Tenet Healthcare Corporation (THC) Q4 2015 Earnings Report, Transcript and Summary

Good day, everyone and welcome to the Fourth Quarter 2015 Tenet Healthcare Earnings Conference Call. My name is Dana, and I'll be your operator for today's call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. The slides referred to in today's call are posted on the company's website. Please note the cautionary statement on the forward-looking information included in the slides. I will now turn the call over to Trevor Fetter, Tenet's Chairman and Chief Executive Officer. Mr. Fetter, you may begin Trevor Fetter - Chairman, President & Chief Executive Officer: Great. Thank you, operator, and good morning, everyone. Let me start by saying that we achieved what we set out to accomplish in 2015. We hit our outlook for the year. We significantly improved our cash flow position. We made substantial progress on the plan to improve our hospital portfolio. We expanded our higher-margin businesses, and we became an even stronger partner to not-for-profit health systems opening up new avenues for growth. With that overview, there are a few topics I'd like to review on today's call. I'll begin with our financial and strategic highlights for the quarter and the year. Further to the discussion we had on last quarter's call, I'll offer my current perspective on our capital allocation priorities. And finally, I'll provide a high-level summary of our outlook for 2016 and the next few years. As you can see on slide three, we drove strong financial results in 2015, including adjusted EBITDA of $2.276 billion. This is a 17% improvement over the prior year. Despite a challenging operating environment, fourth quarter adjusted EBITDA was right at the midpoint of our outlook at $613 million. In fact, adjusted EBITDA was within or above our outlook range in every quarter of the year. One of our most important achievements last year was to dramatically improve free cash flow. 2015 was our best year for cash flow generation in more than a decade, with the company delivering $405 million in adjusted free cash flow. We are targeting $400 million to $600 million of adjusted free cash flow in 2016 and expect to drive further improvement in 2017. As you know, enhancing margins and cash flow has been a primary focus for Tenet for many years, and in 2015 we demonstrated the cash-generating power of the business. We expect to translate EBITDA growth in 2016 and 2017 into improved cash flow from operations and anticipate even greater improvement in adjusted free cash flow, as a result of entering a sustained period of lower spending on major capital projects and new hospitals. Importantly, once we complete the projects that are currently under construction, it will be the first time in more than a decade when we will not have at least one new hospital or major tower under construction. I mentioned this on the third quarter call, but let me add some details. We reduced capital expenditures from $933 million in 2014 to $842 million in 2015. We plan to invest between $850 million and $900 million this year, as we reach the completion of our last remaining capital-intensive hospital construction projects. These projects include a new orthopedic institute in San Antonio, a new patient tower in Delray, Florida, an entirely new hospital that we're building in El Paso, and a new children's tower in Detroit. All of these projects are on track to be completed in the first half of 2017. As a result, we expect our capital expenditures to be roughly $150 million lower in 2017 than 2016. This new lower base of capital expenditures still allows for a healthy level of investment in new projects to create growth and competitive advantage and will enable us to produce even greater free cash flow next year and beyond. Not only is it roughly $150 million better than 2015 and 2016 levels, but it's roughly $200 million lower than the average of published analyst models. Now let's spend some time talking about our results for the quarter. In our hospital segment, our growth in adjusted admissions was softer-than-expected at 0.3%. One of the primary contributors was a weaker season for low acuity-admissions like the flu. Most importantly, we continue to drive admissions in several high-acuity service lines. We've spoken many times about our focus on growing the more profitable surgical programs within our hospitals, and on our last quarterly call, we highlighted our strong performance in a few of those categories. I'm pleased that we continued to grow volumes in each one of those areas, sustaining momentum from the third quarter, and underscoring that we're making sound investments in these programs. We had solid volume growth in our hospital-based outpatient centers and our ambulatory segment produced strong results that exceeded our expectations. Bill Wilcox and his team at USPI drove a 12.5% increase in same-facility, system-wide revenue and EBITDA increased by 17.9%. I could not be more pleased with our decision to create the USPI partnership and with their operating performance to-date. Conifer delivered fourth quarter results in line with our expectations. 2015 was a great year for the business with revenues up 18% and EBITDA up 30%. Conifer's deep expertise across the healthcare services sector has been a real selling point to potential health system partners, and we believe we have a compelling channel of new client prospects in 2016. I'm very pleased with our strategic accomplishments last year, and I'll run through just a few of the highlights as summarized on slide four. We significantly sharpened our hospital portfolio, completing six transactions between July and December. These include the sale of a majority position in our Dallas hospitals and the divestitures in North Carolina and St. Louis. We raised approximately $500 million in cash from our divestitures and redeployed the proceeds into a combination of other acquisitions, paying off our revolver entirely and repurchasing $40 million of stock in the fourth quarter. We also signed a definitive agreement to sell our five Atlanta hospitals to WellStar and expect to complete the transaction as early as March 31, at which point we expect to receive another $575 million in proceeds. In addition, we took important steps to improve our supply-chain function and capture efficiencies. We signed a new four-year agreement with our largest health plan customer, and we expanded Conifer's base of clients to drive strong revenue growth in 2016 and beyond. I'm very proud of what we accomplished in our operations and with the reshaping of our portfolio of businesses and I'm also pleased that we did this while driving strong operating results in 2015. I thought it'd be a good opportunity to provide our updated thoughts on capital priorities, given how much has changed over the last seven months. Last February, we were trading at roughly $45 per share, and by mid-July, we were trading near $60. Since that time, despite demonstrating strong operating performance, the market views our company very differently than it did just seven months ago. This coincides with a natural evolution in our strategy that I first described on our third quarter call. I'd like to add some specifics today. I've shared my thoughts before on how I think about the past 13 years of Tenet in three phases. In phase one, which I'll refer to as establishing foundational excellence, we stabilized our operations, we built a new culture centered around clinical quality and regulatory compliance, and we focused on organic growth and operational effectiveness. It was also during this period that we started Conifer and established our own internal outpatient services division, which created enormous value and is now a part of USPI. I'm proudest of the fact that we generated nine consecutive years of increases in EBITDA and EBITDA margin during this period, with a largely static portfolio. Our organization has not forgotten how to do this by the way, and our skills in cost management have never been better. In phase two, which I'll refer to as building strategic platforms for growth, we positioned Tenet for the future. During this period, we enjoyed some tailwinds from the ACA in a favorable capital markets environment that enabled us to make two transformative acquisitions to achieve scale in the acute care and ambulatory segments of our business and two smaller acquisitions to fill out Conifer's offerings. As a result, we now have an acute care portfolio with number one or number two market share positions in 21 of our 30 markets. An ambulatory surgery platform that's the nation's largest with the best partner network, and Conifer is the leader in hospital revenue cycle services. Together, our three businesses have a vast network of partners and comprise in excess of 10% of the U.S. hospital market. These are the most prominent not-for-profit systems in the country and while we're already in business with all of them, we've just begun to tap the potential for our three segments to work together to expand these relationships. Phase two laid the building blocks for future growth and is now complete. Given the strategic pieces are in place and given the degree of growth in capital spending in the past several years, we will return to a more normalized level of spending. We'll focus on operational excellence, expanding our margins, driving organic growth, and generating strong free cash flow. You should think of this as phase three, which I'll refer to as driving value from the platform. As I discussed on our third quarter call and at an investor conference in January, we are reducing the large-scale M&A, turnaround acquisitions and large-dollar, long-tailed hospital capital projects that we've undertaken for the past decade. They were a good investment of capital, but these types of activities are no longer consistent with the rapid changes in the industry, nor are they necessary to meet our strategic objectives. What we invest in acquisitions will be focused on the ambulatory segment, where the opportunities are greatest and most abundant. Even then, I'd be surprised if we found more than $100 million to $150 million of acquisitions that meet our criteria in most years. I mentioned earlier that the proceeds of asset sales and our improved free cash flow outlook. The disruptions in the capital markets have created opportunities, which we believe are limited in time. We'll take a balanced approach to using capital to repurchase stock and retire high-cost debt. Between our expected EBITDA growth, improved free cash flow, lack of large-scale M&A and our divestiture program, we believe we can naturally de-lever. We also expect to maintain a strong liquidity position and have capital available to repurchase shares and retire some high-cost debt. As I mentioned earlier, we repurchased $40 million in stock in the fourth quarter and may repurchase some additional stock in the first quarter, but we do not expect the repurchase activity to be more significant until we have completed our sale in Atlanta and resolved outstanding litigation, which I'll turn to now. We disclosed in our 10-K a significant increase in the reserve for a matter known as Clinica de la Mama, which we're in the active process of working with the government to resolve. This matter involves contractual arrangements that began in the year 2000, and we first disclosed this matter in our 2012 10-K after we learned of the government's investigations. We've increased our reserve to $238 million as a result of a settlement offer we made last week, but there's no way to estimate the final settlement amount or any other terms of the resolution. Given the extensive disclosure in our 10-K and the fact that this is active litigation, we won't be discussing the topic any further in the Q&A. Before I conclude, I want to comment briefly on our outlook. We expect to deliver adjusted EBITDA of $2.4 billion to $2.5 billion in 2016, representing growth of 6.5% at the midpoint versus our pro forma view for 2015. As I noted earlier, we expect to generate adjusted free cash flow of $400 million to $600 million this year. You all have different expectations and models for our cash flow, but I hope you agree that our current outlook and comments regarding future levels of capital expenditures represent a materially stronger level of cash flows that you might have assumed in the past. Many of you've been asking what we think Tenet will look like three to five years from now. To help paint a clearer picture now that our three operating segments are in place, you'll see that we've also outlined our expectations for EBITDA growth within each business over the next few years. Dan will provide some additional details during his remarks and we hope this provides you with greater visibility into our business and our growth prospects. The key takeaway here is that we expect to deliver strong growth and translate that growth into improved cash flow over the next few years. I think this will be a very good year of value creation for Tenet. We see tremendous opportunities ahead from the growth we expect to generate in each business and the prospect for those businesses to work together, combined with the opportunities presented by our divestiture proceeds and enhanced free cash flow position. I'm confident that we have the right strategies in place to deliver on our commitments, and I look forward to updating you on our progress. And with that, let me turn the call over to Dan Cancelmi, our CFO. Dan?

Thank you, Trevor, and good morning, everyone. I'd like to start with a high-level summary of our financial results for the quarter and the year. We produced fourth quarter adjusted EBITDA at the midpoint of our outlook range, capping off another strong year for Tenet, in which we grew EBITDA by 17%. We enhanced our cash flow performance in 2015 and are positioned for additional improvement in adjusted free cash flow in 2016 and 2017. We continued to benefit from our strategies to grow higher acuity admissions. And while softer demand for low-acuity services challenged volume growth during the quarter, we were still able to deliver results at the midpoint of our outlook. We generated solid growth in our hospital-based outpatient centers, and our ambulatory segment had an excellent quarter. Conifer achieved its outlook for the quarter and grew adjusted EBITDA by 30% for the year. Finally, we continue to demonstrate disciplined cost control and believe our diligent expense management will enable us to realize further savings in 2016. With that overview, I'll now provide some additional color on our results. We produced adjusted EBITDA of $613 million in the quarter. When comparing our performance to the prior year, I'd like to remind you of the impact of the timing of the 2014 California Provider Fee revenues. As you may recall, CMS approved the program in the fourth quarter of 2014, so we recorded the entire full-year benefit of $165 million in that one quarter alone. This compares to $49 million of California Provider Fee revenue that we recorded in the fourth quarter of 2015. Once you normalize for those timing differences, adjusted EBITDA improved by 17.4%. As you can see on slide five, we grew adjusted admissions by 0.3% during the quarter, and same-hospital admissions declined 1.8%. While volume growth in the second half of 2015 was softer than expected, we were pleased that our full-year same-hospital adjusted admissions increased by 2.4% and admissions were up 1.1%. Similar to the third quarter, we drove growth in higher-acuity service lines, such as neurosurgery, orthopedic surgery, joints and infectious disease cases. Our focus on these specialty areas was an important contributor to our results again this quarter. Like several of our peers, we treated fewer low-acuity cases in our hospitals in the fourth quarter, particularly in the area of pulmonology and ENT cases. There was greater demand for these services in the fourth quarter of 2014, given the more severe flu season. We're also pleased with the continued strength of our hospital-based outpatient centers, which delivered solid results. We drove growth in outpatient visits of 3% for the quarter and 4.5% for the full year. Keep in mind, we achieved this growth without the benefit of our faster-growing, freestanding surgery and imaging centers, which are now included in the operating metrics that we report for our ambulatory segment. When you analyze our revenues in the quarter compared to the prior year, keep in mind the impact of the California Provider Fee program. After normalizing for timing differences, we generated same-hospital patient revenue growth of 3.6% and increased net patient revenue per adjusted admission by 3.2%. For the full year, net revenue per adjusted admission was 3.1% higher than 2014 and same-hospital revenue increased 5.5%. Turning to costs; on a total hospital basis, we successfully managed expenses as our cost per adjusted admission only increased 1.4% in the quarter. For the full year, our costs were only 1.7% higher, which is better than the 2% to 2.5% growth that we expected. We continue to aggressively identify and implement actions to control costs during the year. In the fourth quarter, our operators managed staffing levels very well as our total SW&B only increased 0.5% per adjusted admission. We also continued to reduce contract labor expense, which declined by 9% per adjusted admission. This was the fifth consecutive quarter we've been able to drive improvement in this spend. Between our focus on further improving our labor costs and the benefits we will generate from our supply initiatives, we believe we are well positioned for another year of solid expense management in 2016. Moving to bad debt, as you can see on slide six, bad debt expense was 7.2% of revenue in the quarter compared to 7.4% in the fourth quarter of 2014 and 7.3% in the third quarter of 2015. For the full year, bad debt expense was 7.3%. Uncompensated care as a percent of adjusted revenue was 22%, which was down 20 basis points year-over-year. This improvement was related to the decline in uninsured volumes that we experienced during the quarter, including a 1.8% decline in same-hospital uninsured and charity admissions. Turning to our hospital segment EBITDA in the fourth quarter, you may have noticed in the segment disclosure that hospital EBITDA was $394 million compared to $553 million in the fourth quarter of 2014. There are several items that impacted this year-over-year comparison. First, we recognized $124 million California Provider Fee revenue in the fourth quarter of 2014 that related to periods prior to the fourth quarter of that year due to the timing of the approval of the program. Second, we recognized $24 million of gains from asset sales in the fourth quarter of 2014. Third, we recognized $20 million of incremental malpractice expense in the fourth quarter of 2015 to settle certain cases. Fourth, the sale of our St. Louis University Hospital resulted in a $15 million year-over-year decline in EBITDA. And HIT incentives were $6 million lower in the fourth quarter of 2015 compared to Q4 of 2014. When you normalize for these differences of $189 million, our hospital segment generated 8% growth. Trevor already covered some of the key highlights on slide seven. I'll just add that we were extremely pleased with the impressive performance of our ambulatory segment, including case growth of 6.9% and revenue per case growth of 5.2%. The high value services that we are providing in our ambulatory centers with high value being defined as high-quality services at a lower price point, continued to resonate with payers and patients alike. We believe our ambulatory business remains very well positioned for continued growth in 2016 and beyond. Slide eight illustrates the solid historical performance of our ambulatory segment across a number of key metrics. For the full-year 2015, the segment generated pro forma EBITDA growth of 14.5% and growth in EBITDA less NCI of 11.7%, before deducting Welsh Carson's NCI. EBITDA and EBITDA less NCI before deducting Welsh Carson's NCI increased by 17.9% and 8.9% respectively in the fourth quarter. As you can see on slide nine, Conifer generated adjusted EBITDA of $61 million in the fourth quarter. Full-year adjusted EBITDA of $265 million came in slightly above our outlook and represented impressive growth of 30%. Turning to cash flow; as Trevor mentioned, we generated $405 million of adjusted free cash flow in 2015 compared to negative $55 million in 2014, which is a $460 million improvement. It's clear that 2015 represented an inflection point for cash flow generation, and we believe we can drive further improvement in 2016 and 2017. Now, let's discuss our outlook beginning with slide 10. In 2016, we expect to produce adjusted EBITDA of $2.4 billion to $2.5 billion, representing growth of 4% to 9% compared to pro forma EBITDA of $2.3 billion in 2015. We also expect to generate $1.3 billion to $1.45 billion of adjusted cash flow from operations and deploy $850 million to $900 million on capital expenditures. This results in adjusted free cash flow of $400 million to $600 million. If we subtract $220 million to $240 million of cash NCI distributions to our joint venture partners, this leaves us with roughly $200 million to $350 million of cash flow prior to restructuring charges, litigation costs, and settlements. Looking out to 2017, before considering any earnings growth in 2017, by simply adding the benefit of lower CapEx of about $150 million, this would imply about $550 million to $750 million of adjusted free cash flow and $350 million to $500 million of adjusted free cash flow after NCI distributions in 2017. Slide 11 is a very important slide as we've outlined our expectations for EBITDA growth by each segment for both 2016 and over the long term. As detailed on the bottom half of the slide, we believe we can drive 3% to 5% EBITDA growth over the long run in our hospital business, 8% to 10% growth in the ambulatory segment, with the benefit of a regular stream of routine-size acquisitions each year and about 10% growth at Conifer. Some years are likely to be stronger, while some years might be softer in periods where we make additional investments to enhance growth or expand services. There are a few other points that are helpful to think about for each of the segments. In the hospital segment, on a pro forma basis, after adjusting for divestitures, we expect EBITDA to increase by 3% to 5% in 2016. The ambulatory segment is a key source of our growth in 2016, with EBITDA and EBITDA less NCI both expected to increase by roughly 15% to 20%. The year-over-year improvement will be generated by organic growth, completed and planned acquisitions and synergies. Conifer expects to generate another strong year of revenue growth in 2016, as we continue to integrate new customers, including additional Catholic Health Hospitals and Dartmouth-Hitchcock. We anticipate Conifer's revenue growing in a range of 10% to 15% to nearly $1.6 billion this year. As is typically the case with these large outsourced customers, our services during the initial 18 months to 24 months produce lower margins as we integrate our operations. We are also making targeted investments this year to further position Conifer for additional growth. Despite these investments, Conifer anticipates producing about $265 million of EBITDA this year, or growth of 4% excluding $10 million of non-recurring customer incentive revenues it recognized in the first quarter of 2015. Another way to think about Conifer's EBITDA growth is to compare Conifer's projected 2016 EBITDA to the $244 million they generated on an annualized basis in the second half of 2015, which is a growth rate of 9%. Before we conclude, let's spend a minute on our capital structure on slide 12. When you think about Tenet and our leverage, there are a few important points to consider. First, 94% of our debt is fixed, so short-term increases in rates have an immaterial impact on our interest expense. Second, over 80% of our debt matures in 2020 and beyond. Third, the piece of debt that is coming due consists of senior secured first lien notes in 2018. Fourth, as we continue to grow EBITDA, this will create additional secured debt capacity. For example, every $100 million increase in EBITDA gives us another $300 million of first lien secured debt capacity. Fifth, in light of our expectations around improved free cash flow generation, we may consider retiring some of our higher-cost debt as a means of enhancing shareholder value. And finally, the covenants in our secured notes that prescribed certain secured debt-to-EBITDA ratios are incurrence tests, not maintenance tests. This is a very important distinction because we only need to meet these ratios at the time we incur or refinance secured debt. We believe our capital structure is well suited to weather volatility in the capital markets and maintain adequate levels of liquidity at all times. In summary, we are pleased with our performance in 2015. We generated EBITDA each quarter within or above our outlook range, drove strong growth in our higher-margin businesses, significantly improved our cash flows, and effectively managed our costs. Our performance demonstrates that our strategies are delivering tangible results and that we're on a solid path to improve cash flow and margins in the years ahead. I'll now ask the operator to assemble the queue for our Q&A session. Operator?

Thank you, sir. And we'll go first to A.J. Rice with UBS.

Hello, everybody. First of all, I appreciate all the restructuring you've done. I think, Trevor, you made the comment that now you're in a top position in 21 of the 30 markets. Is sort of this it on the restructuring or are there further opportunities you're pursuing and will they be such that they create some debt repayment or cash flow enhancing opportunities if you do pursue? Trevor Fetter - Chairman, President & Chief Executive Officer: Good question, A.J. Let me ask Keith to comment on that if there is more work that we're undertaking.

A.J., there's a few other markets that would be among those nine markets where we're not one or two that we are looking at and continue to work through. Some of those will take some time to get done, but we think we still have some opportunities there that can generate some additional capital.

Okay. And then maybe just on the Georgia situation. So that's $500 million in proceeds. Can you tell us a little bit about your intention there and is – that's been delayed a little bit. Is the litigation, because I think it relates to some of those facilities, is that holding up or is that totally separate from what's going on in terms of trying to close those transactions?

No. The litigation is really separate from closing the transactions. That's not holding it up. It just – it takes a little – it'll take a little time. We still are hopeful that we'll be able to close that by the end of the first quarter. Trevor Fetter - Chairman, President & Chief Executive Officer: And I think you said the proceeds were $500 million, they are $575 million.

Right. Right. And will that be going to – are those earmarked at this point? Trevor Fetter - Chairman, President & Chief Executive Officer: No.

Okay. You won't say – any comment about whether debt, particularly the debt paydown or whether share repurchase or what – hold it for working capital needs or any thoughts? Trevor Fetter - Chairman, President & Chief Executive Officer: No, I think I laid out in my prepared remarks sort of a comprehensive view about the use of sources of capital and cash flow, whether it's from operations or from transactional activity. And I think it was a balanced approach that I described involving investments, retiring high-cost debt, repurchasing shares. We have announced already last year the share repurchase program that was to be funded by proceeds from divestures. And so, I think that's about as specific as we'll be today.

And we'll take our next question from Whit Mayo with Robert Baird. Whit Mayo - Robert W. Baird & Co., Inc. (Broker): Hey. Thanks. Maybe just ask that question a different way. The first quarter typically can be a fairly soft cash flow quarter. So can you help us think through the sources and uses of capital over the next quarter or two to fund the obligations, all the working capital, the put call? That would be helpful. Trevor Fetter - Chairman, President & Chief Executive Officer: Sure. Dan will take care of that.

Good morning, Whit. How are you? Certainly, when we complete the Atlanta transaction, that'll be a source of cash proceeds as we move through the year and continue to grow our cash flow generation. That certainly will be a source of cash flows to fund our business, as well as obviously we have our $1 billion line of credit as well, as well as from some of the transactions that we completed, we'll continue to realize some proceeds as some of those working capital amounts wind down and we collect some of the receivables. Whit Mayo - Robert W. Baird & Co., Inc. (Broker): Okay. And maybe just update us on your current self-pay and balance after collection rates, whether or not there's been any material change in those numbers.

There really hasn't, Whit. We go through each quarter, we do a number of different analyses, including an 18-month lookback where we look at receivables and then we look at ultimate collections on those receivables. And then in addition to other analyses we perform, we monitor collection trends on more recent receivables to see if they're tracking consistently with our historical experience. And I would tell you that our quarterly adjustments related to updating our collection rates are typically insignificant. Whit Mayo - Robert W. Baird & Co., Inc. (Broker): Okay. Thanks a lot.

And we'll take our next question from Josh Raskin with Barclays.

Thanks. Good morning. Just sort of touching back on the hospital sales and obviously the pending one in Atlanta, I'm just curious, was there a specific catalyst, some sort of opportunity that presented itself in the market or was this more around thoughts around cash needs as you came into 2016? Should we think about this as – and I appreciate the comments you made, Keith – but should we think about this as part of the annual strategy now or was this just sort of opportunistic?

Well, when we set out to look at different markets, we felt like there was an opportunity in that market based on other consolidation activities for us to be a participant. As we looked through it, we felt that the best option for us was actually to exit the market versus stay in the market in a relationship versus in contrast to Dallas where we were small, also we did a joint venture with Baylor Scott & White. The markets move at different times around the country. And as those change, as we look at our portfolio and continue to hone the portfolio, we'll take the opportunities that the markets offer us, where it's appropriate. At the same time, we continue to invest in our real strong markets and continue to grow those as well.

Okay. And then just on the ASCs, it looked like there was a little bit movement between equity method and consolidated. I don't know if there was a change in ownership structure there. And then I guess within the operations of the ASC, are you guys seeing impact from CCJRs or bundling at this point? Just trying to figure out why such strong organic growth. Trevor Fetter - Chairman, President & Chief Executive Officer: Dan, why don't you take that, the accounting part of the question first? And then Bill Wilcox is here with us and can comment on the operations question.

Yes. Whit, there were some transactions; we made some additional investments that resulted in us consolidating certain centers that were previously accounted for on the equity method where you just pick up your share of the earnings, but there was transactions that did occur in the fourth quarter. And as a result when you do that, when you buy up and have a majority interest position, you then begin to consolidate full revenues and expenses. William H. Wilcox - Chief Executive Officer & Director, United Surgical Partners International, Inc.: This is Bill Wilcox. On the specific question regarding CJR and BPCI, that's a very modest part of what we're doing. As you probably noted, the CJR is inpatient only as is the BPCI, so we only have four of our hospitals participating in that. There are 26 pending hospitals that are participating in that. Our early participation in BPCI, which we're doing through our physicians, has primarily been just so we can understand the model and how that works. On a perhaps a more global response to your question, we continue to have some environmental tailwinds that are impacting us, that side of service migration from inpatient to outpatient and outpatient to ASE (38:24) continues to be favorable for us. That patient consumerism increase, which is a result of changes in health plans to higher deductibles, increasing payer steerage particularly on some of the lower complexity cases, helped us in the fourth quarter. And then, as those come into play, our business becomes much more cyclical, and we now have about a third of our earnings in the last quarter of the year. Is that a good enough answer to your question?

Yeah, that's perfect, Bill. Thank you. Yeah.

And we'll take our next question from Sheryl Skolnick with Mizuho Securities USA.

Good morning, gentlemen, and thank you. It was a tough year and I must say despite what the stock is doing, I know you work really hard and you really do a good job and thank you for... Trevor Fetter - Chairman, President & Chief Executive Officer: Thank you, Sheryl. Could you just speak up a little bit, we're having a little trouble hearing you.

Oh, I'm so sorry. I was trying not to shout at you for a change. So here's my question. As we now look at the hospital business, you've reorganized the portfolio. You've reached meaningful market share position, one or two in the majority of your markets. And your EBITDA growth projection of in the neighborhood of 5%-ish or so, it seems reasonable. But I'm curious as to when you would anticipate, or if you would anticipate, getting margin improvement from that market share, from any scale economies you might be able to deliver, that might perhaps make that EBITDA growth either more visible or perhaps a little conservative? Trevor Fetter - Chairman, President & Chief Executive Officer: That's a very good question. So let me start – I'm going to start and I'll hand it off to Dan and to Britt Reynolds. Keep in mind a couple of things. Many of the hospitals that are part of our portfolio today are still relatively immature in either our portfolio or historically the portfolio of Vanguard. As you know, the historic Tenet portfolio was much more static for a very long time, and I referenced in my remarks the track record of nine consecutive years of earnings growth and margin growth, margin expansion, and that was really a primarily hospital-centric company portfolio. So those techniques of cost management, revenue management and investments for volume growth are still very much in evidence, but they have different levels of maturity in different parts of the portfolio. I also mentioned the sort of rapid transactional activity that we undertook just in the last year. Much of that was within the hospital portfolio. It was sort of overshadowed by the USPI transaction, but still there was quite a lot of moving parts within the hospital portfolio. So, what I was really suggesting there is that, once again, you should expect us as we have a more static portfolio, at least on the acquisition side, that we can resume, again, demonstrating that – the techniques that lead to those improvements in earnings and in margin that we demonstrated over a course of a decade earlier. I think what I'd like Dan to comment on is some specifics around the cost management because in an environment, as you point out, with a challenging environment for the industry last year, there were quite a lot of worries among investors about cost controls, whether it was around labor or pharmaceuticals or other topics. Our cost controls were actually very good.

They really were. And we believe there's still a long runway to continue to generate further cost efficiencies in our various hospital businesses. In addition to not only recent acquisitions like Vanguard and Tucson and Birmingham, but even in the legacy Tenet facilities, there's – we're implementing a number of different things, so let me talk about a few of them. So when you think about labor, we've been demonstrating very good labor management cost. However, there is still further room for opportunity as we continue to standardize our pay practices, as we roll out enhanced and standardized staffing standards across our entire portfolio. We've done a pretty good job managing down premium pay or contract labor type of spend, but there's still more room for opportunities as we evaluate our mix of fixed staffing versus variable staffing standards, developing market labor pools where resources can be shared across certain markets. There is a number of different areas. One line on our income statement, other operating expenses, there's a lot of opportunities there and with disparate vendors related to some of the acquisitions where we've begun to consolidate vendors and leverage our broader scale to achieve improved pricing as well as service-level benchmarks and standards that the vendors need to achieve and to create additional other operating expense efficiencies. We've been talking about over the past several quarters, we're in-sourcing our purchasing functions and transitioning – we just transitioned to our new group purchasing arrangement with HPG. There's a lot of opportunities there to continue to create, identify and achieve spend savings there as well. So, there's a lot – there's still a long ways to go in terms of us continuing to drive margin improvement on the hospital side. Now, on the product line perspective, so we've been doing – we've been very focused on the higher margin services. We still have a lot of work left to do there. So, let me turn it over to Britt to talk about that.

Sure. Good morning, Sheryl. As Dan said, obviously we have dissected each component of the expense management and have teams all over that. But I'd like to address the strategic side of the equation. As you know, as we round out our hospitals in conjunction with my colleagues at USPI on the urgent care and the ambulatory segment, we're really getting patient in the right level of care, and oftentimes that's at a higher margin in aggregate in the ASCs or in the urgent care centers. We have also really focused, as you know, over the last several years on high-acuity inpatient, mostly surgically-oriented care, and in the prepared remarks as well as we've said in previous quarters, those are really, really maturing, and specifically neurosurgery, cardiology, orthopedics including joint, spines, all areas of work there, really developing out, some oncology services, bariatric. So, we're seeing that high-acuity service line, which carries with it a much better revenue per case, we're seeing better mix within that, and then obviously with expense controls, you're going to get a higher margin on the core business. And then we're also expanding into some other higher-margin services that we don't – we haven't spoken a lot about because we're in the early stages, but we have a lot of excitement about, and that's in select behavioral health build out and placement and maturing our rehab services as a continuation of these higher acuity service lines. The last point I would make is, we've been really successful in recruiting some key, key high-name, regionally recognized physicians in many, many markets that add to the great physicians we have there, and we're seeing a lot, a lot of excitement around those physicians and services.

And we'll take our next question from Kevin Fischbeck with Bank of America.

Great. Thanks. I didn't really hear anything about healthcare reform as far as 2016. It looks like 2016, the hospital business is going to grow in line with what the long-term average is adjusting for divestitures. How do you think about reform impacting the company in 2016?

Hey, Kevin, it's Dan. We're very optimistic as we move through the year. We're very well positioned from an exchange contracting perspective. We have solid contracting positions with the most affordable plans across essentially all of our markets. So, we think we're very well positioned to capture our fair share of that business. Florida and Texas are our two most robust exchange markets. So, we're going to continue to drive growth in the exchange business. We have not assumed any additional states expand Medicaid in 2016. But if you're thinking about from a modeling perspective, you might want to think about maybe roughly 1% EBITDA, that's sort of benchmark of what we think that will mean to us this year.

Okay. And then just the commentary on the cash flow I think was very helpful, but just really trying to dig into that a little bit more because if you talk about $200 million to $350 million of kind of adjusted free cash flow, then I guess after distribution to minority partners, I think that cash would be used to also do the $150 million to $200 million of ASC deals and I guess would also be used to buy back in whatever you're going to buy back in from Welsh Carson. After you do those two things, which it sounds like you kind of plan on doing every year for the next few years, how much kind of free cash flow do you have to actually use for debt pay down or share repurchase? Obviously, you're going to have cash divestitures coming in too. But just from a free cash flow basis, like how much on an ongoing basis is a way to think about 2016 cash flow so we can build a bridge to it growing in 2017 and beyond?

So, certainly the $575 million proceeds related to the Atlanta transaction will come through. We're going to continue to grow as we mentioned in our remarks, when we get past 2016, our capital spend is going to come down by about $150 million. So that's going to enhance our free cash flow generation and that doesn't include any additional cash flow that we'll produce in 2017 and beyond, continuing to grow our earnings, which obviously translates into additional cash as well. So, we feel good about where we've come. We still have more work to do certainly in terms of continuing to generate additional free cash flow. But I think that's how you should be thinking about. We're going to continue to grow our business. The ambulatory segment is a great cash flow generating business. That side of the business is going to continue to grow and so, that's how – when we think about our ability to continue to grow free cash flow, we're optimistic that we're going to be able to continue to drive incremental improvement.

And we'll take our next question from Andrew Schenker with Morgan Stanley. Andy Schenker - Morgan Stanley & Co. LLC: Great. Thanks. Good morning. Can you maybe talk a little bit more about the seasonality of the three separate businesses and how that's impacting the total company, given your 1Q guidance is down as a percentage of the full year, year-over-year, but maybe more in line with past years? Thank you.

Good morning, Andrew. It's Dan. As we think about the three businesses, in terms of how you should think about 2016, obviously, we put our guidance out there for the first quarter of $550 million to $600 million; we're going to continue to grow our earnings throughout the year. And let me give you a couple of things. So as Bill mentioned, the fourth quarter is very strong seasonally for the ambulatory businesses. So, you have to think about the earnings that will be in the fourth quarter of this year similar to last year, a very strong fourth quarter. So, you should anticipate that as well. In terms of some of the other businesses, such as the hospital business, as we continue to execute on our initiatives and whether it's executing on synergies related to transactions or efficiencies related to whether it's on the supply side, whether it's on the labor side, we'll continue to build on those and similar to how we have in the past several years, when we started off with Vanguard, we said our synergy range was $100 million and $200 million; we exited 2015 at our annual run rate of $200 million. The two recent transactions in Tucson and Birmingham, as we continue to integrate those operations into our business, you're going to see additional improvement there during this year and beyond because we won't capture all the synergies and operational improvements in year one. Andy Schenker - Morgan Stanley & Co. LLC: Okay. Thanks. And then going to the hospital segment here, your admissions guidance and adjusted admissions guidance implies a stepdown year-over-year. Obviously the first half of 2015 was stronger than second half. Can you talk about maybe the moving parts heading into the 2016 guidance on the volume front, how you think that's playing out and what some of the opportunities are that can drive you to the high end or above? Thank you.

We've essentially assumed that our inpatient volume will be essentially flat; the midpoint maybe up 1%. Adjusted admissions growth is going to be zero to 2% growth there. And so obviously, with the flu season being softer than last year or 2014, that certainly has had an impact. And again, building on our initiatives and focusing on growing our service lines, that's going to continue to generate additional growth as well, we believe.

And we'll take our next question from Gary Taylor with JPMorgan.

Hi, good morning. A couple questions. First, just thinking about the stepdown in CapEx guidance you outlined for 2017, I know you guys haven't given revenue guidance for 2017 but just kind of based on our model, it looks like that would represent maybe 4% of acute care revenues and over the last two decades I think we've seen hospitals run basically 6% revenue per CapEx. So one, does the stepdown imply something like 4% of hospital revenues in CapEx? And two, do you feel like that's a good competitive number just given the fact that some of the facilities are newer and you essentially over invested the last couple of years?

We do. When we think about our investment opportunities on the hospital side, we've obviously been investing in some larger projects. Those wind down essentially by the end of 2016, a little bit into 2017. But we've spent – obviously been spending a lot of time over the past several years analyzing our capital allocation, and we think capital expenditures coming down by $150 million will still allow us to be able to invest appropriately to grow our hospital business. Trevor Fetter - Chairman, President & Chief Executive Officer: And I think that CapEx is also a higher percentage of the hospital segment revenues. As you know, our other segments do not require so much capital as a percent of...

Yeah. I was kind of coming up with that might be 4% of hospital revenue, less than a couple percent in ASC and nothing in Conifer. It just looked like a lower hospital number. That's helpful. The other thing I didn't understand in the quarter was given the – on the ambulatory segment, 18% pro forma revenue growth, pro forma for USPI, USPI system-wide same-store revenue 12% and that only translating to a little less than 5% growth in EBITDA to THC, basically. Can you help me understand that?

Hey, Gary. This is Jason Cagle from USPI. How are you? I think the real answer to your question, if you go back to slide eight, it's 9% EBITDA less minority interest growth. I think the number you're getting to is the after Welsh Carlson minority interest answer and there's some tax noise in the calculation of the minority interest to Welsh Carlson. If you just look in that, the health of the business overall, the EBITDA less minority interest you ought to look at is that 8.9%.

And our last question today will come from John Ransom with Raymond James. John W. Ransom - Raymond James & Associates, Inc.: Hi, good morning. Could you just give a little more specifics? If we look at 1Q guidance and then we look at the full year, we're just not quite getting there. Is the answer as you mentioned before, just the disproportionate ASC fourth quarter numbers combined with some ASC EBITDA? Is there anything else missing in kind of bridging 1Q to the full year?

Good morning, John. It's Dan. Certainly, the seasonality of the ambulatory business is part of that growth as we move throughout the year, as well as some of the initiatives that we're executing on during this year in terms of driving performance improvement at the hospitals we acquired recently. The savings and efficiencies we'll gain from in-sourcing or purchasing functions and the new GPO arrangement with HPG, as well as there's some additional HIT incentive after the first quarter that we'll be able to recognize as well. John W. Ransom - Raymond James & Associates, Inc.: And one other thing real quickly. Maybe I should know this, but Conifer, as you divest these hospitals, is there any obligation on behalf of the parties that you sell to that they use Conifer? Does that represent revenue at risk down the road?

So, John, we have generally been, as part of the negotiations, negotiated either transition agreements for a few years, which gives us an opportunity or in the case, for example, St. Louis University. We have a new five-year contract. And now, it's obviously a non-tenant customer, an independent customer. So we, in some of the divestitures, we feel like more than – most of them will have an opportunity for Conifer to continue on for some period of time and maybe even indefinitely. John W. Ransom - Raymond James & Associates, Inc.: But perhaps North Carolina would be the one that – LifePoint buying that and they use Parallon, that would probably be the one we might think of as most at risk?

That one would be, we have a shorter-term agreement with them, but that's with Duke LifePoint, the JV, but we continue to hope to have longer-term services there. And Steve (58:50) can certainly comment on that, but also on a revenue basis kind of the smallest one we've done.

I'll just add, this is Steve (58:57). We talked to Duke LifePoint, obviously about that relationship and we obviously have to prove ourselves. And they've got, as you know, Parallon, as you just mentioned there as well. We think it's a great opportunity for us to show what we're capable of doing amongst the competition. So, (59:12) just has a short-term relationship we hope to turn into a long one. John W. Ransom - Raymond James & Associates, Inc.: And lastly, Atlanta's not going to do any – does Atlanta do any EBITDA in the first quarter to speak of? It looks like – I mean it's a big hospital system. What's the EBITDA that comes out after 1Q?

John, this is Dan. How you should think about Atlanta for the full year, there's not really anything significant or material amounts in for the full year. They're obviously a little bit in the first quarter. John W. Ransom - Raymond James & Associates, Inc.: Yeah.

And then as we move through the year, there will be some typical costs that sort of offset what would be there in Q1.

Thank you. And ladies and gentlemen, that does conclude today's conference. Thank you for your participation. You may now disconnect.