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

Executives

Steve Filton - SVP and CFO

Alan Miller - President and CEO

Analysts

Adam Feinstein - Lehman Brothers

Kenneth Weakley - Credit Suisse

Thomas Gallucci - Merrill Lynch

Erik Chiprich - BMO Capital Markets

Shelley Gnall - Goldman Sachs

Jason Gurda - Bear Stearns

Darren Lehrich -Deutsche Bank

Justine Lake - UBS

Frank Morgan - Jefferies & Co

Jeffrey Englander - Standard & Poor’s

Bill Bonello - Wachovia

John Ransom - Raymond James & Associates

David Bachman - Longbow Research

Whit Mayo - Stephens

Andreas Dirnagl - JPMorgan

Christine Arnold - Morgan Stanley

United Health Services Inc. (UHS) Q1 2008 Earnings Call April 25, 2008 9:00 AM ET

Operator

Good morning. My name is Bradley, and I will be your conference operator today. At this time, I would like to welcome everyone to the first quarter 2008 earnings release conference call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. (Operator Instructions)

Thank you. Mr. Filton, you may begin your conference.

Steve Filton

Thank you. Good morning. I am Steve Filton. Alan Miller, our CEO, is also joining us this morning, and welcome to this review of Universal Health Services results for the first quarter ended March 31, 2008. As discussed in our press release last night, the company recorded net income per diluted share of $1.20 for the quarter.

During this conference call Alan and I will be using words such as believes, expects, anticipates, estimates, and similar words that represent forecasts, projections and forward-looking statements. For anyone not familiar with the risks and uncertainties inherent in these forward-looking statements, I recommend a careful reading of the section on Risk Factors, and forward-looking statements and risk factors in our Form 10-K for the year ended December 31, 2007.

We would like to highlight just a couple of developments and business trends before opening the call up to questions. Revenues for the first quarter increased 8% over the prior year. Exclusive of the impact of new facilities, most notably Centennial Hills in Las Vegas and the revenues related to construction management contract, whereby we built a new hospital for an unrelated third-party. Revenues have increased by 7%. We anticipate that the second construction management contract will be finalized shortly.

On a same facility basis in our Acute Care division, revenues increased 6.9% during the first quarter of 2008. The increase resulted primarily from an increase in revenue per adjusted admission. Adjusted admissions to our hospitals owned for more than a year were up 1.5% for the quarter. These admissions were clearly supported by a busier than expected flu season. As we have previously indicated that we expected during the first quarter of 2008, newly constructed capacity at the physician-owned hospital in McAllen, Texas unfavorably impacted our admissions in that market. Additionally, the opening of the Centennial Hills Hospital in Las Vegas negatively impacted our same-store admissions comparisons to the extent that it cannibalized some of its volume from our existing facilities.

Finally, we remind you that admissions in the first quarter of 2007 were particularly strong due to the termination of the Sierra/HCA contract in the Las Vegas market. On a same facility basis, revenue per adjusted admission rose 5.3% during the first quarter of 2008 for our acute hospitals. We defined operating margins as operating income or net revenue less salaries, wages, and benefits, other operating expenses, supplies expenses and provision for doubtful accounts divided by net revenues.

On a same facility basis, operating margins for our acute care hospitals increased to 17.1% during the first quarter of 2008 from 15.1% during the first quarter of 2007. The margin improvement results from an increasing flu-related and commercial payor volumes, the opening of several new projects and capacity additions in Florida and California, and the reduction of registry malpractice expense and overall operating efficiencies.

Our acute care hospitals provided charity care and uninsured discounts based on charges at established rates, amounting to $151 million and $124 million during the three-month periods ended March 31, 2008 and 2007 respectively. As a percentage of net revenue, bad debt charity expense, and the uninsured discounts for the first quarter were consistent with those levels we experienced for full year 2007.

On a same facility basis, revenues at our Behavioral Health division increased 9.2% during the first quarter of 2008. This increase resulted from admissions growth and an increase in revenue per adjusted admission. Adjusted admissions to our behavioral health facilities owned for more than a year increased 6.4% during the first quarter and revenue per adjusted admission rose 2.6% over the comparable prior year quarter.

Operating margins for our behavioral health hospitals owned for more than a year increased to 23.7% during the quarter ended March 31, 2008, as compared to 22.7% during the comparable prior year period. Our cash flow from operating activities was approximately $132 million during the first quarter of 2008, as compared to $99 million in the first quarter of 2007. At March 31, 2008, our ratio of debt-to-total capitalization was 41% and the ratio of debt-to-EBITDA was 1.95. We spent $82 million on capital expenditures during the first quarter. Included in our capital expenditures were the construction costs related to our new 165-bed Centennial Hills Hospital in Las Vegas, that opened in January and a new 171-bed hospital in Palmdale, California, that is scheduled to be completed and opened in 2009.

In California, we are also underway with a major expansion of Emergency Room Imaging and Women's Services to our Southwest Healthcare campuses in Riverside County, California. Our behavioral facilities have operated at a very efficient 77% available occupancy rate for the first quarter. We have multiple projects to add capacity to our busiest behavioral facilities. We opened a total of approximately a 140 new behavioral health beds during the first quarter and anticipate opening a total of 350 to 400 new beds in 2008.

During the first quarter of 2008, we repurchased opportunities 1.8 million shares of our Class B common stock at an average price of approximately $50 per share. We currently have 3.8 million shares remaining under the previous authorized share repurchase program. Alan and I will be pleased to answer your questions at this time.

Question-and-Answer Session

Operator

(Operator Instructions). Your first question comes from Christine Arnold of Morgan Stanley. Christine your line is open.

Steve Filton

Next.

Operator

Your next question comes from Adam Feinstein of Lehman Brothers.

Adam Feinstein - Lehman Brothers

Okay and I am actually here. So, great quarter looks phenomenal. Just a couple of questions here, Alan and Steve. Just may be if you could just talk a little bit about the operating leverage. I mean clearly a big benefit to margins from better pricing, Steve you mentioned better job of managing registry costs and malpractice. But clearly the operating leverage is very impressive here. Just wanted to get some more thoughts there, and was just curious if you can quantify just the improvement in our registry and I've a couple of follow up questions?

Steve Filton

Okay well, I mean again I think its does start with the same store revenues. Obviously we had same store revenue growth of 7% on the Acute side and 9% on the behavioral side Adam. And frankly I think with those kinds of same store revenue growths, we would anticipate that leverage is available… operating leverage is available to us, and I think our operators deserve a lot of credit in the first quarter for making that happen.

We announced that adjustment to our malpractice reserves back in, I think, the second quarter of 2007 and said we'd have an ongoing benefit from that and clearly that has been the case. Our malpractice expense in the first quarter was $4 million or $5 million lower than it was in last year's first quarter. Our registry expense was about $3 million lower than it was in last year's first quarter, which is pretty I think impressive given the fact that I think other providers have decided sort of the unexpected severity, the flu season as a reason why their registry cost has increasing now.

A good portion of that decline in fairness is due to the Las Vegas market, where we were experiencing some significant registry cost last year as a result of the kind of lingering result of the strike we had in December of '06, and we had some registry commitments that extended into the first quarter of '07. So there is a positive comparison there.

But even in hospitals that didn't have great revenue performance like McAllen where we lost as we discussed on previous calls, significant amount of OB business. That facility did a good job of adjusting their cost downward, and as a result raising their margins even on lower revenues. And in facilities like Texoma which we acquired in the first quarter of '07, we've made some of the operating improvement that we anticipated making when we did the acquisition, and that's reflected in our expanded margins as well.

So, again I think a lot of credit to the operators for doing a good job in the quarter and taking advantage of strong same store revenues in both of our segments.

Adam Feinstein - Lehman Brothers

Okay and just a follow-up question here. May be talk a little bit about new hospital in Vegas, about the ramp up, just curious in terms of what the impact wise in other quarter. And may be if you could just let us -- may be it will be interesting just to compare and contrast the ramp up of Centennial Hills to Spring Valley?

Steve Filton

Sure. I mean - if those of you recall at our year-end call at the end of February, Alan was actually in Las Vegas and provided some commentary on Centennial Hills, which was rather bullish. Centennial got off to a strong start, our volumes have been better than we expected. It still was dilutive for the quarter as we would have expected it would be, probably contributed about $0.05 or $0.06 worth of dilution to the first quarter, although that's probably a couple of pennies better than we expected.

I think as I said it got of to a strong start from a volume perspective, better than we expected. That was kind of our experience with Spring Valley as well. I would say probably the major difference and to some degree we anticipated this was the quality of the payor mix, and Centennial looks like it is better than when we got started at Spring Valley. And again, I think Alan talked about just really good demographics of the neighborhood surrounding Centennial, and so we are just extremely bullish on its outlook. It will be dilutive probably for another quarter or so, but the long-term prospects of Centennial in our mind are as good as any hospital we've opened in quite some time.

Adam Feinstein - Lehman Brothers

Okay. And just one final question and I'll get back in the queue. Just on the side piece things weren't real, so at 9.2%, so that's too straight quarter of over 9% growth and you haven't seen that in a while. Just may be you can just provide any commentary there in terms of what's going, and you mentioned the benefit from new beds but certainly pretty impressive growth, just any thoughts in terms of anything going on there?

Steve Filton

You are right, and we obviously talked in our year-end call about the fourth quarter growth which was impressive and obviously it's continued into the first. And I think just as it was in the fourth quarter, it is relatively widespread throughout the portfolio. We are benefiting from the new beds where we've added, but we are benefiting frankly in markets where we don't necessarily have new capacity. In some of our large like Atlanta and in Chicago. We're definitely taking market share from competitors. In some places, I think we mentioned at the end of… at the end of the year call, we converted one of our facilities from residential to acute and have really increased our profitability at that facility. And again the strength is really throughout the portfolio which is credit to our operators.

Alan Miller

As Steve pointed out, the operators have really shown their capabilities certainly all alone. But in behavioral, we have been very disciplined. There have been a number of acquisition opportunities that we have passed because of pricing and because of our valuation of the market opportunity. So consequently, our portfolio is tight, the facilities are needed and I think our operators and our development people in that area have really been exceptional.

Adam Feinstein - Lehman Brothers

Okay. Thank you very much. Great quarter.

Operator

Your next question comes from Ken Weakley of Credit Suisse.

Kenneth Weakley - Credit Suisse

Thanks. Good morning, everyone. Steve, I was curious on the flu if you had the sense of whether it was dilutive to the margins. Your achieved margins are actually pretty good rationally this quarter. But I was just curious, would they have been without flu, if that's something you can actually tell us?

Steve Filton

Yeah. It's a good question Ken. And to be honest, I think we have always been a company that has not necessarily stressed the impact of the flu, but this clearly was one of the more severe flu seasons in a number of years, particularly in some of our markets. We calculate based on the incremental increase sort of respiratory discharges that there was probably a $0.05 or $0.06 benefit in the quarter from the flu. But again I am going to go back and give the operators credit because the flu by its nature is not sort of a high margin, high revenue business and the way you make it work is you have to control your length of stay, good throughput, control your expenses. And I think our operators did all that. And that's what sort of turns the incremental volumes into a $0.05 or $0.06 benefit. So, that's not a given when you have that flu volume that you are going to do well with it, but we did in the first quarter.

Kenneth Weakley - Credit Suisse

Okay. I guess question number two, I guess for Alan. There has been huge heard General Electrical couple of weeks ago talking about the… it sounds like the CapEx spending of not-for-profits [ph] is coming under some pressure for a lot of good reasons. And I was just curious if you had a sense as to whether that was developing in your market in particular and most probably then just not might be allowing for as you go forward into next year or two?

Alan Miller

We haven't really calculated it. I am not aware of any of things like that in our market but it will work to our advantage.

Kenneth Weakley - Credit Suisse

Okay. All right. And then lastly, on Medicaid as we get into the… going into the second quarter, we'll have a lot of the stage coming up, any comments from either of you on Medicaid risk in Texas disproportionate share payments?

Alan Miller

We have not seen any proposals to reduce disproportionate share payments. I think Medicaid in many states is kind of on the table as budget item. We said a couple of months ago and I think it's still true that right now with the proposals that have essentially been implemented or been committed to in Florida, in California which will have later in the year, I think that our Medicaid pricing that's embedded in our guidances which is only about zero to 1% increase blended for the year is still good. Obviously if some of the states that are considering it to make more draconian cuts to Medicaid, it could be challenging to us. But that's something we'll have to continue to watch, as it moves along. And obviously, I think it's very dependent on exactly how severe or precisely how severe the economy or the weakening in the economy gets. If I think it extends only for another quarter or two, the states probably I think handle it. If not, there are certainly going to look at their own budgets and their own spending.

Kenneth Weakley - Credit Suisse

Okay. All right. Good enough. Thanks so much.

Operator

Your next question comes from Tom Gallucci of Merrill Lynch.

Thomas Gallucci - Merrill Lynch

Thank you. Good morning. The leverage obviously was tremendous down to the bottom line. So I am a little bit curious to try and dive a little deeper into the volume side if I could Steve. You are 0.8% on same-store growth, but Centennial has cannibalized some business I guess on same store, did that another 50 or 100 basis points if you were sort of to try normalize for that?

Steve Filton

I mean our guesstimate of that is that about a third of Centennial's admissions came from our existing facilities. And so if you added that back to our same-store volumes, it would add probably about 70 or 80 basis points of admissions back. We get to about 1.5 or so, 1.6 from 0.8. The other thing that we talked about at the end of the year and the dynamic is the same is that we are down quite a bit in the McAllen market in both the fourth quarter of last year and the first quarter of this year in OB volumes because the competitor… physician-owned competitor hospital opened an OB service. That is not very profitable business to us. So if you add those admissions back, if you add McAllen back and you add a third of Centennial's admissions back, you probably get to about a 3% same-store acute admission growth for the quarter and we attribute about half of that increase to the flu. So that's I think the biggest moving pieces of admissions for the quarter.

Thomas Gallucci - Merrill Lynch

And then of course I think you mentioned earlier, you had a pretty tough comp given sort of some other dynamics a year ago in Las Vegas. So a very strong volume now. What was there, what about was in the payor mix sort of. Was there - Medicaid I think might have been down you said with COB [ph], the last OB volume in McAllen? What about in Medicare and managed care, but it was skewed towards managed care?

Steve Filton

Yeah I think that the other sort of significant trend in the quarter beyond flu on the the Acute side was, we saw a pretty sizable increase in managed care volumes. Some of that is flu related, but clearly a portion of it is not. And we can go sort of market-by-market and identify some new contracts that we have or specific market where we know, we are taking managed care market share from a competitor.

But in general, I would say that our managed care volumes were up probably close to 6% for the quarter, and I think may be 3% of it is clearly attributable to flu or specific contract, but half of it is just general strength in managed care volumes. And obviously I think it's the provider side of what many of the managed care companies have been reporting over the last few weeks, we certainly had been experiencing that trend and obviously that as helped pricing.

So in a quarter in which we have seen, compared to last year, a fairly significant increase on insured charity care etcetera, although it was comparable to the full year of last year it was quite a bit over last year. So to have that number quite a bit over last year and still have 5.3% pricing increases in Acute care, I think it reflects the overall strength in that managed care volume.

Thomas Gallucci - Merrill Lynch

Right. So it's still not your best payor mix, your best payor grow the fastest. And what about the sustainability, was it spread across market fairly evenly or is it really concentrated, let's say in Vegas?

Steve Filton

No. I think it was spread. We had a good quarter in Vegas, there is no doubt. Obviously as point out, there is a tough comparison, but if you look at our minority interest line, you can tell that the greatest portion of that relates to Vegas and you can see that it's up and we had a strong quarter in Vegas, but with every strength throughout the portfolio as well in the number of other markets. So that managed care dynamic especially we felt in a number of our large numbers, and frankly even in some of our small markets.

Thomas Gallucci - Merrill Lynch

And I guess just last one. Absolute pricing for managed care is pretty steady or is that gotten better or worse?

Steve Filton

No, I think it's been pretty steady from our perspective. I mean again to me the story of the quarter is managed care volume, 6% is sort of the best that we have seen in some time. Managed care pricing I think is still on that 6% to 7% range, which has been pretty consistent for a couple of years now.

Thomas Gallucci - Merrill Lynch

Okay. Great. Thank you.

Operator

Your next question comes from the line of Erik Chiprich of BMO Capital Markets.

Erik Chiprich - BMO Capital Markets

Good morning, and thanks for taking the question. Nice job on the quarter. Wondering though in regards to McAllen, I know you talked about some of the challenges there. Is the profitability up year-over-year in that facility with lost volume? And then I know you guys have been pretty patient in that market, just curious if you can give us an update on what your strategy is going forward there?

Steve Filton

Sure. I mean the profitability of the McAllen market is definitely better than it was in the first quarter of last year, and I think there's a couple of factors to that. One is our uninsured expense is lower. We made some changes frankly in our uninsured accounting in the McAllen market specifically last year's first quarter. I don't think it much affected our consolidated results, but it was specific to the McAllen market, and so the comparison to this year looks like a favorable one.

But as I said earlier in response to a question, even with significantly reduced volumes in that market, the operators in that market have reduced their expenses in such a way that our margins have actually risen and so we are doing better in that market, although in fairness a good portion of that was built into our own expectation and our own guidance. So McAllen is well ahead of last year, a little bit ahead of our own internal result.

Erik Chiprich - BMO Capital Markets

Got you. And then can you give us an update for the contract renegotiations with Sierra in United and Las Vegas and what then anything you are hearing on HCA getting back in the contract?

Steve Filton

To the best of our knowledge HCA is not back in the contract and/or back into the Sierra network. And from what we hear from both Sierra and HCA, there is no imminent plans to have them back in the network. We have signed a three year renewal with Sierra that will extend, will take effect that I think in May and extend out for the next three year. So we feel like we've just gone a long way to cement what is a very good market position from our perspective and a very strong relationship with the biggest payor in the Las Vegas market.

And that is basically based on the legacy Sierra business, and I think specifically provides for the fact that it does not apply to the legacy United business. So at some point when the United contract is up, which is not for some time, that contract will either separately be renegotiated or United will try and fold it's subscribers into other products and it's other products in the market.

Erik Chiprich - BMO Capital Markets

And what type of increases did you see on the three year renewal?

Steve Filton

I think as is historically being the case, they are a little bit lower than the average increases that we mentioned or I just mentioned in response to Tom's question of 6% or 7% just a little bit lower than that, but in our mind well worth it for the significant business that we get from again what is the largest payor in that market.

Erik Chiprich - BMO Capital Markets

Okay, thanks very much for the update.

Operator

Your next question comes from Mathew Borsch of Goldman Sachs

Shelley Gnall - Goldman Sachs

Hi thanks for taking our question this is Shelley Gnall in for Matt Borsch. I guess our first question is on the bad debt, looks like it was up sequentially into the quarter. I was relating [ph] to the comment, are you seeing any, could that be related to job loss or I guess specifically insured job loss in any of your market.

Steve Filton

Shelley what I said before, I said in my prepared remarks as well was that the total of bad debt and Charity care and uninsured discount and I think you need to look it all three together, is running at about the same percentage as it ran for full year 2007. Frankly that's well within our expectations, we actually expected that number to tick up a little bit in 2008 and so far it hasn't and we are obviously grateful for that.

In all honesty while the economic news coming out of many of our markets including Las Vegas is not great, we have not felt a pinch in too many of our markets. Other than in Florida which we mentioned in our year-end call, and particularly on the East Coast of Florida. And it's not something that we are feeling as yet in our markets. We certainly are watching it very carefully and its possible that I think if the economy continues to weaken, we will, but so far our fingers our crossed, we are not getting pinched a whole lot.

Shelley Gnall - Goldman Sachs

Okay, great. And then I guess a related question. In surgical does the (inaudible) expense looks like it was little bit better. Clearly there's a lot of flu in the market, but can you talk a little about the demand in the utilization you are seeing in surgeries.

Steve Filton

Our surgeries were relatively flat for the quarter. Yeah as you point out because of the emphasis on flu, which is not a supply intensive diagnosis that will drive it down a little bit. I think the other the only others sort of notable dynamics is that in the Las Vegas market, we saw a decline in some of our very highly intensive supply type surgeries, spine surgeries etcetera. And frankly at the end of the day I think that probably wasn't a bad thing for us because of the cost of those procedures I don't know that we make much of margins so their essence really didn't hurt us and certainly make margins probably look a little better.

Shelley Gnall - Goldman Sachs

Okay. Great. Thanks for taking my question.

Operator

Your next question comes from Jason Gurda of Bear Stearns.

Jason Gurda - Bear Stearns

Good morning. Steve, I think you had said that your case mix was up. Do you have a sort of indication of what type of - since your surgery volume were flattish, what was sort of procedure are driving the increase in the case mix?

Steve Filton

We did have a small, I would say, may be 2.5%, 3% increase in our case mix which is pretty strong especially given the fact that we did have so many more flu cases. As we look at cost that diagnosis group there is no other sort of diagnosis group that tends to dominate that. And again I would sort of tie it back to increase in managed care utilization. Those managed care patients tend to be younger patients who are in the hospital for some sort of procedure as oppose to Medicare patients who are more weighted toward medical cases where they are in four, in many cases longer length of stay etcetera and not necessarily severe illnesses. So I think it's tied to the kind of slant towards more managed care business in the quarter.

Jason Gurda - Bear Stearns

Okay. And if I could -- Alan if I could ask a couple of questions just related to your experience in the industry. Your thoughts on how a recession would impact volumes or if you have thoughts on how it would impact volumes in the past and also nursing cost?

Alan Miller

Interestingly the beginnings of our recession or slowdown, people tend to use hospitalization more because they had coverage. And coverage extends for 18 months and cover [ph]. So usually this industry does a little better when the economy slows down. Obviously if it continues for a long period of time, you are not going to be able absorb it, but in the shorter run you do pretty well. And obviously we haven't seen anything there. There was an earlier question on that.

With regard to nursing, I don't see any differences other than perhaps people move from an industry that is laying off workers and you get some people who go into the nursing field. The best I could do on that.

Jason Gurda - Bear Stearns

Okay. Thank you, guys.

Operator

Your next question comes from Darren Lehrich of Deutsche Bank.

Darren Lehrich - Deutsche Bank

Thanks, good morning everyone. I do have a follow-up question regarding the Sierra renewal. Steve just two things there; first, were you able to secure annual inflators in the contract or is there just a one time increase that you've negotiated?

Steve Filton

No Darren. We will get an increase kind of as I described Mr. Eric just little bit less than our average in each of the three years of the contract.

Darren Lehrich - Deutsche Bank

Okay. And then were there any bells and whistles in the contract relating to quality or you are doing anything along those lines which we have pay for performance?

Steve Filton

No in all honestly other than the increase rates, I think the contract looks very much like our last contract, and there were no major changes.

Darren Lehrich - Deutsche Bank

Okay, fair enough. And then Centennial Hills, you've spoken about the impact in and I guess we can go back and figure out where you might be senses wise. But can you just give us a sense for where you thought you would be by the end of the year in Centennial Hills with senses and where that squares with, the first quarter just to put your comments about it being a little bit better than expected in the context.

Steve Filton

Sure I mean, I think and to be honest I don't remember sort of with in our guidance where we pegged Centennial for later in the year. But for the first quarter we sort of thought Centennial would open in its first quarter and kind of a 34-40 ADC range and they have been more in a 55 -60 ADC range. And I think just as important as I mentioned before, the quality of the payor mix is probably little bit better than we anticipate. Although we anticipated frankly it would be a little bit better than Spring Valleys experienced, but I think its been even lower better than we expected.

I don't want to read too much into a couple of months worth of results, but again I mean we just love where Centennial is positioned in the market, we just think that its cannibalized less business than Spring Valley did when it opened and so the trends it is very encouraging, we feel better after more quarters and we feel better if we get to where we thought we'd be at the end of the year which is EBITDA positive, and we think we will get there. But we feel more confidence certainly at that point.

Darren Lehrich - Deutsche Bank

And your MOB is at least up to this point?

Steve Filton

It is up and a good portion of space is committed to it.

Darren Lehrich - Deutsche Bank

Okay, just a few other things here. CapEx you didn't comment at all about any change in your guidance. I think you were a little over $400 million projected. Is that still a safe range?

Steve Filton

Yeah, I mean, obviously our guidance for the year is 400 to 425 of CapEx. We spend about little over 80 in the first quarter, so we are at somewhat slower rate than we projected. You can peg that to a couple of big projects. We got a little bit slower in Californian Palmdale then was our schedule. The pace is picking up and Texoma will get started in earnest with real construction spending in the back half after this year, it's clearly back half weighted. So, I think right now we still think we probably get to that number, we certainly are not going to exceed it but we are going to leave that guidance out there the way it stands, because we think the pace of our capital spending is going to pick up.

Darren Lehrich - Deutsche Bank

Okay. And Alan I know you responded to Ken's question, but I guess I will ask in a different way about CapEx. Is it fair to say that you and may be others industry are pushing out a little bit with regard to projects? It seems like that the budgeted spending is there, but the point of CapEx is gone a little bit slower, is that a fair observation Alan?

Alan Miller

It's gone slower, but it's not anything that we did by design. It's just a question of timing as the projects move along. So Steve pointed out, we are going to probably spend what we had announced earlier. It's just a timing question.

Darren Lehrich - Deutsche Bank

Okay. Fair enough. And then on Steve you had a couple of closures in behavioral, what was that?

Steve Filton

We closed two very small facilities in the Behavioral division in the first quarter at a total of I think 28 license beds, and I think which is the function of sort of a niche programs that when they were not sort of meeting their demand, there was no point in keeping them operating. So they look to be significant in the number of facilities, but in terms of the actual capacity it's pretty immaterial.

Darren Lehrich - Deutsche Bank

Okay, and that's fair. And then last thing here. Are there any major systems or IT initiatives we should be aware of for the next two to three years at UHS?

Steve Filton

No I think information technology like any of our capital investments it's something we are evaluating all the time and trying to make sure that we are competitive etcetera. So I wouldn't say that it's not possible that we wouldn't have a significant investment in IT clinicals or something down the road, but at the moment there is no such commitment. But the process is kind of a continuing one that's underway all the time.

Darren Lehrich - Deutsche Bank

Okay. Thanks nice job.

Operator

Your next question comes from the line of Justine Lake of UBS.

Justine Lake - UBS

Thanks. Good morning. Just looking at a bead of this size and just would love to spend a minute going through some of the pieces. I mean I know you've identified flu is $0.05 of the bead. I'm just curious if you can walk us through; versus your plan I think you said that the bead was $0.25 better than your plan. Can you tell us how much of that came from the different components, whether I guess like kind of look at the business and say how much came from Vegas, from Syke [ph] and then just from better operating expenses and then maybe the rest of the acute is?

Steve Filton

Sure I mean I think Justine some of this is not absolute precise science, because some of these issues overlap. We would say, I think I answered Ken weekly before that the flu contributed probably $0.05 or $0.06 bead. I think that the performance, the overall performance of the Vegas market contributed probably a similar amount. We probably got $0.04 or $0.05 from the rest of the Acute division and $0.04 or $0.05 from the Behavioral division, $0.03 or $0.04 just from interest expense being less then we expected. And those are probably the major components of it.

Justine Lake - UBS

Got it. I mean it looked like there was a lot on the margins and I know you talked about lower nursing cost. Any other may be malpractice or anything else that you saw in the quarter that might not be sustainable? Or might have been kind of may be more one-time in nature other than the flu.

Steve Filton

I think that the other the piece that, we our challenged in explaining and predicting at sustainability is this, the nature of the increase in managed care utilization. And just as I know you know as well as anybody that managed care companies have struggled mightily in the last few weeks to explain that and there doesn't seem to be one single cohesive explanation. We obviously as a provider are benefiting from that, and so we are not as pleasured to explain it as they are, but it's hard to know how sustainable that is.

And as you know, I mean obviously the managed care companies are certainly going to alter their behaviors I assume over the next ensuing quarters to try and get their spending under control. Now a lot of our contractual pricing is fixed for a extended period of time, but certainly from a utilization perspective and those sort of issues, I assume the managed care industry is going become more aggressive and so the that's a little bit hard to predict.

Obviously, I think the behavioral results you been sustained already for a while, I don't know we can stay at that 9% revenue growth rate but got to be able to keep some where in that neighborhood. And you know interest expense is hard to predict, but obviously it helps that we are generating more cash and spending less of it for CapEx, so we'll certainly have that benefit going forward.

Justine Lake - UBS

Got it. To the extent that you have visibility, can you give us update on how April's running versus the first three months of the year?

Steve Filton

Yeah, I mean the only problem was sort of giving that intra month call is, that it's almost purely based on volumes and volumes in April looked strong in both size of the business in both segments. Obviously, it's hard to get a meaningful read on payor mix or some of the other issues or quality of the payors. But volumes themselves were pretty good in April.

Justine Lake - UBS

Okay. And then just one quick follow-up on CapEx and not in a short term but just taking longer term. I look at your CapEx for '08 and '09 and there is a fair amount of new construction going on there in the Acute base. And correct me if I am wrong, but I kind of targeted around may be $200 million a year of just purely new construction.

Steve Filton

I would say between 150 and 200 has been the number in '06,'07,'08.

Justine Lake - UBS

Okay. You've got that spending for '09. Is there any spending that you've got, that's kind of… is there any plans for 2010 or I think we've spoken offline about the fact that you might be reevaluating the level of CapEx you put into the Acute business especially outside Vegas given the performance. Anything there or do you still expect to become materially more cash flow positive from a free cash flow standpoint in 2010?

Steve Filton

No, I think your first point is the relevant one, and we've talked of quite a bit publicly about the fact that these three new hospital projects being Centennial, Palmdale and Texoma are probably a total of a little over $500 million of capital spending over essentially a three year period. That certainly affects the look at the capital numbers. Once Texoma is finished in early 2010, we at the moment don't have any other commitment of that magnitude on the table and our expectation is short of that or our capital spending will progressively decline as we get there.

Justine Lake - UBS

That's great. Thank you very much.

Operator

Your next question comes from Frank Morgan of Jefferies & Co.

Frank Morgan - Jefferies & Co

Good morning. Two questions, Steve you mentioned about taking market share, it's a great think but do you have any good theories on why you are able to take market share. I think you mentioned it particularly on the table [ph] side mentioning Atlanta and Chicago. Any more color that you can give us on that. And then secondly on the MedMail side were there any releases of MedMail from prior periods, and kind of what's the current run-rate on that. Thanks.

Steve Filton

No I mean there were no prior period impacts. Again I think we took back some reserves back in the second quarter of '07, which were well highlighted in that press release and we didn't count it in our sort of income from continuing operations that we disclosed, but in the quarter absolutely not. As far as the market share goes, I mean I think it's a function of having a preeminent market position in the markets that I cited, Atlanta etcetera. And I think that it's just easier to operate from a position of strength. And I think in some of our markets, some of our competitors have had some quality issues and that obviously provides an opportunity for us unfortunately for them to step up and where we have a strong reputation to go to referral sources and take market share. And again I think that's happened in a few markets. So much credit again goes to the operators. There's just not enough credit I think that can go the operators this quarter. This is a quarter in which they've really shown.

Frank Morgan - Jefferies & Co

Thank you.

Operator

Your next question comes from Jeff Englander of Standard & Poor's.

Jeffrey Englander - Standard & Poor’s

Good morning guys. Steve just back with me if you can on the other operatives, since I believe last quarter we had the same discussion in terms of them coming a little better than expected, and I know you in your earlier question didn't see anything specific there. But given this is two quarters in a row, and another competitor had a similar experience, is there anything you can put your on trends wise that may be happening there?

Steve Filton

Well let me say couple of things Jeff. One it's just kind of a mechanical thing that I know at least some analyst have in their model. We've had over the last probably four or five quarters about $20 million a quarter in other operating expense on average related to this construction management contract. And if that's what people had modeled in, in the first quarter, we only round off with about $5 million, which is just really a timing issue. But probably there is about $15 million of, I would say $10 million to $15 million in our own internal modeling and I think in what a lot of other people had related to this construction management contract that destroys that a little bit. By the way they probably… If you have that, you probably have that in other revenue as well.

Other than that, again we touched on these things; malpractice expense is down, registry is down, we are getting some benefits from the integration of Texoma which has now been in the portfolio for five quarters, we are getting some benefit in the Laredo market from a transaction in which we combine a surgery center that we were joint ventured in, in the market with our hospital and consolidated the two physical entities and that produces some economies.

And then as I just said, I mean, I think when you have 7% same-store revenue growth in Acute, and 9% in Behavioral and two businesses that are largely fixed cost businesses there is operating leverage available. And it's incumbent upon the operators to execute their plan in the first quarter. And frankly in the fourth quarter last year they did so.

Jeffrey Englander - Standard & Poor’s

So, the other question would be. Can you talk a little bit about may be the economy between what's happening in the economies particularly in Las Vegas? And what you are seeing in your operations and any thoughts on why you might be seeing that?

Steve Filton

Well, the one thing that I would say is that most of the economic news, let's start by saying that. Historically, I think the economic metric that has most affected hospitals is unemployment rates and as people lose their jobs, as Alan indicated with a lag that creates a problem for us because they lose their health insurance; eventually, they loose their health insurance associated with their job. But actually as you know, I mean unemployment rates have not gone up terribly dramatically. There has been lots of talk about foreclosure rates and housing starts and all the signals of the economy is weakening but in most of our markets, that hasn't translated yet to a measurable increase in unemployment rates, and I think that may well be why we are not feeling a pinch yet. I don't know whether it will ultimately translate and if does, as Alan said, we may not feel that for at least a couple of quarters, but I think that's probably why when you pick up the newspaper and read some pretty grim stories, that's why it's not translating directly to our business just yet in most our markets.

Jeffrey Englander - Standard & Poor’s

Great. Thanks very much.

Operator

Your next question comes from Bill Bonello of Wachovia.

Alan Miller

We are not a discretionary business, I mean to a large extent.

Operator

Bill, still your line is open.

Bill Bonello - Wachovia

Can you guys hear me?

Steve Filton

I can hear you, Bill.

Bill Bonello - Wachovia

Okay. Steve, you talked about the April trends and that the volume is pretty strong, and but be careful to read too much into that and it's hard to tell on the payor mix. So, just to be perfectly clear, can you not tell yet whether that exceptionally strong managed care volume growth has continued in April. You don't know where the volume is coming from?

Steve Filton

It's a little bit hard to get that sort of clarity of the data kind of on an intra-month basis, I mean, again Bill it seems that a lot of those trends are continuing to April but it's very difficult to say that with definitiveness.

Bill Bonello - Wachovia

Okay. And then totally separate subject and maybe a question more for Alan. But it seems like at least that what we were hearing out there was maybe at one point in time earlier in the year, you guys were pretty actively at least considering some of the acquisition opportunities that were out there. And I am just curious what your thoughts are on acquisitions these days? What the marketplace is like? Is that something you would bite off if the right opportunity came along et cetera?

Alan Miller

Yes, we would. We have consistently said that our acquisition activity relates to the opportunities. And we are in a good position. We have available capital and if we see a good opportunity we are very actively looking. But, as I said earlier, we also have a disciplined approach to it. There have been a number of opportunities coming by in the behavioral end, and we have passed on them because of price or because of what we felt the future growth of those facilities might be. But we are very actively out there, and we would be happy to make acquisitions and are capable of doing so.

Bill Bonello - Wachovia

And just in terms of the competitive environment or the type of opportunities you are seeing in both Behavioral and Acute, is anything changing there? Is there, maybe less competition that multiples might start to come down or starting to see any sort of better looking properties coming up for sale?

Alan Miller

Frankly, in the acute end of it, I think it's fair to say surprised that there haven't been more acquisition opportunities, and there just haven't been. We expected competitors to be selling more facilities and the good ones, and we haven't seen that. But we are continually looking and we are in the market. In the behavioral end, I think it's about the same, maybe pricing has moderated a little bit as our competitors are realizing that if you pay up, you don't get as good return or you don't get the return you should be getting. But we are patient and we are particular.

Bill Bonello - Wachovia

Okay. Thanks a million.

Operator

Your next question comes from John Ransom of Raymond James & As.

John Ransom - Raymond James & Associates

Hi, good morning. Just looking at some individual states, are you hearing anything about Dish programs? I know, Texas is off cycle. But is there anything going on with discussion about disproportionate share program in the state, fiscal year back half of calendar '08?

Steve Filton

John, I mean, obviously as you point out, Texas is the state where we get the lion share of our disproportionate Medicaid [ph] portion of share payments. And we've really not heard anything about their state fiscal year or our disproportionate share payment is locked in now and through August of this year, and then their fiscal year begins in September of '08. And I think that they haven't even to the best of our knowledge sort of put that on the agenda yet. So, the one thing that I always sort of point out to people is that because the lion share of disproportionate share of monies go to public hospitals and hospitals that treat a large share of indigent patients et cetera. It's a politically sensitive area and so there is a fair amount of political cover that goes along with it. And I don't know that the state is out to protect UHS but I think they are generally … there are a lot of underlying constituencies that are out to protect the hospitals that receive disproportionate share of funds. So, we have been getting disproportionate share for many, many years and it changes year-to-year and there is some tweaks in the system but it's never been dramatically cut back and we don't have the expectation that it will be dramatically cut back this year.

John Ransom - Raymond James & Associates

Okay. Great. And my other question, I mean, just make sure this is clear in all the noise. The biggest change with respect to your expectations this quarter was the commercial volumes is that correct? Plus the cost controls?

Steve Filton

I would say the impact of the flu season and the commercial volumes are two of those issues.

John Ransom - Raymond James & Associates

Okay. Now, that the flu season has receded, are you still saying similar commercial volume trends, so far this quarter because the only thing your guidance up $0.05 or so this quarter. Is there anything you've seen so far this quarter that suggest that was just a blip?

Steve Filton

And that's … I know Bill Bonello asked the question, I think in a slightly different way. I think it's hard to say John, I mean, we can say that our volumes overall look relatively strong in the first … in April. But we don't have enough sort of deep-dive information to know the real payor mix the way that slices from a payor mix perspective just yet.

John Ransom - Raymond James & Associates

Okay. Thank you.

Operator

Your next question comes from David Bachman of Longbow Research.

David Bachman - Longbow Research

Hey, good morning and nice quarter guys. I think most of my questions have been answered here. But just back to interest expense, that was a little bit better. What should we be looking at through the rest of the year, just generally on that?

Steve Filton

I mean, obviously, I think that the run-rate for interest expense, I mean, I am not about to predict what direction rates go. I'll leave that to people who are smarter than me but from our own internal perspective, our borrowings will increase to the extent that our capital spending raise pick-up if in fact they do obviously the flip side of that is we generated a lot more cash in the quarter than we expected. So, I think that we probably will have a little bit of a favorable variance going forward on interest rates, is what we would expect and frankly bake that into our revised guidance for the year.

David Bachman - Longbow Research

Okay. So, your guidance reflects at least directionally something positive there.

Steve Filton

I think that's right.

David Bachman - Longbow Research

Okay. And then you've got to nitpick here to look for anything negative. On the behavioral side, obviously, strong volumes pretty happy with where the pricing came in or is there, is that looks like it might have been slightly less than we thought it might be?

Steve Filton

I mean, I think we've said for the last few quarters that Behavioral pricing is on a low-end of the range of our expectation, but you are right I mean it's a little bit of nip. And also I would say this, I think that the two dynamics go together. When you got 8% same store admission growth, it gives you little bit leeway about picking patients etcetera. And you are trying to get patients in and out and just meet your demand, and I don't know that you can be quite as selective as you would otherwise be, so think the tow go together. It's tough to have great pricing when you've got such strong admission growth.

David Bachman - Longbow Research

Sure. Okay that makes sense. And then you've given a lot of credit to your operators for last and this quarter and performing to play in. On the cost side, what's the key metrics that they have to meet? Is it really staffing or is that biggest thing under their control?

Steve Filton

Well staffing is our probably biggest variable cause. But I think again the issue is, what I tried to stress is that, when you have 7% same store growth of Acute, 9% same store revenue growth in Behavioral. It provides an opportunity for leverage, but what the operators have to do is control their staffing and make sure that their semi-fixed and fixed cost remains fixed and that their cost don't slide, and that's, that's a battle every single day. They've got a very complicated job, and again, I think in the last couple of quarters they performed exceptionally well.

David Bachman - Longbow Research

Okay, and then just one last follow up on that. It seems to me that in a weakening economy, it may be a little easier to squeeze, coverage - those coverage out of your existing staff that you would have otherwise people's willingness to a pick up extra hours or extra shift. I mean is that a safe assumption?

Steve Filton

No I think it's fair, and I think it was Jason Gurda who asked kind of similar question before. If you look back on at the last time that registry expense peaked, was sort of in the summer of 2001 and it's starting to go down after that and not coincidently that was in the middle of last recession that we went through. So, I think it is true and Alan kind of alluded to it before, when we are in a recession nurses some of them return to work or take more hours if their spouses are laid off or whatever the issue is. But it's easier to deal with it. So, I think actually, that aspect of our business may get a little easier in an economically depressed time period. There may be other aspect of the business that are more of a challenge, but I think the labor side may provide a few opportunity for us.

David Bachman - Longbow Research

And obviously there wasn't a flu running rapid among your staff which cut the lot of mischief as well.

Steve Filton

And again here is another place we give the operator credit. We had a severe flu season that surprised most people; and its easy to have the registry expense go up in an environment like that. And as I said our registry expense was actually down considerably for the quarter. So, just a good job by those who staff arsenals [ph].

David Bachman - Longbow Research

I am going to try to squeeze in one other quick question here. On the CMS recovery audits, do you guys have any comments on that or looking any thoughts on how to handle that when that gets rolled out and I guess January '09 now?

Steve Filton

No. And look this is just revenue enhancement, revenue raiser for the government. They are going to try and raise as much money as they can, and if they can't do it by lowering Medicare rates, they'll do it by trying to recover previously made payments and we just have to make sure that all our eyes are dotted and T's are crossed and that the government isn't doing anything or trying to recover money in violation of their own rules. So it's kind of a hassle for us, but we just paid closer attention to what we are doing in those areas that they are auditing.

David Bachman - Longbow Research

Okay, great. Nice quarter again. Thanks.

Operator

Your next question comes from Whit Mayo of Stephens.

Whit Mayo - Stephens

Thanks guys for squeezing me in at the last minute, I'll make it quick. Steven the 300 to 350 to 400 beds that you are adding this year in your Behavioral division, does that include the 140 that you added this quarter.

Steve Filton

Yes.

Whit Mayo - Stephens

Okay. And of all those beds that you are adding this year, are all of those additional beds you are adding to current facilities or some of those or are any of those De novo projects.

Steve Filton

No I don't think we have De novo projects on the current facility.

Whit Mayo - Stephens

Okay. And can you comment just quickly about how maybe the Easter shift impacted your business at all. I mean over 9% same store is really strong, but just any adverse impact there.

Steve Filton

No. We saw maybe a little softness right in the couple of days before Easter and right after Easter, but I would say it didn't have a meaningful impact on the quarter.

Whit Mayo - Stephens

Okay. And one other quick question, you talked earlier about the construction project. Can you give us an update on when that trails off, how much contributed in the quarter, and do you guys expect any other contract at some point?

Steve Filton

We probably had about a $1 million of EBITDA related to that project in the first quarter. Probably as we close, that facility is now open and so we are just sort of closing out the accounting and final billing for and there's probably maybe another $1 million of trailing EBITDA next quarter perhaps.

As we talked about in our year-end call, we have a second contract that we - and I mentioned in my opening remarks that we feel likely to finalize. There's probably given the timing out $3 million or $4 million of potential EBITDA to be had in the back half of '08 related to that contract, but in fairness we'd already included that in our even our original guidance and obviously in our revise guidance as well.

Whit Mayo - Stephens

Okay that's it. Thanks guys, good job.

Steve Filton

Thank you.

Operator

Your next question comes from Andreas Dirnagl of JPMorgan

Andreas Dirnagl - JPMorgan

Good morning guys. At this point most of my questions have been answered, so just a couple of subtleties may be. Alan when you were talking about the acquisition environment on the both sides of the business. I guess, I would characterize it as sort of may be a little bit of head scratching, that there isn't enough or there aren't a lot of assets for sale. On the Acute side and on the Behavioral side its more pricing oriented. On that point are you finding that you're sitting at the table with people who are outbidding you, or are you finding that sort of seller expectation have gone up.

Steve Filton

Andreas let me take a shot at that. Interestingly I think as Alan said, on the Acute side, we're just not seeing very many opportunities. I mean the reality is, I think most of the deals that have been done recently have been other for-profit sellers, selling to for-profit sellers. And generally, I won't say you make a blank statement, but generally those are properties that are not necessarily of great interest to us.

On the Behavioral side, I think that, there has been over a number of years, a lack of sort of interest in that business and then over the last three or four there has been kind of renewed interest and so I think there is sort of a backlog of demand for those properties, and therefore we haven't seen and obviously that's the business that hasn't faced some of the headwinds that the Acute businesses has faced.

I think we still see that the multiples in that business can be pretty high, and again as Alan indicated we take a look at most just about every opportunities that's out there. And if the bidding gets to a point where we think it just doesn't make sense anymore, we are okay, we are dropping out. But again I think on the Behavioral side it's more of a pricing issue, on the Acute side I think it's just the availability of properties themselves.

Andreas Dirnagl - JPMorgan

Okay. And then may be trying to yet again sort of slice and dice this whole managed care increase that you've seen in terms of volume. I guess the concern that's running through a lot of the question, let me state it out right is. Is this sustainable or not or are we seeing an acceleration of elective procedure sort of prior to sort of recessionary or an economic downturn. And may be the question I have is, how do you think your operators are preparing for that, because clearly you staff differently depending on what you think it is?

Steve Filton

Well, yeah. And by the way I mean Andreas I appreciate you are being upfront about it, but we are certainly not trying to hide the notion that some of this increase may not be sustainable….

Andreas Dirnagl - JPMorgan

Absolutely.

Steve Filton

I think our guidance is realistic in terms of not, our not taking stand that is absolutely is sustainable. I don't know, I mean like I said before, the managed care companies who frankly I think probably should have a better handle on this than the provider themselves, I think have been struggling with why some of these utilization data points have increased pretty dramatically pretty quickly. And I am not sure that I have any great explanations beyond what has sort of offered out there already.

So, all I can say about how we are handling this is our operators are certainly not behaving as if this is volume and this is payor mix that's going to continue indefinitely, and we are not staffing up or ramping up for a wholly different business model or anything like that. And again I think we are in a position to react relatively, flexibly to whichever way this goes. If the business is sustainable, I think, we are prepared to deal with that and if it's not, I think, we are prepared for that as well.

Andreas Dirnagl - JPMorgan

Okay Great. And then you have been very upfront about the uncertainty surrounding this. But sort of just one more quick one maybe just to confirm I mean, you are really seeing no specific trend on that sort of extra managed care volume in terms of, I mean, is there any ability to sort of characterize it as more elective in nature versus acute or there is a lot of orthopedic in there, which has a lot of elective procedures in it; anything along those lines?

Steve Filton

No, again. I think some of is flu related. That sort of fits if it's into what, obviously, others have reported but we saw an uptick in our patient surgeries in our managed care business and in some other diagnoses, so I don't know that there is a kind of a single comprehensive explanation to point to.

Andreas Dirnagl - JPMorgan

Okay, great, Steve. Thank you.

Operator

Your final question comes from Christine Arnold of Morgan Stanley.

Christine Arnold - Morgan Stanley

Thanks for fitting me and sorry I was sort of delayed coming back from presentation. It seems like the real issue here just to probe on the commercial volumes is whether or not sustainable, which is what everyone is asking about. So, what's really astounding is that the volume was so good in the first quarter, which is when deductibles generally reset and meet volume kind of seasonally for the managed care companies. And managed care companies aren't admitting to an increase in volume. They are saying that the pricing perhaps just are getting better. So, couple of questions here. Give a sense for how many … as you look at your employer base in your market, is it mostly large employers who had reset co-pays and deductibles in January and mostly small employers where it kind of renews throughout the year?

Steve Filton

My general sense to that Christine is that, both small and large employers have gone down the benefit plan design route in '05 and '06 and increase co-pays and deductibles dramatically in those years. And we clearly saw a less of it in '07 and I haven't seen real hard data in '08 but my guess is we probably saw less of it in '08 because we know this is an employer of 40,000 people. There is only so much you can push those co-pays and deductibles before you create real dissatisfaction among your employee base. So, like everybody else, I think we raised ours in '05 and '06 and then kind of mute it in '07 and '08 and it just strikes me that that's the pattern that we've seen with most employers.

Christine Arnold - Morgan Stanley

Okay. So, part of this could be a wear-off of a deductible effect?

Steve Filton

No. I think that's an element of it for sure.

Christine Arnold - Morgan Stanley

Okay. And then have you highlighted, I thought as I missed a bunch of this, have you highlighted the profile of the ex-flu admissions which is 5 to 6 volume from managed care, half of that was flu, but that still leaves you with strong 2% to 3% volume ex-flu and which is above baseline. So, is it dialysis? Because re-insurance companies are saying it's dialysis and premies that they are seeing driving kind of volumes or is it something else in terms of the procedures?

Steve Filton

I think its … I mentioned this to Andrea, I mean, I think it's across the board. I don't think it's specific to a single diagnosis. It's into an out-patient surgeries and it's in other in and out-patient diagnosis, so. In some ways I think that, kind of, is encouraging that it may be sustainable but because it's not in a one particular place, but it's not easy to pinpoint from our perspectives.

Christine Arnold - Morgan Stanley

I appreciate that. Then last question, you have great cash flow, you showed CapEx restrain. This quarter you repurchased shares. Do you target being cash well positive like operating cash flow minus CapEx or is that something that doesn't even enter kind of your process as you look out and look forward, as you want that levered, so it's not like as a challenge to get more leverage. How do you think about that?

Steve Filton

Right. I mean, I think that our original projections for the year assume that we would be in that bar or given the fact that we already bought back $90 million worth of shares in the first quarter. And we had a $400 million to $425 million capital budget. Obviously, if we are able to sustain the operating performance that we have, that should improve some but, no. And then, I think getting back to so I think Justin Lake's question before. I think after 2008, we assume that we would become a net re-payor of debt as our CapEx started to skinny back a little bit.

Christine Arnold - Morgan Stanley

All right. Thanks for taking my question.

Steve Filton

Thank you.

Operator

There are no further questions in queue sir.

Steve Filton

Okay. We appreciate everybody's time. And look forward to talking with everybody next quarter. Thank you.

Operator

Ladies and gentlemen, this does conclude today's conference call. You may now disconnect.

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: United Health Services Inc. Q1 2008 Earnings Call Transcript
This Transcript
All Transcripts