Good morning. My name is Melissa, and I will be your conference operator today. At this time, I would like to welcome everyone to the Community Health Systems Fourth Quarter 2013 Conference Call. [Operator Instructions] I would now like to turn the call over to your host, Ms. Lizbeth Schuler, Vice President, Investor Relations. You may begin your conference.

Thank you, Melissa. Good morning, and welcome to Community Health Systems' Fourth Quarter and Year End Conference Call. Before we begin the call, I would like to read the following disclosure statement. This presentation may contain certain forward-looking statements, including all statements that do not relate solely to historical or current facts. These forward-looking statements are subject to a number of known and unknown 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 those forward-looking statements. With that said, I'd like to turn the call over to Mr. Wayne Smith, Chairman and Chief Executive Officer. Mr. Smith?

Thank you, Liz. Good morning, and welcome to our fourth quarter conference call. Larry Cash, our President of Financial Services and Chief Financial Officer, is on the call today; as well as David Miller, our Chief Operating Officer; Lynn Simon, our President of Clinical Services; and Mike Colada [ph], who is our new VP of Investor Relations. As you all probably know, this is Liz Schuler's last call. We all want to wish Liz the continued success in retirement. And, as you know, we'll dearly miss Liz. So, Liz, we appreciate all your service through the years. Larry was recently promoted to recognize his many contributions and consistent leadership of the company. After the market closed, we issued an 8-K and including a press release with our financial statements. 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 some comments about our recently completed acquisition of HMA in the quarter and then turn the call over to Larry, who will provide additional details on our financial results. We are very pleased that the transaction of acquiring Health Management Associates closed on Monday, January 27. This transaction marks another important milestone for our company and establishes us as the largest publicly traded hospital management company in terms of number of hospitals in the United States. We now operate 206 hospitals in 29 states. We have 135,000 employees and 27,000 physicians on our medical staffs. 93 of our hospitals were named Top Performers on Key Quality Measures by Joint Commission. We have a proven track record in acquisitions, having acquired 115 hospitals since 1997, including the Triad transaction of 50 hospitals. The 71 hospitals acquired represent a complementary geographic fit with our…

Thank you, Wayne. First, the fourth quarter operating results for consolidated and same-store are identical, as all acquired hospitals are now considered same-store. Additionally, I will just disclose some consolidated operating results, excluding the $3.5 million reserves established for TRICARE and Medicaid in the fourth quarter and the $101.5 million reserve established for the government settlement to 2005, 2010 for short-stay admissions and other claims related to our Laredo, Texas, in TRICARE and Medicaid. We also excluded HMA-related acquisition expenses: for fourth quarter, about $8.8 million; and the year, $14.1 million. Our fourth quarter admissions decreased 10.5% compared to the same period last year. As previously reported, our small hospitals continue to experience lower volume, and our larger facilities' adjusted admissions decreased 6.7%. And the following specifics contributed to the lower admissions in the fourth quarter and represent about 80% of the decline: lack of flu, 29%; reduction in cardiology cases, primarily low intensity, 22%; service closures, weather and other, about 17%; lower readmissions, about 8%. Decline in admissions in women's services was 5%. We did have an effect on the 2-midnight rule, which was about a 60 basis points effect to the thirds quarter on Medicare. Excluding specifics, same-store admissions would've decreased 2% for the quarter. Net revenues in the fourth quarter decreased $3,277,000,000 last year to $3,231,000,000. Physician office conversions from paper records to electronic health medical records reduced physician practice net revenue by approximately $4 million in the fourth quarter; year-to-date, it's about $24 million. We had an unfavorable revenue adjustment of approximately $10 million for Indiana Medicaid supplemental programs and an approximately $5 million reduction for the 2-midnight rule. Additionally, a portion of the decline can be contributed to an 80 basis point increase in bad debt. For the fourth quarter, same-store net revenue per adjusted…

Thank you, Larry. While our results for 2013 have been hampered by a variety of economic issues, we believe in the underlying strength of our operating model. We're extremely excited about the integration of Health Management and look forward to working with employees and medical staffs at our new facilities. With that, I would now like to 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] And our first question comes from the line of Andrew Schenker of Morgan Stanley.

So I just wanted to follow-up on some of the details you guys provided on the -- around the reform contribution there. So when you've mentioned the declines in self-pay admissions, are you guys seeing a subsequent increase in Medicaid or exchange lives flowing through to kind of offset those -- that impact here?

What we've decided to do, which we don't normally do, is discuss month-to-month. And clearly, we are seeing a decline in self-pay, like I said, adjusted admissions, and we are seeing a little of that come through in Medicaid. You also got some of the decline in the first quarter was probably because of the flu from the year ago and also some of the difficult weather. But it's encouraging to see that the decline was better in the expansion states versus non-expansion states, so it tells us that health care reform is working. It's not an absolute rollover into Medicaid. It's early in the program, but we are feeling pretty good that a lot of our states, especially the ones that are -- state exchanges are doing really well, and the private option in Arkansas.

Okay. And then just following up on the -- I think you said that 55% of your people would be eligible for Medicaid, so I just wanted to make sure, was that a '14 expectation or was that a 2016 expectation?

That was an estimate of all of the uninsured, in other words, the 55% of our entire uninsured population itself would be probably eligible for Medicaid. I think there were some numbers quoted by others a little higher than that, and our statistics that we looked up and worked with some outside people showed a more realistic number, what we thought, at 55%.

Okay. And just to be clear, that includes current expansion and non-expansion states, so it's everyone?

Yes. So in our overall prospection, we do expect that the exchanges, in 3 years, will be a much bigger percentage of our enrollment than they are in 2014, which will make the growth in the health care reform get a little better as the years go out. But we don't expect to -- with respect [ph] at the 55%, and I believe the CBO actually has estimates more closer to 50-50.

Okay. Great. And then finally, just maybe talking about your outreach program and exchange enrollment. Are you guys actually seeing any exchange lives flowing through today? At this point, you guys have been clear on that thing [ph].

We are seeing some, not a great deal. You didn't see much in October, November. December picked up. Each week, it gets a little bit better. And still some small numbers, but we are starting to see activity there. And, of course, they don't necessarily have to enroll through us. They can enroll through an exchange or a navigator, but we are starting to see a little bit of a pickup. It clearly started out very slow in October, November, got better in December, and we expect to -- I think, every week, it gets a little bit better.

Your next question comes from the line of Tom Gallucci of FBR. Thomas Gallucci - FBR Capital Markets & Co., Research Division: Two questions. I guess, first, on the volume guidance for '14, just curious if you could detail some of the drivers within that? Obviously, looking for some pressure in a majority of the guidance. I mean, how much of that is short-stay? And I think, Larry, you said you're looking for some reasonable utilization from reform-related lives, so is reform relevant to the adjusted admission volume guidance, and any other key things we should be thinking about there?

Yes, I think everybody, Thomas, thought [ph] that you'd probably pick up some utilization. But it's really a small -- it's 8% of your admissions. It's going to be reduced to 4% in a few years, and so the first year is around 1.5% or so. So if that goes up 20% or 30%, it's still a roughly small number. I think, just to speak to some of the activities, we're doing a lot of work around orthopedics. We've done a real good job of adding some strong physician recruitment the last part of the year. One of the things we're doing is trying to institute the good work on physician recruitment we do in the HMA hospitals. We've got a real strong effort, led by our new President and COO, to do a much better job on growth. We did have a lot of things in 2013 that shouldn't repeat in '14. The electronic health record activity that affected us should not, we don't expect the system conversions issues or the activities around involuntary physician turnover. Those all should be a little bit of a positive for 2014's guidance, although I'll just repeat, again, the weather has been a little challenging in the first quarter so far.

Tom, this is Wayne. Clearly, our past year was not a great experience for us. We obviously had lots going on in terms of government investigations, solving that, as well as a big acquisition. Having said all that, David Miller's primary focus now is on growth and how we improve and enhance our market share, which will cover a number of areas, and we'll be reporting on that as we kind of go through the year. Thomas Gallucci - FBR Capital Markets & Co., Research Division: Okay. And then maybe, Wayne, a big-picture question regarding HMA. Obviously, that business deteriorated as sort of '13 went on, for a number of different reasons. How would you sort of describe the state of that portfolio at this point? And maybe give us some color on the initial steps you're taking since you gained control in the last month.

Yes. I would think that we've had good reception in all the facilities, including the medical staffs, the boards, the employees. We're excited about the opportunities. As we look at opportunities, we think that this is a group of hospitals that could use a lot more resources, a lot more directed resources in terms of -- in not only improving -- enhancing quality in their HCAHPS, but also around physician recruiting and market share. So the opportunity is absolutely there for us, not only on the synergy side, but also on the growth side. So as we continue to look at this and work on this and, of course, we're only about 3 weeks into it, but I think we've visited every hospital. So far, I think our division have visited every hospital, and they are providing their updates as we go along, all of which are positive, all look like there's a lot of opportunity there. Opportunity, that's code for there are lots of issues for us to solve.

Tom, I'll just mention one thing about synergies. We clearly had to make some changes in the original guidance because we bought them about a month late. We lost 4 hospitals. We did keep the synergies at $100 million, even though we've got 4 less hospitals out of the 70 and much less operations, which should give you some belief that we believe there's a lot of good synergy opportunities.

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

This is Dana Nentin in for Darren. Just with respect to HMA's EBITDA run rate, Q4 results implied an annual run rate sort of above $900 million. Is that the right way to think about the run rate coming into the fold, or were there any onetime elements in there that you could quantify? And then, I guess, looking into 2014, what are some of the big swing factors for HMA in relation to its run rate EBITDA?

Yes, I don't think that's the quite right way to look at it. There was about $70 million of HITECH in the fourth quarter and $96 million for the year, and so that would distort the fourth quarter if you tried to annualize it. The year ended up about $760 million, a little -- the couple of things you've got to think about. And I'll just deal with the combined company for a second about things you'd need to consider. Sequester is about $20 million, is as a headwind because that's an extra quarter in '14. And again, on a combined basis, the 2-midnight rule is about $20 million because it started October 1. They didn't have a lot of physician productivity there at EHR, but we've got -- we think we can improve by about $20 million. Now a good thing, specifically, HMA had the Mississippi contract, which is about $25 million that they got hit with in the 2013 would be there. The synergies, $100 million, of course, there. and, of course, the BNA will be helpful. Those are a couple of the things you have to think about. They did have some specific expenses that we identified that would be part of our synergies, so about $20 million, which help us get to our $100 million. And it's stuff that they probably would not have had themselves. The rest would be stuff that we'll try to accomplish. And then, of course, health care reform, we've often said that they're somewhere -- they'd originally estimated $95 million to $100 million with some consultant study. We think it's going to be about half of that, so that's going to be helpful there. Those are -- and I think their net revenue was a little weak throughout the year with some RACs and some Medicare Advantage stuff. And I think the fourth quarter was a little better from that perspective, hope that will carry forward

Okay. Great. And then just an update on your Cleveland Clinic relationship, if you have any thoughts on timing of your market initiative throughout '14 and '15. And sort of what are your goals with that relationship?

We continue to work with the Cleveland Clinic. We -- once we developed this relationship, we had a number of projects. All those projects are proceeding. We're in the process now of really getting them implemented and going. There's a lot of work associated with that, so we should start seeing results from the Cleveland Clinic work in the next 6 to 8 to 10 or 12 months, I would think. So it's an ongoing relationship. We've got so many other things and they've got so many other things, we're focusing on the initial work that we decided to do. And once we get through that, we'll decide what the next steps are.

Okay. Great. And then just one more. How quickly do you think your opportunities with HMA's portfolio will materialize with the Cleveland Clinic relationship? Are there any markets that may have higher priority over the near term?

It's a little early to tell about that. And I would tell you that we also have lots of other opportunities in terms of other people who are interested in having a relationship with us all over the country. So we'll just have to think through this about where it works the best. So there's a lot of opportunities for us now in terms of collaborations.

Let me clarify one thing. Maybe -- actually, the HMA margins for '10, '11, '12, after restatement, about 16%. Even with the fourth quarter being a little better and the higher HITECH, it's about 13%. So similar to the way that Triad sort of developed, it was up 14% or 15% margin, got down about 12%, and we got it back up in the mid-teens in a few years. I think we've got a similar opportunity here. But they clearly had a very challenging 2013. But if you go back and look in '10, '11, and '12, they did run 16% fairly consistently.

Your next question comes from the line of Jason Gurda of KeyBanc.

Curious how you're experience in 2013 has impacted your guidance for 2014? I mean, just looking at the bottom end of your range, it looks like if you just take your fourth quarter run rate and EBITDA for Community, add in last year HMA's full year performance and then also your health care reform and synergies, and you're already at the bottom end of guidance.

Well, what you sort of do, if you take the combined company, you first got to remove January and you've got to remove the divestitures, which is about $100-plus million. There's a little tail effect of some acquisitions, $10 million, $11 million in the acquisitions that we know we're working on, is about another $50 million to $60 million. Then you've got to remember the 2-midnight rule will be there and the sequester will be there, and I went through the other items before. I still think there's a couple percent growth at -- using the low end of the range of health care reform. The high end of the range of health care reform, that may be correct, but the way we looked at it, in the low end, we probably should be considering the low end of the range of health care reform because we've still got a lot of ways to go, and I think it's $95 million. And then on the high end, you've probably got to get to about 6% same-store growth, excluding items that we named here, their synergies and other stuff. So I don't think the low end is quite -- it should be achievable, but I don't think that there is some expected growth. I think the revenues probably needs to grow a couple percent; EBITDA, a couple percent to hit the low end of the range.

And by comparison, do you recall what the range was for your original guidance going into 2013?

It was probably about $1,306,000,000 [ph], I believe, was on the midpoint, and we ended up about $13 billion. EBITDA, was over $2 billion, $2.3 billion or $2.5 billion, and we had to step it down throughout the year. I think we made 2 reductions in the guidance throughout the year, both about $100 million or so.

Okay. And then just looking at the overall volumes, your volumes are -- at least at the adjusted admission level, were positive in 2012 for you guys in each of the 4 quarters, but then were strongly a negative in 2013. How do you think about anniversary-ing some of these volume declines, or you could -- that gives you, perhaps, a little bit of confidence going into 2014?

Yes. I mentioned some of that a while ago, Jason. We had the decline around the physician turnover. It's 6% of the drop for the year. We got the EHR system conversions, about 5%. We are seeing a little bit better trend in the women's. It got better in the quarter. I don't expect to always see service closures and weather to be the challenge that we had in the quarter, although the first quarter has got some weather challenges. The readmission shouldn't be as -- that difficult, and then we have got an easier flu comp in 2013 versus '14. The guidance of minus 3% to plus 1% should be achievable. We've got to carve out for service closures and weather, but I think it would be achievable.

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

I just wanted to go back and just confirm, it sounds like, when you talk about this guidance you're providing last night versus what you provided back in January, it sounds like the moving pieces are adjusting for the timing of the HMA deal and then adjusting for these 4 divestitures on top of that. Is there any other adjustments within the EBITDA number, or has everything else kind of remained the same?

I think we kept the range at $250 million, so the low end coming down $20 million or $25 million. We did a lot of work on it. And I think we just went through all of the moving parts here, and there's, probably -- the only difference would be that the range, instead of letting the range grow a little bit when some of these items came out, the range was kept $250 million, which pushed the low end down $25 million.

Okay. All right. But that's basically just how the math worked.

That's how the math worked. But we bought them 26 days later than we thought. We did that so that people who were looking at the company, especially for the financing purpose, could see a full year and a full year debt-to-EBITDA. We had -- we couldn't very well talk about the FTC activity until the FTC approved it. They didn't approve it until the second week or third week of January. We received a right of first refusal after the January 6 information. And then the facility there, I think, we actually thought that the West Virginia facility midnight stay as of -- in January, but we do not believe it may stay that way for a while. So it's a discontinued operation. So there's no real difference other than the math.

Okay. And then, when I look at the volume number, it sounds like you're saying a 23% increase in volumes on the small percentage of the people who get insurance, maybe a 20, 30 basis points for the guidance from volume, if I'm doing that math right. And then you also said that your same-store guidance will include HMA. HMA's numbers were a little bit better than your numbers last year. Does that impact kind of the combined number at all, or how do you think about combining that?

I don't think it will that much. We're twice their size, and we tracked pretty well. I mean, they had a little worse first half of the year, and then we had maybe just a little worse here at the end of the year, and they may have had an easier comp in the fourth quarter, I believe, than we did a year ago. And I don't think they're making that much difference. And I realize, Kevin, I know you may be right that most of the people that enroll would be the heavy utilizers. That's probably held up with what we're hearing, it's just we've not put that type of assumption in yet.

Okay. And then as far as HMA goes, I guess, I think Wayne made an allusion to how, in 2013, you guys both had to deal with government investigations, you both had to deal with the deal between the 2 companies, and maybe that was a little bit distracting. Since the Community side seems to be coming close to resolution on the one-day stay issues, on that side of the business, do you think that's going to be a tailwind as far as kind of getting that behind you, but it's still a headwind on the HMA side? How do you think about where you are in the 2 kind of settlements, as far as impacting the ability to grow?

Experience is always good to have, and some kinds of experience are not so good to have. But we are experienced in terms of resolving and working through these now. And as you probably know, we internalized all the work, and we didn't see the impact as much, externally, as HMA did. They do have some residual in the marketplace over their investigations and their 60 Minutes appearance, but I think we will bring this in-house and do the work on it and, hopefully, we'll come to some resolution. I can't tell you -- you can never predict how long these things will take, but we will put the appropriate resources on it to make sure that we move forward in terms of trying to resolve this.

Okay. And then just last question, Larry, you kind of alluded to this. Obviously, our view has been that sick people will buy insurance upfront, and I think the difference between you and a competitor, as far as your 55%, 80%, it sounded like they were trying to build in with their actual volume that they see today, how much of that volume would qualify, versus what the people in their markets would qualify. So is that right, then, that you guys are talking about it a little bit differently than they're talking about it? They're trying to do how many people came in last year, and you're trying to say how many people in your markets?

We're trying to think about it not just '14 but through '16. And we think this changes -- for instance, to date, 80% of the people have enrolled and are getting subsidies, so that's all the way up to 400% of the federal poverty level. A lot of people are buying the silver plan, which is helpful. And there's a little bit older population, so I think we're thinking about it more from a global perspective of an entire population, not just what's happening in the last couple months.

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

Larry, just to clarify that last point, the 55% is where you are today, or that's where you would expect to be in 2016?

55% is the percentage of uninsured in our markets that we think will be eligible for Medicaid. It's not about a point. It's looking at the entire thing. We've got 3 million people, I believe, in total, of uninsured, and trying to look to see how much of those would fit in the up to 138% and be eligible for Medicaid, and then more of an analysis like that. That's not just the point in time of a few people that have enrolled in the last couple months.

Okay. And where was it -- is there a number that you compare it to as to where it was last year?

55% is probably a similar number. I mean, the uninsured haven't moved a lot, maybe moved 1% or 2%.

I think this is a published number that's pretty well recognized.

Yes, if you look at the CBO, and CBO has similar type of statistics over the next couple of years.

Okay. I guess, there's also been a fair amount of discussion about not only sort of the adverse selection, but on the exchange side, the percentage of uninsured or individuals signing up that were previously uninsured, do you have any views there or any interesting statistics?

It's hard to get to that because some of your ID cards are not that visible. I do know we're seeing a good percentage of people in Arkansas, which has been pretty successful, compared to what our previous uninsured is. But it's really not easy for us to know if someone's been insured or not just and anecdotally list the managed care companies that felt like that the 4 million people that they lost, a lot of them got reenrolled off to another plan. [ph] So we don't have any really good statistics to answer that question.

Okay. And then maybe just finally, Wayne, you said you thought there was some lingering impact from some of the investigations on HMA's admissions or, I guess, admission policies. How long do you think that takes to play out? And is Community seeing any lingering effects, or have you kind of worked through that?

Yes. I think we're focused now on moving forward in market share. And I think there is some, has been, but these issues, some of which have to do with physician relationships, I think we have said that we have a 90% "would recommend" among our physicians that are on our medical staffs. Their's is lower than that. I think it really is a relationship issue, and I think one of the things that we think we bring to this opportunity is the ability to develop and enhance and improve physician relationships, which is clearly the driver of all this.

Your last question for the day comes from the line of Ralph Giacobbe of Crédit Suisse. Ralph Giacobbe - Crédit Suisse AG, Research Division: Just wanted to clarify some of the commentary, Larry, that you went through. Did you say -- you just said January saw a 10% decline in uninsured within your expansion states and a 7% decline in non-expansion states, is that right?

I thought it was 17%. It's... Ralph Giacobbe - Crédit Suisse AG, Research Division: Oh, I'm sorry. 17% and 7%, and then that's off of a base, like, if we look at fourth quarter, the uninsured was down about 3%?

Yes. And I think that's much -- and the reason we did it was we usually don't like to -- I'm sorry, it was 10% and 7% for unique patients. But the self-pay adjusted admissions in expansion states, which had a factor in the actual revenue, was down 17%, and the non-expansion states were 7%. But it made us think like, look, expansion states, the Medicaid is doing well, and you're seeing some decline. There's lots of reasons things go down: tough flu comp, weather, other things. But at least expansion states are declining better, and I think that would tell us that some of the Medicaid activity is helping. And we also felt like, earlier in the fourth quarter, that we saw a little bit of growth in the woodwork effect, which we think could be of benefit to the health care reform. Ralph Giacobbe - Crédit Suisse AG, Research Division: Okay. And then just going back to the HMA deal. Are there anymore -- or any sort of top line synergies you see in terms of the -- just the managed care contracting on either the larger book, obviously, or even just reconciling rates now that you have sort of full disclosure there? And is there any assumption baked into that into the $250 million sort of 2-year synergy target, or would that be included?

There will be some. There's very little in the $100 million. A lot of your contracts are already done for '14, so you don't have as much -- you always hope that, by expanding your network, you can have a little bit of strength and that there will be some built in there. But there's not a -- probably a little bit less built in than what we had for Triad. But I do think we'll see some opportunity for '15, more so than '14. Ralph Giacobbe - Crédit Suisse AG, Research Division: And that's baked in -- that's there -- that is baked into the $250 million?

Yes, a small amount is. Yes. Most of the synergies, we like to deal with cost and expenses because -- but if we can determine there's a contract improvement that we might not have otherwise got, we would guarantee [ph]. Ralph Giacobbe - Crédit Suisse AG, Research Division: Okay. And then just on the -- my last one, on the 2-midnight rule, did you say it impacted admissions in the quarter by about 60 basis points, is that right?

That's right. Yes. That's on Medicare, and I think that's about 1,000 admissions, if I remember correctly. Ralph Giacobbe - Crédit Suisse AG, Research Division: Okay. And do you have what percentage of your Medicare admissions, at this point, are one-day stay?

Yes, I do. Give me just a second so I'll quote it right. Ralph Giacobbe - Crédit Suisse AG, Research Division: And if you have it, too, Larry, just wondering if that stat varies for other payors as well.

Medicare, one-day, is about 13%. And for all payors, it's 15% or 16%.

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

Thank you, Melissa. Thank you for spending time with us this morning as we embark on an exciting chapter in CHS's history. Our standard and centralized operating platform will help move the company into the new health care era. At this point, again, I would like to acknowledge Liz Schuller and the many contributions she has made over the last 15 years to this company. We want to specifically thank our management team and staff, hospitals, Chief Executive Officers, Chief Financial Officers, Chief Nursing Officers and division operators for the focus on operating performance in the fourth quarter. And once again, if you have questions and if you'd like to reach us, you can get us at (615) 465-7000. Thank you.

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