ross a in adjusted As adjusted per of XXXX decrease

Our in-patient admissions declined X.X%.

decreased visits ER Our X.X%.

per increased close divestitures. few better rates of On basis, hospitals a the of improved quarters, performance. benefited we Medicare revenue delivered number following from Similar we surgeries strong acuity X.X%. across a stronger to the the year-over-year and Our admission net payers, past all of adjusted portfolio

XXXX basis, up. adjusted increased Advantage. for points. On revenue Based Our which provision Self-pay for the XX net our revenues admissions increased compared up XX same includes of store points. quarter increase service our XX to XX payer Medicare down, revenues, Medicare points, for volumes our points. of net other of and was Medicaid self-pay care, XX% decreased points. a basis payer our after shows fee were class, fee basis and Medicare managed mix XXX XX while outpatient volumes third basis care basis revenue managed the third of revenue was for operating basis points. service Medicaid uncollectible XX% Medicare XXXX increased revenues and quarter and Consolidated per Advantage on were basis

the discounts point uncollectible points adjusted from the quarter, XX XXX revenue comparative net Same-store consolidated to During from uncollectible XX.X% three increase. XX.X% of the up revenue, is third revenue and periods XX.X%. of for increased months care, has sum XX.X% self-pay basis basis to

our operating driven expense by net and net same-store salaries points. percentage as revenues primarily XX Supplies higher for as approximately stores by a decreased XX for implant percentage supply benefits offset same FTE management. and spend, which expense of decreased basis stores items, the For was points, of decrease same improved pharmaceutical a operating revenues The commodity driven expense. lower basis

insurance services, certain basis operating The a operating percent increase net of points. system costs. higher expense stores specialist purchased by and fees, the as Our other for viewed increased expenses revenues was information XX same medical

our are expense and performance with of same-store we pleased on the management, lines. SWB our terms In expense supplies

for still we organization. the opportunities more efficiency across see However,

over flows capabilities, have our we Specifically our expect to million million cash $XXX savings Switching focus across XXXX. driving by $XXX from operations first QX, with months, improvements organized cash year-to-date the were two deliver to from in of on $XXX the year. compared to our In seen last million. operations And prior few of enhanced was flow the in compares million months cash we've nine savings the operations provided flows, to cash $XXX our line. during This of supplies, flow past and XXXX. in the teams while additional supply we quarters, all expense data

terms the primary last than accounts decrease million being prior-year to cash of difference divestitures. flow mostly due to the collections September $XXX due receivable In through the XX, is from year-over-year approximately higher year,

revenue receivables cash year from mentioned stronger growth, same-store receivables benefited patient date, flow by impacted same-store prior were current lower year-to-date while to negatively we quarter, growth. net As net patient last from revenue

contributed we patient divestitures number in our year-to-date year to a flow divesture closed fewer large which Additionally, cash of the XXXX. from year last closings earlier versus in in XXXX receivables

X.X% CapEx Turning of or net our CapEx, to year-to-date million $XXX was revenue.

nine $XXX net first revenue. months or the During our of was X.X% CapEx million of XXXX,

earlier, our Tim number across core on and Wayne of both capital high-growth continuing invest we're a As mentioned markets. areas to

end had approximately end quarter, of the $XX with quarter, the had third to Moving third the debt billion the maturities debt long-term of the on million. $XX.XX balance At sheet. long-term at sheet, of approximately current of cash the we million of of balance we $XXX

divestiture our debt further expect our plan We forward. moving to reduce

of Wayne completed divesture nine As of we've divestitures mentioned, and close in million proceeds. generating $XXX XXXX to XXXX, we our additional hospitals of $XXX accounting in net and expect approximately Year-to-date divestitures approximately XXXX total of during the for million fourth from the quarter XXXX. revenue plan,

to been has covered September consolidated liability value the settlement and accrued company the by as recorded acquisition with Justice agreements number assets ongoing were the liability XXXX. were in amount estimated as to matters. paid of it been before known the the current the date will guidance, uncertainties XXXX. classified be XX, payment. acquisition, of to matter agreement into of amount and XX, to an remaining The global by on amount settlement this that underlying company move take of adjusted as XXXX. pending pleased timing settlement the connection HMA January has of I of $XXX Department for On settling of liability we investigation announced on CVR this and previously the September HMA announcement part these around quarter the obviously XXXX, make at company September and global liabilities ends and had HMA I'd the sheet been lawsuits acquired a the fourth the interest million in At other the to legal and claims of condensed of and account at a balance years and legal of agreement, as company's the the We fair – in the of also liabilities. like and including a resolution contemplated This settlement Before that claims comment are initiated XXXX tam the our by qui U.S. ending CFR the XX,

be the includes will that to to no legal Our by fees related probable current reflect there be continues counsel to CVR claimed estimate payment (XX:XX) holders.

following. our adjusted full-year be the For flat. guidance to to admission includes Same-store XXXX, is growth anticipated down X%

net billion $XXX million to to to million. operating Adjusted XXXX, Cash EBITDA $XXX expected be $X.XX $XXX doubtful to is For $XX from million forecasted less to flow for revenues billion. anticipated anticipated at provision million. billion be to billion. $X.X accounts to $XX.X CapEx are is $XXX is operations be

expect We negative approximately from the for the outstanding X.X% operations Income Wayne? is average expense be to of based expected anticipated share XXX be net is $X.XX to zero. to Interest to on approximately to diluted HITECH be $X.XX close incentives per year. revenue million. continuing weighted shares

Wayne T. Smith

At this open operator, Thanks, to questions. point, we're up for it ready Tom.

on We so everyone you us at question, will of several reach XXX-XXX-XXXX. as can have to this you time But available one and you limit to we're anytime always, talk call. to will

Operator

question comes the Markets. first of from Capital Your from RBC line Morgan Frank

Frank George Morgan

I'm revenue excluding for on on of what EBITDA maybe little additional Good Thanks. divestitures. appreciate would those could us curious, the run But rate cash flow I volume run also also morning. the you or divestitures? the rate color color business, be, give a the the adjusted the

Thomas J. Aaron

pretty divestiture broad program, broadly, margin you ones the we on improvement. previously we're years I look divestiture at we we've programs you Frank, divestitures, going Yeah. announced about and described anticipated when a margin the if what the with that prior looked and historically, we've take – being just on divestitures And at not be to the gone consistent guided think look at, back on so just if we but talked improvement.

think pan is at look influence that up we we on consolidated margin. on quarter, growth improvement that think results divestitures the a had X.X% our do side. volume and some Going as of starting the that out got initiatives strong forward, we've EBITDA this the well to when We as

One $X.X Frank, of So, we'll proceeds. closures, I'd – thing, $X of other divestitures, is talked just that. might billion at we've revenue mentioning Also, those $X guide to the revenue, you the billion helpful. least of out about be billion point

million look closures. two around in closed those the about then and in Tennessee. we if at run rate previously for includes that's Kennett, about you – that's talked $XXX the Missouri revenue XXXX Now, one just a in revenue, of East That about

Wayne T. Smith

the So, down Frank, a not-too-distant take months making or mid-teen somewhere in future. But future, good the this us or should road we're year progress. of but margins out XX in

Operator

Your the A.J. Suisse. comes next line of from Credit question from Rice

first want LLC Credit about get finances. don't lenders got covenants, Your you've now any to remarks. line the I is the whether Strong the Is of Rice (USA) open. finally, that quarter, your bit to prepared do Hi, in flow half A.J. $XXX fourth then just to about of then your if liquidity the your just little mind. then, and you're approvals the on make at about payment multipart And in cash then you improvement million definite from a have in I to there? over that. Suisse Securities divestitures you've you of the out. sources in where of unusual Maybe But single you payment, sort And question that the also talked and quarter, obviously a your know - just everybody. trends there anything year. the talked

Wayne T. Smith

finances. That's all Credit Suisse (USA) A.J. Rice more Securities LLC than It's about one - A.J. question,

Wayne T. Smith

category. Same

Thomas J. Aaron

those still down. I'm writing

Okay, take at a A.J., swing this. let me

we our have cash the influencing operations. amounts from did unusual cash all, flows of not First flows, any

a lot not out, play as and I and that time of of think, on and receivables in payables impact divestitures the interest would that the about mostly spent the be recurring, acceleration QX fact of talking our did, payments we focused and our well. fact,

cash. we just we million substantial rest $XXX then, paid million quarter where at anticipated We Because And did refinancing, portion available then approvals lenders as the to We amounts cash. ABL. this from October to our this, Likely, small million, to and get well. – have respect then, this. about any use have and cash of made already our there's this. of the the we unusual And for will $XXX in of that. lot anticipated fund the paid did got lots in covenants, just liquidity be we no and a not in paid included we with respect the know items some been over on so ABL. steps settlement, lien be on first the million at We on is the have A And X.XX, improvements. coverage revolver that final and amounts has X.X a – in covenant. of XXXX first of sure with covenant, X, our that this that to expected of about So, sheet. you the on in like $XXX in With we're $XXX to have million at will the the quarter looking we're we with that down We've balance already QX. was with were as fact undrawn fourth under probably $XXX

Operator

You next question...

Wayne T. Smith

bit that Thank the been of generally I has to little have to real haul, HMA a add and a to speaking, happy with. just a pleased happy have and But we're we're concluded. distraction. that been It's over want matter very you. that long quick very

Operator

question from next Your Josh Raskin Nephron Research. from comes

open. Your line is

Joshua Raskin

and Wanted you that I impact revenue potential process Hi. want the to know facilities presumptuous. understand little number. the gave guys. closing assume don't I Thanks. the point, Good morning, those is do EBITDA-enhancing I on a it where this the losers the And are decision at the but around to into there. of again, money be bit networks more part terms of of we become but And actually don't we about you lose how volumes? has one of down, hospital necessarily And shut factoring think all scenarios this your these existing as in that process? volumes?

Tim L. Hingtgen

decisions. Knoxville the and on a market, on those This Overall, are give on that all, Thank Tim. of are is the hospitals I'll you, you first the market. some drag go closing updates ahead Josh.

So of with the the facilities the to some run. long said, take the that investing that at we've on think projects service remaining will strengthen being expansion some we network that in capacity, capital for been us the physicians in lines,

expanding that's And building much stronger hospital. network out the So, the by place. next performers space be first instance, cardiac projects and from taking for in the part capacity, OB to the capacity volumes of of on larger Knoxville better the closure our capacity, orthopedics year, those will a some take of

does It trends strengthen it the So, us in from profile, flows overall. It the strengthens volume cash market. our underlying EBITDA the market. strengthens

we consolidation So, about feel that good real decision.

Thomas J. Aaron

just we as hospitals, an strong been right make in options. is would the longer balance as but that possible best picture, cash get trying sure to of to put portfolio position sheet accelerate and profitable, to we I down looking as look soon Josh, bigger the at flow that us start our transaction add it's date, about this important – divestitures and been to term, mostly part it's

Tim happy progress situations mentioned, to as we're the some those in elsewhere. services capture of we're especially So, like able with this. on making And we're where this,

Wayne T. Smith

I was working group sensitive the no reflection market. share can It's the or when well issue And work. I the is excellent is we for They XXXX, This Morristown in They're since this was has us in employees at qualified. people. a best me particularly market and consolidate Humana. do trainee to there the physicians. a first how on of good

right this are that hate the And to in close, one facilities. good people work is see these I So decision. that these but

Operator

Brian Tanquilut Your from question Jefferies. next from comes

Bryan Ross

mix, on I detail And overall at growth there Hi, on the payer Tanquilut. moving planned on about per Brian per any difference you guys. in any the the the Bryan admission, on factors divestitures a question XXXB, the adjusted provide had facilities? ex metric more acuity, X%. of admission measure? thinking Is that for and the core is Can This the rev for magnitude closures. spoke other rev about on terms strong you admissions I adjusted there, again parts Ross guess, just very

Thomas J. Aaron

Yeah.

of adjusted going start, started stat a net we revenue quarter that me adjusted fourth our just case our about up that let through net Bryan, quarter. the this the going service mentioned, a up benefits admission. to focus So higher-acuity revenue seeing talking when of our to admission you mix lines I'm back X% was line that's for XXXX, started per service and flowing per

quarter, that, That on For X, rates, we around XX points we gave started per basis benefit X.X%. increase a stepping been the that XX to had Effective basis statistic. admission. net that points before got several which years us January about Medicare the or area. up Fourth to maybe X% that outpatient translated X% of XXXB, adjusted the revenue in on

the So, which that higher just have through to payment. especially to last with piece will surgeries, year carry was We the in will. our hurricanes bit Florida might had mix we then, that And one-time self-pay. respect little of fourth quarter, impacted a cancel had payer more towards

probably I that would and stat. have quarter at been that look we of normalized QX we've more of been fourth you that. in last were, think on to some year, and So, if where a due is of But where the QX

Operator

Gupte Leerink from Partners. from Your of Ana line next comes question the

Ana Gupte

Yeah. sense that was coming margin XX to in question the Good mid-teens the The that XX months. on for now? setting Can there heard top-line likely into physician that bit now a rates and haven't which volume just trends, from and other that you're on your for does markets get how OpEx morning. give the plays is you expansion to goal strategy, like that of about and efficiencies you're Hey. the Thanks. versus contract what the us for you're trends portion a

Thomas J. Aaron

Ana. Sure,

at back done done operating recently, program, better have those revenue they're rates because admission. relevance also better a payers in better historically able achieve statistics to be when when when still is parts we're of these more per that. look to So, from history they've more that we're to have core same-store on we market They their that to what a net from their there's markets. volume what go. the and two standpoint, even much presented, their in look we've divestitures markets going adjusted divestiture One They have than with volume we

as a So, that history they've well. got of

we from hospitals SWB, started So, expense down. (XX:XX). where with be know indicator slide on We a so our to of on those that's and think that much achieve management once good we've been we're to we've to we've able wound going that

we have as a growth we getting with past. some and that we're we in hospitals those volume, opportunities if lot comfortable EBITDA have hospitals forward, have the volume EBITDA we're Going grow growth we're And of well. and as at still – rate getting great we pretty are can showing

So, that's be a our going we're of going to going bigger to forward. – portion portfolio

The pulling been out that's free is been drag drag it flow. that's does other on on the our thing divestiture a a our margin, just cash

we so, the that, – to twist newer hospital closures have three we And doing to with closures the that we everything can now that announced. expedite are

on are really getting So, getting at we price. divestitures the focused the accelerating right that, done done, that

that. I on I are we on we've margin to core So, EBITDA two seen want on everything those, going those we do growing to But hospitals, based to-date. our to contributors think our be history are the bigger emphasize, believe and

Tim L. Hingtgen

total. will share underway. grow our capacity some the in believe We in projects grow for higher-margin we those can contributor which Another in obviously more the would be of markets margin markets. company are market we're expanding Those

In mentioned to visits terms drive to right higher-acuity care the share, remaining but primarily in and we've this, of our out really earlier, more our good development. growth focus their market heavily on line our in very being we're to that drive our it of markets. in invested portfolio put our portfolio. in help very medical up across importantly, certainly We're right of been physician the us phase year. this more over-recruit, development market strong careful primary building physician primary performance We've service not a hospitals. strategy, staff having our strategy in And in number care start-up recruitment will the I primary lines drive will cares service really the in strategic

in markets as the of – great great a over new that doctors are We I to we deal have XXX a that serve. doctors of number start-up, said,

the the strategies the on in as having new cares with of our our adding core our a focused as retention strategies. to We are very up been improve health we've doctor Short this who've believe but also service we we growth. and are another possible on portfolio XX% them And I market, line better also, the independent XXX to market, drive I mentioned quickly physicians signed to every in said, alignment very providers ramping the year, rate position recruit a primary drive ACO. on of focused to to initially, those communities, community competitive as with care building

Operator

Jaffray. Piper Your next Sarah from James question comes from

Sarah E. James

the you. of additional expansion, into had that you supply mentioned Thank margin for for opportunities thought some pieces Breaking the savings you XXXX you in expense.

Thanks. of the you've can year both recognized pharmaceutical the additional on this help about what related vendors commodities your or management? we through understand with progress more programs? us to utilization is scale opportunity versus So, already as of it for that on you should negotiations the price think And and the that savings, point, more

Thomas J. Aaron

that. There's buy you I question. want data this well, might contract. put of purchase the XX hit we HPG item, for and to probably is, we the look the person components requesting as through thanks to any probably, we services a there's want if them. Sarah, One way, supply analytics, want information but the who be our of side, on on our to supplies side, to there for items lot at of front in is Using And the XX under put item, two GPO. Okay. or supply it

items, to at XX so items point them lowest-priced item. that, on XX, So select two list instead of quality, picking the that that make those, choice upfront, they best we to looking the on right the the highest maybe from

being you one as might what look with able been And but items, preference labor. want to that's non-physician then we've piece. with to that can just at do data with And do to better that So, that. similar we

ability that it's The getting a our we're We negotiate at and we're have hospital, off optimize and certain even really but the that, organize without think and that share you do. by consumption where vendors, looking And market that's some have better so on information quite using is that second piece item bit. when prices one at looking a our implants, better who's of forth, vendors that's you we and of called which do been out to the to negotiation what could to we've that.

a been bit decisions those on there. drug side a drug of think and help our we of do the point of better we that's supplies have leveraging areas Cardinal spend supplies, this we've improvement with purchasing able again, towards on on significant to With quite – Health, the helped to-date. both But we data

the that to still where and on coming think for the some Using purchase that had XX we procurement is as services supply had strategy, quarter. area That's another we improvement points in off most the quarter come improve think and well. we basis can side. we think I still we

do space think we our to some as those get in about competitive the more dietary, have better in procurement bidding opportunity ability and maybe you think, the going in we area maintenance And on, contract contracts. better facilities, So security, there's well. that national

Operator

Giacobbe Your next question Ralph from comes Citigroup. from

Ralph Giacobbe

Can expectations driving of morning. you the of slimmer think Is what the than are identified of for and a still far happen divestitures? Thanks. number apart timing just the maybe maybe confident or guess, are you should of you sense that what's you Thanks. buyers divestitures push-out Good why it give you negotiation? some And proceeds will the us thought a in I of change? all or

Thomas J. Aaron

Ralph. right, All

size was of We're see buyers confident then X out the divested Pennsylvania, hospitals; and hospitals and to we interest So, amount year large individual getting transactions. X hospitals proceed compared at $X year we're significant last point especially still want When in last still very Steward XX in look very inbound we to in at we the had there. when one, two billion, we're the And have strong some with hospitals of hospitals. in newer it's that strategic single we've In options with of that those involved. buyers cases, the – transaction. We most of transactions transaction. least just a bigger bigger with in strategic dealing some are those, still we marketplace. many so at very not got two the least

those hiring involved they're For buyers, some with They're getting new counsel. that. advisors of

longer hospitals that is would we some can We've we hospitals in so being I portfolio bit closed we're we ones just that about ones a closed more involved are mid-single as on far so So, in talked the closed this. that's lower those. of time. a one on performers tell are far, digit were working earlier that. slightly have this transactions. And the smaller The so smaller year's differently divestitures. we The there little say structured little And transaction got a you that taking

at the And aren't relative revenues, so, to very high. if those looked proceeds you

relative However, high the proceeds those. are to the extremely EBITDA on

going get in higher confident to maybe you're will done low. EBITDA slightly to But going So, I proceeds pushback, and think, numbers, we're fourth XXXX forward, Those see we'll and those quarter of done. get then the those going multiples, revenue to on the into we're XXXX.

Wayne T. Smith

thing and has I most that that portfolio that is in to would is area that or geographic-specific add The only add are of an network. these their to to that interest there their acquisitions someone to

property. are today, our we people for any even around in not competition hospitals a that that of the there's there lot interested and a are except are really selling people – don't other this, though So, number of not-for-profits fact there

it's going well. So, still

Thomas J. Aaron

provider kind their strategy we're hearing, operational helps areas, broad that's with still the better other share everything having and them market about rate true. From of

drive And to hospitals. our so, demand that's still for going

Operator

of next Bank the Kevin Your comes question from from of America. Fischbeck line

Kevin Mark Fischbeck

is I for kind the the seeing really upon growth I you kind your lot core getting markets Great. last of growth lower your in gain be just think share of want of it think Thanks. hospitals have been the stronger that Can the growth to fair versus you than a seems five-plus services bit a years, what growth you like talk much a maybe you and of being core have the get urban-focused that based little going there core companies. share of as you demand bit core about growing in to organically? how the little sense your of market is non-urban over to just their to and demand be markets? see what volumes

Tim L. Hingtgen

Sure, profile the, suburban more to portfolio that's This off is have seen kick underway, that. been urban I'll of the the rationalization answer shift Tim. I'll with Overall, smaller to market say, a our Kevin. in or we markets.

average XXX,XXX. has about visited population market and matter months, couple – grown a in of of are last the this of mid-tier of shared a XXX,XXX some market, is road As that with XXth our kind the some shows of us if folks you fact, has who our population largest we've will,

markets. improved indicators those employment faster growth larger across development dynamics drive and overall see service demographics indicators those population helps lines, in and us We So, getting strategies, growing.

markets care through through can in the believe drive the walking development, terms in and when do earnings of of All line things we we're been margins what's really So centers, to points. those will rationalization, service the forward. the left transfer drive going the at shares in group access development, we the primary you market grow that when strategic portfolio a assets deploy look I've we initiatives have and

Thomas J. Aaron

Yeah.

are looking combined be that Just or add going at would one to have XXth XX,XXX in hospitals to less. six about areas other are When point our to of divestitures, service only I we largest market. post going piece Tim's these we're planned

that we have very operating. that But So, very mentioned. and do successful by in intend rural in the hospitals, more in on hospitals area some keeping Tim going are that less be way, and to few We the we're rural. markets

Operator

comes Patrick from the next Barclays. Your of line Feeley from question

Patrick Feeley

Good is free are negative divestitures Thanks. Or flow sales morning. year pool these the you way alternatively, flow Thanks. for about do talked done? cash think profile of from flow. these assets to quantify the once assets fully past, In the you've the any what to date? the total slated company cash of Is free there free having cash

Thomas J. Aaron

and in Patrick, we out called this is XXXX divested the divestitures, XXXX.

million the proceeds, looking This for the free going the versus be cash of a $X Plus, be from that. cash flow. level. those it's negative about. are fewer – negative $X same It were billion. talking is than hospitals only those less billion from $XXX is it's free of to revenue $X.X to XXXX, XXXX. we've we're about talked billion billion $X.X flow at and we're in in portfolio So, that those And hospitals revenue The going not

meaningful is us. to going But be that. less it's than So, for number it a

out already some very hospitals, operate come what these are CapEx. our as out project a see free free of we're flow. seeing, were that We starting of has old impact requiring lot like the We to had flow those cash our as to on that cash campuses we

And the seeing that divestitures we'd from would from anticipate benefit to we we're improvement. the closures. that that, So, continue and

Operator

last from Sachs. question from Goldman Tanal comes Our Steve

Stephen Tanal

wanted levels there guys. for improvement, about you run performance business morning, ask working Good this unusual or the Thanks I to anything Was can just these good all forward? the at going quarter. that guess outcome I question. the the one capital helped there

Thomas J. Aaron

some capital, will there have we there. Well, do little items do be have quarter interest that fourth than in the the were and unusual heavier working no in real – the payments things on like third. We a so it's in second

quarter end. called, closed, closing month we pay and we retain end. And and the all Steve, Steward months already, quarter are it's out time that we discussed second a hospitals one collect quarter the end, working to receivables that's transaction, going have, we CVR immediately closed year, And When it that two going quarter, payables the before before eight divestitures the the prior the compared in to capital. takes to prior some had in thing played the fourth to we to We be other as the we settlement just that out quarter. month had the

interest second so, as, influenced we the acceleration payments. the of that mentioned, as quarter well And the

quite though, divestitures does Patrick's forward, call, bit free closures. the already once improve Going on seeing complete that. flow we impact as of I mentioned a We're cash and

project continue We that. to

say divestitures going just the our And we're flow. forward thing the timing in and of free cash I other that get think is do fall. going an core hospital only we So, those would to the when improvement

like for free in cash do did or flow. the they the one trajectory direction could like forward. But it, quarter, going those core, other, we impact our second Just the from

Operator

I'll now Mr. comments. back turn for to the closing call over Smith

Wayne T. Smith

Once time our division management Thank again, executive we've officers, and nursing progress and you and get on and financial reach the focus specifically staff, performance hospital today. We're to with our us for quality. can thank chief spending area us Thank and always today. strategies for have you. updating XXX-XXX-XXXX. hospital you call officers, our on operators that We look again, questions, to concludes We if throughout on want officers the code outlined. team This for you, forward any chief focused year. continued you chief operational their at

Operator

This concludes today's conference call.

You may now disconnect.

Community Health Systems (CYH) 30 Oct 182018 Q3 Earnings call transcript