Lifepoint Hospitals Management Discusses Q3 2013 Results - Earnings Call Transcript

| About: LifePoint Hospitals, (LPNT)

Lifepoint Hospitals (NASDAQ:LPNT)

Q3 2013 Earnings Call

October 25, 2013 10:00 am ET

Executives

William F. Carpenter - Chairman, Chief Executive Officer and Chairman of Quality Committee

Leif M. Murphy - Chief Financial Officer and Executive Vice President

David M. Dill - President and Chief Operating Officer

Analysts

Justin Lake - JP Morgan Chase & Co, Research Division

Albert J. Rice - UBS Investment Bank, Research Division

Joshua R. Raskin - Barclays Capital, Research Division

Darren P. Lehrich - Deutsche Bank AG, Research Division

Ralph Giacobbe - Crédit Suisse AG, Research Division

Jason Gurda - KeyBanc Capital Markets Inc., Research Division

Frank G. Morgan - RBC Capital Markets, LLC, Research Division

John W. Ransom - Raymond James & Associates, Inc., Research Division

Gary P. Taylor - Citigroup Inc, Research Division

Ryan K. Halsted - Wells Fargo Securities, LLC, Research Division

Whit Mayo - Robert W. Baird & Co. Incorporated, Research Division

Operator

Before we begin -- ladies and gentlemen, before we begin the call today, on today's call, LifePoint will be making forward-looking statements based upon management's current expectations. Numerous factors could cause LifePoint's results to differ from these expectations, and LifePoint has outlined these factors in its filings with the SEC. The company encourages you to review these filings. LifePoint also asks for you to please review the cautionary language under the caption, Important Legal Information, in the company's press release issued this morning. The company undertakes no obligation to update or make any other forward-looking statements whether as a result of new information, future events or otherwise. Also, please visit LifePoint's website for links to various information and filings.

Welcome to the LifePoint Hospitals' Third Quarter 2013 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded, Friday, October 25, 2013.

I would now like to turn the conference over to Bill Carpenter, Chairman and Chief Executive Officer, LifePoint Hospitals. Please go ahead, sir.

William F. Carpenter

Thank you, and welcome, everyone to LifePoint Hospitals' Third Quarter 2013 Earnings Call. We hope you've had a chance to review the press release we issued earlier this morning.

I'm pleased to report that we had a solid third quarter. Before I discuss our results, I'd like to introduce you to Leif Murphy, who is joining us today in his new position as Chief Financial Officer, after serving for 2 years as our Executive Vice President and Chief Development Officer. For those of you who don't already know him, Leif has nearly 20 years of experience in our industry with extensive knowledge of health care finance. He continues to play an important role in our development strategy and we're very pleased to have him expand his role on our team. Leif, welcome.

I'll begin the call today by taking you through our key observations from this quarter, and then I'll turn it over to Leif to discuss our results in greater detail. Following our prepared remarks, Leif and I, as well as David Dill, our President and Chief Operating Officer, will be available to answer your questions.

Let me start with a few financial highlights. Revenues from continuing operations grew to almost $900 million, an increase of 9.7% compared to the same period last year. EBITDA was $134.3 million, up 25.1% and diluted EPS was $0.68, a 74.4% increase from the third quarter of 2012.

Adjusted for certain items that adversely affected our financial performance in the third quarter of 2012, EBITDA and EPS each increased by approximately 13%. The operating environment for health care companies continues to evolve and our strategy positions LifePoint well to navigate the shifting landscape.

While in-patient volumes remain soft in the third quarter, we achieved growth in outpatient volumes, primarily as a result of improved outpatient surgical cases, and our recent acquisitions performed well. We're focused on continuing to strengthen our operations and increase market share through strategic acquisitions and organic growth initiatives and we are seeing progress in both areas.

Our acquisition pipeline for both LifePoint and Duke LifePoint remains strong, as community hospitals continue to seek the benefits of scale and the additional resources available through a partnership with a large organization such as ours. The additional regulatory burdens imposed by health care reform are causing hospital boards to pursue strategic partnerships, which we believe will serve as an additional catalyst for the growth that we've seen over the past several years.

Our growth strategy remains focused on acquiring hospitals in faster-growing markets with a more diversified employer base, as well as building networks throughout our regions and strengthening service lines in our facilities. Under the LifePoint umbrella, we're working to expand our network in the upper peninsula of Michigan and complement Duke LifePoint's Marquette General Health System through the acquisitions of Bell Hospital and Portage Health.

We also expect to complete the acquisition of Fauquier Health, which will be LifePoint's 6th hospital in Virginia and will further enhance our statewide presence with a new footprint in Northern Virginia. We expect to close these transactions in the fourth quarter.

On the Duke LifePoint side, we continue to see a growing level of interest in our innovative and fully-operational partnership, which combines the clinical and quality resources of Duke with the financial and operational resources of LifePoint. As we discussed last quarter, we entered into a memorandum of understanding in the form of joint venture with Wilson Medical Center, which further expands our network in Eastern North Carolina and particularly our exposure to the Greater Raleigh area and is expected to close in early 2014.

In the third quarter, we signed an MOU to acquire Rutherford Regional Health System. Rutherford establishes our position in Western North Carolina and adds to the network we hope to continue building in the state. We expect to complete this acquisition in the first quarter of 2014.

In addition to our acquisition activities, we continue to make regular investments in our operations to ensure that our hospitals are preferred facilities among both patients and physicians. Through our efforts, we are exceeding our Hospital Engagement Network targets for reducing readmissions and hospital-acquired conditions.

We also continue to move forward with our growth initiatives. With respect to our emergency departments, we continue to make sustained improvements in our quality and patient satisfaction results across the organization. In the third quarter, we began to roll out a program that will result in 30 of our hospitals, including all of our largest hospitals, achieving a chest pain center of excellence designation during 2014.

This quarter, we saw several significant developments in health care reform, and we're taking concerted action to help us manage and benefit from these changes. As I said in the past, over time we believe health care reform will be a net positive for LifePoint, as more people will have medical coverage and seek hospital services.

We intensified our focus on exchange contracting during the third quarter in anticipation of the launch of health care insurance exchanges on October 1. We're now participating in almost all plans at commercial rates in the states where we operate. We've developed a strategy to maximize enrollment on these exchanges and we're conducting educational outreach in our communities.

While the exchanges have had a slow start, we have put in place the processes and infrastructure required to enroll people efficiently. 100% of our hospitals have a certified application counselor on staff, with 351 total certified counselors across all LifePoint facilities. We've also prepared an informational mailer that will be printed and sent to 35,000 self-pay patients once the healthcare.gov website has stabilized. We're also making appropriate preparations for the expansion of Medicaid coverage in 2014.

Our industry and rural hospitals in particular will continue to be impacted by changes in Medicaid and Medicare, including the lapse of the Medicare extender program on October 1. Other key industry initiatives include the implementation of the 2-midnight inpatient admission rule and the sustainable growth rate fix. Congress absolutely must deal with the SGR issue before the end of the year.

Overall, we believe that we are well positioned to benefit from the expanded coverage in our markets, while working to offset any negative impacts associated with changes to federally-administered health care programs.

With that, I will now turn the call over to Leif for a more detail on our third quarter financial results. Leif?

Leif M. Murphy

Thanks, Bill. Thank you, everyone. I am very excited to be in this new role here for the last couple of months and I'm happy to join everyone here for my first call. So I will move on into our earnings.

So as Bill mentioned, we had a solid quarter. Starting with volumes on a same-store basis, admissions and adjusted admissions in the third quarter were down by 4.3% and 1.3%, respectively, versus the prior year, primarily due to a continued decline in our 1-day stay admissions and a 1.4% decline in ER visits.

Same-store outpatient surgeries were up 3.5%, while inpatient surgeries were down 5.2%, resulting in a net increase in total surgical volumes of 1.4% compared to the third quarter of 2012.

Turning to pricings. On a same-store basis, net revenue for adjusted admission was up 2.2% over last year. Net revenue per adjusted admission from continuing operations was up 6% compared to the prior year. The Medicare case mix index was up by 3.8% on the same-store basis, reflecting higher intensity procedures as a result of our expansion of certain service lines, including orthopedics and cardiology in several of our facilities.

In continuing operations, case mix was up 6.2%, reflecting the higher intensity service lines at newly-acquired hospitals. Our third quarter revenues from continuing operations of $899.7 million represent an increase of $79.5 million or 9.7% from the third quarter of 2012. Same-store revenues in the quarter were up by $6.7 million or 0.8%, primarily due to higher contracted rates from discount payers and partially offset by lower admissions and equivalent admissions as compared to the same period of the prior year.

This quarter, bad debt expense was 24% of revenue on a same-store basis, an increase of 3.4 percentage points from the prior year and same-store charity care write-offs were 4.1% of revenue in the quarter. Same-store self-pay admissions were up 4.5% in the quarter and represented 8.1% of total admissions.

Third quarter EBITDA from continuing operations of $134.3 million represents an increase of $27 million from the same quarter last year. In comparison, our third quarter of 2012 included $12.1 million in unfavorable items related to acquisition costs, severance costs and other items, making the comparative increase $14.9 million.

Our third quarter 2013 EBITDA from continuing operations includes $8 million in incremental EHR income, and includes improvements from both our same-store operating results, as well as our recent acquisitions.

Diluted earnings per share from continuing operations were $0.68 in the quarter, as compared to $0.39 in the prior year or $0.60 when adjusted for the items mentioned previously, plus $4.4 million in debt extinguishment costs. Third quarter 2013 EPS of $0.68 represents an approximate 13% increase from $0.60 in the comparable period of 2012 as adjusted.

Moving to costs. Same-store salary, wage and benefit cost increased by 0.9% compared to the prior year and include higher physician employment costs and retention costs, related to our shared services initiative. Same-store supply costs decreased by 0.5% as a result of our continuing efforts to effectively manage our supply costs and increased savings associated with participation in our group purchasing organization.

Other same-store operating expenses increased by 0.7% compared to the third quarter of last year. We recorded $20 million in meaningful use payments and have related operating cost of $5.1 million. This equates to $14.9 million in EBITDA in the third quarter and $22.1 million in EBITDA for the first 9 months of 2013.

Moving to cash flow and liquidity. Cash flow from continuing operations for the quarter was $104.1 million, an increase of $19.8 million or 23.5% from the same quarter last year. We invested $32.7 million in capital expenditures in the quarter, including $5.9 million in IT capital investments.

Depreciation and amortization expense increased by $9.7 million or 20.2% compared to the prior year, driven by our recent acquisitions as well as significant increases in our spending related to IT systems, including compliance with the HITECH Act.

During the quarter, we bought back $30.1 million in stock under our repurchase plan at an average price of $45.76, and we have $165.3 million remaining under our current authorization. We finished the quarter with $194.8 million in cash on hand.

Before I summarize the quarter, I'd like to provide an update on the sole community provider program in New Mexico. As expected, during the third quarter, we received $7.1 million in reimbursement and we continue to anticipate that the sole community program will provide reimbursement of $7.1 million in the fourth quarter of 2013. As we previously said, the status of the provider program was uncertain for 2014 and despite our continuing efforts to demonstrate its critical importance, we now expect it to be reconfigured in 2014 with annual reimbursement reduced to between $6 million and $9 million.

As we look into the fourth quarter, payments under the Medicare-dependent hospital and low-volume Medicare extender programs had stopped as of October 1. Bipartisan legislation has been introduced in the House and Senate to extend these programs. While the future of this legislation is unclear, we're working diligently to make sure congressional leaders understand the importance of these programs.

This reduction, including its fourth quarter 2013 impact of approximately $5 million, was considered in our full year guidance for 2013. To the extent that the program is not renewed, the lapse of the Medicare extenders program is expected to have a total negative impact of $20.1 million annually going forward.

To summarize the quarter, inpatient volumes remain soft, but we began to see stability in adjusted admissions. Case mix and revenues per adjusted admission are both improving as we focus on expanding our complex tertiary service lines and benefit from the expertise and assistance of our Duke LifePoint partnership. We remain focused on managing our cost structure and we are progressing well on our shared services initiatives, with 24 of 35 2013 revenue cycle convergence complete and 26 of 39 2013 supply chain convergence complete. We expect to complete our final revenue and supply chain convergence in 2014.

Given our solid third quarter, our guidance for full year 2013 remains unchanged with revenue expected at $3.65 billion to $3.75 billion, EBITDA at $530 million to $550 million and earnings per share at $2.67 to $2.94 for the year. Additional information regarding our third quarter results is available by reviewing our SEC filings, including the 10-Q, which we will have on file later today.

With that, I want to turn it over to Bill for closing remarks.

William F. Carpenter

Thanks, Leif. Before we open up the call for questions, I'd like to share a few closing thoughts. We're confident that we are effectively managing industry headwinds, while simultaneously positioning LifePoint to benefit from health care reform. We're encouraged by the ongoing strength of outpatient activity and believe our sustained strategic investments in quality and service, growth, operational excellence and talent development will continue to position us well.

In addition, our solid cash flow and strong balance sheet continue to support our capital deployment strategy of investing at hospitals, making strategic acquisitions and repurchasing stock. We believe we are making progress to create additional value for our shareholders, patients, physicians and employees in the communities we serve.

With that, operator, we'll now take questions.

Question-and-Answer Session

Operator

[Operator Instructions] Our first question comes from the line of Justin Lake with JPMorgan.

Justin Lake - JP Morgan Chase & Co, Research Division

First question, Leif, can you go out -- can you go back to -- you mentioned the headwinds for '14 in New Mexico on the extenders program. Can you sum up what you think the headwind is going to be for 2014 relative to 2013 from declining reimbursement from these programs?

Leif M. Murphy

I sure can, Justin. We've been happy that the program has been stable in the last 2 quarters of the year, where we have seen reimbursement of $7.1 million in each of the third quarter and the fourth quarter. As we look at it for the year, we will essentially have seen and recognize a smaller amount because of the write-offs that we made in the second quarter. So as we look at the full year 2013, we anticipate that we'll have received reimbursement of about $16.5 million and that will decline next year to a range of between $6 million and $9 million.

Justin Lake - JP Morgan Chase & Co, Research Division

And that's on New Mexico, right?

Leif M. Murphy

That is sole community for New Mexico.

Justin Lake - JP Morgan Chase & Co, Research Division

Okay, great. The second question is on volumes, admission is down another 5% in the quarter. Can you give us any color on what the impact was from declining observation visits? And where we are there in terms of observation visits as a percentage of total admission? Or short stay, I should say, the percentage of overall admissions?

William F. Carpenter

Not that much of a change, Justin, sequentially from the second quarter to third quarter on observation visits, but we did see a strong quarter on the outpatient side for us this quarter really across the board if we talked about observation visits already. But outpatient revenue up mid double digits. Outpatient surgeries that Leif talked about, up 3.5%. When we look at other product lines within imaging, radiology, all those product lines are growing as well.

Justin Lake - JP Morgan Chase & Co, Research Division

Okay. And the drivers of acuity, I mean that the increase in acuity is going up as much as it is there and volumes are down. Where are the volumes declining?

Leif M. Murphy

So part of that, it's really 2 things, Justin. One, you take a short 1-day stays out, which are low acuity by definition. That, in effect, lifts the case mix. That's the piece of it. The other piece of it is expanded cardiology-spawned programs, a couple of service lines that we built in a few hospitals over the course of the year.

Justin Lake - JP Morgan Chase & Co, Research Division

Can you give us a number that I missed in terms of the 1-day stays, what they did in the year-over-year? And what percentage of admissions they now represent? Just trying to figure out where the bottom here is.

William F. Carpenter

1-day stays, Justin, were down 7.4% in the quarter over last year. They have continued decline -- to decline as a percentage of the total admissions as a result of that rate of decline. But we're still seeing 1-day stays hover around that 18% mark.

Justin Lake - JP Morgan Chase & Co, Research Division

Okay. So not that much different than the overall. And then just last question, can you give us an update on physician spending investment there in terms of the number of employed physicians and how you think that's going to change going into 2014? Do you expect that to be less of a headwind? Do you expect a ramp up there? Or should we continue to see that spending pickup?

Leif M. Murphy

The actual investment in physician is significant as it relates to each of our communities. It has been a headwind as we've increased the numbers over the course of the last several years. So we should start to see at least a slowdown in same-store markets in terms of the number of new physicians that are being employed. We look at the numbers, they've been consistent with where we've been in past periods, which is recruiting net new physicians over the course of the year to approximately 100.

Operator

Our next question comes from the line of A.J. Rice with UBS.

Albert J. Rice - UBS Investment Bank, Research Division

A couple of questions. Maybe just specifically since it's such a significant facility, any comment or update on how Marquette is doing, impressing? And then, Bill, I'm also interested in your comments about the acquisition pipeline remaining strong. Do you think you're going to have a pause at all here as we move into January 1, the rollout of deals -- I mean of the ACA or do you think you'll just continue to see acquisitions announced. And it sounds like you might even -- you think you might even have some between now and the year end possibly announced at least?

David M. Dill

Let me start on the Marquette side then I'll turn it over -- and Bill will take the M&A side. Really excited about the progress, I think you sensed that on the second quarter call as well. We had made changes to the leadership team there and we've got our new team on the ground. We've seen our progress on clinical operations front, but really excited about the progress we're seeing just in the financial results, where this quarter, margins are moving in the direction that we expected them to move. During first year of operations, it was a little bumpy, the first couple of quarters. And I think now we have some sustained improvement that's in there within the new baseline and we keep building on that baseline moving forward. In addition, we've got new M&A that Leif talked about. It will give us a chance to even strengthen more service lines in the Upper Peninsula over time. And then finally, you may have seen that we have committed to investing significantly up in the Upper Peninsula as part of our agreement with the community. We're going to spend a significant amount of money over 10 years and we looked at investing that money in existing plant. But we had a chance to really do something that's unique and for similar dollars, build a new facility that meets the demands in the future delivery system with physicians integrated into the hospital, coordination of care, continuum of care and a bigger health system across the Upper Peninsula. That's really exciting. Things are happening up in the Upper Peninsula. Some of them will take a little time. But in the short term, progress is being made, margins are improving. I think you see that driving some of our results here in the third quarter.

William F. Carpenter

And A.J., with respect to the acquisition environment, you're exactly right. It continues to be very active for us and a strong set of potential hospitals. We really think we're very well positioned both financially and alongside our quality partners to take advantage of this and what I believe is a differentiated way for LifePoint. We have good hospitals that are reaching out to us and I appreciate the commitment to quality that we shown in our financial and operational resources. You mentioned the 3 that we have announced that will be -- we expect to close by the end of the year. Bell and Portage in the Upper Peninsula and Fauquier Health in Northern Virginia. All 3, really solid adds for us. And then expected early in 2014, Wilson Medical and Rutherford Regional, both in North Carolina, both part of the Duke LifePoint partnership, these are really significant and very, very good hospitals and we're very well pleased with those. And so, the thing that's driving the acquisition pipeline these days seems to be -- for the good hospitals that we're seeing, seems to be more along the need for scale. The need to be a part of something bigger. To be a part of something that is bringing the resources of a larger organization, one that's committed to quality and to help deal with the regulatory burdens that are coming out of Washington. Those are the things, more than the financial needs. Although they're very significant for stand-alone and rural hospitals. So that's what we're seeing and we're really pleased that we've been able to position the company in order to take advantage of that.

Albert J. Rice - UBS Investment Bank, Research Division

Okay. And then maybe just finally. Just on your reiterating guidance I guess that leaves you with about a $0.27 range for the fourth quarter fairly wide. Any commentary around that? I mean, and specifically, I guess also we have here affirmed if you get -- I think on the second quarter you said you were looking at $25 million to $30 million of EBITDA contribution from the high-tech in the back half. You got $15 million roughly this quarter. Is that the aggregate number for the back half still same or has that moved around at all?

Leif M. Murphy

A.J., this is Leif. As we look at -- and I'll start with the latter question on meaningful use. We have done well on the high-tech initiatives and we've done well on securing our meaningful use payments. As we look out into the fourth quarter, we feel very good about the fourth quarter as it relates to our targets that we have previously talked about and we feel good about the fourth quarter even relative to what we earned a meaningful use in the third quarter. So I estimate that we will be seeing something north of $40 million in contribution for the year for meaningful use and perhaps even slightly higher. So a little bit better than where we had guided toward the end of the second quarter. As we look at the range and as we look at the end of the year and looking at the full year, but we're still comfortable that we will be inside of the range. There are a number of initiatives that will essentially take root as we look at the fourth quarter. A little bit from the favorable meaningful use impact that I just talked about. We have had negotiations with discounted payers throughout the year, many of which take effect here in the fourth quarter. We have still operationally been working hard on cost containment initiatives. We still have tailwinds from Caroline [ph]. Last in the third quarter, hopefully more in the fourth quarter just as a result of the timing of certain things in the revenue initiatives and the timing of things that hit inventories and ultimately, you benefit through supply cost as they come out over time. So we do have some tailwinds that will put us we believe inside of that range.

Operator

Our next question comes from the line of Josh Raskin with Barclays.

Joshua R. Raskin - Barclays Capital, Research Division

First question, just around the strength in the outpatient surgery. I was wondering if you could maybe give us a little bit more color if there's specific procedures or geographies or changes in the competitive landscape in any of your markets or anything -- anymore color that would be helpful in the outpatient surgery side.

David M. Dill

I'd be more than happy to. Really nothing geographic in nature. But when we look across 4 or 5 of the big product lines within our surgery, surgical volumes, we have seen improvement sequentially in almost every one of those and I'd say almost every one, all of them except really one. But we've seen improvement in general surgery trends. General surgery trends are still slightly negative for us, but they are improving. But then, as it relates to orthopedic surgery, GYN, urology, each of those product lines are up, actually growing year-over-year, not just a slowdown or decline, but actual growth rates year-over-year. Ophthalmology and few other small profitable service lines for us, as well, are driving those cases and then finally endoscopy procedures are up quarter-over-quarter and then relatively through the course of the year.

William F. Carpenter

I'd might add to that, Josh, briefly, that the result of this is also the investments that we've been making in these areas. So outpatient visits, outpatient utilization of hospitals continues to be a trend and it's something that we've seen over the years and something that we have really focused on as people are seeking that type of care in hospitals. And so when David talked about the work that we'll be doing in Marquette and the work that we'll be doing on that new hospital there, the work that we did when we constructed the new hospital in Winchester, Kentucky. These are significantly designed both to provide for the inpatient needs of patients, but also to recognize the growing trend toward the outpatient delivery of care. So I think that's worth noting.

Joshua R. Raskin - Barclays Capital, Research Division

I got you. That's helpful, Bill. And then, just on the intensity issue, obviously, your pricing is improving a little bit and your case mix is going up. I'm just curious are you seeing more of the higher intensity cases or are you just seeing less of the lower intensity cases?

David M. Dill

It's a little bit of both, with the 1-day stay pressures that we have seen in the short stays. So that's disappearing, as I talked about in Justin's question earlier. It certainly providing a whip. But through the position recruitment meetings that Bill just talked about, a very targeted service line development happening in a few key hospitals, expanded cardiology programs, spawned programs are driving a piece of case mix column as well.

Joshua R. Raskin - Barclays Capital, Research Division

Okay, that's helpful. And then just last one for me, just I know you mentioned that you guys have organized an outreach program around increasing the level of insurance in your markets and reaching out to self-pay and things like that. I assume it's sort of too early. I'm just curious, have you actually started any of these initiatives or is this let's wait until the exchanges are fully functional? I mean I'm just curious when we'll start hearing feedback as to what sort of success you're getting in terms of previous hospital patients coming in and actually buying insurance?

William F. Carpenter

Yes, that's a good question. A good point that you're making there, Josh, with regard to sort of the timing. Because we want to be sure that we time over outreach in order to achieve maximum results. So we are in the very early days of these programs. There's a lot of noise and it's early to draw out conclusions. But your question goes to what are we doing? And we have taken steps to position LifePoint to benefit from the new health care environment. I'll give you a couple of examples. We have strategies in place in order to deal with eligibility and enrollment, as well as outreach and education. We have obtained certified application counselor designations for each of our facilities. We develop call centers for hospitals. We have trained certified application counselors at every hospital and I mentioned we have 351 counselors across the system ready to help people get enrolled as appropriate. We have streamlined the process. We look at the regulatory and legal requirements because this is so new and there are lots of questions that people are having and we want to be able to answer those questions. We have put tool kits in place. We develop PowerPoints and Q&A presentations for our hospital leaders to be the focal point for getting this word out in the communities. We have used our hospital websites. We sponsor community forums and done those kinds of things. I mentioned the 35,000 mailers that we have currently at the printer ready to go to be sent out to self-pay patients. The only reason we've held off on sending those out so far is due to the point you made, the question is, due to the unstable healthcare.gov website. But we don't want to get ahead of that. We think we may have one opportunity to really get these folks educated and enrolled. So at this point, our hospital engagement, our hospital teams that are managing the exchange programs have decided to hold off until November, sometime in November. And then we will distribute those. So it is a little bit of timing in this, but we have done the work. We have -- and we are confident in the steps that we are taking in order to position the company to be able to benefit from this new environment.

Joshua R. Raskin - Barclays Capital, Research Division

Maybe if I could sneak in one follow-up. That 35,000 patients that you mentioned, is there a percentage of sort of self-pay visits over the last year that you could get that in terms of what they represented?

David M. Dill

Yes. We obviously know that. I mean, we're not going to give out those details. But it was very targeted. Those people are currently using our hospitals today. We had -- we talked about this a couple of quarters ago, some of the rules and interpretation of the rules are still being written. So making sure that we can kind of target our marketing and education to that group to give -- show them the benefits of expanded coverage.

William F. Carpenter

But that 35,000 is over and above the sort of more general mailings or targeting that we will make to low-income households, who may be able to qualify for Medicaid. So there's a lot of work that's going into this. A lot of thought and I really give our teams credit for having thought through this so carefully and plotted out so methodically and well. I think we're well positioned.

Operator

Our next question comes from the line of Darren Lehrich with Deutsche Bank.

Darren P. Lehrich - Deutsche Bank AG, Research Division

Bill, thanks for all these comments on the ACA rollout, very helpful. I guess I just be curious to get a little bit more on your thoughts along the lines of how you will be measuring success. Maybe talk about some of the management reports perhaps that you have in terms of reaching people in the communities. And maybe just to understand a little bit more detail about how you, as an organization, will be tracking the success of this?

William F. Carpenter

Darren, that is a great question. It's one that we had invested a great deal of time and internally. And I want to hold off for right now on introducing what metrics we are going to report on to allow us to try to succinctly measure our progress around it. Our first blast at it was extremely complex and had an enormous number of measures. And as we've looked and delve deeper into it, I'm hopeful that we'll be able to distill it down into a couple or 3 measures that will really be able to help folks understand what those -- what our success is and how it compares to prior periods. But we're probably a little early on disclosing what those will be.

Darren P. Lehrich - Deutsche Bank AG, Research Division

Okay. And then maybe, if I could just talk about on the Medicaid side, there's been a lot of discussion in the national press just about the Woodwork Effect, if you will. And I'm wondering if you are seeing that, if your Medicaid eligibility has increased in any way that you can tell early on here and whether you think that holds true in your markets?

David M. Dill

We're not -- Darren, this is David. There is -- it's too early to make any conclusions and draw any conclusions. Some of our states are off to a good start. I think we saw some news flow recently in Kentucky about the number of patients that they have been enrolling through their statewide exchanges. But it's something obviously that we're closely monitoring, but at least through the third quarter and into the early days of the fourth quarter, way too early to draw any conclusions.

Darren P. Lehrich - Deutsche Bank AG, Research Division

Yes, that's fair. It's still October 25. Just a couple more things here. First, I wanted just to ask about the refinancing plans that you have. I know that converts went to current liabilities and mature next May. Can you just update us, I know you have been sort of a seasoned issuer in the convert market. Is that what we should be expecting for those or do you have any other specific plans?

Leif M. Murphy

As we sit here right now, Darren, I have been very focused on this first 2 months, preparing for our first close and preparing for our first earnings call. And as we exit the day-to-day, I will shift focus together with the team here to really think through and define exactly how we access the capital markets. We clearly need to do it before the converts come due in May. We're very fortunate because the markets are very receptive and very strong in terms of appetite for LifePoint paper. So we should be coming through with an announcement or something here in the fourth quarter and it should give us all of the financial capacity necessary to refinance those converts and also fund the fourth quarter acquisitions and some other things pending.

Darren P. Lehrich - Deutsche Bank AG, Research Division

Okay. That's terrific. And then my last question, maybe for David. I mean, the revenue beat, obviously, was driven a lot by the non-same-store. I'm wondering if you can just give us a flavor for what the organic same-store growth was in that group? It looked pretty strong to us. And I just want to get a sense for it since they'll be coming into the same-store over the next year.

David M. Dill

Yes, so on the acquisitions for the quarter, I'll call these the class of 2013 acquisitions. There are 4 or 5 hospitals that fall into that bucket, with Marquette being about 85% of the total number. So clearly, the performance in the acquisitions is being driven from the improvement in Marquette. The margins in these class of acquisitions have improved from kind of low-single-digit margins to the upper-single-digit margins, almost touching 10% margins. And I think we've got -- have a run rate in that base of operations that will continue and it will layer on the other acquisitions that Bill and Leif talked about earlier on in the call.

Darren P. Lehrich - Deutsche Bank AG, Research Division

And then from a revenue growth standpoint?

David M. Dill

Revenue growth rate in the hospitals kind of year-over-year, it's a little bit hard because some of these are still early on, but I think they're slightly higher than the company average. Just we typically see that as hospitals come in and we're investing dollars in building a more solid physician base. And the excitement that quite frankly it creates when the enrollment [ph] comes to town. So those have ramped up quicker on the revenue side and then we saw the improvement this quarter on the margin front. So I think it will be additive to the same-store numbers, where Leif reported same-store revenue, flat year-over-year, 9%, a little over 9%, when you include the acquisitions. It will be additive to that number based on everything that we're seeing today.

Operator

Our next question comes from the line of Ralph Giacobbe with Credit Suisse.

Ralph Giacobbe - Crédit Suisse AG, Research Division

Do you have a sense or can you give us a sense of your success rate of getting those that qualify for Medicaid today signed up?

William F. Carpenter

We have very good success in our hospitals of working with low-income people who come into our emergency rooms and helping them quality for whatever program that they may be eligible for.

Ralph Giacobbe - Crédit Suisse AG, Research Division

Okay. Is there any way to frame it? I mean, is it 3/4 of the people you'd say that come in, you have sort of the success rate of getting them on? Is it even higher than that percentage? Just a rough ballpark.

David M. Dill

Yes, roughly, roughly 60% of those that come in, we feel ultimately get converted.

Ralph Giacobbe - Crédit Suisse AG, Research Division

Okay. All right. That's helpful. And then can you talk about the -- you mentioned in the prepared remarks, Bill, I think, the 2-midnight rule, can you give us a sense of what kind of impact do you think that will have and maybe just your general thoughts on the rule itself?

William F. Carpenter

David spent a lot of time operationally on that. And so let me turn it to him first.

David M. Dill

Maybe a little education will help just to level set because I think it doesn't form while we're doing the things that we're doing. But under this, I'll call it the "2-midnight rule", in addition to services designated by CMS as inpatient-only services, patients will generally be considered appropriate for inpatient admission and for payment under the Part A program when the treating physician expects the beneficiary to require a stay that crosses at least 2 midnights and certifies that expectation. So that's a little bit of background, I think we've all read about it. So it does change workflow. It changes what's required from a documentation standpoint. So here's what we we've done, we've undertaken a broad educational campaign. So as Bill mentioned, it has big operational implications, big educational campaign, as well as intensive process design work to ensure assessment, one, certification, two, and documentation practices are in place, audit functions in place, in these early days especially. But many of those will be ongoing as well. So our limited data -- we're only a few weeks into this, but our limited data since the beginning of October has just not revealed anything conclusive in the inpatient and observation services. However, more analysis is ongoing. We are monitoring this at our hospitals and then to our hospitals support center, up to our quality, compliance and our HIM departments, each and every day. During our year-end earnings call in February, I think we'll be in a much better position with more clarity to quantify the impact, if any, that this has not only on our fourth quarter results that we will report, but also in the guidance that Leif will lay out for you in 2014.

Ralph Giacobbe - Crédit Suisse AG, Research Division

Okay. Great. And then I just wanted to ask about maybe leveraging capital structure. Obviously, you've done a number of deals, pipeline seems like it's pretty active. So I just want to gauge your appetite to lever up maybe where you would feel comfortable taking the leverage ratio to?

Leif M. Murphy

Ralph, it's something we have done a lot of thinking about. I think we have been very consistent in being happy with the strength of the balance sheet. It's given us the competitive advantages, we've been out on the development front. Nevertheless, I think that there's great comfort with a leverage number that operates up to the 4x range and, on a short-term basis, could go higher than that to accommodate specific opportunities. So what we've got to do is balance our approach and balance our capital deployment strategy to make sure that as we anticipate acquisitions that are coming up, that we maintain an enough dry powder to get those done. And so we will see leverage flex low and upward into around 4x. So we finished the quarter real strong, with the cash that we had on hand of $194.8 million. We essentially had a little less than 3x in terms of a leverage ratio. So there's a good deal of room for us to fund the upcoming acquisitions to look at completing the upcoming share repurchase program and hopefully have even additional dry powder to consider our options there.

Operator

Our next question comes from the line of Jason Gurda with KeyBanc.

Jason Gurda - KeyBanc Capital Markets Inc., Research Division

Do you guys have a sense for how we should think about high-tech payments for next year?

Leif M. Murphy

Yes. Although I think we'll hold off on providing any guidance until we get into February of next year when we report the year-end numbers.

Jason Gurda - KeyBanc Capital Markets Inc., Research Division

Is there anything you can maybe add qualitatively about where payment trends will end up?

Leif M. Murphy

I think, qualitatively, we're on a -- we're essentially on a level set as we look into 2014. So we're not expecting big fluctuations into the year, but I want to be -- I don't want to get too specific on the numbers, just starting to cross over into giving guidance early.

Jason Gurda - KeyBanc Capital Markets Inc., Research Division

No, I appreciate that. But another question actually on guidance. I was just curious, how do you guys are going to think about the impact on health care reform and expansion of coverage when you provide guidance and whether you'll make any assumptions for the expansion of coverage in that guidance?

Leif M. Murphy

The good news is that we're heavily involved in the enrollment processes, as Bill just described. So our hope is that as we get into the January, February time frame, we're going to have some very valid experience to help us extrapolate what the year is going to look like. So the timing of guidance this year is going to correspond very well with the implementation time frames around reform.

Operator

And our next question comes from the line of Frank Morgan with RBC Capital Markets.

Frank G. Morgan - RBC Capital Markets, LLC, Research Division

I just wanted a follow-up from earlier comments you made. I think you said the headwind for the New Mexico payment system was about a $6 million to $9 million headwind. I didn't catch what you said it was on the extender program. How much of an incremental headwind that would be in '14 versus '13?

Leif M. Murphy

So the extenders expired here, Frank, on the 1st of October. And although we had those in our guidance for the fourth quarter at approximately $5 million, we haven't given guidance for 2014 yet. But as we contemplate the impact of extenders on an annualized basis will be approximately $20 million. If you think about it from a year-over-year perspective, because we'll have them in for the first 9 months of the year, it's approximately a $15 million decline from a full year perspective.

David M. Dill

And Frank, I thought we, like, did a great job early on the call on trying to roll forward the sole community program, that was the first part of your question. Roughly $16 million will be the amounts that we receive in 2013 going down to a range of $6 million to $9 million in 2014. So I just want to make sure you have those numbers right. You're looking at more of an $8 million to $9 million if you get the midpoint of that range headwind year-over-year '13 to '14. That $6 million to $9 million was what we expect to receive in '14.

Frank G. Morgan - RBC Capital Markets, LLC, Research Division

Okay. And then, I guess, my only other question would be as you look at this pending backlog of acquisitions out there, how do you compare those structurally to the ones you have made more recently because it does seem like the acuity and the pricing and the surgery levels and all of the things that you kind of need that are now in the non-same-store pool that looks in a lot of ways better than your same-store portfolio. But how would you compare, other than the fact that you're probably not going to do one as large -- so dominated by one hospital, how would you characterize these pending deals relative to these more recent deals you've made?

David M. Dill

Operationally, Frank, the 2 up in the Upper Peninsula, while they may not be the same size as Marquette, it just is a perfect fit as we build out that health system over time up in the Upper Peninsula. So really excited about those individually, but even more exciting collectively when you put that together with Marquette. And then you go up to Warrenton, Virginia, from just a demographic standpoint, a population growth standpoint, I expect that to look, even though the size of the hospital may not be that much different than on the upper half of the size of the existing LifePoint Hospitals, clearly, the demographics were working in our favor up there and you've seen that in their performance over time even before we get there.

William F. Carpenter

Frank, there are some larger hospitals that are out there that you never can -- you never know when they're going to come exactly. But there are larger opportunities that are available in community-based hospitals that we are interested in and where we believe there is further potential for network development in a region. So consistent with the strategy that we have deployed in the Upper Peninsula as we bring Bell and Portage along with our Marquette General Hospital. There are others -- other places where we think this type of strategy can continue and we are implementing it today, as I think about Wilson and Rutherford coming along and continuing to strengthen the Duke LifePoint partnership in North Carolina and Southern Virginia. So it's a -- it is an exciting time.

Frank G. Morgan - RBC Capital Markets, LLC, Research Division

And the pending acquisitions, are those coming in at mid-single-digit margins like you referenced for your class of '13?

William F. Carpenter

Very similar, very similar.

Leif M. Murphy

And Frank, just to follow up on that, that question on the extenders. I just pulled up to look at the numbers because timing of some of the payments and the calculations change. It looks like even with $5 million in the fourth quarter being essentially a $20 million reduction from a run rate, it will actually be an almost $20 million reduction year-over-year as well because of the way some of the payment calculations worked in the first 9 months.

Operator

Our next question comes from the line of John Ransom with Raymond James.

John W. Ransom - Raymond James & Associates, Inc., Research Division

Can you give us an idea of how much you think Parallon might save you in '14 versus '13, and then maybe in the outer years?

Leif M. Murphy

We are -- John, it's a great question. And as we have looked at this year, we have looked at an $8 million to $10 million type of savings number. In the first half of the year, we realized probably a couple to $3 million. The third quarter, not so much just because of some of the transition cost and the like and some of the things that I had mentioned in my earlier comments. In the fourth quarter, we are hoping to see more tailwinds. So I think that the run rate that we'll establish in terms of savings from Parallon, around $8 million to $10 million by the end of the year, is solid. As we look into next year, we expect that number to be higher than that likely another $5 million to $8 million.

David M. Dill

John, we are in the midst of converting these hospitals, so while we have on the supply chain side 26 and will end up the year with about 39 converted on the revenue cycle side, we only have 24 completed now. So by the time we get into the end of this year, we'll have much more than half on the revenue cycle side converted and we'll start seeing the benefits into '14 and we'll try to break that out for you on the guidance call in February.

John W. Ransom - Raymond James & Associates, Inc., Research Division

And to calculate -- just to make sure our calculator is working, can you give us a reset on the revenue that will be in for the full year and '14 compared to '13 on your acquisitions. Just trying to line up all the timing and making sure we get the revenue and timing effect of each -- of all the stuff you're doing?

David M. Dill

Yes, there is in the acquisitions that aren't in same-store today, just north of $110 million of revenue in the fourth quarter is roughly it, so that will all flip into same-store in January. And then you get the impact of Portage, Bell, Fauquier and the other transaction in North Carolina that Leif mentioned a little bit earlier that'll start rolling, and it's just too early to tell when each of those are going to close. They'll have some small impact in the fourth quarter because some will close in the fourth quarter and we just don't know the time at which they'll close. So it will be -- that $110 million will grow a little bit based on a couple of months of activity in 1 or 2 of these hospitals.

John W. Ransom - Raymond James & Associates, Inc., Research Division

Okay. And then just lastly, is the -- I mean everybody knows the ACA, and we're struggling to get people signed up on the exchanges. Do you think just all the publicity and all the outreach has made it easier to sign people up for Medicaid?

William F. Carpenter

John, I think the interest and the publicity has made more people aware. And I think -- so, yes. I also think that as people get into the process, and some of them learned what it is they're eligible for, we're seeing some of that with regard to Medicaid. So I think the simple answer to your question is yes.

John W. Ransom - Raymond James & Associates, Inc., Research Division

Practically speaking, do you think you're just going to end up auto-enrolling these people as they come in for service or do you think your efforts to reach them before they show up at your hospital are going to work?

William F. Carpenter

We intend to continue our community outreach. We continue to plan to use our hospitals as a focal point for information in the communities. And we think that will have an impact.

David M. Dill

And then also continue to execute on processes that we already have in place to secure coverage for those patients that we see today. So it's process that every one of our hospitals know today. So we'll have 2 ways to catch them and that front-end process that Bill is talking about will definitely catch some, and then we'll work hard to make sure we catch as many as we can on the back-end.

John W. Ransom - Raymond James & Associates, Inc., Research Division

So just to be clear...

William F. Carpenter

John, I didn't mean to indicate that we're going to let up on what we're doing today. We're going to add on the additional.

John W. Ransom - Raymond James & Associates, Inc., Research Division

So just to be clear, let's say I enroll in to your hospital and I don't qualify for Medicaid expansion for whatever reason, do you think there'll be a time in the next 12 months where you can sit down and enroll that person and have them pick a private exchange plan on the front end? Or do you think, again, there's just going to be more auto-enrolled Medicaid and then continue your outreach? So in other words, can you enroll people in the exchanges when they come in to your hospital? Do you think that will -- once they get the website working, do you think that will be something that will be in addition to what you're already doing with Medicaid?

Leif M. Murphy

So I think, John, as we've looked at this, having the CACs [ph] in place, on the ground, in the hospitals is clearly going to facilitate getting people signed up for the right kind of coverage that's appropriate for them. We will see ongoing enrollments with Medicaid populations throughout the year. Obviously, we will have to get the folks enrolled on the health insurance exchange within a tighter window of time. Each year on the enrollment side, I think that we'll have learned lessons this year that will be extremely valuable going into next year's enrollment process, and we'll continue the outreach and the education process throughout the year.

Operator

And our next question comes from the line of Gary Taylor with Citigroup.

Gary P. Taylor - Citigroup Inc, Research Division

I just wanted to clarify a few things. I apologize. On the New Mexico stuff, I've written down 3 different sets of numbers every time you guys explain. So I'm still struggling. Can you just give us both the extenders and the sole community program, the combined EBITDA headwind for '14 versus '13 in total?

Leif M. Murphy

I will -- well, I'll give them to you separately just in case we have confused them and then we can add them up. So on the sole community side, for the year 2013, with the reimbursement that we anticipate in the fourth quarter, and we anticipate that to be $7.1 million, we will have received reimbursement payments of $16.5 million for the year. Next year, for the year, we anticipate total reimbursements to be between $6 million and $9 million. So the headwind there is essentially there at the high-end, $10 million on a year-over-year basis. As we think about the extenders, the extenders expired on October 1. It's a headwind in the fourth quarter of approximately $5 million. We've anticipated that in our guidance. As we look at the full year 2013 going to 2014, the total headwind will be $20 million. And despite it being -- having had 3 quarters of benefit to having a fourth quarter loss, those payments are calculated and they move over the course of the year, so we would have a disproportionately high amount in the first 9 months. And so year-over-year, we are looking at approximately $20 million decline. So the 2 together from a year-over-year basis, approximately $30 million.

Gary P. Taylor - Citigroup Inc, Research Division

And which program had the negative revenue adjustment in the 2Q, that $4.6 million?

Leif M. Murphy

So in the second quarter for sole community, so -- to step back for a second, we had anticipated that we would receive reimbursement of approximately $7.1 million in each of the 4 quarters of 2013 for sole community in New Mexico. In the second quarter, we actually had to write-off amounts related to prior periods that flowed through the second quarter numbers. So whereas we would have anticipated $7.1 million in benefit in the quarter, we actually recognized $4.8 million in negative earnings associated with the quarter. So we had a $12 million shift from what we would have anticipated and budgeted for in the year. So whereas, we would have had a $7.1 million estimated reimbursement, we had a $4.8 million loss in the second quarter of '13. So for the year...

Gary P. Taylor - Citigroup Inc, Research Division

The $4.8 million is netted against the full -- the $16.5 million that you'll recognize for '13 is net of that $4.8 million adjustment?

Leif M. Murphy

That's right. So that $16.5 million is essentially $7.1 million in the first quarter, negative $4.8 million in the second quarter and then $7.1 million in each of the third and the fourth quarters.

Gary P. Taylor - Citigroup Inc, Research Division

Got it. Great. Perfect. And also, I just want to clarify, in the health care IT income for '14 in your comment, it sounded like you said essentially flat or not materially changed. I know you didn't want to give a specific number, but I just want to make sure that, that comment was referring to the health -- or the meaningful use income?

Leif M. Murphy

That's correct.

Gary P. Taylor - Citigroup Inc, Research Division

Okay. And then last question for David, just going back to the 2-midnight rule, I think initially the thought was the rule is great because it basically establishes who is eligible for inpatient reimbursement. But then subsequently through some of the CMS Q&A and conversations I've had with hospitals, it sounds like there's a lot of hospitals that are concerned the rule is going to explicitly put more pressure on 1-day stays more so than it allows long observation to move from observation back to inpatient. And a lot of hospitals I've talked to viewed it as a negative. I think, you're saying, we'll know more once we kind of see how it's implemented. But in general, you view this as likely a potential headwind for '14?

David M. Dill

We do not know. We think it's just too early and it would be premature to draw any conclusions. And we can see things are happening in our hospitals over the first 3 weeks. What we can't see is whether it's RACs over time or the MACs or any other body that's looking over our shoulders coming back and questioning our documentation, our coding and our practices, that's hard to quantify at this point. But give us -- I think giving us these 90 days to make sure our processes are in place, give us a little more visibility on what could be happening on the back end, I think that will help us shape our opinion on what impact, if any, we think it will have on 2014.

William F. Carpenter

And at this point, it's all I know. We're collecting data. I was in one of our hospitals yesterday, Gary, and I asked how it's going with the 2-midnight rule and the things that we can do, once again, and this is one of the places where there are things that we can put in place and we've done that. But as far as assessment goes, as far as certification goes, as far as documentation goes, our hospitals working closely with our physicians, including our hospital-less physicians, are prepared and they're doing the things that we need to do, but it's very different. And so to David's point, we need to wait and see. And then I want to make one more comment on the rural Medicare extenders too because we put it up and it is important for us to kind of give you the view of it that we have today. And so we have done that. But we are working very hard in Congress on these Medicare extenders. They expired last year also, you may recall, at the end of -- at the beginning of October. And we were successful in seeing them attest to the SGR fix at that time. And so, we are -- I've been in Washington the last 2 weeks and have been meeting with Congressmen and Senators, there is by far some legislation in both houses, and we have secured quite a number of cosponsors for this legislation, H.R.1787 in the House and S. 842 in the Senate, both designed to extend this very important rural extender program. So I don't want to predict success on it, it is a heavy lift, of course, on any program like this, but the reception, the receptivity, particularly to the importance of community hospitals, and I'm speaking on behalf of rural hospitals when I'm there, not just LifePoint Hospitals, and the receptivity in Congress to the importance of those hospitals in communities is very well acknowledged. So I guess I just wanted to give that additional color on that as we think about. We haven't given up.

Operator

And our next question comes from the line of Gary Lieberman with Wells Fargo.

Ryan K. Halsted - Wells Fargo Securities, LLC, Research Division

This is Ryan Halsted, on for Gary. I'll keep my questions brief. Can you help me reconcile, I guess, bad debt expense. It looked like it's spiked as a percent of revenue in the quarter. But it looked like your same-store self-pay volume was relatively under control. Was there something unusual in the quarter that we should be aware of?

Leif M. Murphy

Ryan, no, there is nothing unusual. Self-pay revenues increased from 20.8% of revenue to 22.3% of revenue, so up about 1.5 percentage points. The bad debt percentage increase from 20.1% to about 21.5% of revenue, so up about 1.4 percentage points. So those are moving in lockstep, largely as a function of our price increase that's reflected here in the back half of the year.

Ryan K. Halsted - Wells Fargo Securities, LLC, Research Division

Okay. That's helpful. And then on your CapEx guidance, it looked like your run rate is coming in below what you guided to. Is there any sort of catch-up projects or do you suspect some projects may get pushed back to next year?

Leif M. Murphy

That's a great question. And as we look at our full year CapEx, I anticipate it will come in very close to where it came in last year. So you do the math on that, and that means there are significant projects that are going to roll into the fourth quarter. We've got a $20 million project that's underway at one of our hospitals here in Tennessee that will be completed in the fourth quarter. We've got our Hospital Support Center relocation that will have fairly significant dollars that will be incurred in the fourth quarter. Then we also have some IT projects that are underway that will be rolling in, in the fourth quarter. So we may still come in favorable, too, with comparison to last year as we approach the end of year, but it has been largely a function of timing as we look at the first 9 months.

Operator

And our next question comes from the line of Whit Mayo with Robert W. Baird.

Whit Mayo - Robert W. Baird & Co. Incorporated, Research Division

I've got just really one quick one, Bill. Back on the Medicare dependent stuff, is your sense that the rural extenders fix needs a vehicle to be attached to for success? Or is this something that you think can pass on a standalone basis? I guess, the ultimate question is it's a large number here that probably has a solid chance of being extended and fixed. And is there any reason why this can't be statutorily extended again?

William F. Carpenter

There is no reason that it can't be statutorily extended again. These 2 pieces of legislation are standing on their own and there is support for rural hospitals in Congress. Every congressman has a hospital in his or her district. So that's important to remember. The other thing is with last year, the extender provisions, the extender bill, did wind up being attached to the SGR. And as we look for places to how this will move through the legislative agenda, it is not unlikely to think that it could happen that way again. I don't know how it will happen. That will be a determination made in the rules committee in the House and then the Senate. So we'll just wait and see on that, but I just did want you to know that we're working hard on that.

Operator

And that's all the questions that we have for today, and we'll turn the call back over to Mr. Carpenter for any closing remarks.

William F. Carpenter

Okay. Thank you, operator. We did want to stay on to make sure that we had covered plenty of time today, and so I appreciate everybody hanging in here with us. As we close out the call today, I would like to thank you for your interest in our company. I'd like to specially thank the more than 30,000 employees and physicians at LifePoint Hospitals who stay focused every day on the most important strategy that we have, and that is delivering quality patient care and service across the country. This, along with the execution of our strategies for growth, operational excellence and talent are driving our results. Additionally, our cash flow and balance sheet are strong and providing maximum flexibility for capital deployment. We are well positioned to continue delivering value for our stockholders. Thank you for joining our call today. Leif, welcome. Thank you for today and look forward to the leadership that you will continue to give us, both in development and as CFO. Thank you, all, for your interest in LifePoint Hospitals.

Operator

Ladies and gentlemen, that does conclude the conference call for today. We thank you for your participation and ask that you please disconnect your line.

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