Welcome to the Adeptus Health third quarter 2016 earnings conference call. Today’s call is being recorded. All lines have been placed on mute to prevent any background noise. After the presentation remarks, there will be a question-and-answer session. Before we begin, I would like to remind everyone that today's remarks and responses to your questions today may contain forward-looking statements that are based on current expectations of management and involve inherent risks and uncertainties that could cause actual results to differ materially from those indicated, including those identified in the Risk Factors section of our annual report on Form 10-K as such factors may be updated from time to time on our filings with the SEC, which are available on our website. Adeptus assumes no obligation to update any forward-looking statements In today's remarks, all financial comparisons will compare the third quarter 2016 to the same period in the prior-year unless otherwise noted. In addition, Adeptus management will refer to certain non-GAAP financial measures. Reconciliations of these non-GAAP financial measures to the most comparable measures calculated and presented in accordance with the GAAP are available in the earnings release and supplemental disclosure on the Investor Relations portion of our website. Following today's call, an archived recording of the replay will be available on the Adeptus Health investor relations page for 30 days. At this time, for opening remarks, I’d like to turn the call over to Tom Hall, Chief Executive Officer. Mr. Hall is joined by Greg Scott, Chairman; Frank Williams, Executive Vice President and Chief Financial Officer; and Graham Cherrington, - President and Chief Operating Officer of Adeptus Health. Please go ahead, Mr. Hall.

Thank you, operator, and welcome to Adeptus Health third quarter 2016 earnings call. First, we need to address the reason for the delay in releasing our third quarter results. Our team worked very late last night to secure commitments for a $57.5 million incremental financing to bolster the company’s liquidity position. Frank will describe the transactions in more detail in a moment. Ultimately, we needed signatures to finalize these arrangements, which were not available or not attainable given the lateness of the hour. We made decisions despite knowing the obvious market disruption this delay would cause that coming to market with a completed story six or seven hours later was preferable to an incomplete story on time. That being said, we are clearly disappointed with the results we’re reporting today. However, I believe we have a solid grasp on the issues and an achievable plan for overcoming the challenges we are facing. This afternoon, we announced the appointment of Greg Scott, Adeptus’ Director since 2013 as Chairman of the Board. Greg has been an active director on the board, serving as chair of the audit committee and a member of the nominating governance committee. Greg knows the industry and is a long-time healthcare executive, holding a number of positions including former chief financial officer PacifiCare, an experience that will help us navigate through our current challenges. I will now pass the call over to Greg. Greg?

Thank you, Tom. And good afternoon, everyone. When I was appointed to the Adeptus board three years ago, I thought the company had a unique business model and that the opportunities for value creation were significant. And I remain a firm believer in our future. Obviously, we face some significant challenges. As a result of these challenges as well as Tom’s previously announced decision to retire, the Board has determined it best to change our corporate governance structure by separating the Chairman and the CEO role. This will give the board much closer oversight with respect to company operations. I intend to work very actively and very closely with our management team to help bring about the changes necessary to restore profitability and, ultimately, shareholder value. Frank Williams joined the Adeptus team as our Chief Financial Officer in August. He has immediately dived into deep waters to understand this business. The board and the management team want to thank Frank for all of the effort he’s put in and jumping ahead first into this mix. And I can tell you just from working with Frank over the last week to ten days, he is already having a very significant impact on helping the company navigate through some of these challenges. With that, I’m going to turn it to Frank to give you a more complete understanding of our third quarter results and where we go from here. Frank Williams Thank you, Greg. And again, thank you everybody for joining us. As you know, I joined Adeptus at the end of August, understanding the need to deliver more transparent information and results. We’ve had a rough quarter and I’ll highlight the key issues as well as actions we have in place to resolve these challenges. I’m working closely with the rest…

Thanks, Frank. The third quarter was a pivotal period for us in regards to opening hospitals, converting the majority of our freestanding facilities to hospital outpatient departments or HOPDs and strengthening our partnerships. All of this activity underscores our business strategy and will help drive long-term growth. Here is a quick recap of some operations activity during the quarter. Over Labor Day weekend, we rebranded our hospital and 32 HOPDs in the Dallas-Fort Worth market to Texas Health Resources. As a reminder, THR is one of the largest healthcare systems in the country, serving more than 7 million residents in 16 counties in the Dallas-Fort Worth area. On September 20, our Denver hospital received CMS certification, allowing us to convert our 12 UCHealth freestanding ERs to HOPDs. On October 11, First Texas Hospital in Houston received CMS certification, allowing us to convert 23 of our 29 freestanding ERs to HOPDs. HOPDs accept all insurance, including Medicare Medicaid and Tricare. Approximately one year ago, we converted to HOPD in Dallas-Fort Worth. We saw an increase in volume, of which approximately one-third was commercial and two-thirds was government. While very early in the process, we’re seeing a positive trend in Denver and Houston with the incremental volume coming from both government and commercial patients. Subsequent to quarter-end, we began operations in our fourth state, Louisiana, with the opening of the first facility in New Orleans with Ochsner Health. While very early in its operations, the facility is performing similar to our facilities in Arizona. With this facility, we have a model that does not require us to incur the capital outlay of building and supporting a hospital. We expect that the majority of any development activity we do going forward will operate under this model. We expect to open one more freestanding ER in Louisiana by year-end. And importantly, these freestanding ERs are HOPDs through an affiliation with Ochsner Health, thereby not requiring Adeptus Health to invest the capital to build a hospital. For the year, with the financing commitments we've announced today, we remain on track to open 27 new facilities, including 24 freestanding ERs and three hospitals, bringing our anticipated facility count to five hospitals and 104 freestanding ERs. At the beginning of the third quarter, approximately 40% of our facilities were HOPD. As of today, approximately 79% of our freestanding ERs are HOPDs. Once the Colorado Springs hospital is accredited and the four freestanding ERs in that market are converted to HOPDs, over 82% of our facilities will be HOPDs. In order to receive the necessary joint commission survey, Colorado Springs must see 20 inpatients. As of today, we are about halfway to seeing the required number of inpatients. Now, I’ll turn it back to you, Frank.

Thank you. With the disappointing quarter, I’ve highlighted the following actions that the management team is taking to address the issues that are facing our business. First is a focus on completing the conversion of non-HOPD markets to HOPDs. Second, evaluating the working capital of our JV investments and focusing on how to mitigate the cash flow impact of our joint ventures. Next, addressing issues with our primary third-party billing and collections company by implementing new internal and external resources to recoup our billings. Next, scaling back on development activities and evaluating opportunities to reduce expenses. And finally, offsetting investments and costs related to hospital opening and preopenings by our new partner model that does not require the building of hospitals. And finally, our liquidity issues being addressed by the expansion of the remainder of our credit facility’s accordion and the preferred stock funding I described earlier. With that, I’ll turn the call back to Greg Scott.

Thanks, Frank. I think Frank summarized the operating activities we’re taking to correct the profitability and cash flow issues that we face. We believe that the steps we’re taking will build a pathway to improving cash flow and certainly enhancing our financial flexibility and, most importantly, regaining our profitability. We’re confident that the strategy long-term here is sound, that the formation of partnerships with leading health systems to grow our business is still a viable way to grow this business. We think our new partnership model that does not require significant investment in hospitals and in working capital provided by Adeptus will be much less capital-intensive going forward. And we look forward to getting this company back on track and back on a growth trajectory that will enhance shareholder value. I think we all – all of us sitting around the table understand that the reports today – that the earnings report today is far from acceptable and we have a lot of work to do. As I mentioned, I think we’re focused clearly on enhancing our transparency and working with investors going forward. That's a commitment of ours that we’re going to do that, so that you can understand our business more fully and really begin to understand what our future looks like. So, we’ll be meeting and speaking directly with a lot of the analysts and the shareholders in the days and weeks to come. And we look forward to those discussions and presenting to everyone a clear picture of the direction of our company in the future. And with that, I'd like to open up the call for questions. Operator?

Thank you. [Operator Instructions] Our first question comes from Brian Tanquilut from Jefferies. Please go ahead.

Hey, good afternoon, guys. Greg, first question for you. Obviously, tough situation here. And the stock has taken quite a beating. There are lots of moving parts. Lots of project ongoing. So, as you think about value creation and how you can turn this business around, given the new seat that you have, how are you thinking about prioritizing what needs to be done first? What creates immediate value and balancing that with the long-term strategy of the company?

Well, first and foremost, with what we’ve been through for the last ten days, we’ve got to get our balance sheet in order. Without a sound financial footing, there can’t be growth. And that is really two-fold. Number one is, obviously, looking to external sources of capital. And as Frank indicated, we’ve asked Goldman Sachs to advise us on access to the markets and how best to do that. But, more importantly, it’s better stewardship of the capital resources we do have. And if you look at the quarter, there’s no question that if you look at the outflow in the quarter, you look at that and you see the amount that this company has invested in both accounts receivable and, as Frank indicated, that really is frankly an inability to collect on the bills we send out. And there’s a long story that we can get into about how that happened and what we’re doing to address that. But we can't be investing that much money in accounts receivable and allowing bills to go uncollected. Number one. Number two, we have a situation where we have been the sole capital source for many of our joint venture activities. That is not a position that we should be in as the sole capital source to these JVs. So, we have to work closely with our partners and these are partners that we value tremendously in terms of the future of this business. So, we have to do this in a way that is in the spirit of the partnership we’ve formed with these people. But we cannot be the sole supplier of capital to these joint venture entities. And that is the position we found ourselves in over the last two quarters. And you can see the size of the…

No, that’s perfect. Follow-up question to one of your comments. So, Frank or Graham, as I look at the equity earnings line coming in at negative $8.5 million, you did $4.5 million last year, $2.5 million the previous quarter, that explains a lot of the myths this quarter. So, I’m just wondering, if we’re talking about the strength of the HOPD business, why is it that the JVs are a big drag to profitability?

The majority of that is related to Denver and the way that the preferreds works, in that we take all of the loss at that point. So, that's really the impact that’s there. And, again, I would just remind you for the Denver market that that flipped and became an HOPD market only on 20 September and the rest of the freestanding ERs in that market, the last four in Colorado Springs, will become HOPD when the Colorado Springs hospital receives its certification.

And just to add to Frank’s comment there, just so there’s clarity around that, because we have a preference arrangement where we – because we transferred to UCHealth a number of profitable freestanding ERs, we have the first call on earnings coming out of that joint venture until we get our preference return and then we split the balance 50-50. So, what that means, though, is when we’re in the preference period, if there are losses and there were because the hospital expenses and the openings of the hospital expenses there, guess what, we get a 100% of the losses too. Now, those losses will get recouped, and then some, and then our preference satisfied on top of that in subsequent months as and when the venture turns around and becomes profitable. So, we had a little bit of a perfect storm of events here occur in the third quarter and you're right to point out that that was a significant swing. But, again, if our strategy is correct, Denver will turn, the hospital expenses will not be a drag, volumes will pick up because it will be an HOPD market, and we’ll see that trend reverse itself.

Okay. And then on the HOPD strategy, as we think about same-store, you are talking about 30-plus-percent same-store, but as we anniversary the conversion of Dallas in November, how do you envision or how do you project same-store for those maturing facilities? And I guess, this will be the same as we anniversary Arizona and Houston and all these other things – the build-out of the HOPDs. How should we be thinking about same-store and how you view that?

Brian, this is Graham. I’m going to start and then Frank and Greg can chime in. Let me start with Dallas. So, of course, we just partnered with Texas Health. And I describe that health system to you. Just changed the signage over Labor Day weekend. So do we think that that’s already been a positive impetus to volumes and will provide a lift over the coming year? Certainly, not to the same levels going straight from independent to the HOPD model, but we do see a lift in that partnership with Texas Health. In the Arizona market, yeah, we are coming up on year anniversaries on a number of those facilities, but we continue to build brand awareness and we only have nine facilities in that market currently. So, certainly, a lot of opportunity to continue to build brand awareness with our great partner, Dignity, in that market. So, we're hopeful we will continue to see some rises in same-store volume.

Got you. And then last question for me. Frank, as we think about the receivable line, how should we think about the risk of an AR write-down, given that you are north of 100 days in DSOs?

Well, look, we believe that this is an issue related to how you pursue bills that are not paid in full. And prior to our outsourcing, when we managed this process, we had a high touch model, where we were following up on these immediately. And we've engaged internal and third-party resources to pursue this. So, what we know today is that we continue to pursue these claims and seek repayment for them.

I think what we’ve got here is a little bit of the age-old game that’s gone on between provider and payer. And because of our outsourcing, I think we've taken a little bit less aggressive approach to interfacing, I should say is the word – to interfacing with our payers and making sure we’re getting paid for what we’re owed. And we’re bringing resource to the table to affect that balance between ourselves and payers and bring the payable back down into line. We have a lot of work to do. This is not a risk-free situation. But, clearly, this is something that has drawn a lot of attention internally. It’s drawn a lot of attention, obviously, with our accountants. And we are where we are and we’re going to go after what we think we’re owed. But as I said, it's not a risk-free enterprise.

Got it. Thank you, guys.

Our next question comes from Paula Torch from Avondale Partners. Please go ahead.

Great. Thank you, everybody. And good afternoon. I guess, I wanted to start just with talking a little bit more about the new JV capital-light model for growth. Maybe this should be simple for me to get, but I would just like more clarity as to why you don't need to build the hospital and how that impacts your ability to move into maybe certificate of need states and maybe some of the regulations behind it. And, obviously, I'm interested to know the differences in the metrics with those JVs and how that's going to differ from Dallas, Colorado and Phoenix where you do have hospitals and maybe you can just give us a little bit more color there to start.

Paula, thank you. Let me start. So, the model has us utilizing an existing hospital that our partner already has for which our freestanding becomes part of the HOPD. And I wouldn’t say that it’s specifically related to [indiscernible] state, right? Each state has a different regulatory scheme. So, it’s not quite that simple. But we should have the benefit of having the hospital without the cost of having to build the hospital, if that makes sense. It really is that simple. And so, not only are we not putting the capital in to build the hospital, we’re not investing the significant capital in the preopening and the ramp-up phase as well.

No, I realize that. And that’s great. And, obviously, you had to build some existing hospitals probably in order to get yourselves into this position with new JV partners. But how is this going to work with some of your existing partners, in Dignity, if you want to, let’s say, in Arizona, maybe do a little bit more, is this going to be where you can utilize one of their hospitals now? Or in the markets where you’ve already built hospitals and now you have JV partners with THR and UCHealth, does that sort of change the playing field there?

On our existing markets where we have an existing hospital, we have the hub and spoke model set up. If we get into a situation we want to build more HOPDs and feel it’s more beneficial to attach them to an existing hospital, we have that option. And so, we have had discussions with our partners on that. And there’s different market dynamics we’re looking at there. I think it certainly opens up a lot of new doors in new markets for us going forward. And that’s what’s exciting.

Okay. And I was just wondering if you might be able to just walk us through the performance maybe in Dallas, in that market before and after the certification of the HOPDs and then maybe post rebranding. I realize that we’ve only rebranded there – it’s been a little bit, like, two months or so. But just – can you give us sort of a sense on what's going on there in that market and how much more commercial? Is it still 1 to 2? Is it more than that? How is that sort of progressing, just to give us some idea?

Right. So, if you go back a year ago, Paula, when we opened up First Texas Hospital in Dallas and converted the market here, we saw an increase. And I think in my remarks, I said it was roughly one commercial to two government, was kind of the increase we saw. This year, as we have rebranded to Texas Health, again, it’s only been one month and I think Frank walked you through the September numbers as how they compared to the third quarter. So, it's a little hard to tell exactly what would be attributable to that model right now in terms of the affiliation with Texas Health. So, we’re very positive about the relationship and the number of sites of service that they have in the DFW marketplace.

Yeah. I think the trend – without – and we can give you the specific numbers. The trend is clear that when we were operating as non-HOPD in Dallas and then switched to HOPD, we saw a significant uptick in volume. And as Graham said, roughly speaking, one-third of that was commercial and two-thirds was government. But, again, given our model, significant operating leverage, significant impact on profitability. Then the rebranding, then the deal with THR occurs and we expected a lift because we are now using a brand that we think has more cache in the market than frankly first choice emergency rooms did. You now have a respected health care brand in the Dallas-Fort Worth marketplace and we expected a lift in terms of members. Early to tell, but, Frank, what…

In the third quarter, we saw 37,008 patients in our DFW ERs. And in the month of October, we saw 14,415. So, I hate to call that a trend, but if we’re right that some of that could be attributed to the THR brand now on our facilities. We can’t give a direct attribution and we’ve just got to keep an eye on it going forward.

Okay. And then, you know what, we continue to hear from investors about sort of regulatory and reimbursement concerns and I was wondering if you could comment on the level of comfort you have with those two items over the next year or two. And I think we’ve been hearing about some potential legislation maybe coming up in Texas that could potentially impact freestanding ERs. Can you just maybe fill is in on some color there?

Yeah. So, Paula, this is Graham. I have not [indiscernible] coming in Texas and I am on the board of NAFIC, the national association, as well as involved with TAFIC, which is the Texas Association. They keep us very up to date on upcoming news. Next year will be a legislative session year for Texas. But at this point, I’ve not heard of anything coming out of or potentially coming up in Texas.

Okay. And then just maybe last from me on – just from an operations standpoint, I think by our tracking, it seemed to us that Denver took a little bit longer to get credentialed versus Houston and I think they needed those patients, if I'm not mistaken. So just curious as to why the ramp was maybe so much longer in that market, especially given that Houston I think was a little bit softer from a volume perspective last quarter as well. So maybe any kind of color you can help give us there. Thank you.

I think one thing, Paula, take into account, remember, Houston has approximately 30 freestanding ERs to draw in-patients from, to transfer from. And many of those are good, are directionally close to our hospital there. Denver is just simply a smaller market. We only had 12 facilities at the time. So, it did take a little bit longer. It’s a different market for sure. But I think I can absolutely point to two times the number of freestanding ERs to provide patient transfers to the in-patient ward.

That makes perfect sense. Okay, thank you.

I would just add comment to sort of your regulatory question. Again, I think we’ve spent a lot of time discussing here the fact that that we have actively transitioned this business from a non-HOPD business to an HOPD business. And that’s a significantly different position to be in.

Operator, next question please?

Our next question comes from Matt Borsch from Goldman Sachs. Please go ahead.

Yes, thank you. Good morning. Or good afternoon. So I wanted to ask about the – if you look at the dollar volume of the DSOs, how much of that is identifiable as out of network? I'm trying to understand whether there is an issue here with how payers are handling that part of the billing. Or is it – if it's mostly in network, what do you surmise is happening, if anything, with the payers that you’re working with that you have so much accounts receivable outstanding?

It's not broken out in the out-of-network/in-network sense. I think – look, Greg said this earlier. There's a constant tension between payers and providers and they will choose to push in different ways and different areas. It’s not consistent. We can’t tell you that there is one code or one facility or anything else. And I think – look, I said it before. We should have recognized the situation sooner and brought the resources to bear that we have. But we continue to pursue these claims very actively.

But, Matt, specific to your question, if you look at our markets where we’re partnered with Dignity, UCHealth, and THR, we’re in network because we’re using their contracts, right? And where we’re, we’re either developing our own contracts to be in network or we’re basically billing to multi-clients. So, in a way, that’s in-network as well from the standpoint of the way the carriers are treating this. So, we don’t have what you've seen in other subsectors in the industry where people are avoiding going in-network and thinking that's a great game to play. That is not a great game to play and that’s not the game we’re playing. We’re an in-network provider.

That’s good to hear. I guess what I’m also just trying to get at is, how much of it a process problem that relates to Adeptus and McKesson, the vendor that you’re working with, and how much of it is driven by maybe some concerted effort or implicit effort by payers to push back against whether it’s HOPD or not, the freestanding emergency room model?

That’s a good question. I don’t know whether they’re picking on just freestanding emergency rooms. Look, we’re billing emergency room services as Dignity Health basically. And so, how do they know whether it's a freestanding emergency room or a Dignity Health emergency room in the mothership downtown, right? So, I think what we’ve got here is a need for us to marshal resources, to go back and say, let's build a new paradigm on how we’re going to get paid on these claims, and we’ve got to be more aggressive on collecting on the patient responsibility side of the equation as well because, as you know, more and more – if you look at what's going on in the market, more and more the bill is shifting to the individual. And we’ve got to be more aggressive on ways of collecting what’s owed to us from the patient as well. So, we’ve got a lot – but, look, we’re going to get after this. We’ve got to get after the payers. We’ve got to get after the individuals who can pay to get a system in place that pays us for the services we’re rendering.

And maybe I can could ask on the volume front. Is there – do you have any sense for how much of the uptick in the run rate, which seems pretty pronounced in October as compared to what you experienced in the third quarter, how much of that do you think is organic and how much of the uptick relates to HOPD conversion?

No way to – I’m not sure how you would break out organic uptick in an HOPD market versus something that was HOPD.

Look at the numbers right. Our non-HOPD markets, San Antonio and Austin, flat. Pretty much flat.

Yeah. We haven’t seen an uptick in October that would indicate you’re going to get a big positive surprise in the non-HOPD markets in the fourth quarter. The HOPD markets, we’re seeing a significant lift. So, I’d say, based on very preliminary indications, most of the lift is because we switched to HOPD.

We started the quarter at 40% and we finished it 79% HOPD.

Last question for you. Just on your effort to move away from a model where you’re the sole source of capital to the joint ventures. What makes you optimistic that you're going to be able to make headway in changing the business model that you have today and what do you think we’re going to be contemplating as sacrificing in getting there?

That’s a good question. And I would say that – what makes us confident? Well, one existing venture doesn’t make us entirely confident of a bright future, but we have one, right? We have Ochsner. We have a lot more out there under discussion, which, obviously, we can’t disclose at this point in time. But these are all structured in a way that is similar to the Ochsner deal, right? So not 100% of our pipeline is structured ala Ochsner. There are still some that are old model. But we’ve got to work through that. And we’ll be mindful of our capital resources in doing that. And in terms of what we give up, that is a TBD as we continue to try and grow this. It’s a negotiated process between ourselves and our partners. But based on what we think we can achieve in these negotiations, we’re going to achieve very satisfactory returns on this. And by the way, returns on invested capital will be way better, way better. So, net-net, I think in terms of shareholder value, we’re moving in the right direction.

Okay, thank you.

Our next question comes from Jason Gurda from Keybanc. Please go ahead.

Thank you. Good afternoon. I want to follow up on Matt’s question there on the in-network status. My understanding is that a number of the hospital systems can be in-network, but the physicians that work in the ER can be out-of-network. What's the status of your physicians?

Most of our physicians, just like other ER physicians are out of network, but we bill at very reasonable rates. We don’t balance bill our patients either.

You don't balance bill the patients? Did you say earlier, though, that part of the DSO issue was related to balance billing?

No, it’s not.

No. For the professional services, he’s saying we don’t balance bill the patient.

That’s what I’m saying.

Okay. But for the facility fee?

Yeah, we don’t balance bill the patient. This is the patient responsibility as determined by the payer.

That’s right.

Okay. It would just be co-pays, deductibles?

Correct.

Correct.

Is that the majority of the DSO increase or is it some of it related to the managed care owing you?

It’s managed care owing us. It’s about pursuing the full bill that we’re owed.

Okay. When we think about the weakness in volumes that you're seeing in the non-HOPD markets, are you able to tie to some of that to competition or is it so broad-based that it’s a bit of [indiscernible] competition?

Look, the example, Jason, that would use is the Houston market, before we flipped it to HOPD, that is probably our most competitive market. And that is a place where we were seeing, as we detailed, significant decreases in volumes. And as we said, Q3 saw 15,222 patients in Houston. And in the hospital which opened on the 11th, so flipping to HOPD for the entire month of October, that number was 7,354. So, I think there's – I think there are competitive issues. And I think flipping to HOPD has an impact there.

Look, I guess, if you’re at a market in Houston that we think is at this point, relatively speaking, saturated in terms of freestanding ER penetration between ourselves and some of our competitors, I would rather be in our position now or we can take all payers and create the volume throughput that we’re getting rather than hope commercial patients appear at our door magically. So, I think we’re in the right position there. And I think in terms of the ability that that gives us to have staying power against our competition, it heightens our staying power. And so, again, I think the strategy will play out, but I think from a competitive positioning standpoint, it seems like we’re in a good place there. And we haven’t been in a good place there for probably 18 months as we watch these volumes deteriorate.

And just last question there. Appreciate all the details you provided here. Frank, on how you – the DSO number that you calculated earlier, is that available to us?

It’s based off of the balance sheet.

Yeah, it’s based off the balance sheet. We can follow up if you need, Jason.

But there’s no component of it that is off-balance-sheet?

No.

Okay, thank you very much.

Sure.

Our next question comes from Kevin Fischbeck from Bank of America Merrill Lynch. Please go ahead.

So, I guess, you’re looking for about $21 million in EBITDA in Q4 off of the $9 million in Q3. Can you provide a bridge from Q3 to Q4, how you get there?

I think we believe that we’re going to see increased patient volume as a result of the successful conversion of Denver, Houston and, ultimately, Colorado Springs to HOPD markets.

Is there any investments that were made in Q3 that are not going to be in Q4?

Well…

In Q3, that are not going to be…?

Well, not repeated. I think what you’re saying is, we had investments in the opening of the Denver hospital and the Houston hospital, which are – again, Houston opened at the very beginning of the fourth quarter, not repeated, and we’ve got Colorado Springs which again is in its certification period, but should be open sometime this quarter. So, there's – so we're not seeing those preopening expenses from two hospitals.

I think if you look at it, we, basically, we looking at our two non-HOPD markets, San Antonio and Austin, are still going to be mediocre performers in the fourth quarter. And we don't see any reason to change our expectation there. We expect Houston to turn around significantly. So, as Frank indicated, if you look at Q2 to Q3, we probably saw just in terms of location profitability, $4 million to $5 million deferment in profitability in the Houston market from Q2 to Q3. And I think Frank outlined why that was, principally driven by 2,000 less patients in that market than – 2,000 less patients in the third quarter than in the second quarter. And so, when you look at what we’re seeing and you look at the transfer from non-HOPD to HOPD, it’s our reasonable expectation that that market will turn and that we’ll see a reversal in that – in terms of what happened in the third quarter, we’ll see a reversal in the fourth quarter. Denver, same thing. Denver, Graham, tell me again, when did we switch to HOPD in Denver?

September 20.

So, basically, right before the start of the fourth quarter, we’re now open for business in terms of taking all payers in Denver. We’re working like crazy to get the certification in Colorado Springs to begin to take all payers. So, we expect that you'll see a turn in the Denver market in the fourth quarter as well. So – and Dallas – look, Dallas is a more mature, call it, HOPD market. But early indications are, maybe the THR alliance and the rebranding exercise that went on will have some positive results. Too early to tell. But I think you couple all of that then with reduced outlays for hospitals in terms of the startup expenses and we can see our way clear to a much better fourth quarter than what’s – than it was in third quarter.

This concludes our question-and-answer session. I would like to turn the conference back over to Mr. Hall for any closing remarks.

Well, look, we want to thank you all for joining us today. As we've indicated, this was not an easy call to do for any of the team here. We’re not happy with these results. But I do think that we’re all confident in the future of this company. We’re all confident that we’ve got the strategy in place to make this company successful. And we’ve got significant wood to chop here in the short term to make sure that we get back to where we need to be on a lot of these operational issues and some of the financial and liquidity issues that we’ve talk about here on the call. So, thank you so much for joining us and we look forward to speaking with all of you again in the near future.

Ladies and gentlemen, the conference has now concluded. Thank you for attending today’s presentation. You many now disconnect.