Good morning. My name is Tiffany, and I will be your conference operator today. At this time, I would like to welcome everyone to the Community Health Systems Fourth Quarter Conference Call. [Operator Instructions] Lizbeth Schuler, Vice President of Investor Relations, you may begin your conference.

Thank you, Tiffany. Good morning, and welcome to Community Health Systems' Fourth Quarter Conference Call. Before we begin the call, I would like to read the following disclosure statement. This presentation contains forward-looking statements, including all statements that do not relate solely to historical or current facts. These forward-looking statements are subject to a number of known and unknown uncertainties and risks, which are described in headings such as Risk Factors in our annual report on Form 10-K and other reports filed with the Securities and Exchange Commission. As a consequence, actual results may differ significantly from those expressed in any forward-looking statements in today's presentation. We do not intend to update any of these forward-looking statements. With that said, I would like to turn the call over to Mr. Wayne Smith, Chairman, President and Chief Executive Officer. Mr. Smith?

Thank you, Liz. Good morning, and welcome to our fourth quarter conference call. Our Executive Vice President and Chief Financial Officer, Larry Cash, is with me on the call today. After the market closed yesterday, we issued an 8-K, including a press release with our financial statements for the fourth quarter and the year ended 2012. For those of you listening to the live broadcast of this conference call on our website, a slide presentation accompanies our remarks. I'd like to begin the call with several comments about our performance and then turn the call over to Larry, who'll provide additional comments on our financial results. Our first -- fourth quarter performance further extended Community Health Systems' consistent record of growth in 2012. Net operating revenues of $3.3 billion, an increase of 9%, and adjusted EBITDA include -- increased by 3.9% over the fourth quarter last year. We're also encouraged by the more favorable volume trends in 2012 compared with the prior year. Excluding the adjustment for our asset impairment, as well as disclosed legal matters, earnings per share from continuing operations was $0.85. Net operating revenue for the year ended December 31, 2012, was $13 billion. EBITDA was $2 billion. Excluding the early extinguishment of debt and the disclosed adjustments, earnings per share from continuing operations for the year ended December 31, 2012, was $3.55 compared to $3.33 for the same period a year ago. With that, I'd like to highlight some of our recent accomplishments. During 2012, we acquired the assets of 4 hospitals, several physician practices and a few surgery centers. While our acquisition team is very busy with a full pipeline, we continue to be very selective. As I mentioned on the last call, during 2012, we completed construction of 3 replacement hospitals in Arkansas, California…

Thank you, Wayne. Our consolidated admissions for fourth quarter increased 4.7% compared to the same period last year. Adjusted admissions, which factors in outpatient business, increased 6.4%. Our same-store admissions increased 1%. Flu and respiratory admissions represent an approximate 130-basis-point increase, offsetting the 40-basis-point loss in admissions, albeit limited services. Same-store adjusted admissions increased 2.3% for the quarter. Net revenues for fourth quarter increased 9% from $3 billion last year to $3,276,000,000. On a same-store basis, net revenue increased 5.4% -- 5.5% for the quarter. On the fourth quarter, same-store net revenue for adjusted admissions increased 3.2%. We saw a decline of same-store surgery in the fourth quarter of 2.1%, as I mentioned in our third quarter call. The fourth quarter had some adverse seasonality with the holiday falling on a Tuesday this year, versus a Sunday for last year. Same-store emergency room admissions increased 8.1%, partially driven by the increased flu and respiratory volume in December. Consolidated EBITDA was $482 million for the fourth quarter versus $464 million for the same period a year ago, an increase of 3.9%. On a same-store basis, EBITDA was $491 million for the fourth quarter, an increase of 4.1%. I would disclose on issue adjustments of $13.4 million, primarily for the cost of certain legal matters, its leading the -- these disclosed adjustments for fourth quarter consolidated EBITDA within $495.3 million. For the fourth quarter, EBITDA margin on a consolidated basis was 14.7% versus 15.4%. The decrease of 70 basis points is primarily due to the low margins at recently acquired facilities, as well as the disclosed adjustments as reported in our 8K. Consolidated operating expenses, as a percentage of net revenue, increased 70 basis points in the fourth quarter 2012, primarily due to our recent acquisitions and an increase in our operating…

Thank you, Larry. Community Health Systems has continued to demonstrate success in a dynamic and challenging health care environment. Our results for 2012 confirm the strength of our operating model, our proven ability to drive efficiencies in our hospitals, recruit and retain qualified physicians, make selective acquisitions and deliver high-quality health care services in a cost-effective manner. As we look to 2013, we will continue to pursue the strategies that are valued to both our community partners and our shareholders. With that, I will now open the call for questions. If you'd like to talk to us after the call, you can reach us at area code (615) 465-7000.

[Operator Instructions] Your first question comes from line of Josh Raskin with Barclays.

Just Larry, just following up on the 30 to 80 basis points Medicare cut. I assume that's a full year impact, even though that's starting April 1. And I also assume that there's a much more significant impact in the fourth quarter, once you get the fiscal year '14 update. So could fourth quarter be -- I just want to make sure that's correct. And then, could fourth quarter be 150 to 200 basis points? Does that sound in the ballpark?

Well, what that 30 to 80 basis points does not include your normal market basket increase. And it's the 30 to 80 basis points of the whole year's revenue applied to the period of time. So it would start April 1 for the sequester, and what we've estimated the sequester would be -- starting that period of time, it'd probably be something like 50 to 60 basis points of reimbursement or cuts in 2013, starting on -- at least on the high end on April 1. We've also made a shot at decoding adjustment, which should be about 10 basis points, or about approximately $10 million cut, it would start on October 1. And then you would have the DSH cuts, I think, which we estimate at 10 to 15 basis points, which should be something like $15 million to $20 million of cuts, starting the fourth quarter. So you're correct that the fourth quarter cuts would be a higher percent. But now the market basket will help improve some of that, and we did include the market basket when we quantified these specific 3 items, because number one, they're relatively new to the -- [indiscernible] the pressure's been around, but the discussion of it happening has been more active lately. The coding adjustment just started in January, and it's going to start in October, and the DSH is just part of health care reform. But some of that would be -- is included in our base, you don't get the market basket for sure, and that will help offset some of these cuts.

Okay. So -- and the $10 million for coding and the $15 million to $20 million, that's just your fourth quarter impact, right? That's on an annualized number, right?

It's a -- it's correct, that's the fourth quarter dollar amount impact, and we express the basis points as a percentage of the whole revenue.

Okay. And then in a couple of months, when we get the market basket update, will -- that will be additional, that will bring your number up for the fourth quarter, is that fair?

That's correct. And we put the market basket for the fourth quarter in what we consider our normal run rate of estimate of earnings and trying to grow EBITDA but these are 3 unique items, which is going to cause some challenge for 2013.

Got you, got you. Then just a second question on M&A, you guys are sort of picking up your M&A guidance of 3 to 4 hospitals. It seems like -- you talked about the bigger pipeline, et cetera. So I guess, my question is around the impact of reform and leverage ratios. So do you think that 5x is -- that you guys have been running at, is that a good run rate, or do you think there's something in reform that makes you think maybe you could take on a little more leverage or maybe want to move towards a lower level of leverage as you proceed? I'm just curious if there's anything in the reform we're not thinking about that could impact your ability to borrow some more money.

Larry can talk about the leverage on this. I'll just tell you in terms of the, if health care reform continues, and we do insure across the country, all these people, there is a huge opportunity for us in terms of enhancing and developing our networks that can provide those services. So we are carefully assessing and looking for opportunities that work for us in our markets. And so I suppose you could take on a little more leverage if you found the right opportunity in terms of the -- there are lots of larger systems that are now looking for a partner. It seems that size matters now, going forward.

At least you know, Josh, yourself and several other analysts have estimates out there for '14 and '15. If you consider those estimates as -- while we think the health care reforms will be a positive and should be there 2014, there's a lot to be done between now and then. But if you take the estimates, done on a -- consensus wise, we're currently running at the half or worse, and you would think that the EBITDA in '14 and '15 will be down to the low 4s, if the health care reform plays out as it's currently modeled out there. So that should be a positive for everybody and it allow for more growth with either acquisitions or if the cash flow comes place, paying down debt.

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

I just want to pick up on the last part of that question around reform. And I guess, just the question here on -- about 2014, it looks like it'll be a lot more about Medicaid expansion than the exchanges. So I guess, how do you feel about your footprint versus what the states are going to do? And can you update us if you're hearing anything new or different on the ground in Pennsylvania, just given what the governor said there?

Yes, I think we feel pretty comfortable where we are, and we continue to, one of the reasons we're buying physician practices is because of -- to help with our network and our size and our footprint. I actually think, it's still a little early in terms of determination. I don't think anybody wants to speculate in terms of Medicaid expansion. But of course, we saw what happened in Florida this week, which was a little bit of a surprise. I don't know if you saw these articles in The New York Times this morning or not, but I still think there's hope in terms of the expansion side of it, but, the determination doesn't have to be made immediately on that. I guess, more importantly, for the states, is their determination around exchanges, and I think that's a complex issue for the states to implement and to administer, and for the Feds to implement and administer. So I think there's a lot more to this. But I actually think we're well positioned. I think that's what we've been doing for the last number of years, thinking about this. You keep in mind that our 80 hospitals, that -- where we don't really -- we're the only hospital in town, we are the network in those communities. So it's the other larger communities that bring in, that we're busy trying to enhance the network.

Like you said, on another point about that, we have always worked really well, working our self-pay, screening vendors, contacting, enrolling people in Medicaid, I think we've got over $150 million of cash collections in that effort. We do it internally, we do it externally with some good vendors. And I think this eligibility screening we do would be very helpful, when Medicaid expansion starts, and try to make sure we get the Medicaid people enrolled, we don't -- our own internal records last year grow 60,000 accounts for Medicaid. And I think that type of effort would be very beneficial, to be able to do it yourself when Medicaid expansion starts.

That's very helpful. And then, if I could, just one other question here, really around other operating expense. Larry, you referenced it as having a bit of upward pressure, some legal, obviously in there. But just stepping back and looking at that number, it has gone up. So can you just give us a little bit more flavor for what's been driving that, and how we should be thinking about that for 2013?

Yes, if you look at -- on a quarterly basis, I think I mentioned that malpractice is up 30 basis points. And year-to-date, it's about flat. I think we had a earlier benefit in the second quarter of 2012. I know our contract labor is up slightly, about 20 basis points. And most of that increase revolves around provider taxes widths and new provider tax programs earlier in the year; no new provider tax programs in the fourth quarter. And I think that's what's driving most of that activity. It might it a little bit in the repairs category, 10 basis points. But in the quarter, in similar type statistics, other than malpractice, it was flat for 2012. But I think our business taxes were also up in the fourth quarter -- for the year.

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

Just a couple of quick numbers question and then a big -- bigger picture question. Larry, on California provider tax, I just want to make sure I wrote down correctly what you said. So starting April of '13, a figure that comes in it, 10 basis points, I thought, I wrote down. Is that right?

I thought I said 10 basis points, yes, correct, that's right.

So it's just -- so it's $13 million for the whole year?

Well, that would be the benefit that would be retroacted from January 1, all the way back. It's not the whole year, and we'd also get a benefit, going forward.

But smaller than the...

Yes.

So basically, it's not very material to the guidance?

No. But it seems to be a lot of questions with provider tax programs, and so we elected to announce it early. And that it's included in our guidance, so there's no confusion about what's in the guidance and what's not.

Got it. No, I appreciate that, I just wanted to -- I just, couldn't -- didn't look like it was very material, so I just wanted to make sure I wasn't thinking about it wrong. And then on medical malpractice, I know you talk in basis points and I'm not always quick enough to get that written down and think about it in dollar terms the right way. But can you just kind of run through like, what was, on a dollar basis, med mal in the fourth quarter? And what's really the right run rate on a quarterly basis going into '13?

Yes, on a run rate, I think 30 basis points would be about $10 million extra expense, $10 million or $11 million extra expense. When you look at it on a run-rate basis, it's probably around 1.2% of revenue, which should put it somewhere in the $150 million per year. And I would hope that we would be at that amount, a little better. I just would add, as Wayne referenced, some of the efforts on safety, some of our efforts on our company-wide malpractice trimming credit program, a lot of our success there and efforts that's helped drive our malpractice, are some on our cases, through our lawyers, and risk management has been pretty successful. But on a run-rate basis, around 1.2% of revenues is what we've run the last couple of years. Hopefully, we'll be a little bit less than that for '13, as per all the efforts that we've got underway or later.

So roughly $40 million a quarter, but this quarter, you booked almost $50 million, a little higher than a kind of a normalized number?

That'd be correct.

Okay. And then my 2 other quick ones. One, when you were thinking about the DSH cuts for the fourth quarter of '12, that you put in your total Medicare pressure statement, that's built in your guidance, what do you -- can you just kind of walk us through, HCA raised this issue that based on a proposal by a consultant that hasn't yet been proposed by CMS that, as much as 1/3 of all their DSH money could go away from a definitional change before the ACA cuts even actually take place. And not to have you guys go against them, but just what is your thinking on kind of where that stands? And I think the industry is lobbying for a more inclusive definition of uncompensated care to include discounts on a parity basis with charity, but is there any update to your thinking on that?

We don't have any more information than what they would have. There's been some calls, I think maybe since they had their conference call, but we're waiting for the regulations to come out. You would think that surely, discounts are similar to what charity and bad debts are, and that would be fixed. The other issue is, if you use some cost formula, companies that are efficient, such as us, and HCA and others would probably get a little less DSH in that allocation, which would be unfortunate. But that could happen. And so we try to take what we knew and have gone to a lot of efforts and tried to take pretty much what's out there now. Hopefully, as time moves on, these estimates will be a little high. But we decided to put that in our thought process for 2013, and that's why we developed a range that would be in -- I think, that range was like 10 to 15 basis points, or -- which would be $15 million to $20 million for the fourth quarter. We'll know more in April, and you'll know more, final answer in August, I think.

Last question, and I appreciate you guys are always pretty candid, so can you just kind of talk about your latest thinking on negotiating reimbursement rates for exchange plans? I mean, that's obviously one of the critical assumptions in some of the Street estimates for how the ACA is going to impact the industry, and we've got payors on one hand, who are talking as low as Medicaid rates, and then we have hospitals on the other hand saying, for a family of 4 making $90,000, this is going to essentially be a commercial product at the high end of the scale. So any updated thoughts on how that's going, and where that may fall out?

The -- we're really just getting -- starting to get on this, and I think we're doing fine. It's a little -- I don't really understand the payors, in their conversations they would like for it to be, we should put that in there, they would like for it to be a Medicaid rate when it's all said and done. It's hard for me to understand how they're going to get a 40% or 50% increase on the premiums on individuals, and then try to reduce the payment rate on that. But Larry may know more than I do about that, but I think we're doing fine.

Yes, I'll just say, first of all, negotiations are confidential, but -- and we're happy to respond to it, because some people, some of the major players try to target Medicaid rates or Medicaid to Medicare. Our negotiations, which have been more with regional players, some of them good in size, are closer to the commercial rates, and we're not going to get in to specific locations of those, but I think, as we said all along, that I believe that we will stay close to the commercial rates, which we think for 2013, will probably go up 5% to 6%. And that would be our objective, and our managed care team does a pretty good job of trying to stay close to what their objectives are. And they're very focused on it. And from what we can tell them right now, we're not going to be left out of networks and I think we should, especially at the type of networks we have, and hopefully we'll continue to stay close to the commercial rates.

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

A couple of questions. First of all, just to flesh out a little bit, you're thinking about HITECH and obviously, it came in a little better than expected in Q4, and then also in your guidance relative to, I mean, some previous commentary. What's driving that, or is there any play in there on acquisitions having an impact? And then, maybe just to update us generally on where you are in getting the portfolio qualified for the stage 1 compliance?

What we've got in HITECH, we don't have numbers out there, but a lot of analysts, did some math work, have done, our number says it's $600 million to $700 million opportunity for a company our size, and we've got the physicians, which we're able to get Medicaid and Medicare. There's still a reasonable number of hospitals we're working on, in stage 1, that we had $60 million approximately in 2011 and $127 million this year. So it's $187 million if you're just chasing $600 million to $700 million at this stage, you got a lot more ahead of you, and some of that is stage 1 activity, probably 15 to 20 hospitals, probably in the ballpark, what we've been working on and some more physicians. I think, if you think about overall, the one reason it was up, we were able to get a couple of hospitals we acquired in the first part of the year done. So the growth of both the guidance -- the high end of the guidance, I thought about half of that $7 million related to acquisitions, and the other, about half of it related to -- or about 1/3 of that related to physicians. I think we have a good year, and keep in mind here also, into the second year, you're going to get money. So we feel pretty good that we'll be able to stay in that range of 1.1% to 1.2% of revenue, which is an increase over what we had last year.

Okay. I think you've already been asked earlier about the exchanges and the pricing there. Can you just maybe step back more broadly, and give us whatever thoughts you want to give us about reform and how that seems to be shaping up? I know there's a lot of discussion about how quickly the coverages will ramp up, and whether that -- what that means for our hospitals versus payors, et cetera? And maybe your sense of what are the variables that you need, where the greatest uncertainty is, as you look at reform and try to figure out what it might mean for you?

Yes, I think there's a couple of things. Just the administrative side of setting up the exchanges is a huge process. I'm not sure when and if that all can get done by October. And I suspect some states will be faster than other states, but it ultimately will happen. It may take a little bit longer, but it ultimately will happen. Whether there will be a consistent way of managing exchanges, I have no clue. I don't know that the government has a great process in place on how to do that, and certainly states may not as well, but they may change their mind, turn this over to somebody who can actually do it, so can actually administer this. So we'll see, when all is said and done. I think it's moving, it's going to move forward, I don't mean to, in any way indicate that it's not going to move forward because it is here, and it's here to stay. I'd say, in terms of risk, it's around Medicaid expansion. We -- we're working very hard in the states that we have to make sure that we are to do everything we can. I know in Tennessee, it's a very large number for the state. It's $22 billion from 2013 to 2022. And it costs the state about $1 billion to insure another 285,000 people or so. So as states think about it, and look at it, it's the opportunity to clearly -- to insure those people's opportunity to help, in terms of the health issues around that part of the population. So I think when it's all said and done, rational minds will prevail, and we'll see other states think that it's the right thing to do.

Okay. Maybe one last thing I'll slip in here is on the physician recruitment. You've obviously had a long history of being sort of an industry leader in doing that. As you look at reform, do the type of people you go after, physicians you go after, change? Does physician availability, is that changing because of reform? Is there any impact on that?

Yes, I think there is, to all this discussion around, and as you look at the numbers of people that are going to be insured going up pretty dramatically over a relatively short period of time, can the current system accommodate, can the current physician system accommodate, a lot of those patients are primary care patients. And I'm not sure the system can accommodate that. We, actually in terms of our extenders, mid-levels and nurse practitioners, I think in 2012, we recruited something over like 700. So we're busy doing that as well, and trying to think about that particularly in our large practices, how we can develop a better system in terms of seeing more people, and providing more opportunity for people to see nurse practitioners and others, as well as get to the physicians. So that's a challenge for us, it'll be a challenge for everybody, it's a challenge for the country, as we move forward.

A.J., we had about 250 nurse practitioners, et cetera, in 2008. So we've added a lot since then, so. As Wayne said, we're up to 700. The other thing is, a lot of the Medicaid population today that's not insured uses ER, and we've done a real good job of enhancing our ER, improving our ER, constructing the ER, so that activity -- a lot of our self-pay business on the outpatient outcomes with ER and that's probably be another -- that probably will continue for a while.

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

What percentage of your 2014 commercial contracts do you currently have negotiated?

We generally like to talk more about purchasing and if we waited into the middle of the year before we get into 2014, it's similar to what it's been. We're about 70% complete for 2013. So we're probably half of that, a little better. But -- and people didn't say what percent it is, and you really can't take 30% or 40%, interpolate for a number of -- we're 70% complete for 2013. And I think we'll be in the 5% to 6% increase.

Okay. And is there any sense that the commercial payors are sort of going slower, with regards to '14, maybe in some attempt to try and tie the exchange negotiations with your typical commercial negotiations?

If I remember correctly, we're about the same percent today for '14, as we were last year for -- or going into the -- I don't think so.

I don't think there's any indication so far that we can see any of that kind of activity.

Okay. And then, with regards to reform, there's been I guess most of the focus has been on the impact of bad debts. Have you guys given any thought to utilization changes, and how you think reform may impact that?

Well, I think everybody is trying to think about how we manage bundled payments and readmissions and all of the above. I actually think productivity is going to become a pretty important issue, kind of going forward. So all of us are thinking about that in terms of how we best position ourselves. I think that's one of the values of having a very large system, is being able to do things that would be helpful there.

In a prior life, I had the opportunity to manage actuaries and I think every actuary would tell you that...

Maybe what's wrong with you.

It's probably so. Every person would probably tell you that when you give people insurance, that don't have insurance, you're going have enough to deal as such.

Okay. So I guess, as you're thinking about reform, is part of that preparing for that, and do you have any initial thoughts in terms of percentage uptick or anything like that?

I think we've got plenty of capacity. And if you look at Massachusetts, it's around 10%, whether it holds true or not, but it's clearly -- should be enough to...

We just talked about -- most practitioners and some of those kinds of things that we're working on, in terms of how we might manage this going forward, but other than that, not really.

Your next question comes from the line of Ralph Giacobbe with Crédit Suisse. Ralph Giacobbe - Crédit Suisse AG, Research Division: I wanted to ask about the volume side, inpatient admits were up for the first time in years. And so I guess, just general commentary around the sustainability of that. And then, anything to highlight in terms of geographical region, showing better or worse in terms of volume trends? And also, if you could help with volume trends by payor, particularly interested in the managed-care side and whether there's any indications that things are improving there.

Well, we give out guidance on adjusted admissions, because again, it's 52% or 53% of our revenue, I know the focus on admissions, and it's important that we'll stick with our guidance there, and we don't have a specific guidance for admissions. I would say the first quarter is going to be a little challenging, as you lose a loop [ph] day, you lose a midweek day as it relates to New Year's Day, and you also move Easter in so that'd be a little bit of a challenge. Our overall admissions and adjusted admissions, the change in managed care and other was better than the overall for the company, and I think we've had that way for a while. And so our hope that our managed care admissions would continue to do better than company average.

You might just -- in terms of geographics or demographics, the only thing is, is that our larger markets are performing better than our smaller markets.

Our smaller markets still continue to be a little bit below the company average. Ralph Giacobbe - Crédit Suisse AG, Research Division: Okay. And then, I guess, can you talk about whether you have sort of appetite to kind of potentially take on more risk, there's been a lot of talk on ACOs, and maybe also any interest in maybe even select markets to -- for yourselves to kind of offer an exchange product?

I think it's way early, in terms of risk, and a lot of the risk that currently is -- people are talking about, is sort of bonus risk. If you do certain things, you might get a little higher payment. All that will ultimately go to full risk. I think it's pretty early, I think we're well positioned. I think we've got large practices, we've got concentration, we've got the resources in place, the ability to provide the services. We clearly have demonstrated quality. All of the above that we need in place to take risk, but I think it's a little early to look at very much risk, and we may have -- we may end up taking a little risk along the way. But I think it's a little early for us. I think we're very cautious, primarily because Larry and I both have a fair amount of experience with this, and we've seen what happens across the country when people start taking risk and don't have the ability to understand it. And that's why Larry managed the actuaries before, it was all about that. So and if you look at risk, as it -- around the country, in terms of component of payors, the geographics are relatively small, South Florida, maybe some in the Northeast, in Minnesota and the West Coast, there is not a lot of risk all over the country yet. That's -- that will come with time, but it will not happen overnight.

And Ralph, if you look at the ACOs, there's a few down here recently, but just before that, I think we looked at it, and the ACOs touch less than 5% of our population. So I don't think the ACOs, sort of throughout the country can be much of a challenge to us, but if it becomes that, we'll have to adopt, accordingly. But it's, as we know it right now, ACOs should not be that big a challenge to us. Ralph Giacobbe - Crédit Suisse AG, Research Division: Okay, that's helpful, and if I could squeeze in one more. I guess, are there incremental investments that you're making in 2013 to prepare for reform in 2014? And I guess, I'm talking from both an operational and outreach perspective. I mean, do you think you can have a role in getting people signed up for exchanges and/or processes in place to get people signed up for Medicaid?

Well, I mentioned earlier, we have an eligibility screen vendors that both internally and externally. Internally, it takes for about 6 different hospitals not a part of the 80 or 90 about -- at the end of the year, and that may be a good tool, it's already dealing with the Medicaid activity for us to use them. And we are looking at ways that we could use that organization and also use some of our financial counselors in our hospitals to get people enrolled in Medicaid. So yes, and -- but I think that would be the primary thing, and -- but I think we have plenty of capacity. I don't think we have to worry about our capacity perspective and plenty of resources, but we are looking at the eligibility to help us do a good job for that Medicaid expansion.

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

I wanted to go back to the rates on the exchange. I wasn't sure if you guys are seeing anything different in your contract negotiations, as far as exchanges go in those markets where you are the sole community provider versus markets where you're not. Are you getting -- is it, are the rates coming together more quickly, in the markets where you have better market share? Or is it a function of your market share, is it a function of that's where you tend to deal with the regional managed care payors rather than the national ones? And any color there about full community versus non.

It's predominantly regional. When we start to negotiate, we try to do it on a statewide basis to cover most of our states. Most of the national players are locked. We interested in our small 80 hospitals or so providers, I think. I would think they're probably going to concentrate, as I understand, on the larger markets. So most of our probably activity will be around the regional players with some of our different markets. So you might do the national players, the negotiations aren't much different.

Okay, that's helpful. And I don't remember hearing you give an outlook on the Medicaid side. Did you give an outlook on Medicaid and what you're seeing there?

Yes, it could be down 1% or 2% for 2013. I think we've got a few states, Texas in particular, that could cause us to be down a little bit. We were up about 1% in '12, so it could be a little bit we've gone the other way. And I'd say our biggest change would be, we got one of our UPL programs is probably not going to have the funding it had. We also had some provider taxes that were favorable in 2012, that were more than 1 year, and that you got to take in consideration. So that's the 2 big negatives for 2013. But it won't be anywhere near the challenge it was in '11, not quite as good as it was in '12 and down 1% or 2%.

And then, as far as the Medicaid expansion, is there a thought that the rates that you get on the Medicaid side would be similar to what you're getting for comparable patients, or that we're really kind of creating a whole new benefit because we're going to be covering travelers, adults which really don't cover in right now, and that the rates for those people may end up being better than what you're currently seeing on the Medicaid side?

All the insurance companies are putting their bids in I think, in April. Selling the bids, or...

Yes, I don't know about the Medicaid. I think that's on the exchange. The one thing I would say is, that the case mix in Medicaid today is lower because it's primarily women and children, so if you put an adult male in, with heart trouble, and orthopedics, the intensity of service should be higher and he should also probably have a higher payment that's paid in a DRG because soon there'll be, whatever the Medicaid payment rate. But the opportunity for having higher intensity and the new people coming in, would be better than existing Medicaid people who are predominantly women and children.

Okay, do you think it would be more a mix shift issue than a rate issue?

Right.

Your next question comes from the line of Andrew Schenker with Morgan Stanley.

So your guidance includes 3 to 4 acquisitions. I think at this point last year, you already had one under your belt and another one pretty close. So if you could just update us on where you are in the process, and how the market looks today, if there's any changes and then also, if you could just remind us on how your 2012 and past acquisitions are ramping up?

Let me just talk to the opportunity here. There continues to be lots of opportunities, but as I said earlier, we're being very selective. We're looking for opportunities that will enhance our current networks, are there opportunities where we might establish a new network. So I'm not concerned about the fact that we haven't done anything yet. It's still early in the year, and I think there are plenty of opportunities out there. Larry can talk about the other point.

Yes, I'd say the tail of 2012 going in '13 is around $100 million that's split out and close to March and New York and -- there, which is less than it was last year, we had a -- Moses Taylor and we had Blue Island done, almost, before this call, and then we did in [indiscernible] committed to. We would think, in the hospitals that are to be done, would be more in the second half of the year, maybe worth $100 million, $200 million revenue, that's on recent revenues, so growth rates are lower. We're doing pretty good on the acquisitions. We did better in the fourth quarter than we did in the third quarter, and better than we did year-to-date. Going back and looking at it, we continue to make progress. If you quantify it, there's about $1.3 billion or $1.4 billion revenue that we bought in 2010, '11 and '12. While they've improved over last year, there's plenty of opportunity for improvements, that's one reason we think we can have good EBITDA growth in 2013, just a benefit of those '13 and '14 hospitals. But we will have less early on acquisition revenue in 2013, we did in '12.

Okay, great. And then just wondering if you've seen any changes recently, at least in the last quarter, on your one-day stays or rack audits that has been trending in line or changing at all?

Yes, the one-day stays have been roughly flat throughout the year. We haven't had to call out. Observations have been relatively consistent year-to-year. Denials came in probably just a little under 20 basis points for the year. Denials in both racks in Medicare denials, and that was consistent for about everything [ph] we talked about last quarter, so not much of a change on a year-to-date basis versus where we were year-to-date last quarter. And hopefully, we would say that over time, technology in -- with the outpatients going to happen, but had it been something we had to talk about in 2012.

Your next question comes from the line of Justin Lake with JPMorgan. Justin Lake - JP Morgan Chase & Co, Research Division: First question, just to go back to reform. You mentioned that the, Larry, that the Street has estimates for reform, and that would seem to indicate EBITDA should grow meaningfully in '14 and '15. Just curious how you feel about the economic impact here versus the Street estimate? Do you think we're being too conservative, too optimistic? Could you give us any color there?

I know you've got something in the single-digit EBITDA growth, and other people have got something, 10% to 15%. I think as Wayne said, one of the variables you've got to watch is Medicaid expansion, and of course, the movement of exchanges. But I think most, if all try to do that, you put it out a little later, and probably had a little bit more to factor in. I think it's like a -- in our situation, 70% of the markets probably would expand, and 30% may not. But I think over time, I think as Wayne said, most people will expand it, but they may not be in '14, it might be a little bit later. But the current estimates of -- throughout 2014 and '15, if you think about 10% is where most people fall out, growth in EBITDA. Justin Lake - JP Morgan Chase & Co, Research Division: And how you've -- that versus that 10%, how do you guys feel when you look at the numbers?

We'll tell you in some time, it's the latter part of the year. Justin Lake - JP Morgan Chase & Co, Research Division: Okay, great. And then just lastly, on the exchanges, someone asked about rates. I just want to follow up there. It seems like the focus of managed care is on creating narrower networks. First, is that what you're seeing? And how do you feel about your inclusion in those networks? And then maybe you could just give us some feel on how your commercial rates look, versus Medicare? Your average commercial is at 150% of Medicare, 200% of Medicare on average, just a kind of ballpark, you versus the rest?

Yes, let me just speak to the network issue. I think we're very well positioned in terms of networks, both on a regional basis, a statewide basis, our local -- as I said earlier, we've got 80 facilities where we are the only hospital in town. We are the network in those communities. In the other communities, we have size and a large footprint. So we're in very good shape in terms of not being excluded from network. There's 2 components of being excluded from network, is one is, not being able to offer the services, and then secondly is, demonstrating quality. As I think, that's why we've talked about this over the last number of years, that those are the 2 things we've put a lot of focus on, going forward. And I think we're in very good shape, in terms of being able to be part of the vast majority of the networks and not being excluded. Larry could talk about rates if he wants to.

We don't have public information on churn, but are generally, we're 150% or so on the Medicare rate, collectively, which you've got to remember, there's a wide range of managed care rates, it's -- not all managed care companies got to sign. Justin Lake - JP Morgan Chase & Co, Research Division: And just in terms of -- as these negotiations are going on, are you hearing -- is managed care presenting this as, we're going to offer you a narrower network, meaning we're going to offer you on a narrow network, can you give us a discount and we'll -- you'll get more market share if we're narrowing this network, or is that not right?

Justin, we can tell you that folks don't manage care around here lately. Clearly, managed care companies, these are lot -- I think we'll work well with managed care companies. It's going to vary by market. And I don't think there's some -- managed care companies want to do narrow network. There's some that may only do 10 or 12 locations, some 20, and I think this has to play out. But I think we're, as Wayne just said, we're in a good position to make -- well, be in most of the networks we want to be in. I don't think you will see us do Medicaid rates, which is where the couple...

We love managed care companies, and we're more than happy to negotiate the table, but we're not going to negotiate publicly. If they think it helps them to negotiate publicly, then we're happy for them. But we're going to do our work at the table and then we'll talk about it later.

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

A lot of questions been answered, so these are a couple of random ones. From a rack activity basis, can you talk about what your overturn rate is on the denial from rack audits?

I think of the ones that we'd go after, it's 79%, I believe.

Okay. In terms of, you mentioned about the investments you're making to deal with the whole one-day observation stay issue, are there any incremental, kind of software investments or software updates you'll be making as part of this kind of InterQual implementation, that I'm assuming now is mostly done?

InterQual is completely done, and the only thing I'd say, we made this year is enhancement of our case management programs that we've turned to, just to make sure we've got a good, effective case management. It shouldn't be a big investment, though.

Okay. And then finally, just with the recent changes in readmission policies, can you give us any update or color on how that's going so far for you?

We reduced the readmissions rather nicely, because I think our annual cost for 2013, starting October Medicare year, was $7 million. And I think the next time, that you're on, we'll have a lesser percentage of readmissions. It's an issue we've also involved our home health to help some of our operating people. So hopefully, it will come down.

Mr. Smith, I now turn the conference back over to you for closing comments.

Thank you for spending time with us this morning. Our consistent ability to drive revenues and achieve cost efficiencies in this environment demonstrates solid execution of our centralized operating platform. And we want to specifically thank our management team and staff, hospital Chief Executive Officers, Chief Financial Officers and Chief Nursing Officers and division operators for their excellent operating performance for the third quarter. We remain focused on our business strategy and improving results. Once again, if you have any questions, you can reach us at area code (615) 465-7000.

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