Good morning, everyone, and welcome to HealthSouth's second quarter 2016 earnings conference call. At this time, I would like to inform all participants that their lines will be in a listen-only mode. After the speakers' remarks, there will be a question-and-answer period. You will be limited to one question and one follow-up question. Today's conference call is being recorded. If you have any objections, you may disconnect at this time. I will now turn the call over to Crissy Carlisle, HealthSouth's Chief Investor Relations Officer.

Thank you, operator, and good morning, everyone. Thank you for joining HealthSouth's second quarter 2016 earnings call. With me on the call in Birmingham today are: Jay Grinney, President and Chief Executive Officer; Doug Coltharp, Chief Financial Officer; Mark Tarr, Chief Operating Officer; Patrick Darby, General Counsel and Corporate Secretary; Andy Price, Chief Accounting Officer; Ed Fay, Treasurer; and Julie Duck, Senior Vice President of Financial Operations. Before we begin, if you do not already have a copy, the second quarter earnings release, supplemental information and related Form 8-K filed with the SEC are available on our website at www.healthsouth.com. On page 2 of the supplemental information, you will find the Safe Harbor statements, which are also set forth in greater detail on the last page of the earnings release. During the call, we will make forward-looking statements which are subject to risk and uncertainties, many of which are beyond our control. Certain risk, uncertainties and other factors that could cause actual results to differ materially from management's projections, forecasts, estimates, and expectations are discussed in the company's SEC filings, including the earnings release from our latest Form 8-K, the Form 10-K for the year ended December 31, 2015, and the Form 10-Q for the quarter ended March 31, 2016 and June 30, 2016 when filed. We encourage you to read them. You are cautioned not to place undue reliance on the estimates, projections, guidance, and other forward-looking information presented. Statements made throughout this presentation are based on current estimates of future events and speak only as of today. The company does not undertake a duty to update these forward-looking statements. Our supplemental information and discussion on this call will include certain non-GAAP financial measures. For such measures, reconciliations to the most directly comparable GAAP measure is available at the…

Your first question comes from the line of Sheryl Skolnick of Mizuho.

My goodness, okay. So let's, if we could, this is a ton of information, and all of it very high quality and very helpful. Jay F. Grinney - President, Chief Executive Officer & Director: Hey, Sheryl. Excuse me. We're having hard time hearing you.

Okay, let me try something else. Just bear with me. Jay F. Grinney - President, Chief Executive Officer & Director: Sorry.

Okay, this should be better. Jay F. Grinney - President, Chief Executive Officer & Director: Yes, it is.

Sorry. Okay. So a ton of information, really high quality, fabulous job. You gave us a great heads-up in the first quarter telling us that you're upping your guidance when you never do. This is what management teams should do. Now I want to try to dive into something that you mentioned. So you said in particular, you called out strength in your Medicare Advantage business inside the IRFs. And I'm going to ask this question in the context of transformation of payer and upstream provider thinking about the IRF as a high-quality, ultimately low-cost setting. What's behind that? Is it a shift in the demographics of your market into Medicare Advantage, which may be happening, or do you think you're making strides with private sector Medicare business that you'll then be able to translate into the public sector Medicare business? And then I had a follow-up. Jay F. Grinney - President, Chief Executive Officer & Director: So the answer is the latter. We're making strides with the plans and getting them to understand and appreciate that value proposition on an episode basis. And they're seeing it, as I mentioned in my comments, particularly in the area of stroke rehabilitation. Mark J. Tarr - Chief Operating Officer & Executive Vice President: And, Sheryl, this is Mark. In some cases, we've seen where hospitals have improved what we call the conversion rates. So in many markets we have always gotten these types of referrals from physicians in the past but were unable to convert to an admission because the Medicare Advantage plan would not approve the admission. Over the years, as Jay said, we've been able to go out and articulate our value proposition, highlighting the outcomes, particularly with stroke patients, and that has subsequently led to an increase in what we refer to as the conversion of referrals to admissions in many of our markets. Douglas E. Coltharp - Chief Financial Officer & Executive Vice President: And we believe that the stroke guidelines, as Jay mentioned in his comments, that came out just the beginning of May are going to further that trend.

Right, I would agree. And so that leads me into the second part of this as part of movements to alternative payment mechanisms, which I would agree can really overall only benefit you. But it seems that Wall Street is having trouble understanding that just because you got hospital attached and therefore a high per diem, you can actually be cost effective over a 90-day episode. And so when we hear these numbers that CJR might cost you a couple of million dollars of EBITDA on a pretty big base of nearly $800 million this year and growing next year, and then the cardiac, very back of the envelope, worst case another couple of million. But wouldn't you think that with the strides you're making and given that cardiac and stroke are still closely related that there's an opportunity for the company to offset that through the same kinds of progress you've made with Medicare Advantage on stroke with cardiac? Jay F. Grinney - President, Chief Executive Officer & Director: Absolutely.

And then actually moving HealthSouth and other high-quality IRFs into a position of site of care of choice? Jay F. Grinney - President, Chief Executive Officer & Director: Absolutely, and the numbers that I mentioned were unmitigated numbers.

Right. Jay F. Grinney - President, Chief Executive Officer & Director: As I said, we do believe there are market share gain opportunities in those markets where we have a cost advantage. We think we can gain share in markets where we don't have a cost advantage today by moving those hospitals to best-of-class status with respect to acute care transfers and discharges to SNFs. And then additionally, as I mentioned in our comments, we are developing a risk-sharing model that we will be rolling out at the latter part of this year. And apropos of the first part of your question, Sheryl, this initial wave is to go to the acute care hospitals in the bundled markets and to offer the risk-sharing model to them so that we can essentially take the post-acute management risk of these patients off of their plate. We believe that that same model can be ultimately used with the Medicare Advantage plans. And so I think that the trend toward, A), looking at quality and outcomes as an important consideration, and B), looking at cost from a 90-day episodic basis all really play into the strength of our facility-based and home-based services. And as we look at this, frankly, the one post-acute service that we believe is most at risk are the nursing homes. Virtually every kind of care that's provided in a nursing home can be provided either in an IRF or in home health. The same can't be said for nursing homes being able to take the patients who are currently treated in our hospitals because those patients all require hospital-level care. So as we think about the future – and this is our view – but as we think about the future, the disintermediation is going to occur primarily in the skilled nursing area, not in IRF and not in home health. And our view is that skilled nursing eventually is going to go back into more of a convalescent location for the elderly and the poor. And that's just our view long term.

Your next question comes from the line of Whit Mayo of Robert Baird. Whit Mayo - Robert W. Baird & Co., Inc. (Broker): Hey, thanks. Good morning. I don't know if April is there, but I'm curious to hear a little bit more about the home health pre-claim review, the pros and cons of the pilot, and just the work that you guys are putting forth to manage through this. And furthermore, just curious what you think the actual objective here is from CMS. I'm just trying to size this up as a risk factor? Jay F. Grinney - President, Chief Executive Officer & Director: Good morning, Whit. No, April is not here. I'm assuming that she is doing something that is very productive and adding value to Encompass. I will tell you our take, and we meet with April and her team on a regular basis. We just had a big meeting over in Dallas with them, quarterly meeting last week, and their assessment is as follows. Number one, pre-claim review is a heck a lot better than waiting in line for the Medicare contractor to give them permission to treat the patient. So it's the lesser of two evils. To your question, what is CMS trying to achieve? Ostensibly, what they're saying is they're trying to root out fraud and abuse. Our view and April's and her team's view is that this is really not the correct way to do it. There are certainly much more targeted means of going after the fraud that may exist in the space. So it will be inefficient. We are going to have to add some incremental staff. That incremental staff in the home health segment is going to have to make sure that the documentation interface with the MACs are perfect.…

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

Good morning. Thanks for taking my questions. Mark J. Tarr - Chief Operating Officer & Executive Vice President: Good morning, Gary.

Just maybe a little bit more on the update on the issues with Cahaba, any conversations with them or maybe more importantly any conversations with CMS on any type of broader resolution on the horizon? Jay F. Grinney - President, Chief Executive Officer & Director: We do have a meeting that we are scheduling with CMS and with Cahaba in the not too distant future. This is something that was really organized with a collective agreement that it would make sense. And we hope that at that meeting we'll be able to lay out where we believe there are significant areas of ambiguity. And our approach is to see this as a problem solving opportunity. The good news is that the folks at Cahaba are very supportive of that approach as well. And the good news is that the folks at CMS are also interested in trying to see if there is a path forward where these gray areas of interpretation can be narrowed and the lines of what is and is not allowable can be more clearly drawn.

And then in recent quarters you've discussed more effort on sort of the documentation and just making sure the documentation is as clean as possible. How is that going? Mark J. Tarr - Chief Operating Officer & Executive Vice President: Hey, Gary, it's Mark. It's going quite well. We are now up to 93 of our hospitals have the ACE IT system installed which is a critical part of this documentation process. We also have a number of physician leadership out doing presentations on-site, in-services with our physicians in our hospitals addressing the problematic areas. So we feel very good about the progress that we've made in terms of the completeness and accuracy of the documentation component in our records.

Your next question comes from the line of Frank Morgan of RBC Capital Markets. Jay F. Grinney - President, Chief Executive Officer & Director: Good morning, Frank.

Good morning. Hey, I hopped on late. I hope this hasn't been asked already. But just looking at same-store results, the same-store volume numbers, is it of the 1.9% versus usually it's been running 2.5%, 3.5%, just curious any color there? Is that more driven by just a larger percentage of more recently added facilities the same-store, or do you think that's sort of the new norm for same-store in that, we can call it 2% range versus, say, a 3% range? Jay F. Grinney - President, Chief Executive Officer & Director: I do think that part of it is is that same-store denominator is certainly growing. But if you look at our business model, we've said for some time that the expectations for volume growth in the IRF segment is in that 3% plus. And obviously that's going to vary for a lot of different reasons just because things don't progress on a straight line. But in that 3%, we've always said that about two-thirds of that is going to be same-store and a third is going to be new store. Now, clearly when you bring on the number of new hospitals that we did last year with Reliant, those numbers get skewed. So that 1.9% – 2% is what we think and have thought for a while as sort of that expected range for same-store. Now, we're not going to be comfortable with that, obviously, but we're always going to be trying to do better than that. But that's, I think, the right range for you to think about. Douglas E. Coltharp - Chief Financial Officer & Executive Vice President: And Frank, this is Doug. I'd note as well we're up against the 2.8% same-store comp from Q2 of last year. And if you look at the last eight quarters, including the most recently reported quarter, our average same-store growth in the IRF segment was 2.7%.

Okay, just one follow-up on a different question. In terms of just the updated guidance on the year, how would you generally characterize that in terms of conservatism? And is it also – obviously there was – you had a beat in the quarter, but in terms of your view about the balance of the year, is there anything you've got built in to some of these issues you've raised on the home healthcare side that make it a little more conservative? Thanks. Jay F. Grinney - President, Chief Executive Officer & Director: No, it's consistent with the approach that we've always taken, which is a pretty humble approach with respect to the patients that we treat. As you know, our business is driven by the number of patients that we serve, and we don't take anything for granted with respect to volumes and being able to execute on that. So there is nothing new in terms of the approach or the philosophy. I think we've outlined on page 14, and Doug did an excellent job of summarizing, some of the considerations for that second half.

Your next question comes from the line of John Ransom of Raymond James. John W. Ransom - Raymond James & Associates, Inc.: Hey, good morning. Your volume numbers in home health this quarter, is there any way to tease out what the effects may or may have not been from CJR? In other words, are you already starting to take any share from the home – from the SNFs? Jay F. Grinney - President, Chief Executive Officer & Director: John, that's no. The answer to your question is no. There's really no way of teasing that out. In talking with April and her team, they do believe that they are getting some incremental orthopedic business. But it's really too early to know with certainty whether or not it's CJR-related or whether or not they may be other factors in the market. I think it's going to take several months for us as an industry to really understand CJR, in part because we do know in many of our markets that the acute care hospitals are just now digesting the data that has been provided, are just now really seriously looking at the post-acute spend. In some markets they're a little more ahead than others, but there's still a lot in this first year where there isn't a penalty associated with CJR. There's still a lot of fact-finding and decision making going on, which gives us some confidence that this risk model that we're developing and should have rolled out by the end of the year can help solidify the thinking of the acute care hospital partners and kind of line us up with them going into next year. John W. Ransom - Raymond James & Associates, Inc.: Great. And just to ask the requisite stupid question on the call, could…

Your next question comes from the line of A.J. Rice of UBS. Jay F. Grinney - President, Chief Executive Officer & Director: Hey, A.J.

Hi, everybody, just two areas, I guess, real quick. In the commentary on the fourth quarter and I guess slide 14 of your deck, and you mentioned it, Doug, I think the $1.5 million drag from the new home health update, is that the way to think about that? That's basically two months of impact the way the discharge payments and all work, and so we need to add another month to get the quarterly run rate for next year? Is that the right way to think about it? And is there any way to quantify the administrative costs from the pre-claims review that you're factoring into the guidance for the back half? Douglas E. Coltharp - Chief Financial Officer & Executive Vice President: A.J, it's Doug. I think that you're looking at it the right way in terms of the pricing impact. Now, all of that is on an unmitigated basis and assumes the same patient mix moving into 2017.

Okay. Douglas E. Coltharp - Chief Financial Officer & Executive Vice President: But with those caveats, it would create a $10 million to $12 million revenue and therefore EBITDA headwind as we head into 2017. We don't intend to stand still on that. I think that there are opportunities to mitigate at least a portion of that. With regard to the administrative cost, it's difficult to say right now because the dates for the state rollouts were established as not sooner than, but we don't know specifically when they'll line up. We'll need to add resources in advance of those becoming live, but we don't want to add them too far in advance. I also want to comment, and this is an elaboration on Jay's explanation of these provisions earlier on, that although we believe that there may be some friction cost here on the administrative side and also some potential increases in DSO and maybe even bad debt expense for a period of time as we transition to this new provision, we think that that will be temporary. We think there is going to be some timeframe for both the MACs and the providers to transition to the pre-claims demonstration. But over time, as it relates to both bad debt and to DSO, I'll remind you of two things. One is that about 80% of our Medicare payments are under the RAP program, which is the request for advance payment. And that's where we actually get paid about 60% from Medicare at the beginning of the episode, and that is not going to change with the pre-claims demonstration. So we'll continue to have that amount coming in up front. And then as it relates to both the longer-term implications on bad debt and also the administration costs, as Jay mentioned, if this program continues, it should ultimately supplant the work that is being done by ZPICs and also on ADRs and so forth. And so both the impact on bad debt can come down or should be neutralized, and the administrative costs that have been applied toward dealing with those audits will really be substituted for any of the administration on the pre-claims review.

Okay, great. And then just my follow-up, I have to ask my obligatory bundle payment question. We've been talking to providers. Obviously, some of them are starting to look at this idea of gain-sharing with constituencies outside of the hospital to share in any kind of savings that you may realize. Having the IRF capability and the home health capability, have you entered into any of those discussions, or are we still too early on that? Maybe elaborate on whether any of that kind of thing is going on behind that scenes. Jay F. Grinney - President, Chief Executive Officer & Director: That's exactly what we are positioning ourselves. First of all, those discussions are going on behind the scenes. And it plays right into what I said earlier and what we mentioned on the first quarter call, which is the development of this risk-sharing model that we will be rolling out and going to the acute care hospitals with towards the latter half of this year and into 2017 to do exactly what you are commenting on, and that is to volunteer and to offer to be their risk-sharing partner. In fact, we are looking at it not so much on sharing the upside, although certainly that's going to be a part of it. But what we want to do is we want to provide that downside risk safety net for the acute care hospitals. So I think what you're hearing from the market is exactly what we're hearing, and we are actively driving that in many of our situations. Douglas E. Coltharp - Chief Financial Officer & Executive Vice President: And, A.J., recognize that right now there's no ability for anybody to do that because at least under the bundled payment initiative for CJR because there's no risk-sharing…

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

Good morning. Actually this is Joanna Gajuk on behalf of Kevin here. Thanks for taking the last question. Just going back on the discussion around the cardiac before the bundle and the expansion of CJR, there was also this provision that CMS came out with about the, what they call a new model to increase cardiac rehabilitation utilization. So any comment there? Is that anything that you might benefit from in terms of potential adjustments to the pressure on IRFs, if at all? Thank you. Jay F. Grinney - President, Chief Executive Officer & Director: No, there won't be pressure on IRFs. That's an outpatient program. There is no pressure on IRFs.

All right. But are you able to participate to benefit from that? Jay F. Grinney - President, Chief Executive Officer & Director: Yes, if we wanted to. If we wanted to participate, we might do that, but that's not a current business line that we're in. Now, on the home health side, that's different, but the program that they're talking about in the bundle is for outpatient services. And, you know, frankly, the rates that are in there are not particularly attractive. So that's not something that we would look to move into.

Great. I figured I'd just check. Thank you so much for taking the last question. Thank you.

Thank you. I will now return the call to Crissy Carlisle for any additional or closing remarks.

Thank you. If anyone has additional questions, I will be available later today and next week. Please call me at 205-970-5860. Thank you again for joining today's call.

Thank you. That does conclude today's HealthSouth second quarter 2016 earnings conference call. You may now disconnect.