Seeking Alpha
We cover over 5K calls/quarter
Profile| Send Message| ()  

HCA Holdings, Inc. (HCA)

February 26, 2013 11:05 am ET

Executives

Samuel N. Hazen - President of Operations

R. Milton Johnson - President, Chief Financial Officer, Principal Accounting Officer and Director

Victor L. Campbell - Senior Vice President

Analysts

Gary P. Taylor - Citigroup Inc, Research Division

Gary P. Taylor - Citigroup Inc, Research Division

Good morning. Thanks for coming in to check in with HCA. HCA is the nation's largest hospital company. It has 163 hospitals, over 100 ambulatory surgery centers. They're in 20 states, as well as England. And what's interesting, I was kind of thinking about how to describe HCA. If you look at the parts of HCA, you've got the largest hospital company in the country; also, by itself, one of the largest BPOs in the country; one of the largest physician practice management companies; one of the largest revenue cycle companies; and one of the largest surgery center companies. All combined just being what it is in supporting all the markets.

So a pretty broad cut of the industry is being represented up here today. So we have Milton Johnson, who's the CFO; Sam Hazen, who's the COO; and Vic Campbell, who's Head of Government Relations or primarily works in government. Right?

Samuel N. Hazen

And Milton is President too.

Gary P. Taylor - Citigroup Inc, Research Division

Oh, President and CFO. Sorry.

Samuel N. Hazen

No big deal.

Question-and-Answer Session

Gary P. Taylor - Citigroup Inc, Research Division

So first question I just want to go is big picture. I mean, the theme of our conference is the value imperative. And I guess, at this point, I'd say, ad nauseam, we've heard a lot transitioning away from fee-for-service or it's that really in the health care industry over the next 5 to 10 years, less being paid per volume, more being paid for value that's being delivered to private, the public payers. So first question is do you agree with that thesis? How quickly do you think that's moving and what does HCA need to do differently than it's doing today if anything?

R. Milton Johnson

Maybe I'll take a shot at the first part of that and Sam might have some comments to add. In our market, we're not seeing a widespread movement to a different revenue model than our fee-for-service model. Yes, you do have with Medicare now you have certain penalties, pay-for-performance, readmission and the like. But still, that's a relatively small piece at risk for us. Of course, our performance there is very strong, but it's not a significant piece of our revenue at risk with that. And so we're still seeing structurally, our reimbursement consistent with the recent past. I don't see that changing in a significant way for HCA in the intermediate term looking out over the next 2, 3, 4 years. We may see some of it develop over time. But again, I still believe it will be a largely fee-for-service reimbursement model for HCA.

Samuel N. Hazen

Just to add to Milton's comments, Gary. I think it's important to understand what we're trying to [indiscernible] HCA is unique with its scale across the multi-market, multistate environment. But within the marketplace, one of the things we're trying to do is create what I call local scale. And within that local scale, really having a network that has the full complement of service capability. Thus, you could see that we've been adding services to our array, whether it's behavioral rehab, trauma programs, children's programs and so forth. And then additionally, making sure we have enough access in these large markets where we do business to provide for easy accessibility to our HCA system and hopefully being able to keep the patients internally within our network of facilities. And as we think about changes in the marketplace, having, for lack of a better term, a must-have network position is important in today's market, but I think it's going to be even more important in tomorrow's market. And so from that standpoint, that's the core element of what we're trying to get done today. Additionally, I would say in preparation for tomorrow, we're continually advancing our quality performance with quality initiatives across the company to enhance our metrics down at that line, as well as improving our overall patient satisfaction in a very significant way. And all of those are just basic elements of building a network that is competitive in the marketplace and capable of adjusting to whatever dynamics come down the road.

Gary P. Taylor - Citigroup Inc, Research Division

Can you talk a little bit about how you've approached participating in ACOs and bundled theme and some of these demonstration projects and how much of that are you doing? How important you think that is at this early stage of the game?

R. Milton Johnson

Well, with respect to governmental ACO program, we have chosen not to participate. We did look at the programs and decided that, for us, it did not make sense for us currently. But ACO is a pretty broad term. I think people use it to describe a lot of different models. And what Sam just described, the ability of taking care of a patient is the continuum of care. Certainly, that's something that we are focused on. It's just not under the governmental ACO definition. We do have models on the smaller scale that we have with different payers where we may have a gain-sharing opportunity; again, where we may be in a position that if we can change certain cost parameters, cost structures, that we can participate in the first couple of years with the upside, with the gain-sharing programs and with the idea of down the road, if we're successful in doing that, could we convert that into more of a risk bearing sort of arrangement. But again, these are all, right now, on a very small scale for HCA and not material to our operating results. But again, we're getting that experience and learning how to operate in that environment.

Gary P. Taylor - Citigroup Inc, Research Division

Big picture, I think I get a lot of questions about some of the potential challenges or additional challenges on the cross utilization. They come out of seeing things like do we need those transactions for PCP and an ACP kind of getting more visibility in the investment market, talking about how they, with care coordination, take utilization down in a the population outside of MA at the presentation yesterday. They were highlighting a program in Maine where a select MA population, on their slide, they were showing 40% less admissions out of that population, that sort of thing. Obviously, there's some reasons why implementing those types of programs are perfectly simple. Otherwise, everybody would be doing them. And we'd be seeing a dramatic effect. So just at the high level, I mean, what do you think about the risk of some of these new models of managing, particularly the MA population? How much risk does that present to HCA? How much development of that are you seeing in your market and how concerning should that be?

R. Milton Johnson

I think most of these programs, Gary, you're describing are probably going to be found in certain geographical areas, like Southern California, maybe some in certain Florida markets. And these models have typically worked with the high acuity patients, the chronic patients that really require a lot of care. And to coordinate that care and provide resources to that patient through these models have shown that you can reduce utilization. So they have proven in that they work. But right now, they tend to be more not in lot of the few markets that we're operating in.

Samuel N. Hazen

Let me just add to that. I think as you pull back for a moment and you look at the overall demand equation for HCA as a system, in particular, first and foremost, the company is located in great demographic centers that are growing naturally. So demand in our market is growing as a natural phenomenon because of population growth. And so that's an important component of viewing HCA. The second piece I would add is that we have seen over the past 5 or 7 years, a significant movement to Medicare Advantage membership within our overall complement of Medicare business. But you have to bump up against that an aging population and so forth. So these factors have been in play for many, many years. On the margin there, as Milton said, are incremental adjustments that people are making to control utilization. But on the larger scale, we're seeing overall demand in HCA markets growing somewhere around 1%, which is an improvement over where it's been in the previous 24-, 36-, 48-month period. We came through the recession, obviously, and we're starting to see a little bit of a rebound in overall demand in our market. And again, I think some of that is economies where we do business. But in addition to that, I think we're seeing a little bit of the lag that comes from a slight rebound in the overall economic inflation. But clearly, the Medicare traditional book of business is the book of business where a lot of experts think that there are opportunities for improved utilization control. But again, you've got to sort of factor that in with the overall demand that's happening because of population, as well as aging that's going on in the market.

Gary P. Taylor - Citigroup Inc, Research Division

Got it. One of the questions I want to ask, just looking at your same-store growth both on the inpatient and the outpatient side, it's been better than all the other for-profits anyway for at least the last 2 to 3 years. And I think the demographics is one factor in that. But you do a pretty -- more so than most, pretty real-time statistics or attempting to keep on top of market share that shows you have been gaining share as well. What are some of those basic strategies that you think are really effectively driving some of the share gains and driving these same-store statistics rates there?

Samuel N. Hazen

Well, I mean, you see a slide up there. I think it's on the slide. It's called the network approach. I think we have learned that our system of assets and facilities within an individual market can work better as a unit, that it can, to some degree, as an individual component. And so when I think about the things that we're doing to try to drive organic growth inside of HCA's markets, first and foremost, it's managing the continuum, as Milton mention, where we've got a broad enough array of services where we can keep people within our system whenever they need a higher level of service or a more specialized level of service. And so there's internal growth, if you will, within our system. So that's sort of point number one. Point number two is we have increased the access to HCA systems by adding outpatient facilities, selectively and strategically placing our physician practices and then putting other sort of freestanding centers in certain geographies within our marketplace to increase the accessibility to our systems so we can start the process of taking care of the patients on a basis of full continuum. The third thing that we've done is we call it expanding our markets. In the hospital business, there's a tendency to want to focus on what we call your primary service area in your primary service area only. When the marketplace was contracting or flattish because of the economy or other dynamics that were in place, we felt we needed to figure out a way to make the marketplace bigger so that we can have a growing demand equation. And that led to a number of initiatives within the company, most significantly would be our rural outreach initiative where we looked to the rural markets, which deliver a lot of business to the urban markets as an opportunity for HCA to gain share. And so we managed that effort with resources, with infrastructure that we've invested in, with relationships in our salespeople where we put them into the rural market to develop relationships for downstream activity. That would be the third thing. And then the fourth thing -- there's 2 more, would be our physician strategy. I mean, looking at our physicians as a core customer of our system has been an important ingredient to HCA's success, and we have implemented a number of initiatives to make practicing at an HCA facility easier for our physicians, whether it's technology, more efficient operations in our surgical suite, better nursing care on our floors, you name it, medical office buildings that are proximal to our facilities. All of these come together to create a more efficient environment for our physicians to practice medicine and achieve their objective. And then the last thing would be capital. I think we've really enhanced our ability to identify when we have capacity constraints, when we have opportunities in the market and how do we deploy capital to our existing facilities to drive growth. So those 5 pieces bumped up against the good portfolio of market where there's decent demographics, I think, has yielded a better-than-average performance in the industry and market share gains within our individual markets.

R. Milton Johnson

Gary, I'll add to that. Sam mentioned the service line strategy. I think one of the key service line strategies for us contributing to the very consistent strong growth has been our emergency room strategy, and the expansion there of pre-expanding ED or just also improving the throughput and the ability to drive more volume through our existing emergency room has been a key component. When you think about over 60% of our admissions come through the emergency room, and we have now about 7 million emergency room visits a year across HCA. Almost 1 out of every 22 ER visits in this country will go to an HCA ER. I think that's been a significant contributor to our consistent growth.

Gary P. Taylor - Citigroup Inc, Research Division

How many freestanding EDs do you offer right now?

R. Milton Johnson

We have 30 that are in operations and we have another 20 or so that are in development.

Gary P. Taylor - Citigroup Inc, Research Division

Are these all in markets?

Samuel N. Hazen

They are. These are complementary components to our overall mix of access points, if you will, within a market. Less than 5% of HCA's business comes from free standing emergency rooms. So it's a small element of our overall 7 million visits that Milton mentioned. But it's convenient. It's accessibility. It's well-resourced, well-trained physicians and nurses just like you see in a hospital environment. And it's been a way also for us to allocate capital maybe a little bit more judiciously and more efficiently by using that method as opposed to reconstructing a more complicated facility on campus.

Gary P. Taylor - Citigroup Inc, Research Division

Are there licenses in emergency rooms?

Samuel N. Hazen

That's not our license. That's part of the hospital.

Gary P. Taylor - Citigroup Inc, Research Division

It's part of the hospital...

Samuel N. Hazen

Everything. That's part of disaster management, 24/7, same technology. You would go in, it would exactly like what you would see at the base hospital.

Gary P. Taylor - Citigroup Inc, Research Division

Got it. Since both of you mentioned capital a little bit, if we look at your capital spending for next year and we take out routine and we take out information technology, and we're really looking at development CapEx to the extent that, that's a little fungible. But what are the top one or two things on that development CapEx piece? Would it be these freestanding emergency rooms or...

Samuel N. Hazen

Well, I'll start and Milton can fill in the blanks. I mean, we're seeing a little bit of an increase in our IT spending. I think everybody in the industry is seeing that to some degree. We're trying to manage that effectively. But within our capital budget for 2013, we do have capital that's dedicated to 4 new hospitals in existing markets. There's some markets where there's no acquisition opportunities for HCA for whatever reason. And one of the ways for us to expand our footprint and open up new markets, expand our markets back to our strategy, create access points is to develop new hospitals. So that would be one thing. We have 4 new hospitals under construction as we speak: one in Orlando; one in Houston; one is Salt Lake; and one in Dallas, the Fort Worth area. And so we're very excited about how those facilities will complement our existing networks in those markets. We do have increases in bed capacity at existing facilities where we have capacity constraints. We're constantly monitoring our overall capacity utilization from one institution to the other, and we start approaching thresholds for concern as far as needing more capacity for growth. So bed expansion would be a piece of it. Our emergency room capacity is a small piece of it. But it's just -- each bucket is growing a little bit is what I would say, Gary, back to your original announcement of our capital spend. But the newest piece would be the 4 new hospitals.

R. Milton Johnson

I mean, in terms of the numbers, it's about $1 billion, roughly. If you take out routine and IT spending, it leaves about $1 billion. Next year, our capital spend would be targeted towards addressing the capacity issues and growth issues that Sam just described.

Gary P. Taylor - Citigroup Inc, Research Division

Got it. One of the questions we asked in our annual nonprofit survey where we have 300 nonprofit hospitals. And what has been interesting to me, over the last couple of years, is we have a question just about are you being approached by the payers to take more risk in your commercial contracts. And granted how someone might define risk as making 1% of the payment, be it risk based on some quality metrics versus being in a capital arrangement as a wide spectrum of risk. But over the last 2 or 3 years, we've seen well more than half of the hospitals saying yes, they are being approached by the commercial payers to take some new increased form of risk in the contract. And then the follow-up question is being approached is one thing, but are you willing to do that is another. We've really seen, again, over the last 2 or 3 years, a really dramatic increase where 40%, 50% of hospitals are saying, "We're seeing it. And yes, we want to do that." So when you look at your commercial contracts with payers, what kind of risks are they're trying to hoist in your direction and how much of that do you actually want to take?

R. Milton Johnson

Well, it's been fairly consistent. We've been seeing -- again, at the very low end, you described that 1% or so about the reimbursement at risk. We're hitting certain quality metrics, and we're comfortable with that. And we've been doing that. That's not something new. It's something we have been doing, and we have been successful in capturing most of that upside or avoiding the penalty however it may be structured under the contract. But our managed care contract and strategy overall, today's environment, I would say, is very consistent with where we've been in recent years. We've got a lot of visibility into our managed care contracting. We've got virtually all of 2013 under contract in that 5% to 6% zone increase. We've got about half of 2014 under contract with similar rate increases and about 30% to 40% of 2015. So as usual, we have a lot of visibility, and there's a lot of consistency in our managed care contracts today that, frankly, we've had over recent years.

Samuel N. Hazen

And the structure of those contracts has really not substantially changed as far as the terms that they're in. I mean, is there a market where the company would consider taking population risk for the commercial? Possibly. Are we in active discussions with any payers at this particular point to do that? Not really.

Gary P. Taylor - Citigroup Inc, Research Division

And on that 5 commercial percent -- 5% to 6% commercial rate growth, I would imagine your visibility into how much yield you're actually getting out of that because of copays, benefit design changes, benefits probably -- by necessity, has probably increased over the last few years as we've seen a lot of that. That 5% to 6%, is that a number on the commercial side that you think you can yield? Or is that kind of growth before benefit design?

R. Milton Johnson

Well, I think probably a bigger impact rather than benefit design has been the acuity level of the patients we've been treating. We did see in the second quarter of '11, that shift onto somewhat in the first -- in the Medicare book and then later, in the managed care book. Since then, it has been stable and -- to slightly increasing. So it seems to have bottomed out and actually is slightly increasing. And I think that's affected our yield on our managed care contracting. The rest have been getting something in that 5% to 6% zone. We've been yielding just slightly under 5%. So I think we finished 2012 yielding on an annual basis of 4.5% on our managed care contracting. But in the fourth quarter, for example, I think we yield 4.8%. So we solved the yield on our managed care contracting, increasing the first quarter through the fourth quarter of 2012.

Gary P. Taylor - Citigroup Inc, Research Division

Okay. I want to congratulate myself because I went almost 25 minutes without asking about health care reforms. But now I'm going to do it.

R. Milton Johnson

We'll go for 30.

Gary P. Taylor - Citigroup Inc, Research Division

A lot of moving parts, a lot of assumptions on how you guys get inundated with questions from every angle about reform, enrollment assumptions, reimbursement assumptions, crowd out this cut, new volumes, incremental margins, all that. I guess the question is, what do you think, at this point, which key assumptions do you think we have the least visibility on today? And which critical assumption do you think we get visibility on doing that? So what's the biggest piece missing and what's kind of the next piece we're going to learn something on?

R. Milton Johnson

Well, when you think about the health care reform and the financial impact on HCA, there's 3 that come to mind for me, top variables that, obviously, we need some time to clarify. And the first one is probably no surprise and that would be the rates that will be paid in the exchange market. I think that variable will have the most financial impact. I think the second-largest impact will be the crowd out or the employee dumping that may occur or could occur over a period of time. And then third would be Medicaid expansion. I think those 3 variables will drive most of the variability of financial performance under health care reform. There's probably another 8 or 9 variables that are important. But I think those 3 would be, in my view, the top 3, Gary, that would determine the financial -- most of the financial impact on HCA. And as you need more time to get those clarified, I think over the next several months. We'll get some clarification on exchange pricing. We're getting clarification almost daily on the Medicaid expansion and I think it's going to take 2 to 3 years to get some visibility on the employer crowd out and how that's going to affect and how that's going to play out in the market. I think that it will be a market by market determination. I think you'll probably see smaller employers more likely to dump into the exchange versus large employers. And I think the type of industry will determine the crowd out. Will it be more of a lower income employees more likely to go, being maybe retail or food service, were 2 examples, obviously, versus the more professional sort of industry. So I think all those things will play out over time. Some, we'll know sooner. Some, I think it will take a couple of years to really understand how it could play out.

Samuel N. Hazen

And the fourth one, I guess, would be the uptake, how quickly does all this roll.

R. Milton Johnson

Just the overall ramp up of reform, and that's a very good point. We don't think -- obviously, sitting here at the end February, that in 10 months, all these benefits of health care reform will hit in 2014. I think Richard said it on the call, the last call, it's not all about 2014. It's going to be about 2014, '15, '16 and it will take time, I think, for health care reform to ramp up.

Gary P. Taylor - Citigroup Inc, Research Division

I'm sure in those other 8 or 9 variables, just -- or maybe you don't directly associate it with the reform at this point. But certainly, another variable I get a lot of questions about are, what are we looking at incrementally in terms of reimbursement reductions? There was a sizable amount the industry paid in to help finance the coverage expansion. You got to pay in a little bit on New Year's Eve just to keep things rolling along. And so -- and maybe you're going to pay in here at the end of the week, another 2% for the good old Uncle Sam. Where do you see things shaping up in terms of alternatives to sequestration, grand bargain, larger Medicare or Medicaid cuts as part of that, both systems, every idea in the last 10 years to save money is wrapped up in there? Where do you feel we are in terms of comfort level? We're going to have sequestration and that's what we're looking in the near term versus there's a very sizable chance that we get a much bigger piece of debt reduction legislation that has real reimbursement risks. What is your thinking on that?

R. Milton Johnson

I'm not sure we have a whole lot more visibility than you or anyone else. What we see in here, we're obviously involved in Washington. But clearly, it looks like we're days away from sequestration kicking in. Does that mean it's in for a number of years or even a whole year? I don't think we got that answer necessarily, but we're expecting it to kick in at 2%. You've got to come up with a continuing resolution by the end March. Will that, in that process, as they sort of move it? I think, they move it from end of March to end of September. Is there something that delays sequestration in that process? Again, I think those are all uncertainties. What we do know right now is there's a 2% sequestration. We've built it into our model. We've put it in our guidance and what have you. Grand bargain, I think each day it becomes less likely that the parties can come together with the White House and come up with a grand bargain. One of the items I mentioned at breakfast this morning that actually is a good factor. If you go back that in 2010, CBO was projecting -- I'm getting my numbers right, this time, Sam, CBO was projecting that Medicare expenditures in 2020 would total $6.5 trillion. And at that time, it seems involved that we need to cut $300 billion out over that period of time, about an 8-year time frame. Well, the latest CBO projection now is not $6.5 trillion in 2020. It's $6.1 trillion in 2020. So we've already seen $400 billion improvement in projected health care expenditures. Now when that started showing up a while ago, a lot of people in Washington said, "Oh, it's temporary. It's the recession. It will come right back." Well, we've seen now an extended period of time where it appears it's not. It is real. I'm sure there are some recession in there, but that's a big change. I think as time plays out, that actually is good for our industry and people to see this and say that we've got an issue in this country but it's not necessarily in the next 5 to 10 years. It's further down the road as all of us continue to get older and use health care and what have you. So I think all of that plays to the good of the industry. Obviously, we were -- going back to New Year's Eve, we've got the health fund, the doc fix to a much greater degree than hospitals liked or thought they should. That is a major concern. The doc fix needs to be addressed and at the top -- one at the top of my list that needs to be addressed, not for 1 year at a time or 6 months at a time. It needs to be addressed overall. There are plenty of ways to do it. It should have gotten done on New Year's Eve. It didn't. It sort of creeped through. Actually, I'm barely optimistic that we will see that addressed even if there's not a grand bargain. That it does addressed and there's plenty of money there, not on the hospital's backs to fund of that. And also the cost of doing the doc fix has substantially come down. So that is a much smaller number, and that's not going unnoticed. People that I talked to recently has said, "You know what, that number has come down. Maybe we better get it while -- it's a numbers game." But let's get it while we can and we can afford it, whether it be through the overseas contingency funds that's still set out there that can be used or some other mechanism. I'm pretty hopeful that, that will get addressed.

Gary P. Taylor - Citigroup Inc, Research Division

Well, if we didn't have the annual Christmas Eve doc fix, I don't know what I'd write about. So it's kind of a pretty good job security for the health care analyst to speculate on that every year. In the last 10 minutes or so, we'd be happy to take questions from the audience.

Unknown Analyst

Can you provide an update on Rick Scott's decision to expand Medicaid and to accept the federal funding from Medicaid? And do you think the state legislature will approve it?

Samuel N. Hazen

Vic, do you want to address that?

Victor L. Campbell

Sure. I guess I'd commend the governor for the efforts he went through trying to analyze the situation. He didn't address it politically. He studied it, and I think they came up with what they thought was the right recommendation for the state to get coverage for those that are uninsured in that state. And there's a lot of federal money there that is hard to turn down. So we're pleased to see that happen. I think the Senate generally is supportive in Florida. The House, maybe not so much. But I think as they study it, I'm relatively optimistic that the legislature's decision will go forth.

Unknown Analyst

It seems the preferred outlet or access point from the payer side is going to be home health care. Where do you kind of see your role in that and if you have any just thoughts about home health care market for HCA?

R. Milton Johnson

Sure. I don't see HCA today investing capital in home health. As I think about trying to manage readmission risks, for example, and that's been the role that home health can play in that, our first approach would be try to contract for that service with very good providers and work with those providers in a way to minimize the readmission risks that we would have. And I think that to be our first course of action, to see if we can manage under that approach. And then if, for whatever reason, that fails, then with some sort of capital investment be necessary, that would be determined down the road. But today, it's not going to be a use of our capital in any significant way.

Unknown Analyst

With regard to your comments on exchange pricing, I'm just curious how negotiations are going. I'm assuming the intensity has picked up a lot with the plan as they have to file products here in the next couple of months.

R. Milton Johnson

Sure. We're certainly are in negotiations in many of our markets with the payers on exchange pricing. But again, it's early. And today, we're not going to publicly discuss this other than to say that we are in negotiations.

Unknown Analyst

Just on the capitated payment question. You sort of answered it in the near term of this year or next year. Can you just talk about -- it's such a large topic over the last 12 months. Is it going to be a big part of your revenue stream in 3 years, in 5 years? Or is it just sort of a fad at a moment and you see the current system holding for a while?

R. Milton Johnson

I think in the immediate term, 1, 2, 3 years, what's facing us is how do we negotiate and how do the health care reforms play out? How will the exchange work? How will that affect our business? I think that's a primary focus today. And then as you think about new revenue models, as Sam said, I'd never say never, that we would not pilot or try a risk revenue model in a right circumstance. But again, we would move into that in a very careful disciplined way. We would need an incredible amount of data and, I think, coordination across the continuum to take that on. And I don't think -- and again, looking, say, 2, 3 years out, that it will be material to HCA. After that, the marketplace will play out, and we see how we will have to react. I think as Sam described it very well, if that does happen, we are very well positioned to compete in that environment based upon the access point, our quality agenda, our physician integration, our physician alignment. So I think we're very well positioned for it. But today, again, fee-for-service is going to continue to be our revenue model.

Unknown Analyst

Talking about emergency department strategy here, I wonder if you are managing your emergency room yourselves or you have contractors, like new health or others managing them? And also, is it like a largest loss leader for the company and what we should expect going forward if you're going to be expanding your emergency rooms?

Samuel N. Hazen

Well, we made a journal in the emergency department with HCA employee. On the physician side, we do use outside physician company team's help in some hospitals in care and others local emergency room providers in other situations. There are very few hospitals where we actually employ these physicians in the emergency department. So that's sort of our structure, and that structure seems to work well. We tend to have one group per market. So in Dallas-Fort Worth, it's the same group that may provide all the services there in Nashville, Tennessee the same way, that way we have continuity that can share when they need to staff up or staff down in a way that's synergistic for our physicians, providers, partners. So that's sort of the structure. As we think about the emergency services from an economic standpoint, if you look at it in holistic terms, which includes the inpatient activity, I would not say it's a loss leader for the company. You couldn't have a situation where 60% of your admissions are coming through the emergency room and the company be as profitable as it is under those circumstances. So there are clearly unfunded patients who come through the emergency rooms for HCA that are not profitable. There's approximately 25% of our 7 million ER visits are, in fact, uninsured patients where we get very little, if not anything at all, on reimbursements. And then another 25% or 30% on Medicaid, where we generate modest contribution margins in most instances, but it doesn't cover our fully allocated costs. So you move up the chain, Medicare up, pays us slightly better, and then commercial pays us even better than that. So I think the overall composition of our structure for emergency services is profitable, and that's one of the reasons we continue to invest in it, in addition to it being a critical access point, as we've mentioned to our network for our patients.

Gary P. Taylor - Citigroup Inc, Research Division

One minute left. Any last questions?

If not, thank you very much, gentlemen.

Samuel N. Hazen

Thank you. We appreciate it.

Copyright policy: All transcripts on this site are the copyright of Seeking Alpha. However, we view them as an important resource for bloggers and journalists, and are excited to contribute to the democratization of financial information on the Internet. (Until now investors have had to pay thousands of dollars in subscription fees for transcripts.) So our reproduction policy is as follows: You may quote up to 400 words of any transcript on the condition that you attribute the transcript to Seeking Alpha and either link to the original transcript or to www.SeekingAlpha.com. All other use is prohibited.

THE INFORMATION CONTAINED HERE IS A TEXTUAL REPRESENTATION OF THE APPLICABLE COMPANY'S CONFERENCE CALL, CONFERENCE PRESENTATION OR OTHER AUDIO PRESENTATION, AND WHILE EFFORTS ARE MADE TO PROVIDE AN ACCURATE TRANSCRIPTION, THERE MAY BE MATERIAL ERRORS, OMISSIONS, OR INACCURACIES IN THE REPORTING OF THE SUBSTANCE OF THE AUDIO PRESENTATIONS. IN NO WAY DOES SEEKING ALPHA ASSUME ANY RESPONSIBILITY FOR ANY INVESTMENT OR OTHER DECISIONS MADE BASED UPON THE INFORMATION PROVIDED ON THIS WEB SITE OR IN ANY TRANSCRIPT. USERS ARE ADVISED TO REVIEW THE APPLICABLE COMPANY'S AUDIO PRESENTATION ITSELF AND THE APPLICABLE COMPANY'S SEC FILINGS BEFORE MAKING ANY INVESTMENT OR OTHER DECISIONS.

If you have any additional questions about our online transcripts, please contact us at: transcripts@seekingalpha.com. Thank you!

Source: HCA Holdings' Management Presents at Citi 2013 Global Healthcare Conference (Transcript)
This Transcript
All Transcripts