Marianne Denenberg - Community Health Systems, Inc. Wayne T. Smith - Community Health Systems, Inc. Tim L. Hingtgen - Community Health Systems, Inc. W. Larry Cash - Community Health Systems, Inc..

A.J. Rice - UBS Securities LLC Gary Lieberman - Wells Fargo Securities LLC Brian Gil Tanquilut - Jefferies LLC Joshua Raskin - Barclays Capital, Inc. Chris Rigg - Deutsche Bank Securities, Inc. Ralph Giacobbe - Citigroup Global Markets, Inc. (Broker) Ana A. Gupte - Leerink Partners LLC Kevin Mark Fischbeck - Bank of America – Merrill Lynch.

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 First Quarter 2017 Conference Call. I will now turn the call over to Marianne Denenberg, Manager of Investor Relations. You may begin your conference..

Thank you, Mike. Good morning, and welcome to Community Health Systems' first quarter conference call. Before we begin the call, I'd like to read the following disclosure statement. This conference call may contain certain forward-looking statements, including all statements that do not relate solely to historical or current facts.

These forward-looking statements are subject to a number of known and unknown risks, which are described in headings such as Risk Factors in our Annual Report on Form 10-K and other reports filed with or furnished to the Securities and Exchange Commission.

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

For those of you listening to the live broadcast of this conference call, a supplemental slide presentation has been posted to our website. We will be referring to those slides during this earnings call.

As a reminder, our discussion of our results excludes Quorum Health Corporation, the joint venture in Las Vegas that was sold to Universal Health Services and the company's home care division from our prior-year results.

All calculations we will be discussing also exclude discontinued operations, loss from early extinguishment of debt, impairment of goodwill and other long-lived assets and the gain or loss on sale of businesses, expenses related to government and other legal settlements and related costs, expenses incurred related to the announced hospital divestitures, expense from fair value adjustments on the CVR agreement liability related to the HMA legal proceedings and related legal expenses.

With that said, I would like to turn the call over to Mr. Wayne Smith, Chairman and Chief Executive Officer. Mr.

Smith?.

a 100-bed Memorial Hospital of York in York, Pennsylvania; Lancaster Regional Medical Center in Lancaster; Heart of Lancaster Regional Medical; and a 165-bed Carlisle Regional Medical Center in Carlisle. This transaction is expected to close in the summer of 2017.

Yesterday, we announced a definitive agreement to sell two hospitals in the state of Texas to HCA. And the hospitals in transaction include 358-bed Tomball Regional Medical Center in Tomball, Texas; and 67-bed South Texas Regional Medical Center in Jourdanton, Texas. We expect this transaction to close later in the second quarter.

Yesterday evening, we also announced definitive agreement to sell Lake Area Medical Center in Lake Charles, Louisiana, to CHRISTUS Health. This transaction is expected to close late in second quarter.

Adding up the total hospital divestiture plan, it now encompasses 10 hospital transactions that include 30 hospitals of which 11 have recently closed, 12 are under definitive agreement and seven are under letter of intent. These divestitures account for approximately $3.4 billion of annual revenue and mid-single digit EBITDA margins.

Estimated gross proceeds from these divestitures including working capital are projected to generate $2 billion. The multiple from our 30-hospital divestiture plan is approximately 12 times EBITDA. We expect the transaction for these hospitals to close during the first nine months of 2017.

One change from our last divestiture update back in February is that the other divestitures that were included in our initial 2017 guidance accounting for approximately 4% to 5% of our 2016 net revenue and mid-single digit EBITDA margin is now under letter of intent included in our 30-hospital plan.

Looking at our hospital divestitures, our divestiture plan today includes approximately $3.4 billion of annual revenue and projected proceeds, including working capital of approximately $2 billion. This is up from last quarter, when our plan included approximately $2.8 billion annual revenue and projected proceeds of approximately $1.5 billion.

On page 9 of our supplemental slides, we show the divestiture growth we've experienced over the past several quarters.

It's worth noting that these numbers including previously closed transactions, such as the majority interest in our home health care division, and the sale and leaseback transaction for medical office buildings, both of which closed in late December. We're pleased with the progress that we're making with our divestiture strategy.

We're continuing to receive inbound inquiries from a number of parties interested in our assets, and we continue to evaluate whether a potential transaction would advance our portfolio optimization goals. We will continue to provide updates as we reach definitive agreements and reach the close of transactions.

Proceeds from these transactions will be used for additional debt paydown. We're working to not only improve our debt-EBITDA ratio, but also working to reduce the overall amount of our debt.

Our current divestiture plan will also allow us to move to a portfolio of hospitals that are better positioned in our markets with better volume growth, higher EBITDA margin, improved cash flow. This will also allow us to direct future investments in our most attractive markets and regional networks, which provide a higher return on capital.

Now I'd like to talk about our 2017 guidance. Larry will provide more detail later. Our 2017 guidance includes net operating revenues excluding expected divestitures are anticipated to be $15.8 billion to $16.2 billion. Same-store hospital adjusted admissions growth is anticipated to be flat to up 1.5%.

Adjusted EBITDA is anticipated to be $2 billion to $2.175 billion. Income from continuing operations anticipated to be $0.25 to $0.90. As it relates to our pending HMA legal matters, there has been no material change for several quarters. We continue to reevaluate the estimated liabilities covered by the CVRs on a quarterly basis.

Our current estimate, including probable legal fees, continues to reflect that there will be no payment to CVR holders. Tim will now provide some comments on our operations, and Larry will discuss the results later..

Thank you, Wayne. I think we had a good first quarter, and we are off to a good start for 2017. As I think about the remainder of 2017, I see a number of areas of opportunity to drive improved financial performance across our core same-store hospitals and market.

In terms of expenses, I'm highly focused on driving better same-store expense performance across the company. In the first quarter, we did a good job of managing SWB, both on a sequential basis and compared to full year 2016.

As I mentioned before, we are continuing to work with local market leaders on matching the cost structure of each respective hospital with their hospital or network's revenue outlook. As part of this work, we are enhancing our labor analytics tool in our core hospitals.

This work, coupled with our recent divisional changes that Wayne just talked about, will be helpful in driving incremental improvements moving forward. Finally, I would like to provide a quick update around our high-opportunity hospitals initiative.

As I've mentioned in the past, we started this framework in the fourth quarter of last year, where we identified an initial 15 hospitals or three per division that have historically operated at a higher EBITDA margin but have experienced some EBITDA decline in 2016.

For each hospital, we conducted an in-depth operational assessment, completed focused, strategic planning and layered on increased oversight to drive improved EBITDA performance.

While we believe we are still in the early innings of this initiative for these 15 hospitals, we're seeing good progress with improved net revenue and EBITDA growth across the group. In summary, we are off to a good start for 2017, but I see a number of opportunities for better performance.

I look forward to providing an update on our second quarter earnings call.

Larry?.

revenues improves 50 basis points; admissions into the ER visits, 40 basis points; adjusted admissions, surgeries, 20 basis points; payroll as a percentage of revenue gets better by 80 basis points; and EBITDA margin improves by 2 basis points (sic) [200 basis points]. Now, I'd like comment on the recent debt offering.

In March, we completed an offering of $2.2 billion of 6.250% senior secured notes due 2023. The proceeds were used to purchase all of our 5.125% senior secured notes due August of 2018 and our term loan due December 2018. We reflected the additional interest expense from this offerings in our revised guidance.

Only long-term debt maturities due prior to 2019 will be our $250 million on our AR securitization due November 13, 2017, and then we also have $450 million due in November 2018. In terms of our bank covenants through the fourth quarter of 2017, our maximum secured net leverage ratio was 4.5 and our minimum interest coverage is 2.0.

We're in compliance of both covenants on March 31 of secured net leverage ratio of 3.9 and an interest coverage ratio of 2.39. Our EBITDA cushion on the senior secured ratio was 11% and our EBITDA cushion on our interest coverage was 16%.

Before we move to guidance, I'll just talk quickly about the first quarter consolidated performance compared to the first quarter 2016.

If you adjust for the impact of our divestitures of Quorum, Las Vegas JV and Home Health, the leap day and the HITECH drop and other acquisitions we did, our EBITDA performance was almost flat here in the first quarter.

Additionally, our 3/31/17 quarterly EPS of $0.08 includes an additional tax expense of about $16 million or $0.14 EPS related to the new accounting standard, which changes how differences in compensation expense with share-based awards for accounting tax purposes are recognized upon vesting. Share price has dropped from the grant date.

This effect should probably only be in the first quarter of the year of any significance. Switching to our full-year 2017 guidance.

The only change to our EPS line due to the higher interest expense is (23:48) debt offer we completed in March 2017 full year guidance, again operating revenues anticipated to be $15.8 billion to $16.2 billion after you adjust for divestitures. Adjusted EBITDA of $2 billion to $2.175 billion.

Cash flow from operations is forecasted at $1.050 billion to $1.225 billion. CapEx is expected to be $625 million to $775 million.

Income from continuing operations anticipated to be $0.25 to $0.90 on a weighted average shares of 112 million to 113 million and the debt offering lowered our high end of the guidance by $0.20 and the low end of the range was trailing by only $0.05.

While we typically do not provide quarterly guidance, just want to add a couple of things about the divesture headwind for the second quarter. Our first quarter consolidated EBITDA came in at $527 million.

Based on recent divestiture closings and anticipated closings during the quarter, we estimate an approximately $10 million to $15 million drag on our adjusted EBITDA during the second quarter, and also it is worth noting that our second quarter does include Easter, and last year it was in the first quarter.

Wayne?.

Thanks, Larry. Before we open up for questions, I just want to publicly acknowledge and express my appreciation to Larry. All of you all know Larry is retiring this month. He's been not only a significant contributor to Community Health Systems, but professionally I know he has been very helpful to a number of you all.

So we appreciate everything you've done for us, Larry. All of us do, and thank you very much for your contribution to this industry..

Thank you, Wayne..

At this point, operator, we are ready to open up for questions. We will limit everyone to one question. So several of you can have time on this call, but as always we're available to talk to you and you can reach us at 615-465-7000..

Your first question is from A.J. Rice from UBS..

Hello, everybody. And, Larry, I want to echo those best wishes to you in retirement, and I wish you the best. On the question side, I guess there's two parts to it – to my single question. The commercial business stepped up as a percentage of 140 basis points year-to-year and you also had a pickup at HMA.

I wonder, are you attributing either of those to a stronger economy either nationally or in Florida, or are these mostly your initiatives or as you drill down, any thoughts on those two dynamics, improved commercial performance and improved performance at HMA in terms of volumes and all?.

First of all, thanks, A.J. The consolidated – I said, consolidated is up 140 basis points, it's less than that, probably 50 basis points, because of the – we had Quorum in last year, and Quorum's gone.

But I think we are seeing pretty good employment growth and we are seeing a pretty good result especially on the outpatient side from Managed Care getting for the most part good prices, and I think we do have in our Managed Care, a little bit of Medicare Advantage, so there's a little bit of movement from Medicare to that.

But I think we're pretty pleased that we're still seeing some same-store Managed Care growth accept our pricing, 2.1% which is pretty good for us, compared to last year we were under 2%. So that's a good movement, especially the fact that the surgeries didn't go up.

We also are starting to see a little bit higher intensity in our surgeries, a little bit higher percentage of our surgeries have implants, which drives a bit better acuity, and our case mix improved on our Managed Care business, which was helpful, so all that together. But I think (27:42) is catching up with some of the other locations, which helped.

Medicaid was relatively flat and self-pay was down 10 basis points..

Okay.

And anything on HMA specifically?.

HMA is a little bit better in Florida. We've done some good contracting in the Managed Care side there, and I think the Florida has improved some, which is probably helpful to the overall Managed Care in Florida, because most of our hospitals in Florida are HMA hospitals..

Right. Of course. Okay. Thanks a lot..

The next question is from Gary Lieberman from Wells Fargo..

Good morning. Thanks for taking the questions. Larry, thanks for all the help over the years, and congratulations on a very well-deserved retirement..

Thanks..

As you guys go forward, you've now had two pretty good quarters after a rough patch. Looks like the acquisitions or rather the divestiture pace may be slowing down a little bit.

I guess, can you talk about how you may be refocusing your efforts on working to improve the operation of the remaining hospitals?.

Yeah. You're right that we've been working very hard on divestitures, but we also have been making a lot of progress on our operations. But there is a lot of opportunity left. We should see more improvements in the latter part of the year based on the initiatives we have in place now.

But as I've said this a number of times on calls, we're a better company today than we were yesterday or last year, and we're continuing to improve our skill level, believe it or not, in terms of our operations. So our focus now going forward will be operations oriented.

We're about finished with our divestiture process, this 30 just about lines it up. There may be one or two more, but we're not specifically thinking about doing anything significant for the rest of the year. So I think we're on the right track, and I think we'll continue to make improvements..

Gary, looking back, a year ago in the second quarter, we were down a little over 20%. So like I did that reconciliation of what you own and don't own, and HITECH and things of that nature, we are probably down more like 15% in the third quarter of 2016, and under 10% in the fourth quarter and we're basically flat for the first quarter.

So we've made pretty good progress, but I think there is a lot of, as Wayne said, a lot of good progress especially in second half of the year, to follow initiatives that everyone, that Tim talked about and everyone else has got going on..

And as we conclude these divestitures, obviously our margins get better, our cash flow and broadly everything improves. But then is a real opportunity for us to enhance our margins going forward and that's where the big opportunity this year we think for the future..

Great. Thanks a lot..

The next question is from Brian Tanquilut from Jefferies..

Hey. Good morning, guys. And Larry, thanks again for all the help over the years and congrats. So two-part question for me.

Wayne, just to follow-up on that comment that you just made so, if you guys are thinking that we're pretty much done with the divestitures for this year, how are you thinking about longer-term leverage and then all the debt maturities coming up again in 2019? And then tying that with, I think, there was one slide deck or a slide that you put up earlier this year showing the profile of your hospitals in terms of how competitive the markets are and their market positioning and I think there were four different buckets.

So how do you put all that together as you think about kind of like concluding the divestiture strategy at least for the time being?.

Yeah, as you might expect divestitures have been a significant diversion for us in terms of working through all the process, dealing with all the issues related to the divestitures. So that in itself will open a lot of time for us to work on other issues.

So, once you kind of get through this, the margin, I think there is a slide somewhere that shows you what the margin goes to, it goes to almost 13%. And that's just with the things – that's basically just the opportunity here in terms of reduction in number of facilities.

So our opportunity going forward is and Tim's got all these initiatives which we won't go into all the detail about them, but we have a huge number of initiatives going on that we think will be very helpful. As we said all along, the strategy here now going forward is sustainable markets.

As Larry mentioned, we're getting a little growth in our markets now, sustainable hospitals and sustainable markets. There is no question, if we can improve our margins going forward, it helps us in terms of debt reduction as well. So I think we're on the right track, and I don't know, Larry or Tim.

Either one of you want to add to that?.

Yeah. I might just add. If you go back a year ago around this time we did the spin, that's 38 hospitals, of which we got these 30 hospitals. So I think when you talk about sort of being done, we're done for 2017, there may be something else coming along.

But nothing sitting here in May, you're not going to start working on something that's probably going to get done by the end of the year. But if you're interested to look at taxes, there might be some divestitures in the future, but not affecting 2017.

If you look at the debt-to-EBITDA probably at the end of the year pro forma for the divestitures in the same way, we'll be somewhere in the mid-6s, maybe a little less on that on debt-to-EBITDA. And probably in 2018, we'll probably hope, we'd expect to be somewhere below 6%, so. And I think that put us in a better position.

As far as maturities, we got rid of all of 2018 maturities. We've got some January of 2019 maturities which we'll be thinking about and the next maturities is after that or December of 2019, and I think, we'll be well positioned a year from now or maybe even sooner to address those maturities..

So, this other thing, I've said this a couple of times at conferences that if the right opportunity were to come along in some of our larger markets, larger facilities and we got 12 times, which we're getting currently with our single digit margin facilities.

Just because of the size of our debt, we may take advantage of that opportunity when it's all said and done..

I appreciate. Thanks again, guys..

The next question is from Joshua Raskin from Barclays..

Thanks. I'll echo the comments. Thanks for Larry as well. My question is on payer mix. You guys are improving in payer mix, commercial, I think, is at 140 basis points.

And I guess, maybe help us understand how that fits relative to some of the other hospital companies that we're seeing, and what do you think the major differences are, for community, why are you guys seeing that benefit relative to some of the others?.

Yeah. Josh, so 140 basis points is consolidated, it's probably more like 50 basis points same-store, which I don't know everybody else's numbers, but clearly not having Quorum in the first quarter, compared to a year ago, helped that.

One of the things we're doing when we have divestitures, we're improving our payer mix, the 30 hospitals we've got going now, when they're going that are pushed to payer mix backup, and help the payer activity. We're seeing a little bit of movement from Medicare to Medicare Managed Care, which we put in Managed Care.

I think you do a pretty good analysis about the enrollment (35:05) and what's growing, and you pointed out that our markets are starting to have a little bit of enrollment (35:05) growth. We've got good opportunities, some of them probably lost some market share back in 2015 and 2016, hope we'll get a little bit of that back right now.

Volume was basically flat once you adjust it for leap day. Our surgery case mix is up, and our Managed Care patient case mix was up..

Okay. And then, just....

(35:31) focused on our service line development, which we've not done before, which I think is helping us as well..

Got it. Got it. That makes sense. And then, just on the 12 multiple, obviously, now that seems as very attractive especially relative to where you guys are trading or any of the public trade companies are trading.

Is that more reflective you think of the EBITDA margin opportunity for the buyers or do you think there is a general disconnect between public and private markets in that even for higher margin hospitals you think you could get higher multiples?.

One of the things is that, we've attracted a lot of strategic buyers, who have opportunities in and around their markets. Generally speaking, I think that's one of the reasons that people are interested in.

And by and large these are opportunistic properties, I mean, we think they are good properties going forward and so, by us going from 200 to 100 and whatever it is, gives us a lot more focus on this.

But probably, we've spread our wings a little too far to start with, but this is a great opportunity I think for them and for us and as evidenced by people paying 12 times for these properties with single-digit margins. They obviously think they can improve the margin..

Right..

I'll just add. We sort of manage this internally. The people who used to do acquisitions, we had one new person join Harry (36:56) down there. They've done a good job and so I think that by managing it internally you can look at your tax basis, you can look what the future is, and we picked the right buyer for us and then get good proceeds for it..

Okay. Thanks, guys..

The next question is from Chris Rigg from Deutsche Bank..

Hi. Good morning to all. Echo all the previous comments, Larry. (37:08) go forward. So, I guess in this, answer might be obvious, but Wayne when you sort of think about the way you view the company going forward and historically we're sort of M&A driven growth.

I guess, how would you characterize the philosophy of the company going forward? Is it solely focused on cash generation and just margin improvement or you still want to selectively look at M&A down the road? Thanks..

I think we will continue to look for M&A – for opportunities to expand our footprint. Most importantly now we believe and look, it doesn't exclude us from buying a hospital.

But I think, what we are trying to do now is to look at our footprint and look at some of the markets where we've got significant presence and even in the markets where we are the sole provider, expand our footprint in terms of obviously in outpatient, diagnostics, freestanding EDs, freestanding urgent care centers, all of the above, all those should be accretive as we go forward.

I think the objective here is now, is to how we enhance the patient experience and how (38:11) patients going forward. I think, that's a – in whatever area whether it be inpatient or outpatient. But I don't think there is – the need for large tertiary inpatient now is beginning to become less kind of going forward.

So if you fast forward out five years, six years or seven years, I think you will see more expansion. Everything is going to outpatient. We're at 56% or 57%, so. I think that's the opportunity. In deploying our capital in markets where we have higher margins, we will get a better return as well..

Thanks a lot..

The next question is from Ralph Giacobbe from Citi..

Thanks. Also I want to echo best wishes to you, Larry. Appreciate the help over the years. Just in terms of – you guys mentioned better same-facility sort of expense performance and certainly saw good improvement on the labor side.

I guess, the question is what do you expect controllable operating expense per adjusted admissions to grow, sort of, sustainably over time? And then when you brought down the divisions five to four, can you give us a sense at all of magnitude of how much savings that could drive? Thanks..

Well, we could have grown revenue for adjusted admission 2% to 3%, I expect our expenses to be less than that. We had a better first quarter here than we did in the preceding quarters. We still got some opportunities, especially in the labor line. I think the supply line there is lot of efforts there in our strategic sourcing.

We're doing a lot of consolidation in and around our payables, and trying to have a common master index for buying a lot of efforts around physician practices, which will help us in the second half of the year a lot. The one category, medical specialist fees, is something we've got to work a little bit more on.

That's growing more – it's probably the fastest-growing line we've got. We've got a lot of thoughts on how to do that better from that perspective. So I'd say if the revenue per adjusted admission's is going to grow 2% to 3%, we'd want to be more like 1.5% to 2% on the expenses..

Larry, you might comment on the shared service approach as well..

Yeah. And Wayne just said that we've now got six service centers. We've moved over 90% of our hospitals into the shared service centers. We've started to see a little bit of benefit of that. I think our receivables performance was a bit better here, a lot of it last year. So we've been doing a lot of conversions, which have affected it.

We've also got a consolidated effort around Health Information Management. They're operating at a lower cost today than they were before. We're doing consolidated payroll we did a few years ago, getting a lot more analytical information, which Tim talked about.

And then the one that's still underway, which is investment of the monies in centralized payable, and tied with that is some purchasing information. So all those are embedded into the plan to do better, and they're all pretty much on target. We did also work on our health benefits.

We've made some changes in our claims administrator and also made some changes in our drugs, which will help us for the year. But you're right about the comment. We've got to recognize that the revenue per unit may be 2% to 3%.

We got to operate more effectively trying to keep the costs under that, which we didn't do the mid part of 2016 and we did better in the fourth quarter and better in the first quarter..

Helpful. Thank you..

The next question is from Ana Gupte from Leerink Partners..

Yeah. Thanks for taking the questions. So congrats, Larry, as well and thank you so much for all your support. Wanted to go back to guidance, again. This is second quarter you've reiterated guidance and I don't think I saw a waterfall as you normally have.

So as you're thinking about the puts and takes and the upside and downside risk, can you talk about the line items, and are they more volume related and physician productivity related to the upside relative to on the expense line, either docs or other supply and group purchasing, session fees, and the like?.

Yeah. If you go back to what we did, we did a midpoint reconciliation of 2016 to the midpoint of 2017. There's not much change there. The divestiture is $110 million. We're probably going to have another $100 million come out on divestitures, maybe a little bit less than that based on timing.

We got a little bit of acquisition pickup from the La Porte, Fayette (42:56) activity. We got the leap day, which probably cost us about $20 million. We also lost about $50 million of HITECH. Pricing and volume was probably somewhere in the $30 million to $40 million of a benefit and the physician practice is $20 million to $25 million.

Expense management is about $70 million of it as I just went over a lot of initiatives built around those shared service centers, around our HIM, health insurance, and stuff from which we hope to get $70 million.

We decided not to repeat the same schedule we did before, but because we've kept the (43:30) guidance the same, the $527 million was pretty much what we had expected to be. So I think that's why didn't redo the bridge, and we'll wait for the second quarter for something that needs to change. Some people commented about the volume being negative.

If you adjusted for the leap day, our volume was basically flat, and our guidance is 0% to 1.5%. We're not going to have the leap day challenge going forward. So I think we're still comfortable with our 0% to 1.5%..

Got it. Okay. Thank you. One follow-up. You and one of your peers earlier today also seemed very bullish on Medicare volumes, particularly also on the managed Medicare side.

Is this more just the baseline was low or is something else changing in terms of their prior auth or practices?.

Well, I think the companies you're talking about work pretty hard and have pretty good managed care relationships, and I think our managed care area's done a pretty good job getting us most of our contracts.

So I do think we do participate in a lot of the managed care contracts with the major managed care companies, which makes us a little bullish competing against maybe some of our competitors..

Got it. Okay. Thanks, Larry..

The last question is from Kevin Fischbeck from Bank of America Merrill Lynch..

Great. Thanks, and thank you, Larry, for all your help over the years. I guess I just wanted to maybe follow up on that last point that you made about the volume number, and I can appreciate that without leap year you're talking about basically flattish volumes for Q1.

But to get to the midpoint of that guidance for the year, is there anything that you would point to that kind of says the back half of the year should be closer to 1% than to flat?.

Yeah. I'd say our psych business is doing better. We've internalized that. We've done a much better job in getting some of our psych business. Our orthopedic business, which is one of the specialists we're recruiting for, Dr. Simons, (45:33) did a good job for service line from that perspective.

And I think we also feel pretty bullish about our ability to get a little bit more ER business and ER transfer business, some efforts we've got going on there and I think there. And we've also had a fairly long run of OB being down, I think that will anniversary itself here you would think. Also our readmissions have started slowing down.

So that activity would be the ones, but from a specialty perspective, behavioral, orthopedics, and the ER activity we've got going on would be the categories that we feel good that should help us in the next three quarters..

And then when you look at the portfolio of core community versus HMA, do you expect a disproportionate amount of that volume improvement to come from either one of those buckets?.

We're starting to see the narrowing of the gap. We've not narrowed the gap enough on surgery, so there is a lot of work Tim's got underway to get the surgery business up. And I'd say other than surgeries, I'd say they'd be pretty comparable both for admissions and adjusted admissions.

We have not quite got the surgeries for the HMA hospital, some of which are in the divestiture category that we've announced, but I'd say other than surgeries, it'd be pretty much throughout the company..

Okay. All right. Thanks..

I will now turn the call over to Mr. Smith for closing comments..

Thank you again for spending time with us this morning. We're very focused on our strategies we have outlined over the past several quarters.

We want to specifically thank our management team and staff, hospital chief executive officers, hospital chief financial officers and chief nursing officers, division operators for their continued focus on operating performance. And again, a special thanks to Larry and a wish for a happy retirement. This concludes our call today.

We look forward to updating you on all of our progress through the year. Once again, if you have any questions, you can always reach us at area code 615-465-7000..

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