Good morning. My name is Jennifer, and I will be your conference operator today. At this time, I would like to welcome everyone to the Universal Health Services second quarter earnings conference call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. Thank you. And, Mr. Steve Filton, you may begin your conference.

Good morning. Alan Miller, our CEO, is also joining us this morning. Welcome to this review of Universal Health Services' results for the second quarter ended June 30, 2016. During this conference call, Alan and I will be using words such as "believes," "expects," "anticipates," "estimates," and similar words that represent forecasts, projections, and forward-looking statements. For anyone not familiar with the risks and uncertainties inherent in these forward-looking statements, I recommend a careful reading of the section on Risk Factors and Forward-Looking Statements and Risk Factors in our Form 10-K for the year ended December 31, 2015, and our Form 10-Q for the quarter ended March 31, 2016. We would like to highlight just a couple of developments and business trends before opening the call up to your questions. As discussed in our press release last night, the company recorded net income attributable to UHS per diluted share of $1.89 for the quarter. After adjusting each quarters' reported results for the incentive income and expenses recorded in connection with the implementation of electronic health records applications at our acute care hospitals as disclosed on the supplemental schedule included with last night earnings release, adjusted net income attributable to UHS increased to $191.1 million or $1.94 per diluted share during the second quarter of 2016 as compared to $186.6 million or $1.85 per diluted share during the second quarter of last year. On a same-facility basis in our acute care division, revenues during the second quarter of 2016 increased 7.4% over last year's comparable quarter. The increase resulted primarily from a 3.9% increase in adjusted admissions to our hospitals owned for more than a year and a 1.3% increase in revenue per adjusted admission. On a same-facility basis, operating margins for our acute care division decreased to 17.7% during the…

And our first question comes from the line of Paula Torch with Avondale Partners.

Thank you. Good morning. So, Steve, I wanted to start off maybe in asking about the behavioral volumes. They were a little bit weaker than we were expecting, and wondering if you could just give us a little bit more color around the drivers of that weakness. I realize that compares were more difficult last year and that you're still working through some of the labor shortages, but how is that going forward, and what are you thinking about those volumes in the second half of the year?

Sure, Paula. So I think, as you suggest, we've really, I think, been talking about the pressures on our behavioral volumes for almost a year now. I think beginning in the third quarter of last year, we began to clearly see the shortage of clinicians, psychiatrists, and nurses, and to a lesser degree other mental health technicians, as hampering our ability in certain facilities – in a relatively small number of markets and a small number of facilities – hampering our ability in some cases to admit all the patients who were being presented to us for admission. I think those dynamics – and we said this when we gave our guidance for 2016, we thought that those dynamics would persist through the second quarter of this year. We also suggested that they would improve in the back half of this year, in large part because, number one, the comparisons would become much easier, as they will, and also because a number of the initiatives that we've been working on and putting in place to mitigate this problem would also begin to gain some traction. So I think that the softer volumes in Q2 were somewhat disappointing to us as well, but largely expected. And I think our sense continues to be that they will improve in the back half of this year.

Is it possible to parse out how much of the softer volumes were because of this dynamic with the labor versus just overall weakness in general?

Sure. So our general sense, Paula, is that our original guidance for the year contemplated about a 5% increase in behavioral same-store revenue. And that was really broken down into a 3% to 4% anticipated increase in volumes, in patient days, and a 1% to 2% increase in price. On the pricing side, I think we're absolutely where we expected to be. And so we're basically showing flattish volumes as compared to that 3% or 4% increase that we were anticipating. And I think we believe that that entire gap and that entire difference can be attributed to the shortage of clinicians and that if we're able to solve and resolve that problem, we should be able to get back to that sort of 5% overall revenue growth level and that 3% to 4% volume growth level that we anticipated originally.

Okay. And then maybe just a follow-up to that. I'm curious if you could share with us some of the initiatives that you have in place to mitigate this. Is it paying out higher wages, training programs, maybe more effective recruiting? I mean, anything that you can kind of tell us there that you've been doing that you feel will really drive this home in the second half?

Sure. Well, I think, frankly, Paula, it's all those things and more. Obviously, in a tight labor market, wage rates matter. And so, in markets in which we are experiencing shortages, we've conducted extensive compensation surveys and have modified our wage rates to make sure that we're competitive with the marketplace. And every marketplace is different. We have also hired more people and dedicated more people to both the physician and nursing recruiting processes. And, finally I think we're very focused on the retention aspect and not just the recruiting aspect, because – for two reasons. I mean, obviously, to the degree that we're able to retain our nurses, we don't have to, by definition, recruit for their replacements. And to the degree that we recruit replacements, we want to make sure that they stay with us as long as they possibly can. And so our chief nursing officer in the behavioral division has focused a lot of her attention on a new and sort of reinvigorated onboarding process in which we're making sure that nurses are properly trained and have a clear career path and have the appropriate sort of mentoring resources dedicated to them, et cetera. So, as I said, in every market the approach is somewhat different, and it's tailored to the market. But it is by far sort of the number one focus of the operators in the behavioral division at this point.

Okay. Thank you, Steve, for the color there.

And your next question comes from Chris Rigg with Susquehanna Financial.

Hi, this is Frank Lee on for Chris. Thanks for taking my question. The same-store revenue in the acute care business remained high in the quarter relative to the full-year outlook. Could you just provide a sense for how much of the volume growth was attributable to economic improvements in your markets versus increasing market share, or if there was any other unusual activity to call out there?

Sure, Frank. I mean, I think we have said, quite frankly, for the last few years that it's difficult to parse out acute care revenue improvement. Obviously a couple years ago, the real focus was on parsing out the ACA impact versus the economy, and I think clearly the ACA impact has shown diminishing returns for the last few years. We're still posting strong acute care volume numbers. Obviously, because we're the first report this quarter, I don't know how we'll compare with others, but my sense is these are still going to be fairly robust volumes, and I think what we've said all along is I think that we largely feel it's a function of the just strong local franchises that we have in markets like Las Vegas, Southern California, South Florida, and the economic improvement in those markets, but also our market position and our ability to take market share in those markets. I think it's very difficult to sort of parse the 4% improvement in same-store adjusted admissions among those various factors. Suffice it to say that we still think that's a pretty good number and well within our expectations.

Okay, thanks. And then the same-store operating margin in the acute care business was down year over year by a decent amount. Is that primarily related to some of the staffing shortage issues that you had discussed in the acute care side? And then can you talk about the progress that you've made on the initiatives that you've put in place to rectify those shortages? Thanks a lot.

Yeah, so I think – and we talked about this certainly last quarter and I think for several quarters really, again, beginning in the second half of last year. Look, I think that as a result of the improving U.S. economy and the improving economy in our local markets, we have seen a tightening of the available labor force in all or most of our markets. That tightening, I think, is manifested somewhat differently in the two divisions that we have. We just talked about on the behavioral side, quite frankly, we're just not able in some markets to find sufficient nurses and physicians. And as a consequence, we're forced to turn patients away. On the acute side, I think, it's manifested more prevalently in higher use of what we describe as premium pay, which would be overtime or shift differential payments that we make to our current employees or the use of temporary or agency nurses, where current employees are not available. And certainly that use of premium pay on the acute side has contributed to the margin pressure in Q2, as it did back in Q3 of last year. But I think we continue to sort of focus on that, and it got better in Q4 and Q1 of this year, and I think our sense is that we'll continue to focus on it and it is a solvable problem on the acute side. The one other comment I'll make on the acute side vis-à-vis margins is, while I think the volumes on the acute side were well within our expectations, the revenue per admission growth of 1.3% is probably 50, 75 basis points short of where we thought we'd be. I think that's a bit of a weaker patient mix, and that's mostly maybe a growth in uncompensated patients in the quarter, not by a material amount. But I think mostly the big change from Q1 is, in Q1, our other non-uncompensated volumes were just so strong, particularly our Medicare volumes were so strong, that they offset a bit of the uncompensated tick up in volumes. In Q2, as Medicare and other commercial volumes moderated some, the uncompensated rise had a bit more of an effect. So I think the staffing pressure or the premium pay pressure, along with the slight payer mix deterioration, probably explain the bulk of the pressure on acute care margins.

Okay. Thanks a lot.

And your next question comes from Matthew Borsch with Goldman Sachs. Tejus Ujjani - Goldman Sachs & Co.: Hi. This is Tejus on for Matt. Thanks taking the question. Just to follow on acute care volumes. We were expecting them to moderate in 2Q, but was this in line with your expectations? Any additional weakness to call out? And then also anything you can talk about in terms of regional differences between, call it, Nevada and then more the Texas, Florida, California markets would be helpful.

Sure, Tejus. So our original guidance for the year was something like 6% acute care same-store revenue growth, and we broke that into components – pretty evenly broke that into pricing and volume. So the 4% same-store adjusted admission volume growth we saw in Q2 was, as I said, well within and frankly ahead of our expectations, while the pricing was slightly lower. But overall acute care revenues were pretty close to what we expected. In terms of regional differences, I think, most of – we clearly saw an overall moderation in acute care revenues in Q2 from the really extraordinary levels of Q1. We absolutely have said all along that's what we expected would happen. And obviously the Q2 performance is much closer to our original guidance. I think the regional commentary that we've given for probably a year now still holds in Q2 of this year, which is that markets like Vegas and California and Florida have been sort of overperformers, and the Texas markets, namely the South Texas markets and Amarillo, probably have been the weaker performers. Tejus Ujjani - Goldman Sachs & Co.: Great. Thanks very much. And can you touch on the other operating expenses; that looked like it increased this quarter.

I think those other operating expenses are distorted a little bit by the impact of our insurance company. We had about a $25 million to $30 million increase in both premium, revenue and in claims expense in the insurance company in this quarter. We record that in our acute care division, and we record the expenses specifically in other operating expenses. So I think if you adjust that $25 million to $30 million out of both revenue and other operating expenses, those numbers, at least for us, will certainly look like much more in line with expectations. Tejus Ujjani - Goldman Sachs & Co.: Got it. Thanks. That's very helpful.

Your next question comes from Kevin Fischbeck with BoA.

Good morning. This is actually Joanna Gajuk filling in for Kevin. Thanks for taking the question. So I just want to come back to the discussion about acute care volumes, which – to your point, it wasn't really surprising to see deceleration but actually deceleration from these very elevated numbers in Q1 was (19:51) deceleration might have been surprising to some. So can you just parse it out a little bit more in terms of the different sort of parts of your business? And specifically maybe talk about the surgery performance in Q2? Because I guess we're hearing from some of the medical device companies that the volumes decelerated in terms of surgeries, but the deceleration was not as dramatic. So just can you touch base or could we just talk a little bit about the surgeries, inpatient versus outpatient performance in the quarter?

Sure, Joanna. So our inpatient surgeries increased by about 2% in Q2 versus a 4% increase in Q1. And, again, I think we thought that 4% increase for inpatient surgeries was above what we thought we could sustain. The outpatient surgeries rose by about 7% in Q2, and that was pretty similar to the Q1 performance. So again, from my perspective, our surgical volumes in Q2 were very much in line with our expectations.

Great. And just touching based on the Vegas minority interest purchase and the impact specifically for the company. So Community kind of talked about maybe the annual impact of $60 million. So is it fair to kind of assume there's maybe $36 million impact for your interest on the minority interest since it's after taxes, is it roughly in the ballpark number annually?

Yeah. So let me just remind to everyone that, first of all, the transaction was not completed until the beginning of May. So we only have two months of the transaction's impact in the quarter, and we've estimated that the positive impact for us would be somewhere between $0.015 and $0.02 a month. And so we've got $0.03 to $0.04 in Q2 and $0.12 to $0.16 or so for the year, or for the eight months, that should be our favorable impact for the year.

So that's net of the higher interest expense? Because I guess there was also (22:04) debt, but you raised additional debt to fund the purchase of $400 million-plus – purchase. So is the $0.01 to $0.02 per month, is that net of that higher interest expense, or it's just -?

Yes.

Okay.

Yes. So it's the increase in earnings as a result of having the full impact of the Vegas earnings, less the interest expense on the $445 million to fund that buyout, and obviously also less the tax impact of the additional earnings.

Great. That's helpful. And on the last topic in terms of your UK business and the Brexit and your outlook there going forward for that part of the segment in terms of any currency things or impact on the actual business in terms of maybe any pressure on staffing there, or the government funding, so any color you might have on the UK business, that would be helpful. Thank you.

So, yeah, I mean, first of all, let me just kind of set the sort of relative importance of the UK to our consolidated results. As opposed to some of our peers, it's a relatively small footprint in the UK. About 2% to 3% of our consolidated revenues this year will come from the UK. We have said from the outset that our original investment in the UK, which is equal to roughly about $500 million or so, has been hedged, so from a currency risk perspective we are protected on currency fluctuations. Finally, I think, while obviously Brexit made a lot of headlines, I think in terms of its impact on the fundamentals of the behavioral business in the UK, it's had virtually none in the short run. In the longer term, we'll see. I think obviously, as you know, many, many details of the Brexit process have to be worked out involving labor – folks in the labor force, et cetera, so we'll see how that all plays out. But again, at the moment, no impact, and I think just keep in mind that it is a relatively immaterial part of our business.

We've done very well with regard to our acquisition. We paid reasonable prices for the acquisition both in Cygnet and Alpha, and we're very pleased with them. But it relates to how much you pay and how good is the management, and we've been pleased with what we have.

Great. And just very quickly on that point. It sounds like there could be some assets for sale in the UK, so would you be still interested to grow that business given the maybe special uncertainty around Brexit and whatnot that might happen?

I think it's premature to speculate, obviously. We don't know what assets might be for sale. I think it's always sort of a given that when assets are for sale, whether in the UK or in the U.S., and they're of a high quality, we're certainly interested in taking a look. But we don't even know what the specifics may be in the UK, so it's probably too early to comment.

Great. Thank you. That's all for me for now. Thanks.

Your next question comes from Gary Lieberman with Wells Fargo.

Good morning. Thanks for taking the question. You mentioned a weaker payer mix on the acute care side. Are there any numbers that you could share with us, Steve?

Yeah, I mean, uncompensated volumes were up probably kind of 2%, 2.5% in the quarter. Honestly, I think they were up by a similar amount in Q1. As I think I said earlier, I think the difference was in Q1 other volumes were just so strong that they tended to really offset any impact of that increase. I think the other sort of commentary I'd make about uncompensated care in general is we take our total uncompensated care – all of which we disclosed in the press release, the bad debt, the charity care, the uninsured discount – and we take that total number and compare it to our gross revenue, which I know is generally not a metric most people use very much. But I think from our perspective it takes into account the gross pricing impact that runs through those numbers. And while our second quarter uncompensated care experience was measurably higher than last year's second quarter, it's still lower than it was in the back half of last year. And so I think our general notion is that we're seeing kind of a slight uptick in uncompensated care, but it's reasonably steady over the last three or four quarters.

Any reason to think that the trend in the second half of the year will be different? Do you feel like you're seeing pressure earlier this year and that it's going to continue, or that this is just sort of an anomaly?

Yeah. Look, as Yogi Berra always said, it's hard to predict the future. But, look, I think our general sense is that we may see a continued uptick incrementally in uncompensated care. It doesn't have the feel to us of a big measurable change. But payer mix is probably the element of our business that's most difficult to project. So I don't want to make too many really definitive statements in that regard.

Okay. And then maybe just a follow-up on the IMD exclusion. Are you seeing anything yet? I realize it's still pretty early. And then maybe just comment on that in light of the comments or the issues with hiring psychiatrists. Do you think that that is going to prevent you from seeing any benefit with regards to that?

I mean, I think we've consistently said, Gary, that we view the IMD benefit as a meaningful one but also one that will be impactful and have an impact on us over time and also will be part of kind of our broader efforts to penetrate the acute care hospital segment of the behavioral industry – that is, acute care hospitals who have their own behavioral units. I think your first comment is absolutely right. I mean, we're sort of two or three weeks into the effective date of the new IMD managed Medicaid rule, and I think any commentary or any reaction we'd have at this point would be purely anecdotal. I think honestly we've always had the view that probably the biggest impact doesn't start to occur even until the beginning of next year, when managed care plans have all their new plans in place and start to direct and redirect business in different ways. But I think, finally, I think the other comment that we've made on previous calls and I think we're still very much believers in, is that I think we believe that the IMD or we view the lifting of the IMD exclusion in the broader context of our very pervasive and very aggressive program to try and collaborate with acute care hospitals around the country and to help gain access to their behavioral units. And obviously the lifting of the IMD exclusion removes one of the hurdles that I think has always prevented that from happening in a pervasive way. But, again, I think that whole process is one that will continue to take place and continue to have an impact for many years to come.

Okay, great. Thanks very much.

Your next question comes from Whit Mayo with Robert W. Baird. Whit Mayo - Robert W. Baird & Co., Inc. (Broker): Hey, thanks. Just have a couple quick ones. Steve, I don't know if you gave any comments around just surgery trends, ED trends, and outpatient visits in the quarter.

So I did comment on the surgery trends, Whit; you can just go back and look at that. On the ED side, I think our ED visits were up 1% or 2%, which is a kind of moderation from where we were in the first quarter but pretty consistent with our overall sort of admission number moderation, and outpatient visits were up in the 5% to 7% range. Again, that's fairly consistent with our first quarter results. Whit Mayo - Robert W. Baird & Co., Inc. (Broker): Got it. And any update on Henderson and just the timing of the opening? I heard you say the fourth quarter, but should we expect any start-up, or pre-opening expenses this year, or – ?

Whit, Whit -

Speak up.

Can I ask you to repeat that? I didn't hear you.

Please speak up. Whit Mayo - Robert W. Baird & Co., Inc. (Broker): Sorry about that, Alan. Just wanted an update on Henderson, the timing of the opening. I heard you say that it'll be in the fourth quarter but didn't know if we should anticipate any pre-opening expenses this year or if that will be more 2017.

The opening ceremony is October 6, and we'll be taking patients shortly thereafter. We are very excited about it. We've been very good in that area. One of the good areas – Temecula, which we opened a couple of years ago, has just been – exceeded all of our expectations. Henderson completes our coverage of the market. We're very excited about that. And we opened a Spring Valley tower, and that's now in operation, so we're really looking forward to success in Las Vegas in addition to what we have currently.

And, Whit, just to answer your specific pre-opening questions, so as part of our 2016 guidance we said that there'd be a $10 million EBITDA drag from Henderson in the back half of the year, both in Q3 pre-opening costs and then in Q4 opening losses. That number frankly just mechanically will be a little bit larger because it didn't originally contemplate the fact that we buy out the Community interest, so it's probably $2 million or $3 million higher than that, but that hasn't changed, and that was in our original guidance. Whit Mayo - Robert W. Baird & Co., Inc. (Broker): Okay. And just last one. I know you don't provide quarterly guidance, but the Street has had a historical tendency to get ahead of your internal budgets in the second half and prior year, so just any comments or observations would be helpful. Thanks, Steve.

Look, I'll just talk about the trajectory of the year from our perspective. We talked in the first quarter about the fact that we were ahead of our own internal budget, but I think that we also conceded that the results in Q1 were further ahead of consensus than they were of our own internal budget. I think in Q2 we were pretty close to the Street consensus. So I think our view is if we continue to meet our own internal modeling and expectations in the back half of the year, with the benefit of the Community buyout impact, which was not contemplated in our original guidance, we should still be very comfortably in our guidance range, probably close to the upper half of that guidance. Whit Mayo - Robert W. Baird & Co., Inc. (Broker): Okay. Thanks.

Your next question comes from Joshua Raskin with Barclays.

Hi. Thanks. Good morning. Maybe just taking a step back on the psych business, the trends have looked relatively similar to acute the last several quarters, and I think the historical perspective is the psych business has been a better growth business and more opportunity. And I'm curious if you feel like we've seen sort of more of a maturation of that business. And I guess as you guys think about your valuations when you're looking at assets, what do you think in terms of valuations for psych assets versus acute care assets, and do you still think the growth dynamics in psych are noticeably different than acute care going forward?

I'd answer the question, Josh, in a couple of different ways. I mean, one is, in terms of the growth prospects of this business – the behavioral business, that is – we remain fairly bullish, and that is because, as I indicated in earlier remarks, we believe that there's demonstrated demand for this business. And quite frankly I think there are a number of dynamics that would suggest that that demand does nothing but increase. We could have a whole long conversation about that, but things like the incidence of addiction illness and the need for addiction treatment and the opioid epidemic in the U.S. and the continued incidence of mental health issues in the elderly population, there's just a whole host of reasons to believe that, I think, the demand for mental health services is going to increase. And in fact we believe we demonstrate that in our hospitals. We've been unable to demonstrate it in our financial results because of this clinician shortage. I think we have the view that in the short run we will make inroads and significant inroads in that clinician shortage in the short run. And in the long run, the market itself will correct for this, as it has when the acute business suffered through a nursing shortage some 10 years ago. And just nurse salaries went up and more people enrolled in nursing schools, and the supply and demand balance sort of was restored. And I think the same thing will happen here, both with psychiatrists and with nurses on the behavioral side. In terms of commenting on valuations of the two businesses, I think it's difficult for us to do. We clearly look at individual acquisition opportunities on a standalone, discrete basis and the growth potential in an individual behavioral facility or individual behavioral company versus an acute is really dependent on the markets they're in, what their specific market position is, what the strategies are for growth, et cetera. So we certainly don't go into any acquisition, either acute or behavioral, with a notion of kind of there's a fixed sort of a valuation that make sense. I do think UHS has a reputation for being fairly judicious in its acquisitions and its deployment of capital. I don't see that judiciousness changing, but I think it's a market-by-market issue.

Okay. That's very helpful. And then so, Steve, one of the health plans yesterday made comments around some higher-than-expected costs in substance abuse. They were talking about I think mostly exchange patients and individual patients. I think there was a lot more focus on the West Coast with some of that. Are you guys seeing anything in terms of substance abuse upticks or anything in the exchange membership where you guys think you're seeing a little bit better volumes?

I mean, as I said, Josh, I think that there's all sorts of data out there that suggests that both the incidence of addiction illness and obviously the corresponding demand for addiction treatment is growing. I think when that happens – when there's a growing demand for a particular service, the payers start to focus on it more. I think one way that we're seeing that manifested is I think the payers are more focused on this whole out-of-network segment of the addiction treatment business. I think a bunch of companies have grown up around that model. We were very targeted, or we made a very targeted decision, when we bought Foundations, that they were a company that had both out-of-network and in-network business, split pretty evenly, and that they in our minds and I think we've seen them in the short time we've owned them navigate very freely between sort of the two segments. So if this business shifts to more of an in-network model, we think we'll be prepared to make that transition more easily than a number of these other companies that have focused almost exclusively on that out-of-network model.

Okay. That makes sense. Thanks, Steve.

Your next question comes from John Ransom with Raymond James. John W. Ransom - Raymond James & Associates, Inc.: Hi, good morning. Kind of going back to a topic. Obviously, there was a big difference in your bad debt expense in 1Q and 2Q. I know you called out the higher uninsured. Your internal model for the back half of the year, how should we think about the bad debt number relative to what you experienced in 1Q and 2Q?

So what I was saying before, John, is that I think our uncompensated volumes have been growing in the first half of the year by – in that kind of 2%, 2.5% range, and I think that's consistent with what our model for the year is, and that's I think we would, if pressed, suggest is what we would expect in the back of the year. John W. Ransom - Raymond James & Associates, Inc.: So does that mean a high 8%'s or a low 7%'s (39:52) bad debt? That's what I was trying to figure out. I was looking at the percentage number, and it was obviously a lot higher in the second quarter than the first quarter.

Yeah, so two things. I mean, one is, as I suggested in some comments earlier, we really don't look at bad debt on its own. I think you have to look at it in combination with charity care and uninsured discount. John W. Ransom - Raymond James & Associates, Inc.: Okay.

And again, I mean, I think the way that I sort of think about it, John, is I'm back to we talked about acute care revenue growth, net revenue growth, which is after bad debt and after charity care and uninsured discount, of about 3% for the year. And I think that's what I would guide people to think about for the back half of the year. John W. Ransom - Raymond James & Associates, Inc.: Okay.

And that would take into account the growth in uncompensated volumes. John W. Ransom - Raymond James & Associates, Inc.: Great. And then just to go back to the – I mean, congrats on the Community deal, obviously accretive. How do you think about the – I was a little curious about the cash flow impact of that deal. Was Community just getting a chunk of the earnings and you had all the CapEx, or is there a cash flow obligation that you pick up moving to 100% ownership? I just wasn't exactly sure how the cash flows worked in that deal.

So it was mostly, John, a cash flow deal. That is, Community's 27 roughly percent interest was in the cash flow of the joint venture, both the earnings and the capital expenditures. So you are correct that, as we move forward, we'll have a larger share of the CapEx there. Now, obviously we've just finished up a significant – and Alan commented on a couple of very large projects that are just finishing up. John W. Ransom - Raymond James & Associates, Inc.: Right.

So I think we're going to return to, at least in the short run, a bit more of a normalized CapEx spend in that market. But, yes, we'll now have 100% of it. John W. Ransom - Raymond James & Associates, Inc.: So when we think about your purchase multiple, it's really an EBITDA kind of purchase multiple, not a pre-tax earnings purchase multiple or something like that?

I think that's right. John W. Ransom - Raymond James & Associates, Inc.: Okay. Great. Thank you.

Your next question comes from A.J. Rice with UBS.

Thanks. Hi, everybody. First of all, maybe just quickly on the – your cash flow number was good, your debt-to-EBITDA is down at 2.2 times, which I think is sort of below the low end of your target. Any thoughts on capital deployment from here? I know you got asked about the Acadia potential divestures, but more broadly, acquisition pipeline versus opportunities for share repurchase, given where you're at and the capital base?

Sure, A.J. I mean, look, you've heard me say this before, and I'll repeat it just because it's true, and that is acquisition spending is probably the most difficult aspect of our business to predict. So as we sort of try and measure what sort of opportunities we have, that's sometimes difficult to do, but we've been an aggressive acquirer of our shares over the last, I would say, six or nine months. We have tried to be an opportunistic acquirer, and I think we'll continue to do that in the future and take advantages when we think the stock is at a particularly valuable level. So, as you suggest, we certainly have the financial flexibility to do all that, to respond to opportunities as they arise but also to continue to be an aggressive acquirer of our own shares.

Okay. And I thought I'd just ask maybe on the payer side, both from the managed care and the government side. On the managed care side, any update on how contracting's going for 2017 at this point? I know it's early, but typically you have a fair number of contracts reworked. Any change in approach you're seeing from pricing or terms that they're asking for? And then I would probably also ask you, on the Medicare side, there seems to be this push toward bundled payments. Have you had any experience so far? I know they rolled out the joint replacement bundle payment in April. So it's still fairly early, but just any early experience on that?

So I think we feel, A.J., that we're prepared for what I think we view as sort of the inexorable move to more risk shifting, which would include more bundled payment – methodology payments. We were volunteers in some of the early Medicare demonstration programs. We can remain in some of those. We've exited some. I think it's a developing and a continually evolving area. But I think we have worked now for probably the last two or three years to make sure that we're prepared for it. And so I think we remain prepared. Obviously, Medicare announced just within the last couple of days an expansion of their bundled payment program, but a number of the details, I think, are still somewhat fuzzy. So it's difficult to, again, make any precise predictions. As far as managed care contracting, I think we're probably still 45, 60 days away from the real sort of height of the 2017 renegotiation process. But I would suggest that we're not seeing huge changes, either in our rates or in the structure of those contracts from what we've been experiencing over the last few years.

Okay. That's great. Thanks a lot.

Your next question is from Ana Gupte with Leerink.

Yeah, thanks. Hi, Steve. Good morning. The question I had – and I wonder if anybody explored this; I'm just a little late to the call – is on connecting the dots between your deterioration in bad debt from 1Q to 2Q, and again the same thing on your acute volumes. Does that give you pause around what the driver of the volumes is? Are you still thinking this is economic rebound rather than exchanges? Which seems like the more obvious thing given the tick up in membership in the first quarter, and it's consistent with what the managed care companies are complaining about and where the claims costs are being incurred.

Yeah, I mean, Ana, I think we have touched on it. I'll just reiterate a little bit of what I've said before. I mean I think we're running about 2% to 2.5% increase in uninsured volumes. I think that's consistent with what our original guidance and original model was. So, no, I mean, I think – and we talked at great length in Q1, when we really had extraordinary acute care volumes – that those were largely driven by Medicare volumes. And I think that was reflected in our very strong pricing. The moderation in our Medicare volumes in Q2 has caused the pricing to again step back some. But I think we're largely in line in Q2 with what we expected to be our overall same-store acute care pricing. So from my perspective, I'm not sure that there are any sort of sinister dots to connect, but we'll certainly see how this continues to play out.

Okay. But did you see anything specific in terms of geographies? You had pretty solid year-over-year growth. Now I'm just trying to compare to the baseline in 2015 and 1Q relative to 2Q. So was it just about comps, or was it something else? I guess that it's tough to look at the actual (47:42) numbers, but -

Well, again, I mean, I'll just remind people that in first quarter our acute care same-store revenue grew by 12%. That's about as an extraordinary number as you're going to find, and I think anybody who had the expectation that we could sustain a number like that was simply kidding themselves, and we certainly didn't encourage people to think that way. So when we moderate to something closer to 7% in Q2, again, I think that's going to wind up being a number that's going to be pretty competitive amongst our peers – we'll see – but doesn't reflect any significant or unexpected changes in payer mix.

And then on the outpatient side, just a final question on this. The theme again has always been from the insurers that this mix shifting is to outpatient. It feels like there's a accelerated mix shift to outpatient surgery, or even ambulatory surgery as ortho procedures and cardio and all are just seeing more convenience and ease in an ambulatory setting. Are you seeing something that points to something structural in this arena and going forward that might actually really put pressure on the inpatient side? And then connecting it to the value-based care question earlier that the incentives will be far more to try to mitigate costs with a risk-sharing reimbursement mechanism over time in acute.

Jesus.

We certainly have seen the continued shift to outpatient that, as you suggest, I think, virtually every provider in America has recognized. Again, I'm just going to go back and say that even with that continued shift, which has been underway for years now, the 4% same-store adjusted admission growth in Q2 is certainly well within our expectations and I think is a reflection of even with that shift to outpatient that we're still seeing growth on the inpatient side for all the reasons that I described before: strong franchises, taking market share from competitors, recovering economies, et cetera. So, yeah, I mean, we see that same dynamic that everybody else sees, but we're still posting pretty good inpatient numbers at the same time.

Got it. Thanks for the perspective. Appreciate it.

Your next question comes from Ralph Giacobbe with Citi.

Thanks. Good morning. Steve, just want to go back to uncompensated care and bad debt. I mean, is it all uninsured, or are you seeing any sort of bad debt creep in the uncollectible from out-of-pocket that might be having an impact versus just the uninsured and any changes to your collection percentages that you've seen?

Sure, Ralph, and again, this is a trend, I think, that has now been underway for a while now. There's no question that over the last few years, the amount of the hospital bill that is due from the patient because of copays and deductibles has grown, and as a consequence the amount we collect on that portion of the bill has declined. So 10 years ago, we collected 55% to 60% of the patient portion of the bill, and today that number's probably dropped to 45%. That's been a gradual change; we've accounted for it. It has contributed to some degree to the rise in uncompensated care, but I think we've also always said that two-thirds of our overall uncompensated care numbers are the result of those who purely have no insurance, and I think that remains largely the case.

Okay. All right, that's helpful. And then I joined the call a little late; I'm not sure if you had mentioned this. Did you give exchange volume in the quarter or growth you think that the exchanges had? I know it's a small number, but just if you had that.

Yeah. We didn't, and I don't think we ever have, in large part, because in contrast with some of our peers I think we have always viewed it as a relatively difficult thing to do with precision, to identify patients who have exchange coverage versus those who might have just regular commercial coverage.

Okay. All right, fair enough. And then just last one, your other revenue within acute seems to be sort of ramping. I know it's a small piece, but I think that's the health plan business. So can you maybe just talk about the growth there in terms of capturing lives, I guess, and maybe refresh us on the strategy there? Thanks.

Yeah. So we acquired a health plan, a provider-based health plan in the Reno market, just about two years ago at this point. I did comment before that we had about a $25 million to $30 million increase in the quarter in both premium revenues and other operating expenses. The rationale for acquiring that business, which we have talked about on previous calls, more so at the time that we made the acquisition, is really to prepare for this risk shifting that several of the last questions have focused on. But as more of the risk shifts to the provider, we will have to shift our focus to more of sort of an underwriting exercise, and we think that having that insurance infrastructure and that insurance expertise is helpful when you're doing that sort of analysis, and that continues to be our belief.

Okay. Thank you.

And we have no other questions in queue at this time.

Okay. Well, we thank everybody for their time this morning and look forward to speaking with everyone next quarter.

Thank you for your participation. This does conclude today's conference call, and you may now disconnect.