Darren Lehrich - Deutsche Bank Adam Feinstein - Lehman Brothers Shirley Skolnick - CRT Capital Group Henry Ritchotte - Deutsche Bank Justin Lake - UBS Ken Weakley - Credit Suisse Shelley Gnall - Goldman Sachs Erik Chiprich - BMO Capital Markets Gary Lieberman - Stanford Group

Good morning and welcome to the Tenet Healthcare's conference for the fourth quarter ended December 31, 2007. Tenet is pleased that you have accepted their invitation to participate on this call. Please note that this call is being recorded by Tenet and will be available on replay. The call is also available to all investors on the web, both live and archived. A set of slides has been posted to the Tenet website to which Management intends to refer during this call. It is recommended that you download these slides for use in the following Management references. Tenet's Management will be making forward-looking statements on this call. Those forward-looking statements are based on Management's current expectations and are subject to risks and uncertainties that may cause those forward-looking statements to be materially incorrect. Certain of those risks and uncertainties are discussed in the Tenet's filings with the Securities and Exchange Commission, including the Company's Form 10-K and its quarterly reports on Form 10-Q, to which you are referred. Management cautions you not to rely on and makes no promises to update any of the forward-looking statements. Management will be referring to certain financial measures and statistics, including measures such as adjusted EBITDA, which are not calculated in accordance with Generally Accepted Accounting Principles or GAAP. Management recommends that you focus on the GAAP numbers as the best indicator of financial performance, but is providing these alternative measures as a supplement to aid in the analysis of the Company. Reconciliations between non-GAAP measures and related-GAAP measures can be found in the press release issued in this morning and on the Company's website. Detailed quarterly financial and operating detail is available on First Call and on the following websites: tenethealth.com, businesswire.com and companyboardroom.com. During the question-and-answer portion of the call, callers are requested to limit themselves to one question and one follow-up question. At this time, I will turn the call over to Trevor Fetter, President and CEO. Mr. Fetter, please proceed.

Thank you, and good morning, everyone. This quarter we achieved a major milestone by generating positive growth in admissions. We also continue to demonstrate positive trends in several key areas and certain leading indicators have never looked stronger. I feel that the health in trajectory of this company is better than at any time in the recent past. This was the first time in nearly four years that we had positive admissions in a quarter. And because it was just slightly positive, I want to add some color to the statistic. First, we've had more consistent results among our regions in the past quarter and we continue to move more hospitals into positive admissions territory. Admissions in Florida stabilized significantly to just below breakeven, compared to the decline of more than 3% that we've been reporting in recent quarters. More importantly, the improving trend has accelerated into the first quarter of 2008, with same hospital admissions up 2.3% through January. Florida admissions growth was positive for the first time since Q1 '04 with an increase of more than 2% for the month. This upward trend has continued into February in both Florida and across the company, and even the trend in outpatient visits has improved. Same-hospital commercial managed care revenues increased by almost 9%, despite a nearly 2% decline in commercial admissions. This is the single largest quarterly revenue increase we've reported in five years. We are positioned for further pricing strength as a result of the numerous managed care contracts we announced recently. In fact, these contracts with United, Cigna, and Blue Cross of California represent a third of our total commercial managed care portfolio. And once again, we kept the growth in controllable expenses on a unit of service basis at or below that reported by our peers.…

Thanks, Trevor, and good morning everyone. We made gratifying progress in the fourth quarter that is also continuing in the first quarter. In my opinion, our turnaround is accelerating and increasingly evident in a number of areas. To show you why I believe this, I'll give you a flavor for our momentum in three key areas; volumes, pricing and its relationship to our quality initiatives, and our progress in expanding our medical staff. I'll also touch on the improvements we're driving in Florida and the successes we've achieved in our new managed care contracts. Let's start with volumes. Fourth quarter same-hospital aggregate admissions increased a tenth of a percentage point over Q4 '06. That's the first positive quarter for admissions growth in almost four years. January's inpatient admission growth was 2.3% and February has continued that trend. So, I think it's clear that our volumes are on an upward trajectory. The progress in the fourth quarter and in January is especially gratifying when you remember that we had a mild flu season until four weeks ago. It's not our normal practice to disaggregate volume results and we make no promise to do this on a regular basis. But I think some drill down this time will help you understand the underlying trends we are seeing. In our key Florida market, fourth quarter inpatient admissions were down to just three-tenths of a point, our best performance there since Q4'04. In Palm Beach County fourth quarter admissions actually increased to 80 basis points. Four of our five Palm Beach hospitals had positive year-over-year admissions growth. Additional evidence of our flood recovery is demonstrated by January admissions being up more than 2% over January 2007. Our new Florida regional leader, Marsha Powers has accelerated our physician recruitment, redirection and employment activities. We're confident…

Thank you, Steve, and good morning everyone. In the interest of time, I am not going to repeat the lot of the numbers in our earnings release or 10-K. I'll limit my comments to providing a relevant context for our disclosures. In the fourth quarter, we benefited from pricing, costs control, bad debt mitigation, and stabilized volume. We face the year with adjusted EBITDA the middle of our last outlook, and will adjust within the outlook range we started out with last March. There were two unusual items in the quarters which largely offset each other. The first was a net charge of $12 million related to yearend accruals for compensation and benefits. This includes adjustments to a predecessor company pension plan, union settlements costs in Florida, workers' compensation adjustments and yearend incentive plan accruals. The other item is a favorable adjustment to our bad debt reserve of $19 million. This reserve is set through the use of an 18-month look-back on our collection history. As you know, our collection rates continue to show modest improvement across most customer segments. In recent quarters, our results have often included cost report settlements generally with a favorable impact. The impact this quarter was effectively at zero. With that brief analysis in mind, let me offer a few thoughts on the drivers, regardless to those results. Steve has already covered volume, so with that detail I will just reiterate how pleased we are to see aggregate positive growth, particularly considering the well advertised strong headwinds in the industry. I also want to note that our uninsured and charity volumes actually declined in January. So the positive 2.3% in admission growth Trevor referred to earlier will contribute to our bottomline. Now on revenues, fourth quarter same-hospital revenues rose $2.2 billion, an increase of 6%.…

Thank you. (Operator Instructions). Your first question is coming from Darren Lehrich with Deutsche Bank. Please go ahead.

Thanks. Good morning everyone.

Hello Darren.

Hi. So, with regard to the walk forward that you have provided, I guess couple of clarifying questions I would like to ask. In terms of the 40% incremental margin that you are suggesting on incremental volume growth, can you just give us some color there as to what the actual results have been in hospitals that have turned positive, and how comfortable that 40% margin feels? It seems a little high still. And then, you do reference adverse mix changes in the walk forward, and I am just wondering if you could comment specifically what those are?

Okay. With respect to our actual experience, certainly on those hospitals you look at it broadly. Where we've had volume growth and it has been consistent, I think we have been able to capture those kinds of benefits. On the flip side, in areas where we've had or hospitals where we've had volumes decline, particularly where they haven't been anticipated, or where we were expecting growth and still there were declines, we had difficulty managing the 40% relationship. So in 2007, if you look back, we weren't able to achieve what we would have targeted on this basis, because of the declines we experienced in some of our hospitals, offsetting the efficiency of those where we had gains. But certainly going forward, we think it is achievable, but as I said, if it's not a broad based volume growth across our hospital base, then it is more of a challenge. In terms of your question on mix, basically that line for volume and the base line of price increases are all encompassing, so it’s embedded in there. But it definitely should be everything except for the effect of managed care pricing increases on the rate parity adjustments or the other initiatives. So we put the definition down there saying it included everything. In terms of payer mix and mix in business there isn't a substantial amount assumed in the sample walk forward that would be a risk. If we have it, as I pointed out, then that could affect it, but for the sake of this particular analysis, we are not assuming to have any significant change in mix.

Okay. Thanks for that. My follow-up here just relates to the collection rates going up, and I'm curious to know how long and sustained that uptrend has been in place? And I guess, the real question would be, why make favorable adjustment at this point in the cycle, certainly after seeing some pretty large uninsured growth in the fourth quarter?

Well, we have been experiencing improved collection rates over the last couple of years. We've made an adjustment at the end of last year. We reported during the course of this year that we had improved collection rates. We didn't adjust the reserving percentages on that basis, although it was mitigating bad debt expenses through the course of the year. And then at the end of this year, as we do annually, we look at our experience on an 18 months look back and say, based upon that historical experience should we adjust our reserving percentages, and based on that we do. So, it is based upon historical performance, which includes an 18 months period, and so there isn't a lot of subjectivity to it.

Okay

In terms of why now, it's just simply that. I think I would point out that we would expect to continue to drive on collections. It would be our anticipation, and we'll continue to find mitigation of bad debt expense going forward.

Thanks very much.

Sure.

Thank you. Your next question is coming from Adam Feinstein with Lehman Brothers. Please go ahead.

Great. Thank you. Good morning, everyone.

Good morning, Adam.

A few questions here. I was very pleased to see the improvement in the volume trends here. So a big change there. But I just wanted to get more clarity on the components of volumes. Clearly, the commercial managed care and Medicare piece did not grow. If you look at it, more of the growth was in some of the other categories. I just wanted to get some more color in terms of how you view that, in terms of some of the newly recruited doctors. Do they bring in some of those other patients first? So, clearly, I just want to get better sense in terms of the components. And then, secondly, on the pricing side, you continue to show progress there, also. But I know there was some one-time benefits in the other third quarter such as the (inaudible) cost reports. But in terms of the peer managed care piece, if you could just refresh our memory, in terms of the trend in the third quarter relative to the fourth quarter, I just want to get better sense there in terms of what the underlining pricing difference was between the quarters? Thank you.

Adam, this is Steve. Let me deal with the first part of your question. We are very much focused, as we expand our medical staffs, in making sure that they are high performing physicians that have a good book of commercial managed care business. And we are preferentially targeting those physicians to add them to our medical staffs. I think that the decrease in commercial managed care admissions on the fourth quarter was really isolated to three of our hospitals, where we had special situations. In the absence of those three hospitals’ negative effects, we would have basically been even year-over-year in terms of commercial managed care admissions. We have seen an increase in Medicare admissions, and we've seen a bigger increase in Medicare of managed care admissions, because of the distribution of our hospitals in Florida, in California, where that payer is continuing to grow. We feel very positive about the expansion in Medicare and managed Medicare, because we focus our cost structure to make sure that we have margins on those particular lines of business. Additionally, focusing on the targeted growth initiative, where we have that excess demand in the micro markets we're serving, we also identify those with exceptional margin opportunity, and the combination of those being both in Medicare, managed Medicare, and commercial managed care should contribute to our margin expansion over time.

And then the second part of your question on pricing. This is Biggs, Adam. There weren’t any managed care contracts, any new negotiations, kicking in into the fourth quarter relative to the third, so the effects of our negotiations were relatively [constant] in two quarters. We do have a number of pricing increases, as I commented in my script, which will kick-in on January 1, or did kick-in January 1 on contracts that we've negotiated.

Okay. But that 9.4% managed care growth number that you gave out, I [apologize] it was somewhere in the presentation, so that number would have been the same for the third quarter?

It's close. Both quarters had the effect of the ED charging effects and to a lesser degree, any flow through on charge master changes, but they would have been roughly the same.

Okay. Great. Thank you very much for all of the detail.

Thank you. Your next question is coming from Shirley Skolnick with CRT Capital Group. Please go ahead.

Good morning, and on a day like today I'll take the statement of the name in [stride]. Nice job, Biggs. Thank you. I actually understood what you said. I appreciate it very much. It was very clear. A couple of little things, though. And I'm going to ask you a couple of things about the walk forward as sort of one question, if I can, and then I have another follow-up. In the guidance you footnoted, if I am reading that correctly, it says that 1.5% increase in admissions, I think in the text it says 2% to 3% increase, is that on an adjusted admissions basis? Is that just the difference? One talks about inpatient and other talks about adjusted?

The aggregate number I gave of -- for 2008

It’s 1% to 2%. Okay. It's the same thing.

If you get to the aggregate number that I used in my prepared comments, you get to it by taking the $193 million of revenue from volume in 2008, by example, and dividing that by the 2007 starting point, to get to, effectively, the revenue generated from volume growth presumed in the $193 million. So it is close to adjusted admission basis, but it's using the math that I just described.

And it's based on same-store admissions of 1.5% in the middle of the admissions range, as opposed to the top end of the admissions range. So you're using the middle of the volume range to get to the top end to the EBITDA range.

I will say, I have to look at unit note one on the explanation to see whether we have been as clear as we need to be. But in general, okay, for 2008 and 2009, I would say the volume assumption here would be more towards the top end of our volume assumptions.

Okay. Because you are at the top end of your EBITDA range?

Correct.

Right. Okay. So, that's consistent. And also it’s part of your walk forward in your discussion of the cash. I think if there is a point of concern, it’s clearly the cash flow. So -- and also the fact that you would be somewhere around $200 million to $300 million at the end of '08 in the absence of any of the cash freeing initiatives from the balance sheet. I guess, what is the company's thought, that you would need to, or want to, or be likely to use the asset-backed revolver during the year as part of this, or is that not a factor into it?

Well, it's certainly not our desire to use it. It's not our anticipation to use it. We will have negative cash flow in the first quarter, which is typically the case, but we still don't believe that will put us into the revolver. So I think that there is an insurance policy, a safety net. But we expect to work very hard on our cash performance in 2008, get the improvement back and working capital that we expected in the fourth quarter, but didn't achieve. And as I pointed out in the script, there had been some other drivers of cash flow that were negative in 2007 that we don't expect to repeat themselves in 2008.

Yeah. Just tell people stop writing checks.

Yeah. We expect to execute.

Okay. And also related to walk forward, I'd like to understand what your targets implicit there for additional physician recruitment might be? And then if you could, the final thing would be an update on the healthcare property's lawsuit. I think I saw something that I'd like some explanation on?

Sheryl, let me deal with the physician recruitment issue and then let Peter give an update on the HCPI litigation. We are in the process of completing a fairly sophisticated medical staff development plan for each of our hospitals. We did what I would call a more elementary plan as part of the October through December budget process. We have that as a base line, but we're actually digging deeper into that in doing some extensive modeling on attrition related to aging of existing medical staff. I guess, in summary, we're probably looking to add 1,000 incremental active medical staff physicians to our medical staff in both 2008 and 2009. That will be our target for those years, and I think that will both handle the attrition, as well as meet the needs in those communities where demand continues to grow.

I am sorry, Steve. The targets for '08 and '09, I know you said it but I couldn't write it down (inaudible).

1,000 incremental active staff physicians.

In each. Okay.

Each year.

Okay. Great.

And sure we have Peter, if you have a detailed question on HCP, but we've disclosed in our 10-K that we're in settlement discussions. If there is a sensible settlement to make, we would prefer to settle it. But I think that's all we're going to say on the matter.

Well then, I guess I don't need to hear from Peter. So the summary is that no flow in January, but you had volume increases flow in February, getting some volume increases. Pricing is better than it was, and you are targeting the physician growth in areas where it’s going to help you. The way you target it, your capacity in areas is going to help you, and your cash is still an issue. Is that fair?

Perfect summary.

Great. Thanks a million. Good job.

Thank you. Your next question is coming from Henry Ritchotte with Deutsche Bank. Please go ahead.

Yeah. Just a question on the EBITDA for the quarter. Just on the normalized or the favorable bad debt adjustment that you were able to take in the quarter of $19 million. How much is that related to the fourth quarter, and how much of that is related to all of 2007?

Well, I would say that it all relates to 2007, so if you are trying normalization, I would normalize it out of the year, in which case then I would say it probably is equally spread over the course of the year. But as I said, there were other cost effects in the quarter that you would also normalize out, the compensation and benefits accruals that I referred to would be attributable primarily to the year. There is the case of the pension component of that, which is relatively a small portion of it, but that component probably is something that we wouldn't expect to recur at all.

Okay. And then just on the pricing for the managed-care contracts, I know you had the -- I think it was the 9% growth and you got a couple of contracts that are being renewed or renewed after the end of the year. Should we be thinking about managed care pricing increasing along the lines to that 9% in 2008?

Well, I think that the walk forward should be reasonable view of what we expect in terms of incremental lift from the negotiations. We put $36 million into 2008, and $34 million in 2009, reflecting the price increases associated with achieving market parity on our contracts in those specific hospitals, contracts in markets where we needed to get ourselves back up to market level. Beyond that, we really don't make disclosure on managed care pricing and commercial managed care pricing separately. So I wouldn't want to give you the exact number, but I think a reasonable continuation of what we experienced in the fourth quarter of the second half is an acceptable approach.

Okay. Thanks very much.

Thank you. Your next question is coming from Justin Lake with UBS, please go ahead.

Thanks. Good morning, just a couple of quick questions on some of the numbers here. The bad debt, it looks like the uninsured, and that's where half the charity cares down. Can you remind me if there's been any change in charity care recognition versus uninsured over the last summer quarters.

The only real change that occurred was a regulatory change in California, but it would have actually gone in the opposite direction and would not have declined or reduced the charity number. That was relatively minor, so on all that it’s apples-to-apples, but it does move back and forth as we go through time. In the aggregate, the trend seems to be narrowing and the rate of increase that we experienced in the past seems to have diminished and stabilized somewhat. Okay, on the two combined.

Okay. That's helpful. And as you look at your volumes, I know you said there was much benefit from flow in January and same in February, but how is the payer mix looking?

The payer -- in the fourth quarter?

No, I am sorry, January and February.

Oh, January and February is that. At this point, I wouldn't want to comment on that level of detail on the first couple of months or first month and a half on which we have the information. We give volume information, we started that practice and recognized it. We set that precedent, but I think drilling down in a greater level of detail, on an interim basis it wouldn't make a lot of sense.

Yeah. We'll wait for the first quarter call. Yeah.

Okay. Is there a reason, I think, that has been meaningfully different than what you've seen in the last couple of quarters?

That would be the equivalent I am giving in a comment on a great level of detail.

And then on the managed care pricing, just a couple of quick questions and I'll jump back in the queue. Do you have the pricing of 9%? The ad net is down, because of those couple of hospitals. Given that you mentioned the contracts are bringing some of your hospitals in network versus other network. I would think the opposite effect will be happening, or your pricing will come down a little bit just because other networks normally have the inflation side is obviously on higher revenue, but that your ad nets will be going up because you're going in network. Is there a reason that's not happening?

Well, what you've described Justin, is actually true, but because it takes time for those factors to work and it would take maybe two quarters before you actually see the effect of that dilution of bringing those out of those network providers.

Okay. And then as I talked to some of the managed care providers. I talk about the pressure from hospitals out there as far as contracts negotiations. Some of them talked about giving in a multi-year contract giving a large increase upfront in the first year, so you might get to a 7% blended number, that you are giving 12 in the first year and 4 in the next two. Can you tell us are any of your contracts structured and I noticed you mentioned most of your contracts have an inflationary update to kind of factor in them, but…

Well, without giving you specifics, Justin, we are very sensitive to that particular issue and we need to make sure that we stay at rate parity if we are dealing multi-year agreements. So our contracts range in duration from two to four years. And certainly there may be some variation over the course, but one of our major contracts we recently did, which will remain unnamed is actually higher in the outer years than it is in the first year. So that's very much to be individualized with each contract renewal, and it's also based on where we see that hospital in relationship to the competitors in the marketplace, so that we get parity for our acuity adjusted reimbursement.

Okay. So you expect to see similar rates in the back years that you are getting right now.

That is correct.

Very helpful, thanks a lot.

Thank you. Your next question is coming from Ken Weakley with Credit Suisse. Please go ahead.

Thanks, and good morning everyone. Just a follow-up on Justin's questions on the Florida market. If you look back at the fourth quarter, I think you said the admissions were down 0.3. Can you tell us, historically at least, what that admission trend would have been if you take out Charity and uninsured. In other words, I mean clearly Florida has been a problem because of Charity and uninsured, so I'm just trying to get a sense of how that composition of admissions in Florida is changing?

Well, we would have to get back with you on that. Maybe we'll have Tom Rice give you a call back. We wouldn't have that subtracted and ready to give you today.

Okay. Is it your sense, generally speaking, that Florida is improving in a qualitative way on the payer mix side? Clearly, over time, the uninsured has been a big issue. But I'm just wondering if tourism is coming back in a strong way, and that's really helping out the marketplace, or are you taking market share more aggressively than you had in the past?

I think the answer to your question is yes, yes, yes and yes. Tourism has increased slightly in this winter season compared to prior year; it's not back to the pre-hurricane levels by any stretch of the imagination. Secondly, we are growing the preferred payers there and we are taking markets share from the competition in a number of key payer lines.

Okay. And as one follow-up for your Medical Staff Development Plan, adding 1,000 doctors could bring in some sort of financial risk, if you will, on a supply side. So can you give us some sense of where your safeguards are? In that respect, it's clearly, you know, doctors want to practice medicine the way they want to and that can really drive your margin the wrong way.

Well, clearly, Ken, whenever we do a relocation agreement with a physician or an employment agreement, we make sure there is a defined community need, and we have extensive methodologies with third parties that make that assessment before we do that. Whether a given private practice decides to expand because of the aging of the senior members of that group is a totally different story. But we are very careful, and we look at it from a financial point of view, as well as what is that community need that we're expanding to meet with our active recruitment, relocation, redirection programs.

Actually, I meant supply costs, managing supply costs in light of bringing in lots of doctors. Sometimes that can be a challenge for hospitals. I'm sorry.

So you're talking about by medical supply cost?

Yes, yes.

Well, clearly, I hope and as we saw in the fourth quarter, that our revenue grows, as we do more procedures that include higher intensity of supplies. For example, in the fourth quarter, we had a 3.5% increase in the number of surgical procedures that required an implant. So there should be a compensatory offset of that in revenue. Most of our managed care contracts have carve outs for those specific procedures, so we are very cautious about expanding the implant surgical business, such that we can offset those extraordinary supply cost. Additionally, we are always working on new supply contracts that will lower our cost of providing those particular prostheses.

And do you have case mix in the quarter?

Case mix in the quarter, it was up just slightly.

Okay. Thanks so much.

Thank you. Your next question is coming from Matthew Borsch with Goldman Sachs. Please go ahead.

Hi. Thank you. This is Shelley Gnall for Matthew Borsch. Question on the volume update. I think you mentioned that you were seeing some deterioration in Texas and that you were expecting to be resolved, can you give us a little more detail on the situation there? - Goldman Sachs: Hi. Thank you. This is Shelley Gnall for Matthew Borsch. Question on the volume update. I think you mentioned that you were seeing some deterioration in Texas and that you were expecting to be resolved, can you give us a little more detail on the situation there?

Well, we don't disclose the names of the individual hospitals, but we do have one situation in Houston, where our physician-owned competing hospital opened early in 2007, so we're passing the anniversary date on that. And additionally, we are adding tertiary care services that will help to differentiate that hospital from the competitor about a mile or mile and half away. Other situations, we have seen in at least one of our other markets, some erosion of the physician days, and we are working aggressively on a particular service line renovation and expansion, which should re-attract those particular physicians and the volume with those doctors.

Can I ask for a clarification? Is that because those physicians are retiring or they perhaps leaving for competitors in those markets? - Goldman Sachs: Can I ask for a clarification? Is that because those physicians are retiring or they perhaps leaving for competitors in those markets?

In the second case, it was going to a competitor that made a very substantial capital investment and a similar physical plan, and we’re moving forward to extinguish that advantage.

Okay. Great. Thanks. And then one quick follow-up, if I could, on the asset sales issue. I'm just wondering if you can tell us where Broadlane contribution is on the income statement, I mean how much it impacted earnings in '07? - Goldman Sachs: Okay. Great. Thanks. And then one quick follow-up, if I could, on the asset sales issue. I'm just wondering if you can tell us where Broadlane contribution is on the income statement, I mean how much it impacted earnings in '07?

Well, we don't disclose separately Broadlane's contribution earnings, but it is in the equity earnings element of the financials. So if you look in the disclosures in our 10-K, you'll see disclosure of our equity earnings of the unconsolidated subsidiaries and [investies], but is just a component of that.

Yeah. Okay. Thank you. - Goldman Sachs: Yeah. Okay. Thank you.

Thank you. Your next question is coming from Erik Chiprich with BMO Capital Markets. Please go ahead.

Good morning. Just a question, I know you talked about the good volume increases in January, and I know the first quarter last year was a bit weak, but can you talk about the monthly progression last year and kind of what the comps are that you're seeing in that months?

Erik, this is Steve. You're correct. Last January we had weakness. February comp was fairly strong in '07. We are continuing to see strength in February as Trevor pointed out in his remarks fairly gratifying month-to-date. We have four more mid-nights to go through before we finish the month of February. So I am reluctant to make more predictions about that. But I think it’s fair to say that the strength we saw in January is continuing through February, and is extraordinarily broad based across all regions.

Okay. And then, finally, could you just talk about what's embedded in your 2008 guidance for the help of the underlying economy, and what macro pressures might have on your volumes and bad debt?

Well in terms of the outlook of 70 to 75 to the 850 of EBITDA, we said that one of the variables assumptions was bad debt expense. I think we gave a range on the year of 6.5% to 7%, which would be an increase of this year. So there is a combination in the range, should we have an increase in uninsured or a decline in the ability to pay above and beyond our ability to mitigate. At this point in time, we don't see evidence of that. We looked at our collection experience over the last several months, and at this point, do not see once again any evidence, so it remains subjective, highly subjective, as to whether or not that's going to occur.

Okay. Thank you, and good luck with your initiatives.

Thank you.

Thank you. Your next question is coming from Gary Lieberman with Stanford Group. Please go ahead.

Good morning, Gary.

Well, good morning. I appreciate the comment in the press release about the three hospitals accounting for the majority of the decrease in the managed care commercial volumes, but it's not like that this is the first quarter you've had that trend. It's been going on for some time and is actually accelerated in the fourth quarter from the third quarter. So, tell me, if you could, talk a little bit more about what you are doing broader to get that trend going in your favor, because I think that it is an extremely important one, in terms of revenue guidance that you put out here?

Well, Gary, you are correct. It isn't important issue for us. But if you go back and look sequentially the fourth quarter was actually the second best quarter that we've had in the last three years. So, we're making progress. The third quarter was extraordinary, down 0.6%, so this really continues our trend line of moving towards zero year-over-year. So, I would suggest that third quarter was more of an aberration than the fourth quarter. But we are redoubling our efforts through the physician relationship program….

Are you there?

Ladies and gentlemen, this is the Operator. I apologize that there will be a slight delay in today's conference. Please hold on and the conference will be resumed momentarily. Thank you for your patience. The conference will now resume.

Okay. Sorry about that we had a line disconnected here. We only have time for about one more question anyway, so operator, I'm not sure if you've lost the queue, but why don't you take the next caller?

(Operator Instructions). Your next question is coming from Tom Gallucci with Merrill Lynch.

Hi, good morning, this is (inaudible) on for Tom. Discussing your physician relationships, how quickly are your new doctors ramping up in their markets. And I guess as a follow-up on that, where are you guys attracting the doctors from, primarily?

Well, two good questions. The first, it really depends on the specialist of the physician. We see that surgical specialists tend to ramp up their business over 12 months to 18 months, as opposed to primary care, which is more an 18 month to 24 month up tick to a plateau. So it does take a period of time, depending on the overall need and what the specialty of the physicians. With respect to the greatest number of physicians we're adding to our medical staff, it clearly come from redirection of physicians who have practices in our combined service areas. That way, they're able to translate more discretionary admissions in out-patient utilization in a shorter period of time. That redirection activity really dwarfs the total number of patients we see as a result of both active relocation, as well as our employment strategies.

Okay. Great. And do you have a breakdown of the doctors that are specialists, like a ratio?

Yes. In terms of our overall redirection strategy, about 60% of the redirection is in specialty, about 40% is in primary care. In terms of the employment strategy and relocation, it’s virtually the reverse, where we're needing to expand our primary care base to meet community need.

Okay. Great. And I just have one last one on the guidance. For EPS the front page of your press release says negative $0.03 to positive $0.06, and it looks like the reconciliation in the back on the text is, I believe, negative 10 to positive 5. Is there something quirky going on there with like taxes or a one time item?

Yes, the difference is, the one on the front page is normalized the way we understand the street traditionally does it, so it uses a normalized tax rate of 37.5%.

Okay.

The one in the back, you'll see in the tables, is reconciled to GAAP and uses $20 million actual tax expense, even at the low end.

Okay.

Now which drives to a lower number, and also includes $5 million of litigation expense, which is not included on the front page.

Okay. Great. Thanks for the color.

The front page is just very clean and normalized.

Okay. Thank you.

Okay, operator. I think we have been going for an hour and a half; we plan to end the call at this time. So, for any of you still listening, who are in the queue for questions please just follow up by phone with Tom. And thank you all very much. We'll see you on the next call for the first quarter results.

Thank you. This does conclude today's teleconference; you may disconnect your lines and have a wonderful day.